to start the meeting to minutes at the hearing the two witnesses are on their way and will be here basically tremendous hopefully good morning i call this hearing of the house small business committee  facts of what has seen become a full blown recession crippling downturn the injury they're all rebates for example drop a spike in consumer spending by late may retail sales have climbed one percent and nearly indicators show that they continue to rise in june in fact many retailers report gains of four point three percent these trends were especially helpful to small businesses which tend to be the largest beneficiary of consumer spending their stimulus business commerce you have the potential to put cash back in the pocket of our interpreter or these rebates have done a great deal to bolster our struggling financial market and yet despite their many benefits the economy has still have a long way to girl rising inflation and climbing on employment rates have dampen this brings financial uptick and we are now facing a perfect storm of financial crisis allow small firms to build off of the first stimulus package several proposals as being suggested for accomplishing this these ideas include a second round of stimulus checks traced infrastructure spending update out moated tax quote thereby correcting many of the inequities in the facing small firms while looking for ways to stimulate our small businesses it is important to search for solutions that both long and short term effects infrastructure spending for example will promise of both not only would he gave an immediate boost but he also set up is serious of returns down the road we now know that the first stimulus package created a foundation for economic turn around today we will look at ways to build on that framework as we move forward we want to make certain that we provide much someone opportunity for our small businesses to grow and fast recession's interbrand wars has succeeded in bringing our economy back on track these time around promises to be different i am pleased that today's witnesses could join us for th small businesses like all americans are concerned about the slowing growth of the economy energy prices are high too high the stock market is lagging people are losing their homes and the u s dollar has weakened small businesses have been particularly hard hit by this confluence of factors the economic stimulus package that was passed in a bipartisan manner early this year i think was the right thing to do it was a temporary solution or fix to a problem as we saw it was one of those things that oftentimes has happened to rarely both under republican control and democratic control and that's something happens in a bipartisan manner and quickly i support is that you and most other members of congress and as i say i think it was the right thing to do but there are a lot of other more permanent things which need to be done and more and i'll get into those now we need a comprehensive approach to stem rising energy prices for example  to create more jobs and strengthen our economy first we should increase domestic oil production invest in renewable fuels and increase incentives for energy efficiency and new technologies i strongly believe the most critical step toward reducing the price at the pump is boosting domestic oil production by opening alaska's arctic national wildlife refuge or anwar and the outer continental shelf to environmentally responsible energy exploration until we can further develop cost effective alternative energy solutions we need more domestic oil production to help lower gas prices and move towards energy independence and again i want to emphasize that i also firmly believe that the alternative  three tax cuts permanent these cuts included an across the board tax cuts for all working americans which is special helpful to small businesses since most smile but most of those ochs file as individuals  in addition relief increased the child deduction raised the student loan interest deduction and eliminated the death tax of course that was over time because we didn't have the votes in the senate to make elimination of the death tax permanent and as we all know because we didn't have the votes in the senate that what i believe is an egregious tax will come back again very soon if we don't do something about it taxpayers will face the biggest tax increase in history if these that i've mentioned and others are allowed to expire the chairwoman has called a number of hearings on health care and i think we share a concern about the high cost of and access to health care believe we should continue to try to find innovative ways to make health care more affordable and accessible to small businesses finally we must eliminate wasteful federal spending our nation's long term fiscal health depends on cutting spending and working towards a balanced budget the congressional budget office estimates that for the first three quarters of two thousand and eight the federal government incurred a budget deficit of two hundred sixty eight billion dollars more than twice the deficit recorded for the same period last year these steps would help all americans and especially our nation's small businesses through our challenging economic environment again want to thank the chairwoman for holding this hearing i look forward to the testimony of all the witnesses here this morning especially the witness from cincinnati thanks very much madam chairwoman ranking member cabinet members of the committee my name and as you know is a connelly my bank is one hundred seventy five year old mutual institution just south of boston with one hundred  fifty million dollars in assets our nation is certainly facing difficult economic conditions however i want to say at the outset that i am in my banking colleagues across the country a very positive about our next nation's economic future our nation is face these challenges before and has emerged much stronger as a result this is not to minimize the problems that are occurring today whether they are from job losses struggles to avoid foreclosure address trying to meet the daily needs in the face of high gas prices and food prices these economic weaknesses will take many months to resolve perhaps even several years we need to collectively look for solutions that will ensure a fast recovery the focus on small businesses and is important now as they are drivers of new ideas new employment and new economic growth the vast majority of banks in our country are community banks small businesses in their own right in fact thirty five hundred banks body one percent of the industry have fewer than thirty employees small banks like mine have been an integral part of our communities for decades and we intend to be there for many many more years to come we continue to work to help resolve financial problems as quickly and judiciously as possible indeed the process of economic adjustment is well underway helped by federal reserve action and the economic stimulus package congressional actions be turning to a few suggestions for change however i know that many of you may be wondering about the health of the banking industry in light of the recent failure of indy mac let me assure you that the industry as a whole remains fundamentally strong ninety nine percent of banks are currently classified by regulators as quote well capitalized the highest possible designation we have the capital in the reserves to continue to make loans that are so vital to each and every one of our communities changes are needed however particularly to avoid a severe credit crunch the secondary markets have already reduced the amount of credit available for residential and commercial real estate a b a recommends a thorough discussion of securitization accounting rules to ensure credit can flow from this source moreover that as b s so called fair value rules often fail to reflect intrinsic values or provide accurate and useful information to investors a b a recommends that these rules be revised immediately the credit crunch can also stem from an overreaction on the part of bank regulators they're combing through the bank's books looking for anything to criticize this clearly has a chilling effect on the willingness of a banker to make new loans to deserving individuals and small businesses that need help today while banks will naturally be more conservative as the economy weakens pressure to write down the value of the loans where payments to current will have a devastating effect on the availability of credit finally i want to mention an issue that's arisen very recently the problem of naked short selling as well as the repeal of the uptick rule which has a dramatic impact on many publicly traded banks large and small in spite of the strength of the industry and the next top of the f our members are reporting that bank customers are equating stock drops with the safety of their deposits while the f c c is emergency ought to help stop a speculative practice for a few lodge institutions it really did understand that you're about to drop a tax bill for small businesses we want you to know that the a b a strongly supports initiatives like this one to address the concerns of small business i appreciate the opportunity to be here engineering firm operating in the same louis area for over forty years mr oates is here to testify on behalf of american council of engineering companies a c e c members fans employs thousands of seniors architects and then surveyors scientists and all the specialists its members are responsible for more than two hundred billion dollars of private and public thank you madam chairwoman and members of the committee i appreciate the opportunity to testify before you today about the importance of the safe and efficient transportation system to our economy and the role that transportation and infrastructure investments play  promoting economic growth as mentioned my name is david oates and i'm president of a civil and structural engineering firm in the st louis area my firm currently employees forty civil and structural engineers i'm also an active member of the american council include spending on our nation's transportation and environmental infrastructure as you consider legislation to stimulate the faltering economy i was very pleased yesterday to see the house passed h r sixty five thirty two a bill that addresses the impending shortfall of revenues in the highway trust fund which could lead to a thirty four percent cut in your state highway program i hope the senate will act quickly on that legislation but much more can and should be done beyond a short term fix to the highway trust fund additional spending on infrastructure from roads and bridges to sewer and drinking water systems will provide a near term boost to our economy through job creation at the same time provide long term benefits to our economy my firm is involved in all manner of public works projects but my passion and experience lie in the transportation field so out will direct the majority of my comments to those matters my written testimony contains much more information on water and environmental and for structure transportation and transportation related industries account for ten percent of the u s gross domestic product and there is well documented evidence that a direct correlation between transportation spending and job creation one commonly cited study from the department of transportation found that forty seven thousand five hundred jobs were associated with one billion dollars in infrastructure spending  firm and others in the transportation and been airing construction industry support well paying engineering and construction jobs additional spending on transportation projects and programs will foster immediate job creation but it is also important to appreciate the long term benefit as to our national economic competitive competitiveness the primary purpose of the federal surface transportation program is the safe and efficient movement of people and goods which contributes to economic growth by facilitating on time manufacturing and delivery making personal business travel easier and reducing congestion and maintenance cost transportation investments also strengthen local regional and state economies and in turn generate additional tax revenue by allowing businesses to expand operations and hire more workers inadequate funding for transportation as led to deterioration congestion and delays all of which raise the price of doing business through maintenance and repair needs wasted fuel and delayed cargo shipments last year our national economy was crippled by nearly eighty billion dollars  congestion costs on the safety side traffic accidents on foot to pallet ease the odd beyond their personal impact exact that two hundred thirty billion dollar annual toe in economic costs the national surface transportation policy and revenue study commission concluded that we need two hundred twenty five billion minimum annual investment to upgrade our system to the state of good repair and create more advanced sustainable system the massive quantity of transportation infrastructure needs are certainly not going to be met in one piece of legislation but the american association of highway transportation officials has been a fight over three thousand ready to go projects that would be sped up through additional near term spending and influx of additional funding would allow state the o t s to move forward with projects that are currently on hold and my state the department of transportation has the genocide two hundred ready to go projects in need of two billion dollars in funding and these projects won't just the huge multi state firms small businesses like mine will benefit greatly from contracting as some cards opportunities from this additional funding by boosting infrastructure spending you can take an important step toward fixing structurally deficient bridges rebuilding and crumbling roads and highways and the best part is that these are truly investments we're building structures that will last and will provide added value for years and years there is both a short term stimulus and a long term gain on behalf of a c e c and the nation's engineering industry i want to thank this committee once again for focusing attention on this important issue i would be happy to answer any questions thank you mr oates our next witness is mister rochelle bernstein she's the vice president tax industry with more than one point six million u s retail companies a more than twenty five million employees welcome for the national retail federation which is the world's largest retail trade association and r f represents an industry with more than one point six million u s retail establishments more than twenty four million employees about one in five american workers and two thousand and seven sales of four point five trillion dollars most retailers are small businesses ninety six percent of retail companies have only one location chairwoman of alaska's ranking member shabbat members of the committee and the rest commend you for holding this important hearing to evaluate the impact on small business of the economic stimulus package and acted earlier this year and assess the need for additional relief early this year congress and the administration work together in a bipartisan fashion to enact economic stimulus legislation to aid a slowing economy the energy of commence the congress for its quick action to address the nation's economic needs because consumer spending represents seventy percent of the g d p we believe that the tax rebate payments  particularly important today we would like to share with the committee what we have learned to date about the impact of these tax rebate in the current economy most categories of merchandise and most types of retail outlets are struggling to achieve even modest sales increases tax rebate payments are providing some stimulus but consumer spending remains subdued because of the stresses of declining home values escalating fuel and food costs increasing unemployment and weak financial markets consumers are concentrating their spending on essential they are also more concerned than ever with the pricing of merchandise consumers are shopping more online so that they can more easily make price comparisons and also save money on gas for small retailers this economic climate is even more difficult than for larger retailers small retailers tend to compete more on service than on price because small retailers cannot benefit economies of scale they are hit harder than other merchants by rising costs particularly the rising cost of fuel small retailers who do not sell their goods online are not able to take advantage of the shift to online sales direct deposits as tax rebate payments began the last few days of april followed by the mailing of the rebate checks through july eleventh for eligible taxpayers who filed a tax return after a decline in retail sales in march there has been a bump in retail sales of general merchandise for april may and june which we attribute to the distribution of the tax rebate checks the april prompt and retail sales was point six percent only adjusted month to month which was the largest month month increase since november of two thousand and seven with substantially more checks distributed in the month of may and mounting to more than forty billion dollars in rebates retail industry sales increased by point nine percent most of them a sales went to discounters and grocers although some shoppers splurge small electronics and appliances the treasury department repeated almost thirty billion dollars in rebate checks in the month of june but consumer spending remains soft with an increase of point two percent most of this increase seems to be focused on th cities a survey of consumers use of tax rebate checks was performed by big research the week of june third to tenth as is that date forty five point three percent of survey respondents had received their tax rebates forty two point nine percent said they used the money to purchase something however nearly half of the that money was spent on gas or necessities such as groceries rather than general merchandise as envisioned when the rebate check program was passed by congress seventeen point one percent of the respondents initially save their remit save money but it appears that they may have set it aside for purchases in upcoming months in sermon survey findings released this just this week and  found that one fifth of parents nationwide have set aside a portion of their stimulus check for back to school purchases specifically parents say they will use some of their tax rebate check to fund electronics such as computers and cell phones despite a more modest increase in retail sales over the last few months than was expected from the rebate checks we believe the results are better than they would have been if congress had not enacted these rebates based on the economic information that is currently available we believe that compelling case can be made for providing additional economic stimulus legislation if congress doesn't act on a second stimulus package we believe it should once again include relief for the consumer since consumer spending is the largest contributor to p it is difficult to foresee an improvement in overall economic growth growth until consumer spending improves chairwoman the last cast members of the committee thank you again for the opportunity to speak to you this morning i would be happy to answer any at the university of pennsylvania more days he directs the company's research and consulting activities more this economy dot com is an independence a series of the moody's corporation and a leading provider of the economic research and consulting services welcome thank you thank you chairwoman thank you committee for the opportunity to be here today let me just say that these are my personal remarks and are not representative of the moody's corp i have strong support for the idea that we needed a second fiscal stimulus plan and i think that's a very laudable plan idea and is much much needed in today's economy i think the plan should be timely so that the stimulus gets to the economy by early two thousand and nine i think it needs to be targeted to lower income middle income households that will spend the money quickly into small businesses that will use the money quickly to support hiring and investment for their activities and that it should be temporary should not lift the long term federal budget deficit that's a very significant problem that we're going to face in coming years and we don't need to add to that problem so timely  targeted and temporary i think those are the key criteria i support the plan for the idea of her second stimulus plan for three reasons the reason number one the economy is still very weak  lost over four hundred thousand jobs since the beginning of the year the job losses are very broad based across lots of different industries not just housing it's not just manufacturing vehicle manufacturing it's retail it's financial services it's information services as professional service in fact  only two industries that are adding to payrolls in a consistent way and that's health care and educational services the job losses are broad based across the country in my view nine hundred states are now in recession ohio is one of those states california arizona nevada michigan rhode island they are all over the country in their many other states that are very close to recession and probably will be in recession before this is all said and done the problems that county faces are persistent they're not going away quickly the housing downturn is in full swing price declines will continue through this time next year even under the best case scenario the problems in the financial system are well entrenched the banks are banking system is writing down problem loans and that will continue for the foreseeable future and the high energy food costs are significant drain on the economy that aren't going to go away so i think the economy's problems are persistent second reason for my support is that the benefits from the first stimulus package are fading the tax rebate which was the principal element of the first stimulus package but one hundred billion dollars that has lifted retailing activity in april march and june talking to retailing clients that i have they already are seeing retail sales are falling off quite dramatically in the month of july so it's already we're we're seeing it fall off very rapidly and the investment tax benefits they are course expire at the end of the year and what they've done is push on them in a modest way that push investment forward into this year stealing away from investment for next year so if those into investment tax benefits are not extended then there will be a pay back in early zero nine with less investment by businesses so the stimulus is going from a plus and it will be a negative later this year into two thousand and nine so a second reason for support third reason for support is monetary be fiscal stimulus so those are three reasons for support what should the plan look like i think it probably should be fifty two hundred billion dollars fifty to one hundred billion dollars would be  equal to the difference between what economists think is going to happen next year and what the economy should grow in a normal well functioning environment the difference between what we think growth will be and what the econ potential growth that growth necessary to maintain a stable rate of unemployment most economists including myself believe that unemployment will rise into two thousand and nine if the economy doesn't experience stronger growth  fact just the consensus view on unemployment the employment rate today's five and a half percent most economists think it will be between six and six and a half percent by the spring summer of two thousand and nine and of course that understates the stress in the job market many people are being pushed from full time to part time five point five percent unemployment rate we could use a little bit of extra growth anyway to bring that unemployment rate down back to where most comes to think is full employment which is below five percent so i don't think there's much downside to being wrong it would be nice if we were  terms of what should be in the plan i'm just going through out some ideas all of which are more or less good some better than others but it depends on circumstances i think extending the food stamp program would be a great idea you can implement that quickly you can have it out there in sixty days all research shows that people spend that within three days after that these are going to help people who are struggling low income households are struggling with these high food costs it's killing them and i think that would be very helpful very efficacious kind of policy i think a gas tax holiday is a good idea i think that would help people who are struggling low income households that are struggling to get to work driving long distances and any help they can get  in terms of tax relief there i think would be helpful those are for consumers for businesses i would i would extend the investment tax benefits for another year i don't think the cost of treasury is very significant and i think that would be at least take away that drag that will be on the economy in two thousand and nine particularly for small businesses that will face higher costs because of that here's a little bit of a stretch but i think apparel tax holiday would be a very good idea it would go to low income households people who don't pay income tax but work and pay payroll tax and to small businesses because that will be a cash infusion to them that they can use to hold on to their workers and to their to their hold on to investment so those are businesses for government aid to state local governments would be very important very good piece in the journal today about the size of the fiscal problems states are facing they're going to cut back on medicaid and other infrastructure that would be very beneficial to get them some help to forestall some of those cuts in finally infrastructure spending the only cathey out there is you've got to figure out how to cut the checks quickly if you can't then it's not worth it criterion number one is timeliness it's not timely it's not stimulus it's counterproductive so if you can marry stimulus with infrastructure that's great but you've got to figure out how to execute  thank you madam chairwoman and i'm pleased to introduce we have miles from cincinnati ohio bill serves as vice president and a member of the board of directors at the western economic council an organization created twenty years ago to promote economic development and community pride in western hamilton county ohio he's a retirement plan or with a firm of miles and miles located in covington kentucky bill it's been working with clients for over thirty years in the firm that is father founded fifty five he's also a member of the leadership team of agenda three sixty economic development strategic plan for cincinnati and its surrounding counties a graduate of the civil bill lives with his wife barbara the cincinnati neighborhood of bridgetown and we're pleased to have him here with this morning and look forward to your testimony thank you thank you thank you chairman the chairwoman of alaska was ranking member shabbat and all the members of the committee for the opportunity to speak today the western economic you say was founded twenty years ago as a nonprofit economic development group today our members represent nearly every aspect of life in the western suburbs of sense and addie ohio as members we voluntarily work to foster a greater economic and built environment for our region in an effort to prepare for this hearing i asked our members a number of questions on the subject much was revealed after several dozen conversations consumer rebates are being used in every imaginable way reception and so i spoke with our respective way pain bills buying gasoline buying a high definition television going on a trip investing in long term savings putting the money on the side for a time when they may need it and everything in between who would argue any payments to consumers is not in itself positive for the economy an eight hundred dollars check to a family of four with adjusted gross income of seventy thousand dollars is finding measures something of a windfall one of our members shared a report of the international shopping centers trade group from earlier this year it reported their tenants were credited or crediting increased sales to the consumer rebates last week same group reported those sales had leveled off and it expects a record number of tenants will go out of business in two thousand and eight the anecdotal conclusion of the great majority of those i canvassed is that consumer rebates are helpful not enough to lift the economy out of the low spot and business cycle rebates may never be reliable what stimulating the economy because they don't guarantee the desired change in behavior conversely tax deductions are inherently reliable generally our members feel a better short and long term approach is to target benefits to those who have directly invested in the means of production of goods and services the owner of the home improvement company hesitated last year to buy  equipment this year it's a different story he will hire more people to use this new equipment because of the tax benefits to small business he and others like him will be creating a recurring eight hundred dollar payment to newly hired workers if the goal is to assist those suffering through a particular hardship such as avoiding a home mortgage foreclosure perhaps specific legislation minding your i wrote this a few days ago will be more efficient than broad onetime consumer rebates as a solution this way along with transportation infrastructure improvements a common alternative to consumer rebates suggested by our members perhaps in the fullness of time empirical data will reveal the true impact of the economic stimulus act of two thousand and eight in the meantime our members value the tax incentives as having a much greater effect on their businesses than consumer rebates and they very much want you to know that continuing the tax incentives for small businesses is critical fuel for what has become the engine of the american economy thank you again on behalf blunders is essential more importantly it's essential to find a balance extreme caution is necessary prudence and moderation consistent prudence and moderation on the part of the regulator is critically important prudent and responsible reporting on the part of the media is important we've heard a lot in the last week or so about the the list of troubled banks in this country it's critically important to understand that ninety nine percent of the banks in this country are well capitalized number one number two that eighty seven percent historically eighty percent of seven percent of the banks that have been on that list have successfully worked their way off so it's a meaningless list list to the public unless they have the backup data that they shouldn't have well while  forbearance and due diligence is being exercised so i think caution and balance is the most important thing and doing everything we can to control inflation thank you  created by the stimulus package could be outweighed by the long term effect of increasing increases our national debt now if well designed death a key criteria for a fiscal stimulus plan should be that every element of it is temporary that it's not something that's put into law for except a very brief period of time therefore it would add to the deficit in that window and that's the idea  that's how you get stimulus you're you're borrowing money and you're using that to put in to the pockets of businesspeople and consumers so that they put it into the economy right away now that would be a problem if you kept borrowing money because then investors would say oh you're going to borrow a lot of money you're going to pay higher interest rates but if you're going to them and say i'm borrowing once for these things then they won't charge you a higher interest rate for it so you get the benefit with no cost but when you do that as long lasting consequences would be counterproductive and detrimental thanks miss bursting you spoke about the effect of the first stimulus package in terms of the rebate checks the rebates were issued for you so consumer spending going up then in july is dropping it's still unclear to me what's happening in july obviously we don't have the results of the month yet i can tell you anecdotally have heard from some retailers who based on the first week of july think that the results may be better than they were in june so i think it's just a little too early to be able to to make an analysis of that situation remember the checks kept coming up through july eleventh but it is your opinion that it really provided some short term absolutely the economy absolutely mr oates you talk shop on the benefits derived from increase infrastructure standard and poor's report said every dollar invested in the highway infrastructure how we construction generates about a dollar eighty and gross domestic product in the short term and as i said i my testimony transportation and transportation related industries account for ten percent of the u s gross domestic product so when you look at those two factors the influence of additional investments and transportation infrastructure on the overall economy can be substantial and also the efficiency of highway improvements affects the economy research is from new york university show that every dollar invested in the nation's highways generate about thirty cents a production cost savings to businesses every year so over the over four years you would get a return on that investment that same studies estimated that how we investments contribute in an average of twenty five percent of total productivity growth nationwide over the last forty years mister you spoke you mentioned the three thousand highway projects that are ready to go and the money's there the program that i see is done many small businesses we have in our local area the counties and cities that we do work for if they had and as doctors and he said if they had a check or had an assurance of funding quickly most of them have projects that they can move ahead and get and get started on if it's if something happens quickly so yes there are a number of our clients are waiting for funding for projects that they have ready to go or they can advance from over from next year and do some other things in the following year mr singh is circle part of this team will involve increasing the section one seventy nine along with allowing make invest i can only give you an external information what i have learned from retailers is that as a c e o began i was so soft that they continued with projects that had to be done or where they were committed to a contract that they couldn't get out of but that in terms of new spending on on improvements that that might be needed or other types of  quipment that they might need but night not necessarily by people were just not spending the money because of the industry was doing so badly and they were so much cutting back on on expenditures mentioned that the benefits of the first stimulus package are fading you support the second stimulus package but you say that should be timely targeted and temporary if you will if you are  to say today we are limited here in terms of how much money there is what will be the most targeted a more productive  as much as thank you very much and now i recognize and the ranking member thank you what dr sandy when you said it doesn't help as much you might be thinking and i assume in the short term but it's also been indicated here we get a bump up for a couple of months and then it falls back off if you want to do some structural something that's actually going to benefit the economy over the law long term we're small businesses may be able to grow and hire more people which is actually  perhaps better for the country and maybe employs more people and maybe means that recessions aren't as deep or that everybody does a little better over the long term than those investment  economic stimulus packages because most republicans and democrats did but i think the argument that i would make is that if we can improve the overall economy over the longer term by having businesses be healthy especially small businesses because that's the emphasis of this committee that you're hiring more people and people have jobs for a longer period of time and we have a more resilient economy so the recession which are inevitable to some degree will be less steep and perhaps less frequent if if the country is if we grow the pie so to speak rather than just redistribute money which is the alternative even though that may help for a month or two but excellent point ma thing how how much how important would it be in the long term planning if for example we made the tax cuts that we passed in no one in zero three permanent and if we did some structural things like simplify the tax code and people could rely upon it for longer periods of time so they didn't worry about us changing things around how how much would that have to do with improving the overall economy and people's lives there nothing you could do that would be more important than that that's simply than the number one planning challenge can't say it any better and you just said ok and that's that right now you don't know what we're going to do and you don't know the tax cuts are going to continue or not because at this point next year they're going to a lot of are going to go out of existence in the taxes will go back up to the levels that they were some years ago and a lot of americans aren't aware of that quite frankly is that your understanding it's very much so from the estate tax on the top end to the savers tax credit for those most modest earners among us very true on i think you said half of those that actually spent it ended up spending it on gas or fuel of some sort and food rent and and so so how important is it that we get a handle on this energy crisis that we find ourselves in this country i think it's important to get a handle on it for many different reasons not being an economist i don't know how quickly that can be put into place and whether that affect how well that can affect the immediate situation but from the retail perspective we're hit by it in many ways obviously to the extent that consumers are are using their their wages or rebate checks or whatever money they have to spend on gas instead and instead of spending it on other things and to get the same amount of gas not to get more for that that is real problem for the retail industry which is really suffering in addition obviously the fuel costs are are very high for retailers that must get their inventories to their stores for small retailers that don't have the benefits of economies of scale those delivery costs to get things to their stores and being that much higher it ends up being something that is that much more of a burden to them so so all around fuel costs are important in the retail industry thank you and if gas was say you know year and a half ago or so to something a gallon is now four dollars a gallon in the consumers paying that and maybe some of that out of the economic stimulus package if a significant portion of that is going to say saudi arabia or nigeria or venezuela or wherever it's going that portion of it isn't doing a heck of a lot for the retailers here locally or the overall economy would you agree with that that would appear to be so but i have to sat down their particular background  mr rhodes if i could go to you next you had mentioned the importance of you know the highway funding in the infrastructure and all those things which i certainly agree with you let me ask you how much confidence do you have in congress and again i would  stipulate that i mean under republican control in the past or democratic control now how much confidence do you have that the the decisions relative to where the highway funding ought to be spent is going to be based upon the merits as opposed to you know pork barrel earmark type spending which may end up in say a bridge in alaska that doesn't go anyplace or you know and perhaps in a smaller state like say west virginia which traditionally has had a fairly powerful representation in the senate and been able to direct a fair amount of money in that direction this is a pretty long question here but would you feel more confidence do you think we ought to adjust our thinking up here on the hill in how we go about funding things and should they be funded more upon the merits as opposed to you know some political decision making process they said there would be no trick question but talking about the stimulus package i think both in the timeliness and how this is done for it to be effective for infrastructure it does need to be distributed in some way that is just straightforward grants to states and or local communities to take care of certain infrastructure things with as few strings as possible and probably distributed by a state size or or or community size or something like that so that the state and the local folks can decide where they need to spend that money within a certain range or parameters if a local community has another five hundred thousand dollars that they can go spend on sewer projects or road projects yet this year if they have the money they'll be able to do something with it and they'll be able to hire people buy a supplies that'll help all different sizes of business thank you and then finally connelly with the economy as it is today and tighter markets is it getting tougher or is it relatively tough for small businesses at this time to get access to credit and do you have any suggestions as to what we can do about that well first of all mr shabbat thank you for not asking me the last question coming from the home of the big dig i might have a uniquely different business as usual in my town  are small business lending and residential lending are up substantially over this time last year i just spent the weekend with three hundred of my closest friends bankers from across the country who tell me that bank  going on now admittedly there are pockets there are pockets where there are problems when not making loans like the old ninja loans you know no income no jobs no assets but we are making loans with prudence  know we are looking at income and likelihood and ability to repay him and it wasn't our institutions that caused the problem so there is lending going on out there and in some pockets there's a l other in points imports food prices what the you know because if you look at it the gas prices haven't gone up in europe because of the strong euro but they're buying almost one and a half almost two barrels for our one barrel that we purchased so what impact has the weak dollar had on the economy or has it been the economy obviously impacted the weak dollar  the higher cost of oil and other commodities prices are higher commodity prices are higher because of the lower dollar because these products are traded globally in dollars and so when the dollar falls in value to ensure that demand supply globally remains the same the dollar price has to rise so there's debate as to what degree the lower dollar has contributed to the prices but by my twenty five bucks of that is the weaker dollar that's been very negative because taken by itself that's a problem but in the context of the pluses on net so far it's been plus so if we continue to increase the de we continue we don't have the revenues in hand and we continue to increase our national debt i mean we're we're ultimately going to get to the point were upside down and what the impacts are going to have on the what the short term we can talk about short term we can stimulate all we want and we can continue and set of a hundred billion let's put four hundred billion in but what impact is that going to have all my children's future both ten and fifteen and twenty years down the road if there's a short fall in congress that i see is everybody looks two years ahead because that's their next election so what's the impact that we're going to have ten years fifteen twenty years and that's what we should be talking about is what the long term impact is going to be yes we're going to take we're going to increase and stimulate the economy today but what impact it will also have in five years and ten years and in twenty years you make an excellent point and i think our most significant economic problem is the daunting fiscal future that we face i mean the arithmetic is doesn't work something's going to break if something doesn't change has to happen this year and it won't happen next year and it and let the deficits increase and that will be catastrophic because that rates will rise it'll undermine investment the economy will struggle many more problems the other option is to raise taxes and the third option is to cut spending and that's it those are the three choices and obviously there are very difficult choices that you're going to have to make but you have to make them and you got to figure out a way to do it but that that is clearly our most significant economic problem let me just say though you know the long run is made up of a lot of short runs and we are now in a short run that is very debilitating and painful and people are obviously under a lot of stress and i think we can do some things in the near term t answer we have to be able to we have to stimulate the economy is the claim fifty and one hundred billion dollars into the economy or more how do you recommend we do that we print more money or do we borrow from foreign investors l been i mean so one of the two so which one we don't know is that yes or no well i know what the answer is no i know but we've got two options correct or is there another option out our money we're going to have to borrow money so we're going to so we borrow money from the chinese to ultimately buy more chinese products i wish i was in that business to lend somebody money that's going to ultimately buy products well that's not quite fair not quite fair you know put it into a bridge or a road in your people that would be   i want to just ask a question about infrastructure development to mr oates in particular because one of the equations that i see this sort of missing in in in terms of  the stimulus of infrastructure is sort of the companion infrastructure which has to do with energy that goes along with it because if indeed we're going to talk about rebuilding roads we have to talk about what it costs across the board and in terms of energy right now we're really struggling you know how are we going to pay for the oil that goes into the bulldozer or the other equipment how are we going to move products or  materials from one place to another and one of the one of the challenges that i think we face is how we're identifying an emerging industry which is the redevelopment of energy and the infrastructure that we need to distribute it  so has your organization taken a position with respect to energy and how it's distributed and and what we need to put in the pipeline now because a lot of what we're talking about here are dealing with variables that currently exist and what has made america great is the imagination of what can exist and i think we have to move into that mode if we're going to talk about prosperity again and not this you know do we print money or do we borrow money scenario how do we create wealth again i think is the major issue here we need to be focusing on which are honest vive our kids will be struggling to survive if we don't talk about the innovation that is made america great so i want to know whether there'd been any conversations written you know we have in blackouts in brooklyn new york and conic in patch and patch or key spankin patch and patch patch for as long as they want to it's an old city this place as long as we continue to use the type of appliances and lifestyle that we have with it because when you go through the blackout no one's talking about that new infrastructure that goes along with engineering and transportation in order to get us where we need to be have you had any conversations or any is that risen as an issue for your organization and or energy questions have come up in our organization we are we are mostly a public infrastructure organization and deal with investments there i'm a transportation engineer so i don't know a whole lot about a lot of the other infrastructure issues and one of the issues could be that it's more difficult for for congress to get spending in those areas because a lot of that is controlled by public private companies to do it deal with the infrastructure for energy so i can't i can't answer a whole lot because i'm thinking construction about the fact that our energy cause sort of the companion is like the shadow is like that extra piece this thing you know off right and everything that we're talking about here whether it's the cost of food whether it's the cost of products i sort of hanging off and we're kind of ignoring it but what we're talking about about what kind of playing footsie with it but it's costing us do you have any ideas about how the public can partner to jettison a deal with this because i think that that is the one of the pieces that you know helps us in the long run it's the new industry that creates wealth we're talking about specifically well i think here the solution to our energy problems are long term they are a long term there's very little you can do in the very short run i mentioned a gas tax holiday i think that takes some of the edge off for some folks but that's just very modest and doesn't solve our long term problems right now with respect to long term energy there's really policy should be focused on supply and that is i do support expanding offshore drilling i think that makes perfect sense and by the way you don't need to see oil drills oil wells dug in oil coming out to affect the current price line as soon as the markets sense that this is going to happen prices will come down to reflect that this is in the i don't want to say get into one particular industry what i'm talking about is innovation right and they're going to be a whole host of different types of production of energy for us and if we don't do that then we're doing a disservice to his seven year old son and three year old daughter because we're talking about the long term and everything that we're talking about today has that as part of the equation and while people keep saying it's long term it's now and it's long term and if we don't start because we're doing a little pieces the snippets that you're talking about right it still remains a part of the equation that we have yet to to address so you know i think that part of the equation and winding down madam chair is that we have to make incremental steps as we begin as we try to solve the immediate to come to that point where we've reached the tipping point for the development of new industry and energy if we don't we will wake up ten years from now and the same challenge that we're facing in terms of how we make things happen  will continue to exist so in terms of the economics of that equation i think we have to have a wider view of each step that we're taking for our economy and what the shadow this cast by the energy cost involved has done in every sector of our lives thank you very much madam  it's a long term problem that we have here and it would be good if we could work this out together in a bipartisan manner we do too little of that in congress but this is one we really ought to work on together and perhaps the rest congress ought to look to this committee because the chairwoman has worked over this the last year and a half in a very bipartisan manner and i commend her for that dr you just mentioned that if for example we announced that we are going to drill offshore in anwar or wherever where we know that there are significant quantities of energy available to us that we've essentially put off limits that you would see that essentially directly affect the price because the markets would know that we're serious about this we're actually going there to get this even though we may not see that all for some years and that's why some of argued well we're not going to see that all for three years five years ten years whatever and therefore why do we have to do this now and that's why i think we should've done it three years five years ten years go and have voted consistently to do that but that's the past at this point as you indicated it would be reflected immediately in the markets because of speculation that this is something the republican leadership speculation that's not a big deal i think i agree with the democrats i think that is part of it not the whole thing but it's part of it and so that's why it is so important that we act sooner rather than later to actually announce we're doing this even if we don't see that i will see it reflected in the prices very quickly in the downside because of the speculative part of that is that correct let me just point out though the conduit through which this would affect current price may be another conduit that you have producers global energy producers that know feel like prices are going to higher in the future therefore you're going to keep more just want to reiterate what i said before is that even though i and many talk about increasing supply now drilling in anwar outer continental shelf that's only part of the thing that we only do as well i mean we clearly have to emphasize increased technologies of the future whether it's wind solar biomass geothermal all those things are part of this picture as well as well as making it possible to build new  leases in about sixty eight million acres of land and they're not draining it and we're saying use it or leave it we're going to take it away so you mentioned that probably those companies are speculating about oil prices going up and that might be the reason why where they can drill today they're not doing it so we don't always single new lease a single new drilling authority sation we can get for four point eight million barrels of oil a day in this country without going into war but that is not the question about the holiday the payroll the pay tax holiday that you mentioned as being part of the to be part of the second stimulus package there are some critics that while employees could see immediate relief employers could be burdened by administrative challenges is there a concern that small firms will face  compliance issues and that this could potentially minimize the benefits right now excellent point that is that is the single most significant negative of that particular proposal you know you have to turn the switch on and off for many particularly small businesses they don't have a payroll company that's managing their affairs and if they don't do it right they'll get penalize you might construct the legislation so that they don't over a period of  time the other downside is companies more than likely will try to figure out ways to include compensation that they would pay out at some other point in that period so that they would have to withhold payroll tax so i'm not saying this there is no downside there are and that sting i would like to hear your comments and i agree with with what doctors and you just said what we have seen there are the larger employers who do use outside service providers and i know that there are certain payroll company companies that can handle this and and this is an issue that we looked at a little bit when we were looking at what what type of consumer rebate whether it could be a check or whether it would be sastre to get the rebate payment to consumers by actually doing it through employer withholding so it's a very similar issue and we did a little bit of investigation there i am a little more concerned as dr zandi said about the small businesses that don't necessarily use those same outside payroll providers and that there might be more of a burden but remember on the small business the self employed person there's you know pays payroll tax twice so it is probably is a significant benefit for a small person business person who plays as the employer and as the employee and so you know it's possible that that they may be able to get more access to more of the software that is out there and perhaps if there was it was widespread enough the costs could be minimized you know it's the question is is it something that could be done how how long would that take what would be the start of time if you wanted to turn this on more quickly there might be more of a burden  in your testimony on page five you provided fiscal economic bang for the buck and you have the payroll tax holiday a one point twenty nine  across the board tax cut one point zero three accelerated depreciation point twenty seven so as we discussed before our budget is limited and when we are considering a six second stimulus package we've got to be targeted we've got to be specific we need to know what what of the many things that we're going to be consuming is going to have the most positive impact in terms of our work on a me how do you come up with this numbers it's a based on a simulation of a macro econometric model and i constructed for the purposes of doing this kind of an evaluation i've done it a number of times i did it in preparation for the zero one tax  mae you represent small banks what would you say will be an action taken by congress that could be could prove beneficial for small  banks to continue the great work that you're doing well i think the improvement to the f h a programs g s t reform temporary f h a program all great things there's a critical thing i want to mention now and that is we need to recall the lessons that we've learned from the previous go rounds coming from the window and i recall the real estate debacle of the early ninety's and  a lot of problems that caused small businesses to be squeezed out of business as a result of performing non performing loans and just this weekend i heard from some of my colleagues around the country that bank regulators are beginning to ask  appraisals non performing loans and it's important that we not force currently performing loans into a distressed condition by making such requests so i think we really want to be careful on the regulatory side that we not fuel to the fire those lessons that we learned five ten twenty years ago so critically important to bear in mind stimulus package i promise you that the discussion that we have today will prove beneficial in my input in those meetings where i meet to discuss with the democratic leadership why we're going to do next and hopefully i'll be i'll be there at the table presenting the voice of small businesses in this country thank you very much and i'm sure nancy pelosi will care a lot what i thought about the issue to