statement from the chair and then from our friend and ranking member mister kucinich then get right into testimony in early two thousand and nine president obama sold the stimulus as a solution to the recession and skyrocketing unemployment the president worked with house and senate democrats to pass was in the country's best interest the president and others claimed the stimulus would create three million to four million new jobs yet over two and a half years later one point seven million fewer americans have jobs at a cost of eight hundred and twenty five dollars billion to taxpayers the unemployment rate no matter how you look at the stimulus it has simply failed to live up to the administration's promises however president obama has never admitted any failure instead he has continued to mislead the american people by praising the benefits of the stimulus package and at times has claimed  it worked exactly as we anticipated now the president wants more last thursday he announced he wanted a new four hundred and forty seven dollars billion stimulus package the president claimed that this new american jobs act will  provide a jolt to an economy that has stalled almost the exact same language vice president biden used to describe the two thousand and nine stimulus when he said it would provide a necessary jolt to our economy we all know that the first stimulus did not provide that j but the similarities between two thousand and nine and two thousand and eleven go beyond the administration's rhetoric the stimulus part ii contains many of the same spending priorities that failed to create jobs under the first one throwing hundreds of billions of dollars in tax money around at ill advised projects that did not create jobs the first time and will not create jobs under a second so called stimulus bill we need an honest discussion about our economy and not just rhetoric millions of unemployed americans are depending on it before we consider the president's second package we must examine the results of the first one to learn from that and to prevent ourselves from making the same mistakes i have said many times if big government spending was going to get us out of this mess for goodness sakes we should have been out of it a long time instead of rushing to pass additional spending we need to ensure that any new legislation is carefully crafted and actually facilitates job creation today's hearing brings together economic and financial experts from a wide array of backgrounds to discuss this so called second stimulus i hope this hearing will bring to bear what we have learned over the past several years and how we can move forward to create an environment favorable to job creation and economic growth one that is conducive to job creation and not an impediment to jordan with that i now recognize my good friend the distinguished member from ohio mister kucinich mister kucinich thank you very much mister chairman the most recent figures paint a stark picture of the u s economy employers did not add any jobs in august and only thirty five thousand jobs were added over the last three months unemployment remains at eight point one percent and although the economy added two four million private sector jobs between february two thousand and ten and july two thousand and eleven these gains were partially offset by the loss of four hundred and two thousand public sector jobs at the state and local level during the same period the problem we are facing is growth is too slow the economic policy institute just released a report that found there are approximately eleven point one million fewer jobs than needed and six eight million fewer jobs than when the recession started to bring down the unemployment rate and to stay even with the adult population growth our economy should be creating four hundred thousand jobs per month as the epi report notes over the last six months the economy has added only an average of one hundred and forty four thousand jobs each month in august most private sector jobs added were in the entire stimulus failed one of the key assertions in this report is that the stimulus somehow destroyed a million jobs to support this conclusion chairman issa's staff report cites a single study one study an analysis issued in may two thousand and eleven by researchers at ohio state university unfortunately this study has been widely discredited by economists because of its flawed methodology the first document i would like to enter into the record is an analysis by economist and nobel laureate paul krugman called stupid with this kind of estimation the instruments variables used to correct for possible two way causation are weak and dubious the best interpretation is that the authors tried something that happened to give the results they wanted then stopped looking really this isn't the sort of thing worth wasting time over the second analysis i want to be made part of the official record is an analysis by dean baker this is an analysis that also faults the methodology of the percent they lowered the unemployment rate by between zero point five percent and one six percentage point they increased the number of people employed by between one million and two nine million and increased the number of full time equivalent jobs by one point four million to four million will go right down the list and start with mister taylor each of you has five minutes so fire away mister taylor thank you mister chairman and members of the committee for holding this hearing which is very important as both you and the ranking member indicated unemployment is tragically high at this point also as you both indicated the reason for that is economic growth is so low businesses are not starting up enough they are expanding enough and they are not hiring enough to reduce unemployment from these very high levels in my view based on my studies and others i think the fiscal policies responsive to this so far have been largely ineffective they may have even made things worse they largely been in the form of temporary targeted interventions rather than comprehensive economic strategy economic growth in this recovery has been two point four percent almost not a recovery all that compares to six point five percent in the recovery from the last deep recession in that recovery had a growth of six point five percent i have a chart in my testimony that shows the striking difference  i do think we need a new economic policy one that focuses on sustained higher growth unfortunately the proposal the president announced last week is really more of the same as what we have had in the last few years temporary targeted programs and now even with permanent tax increases down the road it is much like the two thousand and nine stimulus when you look at it three hundred and seven billion of the four hundred and forty seven billion are temporary reductions in tax payments we did that in two thousand and nine it didn't work when i look at where the money went and it is very important to not just use regressions not just to use models but look where the money went when i look at where the money went it largely stayed in peoples pockets they didn't spend it it didn't jump start consumption or the economy when we look back at previous to increase spending this also we tried in the two thousand and nine stimulus i looked at this in detail looked at where the money went it didn't work these state and local governments largely put these funds in their coffers and you see thing happened we should learn from these experiences don't keep trying these things some say it would have been worse and mister kucinich referred to some of these studies they are based on models people simulate models they say it will work in advance  simulate the same models to show it worked after the fact it is no new information they are not looking at where the money went i hope people recognize that from my point of view more of these kinds of policies will not effectively lower  unemployment i think they are a mistake a much better approach is to lay out a lasting permanent economic strategy i would build on the budget control act which was signed this summer that makes some progress it doesn't go all the way but if it brings spending down further i would bring it to levels just of two thousand and seven as a shared gdp what is so hard about that if you do that you can do it without increasing taxes with tax reform that is revenue neutral and allow for regulator reform or monetary reform as well to me that is the best most promising way to reduce unemployment to get this economy going much more effective than more temporary targeted interventions which we have seen do not work thank you m  everything professor taylor said and i don't want to repeat what he said i would like to move on to the later parts of my testimony one of the thing we are doing increasingly in the united states is making it harder for employers to hire workers we run the risk of getting back to a normal gdp growth path about two point five to three percent a year but still having employers choose to hire fewer workers than they did previously  like to go through a few reasons for that one is the new health care tax that is going to take place in two thousand and fourteen starting from two thousand and fourteen employers who don't have the right kind of health insurance will have to pay two thousand dollars per work year employers who do have the right kind of health insurance but whose workers have low incomes and the premiums are higher than nine point five percent of the worker's household income will have to pay business forty thousand dollars a year you can see that many businesses are planning ahead the administration says this tax only takes effect in two thousand and fourteen so it doesn't matter but businesses do plan ahead the tax also affects franchises which are groups of firms if you are running a mcdonald's for example and it is part of a franchise of half a dozen mcdonald's then your number of workers would very well exceed forty nine and you might be competing against another small independent firm with just forty nine workers you would be at a competitive disadvantage interestingly enough the tax doesn't apply to part time workers the incentive would be for the employers to reduce the from health care there are different regulations that make it increasingly difficult to hire president obama admitted this when he put a hold on the ozone regulation he did that week before last saying this is not the right time for such a regulation i went to the unified spring regulatory agenda at www reginfo gov and i counted the number of epa regulations there are three hundred and eight regulations in process that means there are still three hundred and seven that are moving forward this doesn't count the thirty six completed regulations completed actions these might seem small if you are an employer say a farmer there is a regulation that is going to tell you how you have to feed your cattle and how you have to dispose of the manure if you sell pesticides there is a regulation that says what kind of pesticide greenhouse gases moving on to the labor department the epa would still allow coal production we just wouldn't be able to use it in our power plants we would be allowed to ship it to china but the labor department has regulations on coal dust that would prevent us even from mining the coal and getting it out of the ground and shipping it to china for them to use again this affects geographic areas that are already very much hurt in our recession the national labor relations board in its charges against boeing for opening a second plant in south carolina is sending a chilling effect to any employer especially those who want to locate in the more unionized states any manufacturing candidates thinking of perhaps opening a plant on the south general electric moved its ge headquarters to china they didn't get any problem from the nlrb the message goes if you offshore your work you are fine if you open a second plant here in the united states we are going to cause problems finally in the last nine seconds i would like to mention that we need to do more in terms of importing entrepreneurs senators kerry and lugar have proposed a bill that would allow more visas for employers abroad who want to create jobs chairman jordan and ranking member kucinich for inviting me to testify today my name is heather boushey and i am senior economist at the center for american progress action fund the american jobs act includes proposals that will create jobs by investing in infrastructure putting teachers back in schools targeting tax cuts towards small businesses and helping the unemployed independent economic forecasters say the plan will boost growth and employment i provide details on this in my written testimony presidents and congresses of all political stripes including the bush administration have embraced short term temporary fiscal expansion to create jobs in times of labor market weakness an empirically grounded body of literature documents the effectiveness of fiscal expansion and again i document that in my testimony denying that there was any impact of fiscal expansion in recent years is an ideological not empirically based stance the american jobs act builds on what we know we works to get people back to work investments in infrastructure both human and physical capital will put people to work now and yield lasting benefits for the economy these investments should raise u s economic output by about two hundred and twenty dollars billion above what it would otherwise be it will prevent up to two hundred and eighty thousand teacher layoffs and keep police officers and firefighters on the job it will modernize and upgrade our school infrastructure community colleges and invest immediately in highway highway safety transit passenger  much needed spending the accumulated backlog of deferred maintenance and repair in schools is at least two hundred and seventy dollars billion the american society of civil engineers estimates that we need to spend at least two dollars twenty cents trillion over the next five years just to repair our crumbling infrastructure increased investments in infrastructure have saved or created one point one million jobs in the construction industry and four hundred zero jobs in manufacturing through this spring almost all of these jobs were in the private sector upgrading roads bridges and other basic infrastructure not only creates jobs but lowers the cost of doing business and paves the way for businesses small medium and large to be more competitive they put people to work earning good middle class  comes which expands the consumer base for businesses the american jobs act also cuts payroll taxes and provides a tax holiday on new hires but focuses these tax cuts on small businesses in two thousand and ten fifty house republicans co sponsored similar legislation tax cuts are an effective way to boost the economy when demand is low although the multipliers are smaller than for other expenditures such as unemployment benefits and infrastructure investments the american jobs act will help the long term unemployed unemployment benefits kept an average of one point six million american workers in jobs every quarter during the recession during the past forty years congress has not once allowed benefits for the long term unemployed to expire when the unemployment rate was above seven point two percent and as already noted that is one point nine points lower than it is today the american jobs act will also provide every worker with a payroll tax cut the typical household earning  fifty thousand dollars will receive about one thousand five hundred dollars this is paid for by limiting itemized deductions and certain exemptions for high income families taxing investment fund managers income as ordinary income eliminating certain oil and gas industry tax breaks and changing the corporate depreciation rules this is a good set of pay fors the economy does not have a supply side problem since december two thousand and eight the non financial corporate e also not the reason for today's high unemployment let's go back to basics as the financial crisis inquiry commission found it was a lack of regulation that was a key factor in creating today's economic crisis and putting fourteen million people out of work the problem is demand the collapse of the housing bubble drained billions from our economy followed by a financial crisis which has left fourteen million people unemployed meaning that households quite simply have less to spend there is less money flowing through our economy as bill businesses which represents small business owners reported in august as it has each month since mid two thousand and nine that it is weak sales that is the problem there are clear steps we can take to create jobs and the american jobs act is a real step forward thank you for your time booming i would rather profit from america's success rather than her failure which is the reason i am here today we have some serious structural problems underlying the u s economy and we cannot solve them until we understand them as a nation we have borrowed and spent our way into a gigantic ditch we are not going to get out of the ditch by digging it deeper we have to reverse the mistakes of the past not repeat them government stimulus will never grow this economy it will never create jobs it is the equivalent of trying to put out a fire by pouring gasoline on it we have to understand that the housing bubble the financial crisis of two thousand and eight two events i predicted and warned about were the consequences of government stimulus we stimulated our way into this problem we are not going to stimulate our way out in fact the stimulus is actually a sedative the stimulus is preventing the free market from unraveling the problems that years of bad monetary and fiscal policy have created we don't need more spending we need the opposite of spending we need under consumption what the economy lacks is savings investment production if we try to preserve the jobs of the bubble economy with more reckless money printing borrowing and government spending all we are going to succeed in doing is preventing the restructuring we need and preventing more productive jobs from ever coming into existence i want to talk specifically about jobs i am an employer i employ about one hundred and fifty people i would probably employ one thousand more if it weren't for government regulations that have inhibited my ability to hire and grow my business and have forced me to move portions of my business overseas in order to escape the regulatory burden here the question is why do i hire people where are these jobs coming from jobs in a free market come from two things they come from profits or the profit motive and they come from capital you need both to create jobs in a free market there are going to be jobs and if there aren't enough jobs congress has to ask what are we doing to inhibit this process how are we preventing jobs that would normally be here from coming into existence in order for me to hire somebody i have to be able to make a profit that means the person i hire has to deliver to me more value than the cost of employing them the cost of employing them is not just the wages i pay them but all the mandatory benefits the taxes and more importantly the legal liability that i incur when i hire somebody in fact one of the riskiest things you can do in america is to hire somebody because of that reason because of all the liability from government from lawsuits that you have put on employers most small businesses main concern is how not to hire people how can i grow my business and hire as few people as possible that is not something that happens in the market that is something that happens as a consequence of government the other thing you need to create jobs in addition to profit is capital people work for me because i have capital i have tools that my employees lack they come to work i give them an office i give them secretarial support i give them computers i give them leads i give them brand i give them all sorts of things but where does capital come from it comes from savings from under consumption either i have to save it myself or i have to borrow it from  else there is no money to borrow because it is all going to government or something that government guarantees like education or home mortgages there is no credit available for small businesses it is actually a paradox but what we need is higher interest rates higher interest rates encourage savings these low interest rates are of no benefit to typical businesses yes it benefits government government can borrow all this money from the bond market some of the major corporations have access to cheap money wall street can gamble with it but small  happy to talk from my experience fifteen thousand dollars by security regulators because i hired too many people because i hired too many people i incurred over five hundred thousand dollars in legal bills defending myself because i hired too many people because i hired too many people i have been in a hiring freeze ordered by regulators for three years they will not let me hire people they will not let me open new offices despite the fact that i was dying to do it i had plenty of demand my business was growing unfortunately thanks to what you guys were doing but regulators prohibited me from doing this there are all sorts of ways that rules and regulations have inhibited my business in fact it is now so expensive i started my securities firm in one thousand nine hundred and ninety six there is no way  i could have started that firm today i have an entire compliance department and it costs me millions of dollars a year just to stay in business just to comply with rules and regulations that are not doing anything to protect my customers  what is less well known is the roots of our present jobs crisis go deeper than the great recession that began in two thousand and eight the share of adult americans who are employed peaked at an all time high of sixty four point four percent back in two thousand eleven years ago and never recovered since in two thousand and seven before the financial crisis of two thousand and eight and the ensuing recession the employment to population ratio had fallen down to sixty three percent it now stands at fifty eight percent the lowest level and eighty three for public policy to be effective in dealing with this grim situation it needs to be based on a clear understanding of where jobs come from on that question research from the kauffman foundation my employer leaves no doubt new firms are the main engine of job creation in this country specifically from one thousand nine hundred and seventy seven to two thousand and five there were only seven years in which existing firms created more jobs than they destroyed the bottom line is simple without start ups there would be no job creation in the united states additional kauffman foundation research reveals that the engine of new jobs began sputtering before the great recession census data show that the number of new employer businesses created annually began falling in two thousand and six dropping twenty timing of deteriorating employment situations suggests the problem is structural not merely cyclical structural problems call for structural solutions not temporary stimulus but permanent policy changes specifically the ultimate answer to restoring prosperity and vigorous job growth lies in policy reforms that create a favorable environment for the creation and growth of new businesses barriers to entrepreneurship need to be identified and systematically dismantled this conclusion is furth own research into the growth challenges confronting not only the united states but all advanced countries operating at the technological frontier my findings regarding what i call frontier economics can be summarized as follows the available sources of growth and the policy requirements of gro change over time with a country's advancing economic development what may work at one stage of development won't work in another in particular as countries get richer they become ever more heavily dependent on homegrown innovation as opposed to merely expanding existing opportunities or borrowing good ideas from abroad in order to keep the growth machine humming since new firms play a vital role in the innovation process that means that removing barriers to entrepreneurship becomes increasingly important to maintaining economic dynamism and prosperity in an effort to identify the kinds of policy reforms needs to reduce structural barriers to entrepreneurship and job creation the kauffman foundation unveiled in july of this year a series of legislative proposals that we call the startup act of two thousand and eleven let me review the major elements of this plan an entrepreneur visa along the lines of the revised lugar startup visa act green cards for foreign students that receive so called stem degrees degrees in science technology engineering and mathematics exemption from capital gains taxation for investments in start ups held for at least five years one hundred percent exclusion from corporate income tax for qualified small businesses on their first year of taxable profit followed by a fifty percent exclusion over the next two years allowing shareholders of companies with market valuations under one dollar billion to opt out of sarbanes oxley requirements since those requirements are supposed to protect shareholders then we think shareholders should be able to have a say as to whether they want that protection or not higher fees for better faster service at the patent and trademark office to clear the backlog at the pto i believe that provision is included in the patent reform legislation now nearing completion mandate that all federal research grants to universities be conditioned on university affording their faculty members the ability to choose their own licensing agents rather than having to rely as they do at present on their own university's technology licensing office institute a requirement that all major regulatory rules sunset automatically after ten years subject all proposed and existing major regulatory rules to uniform cost benefit analysis and institute monitoring of the business climate in sta along the lines of what the world bank's doing business report does for different countries the proposals contained in the startup act can represent a kind of greatest hits collection from a far broader set of promising reform ideas some of these other ideas can be found in a book published this year by the kauffman foundation entitled rules for growth a great deal of additional work will need to be done beyond these proposals but in the current crisis first steps are urgently needed we believe the proposals put for employer because of all the stuff you make us do and he pointed right at me talking about government it is not that mike doesn't like people or want to hire them it is just he said exactly may be not as eloquently as you put it but exactly what you said all the regulatory things that government piling up the job creators out there deep down understand they are probably going to have to pay for that too at some point that has to be paid off i would argue that may be more than anything is the biggest uncertainty they face i think there is a huge link between the taylor i think a moratorium on new regulation would help a lot absolutely you heard the testimony here that confirms that and i have seen it myself firms are sitting on a huge amount of cash not all of them have it but a large number do so that would remove a lot of uncertainty to the second part of your question i do think the debt and the uncertainty about how it is resolved creates uncertainty will there be a tax increase will there be inflation will there be december we went through a whole discussion debate as to what to do with taxes finally they were kept at the current level for the next two years in every speech president obama says he wants to raise them he just proposed raising them yesterday in the bil today's new york times for example there was an article about whether or not the fda would regulate new forms of e coli in our hamburgers that creates a level playing field so every producer knows it everyone else needs to make sure they are not allowing hazardous food that is an important regulation and certainly it costs businesses money but that is important for consumer health i don't know when i see that hamburger what is in inside of it that is critical so there is sort of blanket regulatory stuff and we need to dig down deep into that second we had an over eight percent drop in gdp because of the crisis that is a massive hole to fill i concur with my colleagues over here that it may have been that the housing bubble had an elevated level of demand flowing through the economy because of the housing bubble but that doesn't change the fact that when you pull it out of the economy you have a gapping hole and that has left fourteen million people out of work it is that hole that government spending the only entity right now can fill unless we are going to dramatically increase our experts very quickly my third point is around this uncertainty question certainly there is always uncertainty an economy but i think we should have been asking ourselves in the early 's how we were going to pay for the massive tax cuts that we did when we were also having to unfunded wars i didn't hear as much discussion around that then but those are the kinds of questions we should have been asking and a part of why we are here regulations are concerned certainly we need to stop piling new regulations on top of the existing regulations more importantly we have to start repealing a lot of the rules and regulations that are already in place there are millions of americans unemployed how do we increase the demand for labor it is simple you bring down the cost of labor regulations substantially increase the cost of employing people and as a result fewer people are employed there are simple things you can do from getting rid of the minimum wage law which you can do this afternoon  which would create millions of jobs and more importantly help people get trained for much higher paying jobs in the future right now they are never going to get jobs the regulations that increase labor costs and that subject employers to all sorts of lawsuits if they don't create jobs in precisely the manner that some bureaucrat thinks they should be created have to level the playing field between employers and employees you can't lose your rights because you hire somebody you process a couple of the proposals in our startup act go to that first is cost benefit analysis instituted uniformly for all major new rules and second even more importantly ten year sunset provisions for all major regulatory it seems to me that the portion of the american jobs act that addresses infrastructure is so very very very important it makes no sense folks say don't tax the rich in a recession but still the very people who have worked for this committee will probably end up taking a ten percent pay c they say what about them in a recession what about the secretary who is only making fifty thousand dollars who wrote some of the thing we are asking this morning what are her and her two kids we saw that people look at us like we were fools and they were totally disgusted they said they can't even get it together to pay the debts we have already made years most of these regulations were created over the years so now we say let us take away the regulations let me tell you what worries me i used to be an employer of  the things that worries me is that we give the tax cuts to business who are not hiring we look out for the banks who are not lending if we cut out the regulations making it possible for business to make even more money and by the way there is no guarantee when you get rid of the regulations that it is going to lead to them hiring more people even if they are saving money because the  they hear this i can hear the people in my district now if they are watching when i get home tonight they will say cummings they don't get it they don't get that i was not able to pay for my kids tennis shoes being on the premises black stuff came out in your mucous i think we need to be careful with regulations and we need to keep in mind why we have regulations they  think any stimulus type of action needs to be carefully planned and i think it needs to be very targeted but it has a role then business needs to do something for us the businesses that have benefitted tremendously from americans when the times were good may be they need to say it is time for us to start doing some things too and staying here in this country and making it in america as steny hoyer says  is now because of recovery dollars they are out there repairing those pipes giving us new pipes they are a hundred years old here in the district of columbia that is fantastic that is exactly what we need to be doing so he can be competitive and so american can compete in the st century economy i think  because we had a vigorous debate in congress about what should happen relative to the debt ceiling or did they down grade us because the deal that was put together didn't address the gravity of the problem mister taylor they mentioned the ongoing accumulation of debt they saw coming down the road and that had not been changed enough by the budget deal people think they commented on the way the budget was put together i think it represents an accomplishment that something was done something actually was done compared to the first budget that the president submitted in february of this year there is a substantial change in direction from that deal so i think there is some positive there but i think s and p was looking at the fact they wanted more  gets a credit card runs the bill up to fourteen thousand dollars and says that is not enough goes to the bank the bank says we will give you two thousand four hundred dollars more but you have to promise us over the course of the next year in your budget that you plan on spending you will spend twenty one dollars less than you planned on spending that was schiff he made so many points but you are right about one thing the bad regulation didn't start under obama we have a lot of regulations that need to be undone it is not just the intent i don't argue that in some cases the intent of the regulation is good the problem is the consequences are the exact opposite of the intent infrastructure spending doesn't stimulate the economy it drains the economy of resources infrastructure only helps in the long run when you finish the project if it raises the productivity of the nation in the meantime we are too broke china can put in these airports because they are rich we are broke before we can afford to improve the infrastructure we need to have more serious restructuring of our economy we have to start making stuff we need more factories before what you should have done if you didn't raise the debt ceiling then we could have cut spending you said we were paying our bills we don't pay our bills by going deeper into debt that is avoiding paying our bills and guaranteeing eventual default mister jordan the gentleman from tennessee is recognize chairman i was one of those guys going around saying we shouldn't raise the debt ceiling without significant cuts we saw what happened because we didn't get significant cuts i am all in favor of rebuilding our infrastructure and making our bridges safe we had a bridge in minnesota that collapsed years ago and that has become the poster child for our failing infrastructure we have millions of bridges that work just fine the point is what i don't get is how we are going to pay for matter where these regulations came from the fact is there are two darned many in the american jobs tour and my stops across tennessee the number one complaint and impediment to job growth according to the thirty plus industries i shocked at the debt ceiling debate my stance and at least what i gathered from the people from tennessee is they are shocked that we once again increase our debt ceiling by two dollars forty cents trillion and weighed it over cuts over ten years that they don't have any faith is go professor taylor you are obviously a student of history and i do believe you don't study history you don't repeat it let me read a quote we have tried spending money we are spending more than we have ever spent before and it does not work and i have just one interest now if i am wrong somebody else can have my job i want to see this country prosper i want to see people get a job i want to see people get enough to eat we have never made good on our promises and i roosevelt we haven't had eight years of this administration but as the chairman spoke and being a small businessman myself we keep talking about the uncertainty is what is keeping people on the sideline i would say it is just the opposite it is the certainty that under this administration's policies we have no way in heck to dig ourselves out of this debt i am a firm believer that you have to kill more than you eat or you can't stay i am trying to understand how in the world with these policies that we are enacting with no remedial only punitive actions against people and small business people how in the world are we encouraging these people to hire people mister schiff i feel your pain we talk about china and what china is doing china is not borrowing forty two cents on every dollar it spends it is not as clear and transparent a society as we would like it to be all these things are important all these things are fun to talk about but the reality of this is trajectory we are on right now is totally unsustainable standard and poor's was not wrong if you want to see what is wrong go back to fannie mae and freddie mac when you tell banks you have to lend money to people who no way in heck can pay it back but you have to do it anyway when i bought my first house the first question i was asked by the lender was how much money do you have to put down i said ten thousand dollars and i was told you can buy a thirty thousand dollars house flip it to now how much do you have to put down nothing then buy anything you want we will underwrite it doctor we talked about stimulus in the past under president bush i had friends that just couldn't wait to get that check from president bush in your opinion what do people do with this money they get back do they put it back into the economy what do they do with it  temporary interventions don't work and i think they are counter productive for many of the reasons you are saying mister kelly i agree mister schiff i have also tried to borrow money and i will tell you right now the problem with lenders is they are scared to death because there is legislation passed with no rules banks and i am talking about the smaller banks and i have come to believe that if you are too big to fail you are also too small to survive when collateral used to be what we worked on but there is uncertainty as to what your only borrow if somebody is saving there has to be a lender on the other side of that transaction there has to be something in it for the lender you have to have higher interest rates the problem is the banks are just getting money from the federal reserve and buying treasuries with it that is not going to grow the economy that is going to grow the jobs they destroy to create those jobs all the government can do is rearrange the resources it doesn't create any wealth the problem is the jobs or the wealth that gets destroyed is more productive than whatever the government replaces it with  balance the country is poorer as a result of that the fact that we send out a stimulus check is not going to stimulate the economy if an american buys some more products that were made in china how does that help our economy it runs up the trade deficit and now we have to go deeper into the biggest reason for doing that was what we had seen two years prior in this administration this government overreach this keynesian economics where we think we can spend money to create jobs doesn't work i have spent the last several months in my district talking to the businesses because those small businesses are what make upstate new york tick upstate new york has taken such a hit you mentioned manufacturing jobs we used to have carrier we used to have crucible steel we  is get the government out of our way we comply with these regulations we spend the money to comply and before we know it the regulations have changed they continue to change the rules which is what mister kelly mentioned they continue to create an environment of uncertainty i guess the question for all of us because we all want to address this issue is what are we going to do about this how are we going to get the government out of the way my own personal belief is if they would just rewind and get rid of these regulations just get out the way and just be silent i think we would all be better off i would like to hear from you and i will start with professor taylor what is your vision  agree with much although i haven't seen the specifics of this bill i just know that the last stimulus of close to one dollar trillion failed i have listened and talked to my city and county governments and so many of them used that money to plug holes in their budgets that wasn't want that money was supposed to be used for it was not used at all i don't think for what it should have been used for we have proven that doesn't work what would work in your estimation taylor the new proposal is much the same so i don't see how that could work based on what i have looked at myself which corresponds to your observations what would work is a comprehensive economic strategy to  small bit of headway on that but it needs to come back to two thousand levels as a share of gdp then we wouldn't have to have a tax increase that everybody is worried about we could have some revenue neutral tax reform which would boost the economy and then we could proceed with the regulatory issues and i think some of the monetary issues that are also a drag on the economy it is really a comprehensive strategy i think it could build on the budget control act which obviously didn't go fifty thousand dollars those are the small business owners who file subchapter s it has nothing to do with families who are wealthy these are a lot of small businesses who look good on paper but their net income is not anywhere near two hundred thousand dollars my concern is what you said about these people who have profited now we need to go back and tax them and increase their taxes since when does the united states of america punish success that is the fundamental we reward hard work our system is one that if you take  risks and work hard you succeed and you should be able to succeed without being penalized that is my concern with this message about we are going to raise taxes on these people who have done so well they didn't steal that money they worked hard for that money i think it is very important that this class warfare businesses that is an incredibly important thing second on the tax revenue raisers those are cutting loopholes many of whom are focused on families but i want to make one note about the small business owners this is net income  lawyer firms things like this these are people who could afford it the last thing is one of the key pieces of the president's proposal for the pay for is to tax hedge fund managers at the same rate that me and most americans who work for a living are taxed right now they that they should be taxed at the same rate as everyone else who works for a living not at a much much lower rate mister jordan i am going to pick up where ms buerkle left off one of the thing we thought this debt ceiling debate made sense was a proposal we put forward we thought was starting to break through with the american we called it cut cap and balance cut spending in a bigger way the first year not just twenty one dollars billion over one hundred and ten dollars one hundred and eleven dollars billion cap it as a percentage of our economy professor taylor to get it back in line where it has historically actually a solution we also understand the importance for growth i would argue we need something like cut cap balance and grow tell me what the tax reform part of a growth manner of getting rid of the loopholes and lowering the rate so we would end up with the same amount of revenue as we did before then with a more efficient economy you would be pulling in more amounts of tax revenue mister jordan would you advocate a flat tax taylor would you agree that kind of approach is what is needed for growth mister taylor absolutely tax reform which is revenue neutral should be the goal and that will increase economic growth because those lower marginal tax rates are shareholders pay the taxes tax them at the shareholder level the employees pay the taxes when they get paid but ideally we would have no income tax we would have no payroll tax if the federal government needs revenue let it raise it through a national sales tax it would be much more conducive to tax people when they spend their wealth not when they accumulate it mister jordan i agree with all that mister schiff the argument is always if we only tax spending the rich don't spend all their money precisely the money they don't spend is what grows the economy that is what produces jobs if they are not spending the money it is benefitting everybody but the rich the rich enjoy their wealth when they spend so that is a much better time to tax it as far as your budget plan i think congress is much under estimating how much time we have to deal with this crisis i think there is a sovereign debt crisis and a currency crisis coming to this country soon may be even before the next election that will be far more catastrophic to our economy than what happened in two thousand and eight mister jordan well said the window of time to fix this is wars we had the prescription drug program and they weren't paid for and at the same time we were reducing taxes is that right we reduced taxes sharply in early two thousand and did not reduce our expenditures commensurate with the lower taxes and it did not lead to the kind of rebound in economic growth that would make those taxes pay for themselves if i could make one more point on that in fact after those tax cuts you saw the economic recovery of the 's was the weakest in the post world war ii era in terms of growth and investment employment gains and was the only economic recovery since the end of world war ii where families ended the recovery in two thousand and seven with less income on average the median family than they had in the year two thousand mister cummings most top economists are saying that the president's american jobs act will boost the as proposed allen sinai chief economist of decision economics states payroll tax cuts are very powerful they provide a boost to direct income schiff i think the deficits that will be created to finance that tax cut will do more damage to undermine this economy and destroy jobs than any benefit we will get from the extra income government does to the economy is not limited to taxation it is spending it is what the government is spending that is damaging the economy if we run deficits instead of taxes we actually do more damage deficit spending is more detrimental to the economy than taxation what we need to do is dramatically reduce government spending that is the only stimulus that will work mister cummings i think we need to do both i don't think there is any member of congress that does not believe that we need to do both massive layoffs that have happened in education around america because of the state and local budget crunches that using government dollars right now it is hard to understand how that is not easy for us to do because we can afford it and that  help our economy having children in school rooms in places across the country with forty children is not good for america's future it is not good for america's work force we can do something to fix that we can borrow at historic low rates and pay it back as the economy gets back on track i would like to take issue with one thing mister schiff said earlier which is that america can't afford it america remains one of the richest countries on the planet to say that we cannot afford to make these investments right now when our economy needs it most and get fourteen million people back to work is quite frankly absurd we can afford it it is how we are using our resources mister schiff we can't afford it and the problem is interest rates are low now they are not going to stay low we have a fifteen dollars trillion national debt finance with treasury bills it is the same mistake people made who were taking out subprime mortgages what is going to happen rates are at five or ten percent what is going to happen when interest on the national debt consumes one hundred percent of federal tax receipts that can happen in just a few years interest rates got to our national security is our failure to properly educate every single one of our children that is the greatest threat if we have to spend now to educate our children so they can take over this world innovate create getting educated we need more on the job training unfortunately we have too many kids going to college on government grants that has bid the price into the stratosphere and we have all these kids graduating with huge mortgages and no houses and no marketable skills mister cummings i am saddened by those comments  this i remember very vividly because i paid one percent over prime for my floor plan costs so in the early s when prime was around twenty one percent which people say is not possible it is and in the artificially low it should be market value the effect it is going to have on businesses mister schiff the problem the artificially low interest rates right now are one of the main problems that the economy has i think we are pursuing those rates to prop up insolv afloat by the cheap money from the fed their portfolios are loaded with low yielding long term mortgages and government bonds and when interest rates go up the value of those assets will collapse they have to go up because eventually the dollar will sink so much prices will rise so much nobody will lend us money the dollar won't be the reserve currency right now it is kind of benefitting from the fact that there are problems in other parts of the world but look at the price of gold it is at one thousand nine hundred dollars a ounce for a reason it is going up because of all the inflation that we are creating now and all the inflation we are going to have to create in order to keep interest rates at these low levels the only way to solve our problems is to let interest rates go up and they are going to go way up then what are we going to do if we keep inflating this bubble if we let the national debt get to twenty trillion and then rates go to ten or twenty percent what people are saying now is exactly what they said during the real estate bubble people used to tell me peter you are crazy real estate prices will never fall now we know what happened people are now saying the same thing with interest rates we don't have to worry because interest rates will never rise they will stay low forever they won't mister kelly you are right the only thing we know for sure is they are not going to rise before the next election mister schiff we don't know that for sure they are going to try everything they can to prevent mister kelly the other thing that is going to happen is if we print money that isn't backed by anything our lenders are going to say at some point you are paying me back with money that isn't worth what i lent you mister schiff we are destroying the value of our money and that is why prices are rising oil prices aren't going up in fact ron paul pointed out in his last debate you can buy a gallon of gasoline for a dime as long as you have a dime that was minted before one thousand nine hundred and sixty five it is because our money is being debased by the federal reserve that is what is happening prices aren't going anywhere the value of our money is declining and it is going to lose a lot more value in a very short period of time if we continue these under the president's new plan there is a four thousand dollars incentive for hiring people who have been unemployed for long periods of time for somebody like yourself who is an employer and somebody like myself who is an employer who interviews people  picking winners and losers as to who it we are going to hire mister schiff absolutely in fact this is another example of things that are going to backfire the government is proposing a plan to make it illegal for employers to discriminate against people who have been unemployed for more than six months the effect is going to be so they can start them at the six months so they can get the tax credit but it is simply going to shift jobs away from people who are newly unemployed or long term unemployed to people who have been unemployed for a specific period of time i think the most it is going to do is influence minimize wage  i said earlier that we should abolish the minimum wage that four thousand dollars tax credit temporarily substantially reduces the minimum wage for a six month period of time i think on the margin you will create some minimum wage type jobs on a temporary basis but it is not going to be any kind of great stimulus as i said the deficits we will generate to finance the tax cuts will destroy more jobs than those tax cuts create mister kelly i would agree with you on a lot of these things it is totally bizarre to me that the people we expect to do the most lifting are the people that we put the most burden on and continue to overburden them with regulations that really don't in the long run cost benefit analysis doesn't play out i am not saying they weren't good intentions to start with but when you look at what has happened and it makes it so difficult on those people who are absolutely being depended upon to lift that load it is bizarre to me that anybody could look at this logically and think this is a plan that makes sense when in the history of the world we don't have any data that would suggest that is possible thanks so much for being  counsel of the nlrb wants to stop the boeing company which has a backlog of over eight hundred dreamliner aircraft on order from using its new aircraft manufacturing plant in south carolina to build dream respondent talking about boeing from making non discriminatory decisions with respect to where work will be performed including non discriminatory decisions with respect to work at its north charleston south carolina facility  madam are you aware that the case brought by the nlrb's acting general counsel against boeing is about work that was illegally taken away to retaliate against workers for engaging in acts that are protected under federal law the remedy is that the work that was transferred must be performed in washington not that boeing cannot produce planes in south carolina or any other state are you aware of that ms furchtgott roth boeing did not close its plant in washington state it did not lay off any w government spending during economic turndowns in january two thousand and eight congress passed an economic stimulus act which injected over one hundred and fifty dollars billion into the economy there were one hundred and sixty five republicans who supported it and president bush signed  in the spring of two thousand and eight congress extended benefits for long term unemployed with the support of one hundred and eighty two republicans and president bush signed it there is widespread agreement among economists that economic growth and job creation during this economic downturn economist for the world bank it is also the view of bruce bartlett a conservative economist who held senior policy roles in the reagan and george h w bush administrations and also argues that the federal government could increase aggregate spending by directly employing workers or funding public works projects mister taylor in your written testimony which i was pleased to be here for you seemed to dismiss this perspective do you agree with bruce bartlett and joseph  cummings mentioned zandi these people have these models which they simulate it is their models of the economy and they simulate them and the models say this is going to work then they do it after the case they simulate the same model and say it did work what i have tried to do and others have tried to do is look at the money look at where it went and when we do that we don't see these impacts you might look at a particular project may be in my state of california and there is a sign be disagreement and i would like to hear your perspectives on what works and what doesn't work mister taylor we could learn from history about what works for example in the recovery from the last deep recession we had and more recently and see the same thing to me when people study these carefully they come to the conclusion that the shorter term temporary and i would add targeted to that  policies don't work what works are these more permanent more lasting policies that is what we need so much if we are going to get the unemployment rate down the unemployment rate is high because economic growth is low  and even the forecasters who say this is going to work predict economic growth will come back down again after a short term boost i don't even see the boost but even if you get a boost it doesn't deal with the problem we need to get unemployment down to where it was before the unemployed six months or more now it is forty five percent the teen unemployment rate has gone up the african american unemployment rate has gone up we can see that this isn't working we do need to take a different tact i would say fundamental tax reform is the best chance of immediate economic growth together with reform of regulation i have written about regulations that were passed during republican administrations and how those should be revoked also one that i have written about is the incandescent light bulb ban which was part of the energy security act of two thousand and seven and ge closed its last light bulb incandescent light bulb plant in west virginia kind of investment you can't do that now because of the collapse of the housing bubble this recession is very very different in terms of the recovery and what we need to do second there is a lot of good research that shows the impact of stimulus i have cited a lot of it in my the catastrophic costs like the financial crisis when you are thinking about regulation thank you ms buerkle thank you professor taylor i don't know if you would like a minute or less than a minute for rebuttal mister taylor sure no recovery is the same because the dollar got so high at that point where it dragged about two percent per year negative right now housing is not going anywhere but it is not taking away from growth every recovery has its problems what is unique about this one is its broad base investment is down consumption is down firms are not hiring it is across the board and that is why i think if you try to understand what is going on you come to these questions about the policy the uncertainty that it has caused the worries voted for and within a year of that his own council of economic advisors concluded that it didn't work very well and recommended it not ever be done again again president carter a democrat of course the same thing his advisors said it didn't work we learned that lesson for a couple of decades now we are back to the failed policies of the past i think it would be a terrible mistake to do it yet again and that is my concern here ms buerkle thank you professor taylor efforts by government in the past to artificially stimulate the economy have failed they have worsened the problem the recession is actually part of the cure the recession needs to be allowed to run its course the reason we are never going to have a real recovery is because the government won't let us have a real recession we have serious economic imbalances that i mentioned we have an economy that is based on spending borrowed money that can't be economies have to be based on savings  investing and production we are trying to run an economy upside down in order to maintain it we have to keep interest rates at zero we have to run these huge imbalances we have to import all these goods that we don't produce we have to borrow from the rest of the world we have to allow the to level with the american public about how severe these problems are and how they are the consequence of years and years of mistakes made by congress and by the federal reserve there is a free market cure it will work if the government gets out of the way and let it happen it is going to be painful just like anyone who has a drug habit they check into rehab they will come out better but it is not going to work if every time they feel the withdrawal symptoms they take another shot of heroin because that is what these stimuluses are a shot of conditions that are favorable for economic dynamism and economic growth since our focus here is on jobs we need to keep in mind that the job market in this country has been slack for a decade that the track record of new business formation and unemployment and new business has been off trend in recent years well before the recession so we should be looking at structural issues not just as temporary cyclical fixes  panel this morning i spoke with the northern virginia tech council all ceos all involved directly or indirectly in high tech growth in northern virginia a great success story to say the this morning was we wouldn't invest it basically we don't have the kind of stability that causes us to want to make the investment what is it that we should be looking at from this side of the dais where we have been talking to american job creators through americanjobcreators com we have been hearing from people what the impediments are to job creation and we want to deal with those those are a given what else could we do so that dollar trillion to two dollars trillion came back in it would be invested in america and then i have a side bar question which is aren't we focusing on the wrong thing when we focus on jobs shouldn't we be focusing on money in order to create jobs for ourselves we work so that we can have money to spend the purpose ultimately of economic activity is consumption but clearly our economy is under performing in job creation and making use of valuable creation the overwhelming source of net job creation in this country is new businesses businesses under five years old specifically startups what you need to do is look at the kinds of policies that make it easier for them to get started easier for them to attract aircraft with less labor should they be able to do that or should we consider that retaliation if they find ways to use less labor and thus need less union workers in everett washington doesn't the logic of  only adding two thousand jobs in everett being a retaliation because they could have added three zero isn't the logical next step for nlrb and for the federal government to say we want you to add four thousand jobs you figure out how to do rather than spending every day figuring out how to build a better airplane with less total cost ms furchtgott roth what the national labor relations board is doing to boeing is absolutely unprecedented mister issa i just want to know how far if we let them take it they should be able to take it next shouldn't they be boeing did not boeing kept its plant in washington state we can just have a look at the violence in washington state over the past week from the longshoremen who are destroying railroad carts and grain to give some indication of why an employer might prefer to build another plant elsewhere if nothing else for geographic diversity as well as because of different costs this is sending a chilling effect to employers who want to locate in unionized states they might very well be stuck there if the  continues with its current policies of not allowing them to move it also puts them at the mercy of strikes if there is a strike over some perhaps needless or small issue and that is used in the future as a rationale for disallowing another plant elsewhere it works to the harm of the united states because then companies just prefer to offshore their manufacturing mister issa isn't there a record of exactly that happening in germany for example even though they had a lot to be said for locating in germany for a long time you couldn't close an operation or reduce an operation in germany and as a result nobody would make an investment in germany unless it was sort of a guaranteed investment which usually was a government contract ms furchtgott roth that is correct the eu also has rules against firing workers which makes it very difficult for employers to take on workers they know once they have them they are stuck with them in the past we have benefitted from flexible labor markets we have created vast numbers of jobs we have had unemployment rates two to three percentage points lower than europe we have laughed at germany for its nine percent unemployment rate and now it is reversed my fellow witness talked about the slack labor market in the earlier part of the last decade  comments will help everyone how many of you out of five believe henry ford did a service to america in automating and increasing the productivity at ford plants during his tenure in the model t and model issa one of the things we can all agree on isn't that part of the challenge we face today if you can produce a better product for less which also includes less labor  that is how you end up being a world class creator of jobs isn't that the principle that for some reason stimulus simply adding jobs by paying for them does the exact opposite of less labor perhaps but thousand five hundred dollars a week ford's workers were making two thousand five hundred dollars a week the equivalent paying no federal income tax and no payroll taxes there was no minimum wage and no unions we paid the highest wages in the world yet we produced the best quality and least expensive products how was that possible that was because we had the smallest government we had minimal regulations and low taxes if we want to recreate american industry we have to recreate that environment we have to allow businesses to grow and prosper we have to remove all the road blocks and impediments that congress has placed in their path over the years mister issa doctor boushey you are sort of surrounded here so i will give you the last word appreciate that very much at this time this hearing stands a