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PROSPECTS FOR EMPLOYMENT GROWTH: 

IS ADDITIONAL STIMULUS NEEDED? 

HEARING 

BEFORE THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

FEBRUARY 23, 2010 

Printed for the use of the Committee on Financial Services 

Serial No. 111–101 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

CHARLES A. WILSON, Ohio 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

BILL FOSTER, Illinois 

ANDRE ́ CARSON, Indiana 

JACKIE SPEIER, California 

TRAVIS CHILDERS, Mississippi 

WALT MINNICK, Idaho 

JOHN ADLER, New Jersey 

MARY JO KILROY, Ohio 

STEVE DRIEHAUS, Ohio 

SUZANNE KOSMAS, Florida 

ALAN GRAYSON, Florida 

JIM HIMES, Connecticut 

GARY PETERS, Michigan 

DAN MAFFEI, New York 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

KENNY MARCHANT, Texas 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

BILL POSEY, Florida 

LYNN JENKINS, Kansas 

CHRISTOPHER LEE, New York 

ERIK PAULSEN, Minnesota 

LEONARD LANCE, New Jersey 

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III) 

C O N T E N T S 

Page 

Hearing held on: 

February 23, 2010 ............................................................................................ 1 

Appendix: 

February 23, 2010 ............................................................................................ 43 

WITNESSES 

TUESDAY, FEBRUARY 23, 2010 

Hassett, Kevin A., Director, Economic Policy Studies, American Enterprise 

Institute ................................................................................................................ 11 

Mishel, Lawrence, Ph.D. , President, Economic Policy Institute ......................... 10 

Stern, Andy, President, Service Employees International Union ........................ 8 

Zandi, Mark, Chief Economist, Moody’s Analytics ................................................ 13 

APPENDIX 

Prepared statements: 

Hassett, Kevin A. .............................................................................................. 44 

Mishel, Lawrence, Ph.D. .................................................................................. 54 

Stern, Andy ....................................................................................................... 83 

Zandi, Mark ...................................................................................................... 91 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Package of statements from the National Council of La Raza (NCLR) .............. 114 

(1) 

PROSPECTS FOR EMPLOYMENT GROWTH: 

IS ADDITIONAL STIMULUS NEEDED? 

Tuesday, February 23, 2010 

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The committee met, pursuant to notice, at 2:03 p.m., in room 

2128, Rayburn House Office Building, Hon. Barney Frank [chairman of the committee] presiding. 

Members present: Representatives Frank, Waters, Maloney, 

Watt, Sherman, Moore of Kansas, Clay, Baca, Miller of North Carolina, Scott, Green, Bean, Ellison, Perlmutter, Donnelly, Foster, 

Carson, Kosmas, Himes, Peters; Bachus, Castle, Royce, Manzullo, 

Biggert, Capito, Hensarling, Garrett, Marchant, Posey, Jenkins, 

Paulsen, and Lance. 

The CHAIRMAN. The hearing will come to order. This is a hearing, in conjunction with the hearing we will be holding tomorrow, 

according to the statutory requirement that the Chairman of the 

Federal Reserve report twice a year to both the House and the Senate to talk about the state of the economy, and particularly about 

employment under the Humphrey-Hawkins Act. It has been our 

practice since I have been the chairman not simply to have the official view of the Chairman of the Federal Reserve, but also to invite 

some other witnesses, economists in particular, to talk about these 

issues. And that is today’s hearing. 

The question is whether additional stimulus should be adopted 

by the Congress, given the state of the economy. I want to address 

a couple of issues. One of the things I have heard from some of my 

Republican colleagues from time to time is that part of the problem 

has been taxation. Indeed, I was on a panel with some of my Republican colleagues in which they complained about increased taxation. I think it has not, I guess, been expressly underlined, maybe 

because someone thought the obvious need not be underlined—but 

that is not politics—that a substantial part of the bill that passed 

a year ago was in fact tax reduction. People used the $787 billion figure or whatever figure they used as if it was all spending, where over $200 billion of it was tax reduction. There have subsequently been two other much smaller tax 

reductions adopted to try to stimulate the economy: the Cash-forClunkers to stimulate the sale of automobiles; and the homeowners’ tax. Now those were supported in varying degrees by different Members, but in fact those were also additional tax cuts. So 

while a majority of the activity designated stimulus was spending, 

in fact a significant amount was tax cutting, and certainly people 

2 

who talk about $787 billion of spending as if that were the whole 

stimulus are simply wrong. 

There is also the argument that because, having passed an economic recovery plan, we did not see unemployment disappear, the 

plan hadn’t worked. The crudity of that logic is so basic that, once 

again, one would not have thought you needed to talk about the obvious, but apparently you do. The relevant question is: What would 

things have been in its absence? I know of very few economists who 

think that there were no jobs created or kept and that the unemployment would have been the same as it is today if we hadn’t 

passed the stimulus. 

I am particularly struck, and I know Bloomberg talked about 

this, with some of my Republican colleagues who have, with a very 

straight face, maintained two propositions which one might have 

thought inconsistent: one, that the stimulus did not create any 

jobs; and, two, that officials in charge of stimulus money should 

provide some to their districts so jobs could be increased. I have 

seen the releases from people who have steadfastly denied there 

were any jobs here, arguing the stimulus would produce jobs in 

their district. 

Now I am not making the argument that, having voted against 

something which passed, you should boycott it. That is simply 

wrong. That is undemocratic. People who live in a particular district should not be denied anything because their Member voted 

against it. What I am talking about is the intellectual inconsistency 

of writing a letter to Administration officials to ask that certain 

funds be made available because of the job creation and then denying there was any such job creation. That, I think, flies in the face 

of a number of things, including the facts. 

I will reserve the balance of my time because I will have other 

Members. The gentleman from Alabama is now recognized for 4 

minutes. 

Mr. BACHUS. Thank you, Mr. Chairman. 

First, let me say that Mr. Peters and I and some others traveled 

to Afghanistan last week, and I enjoyed our conversation. I think 

we came back better informed. I think you have a good Member in 

Mr. Peters. 

The CHAIRMAN. We can arrange for you to say that in Michigan. 

Mr. BACHUS. Mr. Chairman, we all want the same thing. We 

want every American who wants a job to have a job. We want those 

jobs to be real productive employment. And a jobless recovery is no 

recovery for millions of Americans on the unemployment line. And 

that is basically what we have. I am really surprised that we are 

even debating the need for a new stimulus in light of our experience with the old stimulus. 

It was just a year ago today that the Obama Administration and 

congressional Democrats really sold the American people on the 

idea of a government stimulus as a way to create 3.5 million jobs 

by the end of 2009 and to cap unemployment at 8 percent. 

The chairman mentioned his Republican colleagues. Well, we 

warned that the stimulus wouldn’t work and that those were overblown promises. We said the way to fix an economy that had been 

distorted by government meddling was not for the government to 

meddle further. And we continue to believe that the answer is not 

3 

growing government. Our warnings were not realized, and I think 

it is time to reevaluate the current course of action, which is just 

to grow government and more government response, which pulls 

money out of the private sector. The last thing America needs is 

a sequel to the so-called stimulus, which only succeeded in adding 

hundreds of billions of dollars to the debt, an unsustainable debt 

and one that I think is a fiscal catastrophe waiting to happen. 

The time has come, Mr. Chairman, for this Congress to stop pretending we can spend our way out of a recession caused by excessive debt by borrowing and spending yet more money we just don’t 

have. That is not the way that American families recover, by 

spending more and borrowing more when they are deeply in debt, 

and that is not the way the government ought to address it. 

Before he became the Chief White House Economic Advisor, 

Larry Summers famously asked, ‘‘How long can the world’s biggest 

borrower remain the world’s biggest power?’’ We must remember 

this as we go forward. Unless and until we take the steps necessary to put our house in order, our financial house in order, we 

will not have an economy capable of producing the kind of jobs that 

sustain families and communities. We can’t continue to waste billions of taxpayers’ dollars on job creation schemes which fail to 

produce jobs. What we need are new solutions that will put Americans back to work without burdening future generations with 

crushing deficits. 

A good first step would be to abandon the Administration’s 

health care and cap-and-trade proposals, which are freezing small 

business in place and impeding economic recovery and focus on 

policies that promote growth and investment. There is one way and 

one way only to spur the creation of new jobs; it is to take the 

heavy hand of government off the economy’s neck and take the government’s hand out of ordinary people’s pockets. That will let business make what it knows how to make best and people to have 

enough money to buy the things they need. 

The government doesn’t make jobs. People create jobs by making 

things and buying things. Jobs created by government spending, 

especially in the public sector, take money out of the private sector, 

where most productive jobs are created. 

So, Mr. Chairman, I want to take a page from President Obama’s 

playbook and invite you and the congressional Democrats and the 

President to come work with us. Let’s pass a financial regulatory 

reform bill that fixes what is wrong without wrecking what isn’t. 

Let’s do the same thing with health care. And let’s give businesses 

and families some certainty about what their income picture will 

be like for years to come so they can start budgeting for spending 

again without worrying what their government will do next, increased taxes and failure to be able to meet our obligations. 

Thank you again, Mr. Chairman, for holding this hearing. I look 

forward to the testimony of the witnesses. 

The CHAIRMAN. The gentleman from Delaware is recognized for 

11⁄2 minutes. 

Mr. CASTLE. Thank you, Mr. Chairman. 

Despite signs that our financial system is more stable than it 

was a year ago, we are still facing obvious serious economic problems. Millions of Americans are unemployed and finding it difficult 

4 

to pay their bills. I recently held a second job fair in my State, 

which brought over 400 job-seeking Delawareans for an opportunity to meet with businesses that were hiring or offering training. This fair was in Kent County with an 8.2 percent unemployment rate, under the double digit numbers we have in other parts 

of the State. 

With respect to the American Recovery and Reinvestment Act, 

commonly known as the stimulus bill, I am concerned about the 

longevity of the employment opportunities derived from this law. I 

worry that too much of the stimulus has failed in this respect. 

How many of these jobs were long term, and how many were just 

temporary? When the stimulus funds run out, how many more 

Americans will become unemployed? As I see it, we should be creating permanent jobs by helping small businesses grow and American companies to innovate and expand. 

As we move forward here, I hope we can collaborate in a bipartisan way to address the unemployment and economic challenges 

in this country and focus on providing long-term solutions that will 

create jobs and improve job training and placement programs for 

those people unable to find work. 

I yield back the balance of my time. 

The CHAIRMAN. The gentleman from Georgia is recognized for 2 

minutes. 

Mr. SCOTT. I can’t express to you how much I appreciate this 

hearing, because the jobs and economy is the most important issue 

we are faced with today. But I hope that this panel will take just 

a couple of minutes to talk about the disproportionate impact that 

unemployment is having in the African-American community. 

The overall White unemployment rate is right around 8 percent. 

But among African Americans, it is 6.4 percent. And we haven’t 

even begun to factor in those individuals who have given up looking for work or, especially, African-American males. In some communities, it is 50 percent. 

Now, we can put our head in the sand and not want to talk 

about this because it brings up the big question of race, but it has 

to be dealt with. We can’t begin to deal with this pressing unemployment when we don’t look at the high disproportionate share. It 

dovetails into other issues, into crime, into family breakdowns. 

Why? 

So I think we ought to figure out, when we are talking about this 

unemployment, how can we address this issue? How can we look 

at the impact of this issue that is happening to a very important 

part of a segment of our economy? We are never going to bring the 

unemployment rate down unless we target things to those areas 

where there is a high disproportionate number of unemployed. And 

so definitely we need more stimulus, but we need it directed, and 

we need it targeted, and we need it focused. Just as surely as we 

target and focus money to Wall Street, to specific banks where the 

problem was, we need to do the same thing with unemployment. 

The CHAIRMAN. The gentleman from Texas, Mr. Hensarling, is 

recognized for 11⁄2 minutes. 

Mr. HENSARLING. Thank you, Mr. Chairman. 

The question of this committee hearing, is additional stimulus 

needed, another way of asking the question is, is additional debt 

5 

needed? We know, with the interest factor, the so-called stimulus 

bill created $1.2 trillion of additional debt for our Nation, which 

begs the question, how much debt is enough? 

We have seen that the deficit has increased tenfold in just 2 

years. Recently, the President has presented a budget which will 

double the national debt in 5 years, and triple it in 10 years, from 

Fiscal Year 2008. We see that the debt held by the public will soon 

go from roughly 40, 43 percent of the economy, under the President’s budget, up to 77 percent of the economy. 

I spent most of the break, which turned out to be a 2-week February break, speaking to small business people in my district in 

Texas. I spoke to community banks, spoke to people who are involved in investment management. I hear the same message. People are reluctant to create jobs or expand business. 

The CHAIRMAN. The gentleman’s time has expired as allotted. We 

had 11⁄2 minutes, was that correct? Let me apologize. The red light 

went on. I have to apologize. I need to correct this. This doesn’t do 

minutes. I apologize. The gentleman is recognized for an additional 

30 seconds. Don’t have the red light go on after 1 minute. Do the 

2 minutes. 

Mr. HENSARLING. I would be happy to start over from the beginning, if that would be helpful. 

The CHAIRMAN. I thought the gentleman had, several times. 

Mr. HENSARLING. Thank you, Mr. Chairman. 

I continue to hear business people say, how are we going to pay 

for all this debt, all of this deficit? It will lead to massive taxation 

or massive inflation. It is a huge impediment to job growth, as is 

the threatened takeover of our health care system, which by any 

honest accounting, could cost up to $2 trillion. Add in the threatened $800 billion potential energy tax. No one is going to create 

jobs and expand businesses in this economy. Wipe that away and 

this economy, by any historical standards, should already be out of 

recession and creating jobs. That is what needs to be done. 

I yield back the balance of my time. 

The CHAIRMAN. The gentleman’s time has expired. I am going to 

use my remaining time to repeat, again, I am struck by the unwillingness of my Republican colleagues to acknowledge that a substantial part of the stimulus was tax reduction. Now the gentleman 

just said more debt. Well, a third of that debt, almost 25 or 30 percent of it, came from tax reduction. If what we are hearing is a Republican objection to tax reductions this time, we may have more 

agreement than I thought. 

But let’s understand that the stimulus package included over $200 billion of tax reductions. There were several additional tax reductions in a smaller amount, $10 billion or $12 billion. So I am, 

as I said, impressed that there is no differentiation. The tax reduction and spending are apparently equally destructive to the economy in their rhetoric, not in their analysis. 

The second argument that there is no role for the government is 

a very surprising one. Let me talk about two elements of the economic recovery that I think are essential. One, I think 47 Governors just asked for an extension of the FMAP program, the program that helps with Medicaid. That was part of the stimulus. 

They are facing serious problems. The notion that we should not 

6 

help Governors avoid serious cuts in Medicaid is shocking to me. 

In fact, that is a part of what we are talking about. 

Secondly, we have the whole problem of State and local budgets. 

We are told, well, the private sector will create those jobs. There 

are police officers in cities in the district I represent in New Bedford and Fall River, for example, and firefighters who are now at 

work because of the economic recovery funds. The private sector 

does wonderful work, but they don’t make cops. They can’t hire 

cops. They are not supposed to. They don’t hire firefighters. There 

is an element of public service that we are getting, and it is a twofold benefit. You are providing services, and you are helping avoid 

strains at the local government. 

So I understand the notion of how much and whether, but the 

notion that it did no good whatsoever; the notion it was all bad, 

when a substantial part, not a majority but a substantial part, of 

that deficit addition was tax cutting, let me put it this way, as I 

listen to the rhetoric here, if we had avoided the tax cut part, it 

would have been better if we simply had done the spending. Because that added to the deficit. There is no differentiation in their 

rhetoric. 

Secondly, the notion that the private sector will do it all. No, the 

private sector will not keep policemen on the street. It will not 

keep teachers in the classroom. It will not keep them shoveling the 

snow in the municipalities. And that, I think, is a serious fault. 

I reserve the balance for other members who have since arrived. 

The gentleman from New Jersey is recognized for 11⁄2 minutes. 

Mr. GARRETT. Thank you, Mr. Chairman. 

Just a quick note. Only about 12 percent of the American population believe that they got any tax cut, so that may explain the 

effectiveness of the tax cuts that you speak of. 

I thank the chairman and thank the panel for coming here today. 

It is amazing, isn’t it, that there are many voices still on the other 

side of the aisle calling for more massive government spending despite the fact that the last massive stimulus bill obviously did not 

work. 

Now some are going to try to defend, as they already have, the 

last year’s stimulus, saying that it hasn’t created any new jobs; it 

saved jobs that wouldn’t have otherwise been lost. Yet, I studied 

economics for a number of years, and I have yet to see any chart 

that shows anything other than employment numbers of people employed and unemployed. I have never see that column actually say, 

‘‘saved jobs.’’ 

It comes down to this; the American public has spoken loud and 

clear. They are telling us very clearly that the Federal Government 

is doing too much in too many different areas and is spending too 

much money, and they want Washington to stop and slow down. 

The consequences of ignoring their call and the spending problems are starting to become evident throughout the world. Greece 

has been in the news about possibly defaulting on its obligations. 

But Greece is really only the tip of the iceberg. You have Spain and 

Italy, among others, who are showing serious strains because they, 

too, like us here, ignored their spending problems for way too long. 

So here in the United States, we have $1.6 trillion deficits and 

no real serious commitment to cut spending by this Administration 

7 

or the Majority in Congress. So because of that now, Moody’s is 

coming out, and they are warning that the USA AAA bond rating 

may be in jeopardy. There are people whispering that if things 

don’t change, the United States may default on its debt in the coming years. 

Mr. Chairman, I yield back. 

The CHAIRMAN. I thank the gentleman. 

I will just take 15 seconds to say this is an interesting way to 

analyze. The reason they didn’t mention tax cuts on the other side 

is because 12 percent of the people only thought they had them. It 

is a vicious cycle. They keep telling people they didn’t exist, so 

some people are persuaded. The notion that tax cuts didn’t happen 

when they in fact did happen because 12 percent of the people 

thought they did, that is an odder form of economical analysis than 

any others the gentleman talked about. 

The gentlewoman from Illinois is recognized for 1 minute. 

Mrs. BIGGERT. Thank you, Mr. Chairman, and thank you for 

holding today’s hearing. 

Where are the jobs? About 1 month ago, in his State of the Union 

address, President Obama said jobs must be our number one focus 

in 2010. I couldn’t agree more. 

To create jobs, we need to accomplish at least three things. The 

first way to create jobs is right in front of us—trade. Congress can 

pass three trade agreements now instead of allowing U.S. businesses to lose out to foreign competitors. On deals to export, expand, and create jobs, Congress needs to move the U.S.-South 

Korea, Panama, and Colombia trade agreements. 

Second, we need serious tax reform. Reduce the corporate tax 

rate. Permanently repeal the death tax. And extend the increased 

section 179 expensing limits, to name a few. 

What we don’t need is a bank tax, transaction tax, and more outof-control Federal spending. 

Third, we need commonsense financial services reform that will 

again bring certainty to the marketplace and get credit flowing 

again to small businesses. 

We don’t need another Federal program, another Federal agency, 

or another taxpayer-funded bailout. We need for Federal legislators 

and regulators to get their act together and implement policies that 

make sense. We don’t need, for example, mark-to-market accounting; rules that seem to be distorting the books, tying up money that 

could be lent to small businesses and causing some financial institutions to unnecessarily fold. Small businesses need tax relief and 

certainty to help them invest, expand, grow, and produce more 

goods and services, create jobs and give our economy the jump 

start it needs. 

The CHAIRMAN. The gentlewoman from California is recognized 

for the remaining 1 minute and 45 seconds. 

Ms. WATERS. Thank you very much, Mr. Chairman. 

I want to follow up on David Scott’s plea to talk about what we 

do about the disproportionate loss of jobs and unemployment in 

these minority communities. 

As you know—and he cited some of those figures—it is up to 

about 17 percent officially in the 20- to 30-something category, and 

in many communities, this translates into 40 to 50 percent of unVerDate Nov 24 2008 17:30 Jun 25, 2010 Jkt 056765 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 K:\DOCS\56765.TXT TERRIE
8 

employed in certain areas in this country. And so we have to be 

serious and creative about creating jobs. 

I would like to hear today from some of the testimony that is before us about how we can truly empower businesses to create jobs. 

And it is not simply with tax breaks. Tax breaks means you have 

to spend money on the front end. And if you spend money on the 

front end and you do well, then maybe tax breaks will mean something to you. We have to talk about how we support businesses and 

doing training and offset the costs of dealing with government and 

doing training. Of course, tax breaks are okay, but we can’t simply 

rely on them. 

Also, I would like to say, those who are saying the stimulus has 

not done anything, that is not quite true. The stimulus did save 

some jobs, create some jobs, but in minority communities, after you 

get through the bid process, the Association of General Contractors 

and the big boys, the well-connected ones, the ones making all the 

campaign contributions, they are the ones getting these bids. They 

are not getting down to small contractors and minority contractors. 

And that is why we have not felt the impact of the stimulus in 

some of these communities. 

So let me just say that it is not only the Tea Party that is angry. 

We have a lot of small business people, unemployed people, and minorities who are angry about what is happening in this economy. 

I hope we can put politics aside and truly deal with the issue of 

job creation. 

I yield back the balance of my time, and I thank you. 

The CHAIRMAN. We will begin our testimony now with Andy 

Stern, President of the Service Employees International Union. 

Mr. Stern. 

STATEMENT OF ANDY STERN, PRESIDENT, SERVICE 

EMPLOYEES INTERNATIONAL UNION 

Mr. STERN. Thank you, Mr. Chairman, and thank you, Ranking 

Member Bachus, for this opportunity to testify today. I submitted 

my formal testimony, which I offer today. 

The CHAIRMAN. Let me say, all statements by all the witnesses, 

and any supporting material, without objection, will be made a part 

of the record. 

Mr. STERN. As the president of the Nation’s fastest growing 

union, representing more than 2.2 million people, I know that our 

members struggle with the same challenges that nearly every 

working family faces across the Nation. People are scared. They are 

scared that the American Dream, the dream of owning your own 

home, having a decent job with affordable health care, retiring with 

dignity and security, while providing a better life for your children 

and grandchildren, is now slipping away. 

The problem of good American jobs, sadly, is not new. We began 

this decade, 2010, with fewer jobs than we had at the beginning 

of the last decade, although the labor force grew by nearly 11 million workers. And now, 16 months into the economic crisis, we have 

lost another staggering 8.4 million jobs. 

So, today we are in a very unusual situation where the recession 

appears to have ended. Economic growth is slowly improving, leaving many pundits and politicians to cheerfully predict that such a 

9 

moment does not require the government to do more to reduce unemployment. 

As Paul Krugman says, and I believe, ‘‘We are in the aftermath 

of a severe financial crisis which has led to mass job destruction, 

and right now we need more of that deficit spending because millions of Americans are blighted by high unemployment, and the 

government should be doing everything it can to bring unemployment down.’’ 

With more than 6 unemployed workers seeking every single job 

opening; nearly 15 million unemployed workers, of which 6 million 

have been jobless for over 6 months; and 11 more million workers 

underemployed, which combined between the unemployed and underemployed is equal to the population of 18 States, the scope and 

scale of the job crisis in the United States continues to be a national emergency, and now is not the time to put our foot on the 

brake of job growth. 

Lost jobs, lost wages, and lost wealth cannot fuel an economy 

where consumption drives 70 percent of our growth, coupled with 

Americans losing $11 trillion of wealth in 2008, and several years 

after the supposed recovery in median wealth actually declined 

even before the crisis hit. 

Members of Congress who voted for the American Recovery and 

Reinvestment Act clearly understood this challenge and appropriately acted when we were losing more than 2 million jobs in just 

one quarter. 

The Recovery Act, in my opinion, has been a success. It stopped 

a free fall of our economy, saved jobs, and produced almost all of 

the economic growth we have seen in the past 2 quarters. 

As successful as it has been, it is clearly not enough. With unemployment at 9.7 percent and the bulk of the ARRA’s relief scaling 

back later this year, just as States and local governments start to 

really feel the impact of their budget shortfalls, we still need to act. 

States alone will confront an estimated $100 billion budget gap 

for the coming fiscal year. To address the shortfall, Governors are 

proposing a new round of deep budget cuts that would increase unemployment and threaten the fragile economic recovery. Without 

further Federal aid, the actions States will have to take to close the 

budget gap could cost the economy another 900,000 jobs, jobs of 

teachers and firefighters, and also make painful cuts at a time 

when people need help the most. 

Nevada, for example, is planning to make cuts to the State’s 

Medicaid program, including rationing adult diapers, eliminating 

denture and hearing aid programs, and forcing personal care assistants to buy their own disposable gloves. In Arizona, there are 

plans to eliminate the State’s Children’s Health Insurance Program 

and repeal Medicaid coverage for more than 300,000 adults. In 

California, the Governor has proposed eliminating the entire welfare program and reducing eligibility for in-home services of the elderly and disabled by 87 percent. 

The magnitude of the job crisis and the deteriorating budgets of 

State and local governments demand serious action now and doing 

more, like putting people to work and providing for the services 

that Americans need today. 

10 

We have offered as part of our testimony a 10-point job program, 

some of which does not require Federal assistance, and others 

which would. But I would also like to state for the record that we 

should not overlook, as some have suggested, the role health care 

reform can play in promoting a robust economic recovery. 

First of all, it is important to understand that the private sector 

is supporting, in many cases, the passage of health care reform for 

its own economic security and competitiveness. Two, that health 

care reform, even despite this recession, health care has added 

631,000 jobs since the recession began. And if Congress sends a 

health care bill to the President, that legislation is expected to add 

between 2.5 million and 4 million jobs over the next decade and at 

the same time reduce the deficit. 

Health care and bioscience have the potential to be a major solution to jobs for our kids and our grandkids. It is now time to act 

aggressively so we don’t face the same problem and mistakes we 

made in 1937. 

I thank you very much for the opportunity to address this committee. 

[The prepared statement of Mr. Stern can be found on page 83 

of the appendix.] 

Ms. WATERS. [presiding] Mr. Mishel. 

STATEMENT OF LAWRENCE MISHEL, PH.D., PRESIDENT, 

ECONOMIC POLICY INSTITUTE 

Mr. MISHEL. Thank you very much for the opportunity to testify 

today. 

The United States is in the worst jobs crisis since the Great Depression, with unemployment hovering around 10 percent and 

probably rising to 10.5 percent by the end of the year. Note that 

these projections actually assume that we are going to renew UI 

for the entire year, when in fact it has not yet been done. 

Unemployment 2 years from now will probably top 8 percent, a 

rate higher than was achieved in either of the prior two recessions. 

This is unacceptable, as it will lead to severe losses of income, a 

scarred generation of young people, and limit our future potential 

growth by retarding investment and innovation. 

So what should we do? I think we should target getting unemployment down to 9.5 percent by the end of the year. This would 

mean we need an additional 1.5 million jobs. But I think we have 

to go beyond that because there are three reasons we should go beyond that: 

First, we have seen the labor force shrink by roughly 2 million 

people since last May. They are going to come back in the labor 

market. If we get growth, that is going to make it hard to get unemployment. I think we can expect a million people back. 

Second, we have exceedingly high productivity growth, which 

means when we have growth, we are not seeing much job growth. 

I think productivity will likely be a percent faster than what most 

forecasters are saying, meaning we need an additional 1.2 million 

to 1.4 million jobs. 

And third, we have seen a historic decline in work hours. And 

so I think that as employers look to increase output, they may inVerDate Nov 24 2008 17:30 Jun 25, 2010 Jkt 056765 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 K:\DOCS\56765.TXT TERRIE
11 

crease work hours before they add jobs. And I think that is another 

reason to add more jobs. 

Overall, I think we have to look to increase jobs by around 3.5 

million beyond those that would be created by the unemployment 

insurance extension. That would cost $250 billion to $300 billion. 

That is what is needed. 

The Economic Policy Institute has developed the American Jobs 

Plan to accomplish this. I will review the five ways we suggest to 

do jobs: 

First, we need to continue the expanded unemployment insurance. This is giving money to people who will spend it. This creates 

jobs throughout the economy. At a time when there are 6 unemployed for every job opening, this is both compassionate and will 

lead to around 900,000 jobs. 

Second, as the State and local governments are going to pare 

back on their budgets in response to the deficits, we will see a million public sector and private sector jobs lost this summer and fall. 

It is therefore essential, both to preserve services and to preserve 

those jobs, that we do provide more relief to State and local governments. 

Third, I think we should do infrastructure investment. I think we 

can provide support for rehabbing and modernizing schools. That 

would create 240,000 jobs this summer. 

Fourth, we need to directly create jobs. It is the most cost-effective way to create jobs, providing funds to local governments for 

people to do jobs that are needed in their communities. It is a good 

way to target employment creation to those most distressed communities. 

And fifth, I have been in favor of a jobs tax credit if these other 

policies are implemented that would help boost demand. I should 

say, however, that I strongly oppose the approach taken by the 

Senate, which I regard as extremely poorly designed and terribly 

small, especially in the context of not any other stimulus besides 

that. 

Let’s talk about the budget deficit. And I encourage discussion 

with the members afterwards on this. This is an important issue. 

We need to understand that we have a large deficit because we 

have a huge jobs crisis that lowered revenues and raised safety net 

expenditures. We do not have an out-of-control budget; we have an 

out-of-control economy. Thank you very much. 

[The prepared statement of Dr. Mishel can be found on page 54 

of the appendix.] 

Ms. WATERS. Thank you very much. 

Mr. Hassett. 

STATEMENT OF KEVIN A. HASSETT, DIRECTOR, ECONOMIC 

POLICY STUDIES, AMERICAN ENTERPRISE INSTITUTE 

Mr. HASSETT. Thank you, Ms. Waters. 

While the short-term trajectory provides some sign of hope, there 

is no way to sugarcoat the description of the labor market. 

In the Post-War period, unemployment has only reached our current level once, peaking at 10.8 percent in November and December 

1982. As bad as the current number is, there are indicators below 

the top line that are truly horrifying. In particular, it is astounding 

12 

the extent, which was mentioned by the Member, to which Black 

Americans have borne the brunt of this recession. For Black Americans, the rate at trough was 14 percent and now has risen all the 

way to 16.5 percent. 

It is important to look closer at the data for Blacks, as this has 

received far too little attention. While White employment has been 

declining since last November, unemployment among Blacks has 

steadily risen. The picture among less-educated African Americans 

is far worse. This month, the BLS reported 21.3 of African Americans without a high school diploma were unemployed. 

It is, sadly, a statistical regularity that unemployment has been 

far worse for Black Americans. Since 1972, the earliest year the 

BLS reports unemployment data for African Americans and Blacks, 

the White unemployment rate has averaged roughly 5.5 percent, 

while Black Americans have experienced an average rate of 12.1 

percent. 

In bad economic times, racial differences in unemployment are 

magnified. Since 1972, the monthly unemployment rate for Black 

Americans has risen as high as 21.2 percent, nearly 2 times the 

highest rate for the overall population during the same period. 

Why are the effects of recession exacerbated for Blacks? Economists from the University of Connecticut and the University of 

California examined what is known as the last-hired/first-fired hypothesis, which speculates that Blacks are the last to be hired during an expansion and the first to be let go during an economic contraction. They examined labor market transitions for Black and 

White men during the business cycle and find Blacks are usually 

the first to be let go as the business cycle deteriorates. 

But contrary to the hypothesis, they are usually hired back early 

in the recovery phase. Thus, it is likely that the gross flow data 

right now would show us, if available up to the minute, that Black 

Americans are flowing into new jobs created at about the same rate 

as everyone else but are disproportionately still bearing the job destruction. 

Now I cover a lot of policy prescriptions in my testimony, but 

since time is limited, I want to focus on one that I think is the 

most important. 

Ms. WATERS. Unanimous consent for 5 more minutes. 

Mr. HASSETT. I think that the policy that I would like to focus 

on is a policy that, for me, it is unusual because Mr. Stern and I 

agree. It was the first that he mentioned. And the reason that I 

think it is such an important policy that has, to this point, been 

neglected in the job creation debate, and the reason why I think 

it is most important is because of these Black American statistics. 

The fact is that the policy I am about to discuss is the best thing 

I can think of for addressing the Black unemployment problem, 

precisely because of the academic result that I just mentioned, that 

Blacks bear disproportionately layoffs when they occur. 

The fact is that underneath a net change like 20,000 jobs, which 

we saw in January, there is a tremendous amount of job creation 

and destruction. In November, the numbers were along the lines of 

4 million created and 4 million destroyed. About half of the destroyed were people who did it voluntarily. If you could reduce job 

destruction even by a small proportion, then, all of a sudden, the 

13 

monthly data might like more favorable. A 10 percent reduction 

might add 200,000 jobs net in the month that this happened. 

There is a policy that can do that effectively, and because Blacks 

bear disproportionately layoffs, it would disproportionately benefit 

them. It is modeled after the German policy known as ‘‘Kurzabeit’’ 

or ‘‘short work.’’ The idea is really simple, and it won’t make me 

run over very much. The idea is that if you reduce a worker’s hours 

by say 20 percent, then why not let him get 20 percent of his unemployment insurance? If you provide an incentive like that, then 

firms will want to spread layoffs out amongst large numbers of 

their workers with hours reductions rather than terminations. And 

so if you reduce hours for 5 workers by 20 percent, then that is the 

same as laying someone off. 

Right now, the government only really shares in supporting that 

worker if you lay the whole worker off. By adopting job sharing, we 

can give firms an incentive to slow job destruction. The German experience, and there are other countries that have similar programs, 

has been astonishing. Even during this recession, while GDP has 

declined about at the rate we have seen in the United States, the 

unemployment rate has barely budged. 

I share with this committee the concern that the job market is 

the worst in our lifetimes, and that something needs to be done. 

I would encourage the committee members to support policies like 

job sharing that are smart and target precisely the things that are 

the most important things to target and don’t cost nearly as much 

as the stimulus of last year. 

Thank you. 

[The prepared statement of Mr. Hassett can be found on page 44 

of the appendix.] 

The CHAIRMAN. Finally, a witness who has always given his time 

very generously, Mark Zandi, who is the chief economist from 

Moody’s Analytics. 

STATEMENT OF MARK ZANDI, CHIEF ECONOMIST, MOODY’S 

ANALYTICS 

Mr. ZANDI. Thank you, Mr. Chairman, and the rest of the committee for the opportunity to speak here today. 

These are my views and not those of the Moody’s Corporation. I 

would like to explicitly address the four questions that were posed 

in anticipation of the hearing. 

First, what is your current forecast for employment growth? My 

view is that the job losses will end this spring, and that by this 

coming spring, the spring of 2011, we will have enough job growth 

that it will start to measurably bring down unemployment. 

It is not going to be a straight line. At times, we will have a better job market. When the Census is hiring in April and May, we 

will get good solid job numbers. And at times, it will be weaker. 

In the summer, for example, when the Census jobs fade away, the 

job market will be softer. 

I don’t think we will get enough job growth through the remainder of this year to bring down unemployment. I think it is very 

likely that unemployment will drift back up into the double digits 

and, by late this year, be closer to 10.5 percent. That goes to the 

fact that the labor force is declining, which is incredibly unusual. 

14 

The last time that has happened on a consistent basis was during 

the Korean War. That will start growing again, and many of those 

people will be counted as unemployed, and unemployment will 

move higher. 

This forecast I just articulated is based on a number of assumptions: One, that the Federal Reserve will not raise interest rates 

this year’ and two, that we get some legislation to add more unemployment insurance benefits for those folks who lose their jobs in 

2010. Other than that, I am assuming nothing else. 

One other point on the outlook. I think the risks are to the downside. I think as long as businesses aren’t hiring—they have stopped 

laying off, but they have not started to hire. And as long as they 

are not hiring, we can’t conclude that the coast is clear. I expect 

them to hire. All of the preconditions are now in place. But that 

is still very much a forecast, and we need to see it. And with each 

passing month that we don’t see it, I think there are reasons to be 

concerned. 

One other quick point about the outlook. Even under the best of 

circumstances, I don’t think the unemployment rate will get back 

to anything anyone would consider to be full employment, say 5.5 

percent unemployment rate, until 2014. So I think it is going to be 

a long, long time before we get back to full employment. 

The second question, why isn’t there any job growth? What is 

going on? Why haven’t we seen any job growth since the recession 

ended 6 months ago? I think it boils down to two things. The first 

is credit; a lack of credit for small businesses. Big business can get 

credit. The bond market is working. The commercial paper market 

is functioning very well. But small businesses can’t get credit. 

Many rely on their credit cards. And the number of credits cards 

outstanding has been falling very rapidly. Many rely on small 

banks, and this is very important in small communities. Small 

banks, obviously, are under tremendous pressure, in large part because the commercial mortgage portfolios are not extending loans, 

so small businesses can’t get credit, and therefore, they can’t hire. 

It is confidence, a lack of confidence. And that is really a concern 

in a lot of things. I do think it is necessary to address things like 

health care and energy policy, financial regulatory reform and tax 

policy. But as long as we are debating those things, and I think we 

should be debating them, but as long as we are, that creates policy 

uncertainty, particularly among big businesses, and they are reluctant to hire as a result. 

It is also important to remember that many businesses were put 

through the proverbial wringer not too long ago. About a year ago, 

many were failing, and it is very difficult for many of them to forget that. 

Going to the third question, is this recovery going to be more like 

the jobless recoveries in the wake of the last recession and the one 

in the early 1990’s, or not? I think it is going to be very much like 

the jobless recoveries. Everything so far suggests that we are not 

going to see this job market revive in a significant way. Maybe for 

other reasons than the ones that we suffered back in the last recession and in the early 1990’s, credit and confidence. But, nonetheless, I think this will be a jobless recovery. 

15 

This goes to the last question, what should we do? Should we 

have any more additional stimulus? I think the answer is ‘‘yes.’’ I 

think that is prudent risk management. I think because the risks 

in my outlook are to the downside, I think it is very important to 

be aggressive. Moreover, if we go back into a recession, although 

it is a low probability, but if we go back into a recession, we are 

not coming out. We have a zero percent funds rate target. We have 

a $1.4 trillion budget deficit. If we have another recession, we will 

have no policy response. Therefore, we have to err on the side of 

doing too much rather than too little. 

Let me just list five things I would do quickly: First, unemployment for those workers who lose their jobs in 2010; second, more 

help for State and local governments; third, expand out SBA lending for credit to small business; fourth, I concur with work share, 

that is a fabulous idea we should implement; and fifth, a jobs tax 

credit. I think that could turn the light switch on and get this job 

market rolling sooner rather than later. Thank you. 

[The prepared statement of Mr. Zandi can be found on page 91 

of the appendix.] 

The CHAIRMAN. Thank you, Mr. Zandi, and thanks to all the 

panel. 

Mr. Hassett, I am particularly interested in the create jobs directly. Let me ask, on job sharing, is that something which would 

need to be encouraged legislatively? I assume people can do that. 

Are there tax implications? Do we need to do this legislatively if 

we wanted to do it? 

Mr. HASSETT. Yes, sir, you do, because what we want to do is 

provide the firm the ability to reduce the salary or the payments 

to the worker and have the government fill in some of that so it 

doesn’t damage— 

The CHAIRMAN. I meant on the job sharing. 

Mr. HASSETT. Excuse me. That is how the job sharing works. The 

way the job sharing works is that the firm will reduce hours 20 

percent for 5 workers rather than lay a guy off. And then those 

guys will maybe each get 20 percent of their unemployment insurance, and he will reduce their wages. 

The CHAIRMAN. Also, you talk about the direct jobs program. 

Both of those would require the expenditure of Federal funds? 

Mr. HASSETT. Yes. 

The CHAIRMAN. Both of them would add to the deficit? 

Mr. HASSETT. Yes. 

The CHAIRMAN. Both of them you would recommend us doing at 

the current time? 

Mr. HASSETT. Yes. They are very cost-effective ways to create 

jobs. 

The CHAIRMAN. Right. But you don’t get too cost-effective until 

you accept cost. If your mantra is never add to the deficit, no way, 

no how, then what is the most effective way to do it becomes irrelevant. That is my difference with many of my colleagues. Debating 

how most efficiently to do that is a very important thing for us to 

do. But to simply take the position anything adds to the deficit at 

a time of this economic situation you all described, that is a problem. You can’t get the cost-effectiveness. So I appreciate what you 

have to say, and I think these are things that are very useful. 

16 

Let me go on to Mr. Stern, in particular. There are two things 

that I have been surprised are not more largely supported here. 

One is extension of the aid for Medicaid. One of the things we are 

told is the private sector would take over. 

Mr. Stern, everybody else, if we don’t extend aid to the States for 

Medicaid to keep things going, in what way would the private sector step in and take up the slack? 

Mr. STERN. I think to the contrary, unfortunately, what the private sector is doing is dumping its responsibilities onto the States. 

As their obligations and budgets get tight, what they are doing is 

increasing copays, premium sharing, things that make it difficult 

for workers to take up the health care. So I think we are going to 

see an ever-increasing burden on the States. And I think it is appropriate, as the 47 Governors said, to continue assistance. 

The CHAIRMAN. Let me go back to Mr. Hassett. I want to go back 

to the Governors, because on the creating jobs directly, is that the 

one that I read Governor Barbour of Mississippi is employing? 

Mr. HASSETT. That is correct. 

The CHAIRMAN. So a former Republican National Chairman is in 

fact adding to the deficit by using funds that the Federal Government has provided to him to do this? 

Mr. HASSETT. That is correct. He has publicly supported this program. Again, it is a much more cost-effective way to create jobs, 

maybe on the order of 10,000 or 20,000, as opposed to last year’s 

stimulus, if we accept President Obama’s numbers, is about 

100,000. 

The CHAIRMAN. I think it is an example of how sometimes politics can get in its own way. The notion of directly doing this offends 

some people, and therefore, we get into ways to mask it and wind 

up adding to the costs and being less effective in this regard. 

You say that House Democrats have correctly judged this program positively. Republicans support such a program, too. I want 

to pay tribute to the bipartisanship of my colleagues who did select 

you as their witness. So I do want to say— 

Mr. HASSETT. At least this time. 

The CHAIRMAN. I think that people are ready to pick up your option if you decide to become a free agent in this regard. But I think, 

again, if you start out with ideological binders—no, we will do 

nothing—you have a problem. Once you agree that something 

needs to be done and that we are not going to get out without a 

combination of public and private efforts, then it becomes relevant 

to talk about these things. 

The last thing I would say is this, and we will get—I am just 

making a statement—we have State Governors also telling us that 

they are going to have to lay off police officers and teachers and 

sanitation workers and home health care workers, etc. If we do not 

extend the aid, that is going to happen, and you have a double hit 

there; you will have important services not provided and you will 

have more people added to unemployment and all that does. 

The gentleman from Texas. 

Mr. HENSARLING. Thank you, Mr. Chairman. 

I heard you use the word ‘‘offended.’’ I must admit, yes, I am offended by ineffectiveness. And I have rarely seen a more ineffective 

17 

piece of economic growth legislation than the so-called stimulus 

bill. 

As the chairman has referenced, a substance of the bill had tax 

relief, there are a number of provisions and policies that I support 

in Federal law, but I don’t necessarily confuse them with progrowth economic policies. I believe $112 billion of that package 

would be more aptly described as tax relief for people who don’t 

necessarily pay income taxes. There are aspects of welfare. Not to 

say that they weren’t needed in the economy, but something that 

temporarily increases personal income does not necessarily translate into increased demand in our economy, much less creating 

jobs. By most calculations, a very, very small percentage of that 

particular legislation had anything to do with pro-growth policies 

that historically have created jobs, hope, and opportunity in our society. 

Again, I would point out, you can’t fool all the people all the 

time. So if the new talking point for my friend on the other side 

of the aisle is, look at all this great tax relief we had to create jobs 

in the stimulus programs, I would ask my friends on the other side 

of the aisle, then why are you getting ready to take it all away? 

Why is it that all the tax relief is about to expire? Why is it that 

the death tax is about to go from zero to 55 percent? Why is it that 

many small business men and women in America are about to see 

their capital gains taxes increase by a full third? Why are they 

going to see their dividends tax increased by over 150 percent? 

Why are they going to see their marginal rates for every bracket 

increase under current law, with one exception? And so Milton 

Friedman, Nobel Laureate, who had the permanent income theory, 

and you can’t fool people with temporary tax relief. 

I wish it were true, but it is not. And so what we see is a policy 

that still has us mired in almost double-digit inflation. It has been 

a while, but I have actually studied economic histories. That is 

what I had my undergraduate degree in. And I cannot find a single 

instance where you have anywhere close to this deep a recession 

to where you shouldn’t have had already a bounceback recovery. 

That has been the post-war history of all recessions, and yet we 

don’t see it today. And why don’t we see it? 

One of the reasons, I believe, again, in my talks with business 

people and bankers, from small and large throughout America and 

in my districts, is fear. I believe that Mr. Zandi spoke of a lack of 

confidence. People who invest capital, people who create jobs, have 

a lack of confidence on how to deal with this debt and this deficit. 

I hear absolutely no words of concern from my friends on the 

other side of the aisle. I suppose the theory is that there is no level 

of debt or debt that we cannot exceed for some price of short-term 

economic growth. Number one, we really haven’t seen it. Perhaps 

I am paraphrasing Mr. Stern, but what I believe I heard him say 

is: No jobs, no recovery. It is certainly what I believe. And I don’t 

see the jobs in my district. And people across America continue to 

ask: Where are the jobs? 

And so why would you want to follow the same failed policies? 

I am not even sure John Maynard Keynes would have claimed that 

particular stimulus program. And here we are contemplating another one. You look at the spend-out rates; you look at the shovelVerDate Nov 24 2008 17:30 Jun 25, 2010 Jkt 056765 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 K:\DOCS\56765.TXT TERRIE
18 

ready projects. It wasn’t there. Even following classic Keynesian economics, this package was a complete failure. And now we are contemplating more of the same. 

I also think there is an aspect of, frankly, generational theft 

here, borrowing from future generations, robbing future GDP 

growth to try to promote current GDP growth. At some point, do 

you ask yourself, is this really fair to future generations? 

I see that my time is drawing near, so I will ask a question. And 

that is, Mr. Stern, you said we need more deficit spending. Let me 

ask you the question, is there any level of deficit spending that you 

would not accept? Are you at least troubled by the aspect that perhaps future members of your union may have to pay for this debt 

with future jobs? 

Mr. STERN. I am absolutely concerned about the long-term economic stability of this country, including the deficit. I don’t, however, think there is any way out of this situation without job 

growth and wage growth. I don’t think we can cut, borrow, or 

spend our way out until we have Americans back at work and gaining raises. 

But I do think we have a short-term and a long-term issue. And 

I think in the short term, as everyone has said up here in one form 

or another, we can debate what are more effective ways, but we 

need an effective way forward from this moment of history. We can 

all attempt to continue to adjudicate what we did, but we are here 

now. I think there are ways you have heard to do effective job 

growth, including from Governor Barbour and others. I think we 

should pursue them. 

The CHAIRMAN. The gentleman’s time has expired. 

I recognize the gentlewoman from California. 

I will take 20 seconds to say that the gentleman said we need 

to have permanent tax cuts. And look what has happened to the 

estate tax. It is going to go from zero to 55 percent. I didn’t vote 

for that. They did. That was George Bush’s cockamamie way to get 

around the budget rules. The fact we have an estate tax going from 

zero to 55, that was what was voted on in that tax package that 

I opposed. 

Mr. HENSARLING. Will the gentleman yield? 

The CHAIRMAN. I will give unanimous consent for an additional 

15 seconds. 

Yes. 

Mr. HENSARLING. Do I understand the gentleman is then against 

the policy and so would support a policy that keeps the death tax 

zeroed out? 

The CHAIRMAN. No. I am talking about the gentleman’s point 

that it is a mistake to have nothing permanent, and that it is going 

from zero to 55 percent. That is what you guys voted for because 

you were trying to play games with the budget rules. I would have 

kept it up, not at 55 percent, but at a more reasonable level. This 

going from zero to 55 percent, this is nothing anybody here voted 

for. That was part of the Bush tax package the Republicans supported. 

The gentlewoman from California. 

Ms. WATERS. Thank you very much. 

19 

Mr. Hassett, I would first like to thank you for espousing the last 

hired/first fired scenario that we know something about. I would 

like to thank you for not being afraid to talk about Black unemployment. It is real. It is profound. It is hurting and destroying 

communities. Not a lot of people would like to give recognition to 

that. 

I like your idea of job sharing. I like the idea that you have some 

creative thought about what to do about unemployment in general 

and Black unemployment. I want to ask you about a few concepts 

that I am thinking about that have not really been employed in 

trying to do job creation. What about loan guarantees for small 

businesses who employ the unemployed? It seems to me, again, I 

have this idea that small businesses need upfront money. Even tax 

incentives are okay, but it comes after the fact. So I like the idea 

of loan guarantees. I am not so sure what others think about it. 

The other thing is, in the bid process, part of what was wrong 

with the stimulus, it is not that it didn’t create jobs; it just took 

so long to do because of the bureaucracy and the bid process. Our 

small businesses are up against big businesses and competing for 

some of these contracts and these so-called shovel-ready projects. 

What about breaking up these contracts and not having such large 

contracts? But spreading them out so more small businesses can 

participate and create more jobs? What about credits for hiring in 

the area where the contracting is being done? One of the things 

that we see in some communities is once the stimulus projects are 

awarded, the large contractors are getting the contracts. They hire 

from all outside of these districts and not from the districts where 

they are working. What about some credits for hiring in the areas 

where the jobs are being done? And what about joint venture 

projects that would put together some large and small businesses 

so that small businesses would have an opportunity and they 

would get credit in the bid process as the request for proposal that 

is being honored recognizes the fact that they should involve small 

businesses? 

Mr. HASSETT. Thank you very much for the kind words, Ms. 

Waters. I think that it would be important to try to shy away from 

a strategy of trying a million little ideas. I think the job-sharing 

program that we have, I guess, all mentioned is something that has 

been designed and implemented in other countries and shown to be 

effective. 

I think that the best strategy right now, if we are going to do 

a targeted program, would be to copy success and do it in a big 

way, but I also think that we should be careful with some of the 

issues that you mentioned to lose sight of the fact that we do have 

an environment right now that is not one that is producing a lot 

of optimism. And we need optimism from every business, not just 

small businesses. We need optimism from big businesses and small 

businesses. And I have other parts of my testimony where I talk 

about why I think there isn’t that optimism. And there are bigger, 

less targeted programs, I think, that would adopt it. 

I think we do need to have a commission to restore fiscal balance 

so that people aren’t worried about future tax hikes, and I think 

we have to address the fact that we have a really unfriendly climate for corporate America with really high tax rates. 

20 

Ms. WATERS. Don’t you think that small businesses are suffering 

more than the big businesses? 

Mr. HASSETT. I think that is clear. But I think as we are trying 

to create jobs, then big businesses will be an important way to do 

that. And to focus help only on small businesses, I think— 

Ms. WATERS. Don’t we have some statistics that show us that 

small businesses are more job-intensive than large businesses, and 

they actually, in the final analysis, create more jobs? 

Mr. HASSETT. That is a long thing to talk about. But those statistics have often been misstated to say that small businesses create 

all the jobs and so on. But going forward, big businesses definitely 

could be an engine of growth if we could make the U.S. climate 

more friendly towards them, too. 

Ms. WATERS. I like your job sharing. I am not sure I like your 

approach to big business as opposed to small businesses. 

The CHAIRMAN. One out of two is pretty good with Ms. Waters. 

The gentleman from Delaware. 

Mr. CASTLE. Thank you, Mr. Chairman. 

Mr. Zandi, I am concerned about the permanency of the jobs 

which have been created in the stimulus bill. If you can help me 

with this and let me tell you why I say what I just said. A lot of 

these jobs are created by the extension of help to the States and 

local governments in terms of their governmental jobs. And I assume at the end of a fiscal year, they will no longer have that 

money. Those jobs may or may not continue depending on what we 

do or they are able to do. 

And in addition, a number of the other jobs that were created 

were capital projects, perhaps adding a lane to a highway, whatever it may be, which may have expired after 3 months, and I assume those jobs with the construction companies that were hired 

may also not be continued. 

Have you analyzed that or looked at that at all? 

It is hard to follow it in terms of all the numbers. I will be the 

first to tell you that some jobs were certainly saved and maybe 

even created by this bill. But were they jobs that 3 or 4 months 

later have expired? We really haven’t changed the underlying fundamentals of the economy. 

Mr. ZANDI. Your intuition is correct. The stimulus is not designed 

to provide permanent job growth. The purpose of the stimulus was 

to provide a bridge to a time when businesses can again get credit 

and have the confidence to start hiring on their own to fill the void 

left by the fact that businesses were panicked a year ago. So the 

intent of the stimulus is not to create lasting jobs; its intent is to 

stimulate the economy, to get private businesses to step up to the 

plate and begin to hire. 

I can give you a sense of what my analysis has shown, that the 

level of employment will be 2.5 million jobs greater than it would 

have been otherwise at the end of this year with the stimulus. So 

that is the net benefit of the stimulus. 

Mr. CASTLE. But many of those jobs will drop off at some point, 

too. 

Mr. ZANDI. That is the peak employment effect. By the year end 

2011, we are down closer to 1 million; by the year end 2012, it 

21 

fades largely away. The stimulus was not designed to create permanent jobs. 

Mr. CASTLE. Thank you. 

You also indicated in your testimony, if I wrote it down correctly, 

that we should have more stimulus, and that could be measured 

in a variety of ways. As you know, we passed a House bill. There 

is a Senate bill which is being acted on this week, we think, and 

there is also more stimulus in terms of the stimulus bill that we 

passed last year which has not yet been expended. Can you expand 

on when you say ‘‘more stimulus,’’ what you are talking about? 

Mr. ZANDI. Right. So you passed a bill at the end of last year that is worth about $50 billion to south of that for 2010. That was 

the housing tax credit through April, that was lost carryback, that 

was the higher conforming loan limits, and some UI. I would budget another approximately $50 billion for UI benefits, 

extended emergency benefits, for people who lose their jobs in 2010. 

I would allocate another approximately $50 billion for FMAP extension. I think that is vital to the job market later this year, because 

if the States don’t get that, we will see very large job losses at 

States. And then I would allocate another $50 billion to include 

things like a jobs tax credit, an empowerment of the Small Business Administration to become more aggressive in extending credit 

to small business, and if you are interested, we can talk about how 

you want to do that. If you add all those things up, it comes up 

to be $150- to $200 billion over the course of 2010, 2011. 

I think that would be appropriate in the context of, again, risk 

management. We do not want to go back into a recession. It will 

cost taxpayers measurably more if we do. 

Mr. CASTLE. This question could be for anybody, but you are the 

one who mentioned it, Mr. Zandi, and that is the need to have— 

one of your five solutions was to have the Small Business Administration—you just mentioned it again—do more, get more money. 

But that doesn’t speak to bank lending, and a lot of us here are 

concerned about that. So many of our businesses are used to dealing in that particular way, and my concern is what, if anything, 

can we be doing to extend bank lending to businesses who may 

hire? 

Mr. ZANDI. Be more aggressive. For example, as part of the stimulus, the loan guarantee on an SBA loan under the two programs 

went from 70 percent to 90 percent. You could lift it to 95, 971⁄2

percent, make it like an FHA loan, not for very long, I wouldn’t do 

it for very long, but if you do that, that would incent banks to then 

go out and be much more aggressive in extending credit to small 

business. There are a number of other things you could do, but that 

would be one of the most obvious things to get money out to small 

businesses very quickly. And the President has an idea: Take 

TARP money, provide capital to community banks so that they will 

go out and lend. I don’t think that is going to work, at least not 

that quickly. 

Ms. WATERS. [presiding] Thank you. 

Mel Watt. 

Mr. WATT. Thank you, Madam Chairwoman, and I thank the 

Chair for convening this hearing. I will say right at the outset the 

witnesses were very clear in their presentations, and I am not 

22 

planning to ask you any questions because I think you have been 

very clear about what you had to say. But I am not planning to 

yield back my time either. 

I just want to get a couple of things off my chest. 

First of all, I don’t usually pay much attention to whose witness 

is invited to testify. I just listen to the substance of what they say. 

But I can assure Mr. Hassett that he isn’t likely to be invited back 

again by my colleagues on the other side. And I can say to him that 

I wish he had written their talking points today rather than all of 

the crap that we have heard. 

And that is what has me a little agitated and frustrated here, because I came to Congress in 1993, and I didn’t come into Congress 

thinking that I was going to spend a lot of time trying to reach a 

balanced budget and getting us out of deficit. I am not even sure 

at that time I had much of an appreciation for what that meant. 

But it didn’t take me long to figure out if we kept spending more 

and more of our budget, paying interest on debt, that was taking 

more and more and more of our budget away from things that I 

came to Congress to work for. 

And I took some tough votes in the 8 years, the first 8 years that 

I was in Congress, leading to a point that we could get to a balanced budget with surpluses projected forward as far as the eye 

could see. And it frustrates me to have a bunch of ideologues here 

making it sound like they are the first people in life to have any 

concerns about balancing the budget and creating fiscal discipline 

when it took their President less than 1 year to wipe out everything we had done in 8 years of trying to get to a balanced budget. 

I think that is disingenuous. And for anybody to come in here and 

try to make it sound like we created this problem, and we are not 

trying to do anything long term or short term that will have any 

impact on this problem, I think—I can’t say under the protocols 

that we are constrained to act under how much of a frustration 

that creates for me. 

I think Mr. Hassett’s idea is a wonderful idea. I turned to my 

staff and said, go draw me a bill that will do this kind of sharing 

if nobody else has introduced that bill. But if he thinks that the 

folks who were responsible for inviting him here today will get on 

board, even though it has been implemented by a Governor in their 

party, and that they will be more interested in doing something 

positive to create jobs than just bitching and moaning about what 

isn’t working or what might be politically expedient for him, then 

I think he is deluding himself. 

On that bill, we aren’t going to get any support on the stimulus; 

we didn’t get any support on anything that we have tried. We 

haven’t gotten any support, including health care and the kinds of 

things that you have talked about cogently today, that would help 

address job creation. We have gotten no support, and all we have 

gotten is opening statements that make it sound like we are unAmerican because we are trying to dig out of this situation that 

they created. I am sick of it. And I am glad my time is over because 

I just can’t take it any more. 

I yield back. I thank the lady for allowing me to express myself. 

Ms. WATERS. Thank you, Mr. Watt. 

Mr. Manzullo. 

23 

Mr. MANZULLO. Thank you. 

In going through the testimony and listening to the witnesses’ 

answers to the statement, I don’t think I have heard the word 

‘‘manufacturing’’ come up once. The area that I represent in northern Illinois is the largest county. One of the four jobs is directly related to manufacturing. And next to it, McHenry County is one out 

of five, and our unemployment is probably effectively 25 percent. 

You take 17 percent and add 7 percentages to that. 

We can’t buy out of way out of this recession. We have to manufacture our way out of it, and none of the four of you have mentioned that. And unless we get the supply chains going again, we 

are going to go nowhere. 

I had introduced a bill last year to get our manufacturing of 

automobiles back up to around 15 million vehicles sold each year. 

Follow this: For every 1 million cars that are sold in this country, 

it is 60,000 employees, the government saves—the government 

takes in $1.7 billion in Federal income tax; the States take in $300 

million to $500 million in State income tax; States take in $1.3 billion in sales tax; and the Federal Government saves $1.3 billion in 

unemployment compensation, COBRA extensions, food stamps, and 

job retraining. 

Now, I don’t know what it is going to take for this country to understand that manufacturing does it all. Once we restart the supply chains, we go back to the minerals and the ores and the chemicals that start the manufacturing process all the way through exporting, once the automobile industry is restarted, that will help 

out. 

Only one person mentioned the lack of credit. I can show you 

case after case—Ibsen, for example, in the congressional district 

that I represent, is the only manufacturer of a portable heat-treating machine. It is called the Titan. It costs less than $250,000. For 

high-end carbon, that is not that high. A lot of people want to buy 

it. There is no credit. Orders are coming in. The Institute for Supply Management, I think it is 7 months in a row, it increases. It 

is above 50. 

No one in this country seems to think that the way to come out 

of this thing is to start the wheels of manufacturing going again. 

And I would like to know what you gentlemen think about that. 

No one mentioned it. 

Mr. HASSETT. Actually, sir, it figures prominently in the policy 

response that Ms. Waters didn’t like that I gave that is in my testimony. I think you can’t expect to have firms decide to locate a 

whole bunch of manufacturing plants in the United States when 

our corporate tax rate is about 10 percentage points higher than 

the average for our overseas— 

Mr. MANZULLO. I understand they are not thinking about that 

now. They are thinking about getting a line of credit so they can 

sell their machines. That is the most immediate thing right now. 

They are also concerned, a lot of the shops, about card check. They 

are concerned about the health care bill that would cost 5 million 

jobs. We lost in our congressional district because of the carbon 

tax—the mere fact that came up, an $800 million project was 

dumped in East Dubuque, Rentech, a company that—could I ask 

for another minute? Would that be possible? 

24 

Ms. WATERS. Without objection, it is so ordered. 

Mr. MANZULLO. Thank you. Rentech makes anhydrous ammonia. 

They are going to switch to the Fischer-Tropsch process—1,000 

manufacturing jobs for several years, $800 million investment, it 

would have started the green revolution across northern Illinois. It 

was killed because of the carbon tax and cap-and-trade. No one has 

talked about the fact that those are job-killing policies and scare 

manufacturers from getting involved in it. 

So we have lost out on the latest technology. There is a loss of 

credit, and we seem to be adrift with very few people concentrating 

in restarting of manufacturing. And unfortunately, I talked too 

long and didn’t give you the opportunity, but if you want to respond to me in writing, I would appreciate your thoughts on that. 

Thank you. 

Ms. WATERS. Thank you very much. 

Mr. Moore. 

Mr. MOORE OF KANSAS. I am concerned about how the commercial real estate market will impact any economic recovery for our 

country. The Congressional Oversight Panel for TARP issued a report this month expressing a concern that a wave of commercial 

real estate loan losses over the next 4 years could jeopardize the 

stability of many banks, particularly community banks. In the report they say, ‘‘A significant wave of commercial mortgage defaults 

would trigger economic damage that could touch the lives of nearly 

every American.’’ 

You touched on this issue in your testimony, Mr. Zandi, but is 

there anything Congress can or should do to minimize the negative 

impact of a commercial real estate crisis? 

Mr. ZANDI. You are absolutely right. If you are going to list in 

rank order the impediments to the recovery, potential impediments 

to recovery, commercial mortgage defaults would be right at the 

top. It has two negative consequences for the economy. One is obviously small banks that are choking on their defaulting mortgage 

loans, which is restricting credit to small business in small communities in particular; and second, the collapse in construction as a 

large employer in many communities. 

Unfortunately, there is no direct way that the Federal Government can help, unlike the residential mortgage market. In the residential mortgage market, Fannie Mae, Freddie Mac, and the FHA 

can come in and fill the void left by the fact that private lenders 

aren’t extending credit. There is no direct mechanism to do that. 

There are a couple of things that can be done. Fannie Mae and 

Freddie Mac do have arms that make multifamily mortgage loans, 

and so they can be empowered to go out and extend more credit 

to the multifamily sector of the commercial real estate market, 

which is quite important. 

Also, I think it is important to have regulators apply forbearance 

with respect to how they address these commercial mortgage loans. 

If they can figure out ways to work with these small banks to make 

sure that they don’t have to force the mortgage owner to default 

on the loan, that would be quite therapeutic, and I think it would 

be good policy for regulators to show some forbearance in that regard. 

Mr. MOORE OF KANSAS. Thank you, sir. 

25 

Would any other witnesses care to comment? 

Thank you. I yield back, Madam Chairwoman. 

The CHAIRMAN. The gentleman from Texas, Mr. Marchant. 

Mr. MARCHANT. Thank you, Mr. Chairman. 

Mr. Zandi, I would like to take advantage of your expertise in the 

home building field. Have we ever had a— 

Mr. ZANDI. Like is your home going to fall in value? What is your 

address? 

Mr. MARCHANT. Have we ever had a recession where home building was not one of the leading components that led us out of that? 

Mr. ZANDI. It has always led us. It is one of the sectors that has 

always led us out of recession into recovery because it is a very 

rate-sensitive sector, and historically in recessions interest rates 

come down. That juices up demand, and you get more construction. 

So it has also been a sector that is key to recovery. 

Mr. MARCHANT. So what is different about this recession, and 

why hasn’t home building, housing production, led us out of this recession? 

Mr. ZANDI. Well, of course, housing is ground zero for the financial crisis that we are in. It was aggressive lending, speculation in 

the housing market which led to the collapse of the financial system and the mess that we find ourselves in. So the housing market 

is now significantly overbuilt. The number of vacant homes that 

are for sale or for rent is still very high by historical standards. 

House prices, we still have a mountain of foreclosures to work 

through which will continue to depress prices. And so given the ill 

effects of all of the speculation and euphoria during the bubble, 

housing is not going to be able to lead the way out of this, lead the 

way through—into this early part of this recovery. It is just not 

going to do it. Another reason to suspect the recovery is going to 

be modest as a result. 

Mr. MARCHANT. Have we ever had the phenomena of apartment 

occupancy actually going down when home building is going down 

at the same time? 

Mr. ZANDI. No. This is extraordinarily unusual. When you have 

both rental vacancy rate and homeownership vacancy rate high 

and rising, that goes to the mountain of vacant homes that are out 

there for sale and for rent, and fundamentally due to the overbuilding that occurred during the boom and the bubble. So I think 

it is fair to say it is unprecedented, yes. 

Mr. MARCHANT. So the industries that normally recover quickly, 

manufacturing, furniture, housewares, all of these other industries 

that traditionally will follow right behind the housing boom, that 

is not happening either? 

Mr. ZANDI. No, it won’t happen—when you get a home sale, people go out and they buy furniture, they may even buy a car, they 

refurbish the home. So this is remodeling and repair. So, yes, all 

those things will be depressed, at least compared to where they 

would be normally at this point in an economic recovery. We are 

just not going to see it in this go-round. 

Mr. MARCHANT. So in any kind of new economic package or stimulus package, shouldn’t there be some component of it that addresses this issue? 

26 

Mr. ZANDI. I don’t think it is part of the stimulus. I think it is 

part of the policy response, though, and if I were you, I would focus 

entirely on loan modification and foreclosure mitigation. That is the 

most positive thing that you could do. At this point, I think an extension of the housing tax credit would not be particularly helpful; 

you have done that now 3 times, and it is losing its firepower. You 

extend it a fourth time, it is really not going to add anything. In 

fact, it is going to be very inefficient because you are just giving 

it away to people who would have bought a home anyway. 

So if I were you, I would devote all of my resources, and you 

have resources in TARP, to figure out a more effective method of 

modifying mortgage loans. 

Mr. MARCHANT. So we are finding that this latest round of firsttime homebuyer stimulus is not having the effect. 

Mr. ZANDI. Well, the one that expired in November, fabulous, it 

worked very well. I think the Realtors got out and really marketed 

it. This next round, this next tax credit extension expires in April. 

It is still early to judge, but I suspect you are going to get more 

sales come March or April. But if you do it again, I don’t think it 

is going to provide much juice, because you pulled forward all those 

sales as a result of these previous three tax credits. You are not 

got going to get much of a benefit, no. 

Mr. MARCHANT. Thank you, Mr. Chairman. 

The CHAIRMAN. The gentleman from California. 

Mr. BACA. Thank you, very much, Mr. Chairman. Thank you for 

holding this hearing. 

I agree with what Congressman Mel Watt said earlier. A lot of 

us are very much concerned that a lot of positive things are not 

happening. But as we look at our Nation and our country, and we 

look at the last quarter of 2009 and again the first month of 2010, 

but obviously the big issue remains high unemployment. And in my 

State of California, the unemployment rate is about 12 percent. In 

my home district, it is over 14 percent. Many have termed these 

recent events to be a sign of jobless recovery, and people are concerned right now, they are saying, hey, what about a job for me? 

I have lost a job. What are you going to do? And they are asking 

us specifically what can be done in that area. 

What is unique about our current economic crisis compared to 

the ones this country has experienced in the past where significant 

job growth has fallen, significant economic growth? And I say this 

because it needs to be addressed in the area that we have all 

talked about. 

You talked about the manufacturing, you talked about home 

loans, Mr. Zandi, but when you look at the mortgage lenders, remember that the manufacturers, the furnitures and others, all 

those jobs were never outsourced. So when you look at economic recovery from the past, we didn’t have the outsourcing, we didn’t 

have the trade that is going on right now. That is attributed a lot 

to the growth and economics in the area because we don’t have 

those manufacturers in our areas. We don’t have them creating 

those jobs here in the United States; they are being outsourced. 

The same greedy corporations that got involved with predatory 

lending and everything else went outside of this country, operated 

27 

outside of this country, and then we end up not being able to employ the bodies or people that we need. 

Hopefully, you can address that, and address the outsourcing the 

impact it has had on the recovery. And that is open for all three 

of you, maybe starting from labor, Mr. Stern, starting from you. 

Mr. STERN. Let me just start by saying I think there is something much more profound here, and I know we could talk about 

life in terms of this economic crisis, but I said I want to respond 

to you. This is not our fathers’ or grandfathers’ economy. The ‘‘one 

job in a lifetime’’ economy is gone. We had a jobless decade, not 

just a jobless 2 years. American workers faced 5 years before the 

economic crisis where they didn’t get a raise, the longest period of 

economic stagnation in the history of our country. 

So there is something profoundly different, I agree with you, sir, 

that is going on, and the first thing is that we are in a global economy, and our country no longer salutes our flag, they salute their 

own corporate logo a lot more. And in a global economy, the responsibility of America is really different. We are a team. And I would 

say our team has no plan to how to deal with a 21st Century economy instead of a 20th Century economy. Whether it is about our 

manufacturing center, whether it is about trade or incubating the 

jobs of the future, the privatizing, deregulating, ‘‘let the market 

solve all our problems’’ failed us miserably in the last century, at 

the end of last century, and in a global economy we need to change. 

And I think all the policy issues you have talked about, what we 

do about manufacturing, about the fact that if we pass the health 

care bill, we will add 21⁄2 to 4 million jobs that are paid for in 

America, which no one really wants to talk necessarily about; or 

that health care and bioscience and pharmaceutical are really the 

jobs that we do export— 

Mr. BACA. And those jobs won’t be outsourced. They will be created right here in the United States. 

Mr. STERN. In every State, in every community. This is not a 

Democrat, a red State or a blue State, it is an American solution 

to a problem as well. 

So there are some things we are looking for jobs in all the wrong 

places I like to say sometimes, because the health care bill is a jobs 

bill that is paid for. But I do think we need a different economic 

plan in the 21st Century, and we don’t have one right now. 

Mr. BACA. The rest of the panel? 

Mr. HASSETT. I just think that if you think of it from the point 

of view, say, a State, suppose you are a State, and you are charging 

corporations a lot more to be in your State than all your neighbors. 

Then what is going to happen is the plants are going to locate in 

the neighboring States because they have lower tax rates. 

We are way out of line with the rest of the world right now, and 

the fact is that in order for firms to compete, they have to locate 

activity in places where the taxation of their activities is comparable to the people they are competing against. And that is not 

because they are evil or unsympathetic, it is because— 

Mr. BACA. There has to be a fair, level playing field because they 

all leave the United States, and they say it is a lot cheaper to go 

outsource out there and create those jobs out there versus out here, 

and then all we end up having is distribution centers in our area. 

28 

Mr. HASSETT. There is very clear evidence that relates changes 

in corporate taxation to blue-collar wages. If we made ourselves a 

more attractive country for the location of manufacturing plants, 

then wages would go up, and we would create jobs. We can’t go 

around and micromanage little things like access to credit and expect really big responses when there is a fundamental knife in the 

chest of manufacturing in the United States, which is that we are 

the most unattractive tax climate if you add, for example, the California tax rate to it on Earth. 

So people aren’t going to look at the deficit that we have and the 

high taxes that we have and say, well, I will locate my activity 

there and create jobs there, because there are so many more attractive places. And unless you address that fundamental problem, 

then we are going to be tinkering around the edges. And it is not 

because of the motives of corporations, that they are bad people. It 

is because they are competing against folks who have a tremendous 

advantage because our policies are messed up. 

Mr. BACA. Mr. Mishel? 

Mr. MISHEL. I don’t believe that corporate tax rates are what is 

deindustrializing America, but I think we should at least mention 

the fact that exchange rates are way out of line, and people are totally afraid to even deal with it. And so we have a very large external deficit, especially with China. When people complain about all 

the public debt going to China, that is really a process of our trade 

problem with China and not, in fact, anything to do with our current fiscal position. So I would suggest that we have an exchange 

about that. 

Mr. BACA. For a level playing field. 

The CHAIRMAN. The gentleman from California. 

Mr. ROYCE. Thank you. 

Mr. Hassett, I was going to ask you as we talk about the need 

for job creation, I think it is hard for those out there who are entrepreneurs to ignore the uncertainty that many Americans face when 

they turn on the news and they hear what is coming out of Washington. The rush by the Administration, and frankly by this Congress, to transform the U.S. economy into one centered on the Federal Government, and that is the way a lot of people perceive it, 

has created, frankly, a level of uncertainty among our Nation’s 

small businesses that is a 35-year low in terms of the polling that 

you see in business. 

Businesses are not hiring. One of the reasons is they see the new 

mandates. They see the new taxes being debated in the health care 

bill. They understand that the cap-and-trade legislation will restrict growth. Certainly, it is going to increase their costs of doing 

business if their energy costs are going to go up. 

I know my overarching concern with the regulatory reform bill 

that this committee passed out late last year was the power relegated to government bureaucrats in terms of the way in which it 

was done. And I think businesses throughout our financial system 

see the creation of a new expensive consumer protection agency. 

They understand that a common theme found throughout the legislation is a spike in legal liabilities, which is another thing for them 

to be concerned about. They are going to have to deal with that. 

In the past few months, you saw the Speaker and an advisor to the 

29 

President, John Podesta, both raise the idea of another tax, a 

Value Added Tax, or VAT tax, to generate revenue. 

Well, if you are in the small business community, and you are 

looking at what is around the corner, and you are looking at the 

potential of facing all of those taxes, card check would be another 

thing that you would put into the equation, all of these factors, arguably, lead to an aversion to risk across-the-board, an aversion to 

the idea that you are going to put more capital at stake. And instead of bringing on new employees or investing in the firm, I 

think businesses are preparing for what they believe will be hostile 

operating environments that they are going to have to live in for 

years to come, basically a politically hostile environment as the 

government grows and the private sector shrinks. 

The National Federation of Independent Businesses were the 

ones that did the recent study on capital expenditures and nearterm plans for new capital investment. They say that is at a 35- 

year low. 

So these facts suggest that it was a serious economic mistake to 

press for this major transformation, in my mind, to government 

power in Washington, centered in Washington. That has been a lot 

of the messaging, that these decisions are not going to be made in 

the private sector. A lot of them, including even the ownership of 

institutions, are going to stay with Washington for a while. Political pull is going to replace market discipline, is going to replace 

market forces on the heels of the worst financial crisis in decades. 

And I would like to ask you, Mr. Hassett, for your views on that 

topic. Are small businesses around the country hesitant to expand 

because of the rhetoric coming out of Washington and the concerns 

that some of these things are going to come to pass? 

Mr. HASSETT. Thank you for the question, Mr. Royce. I think 

that absolutely uncertainty about policy is something that squashes 

investment, especially capital formation. It is something we have 

seen repeatedly in the past. But also uncertainty about things like 

tax policy and future taxes. If we take just the stimulus, for example, if you are a small business or a medium-sized business with 

a taxable income, say, between $200,000 and $500,000 a year, you 

employ a few people, your own bill for the stimulus and expected 

future taxes is about $41,000 just for that one guy. That is his 

share of the stimulus. It is about $8,000 for every taxpayer. 

And the fact is that we have to pay off this stuff or we are going 

to keep making our credit card payments every month. And I think 

that that creates a lot of uncertainty. That is why the first policy 

that I addressed in my testimony was fiscal consolidation, the notion that—I know it was addressed in the Senate recently where 

it was actually a failed initiative to have a panel, a bipartisan 

panel, try to seek ways to fix the budget deficit. If we don’t address 

these problems and provide some kind of clarity, then we should 

expect high-risk aversion to continue, and we will continue to be 

disappointed by the recovery. 

Mr. ROYCE. Mr. Zandi? 

Mr. ZANDI. I think it is fair to say that policy uncertainty is contributing to the lack of hiring. I think, though, that these are 

issues that need to be addressed. And I think health care needs to 

be addressed, and energy policy, and financial regulatory reform 

30 

and tax policy. All those things are very, very important. I don’t 

think there is any way around addressing them. But I think one 

unfortunate byproduct of that is it creates uncertainty and is playing a role in the lack of hiring, yes. 

Mr. ROYCE. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. The gentlewoman from New York. 

Mrs. MALONEY. Thank you. I didn’t expect to be called on, but 

I am delighted to be called on, and thank all of you. 

I would like to follow up on the gentleman’s questioning on uncertainty. And I believe that part of what the Democratic Congress 

and President was attempting to do was to create certainty. We 

had whole segments of the housing market that were not regulated, and it burst into a flame of pain for many people. And we 

came forward with regulations so that there would be certainty. So 

what we were doing was working to put certainty back into the 

system so that you knew what the health care plan was and what 

the housing regulation was going to be. But many of these economists have said that we basically have two choices: We can either 

provide stimulus money or tax credits for jobs. 

I would like to ask Mr. Zandi, which do you think is more effective in creating jobs? Or do you need a combination of both? 

Mr. ZANDI. I think a combination of both would be appropriate. 

I think a jobs tax credit is probably the best idea for trying to generate hiring this year to do it quickly. 

Mrs. MALONEY. Do you think we need more stimulus to keep the 

recovery that we are experiencing now going forward? I understand 

OMB came out with numbers today that showed that we are really 

continuing to trend in the right direction, but rather slowly. 

Mr. ZANDI. Yes, I think we need more stimulus, including the job 

tax credit and the help for unemployed workers and State governments. Work Share, helping to fund Work Share would be a good 

idea, more money to the Small Business Administration so that 

they can get more credit out. 

So I think—I expressed this early on, and I will restate it—the 

odds are that our economy, without any more policy help, will get 

through this. The job market will rev up, and by this time next 

year, we will feel better. But I think the odds are uncomfortably 

high that I am wrong and that we go back into a recession or some 

very weak economic environment, and if we do, it is going to be 

very difficult to get out. So prudent risk management would say err 

on the side of doing too much rather than too little. 

Mrs. MALONEY. Now, in terms of the jobs tax credit, Professor 

Blinder in his op-ed in the Washington Post this week—and incidentally, he was supposed to testify when you were, but he was 

snowed in, so he turned his testimony into an op-ed, and he talked 

about major ways employers may ‘‘game’’ a jobs tax credit. So I 

would like to ask you, and the others if they would like to participate, how would you design a credit? What would be the key parts? 

For example, should we target firms of a particular size or age, or 

should it be all firms? Should it be tied to head counts, or should 

it be tied to overall payroll increase? 

If you were to design a tax credit bill—and there are a number 

of them out there, the Senate may be moving forward with theirs, 

31 

and I even have my own in, I am sure the chairman has two or 

three in, everybody on the committee has one—but I would ask Mr. 

Mishel since you seem to want to respond, how would you design 

it if you—and anyone who would like to participate or have ideas? 

Mr. MISHEL. Thank you for the opportunity. 

My institute has offered a jobs tax credit designed by Professor 

John Bishop of Cornell and Tim Bartik of the Upjohn Institute, and 

it works in the following way: Employers have to file a quarterly 

tax return, and in that you can see how much payroll tax they pay 

this year versus four quarters ago. If they are paying more payroll 

tax this year, over a certain amount, then you estimate, not normal 

wage growth would generate, and they get a credit up to around, 

I think, 15 percent. So what you are doing is you are rewarding 

employers for raising wages, increasing hours of work, and increasing head count. And I think that is pretty impossible to game other 

than issues around new firms, which I think are easily handed. I 

think this is a useful thing to do in the context of getting more 

growth. 

One of the things we haven’t talked about here is that we have 

also seen—whatever growth we have seen, it has been from the 

stimulus. But the growth that we have seen is very slow, 3 percent 

growth. We need to have twice as much growth. So, in fact, we 

need robust, increased demand. If employers see that, and if they 

have some kind of job tax credit, I think we can multiply the effect 

of that. 

The CHAIRMAN. The gentleman from Alabama. 

Mr. BACHUS. Thank you, Mr. Chairman. 

Mr. Zandi, if you look at possible ways to create jobs without taking on more debt, in other words, government expenditures, or 

without expanding the deficit—that is actually one thing about tax 

cuts is you do expand the deficits—but are there ways that we can 

create jobs without doing either of those? What might some of 

those be? 

Mr. ZANDI. Well, there is no reason that these stimulus proposals 

that we are talking about can’t be paid for. In fact, I wouldn’t pay 

for them this year, but I would pay for them over a 10-year budget 

window. 

Mr. BACHUS. Which ones? 

Mr. ZANDI. All of them. I think it is important to show fiscal discipline, particularly now. In fact, that will buy us a lot of goodwill 

in financial markets and will help our economy. So we should run 

a larger deficit this year, and some of the proposals I said would 

do that. That doesn’t mean we can’t pay for it over a 10-year budget window. 

Mr. BACHUS. What are some of the things that you think would 

do that? Are you saying the tax cuts? 

Mr. ZANDI. Yes. I would think that some of the things that you 

could do to pay for it would be to focus on things, and I am just 

blue-skying it for you, but the financial TARP tax, the so-called 

TARP tax that has a 10-year window. I think that is a very legitimate kind of tax. It is a way to address the ‘‘too-big-to-fail’’ issue. 

You are raising the cost of capital for large institutions. It is a 

much more effective way of addressing it than trying to break 

these institutions apart, and you generate revenue. I would make 

32 

that permanent, and I would use that money to pay for this additional stimulus. That would be one way of paying for it. 

Mr. BACHUS. What are some of the other tax cuts that you think 

would be beneficial and revenue-neutral? 

Mr. ZANDI. I agree with Kevin that I think the corporate tax 

rate, of all the taxes we have, that is the worst tax. It is inefficient. 

It is reasonable to argue that it is inappropriate and that we 

should work to reduce that, and we have to do that— 

Mr. BACHUS. Do you think that would create jobs? 

Mr. ZANDI. I do, but we have to do it in the context of broader 

tax reform and make sure we don’t raise future deficits, because 

this is 10 percent of tax growth. 

Mr. BACHUS. Mr. Hassett, do you agree with him that the tax 

cuts actually would create jobs and would in the long term be revenue-neutral or actually produce revenue? 

Mr. HASSETT. On the corporate tax specifically, there is a fairly 

recent Brookings paper by Kim Clausing, who is a professor at— 

is it Reed College—who shows that again the multinationals are so 

nimble with respect to the corporate tax that it appears that we 

are on the wrong side of the Laffer curve. That is probably the only 

tax rate that I can think of where that is really true. But there is 

academic literature that suggests that reducing the corporate rate 

wouldn’t be very costly at all. 

I agree the deficit is so large, it is a key part of my testimony 

that we need to be concerned about that, but I think some kind of 

cautious reductions, especially phased in—there is a great policy 

opportunity to phase in a reduction in the corporate rate, because 

if the rate, say, went from 35 to 25 over 10 years, then firms would 

have incentive to buy machines today and deduct them at 35 cents, 

and when they get profits in the future from the operation of the 

machine, it is a lower rate, so it is a double positive. So I think 

it would be very, very important to do something like that. 

With regard to the stimulus, the one thing I can say is that the 

thing that pains me looking back—and I agree with the chairman 

that anyone who says that it hurt last year, I think, doesn’t have 

at least the literature to point to. Even Bob Barrow’s piece in the 

Journal today talked about a positive effect last year of the stimulus. The thing that pains me is that we have all these broken policies, and we didn’t use the money to fix any of them. And this corporate tax thing is something I care as much about as the jobs 

credit that we were talking about earlier, and we don’t have the 

money to fix it. 

Mr. BACHUS. Both of you agree that cutting the corporate tax 

rate, Democrat and Republican witness. My next question would be 

this, and called by the Republican and Democrats. What about the 

free trade agreements? Would those create jobs? There are four of 

them pending. Mr. Zandi or Mr. Hassett, just the two of you all, 

just to maybe—and how many jobs do you think? 

Mr. ZANDI. You are stretching my limits of expertise. I don’t 

know these agreements well enough to comment. Let me say this: 

I think we are a net benefactor of globalization, and one of the— 

The CHAIRMAN. Benefactor or beneficiary? 

Mr. ZANDI. Beneficiary. Net beneficiary of globalization. One of 

the most amazing things, from my perspective, that came out of 

33 

this global crisis is that we were able to globally coordinate and cooperate, and no one raised barriers in a significant way. We all had 

our Buy America provisions, but they were modest. And I think 

that is testimonial to the fact that at the end of the day, it is very 

important that we keep our— 

Mr. BACHUS. Can Mr. Hassett respond? 

The CHAIRMAN. Briefly. Sure. 

Mr. HASSETT. Really quickly, I think that the arguments against 

trade all have a great deal more purchase when our policies are so 

terrible that everybody wants to leave. And so the reason why we 

are worried about things like the jobs being located off-shore is that 

locating domestically is unattractive, and if we fix that problem, I 

think there would be very significant benefits from trade for sure. 

The CHAIRMAN. The gentleman from Georgia. 

Before that, don’t start his clock yet, I ask unanimous consent 

that a package of statements from the National Council of La Raza 

be made part of this hearing. And without objection, they will be. 

The gentleman from Georgia. 

Mr. BACHUS. Mr. Chairman, Mr. Stern and Mr. Mishel wanted 

to respond, too. 

The CHAIRMAN. The gentleman can’t take other people’s time. 

Mr. BACHUS. I am sorry. 

The CHAIRMAN. Can we get unanimous consent? If there is unanimous consent for 45 seconds for Mr. Mishel, I think we can do 

that. That was a fair comment. Forty-five seconds unanimous consent. 

Mr. MISHEL. On the free trade agreements, I find it remarkable 

that people claim that as something that is going to create a lot 

of jobs. Somehow they seem to think we get more exports, but don’t 

take in more imports, and whatever estimate there is of the gain 

would be so small as to be almost unmeasurable. 

And I think what my colleagues were saying as a long-run stance 

that we are for globalization. But actually most economists don’t 

think trade is about jobs; it is about increasing comparative advantage and increasing productivity and wealth, and it is not a job-creation measure. And in fact, all the trade agreements we have had 

in the past have led to severe net job losses, in my view. 

The CHAIRMAN. We have 15 seconds. 

How low would we have to get the corporate tax rate to be fully 

competitive with China? 

Mr. MISHEL. I am not sure about that. I think our issues with 

moving to China have almost nothing to do with corporate tax 

rates. 

The CHAIRMAN. The gentleman from Georgia, finally, again. 

Mr. SCOTT. Thank you, Mr. Chairman. 

The CHAIRMAN. And a full 5 minutes, please, for the gentleman 

from Georgia. 

Mr. SCOTT. Thank you again. 

Mr. Hassett, let me go to you, if I may. First of all, let me commend you on the profoundness of your paper. You have nailed the 

core of the unemployment problem by willingness to address the 

disproportionate impact that this unemployment is having on African Americans. And until we deal with that, until we pull the covers off and say we have to go where the core of the problem is, just 

34 

as surely as we went at where the core of the problem was on Wall 

Street, we targeted there, and I commend you for that. 

I want to call attention to a couple of points you made. First of 

all, you said it is astounding the extent to which Black Americans 

have borne the brunt of this recession. Then you go on to say it 

is important to look closer at the data for Blacks as this has received far too little attention. While White unemployment has been 

declining since November, unemployment among Blacks has steadily increased, which brings me to my point that the reason we are 

going up so high is because the African-American unemployment is 

going so high, while the White unemployment is going down. It is, 

sadly, a statistical regularity that unemployment has been far 

worse for Black Americans. 

And then you ask the profound question, why? Why are the effects of the recession exacerbated for Blacks? You point to the 

study. You bring your information from the study by the economists at the University of Connecticut and the University of California, and they say that Blacks are the last to be hired and the 

first to be fired. And you conclude that given the terrible state of 

the labor market, it is clear that more must be done. And you say, 

I would add that we should look especially to policies that are most 

likely to help Black Americans who have suffered the worst of the 

recession’s job destruction. Thank you for stating that. 

Now, what must we do about it? I commend you on your job 

sharing, and I want to ask you, first of all, how is House Resolution 

4135 going? Where are we on that? That is the job-sharing bill. 

How can we help you move it forward, and what needs to be done 

to strengthen it, especially with the emphasis on the African American jobless situation? 

Mr. HASSETT. I think the policy itself is really focused on helping 

those who are first to be laid off when those begin to occur. And 

so I don’t think that it needs to be modified to increase its targeted 

nature. I think the concern is that the difference between the 

United States and many European nations that have had an astonishing success from job sharing is that fixed costs in the United 

States, like benefit costs, are a bigger share because, say, in Germany, the government would give you your health insurance. And 

so if you reduce somebody’s hours 20 percent and their wages 20 

percent, then the saving to the firm wouldn’t be as much, because 

the lump of the health insurance is still there. 

And so I just think that to be—to get effectiveness along the 

lines of what we see in Europe, it needs to be a pretty darn generous program. And so I think that as ambitious as you could challenge your staff to be about making it generous, I think the returns 

from that would be large and perhaps necessary because of the 

share of fixed costs and overall labor compensation. 

Mr. SCOTT. We will find where that bill is. My staff is over there, 

and I will join you on that bill, sign on to that bill. I think that 

is a creative way to go. 

For those who might not be familiar with it, my understanding 

is that instead of firing a person, you kind of reduce the workload 

and be able to share that, and that saves the government because 

you fire them, they got to do unemployment, and there is a greater 

return on keeping him there so you don’t have to go through your 

35 

training and retraining of new employees when the economy gets 

better. It is great. 

Would you not also agree that any future stimulus—and some of 

you may answer this, too. Mr. Stern, good to see you here. And you 

are absolutely right about the health care bill. It will create more 

jobs. 

But here is the point and the problem. I am worried about more 

stimulus because I am concerned about it going to the States, particularly when you look at trying to engender employment. Most of 

the African Americans who are employed are concentrated in the 

cities, governments. And where we have found we have had greater 

impact is when we have been able to get that money away from 

the States, and many States, particularly like my own State of 

Georgia, let money sit there. And many of them are—unfortunately, they are Republicans, and they don’t want the stimulus, no 

way, until it comes someplace, and then they will go and may take 

a photo op with it. So wouldn’t it make sense for us if we do more 

stimulus to try to get it targeted into the cities and the counties? 

Mr. GREEN. [presiding] I am sorry. Your time is up. We will ask 

that your responses be in writing. 

I have instructions. Apparently, we will have votes in the near 

future, perhaps as early or as late as 4:20. I would like to at this 

time announce the order such that everyone will know that they 

will be heard in the order of arrival. We will have Representatives 

Ellison, Kosmas, Bean, and Sherman, and if time permits, we will 

go to this guy known as Al Green. With this said, we will go to Mr. 

Ellison. You are recognized for 5 minutes. 

Mr. ELLISON. Thank you, Mr. Chairman, and let me thank all 

the panelists. 

Mr. Mishel, I join in commending Mr. Hassett for identifying the 

disparate impact of unemployment on African Americans. But 

weren’t you saying this at a panel that I had you on back in September 2009? 

Mr. MISHEL. I commend my friend Kevin for saying this. We, in 

fact, have a Web site at our institute, economytrack.org, which provides even further information. 

The underemployment rate for Blacks and Hispanics is both now 

at 25 percent. You can’t find that in any other place. So, yes, there 

is disparate impact by minorities. But there is also—I must add we 

also had the highest unemployment rate among college graduates 

than we have ever had, among white-collar workers. This is a disaster. 

Mr. ELLISON. Let me also ask you this question. I think it was 

Mr. Stern had got to this issue a little earlier. Before this recession 

hit us, there was a general malaise among working-class people, 

stagnancy of wages, and so it is no doubt that we are—the bounce 

of this recession is not going to go as high because we started so 

low anyway. Do you want to elaborate on that? 

Mr. MISHEL. I will comment on that. The last business cycle was 

pretty much the worst economic performance in the postwar period, 

and that was the one I have to reflect on, deep tax cuts with large 

deficits. 

The CHAIRMAN. Give the years of that. 

36 

Mr. MISHEL. The years of tax cuts, 2000 to 2007. It is the first 

time we had a business cycle where a typical working-class family 

had less income at the end than they had at the beginning. It is 

the first time in a recovery, from 2002 to 2007, where we had fast 

growth of productivity and the hourly compensation of either a 

high school graduate or a college graduate compensation, wages 

and benefits, didn’t increase by one penny. And so we saw surveys 

back in way before we had a recession where the American population responded that they actually thought they were in a recession before we even had a recession. 

I would also add that the stimulus bill was passed in February 

and started affecting the economy pretty much in April. In March 

of that year, unemployment already happened to be, by the way, 

8.6 percent, which has already exceeded what we had in the prior 

two recessions, and we had already lost a greater percentage of our 

jobs than we had in any recession since World War II. 

So I find some of the discussion here quite flabbergasting to me 

as if somehow those people who were in charge of the economy before the Recovery Act somehow are absent from our discussion, and 

it annoys me greatly. 

Mr. ELLISON. Mr. Hassett, I do commend you for that very important observation. But I would like to turn and ask you about 

something else, and that is you have mentioned corporate taxation. 

And I think that we should look at things to find a way to improve 

the economy, but as you compare the United States with other 

economies that had a lower corporate tax rate than the United 

States, perhaps Germany, how do you factor in the fact that they 

do have universal health care, that German workers work about 

300 hours a year less than American workers do? 

We may have a higher corporate tax rate. But the standard of 

living and wellbeing of the average German worker, I hate to say 

this, probably exceeds our own. Can you comment on that? I would 

love to hear what Mr. Stern has to say about that, too. 

Mr. HASSETT. Thanks for the question. There are 56 seconds, so 

I will go quickly. I would add that I commend you for mentioning 

Larry’s long work in this area and will even broadcast that Jared 

Bernstein and I also pursued a project jointly between our two institutes for many years on how to measure the welfare of those 

who are less well off. 

There is a big literature that looks at the impact of corporate 

taxes on the welfare of workers that finds that when you lower corporate taxes, that you make the workers better off. That is across 

many, many nations, with different rates. 

I think the big difference between today and back when President Clinton signed a 1 percent increase in the corporate rate is 

that when they did that, the average rate for our OECD trading 

partners was about 39 percent, and now it is about 24 percent. So 

we have stayed 34, 35 percent for a long time, and the rest of the 

world has moved. 

Mr. ELLISON. I didn’t realize we were so short on time, so I have 

to ask this question. What about a bill for direct job creation for 

chronically unemployed people? 

Mr. MISHEL. Yes. Well, I don’t know about how unemployed, but 

we should have direct job creation in distressed communities. 

37 

The CHAIRMAN. Mr. Hassett covered that in his testimony. 

Mr. HASSETT. I also covered that. 

Mr. ZANDI. I think for this summer and for this period in the 

next year or two, I think that would be quite therapeutic. 

Mr. ELLISON. So I have a bill on that. 

The CHAIRMAN. The gentleman’s time has expired. 

The gentleman from Texas. 

Mr. GREEN. Thank you, Mr. Chairman. 

I thank the witnesses for appearing. 

I don’t know the history of all of the witnesses, but I do know 

Mr. Stern’s history, and it is one of doing an admirable job for 

workers, for persons who are many times the last hired and the 

first fired. I, too, would like to compliment you. 

And I compliment all of the other witnesses as well. 

Mr. Chairman, it seems to me, and this is by way of an observation, that it is beneficial to some to do nothing such that you will 

be in a position to criticize whatever is done. If we do a good job, 

you get to compare the good job to the perfect job. And when you 

compare the good to the perfect, there is always reason to find that 

the job done was not done well enough. And that is what we are 

having to cope with. No matter what we do, it will be compared to 

perfection. 

The only person in this Congress who can draft a perfect bill is 

speaking right now. Nobody else can draft a perfect bill. By the 

way, my 434 colleagues all are of the same opinion. So since we 

can’t draft perfect legislation, we will continually subject ourselves, 

those of us who are willing to do the hard work of taking on the 

challenges, will continually subject ourselves to the criticisms of 

those who do nothing, yet criticize the perfect—excuse me, the 

good. They compare the good to the perfect. 

Now, to answer the question, where are the jobs, I will tell you 

how to find the answer: Ask your school superintendent, who has 

teachers who were not released because so-called stimulus dollars 

were there to help them. Ask your mayors, who have firefighters 

who were kept on because stimulus dollars were there to keep 

them on. Ask your mayors about the first responders who are police officers who were able to maintain their jobs because the stimulus dollars were there to keep them on. These jobs are important, 

too. 

It seems to me that some are of the opinion that keeping a person at work is somehow less than an honorable thing to do in a 

time of crisis. The money was well spent by keeping these people 

on their jobs. Education is important to this country. We are falling 

behind. We cannot afford to lose our teachers. First responders are 

important. There are always concerns that have to be met, and 

first responders meet these concerns. So keeping these people employed has been an absolute necessity, and it was the right thing 

to do. I back down from no one when it comes to defending my position. 

And I am just glad that Carlyle is right. No lie can live forever. 

And William Cullen Bryant is right: Truth crushed to Earth will 

rise again. And Dr. King is right: Although the arc of the moral 

universe is long, Mr. Stern, it bends toward justice. That means it 

bends toward those who were in a position to do and did, as opVerDate Nov 24 2008 17:30 Jun 25, 2010 Jkt 056765 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 K:\DOCS\56765.TXT TERRIE
38 

posed to did nothing and criticize those who have the courage to 

do. 

History will reveal, as they look through the vista of time, that 

those who took the hard votes to save this economy did the right 

thing. There is no question about it. We have to just move on and 

let history vindicate us. 

Now, having said that, let’s talk about this create jobs directly 

caption that has been called to our attention by Mr. Hassett and 

others have agreed with. Let’s talk about the teen unemployment 

this summer. Is there anyone who thinks that we should create 

jobs directly for these teenagers, many of whom, by the way, will 

be of African ancestry? Is there anyone who thinks we shouldn’t do 

this? 

Mr. MISHEL. I think it is one of the successful things that was 

done last summer and we should definitely be repeating summer— 

Mr. GREEN. We should repeat it. We should have direct jobs created for young people who are going to be in the job market. There 

is value in this. 

Can anyone believe that if we do it, that it won’t be criticized? 

I absolutely assure you it will be criticized if we do it. Make no 

mistake. And the criticism will, again, come from those who would 

have us do nothing so that they can criticize us for doing nothing. 

If we don’t get the job done, we get criticized. If we do the job, we 

get criticized. The thing to do is do it and let history vindicate us. 

I yield back. Thank you, Mr. Chairman. 

The CHAIRMAN. The gentlewoman from Illinois. 

Ms. BEAN. Thank you, Mr. Chairman. 

And thank you all for being here today and sharing your subject 

matter expertise with us on a topic that is of such great importance 

to our Nation’s economy. 

The feedback that I have heard from employers in the Illinois 

district that I represent and really even outside of Illinois is that, 

typically, hiring decisions are made mostly based on the confidence 

they have in their own forecasts. And they like to see some repeated quarters of increase in trending before they have the confidence to move forward in making additional hires. 

Mr. Zandi stated that businesses aren’t likely to give up productivity gains they have achieved in recent years. Mr. Hassett claims 

that firms maintain excess capacity in downturns and strive to increase output through the activities of workers already employed. 

Given these premises, and even Mr. Mishel’s comments that over 

the last decade we have seen GDP growth without the wage correlation, and so there has been growth without wages. And where 

they have typically tracked historically, they haven’t been tracking 

in these recent years, and that is the struggle that so many families are facing. And given that the economy is driven 70 percent by 

consumer spending, should we consider—would the likelihood of 

some of the payroll subsidies or cuts being proposed be as effective 

as what has also been suggested by some, including the President, 

that we look at incentives for wage increases for companies that 

are profitable and are essentially doing non-executive profit sharing? 

Would that be potentially more stimulative so that the consumer 

spending goes up, the forecasting goes up, and the hiring would 

39 

then follow? I would be curious. Can I start on this side and go this 

way? Can I start with Mr. Zandi? 

Mr. ZANDI. I am sorry; I am not familiar with the proposals you 

are referring to. 

Ms. BEAN. There haven’t been hard proposals, but some suggestions for increasing overall wages within firms, small businesses 

specifically, to drive consumer spending, which would then in turn 

build the demand side of consumer spending, which will help drive 

jobs. 

Mr. ZANDI. What policy proposal? 

Ms. BEAN. The President recently talked about it as something 

to consider. He didn’t detail it. 

Mr. ZANDI. I am not familiar with this. 

Mr. MISHEL. Well, the proposal that the Obama Administration 

has talked about as well as the one that we have offered that has 

been introduced by Senator Casey rewards firms for both—new 

hires. If your payroll taxes go up, and they can go up because you 

have hired someone, you have increased hours of work, or you have 

given wage increases. 

Mr. ZANDI. Are you talking about the jobs tax credit? 

Ms. BEAN. I am actually in general saying it is one thing to try 

to get to people to hire new people based on saying we are not 

going to make you pay payroll tax; it is another thing to say overall 

wage increases go up reflecting the profitability in your firm. So it 

is a slightly different approach. And I am asking for a comparative 

from you, just your opinions. 

Mr. MISHEL. Well, let me say this about that, because I think in 

moving forward to get the economy that we want, to get robust economic growth will require addressing this problem of the disconnect between wages and productivity, in my view, because we 

have grown over the last 30 years based on people borrowing or 

based on consumption tied to asset bubbles. Those are neither desirable nor can we return to that. If we are not going to return to 

that, then we have to find a way to do it based on the creation of 

good jobs and wages that grow with productivity, or else we are not 

going to get robust growth. So I view that as an essential thing 

that we start doing. 

I would add that the idea of a higher minimum wage, 50 percent 

of the average wage, that we provide the people the right to have 

unions, that we have labor standards that are worth something 

and enforced, these are essential core items to reestablish a connection between wages an productivity. 

Mr. ZANDI. I think the key here is to get unemployment down, 

because unless we are back at full employment, labor is not going 

to be on the same playing field with business in terms of their negotiation about compensation and wages. 

Ms. BEAN. But many have suggested that just because you are 

going to cover payroll, I am not going to go out and hire people because of that. I am going to hire when I see my demand increase. 

That is the question, would it be a better return if essentially we 

were to provide that incentive, and they don’t hire because of it, 

that that is not going to be our best policy initiative. So I am asking if you have some other suggestion. 

40 

Mr. ZANDI. I think those policies that incent businesses to hire 

and hire as quickly as possible to bring that unemployment rate 

down will get us back to where we need to be with the compensation growth. So things that support demand, UI and State government aid, things that support credit, SBA lending and things that 

lower the cost of labor, at least temporarily, get them hiring again, 

like a job tax credit, would be helpful. 

Ms. BEAN. Mr. Hassett? 

Mr. HASSETT. I just think that Mark’s proposals are kind of indirect, and you could just directly do it by increasing the share of 

profits that a firm gets to keep if they make some money. 

The CHAIRMAN. The gentlewoman’s time has expired. 

The gentleman from California, Mr. Sherman. 

Mr. SHERMAN. Thank you. 

A couple of preliminary comments. Mr. Hassett talks about tax 

rates. As an economist who used to be a tax lawyer, you are working with phony numbers because you are looking at the tax rate 

without looking at the way the base can be hidden through the 

phony use of tax havens, which we in Congress have not plugged 

those loopholes for so long that the corporate taxes are far less 

than you can determine without cracking down on the tax savings. 

As for free trade, it would create jobs if life followed theory. The 

economic theorists tell us that anybody who actually looks at the 

facts and sees that we have not free trade but malignantly disproportionate trade, anybody who looks at those facts is just too 

dumb to understand the theory. 

Mr. Zandi, we get a crack at Mr. Bernanke tomorrow, he is very 

slightly less than pedal to the metal in the use of monetary policy 

to expand our economy. Lowering the discount window, some hints 

on other things. Fiscal stimulus, which I support, does increase the 

deficit, at least short term. Monetary policy does not involve the 

use of Federal expenditures and, in fact, usually reduces the deficit 

because it reduces borrowing costs. Should we be making sure that 

the Fed continues and goes all the way, pedal to the metal on monetary policy and stays there before we look at fiscal policy as a way 

to expand the economy? 

Mr. ZANDI. I don’t think they are mutually exclusive. I think it 

is important to keep monetary policy pedal to the metal, as you put 

it, with fiscal stimulus this year. 

Mr. SHERMAN. So push him to go pedal to the metal and continue— 

Mr. ZANDI. I don’t think you have to push him too hard. I don’t 

think the Federal Reserve will raise interest rates, the interest rate 

on reserves or the funds rate, until employment rate is definitively 

moving lower, and I don’t see that until this time next year. 

Mr. SHERMAN. Now there is this proposal for giving a tax credit 

or tax holiday or tax relief for those who hire new employees. Imagine a restaurant that used to have 50 employees; now they are 

down to 48, and they are struggling to hold on to 48. Somebody is 

planning to put a restaurant across the street with 40 new employees. Does it make sense for the new restaurant to get a huge tax 

incentive that will allow them to out-compete the struggling existing restaurant across the street? How do we design a new jobs tax 

credit that doesn’t just put more pressure on those enterprises that 

41 

aren’t hiring new employees but are struggling to hold on to the 

old ones? 

Mr. MISHEL. I think you have identified the downside of this policy. But it is something that would be for a year or two. I am hostile to a permanent jobs tax credit. This is temporary, to advance 

the hiring. And there would be special rules for new startups 

where they would get less than a firm that is just expanding. But 

that is a problem. 

Mr. SHERMAN. And I will point out, hiring a new employee involves an awful lot of costs, which are just partially offset by the 

credits that are being proposed. 

So, Mr. Stern, it is pretty well accepted that we are going to need 

stimulus for the next 12 or 18 months. I hope we are not in a position where we need a stimulus 2, 3, or 4 years from now. So the 

emphasis is on finding shovel-ready projects. Even if you turn dirt 

today, you may still be building the bridge 3 or 4 years from now. 

Is there anything as shovel-ready as not firing a school employee 

or not firing someone in law enforcement? 

Mr. STERN. Clearly, when we are threatened with losing 900,000 

jobs in State and local government who are teachers and firefighters, as many people said, if we are just going to write that off 

and then start looking for a payroll tax to hire someone else back 

at the restaurant across the street, it doesn’t seem like a very responsible policy. So I would say no. 

Two, there are a whole series of jobs—child care, home care— 

that are in desperate need of people to go to work immediately. It 

is just that budgets in States have restricted even the job growth, 

forget even retaining the people. It seems to me there are things 

that are job-ready, may not be shovel-ready, but are job-ready, and 

citizens can use those services, particularly at this moment in history. 

Mr. SHERMAN. Coming from California, I don’t dream of new 

hires to meet needs that have not been met during the good times. 

I will settle for not firing people. 

I yield back. 

The CHAIRMAN. I thank the gentleman. 

I would say for people who want to continue the discussion of 

pedal to the metal, the Toyota hearing is in Government Affairs 

just around the corner. So if you haven’t gotten enough of that, feel 

free. 

I thank the witnesses. It has been a very useful thing. We did 

it at a time when the House was not fully engaged, and so I think 

it was interesting. Thank you all for a very thoughtful discussion. 

The hearing is adjourned. 

[Whereupon, at 4:19 p.m., the hearing was adjourned.] 

(43) 

A P P E N D I X 

February 23, 2010 

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