Date: 1981-11-10
Speaker: ROBERT C. BYRD (democrat)
Chamber: S

Mr. President. I rise in support of the amendment offered by Senator CHILES. We are at a crisis in the creditsensitive sectors of our economy. Whatever hope the supply side miracle may have held out to our Jobless citizens Is swept away by skyhigh Interest rates that make new investment unprofitable. The Chiles amendment directs the President by November 25. 1981. to work with the Federal Reserve Board to assure an adequate flow of credit to small borrowers. It requires that particular attention be paid to reducing home mortgage rates and Increasing employment. The amendment also directs the President to limit largescale diversion of credit to nonproductive uses. such as conglomerate mergers and corporate takeovers. This amendment takes strong action to bring Interest rates down. now. and let the economy begin to grow. There has been much talk about declining interest rates lately. and it is true that the prime rate has fallen to 17 percent. But Is 17 percent something to be satisfied with? Is it a rate we can tell our Nations businessmen they should pay? While the prime rate. and other short-. term rates. are edging downward. longterm rates are staying high. Just last Thursday. 29 -year Treasury bonds sold at an alltime high of 14.1 percent. and mortgage rates continue to hover near 1.8 percent. LTE/ November 10. 1981 Unless longterm rates come down. capital Investment will not Increase significantly. and the housing industry will not recover. Companies will be reluctant to use shortterm money for capital investment. even If these rates are low. because the returns to capital Investment are often many years In the future. Turning to housing. one simple fact determines the fate of that industry: The vast majority of our Nations families cannot afford to buy a house at 18 percent Interest. Until those rates come down the housing industry cannot recover. The drop In shortterm rates. while longterm rates stay high. reflects a combination of widespread confusion about the administrations fiscal policies. and the strangling effects of Its tight monetary policy. The lower shortterm rates reflect the Impact of the current recession. but the high longterm rates reflect a belief that after a small dip. Inflation and credit demands will soar once more. The administrations disarray on fiscal policy is only adding fuel to the fire. Investors will not accept lower returns on longterm Investments until they believe that our Oovernment has returned to a responsible fiscal policy. Unfortunately. every week brings new. and larger deficit predictions for the next 3 fiscal years. Only a few months ago. $100 billion deficits were characterized as out of the question. Now a. $100 billion deficit is widely predicted for this fiscal year. It may be hard to Imagine deficits- that large. but consider that to spend $100 billion we have to spend $1.60 for every second since the birth of Jesus Christ. Last Friday. after assuring the Nation for 9 months that a balanced budget could be reached In 1884. the administration formally abandoned that goal. As a resullt of that announcement. the Investment community. small businessmen. and labor leaders have no reference point against which to make their economic plans for the next few years. The administration must come forth with new. realistic deficit goals for fiscal years 1982. 1983. and 1984. There Is no substitute for fiscal responsibility as a way to bring longterm interest rates down. As the days go on. and this recession deepens. the Importance of passing Senator CHILES amendment becomes more clear. Unless interest rates come down. it will be .next to Impossible for the economy to recover. The housing Industry. which traditionally leads the economy out of recessions. shows no signs of Improving. Yesterdays Wall Street Journal quotes a homebuilder in Kansas City as saying. "This fall. we builders will drop like leaves." If the fall turns out to be anything like the first 9 months. there may be little left of the housing industry by years end. 2.660 construction contractors had filed for bankruptcy by the end of September. That is up nearly 50 percent from the -1980 period. The rate for subcontractor failures Is even higher. with bankruptcy filings up 120 percent from last years figures. No amlount of supplyside rhetoric. or administration assurances will help the Nations housing industry lead us out of recession. We need fast action. and the Chiles amendment guarantees such action. I hope you will all join me in supporting this amendment today. I ask unanimous conrent that the full text of yesterday mornings Wall Street Journal article be printed In the RECORD.