Horizon, Host: Ted Simons

December 16, 2008


Host: Ted Simons

senator Jon Kyl


  • Arizona's Jon Kyl is one of the most vocal critics of a proposed bailout for the Big 3 automakers. The Senator joins us to talk about the plan, other economic issues, and the incoming Obama administration.
Guests:
  • Jon Kyl - U. S. Senator
  • Dora Schriro - Director, Arizona Department of Corrections


View Transcript
Ted Simons:
Tonight on "Horizon," Senator Jon Kyl will be on the show. He will talk about the stalled auto bailout, the economy and the balance of power in the Senate. Plus, you'll hear about an award-winning program aimed at keeping convicts from returning to prison. That's next on "Horizon."

Announcer:
"Horizon" is made possible by contributions by the "Friends of Eight," members of your Arizona PBS station. Thank you.

Ted Simons:
Hello, and welcome to "Horizon," I'm Ted Simons. In the news today, the Federal Reserve sliced its main interest rate to a record low. The federal funds rate, which is what banks charge each other on overnight loans, was at 1\%. Today the Federal Reserve set that rate between zero and .25\%. The stock market immediately jumped 210 points this afternoon in trading, that's in reaction to the news. The stock market closed for the day, up 360 points. Fed Chairman Ben Bernanke says the lowered rate does not mean the Federal Reserve is out of tools to fight the current recession.

Ted Simons:
Democrats won't have the magical 60-seat majority they wanted in the senate. The most they can hope for is 57, if Al Franken wins in Minnesota, along with two independents who generally vote with the democrats. Senate Minority Whip Jon Kyl will be among the minority republicans. Senator Kyl is here with us tonight to talk about that and other issues. Senator, good to see you again, thanks for joining us.

Jon Kyl:
Good to be with you.

Ted Simons:
Let's get started with the auto bailout. Big news there, it just seems like we're getting different reactions. Some folks like it, some folks don't. It almost changes by the day. Your thoughts: a $13, $14 billion bailout here?

Jon Kyl:
Well, it could be as much, ultimately, as $125 billion, according to one who testified. The administration is currently thinking about a loan in the neighborhood of somewhere between $10 and $40 billion with conditions attached to it. Recall that last week the Senate rejected the bailout package that had been drafted there, after we had negotiated with the various creditors of General Motors. They all agreed to take a loss in exchange for the loan to G.M., except for the United Auto Workers. At the end of the day, they said no, they would not agree to concessions, as a result of which it fell apart and the Senate refused to approve the loan. Some people thought that was the end of it. But the administration had always kept open the possibility that it would provide the funds, either out of the so-called "tarp funds," the $700 billion that we authorized for other purposes, not for an auto bailout, or perhaps some combination of that money and the Federal Reserve authority. It's unclear what the administration will do, but I suspect in the next couple of days they'll make their announcement.

Ted Simons:
Are you suggesting that the inability of the auto workers to concede in this particular instance, because auto workers have done some concessions in the past, but in this instance that was the deal-breaker? Critics will say, "What about some other concessions by everyone from dealers to suppliers to these kinds of folks?"

Jon Kyl:
Yes. The auto workers were the final piece of the puzzle. The bottom line is that G.M. has a monstrous debt. They've got to get that debt down or they'll never be competitive with Toyota or Nissan or Honda, for example, let alone Ford. The bond holders represented in these negotiations were willing to take a huge loss. Motor companies were willing to equitize the investment into the fund that is going to pay for pension benefits, to make that story very short. The big piece left was how much of the U.A.W. labor union contract would be reduced. The effort was to get them to reduce within a year or so, to the point where they were competitive with these other foreign automakers that make cars here in the United States. Last year the difference was between about $73 an hour for G.M. versus $45 an hour for Toyota, let's say. That obviously needs to be reduced. The union was unable or unwilling to do that. And so Congress said no to the legislation. The administration is working to get some concessions like that. I don't know where they are right now in those negotiations.

Ted Simons:
And we should know that $73 an hour regarding the auto workers includes things like pensions and benefits and other things as opposed to an hourly wage.

Jon Kyl:
The wages are actually not that far different. It's the legacy costs, the health and pension costs, that are the big drivers.

Ted Simons:
Is bankruptcy an option?

Jon Kyl:
Sure. And as a matter of fact, Chapter 11, which is the protection of bankruptcy, it's not where you go out of business, it's where you go into court, restructure all of your obligations and get protected during -- up to 18 months' time. You don't even have to pay your creditors during that period of time. So when you come out at the other end of your bankruptcy, you're more efficient, all of your debts have been taken care of one way or another, you've got the money to move forward and you can be much more competitive. All of the airlines but one have gone through a Chapter 11 "reorganization," that's what it's called, and they've all come out much more competitive as a result. As have thousands of other businesses.

Ted Simons:
And yet the companies -- the auto companies will tell you that buyers, that consumers, are inherently wary of purchasing a vehicle with long-term warranties and these sorts of things they're going to hold for a while from a company that's gone bankrupt.

Jon Kyl:
I think the concern is overblown, but I understand it's a concern. What we've said is, "Fine, we'll back that up. The United States government will back up your warranties. And we'll even do you one better. We'll provide the so-called debtor in possession financing during the Chapter 11 proceedings so you don't have to worry about that." Well, to still object suggests that there's something else to this.

Ted Simons:
Can the country afford for the automakers to go out of business? I'm talking about the aluminum industry, steel industry, tin, rubber, you name it. Lots of these industries are so dependent on the auto industry. Can we afford for those things to go out of business?

Jon Kyl:
Well, they're not going out of business. There are a lot of reasons why the auto companies are not competitive. At the end of the day, unless they get competitive, unless they can shed all of these legacy costs, the union contracts that cost too much, too many franchises, and all of these other obligations, unless they can get competitive they're going to fail at some point anyway, unless the taxpayers are willing to continue year after year after year to pour billions of dollars in. But the steel industry, while it would lose a little bit of business, is not going to go out of business. And in any event, if G.M. doesn't get its act together, it's going to be toast anyway. So the bottom line is, how do we help them get to a competitive position? The bottom line is they're going to have to make concessions in exchange for a taxpayer loan that would demonstrate that, when all is said and done, they will be competitive. Otherwise we're just pouring good money out the bag.

Ted Simons:
You didn't mention though retooling vehicles to make things that either people want or that people might want if given the opportunity. We're talking hybrids and we're talking these kinds of things --

Jon Kyl:
Those vehicles are available today. But people don't want to buy them because gas is cheap and besides that, these vehicles are enormously expensive. People wanted to buy SUVs because gas was cheap, ok? There are a lot of folks in the Congress that don't want people to buy SUVs. They are happy with high gas prices because they want people to drive small cars. My view is, let people decide on their own what they want to buy. My daughter has a bunch of kids that she schleps to and from school every day, and she wants a van, something that's bigger and safer. If it costs her more, but she's willing to make that concession, why shouldn't she be allowed to do that? The auto manufacturers made cars that we have bought. And I don't want congress to say, "That's not good enough. We want you to make cars that we want to force people to drive."

Ted Simons:
But have we been buying those cars?

Jon Kyl:
No, because they cost too much.

Ted Simons:
Ok, but, whatever. But the thing is, you look at a parking lot right now, there are not a lot of American-branded cars in that lot. American-made, some of them obviously are made in the South, but I'm talking about the Buicks and Chryslers, you aren't seeing a heck of a lot of those on the road.

Jon Kyl:
That's right. G.M. now, our biggest manufacturer, has only about 20\% of the market share. I think the three U.S. companies together have no more than 40\%.

Ted Simons:
So you're saying the demand for things like hybrids and things simply aren't there?

Jon Kyl:
Yes, the demand for the hybrid vehicles and the battery-powered vehicles and the so-called green vehicles that a lot of folks would like to get Americans into, that demand is not there because those vehicles are still very expensive, and it's going to take a long time to develop the battery technology and other technology to get the cost down. Even with massive subsidies, a $15,000 to $20,000 subsidy for you to buy such a vehicle, it doesn't pencil out for you. So, that's going to take time. Eventually, it'll come, but it's going to take time.

Ted Simons:
Ok, let's talk about the economy and every day, new stories, new concerns. We have this made off situation -- Before we get to that, interest rates: they can't get much lower than they are now. Is this going to be something that breaks the proverbial ice?

Jon Kyl:
I don't think so. I understand why they made the choice. But I think that the fed chairman is wrong when he says we haven't lost a tool here. Yes, they have. They've lost one of their basically two main tools to deal with the economy. Now all they've got left is money supply, and they're going crank out money like crazy. Right now we're not that fearful of inflation. So they think that putting more money into the system would be beneficial. You can argue that either way, but by taking interest rates down to a point where you can't get them any lower, we have now run that string out and that's not a good thing.

Ted Simons:
What about the concept of a stimulus plan?

Jon Kyl:
The idea of a stimulus is to get people to spend more money, so that the retailers will acquire more stuff for manufacturers. They will make more stuff and people will have jobs, and so on. It's a nice sentiment, until you think about where the money has to come from. It either has to come out of your pocket and mine, and that's the last thing you want to do in the middle of a recession, is to take more money out of people's pockets, you want them to have more money not less. Or we have to borrow it. We're going to have a $1 trillion deficit this year, well over twice as much as last year. Eventually that has to be repaid and the ramifications of having a deficit that big with an economy that's not growing are not good. So you have to be very careful. If you have a stimulus, you better make sure it's really going to stimulate. What are they talking about? Things that won't stimulate: advancing road and bridge construction. I don't know of too many guys that have gotten fired from Wall Street, for example, that are going into road-building. That doesn't solve the unemployment problem there. The companies that do road building and bridge building already have contracts in place and it takes a long time for those things to play out. The other kinds of things they talk about stimulus won't stimulate. The only thing that will stimulate is to allow businesses to write off their investments more quickly for example, provide for net operating loss benefits and tax policy, potentially capital gains tax reductions and that sort of thing.

Ted Simons:
But certainly here in Arizona with the construction industry hit so hard, there are a lot of folks out of work who could be put to work stabilizing bridges and building roads and those sorts of things. Wouldn't that make sense? If there's going to be money paid to the finance industry, to the auto industry, and to who else is coming around, why not to local state governments to take care of things that are" shovel-ready," ready to go?

Jon Kyl:
Well, it doesn't stimulate. Those jobs are going to be done anyway.

Ted Simons:
Are they going to be done?

Jon Kyl:
Yeah. They're talking about projects that are "shovel-ready." That has been designed, where there's a recognized need, and where the bid has been let or could immediately be let. Those are things that are going to happen anyway. Furthermore, if they're talking about bringing more projects in say a year or 18 months from now, that doesn't help to stimulate the economy today. The reality is that while construction work is good work to have if you can get it these days, it doesn't stimulate the economy more than it otherwise would be stimulated.

Ted Simons:
Is there a better idea?

Jon Kyl:
Yes, I just gave you three. In terms of tax policy, we can help business invest because it's not as expensive for them to invest and so they can see their return more quickly. Unless you provide that kind of benefit and other promise of tax relief, or at least not raising taxes so that individuals will spend more, families will spend more or commit more, and businesses will do the same. Unless you do that, there's not a lot of spending that you can do that will really help. Remember we did a stimulus about -- less than a year ago. Experts said, "Well, granted, stimulus like this haven't helped in the past, but maybe it will this time." The tax rebate, that $600 rebate turns out not to have helped at all. Only about 20\% of that was actually spent. And so, these spending stimuli very rarely do any good.

Ted Simons:
Last question: with all this economic concern and all the political ramifications going back and forth, what's the mood like in Washington right now?

Jon Kyl:
You and I were talking earlier, and you put your finger on it: people are stunned, they're anxious, they're scared. Nobody knows where this thing is going. We have a deep recession. It's going to last for quite a long time, many months. That means there are going to be a lot of people suffering. Everybody is going to suffer in some way or another. The government will help. We extended the unemployment benefits, for example, and there are other things the government can do. But we're all going to have to recognize that this country got way overleveraged. Families were committed to credit beyond their means. Housing was purchased beyond people's means to pay the mortgage. Businesses got way overleveraged. Until we get our own budgets closer to balance, where we can handle all of this credit that we took on, we're going to continue to have a problem. And that's simply a matter of -- it's like going on a diet. You can't do it immediately. It's going to take a little time to get down to where we need to be.

Ted Simons:
Senator Kyl, thank you so much for joining us.

Jon Kyl:
Thank you Ted.

Ted Simons:
Historically about half of all Arizona inmates released from prison return within three years. The state Department of Corrections is trying to reduce the rate of recidivism with a program called "Getting ready." In September, the program won an Innovations in American Government award from the Harvard Kennedy School. Arizona's prisons director is here to tell us how the program is working. But first, David Majure shows us what it's all about.

Christina Duran:
Coming into a prison, you've hit rock bottom, that's it. It doesn't get any more rock bottom than this.

David Majure:
Prisoners may start at the bottom. But in Arizona they don't have to stay there.

Mario Diaz:
One thing that we want to make sure: are they employable when they leave here, are they sober, some sobriety? And then, are they educated?

David Majure:
Those are the goals of "Getting Ready," a program that prepares inmates for a successful release.

Mario Diaz:
In the past we'd give them a $50 "kick out check," is what we call it, and we'd say, you know, "Here you go."

David Majure:
No better off than when they were sent to prison, inmates were likely to re-offend and return. But prison officials are trying to change that.

James O'Neil:
I believe the difference is that we're now making inmates accountable and responsible for their own behaviors.

David Majure:
It's called a parallel universe, prison made to resemble the real world as much as possible. Inmates who work, learn and follow the rules earn rewards and extra privileges.

Gwendolyn Benton:
It has changed my outlook tremendously. I respect the authority here so much more. Because before, they used to come and get you to go to work, and come get you to go to programs. Now it's all on me.

David Majure:
That's how it is on the outside, and that's how it is here at Perryville.

Prison official:
So the corrections plan here tells me about --

David Majure:
At every state prison, inmates get an individualized corrections plan, based on a thorough assessment of their social, educational, and medical needs.

Prisoner:
So I put the 82 feet right here.

David Majure:
The cornerstone of every plan is an education.

Teacher:
34.

David Majure:
Inmates must earn a GED before they qualify for job training, better work assignments and higher wages. A partnership with Rio Salado College allows inmates to further their education. Plus, there are plenty of work-based educational opportunities. Everything from the culinary arts --

Teacher:
You'll feel it click in there.

David Majure:
-- to computer repair. Inmates can become a certified auto mechanic.

Prisoner:
And he would be the only person I would speak with regarding your development team for I.T.?

David Majure:
Or like Gwendolyn Benton get on-the-job training with Televerde, a marketing firm.

Gwendolyn Benton:
I had my high school diploma before I came here. But from 2005 to now, I have my associate in computer technology. I'm furthering my education even further through distance learning. I'm doing chemical dependency. I've completed my action plan so far, and just being a positive member of the community.

David Majure:
That means using her leisure time productively. Inmates are expected to engage in self-improvement, community service, and victim-based restorative justice activities. Everything they do is based on an earned incentive program.

Mario Diaz:
Good work, good behavior, good consequences.

David Majure:
Like more phone calls, family visits, and meals.

Christina Duran:
It's got the inmates to think about their behavior and how they're responsible for it and how they can change. They are changing.

David Majure:
Officer Duran didn't believe that was possible back in 2004, when "Getting Ready" was started.

Christina Duran:
Myself and a lot of fellow officers were going, "No way this is going to work. We're going to have inmates running amok everywhere. They're going to be passing their drugs and it's going to be hard for the officers. They're just going to be harassing us. It's going to give them more opportunities."

David Majure:
But that hasn't happened.

James O'Neil:
We've seen a major reduction in institutional violence. We have more inmates being productive and pro-social.

David Majure:
Our prisons are safer and prison officials are betting our communities will be safer when prisoners are released into the real world better prepared to succeed.

Ted Simons:
Joining me to talk about the "getting ready" program is director of the Arizona Department of Corrections, Dora Schriro. Good to have you on the program. Thanks for joining us.

Dora Schriro:
My pleasure.

Ted Simons:
This program, what -- did you get -- is it modeled after something? What gave you the idea for this and how did it get developed?

Dora Schriro:
This really represents the work of extraordinary men and women in the department, and a lot of consultation with the prisoner population and other constituencies, particularly crime victims. They have a vested interest in what we do, and they really want to make sure that we are successful.

Ted Simons:
And the idea, again, model the prison experience after the real world.

Dora Schriro:
The real world. We stopped and took a look at why it is that the good inmate all too often ends up becoming the lousy ex-offender. And it had a lot to do with the way in which we run our prison system, where we do all of their thinking for them. And so we said, "No more." Adopting the principles of a parallel universe, how do we remake the prison system to operate more like the real world, that place where virtually every inmate is going to go back to?

Ted Simons:
Let's say I'm in there and I've spent a couple of years in the prison system. In this program, you don't even wake me up, do you?

Dora Schriro:
You are a grown up, you are on your own. It is your responsibility to determine how much time you need to get ready, get to chow, and then be to schoolwork or treatment on time.

Ted Simons:
And if I go for my GED, that develops into other opportunities. It just keeps growing and growing.

Dora Schriro:
Just like the real world. It's a prerequisite to getting better wages, it's a prerequisite to getting into job training. It's the gateway to earning those incentives that really improve the conditions of your confinement.

Ted Simons:
Has the program been around long enough now to get a good idea of what kind of results you're getting?

Dora Schriro:
Yeah. We started it as a team a little over five years ago. At this point in time we have had several thousand inmates who have completed the whole of it, and they've been released to the community and they've been in the streets for as much as two years. And the really great news is that they are 35\% more successful, that is, 35\% reduction in recidivism for that population. The other thing that's really promising is when we compare that group to other inmates, regardless of their levels of risk, the outcomes are always better. So this is something that works no matter who you are or what your relative needs and risk concerns are.

Ted Simons:
Interesting. And as far as male and female inmates, not much of a difference?

Dora Schriro:
Not much of a difference. What you saw on the screen happening at Perryville you will see at the other facilities that has the male population.

Ted Simons:
And we heard that, what? Inmate on inmate violence down, inmate on staff violence also down.

Dora Schriro:
Absolutely, really important. Prisoner litigation down over 63\%. That's great news for taxpayers, it's great news for staff, crime victims, for everybody. That reduction that I was telling you about with less failure and less returns to prison, that translates into bed day savings, real dollars that are important for our state, certainly at a time when we're in a budget scramble.

Ted Simons:
I was going to say, this is not costing anything, and it's bringing in -- do we have any idea what kind of savings you're talking about?

Dora Schriro:
Well, certainly in bed days alone, it's $1.6 million just for that small group for a finite period of time. But there are all sorts of other savings that are associated with reductions in violence, reductions in litigation. There are some other -- initiatives. The prisoner population is more aware of their conduct -- impact on others, both bad and good, have really been mobilized in raising moneys for the crime victims organizations around Arizona. In addition to better court-ordered restitution payment, there is also contributions now exceeding $1.5 million. Again, at a time when organizations are tough, it's really great news.

Dora Schriro:
Is there a concern though that, again, it's still difficult for someone, a felon, an ex-convict out on the streets, now free. It still can be difficult for them to find work, for them to succeed, if they didn't otherwise have that record. Is there concern that maybe the inmates will expect something on the outside they're not going to get?

Dora Schriro:
The whole notion of shifting responsibility to the population is that they are responsible for making their lives and figuring out ways to take care of themselves and their family. But we have worked hard to identify career tracks, postsecondary job training programs with the community colleges around the state that will afford our population real work opportunities, with sustainable wages. So we are not preparing them for fields where they will have no success. We are setting them up for success, and we will succeed in the process.

Ted Simons:
And real quickly, any updates, improvements you're looking for in the program? Or is it pretty much up in operation the way you want it?

Dora Schriro:
You know, it's a continuing evolution. Most recently we've been looking at ways to reduce health care spending. So the question is, "Well, how would you do it in the real world?" And so we've moderated the way inmates are making medical co-pays, so as to encourage them to adopt more wellness activities and be more thoughtful about when they access health care.

Ted Simons:
Alright, well, very good. Thank you so much for joining us on "Horizon."

Dora Schriro:
My pleasure, thank you very much.

Ted Simons:
Tomorrow on "Horizon," find out what you need to know to ride light rail, which starts service at the end of the month. Then a conversation with Leonard Downie, Jr., the former executive publisher of the "Washington Post." Downie has been hired to teach at the Cronkite School here at ASU. That's Wednesday at 7:00 on "Horizon." Thursday join us for a one-on-one interview with PBS "Newshour" host Jim Lehrer. Friday get the inside scoop on local headlines on the "Journalists Roundtable." That is it for now. I'm Ted Simons, thank you so much for joining us. You have a great evening.

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