Horizon, Host: Ted Simons

February 19, 2009


Host: Ted Simons

Representative Flake


  • Hear reaction from Congressman Jeff Flake, one of the biggest critics of pork-barrel spending in congress, on President Obama's stimulus package.
Guests:
  • Jeff Flake - U.S. Congressman, Arizona (Rep.)


View Transcript
Ted Simons
>> Now it is time to hear from the other side of the aisle -- a congressman who doesn't believe we can make the situation better by putting more money into bad loans. he is congressman Jeff Flake. Congressman good to see you again, thank you for being here, as I mentioned earlier I feel like Captain Kirk. give me more power, Scotty. Were having some power problems but it's good to have you here.

Jeff Flake
>> I’m a Republican in the minority, I’m used to being kept in the dark.

Ted Simons
>> Let's start with the president's plan announced yesterday, a $75 billion plan to fight foreclosures. your thoughts.

Jeff Flake
>> For months, the president's been talking about jobs, jobs, jobs. that's why the stimulus plan was passed. obviously, they don't have enough faith in the stimulus bill to come back with another big, big spending bill here, we're going to have to borrow more money for. I don't think it's a good idea. the plan is vague so far. But some of the elements we know of don't look to good.

Ted Simons
>> Will those elements, though, make some kind of a positive difference?

Jeff Flake
>> You can't spend a lot of money without having some effect and there may be some temporary boost and certainly you'll help some people stay in their homes when they couldn't otherwise. But what are the long term effects? and are those positive effects completely outweighed by negative effects in the bill? you mentioned before the cram-down portion of the bill. I don't think how anybody can think that bankruptcy judges to go and write down mortgages is going to do anything but make mortgages harder to come by in the future for anyone with less than pristine credit. Its simply going to raise costs for everyone.

Ted Simons
>> In very uncertain time, unchartered times, is it a reasonable first step?

Jeff Flake
>> With regard to the cram-down, you can say let's take it for loans that have already originated. That would be one thing, I’m not saying that would be a good idea but you could argue that. but to say we're going to allow that, that's sounds a lot like stimulus bill that we just did. it wasn't so much stimulus as putting in place policies and spending that the other side of the aisle has wanted to do for years and it's making use of a crisis, a real crisis that we have to enact policies that the other side has wanted for a long time.


Ted Simons
>> Let's stay with the foreclosure here for a couple of minutes. what should be done? are there answers other than saying this is not the right way to go? What are the answers?

Jeff Flake
>> The biggest problem with this is it assumes you can solve the problem by allowing a few to -- a few who have played by the rules to stay in their home but there's no way to really differentiate between those who didn't game the system and those who did. you're spending a lot of money for probably very little. When you look at the other programs we've had in place for the last year and a half, the “hope” program and others, we look at the same default rates as those who participated in the programs as those outside of the program. The history of this is not good. You're probably going to make a small difference on the margins but you'll allow Freddie and Fannie to have $200 billion more to enlarge portfolio, you're going to guarantee the taxpayers are exposed for a lot more.

Ted Simons
>> As far as though, a general feeling, it's going to be difficult to differentiate who gamed the system and who have fallen on hard luck, and a lot are because their losing their jobs. what about the argument that the rising tide lifts all boats, even a few pirate ships?

Jeff Flake
>>You hit the right point, people are losing their jobs, the people I talk to aren't worried about refinancing and getting a lower interest rate or payment. it's keeping their jobs or getting their job back. And that's why we miss such a great opportunity with the stimulus bill. We should have done something that would really stimulate, rather than simply spend money for programs that currently exist and creating new ones that aren't going to have a stimulative -- a stimulus effect.

Ted Simons
>> So the economist who say the foreclosure mess right now, is the key to getting the economy back going, fix that, there goes the economy, you would disagree?

Jeff Flake
>> Yes, I would. it's bigger than that. It may have started that way, but it's bigger than that now. The only way to solve the foreclosure crisis is to make sure there are jobs being created and government isn't going to create those jobs. We can simply set a environment where private sector jobs can be created and we didn't do that with the stimulus bill. Just a small portion was devoted to that.

Ted Simons
>> Let's get to the stimulus package. Opposed to criticizing what happened, what should have been done?

Jeff Flake
>> We should have done fast-acting tax relief. capital gains. Congressman Mitchell mentioned there should have been more of that in the bill. He's right. We could have cut the corporate tax rate. 90% of the jobs are created by small businesses and they're burdened by regulation and high taxes and we should have given relief there. and we did very little. If you look at the overall package, only 17% was devoted to any kind of tax cuts at all. Aside from A.M.T. and that was going to happen anyway. so didn't do what -- President Obama said we should have 40% at least devoted to tax cuts and it was really just 17% and a lot of those were going to those not paying income taxes. They're paying payroll taxes but not income tax.

Ted Simons
>> It's said that the party is going back to the same idea over and over. tax cuts and tax cuts, as opposed to seeing really what a tax cut would do, and b, how a stimulus plan at least primes the pump to get things going.

Jeff Flake
>> Nobody can look at the situation we're at right now and blame it on tax cuts. like the taxes were too low and, therefore, we're doing poorly.

Ted Simons
>> But as far as a solution?

Jeff Flake
>> If you want to create jobs you allow small businesses to create jobs and do that by allowing them to keep more of their money and the best way to do that is not to take money from them and then have the government decide which businesses are fit to save and which should go away but have businesses decided that themselves by letting them keep their own money. and in terms of stimulating the economy, or priming the pump, most of those who supported this stimulus say they're believers in -- that there's a John Cane. Personally I think he would have been embarrassed by this pill. Cane thought if you spent on infrastructure, that would somehow prime the pump, but so little of this bill is devoted to infrastructure and the spend-out is over a number of years, not in the initial years and Cane started with a balanced budget and going into deficit for a time. he wasn't facing when he expounded his theories a massive deficit and to go further into deficit and spend on programs that have little stimulating value. Spending $50 million for the national endowment for the arts may be something we ought to do, may not, but it's not stimulus. it may stimulate creativity but not jobs.

Ted Simons
>> The idea of jobs as opposed to work has been mentioned as well. get jobs in the private sector that will keep things going as opposed to make work, fix a bridge and then you're not working anymore. Is that not a way to get things going and then maybe push more tax cuts and maybe get the private sector to follow a little bit.

Jeff Flake
>> I think you have to look at the long range here. by -- nobody is denying that if you spend a lot of money you're going to have some stimulating effect, by virtue of a lot of money out there. but the negative effects are apparent when you're carrying this kind of debt and when the deficit is -- as a percentage of G.D.P., the threshold for an economy to grow in any country has been five or six. you cant have your deficit as a percentage of G.D.P. any higher than that. by throwing money at the wall and saying it will fall and people will spend it I think is certainly more than balanced by the problem with carrying this much debt going forward.

Ted Simons
>> A political question. democrats say the republicans have had the white house and much of congress for quite a while. obviously before the last presidential election. Did their way led to this or at least we've got this now, why are they wrong when they say you had your chance, now it's our chance?

Jeff Flake
>> Well, we made a mess of it. I’m not arguing that. we had double digit spending growth – and when you look at the stimulus you have to look back to what republicans did in 2003, if you use accrual accounting we added about $10 trillion in unfunded liabilities with one bill , we ended Medicaid prescription drug benefit and didn't do well. I’m not defending our record but to say that republicans were headed toward a cliff with spending -- let's step on the accelerator and get there faster is not a good option.

Ted Simons
>> Last question, again, political aspect of this is becoming so partisan. the crafting of the bill, Republicans saying there was no bipartisan effort at all. was this different than what we saw when President Bush was in the White House and the Republicans in control of Congress?

Jeff Flake
>> I was often critical of our party by holding votes open and having partisan measures there. but I can tell you, I hadn't seen anything like this. I mean, to have a bill -- a trillion dollar bill come to the floor with just a couple of hours to read it and the republicans had no input. In fact, a couple of committees met, like energy and commerce, I think, for 10 hours to mark up the bill and approved several substantive amendments only to have them taken out after they were finished and we really have been kept in the dark so to speak.

Ted Simons
>> We tried to get as light on you as possible. We're in the dark with the power problem, thank you for joining us.

Jeff Flake
>> Thanks for having me.

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