Horizon, Host: Ted Simons

February 19, 2009


Host: Ted Simons

Representative Flake

  |   Video
  • 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.

Representative Mitchell

  |   Video
  • U.S. Representative Harry Mitchell talks about the economic stimulus plan and other important national issues.
Guests:
  • Harry Mitchell - U.S. Congressman, Arizona (Dem)
Category: Business/Economy

View Transcript
Ted Simons
>>It has been a busy week with economic news. in addition to the president's housing plan unveiled yesterday in Mesa, he signed the $787 billion federal stimulus plan into law on Tuesday, and today, the dow closed at its lowest level in more than six years. we have two of Arizona’s congressmen on tonight to talk about the economy and other issues. later in the program, we will speak with Republican Jeff Flake, but first tonight, Democratic congressman Harry Mitchell joins us, and congressman, thanks for being here. sorry about the lights and electricity and every, but we will make it through.

Harry Mitchell
>> Absolutely.

Ted Simons
>> Let's start with the foreclosure plan. Your thoughts on what the President said yesterday in town.

Harry Mitchell
>> The president was received very well. he made a good statement. he was very articulate but the problem in Arizona is huge. we're the third largest foreclosure state. the highest foreclosure state in the nation. our housing prices have gone down, plummeted. I’m not so sure until we see all of the details. he said he was going to release more details by I think march 4th. so to be wholly in favor or opposed to what he had to say, I’m glad he came and focused on foreclosure, because this is the place to do it because of the high foreclosure rates but he's giving hope. and we need to see what it is that he's talking about in terms of helping the homeowner.

Ted Simons
>>There's concerns that the gist of what was presented involves responsible folks, paying to bail out folks who weren't all that responsible at all. You respond.

Harry Mitchell
>> First of all, I understand that concern. but let me tell you. as home prices fall and there's more and more foreclosures, everybody's home prices are falling and that mean the amount of equity you have in your home is falling. It's a responsibility for all of us to be involved and stop the drop in home prices. you know, I -- I’m one who has been responsible. I’m not facing foreclosure, but I think we've got to stop this drop in the foreclosures because it's affecting all of us. It's a nationwide and a neighbor problem.

Ted Simons
>> Does it send though the wrong message. That once this is cleared up, should it get cleared up, to folks who might just go on out there and lenders and borrowers both, make the same mistake all over again?

Harry Mitchell
>> I hope we don't do that. I hope we don't reward those who bought more than they could afford and lenders that misled borrowers. We've got to make sure that we have regulations in place to keep that from happening.

Ted Simons
>> How do you separate the unfortunate, those who have lost their jobs, these sorts of folks from the unscrupulous? Those who, we were referring to earlier.

Harry Mitchell
>> I think you'll find not everybody will be saved by any plan that comes out. there are going to be those who lose their homes. But those who have jobs and can make the payments under a restructured plan, those are the ones we're trying to help. and it won't be all of them. It's estimated anywhere from 7 million to 9 million people face foreclosure. this plan, whatever it is, may only help three to four million. We've got to start somewhere and we have too many people losing their homes and forcing the price of homes, which affects everybody and local governments who depend on property taxes and you and I, whoever, equity in our homes, that affects us, we may not be able to borrow for what we need if we lose our jobs. They can't sell or downsize. I think the lower home prices affects everyone and we've got to do what we can to stop that.

Ted Simons
>> One more point on this. The cram-down loans, which is a new term that we are all getting familiar with, is popping up in this plan as well. The idea that a bankruptcy judge can go ahead and write down loans. The concern is you do enough of that and the interest rates for you and me go shooting up. concerned?

Harry Mitchell
>> Absolutely I’m concerned and I’m not so sure -- we need to see what's in the plan before we do that. to have a wholesale change in the foreclosure is wrong. We need to be responsible in that but I think anything that causes the interest rates to go up for the rest of us is not good.

Ted Simons
>> Let's get to the stimulus plan, which is a big deal. Were talking billions of dollars. Why did you vote yes?

Harry Mitchell
>> I think we're in a situation that's unparalleled since World War II. It's a very drastic situation, a real crisis and we need to act.

Harry Mitchell
>> It's said there's 10,000 homes facing foreclosure or foreclosure a day. people are losing thousands of jobs every day. People are losing their 401ks and savings and we've got to act. In this particular bill, and the crux of it is to save jobs. and it's estimated it will save or keep jobs up to 70,000 Arizonans. It’s going to add $60 billion in infrastructure. these are jobs and that's what is important about this bill. The important thing is saving jobs.

Ted Simons
>> And to that end, critics will say what the bill does, the plan does, is provides work. it does not make for jobs. Work that will come and go quickly as opposed to making jobs in the private sector that be there for a long time.

Harry Mitchell
>> 90% of the jobs will be in the private sector with this bill. 90% in the private sector. And these are investments. When you look at the investment in the infrastructure, these are investments. You walk around this campus here at ASU and you'll find that people are still using buildings that were built during the depression. I taught at Tempe high school. went there. how many years has that building been used? how many generations gone through that? we're not talking just about make-work by government. We're talking about private jobs and I think that investments that you see -- the Solano project in Gila bend where we are talking about 1,500 to 2,000 jobs, an investment of almost $1 billion in economic activity after that. this is an investment. And I think that's an important thing to keep in mind because we're concerned about jobs.

Ted Simons
>> Congressional budget office says it will be 10 years before we start to even pay off tarp, much less this particular stimulus. who is going to pay for it. and is it generational theft, because it's going to be paid off by folks way down the line.

Harry Mitchell
>> It's generational investment. We're investing in healthcare. investing in education and infrastructure that will be around. we're trying to do what we can. not only to get out of this mess we're in right now. but also to invest in the future and I think this is -- when you see the investment in I.T., information technology, and the other areas, which is the future of the state. it's not just spending. I might add when you talk about the almost $800 billion fund, 40% is tax credits. and tax relief. So it's not all spending. it is a mixture of tax relief as well as spending or investment.

Ted Simons
>> But why -- for those who say there's so much spending here, the spending in and of itself will bog down the economy, you say?

Harry Mitchell
>> I say that's not true. and remember, this is for two years. in two years, this spending stops, so if it does add to the inflation of the problems or bogs down, I think we'll take a look at that time and hopefully we're out of the mess in two years.

Ted Simons
>> Are you comfortable, though, with so much money coming out of government right now?

Harry Mitchell
>> Obviously we'd like to have left government spending or less government investment. but it's not everything that I wanted in this bill. I voted for a couple -- in fact, I sponsor a couple of amendments to cut taxes even more, particularly with the pay raise of the congressman. But also the tax on capital gains which I think would be a stimulus in itself. People who have money, if they can be assured that the investment they make will not be attacked at a higher rate later on they may be investing. It's not everything I wanted. There should be more tax cuts included in there.

Ted Simons
>> You voted for it and your party was behind it. Why are there things for global warming, golf course renovations and those things? Wouldn't it have been easier to get bipartisan support to get rid of that stuff?

Harry Mitchell
>> Everything I’ve seen, they're driven by formulas and grants. Formulas and grants. There's no earmarks in this program at all. So what they are, their formulas or grants that people apply for, governments apply for, for particular program. to say it's going to be a particular thing like a golf course, that's not going to be in there. You cant find those in there they’re grants and formula driven. all of them are that way.

Ted Simons
>> Going after congressional pay raises, why are you so strong on this?

Harry Mitchell
>> I introduced a bill with congressman Ron Paul to halt the pay raise in 2010. when people are losing their jobs and getting cuts in their salary, no one is getting pay raises and why should congress? as representatives of the people, hearing what our constituents are saying, they're hurting and we're setting the wrong tone if we accept a pay raise. I’m might say that I’m very pleased we had over 110 cosponsors on this bill. as a result, the bill didn't go anywhere except the leadership has said they'll include in the next appropriation bill a statement that we will not take the pay raise. so we feel very good about that.

Ted Simons
>> You've been around Washington enough though to look around the chamber there you get what you pay for and you might get better folks back there. That's the argument. You get better folks, you get better pay.

Harry Mitchell
>> The last two pay raises we had, '09 and '08. I returned the money to charity. I want it make a point for that. when our economy is in the shape it is right now -- I’ll tell you our nonprofits, charities are hurting. people aren't giving. they need help. many times they fill the gap. We're talking about food banks and shelters and talking about a host of nonprofit groups which I hope people will support.

Ted Simons
>> All right. congressman, it's great to have you here. Sorry the lights aren't working and the power is out. But we had a great discussion and a good conversation, thank you for joining us.

Harry Mitchell
>> Thank you, Ted.

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