|00:00:00||HAS HAPPENED WITH OUR ECONOMY OVER THE PAST FIVE OR SIX YEARS.|
|00:00:06||WE ALL REMEMBER DURING THE LATE 1990'S WE HAD VERY ROBUST GROWTH IN THE STOCK MARKET.|
|00:00:15||THINGS WERE GOING ALONG AT A RATE THAT MOST ECONOMISTS AT THE TIME THOUGHT WAS AN EXUBERANT TIME WHEN INVESTMENTS WERE BEING MADE FOR REASONS OTHER THAN PERHAPS GOOD SOLID -- FOR REASONS OTHER THAN GOOD SOLID RATIONALE.|
|00:00:39||IN THE LAST QUARTER OF 19 -- IN THE LAST QUARTER OF 2000, THE ECONOMY IN THE THIRD QUARTER OF 2000, THE ECONOMY BEGAN TO GET SOFT AND IN THE LAST QUARTER OF 19 -- OF 2000 IT DID EVEN WORSE.|
|00:00:58||AND AS WE LOOK AT THE REASONS FOR THAT, THERE WERE A NUMBER OF ECONOMISTS WHO CONCLUDED DIFFERENT THINGS.|
|00:01:06||ONE THING BECAME CLEAR.|
|00:01:07||AND THAT WAS THAT INVESTMENT WAS NOT BEING MADE AND THAT SOMETHING NEEDED TO BE DONE.|
|00:01:12||THIS CHART TO MY LEFT IS A CHART WHICH SHOWS FIXED PRIVATE NONRESIDENTIAL INVESTMENT.|
|00:01:18||IN OTHER WORDS, INVESTMENT IN THINGS THAT WOULD BE PRODUCTIVE IN OUR ECONOMY.|
|00:01:25||AS WE LOOK AT WHAT HAPPENED AS WE BEGIN TO MOVE THROUGH 2001 AND 2002, THESE BARS THAT DROP BELOW THE LINE SHOW THAT THERE WAS NEGATIVE INVESTMENTMENT PEOPLE WERE NOT INVESTING IN PRODUCTIVE THINGS AND AS A RESULT OF THAT THE ECONOMY WAS NOT DOING WELL.|
|00:01:44||AND THE ADMINISTRATION PROPOSED A FIX.|
|00:01:48||THAT FIX WAS TO DO THINGS HERE IN THE HOUSE OF REPRESENTATIVES AND IN THE SENATE AND THROUGH THE ADMINISTRATION THAT WOULD ENCOURAGE THE AMERICAN INVESTOR TO RE-ENGAGE IN INVESTING IN PRODUCTIVE THINGS.|
|00:02:06||AND SO IN 2003 THE HOUSE OF REPRESENTATIVES AND THE SENATE COLLECTIVELY, TOGETHER PASSED SOME TAX CUTS TO ENCOURAGE INVESTMENT.|
|00:02:17||AND THOSE TAX CUTS WHICH WERE TEMPORARY IN NATURE, WHICH WE CONTINUE TO TALK ABOUT MAKING PERMANENT, HAD THE DESIRED EFFECT.|
|00:02:26||IF WE LOOK AT THIS CHART AND LOOK AT WHEN THE NEGATIVE INVESTMENT ENDED AND POSITIVE INVESTMENT STARTED, IT HAPPENS TO BE AFTER THOSE TAX CUTS WENT INTO COLLECT.|
|00:02:39||AND AS A RESULT OF REDUCING THE PERCENTAGE OF TAXES PAID ON DIFFICULT DEN -- DIVIDEND GAINS AND AS A RESULT OF TAX CUTS ON CAPITAL GAINS WE SEE BEGINNING IN 2003 AND THROUGH 2004 AND THROUGH 2005 AND PROJECTED TO CONTINUE BY THE FED AND BY OTHER BLUE CHIP ECONOMISTS AND BLUE CHIP FORECASTS WE ARE EXPECTING TO SEE THAT GROWTH CONTINUE THROUGH 2006 AND 2007.|
|00:03:14||AS A MATTER OF FACT WE HAD 4% GROWTH IN 2004.|
|00:03:22||5% GROWTH IN 2005.|
|00:03:23||AND IN THE FIRST QUARTER OF 2006 WE SAW 4% GROWTH CONTINUED.|
|00:03:29||THIS IS GOOD NEWS FOR NOT ONLY FOR THE AMERICAN INVESTOR, IT'S ALSO GOOD NEWS FOR OTHERS IN THE WORK FORCE AND IN THE ECONOMY.|
|00:03:39||HERE'S WHAT HAPPENED TO EMPLOYEES' PAYROLLS DURING THAT PERIOD OF TIME.|
|00:03:44||ONCE AGAIN WE SEE SOME LINES THAT DROP BELOW THE POSITIVE MARK.|
|00:03:52||WE SEE SOME NEGATIVE GROWTH IN NONFARM PAYROLLS AS WE MOVE THROUGH.|
|00:03:58||AND AS WE SAW THE 2003 TAX CUTS GO INTO EFFECT, ONCE AGAIN WE SAW THE ECONOMY REBOUND AND WE SAW EMPLOYEES AND NONFARM PAYROLLS BEGIN TO INCREASE TO MUCH HEALTHIER LEVELS THAN THEY HAD BEEN DURING THE-2001, 2002, 2003 PERIOD OF TIME WHEN INVESTMENTS, PRODUCTIVE INVESTMENTS WERE NOT BEING MADE AND AS WE SOUGHT AN ANSWER AND THE ADMINISTRATION PROPOSED THE TAX CUTS AND THE HOUSE AND SENATE IMPLEMENTED THE TAX CUTS, ONCE AGAIN NONFARM PAYROLLS AND EMPLOYEES' PAYROLLS BEGAN TO GROW AS DEMONSTRATED BY THIS CHART.|
|00:04:40||CHAIRMAN, I WOULD JUST POINT OUT THAT GROSS DOMESTIC PRODUCT, WHICH IS HOW MOST ECONOMISTS MEASURE GROWTH IN THE ECONOMY, CONTINUES TO BE VERY GOOD.|
|00:04:51||ONCE AGAIN BEGINNING IN 2003 AS OUR TAX CUTS WENT INTO EFFECT, DIVIDEND TAX CUTS, THE TAXES ON DIVIDENDS WERE LOWERED.|
|00:05:00||THE TAXES ON CAPITAL GAINS WERE LOWERED.|
|00:05:03||WE ONCE AGAIN SEE IN 2003 AND 2004 AS WE MOVE ACROSS HERE, AS I SAID BEFORE, IN 2004 WE HAD AN AVERAGE OF 4% GROWTH.|
|00:05:14||IN 2005 WE HAD AN AVERAGE OF 3.|
|00:05:16||5% GROWTH OVER THE FOUR QUARTERS OF THAT YEAR.|
|00:05:20||THE FORECAST FOR THE FIRST QUARTER OF THIS MONTH, WHICH IS IN RED ON THE OTHER SIDE, THE FIRST OF THE FOUR LINES, THE ACTUAL FORECAST IS 4.|
|00:05:28||7%. I THINK THAT MIGHT BE A LITTLE HIGH.|
|00:05:30||I THINK IT MIGHT BE CLOSER TO 4%.|
|00:05:32||BUT THAT IS HEALTHY ECONOMIC GROWTH AND WE CONTINUE TO SEE THE EFFECTS OF THE POLICIES THAT WE PUT INTO PLACE.|
|00:05:39||WE EXPECT THAT THE GROWTH MAY SLOW SOMEWHAT DURING THE SECOND, THIRD, AND FOURTH QUARTER BUT WE WILL, WE BELIEVE, AVERAGE 3.|
|00:05:47||5% THIS YEAR.|
|00:05:48||I MIGHT ADD ONE THING THAT I THINK IS IMPORTANT FOR US TO REMEMBER AND THAT IS THAT THE TAX CUTS TOGETHER WITH OTHER POLICIES HAVE PRODUCED THIS GROWTH AND WE NEED TO CONTINUE TO SUPPORT THOSE POLICIES AS WELL.|
|00:06:01||THE FEDERAL RESERVE HAS BEEN A HUGE PART OF THIS AS WELL.|
|00:06:04||SO WHILE IT'S NICE FOR THE CONGRESS TO TAKE CREDIT FOR -- WITH THE IMPLEMENTATION OF THE TAX POLICY THAT WE IMPLEMENTED, THE FEDERAL RESERVE ALSO DESERVES A LOT OF CREDIT FOR WHAT IS HAPPENING -- FOR WHAT HAS HAPPENED HERE THROUGH THE POLICIES THAT HAVE BEEN BROUGHT ABOUT THROUGH SOMETHING CALLED INFLATION TARGETING.|
|00:06:26||TODAY INFLATION IS VERY LOW.|
|00:06:28||TODAY INFLATION IS AROUND 2%.|
|00:06:30||AND IT'S AROUND 2% BECAUSE IN MY OPINION THE FEDERAL RESERVE HAS USED THIS POLICY OF INFLATION TARGETING AS THE CORNERSTONE FOR FED POLICY.|
|00:06:42||AND AS INFLATIONARY EXPECTATIONS, AS WE LOOK TO THE FUTURE CONTINUE TO BE LOW, INTEREST RATES HAVE CONTINUED TO BE HISTORICALLY LOW.|
|00:06:52||IN SPITE OF THE FACT THERE'S BEEN A LITTLE UPTICK IN INTEREST RATES BECAUSE OF THE FED POLICY HERE IN THE LAST YEAR OR SO, WE CONTINUE TO SEE AFFORDABLE INTEREST RATES, AND INTEREST RATES THAT INFLUENCE INVESTMENT AND CONTINUE TO PROVIDE THE STIMULUS THAT WE NEED FOR THE KIND OF ECONOMIC GROWTH THAT WE HAVE SEEN SINCE 2003.|
|00:07:18||CHAIRMAN, I JUST WANTED TO MAKE THESE POINTS.|
|00:07:20||I THINK THIS IS A VERY IMPORTANT BACKGROUND FOR US AS WE BEGIN THIS BUDGET DEBATE.|
|00:07:26||I RESERVE THE BALANCE OF MY TIME.|
|00:07:27||THE CHAIRMAN: THE GENTLEMAN RESERVES THE BALANCE OF HIS TIME.|
|00:07:30||THE GENTLELADY FROM NEW YORK.|
|00:07:31||MRS. MALONEY: I YIELD MYSELF SUCH TIME AS I MAY CONSUME.|
|00:07:35||SPEAKER, THE GENTLEMAN MENTIONED THE RHETORIC COMING FROM THIS SIDE OF THE AISLE.|
|00:07:39||BUT WE ARE NOT SPEAKING RHETORIC.|
|00:07:41||WE ARE SPEAKING FACTS AND FIGURES.|
|00:07:44||AND NUMBERS DO NOT LIE.|
Mr. SAXTON. Mr. Chairman, I yield myself such time as I may consume.
It seems like there must be an election coming to hear some of the rhetoric here on the floor which actually defies reality. Let me try and explain to those who are at least open-minded about the situation what has happened with our economy over the past 5 or 6 years.
We all remember during the late 1990s we had very robust growth in the stock market. Things were perking along at a rate that most economists at the time thought was an exuberant time when investments were being made for reasons other than perhaps good, solid rationale.
In the third quarter of 2000, the economy began to get soft and in the last quarter of 2000 it did even worse. As we look at the reasons for that, there were a number of economists who concluded different things. One thing became clear, and that was investment was not being made and that something needed to be done.
This chart to my left is a chart which shows fixed private, nonresidential investment, in other words, investment in things that would be productive in our economy. As we look at what happened as we began to move through 2001 and 2002, these bars that drop below the line show there was negative investment. People were not investing in productive things; and as a result of that, the economy was not doing well.
The administration proposed a fix, and that fix was to do things here in the House of Representatives and in the Senate and through the administration that would encourage the American investor to reengage in investing in productive things. And so in 2003 the House of Representatives and the Senate collectively, together, passed some tax cuts to encourage investment. And those tax cuts, which were temporary in nature which we continue to talk about making permanent, had the desired effect.
If we look at this chart and look at when the negative investment ended and positive investment started, it happens to be after those tax cuts went into effect. As a result of reducing the percentage of taxes paid on dividend gains and as a result of tax cuts on capital gains, we see beginning in 2003 and through 2004 and through 2005 and projected to continue by the Fed and by other blue chip economists and blue chip forecasts, we are expecting to see that growth continue through 2006 and 2007.
As a matter of fact, we had 4 percent growth in 2004; 3.5 percent growth in 2005; and in the first quarter of 2006, we saw 4 percent growth continue. This is good news for not only the American investor; it is also good news for others in the workforce and in the economy.
Here is what happened to employees' payrolls during that period of time. Once again we see some lines that drop below the positive mark. We see some negative growth in nonfarm payrolls as we move through. And as we saw the 2003 tax cuts go into effect, once again we saw the economy rebound and we see employees in nonfarm payrolls begin to increase to much healthier levels than they had been during the 2000, 2001, 2002, and 2003 period of time when investments, productive investments, were not being made. [Page: H1581] As we sought an answer and the administration proposed the tax cuts and the House and the Senate implemented the tax cuts, once again nonfarm payrolls and employees' payrolls began to grow, as demonstrated by this chart.
Finally, gross domestic product, which is how most economists measure growth in the economy, continues to be very good. Beginning in 2003, as our tax cuts went into effect, dividend tax cuts, the taxes on dividends were lowered, the taxes on capital gains were lowered. We see in 2003 and 2004 as we move across here, and as I said before in 2004, we had an average of 4 percent growth. In 2005, we had an average of 3.5 percent growth over the four quarters of that year.
The forecast for the first quarter of this year, which is in red, the first of the four lines, the actual forecast is 4.7 percent. I think that might be a little high. I think it might be closer to 4 percent. But that is healthy economic growth, and we continue to see the effect of the policies we have put into place. We expect that the growth may slow somewhat during the first, second, and third quarter; but we believe we will average 3.5 percent this year.
I might add one thing that I think is important for us to remember, and that is that the tax cuts, together with other policies, have produced this growth and we need to continue to support those policies as well. The Federal Reserve has been a huge part of this as well. While it is nice for the Congress to take credit with the implementation of the tax policy that we implemented, the Federal Reserve also deserves a lot of credit for what has happened here through the policies that have been brought about through something called ``inflation targeting.'' Today, inflation is very low. Inflation is around 2 percent; and it is around 2 percent because, in my opinion, the Federal Reserve has used this policy of inflation targeting as the cornerstone for Fed policy. As inflationary expectations, as we look to the future, interest rates have continued to be historically low. In spite of the fact there has been a little up-tick in interest rates because of Fed policy in the last year or so, we continue to see affordable interest rates and interest rates that influence investment and continue to provide the stimulus that we need for the kind of economic growth that we have seen since 2003.
Mr. Chairman, I just wanted to make these points. I think this is a very important background for us as we begin this budget debate.
Mr. Chairman, I reserve the balance of my time.