Center for American Progress Action
An Economic Recovery Double Standard
An Economic Recovery Double Standard
Senate conservatives hold Main Street recovery to a higher standard than the Wall Street bailout, write Daniel J. Weiss and Kalen Pruss.
Last night the U.S. Senate voted for American families by limiting debate and proceeding today to final passage of the American Recovery and Reinvestment Act, H.R. 1. This bill, as amended by Senators Ben Nelson (D-NE) and Susan Collins (R-ME), would spend $827 billion to offset rising unemployment and put people back to work. It passed by a vote of 61 to 36—only one more vote than the 60 necessary for a supermajority to halt a filibuster.
Not a single Senate conservative voted for this employment rescue package. Last October, 22 of them voted for the enormous Emergency Economic Recovery Act that provided $750 billion to revive huge financial institutions suffering from risky investments gone bad (see chart). These same 22 Wall Street senators opposed help for Main Street yesterday even though there are 3.7 million unemployed Americans, a number that grows daily.
There’s no doubt the financial bailout was needed. The United States faced a mounting economic crisis last fall. Stock prices fell, credit dried up, and massive layoffs loomed. To prevent a meltdown of the entire financial system, congressional leaders on both sides of the aisle united to pass the Emergency Economic Stabilization Act. Of the 35 senators who voted with the American Conservative Union two-thirds of the time or more, 22 supported the $750 billion bank bailout bill even though it had very few conditions for the institutions that received this financial lifeline. Conservative leaders showed enthusiastic support for the Emergency Economic Stabilization Act because they recognized the crippling effect a financial meltdown would have on Main Street Americans.
Several of them expressed their reasons for supporting the financial bailout legislation. “Mr. President, I know that many of my fellow members are concerned about the scale of this package,” Senate Minority Whip Jon Kyl (R-AZ) told his fellow senators last October during debate on the bill. “And while I agree that more private sector involvement would be preferable to placing hundreds of billions of taxpayer dollars at risk, I think that the enormity of the current financial crisis requires the government to act.” Kyl subsequently voted for the bank bailout, but opposed the recovery package, even though his state of Arizona has 6.9 percent unemployment.
Senator Bob Corker (R-TN) likewise voiced support for the financial bailout despite its enormous price tag, calling the stabilization act “critical.” Although he saw bailing out U.S. financial institutions as an “unpleasant task,” he recognized the bill as “something that is directly helping the people across our country … At the end of the day, this is something I believe needs to pass.”
Senate Minority Leader Mitch McConnell (R-KY) urged his colleagues to support swift and dramatic action, saying, “The voters sent us to Washington to respond to crises, not to ignore them. To that end, we have acted swiftly. And lawmakers from both political parties have worked hard to protect taxpayers at the beginning and at the end of this plan.”
His colleague Sen. Tom Coburn (R-OK) also supported the bank bailout, voicing his support on the Senate floor: “I plan on voting for this bill. I support that we have to do something now” to stave off greater crisis. Corker, McConnell, and Coburn all voted for the Economic Stabilization Act, and they all opposed the Recovery and Reinvention Act. The states Corker and McConnell represent, Tennessee and Kentucky, have 7.9 percent and 7.8 percent unemployment, respectively.
Then-Republican presidential nominee John McCain (R-AZ) was yet another supporter of the Emergency Economic Stabilization Act in October. He said, “We’re not talking about failure of institutions on Wall Street. We’re talking about failures on Main Street, and people who will lose their jobs, and their credits, and their homes, if we don’t fix the greatest fiscal crisis, probably in—certainly in our time, and I’ve been around a little while… And we’ve got to create jobs. And one of the areas, of course, is to eliminate our dependence on foreign oil.” McCain voted against the Recovery Act, even though it has provisions that would reduce dependence on oil.
The bank bailout provided $750 billion to financial institutions through the Troubled Assets Relief Program, or TARP. Though TARP funds were necessary to stem bank failures and job loss, a Congressional Oversight Panel report found that the Treasury overpaid financial institutions by about $78 billion through the program last year.
Furthermore, the panel found that the U.S. government received far less value than private investors did in major recent transactions. The Treasury received as little as 41 cents in securities from every dollar spent on investments in financial institutions such as AIG and Citigroup. In addition, some recipient financial institutions have already wasted billions of taxpayer dollars on luxuries such as executive retreats, private jets, office renovations, and multimillion dollar bonuses after receiving TARP funds.
Given the clear need for both recovery packages, it’s reasonable to ask why Senate conservatives are holding Main Street recovery to a higher standard than the Wall Street bailout. After all, wasn’t the Wall Street bailout also about helping “the people across the country?” The very same conservatives who so adamantly supported the bank bailout unanimously rejected the American Recovery and Reinvestment Act. McConnell dismissed the package as a bloated “free-for-all.”
Kyl and Corker also criticized the package. Kyl complained that “the bill spends far too much money for far too long a period of time.” Corker condemned what he saw as rushed and incomplete legislation. “I think for us to rush out and put forth $1 trillion on spending on top of a projected $1 trillion deficit, without fully understanding the other issues our country faces and how the administration plans to deal with these other issues, is incredibly imprudent,” said Corker.
And Coburn, who likewise voted for the bank bailout, was very vocal in his opposition to the recovery package. “Now that the states are in trouble, we are going to absorb a portion of the problems the states have because they have not been fiscally prudent, and we are going to say: We are going to bail you out. Well, think about what that says to state legislators all across the country,” Coburn said. Never mind that according to Coburn’s own logic, his “yes” vote on the Emergency Economic Recovery Act sent a message of approval to banks regarding their fiscal irresponsibility.
McCain has been one of the harshest critics of the recovery package. He insists that it is “a spending bill full of unnecessary spending, unexamined policy changes or policy changes that have been examined and rejected in the past, and, of course, tax cuts which do not stimulate the economy.” He has especially attacked provisions that fund education, health care, and housing, including $2.9 billion for the Weatherization Assistance Program. This program enables low-income families to permanently reduce their energy bills by making their homes more energy efficient. According to the Department of Energy, it also spurs job growth and economic development.
Conservative lawmakers put ideology aside to craft bipartisan legislation and save U.S. financial institutions last October. Nevertheless, when it came to helping millions of everyday Americans, these conservative lawmakers voted “no.” As Sen. McConnell said about the Emergency Economic Stabilization Act, “For lawmakers, failing to pass this economic rescue plan would be grossly irresponsible.” But failing to pass the current broad-based economic recovery plan would be just as irresponsible. Senate conservatives should have followed their own advice and worked with their colleagues to pass the American Recovery and Reinvestment Act. Fortunately, a supermajority of 61 senators agreed to do so, and a bill could be sent to the president within a week, beginning the process of stemming job losses and getting the economy back on track.
Daniel J. Weiss is a Senior Fellow and Director of Climate Strategy at the Center for American Progress Action Fund. Kalen Pruss is an intern at CAPAF and a junior at the University of Michigan majoring in environmental studies and history.
|State||Party||Senator||State Unemployment Rate, December 2008||ACU Lifetime Score||Roll Call 213, Emergency Economic Stabilization Act of 2008, 10/01/08||Roll Call 59, cloture vote on Sen. Amdt. 570 to American Recovery and Reinvestment Act, 02/09/09|
The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.
Daniel J. Weiss