Sounding off on the economy
With the weak economy the overriding domestic issue, the five candidates for US Senate spoke with Casey Ross of the Globe staff about their plans to combat the recession, fix Wall Street, and address other financial matters.
Michael E. CapuanoDemocrat
US Representative Michael E. Capuano starts a discussion about the economy by explaining how the recovery has faltered. He says federal tax cuts were not focused on jobs, and stimulus aid was distributed indiscriminately. “The only way out of the economic doldrums is for the federal government to step up and help create jobs,’’ he said. “The best way to do it is through direct federal investment, things like construction funding and loans to small businesses.’’ Unlike some candidates, Capuano has not released a detailed plan for job creation, an endeavor he called “ridiculous.’’ “Nobody in Washington is waiting for the senator from Massachusetts to be elected to bring their plan.’’
Job creation: Whatever I can get through Congress. Anything I can get through to get people to work is what I favor. I’ve already made compromise after compromise to get through the stimulus. The stimulus wasn’t what I wanted, but it created some jobs and saved a lot of jobs. Having your own plan is all well and good. Personally, Mike Capuano can come up with a dozen different plans, and they’re all fine. But in the final analysis, Congress is not going to adopt the plans these people have probably had somebody else draft for them.
A second stimulus: If it’s targeted, I would probably vote for it. If it’s just a generic across-the-board Christmas tree, no, I wouldn’t vote for it. But I would vote for something that’s targeted toward job creation. When I say job creation, I want to be real clear: I also mean job saving. The easiest way is direct infusion into the highway trust fund. It’s not the only one, but it’s a classic one. It’s easily measurable, and at the end of it, you have something to show for it.
Financial regulation: I believe we need to begin the process of re-regulating. Human greed being as it is, there is always a drive to make more. I know that. It’s normal. It doesn’t even bother me. It’s good. But at the same time, unfettered greed always leads to disaster, which is exactly what happened. Without any lines drawn the competition to draw clients in the financial services industry becomes impossible. Like anything else a race to the bottom is inevitable.
Consumer protection: States will do it differently, and the federal government should do some minimum things. Right now, I’m trying to put a ceiling on credit card rates. I think it’s ridiculous we don’t have a ceiling on it. I’ll take what I can get. I’d rather it to be tied to prime. Right now it’s completely uncapped. I can’t see anybody looking me in the eye and telling me a credit card company, because they happen to be located in South Dakota, should be able to charge 36 percent. That’s unconscionable.
Tax policy: In my perfect world, there should be no difference between capital income and earned income. They should be treated at the exact same rate. I believe firmly in progressive taxation, which means people who earn more should pay more. I’m not looking to soak the rich. I just think somebody who’s earning $10 million can live quite comfortably on, I don’t know, $5 million. Pick a number. Their lifestyle doesn’t change if they have a 30, 40, 50 percent tax rate. Whereas someone making $50,000 with that same rate gets crushed.
Martha Coakley says the foreclosure crisis led the country into an economic spiral, and the only way out is to end the unscrupulous practices that left some borrowers bereft and the economy hanging on a limb. “This kind of an economic recession didn’t have to happen,’’ Coakley said. “Wall Street was not self-regulating in any way and Washington and its regulators weren’t paying attention. Until we take care of the issues around lending, we’re never going to fully recover from this.’’ Coakley’s preference would be to target tax credits for a short-term boost to the economy, rather than commit to a second stimulus package, saying she prefers more targeted tax credits in the short term.
Job creation: It starts with trying to get the economy leveled out, making sure we stop foreclosures - get loans modified and keep people in their homes. On creating jobs, I’m looking at specific tax credits - one would be a research and development tax credit that would be permanent; another would be a seed capital investment tax credit for private investment in start-ups. We need to look at where our jobs in Massachusetts traditionally come from - such as cranberry bogs and the fishing industry - and support them. We also need to look at the jobs of the future - in clean energy, biotechnology, and high tech - and close the gap between those jobs and what the workforce is trained for.
A second stimulus: The jury is still out on the first one. I think it helped retain jobs, particularly in municipalities and traditional positions for teachers, police, and fire. It’s very important to make sure we stem the flow of unemployment. Massachusetts is behind, and I think for some good reasons, with shovel-ready projects. Before we look at a second stimulus, we need to see if the money from the first stimulus went where it was supposed to go.
Financial industry regulation: We need to address issues around lending. The president’s plan to create a new financial consumer protection agency makes total sense. We need to change regulations of banks and larger financial institutions that have had no focus on the consumer. Had we had that approach to begin with, we would have seen nothing near the total collapse of the economic system. The securitization of loans and other consumer products, the use of credit default swaps - I’m not saying those products are inherently bad, but they can’t be unregulated going forward.
Consumer protection: I’m in favor of increasing regulation of deceptive practices in designing, marketing, and selling those products to consumers. One thing that’s particularly egregious is that, even as we speak, credit card companies are allowed to charge usurious rates, and states are not able to address it. That will change in the new legislation in Congress, which does provide for state enforcement. Until now, banks and credit card companies have been saying, ‘We’re going to charge whatever rate we want.’ Congress has been letting them do it and states have been preempted from taking action on it.
Tax policy: I would let the Bush tax cuts expire, which I believe we’re going to do. There has been discussion about what amounts to look at if we’re going to target an income tax [increase], and I selected $250,000 [as the threshold]. I’m against putting any additional burden on the middle class and middle class families. The income tax is something that has to be carefully weighed. I have not taken a position on capital gains.
Ask Alan Khazei how to reverse ever-rising unemployment and he is immediately animated. He unfurls an array of statistics to explain the depths of the recession, and how his policies would lead the nation out of it. The government’s simple focus, he said, should be encouraging businesses to resume hiring. “This recovery is not affecting people on the ground,’’ he said. “There’s a lag, and there’s something worse in this recession, which is that people are scared and they’re not spending money. Jobs will get consumers spending again. The first bill I will file as a new senator will be a jobs bill.’’
Job creation: First, we have a new jobs hiring tax credit. We would give every business a 15-percent tax credit in the first year for every new hire, and a 10-percent tax credit the second year. For small businesses, it would be 15 percent for both years. This would create anywhere from 50,000 to 100,000 new jobs in Massachusetts, 2.5 million to 5 million jobs across our country. It only costs $5,400 a job; it will pay for itself because it moves people off the unemployment rolls into jobs.
A second stimulus: Yes, all the candidates were asked this in the first debate. I unequivocally said yes. Others said, no, well maybe, let’s see if it’s working. I know it’s not working. People are hurting and unemployment keeps going up, and it keeps getting worse. I would focus it solely on jobs. The first stimulus was full of pork; there were thousands of earmarks, billions of dollars. The average cost of a job in that stimulus was between $100,000 and $150,000. The tax credit would be $5,400 a job; so, we can actually spur the economy and support job creation much cheaper.
Financial industry regulation: People didn’t know what they were trading and what they were buying, and balance sheets are a mess. Here’s what I would do: I think we need one financial risk regulator. The problem is we’ve got six different government agencies that are trying to regulate the financial markets, and I learned growing and running City Year, unless you have one person in charge, or one department in charge, it doesn’t get done. Nobody’s accountable. People try to pass the buck, and that’s what happened. I would shrink it down to one regulator.
Consumer protection: We do need a new consumer financial products safety commission. We need tighter controls on credit cards. We bailed out the banks. I know too many people who are living off their credit cards. They don’t have anything else. They get these promotions in the mail, you know: ‘Zero percent!’ And then the fine print you can’t even read unless you have a magnifying glass. There are too many people who are paying more in interest than what they borrowed the initial money for.
Tax policy: Once we get out of the recession, we have to deal with the deficit. We need to restore the Clinton tax rates for the highest earners. We need to get back to 39.4 percent on [wealthy taxpayers]. We need to get the capital gains rate back up to 20 percent. We need to close corporate tax loopholes, which can get us $70 billion. We need to keep the estate tax in place, and we need to look at government reform. But we’ve got to phase it in. If we’re too aggressive now on the deficit, we’ll never get out of the recession.
Stephen Pagliuca says Washington has lost focus on the underlying problems of the recession. It’s fine to pour money into the economy, he says, but workers and businesses must be prepared to use it. He is pushing a dual approach to job growth: Give businesses a $7,500 credit for hiring workers, and ensure workers are qualified to take those jobs by providing a $4,000 credit for training programs. “My frustration is the lack of direct funding for education to prepare workers who need jobs,’’ Pagliuca said. “There should also be more balance in how the money is distributed. If you just keep focusing on earmarks, the money is going to run out at some point.’’
Job creation: We would implement tax incentives to create jobs and fund job training. We would provide a $7,500 jobs tax credit for businesses that hire a worker that lost his or her job as a result of the economic crisis. We would also implement a job training tax credit - $4,000 per year for two years for programs that provide retraining. We’ve got to take the best demonstrated practices in job training and expand those. That’s a critical piece of getting people back to work.
A second stimulus: We needed a stimulus because we’re in a jobs crisis and an economic crisis that we’ve never seen before. But we should be targeting the funds toward things that can create and sustain long-term jobs and increase productivity. There should also be more balance in how the money is distributed.
Financial industry regulation: Number one, there’s got to be a strong national regulator. Not unlike after 9/11, when we knit all the agencies under Homeland Security, we need to do that for the financial system. There’s too many agencies with overlapping responsibilities, which leads to a lack of accountability. The agencies have a limited ability to pull together an analysis of the systemic risks the country is facing. We have six regulators that deal with banks. What we would do is create a central regulator with a direct line to the president.
Consumer protection: A consumer protection agency would be within (the office of the central regulator). The agency would be responsible for nationwide education and financial literacy training. It would also step up oversight to make sure lenders are securing documentation and adhering to reasonable underwriting standards as a requirement of making loans. One of the key drivers of the financial crisis was no-documentation, no-deposit, speculative lending done by predatory mortgage brokers. The consumer protection division would also look into credit card programs and hold companies accountable for their advertising and explanation of their products.
Tax policy: I would reverse the Bush tax cuts and eliminate the tax deductibility of all corporate bonuses over $1 million. I would also raise the capital gains tax from 15 to 20 percent. Together, eliminating the deduction and raising capital gains would raise about $30 billion, which I would use for the jobs and training tax credits. I’m essentially taking dollars from one area and putting them into job training and job creation.
Scott P. BrownRepublican
State Senator Scott P. Brown says he has heard from business owners that they are starved for credit, strangled by government regulation, and unable to break out of a slump that has forced them to pare operations and cut jobs. His antidote is a combination of policies he says are pulled from leaders ranging from Ronald Reagan to John F. Kennedy: cut taxes, make regulations more predictable, and restore the flow of credit. “The first thing we need to do is make sure that banks, especially those that are getting bailout monies, are releasing it and not using it to pay salaries or backfill their own losses,’’ he said.
Job creation: Businesses are being tasked to pay more and more, whether it be through taxes, unemployment insurance, or energy costs. The strain on businesses is a lot more than it has been in the past. I just went out to Northbridge, a mill out there that makes lobster traps. He has 100 employees. It’s a 400,000-square-foot facility and the CFO asked me, ‘What can you do about freeing up credit?’ A lot of the larger lenders are not lending like they should be. I think that’s pretty evident nationally. The other thing I’d do is increase the Small Business Administration’s ability to loan. Now I believe it’s $2 million; I’d bump that up to $5 million, so you can have smaller businesses getting the ability to get more credit.
A second stimulus: No, we don’t need another one. The first one didn’t work. It hasn’t created one job that I’m aware of. It created government jobs certainly, and government is doing well. But Massachusetts is 49th out 50 in terms of releasing the stimulus [highway money]. I find that outrageous. I would actually recapture the monies that haven’t been disbursed yet, and disburse them in targeted areas, whether it’s health care or biotech or construction jobs, and get them immediately in the system. In the first one, the funds haven’t even been released. How can they do a second one?
Financial industry regulation: The question I’ve asked even when it was happening is, where were the regulators? Where were the boards of directors in those banks recognizing that these were risky ventures? So I’ve always felt we have plenty of regulations. If we overregulate any industry, it’s going to get to the point where they can’t create jobs and ultimately allow the economy to naturally get us out of this mess, because government isn’t going to get us out of this mess by creating larger government.
Consumer protection: I’ve received a few calls from folks recently that, you know, if they’re late or they miss a payment, their rate goes from point A to point Z - very, very high interest rates. It’s disturbing the lenders we bailed out with taxpayer money are not passing on some of those savings to some of the citizens by offering either a grace period or not whacking them to the point where they are going to be paying more in credit card interest. It’s something I would look at.
Tax Policy: If you want to bring the economy to a total grinding halt, then raise capital gains, raise taxes, raise fees, raise red tape. I thought we were in the second year of a recession. It’s common sense: If you lower taxes and allow more businesses and individuals to retain money in their pockets, they will spend it. They will either spend it to take their kids to a movie or to dinner; they will hire an employee.
Casey Ross can be reached at firstname.lastname@example.org.