Wednesday, January 30, 2008

Kyl Weighs in on the Stimulus Plan

(Here’s the full transcript from my interview on Kudlow & Company last night with Senate Republican Whip Jon Kyl (R-AZ).)

His thoughts on the fiscal stimulus plan:

I think it’s more of a political, than an economic exercise. I am dubious that the economic value will be that which is purported to be the case. And it could preclude us from doing some more important things that could really stimulate the economy. It’s one of the reasons why when the [Senate] Finance Committee meets tomorrow, I will be offering some amendments that I think would have a more direct impact on our economic growth—such as cutting the corporate tax rate and insuring that American citizens won’t have to pay the Alternative Minimum Tax again this year.

On whether other Senators will be opposing the plan:

I’m not sure what the whip count is on it. I think the more important concern right now is that rather than taking the House version of it, the Senate may well add a great deal of more spending to it. And in effect, allow it to become a Christmas tree-perhaps even to the point that the President couldn’t support it. There’s no telling what happens when this bill gets on the floor and it’s subject to all sorts of amendments.

On whether the plan will balloon the budget deficit:

It could well. First of all, the budget deficit will increase by about $150 billion dollars, because this is not paid for as you know. And so everything that is added to it will increase the deficit even more than that. And there is a concern that when unemployment benefit extensions are added—which they surely will be in the Finance Committee here in the Senate—that the economic effect could go from a potential positive of maybe half of a percent to three quarters of a percent at most, to a negative. And therefore it seems to me that we have got to oppose that part of what’s going to be offered up tomorrow.

On whether the plan could undermine efforts to make the Bush tax cuts permanent:

Well that’s a concern that I have. Now, political people respond to political requirements. And the view right now is: "there may be a recession coming and we don’t want to be blamed for it. So, we’ll do something so that if it comes, at least the blame won’t be on us." The problem is that we might do some harm that then prevents us from some good later on—the precise point you’re making. To the extent that we spend—an odd phrase to use—but that we spend $200 billion dollars here of taxpayer money, that makes it more difficult by that same amount to extend the tax relief that we need to extend at least in 2010, and hopefully we’ll do it sooner.

On the political ramifications of opposing the plan:

We’re not taking a position as a party. We’re each one of us evaluating this on its merits. And we’ll each take our own position. Something I suspect will pass and it will be overwhelming. My goal right now working with Mitch McConnell, our leader, and the majority of our conference, is to try to make sure that this thing does not balloon into this giant Christmas tree that we talked about. But that we can constrain it as close to the House package as possible. And I’m working with my colleagues to try to see that that’s done.

On whether he’ll vote against the plan if it’s not parsed down to his liking:

At this point, I am enough convinced that it doesn’t do the job that it’s intended to do, adds to the deficit, and that there are better things that we can be doing with the money that I would be inclined to vote no.