Senator Who Predicted Bailouts Sees More Spending
SCOTT SIMON, host:
This is WEEKEND EDITION from NPR News. I'm Scott Simon.
The Federal Reserve said Friday it's drafting a plan that, for the first time, would police compensation for investment bank employees. Fed would try to encourage long-term investment strategies over short-term risk-taking by financial institutions. President Obama has urged Congress to pass tougher regulations on the financial industry.
Senator Byron Dorgan, a Democrat from North Dakota, says he wants the president to go a step further and create a new position that he calls a budget deficit reduction counselor.
Senator BYRON DORGAN (Democrat, North Dakota): Well, the issue of a budget deficit reduction counselor is pretty simple. In fact, I've talked to the president personally about this in the Oval Office in the last week. We have very serious problems with respect to a long-term budget deficit. And what we see in the out years is unsustainable.
It requires us, in my judgment, to put our fiscal policy back on track because I don't think we'll see the economic growth or the economic recovery that our country needs unless people have confidence going forward. And part of that confidence would come from a fiscal policy that they see adds up, makes sense, and begins to tame these out year deficits.
SIMON: But you understand some people would naturally be suspicious when you say I want to cut the deficit, and the first way to do that is to hire another czar.
Sen. DORGAN: No, I'm not suggesting a czar. I'm suggesting that somebody at a counselor level to the president be focused like a laser full time working with the president and the Congress to try to address this issue. I know there are a lot of people at the Office of Management and Budget and so on, but the fact is if you look at the out years, out to 2019, what you will see is we are on a path that's not sustainable, and it's a path that could wreck this economic recovery.
We will see economic growth, even during times of growth, a budget deficit that increases.
SIMON: Where would you cut the budget when there's health care overhaul to pay for perhaps, ongoing wars in Iraq and Afghanistan, commitments in those countries.
Sen. DORGAN: Well, first of all, you can't fight wars by deciding that you're going to cut revenues. I mean you're going to have to begin to pay for these things if you're going to do them. When President George W. Bush said we're going to fight a war in Iraq and some of us said, well, you have to begin to pay for some of these extra costs, he threatened to veto any legislation that would have us raising additional revenue to pay for the cost of the war.
I think you've got to look at almost everything and begin to tighten your belt on spending, take a look at new revenues. And by the way, I think there's plenty of revenues around. We've got some of the wealthiest Americans paying the lowest income tax rates of 15 percent on carried interest. We have some of the wealthiest corporations that have been making a lot of money running their income through third-country tax havens in order to avoid paying tax revenue to the United States government.
You know, there are plenty of ways, if we're focusing on this, to try to put this back on track and get the deficit under control.
SIMON: You've criticized the Department of Homeland Security and, in fact, Secretary Napolitano for some of their spending of federal stimulus money.
Sen. DORGAN: The criticism is of the requirements that were established in 2002 and 2006 by the Department of Homeland Security about how they would build border ports of entry. So now the stimulus money is being used to improve security by rebuilding or building ports of entry at these smaller ports has us on average spending $15 million at ports of entry that on average have five cars an hour coming through.
SIMON: This is like Whitetail, Montana, I believe?
Sen. DORGAN: Well, yeah, and Antler, North Dakota. Nine of them are in my state. Now, those requirements that were created during the past administration need to be changed. We can't drive that kind of spending. That makes no sense. I'm all for border security, but I'm not for wasting the taxpayers' money, whether it's in my state or other states.
SIMON: I wanted to give you the chance to say I told you so. We found a quote, 1999, from New York Times when you said, we will look back in 10 years' time and say we should not have done this - this was President Clinton's bank deregulation act - we should not have done this but we did because we forgot the lessons of the past, and that which is true in the 1930s is true in 2010. We have now decided in the name of modernization to forget the lessons of the past of safety and of soundness.
Sen. DORGAN: Well, I mean, it does precious little to say I told you so, but this was 10 years ago on the floor of the U.S. Senate. At the time, I said I thought it was a huge mistake and, you know, I was critical of the Clinton administration and critical of the Republicans in Congress who were pushing it.
But what I said is I think within a decade we're going to see massive taxpayer bailouts. I didn't necessarily know that for sure but it turns out my prognostication was a pretty expensive lesson. Because it made no sense that we should repeal Glass-Steagall and the protections that were put in place after the Great Depression.
And the result of that, in my judgment, was to steer this economy into the ditch and cause a significant economic wreck that's going to take us some time to get out of.
SIMON: The timing is something that intrigues me, 'cause you said this in 1999, whereas you note your party was in party.
Sen. DORGAN: Uh-huh. Well, but let me just say to you that the legislation that was passed by the Congress was called Gramm-Leach-Bliley - all three Republicans. Phil Gramm - those three Republicans led the approach. It was Republican legislation but warmly embraced by President Clinton, Secretary of Treasury Rubin and so on.
But I was one of eight U.S. senators that went to the floor of the Senate repeatedly in opposition to what they were doing. And, you know, as I said, I made some prognostications and say if we do this we're going to see massive taxpayer bailouts in the future.
And unfortunately, that has been the case.
SIMON: But you know, there's concern now, Senator, about overregulation. Because there's an economic crisis on, after all, and there's some concern that overregulation could stifle the creation of jobs.
Sen. DORGAN: Well, I understand that some people think regulation's a four-letter word. For my point, I think the free enterprise system is the best way I know of to allocate goods and services. But let me just say this: it needs a referee - a referee with a whistle and a striped shirt that can blow the whistle when they see the fouls.
Now, we had a lot of fouls going on in the free market system by big investment banks that were expanding their leverage at 30 times capital. I mean, it didn't take a genius to understand that's going to collapse at some point. And everybody was making a lot of money until the whole house of cards collapsed and the rest of the American people were victims of this unbelievable greed and avarice.
And one final point. Who was supposed to be regulating this? Who was supposed to be overseeing it? Well, people in agencies like the SEC and the CFTC and so on, we had regulators there that were boasting about being willfully blind. So, shame on them. We need effective regulation. I don't want to over-regulate but I sure want to have effective regulators to stop this sort of thing from ever happening again.
SIMON: Senator Byron Dorgan of North Dakota, thanks so much.
Sen. DORGAN: Thanks a lot. It's good to be with you.
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