Small Business Job Creation Tax Act of 2010

Mr. President, I rise tonight to speak of what I believe is the central concern of the American people right now, and that is the issue of jobs or in many cases the lack of a job. We have seen it in so many ways. We have seen it in our own communities. Many people have seen it in their own families. These are not statistics on a business page. When they see an unemployment rate or the number of people who are out of work, it is real life for far too many American families. As long as the unemployment rate in America is 10 percent, the American people want us to focus, as we never have before, on the issue of job creation.

In Pennsylvania we have now 560,000 people out of work as of the last month it was calculated, the month of December. That is a huge number. If you look at it by percentage it looks like it is lower than a lot of States, 8.9 percent, but it is 560,000 people in Pennsylvania, and it spiked upwards toward the end of the year.

I had a chance, now just about a week ago, to sit down with 8 of those 560,000 people, 8 people out of work. I will not give you their names because that was the agreement. I wanted to spend some time listening, mostly, to folks who had been laid off, who lost their job in one way or another, through no fault of their own, victims of this horrific recession that so many families have lived through.

To encapsulate what they said, it comes down to much of what we heard President Obama speak about the other night in the State of Union, as well as what he said a number of weeks ago when he met unemployed individuals in Allentown, PA.

What he saw in that job center in Pennsylvania is what I saw in another job center in another part of the State: people who do not fully understand why they are in this predicament--people who had worked their whole lives, had great work records, never missed a day of work for the most part, many of them over the age of 50, many of them over the age of 60 and feeling a kind of economic insecurity and vulnerability they never had felt before, but, despite all that, they were not complaining. They were not pointing fingers. They were not complaining about the number of applications they filled out--scores of them, 25, 30, 50, 100--and in many cases getting either rejected or hearing nothing at all. That is what I heard.

I also heard, as the President said, a real determination to keep fighting, to keep applying, and to keep trying to get a job. Maybe the thread that runs through all of them is they are grateful for the country they live in and they want to work. They don't want to be in the position they are in. Many of them feel ashamed to have to rely upon someone else or an institution or, in particular, a government program.

One woman said to me, in the meeting I had a week ago--she was just sitting on my right. She had a lot of brains and talent and commitment, had never had to worry about being out of work before. But she told me she felt--and I am not quoting her directly--bad or even embarrassed about having to rely upon food stamps, a program that we know helps people get across that bridge when they are out of work, when they can return to work.

These eight individuals gave me just an insight, just a glimmer of how difficult it is for so many families.

I received a couple of letters recently. I will not use names because we do not have permission, but two individuals, one from southeastern Pennsylvania, and one--actually two from southeastern Pennsylvania, which in Pennsylvania, generally, is probably one of the most prosperous corners of our State.

But even in suburban communities that seem well off and strong economically, we are seeing many challenges for families who have lost their jobs, in some cases more than one person. One woman wrote to me and said:

My husband got a job at a particular company [I will not

identify the company] right out of high school. Left to serve

in the Army. Then went back and retired from there when they

closed.

So like a lot of places, someone works for decades and the plant closes, that is where they lose their job.

She continues:

I got a job in a factory and worked there while starting to

raise two sons until they closed that company as well. We

both got our jobs to support our families.

Then she talked about her sons getting the benefit of a college education which she and her husband did not have. But now they are at risk because one son is out of work and the other one is having challenges as well, despite having a college education.

She concludes the letter with one question, a question which I think is on the minds of a lot of Americans, not a question where they are pointing a finger at what is happening or not happening in Washington, but it is a question we need to listen to and do our best to provide answers for.

She says: When is the change coming?

When is the change coming? I think it encapsulates a lot of the questions I have heard across Pennsylvania. People are worried about what a lot of us have been talking about here; it is not moving fast enough to help them.

I point to another letter from an individual, again in southeastern Pennsylvania. This gentleman said to me that he grew up in Pennsylvania, had roots in Pennsylvania. He said:

I worked hard all of my life, yet to no avail. I have been

unemployed since the last layoff for a year now.

It is hard to comprehend that, being out of work for a year, in some cases longer than a year.

I seriously think we should start focusing heavily on jobs in the United States. We are hearing that everywhere, the same sentiment. But like the letter I cited a minute ago from a woman in southeastern Pennsylvania, this man said to me toward the end of the letter: When will the recovery begin for those individuals, the people he described in his letter, in addition to talking about his own situation?

So we can't pretend that just because we passed a recovery bill last year, which I voted for--I was very proud to support that. I know it was not the most popular vote in the world for a lot of folks around here, but we know the recovery bill is starting to work, in some cases working faster than others. There are good numbers on job creation across the country. Instead of losing 741,000 jobs as we did in January 2009, we are losing in the tens of thousands now--still not good, not enough when the unemployment rate is 10 percent across the country, when 560,000 people in Pennsylvania are out of work. So we should point this out, that the Recovery and Reinvestment Act is beginning to work but it is not working fast enough. So we have to do more. We can't just say: Let it fully play out and let it be fully implemented and all. That is not good enough for the economic trauma so many families are facing.

So for those who are leading lives of struggle and challenge, lives of anxiety and worry, and a kind of collective economic insecurity, we have to act. We can't just talk, we have to act. And I believe one of the ways we can act is by passing not just a jobs bill, which we should and must pass very quickly, but a jobs bill that is targeted on creating jobs in the fastest way possible. We do not need theories; we do not need some idea or some theory, untested; we do not need a bill that we hope will create jobs over many years. We need a bill that creates jobs this year, in the next 6 months to the next year, not the year after and 5 years later. We need a job creation bill that does that now.

I hope many of my colleagues will support legislation I have introduced, the Small Business Job Creation Tax Credit Act of 2010. I have introduced it today. I thank Senators Gillibrand, Levin, and Begich for cosponsoring this important legislation.

I mentioned the job loss in Pennsylvania, 560,000 people out of work through no fault of their own. That number across the country, since the

beginning of the recession--if you add up the jobs lost, it is over 7 million jobs since the beginning of the recession.

I just saw a story yesterday in my hometown paper in Scranton, the Times Tribune, a front-page story talking about the manufacturing job loss in just one region, not even a corner, just a region of Pennsylvania, 3 counties out of 67 counties. It was reported that in 2005--not that long ago--there were 35,150 manufacturing jobs in that region, over 35,000 jobs in 2005, and it is down below 30,000 now, 29,400 as of the latest number, meaning that a little more than 5,000 jobs have been lost in that period, in just a couple of years in northeastern Pennsylvania, and if you stretch it over 5 years, it is more than 7,500 manufacturing jobs. We know that number nationally is 2 million--2 million manufacturing jobs lost since the recession began in December 2007.

I mentioned the 10-percent unemployment rate, and I also mentioned that the Recovery Act is having an impact. We are happy about that, and we should mention and affirm that, but it is not moving fast enough. We have to do more.

This job creation tax credit--and many others have different versions of it, but the version I have been working on is actually very simple. We set the line of division between a large and small business at 100. So if you are under 100, you are considered a small business in this bill; over 100, a large business. If you are under 100 and you increase your payroll--when you compare one quarter of a particular year to the corresponding quarter from the year before, if you increase your payroll in that quarter, you get a tax credit of 20 percent. If you are above 100 employees and you add to your payroll in a particular quarter, you can get a 15-percent tax credit. It makes sense because it is targeted, it is focused on the problem, and it is going to be effective. We know from prior history--it is not theory; we have already tested this in recent American history--that it is a job creator. It creates jobs in big numbers fast. That is what we need.

We know the focus of this, of course, just by definition, becomes small business. We know that in America, most of the job creation in any period but especially in recent history has been the creation of jobs in small businesses. In Pennsylvania, small businesses with less than 100 employees--that fit into the definition of our bill--accounted for 91.6 percent of job growth between 2003 and 2006. Almost 92 percent of the job growth in Pennsylvania for that time period was small business.

This tax credit legislation would provide employers with a nonrefundable quarterly payroll tax credit based upon the increase in the employers' wages paid. It would be 1 year. We want to emphasize that we are focused on the short term, immediate direct benefit for the economy and to individual employers. The credit would only apply to an employee's wages up to the Social Security wage base of $106,800.

I mentioned a business of 100 or more getting a 15-percent credit and less than 100 getting a 20-percent tax credit. So, for example, if you had a firm that would be considered a small business and say they have a total payroll of $\1/2\ million--and we are talking about the second quarter of 2009--we pass the bill and we get the legislation enacted, a year later, you compare that $500,000 payroll to a quarter in 2010. Say they hired five employees. If you hired those five employees, all of whom are given an annual salary of $40,000, that means you have five employees making $10,000 in a particular quarter. The tax credit would apply to that increase in their payroll. So that particular company could get a tax credit to offset their quarterly taxes by some $10,000.

So we wanted to make this part of the jobs bill we are going to be considering very quickly. I believe the bill we are going to be completing work on and voting on will be a bill that will focus on strategy to create jobs very quickly and not be a big bill that a lot of things get attached to that make people feel good but may not create jobs.

I wanted to move to three charts very quickly. The first chart with regard to the small business job creation tax credit is a chart that depicts one of the themes here, that this particular strategy will be effective. This is from the Congressional Budget Office.

As of January of this year--for those who follow us, I use the acronym ``CBO,'' but for those who do not, the Congressional Budget Office. By definition, I think by acceptance of both parties in Washington, the CBO is a referee. When the Congressional Budget Office, CBO, says this is what this particular legislation will cost, it tends to be accepted as a good number. So when the CBO speaks about a particular policy provision, it speaks with authority and I think with a significant degree of credibility. Here is what CBO said:

Providing tax credits for increases in payrolls would

increase both output and employment.

That is what we want. We want legislation that will be, first, effective. The next part is very simple, just the word ``efficient.'' We want to make sure we can put dollars in the hands of employers very quickly to create jobs in the near term.

The same Congressional Budget Office report that I cited before for January of this year says that:

This particular policy would provide tax benefits linked to

payroll growth; fewer budget dollars would be used to cut

taxes for workers who would have been employed anyway.

So that is an indication that it can be efficient.

Finally, related to the question of efficiency is, how will this work in the real world? Often, we talk about and debate and enact things that sometimes do not work as well as we hope they would. We want this to work. We do not want to have an employer say: Well, I have a tax credit, but I need to hire an army of lawyers to interpret and implement it. We want this to be a provision that is easy for businesses to use.

So here is a basic form 941. Every employer has to fill this out quarterly. And there is a lot to go on this. I will not read every line, but as you can see, the form captures the number of employees who receive wages, the taxes and wages. The IRS would simply have to add in the ability to calculate the change in the payroll from one quarter of one tax year to one quarter of the next. So if the IRS can add a line or two, when this employer is filing out this form they are well familiar with--they have to fill it out every quarter--they can just add in how they have increased their payroll. They do that, and they will have the opportunity to benefit from the tax credit.

Finally, let me turn to one final theme, which is cost. I expect the cost of this tax credit to be $30 billion. The improvement to the economy from this tax credit will more than offset the overall cost. An increase in the gross domestic product will obviously increase company profits, which will increase the revenue of the U.S. Government. An increase in revenue will also reduce the deficit.

We have to invest in a strategy that will create jobs right now. We do not have time for a long ramp-up along the implementation of new legislation.

Finally, an increase in jobs will assist in taking people off unemployment, putting people to work. We want to have the safety net in place of unemployment insurance and/or food stamps and COBRA for insurance, but we also want to create opportunities so that more and more people do not have to worry about having to enroll in those programs and can actually be going to work every day because we answered the questions that were in those letters about when will the change come, when will we have the kind of economic security that workers and their families have a right to expect.

As we go through these next couple of days--I think we are down to days now--finishing up a provision or a set of provisions that will be a jobs bill, we have to be not just focused on getting the policy right, we have to be focused on getting this right for real people, people who are leading lives of struggle and anxiety and worry every day. Every morning they get up, they are worried about not having a job. Many of them are worried because they do not have access to health care or sometimes the protections we should have on health care-- another bit of unfinished major business we have. But, in particular, most Americans are faced with the prospect of darkness, of misery, and the pain of no job at all. For those eight individuals I met and for those who have been writing to me--and I am sure many people in both parties--we have to act, and we have to

act now. Talk is long past. We have exhausted the time for just talk and discussion. We have to act and pass a jobs bill. A central part of a jobs bill has to be a job creation tax credit to efficiently and effectively and in a very focused way create jobs in the near term.

I ask my colleagues to review and cosponsor the job creation tax credit legislation I have for small businesses.

Mr. President, I rise tonight to speak of what I believe is the central concern of the American people right now, and that is the issue of jobs or in many cases the lack of a job. We have seen it in so many ways. We have seen it in our own communities. Many people have seen it in their own families. These are not statistics on a business page. When they see an unemployment rate or the number of people who are out of work, it is real life for far too many American families. As long as the unemployment rate in America is 10 percent, the American people want us to focus, as we never have before, on the issue of job creation.

In Pennsylvania we have now 560,000 people out of work as of the last month it was calculated, the month of December. That is a huge number. If you look at it by percentage it looks like it is lower than a lot of States, 8.9 percent, but it is 560,000 people in Pennsylvania, and it spiked upwards toward the end of the year.

I had a chance, now just about a week ago, to sit down with 8 of those 560,000 people, 8 people out of work. I will not give you their names because that was the agreement. I wanted to spend some time listening, mostly, to folks who had been laid off, who lost their job in one way or another, through no fault of their own, victims of this horrific recession that so many families have lived through.

To encapsulate what they said, it comes down to much of what we heard President Obama speak about the other night in the State of Union, as well as what he said a number of weeks ago when he met unemployed individuals in Allentown, PA.

What he saw in that job center in Pennsylvania is what I saw in another job center in another part of the State: people who do not fully understand why they are in this predicament--people who had worked their whole lives, had great work records, never missed a day of work for the most part, many of them over the age of 50, many of them over the age of 60 and feeling a kind of economic insecurity and vulnerability they never had felt before, but, despite all that, they were not complaining. They were not pointing fingers. They were not complaining about the number of applications they filled out--scores of them, 25, 30, 50, 100--and in many cases getting either rejected or hearing nothing at all. That is what I heard.

I also heard, as the President said, a real determination to keep fighting, to keep applying, and to keep trying to get a job. Maybe the thread that runs through all of them is they are grateful for the country they live in and they want to work. They don't want to be in the position they are in. Many of them feel ashamed to have to rely upon someone else or an institution or, in particular, a government program.

One woman said to me, in the meeting I had a week ago--she was just sitting on my right. She had a lot of brains and talent and commitment, had never had to worry about being out of work before. But she told me she felt--and I am not quoting her directly--bad or even embarrassed about having to rely upon food stamps, a program that we know helps people get across that bridge when they are out of work, when they can return to work.

These eight individuals gave me just an insight, just a glimmer of how difficult it is for so many families.

I received a couple of letters recently. I will not use names because we do not have permission, but two individuals, one from southeastern Pennsylvania, and one--actually two from southeastern Pennsylvania, which in Pennsylvania, generally, is probably one of the most prosperous corners of our State.

But even in suburban communities that seem well off and strong economically, we are seeing many challenges for families who have lost their jobs, in some cases more than one person. One woman wrote to me and said:

My husband got a job at a particular company [I will not

identify the company] right out of high school. Left to serve

in the Army. Then went back and retired from there when they

closed.

So like a lot of places, someone works for decades and the plant closes, that is where they lose their job.

She continues:

I got a job in a factory and worked there while starting to

raise two sons until they closed that company as well. We

both got our jobs to support our families.

Then she talked about her sons getting the benefit of a college education which she and her husband did not have. But now they are at risk because one son is out of work and the other one is having challenges as well, despite having a college education.

She concludes the letter with one question, a question which I think is on the minds of a lot of Americans, not a question where they are pointing a finger at what is happening or not happening in Washington, but it is a question we need to listen to and do our best to provide answers for.

She says: When is the change coming?

When is the change coming? I think it encapsulates a lot of the questions I have heard across Pennsylvania. People are worried about what a lot of us have been talking about here; it is not moving fast enough to help them.

I point to another letter from an individual, again in southeastern Pennsylvania. This gentleman said to me that he grew up in Pennsylvania, had roots in Pennsylvania. He said:

I worked hard all of my life, yet to no avail. I have been

unemployed since the last layoff for a year now.

It is hard to comprehend that, being out of work for a year, in some cases longer than a year.

I seriously think we should start focusing heavily on jobs in the United States. We are hearing that everywhere, the same sentiment. But like the letter I cited a minute ago from a woman in southeastern Pennsylvania, this man said to me toward the end of the letter: When will the recovery begin for those individuals, the people he described in his letter, in addition to talking about his own situation?

So we can't pretend that just because we passed a recovery bill last year, which I voted for--I was very proud to support that. I know it was not the most popular vote in the world for a lot of folks around here, but we know the recovery bill is starting to work, in some cases working faster than others. There are good numbers on job creation across the country. Instead of losing 741,000 jobs as we did in January 2009, we are losing in the tens of thousands now--still not good, not enough when the unemployment rate is 10 percent across the country, when 560,000 people in Pennsylvania are out of work. So we should point this out, that the Recovery and Reinvestment Act is beginning to work but it is not working fast enough. So we have to do more. We can't just say: Let it fully play out and let it be fully implemented and all. That is not good enough for the economic trauma so many families are facing.

So for those who are leading lives of struggle and challenge, lives of anxiety and worry, and a kind of collective economic insecurity, we have to act. We can't just talk, we have to act. And I believe one of the ways we can act is by passing not just a jobs bill, which we should and must pass very quickly, but a jobs bill that is targeted on creating jobs in the fastest way possible. We do not need theories; we do not need some idea or some theory, untested; we do not need a bill that we hope will create jobs over many years. We need a bill that creates jobs this year, in the next 6 months to the next year, not the year after and 5 years later. We need a job creation bill that does that now.

I hope many of my colleagues will support legislation I have introduced, the Small Business Job Creation Tax Credit Act of 2010. I have introduced it today. I thank Senators Gillibrand, Levin, and Begich for cosponsoring this important legislation.

I mentioned the job loss in Pennsylvania, 560,000 people out of work through no fault of their own. That number across the country, since the

beginning of the recession--if you add up the jobs lost, it is over 7 million jobs since the beginning of the recession.

I just saw a story yesterday in my hometown paper in Scranton, the Times Tribune, a front-page story talking about the manufacturing job loss in just one region, not even a corner, just a region of Pennsylvania, 3 counties out of 67 counties. It was reported that in 2005--not that long ago--there were 35,150 manufacturing jobs in that region, over 35,000 jobs in 2005, and it is down below 30,000 now, 29,400 as of the latest number, meaning that a little more than 5,000 jobs have been lost in that period, in just a couple of years in northeastern Pennsylvania, and if you stretch it over 5 years, it is more than 7,500 manufacturing jobs. We know that number nationally is 2 million--2 million manufacturing jobs lost since the recession began in December 2007.

I mentioned the 10-percent unemployment rate, and I also mentioned that the Recovery Act is having an impact. We are happy about that, and we should mention and affirm that, but it is not moving fast enough. We have to do more.

This job creation tax credit--and many others have different versions of it, but the version I have been working on is actually very simple. We set the line of division between a large and small business at 100. So if you are under 100, you are considered a small business in this bill; over 100, a large business. If you are under 100 and you increase your payroll--when you compare one quarter of a particular year to the corresponding quarter from the year before, if you increase your payroll in that quarter, you get a tax credit of 20 percent. If you are above 100 employees and you add to your payroll in a particular quarter, you can get a 15-percent tax credit. It makes sense because it is targeted, it is focused on the problem, and it is going to be effective. We know from prior history--it is not theory; we have already tested this in recent American history--that it is a job creator. It creates jobs in big numbers fast. That is what we need.

We know the focus of this, of course, just by definition, becomes small business. We know that in America, most of the job creation in any period but especially in recent history has been the creation of jobs in small businesses. In Pennsylvania, small businesses with less than 100 employees--that fit into the definition of our bill--accounted for 91.6 percent of job growth between 2003 and 2006. Almost 92 percent of the job growth in Pennsylvania for that time period was small business.

This tax credit legislation would provide employers with a nonrefundable quarterly payroll tax credit based upon the increase in the employers' wages paid. It would be 1 year. We want to emphasize that we are focused on the short term, immediate direct benefit for the economy and to individual employers. The credit would only apply to an employee's wages up to the Social Security wage base of $106,800.

I mentioned a business of 100 or more getting a 15-percent credit and less than 100 getting a 20-percent tax credit. So, for example, if you had a firm that would be considered a small business and say they have a total payroll of $\1/2\ million--and we are talking about the second quarter of 2009--we pass the bill and we get the legislation enacted, a year later, you compare that $500,000 payroll to a quarter in 2010. Say they hired five employees. If you hired those five employees, all of whom are given an annual salary of $40,000, that means you have five employees making $10,000 in a particular quarter. The tax credit would apply to that increase in their payroll. So that particular company could get a tax credit to offset their quarterly taxes by some $10,000.

So we wanted to make this part of the jobs bill we are going to be considering very quickly. I believe the bill we are going to be completing work on and voting on will be a bill that will focus on strategy to create jobs very quickly and not be a big bill that a lot of things get attached to that make people feel good but may not create jobs.

I wanted to move to three charts very quickly. The first chart with regard to the small business job creation tax credit is a chart that depicts one of the themes here, that this particular strategy will be effective. This is from the Congressional Budget Office.

As of January of this year--for those who follow us, I use the acronym ``CBO,'' but for those who do not, the Congressional Budget Office. By definition, I think by acceptance of both parties in Washington, the CBO is a referee. When the Congressional Budget Office, CBO, says this is what this particular legislation will cost, it tends to be accepted as a good number. So when the CBO speaks about a particular policy provision, it speaks with authority and I think with a significant degree of credibility. Here is what CBO said:

Providing tax credits for increases in payrolls would

increase both output and employment.

That is what we want. We want legislation that will be, first, effective. The next part is very simple, just the word ``efficient.'' We want to make sure we can put dollars in the hands of employers very quickly to create jobs in the near term.

The same Congressional Budget Office report that I cited before for January of this year says that:

This particular policy would provide tax benefits linked to

payroll growth; fewer budget dollars would be used to cut

taxes for workers who would have been employed anyway.

So that is an indication that it can be efficient.

Finally, related to the question of efficiency is, how will this work in the real world? Often, we talk about and debate and enact things that sometimes do not work as well as we hope they would. We want this to work. We do not want to have an employer say: Well, I have a tax credit, but I need to hire an army of lawyers to interpret and implement it. We want this to be a provision that is easy for businesses to use.

So here is a basic form 941. Every employer has to fill this out quarterly. And there is a lot to go on this. I will not read every line, but as you can see, the form captures the number of employees who receive wages, the taxes and wages. The IRS would simply have to add in the ability to calculate the change in the payroll from one quarter of one tax year to one quarter of the next. So if the IRS can add a line or two, when this employer is filing out this form they are well familiar with--they have to fill it out every quarter--they can just add in how they have increased their payroll. They do that, and they will have the opportunity to benefit from the tax credit.

Finally, let me turn to one final theme, which is cost. I expect the cost of this tax credit to be $30 billion. The improvement to the economy from this tax credit will more than offset the overall cost. An increase in the gross domestic product will obviously increase company profits, which will increase the revenue of the U.S. Government. An increase in revenue will also reduce the deficit.

We have to invest in a strategy that will create jobs right now. We do not have time for a long ramp-up along the implementation of new legislation.

Finally, an increase in jobs will assist in taking people off unemployment, putting people to work. We want to have the safety net in place of unemployment insurance and/or food stamps and COBRA for insurance, but we also want to create opportunities so that more and more people do not have to worry about having to enroll in those programs and can actually be going to work every day because we answered the questions that were in those letters about when will the change come, when will we have the kind of economic security that workers and their families have a right to expect.

As we go through these next couple of days--I think we are down to days now--finishing up a provision or a set of provisions that will be a jobs bill, we have to be not just focused on getting the policy right, we have to be focused on getting this right for real people, people who are leading lives of struggle and anxiety and worry every day. Every morning they get up, they are worried about not having a job. Many of them are worried because they do not have access to health care or sometimes the protections we should have on health care-- another bit of unfinished major business we have. But, in particular, most Americans are faced with the prospect of darkness, of misery, and the pain of no job at all. For those eight individuals I met and for those who have been writing to me--and I am sure many people in both parties--we have to act, and we have to

act now. Talk is long past. We have exhausted the time for just talk and discussion. We have to act and pass a jobs bill. A central part of a jobs bill has to be a job creation tax credit to efficiently and effectively and in a very focused way create jobs in the near term.

I ask my colleagues to review and cosponsor the job creation tax credit legislation I have for small businesses.

Mr. President, I rise tonight following on the heels of three more bank closings in my State last Friday; not new banks, one of them over 60 years old, one of them over 100 years old. I want to talk for a few minutes tonight about the unintended consequences of well- intended regulation.

We are now going into the 26th month of the current recession. This will arguably be the longest recession post-World War II America has experienced. I can tell you from having gone through four of the recessions post-1960, this is by far the worst of anything that we experienced. We are at a point where we have to make some good, solid decisions, but we have to help our economy, help our businesses, and help our financial institutions.

Don't get me wrong at the outset. I am not talking about waiving or dispensing or looking the other way. I am not talking about loosie- goosie regulation which got us into the mess we are in: shoddy underwriting and poor credit. But what I am talking about are realistic approaches to difficult problems and looking to our past to understand the answers for our future.

I wish to talk about rule 114, which is called mark to market. Mark to market is where an appraisal of an asset held by a bank is appraised at what it would sell for today, and in many cases because of a difficult real estate market, in both commercial and residential, those values are dramatically depressed, in most cases below the loan that is against them. So the asset deteriorates, the asset side of the balance sheet of the bank deteriorates, and you have difficult problems.

In the late 1980s and early 1990s we had a similar period of time. We had something called the Resolution Trust Corporation, the RTC. It was kind of a bad bank that took all the assets of the failed savings and loans around the United States. We waived mark to market for 3 years. We had a 3-year moratorium so the banking institutions and their regulators could deal with loans in a practical, pragmatic way rather than Draconian, rigid application of mark to market.

Second, we have to consider doing something on the appraisal rules that have been passed down. I have talked to our Secretary of HUD on this matter, and I intend to talk to him more about it. I was in Clayton County, GA, south of Atlanta, just 2 weeks ago, a county that has been hit hard by the housing recession, a county where values are 42 percent below what they were in 2006. That is a significant decline.

I talked to one realtor after another and one lender after another who told me the interesting thing that has happened. With the new appraisal regulations, the appraisals on these houses when they sell at a short sale or foreclosure are coming in at exceedingly low values. But when the people have to get their homeowners insurance to insure the house, they are having to insure the house for more than they paid for it. Why? Because you can buy houses in Georgia today or around the country for less than what it costs to replace them.

When I entered the business in the 1960s, cost to replace was the principal way real estate was evaluated. Later, comparable sales took over cost to replace. I think it is time we look at cost to replace becoming the primary mechanism for establishing lending and insurance purposes.

The short sale situation is another problem. It has taken banks in some cases 10 to 12 months to give somebody an answer on a short sale. A short sale, for those listening, is when you have a house and you are in default, you can't pay your loan but it is not in foreclosure yet, you find a buyer who can pay 80 cents on the dollar.

Say you owe $100,000, and they can pay $80,000. You go to your bank and say: Will you take $80,000 and forgive the $20,000 and let me sell this property rather than foreclose it? Banks are reluctant to make decisions and most of the time, therefore, they didn't. Those houses they could have sold on a short sale go into foreclosure. When they go into foreclosure, more often than not they are vandalized. Their value declines 1, 2, 3 percent a month and the house comes out at an even lower value.

To show you the value of some well-intended regulation, I want to commend the Treasury because last week the Treasury issued a ruling to banks that received TARP money that they must respond within 10 days on any short sale offer on a mortgage that bank holds. We are going to see a remarkable change in Denver, in Atlanta, in Houston, and a lot of other places. We are going to see some sales that have not been taking place start to take place. We are going to see some inventory reabsorbed. I commend the Treasury on their good approach to short sales.

I wish to talk a minute about loss-share. The FDIC has come up with a loss-share proposal for the banks that take the troubled assets of banks that have failed. FDIC says: If you will take these assets, we will guarantee the most you can lose is 20 percent on the value. We will cover the other 80. But to make sure we do not get in worse trouble, you cannot extend credit beyond 10 percent of the debt owed to the borrower.

The problem with that is a lot of these assets are, in fact, performing, but they have not been completed yet. To complete the asset so it begins to pay back, sometimes you have to extend credit beyond 10 or 15 or 20 percent. To have an absolute rule that you cannot is causing loans to go bad or to go unfunded that otherwise should have been funded.

In 1974, we went through a housing recession as deep and as problematic as the one today. Foreclosures were every bit as rampant-- maybe not as big in numbers but as rampant and as difficult. As is beginning to happen now, the commercial loans began to fail in 1975.

An interesting thing happened around the country. Commercial lenders and the regulators recognized very quickly if they foreclosed on commercial loans like they had foreclosed on residential loans, the banking system would collapse; the asset side of almost all banks would collapse. So what they decided to do was encourage banks to work out these assets by going to the developer who was in trouble, who owed the money, and say: I'll tell you what. If you deed this property back to us in lieu of foreclosure and then let us hire you on an earned-out process so we can develop our way out of this debt rather than foreclose ourselves into a loss--and more often than not, probably three out of every four transactions, it happened.

The house I live in today I built on a lot I bought in a subdivision that had been taken back by the C&S National Bank. They had hired the developer to do a workout. I bought it at a good price and later did most of the sales in the development. It became a great development, and the bank eventually was made whole. The bank would have lost lots of money if they had to take that thing and foreclose on it and had not worked it out.

I encourage our regulators to give the great American ingenuity and entrepreneurship the chance to work. Sure, some of these people are in trouble, but there are avenues outside of that trouble.

There has been a lot of talk about taxing banks that receive TARP money. I want to address that for a second because, the best I can tell, every bank that has received TARP money is paying it back at a 5- percent dividend. We are making a profit. The only people who have not paid it back are GM and Chrysler, who probably never will. But if we put that much more of a burden on top of the people who are paying us, and paying a premium when we have a banking system under stress and duress, it is only making it more and more impossible for them to stay in business, for them to be vibrant and come back to bring credit to our communities.

On that point, with mark to market enforced at a Draconian rate, with appraisal rules driving down the values of properties that are financed by the banks, with the regulatory environment being so stiff to recognize losses and deteriorate the balance sheet, there is not any credit for small business to speak of.

We are making a recession that is deep, that is broad, and that is pervasive worse because of the unintended consequences of well-intended regulation.

Last, I have enjoyed working with Senator Kaufman so much over this issue of short sales that I just want to put in one more plug for what we plugged in this entire session and encourage the SEC. In the collapse that took place in the markets, one of the things that went out of hand was the short selling of financial stocks to terrible lows. That short selling took place in large measure because there was no uptick rule, which was the old rule that was good for years on the stock market that once you had a declining value in the stock, if it ticked up on a trade, you stopped the short selling from continuing to take place.

We need the SEC to revisit it. They took 30 days a year and a half ago and suspended it and it helped, but we don't need those speculating in the marketplace to take unfair advantage of the values of equities that are owned by Americans all over this country for the sake of making a buck on a short sale.

My remarks are very simple. There are unintended consequences to regulation, and we need to start looking at the cause and effect. Where we can find opportunities for banks to work out, for mark to market to be suspended, for appraisals to be based on cost to replace rather than comparable sales, we will begin to give the flexibility to the banking system to begin to recover, to stop the losses, stop the failures and, over time, recover our economy.

I yield the remainder of my time.

Mr. President, I ask unanimous consent to speak as in morning business.

I yield the floor and suggest the absence of a quorum.

I ask unanimous consent that the order for the quorum call be rescinded.