Snowe Advocates Plan for Economic Recovery
December 11, 2008
Washington, D.C. - In a letter to President-elect Obama yesterday, U.S. Senator Olympia J. Snowe (R-Maine) detailed her priorities for a broad-based economic recovery package that will help boost economic growth and avert a deeper and more intractable economic recession. Senator Snowe recommended the provisions to be included in any economic stimulus package to be considered by the next Administration and the 111th Congress in January.
"With jobless claims reaching a 26-year high and 10.3 million people out of work, we must swiftly enact an economic recovery package," Senator Snowe said. "These unprecedented challenges call for meaningful collaboration at both ends of Pennsylvania Avenue to create viable solutions that will reduce home foreclosures, turn the tide of unemployment, and provide relief for all Americans."
The text of the letter is below:
December 10, 2008
The Honorable Barack Obama
Dear President-elect Obama,
Congratulations again on your historic victory! I appreciate that you took time out of your busy schedule to call me on Monday. I share your sentiment that now is a critical time in our nation’s history, and we must work together closely, across party lines, for the good of the country. In my 35 years in public service, I have known of no other way than to put partisanship behind for the benefit of our great nation.
In following up on our conversation, I write today to share with you a number of priorities that I have championed that could help to steer our economy towards economic recovery. This national emergency demands swift and efficient action to avert a deeper and more intractable economic recession. With more than 10.3 million people currently out of work, Congress must swiftly enact economic recovery legislation that will create jobs, assist the unemployed, and reduce the devastating rate of home foreclosures. To that end, I humbly request that you include at least the following priorities in any economic stimulus package:
Unemployment Insurance Extension. As you are well aware, the Department of Labor reported early this month that the United States economy has shed an alarming 533,000 jobs last month; the largest drop since 1974. This raised the national unemployment rate to 6.7 percent, the worst level since 1993. Incredibly, we have lost 1.2 million jobs since last September. As an economic stimulus package is being developed, it is vital that the package include continued unemployment benefits of at least 13 weeks.
Unemployment Insurance Income Tax Suspension. The economic stimulus package should also temporarily suspend the taxation of unemployment insurance for 2008 and 2009. I have introduced legislation [S 3718] this week that would take this action, which would stimulate the economy by making unemployed workers’ benefits stretch farther. The Congressional Budget Office (CBO) has estimated that the effect of the current tax falls squarely on middle-income families with incomes between $50,000 and $100,000, who paid $1.2 billion in income taxes on UI payments in 2005. You have publicly praised this targeted tax reform, calling it "a way of giving more relief to families," and I could not agree with you more.
Food Stamps: The use of Food Stamps is nearing an all-time high, with 31.5 million people, one in ten Americans, participating in the program as of September. This is a 17 percent increase over last year. The record is 10.5 percent of the population – which was set in 1994. In Maine, which is one of the most effective states in the nation in reaching eligible families, the number of people receiving food stamps increased from 171,356 people in November 2007 to 189,658 in November 2008 – a 10.6 percent increase. An increase of at least $5.2 billion in funding for Food Stamps – as well as additional assistance for local emergency food organizations and food banks – must be part of any economic stimulus package.
Federal Medical Assistance Percentages (FMAP): Medicaid is the second largest component of state budgets and during economic downturns, the need for these critical services is greater. According to the Kaiser Family Foundation, a one percentage point rise in the national unemployment rate would increase Medicaid and SCHIP enrollment by 1 million (600,000 children and 400,000 non-elderly adults) and cause the number of uninsured to grow by 1.1 million. Given these alarming figures, it is abundantly clear that we must increase FMAP in order to preserve access to care for those already enrolled and reach out to those newly in need.
Reduce Home Foreclosures: The mortgage foreclosure crisis is only going to worsen and must be addressed. According to TransUnion LLC, the proportion of consumers with mortgages that are 60 days or more past due will hit 7.17 percent in the fourth quarter of 2009. That compares with an expected delinquency rate of 4.67 percent at the end of 2008. I believe that we should adopt Federal Deposit Insurance Corporation (FDIC) Chair Sheila Bair’s proposal to use $24.4 billion in TARP funds to help prevent 1.5 million foreclosures in the next year by offering financial incentives to companies that agree to reduce monthly payments on mortgage loans. In exchange, mortgage companies would receive a basic guarantee: If the borrower falls behind on the new monthly payments and the company ends up losing money on the loan, the federal government will cover half the loss.
Required Minimum Distributions from IRAs and 401(k)s: The economic stimulus package must also help retirees who are forced under current law to withdraw money from certain retirement accounts, which have suffered tremendous losses in recent months. Indeed, according to the American Association of Retired Persons (AARP), losses in retirement accounts between September 30, 2007, and October 16 of this year could total $2.3 trillion. This is why I introduced this week the Retirement Account Distribution Improvement Act [S 3719], which would delay the mandatory withdrawal of savings through 2010 and provide retirement accounts, such as IRAs and 401(k)s, an opportunity to recoup financial losses suffered in the last year.
Small Business Credit Crunch. As Ranking Member of the Senate Committee on Small Business and Entrepreneurship, I request that you consider including in the economic stimulus package provisions that would help small businesses weather these challenging times. First and foremost, the SBA must address the small business credit crunch. Banks are tightening lending standards without a similar increase in the volume of SBA-guaranteed loans to small businesses, creating a domino effect on the job-creation ability of small businesses. According to the Federal Reserve, in the last quarter, 75 percent of banks reported that they have tightened their lending standards for small firms, and over the past year, lending in the SBA’s flagship 7(a) program has dropped by 55 percent.
This is why I recently introduced the 10 Steps for a Main Street Economic Recovery Act [S 3705], legislation that would help small firms get the necessary capital to finance business growth by reducing lending fees by over $500 million. It would also provide the Treasury Department with the authority to thaw frozen secondary markets for loans made through both the SBA 7(a) and 504 programs, so that private banks will start lending to small businesses again. My bill also would address the lack of liquidity in the 504 loan program by providing a new short-term government guarantee on the first loans in a 504 loan package to encourage investors to buy these securities.
Energy Efficiency Investments: Homeowners have been hit hard by high energy bills and our country remains extremely susceptible to the price of oil. I strongly believe that the pathway to energy security will require bold investments in energy infrastructure with a long-term tax incentive for renewable energy. In the short-term, investments in the efficiency of our existing homes will create jobs, reduce carbon emissions, and reduce energy bills. I believe that the stimulus package should include $1.5 billion in funding for the Weatherization Assistance Program, which will assist America’s most vulnerable improve their housing stock. Furthermore, I believe that the stimulus package should include a major rebate program for middle class homeowners to hire an energy auditor and invest in energy improvements to their homes. This will reduce our aggregate demand for energy and spur a new industry focused on improving America’s energy security.
Homeowners have been hit hard by high energy bills and our country remains extremely susceptible to the price of oil. I strongly believe that the pathway to energy security will require bold investments in energy infrastructure with a long-term tax incentive for renewable energy. In the short-term, investments in the efficiency of our existing homes will create jobs, reduce carbon emissions, and reduce energy bills. I believe that the stimulus package should include $1.5 billion in funding for the Weatherization Assistance Program, which will assist America’s most vulnerable improve their housing stock. Furthermore, I believe that the stimulus package should include a major rebate program for middle class homeowners to hire an energy auditor and invest in energy improvements to their homes. This will reduce our aggregate demand for energy and spur a new industry focused on improving America’s energy security.
Small Business Expensing: With small businesses creating nearly three quarters of net new jobs each year, it is imperative that we ensure that small businesses as the true engine of our economy are equipped to grow and expand their business, and in particular during these very difficult times. This is why I have championed small business expensing that allows small businesses to expense, rather than depreciate, investments in equipment to grow their business and create jobs. For 2008, the limit was raised to $250,000 as part of an economic stimulus package. In 2009 and 2010, the amount will return just over $100,000, and then $25,000 in 2011 absent Congressional action. I was most pleased to see that you called to extend the expensing amount at $250,000 through 2009, and further urge you to consider my proposal to make the $250,000 level permanent to provide small businesses with the ability to plan for expansion and job growth.
With small businesses creating nearly three quarters of net new jobs each year, it is imperative that we ensure that small businesses as the true engine of our economy are equipped to grow and expand their business, and in particular during these very difficult times. This is why I have championed small business expensing that allows small businesses to expense, rather than depreciate, investments in equipment to grow their business and create jobs. For 2008, the limit was raised to $250,000 as part of an economic stimulus package. In 2009 and 2010, the amount will return just over $100,000, and then $25,000 in 2011 absent Congressional action. I was most pleased to see that you called to extend the expensing amount at $250,000 through 2009, and further urge you to consider my proposal to make the $250,000 level permanent to provide small businesses with the ability to plan for expansion and job growth.
New Markets Tax Credits: As discussed above, our country is facing an economic downturn that has resulted in a credit crisis in communities all across the nation. A lack of available credit to promote development and job creation, however, is nothing new for some of our most challenged low-income and rural communities. As a result, I am calling for an additional $1.5 billion of New Markets Tax Credit (NMTC) allocation, retroactive for 2008, that will provide a prompt infusion of capital in low-income and rural communities. According to the Treasury Department, through the NM TC, some $12 billion of private-sector capital has been invested in distressed urban and rural communities. Even in these uncertain times, NMTC continues to leverage private sector investments with some $250 million in new investments being raised through the credit in the last 60 days. Increasing allocations for 2008, will allow Treasury to make available credits to qualified applications on hand, thereby providing immediate, additional stimulus.
As discussed above, our country is facing an economic downturn that has resulted in a credit crisis in communities all across the nation. A lack of available credit to promote development and job creation, however, is nothing new for some of our most challenged low-income and rural communities. As a result, I am calling for an additional $1.5 billion of New Markets Tax Credit (NMTC) allocation, retroactive for 2008, that will provide a prompt infusion of capital in low-income and rural communities. According to the Treasury Department, through the NM TC, some $12 billion of private-sector capital has been invested in distressed urban and rural communities. Even in these uncertain times, NMTC continues to leverage private sector investments with some $250 million in new investments being raised through the credit in the last 60 days. Increasing allocations for 2008, will allow Treasury to make available credits to qualified applications on hand, thereby providing immediate, additional stimulus.
Health Information Technology Investment: As health care providers struggle to adopt modern information technology to improve care, reduce costs, and save lives, the leadership of the federal government is crucial to promote adoption of Health IT. As federal beneficiaries will realize improved health care, and costs can be reduced through application of such technology, funding to promote health IT is necessary to achieve substantive health reform. Funding of both grants and tax expensing provisions to promote adoption by health care providers – similar to that in legislation offered by Senator Stabenow and myself – would help substantially advance quality, cost-effective health care delivery.
Thank you again for soliciting my suggestions and for considering them for inclusion in economic stimulus legislation. I look forward to working with you in the 111th Congress.
Sincerely,
OLYMPIA J. SNOWE
United States Senator
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