Credits Mangano, Levy for Using Stimulus Money ‘the Right Way’
On Monday, June 28, Senator Charles Schumer came to the Long Island Association Small Business Council Executive Breakfast at Crest Hollow Country Club in Woodbury to discuss the economy- both on a national level, and to address issues specific to Long Island.
While the Senator expressed concern about the lack of jobs available in the country, calling the May jobs number of 41,000 private sector jobs “the worst number in a long time,” he was optimistic about the future in light of the government’s recent efforts, which he dubbed “targeted measures,” or smart, inexpensive strategies that will produce growth.
“We are at a place where we’re not at risk of falling into a depression, and we’re probably not at risk of a contracting economy. But the problem is that we yet haven’t achieved the takeoff that leads to growth – real growth,” Schumer said. The Senator recapped the government’s efforts to resuscitate the economy, starting with a statement in 2008 by Ben Bernanke, Chairman of the Federal Reserve Board, who informed the Senate on the eve of the financial collapse that the financial system was about to freeze – leading to another Great Depression in a month.
“So we had to act, and we did: The so-called ‘Bail-out’ bill was passed. If it had been called a rescue, I think it would have a different reputation. But it was definitely needed, and it was bi-partisan, and we pumped money quickly into the system. It’s going to be regarded as a great success in history, because it avoided the Great Depression, and furthermore, the federal government will be paid back every nickel of those dollars – about half of it has been paid back already,” Schumer said.
He also credited the stimulus bill of January 2009, though a flawed bill in his view, with keeping the country out of a deflationary spiral, which, he said, no one – including economists- knows how to get out of once it starts.
However, Schumer was clear that the time for such strategies has passed. “We’re not at the place, praise God, where Greece is, or where any of the European countries are- we’re in better shape. But we’re getting to the point where a lot of spending will lead to other problems every bit as serious as the problems we faced earlier,” the Senator said.
He went on to say, “We really need to have the economy create two, three hundred thousand jobs a month. And then, after four or five months of that, there will be a takeoff, and the economy will just continue to prosper on its own. So the question is, how do we get there?”
The Senator specifically pointed out two strategies that he believes will lead to significant economic growth at little cost: the “Hire Now Tax Cut,” a bipartisan bill presented by Schumer and Republican Senator Orrin Hatch, which has already been signed into law by President Obama, and pending legislation that would make more small business lending possible.
As a part of the “Hire Now Tax Cut,” businesses will avoid paying the employer’s share of Social Security taxes on a new worker (provided the worker has been unemployed for at least 60 days) for the duration of 2010. The more a business pays a worker (up to the maximum Social Security wage of $106,800), and the longer a business has a worker on its payroll, the greater the tax benefit – so there is an incentive to hire people sooner, and pay them more, he explained. The benefits go immediately into a business’ cash flow – there is no waiting to receive a tax credit.
“It’s not a panacea; if you’re not getting increased orders, you’re not going to hire people. But if you’re beginning to get increased orders, this may push you to hire somebody that you wouldn’t otherwise,” Schumer clarified.
Schumer said he expects three million people to be hired as a result of the payroll tax holiday, contrasting the” relatively modest” $15 billion cost of the program with the $800 billion stimulus bill.
In terms of small business lending, Schumer said that the Small Business Association has great programs, but the wait before getting a loan can be too much for small businesses. To make it easier and faster for businesses to get loans, he said that he wants to pump about $30 billion of the returned TARP (Troubled Asset Relief Program) money into direct small business lending, which, he said, would not increase the deficit. While Schumer did not provide more detail, he did say that his office will have more information shortly.
“Please look for it; it’s going to be much better than other programs in the past,” said Schumer with enthusiasm.
After addressing the economy on the national level, Schumer turned his attention to Long Island specifically, citing high property taxes as the biggest problem. He commented that he has been fairly conservative on State issues out of practicality, because he wants to bring in businesses and not drive them away.
“We can’t have the taxes keep going up; we just can’t, in terms of business climate. At the Federal level it doesn’t matter as much, but when New York State and our localities have high taxes, it’s a disincentive for businesses to stay here- same with all the rules and regulations they’ve put in,” he said.
He was critical of the state government, explaining that he wrote a provision in the law so that stimulus money that was supposed to go to the state would go directly to the localities: “Because once it goes to Albany, you’ll never see it again. They’ll mess it up,” said Schumer, to much laughter from the crowd at Crest Hollow.
He also credited County Executives Ed Mangano and Steve Levy with using stimulus money the right way, as opposed to the State. “We gave them (the State) the money, and they still raised taxes. Which was appalling. Appalling.”
On a positive note, Schumer expressed great optimism for the future of Long Island due to the current shift in the economy towards highly skilled labor; he cited, as symptomatic of the trend, the return of GE manufacturing to New York, which has led to several thousand hires in Schenectady and Syracuse- something which won’t affect most Long Islanders directly, but is a sign of good things to come.
Closer to home, he pointed out that Canon has recently chosen Long Island for their North American headquarters due to the quality of the available labor force; the Senator also mentioned that he helped Canon cut through red tape to get their headquarters built sooner. The need for high-end manufacturing is beneficial, he said, for areas where residents traditionally invest greatly in education, such as Nassau County. “You can’t do this kind of manufacturing in developing or undeveloped countries,” said Schumer.
“If we can just keep taxes down and keep the business climate positive, we will attract business after business after business as the economy starts to expand, because actually, a productive worker is more important than just about anything else to new high-end businesses,” he stated.
One major economic boon is the expansion of the defense business on Long Island, with major contractors such as Northrop Grumman in Bethpage receiving new contracts, explained Schumer. Recently, Northrop Grumman announced a $517 million agreement to develop up to three Long Endurance Multi-Intelligence Vehicle (LEMV) systems for the U.S. Army.
The Senator also noted that the presence of the new high-energy physics machines, the RHIC (Relativistic Heavy Ion Collider) and Light Source Two will make Brookhaven National Labs the primary destination for high-energy physics research in the world. Thousands of scientists will visit Long Island for research annually, he said, meaning they will pump money into the local economy, but more importantly, spin off private sector jobs.
Schumer stated, “Why do you think there’s a Silicon Valley? It’s because Berkeley and Stanford did this high-end research and spun it off and created businesses.” According to Schumer, there is currently a vacuum created by California cutting back on university funding as the state focuses on its own economic troubles, meaning that highly-regarded research universities like SUNY Stony Brook are well-positioned to fill the gap.
Finally, Schumer outlined his vision for the Democratic party:
“I believe the agenda for America has to be an agenda for economic growth. And frankly- and this is a little partisan – I would like my party to be the champion of that. We will be different than the Republicans in that we’ll want a slightly more active government to help us champion economic growth…but, we have to not become a country and party of redistribution and fighting among ourselves, and rather to get the pie to grow in the 21st century,” Schumer stated.
“So stay tuned; for the next six months, that’s what I’m going to be thinking on and working on with some of my colleagues, and I will come back – if you’d have me – and give you a little talk in January or February of next year,” concluded the Senator.
Before Schumer’s speech, the following individuals received awards from the Small Business Council: Dr. Samuel Stanley, Stony Brook University (Education Advocate), Seymour Liebman, Canon U.S.A. (Small Business Advocate), Lillian Dent, LL Dent Restaurant (Women-Owned Business Advocate), Patrick J. MacKrell, New York Business Development Corp. (Financial Services Advocate), Paramjit Singh, Elle Belle, LLC (Minority Business Advocate), and Lea Tyrrell, News 12 Long Island (Media Advocate.) The event was sponsored by LIA Health Alliance, Roslyn Savings Bank, and the law offices of Kyle Norton, PC.
