MODERATOR: The following is an unrehearsed interview with Iowa Senator Chuck Grassley speaking to you live from Washington. Participating in today's public affairs program are Matt Monahan with KDST Radio in Dyersville and Steve Woodhouse with the Knoxville Journal Express in Knoxville.
The first question will be from Matt Monahan.
QUESTION: Good morning, Senator. Thanks for your time.
GRASSLEY: Good morning.
QUESTION: The first question I have, if you could just give us an update on the status of the stimulus package and also what impact that will have on Iowa.
GRASSLEY: Yes. Well, first of all, I was a conferee, but since it was a Democratic-driven bill, Democrat leaders of two committees in the House and two in the Senate met and really compromised between the House and Senate. So Senator Cochran, ranking member of the Appropriations Committee and Chuck Grassley as a senior member of the Finance Committee. And then on the House side, our counterparts over there, the four of us really weren't involved in anything except the last meeting of the conference in which there was no business allowed, no amendments or anything.
So it was kind of take it or leave it. So I won't be signing the conference report. But to get to a quick answer to your question, I expect it's going to pass the House today, maybe late today. It will be received in the Senate. If it's received in the Senate soon enough, there will be some debate today. But sometime tomorrow, it will pass.
I don't think we're going to have the 30 hours of debate that would be permitted because, probably, all that's ever been said in favor and against it has been said. And we might as well let it come to vote. It's not improved enough that I'm going to vote for it on final passage even though I know that we need some stimulus.
But the reason I'm voting against it is it isn't all stimulus. There's a lot in it that's just spending to goes well beyond the next two years. So in other words, a stimulus needs to be jumpstarting the economy this year and next year and not have programs -- money in the same bill that will be spent, in some instances, between now and 2016.
So that's the part I don't like about it. I like stimulus. I don't like the spending, long-term obligations. So that's why I'm voting against it. And I think that -- I always hesitate to say when I'll be coming back to Iowa, but I think I should get back no later than midnight on Friday. So I'll have -- start my 24-county tour next week for town meetings because we're not in session next week because it's the president's holiday week. So we're taking that off. We traditionally take that off so we can be in our constituencies.
We'll go to Steve now.
QUESTION: OK. Thank you, Senator, for your time.
I was just wondering, with all -- with the stimulus package and all the increased federal money in the banking still, can we still consider ourselves a capitalist nation?
GRASSLEY: Only if we end up actually controlling the banks that we're injecting money into. Right now, how we tried to avoid it -- but I'm not trying to blow blue smoke at you.
So if you feel this has gone too far and you want to say we're nationalizing the banks, you know, tell me. But we've been cautious not to control banks. We're injecting a lot of money into it. We're taking preferred stock. Preferred stock is not voting stock.
We're getting 5 percent dividend. If they don't buy back the preferred stock within two years, they're going to have to start paying us 9 percent dividends. So we're a preferred stockholder, but a non-voting stockholder. And right now, that's there we are.
Now, a step towards what you're concerned about would be, possibly, the next injection of money we would take warrants to buy common stock if we wanted to. But the warrants still don't give any voting authority like common stock does. So we're still not in control of the banks.
On the other hand, to some extent, we're controlling indirectly the operation of banks. When you say, well, if you're going to get this money, you can't pay your bank president more than $500,000 a year. You can't have golden parachutes. You can't have bonuses. And if you have stock options, they have to be -- they have to be exercised at a certain time not at the discretion of the CEO or other ones.
So that's where we are. And if that doesn't answer your question, then shoot me another one.
QUESTION: It answers it fairly well. I just -- increased stimulus and increased spending, it seems like the government is grabbing more and more control.
GRASSLEY: OK. Let me tell you an answer yes to your question in agreement with you from this standpoint.
QUESTION: Uh-huh?
GRASSLEY: Normally, the federal government has taken 18 to 20 percent of gross national product through the federal treasury. It's been that way, maybe, for a 40-year average. At least the taxes that come in have been about 18.3.
The extent to which that gets bigger than 18 or 19 percent, and it will over the next few years because we're going to have a deficit that is going to be 10.4 percent of gross national product where the 40-year average is about 2.3 percent of gross national product.
And so you can see many times -- many time Europe where it's under 3 percent of gross national product for most nations -- the annual deficit is. To that extent, we can quantify that you're right.
But now where that can be backed off fairly easy is we're, in a sense, spending money which we hope is only investing money in this preferred stock. And when we sell that preferred stock back, that's coming back in and it would reduce our involvement in the economy if that happens. And it did happen at least once before in the history of our country in the later '80s or '90s when we had to bailout savings and loans. And we got back $0.80 on the dollar when we sold that -- those instruments or though institutions into the private sector.
OK. Back to Matt.
QUESTION: OK. Senator, switching gears here a little bit, as far as relief funding for Iowa. FEMA, yesterday, the director of homeland security was here and they provided a nearly $6 million loan for five cities in Iowa to help out with the flooding recovery. Do you see more federal money on its way to Iowa fairly soon?
GRASSLEY: Well, X percentage -- I can't give you an exact percentage, but it ought to be in proportion to the damage done in Iowa versus 18 other states that got FEMA money appropriated last year.
X percentage of $24 billion. And that $24 billion hasn't been spent yet. It was appropriated last October. And that's probably where these few million you're talking about is coming from. But we're going to get billions out of the $24 billion, but I can't tell you exactly how many billion. And it's not all coming through FEMA. Some it's coming through Commerce, U.S. Department of Agriculture, and Housing and Urban Development and Small Business and maybe even a couple other departments.
But anyway, that money is there. Now, when that money runs out, we're going to do like we do in a lot of other disasters. When you first have the disaster, you don't know exactly what the need is. So then we do the best we can early on and, in this case, it was $24 billion. In the case of Katrina, it was $60 billion. But five years later, we're still appropriating some money for Katrina, probably, on a scaled down basis because the sooner you get out there, the more you know the exact dollar you need.
And it'll be the same way for eastern Iowa. And then let me add to that that, basically, when you have to replenish those funds, it's kind of not an argumentative situation. It's kind of bi-consensus that since the federal government is your last resort, you just put out what's needed; not one penny more but not one penny less.
Back to Steve.
QUESTION: OK. And with the -- with the growing debt that the nation has, how is that being addressed? Or is that being addressed at all?
GRASSLEY: Well, Steve, it's being addressed this way. When you spend more than you bring in taxes, you increase the debt. And when you bring in more that you spend, you automatically decrease the debt.
And either way, it's automatic. Congress doesn't make a decision today that we're going to borrow a billion dollars or $2 billion. We do increase the in that debt from time to time, but that allows the secretary of treasury to do pay down or borrow more.
The most recent time we've paid down on the national debt was '97 through the year 2000. We had a Republican Congress. We cut back on spending quite a bit. And we were able to pay down $580 billion on the national debt.
And then we had 9/11 and the beginning of the Bush administration. And we also inherited a downturn in the economy from Clinton. And we started borrowing money again. And we've been borrowing money since.
And right now, I told you, we could be at 10.4 of a percent of gross national product compared to a 40-year average of 2.3 percent with a deficit compared to Europe's less than 3 percent. So we're going to be borrowing a heck of a lot more money.
Now, some of that money is being borrowed -- well, in the case of stimulus, it would be for expenditure. But in the case of the -- what we call the bailout money, that would be investment in a sense maybe with a positive return, maybe not. At some time, we're going to get that money back.
MODERATOR: Thank you, Matt and Steve, for participating in today's public affairs program. This has been Senator Chuck Grassley reporting to the people of Iowa.