Get Ready for Stimulus Package, the Sequel?

This is a rush transcript from "On the Record," July 8, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Is a second stimulus package coming? Some Democrats, including House majority leader Steny Hoyer and Senate Banking Committee chairman Chris Dodd, are not ruling out the idea.

What are they saying on the other side of the aisle? Joining us live is Senator Mitch McConnell, Senate minority leader. Nice to see you, Senator.

MINORITY LEADER SEN. MITCH MCCONNELL, R-KY: Good to be back, Greta.

VAN SUSTEREN: Senator, first of all, before we get to this possibility of stimulus 2.0, second stimulus package, how much are we spending on interest on the first one? Do you have any idea?

MCCONNELL: About $100 million a day on interest on the first stimulus.

VAN SUSTEREN: One hundred million...

MCCONNELL: A day.

VAN SUSTEREN: ... each day that passes we're spending to support that original one.

MCCONNELL: Yes, and figures just out a few minutes ago, this fiscal year, we're spending -- we have an $800 billion greater deficit at the end of the third quarter of the fiscal year that we're currently in that ends September 30th than last year. We're spending like drunken sailors.

VAN SUSTEREN: All right, so 2.0, people are talking about. It's not a done deal, necessarily. I mean, there are some Democrats who are talking about it. They are not wedded to it, right? This is not a certainty, it's just a beginning point, a discussion about it.

MCCONNELL: Well, I sure hope not. I mean, we had a great saying down home in Kentucky that there's no education in the second kick of a mule. I mean, we passed the first stimulus on the representation the president made that it would keep unemployment from going above 8 percent. Well, we now know it's going to go above 10 percent. And we just discussed how much interest we're paying every day on this ill-begotten venture. To suggest that we want to do it again is truly astonishing.

VAN SUSTEREN: Is there any sign from that $875 billion stimulus package that was passed in February -- are there any positive indicators? I realize that unemployment is sort of a lagging indicator, but are there any signs that it's working?

MCCONNELL: Not yet. I mean, what's been done with most of the money, according to GAO, is states have used it to plug holes in their budgets. In other words, their revenues are down, too, because of the economic slowdown, so they just used our borrowed money to prevent them from having to make as many tough decisions as they would otherwise have to make. And of course, we're sending the bill to our children and our grandchildren.

VAN SUSTEREN: And which, of course, the whole point of the stimulus bill, if it were to work, if it worked, is that it creates jobs. It generates income. It's not to pay off what you owe. It's not to pay off back expenses.

MCCONNELL: Well, if you're going to do a stimulus, it ought to be timely, temporary and targeted. It's obviously not targeted. It's not temporary. And it's proving not to be timely. I think by any objective standard, the first stimulus was a failure. And now they're talking about doing another one?

VAN SUSTEREN: Is there -- when you talk to the senators on the other side of the aisle, when you're visiting or walking down the hall and you run into them, do you have some sort of discussion about this? Are they defending stimulus 1? They say, you know, Senator McConnell -- or I guess they call you Mitch or something, but do they say to you, you know, You're wrong, this is how it's working? Do they say that to you?

MCCONNELL: Oh, they're trying to defend it, but you saw the reaction of some of the Democrats, including my counterpart, Harry Reid, indicating a lack of enthusiasm for a second stimulus.

VAN SUSTEREN: If -- so -- so what's going to happen? Is there any -- is there any likelihood we're going to get a second stimulus?

MCCONNELL: Well, I sure hope not. The first...

VAN SUSTEREN: But is there any -- I mean, who -- are there any sort of real cheering this on?

MCCONNELL: Well, I think they're clearly floating a trial balloon. They're thinking about it. And you've got people like Larry Summers down at the White House, you know, throwing out the possibility. So they wanted to send up a trial balloon and see if it flew. I think, based on the evidence of the first one so far, I can't imagine they can pull this off.

VAN SUSTEREN: What would you do?

MCCONNELL: Look, what we would have done back in the beginning, at about half the cost, was to go straight at the housing problem and to put money directly back in the pockets of middle and lower-income people through tax relief, immediate tax relief. It would have shown up in their paychecks right then.

VAN SUSTEREN: So you mean withholding, get rid of withholding.

MCCONNELL: Yes. Not entirely, but I mean, we would have lowered the rates immediately, which would have been reflected in a lower withholding immediately, and gone straight at the housing problem, which is what started this whole economic problem.

VAN SUSTEREN: Why not -- why wouldn't you have just gotten rid of it altogether? Because, I mean, there's a -- as a threshold anyway? I mean, that would have been a really fast thrust of money.

MCCONNELL: Well, I mean, it depends on how much money you want to put back in. But you know, giving the -- putting the government in charge of the spending guarantees that it doesn't do anything quickly.

VAN SUSTEREN: All right, so now we're in this position -- I mean, I realize what you would have done in the beginning. We now have this $875 billion stimulus bill. What would you do now, if you were in the majority?

MCCONNELL: Look, I think the economy would be doing a lot better if the government were now running -- not running banks, car companies, insurance companies, student loans. And now, on top of all of this, they want to take over the American health care system, 16 percent of our economy.

VAN SUSTEREN: But we're already there with banks and automobiles. We're not there with health care. So what would you do right now?

MCCONNELL: Well, I would not be doing these things.

VAN SUSTEREN: OK, so but how do you reverse it? I mean, like, we're in this -- we're here!

MCCONNELL: Well...

VAN SUSTEREN: We're here, so we got to deal with it.

MCCONNELL: The way to reverse it is to put more money directly in people's pockets. We're a consumer-driven economy. Two thirds of our economy typically is consumer spending. Rather than, you know, borrowing all this money and having the government involved in so many areas of our economy, it would have been a lot simpler, a lot quicker and a lot more effective to put money straight back into the pockets of the American taxpayers.

VAN SUSTEREN: So we could still do that now, between stimulus 1 and the possibility of stimulus 2. That would be a better idea than (INAUDIBLE)

MCCONNELL: Well, in the meantime, we need to, you know, get out of the car business, get out of the banking business, get out of the insurance business, get out of the student loan business, and don't get in nationalizing health care.

VAN SUSTEREN: Senator, thank you. Nice to see you, sir.

MCCONNELL: Thank you, Greta.

VAN SUSTEREN: As reports continue about a second stimulus package, consider this. According to the Government Accountability Office, some states are not using the original stimulus money the way they are supposed to. Does that spell trouble?

Joining us live is Steve Moore, senior economics writer for The Wall Street Journal editorial page. Steve, the whole point of the stimulus was to create jobs, not pay down debt. Where's the -- where is this -- we've only spent -- so far, we've spent about 10 percent of the $787 billion, right?

STEPHEN MOORE, WALL STREET JOURNAL, "THE END OF PROSPERITY" CO- AUTHOR: A little less.

VAN SUSTEREN: A little less than 10 percent. How have we spent it?

MOORE: Greta, you have been asking me that question for the last few weeks, and now I have the report from the General Accounting Office, which -- which gives us some indication of where that money is going, and you're not going to be too happy with the answers. I don't think most taxpayers are going to be too happy.

It turns out that about three quarters of the money that's gone to the states has been used for two programs, Medicaid and to stabilize their budgets. Now, you might say, Well, giving money to Medicaid and for budget stabilization is a good thing to do, but it doesn't create jobs, and that was the purpose of this program.

Here's the other amazing statistic. Only 6 percent of the money that has gone to states and localities has been used for those kind of infrastructure projects, the investments that we were told were going to create jobs. Only $1 of every $13 is going for, you know, fixing potholes, building new roads, fixing bridges, things like that.

VAN SUSTEREN: The problem with pay -- with making the payments -- like, the Medicaid payments you talk about -- is that you're taking that money, you're essentially making payroll. Right?

MOORE: That's exactly...

VAN SUSTEREN: That's -- that's...

MOORE: That's right.

VAN SUSTEREN: ... essentially what we do is making payroll.

MOORE: That's right.

VAN SUSTEREN: And the problem is that you may have this infusion of cash from the stimulus bill to make payroll, but the problem is, two weeks from now, you got more payroll.

MOORE: That's right.

VAN SUSTEREN: You haven't created the jobs that are going to generate the income so that you could create your own...

MOORE: That's right.

VAN SUSTEREN: ... your own payroll.

MOORE: Now, to give President Obama his due, he would say, Well, look, we saved jobs. Some teachers might have been laid off...

VAN SUSTEREN: How do you tell -- how do you tell that?

MOORE: ... some firemen might be laid off...

VAN SUSTEREN: Because I'll tell you, I heard that before, that he said that we saved jobs, teacher jobs...

MOORE: Right.

VAN SUSTEREN: The night that he said that, we played that sound bite...

MOORE: Right.

VAN SUSTEREN: ... my inbox got flooded with teachers whose jobs weren't saved!

MOORE: Who said they did lose their jobs! Exactly.

(CROSSTALK)

MOORE: I got a lot of those e-mails, too. The point is, we -- the other interesting thing, by the way, about this report that the senators and congressmen should be very angry about -- a lot of states can't tell us what they're doing with the money. It's almost like it's been lost in space. And so there's no accountability.

I think Senator McConnell had it exactly right. We would have been much better off, instead of sending this money to the states, send it right to the people. Let them spend it, rather than having it going to states and local governments, where don't know what happened to a good portion of the money.

VAN SUSTEREN: Explain this "saved jobs" figure to me because I understand that if we have five jobs today and ten jobs tomorrow, we've created five jobs. We're now -- (INAUDIBLE) How in the world can you possibly figure out what you've saved?

MOORE: Well, it's impossible.

VAN SUSTEREN: I mean, that -- and that's -- I mean, that's where I think we're being a little bit bamboozled...

MOORE: Right.

VAN SUSTEREN: ... about statistics. And Mark Twain had a wonderful quip about statistics which I won't go into, about how they can be manipulated and...

MOORE: Lies, damn lies...

VAN SUSTEREN: ... they're laughable.

MOORE: ... and statistics. Well, I think the main point is you can never really measure whose job has been saved here. Certainly, some jobs have been saved because -- because states and localities might have had to lay off some teachers, firemen, policemen and so on...

VAN SUSTEREN: But that's (INAUDIBLE) massage the details.

MOORE: Right.

VAN SUSTEREN: I mean (INAUDIBLE) massage (INAUDIBLE)

MOORE: I mean, look, we just have to look at the overall numbers, and the job numbers are terrible. I mean, these are the worst job numbers we've seen in 30 years and...

VAN SUSTEREN: How many have we lost since the stimulus bill?

MOORE: We've lost somewhere in the neighborhood of three to four million jobs since then. So that's a huge amount of job losses, when, in fact, we were told this was going to reverse the losses.

Now, look, I very much hope that the next couple jobs reports are better. A lot of economists think maybe we're past the point -- you know, the high point in job losses, but even the administration was saying, Well, we expect the inflation -- the unemployment rate to maybe go up to 10 percent or so. That...

VAN SUSTEREN: And then...

MOORE: That's really lousy number. That would mean another million or two lost jobs.

VAN SUSTEREN: And that does not take into account, which you and I have always discussed, is that when you talk about unemployment, you're talking about the people who are looking for jobs who can't get them. We're not talking about the people who are so discouraged and have given up.

MOORE: That's right. And that...

VAN SUSTEREN: That's a -- so that number is actually much bigger, and of course...

MOORE: Right.

VAN SUSTEREN: ... in some inner cities, you have -- the inner cities, the unemployment rate is skyrocketing.

MOORE: That's right. I mean, just to give you one example, the black teen unemployment rate now...

VAN SUSTEREN: High, very high.

MOORE: ... is 38 percent.

VAN SUSTEREN: Thirty-eight?

MOORE: Thirty-eight percent. Twenty-four percent for all teens. By the way, one of the things the Congress is going to do in a couple weeks is raise the minimum wage. This is a terrible time to be raising the minimum wage, when teenagers can't get jobs as it is. So there are a lot of things that Congress could do to stop the bleeding. I think Senator McConnell is right. We shouldn't be doing the health care. We shouldn't be focusing on health care reform right now. We shouldn't be doing cap-and-trade.

VAN SUSTEREN: And could I...

MOORE: We should be...

VAN SUSTEREN: Could I just make (INAUDIBLE) though?

MOORE: ... focusing on jobs, and Congress isn't doing that.

VAN SUSTEREN: If there is a second stimulus...

MOORE: Right.

VAN SUSTEREN: ... I think the American people ought to beg the members of Congress this time to read it.

(LAUGHTER)

(CROSSTALK)

VAN SUSTEREN: And if they're thinking about passing one in September, start talking now so everyone can read it and they can put it on the Internet, as promised...

MOORE: That's right.

VAN SUSTEREN: ... instead of that rush, rush, rush.

MOORE: There have been...

VAN SUSTEREN: Instead of...

(CROSSTALK)

MOORE: ... three bills this year already over a thousand pages, the stimulus bill, the budget and the cap-and-trade bill, and Congress did not read any of them.

VAN SUSTEREN: That makes all of us crazy.

(LAUGHTER)

VAN SUSTEREN: Anyway, Steve, thank you.

MOORE: Thank you, Greta.

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