Point, Counterpoint: Stimulus 2.0

This is a rush transcript from "On the Record," July 10, 2009. This copy may not be in its final form and may be updated.

JENNIFER GRIFFIN, FOX NEWS GUEST HOST: Is stimulus 2.0 coming soon? I'm Jennifer Griffin, in for Greta Van Susteren. $787 billion later, some Democrats say we need another one to save the economy. Republicans see it as a mid-term election rallying cry. So who's right?

We have both sides covered. First, Senator Richard Shelby is here with me in Washington. He's the ranking Republican on the Senate Banking Committee. He opposes any talk of any more stimulus.

Senator, thanks for being here.


GRIFFIN: Now, I remember what you said about the first stimulus. You said it was a disgrace. So I can only imagine what you think about this talk of a second stimulus. Why is this not a good idea?

SHELBY: Well, it's not a good idea for a lot of reasons, but one -- of the stimulus we have put together and that I opposed, most of the money has not even been spent. You know, in other words, the stimulus has not been implemented yet. And now they're talking about another one. And I think it's a dumb idea. I think that it will not work. Most economists -- I wouldn't say all.

Most economists, though, (INAUDIBLE) majority, would say we don't need a stimulus. And even The Washington Post today, in an editorial you may have seen, questioned the idea of another stimulus, said this would be the third stimulus because we had a stimulus of some kind under Bush and then the big one under Obama. And now they're talking about another one. My goodness. Washington Post said, basically -- and I want to quote them, in a sense -- they were concerned about the creditworthiness of our paper down the road -- in other words, our bonds...


SHELBY: ... if we continue to borrow and borrow. I believe we cannot borrow our way to prosperity.

GRIFFIN: Now, what I don't understand is why so little of this $787 billion has been spent. It's about 10 percent that has been spent. And we were told at the time when this was rushed through in February that these were shovel-ready projects. Why only 10 percent?

SHELBY: Well, just say -- talk about shovel-ready -- obviously, a lot of shovels weren't ready and -- to put people back to work, to build all these things. And there's a lot of politics in the stimulus, as we all know, Democratic politics. I thought that was a mistake. I know a second stimulus would be a mistake because we're going to borrow that money. And it won't not turn the economy around. A lot of things will turn the economy around, but I don't believe the stimulus will.

GRIFFIN: Now, Treasury Secretary Timothy Geithner was on the Hill today. He was meeting for an oversight committee hearing. Here's what he said. Let's hear your response.


TIMOTHY GEITHNER, TREASURY SECRETARY: The stimulus package is on its expected path in terms of the rate of change and in terms of putting money in the pockets of taxpayers to provide substantial forms of (INAUDIBLE) states, to reduce the risk that they're forced to fire tens of thousands of teachers, workers and firemen. And there are very substantial investments in infrastructure products (SIC) that start to -- that have already started to take effect and will have their maximum impact on the economy in the second half of this year.

So my own sense is -- and I think this is a consensus of broad-based economists -- that there has been substantial improvements in arresting what was the worst recession globally we've seen in generations. And those are the result of the actions this Congress took, the administration put in place, and complementary actions taken by governments around the world to, again, help address what is the worst crisis we've seen in a long period of time.


GRIFFIN: Do you agree that the crisis would have been worse if there hadn't been this stimulus package?

SHELBY: I don't agree. I think that there would be pain out there because we are in a world recession, you know, a contraction of the economy. But the sooner we face up to this and the sooner we straighten out our banks -- that's the key to where banks can start lending. There's a liquidity crisis in this country. Even after the TARP bail-out of the banks, a lot of the banks aren't lending. Small, medium-sized businesses are dying for capital and for credit. And that hasn't happened yet. Secretary Geithner knows that, too.

GRIFFIN: Well, The Washington Post is reporting tonight that, in fact, the Obama administration is considering using some of the banking money for small businesses. Is that the answer?

SHELBY: Well, I don't know it's an answer. It's something we ought to consider. I -- if there's money going to be out there and this money has already been appropriated for that, borrowed, so to speak, borrowed for the banks, and the banks aren't lending, if we can get some money into the hands of a lot of small, medium-sized businesses, that's where your job creation comes from in America.

GRIFFIN: OK. Thank you very much for being with us here.

SHELBY: Thank you.

GRIFFIN: And we appreciate your thoughts on the stimulus . We'll have to wait and see. Some economists are saying that, in essence, the economy will turn around by the end of this year, but we'll have to see if that is, in fact, the case. But thanks for being with us, Senator Shelby.

SHELBY: Thank you.

GRIFFIN: OK. Pennsylvania governor Ed Rendell, a Democrat, is open to the idea of a second stimulus. He joins me live from Philadelphia. Governor, thanks for being with us.

GOV. ED RENDELL, D - PENN.: Good evening, Jennifer.

GRIFFIN: So tell me, why -- you've just heard Senator Shelby. He's obviously opposed to a second stimulus. Why do you think we need one?

RENDELL: Well, first of all, I'm not to the point where I think we need a second stimulus. Understand -- Senator Shelby makes a point. We haven't seen the crux of this first stimulus put into action yet. And when we do, we'll be able to judge how successful it is. And at that point, we can make a decision on whether we have a second stimulus.

The president is exactly right. He's not for a second stimulus yet, but he's not taking it off the table. And given the mercurial nature of the economy, this is the right position to take. Let's see how it works. It's starting to work fairly well in Pennsylvania, and I think we're going to see an explosion of new jobs created in July, August, September, October, November.

We've already stopped the loss of jobs. That was the point that Tim Geithner made. Had we not gotten -- the state of Pennsylvania's government had not gotten the stimulus money that we got to help us on Medicaid and to help us on corrections, we would probably have had to lay off 5,000 to 10,000 state, county and municipal workers.

GRIFFIN: And in fairness to President Obama, the Congressional Budget Office did say that about a quarter of the stimulus money was expected to be paid out by the end of this year. They weren't expecting all of it to come in at the beginning of this year. It was going to be over two years. Is that the right way for it to come out, slowly? I mean, we make a big point about this 10 percent being spent.

RENDELL: Well, it's not really as slow as you think. For example, in Pennsylvania, we had our transportation plan approved by the federal government on March 12, pretty soon after the stimulus was signed. It's now four months later, and we have over 50 percent of our projects. We have 242 projects from the stimulus money. And 131 of them, work has begun, and hiring on those projects has started. It will ramp up dramatically. The other half of our projects will almost all be under way by Labor Day. So it's going to be much faster in the infrastructure side than two years. We're going to see the impact of that in the first six to nine months.

And if we do have another stimulus, Jennifer -- and I'd love -- it's a shame Senator Shelby's not on the line, but I think everyone agrees, Republican and Democrats, that the best stimulus is infrastructure -- building bridges, roads, highways, things that we absolutely need, wastewater systems. And everyone knows that those produce jobs and they produce orders for Pennsylvania and American factories -- steel factories, asphalt, concrete, lumber. So if we have a second stimulus, no programs that are social programs or long-range programs, let's do a tight stimulus, $200 million, $250 million, $300 million for the American infrastructure. That will produce jobs, orders for U.S. factories.

GRIFFIN: Well, I guess what I don't understand is why weren't those infrastructure projects in the first stimulus package? You've got $787 billion? What percentage of that were supposed to be infrastructure projects?

RENDELL: About $180 billion for infrastructure projects, some of them long-range infrastructure, like building out the electricity grid, which is vitally important but isn't going to happen quickly.

I think the reason is that $375 billion of it was tax cuts. And I think the Obama administration put those tax cuts in, in part, to try to get Republican votes, which, as we know, they virtually didn't get any. So I think the tax cuts dominated almost half of the stimulus, and that reduced the infrastructure spending.

But I think we've learned a lesson, so if there's a second stimulus, let's put it all into hard infrastructure, construction, factories, everybody going back to work, construction and manufacturing jobs produced by a hard infrastructure stimulus.

GRIFFIN: The White House has been somewhat coy as to whether they're really considering a second stimulus. But you -- this -- the talk began, in fact, earlier this week when Laura Tyson, who's an economic adviser to the president, was out in Singapore. Do you think the White House was floating that idea through her as she spoke in Singapore?

RENDELL: Oh, that's hard for me to say. But I think the president's position is dead on. It's too early to tell. And even someone like me agrees with that. It's much too early to tell whether we need one. But we can't rule it out. I mean, we've got to see where the economy is in September. You're right, every economist I've read and our own consultants in Pennsylvania tell us that in the last quarter of '09, we're going to see growth return, not explosive growth, but growth return. So we have to see where everything is before we make that judgment.

GRIFFIN: OK, Governor, thanks for being with us.

RENDELL: Thanks, Jennifer.

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