Issue Position: Economy

Issue Position

Stabilizing Our Economy and Making it Thrive

What's Wrong

Despite talk of an economic recovery, more of our neighbors are losing their jobs, quality health care is out of reach for millions of families, home foreclosures are increasing, and our children are falling behind their peers abroad. The large banks that caused the near-collapse of the global financial system were bailed out by taxpayers and have used the money on bonuses for their executives. Meanwhile, America's small businesses are responsible for the majority of new jobs but have been unable to access the credit they need to invest and grow.

In November 2010, voters of Illinois will be faced with a clear choice: go back to the reckless Bush-Cheney fiscal policies Mark Kirk supported that cost this state hundreds of thousands of jobs and created the worst economic crisis since the Great Depression, or move forward to fundamentally change our economy and create the next generation of good jobs here in Illinois.
Alexi's Plan To Make It Right

Alexi Giannoulias has the experience and bold ideas to move our nation forward and build a 21st Century economy based on principles of fairness and innovation. He is the only candidate to outline a comprehensive plan to get our economy moving again and rein in the corporate practices that got us into this mess. His Future Works America agenda addresses four key goals:

1. Put people back to work and stimulate the economy by cutting taxes for working Americans and small businesses, not wealthy corporations.
2. Rein in unfair, deceptive and dangerous practices of corporations, financial institutions and mortgage brokers.
3. Restore fiscal sanity to the U.S. budget and begin closing the deficit, a tax on our children and grandchildren.
4. Keep our children competitive in the global economy and help people move to more secure jobs by investing in education and access to universities and community colleges.

Future Works America, Part I: The Giannoulias Plan to Build the New American Economy

"Nothing is more important right now than creating the next generation of good-paying American jobs. It will mean ending business as usual in Washington and the failed policies that reward those who ship our jobs overseas. Instead, my plan rewards small businesses and first-time homebuyers who hold the keys to future growth." - Alexi Giannoulias

Alexi Giannoulias is the first U.S. Senate candidate to begin releasing a broad economic plan to rebuild and reform our nation's economy, focusing his first initiative on reshaping tax policy to invest in American jobs and middle-class tax cuts.

Part I: CUT TAXES TO CREATE JOBS
The Proposal:

Stimulate immediate financial recovery by providing tax breaks to small business owners and low- to middle-income people who are most likely to put their savings back into the economy and curb overseas outsourcing of American jobs by closing tax loopholes.

* Extend the tax credit for first-time homebuyers. The tax credit for first-time homebuyers has helped middle-income Americans afford their first home and helped stabilize the housing market and home values. Allowing it to expire would hurt home sales just as the market is expected to pick up. Alexi supports an extension of the $8,000 first-time homebuyer tax credit through December 1, 2010.

* Create a payroll tax holiday for low- and middle-income Americans. Alexi wants middle-class tax relief that will go straight into the pockets of working Americans so that they can pay their mortgage, put food on the table, and keep the economy moving. He supports a one-year payroll tax holiday on the first $20,000 of individual income for those making up to $75,000. Under his proposal, qualified workers would see an extra $125 a month in their paychecks.

* Establish a job creation tax credit. Making it less expensive for employers who hire within a 90-day timeframe would encourage businesses to start hiring now. Alexi is calling for a "job creation tax credit" for small businesses with less than 50 employees to help incentivize job creation among small businesses, which are responsible for 65 percent of jobs created in America.

* Offset the costs of these proposals by repealing the corporate tax loophole that rewards the shipping of jobs overseas. The U.S. tax code currently rewards companies that ship jobs overseas. Alexi wants to ensure that those companies pay their fair share by eliminating the tax loophole that allows them to defer paying U.S. taxes on overseas profits. This proposal would raise nearly $200 billion and deter companies from moving American jobs abroad.

Future Works America, Part II: Reforming TARP to Support Main Street, Not Wall Street

After billions of dollars of taxpayer bailout money, the large banks still aren't lending. Some have spent their money on executive bonuses; others are rushing to pay it back so that they can resume their risky investment strategies without government oversight. As a banker and Illinois State Treasurer, Alexi has a record of targeting funds to maximize their effectiveness. Small businesses, not the Wall Street behemoths, serve as the lifeblood of Main Street economies. That is why he is proposing reforms to the Troubled Asset Relief Program (TARP) to better ensure that taxpayer funds are creating jobs.
The Plan

Reroute TARP funds from Wall Street to Main Street: Alexi's plan would create a $50 billion fund from the money returned to TARP and establish a lending program through the Small Business Administration (SBA) to steer money directly to small businesses. The money would come with stricter guidelines, more oversight and greater accountability than the original TARP program.

* Loans would be made to businesses that are creating jobs, and the loan guarantee amount would equal twice the salary and benefits of the new hire. This would ensure that taxpayer funds are directly creating jobs, and that the businesses are given some flexibility to reinvest in their company with the extra money. The SBA would conduct a compliance check two years after the loan is secured.

* Loans would be made by small banks and credit unions, and could only go to small businesses with less than 100 employees. These businesses will be eligible to receive new capital at an initial dividend rate of 3 percent, down from the 5 percent rate available for big banks under the original TARP Capital Purchase Program. To encourage timely lending and repayment, the dividend rate for small banks will increase to 9 percent after five years or if a business is out of compliance.

* The SBA would administer the loan program by providing guarantees to participating lending institutions with less than $1 billion in assets. Those banks and credit unions will be required to submit a small business lending plan that will explain how the capital is being invested. The loan is serviced by these financial institutions, which eventually pay them back into TARP.

To enhance this program, Alexi supports the effort of Senator Olympia Snowe (R-Maine) to increase the caps on the Small Business Administration's 7(a) and 504 loans to $5 million in most instances, and to raise the maximum loan size for microloans from $35,000 to $50,000.
The Record

Targeting taxpayer money to create jobs, not to line the pockets of bankers: Alexi learned in Illinois that the best way to get money to those who are hiring is by attaching strings to the capital, like strict collateral requirements and mandates to lend. His Access to Capital and Employ Illinois programs include these restrictions and result in more money for Illinois small businesses and a better return for Illinois taxpayers.

At the beginning of the economic meltdown last year, Giannoulias extended his Access to Capital Program to thaw the credit markets. Since then, nearly $300 million in interest-earning deposits were made in statewide financial institutions to boost their liquidity and extend credit to businesses and consumers. His Employ Illinois program, which provides low-interest loans to business owners, has been equally successful. Under his administration, the state created more than 500 jobs.

Future Works America, Part III: Empower Consumers and End "Too Big To Fail"

Financial deregulation allowed for the creation of giant financial supermarkets that could own investment banks, commercial banks and insurance firms -- a practice banned since the Great Depression but overturned ten years ago. This cleared the way for the creation of companies that were too big and intertwined to fail. When they engaged in risky behavior and lost billions of dollars, the U.S. government had no choice but to step in and keep the financial system afloat.

Entwined in this web was the proliferation of risky mortgages issued by unregulated non-bank lenders. These companies make a quarter of all mortgages, but account for nearly half of all subprime loans. Once these loans were made, unregulated mortgage lenders quickly bundled them with similar loans and sold them as mortgage-backed securities. The collapse of the housing market turned these securities into worthless "toxic assets" and added significantly to the downfall of the large financial institutions that had bought the securities and spurred the demand for even more risky instruments.

Instead of reigning in the size and scope of financial firms, the bailouts have led to even larger institutions. Since the financial crisis, the country's four largest banks have only gotten larger and now account for nearly 40 percent of total banking deposits and issue half of the country's mortgages. If one were to fail again in the future, the resulting economic storm would be even more severe than the last.
The Plan: Put the interests of taxpayers over those of the large financial institutions

Alexi's plan aims to prevent a future crisis by providing more oversight of "too big to fail" institutions, opening up the secretive derivatives market, and ending the cycle of consumer debt caused by hidden costs in financial service products.

* Proactively address the threat of "too big to fail" institutions rather than waiting for the next crisis to strike. Current proposals in Washington DC are music to the ears of Wall Street CEOs: keep doing what you're doing, and if we are on the brink of another meltdown the government will step in and deal with the problem. But this strategy does little to prevent a crisis from happening in the first place. Alexi believes that we need a proactive plan to protect consumers and the American economy from another financial catastrophe caused by Wall Street's thirst for greater profit. To achieve this, he would call for enhanced supervision of the most fragile institutions, for greater capital requirements at financial firms, for immediate contributions by large financial institutions to an "emergency fund" that could be tapped for any future bailout, and for a "living will" that would provide a plan to wind down any institution that is close to failure.

* Regulate the non-bank mortgage lending industry. Alexi supports applying the same oversight rules that govern banks to non-bank lending institutions. These institutions, which are often registered as subsidiaries of regulated institutions so that they can evade the government's review, account for a disproportionate number of subprime loans and deserve the same scrutiny as other lending firms.

* Reign in the unregulated multitrillion-dollar derivatives market that helped create the financial crisis. Derivatives are supposed to help investors and businesses manage risk, but after they were deregulated in 2000 they became tools for vast speculation that are largely traded with no public scrutiny or transparency. This creates and amplifies risk instead of reducing it. Alexi supports the creation of an exchange on which all over-the-counter derivative transactions would be required to take place.

* Empower consumers to protect against deceptive banking and lending practices. The large financial institutions continue to grow rich by charging fees on just about everything, and consumers frequently have no idea about these costs that are hidden in fine print. Alexi supports the creation of a Consumer Financial Protection Agency that protects consumers from home loans, credit card fees, payday loans and other forms of consumer finance that hide costs and push more Americans into an unending cycle of debt.

Future Works America, Part IV: Restore Fiscal Sanity To The Federal Budget

Alexi believes that fiscal discipline and long-term economic planning are key to creating a strong economy for our children. After eight years of tax cuts for the wealthy and corporate giveaways, the surpluses of the 1990s are a distant memory. Fiscal mismanagement has exacerbated the economic recession and threatened America's global economic leadership. Current levels of government borrowing and spending are needed in the short term to stimulate the economy, but over the long term can reduce domestic investment, lower future incomes, raise interest rates, and spur inflation -- all of which can damage the economy and hurt people who see their wages fail to keep up with rising costs.
The Proposal: Erase annual budget deficits and begin paying down the debt

Alexi's plan will push the government to spend within its means, to close tax loopholes that benefit special interests and to institute reforms that make government more transparent and accountable to taxpayers.

* Institute "pay as you go" budgeting. No American family would survive if it budgeted like the U.S. government. Alexi supports PAY-GO as a way to ensure that every new spending bill must be offset by savings or increased revenue elsewhere.

* Target tax cuts to those who most need them and are most likely to put the extra income to use. The Bush tax cuts for the wealthiest Americans generated some of the largest deficits in U.S. history and contributed nearly $2 trillion to our deficits. Those tax cuts were unnecessary and irresponsible, and Alexi would allow them to expire. Any new tax cuts should be geared toward middle-class Americans and small businesses. This would put more money in the pockets of those most likely to spend it, and would support the businesses that are responsible for most new job growth in America.

* Cut wasteful spending and corporate subsidies that do nothing to help taxpayers and only fatten the wallets of those with the resources to lobby Congress. Recently-passed legislation that eliminated subsidies for corporate middle-men in the student loan industry is projected to save taxpayers $80 billion during the next decade. But we can't stop there. Alexi will push to end subsidies for oil and gas companies that are enjoying record profits, and eliminate the tax loophole that currently allows companies to pay lower taxes if they create a job in southern India rather than in southern Illinois.

* Hold tax cheats accountable. Alexi will fight to arm the U.S. Treasury Department with the tools and manpower necessary to stop the abuse of tax shelters and offshore tax havens and to help close the $350 billion gap between taxes owed and taxes paid.

* Tackle the growing cost of earmarks. The government could save money and reduce fraud by introducing competitive bidding for all for-profit contractors receiving these federal funds. No business remains competitive by awarding contracts to the highest bidder. An open process would reduce the abuse of these funding mechanisms that can otherwise circumvent merit-based or competitive allocation processes.

* Shine a light on government spending. Taxpayers deserve to know how their money is being spent. As Illinois Treasurer, Alexi passed legislation requiring his office to post monthly investment data online for the public. In the U.S. Senate, he would broaden the online, real-time tracking system that is part of the Recovery Act to cover all U.S. government spending, and fight to change the government's definition of "public information" to ensure that all publicly released data is also put online in an easy-to-download format. He also supports efforts to post all legislation online in final form for 72 hours prior to voting so that the public can read it in its entirety.

Future Works America, Part V: End Unfair Trade Agreements and Fight China's Anticompetitive Practices

Fair trade should open new markets for American goods and create more American jobs while promoting the best labor and environmental standards. Instead, many of today's agreements do little to protect American jobs and instead promote a global "race to the bottom" as companies look for the cheapest labor and most lax environmental standards. At the same time, China is using a range of tools to weaken the U.S. economy. The government continues to substantially undervalue its currency, fails to protect intellectual property rights, artificially undercuts prices, and adopts illegal boycotts on U.S. products. Alexi is calling on the Obama administration to more forcefully push China on these issues and use international institutions -- like the World Trade Organization -- to force China to play by the rules.
The Proposal: Put an end to unfair trade practices

Alexi believes that the U.S. government must aggressively negotiate trade agreements that strengthen America's economic security and respects America's labor and environmental standards.

* Renegotiate the North American Free Trade Agreement and other trade pacts, and ensure that future agreements learn from our past mistakes. American workers will never be able to compete with those who are paid a few dollars for a day's work. In the U.S. Senate, Alexi would push legislation that requires the nonpartisan Government Accountability Office to analyze the impact of NAFTA and other trade deals on American jobs, wages and business investment, and calls for the White House to give Congress a plan for renegotiating those pacts. Alexi would not support new trade agreements that fail to protect American workers and uphold strong environmental standards.

* Close loopholes that give tax breaks to companies that ship overseas. The U.S. tax code currently rewards companies that ship jobs overseas. Alexi wants to ensure that those companies pay their fair share by eliminating the tax loophole that allows them to defer paying U.S. taxes on overseas profits. This proposal would raise nearly $200 billion and deter companies from moving American jobs abroad.

The Proposal: Fight China's anticompetitive practices

China's uncompetitive trade practices and currency manipulation touch all parts of America's economy -- from the hog farms of southern Illinois to the manufacturing plants of Peoria to the aisles of Chicago's grocery stores. Alexi would push to use all available tools to force China to comply with international trade rules

* China must let their currency appreciate in value, not be pegged to dollar. Rather than allowing the yuan's value to be determined by the market, China has pegged its currency to the dollar. This action keeps the yuan artificially low and gives Chinese goods an uncompetitive advantage in the global marketplace. If China fails to let its currency float, Alexi will push congressional efforts to offset the subsidy so that American businesses are able to compete on a level playing field.

* Unfair subsidies must come to an end. China continues to hand out subsidies that discourage imports and prop up domestic industries that typically are not as strong as their foreign competitors, like renewable energy infrastructure, telecommunications and financial services. The WTO has ruled against China on these issues in the past, and Alexi believes that the U.S. government should continue to work with its European allies to push more complaints.

* China must respect intellectual property rights. Piracy is rampant throughout China, from Hollywood films to computer software. China should reign in this burgeoning industry that costs Americans billions of dollars a year in lost compensation.

Future Works America, Part VI: Invest in Innovation to Keep America Competitive

The U.S. economy has grown at unparalleled rates over the past several decades because of our investment in a world-class education system, a focus on science and technology, and a commitment to innovation. But our leadership has waned as countries like China have invested heavily in clean energy technologies and scientific advances. Just a decade ago, American ingenuity created internet companies that now rank as the five largest in the world, but today we barely register among the top five manufacturers of emerging technologies like wind energy equipment.
The Plan: Educate a new generation of innovators

Alexi's education plan outlines several policy priorities to make our education system effective, affordable, and accessible -- from comprehensive early childhood education programs, to reduced class sizes and better teacher support, to reform of No Child Left Behind. As a next step, he supports a series of initiatives to create a new generation of innovators in the fields of science, technology, engineering and mathematics (STEM).

* Invest in an army of well-trained STEM teachers. Nearly seventy percent of U.S. 8th graders receive mathematics instruction from a teacher without a degree or certification in that discipline, and our students consistently rate behind their international peers on exams to test science and mathematical literacy. Alexi will push to create a merit-based scholarship program that would target 25,000 students pursuing both a K-12 teacher certification and a bachelor's degree in a STEM field. In return, the students would have to commit to teach for at least five years.

* Create a $100 million federal Innovation Partnership Investment Fund to match private donations that create opportunities for the next generation of research at American universities. The federal government should better leverage its investment in research by providing matching funds to new partnerships that bring together university researchers and private sector investment. Alexi supports a new Innovation Partnership Investment Fund that would match investments up to $1 million made by companies in university research into the next generation of energy and information technology. These types of partnerships provide universities with the resources to conduct cutting-edge research, give students the type of real-world research experience that will help them succeed upon graduation, and offer companies access to leading thinkers and research laboratories.

* Upgrade skills through apprenticeship programs. By linking students with on-the-job training, they leave college or university with stronger technical skills and the potential to add more value to their future employer while earning more for themselves. Alexi wants to double the current 1 million apprenticeships and would start by pushing legislation to provide a $1000 a year tax credit to businesses for each apprenticeship they create. These programs have been shown to create openings in areas that are most likely to be industries of the future, and are particularly useful in moving students into good-paying jobs upon graduation.

The Plan: Help American businesses innovate

Eras of dramatic American innovation have been marked by increased government investment in new industries and a stronger education system. Countries like China have employed a similar model and have seen enormous gains in productivity and job growth, but here at home that commitment has weakened over the past decade and we are seeing the effects in higher unemployment and slowing economic growth. In today's globalized world, the U.S. federal investment in research and development cannot continue to decrease if we hope to remain competitive against emerging economies. Alexi believes that the government must play the role of the catalyst and give businesses the tools and incentives they need to invest in the next generation of technological and scientific breakthroughs.

* Make the research and development credit permanent, and raise the rate from 20% to 40%. The benefits from private investment in research and development are significantly larger for the overall economy than they are for the individual firm. But the tax credit for companies that invest in research and development is not permanent, and has expired twice since originally passed in 1981. This disincentivizes investment as companies face an uncertain long-term economic landscape. Alexi supports efforts to make the tax credit permanent so that businesses make the types of long-term investment that yield significant technological breakthroughs and economic payback.

* Increase federal funding in research and development. As a Senator, Alexi will push to fully fund the American COMPETES legislation. The bill, which was pushed by President Bush as part of his American Comptetitve Initiative, has passed both houses of Congress and would double the research budgets of the National Science Foundation, the Department of Energy's Office of Science, and the National Institute of Standards and Technology. Now Congress must find the appropriations to fund the initiative.

* Create a national, public "Green Bank" that could open credit markets and motivate businesses to invest in scientific and technological advances that reduce our dependence on dirty fuels, spur new economic markets and jobs, and strengthen our national security. Existing federal loan guarantees and tax incentives are not adequate to spur the clean-energy transition. In the U.S. Senate, Alexi would work in partnership with the private sector to create a funding mechanism that would enable clean-energy technologies to be deployed on a large scale and become commercially viable at current electricity costs.

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