Sunday, Nov. 8, 2009 | 2 a.m.
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We have a credit problem in the United States.
The same is true in Nevada. Lack of credit availability is the defining cause of the unemployment crisis in Nevada and the nation. The inability of companies to borrow the money they need to survive the worst economic meltdown in a century continues to wreak havoc across America and especially here at home.
This very real problem continues to drag Americans down further and further into some kind of malaise that threatens the economic health of our country and makes us question our own future. It will, however, be resolved at some point as the best minds available have been focused on this challenge for well over a year.
Let me talk about a different kind of credit problem that promises to plague us for at least another year — through the 2010 elections. This is the problem of giving or taking credit for that which is good in America and, conversely, the political spectacle that ensues when the issue of who should get credit gets run through the political agendas of media outlets, candidates and others — all to the confusion of the public, which, quite frankly, just wants the facts.
A headline in the Friday Las Vegas Review-Journal said, “Claims for credit weighed” and was underscored with “Nevada Job Preservation.” The story that followed dealt with Nevada’s senior U.S. senator, Harry Reid, and his contention that a provision in the $787 billion stimulus bill this year — which he took credit for — saved more than 31,000 jobs at Harrah’s alone.
Of course, the R-J story took issue with that claim and proceeded to suggest that our good senator was fabricating not only the numbers but also his role in the passage of the bill and that provision. All of this gets tied back to the issue of how many jobs were either created or saved as a result of President Barack Obama’s stimulus bill.
There is a lot that goes on in Washington, D.C., about which I, like most Americans, am completely unaware. In fact, it has been a long-standing desire of mine not to know too much about the “sausage-making” process of passing a bill through Congress. It is a bit like watching movies such as “Food, Inc.” Once the movie is over, the question remains whether or not I will ever eat again!
It just so happens that when it comes to the stimulus bill and, specifically, the debt cancellation provision that ultimately became a part of it, I know a great deal. In fact, I think I know more about what happened and how it happened than the experts quoted in the R-J story, which, it appears, was written in a continuing effort to make Sen. Reid look bad.
First, let me make one thing abundantly clear. I don’t believe the debt cancellation provision was responsible for saving the jobs of 31,000 Harrah’s people — the sum total of Harrah’s Nevada employees. What is factual is that 31,000 Harrah’s jobs as well as tens of thousands of other Nevada jobs were protected by the provision in question.
So, if we must quibble with words like “saving, creating or protecting” jobs, then those who nitpick this issue can have a field day. But if you are one of the 31,000 people at Harrah’s or one of the tens of thousands of Nevadans who work for MGM Mirage and Station Casinos and other major employers caught short of credit when the meltdown happened, I don’t believe that’s what you would be thinking.
If I were one of those people, I would be thinking, saying and shouting to the rooftops, “Thank you, Sen. Reid, for helping to save my job.”
Let me explain.
Before the recently passed stimulus bill, if a company wanted to buy back its debt — the money it had borrowed from banks and other institutions — at a discount, it would have to pay tax immediately on the perceived benefit. For example, if I owe $1 million and the market says that amount is worth only $500,000 because my ability to repay is questionable, I would be immediately responsible for the tax on the $500,000 that I didn’t get.
In real terms, when a Nevada company that owed $10 billion in debt wound up buying that debt back for $5 billion, Uncle Sam would send him a tax bill for somewhere between $500 million and $1 billion. For a company in need of credit and with no cash, that would be a nonstarter.
So, instead of buying back debt and saving the interest costs, a company would have to lay off sufficient numbers of people to pay the debt service to the banks. In the case of the $10 billion debt, that could be a billion dollars. How many employees would have to be fired to make that kind of payment in these tough economic times?
So what did the majority leader of the U.S. Senate do? What only a majority leader could do!
No matter who takes credit for doing what, the inserting of the provision to remove that tax disincentive at the last minute in the legislative process was Harry Reid’s doing. No one else’s. This was a provision sought by America’s businesses, pushed by the Chamber of Commerce and supported by almost every Republican constituency. The converse was also true — no Democrat would put his fingerprints on this provision because it ostensibly helped big business.
Harry Reid understood that the issue was about jobs. Nevada jobs. Countless thousands of jobs that would otherwise be lost if interest payments to banks took precedence over paychecks to working Nevadans.
When push came to shove in Congress, that provision was dead, gone and buried. It had no chance of passage and with it would go countless thousands more Nevada jobs. Only one person could make it happen.
So Sen. Harry Reid of Nevada did what any other knowledgeable, experienced majority leader would do. He had his way with the legislation for the benefit of Nevada’s working men and women and Nevada’s employers. It was a home run.
I know it happened and how it happened because for some crazy reason I was in the middle of it while it happened. The credit — in the end — goes to Harry Reid and only Harry Reid.
So if you have a problem with Sen. Reid helping both business and labor at the same time — when no one else would or could — then go for it. Or, if you want to quibble over the relative importance of a job created, a job saved or a job protected, have at it. But first, you might want to check with a neighbor or a friend who is still working because of Harry’s courage and cunning.
And if, after all of this, you still want to question Harry Reid’s importance to our state in the U.S. Senate, then I suggest you get an even clearer picture of the state of the U.S. economy, the continuing danger to the financial prospects of our main industry and about 2.6 million people who call Nevada home, and an
E-ticket to Fantasyland.
Because that’s the only place where your quibbling can make any sense at all.
Brian Greenspun is editor of the Las Vegas Sun.
