Lori Walsh: As we move further into the American Coronavirus crisis and response, the debate over the federal response and future direction clarifies and intensifies. US Senator Mike Rounds joins us now for a look at where we are today and what to expect in the days to come. Senator Rounds, thanks for returning to the program.
Mike Rounds: Well, thanks very much. I appreciate the opportunity just to visit with you and work our way through some of these rather challenging issues.
Lori Walsh: They are indeed, and I really appreciate the extended amount of time that we have today as well. So, let's settle in, and let's talk about, first of all, let's start with the PPE program and casinos because your office just released a press release about some changes to who, in South Dakota, qualifies for that PEP payment... Yeah, sorry. I said PPE. I meant the Payment Protection Program and protecting those employees and keeping them at work. Let's start there.
Mike Rounds: Yeah, this is the Payroll Protection Program, and it's designed to allow businesses to continue to keep their employees on their payroll and to continue to pay their benefits and, at the same time, to add an additional 25% on top of that for their other expenditures such as utilities or interest on a mortgage payment or a rental payment. The idea is to keep those businesses up and ready to go as soon as we're ready to open up. Some businesses had said, "Well, why do I want to keep my employees on if I'm not opening?" The idea here is to keep them off of the unemployment roll and to keep them ready to go as soon as that business is ready to open up. It was a way to simplify that process and to expedite getting back into business quicker.
And at the same time, if they wanted to bring them in and just get things ready, if they wanted to make improvements with isolation's still in mind, but perhaps improving a business facility and so forth, that would all be part of this. The good news today is, is that after literally multiple contacts with the Department of the Treasury and multiple letters in conversations with our leadership team, we got news today that Treasury has agreed with us, and they have changed the guidance on businesses eligible for the Payroll Protection Plan. And they now include gaming facilities with employees of less than 500 employees. So, basically, your small casinos, your Native American gaming facilities, the folks out in Deadwood that have less than 500 employees, are now eligible to apply for this new round of PPP funding, which is, hopefully, being signed by the president at this point and will be released very, very shortly by the Treasury. Great news for South Dakota gaming industry.
Lori Walsh: Yeah. Help us understand, does Treasury make these decisions and then Congress pressures them to make different decisions? Congress decides the funding and passes the CARES Act, and you can't put limitations or restrictions on, or parameters, on that? To tell us how that works because I don't think I fully understand what Treasury's role is in some of these decisions about how this congressional act is unfolded.
Mike Rounds: Rest assured, it is one of the more frustrating things that we have to contend with at the federal level. And I'll just give you an example. At the state level, we write a law, and then we basically can look at the rules that are implemented on a department by department basis through the Rules Review Committee of the Legislature. And if the rules that are that are being proposed aren't correct, then you can stop it from going into effect in South Dakota. We don't have that at the federal level, and so what happens is, you write a law in Congress, such as we did with the CARES Act, and then the individual agencies responsible for the implementation write rules. And then, they do what they called guidance on how to interpret their own rules. Well, since about 1984, you have to give credibility and, in my opinion, an undue amount of preference to the way the rules are interpreted by the different departments.
In this case, the Treasury, working through the Small Business Administration, imposed on all of the CARES Act funds limitations that also applied on previously administered SBA loans. A couple of those included gaming interests were not included in the SBA rules that we felt we had overwritten with the direction from the CARES Act. Treasury disagreed, so they arbitrarily included the older rules. One of the other rules that came to light here in South Dakota with a little bit of press, if you have a felony and it's less than five years old, you're not eligible for an SBA loan. Well, in this case, they also applied that the CARES Act. Some people may agree with it or disagree with it, but those series of limitations that were in the earlier SBA rules were just applied by Treasury in their guidance and in their rule making to the new CARES Act provisions of the Payroll Protection Plan.
We thought it was inappropriate. We challenged them immediately. We sent letters in saying our legislation superseded that, and we specifically included the gaming activities, including Native American gaming, would be included in the CARES Act. And the first two series of guidances that were issued by the Treasury, they ignored us and came out with guidance that first said, "If more than a third of your income was from gaming, you weren't allowed." And then, in the second guidance they said, "If more than half of your revenue was from gaming, you weren't allowed." Now, they've eliminated that and said, "Okay, we get it. Gaming interest is now allowed." So, we've won it, but nonetheless, we've had to work through a bureaucracy that decided they would interpret it first.
Lori Walsh: Likewise, and I know we talked about this a little bit last time that we spoke, and Governor Kristi Noem said in her press conference yesterday, and I'm asking you as a Senator and as a former governor of South Dakota, she is frustrated with the lack of flexibility to replace revenue from the CARES Act with money that's coming from South Dakota. She said, "I'm not asking for new money," she said, "I don't want to create new programs. I don't want to grow government with new programs. Help me figure out how to put this money into the revenue that we've already lost as a state, that is is funded primarily by sales tax." What is the progress on that flexibility? What new programs is this money supposed to create in South Dakota that she doesn't want to create?
Mike Rounds: Well, I personally thought we should have allowed more flexibility in the first place, but I'm in the minority. And I was not able to get more flexibility included when we first started looking at this. And when the language was placed in, it was intentionally designed by the authors of the bill, when they agreed to 150 billion going in for the states, it had to be explicitly used for COVID-19 expenses. I pushed that I thought they should have the flexibility to include some percentage of it for a loss of revenue. As an example, in South Dakota, the minimum amount we receive is $1.25 billion. We're not going to have $1.25 billion in COVID-19 expenses at the state and local governmental level, but we will have losses of revenue because we basically directed businesses to shut down. So, South Dakota is relying on sales taxes, relying on video lottery funds and so forth, and because of that, our revenue will be decreased.
Well, if the federal government is recommending and the guidance is to slow things down and to basically isolate, these businesses aren't producing economic activity. We're not receiving tax revenue in the state for economic activity. I felt it only appropriate that at least a percentage of the money which was already being delivered to the state could be used for this revenue replacement. I lost that battle up here. I continue to have opposition on the part of a large number of individuals who fear that the states might very well use it for inappropriate activity. I disagree. I think decisions at the local level are just as scrutinized, if not more closely scrutinized, than what we do in Washington, and we most certainly don't do a great job of scrutinizing the resources that we expend in DC. And we're not the example that states should follow, so to hold them to a higher level of scrutiny seems to me to be inappropriate.
So, I support what the governor is suggesting. I have from day one. The governor and I have texted back and forth multiple times trying to figure out a way to get it included. I've also recommended in just the last week or so to my colleagues that we revisit that issue. And then, if they're not prepared to put more money into the states, and a number of them don't want to put more money into the states, that we should at least allow for flexibility for the states to be able to utilize some of the funds that have already been allocated.
I can also tell you that in our discussions we've had a little bit of success in that now we are allowing for more flexibility. The Treasury is now laying out more flexibility for these states to be able to use some of the money for other activity and specifically for unemployment insurance trust funds. And that, as many people are aware, we've got more individuals applying for unemployment, we have higher costs involved in delivering those unemployment funds and so forth, and at least to be able to get those as an additional expense is a step in the right direction but only a very small step in the right direction.
Lori Walsh: Governor Noem also spoke this morning at a press conference, and her top things that she was requesting were for South Dakotans to continue to take this seriously, to continue the social distancing measures, and realize that we're in this for the long haul and mid June is our new peak. But then, the second thing she asked for was increasing in testing capabilities, and this is something that has been in the national news and the local news, this great frustration for manufacturing tests, for manufacturing PPE in America, for manufacturing the swabs that originally came from Italy. Does the United States have a manufacturing problem right now? Because it seems like so much of the economy could get back to work if we could really move strongly in the direction of availability of rapid response testing.
Mike Rounds: Two parts to the answer, I think. First of all, yes, we do have a manufacturing problem here in the United States and that we have a lot of our capabilities to be moved overseas. For economic purposes, in some cases, just because other countries can produce it and, many cases, less expensively because they pay less to their workers than what we do here in the United States. But the second part on that is it leaves us vulnerable to their demands from elsewhere and to market demands on that supply.
For purposes of defense, our nation's defense, we have in the past required certain items be manufactured in the United States. There's a group of us that have been discussing legislation that would require a percentage. What we produce for those critical needs to be continued to be produced here in the United States. That means if you identify some of your pharmaceuticals, medical supplies, some of your defense systems, and, just as importantly, your food supply, I think we're going to have to go back and have a real serious discussion about giving preference to US made products. We do that in the National Defense Authorization Act, and in fact, one of the few times in which I actually had a disagreement with the former chairman, Senator John McCain, he and I got at odds because I insisted that we should give a preference to shoes that were made in the United States versus outside of the United States in the NDAA for our armed forces. I think we made the right decision. He wasn't very happy with us at the time, but nonetheless, it allows us to make shoes that are here in the US. And it gives our shoe industry a foot up or a leg up on some of the others, and I think it was the right move.
The other side of that is that, with regard to the specific items that are in front of us now, the N-95 masks as an example, we could produce those here in the United States, but we have a bureaucracy problem as well. And it's at the federal level. And when it comes to tests, it's not a matter of not being able to get the tests, it's a bureaucracy problem right now at the federal level that's causing a mismatch of where those are being delivered. And I will tell you, we have a problem getting those tests out, and regardless of what we hear about the optimistic reports on testing, we are not doing a good job of getting testing packets out. We may have the testing equipment out to where it's needed, we're still short on the testing packets that go with them, And you need to have both. And to say that we've got it all set up is not correct.
N-95 masks, we're working through a bureaucratic mess right now. We've got a company right here in South Dakota that produces them. They want to produce more. We have been in negotiations, we've followed negotiations with 3M, in which 3M has been asked to produce more masks. They're ready to do it, but you've got to put in the appropriate manufacturing lines to do that, which means you've got to build the line. The companies that built those lines have been waiting for the contract to build the lines now for closing in on a minimum of three weeks. And we have pushed with the Department of Defense and with the task force responsible for getting this information out in the contract side.
And even as I speak today, I am frustrated because we are still waiting for contracts to determine which fund account this should be authorized from. And in the meantime, the companies that built these lines will be looking at other ways to keep their people busy, including moving overseas, to build these types of facilities in other countries. There's just no excuse for this kind of delay at the federal level when we've got this kind of a pandemic going on.
Lori Walsh: What solves the problem? Because that, I think, you're expressing the same frustration that so many South Dakotans are expressing. This is America. This is how we won World War II through manufacturing and production. We want to work, we're ready to work. What's the hold up? What opens the door, Senator Rounds? What makes that change?
Mike Rounds: Due diligence, paying attention to what's going on, and not letting our foot off pedal. At the federal level, the vast majority of the phone calls that I'm having every single day are in conference calls trying to move the ball forward on trying to cut through the bureaucracy that has been put in place. FEMA does a great job when you open them up and you let them get their work done. They cut through the bureaucracy. They have a system which has proven and in place, but you've got to authorize them and then you've got to let them get their job done. You don't need additional bureaucratic oversight on top of them, and yet, that's what we seem to have created within the federal system of government.
At the state level, look, we had disasters when I was governor, but we had an emergency operations center, which we would open immediately. We'd run it 24 hours a day, seven days a week. We'd have it in operation, and in doing so, you allow the experts to do their job. Today, I'm frustrated because these same folks have to get permission from higher ups in order to do their job in some cases, because we have task forces that are reinventing the wheel, with all due respect. I think our president truly is doing his best to lay out a plan of attack and to get people moving in the right direction, but when you've got a bureaucracy involved that's always trying to protect their focus... And for some reason they have a difficult time in understanding that sometimes time is of the essence, and you've got to move stuff forward and then explain what you're doing as you're doing it rather than waiting for multiple approvals, it makes it more difficult.
And I express my frustration because this is exactly the kind of frustration I express when I get into my conference calls. And as a member of the United States Senate, we can ask questions, we can push, but we can't make people do things. That falls to the responsibility of the Executive Branch. We can oversee and we can make sure that the resources are available, which is what we've tried to do here to a fault. We have now authorized, well, more than, in my opinion, $4 trillion plus, and we want to make darn sure that it gets out as quickly as possible and get this economy back rolling again.
Lori Walsh: The obvious follow up question here, Senator Rounds, is that we have heard the president talk about how it's up to the states to bid on their own gear, and governors have been very vocal about their complaints about that. And yesterday, we heard the president talk about injecting disinfectant, which of course became a news headline immediately. When we talk about how that task force and how the president of the United States is communicating with the American people, it seems to me that it would be more useful for him to be addressing that bureaucracy, and some of the things you're talking about here, instead of speculating about a unproven science to where Lysol has to come out and say, "Please do not inject our product." Talk a little bit about communication in those press conferences. What would you like to hear the president say during those times?
Mike Rounds: Well, first of all, let me reiterate what Lysol has indicated. Please do not inject anything of a cleaning solvent into yourself or into anybody else. Don't try to take it internally. This is not good. I did watch the news conference, and I think what the president is trying to suggest is, "Look, we've got options out there. We're going to get the best of the ideas out there, but we're going to think outside the box." But I think his example in this particular case is not one that anybody should take literally, and I would also suggest very strongly that we're going to use the medical experts and we will confirm those items which actually work, not items that could be dangerous. And so, I agree wholeheartedly that the Lysol is used as a cleaning disinfectant the way it's supposed to be used and not as an injectant.
And I truly don't believe that the president really intended it to come out that way. I just don't believe he did. I think he's saying, "Look, if there are some things within Lysol that we can go in and do some more research on that kind of stuff, is there something in it that can be used in the future as a therapeutic?" And I think he's musing about all the different opportunities that are out there. But I'll add my voice to those who say, "Do not take that literally." With regard to the guidance right now, look, I like the idea that we've got a president and a governor who are laying out for us every single day the direction and giving advice, giving counsel in terms of getting things back and operating again, letting everybody know that we're paying attention to it and we want people to get back to work. Absolutely critical.
At the same time, we've got to get, for people that are worried about their next paycheck, that are worried about whether or not they're going to have enough money to pay for food, we've got to let them know that there is immediate help available. That's the reason why we did the first refund checks, going back out to as many people as we could get as quickly as possible in terms of $1,200 per person and $500 per child, directly into the checking accounts with as many people as possible so that they have something to get by for a little bit. And second of all, to make sure that people who are available through the PPP to maintain their payroll, to convince our businesses, and in South Dakota we're talking 80% of our businesses have applied for the PPP. That's great news, and that means that the payroll is out there and available for employees of those 80% of the businesses. I like that. I think that was a step in the right direction.
But we also have to make sure that as we do this, that we take care of those folks who, through the unemployment rolls, had no other place to go and that those unemployment checks get out as quickly as possible. We've got a very efficient system here in South Dakota compared to a lot of other States, and we've got people that are dedicated, they've got a huge amount of experience. I think it's a fallback position, but nonetheless, it's a necessary one. But the bottom line is, until such time as we can get back to work, we're all going to feel the effects of this pandemic. We just got to do it as safely as possible with good ideas about hygiene. The separation and so forth, we've got to continue with.
Lori Walsh: And we have to solve that manufacturing problem so we have the test kits and the availability to do some of the things that will help us move forward. I have a question, Senator Rounds, about... People are looking back about what happened in 2008 and the recession that followed, and one of the things that they are arguing is that stimulus fatigue caused money to stop coming a little bit too soon, which caused the rebound to be softer than it possibly could have been. And I want to ask you about stimulus fatigue and Congress now going forward. Is there a point where there's less and less offered, and what kind of longterm... First of all, do you agree with that assessment about 2008, that more could have been done to help the economy if we'd hung in there a little longer with stimulus? And secondly, how are you looking at that right now as a Senator to say, "We can't get tired of solving this problem before the problem is actually solved?" How do we position ourselves best for the best economic recovery when the time comes?"
Mike Rounds: I think the way that I've looked at it is, number one, we have to learn from what we did in the past and whether or not it was successful. With the stimulus, at that time, it was designed for shovel-ready products, and there weren't a lot of those shovel-ready projects out there across the entire country. In South Dakota, we put the vast majority of our stimulus funds, we put it into the highway projects and into local roads repairs and so forth. So, we did a lot of that in the stuff that really did come back in fairly quickly, but a lot of the states didn't have that available to them. They didn't have this stuff ready to go.
So, I think, number one, any kin- of an injection in order to re stimulate the economy that might come up, I think can't be limited just to shovel-ready stuff. And it needs to be laid out with good planning to allow for an intelligent and thoughtful reinvigoration of infrastructure, water projects, sewer project road projects, 5G and 6G activity, all of which will lend additional economic activity not just for this generation, for generations to come. But you still got to, as I told people back in '08 and '09, the complaint that I had at that time was is, "How do we pay for it?" And as a governor, we accepted the money coming in, but we didn't ask, "So, when this does come in, do we have a plan to pay for it?"
And the same question has to be asked now. We're in the middle of a war, and we know that in the middle of a ward you worry, first, about winning the war. And then, if you have the resources and if you have to borrow the money, which is what we're doing, we're borrowing the money to win the war. And once you are successful in winning the war, and we will be, when we're successful in winning the war, we've got to lay out how we're going to finance this. And we've added trillions of dollars. We're going to be close to $25 trillion in debt, which is, compared to our GDP, the most we've had since World War II, and we can't take that lightly. So, as we look at an infrastructure package, and I know the president would like to do an infrastructure package because if you look at the resources we've got, the cost of borrowing money today because of, really, the worldwide demand for US Treasury dollars and so forth and in terms of a place where they can safely put their assets, we've got the ability to borrow money at a very, very low rate.
And I know that they are, at the present time, refinancing and looking at refinancing a lot of the debt that we've got already with lower interest rates. And I would suspect that the Department of the treasury will be coming back out and making suggestions about how to lower the payments and extend out the debt over a longer period of time so that we could actually handle it. I would suspect that that may very well be part of the way that we address the issue of debt going into the future, is refinancing some of the debt that we've got and focusing on building the economy so that our GDP is in such a position to where it can actually handle the amount of debt that we are carrying forward.
Lori Walsh: Us Senator, Mike Rounds, thank you so much for your time today. We appreciate it. We hope to talk to you again in the near future.
Mike Rounds: Thank you very much. Appreciate it. And once again, thanks for the opportunity. Our offices are open. People need to touch base with us, give us a call or catch us on our website.
Lori Walsh: All right. We'll put some links up to that on our website as well. Stay healthy, sir.
Mike Rounds: Thank you.