Hatch Slams Senate Democrats’ Stimulus Infrastructure Spending Bill; Pushes for Common-Sense Alternative
WASHINGTON –U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, today slammed Senate Democrats for offering a flawed $60 billion infrastructure spending bill (S. 1769) that would use permanent tax hikes for temporary, second-stimulus spending and undermine much-needed job growth during a speech on the Senate floor:
Mr. President, let us be clear about what the Democrats’ Rebuild American Jobs Act is and is not about.
It is about expanding infrastructure spending, financed by tax increases.
It is about setting up a brand new government bureaucracy, in the form of an infrastructure bank that will take years to get underway and will subject taxpayers, once again, to private-sector risk taking and to bailouts.
It is about following in the footsteps of the ongoing, costly, government sponsored enterprises — or GSEs — called Fannie and Freddie.
It is about increasing the federal footprint in the infrastructure arena.
It is about increasing taxes on those with incomes above $500,000, now creatively called millionaires, including incomes of many business owners who risk their own capital to create jobs.
It is about further federal wage controls on construction projects which lead to inefficient use of taxpayer funds.
And it is about creating political talking points for the upcoming Presidential election.
Now here is what the legislation is not about. It is not about creating jobs. And it is not about engineering a more efficient and fair tax code.
No, this is the same tune, different song — a bill for more spending, financed with new taxes. It remains baffling to me that this is all that the other side has to offer.
The Democrats’ proposal incorporates more spending on various infrastructure initiatives, including one of the President’s favorites — high speed rail.
As columnist Robert Samuelson wrote in the Washington Post in February of this year: “High-speed rail is not an ‘investment in the future’: it’s mostly a waste of money.”
As for the arguments by some that we risk losing our global competitive edge without things like high-speed rail, I would encourage them to pay attention to what is going on beyond our shores.
China, facing safety concerns, high debt associated with high-speed rail, and political scandals involving kickbacks and undue influence on rail spending, has scaled its plans back and operates some high-speed rail at 30 miles-per-hour.
Spain, a one-time darling of those who promote high-speed rail spending, is also scaling back, having identified such spending as imprudent in the current economic environment.
Here at home, states have rejected high-speed rail initiatives, and we just learned in recent days that California’s bullet train is now projected to cost close to $100 billion, nearly twice its previous projection.
Nonetheless, the administration and my friends on the other side of the aisle wish to plow forward by shoveling more taxpayer funds into exactly those sorts of projects, with little more than rosy projections of future costs and benefits to justify the expense.
Mr. President, I am deeply skeptical that the Democrats’ legislation to fund more infrastructure projects is a good way to address our current national unemployment emergency and need for jobs. According to CBO: “Large-scale construction projects of any type require years of planning and preparation. Even those that are ‘on the shelf’ generally cannot be undertaken quickly enough to provide timely stimulus to the economy.”
And more often than not, the delays are because of burdensome and inefficient regulatory red tape.
As President Obama discovered too late, shovel-ready projects are hard to find. In June, he joked about his first stimulus, saying that: “Shovel-ready was not as shovel-ready as we had expected.” Unfortunately, Americans looking for jobs, and the American taxpayers who are now on the hook to pay off President Obama’s stimulus driven debt, do not find this to be a laughing matter.
The infrastructure bank proposed by the other side would not even be up and running for well over a year, and probably longer. It will take a year or more just to set the bureaucracy up.
How can this possibly have anything to do with creating jobs and lowering unemployment today?
There are worrisome details about the proposed new government infrastructure bank bureaucracy, and the power that it will wield. The proposed bank’s Board is required to give “adequate consideration” — whatever that means — to a host of features including “whether there is sufficient State or municipal political support for the successful completion of the infrastructure project.” While proponents of the infrastructure bank are selling it as a new, politics-free way to fund projects, even the authorizing legislation explicitly calls for political considerations.
The Democrats’ bill also claims that the bank would be a “United States Government-owned, independent” institution. Government owned and controlled by political appointees, but somehow independent.
Just like a GSE.
The definition of “eligible infrastructure project” in their bill includes a wide range of possible projects, including high-speed rail, which Americans do not want or need, and solid waste disposal facilities like the one that drove Harrisburg, Pennsylvania into bankruptcy.
Most worrisome, the infrastructure bank Board is provided with the authority to make any modifications it would like, at its discretion, to what constitutes an eligible infrastructure project. How long do you think it would take for the Board to start doling out taxpayer funds to non-viable projects?
Proponents of the infrastructure bank make the peculiar argument that, somehow, because the bank would not be able to make grants, taxpayers face no risks of losses. Yet the bank is empowered to make loans, which are risky. And the bank is empowered to issue loan guarantees, just like taxpayer-backed government guarantees of Fannie and Freddie.
How is that not risky?
Also problematic is direct authorization in the Democrats’ proposed infrastructure bank for deferral of payments of direct loans in the event that “the infrastructure project is unable to generate sufficient revenues to pay the scheduled loan repayments of principal and interest on the direct loan under this Act…” Translation: If a project’s revenues streams are insufficient to pay off the government loan, then the loan gets modified and extended.
This, of course, benefits any private partner of the taxpayer-funded infrastructure project while taxpayers are put on the hook for the losses. This is an explicit admission, in the authorizing legislation, that contingencies are expected in which taxpayers suffer losses and end up bailing out private entities. This is the essence of a corporate bailout.
This is corporatism at its worst — privatized profits and socialized losses.
The whipsawing here is too much to handle. On one hand, the President, former community organizer, stands with the Occupy Wall Street protestors, criticizing the so-called rich.
On the other hand, he and his congressional allies support legislation that would make taxpayers responsible for the bad decisions of wealthy contractors.
I look forward to the critiques of this crony capitalism at the Occupy Wall Street gatherings.
And taxpayers are on the hook for billions. Keep in mind that it is not merely the advertised initial price tag of $10 billion of taxpayer money necessary to start up the proposed new infrastructure bank bureaucracy that would be at stake. The bank will be empowered to “leverage” taxpayer dollars to support ten, twenty, or maybe thirty times that amount for so-called private-public partnership projects.
Have we already forgotten that leverage is what helped create the largest financial crisis since the Great Depression?
Yet amazingly, for proponents of the infrastructure bank, leverage in this case is a good thing. Make no mistake, leverage means risk, and more leverage means more risk.
Why, when taxpayers have not even seen the last of the losses from Fannie and Freddie, would we even consider setting up a brand new public-private mongrel called an infrastructure bank that will again subject taxpayers to losses?
Why would we set up a new federal bureaucracy that will require bailouts on projects specially selected by unelected political appointees with the powers to pick winning and losing projects eligible for government assistance?
It is of interest that one of the new pitches for an infrastructure bank is that we need it to help us be more globally competitive. Sometimes, comparisons are made with the growth of infrastructure spending in developing countries like China.
But of course developing countries devote many resources to infrastructure spending. It is almost a tautology: those countries are starting with a much smaller beginning base, so you would expect a need for greater growth.
Proponents of infrastructure spending cite rankings of the U.S. globally on its infrastructure from a recent World Economic Forum’s Global Competitiveness Report.
If they had read the most recent report carefully, they would note that it identifies that the top two most problematic factors for doing business in America are tax rates and inefficient government bureaucracy. Yet, the Democrats’ bill seeks to increase tax rates and construct a new bureaucracy called an infrastructure bank.
Mr. President, we do not need a new federal bureaucracy filled with politically appointed bureaucrats.
We do not need government picking economic winners and losers. We do not need more government spending years from now to deal with an unemployment crisis today.
We do not need more taxes at a time when the unemployment rate is stuck at 9.1%. And we most definitely do not need another GSE. But I can tell you, if you liked Fannie and Freddie, you will love the proposed infrastructure bank.
Once again, the other side has turned to divisiveness and class warfare. Evil millionaires and billionaires, who Democrats now define as an individual with income starting at $500,000, need to be brought to economic justice. A 0.7 percent tax — or whatever the rate-of-the-week special cooked up by the Democratic war room happens to be — imposed on individual income that begins at $500,000 will bring equality and justice for all.
A few points need to be made about the surtax proposal.
First, it is more taxes to pay for more government spending. We need to keep that in mind when we hear Democrats talk about the need to raise taxes to reduce the deficit.
Second, it is not real economic or tax policy. It is designed to deliver a talking point to an Administration increasingly concerned about its reelection prospects.
Mr. President, I remind my friends on the other side of the aisle, again, that those earning $500,000 or more, who they creatively call millionaires and billionaires, are not a static group of people. Many who earn those amounts in one year are likely to earn far less in the next year or in the prior year. In fact, the highest-income taxpayers are a dynamic and rapidly changing group.
And keep in mind that a significant number of people hit by the Democrats’ tax hike would be business owners — the same people we need to create new jobs. Significant fractions of net positive business income and of active flow-through business income would be subject to Senator Reid’s new surtax. This is especially harmful to small businesses, which are often organized as flow-through entities, including sole-proprietorships, partnerships, LLCs, and S-corporations.
Mr. President, we do not need higher taxes that will fall on job creators to write checks for the President’s special preferences, like spending on high-speed rail that Americans do not want or need.
We do not need a risky, GSE-like, taxpayer-funded infrastructure bank populated by political appointees able to pick and choose whatever spending they’d like to define as an infrastructure project, while subjecting taxpayers to private risk taking.
Fortunately, there is a better way, and it is contained in my legislation titled the Long-Term Surface Transportation Extension Act of 2011. Briefly, here is what it does.
It eliminates dedicated funding for transportation enhancements and gives states the authority to decide whether to spend resources on add-ons such as bike paths.
It reforms the National Environmental Policy Act — or NEPA — by eliminating inefficient bureaucratic red tape and accelerating project delivery and contracting, just as called for by the President’s Jobs Council.
It supports job creation by placing a temporary time-out on job killing regulations that are estimated to have significant economic effects.
It includes provisions for waivers of inefficient environmental reviews, approvals, and licensing and permitting requirements for road, highway, and bridge rebuilding efforts in emergency situations.
It goes straight to the matter of job creation and it draws from bi-partisan recommendations, including recommendations from the President’s own bi-partisan Jobs Council.
And it allows fully paid-for infrastructure projects to be undertaken to help build roads, bridges, and a host of other projects without imposing permanent, job-killing, higher taxes during our national unemployment emergency.
Mr. President, I urge all of my colleagues to vote in support of my legislation and to vote against the tax and spend alternative offered by those on the other side of the aisle.
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