Mr. BOND. Madam President, I am going to take advantage of the attention Senator Bennett brought to give some of my views on the economy and the compromise bill that we hope will be pending before the Senate. My apologies for lowering the grade of discourse by moving down to such a mundane but nevertheless important subject.
Madam President, it has been more than 2 years since the severe crisis beginning in the housing and mortgage markets nearly brought down the financial system, and with it the entire economy, in late 2008.
The American people are still struggling from the effects of this crisis. Unemployment continues to rise and is nearly a staggering 10 percent, millions of families continue to face home foreclosure, and many more are having difficulties finding financing to make large purchases or run businesses.
We face no more important task than stabilizing the economy. On November 2, Americans sent a clear message to Washington.
They have had enough of the runaway spending, the exploding debt, the bailouts, and the job-killing policies coming out of this Congress and administration. The recent election showed us that Americans will not settle for a Washington agenda that does not make economic recovery, fiscal restraint and job creation the top priority.
We need new jobs now. Plain and simple I cannot be any clearer about this point. As I have said repeatedly on this floor, government cannot create jobs, but it can create the conditions to allow the private sector to flourish through low taxes, commonsense regulations, and enhanced trade opportunities.
Unfortunately, for the past 2 years, Washington has moved in the opposite direction, seeking to raise taxes, increase regulation, and allow trade agreements to wither.
We now have an opportunity to move towards more commonsense approaches that will help in job creation. And we can start now, during this lameduck session.
We must address the looming tax hikes scheduled to hit every American on January 1.
The proposal the President outlined earlier this week is an important step., His efforts to stop the crippling tax hikes in January from hitting American families and small businesses show he has gotten the message.
I only hope he can convince Democrats in Congress what Republicans and the American people understand, raising taxes on the people and small businesses that create jobs is a really bad idea. The President's plan first and foremost ensures that our small businesses will not face the largest tax increase in American history.
Why is this important? Because our small businesses: Represent 99.7 percent of all employer firms, employ just over half of all private sector employees, pay 44 percent of total U.S. private payroll and, have generated 64 percent of net new jobs over the past 15 years.
As my colleagues know, most small businesses are taxed as individuals through their proprietorships, partnerships, or subchapter-S corporations. So if you raise taxes on those earning above $200,000 or $250,000, you are raising taxes on small business owners--the ones most able to create jobs.
The President's compromise also ensures the death tax will not come back to life at the sky-high rate of 55 percent. This is an important provision, because the death tax is anti-savings, anti-family, and anti-investment. It is quite simply unAmerican, and it should be eliminated entirely. The President's plan increases the estate exemption from $3.5 million to $5 million and maintain the 2009 rate of 35 percent is a step in the right direction. It will keep families production farms and businesses from having to sell the farm or business to pay estate tax. We need to pass this compromise before we leave town.
Extending tax cuts is one way we can help the private sector create jobs. That alone is not enough.
There is another area that Congress has direct control over, and that is spending. For the economy to recover and create jobs in the long term, Congress simply must control spending. Today, our debt totals more than $13.8 trillion, which breaks down to more than $44,000 for each citizen's share of that mind-boggling amount.
Likewise, our annual deficit, the amount we add to our children and grandchildren's credit cards, stands at roughly $1.34 trillion, but left unaddressed, could reach as high as $9 trillion over the next decade.
Both entitlement and discretionary spending must be cut. Runaway entitlement spending is stifling our prosperity and will continue to hold our economy back if not addressed promptly.
I am hopeful the next Congress will make this debate their top priority, enact necessary legislation to curtail our drastic runaway spending and raise revenue through a more fair and efficient tax regime.
I believe the debt commission has come up with a reasonable proposal. I may be so bold as to suggest that we establish a BRAC-type commission, a BRAC-type proposal, to deal with that Commission and say it can be accepted or rejected on a simple up-or-down vote by both Houses. That is one good step.
The other step that has to be taken is to reform entitlements. I am disappointed they did not deal with that. But the health care costs of Medicare and Medicaid plus Social Security are what is going to drive our spending through the roof.
Along with extending tax cuts and restraining spending, opening new markets to American businesses through free trade is another critical component to future economic and job growth.
Up until President Obama's recent push for trade in Korea, our pending free trade agreements have been held up to safeguard the interests of labor and extreme environmentalists. I congratulate the President for moving forward on this important job-creating agreement.
With the election behind us, I hope that the politicization of trade in Congress will be behind us as well.
The new Congress must renew its efforts to expand and open up new markets abroad, particularly in Asia where the most dynamic growth in this century will take place.
The Obama administration deserves credit for attempting to reinvigorate the U.S. focus on Asia and trade with this dynamic region.
Trips by the President and the Secretary of State to Asia have helped to elevate ties with longstanding friends and allies like Korea and Japan. They have also been working to forge deeper, stronger relationships with India, Indonesia, Malaysia, and Vietnam.
Reaching an agreement on the U.S.-Korea FTA signals that the United States can return to a leadership position on trade and create some much-needed jobs based on exports here at home.
We must play a leadership role in negotiating and pursuing new FTAs, like the Trans-Pacific Partnership and approving the long-awaited agreements with Colombia and Panama.
Even the Chairman of the President's own Export Council, Jim McNerney, CEO of Boeing, has warned that a failure to approve the free-trade agreements will leave the United States at a ``significant disadvantage'' to other nations that are working to lower barriers to their exports.
For example in Southeast Asia, where the United States exports as much as it does to China, China has negotiated a free trade agreement with all 10 ASEAN countries.
We are languishing while our competitors are moving forward with their own FTAs to give their exporters and their workers a competitive edge.
One such opportunity to increase jobs in the U.S. and secure our strategic interests in the paramount Asia-Pacific region, is the Trans-Pacific Partnership or TPP. The TPP would ensure the United States remains fully engaged in the Asia-Pacific region where strong economic growth will occur in the 21st century.
The partners involved in the TPP discussions now include, in addition to the United States: Australia, New Zealand, Chile, Peru, Malaysia, Vietnam, Singapore and Brunei, which represent the fastest growing regions in the world.
Another way in which we ought to view the TPP, and other free trade agreements, is as a way to cash in on the peace dividends created in the region from our efforts in World War II, the Korean war, and the Vietnam war.
The TPP will open Asian markets to United States exports in a way that we have never seen.
We are already the world's largest exporter. We can build on that and create millions of new jobs by aggressively competing in markets abroad and by rejecting isolationism at home.
In closing I will put these economic considerations in a larger context.
In the 24 years I have been in the U.S. Senate, I have traveled around the world and have seen the remarkable change that came with the fall of the Soviet Union.
With the fall of Socialism and Communism, countries around the world immediately began to look to the United States as ``the'' economic model.
Our free enterprise system has demonstrated that successful businesses can provide job opportunities for all our citizens. This is a classic case of the rising tide lifting all boats.
As the economy gets stronger, people up and down the economic scale benefit, and people in low-wage jobs have the opportunity, through hard work and/or education, to move on up the ladder.
These countries are not looking to Denmark or Sweden with their very high tax rates as a model.
They see the difference between a government-controlled economy and a free economy with appropriate government regulation.
The European Socialist model has demonstrated that it does not grow as quickly as the U.S. economy.
High levels of unemployment generate more social welfare and transfer payments. These transfer payments put pressure on the government to raise taxes even higher, and make more people dependent upon the largesse of the Federal Government.
Last year's ``stimulus'' program did a tremendous job of putting more people on the government payroll. It did not do much for creation of jobs in the private sector.
The private sector in the United States has historically been vibrant and it will create jobs despite increasing government taxation, deficits, and regulation.
But the number of jobs created necessarily will be far less than what the free market system could create if it were not inflicted with an increasing government role.
Using history as our guide, high taxes and excessive spending, such as the new health care bill, will likely lead to a slower recovery, continued high unemployment, and a lower standard of living for all Americans than would otherwise be possible.
There is a chance now for us to reverse course, stop tax hikes, put the brakes on spending, reform entitlement programs, and to pursue new trade opportunities that will create jobs. I believe that is what the American people expect us to do.
Real growth is only possible if we get our fiscal house in order.
If we care about jobs in this country and the future of the economy, Congress cannot continue to vote for thousand-page bills that are full of job-killing provisions.
And Congress cannot continue spending in such a way as to destroy the prosperity of future generations stuck paying the bill.
I am hopeful that the next Congress will make this debate their top priority and enact necessary legislation to curtail drastically our runaway spending and to raise revenue through a more fair and efficient tax regime.
Madam President, I wish to include for the Record my discussion of the role housing played in the bubble we had, the crash, and the recession we have gone through. I have spent all my time in the Senate either looking at housing on the Banking Committee or as a member and then chairman or ranking member of the appropriations subcommittee that funds housing. Most of my friends are not interested in hearing a full description of the housing crisis and what needs to be done. I will give them the opportunity to read it at their leisure.
Promoting what we think is the American dream by giving people no-downpayment homes, homes which they don't have the financial ability to afford, is not the American dream. It leads to the American nightmare. The American nightmare, unfortunately, for too many families, has resulted in home foreclosures, and communities with large numbers of foreclosed houses that are deteriorating thanks to the genius of Wall Street which, through its wonderful, innovative efforts, created high-tech computer game derivatives on which they made profits by selling around the world, which crashed and brought not only our economy but the world economy down. We have to stop that trend. We need a responsible housing policy to rein in Fannie and Freddie, keep them from buying up housing mortgages which are not subject to underwriting standards which could cause problems in the future. These items are all laid out in the statement I include.
If anybody reads them, I would be happy to answer any questions they have.
I ask unanimous consent to have the statement printed in the Record.
There being no objection, the material was ordered to be printed in the Record, as follows:
As I prepare to leave the Senate after 24 years, I have had the opportunity to reflect upon some of my most rewarding work in various issue areas.
If my colleagues will indulge me for a few minutes, I have some thoughts to share about America's housing and community development policy.
This is not typically an area that gets a lot of attention, though certainly it has gotten some negative attention because of the recent housing market meltdown.
But good housing is fundamental. It is fundamental to each of us as people. And it is the foundation of any community.
To a community, good housing means economic development and jobs. It means kids are safer, healthier and happier.
To an individual, a home means safety and security, a starting point from which to do everything else in life.
And good housing goes hand-in-hand with community and economic development. One cannot sustain a community very long if there are no jobs. And there won't be jobs if companies don't locate in a particular area, and so forth.
Early in my Senate career, I joined the Housing Subcommittee of the Senate Banking Committee. A few years later, during the 102nd Congress, I became a Member of the VA-HUD-Independent Agencies Appropriations Subcommittee.
Since that time I have been either Chairman or Ranking Member of the Housing Appropriations Subcommittee.
And I have had the good fortune of having as partners in my work the Senator from Maryland, Barbara Mikulski and the Senator from Washington, Patty Murray. I cannot say enough good things about each of these fine colleagues and the work they do.
While bipartisanship has become something of an anachronism in today's Washington, that is not the case on this Subcommittee. These Senators have always been willing to work on a bipartisan basis to get things done for the American people, and I deeply appreciate each of them.
So I have had the opportunity to be involved in housing issues both from a policy and from a funding perspective.
As I have worked on these issues through the years, I have discovered that housing and economic development are the glue that holds our communities together, even though urban and rural areas often face difference issues and concerns. Both are important and I have worked to promote their unique needs.
If we provide the right incentives and investments for growth and opportunity, then families and individuals will prosper and grow, with a tax base that will allow the needed investment for infrastructure, schools, hospitals, libraries and all the necessary amenities that make our Nation great.
As we are all painfully aware, we are at a crossroads when it comes to housing policy in this country. We have seen the devastating after-effects of a housing ``bubble,'' and how the housing market meltdown nearly precipitated a worldwide economic depression.
In part, this crisis was preceded by unrealistic expectations in housing.
Homeownership is perceived by many as key to achieving the ``American Dream.'' However, most of us now recognize that homeownership, while a blessing for many, is not an ideal solution for all. For example, in many cases, rental housing is appropriate for families.
It provides flexibility while limiting exposure to frequent variations in market conditions.
Homeownership is a great way to build wealth for those able to maintain financial stability throughout the life of a home loan.
However, by subsidizing homeownership, and encouraging all families to own homes, even those without realistic resources to maintain their mortgages, the government has turned the American Dream into a nightmare for homeowners, neighbors, communities, the global financial system, and taxpayers.
Since 2007, millions have had their homes foreclosed; millions more are at risk. In the aftermath of this meltdown, the government's efforts to date fall far short of what is required to address adequately the growing number of foreclosures that are hurting homeowners and communities.
As we have seen with previous housing bubbles, the taxpayer ends up bearing the brunt of the costs and the government ends up holding foreclosed properties. The last time I checked, the government did not do a good job of being a landlord.
It is critical that policy-makers address our overall housing policy and the proper role of government versus the private sector.
I believe that three essential areas of our housing system must be reformed. We must address:
Housing finance issues;
Tax policy;
Affordable housing for all.
With a comprehensive but balanced approach, I believe the United States can join other nations in creating a market where responsible consumers buy and retain their homes with confidence; where those who should rent are able to access affordable, safe housing; and where the needs of the homeless and vulnerable are met.
HOUSING FINANCE
First, we need to make changes in the amount of involvement the federal government has in housing.
The federal government is now responsible for 95% of the mortgage market. The Federal Housing Agency (FHA), Fannie Mae, and Freddie Mac guarantee nearly all mortgage loans in the U.S. They are fully backed by the federal government. This means it is the taxpayer who will ultimately be on the line to foot the bill as these entities pay for defaults.
FHA
As many of you may know, I not-so-fondly refer to FHA as a ``powder keg'' or ``ticking time bomb.'' FHA's market share has increased dramatically while its capital reserves have significantly decreased.
FHA's rapid growth in the mortgage market is largely due to the fact that the average homebuyer receives a guaranteed loan with a down payment of only 3.5%--lower than any sane lender would require.
I remember growing up in an era where you did not buy a home unless you had 20% of the loan upfront.
But who would put that much cash down if they are incentivized by the federal government to pay far less?
The current ceiling for an FHA loan is over $720,000 dollars. While I realize that there are some areas of the country considered ``high-cost,'' keeping the loan limits at such high levels perpetuates big government and increases the risk to taxpayers. It is time to reduce the FHA loan limits.
There is a private housing market ready to fill the FHA gap and we need to restart the private housing market and let HUD return to helping first-time homeowners and the more marginal housing applicants.
Rather than continuing to extend these expiring limits, I hope that my colleagues will begin to take a comprehensive look at our nation's housing policies and determine who truly needs the government to back their home loans.
High loan limits and low down-payments combined with the FHA's seeming inability to prevent waste and fraud, sets up the taxpayers for another huge bailout (estimates range from $54 billion to $100 billion). With FHA's capital reserves already at dangerously low levels (below the mandated level of 2 percent), raising the loan limits is equivalent of pouring more gasoline on the fire. The recently-retired HUD IG testified that the increased loan limits are a contributing factor to FHA's growing risk.
In the 2010 housing appropriations bill, I worked with my colleagues on the committee to include $20 million dollars for FHA anti-fraud activities and $5 million dollars in additional funding for the HUD Inspector General to conduct oversight.
FHA has had long-standing management and resource challenges, so we provided $180 million dollars to modernize their information-technology systems to track better mortgage and associated obligations.
In a rational world, Congress and the White House would tighten FHA underwriting standards, in particular by eliminating the 100 percent guarantee.
That guarantee means banks and mortgage lenders have no skin in the game; lenders collect the 2 percent to 3 percent origination fees on as many FHA loans as they can push out the door regardless of whether the borrower has a likelihood of repaying the mortgage.
The bottom line: Congress must take stronger action to shore up the weakening insurance fund to prevent another financial meltdown for another federal entity.
FANNIE MAE/FREDDIE MAC
Not only did this Congress fail to address our housing finance system, the Financial Regulatory Reform bill passed without any Republican participation and failed to address the problem of Fannie and Freddie when these two government sponsored entities were, I believe, at the heart of the housing finance bubble collapse.
The legislation did nothing to rein in the future role of the Government Sponsored Enterprises (GSEs), even though many of us encouraged the leadership to do so during the financial reform debate. Some of my colleagues proposed a finite end to the government conservatorship of Fannie Mae and Freddie Mac. Others favor a gradual move towards reducing the government's exposure to risk by lowering loan limits to a level which is sustainable.
We have already experienced the pain that the GSEs, Freddie and Fannie, can cause, and that pain is expected to continue.
The Federal Housing Finance Agency (FHFA) reported recently that the total cost to the federal government since taking Fannie and Freddie into conservatorship could rise from $148 billion dollars to an astounding $363 billion dollars.
Responsible reform would put an end to the taxpayer-funded bailout of Fannie and Freddie and refocus them on promoting affordable housing. I believe strongly that whatever path is chosen for the future of the GSEs, it is essential that any cost to the government for supporting these entities be placed in the annual budget and accounted for with all other programmatic spending.
I believe the operations of the GSEs must be dramatically wound down to shift the risks from the taxpayers to the private housing finance market.
TAXES
Today, the tax code provides generous incentives to encourage homeownership through the mortgage interest deduction, property tax deduction, and capital gains tax exclusion. The Joint Committee on Taxation estimates that for 2008 these tax incentives totaled just over $108 billion.
The tax code needs to be fair and not skewed toward those who are able to purchase million-dollar homes; it should treat homeowners on a level playing field that helps preserve an effective tax code.
Specifically, the mortgage interest deduction can be claimed by anyone whose mortgage balance is less than $1 million.
Like many, I believe that the federal government should not provide a hefty deduction for mortgage interest paid for million-dollar homes when many families are struggling to maintain homes that average $500,000 dollars or less. This deduction level needs to be revisited soon.
Other government gimmicks such as the First-Time Homebuyers Tax Credit simply kicked the reality of our housing market woes down the road further, and today we are feeling that pain.
Initially, I supported the creation and first extension of the home-buyer tax credit. As a long-time housing advocate, I believed the credit, combined with other tools such as housing counseling and refinancing efforts by state housing finance agencies would help in the stabilization and recovery of the housing market.
Like many of my colleagues, I believed that it was critical to address the housing market that was at the root of the credit crisis and led to our recession. However, the housing crisis evolved from a crisis caused by loose lending through risky subprime loans to a crisis where job loss has become the primary cause of foreclosures and delinquencies.
Today, we can look back and see that the newly-formed tax credit was costly and a target of fraud.
Congress needs to stop trying prescriptive programs to cure a systemic disease that has plagued U.S. housing for too long. Rather than credits or incentives for some, we should allow the market to correct itself and truly feel the bottom of the recession so that a genuine, solid recovery can be realized.
So the question I ask my colleagues is: why are we continuing these debt-fueled policies that led to our housing and economic troubles? Why do we keep using taxpayer dollars to distort and manipulate the housing market?
Americans expect Congress to address fully the causes of the recent financial crisis. As we work toward a full economic recovery, it is essential that Congress address the root of the problem--failed housing policies that were pushed by the government and manipulated by the private market to reap unprecedented profits for a few bad actors.
I strongly urge my colleagues to consider carefully the future role of government in housing, so that the people of this great nation do not bear the burden of a housing crisis ever again.
AFFORDABLE HOUSING
As is always the case, the housing collapse and subsequent recession have hit vulnerable people the hardest.
We must continue to look forward and renew our commitment and energy to ensure that all Americans have fair access to safe and affordable housing.
It is unacceptable that people with disabilities, families with children and minority residents still meet severe challenges for fair housing.
It is unacceptable that the 20 percent of Americans who suffer a physical disability face a significant shortage of accessible and affordable housing.
It is unacceptable that one-in-five Hispanics, African Americans, Asians or Native Americans still face discrimination when renting, buying, or financing a home.
And it is unacceptable that so many families, veterans and the mentally ill are homeless.
VA-HUD COMMITTEE
HUD has a number of primary ``core'' programs to address these needs, including Section 8 housing assistance, public housing, Section 202 housing for the elderly, Section 811 housing for persons with disabilities, the Community Development Block Grant program, the Housing Block grant program, the FHA mortgage-insurance programs and the Homeless Assistance program.
I think it is safe to speak for my colleagues, Ms. Mikulski and Mrs. Murray, in saying that it has not always been easy to garner support for these programs, particularly during tight budget years.
But we did, in fact, increase funding and make these programs more effective through our partnership on the Subcommittee, even when successive Administrations--Democratic and Republican--were not supportive.
In fact, many of the innovations that provide cohesion among the programs were first included in the VA-HUD Appropriations bill at our insistence.
Looking ahead, public housing still faces a crisis of some $20 billion-$30 billion in a backlog of capital needs.
It will take vision and will to persevere and make progress addressing this, but there are some good ideas that can help move us forward. Choice Neighborhoods is one such program that provides a mixture of ideas and perspectives for addressing public housing challenges.
And this is an expansion of the HOPE VI program which dramatically changed the way we think of public housing in this country.
HOPE VI
A few of my colleagues will remember our efforts in the early 1990s to rid cities of dilapidated public housing projects which forced residents to live in substandard housing and had become breeding grounds for crime and drug abuse.
The federal government had a rule at that time requiring a one-for-one hard unit replacement of any housing units slated for demolition.
The intention was good, but in practice this meant that cities could not replace housing stock, even if it was uninhabitable.
So with the help of Senator Mikulski, I convinced my colleagues to include a provision in the National Affordable Housing Act of 1990 that would allow St. Louis, in particular, to replace a dilapidated complex called Pruitt-Igoe with both vouchers and hard units.
This demonstration led to what is now known as the HOPE VI program, which has been very successful in developing mixed-income housing and transforming many distressed communities into revitalized neighborhoods with new jobs and economic investment.
FIGHTING HOMELESSNESS
In 2009, I teamed up with Senator Jack Reed (D-RI) to introduce comprehensive legislation designed to get homeless individuals and families into permanent supportive housing where appropriate and to assist others at risk of homelessness so they do not end up on the streets.
The Homeless Emergency Assistance and Rapid Transition to Housing Act (HEARTH) builds upon recent research showing that providing permanent supportive housing is a more effective way to fight homelessness than providing only emergency shelter programs.
Our legislation:
Provides $2.2 billion for targeted homelessness assistance grant programs;
Allocates up to $440 million for homelessness prevention initiatives, like those serving people who are about to be evicted, live in severely overcrowded housing, or live in an unstable situation that puts them at risk of homelessness;
Expands the definition of homelessness to allow families on the verge of becoming homeless to qualify for assistance.
The HEARTH Act was approved by the Senate as part of the Helping Families Save their Homes Act, and signed by the President in May of 2009.
HOMELESS VETERANS
According to the National Alliance to End Homelessness, about 20 percent of the homeless using shelters in the U.S. are veterans. Homelessness is a major problem among Iraq and Vietnam veterans, particularly those who may have both physical and psychological problems like Post-Traumatic Stress Disorder (PTSD) or Traumatic Brain Injury (TBI).
Senator Murray and I started a new partnership between HUD and the VA to help homeless veterans in the 2008 Transportation-Housing spending bill.
The program, known as the Veterans Affairs Supportive Housing Program, or HUD-VASH, combines rental housing assistance with case management and clinical services to assist homeless veterans. Veterans use Section 8 rental assistance and the supportive services they need to be integrated back into their communities and former lives.
We have continued to fund the program in the years since and I hope that will continue after I am gone.
In closing, I note that many Americans have experienced a very rough time when it comes to housing recently. We have the opportunity now of learning from the mistakes that were made and taking steps to ensure that such a crisis does not happen again.
One simple principle I hope everyone in this body will remember is that a successful housing program requires that every participant in the process must have ``skin in the game.''
To ensure that everyone has ``skin in the game'' we must:
(1) End ``no-down payment'' purchases by homeowners, and require at least a 5 percent down payment;
(2) End the 95-100% government guarantee of loans; make lenders and loan promoters face a real economic loss for any bad loan they promote; and
(3) Require that any loan securitizer keep a stake in the loan or mortgage that will be wiped out if the security fails.
In sum, good housing does not require home ownership; a family can live in rental housing when appropriate to their financial circumstances, and we can encourage the availability of such housing.
There are a number of ideas worth pursuing in the affordable-housing arena that will ensure that more Americans have stability in their housing arrangements so they can pursue their lives with some security.
While I will no longer have the opportunity to participate in Senate debates over housing policy, I look forward to continuing my involvement in these issues in the next phase of my life.
Thank you, and I yield the floor.
Mr. BOND. I yield the floor to my good friend and fellow retiring Senator from my neighboring State of Kentucky, who has been known for his talents on the baseball diamond but also has some, I am sure, very candid comments on what he thinks the Senate has done and ought to do. I will listen with great interest.
Source: http://thomas.loc.gov/
