U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, today spoke to the Utah Association of Financial Services and the National Association of Industrial Bankers this morning about our country’s fiscal crisis. In the speech, Hatch discussed the consequences of our nation’s mounting debt and the looming tax hikes that would hit nearly every American taxpayer unless President Obama and Congress act by the end of this year.
Hatch said that “the bottom line is that when it comes to tax reform, and the looming tax increases, the economy is not going to take no for an answer.” Hatch added that he Congress “need[s] to get moving on tax policy that will abide by the principles of fairness, economic growth, and simplicity. Those were the principles articulated by President Reagan and that motivated the 1986 reform. And they should motivate us today.”
Hatch added that he looks forward to working with Utah’s economic leaders “to make sure that we resolve these pressing fiscal issues in a way that gives America’s families, businesses, and job creators the opportunity to grow and thrive in the coming decades.”
Hatch’s full remarks are below, as prepared for delivery:
It is great to be here again with all of you today, and to share time with some of the people who help make our great state of Utah a shining beacon of prosperity in an otherwise sluggish economy.
And make no mistake, our economy is sluggish.
I talk about it so much, that my wife Elaine is starting to refer to me is Dr. Doom.
But that might be unfair to Nouriel Roubini.
The fact is, our economy remains in very rough shape.
This is the worst economic recovery since World War II. Stalled economic growth is undercutting job creation, and with it the economic security of all Americans. Economic growth slowed to 1.5 percent in the last quarter, down from 4.1 percent at the end of last year. For 42 consecutive months, the unemployment rate has remained above 8 percent. At the current rate of job creation and given current conditions in labor markets, it would take over 50 years to get the unemployment rate down to the 5.3 percent average experienced during the period 2001 through 2008.
There are also renewed signs that business activity is slowing. Activity in the manufacturing sector has slipped into contraction in the past two months. And there are many indications that businesses are putting their hiring and investment plans on hold
The failure of our economy to produce a sustained recovery is in significant part owing to decisions in Washington. Both the coming fiscal cliff -- what some have called Taxmageddon – which threatens to raise taxes on all Americans, and the new taxes and regulations in Obamacare, are creating enormous uncertainty for job creators.
And when it comes to the financial services sector, the Dodd-Frank Act is a significant drag on what should be one of the most productive sectors of our economy. As you are all too aware, the over 2,300 page monstrosity -- otherwise known as the Dodd-Frank Act -- imposed a three-year moratorium on new ILC charters that ends next year in 2013. As a staunch opponent of the Dodd-Frank Act, I for one will be glad to see this important moment come.
Clearly, this is a significant moment for the ILC industry as the moratorium is lifted, but the question is what does this mean?
Although ILCs make up only a small percentage of the banking system, critics have described the industry as a threat. Simply stated, the ILC industry remains small relative to the banking sector, accounting for only one percent of the total assets of federally insured depository institution. Some contend that the industry is under-regulated, but you know and I know that is simply not true, especially here in Utah, where the state does an excellent job of regulating all financial institutions.
In fact, a recent report from the U.S. Government Accountability Office, required by the Dodd-Frank Act, studied this issue and was inconclusive on the threat that ILCs posed to the stability of our financial system. In my opinion, they do not pose a threat. The industrial loan banks are a vital part of the banking industry in Utah, and I do not see how eliminating the growth of this industry will strengthen financial regulation in Utah or anywhere else in America.
With the demands of the general election, I do not expect that much of anything will happen legislatively with respect to banking for the remainder of this year. After the Senate returns from the August recess, there will not be much legislative time for Congressional business before the election is upon us. Beyond the election, you may see a lame duck session to resolve many of the year-end items such as taxes and other issues.
However, I do not mean to suggest that you can relax as you approach next year. Whatever the results of this November’s election, it is important for you to remain vigilant in reminding Congress of the impact that its decisions have on your industry. If past history is prologue, industrial loan companies may remain vulnerable in the future. I see the promise in your industry, but there is much work to do as you approach 2013.
Therefore, my advice to you is that you and others in your industry should continue to maintain and foster good relationships with members on the Senate Banking Committee and the House Financial Services Committee. Bear in mind that there will be some new members next Congress, and you will need to educate them about your industry. At a minimum, Senators Akaka and Kohl on the Senate Banking Committee are retiring.
I know that your industry has a good story to tell, and I hope that you will be able to tell it in the future. But without a growing and well-functioning economy as a foundation, it may all be for nothing. This is why as the current Ranking Member on the Senate Finance Committee, I am doing everything I can to protect our economy by extending the 2001 and 2003 tax relief for all Americans through 2013. The reality is that if we fail to take this action, in about five months almost every single American taxpayer will be hit with the largest tax increase in history. The fact that small business owners will face a top marginal tax rate hike of 17 percent represents a real threat to our economic recovery and job growth.
But you don’t have to take my word for it. Federal Reserve Chairman Bernanke has realized this threat too. The Congressional Budget Office has said that failure to act will push us into recession. In fact, it is already threatening the economy. As the Fed’s monetary policymaking committee has noted, uncertainty about the fiscal environment can lead to companies deferring hiring and investment, while holding back consumer spending and business investment.
It is unfortunate, but if we fail to turn our economy around, your industry won’t have much business to conduct anyhow. This is why I strongly believe that instead of playing political brinksmanship with the economy, we should take the opportunity now to address these critical issues. Action on the fiscal cliff is long overdue, and it overshadows everything. The Senate recently had an opportunity to extend tax relief to millions of hard-working Americans by voting for a bill that I introduced along with Senator McConnell, the Senate’s Republican Leader. Senate Republicans wanted to extend current tax law for one more year until we can accomplish tax reform. By contrast, the Senate Democrats’ bill offered nothing but more uncertainty and tax increases on job creators.
This bill, which mirrors the President’s reelection promises to raise taxes, is the last thing that our struggling economy needs right now.
Instead, we need to be working now towards extending expiring tax policy so that we have the time to effectively reform our tax code to get our country back on track.
Unfortunately, unlike in 1986 the Administration does not seem interested in leading the way and helping to forge a serious proposal for fundamental tax reform. Administration officials have publicly acknowledged that they do not have a reform plan in place and do not intend to act on one before the election.
They might hope to put these decisions off, but I think that the state of our economy is going to dictate the pace of these reforms.
The bottom line is that when it comes to tax reform, and the looming tax increases, the economy is not going to take no for an answer.
And I am not either. We need to get moving on tax policy that will abide by the principles of fairness, economic growth, and simplicity. Those were the principles articulated by President Reagan and that motivated the 1986 reform.
And they should motivate us today.
I expect that next year, Republicans in Congress will have a partner in President Romney, and I know that tax reform is an essential component of his platform. I look forward to working with him and Vice President Paul Ryan next year to achieve the fiscal reforms our economy demands. And I look forward to working with you, to make sure that we resolve these pressing fiscal issues in a way that gives America’s families, businesses, and job creators the opportunity to grow and thrive in the coming decades.
Thank you again for having me here to speak with you this morning.
I am happy to take a few questions.