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Washington, D.C. — Senator Orrin Hatch, R-Utah, took to the Senate floor today to identify pro-innovation policy priorities for the 114th Congress. His speech outlined a series of bipartisan legislative initiatives he will help advance early in the next congress.

Below are select excerpts: 

On Patent Trolls:

Patent trolls – which are often shell companies that do not make or sell anything – are crippling innovation and growth across all sectors of our economy. It is estimated that abusive patent litigation costs our economy over $60 billion each year. With so much on the line, how can we afford not to act?  Yet, the current Senate did exactly that, and ignored the very real opportunity we had to follow the House of Representatives and pass bipartisan legislation that was supported by the White House.

Now, there are some who argue that patent troll legislation is not necessary in light of the Supreme Court’s decisions in the Octane Fitness and Highmark cases. Ms. Charlene Morrow and Mr. Brian Lahti, however, writing in the BNA Patent, Trademark & Copyright Journal, confirm that “nothing in these cases addresses the proposed reforms to make the real parties in interest who are managing patent assertion entities responsible for fees and costs.” As these experienced practitioners acknowledge, such legislation is essential to address fee-collection concerns faced by defendants in patent litigation. One of the legislative approaches Ms. Morrow and Mr. Lahti propose is to make bonding more readily available at an early stage of litigation.

It is past time that the Senate does its part.  I’m determined to make such patent reform a priority early next year, and to make sure we send the President a bill he can sign into law for the good of American innovation.

On Trade Secrets: 

We have made some progress in moving forward trade secret legislation. Earlier this year, the Senate Judiciary Subcommittee on Crime and Terrorism held a hearing on the importance of creating a private right of action for trade secret theft. And the House Judiciary Committee reported its bill, by voice vote, on September 17th.  Although we didn’t get the bill across the finish line this Congress, we are well positioned to move trade secret legislation early next year. It’s past time to enable U.S. companies to protect their trade secrets in federal court.

On the Electronic Communication Privacy Act:

To make matters more complicated, ECPA is silent on the privacy standard for accessing data stored abroad. Storing digital information around the world – a practice that did not exist when ECPA became law – is now routine.  Moreover, the federal government has taken advantage of this statutory silence to apply its own standard, requiring access to data abroad if the company storing it has a presence in the United States. For that reason alone, Congress should amend the law. 

That is why – together with Senators Chris Coons and Dean Heller – I introduced the Law Enforcement Access to Data Stored Abroad Act.

The LEADS Act would require a warrant when the government demands customer communications from third-party service providers. Such a warrant would only apply to data stored in the United States, unless the data is owned by a U.S. corporation, citizen, or lawful permanent resident. To provide additional protections, the bill requires courts to modify or vacate such warrants if they would require the service provider to violate the laws of a foreign country.

On High Skilled Immigration:

There is widespread consensus and real opportunity for bipartisan, bicameral reform of our outdated visa system for economically essential high-skilled immigrants. For too long our country has been unable to meet the ever-increasing demand for workers trained in the science, technology, engineering, and mathematics – or STEM – fields.  As a result, some of our nation’s top technology markets are in desperate need for qualified STEM workers.

This is one of the principal reasons why I, together with Senators Amy Klobuchar, Marco Rubio, and Chris Coons, introduced the bipartisan Immigration Innovation (or I-Squared) Act. To date, the legislation has 26 bipartisan cosponsors. Among other things, the I-Squared Act provides a thoughtful, lasting legislative framework that would increase the number of H-1B visas, based on annual market demand, to attract highly skilled workers and innovators. The bill also reforms fees on H-1B visas and employment-based green cards to fund a grant state-based program to promote STEM education and worker retraining.

The full text, as prepared for delivery, is below:

 Mr./Madam President: I rise today to emphasize the importance of keeping our technology industry at the forefront of the global economy.

America has made extraordinary strides in innovation.  For decades, we have been the world’s leader in developing new technologies and advancing the Internet age.  But we are not the only nation in the hunt.  Across the globe, and particularly in China and other parts of Asia, our international competitors are working furiously to catch up.  If the United States is to enjoy continued success in the technology arena, policymakers must ensure that we have a legal and regulatory landscape that will enable our innovators to thrive.

As chairman of the Senate Republican High-Tech Task Force, I have been working with colleagues and stakeholders to develop an innovation agenda for the coming Congress.  Today, I would like to highlight several bipartisan initiatives we should prioritize early next year to help ensure the continued success of our high-tech economy.

First, Congress must act to protect America’s innovation and inventiveness.  An essential part of fostering innovation is protecting legitimate intellectual property rights. In particular, we must enact legislation to combat abusive patent litigation.

Patent trolls – which are often shell companies that do not make or sell anything – are crippling innovation and growth across all sectors of our economy. It is estimated that abusive patent litigation costs our economy over $60 billion each year. With so much on the line, how can we afford not to act?  Yet, the current Senate did exactly that, and ignored the very real opportunity we had to follow the House of Representatives and pass bipartisan legislation that was supported by the White House.

Why would anyone walk away from the opportunity to enact pro-innovation policies that would do so much good for our economy?

It’s no secret that trial lawyers and others told the current Majority Leader not to bring patent troll reform up for a vote. And we all know that when the trial lawyers sayjump, the only answer for some of my Democratic colleagues is how high.

While I am disappointed the Senate failed to act during this Congress, I intend to help ensure that we pass such legislation next year. Fortunately, combatting patent trolls is a priority for incoming Senate Judiciary Committee Chairman Chuck Grassley and House Judiciary Committee Chairman Bob Goodlatte. 

I look forward to working with them and others who are committed to making long-overdue reforms to our patent laws, including: mandatory fee shifting, heightened pleading and discovery standards, demand letter reforms, and a mechanism to enable recovery of fees against shell companies. 

In addition, we must improve the quality of patents issued by the U.S. Patent and Trademark Office. Low-quality patents are essential to a patent troll’s business model. I am optimistic that we can reach agreement on how best to improve the patent process. 

We also need a high-functioning and well-funded USPTO.  A fully funded patent office, would – at the very least – mean more and better trained patent examiners, more complete libraries of prior art, and greater access to modern information technologies to address the agency’s growing needs.  All of these improvements would lead to higher-quality patents that are granted more quickly. And the good news is we can make these changes at no cost to taxpayers since the USPTO is a fee-generating agency.

Now, there are some who argue that patent troll legislation is not necessary in light of the Supreme Court’s decisions in the Octane Fitness and Highmark cases. Ms. Charlene Morrow and Mr. Brian Lahti, however, writing in the BNA Patent, Trademark & Copyright Journal, confirm that “nothing in these cases addresses the proposed reforms to make the real parties in interest who are managing patent assertion entities responsible for fees and costs.” As these experienced practitioners acknowledge, such legislation is essential to address fee-collection concerns faced by defendants in patent litigation. One of the legislative approaches Ms. Morrow and Mr. Lahti propose is to make bonding more readily available at an early stage of litigation. 

I couldn’t agree more. 

We must ensure that those who defend against abusive patent litigation and are awarded fees will actually get paid. Even when a patent troll structured as a shell company has no assets, there are other parties with an interest in the litigation. These parties are often intentionally beyond the jurisdiction of the courts. They stand to benefit if their plaintiff shell company forces a settlement, and are protected from any liability if they lose.

It’s a win-win situation for them. And a lose-lose situation for America’s innovators.

Since we cannot force parties outside a court’s jurisdiction to join in a case, we must incentivize those interested parties to do the right thing.

That’s the whole purpose behind my recovery-of-award provision.

Under this provision, those who are deemed interested parties may either voluntarily submit to the court’s jurisdiction and become liable for any unsatisfied fees awarded in the case, or they may opt-out by renouncing any meaningful interest in the litigation. If interested parties stand aside and do nothing, the original plaintiff must post a bond to ensure that any shifted fees are paid.

Bottom line: without such bonding measures, all defendants have is a toothless joinder provision that can be easily circumvented by bad actors with no intention of paying the court-awarded fees for their abusive lawsuits.

I’ve said this before, but it bears repeating: fee shifting without such a recovery provision is like writing a check on an empty account. You’re purporting to convey something that isn’t there. Only fee shifting coupled with this recovery provision will stop patent trolls from litigating-and-dashing. 

The House has already demonstrated that members from both sides of the aisle can come together to craft and pass commonsense legislation to combat abusive patent lawsuits.  President Obama supports such efforts.  It is past time that the Senate does its part.  I’m determined to make such patent reform a priority early next year, and to make sure we send the President a bill he can sign into law for the good of American innovation.

Mr./Madam President, in addition to patent troll legislation, there is strong bipartisan, bicameral support for creating a harmonized, uniform federal standard for protecting trade secrets.

Here in the Senate, Senator Chris Coons and I introduced the Defend Trade Secrets Act on April 29, 2014. In the House of Representatives, Representative George Holding introduced the Trade Secrets Protection Act on July 29, 2014. Through our collective efforts, we have shed light on an often overlooked form of intellectual property.

Trade secrets, such as customer lists, formulas, and manufacturing processes, are an essential form of intellectual property. Yet, trade secrets are the only form of U.S. intellectual property where misuse does not provide its owner with a federal private right of action. Currently, trade secret owners must rely on state courts or federal prosecutors to protect their rights.

The multistate procedural and jurisdictional issues that arise in such cases are costly and complicated, and the Department of Justice lacks the resources to prosecute many such cases. These systemic issues put companies at a great disadvantage, since the victims of trade secret theft need to recover information quickly before it crosses state lines or leaves the country.

Unfortunately, in today’s global information age, there are endless examples of how easy—and rewarding—it can be to steal trade secrets. While the maximum penalty for trade secrets theft is 10 years in prison and a $250,000 fine, few of these thefts actually result in federal prosecutions. And while $250,000 may sound like a steep penalty, most stolen trade secrets amount to tens or even hundreds of millions of dollars in lost profits and sales. Even when thefts are prosecuted, victim companies rarely recover the full extent of their loss.

We have made some progress in moving forward trade secret legislation. Earlier this year, the Senate Judiciary Subcommittee on Crime and Terrorism held a hearing on the importance of creating a private right of action for trade secret theft. And the House Judiciary Committee reported its bill, by voice vote, on September 17th.  Although we didn’t get the bill across the finish line this Congress, we are well positioned to move trade secret legislation early next year.

It’s past time to enable U.S. companies to protect their trade secrets in federal court.

Mr./Madam President, another bipartisan initiative ready for congressional action relates to our privacy laws. I speak about the need to update the Electronic Communications Privacy Act—or ECPA—to require a warrant for all e-mail content within the United States and to safeguard data stored abroad from improper government access.

Enacted in 1986, ECPA prohibits communications service providers from intercepting or disclosing e-mail, telephone conservations, or data stored electronically, unless such disclosure is authorized. Virtually everyone agrees that Americans should enjoy the same privacy protections in their online communications that they do in their offline communications. But Congress has not adequately updated the law since its enactment and technological developments have resulted in disparate treatment.

As currently written, ECPA requires law enforcement to obtain a warrant for e-mails that are less than six months old, but only a subpoena to access older electronic communications.  Think about your own e-mail account. You might have hundreds of e-mails that you’ve received over many years. Additionally, ECPA has allowed law enforcement to access e-mail that has been opened with just a subpoena, even though a search warrant would be required for a printout of the same communication sitting on your desk. These conflicting standards should cause great concern to everyone who values personal privacy.

To make matters more complicated, ECPA is silent on the privacy standard for accessing data stored abroad. Storing digital information around the world – a practice that did not exist when ECPA became law – is now routine.  Moreover, the federal government has taken advantage of this statutory silence to apply its own standard, requiring access to data abroad if the company storing it has a presence in the United States. For that reason alone, Congress should amend the law.

That is why – together with Senators Chris Coons and Dean Heller – I introduced the Law Enforcement Access to Data Stored Abroad Act.

The LEADS Act would require a warrant when the government demands customer communications from third-party service providers. Such a warrant would only apply to data stored in the United States, unless the data is owned by a U.S. corporation, citizen, or lawful permanent resident. To provide additional protections, the bill requires courts to modify or vacate such warrants if they would require the service provider to violate the laws of a foreign country.

The practice of extending warrants extraterritorially presents unique challenges for a number of industries, which increasingly face a conflict between American law and the law of the countries where the electronic data is stored. Additionally, if the U.S. expects to extend its warrants extraterritorially, we should not be surprised if other countries—including China and Russia—seek to do the same for e-mails of Americans and others stored in this country.

Congress must ensure that law enforcement has the tools to execute search warrants where necessary, so long as officials comply with the laws of the foreign country where the electronic data is stored.

The LEADS Act also provides needed improvements to the mutual legal assistance treaty process, which are formal agreements for sharing evidence between the United States and foreign countries in international investigations. Currently, the MLAT process is slow and unreliable – sometimes taking several months to access data held by foreign jurisdictions. The Department of Justice not only needs additional funds to hire more people to handle MLAT requests, but reforms to the underlying program are needed to improve transparency and efficiency. 

The legislation recognizes through a Sense of Congress that data providers should not be subject to data localization requirements.  Such requirements are incompatible with the borderless nature of the Internet, they are an impediment to online innovation, and they are unnecessary to meet the needs of law enforcement.

It’s time to act to update our electronic communications privacy laws.

Finally, Mr./Madam President, there is widespread consensus and real opportunity for bipartisan, bicameral reform of our outdated visa system for economically essential high-skilled immigrants.

For too long our country has been unable to meet the ever-increasing demand for workers trained in the science, technology, engineering, and mathematics – or STEM – fields.  As a result, some of our nation’s top technology markets are in desperate need for qualified STEM workers.

We face a high-skilled worker shortage that has become a national crisis. In April, for the second year in a row, the federal government reached its current H-1B quota just five days after it began accepting applications. Employers submitted 172,500 petitions for just 85,000 available visas, meaning American companies were unable to hire nearly 90,000 high-skilled workers essential to help grow their domestic businesses, develop innovative technologies at home rather than abroad, and compete internationally.

This is one of the principal reasons why I, together with Senators Amy Klobuchar, Marco Rubio, and Chris Coons, introduced the bipartisan Immigration Innovation (or I-Squared) Act.

To date, the legislation has 26 bipartisan cosponsors. Among other things, the I-Squared Act provides a thoughtful, lasting legislative framework that would increase the number of H-1B visas, based on annual market demand, to attract highly skilled workers and innovators. The bill also reforms fees on H-1B visas and employment-based green cards to fund a grant state-based program to promote STEM education and worker retraining.

The I-Squared Act addresses the immediate, short-term need to provide American employers with greater access to high-skilled workers while also addressing the long-term need to invest in America’s STEM education.  I am confident that this two-step approach will enable our country to thrive and help us compete in today’s global economy.

No doubt, a concrete legislative victory where there is already considerable consensus would help build trust and goodwill among those who disagree sharply over other areas of immigration policy. And it would mark a critical first step along the path to broader reform. I look forward to working with my Senate colleagues in introducing I-Squared early next year.

Mr./Madam President, as you can see there is a lot we agree on and much we can—and must—accomplish.

Looking ahead to the next Congress, I intend to do everything in my power to enact pro-technology, pro-innovation policies that will ensure the continued success of our high-tech economy. I yield the floor.

Nov 18 2014

Senator Hatch Comments on Senate’s Failure to Pass Keystone Pipeline Bill

"I will continue to fight for American jobs and affordable energy in the next congress when Republicans will be in the majority.”

Washington, D.C.—Senator Orrin Hatch, R-Utah, the senior Republican in the Senate, released the following statement on passage of the Cassidy Keystone Bill:

“I am very disappointed that tonight’s vote to authorize the construction of the Keystone XL pipeline failed, though I am confident that we will win when the issue is considered again early in the next Congress. Nevertheless, the fact that the approval process has dragged on for more than six years clearly demonstrates that the federal regulatory process is broken.  Helping create jobs and getting our economy back on the right track should be at the top of Washington’s agenda, which is why pursuing regulatory reform will be one of my priorities in the coming Congress. I will continue to fight for American jobs and affordable energy in the next congress when Republicans will be in the majority.” 

Senator Hatch has been a strong supporter of the Keystone pipeline, having voted in favor of every bill that has directed the President to build the pipeline. Senator Hatch has long been an advocate for increasing domestic energy production in the United States and supports an all-of-the-above approach to our nations energy development. As Chairman of the Senate Western Caucus Subcommittee on Public Lands, Senator Hatch continues to encourage the promotion of our country’s energy infrastructure and the access to and development of our vast domestic natural resources. 

Nov 17 2014

Hatch Outlines Importance of Dynamic Scoring for Major Policy Reforms in Speech at American Action Forum

“Tax reform has been and will continue to be a long and difficult process. I believe the expanded and sensible use of dynamic analysis can, if done correctly, be an important tool to help us achieve our goals.”

Washington, DC – In a speech today at the American Action Forum, Finance Committee Ranking Member Orrin Hatch (R-Utah) called for dynamic scoring to be used to evaluate any major reform, including an overhaul of the tax code, so that the proposal’s macroeconomic effects can be fully assessed.

Below is the text of Hatch’s full speech delivered today:

Let me begin with a story I heard about an upstanding Utahn named Jim who recently visited a park on his way to see his friend Lisa.  Jim happens to be keen on law-and-order and was very unnerved when he observed two people in the park apparently engaged in an illegal drug deal. 

 After leaving the park, Jim drove to pick up Lisa, who has a strong libertarian streak.  When he arrived, Jim could barely contain himself and immediately shrieked: “Lisa, I just saw a drug deal take place in the public park, can you believe it?”   

With strong indignation, Lisa cried out: “Oh my goodness, you were in a Public Park?”

The story is an example of how orientation influences what we view as being important. When it comes to the effects federal spending or taxes have on the economy, views also often tend to shift depending on orientation.  

Some seem oriented toward the demand side of the economy, and they focus mostly on effects of federal spending. 

Others seem oriented toward the supply side of the economy, and they focus on the effects of effective marginal tax rates. 

In my view, both are right: demand matters and supply matters. 

What I’d like to talk about today is how we have and will, in the future, bring supply, demand, and macroeconomic analysis to bear in analyzing proposals involving significant changes in taxes, spending, and other policy matters.  

To preview where I come out on these matters, I’ll note at the outset that while analysis of macroeconomic effects of proposed legislation, or what we sometimes call dynamic analysis, is challenging, it has a number of benefits.  

Both Democrats and Republicans alike have acknowledged that dynamic analysis can be useful in a variety of areas. It provides valuable information that should not simply be ignored or discarded.  And, it should be used, as it has already been used, to reach budget and revenue estimates associated with major legislative proposals, including tax reform proposals. 

That said, use of macroeconomic analysis in scoring and revenue estimation – sometimes called dynamic scoring – is not a panacea. 

For example, when applied to tax changes, macroeconomic analysis shows positive effects from reduced marginal effective tax rates on growth in productive inputs like labor and capital.  Those effects are real and significant and they capture how a policy proposal would impact American workers and businesses.

However, those effects are not a magic elixir. 

While I’d like to tell you that tax cuts always more than pay for themselves, or maybe even that tax cuts cure influenza, I’m sad to have to tell you that just isn’t the case. 

Nonetheless, reductions in marginal effective tax rates on labor and capital can and do have positive macroeconomic effects that cannot and should not be ignored by Congressional scorekeepers.    

There are statistical studies, simulations, and cross-country comparisons that show those effects are plentiful.  It doesn’t take much effort to browse through the Tax Foundation’s website, for example, to find evidence of these positive results.  And, I’m sure that Doug, in his more productive academic days, produced numerous studies that show such effects.       

Economic growth will be key to moving the economy out of the rut it has been in over the past six years. 

Since the end of the recent recession in the second quarter of 2009, GDP growth has averaged only 2.3 percent, a full percentage point below the long-run average we’ve seen since 1947.  Projected over long periods, the difference in growth rates means significant differences in standards of living for future generations. 

Put simply, more growth means a better future. 

We also face significant underemployment in the economy. 

While the top-line unemployment number has gone down, other indicators confirm significant weaknesses in the labor market.  For example, since 2009 we have an unbroken downward trend in labor force participation, which has fallen from 65.7 percent at the beginning of 2009 to rates not seen since the 1970s, like the 62.8 percent we saw in October.  

Increased participation, job growth, and enhanced opportunities in labor markets come hand in hand with stronger economic growth.  Economic growth comes from growth in employment and investments leading to growth in physical, human and intangible capital, and from technological change. 

Long-run growth does not come from deficit-financed government spending or redistribution. 

The true drivers of economic growth, together with returns from work effort, capital formation, and innovation, get tied together in basic economic models.  Growth and other models are used by the Joint Committee on Taxation (JCT) in analyzing macroeconomic effects primarily of tax policy changes and by the Congressional Budget Office (CBO) in analyzing effects primarily of spending or other changes. 

And the returns to work effort, capital formation, and innovation that matter, both to Americans in the actual economy and in the macroeconomic models, are after-tax returns, where effective marginal tax rates determine decisions at the margin.

When we refer to a piece of legislation’s budget score, as most here know, we are talking about projected changes in budget authority or outlays that will result from the legislation.  And, revenue estimation refers to projected changes the legislation will have on federal receipts. 

Of course, those changes are measured according to a “baseline,” which represents what outlays and revenues would be if we assume current law will remain in place or if we alternatively assume that some notion of current policy would hold.  What policymakers choose for a budget baseline can matter a lot, as we saw in the so-called fiscal cliff episode at the end of 2012.  In consideration of any proposed legislative change that will affect the budget, such as tax reform, policymakers need to arrive at agreement on the relevant baseline.  The work of budget scoring and revenue estimation generally involves projecting how a legislative proposal will impact the federal budget relative to whatever is the chosen baseline. 

There are two basic types of scoring that vary as to how they measure or predict the effects a legislative proposal will have on the general economy.  The first, usually referred to as static scoring or conventional scoring in the case of JCT, assumes that a bill will not have any effect on important macroeconomic variables like employment, GDP, or national income.  Static scoring does often incorporate some behavioral responses to policy changes, but not general economic effects.  This is the most typical type of scoring employed by both CBO and JCT. 

For many cases, like those that do not have large-scale effects on spending, tax rates, labor markets, or technology, a score with static assumptions is probably safe. 

However, for large proposed changes to government spending, provisions in the tax code, or policies with significant labor force or technology effects, static scoring is downright dumb.

The second type of scoring, which I mentioned previously, is what some refer to as dynamic scoring or dynamic analysis, which simply refers to budget scores and revenue estimates that include analysis of a legislative proposal’s macroeconomic effects.  

Both JCT and CBO can offer macroeconomic analysis of a proposal as either supplemental information accompanying a static analysis or as the principle score of interest to policymakers.  Similar to a decision about what is to be the relevant baseline, it is up to policymakers to decide how to use results derived from macroeconomic analysis of a proposal.

Now, if you listen to some people discussing static versus dynamic analysis, you’d think that dynamic analysis is to be feared and is something that has never been used, ought to be avoided, contains mysterious features, is too hard to accomplish, or involves unmanageable uncertainties. 

Those views are typically overblown and, in most instances, are also downright dumb.

But don’t take my word for it. 

Take the word of CBO, JCT, the Social Security Actuaries, the IMF, the Federal Reserve, members of Congress on both sides of the aisle, or the administration. All of these groups have either produced or supported and utilized dynamic analyses of large-scale policy proposals to guide decisions, acknowledging that static scores would be – to paraphrase their views – downright dumb. 

Some of the debate I hear concerning use of dynamic analysis by CBO and JCT seems remarkably uninformed.  Hearing the debate, you’d sometimes think that dynamic analysis is some untested, never-before-used tool.  But, anyone paying attention knows that is not the case.  CBO and JCT have and will perform macroeconomic analysis of dynamic effects on the economy and the resulting budgetary implications of major legislative proposals.  

And, not surprisingly, the Republic has survived.

Take, for example, the most recent immigration proposal put forward in the Senate. 

That proposal involved policies that have the potential to generate significant effects on the labor market, including employment, earnings, and the skill mix of the labor force.  Those opposing use of macroeconomic analysis in budget scoring would, if they were consistent in their arguments, say that CBO and JCT should have used static scoring, including an assumption that employment and GDP would remain fixed at values projected under current law.  But, in explaining their dynamic analysis of the immigration proposal, CBO essentially wrote that with a proposal involving such a large possible labor market impact, the use of static scoring would be, in my words, not theirs, downright dumb. 

Instead, CBO and JCT produced an analysis in which many macroeconomic effects were considered, which ran counter to a strict static analysis. 

And, wouldn’t you know it, the Republic survived. 

In fact, the positive economic results that CBO predicted were warmly embraced by a number of Democrats.  Indeed, you can see the results of CBO’s dynamic analysis of the immigration bill touted on the White House website.  

Oddly enough, these same Democrats, in other contexts, have written off dynamic scoring as some sort of fantasy used by Republicans to justify lower tax rates.  But, when the same type of analysis could be used to bolster the case for the immigration bill, they were singing off a different song sheet altogether.  

Immigration reform is not the only case in which Congressional scorekeepers have provided dynamic analyses of proposed changes to federal policy.  While I don’t have time today to review them all, it does not take much effort to browse through the CBO and JCT websites to find many examples.  JCT even has a special tab on its main web-page titled Macroeconomic Analysis.

The question is not whether CBO and JCT should use dynamic macroeconomic analysis.  As I have said, they have done so, can do so, and will do so.  The question is what role that analysis should play.  And, as we continue to work toward tax reform, that question becomes all the more relevant. 

Once again, I want to stress that dynamic scoring is not a magic elixir that solves all of our problems when it comes to tax policy.

Even if we agree to use dynamic scoring on major tax reform proposals, there are a number of questions we must consider, including: what economic models to use; what so-called parameter values to choose for things like sensitivities of labor and capital suppliers to after-tax returns on their efforts and investments; what assumptions to make about possible behavior of the Federal Reserve or foreign policymakers; and what assumptions to make about how any proposal fits with the government’s long-run budget constraint.  

But, while these issues are certainly challenging, they have not prevented JCT or CBO from arriving at informative projections regarding large-scale spending or tax policy changes in the past, and they shouldn’t hinder such efforts in the future.  

Macroeconomic analysis providing projections of future effects of policy changes are, of course, subject to uncertainties.  And no matter what models, parameter values, and assumptions we use, that will remain.  However, the argument that we should not use information from dynamic analysis of policy proposals because the analysis is uncertain and difficult is almost comically misguided to me.  

Oddly enough, many who argue against use of macroeconomic analysis of tax proposals because of some uncertainties are the same people who argue for the embrace of point estimates from global climate-change models that are flat-out rife with uncertainties.  

 Go figure. 

So where do I stand on use of dynamic scoring for tax policy changes? 

To me, it is clear that we should continue using dynamic analysis and work with CBO and JCT to ensure that those efforts proceed and are accelerated and refined. 

As with the economics profession, the work at CBO and JCT should adapt to the advancement and development of the tools of analysis used by economists.  I recall seeing a picture of Milton Friedman and Anna Schwartz as they were analyzing data for use in their historic work on the Great Depression and Monetary Policy.  The picture shows the two scholars at a large table looking over a grid of data points, and they were trying to fit a trend line to the data using a long piece of string.  Well, since that time, there have been major developments in the tools that economists use, including the development of dynamic programming and computing.  Arguing against use of dynamic analysis by CBO and JCT is like harkening back to the days of fitting data with a string.

I’d like to end with a brief note on what is at stake with respect to our efforts on tax reform, especially given that I believe that there is a lot of misinformation being peddled out there about dynamic scoring.  

Let’s look back at JCT’s projections from its dynamic analysis of Chairman Camp’s proposal.  Of course, Chairman Camp deserves a lot of credit for putting his plan out there and showing how hard it is to engage in comprehensive tax reform, especially when constrained by static revenue neutrality and distributional neutrality. 

According to JCT’s results, Chairman Camp’s plan could produce, from positive macroeconomic effects, upwards of $700 billion of revenue relative to a static analysis.

If you accepted the $700 billion positive revenue effect – which was, once again, at the high end  –  and hypothetically plowed it back in for further rate reductions, you’d probably be able to lower tax rates in the various brackets by less than one percentage point.  

While that would be real change with real impact on Americans, it would hardly be the supercharged supply-side miracle that many, including some on my side of the political spectrum, have argued we would see. 

Don’t get me wrong, incentives, the supply side, growth, and capital formation matter.  And they matter a lot for future living standards, and cannot be ignored.  Indeed, as tax writers, we would be committing malpractice if we undertook an exercise as far-reaching as tax reform and ignore macroeconomic data.  However, especially with the type of exercise like Chairman Camp undertook, we should not expect dynamic scoring to produce outsized miracles from either the supply side or the demand side. 

As always, there have been and continue to be political and economic debates about economic analysis, but that is healthy and useful.  What is not healthy is to ignore useful information or to try to bias or distort analytical work done by CBO or JCT.  And, if anyone thinks of purposefully writing legislation to distort the way bills will be scored or to dupe the American people, well…don’t get me started.

Dynamic analysis of major spending, tax, regulatory, and other proposals should be valued.  It is intellectually dishonest to praise and accept such analysis for spending or labor-market related proposals like immigration, while arguing against the use of that same type of analysis when it comes to taxes. 

Tax reform involves changing many margins along which Americans make important resource allocation decisions.  Dynamic analysis can help us analyze how changes in the margins, distortions, and deadweight losses will affect people, for better or worse.      

That being the case, such analysis should be used with regard to tax policy changes. 

We need to stay focused on what is important.  The primary goal of tax reform and analysis of any such reform must be growth in opportunities, incomes, and jobs for Americans, as well as fairness and simplicity in the tax code.  If we limit ourselves to static analysis, we take attention away from things that really matter.  What matters to American households and businesses is not simply how much a proposal changes a revenue estimate or budget score; what matters is what tax policy will do to or for them.  

Tax reform has been and will continue to be a long and difficult process.  I believe the expanded and sensible use of dynamic analysis can, if done correctly, be an important tool to help us achieve our goals.  

I look forward to working with all of you as this effort continues.

Thank you, once again, for having me here today. 

Nov 17 2014

Senator Hatch Comments on Passage of CCDBG

"Too many young parents, faced with financial hardship, have to choose between providing for their children and caring for them. I'm thrilled that we’ve been able to work towards a solution to that dilemma."

Washington, D.C.—Senator Orrin Hatch, R-Utah, a member of the Senate Health, Education, Labor, and Pensions (HELP) Committee released the following statement on the passage of the bipartisan, bicameral reauthorization of the Child Care and Development Block Grant Act of 2014 (CCDBG): 

“I was honored to work alongside Senators Burr and Mikulski on this much-needed reform in child care licensing, monitoring, and safety.  Too many young parents, faced with financial hardship, have to choose between providing for their children and caring for them.  I'm thrilled that we’ve been able to work towards a solution to that dilemma.  By empowering states to direct the use of funds to train providers and improve the quality of care, families, not the federal government, get to determine what child care option is best for them.  I look forward to the President signing this bill into law.”

Senator Hatch has spent his career seeking ways to protect and help our children.  In 1989 he backed legislation that would provide funds to lower- and middle-income working parents to help them pay for childcare.  In 1997 he created the Children’s Health Insurance Program (CHIP), designed to help provide children with health insurance.  Last month the Voices for Utah Children’s First Focus Campaign recognized Senator Hatch as a defender of Children.

Washington, DC – According to the Washington Post, Senator Orrin Hatch, R-Utah, was the "Distinguished Pol of the Week" last week, and "perhaps the most productive lawmaker in the Senate." 

The full text of the article appears below:  

      Kudos to Speaker John Boehner (R-Ohio) and Sen. Mitch McConnell (R-Ky.) who were elected by acclamation to lead their respective house’s Republicans. But as we turn from campaigns to governing, I want to single out perhaps the most productive lawmaker in the Senate

     Sen. Orrin Hatch (R-Utah) for decades has done what the liberal media constantly demand — work across party lines to pass constructive legislation. This year he didn’t wait for the GOP majority to arrive. Back in January, he joined with fellow Republicans Tom Coburn (Okla.) and Richard Burr (N.C.) to set out a detailed Obamacare alternative. In October he presented an innovation agenda “to foster an environment that encourages research and innovation by addressing abusive patent litigation, protecting trade secrets, modernizing the Electronic Communications Privacy Act, strengthening cybersecurity, reforming immigration policy for high-skilled workers, reducing regulatory and tax burdens for innovators, and removing barriers to digital trade.”

     In addition, this week he made a constructive suggestion on immigration reform, writing that “effectively fixing this high-skilled piece of the immigration puzzle will require legislative action, and the president’s promise to act unilaterally in other areas will only short-circuit the statutory reforms we desperately need.” He warned, “Obama’s promise to make further unilateral changes to our nation’s immigration policy breeds mistrust and makes meaningful legislative reform even harder to achieve.”  He then suggests, as the GOP House leadership supported, a piecemeal approach starting with a pro-growth, bipartisan H1-B visa plan. (“thoughtful, lasting legislative framework that would increase the number of H-1B visas, based on annual market demand, to attract the highly skilled workers and innovators Obama highlighted in his speech”). Now that the Senate is in GOP hands, it can come up with a series of these. Let the Democrats filibuster border security and H1-B vs. reform or a new e-Verify, thereby showing the public which party favors the component parts of a reasoned immigration approach. 

     And in a fine speech before the conservative Federalist Society he offered this sage advice:

[T]he Constitution teaches the virtue of prudence.  Prudence is a habit of mind that should come naturally to conservatives.  It restrains us from seeking immediate and complete vindication of a single, abstract principle.  Rather, it counsels us to work within our existing circumstances to advance the enduring principles upon which liberty depends.  Prudent lawmakers make real-world experience, not abstract theory, their guide, and recognize that success requires harmonizing competing values.

The Constitution is an exercise in such prudence.  It contains within its structure a clash of many competing institutions: The democratic, majoritarian House.  The deliberative Senate.  The unified and energetic Executive.  And the independent judiciary.  There is tension between individual rights and majority will, energy and stability, limited powers and flexibility to act.  The Constitution mediates many rival goods.  It is founded on compromise.  And it institutionalizes prudence as a signal virtue of our Republic. 

Conservatives have been most successful when we have tempered our ideological zeal with the prudence necessary to produce practical results. Many conservative leaders and thinkers eagerly wrap themselves in the mantle of Ronald Reagan. But as time has passed, President Reagan’s legacy has become increasingly prone to misappropriation and misuse. . . .When I see someone misappropriating President Reagan for their own purposes, I often feel duty-bound to remind my fellow conservatives that President Reagan never prized ideological purity over concrete results.

When faced with divided government, he did not choose a my-way-or-the-highway approach.  Instead, he searched for areas of agreement. That meant accepting that some of our noble goals—such as restraining spending and reforming the administrative state—were out of reach at the time. But it enabled President Reagan to make meaningful progress in other, equally critical areas—like pro-growth tax relief and bolstering our national defense—progress that helped produce economic prosperity and won the Cold War.

Today, we honor President Reagan’s legacy, not by mischaracterizing his record or engaging in idol-worship, but instead by thoughtfully emulating his leadership, adapted to the challenges of today. 

     So for all that, and with the promise of a productive 2015 legislative year and prudent governance , we can say, well done, Sen. Hatch.