Congress must be bold
Warner believes deficit panel should tackle entitlements, tax code
- October 27, 2011
It’s not every day that journalists receive a professorial lecture from a U.S. senator. That’s exactly what the editorial staff at Virginia Business got from Sen. Mark R. Warner when asked if he had any plans to spark job growth.
Warner leapt up, grabbed a red dry-erase marker and filled a conference room white board with an outline of his thoughts. The lecture included a wide range of initiatives categorized into seven separate “buckets.” Some ideas already are included in proposed legislation, while Warner is still working on the details of others.
The job proposals include:
- Start an infrastructure investment bank to boost road, bridge, rail and energy projects.
- Use long-term unemployed workers to retrofit energy-inefficient schools.
- Reauthorize the Federal Aviation Administration.
- Approve free-trade agreements.
- Ease visa restrictions to encourage international tourism.
- Accelerate approval of drugs by the Food and Drug Administration.
- Lower the corporate tax rate, but close loopholes and exemptions.
- Offer a repatriation tax break to companies that bring research and development investment and jobs to the U.S.
Warner, a former governor who was elected to the Senate in 2008, spoke with the magazine staff in late August fresh from the government’s bruising battle over raising the debt ceiling. He was a member of a bipartisan group of senators — known as the Gang of Six — that developed a plan to reduce the country’s crushing deficit.
Ultimately Congress agreed to cut $1 trillion from the federal budget during the next 10 years, but tasked a group of 12 senators and representatives with finding another $1 trillion to $1.5 trillion to cut by Nov. 23. If the “Super Committee” doesn’t meet its deadline, $1.2 trillion in automatic cuts will be made.
Although no one from the Gang of Six was named to the Super Committee, Warner has been trying to persuade committee members, lobbyists and other members of Congress to push for even more cuts — about $4 trillion.
This time, Warner believes the business community must be involved in encouraging deficit reductions and fighting gridlock in the Congress. “We need to put the business community’s feet to the fire,” Warner said. “We need to get them invested. And I think they will be ready to be.”
Warner spoke on wide range of issues and did not at all sugarcoat his disdain for political discourse in Washington.
Virginia Business: What’s the mood like in Washington right now? Do people expect anything to get done? The opinion down here isn’t very positive.
Warner: It’s ugly. I saw the poll that said 87 percent of Americans are disgusted with Congress. I’ve yet to find any of the 13 percent that are happy with them. And if I find them, I’ve got to ask them, “What are you thinking?” Because I’m disgusted.
There is a sense of conventional wisdom where all these issues have to be punted until after the presidential election. I’m not sure we’ve got that much time … from the markets and from just general public confidence.
And the thing is America always used to be so far ahead economically, infrastructure-wise, research and development wise on all these categories, that if we messed up for a couple of years, it didn’t affect our overall standing. We don’t have that kind of lead to fritter away in so many categories anymore. So you can either get kind of down on this, or you can redouble your efforts.
We [the Gang of Six] were late getting our plan out, but we got tremendous support. There have been a lot of kind of the status quo forces said, “Let’s not do something major.” So you kind either kind of retreat or try to rebuild and build a broader coalition.
VB: So were you surprised at all that none of the Gang of Six members was named to the Super Committee?
Warner: Well, I was not surprised because I think there was enormous pressure to kind of wall off things. At the end of the day, every commission said, “You need to find $4 trillion [to cut].” We’ve done close to $1 trillion now in this Aug. 2 dealing, over a 10-year period. And the Super Committee, the challenge of the Super Committee, if it is 100 percent successful and gets another $1.5 trillion, many would argue that’s still not going to be enough. And if you don’t take on the broad issue of entitlement reform and tax reform, unless you can deal with how you get more revenues and make sustainable some of these programs, I’m not sure we’re going to really solve the problem.
And there are some that would say, “Well we’ve got that much time. We can punt it until after the election.” My response is, “Maybe you’re right, but why would we take that chance?”
VB: How much influence do you plan on having, or what’s your role going to be
throughout the Super Committee’s negotiations?
Warner: I want them to be successful. What I think, I hope I can be part of, is a bipartisan and bicameral, one of the things we got criticized for with the Gang of Six was, “Oh, even if you can get through to the Senate, could you ever get it through the House?” And I think there are members in the House, Democrats and Republicans, who will step up. We’ve got to show that it can be safe to be bold. We want to be able to show that there will be people that will, if the Super Committee takes a courageous stand, people will support them.
And I think part of our challenge here is going to be with the business community. The business community was AWOL in this whole debate. I remember begging them, the national business organizations, in June to kind of weigh in in a major way. Don’t have to be exactly for the Simpson-Bowles [Commission Fiscal Responsibility and Reform ] approach, but just something that’s substantial. And there were two responses: one was, “Well those guys in the House won’t be that crazy.” And there was just the general concern you’d get a CEO, but then you’d say, “Well if we do that, you might make this person mad or that person mad.” And it was only in the last 10 days when the reality hit that “Oh my gosh, we could go over the cliff.”
The good news on that is I think the business community is more willing to engage now. One of our biggest challenges, back to the Gang of Six, was even though we had most of our substantive work done, there was a reluctance by some of our members to share it. So the business community said, “Well you haven’t given us all the details.” And I think that was a fair concern. I would have much rather laid out our ideas in March or April and let them get shot at for a while.
VB: But what was behind that reluctance [to share] the details?
Warner:Let’s see how I can say this on the record. We had some of our team members, one of our team members for example [Sen. Tom Coburn, R-Okla.], who took a time out for a while, and then came back. I think there was a goal that you needed to make sure it was balanced in terms of number of Democrats and Republicans coming out.
And so the luxury, or not the luxury, but the opportunity we have now is, I’ll always remember, we weren’t sure what kind of response we were going to get when we finally did bring it out, and it was more kind of like a kind of last gasp. But the remarkable thing happened, with less than 24 hours notice, we had 49 senators show up, and we only invited 60. And 36 of them said, “Sign me up.” It was like I’d never been in a meeting where as opposed to, “Well this sounds OK but I want to think about it.” Instead, people were going out and saying, “I’m with it.” There was almost, you could almost feel this palpable energy release with people saying, “Oh my gosh, there’s something we can be for,” as opposed to “Let me tell you what’s wrong with it. But we were too late…
But the attitude is going to be gone now. We need to put the business community’s feet to the fire. We need to get them invested. And I think they will be ready to be. I don’t want to always … with anybody in politics, you always go back to your own personal reference point. And I was always so proud of what the business community did in 2004 in Virginia. The public part of that, with the Chamber and the business community, only came after months and months of working behind the scenes. Now we’ve got a little bit more time to build that connection. And the notion of, “Oh they won’t be crazy enough, that has been debunked, they are believers now.
VB: What are you hearing privately from the business community?
Warner: Until the last 10 days, and I asked every one of the Democrats, and I asked about 25 of the Republicans, not a single senator had been called by a CEO on this issue. If they were coming in on whatever the particular issue was, they might say, “You guys are going to get this fixed aren’t you?” But there was not any concerted effort, which is pretty stunning. It was not Democrat or Republican; it was just nobody ….
I think there is a sheepishness among some that are not saying, “Well gosh, you know, we could have gotten more engaged.” And I think there is a real willingness now. As long as it truly is bipartisan, as long as it is balanced, as long as it is a fair approach. There is obviously still anger at the administration about posing some of these issues on the populous terms. That’s why what we’ve been framing as: “It’s much more about tax reform than about traditional kind of just raise X rate or Y rate.
You can still maintain or improve the progressiveness of a tax system with lower rates and reform of deductions. So there is a way to get to that, those goals.
VB: Do you think it’s going to come down to another last-minute, at the brink
kind of situation that we had with the deficit?
Warner: That’s a great question. Because to everybody that’s a little bit of a … because people in policy love drama, but I think we’re kind of drama-ed out. There’s really two steps. My hope is the Super Committee is successful. And I think there are, the good thing about that is a short time line, and there is an expedited process. And we’re going to know pretty quickly.
There’s also a second [theory] that says if they don’t reach something, there will be the time at the end of 2012 when the automatic cuts will take place and the Bush tax cut will expire. I’m hopeful the Super Committee, it would be better for the economy and the country and the world, if we could show a 10-year plan, a real 10-year plan by the end of this year but, if not, by the end of this year, there will be another chance before the end of 2012.
The point I was trying to make is that people sometimes get intimidated by a $4 trillion reduction plan over 10 years. It’s hard, but it’s not that heavy a lift when you compare us to Britain.The UK is going through a much more dramatic transition. With increased revenues, cutting back on spending. And I use the line that it’s down right un-American that we’ve let the Brits beat us. With the coalition government over there, I’m not saying theirs is the perfect solution, but they’re at least biting the bullet.
VB: If the committee could do one thing, get one major thing done, what do you think it should be? If you were on the committee, what would you really be pushing?
Warner:I think it has got to be a reform of our entitlement system paired with reform of our tax code. Those are the two. The entitlement programs are not sustainable as they stand. The revenue base that they would generate is not sustainable on any historic basis for even a slimmed-down government. And so that’s not just one particular … those are broad buckets. But if you look over the last 70 years, the only time America has been in either surplus or relatively deficit neutral, is when spending and revenues have roughly been 19 ½ to 20 ½ percent of our GDP. Spending is at 25 percent, all-time high. Revenue is at 15%, 70-year low. You’ve got to put it kind of … it’s not Democrat or Republican, but those who say, “We’re going to drive it, revenues down to 15, 16, 17 percent,” and they say, “We’re not going to touch defense, and we’re not going to touch entitlement programs.” The math doesn’t work when you’ve got 3 million Baby Boomers a year from hitting retirement.
VB: If the Super Committee can’t come to a decision or agreement and the trigger cuts did happen, what do you think the impact would be on Virginia given its large military population and defense industry?
Warner: It will be hard on Virginia. We have disproportionately benefited from both government contracting and from the military presence, and we will disproportionately be hurt, which would be all the more reason why … and I was really, and I compliment the governor [Bob McDonnell] on this …. He and I worked very closely on the [U.S. Joint Forces Command] closing. We said, “You’ve got to show us the business case.” We saved half the jobs based on the business case. I would like to save more, but we can actually say to other states now, “We already gave at the office.” So our state went through that kind of tough analysis, some very good quality jobs, but we didn’t argue it just on the normal cut everybody else. And I give the governor a lot of credit for that. He was a great partner.
VB: The Virginia economy also benefits from being right outside DC. If the deficit reduction trims Federal spending, is that going to also affect unemployment in Virginia?
Warner: It will, but the one thing I would give, and it won’t hurt us, but, how do I say this in the right terms? That Northern Virginia tech/government contracting community, that’s about as adaptable a group. You think about it, in the ‘80s and ‘90s, they were traditional government contractors. Then they became Internet companies. Then they became defense companies. Then they became homeland security companies. I say that as a compliment that this is a group of entrepreneurial people who have adapted to a variety of changes over the last 20 years. So I think these are well-trained, smart, talented companies. They’re going to find a way through this.
VB: And then a lot of Republican politicians have been saying that the current regulatory environment is preventing small businesses from hiring. Do you think that’s the case?
Warner: I think there’s truth in that. But I think it’s not … the thing that I think is unfair is this is not something that just happened in the last 24 months. This has been the result of increased regulatory burden for the last 25 years. And so then you’ve kind of got the pendulum swinging with ideas saying, “Well let’s just have a moratorium.” Well science changes, health changes.
So here’s my approach. I’ve been working on this for a year and a half and hopefully will be talking with [Sen.] Rob Portman who is a really good guy, [Republican] senator from Ohio, on a joint legislation. And it says as an agency adds a new regulation, you have to do a cost benefit analysis of it. And if they decide to move forward with it, they have to take one away of equal cost and value. The reason being that there is currently no sustained effort to eliminate outdated, outmoded rules and regulations.
Every world-class company reinvents itself at least every 20 years. Presidents come and go, and they say they’re going to do some regulatory reform, but it kind of gets pushed to the side. And frankly agencies are rewarded with more money the more regulations they add. So if you put in place a self-regulatory check in a sense, a changing of the incentive so as the person who is thinking of the regulation says, “Oh my gosh, I can maybe get 70 percent effectiveness with 20 percent cost as opposed to now there’s no throttle on going for 99 percent cost for 90 percent effectiveness.” And you say well that sounds good, and we’re calling it regulatory PAYGO (pay-as-you-go) because it’s people understand the PAYGO (pay-as-you-go) concept in Washington.
But this has actually been done for the last year in Britain. They call it One in, One out. And the value of it has been a kind of change in mindset inside the agencies. And I still think there’s a real opportunity to do this in a smart way that can still protect the public good but without this over-reaction approach. And the pressure of radical change on the other side will help move some of my side to say, “Yes, there may be some, there may be a better idea.” But this one had been vetted pretty well.
And a corollary to this, which I’m also trying, but I don’t have it fully fleshed out yet is if we think about infrastructure projects like rail and other things that are going to diminish, climate change issues and stuff, there ought to be an expedited environmental review on those projects. It shouldn’t take five to seven years to go through the NEPA (National Environmental Policy Act) process.
So I think the necessity of the world changing so fast is going to, if we do it right, force us to rethink some of these issues.
Just as an aside, two years ago I was sitting with one of the senior, now departed members, of the administration and five or six senators, and we were talking about high-speed rail. And they were talking about how in China they’re going to build the whole high-speed rail in three years. And this senior person from administration was saying, “Well we could never do that in America,” which is kind of anti-American in my mind.
But the interesting thing was you saw that horrible tragedy just a month or so ago. ??????So there is a cost of doing these things without safety and environmental concerns. But there ought to be a balance that says how do you get this more balanced? And I think the balance over the years accumulated too much on the regulatory side because we’ve just got the incentives aligned. What agency head gets rewarded for cutting back on regulations? They only get in trouble if something slips through. So we’ve got to rebalance that.
So I think they are right on that shift. I think sometimes it’s taken like that’s going to be the single thing that’s going to solve the problem. It’s not. At the end of the day, you’ve got to have consumers and others having demand. We’ve got decreased demand.
VB: And then what are some of your plans specifically for job creation?
Spokesman Kevin Hall: Do you need a white board?
Warner: I’m still trying to get these in my head the right way to present them. You’re a little bit guinea pigs.
First and foremost, the single best thing we could do for job creation. Let me back up for a second. Traditional government tools in recession are twofold — monetary policy and fiscal policy. We’ve basically shot those. We’ve lowered interest rates as much as we can, and we’ve used fiscal stimulus as much as we can. So we have to acknowledge that there is not a silver bullet here. There’s not some, short of massive additional borrowing, there’s not some single governmental action that’s going to spur jobs.
I actually think from a confidence-building standpoint, the best thing we can do is a long-term, $4 trillion cuts because that I think would help free up … one of the things people are forgetting is there is $2.5 trillion approximately cash on American balance sheets right now.
Spokesman: You mean trillion at the top too, right?
Warner:Yes, $4.5 trillion, right. The main thing, I just want to put my buckets up for job creation.
So getting that money off the sidelines. I would put this into about four different categories. One is infrastructure.
VB: Ala a depression core job creation…?
Warner: I’ve got variations on that. Infrastructure investment bank. It’s bipartisan at this point. It has been changed from what Obama was talking about. It’s U.S. Sen. Kay Bailey Hutchinson [R-Texas], me, U.S. Sen. Lindsey Graham, [R-S.C.], U.S. Sen. John Kerry [D-Mass.]. It’s $10 billion, not in grants but a revolving loan fund that would normally be used to buy down interest rates and do back stop on private financing for infrastructure. This would generate $600 billion in infrastructure investment. That would be road, water/sewer, rail, ports, energy …
Hall: Endorsed by AFL and chamber.
Warner: Endorsed by AFL and chamber.
Second, small one, but one that would be very important in Virginia. We really need to do the FAA reauthorization bill. Reason for that is we’ve got money for most of that, but our current air traffic control system uses World War II radar. There’s more technology in your GPS Garmin than there is in all of our air traffic control system. If we move forward on this, they’ve been talking about it 10 years. The technology is there. It would allow America to take the lead into kind of next-generation aviation. And for Virginia, one of the things as a Virginia subset, we’re trying to build a public/private, next-gen, aviation area at Langley, because our single largest export category right now is aviation. And we are … before you look at Airbuses, all the others, they’re moving ahead, and we’re losing our aviation people. FAA reauthorization is a simple thing.
Third is energy infrastructure. Let me just give you this one specific idea. Last year I worked … I’m trying to think, you know, you’re not going to get through the House anything that spends a lot of money, so let me give you a variation. Last year I worked on a plan; it was called Homestar that was a tax credit to retrofit houses where you go to Lowe’s and you get a tax credit, and you can retrofit houses for energy conservation. And you could actually finance part of that. It had bipartisan support, but I don’t think, even though it was only $3 or $4 billion, I don’t think it’s probably going to go forward.
So here’s a variation on that, that I think would be sustainable. And we learned a lot about what it takes to train somebody to do retrofitting of a home or building. It’s about a two-week training course, a little bit less.
We have about 100,000 schools at this point in this country that are old, aging schools, that are horribly energy inefficient. My suggestion is, and we’ve got in many communities 30 percent youth unemployment. My thing would be why not make a requirement, this is still in a to-be-fleshed-out idea. After, pick your number, 10 weeks, 20 weeks on unemployment, you want to keep getting unemployment, you’ve got to go to work retrofitting energy efficiency in these schools. Dollars used, we’re going to be paying these kids anyway. They come out with a skill, and we could finance, we could use the money that’s used to retrofit on a revolving fund because most of these schools would have a payback, five or six years off of that energy efficiency-ness. So it would be a self-sustaining dollar. And I’ve got to price it out yet. It’s not going to solve everything, but you could put hundreds of thousands of kids back to work and actually have them come out — and as opposed to the traditional construction industry where you’re going to take my construction jobs away — these are jobs where we’ve never, it’s kind of a new area that doesn’t require a huge amount of training. So it would be kind of as opposed to … well let’s just go big.
I have nothing against the idea of clearing trails and all this stuff, but this is actually finance-able. And you could actually, if you got your energy infrastructure bank, and you have the bond rate in the school systems, you could absolutely finance this in a way that wouldn’t require a lot of upfront cash.
So one batch I put over here on infrastructure.
Another one I’d put on trade. And here I support Colombia, Korea, Panama (free trade agreements). The next one coming along is the Trans-Pacific [Partnership], includes a lot of the … New Zealand, Australia, and I think Singapore and those. We really need to move aggressively on trade.
Now combined with that, this is related to job creation, and the administration was supposed to come up with this, but they haven’t done it yet. We need to consolidate and rearrange all our existing small business trade support programs, which are a total fricking mess. There’s stuff in Commerce. There’s stuff in the trade representative’s office. But we basically need a partner in trade. Ninety-five percent of all the new customers in the world for American business are going to be abroad.
And one of the reasons Germany has done so well is because they’ve always had that trade mentality. We’ve always felt America was a big enough market, who needs to go deal with that? We’ve got to have trade support here, and that means government reorganization to support not just these trade agreements but to build a bigger basis for trade overall.
I put this kind of in the trade/international category, let me give you another low-hanging fruit that would be helpful for Virginia. For every 1 percent that we can increase international tourism, we add 120,000 jobs. And as one of the gateway airports at Dulles, we are just blowing it on that. It takes 120 days on average to get a tourist visa if you come from some place like China. It takes 14 days to get into the UK. So we have … you travel the world … at every American Embassy it’s embarrassing. Under the guise of homeland security, we make it so difficult for tourism, international tourism to come here.
And again, it doesn’t cost money. We finally passed bipartisan way a couple of years ago the first time where America was actually going to start to market itself abroad. Doesn’t require additional tax dollars, additional entrance fee. This doesn’t cost money, but it is immediate jobs. And as the world gets richer, we’re turning away people.
On this same category I’m going to put trade internationally. I don’t think we can wait. We ought to go ahead and not only the traditional thing every politician says, that if you’ve got a graduate degree in math and science stay with a green card. I support that, but there’s some specific we can do. We have right now that if you’re trying to come into this country and be on an entrepreneurial visa, you’ve got to have $1 million in assets. So why not make it $500,000? So why not continue to attract the best and brightest?
Canada has been making money like … look at Canada’s economy right now. A lot of that is because people who want to come here can’t come here, and so they’re going to Canada.
Then, let’s do an innovation bucket. Give me three things here that don’t cost much money but could be immediate job creation. Patent reform, which we’ve actually passed half the legislation, and they’re still fighting between the House … you’ve got to get it done. We should be afraid when Google spends $12.5 billion for Motorola just to kind of protect the patent arsenal. Three years to get a patent in this country. Well this going to be self-financing? It should take less than a year. And we need to have a system that cuts down on the litigation.
Second, FDA reform. We’ve got to be safe, but it takes 13 years and $1 billion to get a drug to market in America. You can do that in half the time in Europe. And they have every bit as good safety and efficacy. So FDA reform in terms of drugs, in terms of medical devices. I think both the review process and ____, it can be shortened.
Spectrum. My old industry, the tech…We are so far behind some places like Korea on the spectrum allocation. This is money. We’re working now with the broadcasters. We need to incentivize the broadcasters to move off some of that spectrum and move to a digital system, and then auction that spectrum off; it create wireless jobs. If you think about how you’re going to get broadband to rural communities where we still have enormous fall off, spectrum is one thing.
I’ve been trying to think about how you can do target areas on tax reform. One thing, I do think there is a part of the overall tax reform ought to include corporate tax reform, which lowers rates but cuts out expenditure. We do have the second highest tax rate in the world at 35 percent, but if you’re paying 35 percent, and you’re a Fortune 100 company, you ought to fire a CFO. The effective rate of most, particularly in my old industry, the tech industry, about mid-teens, so let’s go ahead and lower the rate to mid to high 20s, but make everybody pay basically that.
And part of that tax reform ought to be tied into a meaningful repatriation issue. You guys understand, but most people’s eyes roll back in their heads. We do the double taxation of offshore profits. Let’s bring it back, but let’s actually tie it to job creation and our R&D investment here, and there’s a way to tag this. And repatriation, repatriation funds, corporate wants it at five, the current roll off is 35. Of course you get an offset based on the taxes you pay abroad. Maybe you set some place in the middle and have that geared based upon job creation. Now some industries, farmers, are not going to create jobs, but they’ll do an R&D.
But the funds you bring back from that one-time repatriation could fund your infrastructure bank. So again, assuming we’re in a world that doesn’t want to fund anything.
So here are six or seven things that net/net would not require large government expenditures, that I think would have immediate effect upon jobs, that I’m not sure any of these, maybe the repatriation, these aren’t that super controversial.
I left out one, which is trying to supplement existing, I’ve got this American Recruits Act with [U.S. Rep.] Frank Wolf, [R-10th] that says you wouldn’t create a new program, but it would say when a state is going after a major manufacturing or technology, and it’s an offshore company coming here and we’re competing, we ought to have some Federal support that would supplement the state and local economic development. Because Virginia can beat New York and California any day of the week. But when we were going against Korea… so this would be up to a $10,000 forgivable loan per job, a certain amount that would be forgivable over a longer period of time so you don’t have these companies move in for three years, take your benefits, and then go. And it would only be available for jobs that were coming back into this country in kind of an on-shoring business.
And it gets a little hard here, but other countries have figured out a way to do this, so you don’t play one against another in terms of domestic jobs moving.
But I think there is a series of things we could do in this area that could happen tomorrow that wouldn’t require massive new government or a massive new program. That that combined with that $2.5 trillion on the sidelines, and the confidence of a real deficit reduction plan, I’m going to go along.
VB: I love specifics. I think that’s what America is crying out for. Getting back to the observation you made that the business community went AWOL, do you think that one of the reasons CEOs didn’t venture out there is because of what some people are calling now this very deep crisis in confidence, that it really doesn’t make a difference anymore if you call or you try to participate, because it has gotten so ugly in the partisanship. And as we saw with the most recent debt ceiling, this inability for anyone to collaborate, to be innovative, to be bold to step up and get the job done, to let it go to the brink, that people are so turned off that they don’t want to participate anymore?
Warner: I think that’s true. But what does that push you too? That pushes you to either get disgusted, which means throwing in the towel, which to me is anti-American, or it says you pick yourself up and fight again.
VB: Or you have specifics.
Warner: Or you have specifics. Ninety-five percent, until the last 10 days, 95 percent of all my calls, emails and contacts I got were from people on both ends. “Don’t touch taxes.” “Don’t touch my Social Security.”
It was only the last 10 days when people kind of said, “Hey, fix this thing,” when they said, “Oh my gosh, these guys ….” Because I think everybody assumed, “Oh, it’s going to be political theater. They’re going to get to the end, and they’ll fork something out.” And I think we lost a lot of credibility when we almost shut down the government this Spring over nothing. It’s like the little boy who cried wolf, and this time the wolf was at the door.
I know there has been an anti-business populace sentiment out there. And I think at times some folks in administration have overdone on that. But I also think there is, and I don’ know how we get at this, but there is a … I do get tired of some of my business friends who say, “You know, Mark, I agree, but I can get that 10 percent tax rate in Malaysia.” But then they never say, “And I like it so much I’m going to move my family there.” I know you’re responsible to your shareholders, but you’ve got to have some responsibility to your country as well.
And somehow rebuilding that connectivity in a global world. I mean this is not just an American problem.
In Spring of ’09, when people were so angry at the banks, rather than slapping on a $100 billion banking tax, I wish — we all know who the 8 or 10 guys are — get them in the room and say, “Here’s what … the American taxpayer bailed your butts out last year. I can either hit you with this tax, or you can put your brightest people together and you come up with a $2 trillion infrastructure investment bank. Make good returns; make 7, 8, 9 percent, make single-digit returns, but show this country you’re willing to help. You created financial instruments that got us in this; create us financial instruments to help us get this country out.”
And instead, we kind of got, “No, your fault.” And people got in a defensive crouch. We’re not going to get out of this without a collaboration with business. You can’t demonize business, but business also has to recognize if needs to be more than just the next quarter results.
VB: What about the Dodd-Frank Bill that we came up with? This was the answer to fixing what went wrong last time. And I understand now with Capital One’s proposed merger with ING, this might become the first test case of deciding how big is a bank that is too big.
Warner: Two points on this. One is, I wouldn’t mind folks that suctioned to the bill Title I and Title II that I worked on with U.S. Sen. Bob Corker, R-Tenn., we got 95 votes in our section. And I give Dodd credit because instead of jamming a bill through, he actually let it play out on the floor. And there were some amendments that kind of got … there was stuff, you could almost feel the bill kind of come unglued at one point as people were coming up with ideas that were substantive ideas. They didn’t understand the implications.
I think if you go to Europe, almost always, because I’m now chairman of the International Banking Subcommittee, almost all the European countries say, “It isn’t perfect what you did, but thank goodness you guys went first.” And I do get some of the bankers who say, “Well, you’ve got this crazy bill, we’re going to move London.” Well they’re not saying that anymore because they’ve added a much higher tax in London.
But here’s the problem with what has happened in our political system. There are a lot of things in Dodd-Frank that need to get fixed where the bill went to far or there needs to be more time. The problem right now is you’ve got a house that wants to relitigate the whole issue. So rather than coming back in and being able to fix something, you end up with a bill that has bad parts on the books because you don’t want to end up … the whole notion that you’re going to go ahead … if they say … and repeal. There is nobody I know in the banking industry that would say … they might say in terms of position … but would ever say privately, “Oh, we want a full repeal.” They say, “All right, we want to change this, we want to change that, but we can live with this frame.” I got from banks saying, “Oh my gosh, you’re killing us.” And then a whole bunch of people said, “You sold out to the banks. You didn’t break them up.” If I get kind of equal amounts of criticism from both sides….
But I know a lot of places I’d like to fix and change Dodd-Frank. It’s to a degree … I remember on healthcare, same thing. I thought the health-care bill would pass, and there are a lot of things wrong with it. There were lots of my Republican colleagues who said, “Hey, I want to work with you on this afterwards. We can fix parts of it.” Well you can’t fix it now because you get it into the House, and it’s not fix it, it’s this kind of ironclad repeal or not. And the system on all these things … I voted for health care at the end of the day for a very imperfect bill because I thought the status quo was going to bankrupt us. This bill may or may not bankrupt us, but I think the jury is open. But there are parts of it that are fixable.
The irony on health care was the ideas around this healthcare reform were George Bush 41’s ideas around personal responsibility, was the whole frame. This was basically … the only reason [former Massachusetts Gov. Mitt Romney supported it was because … the individual mandate in the late ‘80s was called personal responsibility. It was kind of like why do you not have … if somebody is 28 and making $200,000, is it really fair for them not to have insurance, and then get in a car accident and stick [us with the bill].
So it’s a long answer to Dodd-Frank, but I do think all of these, you’ve got to have a political system that can fix …. You shouldn’t make every issue kind of an all or nothing. And that’s again what the House, what’s happening now is that there is at least a partial crowd in the House that it’s kind of their way or the highway.
What gets me so frustrated with them sometimes is they say they are protectors of the Constitution, but the genius of our constitution was you had an independent president, independent House, independent Senate, and you almost created a slightly dysfunctional system that forced people with checks and balances to work together. I think the constitutional amendment that some of this crowd ought to be advocating for is a change to a parliamentary system. I’m not criticizing. It’s a legitimate form of government. ou win, you control everything, and then you get voted out if you don’t. But our system has never been that way. And so what happens is every bill becomes a “I’ve got to have it entirely or we’re going to shut it down.”
I know this is going to be a November issue, but there is a group in the House right now that even though the kind of of next year budget lines have been set by this deal, there is a group, and I don’t think it will gain much traction, was talking with UPS about it, but are going to try to make … the highway bill expires at the end of September, and there’s legitimately a group of people who are trying to say, “We want to kill all the Federal gas taxes, so let’s not renew at all any highway bill.” For a country that is disinvested in infrastructure by 50 percent in terms of real GDP spending in the last 30 years, to completely dismantle the gas tax when it doesn’t even meet current needs is the height of insanity. But that’s a legitimate political view today.