Jeff Flake

Mr. FLAKE

Mr. FLAKE. I would.

Mr. FLAKE. I thank the gentleman and reserve the balance of my time.

Mr. FLAKE

Mr. FLAKE. I thank the gentleman for yielding. I wish the gentleman from Massachusetts were here to hear this discussion. Earlier in the year we had a discussion about moral hazard. I think all of us recognize that moral hazard played a role in the mess that we got in last year and have been in for a couple of years. The implied guarantees that we had at Freddie and Fannie played a role, a rather large role, in the problems that we later had. I had mentioned to the gentleman from Massachusetts that some legislation we were passing earlier this year would further foster that principle of moral hazard. He said to me that, yes, that would be a problem if what we were doing were permanent, but it wasn't. It was simply temporary. But here what we are doing is very permanent. We are establishing a permanent, in a sense, a permanent bailout fund. We are told only to believe that we are establishing a bailout fund that will never bail out any companies but, rather, will be used to shut companies down, or something like that, to establish a fund. Fifty billion seed money from the Treasury, 50 billion in taxes from other companies to establish a fund to shut companies down? I don't think so. I think what we are establishing here, it's rather clear, is a bailout fund, a permanent bailout fund. If you want to talk about moral hazard, this is it. This is moral hazard institutionalized that will lead to the types of problems that we have seen. It's not a Republican issue or a Democrat issue. This is a principle, an economic principle that simply we cannot ignore.

Mr. FLAKE

Mr. FLAKE. Yes, that is correct.

Mr. FLAKE. That is my language. I'm pleased to see it is part of the legislation. However, as to the broader bill, I still remain opposed, but I thank the gentlewoman, and I hope that that language remains in all the legislation. Sometimes we have a habit of putting it in, then it goes to conference and the language is removed and it comes back. So I'm glad to be surprised and I'm very happy to be wrong in this case. As to the broader bill, I think that when we are running a deficit of $1.4 trillion this year and have a debt of somewhere around $11 trillion, it behooves us to look at programs like this and wonder why we are taking taxpayer money. I know the sponsor of the legislation says that it will be invested wisely. We are basically, as I understand it, using taxpayer money to give to or combine with venture capital money to invest in small business. By definition, if we are moving in with Federal taxpayer money, it's because venture capitalists and others don't see a profit being generated in the future or don't see the need or don't agree that this business model is sound. Yet we are taking taxpayer money and saying we're going to invest it because we know better than the venture capitalists, that somehow Congress, in all of our wisdom, in all of our small business wisdom and business acumen, we know better than venture capitalists which businesses are going to succeed and which ones are not. I think that that thinking is folly. We in Congress don't have a stellar record when it comes to investing. You could name a number of things starting decades and decades ago where we haven't exactly picked the best winners and losers in the economy. But in this case with the kind of deficit we're running, with the kind of debt that we have, with the unfunded obligations totaling more than $50 trillion out there, to come with new authorization for new money, to invest where venture capitalists dare not tread, with taxpayer money, I think it should frighten us all. And to the extent that this legislation does that, we should reject it. I should mention, as well, that this is talked about with early investment, but under the legislation only 50 percent of the funding is required to be invested early. Now, I think it would be folly to invest early, late, or anytime with Federal taxpayer money in private business in this fashion, but I think it's a bit of a misnomer even to call it ``early investment'' when only half of the money is required to be invested early in this case. I hope that we reconsider this. Between now and the end of the year, we're going to be passing a lot of authorization bills like this, and a lot of people will say, well, it's not appropriation. It's not real money. We're just authorizing it. We're just stating goals and ideals. But then come next year or later when we haven't funded this, people will say, hey, we're cutting back or we're cutting funding that has been authorized. The Congress authorized it by a big margin, and this will probably pass by a big margin, and yet when we don't fund it, people will come back and say we haven't funded what we've authorized. So it is important to make a statement here that it's not the right time, now or anytime, frankly, to use taxpayer money to invest in small business in this fashion, to go where venture capitalists dare not tread, where they will not invest their own money, but we're going to put Federal taxpayer money in this venture. So with that, I appreciate the gentleman for yielding, and I thank the gentlewoman again. And I appreciate the diligence that you've worked with to keep the language in the legislation. That hasn't always happened, and I appreciate that it is here.

Mr. FLAKE. I thank the gentlewoman and I apologize.

Mr. FLAKE. I thank the gentleman for yielding. I rise in opposition to the legislation. This bill is one of many we're considering under suspension of the rules that were part of broader pieces of legislation we passed just a few weeks ago. Members may recall that I offered an amendment to clarify that the grant program established under this program remain free of earmarks. That amendment was hardly controversial. It's passed a number of times, a similar amendment on similar bills. In fact, I think it's been by voice vote six times in the 111th Congress, twice by recorded vote, once in the 110th and again just a few weeks ago. This amendment on this bill earlier passed by a margin of 370-55, yet that language does not appear in the legislation that we're considering today.

Mr. FLAKE. I yield to the gentlewoman from New York.

Mr. FLAKE. I hope I'm mistaken. I hope that it is.

Mr. FLAKE. Thank you. I appreciate that. On to the broader piece of legislation, this Early Stage Investment program would allow the SBA to provide matching grants to private investment firms when they will use the money to invest in small business. I have to wonder, have to question----

Mr. FLAKE. Yes, I yield.

Mr. FLAKE

Mr. FLAKE. I thank the Chair. This amendment would simply prohibit the Assistance to Firefighters Grant program and the SAFER grant program from ever being used as vehicles for earmarking. As my colleagues are likely aware, I have offered a similar amendment several times this year. It's been adopted this year six times by voice vote and again by a roll call vote at least once. As before, H.R. 3791 stipulates that the grant programs it authorizes are to be run on a competitive basis or on some basis based on need. While we have language prohibiting earmarking in there somewhat, this may seem redundant, but we all know that just because grant programs are labeled competitive doesn't mean that they won't be vehicles for earmarking. In fact, we've had in some other programs, like FEMA's Pre-Disaster Mitigation program, that's a competitive grant program designed to save lives and reduce property damage by providing funds for hazard mitigation planning, acquisitions, and relocation of structures out of the flood plain; unfortunately, that program, although it's supposed to be competitive, has been completely earmarked, like 100 percent of the funds have been earmarked. We want to prevent that from happening here. If we're going to establish a grant program and call it a competitive program, we need to ensure that it is, indeed, competitive. That's what this amendment seeks to do. With that, I reserve the balance of my time.

Mr. FLAKE. Mr. Chairman, I have an amendment at the desk, designated as No. 3.

Mr. FLAKE. I yield 1 minute to the gentleman from Nebraska (Mr. Smith).

Mr. FLAKE. I thank the chairman of the subcommittee and also the ranking minority member for supporting the amendment. I yield back the balance of my time.

Mr. FLAKE

Mr. FLAKE. Mr. Speaker, I rise in opposition to this bill. When there is 10 percent unemployment, you stop digging.

Mr. FLAKE. Mr. Speaker, there is so much wrong with this bill it is impossible to cover in 90 seconds, so let me focus on one aspect. Yesterday we learned that unemployment has reached 10 percent in this country. Can you imagine being a small businessman and deciding whether or not you are going to hire new employees when you face the prospect of an 8 percent tax if you are not providing the kind of health care coverage that this bill envisions. An 8 percent tax. And depending on the kind of business you have, if you file as a Sub S corporation, for example, you could face an additional 5.4 percent surtax on top of that. Are you going to hire more people? Not a chance. Unemployment will get worse. We are in a deep economic hole, Mr. Speaker, and the first rule should be, stop digging. Yet here we have doubled down, and we are trading in our shovel for a backhoe, and we are saying we are going to dig faster and deeper. To what effect? What are we saying to people out there? That jobs aren't important? That we don't care because we just have to pass this legislation? We ought to have more responsibility than that.

Mr. FLAKE

Mr. FLAKE. I thank the chairman. And would that all chairmen shared your view on earmarks and programs of this type. I am glad the chairman has agreed to accept this amendment, and I urge its adoption. Mr. Chairman, I yield back the balance of my time.

Mr. FLAKE. Mr. Chairman, I have offered different iterations of this noncontroversial amendment many times during this Congress and the last. This particular amendment was offered last June to the TSA Authorization Act when it was adopted by voice vote. H.R. 2868 establishes a new Worker Training Grants program that seeks to provide grants to nonprofit organizations with demonstrated experience in implementing and operating successful worker or first responder health and safety training programs. This amendment would simply prohibit the Worker Training Grants program from being earmarked by Members for pet projects or favored entities back home. This amendment also establishes that it is the presumption of Congress that these grants would be awarded competitively based on merit. I am often asked why I offer this. These are set up to be programs that are competitively awarded, but sometimes it's explicitly stated, sometimes it's not. In either case, sometimes when it is explicitly stated--and when it's not--these grant programs are sometimes just earmarked, all of them. All of the money in some of these accounts, if you take, for example, some of the programs in the Homeland Security bill, nearly 100 percent of the funds in one particular grant program were earmarked in the most recent Homeland Security spending bill. So what we are seeking to do is make sure that people who want to apply for these grants are able to, and that Members aren't able to simply earmark that money for people in their district or favored entities. Mr. Chairman, I reserve the balance of my time.

Mr. FLAKE. Mr. Chairman, I have an amendment at the desk designated as No. 6.

Mr. FLAKE

Mr. FLAKE. Mr. Speaker, someone with a lot of time on his hands, or more likely somebody with a pretty good search engine, found that the 2,000-page Pelosi health care bill uses the word ``shall'' more than 3,000 times. Now, that's an average of more than 1.5 times per page. It seems about the only page where the word ``shall'' is not used is the page that states that Members of Congress ``may'' enroll in the government-run insurance option. No ``shall'' here, just ``may.'' In other words, what's good for the country isn't necessarily good for Congress. I'd encourage anyone who is watching or listening out there to call the Speaker and ask her why. If this government-run insurance option is so good, why aren't Members of Congress required to enroll in it as well?

Mr. FLAKE

Mr. FLAKE. I thank the gentleman. I doubt I will take 8 minutes. Mr. Speaker, I rise in opposition to this rule. I submitted an amendment to the Rules Committee that would have prevented the Small Business Administration from engaging in the practice of making direct loans to private small businesses. I should mention that this amendment was germane. There was no problem. It wasn't out of order, and it should have been made in order here today. The Capital Backstop Program, authorized by this legislation, would allow the SBA to make direct loans during a time of recession to small businesses that are denied loans by private lenders. In other words, the Federal Government will begin making loans using taxpayer dollars to finance small businesses that are unable to secure loans through the private sector. Now, let's back up just a bit. What the Small Business Administration does is it guarantees loans made by banks to businesses. In this case, if a bank won't lend money to a business even if that money is guaranteed by the Federal Government, then we might step in and lend money directly to that business. This is something we have not done in decades with the SBA. Ask yourself: If a bank out there won't lend money with Federal guarantees, is it the proper role of the Federal taxpayer to step in and lend money directly to that business? Maybe we ought to step back and say, There might be a problem here with that business. If a bank won't lend them money when that loan is guaranteed, why should we be lending them money? Why should we be exposing the taxpayer here? Government interference in the private sector is not the only cause for concern over this program. Not long ago, Congress undertook a series of studies and hearings on the government-run Reconstruction Finance Corporation, which was a relic of the Great Depression that engaged in direct lending to private entities. I will mention we haven't done this for a long time, but we did at one point lend money directly to businesses. The Depression had long since ended, but the RFC remained intact, and there were reports of corruption. One of the studies, called the Hoover Commission, submitted a report to the Congress in 1949. It warned--and I'll read directly from the report: Direct lending by the government to persons or enterprises opens up dangerous possibilities of waste and favoritism to individuals and enterprises. It invites political and private pressure or even corruption. This is what they found happened when we lent money directly to businesses in this fashion. Yet here we are today, willing to ignore our own reports in Congress, willing to ignore the lessons of the past, and willing to start engaging in this practice again. Again, this bill authorizes a program which, after a bank has passed on giving a loan to a business even after we step in and say we'll guarantee that loan, the bank says, No, we still won't do it. So we say, Okay. We'll put taxpayers on the hook. Now, why in the world wouldn't we allow an amendment today to have an up-or-down vote on whether to strike that provision of this new authorization? Why shouldn't we decide that here in this House? Why is it so important to rush this bill through without giving the Members of this body the opportunity to stand up and say, Hey, you know, we've produced reports in this Congress; we've had commissions which report that there is a problem when we have direct lending programs like this that, maybe, we ought to consider? No. The Rules Committee says, We don't even want you to vote on that. We don't want anything to do with it. We'll just not allow it on the floor. We'll have a structured rule, and you won't have an opportunity to vote on it. That simply isn't right, Mr. Speaker. I'm disappointed that we won't be able to debate the merits on this. I would ask that the Members of this body vote ``no'' on this rule. Go back to the Rules Committee. Allow a rule to come to the floor that allows the Members of this body to actually exercise our franchise here. When we see a program that might have a problem, let's at least have an up-or-down vote and at least be able to decide if we should be doing this or not instead of just turning a blind eye and saying that the reports that this Congress has produced in the past and that the studies of the commissions that we've appointed don't matter because we know better now. So, Mr. Speaker, let's vote down this rule, if we can't change this bill, to prohibit the direct lending to small businesses that banks won't even lend to after we guarantee those loans. If that provision isn't removed, we ought to vote down the bill.

Mr. FLAKE

Mr. FLAKE. Mr. Chairman, I have an amendment at the desk designated No. 5.

Mr. FLAKE. Mr. Chairman, this amendment would simply prohibit the grant program established in the Small Business Early Investment Program from ever being used as a vehicle for earmarking. As my colleagues are aware, I have offered this noncontroversial amendment many times to legislation in both the 110th and 111th Congresses. I would expect that this would be accepted by the majority. This is noncontroversial. There is language in the bill that says this is a competitive grant program. Having said that, unfortunately, we have many programs that are slated to be competitive, or there is language saying these grants will be awarded on a competitive basis. And still, unless we have language like this amendment provides for, they become a vehicle for earmarking. If we look at some of the FEMA grants in the Homeland Security bill, some of those are competitive grant programs, and 100 percent of the money in some of those accounts has been earmarked. So it behooves us to opt for language like this that prevents that from happening. Under the Small Business Early Investment Program, this is a little different than others. Private investment companies can apply to receive a grant from the SBA. These grants are to be used by approved applicants for the purpose of making investments in new small businesses, presumably with a goal of creating or preserving jobs. Language contained in the committee report says applicants ``should be judged by the merits of their application and should compete on equal footing with other applicants for selection to participate in the program.'' That is all we are trying to preserve, just with language to make sure that happens. I reserve the balance of my time.

Mr. FLAKE. I thank the chairwoman and the ranking minority member on the committee for accepting the amendment. I yield back the balance of my time.