Supercut: Team Biden Vows to Impose Carbon Tax
Joe Biden and Kamala Harris have endorsed a carbon tax on the American people.
And as shown in the video below, they are surrounding themselves with others pushing a carbon tax, including climate czar John Kerry, OMB pick Neera Tanden, and Treasury Secretary Janet Yellen:
A carbon tax would impose burdens on households due to higher costs of cooling and heating, transportation, and groceries.
Even Hillary Clinton in 2016 decided to oppose a carbon tax after she learned the following from an internal Clinton report prepared by policy staff:
The Hillary memo states that a carbon tax would devastate low-income households: “As with the increase in energy costs, the increase in the cost of nonenergy goods and services would disproportionately impact low-income households.”
The Hillary memo states that a carbon tax would cause gas prices to increase 40 cents a gallon and residential electricity prices to increase 12% - 21%: “In our analysis, for example, a $42/ton GHG fee increases gasoline prices by roughly 40 cents per gallon on average between 2020 and 2030 and residential electricity prices by 2.6 cents per kWh, 12% and 21% above levels projected in the EIA’s 2014 Annual Energy Outlook respectively.
The Hillary memo states a carbon tax would cause household energy bills to go up significantly: “Average household energy costs would increase by roughly $480 per year, or 10% relative to the levels projected in EIA’s 2014 Outlook.”
The Hillary memo states that a carbon tax would increase the cost of household goods and services: “The cost of other household goods and services would increase as well as companies pass forward the higher energy costs paid to produce those goods and services on to consumers.”
(Source: MEMORANDUM FOR HILLARY RODHAM CLINTON -- Jan. 20, 2015)
Carbon taxes are highly unpopular with voters. In fact, carbon tax advocates can’t even get a carbon tax passed in a single blue state, as this timeline shows.
Carbon taxes also saddle state and local governments with huge costs. For example, a school district in Canada was forced to kick 400 kids off the school bus program in order to pay a $3.3 million carbon tax bill.
It's no wonder conservative groups wrote a letter to Congress Stating: "We oppose any carbon tax." The official Republican Party platform also rejects "any carbon tax."
Biden's carbon tax will also shatter his pledge to each and every American making less than $400,000 that he will not raise a single penny of any tax.
Biden Keystone Order Hits Small Business Hard: “Over $3,000 in monthly revenue that was gone literally within 48 hours.”
President Biden's order to kill the KeystoneXL pipeline is not only hitting pipeline workers. Small businesses along the pipeline route are also being hit hard.
South Dakota resident Tricia Burns owns a gym in Philip, South Dakota:
"We lost 45 memberships -- that's over $3,000 in monthly revenue that was gone literally within 48 hours. We had negotiated contracts with security companies that were coming in to secure the pipeline. That would have brought us another 120 memberships."
Indiana House Republicans Push Second Tax Hike in Four Years
The Indiana State Senate will have to stop the latest tax hike scheme to come out of the Indiana House of Representatives in the past four years.
Last week, the House approved a budget that increases taxes overall, on the back of a tax hike on vape and tobacco products.
Only two Republicans voted no, with a handful not voting. A dozen members who promised their constituents they would not vote to increase taxes, voted to do just that for a second time. Their constituents are likely thinking of the old saying, ‘Fool me once, shame on you. Fool me twice, shame on me’.
In 2017, the Indiana legislature approved a significant increase in the state gas tax. This year it is a dangerous tax on vaping, and misguided tax hike on cigarettes.
Increasing taxes on vape products simply means fewer people will switch to vaping from higher risk tobacco products, and small businesses like vape shops will suffer as they try to recover from a pandemic and keep people employed.
Budget lead Rep. Tim Brown said, “one of the most important things we can do in the state of Indiana to make us a healthier state is to decrease smoking.” In fact, his tax hikes will do the exact opposite.
Reduced-risk tobacco alternatives such as e-cigarettes that are proven 95% safer than combustible tobacco and twice as effective as more traditional nicotine replacement therapies. It is downright irresponsible to hurt people who are trying to quit smoking.
Cigarettes may look like a soft political target, but increasing taxes on them carries multiple downsides – and there is no upside for health.
Data from the National Adult Tobacco Surveys has consistently demonstrated that tobacco tax increases have no statistically significant impact on the prevalence of smoking among those with household incomes of less than $25,000. Seventy-two percent of smokers are from low-income communities.
They also lead to smuggling. According to the nonpartisan Tax Foundation, tobacco taxes in nearby Michigan and Illinois have resulted in 20% of the market consisting of illicit tobacco.
New revenues would be slated to go to Medicaid, but cigarette taxes are notorious for falling short of revenue promises. Missed revenue means gaps that government is loathe to address by cutting spending – meaning they’ll find other taxes to increase to keep spending levels up.
To be fair, a positive from this budget is the expansion of school choice, which empowers parents at a time when the importance of that choice is more clear than ever.
By pursuing these tax increases, Indiana House Republicans are making promises they can’t keep, while breaking the understanding voters have that Republicans will protect their wallets.
Indiana Senators can and should stop their House colleagues from harming themselves, and the taxpayers they represent. The more legislators get used to increasing taxes, the more Indiana will slip from the pro-taxpayer, business-friendly state it has been.
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ATR Supports the “Protecting Retirement Savers and Everyday Investors Act”
ATR President Grover Norquist today released a letter in support of the “Protecting Retirement Savers and Everyday Investors Act,” legislation that prohibits states from imposing financial transactions taxes (FTT) on American savers and investors across the country.
All members of Congress should support and co-sponsor this legislation.
You can read the full letter here or below:
March 3rd, 2021
Re: Support the “Protecting Retirement Savers and Everyday Investors Act"
Dear Representatives McHenry and Huizenga:
I write in support of the “Protecting Retirement Savers and Everyday Investors Act,” legislation that prohibits states from imposing financial transactions taxes (FTT) on American savers and investors across the country. All members of Congress should support and co-sponsor this legislation.
Most FTT proposals impose a 0.1 – 0.25 percent tax on any buying and selling of stocks, bonds, and other financial instruments.
In the wake of the Robinhood-GameStop controversy, several Democrats have called for FTTs to limit market volatility. FTTs would do nothing to limit volatility: rather, they would act as a Trojan Horse to pass new regulations and new taxes.
If implemented in any given state, an FTT would result in significant harm to investors. Because the tax would be imposed on transactions processed by the exchanges in a state, it would harm investors across the country, not just those in the state which implements it. Your legislation would protect against this by prohibiting a financial transactions tax on taxpayers outside a state’s borders.
FTTs represent another attempt by the left to create new and higher taxes on the American people and grow the size and scope of government. If implemented, this tax would have broad, negative economic effects. It would impose an additional layer of taxation on top of corporate income taxes, capital gains taxes, and individual income taxes. This would impose a barrier to trades, which could increase the cost of capital and reduce economic productivity.
This tax could even increase market volatility as investors would be less likely to buy and sell. It also punishes shareholders who have strategically invested, saved and planned for a prosperous future.
An FTT would especially impact 401(k)s, pensions, and index funds. These funds make frequent trades, so the tax would increase the costs of buying and selling, resulting in lower returns. A 0.1% surcharge would require average Americans to work another 2.5 years before retiring in order to make up for the shortfall in savings. A 2021 study conducted by the Modern Markets Initiative found a proposed financial transaction tax would cost $45,000 to $65,000 over the lifetime of a 401(k) account.
FTTs fail to raise significant revenue because they reduce trades and increase the cost of capital. In fact, an analysis by the Congressional Budget Office found that imposing a FTT would “decrease the volume of transactions and would make some types of trading activity” and “probably reduce output and employment.”
This is not hypothetical. FTTs have failed when they have been tried overseas. For instance, in 1984, Sweden imposed a financial transaction tax. However, this tax lasted just six years due to investors fleeing to foreign markets. Not only did the FTT raise little revenue, capital gains tax revenue dropped because of a reduction in sales. According to the Center for Capital Markets, this has also happened in Spain (1988), Netherlands (1990), Germany (1991), Norway (1993), Portugal (1996), Italy (1998), Denmark (1999), Japan (1999), Austria (2000), and France (2008). It was even repealed here in the United States in 1965 through a bipartisan vote, due to its failure. In the years following the repeal, trading volume in the United States increased substantially.
While many are motivated to support an FTT by their disdain for short-selling, the fact is that short selling is not responsible for market crashes and economic downturns. Instead, it is a function of the free market. Investors will short a stock when they think it is overvalued. In this way, it helps promote investor efficiency and provides information to markets, ultimately softening the blow of a downturn.
For instance, the 2008 market crash could have been far more widespread if short sellers hadn’t recognized the housing market was overvalued. Arbitrarily restricting this trading will likely lead to severe pain if we experience another crash. Rather than improving market volatility, an FTT could make this problem worse as there would be fewer buyers and sellers and therefore more price jumps.
The effort by blue states to impose FTTs should be rejected. These taxes have failed where they have been tried before, would harm economic growth and investment, and would fail to raise any significant revenue.
The Protecting Retirement Savers and Everyday Investors Act would protect Americans from FTTs by ensuring that states could not impose them on taxpayers across state lines. All members of Congress should co-sponsor and support this important, pro-taxpayer legislation.
Onward,
Grover Norquist
President, Americans for Tax Reform
Photo Credit: S Chia
It’s Not Just Blue States Where Surprise Tax Bills Are A Threat This Spring
As in many state capitals, lawmakers in North Carolina are currently debating whether or not to fully conform with all of the tax relieving and liquidity enhancing provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act relief package approved by Congress last April.
North Carolina legislators have already conformed to the CARES Act’s tax exemption for forgiven PPP loans, approving that state level tax exemption last Spring. This conformity, which most other states have followed suit in enacting, or are in the process of passing, ensures that businesses who have been able to remain open with the help of a PPP lifeline will not be hit with a surprise state income tax bill. Right now, 29 states, including neighboring South Carolina, will not tax forgiven PPP loans.
While North Carolina lawmakers have exempted forgiven PPP loans from state taxation, they have not permitted the same payroll deduction authorized federally, nor have they permitted the code to conform with the other liquidity enhancing provisions of the CARES Act. Americans for Tax Reform recently sent a letter to legislators in North Carolina urging them to pass legislation doing just that.
Legislation to accomplish this goal, Senate Bill 104, was introduced on February 27 by Senators Jim Perry, Chuck Edwards and David Craven. It’s ATR’s position that North Carolina legislators should not tax employers’ pandemic relief aid, nor do they even need to, as the state has a reported $4 billion budget surplus.
In addition to the PPP loans, the CARES Act increased business liquidity in a time of crisis by reducing existing limitations on business interest expenses subject to deduction in tax years 2019 and 2020; eliminating loss limitations for noncorporate taxpayers that were enacted as part of the 2017 Tax Cuts & Jobs Act (TCJA) for tax years 2018, 2019, and 2020; and relaxing the TCJA’s limitation of NOL deductions, permitting a five-year carryback of NOLs generated in tax years 2018, 2019, and 2020.
The last thing struggling small businesses need right now is a surprise tax bill brought on by acceptance of pandemic aid. Enactment of SB 104 will prevent that from happening in North Carolina. By passing SB 104, which would have North Carolina’s tax code conform to the other liquidity-increasing provisions of the CARES Act, North Carolina lawmakers will boost the job-creating and sustaining capacity of employers at a critical time for many businesses.
Photo Credit: Mr.TinDC
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"Canceling this Keystone Pipeline to make a group of people happy has had real life consequences. We got people who can't work now, can't provide for their families."
Americans for Tax Reform is collecting personal testimonials of Americans hit by President Biden's policies. (If you would like to submit a short video, please send it to Mike Mirsky at mmirsky@atr.org).
Please watch this video from Neal Crabtree:
"My name is Neal Crabtree. I was welding on the Keystone XL pipeline January the 20th and I was laid off that very same day, the same day that president Biden took office.
One of the biggest issues I have is how people don't seem to care. They say these are just temporary jobs. Well, if you think about it, a lot of jobs in this country are temporary. When a carpenter goes to build a house, he's not working on that same house his entire career. He starts that house and finishes it and moves on to another one.
The same way with a lawyer. When he signs up a client he takes that case to court, and he either wins or loses, and then he moves on to another one. In this case, that pipeline was our client and the government is taking our future away by not letting us work.
To me, leadership -- which, when I say leadership I'm referring to the president, leadership isn't thinking you're solving one problem when you're really creating another one.
Canceling this Keystone Pipeline to make a group of people happy has had real life consequences. We got people who can't work now, can't provide for their families."
ATR Leads Coalition Supporting Legislation to eliminate the Office of Financial Research
Today a group of free market groups released a letter supporting Sen. Ted Cruz (R-Texas) and Rep. Ted Budd's (R-N.C.) legislation to eliminate the Office of Financial Research.
Established under the Dodd-Frank Wall-Street Reform and Consumer Protection Act, the Office of Financial Research is a regulatory agency that collects data provided by financial institutions, such as bank holding companies. The data is used to examine financial market risks and supports the Financial Stability Oversight Council. This data is commonly volunteered by financial institutions. However, Dodd-Frank provides wide latitude for the Office’s Director to use their subpoena power to demand the data.
OFR receives funding outside the congressional appropriations process through fees the agency collects from the financial institutions that it regulates. As a result, the agency avoids direct congressional oversight, allowing OFR to determine what their budget should be almost unilaterally. For the fiscal year 2020, the OFR had a $62.7 million budget and about 100 full-time staffers.
The Office of Financial Research is redundant and duplicative. Its mission to research the stability of financial institutions has been conducted by roughly 20 other federal agencies, well before the enactment of Dodd-Frank, including the Department of Treasury’s Office of Economic Policy, the Federal Deposit Insurance Corporation’s Center for Financial Research, and the Federal Reserve’s Division of Financial stability
The previous Republican Administration took steps to shrink the Office and reduce its regulatory burden on the financial services industry. However, the current Director of the OFR, President Trump appointee Dino Falaschetti, has reversed his stance on agency cuts and called for more funding and increased staffing. Additionally, the newly appointed Secretary of Treasury Janet Yellen acknowledged in her written testimony before the Senate Finance Committee that she would reassess the Office’s cuts and expanding the agency’s footprint to research the economic effects of climate change.
Furthermore, a new Director under a Biden Administration could potentially weaponize the Office’s subpoena power to collect information from financial institutions lending activity to publicly shame institutions from servicing certain industries.
The organizations who joined this coalition letter are proud to support Senator Cruz’s efforts to curb further government overreach by unaccountable agency bureaucrats.
Click here or see below to view the letter.
Dear Senator Cruz & Congressman Budd:
On behalf of the undersigned organizations, we write to express our support for your legislation eliminating the unaccountable Office of Financial Research. This agency was established in 2010 by the Dodd-Frank Act and operates outside the Congressional appropriations process, receiving its funding from industry fees collected from financial institutions.
In response to the financial crisis of 2008, Congress quickly passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, expanding the federal government’s role in oversight of the financial marketplace and created several new regulators. The Office of Financial Research serves as a data collection agency that supports the Financial Stability Oversight Council, another regulator initiated by Dodd-Frank. While much of the data collected by OFR is voluntarily provided by private financial institutions, Congress granted the Office’s Director subpoena power to collect information from bank holding companies as he sees fit.
OFR receives its funding through fees collected predominantly from the bank holding companies it regulates, insulating itself from Congressional oversight. Congress has no authority to review OFR's operations and how it spends its fees, shielding the Office from Congressional accountability. For bank holding companies, there are limited options other than surrendering capital to fund their regulator.
The Office of Financial Research's mission to support the Financial Stability Oversight Council with financial research is duplicative in nature. Nearly 20 other agencies, departments, bureaus, and committees exist and already conducts similar research, including the Department of Treasury’s Office of Economic Policy, the Federal Deposit Insurance Corporation’s Center for Financial Research, and the Federal Reserve’s Division of Financial Stability. OFR is housed within the Treasury and operated on an annual budget of $62.7 million for the 2020 fiscal year. Furthermore, despite OFR's significant outlays, the bureau has a history of producing incomplete and analytically unsound research.
Concerningly, the current Director of the OFR, President Trump appointee Dino Falaschetti, is now calling for more funding and increased staffing to increase the agency's scope. The Trump administration took steps to shrink the Office and limit its intrusion among financial institutions. But, Secretary of the Treasury Janet Yellen discussed reassessing the Office's cuts and expanding the Office's scope to include climate research during her confirmation hearing before the Senate Financial Committee.
Under the Biden Administration, a Democrat-appointed Director could weaponize the Office and abuse its subpoena power to liberally collect information from financial institutions. Specifically, the Office could be used as a backdoor collection point for banks to surrender information regarding their lending activity in an attempt to publicly shame institutions and discourage them from lending to certain industries. For these reasons, we, the undersigned organizations, strongly support your legislation to eliminate the Office of Financial Research in its entirety.
Sincerely,
Grover Norquist
President, Americans for Tax Reform
Adam Brandon
President, FreedomWorks
Andrew F. Quinlan
President, Center for Freedom and Prosperity
Heather R. Higgins
CEO, Independent Women’s Voice
Pete Sepp
President, National Taxpayers Union
Maureen Blum
Executive Director, USA Workforce
Phil Kerpen
President, American Commitment
Matthew Kandrach
President, Consumer Action for a Strong Economy
Iain Murray
Vice President, Competitive Enterprise Institute
Tom Schatz
President, Council for Citizens Against Government Waste
Photo Credit: RoguePlanet
Nebraska's LB459 Would Increase Taxes on Life-Saving Products, Lead To Increase In Tobacco-Related Deaths
Americans for Tax Reform submitted testimony today in opposition to Nebraska’s Legislative Bill 459, which would increase taxes on life-saving reduced risk tobacco alternatives such as e-cigarettes and increase the highly regressive tax on tobacco.
ATR Director of Consumer Issues, Tim Andrews, wrote: "These anti-science provisions would have a disastrous impact upon not only businesses, but public health throughout the State, and lead to an increase in tobacco-related deaths. LB 459 also seeks to increase the highly regressive tax on tobacco, disproportionately harming the state’s most vulnerable populations at a time when they can least afford it, while doing nothing to reduce smoking rates."
Andrews noted the ever-growing body of research showing vapor products are an effective harm reduction tool for adults looking to quit smoking: "Extrapolating from a large-scale analysis by the US's leading cancer researchers and coordinated by Georgetown University Medical Centre, if a majority of smokers in the state of Nebraska made the switch to vaping, over 40,000 lives would be saved. In seeking to tax these life-saving products, this bill would place these in jeopardy.”
LB 459 fails to incentivize smokers to move away from deadly combustible cigarettes. Andrews noted that "As the price of a product increases, its use decreases. In previous instances, levying taxes on vaping products has been proven to increase smoking rates as people shift back to deadly combustible cigarettes. Minnesota is serving as a case study on this already. After the state imposed a tax on vaping products, it was determined that it prevented 32,400 additional adult smokers from quitting smoking. Small increases in projected revenue should never come at the expense of human lives.”
The full testimony can be found here.
Photo Credit: Jimmy Emerson
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Lawmakers Should Reject H.R. 1, the "For the People Act"
As soon as this week, the House of Representatives is set to vote on H.R. 1, the "For the People Act." In the coming weeks and months, the law is also expected to be taken up by the Senate. H.R. 1, a top priority for Congressional Democrats, is an 800-page bill filled with partisan policies to rig the system in favor of the Left.
This proposal would fundamentally transform how elections are conducted in the United States, would politicize the Federal Elections Commission, would create taxpayer-funded candidates, and would directly violate constitutional mandates like free speech and states’ freedom to determine their own election laws. Congress must reject this dangerous piece of legislation.
Instead of working within our institutions, Democrats have taken to attacking the institutions themselves when they do not produce the left's preferred outcome. When they didn't like the composition of the Supreme Court, they threatened to pack it. When they couldn't convince enough of the legislature of an idea, they fought to repeal the filibuster. Now, because they do not want to lose the presidency or their majorities in the House and Senate, they are working to pass H.R. 1.
See Also: Key Vote: ATR Urges NO Vote on H.R. 1, the "For the People Act"
H.R. 1 would unconstitutionally undermine state election oversight. Article I Section IV of the U.S. Constitution empowers states to determine the “Times, Places and Manner of holding elections…” By nullifying several state election laws, H.R. 1 would make significant strides in stripping states of this enumerated power.
It would force states to implement early voting, automatic voter registration, same-day registration, online voter registration, and no-fault absentee balloting.It eliminates any restrictions on vote-by-mail. Additionally, the bill would invalidate voter identification laws all across the country by allowing voters to simply sign a statement affirming their identity as they enter their polling place.
H.R. 1 would create taxpayer-funded candidates. Taxpayers would be on the hook for matching 600% of campaign contributions to subsidize candidates they may disagree with – a practice that has been ripe for corruption, despite having the intentions of reducing corruption.
Thomas Jefferson once said: “To compel a man to furnish funds for the propagation of ideas he disbelieves and abhors is sinful and tyrannical.” In this way, it could be described as compelled speech. Especially because it will almost certainly propagate one political party (the Democratic party) over the other upon implementation.
Taxpayers should not be forced to fund campaigns they find disagreeable. In fact, they shouldn’t be forced to fund campaigns they agree with. Americans’ ability to choose to or refuse to participate in politics has always been a foundational principle in the United States.
H.R. 1 suppresses free speech. First, it empowers federal regulators to categorize and regulate speech, including online speech. It does so by undoing the FEC’s “internet exemption” which excludes the internet from regulation of political speech. This exposes online communication to the same scrutiny as traditional advertisements.
The law also invents a new regulation called “PASO,” an overbroad standard that asks whether political speech “promotes,” “attacks,” “supports,” or “opposes” a federal candidate or official. Besides the blatant unconstitutionality of this regulation, it is also so unclear and broad that it can be used as a weapon by whichever political party is in power. As Rich Lowry explains, the current law “limits expenditures that expressly advocate for the election or defeat of a candidate, or refer to a candidate in public advertising shortly before an election.”
Any and all political, nonelectoral messages can be framed as something which promotes, attacks, supports, or opposes a candidate. Under this law, the party in power can frame their opponents’ political speech this way and subsequently limit their opponents’ speech.
Additionally, the bill transforms the “stand by your ad” disclaimer in video advertisements, forcing organizations to identify their top five donors at the end of advertisements. This represents a radical change in policy: currently, the “stand by your ad” provision simply requires a statement by the candidate or organization/corporation that they approve the communication. In addition, the bill mandates the disclosure of all the names and addresses of donors giving more than $10,000 to groups that engage in “campaign-related disbursements.” With the incredible rise in partisanship, cancel culture, and doxing, it is more important than ever to protect donor privacy.
Finally, H.R. 1 would politicize the FEC. Under current law, the FEC is comprised of a six-member bipartisan committee: three Republicans and three Democrats. In order to move forward with any prosecution of alleged campaign violations or investigations, the FEC needs four votes. This law would limit the member number to five, therefore including two Republicans, two Democrats, and one “independent” from a minor political party. Under this rule, a president could appoint a Bernie Sanders-style “independent” to serve as the fifth member of the FEC. To make matters worse, under this law, a president could also pick the Chairman of the FEC, all but ensuring total presidential control of the Commission.
H.R. 1 is a dangerous piece of legislation. This legislation would suppress free speech, invalidate state laws, create taxpayer-funded candidates, and do nothing to help the economy or fight the Coronavirus pandemic. This Democrat power grab should be rejected.
Photo Credit: Martin Deutsch
Pipeline Welder: "Biden's decisions to shut down the KeystoneXL pipeline and many others affects me and my family of five very much so."
Americans for Tax Reform is collecting personal testimonials of Americans hit by President Biden's policies. (If you would like to submit a short video, please send it to Mike Mirsky at mmirsky@atr.org).
Please watch this video from Nate Manor, a member of Pipeliners Local Union 798:
"Hi my name is Nate Manor. I am a proud 798 pipeline welder. President Biden's decisions to shut down the KeystoneXL pipeline and many others affects me and my family of five very much so. Having 16 years of pipeline experience -- and that being all I've really done or known most of my life and made a really good living and had great health insurance and everything else for my kids and family -- the starting over thing is going to be really hard, almost next to impossible for me."
ATR Signs Coalition Letter Urging Congress to Overhaul Fannie Mae and Freddie Mac
Americans for Tax Reform joined a group of free-market groups and signed a coalition letter encouraging legislators to prioritize reforming Fannie Mae and Freddie Mac this Congress. Reforming these Government Sponsored Enterprises and their conservatorship will help protect American taxpayers from continuing to remain on the hook and bailing them out again in the event of another financial market emergency.
Fannie Mae and Freddie Mac are America’s two largest home mortgage companies. While they do not originate any mortgages, both provide liquidity to the mortgage market by purchasing mortgages from lenders. Fannie and Freddie either hold the mortgages in their portfolio or securitize the loans into pools called mortgage-backed securities that are sold to investors.
The two GSEs wield an effective duopoly over the secondary mortgage market and currently guarantee almost $7 trillion in mortgage-related debt. Fannie Mae and Freddie Mac were congressionally chartered private companies established to encourage homeownership, but the actions taken in the wake of the housing crisis effectively put the companies under government control, known as conservatorship.
During the 2008 financial crisis, some of the mortgages bought by the GSE’s started to fail. Homebuyers were unable to meet their mortgage payments, jeopardizing the solvency of Fannie and Freddie’s mortgage portfolios. As a result, the Housing and Economic Recovery Act of 2008 placed both Fannie Mae and Freddie Mac into government conservatorship on September 6, 2008, under the newly created Federal Housing and Finance Agency. Because the conservatorship arrangement implies that the government now guarantees the loans, the American taxpayers have become the backstop of a multi-trillion-dollar loan portfolio. When Fannie and Freddie were nearing insolvency in 2008, they borrowed over $191.4 billion from the U.S. Treasury. If the housing market declines again, Fannie and Freddie can borrow the remaining amount from the $254 billion Treasury credit line left over from 2008.
Legislators and regulators did not intend for the conservatorship to be perpetual. It was supposed to be a short-term emergency measure to keep GSEs solvent and prevent further escalating the financial crisis. In 2008, FHFA Director James B. Lockhart stated that Fannie and Freddie would only be under conservatorship until they were stabilized. Similarly, the former Office of Management and Budget Director Jim Nussle considered the arrangement to be temporary.
However, Fannie Mae and Freddie Mac are entering their 13th year under federal government control. Fannie Mae and Freddie Mac have increased their loan portfolio to levels 33% higher than pre-crisis. After a decade of recovering home prices and economic expansion, the need for GSE’s to remain in conservatorship has long passed.
It is long overdue for Congress to prioritize ending the GSEs conservatorship and protect taxpayers from further remaining as a federal backstop. Americans for Tax Reform and the undersigned organizations strongly urge Congress to prioritize comprehensive housing finance reform in the 117th Congress.
Click here to review the letter.
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