Dear Friends,
I hope this letter finds you and your family doing well and enjoying the start of the New Year.
I write to share with you perspectives on my first year proudly representing Maryland’s 6thCongressional District and to engage you in a broader economic policy discussion. To efficiently accomplish that objective, I have divided this letter into five sections: First Year in Office, Economic Environment in Brief, Policy Agenda, 6th District Deep Dive, and Goals for 2014. I hope you read them all or at least that which section you find most relevant. Here goes:
First Year in Office
It would be hard to describe the work of the 113th Congress in glowing terms. We managed to pass only 72 bills (a record low), closed the Federal government for 16 days, had the sequester, and came within 85 minutes of violating the debt ceiling. The House of Representatives took no action on immigration or tax reform, we passed no gun safety/mental health laws despite a horrible tragedy, and took no steps to change the long-term fiscal trajectory of the country. We ended the year, however, with a small win – a modest budget deal that will ensure no government shutdown for 2014 and 2015.
Our office worked deliberately against things under our control and had a productive first year. In addition to our most important work – representing the 6th District – we worked in a bipartisan manner to craft innovative solutions to vexing problems. It is my view that good policy is always done at that beautiful intersection of principle and compromise and this perspective animates our work.
We established ourselves as a leading voice on economic policy. To help make this case, we’ve assumed several leadership positions including being one of the class Presidents of our 85-member freshman class, becoming a deputy democratic whip, and serving on two desirable committees – The Joint Economic Committee with the Senate and the Financial Services Committee.
Legislatively, we passed the Veterans Advisory Committee on Education Improvement Act, which authorizes a council of veterans to advise the VA on the design and implementation of educational programs. This bill gives our veterans a voice in government programs that educate them. Serving in Congress has provided me with an even deeper appreciation for the tremendous sacrifice our service men and women make for our country. Not a day goes by in Congress when I don’t meet several returning, and mostly injured, heroes. I am therefore very proud that our first law helps them. There have been over 3,500 bills introduced in the House this session but only have 170 have passed, including our Veterans bill.
Our signature legislative effort in 2013 was crafting and rolling out a major and innovative piece of infrastructure financing legislation called The Partnership to Build America Act. The Partnership to Build America Act (PBAA) creates the American Infrastructure Fund (AIF), which is a large scale infrastructure financing enterprise that will act as a lender or bond insurer for state and local governments to finance transportation, energy, communication, water, and education projects. By any measure, investing in our infrastructure should be our top economic priority. We face a $3-4 trillion infrastructure investment shortfall. Fixing this will create jobs that have a good standard of living, make the U.S. more competitive in the long-term, help foster innovation, and provide a good return on investment.
Under our proposal, the AIF is capitalized with $50 billion of initial capital that can be levered at a ratio of 15 to 1 to create $750 billion of revolving infrastructure fund to be used by state and local governments. Over the next 50 years, the AIF can finance at least $2 trillion of infrastructure, create over 10 million jobs, and transform our economy. Unlike other efforts to create infrastructure-financing entities, the AIF is not funded with government money and does not use taxpayer dollars. Instead, the $50 billion of capital would be funded by private companies that purchase 50 year, non-government guaranteed bonds that pay 1 percent interest. As an incentive to get U.S. corporations to purchase these below market bonds, buyer of the infrastructure bonds will be allowed to “repatriate” or bring-back a certain amount of their overseas earnings back into the United States tax-free. The specific ratio would be established by auction, but we expect the ratio to be approximately 4 to 1. This means that if “Company X” were to purchase $1 billion of bonds, they would be able to bring back to the U.S. $4 billion of overseas earnings. If the bonds are worth 20 cents on the dollar, the cost to Company X is equivalent to a 13% tax rate, which would be in addition to the tax they have already paid overseas. Almost $2 trillion of U.S. corporate cash sits overseas because of flaws in our tax code – companies are required to pay tax where they earn the money and then pay a second U.S. tax to bring the earnings home. This “double tax” creates and incentive for companies to keep their cash overseas and as a result almost half of U.S. corporate cash sits overseas and is not being invested domestically. While we should fix the larger tax issue through tax reform, our approach would, in the meantime, create a path for $200 billion of this money to come back to the United States to be invested here while also creating a $750 billion permanent infrastructure vehicle. It’s a double jobs bill in that regard!
The Partnership to Build America Act has 26 House Republicans and 27 House Democrats. It was introduced in the Senate a few weeks ago by Senators Bennett and Blunt with six senators from each side. It is now the most significant bipartisan economic and jobs legislation in the Congress and also enjoys the support of think tanks on both sides, labor, and business groups. Linked here is some recent press coverage from the Wall Street Journal and The Washington Post on the strong momentum building for the PBAA.
The Partnership to Build America Act is a good example of our efforts to work in a bipartisan manner. The Bill was specifically designed to appeal to both sides – as opposed to simply being a “messaging” bill like so many other Bills in Congress. To obtain such significant bipartisan support we had over 125 one-on-one meetings with Republican members in their offices over five months – something that rarely happens in Congress.
In addition to our formal work on the Hill, we have taken a leadership role in statewide matters in Maryland. In June, we announced that we would lead an effort to raise the minimum wage in Maryland. Twenty-two states have raised the minimum wage above the federal level and there is a strong correlation as to which states have raised the minimum wage and the cost of living in those states. Maryland is an outlier – it’s a very expensive state and it has not raised its minimum wage. While the serious economic research on the effect of raising the minimum wage on the economy is inconclusive, I believe that if done in a sensible manner, with business at the table, we can help a large number of Marylanders without hurting economic activity. If done smartly, the negative effect of increasing wages should be offset by the increased buying power of low wage workers and reduced turnover. I was the first statewide or federal elected official in Maryland to step forward and call for a higher minimum wage and now most have followed our lead. I think we will win in Annapolis this year on this issue.
We have been very vocal on pressing state leaders to improve its management of the Affordable Care Act roll out. Maryland was one of fifteen states to elect to build its own exchange – The Maryland Health Connection. Over $100 million in state and federal money was spent to build the Maryland’s healthcare exchange and it’s been an utter failure – it’s tied for last with Oregon’s exchange in terms of performance. The Washington Post has outlined in great detail the management failures associated with the exchange and we’ve pushed for changes by encouraging Maryland to switch temporarily or on a simultaneous basis to the Federal Exchange, which as we all know is now working to a very high standard (after its own bad roll out). The state has still not taken our advice – or shockingly even answered our questions after months of posing them – and yet Maryland continues to massively lag the rest of the country in every respect, something that hurts Maryland citizens. It has renewed my focus on good management and transparency at all levels of government if we ever want people to trust us that we can engage in transformative policy-making. I will keep pushing this issue to the dismay of state wide elected officials, but it’s not about them – it’s about the citizens!
We are also increasingly taking a leadership role on Maryland competitiveness. Maryland is the third most dependent state in the U.S. on federal spending – not an enviable place to be in an era of reduced federal spending. In terms of private sector job creation, Maryland consistently ranks in the bottom half. This despite the fact that we have the second most educated population in the U.S., the third most innovative (as measured by patents per person) population in the U.S., and we are next to the fastest growing major city in the country. In my judgment the economic strategy for Maryland has relied too much on hoping for more federal spending. Instead we should developing our strengths by investing in transportation, collaborating more with the private sector, and by making Maryland a start-up center. We need to raise our game if we want to continue to invest in our kids and maintain a robust safety net.
Finally, the other aspects of serving in Congress have been a true privilege. The overwhelming majority of my colleagues are terrific – smart, dedicated, and serving for the right reason. The quality of my colleagues is a great reminder that the problem with Congress lie not entirely with the people, but with the structural incentives that exist on the Hill.
Speaking of incentives, the redistricting situation is a significant problem. The majority of the seats in Congress are considered “safe” – meaning there is no real threat from the other party. Not surprisingly, this causes members in these seats to focus on primary threats, which inevitably causes them to be more partisan than their natural orientation. To put this in perspective, when I’m looking to build bipartisan support for legislation, it’s always easier to work with members (on both sides) in competitive districts. These members have competitive general elections (which means they have to appeal to both parties) and therefore want to work on a bipartisan basis. Members in safe Districts generally only have to worry about primary voters and, generally speaking, shy away from bipartisan efforts. This is why I’m working on comprehensive redistricting reform.
Outside interest groups also create incentives that drive bad behavior. For example, if I were to give a speech on the floor of the House saying we should never raise taxes (a speech I would never give), I would walk off the floor and many groups would support me. Similarly, if I were to give a speech saying we should never reform our mandatory spending programs (also a speech I would never give), I would walk of the floor with similar support. If, however, I discuss that we need both increased tax revenues and entitlement reform to fix our fiscal situation – then I walk off the floor into an empty room. Put another way, the balanced approach that so many Americans desperately want is not reflected in the incentive system in Congress. This has to change and the only real solution is both redistricting reform and organizing more groups to support moderate candidates.
As we end the year, we have several important and innovative new legislative initiatives in the work that deal with housing finance reform, a carbon tax, and the establishment of a social security reform commission. More on these later.
Economic Environment in Brief
U.S. growth remains modest, joblessness remains persistently high, and standards of living are flat to declining. While jobs data from 2013 showed many positive trends – the absolute levels continue to indicate pain for a broad number of Americans and our tax base.
Despite the sluggish “bottom line” there are many positive indicators. Big industries like housing and autos are doing very well. Our financial institutions and the balance sheets of corporate America are in good shape and consumer debt has come down considerably. Energy prices remain at historic lows and U.S. energy independence is just around the corner. Interest rates are similarly at low levels and low energy prices, when combined with low borrowing costs, typically leads to sustained economic growth. We continue to lead the world in technology and innovation, our university system is unrivaled, we are the destination of choice for the world’s best and brightest, growth in healthcare costs (the single most important number for our economic future) is slowing, and all debt and equity markets have rallied significantly and are at or approaching all time highs. A long list of good news.
So why such sluggish growth? First, federal spending has been decreasing, which has taken meaningful demand out of the economy at precisely the wrong time. Second, a flawed corporate tax system that keeps almost half of U.S. corporate cash overseas when combined with fiscal uncertainty and a burdensome regulatory environment has chilled investment. Third, the U.S. economy has become highly specialized and utterly transformed by globalization and technology – productive and disruptive forces – that we have yet to adequately respond to. Driving broad based growth against that backdrop is hard, particularly in the context of the scale of our overall economy.
While no one can predict the future, it’s reasonable to assume that today’s level of growth will continue. By no means does modest economic growth have to be the case, however. If we could come together on several actions – immigration reform, new trade agreements that open foreign markets, significantly greater investment in infrastructure, education, and job training together with long term debt reduction strategies to pay for these investments, tax reform, and regulatory relief – we could, in my judgment, dial up economic growth. More on that later.
Policy Agenda
Any actions I take legislatively are against a larger policy agenda we’ve formulated across the last several years. Like most “theories of the case” we are constantly evolving it based on new data but it remains rooted in two unwavering beliefs. First, our economic policy agenda has to be based on the facts and an accurate description of the problem we are trying to solve. You can’t solve a problem – and rally large numbers of people behind a solution – unless you can accurately describe it. Second, we need both good policy and good execution. In business I was fond of the expression “strategy is easy and execution is really hard.” We can have the best policy ideas in the world but unless they are rooted in an honest assessment of what government can and cannot do, no one will trust us to do them. Or worse, we will fail.
So let’s start with my view of the problem and the opportunities ahead of us.
Across the past thirty years the forces of globalization and technology have transformed our economy and disrupted the employment market. Thirty years ago there were 1 billion people participating in the global economy. Today there are over 4 billion. During the same time, computing power has grown 100,000 fold. These forces have benefited Americans that are highly educated, skilled, or have access to capital. They have also benefited billions of people around the world who have moved from abject poverty into a world where at least some basic needs are met. But they disrupted and hurt the middle skilled American worker – the same people who built our country and saved the world last century during World War II.
In a simplistic sense, the country’s economy has become more specialized and a specialized economy leads to “bar belled” job growth and income divergence. More than tax policy or debates about the size of government, bending the forces of globalization and technology to benefit more Americans should be our top economy priority. In that regard, we arguably stand at a time of great opportunity, but we will miss it unless we take bold steps and make important investments. Thinking differently about our economic opportunities and challenges may never be more important as the pace of change has significantly increased the risk of inaction.
We have three core problems that we need to solve for, all of which are interrelated.
A competitiveness problem:
The United States faces significant competitive threats as core advantages – rule of law, robust capital markets, high educational attainment, innovative culture and entrepreneurial spirit – are pressured by structural flaws in our tax code, sub-standard immigration policy, inadequate national infrastructure, structural debts that constrain investments, and a terribly burdensome regulatory framework. We must ensure that American businesses can compete and that we maintain our position as the start-up capital of the world.
An opportunity problem:
The opportunity gap between those born into privilege and everyone else is growing. If this continues, we risk becoming a nation of birthright, not opportunity. At the same time, the standard of living of the average America is largely not growing and in many ways is in decline. If these trends continue, a growing majority of Americans will struggle against almost overwhelming odds and it will be difficult for their children to achieve a better life than their parents. Taken to an extreme, our national ethos – the American Dream – is at risk.
A childhood inequity problem:
As incomes at the top, middle and bottom diverge, large numbers of Americans struggle to pay for basic needs such as rent, food, health care, and utilities. These conditions cause many low-income children to have reduced skills relative to other children and many never graduate from high school. These young people and – many of their parents – have limited opportunities to hold good jobs and believe poverty is their permanent station. As a nation, we allocate 2-3 times the resources towards our seniors as we do for our children.
Several factors have contributed to the situation we find ourselves. Some of these are macro, others are micro.
Macro elements include:
- Working together, technology and globalization have changed the workforce, eliminated jobs that were historically middle class, and created high educational/skills barriers to entry for middle class jobs while expanding the value and income of high skilled workers and increasing the demand for low skill, and low paid workers in the service sector. This is creating a “bar bell” effect in the labor market;
- Americans with world-class educations, those that are highly skilled, and those with access to capital have benefited enormously from the changes in the world; and
- The country is divided – a growing number of “opportunity clusters” exist – places where jobs are plentiful, public and social services are offered to a high standard, and skilled workers aggregate. People living in these areas are disconnecting from the struggles the majority of American face.
Micro elements include:
- A flawed U.S. educational system has limited our ability to broadly respond to changes in the world. Education has inadequate funding, it is funded in an inequitable manner, and it is not designed to meet the economic challenges of this century.
- Inadequate resources dedicated to kids ages 0-5;
- The K-12 education system as developed post WWII does not broadly – or fairly – prepare students for post-graduation success – either in college or in the job market; and
- Colleges are becoming unaffordable for many. College education for men has stagnated and we see success rates lower than other countries.
- Loan programs are arguably a disgrace – they take what should be an economic benefit and turn it into servitude.
- A vast, burdensome regulatory state that seeks to engage government in an overly complex manner. Dodd-Frank and the ACA are good examples of well-intended and important initiatives that became almost incomprehensible multi-thousand page laws and rules. Regulations favor incumbents and stifle innovators.
- Decreased overall U.S. Competitiveness has limited the creation of jobs with a high standard of living; specific failures of federal policy in four key areas:
- Inability to fix our broken immigration system;
- Inadequate investment in public infrastructure;
- Failed policies to increase post-secondary education;
- Reduced investment in basic research;
Emerging elements:
- Climate change will pressure government resources;
- Federal budget constraints, exacerbated by a sustained period of unsustainable tax cuts that underfunded government, have materially limited the country’s financial flexibility, weakened the social safety net, and put the republic at risk;
- Inability to reform entitlement programs and prioritize investments to create generational parity;
- The next technology frontier – artificial intelligence – could bring on a second wave of employment disruption at massive scale; and
From a legislative perspective, all of our domestic economic efforts fit within this larger policy framework. Every decision to support or reject economic legislation is carefully considered against this larger policy agenda. Our job is to craft innovative solutions – that appeal to both sides – that make progress against our challenges and opportunities. The Partnership to Build America Act is one example and we have several more in the work. We can solve our problems and materially increase the probability of broad based economic growth with practical solutions. That’s our job.
Deep Dive on 6th Congressional District
Our primary mission is to provide exceptional service to the whole of our District – from the close-in Maryland suburbs to the hills of Garrett County. Our strategy for accomplishing this mission is threefold. First, assemble a terrific team to be the day-to-day contact for constituents on issues ranging from the receipt of government benefits to the coordinating of federal, state, and local resources. Second, be good listeners and work to deeply understand the concerns of our constituents and ensure that these concerns animate our focus on the Hill. Third, be objective and balance our time with advocates that both agree and disagree with our views. We did all three of these in 2013 and as a result I believe provided high standard service to our constituents.
In no particular order, I want to focus on a few of our efforts.
As an advocate for Corridor City Transportation Project: This project will improve the transportation flow along the 270 life sciences corridor. We have partnered with Johns Hopkins on leading the push for this projects prioritization among the states many competing transportation initiatives. Our approach, as always, is fact based. On the merits, and by any measure, the CCT should be Maryland’s number one transportation priority.
Building a Downtown Frederick Hotel: This project would add further momentum to Frederick’s successful downtown revitalization, which is one of the great success stories of our state in the last few decades. Speaking with local officials and members of the business community, I have proposed an innovative public private partnership model to help make this happen, which would create jobs in Frederick and strengthen the city’s profile as a tourism and conference location in the greater Washington region.
Expanding Broadband Access in Garrett County: In July, I joined local and federal officials in announcing a $250,000 grant to Garrett County, which is designed to expand high-speed broadband internet access to Maryland’s westernmost county. This grant is an example of using federal resources to direct a specific local need that is especially important to the economic health of our district. In my view, Western Maryland’s long-term economic health is tied to the region’s ability to fully integrate into the thriving Richmond to Boston mega region, which is one of the largest economic engines on the planet. Without high speed internet capabilities, businesses in Western Maryland are starting behind. This grant, along with further investments in our infrastructure, should help Garrett County compete.
Ensuring Frederick and Hagerstown Airports Have Funding: One of the most potentially damaging aspects of sequestration was the proposed closure of air traffic control towers in Frederick and Hagerstown. Shuttering the towers in our local airports would have harmed our local economies and placed an undue traffic burden on other regional airports like BWI. Closing the towers would have been especially illogical, because both Frederick and Hagerstown have seen significant upgrades in recent years, but rather than building on these investments, we were very close to squandering them. I was a loud voice on this issue and made it clear to the Department of Transportation and the Federal Aviation Administration, in repeated and sustained correspondence, that closing the towers was wrong for my district and the country. I was happy to amplify the local point of view on this issue. Eventually, the closures were avoided. Our local airports are tremendous assets and they are incredibly well-positioned to grow in the next decades, offering a low-cost freight and private aircraft alternative in the Washington region.
Fighting for Fisher House: My district has a very large veteran population and is close to some of the largest military installations in the country. As the House was developing our initial Department of Defense budget, I successfully introduced a measure to increase funding for Fisher House. Fisher Houses are located across the country near our major military and veterans hospitals. They offer 100% free lodging for military families so that they can be close to their brothers, sisters, husbands, wives, and sons, while they receive care. The Fisher House Foundation builds these homes to the highest standard, then donates them to the Department of Defense. In facilities without a Fisher House nearby, it is not uncommon to see military families sleeping in their cars in the parking lot or even setting up tents. My amendment to the Defense appropriations bill passed on the House floor, increasing our support for Fisher House from $4 million to $20 million dollars, which would allow Fisher House to build at least four new homes. Unfortunately, this portion of the budget was a victim of the government shutdown, and my amendment was not included in the subsequent agreement, which was not open to amendment. I’m not done fighting for more support for Fisher House however.
Fighting for national fire fighter training center: Last summer, I joined with my Republican colleague from Washington, Rep. Dave Reichert, in restoring pre-sequester funding for the National Emergency Training Center (NETC) in Emmitsburg, in Frederick County. The NETC is the only facility of its kind in the country, providing fire fighters with on the ground training in fire safety, crisis management, and anti-terrorism techniques. My measure moved money from the general administrative fund to make sure that the NETC was fully operable. Although Emmitsburg is just over the line across from my district, the facility’s impact on Frederick County is quite large. Moreover, the NETC benefits the entire country, as fire fighters and first responders are an integral part of our national security and anti-terrorism apparatus. In Frederick County we train heroes, heroes who will save lives around the country.
Working with Fort Detrick: One of the first things I did upon taking office was tour Fort Detrick and meet with the Fort Detrick Alliance. Fort Detrick is one of the most advanced U.S. Army installations in the United States and home to U.S. Army Medical Research and Material Command. The work done at Fort Detrick, including very high level scientific and medical research, keeps our nation safe in a myriad of ways that never make it into the newspaper. Representing Fort Detrick gave me a local perspective on irrationality of sequestration, which applied across the board cuts. Sophisticated research trials shouldn’t be treated the same way as an office supply order, and the insight from officials at Fort Detrick was part of why I spoke out against sequestration. I have also worked with the Fort Detrick Alliance to see how we can build stronger ties between Fort Detrick and the local business community. Moving forward, I will continue to be a strong advocate for science and research, both in and out of our military, which is hugely important to our national security, and quality of life.
Spotlighting service agencies and charities: One of the greatest privileges of serving in Congress is my ability to shine a spotlight on the local organizations and individuals that are making a difference in Maryland. I’ve made visits to places like the Manna Food Center in Montgomery County and Garrett County Community Action in Oakland a regular part of my schedule. The individuals who work at our homeless shelters, food banks, community health centers and senior assistance facilities are truly awe inspiring. From Germantown to Cumberland, dedicated men and women are working hard to help the less fortunate, including many seniors and children, in our communities. Local agencies are often responsible for making federal programs work at the ground level, and their feedback is invaluable. When extreme partisanship shut down the government for sixteen days, I donated my congressional salary to Mercy Health Center in Gaithersburg, a non-profit that provides health care to low income people in our area. Our non-profits set a high standard that Congress would do well to follow.
Goals for 2014
We have many goals for this next year, but passing the Partnership to Build America Act is our top priority. By any measure, the PBAA is the most significant jobs bill in Congress. It will create jobs in the short term, make the U.S. more competitive in the long term and improves the lives of every American. It is a fiscally responsible approach for investing in infrastructure and it is completely bipartisan. We will put all of our energy into making it law in 2014.
Early this year we introduced an outline for an innovative housing finance proposal. Our framework – which I originally introduced last summer – will create a path to finally resolve Fannie Mae and Freddie Mac and create a new framework for housing finance in the U.S. Under our proposal, the federal government will be in a position to provide continued liquidity to the housing market – thereby ensuring a stable market with 30 year fixed rate mortgages – while also ensuing that the private market prices all of the risk through an innovative public-private partnership model. Our approach – which enjoys liberal and conservative support – will likely become a central player in the projected 2014 housing finance reform debate. Eliminating unnecessary housing subsidies is important so that we can allocate our funds towards both more important housing initiatives – like building more affordable housing – as well as other higher returning investments like education, investments in basic research, and infrastructure.
We expect to introduce a bill to establish a Social Security Reform Commission with a high-ranking Republican colleague. Our approach is to establish a bipartisan, bilateral commission to develop a plan to strengthen and extend Social Security so that Americans can get the benefit of our most important social safety net program. Other areas of focus where we plan on introducing meaningful legislation include a carbon tax to mitigate climate change, legislation to ensure gender equality, and legislation to encourage greater use of social impact bonds.
In sum, the Promise of America requires two outcomes – individual and business success. Equality of opportunity, broad based prosperity, and adequately taking care of those left behind can only exist when economic policy focuses on the needs of both workers and businesses in a fair and just manner. We have singular strengths including a marketplace driven economic model, the rule of law, an innovative and entrepreneurial culture that rewards risk takers, the finest university and research community in the world, a social insurance program that protects the elderly and the poor, the finest military the world has ever seen and the fact that the overwhelming majority of the world would immigrate to the U.S. if possible. These strengths, when combined with coordinated state, local, and federal policy will ultimately solve all our problems, truly. I hope to contribute to these efforts.
With my deepest respect and appreciation,
John