On the many occasions I’ve been interviewed about my service in the Senate, almost all of the questions understandably have focused on major, highly publicized matters like the Clean Air Act and the several battles on the budget. I was involved in many other legislative efforts, however, two of which were, in my view, noteworthy because of the major and continuing effects they have had.
One has come to be known as the Low Income Housing Credit. I have already described briefly the tax reform effort of the late 1980s, initiated by President Reagan. The motivating principle was that the tax code had become far too large and complex. Filled with credits and preferences, it distorted economic decisions and inhibited the working of the free market economic system which had proved so beneficial to our society. The thrust of reform was to eliminate all, or as many as politically possible, of the many distorting preferences. The motive was valid and the method sound. As a result the code was trimmed. But, as with all human efforts, it was imperfect. Some preferences that should have been eliminated were retained, while others that should have been retained were eliminated.
Why should any preference be retained? A good question to which there is a good answer: because there are some areas of our economy where there is no market in which profit-seeking enterprises can operate successfully. One such market is in the provision of housing for families with very low income. This was not clear, or at least not accepted as clear, when the Tax Reform Act of 1986 was being considered and debated. I was convinced it was a valid position, and I led the affordable housing effort in the Finance Committee and in floor debate. But I had a hard time convincing other members of the Committee. That was understandable because the very idea of a new or expanded credit was contrary to the primary objective of tax reform.
The Housing Credit is a complicated program but has a simple construct. It is designed to substitute equity capital for debt capital that is typically used to build and acquire real estate. The equity capital is raised from corporations, which receive a return in the form of tax credits on their investment. Almost all real estate—whether a single-family home, an apartment building, or an office building—is largely financed by borrowing money, which requires monthly interest payments to service the debt. But there is much less capacity to borrow money to finance affordable housing because the cash flow from rental income is limited to make the property affordable to lower-income families. There must be a substitute source of capital to keep debt low; that is where the Housing Credit program comes in. It enables a developer to raise equity capital from corporate investors, largely banks, who receive a return from the tax credits on their equity rather than from interest payments on debt. The Finance Committee’s initial tax credit proposal included some unrealistic limitations on the Housing Credit that would have made the program unusable. Among other problems, the finance bill would have prevented the use of the new tax credit program with any other federal housing subsidy.
Bob Rozen, a very able member of my Senate staff, spent a lot of time working with the affordable housing community and the Senate Finance and Joint Tax Committees. As a result during the debate on the Senate floor I offered an amendment with nineteen cosponsors, five of them Republicans. The amendment made a number of changes to the Finance Committee bill, including changes to facilitate use of the new program with existing affordable housing programs offered through the Department of Housing and Urban Development and with tax-exempt debt, and to encourage participation in the program by nonprofit organizations. The amendment was approved unanimously in the Senate. But this was a new concept, and more design work was needed in a short period of time to make sure the program that emerged from the tax reform conference committee with the House would be an effective tool to develop affordable housing. In conference we modified the basic subsidy credit rates in the program, changed the income rule to target farther down the income scale, and refined the rules for use of the program with other housing programs.
When tax reform was enacted, with a temporary three-year life for the Housing Credit, many in the industry doubted it would work. That was a reasonable concern because it was a new approach that had not been the subject of hearings, academic study, or industry debate. In the first year of the program’s existence, only about 20 percent of the Housing Credit authority was used, mostly by developers who had projects in the works that for the most part had sufficient subsidies to develop without the credit. The states were ill-equipped to manage the allocation of tax credits. It was clear the program needed to be reviewed and reimagined if there was going to be any chance to extend it beyond its 1989 expiration date.
In 1987 Senator John Danforth, a moderate and articulate Republican from Missouri, joined me on this effort. We put together an industry task force to review the program and make recommendations for improvement. The task force proposals were largely enacted into law in 1989, along with a temporary extension of the program. The 1989 changes kept the basic design of the program but reworked many aspects of the law, especially giving more responsibility to state housing finance agencies to manage the program by establishing annual housing needs assessments, creating competition among developers for credits, and providing effective oversight of the financing and management of developments. These changes helped make the program successful, and further improvements were made in 1993, when the program was made permanent.
Over the years the program has had strong bipartisan support in Congress and in the affordable housing community. The Housing Credit is now the primary tool by which the federal government supports the production and preservation of affordable housing in this country. Since enactment, about 2.5 million affordable apartment units have been developed, averaging about 100,000 units annually. The Housing Credit is a job creator, generating about $7.1 billion in economic income and about ninety-five thousand jobs each year. Over the first twenty-four years of the program’s existence it financed more than sixteen thousand properties across the country. During that period, according to a recent study, only ninety-eight properties experienced foreclosure, an extraordinarily low aggregate foreclosure rate of about .006 percent.
The Housing Credit is proof that it is possible to design a federal program to meet a clear public need and to do so in an efficient and effective manner. It also demonstrates that bipartisanship can pay significant policy dividends. Some of the most important and enduring acts of Congress, including the Tax Reform Act of 1986 itself, have been the product of vigorous bipartisan negotiation and have enjoyed strong bipartisan support.
The other minor bill that had a major effect dealt with major oil spills. Shortly after I entered the Senate I was surprised to learn that there was no comprehensive federal law protecting against or responding to oil spills in American waters.I Maine had such a law (as did three other states), enacted in 1969 in reaction to an oil spill along our coast. For a long time Portland was the fourth largest oil-importing port in the country, being at one end of a large pipeline through which crude oil was pumped to Montreal for refining and use in eastern Canada. Concern about spills in and around Portland harbor led the Maine Legislature to enact the law.
The realization that almost all of the harbors in the United States were largely unprotected led me to join with other senators in introducing legislation in 1981 to establish a national protection and response program. That bill would have imposed strict liability on an owner or operator of a vessel for the discharge of oil into the navigable waters of the United States; the discharger would be responsible for the costs of cleanup of the oil as well as for damage to another person’s real or personal property, loss of income or loss of use of natural resources; a fund would be established through a fee on each barrel of oil produced in or imported into the U.S. to provide cleanup costs and compensation for damage from oil spills when the damage exceeds the limits of the owner’s liability or the responsible party cannot be found. Later bills added a provision requiring, over a long phase-in period, double hulls on all oil tankers entering U.S. ports.
The effort was complicated by the fact that some members of Congress (especially in the House, where similar legislation was considered) who supported the concept of a national program insisted that it preempt existing and future state laws on the subject. I refused to accept preemption because I feared that the industry would persuade friendly members of Congress to support a weak national law that would eviscerate stronger state laws like Maine’s. The debate over this issue was contentious, even acrimonious at times. Despite our best efforts we were unable to gain enactment into law of the legislation. I then introduced updated versions of the legislation in 1986 and 1988 with the same negative result.
On March 24, 1989, thousands of miles from Washington, DC, in the cold waters of the North Pacific Ocean, in just a few hours the politics of oil spill legislation changed irrevocably. There had been major spills before. In December 1976 the Argo Merchant ran aground off Nantucket Island, spilling 8.5 million gallons of fuel oil. Luckily, it was blown out to sea. Two years later the Amoco Cadiz went aground off the coast of France, losing its entire cargo of 67 million gallons of oil.
But the Exxon Valdez spill took place in the biologically rich waters of Prince William Sound. The effect, and the reactions, were larger. It changed the attitude of Americans and, therefore, of the president and members of Congress. It became politically impossible to oppose legislation that had been stuck in Congress for nearly a decade. The Senate unanimously approved the oil spill legislation and it became law on August 18, 1990. While oil spills continue to occur, they are fewer in number and most are far less damaging than they would be if the law had not been enacted.
I. There was limited and inadequate coverage under two earlier laws: The Federal Water Pollution Control Act of 1972 and the Clean Water Act of 1977.