“YES” ON THE CONGRESSIONAL DISAPPROVAL OF THE CFPB’S “ARBITRATION RULE” (S.J. Res. 47)

This week the Senate could vote on a Joint Resolution (S.J. Res. 47) providing for congressional disapproval of the rule issued by the Consumer Financial Protection Bureau (CFPB) related to “Arbitration Agreements.” Sponsored by Sen. Mike Crapo (R-Idaho), S.J. Res. 47 would use the Congressional Review Act (CRA) to overturn a new rule issued by the CFPB intended to ban financial service providers (banks, credit card companies, small dollar lenders, etc.) from using mandatory arbitration clauses to resolve their disputes and avoid class action lawsuits.    

Arbitration has a long history of providing consumers with efficient, cost-effective and fair results in disputes with financial service providers. The Heritage Foundation explains the “only real alternative” to arbitration is “expensive and time-consuming litigation that in many cases does more to line trial lawyers’ pockets than redress consumers’ injuries.” In other words, “any action to curtail arbitration would only injure consumers and workers.” In a recent commentary, Norbert Michel, Director of the Center for Data Analysis at The Heritage Foundation, elaborated:


“Many trial lawyers oppose arbitration because it denies them of exorbitant class-action lawsuit fees—it is an inexpensive alternative to courtroom litigation. Arbitration is undeniably a fair and effective alternative for resolving disputes, particularly between businesses and consumers. Proponents of the bureau’s rule are upset that financial services companies often use mandatory arbitration clauses in their contracts, thus preventing customers from resolving disputes through class-action litigation.”

Congress authorized the CFPB to study arbitration agreements in the misnamed Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. According to Diane Katz, Senior Research Fellow in Regulatory Policy at The Heritage Foundation:


“The statute also authorized the bureau to regulate arbitration agreements “if the bureau finds that such a prohibition or imposition of conditions or limitations is in the public interest and for the protection of consumers. The findings in such rule shall be consistent with the study conducted under subsection (a).” The bureau produced an arbitration study in 2015, but the content was methodologically meaningless and the rule is not, in fact, consistent with the study.”

In response to the CFPB study, more than 50 members of Congress called upon Director Richard Cordray to reexamine the bureau’s “fatally-flawed study.” The Arbitration Rule is just the latest of many unwarranted and costly regulations perpetrated by the CFPB that undermine consumer choice and offend the Constitution’s separation of powers.

Ultimately, Congress should act to eliminate the CFPB altogether or at least dismantle the Bureau as outlined in the Financial CHOICE Act of 2017 (H.R. 10). In the meantime, passing S.J. Res. 47 will protect consumers and send a clear message to federal agencies that Article I’s legislative powers are vested in Congress, not Washington, D.C. bureaucrats.

***Heritage Action supports S.J. Res. 47 and will include it as a key vote on our legislative scorecard.***        

Related:
Heritage Foundation: The Unfair Attack on Arbitration: Harming Consumers by Eliminating a Proven Dispute Resolution System (2013)
Heritage Foundation: Time to Eliminate the Consumer Financial Protection Bureau (2016)
Heritage Action: Congress Must Roll Back CFPB’s Costly Arbitration Rule (2017)
Heritage Foundation: This Official Had the Spine to Stand Up to the Powerful CFPB. Congress Should Follow His Lead (2017)
Heritage Foundation: House and Senate Set to Protect Consumers From an Overreaching Federal Agency (2017)

Co-Sponsorship of the Employee Rights Act (S. 1774)

The Employee Rights Act (S. 1774), introduced by Sen. Orrin Hatch (R-Utah), would protect workers from union pressure by putting power in the hands of employees and making union leaders more accountable to their members. As the Heritage Foundation notes, if union bosses “were angels, such changes would be unnecessary” but “since they are not” new protections are necessary.

Heritage explains the legislation would guarantee employees the rights to:

  • Vote privately in a secret ballot election before forming a union;
  • Opt out of having their personal contact information provided to a union during an organizing drive;
  • Hear from employers at least 40 days prior to voting in a union election;
  • Vote in a secret ballot election before accepting a contract or going on strike;
  • Vote regularly on re-electing their union;
  • Decide whether their union can spend their dues on matters unrelated to collective bargaining; and,
  • Be free from union interference or extortion in exercising their legal rights.

Workers should not be pressured or coerced by unions or union bosses to take actions that undermine their rights. Protecting the voting rights of employees is essential:

“Under general union representation, employees relinquish their individual negotiating authority to a union. The union becomes the sole representative of the employees in negotiations with their employer. Unionized employers must negotiate employment terms with the union and the union alone. They may not bargain with individual workers.”

Though the purpose of unions is ostensibly to protect workers, they often fail to do so because they are motivated by the “institutional objectives” of expanding in size, income and influence. They want “contracts that protect their institutional powers.” When the interests of unions come in conflict with the interests of workers, unions often make decisions that benefit them rather than employees. In an effort to expand power and influence, unions discourage secret ballot elections or work to eliminate them altogether; this results in the loss of privacy benefits for workers. Unions can also call for a strike without first consulting workers.

Workers deserve a say in decisions that put their jobs at risk. The Employee Rights Act would amend this by requiring a secret ballot vote before a union can call a strike. Furthermore, the bill would solidify paycheck protection provisions, provide a mechanism for union re-certification, and finally criminalize union threats under federal law.

David W. Kreutzer, Ph.D., Senior Research Fellow in Labor Markets and Trade in the Institute for Economic Freedom and Opportunity at The Heritage Foundation, issued this statement:

“All union members deserve the protection of secret ballots and reasonable choice over who represents them. Ninety-four percent of union members are represented by unions for whom they never voted.  Let the dues-payers decide whether their union is an effective advocate for them or not. Competent, worker-focused union leadership has nothing to fear from members’ freedom to choose.”

The Employee Rights Act would solve many problems workers face today, including problems enshrined in current labor law. The bill would help restore a balance of power in the workplace from unions to workers and help ensure labor unions best serve the interest of employees, not union bosses.

Heritage Action supports S. 1774 and will include CO-SPONSORSHIP of this legislation in our scorecard.

Amendments to Senate NDAA (S. 1519)

The Senate is currently considering the National Defense Authorization Act (NDAA) for Fiscal Year 2018 (S. 1519), and multiple amendment votes are expected throughout the week.  In the House, Heritage Action key voted multiple amendments on H.R. 2810, including those related to Base Realignment and Closure (BRAC), Davis-Bacon prevailing wage provisions, Buy America protections, amnesty related provisions, and funding for gender transitions (see here). Similar amendments are expected in the Senate, and Heritage Action reserves the right to key vote these amendments and others throughout the course of the debate.

The Heritage Foundation’s recommendations for the 2018 NDAA can be found here.

Key Vote: “NO” on Pelosi-Schumer-Trump Debt Ceiling Deal

On Wednesday, the House passed a $7.85 billion emergency spending measure to replenish the Federal Emergency Management Agency’s dwindling disaster relief fund by a vote of 419 – 3.  Last week, Heritage Action said the measure was “largely encouraging” as 95 percent of the spending was targeted to FEMA’s disaster relief fund, which is expected to run out of money at the end of the week due to ongoing efforts in response to Hurricane Harvey.

Unfortunately, the Trump administration and congressional Republicans agreed to link that much-need emergency spending to a suspension of our nation’s debt ceiling, and the administration ultimately agreed with congressional Democrats that the debt ceiling suspension should last less than three months. As a result, the Senate will soon vote to amend the House-passed Harvey bill with McConnell Amendment 808. That amendment would:

  • Provide $7.4 billion in emergency funding for FEMA’s dwindling disaster relief fund,  $450 million for the SBA, and another $7.4 billion for Community Development Block Grant program, which the president’s budget eliminated;
  • Suspend our nation’s statutory limit until December 8, allowing Treasury to borrow unlimited sums of money;
  • Extend government funding, scheduled to expire after September 30, through December 8, 2017; and,
  • Extend various other expiring programs, such as the National Flood Insurance Program (NFIP) through December 8 as well.

Last weekend on Fox News Sunday, Heritage Action’s chief executive officer Michael A. Needham cautioned that linking any debt ceiling suspension to emergency spending would be “exploiting this hurricane and people who lost their houses to allow business as usual in Washington” to continue.  The Heritage Foundation added, “Congress can provide targeted, appropriate disaster relief without an irresponsible hike in the debt limit” and urged Congress to avoid “exploiting the goodwill of the American people to assist their fellow Americans when disaster strikes.”  

Beyond the politics of exploiting hurricane victims and potentially delaying much-needed disaster relief, the proposed combination is wrong on policy grounds.

First, our nation’s debt ceiling should be used as an opportunity to address the federal government’s spending addiction and ultimately get our nation on a path to balance. In August, Heritage Action explained that “Our nation’s structural deficit is driven by historically irresponsible levels of federal spending” and that any increase “should be paired with serious spending reforms that begin reducing federal spending in real, meaningful ways.”  The Heritage Foundation urges Congress and the Trump administration to “adopt spending cuts and critical reforms” along with any debt ceiling:

“A fiscal crisis that forces lawmakers to take action when investors lose confidence in the U.S. government would have far worse consequences than deliberate congressional action now, to ensure that necessary government functions are sustained.”

In a letter to congressional leaders, Heritage Action and nine other conservative groups reminded Republican leaders they argued in 2011 when Barack Obama was president that “a debt limit increase was fiscally irresponsible and could not pass the House of Representatives without corresponding spending cuts.” The letter continues:

“The United States’ fiscal situation has only gotten worse. … With such an ominous picture facing our country, a debt ceiling increase would send a signal that congressional Republicans are not serious about tackling these challenges and that past words were only convenient rhetorical tools with which to criticize a Democratic administration.”

Second, a “suspension” of the debt ceiling is a political gambit to avoid fiscal responsibility.  The Heritage Foundation explains that “With a debt limit suspension, Congress effectively abdicates its constitutional power to control the borrowing of the federal government.” It also allows lawmakers to avoid explaining the full amount of the new debt that will be incurred. Also, because Treasury will be able to use extraordinary measures again on December 9, timing of the next debt ceiling deadline is uncertain.

Third, as Heritage Action explained to the New York Times, it is political malpractice to put “conservative lawmakers — including those from Texas — ‘in a pretty difficult political situation’ by essentially daring them to vote against a measure containing both Harvey aid and an increase to the debt limit.” The Senate’s inclusion of $7.4 billion in “emergency” funding for the HUD’s Community Development Block Grant program suggests the Harvey relief process is quickly becoming a swamp-like boondoggle. Additionally, Democrats — now in the political minority — suddenly view the nation’s debt ceiling as legislative leverage to advance their big-spending, progressive agenda.

Any increase in our nation’s debt ceiling should be paired with reforms that deliver on then-candidate Trump’s promise to “start to pay[ing] down our $19 trillion in debt.” According to the non-partisan Congressional Research Service, the debt limit “imposes a form of fiscal accountability” when the federal government spends more money than it collects. The goal of the century-old debt limit was to maintain a congressional check on the increasingly common and complex activity of borrowing. It is irresponsible and reprehensible for Congress to use much-needed Harvey-related spending to bypass this important fiscal check.

***Heritage Action opposes efforts to tie the debt ceiling to emergency disaster spending and will include it as a key vote on our legislative scorecard.***       

Co-Sponsorship of the Welfare Reform and Upward Mobility Act (H.R. 2832 / S. 1290)

The Welfare Reform and Upward Mobility Act (H.R. 2832 & S. 1290), introduced by Rep. Jim Jordan (R-OH) and Sen. Mike Lee (R-UT), would help reduce poverty and government dependency, increase self-sufficiency, restore families, and strengthen the effective and popular work requirements on means-tested welfare programs that have been gutted by the Obama administration.

In 1996, President Clinton signed the Personal Responsibility and Work Opportunity Act, which became popularly known as “welfare reform,” into law. The legislation transformed the Aid to Families with Dependent Children (AFDC) into Temporary Assistance for Needy Families (TANF), a program intended to provide temporary financial assistance to low-income families while encouraging work and self-sufficiency. Most significantly, the 1996 welfare reform included mandatory federal work requirements, stipulating that welfare recipients must be engaged in work or some type of work activity in order to receive TANF benefits.

According to Robert Rector, Senior Research Fellow in Domestic Policy Studies in the Institute for Family, Community, and Opportunity at the Heritage Foundation, and Rachel Sheffield’s paper Setting Priorities for Welfare Reform:

“Mandatory federal work requirements for recipients were at the heart of the change, which led to significant decreases in the program’s rolls, increased work among former recipients, and historic reductions in child poverty.”

Despite the success of the 1996 welfare reform, 20 years later there’s still much to be done to ensure that the welfare system moves people toward work and self-sufficiency rather than toward government dependency. Rector and Sheffield continue:

“The United States’ means-tested welfare system [still] consists of over 80 programs that provide cash, food, housing, medical care, and social services to poor and lower-income Americans. Total annual spending on these programs reached $1 trillion in 2015. More than 75 percent of this funding comes from the federal government….

“Although the welfare reform of the 1990s was popular and initially successful, it was actually quite limited. Of 80 welfare programs, only TANF was reformed, and even in TANF, the vigor of reform has nearly disappeared.”

Rep. Jordan and Sen. Lee have restarted the conversation, advocating for conservative reforms that will help reduce poverty and government dependency, increase self-sufficiency, restore families, and strengthen the effective and popular work requirements that have been gutted by the Obama administration. These ideas, and more, are found in the most comprehensive and serious welfare reform legislation introduced since Republicans regained control of Congress in 2010: The newly reintroduced Welfare Reform and Upward Mobility Act (H.R. 2832/S. 1290).

The bill contains five major policy reforms:

  1.      Improves accounting of government welfare spending by requiring the federal government to report all means-tested welfare spending–including state and local––as well as to report estimated spending levels over the next decade.
  2.      Strengthens work requirements for all able-bodied adults without dependents (ABAWDS) who receive food stamps (SNAP). Similar reforms have been implemented in Maine, Kansas, and Alabama with great success. It also creates a new work requirement for parents in SNAP, modeled after the 1996 TANF law.
  3.      Strengthens TANF work requirements by implementing a new “work preparation requirement” for the 50% of the TANF caseload that is currently completely idle.
  4.      Phases down the federal involvement in subsidized housing programs by decreasing the federal share of funding by 50% over ten years and transferring fiscal responsibility for these programs to the states.
  5.      Prohibits any funding for abortion.

While there is more to be done to achieve comprehensive welfare reform, such as rooting out fraud in the Earned Income Tax Credit and Additional Child Tax Credit and eliminating marriage penalties, Senator Lee and Congressman Jordan’s Welfare Reform and Upward Mobility Act is not just a white paper, but a serious and significant first step toward real welfare reform.

This bill builds on the successful 1996 law by restoring and strengthening TANF work requirements and by placing real work requirements into SNAP, the second largest means-tested welfare program in operation today. It requires accountability for welfare spending and moves toward creating true federalism in America’s welfare system. If enacted, this legislation would be the start of Welfare Reform 2.0, by compassionately encouraging work while saving the taxpayers trillions of dollars over the next twenty years.

Heritage Action supports H.R. 2832 / S. 1290 and will include CO-SPONSORSHIP of this legislation in our scorecard.