Senator Orrin Hatch receives NAREIT’s 2001 Small Investor Empowerment Award.

By Matthew Bechard

With almost 30 years spent in Washington, D.C., Senator Orrin G. Hatch (R-UT) has earned the reputation as "Mr. Free Enterprise" and the "Guardian of Small Business." The son of a metal lather and former member of the AFL-CIO himself, Hatch has gone from a lawyer with little chance of being elected to one of the most well respected members on Capitol Hill.

Hatch was elected to the U.S. Senate in 1976, which was the first public office he ever held. Although considered at the time a long shot to beat out incumbent Democrat Frank Moss, Hatch waged his campaign around the guiding principles of limited government, tax restraint and integrity in public service. Those principles have stayed with him and are still reflected in his political beliefs today.

Hatch is chairman of the Senate Judiciary Committee and the second ranking Republican on the Senate Committee on Finance, where he has been a leading advocate for policies to encourage savings and investment. Hatch is also a member of the Senate Select Committee on Intelligence, the Committee on Indian Affairs, the Special Committee on Aging, and the Joint Economic Committee.

Among his many political accomplishments, Hatch has long been a staunch supporter of the commercial real estate industry, and of publicly traded real estate companies in particular. He was the lead Senate co-sponsor of the REIT Simplification Act of 1997, was an original co-sponsor of the REIT Modernization Act (RMA) in 1999 and, most recently, was the lead Senate co-sponsor of the REIT Improvement Act (RIA) of 2004, which was passed by Congress as part of a larger tax bill and is expected to be signed by President Bush as this issue goes to press. In recognition of his leadership, his unwavering support of the industry, and his work on behalf of small investors nationwide, NAREIT honored Hatch with its 2001 Small Investor Empowerment Award.

One of the strongest advocates for the publicly traded real estate industry on the Hill, Hatch recently spoke with Portfolio about a number of issues including the political landscape, key legislative issues, improving the REIT structure and extending the Terrorism Risk Insurance Act (TRIA).

On the Political Landscape

When Portfolio sat down with Hatch in mid-September, the presidential election had yet to reach the home stretch. However, the tone of the campaign had already reflected the increased partisanship seen throughout Washington lately. Hatch has notably worked with legislators across the aisle to see passage of key legislation.

"Acting in a non-partisan manner really just takes sticking to your principles," Hatch says. "I've been a staunch conservative for my entire career, but that doesn't mean I can't work with Democrats, even liberal Democrats, who truly believe in trying to get things done for the good of all Americans. Truly decent, principled people of all walks of life, with dramatically different worldviews, can easily work together when they have the same goal in mind: doing what's right for America."

A lot has changed in Washington since Hatch began his political career in 1976, but the increased partisanship is the biggest difference he has witnessed.

"There are more and more politicians who seem to be willing to sacrifice good policy to score political points," he says. "When I began my career here almost 28 years ago, I learned from senators who wanted to accomplish things for the good of our country—whether or not it helped them or their party politically. That's the kind of senator I've tried to be throughout my career, and I'd like to bring that spirit of bipartisan accomplishment back to Capitol Hill."

On Key Issues

The health of the U.S. economy is always a hot issue around election time, especially during a presidential election. This year is no exception. Hatch says the economy is doing well, but there is still room for improvement.

"Of course, I would like to see even more growth, but I don't think we should be unhappy about the progress we have seen," Hatch says. "While we saw only 2.8 percent GDP growth in the second quarter of 2004, when it hit a soft patch, economists are predicting 3.5 percent growth in the third quarter and 3.9 percent in the fourth. These are good numbers."

Hatch adds that the number of jobs has continued to grow, with September posting the 13th straight month of job growth gains.

"We would all like to see even more jobs created, but our economy would have been far less healthy had we not passed the tax cuts of 2001, 2002 and 2003," Hatch says. "Despite all the attempts by certain Democrats to talk down the economy and make it appear worse than it is, there is no question that Republican policies are working."

While the economy will continue to be a highly debated subject, Hatch's role as chairman of the Senate Judiciary Committee puts him right in the center of some of the most important issues facing the country today. Over the course of the next year one of the most pressing issues will be the ongoing battle over confirming judges to the federal bench, which Hatch says will only become more intense with the likelihood of at least one Supreme Court vacancy in 2005.

In addition, Hatch says the committee must enact meaningful litigation reform in three areas: asbestos liability, medical liability and class action.

"We are currently seeing crises in this country due to excessive litigation, particularly in the first two areas, asbestos and medical liability," Hatch says. "Asbestos litigation is bankrupting companies and preventing injured workers from recovering just compensation. Similarly, medical litigation is driving doctors out of practice, hindering access to vital medical care, and raising health care costs across-the-board."

Hatch adds that the committee will continue to be the first hurdle for some important constitutional issues such as the effort to enact an amendment to the U.S. Constitution protecting traditional marriage.

On Protecting Investors' Rights

As a past recipient of NAREIT's Small Investor Empowerment Award and second ranking Republican on the Senate Finance Committee, Hatch's actions to protect the rights of the average investor have been well documented. However, he says there are additional steps that need to be taken.

"We need to do much more to simplify and rationalize the pension and retirement savings rules," Hatch says. "Although good strides have been made in these areas, more is needed. Most Americans are saving far too little for retirement and the tax code discourages them from doing so in too many instances."

The first priority is remedying the defined benefit pension system, which Hatch says "is in a deep crisis that appears to be getting worse with the problems of several of the larger airlines." He says that Congress needs to make some hard decisions on the funding rules for these plans in 2005, and he is working with several of his colleagues on the Finance Committee in a bipartisan way to begin looking at what needs to be done for both defined benefit and defined contribution plans.

On REIT Legislation

As outlined in the opening of this column, Hatch has been at the forefront of legislation that has enhanced publicly traded real estate as an investment alternative for all investors.

"REITs have been tremendously successful. REIT stocks regularly outpace every other major investment benchmark—Dow Jones Industrials, NASDAQ, S&P 500—and they remained a strong investment throughout the recent recession," Hatch says. "They are a terrific way for investors to put their money in real estate and maintain liquidity."

Among Hatch's many legislative efforts on behalf of the publicly traded real estate industry, he was an original cosponsor of the REIT Modernization Act of 1999.

"Every indication is that the REIT Modernization Act of 1999 has been a major boost for the industry," Hatch says. "I am proud to have been involved in its enactment. Moreover, I have greatly enjoyed working with NAREIT and many of its members. My staff and I rely on them to let me know how the REIT rules are working and what needs adjustment."

Because the modern economy is ever changing, Hatch says it is imperative that tax laws keep up with that change. Outdated or obsolete tax rules can impede economic growth, both in specific industries such as real estate and also generally, he says.

"This is why I supported putting all the provisions of the REIT Improvement Act in the FSC/ETI bill," Hatch says. "The FSC/ETI bill, which includes the REIT Improvement Act, is very important, and I am pleased that both the Senate and House cooperated to pass the bill this year."

On Extending TRIA

In the aftermath of the tragic events of September 11, the issue of affordable and adequate terrorism insurance coverage became an issue that Congress needed to address. As a result, the Terrorism Risk Insurance Act (TRIA) of 2002 encouraged more insurers to write comprehensive and less costly terrorism risk insurance coverage of people and property in the event of another terrorist attack.

"Because terrorism re-insurance was almost unavailable, the property and casualty insurance industry was near a crisis that had the potential to do great harm to the economy at the worst possible time," Hatch says.

While TRIA has made an impact, further Congressional action is needed to keep its provisions in place, Hatch says.

"The Terrorism Risk Insurance Act made a huge difference," Hatch says. "The problem is that its provisions expire at the end of 2005. Because of the need for lead-time, however, we really need to be extending this act very early in 2005. I am a proponent of this and will be working with my colleagues to get it extended as early next year as is possible."