By Matthew Bechard

A rising star in Washington, Senator Rick Santorum (R-PA) is the youngest member of the Senate's leadership. He was recently elected to a third term as Republican Conference Chairman, the party's third-ranking leadership position in the Senate. As such, he directs the communications operations of Senate Republicans and is a frequent party spokesman.

Santorum's career on Capitol Hill began in 1990 when he was elected to the U.S. House of Representatives. He has served in the U.S. Senate since January 1995. Santorum serves on the Senate Finance Committee and is the chairman of the Subcommittee on Social Security and Family Policy. In addition, Santorum serves on the Senate Agriculture Committee, the Senate Committee on Banking, Housing and Urban affairs, the Senate Committee on Rules and Administration, and the Senate Special Committee on Aging.

During his political career Santorum has fought for government accountability and welfare reform. He played an active role in the 1996 welfare reform law. He is also on the front lines of the move to save and strengthen Social Security and Medicare.

Santorum recently spoke with Portfolio about a number of issues including social security reform, the health of the economy, future tax reform needs and extending the Terrorism Risk Insurance Act.

On Social Security

One of the key issues of President Bush's second term will be reforming the nation's Social Security system. As a member of the Special Committee on Aging and the chairman of the Senate Finance Subcommittee on Social Security and Family Policy, which has jurisdiction over the Social Security program, Santorum will play an active role in strengthening the system and he says he takes the responsibility of representing both current and future retirees very seriously.

"Since the beginning of the 109th Congress, both of these committees have held hearings in which nonpartisan experts have had the opportunity to testify. Future hearings will continue to provide the opportunity to hear from a variety of experts on how best to strengthen Social Security for our children and grandchildren," he says.

At this point, Santorum says doing nothing to reform the Social Security system is not an acceptable option, as it would threaten the retirement security of future generations. Santorum says establishing voluntary personal retirement accounts (PRAs) would lessen the need for other alternatives down the road.

"Voluntary PRAs provide hope to younger workers through options that allow them the flexibility to plan for their retirement," he says. "PRAs should be incorporated into Social Security so that they have the time needed to grow and help sustain the overall program. Establishing these accounts will allow interest to compound over time and offer a substantially greater rate of return—a rate of return that is more than our children and grandchildren can expect from today's system."

One of the concerns opponents of the proposed PRA plan have is that they consider investment accounts to be too risky for securing retirement savings. Santorum says measures would be taken to reduce the risk as much as possible. "Under current proposals, investment will be limited to broad index funds that reflect the overall strength of the American economy and have shown historically greater return than current Social Security," Santorum says.

For example, he says that state and local government workers who do not participate in Social Security have experienced significantly higher returns on their retirement accounts–investments consisting of a mix of bonds and stocks. Moreover, he says transitioning to PRAs basically means moving from a system in which Washington invests the Social Security Trust Funds in government bonds to a system in which you invest in a mix of securities that can include government bonds.

The debate over Social Security reform will continue to be contentious and change will not come easily. However, Santorum says he is hopeful that Congress will work together by the end of this year to enact meaningful reform to ensure that Social Security continues to meet the retirement needs of today and tomorrow.

On Economic Health

While Social Security reform looks to stabilize long-term financial health for U.S. workers, overall economic stability and growth in the near-term is also a key issue for Congress. Since May 2003, the economy has posted steady growth and more jobs are being created as a result, Santorum says.

"This past February, payroll employment rose by 262,000 and the economy has created over 3 million jobs since May 2003," he says. "We have seen steady job gains for each of the last 21 months and more Americans are now working than ever before."

A key component in the continued increase in job growth and ongoing economic stability has been the Jumpstart Our Business Strength (JOBS) Act, Santorum says.

"Providing tax relief for all companies that manufacture in the U.S. regardless of size was an appropriate way to deal with the growing and changing U.S. economy," he says. "The JOBS Act also ensured that U.S. companies and jobs remained in the U.S. by ending the trade sanctions imposed by the World Trade Organization. Although we have yet to see the full effects of the legislation, I am hopeful that the JOBS Act will assist domestic manufacturing and promote job opportunities and economic growth for hard-working Americans."

On the international front, Congress is continually working to make U.S. products and businesses more competitive in the global marketplace. Santorum has been a strong supporter of the Economic Development Administration (EDA), which provides grants and leverages private funds for local projects that lead to job creation and economic development.

On Global Competition

Going forward, Santorum says the federal government must be vigilant in calling attention to the unfair trading practices of many of its trading partners. The burden of enforcing trade laws and trade agreements falls primarily upon the office of the United States Trade Representative (USTR).

"I support those efforts that will improve the value of American workers as producers of manufactured products. By investing in our citizens–through raising the standards of our schools, demanding a higher level of academic achievement for our children, and strengthening the math and science curriculum of our schools—the U.S. can equip future generations of workers to be the world's most sought after commodity," Santorum says. "We can do more to invest in our workforce and to enable these workers to attract foreign investment because of their ability to add significant value to the products they produce."

Additionally, as part of the REIT Improvement Act provisions included in the JOBS Act, a discriminatory barrier to foreign investors buying publicly listed REIT stock was eliminated. Prior to this modification, a foreign investor who invested in U.S. REITs and received capital gain distributions was required to pay a 35 percent tax on the distribution, file a U.S. tax return and possibly pay a "branch profits" tax. Under the new law, so long as the foreign shareholder owns 5 percent or less of the REIT and the REIT is publicly traded on a U.S. exchange, capital gain dividends are subject to a 30 percent withholding tax (or lower tax if a tax treaty applies) and the shareholder no longer files a tax return.

"As a cosponsor of the REIT Improvement Act in the 108th Congress, removing this barrier to foreign investment in U.S. REITs should provide a greater flow of capital into these companies," Santorum says. "This is another way of strengthening the value of American businesses in the global economy."

On Additional Tax Reform

Santorum has been an advocate for reforming and simplifying the tax code. He supported the most recent tax cut and says he hopes that Congress will act to further reform the tax code this year.

"Taxpayers deserve a more pro-growth system. Economic growth occurs when people have more money in their pocket, work more, save more, and invest more. Tax relief has played a key role in fostering growth in our economy and has stimulated economic recovery by creating an atmosphere of opportunity and personal ownership for hard working Americans."

To that end, Santorum says it is essential that Congress make the most recent tax cut permanent to continue growing and strengthening our economy.

In addition, Santorum recently re-introduced legislation that encourages the cleanup of brownfield sites through a permanent fix to the U.S. tax code. Brownfields are real property; the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant or contaminant. In the past, cleanup costs associated with brownfields had to be capitalized to the land, postponing any recovery of these costs for tax purposes until the property was sold.

"My legislation amends the tax code to allow cleanup costs to be expensed in the year they were incurred. By doing so, we can help developers manage the cost of rehabilitating existing properties—which is typically much more expensive than developing new sites," Santorum says.

Brownfields have a serious financial impact not only to the market value of the brownfield properties themselves, but also to property values in the surrounding neighborhoods, according to Santorum.

"Brownfield revitalization enables communities to take back the land and make it into something useful and productive," he says. "The redevelopment of existing brownfield sites has the potential to generate about $2 billion in annual tax revenues, as well as create good-paying jobs and affordable housing."

On Terrorism Insurance

Although the economic struggles had already begun prior to Sept. 11, 2001, the terrorist attacks on America expedited the country's fall into recession. And while the economy has made strides forward, the president continues to remind the country to be vigilant and that the terrorist threat is just as pressing today as it ever has been.

The Terrorism Risk Insurance Act of 2002 (TRIA) has played a role in protecting the nation's economic security. However, TRIA, which provides a federal backstop for terrorism insurance, is scheduled to expire at year-end. NAREIT and other members of the multi-industry Coalition to Insure Against Terrorism are working with Congress and the administration to seek a long-term national policy solution to the insurance challenge presented by terrorism. "I am sympathetic to the concerns of the insurance industry, as well as those who are seeking insurance. I believe that all parties concerned need to work together to find long-term solutions," Santorum says. "In the meantime, I would support a short-term extension of TRIA."

Santorum adds that Senate Banking Committee Chairman Richard Shelby will be holding hearings in the near future to evaluate the effectiveness of TRIA and the need for legislation to extend the program.

"As a member of the Banking Committee, I look forward to hearing testimony that will allow my colleagues and I to better understand TRIA's impact on the insurance and business communities and the implications it has on our economy," he says.