Rep. Barletta fights for lower disaster recovery loan rates

Feb 16, 2012
Press Release

WASHINGTON – U.S. Rep. Lou Barletta, PA-11, blasted policy experts who said potential victims of natural disasters should either move to safer areas or buy more insurance, rather than hope for a low-interest loan from the U.S. Small Business Administration – even as the United States sends billions of tax dollars overseas for foreign disaster relief.

The House Small Business Economic Growth, Tax and Capital Access Subcommittee heard testimony Thursday morning about Rep. Barletta’s bill, the Disaster Loan Fairness Act (H.R. 3042), which would cut the interest rate on all SBA disaster recovery loans to 1 percent for 30 years.

Small business owner Gene F. Tighe of Pittston-based GT Fabrication, a precision metal fabricating and powder coating business that was inundated by 15 feet of floodwater during Tropical Storm Lee in September 2011, testified about the difficulties his family owned business experienced trying to receive an SBA recovery loan. After numerous paperwork snafus, GT Fabrication was offered a 6-percent interest rate – far too high to be of any use to the company as it struggled to recover.

The hearing also featured testimony from Doug Hoell, director of the North Carolina Division of Emergency Management in Raleigh, N.C., who testified on behalf of the National Emergency Management Association; Howard Kunreuther, Ph. D., James G. Dinan Professor of Decision Sciences & Public Policy and co-director of the Risk Management and Decision Processes Center at the University of Pennsylvania in Philadelphia; and David B. Muhlhausen, Ph.D., research fellow in Empirical Policy Analysis at The Heritage Foundation in Washington.

During the presented testimony and subsequent question-and-answer period, Muhlhausen and Kunreuther repeatedly stressed that lowering the SBA loan interest rate to damaged businesses was not the answer, and that business owners should instead be directed to buy more disaster insurance. Tighe testified that his company purchased flood insurance that only covered a maximum of $1 million in property and contents damage – far less than what GT Fabrication needed to recover.

Muhlhausen claimed that “Americans are becoming overly dependent on federal assistance after natural disasters occur,” and that federal disaster declarations are “a political tool” used in election years.

Rep. Barletta pointed to photographs of destruction the people of the 11th District experienced during the 2011 floods.

“Do you believe that helping those folks would be politically motivated?” Rep. Barletta asked Muhlhausen. “These are real people. Do you think us coming in to help them is politically motivated?”

 Muhlhausen claimed that Rep. Barletta’s bill would encourage businesses to relocate in areas that experience disasters, instead saying that businesses “where it’s easy to move” should consider moving to areas that are unaffected by natural disasters.

“Where should they move? There can be an earthquake in California, so should everyone move from California. People in the Midwest, there could be a tornado. Should they move?” Rep. Barletta said.

Rep. Barletta also asked Muhlhausen what would happen to the employees of small businesses like GT Fabrication – and their families and communities – if those companies did relocate.

Rep. Barletta pointed out that the United States gave $215 million in flood disaster relief to Pakistan over the last two years, and said American taxpayers gave that money to Pakistan without charging interest or expecting any monetary payback.

“Did we insist that Pakistan, did we require them to have mitigation first, before we use American tax dollars? Did we ask them, do they have insurance before we give American tax dollars? Know what interest rate they’re paying? Not six percent, like we would have offered Mr. Tighe. Zero percent. Is that fair to the American taxpayers? And do you know what the payback is? There is no payback. They don’t have to pay it back. So I would tell Mr. Tighe, if he wanted to move, maybe we want to say, ‘Maybe you should move to Pakistan, where we would have offered a zero percent loan and you wouldn’t have to pay the money back,’” Rep. Barletta said. “We are trying to keep manufacturers and people in business, sir. We are not trying to make a profit.”

Later, Rep. Barletta asked, “Should we not help Americans first? How do we justify that we help other people before we help Americans?”

Rep. Barletta asked what was a better use of American taxpayer dollars – foreign disaster relief or helping American small businesses recover from disasters through lower-interest loans and keeping Americans employed.

“Is there not a return to the American taxpayer by helping American businesses stay in business?”

After the hearing, Rep. Barletta said, “I’m embarrassed to say that the federal government did not do everything it could to help GT Fabrication and other businesses across Northeastern Pennsylvania re-open. At a time when we’re trying to create a pro-jobs, pro-growth environment at the federal level, SBA disaster loan interest rates jeopardize family businesses and Northeastern Pennsylvania manufacturing jobs. That’s unacceptable.

“That’s why I introduced the Disaster Loan Fairness Act, which would set a 1-percent interest rate for all recovery loans for up to 30 years, retroactive to loans made after January 1, 2011. I don’t know any business owner who thinks a 6-percent government disaster recovery loan can help them get back on their feet. The people of the 11th District and Northeastern Pennsylvania need their jobs, and we can’t afford for businesses like GT Fabrication to close. If we can give Pakistan – the country that harbored Osama bin Laden – $215 million in flood relief, without asking for any money in return, then we must be able to take care of American families and American businesses first.”




To watch video of the hearing click here.