Quigley statement at hearing on Department of Treasury FY 2018 budget request

Thank you Mr. Chairman, I would like to join you in welcoming Treasury Secretary Mnuchin to the committee. I thank you for making the time to be here today.

The vital role that the Treasury Department plays in both the domestic and global economy cannot be overstated.  Not only do you and your department oversee the Federal Government’s ability to collect trillions in revenue and finance government operations,  But you are also charged with investigating and protecting our financial system from the illicit and criminal activities of both foreign and domestic adversaries.  That’s why I was so disappointed with this year’s Treasury budget request, which slashes funding by $372 million.

For the IRS, this means a cut of $260 million.  After factoring in built-in costs such as statutory pay raises, inflation, and infrastructure maintenance, the cut in real terms is closer to $630 million.  This is on top of the nearly $1 billion that has been cut from the agency since 2010.  In order to meet this new draconian funding level, the IRS would need to reduce staffing by 6,000—adding to the more than 17,000 that the agency has already lost over the last seven years.  This is simply a formula for expanding the tax gap, empowering tax cheats, and confusing honest taxpayers.

You yourself, Secretary Mnuchin, have previously said that the IRS is “under-resourced to perform its duties” and that further cuts “will indeed hamper our ability to collect revenue.”  Many of us here agree with you, and I encourage you and the President to listen to your own advice.

I was also deeply troubled by the elimination of the Community Development Financial Institutions Fund, which plays a vital role in spurring both economic growth and revitalization in our most underserved and neglected communities. In my hometown of Chicago, CDFIs are investing tens of millions every year to provide low-income families with affordable housing, neighborhoods with safe community centers, and small businesses with the capital to grow and hire local workers. For the cost of less than 80 cents per American, this program helps CDFIs across the country support the creation of tens of thousands of jobs, financing for over 13,000 businesses and more than 33,000 affordable housing units. And that’s just for last year. This is not only a hugely successful program, but it’s bipartisan, which is evident though the increased funding it received in this year’s omnibus.

There are numerous other cuts to the department that are harmful as well, including questionable reductions to cyber security enhancement at a time when hacking and identity theft are at an all time high, cuts to programs that safeguard our financial system from criminals, and enforce trade and economic sanctions, and unwise reductions to various inspectors general offices; particularly the premature 50 percent cut to the Special Inspector General for TARP, which is still charged with auditing the $38 billion in open TARP programs that will last until 2023.

But I briefly want to touch upon something that you bring up in your written testimony, and that’s the issue of financial regulation. Last Friday, the President tweeted his support for the House-passed bill to repeal Dodd-Frank. It’s surprising how easily some folks forget that less than a decade ago a financial crisis sparked the biggest global recession since the Great Depression and pushed our economy to the brink of collapse.  Main street businesses and families suffered even greater losses than Wall Street as home values declined, retirement savings shrank, and credit dried up.  And how did we get there: a disastrous combination of irresponsible lending, overly complex derivatives, highly leveraged and undercapitalized banks, and inadequate regulatory oversight.

No serious person would argue that the status quo, which almost crippled our economy, was working before the crisis. We needed to make our financial markets safer, more transparent, and more accountable.  And that’s exactly what Dodd-Frank has done.

We can all agree that rules need to be tweaked to make sure that small banks are not overly burdened with rules intended for those that pose a systemic risk to our economy. And that Dodd-Frank came up short on reforming Fannie Mae and Freddie Mac. But gutting Dodd-Frank and rolling back the clock isn’t the answer.  The answer lies in Democrats and Republicans working together, in a bipartisan way, to continue to improve the safety and soundness of our financial system.

I look forward to discussing these and other issues with you today. 

Thank you, Mr. Chairman.