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Jewish World Review Jan. 14, 2003 / 11 Shevat, 5763

Bill Steigerwald

Bill Steigerwald
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10 minutes with Santorum on ... taxes, steel and Lott | Sen. Rick Santorum of Pennsylvania, a 12-year veteran of Congress at a mere 44 is the third-ranking Republican in the U.S. Senate and often is listed near the top of possible GOP vice presidential candidates in 2008.

As conference chairman, he is essentially the chief spokesman - flack, if you will - of the Senate Republicans. To get his thoughts on President Bush's proposed economic stimulus package, especially the part about ending the double taxation of stock dividends, I talked to Santorum by telephone from Washington on Thursday:

Q: I play poker with a bunch of liberal Democrats, older guys, and last night to a man they were apoplectic about the dividends part of the stimulus package. They said it was just another sop to the rich and to President Bush's friends. What should I have said to persuade them otherwise?

A: Your response to that is this: What we have seen over the past is a perversion of business judgment due to the tax structure that we have now. Here is the perversion: We tax the distribution of income - profits - in the form of dividends. But we do not tax someone running a business who takes those profits and goes ahead and buys another company, or makes an investment in a harebrain scheme, or tries to grow the stock price, because that's the way you reward shareholders.

You don't do it through dividends. You did it through mergers, you did it through acquisitions, you did it through expansion, you did it for all these things which, from a liberal point of view, created false value in many cases. It resulted in massive dislocation of workers, because you had all these mergers, all these acquisitions, layoffs, restructurings, closings, everything else. All were driven by the need of the CEO to increase shareholder value, which means drive up the stock price...

If we had not had the double taxation of dividends -- and if we don't have it in the future -- then there will be (an) equal amount of value given to simply taking the company's profits and distributing them to the shareholders.

Q: Like back in the good old days?

A: Back in the good old days, where you had more stability, you had more long-term planning. You did not have the obsession with next week's stock price. But when you give out a dividend, you gave inherent shareholder value...

Buying a stock becomes a more reliable investment and so it ads value to the market, which is a good thing for investors. And adding value to the market is a good thing for Main Street America. Over 50 percent of Americans invest in the market now - it's not just "the rich."

You have a lot of folks who have pension funds that they are dependent upon, and a lot of them are very low and moderate income and dependent on quality investments and the stability of that market.

So I would argue that this, first and foremost, is a corporate governance issue. This has to do with encouraging more corporate responsibility and you do that by creating parity between what is speculative investment and growth and merger and acquisition through excess profits and the distribution of those profits to shareholders through dividends.

Q: Will the president's economic stimulus plan be passed by Congress without too much tinkering or watering down?

A: I'm sure it's going to get changed. If you look at the last bill, which was considered pretty much a slam dunk for the president, he still didn't get everything he wanted. He got a lot, but not everything. The same is going to be true here.


Q: Are you pleased with the effects of the steel tariffs that were put into effect last March?

A: What the president wanted to do was see a consolidation of the industry and improve the chances of survivability and even profitability of the steel industry going forward.

Now you see what U.S. Steel has done (buying National Steel) and the announcement of the Bethlehem merger (with Lukens). Those were the things that the steel tariff was supposed to incentivize, and it has.

Yes, there have been downsides to the steel tariffs. There's no question. We knew there would be some injuries as a result of that. That's a given.

We knew unit prices were probably going to go up. But we thought that this was an opportunity for the industry to consolidate, to right size, to get in a position where, when prices begin to settle down, given the cut-throat global competition, they would be in a better position to survive.

I think the president has accomplished that. Whether you're for the tariffs or not, if you look long term, the steel industry will be in better shape after the three-year tariff period and will be more in position to survive than it was beforehand.

Q: Have you heard any complaints from any steel-using manufactures in Pennsylvania who've been hurt by the high prices?

A: Sure, oh sure… No look. I have sympathy for them. My feeling was, anything I could do to be helpful, in the sense that, let's see if we can get through this period of time …. The tariffs are coming down. As you know, it's a phase-down over three years. So in March they will go down, I think, by a third.


Q: During the Trent Lott episode, you were very loyal to the senator. Robert Novak said you may have been too loyal and that you stuck with him even after it was clear that he would have to resign. Did you hurt your reputation in the Senate or your future plans in any way?

A: It's hard for me to make that judgment. I guess what I did was what I thought was the right thing for, obviously, the Senate, the Republican Conference, and I would argue, for the country.

We worked very hard internally to shepherd everybody through this process. I think we came out with the right result. ... I think the role I played was an important one and I feel very comfortable that, in the end, the result was the right one and we're able to transition into what is, as you see, an effective leadership team that can lead the Senate in the next two years.

I don't look at things as to how they advantage me. That's not why I'm here.

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JWR contributor Bill Steigerwald is an associate editor and columnist at the Pittsburgh Tribune-Review. Comment by clicking here.

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© 2002, Bill Steigerwald