By Matthew Bechard

Sen. Edward M. Kennedy (D-MA) has been almost as much of a fixture in Washington's political landscape as the Capitol. With more than four decades in office, Kennedy is the second most senior member of the Senate and plays a key role on several important committees. He serves on the Senate Judiciary Committee, where he is the ranking member on the Immigration Subcommittee, and the Armed Services Committee, where he is the ranking member on the Seapower Subcommittee. He is also a member of the Congressional Joint Economic Committee. As the senior Democrat on the Health, Education, Labor and Pensions Committee in the Senate, Kennedy is actively involved in shaping policy affecting education, health care and pension plans—an issue of particular importance to the REIT industry. The senator spoke with Portfolio for this "Window on Washington," providing his insight on partisanship in the Senate, the 2004 elections, reviving the economy, securing pension plans and the value of REITs.

On Increasing Partisanship in the Senate

Since first being elected in 1962, Kennedy says he has seen numerous changes in the Senate—most notably the increase in partisanship. "When I was first elected, many of my best friends in the Senate were on the other side of the aisle," he says. "We worked hard, and we also enjoyed each other's company outside the halls of Congress. With the Senate now often working longer hours during the week and many senators going back to their home states as soon as we complete our work each week, that simply isn't possible now, and partisanship prevails."

Despite the prevailing partisanship, Kennedy has made concerted efforts to work with conservative Republicans on issues ranging from education to health care.

"I believe that voters elect senators and members of Congress to get things done," Kennedy says. "To do the best for the American people, we must work across the aisle with each other. That is what I did with Sen. Nancy Kassebaum (R-KS) on legislation on health care for workers who change their jobs or lose their jobs, with Sen. Orrin Hatch (R-UT) on the children's health insurance bill, and with President Bush on school reform."

On the 2004 Election

No politician enjoys his or her party being in the minority, and Kennedy is optimistic that Democrats can regain some of the seats they have lost in the Senate in the 2004 election on their way to regaining the majority. "I look forward to calling Tom Daschle ‘majority leader' again, and I think ‘Speaker Pelosi' has a nice ring to it," Kennedy says.

As for the 2004 presidential election, Kennedy says Sen. John Kerry (D-MA) is the best candidate to challenge President Bush and the Republican Party on the issues he feels matter most.

"John has always been a leader in the Senate in both foreign and domestic policy, and I look forward to working to elect him President of the United States," Kennedy says. "He's always fought for what he believes in, including a cleaner environment, safer streets, a strong defense, and now a foreign policy that best meets the economic and security needs of the American people."

On Reviving the Economy

Kennedy has been vocal in his criticism of President Bush on many fronts, including the President's "Jobs and Growth" tax bill, which was aimed at reviving the sluggish U.S. economy. Not surprisingly, Kennedy doesn't expect the tax cut to meet that goal and feels things are only going to get worse.

"The tax cuts haven't worked," he says. "They're unaffordable in these troubled times, when so many other higher priorities are obviously not being met. Unemployment is soaring. State and local governments are on life-support. Vital services are being cut. We have huge new challenges like costs for domestic security, protecting Social Security and Medicare, and meeting the needs of seniors with an adequate prescription drug benefit."

"REITs have also helped demystify real estate investment, so that Americans can learn the underlying principles of this basic sector of the economy. Four decades after their creation, we can look back and say that Congress made a wise choice for the American people."

Over the past three years, Kennedy says the two positive economic indicators have been the housing and automobile sectors, which have kept the economy afloat as a result of the extremely low interest rates. "Now I fear that these bulwarks may begin slipping and that the financial markets are losing confidence in the finances of the U.S. government," he adds.

So what does Kennedy believe it will take to get the economy running at full steam again? "In my view, the biggest single challenge confronting our long-term economy is the mounting insecurity that the vast majority of Americans feel about their future," he says. "From the beginning, the American economic engine has been fueled and sustained by their motivation to earn, to save, to seek advanced educational training, and invest their hard-earned dollars. When the government demonstrates that average Americans can still get a fair shake, the American people will restart the American economic engine."

In addition to reviving the economy, Kennedy says there are other issues at the top of the Congressional agenda for the foreseeable future.

"Iraq and homeland security are the biggest challenges (other than the economy), but there are many others as well: whether we'll provide adequate funding to ensure a good education for all our children; whether we'll provide a real prescription drug benefit under Medicare so seniors can afford the skyrocketing cost of prescription drugs," he says. Kennedy adds that the most important piece of legislation he has worked on, which has yet to pass, is securing health insurance for all Americans.

On Protecting U.S. Pension Savings

As the ranking member of the Senate's Health, Education, Labor and Pensions Committee, protecting and maximizing the pensions and retirement savings, particularly 401(k) plans, of U.S. workers is a growing concern for Kennedy.

"Today, millions of Americans can't afford to retire. Two-thirds of families with incomes under $50,000 don't have any retirement savings at all," he says, adding that the 50 million workers who have retirement savings in the form of 401(k) plans remain concerned that an Enron-like collapse could destroy their nest eggs too.

With Enron providing a much-needed spotlight on the risks that exist, Kennedy says there are steps that can be taken now by companies and the government to protect employees' retirement security. "Employees need the opportunity to diversify their 401(k) accounts. Employers shouldn't overload their employees' 401(k) portfolios with company stock," he says. "Workers need access to independent investment advice, and corporate officers who knowingly endanger employee pensions must be held accountable."

As part of this, Kennedy says Congress must encourage businesses to set up retirement plans and create pension opportunities for low and middle-income workers who currently don't have them. In addition, he says pensions need to be portable, like health insurance coverage, "so that employees can take new jobs and better jobs without losing their retirement savings."

While it is important that plan providers and sponsors and the government continue to institute changes, increased participant knowledge of the investment process and available options will also spur improvements, Kennedy says.

"It's important to see that employees understand the different options, so they have confidence they're making the best choices for their families," he says, adding that investors need to be educated about asset classes such as REITs that have traditionally not been available in 401(k) plans. "Americans need to be educated about such investments so they have the knowledge and confidence to ask their company plan manager to include it. In the last decade alone, the investment knowledge of middle-class Americans has increased dramatically. The challenge is to keep building upon those gains."

On the Role of REITs

One of the key components to improving the diversification of 401(k) plans is the inclusion of real estate stocks. In 1960, Congress created REITs to make investment in large-scale commercial real estate available to every investor. Although not in office when the legislation was passed, Kennedy has watched the evolution of the publicly traded real estate industry and feels it has lived up to its mission.

"REITs have broadened investment opportunities and provided help in attaining financial independence," Kennedy says. "They have also helped demystify real estate investment, so that Americans can learn the underlying principles of this basic sector of the economy. Four decades after their creation, we can look back and say that Congress made a wise choice for the American people."

Not only have publicly traded real estate companies had an impact on investors, but they have helped shape the foundation of cities across the nation—including Kennedy's own Boston metro region.

"Boston is unique because of its layout, history and geography, which present specific challenges to developers that don't exist in other parts of the country," he says. "We have to use land more efficiently, adapt outdated facilities for modern uses, and make projects fit densely populated communities."

Kennedy adds that the commercial real estate industry in Boston recognizes these challenges. "Finding the right balance between modern space demands and the city's long heritage is the way the industry has helped shape the region," he says.

Boston was also the birthplace of the forerunners to REITs in the late 19th century and was the home of the companies lobbying for REIT legislation in the 1950s and 1960s. Before they were legislated by Congress, trusts were formed as investment pools for Easterners with capital to invest in real estate to the west. Kennedy's family had substantial holdings in real estate, including the Merchandise Mart in Chicago that was sold to Vornado Realty Trust (NYSE: VNO) in 1998.

So, had his career in politics not worked out, would Kennedy have become one of the pioneers of the REIT industry? "No, I think I would have tried out for the [NFL's New England] Patriots," he says. "I used to play left end in college, and people say that's how I got my politics, too."