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tv   Treasury Sec. and Fed Reserve Chair Testify on Pandemic Response of...  CSPAN  October 2, 2021 5:58am-8:01am EDT

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present your testimony. secretary yellen: thank you, chairwoman waters, ranking member mchenry, members of the committee. it's a pleasure to testify
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today. we are in the midst of a fragile but rapid recovery from the pandemic-induced recession. while our economy continues to expand and recapture a substantial share of the jobs lost during 2020, significant challenges from the delta variant continue to suppress the speed of recovery and presents substantial barriers to a vibrant economy. still, i remain optimistic about the median term projection of our economy, and i expect we will return to full employment next year. rebounds like this was never a foregone conclusion. in fact, the american recovery is stronger than those of other wealthy nations. one key factor for our overperformance is the policy choices that congress has made over the past 18 months.
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those choices include the passage of the cares act, the consolidated appropriations act, and the american rescue plan. treasury, as you know, was tasked with administering a large portion of the relief dollars in those bills. and when we last met, our department was busy standing up programs to help individual families, state governments, and organizations of every size in between. while we still have much more work to do, we have made significant progress. and i wanted to give you an update. let's start with families. in july, our department started sending the monthly expanded child tax credit payments to the families of nearly 60 million children across the country. to date, $46 billion in payments have been made and we're already seeing the impact.
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analysis by the census bureau found that after the first payments in july, food insecurity among families with children dropped 24%. as for state, local, tribal, and territorial governments, covid-19 decimated their budgets. there were mass layoffs. and to end the health and economic emergencies, we knew that communities would need funding to hire educators to bring kids back to school, for example, or frontline workers to administer the vaccine. the american rescue plan included $350 billion to that end, and those dollars are indeed helping the machinery of local governments get up and running. states and localities can rely on relief money that's available instead of resorting to painful budget cuts. congress writely de -- rightly
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designed the flexibility in mind. i think knew of us the recovery could run up against unforeseen challenges, and we wanted communities to be able to devote resources where and when they saw fit. i want to note that this flexibility is paying off now, especially with the spread of the delta variant. harris county, texas, for instance, has used this funding to boost its immunization rate, offering $100 to each person who gets their first vaccine dose. for the relief dollars not yet out the door, treasury is doing everything it can to expedite their delivery. the emergency rental assistance program is one example. prior to the pandemic, there was essentially no national infrastructure to get money from government coffers to renters and landlords.
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building that infrastructure has been a massive undertaking for states, localities and tribes. the program is scaling up quickly with 1.4 million payments made to help struggling renters keep a roof over their heads. still, too much of the money remains bottle necked at the state and local levels. that's why our treasury team has worked to eliminate every piece of red tape possible in order to ensure more payments can get to renters and landlords. but states and localities must also work to remove barriers that can speed up distribution of rental assistance funds. i'll end my remarks there except to say this -- it is imperative that congress address the debt limit. if not, our current estimate is the treasury will likely exhaust its extraordinary measures by
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october 18. at that point, we expect treasury will be left with very limited resources that would be depleted quickly. america would default for the first time in history. the full faith and credit of the united states would be impaired, and our country would likely face a financial crisis and economic recession as a result. we must address this issue to honor commitments made by this and prior congresses, including those made to address the health and economic impact of the pandemic. it's necessary to avert a catastrophic event for our economy. representatives, the debt ceiling has been raised or suspended 78 times since 1960, almost always on a bipartisan basis. my hope is that we can work together to do so again and to build a stronger american economy for future generations.
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thank you and i'm pleased to take your questions. ms. waters: thank you, secretary yellen. chair powell, you are now recognized for five minutes to present your testimony. chair powell: thank you, chairwoman waters, ranking member mchenry, and other members of the committee for the opportunity to discuss the measures we have taken to address the hardship brought by the pandemic. since we last met, the economy has continued to strengthen. real g.d.p. rose at a robust pace in the first half of the year, and growth is widely expected to continue at a strong pace in the second half. those impacted by the pandemic has risen in months. but the rising covid cases has slowed recovery. spending softened in covid-sensitive sectors. additionally, in some industries, near-term supply
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constraints are restraining activity. as with overall economic activity, conditions in the labor market continue to improve. demand for labor is very strong and job gains average 750,000 per month over the past three months. in august, however, gains slowed marketedly with the slowdown concentrated in sectors most sensitive to the pandemic. the unemployment rate was 5.2% in august. this figure understates the shortfall in employment, particularly as participation in the labor market has not moved up from the low rates that prevailed for most of the past year. factors related to the pandemic appear to be weighing on employment growth. these factors should diminish with progress on containing the virus. the economic downturn has not fallen equally on all americans, and those least able to shoulder the burden have been the hardest hit. in particular, despite progress,
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joblessness continues to fall disproportionately on lower wage workers in the service sector and on african-americans and hispanics. inflation is elevated and will likely to remain so in coming months before moderating. as the economy continues to reopen, we are seeing upward pressure on prices, particularly due to supply bottlenecks in some sectors. these effects have been larger and longer lasting than anticipated, but they will abate. and as they do, inflation is expected to drop back toward our longer run 2% goal. the process of reopening the economy is unprecedented. as it continues, bottlenecks, hiring difficulties can prove to be more greater and enduring than anticipated, posing upside risks to inflation. if sustained, higher inflation would become a serious concern, we would certainly respond and use our tools to ensure levels that are consistent with our goal. the path of the economy
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continues to depend on the course of the virus and risks to the outlook remain. the delta variant has led to a surge in cases, causing human suffering and slowing the recovery. continued progress on vaccinations would support a return to more normal economic conditions. the fed's policy actions are guided by our dual mandate to have stable prices as well as to promote the stability of the financial system. in response to the crisis, we took broad and forceful measures to support the flow of credit and to promote the stability of the financial system. our actions, taken together, helped unlock more than $2 trillion of funding to support businesses, large and small, nonprofits, and state and local governments between april and december of 2020. this helped keep organizations from shuttering and put employers in a better position to keep workers on and to hire them back as the recovery continues. these programs have served as a backstop to key credit markets
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and help restore the flow of credit from private lenders. we have deployed them to an unprecedented extent. our emergency lending tools require the approval of the treasury and are available only in unusual and exigent circumstances, such as those brought on by this crisis. many of these programs were supported by cares act funding, those facilities provided essential support through a very difficult year and are now closed. the fed completed its sales of assets from the secondary market corporate credit facility on august 31. we were able to wind down the facility with no adverse impact on credit conditions. we also recently closed the p.p.p. to new lending and are managing the paydown of assets in our other cares act facilities as they wind down. we continue to analyze their efficacy and to review the lessons learned. the fed's actions affect communities, families, and businesses across the country. everything we do is in service to our public mission. we will do all we can to support
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the economy for as long as it takes. thank you. i look forward to your questions. ms. waters: thank you very much, chair powell. i now recognize myself for five minutes for questions. secretary yellen, your department reports that as of august 2021, $7.1 billion in rental assistance have been allocated to households assisting approximately two million renters. although spending has increased over the past several months, i think we are all concerned that the pace of delivery of this critical assistance is not happening quickly enough. can you talk about the challenges you have faced after taking oversight of era-1 from
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the trump administration? what do you believe are the most significant improvements to the program's guidance you have made? and what impact have you seen? secretary yellen: well, thank you for that question. this is a critically important program that treasury has been very focused on expediting the delivery of these rental assistance funds to those who need it. as i mentioned in my opening statement, giving these funds out has involved creating a national infrastructure where none existed before. and that's been a very difficult and slow process. treasury has done everything possible to facilitate getting these programs up and running around the country. in particular, we have tried to give states and localities
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flexibility to administer the program in ways that are appropriate for different communities to reduce the paperwork requirements while also making sure that we have accountability and transparency with provided technical assistance and working to provide more technical assistance. and i do think we are seeing a payoff. as i mentioned, we've had 1.4 million renters helped by this assistance, and the pace at which it's flowing out is increasing. also, i would note that the act requires treasury to begin to reallocate funds on september 30 from those localities that are either not effective in getting assistance out or have less need
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for the funds and to reallocate them to those that are more effective and have demonstrated need. ms. waters: well, thank you very much. i want to thank you and your team for working with me on h.r. 5196, the expediting assistance to renters and landlords act, which would make it easier for both renters and landlords to apply for assistance and provide for the deeper involvement of treasury to support grantees to get the funds out the door. are there particular provisions that you think would aid treasury's efforts to make the rental assistance program more successful? you've given us quite a bit of information about what you have been involved with. is there anything else you would like to share? secretary yellen: well, chairwoman waters, we are very supportive of your efforts to try to put in effect changes that would expedite the delivery and effectiveness of this
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program, and we look forward to continuing to work with you. i think we have offered substantial technical assistance and absolutely want to work with you to make sure this program is as effective as possible. ms. waters: thank you very much. the gentleman from north carolina, mr. mchenry, who is the ranking member of the committee, is now recognized for five minutes. mr. mchenry: well, thank you. chairman powell, i know the policy of the federal reserve to not comment -- to not comment on fiscal policy. but fiscal policy does impact the fed's economic projection, does it not? chair powell: yes, it does. we make assumptions about fiscal policy. once enacted, we would that into our models. mr. mchenry: but your public models is a statement about
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current law rather than proposed policies, is that largely correct? chair powell: we don't forecast individual participants publish their forecast in the summer of economic projections but that would include their personal assessments of likely fiscal actions. mr. mchenry: so about these fiscal actions -- secretary yellen, i said this in my opening statement and i'll say this to both of you, again. i am grateful as an american that you both are in the seats that you are in right now. because we're in a special circumstance here in the fall of this year. it was a foreseeable slow-moving disaster but here we are. but your credibility of your relative agencies and the credibility of you two individuals is of substance right now. very important to us as an american government. so secretary yellen, you said in july right before the debt limit was reinstated, c.b.o. said
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treasury would probably run out of cash sometime during the first quarter of the fiscal year, most likely in october or november. secretary yellen, you began exercising treasury's authority to take extraordinary measures to prevent a default back in august, is that correct? secretary yellen: yes. the debt limit -- the suspension expired on august 1, and we began using extraordinary measures to remain under the debt ceiling. mr. mchenry: but those extraordinary measures are just a band-aid for a period of time, right? secretary yellen: well, as i indicated, we expect them to be exhausted on october 18. mr. mchenry: and it it would be a disaster if we did not? secretary yellen: it would be a catastrophe if congress failed to raise the debt ceiling. mr. mchenry: so here's the deal for republicans. democrats control the house and the senate and the white house. and since january 20, the approach of this congress is that they do not need republican
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votes to do anything. that's been the approach. and now they want the political cover in the midst of this massive amount of new spending to have republicans raise the debt ceiling. that's really the request. so here's my question to you, secretary yellen. for the seat you sit in, do you care whether or not the debt limit is raised with republican votes or do you just care if it's raised? secretary yellen: i think it's important that this be done on a bipartisan basis. i think it should be bipartisan in recognition of the fact that both republican administrations and congresses and democratic ones have run budget deficits for most of the post-war period with only a few -- a few years serving as an exception.
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and that requires on a regular basis raising the debt ceiling. it is not about the need to do so -- the need to do so has nothing to do with future spending or tax plans that haven't been enacted -- necessary to pay our bills. mr. mchenry: i understand, secretary yellen. secretary yellen: it's something that republicans and democrats need to share that responsibility. mr. mchenry: secretary yellen, as i said to you on the phone last week, i have been part of every single debt ceiling increase for the last decade. every fiscal consequence of congress. and some of them have been very bad, but i tried to make things better. i have been part of the solution for the last decade. and the call that i received from you last week was the first outreach i've had from this administration to do something on a bipartisan basis. and you called me to raise the debt ceiling. not with a plan, not for a fiscal plan, not for my buy-in but simply for my vote. that to me speaks volumes. now, i'm grateful for the
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outreach from you. but it speaks to the larger issue for the administration. and i don't envy the position you're in. i don't. because the bad strategy from this white house and the leadership of this house and the senate is showing they don't want republican votes. we did bipartisan bills last congress, last congress. in the midst of covid, bipartisan bills. major bipartisan bills. we can work together in a responsible manner, but to ask for my vote the week before it comes up in the house is not in keeping with the reality of the situation. we have the tools, we have the votes to get this thing done through congress. it's just a question of who votes for it. secretary yellen: i would like to point out that in 2017, when the white house and both houses of congress were controlled by republicans and a reconciliation bill was in progress that led to the 2017 tax cuts, the debt
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ceiling was raised and it was done in a bipartisan basis. mr. mchenry: and in 2011 and 2013 i voted for a bill that president obama signed. so i'm willing to participate in a bipartisan way. it's a question of who votes for it and the circumstances of $7 trillion of new suspending this year. ms. waters: the gentleman from new york, mr. meeks, who is also the chair of the house committee on foreign affairs, is now recognized for five minutes. mr. meeks: thank you, madam chair. and i got to just say initially, i'm kind of shocked that the ranking member mchenry saying, of course, he wasn't asked for a vote, something that will determine whether or not the american people, democrats and republicans will suffer if we don't raise this debt ceiling. and i've been here for 22 years between whether it's democratic or republican administrations. and each time when it came to the credit of the united states and our economy, it didn't make
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a difference to me whether or not the administration was democrat or republican or whether or not someone called me to ask me for my vote. i'm here trying to do the best thing for the american people, not play politics. and when it comes to the credit for the united states and the economy moving over -- moving on, it's not about who's the president or who called and asked me for a vote. it's about doing the right thing for the american people. democrats and republicans. and moving up this debt ceiling, making sure we don't default on our debt is essential to that. and it's essential to our responsibility as members of congress and not to say, oh, nobody called me for a vote. that's simply not our responsibility. now, madam secretary, there are consequences if we don't pass and increase the debt ceiling.
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i mean, like, increase the cost of borrowing for a home or car or through one's credit cards of which folks will say on the other side, i don't have to deal with that, but then it's going to be -- play politics with it. so i was wondering, as we are recovering from this economy, what setbacks will a default on debt cost american households, be they democratic, republican, independent, nonvoters, what cost would it cost us? secretary yellen: well, i think it would be catastrophic for the economy and for individual families. nearly 50 million seniors could stop receiving social security payments or see them delayed. our troops would not know when they would get their next paycheck. we have 30 million families who rely on the monthly child tax
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credit, and they would not receive that relief, at least on time. and as we saw in 2011 when the debt ceiling came -- was raised at the absolute last minute and investor and consumer confidence was shaken in the run-up, we saw a marked increase in interest rates, a marked drop in the stock market, and when u.s. interest rates go up and the credit rating of the united states was downgraded, that means higher that means higher interest payments for everyone who has alone, whether it's a small business homeowner with a mortgage, a credit card payment, anyone who borrows would see higher interest costs of their debt. >> we must raise the debt ceiling for the benefit of the american people. i don't care what party they're from. let me go to chairman powell. now, the fed is rightfully
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focused on controlling inflation while boosting employment with the aim of guiding our economy back to its pre pandemic normal. and at the european central forum, you mentioned that it's urgent for the fed to resolve the tension between these two policy goals, since taming prices by raising interest rates would weaken our labor market as the fed considers its monetary policy. how will you manage the trade offs between controlling prices and ensuring full employment? and how do you plan to resolve the tension between the two that you spoke on on wednesday? >> that that's the very difficult situation. we find ourselves in almost all of the time inflation is low when unemployment is high and so interest rates work on both problems. problems now.
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so right now we are we're far away from, we think away from full employment, so that gives us an incentive to keep accommodative policy strong to keep accommodative policy in place. inflation is well above target. you know, we have an expectation that that high inflation will abate because we think the factors that are causing it are temporary and tied to the pandemic and the reopening of the economy. what we say is we just have to balance the two, but i would say our expectation is that inflation will come down and we won't ultimately face that difficult trade off of having the two goals intentions. >> right, thank you. the gentlewoman from missouri, mrs. wagner, is now recognized for five minutes. >> i thank you madam, chairwoman and secretary yellen. thank you for finally taking the time to appear before this committee. i know that the ranking member has formally requested your presence at least twice within the last few months with no response. last week, treasury released the latest data on its emergency rental assistant assistance programs. as you know, $46 billion covid
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dollars was made available to help impacted low-income families pay off their back rent and to help make mom and pop property owners whole in missouri second district and beyond. after more than nine months and an entire summer of republicans pushing treasury, your own data still shows more than 83% of your funds remain unspent, while millions of renters and property owners remain stuck in limbo. it certainly doesn't sound, ma'am, like it has been in your words, an expedited program. now, i have a series of yes and no questions, because my time is limited. i would appreciate and will insist upon a simple yes or no, ma'am. first madam, secretary, do you consider treasuries emergency rental assistance program to be a success?
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yes or no. >> yes. >> amazing. are you aware that in december of 2020, when congress appropriated the first $25 billion, funds were to be used by december of 2021, yes or no. >> yes. >> do you know why congress set that initial deadline to get to -- -- that initial deadline? >> to get it out. >> to get it out the door to renters and landlords. asap. are you aware the justice past march democrats extended the time frame for emergency rental assistance program to the years 2020, 2022, and are you ready for this, 2025, for the two respective programs? yes or no. >> yes. there is significant need and it
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will continue. >> in 2025, ma'am? i continue. does extending the program's deadline incentivize grantees to get funds out by extending this? does it doesnt incentivize grantees to get funds out the door? yes or no. >> we're doing everything we can, and the states and local. >> is not fast enough. >> to get it out the door. as i indicated in my opening statement, in response to a previous question, the infrastructure to do this had to be built and the pace at which there was -- >> there was plenty of time. the fed programs. the ppp programs. all of those expeditiously got money to people who needed them. this is a complete and abject failure. i want to read a quote to you from a treasury official to journalists on september 24th, and i quote, "to simply take the
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amount of money that has gone out in the first five or six months and then compare that to what was allocated for for five years is just a meaningless number meaningless number." meaningless number. secretary yellen is getting money out the door as soon as possible. a meaningless gauge, particularly when we are talking about a pandemic related eviction crisis. yes or no. >> our objective is to get the money out. >> well, it hasn't gotten out the door, 83% of it is still sitting in treasury coffers. my constituents in st. louis and i do not find it meaningless when we are talking about emergency assistance meant to keep individuals and families in their homes today, during a pandemic, not years and years later, out to 2025. moving on. chairman powell, with spiking energy prices and bottlenecks in supply chains around the world.
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there are concerns that there is a rise in inflation. it may not be as transitory as you originally predicted, given our current economic situation. and the fact that democrats want to pass trillions and trillions more in spending. what makes you believe we will not see more sustained, higher inflation, especially when we've seen a significant consumer price increases, etc., etc.? >> so, as i mentioned in my opening remarks, we do think that inflation will remain elevated before the supply bottlenecks. the supply side bottlenecks are resolved, and we think that it will then move back down toward our toward our goal timeframe. -- our goal. >> timeframe? >> these are nothings that we control. >> it seems pretty dug in. >> i would say that this is a function of of supply side bottlenecks over which we have no control. but i would say that we do expect in the first half of next year to see some relief depending on the bottleneck in question, and inflation should move down over the course of not
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-- over the course of. >> not a time to spending trillions and trillions of dollars a year back. >> the gentlewoman from new york, mr. velasquez, was also the chair of the house committee on small business is now recognized for five minutes. >> thank you, chairwoman. i would like to call up -- >> ms. velasquez, we can't hear you. >> can you hear me now? >> you seem to be unmuted, but the sound is not coming through beer we will. >> can you hear me now? >> no, we can't hear you. would you try it again, please? >> okay, can you hear me now?
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>> yes. >> okay, thank you. secretary yellen, i would like to pick up with what chair waters was asking on iraq. can you please explain the type of resistance the treasury department continues to face from some state and local government? how is the treasury department trying to expedite this funding to tenants and landlords who needed the most despite these challenges? >> well, in cases where states and other grantees launch their programs late, they faced an array of complications. the most significant involved obtaining the necessary authorizations from a grantee's governing body. and there were procurement
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challenges that arise, when grantees have to engage outside partners and contractors. we have received a lot of feedback indicating that the guidance the treasury has released really does give state and local programs the tools they need to move forward expeditiously. and i'd also note that we've been partnering with hud, to send out technical experts who can help grantees accelerate their programs and help them document best practices. >> thank you. so, early on, new york was one of the lowest performance states in distributing funding. but significant progress has been made, and the state now ranks first nationally with more than $1.2 billion dollars in
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payments made or obligated. unfortunately, more assistant is needed. so the treasury department is required to start relocating access -- reallocating excess first round funds at the end of september. can you tell us how this process will unfold? >> well, thank you for that question. our objective will be tomize the -- to maximize the number of eligible households that are served, by ensuring that the resources of the program are appropriately aligned with each grantee's needs and ability to deliver the assistance. and reallocation will be really critical in achieving that objective. >> [indiscernible] >> we will identify localities that have excess funds. we will use clear expenditure benchmarks that increase over
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time. we will strive to keep reallocated funds within the same state, when it's possible, and afford a venue for voluntary reallocation among grantees. >> thank you. thank you. under the american rescue plan, secretary yellen, democrats reauthorize the state small business credit initiative, providing $10 billion in federal funds to support up to 100 -- $100 billion in new loans and initiatives for small businesses through state territory, tribal, and local government. under the program, potential grantees must submit a completed application by february. how is the treasury department conducting outreach and working with local governments to ensure completed applications are submitted on a timely basis? >> well, thank you.
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this is a very important program. our staff have contacted each state individually to follow up on the application notice. to see if there are questions or if help is needed with uh set up -- with set up webinars. we're assisting in program design in helping to develop programs with respect to tribal governments. we've been conducting extensive outreach. >> thank you. chair powell, would you agree with what secretary yellen is saying, regarding raising the debt limit at that ceiling? >> yes, i think it's essential the debt ceiling be raised in a timely fashion, so we can pay our bills, and i think the consequences of that failure to do so would be potentially severe. >> thank you. chairwoman, i yield back.
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>> thank you very much. the gentleman from west virginia, mr. mooney, is now recognized for five minutes. >> thank you, madam chair. secretary yellen, do you believe that president biden's reconciliation package proposal, the one with the $3.5 trillion dollar in total spending, will cost zero nb -- and to be fully paid for? >> yes, i do. we have a full program that the president has proposed to raise revenue that would cover the costs of the program. in the president's budget, of course. there are changes under consideration, as this goes through congress, but there are a host of revenue raisers and i do believe it will be actually deficit reducing, beyond the 1st 10 years of the program. >> okay, thank you.
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i mean, yesterday, speaker pelosi claimed the same thing -- that the democrats reconciliation proposal would cost zero. that would be paid for. president biden said the same thing in a tweet earlier. so call me skeptical. but given the record of the democrats in congress here on runaway spending, i just don't believe it. and i'm not the only one. the washington post called president biden's claim that the bill would be budget neutral, misleading, and gave it a score of two pinocchios. we're passing bills out of committee. i understand without even cbo scores, congressional budget office scores. so we don't really know and that -- we've not done that before. that's a change in our policy. the truth is, we're spending an alarming rate in this country, since the covid-19 pandemic began last year. the federal government has spent more than $5.3 trillion $16,000 for every american. -- $5.3 trillion on relief, $16,000 for every american. our ballooning debt is not some
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abstract problem, out of control spending proposed by biden and being rubber stamped here in congress will leave a mess that our children and grandchildren have to clean up and pay for. decisions we make today, 20 or 30 years from now. our children and grandchildren have to pay this money back. so i'd like to move to a different aspects of the package. one of the attempted pay fors in the package that's alarming to me is tax increases will make our economy less competitive. my question is, is the proposed corporate tax rate in the house reconciliation bill is 26.5%. this actually moves us higher than communist china's corporate tax rate of 25%. we're gonna have a higher tax rate than a country that has been taking our jobs and has a communist ideology. can you explain why raising our corporate tax rate above china's is a good idea? if you think it is? do you think this would hurt our
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competitiveness with china and around the world? >> our our companies are the most competitive and profitable in the world. the effective tax rate that they pay is very low. and recent studies suggest that among advanced countries, the united states has an effective tax rate that is among the lowest of countries around the world. we can certainly afford to um -- we can certainly afford to take the corporate tax rate up -- up to 26.5% without negatively impacting firms' performance. we proposed to do that in the context of an international
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agreement that has been voted. what support. it received the support of over 130 countries worldwide to establish global minimum tax rates that will apply to other country's firms. right now, the united states is the only country with the global minimum tax rate on its multinational corporations. we propose to raise that, but at the same time, other countries will raise -- will raise there much more. that means that the competitiveness of american firms will be enhanced and we will be reducing the incentives that exist in our tax law right now to export jobs and profits. thank you. >> i don't know much time, i have left. thank you. one thing we've learned over the last several years is we need to take the threat from china more seriously here in america, making america less competitive. and despite what you said, raising our corporate tax rate, it makes us less competitive in our economic adversaries like china. it's too high of a cost for all this spending, running up these massive debts that our children
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will have to pay back for this spending is just not right. so despite what we're hearing and what many are saying, this reconciliation package will be expensive in terms of dollars and frankly to the future of our competitiveness in this country -- racking up this debt. and i just fear we're going to pay for this for years to come. so thank you, madam. >> thank you very much. the gentlewoman from ohio, mrs. beattie, who is also the chair of the subcommittee on diversity and inclusion is now recognized for five minutes. >> thank you, madam chair, and thank you to our witnesses today. certainly, as i've been listening, a lot of descriptive words were used, everything from
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dysfunctional to meaningless, to irrational. well, i could think of a lot of other words that i could use, but certainly those words are appropriate to describe what democrats inherited from the last administration. whether that's the irresponsibleness of the past administration, whether it's all the debt that was incurred because of the trump administration. i think those words are appropriate, madam chair, by my colleagues. we're very misdirected. in my opinion, you should look at your own house and home before throwing stones, and especially when they're not appropriate. now, with that said, to our two witnesses, they have been very responsive. i say thank you, and let me get in quickly to my first question on the federal reserve. certainly, you know, mr. chair, we've had a lot of conversations about diversity.
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i want to thank you for responding and continuing to increase your diversity. but as you know, there recently -- recently, there's been two federal reserve presidents who have left, quit, retired, bottom line, immediately leaving or gone from the bank of dallas in boston. -- dallas and boston. so my question is, you know where i'm going with this, i would certainly be hopeful that we could increase our numbers and diversity beyond raphael bostic, by asking that we use the baby rule pattern after the rooney rule to do as we did with the atlanta federal reserve president and make sure in that interview process, we have a
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-- we have an african american or female. do you have any comments on that? >> i do. thank you, ms. beatty. so i can absolutely guarantee you that we will work hard in both of those processes to find and give a fair shot to diverse candidates for those two jobs, as we do. and it will be a big focus of both of those processes. >> thank you. secretary yellen. you will recall, back in 2016, secretary lew made his historic announcement that harriet tubman would be the face on a $20 bill. i sent you a letter in july, early july, along with my colleague, requesting the committee to move forward with the obama administration's plan to put her on the face of the $20. i understand your staffs have been in discussion on this issue and i was hoping to get a high
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level overview and to ask you if there's any comment you can make on this. >> well, thank you for that question. we believe it is very important that our notes reflect the history and diversity of our country. and i couldn't possibly think of a better way to honor harriet tubman's legacy in her courage and fighting for the freedom of enslaved people in women's right to vote than seeing her on the on the $20 bill. issuing notes, as you know, is a very lengthy process. it involves collaboration, among a number of different agencies and it's necessary to design new security and counterfeit features. and unfortunately, that means the lead time to redesign new bills and ensure their security is long.
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>> madam secretary, i'm gonna go to my rental question, because the clock is down and we will follow up with your staff. just prior to the administration coming into office. the former administration rushed the regulations and questions for the rental assistance program. those regulations were so unworkable. that states like my state, ohio and others, were telling me that they weren't even sure if they would be able to distribute rental assistance funds under those guidelines. isn't it true that the secretary under the new administration had to spend weeks going back and redoing all of that to make sure that the funds could actually [indiscernible]? >> that's correct.
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>> thank you. i want that to go on the record, some of my colleagues wanted to drill down and make our secretary you answering those questions. -- our secretary answer those questions. thank you. >> the gentlelady's time has expired. mr. davidson is now recognized for five minutes. >> thank you. i think our witnesses and our colleagues appreciate this hearing. chairman powell, you have extensive private sector experience. and of course, as chairman of the federal reserve, you have a role in bank regulation. do banks or lenders increased lines of credit unconditionally? isn't there some level of underwriting involved? wooden banks have problems with their regulators if they did know underwriting for a line of credit? >> yes, no, of course, they are very careful in the lending that. >> well, i would submit that it's perfectly rational for congress to expect something in exchange for an increased line of credit. the plan presented is atrocious. it will never balance, it
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doesn't even propose to balance in 15, 20, 30, 100 years, there's no plan to quit bankrupting america madam secretary. now, thankfully, under the federal reserve's leadership and 13-3 authority, we had some facilities in place to prevent real financial calamity. so recently, recently, the subcommittee on national security, international development, and monetary policy held a hearing to discuss the federal reserve's lending facilities under section 13-3, and how those facilities were utilized prior to and since the passage of the cares act. you know, some of my colleagues, i fear, you know, don't understand even how some of the products like bonds or margin calls work, as they've criticized programs where there is literally no by side in the market.
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and of course, the federal reserve stepped into created by side and support the markets. i've heard colleagues say, well, there are only two loans under the municipal liquidity facility. for example, while there were hundreds of loans, hundreds of billions of dollars of credit extended. how important are the 13-3 provisions, you know, to the financial stability of our country? >> they're very important, but they're reserved for real economic emergencies, financial emergencies. and as you point out, they functioned i think very well in the crisis as backstops that we put them in place and the private capital markets started working. that's success. that's what success looks like. >> do you think 13-3 should ever be used for a political goal or something to fulfill a dual mandate rather than an emergency? >> actually, no, i don't. i think the current institutional arrangements are very good. i think we need the approval of the treasury secretary realistically, we work with treasury and and we're constrained for very specific circumstances, unusual and exigent circumstances. there are a number of tests in
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the law, and i think it's an arrangement that works. >> thank you. you know, recently, federal reserve governor michelle bowman gave a speech in which she discussed the evolution enhancement of bank supervision, particularly during the covid pandemic. and in that speech, she stated that the fed avoided overreacting and instead approached supervision anymore measured way that allow banks the flexibility to work with their customers. there are a range of topics she's addressed and others have with bank regulation, and just will share this from her paper. she says the goal of this initiative is to ensure our supervisory approaches accommodate a much broader range of activities, while ensuring we don't create an unlevel playing field with unfair advantage or unfair disadvantages for some types of firms versus others.
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and for that reason, i'm working on a bill that would study the evolution of consumer finance and the viability of updating our prudential regulatory structure through consolidation of bank supervisors. of course, there's some level of coordination the fed does. but could either of you give an opinion on scenario where the united states consolidates banking supervision? >> that's something we have to look at. it is something that does tend to get looked at over over intervals, and it hasn't happened. each institution has a different role in our society. i know we have more bank regulators in other countries but we do seem to work pretty well together. >> thanks for that. secretary yellen. obviously, there are a lot of provisions and a large void in the digital asset space. in your opinion, what is a digital asset for purposes of tax reporting? >> for purposes of tax reporting? i believe the irs is issuing -- will issue detailed regulations that will answer that question
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for the purposes of tax reporting. >> thank you. our law hasn't really kept up with this, and frankly, it's led to regulation by enforcement -- of course with the sec and a host of others. i appreciate it when you were chair of the fed the faster payments initiative that got launched. a lot of this involves payments but so much in the digital asset space isn't a currency or a payment system. there are a gazillion use cases and i'd be ashamed to see the regulatory framework curtail that. and i look forward to seeing fintech flourishing in the future. i yield. >> thank you. the gentleman from florida, mr. lawson, is now recognized for five minutes. >> thank you madam chair, and ranking member mckendry. chairman powell, unfortunately, we have seen firsthand the impact of climate change.
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all becoming worse. as we experience mellow, severe, and frequent hurricanes and risk of rising sea level. i'm glad to see greater attention given to how we can better assess and manage climate-related risks. it is my understanding, many financial institutions conduct scenario analysis to assess credit, market, liquidity, and risk related to transition, transition risks, physical risk, like hurricane flooding and wildfires and drought. scenario analysis a good tool? could you please discuss the difference between scenario analysis and stress tested? what other tools did the federal reserve have to assess climate related risks? financial risks? >> thank you.
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so our role of course is to make sure that the financial institutions we regulate and supervise understand and can manage their risks, including the risks from climate change. the financial risk from climate change. scenario analysis is almost certainly going to be one of the principal tools for doing exactly that. it's very different from the stress test. scenario analysis at this point is about institutions really understanding what these risks will be, how they will develop over time. what are the channels through which they will develop. it's sort of early days in understanding how those risks will interact with the economy and with the financial system. scenario analysis is meant to help do that. and we have the federal working on developing a program of scenario analysis. many of the large institutions are doing so, as i mentioned, quite different from stress tests, which are, which have consequences for distributions and that kind of thing. i think overall, we see our job, as i mentioned, as making sure that these financial institutions understand the
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risks and can manage them. and that's just a lot of basic supervisory tools, understanding what they're doing, and have the processes in place and the analytical tools in place and the focus, and that's what we'll be doing. >> okay, thank you. secretary yellen, i am concerned that small business particularly communities of color will have lasting economic damage coming out of the pandemic. the american rescue plan extended assistance to small business by authorizing a 10 billion dollar program. we have $2.5 billion of these funds set aside for minority owned business. the florida department of economic opportunity is waiting. for the release of applications. requirements and program guidance. when can we expect the guidance will be released? and can we share our treasure
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plan to ensure that the system goes a small business that we highly be highly impact by the pandemic? >> it's the state small business credit initiative is an extremely important program and we are in the process of implementing it. we will absolutely make sure that it reaches small businesses that have been very severely affected by the pandemic, and certainly in underserved areas and communities of color. i think, you know, that congress required that treasury provide funds to states based on the extent of job losses that had been suffered. and it sets aside significant funds for businesses that are owned by socially and economically disadvantaged individuals.
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so, we will make this funding available and provide technical assistance. working with communities to make sure that it's used as intended. >> okay, thank you very much. and with that, i yield back. >> the gentleman yields back. the gentleman from north carolina, mr. bud, is now recognized for five minutes. >> thank you, chairwoman and witnesses. the federal government spending and not even talking about debt, but just the spending here. it's expected to reach record highs this year. 2021 democrats are trying to dump trillions of what i believe is very reckless spending into an already inflationary economy. so as a percentage of gdp, our public debt has reached 125% in the second quarter. secretary yellen, very briefly, do you believe that there is a level of debt that is unsustainable in our economy?
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and if so, what is that number? and you can share that with me either in dollars or as a percentage of gdp. >> well, i believe that the debt held by the public relative to gdp is around 105%. and that's a number that is higher than we've had a during most of the post war period in the united states. but it is not a number that i think is fiscally irresponsible or unsustainable, interesting madam. >> secretary, do you have a number that is the threshold that is irresponsible there in percentage or in dollars? >> one way that i would judge that is by looking at the interest burden, the real interest burden on the debt. that really is the burden, a better measure of the burden it places on our economy.
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burden has actually been negative. interest rates have been exceptionally low. this dates back to before the financial crisis in 2008. and most economists believe that there are deep structural reasons why low interest rates are likely to continue, even if nominal interest rates move back toward normal levels that interest burden -- >> i want to be aware of the time constraints. thank you. secretary, the interest rate was zero. what is irresponsible in percentage or dollars? >> well, i think that if the real interest burden stays as if --as article norms. of interest rates r0? >> let's say i pick one of those
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and let's say what is irresponsible as a as a percentage or total dollars of debt. >> well, if interest rates are zero and negative in real terms, certainly we could have a substantially higher burden, although there are always risks pertaining to the path of interest rates that need to be taken account of. >> i understand, thank you. let me shift gears a bit. and one of my recent telephone -- in one of my recent telephone town halls, i asked a poll question to those who are able to join me, and said, have you or your family noticed a sharp rise in prices for food, gas or electricity in 94% of the respondents and it was a good -- in electricity and 94% of the respondents and it was a good sample size. they said yes. inflation is eating away at the buying power of every single fourth killer nana. -- every single north carolinian. bottom line, inflation is a tax on working americans. so chairman panel, i know that you've called the inflation that we're dealing with transitory and boy, i sure hope you're right. but what would you tell people back in my district, especially
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those on fixed incomes when they are struggling to make ends meet right now, what would you tell them? >> i would say that we are dealing with a a very unusual event. that's really part of the covid broader covid event. the economy is now reopening and that we're hitting supply side bottlenecks for example. it's hard to manufacture cars without semiconductors which are in short supply. so car prices are going up and lots of prices are being affected by supply side constrictions. we expect that those will abate and that they will lessen and over time inflation will come back down. exactly when that will happen is not possible to say. but i would say we should be seeing some relief in coming months and over the course of the first half of next year. >> i hope you're right. the folks i talked to back in north carolina are doubtful of that, but i do hope you're right. chairman powell, next question. so in a july hearing before this committee, you were asked about cbdc, the central bank digital currencies and their impact on stable coin and other cryptocurrencies. and you stated, and i think
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quote you correctly here, you wouldn't need stable coins, you wouldn't need cryptocurrencies if you had a digital u.s. currency. so, mr. chairman, as a matter of policy, is that your intention -- to ban or limit the use of cryptocurrencies like we're seeing in china? >> no, and i immediately realized i had misspoken there. i didn't mean that -- take the word cryptocurrency out of that sentence. and i would say fairly widely understood that central bank digital currencies could perform some of the -- >> no intention to ban? >> no intention to ban them. but there, you know, the stable coins are are like money market funds, they're like bank deposits. but there to some extent outside the regulatory perimeter and it's appropriate that they be regulated. same activity. same regulation. >> thank you. i yield back. >> thank you. the gentleman from illinois, mr. kasten. also the vice chair of the subcommittee on investor protection, entrepreneurship and capital markets is now recognized for five minutes. >> thank you, madam.
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thank you so much to our witnesses. we are truly fortunate to have you at the helm of steering us through some past and future crises. i want to talk about those. but before that, i want to just talk about manufactured crises, which i'd like to avoid -- congress, everybody on this call in some fashion has voted to approve our spending. congress, everybody on this call in some fashion has voted to decide how much of that spending will be paid with tax revenues. and then somewhat uniquely we give ourselves the authority to decide how much of the residual which is paid with debt we are going to pay for. it's political suicide. i am a cosponsor and supporter of my friend mr foster's bill h. r. 3305 to end the default act and take that tool away from congress because congress has proven that we cannot be trusted with that responsibility. secretary yellen, without getting into the specifics of mr. foster's bill. would you support simply eliminating the debt ceiling so that we don't have to deal with
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this in the future and can focus on real crisis? >> yes, i would, because i believe when congress legislates expenditures and puts in place tax policy that determines taxes, those are the crucial decisions congress is making. and if to finance those spending and tax decisions, it's necessary to issue additional debt. i believe it's very destructive to put the president and myself, the treasury secretary, in a situation where we might be unable to pay the bills that result from those past decisions. >> thank you. i am glad to hear it, and we'll hopefully try to get that through congress moving on to past crisis. chair powell. i think all of us and all of our districts are hearing about
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labor market tightness and i think a lot of people are explaining that labour market tightness justify pre existing political biases. as you know, and we've talked about, we saw unemployment go from three and a half percent, 10%, back down to 5.2%. but i'm much more concerned that workforce participation went from 63 to 61 and has stayed low. can you just explain for the committee briefly what is driving the reduction in workforce participation and what if anything we can do to get that number back up to make sure that employers have access to the folks who are ready and able to work? >> i'd be glad to. so the two biggest parts of that are caretakers and retirees, so that makes up a lot of the shortfall from where we were with labour first participation before the pandemic crisis and within caretakers, some of that is going to be connected to schools not being opened or people who are afraid to go into an unvaccinated workplace and are afraid of covid and things
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like that, and other reasons. so that's a part of that, and that should abate over time in terms of the retiree piece. it's not clear about that. i would say the lure is that people don't come out of retirement, except i would say all during the last few years of the very long expansion that ended with the pandemic. we were constantly surprised to the upside on participation, including older people staying in the workforce longer. so i think my prior would be that we will get back a big chunk of the so called retirees and that we should be very open minded about how much labor force participation can go up. the united states has low labor force participation compared to our advanced economy piers. -- economy peers. this is not something that has to be that way.
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it's not something that's good. >> well, thank you for that. certainly when i talked to folks in the district, everybody kind of acknowledges that it's that it's the boomers who retired, who are creating a lot of their skills gap and that's a harder challenge. i'm going back to you, secretary yellen, i think subsequent to your first identifying of climate change is an emerging threat, president biden issued an emergency order on climate financial risk, directing agencies including yours to analyze and mitigate risks that climate change poses to the financial system and a little time we've got left. can you give us any updates on status milestones and deliverables that the treasury department has in response to that executive order? >> yes, we were in the process of completing the report and we expect to issue it in late october or early november within the 180 day timeframe. and what we will be doing is looking at the work of individual regulators to incorporate climate change risks
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into their regulatory and supervisory activities, and describing some of the challenges that they face in carrying that out. >> well, thank you. i'm out of town. i will clear my calendar to allow some time to read that week and i yield back to the chair. >> thank you very much. the gentleman from tennessee. mr. kostov is now recognized for five minutes. >> thank you, madam chair. for calling today's hearing and thank you to the witnesses for appearing. secretary yellen. if i could, there was an article in the wall street journal dated september 15. the headline is, "yellen, irs pushed democrats to require banks to report taxpayer annual account flows." now, when you read the first two paragraphs, just briefly, treasury secretary janet yellen and irs commissioner charles reddick pressed lawmakers wednesday, give the internal -- to give the internal revenue service more information about taxpayer bank accounts as the
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biden administration tries to salvage its struggling tax compliance proposal. in letters to lawmakers, the administration officials again asked congress to require banks to report annual inflows and outflows from bank accounts with at least $600 or at least $600 worth of transactions. a proposal aimed at letting the irs target its audits more effectively. it would generate about $460 billion over a decade to cover the cost of democrats planned -- democrats' planned expansion of the social safety net and climate change policies according to the administration. those are the first two paragraphs of the story. that's an accurate reflection of what you've done, correct? >> yes. we have proposed both augmenting the resources of the irs, so that it can hire qualified auditors, and augmenting the
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information flow so that the irs gets insight into opaque sources of income. and both together, we believe can serve to greatly address the $7 trillion estimated tax gap that we'll see in this country. >> and madam secretary, you would tell my constituents that they should not have any privacy concerns about what you're trying to do? >> well, they should not, because this is a simple matter for banks that already file 1099 forms. >> the irs licked information about taxpayers to propublica that was published. their entire tax returns, their entire tax information, on the record. you tell my constituents and all the other members here, their constituents, that they should have no privacy concerns about
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banks reporting $600 or more and -- more in account value to the irs. >> what we've asked to have read -- have reported is the aggregate inflows and outflows from these accounts each year. on an annual basis. two additional pieces of information, not transaction level data. and look, every wage earner in this country has a wage income -- >> at least $600. is that a correct statement? >> well, we want to make sure that this [indiscernible] by expanding. >> those are values of $600. the wall street journal is accurate, correct? >> we did propose that. i don't believe it's an invasion of privacy. and look, the irs gets a great deal of information that it
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needs, in order to make sure the taxpayers comply with the tax code. it receives individual information on wages and salaries that are received on dividends, on transactions, on -- >> pro public a received this information from the irs about the individual taxpayers. how did propublica obtain the information from your agent from the irs about taxpayer information? >> independent agencies and law enforcement are currently looking into that and attempting to figure out how that occurred. that is clearly a crime and an utterly unacceptable thing. and it will be prosecuted, when it's understood. >> your proposal purports to give more information to the irs drilling down to accounts of $600. >> we want to make sure that
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individuals can't game the system by opening multiple accounts, in order to evade the -- >> and you give the irs all this other information about individuals. last question. do you support a move to the department of treasury from homeland security of the united states secret service? >> i haven't taken a view on that. >> thank you. i yield back my time. >> the gentleman from new york, mr. torres, is now recognized for five minutes. >> thank you, madam chair. i'm appalled by the republican gamesmanship around the debt limit. i heard a republican colleague on this committee complained about not receiving a phone call from the administration or complain that we, the democrats, are too partisan. the republican argument seems to be the following, that since the democrats have been mean to us, we are going to sabotage the full faith and credit of the united states to exact revenge against those who have slighted
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us. and that kind of pettiness has me wondering, are we in high school, or the united states congress? now, it has to be said that the debt limit, raising the debt limit, would not authorize new spending. it would simply pay the debts of previous administrations, including the trump administration. the republicans cannot pass $2 trillion worth of tax cuts and then refuse to pay back the debt that made those tax cuts possible in the first place. that, to me, is worse than fiscal responsibility. that's fiscal hypocrisy. and i support congressman foster's legislation abolishing the debt limit so that we're no longer at the whims of bruised egos, slighted by unreturned phone calls. suppose for a moment it is october 18. the use of extraordinary measures is exhausted. what happens on october 19? we're simply in an impossible -- >> we're simply in an impossible situation, in which it will be
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impossible for treasury, on that day or a few days thereafter, depending on, you know, we'll have very limited resources that will be run down quickly. we won't be able to pay all of the government's bills. the treasury has been directed by congress to pay all of the government's bills, to use the tax revenues that are available -- and without that, to issue debt, and the debt ceiling will make it impossible for us to do that. >> and the damage could be irreparable. >> well, yes, and we've got a taste of that in 2011, in 2011, when uh, the debt ceiling wasn't raised until the last minute. the fact that congress might not raise the debt limit and call into question whether or not -- what is regarded as the
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safest asset in the world, dollar denominated u.s. treasury debt will actually be repaid is simply a catastrophic event. >> i want to follow up on an exchange you had with congressman bud, who asked you about the debt to gdp ratio? the u.s. debt to gdp ratio is over 100%. what is japan's debt-to-gdp ratio? >> excuse me? >> what is japan's debt-to-gdp ratio? >> it is about 250%. >> the highest in the world. >> yes, it is. >> and japan is regarded as a successful economy. >> it is. and japan also has low interest rates. >> and i agree with your premise that the cost of servicing debt is a more reliable measure of debt sustainability than the debt to gdp ratio. and if we were to breach the debt limit as republicans would have us to, it would actually
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-- would actually raise the cost of borrowing and reason for streets payments. it would make our debt murder less sustainable, -- debt burden less sustainable, not more. >> that is absolutely correct. you know, it would be regarded as riskier. we might suffer again a credit downgrade and coming out of that, we could expect to see higher interest rates on treasury debt and on the death -- on the debt that private individuals have mortgage, debt, credit card debt, loans and everything else. >> i want to quickly ask you about a title for loan under the cares act. during the term administrations, the largest recipient of the title for national security alone was a trucking company previously known as yellow corporation. do you think a nearly bankrupt trading conduct whose conduct is the subject of a doj lawsuit for overcharging should have received the national security loan from the trump administration? >> i'm afraid i don't know the details of that and i would be glad to have our stuff get back to you on that. >> and i want to be clear that this loan is the subject of scrutiny from the bipartisan
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congressional oversight commission and this select subcommittee on the coronavirus. >> -- >> you said that at the end of september the funding for the emergency rental assistance might be reallocated. up to how much funding? >> i can't give you a dollar estimate, but the objective would be to shift it to areas where there's need and proven success in getting it out. >> and if the use of extraordinary measures is exhausted on october 18, what does the federal reserve do you -- reserve due on october 19? what actions do you take in response? if any? and that'll be my final question . >> i guess i would just say no one should assume that we can really do much. if there were to be a default on her obligations. no one should assume that the fed or anyone else can shield -- fully shield the american people from the consequences of that. >> the time has expired.
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>> my time is expired. >> the gentleman from indiana, mr. hollingsworth, is now recognized for five minutes. >> well, good morning, i'm going to ask most of my questions to secretary yellen, first and foremost, i want to associate myself with the comments that mr. kostov made. i love serving on this committee. i have a great time working on the policies that emanate from this committee, but rarely does something that this committee do lead to questions in the grocery store, questions at convenience stores, and questions around my district. but i have to tell you the proposal that has been put forth about expanding the amount of information that the irs is going to get on private bank accounts, it's been something i've been asked about at parks, at grocery stores, at convenience stores around the district. this has people deeply afraid about the emergence of an apparatus that can be used against them. so i want to better understand with specificity what is being proposed, because what i saw in the proposal as circulated by treasury was extremely generic
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and somewhat incongruent with what i heard today. you said to mr. kostov that the only things that will be reported to the irs under your proposal is the gross inflow and the gross outflow from that particular account in a given year. is that accurate or inaccurate? what you have requested. >> the proposal put forward by the administration requested a bit more information than that. but what is under consideration now, in reconciliation, would be limited to those two pieces of information. and this would be what you should tell people who ask you about this in the park. is that right now, much of the -- the time of the irs is avoided into taxpayers that have relatively low incomes. and we know that the tax gap is
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something that comes from opaque sources of income and from high income individuals. >> i need to tell my -- >> audit rates on individuals earning less than $400,000 would not increase. this would. >> wait a minute, wait a minute. they're not worried about the audit rate. they're not worried about the audit rates, there were about yielding their privacy, yielding their transaction history to a federal government. reclaiming my time. to a federal government that has shown itself time and time again -- mobilizing that information against individuals, against organizations, and against businesses, has shown itself incapable of protecting that data from bridges. -- from breaches by nationstates. excuse me, reclaiming my time, this is deeply concerning to them. so forgive me, if i won't go
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back to them and say, don't worry, despite all evidence to the contrary about their past history, the federal government really means it. when they say they're going to respect your privacy, when they intend to build firewalls around this enormous database of personal information to them. and by the way, which you brought up, we're doing it for a really good purpose. we're doing it for a really good purpose, forgive them if they don't believe that the government is showing up on their doorstep to ask about the inflows and outflows from their personal accounts at a very diminimus level and that is going to be used for only their good purpose. >> there is no transaction level data that would be reported to the irs. >> clarify what you mean by a bit more data then. when you said it's a bit more. what does a bit more mean? >> the proposal by the administration that was originally put forward requested some additional information, particularly about businesses and partnerships.
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but there is no transaction level data per individuals being considered by this kong. >> i want to point out -- >> you know, why is it ok that we have businesses report wage and salary income where companies report dividends? >> reclaiming my time. i think there is some concern about the growing data that this government has proven to handle correctly or at some point ethically to the i.r.s. her testimony two years about how china was able to apprehend in hong kong was by mining financial data about who was scanning their credit card in order to buy subway tickets in those particular locations. this worries americans about the
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federal government who is telling them that for the the greater good, they need to yield more privacy, more of their privacy, more of what they do in their personal accounts because we might be able to close the tax gap for other people who are cheating. with that, i'll yield my time. >> the gentleman's time has expired. the gentlewoman from iowa ms. a spacex ne who is the vice chair on housing community and development and insurance is now recognized for five minutes. >> thank you for being here. it's greet see you. we've heard a lot about inflation. chair powell you mentioned that increases are concentrated in particular areas. think most folks can understand the things like airlines and hotels, etc. industrys that took a hit during
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covid, you know, because people weren't really traveling. this could be an issue there. however, i want to get into some other areas where we've seen price increases. and i wanted to base on this. one of the key causes in the prices of the increase is because of shortages in production issues is that correct? yes, that is correct. there have been semiconductor shortages particularly affecting cars . >> i've heard about supply chain issues and they're unfortunate will, holding back our companies. one told me that their sales are down $120 million because they can't -- their producing to supply chain so chair powell. we've seen that elsewhere too with chips waiting off-shore,
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difficulties moving goods, back and forth, etc., is that correct? >> yes, it is. very correct. it's hard to tell you how long it will take but it will resolve in time. >> the prices have gone up 400% from prepandemic so that's going to add to the cost of anything we buy from china. while we've got you two from here, i'm wondering what are the solutions? >> if we have issues with our ports or with the supply or semiconductors or other component, does it make much sense for the economy to pull back in the ffsments in the bottlenecks or will we do better to expand that capacity? >> that's a question for fiscal poll estimate i will say these are tangled supply chains and it's a combination of other factors to that show shoulder
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bait at times. it would make them more efficient over time. i spoke to chair powell in february. but secretary yellen, you studied labor markets in our career. so when we have constraints does it make sense to limit the number of people able to work or should we instead invest in policies like childcare that help get people into the workforce? >> well, absolutely. i think over the longer term, we've had a problem with declining labor force participation of prime age workers and we proposing paid leave, childcare support. early childhood education supports that would help expand labor force participation in the short run, of course, dealing with the pandemic to mack sure
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schools can operate on a normal schedule. get people back to work will help as well. >> and there are country who is have this in place like early childhood education. do you see economic growth when putting these practices in place? er yes yes, it's been an important source of growth in the united states and elsewhere. once upon a time, the united states just with respect to women's labor force participation had about the highest in the world and that's changed radically in different decades as we fail to expand and provide the level of support for female -- especially for women's labor force participation we've fallen behind other developed countries. >> absolutely. thank you.
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so what i'm hearing it sounds like to me what we're proposing is a solution to some of these inflation concerns and doing nothing would exacerbate issues. i'm not in the business of telling people what they can't buy. what i'm hoping we can find solutions like childcare, like paid family leave, like lowering the cost of prescription drugs to keep money in people's pocks so we can start artificially make -- and other policies will actually help expand the workforce. thank you so much. >> gentlelady's team has expired. mr. rose is now recognized for five minutes. mr. rose: thank you. i want to thank chairman powell and secretary yellen for being
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here today. i'm going to dive right in. i do want to follow-up on a couple of things that have westbound talked about this morning, the debt limit. i feel like there's a lot of misinformation that circulates about this. so to be clear if we suspect the debt limit that would be to allow for the enlargement of the debt, yes some of that for programs that have been in place. but much of that that would likely expand news spanged. i learned a long time ago from my dad not to sign blank checks it seems to me that if we suspend the debt limit that's like signing a blank check and frankly, i'm not willing to participate in signing that blank check. that increase would go simply to cover the -- the current built-in cost of operating the government than that might be a different discussion. but that's not the one we're having and then, secretary yellen, i want to follow up just for a second about the i.r.s. reporting for bank account
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information. i wonder in theed a minutesed a minutes -- i wonder if in the administration, reports would incure from the add reporting expenses to provide this additional information to the ers? ms. yellen: i don't believe it was in the administration's's proposal but we would be glad to work with kong on that to defray any expense. >> well, i certainly know that the existing reporting requirements that banks face is to be -- to be short, onerous and expensive and ultimately, their customers end up bearing that cost i want to shift gears in may, the treasury department imply -- implemented the guidance fund. i continued to hear from cities and county mayors many of whom here in town today. across my district asking for
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additional clarification and flexibility. i wrote a letter to you in july requesting this additional flexibility in the final rule. secretary yellen, can you tell us when we can expect this updated guidance and if there will be increased flexibility included? ms. yellen: we've tried to provide a great deal of flexibility in the guidance we've provide there is an interim final rule that's in place. and states and localities can rely on it. it was out for comment we've received a very large number of comments that we're working through carefully and will work to produce a final rule. but the interim rule -- >> you decided when that rule might be available? >> later this year. but the interim final rule is quite permissive in terms of flexibilities and -- >> we look forward to seeing that. reclaiming my time.
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the committee reported the chair woman's partisan bill that will punish landlords and expose taxpayers to fraud. part of her bill would replace having grantees determine if a household was in fact, an eligibility low income household and congress intended with the self--atestation that would require any of it of the household as true. are you concerned that requiring grantees to accept all atesta ation will increase the likelihood of fraud? >> we're -- we're working carefully with chairwoman waters and want to make sure that we get money out in the most effect ive and rapid way possible while maintaining adequate controls to prevent fraud and abuse.
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>> secretary yellen we've had several hearings regarding the rental assistant program. and yet, you haven't appeared in a single one. and for that matter, you failed to appear at the small business committee hearing as well. so i'm going to yield the remainder of my time to my good friend mr. luka meyer, the ranking member of the small business committee >> thank you, mr. rose. secretary yellen. i'm the small ranking member of the business committee. last december, congress passed a bipartisan bill that required you to testify you on the paycheck protection program that deadline has passed 157 days ago. and you're still not there. you have willfully refused to come before the committee and willfully refused to obey the law so my question is very simple. why can you a member of the biden administration pick and choose which laws you choose to follow? >> i have -- please close your band what and please respond
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off-the-cuff. why can you pick and choose which laws you can respond to? >> i have testified 11 times before congress -- >> please allow the -- >> for seven month, i have agreed to do so. we've not been able to find an appropriate date that -- madam chair -- madam chair, i can show you a list of -- >> your time has expireed. the gentleman's time has expired. >> i yield back. >> the gentleman from massachusetts, mr. lynch is now recognized for five minutes. >> there it is. ok. >> turks madam -- thank you, madam chair. [indiscernible] >> excuse me, mr. lynch, please turn on your microphone.
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>> i apologize to ms. adams. first of all, as someone for the past two years has worked with both republican and democratic administrations to -- to allow our government to meet our obligations to our senior citizens and social security, payout troops and pay our bills, i view this latest threat to -- to default on our debt as -- as a direct attack on the american people and on our government itself. never has it been a good time to -- to destroy the full faith and credit of the united states. and i fully support mr. foster's house bill 3305 which would -- would change the whole dynamic of -- of raising the debt limb. i would like to ask you about the rollout of the cares act.
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and madam secretary, i know that was a joint program between the treasury and the s.b.a. as chairwoman waters pointed out i chair the committee on syntek. prior to the pandemic once we gave them about $330 billion in the second face of the -- phase of the p.p.p. program, they were able to put out i think 15% of the funding lenders to people who needed it. unfortunate will, about 75% of the fraud we detected was from that 15% that went out to syntek
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lenders. these were some of our best, cabbage who has never handled an s.b.a. lone -- loan. they were one of the companys that had difficulties. i'm wondering if there were any lessons learned about that rollout? i know we were rushed especially the first phase, the banks took care of their favorite customers. i understand that. and those were known entities and we in congress encouraged a further reachout for the s.b.a. for people who were not met and were not addressed in the initial phase. but are there any -- we had the rushed aspects of it. i'm not sure what the a.p.i. interface between -- between the s.b.a. and the lenders. i know the relationships are new. but did we learn any -- any lessons from that interaction in getting money out to people who
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need it through the companies and lenders that we used? ms. yellen: certainly there were oversight and review processes that were taking place. i can get back to you. i don't have details on what we found about the lenders and i guess the s.b.a. is probably doing much of that review turnover paycheck protection program. but in -- in every aspect of developing programs that have been assigned to treasury, we've worked right from the outset with our offices of inspector general and others to make sure that we have appropriate reporting and fraud control in place to minimize fraud in the programs and make sure that we
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have controls in place. >> ok. general powell any thoughts on that or would you rather take a pass? >> i'll follow-up and see if we have anything on for you the p.p.e. was administered by the s. barmes. we did the liquidity facility. i'll be happy to check and get back to you. >> that will be great. and madam, secretary, would you again talk about what happens upon default and what that means for the american people? >> it's a catastrophe. we're likely to end up with a financial crisis, surely a recession, and millions of individuals who are counting on checks from the government not receiving those in a timely fashion and long lasting consequences of higher interest rates for everybody who borrows. >> thank you very much i yield back, madam, chair.
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madam chair: thank you. the gentleman from wisconsin mr. >> thank you very much. thank you for being with us here today. out of the gates, i would like to note that propo proposal for bank account reporting that you do not believe to be an invasion of privacy. i just like to be on the record that i believe this would be an invasion of privacy. and i remain concerned with i. i would like to jump to g.d.p. in a previous question, you tholed that crossing the -- you noted that crossing the threshold now 105% was not fiscally irresponsible is that correct? in a doan mr. torres, he was examining -- in a doan mr. torres, he was examining -- ms. yellen: we can certainly bare the burden of the debt now and in the future. >> you believe because we're currently in a low inflation
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nail environment with low interest rates is that right? >> yes, but i'm assuming the interest rate as the committee reekers will move up to a more -- committee recovers will move up to a more level of many profession professional forecast whats. >> so it would increase the burden dost? would that be fiscally irresponsible to have a debt to g. expect ratio of 100 snrs >> it depends what happens to the real interest rates in the committee if they were to rise significantly, that of course, poses a risk that we need to take into account. >> i thank you we should absolutely take it into can i'm concerned with the spending proposals from the biden administration in the event that we enter a more inflationary period. >> i want to make sure that the pro pro sals are neutral respect
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to debt pass. the projections that we've shown display sensually a level that pass over the next 10 years and beyond 15 years substantially reduce the outstanding debt to g.d.p. ratio. >> i remain very concerned about the debt path and a whole array of spending proposals that we're seeing. let me shift gears slightly over to you, mr. chairman powell if i can and build on this topic as it relates to inflation it's something i've spoken with you many times particularly in this committee in july, last december of last year. and in those times you've suggested, the fed is not ready to take action to head off inflation, yet, we're continuing to see prices to increase. we saw consumer prices increase 5.4% year after year. more recently and continuing in regardless of what -- the white
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house press team says, i think people are seeing tim pack of higher price day in and day out. now, i i know that you've said many of these you believe to be transitory, that you think will come down. but here's my concern is that individual and the public expectations are beginning to change as people truly see the price increases when they go to fill up their car with gas when they go to a grocery store, when they go back to school shopping in a recent poll, we saw 87% of americans say they're concerned about inflation. and in order fed reported that consumers expect to see higher inflations over the median turn. can you provide color as to what you think the fed is going to respond to consumer's expecting to see inflation? >> well, essentially what -- what would need to happen for inflation to remain high year upon year upon year, is we would have a new inflation regime in
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which people would enter the psychology and they would think that it's coming and expect that it's coming. >> don't we see that evidence in some of the fed -- fed report that showed that people are expecting inflation or no? >> well, we don't measure these things precisely. but we do measure them a lot. and there are many, many different measures and broadly speaking those measures are at levels that are consistent with our 2% inflation goal. not for the near term by inner the medium and longer term that tease right issue. we monitor that very carefully. and to the extent we were to see expectations -- up and the regime changing we would use our tools to -- to make sure that inflation is consistent with our goal. >> i appreciate you tracking this. because i believe as americans are looking a the runaway spending in washington, d.c. without a long-term plan to pay pay for it, that these expectations will increase. as the expectation flays out, i think we'll see real inflation
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having a significant impact on the debt burden of that the debt to g.d.p. ratio holds. i yield back my time. thank you for being here. chairwoman: the gentle woman from north carolina is now recognized for five minutes. please unmute. >> thank you, madam chair. secretary global, chair powell thank you both for being here i would like to follow up on the dwhea meyer brown posed to you on tuesday. he raised an excellent point that no black woman has serve and on the fed board of governors. you want the viewpoints represented at the highest level of our economic policy making bodies and last year, we had our own
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onm mi directors testify before us about their efforts to diversify your entities, bubu but i would like to hear directly from your both what are you doing in your respective organizations in hiring of black and brown women at all levels of seniority and have you considered recrewing on the campuses of hbcu and other m.s.i.'s? >> i can start off and say that we have a very active program at all levels of the treasury department including political appointments at recruiting diverse workforce and leadership. and i think if you look at the appointments that we've head made or proposed that we've made good on that commitment and continue to give it the highest priority with respect to -- priority.
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with respect to the federal reserve, i and others will provide advice on nominations to the president will be up up to him to make -- to nominate individuals to serve the fed board. and we certainly will insure that he has diverse a slate of candidates to consider in making these appointments. >> thank you. chair powell? >> we work very hard to recruit diverse talent, diverse female the board. and we work very hard to keep and -- and make sure that the people that we do succeed in recruiting have good opportunities are included in opportunitiesto learn and -- opportunities to learn to they can have a career at the fed. it's a very high career focus for us. >> secretary yellen, it's always a pleasure to have us before. incase you don't know, i was a
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professor for over 40 years. i tell people in i might not be in the classroom anymore where i still enjoy educating those here in congress so if you don't mind, i would appreciate if you take us back to the classroom and help educate us a bit so do you believe economic recovery is strong enough to handle the withdrawal of current pandemic relief efforts? ms. yellen: i think the relief efforts have been very important in stimulating a strong recovery. and i mentioned in my opening remarks that we're out performing the united states -- the united states is outperforming most other developed countries in the strength of our recovery due to those efforts that kong has made. and there will be fiscal drag next year namely we had a good deal of impetus or stimulus this year. and it will diminish
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substantially next year. nevertheless most forecast whats in the administration believe that the recovery will continue and that private spending will be sufficient to have us pass the baton to it and keep the economy growing. you know, we've proposed -- we're in the middle of -- reconciliation and the programs under consideration there are really spread out over 10 years provide some modest stimulus in each of those years but at much lower levels and the rescue planner oriented towards structural issues and the economy. >> thank you so now we know our mission here is to insure that the economy continues to recover for all americans so if congress fails to raise our limit, what will the effect be to the economy?
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>> it will be devastating to the economy. we'll be unable to pay our bills for the first time in american history. it could provoke a financial crisis and a recession, and it will harm every -- every american. >> thank you. you know, it's -- irresponsible, i believe that my colleagues in both the house and senate would risk that recovery from this pandemic. i'm glad to hear that you agree. i look forward to protecting all americans by raising this debt ceiling. >> thank you very much. >> the gentleman from south carolina, mr. timmons is now recognized for five minutes. >> thank you, madam chair, and sel secretary yellen, chairman powell thank you for being with us today. just yesterday, speak what pelosi said that president bind has the ability to print a coin and deposit in the federal
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reserve and use that to pay our bills. a number of other members included congressman nadler and they tweeted #mintthecoin. please tell me this idea is as ridiculous as it sounds? >> that's not a question for me. >> i had a feeling you wow say that. i just wanted to start there. madam secretary, please tell me this is not something that we're considering? >> i believe that the only way to hand the debt ceiling is for congress to raise it and show the world the financial markets and the public that we're a country that will pay our bills when we incur them. >> i really appreciate that more than you possibly know. thank you so much. that cuts some of the next few things i was going to say short. we are not going to print -- to
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mint $1 trillion coin. speaking of serious policy pro sew sals, i want to talk about what the congressmen touch on, the idea of change. the biden administration proposed it. it's all transaction history with more than $600 in or out of it yo you testified that that reconciliation is not being considered, it's the account balance. >> i never said that the administration ever proposed collecting detailed transaction data from individuals. that is never anything that the biden administration contemplated. >> you just said it's changed since the original proposal to what is now being considered. how has it changeed? >> a little -- a few additional pieces of information were con
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templated for businesses -- >> so it's get get getting better. i've had a number of banks reach out to me. it's remarkable. generally, they do not agree. they are in agreement that this is a terrible proposal. so i know that we're trying to figure out how to pay for $5 trillion in spending. but this is not -- just as mint the coin is not a serious policy proposal, this is not a serious policy proposal. >> this is a very serious policy proposal, we have a $7 trillion tax gap that we have a great deal of tax avoidance by individuals and businesses in -- typically very high net worth, high income individuals and businesses that have sources of income that are not paying the taxes -- >> respectfully, what does it have to do with $600 accounts? it's 9% of americans?
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>> well, listen. banks already report interest amounting to over $10 to the i.r.s. on every account in the country. and this proposal involves two additional pieces of information that are not at the level of individual transactions. and this will help low income individuals who now are disproportionately subject to audit bis the i.r.s. -- audit bis the i.r.s. >> reclaiming my time. >> for avoiding paying the taxes. >> reclaiming my time. madam secretary, we had a hearing in this very room about the underbank and the unbanked. and one of the biggest concerns is about privacy. for us to make it far more challenging for people to trust the very system that -- that we're hoping that people use, the banking system, the backbone of our economy, we're moving in
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the wrong direction here. and i pressure that we have changed the can want takes from the original proposal so now it's been considered reconciliation. the american people don't want this. they don't think it's reasonable. this is what's going to happen. it's going to get pulled out because there's no support on -- from the american public. it's just not going happen. with that, i yield back. thank you. >> thank you very much. i would like to thank secretary global and chair powell for their system today. without objection, all members will have five legislative days to submit additional written questions for the witnesses to the chair, which will be forwarded to the witnesses for their response. i ask our witnesses to please respond as promptly as you're able. without objection, all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the
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record. this hearing is adjourned. and i thank our witnesses so very much for being here. we have to stop at 12:15. we're right on time. thank you very much.
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