[Joint House and Senate Hearing, 113 Congress]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 113-128
 
                          THE ECONOMIC OUTLOOK 

=======================================================================

                                HEARING

                               before the

                        JOINT ECONOMIC COMMITTEE
                     CONGRESS OF THE UNITED STATES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           NOVEMBER 13, 2013

                               __________

          Printed for the use of the Joint Economic Committee

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                        JOINT ECONOMIC COMMITTEE

    [Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]

HOUSE OF REPRESENTATIVES             SENATE
Kevin Brady, Texas, Chairman         Amy Klobuchar, Minnesota, Vice 
John Campbell, California                Chair
Sean P. Duffy, Wisconsin             Robert P. Casey, Jr., Pennsylvania
Justin Amash, Michigan               Mark R. Warner, Virginia
Erik Paulsen, Minnesota              Bernard Sanders, Vermont
Richard L. Hanna, New York           Christopher Murphy, Connecticut
Carolyn B. Maloney, New York         Martin Heinrich, New Mexico
Loretta Sanchez, California          Dan Coats, Indiana
Elijah E. Cummings, Maryland         Mike Lee, Utah
John Delaney, Maryland               Roger F. Wicker, Mississippi
                                     Pat Toomey, Pennsylvania

                 Robert P. O'Quinn, Executive Director
                 Niles Godes, Democratic Staff Director



                            C O N T E N T S

                              ----------                              

                     Opening Statements of Members

Hon. Kevin Brady, Chairman, a U.S. Representative from Texas.....     1
Hon. Amy Klobuchar, Vice Chair, a U.S. Senator from Minnesota....     2

                               Witnesses

Hon. Jason Furman, Chairman, Council of Economic Advisers, 
  Washington, DC.................................................     4

                       Submissions for the Record

Prepared statement of Hon. Kevin Brady...........................    22
Prepared statement of Hon. Jason Furman..........................    26


                          THE ECONOMIC OUTLOOK

                              ----------                              


                      WEDNESDAY, NOVEMBER 13, 2013

                    United States Congress,
                          Joint Economic Committee,
                                                    Washington, DC.
    The committee met, pursuant to call, at 2:36 p.m. in Room 
216 of the Hart Senate Office Building, Hon. Kevin Brady, 
Chairman, presiding.
    Representatives present: Brady of Texas, Paulsen, Hanna, 
Carolyn B. Maloney, and Delaney.
    Senators present: Klobuchar, Murphy, Coats, and Lee.
    Staff present: Corey Astill, Hank Butler, Conor Carroll, 
Gail Cohen, Barry Dexter, Al Feizenberg, Niles Godes, Colleen 
Healy, Christina King, J.D. Mateus, Patrick Miller, Robert 
O'Quinn, Jeff Schlagenhauf, Andrew Silvia, and Sue Sweet.

    OPENING STATEMENT OF HON. KEVIN BRADY, CHAIRMAN, A U.S. 
                   REPRESENTATIVE FROM TEXAS

    Chairman Brady. Chairman Furman, welcome. Both Vice Chair 
Klobuchar and I appreciate your willingness to reschedule this 
hearing, and I am hopeful that you will resume the long-
standing practice of the Chairman of the Council of Economic 
Advisers testifying before the JEC about the Economic Report of 
the President immediately after its release. Welcome today.
    We are all pulling for a strong recovery. Too many 
Americans of all ages and all races have simply given up hope 
of finding a full-time job.
    Now four full years after the recession ended, while some 
parts of the Nation are making progress, the current recovery 
remains the weakest among all post-1960 recoveries in every 
major measure of economic performance, generating a troubling 
and we think dangerous ``Growth Gap.''
    While real GDP has grown by 10 percent since the recession 
ended, that is just barely above one-half of the growth in 
average recoveries over the same period, producing a growth gap 
of $1.3 trillion in the economy.
    For families the growth gap hits home. Real disposable 
income per capita has increased by a mere 3.7 percent. That is 
less than one-third of the 11.7 percent average. This means a 
family of 4 has $11,420 less in real after-tax income to spend 
that they would have had if this recovery had merely been 
average.
    And the current recovery has produced 4.4 million fewer 
private payroll jobs since the cyclical low than an average 
recovery.
    An important gauge of America's jobs picture is the 
employment-to-population ratio that measures the proportion of 
the country's population age 16 or over that is employed.
    By now it would have risen by 1\1/2\ percentage points in 
an average recovery, more than double that in a Reagan 
recovery. But today the America's employment-to-population 
ratio has actually declined by 1.1 percentage points. And to 
put the stalled labor market into perspective, in October of 
2013 the employment-to-population ratio was only 6/100ths of a 
percentage point higher than the lowest reading during the 
President's Administration.
    In October, the labor force participation rate fell, as you 
know, to 62.8 percent, a low not seen since the Carter 
Administration.
    And as many unemployed Americans are learning the hard way, 
the decline in the official unemployment rate to 7.3 percent is 
largely illusory because so many Americans have simply given up 
looking for work.
    If the labor force participation rate had not declined 
since the President took office, the unemployment rate would be 
a whopping 11.3 percent today.
    As President John Adams observed, ``Facts are stubborn 
things.'' And facts prove that this is the weakest recovery 
since 1960--indeed, since World War II.
    On July 24th, President Obama described ``a growing middle 
class'' as ``the engine of our prosperity.'' And he was exactly 
right.
    In this recovery, however, middle-class Americans continue 
to suffer while Wall Street has roared. Since the recession 
ended, the S&P 500 Total Return Index is up by more than 86 
percent, while real disposable income per capita is up a mere 
3.7 percent.
    To make matters worse, as of this past July 15.7 million 
more Americans were receiving food stamps, while only 2.1 
million more Americans were employed. Adding eight Americans to 
food stamps for every one finding work is not growing the 
middle class. In fact, the recovery might better be described 
as the real war on the middle class.
    Today we want to discuss the Economic Report of the 
President, the roadblocks to job creation and economic growth, 
and search for bi-partisan solutions to restore prosperity to 
the suffering middle class.
    Clearly Main Street is being harmed by the President's 
higher taxes, mountains of new red tape on local businesses, 
and the disastrous roll-out of the ill-named ``Affordable Care 
Act'' that is cutting workers' hours, raising their health care 
costs, preventing small businesses from hiring, and cancelling 
health insurance for millions of Americans.
    Both parties agree that Americans deserve better.
    Chairman Furman, we look forward to your testimony.
    With that, I recognize Vice Chair Klobuchar.
    [The prepared statement of Chairman Brady appears in the 
Submissions for the Record on page 22.]

  OPENING STATEMENT OF HON. AMY KLOBUCHAR, VICE CHAIR, A U.S. 
                     SENATOR FROM MINNESOTA

    Vice Chair Klobuchar. Well thank you very much, Mr. 
Chairman. Thank you, Dr. Furman, for being here.
    The last time a Council for Economic Adviser Chairman 
testified before this Committee was in October of 2009. So we 
thank you for coming close in to the time that you were 
appointed.
    I note that that month the economy shed more than 200,000 
private-sector jobs as it struggled to regain its footing--the 
exact opposite of what we just saw with the job gains from the 
past month of October. And in fact we have now seen an average 
of 200,000 jobs for each month in the last three months.
    I think we all know that we have come a long way, as this 
chart shows, since the beginning of the downturn. Four years 
later, we are still adding jobs. Not as many as we would like, 
as the Chairman pointed out, but we have still seen 44 straight 
months of private-sector job growth: 1.9 million private-sector 
jobs just this year.
    In this time, 7.8 million private-sector jobs have been 
created overall, including more than 2.4 million in the past 12 
months.
    Last month, the unemployment rate was 7.3 percent. In my 
State, as I have noted here before, the unemployment rate is 
down to 5.1 percent. So let's look at another measure of the 
economic progress: the number of unemployed workers per job 
opening.
    In 2009 there were nearly 7 unemployed workers for every 
job opening. There are now about 3 unemployed workers for each 
opening, almost back to the pre-Recession ratio of 2 unemployed 
workers for every job opening.
    In addition, while economic growth has been slower than we 
would like, the overall economy has grown for 10 consecutive 
quarters, growing at an average annual rate of 2.4 percent.
    We are also seeing promising signs of growth in critical 
sectors like the housing market. Single-family home prices are 
up more than 10 percent from a year ago. Housing starts are up 
across the country by 19 percent from August 2012 to August 
2013.
    These are positive signs, but it is clear there is much 
more to be done. We need to focus on policies--what we often 
have done in this Committee on a bipartisan basis--policies 
that spark job creation in the short term, while laying the 
groundwork for prosperity in the long term.
    The first thing we need to do is to stop subjecting the 
economy to self-inflicted wounds like we experienced last month 
with the government shutdown and brinkmanship over paying our 
bills. That crisis was unnecessary.
    A 16-day government shutdown negatively affected millions 
of people's daily lives, stunned countries around the globe, 
and caused significant harm to our economy. As Dr. Zandi 
testified, who had testified before our Committee twice this 
year, noted that it took about, out of the fourth quarter GDP, 
reduced GDP by .5 percentage points, taking it from 2.5 to 2 
percent. He estimated the crisis cost the country $20 billion.
    The agreement reached in mid-October reopened the 
government, allowed us to pay our bills on time, and set up a 
framework for reaching a long-term deal. I am hopeful that this 
will happen. As we know, we have until mid-January, and we also 
have an opportunity as you know, Mr. Chairman, to replace the 
upcoming sequestration cuts, and I hope some of the other 
existing sequestration cuts, with some additional revenue or 
finding other ways to reduce our debt besides that hammer of 
sequestration.
    I have two good ideas right now--the Farm Bill. I felt good 
about our first Conference Committee meeting. It went well, 
between the House and the Senate, and that would bring the debt 
down, at least the Senate side bill, $24 billion.
    And of course the Immigration Bill. We have had a hearing 
on that here. That would bring the debt down $158 billion in 10 
years, $700 billion in 20 years.
    So those are all positive ideas, as well as the many things 
we have discussed in this group.
    The last thing I wanted to mention was exports. It's been 
one of the brightest spots in our economy. I truly see this as 
a way we get out of the downturn that we have experienced. The 
total value of American exports reached a record $2.2 trillion 
last year.
    Exports are a key driver of job creation, with every 
billion in exports supporting nearly 5,000 jobs. I am proud to 
be on the President's Export Council. I think there's a lot of 
good work being done there, including the Export Control List, 
which I've advocated for changing so that we make it easier for 
some of our industries to export items. And we just have to 
look at seeing ourselves as the competitor in this global 
economy and looking at how we can compete in today's world.
    Because if we have learned anything from the economic 
turmoil of the last few years, it is that America can no longer 
afford to be simply a country that churns money. We have to be 
a country that makes stuff, that thinks, that invents things, 
and exports to the world.
    I look forward to hearing your testimony. Thank you.
    Chairman Brady. Thank you, Vice Chair.
    Dr. Jason Furman is a distinguished Chairman of the Council 
of Economic Advisers. Previously he served as Principal Deputy 
Director of the National Economic Council, and Director of the 
Hamilton Project at the Brookings Institute.
    He is an expert in fiscal policy, tax policy, economics, 
Social Security, and monetary policy, all key issues for our 
country.
    Dr. Furman earned his Doctorate in Economics and MA in 
Government from Harvard University, and a MSC in Economics from 
the London School of Economics.
    Chairman, thanks for joining us today, and you are 
recognized.

   STATEMENT OF THE HON. JASON FURMAN, CHAIRMAN, COUNCIL OF 
               ECONOMIC ADVISERS, WASHINGTON, DC

    Dr. Furman. Well thank you so much, Chairman Brady, Vice 
Chair Klobuchar, and Members of the Committee.
    As you know, the Council of Economic Advisers and the Joint 
Economic Committee were created by the same Act of Congress and 
have a common interest in using economic analysis to craft and 
promote policies to support economic growth.
    I am pleased to be before you today and look forward to 
continuing the strong relationship between the CEA and JEC.
    In my statement I would like to highlight some of the main 
opportunities and challenges the economy faces right now, and 
then briefly discuss several policies that could capitalize on 
the opportunities and address the challenges. All of these are 
discussed in more detail in my prepared remarks.
    After going through the worst Recession since the Great 
Depression, the economy today is strengthening. The private 
sector has added 7.8 million jobs over 44 consecutive months. 
The unemployment rate has fallen by about 7/10ths of a 
percentage point per year. And while it remains unacceptably 
high at 7.3 percent, it is now back to where it was in December 
of 2008.
    Mr. Chairman, in the question and answer we may be able to 
discuss some of the points you raised about the participation 
rate and the employment population ratio, and come back to 
those important issues.
    The economy has expanded for 16 out of the last 17 
quarters. America has a strong auto industry. Our banks are 
increasingly well capitalized. Our housing prices are rising, 
and construction is recovering.
    With this context, there are five areas of opportunity that 
I would like to highlight, including two cyclical factors that 
could contribute to the recovery, and three structural factors 
that will help improve the economy's long-run growth potential 
as well.
    First, the most immediate macro economic opportunity is the 
potential for continued increases in residential investment, 
consumer durables, and consumer spending more generally.
    Residential investment has helped drive the recovery over 
the last two-and-a-half years, growing at a 12 percent annual 
rate. The over-building of new homes during the bubble has now 
been offset by several years of depressed construction. And if 
you look at housing construction, it remains below the steady-
state level that we would expect from household formation, 
indicating further potential in that sector.
    There is similar pent-up demand in the automobile sector, 
as well.
    The second cyclical factor is that the economy is headed 
towards a less contractionary fiscal stance, although the 
precise magnitude will depend on policy choices.
    The budget deficit has fallen rapidly from 9.8 percent of 
GDP in Fiscal Year 2009 to 4.1 percent of GDP in Fiscal Year 
2013.
    Remarkably, nearly half of that deficit reduction, 2.7 
percent of GDP, was in this last fiscal year alone. Although 
deficit reduction is an important long-term policy goal, the 
rapid fiscal consolidation over the past year has created 
challenges for growth.
    The good news is that the economy has already gone through 
the most severe fiscal headwinds, and further deficit reduction 
will be at a more gradual pace--although the exact pace does 
depend on policy.
    Third, and shifting towards more structural items, the 
marked slowdown in the growth of health care costs presents a 
long-run opportunity for job and wage growth. According to the 
Center for Medicare and Medicaid Services, inflation-adjusted 
health spending grew at a 2 percent annual rate over the 3 
years since 2010, the lowest rate recorded since we began 
tracking these data in the 1960s. Lower health spending helps 
with wages and jobs.
    Fourth, the dramatic increase in domestic energy production 
is another opportunity for the U.S. economy. Crude oil 
production has growth each year the President has been in 
office, reaching its highest level in 17 years in 2012. We have 
seen stronger fuel efficiency, and as a result of all of these 
advances we learned just today that our domestic production of 
crude oil exceeded our net imports of oil in October.
    More broadly, the President remains firmly committed to an 
all-of-the-above energy strategy, including progress on 
renewable energy as well.
    Finally, the last favorable trend we have is that 
technology provides significant opportunities for long-term 
growth, especially in areas that benefit from the combination 
of mobile computing and increasingly fast wired and wireless 
internet connections.
    Over the last four years, the United States' investment in 
these networks has growth 40 percent, markedly faster than in 
Europe and Asia, and these investments are key to a vibrant 
ecosystem throughout our economy.
    We have several outstanding challenges that I wanted to 
briefly list, as well, Mr. Chairman and Madam Vice Chair.
    The first is that we are still struggling with the legacy 
of a severe recession. And most notably, the significant 
elevation of the unemployment rate. That current elevation is 
primarily due to the large number of long-term unemployed 
workers.
    The second, and less widely appreciated challenge, is that 
the Recession appears to have exacerbated a longer term trend 
of reduced job-to-job mobility for the labor force. While many 
focus primarily on net job growth, the flow of workers across 
firms matters a lot to the economy as well, providing workers 
with matches to the jobs in which they are most productive and 
can be paid the most. As a result, reduced mobility is an 
important challenge.
    Third, and finally, a long-standing and deeply embedded 
trend is the rise in inequality. It began in the late 1970s, 
and one of the starkest data points in that regard is that last 
year 19.3 percent of the total income went to the top 1 
percent, the largest share since 1928.
    Finally, turning very briefly to the policy agenda, the 
most immediate priority is to do no harm by avoiding repeated 
fiscal wrangling, allowing our economy to capitalize on all of 
the opportunities that I sketched earlier.
    There are also substantial opportunities to make more rapid 
progress in addressing the challenges identified through an 
affirmative agenda to create jobs, increase growth, and raise 
wages.
    One area we can make progress in is on budget policy. The 
President's budget includes significantly more medium- and 
long-term deficit reduction than the sequester. As a result, 
the Congressional Budget Office estimates that the deficit 
falls to 2.1 percent of GDP in 2023. And that is consistent 
with debt falling as a share of the economy.
    Moreover, the President's proposal shifts the composition 
of spending towards investments in jobs, infrastructure, 
education, and research, while taking steps to strengthen 
Medicare, continue to slow the growth of health care, and 
reduce inefficient tax expenditures and reform our business tax 
code to make it more competitive.
    Getting beyond these immediate fiscal challenges would 
allow the U.S. economy to continue to mend and strengthen, but 
there are opportunities to do more, and the President has 
sketched many of these out in the context of his better bargain 
for the middle class, which addresses jobs, housing, 
retirement, health care, and ladders of opportunity.
    Finally, the President has identified immigration reform 
and the farm bill, both of which were mentioned by the Vice 
Chair here today, as two economically important priorities that 
he would like to work with Congress to get done.
    That concludes my comments, and I would be happy to take 
any questions you have.
    [The prepared statement of Hon. Jason Furman appears in the 
Submissions for the Record on page 26.]
    Chairman Brady. Mr. Chairman, thank you for being here. You 
cited some positive economic statistics in your testimony, 
which we appreciate very much.
    I agree with your assessment of energy and technology and 
tax reform as potential upsides in growing this economy, but I 
think everyone has to agree this is four years after the 
Recession officially ended that this is a disappointing 
recovery. A lot of Americans have given up hope. A lot of 
college graduates have no jobs or are working behind cash 
registers. A number of people have just dropped out completely.
    So my question is: Do you--with this economy disappointing 
this far into the recovery, do you anticipate the President 
making a change in the direction of his economic policies? Or 
will he continue to stay the course?
    Dr. Furman. Well, Mr. Chairman, I am not sure that I fully 
accept the premise of your question. I went through some of the 
statistics in terms of the strength of the recovery.
    I would, in benchmarking that success and strength, look at 
some comparisons. For example, we have growth more strongly 
than many countries around the world, including in Europe. 
Financial crises pose a very significant challenge and tend to 
have longer lasting effects on the economy.
    And there has been a several-decades-long slowdown in 
things like the growth force of the labor force, as the Baby 
Boomers retire, and that also has an impact on the total 
growth. And when you take all of those factors together, I 
think we are making progress. We are making progress at a 
faster pace than you often have in the face of such a massive 
financial crisis. But I absolutely agree with you, Mr. 
Chairman, that we cannot be fully satisfied with where we are 
and we want to continue to make that progress.
    To that end, the President would like to go to the next 
stage of what we do. So I don't know that I would describe it 
as the same or different, but a continuation. So we had 
temporary business tax cuts during the initial recovery phase. 
Now we are more focused on ongoing permanent business tax 
reform.
    We had temporary investments in infrastructure in the 
beginning. Now we are more focused on the sustained six-year 
reauthorization of the Highway Bill. And so many of those are, 
as the economy recovers, the direction we would like to see our 
policy going.
    Chairman Brady. Do you see--our businesses have cited 
repeatedly the uncertainty over higher taxes, the regulatory 
onslaught, the Affordable Care Act, as significant drags on the 
economy? Do you view the current rate of red tape on local 
businesses as a drag on the economy?
    Dr. Furman. Mr. Chairman, the President has worked very 
hard and issued an Executive Order that you have to take cost/
benefit into account in designing regulations. You have to do 
them flexibly. You have to do them in the lowest cost manner 
possible. And I think it has been very successful in 
regulations whose benefits exceed their costs. But we have to 
constantly look to see how we can do better.
    Chairman Brady. In 2012 the Federal Government issued more 
than 2,300 federal regulations. Only 14 underwent a full cost/
benefit analysis. To me, that doesn't seem to be a reasonable 
approach of laying what may be commendable goals with the 
impact on local businesses.
    Let me ask you this: The Affordable Care Act is forcing 
businesses to cut hours. I visited a steel company in the 
Houston region last week that is doing everything to keep its 
workers at 49 workers, and manage to renew their health care 
plan to avoid a 47 percent increase.
    Do you believe the Affordable Care Act is acting as a drag 
on our local economies?
    Dr. Furman. No, Mr. Chairman, I do not. I think the 
Affordable Care Act includes several important things that 
actually help our economy. One of them I briefly mentioned in 
my prepared remarks, which is the large slowdown in the growth 
of health costs.
    Premiums are rising at 8 percent a year--going up until 
2010. After 2010, they have grown at 6 percent a year. There 
are many factors that have contributed to that slowdown, but I 
have no doubt that the Affordable Care Act is one of them, and 
that that is good for businesses.
    Chairman Brady. As you know, there is a great deal of 
dispute about what has temporarily slowed medical price 
increases, but I know of almost no local business in my 
district that has only seen a 6 percent increase in their 
insurance premiums. Just the opposite.
    They are stunned by the increased costs. Now they are 
seeing workers who, frankly, are having their hours cut. So I 
think there is a significant drag.
    Let me ask you this. With Wall Street roaring as a result 
of the President's policies, middle-class America struggling in 
a significant way, what specifically is the President going to 
do differently in economic leadership to bridge the inequality 
between the middle class and Wall Street?
    Dr. Furman. Mr. Chairman, there is a long agenda designed 
to get at that question.
    I think first and foremost it has to be to continue to 
create jobs, and to create jobs at a faster rate, and that is 
everything from investments in infrastructure to reforming our 
business tax code.
    We have to address many of the particular issues that face 
middle-class families, helping them to own a home. Some of the 
credit standards have gotten increasingly tight. We can do 
something about that.
    Some of the challenges for retirement. Many families are 
having a hard time saving for retirement. Helping more of them 
have accounts.
    Bringing down and slowing the growth rate of the cost of 
health care I think is an important part of that agenda for the 
middle class as well.
    Chairman Brady. May I ask, before I turn to Vice Chair 
Klobuchar, will the White House, having stated its support for 
corporate tax reform, will the White House be bringing a 
proposal forward? And will it be encouraging Senate Democrats 
to pass a tax reform bill this next year?
    Dr. Furman. Mr. Chairman, as you know, the President put 
forward a framework for business tax reform, and it described 
it at a certain level of specificity in terms of, for example, 
naming a rate of 28 percent; describing how it is you would pay 
for that rate. But chose not to put out a fully detailed 
proposal in order to both solicit more ideas, but also be able 
to more effectively work with Congress, which actually drafts 
the laws.
    This is a big goal for the President. It is something he 
tasked his economic team with as early as 2010. We're always 
trying to figure out what's the best way to push it forward. 
And so we would welcome any advice and opinion on that. And we 
have certainly encouraged Democrats and Republicans to do that, 
but also to embed it in a broader grand bargain for jobs that 
includes not just business tax reform but the other things we 
need for our competitiveness like investments in 
infrastructure, training, and strengthening manufacturing.
    Chairman Brady. Thank you, Mr. Chairman. Vice Chair 
Klobuchar.
    Vice Chair Klobuchar. Thank you very much, Mr. Chairman. 
Thank you for your testimony, Dr. Furman.
    We talked about some of the stability improvements in the 
economy and also the employment situation. I cited the figure 
about how in 2009 there were 7 unemployed workers for every job 
opening; now there are 3. And we are almost back to the pre-
Recession ration of 2 unemployed workers for every opening.
    For the record, our State--Representative Paulsen and my 
State of Minnesota--just hit a 12-year high for job openings. A 
few questions along those lines.
    We had a hearing on long-term unemployment here, and one of 
the things we have seen--and I know you have seen with the 
statistics--is that there may be some signs of structural 
unemployment; that there is evidence that long-term unemployed 
workers may eventually become difficult to employ; that even 
though we have seen improvements, there are a number of them 
that still are not getting jobs, and that there are negative 
perceptions developed over time.
    Could you talk about any specific policies that you think 
could help for the long-term unemployed?
    Dr. Furman. Yes. So the entire--almost the entire increase 
in unemployment relative to where it was prior to the 
Recession, is because the long-term unemployment rate is 
elevated. The short-term has basically returned to about where 
it was prior to the Recession.
    I think to date we have not seen that turning into a 
serious persistent structural unemployment, but I think we have 
to be very worried that could happen. We saw in Europe when 
that happened it led to persistently high unemployment and 
other adverse impacts for their economy.
    The first most important thing about long-term unemployment 
is the same things you do about regular unemployment, which is 
increasing aggregate demand and investing in jobs like 
infrastructure, manufacturing training, business tax reform, 
all the issues I had been talking about already.
    I think there are some issues specific to the long-term 
unemployed that you want to look at as well: ways of 
encouraging people to move more quickly into jobs; training, 
matching them to jobs. And the President has a Pathways To Work 
Fund that he has proposed, which is designed to help states 
experiment with different approaches to those goals.
    Vice Chair Klobuchar. Right. And in fact Minnesota has a 
good pilot going with some of our businesses, a community 
college in the northern suburbs, and then our high schools. We 
have one high school where the kids can literally get an 
advanced degree right in high school. And looking at that model 
more, when we've got 60 percent of our manufacturers who say 
they literally can't find someone to fill a job.
    And so we are doing a major report on manufacturing that is 
coming out soon--I don't know what's wrong with this 
microphone; I can use yours, just kidding. I think it's better. 
So we have a major report coming out on manufacturing, showing 
that for the first time in really the history of our Nation the 
number of people who are filling manufacturing jobs with 
advanced degrees, even if it's a one- or two-year post-
secondary degree, has exceeded people that don't have those 
degrees.
    So I think we are seeing a major change there, and I would 
agree with you on the work skills' training.
    Could we talk about, you know we have these budget 
negotiations going on right now, and how damaging from your 
seat as Chair of the Economic Council, do you see another 
episode of brinkmanship, or if we get close to a shutdown, or 
experience a shutdown?
    Dr. Furman. I think there is no doubt that the shutdown and 
the brinkmanship over the debt limit hurt the economy. When it 
comes to economic growth, there is a variety of estimates.
    We had estimated 0.25 percentage points off the fourth 
quarter growth rate. That was more conservative than what Macro 
Advisers, Goldman Sachs, Standard & Poor's, others, estimated 
who thought the effect might be as large as 0.6 percentage 
points off the fourth quarter growth rate.
    I think you also observe it in the data. If you look 
especially at daily and weekly data in the first half of 
October, you saw two different measures that showed slowing 
chain store sales. Two different measures showed plummeting 
consumer confidence. Two different measures, unemployment 
insurance and a survey, showed weakening job market prospects. 
And you also saw weaknesses in housing.
    So you saw a concentrated worsening of the economy in the 
first half of October.
    Vice Chair Klobuchar. I thought I saw your energy 
statistics that just came out today, that our oil produced 
domestically has now exceeded what we're bringing in from other 
countries? Is that----
    Dr. Furman. Yes, for the first time in a long time.
    Vice Chair Klobuchar. Very good. And that does not even 
include the natural gas and some of the other things?
    Dr. Furman. Correct. That is just oil.
    Vice Chair Klobuchar. Okay. Because that is what I have 
seen, too, as being a major--having a major role in our 
increase in manufacturing, is the fact that it is easier to 
transport things and cheaper to do it than it was before. So 
that is a good thing.
    The last thing I was going to ask about is, just as we look 
at the potential for some kind of a long-term budget and tax 
reform that could actually fund some major areas that you 
identified with education, and infrastructure, and some of 
these other things, have you looked at this idea--Congressman 
Delaney has been working on this; we have a bill coming out of 
the Senate, a bi-partisan bill this week--about an 
Infrastructure Financing Authority? Or as it's known, an 
Infrastructure Bank?
    Dr. Furman. I haven't looked at your particular bill, but 
I've looked at other----
    Vice Chair Klobuchar. This is the one with Senator Warner.
    Dr. Furman. Okay, so if it's the bill I'm thinking of, that 
is very similar to the approach that the President has 
suggested in the past. And I think it is important in the time 
of limited budget resources that we are able to leverage our 
budget dollars as far as we can, and also to direct them as 
effectively as we can.
    It is not just more money; it is smarter money, and 
leveraging our money. And as I understand it, that would be the 
goal of your proposal, and certainly something I think is 
important.
    Vice Chair Klobuchar. And you and I, in this context of 
corporate tax reform, discussed, a few months back, 
repatriation and how that could play a role, and whether it is 
tied in with an infrastructure financing authority or not. Do 
you want to talk about that?
    Dr. Furman. Sure. I think as a one-time stand-alone matter, 
a repatriation holiday I don't think would be very effective in 
creating jobs, and I think would cost significant money.
    I think it is different when you are talking about ongoing 
reform of the tax code. And if you are transitioning to a new 
tax system, then you might actually get some money as part of 
that transition process that you could then take back and put 
back into infrastructure.
    But it is important in transitioning to a new system that 
it is both improving the competitiveness of our companies, but 
also taking base erosion very seriously and doing that on a 
permanent basis rather than on a one-time basis.
    Vice Chair Klobuchar. Good. And one last question. 
Immigration reform? How do you see that? We had Grover Norquist 
here testifying about the deficit reduction it would bring. I'm 
sure that is a major factor. But do you see it as contributing 
to our economy if we get the reform done?
    Dr. Furman. Yes. I think this is an issue where there is 
widespread agreement among economists, and the Congressional 
Budget Office embodied that agreement when it said that GDP 
would be $1.4 trillion higher in 2033 because of immigration 
reform.
    What I thought was so exciting about that estimate is 
that's not just a larger population of workers--although that 
is important and good--it's that we would actually have more 
what economists call ``total factor productivity growth,'' more 
innovation, more ideas. Because immigrants have always been a 
really important source of that in America.
    We have even more of that with immigration reform. And so 
we would have more output as a result.
    Vice Chair Klobuchar. Thank you.
    Chairman Brady. Thank you. Chairman Paulsen is recognized.
    Representative Paulsen. Thank you, Mr. Chairman. Dr. 
Furman, thanks for being here to testify.
    This Committee has actually spent a lot of substantive time 
discussing and going over some ideas regarding the growth gap 
and how America has been lagging a little bit in terms of what 
an average recovery would be like.
    As your testimony pointed out, the fundamentals are there, 
kind of on the right track in many respects, but there are a 
lot of folks that we talked to, a lot of Minnesota companies. 
Our unemployment situation is better than in the rest of the 
country, but for many of them it doesn't feel like a recovery.
    You know, for the average folks they think it should be 
much better. There is a lot more potential, I guess is what I 
am trying to say.
    Vice Chairman Klobuchar had mentioned earlier that we are 
doing better in Minnesota. I will tell you that I have met with 
small, medium, and large companies from LubeTech in Plymouth to 
Carlson Companies in Minnetonka, there is one theme that has 
arisen, and it is around the uncertainty of the tax code.
    Typically Congress does six-month extensions, retroactive 
provisions, and there's no doubt that a lot of Minnesota 
employers would like a tax code that is stable, that is 
predictable, and that is conductive to growth. And I agree.
    And in that light, let me just ask you a couple of 
questions around the impact of our current tax code on economic 
growth.
    Yesterday there was a piece written in The Wall Street 
Journal entitled ``The Biggest Fiscal Losers,'' and it did note 
that in the last year the deficit had decreased in large part 
due to higher revenues from higher tax rates.
    However, it also noted that the revenue gains from higher 
tax rates were offset by the slower growth caused by the higher 
tax rates. Do you believe that revenues are affected by slower 
economic growth as a result of higher marginal tax rates?
    Dr. Furman. I certainly agree that revenues are affected by 
growth. I don't agree that the tax changes that we made at the 
beginning of this year have had an adverse impact on growth. I 
think they were part of an overall economic plan that gave more 
certainty about taxes to the middle class, extended their tax 
cuts, and brought down the deficit over the medium and long 
run, and I think that is a sound economic strategy.
    Representative Paulsen. Now recently the Federal Reserve 
Bank of San Francisco did a study, and it found that roughly 90 
percent of the recent fiscal drag comes from higher taxes, not 
from the slowed spending due to the sequestration.
    Do you believe that worry over the sequestration's effect 
on the economy was overblown?
    Dr. Furman. The Congressional Budget Office estimated that 
the sequester would cost 750,000 jobs, and would take a 0.6 
percentage point off the growth rate. That to me is a 
reasonable estimate. But I think the important issue is that it 
is not the magnitude of deficit reduction in the sequester, it 
is the composition and timing of it.
    We would actually like to see more deficit reduction than 
you saw in the sequester over the medium and long run, and we 
would like to see it coming more in areas like entitlements and 
tax expenditure rather than in up-front investments in 
education and infrastructure.
    Representative Paulsen. And let me follow up on that, 
because I would agree with you, for those who say that a blunt 
approach to dealing with the budget and sequestration is not 
the answer, but we have got to address the long term financial 
pressures that the country faces--namely, those of our 
entitlement programs, as you mentioned.
    If we were to replace sequestration with reforms to some of 
those entitlement programs, what reforms would you support in 
order to put our economy and the United States back on a 
fiscally sustainable path?
    Dr. Furman. The President submitted a budget, and the 
essence of that budget was a balanced set of changes both to 
entitlements and to revenue in terms of entitlements. It 
included things like means-testing Medicare, further reducing 
the cost of prescription drugs, and some other structural 
reforms to Medicare.
    In terms of revenue it included reducing tax benefits for 
the highest income households, and that was something he saw 
going together as an effective and balanced package.
    Representative Paulsen. In this latest round now of the 
budget discussions that will be ongoing, will the 
Administration, or do you feel the President will be pretty 
aggressive in terms of pushing some of those entitlement 
reforms that were first a part of his budget? Because there is 
an opportunity there on a bi-partisan basis.
    Dr. Furman. The President will be aggressive in pushing 
those as part of the balanced approach that includes revenue, 
as well. And that was his basic principle: that you need a 
balanced approach that does include both entitlements and the 
revenue side.
    Representative Paulsen. Thank you, Mr. Chairman. I yield 
back.
    Chairman Brady. Thank you. Representative Delaney is 
recognized.
    Representative Delaney. Thank you, Mr. Chairman, and thank 
you, Dr. Furman, for appearing here today and for your 
testimony. I think a lot of the data that you presented makes a 
very compelling case that our response, particularly in certain 
areas like the financial services industry which was very 
proactive and very strong and clearly resulted in this industry 
healing in the United States better than it has around the 
world; our response to the auto industry, the collapse of the 
auto industry; our response to the housing industry; has 
clearly paid good returns for the taxpayers.
    But now I think we are confronted with a different set of 
challenges, which is how do we bring more Americans along into 
the recovery that we are seeing and will likely continue to 
see.
    It seems to me one of the challenges that we face is that 
two of the dominant forces in the world the last 20 years--
globalization and technology--have benefitted too few 
Americans. They have benefitted Americans that are highly 
skilled, have great educations, have access to capital, which 
is why we see good growth among high-skilled workers. And we 
are also seeing good growth among low-skilled workers because 
as we have more income inequality to some extent it creates 
more opportunity for low-skilled workers, because the service 
industries grow.
    And so it is this middle-skilled worker issue that we have. 
And you have outlined some very good policies, in my judgment, 
to address this issue: investments in infrastructure, 
investments in basic research which has proven to be 
tremendously rewarding for the health of the economy, skills 
training, et cetera.
    In which of these areas do you believe that there is 
actually an opportunity for good bi-partisan support? I know in 
infrastructure I've got a bill in the House that has got 23 
Republicans and 23 Democrats on it, that funds infrastructure 
by tying it to repatriating overseas earnings as an example of 
good bi-partisan support for an initiative that is clearly very 
important for creating both short-term and long-term economic 
growth for the country.
    What other areas, or in infrastructure in particular, or in 
investments in research, or in skills training, do you think we 
actually have opportunities for bi-partisan support? And what 
kind of proposals exist? Aside from just saying that we should 
be doing all these things, which I agree directionally we 
should be doing all these things, where do you have specific 
ideas that you think you have support in a bi-partisan basis?
    Dr. Furman. Well, Congressman, of the nine people in this 
room that have microphones I am probably the least expert in 
that particular question, but let me try to answer it. And I 
will say a little bit where I think there ought to be.
    There are some things like immigration, the farm bill, and 
the budget where you have seen progress in one or both chambers 
of legislation moving forward, and those would seem like very 
good areas to take and build on.
    You have areas like infrastructure and the idea of 
leveraging and better targeting. The Chamber of Commerce and 
the AFL-CIO came out together to announce plans in that area 
years ago, Democratic and Republican Governors held hands as 
they announced plans in those areas.
    There are other areas like pre-school. I cannot tell you 
what the bi-partisan prospects are for that right now, but I 
can tell you the President's pre-school ideas are motivated in 
part by the work of Nobel Prize Winner Economist James Heckman, 
who is a Republican, but has done the numbers and finds that 
that is among the highest rate of return you have in terms of 
investments in education.
    And finally I would say business tax reform is something 
where I think there is an increasing amount of convergence and 
views on the topic.
    Representative Delaney. But do you specifically, when you 
look at the agenda you're advancing, overlay kind of the 
reality of the political process in terms of thinking about 
what initiatives should get priorities?
    In other words, I think one of the issues we have had in 
terms of trying to make a difference against this middle-skills 
job issue, if you will, is that we have not been doing the 
things we need to do. We have not been investing in 
infrastructure. We have been cutting back investments in basic 
research. We have not been doing the skills training we need to 
do.
    So the cost of doing nothing has not been nothing. We have 
paid a big cost. So when we think about our initiatives, our 
policy initiatives, are we formulating ideas that we believe 
will actually have bi-partisan support? Or are we more kind of 
working on some of these things, you know, without thinking 
about the political context?
    Dr. Furman. Right. I mean, in terms of me personally I tend 
to give more economic advice. But absolutely we are very 
focused. The President is very focused on getting things done, 
and getting things done either on his own administratively and 
also with Congress, in a lot of the areas I talked about: 
immigration, farm bill, budget, infrastructure, business tax 
reform. They are all areas where I think there is a lot of 
convergence, and it is just a question of going the last part 
of the way and really getting them done.
    Representative Delaney. Great. Thank you.
    Chairman Brady. Thank you. Representative Hanna.
    Representative Hanna. Thank you, Chairman. Thank you, 
Doctor, for being here.
    You mentioned in your earlier verbal testimony that the 
Affordable Care Act, which is only now being enacted, had 
produced cost savings, or cost cuts. Can you explain that, what 
they might be?
    Dr. Furman. Sure. And I said it had contributed to it. I 
said it was one factor among many.
    You have seen things like reduced hospital readmissions, 
fewer hospital-acquired infections. A large increase in 
accountable care organizations. All of those were reforms that 
were made in the Affordable Care Act. You will then have others 
that will matter in the future, things like delivery system 
reforms, bundled payments, and even some of the payment changes 
for providers have in the past we have seen gone through to the 
private side as well. So I think all of that is contributing.
    Representative Hanna. In October the Labor Force 
Participation Rate was I think 62.8. It has not been that low 
since 1978. And if we accounted for the actual numbers of 
people unemployed it would be more like 11.3 percent, not the 
7.3 that we see.
    Do you think that that's--what could cause a trend like 
that? What do you see in the future? Do you think that trend is 
continuing? Maybe you can help me understand what you believe 
is causing that.
    Dr. Furman. I think the number one thing causing it is the 
retirement of the Baby Boomers. And that wasn't just 
predictable; it was predicted. In the Economic Report of the 
President in 2004, written under the Bush Administration, they 
wrote in that Economic Report that starting after 2008 you 
would see an accelerating decline in the Participation Rate.
    So we always knew----
    Representative Hanna. That accounts for 4 million. How do 
you account for the other 2 million people?
    Dr. Furman. You are certainly correct that that I think is 
the main factor, is that I think that there's also a cyclical 
reduction in the Participation Rate as well. And whenever the 
unemployment rate goes up, that tends to lead the Participation 
Rate to go down. And the Participation Rate tends to lag 
changes in the unemployment rate somewhat. So you have the 
structural compounded by the cyclical.
    Representative Hanna. You spoke earlier, too, about 
inequality and the disparagement--the disparaging difference 
between what we--the poor, and the extremely wealthy that we 
see. But a lot of what we have lost is really the middle class, 
which skews that in a way. It's not necessarily relevant how 
rich people are, or how poor people are; it's the middle class 
I think that adds to that concern.
    It would be my belief--it is my belief that educationally 
we have not kept up in the fashion that we should. Pre-K I 
think is a good example of that, and would probably go a long 
way towards helping that.
    Dr. Furman. Yes.
    Representative Hanna. But just give a moment to talk about 
it in any way you would like.
    Dr. Furman. I appreciate that chance to expand on what I 
said. It was a point Congressman Delaney brought up, as well, 
and I very much agree. How the middle class is doing is the 
best test of how the economy is doing.
    And to some degree what I was saying before was a shorthand 
for that trend we have seen of increased technology, increased 
demand for skills on the one hand; deceleration in educational 
attainment on the other hand; and those two trends combining to 
hollow out the middle class. So I certainly think an important 
part of the answer is in education, everything from pre-K as 
you just cited, through college.
    Representative Hanna. Thank you. I'm set. Thank you, very 
much.
    Chairman Brady. Thank you. Former Chair Maloney.
    Representative Maloney. Thank you, Mr. Chairman, and Vice 
Chairwoman, and it is a particular pleasure for me to welcome 
Chairman Furman as he is from the City that I am privileged to 
represent. And I can say unequivocally that New Yorkers are 
very proud of you and the role that you have played not only in 
this position but in other positions in the Administration to 
assist President Obama in the economic recovery which has led 
to 44 straight months of private-sector job growth. The GDP has 
grown for 10 straight quarters. And housing is rebounding.
    And the economic recovery is showing resilience and 
strength even though businesses and individuals have faced 
unnecessary uncertainty and harm because of the government 
shutdown.
    And that fight that really hurt consumer confidence, the 
Reuters is saying that it is at one of the lowest points it has 
ever been. And I would like you to comment on this self-
inflicted damage.
    How much do you think it costs our economy?
    And what other factors could slow and hold back our 
recovery? But it was interesting in your testimony that you 
pointed out that even with these manufactured crises and 
slowdowns, that our economic recovery was deeper and stronger 
than Europe. And could you comment on what factors and reasons 
this is happening?
    Dr. Furman. Thank you so much for those questions.
    In terms of consumer confidence, I think one of the 
troubling things is in the most recent consumer confidence data 
we got for the beginning of November it remained down, and 
actually fell a little bit further relative to where it was in 
October.
    I personally would have liked to have seen the episode 
ended and that confidence starting to recover. And it is too 
soon to say how lasting the consequences of the shutdown and 
the brinkmanship would be, but clearly it will have some 
persistent effects. And I think the degree of that persistence 
will depend a lot on how we handle it the next time. And I 
think we have a great opportunity, with both parties coming 
together through regular order, to address it.
    In terms of your second question, I think that is really 
the big-picture story in the economy. The unemployment rate, 
and I might be wrong in my memory, but I think it is north of 
12 percent in the Euro Zone and rising. And here it is 
obviously 7.3 percent, and has generally been on a trend of 
declining.
    And I think that is because, broadly speaking, we have 
gotten our economic policies right in this country. We have 
gotten, broadly speaking, our fiscal policies right, especially 
in the early days of the recovery.
    We have focused on things like exports, that the Vice Chair 
was talking about. We have had a really vigorous program in 
terms of financial rescue. We have put effort into housing in 
terms of bringing foreclosures down, and providing refinancing 
for families.
    So I think it is that broad-based all-fronts approach that 
has served the U.S. economy well.
    Representative Maloney. I would like you to comment on what 
I am calling the Democratic Stimulus. This is the Credit Card 
Bill of Rights, the Credit Card Accountability Responsibility 
Disclosure Act that was the second bill that President Obama 
signed into law. It was a bill that I offered and worked on for 
over two years.
    And there was a report in The New York Times, front page on 
the business section, that economists have come out with a 
report that this bill alone put $21 billion back into 
consumers' hands, back into the American economy, by cracking 
down on abuse, unfair, and anti-competitive practices.
    So this is a stimulus that can help the overall economy. 
And my question is: Could you estimate the impact on the 
economy of the Card Act in terms of economic growth and 
employment?
    Dr. Furman. Right. Well a study, as you just said, from 
some very good economists found that the Card Act was saving 
$20.8 billion per year, each and every year. It is important to 
understand that those savings disproportionately would accrue 
to middle, and in some cases lower income families who are more 
likely to spend the money. So there is no question that that 
would contribute to consumer spending and help the economy 
recover to its full potential.
    I think it is also important to put it in the broader 
context of de-leveraging we have seen for consumers, both 
credit cards but also as they have gotten mortgage debt and 
other debt more under control, you see interest payments have 
fallen from about 13 percent to about 10 percent and now stand 
around the lowest they have been on record.
    So I think all of that puts consumers--the contributions of 
the Card Act and everything else--consumers in a better 
position to be investing in homes, to be spending, and to 
driving the recovery.
    Representative Maloney. Well this was an important part of 
our recovery, and it did not cost any money----
    Dr. Furman. That's correct.
    Representative Maloney. It was just a reform. Can you think 
of any other areas that we could have a reform that would have 
this type of impact in helping the middle class, working men 
and women, putting more dollars, and rightfully so, back into 
their pockets? And thank the President for signing that bill 
into law.
    Dr. Furman. I will certainly do that. I don't have anything 
off the top of my head, but it is certainly win/win when you 
can find a way to protect consumers, not cost taxpayers any 
money, and do it in a way that helps the economy. And we should 
certainly be looking to any opportunity that could accomplish 
that.
    Representative Maloney. Thank you. My time has expired. 
Thank you.
    Chairman Brady. Thank you. Senator Lee.
    Senator Lee. Thank you, Mr. Chairman, and thank you, 
Chairman Furman, for being here with us today.
    I know you have weighed in in the past--shifting gears for 
a moment--on changing the minimum wage, and on the bills 
addressing the so-called ``Living Wage.''
    It has been suggested by some that we might at some point 
in the near future see movement of such a bill in the Senate, 
and so I wanted to talk to you about an article that you wrote 
in 2006, in June of 2006, in Slate, where you said you would 
``ignore efficiency and the impact on employment of the minimum 
wage for purposes of the article's argument.''
    While noting that at $10 or a $15 an hour minimum wage, 
ignoring those same factors would be, as you put it, ``a 
terrible assumption.''
    Can you explain what efficiency and employment factors 
might exist there? And why it would be, quote/unquote, ``a 
terrible assumption'' to think that a $10 or $15 an hour 
minimum wage might not impact these?
    Dr. Furman. Sure, Senator. I'm glad you've gone back and 
read that more recently than I have. But the issue with the 
minimum wage is that there have been a range of studies that 
have found that raising the minimum wage in the range of what 
we have seen before does not have an adverse effect on 
employment. And that is because the extra cost to a company is 
outweighed by the benefits, in terms of reduced turnover, 
better motivation, attracting workers, and the like.
    The levels of the minimum wage one is most comfortable with 
are ranges that we have seen in the past, in terms of the level 
and an increase. I think it is important to understand that I 
was writing in 2006. There has been inflation since 2006.
    So whatever numbers I have in that article there, if you 
are thinking about 2016, which is when many of these bills 
would be fully affected, you would want to take those numbers 
and take them up by 20 or 25 percent in order to have an 
apples-to-apples comparison.
    So I certainly was not commenting on a $10 minimum wage in 
the year 2016. I was commenting on it in the year 2006.
    Senator Lee. Sure. No, I understand that. And I also 
understand we have had relatively low inflation since then. So 
would it not be fair to say that the corresponding numbers 
might be, say, $12 to $18?
    Dr. Furman. Well the effective date for a lot of the 
minimum wage proposals are around 2015 or 2016. So there would 
be a decade since when I wrote. And then I don't know the 
number off the top of my head. I would have thought it would be 
about 20 percent inflation over the course of that decade, but 
I could obviously look that up and get back to you.
    Senator Lee. Okay. Thank you.
    In your testimony, while writing about lower health care 
costs, you indicated that in the short run lower pressure on 
employee compensation would translate to job growth.
    So all else being equal, would a higher minimum wage, say a 
$10 minimum wage, be a policy that would make it more likely to 
increase employment numbers, to put more Americans back to 
work?
    Dr. Furman. Right. The difference is that there are two 
sides of the ledger when it comes to the minimum wage. On the 
one hand, it is an extra cost. But on the one hand it is also 
an extra benefit in terms of higher productivity, retention, 
motivation, all of those factors.
    And the empirical work finds that those two factors roughly 
balance out, and as a result there is not a significant adverse 
effect on employment.
    In contrast, paying extra for health insurance is really 
just a cost to a company and it is not, you know, everything 
else being equal, of any benefit to the worker so it does not 
have that corresponding other side.
    Senator Lee. Okay. In that same piece that you wrote for 
Slate, you stated that: While supporting the minimum wage, 
absent other policy changes, you would prefer other policies 
because they tend to be more progressive, paid for 
disproportionately through taxes on the wealthy, on upper 
income individuals, rather than through higher prices that 
might be passed along to consumers.
    In a piece on the minimum wage for The New York Times this 
March, former CEA Chair Christina Romer made a similar point, 
stating that it might be the case that, quote, ``businesses 
pass along some of the cost of a higher minimum wage to 
consumers through higher prices. Often the customers paying 
those prices, including some of the diners at McDonald's or the 
shoppers at Wal-Mart, have very low family incomes. Thus, this 
price effect may harm the very people whom a minimum wage is 
supposed to help.''
    Is it in fact likely in your opinion that consumers would 
foot the cost of a higher minimum wage?
    Dr. Furman. I think it is a relatively small portion of the 
cost for those businesses. I think the minimum wage adjusted 
for inflation is today the same value it was in 1950. It has 
not gone up in 63 years. And so I think there is certainly 
scope for an increase, and I think that would complement 
policies like an expanded Earned Income Tax Credit.
    Senator Lee. Okay, I see my time has expired. But I 
understand you to be acknowledging that some of this would be 
passed on to consumers?
    Dr. Furman. No, actually--I apologize, Senator, but I think 
it actually is part of a strengthening of the economy to put 
more purchasing power in the hands of families, and I think 
that would help the economy overall and help consumers more 
broadly.
    Senator Lee. I wish we had more time to talk about that. 
Thank you, Mr. Chairman.
    Chairman Brady. I can feel it coming on, Senator.
    Mr. Chairman, than you for being here today. Obviously we 
are encouraged by certain parts of the economy, and still 
disappointed by many parts, but looking for bi-partisan 
solutions on how we improve the economy, grow jobs, and bridge 
the inequality between the middle class and Wall Street.
    I very much appreciate you being here today and look 
forward to hopefully having you back after the next Economic 
Report is released, after the beginning of the year, February, 
March, whatever that timeframe is. And, Chairman, thanks for 
being here today.
    With that, the hearing is adjourned.
    (Whereupon, at 3:36 p.m., Wednesday, November 13, 2013, the 
hearing was adjourned.)
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