[Senate Hearing 115-49]
[From the U.S. Government Publishing Office]
S. Hrg. 115-49
NOMINATIONS OF KEVIN ALLEN HASSETT AND PAMELA HUGHES PATENAUDE
=======================================================================
HEARING
before the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
ON
NOMINATIONS OF:
Kevin Allen Hassett, of Massachusetts, to be Chairman, Council of
Economic Advisers
__________
Pamela Hughes Patenaude, of New Hampshire, to be Deputy Secretary, U.S.
Housing and Urban Development
__________
JUNE 6, 2017
__________
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
MIKE CRAPO, Idaho, Chairman
RICHARD C. SHELBY, Alabama SHERROD BROWN, Ohio
BOB CORKER, Tennessee JACK REED, Rhode Island
PATRICK J. TOOMEY, Pennsylvania ROBERT MENENDEZ, New Jersey
DEAN HELLER, Nevada JON TESTER, Montana
TIM SCOTT, South Carolina MARK R. WARNER, Virginia
BEN SASSE, Nebraska ELIZABETH WARREN, Massachusetts
TOM COTTON, Arkansas HEIDI HEITKAMP, North Dakota
MIKE ROUNDS, South Dakota JOE DONNELLY, Indiana
DAVID PERDUE, Georgia BRIAN SCHATZ, Hawaii
THOM TILLIS, North Carolina CHRIS VAN HOLLEN, Maryland
JOHN KENNEDY, Louisiana CATHERINE CORTEZ MASTO, Nevada
Gregg Richard, Staff Director
Mark Powden, Democratic Staff Director
Elad Roisman, Chief Counsel
John O'Hara, Chief Counsel for National Security Policy
Kristine Johnson, Professional Staff Member
Matt Jones, Professional Staff Member
Graham Steele, Democratic Chief Counsel
Laura Swanson, Democratic Deputy Staff Director
Colin McGinnis, Democratic Policy Director
Beth Cooper, Democratic Professional Staff Member
Homer Carlisle, Democratic Professional Staff Member
Dawn Ratliff, Chief Clerk
Shelvin Simmons, IT Director
Jim Crowell, Editor
(ii)
C O N T E N T S
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TUESDAY, JUNE 6, 2017
Page
Opening statement of Chairman Crapo.............................. 1
Opening statements, comments, or prepared statements of:
Senator Brown................................................ 2
WITNESSES
Rob Portman, a U.S. Senator from the State of Ohio............... 4
Jeanne Shaheen, a U.S. Senator from the State of New Hampshire... 5
NOMINEES
Kevin Allen Hassett, of Massachusetts, to be Chairman, Council of
Economic Advisers.............................................. 5
Prepared statement........................................... 30
Biographical sketch of nominee............................... 32
Responses to written questions of:
Senator Brown............................................ 89
Senator Sasse............................................ 95
Senator Reed............................................. 102
Senator Menendez......................................... 103
Senator Warner........................................... 103
Senator Heitkamp......................................... 104
Senator Cortez Masto..................................... 107
Senator Schatz........................................... 108
Pamela Hughes Patenaude, of New Hampshire, to be Deputy
Secretary, U.S. Housing and Urban Development.................. 8
Prepared statement........................................... 77
Biographical sketch of nominee............................... 79
Responses to written questions of:
Senator Brown............................................ 114
Senator Shelby........................................... 121
Senator Sasse............................................ 121
Senator Reed............................................. 122
Senator Menendez......................................... 123
Senator Heitkamp......................................... 129
Senator Cortez Masto..................................... 131
Senator Schatz........................................... 134
Additional Material Supplied for the Record
Letters submitted in support of the nomination of Kevin Allen
Hassett........................................................ 136
Letters submitted in support of the nomination of Pamela Hughes
Patenaude...................................................... 142
(iii)
NOMINATIONS OF KEVIN ALLEN HASSETT, OF MASSACHUSETTS, TO BE CHAIRMAN,
COUNCIL OF ECONOMIC ADVISERS AND PAMELA HUGHES PATENAUDE, OF NEW
HAMPSHIRE, TO BE DEPUTY SECRETARY, U.S. HOUSING AND URBAN DEVELOPMENT
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TUESDAY, JUNE 6, 2017
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 10:05 a.m., in room SD-538, Dirksen
Senate Office Building, Hon. Mike Crapo, Chairman of the
Committee, presiding.
OPENING STATEMENT OF CHAIRMAN MIKE CRAPO
Chairman Crapo. This hearing will come to order.
This morning, we will consider the nominations of Mr. Kevin
Hassett to be Chairman of the Council of Economic Advisers and
the Honorable Pamela Patenaude to be the Deputy Secretary for
the United States Department of Housing and Urban Development.
We will begin today's hearing with an opening statement by
me and then by Senator Brown. And then I will turn to Senator
Portman, who will introduce Mr. Hassett, and to Senator
Shaheen, when she arrives, who will introduce Ms. Patenaude.
I see friends and family behind you as well, and I also see
my good friend Bob Dole--at least I did just a minute ago--and
we welcome him here.
Each of these nominees stands to impact the standard of
living for Americans across the country and will play an
important role in spurring economic opportunity.
Mr. Hassett has had a distinguished career in economics
that includes positions in academia, Government, and policy. He
is a widely consulted expert on economic policy and has
contributed countless scholarly papers, commentary, and
testimony. His nomination has received bipartisan support from
notable economists, including past CEA Chairmen.
Mr. Hassett's particular understanding of tax policy and
the way it affects citizens and businesses will be an
invaluable asset to the Administration. He has extensive
experience with economic modeling and will be able to provide
sound economic analysis for pro-growth policies. Key to
economic growth is not only robust financial markets, but also
economic policies that will best enable all Americans to unlock
their potential. I look forward to hearing from Mr. Hassett on
how economic analysis can play a role in achieving this goal.
Ms. Patenaude is a seasoned veteran in housing and
community development who has held leadership roles at the
local and Federal level. Twelve years ago, Ms. Patenaude
received unanimous support from this Committee and was
confirmed by the Senate with a voice vote to become Assistant
Secretary for Community Planning and Development at HUD. In
this role, Ms. Patenaude oversaw all of the Department's
community development operations.
As a former leader in a local housing agency, she has on-
the-ground experience and developed an important understanding
of the impact HUD's policies have on local partners. Ms.
Patenaude's nomination has been met with bipartisan support as
well from industry leaders, affordable housing advocates and
public housing agencies alike.
This speaks to Ms. Patenaude's distinguished reputation and
her commitment to addressing important housing issues.
I look forward to working with Ms. Patenaude on
opportunities to improve the efficiency of HUD programs, reduce
regulatory burdens on local housing authorities, leverage more
private capital, empower local decision making, encourage self-
sufficiency, and address comprehensive housing finance reform.
At this time, I ask unanimous consent to enter into the
record two letters endorsing Mr. Hassett, one of which is
signed by 44 economists from both sides of the aisle, including
several top economists from the Obama administration. Without
objection, so ordered.
I also ask unanimous consent to enter into the record more
than 30 letters showing bipartisan support for Ms. Patenaude,
including a letter signed by former Majority Leaders Bob Dole
and George Mitchell. Without objection, so ordered.
Congratulations to both of you on your nominations to these
very important offices, and thank you for your willingness to
serve.
Senator Brown.
STATEMENT OF SENATOR SHERROD BROWN
Senator Brown. Thank you, Mr. Chairman. Mr. Hassett, Ms.
Patenaude, welcome. Senator Shaheen and my friend and colleague
from Ohio, Senator Portman, nice to see you two.
Thanks for holding this hearing. I look forward to hearing
the views of the two witnesses on important areas of the
Committee's jurisdiction: the economy, housing, community
development.
Ms. Patenaude comes to us with a long resume of involvement
with housing and community development programs, HUD
management, and housing advocacy. More recently, she has headed
the Terwilliger Foundation for Housing America's Families. In a
report entitled ``The Silent Housing Crisis'', the foundation
reported that having access to safe and affordable housing has
long been recognized as a part of America's critical compact
with its citizens. I look forward to hearing her views,
particularly since her past advocacy seems at odds with the
approach that HUD has taken in its budget proposal.
Mr. Hassett is a respected economist. He has done important
work related to the policies that drove manufacturing out of
Ohio communities and others like it across the country. I hope
that his work at the Council of Economic Advisers will focus on
policies to create jobs and improve education and workforce
development and actually rebuild infrastructure. That is what
is needed to strengthen the economy. Instead, we have seen the
Administration threaten Wall Street reform, attempt to take
away health insurance from 23 million people--I appreciate my
colleague from Ohio speaking out on the Medicaid cuts--target
working Americans with steep budget cuts and increased debt,
all to further the interests of the wealthiest Americans.
The Administration's HUD budget proposal is a stark
illustration of this agenda. Eleven million renters, as Ms.
Patenaude and I discussed in my office--and she is so very
aware of this--pay over half their income in rent, meaning one
thing goes bad in their lives, and they are evicted. They
lose--their children have to go to a different school.
Everything turns upside down. Eleven million renters--I want
you always to remember that number, 11 million renters--pay
half their incomes in rent. Five hundred thousand people are
homeless. The President's budget would cut $7 billion, 15
percent, from the HUD budget. The budget would eliminate
programs like Community Development Block Grants and HOME, cut
funding for public housing repairs by 70 percent. We all know
the condition of public housing, and to cut their funding for
repairs by 70 percent, to eliminate funding for an estimated
250,000 housing vouchers next year, it reduces funding for lead
hazard control and healthy housing grants, to protect children
from lead poisoning, from asthma, and other health problems.
Senator Portman knows, in cities in my State, in housing built
before Senator Portman and I were born, the lead content, the
lead exposure in those homes are overwhelming. In some cases,
according to the Health Department, 99 percent of those homes
have toxic levels of lead.
Five months ago in this room, Dr. Carson scoffed at the
notion that he would support a 10-percent cut in the HUD
budget. He said he understood from his experience as a
pediatric neurosurgeon how it was far less costly to avoid lead
poisoning than to treat it. I was one of five or six Democrats
that voted for his confirmation on the floor of the Senate. I
did that because of his personal and his public promises on
lead. Yet this budget, which apparently he is defending--and
that is one of the things we want to hear from you, Ms.
Patenaude--undermines all of this.
The broken promises do not end there. The President
promised in the campaign trail in Toledo and across the country
to revitalize our inner cities and rebuild infrastructure. I
had hoped we would be able to work with the Administration to
strengthen our Nation while providing good jobs in Ohio.
Instead, the President proposes to cut more existing
infrastructure programs than the $200 billion he is willing to
invest. The HUD budget will only add to the struggles of our
inner cities.
I look forward to hearing from our two witnesses how we
tackle the many challenges that face this country from the
crisis of housing affordability for our families and seniors to
the stagnant wages and employment prospects of far too many of
our fellow Americans.
Thank you, Mr. Chairman.
Chairman Crapo. Thank you, Senator Brown.
Now we will turn to Senator Portman to introduce Mr.
Hassett.
STATEMENT OF ROB PORTMAN, A U.S. SENATOR FROM THE STATE OF OHIO
Senator Portman. Thank you, Mr. Chairman, for letting me do
this, and I thank my colleague from Ohio and my friend who just
spoke, the Ranking Member.
It is a pleasure to introduce Kevin Hassett. He, as you
know, is being nominated to serve as Chairman of the Council of
Economic Advisers. I am delighted to see that he has brought
his own team of advisers with him today: his sons Jamie and
John, and his wife, Kristie. Who is the Chair, by the way, of
that Council?
Mrs. Hassett. That would be me.
[Laughter.]
Senator Portman. That would be Kristie. Kristie is the
Chair.
We have known each other a long time. Kevin Hassett and I
served together in the first Bush administration, the
Administration of George H.W. Bush. He was in the Treasury
Department. I was Director of the White House Office of
Legislative Affairs, and I got to know him and respect him. And
he continued to serve as a policy consultant for the Treasury
Department under the Clinton administration. I went on to the
House and the Ways and Means Committee where I looked to him to
provide economic counsel as we tried to reform the Tax Code.
And, again, as the Chairman has mentioned, that is one of his
specialties, and I am pleased that he is being nominated for
this position, in part because there is a need to fix a broken
Tax Code.
He has gotten a lot of respect from economists from both
sides of the aisle. His predecessor as Chair of the Council of
Economic Advisers, Jason Furman, has called him an ``excellent
pick.'' That is from Jason Furman. He has also been endorsed by
Obama administration economists Austan Goolsbee, Peter Orszag,
and Christina Romer, all of whom I think you all know and have
had here before the Committee.
He has served as a senior economist at the Federal Reserve
Board of Governors and as an economic adviser to five major
Presidential campaigns. In particular, I want to point out that
Kevin is an expert, again, on tax reform. I think this is going
to be incredibly important to us, and his focus has been on how
to have a Tax Code that gets rid of some of the loopholes and
some of the preferences for special interests and a simpler Tax
Code with lower rates. And I think that, again, is exactly what
we need to get the economy moving.
What he has shown is that if you could fix the Tax Code in
that way, the major beneficiary would be middle-class families;
wages are flat right now and the best thing to do to get wages
up is actually to reform the Tax Code. And I think that is
really important research. The middle-class squeeze that too
many of our constituents are feeling, flat wages and higher
expenses, is something we can address through a number of ways,
and one certainly is through tax reform. And his work in that
area has respect on both sides of the aisle.
He is the right person at the right time, Mr. Chairman. I
think as Chairman of the Council of Economic Advisers, the
difficult task of tax reform, among other things, will be much
easier.
So thank you very much for giving me the opportunity to say
a few words this morning about Mr. Hassett, and I strongly
support him, and I hope the Committee will send him to the
floor.
Chairman Crapo. Thank you, Senator Portman.
Now, Senator Shaheen, would you please introduce Ms.
Patenaude?
STATEMENT OF JEANNE SHAHEEN, A U.S. SENATOR FROM THE STATE OF
NEW HAMPSHIRE
Senator Shaheen. Thank you, Mr. Chairman and Senator Brown
and Members of the Committee. I am really delighted to be here
to introduce a fellow Granite Stater, Pam Patenaude, to be
President Trump's nominee to serve as the Deputy Secretary of
the Department of Housing and Urban Development. And what I
have to say is probably overkill after your glowing review of
her resume, Mr. Chairman, but Ms. Patenaude's experience in
housing policy goes back nearly three-and-a-half decades,
beginning with her work in New Hampshire at the New Hampshire
Housing Finance Agency. That was followed, as you pointed out,
by service as White House Liaison at the Department of Housing
and Urban Development in the Reagan administration.
Now, Pam and I first got to know each other when I was
Governor and she served in a succession of high-level
positions: Director of New Hampshire's Small Business
Development Centers, the Deputy Chief of Staff and later State
Director for then-Senator Bob Smith of New Hampshire, and
Assistant Deputy Secretary at HUD. And as you pointed out, she
later served as HUD Assistant Secretary in the Office of
Community Planning and Development, and as an executive with
the Urban Land Institute.
You know, what impressed me always about Pam is that she
understands that access to affordable housing and a safe place
to call home is the foundation of families and strong
communities. And throughout her career, she has been engaged in
these challenges as a thinker, a leader, and a problem solver.
And I have especially appreciated her ability to bring together
disparate stakeholder groups to forge bipartisan agreements in
the housing arena, and that she is personally dedicated to the
core mission of HUD, including the challenge of bringing
opportunity, as you pointed out, Senator Brown, to America's
most disadvantaged urban communities.
I think our Nation is fortunate to have someone of Pam's
high caliber who is willing and eager to serve in this position
in the Federal Government, and I hope that Members of the
Committee will agree with me that her experience and expertise
makes her superbly suited to serve as Deputy Secretary at HUD.
So thank you, Mr. Chairman. Thank you, Members of the
Committee.
Chairman Crapo. Thank you very much, Senator Shaheen. We
appreciate that introduction.
And now, before we begin your testimony, I would like to
place both of the nominees under oath, so would you please rise
and raise your right hand? Do you swear or affirm that the
testimony you are about to give is the truth, the whole truth,
and nothing but the truth, so help you God?
Mr. Hassett. I do.
Ms. Patenaude. I do.
Chairman Crapo. And do you agree to appear and testify
before any duly constituted Committee of the Senate?
Mr. Hassett. I do.
Ms. Patenaude. I do.
Chairman Crapo. Thank you very much. You may be seated.
And, Mr. Hassett, you may proceed.
Each of you may take a few moments, which we will not take
away from your time, to introduce any members of your family
you may wish to introduce.
STATEMENT OF KEVIN ALLEN HASSETT, OF MASSACHUSETTS, TO BE
CHAIRMAN, COUNCIL OF ECONOMIC ADVISERS
Mr. Hassett. Thank you very much, Senator Portman, for the
kind introduction. And Senator Crapo, Ranking Member Brown, and
distinguished Members of the Committee, I am truly humbled and
honored to be before you today as President Trump's nominee to
be the Chairman of the Council of Economic Advisers. I am also
deeply grateful to have had a chance to get to know many of you
throughout this process. I wish that the people who worry about
Washington could have witnessed the many private kindnesses
that the Members of this Committee and staff have extended to
me in the last few weeks.
And I would also like to begin, as you invited me to,
Senator, by introducing my college sweetheart and wife of 31
years, Kristie Hassett, and next to her are my sons John and
James, who are sitting behind me. I would also like to
acknowledge my father, John, who was a Korean War veteran but
could not be here today; and my mother, Sylvia, and my sister,
Julia, who sadly are no longer with us.
Senators, I have almost always been a student of economics,
even before I knew it. I was raised by two public school
teachers in the beautiful town of Greenfield, Massachusetts. My
mother was a kindergarten teacher in neighboring Turners Falls.
My father taught English at Greenfield High School and still
lives in Greenfield in the same house I was raised in.
As I was growing up, my town went through a very painful
transition. For the longest time, Greenfield was a thriving
mill town, with the world's largest tap and die operation that
employed thousands of citizens. Neighboring Turners Falls was
almost as prosperous, housing a massive paper mill along the
banks of the Connecticut River. But as we got older, times were
changing. Plants closed. Families started moving away.
Graduates stopped coming home after college.
It seemed impossible to look around and not wonder what was
happening to my town. When I started studying economics in
college and again in graduate school, I always came back to the
example of how my town changed. Why did plants move away or
close? Why did many of the good jobs disappear? And is there
something that policymakers can do to restore prosperity?
Now, economic models suggest a simple answer. Workers can
have high wages if they have high productivity, and high
productivity is enabled by an ample supply of capital. But
going from things that work in textbook models to actual policy
recommendations is a difficult thing. The real world has many
complications that are not included in the models, and the data
often surprise economists, especially those who have too much
confidence in their theories.
That observation led me over the years to focus on things
that can be learned from the data. My dissertation focused in
part on how wages have moved over the business cycle. What do
the periods when workers prosper have in common? My early
career was spent studying how firms' investment decisions
respond to Government policy and how labor and capital
interact.
Since then, my studies have taken me in many different
directions, but I think my record makes clear a few things that
I would like to emphasize about my approach to economics.
First, I believe it is essential to gather evidence and not
just rely on theory. Early in my career, the empirical
literature on international taxation contained many holes,
often because the country-by-country data that one would need
for study were not available. My coauthors and I responded to
this by building a large international tax data base and making
its data available to anyone who wanted it.
Which leads me to my second point: I believe that economic
analysis should be transparent and replicable. An example of my
commitment to this idea is the Open Source Policy Center, which
I cofounded at the American Enterprise Institute. The OSPC has
open source computer code that allows anyone to score tax
plans, evaluate the distributional consequences of that plan,
and see what the assumptions are that others use when they
score their own plans. The OSPC promises to democratize the tax
debate.
Finally, while I respect the need for all types of
research, even the very theoretical, my own focus has mostly
been work that holds the promise of improving the lives of
others and that sheds light on the circumstances of those less
fortunate, like those in my hometown who lost their jobs when I
was growing up. A recent example of this would be my work with
the Economic Innovation Group, where I explore the causes and
cures of the striking geographic inequality that we see in
America today. EIG researchers have worked hard to identify and
measure distress and have constructed publicly available data
sets that shed light on the communities around the country that
most need our help. There is an interactive map even at the EIG
website that helps people explore their own communities, with
the dark color red indicating extreme economic distress. One of
the reddest shapes on the map in Massachusetts is Turners
Falls, the town across the river from my dad's house where the
paper mill closed.
The Council of Economic Advisers was created to provide the
President with professional and objective economic advice, to
help policymakers craft solutions for problems like those we
face today. Throughout history, the CEA has done so admirably
during both Democratic and Republican administrations. In 2009,
then-nominee Christina Romer told this Committee that she would
do her, and I quote, ``utmost to protect the integrity of the
CEA, and make it a center for unbiased, scientific analysis.''
Chairman Crapo and Members of the Committee, if confirmed, I
pledge to you that I would do the same and that I would
enthusiastically and energetically take the helm of this great
American institution.
Thank you.
Chairman Crapo. Thank you, Mr. Hassett.
Ms. Patenaude.
STATEMENT OF PAMELA HUGHES PATENAUDE, OF NEW HAMPSHIRE, TO BE
DEPUTY SECRETARY, U.S. HOUSING AND URBAN DEVELOPMENT
Ms. Patenaude. Thank you, Chairman Crapo, Ranking Member
Brown, and distinguished Members of this Committee. It is a
great privilege to appear before you this morning. I am deeply
honored by President Trump's decision to nominate me as the
Deputy Secretary of the U.S. Department of Housing and Urban
Development.
I also want to thank Senator Shaheen for her very
thoughtful introduction, and a special thanks to my dear friend
Senator Bob Dole for joining us this morning.
Mr. Chairman, if I may take a moment to introduce my
husband and our three daughters: my husband of 32 years, Chuck
Patenaude; Caitlin--they are out of order here--Meghan, and
Jennifer. And I also want to recognize my niece, Kristen
Hughes, who is also here with us today, and the many friends
who are sitting behind me showing their love and support.
Housing has always been close to my heart and part of my
family history. My late parents, Bob and Estella Hughes,
together created and ran a successful homebuilding business in
New Hampshire. In the Hughes household, there was simply no
escaping talk about housing.
For that reason, it was no surprise to my parents when I
came to share their passion for housing. As a senior at Saint
Anselm College, I experienced our Nation's capital as many
college students do: as an intern. I never imagined that that
internship at HUD headquarters 35 years ago would launch a
career that continues to energize, challenge, and inspire me.
Upon graduation, I administered the Section 8 rental assistance
program at the New Hampshire Housing Finance Authority, where I
observed firsthand the transformational impact that HUD
programs could have on improving the quality of life for
seniors and our most vulnerable citizens.
During my career, I have also served at HUD in several
leadership roles. As Assistant Deputy Secretary for Field
Policy and Management, I restructured HUD's critical field
operations and contributed to the development of the 5-year
Strategic Plan. As Assistant Secretary for Community Planning
and Development, I administered more than $8 billion in
community economic development and affordable housing funds and
managed a team of more than 800 experienced professionals
committed to carrying out HUD's mission.
Outside of HUD, my career has focused on promoting housing
policies that are aligned with the significant and changing
needs of the American people.
At the Urban Land Institute, I established the ULI
Terwilliger Center for Workforce Housing to draw attention to
the plight of America's most essential workers: firefighters,
police officers, nurses, and teachers, who are too often priced
out of the communities they serve.
At the Bipartisan Policy Center, I directed the Housing
Commission under the steadfast leadership of three of your
former colleagues: Senator George Mitchell, Senator Kit Bond,
and Senator Mel Martinez, as well as former HUD Secretary Henry
Cisneros. The Commission developed a comprehensive report
outlining a new direction for Federal housing policy.
Currently, I serve as president of the J. Ronald
Terwilliger Foundation for Housing America's Families, where we
seek to elevate rental affordability as a national priority and
to educate policymakers about the silent housing crisis in
America.
Through these initiatives, I have developed strong working
relationships with diverse groups, diverse members of the
housing community--affordable housing advocates, homebuilders,
mortgage bankers, Government policymakers, and academics. I am
very proud to say that bipartisan collaboration has been a
hallmark of these initiatives.
My career in housing at the local, State, and Federal
levels of Government and in the private sector has broadened my
view of America's housing policies. This unique perspective
enables me to understand the factors that contribute to the
success of some programs, as well as the factors that diminish
the well-intended impacts of others.
As Matthew Desmond articulated in his Pulitzer Prize-
winning book ``Evicted'', ``we have failed to fully appreciate
how deeply housing is implicated in the creation of poverty.''
Dr. Desmond believes that ``powerful solutions are within our
collective reach.'' I agree with Dr. Desmond. I believe that as
a Nation, we must recognize that housing is not just a
commodity but a foundation for economic mobility and personal
growth.
If confirmed by the U.S. Senate, I pledge to work closely
with this Committee, with Congress, and with Secretary Carson
to develop new solutions to address the affordable housing
crisis in America and to implement the critical mission of the
U.S. Department of Housing and Urban Development.
I appreciate the Committee's thoughtful consideration of my
nomination. Thank you, Mr. Chairman.
Chairman Crapo. Thank you very much, Ms. Patenaude.
My first question, and I mean brief here because I only
have 5 minutes, but I would like you each to briefly, like
within 60 seconds, to just take a minute to discuss what your
top priorities will be as you are confirmed. Mr. Hassett.
Mr. Hassett. Senator, thank you for the question. If
confirmed, my first priority would be, frankly, to recruit a
lot of economists because the Council of Economic Advisers has
a proud tradition of recruiting folks from universities all
around the country to come to Washington to provide unbiased,
scientific, objective advice to the President. And unlike a lot
of agencies, the Council of Economic Advisers turns over a lot,
and so that there are new people coming to town to serve their
country all the time. And if confirmed, that would be the very
first order of business for me because the staff probably would
go from around 35 to 10 were we not to start recruiting.
The second thing I could say is a very high priority for me
is to increase the transparency of the modeling and the
communication that goes on in all of the economic communication
of the Administration. So I would like to take the work that I
have done at the Open Source Policy Center and at EIG where we
have made these interactive maps and bring that kind of spirit
of transparency to the CEA.
Chairman Crapo. Thank you.
Ms. Patenaude.
Ms. Patenaude. Thank you, Mr. Chairman. My priorities
obviously will be the Secretary's priorities, but the first
thing I would like to do is to hear what the Secretary has
learned during his first 100 days during his listening tour.
From my past experience, I know that I need to certainly assess
the human capital needs and the operations needs of the
Department, and I look forward to working with the Secretary on
developing a strategic plan based on his priorities and those
of the Administration. Thank you.
Chairman Crapo. Well, thank you. And, Ms. Patenaude, I will
stick with you because I am going to go back to both of you
with sort of a priority of mine I would like you to assume. And
with regard to you, Ms. Patenaude, there are actually several.
There has been a bipartisan interest in addressing a number
of important issues in the housing space, such as streamlining
regulatory requirements for smaller PHAs, increasing the role
of private capital in financing affordable housing, and
creating a new, sustainable housing finance system. And I do
not need you to talk about these. I just want to know: Would
you agree to prioritize those and work with us as we seek to
achieve those objectives?
Ms. Patenaude. Yes, Mr. Chairman.
Chairman Crapo. Thank you very much.
And, Mr. Hassett, my question for you is: In the space you
just referenced, you have extensive experience with economic
growth modeling and evaluating the economic impacts of policy.
You mentioned you would like to prioritize getting that more
transparent and, I assume, out there and understood and used.
Various growth estimates have been discussed recently in the
context of tax and budget and other reforms. In your opinion,
is 3 percent growth a reasonable target? And if so, please
explain what policies would be needed to reach that goal?
Mr. Hassett. Thank you very much. The 3 percent growth is
something that Americans used to be accustomed to; 3 percent
growth was the rule rather than the exception. But growth
comes, basically if you want more output, ultimately from more
inputs, and historically we have had a lot of labor force
growth, capital stock growth, and technological innovation that
have driven growth up to around 3 percent.
All three of those factors have been very disappointing for
some time now. We had the computer revolution in the 1990s, but
that seems to have slowed down. Capital formation in the late
1990s was contributing about 1.2 percent per year to growth.
Right now it is about 0.4 or 0.5. And labor force growth, of
course, has been disappointing as well.
And so if we want to go from the 2 or so percent growth
that we have been experiencing to 3 percent, then we are going
to have to get those three things moving. And the thing that I
have researched the most throughout my career is capital,
capital investment, how it affects workers and how to get it
going. And I think that it is absolutely possible to return to
a place where you could get 3 percent growth if we design
policies in a way that would encourage capital formation in the
United States.
Chairman Crapo. Thank you. And I would assume that would
include some comprehensive tax reform. Is that correct?
Mr. Hassett. That is correct, Senator, and I think this
estimate was a little bit high, but there was a survey at the
National Bureau of Economic Research a number of years ago
where a bunch of economists were surveyed about the impact of
the 1986 Tax Reform Act, and I believe the median estimate of
the economic growth that they said was about 1 percent per
year. And so, again, if you are thinking about how could we get
from 2-ish to around 3, then tax reform is certainly part of
the--one of the tools that we would want to use.
Chairman Crapo. All right. Thank you very much.
Mr. Hassett. Thank you.
Chairman Crapo. Senator Brown.
Senator Brown. Thank you, Mr. Chairman.
Ms. Patenaude, thank you again for being here. In your work
with Terwilliger, you cited stagnating wages, a weak economy,
and ``the acute shortage of rental homes that are both
affordable and available to those households with the lowest
incomes'' as factors in the rental affordability crisis we see
today. This indicates you believe broad economic trends are
contributing to the current shortage of affordable rental
housing. Is that correct?
Ms. Patenaude. That is correct.
Senator Brown. OK. Thanks. You mentioned Matthew Desmond's
observation in his book ``Evicted'' that ``we have failed to
fully appreciate how deeply housing is implicated in the
creation of poverty.'' When he came to see a group of us in the
Senate 1 day, I asked him to meet with a number of Senators.
When he signed his book, he wrote, ``Home equals life,''
understanding, as you do, in our discussion that I know you
believe that families turn upside down in so many ways if they
do not have a stable, affordable home.
When I quoted him just now, ``we have failed to fully
appreciate how deeply housing is implicated in the creation of
poverty,'' if you believe what he wrote to be true, then the
HUD budget, if adopted, would it not create additional poverty?
Ms. Patenaude. Senator Brown, I was not involved in the
proposed budget in any way, shape, or form, and I very much
appreciate and understand the role of Congress in formulating
the budget and look forward to working with this Committee.
Senator Brown. But you are going to be--let us just put it
gently, that your knowledge and expertise far exceeds your
boss'. I think that is generally believed. You may not want to
agree with that, but he will be listening to you. What will you
say to him about this budget, that these kind of cuts far in
excess of what he said he would support when he was in front of
us 3 or 4 months ago, what do you argue with him? What do you
say to him?
Ms. Patenaude. I have not had a conversation about the
budget with Secretary Carson. He is going to testify before the
House tomorrow.
Senator Brown. My question is: What will you say to him,
once confirmed----
Ms. Patenaude. As a lifelong houser, I think you can count
on me that I will advocate for programs that work and are
effective going forward.
Senator Brown. So does that mean you do not agree with the
President's budget cuts?
Ms. Patenaude. No. As the President's nominee, I support
the President's budget.
Senator Brown. But you will advocate for adequate funding
of these programs that you know work?
Ms. Patenaude. Going forward, if I am confirmed by the U.S.
Senate, yes.
Senator Brown. OK. I do not know how you support the
President's budget cuts, but you support adequate funding for
these programs that work. Can you explain that to me?
Ms. Patenaude. To clarify, I did not say, you know, the
specific amount on what I would advocate for, but I am--
certainly there are programs that have been very effective at
HUD, and along with that I would be making--I can imagine that
I would be making recommendations to streamline some of these
programs. I am very hopeful that we will come up with new
solutions working with this Committee and your staff to address
the changing housing needs in this country.
Senator Brown. Thank you. I want to give a moment to your
partner there.
A little over a decade ago, there was a debate over whether
the economic growth rate assumed by the Social Security
trustees was too pessimistic, in line with Chairman Crapo's
question. You coauthored a paper then that defended that rate,
1.9 percent, over the more optimistic 3-percent growth rate
that we had experienced over the previous four decades. I think
that was rather prescient of you. Part of your reasoning was
that prudent planning for the future should actually place more
weight on the downside risk than on the upside potential. Now
that it is conservatives who want to assume their way to
balance, do you believe a 3-percent growth rate over the next
decade really is warranted--I heard your comments to the
Chairman--when the consensus among the Fed, the Blue Chip
forecasts, and the Kevin Hassett of 2006 is on the order of 1.9
percent?
Mr. Hassett. Senator, again, I do not want to take up too
much time, but for sure if we do not change policy, we can
expect to stay around 2 percent. I think if you look at the
Blue Chip forecasts, they do not envision the kind of sweeping
tax changes that we experienced in a bipartisan fashion in 1986
and that have been proposed in the House's----
Senator Brown. So if I can interrupt, I am sorry.
Mr. Hassett. Sure.
Senator Brown. So that 3 percent is really contingent on
getting real tax reform, not just a tax cut. You know from your
years in the Bush years that two significant cuts went
overwhelmingly to the wealthy and there was literally zero--
zero--private sector net job growth in those 8 years. So you
are arguing that only if we do real tax reform, not just tax
cuts but real tax reform, can we get anywhere close to the
assumed 3 percent?
Mr. Hassett. I think that is a fair assessment.
Senator Brown. OK. Thank you.
Let me take my last 3 seconds--sorry, Mr. Chairman. I want
to talk about lead for a second because of your boss the
Secretary of HUD's comments as the nominee, Nominee Carson
rather than Secretary Carson. I am particularly troubled by the
proposal on reducing funding for HUD's lead grants and
eliminate HOME and CDBG use for home repairs and other
activities. As I mentioned briefly, most of the homes in
Cleveland, most of the homes in Appalachia, most of the homes
in Dayton and Cincinnati and Youngstown are at least 50 or 60
years old. The head of the Cleveland Health Department said
literally 99 percent of those homes have toxic levels of lead.
Share your thoughts on the effects of childhood lead
poisoning in this country and the role that HUD can play to
eliminate it.
Ms. Patenaude. Thank you, Senator Brown. I appreciate
hearing your concerns. Yesterday Dr. Carson proclaimed June
``Healthy Homes Month'', and he released a video. I did not
watch the entire video because I was preparing for today's
hearing, but the video addresses lead. So I believe that
Secretary Carson is very committed to this issue and will
continue to be.
The budget, as I understand it, it was level funding until
the omnibus, so under the CR, that level of funding is what was
requested in the proposed budget. It was not until after the
omnibus was passed that it actually became a cut. But I think
the level of support is significant.
Senator Brown. Well, that is a matter of opinion. The
original CDBG proposal was deep cuts.
Chairman Crapo. Thank you very much.
Senator Corker? And I do remind my colleagues to hang in
there with that 5-minute rule.
Senator Corker. Yes, sir. I just want to get ready before
my 5 minutes.
[Laughter.]
Senator Corker. They have not started yet.
Ms. Patenaude, I want to thank you for your willingness to
serve. We had a very good meeting in the office, and numbers of
people that I have worked with in housing speak very highly of
you, and I look forward to your confirmation.
Mr. Hassett, your wonderful family is here, and I know
that, you know, you are one of the nicest folks I have met that
is coming through. And I know that when we met, on the other
hand, by the time the meeting was over, my temperature was
about to take my head off as I thought about the fact that
think tanks that you have been a part of, of course, but so
many think tanks here in our Washington community make the
perfect the enemy of the good and really can be very
destructive--very destructive, as we discussed--as we try to
move ahead and actually pass legislation that accommodates some
commonality on both the Republican and Democratic side. And,
actually, the think tank that you have been a part of has
played a big role in trying to undermine actually bipartisan
efforts that we have put together here on the Committee. You
and I discussed that fully. And as I thought about it, I
thought about a person coming into the White House that had
been ``in an ivory tower,'' if you will, sitting over at a
think tank, writing perfect things in a perfect world. I then
began to question whether someone like you would even be good
in this position.
Now, let me say this: As my temperature cooled down and I
thought a little bit more about, you know, your past, obviously
you are qualified for this job, but can you talk with me a
little bit about the role that you will be playing there and
hopefully share a little bit of understanding about the fact
that we live in a world where we represent 320 million people
here, and sometimes, you know, economists sitting over in a
think tank that have nothing in the world to consider but
perfect do not always help us in a constructive way as we try
to move the country ahead.
Mr. Hassett. Thank you, Senator, and thank you for your
time in your office. I can tell you that I think a hallmark of
my career is that I have never been that person who says that
the perfect is the only thing that you should do, and if you do
not do that, then, you know, you are someone who is a traitor
to economics. In fact, I think that I have worked collegially
with people on all sides on pretty much every issue that I have
ever been involved in.
I think that at the Council of Economic Advisers in
particular, the role of the CEA is to provide objective advice
about what decision makers do. I think that the problem of
governing is often one that there are a lot of decisions that
have to be made, and they have to be made urgently, and we need
expert analysis to inform those decisions. And someone who
says, ``Well, in a perfect world, with perfect markets, here is
what you ought to do, and if you do anything else, then''----
Senator Corker. Well, actually, that is not what people
say. They just say, ``This is the only way for it to occur,''
because the perfect is the enemy of the good. They are not
saying in a perfect world. They are actually undermining
legislative processes that have to take into account, you know,
different temperaments, if you will, different values that are
part of democracy. So it was not really that. It was really
just the straight undermining of bipartisan efforts here on the
Committee.
Mr. Hassett. Sir, at the American Enterprise Institute,
there are people with very strong opinions, and they do not
take my advice about what their opinions should be. But I can
assure you that that is not the way I would behave if
confirmed.
Senator Corker. Who will you report to there?
Mr. Hassett. The President, sir.
Senator Corker. So not through Gary Cohn but directly to
the President.
Mr. Hassett. The Council of Economic Advisers was
established in 1946, and by statute it is quite clear, yes.
Senator Corker. You wrote a book in 1999 about ``Dow
36,000'' by 2009. I noticed it was at 10,428. What happened?
Mr. Hassett. Sir, I think that one critic of mine once
looked at that book and called it a ``youthful indiscretion,''
and I think that as youthful indiscretions go, it was not such
a bad one. I think the motivation of the book then was to make
sure that people understood how to think about equities and how
important it was, if you can be a long-run investor, to invest
in equities because they are a good investment in the long run
but not in the short run. And I think that looking back, folks
that bought and held were glad that they did.
Senator Corker. So I know the President has said some
things about trade, and you are a full-blown free trader. Is
that correct?
Mr. Hassett. Historically, yes, sir. That is right. That is
what I have----
Senator Corker. And he has also mentioned some things about
hedge fund taxation. You are a low carried rate--carried
interest rate person on hedge funds. I wonder if you might
expand a little bit on that.
Mr. Hassett. I have written one piece on carried interest,
sir. It is in the journal Tax Notes, coauthored by Alan Viard,
a fellow economist at AEI, and we just analyzed the law of
carried interest taxation and how it relates to partnership
taxation. I think one of the main points of the piece, written
many years ago, was that partnership law is what is applied to
carried interest taxation, and so to change carried interest
taxation would require writing a new special provision.
Senator Corker. Thank you for your desire to serve, and I
look forward to serving with you.
Mr. Hassett. Thank you, Senator.
Senator Corker. Yes, sir.
Chairman Crapo. Thank you, Senator Corker.
Senator Warren.
Senator Warren. Thank you, Mr. Chairman. And thank you both
for being here and for your willingness to serve.
I want to follow up on Senator Brown's questions with a
little more detail about the budget, and I want to focus in on
housing. According to a report earlier this year from the
National Low-Income Housing Coalition, there is a shortage of
about 7.4 million affordable rental units in this country.
Millions of families are now forced to spend more than half
their income on housing, on rent.
The Department of Housing and Urban Development is
responsible for addressing this crisis, but President Trump's
budget now calls for cutting HUD's budget by $6 billion. That
would be a 13-percent cut.
Ms. Patenaude, if you are confirmed, you would be
responsible for overseeing HUD's housing programs, so I want to
know where you stand on some of the specific cuts in the
President's budget. So let me start with CDBG. The President's
budget called for eliminating all Community Development Block
Grants. All of them. That is $3 billion that currently helps
fund shelter for people with special needs, that helps build
nursing homes, that helps create homes for veterans, that helps
create shelters for victims of domestic abuse. This proposed
cut would hurt some of the most vulnerable people in
Massachusetts and all across this country.
Do you support eliminating this funding?
Ms. Patenaude. Thank you, Senator Warren. The CDBG program
has been around for over 40 years, and $150 billion has been
dedicated to this program.
Senator Warren. So do you support eliminating all funding
for the CDBG program?
Ms. Patenaude. During the last two Administrations, there
were significant cuts proposed in the budget for CDBG, and I
believe that was due to the lack of targeting for the program.
Senator Warren. So I am still asking the question. Do you
support eliminating the CDBG program or not? It is really a
pretty simple question.
Ms. Patenaude. I support the President's proposed budget.
Senator Warren. So you support eliminating----
Ms. Patenaude. I was not involved in the negotiations of--
--
Senator Warren. I did not ask whether you were involved.
You have now read it like the rest of us have. I was not
involved either, but I have a very strong opinion about it. Do
you support eliminating all of the Community Development Block
Grants that are used to support housing?
Ms. Patenaude. I certainly would support reforms to CDBG,
and the----
Senator Warren. Do you support the cuts in the President's
budget? This should not be an arm-wrestling contest here. It is
a yes or a no. You either support where the President is or you
do not.
Ms. Patenaude. Well, I did. I did state that I support the
President's----
Senator Warren. OK. You do support all of these cuts then.
OK. We got it. You know, there are going to be a lot of people
who are going to be hurt by that.
Donald Trump's budget also eliminates $948 million in
funding for the HOME Investment Partnerships. Now, HOME funding
helps States build and rehabilitate housing for low-income
families. Organizations in Massachusetts rely heavily on HOME
funding to create more livable, affordable housing units.
So, Ms. Patenaude, there is a housing shortage of more than
7 million affordable housing units in this country, and this
proposed cut would make that shortage worse. More people will
end up on the street. More women, more children, more veterans,
more seniors, more people with disabilities. It is that simple.
Do you support elimination of this funding?
Ms. Patenaude. Senator, the HOME Program has grown, the
number of recipients, participating jurisdictions, over the
years, and the grants are getting smaller and smaller and more
difficult----
Senator Warren. So do you propose--do you support
eliminating funding for this program?
Ms. Patenaude. I support the President's proposed budget.
Senator Warren. So you support eliminating it. That is
going to hurt a lot of people, too.
More than any other Federal agency, HUD is how Americans
help friends and families in need. It is not about handouts. It
is about helping people find decent, safe places to live so
that they can raise their kids, so they can go to school, so
they can get a job. The President's HUD budget attacks those
who need help. It attacks seniors, it attacks children, it
attacks veterans, it attacks people with disabilities, it
attacks abused women. It attacks people trying to put their
lives back together. It is a disgrace, and anyone who cares
about housing in this country should oppose it.
Mr. Chairman, I yield.
Chairman Crapo. Thank you.
And, Senator Rounds.
Senator Rounds. Thank you, Mr. Chairman.
Ms. Patenaude, I would kind of like to just follow up a
little bit on the conversation that you began with Ranking
Member Brown, and I am just curious. With regard to the
President's budget and so forth, and the allocation of scarce
resources through HUD, could you share with us a little bit
perhaps how you would prioritize--I mean, nobody is going to
have as much money as we want to have, and yet there are some
very important projects out there. I am certain that you have
had a chance to look at where your priorities would be. Can you
share with us a little bit what you would see as the priorities
and how you would use the dollars that are allocated and where
you would like to see the focus at with regard to the use of
scarce resources?
Ms. Patenaude. Thank you, Senator Rounds. The priority has
been for a long time to target to the most vulnerable
populations, so I certainly support the continuation of that. I
would also support programs that have a proven track record
that we can measure the performance. But with that said, I
would also like to look at reforms of some of these programs
that I would certainly support in a future budget.
Senator Rounds. So as you take a look at all of these, one
of the areas that we have got concerns with is in Native
American housing and so forth, particularly in the Dakotas,
where we have large land masses, large areas, but basically a
very scarce population. We have found time and again that we
really do lack housing in those areas, and to us, we are
talking about some of the poorest counties in the United
States, actually, where they are on the reservations, and they
really do rely on assistance, particularly when it comes to
housing.
Would you see it appropriate that in those areas where you
can evaluate and you see that these are perhaps some of the
poorest and some of those that are most in need, are these the
types of areas that you would consider prioritizing with regard
to the resources that are available?
Ms. Patenaude. Yes, Senator. As I mentioned during our
meeting, I have limited exposure to Indian country and look
forward, if I am confirmed, to visiting Pine Ridge with you so
I can get a better understanding of the needs. But I was
surprised to learn about the number of barriers to construction
with the lands, and I certainly would like to look at ways to
work--you have more barriers than even normal circumstances for
development, so I would like to look at ways where we can help
reduce those regulatory barriers to development, use of the tax
credit program in Indian country. I think it would be a high
priority.
Senator Rounds. OK. Last year, Congress passed the Housing
Opportunity Through Modernization Act by unanimous votes in
both chambers. This legislation was the first substantive
housing reform enacted by Congress in decades. Among the many
reforms in the legislation were provisions that helped address
homelessness, reduce the administrative burdens on the public
housing authorities and other organizations that HUD works
with, and provisions that further incentivize Americans who use
HUD to find work and provisions that help improve the quality
of life for residents of public housing.
How do you think that Congress can continue to build on
this progress in the future? As you have looked, what other
barriers do we--what have we actually set up that we need to
take a look at in terms of improving to make the job of
actually helping these individuals more realizable?
Ms. Patenaude. Senator, the President has actually
requested that each agency review their regulations, and I
think there are numerous regulations that are on the books that
are outdated, no longer necessary. I believe that if we are
going to make a difference, we have to look at barriers at the
local level, the State level, and the Federal level, and
particularly at the local level. All zoning is local; all real
estate is local. And I think HUD needs to help these
communities see that there is indeed barriers, unnecessary
barriers sometimes, to development.
Senator Rounds. The CDBG Program, Community Development
Block Grants, is an area that we have really relied on at the
State level. During the time that I worked as Governor in South
Dakota, we used CDBGs. I really think that Governors and local
units of Government have a real sense of where the resources
can be put to use the best. And in many cases, these products
can be used to create infrastructure, to improve
infrastructure, to upgrade infrastructure. That really makes a
huge opportunity for individuals to see an improvement in their
quality of life in smaller communities as well as some of the
inner-city communities.
I am just curious what your thoughts are about the use of
Community Development Block Grants, your support for them, and
whether or not they have been an effective tool in your view.
Ms. Patenaude. Senator, you certainly have more experience,
having been the Governor, in utilizing CDBG. But, of course, we
do have success stories with it, but I do not believe that the
amount of money that is available to the grantees is
significant enough to make, you know, infrastructure
investments, and I believe that the President's infrastructure
bill perhaps is a better place to address infrastructure, water
and sewer, than through the CDBG.
Senator Rounds. I most certainly think that additional
resources would be welcome and that when we start talking about
investment in infrastructure, I think the fact that we could
look at areas in which it would actually improve housing by
creating infrastructure that promotes more housing is a really
good thing. But I am also glad to hear that you think that
maybe there were not enough resources put into CDBG as well to
actually make a difference, because we would like to talk to
you about perhaps increasing that in the future as well.
Ms. Patenaude. Thank you, Senator.
Senator Rounds. Mr. Chairman, with that, thank you. My time
has expired.
Chairman Crapo. Thank you.
Senator Donnelly.
Senator Donnelly. Thank you, Mr. Chairman, and thank you
both for being here.
Ms. Patenaude, during your recent visit, we discussed the
crisis in East Chicago, in Indiana, where the lives of more
than 300 families were upended and put at risk due to the
presence of significant levels of lead and arsenic in our soil.
HUD has helped most of the residents find new housing. Local
officials are pursuing emergency HUD funding for the safety and
the security and the ultimate demolition of the complex. Can I
have your commitment that, if confirmed, you will advocate for
HUD to dedicate the resources needed, including emergency
funding, to assist these residents and the local officials in
getting this situation taken care of?
Ms. Patenaude. Yes, Senator Donnelly, you have my
commitment, and I believe that Secretary Carson is committed to
this issue as well.
Senator Donnelly. Yes, I think we are working right now
with his staff to find an exact date for him to come to East
Chicago so he can witness it firsthand.
When I was in the House of Representatives, I served on the
House Veterans' Affairs Committee, and far too many veterans,
as we all know, that served our country find themselves
sometimes without a home or a place to put their head down at
night on a pillow. We need to continue efforts to address this
problem, and that includes the Veterans Affairs Supportive
Housing Program from HUD and VA.
I was troubled to see that the recent HUD budget proposal
did not include any additional funding for new HUD VASH
vouchers, and the broader Tenant-Based Rental Assistance
Program is set for a funding cut.
How can we help end veteran homelessness when we are
cutting the very programs intended to help them?
Ms. Patenaude. Senator Donnelly, in preparation for the
hearing, I met with the career staff and met with the director
of the homeless programs at HUD, and during that briefing the
staff informed me that the allocation of vouchers that they
currently have are sufficient to address the veterans' needs.
And I found that to be somewhat surprising, so I asked again,
and then I did some research. Obviously, there is going to be a
difference of opinions depending on who you talk to, but I do
trust that the career staff that are running the homeless
programs, administering the homeless programs, have the data to
make an informed decision. So I accept their recommendation
that the current allocation is sufficient to address this
issue.
Senator Donnelly. OK. Well, we would love to see all that
data because, you know, the concern, the thought, the
heartbreak of one veteran who does not have a place to go home
to or is in a facility that is nowhere near what they should be
able to expect in terms of living conditions is something that
we owe to every single veteran.
How do you plan to utilize HUD's resources to help house
our homeless veterans?
Ms. Patenaude. The allocation of the vouchers is based on a
formula for veterans for the VASH Program, and I would like to
look at this. If I am confirmed, I would like to look into how
we can reallocate so that the homeless veterans in need of the
voucher and the support services that they are not currently
reaching, that we can get this assistance to the veterans.
Senator Donnelly. Communities such as Gary, Indiana, have
benefited from blight elimination funding, but there are still
really big needs. The population declines there have led to a
plague of abandoned and neglected buildings, resulting in
increased crime and resulting in distressed sections. The main
funding source for Gary to battle housing blight, and other
cities, is the Community Development Block Grants, the CDBGs,
but the President's budget eliminates this program.
How can we help cities like Gary combat housing blight if
the CDBG Program is eliminated?
Ms. Patenaude. Senator, there are other programs, there are
other funding streams that can be used for demolition. I think
the tax credit program, when you are looking at perhaps, you
know, new construction or preservation of affordable housing is
another funding stream that could be used.
Senator Donnelly. Well, we would like to work together with
you because I think the elimination of CDBG makes this much,
much more difficult, makes it much, much more challenging. And
this is not a situation where there is not a need. All you have
to do is walk around the streets and walk around town. And,
actually, you can just drive by on the highway and see it right
from there, some of the same houses that have been abandoned
for a very long time.
Mr. Hassett, I do not want you thinking that I was trying
to ignore you. I wanted to ask you about the desire to see
financial deregulation and the concerns I have about all of
that. I was serving on the Financial Services Committee
during--and I have to ask this quickly--the most difficult and
challenging times we had in 2008, 2009, and 2010. Dodd-Frank
was put in place to ensure safety and soundness. When we saw
the dot-com bubble occur and then we saw collateralized debt
obligations and similar things, I would love to hear from you,
do you see any bubble on the horizon that should concern
policymakers? And what is your biggest concern? You know, I
always try, after that experience, to look at worst-case
scenarios so that it never happens again because it destroyed
my State in terms of employment and other areas. What do you
see as the biggest challenge out there right now, the thing
that concerns you the most?
Mr. Hassett. Financial regulation, Senator, is not my
immediate area of expertise. But, you know, economists study--
--
Senator Donnelly. Well, you have written books about the--
--
Mr. Hassett. Not on financial regulation, and the financial
markets are very complex. They are what economists call
``incomplete,'' which means that they can at times act in
incredibly befuddling ways. And anyone who has seen ``Mary
Poppins'' and saw what happened to a bank understands the
importance of financial regulation. As financial markets
evolve, it is really important that regulation----
Senator Donnelly. Well, what I was asking you was if you
had one thing to keep an eye on or to worry about right now,
what would it be?
Mr. Hassett. I think that----
Chairman Crapo. A short answer.
Senator Donnelly. Yes, sorry about that.
Mr. Hassett. I think that we have got a recovery that is
very long in the tooth. Recoveries very often end of old age,
and that is something that we need to be attentive to and think
about policies that we can adopt that would extend the
recovery.
Senator Donnelly. Thank you, Mr. Chairman.
Chairman Crapo. Thank you.
Senator Scott.
Senator Scott. Thank you, Mr. Chairman. Thank you to the
both of you for being here this morning.
Good morning, Ms. Patenaude. Good to see you again. Thank
you for coming by the office and having a good conversation
about the direction of HUD. Certainly as we have had a lot of
questions about the President's budget, I think it is important
to note that while we in Congress will have the opportunity to
negotiate and wrestle with the outcome of the budget
requirements and priorities, your responsibility will be to
take whatever is given to the Administration, to the
Department, and do as much good as possible.
Speaking of as much good as possible, we talked a little
bit about the importance of treating the whole person as a part
of the HUD approach. Myself, I will be joining Senators Blunt
and Reed in introducing the Family Self-Sustainability Act. The
bill cuts Department costs through consolidating redundant
programs, and at the same time it expands the scope of the FSS
Program to provide more residents access to job training or
help in attaining a GED. Lower costs, more self-sustainability,
I think that is what we call a ``win-win.''
What would be your approach to treating the whole person at
HUD?
Ms. Patenaude. Well, certainly public-private partnerships
would be a critical component to that. The communities that
have the resources are certainly better positioned to be able
to help. But I believe that the private sector as well as local
government can play an enormous role in helping to facilitate
programs, whether it is, you know, after-school programs or
these centers, the vision centers that Secretary Carson has
talked about during his listening tours. So I really do believe
that we need to look to the private sector to help rebuild some
of these communities.
Senator Scott. Thank you very much. I look forward to your
confirmation.
Dr. Hassett, thank you for your work at AEI. I have watched
you from a distance and certainly appreciate your commitment to
our economy, and certainly the way that you have said things
paints pictures, like ``long-toothed recovery.'' Interesting.
You have also said that while certain areas of the country
are doing remarkably well, the recovery has profoundly been
uneven with large swaths of the country facing chronic rates of
long-term unemployment and historically low levels of new
investment.
Can you elaborate on the social and economic cost of this
uneven economic recovery? And, also, what could we do to bring
more resources into distressed communities?
Mr. Hassett. Thank you, Senator. I think that one of the
things that economists have learned in really the last decade
of research--it was really startling to me how extreme it was--
was that there are so many people that, if they lose their job
and they do not get a job back in a little while, then they
start to despair, and they start to have personal problems, and
often it can happen that it turns into a spiral that takes them
to a very bad place. And we know that there are pockets of our
country where, because a mill closed like in my home town,
there are a number of people that end up having substance abuse
problems and so on. Nobel Prize-winning economist Angus Deaton
and Anne Case just wrote a really moving piece on this.
And I know that when I give economic talks around the
country, if you ask Americans about this problem, they
recognize it. And something that I have noticed is that
everyone wants to do something about it. Everybody does. But
they do not know what to do about it, especially the really
concentrated geographic inequality.
And so I think that what we need to do is think of ways not
only with policies but individual-by-individual that we could
help people make a difference, because I know that Americans
want to.
Senator Scott. Yes, sir. Well, I know there are two
individuals who have been working on this, myself and Cory
Booker being those two individuals. We have legislation called
the ``Investing in Opportunity Act'', which seeks to defer the
capital gains tax up to 7 years if folks are willing to
reinvest those capital gains into distressed communities using
the New Market Tax Credit designation. I would love for you to
take a look at the legislation and come back with some thoughts
on how we might have some success in impacting long-term
poverty and unemployment in those distressed communities.
Mr. Hassett. Thank you. If confirmed, I would really look
forward to working with you on that.
Senator Scott. A final question, since I have, I guess,
according to the folks who have asked questions before, 2
minutes and 38 seconds left in this conversation. I thought it
was funny, too. You are next.
So the question I have is on the whole notion of the
workforce participation rate as you just described the impact
of long-term unemployment makes it very difficult to return to
the workforce; hence, our workforce participation rate has been
declining for the last 8 or 9 years.
I think about the economy to come, the gig economy or the
shared economy, the technology economy. It seems like our focus
on workforce investment is going to be a very important part of
how to navigate the future challenges that will displace
millions of workers in a way that we have not seen in the past.
How do you factor that into the goal that we have of growing
our economy?
Mr. Hassett. Thank you, Senator. It is really an urgent
call for us to address the problem that the share of our
population working is something like 27th out of the 35 OECD
countries, that we need to help people get back to work. And I
think that the sharing economy can be part of that, but also
presents a number of challenges.
Senator Scott. Thank you, Mr. Chairman.
Chairman Crapo. Thank you.
Senator Cortez Masto.
Senator Cortez Masto. Thank you, Mr. Chairman and Ranking
Member. And welcome to both of you, and thank you for the time
that you spent with me in my office talking about the issues
that obviously are important to so many of us, particularly in
Nevada as well. And it is nice to see your family here.
Welcome. And I appreciate your commitment to public service.
Dr. Hassett, let me start with you, and we had this
conversation, and let me just follow up with this. In 2013, you
said in a written research piece, ``With lackluster GDP growth
threatening to become our new normal, allowing more immigrants
to enter for the sake of employment is one of the few policies
that might restore our old normal. If the U.S. doubled its
total immigration and prioritized bringing in new workers, it
could add more than half a percentage point a year to expected
GDP growth.''
And despite the clear evidence indicating that you are
correct, here we are in 2017 with the Administration pursuing
precisely the opposite policies. In fact, the President's
policy of mass deportation is sparking panic and fear in many
Latino communities, causing consumer spending to fall by double
digits. This is threatening these communities' confidence in
the economy just as it was starting to be restored after the
financial crisis--and, by the way, a financial crisis that was
hardest hit in Nevada.
So the question I have for you is: Is what you said in 2013
still true about immigration and economic growth?
Mr. Hassett. Thank you, Senator. I think that there are a
lot of policy angles on immigration. One of them is border
security. I am not a border security expert. But economists are
very good at mapping inputs into outputs, and if we have more
input of labor, we will get more output.
My ancestors are Irish immigrants. They were not allowed in
the country because they had a computer degree, I presume. I
think that immigrants in this country have been an important
source of growth. Entrepreneurship is flailing right now in our
economy, but high-skilled immigrants are about twice as likely
to be entrepreneurs. And so I think that any immigration
policy, comprehensive immigration policy, would have to
recognize all the policy challenges and the simple economics of
inputs and outputs.
Senator Cortez Masto. So what you said in 2013 still holds
true?
Mr. Hassett. I do not know if I would advocate specifically
for a number of exactly how much immigration should go up or
anything like that, and that is certainly not the role of the
CEA----
Senator Cortez Masto. But you would agree----
Mr. Hassett. ----but if there were more workers, we would
have more outputs, Senator.
Senator Cortez Masto. Thank you. I appreciate that.
In the past, you have characterized Wall Street reform as
``the worst piece of legislation that I have seen in my entire
life,'' and that the law ``needs to be repealed as soon as
possible.'' Is it still your view that Wall Street reform
should be repealed?
Mr. Hassett. Senator, I would have to look back at what I
was--I do not recall this. I would have to look back at what I
was talking about and get back to you on that. It would take
more to review what it was I was talking about and why I was so
adamant about it. I am not usually so strident, and so I would
really have to review it. So I would look forward to getting
back to you on the record.
Senator Cortez Masto. So let me just say this, because
Nevada, I just said, came out of the worst financial crisis
that we have seen since the Great Depression; and if we are
going to continue to make economic progress, we cannot
eviscerate the rules that we have put in place after the
collapse. So I would hope you would consider that and take that
into consideration when you are looking at this.
Mr. Hassett. Thank you.
Senator Cortez Masto. Thank you.
Ms. Patenaude, thank you again for the conversation. Let me
say this: I am absolutely concerned about the conversation we
just had about eliminating the CDBG, which is proposed in the
President's budget. As somebody who has worked at the local
level in local government and at the State level in the State
of Nevada, I know that that money is crucial to what we do in
Nevada when it comes to homeless services in our rural
communities like Lyon County, transportation for seniors in Nye
County, and Catholic Charities Food Pantry in Clark County, as
well as Meals on Wheels and so many other important services.
So let me ask you this, because I know we had this
conversation. I heard what you said. You support the
President's budget, which concerns me because he eliminates the
CDBG, which is about $20 million coming into the State of
Nevada. But let me give you an opportunity, because you also
talked about reform. Would you eliminate it or reform it?
Ms. Patenaude. Thank you, Senator, and I appreciated the
time that we spent together. I learned a great deal about your
State and the challenges you are facing there.
As I mentioned earlier, as the President's nominee, I
support the President's budget. Going forward, as a lifelong
houser, I would certainly be advocating for programs with
proven track records. When I mentioned reform, CDBG is
certainly a program that we have had a very difficult time
measuring the performance and the outcomes. And I do believe
that the allocation--the amounts that are allocated are
oftentimes not enough to make a significant impact.
Obviously, there are many exceptions to what I am saying,
but over the years, under both Democrat and Republican
administrations, there have been cuts to the CDBG Program.
Senator Cortez Masto. And I appreciate that, and in our
conversation you mentioned how you have strengthened CDBG
accountability and transparency during your previous tenure at
HUD, and I appreciate it. So why not build on that previous
work instead of eliminating that program? And that is the
concern I have with this discussion today.
I understand my time is up. There are others that I will
submit for the record, and I appreciate you being here today.
Thank you.
Chairman Crapo. Thank you.
Senator Tillis.
Senator Tillis. Thank you, Mr. Chair. Thank you both for
being here, and congratulations on your nominations.
Mr. Hassett, I will start with you. I want to go back just
briefly to the discussion about immigration. The point of your
report had to do with, I would assume, legal immigration, guest
worker programs, H-1 at one end of the spectrum to H-2A and -B
at the other end of the spectrum, because they create an
economic multiplier. And I think some would even argue that
they create American jobs as a result of that reliable,
predictable guest worker program that ebbs and flows in this
country, and it is something that we need to get fixed. Was
that the essence of your analysis?
Mr. Hassett. Yes, sir.
Senator Tillis. I have to tell you, I am looking forward to
supporting your nomination, but now it is with a little
asterisk after I read your report on Deflategate because I am
not a Patriots fan. But I am sure the folks in New England love
you. But, no, I thought it was remarkable. It is actually going
to have to make me go back and change my Mac Talk, but I am not
going to use the hearing here to drill into that.
I do want to talk a little bit about a report. You are very
well published and a very impressive list of writings. One that
I wanted you to spend maybe a minute or two on is ``Spending,
Taxes, and Certainty: A Road Map to 4 [percent GDP]''. In your
current role, how would you cut through all the noise that we
have right now and emphasize what we think we have to do to
build the momentum to actually get to a sustainable 4 percent
GDP growth?
Mr. Hassett. Thank you, Senator. I think that it is
essential, if we are to move forward and make the policy
changes we need to get higher growth, that we have to build
consensus by having rigorous modeling that draws on empirical
evidence and is replicable and transparent.
Senator Tillis. But is it purely based on tax policy? Is it
regulatory policy? In other words, what are the fundamentals,
what are the top-line issues that people can understand that do
not necessarily have your expertise that we as Congress Members
should focus on?
Mr. Hassett. And thank you for referencing the specific
article. There are a number of challenges. One is tax policy,
one is regulation, to make sure that they pass cost-benefit
tests. Another is to look at the long-run budget balance and to
help remove uncertainty about what the future holds, because we
have not fully funded the promises that we have made. If you
look back at each of those, the countries that have sort of
gotten their act together on those things have experienced
surges in growth, and I think that there is every reason to
expect that that could be an opportunity for the United States.
Senator Tillis. I agree.
Ms. Patenaude, I wanted to give you an opportunity to
talk--CDBG is something anybody who has worked in State
government knows about, knows the impact that it can have. But
I know that HUD has 100 or more programs and then sub-programs,
duplicative efforts, some are working, others are not working.
When Dr. Carson and I met before his confirmation, I asked him
if he was going to focus on people who would come in,
rationalize the programs, with the goal of--do you believe
within the President's budget, if he zeroes out CDBG, do you
think that the Administration simply wants to turn their back
on the 11 million households that spend 50 percent of their
income on rent and utilities? Or do you think they are trying
to come up with a more efficient way to do it to produce more
resources to people that need it?
Ms. Patenaude. Senator Tillis, thank you for that question.
I absolutely believe that the Administration is not abandoning
the population that you referred to, but that we need to be
more creative. We need to harness the power of the private
sector. We need to work with local communities to help reduce
the barriers. The cost of building has become prohibitive in so
many places in this country, and it can contribute--regulatory
barriers contribute to up to 35 percent of the cost of a unit
or a home, so there is certainly an opportunity there.
As far as the HUD programs, I just wanted to add on CDBG,
we tried to--we proposed formula reform back in 2005, and we
were not successful with the reforms at that time.
Senator Tillis. I think that if we are going to get to a
point to where we are producing more resources to people who
desperately need it, then we have to be open to a different way
of addressing the needs. And I think that we have a lot of
duplication, we have a lot of inefficiency, and it is at the--
while you can pick--and CDBG is personally very important to me
right now because we were successful with getting $334 million
through the CDBG Program for Hurricane Matthew relief.
So it is a vehicle that I am using today, but if you can
give me a more effective, more efficient vehicle that gives me
more productivity for those dollars that we are allocating to
the States for housing, for disaster relief, that is what we
need in HUD. We need to go back, revisit it, make it leaner,
and get it to a point to where the dollars that are going to
these programs are ultimately affecting lives, not funding
programs.
Thank you. I look forward to your confirmations.
Ms. Patenaude. Thank you.
Chairman Crapo. Thank you.
Senator Reed.
Senator Reed. Well, thank you, Mr. Chairman, and thank you
to the witnesses.
First, Dr. Hassett and I had the opportunity to collaborate
together in the Work Share Program. I am extraordinarily
impressed with not only his knowledge but his thoughtfulness
and his analytical skills. We do not always agree, but we do
agree on Work Share. And in that vein, Dr. Hassett, I would
hope in your new role that you would continue to promote this
as an option in every State. I know with your help we have
expanded it to about 19 or 20 States. Could you comment on
that? Is that an appropriate way to deal with----
Mr. Hassett. Thank you, Senator. In fact, I commend the
Senator for his leadership on this issue. There is now an
empirical literature evaluating your efforts that says that
Rhode Island really outperformed a lot of other States because
you not only helped States change their unemployment insurance
to help it serve workers better, but you made sure that the
people of Rhode Island knew that they could take advantage of
this Federal program. And I know that now there is, you know,
hard, peer-reviewed evidence that that was successful.
I think that, absolutely, if unemployment insurance reform
were to be on the agenda again, there is now a large body of
economic evidence that would support extending efforts in that
direction.
Senator Reed. Thank you very much.
Mr. Hassett. Thank you.
Senator Reed. Ms. Patenaude, thank you again for your
service prior in the previous Administration but also your
efforts. One of the issues that came up with Secretary Carson
was I asked him to kind of work with me and others to maintain
the U.S. Interagency Council on Homelessness, and yet I see in
the budget it has been zeroed out essentially. Senator Collins
and I have legislation to restore it. Interestingly enough, you
served on the Council from 2005 to 2007. Will you support our
efforts to restore it? And if not, what is the option to
coordinate all these different programs?
Ms. Patenaude. Senator Reed, thank you very much. The
Interagency Council on Homelessness was certainly unique at the
time. We did not on a regular basis collaborate with other
Federal agencies. As I mentioned, I had never been in the
Department of Transportation or the Department of Health and
Human Services. The only interaction I had, as well as VA, was
during these meetings at the Interagency Council, and I think
the Interagency Council perhaps has outlived, you know, its
time because now collaboration is expected, it is part of, you
know, the Performance Management Agenda, and I would like to
take a look at how the Interagency Council is working right
now. After our meeting, I did go online, and certainly it is a
source of a lot of data, but that perhaps is duplicating
efforts at HUD.
So if I am confirmed, it is something that I would really
like to look into and, you know, give more consideration to the
Council before I could make a definitive decision on that.
Senator Reed. Well, I wish you would. Again, our
legislation, Senator Collins and I, would extend or eliminate
the sunset date in the Council, so it would give it sort of a
long-term existence, and I would very much like you to look at
it and get back to us.
I can recall, again, serving as the Ranking Democrat on the
Appropriations Committee for HUD, having a hearing with Senator
Collins, and we asked the IG what was the number one concern,
and his response was cybersecurity. And in your role, you are
sort of the chief administrative officer. Can you discuss what
steps you intend to take with respect to cybersecurity?
Ms. Patenaude. Thank you, Senator. After our meeting, I
actually scheduled a meeting with the Office of the Chief
Information Officer, and this is an area that I have limited
expertise in, and I think that would--I was amazed at how far
HUD has come, and I realize I was talking to the gentleman that
is in charge of this. He is the Deputy CIO. And it appeared
from the conversation that we had that HUD is actually in much
better shape than perhaps the Inspector General, you know, has
portrayed in the report to Congress. So I was encouraged by
that meeting. It certainly was, you know, an hour long. I would
need, you know, several hours with the CIO, and hopefully we
will have a CIO on board or nominated soon.
So it is an area that I certainly will spend a lot of time
researching and trying to understand the needs of HUD. But it
was a very encouraging conversation.
Senator Reed. And just finally and very quickly, I am
concerned about the cuts to CDBG. That is a refrain you have
heard, I think, from many people. And it is a worthy endeavor
to look for a more efficient model, but in the interim, cutting
a model that appears to work very well, I do not--I have not
heard a lot of complaints. In fact, I have heard lots of
acclaim, particularly by local leaders, mayors, Governors,
about how effective it is, because basically it provides
resources for local initiatives, and I think that is something
that you should consider.
One other point, too, and just to clarify this. In a
response to how you are going to make this more efficient, some
of these uses, the suggestion was the local regulatory
barriers?
Ms. Patenaude. That is to new construction and
preservation. Local zoning is certainly contributing to the
lack of supply in this country. And I feel that that is an area
that we really need to address.
Senator Reed. So let me be clear. The Trump administration
is going to intervene in local zoning to make it more efficient
and effective to develop affordable housing?
Ms. Patenaude. No, Senator, I do not think that HUD or the
Federal Government should, you know, have the zoning powers,
but to be able to encourage local communities. And when
Secretary Kemp was at the helm of HUD, he led a very
comprehensive effort, Not In My Back Yard, which identifies
regulatory barriers that exist at every level of Government.
But the purpose of this was to be able to share best practices.
During the Bush administration, we had an effort to work with
mayors, so I think there are ways to incentivize, but certainly
not to dictate to local decision makers. But I think there is a
lack of education and oftentimes----
Senator Reed. So there is money in the budget to
incentivize changes to local zoning to encourage more
affordable housing?
Ms. Patenaude. No, Senator, I do not see anything in the
budget to do that. We had the Affordable Housing Communities
Initiative, though, that was run through the Office of
Community Planning and Development, and it is certainly an
area, if I am confirmed, I would like to share the results of
that program and the efforts and to work with the Secretary.
Senator Reed. I appreciate it very much, and you have been
very kind, so I will at this point just thank you for your very
kind comments. Thank you.
Ms. Patenaude. Thank you, Senator.
Chairman Crapo. Thank you, Senator, and that concludes the
questioning. Before I give a couple final announcements, I want
to thank each of you for coming and appearing here today and
participating at the hearing, and thank you for your service
and your willingness to give more service to the country.
For Senators, all follow-on questions need to be submitted
by Thursday, and for our witnesses, responses to those
questions are due by Monday morning. So please respond quickly
to the questions that you may get.
With that, the hearing is adjourned.
[Whereupon, at 11:29 a.m., the hearing was adjourned.]
[Prepared statements, biographical sketches of nominees,
responses to written questions, and additional material
supplied for the record follow:]
PREPARED STATEMENT OF KEVIN ALLEN HASSETT
To Be Chairman, Council of Economic Advisers
June 6, 2017
Chairman Crapo, Ranking Member Brown, and distinguished Members of
the Committee, I am humbled and honored to be before you today as
President Trump's nominee to be the Chairman of the Council of Economic
Advisors. I am also deeply grateful to have had a chance to get to know
many of you throughout this process. I wish that the people who worry
about Washington could have witnessed the many private kindnesses the
Members and staff of this Committee have extended to me.
I would like to begin by introducing my college sweetheart and wife
of 31 years, Kristie, and my sons, John and James, who are sitting
behind me. I would also like to acknowledge my father John, a Korean
War veteran who could not be here today, and my mother Sylvia and my
sister Julia, who sadly are no longer with us.
Senators, I have almost always been a student of economics, even
before I knew it. I was raised by two public school teachers in the
beautiful town of Greenfield, Massachusetts. My mother was a
kindergarten teacher in neighboring Turners Falls. My father taught
English at Greenfield High School, and still lives in Greenfield in the
same house I was raised in.
As I was growing up, my town went through a very painful
transition. For the longest time, Greenfield was a thriving mill town,
with the world's largest tap and die operation that employed thousands
of citizens. Neighboring Turners Falls was almost as prosperous,
housing a massive paper mill along the banks of the Connecticut River.
But as we got older, times were changing. Plants closed. Families
started moving away. Graduates stopped coming home after college.
It seemed impossible to look around and not wonder why it was
happening. When I started studying economics in college, and again in
graduate school, I always came back to the example of how my town
changed. Why did plants move away or close? Why did many of the good
jobs disappear? And is there something that policymakers can do to
restore prosperity?
Economic models suggested a simple answer. Workers can have high
wages if they have high productivity, and high productivity is enabled
by an ample supply of productive capital. But going from things that
work in textbook models to actual policy recommendations is a difficult
thing. The real world has many complications that are not included in
models, and the data often surprise economists, especially those who
have too much confidence in pure theory.
That observation led me, over the years, to focus on things that
can be learned from the data. My dissertation focused in part on how
wages have moved over the business cycle. What do the periods when
workers prosper have in common? My early career was spent studying how
firms' investment decisions respond to Government policy, and how labor
and capital interact.
Since then, my studies have taken me in many different directions,
but I think my record makes clear a few things I would like to
emphasize about my approach to economics.
First, I believe it is essential to gather evidence, and not just
rely on theories. Early in my career, the empirical literature on
international taxation contained many holes, often because the country-
by-country data that one would need for study were not available. My
coauthors and I responded to this by building a large international tax
database and making its data available to anyone who wanted it.
Which leads me to my second point: I believe that economic analysis
should be transparent and replicable. An example of my commitment to
this idea is the Open Source Policy Center, which I cofounded at the
American Enterprise Institute. The OSPC has open source computer code
that allows anyone to score tax plans, evaluate the distributional
consequences of that plan, and see what the assumptions are that other
users use when they score their own plans. The OSPC promises to
democratize the tax debate.
Finally, while I respect the need for all types of research, even
the very theoretical, my own focus has mostly been work that holds the
promise of improving the lives of others, and that sheds light on the
circumstances of those less fortunate, like those in my hometown who
lost their jobs when the factory closed. A recent example of this would
be my work with the Economic Innovation Group, where I explore the
causes and cures of the striking geographic income inequality that we
see today in America. EIG researchers have worked hard to identify and
measure distress, and have constructed publicly available datasets that
shed light on the communities around the country that most need our
help. There is an interactive map at the EIG website that helps people
explore their own communities, with the dark color red indicating
extreme economic distress. One of the reddest shapes on the map of
Massachusetts is Turners Falls, the town across the river from my
father's home.
The Council of Economic Advisors was created to provide the
President with professional and objective economic advice, to help
policymakers craft solutions for problems like those we face today.
Throughout history, the CEA has done so admirably during both
Democratic and Republican administrations. In 2009, then-nominee
Christina Romer told this Committee that she would do her ``utmost to
protect the integrity of the CEA, and make it a center for unbiased,
scientific analysis.'' Chairman Crapo and Members of the Committee, if
confirmed, I pledge to you that I would do the same, and that I would
enthusiastically and energetically take the helm of this great American
institution. Thank you.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
PREPARED STATEMENT OF PAMELA HUGHES PATENAUDE
To Be Deputy Secretary, U.S. Housing and Urban Development
June 6, 2017
Chairman Crapo, Ranking Member Brown, and distinguished Members of
the Committee, it is a great privilege to appear before you this
morning. I am deeply honored by President Trump's decision to nominate
me to serve as the Deputy Secretary of the United States Department of
Housing and Urban Development.
Mr. Chairman, if I may take a moment to introduce my family, my
source of support and unconditional love: my husband of 32 years, Chuck
Patenaude, and our three daughters, Caitlin, Meghan, and Jennifer.
Housing has always been close to my heart and part of my family
history. My late parents, Bob and Estella Hughes, together created and
ran a successful homebuilding business in New Hampshire. In the Hughes
household, there was simply no escaping talk about housing.
For that reason, it was no surprise to my parents when I came to
share their passion for housing. As a senior at Saint Anselm College, I
experienced our Nation's capital the same way as many college students
do: as an intern. That internship, which began my career in housing,
was at HUD's headquarters some 35 years ago. Upon graduating from
college, I worked for the New Hampshire Housing Finance Authority as a
Section 8 rental assistance program administrator.
After observing firsthand the transformational impact HUD programs
could have on improving the quality of life for seniors and our most
vulnerable citizens, I returned to Washington, DC, to serve in HUD's
Office of Multifamily Housing, where I further enhanced my technical
knowledge of HUD's rental assistance programs.
During my three-decade career in housing, I have also served at HUD
in several leadership roles: first as Assistant Deputy Secretary in the
Office of Field Policy and Management, and later as Assistant Secretary
for Community Planning and Development.
As Assistant Deputy Secretary for Field Policy and Management, I
helped restructure HUD's critical field operations and developed a
comprehensive training curriculum on HUD programs and policies for
Regional and Field Office Directors. I also played an instrumental role
in the development of HUD's five-year Strategic Plan. More importantly,
I worked hand-in-hand with the dedicated men and women of HUD who are
closest to the people the department serves.
As Assistant Secretary for Community Planning and Development, I
administered more than $8 billion in community economic development and
affordable housing funds. I managed a team of more than 800 experienced
professionals committed to carrying out HUD's mission. I also had the
opportunity to support the recovery efforts in Lower Manhattan
following September 11th and in the Gulf Coast States devastated by
Hurricane Katrina.
Outside of HUD, my career has focused on promoting housing policies
that are aligned with the significant and growing needs of the American
people.
At the Urban Land Institute (ULI), I established the ULI
Terwilliger Center for Workforce Housing, helping to draw attention to
the plight of America's most essential workers--the firefighters,
police officers, nurses, and teachers, who are too often priced out of
the communities they serve by high housing costs. Working alongside a
bipartisan advisory board of national housing experts, we identified
the regulatory policies that contributed to prohibitively high housing
costs and shared best practices in tearing down unnecessary regulatory
barriers.
At the Bipartisan Policy Center, I directed the Housing Commission
under the leadership of two former HUD Secretaries, Senator Mel
Martinez and Secretary Henry Cisneros and Senators George Mitchell and
Kit Bond. The Commission developed a comprehensive report outlining a
new direction for Federal housing policy. Many of you may be familiar
with the Commission's recommendations on housing finance reform, which
were released in 2013.
Currently, I serve as President of the J. Ronald Terwilliger
Foundation for Housing America's Families, which seeks to elevate
rental affordability as a national issue and educate policymakers about
the silent housing crisis in America. Today, more than 11 million
households pay in excess of 50 percent of their income on rent and
utilities. A major cause of these high rent burdens is the severe
shortage of affordable rental homes, particularly for the lowest-income
families. Unfortunately, there is no single solution to this problem.
It must be approached from multiple fronts--reform of regulatory and
land use policies, greater incentives for private investment in
affordable homes, and increased attention from State and local
governments.
Through these initiatives, I developed strong working relationships
with diverse members of the housing community, from affordable housing
advocates and developers, to homebuilders, realtors, and mortgage
bankers, to Government policymakers and academics. I am very proud to
say that bipartisan collaboration has been a hallmark of these
initiatives.
In addition, my career in housing at the local, State and Federal
levels of government has broadened my view of America's housing
policies. This unique perspective helps me understand the factors that
contribute to the success of some programs, as well as the factors that
diminish the well-intended impacts of other programs.
As Matthew Desmond articulated in his Pulitzer Prize winning book
Evicted, ``we have failed to fully appreciate how deeply housing is
implicated in the creation of poverty.'' Dr. Desmond believes that,
``powerful solutions are within our collective reach.'' I agree with
Dr. Desmond and believe that as a nation, we must recognize that
housing is not just a commodity but a foundation for economic mobility
and personal growth.
If confirmed, I pledge to work closely with this Committee,
Congress and Secretary Carson to develop viable solutions that align
with HUD's critical mission--to ensure that HUD's programs are
responsive to the housing needs of our Nation's most vulnerable
citizens.
I appreciate the Committee's thoughtful consideration of my
nomination to serve as the Deputy Secretary of the U.S. Department of
Housing and Urban Development. Thank you for your time today. I look
forward to your questions.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
FROM KEVIN ALLEN HASSETT
Q.1. President's FY2018 Budget Proposal--The President's
proposed budget for FY2018 cuts more than $200 billion from
current infrastructure programs over the next 10 years, while
his infrastructure initiative proposes only $200 billion of new
investment. We don't know the details of the infrastructure
initiative, except that the plan will incentivize private
sector and foreign investment in our infrastructure, proposals
that will likely line Wall Street's pockets.
At the moment, I know that the President proposes cutting
funding for programs that help Ohio. And I don't know that
these funds will be replaced, because I assume they will go to
projects where the profit is greatest, particularly projects
that can charge new tolls and fees on users, rather than where
the need for repair is greatest.
The private sector has no interest in repairing or funding
most of our publicly-owned infrastructure, and failure of an
infrastructure package to dedicate significant funding for
repairs of public infrastructure would continue the drain on
our citizens and our economy that results from the inferior
condition of that infrastructure: congested roadways, travel
delays for transit riders, exposure to health and environmental
hazards in dilapidated housing facilities, etc.
What is your view on the need for direct Federal investment
to repair and improve public infrastructure? Won't cutting
funding for repairs and asking Ohioans to pay tolls and fees
for private projects do little to improve our aging public
infrastructure such as our neglected roads and bridges and
aging public transportation systems?
A.1. I was not part of the budget process, and my research has
mainly focused on tax policy, not transportation policy. But my
understanding is that we currently have a system where Federal,
State, and local governments contribute to maintaining and
expanding our infrastructure, and Federal contributions are
largely funded by the gasoline tax and other taxes. These
revenues comprise the Highway Trust Fund, which allocates money
by formula to the States for their maintenance and capital
priorities, which are determined by the States themselves. This
source has served the nation well, and I believe that the
budget will continue to support the States' efforts to maintain
and improve their infrastructure.
In addition, the private sector has already been helpful
and could continue to play a helpful role in providing new
roads and in managing any systems that have been historically
underfunded. For example, in the D.C. metropolitan area, the
Dulles Greenway toll road has been shown \1\ to be an effective
example of a private company relieving traffic congestion on
the public road system, and providing benefits to its users
without the aid of public money (Bipartisan Policy Center
2016). High Occupancy Toll (HOT) lanes are another example
where the private sector has provided road services that
economic research \2\ suggests are highly valued by their users
(Morgul et al., 2015). Again, unlike traditional projects,
these lanes do not rely exclusively on public funding.
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\1\ https://cdn.bipartisanpolicy.org/wp-content/uploads/2017/05/
BPC-Infrastructure-Case-Studies.pdf
\2\ http://trrjournalonline.trb.org/doi/abs/10.3141/2495-05
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If confirmed, I commit to working with this Committee and
the rest of the Administration to model and understand the
economic effects of specific infrastructure proposals,
including the impact of fees and tolls on consumers.
Q.2. What economic effects would result from a reduction in
funding as proposed in the President's budget for current
Federal programs that assist in repairing and improving public
infrastructure?
A.2. I was not part of the budget process, but my understanding
is that the President's Budget proposals would not result in a
reduction in funding. If confirmed, I look forward to working
with the rest of the Administration to model the specifics of
budget proposals and to present the empirical evidence on the
effectiveness of these programs and their effects in the most
objective and data-driven way possible.
Q.3. Highway Trust Fund (Including the Mass Transit Account)--
President Obama in 2015 signed into law a 5-year surface
transportation law that authorizes Federal highway and public
transportation programs for fiscal years 2016 through 2020.
That law provides modest, but important, increases in Federal
surface transportation investment. However, President Trump's
FY2018 budget proposal outlines a significant cut to highway
and public transportation beginning in FY2021. The budget
proposal suggests that ``Highway Trust Fund outlays conform to
baseline levels of Highway Trust Fund revenues'' (Table S-6),
which would result in a net reduction of investment of more
than $95 billion between FY2021 and FY2027.
Do you believe that the reduction in Federal investment in
highway and public transportation as suggested by the
President's budget proposal would have significant negative
economic consequences?
A.3. I was not part of the budget process. My understanding is
that the budget does not propose to change the basic support of
States' ongoing maintenance and capital programs. If confirmed,
I look forward to modeling the specifics of the President's
proposed budget and presenting the empirical evidence on its
effects to the rest of the Administration and Congress in the
most objective way possible.
Q.4. How would you generally describe the economic effects that
would result from a reduction in Federal funding to repair and
improve highway and public transportation infrastructure?
A.4. I have not performed independent analysis of this
question, but if confirmed, I look forward to presenting the
empirical evidence on its effects to the rest of the
Administration and Congress in the most objective way possible.
Q.5. Do you believe that the reduction in Federal investment in
highway and public transportation as suggested by the
President's budget proposal would have significant negative
effects on employment?
A.5. My understanding is that the President's Budget calls for
a net increase in spending on infrastructure. But if confirmed,
I will work on developing empirical evidence on the economic
impact of Federal, State, and local spending on governmental
infrastructure.
Q.6. Do you believe that the reduction in Federal investment in
highway and public transportation as suggested by the budget
proposal would limit or delay efforts to repair and improve
aging highway and transit infrastructure?
A.6. I was not part of the budget process but my understanding
is that the President's Budget proposal would result in an
increase in Federal investment in infrastructure. If confirmed,
I look forward to modeling the specifics of the President's
proposed budget and presenting the empirical evidence on its
effects to the rest of the Administration and Congress in the
most objective way possible.
Q.7. ``Healthy Returns'' report--In 2005, you coauthored the
report, ``Healthy Returns: The Economic Impact of Public
Investment in Surface Transportation''. Page 4 of the report
contains the following passage:
Moreover, research has demonstrated clearly that public
investments in highways and public transit can raise an
economy's underlying growth rate. One leading study
found that a 1 percentage point increase in a country's
total public capital stock raises its growth by about
0.3 percentage points, and for a lengthy period of
time. Other research has shown the other side of this:
Poor infrastructure constrains growth and increases
congestion by channeling and often limiting a nation's
economic development to its largest cities.
Conversely, public spending on highways and public
transportation systems that relieve congestion and
disperse economic activity can boost a Nation's growth,
especially in countries actively engaged in
international trade.
Does the passage above still represent your view on the
benefits to economic growth from investment in highways and
public transit?
A.7. Yes, although developments in transportation and
technology have changed rapidly over the past 12 years. For
example, there is great economic potential for autonomous
vehicles to help with our infrastructure needs as well as
improve the safety of drivers and passengers. These are
important new technologies and I look forward to further
research being conducted to test them and to help think about
regulations governing their use.
Q.8. Is it your view that the proposed reductions in spending
from Highway Trust Fund beginning in FY2021, as suggested in
the President's FY2018 budget proposal, would reduce economic
growth, unless those reductions in investment are rejected by
Congress or offset by new sources of investment?
A.8. The economic literature suggests \3\ a positive
correlation between infrastructure investment and economic
growth, but the proposed budget targets wasteful discretionary
spending, not authorized spending for the formulas used to give
States construction and maintenance funds (e.g., Lakshmanan
2011). If the spending is wasteful, then it would not have the
impact on growth of the average infrastructure project. In
addition, autonomous vehicles could spur economic growth by
reducing commute times, reducing the costs of shipping goods
and holding inventories, and facilitating the exchange of
ideas. In research \4\ by Edward Glaeser of the Harvard
Economics Department, Jose Gomez-Ibanez of the Harvard Kennedy
School, and Clifford Winston of the Brookings Institution, for
example, the authors show how autonomous vehicles could spur
economic growth as well as improve safety (Glaeser et al.,
2017). While no single study can resolve an issue, these
results are suggestive.
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\3\ http://www.sciencedirect.com/science/article/pii/
S0966692310000037
\4\ https://policyexchange.org.uk/news/finalists-for-wolfson-
economics-prize-unveiled/
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If confirmed, I look forward to modeling the specifics of
the President's proposed budget and presenting the empirical
evidence on its effects to the rest of the Administration and
Congress in the most objective way possible.
Q.9. Page 5 of the report contains the following passage:
We can estimate the economic value of surface
transportation with some precision by simply
approaching it like any other investment. Most studies
show that while the yields from investments, public and
private, vary from very small to very large, investment
in public infrastructure as a whole has generally
produced higher returns than private investment as a
whole. One study conducted for the Federal Highway
Administration (FHWA) found that the net return on
highway capital averaged 32 percent from 1960 to 1991,
ranging from 54 percent in the 1960s to 16 percent for
the 1980s. By comparison, private capital over that
period produced an average net return of 17 percent.
Do you continue to believe that evidence indicates that
investment in public infrastructure as a whole has generally
produced higher returns than private investment as a whole?
A.9. The problem with private investment is selectivity. The
private sector is not free to choose the best projects so the
comparison could be misleading. It is possible, also, that
public infrastructure investment returns could decline over
time. But if confirmed, I look forward to presenting the
empirical evidence on this issue in the most objective way
possible.
Q.10. Page 7 contains the following passage:
It is virtually certain that the total annual economic
benefits produced by public spending on roads, highways
and transit substantially exceed $788 billion.
Does the passage above and the underlying analysis in the
report still represent your view on the economic benefits from
spending on highways and public transit? If not, please
explain.
A.10. There is a multiplier effect. However, I would add that
the paper you are referring to analyzes the benefits from all
existing physical infrastructure. What most people have in mind
as they discuss infrastructure policy is the case of a new
marginal investment in infrastructure. And the average rate of
return and the marginal rate of return can differ quite a bit.
Q.11. Is it your view that the proposed reductions in spending
from Highway Trust Fund beginning, as suggested in the
President's FY2018 budget proposal, would reduce the present
level of economic benefits from spending on highways and public
transit, unless those reductions in investment are rejected by
Congress or offset by new sources of investment?
A.11. My understanding is that the President's Budget calls for
a net increase in spending on infrastructure. If confirmed, I
look forward to modeling the specifics of the President's
proposed budget and presenting the empirical evidence on its
effects to the rest of the Administration and Congress in the
most objective way possible.
Q.12. ``Conserving Energy and Preserving the Environment: The
Role of Public Transportation'' report--In 2002, you coauthored
the report, ``Conserving Energy and Preserving the Environment:
The Role of Public Transportation''. That report identified
significant environmental benefits from public transportation
ridership. Page 2 of the Executive Summary contains the
following passage:
Even at current rates of usage, public transportation
produces large environmental benefits.
For every passenger mile traveled, public
transportation produces only a fraction of the harmful
pollution of private vehicles: only 5 percent as much
carbon monoxide, less than 8 percent as many volatile
organic compounds, and nearly half as much carbon
dioxide and nitrogen oxides.
Compared to private vehicles, public transportation is
reducing annual emissions of the pollutants that create
smog, volatile organic compounds (VOCs) and nitrogen
oxides (NOx), by more than 70,000 tons and 27,000 tons
respectively. These reductions equal:
*nearly 50 percent of all VOCs emitted from the dry
cleaning industry, a major source of this pollutant;
*45 percent of VOCs emitted from the industrial uses
of coal;
*50 percent of NOx from the industrial uses of coal;
*more than 33 percent of the NOx emitted by all
domestic oil and gas producers or by the metal
processing industry.
The reduced VOC and NOx emissions that result from
public transportation use save between $130 million and
$200 million a year in regulatory costs.
Public transportation is reducing emissions of carbon
monoxide (CO) by nearly 745,000 tons annually. This
equals nearly 75 percent of the CO emissions by all
U.S. chemical manufacturers.
Public transportation is also reducing emissions of
carbon dioxide (CO2), which contributes to global
warming, by more than 7.4 million tons a year.
Do you believe that public transportation ridership
continues to generate significant environmental benefits,
including the categories of benefits identified in the quoted
summary? If not, please explain and specify which category or
categories of benefits are no longer generated and why your
previous analysis is no longer applicable.
A.12. As I have noted before, analysis I have conducted does
show a link between public transit and environmental benefits.
I stand by that analysis.
Q.13. ``Capital Investment Grants'' program (49 U.S.C. 5309)--
The construction of new fixed-guideway public transportation
corridors (heavy rail/subway, light rail, bus-rapid transit)
and capacity expansion projects on fixed-guideway routes that
have reached ridership capacity during peak service hours,
allow more Americans to utilize public transportation for their
daily travels. However, the President's FY2018 budget proposal
seeks to eliminate the ``Capital Investment Grants'' program
that provides $2.4 billion annually to support such projects.
Do you agree that the elimination of the ``Capital
Investment Grants'' program would curtail environmental
benefits that would be gained from present levels of investment
under the program?
A.13. It is not an area that I have looked at, and I was not
part of the budget process. If confirmed, I look forward to
working with you and the rest of the Administration on the
specifics of this program and providing objective and
empirical-based analysis on its economic impact.
Q.14. Do you agree that the elimination of the ``Capital
Investment Grants'' program would curtail economic activity and
economic growth that would be gained from present levels of
investment under the program?
A.14. It is not an area that I have looked at, and I was not
part of the budget process. If confirmed, I look forward to
working with you and the rest of the Administration on the
specifics of this program and providing objective and
empirical-based analysis on its economic impact.
Q.15. Do you agree that the elimination of the ``Capital
Investment Grants'' program would reduce employment in
construction and other industries?
A.15. It is not an area that I have looked at, and I was not
part of the budget process. If confirmed, I look forward to
working with you and the rest of the Administration on the
specifics of this program and providing objective and
empirical-based analysis on its economic impact.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR SASSE
FROM KEVIN ALLEN HASSETT
Q.1. I'd like to explore your views on artificial intelligence
and automation.
What positive and negative impacts, if any, will the
increasing artificial intelligence and automation of routine
work tasks pose to the economy over the long-term, particularly
for wages and employment.
A.1. Artificial intelligence research is advancing rapidly,
with programs now available that can beat the best Chess,
Jeopardy, and Go players, and even learn to generate paintings
in the styles of the great masters. The possibility of rapid
and accelerating technological change is clearly very high. As
a person who has been writing computer code since the early
1980s, and continues to do so, this has been an area I have
followed quite closely.
At least since the industrial revolution, there have always
been genuine concerns that the disruptions from innovation
might harm workers and reduce welfare. As with trade, according
to recent research, \1\ the concentrated harms have sometimes
been significant (Acemoglu and Restrepo 2017). We are certainly
much wealthier as a society today because of accumulated
innovations, but that does not mean that our nation always
helped individuals adjust to their new world as effectively as
it could have. As we look forward to driverless cars and other
dramatic innovations, there is no question that much new
economic research is required to fully understand the
challenges and opportunities. Certainly, innovation continues
to hold tremendous promise to increase the welfare of our
citizens. If confirmed, I would make such research into these
issues a high priority, as it already has been in my own
academic life.
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\1\ http://www.nber.org/papers/w23285
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Q.2. How long will it take for these risks to come to fruition?
A.2. As computers programs get ``smarter'' and computers get
more powerful, innovation becomes easier. On the other hand, it
may be that discoveries get harder and harder to make after the
low hanging fruit have been picked. Automation and artificial
intelligence research is clearly advancing rapidly, but
predicting exactly when an innovation will arrive is beyond the
reach of professional economists. Economic models \2\ suggest
that the human impact of automation will depend on a number of
factors (e.g., Acemoglu and Restrepo 2016). These issues are
clearly already having a major impact on our economy.
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\2\ http://www.nber.org/papers/w22252
Q.3. What, if any policy solutions should be explored in order
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to respond to artificial intelligence and automation?
A.3. There are 2 noted schools of economists who have widely
differing views on this question. Robert Gordon at Northwestern
does not believe \3\ the U.S. has another great technological
revolution to come, whereas his colleague Joel Mokyr and Erik
Brynjolfsson at MIT believe \4\ that technology is racing ahead
and that it has many positive impacts to come (Brynjolfsson and
McAfee 2014; Gordon 2016; Mokyr 2013).
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\3\ http://press.princeton.edu/titles/10544.html
\4\ http://books.wwnorton.com/books/The-Second-Machine-Age/
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Over time, as we develop a better understanding of how
these issues affect peoples' lives, we will certainly identify
policy challenges. While it is difficult at this time to
conceive of a complete list, a major challenge will certainly
be that an economy that is changing rapidly requires a
workforce that has ready access to effective education and
retraining, and I look forward to investigating these issues
more thoroughly, should I be confirmed.
Q.4. I'd like to explore your views on deficits and the debt.
During Federal Reserve Chair Yellen's February 14, 2017,
Senate Banking Testimony, Chair Yellen told Senator Corker that
``fiscal sustainability has been a long-standing problem, and .
. . the U.S. fiscal course, as our population ages and health
care costs increase, is already not sustainable.'' Do you
agree?
A.4. I agree with Chair Yellen's statement that fiscal
sustainability is a long-standing problem. In a 2012 testimony
on the fiscal cliff before the Joint Economic Committee, I
noted that evidence of the long-term effects of high Government
debt-to-GDP ratios has been borne out by the literature. As I
have noted previously, in a widely cited paper \5\ reviewing 44
countries over about 200 years, Reinhart and Rogoff document a
strong relationship between high debt levels and slow GDP
growth (Reinhart and Rogoff 2010). They find that this
relationship is especially strong when countries exceed a gross
debt-to-GDP level of 90 percent. This relationship holds true
when examining all of the countries in their sample and when
they restrict their analysis to developed economies. Although
the Reinhart and Rogoff analysis has been criticized for
implying only correlation and not controlling for other factors
that may impede growth and lead to high levels of debt,
separate research by Manmohan S. Kumar and Jeajoon Woo concurs
that higher levels of Government debt lead to lower levels of
output (Woo and Kumar 2015). They estimate that a 10 percentage
point increase in debt as a percentage of GDP is associated
with an annual decrease in 0.2 percentage points of GDP growth.
They also find evidence that the negative impact on economic
growth is even stronger with higher levels of debt. These
results conform with the predictions of economic theory, but
firm conclusions would require a more thorough review of the
evidence. If confirmed, I look forward to helping policymakers
address the U.S.' fiscal course.
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\5\ http://www.nber.org/papers/w15639
Q.5. In correspondence with me last year, Chair Yellen told me
that ``fiscal policymakers should soon put in place a credible
plan for reducing deficits to sustainable levels over time.''
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Do you agree?
A.5. I agree that fiscal policymakers should work toward
reducing deficits to sustainable levels. As I have previously
noted in a 2009 working paper \6\ coauthored with Desmond
Lachman Aparna Mathur, failure to address the deficit exposes
the U.S. Government to significant risk that could, if history
is a guide, emerge as a disruptive factor to financial markets.
If confirmed, it will be the role of the Council of Economic
Advisers to objectively evaluate the risks associated with U.S.
debt levels, and provide policy advice.
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\6\ http://www.aei.org/publication/the-deficit-endgame/
Q.6. What level of deficits and debt are sustainable over the
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long run?
A.6. In the same paper \7\ coauthored with Desmond Lachman and
Aparna Mathur, I write that if spending grew as projected in
2009 and revenues did not rise at a matching rate, annual
deficits would climb and Federal debt would grow significantly.
As debt increases, a higher and higher share of national output
will be devoted to interest payments, and the level of taxation
needed to sustain Government becomes historically
unprecedented. Large budget deficits would reduce national
saving, lead to more borrowing from abroad and also lower
domestic investment. Thus, while there is no magic number for
deficits or debt, there is ample cause for concern.
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\7\ http://www.aei.org/publication/the-deficit-endgame/
Q.7. What metrics would you consult in order evaluate the
impact of the U.S.'s debt and deficit levels? What levels must
these metrics reach in order for the U.S. debt and deficit to
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be sustainable?
A.7. There are several measures of the U.S. debt and deficit
levels including gross debt, net debt, and external debt. Each
measure has strengths and weaknesses, and should be used
jointly to gather a full picture of the current fiscal
situation. The most commonly accepted predictor of a financial
crisis, for example, has been the external debt-to-GDP ratio or
how much of our debt is held by foreign creditors as a
percentage of GDP. If foreign creditors lose confidence in our
fiscal stability, then it is likely that U.S. investors will
lose confidence as well. Once again, there are no magic numbers
when evaluating the sustainability of the U.S. debt and
deficit, and if confirmed, I look forward to evaluating all
metrics when evaluating sustainable levels of the U.S.' debt
and deficit.
Q.8. How would you evaluate the economic impact of an unfunded
$1 trillion infrastructure spending package?
A.8. It is difficult to evaluate the economic impact of any
package without making specific assumptions. There are several
considerations when conducting such an evaluation, including
the economic gains from specific investments and the
willingness to make cuts to other parts of the budget that are
less productive. If confirmed, I look forward to working with
the rest of the Administration and Congress to evaluate the
impact of any proposed infrastructure package with respect to
our broader fiscal trajectory.
Q.9. According to research from the Economic Innovation Group,
the new startup rate is near record lows, dropping by ``half
since the late 1970s.'' The total number of firms in the U.S.
dropped by around 182,000 from 2007-2014.
Are you concerned about this decline in new startups and
broader economic consolidation?
A.9. The decline in new startups is an area of concern in which
I have a particular interest. In their report on economic
growth and recovery, the Economic Innovation Group (EIG) notes
that the 2000s recovery saw a 5.6 percent increase in business
establishments, while the 2010s recovery only saw a 2.3 percent
increase. The EIG attributes much of this decrease in business
creation to a lack of startups rather than closures, and
research \8\ by Robert Litan and Ian Hathaway has showed that
for the first time in over 30 years, the U.S. business dynamism
declined in all 50 States and in all but a handful of the more
than 360 metros (Litan and Hathaway 2014). This decrease in
startups is attributable to a lower rate of business creation
among millennials. Given that millennials will soon be the
largest age segment in the U.S., there is legitimate concern
regarding the rate of business creation.
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\8\ https://www.brookings.edu/research/declining-business-
dynamism-in-the-united-states-a-look-at-states-and-metros/
Q.10. What, if any, policy solutions should be explored in
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order to respond to these challenges?
A.10. If confirmed, I look forward to studying possible policy
solutions to the declining rate of business creation. An
important consideration is the role of policy uncertainty.
Uncertainty can result in lower levels of investment. If an
investment involves sunk costs, it may be optimal to wait for a
potential policy change, even if that policy change is not
guaranteed. With startups, many of the investment costs are
sunk, for example, the costs of complying with complex
regulations. Thus, by reducing policy uncertainty and
encouraging tax and regulation policies that address the high
fixed costs of starting a business, the challenges of business
creation could be alleviated. In addition, it is worth noting
that older, entrenched firms now are a larger share of all
firms than at any time in recent history, which helps them have
and keep their competitive advantage over newer,
entrepreneurial firms--which, according to Litan and Hathaway
(2014), \9\ could be the cause of lower productivity, and less
innovation and job creation. As CEA chair, I would provide
objective analysis of these potential challenges to determine
the optimal policy solutions.
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\9\ https://www.brookings.edu/wp-content/uploads/2016/06/
other_aging_america_dominance_older_firms_hathaway_litan.pdf
Q.11. I'd like to discuss trade policy.
How would a 45 percent tariff on Chinese goods impact the
U.S. economy?
How would a 20 percent tariff on Mexican goods impact the
U.S. economy?
A.11. Free trade has been both a source of prosperity and a
challenge for individual industries and individuals over time.
There is a general consensus among economists that the movement
toward more open and free capitalistic societies has been a
major factor in the dramatic reduction of global poverty we
have seen over the past forty years. That consensus is driven
in part by empirical observations of the benefits to removing
trade barriers such as high tariffs.
It is difficult to fully evaluate the two hypothetical
tariff scenarios you mention, as there are so many other
factors that one would have to nail down before one could
adequately model the impact. Why were the tariffs imposed in
the first place, for example? Trade models often rely on game
theory in order to model the response of the world community to
policies such as higher tariffs, and that response would depend
on the cause of our own policy. A full evaluation would require
estimating the likely response of other countries. One would
also have to model currency adjustment, and the extent to which
the demand for products from these countries is responsive to
price changes, not to mention the actions of the Federal
Reserve.
To be sure, though, economists would tend to agree that
higher tariffs would take us off the path that has contributed
to the spread of prosperity around the world. If confirmed, I
would, if requested to, work with the staff to provide detailed
and objective analysis that draws on the lessons of the
academic literature of the likely implications of such trade
policies.
Q.12. How would a trade war with China impact the U.S. economy?
How would a trade war with Mexico impact the U.S. economy?
A.12. It is widely accepted by economists that the Smoot-Hawley
Act of 1930 induced a trade war that significantly worsened the
Great Depression. I am aware of no economic model that would
produce the result that a trade war would be a good thing. If
someone did present me with such a model, I would expect to be
able to quickly identify flaws in its design.
Q.13. How would NAFTA's dissolution impact the U.S. economy?
A.13. The academic literature on NAFTA suggest that it, like
most expansion of free trade, produced diffuse benefits and
concentrated harms. One recent estimate \10\ of the
concentrated harm suggested that, in localities exposed to
NAFTA, the wages even of workers whose jobs do not compete with
imports (e.g., local restaurant workers) suffered as a result
of the trade expansion (Hakobyan and McLaren 2016). The diffuse
benefit is, by its very nature, difficult to measure, but was
surely positive.
---------------------------------------------------------------------------
\10\ http://www.mitpressjournals.org/doi/abs/10.1162/
REST_a_00587?journalCode=
rest&#authorsTabList
---------------------------------------------------------------------------
NAFTA dissolution would, again, be difficult to model, as
one would have to work out what happens next. If a trade war
ensued, the previous answer would apply.
Q.14. Would dissolving NAFTA be preferable to maintaining the
current version of NAFTA?
A.14. The original NAFTA agreement was signed by the parties
all the way back in 1992. The economies of the United States,
Canada, and Mexico have changed dramatically since then, and a
modernization of this agreement could hold the potential to
provide significant economic benefits for all involved. For
example, the digital economy barely existed back then.
It is difficult to model precisely what would happen should
NAFTA be dissolved, as there are so many factors that would
have a major impact on the modeling. If the countries decided
to act as if it were in place after dissolution, for example,
then there would be little effect. If a trade war ensued that
spread around the globe, then there would be a negative effect.
Q.15. Mexico has reportedly been exploring ways to reduce corn
imports from the United States, including by opening up trade
with Brazil or Argentina. Is there a risk that restricting
trade will drive other countries to explore other import
markets? If so, how significant is that risk?
A.15. The USDA outlook \11\ for U.S. agricultural trade
projects exports of agricultural products of $136 billion in
2017, with imports expected to be $114.5 billion. This trade
surplus is the result of the hard work and tremendous
productivity of America's farmers, and could be at risk should
trade barriers begin to rise around the world. The potential
response of this surplus to changes in trade policy is
something I would be committed to model carefully, should I be
confirmed and requested to do so.
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\11\ https://www.ers.usda.gov/topics/international-markets-trade/
us-agricultural-trade/outlook-for-us-agricultural-trade/
Q.16. Many economists point to weak productivity growth as one
of the major contributors to slower economic growth overall.
Do you agree with this assessment?
A.16. I agree that weak productivity growth is a major
contributing factor to slower overall economic growth. A recent
OECD study that looked at the variation in productivity across
firms finds that while average productivity growth has been
declining, the inequality of productivity has been skyrocketing
(McGowan et al., 2017). \12\ It could be that the most
productive firms are improving as rapidly as ever, innovating
at a rate consistent with the theory that innovation should be
accelerating. But these technical changes are not spreading
down the food chain as they did in the past. We can see the
gains from the high-tech sector, but mostly in the most
productive firms. The problem is that everyone else is doing so
poorly that the aggregate number appears as a disappointment.
---------------------------------------------------------------------------
\12\ https://www.oecd.org/eco/The-Walking-Dead-Zombie-Firms-and-
Productivity-Performance-in-OECD-Countries.pdf
Q.17. Do you believe productivity measurements accurately
---------------------------------------------------------------------------
account for new technology?
A.17. Measuring productivity is a challenge, especially if we
are not estimating our inputs properly. Increasing use of the
Internet, email, and texting at work may mean that hours are
being overstated and that productivity is being understated.
Mismeasurement can also come in the form of digital innovation
where digital innovation replaces products with tangible
values. The other type of mismeasurement to consider is that it
is possible that the things we purchase are not added into GDP
correctly because quality changes are not incorporated into
their deflators.
However, Federal Reserve economist David Byrne, Federal
Reserve Bank of San Francisco's John Fernald, and the IMF's
Marshall Reinsdorf \13\ conclude that it is very unlikely that
mismeasurement explains the productivity slowdown. They show
that mismeasurement would have to increase in importance in
order to create a productivity growth slowdown, but it has
likely declined in importance because the U.S. imports a much
larger share of high tech goods than it did in the past.
Second, when one looks at industry details, the industries that
account for the slowing are not the industries that arguably
are mismeasured. This is, of course, not the final word on the
question. If confirmed, I look forward to exploring ways to
better estimate the real impacts of new technology on
productivity growth, and how to increase productivity.
---------------------------------------------------------------------------
\13\ https://www.brookings.edu/wp-content/uploads/2016/03/
ByrneEtAl_ProductivityMeasurement_ConferenceDraft.pdf
---------------------------------------------------------------------------
Q.18. How does current policy impede productivity growth?
A.18. There are many reasons why current policy may not
encourage productivity growth: taxation, regulation, and
interest rates, to name a few. For example, economist Fadi
Hassan and Gianmarco Ottaviano find \14\ that the reduction in
multifactor productivity is partly caused by low interest rates
and bank forbearance. If unproductive firms can slog along,
average productivity can slow. In addition, too many
regulations can limit the introduction of new firms, reducing
the inflow of new and productive firms inhabited by
unimpressive incumbents. Lastly, too high tax rates discourage
capital formation for all types of firms, giving workers few
new tools to work with. If confirmed, I look forward to
studying productivity growth in greater depth to help advise
policymakers on how to tackle this issue.
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\14\ http://voxeu.org/article/productivity-italy-great-unlearning
---------------------------------------------------------------------------
Q.19. How can the United States improve productivity?
A.19. As I have noted previously, one factor that could help
productivity would be to get tax policy right regarding capital
spending. Labor productivity growth averaged 3.2 percentage
points per year between 1995 and 2004, but has only averaged
1.3 percentage points since then. In some collections of boom
years, capital spending added 1.2 percentage points per year to
productivity growth but in recent years has dropped to an
average of 0.5 percentage points. We could potentially add
three-fourths of a percentage point to baseline growth if we
could get capital spending back to what it has been in past
boom years. Capital spending is highly responsive to tax
policy, research \15\ (e.g., Djankov et al., 2010) has shown.
The U.S. has recently increased tax rates on pass-through
investments and let the corporate tax rate become the highest
in the developed world. As the chair of the Council of Economic
Advisers, I look forward to providing objective advice on
policy to improve productivity, and I would, of course, explore
arguments against this analysis, and other possible policies.
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\15\ https://www.aeaweb.org/articles?id=10.1257/mac.2.3.31
Q.20. According to research compiled by AEI scholar, Nicholas
Eberstadt, in his book ``Men Without Work'', the proportion of
prime-age men out of the labor force more than tripled in the
past 50 years, from only 3.4 percent in 1965 to 11.8 percent in
2015. In addition, eight times as many prime-age men were
economically inactive and not pursuing education in 2014 than
in 1965.
What priority should we give this measurement in our
broader economic calculus?
A.20. The decline in work is a significant issue facing the
country. It is something that I have studied and written
extensively about, including testifying before the Joint
Economic Committee. Increasing labor force participation is a
vital component of increasing GDP growth. A 2013 Congressional
Budget Office report \16\ stated that while potential hours
contributed 1.7 percentage points to GDP growth each year in
the 1970s, from 2002 to 2012 hours worked only contributed 0.3
percentage points. From the supply side, labor force growth
could provide a significant boost to GDP growth.
---------------------------------------------------------------------------
\16\ http://www.cbo.gov/publication/43910
Q.21. To what do you attribute this decline in labor force
---------------------------------------------------------------------------
participation?
A.21. There are several causes of the decline in labor force
participation. The downturn certainly discouraged many, many
people. A contributing factor is also the structure of the tax
code. Corry and Slavov (2013) write \17\ that the treatment of
married couples creates disincentives for secondary earners to
work, as households face a higher average tax rate when the
secondary earner begins working. A 2011 review \18\ of the
literature by Michael Keane finds that women are particularly
responsive to marginal tax rates, resulting in large effects on
their decision to work. An efficient tax code would minimize
the disincentives to work and may increase labor force
participation. If confirmed, I look forward to following the
development of this literature closely and helping to advise
policymakers about how to tackle this issue.
---------------------------------------------------------------------------
\17\ http://www.aei.org/publication/the-tax-treatment-of-the-
family/
\18\ https://www.aeaweb.org/articles?id=10.1257/jel.49.4.961
Q.22. What policies do you believe would be effective in
---------------------------------------------------------------------------
improving labor force participation among prime-age men?
A.22. While there is evidence that labor force participation
would rise with wage growth, achieving this wage growth may
well require policy changes to corporate taxation. In work \19\
coauthored with Aparna Mathur, I found that the burden of
corporate taxation is largely borne by labor due to the
relative mobility of capital (Hassett and Mathur 2015). There
have been many developments in the literature since. If
confirmed, I look forward to considering this topic further.
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\19\ http://www.tandfonline.com/doi/full/10.1080/
00036846.2014.995367
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------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED
FROM KEVIN ALLEN HASSETT
Q.1. In your opinion, how does work sharing soften the blow to
our overall economy when a regular economic downturn occurs?
A.1. I will use this opportunity to dig deeper into this topic.
When faced with a downturn, a company could reduce \1\ the
hours of 100 employees by 20 percent instead of firing 20 full-
time workers.
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\1\ http://www.hamiltonproject.org/assets/legacy/files/
downloads_and_links/policies_address_poverty_in_america_full_book.pdf
---------------------------------------------------------------------------
The impact of job loss is also not limited to the person
unemployed, with recent research showing that job termination
for a parent is related to lower education attainment and
lifetime earnings for his or her children (Hilger 2016; \2\
Oreopoulus, Page, and Stevens 2008 \3\). Keeping workers
employed, albeit with reduced hours, can limit the risks
associated with long-term unemployment.
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\2\ https://www.aeaweb.org/articles?id=10.1257/app.20150295
\3\ http://www.jstor.org/stable/10.1086/588493
Q.2. Do you believe that, if more States had work sharing
programs in place prior to the Great Recession, we would have
seen fewer job losses than what the nation suffered during that
---------------------------------------------------------------------------
time?
A.2. There is evidence that work-sharing programs limit the
effects of long-term unemployment, like that we saw during the
Great Recession. It is the role of the Council of Economic
Advisers to objectively and critically evaluate the
applicability of these work-sharing programs to the U.S. Rhode
Island offers an example of a work-sharing program with use
levels similar to those of developed European countries. As I
note in my 2014 report \4\ on work sharing with Dr. Michael
Strain, Rhode Island's labor department estimated that the
program kept the State unemployment rate down and saved about
9,500 jobs between 2009 and 2010 (Hassett and Strain 2014).
---------------------------------------------------------------------------
\4\ https://www.aei.org/wp-content/uploads/2014/04/-hassett-
strain-workshairng-and-long-term-unemployment_173834868095.pdf
---------------------------------------------------------------------------
------
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR MENENDEZ FROM KEVIN ALLEN HASSETT
Q.1. In a 2010 article, you urged Republicans to support legal
immigration and to rally around former President Reagan's view
that the U.S. is a land of opportunity where ``the doors were
open to anyone with the will and the heart to get here.'' In
2013, you called for the U.S. to double its total immigration
to spur economic growth. During your nomination hearing, you
said that economic research demonstrates that ``immigrants in
this country have been an important source of growth'' and that
``if there were more workers, we'd have more outputs.'' If
confirmed, will you commit to presenting this evidence to the
President in discussions regarding proposed immigration
policies?
A.1. Yes. On this and all other topics, I commit to always
presenting the President with the best possible objective read
of the economic evidence should I have the honor of being
confirmed.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER
FROM KEVIN ALLEN HASSETT
Q.1. During your testimony, you said that the Administration's
goal of 3 percent economic growth is achievable, but both
history and major forecasters tell us that that's an
unreasonable assumption. Experts have estimated that policy
changes like deficit reduction and tax and regulatory reform
are likely to improve the growth rate by only a few decimal
points, not percentage points.
Why do you believe that we will be able to completely
reverse recent trends in productivity, capital growth, and
labor force participation to achieve sustained economic growth
of 3 percent?
Do you agree that higher debt from reducing revenues would
have a negative impact on our economy that could offset or even
wipe out any economic boost from tax reform?
A.1. A variety of research documents the relationship between
higher output and lower taxes. A path-breaking study \1\ by
David Romer and Christine Romer (2010)--herself a former CEA
chair--finds that tax increases tend to lower output. Others
have pursued a similar strategy with data from other countries
and found similar results. This includes the Cloyne (2013)
analysis \2\ of the U.K. fiscal experience and the Hayo and Uhl
(2014) analysis \3\ of the German fiscal experience. The scale
of these effects is uncertain, but the evidence is promising.
---------------------------------------------------------------------------
\1\ http://www.jstor.org/stable/27871230
\2\ https://www.aeaweb.org/articles?id=10.1257/aer.103.4.1507
\3\ https://academic.oup.com/oep/article-abstract/66/2/397/
2362257/The-macroeconomic-effects-of-legislated-tax
---------------------------------------------------------------------------
Meanwhile, the labor force participation rate, as described
in Keane and Rogerson (2012) could possibly be responsive to
policy parameters like tax rates, which can determine how much
one profits from one's labor. In a forthcoming publication in a
book published by Oxford University, I note that the model in
Keane and Rogerson (2012) seems \4\ to be able to explain the
divergence in trends in labor force participation between
different age cohorts that seems to have occurred in recent
years.
---------------------------------------------------------------------------
\4\ https://www.aeaweb.org/articles?id=10.1257/jel.50.2.464
---------------------------------------------------------------------------
The relationships between output, interest rates, and
spending can be extraordinarily complex. It is true that higher
interest rates could serve as a headwind to growth, but given
the complexity of the macroeconomic forces involved, it is
difficult to comment on the macroeconomic interactions at the
heart of fiscal policy in the abstract. One would have to dig
more deeply into the details.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR HEITKAMP
FROM KEVIN ALLEN HASSETT
Q.1. Objectivity: As you're well aware, your primary job in
this Administration will be to provide objective economic
advice to the President on a range of issues. Many times facts
and reason don't match up with ideology and rhetoric. So I'd
like to get your commitment today that you're willing to put
fact and reason above ideology and be a strong advocate in this
White House for an objective approach to policymaking?
A.1. The Council of Economic Advisers (CEA) was created to
provide the President with objective economic advice and to
assist policymakers in solving the issues we face. The CEA has
done this throughout its 70-year history under both Democratic
and Republican administrations. If confirmed, I pledge to you
and to the rest of the Committee to do my utmost to protect the
integrity of the CEA and provide unbiased, scientific analysis.
I look forward to working with the Administration and Congress
in this pursuit.
Q.2. Future of Work: As a conservative economist, you've made
some surprising comments on the need for our Government to play
a more active role in providing direct job opportunities for
the long term unemployed. As I look into the next decade, one
of my biggest concerns is that we're going to have a whole lot
of hard working men and women displaced by automation at a
greater pace than we've ever experienced in this country.
The Bank of England projects that 47 percent of U.S. jobs
could be replaced by technology over the next 15 years (a PWC
study projects 38 percent of jobs in the U.S. will be at high
risk in 15 years).
Former Treasury Secretary Larry Summers recently commented
that a third of men between the ages of 25 and 54 may not be
working by the end of this half-century.
A.2. Long-term unemployment is one of the biggest issues we
face as a county. A large and growing literature has explored
the impact of unemployment for extended periods--generally
defined as 6 months \1\ or longer--on the workers affected. A
key finding \2\ is that the relationship between unemployment
and employability is nonlinear, with harm from unemployment
rising over time.
---------------------------------------------------------------------------
\1\ https://www.bls.gov/spotlight/2015/long-term-unemployment/pdf/
long-term-unemployment.pdf
\2\ https://www.aei.org/wp-content/uploads/2014/04/-hassett-
strain-workshairng-and-long-term-unemployment_173834868095.pdf
---------------------------------------------------------------------------
Long-term unemployment has obvious financial impacts.
Johnson and Feng (2013) detail \3\ the financial losses to
workers who experienced long-term unemployment between 2008 and
the end of 2011, finding that for those out of work for 6
months, half experienced declines in per-capita family income
of 40 percent or more. These financial hardships were felt
especially by African Americans and Hispanics, along with
workers without a high school education and unmarried workers.
Jacobson, Lalonde, and Sullivan (1993) find \4\ that even when
previously unemployed workers find jobs, their earnings are
persistently lower than before their unemployment spells.
---------------------------------------------------------------------------
\3\ http://www.urban.org/research/publication/financial-
consequences-long-term-unemployment-during-great-recession-and-recovery
\4\ https://www.jstor.org/stable/2117574
---------------------------------------------------------------------------
The empirical evidence also suggests there are other, less
obvious, effects on individual and family well being. A 2010
Pew report \5\ found that long-term unemployed workers were
more likely to report a loss of self-respect, and that the 2008
recession had an impact on their career goals or brought
``major changes'' to their lives. Sullivan and von Wachter
(2009) find \6\ a 50 to 100 percent increase in death rates for
older male workers in the years immediately following job loss
if the worker has been consistently unemployed. Long-term
unemployment is also correlated with increased suicide. Classen
and Dunn (2012) find \7\ that for each proportional increase in
the unemployment rate of 10 percent increases the suicide rate
for males by 1.5 percent. The key link is the duration of
unemployment, which increases the probability of suicide.
---------------------------------------------------------------------------
\5\ http://www.pewsocialtrends.org/files/2010/11/760-recession.pdf
\6\ http://rricketts.ba.ttu.edu/
sullivan_vonwachter_job%20displacement%
20and%20mortality_qje.pdf
\7\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3423193/
---------------------------------------------------------------------------
Stevens and Schaller (2009) found \8\ that there are also
significant negative effects from unemployment on overall
family well-being. Parental unemployment can increase the
probability that a child will have to repeat a grade in school,
especially when parents have lower educational attainments.
Charles and Melvin (2004) find \9\ that unemployment by a
spouse can increase the probability of divorce. Nichols,
Mitchell, and Linder (2013) found \10\ that communities with a
higher share of long-term unemployed workers tended to have
higher rates of crime and violence.
---------------------------------------------------------------------------
\8\ http://www.sciencedirect.com/science/article/pii/
S0272775710001202
\9\ http://www.journals.uchicago.edu/doi/abs/10.1086/381258
\10\ http://www.urban.org/sites/default/files/publication/23921/
412887-Consequences-of-Long-Term-Unemployment.Pdf
---------------------------------------------------------------------------
Given all of this evidence, it is clear to me that
Government policies need to take the concentrated harms more
seriously.
There is a literature on the effectiveness of work sharing
in preventing long-term unemployment. Abraham and Houseman
(2014) \11\ note that work sharing encourages employers to
reduce hours rather than terminate employment during periods of
depressed demand. The literature suggests that even at reduced
hours, keeping employees in work can prevent the effects of
long-term unemployment. Work sharing also benefits firms by
retaining valuable employees and limiting the costs of
recruiting, hiring, and training new employees in the future.
There are also several examples of work sharing programs which
showed positive results during the 2008 recession. A 2010 OECD
study found \12\ that without work sharing, Finland, Germany,
Italy, and Japan would have experienced about a three-quarters
of a percentage point greater decline in permanent employment.
In the U.S., Rhode Island offers a model case of a work-sharing
program with use levels similar to those of developed European
countries. Using back-of-the-envelope calculations, if
confirmed, I look forward to exploring further the role that
work-sharing programs can play in preventing long-term
unemployment.
---------------------------------------------------------------------------
\11\ http://www.hamiltonproject.org/assets/legacy/files/
downloads_and_links/policies_address_poverty_in_america_full_book.pdf
\12\ http://www.oecd.org/employment/emp/48806664.pdf
Q.3. You've made it clear that you understand the high toll
joblessness takes on the health and welfare of a society and
have argued in favor of German-style work-sharing programs, in
which unemployment is averted by encouraging companies to
reduce workers' hours and subsidizing the workers' lost wages.
Would you recommend these types of German-style work sharing
programs to the President in order to help workers displaced by
automation? What other options should Congress be exploring to
---------------------------------------------------------------------------
help displaced men and women re-enter the job market?
A.3. I addressed this in my previous answer.
Q.4. Trade and Immigration: On the issue of trade and
immigration, your academic work diverges significantly from the
rhetoric coming from the Administration. You've made it clear
in your writings that open trade and sensible immigration
policies benefit the U.S. economy. Indeed, 95 percent of the
world's consumers live outside our country. What is your
argument to the President on the issue of trade policy with
countries like Mexico?
A.4. Economic researchers have been studying the cost and
benefits of free trade at least dating back to the birth of
this country, when Adam Smith was debating the mercantilists
about the relationship between trade and wealth. The economic
literature is clear that trade can be an important source of
welfare improvements for the world's citizens. The large
benefits from trade are often very diffuse, and those affected
negatively can be a quite concentrated group. These two factors
present us all with significant challenges.
There is a more modern empirical literature \13\ that
explores the concentrated harm to specific industries and
geographic regions that can ensue when plants are closed
because of pressure from foreign competition (e.g., Autor et
al., 2016). Much of my personal attention to geographic
inequality has been focused on helping to give policymakers the
data and analysis they need to understand concentrated harms
better, so that they can craft policies to help avoid or
alleviate them.
---------------------------------------------------------------------------
\13\ http://annualreviews.org/doi/abs/10.1146/annurev-economics-
080315-015041
---------------------------------------------------------------------------
There is also a large and vibrant literature \14\ on
immigration and its economic impacts (e.g., National Academies
of Sciences 2016). If confirmed, I would look forward to
providing the President with objective analysis that draws from
my own past work and the broader economic literature on trade.
---------------------------------------------------------------------------
\14\ https://www.nap.edu/catalog/23550/the-economic-and-fiscal-
consequences-of-immigration
---------------------------------------------------------------------------
------
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR CORTEZ MASTO FROM KEVIN ALLEN HASSETT
Q.1. During my questioning period, I asked you if you still
believed that the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 was ``the worst piece of legislation
that [you've] seen in [your] entire lifetime,'' and whether the
law ``needs to be repealed as soon as possible.'' You responded
that you did not recall making those comments. Pasted below is
a transcript of some of your comments from a debate sponsored
by Bloomberg \1\ on August 11, 2011:
---------------------------------------------------------------------------
\1\ https://www.youtube.com/watch?v=CkxlPpDtbDo
My view [is] that Dodd-Frank is the worst piece of
legislation that I've seen in my entire lifetime. The
impact of Dodd-Frank is conceivably going to be
horrifying, and that it has to be repealed as soon as
possible. Dodd-Frank is lame-brained, horrifying
---------------------------------------------------------------------------
legislation ...
Please describe whether you continue to agree with this
statement from 2011.
What is your current view of the Dodd-Frank Act?
A.1. Thank you for clarifying this, as I did not recall the
interview during the hearing and I would like the opportunity
to set the record straight. I regret my tone and do not now
agree with what I said. There are certainly many, many pieces
of legislation in American history that even the harshest
critic of recent financial reforms would have to concede were
worse than the Dodd-Frank Act.
In the Bloomberg appearance you mention, I expressed
disapprobation towards Dodd-Frank on the grounds that the
structure of its costs put a larger burden on smaller, rather
than larger, financial institutions. While there are aspects,
like this, of the Dodd-Frank Act that I believe are less than
optimal because our Nation needs small banks as well as larger
ones, I would look forward, if confirmed, to working with the
President and Members of this Committee to support efforts to
seek sensible reforms.
I would like to add that while Congressman Frank was
Chairman of the House Financial Services Committee, we had
collegial relations. I would ask that you review my testimony
of February 23, 2010, before that committee, and the hearing
transcript, to see evidence of my ability to focus on economic
substance, an ability that was poorly lacking in the transcript
you cited.
Financial regulation is a very serious and difficult
business, and financial markets evolve naturally over time,
often in unexpected directions. It is essential that
policymakers be nimble, collegial, and willing to consider
modifications of existing law.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCHATZ
FROM KEVIN ALLEN HASSETT
Q.1. For at least the last 10 years, you have advocated for
implementing a carbon tax to address greenhouse gas emissions,
and using the revenues to reduce distortionary taxes elsewhere
in the code, such as the corporate income tax or the payroll
tax. As the Trump administration and Republicans Congress
attempt a broad overhaul of the tax code, in your capacity as
the President's chief economic adviser, will you commit to
advocating on behalf of a carbon tax that both (1) reduces
emissions in line with the commitment made by the U.S. in
Copenhagen in 2009 (83 percent reductions below 2005 levels by
2050; see http://unfccc.int/files/meetings/cop_15/
copenhagen_accord/application/pdf/
unitedstatescphaccord_app.1.pdf), and (2) does not increase the
overall regressivity of the tax code?
A.1. The Employment Act of 1946 created the Council of Economic
Advisers as a means to ensure that the President has
information that is both ``timely'' and ``authoritative'' with
respect to current and future economic conditions. I view the
core commitment of the Council of Economic Advisers to be the
presentation of the best objective evidence. As you mentioned,
I have been an active participant in the economics literature
in this space, including the study of carbon taxation, its
economic effects, and distributional consequences. I stand by
that work, and if confirmed, I would also be sure that the
other members of the team would know not to weigh my academic
work more heavily simply because I wrote it. The CEA
professional staff should always produce unbiased and objective
work that weighs all of the relevant scientific evidence.
Q.2. In your writings, you have argued that cutting corporate
taxes would lead to wage increases because companies would have
more capital to invest in their workers.
However, several market analyses over the past few years
have shown a clear trend. Ccompanies have funneled extra
capital to shareholders through stock buybacks and dividend
payments--not to research and development, wages, or worker
training.
Since the end of the recession. U.S. nonfinancial companies
have amassed $1.77 trillion in cash holdings. Yet, wages and
productivity have stagnated.
Just after the election, Goldman Sachs predicted that stock
buybacks would climb 30 percent to $780 billion. Goldman thinks
$150 billion, or about 20 percent, will come from repatriation
of overseas cash. According to the Wall Street Journal, \1\ if
Goldman is right, ``buybacks will make up the largest use of
cash among S&P 500 companies for only the second time in the
last two decades.''
---------------------------------------------------------------------------
\1\ https://blogs.wsj.com/moneybeat/2016/11/21/goldman-sees-30-
buyback-surge-in-2017/
---------------------------------------------------------------------------
If cutting corporate taxes would give U.S. companies the
cash they need to boost workers' wages and productivity, why
aren't they doing that now?
A.2. There are many possible explanations for the patterns in
the data that were identified in my work with Aparna Mathur,
and then confirmed by many others (Hassett and Mathur 2015). My
own intuition for the emergence of the factors you mention is
that highly profitable multinational firms are able to locate
production in low tax countries in order to avoid the high U.S.
tax. When they do that, they do not create jobs here in the
U.S. so wages stagnate, even when profits soar. The data
suggest that blue-collar workers benefit when countries reduce
their corporate tax rates in order to attract investment. There
is no reason to expect that pattern not to hold should the U.S.
do the same. If confirmed, I would look forward to interacting
with the staff to provide an update on developments in this
literature.
Q.3. Do you think Goldman Sachs' prediction is wrong?
A.3. The capital formation that could drive domestic wages
higher would require financing should there be tax reform in
this country. There is a large academic literature that
identifies the sources of financing for capital spending,
including work \2\ by myself and my coauthor Alan Auerbach of
Berkeley (Auerbach and Hassett 2003). I have no reason to
dispute the Goldman analysis, but it would, I believe, change
significantly if the U.S. were suddenly a more attractive
locale for the location of capital spending. At that point, the
literature suggests that a good bit of the capital spending
would likely be financed by internal cash holdings, and share
repurchases would decline. Indeed, Auerbach and I found exactly
this link.
---------------------------------------------------------------------------
\2\ http://www.sciencedirect.com/science/article/pii/
S0047272701001724
Q.4. Do you support the inclusion of a border adjustment tax in
---------------------------------------------------------------------------
any proposals to reform our tax system?
A.4. The theoretical optimal tax literature suggests that moves
toward tax systems like the border adjusted business cash flow
tax can be positive for economic growth. There are also a
number of uncertainties regarding specific attempts to move
from theoretical modeling to real world tax law, and academic
economists have raised a number of possible transition
concerns, such as the impact of currency adjustment, that
should be taken seriously. If confirmed, I would provide the
President with unbiased analysis of the broad economic
literature in this space.
Q.5. What do you think the impact of a border adjustment tax
would be on an average American's annual cost of groceries and
other consumer goods?
A.5. The impact of a border adjustment tax on the cost of
groceries and consumer goods would depend on the extent to
which the dollar adjusts to offset the tax. If confirmed, I
would, if requested, instruct the professional staff at the CEA
to review the literature in this area and provide a range of
estimates of possible effects.
Q.6. According to independent economists, President Trump's tax
proposal is estimated to cost $3 to $7 trillion over 10 years.
While we don't have all the details, nothing in the President's
proposal suggests a new stream of revenue sufficient to pay for
the cost of the proposed tax cuts. When Secretary Mnuchin
testified before the Banking Committee in May, he claimed that
the Administration expected that the tax cuts would be paid for
by economic growth.
Do you think it is realistic to think that economic growth
will generate sufficient revenue to fully pay for the tax cuts
proposed by the Administration?
A.6. If confirmed as CEA Chairman, I would be actively involved
in the budget process. I was not part of the modeling effort
for this budget, and do not have all of the background
information one might need to provide my own perspective on the
numbers.
Q.7. As a historical matter, one can think of examples where
tax reform efforts have produced positive revenue effects. For
example, the Tax Reform Act of 1986 was designed to be revenue
neutral on a static basis. To the extent that it generated
positive economic growth, which it certainly did (e.g.,
Feldstein 1995), \3\ it would have had a positive effect on
revenue.
---------------------------------------------------------------------------
\3\ https://dash.harvard.edu/bitstream/handle/1/2766676/
feldstein_taxable.pdf?sequence=2
---------------------------------------------------------------------------
Do you think it is realistic to assume that our economy
will grow at 3 percent for 10 years without any downturns?
A.7. It is not reasonable to expect economic growth to return
to 3 percent without significant policy changes. There are many
headwinds at the moment, including low productivity growth and
low capital formation. Should tax policy change in the
direction indicated in the President's tax outline, it would be
natural to expect growth to increase significantly, even to 3
percent if the tax reform is well designed.
Downturns, sadly, are very difficult to see coming. Looking
back at economic history, it was not uncommon for us to
recognize that the data indicated we were in a recession only
after the recession ended. It is standard practice for growth
assumptions not to factor in a specifically dated recession
because economists are simply unable to see ahead accurately
enough to do that.
Q.8. The budget proposed by the President assumes that the tax
cut proposal the Administration has put forward will be revenue
neutral. As Secretary Mnuchin testified to the Banking
Committee, the tax reform proposal would be paid for by
economic growth. However, the budget proceeds to assume that on
top of the economic growth needed to pay for tax cuts, an
additional $2 trillion in economic growth will reduce the
deficit. Independent analysts have pointed out that this double
counts the estimated revenue from economic growth and that,
after correcting for this double counting, the budget would add
to the deficit.
Do you agree that the budget double counts revenue from
economic growth?
A.8. Since I was not part of the modeling team that produced
the budget, and have not seen the model outputs that lead to
it, I cannot speak to its assumptions. If confirmed, I pledge
to be actively involved in the process, and to be available to
you to explain all of the modeling assumptions behind the
numbers.
As to the double counting claim, the 1986 Tax Reform Act,
again, was designed to be revenue neutral, but probably was a
positive for revenue after the growth effects. When I read the
budget, it was this kind of dynamic that first came to mind.
Q.9. Do you think the Administration's budget will create the
conditions necessary for greater economic growth?
A.9. While estimates vary, the economics literature is \4\
clear that tax reform can have a large positive effect on
economic growth (e.g., Feldstein 1995). As this budget proposes
a tax reform, it is logical that it would predict growth to be
higher than private sector forecasts that do not factor in the
President's proposed policy changes.
---------------------------------------------------------------------------
\4\ http://www.journals.uchicago.edu/doi/abs/10.1086/261994
Q.10. Do you think the Administration's budget will reduce the
---------------------------------------------------------------------------
deficit?
A.10. As mentioned, I was not part of the modeling effort that
went into the production of this budget, but have no reason to
doubt the professionalism of the staff that produced it. One of
my favorite parts of every budget is the end, where the staff
members that produced the budget are acknowledged individually.
This year's budget ended with a list of 597 credited OMB staff
who burned the midnight oil to produce the numbers, a majority
of whom (about 75 percent) also worked on and were credited in
President Obama's final budget. If confirmed, I would relish
the opportunity to work with so many able civil servants, with
long institutional memory, who play such an important role
serving their country.
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------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
FROM PAMELA HUGHES PATENAUDE
Q.1. HOTMA Implementation--Last year, Congress passed the
Housing Opportunity Through Modernization Act (HOTMA) with
bipartisan support. If confirmed, will you work to ensure the
expeditious implementation of HOTMA?
A.1. Yes, if confirmed, I will ensure expeditious
implementation of HOTMA reforms.
Q.2. Housing and Poverty--As you point out in your opening
statement, Matthew Desmond makes the case for how the lack of
safe, affordable housing contributes to poverty.
In recent years, we have heard more about how important
safe, affordable housing is as a platform to build better long-
term outcomes for children, seniors, workers, and people with
disabilities. These investments may also help save money in
other areas like health care, education, and criminal justice.
What are your views as to the role that safe, affordable
housing plays as a platform for better outcomes for Americans?
A.2. I believe that decent and safe affordable housing is
critical to family stability and the alleviation of poverty and
prevention of homelessness.
Q.3. Funding for Blight Elimination--Communities across Ohio
struggle with a legacy of blighted properties. These properties
depress neighborhood property values, create crime and safety
hazards, and reduce local tax rolls. Communities in Ohio and
other States have struggled to find resources to remove these
blighted properties.
In response to a question from Senator Donnelly, you
mentioned that Federal funds other than CDBG, which the
Administration has proposed for elimination, could be used for
the elimination of blighted properties.
Can you provide a list of the other Federal programs that
are providing new resources to communities for removal of
blighted properties?
A.3. There are a number of HUD programs that fund demolition,
though most of these allow it when in conjunction with
reconstruction. HUD's Neighborhood Stabilization Programs
(NSP1, NSP2, and NSP3) also allow for demolition of blighted
structures, as a standalone activity. I believe there is over
$400 million in unexpended NSP funds remaining in all three
programs, roughly $10 million unexpended in the State of Ohio
and the State's local recipients of the funds. Additionally,
there are other Federal programs that fund demolition, for
instance the Treasury Department's Hardest Hit Fund (HHF),
which for many communities conducting demolitions, HHF is the
largest source of funds for these demolitions.
Q.4. LIHTC and the Budget--Ms. Patenaude, both you and
Secretary Carson have cited the Low Income Housing Tax Credit
as an example of a public-private partnership that works. I am
concerned that some of the President's proposals could weaken
the impact of the LIHTC. For example, we are already hearing
that investment in LIHTC has already dropped in Ohio and across
the country in anticipation of the President's proposed tax
rate cuts. This is causing some developments and preservation
projects to fall through, and sending States and developers
scrambling to fill holes in their budgets. The budget also
proposes to eliminate the HOME program, which was already being
used to fill critical funding gaps in about 25 percent of LIHTC
developments.
Have you examined the potential impact of these policies on
LIHTC? How would you generate funding for affordable housing if
the President's plans are adopted and HOME is eliminated and
the value of LIHTC is greatly diminished?
A.4. Tax credit pricing at the end of 2016, beginning of 2017
declined. However, to date anecdotal evidence suggests that
market conditions have stabilized in terms of equity pricing
(even in anticipation of Federal tax reform). If the Congress
reduced HOME and CDBG to requested levels, the unobligated
budget authority would take some time to spend down. State and
local governments also provide critical gap funding resources
to support LIHTC developments through State housing trust funds
provided in some cases by State fees on closings. In addition,
some States are using funds earned through participation in
FHA's risk share program.
Q.5. Opioid Recovery and Housing--As you probably know, Ohio
has been ravaged by the opioid epidemic. We hear heart-breaking
stories every day about families struggling with addiction.
Last year, I had the pleasure of speaking at an awards
ceremony for a permanent supportive housing development in
Lancaster, Ohio, called Pearl House. Pearl House provides
affordable housing and access to comprehensive services to
parents in recovery and their children, many of whom were
previously homeless or at risk of homelessness. In this
environment, parents can continue their recovery and work
toward self-sufficiency while their children have a stable
environment in which to grow. It took a combination of LIHTC,
other grants, and dedicated rental assistance vouchers to
create Pearl House and ensure affordability for these fragile
families.
What are your thoughts about whether permanent, supportive
housing such as Pearl House can contribute to addiction
recovery for more Ohioans and people across the country?
A.5. Evidence based research demonstrates that a Housing First
approach is an effective strategy to improve health outcomes
for individuals suffering from substance abuse including
opioids. We should learn from the success of the Interagency
Council on Homelessness as a model for addressing the
complexity of the opioid epidemic.
Q.6. What role do you believe available, affordable housing can
play in helping people avoid or escape opioid addiction?
A.6. I believe that affordable housing plays a critical role in
promoting family stability. Stable housing is a critical
platform for substance abusers seeking treatment for addiction.
Q.7. Federal Housing Administration/Housing Counseling--In the
past, you supported the Obama administration's ``HAWK''
proposal, which emphasized homebuyer education for FHA
borrowers. Do you still agree with this proposal?
A.7. If confirmed, I look forward to working with Congress to
better understand the concerns about this proposal.
Q.8. What are your views about the role of housing counseling
in building sustainable homeownership?
A.8. Housing counseling is a critical component of sustainable
homeownership. The proposed budget for FY2018 requests $47
million for these important programs, a funding level
consistent with the level provided by Congress during the
current fiscal year.
Q.9. HUD's Affirmatively Furthering Fair Housing (AFFH) Rule--
If confirmed, do you intend to carry out HUD's Affirmatively
Furthering Fair Housing Rule?
A.9. Yes, if confirmed, I pledge to carry out HUD's
Affirmatively Furthering Fair Housing Rule.
Q.10. LGBTQ Housing Rights--Do you believe that HUD should
continue to provide equal access to housing opportunities for
lesbian, gay, bisexual, transgender, and queer (LGBTQ)
individuals?
A.10. Yes, I believe HUD should continue to provide equal
access to housing opportunities for all Americans.
Q.11. In recent months, HUD has withdrawn two Notices and
removed from its website several resources intended to carry
out its policies to ensure housing rights for LGBTQ
individuals. This includes LGBTQ youth, who make up nearly 40
percent of all homeless youth. The withdrawn Notices were
designed to (1) require HUD-participating housing providers to
display information regarding the rights of LGBTQ individuals
and (2) collect information necessary to evaluate the
effectiveness of an LGBTQ youth homelessness demonstration
program.
If confirmed, will you work to reinstate these notices and
guidance? If not, why not?
A.11. HUD career staff has informed me that this survey was
withdrawn to allow the program office to thoroughly examine the
information included in the survey and its effectiveness. It is
currently under review and I pledge to consider this issue, if
confirmed.
Q.12. Preserving Access to Opportunity--In recent years, many
cities have seen a wave of population growth and investment
that have led to greater economic activity, tighter rental
housing markets, and rising rental housing costs. As a result,
many lower-income families and businesses who endured
challenging decades in their communities are finding themselves
priced out of their long-time neighborhoods just when
additional economic opportunities are opening up. Loss of
housing in urban neighborhoods can push residents away from
access to jobs, transit, and local support networks such as
hospitals and child care. In many of these neighborhoods,
federally assisted housing may be coming to the end of long-
term affordability contracts or at risk of loss due to physical
deterioration. HUD estimates that we are losing 10,000 units of
public housing every year due to physical obsolescence. By
2025, nearly 2.2 million units of HUD-assisted and Low Income
Housing Tax Credit-supported housing will reach the end of
their affordability periods. \1\
---------------------------------------------------------------------------
\1\ See ``America's Rental Housing: Expanding Options for Diverse
and Growing Demand, Key Facts'', p. 4, Harvard Joint Center for Housing
Studies, December 9, 2015, available at http://jchs.harvard.edu/
americas-rental-housing.
---------------------------------------------------------------------------
Do you believe that HUD and communities should help
preserve housing and economic opportunities for lower-income
families in neighborhoods experiencing economic growth and
rising rental costs?
A.12. Yes, HUD and local communities should encourage and
incentivize economically integrated neighborhoods.
Q.13. If so, what role do you think HUD and HUD's programs
should play in preserving these opportunities?
A.13. HUD should incentivize creative and innovative approaches
to preserving affordable housing developments with nearing
expiring use restrictions.
Q.14. Housing for People With Disabilities--Very-low income
people with disabilities have great difficulty in finding and
paying for suitable affordable housing with access to
appropriate features and services. Over 1 million very low-
income, non-elderly persons with disabilities pay over half of
their incomes for housing, and approximately 2 million more
people--including those with developmental disabilities--are
living in more restrictive, institutional environments than
they would choose or are living with an aging caregiver. Rent
on a modest 1 bedroom apartment at HUD's estimated national
fair market rent would consume all of the income of a person
relying upon Supplemental Security Income (SSI).
What do you view as HUD's role in meeting the housing needs
of low-income people with disabilities?
A.14. HUD programs are designed to allow persons with
disabilities to live as independently as possible in the
community, subsidizing rental housing opportunities which
provide access to supportive services. For at least the last 8
years these programs have faced funding pressure. HUD should
focus on ways to provide such support in the most efficient way
possible. If confirmed, I commit to working with our
stakeholders, including States, local governments, Congress,
and other partners to seek rental reforms that allow these
programs to be sustainable and help our most vulnerable
citizens.
Q.15. Housing for Senior Citizens--Across America, seniors are
struggling to pay for their housing costs. We know that very
low income seniors who pay more than half of their incomes for
housing also spend much less than their peers on health care,
food, transportation, and retirement savings. We also know that
affordable housing can be a tremendous, cost-saving platform
for the provision of services to seniors--services that help
seniors remain healthy, address health challenges, and age in
place.
Yet, only one-third of seniors eligible for HUD rental
assistance programs get to use them, resulting in the housing
cost burdens and associated lower spending on health, food, and
transportation. These shut-out seniors also miss out on the
health benefits that come with access to a service coordinator
in their apartment buildings, from living in appropriately
accessible homes that HUD-assisted housing provides, and living
in a community that guards against social isolation.
What is more, as you know, recent studies from both the
Bipartisan Policy Center and Harvard's Joint Center for Housing
Studies have documented a coming wave of housing needs for
America's senior citizens. These needs will include: additional
affordable rental housing, housing and community adaptations
necessary to help seniors age in place; integrating health and
supportive services into housing; and improving technologies
such as telemedicine. To meet these challenges, the Bipartisan
Policy Center has recommended a combination of continued
investment in affordable rental housing, home modification
programs, and coordination between health care and housing
providers to improve health outcomes and lower costs.
If confirmed, what will you do to meet the housing
challenges of an aging America?
A.15. Housing an aging population represents a major challenge
for the United States. By 2030, the senior population is
projected to exceed 74 million, representing more than one in
five Americans. Over the next 15 years, millions of Baby
Boomers will seek to ``age in place'' in their own homes and
communities.
Yet many of our homes and communities lack the structural
features and support services to enable safe, independent
living by seniors. The Bipartisan Policy Center (BPC) Housing
Commission, which I led as director, identified the desire of
seniors to age in place as a ``new frontier'' in housing
policy. If confirmed, I intend to help focus the Department on
this critical issue. Strong leadership at HUD can help harness
the creativity and resources of the private and nonprofit
sectors, as well as Government at all levels, to respond to the
growing need for affordable housing that is also suitable for
senior living. New and emerging technologies will likely play
an important role in enabling aging in place. It is also more
critical than ever to break down the silos in the Federal
Government to ensure the most effective and efficient delivery
of services across a broad array of fields, including housing,
health care, and transportation.
Q.16. Will you take actions to increase the supply of
affordable, accessible rental housing for lower-income seniors?
A.16. Yes, I will. Throughout my career, I have been a strong
supporter of the Low-Income Housing Tax Credit, which has been
a critical source of financing for rental homes affordable to
the Nation's lowest-income seniors. Some States provide set-
asides and preferences in their LIHTC allocation plans for
senior housing developments and promote the adoption of
universal-design features to improve accessibility. The BPC's
Senior Health and Housing Task Force recognized, regulatory and
land-use policies at all levels of Government can act as
barriers to the production of affordable senior housing. On the
positive side, some communities have adopted policies that
allow for and encourage greater affordable housing options for
seniors, such as accessory dwelling units. If confirmed, I will
make it a priority to illuminate the impact of regulatory
barriers on access to affordable housing, highlight best
practices drawn from communities throughout the country, and
show how these policies can both positively and negatively
impact one of our Nation's most vulnerable groups: low-income
seniors.
Q.17. Will you take actions to help seniors modify their homes
in order to help them age in place?
A.17. Yes. According to Harvard's Joint Center for Housing
Studies, just 57 percent of existing homes have more than one
of five universal design features--no-step entries, single-
floor living, switches and outlets accessible at any height,
extra-wide hallways and doors, and lever-style door and faucet
handles--that can help make homes safer for seniors and enable
aging in place. Improving safety through home modifications has
tremendous upside: Falls are the leading cause of injury-
related death among seniors, and most falls occur in the home.
In 2015, treating falls cost Medicare more than $31 billion. If
confirmed, I will work to ensure that HUD programs are
coordinated with programs administered by other Federal
agencies that also provide resources and expertise for home
assessments and modifications. I am aware of legislation
recently introduced by Senators Angus King and Susan Collins,
the Senior Home Modification Assistance Initiative Act, which
seeks to improve this coordination and provide more consumer-
friendly information on how these programs can benefit older
Americans. Some State and local governments assist low-income
seniors with home modifications through property tax credits,
grants, or forgivable loans.
Q.18. How would you foster collaboration with health care
providers to meet the needs of America's seniors?
A.18. With the rapid expansion of the senior population,
greater collaboration between the health care and housing
sectors will be critical. During my career in housing, I have
found that housing and health care professionals rarely
interact with each other, and when they do, they utilize very
different vocabularies. A notable exemption was the successful
work and model collaboration of the Interagency Council on
Homelessness. If confirmed, I will make it a priority to help
bridge this divide. HUD serves approximately 1.3 million senior
renters, most of whom are dually eligible for Medicare and
Medicaid. I will work with my counterparts at the U.S.
Department of Health and Human Services and the Centers for
Medicare and Medicaid Services to identify ways to improve
health outcomes for these seniors and potentially generate
savings for the two taxpayer-funded health insurance programs.
Q.19. Do you support service coordination as a strategy for
improving outcomes for seniors?
A.19. Yes, effective service coordination can improve health
outcomes for seniors and has the potential to reduce health
care costs. There are a number of locally driven programs like
Support and Services at Home (SASH) in Vermont that are showing
promising results.
Q.20. Listening to Assisted Families and Advocates--If
confirmed, do you plan to meet with assisted families and
organizations that advocate on behalf of HUD program
participants and low-income families?
A.20. Yes.
Q.21. Do you support dialogue between HUD staff and organized
tenant groups to assist HUD in its oversight of housing
programs?
A.21. Yes.
Q.22. Potential Conflicts of Interest--I understand that your
husband works at a mortgage firm that deals with both HUD-
backed and Government Sponsored Enterprise-backed multifamily
and other mortgages. Is that correct?
A.22. Yes, my husband, Chuck Patenaude is employed by Dougherty
Mortgage, LLC.
Q.23. If so, how are you planning to make sure that you do not
have the appearance of any conflicts of interest with your
husband's firm?
A.23. At all times, I will abide by the terms of my executed
Ethics Agreement. I will take the following steps to avoid any
actual or apparent conflicts of interest. I will not
participate personally and substantially in any particular
matter that to my knowledge has a direct and predictable effect
on my husband's compensation and employment with Dougherty
Mortgage, LLC. I will also not participate personally and
substantially in any particular matter involving specific
parties in which I know Dougherty Mortgage, LLC is a party or
represents a party.
Q.24. HUD Staffing and Program Oversight--According to HUD's
FY2017 Congressional Justifications, the Department ``confronts
two major challenges: (1) HUD has experienced the greatest
percentage decline of permanent career employees across the
Government from 2005 through 2014 and (2) HUD possesses the
highest percentage of any agency of career permanent employees
eligible to retire by 2019. This retirement wave can cause a
loss of leadership and institutional knowledge at all levels.''
Such a loss could also cause a failure to ensure that the
Department is upholding its duties to taxpayers by ensuring the
quality of federally assisted housing, enforcing program rules,
and overseeing FHA lending programs, for example.
Have you examined the potential impact of a loss of staff
on HUD's ability to carry out its mission and ensure the public
trust?
A.24. If confirmed, I look forward to approaching this issue
through the work of HUD's agency reform plan. I am confident we
can maintain the quality of HUD services that the American
public expects, despite the staff reductions the Department has
sustained. I look forward to guiding the development of HUD's
hiring plans to ensure that the most critical needs are met
rather than maintaining positions that may no longer be needed
due to technological advancements or from improved ways of
doing business.
Q.25. HUD Fair and Equitable Lawsuit--A recent HUD Inspector
General's audit noted that HUD faces a significant potential
litigation liability of between $55 million and $650 million
for an arbitration known as the ``Fair and Equitable
Arbitration Remedy''. This case has been going on over 10
years.
Are you familiar with this case?
A.25. No, I am not familiar with any pending personnel or labor
cases at HUD.
Q.26. If confirmed, will you commit to looking into this case
and working to wrap it up in a fair fashion?
A.26. Yes, if confirmed I will commit to looking into this case
and requesting regular updates from legal counsel.
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RESPONSES TO WRITTEN QUESTIONS OF SENATOR SHELBY
FROM PAMELA HUGHES PATENAUDE
Q.1. Ms. Patenaude, more than 22 million Americans reside in
manufactured housing. Manufactured homes are particularly
important in rural States such as Alabama (where manufactured
homes are 16.2 percent of occupied housing units, compared to
7.3 percent nationwide). Manufactured housing is critical in
addressing housing needs in many rural communities where
multifamily options are often limited or impractical.
I have long been an advocate for agencies conducting a
cost-benefit analysis when crafting regulations. Without this
analysis, costs are increased without a clear justification
that the new regulations will lead to improvements that are in
the best interest of consumers. Can you ensure that HUD
properly takes into account the economic impacts and necessity
of new requirements when issuing regulations about the
construction and installation of manufactured housing?
A.1. Yes, If confirmed, I look forward to working with you and
your staff to better understand the unique aspects of this
industry.
Q.2. President Trump has asked all Federal agencies to examine
the way their departments are organized. He has recommended
that all agencies determine structural plans that allow for
more efficient and effective operations. Will you commit to
making sure that manufactured housing is well represented and
has an active role in any new HUD reorganization?
A.2. I will. Manufactured housing is the largest source of
unsubsidized affordable housing in America and a critical
component of housing rural America. The importance of
Manufactured Housing will certainly be considered when
considering any reorganization.
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RESPONSES TO WRITTEN QUESTIONS OF SENATOR SASSE
FROM PAMELA HUGHES PATENAUDE
Q.1. In 2015, HUD's inspector general found that as many as
25,000 families received HUD funding despite exceeding income
limits that determine eligibility for HUD programs. For
example, one Nebraska-based HUD beneficiary had $1.6 million in
assets and had an income that was almost twice the income
threshold. Will you commit to addressing the problem of over
income families as HUD Secretary?
A.1. If confirmed, I will review this issue closely.
Q.2. How will HUD defer to State and local governments under
your leadership?
A.2. I believe State and local governments understand their
communities much better than Washington, DC, based officials.
If confirmed, I will delegate as much authority as possible
HUD's regional and field offices. Where the statute allows, I
will work with State and local leaders to provide flexibility
with allocated resources. I pledge to continue to develop
strong working relationships with HUD's partners.
Q.3. How can HUD avoid interfering with community-based,
nongovernmental efforts to fight poverty?
A.3. HUD must respect the role these valuable partners play in
eliminating poverty and to providing opportunity for our
Nations' most vulnerable populations.
Q.4. As HUD Secretary, the late Jack Kemp supported policies
that were aimed at revitalizing urban areas. How will HUD
promote urban renewal under your tenure?
A.4. Consistent with Secretary Kemp's approach, I seek to
ensure that individuals and communities explore a broad range
of options to promote urban revitalization efforts. While
public resources are certainly a component of an overall urban
strategy, we need a greater reliance on market resources to
stimulate investments that will improve the quality of life in
the Nation's communities. The combining of these resource
streams through an expanded use of public-private partnerships
and nonprofits will be critical to these revitalization
efforts. I intend to ensure that HUD will contribute its staff
expertise to aid communities in developing these partnerships
and while also ensuring that available HUD financial resources
are effectively used to promote these efforts.
Q.5. Much of my State of Nebraska is rural. What unique
challenges does HUD face in rural areas and how will you
address them?
A.5. If confirmed, I pledge to work closely with Members of the
Congressional Delegation representing rural communities to
better understand the unique housing and community development
needs of their constituents.
Q.6. How will you police waste and protect taxpayer dollars at
HUD?
A.6. If confirmed I will work with the program offices to
improve program oversight to prevent fraud and abuse. I pledge
to establish a strong working relationship with the office of
the Inspector General.
Q.7. When, if at all, should HUD ignore local zoning laws?
A.7. HUD does not and should not preempt local zoning laws.
However, HUD can share best practices and encourage local
communities to consider adopting land use regulations that
promote the production and preservation of affordable housing.
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RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED
FROM PAMELA HUGHES PATENAUDE
Q.1. The Federal Housing Administration (FHA) has several
foreclosure avoidance tools at its disposal to keep families in
their homes. If confirmed, will you ensure that HUD and FHA
exhaust every possible means of helping a family to avoid
foreclosure before actually foreclosing on a family?
A.1. Loss mitigation alternatives to foreclosure, such as loan
modifications, are very important to HUD and FHA. These
alternatives not only help borrowers stay in their homes, but
can reduce losses for FHA. FHA has in place a clear set of
requirements for lenders to evaluate the borrower's situation
and extend appropriate loss mitigation options to borrowers
interested in staying in their home. If confirmed, I will
ensure that FHA will continue to provide alternatives to
foreclosure tailored to the borrower's hardship circumstances.
Q.2. Given your work on affordable housing in the past and the
time that you have now had to review the President's FY18
budget request for HUD, do you personally believe there are any
programs that are proposed to be cut for which funding should
be maintained or increased?
A.2. As a life-long housing practitioner and advocate I have
witnessed the positive outcomes these programs can achieve but
I am also aware of the urgent need to reform programs to create
efficiency and achieve greater outcomes for the program
participants. As I stated during my confirmation hearing, I was
not involved in the budget development process. If confirmed, I
will be an advocate for programs with proven track records of
success. I will bring my housing perspective to future budget
debates.
Q.3. The National Low Income Housing Coalition (NLIHC) has
described the National Housing Trust Fund, which I authored, as
``the first new housing resource in a generation. It is
exclusively targeted to help build, preserve, and rehabilitate
housing for people with the lowest incomes.'' NLIHC also
recently reported that our nation has ``a shortage of 7.4
million affordable rental homes available to the lowest income
people.'' If confirmed, will you commit to working with me to
preserve the National Housing Trust Fund?
A.3. If confirmed, I will commit to implementing the existing
resources provided to the department for the National Housing
Trust Fund in accordance with all statutes and regulations in
the most efficient and effective manner.
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RESPONSES TO WRITTEN QUESTIONS OF
SENATOR MENENDEZ FROM PAMELA HUGHES PATENAUDE
Q.1. During your nomination hearing, you repeatedly stated that
you support the President's fiscal year 2018 budget request.
Included in the request is the proposed elimination of the
Community Development Block Grant program, the HOME Investment
Partnership Program, and the Choice Neighborhoods program, as
well as significant cuts to the Public Housing Operating and
Capital Funds, to the Tenant Based Rental Assistance program,
and to the Section 811 Housing for Persons with Disabilities
program. When asked about large-scale cuts to HUD's programs
during his nomination hearing, Secretary Carson said that it
would be ``cruel and unusual punishment to withdraw those
programs before you provide an alternative route.'' If enacted
in its current form, will this budget proposal increase housing
instability and homelessness?
A.1. In the short term, if Congress funds HUD at the proposed
level, I believe it will take some time to spend down the
existing unobligated budget authority. If Congress maintains
this level of funding beyond the short term, these are concerns
that will need to be monitored.
Q.2. Do you support elimination of the Community Development
Block Grant program as proposed in the budget? If you do
support the budget, please explain what specific alternative
funding mechanisms will be provided to States, cities, and
localities to fill the void created by elimination of the
program.
A.2. The proposed FY2018 budget does not request new funding
for CDBG, although unexpended budget authority and staffing
remains. As a life-long housing practitioner and advocate for
CDBG, I've seen the great outcomes this flexible program can
achieve. But CDBG's flexibility, one of its greatest virtues,
can also be a curse. For every example of housing created,
detractors can point to cities where mayors have used these
dollars to plug budget holes. Better targeting in areas such as
lead abatement, low- to moderate-income housing production/
preservation and blight elimination would create more
measurable results. As the President's nominee, I support the
Administration's proposed budget, which balances priorities
governmentwide. If confirmed, I will bring a robust,
practitioner's view to future internal budget deliberation
processes. Further, if confirmed, I look forward to working
with Congress on policy reforms to improve the programs of the
department into the future.
Q.3. Do you support elimination of the HOME Investment
Partnership program as proposed in the budget? If you do
support the budget, please explain what specific alternative
funding mechanisms will be provided to States, cities, and
localities to fund the creation of affordable housing for low-
income households.
A.3. As Secretary Carson laid out in his hearings last week,
the Budget reflects hard choices to maintain fiscal
responsibility. When the previous Administration reduced HOME
program funding below $1B, it resulted in national allocations
that can make it difficult for recipients to achieve the goals
of the program. As I said in the previous question, HOME, like
CDBG, has produced some positive outcomes. It has also been the
subject of national media attention surrounding the misuse of
these Federal funds. Significant unexpended budget authority
remains. If confirmed, I commit to ensuring the efficient and
effective utilization of all available HUD resources. I look
forward to working with the Congress, State and local
governments, and private sector partners to identify mechanisms
and means to support the development and preservation of
affordable housing.
Q.4. Do you support elimination of the Choice Neighborhoods
program as proposed in the budget? If you do support the
budget, please explain what specific alternative funding
mechanisms will be provided to revitalize distressed public and
assisted housing and their surrounding communities. I support
place-based strategies. Choice Neighborhoods and the iterations
of the HOPE program have created some strong communities.
Although, many believe it can lead to gentrification and may be
at odds with a mobility or high opportunity area strategy. The
RAD program is showing promising results.
Do you support a 67 percent reduction to the Public Housing
Capital Fund as proposed in the budget? If you do support the
budget, please provide a detailed explanation of what funding
sources public housing agencies can utilize to address the
backlog of capital repairs estimated in 2010 to be at $26
billion and increasing each year.
A.4. This account faces pressure every year. No matter what
amount is appropriated, the repair estimates continues to grow.
If confirmed, I would very much welcome the opportunity to work
with Congress on finding additional ways to address the capital
backlogs.
Q.5. Do you support a 12 percent reduction to the Public
Housing Operating Fund as proposed in the budget? If you do
support the budget, please describe how this proposed cut will
impact public housing agencies' ability to operate and maintain
the country's 1.1 million public housing units. Please also
describe how the proposed cut will impact the residents living
in public housing units.
A.5. HUD career staff advise that this funding level will
support existing households and that this is a first step
towards holistic rental reforms. If confirmed, I commit to
working with stakeholders to identify fiscally sustainable
options to transform this antiquated delivery system. Voluntary
PHA consolidations may be one option. ACC conversion may be
another. Local decision making and flexibility is critical.
Q.6. Do you support a nearly 5 percent reduction to the Tenant
Based Rental Assistance account as proposed in the budget? This
proposed cut will result in elimination of approximately
250,000 housing vouchers, nearly 8,000 of which are in New
Jersey. If you do support the budget, how would you propose
addressing the resulting increased housing instability and risk
of homelessness?
A.6. I'm advised by HUD staff that these funding levels support
existing households. I think some of these numbers are very
hard to project under our current system. As a life long
housing practitioner and advocate, I believe in the goals of
the Section 8 program. As I stated during my confirmation
hearing, I was not involved in the budget development process.
As the President's nominee, I support the Administration's
budget request. If confirmed, I will bring my housing
perspective to future budget debates.
Q.7. Do you support a 17 percent reduction to the Section 811
Housing for Persons with Disabilities program as proposed in
the budget? This proposed cut would result in the elimination
of approximately 6,800 homes, nearly 200 of which are in New
Jersey. If you do support the budget, please explain what
specific alternative funding sources will be used to subsidize
supportive rental housing that allows persons with disabilities
to live independently in the community.
A.7. HUD staff have advised that these funding levels support
existing households. I think some of these numbers are very
hard to project under our current system. As a life long
housing practitioner and advocate, I believe in the goals of
the Section 811 program. As I stated during my confirmation
hearing, I was not involved in the budget development process.
As the President's nominee, I support the Administration's
budget proposal. If confirmed, I will bring my housing
expertise and perspectives to future budget debates.
Q.8. Do you support the elimination of the Housing Trust Fund
as proposed in the budget?
A.8. I will commit to efficient utilization of all resources
provided to the Housing Trust Fund. I am aware of the fact that
GSE reform could impact the funding level.
Q.9. In 2014, you spoke positively about the Federal Housing
Administration's Blueprint for Access, which unveiled the
Homeowners Armed with Knowledge (HAWK) Program--pairing a
modest decrease in mortgage insurance premiums with pre- and
post-purchase housing counseling for first-time homebuyers. You
called the HAWK program a ``particularly welcome development''
and said that it ``recognizes that it is possible to increase
mortgage access for underserved borrowers without exposing
lenders and taxpayers to significantly greater risk.'' Do you
still hold the view that the Federal Housing Administration
should pursue such programs, and will you recommend to the
Secretary that he consider initiatives such as HAWK that expand
access to mortgage credit for underserved but creditworthy
borrowers?
A.9. If confirmed, I look forward to working with Congress to
better understand the concerns about this proposal.
Q.10. FHA-insured loans are an essential source of mortgage
credit for minority homebuyers. During the last two decades, a
third of all African American and Latino borrowers have used
FHA-insured loans. And since 2008, approximately half of all
African-American and Latino households looking to buy homes
received mortgage loans insured by FHA. This is in comparison
to FHA's average market share of 13 percent over its 81-year
history.
What is your vision for the Federal Housing Administration?
How will you ensure that the mutual mortgage insurance fund
remains strong and that HUD serves it mission to provide access
to mortgage credit for underserved borrowers, many of whom are
minorities and first-time homebuyers?
A.10. I agree with the Secretary that FHA should continue to
help low- and moderate-income, minority and first-time
homebuyers access to affordable credit to achieve sustainable
homeownership. FHA has played an important countercyclical
role. We must balance FHA's mission and risk exposure to the
taxpayer.
Q.11. Are you willing to revisit the Administration's decision
to reverse the mortgage insurance premium reduction in January?
A.11. I support the Administration's decision to suspend the
proposed FHA mortgage insurance premium reduction. I believe
further analysis is required to evaluate the impact of any
premium reduction on the health of the MMI fund and the risk to
taxpayers.
Q.12. In prior articles, you have written about low
homeownership rates and particularly among African Americans
and Latinos. In recent years, advances in alternative data and
credit scoring models have made it possible to generate credit
scores for individuals that were previously ``unscoreable.''
Both the GSEs and FHA have taken steps to explore the viability
of alternative credit scoring models. As Deputy Secretary, will
you recommend to Secretary Carson that FHA research and
consider alternative credit scoring models that would provide
credit scores for individuals that may not be able to otherwise
qualify for a mortgage loan?
A.12. Yes, as we discussed during our meeting in your office,
if confirmed, I will continue to explore alternative credit
models.
Q.13. What specific policy recommendations would you make to
Secretary Carson to expand housing opportunities that will
allow our nation's low-income elderly to maintain independence
and age in place?
A.13. Housing an aging population represents a major challenge
for the United States. By 2030, the senior population is
projected to exceed 74 million, representing more than one in
five Americans. Over the next 15 years, millions of Baby
Boomers will seek to ``age in place'' in their own homes and
communities. Yet many of our homes and communities lack the
structural features and support services to enable safe,
independent living by seniors. The Bipartisan Policy Center
(BPC) Housing Commission, which I led as director, identified
the desire of seniors to age in place as a ``new frontier'' in
housing policy. If confirmed, I intend to help focus the
Department on this critical issue. Strong leadership at HUD can
help harness the creativity and resources of the private and
nonprofit sectors, as well as Government at all levels, to
respond to the growing need for affordable housing that is also
suitable for senior living. New and emerging technologies will
likely play an important role in enabling aging in place. It is
also more critical than ever to break down the silos in the
Federal Government to ensure the most effective and efficient
delivery of services across a broad array of fields, including
housing, health care, and transportation.
Q.14. In my State of New Jersey, New Jersey Community Capital
(NJCC)--a nationally recognized Community Development Financial
Institution--has been tremendously successful with the loans it
has purchased through FHA's Distressed Asset Stabilization
Program (DASP), which allows FHA to sell defaulted mortgages to
investors. NJCC is able to make modifications to reduce loan
balances and lower monthly payments for homeowners that are
behind on their mortgages, allowing them to avoid foreclosure
and stay in their homes. And where modifications are not
possible, NJCC has turned foreclosed homes into affordable
rental housing or new affordable ownership opportunities.
Will you commit to making improvements to DASP that allow
community-focused groups like New Jersey Community Capital to
purchase more loans and therefore achieve better outcomes for
more homeowners and communities?
A.14. The Department values all its purchasers, including its
nonprofit and community-based purchasers. FHA continues to
review and constantly improve DASP and similar tools to
maximize recoveries to the insurance fund while also maximizing
community involvement. If confirmed, I will commit to looking
at what can be done to ensure the inclusion of community-
focused groups while still seeking best execution and
protecting the interests of the taxpayers.
Q.15. Will you commit to strengthening the program's loss
mitigation, vacant property, and neighborhood stabilization
standards so that we can ensure homeowners and neighborhoods
are the beneficiaries of this program--not private equity firms
and hedge funds?
A.15. DASP and all note sales are primarily designed to
maximize recoveries/reduce losses to the insurance fund--the
insurance fund's health and viability is the beneficiary. HUD
is proud of the efforts made to date in strengthening DASP loss
mitigation, vacant property, and neighborhood stabilization
elements. If confirmed, I will continue look at ways to improve
all aspects of the Department's note sales.
Q.16. The Department of Housing and Urban Development employs
about 8,300 people nationwide. Job titles and wages, assigned
during the hiring process, typically set a course for an
employee's career for years to come. The quest for diversity at
all levels of Government is an issue of fairness and
opportunity, and it's fundamentally tied to an inclusive
workplace. However, decades of social scientific research have
shown how bias in the employment and hiring process can limit
opportunities for historically excluded groups. What steps will
you take as Deputy Secretary to make your agency a more
inclusive and diverse workforce in both senior and mid-level
management positions?
A.16. Working closely with HUD's Office of Departmental Equal
Employment Opportunity, if confirmed, I look forward to having
the opportunity to advance the work achieved to date in making
HUD among the most diverse Federal agencies. I plan to engage
HUD's Diversity Council to get their feedback on how we can
continue to improve. EEO will continue to be a key management
objective in HUD's strategic plan during the Trump
administration.
Q.17. The Department of Housing and Urban Development has a
unique role in empowering disenfranchised communities of color.
This is an area about which I care deeply. Understanding the
challenges that these communities face, be it housing
discrimination, affordability, homelessness, limited employment
opportunities, or other, will require a diverse workforce at
the most senior level to help you carry out the agency's
mission. What steps will you take as Secretary of Housing and
Urban Development to ensure the strategic planning and mission
of the Department is led and crafted by people who look like
the communities they serve?
A.17. Over half of HUD's employees are from minority
populations as well as 44 percent of the career senior
leadership team. In further building the team, I am committed
to ensuring diversity is a critical component of all hiring
decisions. Additionally, if confirmed as Deputy Secretary, I
will work closely with HUD staff on a comprehensive stakeholder
outreach plan in addition to the great work Secretary Carson
has already conducted during his listening tour.
Q.18. The President's budget request includes a general
provision increasing tenant rent contributions from 30 percent
to 35 percent of income. According to the Department's own
estimates, for households living in units receiving subsidies
through the section 8 project-based rental assistance program,
this proposal would result in a nearly 22 percent tenant rent
increase in the first year, and a 31 percent rent increase in
subsequent years. In addition, the Department calculated that a
staggering 64 percent of the population impacted by the
proposed rent increases are elderly or disabled.
Do you believe that tenant rent increases of 22 percent and
31 percent are significant?
A.18. I believe the idea is that the move to gross rent
proposal would help simplify rents by relying on gross income
rather than adjusted income. If confirmed, I commit to working
with Congress and stakeholders on a rental reform package that
improves the efficiency and effectiveness of HUD rental
assistance programs, to allow us to serve as many as possible
without displacing currently-served households.
Q.19. In your opinion, how will the impacted elderly and
disabled households--the vast majority of whom live on fixed
incomes--be able to afford a 22 percent and ultimately 31
percent rent increase?
A.19. Please see the answer above.
Q.20. Do you believe that a 22 percent rent increase, and
ultimately a 31 percent rent increase, on the Nation's lowest-
income families, elderly, and persons with disabilities will
increase housing instability? If not, please explain.
A.20. Please see the answer above.
Q.21. Both you and Secretary Carson have repeatedly stated that
there is a greater role for State and local governments to play
in the provision of housing assistance and the development of
affordable housing. I agree that States and local governments
have a critical role to play, but they are not able to do it
alone. As a former mayor, I understand that our cities need a
strong Federal partner, particularly when it comes to
investments. What specific evidence have you considered that
leads you to believe State and local governments have the
financial resources to take on more of this responsibility?
A.21. As a life-long housing practitioner, I support the goals
of HOME and CDBG. Many States and some cities have established
housing trust funds. These communities have decided housing is
important and have taken the necessary steps to support it.
State and local governments can eliminate exclusionary and non-
value-added regulations that unnecessarily increase the cost of
housing and restrict the supply of affordable housing. Reducing
regulatory barriers will enable Federal investments in the
production and preservation of affordable housing to extend its
reach.
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RESPONSES TO WRITTEN QUESTIONS OF SENATOR HEITKAMP
FROM PAMELA HUGHES PATENAUDE
Q.1. Wrap Around Services--In past writing, you've stated that
in order to address some of our long term housing needs--
particularly for older Americans--we need to better integrate
health care and other supportive services with housing. I share
this view and strongly believe that we need a more holistic
approach to housing services in this country.
During your distinguished career working on these issues,
what policies and programs have you seen that effectively
adopted a holistic approach to housing services?
A.1. Yes, effective service coordination can improve health
outcomes for seniors and has the potential to reduce health
care costs. There are many locally driven programs like Support
and Services at Home (SASH) in Vermont that are showing
promising results.
Q.2. What can Congress do to work with HUD to advance these
types of holistic housing programs?
A.2. If confirmed, I look forward to working with Congress to
develop viable solutions and ways to better account for savings
in other Federal programs when HUD provides a less expensive
service delivery option.
Q.3. Do you support HUD's recent hard push toward housing first
policies, which have put many effective transitional housing
facilities at risk of losing funding?
A.3. Evidence based research demonstrates that a Housing First
approach is an effective strategy to improve health outcomes
for individuals suffering from substance abuse. If confirmed, I
pledge to work with your office to ensure that the unique needs
of your constituents are addressed.
Q.4. Trauma/Native American Housing--The evidence is clear that
children who have had four or more adverse childhood
experiences--such as living in poverty or facing exposure to
physical or mental abuse--have a 20 year difference in life
expectancy. In North Dakota, we see this throughout our Native
American communities who are struggling with poor housing
conditions, among other challenges.
Will you commit to help design and improve trauma-informed
policies at HUD and work to address the housing challenges
facing our Native American communities?
A.4. If confirmed, I look forward to working with you and
members of your staff, as well as continuum of care providers,
to identify specific policy solutions to address the acute
needs of domestic violence victims. As I mentioned during my
meetings with your staff, I would welcome the opportunity to
travel to North Dakota to visit Indian country and to learn
more about the challenges these communities are facing. Working
together, I'm confident we can find viable solutions to address
the unique housing needs of Americans living in rural
communities.
Q.5. What role does having a safe, clean and affordable place
to live play in helping an individual get a job, avoid drugs
and crime, and become a productive member of society?
A.5. Safe, stable housing is a critical platform for
opportunity and the avoidance of despair.
Q.6. Homeownership Affordability--In an April 2015 article for
housingwire, you discussed your concerns with the plunge in
U.S. homeownership rates, which has hovered around 63 percent
for the past several years. You concluded that due to high
student debt, tight credit markets and increasing rents
millions of families find themselves stuck between a rental
market they can no longer afford and a homeownership market for
which they do not qualify.
What policies do you recommend to help address this fall in
the homeownership rate? Do you believe that the CFPB's
qualified mortgage rule has significantly contributed to this
trend?
A.6. Regulatory uncertainty has contributed to the decline in
the homeownership rate. Looking forward, I believe HUD policies
should stress sustainable and affordable homeownership for
credit worthy borrowers. Prudent underwriting standards and
Housing Counseling are critical to achieving sustainable
homeownership.
Q.7. GSE Reform--I've asked this question to Secretary Carson
and I'd like to get your answer as well. Do you believe a
Federal backstop is necessary to support a 30-year fixed rate
mortgage?
A.7. The current state of the Nation's housing finance system
is unsustainable. I believe the Government should assume the
catastrophic risk on securities backed by standard, long-term
fixed-rate mortgages to maintain broad access to sustainable
homeownership. If confirmed, I look forward to making a
meaningful contribution to this dialogue.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR
CORTEZ MASTO FROM PAMELA HUGHES PATENAUDE
Q.1. President Trump's FY18 budget proposal includes several
legislative proposals aimed at increasing rents on HUD-assisted
households, especially households in the Section 202 Housing
for the Elderly, Section 811 Housing for Persons with
Disabilities, and Project-Based Rental Assistance programs. The
budget states that existing hardship exemptions would apply,
but HUD's own research \1\ has shown that these hardship
exemptions have functioned poorly, with 82 percent of housing
authorities reporting that they provided hardship exemptions to
less than 1 percent to families subjected to minimum rents.
Further, HUD has yet to comply with a recently passed law (P.L.
No: 114-201) requiring the Agency to certify to Congress that
hardship exemptions are being enforced.
---------------------------------------------------------------------------
\1\ https://www.huduser.gov/portal/publications/affhsg/
srrf_2011.html
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Do you agree with the policy proposal to experiment on
increasing rents on America's poorest households, especially
the elderly and persons disabilities, with what little we know
about the enforcement of hardship exemptions and during a time
when housing options are becoming scarcer for the over 11
million households rent burdened in this country?
A.1. I believe Federal rental policies need significant reform.
The current calculation process is very complicated and I am
sensitive to the belief that every assisted person should
contribute some amount toward his or her rent. The policy
proposal, I believe includes an ``up to'' qualifier to provide
the Secretary with some flexibility to adjust the impact of
this change. Regardless, this proposal is a first step toward a
holistic reform. If confirmed, I very much look forward to
working with you on policy reforms.
Q.2. At what rate to you estimate that hardship exemptions
would be granted pursuant to the rent reform proposals outlined
in the budget?
A.2. If confirmed, I commit to working with Congress and
stakeholders on any enacted rental reform package. I believe
any policy change should have a defined process to grant
hardship exemptions. The rules should be clear and unambiguous.
Thus, once clear eligibility standards are established, 100
percent of those eligible should be granted an exemption.
Q.3. Earlier this month, with Senator Rubio from Florida, I
sent a letter to Secretary Carson regarding a change proposed
in the President's 2018 budget as it relates to reverse
mortgages. Our letter raised concerns that the President's
budget may imperil widows and widowers that seek to continue
living in their home after the death of their husband or wife.
Can you please explain, in detail, the rationale for requesting
this statutory change, how it might interact with existing,
related Mortgagee Letters, and any estimated impact on both
surviving spouses and the Mutual Mortgage Insurance Fund?
A.3. If confirmed, I look forward to working with you and
Senator Rubio on this important issue. HUD staff informs me
that in 2014, to protect the residency status of nonborrowing
spouses, HUD added safeguards on newly issued reverse
mortgages. The April 2014 Mortgagee Letter 2014-07 extended FHA
insurance coverage to nonborrowing spouses so the period of
time following the death of the last surviving mortgagor was
further deferred based on the continued satisfaction of the
requirements for a Nonborrowing Spouse.
As HUD advances changes to stabilize the HECM reverse
mortgage program, including those to meet the minimum capital
ratio goals for FHA budget purposes, I have been assured that
none of the changes would result in surviving spouses losing
their current contractual rights to continue to stay in their
home as long as they continue to stay current on taxes,
insurance and reasonably required repairs.
I am further informed that for those nonborrowing spouses
on HECM contracts prior to April 2014, borrowers retain the
ability to refinance to gain the protections included in new
HECMs.
Q.4. In your testimony, you note that as Assistant Secretary
for Community Planning and Development, you supported HUD's
role in the Gulf Coast recovery after Hurricanes Katrina and
Rita. As you know, HUD's role in that recovery was
controversial. Most significantly, HUD was sued by the NAACP
and fair housing advocates over the formula they used to
compensate homeowners for storm losses. After a lengthy court
battle, under the Obama administration, HUD agreed to settle
claims of racial discrimination for $62 million. \2\ During the
Presidential campaign, Secretary Carson conceded that he
wouldn't know what to do if a hurricane struck. \3\ So HUD will
be relying on you to ensure the fair and efficient allocation
of disaster resources. What was your role in the Road Home
program, and what lessons did you learn from this episode that
you would use at HUD, if confirmed?
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\2\ https://portal.hud.gov/hudportal/documents/
huddoc?id=RoadHomeSettlement.pdf
\3\ http://abcnews.go.com/Politics/video/ben-carson-handle-
hurricane-joaquin-34162816
A.4. The ``Road Home'' was the name Louisiana gave its recovery
program. The State had to create an action plan and submit it
to HUD for review. The language Congress included in the
appropriation that funded this recovery was quite interesting.
The Congress directed that the Secretary ``shall waive'' any
provision of any statute or regulation that the Secretary
administers upon a request by the State that such waiver is
required to facilitate the use of such funds. This was the
first time the Congress used the term ``shall''. This ``shall''
language limited HUD's involvement dramatically. Over the years
the Congress rolled ``shall'' back to ``may'', so HUD has much
more involvement in the process than it did under my tenure as
assistant secretary of Community Planning and Development and I
believe this is a good evolution. Congress is still very
prescriptive when it comes to the allocation of these dollars,
but if confirmed, I will work to find ways to improve the
timeliness of the data HUD uses to make the allocation
determinations. Louisiana's Road Home program was a very labor-
intensive process. It took a long time for a recipient to work
through that process and that slowed recovery down immensely.
Many lessons were learned for the response to Hurricane
Katrina. I would note that disaster recovery is an excellent
example of where CDBG is used in a very targeted way to produce
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important results.
Q.5. Secretary Carson, in his listening tour across the
country, has suggested that public and affordable housing
developments were somehow too lavish. \4\ And earlier this
month in an interview he said, ``poverty is a state of mind.''
\5\ I think that views like this can make it difficult for
seniors, veterans, and people with disabilities to have
confidence that the leadership at HUD has their best interests
in mind. Do you agree with Secretary's Carson's views that
``poverty is a state of mind?''
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\4\ https://www.nytimes.com/2017/05/03/us/politics/ben-carson-hud-
poverty-plans.html?mcubz=1&_r=0
\5\ http://www.npr.org/2017/05/25/530068988/ben-carson-says-
poverty-is-a-state-of-mind
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A.5. Secretary Carson clarified his remarks on this issue.
Q.6. Federal Housing Administration-backed loans have helped
millions of Americans attain homeownership, especially first-
time and minority buyers who may've been locked out of other
sources of credit. FHA insurance also stepped into the void
after the private mortgage market collapsed in 2008.
As Congress contemplates housing finance reform, will you
commit to protecting the important role of FHA lending,
including its low downpayments and affordable premiums?
A.6. Yes.
Q.7. To the extent that HUD maintains the Distressed Asset
Stabilization Program--which sells off delinquent FHA loans in
bulk to institutional investors like private equity funds--will
you commit to preserving the neighborhood stabilization and
borrower protection guardrails put in place in 2016?
A.7. The department is proud of the efforts made to date in
strengthening DASP loss mitigation, vacant property, and
neighborhood stabilization elements. If confirmed, I will
continue to look to improve on this program.
Q.8. The previous Administration wrote rules to ensure that all
housing programs at HUD serve people without regard for sexual
orientation or gender identity. These rules are particularly
important for homeless youth, who disproportionately identify
as LGBTQ. Will you commit to upholding nondiscrimination
protections for LGBTQ people seeking housing, particularly
homeless youth?
A.8. Yes.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCHATZ
FROM PAMELA HUGHES PATENAUDE
Q.1. As deputy secretary of HUD, you would be in charge of
implementing HUD's programs.
Do you think the Administration's budget, which proposes to
slash HUD's budget by $6.7 billion (a 13 percent cut), would
make it harder for you to do your job?
A.1. If the Congress were to enact a reduction at this level,
the short run issues of redeploying and reallocating staff
would increase the operational workload, but in the long run,
it could create efficiencies.
Q.2. Given your extensive experience at HUD and knowledge of
these programs, do you think cuts of this size are a good idea?
A.2. As a life-long housing practitioner and advocate I've seen
the positive outcomes these programs can achieve. If confirmed,
I look forward to working with Congress to create viable
solutions to address the changing housing and community
development needs of our Nation.
Q.3. Do you think the President's budget would increase or
decrease the availability of affordable housing?
A.3. If the Congress were to appropriate funding at the
proposed levels, it would take time for the current level of
unobligated budget authority to spend down.
Q.4. Do you think the Federal Government should continue to
fund programs to reduce homelessness and provide affordable
housing?
A.4. Without question. The Federal Government should continue
to fund programs to reduce homelessness, particularly among at-
risk youths and veterans, and continue to support funding for
affordable housing for our most vulnerable populations,
including low-income seniors and persons with disabilities.
Q.5. In your experience, do you think that it is realistic to
assume that State and private funds can make up for a loss of
$6.7 billion in Federal funding?
A.5. It would take time for currently appropriated funds to
spend down, but it would also take time for States to adjust
their budgets to reallocate their resources for this purpose.
Some States have a 2-year budget process. Likewise, I think it
would take some time to ramp up private sector and
philanthropic participation.
Q.6. The budget proposes cutting the rental assistance program
by $2 billion through ``policies that encourage work and self-
sufficiency, including increases to tenant rent
contributions.''
Do you agree that the Federal Government should shift $2
billion of the cost of subsidized housing on to the low-income
families that the program is supposed to serve?
A.6. I believe rent reform is a discussion worth having.
Q.7. Do you think that increasing the cost burden for low-
income families will help them achieve greater self-
sufficiency?
A.7. There is certainly evidence that it can happen.
Q.8. Many of the proposed cuts in the President's budget are
intended to pay for tax cuts for corporations and wealthy
taxpayers. Do you think it is fair to make low-income families
pay $2 billion more for housing in order to pay for these tax
cuts?
A.8. I am only familiar with the broad principles of any
proposed tax reform.
Q.9. I am troubled that Secretary Carson believes that public
housing creates a culture of dependency and that poverty is a
``state of mind.'' The evidence demonstrates just the opposite-
stabilizing housing for low-income families is very effective
in lifting families out of poverty.
In your prior experience at HUD, did you find that HUD's
affordable housing programs created a culture of dependency?
A.9. I am sure examples of how HUD programs can create
dependency and as a platform for opportunity can both be
documented.
Q.10. Do you agree or disagree with Secretary Carson's belief
that poverty is a ``state of mind?''
A.10. Secretary Carson clarified his remarks in recent press
interviews and before the Senate and House appropriations
committees.
Additional Material Supplied for the Record
LETTERS SUBMITTED IN SUPPORT OF THE NOMINATION OF KEVIN ALLEN HASSETT
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
LETTERS SUBMITTED IN SUPPORT OF THE NOMINATION OF PAMELA HUGHES
PATENAUDE
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]