[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                     HOW MIDDLE CLASS FAMILIES ARE
                       FARING IN TODAY'S ECONOMY

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

                                HEARING

                               BEFORE THE

                SUBCOMMITTEE ON SELECT REVENUE MEASURES

                                 OF THE

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 13, 2019

                               __________

                            Serial No. 116-5

                               __________

         Printed for the use of the Committee on Ways and Means
         
         
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                      COMMITTEE ON WAYS AND MEANS

                RICHARD E. NEAL, Massachusetts, Chairman

JOHN LEWIS, Georgia                  KEVIN BRADY, Texas, Ranking Member
LLOYD DOGGETT, Texas                 DEVIN NUNES, California
MIKE THOMPSON, California            VERN BUCHANAN, Florida
JOHN B. LARSON, Connecticut          ADRIAN SMITH, Nebraska
EARL BLUMENAUER, Oregon              KENNY MARCHANT, Texas
RON KIND, Wisconsin                  TOM REED, New York
BILL PASCRELL, JR., New Jersey       MIKE KELLY, Pennsylvania
JOSEPH CROWLEY, New York             GEORGE HOLDING, North Carolina
DANNY K. DAVIS, Illinois             JASON SMITH, Missouri
LINDA SANCHEZ, California            TOM RICE, South Carolina
BRIAN HIGGINS, New York              DAVID SCHWEIKERT, Arizona
TERRI A. SEWELL, Alabama             JACKIE WALORSKI, Indiana
SUZAN DELBENE, Washington            DARIN LAHOOD, Illinois
JUDY CHU, California                 BRAD R. WENSTRUP, Ohio
GWEN MOORE, Wisconsin                JODEY ARRINGTON, Texas
DAN KILDEE, Michigan                 DREW FERGUSON, Georgia
BRENDAN BOYLE, Pennsylvania          RON ESTES, Kansas
DON BEYER, Virginia
DWIGHT EVANS, Pennsylvania
BRAD SCHNEIDER, Illinois
TOM SUOZZI, New York
JIMMY PANETTA, California
STEPHANIE MURPHY, Florida
JIMMY GOMEZ, California
STEVEN HORSFORD, Nevada

                     Brandon Casey, Staff Director

                  Gary Andres, Minority Staff Director

                                 ______

                SUBCOMMITTEE ON SELECT REVENUE MEASURES

                  MIKE THOMPSON, California, Chairman

LLOYD DOGGETT, Texas                 ADRIAN SMITH, Nebraska, Ranking 
JOHN B. LARSON, Connecticut          Member
LINDA SANCHEZ, California            TOM RICE, South Carolina
SUZAN DELBENE, Washington            DAVID SCHWEIKERT, Arizona
GWEN MOORE, Wisconsin                DARIN LAHOOD, Illinois
BRENDAN BOYLE, Pennsylvania          JODEY ARRINGTON, Texas
DON BEYER, Virginia                  DREW FERGUSON, Georgia
TOM SUOZZI, New York

              Aruna Kalyanam, Subcommittee Staff Director

          Randell Gartin, Minority Subcommittee Staff Director

 
                            C O N T E N T S

                               __________

                                                                   Page

Advisory of February 13, 2019, announcing the hearing............     2

                               WITNESSES

Mark Zandi, Ph.D, Chief Economist, Moody's Analytics.............     7
Heather Boushey, Ph.D, Executive Director and Chief Economist, 
  Washington Center for Equitable Growth.........................    16
Sara R. Collins, Ph.D, Vice President of Health Care Coverage and 
  Access, Commonwealth Fund......................................    32
Kevin Brown, Former President, California Association of Realtors    55
Pam Eddinger, Ph.D, President, Bunker Hill Community College.....    71
Tatum Tirado, Mathematics and Special Education Teacher, Ballou 
  High School....................................................    76
Guy Berkebile, Owner, Guy Chemical Company.......................    80

                       SUBMISSION FOR THE RECORD

Michael Binder, Center for Fiscal Equality, letter...............   129

                        QUESTIONS FOR THE RECORD

Kevin Brown......................................................   126

 
                      
                      HOW MIDDLE CLASS FAMILIES
                     ARE FARING IN TODAY'S ECONOMY

                              ----------                              


                      WEDNESDAY, FEBRUARY 13, 2019

                  House of Representatives,
                       Committee on Ways and Means,
                    Subcommittee on Select Revenue Measures
                                                    Washington, D.C

    The Subcommittee met, pursuant to notice, at 10:02 a.m., in 
Room 1100, Longworth House Office Building, the Hon. Mike 
Thompson [Chairman of the Subcommittee] presiding.
    [The advisory announcing the hearing follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    

 Chairman THOMPSON. The subcommittee will come to order. 
Good morning, and I would like to welcome all of my colleagues, 
especially my friend the new ranking member, Mr. Smith of 
Nebraska, and the distinguished panel of witnesses who have 
joined us here today. Thank you all for being here.
    This is the first hearing of the Subcommittee on Select 
Revenue Measures in the 116th Congress, and I want to welcome 
all the members, Republicans and Democrats, who will be serving 
on this panel for the next two years. I look forward to working 
with each and every one of you.
    The subject of today's hearing, how the middle class is 
faring in today's economy, cuts to the core of what I view as 
the key mission of this subcommittee, a subject that could not 
be more important, more timely, or more urgent.
    It has been eight years since my side of the aisle 
controlled Ways and Means Committee and subcommittee gavels, 
and the economy has been transforming rapidly during that time. 
On the surface, many measures of the American economy look 
excellent. Unemployment is near its lowest point in 20 years. 
We have seen 100 straight months of job growth. GDP growth has 
been steady. We are always pleased to see these positive 
economic trends, every one of us.
    But those top-line economic indicators don't capture the 
whole story. These indicators don't acknowledge the anxiety of 
regular, middle-class families in communities all across our 
country, red and blue communities alike, who feel that their 
economic position is getting more fragile.
    They don't reflect the fact that middle-class wages have 
been mostly flat for the last 20 years, while basic, 
unavoidable family costs like housing, higher education, and 
health care are going up quick.
    The unemployment rate is, thankfully, low, as I said 
earlier. But the jobs it counts are now more often part-time 
jobs, temporary jobs, or low-paying jobs. Too many people want, 
but cannot find, full-time, stable, good-paying jobs. We can 
all agree that it is this kind of job that is key to achieving 
the middle-class dream, and it is this kind of job that is 
proving elusive to so many of the Americans we represent.
    The GDP is growing, and of course we are glad to see that. 
But we also understand that, in today's economy, most of that 
GDP growth is captured by wealthier families with large 
investment portfolios and big retirement accounts. We are glad 
to see those families succeed. But the economic prosperity we 
are supposedly enjoying right now is leaving too many 
hardworking people behind.
    For middle income families who sometimes have trouble 
making ends meet and who struggle to save much, they aren't 
necessarily feeling that GDP growth in the same way as their 
more affluent fellow Americans.
    Last May the Federal Reserve found that 40 percent of 
American adults could not come up with $400 to cover an 
unexpected expense without selling belongings or going into 
debt. Over a fifth of adults are not able to pay their current 
month's bills in full, and more than a quarter of adults 
skipped necessary medical care in 2017 because they couldn't 
afford it.
    Consumer debt is at record levels: Americans hold close to 
$4 trillion in non-mortgage debt. Student loans play a big 
role: since the 1970s, the cost of college has exceeded 
inflation by 500 percent. Seventy percent of today's college 
students borrow money to attend, and the average debt at 
graduation is $39,000.
    Home ownership is slipping among Millennials, who are 
struggling to repay crushing student loan debt. What used to be 
a mortgage payment a generation ago is now a payment on an 
education already earned, and the prospect of home ownership, 
one of the greatest creators of net worth among hard working 
Americans, slips further away.
    I am concerned that, with these trends, upward mobility, 
which has always been a core part of the American Dream, is in 
decline. Harvard economist Raj Chetty and his colleagues 
famously pointed out that Americans born in 1940 had a 90 
percent chance of earning more at the age 30 than their parents 
did at that same age, adjusted for inflation. But among 
Americans born in 1980, only about half out-earned their 
parents at age 30.
    It used to be that people who worked hard and played by the 
rules could be confident of getting ahead in America's economy. 
These days, that is just not a given any more. Middle class 
families are working so hard to try and get by. They are doing 
everything that anyone could ask of them, but life still feels 
precarious. They worry: Will I get a raise this year? How much 
will child care cost next month? Can I stay current on my 
student loan? Will I ever be able to afford to own a house? Can 
we put something away to help the kids pay for college? Will we 
ever be able to retire?
    I want to be clear. I am an optimist. I want our work here 
to reflect the idea that we can do good for the people we 
represent. The policies we enact should result in security, 
stability, and prosperity for generations to come. To do our 
work, we need better insight into the financial situation of 
middle-class families. and that is what I hope to learn today.
    And with that I would like to recognize Ranking Member Mr. 
Smith of Nebraska.

           OPENING STATEMENT OF THE HON. ADRIAN SMITH

    Mr. SMITH. Thank you, Mr. Chairman. Congratulations on 
receiving the gavel for the subcommittee, and thank you for 
holding the first hearing for our subcommittee of the 116th 
Congress. I appreciate the opportunity to discuss how middle-
class Americans are faring in today's economy.
    A growing economy and the opportunity to keep more of what 
taxpayers earn are good for the middle class, and that is 
exactly what they are seeing under the Tax Cuts and Jobs Act. 
Our economy is growing at greater than three percent. Wages are 
growing at nearly four percent. The state of our economy is 
strong. It has never been easier for an American who wants to 
take advantage of economic opportunity to get training, enter 
the workforce, or find a better job.
    Last year in the Human Resources Subcommittee we held a 
series of hearings reviewing what more we could do to engage 
those not currently in the workforce. We found reconnecting 
gave workers not just an income, but also the dignity and pride 
of supporting their family and engaging in society. We also 
found employers need people as badly as people on the sidelines 
need that first step to get back toward opportunity.
    The message from employers in those hearings was clear: 
they desperately need workers to fill good jobs, so much so 
that they are willing to train folks themselves and pay them a 
competitive wage with good benefits to fill open positions, 
therefore reducing the need for student debt.
    The witnesses we heard from last year came from locations 
and industries across the country. This was not a regional or 
industry-specific trend.
    I am particularly pleased we will be able to hear a message 
consistent with this trend from Mr. Berkebile here today.
    When I speak with employers throughout Nebraska's Third 
District, I hear frequently about need for workers to fill good 
jobs in manufacturing. And this message isn't confined to just 
traditional manufacturing, either. Last year, when I visited 
MetalQuest, in Hebron, Nebraska, I had the opportunity to see 
their state-of-the-art, automated manufacturing facility. 
During my visit, the head of manufacturing told me that, 
despite the automated production process, the biggest 
impediment to growth was a lack of folks to fill open positions 
to operate and maintain machinery in the facility.
    I also recently had the opportunity to visit the heavy 
equipment program at Central Community College in Hastings, 
Nebraska. I wanted to visit and see for myself the training 
programs taking place at community college because I had been 
hearing from leaders in our state's construction industry how 
pleased they were to help create and support this program to 
address the ongoing needs to find workers.
    During my visit I was impressed with the competitive cost, 
quality training, and the speed at which they get people 
trained to succeed in good jobs, further proof you don't need 
an expensive four-year degree to succeed in our economy.
    I am pleased to see that Dr. Eddinger, the president of the 
largest community college in Massachusetts, agrees community 
colleges have an important role to play in preparing their 
students for jobs. In Massachusetts alone there will be a need 
for 65,000 such jobs in the coming years.
    Alongside the strong job market, tax reform is allowing 
middle-class Americans to keep more of their--of the money--of 
their own money. As I mentioned in our hearing last week, under 
TCJA a single mother with two children doesn't owe a nickel in 
federal income tax until she earns more than $53,000, and a 
typical family of four earning $75,000 will save $2,000 in 
taxes.
    The worst thing we could do for middle-class families is to 
take more of what they earn through tax increases. Raising 
Social Security taxes won't help a single mom get ahead, 
either. Increasing the gas tax and raising taxes as part of a 
green new deal won't help stretch paychecks, further. Repealing 
corporate tax reform, something even President Obama supported 
and included in his budget, won't help add new middle-class 
jobs.
    Tax reform shouldn't be a once-every-30-years event. We 
should work every year to ensure the Tax Code is working well 
for as many Americans as possible. We should view any changes 
to tax policy with an eye toward helping Americans help 
themselves and their neighbors, not with the goal of collecting 
more money so we can grow government on the backs of 
hardworking Americans.
    Thank you again to our witnesses. I appreciate your sharing 
your insight and expertise on what I would say is the front 
lines of our economy. So I am glad you are here today.
    Thank you for holding this hearing, Mr. Chairman, and I 
yield back.
    Chairman THOMPSON. Thank you, Mr. Smith. We have got a 
great panel of witnesses today who I believe will be able to 
really open the pages on how the middle class is faring in 
today's economy. And I know we are all anxious to hear what you 
have to say.
    I would like to first introduce--I will go through and 
introduce all the witnesses. Then we will just go in order for 
your testimony.
    First we have Dr. Mark Zandi. Dr. Zandi is the chief 
economist at Moody's Analytics, and should be a familiar face 
to my colleagues here in the committee.
    Thank you for joining us, Dr. Zandi.
    Dr. Heather Boushey is the executive director and chief 
economist at the Washington Center for Equitable Growth.
    Dr. Sara Collins is vice president of Health Care Coverage 
and Access at the Commonwealth Fund.
    Mr. Kevin Brown is the former president of the California 
Association of Realtors.
    Dr. Pam Eddinger is president of Bunker Hill Community 
College.
    Ms. Tatum Tirado is a mathematics and special education 
teacher at Ballou High School, here in Washington, D.C., and a 
proud Marine.
    And finally, Mr. Guy Berkebile is the owner of Guy Chemical 
Company in Somerset, Pennsylvania.
    Thank you all for being here with us today.
    And we will start, Mr. Zandi, with you.
    You will each have five minutes for your testimony. Your 
full testimony will be put in the record. If you can contain 
yourself to five minutes, that would be very helpful.
    Mr. Zandi, thank you.

        STATEMENT OF MARK ZANDI, PH.D., CHIEF ECONOMIST,

                       MOODY'S ANALYTICS

    Mr. ZANDI. Thank you, Chairman Thompson and Ranking Member 
Smith, for the opportunity to be here, and to the entire 
committee to allow me the opportunity.
    I am the chief economist at Moody's Analytics, but the 
views I express today are my own. And just for sake of 
disclosure, I am on the board of directors of MGIC, one of the 
nation's largest mortgage insurers. And I am the lead director 
of Reinvestment Fund, which is a large CDFI headquartered in 
Philadelphia, which is my home town. So thank you.
    I have three points to make in my remarks.
    Point number one is middle-class Americans are struggling, 
despite nearly 10 years of economic expansion. Believe it or 
not, if expansion continues on through June of this year, it 
will be 10 years old, the longest in history. And moreover, we 
are in the midst of the longest period of job growth in 
history, going back to 2010. But despite that, middle-class 
Americans are having a difficult time.
    One of the best statistics to see that is real median 
household income, median meaning half of the folks make more 
than that, half make less. That is a little over $60,000 a 
year. Over the past two decades, real median household incomes 
have not grown very much. In fact, just barely outpacing the 
rate of inflation.
    More disconcerting, middle-class households can't--are 
unable to raise their wealth. The median net worth of 
households--This is the difference between what they own and 
what they owe is about $100,000. This is no different today 
than what it was--on an after-inflation basis 30 years ago. So 
it goes up and down and all around with the stock market and 
housing values, but no real progress there.
    Middle-class Americans can't save. They have over the last 
20, 25 years effectively been unable to save. Some periods they 
save, some periods they dis-save. And, of course, as the 
chairman mentioned, debt levels are very high, particularly 
student loan debt.
    In fact, one interesting statistic, 10 percent of all 
households in the middle quintile of the income distribution--
that is 20 percent of Americans in the very middle of the 
distribution had an experience with serious delinquency on some 
type of consumer credit or mortgage in 2016, the latest data 
available. So, even despite the solid economy, middle-class 
Americans are struggling.
    Point number two--There are lots of reasons for the plight 
of the middle class. The financial crisis 10 years ago was 
devastating for all Americans. It was especially very hard on 
middle-class Americans, one reason why their net worth hasn't 
been able to recover. They have been just digging out from 
under. The unemployment rate, if you recall, peaked at 10 
percent in the immediate wake of that downturn, and it has 
taken a long time to get back to full employment.
    There are broad secular forces at work here, too, not just 
cyclical forces including the pace of technological change, 
particularly information technology. The advances in technology 
lift all Americans' wealth, but it is particularly hard on 
middle-class Americans, as they effectively get coded out by 
the information technology, and if they don't have the 
requisite skills and education and many do not--when they lose 
their jobs, and they are losing their jobs, they go down the 
income distribution, they don't go up. So IT hollows out the 
middle. And this, obviously, is a trend that is going to remain 
in place for the foreseeable future.
    And again, we want the technology, it is improving living 
standards, but it is very hard on middle-class Americans.
    This gets to point number three. We must do something about 
it. Lawmakers need to act. One of the most obvious things is 
don't allow tax rates on middle-income Americans to rise. Under 
current law they do rise in the middle part of the next decade. 
That would be a mistake.
    I do think tax rates on higher-income households should 
revert back to previous law, that the tax rates are 
inordinately low, tax revenues as a share of GDP about as low 
as it has been in 50 years. And we need the revenue to pay for 
other programs that will help the middle class.
    Let me mention two or three different programs I would 
focus on. First is infrastructure. I think that is key to 
growth. It provides an immediate lift to middle-income jobs, 
construction, manufacturing, transportation. It opens up 
different parts of the country that are now locked out of this 
successful economy in rural areas and inner cities. I would 
also invest very heavily in child care, early childhood 
education, and higher education. These are things that would 
support the middle class, but also lift the economy, get more 
people back to work, and that is, you know, precisely what the 
economy needs.
    I appreciate the opportunity to participate in today's 
hearing. Thank you very much.
    [The prepared statement of Mr. Zandi follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Chairman THOMPSON. Thank you, Dr. Zandi.
    Dr. Boushey.

         STATEMENT OF HEATHER BOUSHEY, PH.D., EXECUTIVE

            DIRECTOR AND CHIEF ECONOMIST, WASHINGTON

                  CENTER FOR EQUITABLE GROWTH

    Ms. BOUSHEY. Thank you. Thank you, Chairman Thompson and 
Ranking Member Smith, for extending an invitation to me to 
speak today. I am honored to be here. My name is Heather 
Boushey. I am the executive director and chief economist at the 
Washington Center for Equitable Growth.
    So I am here today to talk about the state of the American 
middle class and evidence-backed ideas and policies that you, 
as a subcommittee and as lawmakers, can use to promote growth 
that is strong, stable, and broadly shared. That is also the 
focus of our center.
    So statistics that we use to measure the economy, like GDP 
and job numbers, have become less representative of what people 
across the United States and your constituents are feeling. 
There is a reason that the President's boast of four percent 
growth ring hollow to those--to many of those you may meet at 
home. And as Chairman Thompson indicated in his opening 
remarks, headline GDP numbers don't tell us how that growth is 
distributed, just as headline jobs numbers don't tell us 
whether or not those are good jobs.
    The question of who gains from economic growth is a 
critical one to understand. Research from economist Thomas 
Piketty, Emmanuel Saez, and Gabriel Zucman show that, for the 
117 million U.S. adults in the bottom half of the income 
distribution, economic growth has been nearly non-existent for 
a generation. Meanwhile, incomes at the top have tripled since 
1980.
    As incomes have stagnated, the building blocks of a stable 
middle class living have steadily become more expensive. Health 
care, child care, and education are a few of the fundamental 
but increasingly unaffordable pillars of the American Dream.
    A median-income family has to spend nearly 20 percent--that 
is about a fifth of their income--to cover child care costs. 
The total cost to attend a four-year university has increased 
from $26,000 to more than $100,000 over the past four decades.
    The United States stands alone among rich countries in not 
providing workers with nationwide access to paid family and 
medical leave.
    Rising inequality and increasing barriers to middle-class 
life are limiting economic mobility.
    Chairman Thompson told us about Raj Chetty's work that 
found a decline in upward mobility for people born in the 1980s 
versus the 1940s. What that study also showed was that the way 
to address the--that the reason that we saw this lower economic 
mobility was because of the rise in inequality. Their analysis 
shows that 70 percent of the decline in upward mobility 
happened because of rising inequality. So to improve mobility 
we also need to address inequality.
    This subcommittee has a vital role to play in re-balancing 
policy towards the majority of Americans. The Tax Cuts and Jobs 
Act is contributing to inequality in the United States by 
lavishing benefits on corporate shareholders and the already 
wealthy. The Act cuts taxes for those at the top, while 
decreasing the revenue available to fund investments in family 
economic security, education, health care, child care, and 
housing.
    The purpose of the tax system, as with public policy in 
general, should be to support the living standards of U.S. 
families, not just those of the very wealthy.
    So what can you do about this? The policy agenda should 
comprehensively address economic issues at the bottom, middle, 
and top of the income spectrum. At the bottom end, to help 
people move into the middle class, one easy step is to preserve 
and expand the evidence-backed refundable tax credits, like the 
earned income tax credit and the child tax credit, which lifted 
8.9 million Americans out of poverty in 2017.
    In the middle it is really important to make sure that the 
fruits of growth are widely shared, and to make the economy 
work for workers and their families. I want to echo what Dr. 
Zandi said: It is very important to focus on infrastructure 
investments and we need to make sure that families have what 
they need, including access to high-quality and affordable 
child care, and to offer them paid family and medical leave.
    And we need to know more about how to address incomes at 
the top. Many of the statistics that we rely on to inform us 
about the state of our economy are measures of the average. Yet 
in an era of rising inequality, these overall GDP numbers are 
becoming ever more less informative about the experience of 
most Americans.
    The Measuring Real Income Growth Act, introduced by 
Congresswoman Maloney, would disaggregate quarterly or annual 
GDP growth numbers. This would tell us what growth is 
experienced by people across the income spectrum, giving us 
more information to help guide policy-making. Instead of 
promising four percent growth, the goal could become four 
percent growth for the middle class with these new numbers. 
This data should be made available in real time, so that we can 
design policies to lift up those groups that really need it.
    Thank you again for inviting me. I look forward to your 
questions.
    [The prepared statement of Ms. Boushey follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Chairman THOMPSON. Thank you very much.
    Dr. Collins.

           STATEMENT OF SARA R. COLLINS, PH.D., VICE

             PRESIDENT OF HEALTH CARE COVERAGE AND

                   ACCESS, COMMONWEALTH FUND

    Ms. COLLINS. Thank you, Mr. Chairman, and members--and 
Ranking Member Smith and Members of the Subcommittee, for this 
invitation to testify on how middle-class families are faring 
in today's economy. My comments are going to focus on the 
current status of health insurance coverage among people in the 
United States who get their insurance through their employers.
    Job-based health insurance continues to be the primary 
source of insurance coverage for the majority of the U.S. 
population. More than half of residents under age 65, about 158 
million people, get their health insurance through an employer.
    Two recent studies by the Commonwealth Fund indicate that 
families' costs for employer health insurance are rising faster 
than median income. Moreover, even as costs climb, families 
aren't receiving higher-quality insurance. The amount they have 
to pay out of pocket before their insurance kicks in continues 
to rise.
    Consequently, our research indicates that a growing share 
of people with employer coverage have such high out-of-pocket 
costs and deductibles relative to their incomes that they can 
be considered under-insured.
    People across the country are not experiencing health care 
costs equally. This variation stems from differences in the 
size of employer premiums across states, how much employees are 
required to contribute to their premiums, the size of their 
deductibles, and the widening disparity in median incomes 
across the country. Families who could potentially spend the 
greatest amount of their incomes on premiums and deductibles 
are concentrated in the South.
    These high insurance costs have implications. People may 
decide to go without insurance if it competes with other living 
expenses like housing, food, and education. And people who 
maintain their coverage but who are under-insured may make 
similar tradeoffs. Commonwealth Fund surveys find that under-
insured adults are much more likely to skip needed health care, 
like filling prescriptions or going to the doctor when they are 
sick, than are people who are not under-insured.
    In addition, people who are under-insured are much more 
likely to report problems paying medical bills or to say that 
they are paying off medical debt over time. Accumulated medical 
debt affects other aspects of people's lives. Our survey 
research finds that many adults with medical bill problems have 
serious subsequent financial problems such as depleting their 
savings, racking up credit card debt, or getting a lower credit 
rating.
    People with lower incomes are particularly affected, with 
about one-third reporting being unable to pay for basic 
necessities like food, heat, or their rent as a result of their 
bills.
    Take as an example Robert and Tiffany Cano of San Tan 
Valley, Arizona. The Canos were recently profiled by Kaiser 
Health News in its series on consumer medical bills. Both 
Robert and Tiffany work full time and have a combined income of 
about $100,000 a year. At the time of the story, the Canos had 
a family health plan through Robert's job as a manager at a 
large chain retail store. They were spending $7,000 in premiums 
annually for a plan with a $3,000 deductible. The birth of 
their son and some subsequent health problems left them with 
$12,000 in medical debt.
    Robert has taken on three additional part-time jobs to pay 
off their debt, and they estimate that it will take two more 
years to pay it off. Concerned about accumulating more debt, 
they have postponed needed health care for themselves and their 
baby.
    Tiffany, who works for a regional bank, uses a prosthetic 
limb because of a birth defect that required her leg to be 
amputated below the knee as a child. She now needs a 
replacement prosthesis to accommodate changes in her body since 
her pregnancy. And although she has difficulty walking and 
suffers from blisters, she worries about whether they can 
afford their share of the cost of a replacement.
    The personal pain and financial stress suffered by families 
with high medical costs present a fundamental dilemma for 
employers. To the extent that they are designing benefits that 
shift more of their insurance costs to their employees, they 
are potentially undermining the productivity of their own 
workforces.
    More broadly, the growing number of under-insured people 
could have implications for the nation's economic health. 
Research indicates that human capital is key to a country's 
long-term growth.
    In a landmark study in 2003, the Institute of Medicine 
concluded that people who lack adequate health insurance have 
fundamentally different life experiences than those who are 
adequately insured, including lower educational attainment, 
lifetime earnings, and life expectancy. At the time of the 
study, the IOM estimated that the aggregate cost of uninsured 
people's lost capital and earnings from poor health and shorter 
life spans fell between $65 billion and $130 billion, annually.
    We have insured--the U.S. has insured 20 million more 
people since the IOM study through the Affordable Care Act's 
coverage expansions. But with 28 million people still 
uninsured, and an estimated 44 million people under-insured, 
the country continues to squander billions of dollars every 
year in people's lost capital and earnings.
    The subcommittee is to be commended for investigating this 
timely issue. Thank you.
    [The prepared statement of Ms. Collins follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    Chairman THOMPSON. Thank you very much.
    Mr. Brown.

          STATEMENT OF KEVIN BROWN, FORMER PRESIDENT,

               CALIFORNIA ASSOCIATION OF REALTORS

    Mr. BROWN. Chairman Thompson, Ranking Member Smith, and 
Members of the Subcommittee, thank you for the opportunity to 
be here today to testify on behalf of the 1.3 million members 
of the National Association of Realtors about the vital issues 
of middle-class families and barriers to home ownership.
    The American dream of home ownership is not dead. Ninety-
two percent of renters aged 34 and younger aspire to own a 
home, and for good reason. The economic and social benefits to 
families, communities, and the nation are overwhelmingly 
positive.
    The importance of home ownership and household wealth-
building is difficult to overstate. Based on Federal Reserve 
data, the typical home owner's household net worth was 45 times 
the wealth of a renter in 2016.
    In addition to tangible financial benefits, studies show 
home ownership brings many other advantages, including 
increased stability, higher educational achievement, better 
health, and lower crime.
    Federal policy has long recognized these benefits by 
including various provisions to encourage more home ownership. 
This has especially been true in our tax law, at least until 
recently.
    However, barriers that have long existed for many in the 
middle class to accomplish their goal of owning a home seems to 
be growing larger. Middle-class families face issues with 
affordability, high student debt, and a Tax Code that has 
become a lot less home-ownership-friendly. Unfortunately, these 
factors can be even worse in high housing cost areas, such as 
many in my home state of California.
    Since 2012 home prices nationwide have increased by 44 
percent, while wages have increased only 17 percent. Today a 
median household can afford to buy 39 percent of homes listed 
for sale, while a year ago the same household could afford to 
purchase 50 percent of homes listed.
    Lack of inventory of affordable homes is a big culprit. NAR 
produces a housing shortage tracker, which is an index 
comparing building permits to new jobs. Historically, the 
nationwide index has been one single home permit used for every 
two new jobs for an index of two. Today the index is three.
    But some areas are far worse. Seven of the nation's top ten 
inventory shortage areas are in California, ranging from the 
worst in San Jose, suffering an index of 13.6, to 8.1 for 
Thousand Oaks. Washington, D.C. has an index of 3.9.
    High student debt is also taking a toll, particularly on 
Millennials, who are now the largest generation. Nine of ten 
Millennial renters want to own, but less than five percent plan 
to do so within a year. Most lack savings for a down payment, 
and high student debt is a major factor.
    The Tax Cut and Jobs Act is also playing a role, even 
though this is not yet widely recognized. The new law cut taxes 
significantly for most, but it also increased the after-tax 
cost of owning a home by directly cutting the mortgage interest 
and property tax deductions. These changes will mostly hurt 
those in high state and local tax (SALT) areas.
    But it is the new law's stealthy indirect changes that are 
the most wide-reaching. By nearly doubling the standard 
deduction, the Act saps the incentive power of the mortgage 
interest and property tax deductions for all but a fraction of 
taxpayers, those who will still itemize.
    In 2017 almost a third of filers itemize, and it was often 
the purchase of one's first home that brought the incentive 
power of these deductions to life. Starting in 2018, however, 
only one in eight will itemize, and thus find owning a home 
makes a tax difference over renting.
    According to the Joint Committee on Taxation, the amount of 
mortgage interest deducted in 2017 will drop by 62 percent in 
2018, while state and local tax deductions claimed will fall by 
71 percent.
    The new tax law creates a barrier to the middle class home 
ownership everywhere, because now the law will rarely allow 
first-time home buyers to lower their tax burdens by making the 
purchase. Now the great majority of these households won't have 
enough deductions to itemize. And now, for the first time since 
1913, when the modern Tax Code was born, owning a home will be 
the tax equivalent of renting for most.
    These tax changes, combined with the significant challenges 
in affordability, lack of adequate inventory, and rising 
student debt mean that purchasing a home has become 
significantly more difficult for many middle-class families, 
and particularly those who live in high-cost areas.
    Thank you.
    [The prepared statement of Mr. Brown follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Chairman THOMPSON. Thank you.
    Dr. Eddinger.

          STATEMENT OF PAM EDDINGER, PH.D., PRESIDENT,

                 BUNKER HILL COMMUNITY COLLEGE

    Ms. EDDINGER. Chairman Thompson, Ranking Member Smith, and 
Members of the Subcommittee, thank you for the opportunity 
today to brief you on Bunker Hill Community College, the 
mission and challenges of our nation's community colleges, and 
the key role we play in educating and advancing the middle 
class.
    My name is Pam Eddinger, and I am the college's president. 
Bunker Hill is the largest of 15 community colleges in 
Massachusetts, and one of 1,100 community colleges across the 
country.
    Bunker Hill is a mid-size institution in Metro Boston. But 
my sister colleges across the nation vary substantially in 
size, demographics, and geography. We are urban, we are rural, 
and we are suburban, and we range from under 1,000 students to 
50,000 students. Together we educate 13 million students, 1 out 
of every 2 undergraduates in the United States.
    In fact, both middle and lower-income students are more 
likely to attend community colleges than any other type of 
higher education institution: private four-years, public four-
years, or for-profit.
    You might know us best as educators of our first responders 
in emergency health, fire, and public safety. But increasingly, 
we are also the source for the future workforce, for what we 
call new collar jobs, jobs that are middle-skills, requiring 
some post-secondary training, and pay well. Jobs in IT, in 
STEM, big data, health care, manufacturing, and the creative 
economy driven by the expansion of gaming and artificial 
intelligence.
    We are poised to shore up the work infrastructure of the 
crumbling middle class, and to lift those in poverty through 
higher education. You hear often that not everyone needs to go 
to college, and that is true. The concept of college as a four-
year experience is not for everyone. But some training beyond 
high school is not only important, but imperative to working in 
this new collar economy.
    Between 1980 and 2015, the earnings of men with a B.A. rose 
29 percent, while the earnings of men with only a high school 
education fell 7 percent. Men who never finished high school 
saw their earnings decline 24 percent during those 35 years. 
The rise of earnings for women with a college education is even 
more dramatic.
    College used to be a sure ticket into the middle class, now 
it is a prerequisite.
    In Massachusetts alone, we must fill some 65,000 middle-
skills jobs by the end of the decade and the beginning of the 
next. Those new-collar jobs are critical to economic growth and 
innovation. And they are the new path to the middle class.
    Our hopes of a vibrant workforce, of filling these new-
collar jobs, lies in educating and training our adult workers 
and adult learners. Yet this realization is not widely 
acknowledged the way it should be, and we see even fewer 
evidence of it in our policies and our operations.
    Already our students are not who you think they are 
anymore. They are not kids, not 17 or 18, going to college 
full-time, and supported by Mom and Dad. The demographics at my 
own college tells the story.
    We have 18,000 students a year. Only a third of them are 
traditional age. The average age is 27, and the median age is 
24. They are likely to be the first in their family to go to 
college. Many are immigrants living in gateway cities. Three 
out of four work, and many of them full-time. Three out of four 
are parents, and likely taking care of parents of their own. 
Seventy-seven percent--that is over three-quarters--are in the 
lowest two quintile of income. Out of the 18,000, 8,000 are on 
financial aid. And out of the 8,000 on financial aid, 1,000 of 
them are on SNAP. This is a pretty representative profile of 
the low and middle-income, first-time-to-college working 
students across all geography.
    Even though adult students know that college is their path 
to the middle class, education is not at the center of their 
lives. Their family, their children, their jobs--and usually 
there is more than one job--are their priority. Schooling 
happens when they can afford it, often a class or two at a 
time. Our students are one car battery, one pediatric visit, 
and one small disaster away from dropping out. Yet they are 
courageous enough to enroll and persist. Our students take an 
average of four to five years to complete their associate 
degree, and slightly shorter for certificates.
    If we know that the adult learners have good work ethic, 
and are serious about getting ahead, and will be the key to the 
labor force, what is holding up progress? What is needed? I 
would suggest to you two things.
    One, we give up the notion that students be college-ready, 
and insist that our colleges are student-ready. We must meet 
students where they are, physically and metaphorically. Give up 
the mental model of the four-year college, and align our 
financial and college policies with the reality of working 
adults.
    Two, we count the basic needs of food, housing, 
transportation, and child care as essential education costs, 
and fund them. It is true that Pell grant pays for tuition and 
fees, but the average unmet need comes close to $4,500 a year 
for my students on my campus. There is no mom and dad to call 
here. It is not a coincidence that all 15 community colleges in 
Massachusetts have food pantries and emergency aid offices.
    Make applying for aid simpler, by simplifying the FAFSA, 
the federal application for aid, and cover the full essential 
costs of our adult students.
    Thank you.
    [The prepared statement of Ms. Eddinger follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Chairman THOMPSON. Thank you very much.
    Ms. Tirado.

             STATEMENT OF TATUM TIRADO, MATHEMATICS

           AND SPECIAL EDUCATION TEACHER, BALLOU HIGH

                             SCHOOL

    Ms. TIRADO. Mr. Chairman and Members of the Committee, 
thank you for the opportunity to testify about how middle-class 
families are faring in today's economy. With my own personal 
story, I intend to illustrate to you that the middle class is 
barely making their way.
    My name is Tatum Tirado, and I am a highly-qualified 
mathematics and special education teacher at Ballou High School 
here in Southeast D.C. I am 36 years old and have two gorgeous 
daughters, a 13-year-old and a 6-year-old. When I graduated 
from high school in 2001, I wanted to attend college. But the 
limited academic scholarships I qualified for were not enough 
to make college truly affordable.
    Instead, I enlisted in the United States Marine Corps. I 
was in boot camp on Sept. 11th, 2001, and I watched the towers 
fall on an old tube TV in a squad bay on Parris Island in South 
Carolina. In the fleet I was an ordnance man in the now 
decommissioned Marine Attack Squadron 513. I have multiple 
commendations from a year-long tour in Afghanistan in support 
of Operation Enduring Freedom. I am a disabled veteran with 
combat experience.
    While in the Marine Corps, I developed type I diabetes, and 
I was awarded early retirement for medical reasons in 2006.
    As a veteran, I was able to use a combination of the 
Montgomery GI Bill and vocational rehabilitation and employment 
services to complete my undergraduate degree. I attended the 
University of West Florida in Pensacola, Florida, where I 
graduated with a bachelor of science in mathematics, with 
minors in professional education and physics. It was as an 
undergraduate student that I realized that I could teach by 
tutoring my peers and high school students, and that is exactly 
what I did.
    As a teacher in Pensacola, Florida I earned $32,000 a year. 
This was in 2012. I taught in Escambia County for five years 
and did not get a pay raise the entire time, even as I was 
rated a highly effective teacher under Florida's teacher 
evaluation system. After taxes and deductions, my monthly 
paycheck was $2,000. Of that, $1,000 a month went to child care 
expenses.
    Although I worked multiple side jobs, I could not afford to 
continue to live and work as a teacher so far from my childhood 
home. Two years ago I moved back to the D.C. area, where I was 
born and raised, to be closer to family who could help support 
me.
    I was specifically chosen to work at Ballou High School, 
where every student has a story and every teacher has a reason. 
My students, their parents, and I, we forged relationships 
based on common struggles, and we work together to generate 
positive outcomes. We understand that without each other, that 
none of us can be successful.
    Marines believe that once we are Marines, we are always 
Marines. To that end I am always faithful. I intend to support 
my family and my school community in even greater ways, so I am 
in the process of earning a master's degree in educational 
leadership. My course work is completed, and I am trying to 
find a way to complete the required internship hours, which I 
can't do while teaching, even though I need teaching to make a 
living.
    I am a single mother with two children, I am in graduate 
school, and, like more than a million other Americans, I have 
type 1 diabetes. I am totally and irrevocably insulin-
dependent. I diligently take my medication, I eat a low-carb 
diet, and I exercise. But none of this is cheap. I knew the 
health insurance offered by my employer--the cost of my insulin 
would be prohibitive. Fortunately for myself and my family, as 
a Marine Corps retiree I have Tricare benefits.
    My salary as a D.C. teacher is definitely higher than my 
salary was in Florida, but so is the cost of living. I can't 
afford to buy a home in this area, not in the suburbs, and 
certainly not in the District of Columbia. At the moment I rent 
an apartment in the suburbs that is about 600 square feet for 
myself and my two children.
    I have a huge amount of student debt from graduate school. 
I am living on a single teacher's income with a very expensive 
health condition and two gifted children. Their schools have 
officially labeled them gifted; these are not just the words of 
a proud mother. I wish that I could give them things like 
violin lessons or soccer, but I just can't afford it.
    My older daughter is in the eighth grade and scored an 1190 
on the PSAT. I taught that PSAT prep class myself at a local 
community center as a volunteer. There were 20 other students 
in that class. If it weren't for me, PSAT preparation would 
have been financially inaccessible for them, as well.
    I receive no public assistance.
    I have gone over and beyond what you have asked of me. I 
have served my country. I graduated from college.
    I am a dedicated teacher. I am a loving family member. I 
have devoted my life to public service. I volunteer teach and 
tutor when I can. And yet, here I am, struggling. How do I 
provide for my family or feel confident I am climbing the 
ladder to live the middle-class lifestyle, when everything 
continues to get more expensive but my salary doesn't go up?
    Thank you for allowing me to share my story with you. And I 
look forward to answering your questions.
    [The prepared statement of Ms. Tirado follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Chairman THOMPSON. Thank you, and thank you for showing the 
courage to share that fantastic story.
    Mr. Berkebile.

             STATEMENT OF GUY BERKEBILE, OWNER, GUY

                        CHEMICAL COMPANY

    Mr. BERKEBILE. Chairman Mike Thompson, Ranking Member 
Adrian Smith, and distinguished Members of the Subcommittee, I 
am Guy Berkebile, president and founder of Guy Chemical 
Company, located in rural Somerset County, Pennsylvania. And I 
thank you for inviting me to speak about how the Tax Cuts and 
Jobs Act has had a positive impact on my company and on my 
employees.
    At Guy Chemical we are manufacturers. We manufacture 
primarily adhesives, silicone sealants, silicone grease, two-
part epoxies, anaerobic adhesives that are used by mechanics 
for repairing your car, by homeowners for repairing their 
houses, by contractors for building a building. And these 
products are made here in the U.S. and they are shipped, 
literally, over the entire world.
    I started Guy Chemical in 1995 by taking the $80,000 in 
savings that I had--I took out a $70,000 development loan, and 
then I mortgaged my house and I used the equity in my house as 
working capital for my business. And the start was a very rocky 
one. I went on to--I didn't have an employee for eight months. 
I lost money for two-and-a-half years. I did not draw a salary 
from my business for the first five years of the existence of 
Guy Chemical because making my payroll and the survival of my 
business was always more important than how much money I put in 
my pocket at any given time. Over the first 15 years of--after 
I started Guy Chemical I mortgaged my house a total of 7 times 
to pay--or to finance the growth of my business.
    Today I have over 160 employees in production facilities 
located in Somerset, Pennsylvania and Bethel, Vermont. The 
company is doing well. And whenever you have a manufacturing 
company like Guy Chemical in your community, you have a real 
asset because, as a manufacturing company, we employ everyone. 
We employ engineers, chemists, skilled laborers, unskilled 
laborers, business managers, and accountants. So virtually 
everybody has an opportunity to be employed at a company like 
Guy Chemical.
    I am an S Corporation. I was paying a tax rate of 39.6 
percent at the federal level. When you add on my state taxes 
and my local taxes, I was paying a tax rate of nearly 50 
percent. So nearly $.50 for every dollar I made in profit went 
back to the government in the form of taxes.
    Then, in 2017, along came the Jobs Cuts and--the--I am 
sorry, the Tax Cuts and Jobs Act. And this enabled me to keep 
more money in my company, and I used that money wisely. We have 
invested it in new equipment. We have a new lab we built that 
is five times larger than our old lab. We have new mixing 
equipment. We have new production equipment. I have also 
invested in my employees in the form of a higher salary and 
bigger bonuses.
    And I have some of these employees and their families--the 
children that you hear in the background have come with me 
today, as a member of one of my employee's families. Donnie 
Zeigler is a new employee. We added 29 new jobs and our--as a 
result of the tax cuts. We saw unprecedented demand and our 
sales in 2018 were up approximately $9 million. So Donnie was 
one of the beneficiaries of a new position at Guy Chemical. He 
is paying down his credit card debt that he incurred while 
looking for a job.
    George Tomoiaga is an immigrant from Romania. He and his 
wife, Amber, got married this past summer. They were able to 
pay for a bigger wedding. They are paying down student debt, 
and they are now looking for a house to purchase because they 
are now more financially secure.
    It is evident that the tax cuts Act not only had a big 
impact on Guy Chemical, but also on other businesses, and also 
on our employees. On behalf of Guy Chemical and the many other 
small businesses that have benefitted from the Tax Cuts and 
Jobs Act, I thank the committee for giving me the opportunity 
to speak today. Thank you.
    [The prepared statement of Mr. Berkebile follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Chairman THOMPSON. Well, thank you, and congratulations on 
a successful small business. All of us who have small 
businesses know how tough it is to make it, and it sounds like 
you have done well. So congratulations.
    Thank you to all the witnesses. Now we are going to proceed 
under the five-minute rule with questions for the witnesses. 
And I will begin by recognizing myself for five minutes.
    Dr. Zandi, first thing I would like to talk with you about 
is the situation involving millions of Americans whose tax 
refunds are much smaller than usual this year. I am assuming 
you have read the same articles and seen the same reports that 
I have.
    And I know that my Republican friends spent a lot of time 
saying that their tax law would give people bigger paychecks, 
but we are starting to see evidence now that the drive to show 
higher paychecks after passage of the tax law has led to a 
significant drop-off in the size of tax refunds, and so many 
middle and lower-income taxpayers depend on those. And many 
Americans, who are used to getting tax refunds, will instead 
owe taxes in April.
    Can you briefly describe the withholding, what withholding 
is, and why it is done?
    Mr. ZANDI. Yes. Taxpayers withhold from their income or set 
aside part of their income towards their tax liability.
    Withholding is very important, because it avoids the 
problem of getting to April 15th with a huge tax bill for which 
many lower and middle-income Americans, would be a very severe 
hardship to pay. They couldn't do it, and there would be a lot 
of financial pain and suffering. So this is a way to 
effectively have taxpayers save along the way, so that when 
they get up to April 15th they don't have a tax bill that they 
can't manage. Because of withholding, in times past as you 
point out, many taxpayers enjoy a refund.
    I believe the last year before this tax legislation took 
effect roughly 70 million taxpayers out of 160 million had tax 
refunds, and the average tax refund was a couple thousand 
dollars. So far this year--and it is still early days, as the 
tax refunding is just now kicking into gear--it does appear 
that the refunds are meaningfully smaller, somewhere between 5, 
and as much as 10 percent lower than last year. So that is $150 
to $200. And some folks won't have any refunds at all this 
year. They won't get a refund.
    And this is a big surprise to many. No one planned for it. 
And thus, you can hear angst everywhere across the country. And 
if this continues on as it has over the last few weeks over the 
next two months we are going to have a lot of people that are 
going to really struggle.
    Chairman THOMPSON. Thank you. So it is--it helps them avoid 
a big lump sum payment. It is kind of a forced savings.
    But I am also hearing from a lot of my constituents in the 
business community that it is also--acts as a bonus for people 
who then take that money and spend, and the multiplier effect 
ripples through the community and helps, and that ripple may 
not be there this year.
    And to be clear, the Treasury Department has the authority 
to determine how withholding is calculated. And can a worker's 
take-home pay be manipulated through those withholding rules?
    Mr. ZANDI. Yes. So, excellent point about the bonus. I mean 
people treat it like this is a one-time bonus. And if they 
don't get a refund, then retailers will feel it.
    Chairman THOMPSON. Well, we have all been there.
    Mr. ZANDI. Yes, we have all been there. Retailers count on 
that. If taxpayers don't get this refund, then the retail 
sector is--and actually, the retailing data is now coming in 
very weak. There may be other reasons going on, but this feels 
like it is one of the reasons that this is happening.
    And yes, Treasury has a big part--the way they implement 
the tax law change has a--is--contributed significantly to this 
shortfall in refunding that we are experiencing right now. So 
in an effort to really juice things up this time last year--you 
know, because everyone got, you know, kind of a big tax cut--
and to really juice things up, the way they set it up, now we 
are paying the price. On the other side of this, refund checks 
are a lot smaller. Or, again, people are not getting refunds at 
all.
    So yes, the Treasury--the way they implemented it, this is 
a big contributing factor here.
    Chairman THOMPSON. So the withholding manipulation has 
really done damage to about four-and-a-half million taxpayers 
who now find themselves owing the IRS.
    Mr. ZANDI. Yes. So 70 million people got refunds, so this 
year it looks like it is going to come in around 65, 66 
million. And then, of course, all the 65, 66 million who get 
refunds will be--many of them will be smaller than otherwise 
would be the case.
    Chairman THOMPSON. So that is way out of the normal for 
this to happen.
    Mr. ZANDI. Actually, in recent years, the refunding has 
increased year by year by year. Now, it has been----
    Chairman THOMPSON. But the manipulation is what I am 
talking about.
    Mr. ZANDI. Yes. Oh, that is----
    Chairman THOMPSON. Out of the ordinary----
    Mr. ZANDI. Never--I mean only----
    Chairman THOMPSON. A callous move----
    Mr. ZANDI. Exactly.
    Chairman THOMPSON [continuing]. On the part of somebody. So 
thank you for that.
    And one other thing, Dr. Zandi. President Trump and my 
Republican colleagues spent about $2.3 trillion on deficit 
finance tax cut as their marquee accomplishment under the tax 
cut bill. And that money was borrowed. That was money that we 
didn't have. So it was a windfall for folks who were already 
wealthy, and it did little for the rest of the country. That is 
pretty much what the numbers look like today.
    If you had the ability to right that big tax bill last 
year, would it have looked anything like this?
    Mr. ZANDI. No. I mean this is deficit financed, as you 
point out. I mean the Congressional Budget Office, the non-
partisan folks that--and the Joint Committee on Taxation that 
look at this--non-partisan, you know--clearly have--came out 
and said this is going to add significantly to budget deficits, 
and it has. And we are on track to have a $1 trillion budget 
deficit, if not this fiscal year, certainly next fiscal year.
    And a lot goes to the deficits--and, you know, I am a fan 
of lower corporate tax rates. I thought the 35 percent top 
marginal rate was too high. And President Obama did propose to 
put it down to 28, and I think that was very reasonable. But it 
has to be paid for. We have to figure out a way to pay for it. 
Otherwise, the benefit of the lower corporate tax rate to 
businesses who invest, like Guy Chemical, that is offset by the 
fact that interest rates are all--are going to be higher 
because we have to borrow all this money going into the future.
    So it has no net benefit to the economy, but we ended up 
with this much larger budget deficit and higher debt load. So 
if I were king for the day, I would have given--I would have 
gone down the path of trying to make our businesses more cost 
competitive and address those concerns that we had. But I would 
have not lowered it nearly as much, and I would pay for it 
through other tax revenue. And I certainly wouldn't have gone 
down the path of much lower tax rates for high-income 
households, both on income, capital gains, estate taxes, 
because that provides no long-term benefit, and adds 
significantly to the budget deficits.
    And just a final point, tax revenue as a share of GDP today 
is as low as it has been in 50 years. And it is falling. You 
know, the idea that this tax cut was going to juice up growth 
and it was going to pay for itself and then some, absolutely 
not the case. Tax revenues are falling. And that is because of 
the tax cut.
    Chairman THOMPSON. And much of the individual benefit that 
Mr. Berkebile mentioned goes away.
    Mr. ZANDI. Yes. I mean absolutely. I mean somebody has got 
to pay for the----
    Chairman THOMPSON. For those----
    Mr. ZANDI. Yes, it is----
    Chairman THOMPSON [continuing]. Corporate tax cuts that you 
talked about remain, and the other----
    Mr. ZANDI. Yes, the individual tax cuts go away.
    Chairman THOMPSON. Correct?
    Mr. ZANDI. Yes.
    Chairman THOMPSON. Thank you very much. I would now like to 
recognize Ranking Member Congressman Smith.
    Mr. SMITH. I will reserve and come back.
    Chairman THOMPSON. And I will recognize Mr. Rice from South 
Carolina.
    Mr. RICE. Thank you, Mr. Chairman, and thank you for having 
this hearing on the effect of the middle class on the Tax Cuts 
and Jobs Act. I wanted to just kind of go through some 
statistics. I am sorry, you all. I am a CPA, and statistics are 
just exciting as hell to me.
    [Laughter.]
    Mr. RICE. So just a few things that have happened in the 
last two years since the President was elected, and since the 
Tax Cuts and Jobs Act became law.
    Only two years ago we were being told by the media that we 
would never see sustained growth over two percent in GDP. Over 
the last six quarters, GDP has averaged over three percent--
surprise, surprise--double the last six quarters of the--under 
the Obama Administration. We have 157 million people employed 
in the country, the highest in history, 6.9 million available 
jobs. The unemployment rate is at a 20-year low. Since last 
March we have had each month more job openings than people 
unemployed. All-time lows in African-American unemployment, 
all-time lows in Hispanic unemployment. Unemployment for women 
is at a 65-year low. Unemployment for teenagers is at a 50-year 
low. My goodness. How can we not be just celebrating these 
figures?
    It is harder to find blue-collar workers than white-collar 
workers for the first time in decades. Florence-Darlington Tech 
in my--a community college in my district, they tell me that 
they could place 1,000 diesel mechanics tomorrow. Horry 
Georgetown Technical College in my district has just started a 
free program, free tuition--it is not discounted, you don't 
have to get a loan, it is free--to--it is a six-week education 
in construction, welding, or electrical. And they not only pay 
the tuition, they also pay your bus fare to come. And they 
struggle to get people to show up.
    Wages rose 3.2 percent in 2018, the highest in 12 years. 
Consumer spending over the holidays was the highest in six 
years. Small business confidence hit the highest--is the 
highest in 15 years. In the two years since the President took 
office, we have gone from 10 years of economic stagnation to a 
long-overdue economic boom.
    The things--this is--these statistics are the proudest--the 
things that I am the proudest of.
    I have the poorest county in a poor state, South Carolina, 
Marion County, South Carolina, poorest county in South Carolina 
is in my district. In January of 2017, when President Obama 
left office and President Trump took office, the unemployment 
rate in Marion County, South Carolina, which is 57 percent 
African-American, was 9.3 percent. Today 4.7 percent.
    Dillon County, South Carolina--you know, think about that, 
9.3 to 4.7. The unemployment rate was cut in half. My goodness, 
how can we not celebrate this incredible success? Dillon 
County, South Carolina, January 2017, 6.5 percent. Today it is 
3.8 percent, 47 percent African-American.
    Marlboro County, which is 51 percent African-American, when 
President Trump took office, 7.6 percent unemployment. Today 
4.1 percent unemployment. These are staggering statistics. What 
an incredible success. What an opportunity for the middle 
class.
    And, you know, I think their future is brighter now than it 
has been in decades. A growing economy lifts all boats.
    But we can do more. You see, I think I understand why the 
middle class has struggled, really, since about 1990. It is 
because, you know, the last time we did tax reform was 1986. 
And I don't think that is coincidence. In those 30 years since 
then economies around the world have designed themselves to be 
competitive of us, and they have been successful in attracting 
our companies and our jobs away. But the Tax Cuts and Jobs Act 
stopped that flow. In fact, it is starting to reverse; over 300 
manufacturing jobs created last year.
    And we can do a lot more to make our economy competitive. 
If we can work on these trade agreements and make them fair to 
America--30 years ago we could enter an unfair trade agreement. 
We were so far ahead of the rest of the world. But we can't do 
that anymore. And President Trump and this committee are 
working actively to make our trade agreements fair.
    We need to work on merit-based immigration, like most 
companies--countries use their immigration system to make 
themselves more competitive.
    And finally, we need to stop the endless flow of people who 
work for nothing, the illegal immigrants that come over here 
and work for nothing, because who does that affect? That 
overwhelmingly affects people on the lower end of the scale. 
And of course it depresses wages, and it--of course it holds 
our middle class down.
    I could keep going, but the chairman is tapping. I yield 
back.
    Chairman THOMPSON. Thank you. I recognize Mr. Doggett to 
inquire.
    Mr. DOGGETT. Well, just picking up right there, most every 
objective economic study, whether it is from the U.S. Chamber 
of Commerce or independent economist, shows that if we move 
forward with comprehensive immigration reform, it would be a 
boon to our economy, and that even just doing the modest step 
of assuring the future of our DREAMers, these talented young 
people, most of whom have never known any country other than 
America, let them achieve their all, that that would be a 
growth incentive in Texas, in our southwestern states, and in 
many other parts of the country.
    But I want to pick up with the statistics with you, Dr. 
Zandi. Because, as I recall, you provided us some pretty sound 
advice about how we try to dig out of the financial debacle 
that President Obama inherited. And isn't it correct that with 
the enactment of the stimulus, which was, unfortunately, along 
partisan lines, right up until the time that President Trump 
was sworn into office, we had steady economic growth, we had 
jobs, we had job growth, we had economic progress well 
underway?
    Mr. ZANDI. Yes, we did. Just consider unemployment, 
unemployed, which peaked exactly at 10 percent in late 2009. 
President Obama became president January of 2009. Stimulus 
package was passed in February of 2009. The recession ended in 
June of 2009. We lost a million jobs in January of 2009, you 
remember back to that----
    Mr. DOGGETT. Right.
    Mr. ZANDI [continuing]. Fateful month. Unemployment peaked 
at 10 percent. When he left, the unemployment rate was down 
closer to five-and-a-half percent. And what we have seen since 
is a continuation on----
    Mr. DOGGETT. Continuing the progress----
    Mr. ZANDI [continuing]. That steady improvement.
    And here is what I would say. If I go and borrow money and 
then spend the money I just borrowed for a brief period of 
time, it is all going to feel pretty good, right?
    Mr. DOGGETT. It is a sugar high.
    Mr. ZANDI. Absolutely. And of course, I have a bill to pay. 
And when the money is gone, what happens? The time good times 
are over.
    So enjoy it while it lasts, because the economy is already 
slowing. Growth in Q4 is going to come in somewhere around two, 
two-and-a-half percent, which is exactly where it was before 
the tax cuts, and it is going to be lower than that in Q1 of 
this year. And we are not getting back to sustained growth of 
three percent----
    Mr. DOGGETT. And----
    Mr. ZANDI [continuing]. Under the current tax law.
    Mr. DOGGETT. And----
    Mr. ZANDI. And let me say one other thing. You are 
absolutely right about immigration reform. If you want strong, 
sustained economic growth. If you want three percent growth 
sustained in the long run, it will require immigration reform. 
We need more immigrants, not fewer immigrants.
    Mr. DOGGETT. Thank you. And there really is, as near as you 
ever get, economic consensus that our growth rate is slowing 
and it is burdened by the huge amount of debt that you told us 
to avoid when we were considering this tax law last year, 
right?
    Mr. ZANDI. Exactly. It was pretty obvious.
    Mr. DOGGETT. Right.
    Mr. ZANDI. And the CBO and the Joint Committee on Tax was 
telling you this, and we are getting exactly the scrip they 
provided.
    Mr. DOGGETT. I am pleased that every amendment that we 
offered as Democrats trying to improve that bill was fully paid 
for.
    Would your advice be to the committee that, out of concern 
for this huge amount of Republican debt, we ought not to be 
doing things that will add to the debt further with unpaid tax 
cuts?
    Mr. ZANDI. Absolutely. I think we are losing that very 
important fiscal discipline. Every tax cut, in my view, every 
spending increase, has to be paid for. We have to figure out 
how to do that.
    Mr. DOGGETT. And Dr. Boushey, you, like Dr. Zandi, 
mentioned the need for some improvements with child care, with 
infrastructure, with getting a competitive work force.
    Dr. EDDINGER. Certainly our community colleges.
    Isn't the--really, the primary need there for some direct 
expenditure to strengthen our community colleges, to meet our 
workforce training needs with effective programs, and not just 
more inefficient tax credits and tax cuts?
    Ms. BOUSHEY. A hundred percent. I will be quick, so that we 
can hear from the community college expert, as well.
    I mean I would say two things. I mean, first, you know, 
part of what the tax reform did, the tax cuts did, was starve 
the government of the ability to make these much-needed 
investments. And we are not seeing the investments that we need 
to be making in infrastructure, in early education, in 
education writ large, and health care. These are all things 
that are demonstrably going to improve our economy, moving 
forward, on a stable path. Not like the--as you just called 
it--sugar high we are on now. So I would 100 percent agree.
    On the question of tax credits, certainly we do need to be 
making these investments and encouraging investments where 
businesses aren't making them.
    Mr. DOGGETT. Let me just ask, with my time expiring, can 
any of you tell me how you spent the $4,000 in average adjusted 
income that President Trump and this crowd said you would get 
every year as a result of this tax cut? Anybody get their 
$4,000?
    Just another of the phony promises that were made for----
    Chairman THOMPSON. The gentleman's time has expired.
    Mr. DOGGETT [continuing]. A measure that does not work. 
Thank you.
    Chairman THOMPSON. Mr. Schweikert.
    Mr. SCHWEIKERT. Thank you, Mr. Chairman. Just for the fun 
of it, Mr. Doggett, many of us absolutely agree, immigration is 
a crucial part of future economic expansion. And if you will 
work with us on developing what the rest of the industrialized 
world has done, which is a talent-based system--because, as we 
can see from the literature--and I don't think any of you are 
part of the--but lots and lots of the robust literature says a 
talent-based system is where you get your maximum multiplier. 
In our current system it is often a second generation to third 
generation before you get the multipliers.
    So we agree, we just have to actually make the designs 
work, because we have a demographic crisis coming at us. And if 
we don't start to deal with--I have been heartbroken with some 
of the, forgive me, some of the partisan math, because you all 
know it is more complicated. We need a multi-level approach. It 
has got to be immigration.
    It has also got to be incentives for maximum economic 
expansion.
    It has got to be incentives for workforce participation, 
radical adoption of technology and health care so we stop 
having this crazy debate of who gets to pay, but lowering the 
price.
    And then we are going to have to have the most difficult 
discussion, and that is the redesign of our earned 
entitlements.
    Doctor--and, forgive me, I want to--don't want to 
mispronounce your name--Eddinger.
    Ms. EDDINGER. Eddinger.
    Mr. SCHWEIKERT. Eddinger. You actually said many things 
that I think, A, we all agree on, but I find very optimistic, 
but there is a frustration here. For many of us, being from 
Arizona, we have seen some amazing data in the U6--if you get 
down to the U6 cross-steps, that individuals without a high 
school education, that we would have discussions in this room 
just a couple years ago that they were part of the permanent 
under-class in this society, are actually going to community 
colleges, getting those certificates in maybe welding, in maybe 
something else. And because of the impressive job creation out 
there, we are seeing some upward mobility of entire quartiles 
that the really smart people had written off in the previous 
decades.
    And if we are going to have an intellectually honest--there 
needs to be sort of joy and optimism, but also a focus on these 
quartiles and the velocity of movement into higher quartiles.
    What do you do in your system to make it affordable, to 
encourage someone to do those certificates? And what sorts of 
partnerships are you setting up with the employers that are so 
short of employees?
    Ms. EDDINGER. So we always try to put the funds in the 
hands of----
    Mr. SCHWEIKERT. No, no, no, you are fine. I am trying to 
get her to put a slide up.
    Ms. EDDINGER. Oh. We always try to encourage folks to put 
the funding and put the dollars in the hands of the students, 
because they best know how housing, food, and all of the wrap-
around support would work.
    When students finish with us, they hop two quintiles in 
income. It is demonstrable. It is what you saw in----
    Mr. SCHWEIKERT. Say that last part again. So when they 
finish and get their certificate, you are actually tracking 
that they are not going to the next, they are literally 
doubling up on----
    Ms. EDDINGER. They literally double up.
    Mr. SCHWEIKERT [continuing]. Their velocity.
    Ms. EDDINGER. And what we do with the employers that--we 
bring them to the table and say, ``Help us co-educate our 
students. Do not just count on the state or the Federal 
Government funding everything. We our financial partner, and 
then tell us what the competencies are that we need in order to 
create those jobs.''
    Mr. SCHWEIKERT. Mr. Chairman, considering this committee is 
about our middle class, and we all know there is sometimes 
constantly moving definitions of what is the middle class--is 
the middle class in California with a high-cost state, or 
Massachusetts, or Connecticut, different than Arizona? But I 
have a great concern that we are pricing out much of our middle 
classes as--Tirado? Tirado, that is actually--so elegantly said 
and so emotionally said is she is being priced out of the 
middle class.
    [The slide follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Mr. SCHWEIKERT. If you look at this slide--and I will be 
happy to pass it around, but this is easier than me standing 
there with one of those boards. If you actually take a look at 
the last--okay. But if you functionally look at the last 20 
years, the areas that have exploded in cost are those areas 
that have--are our fault. It is this elected body that touches 
hospital services, college tuition, medical care. We have 
distorted those markets.
    But take a look. If you see the blue lines, the other areas 
that have actually crashed in consumer purchasing power. They 
are those that have the lightest touch from this institution. 
We are going to have to sort of think through how do we reach 
out in health care and use technology, availability, and those 
things, instead of what you are seeing.
    The very top of the chart is hospital services, which our 
reimbursement mechanisms have created absolute distortions.
    The last thing I would just--Mr. Brown, for much of my 
life--I was a Realtor for a decade, I was a leader in----
    Chairman THOMPSON. Your time has expired.
    Mr. SCHWEIKERT. You spoke to doubling the deduction as 
being a difficulty. You owe her an apology, as she is trying to 
survive as a renter, needing that deduction.
    Chairman THOMPSON. Okay, the gentleman's time has expired.
    Mr. Larson.
    Mr. LARSON. Thank you, Mr. Chairman. And let me start by 
commending the excellent witnesses that we have, especially Ms. 
Tirado and Mr. Berkebile, who I would also note is an Ironman. 
And based on your testimony, Ms. Tirado, you are an iron woman 
who deserves enormous credit.
    Let me also commend Chairman Thompson and Mr. Neal. The 
difference, I think, that we are noticing this year is that we 
have returned to regular order.
    Now, what do we mean by that? What we mean is that we are 
actually going to have hearings. We are actually going to have 
substantive discussion, where we can exchange ideas and views 
on both sides. Our colleagues on the other side have a lot of 
good ideas. It would have been great if we had public forums 
and hearings on the tax proposal that we are now dealing with. 
Because with everything, there is always unintended 
consequences.
    The goal of Mr. Neal and Mr. Thompson is to make sure that, 
through expert witnesses, we have an opportunity to hear the 
rest of the story. And so I commend all of you for giving us 
the--your various points of view.
    Chief among my concerns in a return to regular order is 
that this tax cut, as we hear in testimony, has fallen 
unevenly.
    Not only unevenly, but if you are from the State of 
Connecticut and you have to deal with, say, the state and local 
tax you can no longer deduct, you find yourself in a situation 
where--750,000 people in my state itemize deductions. The 
average deduction is $19,000. But without any public hearings 
or forums or anything, we concluded--we, meaning the body--that 
we would cap this--our colleagues on the other side--at 
$10,000. The average in Connecticut is 19; 10,000 was the cap.
    So now, when it comes to paying the fiddler this April, not 
only are people going to see an increase--and this is my 
question for you, Dr. Zandi--a person who previously used to 
deduct 19,000 and now is capped at 10, are they in fact 
subsidizing the tax cuts and the corporate rate?
    And as you pointed out, President Obama had a tax rate of 
28 percent and 25 percent for manufacturers, I believe. 
However, there was never a hearing in the eight years that they 
were in control on any of Mr. Obama's proposals to reduce 
taxes. Only behind closed doors and without a hearing did we 
get the tax bill and, therefore, these uneven results that we 
are experiencing now.
    Are citizens of Connecticut and, frankly, a number of 
states across this country, because of this tax bill, 
subsidizing the tax cuts of the very wealthy?
    Mr. ZANDI. I think you are right. I think the tax 
legislation has raised tax liabilities for many people in the 
Northeast Corridor--so for Boston through Connecticut, New 
York, down through Philadelphia, Baltimore, and D.C. Parts of 
Florida, and on the West Coast, particularly around California. 
Around Chicago, as well. These are areas of the country where 
the SALT deduction was very important. And you take that away 
or reduce its value, it is a significant financial hit to those 
households. In many cases they are now doing their tax returns, 
and they are going to find that their tax liability is much 
higher which will force them to significant adjustments.
    So you go look across the housing market and take a look at 
house prices in these different parts of the country, and they 
are now weak, going flat, and in some cases actually declining, 
as these markets adjust to the fact that, you know, these tax 
preferences that were in the code before are no longer there.
    So it is a very significant adjustment, particularly to 
home owners in a place like Connecticut, you know----
    Mr. LARSON. Mr. Brown, are you finding that in California 
also, the impact of the lack of the ability to deduct state and 
local taxes?
    Mr. BROWN. Very much so. We have a huge supply and demand 
imbalance in California, and extremely high prices. We also 
have a very robust and large economy. And housing prices are 
very high.
    So if people can't write off those taxes, it takes some of 
the incentive away to buy a house. We believe that buying a 
home is a way for people to enter the middle class. It is a way 
to climb the economic ladder. People that are struggling to buy 
that first house face a lot of barriers. They have health care 
costs, they have the competition factor in California, and they 
high prices. It is hard to get in.
    So there has to be an economic benefit or incentive for 
somebody that is in that position. The economic benefit, or the 
incentive, was largely taken away for many in the Tax Cuts and 
Jobs Act.
    Mr. LARSON. You bet.
    Chairman THOMPSON. Thank you. Thank you very much. Because 
of the numbers on the committee, we are going to move to a two-
to-one ratio, as has been done always in this committee. And I 
will recognize Ms. Sanchez.
    Ms. SANCHEZ. Thank you, Mr. Chairman, and thank you to all 
of our witnesses for being here today. I am pleased that we are 
beginning the long-overdue process for tax--hearings on tax 
reform. Although I think, as Mr. Larson mentioned, it would 
have been better if we had done those hearings prior to when 
the Republicans passed their tax bill, but here we are.
    Republicans held the committee gavel for eight years, and 
in that time they used that time to focus on multi-national 
corporations, while middle class and aspiring middle class 
Americans often had to take second jobs to make ends meet. It 
is impossible in this hearing to address all of the missed 
opportunities that we could have had in the last tax bill. So I 
am going to focus on just a couple. And I want to start with 
Ms. Tirado.
    I know that you are a D.C. native and you spent some time 
in Florida, but your story reminds me of so many stories that I 
hear from constituents in Southern California. And I really 
want to thank you for your testimony. But I wonder if that side 
of the dais has listened to your testimony, because clearly, 
all this rosy information about how the tax bill has helped 
everybody--it really hasn't helped you, has it?
    Ms. TIRADO. Yes, I have been listening and I have already 
done my taxes. And I didn't--I saw some extra money from 
Maryland, they have some things for teachers, but not from the 
federal side. So all of the great things that they are talking 
about from the tax----
    Ms. SANCHEZ. All these wonderful things, you know, 
unemployment is down, and wages are up--are you feeling that, 
personally?
    Ms. TIRADO. No. And, you know, unemployment rates dropping 
isn't instantaneous. It didn't happen in the last ten years. 
That is a decade's worth of work. And I think that needs to be 
recognized, as well.
    Ms. SANCHEZ. Thank you. And as you mentioned in your 
written testimony, you know, I think you have done far more 
than society asks of you. You have served your country in 
uniform, you teach, you volunteer in your community, all while 
trying to further your own education and trying to raise two 
children on your own, which I think is--the most amazing thing 
are single mothers in this world.
    I would like to talk to you about something that hits close 
to home for me, too. I have four boys, three of them step-sons 
and one of my own. I want to talk about child care costs, 
because----
    Ms. TIRADO. Okay.
    Ms. Sanchez [continuing]. All the unemployment in the world 
isn't going to help working parents afford child care. You 
mentioned that child care costs were not only half of your 
take-home pay in Florida, but that a need for child care 
assistance was one of your--the factors in your decision to 
move back to D.C.
    Ms. TIRADO. It was.
    Ms. SANCHEZ. And I am sure, as an educator, you know how 
important early learning is.
    Ms. TIRADO. Yes.
    Ms. SANCHEZ. I want you to tell us that, as we look to 
maybe realign some of the benefits so that middle-class 
families really do get relief, what should we know about your 
attempts to access quality and affordable child care?
    Ms. TIRADO. Well, in Florida, child care was provided to me 
by a church. You know, church is very important in my 
community. And my child care expenses were actually supposed to 
be $1,200 a month, but I went to the pastor of the church with 
my situation, and he gave me that discount, so it would only be 
$1,000 a month. And I took a second job to help me pay for it. 
And then, of course, the father of my children helped me out, 
as well.
    But even with all of the help from my ex-husband, from the 
pastor of my church, I still had to take on a second and a 
third job. So I worked until 7:00 in the evening after teaching 
all day, and then I worked on Saturdays, as well, to keep up 
with child care.
    When I look at my students, a lot of my students are late 
to school every day, because they have younger brothers and 
sisters, because their parents can't afford child care. They 
have to take their younger brothers and sisters to school 
first, and then come to school. Then they are late, they don't 
get there until second period or lunch time, and then we say 
they were absent from school for the whole day because of the 
rule that if you miss one class then you are absent for the 
whole day.
    Then we tell them at the end of the year, ``You have too 
many absences and you failed the entire school year and have to 
repeat the year,'' because their parents can't afford child 
care.
    Ms. SANCHEZ. Yes, amen.
    Ms. TIRADO. Those are the sort of things----
    Ms. SANCHEZ. I wish we could, you know, blast that out over 
every television set and radio in the United States. You have 
had to get a second job, so the tax bill didn't help you climb 
out of, you know, the deficit of--your wages aren't being--
aren't going up, and you have got student loan debt, and the 
cost of milk isn't the same, you know, from one week to the 
next.
    Ms. TIRADO. No.
    Ms. SANCHEZ. I mean all of those expenses go up. Interest 
rates are going up. When you hear, like, wow, GDP is great, and 
unemployment is low, you know, the reality is those are 
statistics, but those statistics reflect lower-paying jobs or 
jobs that don't provide the kind of benefits that you need in 
order to support your kids and make sure that they have health 
care.
    I mean I really want to drive down that point, because you 
can hear statistics, but you hear stories like yours, and yours 
is not unique. How many people do you know that are similarly 
situated, where they are struggling to afford child care and 
basic necessities, and their wages aren't going up?
    Chairman THOMPSON. The gentlewoman's time has expired.
    Ms. TIRADO. Every single teacher I have ever worked with. 
All the teachers I have ever worked with have the same problem. 
All of them.
    Ms. SANCHEZ. Thank you so much for your testimony.
    Chairman THOMPSON. Thank you very much.
    Ms. SANCHEZ. And I yield back.
    Chairman THOMPSON. Mr. LaHood, you are recognized.
    Mr. LAHOOD. Thank you, Mr. Chairman, and I want to thank 
the witnesses for being here today, for your valuable 
testimony.
    And Ms. Tirado, thanks for sharing your story and for your 
service to our country in the military. I appreciate that very 
much.
    My district that I represent in central and west central 
Illinois is kind of the heart of the middle class--middle-
class, lower-middle-class folks. I am fortunate enough to 
represent about 710,000 people, rural agricultural area, but 
with a lot of manufacturing. And I look at our economy today 
and it is the strongest economy we have had in 25 years.
    And I look at small, medium-sized companies in my district. 
And in going back 10 years and looking at how devastated our 
manufacturing was, our job markets, and I look at the 
statistics today, I mean, the number-one issue that I hear in 
my district as I traveled around--and, Dr. Eddinger, you 
touched on it--we can't find enough workers. Seven million 
unfilled jobs. We don't have enough truck drivers, we don't 
have enough welders, we don't have enough nurses, we don't have 
enough mechanics, we don't have enough technicians.
    But I will also tell you, as I look at companies in my 
district--for instance, Dot Foods based in Mt. Sterling, 
Illinois, they could hire tomorrow 70 new truck drivers, start 
out at $68,000 a year--that is a head-of-household job in Mt. 
Sterling, Illinois for a middle class person--and don't have 
enough workers for that.
    Keystone Steel and Wire in my district, in Bartonville, 
Illinois, they have a waiting list of 80 new people for 
welders, starting out at $20 to $25 an hour. We can't find 
them.
    I look at Knapheide Manufacturing based in Quincy, 
Illinois. Again, they are looking for 100 new workers to come 
in. We have never seen this before.
    And you look at the statistics, and Mr. Rice went over it. 
GDP has grown at over 3 percent, lowest unemployment in 50 
years in all sectors, African-American community, Hispanic 
community, with women, with people with disabilities. Private-
sector wages continue to go up.
    Look at--the stock market is up 27 percent. And remember, 
that affects 529 plans for middle-class Americans, 401(k)s, all 
retirements, created 5.3 million new jobs in the last two 
years, 600,000 in manufacturing. Nobody ever thought we would 
bring back manufacturing in this country, and we have done it.
    And so I look at their--it doesn't mean we don't have 
challenges. Clearly, we do. And a number of you have hit on 
those challenges. And we ought to be working on those right 
now. But when you look at the economy, I look at this as let's 
do no harm with the economy and keep it going, and let's focus 
on these other things.
    And I think, Dr. Zandi, you hit on a couple of important 
points with infrastructure. Absolutely, we ought to work on 
infrastructure. You are going to find a lot of bipartisan 
support on working on infrastructure. You know, the President 
has talked about an infrastructure plan. We ought to be working 
on that.
    Workforce development, career technical education, clearly 
those are bipartisan issues that we can legislate on and find a 
solution.
    Immigration is another one, and health care has been 
touched on.
    So those are all things we should be focused on. But the 
economy is going strong, we ought to keep it going. And it has 
helped middle-class folks. That is not just anecdotal evidence, 
that is real evidence.
    I would also like to submit for the record, Mr. Chairman--
this is a poll that Gallup just did last month. Here is the 
title: ``Optimism about Personal Finances Hits 16-Year High 
with the Middle Class.'' And so I would like to submit that for 
the record.
    Chairman THOMPSON. Without objection.
    [The information follows:]
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    Mr. LAHOOD. And I would just say, you know, again, the 
title of this hearing is how are middle-class families faring 
in today's economy. In my district, they are faring pretty 
well.
    And Mr. Berkebile, I want to ask you. Going back 10 years 
and looking at 2008, 2009, where we are at, and where we are at 
today, can you tell us how middle-class workers in your 
business are doing?
    Mr. BERKEBILE. Yes, they are better off. This is why I 
brought these employees here. It is one thing for me to tell 
you a story about one of my employees. It is another to tell 
you the story with them here, so you could actually ask them 
for yourselves.
    But our bonuses--we have always been fortunate enough that 
we have been able to pay a bonus for many years. We have 
increased our bonuses up to 50 percent. But--and we have 
increased salaries.
    But regardless of whether I am voluntarily increasing 
wages, forget about that. The job market right now is so tight 
that I have to increase wages. I have no choice. And I don't 
hear these people talking about that. The job market is so 
tight right now we are having trouble finding workers in our 
factory. We had to increase these salaries in order to attract 
and retain them.
    Mr. LAHOOD. Thank you. I yield back.
    Chairman THOMPSON. Thank you. I recognize Ms. DelBene.
    Ms. DELBENE. Thank you, Mr. Chairman. And thank you so much 
for holding today's hearing, because I think that this Congress 
needs to consider how our actions are lifting up the middle 
class. And today is an important step to getting back to doing 
that.
    My colleagues on the other side of the aisle talk a lot 
about all that we need to do. They had the gavel for eight 
years, and they spent all this money, created this huge debt, 
and this is work that we should have been doing a long time 
ago, in terms of investing infrastructure and investing in 
human capital.
    I want to focus on an issue that is particularly front of 
mind for many of my constituents, and that is affordable 
housing.
    Every financial planner will tell you that people should 
spend no more than 30 percent of their after-tax income on 
housing. Unfortunately, over 235,000 people in my state of 
Washington, or 11 million nationwide, so roughly 1 out of 4, 
spent over 50 percent of their monthly income on rent, leaving 
too little for necessary expenses like transportation, or food, 
medical bills, or saving for retirement.
    And in Washington State a minimum-wage worker has to work 
78 hours a week in order to afford a modest one-bedroom 
apartment. Data from the NHP Foundation suggests that under-
employed and strapped with debilitating debt Millennials aged 
22 to 37 are renting at a greater number and for much longer 
than previous generations. This will have a variety of 
consequences, the most obvious of which is the longer someone 
puts off buying a home, the longer they delay their ability to 
build equity and pay down other debt.
    Additionally, research shows that high rent burdens have 
priced out many workers from the most productive cities, 
resulting in a 13.5 percent foregone GDP growth, a loss of 
roughly $1.95 trillion between 1964 and 2009.
    Mr. Chairman, I ask unanimous consent to enter into the 
record a recent opinion piece by Mr. Richard Burns, the 
president and CEO of the NHP Foundation published in The Hill.
    Chairman THOMPSON. Without objection.
    [The information follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Ms. DELBENE. Dr. Zandi, could you talk about the importance 
of affordable housing and the budget for a middle-class family?
    Mr. ZANDI. It is the largest expense for most families, 
middle-class families. And, as you pointed out, 30 percent of 
income, that is of the threshold beyond which it is very 
difficult to manage, for any household. And many, many 
households are being forced into that position, because we have 
an affordable housing crisis.
    By my estimate, we have a shortfall in new housing 
construction of about two million units. For context, in 2018 
we put up 1.3 million homes. This shortage is becoming even 
more severe as we go along here. The gap between supply and 
demand is very large.
    So I do think we need to focus on how to improve the 
availability of affordable rental and affordable home 
ownership, increase the supply. And actually, there is a number 
of very good proposals to expand out--funding through the 
Housing Trust Fund would be a good example. New market tax 
credits are another good example. But I think, if we don't 
focus on this, then middle-class families are going to fall 
increasingly behind. And it is a problem for the job market?
    One of the reasons why we have labor shortages in many 
communities, particularly in cities, is because people can't 
afford to live anywhere close to where the jobs are. Like you 
know that if you live in California, here on the East Coast you 
are pushed way out, and there is no way to pay for the commute 
costs.
    So if we want to address this shortage of workers, which 
is, I agree, severe and we need to address it, immigration is 
one way to do it, but this affordable housing crisis, we have 
to address it. Otherwise, we are not going to be able to create 
those jobs.
    Ms. DELBENE. And if you live further out you have got 
greater transportation costs, and that impacts child care----
    Mr. ZANDI. Child care costs----
    Ms. DELBENE [continuing]. Also be there for your family.
    Mr. ZANDI. The whole shooting match, right.
    Ms. DELBENE. Absolutely. Since the burst of the housing 
bubble in 2007, 2008, how has that affected the rate of home 
ownership? And has the decline in home ownership between 
equitable--or been equitable through different income levels, 
Dr. Zandi?
    Mr. ZANDI. Home ownership declined, it peaked in 2004 at 69 
percent of households. We are now down to 64.5 percent. We are 
off bottom. You know, the economy has improved, unemployment 
has declined, so we have seen an improvement. But, you know, we 
are back to where we were 20, 25 years ago, in terms of home 
ownership.
    And obviously, the lower your income level--I mean high-
income households home ownership is very, very high, and it is 
a choice not to be a home owner. You move down into the middle 
income groups and lower income groups, then home ownership 
falls significantly. And it is well below 50 percent.
    One of the other issues is, because of the affordable 
housing crisis and we haven't put in enough homes, house prices 
and rents have risen very rapidly for affordable rental, 
affordable home ownership. People can't afford it. And, given 
the tight mortgage credit standards, they have not been able to 
get a mortgage, either. So all these things are conflating and 
keeping the home ownership rate down.
    If we don't change something the home ownership rate is not 
going to rise. It is going to stay exactly where it is.
    Ms. DELBENE. Thank you.
    And I yield back, Mr. Chairman.
    Chairman THOMPSON. Ms. Moore, you are recognized for five 
minutes to inquire.
    Ms. MOORE. Thank you so much, Mr. Chairman. And let me join 
the entire group in welcoming our panelists and thanking them 
for their time here today.
    I--my good friend and my good colleague, Mr. LaHood, waxed 
on about the health of the economy. He said it is growing 
faster than ever. GDP is great, unemployment is at an all-time 
low, African-Americans are doing well, Hispanics are doing 
well. Wages are rising at the fastest pace in 10 years, blah, 
blah, blah, 90 percent of all tax bearers over all income 
categories received a tax cut under the Tax Cuts and Jobs Act, 
and so on and so forth.
    So there seems to be kind of a disconnect between the--
these--this recitation of things and what testimony we have 
heard here today. In particular, Dr. Zandi, you talked about 
the--that there has been an expansion of our economy that--
but--fill in the blank.
    Mr. ZANDI. Well, I would say a couple things. One, that the 
current state of the economy is very much a function of deficit 
finance tax cuts that will provide a near term boost to the 
economy, but will fade away. It is already fading away. If we 
come back to this room a year from now, the data we are going 
to get is very different than it is currently. Growth certainly 
will not be three percent, it is going to be back exactly to 
where it was prior to all of this. And the evidence to that is 
already very strong.
    Second, the benefits of the strong growth are accruing to 
folks in the upper part of the income distribution. Here is an 
amazing statistic. This is an amazing statistic to me. If I 
look at the 20 percent of the population that is in the middle 
of the income distribution, you know, 40 to 60 percentile, if 
you go back 20 years ago, they accounted for 15 percent of all 
the consumer spending. So 20 percent of the population, today 
they account for less than 10 percent of consumer spending.
    If you consider those in the top quintile of the 
distribution, the top 20 percent, you go back 20 years ago they 
accounted for one-third of all spending. Today they account for 
nearly half of all consumer spending. And that is the bottom 
line, right? Consumer Spending.
    And so the middle class is doing better than the last 
several years, because the economy has finally got back to full 
employment, a process that started well before this 
Administration, but it has to be put into this broader 
historical context. And obviously, in this context, the middle 
class has really struggled and continues to struggle.
    Ms. MOORE. Well, and Dr. Zandi, thank you for that. And I 
just wanted to ask Dr. Boushey to lean into this, as well, 
because while wages have not necessarily grown, you said the 
GDP was less representative of how people were doing than other 
factors, that while there might have been a four percent--there 
might be four percent growth. When you start subtracting it for 
the inflationary cost of child care, health care, housing 
costs, other things, that is a negative number. You even said 
that the average child care was $1,230 a month.
    So I guess I would like you to respond to the--you know, 
the notional assumption that people in the middle class are 
doing better.
    Ms. BOUSHEY. Yes. Let me make two points. One, you know, it 
is the case that when the economy grows not everyone is 
experiencing it in the same way that it--that they were in 
decades past.
    In the 1960s and 1970s, when the economy grew, the vast 
majority of people saw growth at about the average. And today, 
only those in the top 90 percent see growth that is at or above 
the average, you know, over the--looking over the past 20 to 30 
years. So that is a real significant difference in whether or 
not a rising tide lifts all boats. I don't think we can say 
that any more. The data shows that when the economy grows, it 
is disproportionately at the top.
    And I want to add to something that Dr. Zandi said about 
this statistic about what the middle class is consuming. There 
is some new research out that shows that--that actually gets to 
the slide that was up about consumer prices. Because so much of 
this consumption is happening at the top end of the income 
distribution, you are actually seeing that push producers to be 
supplying goods and services to the top, which is actually 
lowering inflation for rich people on the things that they buy. 
And at the other end you are seeing less investment and less 
productivity or changes in products at the middle and bottom, 
so that those of us who are not at the top are seeing actually 
higher inflation, because there is just less competition.
    So there is the--some real serious economic implications of 
this divergence in spending that are affecting middle-class 
families in ways that we haven't talked about enough.
    Chairman THOMPSON. Thank you very much----
    Ms. MOORE. My time has expired. I sure had a lot of 
questions, though.
    Chairman THOMPSON. Mr. Ferguson, you are recognized.
    Mr. FERGUSON. Thank you, Mr. Chairman, and to all the 
witnesses, thank you for your time.
    Ms. Tirado, thank you for your service to this country, 
your profession, and your community. We greatly appreciate 
that.
    I know each of you come today with unique backgrounds and 
experiences and perspectives, just like we all do up here. And 
as I sit here and listen to a lot of the testimony today, I sit 
here in a little bit of bewilderment.
    And Dr. Zandi, you know, one of the things is you were 
talking about--and one of the things I worry that you are 
missing as part of this conversation is the truth about what is 
happening on the ground in a district like mine.
    Business after business, whether it is a small business, 
whether it is a large business, whether it is multi-national, 
every one of them tells me that the direct--the growth in their 
business model and the investment in their employees and the 
investment in their equipment, the investment in new 
technologies, is all a direct result of tax reform.
    So I think to make statements that it doesn't impact the 
economy--and you said it had a no-net increase on the--no net 
effect on the economy--I think you are missing part of what is 
going on in my district.
    The other thing that I would like to point out is that all 
of these CEOs and leaders of these companies are telling me 
that the investments that they have made in their people and 
the technology and the equipment are just now beginning to come 
to fruition. The systems are being brought up, the training is 
beginning to pay off. And they see increases in productivity 
down the road that they otherwise would not have seen.
    Another thing I--when we talk about doing all of this, I 
get pretty excited about it, excited about talking about it, 
for this reason. I come from a rural district in Georgia that 
lost about 35,000 jobs in our area over--in the late--in the 
1990s, early 2000s, with the loss of the textile industry 
there--even going back a little bit further. And one of the 
most important things to remember in all of this is that our 
economy, our communities, our friends and neighbors all need 
access to a job.
    And so I went through living in the community and being a 
mayor of this community for a number of years, where there were 
more people moving on to government programs than moving into 
the job market, because of the lack of jobs. It wasn't until we 
revitalized our local economy, and then had the boost from the 
tax reform, that we saw more and more people move from poverty 
into the middle class, and now moving up through the middle 
class, and that is great for everybody in my community. And 
that is something that you simply cannot, with statistics and 
numbers, write off. It is real in my district.
    Here is another thing. Somebody--reclaiming my time, but 
you mentioned something--we all mentioned something about--and 
I have heard it many times up here about workers. Okay? Could 
not be more excited about the bipartisan work that we did last 
year to re-authorize the Perkins CTE bill, really put good 
money into it, funded it well, bipartisan bill that came out 
of--talking about a guest worker program and real immigration 
reform. Our businesses tell us they need that. The limiting 
factor right now is they got so many people working that there 
are not enough new employees coming along. It is an issue that 
we have got to solve.
    But here is another real issue. And you talked about 
investment in infrastructure. I hope that we will make 
significant investments in infrastructure, particularly 
broadband. And I hope that we make reforms in our education 
system to begin to train more and more people to actually make 
a living on the Internet.
    And I hope that that gets distributed into rural America, 
because we have these booming urban centers, as people have 
indicated, and we think sometimes the only way that we can get 
someone to a job is to put them--or for them to have to buy a 
car, get on a bus, and get there. What if we connect them to 
those jobs remotely? Don't you think that would be a fantastic 
improvement to deal with the poverty and the lack of hope that 
exists in rural America?
    I think we have a remarkable opportunity to continue this 
wonderful economy. I would have a very hard time going back to 
my district and saying we believe that we need to take back and 
take a step backwards in tax reform, because I think that it 
has a negative impact on my district. Every single CEO, real 
estate agent, small business, everyone is saying this is having 
a positive impact on their bottom line.
    So I don't mean to stand up here and preach, but please 
connect to the districts, and not just the papers out there. 
Thank you.
    And, Mr. Chairman, I yield back.
    Chairman THOMPSON. I thank the gentleman and I recognize 
Mr. Boyle for five minutes.
    Mr. BOYLE. Thank you, Mr. Chairman. In many ways I think 
that Chairman Thompson's opening remarks set the stage and 
almost verbatim--when I speak about this topic I like to say 
that it is the best of times, it is the worst of times, that in 
terms of the traditional indicators, economic growth, stock 
market, how much it has grown from what President Obama 
inherited in January 2009 on approximately 100 months, straight 
months of job growth, by those measures people should be 
enormously happy.
    And yet the reality for most Americans is they have not had 
real wage growth in a generation. The indicator that you used, 
Dr. Zandi, of median household income, is completely flat. 
Moreover, if you compare where we are today versus 30 years 
ago, about 30 years ago, when you compared the top 1 percent 
and everyone else, there were about equal shares of wealth. 
Today it is a two-to-one gap, and the two-to-one gap is the top 
one percent versus everywhere else.
    So I don't begrudge the top one percent anything. I am very 
proud, as a Pennsylvanian, particularly, about your success and 
the success of others. What I begrudge is the fact that Ms. 
Tirado and so many of my district in Philadelphia have not 
benefitted from those gains, and that we just passed a massive 
tax cut last Congress in which 83 percent of the benefit went 
to the top 1 percent.
    George W. Bush's tax cuts in 2001 and 2003, while I wasn't 
in Congress at the time, was in graduate school, but--which 
will get me to my next topic of student loans--but back in 
those tax cuts, 27 percent of the benefit went to the top 1 
percent. Tax cuts that were just passed in the Republican 
Congress, 83 percent went to the wealthiest 1 percent.
    So given that, it really is the best of times and the worst 
of times.
    Now, let me shift, because there is so many different 
aspects of this. I do want to talk specifically about student 
loans. Proud to be the first member of my family to go to 
college. I consider myself very fortunate. Graduated almost 20 
years ago from undergraduate, and still own about $40,000 of 
student loan debt to pay off. And again, I consider myself very 
lucky. I am very fortunate.
    However, what concerns me, knowing that we are at likely 
the tail end of this economic growth cycle, if you could speak, 
Dr. Zandi or anyone else, about the number of defaults that we 
are seeing in a growing economy, and recognizing we have almost 
$1.5 trillion of student debt out there.
    And then, if we could, address what we expect will happen 
when the next recession inevitably occurs.
    Ms. EDDINGER. So the student debt issue is directly tied to 
the tuition and fees that the students are asked to pay. When 
you went to school 20 years ago, we probably have quadrupled 
the number of dollars that is needed for students to get 
through school.
    At the same time, the defunding of public higher education 
has played a role. So the--10 years ago students were paying 30 
percent, and my state appropriations paying 70. Ten years 
hence, that formula has flipped.
    Mr. BOYLE. Yes.
    Ms. EDDINGER. So in some ways, the public universities are 
forced, because of our revenue streams, to raise student fees. 
And the students have nowhere else to go, because Pell has--
even though had a small number of increases, has been flat.
    Mr. BOYLE. Let me just reclaim my time, just because I only 
have about 50 seconds. I want to make two points on this.
    One, as Ms. Tirado eloquently showed, this is a problem for 
individuals who are repaying student loans and trying to make 
ends meet. I want to make the larger point, though, that even 
if you are not in college today, even if you are not in 
repayment, this is a threat to our economy.
    And perhaps, Dr. Zandi, if you could speak to that, with an 
overhang of $1.5 trillion, what we expect to happen when the 
next recession inevitably occurs.
    Mr. ZANDI. Yes, that is a very serious issue. $1.5 trillion 
is--just to put it in a context, that is more than--that is 
twice as much as credit card debt outstanding. That is more 
than auto debt outstanding, which is $1.2 trillion. This is the 
single largest debt after mortgage debt, the single largest 
liability of households. And a lot of it, obviously, is owed by 
Millennials. And Millennials are clearly struggling to manage 
through. They have negative saving rates. They are unable to 
accumulate wealth.
    The median age of a first-time home buyer is rising because 
they can't afford to get in, they can't start families. So this 
is very corrosive on the economy.
    And you are right, in the next economic downturn the 
defaults on this are going to be very significant. And because 
of the $1.5 trillion, approximately $1.3 trillion is backed by 
the Federal Government, this is going to be a very serious 
taxpayer problem. We are going to have very large losses that 
are going to be covered by us, as taxpayers.
    So it is a pernicious issue for this Millennial generation 
that is making their way up.
    Here is one other really important point that goes to 
entrepreneurship----
    Chairman THOMPSON. The gentleman's time has expired, so if 
you----
    Mr. ZANDI. It is a great point.
    Chairman THOMPSON. If you have more information, if you 
could get it to us, I will make sure everybody gets it. Thank 
you very much.
    Mr. BOYLE. Thank you.
    Chairman THOMPSON. Mr. Arrington.
    Mr. ARRINGTON. Thank you, Mr. Chairman and panelists. The 
notion that the Tax Cuts and Jobs Act and the benefits accrued 
to the wealthy is just patently false. Over 56 percent of the 
benefits from the Tax Cuts and Jobs Act go to families and 
workers making below $200,000. The majority of the share of 
taxes paid by millionaires increased from 19.3 percent to 19.8 
percent.
    Here is what is just startling to me, as an American, that 
when America is doing well and when something has worked--and 
clearly, lowering taxes and lowering the regulatory burden has 
worked to stimulate this economy the way it--and the 
sustainable stimulation of this economy--that is, we have 
provided incentives for folks like Mr. Berkebile to actually 
invest and expand and support his workers with bonuses and 
higher wages and offer more job opportunities.
    And to the gentlelady's point who is not here, but she says 
these are just stats, and data, and yada, yada, yada. These are 
real people. This is real money in the pockets of hard-working 
Americans. These are real jobs, seven million surplus jobs. 
More people are going to work every day.
    I was at the State of the Union and the President said five 
million people are not dependent on food stamps because they 
have got a job, and nobody clapped on one side of the aisle. 
That, to me, is disheartening, as an American. Things are 
better and things are looking up.
    And while I respect you all, and I appreciate your 
information, I respect my colleagues on--along the spectrum--I 
put my faith and trust in the American people. And when 69 
percent of them say that they believe that next year at this 
time they will be better off, I believe them. That is real 
confidence.
    And you know, this whole bit of the sugar high, Mr. 
Berkebile, are you surprised that you have done what you have 
contributed to your employees, whether it is the 401(k) or 
helped them with higher wages or bonuses--are you concerned 
that you have been doing that under the context of a sugar 
high, and that you may come down from that sugar high, 
realizing that things aren't as rosy as you anticipated?
    Mr. BERKEBILE. No. What I fear is that the--these 
incentives that we have been given by the Federal Government 
are going to end, that they are going to say that my--that the 
money that I earn at my company is better spent in Washington 
than--that they know how to spend it better than I know how to 
spend it on my own employees and how to grow my own company.
    Mr. ARRINGTON. How big of a burden is the cost of health 
care in your small business, just a scale of 1 to 10, 10 being 
the most costly?
    Mr. BERKEBILE. Ten.
    Mr. ARRINGTON. And burdensome.
    Mr. BERKEBILE. Ten.
    Mr. ARRINGTON. Ten?
    Mr. BERKEBILE. Yes.
    Mr. ARRINGTON. It is a 10.
    And Dr. Collins, you talked about the people--the number of 
uninsured folks. Do you realize that after the implementation 
of the--quote--Affordable Care Act that premiums doubled from 
28,000 [sic] to 6,000 across the board, across the nation? Are 
you aware that premiums and deductibles went up significantly 
after the--quote--Affordable Care Act?
    Ms. COLLINS. Well, actually, right after the Affordable 
Care Act there was a flattening in growth in premiums among--
across the board.
    Mr. ARRINGTON. It is indisputable, and most of my 
colleagues even on the other side of the aisle would say costs 
have gone up significantly since the advent of the--quote--
Affordable Care Act.
    And in fact, are you aware also that there were millions of 
people, 10-plus million people, who paid the fine, paid a fine 
because they didn't want, need, or could afford the Obamacare 
and the mandate from our government that you should--that you 
must buy from that exchange, that government-created health 
care program? Are you aware that millions paid a fine, rather 
than to purchase health care on the exchange?
    Ms. COLLINS. Actually, about 20 million people got health 
insurance.
    Mr. ARRINGTON. Are you aware that millions paid a fine? Are 
you aware of that? Is that----
    Ms. COLLINS. Some people did----
    Mr. ARRINGTON. Millions of people----
    Ms. COLLINS [continuing]. Pay the fine.
    Mr. ARRINGTON [continuing]. Paid a fine.
    Ms. COLLINS. Right, but----
    Mr. ARRINGTON. So we didn't solve health care with big-
government solutions. We are not going to solve our problems 
with green new deals, $50 trillion over 10--are you aware, Dr. 
Zandi, as you were concerned about the debt and deficit, are 
you aware that under Obama that the debt doubled from about 10 
trillion to 20 trillion? And is that something you were 
concerned about at that time?
    Mr. ZANDI. I was, yes.
    Mr. ARRINGTON. Are you as concerned about that as you are--

    Mr. ZANDI. I am more concerned about it now, though, 
because we are at a full employment economy that is growing 
strongly and we still have a budget deficit that is rising very 
rapidly. It is in this economy where the budget deficit should 
be falling, not rising.
    Mr. ARRINGTON. I----
    Mr. ZANDI. That is what really concerns me.
    Mr. ARRINGTON. I appreciate the input.
    Chairman THOMPSON. The gentleman's time has expired, thank 
you.
    Mr. Suozzi, you are recognized for five minutes.
    Mr. SUOZZI. Thank you, Mr. Chairman, and thank you for 
having this hearing and returning us to regular order. We 
appreciate it very much.
    If there was ever a time in American history when 
corporations, employers, successful individuals could be 
sharing their good fortune voluntarily with their employees, as 
Mr. Berkebile has suggested that he has, it would be now. This 
would be the time to do it. The stock market is going up 
dramatically. It is not just the past couple years. The stock 
market is 12 times higher today than it was in the 1880s. The 
GDP is six times higher in America than it was in the 1980s. So 
the stock market is going up, GDP is going up.
    But I think I have heard from the testimony--is it correct, 
Dr. Zandi, to say that the middle class is shrinking in 
America?
    Mr. ZANDI. Yes, by many measures, in terms of the share of 
the wealth they hold, in terms of the share of the income they 
hold, and, most telling, the share of the spending that 
actually occurs.
    Mr. SUOZZI. So, despite this enormous growth in our stock 
market, enormous growth in the GDP of America over the past 30 
years, 40 years, the middle class is shrinking. There is a 
serious problem that exists in our country. It is not a 
Democratic or Republican or Obama or Trump issue. The middle 
class is shrinking in America.
    I grew up in a family, my father was born in Italy. I am 
the first-generation American. The American Dream is a big 
thing in our family, the American Dream. The American Dream for 
us is if you are willing to work hard, you make enough money, 
and with that money you could have a place to live, you can 
educate your children, you can have health insurance, and you 
can retire one day without being scared.
    And as we heard from Ms. Tirado, she wants the American 
Dream. She is doing her part. She went to school, she was in 
the military, she works hard every day. There are so many hard-
working people in this country that are trying their very best 
and giving it their full effort that are not making it. It is 
just not happening in our country.
    The minimum wage in Pennsylvania is the federal minimum 
wage, it is $7.35 an hour, $.25 an hour. If you work 40 hours a 
week and you work 50 weeks a year you make $14,500 a year. You 
can't make it. There are so many people trying.
    So we saw shareholders are doing well. We saw a chart 
earlier. Consumers, arguably, are doing well. Now I want to 
come to the health insurance or housing costs. But when it 
comes to buying a car or maybe some clothing, the prices have 
been relatively modest.
    So shareholders, consumers, but what about workers? The 
workers are left out of the whole equation. They are not 
sharing in the good fortune of what is happening in the 
economy. They are not making it in America.
    So I am going to--I am just going to--you know, the 
measurement of how well you are doing in a country is not just 
how many people get off of food stamps. It is how many people 
are able to have a house, how many people are able to educate 
their children, how many people can retire without being 
scared. And that is not happening.
    So let me just ask this question. I want to focus 
specifically on the SALT deduction, because it is a very big 
issue in my district.
    The country is different from place to place. There is 105 
million full-time jobs in America. Of the 105 million full-time 
jobs, 59 million people make less than $50,000 a year; 86 
million make less than $75,000 a year. It is different in my 
friend Congressman Arrington's district than it is in my 
district. It is different from place to place in the country.
    Of the 50 highest SALT deduction districts in America, 49 
of them are in California, New York, and New Jersey. In fact, 
all of my colleagues on the Republican side of this 
subcommittee had SALT deductions less than $10,000, whereas 6 
out of--7 out of the 9 on this side of the aisle had SALT 
deductions well above $10,000. So it is different from place to 
place.
    Let me ask you, Mr. Brown. Is the capping of the SALT 
deduction encouraging home ownership in America?
    Mr. BROWN. No, it is not. If anything, it has taken some of 
the incentive away. And, you know, capping of the SALT 
deduction has really hurt California home buyers and people 
looking to get into the market.
    If you look at home prices in the area where I am, in the 
San Francisco Bay Area, and the other major employment centers, 
you see that the price of housing is extremely high. I think 
the median price of a house in California is about $588,000. 
The median price in the area or county where I am is about 
$950,000. The median price in San Francisco is around $1.6 
million, as of December 2018.
    People who are buying these houses are not rich. These 
people that are buying these houses are struggling, in a very 
hot economy. California has the fifth-largest economy in the 
world.
    Mr. SUOZZI. So it is just very different from place to 
place----
    Mr. BROWN. Very different.
    Mr. SUOZZI [continuing]. Throughout our country.
    Mr. BROWN. There is huge geographical differences.
    Mr. SUOZZI. We have to recognize the middle class is 
shrinking.
    Chairman THOMPSON. The gentleman's time has expired.
    Because Mr. Suozzi brought up the fact that--or made the 
statement that people buying cars are in good shape, I would 
like to ask unanimous consent to submit for the record this 
article that reads a record seven million Americans are three 
months behind on their car payment, and indicates that it is a 
red flag for our economy.
    [The information follows:]
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    Chairman THOMPSON. And I recognize Mr. Beyer.
    Mr. BEYER. Mr. Chairman, thank you very much, and thank all 
of you for being with us.
    Mr. Chairman, I represent the seventh wealthiest district 
in the country. When I was visiting my bank two weeks ago I 
talked to the--the bank manager brought me into his office, and 
I said, ``How are you doing?''
    And he said, ``I am exhausted.''
    I said, ``Why?''
    He said, ``Because I have two children at home and a wife. 
And to support them I am the bank manager 40 hours a week and 
then I drive Uber at night and on the weekends, and I am 
working at 7-11 about 16 hours a week.'' So he was doing three 
jobs just to get by in Northern Virginia.
    So Dr. Boushey, I was thrilled, with many Americans, to see 
the 304,000 jobs last month, the 4 percent. But I also read 
that the Bureau of Labor Statistics said that of the 10 jobs 
with the greatest job growth, 5 of them have a net income less 
than $30,000. And underneath the job growth is this hollowing 
out of the middle class, with people doing really well at the 
top, and an awful lot of people at the bottom just not doing 
well at all.
    Is this your understanding of how this job market is 
working, also?
    Ms. BOUSHEY. Certainly. And it is my understanding of how 
the economy has been going, unfortunately, for quite some time. 
But that--the--while the Tax Cuts and Jobs Act has created this 
stimulus in the short term, it has not led to the broad-based 
gains that we would like to see up and down the wage 
distribution.
    And in fact, some of the evidence shows that some of the 
gains that we have seen at the bottom are actually, in fact, 
due to new policies at state and local levels to raise the 
minimum wage that went into effect earlier this year and last 
year that have increased wages at the bottom. But we haven't 
seen the kind of bump-up in wage gains that we should have, 
given the level of stimulus that went out into the economy.
    Mr. BEYER. Thank you very much.
    Mr. Berkebile, I was very pleased to see what you had done, 
you know, raised wages, expand bonuses, start a 401(k), create 
29 new jobs. I have been part of a family business for 45 
years, too. But you are not seeing that in the economy. There 
have been very, very few businesses like Guy Petroleum, or--
that have done that. And you see this in the statistics. People 
are getting raises of 1.5 percent, 0 percent, 2 percent.
    Where did you get this incredibly generous work ethic, 
culture ethic, that you bring your employees down to do this? 
And how come other businesses aren't doing it?
    Mr. BERKEBILE. You know, I think it is more of a country 
ethic that we have. You know, a small-town ethic. But being a 
manufacturer, I see what is happening in the economy. And then 
these people over here try to measure what I did after I have 
done it.
    So whenever I buy paper, I can tell when I am buying paper 
from international paper and it is going up in price and our 
lead times get longer, I can tell if the economy is expanding 
or whether it is contracting. When I buy commodity chemicals 
from Dow Chemical----
    Mr. BEYER. But do you recognize there is a difference 
between the GDP and how it affects individual families?
    Mr. BERKEBILE. But----
    Mr. BEYER. Individual workers.
    Mr. BERKEBILE. Well, but I can tell what is happening 
across the country, because I do business across the country 
and the entire world.
    Mr. BEYER. Yes, that still doesn't take away that 
connection, but let's move on. I am--I was hoping to understand 
where your values came from, because I admire them. I just wish 
there were more of them.
    Mr. BERKEBILE. Well, my grandparents were Mennonite, so 
maybe that is where they came from.
    Mr. BEYER. Okay, that is great.
    Director Boushey, Rosa DeLauro has this amazing bill called 
the Schedules That Work Act, which talks about trying to direct 
predictable work schedules, because there are so many people, 
especially the people that Ms. Tirado is teaching right now, 
that are going to be limited to 20 hours here or 10 hours 
there, they don't find out until the night before what time 
they are working. How do you see this affecting overall health 
of the middle class and the lower middle class?
    Ms. BOUSHEY. I think that the Schedules That Work Act is 
one really very important pillar of what we need to do to 
improve employment for people in middle-class jobs. So we have 
a Fair Labor Standards Act that doesn't ensure that people have 
schedules that are posted well enough in advance so that they 
can both get to school and deal with their child care, or deal 
with their other care needs. And this bill would allow 
employees to have the right to know what their schedule is, so 
they can have a predictable schedule, which is really 
important.
    So many workers, especially retail workers, low-wage 
workers, don't know their schedule more than a couple days in 
advance. And when you think about the broader economic 
implications of that, you can think about how that might affect 
an individual, but then how that might affect the child care 
facility that is trying to make sure that they have enough kids 
each week so that they can balance their books, but if the 
people that are bringing their children there don't know their 
schedules, it makes it all very difficult for everyone to have 
sort of a sound economics, both for the child care facility, as 
well as for that family.
    So this kind of scheduling issue is something that is not 
currently in the Fair Labor Standards Act and that is part of 
what we need to think about for a 21st century economy.
    Chairman THOMPSON. Thank you very much.
    Mr. BEYER. Mr. Chair, I yield----
    Chairman THOMPSON. Are there other Members of the Committee 
that wish to inquire?
    Mr. Pascrell, do you wish to inquire?
    Mr. PASCRELL. Thank you, Mr. Chairman.
    Chairman THOMPSON. Hold on one second.
    [Pause.]
    Chairman THOMPSON. Go ahead, you may proceed.
    Mr. PASCRELL. As so many of our great witnesses pointed out 
in the narratives which they have presented to us, which I have 
read, the American Dream is slipping away. Today it is less 
likely than at any point in the last 70 years that a child will 
be better off than their parents were. That is startling to me, 
anyway.
    Tax policy has a lot to do with it. The Trump tax cuts were 
a missed opportunity to reform our tax policy. We did not have 
tax reform. Senator Bradley and Congressman Kemp, Democrat and 
Republican, knew what they were doing in 1983, 1984, and 1985. 
That was real reform. We have a more simple way of doing the 
taxes now? You got to be kidding me. That is not the calls that 
I am getting.
    So I think it is a missed opportunity, plus the fact--and I 
think we cannot forget this--the new tax law spent $2.3 
trillion. The new law did nothing to provide opportunities for 
middle-class families and those who aspire to it.
    It was two Democrats eight years ago that projected and 
offered the legislation to cut the corporate tax from--down to 
25 percent: Charlie Rangel and myself. We knew it had to 
happen, also. But instead, the tax law of December of 2017 
entrenched wealth for the already wealthy. It cuts taxes 
further on stock holders and business owners, and concentrated 
wealth further in the hands--all data show that--all by robbing 
the U.S. Treasury of needed resources to invest in tools for 
working families to keep a roof over their heads, to put food 
on the table, and get an education for the children.
    I agree, too many colleges and vocational and technical 
schools are two new engines for the 21st century. I think those 
engines are critical. What are we doing about it, besides the 
STEM programs, which are excellent?
    Yet we had a choice back in December of 2017. We could have 
taken this opportunity to create a fair system for everyone to 
rise and fall by their own merits. Instead they chose to stack 
the deck.
    And let me--you know, Dr. Zandi, I have been wanting to ask 
a question of you for a few years. We wrote some papers and 
talked about what is the difference between taxing assets and 
taxing income. Because, as you know, that has been turned 
upside down in the past 35, 40 years. We used to tax assets 
that people had at a much higher level, and we taxed income 
lower. Now it is reversed. You know what I am talking about?
    Mr. ZANDI. Sure.
    Mr. PASCRELL. And would you respond to that issue?
    Mr. ZANDI. I think that is the case. The changes in the Tax 
Code, particularly the--one year ago, a year ago, significantly 
reduced taxation of individuals' assets, you know, the capital 
gains, state tax. And that has been a trend that has been 
ongoing.
    Mr. PASCRELL. So it makes it easier to protect your assets 
than you do to your income. And who does that hurt most of all? 
The middle class. That is what we are here to talk about today. 
Is that an overreach on my part?
    Mr. ZANDI. No, I don't--that is just patently true. I mean 
who has the assets, right? It is not the middle class. I mean 
the average--the median net worth of someone in the middle of 
the distribution is 100K. The median net worth of somebody in 
the top 20 percent is 500K. So it is very clear that is the 
case.
    Mr. PASCRELL. So we have, I think, entrenched wealth. Here 
is a question that I have, Mr. Brown, as the--from the National 
Association of Realtors.
    We talked about the state and local tax deduction. The 
oldest deduction on the books, Mr. Brown, goes back to the 
Civil War, before we had the code. And there was a very 
specific reason why that was a very big issue during the Civil 
War, to help the states pay their bills so that the Federal 
Government couldn't take anything for whoever they were 
protecting at that particular time, and whatever side you were 
on.
    I introduced a bill this week to restore the state and 
local tax deduction, while restoring the top individual income 
tax rate that was cut from 39 percent to 37.5 percent. Let's 
face it, the Republican Party--and I have many friends on the 
other side, most of my bills are bipartisan--but what they 
finally decided on was the tax cuts on the top by robbing 
states, middle class of their SALT deduction.
    Chairman THOMPSON. The gentleman's time has expired.
    Mr. PASCRELL. Can I just finish my question?
    Chairman THOMPSON. Go ahead.
    Mr. PASCRELL. Thank you.
    Chairman THOMPSON. Make it quick, please.
    Mr. PASCRELL. Mr. Brown, how do the SALT cap and tax law 
impact the housing market in California and elsewhere?
    Chairman THOMPSON. Mr. Brown, we will take that, your 
answer, in writing and I will share it with the rest of the 
committee members.
    Mr. PASCRELL. Thank you, Mr. Chairman.
    Chairman THOMPSON. I recognize the distinguished ranking 
member for his close.
    Mr. SMITH. Thank you. Thank you, Mr. Chairman. And again, 
thank you to our witnesses. I think much of this discussion is 
valuable.
    I think it is very interesting to note--and if we could 
have the Schweikert chart back up on the screen here, and I 
will get to that in a moment.
    [Chart.]
    Mr. SMITH. But we have heard from Mr.--Dr. Zandi that our 
country needed a corporate tax cut, and that we had numbers 
prior to the current administration that I hear Dr. Zandi say 
positive things about. And we have seen the numbers further 
improve over the last two years. And we can argue about who 
gets the credit or who gets the blame, whatever. We can save 
that for another time.
    But here we are in a situation where we have a very capable 
witness here, telling us that she is not experiencing some of 
the middle class benefits, perhaps. But when you look at this 
chart, I think we need to ask ourselves the question which part 
of the chart do we feel is driving our daily lives more, and 
our financial situations?
    I mean we have Ms. Tirado, who cannot deduct her rent 
directly. We have Mr. Brown, who was saying that folks 
purchasing an almost $600,000 house feel left out. And so when 
we went through tax reform, in formulating tax reform, I 
think--especially when you look at the results being so 
positive--that we weren't going to just--even though there was 
agreement that we needed to be more non-partisan--or, I should 
say, bipartisan agreement, that we needed to be more 
competitive in the world economy by reducing the corporate tax 
rate, not for a moment did you think we--I didn't think we 
would do that and just leave individuals behind. So that is why 
we doubled the child tax credit, that is why we doubled the 
standard deduction and have spread the benefits out across the 
spectrum. So that is why I think it is so important.
    And I think that, over time, you will see more folks really 
celebrate what the doubling of the child tax credit had done, 
for example, what the various other benefits through tax 
reform, whether it is Mr. Berkebile bringing his employees here 
today who have benefitted directly, that is incredible. And I 
hope that we can get to the point where Ms. Tirado can feel 
more benefits through a growing economy. And I think she is 
sacrificing a great deal with her current situation, and I hope 
that we can pursue policies that can bring her to a better 
situation.
    So Mr. Berkebile, can you elaborate further on--obviously, 
you need employees. I mean the most common concern across my 
district--and I think other districts, as well--is the need for 
more employees. I stated that in my opening comments. Can you 
elaborate more on the competitive position that you need to 
find yourself in to keep and attract employees?
    Mr. BERKEBILE. Yes, we are seeing--my professional staff 
that I have is pretty much consistent. What we are seeing in 
our--with our factory workers, you know, some of our skilled 
staff, is wages are being driven up across the board. So now 
they are looking at, you know, ``I have opportunities outside 
of Guy Chemical, you know, where can I go?''
    So this is what is driving up the wages, you know, that I 
was talking about at Guy Chemical, that we need to drive up--we 
need to pay our production workers more money in order to 
retain them. And we are also looking now at work environment. 
What else can we do, you know, with our work environment to 
retain these workers?
    Mr. SMITH. So as you look at resources available and you 
try to strike that balance of keeping a vibrant business, you 
know, obviously, your personnel situation is vital. That is 
what I hear from employers, like I said, all across my 
district. Do you feel that, you know, moving forward--if these 
benefits don't continue, what might happen?
    Mr. BERKEBILE. We are going to downsize. And the expansion 
that we have experienced will slow down or reverse.
    The--one of the biggest boons to my company that came out 
of the tax cuts is the depreciation of assets. This has made it 
so much more affordable for me to go out and buy a piece of 
equipment when I can expense it in the same year that I 
purchased it.
    Mr. SMITH. Okay, thank you.
    Thank you, Mr. Chairman.
    Chairman THOMPSON. Thank you, Mr. Smith. And thank you to 
all the witnesses for your testimony today. And I want everyone 
to be advised that members will have two weeks to submit 
written questions to be answered later in writing. Those 
questions and your answers will be made part of the formal 
hearing.
    I want to thank all the members for being here.
    And along the lines of what Mr. Smith was talking about in 
regard to what we are seeing as a result of passing the last 
tax bill, I think it is important that, as we are today, we are 
getting back to regular order. A lot of the problems that we 
talked about today were unforeseen consequences based on 
passing policy without the benefit of regular order, without 
the benefit of hearings, without the benefit of hearing from 
the experts in the field. And it is my intention to continue on 
with the regular order, having hearings, hearing from experts, 
and you are a very important part of that, and I thank you 
again for being here.
    And with that, the hearing is adjourned.
    [Whereupon, at 12:22 p.m., the hearing was adjourned.]
    [Questions for the Record follow:]
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