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


                SOLUTIONS TO RISING ECONOMIC INEQUALITY

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

                                HEARING

                               BEFORE THE

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION
                               __________

          HEARING HELD IN WASHINGTON, D.C., SEPTEMBER 19, 2019
                               __________

                           Serial No. 116-14
                               __________

           Printed for the use of the Committee on the Budget
           

                  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]


                       Available on the Internet:
                            www.govinfo.gov

                              ___________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
38-006                     WASHINGTON : 2020   






                        COMMITTEE ON THE BUDGET

                  JOHN A. YARMUTH, Kentucky, Chairman
SETH MOULTON, Massachusetts,         STEVE WOMACK, Arkansas,
  Vice Chairman                        Ranking Member
HAKEEM S. JEFFRIES, New York         ROB WOODALL, Georgia
BRIAN HIGGINS, New York              BILL JOHNSON, Ohio,
BRENDAN F. BOYLE, Pennsylvania         Vice Ranking Member
RO KHANNA, California                JASON SMITH, Missouri
ROSA L. DELAURO, Connecticut         BILL FLORES, Texas
LLOYD DOGGETT, Texas                 GEORGE HOLDING, North Carolina
DAVID E. PRICE, North Carolina       CHRIS STEWART, Utah
JANICE D. SCHAKOWSKY, Illinois       RALPH NORMAN, South Carolina
DANIEL T. KILDEE, Michigan           KEVIN HERN, Oklahoma
JIMMY PANETTA, California            CHIP ROY, Texas
JOSEPH D. MORELLE, New York          DANIEL MEUSER, Pennsylvania
STEVEN HORSFORD, Nevada              WILLIAM R. TIMMONS IV, South 
ROBERT C. ``BOBBY'' SCOTT, Virginia      Carolina
SHEILA JACKSON LEE, Texas            DAN CRENSHAW, Texas
BARBARA LEE, California              TIM BURCHETT, Tennessee
PRAMILA JAYAPAL, Washington
ILHAN OMAR, Minnesota
ALBIO SIRES, New Jersey
SCOTT H. PETERS, California
JIM COOPER, Tennessee

                           Professional Staff

                      Ellen Balis, Staff Director
                  Dan Keniry, Minority Staff Director
                                CONTENTS

                                                                   Page
Hearing held in Washington D.C., September 19, 2019..............     1

    Hon. John A. Yarmuth, Chairman, Committee on the Budget......     1
        Letter and reports submitted for the record..............     4
        Prepared statement of....................................    36
    Hon. Bill Johnson, Vice Ranking Member, Committee on the 
      Budget.....................................................    39
        Prepared statement of....................................    41
    Heather Boushey, Ph.D., President and CEO, Washington Center 
      for Equitable Growth.......................................    43
        Prepared statement of....................................    46
    Hon. William E. Spriggs, Ph.D., Chief Economist, AFL-CIO, and 
      Professor, Department of Economics, Howard University......    64
        Prepared statement of....................................    66
    Kismet Evans, Home Healthcare Worker, Las Vegas, Nevada......    80
        Prepared statement of....................................    82
    Ramesh Ponnuru, Visiting Fellow, American Enterprise 
      Institute..................................................    83
        Prepared statement of....................................    85
    Hon. Sheila Jackson Lee, Member, Committee on the Budget, 
      statement submitted for the record.........................   123

 
                SOLUTIONS TO RISING ECONOMIC INEQUALITY

                              ----------                              


                      THURSDAY, SEPTEMBER 19, 2019

                          House of Representatives,
                                   Committee on the Budget,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 10:01 a.m., in 
Room 210, Cannon House Office Building, Hon. John A. Yarmuth, 
[Chairman of the Committee] presiding.
    Present: Representatives Yarmuth, Horsford, Moulton, 
Higgins, Morelle, Scott, Kildee, Lee of California, DeLauro, 
Cooper, Khanna, Sires; Womack, Johnson, Smith, Holding, Meuser, 
Timmons, Flores, Hern, Roy, Crenshaw, and Woodall.
    Chairman Yarmuth. Good morning and welcome to the Budget 
Committee's hearing on Solutions to Rising Economic Inequality.
    It is possible that we will have votes during this hearing. 
So I ask unanimous consent that the Chair be authorized to 
declare a recess at any time.
    Without objection, so ordered.
    I want to welcome our witnesses here with us today. This 
morning we will be hearing from Dr. Heather Boushey, President 
and CEO of the Washington Center for Equitable Growth; the 
Honorable William E. Spriggs, Chief Economist at the AFL-CIO 
and Professor of Economics at Howard University; Ms. Kismet 
Evans, one of Mr. Horsford's constituents and a home healthcare 
worker from Las Vegas, Nevada; and Mr. Ramesh Ponnuru, Visiting 
Fellow at the American Enterprise Institute and a frequent 
television commentator.
    Nice to have you all with us today.
    I will now yield myself five minutes for my opening 
statement.
    As a Congress, we have a responsibility to support policies 
that give all hardworking Americans the opportunity to succeed 
no matter where they started out. Unfortunately, policies 
implemented over the past few decades have helped usher in an 
era of economic inequality that remains one of our most 
pressing economic and fiscal challenges.
    During today's hearing, we will examine the causes and 
consequences of inequality and discuss possible solutions to 
strengthen our families and our federal budget.
    Over the past 30 years, the richest 1 percent of Americans 
have seen their wealth grow by nearly 300 percent. At the same 
time, the poorest 50 percent saw no growth, even as the cost of 
housing, healthcare, food, childcare and other basic 
necessities have gone up and up and up, making it nearly 
impossible for millions of American families to make ends meet.
    The share of national income held by the wealthiest 
Americans has also increased to levels not seen since the 
1920s, right before the Great Depression.
    In short, our economy has left working families behind. The 
inequality it has created has impacted every generation. Our 
nation's seniors are struggling to retire. Recent college 
graduates and young people are putting off buying their first 
homes or investing in assets that could increase their wealth.
    Parents are finding it harder and harder to afford college, 
job training and childcare, all of which are key to finding 
success in a changing world.
    Our nation's economic future depends on the success of 
working Americans. Plain and simple, if they do not succeed, 
our country does not succeed.
    Economic inequality is suppressing economic growth and 
eroding our tax base. It is putting pressure on federal, state, 
and local budgets, and it is increasing the likelihood of a 
financial downturn. In fact, income inequality has cost the 
United States up to 9 percentage points in cumulative economic 
growth over the past two decades.
    But it is important to understand that the rise in 
inequality is not just rooted in structural changes, 
globalization, or other forces beyond our control. It is also a 
result of decades of policy geared to help the very rich at the 
expense of everyone else.
    Beginning in the 1970s, as the United States experienced 
major technological advancements, our country failed to take 
the steps needed to ensure shared prosperity. Instead, workers 
suffered from trickle-down economic policies, financial 
industry deregulation, and attacks on organized labor.
    As a result, wage growth slowed, and income and wealth 
consolidated with the top 1 percent.
    Unfortunately, here we are again. Rapid advancements in 
automation and artificial intelligence are set to reshape a 
broad swath of industries. In fact, a top official at IBM told 
me earlier this year that in the next three years alone, 
artificial intelligence will eliminate or significantly change 
120 million jobs around the world, 120 million jobs in just 
three years.
    We need to make sure that the new industries of the future 
and the skilled workers they demand will call the United States 
home, not China or any other country. Instead, we just blew 
$1.9 trillion on the Republican tax law that overwhelmingly 
benefitted the wealthy and did little to improve our nation's 
economy or prepare us for the future.
    Continued efforts to deregulate the financial industry and 
roll back consumer protections are endangering working 
Americans. Legislation aimed at weakening unions is spreading 
in state houses across the country, and we are setting a record 
for the longest period in U.S. history without an increase in 
the federal minimum wage.
    What is worse, the current Administration is advancing 
policies that would expand work requirements and redefine 
poverty to make fewer people eligible for assistance, which in 
turn makes it even harder for them to succeed.
    America's greatest asset has always been our people, more 
specifically, our workforce. And in this rapidly changing 
world, it is also our greatest opportunity, but the federal 
government must step up.
    We must make a national commitment to early childhood 
education and work to make college more affordable, raise the 
minimum wage, expand job training opportunities, and invest in 
the programs that help struggling families get ahead.
    We need to address our aging infrastructure by overhauling 
our crumbling roads and bridges, updating communications 
systems, expanding broadband services to rural areas, all while 
creating the new jobs of the future.
    And we need responsible tax policies that will ensure 
companies invest here, in U.S. workers and in the new 
industries that will drive innovation for generations.
    We must do all of this and more, not only because economic 
inequality hurts American families and hinders their success, 
which should be enough, but because it also threatens our 
ability to compete in a rapidly changing global economy.
    I look forward to hearing from our witnesses on the 
importance of creating an economy that works for all Americans 
and strengthens our fiscal future.
    And now just one unanimous consent request, I ask unanimous 
consent to submit a letter from First Focus on Children, along 
with three of their reports entitled ``Children's Budget 
2019,'' ``Shortchanging our Children Harms the Nation,'' and 
``Implementing a Roadmap to Reducing Child Poverty.''
    I ask unanimous consent to insert those all in the record.
    Without objection, so ordered.
    [The letter and reports submitted by Chairman Yarmuth 
follow:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman Yarmuth. I now yield to the Ranking Vice Chair, 
Mr. Johnson, for his opening statement.
    [The prepared statement of Chairman Yarmuth follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Johnson. Thank you, Mr. Chairman, and thank you for 
your leadership here on the Budget Committee.
    You know, there are many things in your opening statement 
that you and I actually agree on. I wish we could find on this 
Committee more common ground as it relates to our core task 
because it seems to me, Mr. Chairman, once again, our Committee 
has convened a hearing that does not focus on what we are here 
to do, and that is to advance a budget and manage our 
ballooning national debt.
    The title of today's hearing is ``Solutions to Rising 
Economic Inequality,'' but I am concerned this hearing is 
focused on the wrong premise, that income inequality can only 
be solved by redistributing wealth, increasing the minimum 
wage, and eliminating pro-growth/pro-family policies like the 
Tax Cuts and Jobs Act of 2017.
    Instead, we should be focusing this Committee's time on 
policies that create jobs, increase wages, and expand 
opportunities for all Americans. Having lived in extreme 
poverty as a child myself, I am so grateful that we live in a 
country where Americans from all walks of life have the 
opportunity to improve their economic situation.
    And we must continue to build upon pro-growth successes, 
such as the Tax Cuts and Jobs Act, to ensure upward economic 
mobility is within reach for all hardworking American families.
    Today I look forward to hearing more about the leading 
proposal for wealth redistribution, the universal basic income. 
We have heard a lot about universal basic income over the last 
few months as presidential hopefuls discuss ways to address 
what they call the income inequality crisis in our country.
    Just last week we heard one presidential candidate 
reiterate his support for a program that would give, give 
$12,000 a year to each and every American adult. With a $28 
trillion price tag, this type of proposal would not just bust 
the budget and compound our existing mandatory spending crisis, 
but it would also diminish the dignity of work.
    The Budget Committee is supposed to be the Committee of 
fiscal discipline, and we have a responsibility to ensure that 
our government's finite resources are helping to grow the 
economy, create jobs, and raise wages for all. That is why my 
Republican colleagues and I will continue to support pro-growth 
policies that expand opportunities, create jobs, and ensure 
that wages continue to rise.
    This past year was the first tax year under the new Tax 
Cuts and Jobs Act, and American families kept more of their 
hard earned money. As a result of the law, a family of four 
with $73,000 of income received a $2,000 tax cut, a 58 percent 
reduction in federal taxes. And by nearly doubling the standard 
deduction and preserving and strengthening provisions that 
support families, such as doubling the child tax credit, the 
Tax Cuts and Jobs Act ensures that Americans can keep more of 
their hard earned money to spend, save, and invest as they see 
fit.
    Families are seeing bigger paychecks with the median income 
rising by 3.4 percent in 2018, and fewer Americans are living 
in poverty, with the poverty rate dropping from 12.3 percent to 
11.8 percent, according to the latest Census Bureau data.
    Mainstream economists agree that strong economic growth is 
the key to increasing wages and living standards so we should 
be doing all we can to ensure our current economic growth 
continues and expands.
    Once again, I return to this idea that we are here asking 
the wrong question. This hearing should not be about income 
inequality. Instead it should be about policies that encourage 
economic growth to provide all Americans with more 
opportunities for upward mobility.
    And while we have made important strides over the past few 
years, the cost of living for middle class families continues 
to rise, predominantly in heavily regulated and subsidized 
sectors of the economy, including healthcare, higher education, 
and housing.
    Republicans stand ready to tackle the root causes of these 
cost increases so we can put the American dream within reach 
for more families across our great nation. Implementing free 
market policies to increase competition and drive down prices 
in these important sectors can build upon our current progress 
rather than exacerbating our problems by raising taxes and 
slowing economic growth.
    It is my hope that in today's hearing we will discuss how 
we can help people succeed in our economy by enacting policies 
that grow the economy, create jobs, and boost paychecks for 
Americans from all walks of life.
    With that, Mr. Chairman, I yield back.
    [The prepared statement of Bill Johnson follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Yarmuth. I thank the gentleman from Ohio for his 
opening statement.
    And in the interest of time, if any other Members have 
opening statements, you may submit those statements in writing 
for the record.
    Once again, I would like to thank all of our witnesses for 
being here this morning. The Committee has received your 
written statements, and they will be made part of the formal 
hearing record. Each of you will have five minutes to give your 
oral remarks.
    Dr. Boushey, you may start when you are ready.

    STATEMENT OF HEATHER BOUSHEY, PH.D., PRESIDENT AND CEO, 
  WASHINGTON CENTER FOR EQUITABLE GROWTH; THE HON. WILLIAM E. 
   SPRIGGS, PH.D., CHIEF ECONOMIST, AFL-CIO, AND PROFESSOR, 
DEPARTMENT OF ECONOMICS, HOWARD UNIVERSITY; KISMET EVANS, HOME 
   HEALTHCARE WORKER, LAS VEGAS, NEVADA; AND RAMESH PONNURU, 
         VISITING FELLOW, AMERICAN ENTERPRISE INSTITUTE

              STATEMENT OF HEATHER BOUSHEY, PH.D.

    Dr. Boushey. Thank you. Thank you, Chairman Yarmuth and 
Ranking Member Womack, for inviting me to speak today. It is an 
honor to be here.
    My name is Heather Boushey, and I am President and CEO of 
the Washington Center for Equitable Growth. We seek to advance 
evidence-backed ideas and policies that promote strong, stable, 
and broadly shared economic growth.
    I am an economist by training, and I would like to 
summarize for you what the economics field has discovered about 
economic inequality in all its forms, income, wealth, and 
across firms, to name a few, and their effects on productivity 
and growth.
    To get to the punchline, what we found is that inequality 
constricts growth by obstructing, subverting, and distorting 
the processes that lead to higher productivity, greater output, 
and overall wellbeing.
    Let me start with the current economic situation. We are in 
the longest expansion in recorded U.S. history. The economy 
continues to add jobs month after month, and the unemployment 
rate remains historically low, but the strong headline numbers 
have not translated into the kinds of wage gains we would 
expect to see for workers up and down the income ladder.
    As has been increasingly become the case over the past four 
decades, earnings for low and middle income Americans have 
grown slowly or not at all, while incomes for those at the top, 
both in terms of income and wealth, have surged. From 1980 to 
2016, those in the top 1 percent saw their incomes after taxes 
and transfers rise by more than 180 percent, and those in the 
top .001 percent saw their incomes grow by more than 600 
percent.
    At the same time, those in the bottom half of the income 
spectrum saw only a 25 percent increase, according to research 
by economist Thomas Piketty, Emmanuel Saez, and Gabriel Zucman.
    They further find that that the richest 160,000 American 
families own a collective $11 trillion dollars in wealth, or as 
much as the entire bottom 90 percent of the U.S. population.
    The Census Bureau and Federal Reserve likewise confirm that 
inequality by wealth and income are reaching record levels and 
continue to grow.
    Now, some argue that focusing on inequality is misplaced, 
and that the most important goal is to grow the pie and just to 
focus on growth. To be very clear, the empirical evidence from 
the economics profession shows that this is wrong. There is a 
large and growing body of research that shows that we cannot 
create strong or broadly shared economic gains through a policy 
agenda that presumes that growth follows from allowing those at 
the top to reap the bulk of the gains.
    Our inequality-filled economy now grows slower than it did 
when we were less unequal. Over the past few decades we have 
grown at an annual pace of about 1.3 percent, compared to a 
larger 1.7 percent in the 1960s and 1970s.
    So how do we get back to growth that is strong, stable, and 
broadly shared? Well, we need to confront the fact that we have 
spent decades systemically undermining the capacity of 
institutions that were set up to constrain and constrict 
inequality. We must reverse this.
    I encourage you to think about the structural effects of 
concentrated economic wealth and power by focusing on the 
following solutions.
    First, I encourage you to measure what matters, to focus 
not just on that aggregate growth number, but to look at what 
that means in terms of income gains across the income spectrum.
    The Measuring Real Income Growth Act introduced by 
Representative Carolyn Maloney would tell us what growth looks 
like for low, middle and high income Americans and allow us to 
design policies accordingly.
    Second, we need to rebuild institutions, such as unions, 
that are inclusive, broad based, and diverse and represent the 
voices of working and middle class families. I am sure Dr. 
Spriggs will discuss this in more detail.
    Third, we must address concentrations of wealth and power 
and the inherently subversive effects they have on our markets 
and economy through stronger antitrust enforcement and funding.
    Industries from healthcare to telecommunications to airline 
transportation are far more concentrated than ever, leading to 
growing monopoly power for the few firms left standing. This 
leads to lower wages for workers, higher prices for consumers, 
and less innovation. All of that is underscored by recent 
empirical evidence.
    Fourth, as my other fellow witness will undoubtedly 
testify, working people need support and laws that protect 
their opportunity to move ahead in life and to care for their 
families and their personal needs. They need a higher minimum 
wage.
    We also need to protect a worker's right to know their work 
schedule and other policies that allow them to address 
conflicts between work and family.
    Finally, the United States should join its international 
peers in offering a national paid family medical leave program. 
Core to this agenda is the need to rebalance the power between 
those that have access to resources and those who do not. The 
current situation cannot and has not provided a path forward 
for strong, stable, and broadly shared income gains across the 
income distribution.
    Thank you very much for your attention.
    [The prepared statement of Heather Boushey follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Yarmuth. Thank you for your testimony.
    I now recognize Dr. William Spriggs for five minutes.

        STATEMENT OF THE HON. WILLIAM E. SPRIGGS, PH.D.

    Dr. Spriggs. Thank you, Chair Yarmuth, for this invitation 
to speak, and to Vice Ranking Chair Johnson and Members of the 
Committee, good morning.
    I am happy to offer this testimony on behalf of the AFL-
CIO, America's house of labor, representing the working people 
of the United States, and based on my expertise as a professor 
at Howard University in the Department of Economics.
    Income inequality is a challenge for the Committee on the 
Budget. It is already well established that the biggest 
challenge to Social Security's funding is the unprecedented 
rise in income inequality that started in the 1980s. Addressing 
the cap on Social Security taxes to correct for that is well 
known and a simple fix to address that problem.
    But inequality also is a challenge because of the revenue 
stream. We have the lowest taxes on the portions of national 
income that are rising the most. So we have lower capital gains 
tax; we have lower corporate taxes; and those are the things 
that are growing.
    We are raising taxes on working people because that is the 
part that is diminishing, but that is where the tax base is in 
the way we have written the budget. That is a challenge going 
forward.
    If you are going to get lower taxes for the rising part, 
that is a problem, but there is another problem, and that is 
inequality hurts growth. It slows the growth of the United 
States.
    There is a global consensus now. The International Monetary 
Fund, the Organization for Economic Cooperation and 
Development, and the World Bank have all deeply studied the 
issue of inequality and growth and have concluded that rising 
inequality hurts growth, and in the specific case of the United 
States, our rise in inequality between 1985 and 2005 slowed our 
growth during the expansion we had at the beginning of this 
century, a fifth lower. Our growth rate was one-fifth lower.
    That translates to around $12 billion a quarter lower than 
it would have been had we maintained a higher level of 
equality. For this Committee, that means about $2 billion less 
in tax revenue.
    So inequality hurts growth. This is not a tradeoff. This is 
how you get growth, and the challenge is how do we address 
that.
    This income inequality comes from an inordinate growth of 
income at the top. In 1968, the middle three quintiles of the 
United States controlled 53 percent of the household income. 
That made this a middle-income nation. The market responded to 
where the money was, which was the middle.
    But in 1988, the share of income for the middle dipped to 
50 percent. By 2004, half the income was with the top 20 
percent.
    The problem with that is that is where the market is. That 
dictates the market, and specifically it dictates the market 
for housing and for college because that is where the market 
is. Over 45 percent of the market in housing is in just those 
one in five American families, not the rest of us. That is 
where the dollars are. That is why the price of housing is 
responding to their rise in income and not to median 
households.
    How do we fix that? Studies have become clear. Union 
density matters. Both the IMF and independent academic 
researchers here in the U.S. have found, looking at the problem 
from a different set of perspectives, about 40 percent of the 
rise in this inequality, the money going to the top 10 percent 
rather than to the middle, comes from the decline in union 
density.
    Removing from American workers the ability to collectively 
bargain over the productivity gains that American workers have 
been producing means whoever is at the table first gets the 
money, not American workers.
    We can also address this by raising the income from the 
bottom. We have to protect the bottom, and raising the minimum 
wage is crucial to that effort.
    When America had those policies of stronger collective 
bargaining and protecting the minimum wage, wages and 
productivity grew together. Labor share, therefore, stayed 
stable, and that meant we had a middle income country.
    The problem for the Budget Committee is imagining what will 
the budget need to be in order for America to have private 
residential investment and higher education investment to be 
competitive in the 21st century. At this level of inequality, 
it is not affordable. The market cannot solve it because the 
bulk of Americans cannot afford those essential investments for 
our growth.
    We have gone from first in college educated workforces in 
the 1990s to 19th among the advanced economies. That is not a 
formula for sustainable economic growth in the 21st century.
    Thank you.
    [The prepared statement of William E. Spriggs follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Yarmuth. Thank you for your testimony.
    I now recognize Ms. Evans for five minutes.
    Welcome, Ms. Evans.

                   STATEMENT OF KISMET EVANS

    Ms. Evans. Thank you.
    My name is Kismet Evans, and thank you for having me here 
today to talk about the budget and inequality that is going on, 
and a special thank you to Congressman Horsford, who represents 
my district in Nevada.
    As I said, my name is Kismet Evans, and I am currently a 
home health provider in Las Vegas, Nevada, who serves the 
community.
    With that, hearing the previous testimony and to make it 
real clear because there is a lot of statistics and 
information, but let me just be clear and get to the real part 
of what inequality does.
    I am a product of inequality. Twenty-four years ago I was 
on drugs and alcohol and homeless, and through a program that 
gave me the resources, the information, the education, and the 
training necessary, I moved from that to become a business 
owner, receiving the California Peace Prize award as a result 
of my work in the community with homeless people, with the 
underserved, and with the disenfranchised individuals who do 
not get the opportunity to become positive wage earners or 
receive a wage that allows them to care for their families 
properly, which results in them having to put themselves in 
compromising positions, to do things that no one wants to do, 
but to make ends meet, these are some of the things that they 
end up putting themselves in.
    Without raising the minimum wage for individuals who work 
in the home health means we are taking food out of their 
pockets because in the home healthcare industry, every one of 
our compliances we pay for, DOJ, CPR, first aid, our in-service 
training, and that is taking from our minimum wage income to 
pay out to this company who is making billions of dollars, 
millions of dollars a year.
    How is that not inequality to the family that is trying to 
provide a nutritional meal to their child or who wants to be 
able to send their kid down the street to the camp so that they 
are not sitting home going stir crazy or having to be in a 
community which is unsafe for them when they can be doing 
something that they enjoy doing, building them up, you know, 
allowing them to live and become what they desire to be?
    We are smashing, we are stomping on, and we are killing 
people's, who work in the low wage industry, dreams of having 
something more, doing something more.
    Every American deserves to be able to have security, 
safety, pay their bills on time, know what life is going to 
bring to them instead of seeing nothing but darkness, no hope 
or anything.
    I know that with the increase, we are not going to get it 
today because it is an incremental process, but it is a start, 
and those people that become wage increased earners put back 
into the community. You know, they are able to contribute to 
the revenue.
    They are better trained. They are better educated, which 
means that they are going to take and they are going to help 
somebody else and pull them along.
    We deserve an increase not because we need more money, but 
because we want to be a better citizen, a better mother, a 
better father.
    We want to provide for our children and give them a future 
because if we do not, we are only going to continue to see more 
mayhem, more crime, more prostitution.
    And it is not the elderly or the Baby Boomers or the 
seniors. It is our kids that are being subjected to these 
things because parents are not able to make ends meet. We are 
leaving them out of this equation.
    And I am just imploring you guys today to make this 
something that is a priority, the wage increase and for all. 
Home health workers, anybody in the service industry has a 
better income to become a better person in society.
    Thank you so much.
    [The prepared statement of Kismet Evans follows:]

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Yarmuth. Thank you for your testimony.
    Mr. Ponnuru, you are now recognized for five minutes. 
Welcome.

                  STATEMENT OF RAMESH PONNURU

    Mr. Ponnuru. Thank you, Chairman Yarmuth, Ranking Vice 
Chairman Johnson, and distinguished Members of the Committee.
    It is an honor to be testifying before you.
    There is little dispute that inequality has risen since 
1979, although some evidence suggests that it peaked in 2007 
and has been falling since then.
    There is considerably more disagreement about how 
inequality should factor in our thinking about public policy. 
The view that prosperity should be broadly shared is 
widespread.
    Few of us would be satisfied with an economy in which 
average incomes are rising only because those at the very top 
were moving further up.
    At the same time, most of us think that rising living 
standards for most people are more important than the relative 
speeds at which different groups' living standards are rising.
    Many analysts have argued that economic inequality has 
negative effects that offer reasons to worry about it beyond 
its importance in itself. Some believe that greater inequality 
reduces economic growth, but these analyses are seriously 
disputed.
    My written testimony cites summaries of studies that 
suggest that inequality has only modest effects, no effect, or 
even positive effects on these variables.
    It is easy to reach erroneous conclusions about the link 
between inequality and wage growth because of a widespread 
misunderstanding of wage trends over the last several decade. 
Misleading claims that the average wage has been stagnant since 
the late 1970s, coupled with the accurate observation that 
inequality has risen, has heightened the impression of a causal 
link between these trends.
    But as I discuss in that testimony, using the correct 
adjustment for inflation reveals that wages have grown 
significantly, if unsteadily, over this period.
    None of this is to deny that there are policies worth 
pursuing that hold some promise of reducing inequality, but 
these policies are worth pursuing primarily because they would 
raise economic growth, boost living standards, and expand 
opportunity.
    Several provisions of the Tax Cuts and Jobs Act of 2017 are 
examples of such policies. The bill's provisions expanding the 
child tax credit and the standard deduction disproportionately 
aided low income and middle income taxpayers, and the law 
scaled back deductions for mortgage interest and state and 
local tax payments that disproportionately aided high earners.
    A further expansion of the child credit, increasing its 
maximum value and making it fully refundable against payroll 
taxes would recognize and foster investment in the next 
generation, while also reducing poverty inequality.
    Many other such policies would have multiple advantages in 
this way. Loosening restrictions on the construction of 
housing, especially in areas of the country with high economic 
growth and severe restrictions would expand opportunity.
    Loosening occupational licensure laws would also increase 
upward economic mobility, in part, by increasing geographic 
mobility.
    Rethinking education policies so that they better serve the 
large majority of young people who do not receive college 
degrees could also expand opportunities.
    And finally, better countercyclical policy from the Federal 
Reserve might be able to reduce the risk and severity of 
recessions, limiting the damage of business cycles which can be 
especially severe for those with low or no incomes.
    But policy makers should refrain from enacting policies 
that in the name of reducing inequality inflict major harms. 
The Congressional Budget Office's median estimate is that 
raising the minimum wage to $15 would cause 1.3 million few 
people to have jobs in the first year it took effect.
    A tax on wealth would reduce national saving and, 
therefore, either reduce investment in the United States or 
increase capital inflows or both. To the extent that it 
increased capital inflows, it would raise the trade deficit. It 
would also be extraordinarily difficult to administer.
    A universal basic income would very likely reduce the labor 
force participation rate, which has already been in secular 
decline, because people would be able to have a higher income 
without paid work than they currently can.
    It would also reduce hours worked because it would require 
a major increase in taxation.
    In short, public policies that could affect inequality vary 
widely in their effects and thus their desirability. Policy 
makers should focus on ways to reduce poverty, increase 
mobility, and improve living standards, keeping in mind the 
possible drawbacks of those policies and considering their 
effects on inequality as a second order consideration.
    Thank you.
    [The prepared statement of Ramesh Ponnuru follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Yarmuth. Thank you for your testimony, and once 
again, I thank all of the witnesses for their testimony.
    As a reminder, Members can submit written questions to be 
answered later in writing. Those questions and your answers 
will be made part of the formal hearing record.
    Any Members who wish to submit questions for the record may 
do so within seven days.
    And now we will begin the question period, and as a matter 
of courtesy, but first of all, as our habit, the Ranking Member 
and I are going to defer our questions until the end.
    So, I now recognize the gentleman from Nevada, Mr. Horsford 
for five minutes.
    Mr. Horsford. Thank you very much, Mr. Chairman, for the 
courtesy and also for holding this very important hearing to 
discuss something that impacts so many of my constituents and 
low income communities across this country, which is economic 
inequality.
    I am so excited with the panel that we have here today, 
particularly Ms. Kismet Evans, who is one of our constituents 
from our district. She is a leading voice and advocate for 
economic equality and fairness, and I am so delighted that you 
flew all the way across the country to bring your important 
voice to this perspective.
    I want to start off by highlighting the recent U.S. Census 
Bureau's annual report on income and poverty, which showed the 
importance of federal safety net programs in helping to keep 
millions of people from falling into poverty.
    Social Security benefits kept more than 27 million people 
out of poverty last year. SNAP benefits kept an estimated 3 
million people from becoming poor.
    And yet the Trump Administration recently announced a 
proposed rule related to SNAP eligibility that would negatively 
impact about 46,000 SNAP recipients in my state.
    When it comes to available affordable housing, which the 
panelist just spoke about, Nevada ranks as the worst in the 
country, according to the National Low Income Housing 
Coalition. That is especially true for those considered 
extremely low income, a group that often includes those living 
off of Social Security or those with disabilities.
    In Clark County, 250,000 people, or roughly a quarter of 
the workforce in Southern Nevada, fall into the, quote, missing 
middle. Those are people earning between 60 and 120 percent of 
the median income in the area, a large chunk of whom are 
teachers and others in the service industry.
    These are individuals who we are fighting for, to make sure 
that the programs that we support, including the Home Program, 
are preserved. And yet the Trump Administration and 
Republicans, after doing all of this, gave a gift of $1.9 
trillion dollars in tax cuts to benefit the top 1 percent.
    You want to talk about wealth redistribution? That is the 
issue at hand.
    So, Ms. Evans, again, thank you for being here and sharing 
your story. You perform some of the most difficult, intensive, 
and important work in our society as a home healthcare worker 
and caregiver.
    What will the increase in the minimum wage in Nevada mean 
for your household and for others like you?
    Ms. Evans. Thank you, Congressman, for that question.
    First of all, the increase is something that we will not 
see for a while because it is an incremental process, but 
knowing that we are looking forward and toward an increase from 
what we get already because we pay out so much of our income 
for compliances just to be able to have a job; so if you do not 
pay those compliances, you do not have a job.
    So, one, it would mean that we would not have to take so 
much money out of our pocket to pay for those compliances, in 
addition to everything else that we have to pay for.
    We are looking for an increase so that we can become 
better, more attentive parents, provide better nutritional 
meals for our families instead of coming home after being out 
all night with someone else's loved ones, which is an arduous 
yet blessed task to care for someone; however, when we get 
home, I know there are people like the only thing they have 
enough energy to do is pop a Top Ramen in the oven and give it 
to them or, I mean, the microwave.
    Mr. Horsford. So how does that, the pressures of being a 
low wage----
    Ms. Evans. Oh, a sigh of relief. We will be able to breathe 
knowing that we will be able to do more things with the income 
that we will be receiving because we will not feel so trapped. 
We will not feel like we have to compromise, minimize, or 
condone or put ourselves in a compromising position to make 
ends meet.
    So those are some of the real issues. Having to make ends 
meet in other kinds of manners is what I am sure some of the 
people that I work with would love to not have to contemplate.
    Mr. Horsford. Thank you.
    Well, this is a very important hearing. I also want to 
commend Congresswoman Lee who has been a champion on addressing 
these issues of income inequality and poverty, and I know she 
has a number of blueprint policies that would help people like 
you and others that we are fighting for. Thank you, Mr. 
Chairman.
    Chairman Yarmuth. The gentleman's time has expired.
    I now recognize the Vice Ranking Member, the gentleman from 
Ohio, Mr. Johnson, for five minutes.
    Mr. Johnson. Thank you, Mr. Chairman.
    And I, too, want to thank our panel for being here. I know 
you have taken time out of your busy schedules to come, and I 
appreciate that.
    Several things have already been said that I think I have 
to clarify because the facts and the statistics just do not 
match up with what has been said.
    Mr. Spriggs, you talked about rising taxes on middle and 
lower income Americans when, in fact, the Tax Cuts and Jobs Act 
did exactly the reverse. It lowered taxes on middle and lower 
income families. It lowered taxes for virtually all Americans.
    So I do not know what references you are using to get your 
statistics from, but the real facts do not match that.
    And when we talk about income and rising wages, there is 
always that claim that incomes are going up disproportionately 
for upper income wage earners than lower income wage earners, 
and I have been at both ends of that spectrum in my life. So I 
understand that dynamic.
    But here is what is never mentioned. It is never mentioned 
that the top 1 percent of Americans pay 37 percent of the taxes 
in this country, and it is also never mentioned that the top 50 
percent of wage earners pay 97 percent of the taxes in this 
country because taxes are proportional. They are percentage 
based. The more you earn, the more you pay.
    That is the way the system works, and that is the way it 
should work, but let's get to some questions.
    Mr. Ponnuru, the Tax Cuts and Jobs Act increased the child 
tax credit from $1,000 to $2,000 and increased the standard 
deduction from $13,000 to $24,000 for joint returns.
    This provides a substantial tax cut for the middle class 
and helps reduce the cost of raising a family. So what do you 
think the impact of repealing the Tax Cuts and Jobs Act would 
have on American families?
    Mr. Ponnuru. Repealing the Tax Cuts and Jobs Act would be a 
substantial tax increase for many middle class families. The 
Act, as the Joint Tax Committee concluded, cut taxes for each 
income quintile roughly in proportion to the amount of taxes 
that each quintile paid. It was carefully designed to have this 
effect.
    The Joint Tax Committee has also estimated that if you look 
at the provisions that you mentioned: the child tax credit, the 
standard deduction, and also some of the deduction changes and 
the changes to the exemption, all told those provisions tended 
to increase taxes on households making more than $100,000 a 
year and decrease taxes on households making less than $100,000 
a year.
    So those provisions in particular, I would think, need to 
be guarded.
    Mr. Johnson. Yes. You know, we talk a lot about workforce 
development. In the aggregate, America does not have a birth 
rate that is replacing the aging, retiring workforce--the 
10,000 Baby Boomers per day that are retiring.
    One of the provisions of the Tax Cuts and Jobs Act that 
encourages families to have children and to grow their families 
if they want to is the child tax credit.
    So what are your thoughts on what the Tax Cuts and Jobs Act 
did to the child tax credit?
    Mr. Ponnuru. I think that was an extraordinarily positive 
development in the tax code. And I think that the crucial thing 
in what you said was ``if they want,'' because we do have 
evidence spanning decades now that Americans would like to have 
more kids than they end up having.
    To the extent that some of this is economically based and 
some of it is based on being overtaxed, that is something that 
public policy can and should address and in the Tax Cuts and 
Jobs Act did address.
    Mr. Johnson. Okay. I have got 20 seconds. I want to ask our 
other witnesses just real quick. It is a very quick yes or no 
answer.
    Do you think it was beneficial for American families that 
the Tax Cuts and Jobs Act doubled the child tax credit and 
dramatically increased the standard deduction?
    Dr. Boushey, yes or no?
    Dr. Boushey. That is an important policy, but it is an 
incredibly high price to pay.
    Mr. Johnson. No, I need a yes or no.
    Dr. Boushey. For the increase in deficits that we are going 
to see----
    Mr. Johnson. Yes or no.
    Dr. Boushey.--and the way that taxes are going to go up for 
those people in the future.
    Mr. Johnson. Dr. Spriggs, do you have an answer to that?
    Dr. Spriggs. Because you did not make it refundable, no.
    Mr. Johnson. Okay. How about you, Ms. Evans?
    Ms. Evans. No.
    Mr. Johnson. And would you all support repealing those 
provisions?
    Ms. Evans?
    Ms. Evans. Yes.
    Mr. Johnson. Yes?
    Dr. Spriggs. It has to be fixed.
    Mr. Johnson. No. Yes or no, would you support it being 
repealed?
    Dr. Spriggs. I would repeal it because you have to make it 
refundable.
    Mr. Johnson. Okay. Dr. Boushey?
    Dr. Boushey. You need to fix the tax code, and I agree with 
Dr. Spriggs. Making it refundable is absolutely paramount.
    Mr. Johnson. Okay. I yield back, Mr. Chairman.
    Chairman Yarmuth. The gentleman's time has expired.
    I now recognize the gentleman from Massachusetts, the Vice 
Chairman of the Committee, Mr. Moulton.
    Mr. Moulton. Thank you, Mr. Chairman.
    America is founded upon the idea of equal opportunity. It 
is our nation's guiding principle. It is the manifestation of 
freedom.
    The single guiding phrase of the American Revolution- it 
has often been said- is that great Jeffersonian line from the 
Declaration of Independence, ``All men are created equal,'' 
which we of course know now includes not just men.
    Now, America is not a country of equal results. We thrive 
on free competition, and we know that some will have greater 
success than others. But if we do not start with equal 
opportunity, we cannot live up to our fundamental values and 
principles as a nation.
    Therefore, I believe the most important question before the 
Committee today is whether rising economic inequality is due to 
a lack of opportunity, whether we are a country of equal 
opportunity or not.
    My colleagues across the aisle seem to think that 
opportunity in America is just as equal as it needs to be. They 
like to say two things about the problem of rising economic 
inequality, and we heard both from the Vice Ranking Member in 
his opening statement.
    The first is: all we need to do is grow the economy, simply 
grow the economy we already have. Now, this would make sense if 
the current economy lived up to our ideals, that principle of 
equal opportunity. So we should investigate this.
    The second thing Republicans like to say is that this 
entire conversation about economic inequality is about 
redistributing wealth. And since they believe we should not do 
this, we should not even have this conversation, or as the Vice 
Ranking Member stated, we should not be holding this hearing.
    But redistributing wealth is about equal results, not equal 
opportunity. I am a proud Democrat, and that is not what I am 
here to talk about.
    So to directly address the two Republican concerns on the 
table, if you want to, one, grow the pie more and, two, you do 
not want to redistribute wealth, then it seems to me the only 
remaining option is to ensure that opportunity in America truly 
is equal.
    So let us discuss whether opportunity in America is equal 
or not, and whether making economic opportunity more equal, in 
other words, living up to those ideals in our founding 
documents, would help address rising economic inequality.
    Dr. Boushey, to begin with, the research by Professor Raj 
Chetty of Harvard finds that there is a very strong 
relationship between parental income and the future income of 
their children. In other words, economic inequality is not 
equal, but strongly inherited, and it is a generational 
problem.
    Why does growing economic inequality leave the lowest 
income families more at risk of generational poverty?
    Dr. Boushey. Well, two points. First, one of the things 
that we learned from Chetty's research that he concluded is 
that if you look over the period over the past few decades, 
children who are born in the middle part of the 20th century, 
about 90 percent of them grew up to earn more than their 
parents. Kids born in the 1980s, 90 percent are not growing up 
to earn more than their parents.
    And that decrease in absolute mobility over that time frame 
is not due- or we could not have altered that outcome even if 
the economy had grown more. In fact, 70 percent of that decline 
in upward mobility was due to the rise of inequality.
    As he put it, it is because the rungs on the ladder have 
become further apart.
    So it is important that we connect the dots between how 
inequality is actually making it impossible for there to be 
economic opportunity.
    A second point from Raj Chetty's work is his really 
interesting study on patents he did with a bunch of colleagues. 
They found- they had data connecting what someone makes as an 
adult and whether or not they have a patent with their third 
grade math test scores and their parents' income in third 
grade.
    They found that children who scored high on their third 
grade test scores were more likely to grow up and get a patent, 
but if you were from a high income family, you were four times 
as likely to grow up and get a patent among that high scoring 
group.
    That is a direct loss to our economy of productivity gains 
because of the stymieing of opportunity and economic mobility.
    Mr. Moulton. And it seems to me that if this is related to 
third grade test scores, then rich kids are going to better 
schools than poor kids. That does not to me mean economic 
opportunity is equal in America.
    Dr. Boushey. Well, in this case these were all kids in one 
school system. So all the kids, and you have the high scores 
over here. Among the group that scored high in third grade, the 
ones who had rich parents were much more likely to move up and 
out.
    So even a patent----
    Mr. Moulton. So, even if the school systems were equal, 
which we all know that they are not----
    Dr. Boushey. Yes. So, even among children in the same 
school system, that inequality is creating a pipeline across 
someone's life, and it is that that we need to be thinking 
about and connecting the dots on.
    Mr. Moulton. Thank you, Mr. Chairman.
    Chairman Yarmuth. The gentleman's time has expired.
    I now recognize the gentleman from Missouri, Mr. Smith, for 
five minutes.
    Mr. Smith. Thank you, Mr. Chairman.
    I have said this numerous times, but the days change. Today 
marks 150 days since this Budget Committee has failed to pass a 
budget, 150 days. Speaker Pelosi said that a budget is a 
statement of your values. It is a statement of your party's 
values.
    What are your values?
    Instead, we are having hearings on other items than passing 
a budget from this Committee. It is completely ridiculous.
    Let us talk about this. Last month I traveled and visited 
every one of our 30 counties in the month of August, visiting 
with families and farmers and small business owners. And in our 
30 counties, 20 of those 30 counties are below the poverty 
level or above the poverty level. 20 of the 30 counties are 
above the poverty level in Southeast Missouri along the 
Mississippi River.
    What I heard from these families is that they wanted to 
have the opportunities, and the opportunities are what allows 
them to have a better quality of life.
    Speaking to some people that are third and fourth 
generations on government assistance and welfare. Think about 
that. Third and fourth generations.
    Things are a little bit better. The economy is definitely 
doing well. You all admitted to that in your opening testimony, 
but a number that I think we need to point out is 1.4 million 
fewer people are living in poverty today than what they used 
to. That is a step in the right direction.
    But just in the last couple of years, serving on a 
committee here in Congress, I had a young lady that testified 
before the committee that I was serving on, and she gave an 
issue that she had to turn away an increase in her hourly wage 
because of some federal welfare programs.
    Think about that. There are over 80 different federal 
welfare programs that add up to $1 trillion a year that we 
spend to get people out of poverty, and we started that War on 
Poverty back in the 1960s. We have not been winning that war.
    But this lady testified before our committee and said, ``I 
had to turn down the increases in my hourly wage because I 
would lose subsidies, and my childcare subsidies, and my 
quality of living would be less if I took a $2 an hour increase 
in pay.''
    That is called the poverty trap. If we want to get serious 
about ending inequality, we need to make sure that we do not 
keep and push people down to stay reliant on federal government 
programs. We need to give them an incentive to work themselves 
off the system.
    And I think Republicans and Democrats can agree with that. 
But instead, this lady had to turn down a wage increase because 
of that security blanket being ripped out from underneath her 
for childcare subsidies.
    That is an easy fix that I think Republicans and Democrats 
should agree, that would make the quality of life of a lot of 
low income people so much better, and it is not even being 
discussed right now. And I think that is a point of discussion 
that we have to hit on.
    When you are talking about the child, the Tax Cuts and Jobs 
Act, it was my provision that helped double the child tax 
credit, and, sir, it is refundable. It increases the 
refundability up to $1,400. That is more than what it was 
before the Tax Cuts and Jobs Act.
    Do you know that in the district that I represent, the 
median income household of a family in my district is $40,000 a 
year . . . for a family of four? It is one of the poorest 
congressional districts in the country.
    But do you know what? Under the Tax Cuts and Jobs Act, 
those people in Southeast Missouri and bootheel of Missouri, my 
friends and neighbors, the place I have called home for seven 
generations, by the changes in the Tax Cuts and Jobs Act of 
doubling the standard deduction from $12,000 to $24,000 for a 
husband and wife, and doubling the child tax credit from $1,000 
to $2,000, guess what. They do not have to pay one cent in 
federal taxes if they make $55,000 or less.
    And that is under the Tax Cuts and Jobs Act. That is a real 
impact to the door greeter at Walmart in Salem, Missouri. That 
is a huge impact to the cashier at Schnucks in Farmington, 
Missouri.
    And so for you all to say that you do not want that to be 
supportive, go talk to the people on the front lines who are 
barely able to buy their prescription drugs. That are working 
at Schnucks, and Walmart, and the AT&T stand at the mall in 
Cape Girardeau.
    So if we want to get serious about inequality, I give you 
one way that we can start, Mr. Chairman. Let us try to all work 
together.
    Chairman Yarmuth. The gentleman's time has expired.
    I now recognize the gentleman from New York, Mr. Higgins, 
for five minutes.
    Mr. Higgins. Thank you, Mr. Chairman.
    Dr. Spriggs, you had talked in your testimony about a time 
when economic growth in wages grew in tandem, and based on the 
economic data, that was a period between 1950 and 1980. We had 
97 percent economic growth during that period, and real wages 
increased by 95 percent.
    That was a period of shared prosperity. Economists would 
call that a virtuous cycle of growth. So you had high wages, 
high demand, equal high economic growth.
    During that period of 30 years, you had annual average 
growth in the American economy of 4.1 percent. That was not 
coincidental. That was a period of time where American 
corporate leaders believed that it was their responsibility to 
balance the interests of all the stakeholders in the American 
economy.
    So, it was the shareholders certainly that benefitted, but 
it was also the managers, the workers, and the communities 
within which these large corporations operated. And if you look 
at the testimony of the CEO of GM, of Dupont, of General 
Electric, of Standard Oil, of Coca-Cola, their themes were all 
consistent. They thought it was their responsibility to help 
families, the economic interests of all the stakeholders.
    In 1962, an economist from the University of Chicago by the 
name of Milton Friedman wrote a book called ``Capitalism and 
Freedom,'' which was taught in a lot of American business 
schools- Harvard, Stanford, and many others.
    And he basically argued that forget about all of those 
stakeholders. What you should do, as a corporate leader, is 
push all the profits to the shareholders. Forget about the 
workers. Forget about the communities. Forget about your 
responsibility, that you yourselves once accepted was yours.
    What happened during that period, 1980 to 2019, you had 
economic growth of 94 percent and real wages increased by 9 
percent, 9 percent. That was a 39-year period. The average 
annual growth in the American economy was 2.8 percent versus 
4.1 percent when wages were higher.
    In the past 20 years, 84 percent of the growth in the 
American economy went to the top 1 percent. That means, unless 
anybody on this panel is part of the top 1 percent, 16 percent 
of the growth in that 20-year period went to the rest of us 99 
percent.
    We just gave away a massive tax cut to American 
corporations. We were told by the White House Council of 
Economic Advisors that each household would receive four to 
$9,000 annually as a result of that tax cut.
    That did not happen. It is not going to happen, and it 
never was going to happen. In fact, we have a President that is 
in a trade war who has imposed a tariff tax that, according to 
a conservative economist, Mark Zandi, from Moody's Analytics, 
will cost each American household $1,000.
    The Trump Administration and the corporate tax cut has 
added $3 trillion to the national debt. We will have this year, 
next year, the year after a budget deficit of more than $1 
trillion. So we will be $1 trillion short for every budget 
year.
    It seems to me that the way to deal with income inequality 
is through tax policy. Mark Zandi, again, a conservative, he 
said for every dollar that you give away in the corporate tax 
cut, you can expect to recapture 32 cents. The loss in 
investment from the corporate tax cut is 68 percent. Sixty-
eight percent.
    So those who argue here, on the margins, that middle class 
taxpayers have benefitted from this, you have to do that within 
the context of the history, and clearly, clearly, the current 
policies are detrimental to the nation's economic growth and to 
the American middle class that depends greatly and have 
contributed historically to the economic growth.
    With that, I will yield back the balance of my time. I am 
sorry I went over.
    Chairman Yarmuth. The gentleman's time has expired.
    I now recognize the gentleman from Texas, Mr. Flores, for 
five minutes.
    Mr. Flores. Thank you, Chairman Yarmuth and Republican 
Leader Womack, for holding this important hearing today to 
discuss solutions to economic inequality.
    It is appropriate for us to explore this subject as it 
gives us a chance to highlight the strong economic gains that 
have resulted from the Tax Cuts and Jobs Act and free market 
approaches from this Administration and from the last Congress.
    In 2018 alone, median earnings for workers increased by 3.4 
percent, and I am going to overlay this on one of Dr. Boushey's 
charts in a few minutes.
    The number of people living in poverty fell by 1.4 million, 
and the number of full-time workers increased by 2.3 million.
    This tells us that Americans are getting off the sidelines 
and finding full-time work and earning good paychecks. In fact, 
the Federal Reserve in Atlanta recently reported that, over the 
last year, low wage workers in the bottom 25th percentile have 
experienced the fastest rate of growth and pay increases of 4.4 
percent, higher than the 3.4 percent average of all workers.
    It appears that the other side of the aisle is simply 
ignoring these facts in supporting budget-busting approaches to 
income inequality. CBO estimates that the Democrats' 107 
percent increase in minimum wage proposals can cost up to 3.7 
million jobs.
    Presidential candidate Andrew Yang's proposed universal 
income would cost the federal government $2.8 trillion, and 
single payer healthcare would reportedly cost $32 trillion, in 
conjunction with a $93 trillion price tag for the Green New 
Deal.
    Short of monetary theory, which this Committee will not 
hold any kind of a hearing on, my Democratic colleagues have no 
answer as to how they will find ways to pay for this wish list. 
Instead of having the government foot the bill for goods and 
services, we should focus on proven pro-growth and free market 
policies to create more jobs in our country just as the last 
two years have shown us.
    I look forward to discussing solutions that will further 
improve the economic wellbeing of all Americans without busting 
the budget.
    Mr. Ponnuru, a lot of proposals from my colleagues on the 
other side of the aisle to close income inequality come with a 
heavy price tag to both economic growth and to the American 
taxpayer. Specifically, the proposed 107 percent increase in 
the minimum wage proposal would cost up to 3.7 million jobs, 
which is the high end of the scale. I think your number was 1.3 
million.
    Presidential candidate Andrew Yang's proposal for universal 
income would cost the federal government $2.8 trillion, and 
single payer healthcare would cost $32 trillion.
    It is interesting to note that my colleagues have few 
proposals to pay for such ideas, other than muttering monetary 
theory as we talk.
    Furthermore, these cumbersome government-centric approaches 
will slow down economic activity and put people out of jobs, 
which means less people will be paying taxes while more people 
would become reliant on government safety nets.
    In contrast, since our Tax Cuts and Jobs Act was signed 
into law, we are seeing higher tax receipts this year than last 
year, our higher tax last year than the prior year. If we are 
blowing up the budget deficit because of the tax cuts, you 
would see lower revenues to the federal government, which in 
fact we are going to have a record this year.
    So, Mr. Ponnuru, what sort of tax structure would be 
required to pay for all the Democratic programs that I 
mentioned, the universal basic income, the higher minimum wage, 
the single payer healthcare or the government takeover of 
healthcare, and the Green New Deal?
    And what would the impact be on economic growth?
    Mr. Ponnuru. Thank you.
    The details of those policies would matter. People mean 
different things when they talk about single-payer. They mean 
different things when they talk about a Green New Deal.
    But any plausible price tag, if these policies were going 
to be pursued with any degree of fiscal prudence, would have to 
involve very large and broad-based tax increases, including tax 
increases on the middle class of a kind that we have not seen 
in many decades, possibly not ever.
    Those tax increases could be expected to reduce the amount 
of work savings and investment, and thus have a negative impact 
on job growth, on output, on national wealth. All of those 
things would have to be weighed, I think, very heavily in the 
balance.
    Mr. Flores. Okay. Thank you.
    And I am going to close with a couple of things. Again, tax 
receipts this year are estimated to be around $3.4 trillion, 
which is higher than last year's $3.3 trillion, which is higher 
than the prior year's $3.3 trillion by a few billion dollars.
    Now, one of the things I was looking at Dr. Boushey's 
charts here. I found these to be interesting. If you look at 
the average annual income growth for the first period of 1963 
to 1979 and also 1980 to 2016, it was 1.7 percent for the first 
period, 1.3 percent for the second period, but what is it today 
for income growth? On average, it is 3.4 percent.
    So higher than either one of those periods. That is how you 
solve economic growth. That is how you make economic growth 
higher, and you addressed all wages.
    Now, the lowest economic growth is over here on the left-
hand side, and under this chart the assertions were that it was 
higher for the lowest part of the workforce and lower for the 
higher part of the workforce, and then the inverse happened 
during the second period.
    But today what is interesting is it is 4.4 percent, which 
is the highest of all the income groups over the last two 
years. So I think this proves that the Tax Cuts and Jobs Act 
with modern regulatory policy creates better economic growth 
for all boats.
    I will close with President Kennedy's statement that he 
made back in the 1960s. ``Rising economic activity lifts all 
boats,'' and what did he do to get there? He cut taxes.
    Thank you. I yield back.
    Chairman Yarmuth. The gentleman's time has expired.
    And I would like to let him know that we do intend to have 
a hearing on essentially modern monetary theory. It is going to 
be called ``Does Debt Matter,'' which is essentially what we 
are talking about. So you will get your chance to discuss that, 
absolutely.
    I now recognize the gentleman from New York, Mr. Morelle, 
for five minutes.
    Mr. Morelle. Thank you so much, Mr. Chairman, for holding, 
I think, what is a really important conversation, and I 
appreciate the comments by all of my colleagues, and I 
particularly appreciate the comments by the witnesses.
    I find this topic fascinating. Unfortunately, I did not 
really do well in economics when I was in college. I think I 
was not in the classroom nearly enough as I should have been. I 
wish I had known better.
    But, so, I am trying to get caught up. I was interested, 
Dr. Boushey, in some of the charts that you presented. For 
instance, you have by sort of quartile or quintile, I think, is 
the distribution. I am looking for the chart because there are 
several here.
    But I was just curious. What is the optimal distribution?
    You have sort of what the distribution is and what it has 
been over the last 40 or 50 years in terms of distribution of 
wealth, distribution of income. Is there an optimal chart that 
we should look for or a target that there should be, whether we 
decide to do something or do nothing?
    But what would that look like in your mind?
    Dr. Boushey. That is a great question. Thank you.
    So you want to connect the income growth to what is 
happening in the wider economy.
    Mr. Morelle. Yes.
    Dr. Boushey. So I think optimally, there are two ways to 
measure it. One is you would like to see that wages are growing 
in line with productivity because that would mean that the 
benefits of what workers are contributing, and most of us are 
workers in the economy, is being connected to what people are 
taking home.
    Mr. Morelle. May I stop you there because that is 
interesting as well? Talk to me because that is one of your 
charts as well in here. It shows the divergence as it relates 
to productivity.
    I am going to find the page here.
    Dr. Boushey. Yes.
    Mr. Morelle. I think it is the third chart that I looked 
at. Worker pay has lagged behind productivity.
    Before you go on could you just describe, first of all, the 
definition of productivity? Because I think it is important. It 
seems to mean different things to different people, but I know 
there is an economic definition.
    Obviously, I know what hourly compensation is for workers. 
Could you just talk about productivity? Because I have a 
follow-up question to that.
    Dr. Boushey. In its most basic definition, it is how much 
in terms of goods and services are being produced per worker 
hour.
    Mr. Morelle. Right.
    Dr. Boushey. So it is how productive we are, right? You 
know, how many clients people are serving or, you know, what 
quality of work is happening.
    Mr. Morelle. So can I stop you, and I am going to let you 
finish what you started earlier. But I notice that the big 
divergence happens around 1980, 1978, 1980. And I know that 
former Fed. Chair Alan Greenspan talked about this. What is 
happening? Why is that?
    It is not that chart, but I think it is probably in the 
next one.
    Dr. Boushey. There you go.
    [Chart.]
    
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Morelle. Thank you for putting that up.
    So it just seems to coincide to some degree with the 
development and the growth, and this may be completely wrong, 
but just in terms of the growth of technology, particularly 
around productivity tools, technology of the microchip, and 
what it did.
    Is that something that economists look at? Does it just 
happen to be coincidental? Is that not what has somewhat 
contributed?
    Because this is output for number of hours worked, whereas 
if you have a factory now that has doubled the output, fewer 
workers and robotics are doing more of it, that would 
contribute to it. Is that right or is that not right?
    Dr. Boushey. Well, certainly, but that was also happening 
in decades before, right?
    Mr. Morelle. But has there been an acceleration?
    Dr. Boushey. So it is----
    Mr. Morelle. And I am not trying to be argumentative.
    Dr. Boushey. No, no, it is a good question. You were saying 
that because----
    Mr. Morelle. No, I am asking.
    Dr. Boushey. Yes. Was your question if our economy is more 
productive, if because of computer chips you can produce 
things, twice as many things in half as much time?
    The question is whether or not the workers that are still 
participating in that process get any of those gains or do 
those gains only go to people at the very top of the income 
distribution.
    And so what we saw prior to 1980 is that even when 
technology made workers more productive, they shared in those 
gains, where now workers do not share in those gains. Those 
gains go almost exclusively to people at the top.
    And that has encapsulated the fundamental question of our 
times.
    And so the other chart that I had in my testimony showed 
that in the period in the 1960s and 1970s, you know, when the 
economy grew, families all across the income distribution saw 
their incomes grow at about the same rate.
    Mr. Morelle. That is the, if I might interrupt, and I 
apologize because I am running out of time here.
    Dr. Boushey. Yes.
    Mr. Morelle. That is the ``income gains widely shared in 
early post war decades but not since then'' chart that shows 
the divergence?
    Dr. Boushey. Yes.
    Mr. Morelle. Again, around 1980.
    Dr. Boushey. 1980.
    Mr. Morelle. I mean it is----
    Dr. Boushey. And I think it comes down to how we 
reconceptualize the importance of the institutions that 
constrain the rise in inequity. Everything from unions to 
antitrust to how we thought about taxes, there was a change in 
mindset about whether or not it was policy makers' roles to 
create institutions and to support institutions that make sure 
that everybody has a level playing field, rather than allowing 
a few to increasingly reap the disproportionate gains of 
growth.
    So it was not one thing. It was all of these things 
happening together, a shift in how we thought.
    Mr. Morelle. Thank you.
    I apologize for exceeding my time, Mr. Chairman. Thank you.
    Chairman Yarmuth. That is quite alright. The gentleman's 
time has expired.
    I now recognize the gentleman from Texas, Mr. Crenshaw, for 
five minutes.
    Mr. Crenshaw. Thank you, Mr. Chairman.
    It is great to be at this hearing, and it is great because 
it exposes two very different ways of thinking about our 
economy, opportunity, and the mutually shared goal of 
overcoming poverty.
    So, on the one hand, you have a deep and persistent focus 
on inequality, and it is defined as the gap between the rich 
and the poor, and at first glance that seems pretty reasonable.
    But in reality, it means you are dividing your attention. 
Half of your attention is focused on protesting the wealthy, 
and these days that seems actually where most of the attention 
is, and that leaves only a small amount of focus on the real 
issue, which is people in poverty and their ability to move up 
the economic ladder.
    And this is the kind of backwards thinking that leads to 
ideas like Andrew Yang's where we raise taxes on the rich only 
to give it right to them in the form of universal basic income. 
It is hard to imagine a more inefficient and ineffective way to 
reduce poverty.
    So as a conservative, our approach is different. Instead of 
creating resentment against success, we focus on who actually 
needs our help, which is the people who are having trouble 
moving up the economic ladder.
    After all, the fact that there is a much wealthier person 
down the street from you is not the problem. The problem occurs 
that if you cannot find opportunities even when you make all 
the right decisions.
    So the first step to understanding any problem is to get to 
the truth. Mr. Ponnuru, I want to go to you on this. We have 
heard inequality is worse than ever. Is that true, especially 
if we use a more accurate measure of inflation and account for 
welfare programs and cash transfers?
    Mr. Ponnuru. No, it does not appear to be true. The 
Congressional Budget Office's reports on the distribution of 
income suggest that income inequality peaked in 2007; that it 
has been falling since then; and so we are, I think, to some 
extent looking at a problem in the rear view mirror.
    Of course, that could change. Maybe next year's numbers 
will be different, but the trends over the last decade or so 
have been towards shrinking inequality.
    Mr. Crenshaw. And let's talk about the people we really 
want to help, those in the bottom quintile of earners. So let's 
find out who they are.
    So can you break that apart demographically? Who are the 
people in the bottom quintile? Maybe that helps us focus our 
problem setting here.
    Mr. Ponnuru. So people in the bottom quintile differ from 
people in the other quintiles across a variety of measures. One 
of the more important things to look at is the number of 
workers in the household. The top quintile is going to be much 
more likely to have two earners, and that household on the 
bottom quintile is much more likely to have zero earners in the 
household. Obviously, that is going to make a huge difference 
in how much income you have got.
    There is also the question of age. If you are retired or if 
you are young and in school, you may very well be in the lowest 
quintile.
    Mr. Crenshaw. Right.
    Mr. Ponnuru. It does not mean you are always going to be in 
that quintile or always were. Lifetime inequality is lower.
    Mr. Crenshaw. Right. So it is possible that we are placing 
a teenager, who lives with their parents, in the bottom 
quintile of earners and saying that that is one extra person 
under the poverty line, right, statistically speaking?
    Mr. Ponnuru. Right, and equality seems to have increased 
however you measure it, but it is, I think, important to have 
that perspective.
    Mr. Crenshaw. Right. It also turns out that 56 percent of 
Americans will at some point in their lives be in the top 10 
percent of earners. Seventy-three percent of Americans will be 
in the top 20 percent of earners in their lifetime. That is an 
amazing statistic. It does not mean we cannot always do better, 
but it is an amazing statistic.
    It also turns out my colleagues are right that the middle 
class is shrinking. It is just not in the way that they think. 
It turns out the data shows the middle class is shrinking 
because they are moving up into higher income households over 
time.
    This is all good news. It does not mean we cannot improve. 
The point is that the rhetoric about inequality is not only 
inaccurate, but it is just flat out unhelpful to the people we 
are actually trying to help.
    So let us talk about solutions really quick. If we want to 
empower people to rise up instead of disempowering them with 
more handouts, how do we do that?
    You do not need to take my word for this. Mayor Bloomberg, 
a prominent Democrat, studied this extensively with 30 
different pilot programs, and what they found is there are 
different solutions for different kinds of poverty, and they 
are localized solutions. We have to be thinking about it that 
way.
    So back to you, Doctor. How else can we empower people to 
rise up?
    You talk about occupational licensing. You know, I have a 
constituent in my district. Her name is Ashley. She owns a hair 
wash and style company. She cannot find stylists because Texas 
requires 1,000 hours of licensing to wash and dry hair.
    I learned how to free fall out of an airplane at 30,000 
feet in less time than that. That is crazy. Can you talk about 
more solutions like that?
    You mentioned housing. What kinds of deregulation? What 
kinds of vocational training can we be working on so that we 
empower people to rise above their current economic status?
    Mr. Ponnuru. So I think with the little time I have here 
what we should be doing is focusing specifically on mobility, 
opportunity, and fighting poverty, not as much on inequality 
per se, and identifying barriers often created by the 
government that we can get out of the way.
    Mr. Crenshaw. Thank you, Mr. Chairman.
    Chairman Yarmuth. The gentleman's time has expired.
    I now recognize the gentleman from Michigan, Mr. Kildee, 
for five minutes.
    Mr. Kildee. Thank you, Mr. Chairman, for recognizing me and 
for holding this very important hearing.
    As we have heard, the pace of economic inequality has 
increased dramatically over the past few decades, and many have 
made this point. Mr. Higgins brought data that I think points 
to this really stark dichotomy that we have seen, increased 
inequality over the last several decades, and that this 
Administration continues to push policies that further reduce 
support for those families that are struggling.
    And it has been discussed here already. The Republican tax 
bill gave even more advantage to the wealthiest Americans and 
to the largest corporations in the United States and overlooked 
the needs of working families as we continually see greater 
income inequality.
    The earned income tax credit, which is a refundable credit 
for low wage workers and the child tax credit, are two ways--
two very significant ways--we can help families start to get 
ahead.
    And just listening to the debate here today and the 
conversation, I appreciate the enthusiasm that I have heard 
from some of my colleagues on the other side for the expansion 
of the child tax credit. I could not agree with them more. I 
invite them to sign onto my legislation.
    But I find it difficult to fully accept that enthusiasm, 
when they were given the opportunity to make permanent those 
provisions, which I think were not enough anyway, for example, 
they could have made it fully refundable, but did not do that. 
They could have made them permanent. They did not do that.
    The provisions that they did include, as modest as they 
were, expire in 2025, but what happened to the provisions for 
wealthy corporations? They were made permanent.
    So not only is the budget a statement of our values, but 
our tax policy is a statement of our values, as well. If this 
is such a high priority, why did you set it to end for 
hardworking families? And only get a modest break and then give 
a massive break, a permanent break, to wealthy corporations?
    So, one question, if I could just pose to Dr. Boushey and 
also Dr. Spriggs, number one, did those provisions actually do 
anything when you look at the totality of the 2017 tax bill?
    Did those modest, temporary provisions do anything to 
increase income equality in this country or did the totality of 
that tax bill actually take us in the opposite direction?
    Dr. Boushey. Well, in the totality, it moved us in the 
opposite direction.
    And I certainly commend your leadership on the earned 
income tax credit and the child tax credit, and that we do need 
to make that fully refundable.
    You know, proponents claim that the new tax law would boost 
wages, but there has been no evidence that that has been 
directly responsible.
    One of the things that we did see, of course, is that 
corporations used that tax windfall for a record one trillion-
plus in stock buybacks in 2018. That is a really big number of 
income that is going to those at the very, very top in exchange 
for a long-term gap in revenue for the United States to make 
the investments that we need to make in people and families.
    So I think especially over the long term this is really 
just pushing us exactly in the wrong direction on multiple 
levels.
    Mr. Kildee. Dr. Spriggs?
    Dr. Spriggs. First, thank you for representing my wife's 
hometown of Flint in Genesee Country.
    Mr. Kildee. A Flintstone. You chose well.
    Dr. Spriggs. I moved up.
    So there is an inequality tax that low income people pay 
because they don't provide enough of the market to drive where 
prices go. When you exacerbate the big share of the market, you 
add more demand at the wrong end. So the price of childcare 
goes up as inequality goes up because that is where the market 
is.
    And so, yes, you gave a tax credit, but then it gets taken 
away with increased cost of childcare. So when you look at 
earnings gains that have been made, those who are middle income 
and the next one lower are finding the burdens increasing this 
entire expansion because housing cost, childcare cost, 
education cost have all gone up faster than their earnings 
because the earnings at the top are going up faster, and the 
prices are following those earners.
    And the earned income tax credit excludes single people. 
They are currently being taxed into poverty, and the working 
family's tax bill, which corrects the earned income tax credit 
excluding these workers and fixes the issue that the tax credit 
should be fully refundable, are important steps to restore the 
balance that is in that bill.
    And as you pointed out, if corporations need a permanent 
cut, working people need a permanent cut.
    Mr. Kildee. Thank you very much.
    I have exceeded my time. I yield back. Thank you.
    Chairman Yarmuth. The gentleman's time has expired.
    I am going to have to leave in just a minute to attend a 
conference committee on the Defense Authorization Act and make 
a statement. Mr. Horsford is going to chair.
    But before I leave, I just wanted to thank all of the 
witnesses again, as well as the members, for your testimony, 
and I wish I could stay around. I was going to be able to come 
back, but it looks like we are not going to have enough Members 
to make that possible.
    So with that said, I now yield five minutes to the 
gentlelady from Connecticut, Ms. DeLauro.
    Ms. DeLauro. Thank you. Technology, yes.
    Just a couple of facts, and I have a question that deals 
with the child tax credit.
    But Columbia University School of Social Work's Center on 
Poverty and Social Policy estimated in a 2013 report that 
poverty has fallen nearly 40 percent since the 1960s. Much of 
that reduction is due to our social safety net programs.
    And I am not being self-serving, but about three years ago, 
I wrote a book which was called ``The Least Among Us, Waging 
the Battle for the Vulnerable.'' And what I found there was 
that the social safety net programs were crafted by Democrats 
and Republicans, in fact, realizing the economic challenges we 
were facing of families in this country, moved to assist that 
process.
    What are some of the social safety net programs? We have 
got Social Security. It lifts 26.5 million people out of 
poverty. EITC, child tax credit, 9.1 million people. SNAP, 4 
million people. SSI, 3.3 million people. Housing assistance, 2 
million people.
    Now, let's take a look at what my colleagues on the other 
side of the aisle are interested in doing. First of all, they 
want to change the way that the federal government measures 
poverty, thereby throwing people off of these programs, not 
acknowledging that they live in poverty.
    They want to reduce the number of people who are eligible 
for nutrition assistance, continually cutting back on a food 
stamp program.
    They want to eliminate the low income housing energy 
assistance program, the LIHEAP Program, a $4 billion cut in the 
President's 2020 budget.
    They want to eliminate affordable housing programs, the 
very programs that have helped to lift people out of poverty.
    So when my colleagues talk about poverty, take a look at 
what the record is and what havoc you are wreaking in people's 
lives and continuing to push people into poverty in this 
nation.
    Do not talk out of both sides of your mouth because what 
you would do with some of these programs to make them so 
onerous as to humiliate people into not taking advantage of the 
programs that are there.
    The child tax credit, 83 percent of the Republican tax law 
went to the richest 1 percent of the people in this country. 
Your child tax credit is supposed to go to everyone. You left a 
third of the kids and families who earn too little to get a 
full credit.
    Those left behind included, disproportionately, families 
with young kids, rural families. Members of the Congress made 
themselves eligible for the child tax credit for the very first 
time. So we now can get a $2,000 child tax credit for each 
child, but do you know many military families, families who are 
earning the minimum wage, only got a $75 increase.
    We have a piece of legislation called the American Family 
Act, which I am proud to have authored. We would give the same 
full child tax credit to families earning minimum wage, 
military families, rural families, families with young kids, 
all of those left behind by the GOP tax bill, endorsed by 
scholars across the country, consistent with the National 
Academy of Science as showing what would be the most effective 
policy to reduce child poverty in this country.
    Now, there are two questions. Dr. Boushey, we know what the 
tax cut did. I do not care what they say. We know who got the 
benefit of it. It has been proven over and over and over again.
    A $75 increase to families to reduce inequality. Talk for a 
moment about providing a child tax credit for the families that 
I am talking about.
    And I also want to ask you, Dr. Spriggs. You know, this 
conversation about technology and moving forward and, in fact, 
that is what the cost of technology is. That is where poverty 
sees its face.
    We do know that a Nobel Prize winning economist, Joe 
Stiglitz, no schlep in the economy world, here says that 
inequality is not inevitable. It is about the choices we make.
    Dr. Spriggs, how much of inequality is due to the public 
policy decisions that we make?
    Mr. Horsford. [Presiding.] The gentlelady's time has 
expired, but I will allow you to respond.
    Dr. Spriggs. Thank you. Thank you, Chair Horsford.
    Quickly, the divide in 1980 is because we changed policies. 
Because we redistributed income from workers to those at the 
top.
    When you look at that gap in productivity and what workers 
make when we see the declining labor share, we redistributed by 
taking away from workers the ability to negotiate. We un-
invented a middle income nation. We redistributed, today if you 
wanted to correct it, close to some $650 billion worth of 
income out of the middle towards the top by denying workers a 
decent minimum wage. That cut the work productivity and to 
working people the right to negotiate about the increases in 
their productivity and who gets it.
    Ms. DeLauro. Dr. Boushey?
    Dr. Boushey. I would just agree.
    Ms. DeLauro. Child tax credit?
    Dr. Boushey. Child tax credit. It is important that it is 
fully refundable for all the groups that you mentioned. I think 
you made that case very eloquently, and that should be 
incorporated into our tax law. So I could not agree more.
    Mr. Horsford. Thank you.
    The gentlelady's time has expired.
    I will now recognize Mr. Khanna from California for five 
minutes.
    Mr. Khanna. Thank you, Mr. Chairman.
    Thank you to our witnesses. Dr. Boushey, thank you for many 
of your insights. Dr. Spriggs, I appreciated yours. Ms. Evans, 
I appreciate your being here. Mr. Ponnuru, I read your work all 
the time even though I disagree. Thank you for being here.
    My question is simple. There are 70 million American 
families that make under $75,000 a year. They have, by and 
large, not had a meaningful raise in the last 40 years, and we 
can quibble about whether wages are slightly going up or not, 
but by and large, 70 million American making under $75,000 have 
not had a raise over the last 40 years.
    In 2019, the projected corporate profits in this country 
are going to be $9 trillion, $9 trillion. So if we wanted to 
have a program in the Congress, and I would like all of the 
witnesses to answer this, that would give a 20 percent raise in 
the next two years to these 70 million American families, what 
would be the actions or policies that would achieve that?
    Dr. Boushey, we can start with you.
    Dr. Boushey. So give them a 20 percent raise in the next 
two years. Is that what you said?
    Mr. Khanna. The next two years.
    Dr. Boushey. Wow, that is a tall order, and I appreciate 
the ambition.
    I think there are a lot of things you can do. One is that 
you can raise the minimum wage. That is going to focus on those 
at the very bottom, so not at the very top of that $75,000, but 
at the bottom part.
    You can make sure that they have the right to organize and 
bargain collectively because that does have the capacity to 
boost wages.
    You can make sure that their costs are kept low, not 
necessarily going to raise their wages, but you can focus on 
raising the wages of the workers that provide care. So through 
fully funding programs for home health aides, for nursing 
assistants, for childcare workers, that could go a long way 
towards boosting a lot of those folks under $75,000.
    And you could make sure that you rethink the way that we 
enforce our rules around market structure. We know now that one 
of the things that is really keeping wages down is what 
economists call monopsony, which is many workers work in the 
labor markets where they have a single employer. They do not 
have a lot of bargaining power. We need to incorporate that 
value into how we enforce antitrust.
    So it is a long list.
    Mr. Khanna. Let's just keep it to 45 seconds so we can get 
all of these.
    And I do want to recognize Dr. Boushey and Rosa DeLauro, 
leaders here on these issues with paid family leave, paid sick 
days, equal pay, and is handing me a note, affordable 
childcare. I want to make sure I am making Representative 
DeLauro's points.
    Ms. DeLauro. Thank you.
    Mr. Khanna. She has been a huge leader on this in the 
Congress for decades.
    Dr. Spriggs. Thank you.
    So there has been a lot of celebration about wages rising 
at the bottom. That is from minimum wage increases because the 
majority of American workers today do not have $7.25 as a 
minimum wage because Congress has refused to raise their wages. 
States and cities have responded, and so the rise at the bottom 
is because we have raised the minimum wage successfully in some 
states. So that is key.
    It is also key to to reach greater equality and gender 
equality between men and women. The Equal Pay Act would go a 
long way towards that. Because women are a rising and important 
part of the labor force, the inequality that they face is an 
important and rising part of the equation for what causes 
general inequality.
    We have to give workers back their right to organize. This 
a human right. It is globally recognized as a human right. The 
United States stands out as the one country where for most 
multinationals this is their non-union plant. It is 
embarrassing for the United States. So we have to give 
Americans back that right.
    We have to restore in the public sector what the pay of 
teachers used to be. Their relative pay, their pay relative to 
all other workers has been falling. What they do has not fallen 
in importance.
    And we have to give some focus to correcting what has been 
going on in the public sector for public sector workers broadly 
speaking. That will raise the pay of a lot of people pretty 
quickly.
    Mr. Khanna. Mr. Ponnuru, I just want to give you 30 seconds 
if you have a similar or alternative perspective just to be 
fair. I think we only have 30 seconds left.
    Mr. Ponnuru. Okay. Sure. I would just say that if you 
defined the objective as a 20 percent increase for scores of 
millions of people within two years, you pretty much have to do 
just straight up redistribution. It has to be something like 
universal basic income that is set at a high level.
    I happen to think that that is a bad idea, but nothing else 
I have heard, including anything I have heard right now, would 
come close to meeting that target.
    Mr. Horsford. Thank you.
    The gentleman's time has expired.
    I will now recognize Mr. Sires from New Jersey for five 
minutes.
    Mr. Sires. Thank you. Thank you for being here.
    I apologize for not being here earlier. Three hearings at 
ten o'clock makes it a little difficult, and if it is 
redundant, the question I ask, I apologize.
    You know, there is a lot of talk about the tax bill that 
was passed in 2017, and I would just like to know how do you 
think that has impacted the inequality that exists today, this 
new tax bill.
    Either one.
    Dr. Spriggs. Well, because it went overwhelmingly and 
disproportionately to those at the top, it has exacerbated 
inequality.
    And I think my comments earlier were misinterpreted. It is 
not that individuals saw their taxes go up, but the shift in 
burden from where taxes come has been shifted down because we 
made the tax system less progressive.
    So a greater burden of taxes have to come from labor 
income, which is the declining part of national income, and a 
smaller burden is being placed on the rising parts of income. 
Those are the top 1 percent, corporations, and this makes the 
system more unfair because going forward, in order to get the 
revenue necessary to have an economy that can work, it is going 
to have to come from those at the bottom.
    And as we discussed earlier, the portion of the tax cut 
that goes to workers expires. And making up that deficit 
obviously then has to come from that source.
    So this is the big problem that the Budget Committee faces 
because the nature of where the income is coming from does not 
match where income is rising and falling, and it complicates 
the problem going forward for the Budget Committee.
    Dr. Boushey. Let me add a couple of things. When we think 
of inequality, we are often focused on the individual families, 
but the other thing that we were promised with the tax cut, of 
course, was that it would lead to this massive increase in 
investment. That is the economic argument from the other side, 
that if you lower those taxes for corporations on the wealthy, 
that it will lead to that boon.
    And, of course, we have not seen that, and that is the only 
way that the tax cut at the top would translate into higher 
wages for individuals, is if you saw that investment and those 
gains, that greater productivity, were shared with workers.
    So I think that, you know, thinking about that, that kernel 
of the argument is really important as well, that we have not 
seen that investment boon, and in fact, as I noted earlier, 
corporations used that tax windfall to give out a record $1 
trillion in stock buybacks in 2018.
    So instead of using that to invest in productive capacity, 
make our economy more innovative, more productive, they used it 
as a boondoggle for those at the top of the income ladder. So 
that is exacerbating inequality, not just today, but for 
decades to come.
    Mr. Sires. And can you talk a little bit about or elaborate 
on the relationship between the decreasing union membership and 
increasing inequalities?
    Dr. Spriggs. Yes. So much is tied to a chart that would 
show you increases in union density and declining union 
density, and all the patterns we have been talking about.
    America became more equal as more workers had the ability 
to collectively bargain with their boss. I am more productive. 
How do I share in that?
    And when workers had that voice, their wages tended to go 
up with productivity. As they have lost that voice, not just 
union members, but nonunion members also suffer wage losses 
because when we had high union density, many employers took the 
lead from what was happening in the unionized sector for 
setting their own wages.
    So that loss of voice in the workplace has meant a very 
high correlation that other people have looked at and found can 
explain about 40 percent of the disproportionate rise of income 
in the top 10 percent, essentially, the finance and management 
classes of America who get to say where the productivity goes 
as opposed to the workers who are making the product.
    And that gap is important for understanding the weight of 
inequality on our economy because when you shift from the 
market being the middle to the market being the top, there are 
all sorts of implications that make it difficult to produce 
residential investment, which has not been very strong in this 
recovery because the bulk of Americans cannot afford housing; 
because we are not going to get the college educated workforce 
we need. We are falling behind. We have gone from first to 19th 
in terms of our rank among advanced countries in terms of who 
has a highly college educated workforce.
    This is all in the wrong direction because in order to get 
that kind of investment in housing and in education, you need a 
different shaped market. You need a market that is aimed at the 
middle, and you cannot do that when all of the income and all 
of the market is at the top.
    Mr. Sires. Thank you. My time is up.
    Mr. Horsford. Thank you. I will now recognize Ms. Lee from 
California for five minutes.
    Ms. Lee of California. Thank you very much, Mr. Chairman.
    And I want to thank yourself and our Ranking Member for 
holding this very important hearing.
    I do chair the Majority Leader's Task Force on Poverty and 
Opportunity. I care deeply about rising income inequality in 
our country and have been working on it for many years.
    So I just want to thank all of you so much for being here 
and laying this out before the Budget Committee. Your testimony 
is extremely important as we move forward.
    As many of you have pointed out, since the 70s, economic 
growth for middle class and low income workers has only risen 
actually by one-third while income for the top 1 percent has 
tripled. This is especially true for CEOs whose salary has 
grown by 1,000 percent since 1978.
    I know, Dr. Spriggs, you know this very well. According to 
a recently released report by the AFL-CIO on executive pay, the 
average pay gap among CEO-to-worker ratio was 278 to one.
    That's unbelievable in the richest nation on earth, that 
productivity and work hours have continued to skyrocket while 
workers' wages have shamefully fallen behind.
    This is especially true for black and brown families. The 
income gap between black and whites today remains almost at 
exactly the same level from the 1960s. For example, according 
to a report from the Institute for Policy Studies, the median 
black family today owns $3,600, just 2 percent of the wealth of 
the median value of a white family.
    The median Latino family owns $6,600, just 4 percent of the 
median white family.
    So just let me ask you this question because we always talk 
about income inequality, but why do we not frame this as racial 
or income and racial inequality? Because we know that we have 
to have targeted resources and some strategies to address the 
legacy of racism on wealth building.
    And I am not sure, and I apologize for not being here 
through the entire hearing, but I am not sure if the issue of 
race has come up, and I hope that somehow we really look at 
that layer because we cannot talk about income inequality 
without talking about racial inequality.
    Dr. Boushey. Just to weigh in on that, I am so glad you 
brought that up. Just to add to your statistics, we know that 
even being higher educated does not protect black families in 
terms of wealth building because even if they increase their 
educational attainment, their wealth is still lower than it 
should be relative to whites who have higher education.
    And so it is important to think about the racial component 
of wealth. That is one reason why I actually think that a 
wealth tax is very important because it would hit white 
families much more than families of color. It would be a way of 
addressing that inequality in a direct way.
    When we talk about taxing at the top for the most part, we 
are not going to be talking about taxing families of color 
because they are not there. So it is a way to integrate that 
progressivity and then, at the same time, to be making sure 
that we have the resources that we need to create the 
widespread opportunity that we need to do to address poverty.
    So implicit in that agenda that I laid out in my testimony 
is policies that would, I think, go a long way toward 
addressing the racial wealth gap through policies that tax at 
the top and focus on redistribution.
    Ms. Lee. Dr. Spriggs, as you know, some of us are 
supporting H.R. 40. The moment, I think, has come to study and 
look at what reparations mean.
    What do you think about just looking at this dynamic around 
reparations as it relates to the racial wealth gap that has 
historically been systemic in this country for 400 years?
    Dr. Spriggs. It is vitally important because at the root it 
is being blind when we make policies across the board on many 
issues, and the effect of many policies that on the face appear 
race neutral. They are not.
    So giving a tax cut like we just did has a racially 
disparate impact because of the huge tax cut we gave from which 
people of color did not benefit when you look at who got that 
huge part of the tax cut.
    So policies like that matter, and it is the accumulation of 
being blind to those policies. Studying that will allow people 
to go back and revisit it. This is why we cannot have a 
regional minimum wage. A regional minimum wage would have such 
a huge racial disparate impact it would border on being just 
outright racist because it singles out black women and women of 
color to not be protected by a rising wage standard that we 
would give to all other Americans. It is surgical in the way 
that it does it.
    So analyzing policies in that way, the decline in union 
density has been most dramatic among black workers, and the 
lack of access to union membership has been most detrimental to 
black workers who disproportionately live in right-to-work 
states.
    The proactive, very important for making sure that workers 
everywhere have access to the right to organize, and it is 
especially important because the pay increase that black 
workers get from union membership and the pay increase that 
Latino workers get from union membership is far greater, and 
this helps to close the racial income gap.
    And the challenge for the nation is as the current 
population of kids who are K through 12 are now the plurality 
of children of color; the fact that Latino and black households 
have no wealth, relying on the market to provide a highly 
educated workforce is not going to work.
    Ms. Lee. Thank you.
    Dr. Spriggs. Sixty percent of black children today come 
from a household where the maximum expected family contribution 
is zero. So it has clear budget implications if we want as a 
nation to have a highly educated workforce.
    Ms. Lee. Thank you. Thank you very much. Thank you, Mr. 
Chairman.
    I am going to suggest to this Committee that the next time 
we have a hearing on economic inequality we add ``racial.'' We 
have to say economic and racial inequality. Otherwise we are 
missing it.
    And thank you very much.
    Mr. Horsford. Thank you.
    The gentlelady's time has expired.
    I now recognize the Ranking Member, Mr. Womack, for 10 
minutes.
    Mr. Womack. I thank the gentleman. I hope that I do not 
have to take as much time. A lot of the questions that I had 
for the panel have already been asked by many of my colleagues.
    There are a couple of things, a couple of unfinished pieces 
of business, and I want to direct the next couple of questions 
to Mr. Ponnuru.
    We have heard in the discussion, and I thought I saw a 
chart up there on the gap between wages and productivity that 
came up earlier in the conversation; that wages and 
productivity have come apart. Is that true?
    Mr. Ponnuru. I think that the best evidence suggests that, 
no, it is not true and that claims to the contrary that are 
quite widespread that these things have come part, that 
productivity has gone up and wages have not gone up 
commensurately rely on not comparing apples to apples, using 
different groups of workers to look at wages and different 
groups of workers to look at productivity, using different 
inflation measurements to adjust for changes over time in each 
of those trends.
    If you correct for those phenomena----
    Mr. Womack. And different eras, too.
    Mr. Ponnuru. Right. There is no substantial gap. These 
things have moved basically in tandem, and that has been shown 
not just by economists who are more associated with 
conservatism, but economists who are more associated with 
liberalism and the Democratic Party, such as Lawrence Summers.
    Mr. Womack. Yes. I think it is important to get an apples 
to apples comparison, and it is very difficult to do, 
particularly when you are comparing life today with maybe 50 
years ago.
    And I saw a chart that showed that gap widening from about 
1980 out. There was a suggestion made that because we go to 
robotics, that we are finding that the speed of technology has 
created in the innovative minds of corporate America the 
opportunity to do some things that help their bottom line.
    The speed at which technology is changing and that some of 
this speed is affecting the American worker has accelerated 
over time, has it not?
    Mr. Ponnuru. Well, it depends on the time period you are 
looking at, but a lot of particularly the concerns people 
express about rapid automation and technological change you 
would think would be reflected in accelerating productivity, 
and that has not really been happening.
    The most important thing you could do though to increase 
wages over time would be to increase productivity, and we lose 
sight of that if we buy this misleading narrative about what 
has happened to wages and productivity.
    Mr. Womack. In response to Mr. Crenshaw's last question, 
and you were in the process of answering it when time expired, 
the question was something along the lines of how can we help 
that bottom quintile of American workers without just throwing 
money at the problem.
    What are the things? You mentioned mobility as being one of 
those. What are the things that we can do that can kind of help 
lift as we continue to see people being lifted out of poverty 
in that lower quintile?
    Mr. Ponnuru. Well, I do think that there are public 
policies at state, local and federal level that would be useful 
in expanding opportunity and combatting poverty. An expansion 
of the child tax credit, which people on both sides of the 
aisle today have talked about, would be one of those things.
    Loosening restrictions on housing, particularly in some of 
the highest growth parts of the country so that people could 
afford to move there and maybe find better prospects than they 
have where they are would be another one.
    Changing the way a lot of our means tested programs work so 
that they have fewer poverty traps and fewer marriage penalties 
in them would be another.
    There is no shortage of places where I think we could make 
a substantial positive difference and possibly be able to find 
some bipartisan agreement.
    Mr. Womack. Dr. Spriggs, I found it ironic that you 
mentioned in one of your responses to a question earlier the 
concept of a budget, ironic in the sense that you are appearing 
before the Budget Committee, the Budget Committee that is 
supposed to produce a budget.
    The fact that a budget was not produced by my friends on 
the other side of the aisle, do you not find that a bit ironic?
    Dr. Spriggs. I recall living through so many Congresses 
before this Congress that did not produce a budget. I am not 
sure that I find it ironic in the sense that you just used the 
term.
    Mr. Womack. How important is a budget?
    Dr. Spriggs. Congress resolving authorization for our 
agencies if important because, as you have seen in the previous 
three Congresses when we did not have a budget and we could not 
resolve authorizations in time, that federal procurement was 
greatly delayed, and federal agencies need that budget 
authority and authorization in place in time to do and plan 
their purchases in an efficient way.
    It reduces the efficiency of the government, and we have 
seen that in the last three Congresses because of that delay 
and the process. In the fourth quarter, GDP suffers because 
government procurement activities have to stop, and then we see 
a boom in the next quarter because government workers finally 
have the authorization to do what they are supposed to do.
    Mr. Womack. Dr. Boushey, I have a question on a pivot to 
Social Security because it has been on my mind for a long time, 
and I know that there is a bill, the Social Security 2100 Act 
that you are probably familiar with. Congressional Democrats 
have proposed it.
    It is sponsored by 210 Democrat members in the House, 
including 19 on this Committee. It would increase the Social 
Security portion of the payroll tax on all workers from 12.4 
percent to 14.8 percent.
    Do you support increasing that payroll tax?
    Dr. Boushey. I am not familiar enough with that bill to 
comment on it, but I am happy to get back to you in writing.
    Mr. Womack. You know, Social Security, according to the 
trustees is going to be insolvent in 2034 or 2035. Pick one of 
those years, which I think in anybody's estimation is right 
around the corner. It fits my definition of right around the 
corner.
    But let's just say for the sake of the argument that that 
bill was before the House of Representatives today, raising the 
payroll tax from 12.4 percent to 14.8 percent. Given how 
important Social Security is to a lot of people, vulnerable 
people, in our country, would that not have an impact on some 
of these lower quintiles?
    I.e., would it have a negative impact on a lot of workers 
at the lower economic scale, so to speak?
    Dr. Boushey. You are saying that the payroll tax would have 
an impact?
    Mr. Womack. Yes.
    Dr. Boushey. You also said the trust fund needs resources 
in order to continue to pay out benefits, which do help those 
lower income families disproportionately.
    So your job as a policy maker is that this is a policy that 
for decades has lifted people out of poverty. It is one of the 
most important programs that actually lifts children out of 
poverty because children live with elderly or parents that----
    Mr. Womack. But the question is on the payroll tax itself. 
If raising the payroll tax, would it not have a 
disproportionately larger increase on low income workers than 
it would be on the high income workers?
    Dr. Boushey. It is such an important question, and----
    Mr. Womack. That is why I asked it.
    Dr. Boushey. Yes, I am very glad you are asking. What we 
know is that these benefits are incredibly important, and so it 
must be our priority to make sure that those benefits are there 
for future generations.
    We know that payroll taxes are regressive. I do not know 
enough to----
    Mr. Womack. But reclaiming my time, would it 
disproportionately impact the lower income?
    Dr. Boushey. Well, as I said, I do not know enough about 
the legislation, but in other policies that have looked to 
reform Social Security, that has also included raising the cap. 
So if they did that, that would be very progressive.
    So I do not know enough about the details.
    Mr. Womack. So given the importance of workers to 
beneficiaries, in the whole social safety net formula, 
Medicare, Social Security, the two big ones, it stands to 
reason that the more people you have working, the better off 
you will be, right?
    From the standpoint of funding those social safety net 
programs, is that correct?
    Dr. Boushey. Yes.
    Mr. Womack. So from that standpoint, seeing that we have 
increased jobs, and I believe directly attributable to the Tax 
Cuts and Jobs Act, we may disagree on that, but I think it has 
had a big impact.
    Has that not helped the social safety net structure of this 
country, i.e., helping put important resources into those 
programs that benefit such a large number of people who fit in 
that vulnerable category and rely solely on those programs?
    Dr. Boushey. Certainly including increasing the labor 
supply is very important, but we have to remember, of course, 
that the United States has a lower labor force participation 
right now than our economic competitors for both men and women, 
which is a shift from decades before, in no small part because 
we do not offer them the policies that allow them to adjudicate 
their challenges between work and family life.
    So I think you are exactly on the money in terms of the 
question, but I think it is also making sure that we are doing 
more to improve labor supply through things like paid family 
leave or addressing short-term disability.
    Mr. Womack. Mr. Ponnuru, since November of 2016, 6.3 
million jobs have been created. Can you talk about how this has 
improved the labor market and impacts the financial prospects 
of the average worker, in the few seconds I have left?
    But since Ms. DeLauro took a minute and a half and then got 
20 more seconds from Mr. Khanna, I do not feel so in violation.
    Mr. Ponnuru. So just about every economic indicator that we 
have has been pointed in the right direction over the last 
several years, whether you are talking about wages in general, 
wages at the low end of the labor market, labor force 
participation rates, job growth. Everything has been moving in 
a positive direction over this period.
    And in fact, not just moving in a positive direction, but 
moving in a positive direction in a way that people had not 
thought was possible.
    You know, the Federal Reserve itself believed we had 
reached full employment a few years ago, and it turned out that 
it was possible to bring unemployment down further without 
causing inflation to take off, which is a measure, I think, of 
how strong this economy has been.
    Mr. Womack. Thanks to the panel.
    Chairman Yarmuth. [Presiding.] I thank the Ranking Member.
    I fortunately could get back here and take my time.
    I think the gentleman from New Jersey has another question. 
Did you have another question?
    I yield to you for that.
    Mr. Sires. Yes. Talking about Social Security, it just 
popped in my mind. Do you know for undocumented workers how 
much money they contribute to Social Security? Do you?
    Dr. Spriggs. The Social Security Administration has 
conveniently decided that they would not give continuous 
reports on the unclaimed tax revenue. The last picture we had 
of that, it is measured in the billions, the billions of 
dollars that are part of the trust fund because we cannot 
allocate it because those were invalid Social Security numbers.
    A tiny portion of that, of course, is just error, but a big 
chunk of that are the contributions of people who are 
undocumented here in this nation.
    It is going to be a true crisis when those people reach 
retirement, that they will not have access to the money that 
they have put into the Social Security fund. Because they are a 
significant share of our population and because they have been 
here so long, when they reach that age, which is going to be 
soon, we are going to have a very serious issue.
    Mr. Sires. Thank you very much.
    Chairman Yarmuth. I thank the gentleman.
    So it is good to be back. One of the things that I think is 
unfortunate is that in talking about income and wealth 
inequality in this country and how it is growing, we have not 
really projected so far this year and projected into the future 
as to what this would mean.
    And this is the Budget Committee, and so I am interested in 
both from Dr. Boushey and Dr. Spriggs, for your comments on--if 
this trend continues, if the spread between the wealthiest and 
everybody else gets worse or if it stays the same, what are the 
implications for the federal budget and, therefore, for all of 
the taxpayers going forward?
    Dr. Boushey. Well, so let me say two things. One is since 
the mid-teens when Thomas Piketty's book ``Capital in the 21st 
Century'' came out and he made the argument that today's high 
income inequality was calcifying into wealth inequality, and 
that that would continue to increase, there has been a lot of 
work by economists all across the world, but in the United 
States, trying to understand what that would mean for our 
economy and our society.
    There is an increased awareness, I think, of the kinds of 
effects that he talked about in confirmation.
    In terms of the budget, one of the things that we know is 
that as income and especially wealth inequality has increased, 
that has had an effect on agenda setting for democratic 
institutions, for things like passing the Tax Cuts and Jobs Act 
in 2017, the amount of money at the top of the income ladder 
that went into making sure that that went into law, which 
itself exacerbates inequality.
    So one line of questioning is to what extent does that 
inequality subvert our democratic institutions or create the 
bandwidth for policies that then allow those groups to continue 
to garner wealth.
    I think the other thing that we have to keep thinking about 
is how this is very much connected to the concentration across 
firms, and once we see monopolies being created in a particular 
industry, that, too, creates these concentrations of economic 
resources and affects the policy making process.
    Dr. Spriggs. There are certain key things that inequality 
creates. A huge part has to do with the distortion of the 
markets and the marketplace.
    When income rises uniformly, you create many more potential 
new customers. So if you think about the over 185 million 
customer units in the United States, if everybody gets a raise, 
that is a potential 185 million new customers for American 
business.
    When it is only 5 percent, that is a different country. It 
is a different market. And the virtual cycle when we had rising 
wages for everyone was that it is easier to start a business if 
I only have to pick off somebody from 185 million versus a very 
small number of people.
    New firm formation since the 1980s in the United States has 
been declining specifically for that reason, and this recovery 
is slowing. We know we created almost half a million fewer jobs 
than we thought we had because new firm formation is slowing.
    In an environment in which people say we are giving tax 
cuts to businesses and we are getting rid of regulation, that 
is not what businesses want. They want you to give them 
customers.
    And what happens? Well, the only way I can grow my business 
is either I cut my prices, which means I cut my wages, the 
wrong virtual cycle. Now we are all going down, or I buy my 
competitor because I buy new customers.
    And we have seen both. We have seen slowing business 
creation and more business consolidation. This creates 
challenges for the budget because where do you get the revenue 
from?
    And the other part of the budget is hopefully this body is 
concerned with what nation do we have. Are we going to have a 
nation with a well-educated workforce if the price of college 
because it is determined by the market? The market is only the 
people at the top.
    We have so many universities in the United States where 
more students are from the top 1 percent than the bottom 40 
percent, major universities. The University of Michigan at Ann 
Arbor, a major, huge university, has more students from the top 
1 percent than the bottom 40 percent.
    That is not a formula going forward, and so the Budget 
Committee has to be confronted with how are you going to get 
the 40 percent educated, and so if you say, well, we are not 
going to pay attention to that, then you are going to wake up 
20 years from now and we are not going to be the 19th best 
educated out of 28 advanced countries. We are going to be the 
least educated among advanced economies. And that is not a 
formula that is going to work going forward.
    You are not going to get the housing investment that is 
necessary to make our economy turn.
    Chairman Yarmuth. We are seeing kind of an example of this 
dilemma we are in right now with the General Motors strike. It 
seems to me that we have workers who made some sacrifices to 
save their company when GM was on the verge of going bankrupt. 
The taxpayers bailed GM out.
    GM is now doing very well, but the increase in profits to 
GM has not been shared to much of an extent with the workers, 
and one of the things that they did, and I represent two Ford 
facilities in my district, and they did a similar thing, was 
they negotiated in troubled times and said, we are going to 
create two levels of employee. They may be doing the same job, 
but one is going to be continued to be paid $25, $30, $40 an 
hour that they were, but those coming into those jobs are going 
to be paid $16, $17, $18.
    Those people show up in the employment numbers. So the 
employment numbers look good. The unemployment goes down, but 
they are still essentially going to be a burden on the 
taxpayers because a lot of them are not going to make a 
sustainable wage.
    Is that playing itself out across the economy or is this an 
isolated example?
    Dr. Spriggs. No, unfortunately, it plays itself out. This 
is unique because these workers are unionized, and they have a 
voice, and we get to actually hear from them, their concern.
    The case of General Motors is extreme because what the UAW 
did was totally bail out this new company. The new company, a 
large part of their stock was put in trust through the United 
Auto Workers to provide for the healthcare of incumbent 
retirees and UAW members.
    That was a total blessing to this new company that the 
union agreed to take on this risk. What those workers who are 
there now did was make the company profitable enough to pay 
back the United States government with interest.
    And now they are saying we gave up wages. The current 
workers were not given retirement help pledges. They were not 
given the same retirement, and they are saying, ``We saved the 
company. We saved the company.''
    The UAW, by taking on the risk of investing heavily in that 
company, putting the entire risk of their health insurance on 
the table to make this company profitable, and the workers are 
saying, ``Okay. We did that.''
    And so what is unique here is for once in public we get to 
understand the depth that American workers have sacrificed in 
order to help American corporations succeed, and we are finally 
hearing the voices of workers on improving productivity and 
saying, ``Where is our share?''
    So now it plays out for us to see.
    Chairman Yarmuth. I do not have a lot of time left.
    Dr. Boushey. Yes, and you see it in different ways across 
the economy. An economist, David Weil, has called this 
particular trend in the workplace ``fissuring,'' and by that he 
means increasingly you see workers who are employed by a firm, 
but they are employed by a subcontractor rather than the major 
firm.
    And so you go into a hotel, and all the people you may be 
coming into contact with are not working at the big hotel 
chain. They are working for these smaller subcontractors, and 
that means that the profits, the earnings of that brand do not 
have to be shared with all of those subcontracted workers.
    We are seeing that all across the economy, and it is yet 
another way where we are creating these fissured workplaces, 
these different workplaces for some categories of workers, and 
that is part of what has been driving this long-term gap 
between productivity and wages.
    Chairman Yarmuth. My time has expired.
    Does the Ranking Member have any closing remarks to make?
    Mr. Womack. No.
    Chairman Yarmuth. Well, in that case, I once again thank 
all of the witnesses. Thanks to the members for their 
participation.
    And with no further business, this hearing is adjourned.
    [Whereupon, at 12:11 p.m., the Committee was adjourned.]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]