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

                                                            S. Hrg. 116-392

                       REDUCING UNCERTAINTY AND RESTORING
                       CONFIDENCE DURING THE CORONAVIRUS
                                   RECESSION

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                                VIRTUAL HEARING

                                   before the

                            JOINT ECONOMIC COMMITTEE
                         CONGRESS OF THE UNITED STATES

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 JULY 30, 2020

                                   __________

              Printed for the use of the Joint Economic Committee

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Available via the World Wide Web: http://www.govinfo.gov

                                 ______

                 U.S. GOVERNMENT PUBLISHING OFFICE
    41-495                WASHINGTON : 2021

                            JOINT ECONOMIC COMMITTEE

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

    SENATE                               HOUSE OF REPRESENTATIVES
    Mike Lee, Utah, Chairman             Donald Beyer Jr., Virginia, Vice
    Tom Cotton, Arkansas                     Chair
    Rob Portman, Ohio                    Carolyn Maloney, New York
    Bill Cassidy, M.D., Louisiana        Denny Heck, Washington
    Ted Cruz, Texas                      David Trone, Maryland
    Kelly Loeffler, Georgia              Joyce Beatty, Ohio
    Martin Heinrich, New Mexico          Lois Frankel, Florida
    Amy Klobuchar, Minnesota             David Schweikert, Arizona
    Gary C. Peters, Michigan             Darin LaHood, Illinois
    Margaret Wood Hassan, New Hampshire  Kenny Marchant, Texas
                                         Jaime Herrera Beutler, Washington

                    Scott Winship, Ph.D., Executive Director
                     Harry Gural, Democratic Staff Director

                                C O N T E N T S

                                  ----------

                         Opening Statements of Members

    Hon. Donald Beyer Jr., Vice Chair, a U.S. Representative from
      Virginia.......................................................     1
    Hon. Mike Lee, Chairman, a U.S. Senator from Utah................     3

                                   Witnesses

    Dr. Heather Boushey, President & CEO and Co-Founder, Washington
      Center for Equitable Growth, Washington, DC....................     6
    Dr. Jared Bernstein, Senior Fellow, Center on Budget and Policy
      Priorities, Washington, DC.....................................     8
    Dr. Douglas Holtz-Eakin, President, American Action Forum,
      Washington, DC.................................................     9
    Mrs. Rachel Greszler, Research Fellow in Economics, Budget and
      Entitlements, The Heritage Foundation, Washington, DC..........    11

                           Submissions for the Record

    Prepared statement of Hon. Donald Beyer Jr., Vice Chair, a U.S.
      Representative from Virginia...................................    34
    Prepared statement of Hon. Mike Lee, Chairman, a U.S. Senator
      from Utah......................................................    35
    Prepared statement of Dr. Heather Boushey, President & CEO and
      Co-Founder, Washington Center for Equitable Growth, Washington,
      DC.............................................................    37
    Prepared statement of Dr. Jared Bernstein, Senior Fellow, Center
      on Budget and Policy Priorities, Washington, DC................    48
    Prepared statement of Dr. Douglas Holtz-Eakin, President,
      American Action Forum, Washington, DC..........................    59
    Prepared statement of Mrs. Rachel Greszler, Research Fellow in
      Economics, Budget and Entitlements, The Heritage Foundation,
      Washington, DC.................................................    74
    Response from Dr. Boushey to Question for the Record Submitted by
      Representative Trone...........................................    88
    Response from Dr. Bernstein to Question for the Record Submitted
      by Representative Trone........................................    88
    National Coronavirus Recovery Commission Report..................    90

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                       CONFIDENCE DURING THE CORONAVIRUS

                                   RECESSION

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                            THURSDAY, JULY 30, 2020

                        United States Congress,
                              Joint Economic Committee,
                                                        Washington, DC.
        The WebEx virtual hearing commenced, pursuant to notice, at
    3:00 p.m., in Room G-01, Dirksen Senate Office Building, Hon.
    Donald S. Beyer Jr., Vice Chair, presiding.
        Representatives present: Beyer, Heck, Schweikert, Trone,
    and Herrera Beutler.
        Senators present: Lee, Hassan, and Klobuchar.
        Staff present: Andres Arguello, Robert Bellafiore, Carly
    Eckstrom, Harry Gural, Colleen J. Healy, Christina King, Hope
    Sheils, Nita Somasundaram, Kyle Treasure, Jackie Varas, Emily
    Volk, Jim Whitney, and Scott Winship.

    OPENING STATEMENT OF HON. DONALD BEYER JR., VICE CHAIR, A U.S.
                      REPRESENTATIVE FROM VIRGINIA

        Vice Chairman Beyer. We are live, I believe. So, Chairman
    Lee, our distinguished Committee Members and witnesses, welcome
    to everyone.
        Our country faces two crises: a virus that has already
    killed 154,000 Americans; and the worst economy since the Great
    Depression. Our tragic failure to contain the coronavirus has
    led directly to this economic meltdown.
        The President's ill-advised push to ``liberate the states''
    and abandon strict social distancing measures has led to an
    explosion of new cases and new deaths, and is likely to prolong
    the deep economic downturn.
        The President's economic policy is his coronavirus policy,
    which tragically is first to put his head in the sand and then
    throw his hands in the air and blame others. That is the number
    one reason that there are more than 65,000 new cases a day, or
    why there are more than 30 million Americans on unemployment.
        We have had the privilege of talking to many prominent
    economists who all tell us the same thing: To restore the
    economy, first we must get the virus under control. It is not
    essential only to control or contain the virus, we must also
    give Americans a high degree of confidence that the virus is
    contained. They must know that they are safe before they will
    go back to work, or before they will return to stores.
        Fed Chairman Powell said quote: ``Until the public is
    confident that the disease is contained, a full recovery is
    unlikely.'' And the best that we in Congress can do is to give
    Americans confidence that will help them stay afloat while the
    virus rages.
        The economic damage is staggering. For 19 straight weeks,
    more than 1 million Americans have filed new unemployment
    insurance claims. We lost a net 15 million jobs since February,
    and the unemployment rate is the highest it has been in 80
    years.
        The labor market recovery has stalled. According to the
    Census Pulse Survey, the number of Americans employed fell by 4
    million in a recent week. For the fourth straight week, the
    number of Americans with a job has declined. And CBO estimates
    that unemployment will remain above 10 percent for the rest of
    the year.
        As a result, nearly one in five American households could
    not make the rent or mortgage payments in July. Millions stand
    in line at food banks. Forty percent of Americans report
    serious anxiety or stress.
        In March, Congress passed emergency Enhanced Unemployment
    Benefits to help Americans survive the coronavirus recession,
    enough to live on. Thirty million Americans received those
    benefits.
        The Democratic House voted two months ago to extend them,
    but Mitch McConnell refused even to consider the Heroes Act,
    knowing that millions of Americans who relied on those benefits
    live in uncertainty and fear. And tomorrow, thanks to
    McConnell, those unemployment benefits expire. And this will
    have ripple effects throughout the economy. Without benefits,
    jobless workers will reduce spending, miss rent payments, fall
    behind on mortgage payments, and even face eviction or
    foreclosure and more businesses will close.
        The Economic Policy Institute estimates that reducing the
    weekly federal benefits from $600 to $200, as some Republicans
    proposed, would reduce GDP by 2\1/2\ percent, and cost the
    economy 3.4 million jobs over the next year. That is more than
    the total economic growth in 2019.
        But there is a simple solution to this damaging
    brinkmanship. Let us just take politics out of it. Our
    Democratic witnesses, Heather Boushey and Jared Bernstein, as
    well as other of the nation's top economists, support the use
    of automatic stabilizers that tie federal spending to economic
    conditions. They critically provide help when the economy heads
    into a recession.
        If unemployment is elevated, unemployment insurance, along
    with SNAP, Medicaid, and other key supports should continue
    until the economy recovers. We should not have to vote 13
    times, as we did during the Great Recession, to extend
    unemployment benefits. This should be automatic. And it should
    only last as long as it is needed, and no longer.
        I believe this approach would appeal to fiscal
    conservatives. Yesterday, I introduced legislation to tie
    unemployment benefits to the unemployment rate in each state.
    If the bill were to become law, we would not be witnessing this
    damaging political showdown today.
        None of us can predict how long the recession will last, so
    let us not try to guess. It is very likely that whatever
    agreement Congress eventually agrees upon will not include my
    bill, and that is because the political power of some Members
    of Congress depends on holding Americans hostage. But we have
    to reach an agreement to extend and enhance unemployment
    benefits at some level. This is a moral imperative.
        I'll fight to make sure there is enough for unemployed
    Americans to weather the recession, and I will continue to
    fight to make sure that in the future such help is automatic.
        I look forward to the testimony from our witnesses, and I
    am happy to yield to the Chairman of our Joint Economic
    Committee, Senator Lee.
        [The prepared statement of Vice Chair Beyer appears in the
    Submissions for the Record on page 34.]

     OPENING STATEMENT OF HON. MIKE LEE, CHAIRMAN, A U.S. SENATOR
                               FROM UTAH

        Chairman Lee. Thank you very much, Vice Chair Beyer, and I
    thank you for presiding today for the first time as Vice Chair
    over this timely hearing.
        [Apparently the sound is lost here.]
        Vice Chairman Beyer. Senator Lee? Are you still there? I
    believe Senator Lee has disappeared for the moment. Is there
    anyone else here?
        [No response.]
        Okay, why do we not come back to Senator Lee. And while he
    is struggling with broadband in Washington, D.C., let me
    introduce our four distinguished witnesses, and we will defer
    back to our chairman as soon as he arrives.
        So we start with Heather Boushey, the President and CEO and
    the Co-Founder of the Washington Center for Equitable Growth.
    Her research focuses on the intersection between economic
    inequality growth and public policy. Dr. Boushey is the author
    of ``Unbound: How Inequality Constricts our Economy and What We
    Can Do About It.'' She co-edited ``Recession Ready: Fiscal
    Policies To Stabilize The American Economy,'' published jointly
    by The Washington Center for Equitable Growth and The Hamilton
    Project.
        Previously Dr. Boushey worked as an economist at several
    organizations, including The Center for American Progress, The
    Economic Policy Institute, and the Joint Economic Committee.
    She earned her Ph.D. in Economics from The New School for
    Social Research.
        Jared Bernstein--let me yield back to Senator Lee.
        Chairman Lee. Thank you. Thank you, very much. Sorry I lost
    my internet connection somehow.
        This pandemic and the havoc that it has wreaked on American
    lives and on the American economy is unlike anything we have
    seen certainly in recent memory. In response to the pandemic,
    Congress has taken unprecedented action, action that, along
    with Federal Reserve initiatives, helped to stabilize the
    economy and helped to make sure that it did not hit us too hard
    too quickly.
        Beyond the legislative changes that we enacted, existing
    features of the Tax Code and traditional safety net programs
    like unemployment insurance are helping families that lose
    income and jobs to the pandemic--the pandemic ravages in our
    communities. Known as ``automatic stabilizers,'' these policy
    provisions operate automatically and simultaneously with other
    actions taken by states and by local governments, and by
    Congress.
        But it concerns me that many want to extend the economic
    automatic stabilizers, as that would override the deliberation
    that the American people have come to expect of their
    Representatives, their elected officials who are in place to
    make law. And that, in turn, could hinder the economic
    recovery, in addition to weakening our Constitutional framework
    of our limited government system.
        Mandating more spending in the form of automatic
    stabilizers--stabilizers that turn on and off based on
    macroeconomic conditions in real time as they arise--
    contributes to one of the main problems of federal spending:
    that federal spending is overly automated, causing legislators
    to actively manage less and less of the budget, less and less
    of the federal outlays, as time moves on.
        Reducing legislative discretion--taking the discretionary
    authority and the decision-making power away from Congress,
    increases costs, and it reduces our ability to control the
    national debt. It also diminishes policymakers' ability to
    tailor responses to the specific conditions of any future
    crises that might happen.
        These things tend, inevitably, ultimately to diminish
    accountability of government to the American people. The
    extraordinary measures we enacted initially were warranted, but
    they are not strategies that we should necessarily continue to
    pursue now--certainly not without some hesitation, and
    certainly not without asking some questions about their
    advisability. These are unsustainable over the indefinite
    course of the current pandemic. And today I think we have to
    pivot to helping communities reopen safely.
        So our focus moving forward should be on policies that pave
    the way for an American recovery, and to allow businesses to
    adapt and reopen safely and--safely, and as quickly as
    possible, while at the same time giving their employees and
    their customers and other members of the public confidence in
    the procedures that are in place.
        There are a number of actions that Congress could take to
    strengthen the U.S. economy while we are going through this.
    And in the process of doing so, hasten our economic recovery.
        We should examine, and I think we ought to remove the
    regulations currently in place that are holding back businesses
    and workers from responding more dynamically to challenging the
    ever-changing economic circumstances. And we should consider
    how Congress can encourage Americans to save more so that they
    can be better prepared for future crises. Just as this is not
    the first crisis our country has faced, it is also not going to
    be the last. And the healthier we are economically and in every
    other way, the better prepared we can be to handle the next
    crisis as it arises.
        Our efforts should include leveraging charitable giving by
    reforming our tax laws, and specifically reforming the
    inequitable treatment given to charitable contributions in our
    existing Tax Code. This is a reform that could bolster our
    COVID-19 response, as we discussed in our last hearing. We have
    to remember that our safety net consists of three levels. We
    have got families. You have got charitable organizations. And
    you have got governments.
        Charitable organizations are in the middle of those two.
    They are very important. And in a global pandemic like this
    one, you see them stretched thin at both ends. Just as the
    demand for their services is higher than ever during something
    like a global pandemic, you have also got people less inclined
    and less able to donate in such a time--especially from people
    in the middle and lower ends of the economic scale.
        A reference should also include sun-setting all federal
    regulations that were waived during the pandemic. In a letter
    to the recently confirmed Director of the Office of Management
    and Budget, Russ Vought, several of my Senate colleagues and I
    asked that these waived regulations go through the regulatory
    review process. That is, before they can be put in again, we
    ought to review them to figure out whether they still make
    sense. This process would determine whether we need to maintain
    these regulations, whether we need to modify them, or whether
    we need to rescind them. Now we noted in our letter the absence
    of the waived regulations--the absence of these waive
    regulations being implemented--it actually improved our COVID-
    19 response. And it also allowed doctors to practice medicine
    across state lines and to provide telehealth services for
    Medicare patients.
        This resulted in better patient outcomes. It resulted in
    cost savings. And it resulted in a suppression of activities
    that would otherwise have likely led to more COVID-19 exposure.
    So all those things are good. We have to consider them for the
    longer term.
        Now also seems like a particularly good time to pass the
    Working Families Flexibility Act, which would allow more
    employers to offer their own workers a choice between overtime
    pay on the one hand, and time off, paid time off on the other
    hand.
        This could help workers take time off if they become ill,
    or if they need to care for loved ones, while also giving
    employers yet another tool to help weather these nasty
    disruptive effects associated with the pandemic on payrolls and
    on workers' schedules.
        But look, whatever actions we might take, we need to not
    lose faith in our ability as a deliberative body, both in the
    Senate and the House of Representatives, to represent our
    respective constituents and to consider and evaluate, debate,
    and improve various policy solutions tailored to the crisis
    that our country faces at this moment and in future moments.
    And we have to remember that policies should support the
    resiliency of the American people in the face of adversity,
    rather than making them more dependent on government.
        So thanks again, Vice Chair Beyer, for calling this
    important hearing. And thanks to the witnesses for being here
    today. I look forward to your testimony and to a worthwhile
    discussion.
        [The prepared statement of Chairman Lee appears in the
    Submissions for the Record on page 35.]
        Vice Chairman Beyer. Thank you, Chairman Lee, very much.
    And I look forward to working with you together on the
    charitable deduction issue.
        Let me continue with the introductions. Jared Bernstein is
    a Senior Fellow at The Center on Budget and Policy Priorities.
    He was Chief Economist and Economic Adviser to Vice President
    Joe Biden from 2009 to 2011. And before joining the Obama
    administration, he was a senior economist and Director of the
    Living Standards Program at The Economic Policy Institute. Dr.
    Bernstein is the author and co-author of numerous books that
    are popular with economic and academic audiences, including
    ``Getting Back To Full Employment: A Better Bargain For Working
    People.'' He holds a Ph.D. in Social Welfare from Columbia
    University.
        Dr. Douglas Holtz-Eakin is the President of The American
    Action Forum, which he founded in 2009. Previously he served as
    Director of the nonpartisan Congressional Budget Office, and as
    Chief Economist for the Council of Economic Advisers.
        Dr. Holtz-Eakin has spent more than a decade at Syracuse
    University where he was Trustee Professor of Economics at The
    Maxwell School, and he holds a Ph.D. in Economics from
    Princeton University.
        And finally, Rachel Greszler is a Research Fellow in
    Economics, Budget, and Entitlements at The Heritage Foundation.
    Her work focuses on policies that promote economic growth,
    individual freedom, and well-being. Mrs. Greszler's writing and
    research includes analysis of Social Security and Disability
    Insurance Program, public and private sector pensions, and
    labor market policies such as the minimum wage and paid family
    leave.
        Before joining Heritage in 2013, Mrs. Greszler was a Senior
    Economist on the staff of the Joint Economic Committee. She
    holds Masters Degrees in Economics and Public Policy from
    Georgetown University; and a Bachelor's Degree in Economics
    from the University of Mary Washington, one of my favorite
    Virginia universities.
        So welcome all of you today. We are thrilled to have you,
    and we will begin with Dr. Boushey. The floor is yours.

      STATEMENT OF DR. HEATHER BOUSHEY, PRESIDENT AND CEO AND CO-
    FOUNDER, WASHINGTON CENTER FOR EQUITABLE GROWTH, WASHINGTON, DC

        Dr. Boushey. Wonderful. Thank you, Vice Chair Beyer and
    Chairman Lee, for inviting me to speak with you all today. It
    is a real 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 broad-based economic growth.
        Our research shows that economic inequality systemically
    obstructs and subverts the pathways to growth, creating
    distortions in both investment and consumption. The economic
    uncertainty facing your constituents and our Nation is ``when
    will the Administration and Congress address the COVID-19
    pandemic?''
        Addressing the Administration's failure to contain the
    virus is the only way to restore confidence and put us on the
    path to economic recovery. The United States is experiencing
    the most uncontrolled and deadly outbreak of any high-income
    country in the world. Compared to the European Union, we now
    record 10 times as many daily COVID diagnoses and deaths.
        This failure is the result of a series of decisions made by
    the Administration. It is also the result of decisions made
    over the past 50 years that have created underlying fragilities
    in our economy and society. These decisions have made our
    economy less effective in good times, and less resilient to
    shocks. We have put ideology over evidence. We have chosen tax
    cuts and deregulation over investment to paid family leave,
    robust social insurance, and public institutions.
        We have put our faith in the idea that markets can do the
    work of governing. Our neglected unemployment insurance system
    has been unable to handle the millions of Americans losing
    their jobs. Millions have waited weeks or months as decades-old
    computer systems struggled to process claims.
        Now, the emergency unemployment has effectively expired
    because for months the Senate has refused to act. We have no
    nationwide system to contract trace confirmed COVID cases.
    Months into the pandemic, COVID tests for the general
    population can take a week or more to process, and access too
    often varies by race.
        What is uncertain is whether the Senate will renew the $600
    increase in the unemployment benefits that have been allowed to
    effectively expire. Over 11 percent of the workforce is
    unemployed. The unemployment rate for Black Americans is over
    15 percent, and over 14 percent for Latinos.
        We risk a cascade of potentially uncontainable economic
    damage if we do not immediately act to extend high unemployment
    benefits. Families need this money. Their landlords need this
    money. They need them to pay their rent. Their local business
    owners need them to keep ordering take-out, and popping by for
    socially distanced shopping.
        Like the virus out of control, high unemployment spreads
    economic pain throughout the entire community. Unemployment
    benefits accounted for 14.6 percent of all wage and salary
    income. Failure to extend the $600 boost will contract GDP by
    2.5 percent in the second half of this year. More than the
    economy grew in 2019. That would devastate local economies.
        It is states where unemployment benefits replace a greater
    percent of workers' wages that have had the strongest recovery
    as of early June. Enhanced benefits should only end when
    objective conditions show they are no longer needed.
        An unemployment-rate based trigger that turns off when a
    stable recovery is underway would allow this program to wind
    down automatically. The Vice Chair has a bill to do just that.
        The second priority to create certainty is to support
    states and localities with around the $900 billion in the
    HEROES Act. They are bearing the brunt of responding to this
    virus. They are losing tax revenue and, as a result, have shed
    1.5 million jobs so far, even as their services are more
    necessary than ever.
        Other priorities include food assistance, rental
    assistance, extension of the eviction moratorium, direct
    payments, investments in communities of color hit so hard by
    the virus, funding to ensure safe and secure elections in early
    November, and premium pay for essential workers.
        You should also implement the data tools to show how the
    recovery is distributed up and down the ladder. The GDP 2.0
    measure, which we have discussed here before, will tell us
    which families are recovering from the crisis, and which need
    more help.
        And I urge you, do not support a bill with enhanced
    liability protections for big corporations facing lawsuits
    where they put their workers at risk. Markets cannot perform
    the work of government.
        Americans need public institutions that can protect them
    from threats to their lives and livelihoods, and provide
    leadership in times of crisis.
        Thank you. I look forward to your questions.
        [The prepared statement of Dr. Heather Boushey appears in
    the Submissions for the Record on page 37.]
        Vice Chairman Beyer. Dr. Boushey, thank you very much, and
    we appreciate it.
        We will move on to Dr. Bernstein.

      STATEMENT OF DR. JARED BERNSTEIN, SENIOR FELLOW, CENTER ON
              BUDGET AND POLICY PRIORITIES, WASHINGTON, DC

        Dr. Bernstein. Thank you, Vice Chair Beyer, and Chairman
    Lee, for the opportunity to testify before you today.
        The U.S. economy is a precarious place. We learned this
    morning that the GDP contracted at the fastest rate on record
    in the last quarter, a 33 percent annualized rate. Investments
    in homes and businesses fell by half. These nightmarish numbers
    need context, however.
        They reflect the economy falling off a cliff in April,
    partially reviving in May and June as local economies across
    America began to reopen. It is clear, however, that these
    reopenings came too soon, with far too little attention paid to
    controlling the coronavirus.
        Today, because of the ongoing failure to control the spread
    of the virus, tens of millions of Americans continue to
    experience severe disruptions to their lives and their living
    standards. New evidence, which is more recent than last
    quarter, shows that many now risk hunger and eviction.
        Over 30 million people, about a fifth of the current labor
    force, claimed unemployment benefits in recent weeks. And as
    members of this committee well know, they all face a
    potentially huge negative shock to their income should their
    enhanced benefits expire tomorrow.
        In this regard, one of the key points of my testimony today
    is that, while we can and should have a good debate about their
    levels, allowing these enhanced benefits to expire represents a
    failure on top of a failure. Leadership has failed to control
    the spread of the virus, and after initially strong fiscal
    actions--for which I give Congress credit--is now failing to
    help economically vulnerable Americans cope with the fallout
    from the failure to control the virus.
        Congressional majorities appear to agree with the need to
    expand enhanced benefits. The bad news is, the debate over the
    issue started too late to avoid expiration. It is also of grave
    concern that the Republicans' proposal in the new HEROES Act,
    cutting the $600 weekly plus-up to $200, and then requiring
    states to hit a 70 percent replacement rate, represents a large
    benefit cut, something like 25 million jobless persons and
    their families, at a time when the economy and job market are
    clearly weakening.
        On average, this cut, $600 to $200, would lower weekly
    benefits by over 40 percent. In Utah, Chairman Lee, average
    benefits would fall 42 percent. In Virginia, Vice Chair Beyer,
    they would fall 47 percent.
        Small businesses are closing at an accelerated rate.
    Business bankruptcies are up 26 percent from a year ago, and a
    whopping--this is my first figure, actually--a whopping 80
    percent of the U.S. population lives in places where economic
    activity is once again retrenching due to the spread of the
    coronavirus.
        Up-to-the-minute labor market indicators suggest there is a
    fair chance that after strong job growth in May and June,
    payrolls in July may have contracted on net. These unsettling
    trends are shaking the confidence of American businesses and
    households while leading to great uncertainty about what the
    future holds.
        Furloughed employees worry about transitioning to the ranks
    of the permanently unemployed. Working parents with young
    children are fraught with uncertainty about schools restarting
    in the fall, wondering what sort of child care arrangements
    they will need if schools remain even partially shut down.
        Businesses large and small are unable to reliably forecast
    revenues, invest in the future, or even know if they can make
    it for another month. State and local governments are facing
    their largest shortfall in years, leading to job losses and
    great uncertainty regarding their outlook.
        Whatever burdens Americans face on average, they are far
    more significant for persons of color, who have
    disproportionately been hit by both the virus and its economic
    impact.
        Congress must do all it can to reduce this uncertainly and
    give the American people reasons to believe that the Federal
    Government is their reliable partner. They need to see that
    members of this body will work together with the requisite
    urgency to help them and their families and their businesses
    make it through the other side of this crisis.
        We can, we should, discuss and debate the most helpful way
    to get there. I understand and respect that others are going to
    have different ideas, but what is not debatable is that the
    American people and the economy once again needs your help. And
    there is no plausible reason for such help to be delayed. In
    fact, to do so unnecessarily boosts uncertainty, reduces
    confidence by consumers and businesses, while prolonging the
    pandemic, the downturn, and avoidable human suffering.
        Thank you.
        [The prepared statement of Dr. Jared Bernstein appears in
    the Submissions for the Record on page 48.]
        Vice Chairman Beyer. Dr. Bernstein, thank you very much.
        We now move to the testimony from Dr. Holtz-Eakin.

       STATEMENT OF DR. DOUGLAS HOLTZ-EAKIN, PRESIDENT, AMERICAN
                      ACTION FORUM, WASHINGTON, DC

        Dr. Holtz-Eakin. Vice Chair Beyer, Chairman Lee, thank you
    for the privilege of being here today. Let me make four points
    briefly, and then I look forward to the chance to answer your
    questions.
        Point number one is that the U.S. economy entered 2020
    growing strongly, and with a labor market that was displaying
    remarkable resiliency, creating many more jobs than I at least
    thought possible this late in the recovery. It was drawing into
    work those who had been marginally attached to the labor force,
    those with the least skills, least experience, and it was that
    part of the labor market that was achieving the greatest wage
    gains. This was an enormous help to communities of color, and
    to others who had been isolated economically.
        That economy got hit with a downdraft of enormous historic
    proportions. As has been noted before, we saw the second
    quarter GDP fall by nearly 10 percent, a nearly 40 percent
    annual rate. This has been accompanied by other statistics that
    are simply outside the bounds of normal experience. Sustained
    high claims for unemployment insurance. Twenty million jobs
    lost in the month of April alone, ten times more than any other
    single month of job loss in U.S. history.
        And to the credit of Congress and the Federal Reserve, the
    response has been correspondingly large. When the Federal
    Reserve identified massive cash flow shortages in the economy
    and disruptions in financial markets, we've flooded those
    markets with liquidity, expanded its balance sheet by trillions
    of dollars, and we have seen remarkably good functioning of
    financial markets through the pandemic recession thus far.
        Congress, with the Family First and the CARES Act,
    undertook an enormous fiscal expansion, nearly 10 percent of
    GDP, that provided assistance to households, provided
    assistance to small businesses, especially if they remained
    attached to their workers, provided assistance to key
    industries, and in my view successfully executed a strategy
    that said we will provide enough liquidity through Federal
    Reserve and Congressional actions to wrap the economy in that
    liquidities tied from the virus, two-and-a-half months, and
    then resume operations.
        Going forward, it is clear that we can no longer simply
    hide from the virus. We will have to be able to operate an
    economy in the presence of the virus for the foreseeable
    future. And figuring out the right fiscal policies in those
    settings I think requires looking at the roots of the downturn.
        And the key issue in the downturn is that households,
    without any loss in income, stopped spending. In particular, in
    the second quarter two-thirds of the decline was diminished
    spending on services, and fully a third of the list was reduced
    spending on health care services.
        Households, especially affluent households, stopped going
    to restaurants, traveling, going to hotels, they stopped doing
    anything that involved personal interaction and the delivery of
    services.
        To have a successful strategy going forward, we cannot
    simply rely on income replacement in the form of checks or
    unemployment insurance. We in fact have done a remarkable job
    of that already. In the second quarter, the economy contracted
    by 10 percent. Disposable personal income rose by 10 percent.
    And the saving rate exceeded 25 percent.
        To be successful, we have to somehow address the safety
    issues that are the Achilles heel of this economy. It has to be
    the case that workers are willing to go to work, businesses are
    willing to open their workplaces, customers feel safe
    conducting commerce. Those kind of supply side considerations,
    the workers and the businesses, should be the focus of what
    Congress does.
        I am a big fan, for example, of tax credits for subsidizing
    the purchase of PPE, the provision of testing, the modification
    of workplaces so as to be able to conduct business in the
    presence of the virus. That is a strategy that has to be an
    essential part of anything that will be successful going
    forward.
        That strategy does not include, in my view, automatic
    triggers on unemployment insurance, or other such expansions of
    mandatory spending. From a budgetary perspective, mandatory
    spending is the original sin of federal budgeting. Prior to the
    existence of mandatory spending, we balanced the budget on
    average. Since it was widely adopted in the mid-1960s, we
    rarely balanced the budget, and indeed in the 21st Century we
    have never stabilized our debt relative to GDP.
        So we should only have additional mandatory spending
    programs if they are absolutely necessary. We have seen the
    broad discretionary response. I see no compelling case that
    says Congress cannot respond effectively. We do have existing
    automatic stabilizers, as Chairman Lee pointed out. There is no
    reason to suspect they are failing.
        And the entire exercise of putting the automatic triggers
    presupposes that this Congress has better information, has
    better judgment about the policies than a future Congress,
    which might be in a much better position to make those same
    decisions.
        So I do not think you can make the case to give up our
    current system in favor of that mandatory system at this point
    in time.
        So I thank you for the chance to be here today, and I look
    forward to answering your questions.
        [The prepared statement of Dr. Douglas Holtz-Eakin appears
    in the Submissions for the Record on page 59.]
        Vice Chairman Beyer. Thank you, Dr. Holtz-Eakin, very much.
    And now we go to Mrs. Greszler.
        Welcome.

         STATEMENT OF MRS. RACHEL GRESZLER, RESEARCH FELLOW IN
     ECONOMICS, BUDGET AND ENTITLEMENTS, THE HERITAGE FOUNDATION,
                             WASHINGTON, DC

        Mrs. Greszler. Thank you so much for the opportunity to be
    here today. Along with Ms. Boushey, it is a pleasure to be back
    at a JEC hearing.
        As we talk about the shared goals of reducing uncertainty
    and increasing confidence, it is important to recognize that we
    can help Americans who are suffering economic hardships without
    delaying a recovery or further driving America toward fiscal
    collapse, potentially then leaving us unable to respond to the
    next crisis.
        One-size-fits-all government interventions come with
    tradeoffs, especially in light of our $26 trillion debt. So it
    may seem, amid high unemployment, struggling businesses, and
    general uncertainty the government programs could help, but
    that is often when considering only what people can get and not
    what they have to give up.
        So even some of our most basic programs are not without
    consequence. Food stamps reduce hunger, but they restrict what
    items families can buy, and where they buy them. Workers often
    wait a year to receive disability insurance benefits, and
    another two to receive Medicare.
        Some workers are still waiting to receive the unemployment
    benefits from the CARES Act, and some businesses have thrown up
    their hands in confusion and frustration and returned PPP
    loans.
        Automatic adjustments are logical, but they cannot always
    account for individual circumstances. When friends of mine
    suffered an income loss, their food stamps automatically
    increased from $700 to almost $1,000 per month. But they did
    not need more food. They needed a home and a second job.
        When the government decides who receives what, when they
    receive it, and how much they receive, people have less control
    over their circumstances. People save less if they believe the
    government programs will provide for them. And they have less
    to spend if the government takes more in taxes to finance those
    programs.
        And already Americans pay more in taxes than they do on
    food, housing, and clothing combined. It may seem like everyone
    would end up equally well off, paying taxes in and getting
    benefits out, but government programs are not like savings
    accounts that households can access when they want based on
    what is best for them.
        Recent stimulus checks and increased unemployment benefits
    were not helpful to the worker who had an empty bank account
    and lost his job when his car broke down last year. And Social
    Security seems like a sham to someone like my colleague who
    died last week at age 62 and cannot pass on the hundreds of
    thousands of dollars he paid into the system to support his
    wife and his children who will soon be starting college.
        So it is just really hard for one-size-fits-all programs to
    meet the needs of 129 million very different households. I do
    think that those government programs can provide short-term
    Band-aids, but lasting security and prosperity comes from
    households having options instead of feeling trapped.
        People need opportunities to earn a living. They need to
    achieve rising incomes, and to be able to save for their future
    needs and desires. And responsible budgeting and planning ahead
    are key, but the Federal Government sets a terrible example
    here.
        We are told that we should have three to six months' worth
    of expenses set aside for a rainy day. And yet, despite nearly
    a decade of economic growth, the Federal Government has zero
    savings, and instead 62 months worth of debt going into COVID-
    19.
        We are very fortunate that we have been able to borrow to
    combat the pandemic, but there is a fast-approaching limit to
    our seemingly inconsequential debt. And the danger is, we do
    not know the limit. Fiscal crises are often sudden and severe,
    leaving no room for a gradual retreat.
        So as calls for more aggressive federal programs intensify,
    Congress should instead work towards a stronger economic
    recovery by first replacing the $600 unemployment benefit with
    one that better aligns to workers' previous earnings, to help
    unemployed workers without delaying the recovery.
        Second is opening doors to work. With limited jobs
    available, people need options, and that could include
    nontraditional work such as freelancing. Last year, 76 percent
    of people said that they would consider freelancing if there
    were a recession. And 46 percent of people who do freelance say
    it is their only option because of their own health condition
    or a family situation.
        Policymakers should also support workplace flexibility. The
    Working Family's Flexibility Act would allow low-wage workers
    to accumulate paid time off. And rolling back the overtime
    threshold would provide more stable incomes and more remote
    work options for lower income workers.
        And finally, policymakers should enact universal savings
    accounts so that everyone can save in a single, simple and
    flexible account to use for any purpose, and without penalties.
    These accounts have been particularly helpful to lower and
    moderate income households in Canada and the UK. Most
    households would prefer to have a savings account available
    when they need it to spend on what they want than to have the
    government specify what they can get and when they can get it.
        Thank you, and I look forward to your questions.
        [The prepared statement of Mrs. Rachel Greszler appears in
    the Submissions for the Record on page 74.]
        Vice Chairman Beyer. Mrs. Greszler, thank you very much.
    And thank you to all of our panelists.
        I will now begin our first round of questions.
        Dr. Boushey, is there any evidence whatsoever that the
    supplemental unemployment insurance benefit, the $600, has
    acted as a work disincentive? I keep reading again and again
    that because indeed many people are making more with the
    benefit than they did before, that they do not want to go back
    to work.
        Dr. Boushey. So there is not evidence of that as of yet. I
    am actually looking in my written testimony. I have a fantastic
    chart, which I am going to hold up on the screen, if I can do
    this in video-land here, but there is a chart--it is not in
    color because I do not have a color printer at home. It shows
    that 70 percent of the unemployment insurance recipients who
    returned to work in June actually earned more on unemployment
    than they did in their prior job.
        So this is from late-breaking data from a number of
    scholars, a number of economists, and there is a bunch of other
    evidence. There are a number of studies also cited in Jared's
    research, that indicate that really what is hampering people
    from getting back to work is the uncertainty around the
    coronavirus, the uncertainty about whether or not the job is
    available and open.
        I mean, remember that the bulk of the job losses have been
    in those face-to-face industries. So if you are trained as a
    chef, or you are trained as a waiter, and your restaurant just
    is not open yet, it is very difficult to go back to work still.
    So we have to sort of bear that in mind. But what we do know
    from the emerging evidence is that, as jobs come back online,
    people are jumping back into work. And I think it is in no
    small part because most people understand that work is the path
    to maintaining their income, and that is also the way that most
    people get their health insurance.
        So we have created a really strong incentive for people to
    focus on getting back to work, and the evidence so far is not
    that the $600 is the key thing that is preventing people. And I
    just want to stress that it really is the key thing that is
    keeping spending going. And if you want to be creating more
    jobs, you have to sustain that consumer demand. You have to
    keep people paying their rent. You have to keep them spending
    in their communities until we contain the virus.
        Vice Chairman Beyer. Thank you, very much.
        Dr. Bernstein, one of the current Senate Republican plans
    is to cut the $600 to $200 for an interim period, and then move
    it back up to a replacement of 70 percent of the worker's past
    wages.
        Georgia Labor Commissioner Mark Butler, who is a
    Republican, called the 70 percent wage replacement model, which
    would put strains of already overwhelmed state unemployment
    offices, quote, ``the dumbest idea ever.''
        Do you agree? What do you think of the 70 percent
    replacement model?
        Dr. Bernstein. Well, the dumbest idea ever is a really high
    bar. I think probably more to the point is, it is
    unimplementable within two months. I say that with great
    confidence because I spent some time in court in my role as
    Chair of the Board of National Employment Law Project, that is
    extremely close grain on our information on this; that because
    we have 50 different state unemployment insurance systems, and
    some of them are demonstrably quite creaky, which is why we had
    to do the $600 plus-up in the first place, they simply do not
    have the administrative capacity to achieve this. Which means
    that the $200 would likely get locked in.
        So what we should be worrying about is the impact on the
    macro- and microeconomy from this cut. I agree with a lot of
    what Doug said about the importance of this spending to
    supporting the economy through this very difficult period. What
    would have been a deep recession would have been a deep
    depression without it.
        If we were to go from $600 to $200, Mark Zandi, I have in
    my testimony, the economist estimates that this would be a loss
    of a million jobs, and it would raise the unemployment rate by
    more than half a percent. Now the unemployment rate is already
    11 percent, which is higher than its peak in what we used to
    call ``The Great Recession.'' That would mean an unemployment
    rate of probably north of 11\1/2\ percent.
        So this is terrible micro, leading to, in my view,
    cascading hunger and evictions, and it is terrible macro
    pushing exactly the wrong way on an economy which is very
    clearly in a stall right now.
        Vice Chairman Beyer. Dr. Bernstein, thank you very much.
        Let me now recognize our Chairman, Senator Lee, for your
    questions.
        Chairman Lee. Thank you very much, Mr. Chairman.
        Mrs. Greszler, you have highlighted a number of reforms
    that could improve employment opportunities, and flexibility
    for workers beyond the pandemic once this thing is over.
        This includes allowing workers to choose between paid time
    off and overtime pay, as the Working Family's Flexibility Act
    would accomplish. How would those kinds of policies improve
    economic resilience as compared to an extension or expansion of
    automatic stabilizers?
        Mrs. Greszler. So families need to feel like they are in
    control, and to be able to act quickly based on what is best
    for them. Now under the Working Family's Flexibility Act, a
    lower wage worker could have accumulated a week, six weeks,
    however much amount of paid time off, that they can cash in
    whenever they want.
        The problem is, when you have a government program that is
    in charge of those things--you know, Washington State has a new
    paid family leave program, and yet people were told they cannot
    apply for the program. They are overwhelmed. They were waiting
    a month before they could even apply, and then months more
    before they could get benefits.
        And so you end up seeing how you do not actually have
    control when it is the government program. And I agree with
    everything happening on the UI Fund, but the problem there is
    that the programs cannot handle what we want it to do, which
    was to replace the hundred percent of people's incomes. And so
    it was that failure of a government program to do the right
    policy, that we instead ended up with this flat benefit of $600
    that might be $200.
        So we need to have more flexibility. You know, having the
    options like independent work where you can just pick up a job
    and go out and do it, instead of having governments like
    California that are trying to outlaw those types of work.
        Chairman Lee. Okay, thank you. That is helpful.
        This next question will go to you, Mrs. Greszler, and also
    to Dr. Holtz-Eakin after you answer.
        You know, there is bipartisan agreement around the need to
    reform the budget process, and the budget itself in order to
    address what has become a really unsustainable debt trajectory.
    And we certainly need to do that once the economy is on more
    solid ground.
        This agreement was recently underscored by a letter calling
    for budget reform that was signed by 60 Members of the House of
    Representatives. I sincerely hope there is political will for
    that, as we failed to implement important budget reforms after
    recovering from the Great Recession.
        So again, Mrs. Greszler first to you, and then Dr. Holtz-
    Eakin. In your opinion, would expanding automatic stabilizers
    worsen our current special debt trajectory?
        Mrs. Greszler. Yes, and that is the problem: facing the
    situation where we are basically putting everything on the
    credit card. You know, we would not tell households, every time
    you hit a bump in the road, your car breaks down, you lose your
    job, put it on the credit card and do not ever pay it off again
    in the future. And that is effectively what we are talking
    about here. And so there needs to be changes to those
    processes, particularly addressing the mandatory spending side.
        Chairman Lee. Dr. Holtz-Eakin, do you agree?
        Dr. Holtz-Eakin. Yeah. As I mentioned in my opening
    remarks, mandatory spending is a key part of our long-term
    budget difficulties. The reality is that prior to the pandemic,
    the federal budget was on an unsustainable trajectory. We are
    going to emerge at some point back at full employment on an
    unsustainable trajectory, jumping off a much higher level of
    national debt.
        And all I am asking is that Congress at some point
    stabilize that relative to GDP. That is the minimum that a
    nation should be capable of doing. We have not done that in the
    21st Century largely because of our existing mandatory spending
    programs. Adding new ones is unwise at this point, in my view.
        Chairman Lee. So expanding automatic stabilizers would
    increase the federal budget's mandatory spending. And so that
    in turn would leave less room for discretionary spending. It
    seems to circumvent the legislative process, and it is
    something that seems to mean that legislators are better
    equipped to be able to escape their responsibilities as elected
    officials.
        Dr. Holtz-Eakin, does expanding automatic stabilizers make
    members of Congress less accountable to their constituents? Are
    policymakers better able to respond to a crisis using real-time
    information, rather than just putting everything on auto pilot?
        Dr. Holtz-Eakin. It was a clear attempt to tie the hands of
    a future Congress to circumvent their sole responsibility to
    respond to events. And it cements an existing budget problem
    that has nothing to do with the gap between the revenues and
    the spending.
        The fact is that we had spent too little on basic research,
    infrastructure, education, and national security. Those were
    discretionary categories because they are getting crowded out
    of the budget by large mandatory spending programs.
        So if we are going to get back to investing in the future
    security and growth of our country, we are going to have to
    free up discretionary choices of Congress. This goes in the
    wrong direction.
        Chairman Lee. Well said. What makes life easier for Members
    of Congress does not necessarily make for better policy or
    better accountability for the American people.
        Thank you, Mr. Chair.
        Vice Chairman Beyer. I now recognize Congressman Denny Heck
    from the State of Washington.
        [Pause.]
        Denny, you are still muted.
        Representative Heck. Are you sure? Can you hear me?
        Vice Chairman Beyer. We can hear you now, yes.
        Representative Heck. Before I ask my question of Dr.
    Bernstein, I have to respond quickly to three or four head-
    slapping assertions that have been made here I find stunning.
        The idea that we should recalibrate unemployment
    compensation to a percentage of income? My State Department of
    Employment Security tells me that it would take a minimum of 10
    to 12 weeks, during which time enormous amounts of human
    suffering will occur.
        Secondly, perhaps most stunningly, the idea that Social
    Security is a, quote, ``sham.'' Social Security is unarguably
    the single most effective poverty reduction program for the
    elderly in the history of the world. It is not a sham.
        And thirdly, this idea about automatic stabilizers taking
    decisionmaking away from the Congress who is better equipped to
    do it on their own. Oh, yeah? We have a net negative approval
    rating of 58 percent right now. And no small part of that is
    because we are failing to step up and act and respond to the
    pain and misery out there.
        I have two images I cannot get out of my head. One is a
    Herbert Hoover imitation going on right now after the onset of
    the Great Depression, a suggestion that the free market is just
    going to take care of this.
        Wake up! The free market is not taking care of this. And a
    second image is of Thelma and Louise in the final scene, where
    Louise slams the pedal to the metal and they grasp hands and
    they go out over the cliff as we shoot past the unemployment
    enhancement benefit, as we shoot past eviction protection.
        I am not holding hands with anybody and going over the
    cliff while Americans suffer.
        Dr. Bernstein, I am shocked and disappointed, Jared. You
    did not mention rental relief. The last month for which we have
    data, 30 percent of Americans could not pay all their rent; 20
    percent could not pay any. Day after tomorrow, the rent is due.
    We have people exposed beyond belief. The next step for those
    states where eviction protection is not put in place is they
    are going to be evicted. There are going to be more homeless.
    They are going to be sleeping under bridges, and any other
    issue in their life, is it going to be taken care of, whether
    mental health, or unemployment, or substance abuse. Or they are
    going to move in with other people where they create a petri
    dish for the expansion of COVID-19.
        So 160 co-sponsors of the House-passed version; 950
    national and local organizations supporting rent relief. Jared,
    tell me, please, as you have written and said before, this is a
    critical part of what we must do to respond to this problem
    going forward.
        Dr. Bernstein. I certainly agree with you, and very much
    emphasize my written testimony. In my spoken testimony I
    mentioned the threat of cascading evictions, and I could not
    concur more with everything you just said.
        By the way, including this debate about discretion and
    mandatory. I would love to get back to that, because I really
    want to argue with my colleagues on the other side about that.
    I think they are conflating entitlements with counter cyclical
    policies in a way that is really bad economics.
        Look, here is the thing that I want to underscore. I know
    you know, Representative Heck, but this is something people do
    not appreciate enough.
        Even when you have an eviction moratorium, it does not mean
    that you do not have to pay rent. It means that your rental
    payments often accumulate to the other side of the moratorium.
    So when the moratorium ends, there you are stuck with a bill
    that you cannot possibly make if you are a low-wage, low-income
    person who is facing joblessness in this labor market.
        In this regard, enhanced unemployment benefits have been a
    lifeline. And as it fades, it is going to cascade down the
    chain to landlords, to banks, to investors. This is a problem
    on every level of our economy.
        What I appreciate most about the plan you are talking about
    is it is fiscal relief. It does not just tell people, here is a
    few months where you do not have to pay your rent that is going
    to come crashing in on you after those months are over. It
    actually relieves you of those rental payments. And I know you
    have significant resources devoted to this in the HEROES Act.
    And I deeply, deeply urge the Senate, if they want to avoid a
    cascading homelessness problem, to put that in the next relief
    bill.
        Representative Heck. Thank you Jared. And a reminder to
    everybody that more than 50 percent of rental units are owned
    by moms and pops. These are not national corporations. These
    are people who chose to build for their retirement security,
    not through the accumulation of a 401K, but my buying one or
    two or three rental homes or duplexes.
        This is a whole housing ecosystem that we must rescue for
    this period of time if we are to avert disaster.
        Thank you, Mr. Chairman.
        Vice Chairman Beyer. Thank you, Congressman Heck. By the
    way, recent numbers from Fannie Mae and Freddie Mac suggest
    that 80 percent of the multi-family mortgages that are in
    forbearance are those moms and pops, those 50 percent that are
    the C class.
        Let me now recognize the Congressman from Arizona, David
    Schweikert for his questions.
        Representative Schweikert. Thank you, Mr. Vice Chairman.
        Instead of spouting off on some of the things where I
    wish--you know, I think we were having a little bit of a
    partisan interplay on some of our facts--I want to actually try
    to see if we can find an overarching holistic vision.
        So, Mr. Holtz-Eakin, if I turn to you and right now said,
    instead of speechifying, I turned to you and said: Give me a
    playbook that you would see for the next six months that brings
    as much stability and opportunity for the populations that have
    been just crushed, what would that six month plan look like?
        Dr. Holtz-Eakin. So my thinking on this is heavily
    influenced by the experience of the U.S. after the terrorist
    attacks in 2001 where it became clear we had a threat to the
    U.S. population, and the top priority was to deal with the
    threat.
        But it was also necessary to operate the economy in the
    presence of that threat. And we spent a lot of national effort
    and time doing that. It involved enormous amounts of regulation
    in the interests of national security--not all of which I think
    was a good economic idea.
        We set up the TSA so people would feel safe on planes. We
    inspected every cargo container coming into the U.S. at
    enormous expense. And in general we raised the cost of doing
    business enormously. And the economy did not perform very well.
        And there was fiscal stimulus in 2002 and 2003 and 2005,
    and then again in 2008, and none of it was terribly successful
    because we were not taking care of the supply side conditions.
        We are in the same position now. We do need to get workers
    back into workplaces safely. That is going to require some
    modifications of workplaces, some PPE in the near term. A much
    better testing strategy than we have at the moment. Those are
    all costly endeavors. I think helping out that adjustment is
    important.
        We are going to need to provide owners with some security
    that they are not at risk of lawsuits. If they take reasonable
    precautions, they should have some liability protection.
        But we are going to have to make sure that we do not over-
    use the federal bonus to do two things: (a) provide income
    supplement; but (b) provide a barrier to re-employment. That is
    the problem. The higher the income supplement, the bigger the
    barrier to re-employment.
        So it is too high. It needs to be lower. I will leave it to
    Congress to decide where the appropriate compromise is, and
    then look at the rest of the package to make sure that you have
    adequate income support so that you do not actually have a
    demand failure in the second half of this year.
        But if you do all of the demand things with nothing on the
    supply side, I really fear we will be very frustrated and
    unsuccessful in getting people back to work. And in the end, it
    is going to be a long, hard thing to get people back to work.
    And past the next six months, we will have to worry about
    genuine movements of people from one sector to another as the
    economy reconfigures, as it always does in the aftermath of a
    recession, but will even more so in this instance.
        So for six months I think you have got to have some supply
    side elements. Make sure you do not absolutely cut off all the
    demand. But that is not where the key problem is.
        Representative Schweikert. Okay, so thank you. You actually
    brought up two things that have been bothering me, and I have
    been trying to figure out. So you do what is necessary in many
    ways to keep demand stable, or at least active.
        How do you then build the incentive to support demand
    stimulus while providing the incentive for every individual to
    be able to go back to work in a safe manner. Do you provide a
    stimulus, or a bonus, or a demand-side scheme to actually go
    back to work?
        Dr. Holtz-Eakin. You could put in a re-employment bonus. I
    think it would be enough to lower the barrier by, you know,
    taking the $600 where two-thirds of people have a replacement
    rate over 100 percent, and then get it down to something more
    close to traditional levels. And there is a lot of evidence
    that high replacement rates extend unemployment, extend
    benefits, extend spells of unemployment. We just need not
    overdo that and damage our capacity to respond.
        So do that, and do that well. We really do need to fix the
    testing kit. I can go on for longer than I want to right now,
    but the bottom line is these clinical level tests, the BRC
    tests that are so expensive and take so long, are not necessary
    to identify infectious individuals. A one dollar test, and
    three of them approved by the FDA, can identify an infectious
    individual. Everyone should get up every day, take a test, and
    if you flunk, do not go to work, do not go to school.
        That is what we need. And we can do that right now.
    Instead, we are putting clinical tests at the heart of this.
    That is a mistake.
        Representative Schweikert. We are actually--we just
    introduced a piece of legislation to actually provide a credit
    on your--on actually your payroll side. So you get the credit
    almost immediately. We do not have time for it right now, but
    we have also been working on the impact of not having robust
    daycare, or not having schools, those other things.
        And the long-term impact that would mean, particularly for
    female workers. We were finally seeing that remarkable movement
    in income, and it has now been crushed. I have an intense
    concern, and I think this applies to Republicans and Democrats.
    We need to get this policy going again so the separation of
    income differential that has happened in the last six months,
    we all need to start working on finding a way to have the path
    opened again.
        And with that, Mr. Vice Chairman, I yield back.
        Vice Chairman Beyer. Okay, Congressman Schweikert. We will
    now recognize Congressman David Trone from Maryland for his
    questions.
        Representative Trone. There we go. Thank you, Mr. Chairman.
        Dr. Bernstein, the National Bureau of Economic Research
    tells us that 41 percent of Black-owned businesses, 32 percent
    of Latino-owned businesses, 36 overall immigrant-owned
    businesses, have permanently closed.
        Last week I helped to introduce a Jobs and Neighborhood
    Investment Act with my colleague, Greg Meeks of New York. This
    legislation would make about $18 billion available for
    investments for low-income and minority communities that have
    been hit hard by COVID. They will give you community
    development for financial institutions and minority deposit
    institutions capital, liquidity, and the operational capacity
    to expand the flow of credit into the under-served communities.
        What effects do you expect to see from expanding the credit
    access to these minority-owned businesses? And also what else
    should we be doing to shore up these impacted businesses?
        Dr. Bernstein. It is an excellent idea, but an idea that
    should have bipartisan support. It is widely understood that
    credit markets fail in massive terms when it comes to providing
    access to capital for the very folks you are targeting with
    your bill.
        We know this from PPP statistics, that if you essentially
    could not call up your banker and get at the front of the line
    for a loan, oftentimes you went without it. And if you look at
    the results with the PPP, you see precisely that kind of
    disproportionate racial injustice that you described.
        So that is a critically important piece of this puzzle.
        I think the point that I would make is that we have seen
    throughout this crisis that when we provide businesses with
    low-cost credit, some of them will take it, and some of them
    will not.
        And one of the reasons we know that those who will not do
    not take it, is because of the uncertainty. That in fact is the
    theme of this--of this hearing today. They just do not know
    when revenue is going to start flowing again.
        So in this regard, to the extent that grants can take the
    place of loans, I think they could be even more helpful for
    some of the kind of businesses we are talking about.
        Representative Trone. Well I think that makes a lot of
    sense. The aversion to take on debt is something these small
    businesses are really going to feel to be part of their
    business.
        Okay, Dr. Boushey, this week the Center for Economic Growth
    put out a report describing home ownership rates have declined
    the most since the Great Depression. And now these declines are
    concentrated on the bottom half of the income distribution
    among Black and Hispanic families.
        So housing is clearly the most important source of wealth
    for most U.S. families, and thus it is a wealth equalizer. And
    as we debate near-term approaches for stabilizing the economy,
    and American families, what actions do you recommend we take to
    reverse this trend to help all families be able to buy their
    home?
        Dr. Boushey. Well I think it is a great question, and it is
    so important right now with so many families who are struggling
    to be able to afford rent, and to be able to continue to pay
    their mortgage.
        I think that the key thing right now for so many families
    is being able to have that income. And so a lot of it does come
    back down to continuing to extend those additional unemployment
    benefits so those families who are out of work and do not have
    the means to pay their mortgages.
        I know in my family we have folks who are unemployed, and
    that is the most important thing; those benefits are making a
    difference between being able to pay that mortgage and not.
        I think as we look a little bit over the longer time
    horizon, one of the things that came out in this study is how
    home ownership is declining for younger cohorts of families.
    And those are families who have not saved enough. These are
    people that graduated into the Great Recession that we know
    have seen lower lifetime, lower incomes because of what
    happened over the past decade.
        So a lot of it I think is really focusing on ensuring that
    we are doing everything we can to stabilize that labor market,
    especially for young people, is one of the best investments we
    can make to allow them to build up that capital and to buy
    homes in the future.
        Representative Trone. That makes sense.
        Dr. Boushey, you have written about the negative impacts on
    home--on income inequality among the average American worker,
    and now that inequality harms our country's long-term economic
    prospects. And you have advocated for investments in early
    childhood education programs--quality government-funded child
    care; crucial to building ladders of opportunity for economic
    growth and stability.
        These are policies we should be thinking about today to
    stabilize the economy and get people back to work. But it is
    expensive. How would you reconcile the costs against the
    outcomes, which we will not know for sure for many years?
        Dr. Boushey. Well one of the things----
        Vice Chairman Beyer. Dr. Boushey, if I can interrupt?
        Dr. Boushey. Yes.
        Vice Chairman Beyer. If we can--if you can hold your answer
    to that for the second round, which hopefully we will get to in
    about 10 minutes.
        Dr. Boushey. Will do.
        Vice Chairman Beyer. Thank you. So thank you, Congressman
    Trone.
        I now recognize Congresswoman Herrera Beutler from the
    State of Washington.
        Representative Herrera Beutler. Hi, there. I do not know if
    this part has been talked about yet, but I serve on
    Appropriations in the House, and obviously 70 percent of
    spending is mandatory, and interest payments leaving Congress
    with about 30 percent.
        I think it is concerning that expanding economic
    stabilizers to create more mandatory spending I think is going
    to worsen the issue. What changes do you--and this is open to
    the panel--do you think can be made to existing stabilizers to
    make sure that they are more effective, rather than creating
    new ones? I think I will end it at that.
        Dr. Bernstein. I can jump in. You do not have to have the
    programs automatically turn on. I would like them to do so, but
    we can have an honest difference there. What you do not want
    them to do is to turn off too soon.
        And I have got to say, I mean I hope you would agree that
    exhibit A for this problem is that as we speak, enhanced
    unemployment benefits are expiring tomorrow. And I think, at
    least on a bipartisan basis, as far as I can tell, that is
    something that nobody wants to happen.
        I mean Doug was very clear about this a few minutes ago,
    and I appreciate his candor. So one potential solution is to
    make sure that the triggers that we are talking about disallow
    programs from shutting off too soon.
        Mrs. Greszler. And I would just add here, when we talk
    about expanding more programs, or adding additional components
    to existing automatic stabilizers, there is a big difference
    between treating that like saving a head, and putting it on a
    credit card. And so anything that we are talking about doing in
    the future, if that is the decision that is made, that needs to
    be funded in advance.
        But I also would encourage policymakers to look more to
    state and local levels, especially during this pandemic. There
    is a lot of uncertainty, and a lot of that is not, you know,
    equal across the U.S. Schools are making decisions. Parents do
    not know if they are going to be able to work or not in the
    fall, and that is going to affect unemployment rates. You are
    going to have more people out of work.
        And so that is more a local decision. I know that in my
    particular county we have special grants to small businesses,
    especially including child care. New York City has made that
    decision that they are going to subsidize child care. These are
    things that need to be tailored to those state and local
    governments in a better way.
        Dr. Boushey. I am happy to weigh in on this, as well. When
    you think about the unemployment insurance system, it does have
    long-standing local triggers that are supposed to trigger on
    the extended benefits with high unemployment.
        What we know about them is that they typically have not
    worked out as we would like them to. They do not trigger on
    fast enough. And so there has been a lot of work, especially in
    the past decade given what we learned during the Great
    Recession, to study how we can make these triggers more
    effective.
        I think Jared's point, because we do not want these
    benefits to trigger off, but we also want to make sure that
    when the unemployment rate spikes because of a shock to our
    system like we saw during COVID, that you immediately get--you
    make sure that those benefits go out to people.
        We have advocated for a long time at Equitable Growth that
    these are things that we should be focusing on in good times so
    that the system is ready for the next recession. Given that we
    are here to make sure that any steps that we take also shore up
    unemployment insurance for the long haul, so that we are
    acknowledging that people need these benefits, and we do need
    to acknowledge that we need to shore up the systems so that we
    upgrade the computer systems and all that for next time.
    Because it will happen again.
        One thing I want to remind us of, is that when we put in
    place the unemployment insurance system as a part of the Social
    Security Act in the 1930s, the wage base for Social Security
    and the Unemployment Insurance Systems was about the same.
        Over time, the wage base for Social Security has grown with
    inflation. It is now over $120,000 a year. But that was not
    what happened with the Unemployment Insurance System. We have
    allowed the tax base for that to atrophy, and that is also a
    place that we can focus on. If we had allowed that to keep
    pace, then we would have more revenues going into the system
    and we would not be here talking about deficits right now.
    Because it does have a functional pay-as-you-go system.
        Dr. Holtz-Eakin. So these are fine discussions in the
    abstract, and they always sound wonderful. As a practical
    reality, what it would do right now is lock in the $600 benefit
    that everyone agrees is too large, and that has to be dealt
    with it in some way, and doing this on an automatic fashion
    coming out of the Great Recession, we would have arrived at the
    beginning of 2012 with the unemployment rate still at 18
    percent, at which point we begin go phase out extended benefits
    from 2012 to 2013, and when it was finally done in 2014, by the
    end of the year unemployment went down to 5.6 percent.
        To do what they are suggesting, is to lock in high
    unemployment. That's a bad idea.
        Vice Chairman Beyer. With that, thank you Congresswoman
    Herrera Beutler. We will now hear from the Senator from the
    Granite State, Senator Hassan.
        Senator Hassan. Well thank you, Vice Chair Beyer, and
    Chairman Lee, for holding the hearing today. And thank you to
    all of our witnesses for participating.
        I have a question first for Dr. Bernstein and Dr. Boushey.
    The majority of Americans live in states that have paused or
    reversed their reopening plans because of spikes in COVID-19.
    It is clear that we cannot recover economically unless we first
    contain the COVID-19 virus.
        So could you each comment on two things. One, on the
    importance of virus containment for successfully reopening the
    economy. And, contrast our economic outlook in the United
    States, compared to other countries that have taken a different
    approach to virus containment.
        And why do we not start with you, Dr. Bernstein.
        Dr. Bernstein. Thank you. Let me start with your second
    question because I think it is such a dramatic difference. It
    is actually Figure 1 in my written testimony, if anyone has
    that handy by. I just posted something like six graphs of cases
    in the United States compared to Germany, South Korea, France,
    Italy--where of course they had an awful problem with the virus
    initially--and they did two things much better than we did.
        They controlled the virus through testing, tracing, and
    quarantining. And they also helped people stay connected to
    work more. They focused more on making sure that when the
    economy could ramp up, people would be connected to their
    workplace. And that has been shown to give a recovery more just
    kind of economic lift-off because it is much easier to kind of
    dial things up when the workforce is still in place. So that
    was tremendously important.
        On your first question, it is just as everybody is quoting
    these days, the Chair of the Federal Reserve on this, because
    he is a very important guy in this area, but also he said it so
    plainly. Essentially--I am paraphrasing--there's not going to
    be an economic recovery without virus control. It is that
    simple.
        Senator Hassan. And Dr. Boushey--and be relatively quick,
    just because I want to get onto another topic.
        Dr. Boushey. Exactly. A hundred percent I agree with Dr.
    Bernstein. One of the best things that we can do is ensure that
    we have this short-time compensation; that we allow people to
    extend their UI and be able to maintain their connections to
    their employer.
        We have seen that work in other places. That is one of the
    most important things we can do. And there is legislation on
    the Hill that can do that.
        But I think that the other thing is, it is testing. It is
    contact tracing. And it is protective gear. And I think one of
    the most--two of the most important things that we could be
    doing is the Administration needs OSHA to give very clear
    guidelines, with accountability, to make us feel safe as
    workers and consumers. And we need to make sure that firms are
    being held accountable for that.
        So we do not need to do the--getting rid of liability
    protection for them. So I think those are also things that are
    going to help us make sure that we open up safely.
        Senator Hassan. Thank you very much.
        Dr. Bernstein, I want to turn to another critical issue.
    The CARES Act provided vital emergency assistance to state and
    local governments that my State of New Hampshire has used to
    support small businesses, nonprofits, hospitals, and child
    care.
        However, as pointed out by your colleagues at the Center on
    Budget and Policy Priorities, state budget shortfalls due to
    COVID-19 could ultimately be the largest on record.
        Can you comment, please, on the economic importance of
    additional aid to state and local governments during the
    crisis? And how would it harm the economic recovery if Congress
    failed to provide additional assistance?
        Dr. Bernstein. A really important question. Without
    additional assistance, the recovery is going to be much slower
    and take much longer to gain traction. We know that even in May
    and June when the labor market was adding millions of jobs,
    that state and local governments were hemorrhaging blood. I
    suspect they were the only major sectors to do so. They shed
    1.5 million jobs over that period. Just a terrible outcome, and
    it is inevitable that we are going to see more of the same
    without more fiscal relief.
        In the last recession, when I was working for the
    Administration--the Obama administration, state and local
    fiscal relief was one of our most important programs,
    particularly through enhanced FMAP matches, which is the most
    efficient and effective way to do this, in my view. And it has
    an extremely high economic multiplier. That money gets spent,
    and it reverberates through the whole economy.
        Senator Hassan. Well thank you very much. And thank you,
    Congressman Beyer, for holding this hearing, and thank you to
    all our witnesses. I yield back.
        Vice Chairman Beyer. And I apologize for not pronouncing
    Hassan right.
        Senator Hassan. It is alright. It happens all the time.
    Thank you.
        Vice Chairman Beyer. We would love to do a second round,
    for anyone who is willing to stay. And let me kick it off by
    first pointing out to my friend, Congresswoman Herrera Beutler,
    that the best way to deal with mandatory spending in the long
    run is to fix Medicare and fix Medicaid, with evolving health
    care. And to make sure that we fix Social Security. John
    Larson's Social Security 2100 pays it all ahead so that we do
    not have to think about it as mandatory spending, drawing down
    money that has been set aside, as Social Security Insurance
    says it is.
        I also want to reiterate, I think it was Dr. Boushey's
    point about the base. The base in Virginia is $8,000 for
    Unemployment Insurance. I pay it for our occasional
    housekeeper. It is one-tenth of one percent on $8,000. So for I
    think $8 a year, I can afford her. It is not much of a
    contribution to the State Unemployment Insurance Fund.
        Dr. Boushey, I had the opportunity to be on the BEA call
    this morning at 8:35 on GDP, the 32.9 percent. And taking it
    apart, of that 33 percent rounded, 25 percent was decreases in
    consumption; 4 percent was decreases in inventories, mostly car
    dealer inventories. So it was overwhelmingly decreases in
    personal consumption, but it was not goods. People bought just
    as much food as they did before, just as much gas. They spent
    just as much on housing and utilities.
        Where the decline was, was in the health care, in
    recreation services, and food services, and in accommodations.
    Basically all discretionary income. So when we think about that
    $600, that unemployment insurance, I'm interested in how they
    flow through to economic growth and job creation. Doesn't it
    follow right from the numbers that all of that $600 was spent
    on things that those people needed to survive?
        Dr. Boushey. That is certainly what the evidence points to.
    Let me talk about some research. Economists have been able to
    analyze all of this just-in-time data that has been coming out.
        One of the most interesting studies has shown that actually
    in especially sort of middle and lower income communities,
    because of the additional money flowing to them from Congress,
    you have actually seen spending stabilize. And that has
    actually been able to support those local small businesses in
    those communities. Because most of what they are buying are
    things that they need.
        What we are seeing in higher income communities is that,
    because there is more discretionary spending, and because
    people are not going out to eat, they are not buying fancy
    shoes and the like, many of those small businesses are
    struggling because that discretionary spending is falling down.
        So I wanted to start with that example to make that
    connection between the $600 that is going out to families, and
    what it is doing to local economies. And those families that
    need it, who are living--you know, the majority of Americans
    who are living hand-to-mouth, who do not have a ton of money in
    the bank, who are being laid off or having their hours cut,
    means that they do not have a lot to rely on, they are spending
    that on things they need.
        And so we need to make sure that that money gets out to
    them. And on the other hand, in those higher income communities
    where they have more discretionary spending, they are also
    cutting back. And that is harming those businesses.
        So with all of this said, today's GDP numbers really do
    just underscore the importance of what you all did in the CARES
    Act just a few months ago.
        Vice Chairman Beyer. Thank you, very much. By the way, that
    same notion of the people at the bottom need every penny to
    spend just to survive, the annualized savings rate in the
    second quarter was 22 percent, the highest in the history of
    the Republic. And it was not those people that were getting
    unemployment benefits.
        Dr. Bernstein, all through the post-Great Recession we kept
    hearing that certainty was phenomenally important for
    businesses to make investments, to open new stores, to hire
    people. How much will all this uncertainty play in the lives of
    the people that lost their jobs in the last three months? Not
    knowing whether the unemployment benefit was going to be
    extended for the 30 million people without a job?
        Dr. Bernstein. I think that the problem of uncertainty,
    which by the way has been of great interest to economists going
    back to Keynes, if you actually read Keynes' analysis of
    fundamental problems in the economy, uncertainty is at its
    core. And he is very clear to connect this to when markets
    fail, and that there is a role for government to dampen this
    uncertainty.
        If you listen to the Federal Reserve today, they will tell
    you the same thing. And they very much emphasize this notion of
    forward guidance, telegraphing to markets what they are going
    to do to tap the economic benefits that produce uncertainty.
        So people--and I go through this in my written testimony--
    people will simply not plan to take a vacation, so they will
    not book a home; they will not plan to invest in their house,
    so they will not hire a construction firm. And it just ripples
    through. The members of that firm have less income, and then
    they do less spending.
        So this is a really problematic economic infection right
    now. And this is something Congress can actually really do
    something about, by getting together, as Congress did in the
    initial part of the pandemic, and act with the kind of urgency
    that they acted on back then. The virus is rearing just as
    badly as it did then, but Congressional urgency has diminished
    in an extremely troubling way.
        Vice Chairman Beyer. Okay, thank you, Dr. Bernstein, very
    much.
        I now recognize Chairman Lee for a second round of
    questions.
        Chairman Lee. Thanks so much, Mr. Chairman.
        Okay, let us pick back with Mrs. Greszler and Dr. Holtz-
    Eakin, following up on some of the things we covered in the
    last round.
        The CARES Act relaxed a number of restrictions that are
    associated with savings accounts like IRAs and health savings
    accounts so that Americans could more easily reach into and tap
    the resources that they have. A recent Social Capital Project
    report that was produced through the Joint Economic Committee
    staff suggest that policymakers could ensure that Americans
    have access to future savings by creating universal savings
    accounts.
        These accounts have significantly increased savings among
    account holders in both the United Kingdom and in Canada. So I
    would like to know, what do you think of universal savings
    accounts as an option to help improve Americans' future
    financial stability? And what other policies could help
    Americans become more prepared for future crises?
        Dr. Holtz-Eakin. Well, Chairman Lee, I do want to say at
    the outset that, you know, we've kept track of the COVID-
    related relaxations of regulations in the aggregate at the
    American Action Forum, and there were well over 800 instances
    of using emergency authorities to waive regulations. That is
    prima facie evidence that we have too little flexibility in the
    system, and that we ought to think very hard about making many
    of these waivers permanent as you suggested at the outset.
        Telehealth is the leading example. Telehealth has been an
    enormous boon in the midst of these physical restrictions, and
    it is due to the waiver of restrictions out of HHS that you can
    now do this.
        So I think that should be on everyone's radar screen. And I
    want to embrace having the option for a universal savings
    account. We know that too few Americans have access to the
    traditional three-legged stool with a private pension, personal
    savings and social security, and are largely focusing on only
    having Social Security. We need to rehabilitate the private
    sector's contribution to savings and having the flexibility
    during their life cycle to meet emergencies. So that would be a
    good way to do that.
        Chairman Lee. Mrs. Greszler, how about you?
        Mrs. Greszler. Yeah, and I will just add on the savings
    side. The reason that a lot of lower income people do not have
    savings accounts, at least in part, is because it is often
    difficult to save. You do not know which account you are going
    to save in, and what limits are going to be put on it, or are
    you going to be charged a fee if you take money out early. But
    if you have one simple account that everybody can use for
    whatever purpose they want, at whatever time they want, then we
    know that people are going to save more.
        In Canada and the UK, as you noted, 50 percent of the
    accounts that were opened under universal savings accounts were
    low and moderate income savers. And they actually put a higher
    percentage of their income into those accounts than did the
    higher income group.
        So we know that this is an opportunity out there, and in
    this current pandemic, you know, if the UI benefit did not come
    in time, they would have had that account to at least hold them
    over.
        Chairman Lee. Mrs. Greszler, when we look at automatic
    stabilizers, one of the things that I think can be helpful is
    to look at existing automatic stabilizers to see what impact
    they have had on the economy. And the current pandemic reminds
    us of the fact that the economic stabilizers can have a
    significant effect on the economy, not always for the benefit.
        For example, since March 21st of this year, nearly 50
    million Americans have applied for unemployment insurance. This
    is a rate 14 times higher than that found during the same
    period of time just last year. And at the same time, due to
    delays in the overall ineffectiveness of the unemployment
    insurance program, many Americans were left waiting for the
    relief that they needed and still need.
        So in light of that, should policymakers consider improving
    the automatic stabilizers we already have? For instance, by
    addressing the delays plaguing the unemployment insurance
    system to make them better. And if so, what are some ways that
    policymakers can do that?
        Mrs. Greszler. Well I think we should expect the same from
    government that government expects from private individuals and
    businesses. And whereas they can change tax laws, and payroll
    provisions, and other things on a dime and expect the
    businesses to be able to adjust, we should expect the
    government should be able to adjust these programs. And the
    fact is that they are not able to. They are so antiquated that
    they cannot adjust to provide a match at 100 percent of
    somebody's income when their benefit is already based on
    income? It is a little bit incomprehensible that they cannot do
    this.
        And so it just draws to the fact that you can establish all
    these automatic stabilizers and new government programs, but
    the reality is they might not be there for you when you need
    them.
        But I would say, you know, whenever there is a stabilizer,
    it should be funded ahead of time, and make sure that you are
    stress-testing these things. Will they be able to benefit
    people when needed?
        Chairman Lee. Thank you. Thanks, Mr. Chairman.
        Vice Chairman Beyer. Yes, thank you, Chairman Lee.
        I now recognize the Congressman from Washington, the
    champion of the rent-payer, Congressman Heck.
        Representative Heck. Thank you, Mr. Vice Chairman. I
    actually want to stay on the subject of housing. It seems to me
    that we have got a confluence of factors and known facts here
    that might suggest a path forward that we ought to take.
        For example, we know we have a serious housing shortage in
    this country. We know that we have an even greater shortage of
    affordable housing. We know that as occupancies go up, rents go
    up, and people become more rent burdened and there are a higher
    number that are rent burdened today than ever before. But we
    also know that construction of housing units has, until the
    last recession, helped lead us out of every recession in modern
    history.
        And it seems to me this suggests that we ought to be
    pursuing this. I obviously have my own idea, the Fulfilling the
    Housing Trust Fund, which would convert the 10 basis point G
    Fee adopted by Congress 10 years ago to pay for the payroll tax
    during the last Great Recession, to the purpose of building
    affordable housing as a means of helping people with housing as
    a means of helping accelerate economic growth and all the job
    creation associated therewith.
        So for Jared and Heather, I would ask your reaction to that
    particular idea, briefly. But more importantly, what other
    kinds of things, given the fact pattern, should we be pursuing?
    And this time let us start with Heather, if for no other good
    reason than she is a proud native of my home state.
        Dr. Boushey. That I am, a proud Washingtonian. I happen to
    see two Washingtonians on this call today.
        So I am not familiar with your legislation, so I do not
    feel competent and I do not want to comment on that
    specifically. I mean I think what I can say, though, is that
    this idea that in previous recessions housing has been--has
    pulled us out. It is a really important point to be thinking
    about in the current crisis, and how we are going to build
    towards recovery.
        So I think for the most part, today's conversation has been
    about relief. We are in this crisis right now, and we are
    thinking about how we get immediate relief. You're asking us to
    think about what's the next step? How are we going to pull--we
    are going to have this long term lag from the crisis--how are
    we going to pull ourselves out?
        And I would say two things. One is that, unlike some prior
    recessions, because of the nature of this, because of the sharp
    loss--because of COVID requiring everyone to go home, and the
    sharp drop in employment, it is different than say the Great
    Recession or other prior recessions that were caused by
    different kinds of shocks, or caused by what was happening in
    the last recession in the housing market.
        So the first thing is you do not have that overhang in
    housing like you had last time. But that does I think bode well
    for the idea that we should be thinking about the place for
    investment. I think we should--and I do not want to take the
    focus off of housing because I know that you are elevating that
    as really important for family economic security--but I think
    we also need to be thinking more broadly about the other kinds
    of public investments that we need to be making in communities.
        So when you say ``housing,'' I am also thinking about how
    we can make sure that we are thinking about the energy needs,
    that we are thinking about the type of main investments that we
    need to make, and that the housing plan is consistent with
    addressing climate change over the long term.
        I am thinking about the transportation networks that we
    need to have, and making sure that those are environmentally
    sustainable, that are consistent with the housing plan that you
    are talking about. And I am thinking about access to good
    schools and care. We know that there is this massive crisis in
    access to child care, and how are we connecting those dots to
    where people live, because the commutes to those jobs and care
    has become a critical issue.
        So I think I would like us to put the housing issue within
    the context of a broader investment strategy that the United
    States should be thinking about in the coming months and years.
    But as soon as we get out of this immediate crisis, and making
    sure that people have their unemployment benefits.
        Representative Heck. Jared.
        Dr. Bernstein. I have endorsed the idea of seeding the
    Housing Trust Fund with precisely the funding mechanisms you
    have talked about. And if Congress does it in a timely manner,
    which would be soon, it would be similar. That is, a stream of
    resources would go from one program where it is not needed to
    another program where it is needed.
        So that is an efficient and important idea. The only other
    thing I will say, I suspect we are in a time constraint here,
    is that the other thing I would do in this space is make sure
    that the Housing Voucher Program is fully funded. The share of
    eligible people for rental vouchers who gets them is tiny. I do
    not have it off the top of my head, but it is something like 1
    in 6, or something. It is really a terribly under-served
    program.
        So we could house a lot more people a lot more securely by
    fully funding the Housing Choice Voucher Program.
        Representative Heck. Thank you, Mr. Chairman.
        Vice Chairman Beyer. And thank you, Congressman Heck. I now
    recognize Congressman Schweikert.
        Representative Schweikert. Thank you, Mr. Vice Chairman.
        Look, I love the conversation about ``should we be building
    plans to do counter-cyclical automatic mechanisms,'' but in
    some ways we are actually living some of that right now with
    what we have already done policywise.
        And to Mrs. Greszler, or Holtz-Eakin, I have seen stories
    that there is $2 trillion that have actually moved to bank
    accounts. They did not actually move to velocity in the
    economy. Is that an argument that the way we are delivering
    this is not actually creating the stabilization or stimulus in
    our society that we wanted, but in many ways is shoring up
    savings and bank balance sheets? And what would the economy
    look like right now if that $2 trillion, or even a substantial
    fraction of it, was actually circulating instead of shoring up
    bank accounts? Am I seeing something that is worth
    understanding--that this became the actual reaction of some of
    the stimulus we have pumped into society by the Federal
    Government--excuse me, the Federal Reserve pumped it.
        Rachel, go ahead.
        Mrs. Greszler. You know, this highlights the unique nature
    of the crisis that we are facing now, and so certain sectors of
    the economy have been hurt far more than others. There are a
    few sectors that are actually booming, and we do not know
    exactly what all this additional savings--who is it going to,
    for sure. You know, the savings figure was 32 percent in April,
    23 percent in May. So we do know that a lot of households have
    savings sitting there that they are not spending. And if we
    send additional money out, just blanket checks to everybody, it
    may not be very effective.
        And so I think this argues for really targeted assistance
    to the people who do not have job opportunities right now, to
    be focusing on those and not just sending out, you know,
    widespread more money, pumping it out there, if it is not
    actually going to do any good and is actually going to tip us
    towards instability in terms of our debt in the future.
        Representative Schweikert. And, Rachel, sort of directly to
    the point you are making, I think I actually even saw something
    that credit card balances were also being paid down, too. So it
    was more than just savings rates going up. Some of the debt
    carried forward.
        So it is really interesting both for the Keynesians in us,
    and the supply siders in us, some of it is not working the way
    we would have conceptualized.
        Mrs. Greszler. Exactly. You cannot force people to go to
    restaurants, and hotels, and travel when they do not feel safe
    doing so.
        Representative Schweikert. Doug, should I see this as the
    fragility of some of the discussions we are having today of
    ``we should have all these types of automatic shock
    absorbers''? And from what we are seeing right now, it has
    basically shored up people's bank accounts and debt loads? And
    is there something that we should do right now policywise to
    get that money--or to incentivize that money--to circulate in
    our society?
        Dr. Holtz-Eakin. I think it is a reminder of the fact that
    there are severe supply constraints on the economy, and that
    they have returned recently with rises in outbreaks in the
    South and West. And in those circumstances, you can give people
    checks, but if they do not have any place to spend them, they
    are going to end up in the bank.
        We transferred at an annual rate $3 trillion in April to
    the household sector, and $2 trillion in May. That is an
    enormous amount of cash flow, and $2 trillion it ended up in
    bank accounts that was not in there in February. Unless we deal
    with the supply shortages, demand approaches alone will not
    solve this problem. That is one of the major lessons I think we
    have learned so far.
        Representative Schweikert. Okay. So we are sort of in the
    classic, almost a classic, demand versus supply squeeze?
        Dr. Holtz-Eakin. So I think--I want to be careful about
    this, because I am not advocating for throwing away any
    interest in maintaining the level of income and demand support
    going forward. That would be a really big mistake. But I do not
    think it alone will be sufficient.
        We need to deal with the supply problems. Here is the issue
    in a nutshell: Heather described the microdata very well. In
    high affluent zip codes, spending dropped by about 20 percent.
    It did not in other places. That 20 percent was largely
    spending at small businesses that employed low-income
    individuals. You will not get low-income individuals back to
    work unless we deal with that shortfall.
        Sending checks out to lower income Americans will not deal
    with that shortfall. UI will not deal with that shortfall. You
    have to have another strategy. And that is what----
        Representative Schweikert. Okay, so you nailed the point
    much better than I could. What is the strategy?
        Dr. Holtz-Eakin. We do not have one right now. I am
    encouraging you to make places safe to conduct commerce so that
    those individuals will return to their ways.
        Representative Schweikert. Alright, thank you, Doug.
        Thank you, Mr. Vice Chairman.
        Vice Chairman Beyer. Thank you all very much. And I think,
    Doug, you did point out what the strategy is, and we all have
    different thoughts, is to make it safe to go back to the
    restaurant.
        Rachel said it very well. You cannot force people to
    travel, or to go shopping, or eat at a restaurant. We have to
    invest in the health care, the science, to make that possible.
        Well I want to thank all of you. You guys were wonderful.
    Our testifying economists outlasted the Members of Congress.
    Four to three. So you win. Good work.
        And I want to thank all of you for a very lively
    discussion. It was very good to hear the ying and the yang on
    the automatic stabilizers, and the important points about tying
    future Congress' hands versus making Congress react.
        I am continually embarrassed that I went from being a car
    dealer with a 15 percent approval rating down to a member of
    Congress with an 11. And I wish people thought better of our
    abilities to handle all these different things. You know, we
    really are upset with how much we squandered in the early
    months. Jared's comments about is it more than an order of
    magnitude higher rates of infection and death than we have. I
    read in the Pantheon Report they do not expect the death rate
    to peak until the middle of August.
        And then Dr. Fauci was on a fascinating call this morning
    and said as long as this is rearing up anywhere in the world,
    think India, think Brazil, it is going to come back and bite us
    again until we actually have the vaccine and the treatments
    necessary.
        So thank all of you. It is Congress' responsibility to
    somehow take care of the folks who do not have jobs to go back
    to and help them to get through. So let us take politics out of
    it. I will continue to argue for a data-driven approach that
    ties assistance to the level of economic conditions. I will
    also continue to worry about the deaths. And we will want to
    reduce uncertainty and restore confidence in our economy and
    our government, and even in our Congress.
        So thank all of those participating today. I believe the
    record automatically stays open for three days, if someone fact
    checks you and you want to correct the record. And I really am
    grateful to all of you for being a part of this. We hope you
    will come back often.
        Goodnight, have a great weekend. Thank you.
        [Whereupon, at 4:41 p.m., the hearing was concluded.]

                           SUBMISSIONS FOR THE RECORD

    Prepared Statement of Hon. Donald Beyer Jr., Vice Chair, Joint Economic
                                   Committee
        Chairman Lee, our distinguished committee members and witnesses,
    welcome everyone.
        Our country faces two crises--a virus that already has killed
    150,000 Americans . . . and the worst economy since the traumatic
    recession of just over a decade ago.
        They are intertwined. The tragic failure to contain the coronavirus
    led directly to the economic meltdown.
        The President's ill-advised push to ``liberate the states'' and
    abandon strict social distancing measures has led to an explosion of
    new cases and deaths . . . and likely will prolong the deep economic
    downturn.
        The President's economic policy is his coronavirus policy--which
    tragically, is first to put his head in the sand, then throw his hands
    in the air, then blame others.
        This is the number one reason there are more than 65,000 new cases
    a day, and why more than 30 million Americans are on unemployment.
                                   confidence
        I have had the privilege of talking to many prominent economists,
    and they universally tell me the same thing.
        To resuscitate the economy, we must get the coronavirus under
    control.
        But it's essential not only to contain the virus--but to give
    Americans a high degree of confidence that the virus is contained.
        They must know that they are safe before they will go back to work
    in large numbers. They must know they are safe before they will return
    to stores.
        As Federal Reserve Chairman Jerome Powell said, [quote] ``Until the
    public is confident that the disease is contained, a full recovery is
    unlikely.''\1\
    ---------------------------------------------------------------------------
        \1\ https://www.wsj.com/articles/powell-says-despite-signs-of-
    stabilization-risks-of-long-term-economic-damage-are- significant-
    11592316029
    ---------------------------------------------------------------------------
        The best that we, as Members of Congress can do, is give Americans
    confidence that we will help them stay afloat while the virus rages and
    the economy is weak.
                                  unemployment
        The economic damage from the Administration's failure to limit the
    spread of the virus is staggering.

          For 19 straight weeks, more than one million Americans
    have filed new unemployment insurance claims.
          We've lost a net 15 million jobs since February.
          And the unemployment rate is the highest it's been in
    over 80 years.

        After gains in employment in May and June, the labor market
    recovery has stalled.
        According to the Census' Household Pulse Survey, the number of
    employed Americans fell by 4 million in a recent week, and the survey
    has shown a decline in the number of people with a job for four
    consecutive weeks.
        CBO estimates that the unemployment rate will remain above 10
    percent in the fourth quarter of this year.
                               people are hurting
        As a result, nearly one in five American households could not make
    any portion of their rent or mortgage payments on time in July.
        Millions stand in line at food banks.
        Over 40% of Americans report serious anxiety or stress, according
    to a recent Census survey.
        McConnell has pushed us to the precipice.
        In March, Congress passed emergency, enhanced unemployment benefits
    to help Americans survive the coronavirus recession. It was designed to
    be enough to live on.
        More than 25 million Americans receive those benefits.
        The Democratic House voted two months ago to extend them.
        Mitch McConnell, stalled--knowing that millions of Americans who
    rely on those benefits live in uncertainty and fear.
        He refused even to consider the House bill.
        Mitch McConnell is a master of political brinksmanship, holding
    Americans economic hostage in order to gain negotiating leverage. It is
    a cruel tactic.
        Tomorrow, thanks to McConnell and his caucus, those unemployment
    benefits expire.
                      the costs of letting benefits lapse
        Letting unemployment benefits lapse even if they are later restored
    causes people unnecessary pain. And recipients will face a gap in
    benefits of 2-4 weeks, according to the Economic Policy Institute.
        The sharp decline in income for unemployed Americans has ripple
    effects throughout the economy. Without benefits, jobless workers will
    reduce spending, miss rent payments, fall behind on mortgage payments
    and even face eviction or foreclosure. More businesses will be forced
    to shutter.
        Substantially reducing the benefit would also harm the economy.
        EPI estimates that reducing the weekly federal benefit from $600 to
    $200, as Republicans have proposed, would reduce GDP by 2.5 percent and
    cost the economy
        3.4 million jobs over the next year.
        We must learn from the past
        Here is a simple solution to this damaging brinksmanship--take
    politics out of it.
        Our Democratic witnesses Heather Boushey and Jared Bernstein--as
    well as other top economists--support the use of ``automatic
    stabilizers'' that tie spending, e.g. on unemployment benefits, to
    economic conditions.
        They quickly provide help when the economy heads into recession,
    lessening its severity.
        If unemployment is elevated, unemployment insurance along with
    SNAP, Medicaid and other key supports should continue until the economy
    recovers.
        We shouldn't have to vote 13 times--as during the Great Recession--
    to extend unemployment benefits.
                              new ui triggers bill
        In a weak economy, increased help--like unemployment benefits--
    should be automatic.
        It should continue as long as it's needed--and no longer.
        I am a fiscal conservative. I've always believed this approach
    would appeal to fiscal conservatives.
        Yesterday, I introduced legislation, the Worker Relief and Security
    Act, to tie enhanced emergency unemployment benefits to the
    unemployment rate in each state.
        The legislation would provide businesses, families, workers and
    estate and local governments with the certainty that they will get the
    support they need for as long the crisis lasts.
        If the bill were to become law, we wouldn't be witnessing this
    damaging political showdown.
        None of us can predict how long the recession will last. So, let's
    not try to guess. Let's increase the help when it's needed, and
    decrease it as the need recedes.
         uncertainty is a dangerous foe making recovery more difficult
        I believe we will reach an agreement to extend enhanced
    unemployment benefits at some level.
        I will fight to make sure that it's enough for unemployed Americans
    to weather the recession.
        And I will continue to fight to make sure that in the future such
    help is automatic.
        I will fight to help give Americans confidence that the Federal
    Government will provide adequate help when it's most needed.
        I look forward to the testimony from our witnesses.
                                   __________
    Prepared Statement of Hon. Mike Lee, Chairman, Joint Economic Committee
        Thank you, Vice Chair Beyer, and thank you for presiding for the
    first time as Vice Chair over this very timely hearing.
        The pandemic and the havoc it wreaked on American lives and the
    economy is unlike anything in recent memory. In response, Congress took
    unprecedented action that, along with Federal Reserve initiatives,
    helped stabilize the economy.
        Beyond the legislative changes that we enacted, existing features
    of the tax code and traditional safety net programs like unemployment
    insurance are helping families that lose income and jobs as the
    pandemic ravages our communities. Known as ``automatic stabilizers,''
    these policy provisions operate simultaneously with other actions taken
    by state and local governments and Congress.
        But it concerns me that many want to extend automatic stabilizers,
    as that would override the deliberation that Americans expect of their
    elected representatives and could hinder the economic recovery.
        Mandating more spending in the form of expanded automatic
    stabilizers--ones that turn on and off based on macroeconomic
    conditions--contributes to one of the main problems of Federal
    spending: that it is overly automated, causing legislators to actively
    manage less and less of the budget as time goes on.
        Reducing legislative discretion increases costs, reduces our
    ability to control the national debt, and diminishes policymakers'
    ability to tailor responses to the specifics of a future crisis.
        The extraordinary measures we enacted initially were warranted but
    are not strategies we should continue to pursue now. They are
    unsustainable over the indefinite course of the pandemic. Today we must
    pivot to helping our communities reopen safely.
        Our focus going forward should be on policies that pave the way for
    American recovery and allow businesses to adapt and reopen as safely
    and quickly as possible, while giving their employees and the customers
    they serve confidence in the procedures that are in place.
        There are multiple actions Congress could take to strengthen the
    U.S. economy and hasten the recovery. We should examine and remove the
    regulations currently in place that are holding back businesses and
    workers from responding more dynamically to changing economic
    conditions, and we should consider how Congress can encourage Americans
    to save more so they can be better prepared for future crises.
        Our efforts should include leveraging charitable giving by
    reforming its inequitable treatment in the tax code. This reform could
    bolster our COVID-19 response, as we discussed in our last hearing.
        Our efforts should also include sun-setting all Federal regulations
    that were waived during the pandemic. In a letter to the recently
    confirmed Director of the Office of Management and Budget, Russell
    Vought, several of my Senate colleagues and I asked that these waived
    regulations go through the regulatory review process. This process
    would determine whether these regulations should be maintained,
    modified, or repealed. We noted that the absence of the waived
    regulations improved COVID-19 response efforts, and allowed doctors to
    practice medicine across state lines and provide telehealth services
    for Medicare patients.
        Now also seems like a particularly good time to pass the Working
    Families Flexibility Act, which would allow more employers to offer
    workers a choice between overtime pay and paid time off. This could
    help workers take time off if they become ill or need to care for loved
    ones, while also giving employers another tool to help weather the
    disruptive effects of the pandemic on payrolls and schedules.
        Whatever actions we take, we must not lose faith in our ability as
    a deliberative body to represent our constituents and to consider and
    create policy solutions tailored to the crises our country faces. And
    we must remember that policies should support the resiliency of the
    American people in the face of adversity rather than make them more
    dependent upon government.
        Thank you again, Vice Chair Beyer, for calling this important
    hearing, and thanks to the witnesses for being here today. I look
    forward to your testimony and a worthwhile discussion.

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       Response from Dr. Boushey to Question for the Record Submitted by
                              Representative Trone
        You've written about the negative impact of income inequality on
    the average American worker, and about how this inequality harms our
    country's long-term economic prospects. You advocate for investments in
    early childhood education programs and quality, government-funded child
    care programs as crucial to building ladders of opportunity to economic
    growth and stability. These sound like policies we should be
    considering NOW to help stabilize our economy and get people back to
    work. How can we reconcile the costs for such programs against
    outcomes, when we won't actually know their outcomes until years from
    now?
        Thank you Congressman Trone, for the opportunity to respond to this
    question on the record. As an organization, The Washington Center for
    Equitable Growth has been investing in gathering the data to answer
    questions like yours for nearly 7 years. The data tell a clear story:
    investments in early childhood education pay for themselves many times
    over. This payoff is not even far off.
        For example, in one of our early reports, Robert Lynch, Everett E.
    Nuttle Professor of Economics at Washington College, and Kavya Vaghul,
    now Senior Manager for Wages & Workers at Just Capital, estimated that
    a high-quality, voluntary prekindergarten program would generate $8.90
    in economic benefit for every $1 invested, less than 40 years after its
    launch. This 8.9-to-1 economic benefit is derived from three sources:
    immediate changes to parents' labor market participation, longer-term
    improvements in children's quality of life, and both long- and short-
    term changes to government balance sheets. These benefits would
    accumulate over time, but government at all levels would see more
    benefits than costs after only 16 years.
        When parents can rely on pre-kindergarten to provide a safe
    environment for their children during the workday, they work and earn
    more, which also leads to higher tax revenues and lower expenditure on
    income support programs. When children are exposed to a nurturing
    learning environment during the pre-kindergarten years (which are
    critical years for brain development), they have greater achievement
    and success at school: less grade retention, less need for special
    education, and higher graduation rates. These benefits last into
    adulthood, when former pre-kindergarten participants have greater
    attachment to the workforce, higher earnings, improved health, and are
    less likely to be involved in the criminal justice system. Each of
    these benefits at the individual level is mirrored by improvements to
    the Federal balance sheet: more revenue from income taxes, and fewer
    expenditures on health care and the criminal justice system.
        Evidence shows that investing in early childhood education is one
    of the best ways to grow our economy over the long term.
                                   __________
      Response from Dr. Bernstein to Question for the Record Submitted by
                              Representative Trone
        You wrote last month that ``structural racism has amplified the
    health and economic consequences of the current crisis on persons of
    color, but all those pressures predate the virus.'' And you advocate
    for a race-conscious, responsible fiscal policy to address these issues
    and provide ongoing support wherever it is needed, regardless of the
    state of the national economy. You've called for an ``anti-racist
    policy agenda''--can you provide more details or specifics on what that
    might consist of? The article mentioned a labor market focus, as well
    as housing, education, voting rights, and criminal justice reforms.
        A race-conscious policy agenda would of necessity attack the
    problem of systemic racism from many angles. The reason relates to what
    we mean by ``systemic.'' That is, the phrase does not invoke occasional
    or even frequent racist acts or expressions by individuals. It refers
    to the extent to which racism is deeply entrenched in almost every
    aspect of our society, politics, and institutions.
        A good example is housing segregation. The extent of redlining and
    racist housing covenants has been exhaustively documented and the
    impact a legacy of substandard, segregated housing in neighborhoods
    that lack the public goods and investments of neighborhoods where
    whites reside. Thus, housing policy must be crafted to offset this
    systemic segregation. An example would be fully funding ``neighborhood
    choice vouchers'' and ensuring affordable capital access through CDFIs
    and MDIs. ``Moving to opportunity'' policies can also help. [I can
    provide links and references on all of the policy ideas in this note.]
        The same approach must be taken in every case. In education, access
    to college must be affordable for persons of color and any needed
    remediation services to offset systemic unequal quality of K-12
    education must be provided. In labor markets, minimum wages must be
    brought closer to living wages, and refundable credits must make work
    pay for lower-paid workers who are disproportionately workers of color.
    Also, in labor markets, it must be recognized that even in strong
    economies, there are often Black and Brown neighborhoods where jobs are
    insufficient in terms of quantity and quality. Direct job creation
    programs must be considered in these cases.
        Of course, criminal justice is another example of an institution
    rife with systemic racism, including incarceration policies and
    policing. As an economist, policy reforms here are outside my scope but
    I can easily provide you with such information if it would be useful.

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