[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

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

                            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
          
          
          
          
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             U.S. GOVERNMENT PUBLISHING OFFICE 
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                        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


                   REDUCING UNCERTAINTY AND RESTORING

                   CONFIDENCE DURING THE CORONAVIRUS



                               RECESSION

                              ----------                              


                        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\
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    \1\ https://www.wsj.com/articles/powell-says-despite-signs-of-
stabilization-risks-of-long-term-economic-damage-are- significant-
11592316029
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    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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