[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                        THE INFLATION EQUATION:
                        CORPORATE PROFITEERING,
                       SUPPLY CHAIN BOTTLENECKS,
                              AND COVID-19

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

                             HYBRID HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 8, 2022

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 117-73
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
	
                                __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
47-271 PDF                 WASHINGTON : 2022                     
          
-----------------------------------------------------------------------------------   
                             

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York           BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            ANN WAGNER, Missouri
ED PERLMUTTER, Colorado              ANDY BARR, Kentucky
JIM A. HIMES, Connecticut            ROGER WILLIAMS, Texas
BILL FOSTER, Illinois                FRENCH HILL, Arkansas
JOYCE BEATTY, Ohio                   TOM EMMER, Minnesota
JUAN VARGAS, California              LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey          BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas              ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida                   WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam            TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
RITCHIE TORRES, New York             JOHN ROSE, Tennessee
STEPHEN F. LYNCH, Massachusetts      BRYAN STEIL, Wisconsin
ALMA ADAMS, North Carolina           LANCE GOODEN, Texas
RASHIDA TLAIB, Michigan              WILLIAM TIMMONS, South Carolina
MADELEINE DEAN, Pennsylvania         VAN TAYLOR, Texas
ALEXANDRIA OCASIO-CORTEZ, New York   PETE SESSIONS, Texas
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts

                   Charla Ouertatani, Staff Director
                           
                           C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 8, 2022................................................     1
Appendix:
    March 8, 2022................................................    73

                               WITNESSES
                         Tuesday, March 8, 2022

Drummer, Demond, Managing Director, PolicyLink...................     4
Goodspeed, Tyler, Kleinheinz Fellow, Hoover Institution..........    11
Mabud, Rakeen, Chief Economist and Managing Director, Policy and 
  Research, Groundwork Collaborative.............................     6
Vaheesan, Sandeep, Legal Director, Open Markets Institute........     8
Zandi, Mark, Chief Economist, Moody's Analytics..................     9

                                APPENDIX

Prepared statements:
    Drummer, Demond..............................................    74
    Goodspeed, Tyler.............................................    89
    Mabud, Rakeen................................................    94
    Vaheesan, Sandeep............................................   108
    Zandi, Mark..................................................   117

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    Written statement of the Merchants Payments Coalition........   127
    Letter regarding the State and Local Fiscal Recovery Funds 
      (SLFRF)....................................................   131
Gonzalez, Hon. Anthony:
    ``Inflation eroded pay by 1.7% over the past year,'' by Greg 
      Iacurci....................................................   135
McHenry, Hon. Patrick:
    Written statement of the U.S. Chamber of Commerce............   145
Ocasio-Cortez, Hon. Alexandria:
    Letter correcting statements made during the hearing.........   148

 
                        THE INFLATION EQUATION:
                        CORPORATE PROFITEERING,
                       SUPPLY CHAIN BOTTLENECKS,
                              AND COVID-19

                              ----------                              


                         Tuesday, March 8, 2022

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:04 a.m., in 
room 2128, Rayburn House Office Building, Hon. Maxine Waters 
[chairwoman of the committee] presiding.
    Members present: Representatives Waters, Sherman, Scott, 
Green, Cleaver, Himes, Foster, Beatty, Vargas, Gottheimer, 
Gonzalez of Texas, Lawson, San Nicolas, Axne, Casten, Pressley, 
Torres, Lynch, Adams, Tlaib, Dean, Ocasio-Cortez, Garcia of 
Illinois, Garcia of Texas, Williams of Georgia, Auchincloss; 
McHenry, Lucas, Posey, Luetkemeyer, Huizenga, Wagner, Barr, 
Williams of Texas, Hill, Emmer, Zeldin, Loudermilk, Mooney, 
Davidson, Budd, Kustoff, Hollingsworth, Gonzalez of Ohio, Rose, 
Steil, Gooden, Timmons, and Sessions.
    Chairwoman Waters. The Financial Services Committee will 
come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    I now recognize myself for 5 minutes to give an opening 
statement.
    Today, we will continue the discussion we began with 
Federal Reserve Chair Pro Tempore Powell last week about the 
economy and the causes of inflation and its impact on families 
across the country. Last Friday, we received another strong 
Jobs Report which showed that 678,000 jobs were added to the 
economy in the month of February. The record-setting job 
creation we saw during the first year of the Biden 
Administration continues, indeed thanks to the American Rescue 
Plan, signed into law by President Biden. The U.S. has had a 
stronger economic recovery than any other advanced economy 
worldwide. Wages and salaries for workers grew 4.5 percent in 
2021, which is the highest pay increase for workers since 1983. 
Importantly, these wage increases have been most significant 
for low-income workers.
    We are still in the midst of the COVID-19 pandemic and its 
effects, including higher prices at the grocery store and 
higher monthly rents that are taking a toll on household 
budgets. Today, I expect we will hear some of our colleagues 
attempt to pin inflation on the successful American Rescue 
Plan, a bill that helped attack this deadly virus and get 
millions of people vaccinated, supported 6 million small 
businesses, and helped fuel the economic growth, while 
resulting in the first reduction of Federal debt seen since the 
Obama Administration. But this oversimplified narrative has 
been debunked by experts, including by Chair Pro Tempore 
Powell, who explained at last week's hearing that supply chain 
bottlenecks caused by the pandemic are one of the main drivers 
of inflation, and every American knows, whether they rent or 
own their home, that housing is also a key driver of inflation.
    For too long, we have not addressed the shortfall in our 
housing supply. And this lack of supply is driving up costs. In 
2021, the national median rent for an apartment jumped by 
almost 18 percent, and home prices rose by almost 17 percent. 
Additionally, as giant corporations have grown larger in a wide 
range of sectors across our economy over the last several 
decades, they have exercised greater power to set prices. Right 
now, we are seeing big corporations take advantage of economic 
conditions and a lack of real competition to pass higher prices 
on to consumers, simply because they can. Moreover, Russia's 
unprovoked invasion of Ukraine and the related strong response 
the United States and our allies have taken to defend democracy 
and support Ukraine have already begun to have ramifications on 
gas and other prices.
    Congress has an important role to play in addressing the 
complex causes of inflation that is hurting consumers. The 
Senate can start by confirming President Biden's highly-
qualified slate of nominees so that monetary policy decisions 
are made by public officials who are accountable to us. 
Congress has already enacted the bipartisan infrastructure bill 
that will improve the infrastructure we have, including at our 
nation's ports. They have addressed supply chain challenges, 
and Congress must finish the work of further bolstering supply 
chain resilience, supporting domestic manufacturing, reforming 
the shipping industry, and bringing down housing costs.
    The House has passed the Build Back Better Act, which 
addresses labor and housing supply shortages through 
significant investments in housing and child care, and also 
includes investments in supply chain resilience and other 
sectors. Many economists, including 17 Nobel laureates, have 
expressed their view that investments have basically been 
expressed in very significant ways. I look forward to hearing 
from this panel on how to bring about a robust and stable 
recovery for all.
    I now recognize the ranking member of the committee, the 
gentleman from North Carolina, Mr. McHenry, for 5 minutes.
    Mr. McHenry. Thank you, Madam Chairwoman, and thank you for 
having this hearing. If Democrats are looking to crack the code 
on the inflation equation, I would suggest a little self-
reflection. Today's hearing title shows that Democrats want to 
blame high prices on everything--corporate greed, broken supply 
chains, even the COVID-19 virus--but here is where it gets 
rich. It left out the one thing that economists of all 
political stripes have pointed to as the leading cause of 
record price increases: the massive injection of Federal 
spending that occurred over the past year.
    The Biden Administration's American Rescue Plan plowed 
nearly $2 trillion into an already-strong economy, which caused 
consumer prices to rise more rapidly than the economy's 
productive capacity. This is basic economics. Widespread, out-
of-control inflation is the natural consequence of dumping 
unnecessary cash into an economy already well into recovery 
from pandemic disruptions. And now, my constituents and yours 
are paying the full price for all of that free money. By the 
end of last year, the expenses for many working families 
exceeded their incomes, despite any wage gains. The outlook, at 
least in the short run, doesn't look any better. Until we have 
an honest conversation about the root cause of inflation, we 
are not going to get anywhere.
    My colleagues across the aisle want to talk about so-called 
corporate profiteering, so let's talk about that. Profit is not 
synonymous with greed. You don't have to take my word for it. 
Former Democrat Treasury Secretary Larry Summers, and Jason 
Furman, a top economist in the Obama Administration, have been 
openly critical of the attempts to blame corporations for 
inflation.
    According to Summers, ``Business bashing is terrible 
economics and not very good politics.'' I agree. Businesses 
have certain fixed operational costs, just like we do at home, 
and things that make the cost of running a business more 
expensive, like taxes and regulations, get included in the 
final prices customers have to pay. So as wages remain 
stagnant, American families are finding it harder and harder to 
keep up. You hear it around the kitchen table across the 
country. Housing costs more, food costs more, even baby 
formula, if you can find it, because we have a national crisis 
around the shortage of baby food, is more expensive.
    So, that leads me to the next so-called cause of inflation 
my Democrat colleagues talk about, and my friend just talked 
about: supply chain bottlenecks. Steve Rattner, who served as 
Counselor to the Treasury Secretary in the Obama Administration 
noted that, ``Blaming inflation on supply lines is like 
complaining about your sweater keeping you too warm after you 
have already added several logs to the fireplace. The bulk of 
our supply problems are the product of an over-stimulated 
economy, not the cause of it.''
    In short, Democrats' reckless fiscal agenda fueled a 
spending spree right at the moment our supply logistics were 
under the most strain.
    Supply issues are a product of excessive demand that 
happens by default after a huge government cash dump, like the 
American Rescue Plan. And then, there are the billions of 
dollars in new regulatory burdens and the ongoing impact of 
Democrats' mainstream shutdowns during the pandemic.
    The House Small Business Committee, with Ranking Member 
Luetkemeyer, calculated that the Biden Administration has 
produced 283 new regulatory rules, and is on the way to more, 
with an estimated cost to businesses of $201 billion. The 
private sector has been forced to jump through hoops to meet 
local, State, and Federal regulations in their attempt to solve 
supply chain issues, thereby raising the cost of doing business 
and raising the cost of things for the consumer. Meanwhile, the 
previous Administration's incredible efforts to cut 
duplicative, overly burdensome regulations and support private-
sector endeavors have been scrapped out of political expediency 
or out of a political agenda.
    It is time to stop chasing what feels good politically and 
do what is right economically. We must restore fiscal 
discipline and promote policies that support energy 
independence and long-term economic prosperity. Until we do 
that, Democrats will keep throwing flimsy excuses at the wall 
to see what sticks politically, and Americans are, quite 
frankly, tired of cleaning up the mess.
    With that, thank you, Madam Chairwoman, for holding this 
hearing. Thank you for allowing us to discuss this important 
subject matter. I yield back.
    Chairwoman Waters. Thank you, Ranking Member McHenry.
    I want to welcome today's witnesses: Mr. Demond Drummer, 
the managing director for equitable economy at PolicyLink; Dr. 
Rakeen Mabud, the chief economist and managing director of 
policy and research with the Groundwork Collaborative; Mr. 
Sandeep Vaheesan, the legal director of the Open Markets 
Institute; Dr. Mark Zandi, the chief economist at Moody's 
Analytics; and Mr. Tyler Goodspeed, the Kleinheinz Fellow at 
the Hoover Institution.
    You will each have 5 minutes to summarize your testimony. 
You should be able to see a timer that will indicate how much 
time you have left. I would ask you to be mindful of the timer, 
and quickly wrap up your testimony when your time has expired.
    And without objection, your written statements will be made 
a part of the record.
    Mr. Drummer, you are now recognized for 5 minutes to 
present your oral testimony.

   STATEMENT OF DEMOND DRUMMER, MANAGING DIRECTOR, POLICYLINK

    Mr. Drummer. Thank you, Chairwoman Waters, Ranking Member 
McHenry, and members of the committee for the opportunity to 
offer testimony on inflation and its impact on the 100 million 
economically-insecure Americans. My name is Demond Drummer, and 
I am a managing director at PolicyLink, a national research and 
action institute which works to ensure that all people in 
America participate in a just society, live in a healthy 
community of opportunity, and prosper in an equitable economy.
    I would like to center my discussion of inflation on the 
nearly 100 million people in America living below 200 percent 
of the Federal poverty threshold.
    The impact of higher prices falls disproportionately on the 
100 million who must pay an even greater share of their income 
to meet their basic needs, but if we look closer, we see that 
inflation is not the problem. It is being made out to be, 
especially for that 100 million. The problem is an economy that 
suppresses wages and siphons wealth away from working people. 
In the time that remains, I will offer some perspectives on why 
the way we talk about inflation is simply wrong.
    Next, I will discuss how inflation pales in comparison to 
the broader affordability crisis afflicting the 100 million. I 
will conclude with policy recommendations that can begin to 
bring balance to our economy.
    So now, about inflation, the way we talk about inflation 
blames our government for price increases, but it is 
disingenuous to lay inflation solely or even primarily at the 
feet of Federal stimulus. There are many more factors at play, 
including the fragility of global supply chains, et cetera. 
Yes, our government stimulated demand. That was the point. It 
was absolutely necessary during the pandemic. The question is, 
who actually raised the prices? It was the companies choosing 
to take advantage of the pricing power that comes when buyers 
demand more goods than the companies have available to sell. 
These price increases were neither automatic nor inevitable. 
They were a conscious choice that disproportionately harmed the 
100 million people in America living in or near poverty.
    To be sure, there are exogenous factors that inform how 
companies set their price levels. War and weather can inform 
the price of inputs. However, if we are not clear that it is 
not government spending directly, but corporate pricing power 
that drives inflation, then we will always hesitate to make the 
necessary public investments to build a more sustainable and 
equitable economy in which the 100 million can truly prosper. 
This is the work of our time.
    An intense program of economic policy designed to suppress 
wages and siphon wealth is a much bigger threat than inflation. 
Here are the numbers. Nearly 100 million people live in 
households with incomes of less than 200 percent of the Federal 
poverty threshold. That is one-third of the U.S. population. 
Households below the Federal poverty line spend 18 percent of 
their income on energy, nearly 10 times the energy burden of 
higher-income households. While productivity grew by nearly 60 
percent over the last 4 decades, a typical worker's pay 
increased by less than 16 percent. Productivity grew 4 times 
faster than wages.
    In housing, between 2001 and 2020, home production in the 
U.S. fell short of demand by 5.5 million units. The twin forces 
of a housing shortage and uneven wage growth have converged to 
create a national crisis that was only further exacerbated by 
the economic impact of the pandemic. Before the pandemic, half 
of all renters in America were paying more than they could 
afford on housing: half. In 2021, rents increased by at least 
10 percent in 149 metropolitan areas. Today, 6 million renter 
households are currently behind on rent. That is double the 
pre-pandemic baseline. During the pandemic, meanwhile, the net 
worth of U.S. billionaires grew by $2.1 trillion, an increase 
of 70 percent.
    The solution we recommend is to enact a bold program of 
expansionary economic policy that does the following: supports 
wage growth for the lowest-income workers; expands the labor 
force; ensures that the benefits of productivity gains are 
shared equitably; invests in affordable housing infrastructure; 
supports alternative pathways to homeownership; accelerates 
adoption of low-cost renewable energy; and promotes the 
development of high-wage sustainable industries.
    This is our moment to enact practical policies and make 
public investments that will bring balance to our economy and 
deliver real results for the American people, especially the 
100 million who are economically-insecure.
    Thank you again for the opportunity to testify before you. 
It has been an honor.
    [The prepared statement of Mr. Drummer can be found on page 
74 of the appendix.]
    Chairwoman Waters. Thank you, Mr. Drummer.
    Dr. Mabud, you are now recognized for 5 minutes to present 
your oral testimony.

    STATEMENT OF RAKEEN MABUD, CHIEF ECONOMIST AND MANAGING 
    DIRECTOR, POLICY AND RESEARCH, GROUNDWORK COLLABORATIVE

    Ms. Mabud. Chairwoman Waters, and Ranking Member McHenry, 
thank you for inviting me to testify today. My name is Rakeen 
Mabud, and I am the chief economist and managing director of 
policy and research at the Groundwork Collaborative. Groundwork 
is an economic policy think tank dedicated to advancing a 
coherent economic worldview that produces broadly-shared 
prosperity and abundance for all.
    My testimony today will focus on three key points. First, 
corporate profiteering is playing an important role in rising 
prices. Corporate executives and shareholders are enjoying the 
highest profit margins in 70 years, and consumers are paying 
the price.
    Second, Wall Street's presence in every corner of our 
economy suggests a profit-price spiral to significant risk. In 
contrast, there is no evidence that wages are driving prices 
up.
    Finally, today's price increases are the direct result of 
the outsized power that megacorporations hold over our supply 
chains and our economy more broadly.
    There are a range of factors driving inflation right now, 
including increased and shifting demand, as well as supply 
chain disruptions and the resulting shortages. However, the 70-
year record high corporate profit margins demonstrates that 
mega-corporations are taking advantage of this crisis to pad 
their profits, accelerating price hikes for consumers.
    Groundwork has combed through hundreds of earnings calls to 
understand why profit margins are at a record high. In these 
calls, executives tell investors about the last quarter's 
performance and discuss what investors can expect going 
forward. Over and over, the message from corporate America is 
clear: CEOs are telling their investors that the current 
inflationary environment has created significant opportunities 
to extract more from consumers by raising prices and pocketing 
the extra profits.
    Take Constellation Brands, the parent company of popular 
beers, Modelo and Corona. On its earnings call in January, 
Constellation's CFO said, ``As you know, we have a consumer set 
that skews a bit more Hispanic than some of our competitors. 
And in times of economic downturn, they tend to get hit a 
little bit harder and they recover a little bit slower, so we 
want to make sure we are not leaving any pricing on the table. 
We want to take as much as we can.''
    Megacorporations are able to get away with this kind of 
aggressive and extractive pricing precisely because of the 
current inflationary environment. As Hostess' CEO said in an 
earning call this month, ``We are also seeing consumers 
experience a lot of disruptions. They are losing benefits. They 
are moving to a normalized COVID environment. They haven't 
fully recognized they were absorbing pricing, and inflation is 
a helpful cover for these price hikes.'' The same CEO said, 
``Pricing by definition is a change model. It's temporary, 
consumers get used to it. When all prices goes up, it helps.''
    Wall Street's influence in every corner of our economy 
makes this period of inflation unique and puts us at risk for a 
profit-price spiral. As profits rise as a result of price 
hikes, so, too, does the investor demand for those profits, 
sending prices spiraling upwards.
    Take Walmart and Target, whose executives wanted to pursue 
a strategy of increasing market share by keeping prices low. As 
a result, both companies experienced brutal sell-offs. Simply 
put, investors weren't having it. Having seen how successful 
price hikes were across the retail industry, they punished 
anyone who was not pursuing the same strategy. Within 3 months, 
both companies have raised their prices.
    While investor demands for higher profits are sending 
prices up, there is no evidence that wages are playing a role. 
A recent analysis by the Economic Policy Institute looks at the 
relationship between price increases and wage increases across 
sectors. They find no correlation between these two factors 
since December 2020. In other words, there is absolutely no 
evidence to suggest that wage increases for workers are to 
blame for the price increases we are seeing today.
    Corporate America's ruthless pursuit of efficiency has 
contributed to today's high prices in two important ways. 
First, it hollowed out and nearly eliminated diversity in our 
supply chain, leaving us without any failsafes to withstand 
significant shifts in demand without supply shortages.
    Second, it has left us vulnerable to profiteering and price 
gouging. Without competition to undercut companies who are 
charging excess prices, or laws and regulations prohibiting 
this behavior, companies will continue unabated. Congress must 
do its part to bring down prices by taxing excess profits to 
encourage productive investment, and to encourage vigorous 
competition in key product markets and along the supply chain. 
It is also imperative that Congress makes long-overdue 
investments in our supply chain infrastructure and in sectors 
like housing, health care, and child care that have been 
putting strain on family budgets for decades.
    Importantly, interest rate hikes, which slow inflation by 
tamping down demand and making people poorer, will do nothing 
to make our markets more competitive, nothing to help spur 
overdue investments in housing and infrastructure, and nothing 
to address profiteering. We should no longer delay the 
important work of reorienting our economy towards the people 
who keep it going: consumers, workers, and small businesses.
    Thank you, and I look forward to your questions.
    [The prepared statement of Dr. Mabud can be found on page 
94 of the appendix.]
    Chairwoman Waters. Thank you, Dr. Mabud.
    Mr. Vaheesan, you are now recognized for 5 minutes to 
present your oral testimony.

  STATEMENT OF SANDEEP VAHEESAN, LEGAL DIRECTOR, OPEN MARKETS 
                           INSTITUTE

    Mr. Vaheesan. Thank you, Chairwoman Waters, Ranking Member 
McHenry, and members of the committee for this opportunity to 
participate in the hearing. My name is Sandeep Vaheesan. I am 
the legal director at the Open Markets Institute, an anti-
monopoly research and advocacy group that works to build a fair 
economy.
    Ongoing inflation in the United States is, in part, a story 
of corporate pricing power. In industries ranging from 
agricultural chemicals and seeds, to mattresses, to rental 
cars, and to restaurants, CEOs and CFOs have boasted that 
they've been able to raise prices and boost profit margins. The 
extraordinary pricing power of corporations in many sectors was 
not inevitable. It is a result of policy choices, most notably 
initiated by President Reagan's Administration in the 1980s 
that effectively reinterpreted and neutered the strong 
antitrust law that Congress enacted against corporate mergers. 
As the Supreme Court recognized in 1966, Congress decided to 
clamp down with vigor on mergers and arrest a trend toward 
concentration in its incipiency before that trend developed to 
the point that a market was left in the grip of a few big 
companies.
    The Reagan Administration ignored this policy judgment of 
Congress and substituted its own pro-merger judgment that 
granted extraordinary power to executives and investment 
bankers to roll up markets through consolidation. As two 
scholars wrote in 1988, the Reagan Administration's policy 
statements and dearth of anti-merger enforcement served as an 
invitation to corporate America to merge with anyone. Every 
subsequent Administration up through President Trump's followed 
the Reagan Administration's permissive approach to merger 
enforcement. Indeed, they've often further loosened 
restrictions on merger activity on the assumption that mergers 
produce efficiencies and benefit consumers.
    Democratic and Republican Administrations permitted 
consolidation despite the lack of evidence to support the twin 
assumptions that mergers resulted in efficiency and that 
powerful corporations willingly shared any of the benefits of 
efficiency with the public. If anything, the great bulk of 
evidence pointed in the opposite direction. As business school 
professor Melissa Schilling wrote, ``A considerable body of 
research concludes that most mergers do not create value for 
anyone, except perhaps the investment bankers who negotiated 
the deal.''
    With the green light for consolidation, corporations have 
engaged in hundreds of thousands of mergers over the past 4 
decades. Lax merger policies produce high levels of 
concentration in many markets. In such concentrated markets, 
corporations have more power to raise prices unilaterally and 
collude with rivals.
    For example, in meatpacking, processors appear to have used 
their individual and collective power to raise beef and chicken 
prices to consumers. Critically, inflation has given executives 
cover to exercise pricing power, which at other times might 
provoke strong reactions from customers and the public. A CFO 
of a supplier to food companies told The Wall Street Journal, 
``Widespread inflation makes it easier to broach the topic of 
raising prices with customers.'' A permissive posture on 
mergers has also had deleterious effects on the productive 
capacity of the United States. Corporations often eliminate, 
``redundant'' capacity following mergers, especially those 
involving competitors.
    Consider the effects of hospital consolidation on health 
care capacity. In metropolitan areas and counties across the 
country, hospitals in the past few decades have gone on a 
merger frenzy, concentrating local health care markets and 
obtaining extraordinary power over patients and payers. They've 
also closed hospitals and clinics that they deemed superfluous. 
Due in part to consolidation, the United States had 1.5 million 
hospital beds in 1975, but only 900,000 beds in 2017, even 
though the population of the country had increased by more than 
100 million during that time period. As a result, the nation 
was much less equipped to respond to the pandemic and the surge 
in Americans needing hospital care.
    Further, in many instances, corporations have opted to grow 
through mergers and acquisitions instead of the more socially-
beneficial method of investment and hiring. Two economists 
captured this cost of lax merger policy, writing, ``Billions of 
dollars are spent on shuffling ownership shares are, and at the 
same time, billions of dollars are not being spent on 
productivity-enhancing plant equipment, and research and 
development.'' The millions of dollars absorbed in legal fees 
and investment banking commissions are, at the same time, 
millions of dollars not being plowed directly into the nation's 
industrial base. The opportunity costs of merger mania are 
real, and they bode ill for the reindustrialization of America.
    The net result is permissive anti-merger policies, and an 
economy in which many corporations wield exceptional pricing 
power and have less slack capacity to meet even modest 
increases in demand for goods and services. These are not the 
only political economic harms of corporate consolidation and 
concentration, which include lower wages for workers, but just 
the one relevant to today's hearing. The pandemic has merely 
exposed the underlying structural problems in the American 
economy.
    Thank you for the invitation to testify and participate in 
today's hearing. I look forward to your questions.
    [The prepared statement of Mr. Vaheesan can be found on 
page 108 of the appendix.]
    Chairwoman Waters. Thank you, Mr. Vaheesan.
    Dr. Zandi, you are now recognized for 5 minutes to present 
your oral testimony.

  STATEMENT OF MARK ZANDI, CHIEF ECONOMIST, MOODY'S ANALYTICS

    Mr. Zandi. Thank you, Chairwoman Waters, Ranking Member 
McHenry, and members of the committee for the opportunity to 
speak and participate in today's important hearing on 
inflation. My name is Mark Zandi. I am the chief economist at 
Moody's Analytics, but the views I express today are my own. I 
am also on the board of directors of MGIC, one of the nation's 
largest mortgage insurers, and I am the lead director of the 
Reinvestment Fund, a national Community Development Financial 
Institution (CDFI) that makes investments in underserved 
communities across the country. We are headquartered in 
Philadelphia. That is my hometown.
    I would like to make three points in my oral remarks. Point 
number one: clearly, Americans are feeling the acute financial 
pain of higher inflation for the first time in two generations, 
and they are rightly unhappy. The typical American household 
makes less than $70,000 a year, but the acceleration and 
inflation over the past year is costing an additional $3,300 a 
year to buy the same goods and services than it did a year ago, 
which is $275 a month in additional cost. Just to put that into 
some kind of context, the typical household spends about $200 a 
month on eating out, about $150 a month on their cell phones, 
and about $100 a month on clothes. Obviously, this is very 
frustrating, and it is undermining sentiment. Nothing is more 
disconcerting and debilitating than inflation on consumer 
business and investor psychology. And this is, I think at this 
point, a significant threat to the economic recovery. And the 
fate of the recovery does hinge on whether inflation will 
moderate meaningfully in the near future.
    Point number two: the high inflation, the painfully high 
inflation has been, in my view, because of a number of causes 
obviously, but at the top of the list is the pandemic that has 
badly disrupted global supply chains, particularly the Delta 
wave of the variant that hit last fall, which was a big 
surprise after the vaccines that we received in the spring. The 
pandemic has badly disrupted the labor market and demand-supply 
dynamics and lots of markets including, most importantly, 
perhaps, the energy market.
    And that gets us to Russia's invasion of Ukraine, which is 
obviously top of mind here, and it's causing prices, oil prices 
and other commodity prices to spike, which is exacerbating that 
already-high inflation. Let me just give you a sense of that. 
The increase in gasoline prices since the invasion began has 
added about $50 to the typical gasoline bill per month, so it 
just gives you a clear sense of how much damage that is.
    Now, I do expect the pandemic to fade. What I mean by that 
is that each new wave of the virus will be less disruptive than 
the previous one. And I do expect that the severe disruptions 
to supplies related to Russia and Ukraine will be short-lived, 
in terms of weeks, not months. And if that is the case, I do 
expect that inflation will begin to moderate, but clearly 
there's a lot of risk around that.
    And if the pandemic continues to intensify, if the Russian 
invasion of Ukraine is more disruptive, then I expect oil 
prices and other commodity prices to stay more elevated for 
longer and begin to infect inflation expectations. The Federal 
Reserve has a Hobson's choice, really no good choice: They will 
have to raise interest rates more aggressively and recession 
risks will rise very, very quickly. This is still a low-
probability scenario, but it's a rising one and increasingly 
more uncomfortable.
    Finally, point number three, is that some blame the high 
inflation on governments fiscal policies during the pandemic 
that have shored up the finances of pandemic-stricken 
households, particularly lower- to middle-income households. I 
view that as a misdiagnosis of the problem. And they also call 
for government to stand down, and I think that would be a 
mistake.
    In my view, the policies put forward in the pandemic, 
beginning with the CARES Act, and continuing through the 
American Rescue Plan, were critical to the economic recovery, 
ensuring that the economy got back as quickly as it did to 
close to full employment, and we will be there, roughly, by the 
end of the year, which is quite an achievement. And now that 
the economy is back to full employment, I think it is very 
important for lawmakers to focus on how to address the rising 
cost of living, child care, elder care, health care, and 
educational services. And I will call out the cost of housing. 
I think this is a critical element to high inflation going 
forward. Rent costs are rising very rapidly, and will continue 
to do so, and lawmakers can help in this regard.
    So with that, I will stop and turn it back to you. I do 
want to thank you again for the opportunity to participate in 
today's hearing. Thank you.
    [The prepared statement of Dr. Zandi can be found on page 
117 of the appendix.]
    Chairwoman Waters. Thank you very much, Dr. Zandi.
    Mr. Goodspeed, you are now recognized for 5 minutes to 
present your oral testimony.

    STATEMENT OF TYLER GOODSPEED, KLEINHEINZ FELLOW, HOOVER 
                          INSTITUTION

    Mr. Goodpseed. Thank you, Chairwoman Waters, Ranking Member 
McHenry, and members of the committee for the opportunity to 
testify today on an issue of upmost importance and concern to 
the U.S. economy and U.S. households.
    We have in the past year observed inflation at levels that 
we simply haven't observed since the end of The Great Inflation 
of the late 1960s to the early 1980s. And that inflationary 
pressure is no longer isolated to a few sectors. In fact, if we 
look at all of the measures of core or underlying inflation, to 
which those who doubted that there was an inflation problem 10 
months ago pointed, those measures are actually now indicating 
an inflation problem as bad or worse than that implied by the 
headline numbers.
    Now, I submit to the committee that the primary cause of 
the inflationary pressure that we are observing cannot be one 
that is global in nature--supply chains, pandemic-related labor 
market disruptions, corporate profit seeking--because the 
increase in U.S. inflation has been so much greater than that 
observed in other advanced and major economies.
    In fact, of 46 advanced and major economies tracked by the 
Organization for Economic Cooperation and Development, the 
increase in average inflation in the United States in 2021, 
over 2019, was greater than in all but Brazil, Turkey, and the 
Kingdom of Saudi Arabia. And when we look at the timing of that 
divergence in U.S. inflation, it points unambiguously to March 
2021. In the 12 months through February 2021, inflation in the 
United States and the Euro area have been roughly the same, 1 
percent versus 1.1 percent.
    However, in March 2021, we saw a big divergence, such that 
by the end of 2021, the increase in the rate of inflation in 
the United States was approximately 3 times that in the Euro 
area. And if we extend that series to January 2022, it 
increases to about 5 times. What happened in the United States 
in March 2021 that didn't happen elsewhere? We had a fiscal 
expansion, a fiscal stimulus that was the largest during an 
economic expansion in post-war U.S. history, equal to 
approximately 10 percent of the U.S. economy. This consisted 
predominantly of demand stimulus through transfer payments to 
households, with the immediate effect that demand for goods in 
the month of March increased 10.7 percent month-over-month, or 
about 240 percent at an annualized rate.
    A stimulus of this magnitude likely raised aggregate demand 
in the United States to a level 5 percent above its pre-
pandemic potential output. But that is not all of the story, 
because pre-pandemic estimates of the potential output of the 
U.S. economy are almost certainly overestimates of the 
potential of the U.S. economy in 2021. Because in the interim, 
we had had 1.5 million estimated early retirements. We still 
had in March 2021, 3.7 million Americans reporting that they 
didn't look for work in the past month because of the pandemic. 
We still had, by my estimations, a cumulative shortfall in 
business fixed investment of $1.8 trillion. Worse than that, in 
March 2021, the package pass likely exacerbated those existing 
supply side problems by raising implicit marginal tax rates on 
the return to work. And following that, we had throughout 2021 
the prospect of higher tax rates on corporate income after 2021 
that was unlikely to incentivize increased business investments 
in 2021, because it raises the option value of deferring that 
investment into 2022. So, we have a massive increase in demand, 
and impaired supply. That difference has to go into prices.
    Now, we've heard a lot about supply chains' import 
capacity. I have to say that the volume of imports handled by 
U.S. ports in 2021 was about 20 percent above pre-pandemic 
levels. Our supply chains and our ports did a remarkable job 
handling and processing an unprecedented volume of goods 
shipments in 2021. Usually, when we see quantity and price 
increasing, that means it's an increase in demand, not a 
decrease in supply.
    We have also heard a lot about market concentration and 
corporate power, to which I would ask the following questions. 
Why do we only observe this in 2021? Why only in the United 
States? If its concentration in some sectors, why are we 
observing general price inflation rather than relative price 
inflation? And finally, why are we observing an increase in the 
inflation rate and the inflation rate increasing at a faster 
and faster pace rather than a one-off increase in the price 
level?
    Thank you.
    [The prepared statement of Dr. Goodspeed can be found on 
page 89 of the appendix.]
    Chairwoman Waters. Thank you very much. I will now 
recognize myself for 5 minutes for questions.
    I would like to ask each of you to describe for me who will 
get hit the hardest if the Fed raises interest rates too 
quickly? How might this affect low-income workers, especially 
in communities of color that are finally seeing employers offer 
bigger paychecks? And to just share with you, I am a little bit 
surprised that everybody accepts increasing interest rates as a 
surefire way to contain inflation. I have questions about that. 
And I would like to ask each of you to respond to the question 
about the interest rates. Thank you.
    Mr. Drummer. Thank you, Chairwoman Waters. You raise a very 
important point. An increase in the interest rate is going to 
relax demand for workers. That will put downward pressure on 
workers' wages. So, what we are saying is we are going to 
manage inflation by lowering the wages of the lowest-wage 
workers who are already being hit by the structure of our 
economy. It is unjust, it is inappropriate, and, again, you are 
right: The interest rate increase is not a silver bullet. It is 
going to disproportionately harm the 100 million of our lowest 
earners in our economy.
    Chairwoman Waters. Thank you. Mr. Zandi, would you please 
respond to the question of, who will get hit the hardest if the 
Fed raises interest rates too quickly?
    Mr. Zandi. Thank you, Chairwoman Waters, for the question. 
I think the key thing for low- to middle-income households is 
to avoid recession, because if we go into recession, meaning 
the loss of jobs, higher unemployment, lower- to middle-income 
households would be hit much harder than higher-income 
households. So, that is the critical thing here. And to ensure 
that the economy continues to expand and avoid recession, I do 
think it is important to begin to normalize interest rates.
    Interest rates are at zero or effectively zero currently, 
and the economy is strong. We are creating a half million jobs 
every month. We have been doing that for over a year, in large 
part because of the fiscal policies. Unemployment is falling 
very rapidly across all demographic groups, and we are 
approaching full employment. So, we do need to raise interest 
rates, normalize rates to ensure that the economy doesn't 
actually overheat and go into recession. It is calibration, it 
is difficult. It is a difficult needle to thread. But I think 
at this point, we need some normalization rates in the near-
term to ensure that the economy does not overheat, and to avoid 
that recession, which would be very hard on low- to middle-
income households.
    Chairwoman Waters. Thank you very much. I would like to ask 
another one of our witnesses about this particular question, 
Dr. Rakeen Mabud. Thank you.
    Ms. Mabud. Thank you. Interest rate hikes slow inflation by 
tamping down demand and functionally making people poor. It 
does so by raising unemployment rates, by slowing down wage 
growth, and that is simply not the policy that we want to 
pursue right now, especially when we consider the plight of 
low-income people and communities of color who have been hit 
particularly hard by this period of inflation. The good news is 
that Congress has a lot of room to take on sort of the 
underlying conditions that are driving prices up, but Fed 
policy is really not the right tool right now.
    Chairwoman Waters. Thank you very much. At this point, I 
will yield to the ranking member, Dr. McHenry, for 5 minutes.
    Mr. McHenry. ``Dr. McHenry.'' Thank you, Madam Chairwoman.
    Chairwoman Waters. Everybody is a doctor today.
    Mr. McHenry. Dr. Goodspeed, thank you for being here today. 
I think you said it very well. What I said in my opening 
statement is that the Democrats blame everything but their own 
fiscal policy for the inflation we are seeing, so that is fine. 
Let's just accept that. That is fine. Their explanation is 
corporate greed. What is your response?
    Mr. Goodspeed. Thank you, Ranking Member McHenry, Dr. 
McHenry. My response is, as I noted in my opening remarks, that 
if the causal explanation is corporate profit seeking, why do 
we only observe this emerging in 2021? Why do we observe this 
emerging only in the United States, when market concentration 
by some measures have been rising globally? If it is a matter 
of concentration, market concentration, why are we observing a 
general increase in the price level rather than relative price 
increases in more concentrated sectors?
    Mr. McHenry. Okay. So along those lines, has there been an 
industry segment where you see collusion that has been driving 
the price of goods?
    Mr. Goodspeed. Not that I have observed, and when I look at 
the correlation between measures of market concentration and 
observed increases in the consumer price index in 2021, I see a 
negligible correlation.
    Mr. McHenry. Okay. And there is no evidence of significant 
consolidation in Calendar Year 2020 or 2021 that would indicate 
something different than pre-pandemic?
    Mr. Goodspeed. Not that I have seen.
    Mr. McHenry. Okay. So much for that scapegoat. Record 
prices get down to this general principle that we understand, 
which is too much money chasing too few things. And is that 
what is happening here?
    Mr. Goodspeed. Fundamentally, I think that is what is 
happening. And actually, when we look at the pattern of the 
increases in demand for goods, specifically in 2021, as I said, 
we had month-over-month a 10.7 percent increase in demand for 
goods in March 2021. That was a 240 percent annualized 
increase. Goods consumption had been already about 7 percent 
above trend heading into March. It then surged to 19 percent 
above trend, and ended 2021 at 22 percent above trend. As I 
said, our supply chains did a remarkable job handling that 
excess demand. I would not place the blame on the supply 
chains.
    Mr. McHenry. Okay. So, the supply chains are then a 
representation of the underlying economic facts, right? It is 
not the prime mover here. It is a secondary effect of the 
economic policy?
    Mr. Goodspeed. I would say it is predominantly a symptom 
rather than a cause.
    Mr. McHenry. Symptom rather than cause. Okay. So then, are 
we in a unique position compared to the rest of the world? How 
do we compare with the Europeans? COVID hit mainland Europe in 
a significant way, just like it did in the United States. How 
do we fare against the Europeans over the last year?
    Mr. Goodspeed. Right. As I noted in my opening remarks, the 
increase in the rate of inflation in the United States relative 
to the Euro area was about 3 times greater. If we try and 
extend the harmonized series into 2022, that rises to 5 times 
greater. As you noted, we were all exposed to some of the same 
global shocks in 2021. In the United States, in 2021, the 
magnitude of the increase in the demand stimulus was just 
orders of magnitude greater than in the rest of the advanced 
economy world. And at the same time, we engaged in active 
measures that further impaired some of those supply side 
constraints.
    Mr. McHenry. Okay. So, bad economics have driven this 
inflation question. Democrats control the House, the Senate, 
and the White House, sent a $2-trillion bill to juice the 
economy at the very time the economy is ripe to open, and that 
is why we have exacerbated the problems. You raised this 
question. You say to this, their actions, the Democrat policy 
actions of last year raised the implicit tax rate on returning 
to work. What does that mean? Can you simplify that for me? 
What does that mean for the average person? What do they 
experience as a result of these policies?
    Mr. Goodspeed. What that means is that when you have things 
like the extension of supplemental Federal unemployment 
insurance benefits into September, that is a year-and-a-half 
into the economic recovery, when you effectively eliminate work 
requirements for an expanded Child Tax Credit, that lowers the 
rate of return on working relative to not working.
    Mr. McHenry. And, therefore, we have a hangover effect from 
those bad policies.
    Mr. Goodspeed. That likely slowed the recovery in labor 
force participation in the United States in 2021.
    Mr. McHenry. Bad policy, bad economics, bad outcomes. I 
yield back.
    Chairwoman Waters. Thank you. The gentleman from 
California, Mr. Sherman, who is also the Chair of our 
Subcommittee on Investor Protection, Entrepreneurship, and 
Capital Markets, is now recognized for 5 minutes.
    Mr. Sherman. Inflation has been a worldwide problem since 
COVID. It is maybe a third larger here in the United States 
than in most of the developed world. We had a lot of fiscal 
stimulus. We should remember that most of it was bipartisan. 
Most of it was signed into law by President Trump. Yes, there 
is one bill for $2 trillion, the Rescue Bill, that was 
Democratic. There was also a $2-trillion tax cut bill that was 
exclusively Republican during the Trump Administration. So, 
both parties have been solely responsible for $2 trillion in 
fiscal stimulus.
    We kept people's incomes high during the COVID pandemic, 
but we closed down the bars, the restaurants, and all of the 
entertainment. People had money, but they couldn't spend it 
having fun at restaurants and bars, so they went shopping on 
Amazon. The ports in Los Angeles, as one of the witnesses 
pointed out, had a 20 percent increase in all-time volume, and, 
of course, there were delays. When it comes, those delays have 
led to more inflation. We have passed, pretty much with 
Democratic votes, an infrastructure bill. If we had passed it 5 
years ago, we wouldn't have had the delays, particularly in the 
ports in Los Angeles. We have had many hearings in this 
committee on the cost of housing, and clearly, local 
governmental decisions raise the cost of creating new, 
particularly apartment rental units.
    We are told, I believe, by Mr. Zandi, that this inflation 
is costing the average American family $275 a month. Keep in 
mind that under the American Rescue Plan, families were getting 
$250 per child, and $300 if the child was under 5-years-old. 
So, we insulated parents up until our failure to pass the Build 
Back Better bill. We have passed a Competitions bill to make 
sure that more of the chips are built here. Autos are a huge 
part of the inflation. I believe one-third is caused by auto 
costs, and that is a chip shortage.
    I have talked about ports, and finally I would like to talk 
about oil. Keep in mind that Democratic policies for 
conservation have virtually doubled miles-per-gallon. Imagine 
what the cost would be worldwide per barrel if Americans were 
still driving the kind of car I was driving when I got my first 
car, which got 9 miles to a gallon. We have alternative energy. 
We have efficiency. Oil production in the United States is 
higher today than it was when Biden took office, were stated 
for 2023 will be the all-time record in U.S. oil production.
    Mr. Zandi, what is the worldwide elasticity in the demand 
for oil? Will we see either here or in other countries, people 
using less oil because it is so expensive? And I will point out 
that I think there might be more elasticity of demand in other 
countries than here in the United States.
    Mr. Zandi. Yes, the elasticity of demand, the price 
elasticity of demand for oil is low compared to other products 
and services, obviously because it is a necessity; people need 
to get to work. But to give you a sense of it, before the 
Russian invasion of Ukraine and the run up in oil prices, oil 
was trading about $75 a barrel. We expect that global demand 
for oil this year to be about 6 million barrels a day.
    Just for context, there are 100 million barrels a day of 
demand roughly. Now, with prices, let's say they average closer 
to $100 a barrel. Now, obviously, they are a lot higher today, 
given all the things that are going on, but for the year, they 
average $100 a barrel, and hopefully it is no more than that. 
And global demand will be something like 5.5 million barrels a 
day, so that gives you kind of a sense of the price elasticity 
of demand. That also reflects weaker global economic activity. 
So, there is some impact on demand in the near-term. There is 
more impact in the longer-run, because then people can change 
behavior.
    Mr. Sherman. Okay. People can adjust.
    Mr. Zandi. Yes, it is relatively small.
    Mr. Sherman. If I can just point out that supplemental 
unemployment insurance ended in early September, and we have 
seen by its sunsetting that it was not having a major effect on 
the availability of labor and the number of people in the 
workforce. I yield back.
    Chairwoman Waters. The gentlewoman from Missouri, Mrs. 
Wagner, is now recognized for 5 minutes.
    Mrs. Wagner. Thank you, Madam Chairwoman. Dr. Goodspeed, 
the United States is experiencing, as we have all talked about 
here time and time and time again, record high inflation that 
is broad-based and hitting the wallets of my constituents in 
Missouri's 2nd Congressional District. Current prices are at 
levels not seen in 40 years. It is not just the gas prices that 
are 40 percent higher, but meat, poultry, and fish are all 12 
percent higher. Overall, groceries in general are up 7 percent. 
You have discussed the negative impact that the American Rescue 
Plan and its multi-trillion-dollar spending spree had on 
inflation and consumer prices. But could you explain how the 
Build Back Better Act, which is still discussed widely in this 
committee, and an expense of an additional $3.5 trillion, would 
impact our economy and rising inflation?
    Mr. Goodspeed. Thank you, Congresswoman. There are a number 
of provisions in the Build Back Better program that I believe 
would exacerbate some of the supply side challenges that we 
have talked about before. In particular, all of those new 
programs have income phase outs, which means, to use my 
previous term, they are going to raise implicit marginal tax 
rates on work as they phase out. And, furthermore, insofar as 
this is deficit finance, that is likely going to put upward 
pressure on interest rates, which is going to make borrowing 
costs greater for American households, and possibly necessitate 
further action on the part of--
    Mrs. Wagner. It doesn't pay for itself, does it, sir?
    Mr. Goodspeed. It certainly does not pay for itself.
    Mrs. Wagner. Dr. Goodspeed, I know that per usual, our 
colleagues across the aisle want to blame big corporations for 
inflation, particularly energy companies. But if we look back 
at history, it is global crises centered around energy that 
have driven up energy prices: the 1973 oil shortages; in 1979, 
the Iran hostage crisis; and in 1990, the Persian Gulf War. And 
now, it is the Biden Administration's refusal to reinstate 
America's energy independence by drilling in the Arctic 
National Wildlife Refuge (ANWR), opening up the Keystone 
Pipeline, ending the Federal freeze on all new oil and gas 
projects, and fast-tracking pending liquefied natural gas (LNG) 
export permits, to just name a few.
    Dr. Goodspeed, how has the Biden Administration's energy 
policies or lack thereof, allowing us energy independence, 
impacted the prices Americans are paying in terms of gas, 
electricity, heating oil for their homes?
    Mr. Goodspeed. To put some perspective and quantitative 
perspective on this issue, at the Council of Economic Advisors, 
we estimated that the lower cost of energy in the United 
States, thanks to the Shale Revolution, was saving the average 
American household $2,500 per year on the eve of the COVID 
pandemic. And insofar as actions, such as those you just 
described, limit the output potential of the U.S. energy 
sector, that is likely to chip into that $2,500 per household. 
Sorry to be technical, but the elasticity of output in the 
United States with respect to the price of oil is about 0.02 
percent, negative 0.02 percent. So, that means a 10-percent 
increase in the price of oil is going to decrease U.S. output 
by about two-tenths of a percent, and I think what we have seen 
in the past few months is something quite a bit larger than 10 
percent.
    Mrs. Wagner. And how does a strong energy policy help our 
economy by lower prices and job security, to protect our 
country?
    Mr. Goodspeed. I think that we are seeing this today with 
the difficulty on the part of many European capitals in terms 
of responding aggressively to the Russian Federation. Having 
domestic production capacity, in effect, serves as insurance in 
the event that foreign supply becomes unavailable. And one 
thing that we have seen is that different sources of energy are 
not perfect substitutes in the event of a crisis, because we 
can't simply ship LNG to Germany in the event that Russian gas 
and oil becomes unavailable.
    Mrs. Wagner. But, boy, if we could, it would sure be a lot 
cleaner than the LNG they are getting from Russia, wouldn't it, 
sir?
    Mr. Goodspeed. That is quite true.
    Mrs. Wagner. Yes, it sure would be. We are going to hear 
from the President of the United States here shortly; he may be 
on right now. And, finally, I think he is going to agree with 
the vast majority of American people, and, frankly, the rest of 
the world, that we should not be importing Putin's oil into the 
United States of America. We have the ability to be energy-
independent on our own, and we don't need this butcher's blood 
on our hands. Hopefully, we can open up our own energy 
independence with the drilling in ANWR, with the Keystone 
Pipeline, with the fracking, with the shale, all of the things 
that you talked about, to allow us to move forward towards 
energy independence on our own in a cleaner and greener way. 
So, I thank you for your input, and I yield back.
    Mr. Goodspeed. Thank you.
    Chairwoman Waters. Thank you. The gentleman from Georgia, 
Mr. Scott, who is also the Chair of the House Agriculture 
Committee, is now recognized for 5 minutes.
    Mr. Scott. Thank you. Let me start with you, Mr. Drummer. 
You mentioned two things in your testimony that I have been 
fighting for ever since I have been in Congress: one, the need 
to raise wages for workers; and two, removing structural 
barriers to employment that have blocked many low-income 
Americans out of economic opportunities. So tell us, in your 
own words, how important is it for us and Congress to tackle 
these issues of income and equality and occupational 
segregation that we face today?
    Mr. Drummer. Thank you, Representative. It is absolutely 
fundamental for the 100 million who are economically-insecure. 
Again, that is one-third of America. Just 48 percent of those 
are White people, and 52 percent are people of color. This is 
America. It is vitally important that we do everything we can 
to raise the floor of wages for the lowest earners. Again, I 
mentioned in my testimony that wages have stagnated for about 4 
decades. Meanwhile, the productivity of workers has increased 
fourfold faster than the wages have increased. And the question 
is, why shouldn't the workers get the benefits of that 
increased productivity? Why should that increased productivity 
flow to the top earners and the top shareholders in our 
country?
    To restore balance in our economy, it is incumbent upon 
Congress to not just engage in expansionary fiscal policy, not 
just encourage and coax the Fed into doing expansionary 
monetary policy, but to have expansionary regulatory policy. We 
have to raise the floor. The minimum wage has been lagging 
behind normal inflation for decades.
    Mr. Scott. Right. Now, Dr. Zandi, let me go to you. This 
business going on in Russia and Ukraine right now has opened up 
so many areas that illustrate our nation's insufficiency, being 
so utterly dependent upon other nations for our energy and our 
growing need for food, that I raised in our last meeting. Can 
you tell us whether or not we need to move to do things like 
revisiting the Keystone Pipeline, for example? The reason I am 
saying that is it puts us, our nation, in a terrible position 
when we have to depend on Russia for our oil, or Iran, or Saudi 
Arabia, or Venezuela, these socialistic countries, several of 
whom are our worst enemies.
    Do you agree with the growing feeling among both Democrats 
and Republicans that we have plenty of oil right here? We have 
plenty of resources here. Why do we have to depend upon Russia, 
when it might make sense to revisit the Keystone Pipeline and 
other areas that we are blessed with the natural resources 
here? And I would like for you to comment on that and give us 
your opinion.
    Mr. Zandi. Thank you for that, Congressman. I think we are 
energy-independent. We produce 10 million barrels of oil a day. 
We consume 10 million barrels of oil a day. We do import some 
Russian oil just because of the economics of it, but we export 
oil and petroleum products as well. So, the net of all that is 
we are energy-independent.
    In terms of natural gas, similarly, we produce a lot of 
natural gas already. Natural gas prices remain low here because 
that is more of a local market. The problem with oil and oil 
prices is it is a global market, and so the issue is what is 
going on overseas. And Russia is a big producer. They produce 
10 million barrels of oil a day. They export 5 million, making 
them the second-largest exporter in the world. If you take that 
offline, which is completely understandable given the situation 
and what is going on in Ukraine, you must get it, but it is 
going to be difficult to adjust to that.
    So, I think we are there. We need to shepherd our 
resources, and we need to make sure that we can provide those 
resources in a cost-efficient way and evaluating pipelines and 
other things that are important. But at this point, I think we 
have done a pretty good job in terms of energy independence.
    Mr. Scott. Thank you.
    Chairwoman Waters. Thank you very much. The gentleman from 
Oklahoma, Mr. Lucas, is now recognized for 5 minutes.
    Mr. Lucas. Thank you, Madam Chairwoman. And, Dr. Goodspeed, 
being an old ag econ guy from Oklahoma State, I was very 
pleased to hear you discuss the unique concept of the 
elasticity of demand, because that is really difficult for a 
lot of people to get a grip on: the concept that you either 
have enough or you have too much, and that price dramatically 
shifts from one perspective to the other. But back to the to 
the core issue. The Fed's balance sheet sits at just under $9 
trillion, more than double the pre-pandemic amount. The total 
U.S. public debts increased nearly $7 trillion since late 
January of 2020. Dr. Goodspeed, can you discuss how this drives 
inflation and overstimulates the economy from a macroeconomic 
perspective?
    Mr. Goodspeed. Certainly. Thank you, Congressman Lucas. 
What we have observed in the past year is an almost 
unprecedented excess of demand over supply in the U.S. economy. 
And that has, to a large extent, been accommodated by the 
Federal Reserve. And if we look at a broad measure of the money 
supply in the United States, that has increased by about 40 
percent since the start of the pandemic.
    Mr. Lucas. So as we would say in my town meetings, if you 
have dramatically increased the amount of money chasing the 
same or fewer goods and services, then you drive up the price 
of the goods and services, correct?
    Mr. Goodspeed. That is correct.
    Mr. Lucas. Thank you. Farmers across the country are 
experiencing higher costs for chemicals, seeds, fertilizer, 
equipment, fuel, and labor, among other increased input costs. 
The squeeze and uncertainty felt by farmers and ranchers right 
now will be felt for years to come. This means that the higher 
food prices we see now may be with us for some time. Dr. 
Goodspeed, can you discuss how persistent inflation, is it 
simply a supply chain, logistics, or a pandemic recovery issue, 
but spreads much deeper into the economy?
    Mr. Goodspeed. That is right. Sometimes, we see relative 
price increases where prices are increasing in one sector or 
another. But what we have seen in the past year is broad-based 
inflation that crosses multiple sectors, and it hurts working 
people very much because they don't have the same bargaining 
power that other workers have. Things like rent, food, energy, 
and utilities are much bigger shares of their disposable 
personal income. And many lower-income households don't have 
hedges against inflation, namely, housing.
    Mr. Lucas. So the little guys, we would say in town 
meetings, don't have flexibility. They are locked into their 
situation, on their income with their expenses ever increasing. 
This month, the national debt topped $30 trillion and the 
Congressional Budget Office predicts that the debt-to-GDP 
ratio, I should say, will double over the next 30 years. How 
troubling is this for the long-term, and I mean the long-term 
health of the U.S. economy?
    Mr. Goodspeed. In the short-term, it means that every 25-
basis-point increase in interest rates is going to raise the 
cost of servicing that debt by $75 billion. In the long term--
if we look over history when the U.S. has had debt-to-GDP 
ratios of this level, the way we got out of it is not 
especially encouraging. Some of it was from growth, but we do 
not have those growth tailwinds that we had in the aftermath of 
1945. A lot of the rest of it was inflation and what we call 
financial repression, which is basically capital controls and 
implicit pressure on banks to hold Federal Government debt. 
Those are not good recipes.
    Mr. Lucas. I started out farming in 1977 as we slid into 
the inflationary period of the Carter years, and we went 
through Mr. Volcker's dramatic tightening of the money supply, 
and we saw the old 1930s interest rate caps come off. I 
borrowed caffeine money at 17 percent in 1981, and was so happy 
to get it. But I also watched a generation of young farmers and 
ranchers come home from the Vietnam War, who were absolutely 
exposed economically, be destroyed, and the last of those 
sheriff's sales were still taking place in the 1980s. So, I 
carry a few scars from watching my neighbors. We need to try to 
avoid that, don't we?
    Mr. Goodspeed. I think that is right. And when one looks at 
past episodes of the Federal Reserve having to play catch-up 
with inflation, they have to respond even more aggressively 
than had they responded earlier in order to ring that 
inflationary pressure out of all sectors. And that was what we 
saw in the early 1980s.
    Mr. Lucas. The longer the binge, the harder the hangover?
    Mr. Goodspeed. Yes.
    Mr. Lucas. I yield back.
    Chairwoman Waters. Thank you. The gentleman from Texas, Mr. 
Green, who is also the Chair of our Subcommittee on Oversight 
and Investigations, is now recognized for 5 minutes.
    Mr. Green. Thank you, Madam Chairwoman, and I thank you for 
holding this hearing. I think it is exceedingly important. I 
was at the State of the Union Address, and I thought the 
President gave an excellent speech. I was very proud of him, to 
be very honest with you. And one of the things he said that 
really caught my attention was that, ``Capitalism without 
competition is exploitation.'' My question to you, Mr. Zandi, 
is, who suffers most from the exploitation when you don't have 
the competition in a capitalistic society?
    Mr. Zandi. I think competition is a key element, 
Congressman, of a well-functioning capitalist system. Without 
that competition, we don't have innovation, we don't have 
entrepreneurs, and we don't have growth, and clearly, we will 
struggle with higher prices and inflation. So, it is a vital 
ingredient to a well-functioning economy.
    Mr. Green. And we talk about persons within the society. 
How would minority people be impacted as a result of this? We 
know that minority unemployment, especially Black unemployment 
is usually about twice that of White unemployment. By the way, 
I am a capitalist. If you don't have that competition, does it 
have a greater impact on African Americans?
    Mr. Zandi. Yes, I think that is fair to say. If competition 
is impaired, it will result in higher prices for the goods and 
services produced by that business in that industry. That is 
uncompetitive for lower- to middle-income households who don't 
have savings, who don't have wealth, who really are struggling 
just to pay their bills paycheck to paycheck, and that becomes 
an incredibly difficult hardship. Hard choices have to be made 
very quickly, and that is obviously what is happening right now 
with inflation as high as it is.
    People are having to make tough decisions about what they 
are spending their money on, because if they have to spend more 
to fill their gasoline tank, they are going to have less to 
spend on everything else. So, it is critical that we ensure 
that markets are competitive, that businesses are offering 
prices that are consistent with that competition, because if 
they don't, low- to middle-income households, African 
Americans, Hispanics, and Hispanic groups will be hurt more.
    Mr. Green. Thank you. Mr. Drummer, would you care to weigh 
in on this, please?
    Mr. Drummer. Yes. If you are talking about the structure of 
our economy in general, again, as I said in my testimony, it is 
about expansion. We are nowhere near the peak of what America 
can do. We are nowhere near the top of our productive capacity. 
And so, any claim that any investment into our economy will 
inherently be inflationary is just flawed.
    Mr. Green. Let me come back to you again, Mr. Zandi. I 
always enjoy conversing with you. Your commentary is excellent. 
Let's talk for just a moment about indexing. There is a belief 
that we should index wages to possibly the CPI or even to the 
poverty, such that if you work full time, you don't live below 
the poverty line, by indexing. Give me your thoughts on 
indexing, please, and you have about a minute to do it. Sorry 
about that.
    Mr. Zandi. No worries, and thank you for the kind words. I 
would not be a fan of that, Congressman. We had experience with 
that back in the 1970s and 1980s. The last time we suffered 
very high inflation in the indexing, the so-called cost-of-
living adjustments built into contracts exacerbated the wage 
price dynamics and ultimately resulted in a very severe 
recession that hurt all Americans, particularly lower- to 
middle-income Americans. I think it is much better to focus 
policy on trying to address the wage inequities and to make 
sure that we provide the resources necessary so that people can 
get better jobs and get better pay.
    Obviously, this is happening, but very true. Education and 
training and helping with child care and elder care, things 
that allow people to go to work and get the skills that they 
need to get higher wages and to do better. And I think that 
would result in a more well-functioning economy. The indexing, 
I think, would be difficult, and clearly, I am not sure how 
lawmakers would be able to intervene or enter into that given 
that is a decision by private businesses.
    Mr. Green. Thank you. My time has expired. Thank you, Madam 
Chairwoman. I yield back.
    Chairwoman Waters. Thank you. The gentleman from Kentucky, 
Mr. Barr, is now recognized for 5 minutes.
    Mr. Barr. Dr. Goodspeed, as the title of this hearing 
suggests, my friends on the other side of the aisle want to 
blame higher prices on everything but their own policies. They 
blame it on supply chain bottlenecks, they blame it on COVID, 
and they even blame it on corporate greed, and I want to focus 
on that last narrative for a minute, corporate greed.
    Let me tell you how it works in the real world, and I will 
give you an example from my own district where businesses are 
struggling with the cost of higher inflation. The Suffoletta 
Family in Georgetown, Kentucky, has been in the retail home 
furnishings business since the late 1940s. In a conversation 
last week, they informed me that in the last 18 months, the 
cost of goods from their manufacturers has increased 30 to 40 
percent, and they are still receiving price increase letters 
every week. They are also experiencing price increases on sold 
orders that have not even been produced yet, but they aren't 
going back to their customers asking for more money than what 
they agreed to at the time of placing those orders. That is an 
important point.
    They are not sitting around the table trying to figure out 
how to exploit their customers. They are struggling because 
their profit margins are down, because the costs of their 
inputs are going up. Instead, the Suffolettas are choosing to 
absorb those additional costs, contrary to Mr. Drummer's 
narrative. They are choosing to absorb them, and like most 
small businesses, their cost of labor and overhead has gone up 
over 25 percent. So now, they are having to determine how to 
operate without passing all those costs on to the end consumer, 
and still have some profit at the end of the year. This idea of 
businesses trying to exploit this and profit here is offensive 
to most small firms in America today.
    Steven Rattner, a former Obama Treasury official, summed it 
up perfectly: ``Blaming inflation on supply lines is like 
complaining about your sweater keeping you too warm after you 
have added several logs to the fireplace.'' The original sin 
was the $1.9-trillion American Rescue Plan that passed in 
March. The bill was almost completely unfunded, and sought to 
counter the effects of the pandemic by focusing on demand side 
stimulus rather than on investment, and that has contributed 
materially to today's inflation levels.
    So, Dr. Goodspeed, you have focused on the increase in 
aggregate demand, but I want you to elaborate on your testimony 
about how the American Rescue Plan also constrained the supply 
side. Specifically talk about how the American Rescue Plan 
stifled the labor supply, which is contributing to the problem 
that the Suffoletta Family is having right now.
    Mr. Goodspeed. Thank you, Congressman. And to your 
observation about what you are hearing from businesses, we 
have, over the past year, seen the Producer Price Index 
outpaced by a considerable margin by the Consumer Price Index, 
which suggests or implies that firms have been taking that 
pressure out of margin rather than passing most of it on to 
prices. In terms of the supply side impacts that you mentioned, 
I have calculated that there has been a cumulative shortfall 
since the pandemic began in business investment of about $1.8 
trillion. Throughout 2021, with the Build Back Better agenda, 
there was the prospect of substantially higher taxation on 
corporate income after 2021, which was unlikely to help 
facilitate a recovery in business investment.
    Mr. Barr. So to the extent we have supply chain 
bottlenecks, part of that is because there has been less 
business investment?
    Mr. Goodspeed. That is correct.
    Mr. Barr. Because of uncertainty of the potential of tax 
increases.
    Mr. Goodspeed. That is correct.
    Mr. Barr. Then, explain how the American Rescue Plan 
discouraged labor supply?
    Mr. Goodspeed. It discouraged labor supply in two ways. 
One, the expansion of the Child Tax Credit, as designed under 
the American Rescue Plan, effectively eliminated work 
requirements. Relative to the 2017 expansion of the Child Tax 
Credit--remember, we doubled the Child Tax Credit in 2017. 
Relative to that expansion of the Child Tax Credit, we actually 
lowered the return on work. And in addition to that, we 
extended the $300-per-week supplemental Federal unemployment 
insurance benefit, which likely lowered employment by--
    Mr. Barr. So, in addition to increasing aggregate demand 
and creating excess demand in the economy, the agenda from the 
Administration constrained supply. Let's talk about another 
area of constrained supply coming from this Administration. Is 
it more likely that oil executives are sitting around their 
board table trying to figure out how to stick it to their 
consumers; or is it the Administration canceling drilling 
leases, closing pipelines, or limiting production; or is it 
uncertainty and unease among exploration and production 
companies that new environmental crackdowns will come; or is it 
the financial regulators that are attempting to limit access to 
capital, making it illogical to invest in new oil wells--which 
is more likely?
    Mr. Goodspeed. I would say the unresponsiveness of supply 
in response to onerous regulation and crackdowns on domestic 
energy production, because if we look at the historical 
relationship between the price of West Texas Intermediate and 
rig counts, that relationship broke down in 2021.
    Mr. Barr. Thanks. I yield back.
    Chairwoman Waters. Thank you. The gentleman from Missouri, 
Mr. Cleaver, who is also the Chair of our Subcommittee on 
Housing, Community Development, and Insurance, is now 
recognized for 5 minutes.
    Mr. Cleaver. Let me concentrate on Dr. Drummer and Dr. 
Mabud. I don't know if any of you drink Hint Water. It is 
advertised quite a bit on TV. Do either of you drink Hint--H-i-
n-t--Water?
    Mr. Drummer. No, sir.
    Mr. Cleaver. Oh, man. It is necessary. It is the best thing 
that has come along. I love Hint Water. It has a hint of peach 
or a hint of berry, whatever it is, but it is water, with no 
calories, no nothing. It is water. And so, I love it. And I 
also love it because I could go to the dollar store and get 
Hint at $1 a bottle, because at the dollar store, everything in 
there is $1, at least until about 3 weeks ago. And I guess, in 
an attempt to avoid false advertising on the doors, they have 
something taped up that says all items are now $1.25. So, the 
dollar store is now the $1.25 store, which means that Hint goes 
up from $1 to $1.25. I am not happy about that. Life is going 
down here when Hint costs 25 cents more.
    So, Dr. Drummer and Dr. Mabud, do you agree with Dr. Zandi 
that no matter what happens to pricing across most goods, 
inflation will remain high as long as the cost of housing 
continues to rise? Do both of you or either of you agree with 
what Dr. Zandi has written?
    Mr. Drummer. Thank you, Representative. Based on her 
testimony, I would like to defer to Dr. Mabud.
    Ms. Mabud. Thank you. Thank you so much. I think the point 
that you are making is really critical, which is that low-
income communities, particularly low-income communities of 
color, are dependent on these essentials like housing, and 
places to buy cheap goods, like the dollar store. And so, 
higher prices will inevitably disproportionately affect exactly 
those communities, especially when those prices are going up on 
essentials that people really need. If you need diapers, you 
need diapers. It doesn't matter if the box is $20 a box or $40 
a box. And we know that low-income communities are particularly 
likely to see rent as a bigger proportion of their budgets and 
see food and other essentials as a bigger proportion of their 
budgets.
    I think the other important thing to remember here is that 
these exact same workers and families are also more likely to 
face discrimination in the labor market because of occupational 
segregation and other barriers to entry into the labor market. 
Soc, low-income folks, particularly low-income folks of color, 
are really hit from all sides by these price hikes, with rising 
prices at the checkout line, and when they pay their rent, and 
have a harder time accessing good, well-paying jobs.
    Mr. Cleaver. Thank you very much. So, Hint goes up. Dr. 
Zandi, if you look at the cost of housing, the cost has 
increased a whopping 470 percent over the last 40 years. As 
long as that continues to rise like it is, is Hint Water going 
to come down?
    Mr. Zandi. Yes, that's a good point. Yes, we have a very 
severe shortage of housing, particularly for affordable 
housing, both on the rental side and on the homeownership side. 
This has been developing really since the housing bust in the 
wake of the financial crisis. Vacancy rates across the housing 
stock are at record lows, so this has resulted in surging 
housing values and surging rents. And rents, all in, account 
for one-third of the Consumer Price Index, and one-third of 
measured inflation is housing. So as long as we have this 
shortage, as long as we don't address the supply shortage--and 
here is where lawmakers can be critically important--rents are 
going to grow quickly. House prices are going to grow quickly, 
and the cost of living is going to continue to rise quickly.
    Mr. Cleaver. Thank you, Madam Chairwoman.
    Chairwoman Waters. You are welcome. The gentleman from 
Florida, Mr. Posey, is now recognized for 5 minutes.
    Mr. Posey. Thank you very much, Madam Chairwoman. Dr. 
Goodspeed, I feel like I have seen this movie before. To 
paraphrase a classic, we appear to be running up to usual 
scapegoats for inflation under the heading, ``primary causes of 
inflation trends, majority hitting nonetheless supply chain 
bottlenecks and shortages, lack of housing supply, lack of 
competition.'' There is no mention of the Majority's deficit 
spending and the monetization of those deficits to dramatically 
increase money supply.
    Last week, Chair Powell agreed that inflation is a monetary 
phenomenon. The way we ended up with this inflation is that the 
government dramatically increased the deficit in the Rescue Act 
and other legislation, and the Federal Reserve provided the 
lending to support the deficits at no charge and interest 
rates. The primary call to inflation is deficit spending 
financed by the Federal Reserve buying the debt and increasing 
the money supply.
    One price increase that stands out from the rest is the 
skyrocketing increase in energy costs that has been mentioned 
by almost everybody here today, especially the price of 
gasoline. Even before the Ukraine invasion, the price of 
unleaded regular was closing in on $4 a gallon. This is a steep 
relative price increase, and most analysts understand that this 
increase was a result of supply restrictions that followed on 
the Administration's assault on the domestic energy production.
    Please give us your assessment of how reversing the 
Administration's restrictions on domestic oil and gas would 
reduce gasoline prices, and how much would gas prices decline 
if we reset the clock back to January 19, 2021, and erased the 
Administration's impact on the domestic energy sector? Could we 
expect to restore energy independences as we had before?
    Mr. Goodspeed. Thank you, Congressman, and I think, as you 
noted, we have heard some of these stories before. In fact, in 
the 1960s and 1970s, there were a lot of allegations that the 
price pressures that we were observing were the result of 
oligopolistic or monopolistic competition, and, empirically, 
those claims were subsequently tested and rejected.
    I would expand upon a remark I made in response to 
questions from Congressman Barr, namely that if we look at the 
historical relationship between the price of West Texas 
Intermediate Crude and Oil Rig Counts in the United States, 
those two series typically track each other very closely, 
meaning the price of oil goes up, rig counts go up, we get more 
supply. That relationship completely broke down in 2021, and I 
think that was a result of the regulatory crackdown on domestic 
energy production, and the looming prospect of more crackdowns. 
Now, it is hard to say where domestic oil prices and gasoline 
prices would go in the coming months simply because of so much 
international geopolitical uncertainty.
    Mr. Posey. Thank you. One of the favorite boogeymen of our 
friends on the other side of the aisle is the evil price-
gouging firms. They are one of the usual scapegoats for unsound 
fiscal and monetary policy. I believe we can expect that 
businesses will respond to market forces, including inflation, 
like any other economic player, but it is more than a little 
naive to habitually resort to the price-gouging monster to 
explain 7.5 percent inflation. Is there any solid, convincing, 
credible, and peer-reviewed evidence that businesses with 
disproportionate market power have been a major cause of 
inflation through price gouging?
    Mr. Goodspeed. I have seen no serious academic study to 
that effect. And I would add that most empirical studies and, 
for that matter, theoretical papers on this suggest that in the 
short run, the passthrough from cost to price is actually lower 
in less-competitive markets than in competitive markets. In the 
long run, competitive markets have lower average inflation 
rates, but in the short run, the passthrough is actually higher 
in competitive markets.
    Mr. Posey. Thank you. And while I believe the role that 
housing has played in inflation is far more subtle than the 
other side suggests in listing it as a major call to inflation, 
I do have serious concerns about the cost of building housing. 
And I believe that the costs of building new housing, whether 
single or multifamily, determines the prices of houses and 
rents at the margin to the market. Adding demand to a housing 
market, in which the cost of new housing is continually being 
pushed up by regulations and restrictions on innovative 
building techniques, really serves mostly to just drive up even 
further the price of rent and all housing.
    Do you agree that to make significant progress in providing 
affordable housing, we need to focus on bringing down the cost 
of building new housing?
    Mr. Goodspeed. I would say that we should be focused on 
increasing the supply of housing generally, and we have a 
problem in that it is very difficult to build, to construct new 
housing in the United States. And we should ask ourselves, why 
did the price of housing go up so much in 2021? Let's remember 
that housing and autos are the two most interest rate-sensitive 
sectors in the U.S. economy. Thank you.
    Mr. Posey. Thank you. Thank you, Madam Chairwoman.
    Chairwoman Waters. The gentleman from Illinois, Mr. Foster, 
who is also the Chair of our Task Force on Artificial 
Intelligence, is now recognized for 5 minutes.
    Mr. Foster. Thank you, Madam Chairwoman. One of the 
recurrent themes on both sides of the aisle here has been 
inadequate business investment, and now we are being caught in 
a number of ways. So, I would like to explore the extent to 
which sort of the short-termism and the incentives that 
encourage short-termism in so much of our industry. We are 
obviously seeing underinvestment in resilient supply chains. 
That is kind of obvious in a number of areas. We have also seen 
inadequate investment in inventory for rainy days. For years, 
the best management procedures have been claimed to be this 
just-in-time delivery of everything with essentially no 
inventory of anything. And now, manufacturers are panicking and 
sort of switching from just-in-time, to just-in-case inventory 
policies.
    So, there is a tremendous short-term spike in demand which 
leads to tremendous market inefficiency throughout. It is sort 
of reminiscent of the toilet paper shortage at the start of 
COVID, where, as far as people could tell, there was no 
increase in the rate of consumption of toilet paper, and yet, 
there was a huge shortage because of a malfunction of the 
market that I think we are seeing in many areas. We are also 
seeing the same thing in computer chips, where companies like 
Intel engaged in more than $100 billion in stock buybacks, lost 
the lead in advanced semiconductors, and now are asking the 
Federal taxpayer for a $50-billion bailout. And a similar thing 
in the airlines, where during the Obama expansion, they made 
very high profits but didn't leave enough resilience in their 
operations and had to ask again for the $50 billion, 
essentially a gift from the Federal taxpayer, not a loan like 
TARP, just a straight gift.
    And there are a number of potential reasons for this 
underinvestment, but I was wondering, Mr. Drummer and Mr. 
Vaheesan, could you say a little bit about how the CEO 
compensation structures might encourage the short-termism, 
where keeping small inventories make you profitable this 
quarter, but leaving you in trouble when the tide goes out. Mr. 
Drummer, do you want--
    Mr. Drummer. This is a very good question, Representative, 
because it is not just a question of law and policy. It is 
about the practices of some of the largest corporations. Yes, 
when CEOs are incentivized to make quarterly benchmark profits, 
they extract all the work they can from the lowest-paid 
workers. Let's compare Walmart and Costco, right? Costco pays 
double what Walmart or Sam's Club pays, but they make 7 times 
more per employee than Sam's Club. And so, the short-termism is 
cultural. And yes, we do need law and policy that forces and 
really pushes these companies to do the right thing, because it 
ought not be an option to treat your employees right.
    Mr. Foster. Yes.
    Mr. Vaheesan. Thank you, Congressman. You raise a really 
important point. We have seen changes in law and policy over 
the past 40 years that have encouraged short-termism. You noted 
that CEO compensation is tied to short-term movements and stock 
prices. We have also had changes to antitrust policy and 
securities laws that have encouraged firms to engage in 
practices like stock buybacks, and mergers and acquisitions in 
lieu of the more socially-beneficial undertaking of investment 
and innovation. I think the chip industry nicely illustrates 
that point. It used to be the envy of the world, but now 
companies like Intel have been so focused on generating short-
term cash flow that they have been leapfrogged by foreign 
rivals like TSMC and Samsung.
    Mr. Foster. Go ahead. I will take a risk here and see what 
they are--
    Mr. Goodspeed. Sure. I would say that one of the reasons 
that we had weak investment throughout much of the expansion 
from 2009 to 2016 was that the relative cost of capital in the 
United States was much higher, so that the cost of domestic 
capital formation was quite considerably high. And that is why 
in the aftermath of tax reform in 2017, we actually saw the 
level of investment rise to about 10 percent above the pre-2017 
expansion trend. And I think one of the reasons that we saw a 
weak recovery in investment in 2021 was because there was the 
prospect of higher corporate income taxation in 2022, which 
means that the value of stock--
    Mr. Foster. Okay. I understand. There is never a bad time 
to lower taxes, no matter what it does to the national debt.
    Mr. Goodspeed. The value of--
    Mr. Foster. And in my 23 seconds, Dr. Zandi, there are some 
things the Federal Reserve is clearly going to do to unwind the 
balance sheet. Will that be stimulative or contractive in terms 
of the demand? Will it reduce or increase?
    Mr. Zandi. At this point, yes, I think, Congressman, the 
Fed needs to normalize policy. That includes interest rates, 
short-term interest rates, allowing them to go up to zero lower 
bound. And at some point, not right away, we have to see how 
things go but allow the balance sheet to start to wind down, 
which is what they did after the financial crisis, and I think 
that worked well. So at some point this year that seems like a 
good policy to pursue. Again, you don't want the economy to 
overheat and then ultimately go into recession because that 
hurts the very people that we want to help.
    Mr. Foster. So, they are doing the right thing. Thank you. 
And I yield back.
    Mr. Zandi. I think so. Yes, that would be--
    Chairwoman Waters. Thank you very much.
    The gentleman from Missouri, Mr. Luetkemeyer, is now 
recognized for 5 minutes.
    Mr. Luetkemeyer. Thank you, Madam Chairwoman. Mr. 
Goodspeed, President Biden had one accomplishment last year, 
and that was the approximately 300 new regulations his 
Administration issued on businesses and workers. The cost of 
these regulations total about $201 billion. That is their cost, 
by the way, that they said they had. This is 3 times the 
regulatory cost imposed by the Obama Administration, and 40 
times the cost imposed by President Trump in their first year 
in office, respectively. My question, I guess, begins with, how 
do these regulatory burdens impact inflation and the price of 
goods, their business' ability to hire workers, and their 
ability to have more resources to actually focus on more 
businesses?
    Mr. Goodspeed. Thank you, Congressman. These regulatory 
changes, at the end of the day, increase costs. They increase 
compliance costs. Compliance costs incur opportunity costs 
because workers working on compliance aren't working on other 
more productive activities. There is also a deadweight loss 
insofar as it prevents transactions that would otherwise have 
occurred, and there are also spillovers into unregulated 
industries. And I would just add that over the long run, an 
increased regulatory burden tends to decrease the flow of new 
firms into the market and decrease the exit of incumbent firms, 
so it lowers competition. So, insofar as one's hypothesis that 
insufficient competition was a cause for the inflation that we 
have observed, the regulatory burdens that we have seen 
increase in the past year likely exacerbated rather than 
attenuated that.
    Mr. Luetkemeyer. You just sort of made the case that--I 
know of the other side constantly talks about them doing things 
when you are concerned about low- and middle-income folks, and 
yet they continue to produce legislation, more rules that do 
the very thing that they are saying they want to try and 
minimize. As you just indicated, the hammer comes down on the 
low- and moderate-income people in the spectrum with inflation, 
with all sorts of rules, costs, rules and regulations. Is that 
not correct?
    Mr. Goodspeed. That is correct.
    Mr. Luetkemeyer. I also am the ranking member on the House 
Small Business Committee, and we had an economist come in for a 
briefing the other day, and I asked him to break down 
inflation. And I said, basically, I think it is composed of 
excess money supply, rules, and regulations, energy costs, and 
the supply chain/jobs problem. Would you agree that is kind of 
the main four main drivers of our inflation we have today?
    Mr. Goodspeed. I would agree with that.
    Mr. Luetkemeyer. I asked him to break it down percentage 
wise, and he said about 40 percent money supply, 20 percent 
regulations, 20 percent energy, and 20 percent supply chain. 
Would that be in the ballpark, do you think, or is one of them 
little bit low, or one a bit high? What would you estimate?
    Mr. Goodspeed. I would lower the estimated probability for 
supply chains. I would substitute for the regulatory costs. I 
would just say, generally speaking, it is excess demand 
relative to supply.
    Mr. Luetkemeyer. Okay. Again, we had the Chairman of the 
Federal Reserve in here, Jerome Powell, last week, and I read 
this off to him. And he was talking about being able to 
manipulate the economy through interest rates and all sort of 
stuff. And I told him that unless you are going to go with 10 
percent, these type of costs, if you look at them, where do 
you, in this group, have that much influence? And so, if you 
look at supply chain, look at energy production regulations, 
almost all of those are under the direct ability of the 
Administration to impact those, or is it not, would you not say 
that?
    Mr. Goodspeed. It is.
    Mr. Luetkemeyer. And a lot of it is, quite frankly, without 
Congress even being able to intervene. The President, in his 
first week in office, the first thing he did was to close down 
the pipeline. He can open that back up. There we go. That fixes 
that 20 percent.
    Supply chain--he can help with some of the threats of 
taxation. He can help the people get back into the workforce.
    Rules and regulations--that is obviously falling all on him 
and his Administration. And then, you come to money supply, and 
you look at, I don't know, I am guessing at 50-50 the Fed, by 
the way they manipulated, and 50 percent by us, the Congress, 
those guys putting more money into the system. So it would look 
to me like the Fed will only have like 2, 2.5 percent out of 
the 7.5 percent, at most. The Administration can fix this 
thing, and, to me, it all lies at their feet. Would that be a 
fair analogy?
    Mr. Goodspeed. I think that is a fair analogy. I would add 
that the two sectors over which the Fed has the most control 
with respect to inflation are housing and auto prices, and we 
have seen some big increases there in the past year.
    Mr. Luetkemeyer. Very good. Is inflation going to go away, 
and do you think we have a recession coming shortly?
    Mr. Goodspeed. When I look at the underlying inflation 
measures, when I look at the change in inflation expectations, 
I think that this is going to be very persistent, and it is 
going to take some very aggressive action on the part of the 
Fed, and hopefully Congress. And that is disconcerting because 
that could mean some economic pain.
    Mr. Luetkemeyer. Thank you very much, Dr. Goodspeed.
    Chairwoman Waters. Thank you. The gentleman from 
California, Mr. Vargas, is now recognized for 5 minutes.
    Mr. Vargas. Thank you very much, Madam Chairwoman, and Mr. 
Ranking Member. I appreciate it.
    It is interesting that when President Trump and the 
Republicans took office at the crest of the largest economic 
expansion in history, things were going well, and they were 
very happy about that. Then, of course, he presided over the 
worst labor market in the modern U.S. history, as did the 
Republicans. And the reality was, it was the pandemic. The 
truth of the matter is, you can't blame all those millions of 
job losses on Donald Trump and some of the crazy things he 
would say. It was the pandemic. But here, it is interesting, 
the Republicans blame everything except for the pandemic. It 
seems to me, Dr. Zandi, that you kind of nailed the thing down 
pretty well when you were talking about the pandemic. Am I 
wrong here? Is a lot of the inflation due to the pandemic?
    Mr. Zandi. Yes, Congressman, you are precisely right. It is 
the pandemic. And there is a long list of reasons for the high 
rates of inflation. At the very top is the supply disruptions 
created by the pandemic, particularly around the Delta wave. I 
will give you a poster child example. Chip plants in Malaysia 
shut down last August and September. They couldn't produce 
chips for U.S., and German, and Japanese vehicles. The F-150, 
the most popular vehicle in the United States, couldn't get the 
chips. They had to shut down. They couldn't produce, 
inventories collapsed, we had shortages, and prices have gone 
skyward. And roughly one-third of the acceleration and 
inflation that we have observed over the past year is simply 
related to that fact. That is directly related to supply 
chains. And I can give you other examples, but you are exactly 
right.
    Mr. Vargas. It seems to me--and again, I could be wrong--
that is the case. Again, otherwise we can say, well, those damn 
Republicans, they lost millions and millions of jobs. What is 
wrong with Joe Biden? Their policies are so terrible. It was 
the pandemic. It is the pandemic here, and that is why I think 
we should work together to figure this thing out instead of 
yelling at each other about these things. But I am--
    Mr. Zandi. Can I point out that just because there is a lot 
of discussion around inflation overseas, what matters is the 
acceleration of inflation over the past year, and they are very 
comparable in every advanced economy, including in the United 
States. It is the increase in inflation, and if there is any 
differences, they are related to measurement differences. So 
precisely what is happening here is happening in Canada, and in 
the U.K., and in Germany, all across the advanced world. So, it 
is very, very similar, and goes back to the point that this is 
the pandemic, as the pandemic has affected everyone equally.
    Mr. Vargas. Yes, it has happened all over the world. It is 
a little bit like this, just to be frank, reminds me of the old 
tobacco hearings, and you would have a group come in and say, 
``Oh no, those cigarettes are great. They are not unhealthy. Of 
course, not.'' And then, the other groups come in and say, ``Of 
course, they are not healthy; they cause cancer.''
    The truth of the matter here is that we see inflation all 
over the world. We see these problems all over because of the 
pandemic, and that is the big deal here. And it seems like the 
Republicans want to place blame on somebody, and they want to 
place blame on the Democrats. They don't want to take a look 
at, well, really the blame is on the pandemic and how do we 
work together. Now we have the problem with Russia. How do we 
work together?
    The two big things that I see are housing and cars, housing 
in particular. We do have to figure that out. In California, 
the prices have gone out of sight, and I don't see them coming 
back until we get more supply, and there are things that we 
need to do. But anyway, that is what I would like to say. I 
just want to say that sometimes it is kind of nutty listening 
to this stuff because, again, it is not realistic.
    Mr. Zandi. Can I say, Congressman, on housing, what was in 
Build Back Better around tax credits, light tax for low-income 
housing, neighborhood home tax credit for fixing, 
rehabilitating old housing stock and dilapidated parts of urban 
centers, the Housing Trust Fund, all of these things will go to 
quickly increase the supply of affordable housing, and goes 
directly to this very strong surge in rent growth and house 
prices that we are observing right now. So, there are things we 
can do, and what is in Build Back Better goes a long way to in 
fact doing that.
    Mr. Vargas. That is why I supported it. My time has ended. 
Thank you.
    Mr. Auchincloss. [presiding]. The gentleman yields back.
    The gentleman from Texas, Mr. Sessions, is now recognized 
for 5 minutes.
    Mr. Sessions. Mr. Chairman, thank you very much. To our 
colleagues who are watching this, please know that I think that 
there is an equal participation here today for us to tout. And 
I appreciate Mr. Vargas and his comments very much, my dear 
friend.
    I would like to go back to a statement that I believe Mr. 
Drummer made where he spoke directly about household incomes 
and how it has been flat when, in fact, if you go to the Bureau 
of Labor Statistics, you will see that household incomes rose 3 
times higher under Reagan and Trump policies than under Obama 
and Biden. And that is because I believe that what is occurring 
in particular right now that we can directly relate to is that 
we have problems getting people to go to work.
    As of this morning, the Office of Personnel Management 
(OPM) is still weighing their decision-making on whether we are 
going to have Federal workers go back to work. I know what that 
is like, because my office has been at work during this entire 
pandemic and we simply attempted to work with each other. But 
OPM still has people on what they call, ``maximum telework.'' 
And if you have the Federal Government workers who are not 
reporting to work, if you have an Administration that is 
continuing with their onslaught at the free enterprise system, 
including workers of airlines, workers of transportation, how 
can people not go back to work when we have not encouraged it? 
We have to be leading-edge people to say as managers of our 
business, let us go back to work. If you have a reasonable 
reason, why not, then that flexibility should be given by OPM. 
But the way Republicans see it is that policy matters. In other 
words, elections matter. Policy matters. And in that 
circumstance, when you give people more take-home pay, when 
prices are reduced, when gasoline at the pump is a good deal 
rather than a jab deal, the free enterprise system really does 
really well by itself.
    Mr. Drummer made a number of comments which I tend to want 
to agree with, with equitable prosperity, but that is what the 
free enterprise system is. And that is why under the policies 
of Republicans--I don't have to say Donald Trump, but 
Republicans and Donald Trump--more people worked than ever, 
more African Americans, more men, more women, more minorities, 
and people were at work.
    And if you go back to an old book from the Dallas Fed, the 
myth of the rich and poor in America, the facts of the case are 
really simple. If you have a job, whether it be higher or lower 
pay, for 10 years, if you create a circumstance where you go to 
work, you will raise yourself from one segment, one, in 
essence, economic level to another. We need people back at 
work. We need our free enterprise system to work. We are a 
capitalist nation. Mr. Drummer, have I said anything that you 
want to help me with?
    Mr. Drummer. Thank you, Representative. You said many 
things that I want to help you with, and I would love to engage 
this conversation even beyond this hearing. One, it is also a 
fact that wages have not kept up with productivity, and we have 
to examine what kind of economy allows a situation for workers 
to be more productive. But the wage growth is pretty flat, not 
numerically flat, but it is extremely unimpressive, and for the 
last 40 years has been uncharacteristic in the course of the 
whole of American history. So, we have to examine that.
    Two, also in terms of the point of people wanting to go 
back to work, we don't have a shortage of people who want to 
work. We have a shortage of good jobs, and that is the problem. 
Listen, we don't have a benefit cliff. We have a wage--
    Mr. Sessions. I appreciate the gentleman. I have hauled 
hay. I have climbed poles. I have done a lot of things that I 
had to do to help myself out. And I am sorry you don't think 
there are enough good jobs. We have--
    Mr. Drummer. Good-paying jobs, Representative--
    Mr. Sessions. I will just accept that as your answer, and I 
appreciate the time and thank you, sir. And I yield back my 
time.
    Mr. Auchincloss. The gentleman yields back.
    The gentlewoman from Ohio, Mrs. Beatty, who is also the 
Chair of our Subcommittee on Diversity and Inclusion, is now 
recognized for 5 minutes.
    Mrs. Beatty. Thank you, Mr. Chairman. I would also like to 
thank all of our witnesses for being here today, and for 
providing testimony.
    I want to begin by acknowledging the pain and the 
frustration that Americans are feeling over this inflation. I 
don't think we can say stop. I have also said from the 
beginning of the pandemic that this is a global public health 
and economic crisis. And I know after 2 years of the shutdowns, 
looking at supply chains, and also the Omicron variant, this 
latest issue with inflation is the last thing that we want or 
that we need. Democrats in Congress and the Biden 
Administration are committed to doing everything we can to deal 
with the inflation and its impact on the lives of American 
families.
    Mr. Drummer, let me thank you, because I do concur with you 
in your last statement. Inflation has historically reinforced 
economic disparities among minorities and people in rural 
America. When inflation costs hit the average American, it hits 
harder for Americans who have already had economic challenges 
and been disadvantaged, because for every dollar increase in 
inflation, this could equate to $5 for someone who is 
financially unstable. Can you speak to the inflationary 
challenges these Americans face, whether it is purchasing food 
for their families or buying gas for their daily commute? Can 
you talk about that briefly?
    Mr. Drummer. We are in a bit of a quandary here, and I 
appreciate the question, Representative. The reality right now 
is that, yes, price increases disproportionately impact the 
household budgets of low-wage workers. That is a fact. But it 
is also a fact that a rate cut is going to do what? Depress 
demand for workers, and do what? Take money out of the pockets 
of these very same people. So, if we care so much about low-
income households, I don't think the rate cut is our silver 
bullet to fix that situation. What we have to do is take a step 
back, and understand that inflation concerns is a red herring. 
There are larger structural problems that we have to address, 
and let us get to business and build this country and have an 
equitable economy where all can prosper and reach their full 
potential. And that is what we are here to talk about.
    Mrs. Beatty. Let me go to my next question, and thank you. 
Dr. Mabud, I am sure you are aware that the Federal Reserve Act 
mandates that the Federal Reserve must promote things like 
maximum employees, moderate long-term interest rates, and last, 
but not least, stable prices. I don't want this to be a quiz 
game, but do you know how many Governors that there are on the 
Federal Reserve Board? There are seven. And did you know there 
were three vacancies now? And I guess I am concerned about the 
vacancies because my Republican colleagues have literally 
walked out and not appointed these things. And I think the 
American people need to know that we are doing everything to 
help during these tough times.
    Do you have any comments on how some will say it doesn't 
affect inflation, but the reason for having seven is to bring 
diverse people. What do you think about not filling those 
Federal Reserve spots? I think there is a reason that they are 
on there, for us to hear all the differences as we look at the 
effect of inflation. Dr. Mabud?
    Ms. Mabud. Thank you for that question. Simply put, I think 
now is not the time for political games. As Mr. Drummer said, 
families are in crisis. So, now is really the time to have a 
full slate of folks on the Fed Board, and it is time for us to 
take on these issues.
    I do want to note that the Fed has a dual mandate, right? 
It has the mandate to keep stable prices, but it also has a 
mandate to ensure full employment. And there are huge swaths of 
this country who have never experienced full employment. Even 
now, in the midst of what is arguably an historic recovery, the 
Black unemployment rate is still double that of the White 
unemployment rate. So, I am really eager to see a Fed that is 
taking that full employment piece of their mandate seriously.
    Mrs. Beatty. Okay. Thank you, and I yield back.
    Mr. Auchincloss. The gentlewoman yields back.
    The gentleman from Texas, Mr. Williams, is now recognized 
for 5 minutes.
    Mr. Williams of Texas. Thank you, Mr. Chairman, and in full 
disclosure, I am a small business owner. I am a defender of 
profits. Profits are good. Profits mean jobs. I have been in 
the car business for over 50 years, and we are in one of the 
strangest markets I have ever seen. If I had gone on TV 3 years 
ago, for example, and said in a commercial that if you buy a 
car today, it will go up in value over the next 3 years, the 
Federal Trade Commission (FTC) would have fined me for false 
advertising. But this is exactly what is happening in the 
industry today. We simply cannot get our hands on enough new 
cars to satisfy consumers' demands. And this, in turn, has 
caused us to pay a very high premium to obtain used cars so 
that we have any inventory to sell at all. If we don't have 
inventory, we won't be able to sell anything, and we couldn't 
maintain a payroll, in my case of hundreds of employees.
    To put this into perspective, how much has changed because 
of the pandemic, we used to carry 800 units on the ground, and 
today, I called my daughter and I just checked in, and she said 
that we have 20 units on the ground. We talk about corporate 
greed, but corporate greed has not caused us to carry 90-
percent less inventory. It is the result of strange supply 
chains, overspending, and the threat of taxes and minimum wage 
conversation.
    There is no mass conspiracy, I have news for everybody, 
between every business in America to squeeze the consumers to 
raise their profits. That doesn't happen. Corporate greed is a 
buzzword. It is a buzzword from people who have never run a 
business. While the price for a good might be higher from week-
to-week, it does not mean that profit margins are also 
proportionally increasing. If you are looking at gross sales 
dollars, you are looking at the wrong figures. If an $100-
million company grows to a $200-million company, it is highly 
unlikely that the profit margins were also able to double, and 
it doesn't happen. So, what should we be talking about is 
government greed, not corporate greed.
    We have seen many new regulations that are causing 
businesses to hire more compliance officers that are a net 
negative to their bottom line. We have heard many Democrats 
talking about companies paying their fair share, which means 
they see a profitable company as something that they can 
squeeze money from to fund their own pet projects. These public 
policy decisions are having a detrimental impact on prices, 
since businesses are having to dedicate more resources to 
comply and respond. It isn't this fake notion of corporate 
greed for companies that struggled through the pandemic 
creating higher prices; it is government greed.
    So, Dr. Goodspeed, can you talk about the effects of higher 
taxes and more regulations on the price of consumer goods?
    Mr. Goodspeed. Certainly, Congressman. And if I may, first, 
just as a point of fact for the record, I would like to point 
out that when I say that inflation in the United States has 
risen more than in other advanced economies, I mean that on the 
eve of the American Rescue Plan, inflation in the Euro area and 
in the United States was 1 percent. The increase in that 
inflation rate using a harmonized measure of consumer price 
inflation, so that we are comparing apples to apples, the 
increase in that inflation rate in the United States has been 3 
times that in the Euro area.
    In terms of taxes and regulation, I think that there are 
both supply- and demand-side factors here. In terms of price 
pressures, one of the things about the tax measures in 2017 is 
that it incentivized higher labor force participation and it 
incentivized greater investment in domestic capital formation. 
That tends to increase the productive capacity of the United 
States economy, which lowers inflationary pressure.
    Mr. Williams of Texas. And creates competing wages.
    Mr. Goodspeed. And creates competing wages. And to put 
numbers on that, during the first 3 years of the preceding 
Administration, real wages, inflation-adjusted wages, grew 9.8 
percent for the bottom 10th of the wage distribution. They grew 
4.8 percent for the top 10 percent of the wage distribution. 
Real wealth inequality declined, real income inequality 
declined, and labor share of income rose during the 3 years to 
2019.
    Mr. Williams of Texas. Yes, if you reduce regulations, you 
reduce taxes, you let Main Street compete, competition drives 
everything, everybody's saying about corporate greed.
    Mr. Goodspeed. Right.
    Mr. Williams of Texas. People get an even shot at rising 
and making good for their life.
    Mr. Goodspeed. Correct. And that is why we observed in 
2019, 1 year alone, that the median American household 
experienced real inflation-adjusted income gains of $4,400. 
That was more in 1 year than in the preceding 16 years 
combined.
    Mr. Williams of Texas. Okay. Thank you, and I yield back.
    Mr. Auchincloss. The gentleman yields back.
    The gentleman from Florida, Mr. Lawson, is now recognized 
for 5 minutes.
    Mr. Lawson. Thank you, Mr. Chairman, and I welcome all of 
the witnesses to the committee.
    One of the things that I wanted to have you all elaborate 
on is, Chairman Powell addressed the committee, maybe about a 
week ago, and he said that when the Fed seeks to bring 
inflation down, they raise interest rates, which puts 
restraints, raising overall borrowing costs for households, 
businesses, and consumers. If that is the case, and I think 
they probably know more about it than I do, what happens in 
inflation when interest rates are raised on houses and our 
cars, and everything else that you can think of, but the 
average consumer carries more credit card debt with higher 
interest rates than the interest rate that is going to probably 
be decided on by the Fed? How do you stabilize the interest 
rates that are being charged on credit card debt during this 
inflationary period as compared to trying to get the economy 
stable, because they are going to increase with more and more 
debt, with interest rates that exceed sometimes 30 percent? 
Would anyone care to talk about it on the panel?
    Mr. Drummer. Yes, Representative.
    Mr. Zandi. I will take a crack at it, Congressman.
    I think that there are a number of different channels 
through which higher interest rates will affect the economy. 
You mentioned one, through higher interest expense for 
households, particularly those that have debts and most 
specifically credit card debt, and home equity lines of credit.
    But it works through other ways as well--one of the 
quickest and most significant ways is through lowering asset 
prices. So, one of the reasons why stock prices are down--
obviously, there are many reasons, including Russia's invasion 
of Ukraine and higher oil prices--is that investors are now 
discounting a normalization of interest rates, and that has 
brought down stock prices. Of course, that hurts high-income 
Americans, high-net-worth Americans. So all Americans are going 
to feel the financial result of these higher interest rates. 
But we do need to see, as the economy comes into full 
employment, as unemployment gets close to 3 percent, we do need 
to see the rates of growth in the labor market and the economy 
more broadly kind of get back to a level that is consistent 
with the growth in the labor force. And we need that moderation 
to occur.
    Zero interest rates, which is where we are today, is 
inconsistent with that outlook for where we are headed. So, we 
do need to see interest rates normalize. And all Americans from 
top to bottom are going to feel it. But obviously, middle-
America Americans would desperately need to avoid going back 
into recession. And if we don't normalize rates, slow the 
economy as we come into full employment, the odds of that are 
going to rise and we are going to hurt the very same people we 
want to help.
    Mr. Lawson. Okay. And I am going to try to get in another 
question before my time runs out. The Administration puts forth 
a lot of funding for small and mid-sized corporate processes to 
assist with the processing capacity. Do you think we need to 
take the same approach for the timber industry, and invest in 
small and mid-sized timber processes? We know there have been a 
lot of processing issues with timber. Would it be beneficial to 
the housing supply market to invest in smaller processes to 
help increase the timber supply within housing? And that is for 
the whole panel.
    Mr. Goodspeed. Thank you, Congressman. I can't necessarily 
speak to the timber industry specifically, but what I can say 
is that it would certainly be good tax policy to expand the 
expensing for investment in new plants and equipment in the 
United States. That would include equipment of all sorts. And 
as I noted in some of my earlier remarks, one of the issues 
with the prospect of higher corporate income tax rates down the 
road is that it raises the incentive for firms, including firms 
in the timber industry, to defer investment in new equipment to 
2022 because the deduction for new equipment investment is much 
more valuable under a 28 percent rate than a 21 percent rate. 
So, that was unlikely to help equipment investment recover in 
2021.
    Mr. Zandi. Can I just push back on that, Congressman? I 
don't think there is any material evidence that the lower tax 
rates that were put into place back in 2017 have impacted 
investment in a meaningful way. And I don't think the 
discussion and debate around rolling back some of those tax 
cuts had any impact on business investments over the last year. 
In fact, I would say if we go look at business investment in 
equipment, it is much higher than it would have been without 
the pandemic. It has gone skyward. And that goes to supply 
chains, and that goes to trying to improve productivity growth. 
So, I don't think there is any--
    Mr. Auchincloss. The gentleman's time has expired.
    Mr. Zandi. The timber industry is a problem, but I don't 
think the solution is lower tax rates.
    Mr. Lawson. Okay. With that, Mr. Chairman, I yield back.
    Mr. Auchincloss. The gentleman from Georgia, Mr. 
Loudermilk, is now recognized for 5 minutes.
    Mr. Loudermilk. Thank you, Mr. Chairman.
    I am almost speechless--not entirely, I have plenty to 
say--that we are here doing this, because obviously, some of my 
colleagues haven't learned anything from history, especially 
recent history. I heard in testimony earlier that we expect the 
inflation to be short-lived; we will get out of it soon. Yes, 
if you really buy into a lot of what we heard here today, that 
it is the big corporations that are the problem and it is not 
the self-imposed destructive policies that have brought us to 
where we are right now.
    Let us turn the clock back to just a few months ago, where 
in the first quarter of last year, we heard, oh, there is no 
inflation, it is not really there, it is just temporary, caused 
by the pandemic, we will be out of it really soon. But many of 
us on this side of the aisle, me included, were saying no. And 
the direction that we are going with this wasteful spending, 
that it is not just the deficit spending that we are in, it is 
where we are spending the money. You are dumping money into the 
demand side, and then regulating the supply side. It is going 
to cause problems, and we have seen that. Then it went into, 
well, it is here, inflation is here, but it is not going to 
last long. Then we get into, well, finally, you are recognizing 
that we are in inflation, but we have to find somebody to blame 
it on because it can't be our bad policies.
    Quite frankly, my colleagues on the other side are again 
turning away from fact and embracing a more advantageous 
political science instead of real science, and scrambling to 
find a scapegoat for self-created problems that are affecting 
Americans across-the-board. And it is not just me saying this, 
former Democrat Treasury Secretary Larry Summers warned last 
year that excessive fiscal stimulus will cause the highest 
inflation in generations. Democrats dismissed these warnings, 
but it turned out he was right. Again, this is somebody from 
the other side of the aisle.
    And Federal Reserve Chairman Powell last week, in 
responding to one of my questions, admitted that the reckless 
stimulus spending is a significant driver of inflation. These 
are facts.
    Even the Washington Post has reported that Democrat 
pollsters recently advised the White House to find a villain to 
blame inflation on. This is the Washington Post. Because 
Republicans' criticism that the out-of-control spending as the 
cause of inflation is being effective. So, even the Washington 
Post is reporting that pollsters, political science, not 
natural science, is driving this entire narrative.
    Just a little while ago, President Biden finally announced 
that we were going to stop importing Russian oil, but then he 
continued on to blame U.S. oil producers as the reason that we 
are not producing oil, not his Executive Orders. And I also 
would suggest, let us look at some of the self-imposed policies 
like the influence that ESG has had on American producers by 
punishing investors and steering them away from fossil fuels 
and investing in petroleum companies in the U.S. but not in 
foreign entities. So, there is a lot of blame to go around in a 
lot of areas that we have self-imposed the problems that most 
Americans are facing today.
    The Democrats are now blaming the so-called greedy 
corporations for their self-created inflation problems. This is 
a baseless and completely unserious argument. This is simply to 
distract us from the real problem that they have brought upon 
this nation. And the American people are quite frankly not 
buying it. Polling shows that 70 percent of Americans 
disapprove of the way this Administration is handling 
inflation. It is because they are doing the same thing over 
again and expecting a different outcome. And I am not even sure 
they are expecting a different outcome. They are just hoping 
that the American people will finally buy into the narrative 
they are pushing out there, but they are not.
    In a piece titled, ``The White House once again offers a 
bizarre message on inflation,'' the left-wing Washington Post 
editorial board said, ``President Biden is facing mounting 
criticism for inflation's rise to its highest level since 
1982,'' which is right after the end of the Carter 
Administration. And I suggest if you go back and look at 
history, we are repeating the Carter Administration's years all 
over again, but on steroids. Unfortunately, the White House's 
latest response is to blame greedy business. And economists 
across the political spectrum are rightly calling out the White 
House for this foolishness.
    I can go through a litany of things that have caused this 
problem, but I am running out of time. So, Mr. Goodspeed, in 
your testimony you said the American Rescue Plan artificially 
increased demand as much as 5 percent above pre-pandemic 
forecasts. Can you explain briefly how that is the case?
    Mr. Goodspeed. Thank you, Congressman.
    Briefly, that means that with a fiscal stimulus of that 
magnitude, it increased aggregate demand in the United States 
economy at the same, relative to the potential output of the 
U.S. economy. That 5 percent is probably an underestimate, 
because as I noted in my testimony, the supply-side potential 
of the United States economy was probably depressed in 2021.
    Mr. Auchincloss. The gentleman's time has expired.
    Mr. Loudermilk. Mr. Chairman, I yield back.
    Mr. Auchincloss. The gentlewoman from Iowa, Mrs. Axne, who 
is also the Vice Chair of our Subcommittee on Housing, 
Community Development, and Insurance, is now recognized for 5 
minutes.
    Mrs. Axne. Thank you, Mr. Chairman. And thank you to the 
witnesses for being here. I think we all know how much price 
increases are on the minds of our constituents, as we are 
talking here in Congress. And the war in Ukraine has far more 
severe consequences for their people than higher gas prices. 
But since we are here to talk about inflation, let us focus on 
that to start.
    Right now, gas prices are up $0.55 nationally in the last 
week, following oil prices higher after the invasion, of 
course. Those prices may rise further now that we are blocking 
imports of Russian oil, and I support that move. But since 
Russian imports make up only 3 percent of our consumption, that 
is not all that is going on here. Even before this invasion, 
gas prices were up about $1 over last year, and oil was trading 
at $90 a barrel.
    Dr. Zandi, it's good to see you. Do you have an estimate of 
the price where U.S. shale oil production becomes profitable?
    Mr. Zandi. That price is somewhere between $65 and $70 per 
barrel. Obviously, I am painting with a broad brush. There are 
big differences across the fracking fields of North America. 
But that is the marginal cost of producing and transporting 
that oil to the global marketplace, so, about $65, $70 a 
barrel.
    Mrs. Axne. Thank you. Okay. So, about $65 to $70 a barrel 
is becoming profitable. And again, oil was trading at $90 a 
barrel when last we talked. So, pre-pandemic oil was around $60 
a barrel, and domestic production here was around 13 million 
barrels a day. Since the pandemic, though, production is down 
10 percent, which is about 1.3 million barrels a day. Now, I 
understand companies can't turn this on overnight, but oil has 
been over $60 for a year now.
    Dr. Mabud, do you have any explanation for why production 
is still so far below where it was?
    Ms. Mabud. Thank you for that question. The fossil fuel 
industry is not immune to the type of profiteering that I spoke 
about in my testimony. And this moment when things are in flux, 
when there are a lot of geopolitical factors happening, is an 
opportunity to exploit those headlines in chaos and use their 
grip on the market to raise prices. In fact, just 5 oil and gas 
companies raked in over $75 billion in profits last year, which 
is the highest increase in profits in 7 years. Look, the only 
thing more lucrative than pandemic profiteering is war 
profiteering. And sadly, we are probably going to be seeing 
both. And major oil companies, including household names like 
Exxon Mobil, Shell, and Chevron, are set to return record 
buybacks to their shareholders in 2022. Analysts are estimating 
that these buybacks could range anywhere between $38 billion 
and $41 billion, which is nearly double the buybacks in 2014, 
the last time that oil traded above $100 a barrel, so this is 
just corporate profiteering. And this sector is not immune to 
that.
    Mrs. Axne. That is incredibly unfortunate. I certainly hear 
a lot of calls lately for increased U.S. production directed 
right here at Washington, D.C. But the truth is, we are not the 
ones that are stopping it from happening. The companies are 
just choosing not to produce what we need right now. Here are a 
couple of quotes from some oil CEOs just in this last month. 
``Our plan now for 2022 is to just keep our volumes flat.'' 
Another quote, ``Whether it is $150 oil or $200 oil, we are not 
going to change our growth plans.'' Maybe my economics is a 
little rusty, but I know yours certainly isn't, Dr. Zandi. Is 
that how supply and demand is supposed to work?
    Mr. Zandi. No. I do think though, Congresswoman, we are 
starting to see the economic incentives starting to work. If 
you look at Rig Counts, they are double what they were at the 
pre-pandemic low. And in the last 6 to 8 weeks, they have 
picked up sharply. And I suspect now that we are in $120 oil, 
we will see the oil rigs really ramp up.
    I don't have a perspective on the industry and how 
competitive it is. It has been slow to respond to the higher 
prices, that's for sure. But it feels like it is kicking into 
gear now. And thank goodness for that, because we will need 
that oil.
    Mrs. Axne. I am glad to hear that it is turning around and 
that they are actually going to start doing some production for 
us because we need it. A couple of other things that the CEOs 
have been saying, ``The capital that historically we would 
spend in growing, now we are redeploying in the form of share 
repurchases.'' Another quote, ``We have to do what Wall Street 
wants, or else your stock craters.'' This is my big concern, 
that Americans, working Americans are suffering as more money 
is being put in shareholder pockets. And so, this is why 
company after company is reporting record-free cash flows. 
Those calls for more oil production shouldn't be coming to 
Washington. They absolutely need to be going to Wall Street 
because that is who is really demanding that oil companies not 
increase their production. So, thank you so much for your 
testimony here today.
    I yield back.
    Mr. Auchincloss. The gentleman from Tennessee, Mr. Kustoff, 
is now recognized for 5 minutes.
    Mr. Kustoff. Thank you, Mr. Chairman. And thank you to the 
witnesses for appearing today.
    Dr. Goodspeed, the Consumer Price Index has gotten a lot of 
attention. Of course, we saw the numbers last month that 
registered in at 7.5 percent, which was higher than I think a 
number of economists were thinking. The number that I have 
seen, that is expected when the CPI number comes out later this 
week, is 7.9 percent. In historical terms, can you reference 
that? We know that when the number came out last month, that 
was the highest number that we have seen in 40 years. Where 
does 7.9 register? What does that mean for the average American 
and consumer?
    Mr. Goodspeed. Thank you, Congressman. That frankly is a 
level of inflation that we have not observed since the late 
stages of the great inflation of the 1960s to the early 1980s. 
And I would add that it might very well be higher than that if 
we calculated CPI the way we did before 1983. The 1983 was 
improvement, but prior to 1983, home prices directly entered 
into the calculation of CPI. And I suspect that if they did 
again, then we would have actually seen even higher inflation 
than 7.5 percent.
    Mr. Kustoff. And in your opinion, what would 7.9 percent, 
if that number is real, and it projects that way when it comes 
out later this week, what would that mean for the average 
American? What does that reflect?
    Mr. Goodspeed. I think that reflects a substantial decline 
in purchasing power even greater than that which we observed in 
2021 when, in inflation-adjusted terms, wages actually declined 
in 2021. And they declined by various measures between 2 and 3 
percent, because even though wages went up, they did not go up 
by enough to keep pace with the surge in inflation.
    Mr. Kustoff. The markets, as anybody who opens up their 
brokerage statement or logs online and looks at it knows, have 
been tumultuous, certainly over the last several weeks. Do you 
have an opinion of how the markets feel about government 
spending and increased government spending?
    Mr. Goodspeed. I think markets are reflecting a great deal 
of factors, geopolitical uncertainty included, concerns about 
fiscal excess necessitating tightening by the Federal Reserve. 
I would add that when we are talking about asset classes, one 
of the ways in which inflation really hurts lower- and middle-
income households is through the fact that they don't have the 
same hedges against inflation that higher-income households 
have. Higher-income households are more exposed to equity 
markets, higher-income households tend to own their own homes. 
So, they are better-hedged against inflation than lower-income 
households.
    Mr. Kustoff. Thank you, Dr. Goodspeed.
    Mr. Zandi, I would like to talk to you about the travel and 
the airline industry for a moment. I know during this hearing, 
there have been a lot of questions about high energy prices. 
The airline and travel industry, as we know, has been through a 
roller coaster with the pandemic. We all fly. We have seen 
increased capacity, although I am not sure that the business 
traveler has returned to his or her pre-pandemic level. But 
with high energy prices, at what point do the airlines look at 
the price of a barrel of oil and decide that it is not 
profitable and start parking airplanes?
    Mr. Zandi. Oh, I think we are a long way from that. 
Although, you make a great point that the airline industry is 
obviously very energy-intensive, and as prices rise, fuel costs 
rise, it is going to make it very difficult for them to earn 
money. Their profitability is going to be under extreme 
pressure. At least, that has been the case historically. And I 
would be surprised if that isn't the case here as well. They 
may pull back on expansion plans, they may pull back on 
particularly unprofitable routes, but I don't think they will 
do this in a widespread way. Because the other thing that is 
going to happen is I do think demand is picking up, business 
travel, as you point out, has been very depressed. But now that 
we are on the other side of Omicron, offices are reopening, 
particularly in the big urban centers that are globalized, and 
we are going to see more business travel. So I would be 
surprised, Congressman, if we saw the airline industry actually 
park planes on tarmacs.
    Mr. Kustoff. To make up for their margins, if oil continues 
to increase, they would have to raise their prices, wouldn't 
they?
    Mr. Zandi. Yes, sure. And I am sure that they will try to 
compensate for that.
    Mr. Kustoff. Thank you. I yield back.
    Mr. Auchincloss. The gentleman from Illinois, Mr. Casten, 
who is also the Vice Chair of our Subcommittee on Investor 
Protection, Entrepreneurship, and Capital Markets, is now 
recognized for 5 minutes.
    Mr. Casten. Thank you, Mr. Chairman. Our memories are short 
in this town, but I want to remind everybody that 2 years ago 
this month, we were looking at the biggest-ever collapse in GDP 
in our history, and the biggest-ever spike in unemployment in 
our history. And if I would have told you then, don't worry 
about it, 2 years from now we are going to have 300 million 
Americans vaccinated, we are going to have employers creating 
jobs at a faster rate than the workforce is growing, and we are 
going to have Republicans and Democrats united across the aisle 
to support NATO to provide defensive weapons to Ukraine and 
stand up to Vladimir Putin, you would have told me I was 
smoking some funny cigarettes. But here we are.
    And I do not mean to make light of the challenges Americans 
face today, but I think I speak for all Americans when I say I 
am a lot happier to be here than where we were just 2 years 
ago. That rate of change is extremely disorienting. It is hard 
to understand. It is hard to process. And so, I want to start 
with just some really simple questions.
    Dr. Goodspeed, if I gave you a 9.2 percent raise in your 
income, and your expenses went up by 5.6 percent, would you 
have more or less money in your wallet at the end of the year?
    Mr. Goodspeed. [Inaudible.]
    Mr. Casten. You would have less money if your income went 
up at 9.2 percent in your--
    Mr. Goodspeed. [Inaudible.]
    Mr. Casten. No, a 9.2 percent raise and a 5.6 percent 
increase in your expenses.
    Mr. Goodspeed. [Inaudible.]
    Mr. Casten. Okay. I just described the 2021 wage growth in 
the United States and core inflation. And when we only talk 
about income growth, or we only talk about expense growth, it 
is a one-hand-clapping conversation. What matters to Americans 
is how much money is left in their bank, not what is the end, 
and, indeed, we have seen a $2 trillion increase in savings in 
the last year. You also mentioned, Dr. Goodspeed, that the U.S. 
inflation rate, I think, if I understood you, is the 5th-
highest among the G20 countries. Where is our wage growth among 
G20 countries?
    Mr. Goodspeed. I noted that among 46 economies tracked by 
the Organisation for Economic Co-operation and Development 
(OECD), the increase in average inflation in 2021 relative to 
pre-pandemic was the 4th highest in the United States.
    Mr. Casten. Okay. Close. I am just saying that among G20 
countries, what is our rate of wage growth, because I want to 
make sure we focus on not one-hand-clapping.
    Mr. Goodspeed. I do not, off the top of my head, know--
    Mr. Casten. I will help you out. It is the second-fastest 
rate, and, in fact, the third spot is the U.K., which is just 
half of our rate. So, it is a long drop from the silver-medal 
podium to the bronze-medal podium. How does our GDP growth 
compare over the last year to the rest of the G20?
    Mr. Goodspeed. Our GDP growth over the past year has 
outpaced most of, if not all of the rest of the G20.
    Mr. Casten. Yes, I think we are the 8th-fastest, 
interestingly enough, but the number one through three spots 
are Argentina, Turkey, and Saudi Arabia. I think it is safe to 
say that none of us want to emulate their economic policies, 
but they are seeing rapid GDP growth.
    It seems to me that, yes, we have had rapid inflation 
growth, but we have also been at the top of the league tables, 
thanks to a lot of what we did, we would not be there but for 
those changes. So, Mr. Drummer, I would like to start with you. 
I am under no illusions that that 9.2 percent wage growth has 
accrued to every single American. Can you take a minute and 
tell us what you see that we have done from a policy 
perspective to drive that wage growth? And what we can do to 
make sure that those gains are shared by all Americans going 
forward?
    Mr. Drummer. Thank you, Representative. That's an excellent 
question. So, average wages for U.S. workers grew by 4.7 
percent. It was the highest growth in 2 decades. However, 
inflation also grew by 7 percent during the same time, meaning 
that even with--
    Mr. Casten. I'm sorry; let me just interrupt you there, 
because the Bureau of Economic Analysis had 9.2 percent average 
wage growth in 2021. I just want to make sure I am not--
    Mr. Goodspeed. To my knowledge, the Bureau of Economic 
Analysis doesn't report average wage growth. The average wage 
growth would be from the Bureau of Labor Statistics.
    Mr. Casten. I'm sorry but the data says 9.2--
    Mr. Zandi. I think that is wage and salary growth; I am 
pretty confident that is wage and salary growth.
    Mr. Casten. Okay. I am sorry to interrupt Mr. Drummer, but 
I just want to make sure that we are--
    Mr. Drummer. Okay. But to your point, we can get to the 
point here that the wage growth is a reflection of what happens 
when we have expansionary monetary fiscal policy. We don't get 
growth in our economy without stimulating our economy. And that 
is pretty much what it comes down to. Now, unfortunately, we do 
see that the fastest wage growth did happen for the lower 
quartile. But they were coming up from a pretty low number, and 
that wage growth still isn't enough. And this is why the rate 
increase is so dangerous. We are about to claw back those gains 
that they just had after decades of relative stagnation.
    Mr. Casten. Dr. Zandi, with the time left, anything you 
want to add as far as what we have done from a policy 
perspective to make sure that we are at the top of those league 
tables on GDP growth and wage growth, and what should we be 
doing going forward to make sure we maintain those gains?
    Mr. Zandi. I thought the policy response, the fiscal policy 
response in particular, and the American Rescue Plan, more 
specifically, was a slam dunk positive for the economy. And I 
think it is critical to getting the economy back to full 
employment as quickly as it has faster than almost any other 
economic recovery.
    Mr. Auchincloss. The gentleman's time has expired.
    Mr. Zandi. And I don't believe that it contributed in any 
meaningful way to inflation.
    Mr. Auchincloss. The gentleman's time has expired.
    Mr. Casten. I yield back.
    Mr. Auchincloss. The gentleman from Ohio, Mr. Gonzalez, is 
now recognized for 5 minutes.
    Mr. Gonzalez of Ohio. Thank you, Mr. Chairman. First, I 
want to submit for the record a CNBC article entitled, 
``Inflation eroded pay by 1.7 percent over the past year,'' by 
Greg Iacurci.
    Mr. Auchincloss. Without objection, it is so ordered.
    Mr. Gonzalez of Ohio. Thank you. There is a bit of debate 
as to whether the real inflation rate or, I'm sorry, the real 
wage growth was negative. And I think that hopefully helps put 
it in context. So we are talking about historic inflation here. 
And for the 2012 to 2020 period, prices were relatively stable 
and much of the prior period. And so, the question is always 
what changed, what actually changed? If you listen to the Chair 
and some of the witnesses today, it seems to suggest that the 
idea is we should be spending more and we should keep rates 
low, and that will somehow correct inflation.
    I want to start with Dr. Goodspeed. Do you have any reason 
to believe that corporations are greedier today than they were 
4 years ago?
    Mr. Goodspeed. I have no evidence, nor I have seen any 
academic study to that effect, no.
    Mr. Gonzalez of Ohio. So, this notion that greedy 
corporations are somehow driving inflation--I would argue that 
relative greed amongst corporations is pretty stable over time. 
It is sort of silly as an explanation for inflation.
    And it is notable that Chairman Powell, when he was before 
our committee last week, disputed that. And Treasury Secretary 
Yellen rejects that explanation as well. And she didn't mention 
it a single time when she was before our committee. So, I think 
it is disingenuous, to say the least.
    Another thing I am hearing is that we should keep rates 
low, while also complaining about housing prices, which housing 
prices are high.
    Dr. Goodspeed, again, what impact do zero percent interest 
rates have on the price of housing?
    Mr. Goodspeed. They have a very substantial impact on the 
price of housing because you are discounting the future flow of 
housing services at a much lower rate. And that tends to 
increase demand for housing and increase the price of housing.
    Mr. Gonzalez of Ohio. So when the Fed lowered rates to zero 
at the pandemic onset, it's not surprising that we saw demand 
increase, and therefore, prices increase? We saw it in housing, 
but we saw it in most markets. Fair?
    Mr. Goodspeed. That is fair.
    Mr. Gonzalez of Ohio. Okay. And so, this idea that we 
should keep rates low and that is going to somehow solve the 
housing problem, boy, somebody's going to have to explain that 
one to me.
    Now, we are going to talk about another thing that changed, 
which is in the summer of 2020, the Federal Reserve updated its 
statement on longer run goals and monetary policy strategy to 
state that the Fed would seek to achieve inflation above 2 
percent for some time, after periods of low inflation. That is 
a significant change.
    Given the persistent increase in inflation over the last 
year, do you believe that this policy hindered the Fed's 
ability to act sooner to address rising inflation or could you 
see where it might have?
    Mr. Goodspeed. I don't think that the policy change should 
have hindered--they still could have responded earlier. And I 
think they should have responded earlier. I fear that they may 
have overemphasized the, ``flexible'' part of flexible average 
inflation targeting.
    Mr. Gonzalez of Ohio. Thank you. And I wish that this chart 
were easier to see. I know these are hard to see, but 
basically, this is personal goods expenditure from pre-COVID 
levels. If you look before the recession, more or less demand 
is fairly stable over time.
    Here, you see massive jumps in durable goods. Here, here 
and here, where these arrows are all correlated almost 
perfectly with the fiscal stimulus, the Cares Act, March 27, 
2020, you saw a massive increase in demand on durable goods. 
Bipartisan COVID Relief Bill December 21st, again, you see a 
massive increase in the demand for durable goods. American 
Rescue Plan, March 11, 2021, massive increase in demand for 
durable goods.
    These are all things that have changed. And so, when you 
think about what is driving inflation, I think it is fairly 
obvious. We have rates that are at zero. We had a pandemic, and 
we responded. I voted for most of that stuff, frankly. I didn't 
vote for the American Rescue Plan. Massive fiscal stimulus and 
so, you have seen a shift in the demand dynamics.
    What you have not seen is what the chairwoman and some of 
our witnesses seem to suggest, which is that there is evidence 
that corporations are somehow greedier today than they were 5 
years ago. I don't think anybody would make that claim. But it 
seems to be the one that we are hearing. With that, I yield 
back.
    Mr. Auchincloss. The gentlewoman from Massachusetts, Ms. 
Pressley, who is also the Vice Chair of our Subcommittee on 
Consumer Protection and Financial Institutions, is now 
recognized for 5 minutes.
    Ms. Pressley. Thank you, Mr. Chairman. Workers, families, 
and small businesses in my District, the Massachusetts 7th 
District, and around the country, are feeling the impact of 
higher prices, everything from groceries to diapers to 
medication, and other essential necessities. Corporations are 
claiming that they have no choice, but to pass costs on to 
consumers due to inflation, and supply chain bottlenecks, but 
their profits are telling a different story.
    Mr. Vaheesan, isn't it true that most large corporations 
reported greater profits in 2021 than prior to the pandemic?
    Mr. Vaheesan. That is correct, Congresswoman. Corporate 
profit margins were at a 12-year high in 2021. And, 
importantly, markets across the economy were already highly 
concentrated, but inflation has given many corporations cover 
to exercise their pricing power. And CEOs and CFOs have gone on 
record to say that they can exercise pricing power that they 
couldn't before.
    Ms. Pressley. Two out of three of the largest publicly 
traded companies reported more profits in 2021 than they did in 
2019, at a time of a global pandemic, and a pandemic-induced 
recession, when people are struggling to make ends meet. 
Corporations like Amazon, Kroger, and Starbucks are not only 
hauling in massive profits, but they are also still raising 
prices. That doesn't sound like they are simply, ``passing 
costs on to consumers.'' That sounds like corporate price 
gouging.
    Mr. Vaheesan, for those following from home who hear this 
term but don't exactly know what it means--and they are feeling 
the impact of it every day--can you briefly describe what price 
gouging is, and how it impacts consumers?
    Mr. Vaheesan. This price gouging really comes in two forms. 
The first is when a firm exercises monopoly or oligopoly power 
to unilaterally raise prices far in excess of costs. And that 
seems to be in action in industries such as beef, where 
processors are raising prices to consumers while keeping prices 
down to ranchers.
    The second phenomenon is collusion, where a group of firms 
come together to jointly raise prices, foreign excess of costs. 
And that seems to be happening in poultry processing. In fact, 
a number of processors have been indicted and face private 
lawsuits over collusive activity. So those are the two types of 
price gouging that commonly happen in the economy.
    Ms. Pressley. Thank you. And I'll give another sort of 
real-time example that I certainly hear from constituents every 
day. Take Procter and Gamble, for example. They have repeatedly 
raised prices on their products during the pandemic, including 
diapers, while increasing their CEO pay, stock buybacks and 
dividends and raking in $21 billion in sales last year. So, 
these price hikes are rooted in corporate greed, plain and 
simple, and low-income families will continue to pay the 
highest price.
    Dr. Mabud, are we seeing price gouging occur in just one or 
two sectors of the economy or would you say it is more of a 
broader problem?
    Ms. Mabud. Thank you for that question. My organizationz, 
the Groundwork Collaborative, has combed through hundreds and 
hundreds of earnings calls over the last 3 quarters, and what 
we see is in sector after sector, this type of pandemic 
profiteering is really, really rampant. And part of the reason 
we are seeing such widespread profiteering is because these 
CEOs and corporate executives are being egged on by their 
shareholders. Because when prices go up, and there are higher 
profit margins like we have been seeing, record profit margins, 
the demand from investors is yes, keep doing that play, push 
the prices up even more, so we can push profits up even more. 
And the concern here is that investor scaffolding that 
undergirds our entire economy will keep prices elevated for a 
longer period of time and allow these huge companies to get 
rich while all of us pay the price.
    Ms. Pressley. Thank you. And this isn't just about the 
exploitive nature of price gouging by large corporations. It is 
also about investigating how and why, and do they have the 
power to do so?
    Ms. Mabud. Absolutely. In many ways, pandemic profiteering 
is like that little blinking red light that says the whole 
switchboard is going down, right? And what we essentially have 
is 50 years of policy decisions that have led to a brittle 
supply chain and megacorporations really shaping a system that 
works for them and not for others. And as a result, when we 
have a moment of inflation and we are hearing this on the 
earnings calls, executives are saying, inflation is helping us 
with some cover to raise prices, and by the way, we can raise 
prices without losing market share because we are so big that 
our consumers have nowhere else to go.
    Ms. Pressley. Thank you.
    Mr. Auchincloss. The gentlewoman yields back.
    The gentleman from Michigan, Mr. Huizenga, is now 
recognized for 5 minutes.
    Mr. Huizenga. Thank you, Mr. Chairman. I am about to attend 
a funeral of one of our colleagues, Jim Hagedorn.
    Mr. Auchincloss. Mr. Huizenga, you are--
    Mr. Huizenga. --sure all of my colleagues--
    Mr. Auchincloss. Mr. Huizenga, you have come in with some 
buffering issues. Do you want to start over?
    Mr. Huizenga. Sure. I apologize for that. I am on my way to 
the funeral of one of our colleagues, Jim Hagedorn, and I know 
all of my colleagues are thinking of his family today. So, I 
apologize as I am in the vehicle doing this.
    Some pretty amazing statements are being made today. For 
example, the prices are up because of corporate greed, so I 
must assume that gas prices were low because the same 
corporations were not greedy. A year ago, Amazon had record 
profits because they are greedy, not because people are using 
them more, and trust me, I am no fan of Amazon per se. But 
there is another statement that ruthless efficiency has brought 
higher prices. The views on how the economy works are clearly 
very, very disjointed here within the committee.
    I do want to ask Mr. Goodspeed to explain why inflation is 
hurting those middle- and lower-income families that I 
represent. I have the second-poorest county in the State of 
Michigan. It is one of the top 100 poorest counties in the 
nation. It is very rural. It has a significant minority 
population, and I am worried about them. Not the top quartile, 
I am worried about the bottom, and the second, and the third 
quartile of income earners. If you could address that, Mr. 
Goodspeed?
    Mr. Goodspeed. Thank you, Congressman. And on the subject 
of workers and how inflation is impacting them, I would just 
like to note for the record that I am not familiar with the 9.2 
percent figures cited by the Congressman from Illinois. Insofar 
as I can tell, he is referencing nominal, aggregate wage and 
salary income, as reported by the Bureau of Economic Analysis, 
which is economy-wide. That is something very different from 
average wage growth as measured either by average hourly 
warning earnings or average weekly earnings or the employment 
cost index. So, I would just like to note that for the record.
    In terms of your question, Congressman, yes, the inflation 
can be particularly difficult for middle- and lower-income 
Americans because they tend to have lower bargaining power. It 
is more difficult for their wages to keep pace with inflation. 
Second, things like rent, gas, groceries, and utilities tend to 
account for a higher share of their disposable personal income. 
And finally, as I have noted in my testimony, they tend to be 
less exposed to classic inflation hedges like equity markets, 
and like owner-occupied real estate.
    Mr. Huizenga. And how would you respond to these calls for 
more Federal spending, that we haven't been spending enough and 
that more stimulus is going to help those families that you 
were just talking about?
    Mr. Goodspeed. I think that more Federal spending is likely 
to continue to put upward pressure on interest rates and that 
is not good for most households. I think more Federal spending 
is likely to exacerbate a lot of the inflationary pressure. And 
in the long run, I don't think it is sustainable, so that 
implies a higher future tax liability for ordinary Americans.
    Mr. Huizenga. In a previous hearing, I took the adage, when 
you are a hammer, everything looks like a nail, and converted 
it to, when you are a modern monetary theorist or a neo-
Keynesian, everything looks like a spending opportunity. And I 
think that is exactly what the debate is here today, whether we 
are going to pour more fuel on the inflationary fire that we 
have here. And maybe I'll finish with this, Mr. Goodspeed. How 
does fiscal discipline regulatory right sizing and private 
sector investment rather than government sector investment help 
families like those in my district?
    Mr. Goodspeed. I think we ran that experiment, Congressman, 
in 2017, 2018, and 2019, and the result was, as I noted 
earlier, real wage growth for the bottom 10 percent of the wage 
distribution of 9.8 percent versus real wage growth for the top 
10 percent of 4.8 percent. We saw declining wealth inequality, 
and declining income inequality. And we saw real median 
household income grow by $4,400, which was more in one year 
than in the preceding 2016, combined. I think that is the 
result of this sort of policy mix to which you referred.
    Mr. Huizenga. I appreciate that. And with that, I will 
yield back.
    Mr. Auchincloss. The gentlewoman from Pennsylvania, Ms. 
Dean, is now recognized for 5 minutes.
    Ms. Dean. Thank you to the chairman, and I thank all of our 
witnesses for your time and testimony and expertise today.
    I want to follow up on a question that I asked Federal 
Reserve Chair Powell just last week, at our hearing. I have 
voiced my concerns about increasing market concentration and 
the role it has played in contributing to the fragility of our 
supply chain. I am thinking and some of you have spoken to it 
in the beef and poultry industry, for example and its 
connection to inflation. In response to my question, Mr. Powell 
downplayed the role of market concentration, noting that it is 
not a settled question, and he defers to the competition 
authorities. Many of you on this panel see it differently.
    So maybe, I'll start with Dr. Mabud and Mr. Vaheesan. Can 
you please speak more to the market concentration and its 
impact on inflation?
    Ms. Mabud. Sure. Thank you for that question. Corporate 
consolidation and its large size in our economy has really 
helped facilitated the price hikes that we are seeing today. 
With control and dominance over these markets, these massive 
corporations can raise prices and pass along costs to consumers 
who have nowhere else to turn. Think about families again, who 
need diapers, and all of the diaper brands that we are all 
familiar with are made by two diaper companies, and the prices 
are going up.
    Those companies know that they can get away with it because 
families are not going to go without diapers. Pandemic 
profiteering is really just one symptom of an economy that 
prioritizes profits, all while decimating the economic security 
of millions around the country, and faced a broken economy for 
decades. It is kind of the tip of the iceberg in many ways, and 
I am happy to speak more to the supply chain aspect of this 
too, but we'll let my colleague on the panel, go next.
    Ms. Dean. Mr. Vaheesan?
    Mr. Vaheesan. Yes, that is exactly right. First, corporate 
concentration has contributed to higher unilateral pricing 
power on the part of businesses, so they can raise prices, 
raise profit margins without losing large volume of sales.
    Second, in concentrated markets, it is easier for companies 
to come together and collude, and as a number of Members noted 
today, markets were very concentrated before the pandemic. That 
is certainly true. But inflation of an excess of 7 percent has 
given powerful corporations the freedom to approach their 
purchasers, whether they are wholesalers or retailers and say, 
look, inflation is up. We want to raise prices, and they didn't 
have that cover before. So it is easier to broach the topic of 
price increases without jeopardizing their relationship with 
purchasers.
    And I think I would add that 40 years of mergers and 
acquisitions have meant that companies have plowed money into 
buying other companies instead of investing in new capacity. 
And the pandemic has really exposed the fragile nature of many 
of our supply chains and the lack of economic resiliency.
    Ms. Dean. Thank you very much, both of you.
    Dr. Zandi, it is good to see you, my fellow Philadelphian, 
Pennsylvanian. I want to thank you.
    Mr. Zandi. It's good to see you.
    Ms. Dean. Maybe tacking on to this question about 
concentrations in the market and inflation, what are some 
solutions that Congress can apply? And then, I have another 
question for you after that.
    Mr. Zandi. Sure. I do think it is very important that you 
have hearings like this to shine a bright light on these 
practices. In fact, you may want to dig deeper into each of 
these industries where concerns are raised about competition in 
the meatpacking industry or the energy industry. I think that 
is a very fundamental role of government, to make sure that 
everyone is playing by the rules, particularly in a time of 
crisis. And we are deeply in crisis. So, I think that is very 
key.
    And then, making sure that the antitrust laws are in the 
shape they need to be in, and I know there has been a lot of 
work, both in the Senate and in the House, around taking a good 
hard look at our antitrust laws and making sure they are up to 
the challenges that exist today. So, I think those are very 
important things to do, just to make sure that businesses are 
playing by the rules in these markets in a time of stress.
    Ms. Dean. And following up on the American Rescue Plan that 
I was very proud to be a small part of with a yes vote about a 
year ago, sadly, some of my friends on the other side of the 
aisle have been spinning about the American Rescue Plan and 
inflation as though it were entirely to blame for the inflation 
that we are seeing in this country, and we all know that it is 
a global phenomenon. Can you speak to that set of myths?
    Mr. Zandi. Yes, the American Rescue Plan did help demand, 
but that was a year ago and that coincided with the 
vaccinations in the reopening of the economy, so inflation 
picked up. But that was deemed to be okay because we have been 
through a decade or more of low inflation, suboptimal 
inflation. The really difficult inflation came well after the 
American Rescue Plan and its impact on demand waned, and that 
was due to the pandemic and the Delta wave and disruption to 
supply chains and--
    Mr. Auchincloss. The gentlewoman's time has expired.
    Mr. Zandi. --the complicated question we are experiencing 
now is not due to the American Rescue Plan.
    Mr. Auchincloss. The gentlewoman's time has expired.
    Ms. Dean. Thank you for that clarity, and I yield back.
    Mr. Auchincloss. The gentleman from South Carolina, Mr. 
Timmons, is now recognized for 5 minutes.
    Mr. Timmons. Thanks, Mr. Chairman. I have to say the 
evolution of the so-called experts and the leftist politicians 
on inflation over the last year has been absolutely incredible 
to behold. When Republicans warned of inflation last year while 
Democrats were spending like drunken sailors, we were shooed 
away and told that was crazy talk. Inflation was a thing of the 
past, et cetera. My, how their tune has changed, after calling 
it crazy, then it was transitory. And then, it was only used 
cars, lumber, and gas. And then it was, and this is my 
favorite, a first-class problem. The White House chief of staff 
literally described inflation as a first-class problem, but 
nothing could be further from the truth. And we aren't done 
yet. That wasn't the end of the evolution.
    Once my colleagues across the aisle started polling the 
issue and realized what we have been saying all along, that 
inflation functions as a tax, a regressive tax, primarily 
hurting folks living paycheck to paycheck on fixed incomes, who 
are just trying to make it until payday. Once they realized 
they could not wish away this problem, they had to start 
blaming it on something. There has been no introspection to 
speak of friends across the aisle. Instead, they are blaming 
their tried-and-true boogeyman, corporate America. Never mind 
the easy money policies of the Federal Reserve over the last 2 
years. Never mind trillions of dollars of unneeded Federal 
deficit spending poured into an otherwise healthy economy that 
was emerging from the pandemic.
    Last year, Democrats ignored Larry Summers when he joined 
Republicans and warned of the risk of inflation that the so-
called American Rescue Plan posed. So what is our friend, Mr. 
Summers, former Treasury Secretary to President Clinton, and 
Director of the National Economic Council to President Obama, 
saying about the Democrats new plan to, ``break up the evil and 
greedy corporate overlords inflation.'' ``The emerging claim 
that any trust can combat inflation reflects science denial. 
There are many areas like transitory inflation, where serious 
economists defer any trust as an anti-inflation strategy is not 
one of them.''
    One of the last favorite boogeyman is the meatpacking 
industry. What does Larry Summers have to say about that? 
``Breaking up meat packing would in the short run lead to 
reduced supply, which would further increase prices. In 
general, when government goes to war with industries, that 
discourages investment in subsequent capacity.'' I am going to 
say that again. ``When government goes to war with industries, 
it discourages investment in subsequent capacity.'' So in plain 
English, what my friends on the other side of the aisle were 
proposing as a solution would only make things worse.
    Subsequently, making goods and services even more expensive 
for the American consumer, they ignored so much once. They will 
be wise not to ignore him again. So, where do we go from here? 
Obviously, the Fed is the government's institution with the 
greatest ability to curb inflationary pressures across the 
economy. And I am glad to see that they are finally beginning 
to use their tools to address rising prices. Better late than 
never, I guess.
    Dr. Goodspeed, obviously in the energy sector, there are 
many steps Congress can take to address runaway inflation, 
namely increased production here at home. But looking at the 
big picture, besides immediately halting wasteful spending, 
what can Congress do to address this problem and provide relief 
to the American people? It is the least we could do given 
actions of my colleagues across the aisle this last year.
    Mr. Goodspeed. Thank you, Congressman Timmons. I think 
three important things would be not only slowing the growth of 
Federal spending, but also providing some certainty on the 
future direction of both personal and corporate income tax 
rates so that we can incentivize increased labor force 
participation, particularly among those of retirement age or 
near retirement age, 1.5 million of whom have exited employment 
early. And also by giving some certainty on the business tax 
side to incentivize increased business investment to increase 
capacity.
    And if I may, a policy situation that seemed eerily 
familiar to me to the last time that we saw demand excess from 
fiscal policy and a constrained labor force, and this is from 
Alan Meltzer, writing about the origins of the great inflation 
in the 1960s: ``Policymakers denied for several years that 
inflation had either begun or increased, they did not deny the 
numbers they saw, but like Jeff Gardner, the chairman of 
Janssen, they gave special explanations.''
    Mr. Timmons. Thank you, Dr. Goodspeed. Thank you, Mr. 
Chairman. I yield back.
    Mr. Auchincloss. The gentlewoman from Texas, Ms. Garcia, 
who is also the Vice Chair of our Subcommittee on Diversity and 
Inclusion, is now recognized for 5 minutes.
    Ms. Garcia of Texas. Thank you, Mr. Chairman, and thank you 
to all the speakers who are here today to join us in a 
discussion of such a very important topic.
    It is important that we address the issue of inflation. But 
first, we must identify the issues correctly. We cannot produce 
targeted strategic solutions without identifying the problems 
and where they are coming from. I know it is fun for some to 
blame the Biden Administration for economic problems, but these 
problems, as you know, are global and far-reaching. We must dig 
deeper to understand some of the fundamentals, the economic 
structures we operate that rigged the game against lower- and 
middle-class Americans.
    My colleagues across the aisle have talked about upgrading 
America's aging infrastructure for years, with no action. 
Instead of fixing and investing the American infrastructure, 
they spent $1.9 trillion in tax cuts to the wealthy, but while 
the previous Administration only talked about infrastructure, 
we did it. Under the Biden Administration, we have invested 
$550 billion in new infrastructure development, including $17 
billion for ports and waterways, bringing it home. I have 
always been a vocal supporter of the strategic significance my 
city places and why I fought for us to invest in widening, 
deepening, and dredging our port, the Port of Houston, so you 
can expeditiously move goods, keeping up with shipping 
containers becoming larger and heavier, and shipping activity 
moving more frequently. That is critical American 
infrastructure work.
    Dr. Zandi, in your testimony, you referenced the supply 
chain bottlenecks as a major factor in contributing to the 
shortage of goods, thus causing prices to rise. Do you agree 
that it is important that we invest in American ports and 
waterways, and how are the projects funded by the 
infrastructure law reducing supply chain backlog?
    Mr. Zandi. Thank you for the question, Congresswoman. 
Absolutely, I think that infrastructure legislation was a 
critical piece of legislation, both in terms of addressing near 
term inflationary issues related to supply chain disruptions, 
and that is roads and bridges, seaports, and airports. There 
are significant amounts of new funding for all of those things 
in that infrastructure legislation. I also think it is very 
important for long-term economic growth because I do think it 
lowers the cost of doing business, makes U.S. businesses more 
competitive globally, and will lift overall productivity 
growth, which raises the standard of living for all Americans 
and it lowers inflationary pressures going forward.
    The only criticism I would have is it is too small. We have 
been underinvesting in our infrastructure, in everything from 
water systems, to broadband to, you name it. We have been 
underinvesting for a decade, and there is a big shortfall, and 
we need to invest even more. And I think the benefits of that 
are very obvious.
    Ms. Garcia of Texas. Dr. Mabud, from auto companies, to 
hotels, to restaurants, to retailers, earnings calls show that 
many corporations are looking to their competitors and taking 
advantage of unusual pandemic conditions and supply chain 
challenges to pass on the higher prices. Some speakers before 
me mentioned that last year, Kroger's CEO said, and this is a 
direct quote, ``A little bit of inflation is always good in our 
business, pass off costs to consumers when it makes sense to do 
so.'' Can you share examples from these earnings calls or price 
gouging or profiteering?
    Ms. Mabud. Yes, thank you for that question. Johnson & 
Johnson is actually a great example. The company expects to 
make more than $3 billion from its COVID-19 vaccine in 2022, 
which I think is worth noting is the result of more than $1 
billion of Federal funding for research and development. And 
these vaccine profits are on top of the price increases it has 
set for 29 other prescription drugs in this year alone. And on 
these earnings calls, Johnson & Johnson's CEO is really candid 
about the company's potential to profit from future human 
suffering. He noted, ``We remain optimistic on the fact that 
strong underlying demand for health care is there. And there is 
still a lot to do in multiple diseases in order to address 
suffering and death. In other words, future opportunities to 
profiteer from public health crises.'' And as I have testified, 
this is not something that is limited just to the grocery 
sector or the health care sector. These are really widespread 
issues.
    Ms. Garcia of Texas. Thank you. Back to Dr. Zandi, our 
colleagues on the other side of the aisle here really focused 
on Federal spending as the biggest driver of inflation. 
However, they seem to forget the deficits went up every single 
year under the Trump Administration, as they passed multi-
trillion-dollar tax breaks for corporations and the wealthy. Do 
you feel that the American Rescue Plan of 2021 raised or 
lowered deficits in this last year?
    Mr. Auchincloss. The gentlewoman's time has expired. Please 
be brief, Dr. Zandi.
    Mr. Zandi. Initially, it raised deficits because it was 
deficit finance, but without it, the economy would have been 
significantly diminished. And if you look out towards the 
middle to the end part of the decade, it would actually have 
resulted in the same deficits in debt, if we had not done the 
American Rescue Plan.
    Mr. Auchincloss. The gentlewoman's time has expired.
    Mr. Zandi. I don't think there was a choice here.
    Ms. Garcia of Texas. Thank you. I'll yield back, Mr. 
Chairman.
    Mr. Auchincloss. The gentleman from Arkansas, Mr. Hill, is 
now recognized for 5 minutes.
    Mr. Hill. Thank you, Mr. Chairman. I appreciate our panel 
bringing your expertise to the committee. Rising prices and 
ongoing labor shortages are leading to substantial wage growth 
across many industries. The latest data shows that average 
hourly wages grew at 4.5 percent in the 12 months ending in 
December.
    Of course, this is not real wage growth, which is at a loss 
since inflation is running at 7.9 percent. While wage growth 
alone can be positive, it can lead to a vicious wage price 
spiral, like we saw when I began my career in the 1970s. 
Particularly, if higher prices and pay in excessive 
productivity feed into each other, drive up inflationary 
expectations, and lead to persistent inflation, even after this 
supply chain issues abate. Further, these wage gains have been 
outpaced, as I noted, by the rising cost of everything from 
groceries to housing, meaning real wages were negative, and in 
fact, Mr. Chairman, real wages were negative in 8 of the last 
12 months.
    Dr. Zandi, in your testimony, you talk about inflation 
expectations, of which this is a key component. You described 
them as appearing fragile, and said that they bear close 
watching. You suggest that it is hard to see how the Fed can 
tolerate this for long, knowing that, based on the experience 
of the 1970s and 1980s, that the economic cost of waiting too 
long to short-circuit wage price spirals is extraordinary high.
    What do you expect the inflation number to be, the CPI on 
Thursday, ballpark? Let me ask you, if you don't want to give 
an answer, what are analysts suggesting is the range for CPI 
for Thursday?
    Mr. Zandi. It is somewhere between 7.5 percent, and 8 
percent, year-over-year, Congressman.
    Mr. Hill. Right. Thank you, Dr. Zandi. And I am concerned 
that when you see this kind of issue, when I talk to HR 
directors and chief financial officers and company presidents 
all over the country, you are really getting this inflation 
embedded into their infrastructure, not just through costs, but 
through labor shortages.
    And let me ask you, Dr. Goodspeed, if we make it harder to 
hire people through additional regulatory burdens on small 
businesses, vaccine mandates, getting into an argument about 
how old you have to be to drive a truck, and all these kinds of 
things and how many others, does this drive up wages when you 
have these kinds of severe shortages?
    Mr. Goodspeed. Thank you, Congressman. I think what it 
means is that for any given level of unemployment, there is 
going to be a greater degree of inflationary pressure. When we 
look at the efficiency of labor market matching in the United 
States, the efficiency with which unemployed workers are 
matched to vacant jobs, the U.S. labor market has not been 
performing this poorly since the late 1970s. This is the 
beverage curve relationship.
    Mr. Hill. Yes. And that is very concerning to me and to my 
colleagues who keep trying to rewrite history. Deficit spending 
during the CARES Act was bipartisan. There is no doubt about 
that. We didn't know what was going to happen in 2020. And we 
spent $6 trillion in addition to the money that we also spent 
by way of the Federal Reserve. And so, the logic I think Larry 
Summers laid out was, ``Don't spend more,'' and that is the 
American Rescue Plan argument. You have already stimulated the 
economy way too much, plus the monetary policy issue.
    Dr. Goodspeed, let me turn to you now about the components 
of CPI. I am very pessimistic that somehow we are going to get 
a break and that number is going to go down. And I want to ask 
you specifically about the housing component. Housing is 30 
percent of CPI, and about 40 percent of core CPI, but the 
method of calculating housing, both rental and single-family 
ownership, in my view, understates the real experienced 
inflationary cost in the economy. Is that how you understand 
the CPI calculation?
    Mr. Goodspeed. The CPI calculation does understates the 
inflation in housing that I think ordinary Americans feel, 
because for the rental component, it only measures continuing 
leases.
    Mr. Hill. Yes.
    Mr. Goodspeed. Whereas, it is in new leases that we have 
seen double-digit increases in rent, right?
    Mr. Hill. Yes, correct. So with that understanding, I think 
my colleagues need to understand we are going to have higher 
CPI numbers coming as a result of this increase in demand and 
wage pressure. For example, house price inflation--the CPI from 
December 2020 to 2021 was stated at 5 percent. But when you 
look at the new home price index, it was up 18 percent, and 
when you look at single-family rent prices on this point of 
new, it was up 12 percent. So, I think we are going to continue 
to see inflation. And I think it is driven, just as Milton 
Friedman promised us, as a monetary phenomenon, and we have 
overstimulated the economy and fiscal policy, and we have 
mishandled our monetary policy. And I yield back.
    Mr. Auchincloss. The gentleman from Guam, Mr. San Nicolas, 
is now recognized for 5 minutes.
    Mr. San Nicolas. Thank you, Mr. Chairman. I want to begin 
by clearly acknowledging that the inflation that is devastating 
this country and everyday hardworking Americans is just 
terrible. It is terrible. And the circumstances that we are all 
dealing with here today is something with which we all need to 
grapple.
    I wanted to first open, however, Mr. Chairman, with a 
question to Dr. Zandi. We are dealing with inflation today, but 
isn't it true that the actions we took with respect to the 
fiscal policy that we initiated actually prevented a worse 
circumstance happening, which is stagflation; would you agree?
    Mr. Zandi. Yes, I think the odds that we would get into a 
stagflationary environment, which just for everyone's 
edification is very weak growth and high inflation, would be 
much higher. Right now, we have high inflation, but we have 
very, very strong growth, with lots of jobs, and we are getting 
back to form very quickly. So, I would agree with that.
    Mr. San Nicolas. And just to clarify, from an economist 
perspective, stagflation's impact on society would be 
materially worse than inflation, is that correct?
    Mr. Zandi. Yes, because that means both higher inflation 
and higher unemployment. Right now, obviously, the high 
inflation, as you point out, is very painful for Americans, but 
fortunately, we have a low unemployment rate that is falling 
very rapidly and that is good for all Americans. But in a 
stagflation environment, you have both rising inflation and 
rising unemployment, and there's nothing worse than that; that 
is what we had in the 1970s and 1980s, and that is what we need 
to avoid.
    Mr. San Nicolas. And just to really put into context the 
circumstances we are dealing with, the Fed rate was at or near 
zero when the pandemic hit. And so, the monetary policy options 
that we had were very limited with respect to its comparative 
alternative, which was a fiscal policy that we initiated here 
in the Congress.
    Would you agree that the fiscal policy initiative that we 
undertook to really fund us out of this pandemic was materially 
responsible for preventing us from entering into a 
stagflationary scenario?
    Mr. Zandi. Yes. I think that is fair to say. I think the 
very aggressive fiscal policy response beginning with the CARES 
Act 2 years ago in March of 2020, and there were a number of 
other pieces of legislation: a piece of legislation that was 
deficit-financed in December of 2020; and then, the American 
Rescue Plan, which was in March of 2021; and all of that 
together was critical to ensuring that this economy has been 
able to recover as fast as it has.
    And just to give you a sense of that, we are going to be at 
full employment 3 years after the pandemic hit us. And 
obviously, remembering back, that was a harrowing period, and 
we have made our way back in 3 years, typically coming out of 
recessions, since World War II, it takes double that, more than 
6 years. And of course, after the financial crisis, which hit 
us over a decade ago, it took us 10 years to move on.
    So from that prism, because of the fiscal policy response 
and including the American Rescue Plan, we have recovered very, 
very dramatically. There is nothing but good news as a result 
of that.
    Mr. San Nicolas. Thank you. Thank you for that. There is 
bad news, and the bad news is we are still dealing with 
inflation. I think that the American people demand that we 
tackle that, and I very much agree. The inflation that we are 
dealing with, we have been arguing back and forth about all the 
different component parts, and one of the really main points 
that has been brought up over and over again is the indication 
that the increase in profits that is being realized by 
corporations is a sign that corporate profiteering is 
contributing to the inflationary calculation.
    I want to contextualize it more specifically, though, 
because profits could be as a result of market share 
accumulation due to pandemic circumstances. I think the more 
important question is, have margins increased? Have the margins 
of these corporations increased dramatically pre-pandemic, 
pandemic, and post-pandemic, as we get into post-pandemic?
    And so, I wanted to pose that question to Dr. Mabud. Are we 
seeing significant margin increases, because that would be 
indicative of profiteering, because then the input prices, 
although they may be increasing due to supply constraints, they 
are actually not translating on a dollar-for-dollar basis onto 
the actual price points. Would you be able to comment on that, 
Dr. Mabud?
    Ms. Mabud. Yes. That is spot on. In the past two quarters, 
U.S. corporations outside of the financial industry posted 
their fattest profit margins in 70 years. And when we 
contextualized that within 2 years-plus of a global pandemic, 
when so many people are suffering around the country, it really 
points to the fact that we have way too much corporate power, 
and they are able to--as the CEO from Kroger said, `` A little 
bit of inflation is good for business,'' and they are taking 
advantage of that.
    Mr. Auchincloss. The gentleman's time has expired. The 
gentleman from Wisconsin, Mr. Steil, is now recognized for 5 
minutes.
    Mr. Steil. Thank you very much, Mr. Chairman. I appreciate 
you holding today's hearing. People are getting clobbered with 
inflation. When I am home in Wisconsin, people are going to the 
gas pump, and they are feeling it. People go to the grocery 
store, and they are feeling it. People are getting clobbered 
day in and day out. And inflation impacts everybody, but it 
really clobbers seniors on fixed-incomes and low-income 
workers.
    And low-income workers are taking it on the chin right now. 
It was suggested by one of my Democratic colleagues that 
Republicans were having fun blaming Biden. This isn't fun at 
all. People are getting clobbered by higher prices. They are 
getting clobbered by higher prices, and we have to get to the 
answer of the policies that are driving it.
    And I think it is very interesting. We have heard about 
corporate concentration. I am guessing that polls pretty well. 
Do you think that polls pretty well, Mr. Goodspeed, to blame it 
on corporate concentration and corporate greed?
    Mr. Goodspeed. The polling and politics are outside my area 
of expertise. I would imagine if the claim is being made, then 
presumably someone sees some--
    Mr. Steil. Yes. That would be my guess. It was interesting. 
I was looking at your presentation in following along kind of 
the Eurozone against the United States, inflation between the 
Eurozone and the United States tracked pretty closely over the 
past 15, 20 years. Is that accurate?
    Mr. Goodspeed. That is accurate.
    Mr. Steil. And then all of a sudden there was this massive 
deviation between the Eurozone and the United States. Is that 
accurate?
    Mr. Goodspeed. Correct.
    Mr. Steil. Roughly when did that break start to occur?
    Mr. Goodspeed. In March 2021.
    Mr. Steil. In March 2021. So then the question becomes, 
what occurred roughly around March of 2021 that might have 
driven this? The proposal that I have been hearing earlier is 
that all of a sudden, corporate greed in the United States took 
off. But interestingly, the data might suggest that it didn't 
take off in the Eurozone. Would that be a reasonable inference, 
Mr. Goodspeed?
    Mr. Goodspeed. Yes, it would.
    Mr. Steil. Interesting. What would be the Biden 
Administration's policy that was allowing corporate greed in 
the United States, that wasn't taking place in the Eurozone at 
this time? Because previously, inflation between the United 
States and the Eurozone was tracking pretty consistently, then 
we have a break, a huge deviation, triple the inflation in the 
United States than the Eurozone has been experiencing. Is that 
correct?
    Mr. Goodspeed. That is correct.
    Mr. Steil. Then, the logic would say, okay, if corporate 
greed and concentration is driving this in the United States, 
why did the corporations, all of a sudden decide once the Biden 
Administration came in, the Biden Department of Justice--do you 
think these corporations sat down and said, ``We have a Biden 
Department of Justice. We have one-party Democratic rule in 
Washington, D.C. Now's the time to go and drive greedy profits 
up.'' Do you think that occurred?
    Mr. Goodspeed. I have seen no evidence to suggest it 
occurred.
    Mr. Steil. Were there any policies that shifted in the 
Biden Administration or under one-party Democratic rule 
specifically as it relates to corporate greed in profits that 
would have driven these corporations to drive up profits?
    Mr. Goodspeed. No.
    Mr. Steil. Did they say, we are going to stop enforcing 
some certain policy, that they are going to have a massive 
change on anti-trust regulation that would have meant these 
corporations would have said, boom, now's the time to go?
    Mr. Goodspeed. None that I am aware of.
    Mr. Steil. Yes. And the data shows that consistency in the 
Obama Administration, and the Trump Administration, and then 
all of a sudden, this massive deviation--you'd almost think 
that spending suddenly took off in Washington D.C., this year.
    Mr. Goodspeed. I think that is the $1.9-trillion elephant 
in the room.
    Mr. Steil. Did the Eurozone have a massive ginormous 
increase in spending that paralleled the United States?
    Mr. Goodspeed. Neither of the same magnitude in 2020, nor 
anywhere close to the same magnitude in 2021.
    Mr. Steil. Interesting. So, we have this massive deviation 
that occurs. You have not identified any policies that would 
have allowed corporate greed to take off uniquely under the 
Biden Administration. We have problems with corporate greed on 
occasions, right? And we should dig into that. We don't want 
that to occur. But you haven't identified any unique policies 
in the Biden Administration that are uniquely weak, as it 
relates to corporate greed or enforcement?
    Mr. Goodspeed. I have no idea.
    Mr. Steil. And I haven't heard any of my colleagues suggest 
a specific policy of weakness in the Biden Administration on 
that, that we need to dive into. But we have noted all of a 
sudden a massive, fiscal policy change once we had Democratic 
one-party rule here in Washington, D.C., driving huge demand 
increases, more money chasing the same number of products can 
lead to inflation. And at the same time, we have had a monetary 
policy that has been pushing easy money. The balance sheet at 
the Fed has increased over $4 trillion over the last 2 years. 
The Fed's balance sheet continues to increase.
    So, we have easy money policy rather than sound money 
policy. We have massive fiscal spending, and I think we have 
identified the problem that is occurring, that is clobbering 
people in the pocketbooks in Washington, and I think we should 
wake up and change the policies here in Washington.
    Thank you very much. Mr. Chairman, I yield back.
    Mr. Auchincloss. The Chair now recognizes himself for 5 
minutes.
    Dr. Mabud, Dr. Goodspeed, Dr. Zandi, in that order, I have 
an energy question for you. This morning, President Biden 
announced a U.S. ban on Russian oil imports. This is a welcome 
step in ratcheting up pressure on the Kremlin, as I have been 
saying for weeks, although to be effective, this action must be 
global. Working with our allies in NATO and beyond, the United 
States must cut off Russia from the world's oil market. The 
fossil fuel industry is not going to lead the free world; 
Americans need to. This ban will deprive the Kremlin of vital 
hard currency to sustain the Rubal and fund its military and 
government. It will also remove up to 5 million barrels a day 
from energy markets that are already surging in price; a 
primary driver of inflation here in the United States.
    To backfill these 5 million barrels in the short term as we 
transition into a long-term clean-energy economy, the 
Organization of the Petroleum Exporting Countries (OPEC) could 
expand production by up to 2 million barrels, America by 1 
million barrels, Canada, Brazil, and other smaller producers 
buy up to 1 million barrels, and should a deal be reached, even 
Iran by up to 1 million barrels. It is also likely that some 
portion of the 5 million Russian barrels will end up on the 
market, sold to buyers not complying with sanctions, although 
at a significantly discounted price. And finally, of course, 
the Biden Administration and its allies can continue to use 
their strategic petroleum reserves to smooth out supply. 
Although that is only 60 million barrels in a market that 
consumes 100 million daily, that is going to have a marginal 
impact.
    As I said, starting with you Dr. Mabud, then Dr. Goodspeed, 
and then, Dr. Zandi, if there were a global embargo on Russian 
oil, that was accompanied by the supply response that I have 
just outlined, would you expect that gasoline prices in the 
United States would rise beyond the highs they have hit in 
January?
    Ms. Mabud. Thank you for that question. Any hits to supply 
are going to raise prices. But I think what is really critical 
to remember is that our dependence on fossil fuels is keeping 
us tied to volatility. And so, yes, it is going to take a long 
time, but transitioning to and investing in a green economy is 
not only important for people and maintaining low energy prices 
for folks around the country, but also in ensuring that we have 
a planet that works for our economy.
    And I'll also harken back to what I said earlier, which is 
that we know that oil company executives are not immune from 
the type of profiteering that we have been talking about across 
the course of this call. First, they use pandemic disruptions 
to massively boost their profits, and unfortunately, now the 
conflict in Eastern Europe is providing another opportunity to 
pad their bottom lines. So again, going after profiteering in 
the fossil fuel industry is an important short-term imperative. 
And over the long term, we must not delay in making the long-
overdue investments in a clean-energy economy.
    Mr. Auchincloss. Dr. Goodspeed?
    Mr. Goodspeed. I was keeping track, in my head, the 
specific barrel amounts to which you referred. But I will say 
that roughly 12 percent of global oil production is from the 
Russian Federation, and about 17 percent of gas production. I 
think even if in theory, we increased production from the 
United States, increased production from the kingdom of Saudi 
Arabia and other OPEC members can compensate that, I think that 
there is going to be an adjustment period.
    Mr. Auchincloss. Right.
    Mr. Goodspeed. And production, because production of 
different types of oil in different regions of the world is not 
immediately substitutable; the infrastructure just isn't the 
same.
    Mr. Auchincloss. Have the markets priced in those 2022 
disruptions into the January price, or would you predict 
further inflation in gas prices?
    Mr. Goodspeed. I think, as of a few weeks ago, even perhaps 
as recently as a week ago, markets were probably underpricing 
the risk, the upside risk. I haven't checked today what they 
are doing, but I would imagine that they are substantially 
revising their price expectations.
    Mr. Auchincloss. So you would expect that the January 
prices would reflect, would have internalized much of the 
disruption risk of 2022 and also the potential to backfill?
    Mr. Goodspeed. I think throughout January into February 
markets, we are substantially underpricing the risk of conflict 
and conflict escalation, including the oil market implications.
    Mr. Auchincloss. And Dr. Zandi?
    Mr. Zandi. I don't think markets are fully discounting what 
we are talking about. If there are broad-based sanctions on 
Russian oil, and the U.S. stops buying, and Europe stops 
buying, and other advanced economies stop buying, I think we'd 
see prices closer to $150 per barrel, which means the cost of a 
gallon of regular unleaded is going to $5. If, however, it is 
just the U.S., and the Europeans don't go along, and there is a 
lot of discussion about that, then $125 is probably where we 
are going to land. And that would mean that we are going to see 
gasoline prices of $4.50, or $4.75 nationwide.
    Mr. Auchincloss. But Dr. Zandi, are you incorporating the 
supply response that I outlined where there is coordination to 
backfill?
    Mr. Zandi. Yes.
    Mr. Auchincloss. You are? Okay.
    Mr. Zandi. Yes, because that is going to take time.
    Mr. Auchincloss. Yes.
    Mr. Zandi. That will not happen immediately.
    Mr. Auchincloss. Dr. Mabud, as a final request, would you 
be willing to offer into the record at a later date the short-
term proposals that you have alluded to, to crack down on any 
war profiteering by big oil? I would be interested in any of 
the specifics you have there.
    Ms. Mabud. I can follow up. Thank you.
    Mr. Auchincloss. The Chair now recognizes the gentleman 
from North Carolina, Mr. Budd, for 5 minutes.
    Mr. Budd. I thank the Chair, and I want to continue on with 
this theme. Dr. Goodspeed, again, thank you, and I thank the 
whole panel for being here.
    I have heard a lot of my colleagues across the aisle claim 
that the 40-year high inflation spike that we are currently 
experiencing is a result of corporate profiteering. Now, you 
would think that the nearly $2 trillion that the Democrats 
injected into the economy would be more of a culprit. The 
economist, Milton Friedman, would say, ``There are just too 
many dollars chasing too few goods.'' Businesses are forced to 
accommodate the increased cost of production to meet demand 
needs, which is simply Econ 101. I think some of my colleagues 
should reeducate themselves on how basic supply and demand 
works.
    I have a bill, H.R. 5968, that addresses this. It would 
require certain White House employees to receive training on 
economic literacy, and it is clear that they badly need it. I 
am even thinking about expanding the bill to include Members of 
Congress.
    So, Dr. Goodspeed, is there any compelling evidence to 
suggest that inflation has hit this 40-year high because 
businesses are conducting so-called profiteering?
    Mr. Goodspeed. Thank you, Congressman. I have seen no 
evidence as to why corporate profiteering would have increased 
in 2021 relative to previous years, and why corporate 
profiteering would have increased in the United States versus 
Europe. I have seen no evidence as to why we should observe not 
just an increase in prices, but an increase in the rate of 
change in prices. And I have also not seen any evidence for why 
we should see general price inflation rather than simply 
relative price inflation in sectors with greater concentration.
    Mr. Budd. Thank you. Both the Obama and the Biden 
Administrations blocked the development of the Keystone 
Pipeline. President Biden has also established a policy of 
opposing funding of oil and upstream natural gas projects 
through Multilateral Development Banks (MDBs). Oil prices are 
currently sitting at a 7-year high. The unjust invasion of 
Ukraine by Russia has also led to additional impacts on oil 
prices. And the New York Fed has been working on developing 
climate stress testing.
    Are there any concerns that additional regulations and 
stress testing that is hyper-focused on oil in particular can 
make the price concerns that we are currently seeing even 
worse? I'll just leave it at that. Do you think that what the 
Biden Administration is doing, and the Obama Administration has 
done, could make things worse?
    Mr. Goodspeed. As I noted in some of my earlier remarks, 
one very striking aspect of 2021 was the breakdown in the 
historic relationship between the price of oil and Oil Rig 
Counts in the United States. As Dr. Zandi pointed out, we might 
expect that to recover in 2021, given the considerable upward 
pressure on oil prices. But that relationship broke down and I 
think that has something to do with the increased regulatory 
burden on the domestic energy industry and possibly some 
effects on capital allocation.
    Mr. Budd. Continuing on, doesn't restricting the supply of 
oil and natural gas internationally increase the risk of 
inflation even further?
    Mr. Goodspeed. Yes.
    Mr. Budd. I yield back. Thank you.
    Chairwoman Waters. The gentleman yields back.
    The gentleman from New York, Mr. Torres is now recognized 
for 5 minutes.
    Mr. Torres. Thank you, Madam Chairwoman. Inflation is 
deeply regressive, imposing a disproportionate burden on the 
poorest families. The families who are hit hardest by inflation 
are the same families who would benefit the most from an 
expanded Child Tax Credit. The regressive impact of inflation 
underscores the need to restore a progressive Child Tax Credit.
    Mr. Drummer, do you believe, as I do, that the Child Tax 
Credit could be a tool for mitigating the impact of inflation?
    Mr. Drummer. In short, absolutely. These investments in our 
economy are what saved our country from falling into a 
depression, and they lifted millions of children out of 
poverty. Absolutely.
    Mr. Torres. And as you know, inflation is not equally 
distributed across the economy, some sectors of the economy are 
more inflationary than others. And according to an analysis by 
the Center for Budget and Policy Priorities, the CTC monthly 
payments were most commonly spent on food, utilities, and 
housing. Food, utilities, and housing are among the most 
inflationary goods and services in the U.S. economy. Is that 
correct, Mr. Drummer?
    Mr. Drummer. That is right. And energy is particularly 
volatile.
    Mr. Torres. And so, the Child Tax Credit would essentially 
enable the families most affected by inflation to afford the 
life necessities of food, utilities, and housing?
    Mr. Drummer. That is right. The more money they have, the 
more they can absorb these fluctuations.
    Mr. Torres. Mr. Zandi, in March of 2021, you coauthored a 
report entitled, ``Overcoming The Nation's Daunting Housing 
Supply Shortage.'' The report, as I understand it, found that 
the annual demand for housing exceeds the annual supply of 
housing by 100,000 units, representing the largest shortfall in 
nearly half a century. The report also found that over a 10-
year budget horizon, an annual investment of $50 billion in 
affordable housing could boost affordable housing construction 
by 275,000 units per year. It is a common refrain among 
Republicans that government is not the solution; government is 
the problem. But in your professional opinion, as an economist, 
can we even come close to solving the housing supply problem in 
America without government investments like the Build Back 
Better Act?
    Mr. Zandi. Not anytime soon, Congressman. It is a very 
pernicious problem that has developed over a period of more 
than a decade, since the financial crisis. And the root causes 
of that are very, very pernicious and difficult to address 
around zoning, permitting, global supply chain issues, building 
materials and labor supply issues, and construction land, and 
development lending, very complex issues. I think markets are 
starting to work, home builders can make a return and they are 
now starting to build homes that are more affordable at lower 
price points.
    The way it is going, it is going to take a long, long time, 
and inflationary pressures are going to continue to develop 
because again, housing is such a key component of overall 
inflation.
    I would strongly recommend that lawmakers take this up. And 
I think there are a lot of good proposals that are bipartisan 
that can help to lower the cost of construction, particularly 
for affordable housing around light tech, neighborhood home tax 
credits, new market tax credits, HOME, and the Housing Trust 
Fund. These are things that could go a long way to quickly 
addressing this housing shortage and addressing one of the most 
significant contributors to inflation beyond the current 
period.
    Mr. Torres. And as you know, when it comes to housing, 
there is one sense in which government is indeed a problem: 
zoning. Local zoning codes have essentially made it illegal to 
build affordable housing, multi-family housing in much of the 
country. And so, the housing affordability crisis must be 
solved, not only with greater investment from the Federal 
Government, but also greater land use reform from State and 
local governments.
    I have a question about the American Rescue Plan. Among the 
wealthiest countries, the U.S. has seen the strongest economic 
recovery from COVID-19. The U.S. has seen historic highs in job 
creation, economic growth, and wage growth.
    Mr. Zandi, to what extent can the exceptionalism of 
America's recovery be attributed to the American Rescue Plan?
    Mr. Zandi. I think it is a very significant contributor. If 
you are interested, I just wrote a paper that I published last 
week. Just Google, ``Zandi and the macroeconomic consequences 
of global fiscal policy.'' I go through the contribution that 
the American Rescue Plan has made to our economic recovery and 
our economic success compared to other parts of the world. And 
again, just to reiterate, I think it is clearly why we are back 
getting back to full employment very rapidly, much more quickly 
than the rest of the world, and much more quickly than we have 
historically coming out of recessions. And again, I do not 
think you could connect the dots between the uncomfortably 
high, painfully high inflation we are suffering right now, back 
to the American Rescue Plan is related to the pandemic and now 
of course related to Russia and Ukraine.
    Ms. Garcia of Texas. [presiding]. The gentlewoman from 
North Carolina, Ms. Adams, is now recognized for 5 minutes
    Ms. Adams. Thank you very much. And thank you very much to 
Chairwoman Waters and Ranking Member McHenry, and thank you to 
our witnesses for your testimony. Let me drill down on 
[inaudible] opponents of the phase [inaudible] that we are 
currently experiencing, the housing shortage. You don't need to 
take my word for it; economists across the nation are saying 
the same thing. We need to increase our housing supply of new 
units, of affordable units, of all kinds of units, and we need 
to do so immediately. I am proud that under Chairwoman Waters' 
leadership, this committee has advocated for the most-robust 
investment in public and affordable housing in our nation's 
history.
    So Dr. Zandi, in my district, research by the University of 
North Carolina, Charlotte [inaudible] 11,000 family homes are 
now owned by private equity firms, or other Wall Street-backed 
entities. So, with 4 percent of the single--
    Ms. Garcia of Texas. Ms. Adams, if you could raise the 
volume. You are a little low.
    Ms. Adams. Okay. Dr. Zandi, to what extent has the current 
housing supply crunch been exacerbated by the excess of Wall 
Street and private equity firms?
    Mr. Zandi. Private equity firms and investors broadly 
including institutional investors and mom-and-pop investors--
Americans buying homes for investments has risen quite 
significantly, particularly over the last year. So, almost a 
little over one-fourth of the home sales at the end of last 
year were to investors, which is up about 10 percentage points 
from the year before. They are all playing a more active role 
in the housing market, particularly in different parts of the 
country, the South and the West come to mind relatively 
quickly. They are having an impact on house prices, on 
affordability, and on homeownership. And it's really having a 
meaningful impact on the dynamics of the housing market, and 
just making it more difficult for low-income Americans, and 
first-time homebuyers to afford their first home.
    I do think this goes back to supply. I think we need to 
encourage investors to work to increase the supply of housing. 
For example, going back to investors, one thing they are doing 
now is they are buying homes and then renting them. We can 
design policies to incent them to build homes, to rent them, or 
for homeownership. And if we can do that, then we can address 
this problem, but it is increasingly an issue that is beginning 
to affect more and more housing markets across the country.
    Ms. Adams. Okay. Another aspect has to do the across the 
nation [Audio malfunction.] is feeling the crunch? So do you 
believe that Congress should enact [inaudible] State and 
localities to tap into the State and Local Fiscal Recovery 
Funds (SLFRF) dollars to help shore up affordable housing 
developments that are currently in the pipeline?
    Mr. Zandi. I am having a hard time hearing you. I think you 
are referring to the money in the American Rescue Plan (ARP). 
It has gone to State and local governments in helping 
facilitate the direction of that funding to housing. I think 
that is what you were saying.
    Ms. Adams. I said--
    Mr. Zandi. Yes, absolutely. I keep mentioning the Low-
Income Housing Tax Credit (LIHTC), which is an incredibly 
effective way of increasing the supply of affordable rental 
housing in communities across the country. It is a tried-and-
true program and we know how it works. And all we have to do is 
turn the dials here a little bit. I think we can really juice 
that up and get a lot more supply into the housing market. It 
is not going to be next month or next quarter, but by this time 
next year, going into 2024, it will be very significant. And 
taking some of that State and local relief funding that was 
part of ARP, that is sitting out there, and directing that, 
changing the rules a little bit to direct it towards juicing up 
LIHTC and other forms of funding for housing, I think would be 
highly effective.
    Ms. Adams. Thank you very much, ma'am. I yield back.
    Ms. Garcia of Texas. Thank you. The gentlewoman yields 
back.
    Mr. Goodspeed. I think there is an important point here on 
this. There are two things that really substantially contribute 
to housing prices in the United States. One is the State and 
Local Tax (SALT) deduction, and the other is the mortgage 
interest deduction, both of which tend to be fully capitalized 
into housing prices, particularly.
    Ms. Garcia of Texas. Sir, you are out of order. I don't 
think anyone addressed a question to you, sir.
    Ms. Adams. Thank you very much, Madam Chairwoman. I yield 
back.
    Ms. Garcia of Texas. The gentlelady yields back.
    The gentlewoman from Michigan, Ms. Tlaib, is now recognized 
for 5 minutes.
    Ms. Tlaib. Thank you so much, Madam Chairwoman. And thank 
you for this critically important hearing. As you know, the 
pandemic has been great for the richest Americans, who have 
lined their pockets and doubled their wealth during the 
pandemic. As we all know, corporations have the nerve to blame 
inflation, while consolidating their market power and raising 
the price of essential goods and services, while working people 
foot the bill. For me, this is not inflation, it is extortion. 
Meanwhile, the same corporations who are gouging prices on 
consumers, on our neighbors, have been engaging in what we call 
major stock buybacks. When corporations funnel record earnings 
into stock buybacks, Madam Chairwoman, that is money that they 
are not allocating towards capital investment in research and 
development.
    Dr. Mabud, just listening to your testimony has been really 
interesting, to understand some of these trends. One of the 
things that I think we haven't looked at, and I would love your 
opinion on is, what trends have we seen with regards to the 
major corporations and stock buybacks, particularly since the 
Trump tax cuts were enacted?
    Ms. Mabud. Thank you for that question. We are in a period 
where we are seeing record stock buybacks, and that is really 
important because that is money that is going out to 
shareholders, and all ofour prices are going up. And these 
companies are not making productive investments in their firms. 
They are not investing in making the company work better. They 
are just grabbing as much profit as they can and sharing out 
the shares to their shareholders. And tax policy is critical to 
this, because if raising corporate tax rates, or taxing excess 
profits is a real way to curb the amount of money that flows to 
shareholders and executives over productive investments in our 
economy.
    Ms. Tlaib. Thank you so much.
    Dr. Zandi, are stock buybacks making our supply chains more 
resilient, or bringing down prices for consumers in any way?
    Mr. Zandi. It is hard to connect the dots, I think, between 
stock repurchases and what is going on with supply chains and 
inflation.
    Ms. Tlaib. But we have a record number of stock buybacks.
    Mr. Zandi. But that money does go to investors that 
reinvest. I think that is a very tenuous kind of blanket, in my 
view.
    Ms. Tlaib. Okay. One of the things I always say is, we 
obviously didn't predict the pandemic would be around the 
corner in 2019. But today, we all know that the next crisis 
that will pose an existential threat to our economy is our 
planet. If our planet warms 2 degrees Celsius, the damage will 
be irreparable. Extreme weather events will be the new normal, 
our communities will flood, and our economy will be underwater. 
And these are real facts for many scientists across the world.
    Dr. Zandi, we know extreme weather events like floods, 
wildfires, and droughts are occurring with alarming frequency 
due to the climate change. Can you explain the impact climate 
change will have on our supply chains and on prices, for 
example, in the energy and food sectors?
    Mr. Zandi. Yes, it already has, Congresswoman. For example, 
we talked about lumber. One of the reasons for the severe 
problems we are having in that industry is because of 
extraordinary weather events in the Pacific Northwest, 
particularly in British Columbia, where a lot of the timber 
that is produced goes into U.S. homes. So, it is already having 
a major effect, and it is affecting timber supplies, where 
forests are growing, and where they are not growing. It is a 
major adjustment that is adding to our costs and contributing 
to our global supply chain issues. It is not one of those 
things that matters a lot in any given year, but when we look 
back a decade from now, certainly.
    Ms. Tlaib. Yes, when they do nothing now, of course, the 
impact will be there later. Look at the lack of safety nets 
before the pandemic: we didn't have child care; and we have a 
preexisting condition because of environmental racism. So, I 
totally hear you. But I think much of what is happening, and 
the fact that we weren't able to save more lives during this 
pandemic, is because of some of these broken systems and not 
thinking forward. Last year, a handful of dominant shipping 
container firms reaped record profits, while passing those 
costs directly on to the consumer; raising prices here by 1 
percent, according to Kansas City Fed and the European Central 
Bank. Based on this evidence, I am credibly concerned that big 
corporations will simply look at the climate crisis in the same 
way they viewed the pandemic, as just another chance to make a 
quick buck.
    Dr. Mabud, are we doing enough to address our supply chain, 
for fragility and exposure to climate risk? If not, what sorts 
of investments should our country, our Federal Government be 
looking at?
    Ms. Mabud. That is absolutely critical, because every new 
climate shock across the--a storm halfway across the world, 
when we have such a brittle supply chain, can bring the whole 
system crashing down. So, it is really critical that we check 
our corporate power by using tax policy--
    Ms. Garcia of Texas. The gentlewoman's time has expired.
    Ms. Tlaib. Thank you, Madam Chairwoman. I yield back.
    Ms. Garcia of Texas. The gentlewoman from New York, Ms. 
Ocasio-Cortez, is now recognized for 5 minutes.
    Ms. Ocasio-Cortez. Thank you so much. Thank you, Madam 
Chairwoman, and thank you to all of our witnesses for being 
here today. I want to explore a little bit about the role of 
corporate profiteering and its contributions to inflation as we 
have kind of been discussing today, particularly in two areas: 
rent and groceries.
    Now, in terms of housing, big corporations are exacerbating 
what is already a major housing supply crisis in the United 
States. We have these major, often private equity-backed 
companies that are gobbling up homes in our housing market, 
which is already creating excess scarcity on top of the housing 
scarcity that already exists. And then by constricting that 
supply, we are also seeing a lot of these major, huge, multi-
billion-dollar companies, then either flip those properties or 
just resell them at a higher rate due to that artificially 
inflated price, or they hold on and hoard this housing stock 
and rent out at exorbitant prices.
    Dr. Zandi, isn't it the case that the average American now 
has to compete with major companies like Invitation Homes, 
whose parent company is Blackstone, which is the largest 
private equity company in the world, when they are in the 
market for a home?
    Mr. Zandi. Yes. I think obviously, the institutional 
investors and mom-and-pop investors, as I mentioned earlier, 
were one quarter of all home sales at the end of last year, so 
they are big players, and that is nationwide. In some markets, 
if you go to Atlanta or Phoenix or Boise, they are much higher; 
they are at 30 percent to 40 percent of the market. So yes, 
they are playing a very large role. They don't affect the 
amount of housing stock. The home is still there. It is 
changing. We are going from single-family homeownership to 
rental, so it is making it more difficult, of course, for home 
buyers--
    Ms. Ocasio-Cortez. Yes. And available housing stock for 
purchase, I should clarify.
    Mr. Zandi. Yes, exactly.
    Ms. Ocasio-Cortez. Yes.
    Mr. Zandi. So, this is definitely having an impact there. 
And that is why it is very critical, in my view, for lawmakers 
to really focus on the kinds of things to increase the supply--
    Ms. Ocasio-Cortez. Thank you.
    Mr. Zandi. --so that becomes less of an issue.
    Ms. Ocasio-Cortez. Thank you, Dr. Zandi. So to clarify, the 
image that we have here is that you have a young couple, and 
they try to do the right thing. They were told that if you go 
to college, you will get a good job. They graduate with 
hundreds of thousands of dollars, or tens of thousands of 
dollars in student debt, but they worked through it. Perhaps 
they have a young child, so they want to get a 2- or 3-bedroom 
home. And they are competing against the largest private equity 
firm in the world to purchase a home. In fact, companies like 
Blackstone, Zillow, and Bedrock are buying up to 15 percent of 
available homes. But what I find interesting here is that they 
are purchasing them in minority and low-income neighborhoods, 
specifically. Particularly, in metro areas like New York, 
Atlanta, and Detroit, about 1 in every 7 homes in the United 
States is being bought by a corporation at an inflated price.
    Dr. Drummer, we are seeing here that even in communities 
like mine in Queens, renters are now facing drastic rent hikes 
as large as 30 percent to 50 percent up from what they were 
paying last year. Can you expand a little bit on how this 
concentration of corporate power and the skyrocketing costs of 
housing are being disproportionately felt in low-income, 
working-class, Black, and Latino neighborhoods?
    Mr. Drummer. Thank you, Representative, for the great 
question. This is the market that we have created for housing 
in America. Right now, 6 million rental households are 
currently behind on rent. Again, as stated previously, that is 
double the pre-pandemic baseline, and two-thirds of these 
people are people of color. In 2021 alone, rents increased by 
at least 10 percent in 149 metropolitan areas. So what we are 
seeing around the country is a failure of policy and law to 
address the acute shortage of housing. If someone wants to make 
the case that this is just how markets are supposed to work, 
they can. My view is that our current housing crisis 
constitutes a serious significant series of market failures 
that require robust policy response at the Federal, State, and 
local level.
    Ms. Ocasio-Cortez. Thank you. Thank you, Dr. Drummer. I 
have one more question as well. I want to explore a policy 
possibility with you. There are a lot of ideas that are 
explored. The United States has very different housing policies 
than other countries and areas. What do you make of the idea of 
a public institution that purchases distressed real estate and 
finances it to transfer to the social housing sectors such as 
cooperatives, committee land trusts, the nonprofits--
    Ms. Garcia of Texas. The gentlewoman's time has expired.
    Mr. Drummer. Yes. The Build Back Better bill actually has--
    Ms. Garcia of Texas. The gentlewoman's time has expired. If 
you'll just submit your answers, sir, for the record, that 
would be great. Thank you.
    The gentleman from Illinois, Mr. Garcia is now recognized 
for 5 minutes.
    Mr. Garcia of Illinois. Thank you, Madam Chairwoman. And 
thanks to all of the witnesses who joined us today to discuss 
the economic challenges our country faces. I represent a 
working-class district, and my constituents are the hardest hit 
by inflation, and the hardest hit by interest rate hikes. We 
have to understand what is driving inflation in order to tackle 
it, and from your testimony, it sounds like it is corporate 
greed.
    Dr. Mabud, in your testimony, you raised a pretty striking 
quote that I just have to revisit. Earlier this year, the CFO 
of Constellation Brands, a company that owns Modelo and Corona 
beers, and I admit, I enjoy these frequently, said, ``As you 
know, we have a consumer set that skews a bit more Hispanic 
than some of our competitors and in times of economic downturn, 
if you will, or weakness, they tend to get hit a little harder, 
and they recover a little bit slower. So we want to make sure 
that we are not leaving any pricing on the table. We want to 
take as much as we can.''
    I represent a Latino, largely immigrant district, and I can 
confirm that our communities were hit hard by the pandemic, but 
this is shocking. Our suffering is their excuse to raise 
prices. Can you talk about how corporate concentration is 
raising prices for some of the most basic goods that my 
constituents buy, from diapers to beer?
    Ms. Mabud. Thank you for that question, and that quote is 
really striking. The truth of the matter is, we have heard over 
and over and over on earnings calls across a range of sectors 
that these big corporations simply have the power to raise 
prices, particularly when they have the cover of inflation to 
do so. And they are shameless about it. That quote is so bald-
faced about exactly what it is that they are going to do, which 
is to exploit the pain of a community and pocket the profits as 
a result. And we see that time and time again. We have seen 
that with Johnson & Johnson, with Chipotle, with McDonald's, 
and I can go on and on with the number of companies that we 
have heard, really of this moment, to jack up prices and pocket 
the profits.
    Mr. Garcia of Illinois. Thank you. Mr. Vaheesan, the 
corporations and local businesses faced similar challenges at 
the start of the pandemic, but market concentration allowed big 
businesses to reap record profits, while local businesses 
struggled to recover. And as always, consumers pay the price 
with inflation. In your testimony, you laid out that our policy 
choices brought us here. I hope they can bring us out as well. 
Can we reverse decades of corporate concentration to avoid what 
we see happening today? What is the first step?
    Mr. Vaheesan. Thank you, Congressman. You are absolutely 
right. For 40 years, we have tolerated consolidation across the 
economy, and it was a policy choice, and just as we initiated 
certain pro-merger policy choices in the 1980s, we can undo 
those. And I think a good place to start is by reversing some 
of the mergers that have happened in recent years. Meatpacking 
is a great industry to start with, since it is a driver of 
inflation and we have seen extraordinary levels of 
concentration in that industry, driven in large measure by 
consolidation. So, I think the Department of Justice and the 
Federal Trade Commission can actually unwind these mergers and 
create more competitive market conditions. And going forward, 
they can strengthen anti-merger laws to ensure that businesses 
grow through investment in hiring instead of by acquiring 
existing corporations and enhancing their pricing power.
    Mr. Garcia of Illinois. Thank you for that. Mr. Drummer, 
from what we just discussed, it is clear that corporate 
concentration and price gouging directly contributes to 
increased prices of goods and services. Corporate greed should 
be addressed to mitigate inflation. But many policy experts are 
only talking about raising interest rates. Can you talk about, 
in the next 50 seconds, how raising interest rates hurts 
working-class people?
    Mr. Drummer. That is an excellent question. Yes, if we use 
interest rates to curb inflation, what are we doing? We are 
literally driving down the demand for labor, which 
disproportionately affects the lowest-income workers, which 
means that we are lowering their ability to bargain, right? And 
to demand higher wages, which means we are taking money out of 
their pocket in order to balance our economy. That is the most 
inequitable way to handle this crisis. We believe that the best 
way to address this affordability crisis is to turn our gaze 
away from inflation and focus on deep structural changes to 
rebalance our economy.
    Mr. Garcia of Illinois. Thank you, sir. And, Madam 
Chairwoman, I yield back.
    Ms. Garcia of Texas. The gentleman from Indiana, Mr. 
Hollingsworth, is now recognized for 5 minutes.
    Mr. Hollingsworth. Good afternoon. I appreciate everyone 
being here. Maybe I'll just talk about a constellation of 
things I have heard today and observations about some of this.
    Number one, I am frequently reminded of a famous economist, 
John Kenneth Galbraith, who famously retorted, ``When given the 
choice between changing one's mind and proving there is no need 
to do so, almost everyone gets started on the proof.'' This 
hearing is that proof.
    It is embarrassing to hear policymakers try to claim that 
it is anything but the policies that they have enacted that 
have led to this inflation. And frankly, much of the, 
``evidence,'' that has been asserted in some of these 
testimonies isn't real evidence at all. I didn't see 
significant data about the surfeit of demand. I didn't see data 
about the wage gaps that existed 2 years ago that we overfilled 
with trillions of dollars of stimulus and transfer payments. 
No, I saw quotations from earnings conference calls with CEOs 
who mentioned the word, ``price,'' and, thus, it must be 
corporate greed and profiteering and not real inflation.
    Second, during the course of this entire hearing, I have 
been struck by the fact that no one here seems to understand 
that every price increase is not inflation; inflation and price 
increases are different and can be rooted in different things. 
But I don't believe anyone here thinks that inflation doesn't 
exist, being separate from price increases. I think some of you 
can argue short-term supply chain issues have led to certain 
price increases, but I don't think anyone can argue against the 
tidal wave of evidence that inflation also exists.
    Third, I think it is almost embarrassing that we would sit 
here and say that inflation is not harming those at the lowest 
end of the income deciles, the people we are most here to help, 
but we have seen real wages decline month after month, 
purchasing power declining month after month, because of these 
policies. I want to ensure that inflation does not continue to 
erode the purchasing power, especially of those that are least 
able to cope with it.
    Dr. Goodspeed mentioned earlier that those in the higher-
income levels can cope better with inflation. They have many 
opportunities to substitute goods, they have many opportunities 
to move to lower-cost locations. They have more exposure to 
inflation hedges; those are not benefits afforded to those 
lower-decile earners. I want to make sure that we tackle 
inflation in order to empower them. What I have heard, however, 
is that 40 years of failed policy has somehow led to a year of 
the highest inflation in those 40 years, so the mistakes of 40 
years have somehow come together. And all of these corporations 
were sitting around biding their time for 39.5 years, and, by 
God, they saw this was the opportunity for them to dramatically 
raise prices. That was not the case.
    And Dr. Zandi also said that we can't directly tie the 
significant amount of stimulus that the Federal Government has 
undertaken during those periods, because inflation didn't save 
it for a couple of months after that. Certainly, he understands 
that it takes time from the moment Federal legislation passes 
until those dollars are spent in the economy. What I have seen 
in table after table, chart after chart, data after data is the 
tremendous growth in M2, and the tremendous acceleration in 
inflation on account of that, which has led to significant 
erosion in the purchasing power, especially of those at the 
lower deciles. The reason Nobel Prize economists are not in 
here testifying to the contrary is because that is the case--
pandemic profiteering cannot be the sole reason for this 
dramatic increase. And even Mr. Vaheesan, at one point, said 
that companies are beginning to take advantage of the 
inflationary environment to raise prices. Well, which is it? 
Did the inflationary environment preexist corporations taking 
advantage of that to raise prices? It must have for them to 
have used that, as you said, for cover, to do so.
    This hearing is an embarrassment and a further proof of the 
great dichotomy between Washington, D.C., that wants to engage 
in political fallacy, and Hoosiers back home, who are picking 
up the tab for these failed policies. With that, I yield back.
    Ms. Garcia of Texas. The gentlewoman from Georgia, Ms. 
Williams, who is also the Vice Chair of our Subcommittee on 
Oversight and Investigations, is now recognized for 5 minutes.
    Ms. Williams of Georgia. Thank you, Madam Chairwoman. And 
now, we are in the homestretch with the last questions of the 
day.
    Our economy is built on our infrastructure and supply 
chains. And in the decades before COVID, our infrastructure was 
slowly crumbling. Our ports, airports, roads, and bridges kept 
getting older, but year after year, infrastructure work 
remained an empty promise. Before President Biden, we didn't 
invest enough in the infrastructural modernization that will 
help get products quickly to our people. At the same time, we 
didn't invest enough in making critical products here at home. 
Even though we need semiconductors for everything from credit 
cards to cars, we haven't produced enough critical products 
like this in the United States. Before President Biden, we got 
by, but we didn't get ahead when it came to our infrastructure 
and supply chains. Whether it is an economic shock like a 
pandemic or an economic surge like we are seeing now, our 
infrastructure and supply chains have to be resilient over the 
long-term if we want our economy to respond well to rapid 
change.
    Ms. Mabud, how exactly does an economic surge stretch our 
infrastructure and supply chains, and what is the connection 
between the resilience of infrastructure and supply chains and 
the prices of everyday goods?
    Ms. Mabud. Thank you for this question, Congresswoman. 
Corporations have the power to hike prices in a crisis like 
this, because we spent half a century allowing business 
executives and financiers to take control of every single piece 
of our supply chain, from shipping to manufacturing, to 
trucking, to rail. And so, over the last 50 years, these 
companies have shaped our supply chains into the extremely 
brittle system that we have today, which means that when we 
experience shocks, whether it is a pandemic or a weather event 
halfway across the world, we are going to see bottlenecks and 
supply shortages. And big companies can use their dominance in 
markets to hike up prices, because consumers don't know how 
much of that is the rise in input costs, and how much of that 
is just them padding their profits. That is particularly the 
case when they have the cover of inflation.
    Ms. Williams of Georgia. Under President Biden, GDP grew 
nearly 6 percent in 2021 and the demand for goods has boomed as 
consumption patterns have changed. Democrats know that we can't 
build the economy of the future with the infrastructure of the 
past. That is why we invested in long-term success with the 
bipartisan infrastructure law.
    Dr. Mabud, in what ways will the long-overdue 
infrastructure investments from the bipartisan infrastructure 
law address the supply side vulnerabilities currently impacting 
prices, while fostering the continued record-breaking economic 
growth that we have seen under President Biden?
    Ms. Mabud. Shoring up our infrastructure and key modes of 
our supply chains is absolutely critical to making sure that we 
have functioning supply chains that can deliver goods on time, 
and that doesn't allow these big corporations to really take 
advantage of the situation. Furthermore, this bill has critical 
investments in child care and other aspects of our economy that 
have been putting strain on family budgets for decades. So, 
these investments are long-overdue. And frankly, with the ARP, 
I think we really saw how effective these investments are in 
making sure that people can live a good life in this country.
    Ms. Williams of Georgia. That led me to the next part of my 
question. Under President Biden's leadership, we boosted our 
economy from the brink with the American Rescue Plan, and 
invested in our long-term success with the bipartisan 
infrastructure law, but we know that we have more work to do. 
Reducing inflation means advancing our global competitiveness 
and investing in housing, child care, paid leave, health care 
and more so that we can lower costs for working families. Dr. 
Mabud, can you expand on how making these investments and 
realizing President Biden's full vision for building a better 
America and reduce rising costs that are impacting everyday 
people?
    Ms. Mabud. Absolutely. People are feeling this, right? They 
are feeling the pressure of rising prices, but they are also 
feeling all of the issues that you just talked about, rents 
going up, child care being expensive and hard to get, and 
access to health care taking a huge toll. So really, tackling 
both sides of that equation and making sure that people have 
the means to participate in the labor market and continue this 
historic recovery is absolutely critical.
    Ms. Williams of Georgia. Thank you so much, Dr. Mabud.
    And Madam Chairwoman, I yield back the balance of my time.
    Ms. Garcia of Texas. The gentlelady yields back.
    The Chair notes that some Members may have additional 
questions for these witnesses, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    This hearing is now adjourned. We thank everyone for 
participating today.
    [Whereupon, at 2:07 p.m., the hearing was adjourned.]

                            A P P E N D I X


                             March 8, 2022
                             
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