[Senate Hearing 117-165]
[From the U.S. Government Publishing Office]
S. Hrg. 117-165
ANTICIPATED NOMINATION OF JANET L. YELLEN
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
ON THE
ANTICIPATED NOMINATION OF
JANET L. YELLEN, TO BE SECRETARY, DEPARTMENT OF THE TREASURY
__________
JANUARY 19, 2021
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Finance
__________
U.S. GOVERNMENT PUBLISHING OFFICE
46-951 PDF WASHINGTON : 2022
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COMMITTEE ON FINANCE
CHUCK GRASSLEY, Iowa, Chairman
MIKE CRAPO, Idaho RON WYDEN, Oregon
PAT ROBERTS, Kansas DEBBIE STABENOW, Michigan
MICHAEL B. ENZI, Wyoming MARIA CANTWELL, Washington
JOHN CORNYN, Texas ROBERT MENENDEZ, New Jersey
JOHN THUNE, South Dakota THOMAS R. CARPER, Delaware
RICHARD BURR, North Carolina BENJAMIN L. CARDIN, Maryland
ROB PORTMAN, Ohio SHERROD BROWN, Ohio
PATRICK J. TOOMEY, Pennsylvania MICHAEL F. BENNET, Colorado
TIM SCOTT, South Carolina ROBERT P. CASEY, Jr., Pennsylvania
BILL CASSIDY, Louisiana MARK R. WARNER, Virginia
JAMES LANKFORD, Oklahoma SHELDON WHITEHOUSE, Rhode Island
STEVE DAINES, Montana MAGGIE HASSAN, New Hampshire
TODD YOUNG, Indiana CATHERINE CORTEZ MASTO, Nevada
BEN SASSE, Nebraska
Kolan Davis, Staff Director and Chief Counsel
Joshua Sheinkman, Democratic Staff Director
(ii)
C O N T E N T S
----------
OPENING STATEMENTS
Page
Grassley, Hon. Chuck, a U.S. Senator from Iowa, chairman,
Committee on Finance........................................... 1
Wyden, Hon. Ron, a U.S. Senator from Oregon...................... 3
CONGRESSIONAL WITNESS
Feinstein, Hon. Dianne, a U.S. Senator from California........... 6
ADMINISTRATION NOMINEE
Yellen, Hon. Janet L., Ph.D., Secretary-Designate, Department of
the Treasury, Washington, DC................................... 7
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Feinstein, Hon. Dianne:
Testimony.................................................... 6
Grassley, Hon. Chuck:
Opening statement............................................ 1
Prepared statement........................................... 51
Wyden, Hon. Ron:
Opening statement............................................ 3
Prepared statement with attachment........................... 52
Yellen, Hon. Janet L., Ph.D.:
Testimony.................................................... 7
Prepared statement........................................... 54
Biographical information..................................... 55
Responses to questions from committee members................ 73
(iii)
ANTICIPATED NOMINATION OF JANET L.
YELLEN, TO BE SECRETARY,
DEPARTMENT OF THE TREASURY
----------
TUESDAY, JANUARY 19, 2021
U.S. Senate,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 10:16
a.m., in Room SD-106, Dirksen Senate Office Building, Hon.
Chuck Grassley (chairman of the committee) presiding.
Present: Senators Crapo, Cornyn, Thune, Portman, Toomey,
Scott, Cassidy, Lankford, Daines, Young, Sasse, Wyden,
Stabenow, Cantwell, Menendez, Carper, Cardin, Brown, Bennet,
Casey, Warner, Whitehouse, Hassan, and Cortez Masto.
Also present: Republican staff: Nicholas Wyatt, Tax,
Infrastructure, and Nominations Policy Advisor. Democratic
Staff: Michael Evans, Deputy Staff Director and Chief Counsel;
Ian Nicholson, Investigator; Joshua Sheinkman, Staff Director;
David Berick, Chief Investigator; and Peter Gartrell,
Investigator.
OPENING STATEMENT OF HON. CHUCK GRASSLEY, A U.S. SENATOR FROM
IOWA, CHAIRMAN, COMMITTEE ON FINANCE
The Chairman. Today, we welcome the Honorable Janet Yellen
to consider an anticipated nomination for her to become
Secretary of the Treasury.
The role of Treasury Secretary covers responsibilities over
a large number of issues, including taxes; fiscal management,
including the debt; financial sanctions; and economic policies.
The Treasury Secretary also serves as Chair of the Financial
Stability Oversight Council, which has wide-ranging financial
oversight and regulatory authorities. Dr. Yellen has a history
in academics, think tanks, the Federal Government, and at the
Federal Reserve.
This hearing takes place in the midst of an ongoing
pandemic, along with significant divisions in Congress and in
the Nation. I hope we can move away from partisan divisiveness
and personalized attacks against each other. Dr. Yellen, if
confirmed, you can be instrumental in helping generate an
environment for bipartisan efforts and reasoned debate.
You have expressed that you have interest in aggressively
pursuing mitigation efforts toward climate change, which you
see as a global existential threat. The incoming administration
has also identified interest in raising taxes, coupled with
massive spending programs, and working to reduce income
inequality. And Senator Schumer has said that he'd like to
change America. I'll be interested in hearing more about those
and other things as we continue to consider your nomination.
As I've already indicated to you, I think it would be a big
mistake to raise taxes on individuals and businesses as they
struggle through an economic recovery and a pandemic. I know
that the incoming administration has said they'd like to pursue
a two-pronged strategy, with a massive stimulus followed by tax
hikes, coupled with even more spending, maybe on
infrastructure. We are already closely examining President-
elect Biden's proposal for around $1.9 trillion of stimulus,
which even some prominent Democrat economists have said does
not seem to be well-targeted. With the trillions already in the
pipeline, and close to $1 trillion of relief enacted just a few
short weeks ago, it is important to focus efforts on pandemic
relief. Now is not the time to enact a laundry list of liberal
structural economic reforms. Dr. Yellen, if you are confirmed,
I hope that you will work with us on the proposal.
Moving forward, President-elect Biden has stated numerous
times that no one making under $400,000 would see their taxes
raised. For example, last year on CNBC President-elect Biden
stated what we can think of as the new Biden Rule that, quote,
``nobody making under 400,000,'' and he said ``bucks, would
have their taxes raised, period,'' end of quote.
While I do not think we need to be raising taxes, I will
pay close attention to see that the incoming administration
abides by that new Biden Rule and does not go after taxing
small businesses and the middle class.
On my part, let me tell you that I believe in free and fair
trade, both internationally and domestically. International
trade is important to American businesses, and especially
important to the agricultural sector and the farmers across
America. I will make sure that the incoming administration does
not overlook the importance of agriculture or the interests of
rural America.
I am against foreign countries trying to tap into the U.S.
tax base with unilateral digital services taxes under their
self-
proclaimed ``rights'' to invade our tax base. They do not have
that right.
I do not support socialism, or Marxism, or so-called
democratic socialism that would end with command-and-control
policies. I also do not support any rapid or drastic wiping out
of industries and their workers based mostly on ideology and
often on misleading analyses, with some notion of taking care
of the carnage through massive government income and wealth
redistribution.
Prior to the pandemic, although there were economic and
structural challenges to the economy, we saw a very historic
50-year low in unemployment rates, record lows in gaps between
minority unemployment and the overall unemployment rate,
inclusive growth with real wages growing faster for lower
earners, record highs in real median household income, stronger
median income growth for minorities than others, and reductions
in income inequality and poverty.
Although those were goals of Democrats, we did not hear
much about the accomplishments from members of the other party.
Those accomplishments came about in an environment in which tax
burdens were lowered and made more progressive, and regulation
was made more efficient.
Instead of welcoming the accomplishments, we have heard
from the other side that we need to change America. I would
like to see us continue with the accomplishments we saw prior
to the pandemic.
Now let me close with a comment on transparency. This
committee has traditionally expressed bipartisan interest in
reminding all nominees who come before this committee that
transparency is important for our members. That means that I
expect that you will respond to inquiries from any Senator on
this committee no matter on which side of the aisle they sit.
Prompt and thorough responses to our inquiries and
investigations are what we expect.
With that now, Senator Wyden?
[The prepared statement of Chairman Grassley appears in the
appendix.]
OPENING STATEMENT OF HON. RON WYDEN,
A U.S. SENATOR FROM OREGON
Senator Wyden. Thank you very much, Mr. Chairman.
I want to begin, Chairman Grassley, by thanking you and
Senator Crapo for the help in scheduling Chair Yellen's hearing
this morning. And, Senator Grassley, I also want to thank you
for joining me last week in exposing the pharmaceutical
companies' insulin price-gouging scheme. America knows that
they are getting mugged at the pharmacy counter. Now this
committee can use a fresh investigation that helps lay out a
plan to finally end one of the all-time big anti-consumer rip-
offs, which is what is going on with insulin.
Mr. Chairman, I thank you for that. Now to turn to Chair
Yellen.
This is the second time in 12 years that a Republican
President leaves the office with the economy in ruin. Today,
there is also a surging pandemic and armed troops guarding our
Capitol from far-right insurrectionist attack.
The Biden administration is not going to begin with
inaugural balls. It is going to begin with all-out triage. My
top economic priority is avoiding the mistake Congress made in
the last recession, which was taking a foot off the gas pedal
before recovery took hold. Congress did not do enough in 2009
to help the unemployed and struggling homeowners. And if
stepping off the gas was not bad enough, 2 years later House
Republicans passed policies that yanked out the spark plugs and
let the air out of the tires as well.
In Oregon, it took 7\1/2\ years for unemployment to return
to its pre-recession level. That cannot happen again, or else
millions and millions of people will go through years of
needless hardship. Some will never recover the lives that they
had prior to the pandemic.
Unemployment is again rising. Federal Reserve data shows
that workers of modest income are facing Great Depression-level
joblessness. One out of five are out of work. And Donald Trump
repeatedly pressed a false and manipulative choice between
public health and economic recovery, and now America has
neither.
The good news is Chair Yellen knows that going small on
economic relief would be a big mistake. Chair Yellen is exactly
the right person to lead the Treasury Department. Nobody could
be better qualified for this job. And, Mr. Chairman, I would
ask unanimous consent at this point to put into the record a
letter signed by eight former living Treasury Secretaries
urging swift confirmation of Janet Yellen.
The Chairman. Without objection, so ordered.
[The letter appears in the appendix on p. 54.]
Senator Wyden. Thank you, Mr. Chairman.
And I just say to my colleagues, all of those Treasury
Secretaries do not just come together by osmosis. They believe
deeply in the challenge ahead of us in this country, and they
all think Janet Yellen is up to the job. And nobody deserves
more credit than Chair Yellen for the longest economic
expansion that we have seen in our history, which lasted until
the pandemic hit.
Federal Reserve Chair Yellen changed decades of
conventional economic wisdom that put too much focus on
inflation and deficits. She was correct that policymakers
should focus more on wages, employment, and inequality, and
that the economy safely could run a little hotter.
Now, she took some heat at the time from Republicans, but
later they tried to attribute Janet Yellen's success to the
outgoing administration. But the numbers show the successes of
Chair Yellen's approach. Unemployment went down. Wages went up.
And a lot of working Americans were better off than they were
before.
Who better to lead the Treasury Department and help kick
off the next economic expansion than the person who did so much
to bring about the last one? Right out of the gate, the Biden
administration and Congress need to send major relief to
America's working families. That means increasing relief checks
to $2,000. And it means extending enhanced unemployment
benefits to all of those who have lost their jobs through no
fault of their own.
At Mitch McConnell's insistence, the December economic
package reduced unemployment benefits from the CARES Act and
extended them only until the middle of March. There are
groceries in my refrigerator that are going to last longer than
Mitch McConnell's unemployment agenda.
Now this has been a common story, a common story of
Washington letting key economic lifelines expire. They get
extended. They expire. They get extended. Congress cannot go on
with this snooze-button legislating. Our workers and our
economy need a government that is predictable and reliable.
That means the Congress needs to tether the extension of
unemployment benefits to economic conditions on the ground,
with automatic triggers. Those benefits should not be subject
to the whim of one elected official.
The tattered patchwork of State unemployment insurance
systems also needs fixing. My home State of Oregon saw this
when the COVID crash hit. In other cases, it was because of
Republican lawmakers having intentionally hobbled unemployment
insurance programs. Workers suffer because of it, particularly
black and Hispanic workers. Congress needs to reform the
program, which I think should include bringing all workers into
the system, increasing base benefits, and ensuring that it can
hold up in a crisis.
Also, part of our work has to involve fixing America's
broken-down, dysfunctional tax code. And to me, it has to start
with the proposition that corporations, millionaires, and
billionaires all have to pay their fair share. I am developing
a proposal to reform the taxation of capital gains for the top
three-tenths of 1 percent of taxpayers. My plan would tax
wealth like work, and it would minimize the ability of those
who are particularly well-off and have all the accountants and
all the lawyers to just defer, and defer, and defer paying
their taxes.
If you are a nurse--and I was just home for the last close
to 10 days with virtual town halls, and talking to folks in a
socially distanced way, and one of the things I discussed is,
if you are a nurse in Oregon taking care of COVID patients, you
have to pay taxes with every paycheck. You do not get to defer
your taxes if you are a nurse treating COVID patients. But if
you are a billionaire, you can defer, and defer, and defer
paying taxes and, in many instances, figure out a way to pay
nothing at all.
My plan would put a stop to that unfairness, and the
revenue would help preserve the Social Security guarantee for
decades to come with additional funds for other priorities.
Now, the outgoing administration had a different approach.
They were big on corporate tax giveaways, and they actually
increased incentives to ship jobs overseas instead of
eliminating them. I want those mistakes fixed.
Before I wrap up, I want to turn to an existential threat
for, particularly our kids and our grandkids, and that is
climate change. The Treasury Department is going to have a key
role to play on these climate issues.
Much of America's energy policy is tax policy. Having
worked with my friend from Washington State, Senator Cantwell,
we know there are now 44 energy tax breaks on the books. And
some of them look like they just came from yesteryear.
I have a bill to replace these 44 breaks with 3 that go
right to the heart of a new set of priorities: reducing carbon
emissions and promoting innovation. The three are for clean
electricity, clean transportation, and energy conservation. I
am also developing a proposal that would make polluters pay for
the cost of climate change, with much of the revenue returned
directly to the American people through annual cash payments.
The Treasury Department plays a big role--as Chairman
Grassley noted--in trade. Over the last 4 years the American
people got a lot of tough talk about trade, but there was a big
gap between the tough talk and delivering on the big promises.
This administration drove away our economic allies. It
actually isolated us in the crucial fight against trade cheats
in China and elsewhere. Members of this committee are also
concerned about currency manipulation and other tactics that
rip off high-skill, high-wage jobs at a time when wage growth
has got to be right at the top of our economic agenda.
I am looking forward to working with Secretary Yellen on
all these issues, and more. And I certainly hope--and Chairman
Grassley and I have been talking about it--that with her
stellar, extraordinary qualifications, we can get her
nomination approved as quickly as possible. And it seems to me,
with the economic crunch we are facing, it ought to be approved
on Day One.
Now I will close by saying everybody has a constitutional
right to be foolish, but nobody can question Chair Yellen's
qualifications. This country has never had a woman as Treasury
Secretary. What a shame. Anybody who doubts Chair Yellen's
commitment to policies that give everybody a chance to get
ahead, just has not been paying attention.
So, colleagues, I look forward to working with all the
members, Democrats and Republicans, throughout this session.
And I think it is very appropriate that we begin with the
consideration of a person who is so extraordinarily qualified,
and who I very much appreciate being willing to return to
public service. President-elect Biden could not have made a
better choice, colleagues, than Janet Yellen.
Thank you, Mr. Chairman.
The Chairman. Thank you.
[The prepared statement of Senator Wyden appears in the
appendix.]
The Chairman. The chair now recognizes and welcomes Senator
Feinstein from California, for the purposes of introduction.
STATEMENT OF HON. DIANNE FEINSTEIN,
A U.S. SENATOR FROM CALIFORNIA
Senator Feinstein. And I thank the chair. Thank you very
much, Senator, and other Senators. It is just fine to be here
this morning.
I have known Janet since she became President of the
Federal Reserve Bank of San Francisco in 2004. She has been
professor, and now emeritus at the University of California,
Berkeley since 1980--that is 40 years.
Janet has an impressive record. She served twice on the
Federal Reserve Board of Governors and was the first woman to
chair the Fed from 2014 to 2018. She also served as Chair of
the Council of Economic Advisors under President Clinton, and
she is currently professor emeritus at the University of
California, Berkeley, as well as a distinguished fellow at the
Brookings Institution.
Some have joked that Janet's husband of 42 years, George,
won the Nobel Prize in Economic Sciences, yet he is regarded by
many as the second most accomplished economist in his own home.
But it can be said that all of these accomplishments did not
come easily for a women in the male-dominated field of
economics.
Out of 24 students who received doctorates in economics at
Yale in 1971, Janet was the only woman. And she has been a
trailblazer her entire career. Now she brings to us the
experience and leadership needed at Treasury at this critical
juncture.
I believe that Janet Yellen really understands that the
economy is not an abstract series of charts and figures, but a
collection of real individuals, families, communities,
problems, and businesses that need help. And these are the many
reasons that Janet received bipartisan praise when President-
elect Biden announced her nomination in December.
For one, her deep policy expertise matches her
understanding of the impact of economic policy on people. She
is also a pragmatic and steady hand who recognizes the need for
fiscal discipline. In short, she is the ideal candidate to head
Treasury at a time when we can afford nothing less.
So I urge and hope that this committee will rapidly approve
her nomination, and I thank you for the privilege, Mr.
Chairman. Thank you.
The Chairman. Thank you, Senator Feinstein.
I want to go back to Senator Wyden, because he asked to
speak on another point, before I got to Dr. Yellen.
Senator Wyden. Mr. Chairman, just on your point earlier,
because we need to get to Chair Yellen, I very much share your
view with respect to transparency. You and I have worked on
those issues.
I also want to put on the record that the Treasury's record
over the past 4 years on this was dismal, on things like
FinCEN. It has got to do better, but do it in a bipartisan way.
Thank you.
The Chairman. Thank you very much.
Now, I did not congratulate Dr. Yellen on her appointment.
I do that now, and ask her to make her opening statement.
STATEMENT OF HON. JANET L. YELLEN, Ph.D., SECRETARY-
DESIGNATE, DEPARTMENT OF THE TREASURY, WASHINGTON, DC
Dr. Yellen. Chairman Grassley, Ranking Member Wyden,
members of the committee, it is an honor to appear before you.
And, Senator Feinstein, thank you for that very kind
introduction.
Senator Feinstein. You are welcome.
Dr. Yellen. I have immense respect for the task before this
committee: rebuilding the American economy from the sharpest
downturn in history. If I am fortunate enough to be confirmed,
I would strive to be a good partner in that work. I have spent
almost my entire life thinking about economics and how it can
help people during hard times.
My father was a doctor in Bay Ridge, Brooklyn. It was more
of a working-class neighborhood back then. His patients would
take the bus from their jobs at factories or docks, and they
would come to our stoop, because that is where my dad's office
was, in our basement.
He was the kind of doctor who treated the whole patient. He
knew about their lives, about when they had been fired or could
not pay. Those remain some of the clearest moments in my
childhood.
My parents had been children of the Depression, and they
had a visceral reaction to economic hardship. Economics is
sometimes considered a dry subject, but I have always tried to
approach my science the same way my father approached his: as a
means to help people.
And this committee, I believe, has viewed it the same way,
especially during these last few months. When economists look
back on the pandemic, I expect they will conclude that
Congress's actions averted a lot of suffering. But more must be
done. Economists do not always agree, but I think there is a
consensus now that without further action, we risk a longer and
more painful recession now, and longer-term scarring of the
economy later.
The pandemic has caused widespread devastation. Whole
industries have paused their work. Eighteen million
unemployment insurance claims are being paid every week. Food
bank shelves are going empty. The damage has been sweeping. And
as the President-elect said last Thursday, our response must be
too.
Over the next few months, we are going to need more aid to
distribute the vaccine, to reopen schools, to help States keep
firefighters and teachers on the job. We will need more funding
to make sure unemployment insurance checks still go out, and to
help families who are at risk of going hungry or losing the
roof over their heads.
Neither the President-elect nor I propose this relief
package without an appreciation for the country's debt burden.
But right now, with interest rates at historic lows, the
smartest thing we can do is act big. In the long run, I believe
the benefits will far outweigh the costs, especially if we care
about helping people who have been struggling for a very long
time.
People worry about a K-shaped recovery, but well before
COVID-19 infected a single American, we were living in a K-
shaped economy, one where wealth built upon wealth, while
working families fell farther and farther behind. This is
especially true for people of color.
At the Fed, I became accustomed to the institution's dual
mandate: to promote stable prices and maximum employment. As
Treasury Secretary, I think there will be a dual mission too:
helping Americans endure the final months of this pandemic and
keeping people safe while getting them back to work. That is
our first task. But then there is the longer-term project. We
have to rebuild our economy so that it creates more prosperity
for more people and ensures that American workers can compete
in an increasingly competitive global economy.
Members of the committee, these are very ambitious goals,
and I know we will need to work together. You can count on me
to do that in a bipartisan way.
My husband and son are watching us on C-SPAN from the other
room. They are not only wonderful people, they are also
wonderful and opinionated economists themselves. So I am used
to debate about these issues in the house, and I would welcome
it in the Senate.
Thank you. I look forward to your questions.
[The prepared statement of Dr. Yellen appears in the
appendix.]
The Chairman. Thank you, Dr. Yellen. Before I go to
questioning, I have four obligatory questions that we ask all
nominees before this committee. And they are usually stated in
exactly the same way.
First, is there anything that you are aware of in your
background that might present a conflict of interest with the
duties of the office to which you have been nominated?
Dr. Yellen. No, Senator Grassley, I do not believe I have
any conflict of interest.
The Chairman. Okay. Do you know of any reason, personal or
otherwise, that would in any way prevent you from fully and
honorably discharging the responsibilities of the office to
which you have been nominated?
Dr. Yellen. No, I do not.
The Chairman. Do you agree, without reservation, to respond
to any reasonable summons to appear and testify before any duly
constituted committee of the Congress, if you are confirmed?
Dr. Yellen. I will testify, if they ask, before any
committee of Congress.
The Chairman. And finally, do you commit to providing a
prompt response in writing to any questions addressed to you by
any Senator of this committee?
Dr. Yellen. Yes, I commit to that.
The Chairman. In regard to that last one, I hope--I think
Senator Biden, as Senator, would agree with me that when the
Trump administration first came in, they issued some sort of a
regulation that they were going to only answer questions for
committee chairmen. We finally got them off of it. I do not
know whether they answered every question of every Senator or
not--they probably did not--but I hope that we do not hear that
from this administration, that you have to be chairman of a
committee to get an answer to your question.
Before I ask the first question--but it is kind of along
the lines of the question I was going to ask you--I just heard
your opening comment about learning so much from your father
about the workers of America and about the business of America.
I hope you will continually remind people that you have that
background, and that you take it into consideration every
opportunity you can. Because I think people think you, being in
public service for such a long time, may have forgotten that,
just like I think a lot of people think that, after Chuck
Grassley has been in the United States Senate for 40 years, he
has forgotten the 10 years he spent on the assembly line with
the workers of Iowa. And it is important that they be reminded
of these backgrounds.
Dr. Yellen, how will you work at Treasury to ensure that
the interests of American workers and businesses in rural
America are not ignored?
Dr. Yellen. Senator Grassley, thank you for that question.
It will be my core focus, if I am confirmed as Treasury
Secretary, to focus on the needs of America's workers, those
living in cities and in rural areas, and to make sure that we
have a competitive economy that offers good jobs and good
wages. And I really look forward to working with President-
elect Biden and his team, first to address the critical issues
we face as a country now with the pandemic causing such misery
for so many small businesses that have failed or are at risk of
failing and need our help, and the unemployed workers who have
been so badly affected by the impact of the pandemic,
especially in the service sector.
It has disproportionately hit the service sector and the
workers who are employed in that sector, and it has been
particularly brutal in its impacts on minorities and on women.
And I will be focused from Day One on providing support to
America's workers and to small businesses, putting into effect
as quickly and efficiently as I can the relief in the bill that
was recently passed and then, over time, working for a second
package that I think we need to get through these dark times
before the vaccination program enables us to go back to life as
we knew it. But over time, I look forward to working with
President-elect Biden and his team to build back better, and to
address many of the challenges that have faced America and that
have had such an adverse impact on America's workers and small
businesses.
We need to invest in our infrastructure. We need to invest
in R&D. We need to invest in training and workforce
development, so that we have an economy that is productive and
competitive, and workers and families can thrive.
The Chairman. Thank you very much for that answer. That was
kind of a shotgun approach to questioning. I now have a rifle
approach.
Democrats have been arguing for repeal of the $10,000 cap
on State and local tax deductions, often referred to as SALT,
even as part of a pandemic relief effort. Yet, even left-
leaning commentators such as the Tax Policy Center point out
that a SALT repeal would provide the top one-tenth of 1 percent
of households with an average tax cut of about $144,000, with
essentially no benefit going to the bottom half of the
household earners.
Do you think it makes sense for the pandemic relief efforts
to prioritize six-figure tax cuts for the wealthiest few, when
millions of middle-class American families are struggling to
make ends meet? And would you oppose including a repeal of the
SALT cap in any further relief or stimulus measure?
Dr. Yellen. Senator Grassley, thank you for that question.
I certainly believe in a fair and progressive tax code where
wealthy individuals and corporations pay their fair share. This
deduction--the SALT deduction--was eliminated only a few years
ago. And before making a decision about what should be done
going forward, I think it is critical to study and evaluate
what the impact has been on State and local governments and
their ability to provide critical services. And I promise to
work with those at Treasury and throughout the administration
in evaluating what impact that has had on States and local
governments, on households, on small businesses, and study this
issue further.
The Chairman. I have to go to Senator Wyden now. My next
question would have dealt with an issue that he and I have
worked very closely on in regard to the unfair digital services
tax that we see other companies putting on our country, and I
will submit questions like that for answer in writing.
Go head, Senator Wyden.
Senator Wyden. Thank you, Mr. Chairman. And, Chair Yellen,
great to have you in the virtual house. I am going to see if I
can cover a fair amount of ground quickly.
I think we all understand that the country has been hit by
an economic wrecking ball. And so my first question to you
would be, what economic policies will give Americans the
biggest bang for the buck in the immediate term?
Dr. Yellen. Well, I think relief that we provide to those
who are in the greatest need, and to small businesses, has the
best chance of providing both relief to those who have been so
badly affected by the pandemic and creating a great deal of
spending per dollar spent, which will create jobs throughout
the economy, having the biggest bang for the buck.
So I see, for example, extended unemployment insurance,
SNAP benefits, and so forth, as having a very large bang for
the buck. Of course, in a way, the biggest bang for the buck
comes from the money we spend on public health to make sure
that we have widespread vaccinations quickly, so schools can
reopen, and so we can get past the pandemic and reopen
businesses and the economy safely and avoid scarring that will
occur if there is permanent job loss.
Senator Wyden. Good. I also appreciate your comment with
respect to extended unemployment, because that is one of the
policies that allows us in the future, in terms of reforms, to
tie benefits to economic conditions on the ground so it gives
you time to fully get us to that longer-term economic recovery.
So that is very helpful.
The second question I want to talk to you about is China,
because we all understand that China's cheating has taken a
huge toll on our workers, and particularly on creating more
high-paying jobs.
Now I think that the President-elect is absolutely on the
right course, saying he is going to mobilize the allies to work
with us in terms of dealing with China. That is going to take a
little bit of time. So what I would like to hear from you again
is, in the near term, what do you believe you can do, perhaps
your first couple of steps, to start to mobilize our country to
make sure that workers get a fair shake in view of all this
China economic cheating?
Dr. Yellen. Well, China is clearly our most important
strategic competitor. As you said, we need to work with allies.
We also need to strengthen our own economy so that we can
compete. And
President-elect Biden will soon come forward with a package to
accomplish that by investing in our infrastructure, investing
in our people, and creating a more competitive economy in
research and development.
We need to take on China's abusive, unfair, and illegal
practices. China is undercutting American companies by dumping
products, erecting trade barriers, and giving illegal subsidies
to corporations. It has been stealing intellectual property and
engaging in practices that give it an unfair technological
advantage, including forced technology transfers. And these
practices, including China's low labor and environmental
standards, are practices that we are prepared to use the full
array of tools to address. Of course it is important over time
to work with our allies.
Senator Wyden. Very good. I am going to see if I can get
two other questions in and go maybe 30 seconds over, like the
chairman. You heard me talk with respect to climate change,
about refocusing our tax code so we can really zero in on
eliminating carbon emissions.
Can you give us one step that you think you could begin
with to tackle this climate question?
Dr. Yellen. Well, this is one of the most critical issues
facing our country and the world. And it poses an existential
threat. It will be a focus of President-elect Biden and his
entire administration.
The infrastructure plan that President-elect Biden will
come forward with will involve investing in clean technology,
renewable energy, and promoting the use of electric vehicles.
And in the process of addressing this very significant
challenge, there is also the opportunity of creating good jobs
in the process. And that will be a benefit.
Treasury will cooperate by looking at ways that we can
direct investment, enabling private firms to have the
information they need to support sustainable investing.
Senator Wyden. One last question, very quickly. The Wall
Street Journal is reporting on your comments to affirm the
United States's commitment to a market-determined exchange
rate, if you are confirmed.
Well, obviously Americans are interested in your thoughts
on the dollar. Could you briefly outline for the committee your
thoughts on the dollar?
Dr. Yellen. Thank you, Senator Wyden. I believe in a strong
and equitable U.S. economy that delivers good jobs with rising
wages for all Americans. Maintaining confidence in the long-
term strength of the U.S. economy, and the stability of the
U.S. financial system, is good for America, as well as our
trading and investing partners.
I look forward to working with Congress to make the U.S.
economic recovery as strong as possible. I believe in market-
determined exchange rates. The value of the U.S. dollar and
other currencies should be determined by markets. Markets
adjust to reflect variations in economic performance and
generally facilitate adjustments in the global economy.
The United States does not seek a weaker currency to gain
competitive advantage. And we should oppose attempts by other
countries to do so. The intentional targeting of exchange rates
to gain commercial advantage is unacceptable.
If confirmed, I will work to implement the President-
elect's promise to oppose any and all attempts by foreign
countries to artificially manipulate currency values to gain an
unfair advantage in trade.
Senator Wyden. Thank you, Mr. Chairman.
The Chairman. I am going to turn the gavel over to Senator
Crapo. He will be the next person to ask questions. The
Republicans have a rule that you can only be chairman of the
committee for 6 years, and so this could be my last hearing as
chairman of the committee. And it has been a great privilege to
chair one of the most important committees in Congress.
I first joined this committee in 1981 during the 102nd
Congress and became chairman briefly in 2001, before the switch
in party membership changed the balance. And then I chaired it
two times since. I will continue to serve on this committee of
course, but leading this committee has been one of the
highlights of my years in the Senate.
Once the Senate organizes, Ranking Member Wyden will become
chairman. But as I turn the gavel over to Senator Crapo, I know
this committee will be in the good hands of Senator Wyden and
Senator Crapo over the next 2 years.
Thank you very much. Senator Crapo?
Senator Crapo. Well, thank you very much, Senator Grassley.
I want to commend him, even though he just stepped out of
the room, for his great service, and for the opportunity to
serve under his leadership as the chairman.
I will just take a brief moment here to say Senator Wyden
and I have worked together for years on a bipartisan basis and
have built a lot of really big successes. I look forward to
working with you, Senator Wyden, as we move forward.
And, Dr. Yellen, I appreciate your service. I have worked
with you as well. As you know, when we discussed this a little
while back, we had a good working relationship while you were
at the Fed, and I look forward to developing and continuing
that good working relationship as we move forward.
My first question is going to be on tax policy. Prior to
the Tax Cuts and Jobs Act, the TCJA, the United States had one
of the highest corporate tax rates among developed countries.
As a part of the TCJA, Congress lowered the corporate tax rate
to ensure that our domestic businesses could remain globally
competitive. But even now, the corporate tax rate in America is
still the 11th highest among developed countries, according to
the Tax Policy Center.
As a result of the COVID-19 pandemic, U.S. companies are
struggling to stay in business and to keep employees on
payroll. President-elect Biden's proposals include a
significant increase in the corporate tax rate that would hit
already vulnerable businesses and put U.S. companies once again
at a strong competitive disadvantage with the rest of the
world.
What is your view of raising taxes on struggling businesses
during the COVID-19 pandemic?
Dr. Yellen. Well, thank you for that question, Senator
Crapo. I too want to say that I both enjoyed my working
relationship with you during my years at the Fed and look
forward to a very productive working relationship going
forward.
On the 2017 tax cuts, the President-elect has said that
eventually, as part of a larger package that would include
significant spending and investment proposals--but not now
while the pandemic is really depressing the economy--he would
want to repeal parts of the 2017 tax cuts that benefited the
highest-income Americans and large companies. And he wants to
reverse the law's incentives to offshore operations and
profits.
But he has been very clear that he does not support a
complete repeal of the 2017 tax law. There are some areas,
though, that he would amend. For example, a provision in that
law had the unfortunate byproduct of rewarding companies for
moving their operations offshore. And the President-elect would
reverse that.
We look forward to actively working with other countries,
through the OECD negotiations on taxes on multinational
corporations, to try to stop what has been a destructive global
race to the bottom on corporate taxation. And in that context,
we would assure the competitiveness of American corporations,
even with a somewhat higher corporate tax.
Senator Crapo. Well, I appreciate that last observation. As
we discussed on the phone last week, I encouraged you to make,
as one of your top considerations for any changes to our
business tax policies, the competitiveness of the U.S.
businesses and the need to make sure that the United States
remains an attractive place for investment and capital
formation and job creation. So I look forward to working with
you on that.
Can you explain again your views on the importance of these
kinds of considerations when assessing potential changes to tax
policy?
Dr. Yellen. Well, Senator Crapo, I strongly agree with your
view that it is necessary for U.S. companies to be globally
competitive. And that is why these OECD negotiations are so
important. It would enable us to collect a fair share from
corporations, while maintaining the competitiveness of our
businesses, and diminish the incentives that American companies
now have to offshore activities. That is certainly something we
do not want to reward.
Senator Crapo. Well, I look forward to working with you on
those OECD negotiations and the other aspects of tax policy
that we just discussed.
One last quick question. As chairman of the Banking
Committee, I worked in a bipartisan manner to pass the Foreign
Investment Risk Review Modernization Act; the Export Control
Reform Act; and, as part of the NDAA, the Anti-Money Laundering
Act of 2021.
The Treasury Department plays a major role in implementing
these statutes and managing our relationship with China through
the Office of Terrorism Financing and the interagency process
for CFIUS and other export control decisions.
Do you agree to commit to work with me as the Treasury
Department moves forward on the export control decisions for
foreign investment and modernizing our anti-money-laundering
bank secrecy provisions, as well as beneficial ownership rules?
Dr. Yellen. Senator, you have my pledge that I will work
closely with you on these very important matters. And I want to
thank you and Congress for passing a law that will enable us to
identify an official ownership of shell corporations and really
make a big difference in our ability to address terrorist
financing and improve the effectiveness of sanctions.
Senator Crapo. Thank you. I appreciate your attention to
this.
Senator Stabenow is next. I believe she is remote.
Senator Stabenow. Well, good morning. First I want to say
``thank you,'' Senator Crapo, to you. Congratulations on your
incoming position, and also to Senator Wyden, Senator Grassley,
who I think are off to a great start in the committee, doing
this in a bipartisan way, and I look forward to a lot more
opportunities.
Also, Madam Chair, I have to tell you, as I have indicated
to you before, I was extremely excited to hear of your
nomination. I cannot think of anyone with more competence, more
experience, more integrity, to serve as Secretary of the
Treasury. And it is just extra special that you come in as the
first woman to do so. So, congratulations.
Dr. Yellen. Thank you so much, Senator Stabenow.
Senator Stabenow. You are welcome.
Let me first say that I do not believe we have an economy
unless somebody makes something, and somebody grows something.
That is what we do in Michigan; we do both. But I want to talk
about the ``making'' part of it now, as we have talked before,
and how we have to make more of it in America. And I think
Michigan certainly is part of leading the way.
And to tackle the big issue around the climate crisis, as
well as global leadership in manufacturing and so on, certainly
electrifying our vehicle fleet is a very important part of
that.
So just to refresh, the U.S. auto industry accounts for
about 3\1/2\ percent of our gross domestic product. And for us
in the United States, GM is investing heavily in electric
vehicles, some $27 billion to bring 30 different EVs to the
marketplace in the next 4 years--very aggressive. Ford is doing
the same kind of thing. Ford is doing the same with $11.5
billion, including their electrifying of their F-150 truck. So
there are very exciting things happening. The same with FCA
with their popular Jeep line. All good news that we are doing
that.
However, when we talk about China, it is not just stealing
our patents and currency manipulation and other things that I
have deep concerns about, but what we are seeing is that over
the last decade the Chinese Government has invested $100
billion in the EV industry. And what is very concerning is that
of the 142 lithium ion mega-factories under construction, out
of 142, 107 of them are in China, and only 9 of them are in the
United States.
So it is no surprise that by 2025, 54 percent of the EV
sales are projected to occur in China. So we have to get ahead
of this. I know, looking at the Build Back Better plan of our
President-elect, I know that he cares and you care about this
as well, but I wonder if you could speak for a moment on what
we need to do, particularly around the consumer incentives,
until we get enough people purchasing these. Consumer
incentives are critical. Senator Alexander and I had a
bipartisan bill to extend the current consumer credit. This
needs to get done this year, and Senator Schumer--I am working
with him on a broader package that is very important to take us
to the next step in electric vehicles.
But I wonder if you might talk about what we need to do, or
do you support the consumer credit that we need to create the
market for purchasing EVs?
Dr. Yellen. Thank you for that question, Senator.
Climate change is a critical problem facing the country,
and President-elect Biden is committed to a wide range of
policies to address it, and in the process, making sure that in
doing that, we create good jobs for American workers. As you
have suggested, it is important that we make things in America.
And electric vehicles are a very important way of both
creating good jobs and addressing climate change. The
President-elect is supportive of restoring full incentives for
electric vehicles. He wants to ensure a robust electric vehicle
market. And on top of that, that will involve building
infrastructure and making sure that our workers have the skills
that are needed to succeed in electric vehicles.
Senator Stabenow. Thank you. Along with that, we know that
a lot of the jobs in electric vehicles now are the component
parts. They are mid-sized employers, the auto suppliers in the
supply chain that is so critical right now, and we are making
these component parts. And our auto suppliers are very excited
to do that.
But I am concerned that with what has happened under COVID
that the piece that just did not happen as I believe it
should--and despite Senator Mark Warner, who did such wonderful
work that I supported and worked with our auto suppliers on to
deal with our mid-level businesses--we just, I believe, have
not done fully what we need to do to support those jobs.
Do you have any thoughts on where we need to go for mid-
level employers that employ about 50 million people in this
country?
Dr Yellen. Yes, I think that you are absolutely right,
Senator Stabenow, that the largest corporations that have
access to capital markets have not had trouble raising money.
We have a heavy focus on small businesses, trying to get them
the aid they need, and mid-sized businesses have had problems.
The Main Street lending program the Fed set up was not very
effective at reaching them. And so that is an important area
for us to focus on, making sure that capital is available for
those businesses so that they can continue to create jobs and
thrive in our economy.
Senator Stabenow. Thank you----
Senator Crapo. Senator Stabenow----
Senator Stabenow. I am out of time. I would just--not a
question, but just, Madam Chair, you and I have talked about
the multiemployer pension crisis. I am deeply concerned about
that and the over 1.3 million workers and families who are
affected. So I look forward to talking with you more and
developing a way to protect those middle-class Americans.
Thank you, Mr. Chairman.
Senator Crapo. Thank you. And I have been notified by staff
that those who are remote may not have the clock in front of
them, so I will try to remind those who are remote when their
time runs out.
Next is Senator Thune.
Senator Thune. Thank you, Mr. Chairman.
Dr. Yellen, welcome. Congratulations. I am going to try and
roll a lot of thoughts and questions into sort of one big
package here. But the one thing that concerns me, that nobody
seems to be talking about anymore, is the massive amount of
debt that we continue to rack up as a Nation. And in fact the
President-elect has proposed a couple-trillion-dollar fiscal
plan on top of that which we have already done, which would add
somewhere on the order of about $5.3 trillion to the deficit.
And that is according to the Committee for a Responsible
Federal Budget, of which you have been a board member.
That is 25 percent of GDP. And it would move the additional
debt above 100 percent debt-to-GDP, which are categories that
we have not been in literally since the 1940s.
And so what I am concerned about is, we seem to have no
concern now about borrowing money in the short term, and the
argument is that interest rates are low, it is like free money.
It is not. It has to be paid back.
And at some point, people who are lending us money are
going to say the risk/return ratio is not sufficient for the
risk and are going to demand a higher interest rate. That will
happen at some point. Interest rates will start to normalize
and we will have to refinance at a higher interest rate. And
pretty soon the interest on the debt exceeds what we spend on
even national security for our country.
Republicans traditionally have believed that we ought to
reduce spending; that we need to reform entitlement programs;
that we need to have policies in place that create great growth
in the economy, all of which make the debt look smaller by
comparison. Democrats have argued we need more revenue, more
taxes. And Senator Crapo also already sort of got at that
issue.
But I just want to know what you think. Because I know in
the past you have expressed concerns about the debt and the
deficit. The two previous administrations have not been very
interested in entitlement reform. We have not only the debt
that we are adding to in the short term because of the
pandemic, but we have structural problems that are long-term
that are going to continue to drive that debt higher in the
future.
What are your thoughts with respect to reforming
entitlements, with respect to the amount of the debt situation
we find ourselves in right now, and when is it enough? When is
it too much? When do we hit that point where the thing starts
to collapse? That is what really concerns me. And nobody is
talking about it really, in either party anymore. It was
something that used to occupy a lot of our discussions in the
past, but nobody seems to care much about it. And for me, that
is a huge warning sign on the horizon, the fact that we have an
ever-growing deficit, an ever-growing debt, and no apparent
interest in taking the steps that are necessary to address it.
Dr. Yellen. Senator, I agree with you that it is essential
that we put the Federal budget on the path that is sustainable,
and that we are responsible to make sure that what we do with
respect to deficits and debt leave future generations better
off.
But the most important thing, in my view, that we can do
today to put us on a path of fiscal sustainability is to defeat
the pandemic, to provide relief to the American people, and
then to make long-term investments that will help the economy
grow and benefit future generations.
To avoid doing what we need to do now to address the
pandemic and the economic damage that it is causing, would
likely leave us in a worse place fiscally and with respect to
our debt situation, than taking the steps that are necessary
and doing that through deficit demands. We really have to worry
about scarring of workers due to this pandemic and the loss of
small businesses that can really harm the long-run potential
productivity of our economy and leave us with long-run problems
that would make it difficult to get back on the growth path
that we were on.
And it is really critically important to provide this
relief now. And I believe it would be a false economy to stint.
But over the longer term, I would agree with you that the long-
term fiscal trajectory is a cause for concern. It is something
we will eventually need to attend to, but it is also important
for America to invest in our infrastructure, invest in our
workers, invest in our R&D, the things that make our economy
grow faster and make it more competitive, and it is important
to remember that we are in a very low interest rate
environment. And that is something that existed before the
pandemic hit.
Interest rates were low even before the financial crisis of
2008. This has been a trend in developed economies. You can see
it across the developed world. And it represents structural
shifts that are likely to be with us a long time.
So, although the debt-to-GDP ratio has increased, it is
important to note that the interest burden of the debt,
interest as share of GDP, is no higher now than it was before
the financial crisis in 2008, in spite of the fact that our
debt has escalated.
And of course interest rates can increase. Eventually we
have to make sure that primary deficits in the budget are
sufficiently small that we are on a sustainable path. But right
now the challenge is to get America back to work, and to defeat
the pandemic.
Senator Crapo. Thank you.
Senator Cantwell?
Senator Cantwell. Thank you, Mr. Chairman, and I too want
to congratulate the nominee. I want to thank President-elect
Biden for nominating a woman and, Dr. Yellen, for your
willingness to serve.
I can already see by the words that you have chosen--women,
workers, workforce, workforce training--that you are likely to
deliver economic policies that are more focused on Main Street
than Wall Street. And I hope that is what I am hearing, because
I believe that we need wage growth in America; that Americans
from all walks of life need more access to wage growth. And I
hope the policies of the Biden administration and you will help
deliver that.
I have four areas that I would like to quickly go over, if
I could, that are important to these policies. First, I want to
make sure that you are going to protect Federal taxpayers and
their investments as far as the private banking that exists in
America, and that you will protect and continue to enforce the
important laws that are on the books, and use the Federal
Stability Oversight Council to make sure that we are protecting
depositors from having the Federal Government again ever having
to bail out Wall Street, and to make sure that we are focusing
on Main Street instead.
Dr. Yellen. Senator Cantwell, I could not agree with you
more. Our focus should be on Main Street, not Wall Street. And
we should demand, as Dodd-Frank insisted, that the largest
institutions--particularly those that pose systemic risks--have
adequate capital and liquidity and plans by which, if they were
to fail, they could be resolved without posing burdens on
taxpayers.
Through my time at the Fed, I worked very hard to
strengthen the banking system, to make sure that these
institutions do not operate in ways that would harm Main
Street. And I am pleased to see that, when the pandemic hit and
there was a good deal of financial disruption, especially the
largest banks have been able to, due to the reforms that were
put in place, continue to lend, to survive with adequate
capital, and to support the needs of households and businesses.
And you have my absolute pledge that this will continue to
be my focus----
Senator Cantwell. Thank you. Thank you. I have to jump to
the next one that is very important. I have an economy that has
one in four jobs related to trade. I have not been a fan of the
Trump administration's, what I would call ``unilateral
protectionism.'' I do not think that this is the direction for
an economy where 95 percent of consumers live outside the
United States of America. We have digital trade issues that
need to be resolved. We have national security issues that need
to be resolved.
So a recent Oxford Economics trade war study said that the
Trump administration's trade war cost us 245,000 American jobs,
and the Federal Reserve Bank of New York and Columbia
University found that U.S. companies lost $1.7 trillion in the
price of their stocks as a result of U.S. tariffs imposed in
the trade war.
So I am asking you, do you repudiate basically unilateral
protectionism?
Dr. Yellen. Senator, I believe we should try to address
unfair trade practices. And the best way to do that is to work
with our allies, rather than unilaterally. And when the unfair
practices have to do with things like stealing intellectual
property, engaging in forced technology transfer, or subsidies
that provide an unfair technological advantage, I think we
should focus directly on those practices and work with our
allies to make sure they are addressed.
Senator Cantwell. Well, we in the Pacific Northwest believe
in an export economy. And so we want an export economy to take
place, so you have to have trade. And so we want to continue to
focus on that.
I do believe in using sanctions, though. And I think the
Trump administration failed to be as aggressive on sanctions. I
want to make sure that you will use that as an economic tool,
particularly as it relates to cyber-attacks on our
infrastructure.
In the last few weeks, there have been so many momentous
occasions that I think we have lost sight of the incredible
impact of what happened with the hacking of our information
system. And I want to know that you will use sanctions when
necessary on people who have attacked our infrastructure.
Dr. Yellen. Sanctions are a critically important tool to
address cybersecurity and other threats. And you can be sure
that I will be focused on making sure that they are used
strategically and appropriately. And I intend to ask my Deputy,
if he is confirmed, Adewale Adeyemo, to quickly begin a review
of our sanctions policy to make sure we are doing this in a
strategic way, and in the most effective way we can.
Senator Cantwell. Thank you. And I look forward to working
with you on increasing affordable housing tax credits. My
colleague, Senator Young, and I continue--we know you
understand how much affordable housing is important to our
country and our economy.
Thank you, Mr. Chairman.
Senator Crapo. Thank you. And I agree with you on that as
well.
Next is Senator Menendez.
Senator Menendez. Thank you, Mr. Chairman. And, Dr. Yellen,
congratulations on your nomination. I look forward to
supporting you.
I know that Senator Grassley asked you a question on SALT.
I hope when you study it, you look at the fact that there are
States like New Jersey that give billions more than we get
back, and States like Iowa that get $5 billion more than they
pay in Federal taxes, or Kentucky that gets $111 billion more
than it pays in Federal taxes, or Florida that gets $60 billion
more than it pays in Federal taxes.
So you cannot have States continue to be economic engines,
and then also be hurt in this case by the property tax
deduction. So it should be a total--a total look at the
equation, and I hope you will do that as part of your review.
Dr. Yellen. I will do that.
Senator Menendez. Now since 2020, over the last year, State
and local governments have laid off 1.3 million workers. That
is 1.3 million doctors and nurses and teachers and school
custodians, 1.3 million essential workers we rely on to fight
for us on the front lines in the battle on COVID.
It is economic malpractice, from my perspective, what is
happening. Could you explain some of the lessons that were
learned from the 2008 Great Recession and the consequences of
Congress failing to adequately address the fiscal crises facing
State and local governments that are causing these and other
impending layoffs?
Dr. Yellen. Well, as you know, in 2008 when the economy
suffered such a serious downturn, State and local governments
saw a huge shortfall in revenue and an increased need to spend
on safety-net type programs. And they faced massive deficits.
And although Congress and the administration passed the
American Recovery and Reform Act and spent at the Federal
level, there was a huge offset just from the total economic
point of view. It came about because State and local
governments have to balance their budgets, and they were forced
to slash their workforces.
And the same thing as you just described is happening now.
And so----
Senator Menendez. And that was a drag on the economy, was
it not?
Dr. Yellen. It was a tremendous drag on the economy. And
the same would be true now. And as you mentioned, we are seeing
layoffs, especially with teachers, but prospectively policemen
and firefighters and----
Senator Menendez. So it would not be a good time to
withhold fiscal support from State and local governments?
Dr. Yellen. Not in my view.
Senator Menendez. Right. Now you stated that the economic
fallout of the pandemic is, quote, ``an American tragedy,'' and
I agree. What makes it uniquely an American tragedy is that
minority communities--and as the longest-serving Latino in
Congress, I can tell you that community, African Americans, and
other minority communities have borne the disproportionate
brunt of the COVID-related economic fallout.
In December, nearly 10 percent of African American workers
and 9.3 percent of Latino workers were unemployed, compared to
6 percent of the other population. Twenty-eight percent of
black renters and 24 percent of Latino renters were not caught
up on their rent, compared to 12 percent of white renters.
Fifty-five percent of African American adults and 51 percent of
Latino adults reported difficulty in covering their expenses,
compared to 31 percent for white Americans. That is a very dark
and dire picture.
If confirmed, you will be in a position to promote policies
to reduce racial inequality, especially as we continue to fight
the COVID-19 pandemic. Can you give me a sense of how you plan
to ensure that our response to the economic crisis will also
help the minority communities that are being disproportionately
hurt?
Dr. Yellen. Senator, you cited some dramatic and disturbing
statistics. And they are absolutely right. This pandemic is
taking just an unbelievable toll on low-income workers--and on
minorities especially.
And because I am so concerned about the impact on minority
communities, the very first meeting that I had after my
nomination was announced was with representatives of racial
justice and equity groups to hear from them what their needs
are. And I promise you that I will be fully focused on putting
into place, at every level, relief for these communities.
An example would be the State Small Business Credit
Initiative that is contained in President-elect Biden's package
announced last week. There is money there to capitalize lending
to small businesses, and a proposal to provide grants to loans
for small entrepreneurs.
And of course with respect to food security, evictions,
unemployment insurance, and relief that these households need--
paid leave, the minimum wage--all of these things I believe
will be very beneficial.
Senator Menendez. My time has expired, but I just want to
say I hope as part of that--I like a lot of what you said--I
hope you also diversify the Treasury Department, which really
needs to have voices at the table to help you meet those
challenges.
Dr. Yellen. I completely agree with you, Senator.
Senator Menendez. Thank you, Mr. Chairman.
Senator Crapo. Thank you.
Senator Toomey?
[No response.]
Senator Crapo. Is Senator Toomey on line? I am told that he
is not. So we will move on to Senator Carper.
[No response.]
Senator Crapo. I am told you are here, Senator Carper. Oh,
excuse me. All right, we will go on to Senator Scott.
Senator Scott. Good morning.
Senator Crapo. I hear you. Go ahead, Senator Scott.
Senator Scott. Excellent. Can you hear me?
Senator Crapo. I can hear you. Now we can see you also. Go
ahead.
Senator Scott. Excellent. Thank you, Mr. Chairman, and
thank you--I want to continue to call you ``Chair Yellen,'' Dr.
Yellen, and it is so good to see you again and thank you for
your willingness to serve during these challenging times,
without question.
I will hop right to it, because Chairman Crapo will keep me
to my 5 minutes. The first question I have is about the
pandemic relief package that has been presented. You know as
well as I do that in December we passed a package that included
$80 billion for schools to reopen and $280 billion to restart
the Paycheck Protection Program for a second round. It also
included billions of dollars for the vaccines, which I think is
certainly an area where we need to invest even more than we
have so far, without question. But the $1.9-trillion package
that has been presented to us is a package that focuses on some
priorities that I think will actually hurt our economy as much
as they would improve our economy.
One in particular is the issue of raising the minimum wage
to $15 an hour. In talking to businesses around the country,
and specifically at home, the one thing that even the
Congressional Budget Office recognizes is that by increasing
the minimum wage to $15 an hour, it could shutter somewhere
around 3.7 million jobs on the high end, a minimum of 1.3
million jobs in our economy. And the last thing this economy
needs, as we attempt to recover, is a loss of 1.3 to 3.7
million jobs.
But in addition to that, it would increase the cost of
doing business significantly. It would certainly devastate the
opportunity to develop new jobs in rural America and in rural
South Carolina as well. And for those minorities newly coming
into the workforce, it would actually have a disproportionate
impact on those folks who, as you said in your testimony, you
want to target for relief and opportunity.
To say it differently, over 110,000 restaurants have closed
during the pandemic. Thousands of those restaurants are in
South Carolina. By increasing the minimum wage to $15 an hour
and eliminating tips for servers at restaurants, we will do
actually what I would consider an existential threat to those
restaurants and, frankly and more importantly, to those
employees of restaurants.
How do we grapple with parts of this package that really
are philosophical in nature and deny the practical reality that
comes from them?
Dr. Yellen. Well, Senator, I appreciate that question.
President-elect Biden has proposed raising the minimum wage to
$15 an hour because right now we have millions of American
workers who are putting their lives on the line to keep their
communities functioning, and sometimes even working multiple
jobs, but are not earning enough to put food on the table and a
roof over their heads. And they are suffering in countless
ways, especially during this pandemic, and really struggling to
get by. And raising the minimum wage would really help many of
those workers.
And that is the reason for doing it. Now in terms of
potential job loss, there is now a large economics literature
on this. And much of it suggests that raising minimum wages--
this is when researchers often look at what happens when one
State raises its minimum wage and a neighboring State leaves it
alone, to see how businesses fare in the two different places
with different treatments.
And the findings are that the job loss is very minimal, if
anything. So I think that the likely impact on jobs is minimal.
That is my reading of the research. And of course all
businesses are struggling, and it is critical to help those
businesses. I appreciate the PPP package in the recently passed
bill. I pledge that we will do everything we possibly can to
get that money out to struggling businesses effectively.
It is critically important to help those businesses. The
money that has been allocated to a city that applies to support
them and their lending, especially in low- and moderate-income
communities, that is critically important aid, and President-
elect Biden has proposed yet more aid to these businesses so
that they can survive this pandemic and get back on their feet.
Senator Scott. Well, thank you for your answer, Dr. Yellen.
I would say that there is no doubt that when you artificially
increase the minimum wage, you are going to permanently
decrease the number of jobs in the economy. When we have a
market-driven increase of the minimum wage, we see production
go up, and the value of work increases as well.
My final question in my time that I have left, which
doesn't look like much----
Senator Crapo. Actually, your time has expired.
Senator Scott. Yes, sir. Let me just say this for the
record, and perhaps you can answer it on the record for me.
When we think about enough being enough, if there was another
downturn in our economy, whether it's based on another pandemic
or some other act, what are we doing to make sure that we have
the resources necessary for that next downturn in 2 or 3 years,
as opposed to using every weapon in the quiver today for what
is a recovery that has started? I think it would be prudent for
us to save some of the resources for the next time we need to
respond to a global crisis of some sort.
Thank you, Dr. Yellen. And I will look to have that answer
just in writing, ma'am.
Dr. Yellen. Yes, thank you.
Senator Crapo. Thank you, Senator Scott.
Next, we will go back to Senator Toomey.
Senator Toomey. Thank you, Mr. Chairman. Can you hear me?
Senator Crapo. Yes.
Senator Toomey. Thank you. And, Dr. Yellen, welcome and
thank you for your past service to the country and for your
willingness to serve in this capacity. I look forward to
working with you, but I have to admit that the contours of the
stimulus bill as proposed by the Biden administration are going
to make that difficult. The ink is barely dry on the second-
largest stimulus package in American history, nearly a trillion
dollars after nearly $3 trillion earlier in the year, and we
are looking at another spending blowout. The only organizing
principle that I can discern is, it seems to spend as much
money as possible, seemingly for the sake of spending it. An
additional $1,400 per person, regardless of the person's
circumstances, guaranteeing that there will be several thousand
dollars in payments going to families with six-figure incomes
who have had no income interruption whatsoever, just makes
absolutely no sense.
Increasing unemployment payments such that a majority of
unemployed workers will make more money being unemployed than
they make working, can only slow the return to a normal,
healthy labor market. Sending States more money than they have
lost in lost revenue or in additional spending is just not a
good idea. And I completely agree with Senator Scott. Obviously
an arbitrary
government-mandated minimum wage increase is going to cost
jobs. If not, then of course we would just raise the minimum
wage to $20, or $30, or $50 an hour. Obviously it will result
in some job losses.
So these proposals are not targeted at those people who
really need them. It cannot be justified on the grounds of
effectiveness. And it is going to be hard to get to a
bipartisan agreement based on this.
I will say I am pleased to hear your testimony that you
think that the tax increases, the really massive tax increases
that
President-elect Biden is proposing, will be delayed. By the
way, it is implicit the economic damage that those tax
increases will do.
It is quite a staggering list. Huge increases in individual
rates. Adding a 12.4-percent payroll tax on upper-income people
will have many Americans with combined State and local marginal
tax rates well into the 60 percentages. Huge increases on
corporate America, which will make America a less attractive
place to headquarter a multinational company, which will make
it less attractive to invest here.
And I would point out that we reached record low
unemployment rates and rising wages, especially for the lowest-
income people, after our tax reform. I am not sure why we want
to go back on that.
But let me zero in on one particular idea that some of our
colleagues have suggested--and I think Senator Wyden was
alluding to this during his opening comments--and this is the
idea that, separate and apart from the Biden administration's
proposal to double the taxes on capital gains, some are
suggesting that we start to impose taxes on unrealized gains.
An asset appreciates, and we charge a tax on that, even though
there is no liquidity event, there is no sale, there is no
actual realized gains. We will, I guess, have a mark-to-market,
if that is even possible in some cases, and impose a tax on
that.
So my question for you, Dr. Yellen, is, without getting
into any particular bill, do you support the idea of taxing
unrealized appreciation of assets?
Dr. Yellen. Well, I do believe that capital gains should at
some point be taxed. Right now, step-up of bases at death
provides a route by which a very large share of capital gains
are never taxed at all.
Senator Toomey. That is a separate issue. That is a
distinct issue. The idea of an annual tax on an unrealized
appreciation of assets is what I am asking about.
Dr. Yellen. Well, what I wanted to say is that there are
simply different ways of addressing the issue of how to make
sure that some taxes are collected on capital gains, and this
mark-to-market approach is one method, but certainly not the
only method. And there may be technical challenges associated
with it. So I would want to have the administration look at
different approaches.
Senator Toomey. And, Mr. Chairman, are we operating on a 5-
minute clock?
Senator Crapo. Yes, we are, and your time just ran out.
Senator Toomey. I see that. I look forward to the second
round.
Senator Crapo. All right; thank you.
Next is Senator Carper on the line.
Senator Carper. Thanks, Mr. Chairman.
Dr. Yellen, good morning, and we are delighted that you are
joining us and for your being nominated. And again on behalf of
all of us, thank you for your extraordinary service to our
country for almost as long as I have been a member.
When I was new in the Senate, one of the people I did not
really know very well was Ted Kennedy, and I suggested we maybe
have a cup of coffee just to get to know each other. And it
actually turned out to be lunch. When we were having lunch, I
said: ``Why is it that, even though you are considered the most
liberal Democrat in the Senate, you have lots of Republicans in
the Senate who want you to be their lead co-sponsor on the big
bills? Why is that?''
And I will never forget what he said, Dr. Yellen. He said,
``I'm always willing to compromise on policy. I'm never willing
to compromise on principles.'' Always willing to compromise on
policy; never willing to compromise on principles.
Our President-elect knows--having served in the Senate for
the better part of 4 decades, he knows the need to be able to
find consensus and develop consensus. Ted Kennedy kept his
word. He never compromised on principle. He was always willing
to compromise on policy.
Could you talk about the principles that the administration
and Congress should not be willing to compromise on with
respect to the next COVID relief package?
Dr. Yellen. Well, I think that the administration should be
insistent that we have the resources to address the public
health challenges to mount a vigorous national campaign to make
sure that vaccinations are as rapid as possible. Not only is
this going to prevent needless suffering and loss of life, but
it is also the best and most effective way to get our economy
back on track, and to get to re-employ all the workers who have
been suffering in businesses that are really struggling to
survive. So that is something----
Senator Carper. Dr. Yellen, I could not agree more. I could
not agree more. I would like to say, the main thing is to keep
the main thing the main thing. And the main thing for this
economic recovery is to reel in this pandemic. The best way to
do this, as we are getting new vaccines almost by the month
now, is to vaccinate the heck out of our country.
Dr. Yellen. I completely agree with you. And I think that
that is a top priority. And then I would say another principle
that is really critical is that we have to relieve the
suffering that this pandemic has caused. It has been----
Senator Carper. How do we do that? How do we maybe target
that a little bit better, or differently, than is proposed in
this relief package from the incoming administration?
Dr. Yellen. Well, we need to look at how to target it. It
needs to go to the businesses that are most at risk, small
businesses, particularly businesses in low- and moderate-income
areas that received less than a proportionate share of PPP
relief in the first round of PPP aid. So we need to target
small business relief to those most vulnerable businesses. We
need to make sure that people are not going hungry in America,
that they can put food on the table, that they are not losing
their homes and ending up out on the street because of
evictions.
We really need to address those forms of suffering. And I
think we should not compromise on it. And if we do not do so,
that suffering and the loss of spending it will cause will
cause other people to lose jobs and permanent scarring. It will
harm the economy over the longer term.
Senator Carper. Thank you for that. We have millions of
people who have lost their jobs. In many cases, their employers
are out of business. And the folks who have lost their jobs do
not have the skills to be able to do the jobs that are out
there being taken. We heard some ideas how to address that.
One is to use our community college system across the
country to provide not just the ability to get a 2-year degree,
but in some cases, a certificate for a job that needs to be
done. Could you speak about that?
Dr. Yellen. I am strongly supportive of supporting the
community college system. I think it provides a wide range of
very valuable training. In some cases it is helping people to
go on to college, but in many cases providing training, as you
indicated, to workers who have lost their jobs who need new
skills and a new credential to be able to move into jobs that
are available in expanding sectors. And I think investing in
that system, making sure it is available to anybody who needs
it and can benefit from it, is really important.
Senator Carper. Well, thanks so much. Mr. Chairman, I may
have used up my time----
Senator Crapo. Yes, you have.
Senator Carper. I will mention a question for the record,
and then I will stop.
Senator Crapo. Go ahead.
Senator Carper. I am going to ask you a question for the
record. I am going to ask you to share your thoughts with us on
the need for measures such as temporary refundability. It's
about clean energy tax credits that can help the clean energy
industry secure project financing and get back on its feet. I
will ask you that question for the record, but I just wanted to
ask it here.
Thanks for your extraordinary service. It is great to be
with you, as always. Thanks, Mr. Chairman.
Senator Crapo. Thank you.
Senator Cardin?
Senator Cardin. Thank you, Mr. Chairman.
And, Dr. Yellen, thank you very much for your long public
service and your willingness to take on this challenge. We
thank your family also, because we know it is going to be a
family sacrifice. I am sure your discussions at your dinner
table will be very interesting.
Let me follow up on Senator Cantwell's question as it
relates to sanctions. You indicate that you are going to have a
review of the use of sanctions, and absolutely on cyber-
attacks. But we are also suffering today in a decline of the
democracy. Human Rights Watch said the last 4 years were a
disaster for human rights. American values have been under
attack. We have a decline in the number of democratic states in
the world.
So Congress has passed sanction regimes in order to deal
with strengthening the democratic states. And we have done that
on specific issues. We have done it on the global Magnitsky
statute, and I just really want to encourage you, as you are
reviewing the use of sanctions, to recognize that we have real
challenges today, and the United States has to exercise its
leadership.
Senator Young and I have introduced legislation to deal
with corruption. Corruption is one of the most corrosive
elements in the decline of democratic states, and we are
suggesting using a tier system on how countries are dealing
with corruption. Some of it will be dealing with human
trafficking--with consequences.
So my first question is about your willingness to work with
us in Congress so that we can be united in the use of sanctions
globally to advance U.S. values.
Dr. Yellen. You have my pledge, Senator Cardin. I look
forward to working with you. These are very important
challenges and goals. Sanctions are a tool that can be very
effective, and I pledge to work with you on implementing them
in a way that does address these abuses.
Senator Cardin. Thank you.
My second point is an area that has been mentioned by many
members, including yourself in your opening statement, and that
is dealing with our minority community, the under-banked
community, the under-served community, as we come out of COVID-
19.
I have the honor of being a lead Democrat on the Small
Business Committee and have worked with Senator Rubio in
developing a lot of the tools that were in the first two major
COVID relief packages. And we learned a lot from that.
It is difficult to get to the under-served communities, and
we really do need to concentrate and find better ways to deal
with them. We did learn that small businesses that are stressed
much prefer a grant than a loan, even a forgivable loan,
because they really do not want to put another loan on their
books.
So we have looked at ways to develop grants that are
targeted to the most vulnerable small businesses. We know that
they need resource partners so that they are not last in line,
but first in line in order to be able to get help. We know that
there is a very limited amount of venture capital, particularly
in emerging markets, for minority small businesses. And we
certainly know the smaller the small businesses are, the more
vulnerable they are.
So my plea to you is that, as you are developing these
packages, please work with us and what we have found that has
worked, and what has not worked, so we can really help the most
vulnerable of our small businesses, the most vulnerable of our
communities, as we look for tools to help those communities
that are targeted to provide the relief to communities that
have been left out for way too long.
Dr. Yellen. Senator, I pledge to work with you closely on
that. This is a very high priority objective of President-elect
Biden. The proposal that he put forward last Thursday does
contain funding for additional grants to these very hard-hit
businesses, and also funds, a small business opportunity fund
that would be able to be leveraged and enable various State and
nonprofit programs to leverage a large volume of lending to
businesses that have been hard-hit and that have opportunities.
But we will look for ways to target it and work with you
closely to understand what is best.
Senator Cardin. I thank you for that. My last question
deals with the lack of retirement security for Americans.
Before COVID-19, we were not doing what we needed to do. As a
result of COVID-19, more and more households are not saving
anything for retirement today.
We passed some legislation in the past, the SECURE Act. I
have worked with Senator Portman on bipartisan legislation. We
are working on bipartisan legislation in this Congress. I would
just urge you to be an active partner with us in how we can
increase retirement security options for workers in this
country.
Dr. Yellen. I completely agree with the priority that you
place on this, Senator Cardin. Really, so many families are not
prepared for retirement and have not been able to save for it.
It is a huge problem, and the pandemic is making it worse, as
hard-hit families are running down their savings. I think in
this economy, everyone needs access to a workplace retirement
saving plan, and I look forward to working with you to address
this issue.
Senator Cardin. Thank you very much. And thank you for your
willingness to serve.
Dr. Yellen. Thank you.
Senator Crapo. Thank you.
Senator Cassidy?
Senator Cassidy. Hey, Dr. Yellen. Nice to see you again.
And again, thank you for our conversation before.
You used the word ``targeted'' multiple times in your
response to Senate Cardin. Senator Carper suggested that
perhaps the Biden plan could be a little bit more targeted. The
extra $1,400 to families, some of whom, you know, are working,
they see no decrease in their income, many of whom actually--an
analysis from the first check, the $1,200, showed that for many
it turned out to be discretionary income. They put it in
savings, and there are some reports that there was more money
invested in the stock market.
So do you--since you mentioned ``targeted,'' would you view
this additional $1,400 stimulus check as a targeted relief?
Dr. Yellen. Well, I believe that in the President-elect's
proposal it would go to individuals earning $75,000 or less, or
couples earning $150,000 or less. Some families presumably do
not greatly need the money, but there are many families who
were under stress, people have had to drop out of the labor
force while receiving unemployment----
Senator Cassidy. I only have 5 minutes. But on the other
hand, the unemployment insurance that has gone out there was
very directed relief for those who have had to drop out of the
workforce. I totally accept that. But it seems like the $1,400
on top of the unemployment, and on top of some of the other--
you know, the rent relief, for example, seems to be less
targeted. And I go back there because ``targeted'' keeps on
coming up.
Dr. Yellen. It is less targeted. But there are many
families that are bearing unacceptable financial burdens that
are not addressed by unemployment compensation. People who have
had to drop out of the labor force because their children are
out of school, who simply cannot participate because they need
to take care of family priorities----
Senator Cassidy. Can I interrupt again, just because--I do
not mean to be rude. I only have 5 minutes, and I only have
2\1/2\ left.
There is also money for education. And I will note that in
the COVID relief package just passed, plus the CARES package, I
think we have put in a net of $66 billion for education. The
total of Federal outlay is typically only $57 billion. So we
actually are over 100 percent of what the schools already get.
Again, if we are looking at what is targeted--although I am
sure there is always somebody who has need--it seems as if that
need would have been met with an over 100-percent increased
subsidy to a school. So I will just mention that.
Let me ask you a couple more things. The previous
administration considered issuing 50-year bonds to take
advantage of the low interest rates, and to retire some of the
shorter-term bonds. Is that something that you would consider?
Because I think they decided against it, but I am just
wondering what your appetite would be. What would you think
this administration's appetite would be for that?
Dr. Yellen. Well, there is an advantage to funding the
debt, especially when interest rates are very low, by issuing
long-term debt. And I would be very pleased to take a look at
this issue, examine what the market would be like for bonds at
that maturity, and I am interested in hearing your thoughts on
this issue and working with you on that.
Senator Cassidy. Let me also ask about infrastructure,
because that may involve borrowing. In infrastructure, clearly
the problem of the big package has been, how do we finance it?
Now if we spend roughly $450 billion on increased stimulus
checks, well, intuitively that is going to take away some of
the appetite for more deficit spending for an infrastructure
package. But obviously, putting Americans back to work with an
infrastructure program would be very beneficial for Americans.
I will just say that editorially. It does seem that there
is only going to be a certain limit for borrowing if we do not
have a source of revenue to pay for it.
Let me go back to the infrastructure. What thoughts do you
have on infrastructure? And is this one of the programs that
you see the Biden administration would be considering not
raising revenue for but probably just borrowing in order to pay
for it to get the economic benefit?
Dr. Yellen. Well, I think that--so let me just say that
President-elect Biden has proposed an ambitious Build Back
Better program that involves infrastructure. It involves clean
energy, investing in manufacturing, R&D training, and we have
yet to decide exactly how that should be financed. Remember
that companies often borrow to invest in projects that have
sufficiently high returns where there is a net benefit. And
there are at least some investment programs for the public
sector that have been shown to have extremely high returns
where I think one could argue for borrowing to finance them.
But that is something that we will have to look at
carefully, the financing of those programs.
Senator Cassidy. Thank you very much. I yield back. Thank
you.
Senator Crapo. Thank you, Senator Cassidy. And to all of
the Senators, we have a limited time available in this room. We
still have time to get through all the questions, but I am
going to ask all the members to please pay very close attention
to the clock.
With that, we go next to Senator Brown.
Senator Brown. Thank you, Mr. Chairman. Dr. Yellen,
welcome. I am looking forward to working with you to make the
World War II-level investment we need to defeat the pandemic
and build a better economy that honors the dignity of all work.
Last week on the way out the door, the current Treasury
Secretary rushed through an agreement with the Federal Housing
Finance Agency that locks in big changes to the GSEs, leaving
you to deal with the consequences. In the Banking and Housing
Committee, I have laid out a path for reforming our housing
finance system. I look forward to working with you on these
principles, and on implementing the $25-billion Emergency
Rental Assistance program we passed last month.
We also need to make sure that the IRS is enforcing our tax
code in a fair way. I want to work with you to make sure the
IRS's auditing and enforcement activities do not have disparate
impacts for black and brown communities, as soon-to-be-chair
Wyden has brought up also.
Another critical issue is fixing the multiemployer pension
crisis. There are over a million Americans relying on us to
save the pension that they have already earned. I am glad
Senator Stabenow raised that earlier. I look forward to working
with her and with you to address this problem, which gets worse
by the month.
Many of us also were excited that the President-elect
included an expansion of the Earned Income Tax Credit and the
Child Tax Credit in the rescue plan, especially the
refundability of it. That is going to make a huge difference in
the lives of so many families. I thank my colleague, Senator
Bennet, for his partnership on this.
For the first time ever--and we have talked about this--we
can give families the option to get their CTC checks monthly.
That is what my Working Family Tax Relief Act calls for. If we
combine that with the plan to give every American access to a
no-fee checking account at a community bank or credit union, or
the Post Office, we can give millions of families the security
of a steady financial boost and give them more power over their
lives. They will not have to worry about a predatory financial
institution charging them exorbitant fees just to use their own
money.
So I have two quick ``yes'' or ``no'' questions. If we make
monthly distribution optional for families, will you ensure
that IRS makes every effort to implement it as fast as
possible?
Dr. Yellen. Yes, I will. I will need to consult with IRS,
but I will try to get it implemented as rapidly as possible.
Senator Brown. And, Madam Chair, if the IRS needs
additional funding to make this happen, will you make sure the
President-elect's budget proposal includes the funds the IRS
will need?
Dr. Yellen. Yes.
Senator Brown. Thank you.
Turning now to the impact, following on from Senator
Menendez, on State and local governments, how that affects
millions of workers: my State faces a $2.4-billion budget gap.
My State--all States need help for the layoffs of teachers and
firefighters and sanitation workers and children's service
workers. I am glad President-elect Biden understands that and
is calling for that $350 billion in new aid.
Just, if you would expand a bit, briefly, what are the
costs if our country fails to make this investment in local and
State governments?
Dr. Yellen. Well, we are already seeing substantial layoffs
of teachers. And with budget shortfalls, we are going to see
further layoffs of essential workers, including policemen and
firefighters and sanitation workers. And not only is this going
to be a further hardship for these essential workers in the
communities that they serve, but it is also going to have
ripple effects through the economy as they contract their
spending and create further job losses throughout the economy.
And so I think it is very important that we provide this
aid. It is also critical to get children back to school. The
State and local governments and their school systems need the
resources to reopen schools. It is President-elect Biden's plan
to try to have that happen within the next 100 days, but the
schools need more resources that State and local governments
would be hard-pressed to provide.
Senator Brown. Thank you, Madam Chair. A number of my
colleagues have talked today about competitiveness. It is clear
from your comments you understand that corporations paying
their fair share and reforming our tax code puts workers first,
American jobs first, and actually helps America competitively.
So investing in workers through the dignity of work helps us be
more competitive.
Mr. Chairman, I will just close with this. I wanted to talk
for a moment about the work that you and I did in the Banking
and Housing Committee. I appreciate Chair Yellen's comments
today in The New York Times about restoring FSOC to its
intended role.
I look forward to working with the chair and with Ranking
Member Toomey on that, climate change, creating clean energy
jobs, implementing, as you and I have talked about, Madam
Chair, our anti-money laundering bill where we are losing
billions of tax dollars to these anonymous overseas shell
corporations, revenue that could be used to do a lot of the
things that we have talked about today.
So I am thrilled that you are returning to public service.
And, Mr. Chair, I thank you for your forbearance.
Dr. Yellen. Thank you, Senator.
Senator Crapo. Thank you, Senator Brown.
Senator Lankford?
Senator Lankford. Thank you. Dr. Yellen, thanks again for
stepping back into government service. It is not an easy thing
for anyone to be able to step in, and especially in this
season. So thanks for stepping back in again to be able to do
that.
Let me ask you a whole multitude of questions, and I will
try to be rapid and be able to walk through some of these. You
made a comment to Senator Thune earlier saying eventually we
are going to have to deal with the issue of debt.
What is kind of the warning sign that you look for? And is
there an upper limit to the Federal debt that we should be
watching for? And in your perspective, what are the key signs?
Because if you use the word ``eventually,'' that would tell me
that you do not think it is infinite. What is that upper limit?
Dr. Yellen. Well, I would agree with you. I think there is
no single metric that summarizes a number for all fiscal
situations. But one metric that I do think is useful to keep in
mind is the interest burden of the debt. What share of our
economy, of GDP, is going to pay interest on the debt? The
higher that gets, the more we find we have to use tax revenue
just to pay the interest on the debt. And eventually that can
lead to having to curtail other services, other spending, or
eventually lead to runaway debt accumulation that would be an
unsustainable path.
During the low interest rate environment like we are in,
what we are seeing is that, even though the amount of debt
relative to the economy has gone up, the interest burden has
not.
So I would keep the interest burden in mind as a metric.
Right now it is low, but longer-term we have to make sure that
the deficits that we run in the Federal budget are consistent
with stability in that kind of ratio.
Senator Lankford. I would submit that we have to find an
earlier warning sign. Because once interest rates start ticking
up, in some ways it is too late because you have so much debt
and the interest rates begin to tick up. If you find that
moment when it is unsustainable, it rapidly gets worse.
You made a comment in an interview in 2018 that I want to
be able to follow up with you on. In this particular interview,
you said, the United States' debt path was unsustainable, and
that ``if I had a magic wand, I would raise taxes and cut
retirement spending.'' Do you remember what you meant by that?
It was a comment that you made in 2018, and I am not playing
quiz show with you to try to go back and be able to review
that. I want to know just your perspective in 2018. If you had
a magic wand, because of an unsustainable debt path, you would
raise taxes and cut retirement spending.
Dr. Yellen. Well, we have long known that as our population
ages, and if medical expenses and health-care costs continue to
rise over time at rates faster than the general level of other
prices, that there would be increasing shortfalls in both
Social Security and Medicare--and that eventually we would need
to find ways to address it.
And it does not have to be--these are very important
programs. I think it is important to remember that, once upon a
time, poverty in the United States--if you looked at who the
poor population was, it was the elderly. And these programs
have played an essential role in giving Americans a safe and
secure and dignified retirement. So we need to preserve these
programs, and certainly preserve the benefits, especially for
lower-income Americans who depend on them.
Senator Lankford. You are not discouraging retirement
savings, or tax incentives for individuals who choose----
Dr. Yellen. No, I think--I mean, I think we should also
have incentives and ways to help people save for retirement
above and beyond that. But I would want to see these benefits
preserved.
One thing that we could do to diminish imbalances is to
find ways to deliver health care more cheaply and more
efficiently. And there are a lot of ideas for doing that. And I
would look first to those kinds of things to achieve
sustainability.
Senator Lankford. Okay, so really what you meant by that
was not cut retirement spending. It was cut the amount that
retirees spend on health care? Is that what you are saying?
Dr. Yellen. Well, that would be an important way to find
ways to deliver these health-care services more efficiently.
Senator Lankford. Thank you. I will have several questions
for follow-up on the record about the role of OCC. Obviously
that is a different role. You had mentioned before, taxes not
right now. It would be hard to be able to do that right now. I
want to get a feel from you on what the initial metrics are you
are looking for before we can raise taxes, to be able to deal
with that. And also sanction issues with Iran and how that
specifically plays into the coming decisions you will have to
make. So I will submit those for the record, and I appreciate
your testimony.
Dr. Yellen. Thank you.
Senator Crapo. Thank you, Senator Lankford. I appreciate
the Senator's paying attention to the clock.
Senator Bennet?
Senator Bennet. Thank you. Thank you, Mr. Chairman; it is
good to see you. And thanks, Dr. Yellen, for your willingness
to serve. I think we are very, very lucky that you are willing
to do it, especially at this time.
And I wanted to say one word to my colleagues. I heard the
discussion today about the deficit. And I share the view that
in the long term we need to figure out how to create a
sustainable fiscal path for our country. I share that view. I
also believe that we made some poor choices in terms of what we
borrowed money to spend on. We had two wars in the Middle East
that lasted for 20 years that cost us something like $5.6
trillion, all of which was borrowed, none of which was paid
for. We have cut taxes by $5 trillion, almost all of it to the
wealthiest people in America. And we borrowed every penny to do
that. And, as Dr. Yellen was just saying, I do not think
anybody can take pride in this health-care system in America
that costs twice as much as any other health-care system in the
world, and we are borrowing a whole bunch of money to do that.
What we have not done is invested in our human capital, our
people. What we have not done is invested in our infrastructure
in America, in the next generation of Americans. So it is not
just a matter of what the balance sheet looks like; it is also
a question of what are the choices that we are making? And I
hope together we are going to make some choices with this new
administration to invest in the American people and give them a
fighting chance in this terrible pandemic, and in this slowing
economy.
And it brings me to my question for you, Dr. Yellen. I
cannot actually see you, but I wanted to talk about the
decision that the Biden administration made to include the
expanded Child Tax Credit and to make it fully refundable, to
take it up from the level that it is today to $3,000. Sherrod
Brown, my colleague from Ohio, and I have been working on that
for almost a decade. If this manages to make it through the
Congress, we will have cut childhood poverty in America by 45
percent. By some estimates, the cost of childhood poverty in
this country is a trillion dollars.
You were mentioning a minute ago in your answer to the
Senator from Oklahoma the importance of programs like Medicare
in ending the poverty we see among seniors, or diminishing it.
We have a crisis in our country, because so many of our
children are growing up in poverty.
It would seem to me that, of all the things we have talked
about today, at least from my perspective, I cannot think of
anything that would make a greater difference in the prospects
of the next generation, and of this country's prospects, than
cutting childhood poverty almost in half in the way that you
have proposed in the Biden recovery package.
I wonder, Dr. Yellen, if you could say a word or two about
the importance of that proposal.
Dr. Yellen. Well, Senator Bennet, I very much agree with
all of the points that you just made, that childhood poverty is
way too high in America. And one of the best ways that we can
reduce that is providing a refundable Child Tax Credit at a
level that really makes a dent in that. And I think that this
proposal is really important because, as you said, it will
substantially reduce childhood poverty, give families the
ability to invest in their children, and give them the kind of
tools that they need to succeed in this economy.
Senator Bennet. You know, one of the things we suggested in
our bill--I think Senator Brown talked a little bit about
this--is the idea that the Treasury Secretary could set up
monthly advance Child Tax Credit payments.
I wonder, just in the last seconds that I have, whether you
agree that monthly payments would aid in smoothing families'
incomes and spending levels over the course of the year, better
helping them make ends meet during this difficult time?
Dr. Yellen. I agree. These families have serious liquidity
issues, and not having to wait until tax day to receive these
payments would be very beneficial. So I would certainly explore
with the IRS if it is possible to make these available in
advance on a monthly basis.
Senator Bennet. Well, we look forward to working with you
on that. I am out of time. Mr. Chairman, thank you.
Senator Crapo. Thank you, Senator.
Senator Daines?
Senator Daines. Thank you, Mr. Chairman. And thank you, Dr.
Yellen, for being here today. I look forward to meeting with
you one-on-one later this week as well.
Before the pandemic, we had a booming economy. The national
unemployment rate was 3.5 percent, the lowest level we had seen
in 50 years. Wages were growing for workers across the board.
In fact, importantly, the wages for lower-income Americans were
finally growing faster than those for high-income earners. And
I believe this is due, in no small part, to the impact of the
Tax Cuts and Jobs Act signed into law in December of 2017.
I am concerned by President-elect Biden's plans to increase
taxes. I think that raising taxes in general is not a good
idea, but particularly in the middle of a pandemic. It will be
very harmful for growth.
If you think about Montana, in our State 99 percent of our
businesses are small businesses. And our small businesses, our
mom and pop shops across our State, every corner, they have
been hit hard by the pandemic. And this targeted relief has
helped some, but the last thing we should be doing, in my
opinion, is raising taxes--not ever, in fact, but especially
not during or after a pandemic.
Dr. Yellen, I would like to get your thoughts on this
topic. Do you agree that raising taxes while the economy is
still recovering from the pandemic is a bad idea?
Dr. Yellen. Well, Senator, the focus right now is on
providing relief, and on helping families keep a roof over
their head and food on the table, and not on raising taxes. But
longer-term, I think it is important to the Biden program of
Build Back Better, investing in people, investing in
infrastructure, investing in research and development, in
manufacturing and things that will create good jobs and make
our economy more productive. We need to think about taxes in
the context of the package that aims to do those things.
And to the extent that financing is required for these very
valuable investments, I believe it should be coming in a fair
way. Taxes--collections relative to the economy have declined
over time, and although the corporate tax cuts I think did
improve the competitiveness of American businesses--and
President-elect Biden is not proposing to raise the corporate
tax to the level before that act--it is very important that
corporations and wealthy individuals pay their fair share.
And the proposals that he will make will be in the context
of an overall package that is very beneficial to the economy.
And I think working in the context of the OECD negotiations on
global taxation, we have much greater leverage to keep our
firms, American firms, competitive if we avoid a race to the
bottom in corporate taxation globally. And that is one of the--
--
Senator Daines. I know we will have a chance to have
probably a vigorous and robust discussion about that, but I
want to remind everybody on this committee that it is the pass-
throughs and the non-C corps that are the primary drivers of
economic growth in a State like Montana. It is small
businesses. But we will have that discussion at a later point.
I want to shift gears about a bill I have with Senator
Warren on the Retirement Savings Lost and Found Act. This
really gets back to retirement policies to help Americans
ensure that they are saving for their retirement. This bill
recognizes, as people switch jobs--which Americans are doing at
higher rates than ever before--many unknowingly leave behind
employer-sponsored retirement savings accounts. This bill
addresses the problem by requiring Treasury and Social Security
to create a national lost and found registry, using data
employers are already required to report to the Treasury
Department.
Dr. Yellen, would you support this concept? It is a bill I
have with Senator Warren. And would you commit to working
together to make sure this will be administered smoothly by the
Treasury?
Dr. Yellen. Absolutely. I think it is an important
objective that you have outlined there. And if it does become
law, of course we will do everything possible to make sure that
it is implemented effectively.
Senator Daines. Okay. Dr. Yellen, I am out of time. Thank
you for your answers.
Senator Crapo. Thank you.
Senator Casey?
Senator Casey. Thank you, Mr. Chairman. Dr. Yellen, thank
you for your service to the American people again, and for----
Dr. Yellen. I am sorry, I cannot hear you.
Senator Crapo. Senator Casey, can you hear us?
Senator Casey. I can hear you.
Senator Crapo. Oh, we can hear you again. Why don't you
start again.
Senator Casey. Okay. Well, Doctor, thanks so much. I hope
you can hear me.
Dr. Yellen. Now I can hear you.
[Pause.]
Senator Crapo. Senator Casey, we cannot hear you anymore.
Can you hear us?
[Pause.]
Senator Crapo. I take it that we have a technical
difficulty. When we can get Senator Casey back connected, we
will return to him.
Is Senator Whitehouse--I think he had to step out----
Senator Whitehouse. No, I am here.
Senator Crapo. Oh, good. Go ahead, Senator Whitehouse.
Senator Whitehouse. Okay, great. Bob, I am sorry to bump
you. I hope your technology improves. Dr. Yellen, welcome back.
It is good to be with you.
The American political system right now is rotten with dark
money. Anonymous donors are all over our political system with
huge contributions that have been aptly described as a tsunami
of slime flowing through our country. ProPublica has chronicled
the inconsistent statements made by some of these groups
between what they report to the IRS and what they report to
election officials. Both statements are under oath, so when
they are inconsistent, that raises a red flag.
I just wanted to flag for you that when you are confirmed,
I intend to ask you to direct a review of the IRS 501(c)
policies. Because it is my belief that for a long time the
policies of the IRS have been very misaligned with a statutory
direction that Congress gave the IRS over these agencies, and
that to a degree, the IRS was bullied into taking these non-
statutory positions because there was so much blowback from the
dark money forces and from their mouthpieces when they tried to
intervene.
I think the 501(c) problem, and the extent to which
anonymous money is now interfering in our politics, is deadly
serious. And I hope when I ask you, you will take an honest
look at this and not appoint someone to do it who will give it
a whitewash, and instead take a really good, hard look at what
went wrong.
Dr. Yellen. Senator, I would be very glad to work with you
on that. You are pointing to a very disturbing situation, and I
will need to get up to speed on where things are with that. But
I would be glad to initiate a serious review of this matter.
Senator Whitehouse. Good. Another serious matter is Freddie
Mac warning of a coastal property value crash around the
country because of climate change-driven sea-level rise; 40
sovereign banks warning of systemic global risk to the economic
system from climate change; economists warning of a carbon
bubble that will clobber the U.S. economy.
And given how serious all of that is, I am wondering where
your senior-level climate person will be in the Department of
Treasury. There is no specific office. How are you going to
staff addressing climate at the most senior levels of Treasury?
Dr. Yellen. Well, I will look to appoint someone at a very
senior level to lead our efforts and to create a hub within
Treasury in which we particularly focus on financial system-
related risks and tax policy incentives toward climate change.
I think we need to seriously look at assessing the risks to
the financial system from climate change. The Federal Reserve
has recently said that they would be joining the network of
supervisors for greening of the financial system. There are
methodologies to do that, and we will focus on that.
Senator Whitehouse. In a word or two, how seriously do you
think we should take Freddie Mac's warnings of coastal property
value crash, the sovereign bank warnings of systemic risk, and
so many economists' warnings of a carbon bubble crash?
Dr. Yellen. I think we should take these risks very, very
seriously. I think climate change is an existential threat, and
both the impact of climate change itself, and policies to
address it, could have major impacts creating stranded assets,
generating large changes in asset prices, credit risks, and so
forth that could affect the financial system. So these are very
real risks.
Senator Whitehouse. And systemic risk is a mild phrase, but
it conveys a very powerful message, does it not?
Dr. Yellen. Yes, it does. I agree with you.
Senator Whitehouse. Last question: I believe that foreign
corruption and kleptocracy are inimical to our national
security interests. For too long, the U.S. has been a haven for
international corruption and kleptocracy through our shell
corporations. With intense leadership from Mike Crapo--who I
want to give a big shout-out to here--and Sherrod Brown, we got
into the national defense bill the Beneficial Ownership Reform
Incorporation Transparency bill, another tedious name for
something that is actually very brutal and essential. And I am
interested in who you think will lead the effort of cleaning up
that mess using this new statute within Treasury, and how high
up within Treasury you will place responsibility for cleaning
up the dark money shell corporation problem that America has
fomented.
Dr. Yellen. So let me start by saying that this is a very
important problem and that the act that was recently passed by
Congress gives us an enormously potent tool to address this
problem.
We will try to get up and running as quickly as possible
and devote ourselves to building that database so that we can
address these issues. And we will be certainly looking to give
this very high priority.
Senator Whitehouse. You agree it has a national security
dimension?
Dr. Yellen. Absolutely.
Senator Whitehouse. That is it for me. Thank you very much,
Dr. Yellen. I really look forward to working with you, and to
Bob Casey, my apologies for jumping ahead of you.
Senator Crapo. Thank you, Senator Whitehouse.
Senator Portman?
Senator Portman. Thank you, Mr. Chairman. And to Dr.
Yellen, thank you very much for your time you gave me recently
to talk about many of the issues that I know have come before
the committee today. I am going to revisit one that I am sure
has been talked about, which is the fiscal discipline question.
A Treasury Secretary can be very powerful within an
administration, providing a voice for fiscal sanity, and I
would urge you to do that.
Our conversation was about the relatively low interest rate
environment and the fact that you think that investments are
needed, and that going into further deficits and adding to our
debt is appropriate. I would hope, again, that although we do
have relatively low rates today, knowing that that could
change, we should not get too comfortable with that, and
second, that we have historic levels of deficits now, and as a
percent of our GDP, not seen since World War II, which is
frightening.
One quick story. When I was OMB Director under the Bush
administration--this is a long time ago, 14 years ago--I wanted
to propose a balanced budget over 5 years. And there was an
ability to do that, only 14 years ago. Think about that, a
balanced budget not over 10 years, over 5 years in the budget.
There was quite a debate in the administration at the time
and, frankly, I think I was on the losing end of it until
somebody weighed in. And that was Hank Paulson, who was then
Secretary of the Treasury. And I will always be grateful to him
for that. I think it was the right thing to do. At least it
showed that we could get to a balanced budget by making some
tough decisions, and the Treasury Secretary obviously was
someone whom people were listening to from an economic point of
view.
So with that, I do not know that I have posed a question,
but I would love to hear your response to what you see as your
responsibility to be a voice of fiscal sanity within the
administration.
Dr. Yellen. I completely agree with you, Senator Portman,
that the Treasury Secretary has to be a voice for fiscal
sanity. And I pledge--I pledge to do that. Our finances need to
be on a sustainable, long-run course, and that is very
important for us to focus on. I pledge--I pledge to do that.
Right now, short-term, I feel that we can afford what it
takes to get the economy back on its feet, to get us through
the pandemic, and to relieve the burdens that it is placing on
households and small businesses. And research from other
countries suggests that often spending money to address a weak
economy ends up creating a lower debt burden in the long run
than failing to provide that support. So that will be my focus
in the short run: getting the economy back on its feet.
But longer-run, there are challenges in achieving fiscal
sustainability. We have to make sure ultimately the deficits
that we run, if we do that, are consistent with fiscal
sustainability. The world has changed. I believe the future is
likely to bring low interest rates for a long time, but of
course it is a risk that interest rates can rise. And we need
to consider that risk as well in crafting a sustainable and
responsible policy.
Senator Portman. Thank you. I will look forward to working
with you on coming up with ways to deal with that long-term
structural deficit, because we all know about it. We all know
it is there. It is the mandatory spending side of the ledger.
And I have talked to you about this in our conversations
privately, but I do look forward to working with you on that.
The Tax Cuts and Jobs Act was passed in 2017, and the
resulting economic improvements were dramatic. We had, as of
February, as I recall, 16 straight months of wage gains of 3
percent or more, before COVID hit. It is unbelievable. We had a
poverty rate at record levels since poverty rates began to be
measured back in the 1950s. We have never had a rate as low as
we had going into the pandemic. Obviously unemployment was low,
historically low for many groups, including blacks, Hispanics,
and others.
So this is a good thing. We had an opportunity economy that
many of us talk about, but it actually was happening. And I
think a lot of it was because of the investment that businesses
were making, small and large alike, because of the tax reform
that really made it more advantageous to invest in America:
$482 billion in equipment, buildings, and--most importantly to
me--employees by U.S. businesses during this time period after
the 2017 bill and before the pandemic hit.
Let me ask you, if I could, about one part of that. And
that is the corporate rate. My understanding is that President-
elect Biden has talked about raising the corporate rate, and
also raising the amount of taxes that one would pay for global
income, both of which I think are going to result in less
investment in the United States. The whole reason we lowered
the rate was to be sure we were more or less competitive with
the rest of the developed world. Our rate is still, frankly--
when you include the State income tax--higher than the average,
but it is at about the average, whereas before, we had the
highest rate among all the developed countries. And what people
were doing was investing overseas, not in America. We were
losing jobs, and we were losing businesses. Companies were
inverting, we were losing investment, and much of that has
started to come back. It has been a good thing.
The bill introduced a concept of not just lower rates, but
also this global intangible low-tax income, the GILTI regime,
which is very complicated, but basically it is anti-base
erosion, meaning that it effectively acts like a minimum tax on
foreign earnings of U.S. companies. Prior to that, companies
could just defer their taxes forever because our rates were so
high people would defer, and defer, and defer. Now they have to
pay it. And you know, it is kind of a minimum tax.
The high U.S. tax rate we had before made the deferral
necessary, but it also caused this lock-out of foreign earnings
as a barrier to U.S. investment, again creating incentives for
acquisitions of U.S. companies by foreign companies that could
get a better deal.
So we both lowered the rate and eliminated deferral. As a
result, we have created a more level playing field. I just am
worried about these proposals to both increase the corporate
tax and to double the rate, as I understand it, on GILTI, on
this minimum tax, from 10\1/2\ to 21 percent. It would put us
again in a noncompetitive situation relative to our OECD
trading partners. And you know, the OECD right now is
considering a global minimum tax rate of 12.5 percent. So they
are going the opposite way, because they get it. This creates
more jobs in their countries.
So I hope that you will push back against that,
understanding that you may not approve all of the tax cuts and
tax reforms that were in there, but certainly on the business
side, this created an incentive to invest in America.
Senator Crapo. Senator Portman----
Senator Portman [continuing]. The ability to write off your
investment.
Senator Crapo. Senator Portman, we are on a time schedule
here because another committee needs to take this room. So
could I ask that to be a question for the record?
Senator Portman. Well, I would love to hear your response
in the record for that. Again, I appreciate our conversation on
that and other issues, and I look forward to hearing from you.
Thank you.
Senator Crapo. And, Dr. Yellen, I know you have responded
to that type of question a couple of times, but if you could
give a very thorough response to the question for the record,
because I thought that was a very well-stated question----
Senator Portman. Thank you, Mr. Chairman.
Senator Crapo. Thank you.
Next we will return to Senator Casey.
Senator Casey. Mr. Chairman, you can hear me now?
Senator Crapo. Yes. We got it.
Senator Casey. Thanks. Dr. Yellen, thank you for your
willingness to serve the American people again. We are grateful
for that.
I wanted to focus my questions, maybe two broad questions,
mostly on children. But they will touch on other issues as
well.
First of all, the role of both child care and early
childhood education, talking about early care learning, the
importance of that to the economy--and in particular to labor
force participation by women, which we know is a major
challenge we have. The pandemic has exposed the importance of
caregiving on our economy: those who care for and support
children, who support and care for seniors and people with
disabilities. We are seeing more clearly now, probably than
ever, the importance of quality, affordable care for those
Americans, and the connections between that care and our
economy.
In President-elect Biden's American Rescue Plan, he
included a provision very close to my bill, the Child and
Dependent Care Tax Credit, the expansion of that. So I just
wanted to ask you about both the question of child care and the
care economy as an economic imperative to the country.
If you could, discuss your ability to elevate this issue,
both as it relates to COVID-19 as well as the importance in
terms of the short- and long-term competitiveness of our
economy.
Dr. Yellen. Well, thank you for that question, Senator. I
feel this is a really critical area, both because of the
pandemic and longer-term. The availability of child care and
paid leave greatly affects the ability of women to participate
in the labor force. And once upon a time, we had one of the
highest labor force participation rates for women of any
developed country, and that has really changed, and we are no
longer anywhere near the top.
And where we stand out is that the United States does much
less on the front of child care and paid leave than most other
developed economies. And I agree that the competitiveness of
our economy and wanting women to be able to participate is
really critical to address the shortages, and it has been more
than evident in the pandemic. It is women who have suffered a
disproportionate loss in jobs, who have a disproportionate
burden of caring for children who are out of school, and for
relatives who are ill and need help. And it has really impacted
them mightily because of a lack of these supports.
Senator Casey. Well, I appreciate that, because it is, I
think, very much apparent now because of the pandemic how
important those programs are, and those strategies for
caregiving.
My last question, before my time runs out, Dr. Yellen, is
about kid savings accounts. This has been an idea that has been
around, proposed over the last 20 years. I have worked with
Senator Wyden on the Young American Savers Act. It is a measure
that I proposed, a similar measure in the debate on the 2017
tax bill. The Democrats all voted for it.
I think it is time, finally, to enact this savings account
to support equity building for our Nation's kids so we can also
at the same time support emergency savings for their parents.
Could you discuss briefly--and I know we only have less
than a minute left--the role of asset building in securing the
middle class?
Dr. Yellen. Well, just very briefly, Senator, I certainly
agree that assets are not only essential for people in dealing
with an emergency, it is shocking that such a large fraction of
Americans would not have $400 to deal with an emergency. And it
is necessary for home ownership, for business formation, for
saving. And we have huge wealth disparities--even greater than
income disparities--and a racial wealth gap has also worsened
over time.
So looking for strategies to address that gap and promote
asset building, I think should be very much at the forefront of
policy.
Senator Casey. Well, Dr. Yellen, thanks so much. Good luck
in your confirmation. I will have some other questions for the
record. Thank you, Mr. Chairman.
Dr. Yellen. Thank you, Senator.
Senator Crapo. Thank you, Senator Casey.
Senator Hassan?
Senator Hassan. Well, thank you, Mr. Chairman and Ranking
Member Wyden, for holding this important hearing and doing it
today. Thank you, Dr. Yellen, for appearing before the
committee, and for your willingness to serve our country during
this difficult time. Having someone with your expertise at the
Treasury is going to be pivotal to helping struggling families
and businesses as we work to contain the virus, protect and
create jobs, and rebuild the economy.
I have three questions that I think we can cover in our
time. As we discussed when we met earlier this month, Dr.
Yellen, I am working on a bipartisan effort with Senator Young
to expand the research and development tax credit for small
businesses. New businesses and innovative startups are a major
source of job creation, which is going to be key to rebuilding
our economy after we contain the virus.
Dr. Yellen, could you speak to the importance of R&D
investments to creating jobs and to the economic recovery? And
at the Treasury, will you work with us to explore ways to
support R&D through the tax code?
Dr. Yellen. Thank you, Senator. Certainly I look forward to
working with you. This is a very important matter. R&D is
essential to innovation and to the growth of our economy. It
has made a huge contribution. And I think you are absolutely
right that new businesses, and innovative businesses, have
driven job creation.
So finding ways to support R&D investments, including by
small or new businesses, is something I look forward to working
with you on.
Senator Hassan. Well, thank you, Dr. Yellen. As we continue
to assist struggling businesses to keep their employees on
payroll, we also need to strengthen support for the risk-takers
and innovators who create new jobs and help us grow the
economy.
Toward that end, the recent economic relief package
contained a bipartisan bill that I introduced with Senator Burr
to allow small businesses to both participate in the Paycheck
Protection Program and to claim the Employee Retention Credit.
Unfortunately, according to the National Federation of
Independent Businesses, one of the supporters of our bill, many
small businesses remain unaware that they can receive up-front
payments of the Employee Retention Credit to help keep workers
on payroll and cover employee health-care costs.
Dr. Yellen, how can Treasury increase awareness of the
Employee Retention Credit so that small businesses can quickly
and effectively receive the full range of economic relief
available?
Dr. Yellen. Well, Senator, first let me say that I think
allowing these businesses to utilize both PPT and the Employee
Retention Credit was a very worthwhile innovation and should
really help a lot of businesses. So we want to make sure that
they know about it.
I will discuss this, I promise, with the IRS to see if
there is something that they can do, but perhaps we can also
work with nonprofits and with groups like the Federation for
Small Businesses to see if we can find ways to publicize it so
that they are aware that this is a benefit that is available.
Senator Hassan. Well, thank you. I think this is an
important factor in helping us accelerate the recovery and
protecting jobs. So thank you for your willingness to work with
us on that.
I want to switch topics a little bit to the issue of
terrorist financing. In previous Finance hearings with outgoing
Secretary Mnuchin, I have raised the importance of Treasury
programs that combat the financing of terrorist and criminal
organizations. The bipartisan National Defense Authorization
Act passed earlier this month included a provision led by
Senator Warner that established an advisory group with Treasury
to counter new ways that terrorists use emerging financial
technology. One area of growing concern, for example, is the
potential for terrorists and criminals to use cryptocurrency to
finance their activities.
So, Dr. Yellen, can you outline some of these emerging
technological concerns and how Treasury should combat new forms
of terrorist criminal financing?
Dr. Yellen. Senator, I think you are absolutely right that
the technologies to accomplish this change over time, and we
need to make sure that our methods for dealing with these
matters of terrorist financing change along with changing
technology. Cryptocurrencies are of particular concern. I think
many are used, at least in the transactions sense, mainly for
illicit finance, and I think we really need to examine ways in
which we can curtail their use and make sure that anti-money-
laundering does not occur through those channels.
Senator Hassan. Thank you, Doctor. Thank you, Mr. Chairman.
My time is up. I look forward to working with you, Dr. Yellen.
Dr. Yellen. I look forward to working with you as well.
Senator Crapo. Thank you. And next is Senator Cortez Masto.
Senator Cortez Masto. Thank you, Mr. Chairman----
Senator Wyden. Senator Crapo, with leave from my colleague
from Nevada, and in no way taking from her time, I would just
like to take maybe 90 seconds to describe where I think we are
with respect to the Yellen nomination. I hope that will be
acceptable to my colleague from Nevada. I will be very quick,
and this does not come off of her time.
Senator Crapo. Yes.
Senator Wyden. The majority and minority have been talking,
and we now have an agreement that Senate Finance Committee
members will have their questions in for the nominee tomorrow.
Senator Crapo. Close of business tomorrow.
Senator Wyden. Close of business tomorrow. So my hope would
be, Senator Crapo, that we could have Chair Yellen on the floor
of the United States Senate on Thursday. And obviously we are
taking it a day at a time, and we have made some headway here
in the last hour regarding deadlines for member questions. I
mean, this is a person who has been confirmed again and again
and again, and all these past Treasury Secretaries are in
support of her. So I appreciate the discussions that we have
had in the last hour. We have made some progress. I hope she
will be on the floor on Thursday. Thank you.
Senator Crapo. Well, thank you, Senator Wyden. And I will
talk with Senator Grassley, and we will work with members on
our side to work expeditiously. Thank you.
Now, Senator Cortez Masto.
Senator Cortez Masto. Thank you. Thank you, Mr. Chairman.
Dr. Yellen, congratulations. Thank you for the courtesy
meeting last week. I am going to try to keep it brief. It has
been a long morning and afternoon for you, and I thank you so
much for your patience. I enjoyed listening to all of your
responses to my colleagues.
Two issues: hospitality--and we have talked about that. And
the other is housing. So let me just talk a little bit about--
as you well know, in Nevada we have been so hard-hit. Before
the pandemic, the travel and tourism industry was one of the
largest sectors of the economy. In 2019, travel generated $1.1
trillion in spending and supported 15.8 million American jobs.
But the COVID-19 pandemic has devastated the travel industry
more than any other sector of the economy. And according to
Oxford Economics, the U.S. lost $510 billion in travel spending
and 4.5 million travel jobs in 2020.
So my question to you is, what are your recommendations for
addressing this hardest-hit service sector and its workers,
like those in Nevada and across the country?
Dr. Yellen. Well, Senator Cortez Masto, I am really aware
of just how badly the Nevada economy has been impacted by the
pandemic because of the focus on travel, tourism, leisure
activities. This is, as you said, the hardest-hit sector with
the most pain and job loss, and getting this pandemic addressed
and over with so people can go back about their lives and
travel and enjoy leisure activities is top of the agenda--and
in the meantime, making sure that we support the workers and
the businesses that have been so badly affected, giving them
what they need to get through this and come out the other side,
and to help State and local governments in a variety of ways
reopen schools and make sure that you do not have to fire
emergency workers because of the budget pressures that your
State faces, and others.
Senator Cortez Masto. Thank you, Dr. Yellen. Let me be a
little bit specific. Last fall, Senator Cramer and I introduced
a bipartisan bill. It is the Hospitality and Commerce Job
Recovery Act. What it does is, it provides refundable tax
credits for businesses and individuals to boost demand for
travel, once it is safe to travel again.
I am curious what your thoughts are. Can tax credits be an
effective tool to incentivize spending and help certain sectors
like the service sector and travel sector recover and the
economy turn around?
Dr. Yellen. Well, Senator, I would be glad to take a look
at that and work with you and examine the details more fully.
Senator Cortez Masto. I appreciate that. Thank you.
As you said in your introduction, you know that the sector,
particularly the service sector, has been so disproportionately
impacted, we need to continue to provide relief and investments
in this sector. So I am hopeful that you and the Biden
administration will work with us moving forward.
Housing--I know I have about a minute left. Let me ask you
this--and this was an issue. Nevada is literally dealing with
an affordable housing crisis that started even before this
pandemic. I know it is happening across the country. And we
talked a little bit about this.
Could you really address how the Treasury Department can
work with us, as well as the Biden-Harris administration, to
address what we see in the affordable housing crisis across the
country?
Dr. Yellen. It is a huge problem, Senator. And we really
need to devise effective ways to work on this and support
affordable housing. Things like the Low-Income Housing Tax
Credit, I think, have been very important, and we will need to
come up with other innovative strategies. This really is a
crisis in many parts of the country.
Senator Cortez Masto. Well, I know my colleague, Senator
Cantwell, mentioned this to you as well during this hearing. I
look forward to working with you, as well as the Biden
administration, to address this issue.
Thank you again for your willingness to serve.
Dr. Yellen. Thank you, Senator. I appreciate it.
Senator Crapo. Thank you, Senator Cortez Masto.
Senator Young?
Senator Young. Dr. Yellen, it is good to see you again. I
enjoyed our visit the other day. Congratulations once again on
your nomination.
Dr. Yellen. Thank you.
Senator Young. I would like to ask you, for starters, some
questions about our hardest-hit businesses. You know, it has
been widely reported that we are in the midst of a K-shaped
recovery where Wall Street is doing pretty well. So many of our
small businesses are doing well. In fact, we have seen record
profits from a number of them. Meanwhile, a number of our Main
Street firms are, if not hollowed out, certainly just
pockmarked with businesses that are shuttered on account of
this pandemic and associated public health measures.
In your July 17th testimony before a House subcommittee,
you indicated, Doctor, that there would be scars left on the
economy. And by that I infer you probably meant an erosion of
skills in our workforce, a loss of innovation that tends to
occur among the small firms, to say nothing of the future
opportunities for growth.
In the State of Indiana, it is estimated that one in four
small businesses faces closure, including generations-deep
family businesses that have really become pillars within given
communities. So there is a social and cultural dimension to
this as well. That's all if economic conditions do not improve.
Blessedly, we have invented these vaccines, and the economy
will be opening up. And we have a relief package that we came
together on and passed for the American people before year's
end. In light of that relief that we have offered, it seems to
be making a difference. There seem to be some sunnier days
ahead.
What do you expect the need to be for additional small
business assistance? And why do you expect that need to exist
to a particular level?
Dr. Yellen. Well, unfortunately, I fear we have some very
difficult months ahead before the vaccine has been widely
enough disseminated to really open up the economy and let
people get back to their regular lives of going out to eat in
restaurants, and engaging in entertainment, and things that
involve face-to-face contact.
So I think the PPP funding included in the last bill is
tremendously important. We are going to do everything we can to
work with the Small Business Administration to get that support
out as quickly and as effectively as we can.
These small businesses are the lifeblood of their
communities and provide a disproportionate share of jobs in
America. And so supporting them--I think of scarring as not
only affecting workers, but when businesses fail that have been
the backbones of their communities, that is permanent job loss
for workers and a tragedy for the communities.
So this is certainly something we want to do. And if more
funding is needed, we would come back and ask for that. We have
asked for some money for grants to the smallest businesses, and
some funding to support State and local nonprofits in getting
assistance out.
Senator Young. Well, and I have to say, that seems prudent
to me, Doctor. It is my sense, informed by conversations with
people on the ground as well as economists, that there will be
additional assistance needed for some of our hardest-hit
businesses. But we are going to have to continue to monitor
that. I think that is the right approach.
I also sense it is prudent--again after consultation with
others--to hold off certain campaign promises that might have
been made, and I want to get your perspective on that, in
particular, tax increases in the middle of a global pandemic
which has triggered this massive economic downturn.
Dr. Yellen. So the focus now is not on tax increases. It is
on programs to help us through the pandemic. But we also, the
President-elect also wants to pursue his Build Back Better
agenda to strengthen the economy and make sure that we create
good jobs at good wages for workers and invest in
infrastructure and our people. And in that context, there may
be a need for additional financing. We should not think about
tax increases in the abstract. I think anything that is
proposed should be focused on corporations, and on individuals,
and in the context of a larger program.
Senator Young. Yes, Doctor. So I will not focus on the
abstract. Let me get very particular. Are there any elements of
the revenue-raising portions of the Build Back Better plan that
you believe should be reconsidered?
Dr. Yellen. I am not sure what you have in mind. There have
been a few things that have been specified, but probably not a
complete program. President-elect Biden has proposed increasing
the corporate tax and making American companies that offshore
jobs, reducing those incentives, and in doing that, I think
worrying about the competitiveness of American business would
propose to do this in the context of global agreements on
corporate minimum taxes.
Senator Young. I am grateful for the answer. I will have to
probably submit some follow-up questions for the record
pertaining to the loss of jobs. But should companies invert--
that is, send their headquarters overseas to have lower tax
rates--which was one of the reasons that the rate was lowered
initially, but nonetheless----
Dr. Yellen. We need to avoid that, for sure.
Senator Young. Yes. Good. We agree on that as a matter of
principle.
You and I discussed my proposal with Senator Bennet to
create a long-term working capital loan program for our
hardest-hit businesses. It is called the RESTART Act. Sixty
bipartisan co-sponsors were earned here in the United States
Senate, roughly 180 in the House of Representatives, and
thousands of small businesses in Indiana and across the country
were supportive of this.
To the extent we need additional small business relief, and
you have indicated we might, is this something that you might
work on with me and Senator Bennet to try and perfect and
perhaps implement in a bipartisan way?
Dr. Yellen. Absolutely; I would look forward to working
with you on that.
Senator Young. Thank you so much.
Senator Crapo. Thank you, Senator Young.
Senator Sasse?
Senator Sasse. Thank you, Mr. Chairman.
Dr. Yellen, congratulations on your nomination, obviously
an important capstone to a very distinguished career.
I want to focus on a set of topics that involve the
national security equities of the Treasury Department, more
than some of the topics of the last couple of questions. It is
my view that whenever the Senate is fulfilling our advice and
consent obligations with regard to any senior position that has
national security equities, one of our obligations is to make
sure that the nominee in question regards herself or himself as
having a national security portfolio.
And secondarily, I think is it clear that there is a
bipartisan consensus in the Senate now--I come to you having
just been in the Intelligence Committee hearing, first open and
then closed--and the bipartisan consensus is overwhelming that
the number one long-term geopolitical threat the United States
faces, not just in the next 4 years but probably in the next 4
decades, is the Chinese Communist Party.
So I want to ask you two questions about that first. Dr.
Yellen, do you believe that the Secretary of the Treasury is a
national security position in the President's Cabinet?
Dr. Yellen. Absolutely. I think Treasury, along with the
rest of the administration, needs to stay laser-focused on
that. We have many tools that are implemented through Treasury
to address national security concerns. The Treasury leads the
CFIUS process, and we have sanctions and enforcement actions
that can serve to dismantle financial and support networks of
those who seek to do us harm. And certainly leadership of
Treasury is important, and it is a priority.
Senator Sasse. Thank you. I am glad to hear you say that,
Dr. Yellen. Both the CFIUS point and the portfolio and
sanctions regime. I also in the past have chaired the
subcommittee of Banking that deals with sanctions. And I agree
with you that you have a very important and professional staff
in that area, and I am glad to hear that you regard it as a
priority.
Do you regard the Chinese Communist Party as an existential
threat to the United States?
Dr. Yellen. Well, I regard China as our most important
strategic competitor, and feel it is necessary to devise an
administration-wide and multi-faceted approach to address the
threats that China causes.
And certainly we need to target illicit activities that are
linked to theft of intellectual property and trade secrets,
illegal efforts to acquire critical technologies and sensitive
U.S. data, and fentanyl traffic, among other things.
Senator Sasse. Thank you. I agree with your list. In
addition, I wonder if you would regard Chairman Xi and his
regime as guilty of genocide in Xinjiang at present?
Dr. Yellen. I think it is guilty of horrendous human rights
abuses, yes.
Senator Sasse. Thank you. I do think the word, not to
quibble here--I will not make you respond precisely to the word
``genocide,'' but I think it is important for us to recognize
what has been happening in Xinjiang is a genocide. And so it is
not just one issue among many, where we can sort of varnish it
as merely a geopolitical competitor. Chairman Xi's regime is
evil, and they are raping and torturing Uigur women at present.
So I think we need to be well-aware of the nature of the regime
we are dealing with.
Obviously one of the most important pieces for the purposes
of thinking about the future of the U.S. economy is the long-
term technology race we face with China. For years, American
economic and technological innovation have fueled the CCP's
mastery of the digital economy, and then they have gone on to
use that mastery of the digital economy to do a parade of
horribles, some of which you just listed, importantly.
Could you walk us through how you think about a review of
our technological interdependence with China? And do you
believe that some degree of decoupling is going to be incumbent
upon us in the next 4 years?
Dr. Yellen. Well, I think that we face a significant
competition with China. And to address the subsidies that China
has put in place, and other policies to erode our technological
edge, I think first and foremost we have to make sure that we
as an economy make the investments that enable us to compete
with China, investments in manufacturing and infrastructure and
training and research and development, that are ultimately our
sources of economic strength.
But we need to aggressively counter unfair practices that
China uses, whether it is forced technology transfer or to
invest in ways in the United States that are dangerous to our
national security.
Senator Sasse. Thank you. I agree with you that there are a
number of strategic areas where we are under-investing, from AI
to quantum to biotech to robotics, machine learning, et cetera.
But as relates to 5G in particular, and Huawei, could you use
that as a case study to walk us through kind of how you think
our policy should be unfolding in the 5G space, and how we
should be trying to bring together allies to battle the unfair
practices that we see from Huawei around the world?
Senator Crapo. And, Senator Sasse, may I ask that you make
that a QFR? Because we are running against a tight deadline
here.
Senator Sasse. Yes, Mr. Chairman. Dr. Yellen, I will make
that a QFR. And again, congratulations on your nomination, and
we look forward to working with you on these topics.
Dr. Yellen. Thank you, Senator Sasse.
Senator Crapo. Thank you, Senator Sasse.
We are running up against a tight deadline here, because we
have to have this room available for another committee. But we
are going to return to two Senators, Senator Toomey and Senator
Menendez, and then we will wrap up the hearing.
And with that, Senator Toomey?
Senator Toomey. Thank you very much, Mr. Chairman.
Dr. Yellen, I want to talk just a little bit about housing
reform, housing finance reform, I should say, which I think in
some ways is the great unfinished business of the financial
crisis. As you know, the GSEs, Fannie Mae and Freddie Mac, are
still in conservatorship, still perceived as too big to fail.
Now they hold no capital.
But Secretary Mnuchin and Director Calabria of the HFHA did
take some significant steps, it seems to me, steps in the right
direction. While I would have preferred going further, at least
there is an end to the automatic profit sweep. There is the
opportunity to build up capital through retained earnings.
There is a capital target now for the GSEs, and there are rules
that are meant to limit the acquisition of the riskiest loans
by the GSEs.
Have you had a chance to look at these reforms? And have
you determined that you would support leaving them in place?
Dr. Yellen. Senator Toomey, it is a very important matter.
Nothing is more important to the future of housing in the
United States than what we do with Fannie and Freddie. And I
need to look carefully at what has been put in place, and
ultimately we need to find a solution that has bipartisan
support and to work with Congress to craft an approach.
Senator Toomey. Okay. Will you commit to developing and
releasing reform principles both on the regulatory side as well
as on the legislative side?
Dr. Yellen. We will certainly give priority to studying
this issue and coming up with ideas about what should be done.
Senator Toomey. Okay. And just quickly to follow up on a
conversation we had the other day about the FSOC designations,
you know one of my concerns has always been that SIFI
designations raise the expectations of a taxpayer bailout,
should a problem occur. In a way, it designates these firms
that are so designated as too big to fail.
Interestingly, certain categories of financial institutions
have not been designated. And it occurs to me that certain
business models are inherently less of a risk to our financial
system--for instance, asset managers that simply hold assets on
behalf of investors, as opposed to banks that intermediate
credit and transform maturity.
So asset managers have not been designated as SIFIs thus
far. Do you agree with the decision that has been made not to
designate asset managers as SIFIs thus far?
Dr. Yellen. Well, when I served on FSOC as Fed Chair, it
was proposed to look at activities that asset managers engage
in that might pose systemic risks. And a paper was issued that
mentioned problems of possibly looking at high-leverage and
hedge funds. A working group was formed that was to look at--I
think it has since been disbanded--the matter of whether or not
some hedge funds have dangerous levels of leverage. Open-ended
mutual funds that promise daily redemption and liquidity that
invest in assets that are relatively illiquid can pose
problems.
And I think we saw some of those problems in March. I think
these are--this is an activities-based approach that FSOC was
pursuing. And I thought that that was the right approach.
So you know, I would hope to look again at some of those
approaches.
Senator Toomey. I will just point out, the decision was
made not to designate them. And I think that was the right
decision. And I would point out that money market funds have
been remarkably stable and successful.
But I appreciate that, and I look forward to working with
you on these and other issues. Thank you, Mr. Chairman.
Senator Crapo. Thank you, Senator Toomey.
Is Senator Menendez back? I am being told that he has not
been able to make it back. And so that will conclude the
questioning.
Dr. Yellen, you have made it through to the end of the
hearing. I know this was a long day for you, and we appreciate
the fact that you are willing to serve. We congratulate you on
your nomination. And as you probably heard in some of the
discussion, a number of the Senators will want to submit to you
questions for the record. Some have already been stated here
during the questioning period. Others will be submitted in
writing.
Those questions for the record are due by close of business
tomorrow. And as Senator Wyden indicated, the committee does
want to move expeditiously. So we ask you, Dr. Yellen, to
please respond to these questions for the record as quickly as
possible.
We would like some thorough answers to all of these
questions, but please respond to these as quickly as possible.
And with that, again, Dr. Yellen, thank you so much for
being here with us today. And this hearing is concluded.
[Whereupon, at 1:22 p.m., the hearing was concluded.]
A P P E N D I X
Additional Material Submitted for the Record
----------
Prepared Statement of Hon. Chuck Grassley,
a U.S. Senator From Iowa
Today, we welcome the Honorable Janet Yellen to consider an
anticipated nomination for her to become Secretary of the Treasury.
The role of Treasury Secretary covers responsibilities over a large
number of issues, including taxes; fiscal management, including the
debt; financial sanctions; and economic policies. The Treasury
Secretary also serves as Chair of the Financial Stability Oversight
Council, which has wide-ranging financial oversight and regulatory
authorities. Dr. Yellen has a history in academics, think tanks, the
Federal Government, and at the Federal Reserve.
This hearing takes place in the midst of an ongoing pandemic along
with significant divisions in Congress and in the Nation. I hope we can
move away from partisan divisiveness and personalized attacks against
each other. Dr. Yellen, if confirmed, you can be instrumental in
helping generate an environment for bipartisan efforts and reasoned
debate.
You've expressed that you have interest in aggressively pursuing
mitigation efforts toward climate change, which you see as a global
existential threat.
The incoming administration has also identified interest in raising
taxes, coupled with massive spending programs, and working to reduce
income inequality. And Senator Schumer has said that he'd like to
change America. I'll be interested in hearing more about those and
other things as we continue to consider your nomination.
As I've already indicated to you, I think it would be a big mistake
to raise taxes on individuals and businesses as they struggle through
an economic recovery and a pandemic. I know that the incoming
administration has said they'd like to pursue a two-pronged strategy,
with a massive stimulus followed by tax hikes coupled with even more
spending, maybe on infrastructure.
We are already closely examining President-elect Biden's proposal
for around $1.9 trillion of stimulus, which even some prominent
Democrat economists have said does not seem to be well-targeted. With
the trillions already in the pipeline, and close to $1 trillion of
relief enacted just a few short weeks ago, it is important to focus
efforts on pandemic relief. Now is not the time to enact a laundry list
of liberal structural economic reforms. Dr. Yellen, if you are
confirmed, I hope that you will work with us on the proposal.
Moving forward, President-elect Biden has stated numerous times
that no one making under $400,000 would see their taxes raised. For
example, last year on CNBC, Biden stated what we can think of as the
new Biden Rule that ``nobody making under 400,000 bucks would have
their taxes raised, period. . . .'' While I don't think we need to be
raising taxes, I will pay close attention to see that the incoming
administration abides by that new Biden Rule and doesn't go after
taxing small businesses and the middle class.
On my part, let me tell you that I believe in free and fair trade,
both internationally and domestically. International trade is important
for American business, and especially important to the agricultural
sector and farmers across America. I will make sure that the incoming
administration does not overlook the importance of agriculture, or
overlook the interests of rural America.
I am against foreign countries trying to tap into the U.S. tax base
with unilateral digital services taxes, under their self-proclaimed
``rights'' to invade our tax base. They don't have that right.
I don't support socialism, or Marxism, or so-called Democratic
socialism that would end with command-and-control policies. I also
don't support any rapid or drastic wiping out of industries and their
workers based mostly on ideology and often on misleading analyses, with
some notion of taking care of the carnage through massive government
income and wealth redistribution.
Prior to the pandemic, although there were economic and structural
challenges in the economy, we saw historic 50-year lows in unemployment
rates, record lows for gaps between minority unemployment and the
overall unemployment rate, inclusive growth with real wages growing
fastest for low earners, record highs in real median household income,
stronger median income growth for minorities than others, and
reductions in income inequality and poverty.
While those are goals of Democrats, we did not hear much from them
about these accomplishments. Those accomplishments came about in an
environment in which tax burdens were lowered and made more
progressive, and regulation was made more efficient.
Instead of welcoming the accomplishments, we have heard from the
other side that we need to change America. I would like to see us
continue with the accomplishments we saw prior to the pandemic.
Now, let me close with a comment on transparency. This committee
has traditionally expressed bipartisan interest in reminding all
nominees that transparency is important to our members. That means that
I expect that you will respond to inquiries from any Senator on this
committee, no matter which side of the aisle they sit on. Prompt and
thorough responses to our inquiries and investigations is what we
expect.
______
Prepared Statement of Hon. Ron Wyden,
a U.S. Senator From Oregon
Let me just say I share your views on the importance of cooperation
between the Treasury Department and members of this committee on both
sides of the aisle. But the fact is, the Treasury's record on this
matter over the past 4 years was beyond dismal. Requests from my office
were routinely met with useless, perfunctory responses, and in many
cases my requests were outright rejected for flimsy reasons. In fact, I
believe Secretary Mnuchin's responsiveness to requests from Democrats,
particularly in regard to requests for FinCEN information, merits
continued oversight. At the same time FinCEN was stonewalling my and
other Democratic colleagues' requests, the agency was fast-tracking
Republican requests.
I believe that under Chair Yellen's leadership, there will be a
return to the productive relationship we expect between Treasury and
the bipartisan members of this committee.
This is the second time in 12 years that a Republican President
will leave office with the economy in ruins. Today there's also a
surging pandemic and armed troops guarding the Capitol from far-right
insurrectionist attack. The Biden administration won't begin with
inaugural balls; it'll begin with all-out triage.
My top economic priority going forward is avoiding the mistake
Congress made in the last recession--taking a foot off the gas pedal
before recovery took hold. Congress didn't do enough in 2009 to help
the unemployed and struggling homeowners. If stepping off the gas
wasn't bad enough, 2 years later House Republicans passed policies that
yanked out the spark plugs and let the air out of the tires too. In
Oregon, it took 7\1/2\ years for unemployment to return to its pre-
recession level. That cannot happen again, or else millions and
millions of people will go through years of needless hardship. Some
will never recover the lives they had prior to the pandemic.
Unemployment is once again rising. Federal Reserve data shows that
workers of modest incomes are facing Great Depression-level
joblessness. One in five are out of work. The President pushed a false
choice between public health and economic recovery, and now the country
has neither.
The good news is, Chair Yellen is exactly the right person to lead
the Treasury Department through these big economic challenges. Nobody
could be better qualified for this job. Nobody deserves more credit
than Chair Yellen for the longest economic expansion in our history,
which lasted until the pandemic hit.
At the Federal Reserve, Chair Yellen challenged decades of
conventional economic wisdom that put too much focus on inflation and
deficits. She was correct that
policy-makers needed to focus more on wages, employment, and
inequality--and that the economy safely could run a little hotter.
Republicans criticized her at the time, and later they tried to
attribute her success to the outgoing administration. But the numbers
show the successes of Chair Yellen's approach. Unemployment went down,
wages went up, and a lot of working Americans were better off than they
were before. Who better to lead the Treasury Department and help kick-
start the next economic expansion than the person who was so integral
to the last one?
Right out of the gate, the Biden administration and Congress need
to send major relief to America's working families. Increasing relief
checks to $2,000 is key. So is extending enhanced unemployment
benefits. At Leader McConnell's insistence, the December package
reduced unemployment benefits from the CARES Act and extended them only
until the middle of March. There are groceries in my refrigerator that
will last longer.
This is a common story in Washington: key economic lifelines
expired, extended, expired, extended. Congress cannot go on with this
``snooze button legislating.'' Our workers and our economy need a
government that's reliable and predictable. That means the Congress
needs to tether the extension of unemployment benefits to economic
conditions on the ground with automatic triggers.
The tattered patchwork of State unemployment insurance systems also
needs fixing. States including Oregon were overwhelmed when the COVID
crash hit. In other cases it was because Republican lawmakers have
intentionally hobbled their UI programs. Workers suffer because of it,
particularly black and Hispanic workers. Congress needs to increase
base benefits, bring all workers into the system, and ensure it can
hold up in a crisis.
Congress also needs to fix our broken tax code, starting with the
proposition that corporations, millionaires, and billionaires must pay
a fair share. I'm developing a proposal to reform the taxation of
capital gains for the top three-tenths of 1 percent of taxpayers. My
plan would equalize tax rates for wage and capital income and minimize
the benefit of deferring taxes.
If you're a nurse taking care of COVID patients, you can't defer
your taxes--they come straight out of every paycheck. But if you're a
billionaire, you can defer, defer, defer--and then never pay any tax at
all. My plan would put a stop to that unfairness. The revenue would
preserve the Social Security guarantee for decades to come, with
additional funding for other priorities.
The outgoing administration was big on corporate tax giveaways, and
it increased incentives to ship jobs overseas instead of eliminating
them. I want to fix those mistakes.
The Treasury Department will have a key role to play on climate.
Much of America's energy policy is tax policy. There are currently 44
energy tax breaks on the books. I have a bill to replace them with
three focused incentives: clean electricity, clean transportation, and
energy conservation. I'm also developing legislation that would make
polluters pay for the costs of climate change, with a substantial
portion of the revenue returned directly to the American people through
annual cash payments.
The Treasury Department also plays a big role in trade. Over the
last 4 years, the American people heard a lot of tough talk about
trade, but the administration failed to deliver on most of its big
promises. It drove away our economic allies, isolating us in the fight
against trade cheats in China and elsewhere. Members of this committee
are also concerned about currency manipulation and other tactics used
to rip off American jobs.
I'm looking forward to working with Chair Yellen on all these
issues and more. With the country facing the worst economic crisis in a
century, it's critical that the Senate approves her nomination on Day
One. Everybody's got a constitutional right to foolishness, but nobody
can honestly question Chair Yellen's qualifications. It's a shame that
this country has never had a woman Treasury Secretary. Anybody who
doubts Chair Yellen's commitment to policies that give everybody a
chance to get ahead just hasn't been paying attention.
Chair Yellen, thank you for your willingness to return to public
service. President-elect Biden couldn't have made a better choice.
______
Letter From Former Secretaries of the Treasury
We write today to encourage the swift confirmation of Dr. Janet Yellen
as the 78th United States Secretary of the Treasury. Our Nation faces
urgent economic and national security challenges, and we believe that
delaying the confirmation of our government's principal economic
official would create unnecessary risk during this critical time.
Unprecedented economic conditions have created immense hardship and
threaten to further undermine our security and prosperity. With
millions of Americans out of work, long-term unemployment rising, and
activity stalled in large sectors of the economy, daunting challenges
will face the incoming administration. Addressing these pressing issues
will require thoughtful engagement by the Department of the Treasury.
Any gap in its leadership would risk setting back recovery efforts.
The Secretary of the Treasury also has a vital global role. As the
chief economic diplomat for the United States and an essential leader
in international economic policy, the Secretary not only represents our
Nation to foreign governments and international bodies, but also can
drive international cooperation to solve vexing global issues. Between
the recent turmoil in the United States and the magnitude and urgency
of international economic fallout from COVID-19, our allies are looking
for reassurance that our country will be a trusted and reliable
partner. Any delay in confirming Dr. Yellen will only allow concern and
confusion to grow among our allies.
Beyond domestic and international economic leadership, the Secretary of
the Treasury is also a critical participant in law enforcement and
national security efforts. Treasury leads the country's efforts to
monitor and combat financial crimes, terrorist financing, and other
illicit financial activity among state and non-state actors. The
threats to our national security from those who seek to exploit
financial systems or evade sanctions are real and require sustained
attention. At a time when our Nation's adversaries are actively looking
for national security vulnerabilities, any gaps in leadership at
Treasury will only serve to embolden them.
Finally, a word about Dr. Yellen. As former Treasury Secretaries, we
are well-aware of the demands of the job and the steepness of the
learning curve for new officials. It is our view--based on personal
experience for many of us--that Dr. Yellen's experience, knowledge,
judgment, and character make her uniquely qualified for this role. Our
assessment of her integrity and ability is widely shared, including by
the Senate, which has confirmed her several times, including most
recently in 2014, and before which she has regularly testified. It is
hard to imagine a better-prepared nominee to meet this great moment of
need than Dr. Yellen. We urge the Senate Committee on Finance to move
expeditiously to report her nomination to the full Senate to allow a
highly qualified public servant to take up her urgent responsibilities.
Sincerely,
George P. Shultz John W. Snow
James A. Baker III Henry M. Paulson, Jr.
Robert E. Rubin Timothy F. Geithner
Lawrence H. Summers Jacob J. Lew
______
Prepared Statement of Hon. Janet L. Yellen, Ph.D.,
Secretary-Designate, Department of the Treasury
Chairman Grassley, Ranking Member Wyden, members of the committee,
it is an honor to appear before you. And, Senator Feinstein, thank you
for that very kind introduction.
I have immense respect for the task before this committee:
rebuilding the American economy from its sharpest downturn in history.
If I am fortunate enough to be confirmed, I would strive to be a good
partner in that work. I've spent almost my entire life thinking about
economics and how it can help people during hard times.
My father was a doctor in Bay Ridge, Brooklyn. It was more of a
working-class neighborhood back then. His patients would take the bus
up from their jobs at factories or docks, and they'd come to our stoop
because that's where my dad's office was--in our basement.
He was the kind of doctor who treated the whole patient. He knew
about their lives; about when they'd been fired or couldn't pay. Those
remain some of the clearest moments in my childhood. My parents had
been children of the Depression, and they had a very visceral reaction
to economic hardship.
Economics is sometimes considered a dry subject, but I have always
tried to approach my science the same way my father approached his: as
a means to help people. And this committee, I believe, has viewed it
the same way--especially during these last few months. When economists
look back on the pandemic, I expect they'll conclude that Congress's
actions averted a lot of suffering.
But more must be done. Economists don't always agree, but I think
there is a consensus now: without further action, we risk a longer,
more painful recession now--and long-term scarring of the economy
later.
The pandemic has caused widespread devastation. Whole industries
have paused their work. Eighteen million unemployment insurance claims
are being paid every week. Food bank shelves are going empty. The
damage has been sweeping, and as the President-elect said last
Thursday, our response must be too.
Over the next few months, we are going to need more aid to
distribute the vaccine, to reopen schools, and to help States keep
firefighters and teachers on the job. We'll need more funding to make
sure unemployment insurance checks still go out, and to help families
who are at risk of going hungry or losing the roof over their heads.
Neither the President-elect, nor I, propose this relief package
without an appreciation for the country's debt burden. But right now,
with interest rates at historic lows, the smartest thing we can do is
act big. In the long run, I believe the benefits will far outweigh the
costs, especially if we care about helping people who have been
struggling for a very long time.
People worry about a K-shaped recovery, but well before COVID-19
infected a single American, we were living in a K-shaped economy, one
where wealth built on wealth while working families fell further and
further behind. This is especially true for people of color.
At the Fed, I became accustomed to the institution's dual mandate--
to promote stable prices and maximum employment. As Treasury Secretary,
I think there will be a dual mission too: helping Americans endure the
final months of this pandemic and keeping people safe while getting
them back to work. That's our first task. But then there is the longer-
term project. We have to rebuild our economy so that it creates more
prosperity for more people and ensures that American workers can
compete in an increasingly competitive global economy.
Members of the committee, these are very ambitious goals, and I
know we will need to work together. You can count on me to do that in a
bipartisan way.
My husband and son are watching us on C-SPAN from the other room.
They are not only wonderful people, they are also wonderful--and
opinionated--economists themselves. So I am used to debate about these
issues in the house. I'd welcome it in the Senate.
Thank you, and I look forward to your questions.
______
SENATE FINANCE COMMITTEE
STATEMENT OF INFORMATION REQUESTED
OF NOMINEE
A. BIOGRAPHICAL INFORMATION
1. Name (include any former names used): Janet Louise Yellen.
2. Position to which nominated: Secretary of the Treasury.
3. Date of nomination: November 30, 2020 (date of announcement of
nomination).
4. Address (list current residence, office, and mailing addresses):
5. Date and place of birth: August 13, 1946, Brooklyn, New York,
United States.
6. Marital status (include maiden name of wife or husband's name):
7. Names and ages of children:
8. Education (list all secondary and higher education institutions,
dates attended, degree received, and date degree granted):
Fort Hamilton High School, 1961-1963 (diploma received May
1963).
Brown University, B.A., 1963-1967 (degree received May 1967).
Yale University, Ph.D. economics, 1967-1971 (degree received
December 1971).
9. Employment record (list all jobs held since college, including the
title or description of job, name of employer, location of work, and
dates of employment for each job):
Brookings Institution, Washington, DC, Distinguished Fellow in
Residence (2018-Present).
Federal Reserve Board of Governors, Washington, DC, Chair
(2014-2018); Vice Chair (2010-2014).
Federal Reserve Bank of San Francisco, San Francisco, CA.
President and CEO (2004-2010).
White House Council of Economic Advisors, Washington, DC. Chair
(1997-1999).
Federal Reserve Board of Governors, Washington, DC. Member
(1994-1997).
University of California, Berkeley, Berkeley, CA. Eugene E. and
Catherine M. Trefethen Professor of Business and Professor of
Economics (1999-2004).
University of California, Berkeley, Berkley, CA. Bernard T.
Rocca Jr. Professor of International Business and Trade (1992-
1994).
University of California, Berkeley, Berkeley, CA. Professor
(1985-1992).
University of California, Berkeley, Berkeley, CA. Associate
Professor (1982-1985).
University of California, Berkeley, Berkeley, CA. Assistant
Professor (1980-1982).
London School of Economics, London, England. Lecturer (1978-
1980).
Federal Reserve Board of Governors, Washington, DC. Economist
(1977-1978).
Congressional Budget Office, Washington, DC. Consultant (1975-
1976).
Federal Reserve Board of Governors, Washington, DC. Consultant
(1974-1975).
Harvard University, Cambridge, MA. Assistant Professor (1971-
1976).
Yale University, New Haven, CT. Teaching Fellow and Research
Assistant (1969-1971).
Department of Labor, Washington, DC. Summer Intern (1967).
10. Government experience (list any current and former advisory,
consultative, honorary, or other part-time service or positions with
Federal, State, or local governments held since college, including
dates, other than those listed above):
Governor Gavin Newsom's Task Force on Business and Jobs
Recovery. Member (2018-2020).
California Assembly Select Committee on Asian Trade Advisory
Board (2003).
National Academy of Sciences (2000).
President's Interagency Committee on Women's Business
Enterprise. Chair (1997-1999).
Congressional Budget Office. Panel of Economic Advisers (1993).
National Science Foundation. Committee of Visitors, Advisory
Panel in Economics, Visiting Committee (1977-2004).
11. Business relationships (list all current and former positions held
as an officer, director, trustee, partner (e.g., limited partner, non-
voting, etc.), proprietor, agent, representative, or consultant of any
corporation, company, firm, partnership, other business enterprise, or
educational or other institution):
American Economic Association. President (2020).
Magellan Financial Group, Sydney, Australia (work done in
Washington, DC). Consultant (2019-2020).
Committee for a Responsible Federal Budget. Board of Directors
(2018-2020).
Washington Speakers Bureau, Washington, DC (spoke in many
different locations). Paid Speaker (2018-2020).
Delta Dental of California. Director (2003-2004).
Yale University. Fellow of the Corporation (2000-2006).
Bay Area Council. Member of the Executive Committee (2007-
2010).
Barter Trust. Adviser (1999-2000).
12. Memberships (list all current and former memberships, as well as
any current and former offices held in professional, fraternal,
scholarly, civic, business, charitable, and other organizations dating
back to college, including dates for these memberships and offices):
Bretton Woods Committee. Advisory Council (2019-present).
Aspen Institute. Economic Strategy Group (2018-present).
Group of Thirty. Member (2009-2010). Senior Member (2018-
present).
Climate Leadership Council. Founding Member (2017-present).
Yale Program on Financial Stability. Advisory Board (2019-
present).
Tobin Center for Economic Policy at Yale University. Advisory
Board (2020-present).
Bloomberg New Economic Forum. Advisory Board (2018-present).
Washington Center for Equitable Growth. Steering Committee
(2018-present).
National Economic Education Delegation. Honorary Board Member
(2018-present).
National Liberal Club. Member (2018-present).
British Academy. Member (2016-present).
Children's Hospital of Oakland, Board of Directors. Honorary
Member (2008-2010).
Western Economic Association. President (2003-2004).
University of California. Professor Emeritus (2006-present).
Women's Economic Roundtable. Advisory Board (1999-2004).
Council on Foreign Relations. Term Member (1976-1981). Member
(2005-present).
American Economic Association. Member (1971-Present). Advisory
Committee (1986-1987). Nominating Committee (1988-1990). Vice
President (2004-2005). President (2019-2020).
Pacific Council on International Policy. Board of Directors
(2004-2008).
Western Economics Association. President (2003-2004).
Macroeconomic Advisers. Senior Adviser (2003-2004).
Delta Dental of California. Member of Board of Directors (2003-
2004).
Jerome Levy Economics Institute. Board of Advisers (2002-2004).
Economists for Peace and Security. Trustee (2002-2010).
American Academy of Arts and Sciences. Member (2001-present).
The Faculty Club, University of California at Berkeley. Member
(1982-present). Director (2000-2002).
Yale Club of San Francisco. Member (1993-1996, 2000-2004).
National Bureau of Economic Research. Research Associate (1999-
2010).
Center for International Political Economy. Advisory Board
(1999-2004).
Brookings Panel on Economic Activity. Advisory Board (1999-
2004). Senior Advisor (1989-1994). Member (1987-1988, 1990-
1991).
OECD High Level Sustainable Development Group. Member (1999-
2001).
OECD Economic Policy Committee. Chair (1997-1999).
British Ambassador's Advisory Committee for the Marshall
Fellowships. Member of Advisory Committee (1997-1997).
Rollingwood Citizens Association. Member (1996-1999).
Chevy Chase Recreation Association. Member (1994-1999).
International Trade and Finance Association. Member (1990-
1994).
Journal of Economic Perspectives. Associate Editor (1987-1991).
Hadassah. Member (1987-present).
Committee on the Status of Women in the Economics Profession.
Member (1985-1996).
Congregation Beth El. Member (1983-1994).
Hiller Highlands Country Club. Member (1978-present).
Yrjo Jahnsson Foundation. Lecturer on Macroeconomics (1977-
1978).
13. Political affiliations and activities:
a. List all public offices for which you have been a candidate
dating back to the age of 18.
None.
b. List all memberships and offices held in and services
rendered to all political parties or election committees,
currently and during the last 10 years prior to the date of
your nomination.
None.
c. Itemize all political contributions to any individual,
campaign organization, political party, political action
committee, or similar entity of $50 or more for the past 10
years prior to the date of your nomination.
Democratic National Committee. $25,000 (September 24, 2020).
Biden for President. $2,800 (August 15, 2020).
Biden for President. $2,800 (March 1, 2020).
Democratic Congressional Campaign Committee. $250 (February 6,
2019)
McCaskill for Missouri. $2,500 (October 20, 2018).
Democratic Congressional Campaign Committee. $15,000 (October 8,
2018).
Donna Shalala for Congress. $1,000 (April 5, 2018).
14. Honors and awards (list all scholarships, fellowships, honorary
degrees, honorary society memberships, military medals, and any other
special recognitions for outstanding service or achievement received
since the age of 18):
Phi Beta Kappa (1966).
Graduated summa cum laude, with highest honors in economics,
Brown University (1967).
National Science Foundation Graduate Fellowship (1967-1971).
Honorary Woodrow Wilson Fellowship (1967).
Guggenheim Fellow (1986-1987).
Maria and Sidney Rolfe Award for National Economic Service,
Women's Economic Round Table (1997).
Wilbur Lucius Cross Medal, Yale University (1997).
Honorary Doctor of Laws degree, Brown University (1998).
Honorary Doctor of Humane Letters degree, Bard College (2000).
Fellow, American Academy of Arts and Sciences (2001).
Berkeley Fellow (2012).
Distinguished Fellow, American Economic Association (2012).
Fellow, Econometric Society (2014).
Honorary Doctor of Commercial Science, New York University
(2014).
Honorary Doctor of Social Science, Yale University (2015).
Honorary Doctor of Science, London School of Economics and
Political Science (2015).
Honorary Doctor of Laws, University of Warwick (2015).
Blackwell Award, Hobart and William Smith Colleges (2015).
Honorary Doctor of Laws, University of Baltimore (2016).
Radcliffe Medal, Radcliffe Institute for Advanced Study,
Harvard University (2016).
Paul H. Douglas Award for Ethics in Government (2017).
President's Medal, Brown University (2018).
Alice Award, National Woman's Party (2018).
Women of Power and Influence Award, National Organization for
Women (2018).
Global Leadership Award, Columbia School of International and
Public Affairs (2018).
Brooklyn Public Library Annual Award (2018).
Council on Economic Education, Visionary Award (2019).
Foundation Medal. University of California at Santa Cruz
(2019).
Dean's Medal, Brandeis International Business School (2019).
Truman Medal for Economic Policy (2019).
Honorary Degree, Tel Aviv University (2019).
15. Published writings (list the titles, publishers, dates, and
hyperlinks (as applicable) of all books, articles, reports, blog posts,
or other published materials you have written):
``Consequences of a Tax on the Brain Drain for Unemployment and
Income Inequality in Less Developed Countries'' (with Rachel
McCulloch), Journal of Development Economics, September 1975;
reprinted in J. Bhagwati, editor, The Brain Drain and Taxation:
Theory and Empirical Analysis, North Holland, 1976, https://
www.sciencedirect.com/science/article/abs/pii/03043878759000
48.
``Commodity Bundling and the Burden of Monopoly'' (with William
James Adams), Quarterly Journal of Economics, August 1976,
https://www.jstor.org/stable/1886045?seq=1.
``The Limits of the Market in Resource Allocation'' (with
Kenneth Arrow and Steven Shavell), Japan Trade Council,
monograph, 1977. (No link available online).
``Factor Mobility, Regional Development and the Distribution of
Income'' (with Rachel McCulloch), Journal of Political Economy,
February 1977, https://www.journals.uchicago.edu/doi/abs/
10.1086/260546.
``What Makes Advertising Profitable?'' (with William James
Adams), The Economic Journal, September 1977, https://
academic.oup.com/ej/article-abstract/87/347/427/
5220926?redirectedFrom=fulltext.
``Factor Market Monopsony and the Allocation of Resources''
(with Rachel McCulloch), Journal of International Economics,
January 1980, https://www.sciencedirect.com/science/article/
abs/pii/0022199680900562.
``On Keynesian Economics and the Economics of the Post-
Keynesians,'' American Economic Review, Papers and Proceedings,
May 1980, https://www.
washingtonpost.com/blogs/wonkblog/files/2013/10/
postkeynesians.pdf; reprinted in John Maynard Keynes: Critical
Assessments, Vol. 4, John Wood, editor, Croom Helm Ltd., 1983.
``Can Capital Movements Eliminate the Need for Technology
Transfer?'' (with Rachel McCulloch), Journal of International
Economics, May 1982, https://www.sciencedirect.com/science/
article/abs/pii/0022199682900770.
``Technology Transfer and the National Interest'' (with Rachel
McCulloch), International Economic Review, May 1982, https://
ideas.repec.org/a/ier/iecrev/v23y1982i2p421-28.html.
``Efficiency Wage Models of Unemployment,'' American Economic
Review, Papers and Proceedings, May 1984, https://
econpapers.repec.org/article/aeaaecrev/
v_3a74_3ay_3a1984_3ai_3a2_3ap_3a200-205.htm; reprinted in New
Keynesian Economics, Vol. 2, Coordination Failure and Real
Rigidities, N. Gregory Mankiw and David Romer, editors, MIT
Press, 1991.
``Unemployment Through the Filter of Memory'' (with George
Akerlof), Quarterly Journal of Economics, August 1985, https://
academic.oup.com/qje/article- abstract/100/3/747/1821525.
``A Near-Rational Model of the Business Cycle With Wage and
Price Inertia'' (with George Akerlof), Quarterly Journal of
Economics, September 1985, https://www.jstor.org/stable/
1882925?seq=1; reprinted in New Keynesian Economics, Vol. 1,
Imperfect Competition and Sticky Prices, N. Gregory Mankiw and
David Romer, editors, MIT Press, 1991.
``Can Small Deviations From Rationality Make Significant
Differences to Economic Equilibria?'' (with George Akerlof),
American Economic Review, September 1985, https://
econpapers.repec.org/article/aeaaecrev/v_3a75_3ay_3a
1985_3ai_3a4_3ap_3a708-20.htm.
``Efficiency Wage Models of the Labor Market'' (with George
Akerlof), an edited collection of papers with an introduction
by the authors, Cambridge University Press, 1986, https://
www.cambridge.org/core/books/efficiency-wage-models-of-the-
labor-market/B7BACB7EE736DBEC56D86F5F0068FA55.
``Rational Models of Irrational Behavior'' (with George
Akerlof), American Economic Review, Papers and Proceedings, May
1987, https://econpapers.
repec.org/article/aeaaecrev/v_3a77_3ay_3a1987_3ai_3a2_3
ap_3a137-42.htm.
``Fairness and Unemployment'' (with George Akerlof), American
Economic Review, Papers and Proceedings, May 1988, https://
econpapers.repec.org/article/aeaaecrev/
v_3a78_3ay_3a1988_3ai_3a2_3ap_3a44-49.htm.
``Comments and Discussion'' of ``The New Keynesian Economics
and the Output-Inflation Trade-off'' (with George Akerlof and
Andrew Rose), Brookings Papers on Economic Activity, 1988, Vol.
1, https://www.brookings.edu/wp-content/uploads/1988/01/
1988a_bpea_ball_mankiw_romer_akerlof_rose_yellen.pdf.
``Job Switching and Job Satisfaction in the U.S. Labor Market''
(with George Akerlof and Andrew Rose), Brookings Papers on
Economic Activity, 1988, Vol. 2, https://www.brookings.edu/
bpea-articles/job-switching-and-job-satisfaction-in-the-u-s-
labor-market/.
``Is There a J-Curve?'' (with Andrew Rose), Journal of Monetary
Economics, July 1989, https://econpapers.repec.org/article/
eeemoneco/v_3a24_3ay_3a1989_3ai_
3a1_3ap_3a53-68.htm.
``Symposium on the Budget Deficit,'' Journal of Economic
Perspectives, Spring 1989, https://www.aeaweb.org/
articles?id=10.1257/jep.3.2.17.
``Comments and Discussion'' of ``The Beveridge Curve'' (with
George Akerlof), Brookings Papers on Economic Activity, 1989,
Vol. 1, https://www.brookings.
edu/wp-content/uploads/1989/01/
1989a_bpea_blanchard_diamond_hall_yellen
.pdf.
``The Fair Wage Effort Hypothesis and Unemployment'' (with
George Akerlof), Quarterly Journal of Economics, May 1990,
https://www.jstor.org/stable/2937787?seq=1.
``Waiting for Work'' (with George Akerlof and Andrew Rose),
Federal Reserve Bank of San Francisco, June 1990, https://
www.nber.org/papers/w3385.
``How Large Are the Losses From Rule of Thumb Behavior in
Models of the Business Cycle?'' (with George Akerlof) in
William Brainard, William Nordhaus and Harold Watts, eds.,
Money, Macroeconomics and Economic Policy: Essays in Honor of
James Tobin, Cambridge, Mass: M.I.T. Press, 1991, https://
books.
google.com/
books?id=dahiA2ryJH0C&pg=PA59&lpg=PA59&dq=%22How+Large
+are+the+Losses+from+Rule+of+Thumb+Behavior+in+Models+of+the+Bus
iness+
Cycle?%22&source=bl&ots=qjQP-Y5Beh&sig=ACfU3U0hlP3x3Ke3y-
-bLmIzFvv
bHl5oqQ&hl=en&sa=X&ved=2ahUKEwj4v87euPTtAhUkxVkKHT49AvYQ6AEw
AXoECAEQAg#v=onepage&q=%22How%20Large%20are%20the%20Losses%20
from%20Rule%20of%20Thumb%20Behavior%20in%20Models%20of%20the%20
Business%20Cycle%3F%22&f=false.
``East Germany in From the Cold: The Economic Aftermath of
Currency Union'' (with George Akerlof, Andrew Rose, and Helga
Hessenius), Brookings Papers on Economic Activity, 1991, Vol.
1, https://www.brookings.edu/bpea-articles/east-germany-in-
from-the-cold-the-economic-aftermath-of-currency-union/.
``Comments and Discussion'' of ``Unemployment, Non-Employment
and Wages: Why Has the Natural Rate Increased Through Time?''
(with George Akerlof), Brookings Papers on Economic Activity,
1991, Vol. 2, https://www.
brookings.edu/book/brookings-papers-on-economic-activity-19912-
macroeconom
ics/.
Comment on ``East German Economic Reconstruction,'' by Rudiger
Dornbusch and Holger C. Wolf, in The Transition in Eastern
Europe, Olivier Jean Blanchard, Kenneth A. Froot, and Jeffrey
Sachs, editors, NBER and University of Chicago Press, 1994,
https://www.nber.org/system/files/chapters/c6019/c6019.
pdf.
``Gang Behavior, Law Enforcement and Community Values'' (with
George Akerlof), in Henry Aaron, Thomas Mann and Timothy
Taylor, eds., Values and Public Policy, Brookings Institution,
1994, https://www.brookings.edu/wp-content/uploads/2016/06/
gang-behavior-law-enforcement-community-values-aker
lof-yellen.pdf.
``An Analysis of Out-of-Wedlock Childbearing in the United
States'' (with George Akerlof and Michael Katz), Quarterly
Journal of Economics, May 1996, https://www.jstor.org/stable/
2946680?seq=1.
``New Mothers, Not Married: Technology Shock, Demise of Shotgun
Marriage, and the Increase in Out-of-Wedlock Births'' (with
George Akerlof), Brookings Review, Fall 1996, https://
www.jstor.org/stable/20080682?refreqid=excelsior
%3A36435cf3223ac5171fa71415db3b1a52.
``An Analysis of Out-Of-Wedlock Births in the United States''
(with George Akerlof), Brookings Policy Brief, August 1996, No.
5, https://www.
brookings.edu/research/an-analysis-of-out-of-wedlock-births-in-
the-united-states
/.
``Why Kids Have Kids: Don't Blame Welfare, Blame `Technology
Shock' '' (with George Akerlof), Slate, November 15, 1996,
https://slate.com/news-and-politics/1996/11/why-kids-have-
kids.html.
``Monetary Policy: Goals and Strategy,'' Business Economics,
July 1996, https://www.jstor.org/stable/23487605?seq=1.
``The `New' Science of Credit Risk Management,'' Federal
Reserve Bank of Minneapolis, September 1996, https://
www.minneapolisfed.org/article/1996/the-new-science-of-credit-
risk-management.
``Plan Helps Families, Nation,'' USA Today, July 30, 1997 at
12A. (No link available online).
``Trends in Income Inequality and Policy Responses,'' Looking
Ahead, October 1997; and James Auerbach and Richard Belous
eds., The Inequality Paradox: Growth of Income Disparity,
National Policy Association, 1998, https://books.google.com/
books/about/The_Inequality_Paradox.html?id=W0GsAAAAIA
AJ.
``The Continuing Importance of Trade Liberalization,'' Business
Economics, January 1998, https://www.jstor.org/stable/
23487688?seq=1.
``Economic Report of the President,'' February 1998 (with
Jeffrey Frankel and Rebecca Blank), https://www.govinfo.gov/
content/pkg/ERP-1998/html/ERP-1998-frontmatter.htm.
``Economic Report of the President,'' February 1999 (with
Jeffrey Frankel and Rebecca Blank), https://www.govinfo.gov/
content/pkg/ERP-1999/pdf/ERP-1999-frontmatter.pdf.
The Fabulous Decade: Macroeconomic Lessons From the 1990s (with
Alan Blinder), The Century Foundation Press, New York, 2001.
Reprinted in The Roaring Nineties: Can Full Employment be
Sustained? Edited by Alan B. Krueger and Robert Solow, Russell
Sage Foundation and Century Foundation, New York, 2001, https:/
/www.brookings.edu/book/the-fabulous-decade/. Korean
translation published by the Korea Institute of Public Finance,
2003.
``Is He Making the Grade?'', The International Economy,
15(5),21 (2001). (No link available online).
``Overview Panel Commentary,'' in Economic Policy for the
Information Economy, Proceedings of a Symposium Sponsored by
the Federal Reserve Bank of Kansas City, Jackson Hole,
Wyoming--August-September 2001, https://www.
kansascityfed.org//media/files/publicat/sympos/2001/papers/
s02yell.pdf?la=
en.
``Comments and Discussion'' of ``From Reunification to Economic
Integration: Productivity and the Labor Market in Eastern
Germany'' by Michael Burda and Jennifer Hunt, Brookings Papers
on Economic Activity, 2001, Vol. 2, https://www.brookings.edu/
bpea-articles/from-reunification-to-economic-integration-pro
ductivity-and-the-labor-market-in-eastern-germany/.
``Yale Economics in Washington,'' Foreword to James Tobin,
World Finance and Economic Stability, Edward Elgar, 2002,
https://www.abebooks.com/servlet/BookDetailsPL?bi=30749104869.
``The Binge Mentality in the Federal Budget,'' The New York
Times, July 22, 2002, https://www.nytimes.com/2002/07/22/
opinion/the-binge-mentality-in-the-federal-budget.html.
``Government Needs a Return to Fiscal Discipline,'' The Times
Union (Albany, NY), October 27, 2002, at BI, http://
nl.newsbank.com/nl-search/we/Archives?
p_product=AL&p_theme=al&p_action=search&p_maxdocs=200&s_dispstri
ng=ye
llen%20AND%20date(10/27/2002%20to%2010/27/2001)&p_field_date-
0=YMD_
date&p_params_date-0=date:B,E&p_text_date-0=10/27/
2002%20to%2010/27/2001)&p_field_advanced-0=&p_text_advanced-
0=(yellen)&xcal_numdocs=20&p_
perpage=10&p_sort=YMD_date:D&xcal_useweights=no.
``Discussion'' of ``Robust Monetary Policy Rules,'' by
Athanasios Orphanides and John Williams, Brookings Papers on
Economic Activity, 2002, Vol. 2, https://www.jstor.org/stable/
1209203?refreqid=excelsior%3A1634969a8065ba8afc5c3c1f
1c7af02f&seq=1.
``Waiting for Work,'' with George Akerlof and Andrew Rose, in
Economics for an Imperfect World: Essays in Honor of Joseph
Stiglitz, edited by Richard Arnott, Bruce Greenwald, Ravi
Kanbur, and Barry Nalebuff, M.I.T. Press, 2003, https://
mitpress.mit.edu/books/economics-imperfect-world.
Comments on Daniel Benjamin and David Laibson, ``Good Policies
for Bad Governments: Behavioral Political Economy,'' Federal
Reserve Bank of Boston Conference: ``How Humans Behave:
Implications for Economics and Economic Policy,'' June 2003,
https://www.bostonfed.org/news-and-events/events/economic-
research-conference-series/how-humans-behave-implications-for-
economics-and-economic-policy.aspx.
``Putting State's Budget Conundrum in Perspective,'' with
George Akerlof and Alan Auerbach, Sacramento Bee, July 23, 2003
at B7. (No link available online).
``Overview Panel Commentary,'' in Monetary Policy and
Uncertainty: Adapting to a Changing Economy; Proceedings of a
Symposium Sponsored by the Federal Reserve Bank of Kansas City,
Jackson Hole, Wyoming--August 2003, https://
www.kansascityfed.org/publicat/sympos/2003/pdf/Yellen2003.pdf.
``Coordinating Monetary and Fiscal Policies in Stabilizing the
Economy,'' edited by Adam S. Posen and Benn Steil, Blackwell
Publishers, 2004. (No link available online).
``Foreword'' to ``Painting the White House Green: Rationalizing
Environmental Policy Inside the Executive Office of the
President,'' edited by Randy Lutter and Jason Shogren,
Resources for the Future, 2004, https://www.routledge.com/
Painting-the-White-House-Green-Rationalizing-Environmental-
Policy-Inside/Lutter/p/book/9781891853722.
``Discipline and Judgment in Monetary Policy: The Greenspan
Years,'' presented at AEA session on ``Innovations and Issues
in Monetary Policy: The Last 15 Years,'' January 2004; American
Economic Review: Papers and Proceedings, May 2004, https://
www.aeaweb.org/articles?id=10.1257/0002828041302307.
``Reflections on China's Economy,'' Economic Letter, Federal
Reserve Bank of San Francisco, November 5, 2004, https://
www.frbsf.org/economic-research/publications/economic-letter/
2004/november/reflections-on-china-economy/.
``Productivity and Inflation,'' Economic Letter, Federal
Reserve Bank of San Francisco, February 18, 2005, https://
www.frbsf.org/economic-research/publications/economic-letter/
2005/february/productivity-and-inflation/.
``Policymaking on the FOMC: Transparency and Continuity,''
Economic Letter, Federal Reserve Bank of San Francisco,
September 2, 2005, https://www.
frbsf.org/economic-research/publications/economic-letter/2005/
september
/policymaking-on-the-fomc-transparency-and-continuity/.
``Stabilization Policy: A Reconsideration'' (with George
Akerlof), Presidential Address to the Western Economic
Association, Economic Inquiry, 2004 (44)1: pp. 1-22, https://
www.ssc.wisc.edu/mchinn/yellen_akerlof_stabilizationpolicy.
``2006: A Year of Transition at the Federal Reserve,'' Economic
Letter, Federal Reserve Bank of San Francisco, January 27,
2006, https://www.frbsf.org/economic-research/publications/
economic-letter/2006/january/2006-a-year-of-transition-at-the-
federal-reserve/.
``Enhancing Fed Credibility,'' Economic Letter, Federal Reserve
Bank of San Francisco, March 17, 2006, https://www.frbsf.org/
economic-research/publications/economic-letter/2006/march/
enhancing-fed-credibility/.
``Enhancing Fed Credibility: `Too Much of a Good Thing Can be
Wonderful.'--Mae West,'' Business Economics, April 2006, pp.
45-51, https://www.jstor.org/stable/
23490589?refreqid=excelsior%3Af7c48dcfe0b051f01856563035e195a3.
``Prospects for the Economy,'' Economic Letter, Federal Reserve
Bank of San Francisco, April 28, 2006, https://www.frbsf.org/
economic-research/publications/economic-letter/2006/april/
prospects-for-the-economy/.
``Monetary Policy in a Global Economy,'' Economic Letter,
Federal Reserve Bank of San Francisco, June 2, 2006, https://
www.frbsf.org/economic-research/publications/economic-letter/
2006/june/monetary-policy-in-a-global-environment/.
``A Monetary Policymaker's Passage to India,'' Economic Letter,
Federal Reserve Bank of San Francisco, July 7, 2006, https://
www.frbsf.org/economic-research/publications/economic-letter/
2006/july/a-monetary-policymaker-passage-to-india/.
``Economic Inequality in the United States,'' Economic Letter,
Federal Reserve Bank of San Francisco, December 1, 2006,
https://www.frbsf.org/economic-research/publications/economic-
letter/2006/december/economic-inequality-in-the-united-states/.
``The Public Good: Knowledge as the Foundation for a Democratic
Society'' (with Randel, Don Michael, Sandra Day O'Connor, Mark
Noll, Gwen Ifill, E. L. Doctorow, John W. Rowe, and Ralph J.
Cicerone), Bulletin of the American Academy of Arts and
Sciences 61(1), 2007, https://www.jstor.org/stable/4048
1112?refreqid=excelsior%3A4ab4c0ed864ff3711b3495376bc9e9af.
``Update on China: A Monetary Policymaker's Report,'' Economic
Letter, Federal Reserve Bank of San Francisco, March 9, 2007,
https://www.frbsf.org/economic-research/publications/economic-
letter/2007/march/china-monetary-policy/.
``The U.S. Economy and Monetary Policy,'' Economic Letter,
Federal Reserve Bank of San Francisco, July 13, 2007, https://
www.frbsf.org/economic-research/publications/economic-letter/
2007/july/us-economy-monetary-policy-july
-2007/.
``Recent Financial Developments and the U.S. Economic
Outlook,'' Economic Letter, Federal Reserve Bank of San
Francisco, September 14, 2007, https://www.frbsf.org/economic-
research/publications/economic-letter/2007/september/us-
economic-outlook/.
``The U.S. Economy and Monetary Policy,'' Economic Letter,
Federal Reserve Bank of San Francisco, December 7, 2007,
https://www.frbsf.org/economic-research/publications/economic-
letter/2007/december/us-economy-monetary-policy-december-2007/.
``Prospects for the Economy in 2008,'' Economic Letter, Federal
Reserve Bank of San Francisco, February 8, 2008, https://
www.frbsf.org/economic-research/publications/economic-letter/
2008/february/economy-prospects-2008/.
``Economic Conditions in Singapore and Vietnam: A Monetary
Policymaker's Report,'' Economic Letter, Federal Reserve Bank
of San Francisco, February 22, 2008, https://www.frbsf.org/
economic-research/publications/economic-letter/2008/february/
economic-conditions-singapore-vietnam-monetary-policy/.
``The Financial Markets, Housing and the Economy,'' Economic
Letter, Federal Reserve Bank of San Francisco, April 18, 2008,
https://www.frbsf.org/economic-research/publications/economic-
letter/2008/april/financial-markets-housing-economy/.
``The U.S. Economic Situation and the Challenges for Monetary
Policy,'' Economic Letter, Federal Reserve Bank of San
Francisco, September 19, 2008, https://www.frbsf.org/economic-
research/publications/economic-letter/2008/september/us-
economy-monetary-policy-september-2008/.
``The Mortgage Meltdown, Financial Markets, and the Economy,''
Economic Letter, Federal Reserve Bank of San Francisco,
November 7, 2008, https://www.frbsf.org/economic-research/
publications/economic-letter/2008/november/mortgage-financial-
markets-economy/.
``The Path to Recovery,'' Origination News, 17(12),4 (September
2008). (No link available online).
``Economic Conditions in Korea and Japan: A Monetary
Policymaker's Report,'' Economic Letter, Federal Reserve Bank
of San Francisco, December 19, 2008, https://www.frbsf.org/
economic-research/publications/economic-letter/2008/december/
economy-korea-japan-monetary-policy/.
``U.S. Monetary Policy Objectives in the Short and Long Run,''
Economic Letter, Federal Reserve Bank of San Francisco, January
9, 2009, https://www.
frbsf.org/economic-research/publications/economic-letter/2009/
january/us-monetary-policy-objectives/.
``A Minsky Meltdown: Lessons for Central Bankers,'' Economic
Letter, Federal Reserve Bank of San Francisco, May 1, 2009,
https://www.frbsf.org/economic-research/publications/economic-
letter/2009/may/minsky-central-bank-asset-price-bubbles/.
``A View of the Economic Crisis and the Federal Reserve's
Response,'' Economic Letter, Federal Reserve Bank of San
Francisco, July 6, 2009, https://www.
frbsf.org/economic-research/publications/economic-letter/2009/
july/economic-crisis-federal-reserve/.
``Linkages Between Monetary and Regulatory Policy: Lessons From
the Crisis,'' Economic Letter, Federal Reserve Bank of San
Francisco, November 23, 2009, https://www.frbsf.org/economic-
research/publications/economic-letter/2009/november/monetary-
regulatory-policy-crisis/.
``Hong Kong and China and the Global Recession,'' Economic
Letter, Federal Reserve Bank of San Francisco, February 8,
2010, https://www.frbsf.org/economic-research/publications/
economic-letter/2010/february/hong-kong-china-global-recession/
.
``The Outlook for the Economy and Inflation, and the Case for
Federal Reserve,'' Economic Letter, Federal Reserve Bank of San
Francisco, March 29, 2010, https://www.frbsf.org/economic-
research/publications/economic-letter/2010/march/outlook-
economy-inflation-federal-reserve-independence/.
``Closing Panel Presentation,'' Journal of Money, Credit and
Banking 42 (2010): 243-48, https://onlinelibrary.wiley.com/doi/
full/10.1111/j.1538-4616.2010.003
38.x.
``Macroprudential Supervision and Monetary Policy in the Post-
Crisis World,'' Business Economics 46:1, 2011, pp.3-12, https:/
/www.federalreserve.gov/newsevents/speech/yellen20101011a.htm.
``Many Targets, Many Instruments: Where Do We Stand?'', in What
Have We Learned?: Macroeconomic Policy After the Crisis, edited
by George Akerlof, Olivier Blanchard, David Romer, and Joseph
Stigliz, 31-36, Cambridge, Mass.: M.I.T. Press, 2014, https://
www.jstor.org/stable/j.ctt9qf899.
``Perspectives on Inequality and Opportunity From the Survey of
Consumer Finances,'' The Russell Sage Foundation Journal of the
Social Sciences, 2(2), May 2016, https://www.jstor.org/stable/
10.7758/rsf.2016.2.2.02#metadata_info_tab_
contents.
``Inflation, Uncertainty, and Monetary Policy,'' Business
Economics 52, 2017, pp. 194-207, https://ideas.repec.org/a/pal/
buseco/v52y2017i4d10.1057_s11369-017-0057-x.html.
``A debt crisis is coming. But don't blame entitlements,''
Washington Post (2018), April 8, 2018, https://
www.washingtonpost.com/opinions/a-debt-crisis-is-coming-but-
dont-blame-entitlements/2018/04/08/968df5c2-38fb-11e8-9c0a-
85d477d
9a226_story.html.
``Monetary policy at the effective lower bound'' (with Kristin
J. Forbes, James Hamilton, Eric T. Swanson), Brookings Papers
on Economic Activity, August 14, 2018, https://
www.brookings.edu/wp-content/uploads/2018/09/Yellen_final-
draft.pdf.
``Seven questions for Janet Yellen on financial stability,''
Brookings, January 3, 2019, https://www.brookings.edu/blog/up-
front/2019/01/03/seven-questions-for-janet-yellen-on-financial-
stability/.
``Economists' Statement on Carbon Dividends: Bipartisan
agreement on how to combat climate change'' (co-signatory),
Wall Street Journal, January 17, 2019, https://clcouncil.org/
economists-statement/.
``America Needs an Independent Fed'' (with Paul Volcker, Alan
Greenspan, and Ben Bernanke), Wall Street Journal, August 5,
2019, https://www.wsj.com/articles/america-needs-an-
independent-fed-11565045308.
``The Federal Reserve Must Reduce Long-term Damage From
Coronavirus'' (with Ben Bernanke), Financial Times, March 13,
2020, https://www.ft.com/content/01f267a2-686c-11ea-a3c9-
1fe6fedcca75.
``Former Fed Chairs Bernanke and Yellen testified on COVID-19
and response to economic crisis'' (with Ben S. Bernanke), July
17, 2020, https://www.
brookings.edu/blog/up-front/2020/07/17/former-fed-chairs-
bernanke-and-yellen-testified-on-covid-19-and-response-to-
economic-crisis/.
``The Senate Is on Vacation While Americans Starve'' (with
Jared Bernstein), New York Times, August 24, 2020, https://
www.nytimes.com/2020/08/24/opinion/coronavirus-federal-
reserve.html.
``Mainstreaming the Transition to a Net-Zero Economy,'' Group
of 30's Working Group, October 2020, https://group30.org/
images/uploads/publications/
G30_Mainstreaming_the_Transition_to_a_Net-Zero_Economy_2.pdf.
16. Speeches (list all formal speeches and presentations (e.g.,
PowerPoint) you have delivered during the past 5 years which are on
topics relevant to the position for which you have been nominated,
including dates):
``Main Street or Wall Street: A New Mandate for Central
Banks,'' New Economy Forum (11/16/20).
``IC20 Central Banks: Crisis Panacea?'' Bretton Woods Committee
(10/12/20).
``How the Fed will respond to the COVID-19 recession in an era
of low rates and low inflation,'' Brookings Institution (9/1/
20).
``Former Federal Reserve Chairs on Responding to Our Nation's
Economic Crisis,'' Testimony with Chairman Ben Bernanke before
the Select Subcommittee on the Coronavirus Crisis (7/17/20).
``Conversation with Janet Yellen,'' Magellan Financial Group
(7/1/20).
``A Decade of Dodd-Frank,'' co-hosted by the Brookings
Institution and the Center on Finance, Law and Policy at the
University of Michigan (6/30/20).
``COVID-19 and the economy: What Washington has done and the
challenges to State and local governments,'' Brookings
Institution (3/30/20).
``A Fed duet: Janet Yellen in conversation with Ben Bernanke,''
Brookings Institution (2/27/2020).
``The economy and the 2020 election: If the Economy Is Doing So
Well, Why Are So Many Struggling?'', Brookings Institution (2/
26/20).
``DA conversation with David Malpass and Janet Yellen,'' the
Bipartisan Policy Center (2/4/2020).
``Changing Thinking in Economics and Changing the Profile of
Economists,'' Economic Policy Institute (10/29/19).
``What's (Not) Up With Inflation?'', Hutchins Center on Fiscal
and Monetary Policy at Brookings Institution (10/3/19).
``The Gender and Racial Diversity of the Federal Government's
Economists,'' Hutchins Center on Fiscal and Monetary Policy at
Brookings Institution (9/23/19).
``The State of American Capitalism,'' Aspen Economic Strategy
Group (7/28/19).
``Global Perspectives with Janet L. Yellen,'' Federal Reserve
Bank of Dallas (4/10/19).
``A Conversation With Janet Yellen,'' Vanderbilt University (4/
4/19). (No link available online.)
``Keynote,'' Standard Chartered's Middle East Summit (3/18/19).
``Monetary Policy, Currencies and Manipulation,'' Dollars and
Sense Podcast, Brookings Institution (2/19/19).
``Federal Reserve Chairs: Joint Interview'' (with Jay Powell
and Ben Bernanke), American Economic Association Annual Meeting
(1/4/19).
``Janet Yellen in Conversation With Paul Krugman,'' The
Graduate Center, CUNY (12/10/18).
``Tools for Managing Financial Crises,'' Yale School of
Management (11/26/18).
``Managing the Next Financial Shock,'' New Economy Forum (11/6/
18).
``In Conversation With Janet Yellen,'' NACD Global Board
Leaders' Summit (10/17/18).
``Conversation With Janet Yellen,'' 19th World Knowledge Forum
(10/12/18).
``The Tenth Anniversary of the Financial Crisis,'' Griswold
Center for Economic Policy Studies (9/21/18).
``A Fed Duet,'' Hutchins Center on Fiscal and Monetary Policy
(2/27/18).
``The Current Economic Outlook and Monetary Policy,'' The Joint
Economic Committee (11/29/17).
``Remarks accepting the 2017 Paul H. Douglas Award for Ethics
in Government,'' at the Institute of Government and Public
Affairs at the University of Illinois (11/7/17).
``A Challenging Decade and a Question for the Future,''
National Economists Club (10/20/17).
``The U.S. Economy and Monetary Policy,'' Group of 30
International Banking Seminar (10/15/17).
``Community Banking in the 21st Century,'' Fifth Annual
Community Banking Research and Policy Conference (10/4/17).
``Inflation, Uncertainty, and Monetary Policy,'' 59th Annual
Meeting of the National Association for Business Economics (9/
26/17).
``Financial Stability a Decade After the Onset of the Crisis,''
Federal Reserve Bank of Kansas City (8/25/17).
Semiannual Monetary Policy Report to the Congress. The
Committee on Banking, Housing, and Urban Affairs, U.S. Senate
(7/13/17).
Semiannual Monetary Policy Report to the Congress. The
Committee on Financial Services, U.S. House of Representatives
(7/12/17).
``So We All Can Succeed: 125 Years of Women's Participation in
the Economy,'' Brown University (5/5/17).
2017 annual conference of the National Community Reinvestment
Coalition (3/28/17).
``Welcoming Remarks'' at ``Strong Foundations: The Economic
Futures of Kids and Communities,'' 10th Biennial Federal
Reserve System Community Development Research Conference (3/23/
17).
``From Adding Accommodation to Scaling It Back,'' The
Executives' Club of Chicago (3/3/17).
``Semiannual Monetary Policy Report to the Congress,'' The
Committee on Financial Services, U.S. House of Representatives
(2/15/17).
``Semiannual Monetary Policy Report to the Congress,'' The
Committee on Banking, Housing, and Urban Affairs, U.S. Senate
(2/14/17).
``The Economic Outlook and the Conduct of Monetary Policy,''
The Stanford Institute for Economic Policy Research (1/19/17).
``The Goals of Monetary Policy and How We Pursue Them,'' The
Commonwealth Club (1/18/17).
``Welcoming Remarks'' at ``Conversation With the Chair: A
Teacher Town Hall Meeting,'' Federal Reserve Board (1/12/17).
``The Economic Outlook,'' The Joint Economic Committee, U.S.
Congress (11/17/16).
``Macroeconomic Research After the Crisis,'' 60th Annual
Economic Conference. Federal Reserve Bank of Boston (10/14/16).
``Banking and the Economy: A Forum for Minority Bankers,''
Federal Reserve Bank of Kansas City (9/29/16).
``Supervision and Regulation,'' The Committee on Financial
Services, U.S. House of Representatives (9/28/16).
``The Federal Reserve's Monetary Policy Toolkit. Designing
Resilient Monetary Policy Frameworks for the Future,'' Federal
Reserve Bank of Kansas City (8/26/16).
``Semiannual Monetary Policy Report to the Congress,'' The
Committee on Financial Services, U.S. House of Representatives
(6/22/16).
``Semiannual Monetary Policy Report to the Congress,'' The
Committee on Banking, Housing, and Urban Affairs, U.S. Senate
(6/21/16).
``Current Conditions and the Outlook for the U.S. Economy,''
The World Affairs Council of Philadelphia (6/6/16).
``When the Federal Reserve Speaks . . . The World Listens''
(with former Fed Chairs Ben Bernanke, Paul Volcker, and Alan
Greenspan), International House in New York (4/7/2016).
``The Outlook, Uncertainty, and Monetary Policy,'' The Economic
Club of New York (3/29/16).
``Semiannual Monetary Policy Report to the Congress,'' The
Committee on Banking, Housing, and Urban Affairs, U.S. Senate
(2/11/16).
``Semiannual Monetary Policy Report to the Congress,'' The
Committee on Financial Services, U.S. House of Representatives
(2/10/16).
``The Economic Outlook,'' The Joint Economic Committee, U.S.
Congress (12/3/15).
``The Economic Outlook and Monetary Policy,'' The Economic Club
of Washington (12/2/15).
In addition to the speeches listed above, Dr. Yellen served as
a paid speaking guest, as arranged by the Washington Speakers
Bureau, for the following organizations on the following
dates:\1\
---------------------------------------------------------------------------
\1\ Dr. Yellen did not deliver prepared remarks during any of these
appearances.
------------------------------------------------------------------------
Arranging Organization Date Location
------------------------------------------------------------------------
Moore Capital 03/27/18 Washington, DC
------------------------------------------------------------------------
Jefferies 04/02/18 New York, NY
------------------------------------------------------------------------
BTIG 04/03/18 New York, NY
------------------------------------------------------------------------
Strategas Research Partners 04/04/18 New York, NY
------------------------------------------------------------------------
Cisco 04/12/18 and Kiawah Island, SC
04/13/18
------------------------------------------------------------------------
Nomura 04/16/18 New York, NY
------------------------------------------------------------------------
Deutsche Bank 05/01/18 New York, NY
------------------------------------------------------------------------
UBS 05/02/18 New York, NY
------------------------------------------------------------------------
Apollo Global Management 05/09/18 New York, NY
------------------------------------------------------------------------
Itau 05/16/18 New York, NY
------------------------------------------------------------------------
Experian 05/21/18 Scottsdale, AZ
------------------------------------------------------------------------
Morgan Stanley 06/05/18 and New Orleans, LA
06/06/18
------------------------------------------------------------------------
Stifel Financial 06/13/18 Boston, MA
------------------------------------------------------------------------
Charles Schwab 06/14/18 Avon, CO
------------------------------------------------------------------------
Neuberger Berman 06/20/18 New York, NY
------------------------------------------------------------------------
Credit Suisse 06/25/18 London, England
------------------------------------------------------------------------
Amundi Asset Management 06/28/18 Paris, France
------------------------------------------------------------------------
Federal Home Loan Bank of Chicago 08/03/18 Chicago, IL
------------------------------------------------------------------------
University of San Francisco 08/29/18 San Francisco, CA
------------------------------------------------------------------------
Association of Foreign Investors 09/07/18 Washington, DC
in Real Estate
------------------------------------------------------------------------
Carlyle Investment Management 09/13/18 Washington, DC
------------------------------------------------------------------------
BCA Research 09/24/18 Toronto, Canada
------------------------------------------------------------------------
BNP Paribas 09/25/18 New York, NY
------------------------------------------------------------------------
Mitsui 09/27/18 New York, NY
------------------------------------------------------------------------
National Association of Corporate 09/30/18 Washington, DC
Directors
------------------------------------------------------------------------
Vanguard 10/01/18 and Chicago, IL
10/02/18
------------------------------------------------------------------------
Barclays 10/08/18 Chicago, IL
------------------------------------------------------------------------
Vanguard 10/08/18 and Chicago, IL
10/09/18
------------------------------------------------------------------------
World Knowledge Forum 10/12/18 Seoul, South Korea
------------------------------------------------------------------------
Mortgage Bankers Association 10/15/18 Washington, DC
------------------------------------------------------------------------
Macquarie Holdings 10/26/18 La Quinta, CA
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Finance Montreal 10/29/18 Montreal, Canada
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Charles Schwab 10/30/18 Washington, DC
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Chicago Mercantile Exchange 11/13/18 Naples, FL
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Caixin 11/13/18 Naples, FL
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JP Morgan Chase 11/14/18 New York, NY
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Turnaround Management 11/15/18 and Chicago, IL
11/16/18
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Bank of America 11/29/18 New York, NY
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Citadel 12/11/18 New York, NY
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UBS 01/06/19 Atlanta, GA
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Wealth Vest 01/09/19 Washington, DC
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National Retail Federation 01/14/19 New York, NY
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ING 01/15/18 Amsterdam,
Netherlands
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PricewaterhouseCoopers 01/23/19 Davos, Switzerland
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City National Bank 01/28/19 and New York, NY;
01/29/19 and Washington, DC;
01/30/19 and Orange County, CA;
01/30/19 and Los Angeles, CA;
01/31/19 and San Francisco,
CA
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Structured Finance Industry Group 02/26/19 Las Vegas, NV
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Standard Chartered Bank 03/03/19 Dubai, UAE
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Citi 03/06/19 and New York, NY and
03/11/19 and London, England
03/12/19
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Entrust 03/07/19 New York, NY
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Credit Suisse--Hong Kong 03/25/19 Hong Kong
Development Council
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Texas Christian University 03/28/19 Fort Worth, TX
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BNP Paribas 04/02/19 Brussels, Belgium
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Institute for Supply Management 04/09/19 Houston, TX
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PIMCO 05/05/19 and Newport Beach, CA
05/06/19
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National Investment Center 09/12/19 Chicago, IL
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Bank of America 10/02/19 New York, NY
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Barclays 10/15/19 New York, NY
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Citadel 10/17/19 and Hong Kong and New
12/3/19 York, NY
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Google 10/30/19 Washington, DC
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Magellan Financial Group 10/31/19 Washington, DC
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Prudential Global Investment 11/06/19 New York, NY
Management
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HSM 11/21/19 New York, NY
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Stifel Financial 12/04/19 New York, NY
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Hong Kong Development Council 01/13/20 Hong Kong
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CFA Society Atlanta 02/05/20 Atlanta, GA
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Magellan Financial Group 03/31/20 and Teleconferences
05/12/20 and
08/20/20
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Citi 4/30/20 and 5/ Webinars
19/20 and 5/
20/20 and 6/
15/20 and 7/
15/20 and 10/
14/20
------------------------------------------------------------------------
Fiserv 05/26/20 Webinar
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Ares Management 05/26/20 Webinar
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Salesforce 06/24/20 Webinar
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Goldman Sachs 06/17/20 Webinar
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Barclays 07/29/20 Webinar
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Magellan Financial Group \2\ 11/16/20 Teleconferences
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Principal Financial Investors 09/17/20 Webinar
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Credit Suisse 09/30/20 Webinar
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Pillsbury Winthrop Shaw Pittman 10/09/20 Webinar
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PMI 10/22/20 Webinar
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Standard Chartered Bank 10/27/20 Webinar
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Advisor Group 10/28/20 Webinar
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Citadel 10/09/20 and Webinars
10/20/20 and
10/26/20 and
10/27/20
------------------------------------------------------------------------
Daiwa Securities 11/05/20 Webinar
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Deloitte 11/20/20 Webinar
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\2\ Dr. Yellen's engagement on November 16, 2020 was not arranged by
Washington Speakers Bureau.
17. Qualifications (state what, in your opinion, qualifies you to
serve in the position to which you have been nominated):
I served as chairman of the Board of Governors of the Federal
Reserve System from February 2014 to February 2018 and as vice
chairman between October 2010 and February 2014. I served as
President and Chief Executive Officer of the Federal Reserve
Bank of San Francisco from 2004 to 2010 and as Governor of the
Federal Reserve System between August 1994 and February 1997.
Through this service, and my background in macroeconomics, I
acquired an understanding of major issues facing the U.S. and
global economies, and the roles of monetary and fiscal policy
in supporting economic growth, job creation, and price
stability. I participated during these years in financial
crisis interventions and helped to establish a Division of
Financial Stability at the Federal Reserve Board. As Chair, I
participated as a member of the Financial Stability Oversight
Council. I also oversaw banking supervision and regulation, and
the operation of the payments system. This background will
inform my work at Treasury as Chair of FSOC, and on financial
regulation more generally. This experience is also relevant to
Treasury's role with respect to the Bureau of Printing and
Engraving and the Mint. During my term as Chair of the Federal
Reserve, I actively participated in the G20 and G7 Ministers
and Central Bank Governors meetings and those of the IMF. As
Treasury Secretary, I would participate in these same
international bodies. I also was deeply involved in the Federal
Reserve's work in Community Development and met regularly with
representatives of community organizations, developing an
understanding of the particular challenges facing low- and
moderate-income communities in obtaining access to credit and
stable jobs. This background will inform my work at the
Treasury Department in these same areas. I also gained
experience at the Federal Reserve in managing a large and
diverse organization--skills that will be needed at Treasury as
well.
My training is as a professional economist with a specialty in
macroeconomics and international economics. I have published
original research on a wide variety of topics in international
and macroeconomics. I am best known for my work exploring the
causes of price and wage rigidity. This work provides a basic
rationale for the use of monetary policy and fiscal policy to
stabilize the economy. My research has also focused on the
causes and consequences of unemployment.
From 1980 until I joined the Federal Reserve Board as a
Governor in 1994, and for 5 years after leaving the Council of
Economic Advisers, I served on the faculty of the Walter A.
Haas School of Business at the University of California,
Berkeley, where I taught international and macroeconomics in
the MBA and executive education programs of the school.
Beginning in 1999, I also held a faculty appointment in the
Department of Economics.
I received my B.A. summa cum laude from Brown University in
1967 and my Ph.D. in economics from Yale University in 1971.
From 1971 to 1976 I served on the faculty of the Economics
Department at Harvard University, after which I served as an
economist in the International Finance Division of the Federal
Reserve Board. I was also a faculty member at the London School
of Economics and Political Science before moving to Berkeley.
B. FUTURE EMPLOYMENT RELATIONSHIPS
1. Will you sever all connections (including participation in future
benefit arrangements) with your present employers, business firms,
associations, or organizations if you are confirmed by the Senate? If
not, provide details.
Yes.
2. Do you have any plans, commitments, or agreements to pursue
outside employment, with or without compensation, during your service
with the government? If so, provide details.
No.
3. Has any person or entity made a commitment or agreement to employ
your services in any capacity after you leave government service? If
so, provide details.
No.
4. If you are confirmed by the Senate, do you expect to serve out
your full term or until the next presidential election, whichever is
applicable? If not, explain.
Yes.
C. POTENTIAL CONFLICTS OF INTEREST
1. Indicate any current and former investments, obligations,
liabilities, or other personal relationships, including spousal or
family employment, which could involve potential conflicts of interest
in the position to which you have been nominated.
Any potential conflict of interest will be resolved in
accordance with the terms of my ethics agreement, which was
developed in consultation with ethics officials at the
Department of the Treasury and the Office of Government Ethics.
I understand that my ethics agreement has been provided to the
committee. I am not aware of any potential conflict other than
those addressed by my ethics agreement.
2. Describe any business relationship, dealing or financial
transaction which you have had during the last 10 years (prior to the
date of your nomination), whether for yourself, on behalf of a client,
or acting as an agent, that could in any way constitute or result in a
possible conflict of interest in the position to which you have been
nominated.
Any potential conflict of interest will be resolved in
accordance with the terms of my ethics agreement, which was
developed in consultation with ethics officials at the
Department of the Treasury and the Office of Government Ethics.
I understand that my ethics agreement has been provided to the
committee. I am not aware of any potential conflict other than
those addressed by my ethics agreement.
3. Describe any activity during the past 10 years (prior to the date
of your nomination) in which you have engaged for the purpose of
directly or indirectly influencing the passage, defeat, or modification
of any legislation or affecting the administration and execution of law
or public policy. Activities performed as an employee of the Federal
Government need not be listed.
In my personal capacity, and solely on my own behalf, I have
provided technical advice and publicly supported the following
bills: The Paycheck Recovery Act (H.R. 6918), The Worker Relief
and Security Act (H.R. 7821), and The HEROES Act (H.R. 6800).
On my own behalf, I have also testified before Congress and
advocated for the need of additional fiscal support during the
COVID crisis.
4. Explain how you will resolve any potential conflict of interest,
including any that are disclosed by your responses to the above items.
(Provide the committee with two copies of any trust or other
agreements.)
Any potential conflict of interest will be resolved in
accordance with the terms of my ethics agreement, which I
understand has been provided to the committee.
5. Two copies of written opinions should be provided directly to the
committee by the designated agency ethics officer of the agency to
which you have been nominated and by the Office of Government Ethics
concerning potential conflicts of interest or any legal impediments to
your serving in this position.
D. LEGAL AND OTHER MATTERS
1. Have you ever been the subject of a complaint or been
investigated, disciplined, or otherwise cited for a breach of ethics
for unprofessional conduct before any court, administrative agency
(e.g., an Inspector General's office), professional association,
disciplinary committee, or other ethics enforcement entity at any time?
Have you ever been interviewed regarding your own conduct as part of
any such inquiry or investigation? If so, provide details, regardless
of the outcome.
In 2015 the Federal Reserve's Inspector General's office
investigated Medley Global Advisers' publication of important
information expected to appear in Fed meeting minutes the next
day. I was interviewed in connection with this unauthorized
disclosure and fully cooperated. The Inspector General's
investigation was completed.
2. Have you ever been investigated, arrested, charged, or held by any
Federal, State, or other law enforcement authority for a violation of
any Federal, State, county, or municipal law, regulation, or ordinance,
other than a minor traffic offense? Have you ever been interviewed
regarding your own conduct as part of any such inquiry or
investigation? If so, provide details.
No.
3. Have you ever been involved as a party in interest in any
administrative agency proceeding or civil litigation? If so, provide
details.
To my knowledge, in my personal capacity I have never been a
party in interest to any administrative agency proceeding or
civil litigation. As a Governor and Chair of the Federal
Reserve Board, I was named in my official capacity as a party
in a number of lawsuits. I can provide information on any of
those lawsuits if requested by the committee.
4. Have you ever been convicted (including pleas of guilty or nolo
contendere) of any criminal violation other than a minor traffic
offense? If so, provide details.
No.
5. Please advise the committee of any additional information,
favorable or unfavorable, which you feel should be considered in
connection with your nomination.
None.
E. TESTIFYING BEFORE CONGRESS
1. If you are confirmed by the Senate, are you willing to appear and
testify before any duly constituted committee of the Congress on such
occasions as you may be reasonably requested to do so?
Yes.
2. If you are confirmed by the Senate, are you willing to provide
such information as is requested by such committees?
Yes.
______
Questions Submitted for the Record to Hon. Janet L. Yellen, Ph.D.
Questions Submitted by Hon. Chuck Grassley
individual/family tax issues
Question. During the campaign, President Biden pledged not to
increase taxes on anyone making under $400,000. However, a significant
tax increase will go into effect on millions of middle-class taxpayers
in 2026 unless Congress acts to extend the tax cuts and reforms enacted
in 2017. Given President Biden's campaign pledge, will you, if
confirmed as Treasury Secretary, work with Republicans in Congress to
make these tax cuts permanent in order to prevent a massive tax
increase on American Families?
Answer. Expiration of particular aspects of the Tax Cuts and Jobs
Act of 2017 will impact taxpayers with incomes under $400,000. As
noted, President Biden pledged during the campaign that no American
taxpayer with income under this threshold will be subject to a tax
increase. If confirmed as Treasury Secretary, I will work with members
of Congress to address the expiration of various aspects of the 2017
tax law, including in particular those that impact middle-class
taxpayers and families with incomes below the $400,000 threshold.
Question. At various times during the campaign, President Biden
suggested he would repeal the Tax Cuts and Jobs Act either in full or
in part. Please indicate (yes or no) whether the incoming Biden
administration supports the following:
Would the Biden administration support repealing the doubling of
the Child Tax Credit from $1,000 to $2,000? If no, would the
administration support making this provision permanent?
Would the Biden administration support repealing the enhanced
standard deduction, which increased the standard deduction from $6,500
to $12,000 for singles, from $13,000 to $24,000 for married couples,
and from $9,550 to $18,000 for heads of household in 2018? If no, would
the administration support making this provision permanent?
Would the Biden administration support repealing the reduced tax
rates put in place for middle-class taxpayers, which included reducing
the 15-percent bracket to 12 percent? If no, would the administration
support making this provision permanent?
Would the Biden administration support repealing the qualified
business income deduction, which allows small businesses to deduct up
to 20 percent of their qualified business income? If no, would the
administration support making this provision permanent?
Answer. During the campaign, the President advanced a series of
principles around tax policy in general, and the 2017 tax cut in
particular. In describing how he wants to repeal the parts of the 2017
tax cuts that benefited the wealthiest Americans and large companies,
he clarified that the repeal of certain aspects of the tax law would be
restricted only to those taxpayers making more than $400,000 a year,
with a firm commitment that taxpayers earning less than this amount
would not see their taxes increase. At the same time, throughout the
campaign and following the presidential election, President Biden has
proposed a series of tax cuts and policy initiatives, such as an
expansion in the Child Tax Credit and additional financial support for
small businesses, aimed at strengthening the progressivity of the tax
code and aiding small businesses during the recovery. If confirmed, I
will work with Congress to implement a fair, efficient, pro-growth tax
code that provides relief for middle-class families, workers, and small
business owners.
Question. Senate and House Democrats have argued for repealing the
$10,000 cap on the State and local tax (SALT) deduction as part of
pandemic relief efforts. According to the Tax Policy Center, a joint
project of the Urban Institute and Brookings Institution where you are
a distinguished fellow, such a proposal included in a House-passed
pandemic relief measure would provide the top 0.1 percent of households
an average tax cut of nearly $144,000. At the same time it effectively
would give no benefit to the bottom half of households. In your
opinion, does it make sense for pandemic relief efforts to prioritize
six-figure tax cuts for the wealthiest few when millions of middle-
class American families are struggling to make ends meet? Would you
oppose including a repeal of the SALT cap in any further relief or
stimulus measures?
Answer. See response to the next question.
Question. President Biden's position on the SALT cap was less than
clear during the campaign. Third-party analyses of his campaign
proposals have come to different conclusions on his intentions. For
instance, the Tax Policy Center assumes he would not repeal the SALT
cap, but would allow it to expire at the end of 2025. However, an
analysis by the American Enterprise Institute assumes his intent is to
repeal the SALT cap. Can you please clarify what the incoming
administration's position is regarding the SALT cap?
Answer. In response to both questions, as I noted at the hearing, I
certainly believe in a fair and progressive tax code where wealthy
individuals and corporations pay their fair share. On this issue, as
with many others, it is important to consider the entire equation. For
example, it is critical to study and evaluate what the impact of the
SALT cap has had on State on local governments, and those who rely upon
their services. I will work with those at Treasury and throughout the
administration in evaluating those impacts, as well as other aspects of
this issue.
Question. President Biden has proposed reducing the estate-tax
exemption amount from the current level of approximately $11.5 million
to only $3.5 million, coupled with an increase in the top estate-tax
rate from 40 percent to 45 percent. This change would
disproportionately affect farmers and small business owners in Iowa and
across the Nation through wasteful compliance costs and increased
taxes. If confirmed, will you work to promote tax policy that will not
harm farmers and small business owners and their families?
Answer. If confirmed, I look forward to working with you to advance
a range of policies that the President has proposed to strengthen rural
America and small businesses.
On the President's estate tax proposal in particular, it may be
helpful to note that only about the wealthiest 6 out of every 1,000
estates would face any tax--less than 1 percent--and every couple with
assets under $7 million would be fully exempt from the estate tax.
retirement tax issues
Question. Millions of retirees and participants in multiemployer
pension plans face an impending crisis. Many plans are in poor
financial health, and the PBGC's multiemployer pension insurance fund
is projected to be insolvent in 2026 according to PBGC's latest annual
report. I am committed to finding a bipartisan solution that can
resolve this crisis. If confirmed, will you commit to working with this
committee and other interested Senators on a long-term solution that
will secure the retirement benefits for these retirees while also
reforming the underlying system and ensuring taxpayer dollars will not
be used to finance a private-sector system in perpetuity?
Answer. This is a critical time for the PBGC. Millions of working
people and retirees are counting on it to help pay and secure their
hard-earned pensions. I know Congress has been trying to address the
multiemployer pension crisis for a number of years and, if confirmed, I
will work with this committee and the Department of Labor to find and
enact a comprehensive solution to this problem. The President supports
passage of the Butch-Lewis Act, which offers low-interest loans to
financially troubled multiemployer plans--helping them to meet their
commitments.
Question. As part of his tax plan, President Biden has promised to
change the tax benefits of contributing to tax-deferred retirement
accounts. Under the Biden plan, instead of contributing pre-tax dollars
to a retirement account such as a 401(k), workers would be entitled to
a tax credit equal to after-tax amounts contributed. If enacted, this
approach would significantly change the way Americans save for
retirement and could end up discouraging retirement saving. If
confirmed, will you commit to working with this committee to ensure
that any changes to the retirement savings system don't disincentivize
workers from saving?
Answer. During the campaign, President Biden called for the
equalization of the tax benefits for retirement saving across the
income scale. There are many possible options for making retirement
contributions more generous to middle-income families. I look forward
to studying this issue further, as a way of building wealth for the
middle class.
Question. As you know, Congress passed the SECURE Act in 2019,
which made improvements to the retirement savings system. There is
bipartisan support for additional legislation that would further
incentivize retirement savings and make it easier for small businesses
to provide employees with a retirement plan. If confirmed, will you
support this effort?
Answer. I look forward to working with you to find ways to improve
the retirement savings system. During the campaign, President Biden
proposed to give small businesses a tax break for starting a retirement
plan and giving workers the chance to save at work. In addition, under
the President's plan, almost all workers without a pension or 401(k)-
type plan will have access to an ``automatic 401(k),'' which would
provide the opportunity to easily save for retirement at work--putting
millions of middle-class families on the path to a secure retirement.
Question. Multiemployer pension plans are not the only pension
plans facing a looming crisis. Many State and local government pension
plans are severely underfunded and, in too many cases, have been
mismanaged. Absent reform, these public pension plans may soon be
unable to pay benefits to retirees, and making matters worse, these
State and local programs have never been covered by the Pension Benefit
Guaranty Corporation's insurance program of last resort. This crisis
has caused some to suggest that the Federal Government should bail out
these State-based pension plans. Instead of taxpayers in all States
bearing the responsibility for subsidizing the failing pension plans of
a few States, other options should be explored. For example, private-
sector solutions such as annuities could help transfer some of the risk
away from the troubled plans. If confirmed, will you commit to working
with this committee and other interested Senators to evaluate all
possible solutions to this crisis that will secure the retirement
benefits for many public-sector retirees while avoiding the need for
taxpayers to subsidize State and local pension benefits?
Answer. If confirmed, I look forward to working with members of
this committee and other Senators to explore this issue and evaluate
potential policies that might address it.
domestic business tax issues
Question. Prior to the Tax Cuts and Jobs Act (TCJA), the United
States had one of the highest corporate income tax rates among
developed countries. TCJA lowered the corporate rate to ensure that our
domestic businesses would remain globally competitive. Even at 21
percent, the United States still holds the 11th highest corporate tax
rate out of the top 36 developed countries, according to the Tax Policy
Center.\1\
---------------------------------------------------------------------------
\1\ https://www.taxpolicycenter.org/fiscal-fact/oecd-corporate-tax-
rate-ff-01042021.
President Biden has proposed increasing the 21-percent rate to 28
percent. If enacted, the United States once again would have one of the
highest business tax rates among developed countries. Unfortunately,
not just U.S. companies would be affected by the rate increase. There
is an economic consensus that a significant portion of the corporate
income tax falls on workers in the form of reduced wages and benefits.
Even the Tax Policy Center, which is a joint venture of the Urban
Institute and Brookings Institution where you are a Distinguished
Fellow, assumes 20 percent of the corporate tax falls on workers.
Similarly, the Joint Committee on Taxation and Congressional Budget
Office have both concluded that 25 percent of the corporate tax is
borne by workers. If the corporate tax rate is increased to 28 percent
as proposed, American workers will also feel the burden through fewer
---------------------------------------------------------------------------
jobs, reduced wages, and less benefits.
What are your views on increasing the corporate tax rate above that
of most developed countries, particularly if a significant portion of
the rate increase would also be borne by American workers?
With the unemployment rate continuing to be high due to the COVID-
19 pandemic, wouldn't an increase in the corporate tax rate that is
borne in significant part by labor hinder efforts to restore the
historically low unemployment rates we saw in 2019?
Answer. As I discussed in my testimony, President Biden's economic
strategy and investments in people, infrastructure, research and
development--will create good-paying jobs and make our economy more
productive. The President believes that it is critical that we raise
additional revenues from the wealthiest Americans and corporations to
cover our long-term obligations to our Nation's seniors and many
others.
Question. The Tax Cuts and Jobs Act (TCJA) introduced section 199A
of the Internal Revenue Code, which provides a 20-percent deduction for
pass-through businesses, such as sole proprietorships, partnerships and
S corporations, with qualifying business income. Section 199A was
intended to provide parity for pass-through businesses that did not
benefit from the reduction in the corporate tax rate. Most small
businesses operate in pass-through form, and many of these small
businesses have been hardest hit by the COVID-19 pandemic.
How do you view raising taxes on small businesses through the
repeal of section 199A?
Answer. President Biden is committed to improving the economic
environment for small businesses through a variety of strategies. This
begins with providing necessary support during the pandemic so that
small business owners can keep their lights on, and continues with an
assortment of policies that will provide much-
needed capital to aspiring entrepreneurs--especially those in
underserved communities and without existing banking relationships.
For example, in the emergency package he unveiled last week,
President Biden proposed policies that would provide small businesses
with the funding they need to reopen and rebuild. In that package,
President Biden proposed to (1) provide $15 billion in grants to more
than 1 million of the hardest hit small businesses and (2) leverage $35
billion in government funds into $175 billion in additional small
business lending and investment to help entrepreneurs innovate, create
and maintain jobs, build wealth, and provide the essential goods and
services that communities depend on.
President Biden is also committed to a tax code which rewards work,
not just wealth, and this extends to the work supplied by small
business owners. As section 199A is a relatively new provision, I
commit to studying its impact on small businesses since its inception
to determine the extent to which it is helping to improve the prospects
of America's small business owners.
Question. Currently, under section 174 of the Internal Revenue
Code, U.S. businesses can immediately deduct research and experimental
(R&E) costs, incentivizing research investment and job creation in the
United States. Beginning next year, however, U.S. businesses will be
required to capitalize and amortize those costs over 5 years rather
than immediately deducting them. Immediate expensing of research
expenditures provides a critical incentive for investment in
innovation.
President Biden's ``Made in America'' tax proposals suggest that
the Biden administration plans to encourage investment in
manufacturing, jobs, and innovation in the United States. Would you
support maintaining the current immediate deductibility of R&E
expenses, particularly during the COVID-19 pandemic when advances in
innovation are critical?
Answer. See immediately below for a combined response to both
questions.
Question. As a result of the Tax Cuts and Jobs Act (TCJA), business
interest deductions were limited to 30 percent of earnings before
interest, taxes, depreciation and amortization (EBITDA). However, after
this year, the limitation will be reduced further to 30 percent of
earnings before interest and taxes (EBIT). As a result, U.S. businesses
with significant depreciation, such as manufacturers, will see the
amount of interest they can deduct drastically limited, thereby
increasing the cost of capital. What are your views on further limiting
the ability of U.S. businesses to deduct interest, particularly at a
time when some U.S. companies are borrowing to keep their doors open
and employees on payroll?
Answer. President Biden has proposed an array of reforms that would
ensure the wealthiest taxpayers and corporations pay their fair share.
These and other proposals will be further developed as part of the
budget process, and, if confirmed, I look forward to continued
conversations with you about the President's legislative agenda.
If confirmed, I will carefully consider the concerns you raise
regarding deductibility of research expenditures and limitations on
business interest deductions, paying particular attention to any
effects on small businesses during the recovery.
Question. President Biden has proposed a new 15-percent corporate
minimum tax based on book income, rather than taxable income as
currently used in the tax code. As you know, book income, as reported
on a company's financial statements, is designed to provide information
on the company's performance for investors and creditors based on
generally accepted accounting principles. On the other hand, taxable
income is computed in accordance with the Internal Revenue Code and
regulations as the basis for imposing taxes.
Under the tax code, U.S. taxpayers are permitted to adjust their
taxable income by allowable deductions, many of which reflect
incentives that Congress intended to encourage certain behavior. For
example, bonus depreciation is intended to encourage U.S. companies to
invest more in capital expenditures, like equipment and fixed assets.
Imposing a minimum tax would effectively remove the benefit and
undermine the legislative intent of those provisions. Further, it would
require companies and the IRS to calculate tax liability under
different tax bases, creating significant complexity for taxpayers and
the IRS.
Given the important differences between accounting principles and
the deductions permitted by the tax code, do you agree there are
legitimate reasons for substantial differences between book income and
taxable income and that book income is not an appropriate basis for a
new alternative tax regime?
Answer. The minimum book tax proposal was directed at asking those
companies with low or zero tax liabilities to pay their fair share.
Research has identified many examples of corporations with a large gap
between their tax and book income. A minimum book tax could help
recapture the tax revenue lost to gaming and tax avoidance. I look
forward to working with you and others on this committee on this issue,
if confirmed.
Question. Under the Coronavirus Aid, Relief, and Economic Security
(CARES) Act, Congress created a temporary rule allowing U.S. businesses
to carry back net operating losses (NOLs) incurred in 2018, 2019, and
2020 to the prior 5 years. In the Health and Economic Recovery Omnibus
Emergency Solutions (HEROES) Act, House Democrats proposed to repeal
the CARES Act NOL provisions, effectively imposing a retroactive tax
increase on businesses experiencing losses as a result of the pandemic.
The expected revenue effect of the changes proposed in the HEROES Act
was nearly $250 billion. Do you support this kind of retroactive tax
change that would significantly increase taxes on businesses
experiencing losses? Do you agree with former President Obama's sound
advice when he said during the aftermath of the financial crisis, ``The
last thing you want to do is raise taxes in the middle of a
recession''?
Answer. During the campaign, President Biden proposed an array of
reforms that would ensure the wealthiest taxpayers and corporations pay
their fair share, including proposals to increase the corporate tax
rate to 28 percent and ensure robust taxation of overseas profits.
These proposals will be further developed as part of the budget process
and, if confirmed, I look forward to continued conversations with you
about the President's legislative agenda. To the second part of your
question, as I stated in my testimony, the administration's immediate
focus is ending the pandemic and helping families get through the
economic and public health crisis.
international business tax
Question. Senator Wyden and I have been aligned in our opposition
to digital services taxes that unfairly discriminate against U.S.
companies. To date, it has been the administration's position that any
solution reached at the OECD should not ``ring-fence'' the digital
economy, as it would disproportionately burden the U.S. business
community and adversely affect U.S. fiscal security. Will you continue
to negotiate towards a multilateral agreement at the OECD that does not
unfairly target U.S. companies and compromise the U.S. tax base?
Answer. Yes, we are committed to the cooperative multilateral
effort to address base erosion and profit shifting through the OECD/G20
process, and to resolving the digital taxation disputes in that
context.
Question. A multilateral agreement reached at the OECD may require
Congress to ratify a multilateral treaty and enact implementing
legislation. It will become increasingly important that Congress be
closely engaged with the OECD process to ensure members are on board
with any potential legislative changes that may be necessary. As
negotiations continue at the OECD, will you commit to keeping the tax-
writing committees apprised of negotiations and developments occurring
at the OECD?
Answer. If confirmed, I very much look forward to working with the
tax-writing committees as we work through the OECD to update global tax
rules in ways that stop the race to the bottom on corporate taxation,
and prevent global profit-shifting, while securing the competitiveness
of U.S. companies.
Question. Pillar 2 of the OECD's proposed ``unified approach''
would effectively create a global minimum tax. The Treasury Department
to date has made it a priority that the U.S. global intangible low-
taxed income (or GILTI) tax regime would be treated as a ``deemed
compliant'' regime under any multilateral agreement. Do you plan to
continue to advocate for GILTI to be treated as a deemed-compliant
regime under Pillar 2?
Answer. The Biden-Harris administration will pursue a comprehensive
multinational agreement to update global tax rules in ways that
establish effective minimum taxation rules, prevent global profit-
shifting, and ensure that corporations pay their fair share. We will
pursue in a manner that will maintain competitiveness and diminish the
incentives that American companies now have to offshore activities. I
look forward to working with you and your staff on this important
issue.
Question. As part of the proposed Pillar 2 approach, the OECD has
proposed an ``undertaxed payment rule'' that would complement the
global minimum tax. The undertaxed payment rule effectively would tax a
business on a payment made if the recipient business is not subject to
a certain level of tax with respect to the payment. U.S. businesses
have voiced concerns that payments received by a U.S. company from a
foreign affiliate could be subject to the undertaxed payment rule if
the payment receives preferential treatment under the foreign derived
intangible income (FDII) regime or through the application of another
preferential rate or credit regime. Will you advocate to preserve the
application of U.S. tax law, including FDII and other preferential
rates and credits, if Pillar 2 includes an undertaxed payment rule?
Answer. See response to the previous question.
Question. The Tax Cuts and Jobs Act (TCJA) created several new
international tax regimes, including global intangible low-taxed income
(GILTI), foreign derived intangible income (FDII) and the base erosion
anti-abuse tax (BEAT). The Treasury Department has published extensive
proposed regulations that were analyzed, refined, and finalized through
a thorough review and comment process, consistent with the
Administrative Procedure Act (APA). What are your plans for reviewing
and/or revising regulations in these areas?
Answer. If confirmed, I will implement and enforce tax laws fairly.
Any review of regulations will be done to ensure they are consistent
with the law and congressional intent.
Question. President Biden has claimed that the Tax Cuts and Jobs
Act (TCJA) incentivized U.S. companies to move manufacturing and
intangible property overseas. As I've previously pointed out, these
claims aren't supported by the facts. The nonpartisan Joint Committee
on Taxation has concluded that the TCJA international provisions ``are
expected to reduce the incentives for this `profit-shifting' activity,
resulting in an increase in the U.S. tax base.''\2\
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\2\ Joint Committee on Taxation, ``Macroeconomic Analysis of the
Conference Agreement for H.R. 1, the Tax Cuts and Jobs Act,'' JCX-69-17
(December 22, 2017) at 6.
Further, available data confirms that TCJA is actually encouraging
companies to invest more in the United States. Data from the Bureau of
Economic Analysis (BEA) show that, among U.S. multinationals,
employment, investment, research, and production in the United States
has increased at a faster rate in 2018 than the average rate over the
past 20 years and faster than the growth rate of U.S. multinational
companies abroad.\3\ BEA data also illustrates that the quarterly
average of dividend repatriations to the United States from foreign
entities has tripled in the years since the enactment of the TCJA.\4\
Do you agree that significant changes should not be made to the
international tax system until the data on U.S. and foreign investment
and repatriation are fully analyzed and understood, and it can be
confirmed that any such change would not reduce the rate of employment,
investment, research, and production in the United States?
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\3\ https://www.bea.gov/news/2020/activities-us-multinational-
enterprises-2018.
\4\ https://www.bea.gov/news/2020/us-international-transactions-
third-quarter-2020.
Answer. I look forward to working with the dedicated career
professionals at the Treasury Department to ground tax policy-making in
the best available research and evidence. President Biden has laid out
an ambitious set of tax proposals that would ensure that the wealthy
and corporations pay their fair share, including proposals to increase
the corporate rate to 28 percent and eliminate incentives for American
companies to offshore operations. These and other proposals will be
developed further as part of the budget process, during which they will
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benefit from the expertise of Treasury's professional tax staff.
Question. President Biden has proposed doubling the tax rate on
global intangible low-taxed income (GILTI) earned by foreign
subsidiaries of U.S. companies from 10.5 percent to 21 percent. The
Biden proposal also would eliminate GILTI's exemption for deemed
returns under 10 percent of qualified business asset investment (QBAI).
While described as a ``loophole,'' QBAI is intended to represent
earnings attributable to physical infrastructure in a foreign country.
Because GILTI is intended to target intangible income, income
attributable to tangible income should not be subject to tax.
While President Biden has described GILTI as an incentive for U.S.
companies to shift operations overseas, before the Tax Cuts and Jobs
Act (TCJA), many U.S. companies paid no U.S. tax on their foreign
earnings. An increase in the GILTI rate to 21 percent would make U.S.
companies far less competitive with their foreign counterparts because
most foreign countries do not subject a company's foreign earnings to
the same level of tax as domestic earnings. Coupled with the
elimination of QBAI, raising the rate to 21 percent would actually
incentivize U.S. companies to invert or be acquired by foreign
companies, particularly given that the OECD is currently considering a
global minimum tax around 13 percent.
What is your view on the United States imposing a 21-percent tax on
foreign earnings if the OECD is planning to implement a global minimum
tax at or around 13 percent? Wouldn't that harm our U.S. companies by
making them far less competitive?
Answer. I appreciate the concern with regard to the competitiveness
of our U.S. companies amidst a changing international tax landscape. A
global minimum tax agreed to at the OECD could, however, stop the
destructive global race to the bottom on corporate taxation and help
discourage harmful profit-shifting.
Question. President Biden's ``Made in America'' proposal includes a
10-percent penalty on goods and services imported by U.S. companies
from foreign affiliates. This policy would only penalize U.S.
companies, putting them at a competitive disadvantage with similarly
situated foreign companies. It also ignores the reality of global
supply chains. If our country penalizes imports from foreign countries,
couldn't this policy encourage foreign countries to tax goods or
services imported from the United States?
Answer. The President's objective is to create incentives for
American companies to create and maintain jobs at home. President
Biden's Offshoring Tax Penalty is specifically aimed at those who
offshore manufacturing and service jobs to foreign nations in order to
sell goods or provide services back to the American market when those
jobs could have been done by U.S. workers.
Question. As you are likely aware, there are three new tax treaties
with Poland, Chile, and Hungary that have been pending with the Senate
for a number of years. For each of these new treaties, there is an open
question as to how to resolve an interaction with the base erosion
anti-abuse tax (or BEAT), an international provision enacted as part of
the Tax Cuts and Jobs Act after these treaties were concluded. Will you
make it a priority for the Treasury Department to work with this
committee and the Senate Foreign Relations Committee to ensure that
these treaties are ratified and implemented as quickly as possible?
Answer. If confirmed, I look forward to working with the relevant
committees of jurisdiction to address the ratification issues that have
arisen with respect to the outstanding, concluded, but, as yet,
unratified tax treaties with Chile, Hungary, and Poland.
Question. The Treasury Department and Office of Management and
Budget (OMB) currently have a memorandum of understanding in place
under which OMB's Office of Information and Regulatory Affairs (OIRA)
reviews significant tax regulations issued by the Treasury Department.
What is your view of the OIRA review process for significant tax
regulations, and do you intend to preserve the arrangement requiring
OIRA to review Treasury regulations?
Answer. I am committed to a robust and rational regulatory process.
Regulatory decisions should be made based on careful consideration of
the effects of potential regulatory choices.
Question. Technical corrections are an inevitable but essential
component of any newly enacted legislation, including the Tax Cuts and
Jobs Act (TCJA). Without enactment of the TCJA technical corrections,
the legislation will not operate fully as intended. Unfortunately, the
TCJA technical corrections haven't advanced in Congress due to
political issues, leaving taxpayers with unnecessary uncertainty,
compliance burdens, and hampering efforts to prevent abuse. Will you
work with the tax-writing committees to provide technical advice and
support enactment of technical corrections to TCJA and other tax
legislation?
Answer. If confirmed, I would be committed to working with the tax-
writing committees on technical corrections on all legislation.
other tax issues
Question. Recently President Biden spoke about the need to help
small businesses during the pandemic. In so doing, he qualified his
remarks by saying, ``Our priority will be black-, Latino-, Asian-, and
Native American-owned small businesses, women-owned businesses, and
finally having equal access to resources needed to reopen and
rebuild.''\5\ Can you commit that, if you are confirmed, the Treasury
Department will enforce the law equally for all Americans regardless of
their race, sex, sexual orientation, or political beliefs?
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\5\ https://twitter.com/Transition46/status/1348403213200990209.
Answer. If confirmed, I would be committed to ensuring that the
Treasury Department and the IRS administer tax laws in a fair and even-
handed manner, applying the law equally to all Americans. This includes
by helping small business owners from historically marginalized
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communities have access to resources needed to reopen and rebuild.
Question. You have mentioned that there is more than a $7-trillion
so-called ``tax gap'' projected for the next 10 years. The tax gap is
often mentioned as a way to pay for things, but I have yet to see much
in terms of concrete results from talk about closing the tax gap.
We have heard from many, including Treasury Secretary Mnuchin, that
additional funding for the IRS to perform more audits, for example,
could be fruitful. But it won't be fruitful if funds are used to target
tax-exempt organizations whose political beliefs do not align with the
administrations.
According to an October, 2020, post on the IRS website from an IRS
enforcement official: ``Despite common misperceptions about IRS
examination rates, the reality is that the likelihood of an audit
significantly increases as income grows.'' There are other useful facts
offered, some of which don't align with what we often see put forward
by so-called activists.
Will you commit to working with the committee, on both sides, to
separate the myths from the facts and help ensure that any additional
resources for the IRS are used most efficiently?
Answer. If confirmed, I would be committed to ensuring that the
Treasury Department and the IRS administer tax laws in a fair and even-
handed manner, keeping politics out of the process. I will work with
Congress to ensure that any increase in the IRS budget and staff is
used fairly and efficiently.
Question. In 2006, I authored important updates to the IRS
whistleblower program. Since that time, the program has been one of the
most effective programs in addressing tax evasion, leading to the
recovery of more than $6.1 billion in taxes that would have otherwise
been lost to fraud. While over the years the IRS has taken a number of
steps to improve the administration of whistleblower program, there is
always room for improvement. According to the Fiscal Year 2020 IRS
Whistleblower Report, over the past 2 years awards to whistleblowers
have markedly declined while award-processing times have continued to
steadily climb. As Treasury Secretary, will you commit to supporting
the whistleblower program and to work with me, the IRS, and
stakeholders to make improvements where necessary to ensure the
program's continued success?
Answer. Whistleblowers are an important asset to the integrity of
the agency and tax system more generally, and I will work to create an
agency culture that respects whistleblowers and the laws that protect
them.
Question. I have been a strong proponent of the bipartisan IRS
private debt collection program, along with Senator Schumer. In 2015,
Congress updated and made mandatory the IRS private debt collection
program. This program is designed to chip away at the tax gap by
requiring the IRS to contract with private debt collectors to collect
inactive tax debt due but unpaid. These are the tax debts not being
worked by the IRS and, absent this program, would likely never be
collected. The program has proven its ability to collect hundreds of
millions of dollars in otherwise uncollectible tax debts on an annual
basis, including generating nearly half a billion dollars in net
revenue in fiscal year 2020 alone. At the same time, it has generated
additional resources for the IRS that have enabled the IRS to hire 400
compliance personnel and collect millions more in additional revenue.
As Treasury Secretary, can you assure me that the Treasury Department
will continue to operate the program to the full extent authorized
under the law, including by ensuring that all inactive debts as defined
by the statute are provided to the collection companies in a timely
fashion?
Answer. If confirmed, I will work with the IRS to make sure that
taxes are collected in an efficient and effective manner.
Question. In late 2019, the IRS announced that it was increasing
its enforcement efforts against participants and promoters of
syndicated conservation-easement transactions. This past summer,
Senator Wyden and I released a report following our investigation into
these transactions, showing them to be highly abusive tax shelters. The
IRS estimates that promoters of these tax shelters have generated about
$36 billion worth of illicit deductions for their customers between
2010 and 2018. As Treasury Secretary, will you commit to maintaining
the IRS's enforcement efforts against syndicated conservation-easement
transactions and work with this committee to enact legislation to
prohibit abusive conservation-easement transactions?
Answer. If confirmed, I will work to ensure that the IRS's
enforcement efforts are aimed at abusive tax shelters of any kind, and
look forward to considering and working with you on the specific issue
you raised.
Question. Over the last decade, accounts known as donor advised
funds have grown substantially in popularity and are now estimated to
hold over $120 billion worth of assets. These funds allow donors to
claim a charitable tax deduction when they give money to the fund but
before any of those dollars are provided to working charities. Do you
foresee the Treasury Department regulating in this area to increase the
flow of money out of these funds and into the hands of working
charities?
Answer. I believe it is imperative that we continuously examine
various tax preferences and deductions to ensure they are achieving
their desired social and economic objectives. I look forward to working
with the Treasury and the IRS, if confirmed, to learn more about areas
such as this when developing a robust tax regulatory agenda to ensure
the country's tax laws are implemented and enforced fairly and
effectively.
matters related to fsoc, ofr, and financial regulation
Question. The Financial Stability Oversight Council is charged, in
part, with identifying risk to the financial stability of the U.S.
How do you define financial stability, and how do you measure it?
How do you define systemic risk, and how do you measure it?
What are the limiting principles that allow one to separate risks
that are systemic from those that are not?
Answer. As you know, the Financial Stability Oversight Council
(FSOC) was created by Congress under the Dodd-Frank Wall Street Reform
and Consumer Protection Act (DFA) following the Financial Crisis that
brought the U.S. economy and financial system to the brink of collapse.
When the executive branch implements laws passed by Congress, including
carrying out the duties and fulfilling the responsibilities of the
FSOC, we should look to the law that created the FSOC.
While the DFA does not define either financial stability or
systemic risk explicitly, various provisions in the DFA use language
that appears to indicate congressional intent in how the law should be
viewed and executed. For instance, the long title of the legislation
itself is instructive: ``An Act to promote the financial stability of
the United States by improving accountability and transparency in the
financial system, to end too big to fail, to protect the American
taxpayer by ending bailouts, to protect consumers from abusive
financial services practices, and for other purposes.'' That is,
Congress intended for the executive branch to promote financial
stability by implementing those provisions that Congress carefully
crafted and spelled out in the DFA after numerous hearings, meetings,
and discussions and after a lengthy, and thorough legislative process,
ranging from the enhanced prudential supervision provisions in title I
(which is entitled ``Financial Stability Act of 2010''), orderly
liquidation authority in title II, and consumer protection provisions
in title X.
Indeed, one of the missions of the FSOC itself as spelled out by
Congress with regard to financial stability in the DFA is as follows:
``to identify risks to the financial stability of the United States
that could arise from the material financial distress or failure, or
ongoing activities, of large, interconnected bank holding companies or
nonbank financial companies, or that could arise outside the financial
services marketplace.'' This provision appears rooted in the
experiences of the Financial Crisis, when the U.S. economy was close to
ruin following the failures and near failures of large, interconnected
bank holding companies and nonbank financial companies that threatened
and undermined financial stability.
One of the criticisms of the prior regulatory architecture was that
each functional regulator was in its silo and none was charged with
holistically monitoring the financial system for risks that could
threaten financial stability. Therefore, a core mission of the FSOC
given by Congress is to monitor the financial system for risks--
systemic risks--that could threaten financial stability by convening
and coordinating with a group of regulators and staying vigilant in its
mission.
In terms of systemic risk, the DFA includes provisions that discuss
systemic risk beyond titles I and II of the DFA. For instance, a number
of provisions address systemic risk in title VII (``Wall Street
Transparency and Accountability Act of 2010'') as well as title VIII
(``Payment, Clearing, and Settlement Supervision Act of 2010''). In
title VII, Congress clearly had systemic risk in mind when creating a
paradigm for regulating derivatives for the first time, for example
mandating that ``In order to minimize systemic risk, under no
circumstances shall a derivatives clearing organization be compelled to
accept the counterparty credit risk of another clearing organization.''
And in title VIII, Congress further set forth provisions relating
to systemic risk in addressing systemically important financial market
utilities:
``The purpose of this title is to mitigate systemic risk in the
financial system and promote financial stability by--
(1) authorizing the Board of Governors to promote uniform standards
for the--
(A) management of risks by systemically important financial market
utilities; and
(B) conduct of systemically important payment, clearing, and
settlement activities by financial institutions;
(2) providing the Board of Governors an enhanced role in the
supervision of risk management standards for systemically important
financial market utilities;
(3) strengthening the liquidity of systemically important financial
market utilities; and
(4) providing the Board of Governors an enhanced role in the
supervision of risk management standards for systemically important
payment, clearing, and settlement activities by financial
institutions.''
Question. Large financial institutions are required to submit
``living wills'' to regulators, and ``stress tests'' are performed on
those institutions. Part of the reason offered for those examinations
of the institutions is that it is instructive to assess roadmaps of how
institutions are arranged, and how they might respond to stressed
conditions.
President Biden, in December of 2020, criticized the Federal
Government as having been caught off guard and unprepared for
cyberattacks, in association with breaches of the SolarWinds/Orion
platform.
Members of the Senate Finance Committee and House Financial
Services Committee during the Obama administration requested, numerous
times and through many mechanisms, detailed information from the U.S.
Treasury and Federal Reserve about contingency plans at Treasury and
the Federal Reserve for any inability of the Federal Government to make
timely payments on Federal debt obligations. Such an inability could
arise because of cyber-attacks, a super-storm such as Sandy, breach of
the debt limit, or other factors that temporarily knocks out Federal
processing systems in financial networks or legal authorities to pay.
Inquiries were made of you, Dr. Yellen, when you served as Chair of the
Federal Reserve Board, though many believe that your responses were not
complete or fully revelatory.
If requested, will you commit to providing Finance Committee
members, who have oversight responsibility over Federal debt, with
details of Treasury's contingency plans for what to do in the event
that, for whatever reason, the Federal Government is temporarily unable
to make timely payments on debt obligations?
Answer. I respect congressional oversight and look forward to
addressing your questions about debt management, if confirmed. The
market for U.S. debt is the most liquid and the deepest government
securities market. It is essential that we take every step to ensure
this never changes. This includes continuing to maintain the effective
operations of our debt management team. I am committed to taking steps
to ensure that we avoid the risks you outlined. As for one of the
scenarios mentioned in the question--breach of the debt limit--as you
know there are a handful of steps that a Treasury Secretary can take to
delay the harmful impacts of a binding debt limit, and previous
secretaries in both Democratic and Republican Administrations have
taken steps to address this. Ultimately, the ability to avoid a debt
ceiling impasse rests with Congress. Again, I would certainly want to
work closely with Congress to address in advance the issue of the debt
limit to avoid its harmful effects.
Question. You have identified to the committee that you ``helped to
establish a Division of Financial Stability at the Federal Reserve
Board.'' Presumably, that Division has at its disposal resources from
the Federal Reserve's budget to perform research on financial
stability. At the same time, the Office of Financial Research likely
engages in research on financial stability.
Why is it efficient or productive to have multiple agencies
performing like research?
If implications of research from differing agencies differ,
presumably disagreements or understandings could be reached
bureaucratically within the FSOC structure, but is there any reason to
be concerned about setting up structures that could lead to lack of
accountability and abilities for agencies to point fingers at one
another for failures in the event that we realize financial
instability?
Answer. Congress created the Office of Financial Research (OFR) in
the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
to support the Financial Stability Oversight Council (FSOC) in its
mission, among others, to monitor the financial system for risks that
could threaten financial stability:
``The purpose of the Office is to support the Council in fulfilling
the purposes and duties of the Council, as set forth in subtitle A, and
to support member agencies, by--
(1) collecting data on behalf of the Council, and providing such
data to the Council and member agencies;
(2) standardizing the types and formats of data reported and
collected;
(3) performing applied research and essential long-term research;
(4) developing tools for risk measurement and monitoring;
(5) performing other related services;
(6) making the results of the activities of the Office available to
financial regulatory agencies; and
(7) assisting such member agencies in determining the types and
formats of data authorized by this Act to be collected by such member
agencies.''
While a division of the Federal Reserve would presumably support
the Federal Reserve, the OFR by statute is mandated to support the
entire FSOC by, among others, providing data to the member agencies of
the FSOC as well as making the results of its activities available to
financial regulatory agencies.
It may be that each member agency has some capability related to
financial stability from that agency's perspective. It appears clear
from the statutory language, however, that Congress created the FSOC
to, among others, play a coordinating role among the member agencies to
provide a holistic view of overall risks to the financial system, and
created the OFR to support the FSOC in its endeavors in terms of data
and research.
Question. You and other anticipated Biden nominees for Treasury
positions have signaled that you have interest in somehow building up
the Office of Financial Research (OFR). That Office, set up by the
Dodd-Frank Act, promised a lot in terms of essentially scanning the
financial landscape to find heat maps of risks to a weakly defined
notion of ``financial stability,'' but delivered little of use. The OFR
similarly utilized taxpayer resources on a quest to expand Legal Entity
Identifiers to help monitor the financial landscape and activities;
again, lots of promise, but little return for the investment of
taxpayer resources. What, in particular and in terms of details, do you
intend to do to beef up the OFR, and why do you think it will be useful
outside of employing yet more government researchers and bureaucrats
and arranging more seminar and research conferences?
Answer. Congress created the Office of Financial Research (OFR) in
the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
to support the Financial Stability Oversight Council (FSOC) in its
mission, among others, to monitor the financial system for risks that
could threaten financial stability. In creating the OFR, Congress
explicitly mandated that the OFR would fund itself not from taxpayer
dollars, but instead from assessments on large, complex bank holding
companies and nonbank financial companies designated for supervision by
the Federal Reserve.
The mission of the OFR is an important one--that of supporting the
FSOC with data and research capabilities--but it is by no means a cure-
all for all policy questions and issues and, like any other
organization, it is only as capable as the staff and the resources
allocated allow it to be. It has been reported that the staffing level
at the OFR has been reduced significantly in the past 4 years, and
while it cannot be said with certainty at this point exactly what the
specific staffing level or scope of assignment should be, it seems
clear that there should be an assessment of staffing for the OFR to
appropriately fulfill its statutory mission of providing support for
the FSOC.
Question. In a 2012 paper titled ``Behaviorally Informed
Regulation,'' authors Michael S. Barr, Sendhil Mullainathat, and Eldar
Shfir proposed, among other things, a scheme in which credit-card
issuing firms could charge late fees that ``they deemed appropriate,
but the bulk of such fees would be placed in a public trust to be used
for financial education and assistance to troubled borrowers.'' Firms
could keep a share of the fees, but ``the bulk'' of the fees would
effectively be nationalized and presumably controlled by the Federal
Government's behaviorists. Do you support such a scheme of effectively
nationalizing late fees on things like credit cards?
Answer. With the establishment of the Consumer Financial Protection
Bureau (CFPB), that agency is responsible for consumer financial
protection regulation. Congress enacted the CARD Act, which reformed
credit card practices. My understanding is that these reforms have
improved consumer experiences and reduced consumer costs.
Question. What would a ``new Dodd Frank'' entail?
Do you think that the Dodd-Frank legislation failed and there is,
therefore, a need for a new one?
Answer. Dodd-Frank Wall Street Reform and Consumer Protection Act
of 2010 (DFA) was enacted by Congress in the aftermath of the Financial
Crisis to address, among others, issues raised by the large, complex
financial institutions whose material distress and failure threatened
financial stability, and to strengthen the financial system to better
withstand future crises.
The FSOC was one of the reforms to come out of the DFA, whose
statutory mission is to monitor threats to financial stability. Other
reforms included enhanced prudential standards, living wills, and
stress tests, among others, that helped to strengthen the financial
system compared to the pre-Financial Crisis era. While the DFA was
helpful in providing authorities to address issues highlighted by the
Financial Crisis, the passage of time has also shed light on new issues
that may be necessary to deal with. If confirmed, I would be glad to
work with Congress to discuss whether and how to further strengthen our
oversight of the financial system.
Question. Do you intend to, in effect, resurrect and expand on the
``operation chokepoint'' efforts of the Obama administration through
regulatory actions to have financial firms channel or restrict credit
according to partisan and normative views, perhaps under the guise of
``reputation risk''?
Answer. As you know, regulatory actions generally would be the
purview of the prudential regulators--not the Treasury Department--and
the regulators operate as independent agencies not under the
supervision of the Treasury Department. That said, I understand that
this is an issue of importance, and if confirmed, I would be happy to
discuss this issue further to ensure that I'm fully appreciative of
your concerns.
Question. Do you intend to take regulatory actions using
authorities at the Financial Stability Oversight Council to have
financial firms channel or restrict credit according to partisan and
normative views?
Answer. Congress created the Financial Stability Oversight Council
(FSOC) under the Dodd-Frank Wall Street Reform and Consumer Protection
Act (DFA) following the Financial Crisis to, among others, monitor
threats to financial stability. In my view, maintaining the stability
of the U.S. financial system is not, and should not be, a partisan
issue, and if I have the honor of being confirmed, I would faithfully
execute the laws that Congress passed to safeguard our economy and our
financial system. And in carrying out the duties of the Treasury
Secretary under the statutes enacted by Congress, I hope to work with
Congress to understand the views and concerns of members of Congress.
climate change and regulation
Question. In your October 2020 Group of Thirty (G30) paper, from a
working group on climate change and finance that you co-chaired with
Mark Carney, titled ``Mainstreaming the Transition to a Net-Zero
Economy,'' you call for establishment of independent ``Carbon
Councils,'' and advocate for governments to delegate decisions to those
councils to determine policies toward climate change that are insulated
from ``short-term political preferences.''
Please describe whether you will advocate for such global climate
councils, which would remove decision-making and authority from
Congress, and why you think that would be good for constituents that
members of Congress represent and for the democratic process?
You also call for governments to set clear timelines for making
climate-related financial disclosures by private-sector entities
``mandatory by 2023.'' What would that mean for the U.S., and is that
something you will try to do administratively, perhaps through an
interpretation of FSOC authorities?
Answer. Climate change is an existential threat to not only our
environment, but also our economy. President Biden has released a
detailed plan to combat climate change, including rejoining the Paris
Agreement, investing in sustainable infrastructure, and creating new
green jobs. If confirmed, I will support him in implementing that plan
at the Treasury. As we discussed in the Finance Committee policy
meeting prior to my confirmation hearing, the views expressed in this
paper are not views that I've discussed with President Biden and are
not part of the President's planned approach to address the climate
crisis. President Biden and I both respect Congress's vital role in
addressing this issue and we hope to work with members of this
committee and others in Congress to pass legislation needed to combat
this urgent threat.
Moreover, climate change poses a potential systemic risk to the
American economy, and I believe we must seriously look at assessing the
risks to the financial system from climate change. This will be an
issue regulators will also have to think more about in the years ahead,
and we need to ensure that we have appropriate processes and
regulations necessary to assess and mitigate this risk.
Question. The Climate 21 Project, which ``taps the expertise of
more than 150 experts with high-level government experience, including
nine former cabinet appointees, to deliver actionable advice for a
rapid-start, whole-of-government climate response coordinated by the
White House and accountable to the President,'' produced a ``Transition
Memo'' for the Department of the Treasury. The 22-page memo provides a
detailed listing, and timeline, for development of the unelected
authors' preferred agenda for tackling climate challenges at Treasury.
What recommendations of the Climate 21 Project's Transition Memo
for Treasury do you intend to implement?
Answer. The President and I plan to listen to and incorporate input
from many stakeholders in developing the administration's climate
policy. Some of the suggestions in the memo--including announcing a
commitment to this issue and integrating climate into our international
diplomacy--are actions President Biden has already made clear will be
taken across this administration. Going forward, the President's
climate agenda will follow from the ambitious plan he has laid out.
Question. You have mentioned ``stranded assets'' several times
during your confirmation process as a risk from climate change that you
seem to believe could become some sort of aspect of a risk to financial
stability.
Is the anticipated shut-down of the Keystone XL project by the
incoming administration an example of stranded assets, where
investments have been made and the Federal Government intervenes to
strand them and make them worthless?
Is one of the largest risks to realizing large amounts of stranded
assets a risk that the Federal Government will take unanticipated (when
the investments were made) actions to make such assets essentially
worthless, because of actions by the Federal Government intended to
shut down production in sectors such as coal or other ``fossil fuels?''
Answer. Stranded assets are a possible result when new forms of
clean energy, transportation, and production displace those that have
contributed to climate change. While government policy can play a role
in setting market incentives, the transition from the finite supply of
fossil fuels and other energy sources that contribute to climate change
with renewable energy sources is not a decision or choice. Climate
change is an existential threat to not only our environment, but also
our economy. If confirmed, I will work with President Biden to help
build a sustainable and more resilient economy.
treasury administrative matters
Question. Do you intend to resurrect the Obama administrations
failed and ill-
designed myRA retirement savings scheme, partly by misusing the
permanent, indefinite appropriation provided to Treasury for
compensating financial agents?
Answer. The myRA retirement savings account, intended for people
with taxable compensation income but who lack access to an employer-
sponsored retirement plan, was designed to remove common barriers to
saving, and give people an easy way to get started. If confirmed, I
would want to assess whether this product or any other vehicle to
promote savings would be appropriate and in demand under these new
economic conditions.
Question. Will you commit to providing the committee with a
frequently updated listing of financial agents, and their contractual
responsibilities to Treasury, and all fiscal agency agreements with the
Federal Reserve?
Answer. The National Bank Acts of 1863 and 1864 grant the Treasury
Department the authority to retain financial agents to provide services
on its behalf. Financial agents have the fiduciary obligation to
protect the interests of the United States. Financial Agency Agreements
(FAA) entered into by Treasury do not constitute procurement contracts
under the purview of Federal Acquisition Regulations. However, we are
committed to providing information about our fiscal agents and
financial agency agreements with full transparency and in a timely
manner, to the extent required by all applicable laws and regulations,
without compromising the integrity of the nature of the information
requested.
Question. In 2016, the Obama administration transferred $1.7
billion to Iran in cash, ultimately delivered in the form of pallets of
(non-U.S.) cash, purportedly as part of a settlement of a decades-old
arbitration claim between the U.S. and Iran. The transaction involved
use of the so-called Judgment Fund housed at Treasury's Bureau of the
Fiscal Service and payments-system resources of the Federal Reserve. At
the time, since the Judgment Fund did not allow processing of
individual claims of amounts over 10 digits, $1.3 billion of payment
was divided into 13 claims of $99,999,999.99 and one claim of
$10,390,236.28. To my knowledge, members of the Senate Finance
committee, who have oversight responsibility over Treasury, did not
receive any advance notice or consultation regarding the outsized and
unusual payments.
Will you commit to informing the Finance Committee upon receipt of
any request by a Federal agency or body to make Judgment Fund payments
that are outsized and unusual prior to payments being made?
Answer. I am committed to working with Congress generally, and the
Finance Committee specifically, on oversight matters. If confirmed, I
will consult with the Finance Committee on concerns related to payments
from the Judgment Fund.
Question. In a June 7, 2016 article in the Huffington Post titled
``The Koch Brothers Are Trying to Handpick Government Officials. We
Have to Stop Them,'' Senators Warren, Schumer, and Whitehouse put
forward allegations, that have subsequently been shown to be false,
against a Republican nominee for a Social Security Trustee position and
a Republican nominee to a seat on the SEC. The authors identified that
the two nominees had worked at a think tank that received financial
support from the ``Koch brothers.'' The nominees, and officials at the
think tank identified that their research was not guided or constrained
by any institutional donors, though the authors seemed unconvinced,
calling directly into question the integrity of the nominees.
Given the sensitivity of some to institutional funding, especially
if funding is provided to institutions that include conservative
scholars, and given that the Charles Koch Foundation provided
substantial funding to the Brookings Institution when you worked there,
as did many ``wealthy corporations'' and billionaires:
Should there be concern that you, in your position as Treasury
Secretary, if confirmed, will, as the authors of the article referenced
above warn, ``serve the wishes of wealthy corporations and their
billionaire owners''?
Should concerns about think-tank funders be limited to think tanks
that allow scholars to pursue conservative thoughts?
Should there be a double standard with respect to who is and who is
not suspected of being influenced by corporations and ``billionaires''
depending on their political positions?
Answer. As I said at my hearing, my lifelong commitment to putting
people back to work, to making sure small businesses and working
families have relief they need to survive economic downturns like this
one, comes from my heart and has been the story of my life. That is
what will influence me, if confirmed, as Treasury Secretary.
Question. The American Economic Association, of which you were
President, has a policy of publishing papers only if data and code used
in the analysis are clearly and precisely documented and access to the
data and code is non-exclusive to the authors.
Do you agree that such a policy should be applied to analyses
performed and models and data used by the Federal Government, including
agencies, aside from any administrative data that are not allowed to be
publicly shared?
Answer. The American Economic Association is committed to the
replicability of research published in its journals. In order to
facilitate replication, authors of accepted papers that contain
empirical work, simulations, or experimental work must provide
information about the data, programs, and other details of the
computations sufficient to permit replication. The American Economic
Association provides funding for a data replication team that ensures
that the results of papers published in its journals can be replicated
running the same code and data that the authors used. Moreover, the
availability of the code and data allows outside researchers to attempt
broader definitions of replication, allowing the further development of
evidence on the questions posed in the research and thus the
advancement of science. Replication is an essential part of science,
and therefore I am in support of facilitating replication. However, it
is also important to note that replication comes after the original
researchers have completed their work and have advanced to the stage of
acceptance for publication. The association does not, for instance,
require an author whose work is under consideration to submit their
data and empirical strategy as they may need to continue their research
before it is ready for publication. If confirmed, I look forward to
advancing research and its replicability within the Federal Government.
Question. Will you consult with the Finance Committee if Treasury
officials or officials at the IRS are contemplating special
arrangements, such as hiring as temporary IRS or other agency
employees, to enable researchers from outside government to gain
access, under the guise of performing academic research, to data
otherwise not sharable with private citizens (such as sensitive tax
information)?
Answer. The IRS has, for many years, run the incredibly successful
Statistics of Income (SOI) Joint Statistical Research Program. This
program has helped provide new understandings of taxpayer behaviors
that aid in administering the U.S. tax system, and new insights and
understandings of the ways that existing tax policies affect
individuals, businesses, and the economy. While this program was
delayed due to COVID, a new call for researchers is planned for
December 2021. These partnerships are cost-effective ways to learn
about the many ways in which Federal Government policies impact
Americans. Moreover, I appreciate how significant our economic needs
are, and how we must leverage all of our resources to think creatively
about how to best put the country's economy back on stable footing. It
is equally as essential that appropriate precautions are taken to
ensure that data privacy is preserved. If confirmed, I will work with
the Treasury and the IRS to continue robust data protection and access
practices. And I will do everything possible to protect Treasury data.
I look forward to working with you and the entire Finance Committee to
develop creative ways to better leverage the talent of government
employees and outside researchers to improve tax and fiscal policy for
all Americans.
Question. If confirmed as Treasury Secretary, you will help manage
the debt, including the maturity structure of outstanding U.S. debt.
Do you believe that the optimal weighted-average maturity of the
debt is above, below, or equal to where it now stands?
Do you plan to consider issuing any new federal debt instruments?
If you decide to issue any new Federal debt instruments, or decide
to hold a higher average cash balance at Treasury, will you commit to
informing the Finance committee, which has jurisdiction over the debt
and Treasury operations, prior to so doing?
If the Federal Reserve in the future adopts yield curve control
measures, how will you coordinate with the Federal Reserve with respect
to implications for any target by Treasury of the average-maturity of
the debt?
Answer. You raise important questions about the structure of the
national debt. If confirmed, I look forward to reviewing current
Treasury practices with respect to debt issuance, including analyzing
the weighted-average maturity of the debt; discussing whether we have
the right mix of Federal debt instruments; and understanding the cash
balance needs of the Federal Government. I believe that congressional
oversight and partnership on these issues is vital, and look forward to
working with you on the full range of concerns regarding debt
management that you have raised.
matters related to treasury secretary's role as managing trustee of
social security and medicare trust funds
Question. Social Security benefits are said to be ``earned
benefits,'' in that for every dollar of FICA tax paid in for disability
or retirement benefits, there is a commensurate benefit that accrues to
the taxpayer. An old Franklin Roosevelt quote is often invoked to
reinforce the earned-benefit notion; in 1941, Roosevelt stated that
``We put those payroll contributions there so as to give the
contributors a legal, moral, and political right to collect their
pensions and their unemployment benefits. With those taxes in there, no
damn politician can ever scrap my social security program.'' To some,
it is important that Social Security programs remain as ones that can
be characterized as earned benefits, meaning, again, that there is a
benefit commensurate with every unit of tax paid in. Otherwise, some
fear, dependence of Social Security benefits on partial general-fund
revenue, or revenue cloaked as Trust Fund revenue but accruing to the
Trust Funds as tax payments that do not carry any associated benefit
accrual, would lead to Social Security being characterized as some sort
of ``welfare,'' and benefits being thought of as mere transfers to
which recipients do not necessarily have legal, moral, or political
``rights.''
What, to you, is meant by ``earned benefit'' in the context of
Social Security benefits?
Answer. Social Security was designed to ensure that every American
is adequately prepared for retirement. The program recognizes that
people who earn more may need a higher income in retirement to maintain
a living standard in retirement that is commensurate with what they
enjoyed while working. As such, higher earning Americans typically pay
more into the system and receive greater Social Security payments in
retirement. However, Social Security was also designed to reduce elder
poverty by ensuring a minimum living standard in retirement regardless
of earnings while working.
Question. Do you believe it is important to maintain a link between
a benefit and a tax, such that for every unit of Social Security taxes
paid in there is a commensurate claim to a pecuniary benefit?
Answer. The linkage between tax payments and Social Security
benefits is particularly important for the lowest earning Americans who
are contributing to Social Security even while facing pressing
financial need in their daily lives. That their contributions are
directly linked to their future well-being is essential. President
Biden supports lifting the earnings cap on wealthy taxpayers with more
than $400,000 in wages to pay the same rate on their income as other
workers. Requiring such high earning tax payers to continue to pay into
Social Security is not only crucial for the fiscal health of the
program, but also for maintaining equity in the system.
Question. Do you believe that Social Security, while not being a
main driver of future deficits, does contribute to deficits in the on-
budget part of the, and the consolidated, Federal budget?
Answer. Spending out of the Social Security Trust Fund is an
indicator of the need to continually monitor and evaluate the Social
Security program in order to ensure that this crucial safety net that
has helped protect the elderly from poverty since its inception endurs.
Social Security is off-budget, in part, because the Greenspan
Commission determined that changes in the Social Security program
should be made only for programmatic reasons. I appreciate that as the
population ages, shortfalls in Social Security are likely to increase,
and that may require consideration of reform. President Biden has
called for a Social Security reform package that would boost benefits
for vulnerable beneficiaries--including widows and widowers, workers
with low lifetime incomes, and older beneficiaries--and provide an
across-the-board increase for all beneficiaries. The plan also improves
the long-run fiscal position of the Social Security Trust Fund by
asking wealthy taxpayers to pay the same rate on their income as other
workers. On the whole, President Biden's plan would provide older
Americans a more secure retirement. I look forward to working with
Congress, if confirmed, to discuss these important issues, and ensure
that the Social Security program continues for decades to come without
burdening middle-class taxpayers.
Question. The Secretary of the Treasury is the Managing Trustee of
the Social Security and Medicare Trust Funds. The Medicare Hospital
Insurance Trust Fund is expected to be exhausted in a few short years.
The Supplemental Medical Insurance Trust Funds is expected to continue
to require General Fund transfers that can crowd out other spending
priorities. Do you believe that the precarious state of Medicare's
finances is a pressing problem that should be addressed by the Biden
administration?
Answer. While the last report of the Trustees found no material
change in the solvency of the Medicare programs relative to the prior
year, Covid has accelerated the depletion of the Medicare Hospital
Insurance Trust Fund according to Congressional Budget Office
projections released in September 2020. Thus the state of Medicare's
finances remains something that requires close attention and
evaluation. President Biden is committed to ensuring the stability of
Medicare, and providing Americans with greater access to Medicare by
lowering the eligibility age. These changes are part of President
Biden's commitment to improve access to health care for all Americans.
general matters
Question. Your record and statements indicate that you may find
``behavioral economics'' to be useful. To some, behavioral economics is
merely a way for economists to open up additional degrees of freedom
into their analysis; and, with additional degrees of freedom, analyses
lose rigor and results of the analyses become highly questionable and
normative, in the minds of some. Some also believe that behavioral
economics, and the ``nudges'' offered by them, often represent arrogant
claims by elitists that, somehow, infallible ``experts'' or
``technocrats'' are needed to nudge, guide, cajole, and regulate the
fallible non-experts because those fallible people, for various
possible ``behavioral'' reasons, simply don't make choices that are in
their own best interests. Do you support behavioral economic analysis
and, if so, what discipline is there to prevent behaviorists from try
to regulate and constrain Americans simply because of normative
preferences of the behaviorists?
Answer. Behavioral economic analysis reflects the progress of
economists in their quest to study how people make decisions given the
many constraints they face. A fundamental premise is that people
optimize, and do the best they can to make good decisions given their
values, preferences, and opportunities. Over the past several decades,
economists have discovered systematic ways in which individuals'
decisions deviate from prior economists' assumptions. Behavioral
economics seeks to replace old assumptions that have proven to be
untrue using the insights of psychology and the evidence provided by
experiments and observational data. As a result, economics has become a
more rigorous social science. These insights give us a better
understanding of how Americans are likely to experience and respond to
public policy, and provide useful insight into the likely impact of
policy on people's lives. Moreover, they provide accountability to
ensure that policy choices have their intended effect. Your question
refers to the insight of behavioral scientists that people are more
likely to choose a default option rather than actively choosing the
non-default option. That insight does suggest that good policy choices
should recognize that the resulting default option will be chosen by a
large share of Americans and therefore should be beneficial to a large
share of Americans.
Question. The so-called HEROES Act (H.R. 6800), which passed in the
House of Representatives in May 2020, directs the Federal Reserve, in
section 110801, in unusual and exigent circumstances, to purchase
obligations issued by any State, county, district, political
subdivision, municipality, or entity that is a combination of any of
the several States, the District of Columbia, or any of the territories
and possessions of the U.S. Such purchases would occur within proposed
modifications to the Municipal Liquidity Facility that was established
under section 13(3) of the Federal Reserve Act, and the modifications
would have to be made to, among other things, ``ensure that any
purchases made are at an interest rate equal to the discount window
primary credit interest rate . . . commonly referred to as . . . the
`Federal funds rate' ''; and, to ``ensure that an eligible issuer does
not need to attest to an inability to secure credit elsewhere.'' Given
that the Federal funds rate is near zero, section 110801 in effect
requires that the Federal Reserve make near-zero interest rate loans to
States, municipalities, and the like, independent of whether those
jurisdictions are able to secure credit elsewhere--something that turns
the Federal Reserve into an agency providing assistance that is close
to grant making.
Do you support the policies called for in section 110801?
More generally, do you support requiring that the Federal Reserve
make loans to potentially non-creditworthy borrowers at the Federal
funds rate?
More generally, do you support allowing the Federal Reserve to make
grants to private or governmental entities?
Answer. The country is currently facing an unprecedented pandemic
that has exposed economic inequalities rooted in our financial system
for generations. I believe that it is imperative that the government
does its part to catalyze an economic recovery that is both equitable
and sustainable, and supports policies that pursue these outcomes.
Right now, taking too little action poses the greatest risk to the
health of our economy, the livelihoods of the American people who drive
that economy, and future generations. I support, and will pursue
actions that provide aid to fully distribute the vaccine, reopen
schools, deliver badly needed aid to State and local governments,
support small business owners--and most importantly get people back to
work, if confirmed. From Georgia to Montana and Nevada to Maine, first
responders, educators, other essential workers need our help now.
Question. You seem to oppose rule-based monetary policy, and
instead prefer discretion. Do you symmetrically not support rules-based
economic stabilizers, such as unemployment insurance tied formulaically
to economic measures, and instead prefer fiscal-policy discretion that
is consistent with a continuing role for Congress and representative
democracy?
Answer. Automatic stabilizers play a critical role in mitigating
the negative impacts of recession. Our current system needs both
updating and expansion, as evidenced by the economic strain placed on
workers and families during the most recent downturn. Designing and
implementing a modern and effective system of automatic stabilizers is
an important step to take now, so that we can minimize the negative
impacts of any future recessions. I am eager to work with Congress, if
confirmed, on ways to automatically adjust the length and amount of
relief depending on health and economic conditions so future
legislative delay doesn't undermine the recovery and families' access
to benefits they need.
Question. You have, in recent years, identified that, in terms of
long-term deficits, adjustments are needed in fiscal policies in light
of demographics and what you referred to in 2017 as an ``unsustainable
debt path.'' Abstracting from the serious recession- and crisis-related
economic challenges that we face, what fiscal policy adjustments do you
believe are needed, and do any of them not involve simply raising
taxes?
Answer. The most important thing we can do today to set us on a
path to fiscal sustainability is defeat the pandemic, provide relief to
the American people, and make long-term investments that will benefit
future generations. There are long-term budget challenges. The
President is committed to implementing responsible policies that grow
the economy, ask high-income Americans and corporations to pay their
fair share, and give our country even more capacity to face the
challenges ahead.
The President is committed to putting the country on a fiscally
sustainable path and making sure that what we do now leaves future
generations better off. Past experience suggests that, in times of
economic weakness and low interest rates like today, taking the kind of
action that the President supports to provide aid to Americans and help
support the economy can lead to lower debt as a share of the economy
even when financed by larger deficits in the short run. That's because
the action leads to a healthier economy that generates more revenue and
less in the way of future safety net spending.
It is also urgent that we invest in the American people, in
innovation, and in our physical infrastructure, because such spending
will produce returns in the years ahead and leave future generations
better off. Another important fiscal policy adjustment is the more
efficient delivery of public services. For example, during the
campaign, President Biden introduced several health reforms that would
bend the growth in health costs, such as a plan to save billions by
allowing the Federal Government to better negotiate drug prices. These
reforms, coupled with higher rates of economic growth, can drive down
long-term debt and deficits. In fact, the Penn-Wharton Budget Model
found that the Biden health plan decreases the public debt by 4.6
percent over 10 years and 10.7 percent over 30 years.
Question. Do you support a wealth tax, and will you advocate for a
wealth tax, including construction of an entirely new measurement and
monitoring apparatus to track an entirely new tax base?
Answer. President Biden has proposed to tax the investment income
of families making more than $1 million at the same rate they pay on
their wages and to tax some previously untaxed capital gains on the
final return of wealthy taxpayers. These reforms would remove biases in
the tax code that favor wealth over work.
Question. Do you believe a wealth tax is constitutional?
Answer. I would defer to constitutional scholars on this question,
though I note that President Biden has not proposed a wealth tax.
Question. What do you believe international evidence on the
efficacy, or not, of wealth tax schemes tells us regarding whether or
not it is useful to construct one in the U.S.?
Answer. I would need to undertake a careful review of this
literature before I could offer a nuanced assessment of the lessons we
could draw from the international evidence on wealth taxes for a wealth
tax in the U.S. context.
Question. Former Treasury Secretary Lawrence Summers has written
that ``Lack of income growth and opportunity for middle-class families
is a fundamental problem in American society. So too is rising
inequality. The role of moneyed interests in shaping policy is also a
crucial political problem. Wealth taxation is not an effective approach
to any of these problems.'' Do you agree with Summers's conclusion that
wealth taxation is not an effective approach to the problems he
identifies?
Answer. I would need to undertake a careful review of this
literature before I could offer a firm conclusion.
Question. Economists Gabriel Zucman, Emmanuel Saez, and Thomas
Piketty have established a clear political agenda, with what is
apparently a purely normative animus toward rich people, and little
else of policy substance, guiding their policy prescriptions. Those
activists have become renowned for playing fast-and-loose with data,
definitions, interpolations, and the like in order to force massaged
data to conform with their normative prior policy preferences. With
respect to claims about the progressivity of the U.S. tax system, for
example, Zucman and Saez have claimed that the top 400 richest
Americans pay a lower tax rate than the bottom 50 percent, which even
liberal economist and former Treasury Secretary Lawrence Summers is
quoted as having said is ``substantially inaccurate and substantially
misleading.'' Numerous economists have questioned results, methodology,
and attempts at Federal budget scoring of proposals put forward by
Zucman, Saez, and Piketty in various co-authorship permutations. With
the understanding that analyses, data, and claims from Zucman, Saez,
and Piketty face credibility challenges, do you intend to rely on
analyses and data that they produce in efforts to increase
progressivity of the tax code in order to act on inequality?
Answer. Tax policy-making should be grounded in the best available
research and evidence. There is broad agreement in the economics
profession that income and wealth inequality have increased in recent
decades, though the precise magnitudes differ across studies and
methodologies. Similarly, there is broad agreement that higher taxes on
wealthy families can raise substantial amounts of revenue and make the
tax code more progressive.
There is no single best source of data or analysis for all
purposes, but, if confirmed, I will work to ensure that Treasury's
research and policy analysis is rigorous and based on the best
available research.
Question. Measures of income inequality differ according to data
and techniques used. Are you aware of, and can you comment on, any
analyses that use administrative data to find inequality increases over
the recent past that are smaller than those found using other data?
Answer. As noted above, there is a broad agreement in the economics
profession that income and wealth inequality have increased in recent
decades, though the precise magnitudes differ across studies and
methodologies.
Question. Some believe that, independent of revenue raised or lost
because of implementation of a wealth tax, it is important to institute
a wealth tax so ``billionaires'' and high-wealth individuals do not
hoard such wealth.
Do you support implementation of a wealth tax with the primary or
sole intention of ensuring that there are fewer people with high wealth
levels?
If so, what social problem would you be intending to solve by
implementing the wealth tax?
Answer. As noted above, President Biden has proposed to tax the
investment income of families making more than $1 million at the same
rate they pay on their wages and to tax some previously untaxed capital
gains on the final return of wealthy taxpayers. These reforms would
remove biases in the tax code that favor wealth over work. He has not
proposed a wealth tax.
Question. According to a post on the Internal Revenue Service's
website titled ``Audit Rates Increase as Income Rises,'' dated October
20, 2020, and authored by Deputy Commissioner Sunita Lough: ``Despite
common misperceptions about IRS examination rates, the reality is that
the likelihood of an audit significantly increases as income grows.''
The posting provides data showing that higher-income taxpayers were
audited at much higher rates in 2013-2015 than other taxpayers, and
presents challenges surrounding audits of lower-income taxpayer
receiving EITC (such as error rates on tax returns claiming EITC of
around 50 percent and the improper payment rate involving EITC claims
of more than $17 billion each year).
Do you agree with the data provided by Deputy Commissioner Lough in
the aforementioned posting?
How would you address the seeming high error rates and high
improper payment aggregate associated with taxpayers receiving EITC?
Answer. It is also important to note that IRS estimates also show
that EITC errors are responsible for less than 10 percent of taxes that
are not paid on time, while studies show that the top 1 percent of
filers may be responsible for more than a quarter of that ``tax gap.''
Furthermore, about a fifth of households who are eligible for the EITC
do not file a tax return to claim it.
If I have the privilege of being confirmed, I look forward to
working with Treasury, the IRS, and Congress to ensure that IRS tax
compliance and enforcement activity is focused towards the largest
sources of the tax gap, and that the tax laws are fairly applied for
working families and wealthy filers alike. I would also work to both
reduce EITC error and ensure that working families in fact receive
their hard-earned credits, such as by working with the Treasury
Department and Congress to reduce complexity and barriers to accurate,
easy tax filing.
Question. On December 2, 2020, Project Syndicate published an
article by Joseph Stiglitz titled ``What Yellen Must Do.'' In the
article, Stiglitz wrote that ``some $500 billion of this `global money'
[SDRs] could be issued overnight if only the U.S. Secretary of the
Treasury would approve.'' And, he wrote: ``Biden could give the green
light.''
Do you agree with Stiglitz's recommendation, and do you plan to
issue $500 billion of SDRs?
More generally, will you commit to consulting with Congress, on
both sides of the aisle, before pledging any additional funding, or
rearrangement of existing funding, to multilateral international
institutions such as the IMF?
Answer. We must make sure that the IMF and World Bank are doing
everything they can to ensure that developing countries have the
resources for public health and economic recovery. We must also get the
most vulnerable countries the debt relief they need at this critical
time. I know that there are a variety of proposals out there. If
confirmed, I will direct my team to analyze the full range of ways that
the international community can strengthen its support for the most
vulnerable countries during this emergency. I look forward to studying
the issue further and pledge to adhere to the legal requirement to
consult with Congress before making a decision on the U.S. position on
an SDR allocation.
Question. You have advocated for additional ``relief'' funding for
State, local, and other units of government, based partly on forecasts
of ``lost revenue.'' Those forecasts, since the onset of the pandemic,
have been far off the mark. Moreover, they are often based on
historical patterns between things like revenue and unemployment rates
that obtained in past periods in which the economy was subject to
recession-inducing forces, but nothing at all like we have seen since
early 2020.
Do you continue to advocate for additional State, local, and other
government relief?
If so, what data on revenue realizations guide your advocacy, and
what studies of lack of State, local, and other government ``relief''
in past recessions lead you to believe that without additional funding
now, recovery from a recession would be held back in some ways, and do
you think that your assessment reflects a consensus from academic
literature on the topic of efficacy of Federal relief aid to State,
local, and other governments?
Answer. Relief for State and local governments remains essential to
combat the pandemic, restart our economy, and reopen our schools.
States and localities need funds for public health and education, and
to keep front line workers on the job. The last thing we would want
would be for States and localities to lay off teachers, transportation
workers, sanitation workers, or the health-care workers, firefighters,
and police officers so essential for public health and safety.
There is strong evidence from past recessions that a failure to
support State and local governments will make this crisis worse. I
understand that this recession is different from prior ones and have
been closely following changes in State and local revenue and
expenditure. Based on that ongoing review, it remains the case that
State and local governments all across our country need the support of
the Federal Government in this time of need.
Question. The incoming administration desires to reset the Federal
minimum wage to $15, despite warnings from the Congressional Budget
Office that such a move could cost upwards of 3.7 million workers a
job. Of course, given variations in the cost of living across the
country, $15 for a worker in, say, New York City or Berkeley, CA, is
far different than for a worker in, say, West Virginia. And paying $15
an hour as an employer in Iowa is different, in terms of production
costs, than in States with higher overall living costs. A $15 minimum
hourly wage is only a bit below the May 2019 median hourly wage for all
occupations for West Virginia.
Do you agree with the 2019 analysis from the Congressional Budget
Office that increasing the minimum wage, depending on how the increase
is implemented, will result in 1.3 million workers becoming jobless,
and there is a two-thirds chance that the change in employment could be
a decrease of up to 3.7 million workers?
Do you believe that many low-wage workers will become displaced by
technology if a $15 minimum wage in enacted?
Do you believe there are negative employment effects of increasing
the minimum wage at both the extensive and the intensive margin?
What economic literature do you rely on to make your assessments
regarding effects of an increase in the minimum wage to $15, which is
well outside the size of an increase that could be comfortably thought
of as being within the relevant range of applicability of existing
studies?
Would you support implementation of indexation such that an
increase in the Federal minimum wage to $x per hour is implemented, but
with $x per hour applying to any States with price levels equal to the
national median and the minimum wage in other States or municipalities
indexed to State or municipal living costs using the Bureau of Economic
Analysis's Regional Price Parities (RPPs) measure?
Answer. Raising the minimum wage will lift tens of millions of
Americans out of poverty while expanding access to opportunity for
countless small businesses nationwide. It matters how it's implemented,
and the President's minimum wage will be phased in over time, giving
small businesses plenty of time to adapt. Raising the wages of the
lowest-paid workers in America can unlock billions of dollars of
consumer spending that could be used to fuel demand for the essential
goods and services small businesses provide. With greater revenue
coming in, entrepreneurs can not only pay their employees higher wages
(which will increase productivity and retention), but also invest in
new equipment, expand their operations, and grow their business.
Question. Recent reports indicate that unemployment insurance fraud
in California alone may total $8 to $10 billion. Fraud takes resources
away from those to whom the Federal Government intends to help and
places them in the hands of undeserving fraudsters, some of whom seem
to recently have been parts of organized crime rings, perhaps with
international scope. I've already asked the Department of Labor to
investigate California's unemployment insurance system, since the
Governor of the State does not seem very interested in being serious
about reining in fraud. And, in the relief package that was enacted
just a few weeks ago, I argued for strengthened anti-fraud protections,
while Democrats did not want many--if any--protections, partly based on
a notion that fraud detection could involve use of racial- or income-
biased risk-based fraud-detection systems.
Do you believe, with billions of dollars of fraud in the
unemployment insurance system, additional fraud detection is important?
Do you believe that it is possible to enact legislation calling for
systems of risk-based fraud detection without the result being use of
systems or algorithms that have racial- or income-based biases?
Answer. The unemployment insurance (UI) program has provided a
lifeline to millions of Americans in need. Due to the depth of this
economic crisis, State agencies have been working tirelessly, and are
stretched thin under this massive workload trying to get benefits to
qualified applicants. I am supportive of efforts to combat UI fraud
that do not impede working families from accessing funds when they need
them most. If confirmed, I look forward to working with Congress and
the Department of Labor on this important issue.
Question. You have referenced low interest rates as a partial
rationale for massive expansions of Federal spending, and have
identified that debt service costs are important to monitor with
respect to future fiscal challenges.
Do you believe that there are risks that, given the maturity
structure of outstanding debt and associated ``rollover'' risks in
Federal debt financing, interest rates could rise above what most
currently expect, thereby increasing likelihood of a fiscal crisis?
Is advocacy for massive expansions of Federal spending under a
belief that long-term real interest rates will remain low for a long
time into the future a risky bet, effectively using tax obligations of
future generations as the wager, that rates will remain low for a long
future period?
Answer. In the current environment, the most pressing challenge is
to overcome the pandemic and rebuild our economy. That will require
additional relief, as proposed by President Biden. I look forward to
working with the Congress to secure that relief. Presently, interest
rates are at historically low levels, and our interest burden as a
percentage of GDP is also quite low. Therefore, in the current
environment, it makes sense to focus on the relief needed to support
families and businesses. I look forward to working closely with
Treasury's debt management professionals to ensure we have an effective
borrowing strategy. Over the longer term, as I have often stated, we
need to ensure that our country is on a sustainable path with respect
to our debt burden. I look forward to working with Congress on these
important issues, if confirmed.
Question. In the past, I believe that you have identified that,
outside of recession or an economic ``crisis,'' long-term fiscal
sustainability, including existing unsustainable mandatory spending
programs, is something that is important to be concerned about.
Do you believe that now?
If not, and if your views have changed over the past couple of
years, please explain how your views have changed and what evidence led
you to change your views.
Answer. In the current environment, the most pressing challenge is
to overcome the pandemic and rebuild our economy. That will require
additional relief, as proposed by President Biden. I look forward to
working with the Congress to secure that relief. Presently, interest
rates are at historically low levels, and our interest burden as a
percentage of GDP is also quite low. Therefore, in the current
environment, it makes sense to focus on the relief needed to support
families and businesses, rather than on the overall level of our
national debt. Over the longer term, as I have often stated, we need to
ensure that our country is on a sustainable path with respect to our
fiscal position, including with respect to assuring that our safety net
programs are robust and sustainable. I look forward to working with
Congress on these important issues, if confirmed.
Question. You identified during the hearing on your anticipated
nomination that some public projects have been shown to promise
``extremely high returns.'' One idea put forward by you and others is
that ``investments'' by the Federal Government in things like
infrastructure projects with ``high returns'' would be prudent in the
face of low real financing costs.
What are the public projects that you claim have been shown to
promise ``extremely high returns.''
How are those returns measured?
How long will it take for the projects you identify as having
extremely high returns to actually generate those returns (i.e., how
``shovel-ready'' are they)?
Answer. Public projects can generate meaningful economic gains
through a variety of mechanisms. For example, projects can increase
economic activity by raising productivity, increasing labor supply, or
stimulating the macroeconomy in the face of falling growth. Estimates
by economists regularly find that each $1 of public spending can boost
economic activity by well-over $1.5--and sometimes substantially
higher. Examples of stimulative investments can also include
unemployment insurance for workers facing long-duration unemployment,
temporary increases in food stamps, as well as funding needed
infrastructure projects.
The returns to public spending are measured through a variety of
metrics, including increased economic activity, higher levels of
employment, and even increased revenue. The amount of time required for
these programs to generate returns can vary from one quarter to several
years. In the case of investment in young children's education, it can
take over a decade for the returns to fully materialize--although the
gains persist for a generation.
Question. Your response to my question on rural interests during
the hearing on your anticipated nomination was somewhat disappointing.
It sounded as though you are intending to pursue general policies aimed
largely or solely at economic aggregates, with a notion that anything
you do in the aggregate will be enough to ensure equitably shared
returns for rural families and rural economies. Do you have any ideas
for policies that focus on rural and agricultural interests, given that
many in rural America have felt left out of any returns from
globalization and Washington, DC-based decision making?
Answer. I share your concerns that too many rural communities have
been left behind by globalization and other forces, and I am committed
to pursuing policies that specifically ensure that the unique needs of
rural Americans are addressed. I believe there are opportunities, for
example, in our efforts to expand access to capital and provide credit
to entrepreneurs to pay special attention to ensuring that programs are
available and accessible to rural small businesses. If confirmed, I
look forward to working with you and members of the committee to
achieve that goal.
Question. Do you believe that underfunded State and local public
pensions pose a risk to financial stability in the United States?
Answer. States and localities face a wide range of conditions with
regard to their public pensions, which can create varying challenges
for their own fiscal situations--even if State and local public
pensions are not typically considered a major risk factor to overall
financial stability. If confirmed, I would look to pursue an economic
agenda that would support the kind of broad-based economic growth that
would also have a positive impact on public pensions.
Question. Republicans in Congress during the Obama administration
had developed proposals to help address State and local public pension
challenges. Will you commit to working with Congress and members of the
Finance Committee on both sides of the aisle in examining the issue?
Answer. I look forward to learning more about proposals that
members of this committee have developed on the issue, if confirmed.
Question. Given what I expect will be proper efforts on your part
to examine diversity at the Treasury Department, your views on
diversity will impact your decision making. With respect to a recent
lawsuit alleging that Harvard University's admissions processes
discriminate against Asians:
Why did you join an amicus brief to seemingly reinforce your view
that statistical procedures and arguments used by your Berkeley
colleague Professor David Card were more carefully executed than
procedures and arguments used by the opposing side?
Do you believe, given arguments and analyses that you have seen
related to the case, that Harvard admissions do not discriminate
against Asians?
Using data from a lawsuit against Harvard, an April 2020 National
Bureau of Economic Research paper (Working Pater 27068) by Arcidiacono,
Kinsler, and Ransom identifies that they ``show that there is a
substantial penalty against Asian Americans in admissions with limited
scope for omitted variables to overturn the results.'' Do you find the
results of that paper to be relevant to your views expressed in the
amicus brief that you joined, and do the results weigh on your views of
whether or not Harvard has discriminated against Asians through its
admissions processes?
Answer. I signed the amicus brief and supported the arguments that
were laid out within it. I cannot speak further to the admissions
process at Harvard, but as I said at my confirmation hearing, issues of
diversity, inclusion, and racial equity are incredibly important,
particularly at this moment in history when the pandemic has taken an
unbelievable and disproportionate toll on low-income workers and
especially people of color. And because I am so concerned about the
impact on minority communities, the very first meeting that I had after
my nomination was announced was with representatives of racial and
economic justice groups to hear directly from them what their needs
are. The focus of having diverse viewpoints and leadership within the
Treasury Department will continue to be one of my top priorities.
Question. The U.S. private motor coach, school bus, and domestic
passenger vessel industries have suffered unprecedented economic losses
and furloughed hundreds of thousands of employees over the past 10
months due to the pandemic. Collectively, these industries have
furloughed or laid off an estimated 308,000 employees due to the COVID-
19 pandemic. These businesses do not expect to see the start toward a
return to ``normal'' business operations until mid- to late 2021, at
the earliest, forcing their employees to remain out of work or be lost
to other industries. Congress provided some relief for these industries
in the legislation signed into law on December 27, 2020. That bill
provided $2 billion in grants for these industries to be jointly
administered by the Department of Treasury and the Department of
Transportation.
Because this is an entirely new program that needs to be
established by the Department of the Treasury in consultation with the
Department of Transportation, what can the Department of the Treasury
do to expedite development of the program and distribution of the
funds?
Will you commit to expedite, if confirmed, this program and do
everything possible to get funds to these companies as soon as
possible?
Will you commit to providing the Finance Committee with details of
the guidance and criteria that Treasury will use to administer these
funds as soon as they are developed?
Answer. The $2-billion grant program included in the legislation
signed last December is an important source of support for the private
motor coach, school bus, and domestic passenger vehicle industries. I
recognize the importance of these industries and the people they
employ. If confirmed, I will work closely with leadership of the
Department of Transportation to implement this program as quickly and
effectively as possible, and I look forward to consulting and working
with the Finance Committee on this important program.
______
Follow-up Questions Submitted by Hon. Chuck Grassley
Question. At various times during the campaign, President Biden
suggested he would repeal the Tax Cuts and Jobs Act either in full or
in part. Please indicate (yes or no) whether the incoming Biden
administration supports the following:
Would the Biden administration support repealing the doubling of
the Child Tax Credit from $1,000 to $2,000? If no, would the
administration support making this provision permanent?
Would the Biden administration support repealing the enhanced
standard deduction, which increased the standard deduction from $6,500
to $12,000 for singles, from $13,000 to $24,000 for married couples,
and from $9,550 to $18,000 for heads of household in 2018? If no, would
the administration support making this provision permanent?
Would the Biden administration support repealing the reduced tax
rates put in place for middle-class taxpayers, which included reducing
the 15-percent bracket to 12 percent? If no, would the administration
support making this provision permanent?
Would the Biden administration support repealing the qualified
business income deduction, which allows small businesses to deduct up
to 20 percent of their qualified business income? If no, would the
administration support making this provision permanent?
Dr. Yellen did not answer each question to indicate whether the
Biden administration would support either the repeal or permanency of
the specified provision.
Answer. Both during the campaign and the transition, President
Biden supported an expansion of the Child Tax Credit, namely making the
credit fully refundable and raising the maximum value of the credit to
$3,600 for families with young children, and $3,000 for others. During
the campaign, he also firmly committed to a policy of avoiding tax
increases on taxpayers with income under $400,000. Together, these
suggest that the Biden-Harris administration will support higher levels
and refundability of the Child Tax Credit. These improvements to the
Child Tax Credit would be expected to have a dramatic effect on lifting
children out of poverty nationwide, and I would welcome the opportunity
to work with the committee on this effort.
Between the elimination of personal exemptions and expansion of the
standard deduction, the Tax Cuts and Job Act put in place a series of
reforms that shifted the relative tax burden for families largely based
on household size and itemization status. I will need to study the
economic and distributional implications of these combined reforms
before making a judgment and look forward to engaging with you and
others in Congress on this important matter, if confirmed.
During the campaign, President Biden supported repeal of the parts
of the 2017 tax cuts that benefited the wealthiest Americans and
largest companies; he clarified that the repeal of certain aspects of
the tax law would be restricted only to those taxpayers making more
than $400,00 a year, with a firm commitment that taxpayers earning less
than this amount would not see their taxes increase.
The goal of the Biden-Harris administration is to provide support
for small businesses through a variety of mechanisms, including
expanded access to the PPP program and an array of programs designed to
provide capital to underserved communities. Before making a judgment on
this particular provision, I would need to study not only it's specific
impact on small businesses, but the combined impact of other small
business initiatives. I hope to closely consult with Congress as I
better understand the impact of extending this provision.
Question. Senate and House Democrats have argued for repealing the
$10,000 cap on the State and local tax (SALT) deduction as part of
pandemic relief efforts. According to the Tax Policy Center, a joint
project of the Urban Institute and Brookings Institution where you are
a distinguished fellow, such a proposal included in a House passed
pandemic relief measure would provide the top 0.1 percent of households
an average tax cut of nearly $144,000. At the same time it effectively
would give no benefit to the bottom half of households. In your
opinion, does it make sense for pandemic relief efforts to prioritize
six-figure tax cuts for the wealthiest few when millions of middle-
class American families are struggling to make ends meet? Would you
oppose including a repeal of the SALT cap in any further relief or
stimulus measures?
In response to this question, Dr. Yellen indicated the
administration needs additional time to examine the SALT cap to come to
a decision on whether the cap is justified. Given the need for
additional time to review this issue, does this mean the Biden
administration would not be supportive of efforts to repeal the SALT
cap as part of impending COVID relief/stimulus efforts?
Answer. President Biden has released his proposal for an American
Rescue Plan that would form the basis of a new COVID relief package. As
you know, that proposal did not include a repeal of the SALT cap. As
the process of passing related legislation moves to the next phase, I
anticipate that, if confirmed, I would be in a position to evaluate a
wide range of proposals, and that I would be able to do so during the
course of any negotiations with the benefit of the expertise of the
Treasury Department. I would also welcome the views of members of this
committee and others in Congress as we consider what provisions to
include in any final relief package.
Question. Millions of retirees and participants in multiemployer
pension plans face an impending crisis. Many plans are in poor
financial health, and the PBGC's multiemployer pension insurance fund
is projected to be insolvent in 2026 according to PBGC's latest annual
report. I am committed to finding a bipartisan solution that can
resolve this crisis. If confirmed, will you commit to working with this
committee and other interested Senators on a long-term solution that
will secure the retirement benefits for these retirees while also
reforming the underlying system and ensuring taxpayer dollars will not
be used to finance a private-sector system in perpetuity?
In her response, Dr. Yellen noted that President Biden supports
passage of the Butch Lewis Act. Since efforts in 2020 focused on an
alternative approach using partition relief:
Does the Biden administration support employing a partition
approach to help failing multiemployer pension plans?
Do you believe taxpayer dollars should be committed in perpetuity
such that the government would effectively finance this private-sector
pension system?
Answer. I am aware that while members of Congress would like to
seek a resolution to the multiemployer pension crisis, there are
competing approaches to a resolution--including the Butch Lewis
legislation and the partition approach. I respect the expertise of
members of Congress, many of whom have been working to resolve this
issue for years, and look forward to further consultation on this
issue.
I believe that workers should have access to their earned pension
benefits, but also believe it is imperative to find an approach that
does not create undue burdens on American taxpayers. This is a complex
issue, and I am eager to work with members of Congress to find a
solution to ensure that working families who rely on the commitment of
a pension plan aren't left behind.
Question. Prior to the Tax Cuts and Jobs Act (TCJA), the United
States had one of the highest corporate income tax rates among
developed countries. TCJA lowered the corporate rate to ensure that our
domestic businesses would remain globally competitive. Even at 21
percent, the United States still holds the 11th highest corporate tax
rate out of the top 36 developed countries, according to the Tax Policy
Center.\6\
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\6\ https://www.taxpolicycenter.org/fiscal-fact/oecd-corporate-tax-
rate-ff-01042021.
President Biden has proposed increasing the 21-percent rate to 28
percent. If enacted, the United States once again would have one of the
highest business tax rates among developed countries. Unfortunately,
not just U.S. companies would be affected by the rate increase. There
is an economic consensus that a significant portion of the corporate
income tax falls on workers in the form of reduced wages and benefits.
Even the Tax Policy Center, which is a joint venture of the Urban
Institute and Brookings Institution where you are a Distinguished
Fellow, assumes 20 percent of the corporate tax falls on workers.
Similarly, the Joint Committee on Taxation and Congressional Budget
Office have both concluded that 25 percent of the corporate tax is
borne by workers. If the corporate tax rate is increased to 28 percent
as proposed, American workers will also feel the burden through fewer
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jobs, reduced wages, and less benefits.
What are your views on increasing the corporate tax rate above that
of most developed countries, particularly if a significant portion of
the rate increase would also be borne by American workers?
With the unemployment rate continuing to be high due to the COVID-
19 pandemic, wouldn't an increase in the corporate tax rate that is
borne in significant part by labor hinder efforts to restore the
historically low unemployment rates we saw in 2019?
Dr. Yellen did not respond to the first question regarding her view
on an increase in corporate tax being borne by American workers. Please
provide a direct and substantive response.
Answer. President Biden has proposed a slate of proposals that
would strengthen the economy and benefit American workers. The question
of corporate tax incidence is one that received substantial attention
during the presidential campaign. The recent change in the corporate
tax rate enacted as part of the TCJA provides an opportunity to study
precisely how changes in the corporate rate impact wages, although
virtually all public finance economists agree that these dynamics will
play out over several years. Presently, there is little evidence of a
material increase in wages and thus incidence on workers. I look
forward to studying this issue further and consulting with both
Congress and public finance experts, if confirmed.
Question. President Biden has proposed a new 15-percent corporate
minimum tax based on book income, rather than taxable income as
currently used in the tax code. As you know, book income, as reported
on a company's financial statements, is designed to provide information
on the company's performance for investors and creditors based on
generally accepted accounting principles. On the other hand, taxable
income is computed in accordance with the Internal Revenue Code and
regulations as the basis for imposing taxes.
Under the tax code, U.S. taxpayers are permitted to adjust their
taxable income by allowable deductions, many of which reflect
incentives that Congress intended to encourage certain behavior. For
example, bonus depreciation is intended to encourage U.S. companies to
invest more in capital expenditures, like equipment and fixed assets.
Imposing a minimum tax would effectively remove the benefit and
undermine the legislative intent of those provisions. Further, it would
require companies and the IRS to calculate tax liability under
different tax bases, creating significant complexity for taxpayers and
the IRS.
Given the important differences between accounting principles and
the deductions permitted by the tax code, do you agree there are
legitimate reasons for substantial differences between book income and
taxable income and that book income is not an appropriate basis for a
new alternative tax regime?
Dr. Yellen did not respond with her views on whether it is
appropriate to use book-accounting rules as a basis for a new
alternative tax regime. Please provide a direct and substantive
response.
Answer. I appreciate the potential complexities of using book
income to calculate corporate tax burdens, but am also concerned about
the zero or very low tax burdens borne by a subset of corporations.
Ideally, the U.S. would implement a corporate tax code that limits
opportunity for gaming, while also preserving access to tax provisions
that encourage productive investment. This is a complex issue requiring
further study of concerns related to basing corporate tax burdens on
book income, and if confirmed, I hope to work with you and others in
Congress, as well as the Treasury staff, on this issue.
Question. Under the Coronavirus Aid, Relief, and Economic Security
(CARES) Act, Congress created a temporary rule allowing U.S. businesses
to carry back net operating losses (NOLs) incurred in 2018, 2019, and
2020 to the prior 5 years. In the Health and Economic Recovery Omnibus
Emergency Solutions (HEROES) Act, House Democrats proposed to repeal
the CARES Act NOL provisions, effectively imposing a retroactive tax
increase on businesses experiencing losses as a result of the pandemic.
The expected revenue effect of the changes proposed in the HEROES Act
was nearly $250 billion. Do you support this kind of retroactive tax
change that would significantly increase taxes on businesses
experiencing losses? Do you agree with former President Obama's sound
advice when he said during the aftermath of the financial crisis, ``The
last thing you want to do is raise taxes in the middle of a
recession''?
Dr. Yellen did not express support or opposition to introducing a
retroactive tax increase during the pandemic on businesses experiencing
losses. Please provide a direct and substantive response.
Answer. President Biden has released his proposal for an American
Rescue Plan that would form the basis of a new COVID relief package. As
you know, that proposal did not include repealing the CARES Act NOL
provisions. As the process of finalizing the package and advancing
legislation moves to the next phase, I anticipate that I would be
better positioned to evaluate and weigh in on a wide range of proposals
and, if confirmed, would be better able to do so with the benefit of
the expertise of the Treasury Department. I would also welcome the
views of members of this committee and others in Congress as we
consider what provisions to include in any final relief package.
Question. Pillar 2 of the OECD's proposed ``unified approach''
would effectively create a global minimum tax. The Treasury Department
to date has made it a priority that the U.S. global intangible low-
taxed income (or GILTI) tax regime would be treated as a ``deemed
compliant'' regime under any multilateral agreement. Do you plan to
continue to advocate for GILTI to be treated as a deemed-compliant
regime under Pillar 2?
Dr. Yellen did not answer whether the Treasury Department would
continue to advocate for GILTI to be treated as a deemed-compliant
regime under Pillar 2. Please provide a direct and substantive
response.
Answer. President Biden has proposed substantially reforming GILTI
as part of his plan to ensure a fair and progressive tax code where
wealthy individuals and corporations pay their fair share. If
confirmed, I look forward to learning more from Treasury Department
staff about the status of these negotiations and how they relate to
other diplomatic efforts. As part of that process, I will consult with
the staff about the extent to which such positions are appropriate,
including whether it would be appropriate to treat the current U.S.
GILTI regime as a ``deemed compliant'' regime.
Question. As part of the proposed Pillar 2 approach, the OECD has
proposed an ``undertaxed payment rule'' that would complement the
global minimum tax. The undertaxed payment rule effectively would tax a
business on a payment made if the recipient business is not subject to
a certain level of tax with respect to the payment. U.S. businesses
have voiced concerns that payments received by a U.S. company from a
foreign affiliate could be subject to the undertaxed payment rule if
the payment receives preferential treatment under the foreign derived
intangible income (FDII) regime or through the application of another
preferential rate or credit regime. Will you advocate to preserve the
application of U.S. tax law, including FDII and other preferential
rates and credits, if Pillar 2 includes an undertaxed payment rule?
Dr. Yellen did not answer whether the Treasury Department would
advocate to preserve the application of U.S. tax law, including FDII
and other rates and credits, under Pillar 2. Please provide a direct
and substantive response.
Answer. If confirmed, I look forward to learning more from Treasury
Department staff about the status of these negotiations and how they
relate to other diplomatic efforts. As part of that process, I will
consult with the staff about the extent to which it would be
appropriate to advocate for a multilateral rule specific to the United
States FDII regime in the context of a global discussion of a generally
applicable undertaxed payments rule.
Question. President Biden has proposed doubling the tax rate on
global intangible low-taxed income (GILTI) earned by foreign
subsidiaries of U.S. companies from 10.5 percent to 21 percent. The
Biden proposal also would eliminate GILTI's exemption for deemed
returns under 10 percent of qualified business asset investment (QBAI).
While described as a ``loophole,'' QBAI is intended to represent
earnings attributable to physical infrastructure in a foreign country.
Because GILTI is intended to target intangible income, income
attributable to tangible income should not be subject to tax.
While President Biden has described GILTI as an incentive for U.S.
companies to shift operations overseas, before the Tax Cuts and Jobs
Act (TCJA), many U.S. companies paid no U.S. tax on their foreign
earnings. An increase in the GILTI rate to 21 percent would make U.S.
companies far less competitive with their foreign counterparts because
most foreign countries do not subject a company's foreign earnings to
the same level of tax as domestic earnings. Coupled with the
elimination of QBAI, raising the rate to 21 percent would actually
incentivize U.S. companies to invert or be acquired by foreign
companies, particularly given that the OECD is currently considering a
global minimum tax around 13 percent.
What is your view on the United States imposing a 21-percent tax on
foreign earnings if the OECD is planning to implement a global minimum
tax at or around 13 percent? Wouldn't that harm our U.S. companies by
making them far less competitive?
Dr. Yellen's response provides that a ``global minimum tax agreed
to at the OECD could, however, stop the destructive global race to the
bottom on corporate taxation and help discourage harmful profit-
shifting.'' If a global minimum tax is agreed to at the OECD at or
around 13 percent, would the Treasury Department propose that GILTI
apply at the same rate as agreed to at the OECD or continue to pursue
the 21-percent rate proposed during the campaign?
Answer. I appreciate your concern regarding the competitiveness of
our U.S. companies amidst a changing international tax landscape. As
you note, President Biden has proposed substantially reforming GILTI as
part of his plan to ensure a fair and progressive tax code where
wealthy individuals and corporations pay their fair share. The U.S. has
strong and unique attractions as a residence for multinational
corporations and, as a result, U.S. companies would remain competitive
even if they faced a somewhat higher 21 percent rate of tax on their
foreign earnings. This is even more true if a global minimum tax were
agreed to at the OECD.
Question. President Biden's ``Made in America'' proposal includes a
10-percent penalty on goods and services imported by U.S. companies
from foreign affiliates. This policy would only penalize U.S.
companies, putting them at a competitive disadvantage with similarly
situated foreign companies. It also ignores the reality of global
supply chains. If our country penalizes imports from foreign countries,
couldn't this policy encourage foreign countries to tax goods or
services imported from the United States?
Dr. Yellen's response does not answer the question of whether this
policy could encourage foreign countries to tax goods or services
imported from the U.S. subsidiary of a foreign company. Please provide
a direct and substantive response.
Answer. Anticipating the response of other countries to a tax
change passed in the United States is difficult, and relies on a
variety of specific factors concerning the nature of the change and the
foreign country in question. While I would--if confirmed--welcome the
opportunity to further explore this question with you with more
specificity, President Biden's proposal would support American
businesses and workers.
Question. I have been a strong proponent of the bipartisan IRS
private debt collection program, along with Senator Schumer. In 2015,
Congress updated and made mandatory the IRS private debt collection
program. This program is designed to chip away at the tax gap by
requiring the IRS to contract with private debt collectors to collect
inactive tax debt due but unpaid. These are the tax debts not being
worked by the IRS and, absent this program, would likely never be
collected. The program has proven its ability to collect hundreds of
millions of dollars in otherwise uncollectible tax debts on an annual
basis, including generating nearly half a billion dollars in net
revenue in fiscal year 2020 alone. At the same time, it has generated
additional resources for the IRS that have enabled the IRS to hire 400
compliance personnel and collect millions more in additional revenue.
As Treasury Secretary, can you assure me that the Treasury Department
will continue to operate the program to the full extent authorized
under the law, including by ensuring that all inactive debts as defined
by the statute are provided to the collection companies in a timely
fashion?
Dr. Yellen indicated that she would work with the IRS to ``make
sure taxes are collected in an efficient and effective manner,'' but
did not address whether the Treasury Department, under her leadership,
would faithfully operate the private debt collection program as
required by law.
Answer. I look forward to working with Treasury, if confirmed, to
ensure that the private-public partnership makes the tax system better
for taxpayers while strengthening the IRS.
Question. In a 2012 paper titled ``Behaviorally Informed
Regulation,'' authors Michael S. Barr, Sendhil Mullainathat, and Eldar
Shfir proposed, among other things, a scheme in which credit-card
issuing firms could charge late fees that ``they deemed appropriate,
but the bulk of such fees would be placed in a public trust to be used
for financial education and assistance to troubled borrowers.'' Firms
could keep a share of the fees, but ``the bulk'' of the fees would
effectively be nationalized and presumably controlled by the Federal
Government's behaviorists. Do you support such a scheme of effectively
nationalizing late fees on things like credit cards?
Dr. Yellen did not answer whether she supports such a scheme.
Answer. I look forward to studying the specific reform proposal
raised in the paper and referenced in the question. If I am confirmed,
I am committed to working with you to address the issues of
insufficient financial literacy, reasonable access to credit, and a
well functioning and competitive financial system raised by the paper.
I look forward to working with Congress to ensure that consumers
everywhere are informed and safe in the financial marketplace.
Question. You have mentioned ``stranded assets'' several times
during your confirmation process as a risk from climate change that you
seem to believe could become some sort of aspect of a risk to financial
stability.
Is the anticipated shut-down of the Keystone XL project by the
incoming administration an example of stranded assets, where
investments have been made and the Federal Government intervenes to
strand them and make them worthless?
Is one of the largest risks to realizing large amounts of stranded
assets a risk that the Federal Government will take unanticipated (when
the investments were made) actions to make such assets essentially
worthless, because of actions by the Federal Government intended to
shut down production in sectors such as coal or other ``fossil fuels?''
Dr. Yellen did not identify whether she believes shut-down of
Keystone XL is an example of a stranded asset. Dr. Yellen simply says
that transition from fossil fuels and other energy sources to renewable
energy sources is not a decision or choice. She did not comment
substantively on whether shutdowns of energy-source sectors stemming
from government regulation or other actions present a risk of a large
amount of stranded assets being realized.
Answer. As you know, President Biden revoked the permit for the
Keystone XL Pipeline. That decision was consistent with the finding of
the State Department--after exhaustive review--that the pipeline's
significance for energy security and economy is limited. The revocation
for the permit for the Keystone XL Pipeline may negatively impact some
investors in the project, however, the continued development of the
pipeline would have created environmental risks.
I am committed to taking steps to better understand the physical
and transition risks of climate change to our economy, if confirmed.
President Biden has put forth a vision for investing in a clean energy
economy that would recognize both the costs and risks of climate change
on the economy, and the opportunities to create new, good-paying jobs.
Question. Do you intend to resurrect the Obama administration's
failed and ill-
designed myRA retirement savings scheme, partly by misusing the
permanent, indefinite appropriation provided to Treasury for
compensating financial agents?
Dr. Yellen did not identify whether she intends to resurrect myRA,
which would entail use of a permanent, indefinite appropriation for
financial agents.
Answer. I am very concerned about retirement adequacy in the United
States, and am committed to identifying innovative, effective, and
cost-efficient strategies for improving the financial well-being of
American households. I am aware of the goals of the MyRA program, and
some of the concerns surrounding the initiative's administration. If
confirmed, I look forward to consulting with Treasury staff on the MyRA
program and partnering with you and others in Congress to improve our
country's retirement adequacy.
Question. In a June 7, 2016 article in the Huffington Post titled
``The Koch Brothers Are Trying to Handpick Government Officials. We
Have to Stop Them,'' Senators Warren, Schumer, and Whitehouse put
forward allegations, that have subsequently been shown to be false,
against a Republican nominee for a Social Security Trustee position and
a Republican nominee to a seat on the SEC. The authors identified that
the two nominees had worked at a think tank that received financial
support from the ``Koch brothers.'' The nominees, and officials at the
think tank identified that their research was not guided or constrained
by any institutional donors, though the authors seemed unconvinced,
calling directly into question the integrity of the nominees.
Given the sensitivity of some to institutional funding, especially
if funding is provided to institutions that include conservative
scholars, and given that the Charles Koch Foundation provided
substantial funding to the Brookings Institution when you worked there,
as did many ``wealthy corporations'' and billionaires:
Should there be concern that you, in your position as Treasury
Secretary, if confirmed, will, as the authors of the article referenced
above warn, ``serve the wishes of wealthy corporations and their
billionaire owners''?
Should concerns about think-tank funders be limited to think tanks
that allow scholars to pursue conservative thoughts?
Should there be a double standard with respect to who is and who is
not suspected of being influenced by corporations and ``billionaires''
depending on their political positions?
Dr. Yellen did not respond to second and third questions above.
Please provide direct and substantive responses to those questions.
Answer. I am not directly familiar with the circumstances under
consideration in this question. Therefore, I do not think I am in a
position to answer concerning the fairness of the relevant critiques.
As a general matter, I have valued insight and discussion with scholars
and colleagues that have varied viewpoints from my own.
I am not directly familiar with the circumstances under
consideration in this question. Therefore, I do not think I am in a
position to answer concerning the fairness of the relevant critiques.
Question. Social Security benefits are said to be ``earned
benefits,'' in that for every dollar of FICA tax paid in for disability
or retirement benefits, there is a commensurate benefit that accrues to
the taxpayer. An old Franklin Roosevelt quote is often invoked to
reinforce the earned-benefit notion; in 1941, Roosevelt stated that
``We put those payroll contributions there so as to give the
contributors a legal, moral, and political right to collect their
pensions and their unemployment benefits. With those taxes in there, no
damn politician can ever scrap my social security program.'' To some,
it is important that Social Security programs remain as ones that can
be characterized as earned benefits, meaning, again, that there is a
benefit commensurate with every unit of tax paid in. Otherwise, some
fear, dependence of Social Security benefits on partial general-fund
revenue, or revenue cloaked as Trust Fund revenue but accruing to the
Trust Funds as tax payments that do not carry any associated benefit
accrual, would lead to Social Security being characterized as some sort
of ``welfare,'' and benefits being thought of as mere transfers to
which recipients do not necessarily have legal, moral, or political
``rights.''
What, to you, is meant by ``earned benefit'' in the context of
Social Security benefits?
Do you believe it is important to maintain a link between a benefit
and a tax, such that for every unit of Social Security taxes paid in,
there is a commensurate claim to a pecuniary benefit?
Dr. Yellen's response to the first question does not respond, in
that it does not identify with any sense of precision what an ``earned
benefit'' means to her in the context of Social Security benefits.
Please provide a direct and substantive response to the question.
Answer. I support a benefit formula which is based on contributions
but which also acknowledges the gains from a progressive schedule.
Social Security's progressive benefit formula is offset, in part, by
the regressive payroll tax cap. This longstanding balance between
linking benefits to contributions, while also maintaining a progressive
benefit formula, is one of the many successes of the program.
Question. The so-called HEROES Act (H.R. 6800), which passed in the
House of Representatives in May 2020, directs the Federal Reserve, in
section 110801, in unusual and exigent circumstances, to purchase
obligations issued by any State, county, district, political
subdivision, municipality, or entity that is a combination of any of
the several States, the District of Columbia, or any of the territories
and possessions of the U.S. Such purchases would occur within proposed
modifications to the Municipal Liquidity Facility that was established
under section 13(3) of the Federal Reserve Act, and the modifications
would have to be made to, among other things, ``ensure that any
purchases made are at an interest rate equal to the discount window
primary credit interest rate . . . commonly referred to as . . . the
`Federal funds rate' ''; and, to ``ensure that an eligible issuer does
not need to attest to an inability to secure credit elsewhere.'' Given
that the Federal funds rate is near zero, section 110801 in effect
requires that the Federal Reserve make near-zero interest rate loans to
States, municipalities, and the like, independent of whether those
jurisdictions are able to secure credit elsewhere--something that turns
the Federal Reserve into an agency providing assistance that is close
to grant making.
Do you support the policies called for in section 110801?
More generally, do you support requiring that the Federal Reserve
make loans to potentially non-creditworthy borrowers at the Federal
funds rate?
More generally, do you support allowing the Federal Reserve to make
grants to private or governmental entities?
Dr. Yellen's response is, at best, tangential to the specifics
asked in the questions above. Please provide direct and substantive
responses to the questions asked above.
Answer. I have not fully studied the specific language or the
policy implications of the text contained in section 110801 of H.R.
6800.
Without specific context for the economic circumstances and the
underlying position of the borrower, it would be inappropriate for me
to suggest whether lending by the Federal Reserve would be appropriate
or not.
The Federal Reserve's ability to extend assistance to private or
government entities and the terms of such assistance is bound by the
Fed's legal authority as provided by Congress, and the authorities laid
out in the law will be the basis for whether providing such support is
allowed.
Question. You seem to oppose rule-based monetary policy, and
instead prefer discretion. Do you symmetrically not support rules-based
economic stabilizers, such as unemployment insurance tied formulaically
to economic measures, and instead prefer fiscal-policy discretion that
is consistent with a continuing role for Congress and representative
democracy?
Dr. Yellen's response provides her policy preferences, but does not
provide a direct and substantive response to the question posed above.
Please provide a direct and substantive response to those questions.
Answer. I support both automatic stabilizers and discretionary
fiscal policy. Automatic stabilizers help to ensure that assistance is
provided as long as it is needed and is phased out when it is no longer
required, improving the predictability of policy. But there is also an
important discretionary role for Congress to provide fiscal support
suited to unique circumstances, such as those currently resulting from
the pandemic. I believe there are circumstances when automatic
stabilizers are not only appropriate, but can be expanded and improved
(including an examination of the proper role of tying stabilizers to
economic trends), but discretionary fiscal policy can--and should--play
a critical role in any relief effort as well. With respect to monetary
policy, I believe that both rules and discretion play valuable roles.
The Federal Open Market Committee regularly examines the prescriptions
of a variety of monetary policy rules. And it has publicized those
recommendations in its Monetary Policy Report to Congress.
Nevertheless, the committee retains discretion needed to respond as
deemed appropriate to the often unique circumstances prevailing at a
particular time.
Question. The incoming administration desires to reset the Federal
minimum wage to $15, despite warnings from the Congressional Budget
Office that such a move could cost upwards of 3.7 million workers a
job. Of course, given variations in the cost of living across the
country, $15 for a worker in, say, New York City or Berkeley, CA, is
far different than for a worker in, say, West Virginia. And paying $15
an hour as an employer in Iowa is different, in terms of production
costs, than in States with higher overall living costs. A $15 minimum
hourly wage is only a bit below the May 2019 median hourly wage for all
occupations for West Virginia.
Do you agree with the 2019 analysis from the Congressional Budget
Office that increasing the minimum wage, depending on how the increase
is implemented, will result in 1.3 million workers becoming jobless,
and there is a two-thirds chance that the change in employment could be
a decrease of up to 3.7 million workers?
Do you believe that many low-wage workers will become displaced by
technology if a $15 minimum wage is enacted?
Do you believe there are negative employment effects of increasing
the minimum wage at both the extensive and the intensive margin?
What economic literature do you rely on to make your assessments
regarding effects of an increase in the minimum wage to $15, which is
well outside the size of an increase that could be comfortably thought
of as being within the relevant range of applicability of existing
studies?
Would you support implementation of indexation such that an
increase in the Federal minimum wage to $x per hour is implemented, but
with $x per hour applying to any States with price levels equal to the
national median and the minimum wage in other States or municipalities
indexed to State or municipal living costs using the Bureau of Economic
Analysis's Regional Price Parities (RPPs) measure?
Dr. Yellen did not directly and substantively respond to the
questions above. Please provide direct responses to those questions.
Answer. President Biden has proposed raising the minimum wage to
$15 as part of his American Rescue Plan. Doing so would benefit
millions of workers--including many essential workers--who have
struggled disproportionately during this K-shaped recovery. As a result
of a minimum wage that has not been increased in 12 years, the
inflation-adjusted minimum wage has fallen by nearly one-fifth. Raising
the minimum wage to $15 would boost consumer spending power by low-wage
workers, raise retention rates, and boost productivity--all of which
would benefit workers and the economy at large. Moreover, the
President's proposed agenda takes into account the interests of small
business owners and pairs the minimum wage increase with immediate
relief to small businesses as part of the crisis rescue package, as
well as additional measures he will propose to build a stronger economy
over the longer run.
I believe that the President's plan to pass a $15 minimum wage
would benefit both low-wage workers and the economy at large. Past
increases in minimum wage levels, at both the Federal and State level,
have not resulted in sizable displacements from technology.
As I stated in my testimony, there is a robust economics literature
on the minimum wage, and my reading of the findings of much of this
literature is that the likely impact on employment is minimal,
including at both the extensive and intensive margin.
I believe that it is important that all policy choices, including
the minimum wage, consider any and all costs and benefits. The minimum
wage has been carefully studied over many decades and the findings show
that historically the benefits from raising the minimum wage have been
far larger than any costs. Indeed, a number of well-regarded studies
that I am familiar with, including a series of studies by economists
Arin Dube and Michael Reich, have found no materially negative effects
on unemployment.
President Biden has proposed a $15 Nation-wide minimum wage, and I
believe that approach would greatly benefit struggling workers and
strengthen the economy.
Question. Recent reports indicate that unemployment insurance fraud
in California alone may total $8 to $10 billion. Fraud takes resources
away from those to whom the Federal Government intends to help and
places them in the hands of undeserving fraudsters, some of whom seem
to recently have been parts of organized crime rings, perhaps with
international scope. I've already asked the Department of Labor to
investigate California's unemployment insurance system, since the
Governor of the State does not seem very interested in being serious
about reining in fraud. And, in the relief package that was enacted
just a few weeks ago, I argued for strengthened anti-fraud protections,
while Democrats did not want many--if any--protections, partly based on
a notion that fraud detection could involve use of racial- or income-
biased risk-based fraud-detection systems.
Do you believe, with billions of dollars of fraud in the
unemployment insurance system, additional fraud detection is important?
Do you believe that it is possible to enact legislation calling for
systems of risk-based fraud detection without the result being use of
systems or algorithms that have racial- or income-based biases?
Dr. Yellen did not provide a direct response to second question
above. Please provide a direct and substantive response.
Answer. I have not had the opportunity to explore the impacts of
risk-based fraud detection systems and whether they create racial- or
income-based inequities. Although the Unemployment Insurance system is
administered by the Department of Labor, I would be happy to further
discuss the broader issue with you, if confirmed.
Question. Given what I expect will be proper efforts on your part
to examine diversity at the Treasury Department, your views on
diversity will impact your decision making. With respect to a recent
lawsuit alleging that Harvard University's admissions processes
discriminate against Asians:
Why did you join an amicus brief to seemingly reinforce your view
that statistical procedures and arguments used by your Berkeley
colleague Professor David Card were more carefully executed than
procedures and arguments used by the opposing side?
Do you believe, given arguments and analyses that you have seen
related to the case, that Harvard admissions do not discriminate
against Asians?
Using data from a lawsuit against Harvard, an April 2020 National
Bureau of Economic Research paper (Working Pater 27068) by Arcidiacono,
Kinsler, and Ransom identifies that they ``show that there is a
substantial penalty against Asian Americans in admissions with limited
scope for omitted variables to overturn the results.'' Do you find the
results of that paper to be relevant to your views expressed in the
amicus brief that you joined, and do the results weigh on your views of
whether or not Harvard has discriminated against Asians through its
admissions processes?
Dr. Yellen did not respond to the last question above. Please
provide a direct and substantive response.
Answer. I signed the amicus brief because I was persuaded by the
argument that Professor Card made and the strength of his empirical
work.
I have a long record throughout my career of drawing attention to
issues of income inequality and racial equity, including my efforts as
Chair of the Federal Reserve, and the work that I've continued to do
since, to draw attention to the need to diversify the field of
economics. I am committed to leveraging the full powers and authorities
of the Treasury Department to address issues of inequality as well as
diversity, equity and inclusion.
______
Questions Submitted by Hon. Mike Crapo
taxes
Question. A number of countries have imposed or plan to impose
discriminatory digital services taxes (DSTs) that unfairly target U.S.
companies. The Finance Committee has expressed bipartisan opposition to
unilateral measures like DSTs, and advocated for countries to reach a
multilateral agreement at the Organisation for Economic Co-operation
and Development (OECD).
Will you continue to negotiate toward a multilateral agreement at
the OECD that does not unfairly target U.S. companies and compromise
the U.S. tax base?
Answer. Yes, we are committed to the cooperative multilateral
effort to address base erosion and profit shifting through the OECD/G20
process, and to working to resolve the digital taxation disputes in
that context.
Question. House and Senate Democrats have proposed lifting the
limitation on the deduction for State and local taxes (SALT). Given the
effect of the pandemic on our country and economy, Congress has passed
significant relief bills that focus on unemployed Americans and smaller
businesses that are struggling. The proposal to lift the SALT cap, on
the other hand, would overwhelmingly benefit wealthy households.
According to the Joint Committee on Taxation, over half the benefit
from repealing the cap would go to taxpayers with incomes over $1
million, and 94 percent of the benefit would go to taxpayers with
incomes over $200,000.
What is your view of lifting the SALT cap, and do you think now is
the time for a tax break on high-income individuals and households?
Answer. As I noted at the hearing, I certainly believe in a fair
and progressive tax code where wealthy individuals and corporations pay
their fair share. On this issue, as with many others, it is important
to consider the entire equation. For example, it is critical to study
and evaluate what the impact of the SALT cap has had on State on local
governments, and those who rely upon their services. I will work with
those at Treasury and throughout the administration in evaluating those
impacts, as well as other aspects of this issue.
Question. One area of bipartisan agreement is on the issue of
retirement savings. Congress passed the SECURE Act in 2019. With my
support, many of my colleagues in both houses and on both sides of the
aisle are working to develop further legislation to promote retirement
savings, which should be a top priority for the Finance committee.
As Congress considers additional legislation, do you commit to
working with Congress on a bipartisan basis to enact policies that will
further enhance Americans' ability to save for retirement?
Answer. President Biden has proposed giving small businesses a tax
break for starting a retirement plan and giving workers the chance to
save at work. In addition, under President Biden's plan, almost all
workers without a pension or 401(k)-type plan will have access to an
``automatic 401(k),'' which provides the opportunity to easily save for
retirement at work--putting millions of middle-class families on the
path to a secure retirement. I look forward to working with Congress to
improve Americans' retirement security.
housing finance reform
Question. Earlier this month, Treasury and FHFA announced revisions
to the Preferred Stock Purchase Agreements (PSPAs) for Fannie Mae and
Freddie Mac.
What are your views on the content of these changes, and what are
the conditions under which you would support an exit from
conservatorship?
Answer. It is critical that we have a housing finance system that
works for all Americans, with widely available, affordable mortgage
credit for home ownership as well as affordable rental housing. We need
a system that promotes financial stability as a whole, as well as one
that protects consumers and taxpayers and provides stability to
households. A core feature of the U.S. housing finance system is the
30-year fixed rate mortgage. I look forward to working across the
administration and with the Congress in support of these goals, if
confirmed.
non-proprietary machine-readable data (fsoc)
Question. Dr. Yellen, I have long advocated for use of non-
proprietary machine-readable data that is fully standardized,
searchable, and transparent. This data modernization increases
accountability to citizens and investors, and improves the government's
ability to monitor and enforce compliance processes.
In your role as Secretary of the Treasury and as the Chair of FSOC,
will you encourage Federal agencies to use non-proprietary machine-
readable data formats that are easily downloadable?
Answer. I am aware that this topic has been of high interest to you
and your staff for many years, and I appreciate your focus on the
issue. If confirmed, I will work with FSOC member agencies as well as
the Office of Financial Research to review existing standards and
practices to ensure that the Federal Government is able to make the
most informed and transparent policy decisions possible.
climate change and bank disclosures
Question. You have noted several times that you intend to make
fighting climate change a priority as Treasury Secretary. Why do you
think financial regulation is a more appropriate avenue to curb climate
change rather than other agencies uniquely focused on agriculture and
the environment?
What kind of financial regulation are you looking at (financial
disclosure, FSOC requirements, or something that impacts capital)?
Answer. Climate change is an existential threat not only to our
environment, but to our economy. Combating climate change will require
leadership and action from various agencies, including Treasury.
Structuring the right rules in the financial marketplace will ensure
that institutions and their leaders are planning for the risk presented
by climate change, protecting both the environment and the economy from
crisis.
fair access to banking
Question. First, and as you are fully aware, I am a strong opponent
of Operation Chokepoint. During Chokepoint, we saw several politically
disfavored industries, such as firearms and oil and gas, become
essentially unbanked during this time, and in fact, it is still
occurring today due to political pressure. I note all of this because I
strongly support the OCC's fair access rule and believe that legal
industries should be banked.
How will you ensure that all federally legal industries have fair
access to banks, even with the political pressure that they face?
Answer. If confirmed, I plan to direct a review of all recently
released rules and regulations. However, the fair access rule was
promulgated by the OCC, which is an independent banking regulator.
insurance capital standard transparency
Question. The International Association of Insurance Supervisors
(IAIS) continues its work to develop the global risk-based Insurance
Capital Standard (ICS), which is intended to serve as a common language
for supervisory discussions of group solvency and minimum Prescribed
Capital Requirement (``PCR'') for Internationally Active Insurance
Groups. The ICS is an effort to define comparable standards and
determine solvency levels for Internationally Active Insurance Groups
(IAIGs). However, there is concern that the ICS does not fit U.S.
markets and is incompatible with the State-based regulation of
insurance in the U.S.
Treasury, the Federal Reserve Board (Fed), and the National
Association of Insurance Commissioners (NAIC) have expressed these
concerns about the ICS, and Team USA has also diligently been working
on an alternative--the Aggregation Method--to meet the stated
objectives of the IAIS in a less disruptive and costly manner.
Furthermore, the Economic Growth, Regulatory Relief and Consumer
Protection Act (EGRRCPA) also requires that the Treasury, Fed and FIO
to study and report on the impact on consumers and markets in the U.S.
before supporting or consenting to the adoption of any final
international insurance capital standard.
Will you commit to engaging with the FSB and IAIS so the
Aggregation Method, the preferred approach of U.S. supervisors for
measuring group-capital, is deemed to be outcome equivalent to the ICS?
Answer. As with many questions of financial regulation,
coordinating with our allies and with international bodies like the
Financial Stability Board is essential to achieving regulatory outcomes
that serve American interests and protect financial stability. And it
is critical that international regulatory standards be designed to
serve different markets with diverse structures and needs. Insurance is
no different. I am committed to engaging with international bodies like
FSB and IAIS to achieve regulatory outcomes consistent with the
interests of American market participants and State-based regulators,
and I will continue the Federal Insurance Office's efforts to study the
effects of ICS on U.S. insurance markets, if confirmed.
debt
Question. For the last 3 years, you served on the Board of
Directors of the Committee for a Responsible Federal Budget (CRFB). In
its estimate of all of the Biden campaign proposals, the CRFB projects
that even if all of the trillions of dollars in proposed Biden tax
increases were enacted, the Biden plan would still increase deficits by
$5.6 trillion over the next 10 years, under their central estimate.
How sustainable is the current path of the U.S. debt and associated
deficits, and what steps can you take to put the U.S. on more stable
fiscal footing in the long term?
Answer. In the current environment, the most pressing challenge is
to overcome the pandemic and rebuild our economy. That will require
additional relief, as proposed by President Biden. If confirmed, I
would look forward to working with the Congress to secure that relief.
Presently, interest rates are at historically low levels, and our
interest burden as a percentage of GDP is also quite low. Therefore, in
the current environment, it makes sense to invest in the relief needed
to support families and businesses. Over the longer term, as I have
often stated, we need to ensure that our country is on a sustainable
path with respect to our debt burden. I look forward to working with
Congress on these important issues, if confirmed.
financial stability oversight council (fsoc)
Question. You have mentioned that you supported the de-designations
of some institutions previously designated by FSOC. You also mentioned
that you agree it is important to regulate activities that heighten
systemic risk, and that it in many cases that approach makes more sense
than regulating individual firms. However, you have also said that
individual firms also pose systemic risks and it is important to
supervise and regulate them. Under the Trump administration, the FSOC
has been meaningfully reoriented toward activities-based designation.
Do you agree with the guidance issued by FSOC on activities-based
designations, and exhausting all available remedies to financial risks
prior to considering entity-based designation?
Answer. As you know, the idea behind FSOC is to coordinate among
regulators so that significant risks to our economy do not go
unaddressed because they do not fall wholly into the purview of one
regulator's jurisdiction. My view is that the FSOC should address risks
whatever their origin. But our focus must remain on stability in our
financial system and ensuring that we are prepared to mitigate market
disruption in times of stress.
I understand that the legal landscape has shifted somewhat since
the Obama administration, but I believe the FSOC should have the tools
to protect our economy from systemic threats, whether they're presented
by a single firm or risky actions by an array of firms.
However, designation was never meant to be a one-way street--the
procedures required an annual review, and firms should continually be
evaluated and are certainly able to adjust their business models to be
less risky in an effort to be de-designated.
national security policy concerns
Question. If confirmed, you will be the first Treasury Secretary to
enter your term as a statutory member of the President's National
Security Council, thus, ensuring that the economic and financial
dimensions of national security are as carefully considered as more
traditional military, intelligence and diplomatic concerns. The list of
national security concerns that you will face as Secretary on Day One
is long and growing, and includes the enforcement of U.S. sanctions
against Iran, Russia, North Korea, Venezuela and companies in China
linked to its military; and, too, investment decisions before the
committee on Foreign Investment in the United States (CFIUS). From
among these national security concerns, I have a number of questions.
Foremost, then, will you commit to holding bad actors accountable,
to dismantle the financial networks of terrorist organizations and
others who seek to perpetrate harm against the United States and to
ensure that U.S. foreign investment protects the national security
interests of the United States?
How should the United States persuade other nations to follow our
lead when it comes to sanctions against various targets, whether it be
Iran, North Korea or terrorist groups?
What is your view of the Joint Comprehensive Plan of Action
(JCPOA), the sanctions relief it provided Iran, and the continued
enforcement of US sanctions mandated by law?
Will you use the voice of the United States to oppose IMF and World
Bank loans to Iran and other State sponsors of terror?
China has long been one of the biggest violators of U.S. sanctions.
If confirmed, how would you go about seeking better cooperation from
China on sanction matters?
Finally, how should the United States persuade other nations to
follow our lead when it comes to sanctions against various targets,
whether it be Iran, North Korea or terrorist groups?
Answer. I commit to using Treasury's sanctions and enforcement
authorities to identify and dismantle the financial networks of
terrorists, proliferators, and others who seek to perpetrate harm
against the United States. I furthermore commit to overseeing a
rigorous review of foreign investments in the United States through the
CFIUS process. This vital work to our national security is something we
will do both independently and in coordination with partners abroad,
through regular and formalized dialogue, information sharing, and joint
actions. If such coordination does not succeed, the Treasury Department
should be prepared to strongly urge other nations to join us in
targeting dangerous terrorists and proliferators, and expose their
complicity if necessary. When it comes to our competitor China, we must
ensure that it is not allowed to violate our sanctions.
With regard to the JCPOA, The Biden-Harris administration is
committed to ensuring that Iran takes the appropriate steps to resume
compliance. Iran will only enjoy sanctions relief under the JCPOA if it
complies with its nuclear constraints. Furthermore, if confirmed, I
will ensure that Treasury continues its important work to combat Iran's
support for terrorism and abuse of human rights.
When it comes to the IMF and World Bank, we must make sure that
they are doing what they can to ensure developing countries have the
resources for public health and economic recovery, and will evaluate
how investment policies support global security and recovery working
with our allies. The Biden-Harris administration will continue to
maintain and impose sanctions on Iranian entities perpetrating human
rights abuses, and evaluate tools to combat State sponsors of terror.
In particular, President Biden is committed to working with our allies
and partners to counter Iran's destabilizing activities in the region,
including its support for violent proxies.
supporting middle east peace
Question. The Treasury Department has played a key role supporting
the historic peace agreements reached in 2020 between Israel, the UAE,
Bahrain, Sudan, and Morocco. If confirmed, will you continue Treasury's
work to support these agreements and expand business opportunities
between these countries and the United States?
Answer. The Biden-Harris administration has expressed support for
the Abraham Accords, and I also support these historic agreements. I
will work with others in the administration to foster economic
cooperation between and among these countries, and with the United
States.
opposing boycotts of israel
Question. For more than 40 years, the Treasury Department has
played a key role in fighting international efforts to boycott Israel.
If confirmed, are you committed to fighting efforts to boycott, divest
or sanction our ally Israel?
Answer. President Biden has led efforts to oppose the
delegitimization of Israel, whether in international organizations or
by the boycott, divestment and sanctions (BDS) movement in the United
States. I support President Biden's approach of opposing such efforts
and if confirmed, will work as Treasury Secretary to oppose BDS
activities directed at Israel.
______
Questions Submitted by Hon. John Cornyn
tax increases and repealing the tax cuts and jobs act
Question. The Tax Cuts and Jobs Act provided tax relief to
taxpayers by lowering individual rates and expanding the child tax
credit. It also helped to create a more competitive tax system for U.S.
companies in today's global market, helping to create jobs and lowering
the unemployment rate to a level not seen in 50 years prior to the
COVID-19 pandemic. I know many of my Democratic friends are very
critical of this law and have called for its immediate repeal, although
the House of Representative did not send the Senate a repeal bill last
Congress. I also understand that the incoming administration is
proposing over $3 trillion in higher taxes.
In 2009, as the Nation was fighting to recover from the 2008
recession, President Obama was asked about the possibility of raising
taxes. He did not mince words. He said, ``The last thing you want to do
is to raise taxes in the middle of a recession.''
I am concerned about the pledge made by President Biden that he
intends to repeal the Tax Cuts and Jobs Act ``on Day One.'' Is the
administration still advocating that Congress do so even as the country
continues to recover from the COVID-19 pandemic?
It is imperative that this Congress and the administration do
nothing to hamper a robust recovery. I am hoping that you agree that
this is exactly the wrong time for Congress to be raising taxes.
Placing unnecessary burden on most businesses during an economic
recession will only serve to increase the cost of capital and hamper
their ability to make the investments necessary to facilitate job and
wage growth. Given the current economic conditions, do you think now is
an appropriate time to raise taxes on the American people?
Answer. With tax revenues at historical lows, ensuring that wealthy
individuals and corporations pay their fair share should be considered
part of any plan to put our country on a path to fiscal sustainability.
President Biden has stated that he will not ask families making under
$400,000 per year to pay more in taxes, and will enact more than one-
dozen middle-class tax cuts that will finally give working families the
financial support they deserve.
When it comes to the timing of the various fiscal policies enacted
as part of the relief and recovery effort, the most critical elements
are to deliver necessary services and economic relief, including
vaccine distribution, additional aid to small business, and expanded
unemployment insurance. This principle is reflected in the President's
proposed COVID relief package.
u.s. debt and entitlement reform
Question. We have passed almost $3.5 trillion in response to the
COVID-19 pandemic; this includes a $900-billion bill signed into law
less than a month ago. Now, the incoming administration is proposing
another $1.9 trillion. If enacted, the total amount enacted in less
than a year will almost total $5.5 trillion, which is larger than
Japan's economy and is almost 25 percent of our GDP. This is an
astonishing amount of money. It would also be more than what the
Federal Government spent on everything--including defense, Social
Security, Medicare, transportation--in 2019. We know this rate of
spending is not sustainable. The Committee for a Responsible Federal
Budget is already estimating that the budget deficit is set to exceed
$2.3 trillion this fiscal year, the second-highest since World War II.
The future appears to be bleak. The Congressional Budget Office
estimates that the Federal debt held by the public surpasses its
historical high of 106 percent of GDP in 2023 and continues to climb in
most years thereafter. For example, by 2050, it will nearly be two and
a half (2.5) times what it was at the end of 2019. The growth in future
Federal spending, primarily from entitlements, drives the upward
projection of the national debt. In fact, CBO forecasts that spending
will grow from an average of 21.3 percent of GDP from 2010 to 2019 to
an average of 29.3 percent from 2041 to 2050. And, keep in mind, these
estimates do not include the recent legislation passed in response to
the COVID-19 pandemic or any new spending proposals from the incoming
administration.
You have raised concerns about the debt almost every year over the
past decade. You discussed the ``unsustainable'' path of the rising
national debt as Vice Chair of the Federal Reserve, as Chair of the
Federal Reserve, and as an economist at the Brookings Institution.
Do you still have these same concerns? If not, why not?
What is the incoming administration's plan to control spending and
reform our entitlement programs?
What reforms to the congressional budget and appropriations process
does the incoming administration support?
Answer. I believe that the current economic crisis calls for robust
fiscal support, but also believe it is critical that we put our country
on a path towards long-term fiscal sustainability. In this vein, I've
called for more fiscal support since the early days of the pandemic and
continue to do so. Without question, we have to be conscious of our
debt, but it's clear that fiscal stimulus to support the economy and
the working families most affected by the impact of COVID-19 is our
most urgent priority.
Today's low interest rates also increase the urgency of making
investments in our people and in our infrastructure that will produce
returns in the years ahead and leave future generations better off. The
combination of persistently low rates and the need for investing in our
people, communities, and environment offers our Nation a unique
opportunity to make real progress in areas that have been neglected for
too long.
There are long-term budget challenges. We are committed to
implementing responsible policies that grow the economy, ask high-
income Americans and corporations to pay their fair share, and give our
country even more capacity to face the challenges ahead.
These policies will help drive down the debt relative to the size
of the economy. As part of this effort, the administration will
consider and seek reforms to the budget and appropriations process that
can help aid the effort to achieve fiscal sustainability.
financial institution lending
Question. Federal financial policy issues cross over several
Federal agencies, including the Treasury Department, the Securities and
Exchange Commission, the Office of the Comptroller of the Currency, and
the Federal Reserve. On this note, I applaud the Office of the
Comptroller of the Currency for recently issuing a rule that would
prohibit financial institutions from refusing to lend or provide other
services to entire categories of lawful businesses. I think we can
agree that that a borrower's credit characteristics should determine if
they get a loan.
I am concerned about media reports that the new administration
supports policies that would restrict capital investments in America's
energy sector. These restrictions will reverse the progress we have
made. We know that things like horizontal drilling and fracking have
transformed the global energy market, and America is no longer hostage
to foreign oil. Now it is one thing to allow market forces to change
the Nation's energy mix, it is an entirely different matter to
blacklist entire industries from accessing the capital markets.
Can you tell me if the incoming administration is considering
policies that will limit access to capital for specific industries?
If so, what role will the Treasury Department play in limiting
capital for American oil and natural gas development?
How will Treasury interact with the other Federal agencies,
including the Federal Reserve on this effort?
Answer. If confirmed, I believe our near-term focus from a policy
perspective should be on COVID relief and economic recovery. It is the
responsibility of the Treasury Secretary to strengthen the U.S.
economy, foster widespread economic prosperity, and promote an economic
agenda that leads to long-run economic growth. Meeting that challenge
undoubtedly requires focus on the current economy, but also requires a
commitment to the building blocks of enduring prosperity.
The Treasury Department has a wide range of responsibilities to
fulfill these commitments, including monitoring and overseeing various
financial markets, administering our Nation's fiscal policies, engaging
in international economic negotiations, and ensuring the stability of a
wide range of factors related to the health of the U.S. economy.
In addition, you raise important questions about rulemaking by the
independent Federal financial regulatory agencies. If confirmed, I look
forward to working with the Congress on these important issues.
eliminating the cap on the salt deduction
and benefits to high-income taxpayers
Question. The Tax Cuts and Jobs Act imposed a $10,000 cap on the
amount individuals can deduct for State and local taxes, also known as
the SALT deduction. The Tax Policy Center estimates that 57 percent of
the benefit of repealing the SALT cap would go to the richest one
percent of taxpayers. In addition, the Joint Committee of Taxation
estimates that if the cap were removed, over half of the dollar value
of the benefit would flow to households making over $1 million. Last
Congress, the House of Representatives passed the HEROES Act, which
would roll back the SALT cap. Supporters of the HEROES Act argued its
passage was necessary to help the Nation respond to the COVID-19
pandemic.
Do you agree with the analysis that eliminating the SALT cap
created by the Tax Cuts and Jobs Act would provide a disproportionate
direct benefit to upper-income taxpayers?
Do you think repealing the SALT cap is an effective policy response
to the current COVID-19 pandemic?
Answer. As I noted at the hearing, I certainly believe in a fair
and progressive tax code where wealthy individuals and corporations pay
their fair share. On this issue, as with many others, it is important
to consider the entire equation. For example, it is critical to study
and evaluate what the impact of the SALT cap has had on State on local
governments, and those who rely upon their services. I will work with
those at Treasury and throughout the administration in evaluating those
impacts, as well as other aspects of this issue.
u.s. corporate tax rate and u.s. competitiveness
Question. The Tax Cuts and Jobs Act helped make American workers
more competitive in today's global marketplace. One way it did this was
by reducing the corporate tax rate, which was at the time one of the
highest of those countries who are in the Organisation for Economic Co-
operation and Development or ``OECD.'' Many analysts argue that our
high corporate tax rate led many U.S.-based companies to relocate their
headquarters to foreign countries through so-called ``corporate
inversions.'' Now there are instances where companies are coming back
to the United States.
In your view, is it essential that the U.S. retain a combined,
including State and Federal, corporate tax rate that allows it to stay
competitive with its developed country peers?
Answer. I believe it is necessary for U.S. companies to be globally
competitive, and, if confirmed, would work through the OECD/G20 process
to agree with our allies on a global tax regime that protects American
competitiveness while ensuring corporations pay their fair share.
Question. Do you believe cost recovery provisions are essential for
businesses to reinvest and that all economic sectors should be given
access to these provisions?
Answer. I believe that businesses should be able to recover their
costs so that the income tax taxes net income and not gross receipts.
The timing of when businesses should receive such deductions is a
complicated question, on which I look forward to working with you and
the Treasury staff.
government-imposed minimum wage rate
Question. The incoming administration's $1.9 trillion package calls
for an increase in the Federal minimum wage to $15 per hour. In 2014,
former President Obama wanted to raise the minimum wage to $10.10 per
hour. At the time, the Congressional Budget Office (CBO) estimated that
this would lead to about 500,000 Americans losing their jobs. As Chair
of the Federal Reserve, you were asked before the Senate Banking
Committee about the CBO analysis and you replied, in part, that ``there
would be some amount of negative impact on employment'' and that you
would not argue with the CBO assessment. Just last month, CBO again
confirmed that increasing the Federal minimum wage would cause some
American workers to lose their jobs and their family income to fall in
some cases below the poverty threshold.
Do you still agree with CBO's assessment that increasing the
Federal minimum wage will lead to some Americans losing their jobs?
As you know, industries that traditionally pay minimum wage are
many of those that have been negatively impacted by the COVID-19
pandemic; this especially includes restaurants and small businesses.
Given CBO's assessment that increasing the minimum wage means job
losses for American workers, how does increasing the Federal minimum
wage help the Nation recover from the COVID-19 pandemic?
Answer. It is the responsibility of the Treasury Secretary to
strengthen the U.S. economy, foster widespread economic prosperity, and
promote an economic agenda that leads to long-run economic growth.
Meeting that challenge undoubtedly requires focus on the current
economy, but also requires a commitment to the building blocks of
enduring prosperity. A living wage is one of those building blocks.
Raising the wages for the lowest paid workers in America can unlock
billions of dollars of consumer spending that can be used to fuel
demand for the essential goods and services that small businesses
provide. This is especially true for the workers who put their lives on
the line each and every day to provide essential goods and services to
our communities.
committee on foreign investment in the united states (cfius) reform
Question. When we met virtually last month, we discussed how China
seeks to acquire cutting-edge U.S. technology by any means necessary,
including buying it, licensing it, or even stealing it through hacking
or more traditional methods. I consider this a serious national
security issue. Within the U.S. Government, the interagency body that
is responsible for reviewing those types of transactions and
determining their national security implications is known as the
Committee on Foreign Investment in the United States, or as ``CFIUS.''
The Treasury Secretary chairs this committee.
In 2018, Congress passed legislation I authored called the
``Foreign Investment Risk Review Modernization Act.'' This legislation
reformed and modernized the CFIUS process and the outgoing
administration worked to implement this legislation.
Can I ask for your commitment that, if you are confirmed as
Treasury Secretary, you will work to make sure that these reforms
continue to be implemented and that Treasury will work hand-in-hand
with all the other relevant agencies who serve on CFIUS?
I am also working on additional legislative proposals that build
upon these reforms. Would you be willing to work with me in developing
ways to further strengthen the CFIUS process?
On July 10, 2020, I sent a letter to the Treasury Department
requesting a classified briefing on the status of CFIUS's review of a
wind farm project located near Laughlin Air Force Base in Val Verde
County, Texas. To date, I have not received that briefing. Will you be
willing to provide this briefing and update me on the status of this
review?
Answer. If confirmed, I will be fully committed to implementing the
reforms to CFIUS passed in the Foreign Investment Risk Review
Modernization Act. I plan to work closely with all CFIUS members to
execute the committee's mandate and look forward to working with you on
ways to strengthen the CFIUS process, which is so important to our
national security. If confirmed, I will be happy to follow up with you
on the question you raised and your request for a briefing.
general business credits/building business back act of 2020
Question. The CARES Act and its successor legislation focused on
providing liquidity to those businesses that bore the burden of
government action, including lockdowns that crushed economic activity.
Members on both sides were proud to put in place the Paycheck
Protection Program (``PPP'') for small businesses that kept workers on
the payroll. Another example is the employee retention tax credit.
Congress modified and extended both programs on a bipartisan basis. I
think we all know that these employment-based incentives saved millions
of jobs.
I would like to draw your attention to a gap in the scope of the
provision of liquidity for recovery. It affects major sectors of the
economy. I am particularly concerned about that sector of the business
community that is bigger than that defined for the PPP, but smaller
than theFortune 100. The CARES Act set out lending facilities, such as
the Main Street Lending Facility, but unfortunately, those facilities
did not fill the gap.
At a recent SEC roundtable held by the Securities and Exchange
Commission, one participant observed, ``[G]etting credit into the large
cap companies doesn't necessarily distribute credit to our small and
medium-sized businesses that they need.'' During the last Congress, I
introduced the ``Building Business Back Act of 2020'' to fill this gap.
The proposal would accelerate the benefits of general business credits
for which the government is already liable to the taxpayer and thus
would not be new business tax relief. Rather it would simply ensure
that these tax credits, sitting on company balance sheets, would be
``monetized'' or converted to the liquidity these companies need today.
A number of business stakeholders, including the Texas Association
of Business, who employ millions of Americans, support this concept. In
a letter to the Senate Finance committee, these organizations noted
that ``By temporarily giving companies the option to monetize their
general business credits, Congress can help ensure that the recovery is
as strong as possible.''
Question. I would like to work with you on this proposal as the
Biden administration considers additional recovery proposals. Are you
willing to commit to do so?
Answer. If confirmed, I would welcome the opportunity to learn more
about your legislation and work with you to get the economy back on
track, particularly for small and mid-sized businesses which are the
backbone of our economy. The country is currently facing an
unprecedented pandemic that has exposed economic inequalities rooted in
our financial system for generations. It is imperative that the
government does its part to catalyze an economic recovery that is both
equitable and sustainable.
u.s. innovation
Question. Semiconductors underpin nearly all innovation today
including military systems, telecommunications, health care, critical
infrastructure, precision agriculture, and manufacturing. Almost 25
percent of our economic growth can be attributed to semiconductor
technology. Semiconductors are the 5th largest U.S. export and
essential to U.S. economic competitiveness and national security--and
are a critical supply chain.
Unfortunately, the U.S. has lost substantial ground in
manufacturing semiconductors while China is increasing their footprint.
U.S. production has dropped from 24 percent to 12 percent and by 2030,
Asia is projected to control 83 percent of the global manufacturing
supply of semiconductors while domestic production could be less than
10 percent. According to the Organisation for Economic Co-operation and
Development (OECD), between 2014 and 2018, other foreign nations
(including Ireland, Israel, South Korea, and Taiwan) gave more than $50
billion to semiconductor firms to support construction of fabs in their
countries, driving this capacity shift.
The United States must compete with foreign nations and invest in
advanced manufacturing and packaging capabilities to secure our supply
chain and build a robust domestic ecosystem to protect our national
security. For this reason, I worked with my colleague Senator Warner,
on introducing the CHIPS for America Act last year. We joined our
efforts with Senators Schumer and Cotton to include this language in
the NDAA on a floor amendment that passed with 96 Senators supporting-
these provisions are now law. But more work needs to be done. We were
not able to include an investment tax credit that is part of the CHIPS
Act and we need to make sure the CHIPS Act is fully funded in the
future.
Question. Given the global competition and incentives other
countries currently offer, do you think the Federal Government has a
responsibility to compete with these foreign countries, including
China, to support reshoring manufacturing capabilities for critical
industries to ensure supply chain security and create good-paying jobs
here at home?
Answer. The Biden administration will engage in a whole-of-
government approach to China that uses our available tools in a manner
that is designed to achieve our economic, national security, and
foreign policy goals. U.S. efforts to maintain its technological and
innovation edge, including in sensitive ``dual-use'' technologies, must
focus on reshoring critical supply chains. If confirmed, ensuring that
the United States is able to compete in the global economy will be a
top priority.
digital services tax (dst) and u.s. leadership
Question. It is important we confront countries who put in place
discriminatory taxes targeting U.S. companies and appropriating revenue
from the U.S. tax base. Unfortunately, these taxes are expanding to
cover a wider range of digital services, bringing many new US companies
into scope, including streaming services, cloud, and financial
services.
Recently the U.S. Trade Representative released section 301 reports
on Austria, Spain, and the UK determining their digital services taxes
(DSTs) are discriminatory towards U.S. companies, inconsistent with
prevailing international tax principles, and highly restrictive of U.S.
commerce and exports. These countries are joined by France, India,
Italy, and Turkey--which are siphoning billions away from the U.S. tax
base with similar discriminatory digital taxes.
Will the administration engage these countries to protect American
companies and the U.S. tax base from these efforts?
Answer. I am certainly aware of the concerns U.S. companies have
raised about digital services taxes. While the details of digital
services taxes differ across jurisdictions, many have been designed in
a way that unfairly singles out a few large U.S. digital platform
companies. I look forward to consulting with the USTR and the Congress
on these issues.
Question. What steps will the administration take to challenge
these taxes from a trade and diplomatic perspective?
Answer. The administration is committed to a cooperative
multilateral effort to address base erosion and profit shifting through
the OECD/G20 process, and to working to resolve the digital taxation
dispute in that context. I look forward to consulting with the United
States Trade Representative and the Congress on these issues.
Question. How do you plan to assert American leadership in the
discussions on tax reform being held at the Organisation for Economic
Co-operation and Development (OECD) while protecting the U.S. tax base
and U.S. industries?
Answer. At the OECD in particular, the administration will
vigorously reengage with multilateral efforts to update global tax
rules in ways that establish minimum taxation, prevent profit-shifting,
and support a level playing field. More generally, the Biden-Harris
administration will support multilateralism in international economic
affairs not only in tax discussions at the OECD but across a range of
issues, including with respect to bold and creative efforts to use all
existing instruments at our collective disposal to help stabilize the
global economy, and to set the foundation for a broad-based, inclusive
global economic recovery. Recommitting to multilateral leadership writ
large will also help reassert American economic leadership in
international tax matters.
student loan debt
Question. Student loan balances in this country have climbed over
the past decade as the cost of college has significantly outpaced
inflation--increasing by some estimates 3 percent per year. I
understand that the incoming administration supports forgiving $10,000
in student debt per borrower. Others have argued for canceling up to
$50,000.
The Committee for a Responsible Federal Budget recently noted that
nearly two-thirds of the benefit from canceling $50,000 in student debt
would go to the top 40 percent of households and over three-tenths
would go to the top quintile.
How would student loan forgiveness put a downward pressure on
college costs?
As may know, there already exist numerous repayment programs for
individuals with student loan debt, with an average amount of $32,000.
Why does the Federal Government need to offer further debt forgiveness
to individuals who have made a personal decision to take out a loan?
Answer. The rising costs of education and the potential impact that
student loan debt have on a wide range of social and economic effects,
ranging from putting home ownership out of reach, to forcing career
choices, to delaying or eliminating retirement savings. Importantly,
the burden of student debt disproportionately falls on students of
color. A growing economic literature has raised serious concerns about
the burden of student debt for some borrowers and its impact on
lifelong wealth accumulation. Recent actions on student loan payment
deferrals reveal that the Federal Government can have a role in
addressing this problem. If confirmed, I will consult with the
President and the Secretary of Education to discuss the various options
and help identify the appropriate actions to alleviate this burden.
u.s. dollar in the global economy
Question. Many economists and investors refer to the U.S. dollar as
a ``reserve currency'' when referring to its use by other countries
when settling their international trade accounts. This provides our
economy with certain, distinct advantages.
What policies will help the dollar maintain its position as a
``reserve currency'' in the global economy?
Answer. There are many important reasons that the U.S. dollar is
the world's dominant reserve currency. The United States has the
largest economy and the deepest and most liquid capital markets. Going
forward, I am committed to maintaining a sound economy and confidence
in our financial system. The Biden-Harris administration will make
investments in the American people that will accelerate the U.S.
economic recovery and lay the foundation for a strong and equitable
U.S. economy in the years ahead.
Question. What are your views regarding the value of the dollar
relative to the major foreign currencies?
Answer. The value of the U.S. dollar and other currencies should be
determined by markets. Markets adjust to reflect variations in economic
performance and generally facilitate adjustments in the global economy.
exchange rates
Question. Through the Omnibus Trade and Competitiveness Act of 1988
and Trade Facilitation and Trade Enforcement Act of 2015, Congress gave
explicit authority to the Treasury Secretary to address currency
undervaluation by U.S. trading partners and identified bilateral
negotiations as the appropriate recourse in such instances. However,
recently other parts of the executive branch have been wading into
these issues. For example, USTR launched an investigation and issued a
report under section 301 of the Trade Act of 1974 into Vietnam's
currency valuation practices, and the Commerce Department has begun
considering currency undervaluation as a countervailing subsidy.
What are your thoughts on this matter and do you believe these
actions by other agencies are outside the original intent of the
existing statutes to address currency undervaluation?
Answer. The President opposes attempts by foreign countries to
artificially manipulate currency values to gain unfair advantage over
American workers. The Biden-Harris administration will be examining how
Treasury, Commerce and USTR can work together to put effective pressure
on countries that are intervening in the foreign exchange market to
gain a trade advantage.
Question. Will you commit to reviewing the December 2020 report and
reasserting Treasury's role in leading currency undervaluation issues?
Answer. It is critical that we address any issue pertaining to
exchange rates in a coordinated manner. I look forward to working with
Congress and my colleagues in the administration to address foreign
exchange intervention to gain an unfair trade advantage.
tariffs
Question. We are currently engaged in a number of trade disputes
with both allies and adversaries where tariffs have been used as the
remedy of choice. These tariffs have each resulted in retaliatory
tariffs against U.S. exporters including manufacturers and agricultural
interests. Tariffs are taxes that are paid by U.S. businesses, raise
costs for consumers and manufacturers and have led to markets being
lost for our agricultural exporters. The current tariffs have had a
negative impact on companies large and small, especially impacting the
economic recovery of many U.S. businesses during COVID-19. President
Biden has talked about the need to reevaluate the trade war and the
economic impact caused by the tariffs.
Do you commit to conducting an economic review of the tariffs and
the impact they have had on the U.S. economy?
Answer. The Biden administration will work towards a system that
allows U.S. farmers and workers to compete on a level playing field. If
confirmed, I am committed to working across the interagency to conduct
a review of how we can best support American industry and 21st-century
jobs.
Question. With the China Phase One deal still underway and with
built-in mechanisms for bilateral engagement, do you foresee being
actively engaged in bilateral talks with China as your predecessor was
?
Answer. President Biden has said he will review all aspects of the
Trump administration's trade policies toward China, including how
completely Beijing has lived up to the terms of the Phase One
Agreement. We are closely monitoring China's adherence to all of its
Phase One commitments, including both the purchase commitments and
structural commitments. President Biden has said that he is not going
to make any immediate moves on the current China tariffs. As part of
his review, he is going to consult with allies to galvanize collective
pressure. We need a different approach that actually brings meaningful
pressure on China.
Question. What is your position on keeping the section 301 tariffs
on China in place?
Answer. President Biden has said that we will review the tariffs on
China and consult with our allies and will not be making changes until
we do both of these things. The Biden administration will make use of
the full array of tools to counter China's abusive economic practices
and hold Beijing accountable.
foreign trade zones (ftzs)
Question. Tariff levels are nearing those of the Depression-era in
the 1930s. At that time, the Smoot-Hawley Tariff Act was a contributing
factor to those high tariff levels. Today, record tariff levels are a
result of largely unilateral actions used through delegated authorities
given to the executive branch in the trade acts of 1962 and 1974.
Shortly after the Smoot-Hawley Act was enacted, Congress set out to
explore ways to improve trade flows. One such action was the creation
of the Foreign Trade Zones (FTZs) Act in 1934. This program has been in
existence for nearly 90 years, and today's tariff environment deserves
Congress's attention to improving the program and achieving our
Nation's trade and economic objectives.
As Secretary, you will be the executive officer of the FTZ board. I
intend to examine the FTZ program and explore how its use can be
beneficial in (1) working together with our partners and allies to
reinvigorate trade flows; (2) restore critical supply chains; and (3)
help rebuild our economy in the wake of COVID-19.
Can you provide your views on the recently reinstated NAFTA-era
restriction (section 601(b) of title VI of division O of Public Law
116-260) that prevents products operating in FTZs from receiving
reduced-tariff benefits under the U.S.-Mexico-
Canada (USMCA) trade agreement?
Answer. I understand that this provision reinstated a rule from
NAFTA's implementing legislation, which prevents goods produced in U.S.
FTZs from receiving preferential treatment even if they meet rules of
origin requirements. I support efforts to rebuild American
manufacturing and exports. Foreign trade zones can offer American
businesses the opportunity to compete on an even playing field with
foreign companies by reducing tariffs and duties on foreign inputs. It
is critical that our rules for FTZs ensure American producers receive
this benefit and are able to compete on even footing with their foreign
counterparts.
Question. What is the purpose of this restriction, and do you
believe that the U.S. has treaty obligations under USMCA (or other
agreements) to keep this provision in place? If so, can you specify the
articles under which the USMCA obligations apply for this provision? Is
the intent of this provision limited to U.S. law?
Answer. I was not involved in negotiating USCMA or developing this
legislation, so I cannot speak to the purpose of this restriction or
whether USMCA negotiators intended it. If confirmed, I will work to
ensure free trade agreements protect American workers, including FTZ
provisions.
Question. How does the FTZ restriction mentioned above effect
businesses that currently use duty drawback to reclaim duties on
products produced in the U.S. and subsequently exported outside the
country?
Answer. In general, FTZs allow for immediate duty relief once FTZ
status is achieved, whereas duty drawback requires a wait while the
claim is processed.
Question. Do you believe that the FTZ restriction mentioned above
is unfair to the FTZ equivalents in Canada and Mexico that do not have
similar restrictions in their domestic laws?
Answer. We should strive for parity between our treaty implementing
legislation and that of our treaty partners. I believe we should study
the extent to which any differences in domestic FTZ treatment put
American producers at a disadvantage and work to minimize disparities
going forward.
Question. What role, if any, do you believe the FTZ program can
play in creating a controlled and audited environment for providing
domestic production and manufacturing capacity of critical supply
chains?
Answer. I believe that under the right circumstances and with the
right program design, FTZs can contribute to domestic manufacturing and
supply chain security by reducing tariffs on foreign inputs used by
domestic producers, encouraging value-added production by American
manufacturers. If confirmed, I will seek to use all available trade
tools to put workers first and restore American competitiveness.
chinese national offshore oil company (cnooc)
Question. The Chinese National Offshore Oil Company (CNOOC) was
added to the section 1237 list of ``Communist Chinese Military
Companies'' authorized under the 1999 NDAA of which the Treasury's
Office of Foreign Assets Control (OFAC) was tasked with writing the
legal and technical guidelines for how this listing may be applied.
This action, as well as others, such as the addition of CNOOC and other
Chinese oil companies to the Department of Commerce Entity List have
potentially significant economic impacts to U.S. companies with
investments, partnerships, and operations in China as well as
significant unintended consequences with these actions being taken in
series and combination.
Will you commit to responsibly engaging industry stakeholders to
inform how Treasury related sanctions align with economic impacts?
How will the Treasury Department under your leadership administer
effective and targeted sanctions policies that harm their intended
target, change malign behavior, and protect US economic interests in
the process?
Answer. If confirmed, I commit to ensuring that the Treasury
Department actively engages industry stakeholders on sanctions issues,
seeking to carefully understand effects on markets, firms, and our
national and economic security. Furthermore, the Treasury Department
will conduct a careful review of sanctions to ensure that they are
targeted, effective, and minimize unintended consequences.
______
Questions Submitted by Hon. John Thune
Question. Rural communities across the country are hurting, and in
many cases this was the reality before the pandemic. Can you comment on
the administration's plans to help rural America access new capital and
open markets?
Answer. I appreciate that many rural communities are struggling,
and if confirmed, I am committed to working with my administration
colleagues to address both the immediate economic pain being felt in
many parts of rural America as well as longer-term challenges. As we
develop and implement policies to help small businesses access capital,
I will pay particular attention to ensuring that our approach addresses
some of the barriers that might be unique to rural areas.
Question. If confirmed as Treasury Secretary, you would also head
the Financial Stability Oversight Council (FSOC). Can you comment on
some of the non-bank financial risks that you would be focusing on in
your potential position as head of FSOC?
Answer. As you know, the Financial Stability Oversight Council
(FSOC) was created by Congress under the Dodd-Frank Wall Street Reform
and Consumer Protection Act (DFA) following the Financial Crisis that
brought the U.S. economy and financial system to the brink of collapse.
One of the missions of the FSOC itself as spelled out by Congress
with regard to financial stability in the DFA is as follows: ``to
identify risks to the financial stability of the United States that
could arise from the material financial distress or failure, or ongoing
activities, of large, interconnected bank holding companies or nonbank
financial companies, or that could arise outside the financial services
marketplace.'' This provision appears rooted in the experiences of the
Financial Crisis, when the U.S. economy was close to ruin following the
failures and near-failures of large, interconnected bank holding
companies and nonbank financial companies that threatened and
undermined financial stability.
The fundamental purpose behind FSOC is to facilitate coordination
among regulators so that significant risks to our economy do not go
unaddressed because they do not fall wholly into the purview of one
regulator's jurisdiction. My view is that the FSOC should address risks
whatever their origin. But our focus must remain on stability in our
financial system and ensuring that we are prepared to mitigate market
disruption in times of stress. A clear example of such market
disruption is the recent disruptions in the Treasury market, and it
should be part of the FSOC's responsibility to look into the Treasury
market disruption and any potential interplay with non-bank financial
risks.
______
Questions Submitted by Hon. Rob Portman
Question. The Tax Cuts and Jobs Act was the first time Congress has
passed meaningful tax reform in 30 years, and for many Americans.
Hundreds of U.S. businesses, large and small, have made investments
totaling $482 billion in equipment, buildings, and--most importantly--
their employees. Prior to the pandemic, the TCJA helped American
companies stay competitive by lowering the tax rate and providing
relief to low-income and working families.
Do you favor increasing the corporate tax rate from 21 percent?
Answer. Yes. President Biden has proposed increasing the corporate
tax rate to 28 percent.
Question. President Biden has proposed raising the corporate tax
rate from 21 percent to 28 percent and doubling the tax rate on GILTI
from 10.5 percent to 21 percent. Moreover, the OECD is currently
considering a global minimum tax rate of 12.5 percent. An increase in
the GILTI rate to 21 percent would subject U.S. companies to
significantly higher levels of tax than their foreign competitors,
resulting in more profitable business opportunities for foreign
companies and return to the inversion of U.S. companies or acquisition
by foreign companies, resulting in a loss of U.S. jobs and investment.
What is your view on the United States imposing a 21 percent tax on
foreign earnings of US companies, and how do you see that as being
competitive if the OECD is planning to implement a much lower global
minimum tax at or around 12.5 percent?
Answer. I appreciate your concern with regard to the
competitiveness of our U.S. companies amidst a changing international
tax landscape. A global minimum tax agreed to at the OECD would,
however, stop the destructive global race to the bottom on corporate
taxation. With a multilateral agreement in place, American companies
would remain competitive even with a somewhat higher tax on their
foreign earnings. Indeed, any gap between the U.S. minimum tax rate and
a globally agreed rate would likely be smaller than the gap that exists
today under the rules enacted under the Tax Cuts and Jobs Act.
Question. Some provisions from TCJA expire in the next few years,
including provisions that aided working class families such as doubling
the child tax credit and increasing the limit on the alternative
minimum tax which was hurting small businesses and middle class
families. Other provisions which incentivize innovation by providing a
deduction for research and development expenses such as section 174,
will provide a more limited benefit after this year.
Would you favor extending these provisions? If not, what policies
would you support to ensure that we do not unfairly burden working-
class families and allow for innovation as a driver of our economy?
Answer. President Biden is focused on supporting small businesses
and working families through the severe hardship caused by the
pandemic. He has recently proposed a comprehensive relief package that
provides significant tax relief for working families through an
expanded and refundable Child Tax Credit and an enhanced Earned Income
Tax Credit. If confirmed, I would look forward to working with you and
others in Congress to advance plans to fuel innovation by investing in
American workers and American manufacturing, clean energy, critical
infrastructure, and access to broadband.
Question. As you know, the Organisation for Economic Co-operation
and Development (OECD) has been working over the past 2 years with the
goal of having agreement on new international tax rules by mid-2021.
I'm very concerned by the precedent set by some of these digital
services tax proposals, especially as the proposal widened to consider
``consumer-facing businesses.'' What we don't want is for American
companies across all industries to end up receiving little benefit from
a multilateral solution while paying significant revenue into ``market
countries.''
What is your transition plan for the OECD negotiations?
Answer. If confirmed, I will ensure the Treasury Department
immediately and vigorously engages with the international tax
negotiations at the OECD. I believe these negotiations present an
opportunity to establish a more stable, equitable international
corporate tax system.
Question. How will the Department engage in the OECD negotiations
and how it will prioritize this issue in relation to the multitude of
domestic challenges facing the country?
Answer. Please see the answer to the previous question.
Question. In a bipartisan way, Senators have been monitoring the
progress of the OECD process and repeatedly expressed an interest in
protecting U.S. companies and the U.S. tax base during the discussions.
I urge you to continue to press the Inclusive Framework members to
treat U.S. businesses fairly in both Pillar One and Pillar Two; this
will ensure that the U.S. tax base is protected and activities and
income that should properly be taxed in the U.S. remain here.
Will you commit to keeping the members of the Senate Finance
Committee updated on the progress of the negotiations and to bringing
any final agreement back to the Senate to discuss with members of this
committee?
Answer. If confirmed, I will certainly keep the Senate Finance
Committee appropriately updated on the OECD/G20 negotiations. Any
treaty arrangements would, of course, require the advice and consent of
the Senate.
Question. Further, will you commit to providing information to the
members of the Senate Finance Committee about the economic effects of
any proposals on different types of U.S. businesses (manufacturing,
financial services, technology, consumer products, etc.)?
Answer. If confirmed, I would look forward to future conversations
with the members of the Senate Finance Committee about the economic
effects of proposals by the OECD.
Question. Treasury has taken a leading role in Paycheck Protection
Program with the SBA. However, the guidance has lagged and questions on
forgiveness still linger.
How would your Treasury Department work with banks and small
businesses to ensure they have the guidance they need?
Answer. If confirmed, I am committed to working with the SBA to
ensure that small businesses and their lenders have clear guidance
under the Paycheck Protection Program, especially with regard to
forgiveness, so that the program can fully reach the goals Congress has
set out for it and the impacted small businesses can benefit from this
critical assistance.
Question. President Biden's stimulus proposal would give loans and
grants to small businesses. However, I worry about the potential for
this to be less than targeted and to achieve certain partisan
priorities. I believe it is critical that all of these programs are
structured to protect the maximum number of jobs regardless of the
political environment.
How would your Department plan to structure this program?
Answer. The relief bill late last year was just a down payment to
get us through the next few months. As the December jobs report shows,
many families are still in need. We have a long way to go before our
economy fully recovers.
Small businesses are the foundation of our economy and we must do
everything possible to keep them afloat and back on track towards
prosperous growth. The President looked at the latest data, consulted
with experts, and put together a package that is necessary to spur an
economic recovery, and lift more than 11 million Americans out of
poverty in the process. If passed by Congress, I will, if confirmed,
work to ensure the implementation of these programs catalyzes small
business growth in a way that is both equitable and sustainable.
Question. The bipartisan relief package we passed in December will
help provide much-needed support to Americans as we continue to combat
the pandemic. It is crucial that we first see how effectively the aid
from December works to serve as a bridge until vaccines become widely
available and we can get back to normal life. However, President Biden
proposed a $1.9-trillion stimulus plan prior to seeing the impact of
the $900-billion package passed in December.
How will we know when we don't need more economic stimulus? What
indicators would you rely on?
Answer. The pandemic and resulting economic crisis have created
severe pain for families across the country. Unemployment remains
troublingly high and millions of families are facing hunger or the risk
of eviction. Additional relief is needed to strengthen the economy,
address our public health challenge, and provide relief to communities
that have been hardest-hit.
If confirmed, I will work hard to ensure that the package that
passed in December is fully and efficiently implemented so that the
assistance it provides gets to those who desperately need the help.
And, I will continue to consult a range of economic indicators to
understand how workers, households and communities are faring in the
recovery. I would look forward to discussing the performance of various
economic indicators with this committee.
Question. Aside from aiding our economy as we recover from the
pandemic, what would your priorities be as Treasury Secretary?
Answer. It is the responsibility of the Treasury Secretary to
strengthen the U.S. economy, foster widespread economic prosperity, and
promote an economic agenda that leads to long-run economic growth.
Meeting that challenge undoubtedly requires focus on the current
economy, but also requires a commitment to the building blocks of
enduring prosperity. Further, President Biden is committed to
overcoming the economic and social crises facing our country and
addressing persistent challenges such as climate change and racial
inequality. If confirmed, I will be firmly committed to implementing
policies designed to overcome these challenges.
Question. Recently, the U.S. dollar has weakened. Do you believe in
a strong dollar? If so, what can we do to increase the strength of the
dollar?
Answer. As I said at my hearing, I believe in a strong and
equitable U.S. economy that delivers good jobs with rising wages for
all Americans. Maintaining confidence in the long-term strength of the
U.S. economy and the stability of the U.S. financial system is good for
America as well as our trading and investing partners. I look forward
to working with Congress to make the U.S. economic recovery as strong
as possible.
I believe in market-determined exchange rates. The value of the
U.S. dollar and other currencies should be determined by markets.
Markets adjust to reflect variations in economic performance and
generally facilitate adjustments in the global economy.
The United States does not seek a weaker currency to gain
competitive advantage. We should oppose attempts by other countries to
do so. The intentional targeting of exchange rates to gain commercial
advantage is unacceptable. If confirmed, I will work to implement the
President's promise to oppose any and all attempts by foreign countries
to artificially manipulate currency values to gain an unfair advantage
in trade.
Question. As Chair of the Federal Reserve, you were a staunch
defender of an independent Central Bank. Historically, the Treasury
Department and Federal Reserve have coordinated on certain policies.
Thus, in your new role you will coordinate with Chairman Powell at
times.
How will you ensure the Federal Reserve maintains its independence
as it works with the Treasury Department?
Answer. The Federal Reserve has long operated as an independent
institution, and I respect and believe strongly in upholding those
norms. Given my prior leadership at the Federal Reserve, I understand
deeply why it is so important to maintain the tradition of the
independence of the Fed in monetary policy. In areas where it will be
appropriate and necessary for coordination between the Treasury and the
Fed, I, if confirmed, will certainly take those responsibilities
seriously and will be well-positioned to work seamlessly with Chairman
Powell.
Question. During our phone call, we discussed how improving
retirement security is one of my top priorities in the coming Congress.
There are many things that can be done on a bipartisan basis, which
will be critical in such a narrowly divided Congress. I have worked on
a bipartisan bill with Senator Cardin, which has four goals:
First, the bill improves savings rates for lower-income and part-
time workers.
Second, the legislation focuses on improving access to workplace
plans at small businesses.
Third, it allows older Americans who have not saved enough to save
more.
Finally, this bill recognizes that many Americans live longer and
ensures they do not outlive their money.
Can you commit to working on passing this bill in a bipartisan way
in the coming Congress?
Answer. I appreciate your commitment to the important work of
improving retirement security and your work with Senator Cardin on this
legislation.
President Biden has proposed giving small businesses a tax break
for starting a retirement plan and giving workers the chance to save at
work. In addition, under President Biden's plan, almost all workers
without a pension or 401(k)-type plan will have access to an
``automatic 401(k),'' which provides the opportunity to easily save for
retirement at work--putting millions of middle-class families on the
path to a secure retirement.
If confirmed, I look forward to working with you to improve
Americans' retirement security.
Question. As you know, pensions are part of the three-legged stool
of retirement for many Americans. My bill addresses the defined
contribution leg. However, many Americans are worried about whether
they will be able to receive the pensions they earned after years of
hard work. Many of these people cannot simply just start working again.
I was on the Bipartisan Joint Select Committee looking to strengthen
this system. Unfortunately, we came up short on reaching a deal--but we
had some good discussions and came up with a few good ideas.
However, good intentions and good ideas will not give the needed
assurances to thousands of my constituents whose retirement security
relies on their pensions and have received that heart-breaking notice
that they may be forced to take benefit cuts.
Can you commit to me to work with us in a bipartisan way to ensure
we provide security to those Americans?
Answer. If confirmed, I am committed to working with Congress and
the Department of Labor to find and enact a comprehensive solution to
the challenges facing multiemployer pension plans. The President also
supports passage of the Butch Lewis Act, which offers low-interest
loans to financially troubled multiemployer plans--helping them to meet
their commitments.
Question. The final leg of the stool is Social Security. American
workers have faithfully paid into this system. Unfortunately, the OASI
trust fund could run out of money by 2035. If Congress were to allow
this to happen and we see benefit cuts, we would be breaking our
promises to the American people. I'm actually worried that the current
pandemic may have brought that date forward.
The good news is that I believe we can work in a bipartisan
fashion. I want to commit that I am willing to work with you, the
incoming administration and my colleagues on both sides of the aisle on
this critical issue.
Can you discuss both the impact of benefit cuts on the American
people and any solutions you have to avoid such a cliff?
Answer. While the last report of the Trustees (issued in April
2020) found no material change in the solvency of Social Security
relative to the prior year, this analysis was done for the pre-COVID
period. COVID has accelerated the depletion of all major trust funds
according to Congressional Budget Office projections released in
September 2020. An across-the-board benefits cut for Social Security
recipients would plunge some elder Americans into poverty and would
violate the trust of Americans who paid into Social Security for
decades. Strengthening Social Security is essential in order to ensure
a secure retirement, especially for our most vulnerable populations.
President Biden has called for a Social Security reform package that
would boost benefits for vulnerable beneficiaries--including widows/
widowers, workers with low lifetime incomes, and older beneficiaries--
and also provide an across-the-board increase for all beneficiaries.
The plan also improves the long-run fiscal position of the Social
Security Trust Fund. It does this by asking wealthy taxpayers with more
than $400,000 in wages to pay the same rate on their income as other
workers. On the whole, President Biden's plan provides older Americans
a more secure retirement. If confirmed, I look forward to working with
Congress to shore up the Social Security program for decades to come
without burdening middle-class taxpayers.
Question. As you know, the Treasury Secretary is the Chair of the
Financial Stability Oversight Council (FSOC), which has enormous power
to declare financial institutions to be systematically important
financial institutions (SIFIs). This can subject them to increased
regulation. It also gives them enormous power to liquidate institutions
that are seen as a threat to the financial stability of the country. I
was concerned during the Obama administration that many insurance
companies and asset managers were declared SIFIs despite many outside
observers not viewing them as ``too big to fail.''
Can you discuss your thinking at the time on these issues? What
measurements are you considering moving forward? As Chair of FSOC, what
would your areas of focus be?
Answer. As you know, FSOC was created in the aftermath of the
Financial Crisis to coordinate among regulators and ensure significant
risks to financial stability do not go unaddressed because they do not
fall wholly into a single regulator's purview. I believe FSOC should
address risks whatever their origin. But, our focus must remain on the
stability in our financial system and ensuring that we are prepared to
mitigate market disruption in times of stress.
Question. The conservation easement deduction encourages taxpayers
to donate property that has conservation value, a policy goal that
myself and colleagues on both sides share. Since being made a permanent
part of the tax code in 1980, the deduction has been a cornerstone in
the fight to expand conservation for a cleaner, healthier environment.
Unfortunately, the Internal Revenue Service is increasingly challenging
taxpayers' deductions on what can best be described as technical
drafting issues related to conservation easement deeds when the
underlying issue seems to be a perceived over-valuation of the
easement. Groups as diverse as the National Taxpayer Advocate, the Land
Trust Alliance, the American Bar Association (ABA), and the National
Taxpayer's Union have called on the IRS to publish safe harbor guidance
so that potential donors can have certainty that their easement deeds
won't wind up subject to litigation. It seems patently unfair that
landowners are losing at audit and in the Tax Court on technical
drafting issues when requests for guidance from IRS on these very same
clauses has gone unanswered for over a decade.
In fact, just last week the National Taxpayer Advocate in her 2020
Annual Report to Congress again recommended that the IRS ``[d]evelop
and publish additional guidance that contains sample easement
provisions to assist taxpayers in drafting deeds that satisfy the
statutory requirements for qualified conservation contributions,
particularly the perpetuity requirement for those conservation
easements that incentivize land preservation for future generations.''
Will you commit to working with the IRS to publish sample deed
language so that taxpayers can have certainty when making donations,
helping to further this important policy goal? Once we have this
guidance, I think it is important that we provide an opportunity for
taxpayers to come into compliance with the new rules.
Answer. Taxpayer certainty with regard to tax treatment in all
issues is an important goal for the system at large. If confirmed, I
will strive to meet that goal through the issuance of taxpayer
guidance, and I appreciate the importance of creating certainty for
taxpayers on this issue.
Question. The pandemic has caused construction shutdowns, shortages
of labor and materials, supply chain disruptions, financial
uncertainty, shifting lending and transactional requirements, and
indefinite delays on land transactions and project entitlements--all
major obstacles for housing development and rehabilitation projects
underway nationwide.
What new mechanisms and Federal incentives do you envision once we
get past the pandemic to address the deepening of America's housing
affordability crisis?
Answer. I believe it is critically important that we have a housing
system that serves all Americans, and while the pandemic undoubtedly
created challenges in the production of affordable housing, shortages
of affordable housing predate the pandemic. I am committed to a
Treasury Department that is focused on rebuilding our economy
equitably. If confirmed, I would look forward to working with you and
others in Congress to identify the correct (new or existing) solutions
and incentives to address these important issues.
Question. According to the Census Household Pulse Survey, 19
percent of renters are currently unable to pay rent and, if that number
remains steady, rent owed could amount to an additional $87.4 billion
by the end of September 2021. I helped lead the creation of the first
ever emergency rental assistance program through Treasury's Coronavirus
Relief Fund in the coronavirus relief legislation enacted along with
the omnibus at the end of last Congress. Emergency rental assistance is
one of the most effective and sustainable ways to help tenants and
housing providers get through this difficult time.
Do you support additional funding for of emergency rental
assistance through the Coronavirus Relief Fund, if necessary? And what
other policies do you foresee implementing to sustain our Nation's
housing stability?
Answer. I am grateful to you for your leadership in developing
effective and timely programs to support families who rent their homes
and apartments, as well as housing providers, get through this
difficult time. The relief that Congress provided is critical to
supporting Americans in need. If confirmed, I would look forward to
working with you and others in Congress to ensure that sufficient
support is provided to help struggling families.
Question. Any major investment in the Nation's infrastructure
should recognize the important relationship between America's growing
demand for rental housing and the industry's ability to meet it. In
2016 at the end of the Obama/Biden administration, a tool-kit was
released aimed at modernizing housing development regulations and
removing local barriers. The tool-kit stressed the role that zoning,
land use regulations and lengthy development approval processes have
played as part of our housing affordability crisis.
What steps will this administration take as part of the
infrastructure package to incentivize States and localities to remove
these barriers and regulation that discourage development and
renovation?
Answer. You raise important questions about the relationship
between rental housing development and regulations at the Federal,
State, and local levels. Rental housing is a critically important part
of assuring housing affordability. If confirmed, I would look forward
to working on ways to partner with you on these critical issues.
Question. In my role on the Senate Homeland Security and
Governmental Affairs Committee (HSGAC) this Congress, I will be focused
on the oversight jurisdiction over government-wide affairs,
particularly Federal Government-wide cybersecurity. The Treasury
Department was one of the agencies impacted in the recent SolarWinds
cyber-attack. HSGAC will be focused on learning more about the attack
and how to improve our preparedness with these attacks.
If confirmed, will you commit to working with Congress to provide
timely and thorough information about the attack?
Answer. The recent SolarWinds cyberattack that impacted a number of
agencies across the Federal Government is an issue of grave concern. If
confirmed, I look forward to working with Congress as we learn more
about the attack and how to improve our preparedness.
Question. As you are aware, I have a very strong interest in
Ukraine and, as the co-chair of the Ukraine Caucus, have worked in a
bi-partisan manner to support Ukraine with militarily, and economic
assistance as well as pressuring them to continue on much needed anti-
corruption reform. Ukraine faces grave threats from Russia and since
the Russian invasion on Crimea in 2014 and their blatant support of
pro-separatist forces in the Donbas have suffered greatly. Our
sanctions program has been very effecting in making the Russians pay a
heavy economic price for their actions.
Many of our sanctions are by executive orders. Can you make a
commitment that you will encourage the President to keep these
sanctions in effect and work with the Congress to strengthen these and
other sanctions against our adversaries?
Answer. I understand your strong interest in this important matter.
If confirmed, I will work closely with the White House and counterparts
at other agencies across the administration on U.S. policy toward
Russia. I commit to rigorously enforcing sanctions targeting Russian
actors for territorial aggression in eastern Ukraine and Crimea and
other threats to U.S. national security.
Question. Recent reports indicate that the Iranian regime and its
military wing--the Iranian Revolutionary Guard Corps (IRGC)--may be
siphoning money away from the NIMA system (FOREX Management Integrated
System) in an effort to fund terror outside of Iran's boarders. This
informal system was designed to give Iranian exporters access to a
foreign exchange market so that they could convert their foreign
earnings into rials. However, there are allegations that the IRGC has
established a web of front companies which exploit this system to gain
currency which is then given to IRGC affiliated groups throughout the
region.
What steps will you take as Treasury Secretary to ensure that the
IRGC is not able to exploit loopholes in the international banking
system, and in more informal networks such as NIMA, to fund terror
outside its borders?
Answer. If confirmed, I will ensure that the Treasury Department is
closely focused on any Iranian efforts to evade sanctions and abuse the
international banking system. Iran's support for terrorism is a very
serious concern that, if confirmed, I will direct the dedicated
Treasury staff to closely monitor and seek to disrupt with all
available tools.
Question. Following the Obama administration's adoption of the
Joint Comprehensive Plan of Action (JCPOA) with Iran, the Treasury
Department granted Iran a specific license to access the U.S. financial
system.
Should the Biden administration re-engage in negotiations with Iran
regarding nuclear capabilities, would you also consider granting Iran a
specific or general license to access theU.S. financial system?
Answer. The Biden-Harris administration is committed to ensuring
that Iran takes the appropriate steps to resume compliance with its
nuclear commitments. We will carefully review what sanctions relief
would be appropriate if Iran complies, and Iran will only enjoy
sanctions relief under the JCPOA if it complies with its nuclear
constraints.
Question. Following the grant of the specific license to Iran,
Treasury officials were asked by members of Congress if Iran was given
access to the U.S. financial system as part of the JCPOA. Those
Treasury officials, under oath, stated that Iran had not been given
such access.
Do you pledge to provide truthful information regarding the
granting of any specific or general license in response to
congressional inquiries?
Answer. Yes, I will commit to provide truthful information
regarding Iran sanctions and licensing in my communications with
Congress.
______
Follow-up Questions Submitted by Hon. Rob Portman
Question. President Biden has proposed raising the corporate tax
rate from 21 percent to 28 percent and doubling the tax rate on GILTI
from 10.5 percent to 21 percent. Moreover, the OECD is currently
considering a global minimum tax rate of 12.5 percent. An increase in
the GILTI rate to 21 percent would subject U.S. companies to
significantly higher levels of tax than their foreign competitors,
resulting in more profitable business opportunities for foreign
companies and return to the inversion of U.S. companies or acquisition
by foreign companies, resulting in a loss of U.S. jobs and investment.
What is your view on the United States imposing a 21 percent tax on
foreign earnings of U.S. companies, and how do you see that as being
competitive if the OECD is planning to implement a much lower global
minimum tax at or around 12.5 percent?
If the OECD agrees on a global minimum tax rate at or around 12.5
percent, would you propose increasing the rate on foreign earnings from
its current rate of 10.5 percent? Additionally, please explain your
response that any gap between the U.S. minimum tax rate and a globally
agreed rate would likely be smaller than the gap that exists today. The
rate currently being considered at the OECD is at or around 12.5
percent and the current GILTI rate is 10.5 percent, a difference of 2
percent. If the GILTI rate is increased to 21 percent, there would
likely be a much larger gap between the GILTI rate and the OECD rate
(assuming the rate is at or around 12.5 percent).
Answer. I appreciate your concern regarding the competitiveness of
U.S. companies amidst a changing international tax landscape. As you
note, President Biden has proposed substantially reforming GILTI as
part of his plan to ensure a fair and progressive tax code where
wealthy individuals and corporations pay their fair share. The U.S. has
strong and unique attractions as a residence for multinational
corporations, and, as a result, U.S. companies would remain competitive
even if they faced a somewhat higher 21-percent rate of tax on their
foreign earnings irrespective of the outcome of the OECD negotiations.
This is even more true if a global minimum tax were agreed to at the
OECD. Such a global minimum tax could stop the destructive global race
to the bottom on corporate taxation and help discourage harmful profit-
shifting.
Regarding the current gap, I was referring to the gap between the
GILTI rate and the minimum tax rate on the foreign earnings of foreign-
resident multinationals under current law. Today, most other
headquarters' jurisdictions impose no tax on the foreign earnings of
their domestically-headquartered multinationals.
Question. Following the Obama administration's adoption of the
Joint Comprehensive Plan of Action (JCPOA) with Iran, the Treasury
Department granted Iran a specific license to access the U.S. financial
system.
Should the Biden administration re-engage in negotiations with Iran
regarding nuclear capabilities, would you also consider granting Iran a
specific or general license to access the U.S. financial system?
Answer. The Biden-Harris administration is committed to ensuring
that Iran takes the appropriate steps to resume compliance with its
nuclear commitments. We will carefully review what sanctions relief
would be appropriate, if Iran complies--and Iran will only enjoy
sanctions relief under the JCPOA if it complies with its nuclear
constraints. As circumstances unfold and these reviews are conducted, I
will commit to following up with congressional offices with more
specificity.
Question. Should the Biden administration re-engage in negotiations
with Iran regarding nuclear capabilities, would you consider granting
Iran a specific or general license to access the U.S. financial system?
Please state either yes or no.
Answer. Yes, if the Biden-Harris administration reenters the Iran
nuclear deal, we would consider what sanctions relief would be
appropriate. However, Iran will only enjoy sanctions relief under the
JCPOA if it complies with its nuclear constraints. I fully appreciate
the need to communicate with Congress on our Iran sanctions, and will
plan to do that, if confirmed.
______
Questions Submitted by Hon. Patrick J. Toomey
tax policy
Question. President Biden has proposed several changes to the way
U.S. corporations are taxed, including amending provisions of the 2017
Tax Cuts and Jobs Act (Pub. L. 115-97). Among those changes President
Biden has called for are significant modifications to the tax levied on
``global intangible low-tax income'' (GILTI). Under current law, this
category of income is subject to a minimum tax of between 10.5 and
13.125 percent annually. As such, the United States is the only
advanced economy that imposes a foreign minimum tax on the active
foreign-source income of domestically headquartered multinational
companies. The GILTI tax, in addition to other anti-base erosion
provisions in the 2017 tax reform, was specifically designed to
discourage profit shifting, and, along with the corporate income tax
rate deduction, encourage U.S. companies to invest more in the U.S.
rather than offshoring profitable economic activity.
Specifically, President Biden's proposal would assess GILTI on a
country-by-
country basis as opposed to the current aggregate approach; eliminate
GILTI's exemption for deemed returns under 10 percent of ``qualified
business asset income'' (QBAI); and double the tax rate assessed on
GILTI. On the whole, these changes would make U.S. multinationals less
competitive than they are today with a larger tax liability and a
greater likelihood of inverting.
If the proposed legislative changes to GILTI are adopted along with
an increase in the corporate rate, do you acknowledge U.S.
multinationals would face higher effective tax rates and thus become
less competitive than they are today?
Would a higher tax burden on U.S.-based multinationals make it less
likely that a newly formed, or existing, U.S. multinational company
would locate its headquarters in the United States?
Answer. During the presidential campaign, the President proposed
raising the corporate tax rate to 28 percent--which is the midpoint of
the pre-2017 level and the rate imposed after the tax act. At 28
percent, the corporate tax rate would be substantially below the level
that had been in place for decades.
The Biden agenda would couple this tax change with massive
investment that would benefit American businesses of all stripes and
improve our international competitiveness. This includes a sweeping
plan to bolster America's infrastructure, ranging from surface
transportation to broadband to airports and waterways. The plan would
allow billions of dollars to worker training and college education, in
addition to apprenticeship programs--all of which would raise the
productivity of American workers. The Biden plan allocates hundreds of
billions in research funds for renewable energy and other economic
priorities, which ultimately make us more competitive on the world
stage. Finally, President Biden has advanced a plan to quickly
distribute vaccines to households while also providing a lifeline for
the American economy. These critical actions will help businesses
across the country, including those that are subject to the higher 28-
percent corporate tax rate.
Finally, if confirmed I commit to vigorously engage in the OECD/G20
negotiations to reform the international tax system. A global minimum
tax agreed to at the OECD would stop the destructive global race to the
bottom on corporate taxation. Indeed, any gap between the US minimum
tax rate and a globally agreed rate would likely be smaller than the
gap that exists today under the rules enacted under the Tax Cuts and
Jobs Act.
Congress relied on the Treasury Department to fully implement the
Tax Cuts and Jobs Act consistent with congressional intent. Over the
last 3 years, Treasury has issued various regulations to carry out this
responsibility. Taxpayers have made plans and investment decisions in
accordance with the law and accompanying regulations. It is important
that taxpayers be able to rely on the established law and regulatory
implementation.
Question. Do you intend to use Treasury's regulatory authority to
alter or repeal regulations pertaining to implementation of the Tax
Cuts and Jobs Act?
If so, will you and other Treasury officials consult with Congress
in a bipartisan manner prior to exercising rulemaking authority?
Answer. I will work to ensure the country's tax laws are
implemented and enforced fairly. Any review of regulation will seek to
ensure they are consistent with the law. Going forward, the Treasury
Department will work in coordination with Congress on important issues
such as these.
Currently, the OECD is in the midst of multilateral negotiations on
tax challenges arising from digitalization. Negotiations thus far have
centered upon two ``pillars,'' one focusing on allocation of taxing
rights and the other on a global anti-base erosion proposal.
The Trump administration was at first extensively involved in the
negotiations, and expressed support for reforming the international tax
system in order to provide for greater tax certainty and so that
countries will drop their digital services taxes. However, negotiations
were put on pause in 2020.
Question. As Treasury Secretary, will you commit to re-engaging in
multilateral negotiations through the OECD process to address issues of
tax challenges through digitalization?
Answer. If confirmed, I will commit to vigorously engaging in a
cooperative multilateral effort to address base erosion and profit
shifting through the OECD/G20 process, and to working to address the
tax challenges raised by the digitalization of the economy in that
context.
Question. Will you commit to closely examining the economic effects
of any proposals on diverse sectors of the U.S. economy, and to
supporting policies that promote long-term growth, as well as a
transition period during which the new rules are implemented?
Answer. I appreciate your concern regarding the economic effects of
any agreements reached in the OECD negotiations. If confirmed, I commit
to examining the economic effects of any OECD proposals, and to
supporting policies that promote equitable growth.
Question. Will you commit to keeping the Senate and the members of
the Senate Finance Committee updated on the progress of the
negotiations, and to bringing any final agreement back to the Senate to
discuss with members of this committee?
Answer. If confirmed, I will commit to keeping the Senate and the
members of the Senate Finance Committee appropriately updated on the
OECD/G20 negotiations. Further, any treaty arrangements would of course
require the advice and consent of the Senate and I commit to satisfying
any such requirements.
Instead of waiting for agreement at the OECD level, a number of
countries have chosen to unilaterally implement their own digital
services taxes (DSTs). As of January 15, 2021, over a dozen countries
have already imposed DSTs, with many more countries having either
published proposals or announced an intention to publish a proposal to
enact a DST.
The details of these DST proposals vary by country, but the policy
frequently discriminates against non-resident businesses and imposes
double taxation. Additionally, the DSTs of certain countries appear to
be designed to specifically target United States digital companies.
In retaliation for these DSTs, the Trump administration has
initiated investigations under section 301 of the Trade Act of 1974,
into DSTs that have been adopted or are being considered by a number of
U.S. trading partners. In several of these investigations, the United
States Trade Representative has authorized the use of tariffs as a
response.
Question. Do you agree that a multilateral solution to digital
taxation is a better approach than relying upon retaliatory tariffs?
Answer. I am aware of the concerns U.S. companies have raised about
digital services taxes. I agree that retaliatory tariffs also impose
costs of their own on American households. I am committed to a
cooperative multilateral effort to address base erosion and profit
shifting through the OECD/G20 process, and will commit to work to
resolve the digital taxation dispute in that context.
Several Democrats in Congress have endorsed a financial
transactions tax (FTT). One such proposal would levy a 0.5-percent tax
on stock trades and a 0.1-percent tax on bond trades. A FTT would
significantly damage capital markets by raising transaction costs,
decreasing trading volumes, and reducing liquidity. Over half of
American households are invested in equity and fixed-income
securities--either directly or indirectly--so this proposal would be
destructive for American investors. President Biden has not included a
FTT in his official tax policy platform.
Question. Do you believe that a FTT would reduce liquidity in
capital markets? Would it raise costs and lower returns for the
majority of Americans who are investors?
Answer. You raise an important question about financial transaction
taxes (FTT). As you may know, President Biden has not put forward a
financial transaction tax proposal. FTTs vary widely in their design,
and have different impacts on markets. I have not yet had an
opportunity to study particular FTT designs and evaluate their impacts.
financial stability oversight council
Question. I am concerned about the Financial Stability Oversight
Council's (FSOC) designations of Systemically Important Financial
Institutions (SIFIs). A SIFI designation is troubling in part because
it creates moral hazard: it formalizes an institution's ``too big to
fail'' status and creates the expectation that the taxpayers will bail
out a SIFI that falls into financial distress.
Also troubling is FSOC's history of exercising its SIFI designation
powers. Under the Obama administration, FSOC made overreaching SIFI
designations of non-banks in a manner completely lacking transparency,
and without providing a clear path for de-designation. Perhaps the
best-known example of this was FSOC's designation of MetLife. A D.C.
District Court judge overturned the designation, holding that FSOC had
acted arbitrarily and capriciously by ignoring its own guidance on
designation and failing to do a cost-benefit analysis, the bedrock of
reasoned regulatory decision-making in our system.
Since then, in 2019, FSOC issued a policy that made several
improvements to the non-bank designation process. These included
emphasizing that designation is a last resort, requiring cost-benefit
analysis and an assessment not only of the impact of a risk but also
the likelihood that it will be realized, as well as creating both pre-
designation and post-designation ``off-ramps'' to help firms and
regulators avoid or reverse SIFI designation by mitigating systemic
risks.
Congress still needs to reform Dodd-Frank to prevent FSOC from
reverting to its troubling prior patterns of engaging in over-
designation and arbitrary processes. In the meantime, I hope that as
the FSOC Chair, you will exercise restraint in making any SIFI
designations, and commit to a transparent and fair process.
Will you commit that, if confirmed, you will ensure FSOC continues
to treat SIFI designation as a last resort; maintains a clear process
for SIFI designation; conducts cost-benefit analysis for all
designations; and provides institutions with the opportunity to avoid
designation and, if designated, a clear path to reverse such
designation?
Answer. You have raised a series of important questions regarding
the Financial Stability Oversight Council. I will respond to the series
of questions in one set of responses.
The Financial Crisis exposed enormous weaknesses in our financial
system, and in our system of financial oversight. The crisis crushed
the U.S. economy and caused enormous devastation to businesses and
families. Taxpayers were exposed to significant risks. The weaknesses
in our financial system led to an extremely slow recovery that hurt
millions of Americans. In response, Congress enacted the Dodd-Frank Act
to reform financial regulation, including regulation of the non-bank
financial sector that had caused so much harm to the American economy.
One important aspect of the Financial Crisis was that non-bank firms
such as AIG and Lehman Brothers were not subject to meaningful and
effective prudential supervision at the Federal level.
Congress established the Financial Stability Oversight Council to
bring together the financial regulatory community to identify and
respond to emerging threats to financial stability, and to promote
market discipline. The Council is tasked with identifying ``risks to US
financial stability that could arise'' and ``respond to emerging
threats to the United States financial system.'' To help achieve this,
the SIFI designation authority is statutorily provided in order for
FSOC to address risks that non-bank financial companies may pose to
U.S. financial stability in the event of their material financial
distress or failure. FSOC should have the tools to protect our economy
from systemic threats, whether they're presented by a single firm or
actions by an array of firms.
I agree that designation should not be undertaken lightly, that
there should be a clear process for designation, and that designation
was never meant to be a one-way street. Procedures should require an
annual review, and firms, if designated, should be regularly evaluated
and are certainly able to adjust their business models to be less risky
in an effort to be de-designated. As you may know, I disagreed with the
procedural changes put in place by the prior administration because I
think they did not show fealty to the statute Congress enacted and
risked re-exposing taxpayers, households, businesses, and our economy
to the failure of non-bank firms.
Question. In a virtual event hosted by the Brookings Institution in
June 2020, you proposed to expand FSOC's power to regulate directly the
activities of non-bank financial institutions. You said, in part: ``I
personally think we need a new Dodd-Frank. . . . We need to change the
structure of FSOC and build up its powers to be able to deal more
effectively with all of the problems that exist in the shadow banking
sector. I think the structure is inherently flawed. I think the
agencies need a definite financial stability mandate.''
Expanding FSOC's role to allow it to directly regulate financial
stability, instead of coordinating the activities of regulators, would
also entrust regulation of specific markets to a body made up of the
heads of agencies with highly specific regulatory specialties and
expertise in distinct and disparate regulated markets. This means that
FSOC has members, who lack expertise in particular types of activities
or regulated entities, but would be responsible for devising and
implementing a compulsory regulatory regime to govern these same
businesses.
Additionally, FSOC represents a highly politicized viewpoint. Its
members are the political heads of all of the financial regulators.
Despite purporting to represent several multi-member commissions with
commissioners from both political parties, FSOC's members are the heads
(i.e., chairs) of those commissions. They are not obligated to submit
their FSOC activities to a vote by their commissions, and can act
unilaterally. And, FSOC is significantly less transparent and
accessible than the underlying agencies.
Question. What do you consider to be ``shadow banking''
organizations?
Answer. One way that is commonly used to describe non-bank firms
that engage in activities similar to banks is to describe them as
``shadow banking'' organizations. The term is meant to encapsulate a
range of activities that may pose systemic risk to the financial
system.
Question. As a practical matter, the financial regulators have
extraordinary powers over the institutions they regulate. What
additional regulatory powers are you suggesting FSOC should receive?
If FSOC or any of its component regulators were to identify a new
problem in the regulatory system that they lacked the authority to
address, wouldn't the appropriate response be to come to Congress and
recommend that the duly elected representatives of the people enact
legislation to address the problem rather than increasing the already
vast powers of the financial regulators?
Answer. With respect to the important questions you raise, I would
suggest that while the independent financial regulatory agencies and
FSOC have significant authorities, it is difficult to regulate
systemically risky activities that cut across markets. If I am
privileged to be confirmed as Treasury Secretary, I would look forward
to working with the members of FSOC and the Congress to explore these
questions further.
I am concerned about recent proposals to advance a liberal
environmental policy agenda through the regulation of banks and other
financial institutions. Particularly troubling are calls to implement
climate stress tests on banks. Financial regulators lack the expertise
to make environmental policy.
More importantly, generating environmental regulation is not the
mission of financial regulators. Rather than regulating the safety and
soundness of a financial institution, climate stress tests and other
climate policies in the banking space are designed to prevent those
institutions from holding certain assets as a form of indirect
punishment against disfavored industries such as oil and gas. Moreover,
the climate stress tests are not a function of climate change itself
impacting the firm's assets, but rather the risk that government--
specifically unelected bureaucrats--will implement policies to ban or
restrict them. Thus, climate change regulation is a self-fulfilling
prophecy for the government: your oil and gas assets are unprofitable
because we have decided to make them so.
Moreover, as the last year has demonstrated, banks are in a
resilient position even when facing a severe unexpected financial
downturn. As Federal Reserve Governor Randy Quarles noted in November
2020: ``Liquidity and capital remain high and, indeed, have increased
at our largest banks over the course of the COVID event. Firms have
sharply increased their reserves, setting aside resources today against
losses they may incur tomorrow. Banks are well positioned to serve as a
bulwark against broader financial and economic stress.'' Adding an
additional stress testing regime to the existing one would impose
significant economic costs, but is not likely to result in a material
additional benefit to stability.
Question. Will you commit not to use the Treasury Department to
advance environmental policy through financial regulation?
Will you commit not to use FSOC to urge other agencies to advance
environmental policy through financial regulation?
Answer. In the questions above, you raise important questions about
the connection between environmental policy and financial regulation. I
agree with Federal Reserve Chairman Jerome Powell that it is important
for financial regulators to assess all the risks facing the financial
system, including risks from climate change. If I am privileged to
serve as Treasury Secretary, I would look forward to working with the
members of FSOC and the Congress to explore these questions further.
capital markets
Question. Despite the efforts of the Securities and Exchange
Commission (SEC) over the past 4 years, it still appears to be too
costly for a company to go and stay public. Going public used to be a
capital-raising event but it is now all too often a liquidity event for
early investors like venture capital funds and a company's founders.
The 1990s saw an average of around 550 IPOs annually. During the last
decade, the number of IPOs were almost one-third that figure, at around
200 annually. Similarly, during the 1990s there was an annual average
of about 7,200 total public companies. Now, there are 40 percent fewer
public companies, with an annual average of around 4,300 public
companies. Although there was an increase in IPOs in 2020, a number of
these IPOs were non-traditional special purpose acquisition companies
(SPACs). Thus, 2020 may represent an aberration from the long-term
decline of IPOs. Do you agree that part of the IPO decline can be
addressed by lowering the costs of going and staying public?
Answer. You raise important questions about the structure of our
capital markets and the vitality of the American economy. The causes
and consequences of changes in the composition of capital markets and
American businesses are complex. If I have the privilege of being
confirmed as Treasury Secretary, I would look forward to studying these
issues further and to working with the Congress on these important
matters.
Question. In October 2017, the Treasury Department released a
report and recommendations on improving the capital markets. Which
recommendations in the report do you agree with?
Answer. The United States has the deepest and most liquid capital
markets in the global economy. The President is committed to
maintaining a sound economy and confidence in our financial system. If
confirmed, I look forward to studying the findings of the 2017 report
to see how Treasury can build even further on our already-strong
capital markets while ensuring strong investor protections.
Question. Going public may not be appropriate for all businesses,
such as a small family-run business. Private markets play an important
role in capital formation and job creation. Two years ago, new
companies accounted for more than 25 percent of all employment gains.
According to the SEC, in 2019, registered offerings accounted for $1.2
trillion (30.8 percent) of new capital raised, while exempt offerings
accounted for approximately $2.7 trillion (69.2 percent) of new capital
raised. Do you agree that private markets are important to the economic
growth of the United States?
Answer. I agree with you that both public and private markets are
important to the economic growth of the United States. If I am
privileged to be confirmed as Treasury Secretary, I would look forward
to working with you on these issues.
Question. A small business in need of $500,000 often cannot raise
that amount of funds from friends and family. However, $500,000 is
often too small of an amount for a bank to make a loan or a venture
capital firm to make an investment in a small business. How would you
encourage further capital formation to fill this need?
Answer. I agree with you that small businesses often have critical
capital needs that are not being met. Small businesses are the bedrock
of the American economy and of our communities. Oftentimes, small
businesses struggle to get access to bank loans, and venture capital
investments are even harder to obtain, especially for businesses not
located in a handful of large cities with significant venture capital
presence. These means that many small businesses all across the country
that would otherwise be successful founder through no fault of their
own. Congress took an important step in the Omnibus legislation by
providing additional small business relief and creating a new
initiative at Treasury to support Community Development Financial
Institutions that serve small businesses and other borrowers in
economically distressed communities. If I am fortunate enough to be
confirmed as Treasury Secretary, I would be honored to work with you
and other members of Congress to expand access to capital for small
businesses throughout the United States.
Question. Entrepreneurs, including minority and female
entrepreneurs, need capital to transform their ideas into new
businesses that will create jobs. Would minority and female
entrepreneurs benefit from more opportunities to raise capital in the
private markets?
Answer. I agree with you that entrepreneurs, including minority and
female entrepreneurs, need better access to capital to launch and grow
their businesses and to create jobs. There are a wide variety of
potential ways to improve access to capital for entrepreneurs, and if
confirmed as Treasury Secretary, I would look forward to working with
Congress on strategies to expand access to capital for entrepreneurs.
Question. Retail investors could benefit from increased
diversification of their investment portfolios and potentially higher
investment returns if they had increased access to private investments,
such as venture capital and private equity. Defined benefit plans
frequently invest a portion of their assets in private investments. A
2018 study by the Center for Retirement Research indicates that a
defined benefit plan may hold, on average, 19 percent of its assets in
private investments. However, most Americans do not have a defined
benefit plan and currently there is very little or no exposure to
private investments in target date funds offered by employers' 401(k)
plans. Do you support providing employees at least a limited exposure
to private investments through diversified funds with long investment
horizons, such as target date funds designed for workers with a
retirement date more than 20 years in the future?
Answer. I agree that diversification in investments is a desirable
outcome in principle, but there are many possible options for achieving
that outcome. I look forward to studying this issue further, as
building wealth for the middle-class, closing racial wealth gaps, and
protecting the retirement safety of American workers are top
imperatives for this administration.
data collection and security
Question. In your role as Treasury Secretary, will you explore how
to modernize data collection and data standards for Federal agencies,
particularly to enhance data security and consistency and coordination
between such agencies?
Answer. If confirmed as Treasury Secretary, in my role as chair of
FSOC, I will work with the financial regulatory community and the
Office of Financial Research to review existing data capture standards
and practices. The goal will be to ensure that the Federal Government
is able to make the most informed and transparent policy decisions
possible, informed by secured processes and consistent metrics.
national security
Question. The Office of Foreign Asset Control (OFAC) within the
Treasury Department administers economic and trade sanctions based on
U.S. foreign policy and national security goals.
Will you commit to have OFAC work with my staff to identify the
ways in which current sanctions laws on North Korea and China,
including the BRINK Act (Pub. L. No. 116-92) and the Hong Kong Autonomy
Act (Pub. L. No. 116-149), can be more rigorously implemented?
Answer. Yes, I can commit to having OFAC personnel discuss with
your staff the current sanctions on North Korea and China, including
whether the current sanctions are effective and whether such sanctions
should be strengthened and, if so, how to do so.
Question. Do you agree that Iran is the world's largest state
sponsor of terrorism?
Answer. Yes. I do agree with that statement.
Question. Unless an Iranian government entity designated by OFAC as
a Specially Designated Global Terrorist (SDGT) has permanently and
verifiably ceased its support for terrorism, do you agree that lifting,
rescinding, or significantly weakening such a designation would result
in the Iranian government's enhanced capacity to support, finance, or
commit acts of terrorism?
Answer. The Biden-Harris administration has made a commitment, as
part of an overall review of the United States' posture toward Iran, to
review current U.S. sanctions on Iran. I believe such a review should
take into account how the lifting or lessening of such sanctions might
impact Iran's ability to support terrorism and how to counter such
support as effectively as possible.
Question. Will you commit to have OFAC provide regular and
reoccurring staff-level briefings on the Iran sanctions program to the
Senate Banking Committee while you are Treasury Secretary?
Answer. Yes, I will commit to working with the Senate Banking
Committee to ensure that adequate briefings are provided on the Iran
sanctions program.
Question. A primary goal of the Financial Crimes Enforcement
Network (FinCEN) within the Treasury Department is to safeguard the
financial system from illicit use and combat money laundering-related
crimes, including terrorism. In 2011, under President Barack Obama,
FinCEN found Iran was a jurisdiction of ``primary money laundering
concern'' under section 311 of the PATRIOT Act. In 2019, under
President Donald Trump, FinCEN finalized its finding that Iran was a
jurisdiction of primary money laundering concern and took special
measures to ensure that the Iranian financial system remained closed
off from the United States.
Do you agree with the determinations made by FinCEN during the
Obama and Trump administrations that Iran is a jurisdiction of primary
money laundering concern?
Answer. Yes, I believe Iran is a jurisdiction of primary money
laundering concern.
Question. Will you keep in place the Treasury Department's section
311 special measures on Iran as long the country continues to finance
terrorism and fails to clean up its financial system?
Answer. I believe we should keep in place various rigorous
restrictions on Iran targeting its malign support for terrorism until
such time as this ceases. I also believe that we should closely examine
all such measures in the policy review the Biden-Harris administration
will be conducting regarding the United States' overall posture toward
Iran.
Question. The FY21 NDAA (Pub. L. No. 116-283) instructs the
Director of FinCEN to ``reach out to members of the small business
community'' when promulgating the regulations needed to carry out title
LXIV of the law, which establishes new beneficial ownership reporting
requirements. How will the Treasury Department implement this directive
and how will it ensure that its regulatory process adheres to the
Regulatory Flexibility Act (5 U.S.C. Sec. 601 et seq.)?
Answer. I agree strongly on the need for Federal banking agencies,
including but not limited to FinCEN, to consult with the small business
community when promulgating regulations, including on the promulgation
of rules and guidance to implement the beneficial ownership reporting
requirements. If confirmed, I will ensure this consultation occurs.
Question. The United States dollar serves as the world's premier
reserve currency. What level of U.S. public debt is a threat to the
dollar's status as the world's reserve currency?
Answer. There are important reasons that the U.S. dollar is the
world's dominant reserve currency. The United States has the largest
economy, and the deepest and most liquid capital markets. We are
committed to maintaining a sound economy and confidence in our
financial system. Indeed, the Biden-Harris administration will make
investments in the American people that will accelerate the U.S.
economic recovery and lay the foundation for a strong and equitable
U.S. economy in the years ahead. The world can be certain that the
United States will not seek a weaker currency to gain competitive
advantage.
______
Questions Submitted by Hon. Tim Scott
Question. As I noted at your nomination hearing on Tuesday, we
recently passed into law a historic, bipartisan $900-billion package to
address the ongoing COVID-19 pandemic through additional targeted
relief. This package provided more than $80 billion for schools to
reopen safely, supported greater investment into rural broadband, sent
more than $280 billion to restart the PPP for a second round, and even
provided a second round of direct relief checks to Americans.
Yet here we are again, less than a month later, preparing to see
another $1.9 trillion dollar package rammed through by way of President
Biden's American Rescue Plan. The American Rescue Plan includes a third
round of stimulus checks to the tune of $1,400-per-person, raises the
Federal minimum wage to $15 an hour, and includes $400 per week
enhanced unemployment benefits. With $4 trillion added to the debt last
year alone, our national debt is now at its highest level relative to
our economy since the end of World War II. At some point, we will start
paying a price for this.
In your opinion, at what point should we start taking serious
action to rein in the debt?
Should the mounting debt influence the size of additional COVID
relief packages, and, in your view, when and how will we know that
enough stimulus spending has been achieved?
Answer. As I said at my hearing, I agree that it is essential that
we put the Federal budget on a sustainable path. But, I believe the
most important thing we can do to achieve that goal is to defeat the
pandemic, provide relief to the American people and make critical
investments that will help the economy grow. To avoid doing that would
run the risk of causing greater long-term fiscal damage. So, I agree
that the long-term fiscal trajectory is a cause for continuous focus
and attention, but I believe addressing that issue over the long term
requires first taking sufficient and appropriate action to take on the
pandemic and address the current economic crisis.
Question. As we know, the American Rescue Plan also includes $400
per week in enhanced unemployment benefits. However, this $1.9 trillion
package seemingly skips over the opportunity to pair this with
incentives for workers to build skills during this time. Such
incentives allow workers to combat skill atrophy and re-enter the
workplace from a more competitive place. The Skills Renewal Act, which
I joined Senators Sasse and Klobuchar in introducing last year, would
resolve this issue by creating a new, targeted credit for skills
building.
Are you supportive of incentives to drive skills building and
economic mobility, and do you believe concepts like this should be
included in future COVID relief packages?
If confirmed, will you commit to working with me to achieve greater
incentives for skills building, in particular for low-income Americans?
Answer. I believe that alongside efforts to provide financial
relief and assistance to the unemployed and to struggling households,
there is an important role for building skills and providing new
opportunities for upward mobility. As we develop legislation to respond
to the immediate crisis and build a strong recovery I would--if
confirmed--welcome the opportunity to work with you to improve
opportunities for skills building that can provide existing workers and
the unemployed paths to higher-paying jobs.
Question. The American Rescue Plan would also increase the Federal
minimum wage to $15 an hour. In July of 2019, the CBO released a report
finding that raising the Federal minimum wage to $15 an hour could
cause up to 3.7 million people to lose their jobs. In particular, the
consequences will be especially brutal for small businesses, which
already operate within razor-thin budget margins.
Taking into account the plethora of other forms of direct
assistance provided in this $1.9 package, was there any consideration
for a more moderate figure or delaying when this would go into effect?
Was there any consideration given for how this would harm small
businesses, which employ nearly half of all Americans and which have
already suffered a 32-percent reduction in revenues because of the
pandemic?
Answer. The proposal to raise the minimum wage seeks to address the
imbalanced nature of the recovery and will benefit millions of
essential workers. I believe the workers who have risked their health
to provide necessary services to American households should be paid a
wage that allows them to afford basic necessities like food and rent.
The minimum wage increase would be phased in over time, giving
small businesses plenty of time to adapt. This increase would also
unlock billions of dollars of consumer spending that would fuel demand
for the essential goods and services small businesses provide. With
more revenue, small business owners could pay their employees higher
wages--which will increase productivity and retention--and invest in
new equipment, expand their operations, and grow their business.
Question. As you may know, my home State of South Carolina is a
manufacturing powerhouse and a leader in trade. Under the Trump
administration, and prior to the pandemic, we saw 1.2 million new
manufacturing and construction jobs created here in the U.S., thanks to
the pro-growth policies we put in place. Yet the ongoing trade wars
have undoubtedly also restricted the ability for firms to experience
greater growth and expansion. One thing I continue hear from my
constituents is, ``when are the tariffs going away?''
Your predecessor, Secretary Mnuchin, was very active in negotiating
the China Phase One deal as well as other measures related to tariffs.
If confirmed, how will you address the continued use of tariffs?
Answer. President Biden will review all aspects of the Trump
administration's trade policies toward China, including how completely
Beijing has lived up to the terms of the Phase One agreement negotiated
with the Trump administration. As part of his review, the President
will consult with allies to galvanize collective pressure on China and
support American workers and businesses.
Question. What kinds of monetary, fiscal, and tax policies do you
believe would most help improve the lives of those who work in our
manufacturing sector?
Answer. America needs a stronger, more resilient domestic supply
chain in a number of areas supporting domestic innovation, U.S. jobs,
and national security. President Biden is calling for new incentives to
spur domestic production of critical products in the United States.
This will include new targeted financial incentives, including tax
credits, investments, matching funds for State and local incentives,
R&D support, and other incentives to encourage the production of
designated critical materials such as semiconductors in the United
States. He is also calling for the U.S. to close supply chain
vulnerabilities across a range of critical products on which the U.S.
is dangerously dependent on foreign suppliers.
Question. What in your view are the most important policies you
would pursue as Treasury Secretary to promote an innovative and
competitive manufacturing sector?
Answer. There is a wide array of policies that can help improve the
strength of American manufacturers. This includes reforming and
eliminating harmful tax policies which reward offshoring and penalize
U.S. companies for manufacturing within U.S. borders, including some of
the international tax reforms enacted as part of the Tax Cuts and Jobs
Acts. In addition, government procurement can prioritize products made
by American companies employing American workers, as in the policy laid
out by President Biden during the campaign which promised to shift
critical supply chains back to the U.S. through expanded procurement
purchasing power. Empowering domestic manufacturers also includes
pursuing innovative policies, like the Manufacturing Extension
Partnership, which provides technical assistance to small
manufacturers. Lastly, like all small businesses, American
manufacturers benefit from accessible and affordable access to capital
to grow and expand their businesses, and, if confirmed, I would
prioritize policies that provide much-needed capital to aspiring
entrepreneurs.
Question. As you know, I have a professional insurance background
from my time before Congress as a small business owner serving policy-
holders that are now my constituents. I believe that the International
Capital Standard (ICS) framework as proposed would negatively impact
the U.S. insurance market and its consumers, specifically as it relates
to long-duration products like annuities that fill a critical need for
South Carolinians who depend on these fixed-income products to support
themselves during retirement. The ICS would increase the costs
associated with offering these long-term products and make them less
readily available. Furthermore, the ICS would negatively impact the
ability of U.S. insurers to bring new and more affordable products to
market that fulfill the growing and changing financial needs of
everyday Americans.
The European regulators that have dominated this process thus far
oversee markets with much different conditions than ours here at home.
They lack the State guarantee funds we have to protect consumers in the
event of an insurer default or insolvency. They lack a robust private-
sector retirement product market like the one we have. We should reject
foreign rules of the road when they pose a threat to the prosperity and
well-being of the American consumer.As a member of ``Team USA,'' the
Treasury Department has advocated for the recognition of our
policyholder-centric, State-based U.S. insurance regulatory system by
the International Association of Insurance Supervisors (IAIS). It is
imperative that the U.S. regulatory capital framework is recognized
internationally so that American consumers and insurers are not
adversely affected by the application of an ICS that was clearly not
designed to meet our needs.
Will you be a strong voice as Treasury Secretary to advocate
internationally for the recognition of the U.S. insurance regulatory
capital framework? If so, how specifically?
Related to regulatory capital, the IAIS is in the second year of a
5-year monitoring period that will end in a decision as to whether the
Aggregation Method (AM), which leverages the results of our existing
regulatory capital framework, produces comparable outcomes to the ICS.
The Treasury Department's Federal Insurance Office plans to complete a
study of the impacts that ICS adoption will have on the U.S. consumers,
insurers, and insurance markets. Under your direction, how would FIO
plan to use the study and its results in order to support the
assessment that the AM and ICS produce comparable outcomes?
Answer. It is critical that international regulatory standards are
designed to serve different markets with diverse structures and needs.
When it comes to the U.S., this means respecting our system of market-
based insurance provision and State-based insurance regulation. I am
committed to engaging with international bodies like FSB and IAIS to
achieve regulatory outcomes consistent with the interests of American
market participants and State-based regulators, and I will continue the
Federal Insurance Office's efforts to study the effects of ICS on U.S.
insurance markets. I look forward to studying this issue further and
incorporating this research into my approach to advocating on behalf of
U.S. insurers and State regulators, if confirmed.
Question. It has now been over 11 years since the government bailed
out Fannie Mae and Freddie Mac and placed the institutions into
conservatorship. Under the Trump administration, former Treasury
Secretary Mnuchin and former HUD Secretary Carson, in consultation with
FHFA Director Calabria, developed a plan for administrative and
legislative reform of the Federal housing finance system. While those
reformative actions have been a positive step forward, the GSEs are
still more highly leveraged then they were before the financial crisis
and taxpayers remain on the hook in the event of the next market
downturn. I remain strongly committed to comprehensive reform of our
housing finance system by Congress and look forward to working with
Ranking Member Toomey and Treasury on this issue.
In your view, what role should the government play in providing an
explicit backstop to the GSEs?
If confirmed, how will you work with FHFA to address housing policy
and build on the achievements of this administration in the near-term?
Answer. You raise important questions about the housing finance
system. We need a system that promotes financial stability, protects
consumers and taxpayers, and provides stability and affordability to
households. A core feature of the U.S. housing finance system is the
30-year fixed rate mortgage. I look forward to working across the
administration and with the Congress in support of these goals, if
confirmed. Treasury's support for Fannie Mae and Freddie Mac as set
forth in the Preferred Stock Purchase Agreements has been crucial to
providing stability throughout the conservatorship. I look forward to
carefully reviewing the recent changes reflected in the agreements.
Question. During your tenure at the Federal Reserve, you were
intimately involved in systemic risk regulation and have significant
experience on FSOC. I was especially pleased by your recent exchange
with Senator Toomey during Tuesday's hearing in which you indicated
that you are supportive of FSOC emphasizing an activities-based
approach to systemic risk instead of favoring designating individual
entities as systemically important.
Should FSOC be required to follow a transparent framework for
designating individual entities as systemically important after it
exhausts all other alternatives?
Answer. As you know, the key tenant of the FSOC is to coordinate
among regulators so that significant risks to our economy do not go
unaddressed because they do not fall wholly into the purview of one
regulator's jurisdiction. My view is that the FSOC should address risks
whatever their origin. But our focus must remain on stability in our
financial system and ensuring that we are prepared to mitigate market
disruption in times of stress.
I understand that the legal landscape has shifted somewhat since
the Obama administration, but I believe the FSOC should have the tools
to protect our economy from systemic threats, whether they're presented
by a single firm or risky actions by an array of firms. I understand
this is an important issue, and if I have the honor of being confirmed,
I look forward to working with you as we refine our process for
activities-based approach.
Question. As you may know, last year 3.2 million baby boomers
retired, effectively doubling the amount of retirees from 2019,
according to the Department of Labor.
As America's aging population grows, what is your approach to
ensuring a secure retirement, especially for our most vulnerable
populations?
Answer. Having a strong Social Security program is essential in
order to ensure a secure retirement for all Americans, especially for
our most vulnerable populations. President Biden has called for a
Social Security reform package that would boost benefits for vulnerable
beneficiaries--including widows and widowers, workers with low lifetime
incomes, and older beneficiaries--and provide an across-the-board
increase for all beneficiaries. The plan also improves the long-run
fiscal position of the Social Security Trust Fund by asking wealthy
taxpayers to pay the same rate on their income as other workers. I look
forward to working with Congress to ensure the strength of the Social
Security program for decades to come without burdening middle-class
taxpayers, if confirmed.
In addition, President Biden is committed to reforming the tax
benefits associated with individual retirement saving so that all
Americans are supported in their efforts to save for retirement. I look
forward to studying this issue further, as building wealth for the
middle-class and closing racial wealth gaps is a top imperative for
this administration. Finally, older workers have experienced enormous
job loss in our current recession. Helping older workers who were not
yet ready to retire return to work is an essential part of ensuring
that they will be prepared for retirement.
Question Submitted by Hon. Bill Cassidy
Question. In the Consolidated Appropriations Act of 2020, Pub. L.
116-93, I was able to secure funds for the Financial Crimes Enforcement
Network (FinCEN) to contract with an external vendor to thoroughly
assess the risk that Trade-Based Money Laundering (TBML) and other
forms of illicit finance pose to our national security.\7\
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\7\ See H. Comm. Prt. 38-678, at 635 (2019), available at: https://
www.govinfo.gov/content/pkg/CPRT-116HPRT38678/pdf/CPRT-
116HPRT38678.pdf.
The inclusion of this funding stemmed from the FY2020 Financial
Services and General Government Appropriations Act.\8\ Further detail
on the study is provided here:
---------------------------------------------------------------------------
\8\ S. 2524, 116th Cong. (2019).
Trade-Based Money Laundering.--The United States has robust
anti-money laundering and counter-terrorist financing
regulations in place, yet transnational criminal organizations
and terror organizations continue to fund their illicit
operations. Rather than utilizing the formal financial system,
many of these entities fund their organizations and operations
through the use of trade transactions, known as trade-based
money laundering (TBML). TBML disguises proceeds of crime by
moving value through trade transactions. It is very hard to
identify and investigate, which is why the use of trade to
launder money has become such an attractive option to criminal
---------------------------------------------------------------------------
and terrorist organizations.
The Federal Government achieves an impressive level of success
in identifying, investigating, and prosecuting money laundering
offenses that occur through the formal financial system, yet
TBML has been a challenge for U.S. agencies given the fluid
nature of trade. Given that criminal and terrorist
organizations use trade to finance their operations, it is
necessary for the United States to understand the full breadth
of risks posed by trade-based money laundering and other forms
of illicit finance.
The committee recommendation includes $2,000,000 for FinCEN to
contract with an external vendor that will thoroughly assess
the risk that TBML and other forms of illicit finance pose to
our national security.\9\
---------------------------------------------------------------------------
\9\ S. Rep. No. 116-111, at 19 (2019), available at: https://
www.appropriations.senate.gov/imo/media/doc/
FY2020%20FSGG%20Appropriations%20Act,%20Report%20116-111.pdf.
Combating TBML is a top legislative priority of mine, and I am
eagerly awaiting the results of the aforementioned study. Please
provide me with an update on the status of the study. When do you
anticipate completion of the study? Will you ensure that the study is a
priority and that I receive monthly updates on its status until it is
---------------------------------------------------------------------------
completed?
Answer. I agree that Trade-Based Money Laundering is a serious
concern. If confirmed, I will promptly look into the status of the
report and provide periodic updates to your office.
______
Questions Submitted by Hon. James Lankford
tax
Question. In your appearance before the Senate Finance Committee on
January 19, 2021, you made clear that recovering from the pandemic
would be the first priority for the incoming Biden administration. You
reiterated the need for the U.S. to be competitive and that we must
encourage growth here at home. However, we also know that the incoming
Biden administration has proposed increasing the corporate tax rate,
reversing pieces of the Tax Cuts and Jobs Act, increasing the minimum
wage, and imposing new regulations.
Can you confirm that tax increases will not be imposed while the
economy and American businesses are still recovering from the pandemic?
Answer. If confirmed, my immediate priority would be taking the
steps we need to address the current crisis--getting the pandemic under
control, providing relief to struggling families and businesses, and
supporting the communities that have been hardest hit. The American
Rescue Plan that President Biden released reflects that focus, through
measures that support the public health response and offer economic
support to households. As I said in my testimony, in addition to this
immediate relief, the President also intends to pursue measures that
support a stronger economy over the longer term, and in that context,
there will likely be opportunities to help pay for permanent
investments through measures that close loopholes and ask the wealthy
to pay their fair share.
Question. I am concerned about any tax increases on our small
businesses, especially in the wake of a global pandemic. In response to
questions from my colleagues, you've said the ``focus is on providing
relief, and on helping families and not on raising taxes,'' and that
the administration would push for tax increases ``longer-term.''
When is longer-term and what economic signals will you be watching
for before recommending a tax increase?
Answer. As I noted in my testimony, our first task is to provide
immediate support to the economy by combating the pandemic, providing
relief to families and businesses, and supporting hard-hit communities.
In offering the American Rescue Plan, President Biden proposed an
approach that would focus first on putting the Nation and its economy
on a path out of this crisis. If confirmed, I would look forward to
working with Congress to first pass these measures, and then to pursue
policies that would build a stronger economy over the long term.
charitable giving
Question. As you may know, Congress enacted a non-itemizer
charitable deduction last year, allowing single filers to deduct up to
$300 in cash gifts (up to $600 for joint filers) for charitable
donations that they make. Recent data has shown an uptick in small
gifts since enactment, and charitable giving numbers for 2020 are
expected to be the highest on record. While there are many reasons that
Americans give to charity, the data suggests that the charitable
deduction, now available to those taking the standard deduction, could
have some impact on this increase.
Do you agree that tax incentives can encourage behavior, such as
charitable giving, and that incentives like the charitable deduction
should be available to all taxpayers?
Answer. A robust economic literature has established that tax
incentives can in many cases influence behavior. In the case of
charitable giving, it is likely that a diverse confluence of factors
contributed to observed trends in giving, including those related to
tax incentives and demand for services provided by charities owing to
the pandemic. As Treasury Secretary, I would be committed to studying
the impact of changes in tax law--such as the expansion in tax benefits
for charitable giving--and helping to advance reforms that would enable
the tax code to achieve its desired objectives. Moreover, I am
committed to a fair and progressive tax code and will study the impacts
of making such benefits available to a wider swath of taxpayers.
social security
Question. According to the 2020 Annual Report from the Board of
Trustees of the Federal Old-Age and Survivors Insurance and Federal
Disability Insurance Trust Funds, released on April 22, 2020, on a
combined basis, the Old-Age and Survivors Insurance and Disability
Insurance trust funds will be unable to pay full benefits beginning in
2035. If confirmed, you would be Chairman of the Board of Trustees of
the Social Security and Medicare trust funds and Managing Trustee.
In that role as Chair, do you believe that it is imperative that we
address the trust funds' shortfall sooner than later?
Will you commit to working together to stabilize the long-term
financial trajectory of the trust funds?
Answer. While the last report of the Trustees (issued in April
2020) found no material change in the solvency of Social Security
relative to the prior year, this analysis was done for the pre-COVID
period. COVID has accelerated the depletion of all major trust funds
according to Congressional Budget Office projections released in
September 2020. Strengthening Social Security is essential in order to
ensure a secure retirement, especially for our most vulnerable
populations. President Biden has called for a Social Security reform
package that would boost benefits for vulnerable beneficiaries--
including widows/widowers, workers with low lifetime incomes, and older
beneficiaries--and also provided an across-the-board increase for all
beneficiaries. The plan also improves thelong-run fiscal position of
the Social Security Trust Fund. It does this by asking wealthy
taxpayers with more than $400,000 in wages to pay the same rate on
their income as other workers. On the whole, President Biden's plan
provides older Americans a more secure retirement. I look forward to
working with Congress to shore up the Social Security program for
decades to come without burdening middle-class taxpayers.
occ
Question. Is it your opinion that under the National Bank Act a
Federal charter requires deposit taking intuitions to engage in the
``business of banking''?
Answer. You raise an important question about the legal
interpretation of the National Bank Act by an independent Federal
financial regulator, the Office of the Comptroller of the Currency. I
respect the independence of the Comptroller of the Currency and I
understand the importance of the question you are raising with respect
to the OCC's interpretation of the National Bank Act. If confirmed as
Treasury Secretary, I look forward to discussions with you on these
important topics that have consequential implications for the future of
banking and how we think about what banking is and should be.
sanctions
Question. You mentioned in your testimony that you intend to
conduct a review of all sanctions currently in place upon your
confirmation to this position. If confirmed, you will inherit a broad
portfolio of sanctions against Iran that have been enacted over the
last 4 years.
Do you intend to pursue sanctions relief with Iran, or will you
continue exerting pressure in an effort to prevent Iran from securing
nuclear weapons?
What is your strategy to utilize these sanctions against Tehran for
its nuclear enrichment activities? Do you intend to use the leverage
these sanctions provide as a tool to secure concessions from the
Iranian regime, and will you work with your interagency counterparts to
pressure Iran to permanently suspend all uranium enrichment?
Do you intend to build on these sanctions with additional measures
that target Iran's illicit activities and support for international
terrorism?
Answer. With regard to the JCPOA, the Biden-Harris administration
is committed to ensuring that Iran takes the appropriate steps to
resume compliance with its nuclear commitments under the JCPOA. Iran
will only enjoy sanctions relief if it complies with these nuclear
constraints. Furthermore, if confirmed, I will coordinate with
interagency partners on broader concerns with Iran and ensure that
Treasury continues its important sanctions work to combat Iran's
support for terrorism, abuse of human rights, and other illicit
activities.
international development banks and multilateral financial institutions
Question. The Secretary of the Treasury is the Governor of the
United States at the World Bank, International Monetary Fund, and
Inter-American Development Bank.
Will you use the voice and vote of the United States to oppose
loans to Iran and other state sponsors of terrorism by the IMF and
World Bank?
Answer. The Executive Directors will represent and vote consistent
with the U.S. position and U.S. law at these institutions.
Question. Will you use the voice and vote of the United States to
oppose World Bank loans to countries such as China that have exceeded
the graduation threshold of gross national per capita income?
Answer. The Executive Directors will represent and vote consistent
with the U.S. position and U.S. law at these institutions.
Question. What is your strategy to leverage U.S. influence and to
combat China's malign influence at these international financial
institutions?
Answer. The Biden administration will be willing to make use of the
full array of tools to hold China accountable. Our approach to date has
focused on a unilateral approach--and, as a result, could have been
more effective. Going forward, we should strive to meet this important
challenge by building a united front of U.S. allies and partners,
including through multilateral institutions, to confront China's
abusive behaviors.
Question. China has increased its investments in Latin America as
part of its Belt and Road Initiative. What is your strategy to utilize
U.S. influence and leadership at the Inter-American Development Bank to
provide an alternative to China's predatory lending to our friends in
Latin America?
Answer. Competition with China, in Latin America and elsewhere, is
one of the central challenges of the 21st century--and we also need to
compete with China's economic statecraft. The Biden-Harris
administration will craft an alternative vision that promotes
democratic governance and transparency in our global health and
development work. We will distinguish ourselves from China's approach
to development, including the Belt and Road Initiative, by ensuring
that social and economic safeguards are built into the projects we
support. We will focus on partnerships and on strengthening local
capacity. In addition, we will work with allies and partners to
advocate for the highest environmental, social, and labor standards to
promote development investments that are both beneficial and
sustainable over the long term.
Question. How do you intend to approach Lebanon's request for
emergency assistance from the International Monetary Fund? Will you use
the voice and vote of the United States to deny Beirut's requests
without clear, measurable commitments to public sector reforms and
anti-corruption efforts?
Answer. The Executive Directors will represent and vote consistent
with the U.S. position and U.S. law at these institutions.
Question. Will you oppose Special Drawing Rights (SDR) at the IMF
for developing countries as a COVID relief measure if they will use
some or all of the funds to pay back Belt and Road Initiative loans
from China?
Answer. It is important that the IMF and World Bank are doing what
they can to ensure developing countries have the resources for public
health and economic recovery. We should also do what we can to get the
most vulnerable countries the debt relief they need at this critical
time.
I know that there are a variety of proposals out there. If
confirmed, I will direct my team to analyze the full range of ways that
the international community can strengthen its support for the most
vulnerable countries during this emergency.
The Biden-Harris administration is committed to ensuring that
creditors providing debt relief to poor countries are transparent about
their respective exposures and agree to receive comparable treatment.
The imperative for disclosure and transparency is especially
important for Chinese lenders. We will work together with allies,
borrowing countries and multilateral institutions through the G20's new
``Common Framework'' to ensure comparable creditor treatment as well as
ensure that scarce resources meant to alleviate health and economic
burdens on the world's poor are not simply used to repay China or
private creditors.
______
Questions Submitted by Hon. Steve Daines
Question. Congress recently enacted legislation that would require
small businesses to disclose information to the U.S. government about
their beneficial ownership. The legislation, included in the National
Defense Authorization Act, provides new authority to the Treasury
Department to assist law enforcement with preventing criminal activity.
I worry that this new authority could also unintentionally subject
small businesses to new compliance costs and privacy issues.
Will you commit to working with small businesses, and other
stakeholders, to address their concerns as the requirements for
disclosure of beneficial ownership information go into effect?
Answer. I agree on the need for Federal banking agencies, including
but not limited to FinCEN, to consult with the small business community
when promulgating regulations, including on the promulgation of rules
and guidance to implement the beneficial ownership reporting
requirements. If confirmed, I will ensure that appropriate consultation
occurs.
Question. In Montana, we have tribal and rural populations across
the State that feel neglected by their Federal Government, which tends
to focus on the loudest voices in big cities.
What will you do to make sure that tribal and rural interests in
Montana and across America have their voices heard and reflected in
Treasury's policies?
Answer. If confirmed, I will focus closely on ensuring that
Treasury activities are designed and performed in ways that attend to
rural and tribal communities, including by ensuring that appropriate
communication and resources are made available through our recovery
efforts. Tribal Consultations are conducted through the Office of
Economic Policy and the Treasury Tribal Advisory Committee and advise
the Secretary on matters related to taxation and dispensing technical
assistance to Native American financial institutions officers. As
Secretary, if confirmed, I will ensure that these areas act in concert
and are more impactful. I will also work to remove obstacles and work
with Congress on potential solutions to increase impact efficiency
because I recognize that this crisis has hit tribal communities
particularly hard and we have to ensure that they are getting the
assistance that they need.
Question. China is rapidly innovating in the digital asset and
financial technology space, beginning a pilot of a central bank digital
currency in late 2020.
What are your plans to ensure the United States remains a cutting-
edge leader in global financial services?
What are some concrete steps you plan to take to promote
responsible innovation at the Treasury, specifically at FinCEN, OFAC
and the OCC?
Answer. I believe the United States must be a leader in the digital
asset and financial technology areas. This requires us to develop a
regulatory framework that fosters innovation and promising new
technologies while addressing legitimate concerns about the use of such
technologies to finance terrorism and engage in other malign activities
that threaten U.S. national security and pose risks to the financial
system. I look forward to working with other Federal banking and
securities agencies, the Federal Reserve, and Congress in developing
and implementing such a framework.
Question. Secretary Mnuchin issued proposed rules in December 2020
that expands the reach of the Bank Secrecy Act (BSA) beyond its
traditional scope as applied to digital assets, including, for the
first time, customer counterparty requirements. Secretary Mnuchin did
this without meaningful industry consultation and attempted to hold a
truncated public comment period over the holidays. Will you pledge to
revisit the scope of these rules to ensure adequate public comment and
consistency with the past scope of the BSA?
Answer. I am aware of the rules proposed by FinCEN in December 2020
regarding how certain digital assets are treated under the Bank Secrecy
Act. I agree on the need to ensure adequate consultation with and input
from stakeholders If confirmed, I intend to ensure a full and
substantive review of the proposals, which will include an assessment
of how to ensure proper input from stakeholders.
Question. Certain digital asset characteristics may require
paradigm-shifts in BSA supervision, e.g., more use of digital asset
analytics and other risk-based tools and less reliance on financial
institution filings. This is especially important after the recent data
breach at the Treasury.
Are you open to considering new BSA approaches that may be more
effective in the financial technology space?
Answer. I agree that we need to look at BSA rules and oversight in
light of the evolution of digital assets and other financial
technologies. I understand that FinCEN in September 2020 issued an
advance notice of proposed rulemaking regarding BSA reporting and other
requirements, including the solicitation of comments on whether and how
to use risk-based methodologies to improve anti-money laundering
measures. I think the ANPRM is one means of soliciting and assessing
whether risk-based approaches may be more effective, and I look forward
to engaging with stakeholders to ensure that BSA reporting and
oversight efforts are updated to address emerging risks and new means
of promoting effective compliance.
Question. President Biden has stated he will prioritize financial
incentives for the private sector to develop and implement a range of
technologies to create jobs while reducing carbon emissions. One very
promising, vital technology is Carbon Capture, Utilization and
Sequestration (CCUS). Congress enacted section 45Q of the Internal
Revenue Code on a bipartisan basis, and Treasury just last week
published final regulations to implement those tax credits. These
regulations will provide more legal certainty than had been the case
previously, and it appears these regulations have widespread approval
among the various interests supporting CCUS development. However, there
is more that Congress can do to expand the value of the existing 45Q
credits, the duration of the credits, and the applicability of the
credits in order to induce the kind of expeditious and large scale
implementation of CCUS technology that would appear to underlie the
Biden administration's aspirations.
Can you please advise how you intend to facilitate the expanded use
of the existing 45Q credits and whether the Biden administration will
support efforts to expand the 45Q credit?
Answer. Climate change is an existential threat and one of the
dominant forces shaping the world and our economy. Meeting this
challenge is an urgent need, and I am committed to doing whatever I can
to address this impending crisis. Using the tax code to set incentives
for businesses and individuals to adopt climate-friendly policies is a
critical tool in this battle. President Biden has been supportive of
CCUS and of tax incentives to increase its availability and
affordability. If confirmed, I will support the President in developing
and implementing his climate agenda and using the tools at my disposal
to tackle the challenge of climate change.
______
Questions Submitted by Hon. Todd Young
Question. As a response to the COVID-19 pandemic, last year
Congress passed the two single largest relief packages in history. And
just last week, President Biden proposed a nearly $2-trillion plan for
further relief on top of his $5-trillion Build Back Better agenda.
While I believe the Federal Government's response to the economic
crisis so far was vital, I can't ignore the effect this level of
spending has had on our national debt, which continues to spiral out of
control.
In testimony before the House last summer, you noted that despite
the short-term importance of COVID relief, ``at some point, we will
have to think through how to ensure the long-run sustainability of
Federal finances.''
As the national debt approaches $30 trillion, how important do you
believe it is for us to immediately prioritize the fiscal health of the
U.S. government once our economy has recovered?
In FY 2020, the Federal budget deficit tripled from the previous
fiscal year to over $3.1 trillion, largely in response to the pandemic.
That being said, what realistic steps can be taken to slow or reverse
course on this growing expansion of the Federal budget deficit?
Answer. I believe that the current economic crisis calls for robust
fiscal support, but also believe it is critical that we put our country
on a path towards long-term fiscal sustainability. In this vein, I've
called for more fiscal support since the early days of the pandemic and
continue to do so. Without question, we have to be conscious of our
debt, but it's clear that fiscal stimulus to support the economy and
the working families most affected by the impact of COVID-19 is our
most urgent priority.
That being said, near-term fiscal support is not inconsistent with
long-term fiscal sustainability, and the Biden administration will
formulate policies to address these long-term fiscal concerns. During
the presidential campaign, President Biden called for a series of
offsets to pay for his permanent spending programs, proposed a Social
Security reform package that would extend Social Security's solvency
date, and introduced several health reforms that would bend the growth
in health costs. Combined, these policies--coupled with pro-growth
investments across the budget--will help drive down the debt relative
to the size of the economy.
Question. A number of my colleagues have rightly asked you about
the fiscal emergency that is our national debt. While I understand your
concern to prioritize economic recovery in the immediate term, I was
hoping to further understand your views on the contours of this crisis.
In your response to Senator Thune's question during the hearing
regarding the danger of interest rates creeping back up if U.S. debt
becomes a riskier investment, you noted that developed economies have
experienced an environment of low interest rates since before the 2008
financial crisis. Further, you referred to certain ``structural
shifts'' in those economies that will help to ensure the interest
burden of our debt will remain steady as a percent of GDP.
Could you please expand on what these structural shifts have been
and how they have contributed to the ongoing low interest rates in the
developed world?
Considering the magnitude of the problem if interest rates did go
up, what factors would you look for that may indicate rates are likely
to rise?
Answer. There has been a shift in economic thinking quantifying the
costs of rising debt. This shift in the projected link between debt and
interest rates is driven by a complex and changing set of
circumstances, including widely available capital for lending, enduring
faith in the credit of the United States government, monetary decisions
by the Federal Reserve, and the relative appeal of non-interest bearing
assets. Naturally, these rates could experience a rise for a host of
reasons. As Treasury Secretary, it would be incumbent upon me to
closely monitor these factors and consult with the President and Vice
President on the economic consequences of the trajectory of interest
rates.
Question. The Federal Reserve's emergency lending facilities that
were created by the CARES Act were allowed to expire at the end of
2020, with only a few seeing short-term extensions. Compared to
programs administered by the SBA, these programs saw a slow rollout and
reduced impact.
Do you believe the Federal Reserve should play a central role in
further support for small and medium-sized businesses?
If so, are there any lending facilities in particular that you
would be interested in reviving?
Answer. The country is currently facing an unprecedented pandemic
that has exposed economic inequalities rooted in our system for
generations. I believe that it is imperative that the government does
its part to catalyze an economic recovery that is both equitable and
sustainable, and supports policies that pursue these outcomes. Treasury
will look to quickly and effectively implement the programs and support
passed by Congress at the end of this past year. It will be critical to
provide support to small businesses and individuals that are still
struggling to make it through the crisis. The Federal Reserve will
continue to provide support to the economy through its ongoing programs
and the use of its available tools but as mandated by Congress, the
13(3) facilities funded by the CARES Act will not be available.
Right now, taking too little action poses the greatest risk to the
health of our economy, the livelihoods of the American people who drive
that economy, and future generations. I support, and will help the
administration to pursue actions that provide aid to fully distribute
the vaccine, reopen schools, deliver badly needed aid to State and
local governments, support small business owners--and most importantly
get people back to work. If I'm confirmed, I will look forward to
working with your office and others in Congress to help to ensure that
this additional support particularly gets to the small and mid-sized
businesses that have been hardest hit during the crisis.
Question. On June 5, 2020, the United States Trade Representative
(USTR) announced an investigation into the Digital Services Tax (DST)
being implemented by several countries, expanding on the USTR's
existing investigation into France's DST. Earlier this month, the USTR
announced a suspension of planned retaliatory tariffs against France, a
country that is set to raise almost $500 million from U.S. tech firms.
Absent an international agreement regarding the DST issue, how do
you believe the United States should respond to the unilateral
implementation of such taxes by other nations?
Answer. If confirmed, I will be strongly supportive of and firmly
committed to cooperative multilateral efforts to work to resolve the
DST disputes. If such disputes were not resolvable through
international negotiations, I would work with the United States Trade
Representative to determine our best alternative course of action.
Question. President Biden has made it clear that he would like to
roll back many of the tax reforms achieved through the Tax Cut and Jobs
Act of 2018 and implement a sweeping list of new tax increases.
While the revenue raised by his plan is estimated to pay for just
under half of his proposed spending, analysis from the Tax Foundation
and others indicate the long-term economic effect of this plan will
reduce GDP by around 1.5 percent and eliminate some 500,000 jobs. In
addition, as we discussed during the hearing, President Biden's
proposal to increase the corporate tax rate would incentivize corporate
inversion, further reducing the tax base. I have grave concerns about
President Biden's plans.
What is your agenda for tax policy if confirmed as Treasury
Secretary? What will you prioritize in the first year? What are your
long-term goals?
Answer. Our Nation is facing unprecedented challenges. As we
rebuild, we must pursue policies that promote equitable growth and
restore American competitiveness. We must create an economy that works
for everyone. I am intent on helping this administration build a
sustainable and durable economy that is built on a foundation that
prioritizes equity and inclusivity. President Biden and I believe that
this economic recovery must be one that focuses on individuals and
families and rewards hard work. These values must be reflected in our
tax system as well. We recognize that our tax system cannot be tilted
toward corporate interests and the wealthy, while those that are
sustained predominately by wages bear an unequal burden. Biden will
require corporations and the wealthiest Americans to pay their fair
share.
In the short term, the emergency legislative package the President
proposed last week included additional economic impact payments and
expanded refundable credits. During the campaign, President Biden made
longer-term proposals that included an increase in the corporate tax
rate, reforms to ensure robust taxation of foreign profits, and
requiring that families that make more than $1 million pay the same tax
rate on their investment income that they do on their wages. I look
forward to consulting with and working with Congress in both the short
and long term to enact these proposals into law.
Question. How would you prevent corporations from moving their
profits overseas in order to avoid the increased taxes proposed by
President Biden?
Answer. I appreciate your concern with preventing profit-shifting
and inversion transactions. President Biden has proposed reforms to the
tax on global intangible low-taxed income (GILTI) that would ensure
appropriate taxation of corporations' foreign profits alongside a
higher statutory corporate rate. These changes to the tax on GILTI
would discourage profit shifting abroad. In addition, a global minimum
tax agreed to at the OECD would stop the destructive global race to the
bottom on corporate taxation. A multilateral agreement along these
lines would thus further discourage profit shifting and base erosion.
Question. Bitcoin and other digital and cryptocurrencies are
providing financial transactions around the globe. Like many
technological developments, this offers potential benefits for the U.S.
and our allies.
At the same time, it also presents opportunities for States and
non-state actors looking to circumvent the current financial system and
undermine American interests. For example, the Central Bank of China
just issued its first digital currency.
What do you view as the potential threats and benefits these
innovations and technologies will have on U.S. national security? Do
you think more needs to be done to ensure we have appropriate
safeguards and regulations for digital and cryptocurrencies in place?
Answer. I think it important we consider the benefits of
cryptocurrencies and other digital assets, and the potential they have
to improve the efficiency of the financial system. At the same time, we
know they can be used to finance terrorism, facilitate money
laundering, and support malign activities that threaten U.S. national
security interests and the integrity of the U.S. and international
financial systems. I think we need to look closely at how to encourage
their use for legitimate activities while curtailing their use for
malign and illegal activities. If confirmed, I intend to work closely
with the Federal Reserve Board and the other Federal banking and
securities regulators on how to implement an effective regulatory
framework for these and other fintech innovations.
Question. Over a dozen countries have now issued sovereign bonds
with ultra-long-term maturity rates as long as 100 years. Some analysts
have suggested the issuance of longer-term, lower-interest debt
instruments here in the U.S. might have a positive effect on our
national debt given the low interest rate environment.
While interest rates are low and knowing that our national debt is
an ever-
growing problem, what are your thoughts on these so-called ``century
bonds,'' and is this an issue the Treasury Department might revisit if
you are confirmed?
Answer. President Biden is committed to fiscal responsibility and
making sure that what we do now leaves future generations better off.
The most important thing we can do today to set us on a path to fiscal
sustainability is defeat the pandemic, provide relief to the American
people, and make long-term investments that will grow the economy and
benefit future generations. Today, the demand for existing Treasury
instruments remains robust and is sufficient to meet US financing
needs. Introducing new, ultra-long-term instruments would add new
complexities to this market and deserves further study in light of the
many factors that determine U.S. Treasury market policy.
Question. As a part of the Build Back Better agenda, President
Biden has called for Federal investment in American research and
development in order to counter China's push for technological
dominance in the 21st century. Out of similar concerns, last year I
introduced the Endless Frontier Act with Senator Schumer, which would
increase Federal R&D spending, bring emerging technologies to the
marketplace more quickly, and ensure the Federal Government's efforts
reflected the importance of technology innovation in the decades to
come.
Do you agree that the U.S. is at risk of losing our technological
leadership in the world? If so, what role do you believe the Treasury
Department can play in contributing to a robust foundation for
innovative research in emerging technologies across the United States?
Answer. The U.S. has long been a technological leader on the global
stage. Maintaining this leadership position requires continued
investment in areas like research, technical assistance, education, and
worker training--while also protecting intellectual property developed
within our borders. The Biden administration has enthusiastically
endorsed all of these strategies, and as Treasury Secretary I would be
committed to finding the most effective ways to implement them. Indeed,
the Treasury Department is a focal point on many issues relating to
global competitiveness, ranging from tax policies that encourage
investment in research to implementing policies to ensure free and fair
trade with our competitors. If we embrace the strategies outlined by
President Biden during the campaign, I believe we will maintain our
position as a technological leader.
Question. We were facing a housing affordability crisis well before
the pandemic, but COVID-19 has only exacerbated it. My colleague
Senator Cantwell and I successfully fought for inclusion in the
December 2020 COVID relief package a permanent minimum 4 percent credit
rate for the Low-Income Housing Tax Credit (LIHTC). As you may know,
LIHTC is a model public-private partnership that is responsible for
virtually all of the affordable rental housing in our country built
over the past 3 decades. This provision was part of Senator Cantwell's
and my Affordable Housing Credit Improvement Act legislation, which
would also increase the annual credit allocation, lower the ``50-
percent test'' bond-financing threshold to protect the financial
viability of projects that utilize Private Activity Bonds (PABs), and
institute basis boosts to enhance projects focused on serving extremely
low-income and formerly homeless households and rural and tribal
communities.
Will you support further legislative measures to strengthen and
improve LIHTC?
Answer. I am grateful for your leadership in expanding housing
affordability through the Low-Income Housing Tax Credit and supportive
of your work. The measure that Congress enacted through your leadership
is a critically important initiative that will help to make the LIHTC
more effective and to increase housing affordability across the
country. If I am privileged to be confirmed as Treasury Secretary, I
would be honored to work with you on additional measures to strengthen
and improve the LIHTC.
______
Questions Submitted by Hon. Ben Sasse
Question. Could you please expand on your answer to my question
about how you would approach a review of our technological
interdependence with China and clarify whether or not you believe that
some degree of decoupling from China will be required in the next 4
years? Beyond investing more at home in manufacturing, infrastructure,
and R&D sectors, what are the most effective coercive economic tools at
Treasury's disposal to both encourage decoupling from China and to
punitively address China's most egregious trade practices?
Answer. We need a comprehensive strategy and a more systematic
approach that actually addresses the full range of these issues, rather
than the piecemeal approach of the past few years. We have to play a
better defense, which must include holding China accountable for its
unfair and illegal practices and making sure that American technologies
are not facilitating China's military buildup, human rights abuses, or
other malign activities. The Biden administration will be willing to
make use of the full array of tools to counter China's abusive
practices and hold Beijing accountable. We also have to play a much
better offense, by investing in the sources of our technological
strength.
Question. In my opinion, Huawei is the textbook example of the
supply chain problem the United States and the freedom-loving world
faces with continued technological linkages with the CCP. The CCP's
tech puppet with known security flaws cornered the international market
for critical technology by using stolen IP and massive State subsidies.
Can you use 5G and Huawei as a case study to reflect on how you think
decoupling is unfolding in the 5G space and how it should, or should
not, serve as a model for broader technological decoupling from China
policy action?
Answer. President Biden is firmly committed to making sure that
Chinese companies cannot misappropriate and misuse American
technology--and to ensuring that U.S. technology does not support
China's malign activities. I am not in a position to comment on
specific regulatory actions, but I can assure that we intend to review
these issues carefully and will be committed to protecting U.S.
national security and America's technological edge.
Question. Can you please describe the CCP's military-civil fusion
policy?
Answer. This is a very important matter. If confirmed, I will
closely review the Treasury Department's role in responding to China's
civil-military fusion policy
Question. Do you support Chinese companies having access to U.S.
capital markets when these companies are neither as transparent as they
should be or have known links to the Chinese military?
Answer. We need to address the challenges that China poses to our
national security and economy. I agree that transparency and disclosure
is critical to our capital markets. This is part of the reason why our
capital markets remain the deepest and most liquid in the world. I look
forward to working with regulators and my colleagues within the Biden
administration to ensure that companies listed in the U.S. follow the
law.
Question. Do you support sanctions and prohibitions on American
companies and financial instruments investing in Chinese entities with
close ties to the Chinese military?
Answer. As with many policy actions taken by the previous
administration, the Biden-Harris administration will undertake a
rigorous review to determine the appropriate policy response.
Question. Will you support the continued implementation of the
November 12, 2020 E.O. prohibiting U.S. individual investors from
investing in Chinese military companies and their subsidiaries, as
defined by the DOD and placed on a public list authorized by section
237 of the 1999 NDAA (the so-called Pentagon PLA list)?
Answer. As with many policy actions taken by the previous
administration, the Biden-Harris administration will undertake a
rigorous review to determine the appropriate policy response.
Question. What economic tools are most effective to address the
following: the endemic corruption in the Chinese Communist Party, the
Party's ongoing genocide of Uyghurs in Xinjiang, and the crackdown on
the pro-democracy movement in Hong Kong?
Will you commit to having Treasury lead a campaign of sanctions,
investment restrictions, and whatever coercive economic measures are
appropriate to hold the Chinese Communist Party accountable for
corruption and human rights abuses in China?
What sanctions would you advocate to the President to impose if the
PRC took military action against Taiwan?
Answer. I am committed to working in collaboration with my
colleagues across the Biden administration to hold China accountable
for its violation of international law. The Treasury Department has an
array of tools at its disposal that can and should be effectively
deployed to address these challenges.
Question. I read with interest some recent comments you made at the
Asian Financial forum. I believe you commented in part that the
agreement we will sign this week falls short in part because it leaves
in place substantial tariffs. As a follow-on, I'd like to ask you the
following. If it were the case that both China and the United States
were suddenly to eliminate every bilateral tariff applicable to
transactions in goods and services and we were to eliminate every non-
tariff barrier to trade, would you expect the CCP to abandon:
Its pervasive practices of requiring IP transfers as an explicit or
implicit contract term;
Its systematic and strategic harvesting of digital data from
parties that consume digital services as a condition of commercial
relationships and contracts concluded with Chinese firms;
Its domestic law that eliminates the legal barrier between ``state-
owned'' and ``private'' firms domiciled in mainland China?
Doesn't it follow that a narrow consideration of relative tariff
levels or other barriers to trade that act as taxes on commercial
exchanges cannot fully capture the economics of trade between the U.S.
and China?
Answer. China is America's most serious economic competitor.
Strategic competition with China is a defining feature of the 21st
century. China poses challenges to our security, prosperity, and
values. China is engaged in conduct that hurts American workers, blunts
our technological edge, and threatens our alliances and our influence
in international organizations. Winning the economic competition with
China requires us to make transformative investments at home in
American workers, infrastructure, education, and innovation. We cannot
maintain our edge over the long term unless we run faster at home. As
President Biden has said, we need to be far more effective in
galvanizing allies to join with us to push back on unfair Chinese
practices that threaten U.S. values and interests. And we will be
willing to make use of the full array of tools to counter China's
abusive economic practices and hold Beijing accountable. In all of
these areas, we look forward to working with you and with others in
Congress to take on the China challenge.
Question. Is the PRC a market economy? Has it fulfilled its
commitments under accession protocols to the WTO?
Should the U.S. and other market economies continue to grant the
PRC the benefits of being a market economy in the WTO while they have
not fulfilled their commitment after two decades?
Do you think China provides illegal subsidies or support to its
tech champions?
Answer. The economic dimension of U.S.-China competition is
crucial. And we will take on the challenge of China's abusive, unfair,
and illegal practices. China is undercutting American companies by
dumping products, erecting barriers, and giving illegal subsidies to
corporations. It is stealing intellectual property and engaging in
other practices to give it an unfair technological advantage, including
forced technology transfer.
Question. At present, our Federal debt-to-GDP ratio is higher than
at any time in our Nation's history. The ballooning debt is
attributable partly to the COVID pandemic but also to years of
Washington's ever-increasing spending habits. The cost of servicing
that debt is currently low due to investor wariness and the dollar's
dominance as the world's reserve currency. However, despite what modern
monetary theorists may claim, irresponsible borrowing cannot remain
consequence-free forever.
Once the economy and investor confidence rebounds, what would be
the effect on our ability to service rising debt if the dollar's
dominance as the reserve currency was to weaken and interest rates rose
accordingly?
Answer. There are several reasons that the U.S. dollar is the
world's dominant reserve currency. The United States has the largest
economy, and the deepest and most liquid capital markets. We are
committed to maintaining a sound economy and confidence in our
financial system. The Biden-Harris administration will make investments
in the American people that will accelerate the U.S. economic recovery
and lay the foundation for a strong and equitable U.S. economy in the
years ahead. The world can be certain that the United States will not
seek a weaker currency to gain competitive advantage.
Question. Over the last 20 years the dollar's share of foreign bank
reserves decreased by 10 percent. Hostile nations including Russia and
China are seeking to exacerbate this trend by divesting their dollar
reserves where possible and by developing new forms of international
payment systems to circumvent reliance on the dollar; a proposition
increasingly attractive to countries displeased with the United States'
sanctions regime. These concerns are shared by some of our biggest
financial stakeholders. Goldman Sachs issued a warning last year that
``the dollar is in danger of losing its status as the world's reserve
currency'' while JPMorgan noted that investors are starting to have
``more confidence in the euro as an alternative.''
What is your response to these concerns expressed by our financial
institutions? What can, and should, the United States be doing to
ensure the dominance of the dollar as the global reserve currency, not
merely for the next 10 years, but for the next 50 years?
The dollar currently accounts for about 60 percent of global
currency reserves, down from 70 percent 20 years ago. Is this
measurement of the dollar's percentage share of total global reserves
the best indicator of the dollar's continued dominance as ``the world's
currency''?
If the percentage of global reserves is not the best indicator of
the dollar's financial dominance, what is a better indicator?
If the percentage of global reserves is the best indicator, then
how would our continued ability to support our insatiable spending with
cheaply borrowed money be affected if the dollar's global reserves were
to decline further to 50 percent by 2030? How far can the dollar's
share of global reserves fall before our borrowing ability is severely
impacted?
Answer. There are several reasons that the U.S. dollar is the
world's dominant reserve currency. The United States has the largest
economy, and the deepest and most liquid capital markets. We are
committed to maintaining a sound economy and confidence in our
financial system.
Question. The Department of Treasury released the final regulations
on section 199(a) for cooperatives and their patrons. This has been an
issue over which the cooperative industry stakeholders have been
actively engaged with Congress and the Treasury Department for some
time. Nebraska has over 30 locally owned farmer cooperatives that serve
approximately 60,000 farmers.
I request that your team review the congressional action taken in
the Consolidated Appropriations Act of 2018, review the comments
submitted through the public record and review the final rule
published. I would further ask you to conduct an economic analysis on
the impact of the final rule on farmers and share this analysis with
this committee.
Answer. I appreciate the importance of this issue, and I look
forward to working with Treasury staff to ensure that section 199A has
been implemented fairly.
Question. Do you feel the United States' trade deficit is a useful
metric to evaluate trade with countries? What measurements of bilateral
trade flows will be used in the Biden administration to negotiate,
conclude and present bilateral or multilateral trade agreements to the
Congress for consideration?
Answer. The overall U.S. trade deficit, especially in manufactured
goods, represents a challenge and an opportunity. If confirmed, I will
work with President Biden to restore American manufacturing and the
export strength that comes with it. Bilateral deficits can also be
indicators of unfair trade practices, which I will vigorously oppose if
confirmed. At the same time, bilateral trade deficits must be
understood in the overall context of our trade relationship with each
country, not as a single catch-all metric. If confirmed, I look forward
to working with Congress to pursue a rules-based trading system that
protects Americans from manipulative, anti-competitive practices, puts
workers first, and assures that trade rules reward countries that meet
rather than shirk their climate commitments.
Question. What is your view on the Trump administration's decision
to impose tariffs on China and the Phase One agreement between China
and the United States?
Answer. President Biden has said that he is not going to make any
immediate moves on the current China tariffs but rather engage in a
comprehensive review of all aspects of the Trump administration's trade
policies toward China, including how completely Beijing has lived up to
the terms of the Phase One agreement. As part of his review, he is
going to consult with allies to galvanize collective pressure. We need
an approach that actually brings meaningful pressure on China.
Question. What advice will you provide to President Biden and the
United States Trade Representative on currency manipulation in China,
Vietnam, or other countries?
Answer. The President has committed to opposing efforts by
countries to artificially manipulate their currencies to gain an unfair
trade advantage. I am supportive of that commitment and, if confirmed,
will work in coordination with the administration to oppose any such
efforts.
Question. Taiwan is the United States 11th largest trading partner,
with $76 billion in total goods exchanged during 2018. Taiwan has
expressed a willingness to be a strong economic partner and has taken
steps to removed barriers to agriculture goods. Do you agree that a
trade agreement between the United States and Taiwan should be a
priority and will you work with the United States Trade Representative
to support a trading framework that is beneficial to promoting security
and economic growth between the United States and Taiwan?
Answer. President Biden has been clear that he will not sign any
new free trade agreements before the U.S. makes major investments in
American workers and our infrastructure. Our economic recovery at home
must be our top priority. This does not mean that President Biden will
not pursue a robust trade agenda. If confirmed, I will work with
President Biden to reach out to our allies, rebuild bridges, and pursue
trade agreements that support American prosperity and put workers
first.
Question. The decision to keep schools closed in many areas of the
country has had more to do with politics than local coronavirus spread
and too often science has been ignored in deciding how to best serve
kids. I believe that by keeping schools closed we are kneecapping the
next generation and hindering the ability of our economy to rebound.
What is the economic cost of school closures, and how will this impact
our ability to compete with Europe, Asia and the vast majority of the
world that managed to keep schools open over the last year?
Answer. I believe that the best way to get people back to work and
open schools is to get the virus under control and to provide schools
with the resources necessary to be able to safely open. President Biden
has made a commitment to get the virus sufficiently under control and
to safely reopen schools. No parent wants to choose between their
child's safety and education or between their children's safety and
their ability to work. Over 2.5 million children have tested positive
for COVID and the number of cases among children is continuing to rise.
Women with children have left the labor force in record numbers.
Helping women return to work and children return to school is an
essential part of the economic recovery. If confirmed, I look forward
to working with President Biden to achieve his goal of safely reopening
schools and providing the support necessary to help our Nation's
children make up for their lost learning and recover from the emotional
toll of the pandemic.
Question. Do we have a sense of the percentage of individual
earners making less than $75,000 per year who have had their financial
status change due to the pandemic? Wouldn't the data show that the vast
majority of those whose status has changed would be eligible for
unemployment insurance, which also supports earners who are not
unemployed but have had their hours or incomes reduced?
If yes, what in your view is the benefit of an additional across-
the-board stimulus and how would this help the economy more than
targeted forms of aid?
Isn't it true that the safe opening of businesses would provide
more of a boost to the economy than any stimulus check?
In your hearing, several of my colleagues brought up unemployment
insurance and needed reforms to the system. In your view, does an
individual earning more on unemployment insurance than they earned
through their former employment create a disincentive to work and/or
impact the ability of the economy to rebound?
Answer. President Biden supports increasing the stimulus amount to
mitigate the losses that families have experienced and to help the
economy quickly recover from the damage done by the pandemic. In
addition, I believe that it is critically important that we provide
sufficient aid to unemployed workers, many of whom have experienced a
devastating loss of income with no current opportunity to safely work.
President Biden is committed to tackling the spread of the virus and
quickly vaccinating the population so that businesses can safely open
and Americans can get back to work. Economic data and analysis should
guide our reforms to the unemployment insurance system.
Question. Many believe that the rush to automation and
technological advancement has been accelerated by the pandemic. Do you
agree with this view, and if yes, how do you see this trend affecting
the economic outlook over the next 5 and 10 years? How is this likely
to affect productivity and wages?
Answer. It is too early to know how the pandemic has impacted these
trends, but we must ensure that the recovery is an inclusive one. The
pandemic has accelerated the disparity between the wealthiest Americans
and the most vulnerable, as some have continued to accumulate financial
gains while millions have lost their jobs or their lives. Rising
inequality is a drag on our economic growth: when extreme inequality
leaves so many unable to afford even basic necessities, let alone reach
their full potential, it holds back our entire economy. If confirmed, I
will work with President Biden and with Congress to implement his
recovery plan and to begin investing in American innovation and
production to reinvigorate growth, enhance productivity and shared
prosperity, and raise wages.
Question. Farmers and ranchers in my State that applied and
received a round 1 paycheck protection plan (PPP) loan that has been
subsequently forgiven believe they would be eligible to amend their
application, apply again, and receive an increase under the new PPP
terms. Those farmers that received a round 1 loan but that has not been
forgiven are not eligible for an amended or increased amount. Those
farmers ineligible for an amended application would need to apply
separately for a loan from the round 2 PPP program then would have to
have experienced a 25-percent reduction in revenue from any quarter in
2019 to the corresponding quarter in 2020. This is a challenging set of
criteria to meet.
Please review the applicable guidelines and their implementation
through the Small Business Administration and consider issuing an
informational guidance document to stakeholders and the SBA that offers
more flexibility to complex agriculture businesses. I further request
the Treasury Department share this information with members of this
committee.
Answer. I will look into this issue and will follow up with you and
members of this committee.
Question. In your testimony, you discussed the need to implement
domestic policies--including increased investment in manufacturing,
infrastructure, and research and development--that will allow us to
remain competitive against international players, such as China.
However, in contrast to this, President Biden has called for an
increase in the corporate tax rate, which would push us back to one of
the highest corporate income tax rates in the developed world and thus
hamper our competitiveness on the global stage. Could you please
elaborate on what specific investments you feel will increase our
competitiveness and how those policies balance against an increase in
the corporate income tax rate?
Answer. During the presidential campaign, President Biden proposed
raising the corporate tax rate to 28 percent--which is the midpoint of
the pre-2017 level and the rate imposed after the tax act. At 28
percent, the corporate tax rate would be substantially below the level
that had been in place for decades.
The Biden agenda would couple this tax change with massive
investment that would benefit American businesses of all stripes and
improve our international competitiveness. This includes a sweeping
plan to bolster America's infrastructure, ranging from surface
transportation to broadband to airports and waterways. The plan would
add billions of dollars to worker training and college education, in
addition to apprenticeship programs--all of which would raise the
productivity of American workers. The Biden plan allocates hundreds of
billions in research funds for renewable energy and other economic
priorities, which ultimately make us more competitive on the world
stage. And perhaps most importantly, President Biden has advanced a
plan to quickly distribute vaccines to households while also providing
a lifeline for the American economy. These critical actions will help
businesses across the country, including those that are subject to the
higher 28-percent corporate tax rate.
Question. Beginning in 2022, taxpayers will be required to amortize
their research and development expenses over 5 years (instead of being
allowed to immediately expense them). This change will raise the cost
of conducting research here in the U.S. and leave us less competitive
internationally. In your testimony you highlighted the importance of
investment in domestic R&D, and I feel that this change could run
counter to that goal. Could you please elaborate on the
administration's plans to increase R&D activities in the U.S. and your
views on this upcoming change in treatment of R&D expenses?
Additionally, could you commit to working with Congress to ensure we
have competitive tax policies that support domestic research and
development?
Answer. The tax change you describe was part of the 2017 Tax Cuts
and Jobs Act. The Biden agenda would complement this tax change with
massive investment that would benefit American businesses of all
stripes and improve our international competitiveness. This includes a
sweeping plan to bolster America's infrastructure, ranging from surface
transportation to broadband to airports and waterways. The plan would
add billions of dollars to worker training and college education, in
addition to apprenticeship programs--all of which would raise the
productivity of American workers. The Biden plan allocates hundreds of
billions in research funds for renewable energy and other economic
priorities, which ultimately make us more competitive on the world
stage. And perhaps most importantly, President Biden has advanced a
plan to quickly distribute vaccines to households while also providing
a lifeline for the American economy.
Question. Beginning in 2022, an important provision of the code
that allows for full expensing of short-lived assets will begin to
phase out. This provision has lowered the cost of capital for new
investments and encouraged owners to invest back into their own
businesses here in the U.S. I believe it would be unwise to increase
the cost of capital and disincentive investments here in the U.S.,
especially as the economy is coming out of a global pandemic. As we
look at proposals for immediate economic recovery as well as long-term
economic health, I believe that allowing full expensing could be one of
the best pro-growth tools at our disposal. Could you please elaborate
on any views you have on immediate expensing as well as any other pro-
growth proposals you have to lower the cost of investing here in the
U.S.?
Answer. You raise an important issue about the need for pro-growth
tools as the economy remains in a concerning position. If confirmed, I
am committed to working with Congress to strengthen American
competitiveness and increase domestic investment. As discussed above,
this includes research funds, a sweeping plan to bolster America's
infrastructure, and investments in raising the productivity of American
workers, who are the engine of research and development. Together these
proposals, along with those to eliminate incentives to offshore jobs,
will make us more competitive on the world stage. These and other
proposals will be further developed as part of the budget process, and,
if confirmed, I look forward to continued conversations with you about
the President's legislative agenda.
Question. Even prior to this current pandemic, our economy was
rapidly changing. I share your goal of ensuring that Americans are
prepared and have the skills necessary to compete. Could you please
elaborate on what role you believe tax policy will play in ensuring
Americans are prepared to compete in the workforce of the future?
Further, are there any particular provisions currently in the code that
you believe are working well or could be modified to address these
needs?
Answer. To ensure Americans are able to compete in the 21st
century, we must make higher education and training more affordable and
ensure greater gender and racial equity in the workforce. Tax policy
can be one of several tools to help achieve those goals--for example,
by expanding access to education and affordable child care. Without
adequate child care and paid leave policies, many parents are unable to
complete the training they seek or are unable to take jobs that are
most likely to help advance their careers. Alongside investments in
education and care-giving and measures that provide family, medical and
sick leave, incentives in the tax code can help make our workforce more
competitive. President Biden is also committed to a tax code which
rewards work, not just wealth, and such reforms are essential for
ensuring an economy in which all Americans can share in the returns to
American competitiveness. If confirmed, I would look forward to working
with the committee to identify ways tax policy could support workers
seeking pathways for new skills and upward mobility.
______
Questions Submitted by Hon. Ron Wyden
public trustees
The two public trustees for Medicare and Social Security first
signed a trustees report in 1985. In the 35 reports since 1985, the
public trustees have been vacant for nine reports, or roughly 25
percent.
Will you commit to consult with the Committee on Finance and other
stakeholders before nominating individuals as public trustees?
Answer. Consultation with the Senate's committees of jurisdiction
and other stakeholders is a crucial step in ensuring the right
individuals serve in these important, Senate-confirmed roles. It is
vital that the public have a seat at the table when it comes to
oversight of the Social Security and Medicare Trust Funds and the
crucial benefits they provide to America's middle class.
international cooperation
Question. The United States has long played a crucial role in the
global economy by confronting systemic challenges and working with
like-minded partners to address the tough problems. We know that the
big stuff requires collective action.
At the summits like the G7 and G20, consensus-based statements
reflect the collective views of the United States and our allies on
major issues such as monetary policy, security, and multilateral rules-
based trading. Rather than working with allies to find areas of
agreement and make progress toward addressing our collective
challenges, the Trump administration had a record of unnecessarily
isolating the United States on everything from climate change to trade.
Do you agree with me that it is critical for the United States to
refocus our efforts with our allies in the G7, G20, Asia-Pacific
Economic Cooperation (APEC), and other international fora to find
solutions to the major issues facing the United States and the world?
Answer. The global economy is estimated to have shrunk by more than
4 percent in 2020, the worst contraction since WWII. An estimated 90
million people have fallen into extreme poverty as a result of the
pandemic and its economic impact. Challenges of this magnitude need
collective solutions in an interdependent global economy. I strongly
agree that fora such as the G7, G20, and APEC offer the United States
critical opportunities for leadership and for promoting cooperative
actions so that the responsibility for crisis response and for
addressing longer term structural global problems can be shared with
our allies. In addition, our actions at home to promote an equitable
and inclusive recovery will be more effective and yield greater gains
for our workers and businesses if complemented and amplified by similar
policies and actions by our partners. We must lead and shape decisions
in these fora to promote global adherence to the policies, rules-based
system, and financial burden-sharing that will deliver shared
prosperity, equal opportunity, and economic justice.
cfius
Question. In its dealings with Huawei, ZTE, and others, the Trump
administration has demonstrated a troubling willingness to put national
security issues on the table when seeking economic or trade deals from
our trading partners. If confirmed, as chairman of the Committee on
Foreign Investment in the United States (CFIUS), you will be
responsible for evaluating the national security implications of
specific foreign investments and recommending whether to modify or
reject them. In this capacity, CFIUS is intended to focus solely on
genuine national security concerns raised by a covered transaction, and
not on other national interests.
Do you agree that genuine national security concerns should be the
key factor when determining whether to reject or modify a proposed
investment? What steps will you take to mitigate the risk of other
factors, including geopolitical concerns, trade policy, or other
conflicts, influencing the Secretary's decisions on CFIUS matters?
Answer. I think the CFIUS process plays a critical role in
protecting U.S. national security interests. The CFIUS statute sets
forth the rigorous criteria that the administration is required to use
in assessing certain foreign investments in the United States, and I
pledge that the Treasury Department will follow the statutory criteria
in guiding its decision making in CFIUS reviews.
fincen
Question. The last 4 years have seen an unacceptable level of
politicization at FinCEN. Treasury officials worked hand-in-glove with
Republicans to produce information intended only to smear President
Biden and his family, while at the same time slow-walking or ignoring
valid congressional requests from Democrats. Under Secretary Mnuchin's
leadership, I believe FinCEN was used as an opposition research wing of
the Trump campaign, undermining trust and confidence in the
institution. I consider these abuses serious and unprecedented and plan
to conduct serious oversight of the matter.
Will you commit to cooperating with oversight of this matter, and
working to restore trust and accountability at FinCEN?
Answer. I have the utmost regard for the oversight responsibilities
of Congress. To that end, I commit to cooperating with Congress in its
oversight of FinCEN, and to working with you and your colleagues to
build trust and confidence in FinCEN's important work and mission.
digital services taxes
Question. What will be the Biden administration's approach to
prevent countries from adopting, and prevent collection where a country
has already adopted, digital services taxes that target American
companies? Similarly, what will be the Biden administration's approach
to the ongoing OECD negotiations regarding taxation and digitalization?
Answer. I am aware of the concerns U.S. companies have raised about
digital services taxes. I am committed to a cooperative multilateral
effort to address base erosion and profit shifting through the OECD/G20
process, and to work to resolve the digital taxation dispute in that
context.
______
Questions Submitted by Hon. Maria Cantwell
Question. I share the concerns you expressed during your nomination
hearing that climate change poses an ``existential threat'' and support
your plans to make the Treasury Department a leader in addressing the
risks it poses to our economy.
I understand that you have given several speeches, interviews, and
signed onto plans with other economists, business leaders, and advocacy
groups in support of carbon pricing. Do you continue to believe that an
economy wide price on carbon, applied upstream where fossil fuels enter
the economy, is the most efficient mechanism to decrease carbon
emissions at the necessary scale and speed?
Answer. We cannot solve the climate crisis without effective carbon
pricing. The President supports an enforcement mechanism that requires
polluters to bear the full cost of the carbon pollution they are
emitting. I am deeply engaged on this issue and, if confirmed, will
continually discuss my views and thinking with the President and our
entire team. President Biden has amassed a phenomenal team including
some of the most informed thinkers on this issue. We are all committed
to doing everything we can to solve this crisis.
Question. Do you believe that a predictable, market-based carbon
price will incentivize the markets to reduce carbon emissions faster
and more efficiently than could be achieved through direct regulation
of emissions within specific industry sectors?
Answer. Senator, please see my answer above. Thank you.
Question. Do you believe that concerns over carbon pricing
disproportionally harming lower-income households would be addressed if
the majority of revenue raised was distributed back to consumers
through equal per capita monthly dividends?
Answer. Like you, Senator, it is very important to me that, as we
work to solve the climate crisis and move toward a low-carbon future,
we ensure that American families-- especially the most vulnerable--
share in the economic gains that can come from a clean energy economy.
The President's agenda includes investments in clean energy and
energy efficiency technologies that create good-paying jobs, and clean
electricity standards that will achieve carbon-pollution free
electricity by 2035. If confirmed, I will provide advice to the
President regarding the best way to achieve his agenda, including his
plan to achieve net-zero emissions no later than 2050, based on the
principle that that polluters must bear the full cost of the carbon
pollution they are emitting.
Question. Do you believe the experience gained by the Treasury
Department issuing stimulus checks during the COVID crisis prove that
the Treasury Department would be capable of efficiently and cost-
effectively issuing monthly dividend payments to every American?
Answer. Thanks to hardworking career staff across the IRS, BFS,
Treasury Departmental Offices, and other government agencies,
approximately 160 million American households received their Economic
Impact Payments in an efficient and cost-effective manner. This program
was put in place quickly and was able to meaningfully ease the economic
pain of the recession for millions of families. We have also learned
from this experience. Some Americans have not been able to claim the
benefits to which they are entitled. These individuals are often the
most in need of assistance, and often reside in underbanked and
underserved communities. If confirmed, I would be committed to
improving tax administration in a variety of ways, including the
distribution of stimulus checks, and I would investigate the extent to
which investments in IRS IT systems could improve the taxpayers
experience and improve outreach to vulnerable taxpayers. I look forward
to working with you on these issues.
______
Questions Submitted by Hon. Robert P. Casey, Jr.
Question. The 2017 tax bill eliminated the deduction for
unreimbursed expenses workers incur as part of their job--this means
that police and firefighters were no longer able to deduct unreimbursed
cost of their uniforms or equipment. Truck drivers could no longer
deduct travel expenses and workers in unions could no longer deduct the
cost of their dues.
I have a bill, the Tax Fairness for Workers Act, to reinstate these
deductions and make the deduction for union dues above the line. It is
a measure I hope will be included in the President's budget.
Will you commit to working with my office on this proposal which
supports workers and union jobs?
Answer. One of the guiding principles of President Biden's tax plan
is that the tax code should reward work, not wealth. If confirmed, I
look forward to learning more about this proposal and working with your
office on this issue. I would also look forward to working with you and
other members of Congress to advance proposals to strengthen worker
organizing, collective bargaining, and unions.
Question. Since Congress passed the Achieving a Better Life
Experience Act in December 2014, over 65,000 people with disabilities
have opened ABLE accounts worth more than half a billion dollars. ABLE
accounts allow people with disabilities save for their future while
continuing to be eligible for Federal benefits; savings that can lead
to economic independence. Despite strong participation, ABLE accounts
are only available to individuals with an onset of disability before
age 26, leaving out millions of people. I have bipartisan legislation
to expand the program's eligibility to people with disabilities
acquired prior to 46 years of age.
Two questions: will you, in your role as Treasury Secretary, work
to increase the awareness and use of ABLE Accounts?
Will you commit to working with my office to enact the ABLE Age
Adjustment Act, which will expand the number of people with
disabilities eligible to open an ABLE account?
Answer. The Biden-Harris administration is committed to expanding
opportunities and supporting financial security for people with
disabilities. During the campaign, President Biden committed to working
to pass the ABLE Age Adjustment Act, and, if confirmed, I look forward
to working with you to increase the awareness and use of ABLE Accounts.
______
Questions Submitted by Hon. Sheldon Whitehouse
Question. The IMF estimates that annual fossil fuel subsidies in
this country alone total more than $600 billion annually. Would you
agree that until we eliminate or at least greatly reduce this massive
negative externality, it is going to be difficult to transition to a
low-carbon economy?
Answer. Both the President and I believe we can turn the threat of
climate change into an opportunity to boost our economy and
reinvigorate old and new industries to create high-paying middle-class
jobs across America.
President Biden has a comprehensive plan to invest in the United
States, create a clean energy economy, and address the crisis of
climate change. I am focused on the President's agenda, including
investments in the clean energy economy, to address climate change and
create good paying jobs and energy efficiency technologies, as well as
clean electricity standards that will achieve carbon-pollution-free
electricity by 2035.
I will provide advice to the President regarding the best way to
achieve this agenda, including advice regarding his plan to achieve
net-zero emissions no later than 2050, based on the principle that
polluters must bear the full cost of the carbon pollution they are
emitting.
As we do this, we must ensure that American families--especially
the more vulnerable--aren't unduly burdened by increased energy prices
as we move toward a low-carbon future.
Question. Do you believe putting a price on carbon is one of, if
not the most effective policies we can pursue in order to reduce
emissions consistent with scientific targets?
Answer. I am fully supportive of effective carbon pricing, and I
know that the President is as well. We cannot solve the climate crisis
without effective carbon pricing. The President does support an
enforcement mechanism that requires polluters to bear the full cost of
the carbon pollution they are emitting. I am engaged on this issue and
will continue to discuss my views and thinking with the President and
our entire team. President Biden's team includes some of the most
informed thinkers on this issue. We are all committed to doing
everything we can to solve this crisis.
Question. If confirmed, you will serve as chair of the Financial
Stability Oversight Council (FSOC). Would it be prudent for FSOC to
conduct a system-wide assessment of climate-related financial risks,
including those related to coastal property values and fossil fuel
assets? Would it be helpful to create a climate-related financial risk
subcommittee within FSOC to focus on these issues?
Answer. As you know, the Financial Stability Oversight Council
(FSOC) was created by Congress under the Dodd-Frank Wall Street Reform
and Consumer Protection Act (DFA) following the Financial Crisis that
brought the U.S. economy and financial system to the brink of collapse.
It is the responsibility of the Treasury Secretary to strengthen
the U.S. economy, foster widespread economic prosperity, and promote an
economic agenda that leads to long-run economic growth. Meeting that
challenge undoubtedly requires focus on the current economy, but also
requires a commitment to the building blocks of enduring prosperity.
The Treasury Department has a wide range of responsibilities to
meet these commitments, on its own and through the FSOC, including
monitoring and overseeing various financial markets, administering our
Nation's fiscal policies, engaging in international economic
negotiations, and ensuring the stability of a wide range of factors
related to the health of the U.S. economy, including threats from
climate change. If confirmed, I look forward to working with you on
this important issue.
Question. There have been numerous studies and reports documenting
climate-
related economic risk. Much of the research and thought leadership in
this space is taking place in Europe. Will you commit to developing and
promoting research into climate-related financial and economic risks at
the Treasury's Office of Financial Research?
Answer. Congress created the Office of Financial Research (OFR) in
the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
to support the Financial Stability Oversight Council in its mission,
among others, to monitor the financial system for risks that could
threaten financial stability. Assessing and monitoring climate-related
financial and economic risk are important issues. If confirmed, I look
forward to working with you with regard to OFR's research into climate-
related financial and economic risk.
______
Question Submitted by Hon. Maggie Hassan
Question. Members of this committee from both parties support
protecting the U.S. tax base during the OECD Base Erosion and Profit
Shifting discussions. Could you please share your plans to analyze the
economic effects of OECD proposals on different U.S. industries and
your plans to keep the Finance Committee updated throughout the OECD
process?
Answer. If confirmed, I will certainly keep the Senate Finance
Committee appropriately updated on the OECD/G20 negotiations. Any
treaty arrangements would of course require the advice and consent of
the Senate. An analysis of the economic effects of the OECD proposals
is absolutely appropriate and I will look forward to future
conversations with the members of the Senate Finance Committee during
which we can share our consideration of these different effects.
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