[Senate Hearing 117-664]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 117-664


CARES ACT OVERSIGHT OF THE TREASURY AND FEDERAL RESERVE: SUPPORTING AN 
                      EQUITABLE PANDEMIC RECOVERY

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

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                                   ON

EXAMINING TESTIMONY FROM THE SECRETARY OF THE TREASURY AND THE CHAIRMAN 
  OF THE FEDERAL RESERVE, AS REQUIRED UNDER TITLE IV OF THE CARES ACT
                               __________

                           SEPTEMBER 28, 2021
                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs
                                

                  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                                
                                

                Available at: https: //www.govinfo.gov /


                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
52-157 PDF                 WASHINGTON : 2023


            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                     SHERROD BROWN, Ohio, Chairman

JACK REED, Rhode Island              PATRICK J. TOOMEY, Pennsylvania
ROBERT MENENDEZ, New Jersey          RICHARD C. SHELBY, Alabama
JON TESTER, Montana                  MIKE CRAPO, Idaho
MARK R. WARNER, Virginia             TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts      MIKE ROUNDS, South Dakota
CHRIS VAN HOLLEN, Maryland           THOM TILLIS, North Carolina
CATHERINE CORTEZ MASTO, Nevada       JOHN KENNEDY, Louisiana
TINA SMITH, Minnesota                BILL HAGERTY, Tennessee
KYRSTEN SINEMA, Arizona              CYNTHIA LUMMIS, Wyoming
JON OSSOFF, Georgia                  JERRY MORAN, Kansas
RAPHAEL WARNOCK, Georgia             KEVIN CRAMER, North Dakota
                                     STEVE DAINES, Montana

                     Laura Swanson, Staff Director

                 Brad Grantz, Republican Staff Director

                       Elisha Tuku, Chief Counsel

                 Dan Sullivan, Republican Chief Counsel

                     Mark Uyeda, Republican Detail

                      Cameron Ricker, Chief Clerk

                      Shelvin Simmons, IT Director

                    Charles J. Moffat, Hearing Clerk

                                  (ii)


                            C O N T E N T S

                              ----------                              

                      TUESDAY, SEPTEMBER 28, 2021

                                                                   Page

Opening statement of Chairman Brown..............................     1
        Prepared statement.......................................    45

Opening statements, comments, or prepared statements of:
    Senator Toomey...............................................     4
        Prepared statement.......................................    46

                               WITNESSES

Janet L. Yellen, Secretary, Department of the Treasury...........     6
    Prepared statement...........................................    47
    Responses to written questions of:
        Chairman Brown...........................................    51
        Senator Toomey...........................................    52
        Senator Menendez.........................................    60
        Senator Warren...........................................    62
        Senator Sinema...........................................    71
        Senator Crapo............................................    73
        Senator Kennedy..........................................    77
Jerome H. Powell, Chairman, Board of Governors of the Federal 
  Reserve System.................................................     7
    Prepared statement...........................................    48
    Responses to written questions of:
        Chairman Brown...........................................    79
        Senator Toomey...........................................    82

                                 (iii)

 
CARES ACT OVERSIGHT OF THE TREASURY AND FEDERAL RESERVE: SUPPORTING AN 
                      EQUITABLE PANDEMIC RECOVERY

                              ----------                              


                      TUESDAY, SEPTEMBER 28, 2021

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10 a.m., via Webex and in room 216, 
Hart Senate Office Building, Hon. Sherrod Brown, Chairman of 
the Committee, presiding.

          OPENING STATEMENT OF CHAIRMAN SHERROD BROWN

    Chairman Brown. The Senate Committee on Banking, Housing, 
and Urban Affairs will come to order. This hearing is in a 
hybrid format. Our witnesses are in person. Members have the 
option to appear either in person or virtually.
    For those joining remotely a few reminders. Once you start 
speaking there will be a slight delay before you are displayed 
on the screen. To minimize background noise please click the 
Mute button until it is your turn to speak or ask questions.
    You should all have one box on our screens labeled 
``Clock'' that will show how much time is remaining. For those 
joining virtually you will hear a bell ring at 30 seconds and 
then when time is expired. If there is a technology issue we, 
of course, will move on to the next Senator.
    Our speaking order will be as usual, that is by seniority 
of the Members who have checked in before the gavel came down 
at 10, either in person or virtually, and then by seniority 
Members arriving later, alternating always, on this Committee, 
between Democrats and Republicans.
    Welcome to our witnesses. We all remember the dark days of 
2008, and the painful years that followed. Secretary Yellen and 
Chair Powell, you both helped us deal with the aftermath in 
your roles at the Federal Reserve.
    When the biggest banks were in trouble, Washington, as 
always, sprang to action. ``We have no choice. We cannot allow 
these banks to fail,'' we heard over and over and over again. 
But millions of families were allowed to fail. American workers 
bailed out the financial industry, but their livelihoods were 
not treated with the same urgency. Recovering their jobs, let 
alone empowering them to demand better ones, would have to wait 
for years.
    By the end of 2013, the stock market had its best year in 
almost two decades. Eleven million people, though, were still 
out of a job.
    The question before us today is the same question we have 
been grappling with for a year: Are we going to learn from our 
past mistakes?
    Americans do not have to settle for another Wall Street-
first recovery. We have the tools to do things differently. The 
only question is whether we are going to use them, for as long 
as it takes.
    So far, we have worked to learn the lessons of the past and 
do better by American workers. That is what the CARES Act and 
the American Rescue Plan were all about. We put money in 
families' pockets, stimulus checks, Earned Income, Child Tax 
Credit, money spent always in local supermarkets and shopping 
centers on food and back-to-school supplies.
    Treasury helped State and local governments get emergency 
rental assistance to 420,000 families in August alone and $950 
million to help homeowners who are behind on their mortgages. 
The result has been record job growth. Job creation--I am going 
to say this twice--job creation in the first 7 months of the 
Biden administration, Madam Secretary, is nearly double any 
previous first-year President. Job creation in the first 7 
months of the Biden administration is nearly double any 
previous first-year President.
    It is not just the jobs themselves. It is the quality of 
these jobs. For the first time in decades, workers are starting 
to gain a little power in our economy, power to negotiate 
higher wages, power to fight for better working conditions, 
more control over their schedules and their futures. Progress, 
to be sure, but a long way to go.
    We are down 5.6 million jobs since before the pandemic. 
Corporations too often use the pandemic as an excuse to ``cut 
costs.'' We know that by ``costs'' they always mean jobs or 
wages or retirement contributions. They rarely mean CEO bonuses 
or, God knows, they do not mean stock buybacks.
    Instead of hiring back loyal workers as business expands, 
companies outsource or contract out work, often paying people 
more or less half as much.
    The Fed, for its part, has taken extraordinary action over 
the past year-and-a-half to stabilize our economy. But many of 
the Fed's efforts, Mr. Chairman, helped stabilize markets much 
more than they stabilized working families. Those actions have 
been a bonanza for Wall Street. Big corporate mergers are at an 
all-time high. The biggest banks have had one of their most 
profitable years ever, and we are, not to be reminded of it, 
all during a global pandemic.
    The same companies that benefited from the Fed's actions 
want to ``restructure'' the workforce. They complain about a 
``skills gap'' while refusing to cut into their stock buyback 
budgets to expand training programs or offer truly high wages.
    This ought to be a reminder that we are still in the very 
early stages of recovery, and the same old Wall Street system 
is not good enough. Chair Powell, you have talked about your 
commitment to competitive labor markets, yet you have said that 
the test for full employment is, your words, ``all but met.''
    Tell that to the working mother who was forced to quit her 
job because she could not afford childcare, or even find 
childcare. Tell that to the server who worked for decades at a 
major hotel chain, only to lose her job during the pandemic, 
and then be offered the same job by a contractor paying a 
fraction of the wages with no benefits. Tell that to a worker 
in my hometown in Mansfield, Ohio, who, for decades, watched 
companies close down factories and move good-paying, often 
union jobs abroad, only to have them replaced, when they were 
replaced at all, by low-wage, non-union jobs at a big box 
store.
    Now is not the time to declare victory. Americans have 
watched this story unfold over and over again. Crash. 
Recession. Rapid Wall Street recovery. Years of slow, slow, 
painful, uneven job recovery, always within the same corporate 
system that treats quarterly stock prices as the only real 
measurement that matters, and treats workers as a cost to be 
minimized.
    How many times are we going to continue to do this? How 
many times are Americans going to have to watch history repeat 
itself?
    We cannot declare the recovery complete until all workers 
can find a job that pays them fair wages and treats them with 
dignity. The Fed cannot pull back every time workers gain a 
tiny bit of power to demand higher wages. The Fed cannot 
continue to rubberstamp mergers and allow corporate 
consolidation to go unchecked, and then wonder why job growth 
is not reaching whole regions of the country.
    Full employment means a truly competitive labor market, one 
where everyone can get a job, and employers compete for 
workers. We have not seen that kind of labor market in decades, 
but we can. It is our job, it is this Committee's job, it is 
Treasury's job, it is the Fed's job.
    Also, I also need to say a quick word about the games 
Republicans are playing with people's livelihoods. The debt 
limit--we all know this--the debt limit is not about future 
spending. It is about meeting obligations we have already made. 
It is the bipartisan, overwhelmingly popular CARES Act, the 
reason we are holding this hearing today.
    Every single one of my Republican colleagues who served on 
this Committee last year, every one of them voted for the CARES 
Act. Every one of them, again, who served on this Committee 
before, voted for the $2 trillion tax cut for their wealthy 
friends. They did not seem to have a problem with the debt 
limit then, but now they do not want to pay the bill?
    The partisan game is pretty transparent. We need to pay our 
bills on time. We have always done it. Treasury Secretaries, 
past and present, and across the political spectrum, are 
sounding the alarm about the economic devastation that they are 
threatening.
    China watches all of this with glee, all too eager to see 
the dollar tarnished as the world's reserve currency, and we 
play right into that. We cannot play politics with the full 
faith and credit of the United States.
    Last comment. Chair Powell, I understand you have initiated 
a review of the ethics and financial disclosure rules at the 
Fed after we learned of stock trades that at least two Federal 
Reserve Bank presidents made during the pandemic. I have a bill 
with Senator Merkley and Senator Warnock, also a Member of this 
Committee, the Ban Conflicted Trading Act, that would ban 
members of Congress from buying or selling any individual 
stocks. The same should apply to Fed officials. I am 
introducing a bill to do that. Your job, the Fed's job, members 
of Congress' job is to serve the public, not their stock 
portfolios.
    Ranking Member Toomey.

         OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY

    Senator Toomey. Thank you, Mr. Chairman. Secretary Yellen 
and Chair Powell, welcome.
    Last year, Congress, on bipartisan basis, forcefully 
responded to the threat of economic collapse caused by the 
pandemic and that resulting lockdowns. That response, together 
with the Fed's aggressive monetary policy support and the end 
to lockdowns, enabled the U.S. economy to fully recover. Our 
economy today is not only larger than it was before the 
pandemic, but we are now running above prepandemic GDP 
forecasts for this year.
    Unfortunately, our Democratic colleagues are trying to ram 
through a reckless tax and spending bill that will threaten 
this economic growth. Their policies include massively 
expanding the welfare State, raising taxes on U.S. employers, 
and diminishing investment by raising taxes on capital gains.
    Let's be clear about the purpose behind these proposals. It 
is not to spur economic recovery--the economy is strong. Nor is 
it an antipoverty plan--the programs are not limited to the 
poor. It is to redefine the relationship between the Federal 
Government and the middle class. It is about socializing many 
ordinary responsibilities that families have always assumed.
    Instead of raising taxes to partially fund economically 
harmful programs, we should be working to return to the best 
economy of my lifetime, which we experienced just before COVID 
hit. We had the lowest unemployment rate in 50 years, including 
record low unemployment rates for Black and Hispanic Americans. 
Real median household income at an all-time high, and strong 
wage growth, above the rate of inflation, was particularly for 
lowest income earners.
    This was all achieved by reforming the tax code, lowering 
tax rates, and lightening regulatory burdens, and now the 
Democrats colleagues are proposing to reverse all of these 
successful policies.
    The Fed has clear and narrow mandates, to conduct monetary 
policy that promotes stable prices, maximum employment, and 
moderate long-term interest rates, and also to conduct banking 
supervision and maintain an efficient payment system. It is 
therefore concerning to see the Fed, especially its regional 
banks, wade into politically charged areas like global warming 
and racial justice. These efforts undermine the Fed's 
independence and distract from the Fed's actual 
responsibilities, like controlling inflation.
    Speaking of which, the Fed's excessively accommodative 
monetary policy, emergency policies long after the emergency 
has passed, have produced the inflation that I feared and the 
Fed did not expect. We are now seeing rates of inflation 
considerably higher than the Fed projected, and it is hurting 
businesses, consumers, and workers.
    And you do not have to just take my word for it. Here is 
what the CFO one of the biggest retailers in America, Costco, 
said last week, and I quote, ``Inflationary factors abound: 
higher labor costs, higher freight costs, higher transportation 
demand, along with container shortages and port delays, 
increased demand in certain product categories, various 
shortages of everything from computer chips to oils and 
chemicals,'' end quote.
    To address this threat, I urge the Fed to accelerate the 
process of normalizing monetary policy so that it does not fall 
further behind the curve in responding to inflation than it 
already has.
    I am also concerned Treasury may be headed down a similar 
path of exceeding its authority. Too much fanfare, the Biden 
administration has announced an international tax agreement 
that consists of two pillars.
    Pillar one is an unprecedented change that would allow 
foreign countries to tax American companies based on their 
sales overseas. It is a tax revenue transfer from us to them. 
Unsurprisingly, this is the priority for other countries who 
have long sought this tax revenue.
    Pillar two is a global minimum tax on multinationals' 
foreign income. This is the Biden administration's attempt to 
justify burdensome tax increases on U.S. companies, and 
unsurprisingly, this is the Administration's priority and is 
part of its efforts to dismantle our successful 2017 tax 
reforms.
    Now the Administration is imploring other countries to 
implement a global minimum tax that will harm their own workers 
and businesses, and by doing so, the Administration has 
implicitly acknowledged that their proposed multinational tax 
increases will make U.S. workers and businesses less 
competitive, if other countries either do not implement a 
global minimum tax of their own, or if they implement a 
significantly lower rate than what the Administration is 
proposing.
    But there is a real possibility that other countries will 
not implement a global minimum tax for at least two reasons. 
First, the EU can only implement this global minimum tax by 
unanimous consent, which they do not have, which they do not 
have. And second, these countries have only reluctantly agreed 
to Pillar Two in return for Pillar One, which is the transfer 
of U.S. tax revenue from us to them. But implementing Pillar 
One in the U.S. requires a treaty ratified by two-thirds of the 
U.S. Senate. I think that is unlikely to happen.
    So the Administration has implicitly admitted that their 
global tax hike will be a big problem for the United States if 
the rest of the world does not follow suit. But there is a very 
substantial risk that the rest of the world will not follow 
suit. And yet Democrats are charging ahead with this 
destructive tax increase in their reconciliation bill that 
apparently they are going to try to pass any day now.
    So lots to talk about this morning. Secretary Yellen and 
Chairman Powell, I look forward to discussing these and other 
issues with you today.
    Chairman Brown. Thank you, Ranking Member Toomey.
    I will introduce today's witnesses. Today we hear from 
Treasury Secretary Janet Yellen and Federal Reserve Chair 
Jerome Powell, and their agencies' continued actions to support 
an equitable pandemic recovery and make sure that our economy 
works for all Americans.
    Secretary Yellen and Chair Powell, thank you for your 
public service. Thank you for your testimony today.
    Madam Secretary, please proceed.

  STATEMENT OF JANET L. YELLEN, SECRETARY, DEPARTMENT OF THE 
                            TREASURY

    Secretary Yellen. Chairman Brown, Ranking Member Toomey, 
Members of the Committee, it is a pleasure to testify today.
    We are in the midst of a fragile but rapid recovery from 
the pandemic-induced recession. While our economy continues to 
expand and recapture a substantial share of the jobs lost 
during 2020, significant challenges from the Delta variant 
continue to suppress the speed of the recovery and present 
substantial barriers to a vibrant economy. Still, I remain 
optimistic about the medium-term trajectory of our economy, and 
I expect we will return to full employment next year.
    A rebound like this was never a foregone conclusion. In 
fact, the American recovery is stronger than those of other 
wealthy Nations. One key factor for our overperformance is the 
policy choices that Congress has made over the past 18 months. 
Those choices include the passage of the CARES Act, the 
Consolidated Appropriations Act, and the American Rescue Plan.
    Treasury, as you know, was tasked with administering a 
large portion of the relief dollars in those bills, and when we 
last met our Department was busy standing up programs to help 
individual families, State governments, and organizations of 
every size in between. While we still have much more work to 
do, we have made significant progress, and I wanted to give you 
an update.
    Let's start with families. In July, our Department started 
sending the monthly expanded Child Tax Credit payments to the 
families of nearly 60 million children across the country. To 
date, $46 billion dollars in payments have been made, and we 
are already seeing the impact. Analysis by the Census Bureau 
found that after the first payments in July, food insecurity 
among families with children dropped 24 percent.
    As for State, local, tribal, and territorial governments, 
COVID-19 decimated their budgets. There were mass layoffs, and 
to end the health and economic emergencies, we knew that 
communities would need funding to hire educators to bring kids 
back to school, for example, or frontline workers to administer 
the vaccine. The American Rescue Plan included $350 billion to 
that end, and those dollars are indeed helping the machinery of 
local governments get up and running. States and localities can 
rely on relief money that is available instead of resorting to 
painful budget cuts.
    Congress rightly designed the State and local program with 
flexibility in mind. I think many of us knew the recovery could 
run up against some unforeseen challenges, and we wanted 
communities to be able to devote resources where and when they 
saw fit. I want to note that this flexibility is paying off 
now, especially with the spread of the Delta variant. Harris 
County, Texas, for instance, has used this funding to boost its 
immunization rate, offering $100 to each person who gets their 
first vaccine dose.
    For the relief dollars not yet out the door, Treasury is 
doing everything it can to expedite their delivery. The 
Emergency Rental Assistance Program is one example. Prior to 
the pandemic, there was essentially no national infrastructure 
to get money from Government coffers to renters and landlords. 
Building that infrastructure has been a massive undertaking for 
States, localities, and tribes.
    The program is scaling up quickly, with 1.4 million 
payments made to help struggling renters keep a roof over their 
heads. Still, too much of the money remains bottlenecked at the 
State and local levels. That is why our Treasury team has 
worked to eliminate every piece of red tape possible in order 
to ensure more payments can get to renters and landlords, but 
States and localities must also work to remove barriers that 
can speed up distribution of rental assistance funds.
    I will end my remarks there except to say this. It is 
imperative that Congress address the debt limit. If not, our 
current estimate is the Treasury will likely exhaust its 
extraordinary measures by October 18th. At that point, we 
expect Treasury would be left with very limited resources that 
would be depleted quickly. America would default for the first 
time in history. The full faith and credit of the United States 
would be impaired, and our country would likely face a 
financial crisis and economic recession as a result.
    We must address this issue to honor commitments made by 
this and prior Congresses, including those made to address the 
health and economic impact of the pandemic. It is necessary to 
avert a catastrophic event for our economy.
    Senators, the debt ceiling has been raised or suspended 78 
times since 1960, almost always on a bipartisan basis. My hope 
is that we can work together to do so again, and to build a 
stronger American economy for future generations.
    Thank you, and I am pleased to take your questions.
    Chairman Brown. Thank you, Madam Secretary.
    Chair Powell, you are recognized. Thank you for joining us.

STATEMENT OF JEROME H. POWELL, CHAIRMAN, BOARD OF GOVERNORS OF 
                   THE FEDERAL RESERVE SYSTEM

    Mr. Powell. Thank you. Chairman Brown, Ranking Member 
Toomey, and other Members of the Committee, thank you for the 
opportunity to discuss the measures we have taken to address 
the hardship wrought by the pandemic.
    Since we last met, the economy has continued to strengthen. 
Real GDP rose at a robust pace in the first half of the year, 
and growth is widely expected to continue at a strong pace in 
the second half. The sectors most adversely affected by the 
pandemic have improved in recent months, but the rise in COVID-
19 cases has slowed their recovery. Household spending rose at 
an especially rapid pace over the first half of the year but 
flattened out in July and August as spending softened in COVID-
sensitive sectors. Additionally, in some industries, near-term 
supply constraints are restraining activity.
    As with overall economic activity, conditions in the labor 
market have continued to improve. Demand for labor is very 
strong, and job gains averaged 750,000 per month over the past 
3 months. In August, however, gains slowed markedly, with the 
slowdown concentrated in sectors most sensitive to the 
pandemic. The unemployment rate was 5.2 percent in August, and 
this figure understates the shortfall in employment, 
particularly as participation in the labor market has not moved 
up from the low rates that have prevailed for most of the past 
year.
    Factors related to the pandemic appear to be weighing on 
employment growth. These factors should diminish with progress 
on containing the virus.
    The downturn has not fallen equally on all Americans, and 
those least able to shoulder the burden have been the hardest 
hit. In particular, despite progress, joblessness continues to 
fall disproportionately on lower-wage workers in the service 
sector and on African Americans and Hispanics.
    Inflation is elevated and will likely remain so in coming 
months before moderating. As the economy continues to reopen, 
we are seeing upward pressure on prices, particularly due to 
supply bottlenecks in some sectors. These effects have been 
larger and longer lasting than anticipated but they will abate, 
and as they do, inflation is expected to drop back toward our 
longer-run 2 percent goal.
    The process of reopening the economy is unprecedented. As 
it continues, bottlenecks, hiring difficulties, and other 
constraints could again prove to be greater and more enduring 
than anticipated, posing upside risks to inflation. If 
sustained higher inflation were to become a serious concern, we 
would certainly respond and use our tools to ensure levels that 
are consistent with our goal.
    The path of the economy continues to depend on the course 
of the virus, and risks to the outlook remain. The Delta 
variant has led to a surge in cases, causing human suffering 
and slowing the recovery. Continued progress on vaccinations 
would support a return to more normal economic conditions.
    The Fed's policy actions are guided by our dual mandate to 
promote maximum employment and stable prices, along with our 
responsibilities to promote the stability of the financial 
system. In response to the crisis, we took broad and forceful 
measures to support the flow of credit and to promote the 
stability of the financial system. Our actions, taken together, 
helped unlock more than $2 trillion of funding to support 
businesses large and small, nonprofits, and State and local 
governments between April and December of 2020. This, helped 
keep organizations from shuttering and put employers in a 
better position to keep workers on and to hire them back as the 
recovery continues.
    These programs have served as a backstop to key credit 
markets and helped to restore the flow of credit from private 
lenders. We have deployed them to an unprecedented extent. Our 
emergency lending tools require the approval of the Treasury 
and are available only in unusual and exigent circumstances, 
such as those brought on by the crisis.
    Many of these programs were supported by CARES Act funding. 
Those facilities provided essential support through a very 
difficult year and are now closed.
    The Fed completed its sales of assets from the Secondary 
Market Corporate Credit Fund on August 31. We were able to wind 
down the facility rapidly and efficiently, with no adverse 
impact on credit conditions. We also recently closed the PPPLF 
to new lending, are managing the paydown of assets in our other 
CARES facilities as they wind down. We continue to analyze 
their efficacy and to review the lessons learned.
    The Fed's actions affect communities, families, and 
businesses across the country. Everything we do is in service 
of our public mission. We will do all we can to support the 
economy for as long as it takes. Thank you.
    Mr. Chair, if I may just offer one thing. What I said last 
week was that we had all but met the test for tapering. I made 
it clear that we are, and we are, in my view, a long way from 
meeting the test for maximum employment. Thank you.
    Chairman Brown. Thank you, Mr. Chairman.
    Madam Secretary, last night my Republican colleagues 
blocked efforts to provide critical disaster relief to millions 
of Americans to keep the Government open and to raise the debt 
ceilings so that the Government can pay our bills on time, 
something we have always done bipartisanly, including right 
after the Republicans passed their deficit-busting corporate 
tax giveaway via reconciliation.
    Be brief, if you would. What would be the impact on our 
economy if they block call efforts to raise the debt ceiling?
    Secretary Yellen. Chairman Brown, failing to increase the 
debt limit would have catastrophic economic consequences. It 
would cause the Government to default on its obligations, which 
is an utterly unprecedented event in American history. It would 
be disastrous for the American economy, for global financial 
markets, and for millions of families and workers whose 
financial security would be jeopardized by delayed payments.
    For example, nearly 50 million seniors would, or could stop 
receiving Social Security payments or see them delayed. Our 
troops would not know when their paychecks would come. Thirty 
million families who rely on the child tax credit would not 
receive the monthly payment on time. Unemployment would surely 
rise and, as we saw in 2011, even coming very close to the 
deadline without raising the debt ceiling can undermine the 
confidence of financial markets in the credit-worthiness of the 
United States that led to a debt downgrade and soaring interest 
rates, which ends up raising payments on mortgages, auto loans, 
and credit cards.
    Chairman Brown. Thank you. You made clear that the debt 
ceiling is about money. We have already spent, like the CARES 
Act, that Republicans in Congress voted for and that President 
Trump signed into law, and now they want to run out and pay the 
bill. We know it is just wrong. They know it is just wrong.
    Chair Powell, the most recent jobs report, as you point 
out, saw unemployment decreasing generally, but it also showed 
a continued racial unemployment gap, and the unemployment is 
rising for Black workers.
    You committed to erring on the side of lower unemployment 
in a more competitive labor market. Thank you for that. But 
last week you announced that policy tightening will begin in 
November with tapering, that interest rate targets will 
increase next year. Why take away economic support just when 
workers are getting back on their feet and starting to see 
glimmers real wage growth, and when the recovery has failed to 
reach so many Black workers?
    Mr. Powell. Right now, we are buying $120 billion worth of 
securities every month, and all of those purchases add to 
accommodation. They are increasing accommodation. And we had 
set a test for beginning to taper those purchases of 
substantial further progress toward our statutory goals. We 
have not met that yet, but as I mentioned, I think we have all 
but met it on the path that we are looking at. We would 
continue to add accommodation, not subtract it, until well into 
the middle of next year. And we think that is appropriate given 
the strength of the economy.
    The test for raising interest rates is substantially 
higher. And, you know, we want to see just, as you indicated at 
the beginning, we want to see a labor market that we both 
indicated, a labor market that is very strong. We want to see 
the kinds of reductions in disparities and the kinds of things 
that we did see before the pandemic arrived.
    Chairman Brown. Thank you. Secretary Yellen, the 
Conservative Niskanen Center said the expansion of the child 
tax credit would result in billions of dollars in spending, 
hundreds of thousands of jobs in local communities, 
particularly rural communities. We know raising a child is work 
and most of the parents getting CTC are really doing two jobs 
at home and in the paid labor force.
    So, set the record straight briefly, if you would. Does the 
expanded child tax credit, particularly a fully refundable 
child tax credit, does it increase labor force participation 
and boost local economies?
    Secretary Yellen. I believe that it does. I think the 
evidence shows that very strongly, that it helps parents take 
care of their children. As I mentioned in my opening statement, 
we have seen that hunger, the number of families that feel 
their children do not have enough to eat drop substantially 
after the first round of payments. We see that parents are 
using the CTC payments to pay for basic needs, including food 
and clothing. And of course, it can be used for childcare and 
provide the kind of support that enables parents to take jobs--
--
    Chairman Brown. Thank you, and sorry to interrupt. Thank 
you for the way that you and Treasury have gotten those checks 
out monthly, starting in July. Thank you for that.
    Last question. Chair Powell, the New York Times reported in 
February only 2 out of 417 economists employed by the Board of 
Governors, 2 out of 417 are Black. I appreciate you made 
diversity at the Fed a priority. I agree with what you said in 
that article--institutions that focus on diversity and do it 
well are the successful institutions in our society. Cutting it 
even closer, over its 108-year history, no Black woman has ever 
served on the Board of Governors, not one ever. Do you think 
the Board of Governors would be a more successful institution 
if a Black women had a voice and a seat at the table? Should we 
make that a priority?
    Mr. Powell. I would strongly agree that we want everybody's 
voice heard around the table, and that would certainly include 
Black women. And we, of course, have no role in the selection 
process, but we would certainly welcome.
    Chairman Brown. Secretary Yellen, do you agree with that, 
that it is time we had a Black woman on the Board of Governors?
    Secretary Yellen. I do. I think diversity is extremely 
important and that would certainly be a very welcome 
achievement.
    Chairman Brown. Thank you.
    Senator Toomey. Thank you, Mr. Chairman. Let me begin by 
just stating the obvious. If the Government goes on a spending 
binge, that will certainly require more borrowing to pay for 
all that spending. Our Democrats have a spending binge 
underway. They are threatening to dramatically expand that. And 
if they get their way, that will certainly necessarily involve 
more borrowing than we would otherwise need.
    The Democrats have chosen to ignore our warnings about this 
excessive spending but they want us to vote to raise the debt 
ceiling in order to permit the massive spending increases that 
they are planning. I would just remind everyone, just as the 
Democrats have the procedural ability to pass this spending on 
their own, as they intend to, hey have the exact same 
procedural ability to raise the debt ceiling on their own, 
which they inevitably will have to end up doing.
    Mr. Powell, earlier this year there were certainly sectors 
of our economy, especially the sector sensitive to reopening 
experienced, pretty dramatic, but largely temporary price 
spikes. It seems to me now we are seeing a broader, more 
troubling kind of inflation. Input prices are soaring across 
the board. Raw materials, electrical components, energy, and 
consumer expectations seem to have internalized this. The New 
York Fed's most recent survey shows that they expect 5.2 
percent inflation over the coming year.
    Despite this and all the growth that we have talked about, 
as you point out, the Fed is still buying $120 billion in 
securities every month, and I guess my question is, doesn't the 
inflation we are seeing now seem broader and more structural in 
nature than the brief blip we saw, say, in used car prices 
earlier this year?
    Mr. Powell. Yes. I think it is fair to say that it is. 
Mainly what we have seen is that the supply side restrictions 
that are so much at the heart of the inflation we are seeing 
have not only not gotten better, they have actually, in some 
cases, gotten worse. Look at the car companies. Look at the 
ships docked, or with their anchors down outside of Los 
Angeles. And this is really a mismatch between demand and 
supply, and we need those supply blockages to alleviate, to 
abate before inflation can come down. We do believe that it 
will. However, if you look at measured inflation and what is 
contributing to it, most of it is still from a very small 
category of items.
    Senator Toomey. But it is considerably broader than it was, 
and I would also point out, and I know you are aware of this, 
but the Fed's projections of inflation have consistently been 
off. They have consistently been low. And at some point I think 
we need to acknowledge that this is not playing out the way I 
think the Fed had hoped.
    Let me shift the topic to a central bank digital currency. 
So I am increasingly intrigued by the opportunities that a 
properly designed central bank digital currency could provide 
to the U.S. To name a few, instant zero-cost payments, 
interoperability and programmability with smart contracts, 
international competitiveness all come to mind.
    But getting the design correct, getting it right is 
essential. For instance, the privacy of Americans has to be 
respected. We should not design a central bank digital dollar 
that allows the Government to spy on Americans' every 
transaction. And the Fed is certainly not suited to be a retail 
bank, and so we certainly should not try to turn it into one. 
In my view, privately issued digital currency should be able to 
coexist with a digital dollar, if we go down that road, and 
private sector developers certainly should be able to innovate 
either on or in interoperable fashion with a digital dollar.
    So I am not asking you to opine on any of these things, but 
it seems to me the decision about whether or not to go down 
this road is transformational, and there are very, very 
important and sensitive design issues that would have to be 
resolved. So I think that ought to be done in a transparent 
process with political accountability, which is to say, with 
congressional input.
    Could you comment on how important you think it is to have 
congressional authorization if we are going to go down the road 
of a digital dollar?
    Mr. Powell. I would be glad to. And by the way, I agree, 
this is critical work that we want to take forward. So the 
relevant parts of our law were written long before digital 
finance was a thing, and a central bank digital currency could 
take many forms, it is possible that under some forms you would 
be able to make an argument that it would be authorized under 
current law. But I think this is such a fundamental issue. It 
would be ideal if this were to be a product of broad 
consultation, ultimately authorizing legislation from Congress.
    Senator Toomey. Thank you. Madam Secretary, I want to talk 
about the tax agreement. As you know, Pillar One will 
fundamentally rewrite how profits are allocated among 
countries, and will cede U.S. taxing rights to foreign 
jurisdictions to some degree. Well, current bilateral treaties 
would need to be modified to implement this reallocation, and 
obviously this requires a treaty to implement, right? In fact, 
the international agreement itself, I think it acknowledges 
that by referring to a multilateral instrument, layman's terms, 
that is a treaty, and that will be necessary for this 
implementation.
    So do you acknowledge that Pillar One requires a treaty and 
therefore a Senate ratification in order to implement it?
    Secretary Yellen. I believe there are a number of ways in 
which Congress could implement it, but certainly ratification 
of a treaty would be one way in which Congress could authorize. 
And certainly Congress has to authorize the transfer of taxing 
rights that is contemplated in Pillar One.
    Senator Toomey. Well, I will finish Mr. Chairman, but I 
want to stress that we have, for many, many decades, had 
bilateral tax treaties that govern the amounts and the manner 
by which foreign Governments can tax American companies. 
Changing those treaties requires ratification in the Senate. 
There is no way around that, that I can see. Thank you.
    Chairman Brown. Thank you, Senator Toomey. Senator Tester 
is recognized from his office.
    Senator Tester. Thank you, Mr. Chairman, and I want to 
welcome both Chairman Powell and Secretary Yellen. This first 
question is for you Secretary Yellen.
    Through the American Rescue Plan I have fought for, and we 
got targeted relief for local communities and States. I have 
heard some concerns that in Montana some of the funds that you 
have already gotten out from Treasury to the States 
specifically are not getting out for projects, and that 
proposes some problems, especially with winter coming on in 
Montana, that we might miss an opportunity to make upgrades to 
broadband or other critical investments. I have heard some 
folks in Montana, leadership, blaming this confusion that is 
caused by the Treasury Department because the funding is coming 
in two tranches. That does not make a lot of sense to me.
    So Secretary Yellen, beyond the restrictions on uses of 
these funds provided by Congress, and through Treasury's 
guidance, is there anything that the Treasury Department is 
doing which would prevent States like Montana from receiving 
the funds in two tranches and using the funds that they have 
already received now?
    Secretary Yellen. Senator, there is no restriction that 
Montana faces in using the funds that have been allocated or 
making plans to use the funds that will be made available in 
the second tranche. That can be done now. There is absolutely 
no need to wait.
    Senator Tester. OK. So they can use that first tranche 
right now; no need new wait--because your mic was on and off 
there for a minute. Do they need----
    Secretary Yellen. Yes, that is right.
    Senator Tester. Thank you. Do they need your approval to 
start planning what they might use the rest of the funds for? 
And then to clarify, States with split payments do not need 
Treasury's approval to start getting the funds that they 
already have out the door. That is correct, just to make it 
absolutely clear.
    Secretary Yellen. That is correct, and they can plan how 
they intend to use the second tranche of funds as well. They 
can begin doing that now.
    Senator Tester. On the second tranche, do you have a 
timeline for getting the funds to municipalities and States who 
have received these split payments?
    Secretary Yellen. I believe it is a year lag between the 
payments.
    Senator Tester. OK. It is my understanding that the process 
for these funds has worked just as Congress laid them out, and 
it has been pretty predictable. Would you say that is correct?
    Secretary Yellen. Yes, I think it is correct.
    Senator Tester. OK. And then can you talk to me about the 
impact that you are seeing in the communities as program funds 
through the coronavirus State and local fiscal relief fund are 
getting up and running?
    Secretary Yellen. Well, I think we are already seeing 
significant impact of these funds. Some of it is being used for 
immediate pandemic response, vaccination efforts, helping 
unemployed workers, supporting small businesses, and some of it 
is being used to address longer-term needs, including broadband 
infrastructure, water, and sewer. And so these funds can serve 
a variety of needs, and are doing so.
    Senator Tester. OK. Secretary Yellen, I want you to respond 
to something the Ranking Member said, and I think he knows 
better. But he said that Democrats want the Republicans to 
expand the debt limit so that they can spend money. Is it not 
true that the debt limit is expanded because of money that is 
already spent, that it would be similar to you going down to a 
restaurant, ordering a steak dinner, paying for it on your 
credit card, and when the credit card comes back, you would 
say, ``Nope, I am not paying for it.'' Isn't that similar to 
what we are talking about with the debt limit?
    Secretary Yellen. That is absolutely correct. It has 
nothing to do with future programs of payments. It is entirely 
about paying bills that have already been incurred by this 
Congress and previous congresses. And it is about making good 
on past commitments, as you said, paying our credit card bill.
    Senator Tester. Thank you very much. Thank you, Mr. 
Chairman. I yield.
    Chairman Brown. Thank you, Senator Tester. Senator Shelby 
from Alabama is recognized.
    Senator Shelby. Thank you. Welcome, both of you, Madam 
Secretary, Chairman Powell.
    Chairman Powell, I will direct my first question to you. 
The Phillips curve is an economic concept that represents an 
inverse relationship between inflation and unemployment. 
Historically, it has been utilized to understand the 
relationship between unemployment and inflation, in particular, 
in relation to the Federal Reserve's dual mandate of price 
stability and maximum employment. You were aware of this, Mr. 
Chairman. Some economists question the current validity of this 
concept as a connection between inflation and unemployment has 
seemed to grow weaker in recent years.
    Chairman Powell, is the Phillips curve still a valued 
economic model or tool, and have you observed any notable 
strengthening in the relationship between unemployment and 
inflation during the pandemic?
    Mr. Powell. Senator, if you go back to the high inflation 
area that we both recall, there was a very close relationship, 
a one-for-one kind of relationship, or close to it, between 
unemployment and inflation. That is no longer the case. There 
is still a relationship, but we say the Phillips curve is very 
flat, but it is not completely flat. So there is a relatively 
modest relationship. The slope of the line is seven degrees or 
something, so very flat. Is there any change that we observe in 
the near term? To get to your last question, not at this point, 
no.
    Senator Shelby. Do you watch the Phillips curve?
    Mr. Powell. Well, we do, but if you saw, we had 3.5 percent 
unemployment and very modest inflation for a couple of years 
before the pandemic. So it is not a top-of-mind concern. The 
inflation that we are having is, but it is really not related 
to the Phillips curve.
    Senator Shelby. Would you say that the Phillips curve 
concept is not valid right now?
    Mr. Powell. Well, it is not particularly binding right now. 
Inflation is high and the unemployment rate is high, so it is 
not really the binding constraint.
    Senator Shelby. OK. I will direct this question to the 
Secretary. The stepped-up basis, Madam Secretary, is a tax 
provision that allows for a beneficiary to adjust the basis of 
an asset to its current value, rather than its value of when 
originally purchased. We know that. This provision allows for 
beneficiaries to avoid paying high taxes on assets that have 
increased over time, largely due to inflation.
    President Biden's American Families Plan includes a 
proposal to eliminate the stepped-up basis. A lot of people 
believe that such a change would result in a costly tax 
increase on family owned businesses, particularly on farms and 
ranches. According to a study by the Texas A&M Agricultural and 
Food Policy Center, 98 percent of the farms in its 30-State 
data base will be impacted by the Biden administration's 
proposal. The study calculates that the average additional tax 
liability for a farm to be over $720,000.
    Madam Secretary, do you support eliminating stepped-up 
basis for State beneficiaries, and if you do, why?
    Secretary Yellen. Senator Shelby, I do support eliminating 
stepped-up basis. The reason is that a very large share of the 
income of wealthy individuals is simply never taxed. 
Individuals hold onto these assets during their lifetime. That 
income is never taxed. And we know that for some of the 
wealthiest individuals in the country, they pay very low taxes 
overall because most of their income takes the form of 
unrealized capital gains.
    The Biden administration proposed that at death those gains 
be taxed. And with careful consideration, not in any way to 
harm the prospects of family owned farms or small businesses, 
there were substantial exemptions to protect them.
    Even if there is not actually taxation imposed at death, 
getting rid of stepped-up basis would mean that an heir would 
inherit the original basis of the asset, and when that person 
eventually sold the asset, taxes would be paid. But I regard 
step-up of basis as a kind of loophole that allows a very large 
portion of income in this country of the wealthiest individuals 
to go untaxed.
    Senator Shelby. Thank you. Thank you, Mr. Chairman.
    Chairman Brown. Thank you. Senator Warner is recognized 
from his office, remote.
    Senator Warner. Thank you, Mr. Chairman. I want to go back 
and revisit with the Treasury Secretary some of the concerns we 
all share about potential default. I think we all, many of us, 
I know the Chairman and the Ranking Member were around when in 
2011, our Nation got close to that kind of default.
    Madam Secretary--and I particularly worry about some of my 
colleagues who are concerned, rightfully, about additional 
mandatory spending, but if we were to go into this default 
basis, would it not be expected that that would cause a lack of 
faith in the American Government's ability to meet its 
obligations, which, in all likelihood, would result in an 
interest rate spike? And is my math basically correct that if 
there were 100 basis point increase in interest rates, 1 
percent increase in interest rates when we are looking at a $27 
trillion debt, you are looking at more than a $200 billion a 
year additional mandatory interest payment, those interest 
payments because of that spike in interest rates comes before 
payment of Social Security, payment of our military, any of our 
other priorities? And if you extrapolate that on a 10-year 
basis for concerns about spending, would not that be close to 
an additional $2 trillion over 10 years of mandatory spending? 
Is there, Madam Secretary, anything faulty with that analogy or 
my math?
    Secretary Yellen. I do not believe there is anything at all 
faulty about the math. I think there is no question, but if 
Congress were to fail to raise the debt limit, or even if it 
was feared if we are getting close, and it looks as in 2011, 
like Congress might not raise the debt ceiling and we might not 
be able to pay our bills, that you would expect to see an 
interest rates spike. And if the debt ceiling were not raised, 
I think there would be a financial crisis and a calamity. And 
absolutely, it is true that the interest payments on the 
Government debt would increase.
    I would be concerned that the dollar and Treasury assets, 
which are regarded as the most secure in the world and serve as 
the basis for the dollar to be the reserve currency, that it 
would undermine confidence in the dollar as a reserve currency. 
And the interest payments of ordinary Americans on their 
mortgages and on their cars and on their credit cards would all 
go up in line with higher Treasury borrowing costs. And it 
would increase our spending, absolutely.
    Senator Warner. And again, this is not something that you 
could then reverse if suddenly Congress came to its senses, 
once you saw any kind of spike in interest rates or confidence 
losing. Once this genie is out of the bottle there is no 
putting it back in. Is that correct?
    Secretary Yellen. I think that is correct. This would be a 
manufactured crisis we had imposed on this country, which has 
been going through a very difficult period, is on the road to 
recovery, and it would be a self-inflicted wound of enormous 
proportions.
    Senator Warner. And we all know that we are in an economic 
competition with China. Would not this effort in terms of a 
China that is trying to criticize our withdrawal from 
Afghanistan, and would not this give additional fodder to the 
Chinese arguments, and, you know, as you mentioned, undermining 
the confidence in the dollar as the reserve currency? Wouldn't 
this action potentially also give more credibility to China's 
efforts to try to make the RMB an equal to or potentially even 
more of a default reserve currency?
    Secretary Yellen. Well, certainly it would undermine 
confidence in our Government and in the role of the dollar and 
the safety of the dollar, which has really never been 
questioned. The dollar is the safe haven asset when times are 
turbulent, that people feel is absolutely secure. I think China 
has a long ways to go in reforming its financial markets before 
the renminbi is a serious rival to the dollar as a reserve 
currency. But I cannot think of anything more harmful to the 
role of the dollar than failing to raise the debt ceiling.
    Senator Warner. Again, I know my time is up, but I would 
just point out to my colleagues that are rightfully concerned 
about mandatory spending, you know, that interest rate spike 
and the, again, 100 basis points, roughly is $200 billion a 
year. My math says that is 2 trillion over 10. That would be 
spending we do not need to do, and we can all avoid that taking 
place.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Warner. Senator Kennedy 
from Louisiana is recognized.
    Senator Kennedy. Thank you, Mr. Chairman. Thank you, Madam 
Secretary and Mr. Chairman for being here.
    Madam Secretary, when you were here last, and we all look 
forward to you coming, I asked you to tell me what you thought 
inflation would be at the end of this year, and you told me 2 
percent. Do you still stand by that prediction?
    Secretary Yellen. Clearly inflation this year is going to 
be above 2 percent. Just the experience so far this year makes 
that clearly true. But I think we are seeing monthly inflation 
rates taper off.
    Senator Kennedy. Yes, ma'am. What do you think it will be 
at the end of the year, if not 2 percent?
    Secretary Yellen. Probably closer to 4 percent.
    Senator Kennedy. OK.
    Secretary Yellen. And that is already almost must be the 
case based on what has happened this year. But in my 
estimation, there are the types of supply bottlenecks that the 
economy----
    Senator Kennedy. OK. I do not want to spend too much time 
on inflation, and I am sorry to interrupt, but we have so 
little time and I talk slowly.
    What party controls the House?
    Secretary Yellen. The Democrats.
    Senator Kennedy. What party controls the Senate?
    Secretary Yellen. The Democrats.
    Senator Kennedy. I believe we can agree that President 
Biden is a Democrat.
    Secretary Yellen. I believe.
    Senator Kennedy. OK. Senator Schumer, who is a Democrat, 
and my friend, controls the Senate floor, and he can raise the 
debt ceiling by just amending the budget resolution, cannot he?
    Secretary Yellen. It is possible that could be done.
    Senator Kennedy. Yes, ma'am. So why didn't he do it? Why do 
not you all do it?
    Secretary Yellen. Because this is not----
    Senator Kennedy. Let me just finish. Why do not you all 
just do it and then we do not have this fight?
    Secretary Yellen. Because this----
    Senator Kennedy. Why do you insist on doing it the hard 
way?
    Secretary Yellen. Because it is very important to recognize 
that raising the debt ceiling is about paying bills that 
Congresses----
    Secretary Kennedy. I know. But----
    Secretary Yellen. ----have incurred in the past.
    Secretary Kennedy. But I want to----
    Secretary Yellen. And it is a shared responsibility. 
Democrats have----
    Senator Kennedy. So why do not you--I agree with that.
    Secretary Yellen. The Democrats----
    Secretary Kennedy. Why do not you just amend the budget 
resolution?
    Secretary Yellen. Democrats have provided votes in the past 
when both houses of Congress, who are controlled by 
Republicans, when the Republican Party was in the middle of 
reconciliation. 2017 is a good example. And Democrats pitched 
in to do their duty to raise the debt ceiling.
    Senator Kennedy. But I just--I just--I know all that, and 
we--and I appreciate your perspective. But let me ask you 
again. There is a real simple solution. Why do not you all just 
amend the budget resolution? It just takes 50 votes by my 
Democratic friends and the Vice President. Why do not you just 
do that? Problem solved, done, easy peasy, finish. Let's go 
have a cocktail.
    Secretary Yellen. Well, it will be up to the leadership of 
Congress to decide----
    Senator Kennedy. Well, are you going to recommend they do 
that?
    Secretary Yellen. We will confer with them on what is the 
best strategy to move forward.
    Senator Kennedy. I have not been around this place as long 
as you have, but it is not often around here that we have a 
problem that has an easy solution, and this is a real easy 
solution. And I get politics. I understand why politically you 
folks want to have Republican fingerprints on the spending 
fiscal knife. I get that. But is your politics so important 
that you want to gamble here on the----
    Secretary Yellen. I want to make sure that----
    Senator Kennedy. ----sovereign debt of the United States 
when you have a very, very simple solution that you refuse to 
take?
    Secretary Yellen. I want to see that the debt ceiling is 
raised. As I have said, I believe it would be catastrophic not 
to do so. But I equally believe that deficits have been run 
under both Democratic and Republican administrations. It is 
important to recognize that. And that means that paying the 
bills for those deficits is a shared responsibility, and it 
should not be the responsibility----
    Senator Kennedy. I agree with that.
    Secretary Yellen. ----of any one party.
    Senator Kennedy. Very eloquently put. But it is a fact, 
isn't it, that you and your folks just want Republican 
fingerprints on the Democrats' effort to tax, spend, and 
regulate America into Europe. Now it is your prerogative to do 
that, but this is all about the Administration's desire to have 
Republican fingerprints on it, and later call it bipartisan. 
And you know that, Madam Secretary, with all the respect I can 
muster, and so do the American people.
    Thank you, Mr. Chairman.
    Chairman Brown. Senator Kennedy, I rarely speak between 
witnesses, but I wonder if Secretary Yellen takes you up on 
that offer to go get a cocktail, if you would pay or you would 
skip out on paying the bill or expect Secretary Yellen to pay?
    Senator Menendez is recognized from New Jersey.
    Senator Menendez. Thank you, Mr. Chairman. I had not 
intended to pursue this line of questioning but I must say my 
distinguished friend and colleague from Louisiana always sparks 
my interest.
    Republican fingerprints were all over the tax cuts to the 
wealthiest people and corporations in America to the tune of $2 
trillion. Republican fingerprints, for the many years that they 
were in a majority, were all over the budget spending that was 
unpaid for. Republican fingerprints are all over the politics 
of this now.
    When Democrats were in the minority, Democrats did the 
fiscally responsible thing. They voted with Republicans to 
recognize the debt that had already been inherited, not a debt 
to come, but that which had already been inherited. You all 
created a significant part of this debt, and now you want to 
walk away from it. I know that President Trump was the king of 
debt and bankruptcy, and maybe you have adopted that as your 
view, but it is not a view in the national interests of the 
United States. So I love that my friend sparks my concerns.
    In any event, let me turn to my real purpose here. We have 
discussed at length how diversity remains a problem at both of 
your agencies. Chairman Powell, during your tenure, the number 
of minorities in management positions have barely budged. In 
the most recent report, the Fed's Office of Minority and Women 
Inclusion states, quote, ``The Hispanic participation in our 
workforce has remained steady over the past 5 years.'' Steady. 
Well, when it is already pretty dismal, steady does not really 
do very much for me. ``We recognize that our prior efforts,'' 
it goes on to say, ``have resulted in minimal progress.''
    So my question is, what are you doing about it? What are 
you doing about it?
    Then let me just make this a joint question. Secretary 
Yellen, I see the same thing happening at Treasury. I have 
raised this from the date of your confirmation proceedings to 
most recently. I am really chagrined that I have to be forced 
to consider not voting for nominees because it is the only way 
to get the attention of these agencies. But if you are sitting 
as one of the few Hispanic American Senators and seeing what is 
coming forth from this Administration, especially in these two 
sectors, it is abhorrent.
    So what are we going to do about it? Chairman?
    Mr. Powell. Let me start briefly by agreeing that if you 
look at successful organizations in the United States, private 
and public, you will almost always see a successful approach to 
diversity, a focus on diversity from the top. So I think it 
really starts with making diversity a high priority. I have 
done that. My predecessors have done that. If you talk to any 
of our senior leadership, the people who do the hiring, the 
people in all the divisions, you will see that they talk about 
diversity, that they focus on diversity and hiring. It is not 
easy to move----
    Senator Menendez. But if it is a high priority, it is a 
dismal failure. I mean, I hear high priority, but, you know, 
the proof is in the pudding and it is just not there. So I do 
not know how high a priority it is when we continue to have the 
same types of numbers. Madam Secretary.
    Secretary Yellen. Senator Menendez, I would say that it is 
a high priority at Treasury. With respect to political 
appointments that I have been involved with, we are very 
focused on recruiting and hiring Latinos, and we have been 
engaging with Latino interest groups to identify and source 
candidates. Just over the past several weeks, we have extended 
three offers to Latino candidates, including two Latinas who 
will serve in leadership roles within the Department of the 
Treasury, and we will announce those soon.
    In hiring within the Department as a whole, we track very 
carefully the demographic composition of our workforce, and it 
is a high priority to improve diversity. Every Treasury bureau 
has a partnership with Hispanic-serving institutions and 
Hispanic community organizations. We have employee----
    Senator Menendez. Well, I do not mean to interrupt you, but 
I look forward to seeing actual nominations. Every nomination 
that I have been asked to cast a vote on here certainly is not 
Latino.
    Secretary Yellen. They are not all Senate-confirmed, but 
they are senior leadership positions.
    Senator Menendez. OK. Then I would love to see those that 
are not Senate-confirmed because as far as I can see the 
numbers have not changed. So I look forward to the 
announcements because I would love to applaud progress in a 
significant way.
    If I may, Mr. Chairman one last question.
    Chairman Brown. Sure.
    Senator Menendez. Chairman Powell, you know, for the Latino 
community but beyond, expanding access to childcare, would not 
that improve the labor force participation rate among women? I 
know so many women who want to get back in the labor force, but 
they have no access to any affordable childcare that, at the 
end of the day, allows them to do so.
    Mr. Powell. There is a good bit of research that would 
support that conclusion. Yes.
    Senator Menendez. Thank you.
    Chairman Brown. Senator Lummis of Wyoming is recognized.
    Senator Lummis. Thank you, Mr. Chairman, and let me say 
something on behalf of the people I represent in Wyoming. This 
is not pointed to either party. This is pointed to the Congress 
of the United States. It is absolutely irresponsible that we 
are $28 trillion in debt and that both parties sit here and 
blame each other for what they both did irresponsibly. It is 
absolutely unconscionable what we have done to the people of 
this country. It is both parties' faults. It is the Congress' 
fault and we need to address it, but we are so busy making each 
other look like the rat's rear end that we will not address the 
real problems in this country that led us to be $28 trillion-
plus in debt, and now asking to get further in debt. I am 
horrified. My constituents are horrified. This has got to stop.
    That said, now I will turn my attention to the Secretary. 
Secretary Yellen, speaking of horrified, my constituents cannot 
believe that you support a proposal to require banks and credit 
unions to report customer data to the Internal Revenue Service 
for transactions of $600 or more. There are obvious privacy 
concerns for all Americans here, and this represents a dramatic 
new regulatory burden for community banks and credit unions in 
Wyoming and elsewhere. Our banks will have to hire contractors 
to rat on their customers, implement new computer software, 
deploy resources better used elsewhere in order to collect data 
for the Government.
    Bank customers are not subjects of the Federal Government. 
Banks do not work for the IRS. This is invasive of privacy. 
Wyoming's people literally will find alternatives to 
traditional banks just to thwart IRS access to their personal 
information, not because they are trying to hide anything, but 
because they are not willing to share everything.
    My question is, are you aware of how unnecessary this 
regulatory burden is? Do you distrust the American people so 
much that you need to know when they bought a couch or a cow? I 
am astounded by what you are supporting and proposing. I think 
it is invasive. I think privacy for individuals is getting 
ignored. And I think treating the American people like they are 
subjects of the Government is unconscionable.
    Secretary Yellen. Well, Senator Lummis, I really disagree 
with the assessment that you have, and I think you 
misunderstand the proposal. Banks already report directly to 
the IRS the interest that they pay on accounts when it exceeds 
$10. And this is not a proposal to provide detailed 
transaction-level data by banks to the IRS. It is a proposal to 
add two additional pieces of easily ascertained information 
onto the 1099-INT form that banks already file, namely the 
aggregate inflows into the account during the year and the 
aggregate outflows.
    And I think it is important to recognize that we have a tax 
gap that is estimated at $7 trillion over the next decade. That 
is taxes that are due and are not being paid to the Government 
that deprive us of the resources we need to do critical 
investments to make America more productive and competitive.
    And the reason that that tax gap, in part, exists, partly 
it is because the IRS has been deprived of revenue to hire 
auditors, but the IRS has a wealth of information about 
individuals. If you work at a job where you get labor income, a 
W-2 is filed and sent. There are dividend payments and 
transactions payments that are sent to the Government. But 
there are a class of partnerships, businesses, high-income 
individuals who have opaque sources of income that the IRS does 
not have direct information about and that is where the tax gap 
is, not low-income people. And this additional information 
would help to----
    Senator Lummis. Well, $600 threshold is not usually where 
you are going to find the massive amount of tax revenue you 
think Americans are cheating you out of.
    Secretary Yellen. That is correct, but it is important to 
have comprehensive information so that individuals cannot game 
the system and have multiple accounts.
    Senator Lummis. Mr. Chairman, I yield back.
    Chairman Brown. The Senator from Massachusetts, Senator 
Warren, is recognized.
    Senator Warren. Thank you, Mr. Chair. Thank you both for 
being here today.
    Chair Powell, during your time as chair, you have taken 
plenty of actions to weaken the Fed's regulatory oversight of 
our largest banks. So today I want to talk about three 
instances of that and ask you to think about them in hindsight.
    First, the stress test. Now these are designed to tell 
whether or not big banks can survive without a taxpayer 
bailout. When the tests were first set up, bank supervisors 
could restrict stock buybacks and dividend payments to 
strengthen the bank's balance sheet. In 2019, you took that 
power away. And we now know, from the Fed's own research, that 
when the economy hit choppy waters last year, those banks 
needed stimulus from the taxpayers and that without this 
taxpayer help they would have faced up to $300 billion in 
losses, meaning that they were in a sharply weakened position 
to withstand the stress.
    Chair Powell, do you regret weakening the stress test?
    Mr. Powell. I do not think we have weakened the stress 
test, and I am not sure what you are referring to. When banks 
fail the stress test, their distributions are limited.
    Senator Warren. So I laid it out here that you took away 
the power to restrict stock buybacks and dividend payments that 
could be used to strengthen the balance sheet. You do not see 
any changes you made to the stress test and handling stress 
tests out in advance?
    Mr. Powell. Senator, capital in the largest banks is at 
multi-decade highs.
    Senator Warren. That is not my question. I am looking at 
the Fed's own research which says that without the help that 
you had to put into the economy last year, they would have 
faced up to $300 billion in losses.
    Look, I do not want to argue with you about what capital--
--
    Mr. Powell. Which they would have met. Which they would 
have been able to absorb without difficulty.
    Senator Warren. Let me ask you the question then. I take it 
you do not have any regrets about any changes to the stress 
test?
    Mr. Powell. Not really. I mean, I am prepared to look at--
anything we did is fair game to look at again, but I do not 
think so. No.
    Senator Warren. OK. But let me ask about another action. In 
2020, the Fed, along with the other agencies, removed the 
Volcker rule restrictions on whether banks could cosponsor so-
called family funds. And then earlier this year, we watched the 
collapse of a quote/unquote ``family fund'' called 
``Archegos,'' which caused banks to suffer a quick $10 billion 
in losses.
    Given the Archegos collapse, do you regret weakening the 
Volcker rule?
    Mr. Powell. That is actually a family office, Archegos is. 
I do not know that there are any Volcker rule implications for 
Archegos. I will say we have looked at the Archegos situation 
closely, and I think learned our lessons from that.
    Senator Warren. Learned your lessons, but do you have any 
regrets about weakening the Volcker rule around family funds, 
having watched what Archegos did?
    Mr. Powell. I would have to understand the Archegos 
connection. Generally, it was widely agreed that the Volcker 
rule as implemented was complex and not workable. We took a 
fresh look and----
    Senator Warren. OK. I will take that as a no. I just want 
to make sure I can get through all three of these.
    One last example. In 2019, the Fed weakened liquidity 
requirements, the rules that ensure that firms have adequate 
cash to meet their obligations. For banks between $250 and $700 
billion dollars in assets, the liquidity requirement was cut by 
15 percent. So let me just ask, do you regret slashing 
liquidity requirements designed to protect markets from 
crashing like they did in 2008?
    Mr. Powell. So that was tailoring, which the law that had 
been passed through this committee required. I do not see that 
there has been any evidence that that was a bad idea, but it is 
one that could certainly be looked at again.
    Senator Warren. OK, so you would be willing to at least 
look at that one again?
    Mr. Powell. Yes.
    Senator Warren. OK. This cut by 15 percent.
    You know, Chair Powell, the elephant in the room is whether 
you are going to be renominated for a second term as Fed chair. 
Renominating you means gambling that for the next 5 years a 
Republican majority at the Federal Reserve with a Republican 
chair who has regularly voted to deregulate Wall Street will 
not drive this economy over a financial cliff again. And with 
so many qualified candidates for this job, I just do not think 
that is a risk worth taking.
    I know that some argue that your deregulatory actions are 
mostly harmless. I disagree. I think they have put taxpayers at 
risk for hundreds of billions of dollars. But even at that, so 
far you have been lucky, but the 2008 crash shows what happens 
when the luck runs out. The seeds of the 2008 crash were 
planted years in advance by major regulators, like the Federal 
Reserve that refused to rein in big banks.
    I came to Washington after the 2008 crash to make sure that 
nothing like that would ever happen again. Your record gives me 
grave concern. Over and over you have acted to make our banking 
system less safe, and that makes you a dangerous man to head up 
the Fed. And it is why I will oppose your renomination.
    Thank you, Mr. Chair.
    Chairman Brown. Senator Rounds from South Dakota is 
recognized.
    Senator Rounds. Thank you, Mr. Chairman.
    Well, needless to say, Chairman Powell, I would probably 
disagree with my colleague, and I commend you for the hard work 
that you have done, and I most certainly think that you do 
deserve to be renominated to the position that you have right 
now, and I look forward to working with you for the next 
several years.
    Chairman Powell, I would like to ask you about the 
supplementary leverage ratio, the SLR exclusion that the Fed 
and the other banking regulators instituted during the pandemic 
that allowed banks to exclude ultra-safe assets, including U.S. 
treasuries and deposits to the Fed from their balance sheets. 
This exclusion allowed the banks to take in the extraordinary 
amount of deposits that we saw during the pandemic without 
having to grapple with needless capital requirements.
    I am just curious whether or not you believe that that move 
was successful and whether or not you would see any 
possibilities of perhaps a continuation of that in the future?
    Mr. Powell. So it was important that we did it in the 
crisis, and it worked. I think it is less binding now because 
of all the money that is now at the reverse repo facility.
    Ultimately, we do not want leverage ratios to be the 
binding constraint on banks because we think that that gives 
them the incentive to take more risk. I would say we need to be 
very careful with the supplemental leverage ratio because we 
want to make sure that any changes we make to it will not 
reduce the overall binding-ness of the capital requirements for 
the largest institutions. But it is something we would look at 
modifying, and it is one of the things we are looking at right 
now.
    Senator Rounds. Presumably you felt that you received 
pretty positive feedback from the institutions that were 
impacted by this particular modification of the rule.
    Mr. Powell. Yes, and that was an emergency situation. When 
the emergency ended, we allowed that provision to lapse. But I 
think overall though, with all the liquidity in the system, it 
could again become the binding constraint and that would not be 
good from a safety and soundness standpoint.
    Senator Rounds. Thank you. Secretary Yellen, welcome.
    Secretary Yellen. Thank you.
    Senator Rounds. It is good to see you again. I would like 
to direct this question to you. During our last quarterly CARES 
hearing, I inquired about the severe backlog of tax returns 
facing the IRS as approximately 2.4 million tax returns 
remained untouched by the IRS at that time, many of which were 
from 2019. That number only continued to grow with an 
approximate 35 million backlogged tax returns at the end of 
June, when the National Taxpayer Advocate released the midyear 
report to Congress.
    When I originally asked about the IRS's possible plan to 
address the backlog, you responded that you had not yet had a 
discussion with the IRS commissioner about this particular 
issue, but you did provide assurances that you would work with 
me and my office and remain committed to developing a plan to 
address the backlog. After receiving no correspondence 
following the hearing, I sent a letter to you asking these same 
questions to which I have also not yet received a response.
    So my question, Secretary Yellen, I am asking for a third 
time, have you discussed the IRS's plan to address its immense 
backlog of tax returns with the IRS commissioner? If so, what 
is the plan?
    Secretary Yellen. We have discussed this with the IRS 
commissioner and he is addressing it and I would be happy to 
get you more details. My apologies if we have not responded in 
a timely way. I promise to do so quickly.
    Senator Rounds. So it would be fair to say that the IRS 
does have a plan in place to prevent this level of backlog in 
the future?
    Secretary Yellen. We are trying to add to the IRS's 
resources so that they will be able to handle these things in a 
more expedited fashion.
    Senator Rounds. We can perhaps expect a communication from 
your office here in the next 5 days or so?
    Secretary Yellen. We will try to get you that 
communication.
    Senator Rounds. Thank you. Also, Secretary Yellen, with the 
Treasury quickly approaching the debt limit, and I know that 
this is something which you have identified it and have 
expressed concern over, it makes one question when America 
might become the next Greece. When, in your view, when do we 
have to say enough is enough when it comes to our deficit and 
our debt?
    Secretary Yellen. So one, in thinking about what is a 
reasonable level of debt, there are a number of different 
metrics that one might look at. Commonly, debt-to-GDP ratios 
are a measure that is widely used. Ours is a little bit over 
100 percent, which traditionally has been regarded as high. But 
we are in a very low-interest-rate environment, that is been 
true for a very long time, and is likely to be true going 
forward.
    And an alternative, and I think better measure of fiscal 
sustainability is to look at the real net interest cost of the 
debt. What is it in real terms costing to service the 
outstanding debt? And for the last several years, that is been 
negative. And even if interest rates, 10-year rates and the 
Treasury yields revert in future years backup to more normal 
levels, the interest cost, which really is the burden, is 
projected to remain low. The plans that the Biden 
administration has put forth, we keep that low, at under 1 
percent of GDP.
    Senator Rounds. Thank you. My time has expired. Thank you, 
Mr. Chairman.
    Chairman Brown. Thank you, Senator Rounds. Senator Smith of 
Minnesota is recognized.
    Senator Smith. Thank you, Mr. Chair, and welcome to 
Secretary Yellen and to Chair Powell. I am going to direct my 
questions to Secretary Yellen today, and I would like to start 
with the question of emergency rental assistance. I think we 
have all seen that the pandemic has not been a great equalizer. 
It has laid bare the deep inequities in our society, 
particularly, I would argue, in housing. With COVID, you know, 
we are all in the same storm but we are not all in the same 
boat.
    What this looks like in Minnesota is the following. There 
are about 60,000 families in Minnesota that are behind on rent, 
and to support those families, we all worked hard here in 
Congress to get the emergency rental assistance. So far, 
however, only about 15,000 families have received help through 
Minnesota's Emergency Rental Assistance Program, and that is 
not nearly good enough. And this is particularly troubling 
because about two-thirds of these families are families of 
color and indigenous families. So if this program is not 
working, it is disproportionately hurting them.
    So Secretary Yellen, here is my question. I appreciate that 
Treasury has worked hard to clear away the red tape at the 
Federal level to make this program work better, and I 
appreciate that this is being run at the State level, and often 
also at the local level. What can you tell us about what you 
are doing to make sure that renters are not hurt as Treasury 
approaches this recapturing of emergency rental assistance 
funds?
    Secretary Yellen. Well, we want to make sure that renters 
are helped and we have been, as you noted, working hard to 
provide the support to State and local governments to put in 
place effective programs. But the ERA1 statute requires 
Treasury to begin reallocating excess funds that will be 
required as of September 30th, and Treasury is developing a 
procedure to govern that process. We want to make sure that 
localities with demonstrated need receive additional funds and 
that they come from places that are not running effective 
programs or have less need. And we will be looking at 
reallocation in order to improve the effectiveness of the 
program.
    Senator Smith. Secretary Yellen, in Minnesota about 30,000 
applications remain to be processed, which is a sign, I think, 
of the great need in our State. Can Treasury approach this, 
looking at these large backlogs of applications that are 
remaining to be processed, that are in other words sort of in 
the system right now as you are working on this?
    Secretary Yellen. I mean, we will look at backlogs. We will 
look at the effectiveness with which States and local 
governments have gotten out the rental assistance that they 
have. We want to see, before additional funds are made 
available, that the ones that are available have been allocated 
effectively. But if that is true and there is clearly 
additional need than those places would be eligible to receive 
additional funds.
    Senator Smith. Thank you. I appreciated, in your opening 
statement, that you talked about the mammoth task of standing 
up infrastructure at the State and local level in order to 
distribute this rental assistance. And as you move forward with 
this, following the law, we need to make sure that the folks 
that are really needing the help are not the ones that are 
getting penalized because of slower than we would have liked 
implementation of this program. So I appreciate your comments 
and I look forward to continuing to work with you on this as 
well.
    Secretary Yellen. Very good. We do as well.
    Senator Smith. I just have about a minute left and I want 
to just touch briefly on the question of childcare. We know 
that childcare is a family and an economic imperative, and I am 
really grateful to the work that you have been doing. I 
appreciated very much the Treasury's recent report on the 
childcare supply challenge and the great difficulties we have 
here.
    Secretary Yellen, Minnesota childcare providers tell me 
that they are really struggling to find and keep workers. They 
are painfully aware that they are not able to pay their workers 
as much as they are worth and as a result there is high 
turnover in the sector. Now, when most businesses encounter 
challenges in hiring, they raise wages to attract people. Can 
you just explain to everybody why that is not a feasible option 
for folks that are trying to make the system work in the 
childcare sector?
    Secretary Yellen. Well, in many ways, this is a market and 
this is what the Treasury report showed that just does not 
work, that parents, when they most need childcare, are unable 
to borrow in order to cover it, and so they are struggling with 
very high childcare expenses at a moment in their lifetime when 
they can often simply not afford it, and that puts the 
childcare providers in a situation where they just cannot 
afford to pay wages that are living wages.
    And, in fact, a substantial fraction of childcare workers 
receive some additional social support because the wages are so 
low, and we really need to fix that. It is a broken market, and 
there are huge gains to society for making sure that children 
have quality childcare, and it influences the course of their 
success over their whole lives.
    Senator Smith. Well, thank you for that. And, Mr. Chair, I 
know we are out of time, but we have a solution to this problem 
that is included in the Build Back Better plan that President 
Biden has proposed and that we have been working on in the 
Senate and the House. And I look forward to getting that 
solution passed into law to address these systemic problems in 
childcare. Thank you.
    Chairman Brown. Thanks, Senator Smith. Senator Scott of 
South Carolina is recognized.
    Senator Scott. Thank you, Mr. Chairman, Ranking Member. 
Thank you to both witnesses for being here this morning. Good 
morning. I know you all have difficult challenges that we all 
face as a Nation and it looks like they are getting more 
difficult, not less difficult.
    Democrats control the White House, the Senate, the House. 
They have the votes to raise the debt ceiling. Unfortunately, 
they also have the votes to fundamentally weaken the greatest 
economic engine in world history. What they do not have the 
votes to do is to force Republicans to be complicit with their 
reckless spending spree. Killing the goose that lays the golden 
eggs is not just bad for the goose. It is bad for everyone who 
depends on the eggs as well.
    There is nothing compassionate about spending money we do 
not have on new benefits we cannot afford, all the while 
discouraging work and increasing the likelihood of a future 
default, when the yet-to-be-born American receives the bill for 
benefits she did not experience and are no longer available.
    It is also important to note that our labor force 
participation rate is down, not up, even with the new programs 
and the payouts that I heard this morning during this hearing 
that somehow is supposedly increasing our labor force 
participation, when, in fact, it is apparent and clear to 
Americans that is not the case.
    Chair Powell, you know as well as I do, and certainly maybe 
neither one of us knows as well as the folks working paycheck 
to paycheck around this Nation or the seniors depending on 
their Social Security checks to make their ends meet, that 
inflation is having a devastating impact on people on fixed 
income, people working paycheck to paycheck. I think about the 
fact that gas prices are up over 40 percent as a Nation, and 
frankly, over the last few days we have seen signs that it is 
going to only get worse, not better. The gas prices are going 
up over $3 a gallon in so many parts of this country, and 
frankly, even higher in other parts. The fact that food, 
whether it is bacon or fish, meat, all are up double digits.
    Can you point to any specific policies put in place by the 
current Administration that may be exacerbating the runaway 
rise in food and energy prices in recent months?
    Mr. Powell. Senator, that would not be for me to do, but I 
think those things are--I would not be identifying policies of 
the current Administration.
    Senator Scott. Would you agree that the fact is that when 
we have limited supply and an increasing demand, that a $1.9 
trillion COVID relief that has spent less than 1 percent on 
vaccines and 9 percent on COVID-related health only adds more 
pressure on our markets, and that pressure results in higher 
inflation?
    Mr. Powell. Senator, we have some really difficult and 
important jobs, but one of them is not commenting on fiscal 
policy, I am sorry to say, with respect.
    Senator Scott. I do think that it does include inflation 
and employment. Aren't those two major aspects of being the 
Chairman of the Reserve?
    Mr. Powell. Those are the two major aspects.
    Senator Scott. Indeed. And so when you see policies that 
are put in place that has not increased our labor force 
participation but decreased our labor force participation 
rates, and you see policies that are actually designed, so I 
heard earlier this morning, to put people back at work, in fact 
that number is going down, you see that the impact of the 
inflationary, what I thought was transitory, that is what we 
heard earlier this year when I asked you all both the question 
about inflation in this country, seems to me that we are 
heading in the wrong direction.
    Let me ask Secretary Yellen. The phase of spiking 
inflation, slowing growth, lingering high unemployment, and 
historic levels of Government spending and Government debt, how 
do we justify supporting President Biden's $3.5 trillion tax 
spend package?
    Secretary Yellen. Well, first of all, the package is paid 
for, so there is----
    Senator Scott. How is it paid for, ma'am?
    Secretary Yellen. There are increases in taxation on 
corporations and----
    Senator Scott. May I ask you a question?
    Secretary Yellen. ----high income individuals.
    Senator Scott. Let me ask you a question on that while I 
have you here. Do you think that taking the cap gains tax from 
23.8 percent to 43.8 percent will encourage more investment in 
our economy or less investment in our economy? Do you think 
that taking the corporate tax from 21 percent to 28 percent 
will actually--we both recognize that corporations, they may 
write the check, but the people who pay the tax are the 
consumers and the employees with fewer increases in wages and 
lower benefits. How do we think that these higher taxes are 
going to lead to more opportunities in our marketplace?
    Secretary Yellen. Well, first of all, I think that the 
likely impact on investment spending is very small, and I 
think, in 2017, when taxes were cut substantially, you did not 
see any surge in investment spending. Instead, what you saw was 
a surge in stock buybacks. So the linkage between investment 
spending and the corporate tax rate is really very modest. 
Mainly it falls on excess profits. So I think the Biden 
package, the Build Back Better package, will improve corporate 
competitiveness because it is going to invest in critical 
infrastructure in our economy----
    Senator Scott. Thank you. Secretary Yellen, I do not want 
to cut you off but I have no choice because Chairman Brown is 
going to cut me off. So before I lose my time here, thank you, 
Chairman, for----
    Chairman Brown. You already have lost your time, but 
proceed, Senator Scott.
    Senator Scott. You are a patient Chairman, and I appreciate 
that more than I could say.
    I am so glad that you brought up the 2017 tax reform 
package that we worked so hard on. Bottom line is I would say 
that as someone who watches the market, and I know you watch it 
very closely, the fact is that in 2018, in 2019, we saw more 
revenue to the Government, not fewer dollars for the 
Government. And to think that taking the corporate tax from 21 
to 28 percent is somehow going to make us more competitive 
against our OECD competitors, I know that you have a strategy 
to raise our guilty and make us more competitive somehow by 
having other countries agree to higher taxes.
    I will just say that the proof will be in the pudding and 
maybe you and I will be here in a couple years to have a 
conversation about the results of the tax increase that will 
make us less competitive and not more competitive, but thank 
you for your graciousness.
    Thank you, Mr. Chairman.
    Chairman Brown. Senator Van Hollen of Maryland is 
recognized.
    Senator Van Hollen. Thank you, Mr. Chairman. I thank both 
of you for your service.
    Madam Secretary, just to pick up on that last thread 
because we have heard it throughout this morning, our 
Republican colleagues trying to have it both ways. On the one 
hand, they beat up on our proposals to reform the corporate tax 
code to make it more fair, to make sure that every 
multinational corporation pays its fair share, that they cannot 
park their profits in the Cayman Islands and other places. And 
then on the other hand, they say, ``Oh, this reconciliation 
bill is going to add to the deficit,'' and they tie it into 
this debt ceiling debate.
    Let's just be very clear. The Build Back Better agenda that 
President Biden has proposed would pay for itself through some 
of the tax reform measures you mentioned, right?
    Secretary Yellen. Yes, absolutely. It will pay for itself.
    Senator Van Hollen. Right, which is very different than the 
2017 Trump tax giveaway to big corporations that did not have a 
penny to pay for it. Isn't that correct?
    Secretary Yellen. That is correct. It resulted in very 
large increases in deficits, and the Biden package will not. 
And beyond a 10-year horizon, it will improve tax collections 
and reduce deficits substantially.
    Senator Van Hollen. Right. And let's now talk about one of 
the tax cuts we want to extend, right, which is the tax cut for 
middle-income and lower-income families with kids. We estimate 
that this year that cut child poverty in half in the United 
States, right?
    Secretary Yellen. Yes, the child tax credit and other 
features.
    Senator Van Hollen. But that expires at the end of the 
year, does it not?
    Secretary Yellen. It does, and we think it is important to 
extend it. It is really critical support to families that are 
trying to raise children. And we have already seen in 3 months 
of distributing these child tax payments spending on food that 
has reduced food insecurity, on apparel, and on children and 
their well-being. It makes a huge difference.
    Senator Van Hollen. Right. So let's just be clear. We are 
hearing Republicans this morning beat up on us for closing big 
loopholes in the corporate tax cut, in part to pay for an 
extension of tax cuts for middle-income families with kids----
    Secretary Yellen. That is right.
    Senator Van Hollen. ----which cut child poverty in half 
this year. And I guess their position is, ``Well, let's just 
let it lapse, and then we can have child poverty double in the 
years to come.''
    Madam Secretary, I have series of questions. Some of them I 
am going to put you for the record on the issue you raised with 
respect to the emergency rental assistance. And I share your 
concern that this money has not gotten where it is needed 
quickly enough, and I appreciate some of the measures you have 
taken recently to allow renters to self-certify income and 
financial hardship.
    I hope you will also make it clear that with the 
appropriate safeguards, landlords can submit applications in 
bulk on behalf of tenants, and we will be following up with you 
on that.
    Also, I heard you responding to Senator Smith. Can you give 
us assurances that as we reallocate some of these funds, and I 
understand why you want, that we are not going to harm the very 
people we wanted to help simply because their local government 
could not get the funds out as quickly as some others?
    Secretary Yellen. We will certainly try to avoid that. We 
are aware of that possibility, and we will try to reallocate, 
for example, within States so that individual who are not being 
helped locally will have access.
    Senator Van Hollen. Right. I am also going to follow up 
with you on, in Baltimore City's case, the Treasury has said 
that they can use their funds to try to bring back tourism, 
which is a good thing----
    Secretary Yellen. Yes.
    Senator Van Hollen. ----but they cannot use their funds to 
try to bring back families who may have left Baltimore City 
during this pandemic to live in other places, even though 
bringing them back would not just be a one-time tourist 
investment in the city, but a long-term investment. I will 
follow up with you on that.
    Secretary Yellen. I would be happy to do so.
    Senator Van Hollen. Chairman Powell, you have spoken to it 
generally, but you heard Secretary Yellen's assessment of what 
the impact on our economy would be if we did not lift the debt 
ceiling and defaulted. Do you agree with the assessment she has 
provided here this morning, that it would be devastating, and 
all the other pieces?
    Mr. Powell. Yes, I do. I think it is essential to raise the 
debt ceiling in time to avoid payment defaults of any kind. The 
potential effects could be severe.
    Senator Van Hollen. Right. And just to be very clear, isn't 
it the case, Secretary Yellen, that about 68 percent, excuse 
me, 28 percent of our total debt right now was incurred during 
the 4 years of the Trump administration.
    Secretary Yellen. I believe that is right. I think about $8 
trillion. That is right.
    Senator Van Hollen. Right. And I suspect that almost every 
Republican Member of this Committee voted for the measures 
during those 4 years, including that big tax giveaway.
    And I would just point out, I heard Senator Kennedy earlier 
this morning talk about how, you know, let Democrats do it 
alone. We would like our Republican colleagues to do the right 
thing, but we are willing to do it alone. In fact, Senator 
Schumer just announced that later today he will go to the floor 
of the Senate and say, ``Just let the Democrats, with 50 votes, 
and the Vice President lift the debt ceiling.'' He is going to 
ask unanimous consent to do that. We could do that today. I 
have noticed Senator Kennedy is not here anymore, but that 
would get it done. And while we would like our Senate 
Republican colleagues to do the right thing for the country we 
are willing to do it alone if they just let us and get out of 
the way.
    Thank you, Mr. Chairman.
    Chairman Brown. Thanks, Senator Van Hollen. Senator Daines 
from Montana is recognized.
    Senator Daines. Chairman Brown, thank you, and thank you, 
Secretary Yellen and Chairman Powell, for being here today.
    I want to start by expressing my continued concern with the 
inflation we are seeing in the economy. Real wages are down. It 
results in inflation. I am deeply concerned that supply chain 
issues that we are seeing will not be quickly resolved. Add to 
that the reckless $3.5 trillion tax and spending spree. Let's 
be clear. It is the largest tax increase in 50 years. It is the 
largest spending bill in the Nation's history. You have to have 
superlatives if you start talking about what is being proposed 
right now in Washington.
    I fear inflation will persist, and the reduction in wages 
that workers are seeing as a result might indeed accelerate. 
This package would affect and kill hundreds of thousands of 
jobs, hurt economic growth in my home State of Montana, as well 
as across the country.
    Turning to my questions. Secretary Yellen, yesterday I sent 
a bipartisan letter with eight of my colleagues urging Treasury 
to ensure that water storage projects, like those on the, it is 
called the St. Mary's Milk River system, are eligible for water 
infrastructure, ARPA, funding. Would you commit to working with 
me and my team and some of the other senators on both sides of 
the aisle to ensure these critical water infrastructure needs 
would be addressed?
    Secretary Yellen. Certainly. I mean, I am not knowledgeable 
on the details----
    Senator Daines. I would not expect you to know the details 
of that, right.
    Secretary Yellen. ----but we will certainly work with you 
on that. Absolutely.
    Senator Daines. I want to raise your attention, so thank 
you, Secretary Yellen.
    Secretary Yellen. We will definitely do so.
    Senator Daines. Much appreciated.
    Turning now to the topic of energy. Secretary Yellen, I 
would like to get your thoughts on what is happening in Europe 
right now. The U.K., in particular, is increasingly reliant on 
renewable power generation, and right now the wind simply is 
not blowing and they are not able to get enough natural gas to 
meet demand. This has led to massive spikes in the cost of 
power. In fact, power prices for next-day delivery in the U.K. 
are 10 times higher than the average price just 1 year ago.
    In the U.S., we are very fortunate. We have moved from 
being a net importer of energy to now a net exporter. I think 
it is providing incredible competitive advantage for us, 
national security implications by reducing reliance on other 
countries for energy.
    We are able to do this because the U.S. has a very diverse 
mix of energy production: national gas, hydro, coal, wind, 
solar, nuclear, many other sources. However, I am deeply 
concerned with the Biden administration's policies to curtail 
reliable base-load power that comes from coal, oil, gas, and 
would send us back to where we perhaps were back in the '70s, 
into where Europe seems to be headed today.
    Secretary Yellen, could you help us understand and explain 
how the Biden administration's tax hikes and grand aim to 
really shut down fossil fuel production would not lead us to 
the same path of dependence on hostile adversaries, for 
example, Russia, where much of Europe now is faced with today?
    Secretary Yellen. Well, President Biden, and I feel the 
same way too, believe that climate change is an existential 
threat that absolutely must be addressed. And he has proposed a 
clean electricity plan that would, by 2035, shift entirely the 
electricity sector to reliance on renewables. And, of course, 
with renewables, as you pointed out in the case of the U.K., 
there is a question of what to do if the sun is not out and the 
wind does not blow. And I believe there are storage 
technologies that can be deployed and, you know, other means to 
address that, and of course that has to be part of a plan to 
switch to renewables and address climate change.
    Senator Daines. Yeah, and one of our concerns of course is, 
of course, the technical challenge here on intermittent sources 
of energy, as you described, and storage, but the impact this 
will have on families that are on fixed incomes, our seniors, 
our lower-income families are seeing these massive spikes in 
energy costs.
    Secretary Yellen. Well, that is certainly something we 
would want to avoid, and I do not believe that the President's 
program is going to lead to increases in the cost of energy for 
the typical family.
    Senator Daines. And I respect that point of view. And I am 
sure when the Europeans launched on this path, they were not 
planning to have order of magnitude increases in prices either, 
but it has been a consequence of the policies.
    Chairman Powell, earlier this month in response to the 
revelations about securities trading by presidents of Fed 
regional banks, you began to review the ethics and transparency 
rules across the Fed because, and I quote, ``The trust of the 
American people is essential for the Federal Reserve to 
effectively carry out our important mission.''
    The Fed Board of Governors is subject to FOIA and the 
Federal Records Act, but the Fed regional banks currently are 
not. Would you support making Fed regional banks subject to 
FOIA and the Federal Records Act to ensure greater public 
transparency and trust in the Fed?
    Mr. Powell. Senator, that is a good question. I would like 
the chance to think about it and come back to you. I would want 
to reflect on that and on the reasons why they are not subject 
to it, and I will do that.
    Senator Daines. I appreciate that, Chairman Powell. Mr. 
Chairman, I will wrap up here this statement. If there is 
something that concerns many of us it is the loss of trust to 
the American people in their Government, and here you have one 
more example. I appreciate your leadership, and thanks for 
consideration of that request.
    Mr. Powell. Thank you.
    Chairman Brown. The Senator from Georgia, Senator Ossoff, 
is recognized.
    Senator Ossoff. Thank you, Mr. Chairman, and thank you to 
our guests. Mr. Chairman, a question I have asked you in 
several consecutive hearings, the COVID-19 pandemic, of course, 
the most significant shock to the U.S. and global economy in 
the last 2 years. Beyond COVID, what do you assess are the most 
significant systemic risks or threats to financial stability in 
the U.S. and globally?
    Mr. Powell. When I think about systemic risks to the 
financial system I always think about cyber risks, really more 
than anything else. We have a very highly capitalized banking 
system, one that is much better at measuring its risks, so that 
more traditional--making bad loans, losing money, and things 
like that, that will happen, but the banks are really well 
fortified against that.
    The risk that we have not really faced the full brunt of 
yet is a successful cyberattack on a financial institution of 
some kind, be it a financial market utility or a bank or 
another financial institution, and, you know, we work closely 
with Treasury and other agencies all around the country on 
that. You never have the feeling you are doing enough, but it 
is a very high priority to be ready for. But that would be the 
number one thing.
    Senator Ossoff. Madam Secretary, the same question for you, 
please. Other than the ongoing COVID-19 pandemic and the 
terrible economic toll that it is taking and the terrible 
health toll that it is taking, looking more broadly, what do 
you assess to be the most significant systemic risks or threats 
to financial stability?
    Secretary Yellen. I think there are threats to financial 
stability that have come from the growth of activity in the 
shadow banking sector. We saw some of those threats emerge 
during the onset of the pandemic. We have, for example, open-
end bond funds that guarantee daily redemption, saw massive 
withdrawals by individuals who wanted to flee to cash, and that 
can trigger fire sales of assets with systemic consequences. 
The Financial Stability Oversight Council that I head has taken 
that up as a topic that we are looking at and examining.
    There are issues relating to hedge funds and the 
possibility of leverage there that can trigger financial runs. 
That is another topic. And more broadly, climate change over 
time, I believe, could be a significant risk to the financial 
sector and the economy, and FSOC is also doing work on that to 
assess, evaluate, coordinate regulators, work with them to make 
sure they have the data that they need and that we develop the 
methodologies to examine that risk.
    Senator Ossoff. Thank you, Madam Secretary. Mr. Chairman, 
you noted in your testimony the impact of supply chain 
bottlenecks on prices. Can you give a sense to what extent you 
assess that difficulties in the shipping markets and import 
operations are driving those bottlenecks and contributing to 
high price levels in some sectors?
    Mr. Powell. It is certainly one of the major factors. We 
are told by our contacts that retailers, for example, that are 
trying to buy products for the holiday season cannot get the 
product. If they can get the product, they cannot get a 
container. They can get the container, they cannot get a ship. 
If they can get the ship, it is at anchor outside of the port 
of Los Angeles. So transportation is a big issue. Really, our 
supply chains have gotten all tangled up and blocked up. Big 
part of it.
    Senator Ossoff. Thank you, Mr. Chairman. And Mr. Chairman 
and Madam Secretary, as you know, Georgia hosts the Port of 
Savannah, which is the fastest-growing deep water port in the 
United States. It hosts the largest single container terminal 
in the United States. We have additional capacity at the Port 
of Savannah.
    Broadly speaking, have you been in any meetings, 
principals' meetings, or National Economic Council meetings, or 
discussions at a high level about surging governmental 
resources and ingenuity to solve these shipping bottlenecks? 
When I reflect upon the capacity, for example, that our 
Department of Defense has to project power and mobilize 
resources and execute complex logistics around the world, I 
cannot help but wonder whether with a more hands-on and 
targeted approach we could resolve some of these issues at 
major U.S. ports and in the shipping industry.
    Secretary Yellen. The National Economic Council is looking 
closely at this issue. They have hired someone who has 
extensive experience with logistics and supply chains to take a 
very careful look and to see what we can do to try to untangle 
these supply chains.
    Senator Ossoff. Thank you. Any recommendations to Congress 
would be appreciated. And perhaps if there is some emergency 
legislative measure that would allow us to tackle this problem 
which is contributing to price and stability and price 
increases, let's follow up directly about opportunities to work 
together.
    Secretary Yellen. We would be happy to do that.
    Senator Ossoff. Thank you, Mr. Chairman. I yield.
    Chairman Brown. Thank you, Mr. Ossoff. Senator Tillis is 
recognized from his office, remote.
    Senator Tillis. Thank you, Mr. Chairman. Secretary Yellen, 
and Chair Powell, thank you for being here.
    Chair Powell, the Administrative Procedure Act requires 
Federal agencies, including the Federal Reserve, to follow 
well-established rules when entering proposed and final 
regulations. I believe the Fed issues far too much guidance 
that is generally applicable to all banks, which should instead 
be subject to thoughtful and transparent notice and comment. I 
believe former board member, Tarullo, has suggested that that 
certain Federal actions are exempt from the APA, and I think 
specifically noting CCAR, the Comprehensive Capital and 
Analysis Review.
    In my conversations with Vice Chair Quarles, he has made it 
abundantly clear that he believes that Fed does, in fact, have 
to abide by the APA in all circumstances. So, Chair Powell, who 
is right? Does Tarullo have a leg to stand on in terms of 
saying that the Fed is not subject to the APA in all 
circumstances, or is Vice Chair Quarles right, that you are?
    Mr. Powell. Senator Tillis, I will speak to you to this 
issue under the control of my general counsel who is here, but 
my understanding is that the APA does apply to the board and 
that we take care to observe its requirements. I know that our 
stress testing and capital plan rules were promulgated in 
compliance with the APA.
    Senator Tillis. So I guess with legal counsel in the room, 
I have got a half answer.
    Mr. Powell. Well, I have given you what I know. I would be 
happy to follow up with you.
    Senator Tillis. Yeah, I feel very strongly about it. We 
will come back to that.
    I did want to ask you another question, Chair Powell. In 
minutes from the FOMC conference call on October 13th, you 
advocated for--oh, I am sorry, October 2013--you advocated for 
not disclosing contingency plans you had made for a potential 
breach of the debt ceiling, saying it would, and I quote from 
the minutes, ``make it less likely that the Congress will feel 
enough pressure to actually raise the ceiling,'' end quote.
    Do you think it is the role of the Federal Reserve to 
decide to withhold such information, and if you do believe 
that, in what other instances have you deemed it not important 
enough to not influence congressional outcomes?
    Mr. Powell. Actually, if you look at that transcript, what 
I said was, and what I meant was, the things that we will do 
that are within our power to do I think are very well 
understood by market participants. There was a long list of 
things discussed at that meeting, and as you get down the list 
these were things that we really would not like to do and 
probably would not do, but, you know, really, in a national 
emergency we would have to think about doing.
    So I was talking about those sorts of things, and I thought 
putting those out there and having people believe that we would 
do these things was really not a good idea, and that it might 
create a misunderstanding on the part of the public that we 
actually could shield the financial markets and the economy and 
the American people from a default on the debt ceiling, on our 
debt, and that is not the case.
    Senator Tillis. Secretary Yellen and Chair Powell, I know 
you both made comments endorsing the Federal legislative 
solution to provide a replacement framework for outstanding 
financial contracts tied to LIBOR. I agree completely, and I 
was pleased to see the legislation clear the House Financial 
Services Committee last week on a strong bipartisan basis. I 
just want to let you know that we understand that bipartisan 
action is needed in the Senate to affect a smooth transition 
and to provide certainty to capital markets, and I look forward 
to working with my colleagues, first among them Senator Tester, 
to make sure that Congress does act and provide for a smooth 
transition.
    Thank you, Mr. Chairman. I yield back.
    Senator Toomey [presiding]. Thank you, Senator Tillis. 
Senator Cortez Masto.
    Senator Cortez Masto. Thank you. Thank you both for being 
here. It has been, at times, a loud, exciting hearing this 
morning and I appreciate your patience and you are still there 
willing to ask questions, and I think it says a lot about both 
of you.
    But let me just put something, because at the end of the 
day, at least for the people in my State, it is about the truth 
and the facts and people working together and what is happening 
in this country during this pandemic.
    So let me just verify, because Congress passed the CARES 
Act, the American Rescue Plan, and an appropriations bill with 
significant resources for health care, for housing, and support 
for local governments, and they did this because we were in the 
middle of a worldwide health pandemic due to COVID-19. Isn't 
that correct? Yes for both of you? Both shaking your heads yes?
    Mr. Powell. Yes.
    Senator Cortez Masto. Yes. So how important were those 
investments to avoid a deep and painful recession? Were they 
important to avoid that recession? Is that----
    Secretary Yellen. Absolutely.
    Mr. Powell. Utterly essential.
    Senator Cortez Masto. OK. And I appreciate that because at 
the end of the day there is bipartisan work to address this 
pandemic and it was needed at that time. The work that we are 
doing to increase the debt limit has a lot to do with that debt 
that was incurred back then to address the pandemic. Isn't that 
right, Secretary Yellen?
    Secretary Yellen. That is true. Raising the debt limit 
allows us to pay bills that were incurred because of those acts 
and others of Congress.
    Senator Cortez Masto. So just so I can clarify, so my 
colleagues who are refusing to come to the table to address 
this, they are getting the benefit of that relief in their 
States, however. Correct?
    Secretary Yellen. Yes, of course.
    Senator Cortez Masto. All right. Just to clarify that. Now, 
I do know though, coming from Nevada, and Chairman Powell, you 
and I have had this conversation, Secretary Yellen, you as 
well, there is still an industry that was so hard hit that it 
is still trying to recover from this pandemic, which is that 
hospitality, that travel and tourism industry. Isn't that 
correct?
    Secretary Yellen. It is still deeply depressed, and has not 
come back to normal yet.
    Senator Cortez Masto. That is right. So Chairman Powell, 
can I ask you your thoughts on what we should continue to do to 
address to help the recovery? Because I know at least in 
Nevada, which the main revenue generated for our State is this 
hospitality, travel, and tourism, that leisure traveler has 
been there, but the business traveler is not back, the 
international traveler is not back. Are you anticipating what 
can be done by the Federal Reserve to address this--and 
Secretary Yellen, I will ask you the same thing--by the 
Administration, or what should we be doing as Congress? Have we 
done enough for this industry or does more need to be done to 
help bring it back because of this pandemic?
    Mr. Powell. In my view, the most important thing is to get 
control of the pandemic. That is what is keeping people out of 
sporting arenas and off of airplanes and out of restaurants and 
bars. And we saw that very clearly in the August payroll report 
where job creation in these industries had gone from very 
strong for several months to zero in August. So it is really 
all about, at this point, getting the Delta variant and really 
frankly getting vaccination and immunity up higher which is not 
something we can do.
    Senator Cortez Masto. Thank you. Secretary.
    Secretary Yellen. And I would agree with that answer, and 
it is something we are working as hard as we possibly can to 
do, to get vaccination rates up, to deal with the pandemic.
    Senator Cortez Masto. Thank you. And let me talk about 
something that is also impacting my State, and I think many, 
which is the disruption in the supply chain. Senator Ossoff was 
talking to you about it, Secretary Yellen, and you talked about 
the National Council, if I remember correctly.
    Secretary Yellen. National Economic Council.
    Senator Cortez Masto. Yes. Is there a timeframe when they 
anticipate coming back with some kind of concrete answers to 
how to address this disruption in the supply chain?
    Secretary Yellen. I can get information for you on that. I 
know they are bringing together business leaders who were in 
affected industries with experts to see if things can be worked 
out.
    Senator Cortez Masto. Thank you. I appreciate that. I am 
going to yield the remainder of my time. I will submit the rest 
of my questions for the record, but thank you both for being 
here.
    Mr. Powell. Thank you.
    Secretary Yellen. Thank you, Senator.
    Senator Toomey. Senator Hagerty.
    Senator Hagerty. Thank you, Ranking Member Toomey, and 
thanks to the Members of the Committee for holding this 
hearing. I want to thank Chairman Powell and Secretary Yellen 
for being here today.
    Chair Powell, I would just like to also acknowledge you. 
You and I have talked extensively about my concerns about the 
inflation and the economy. We spoke about this in February and 
we spoke about it in depth during our hearing in July. I am 
very pleased to see the Fed beginning to lay the groundwork now 
to address inflation in our economy, and for that, I want to 
thank you.
    Secretary Yellen, I would like to turn my attention to you, 
and if we might speak about the $3.5 trillion transformation of 
the U.S. economy that is being proposed right now, that we are 
going to be expected to vote upon very soon. Last week, you, 
Leader Schumer, Speaker Pelosi stood before the American public 
and said you had agreed to framework, a framework to pay for 
this. Could you tell us what is in this framework?
    Secretary Yellen. Well, it was essentially a list of ideas 
where there is support from the House, the Senate, and the 
White House for how revenue could be raised that would be 
sufficient to cover the expansive programs under consideration. 
And as we have articulated, this involves increases in the 
corporate tax rate, a reform of international provisions that 
will reduce the incentives we currently have in the tax code to 
export jobs and export profits to low-taxed areas, and to 
export jobs abroad and raise revenue, and additional revenue 
raised from high-tax, high-income individuals, well above 
$400,000, for example, by raising back the highest income tax 
rate to where it was before 2017, and will go in 2026, under 
current law to increase the tax rate on capital gains, and 
importantly to improve tax compliance. We have a huge tax gap 
that is estimated at $7 trillion----
    Senator Hagerty. I will come to the compliance issue in 
just a moment. I would, though, very much like to see this 
framework that you agreed to. We are going to be expected to 
vote on the most massive transformation of the U.S. economy 
that this Nation has ever seen. $3.5 trillion is a huge amount 
of money in pay-fors. And the industries and the individuals 
and how they are going to be targeted is something that I would 
very much like to get a copy of before I am expected to vote on 
this. I am certain that my----
    Secretary Yellen. I am sure.
    Senator Hagerty. ----fellow Committee Members would like to 
see this. Is this something that you could get to me and my 
team by the close of business today, Secretary?
    Secretary Yellen. No, it is not. There are currently 
discussions and negotiations taking place within the House and 
the Senate with involvement in the White House to try to decide 
what a final package will look like. And until that is decided, 
you know, you can see that things coming out of House Ways and 
Means, for example, but this is very much in the process of 
being decided.
    Senator Hagerty. This is very, very disturbing when we are 
talking about something of this magnitude and you are telling 
me that I cannot see the framework, that the Members of this 
Committee cannot see the framework. I guess we are just 
supposed to trust the Administration.
    Secretary Yellen. Well you can look at our proposals that 
the President put out in conjunction with his Build Back Better 
plan.
    Senator Hagerty. These are just platitudes. I am talking 
about the specifics of the program.
    Secretary Yellen. Well the Treasury's green book had 
specifics of our proposals and House Ways and Means marked up a 
bill pertaining to revenue that you can look at the specifics.
    Senator Hagerty. I will look forward to you working with my 
staff so we can have a detailed understanding, because the last 
thing I want to do is find ourselves yet again in a situation 
where we have got to pass a bill to find out what is in it. 
And, in fact, we need to have a very clear understanding of 
this sort of transformation because the credibility of this 
Administration has been seriously challenged. If you look at 
the disaster that is taking place in Afghanistan, if you look 
at the disaster at our southern border, the inflation that is 
running rampant in our economy, I am very concerned and I want 
to have a much clearer picture of what the intended pay-for 
will be and the impact on the economy. So I appreciate your 
team working with mine so we can get as much information as 
possible on this. Thank you.
    I would like to turn to another specific area, much more 
specific indeed. You spoke about this with Senator Lummis. That 
has to do with the new requirement that our banking system now 
report transactions that exceed $600. That is going to be an 
impact on community banks, on farm credit lenders. It will be 
an extensive compliance burden.
    But there is a greater concern that I have, and that is the 
concern that my constituents have raised with me and that the 
American public has in the ability to keep this information 
confidential. And after we have seen what happened when the IRS 
disclosed the private confidential tax information of its 
political enemies during this Administration to ProPublica, 
there is a huge concern and a deserved concern on the part of 
the American public that this information, that the detail that 
we are talking about it a detail level that I would expect from 
the Chinese Communist Party, not here in America. But the 
detail will be protected.
    Can you tell me what you are going to do to make certain 
that this taxpayer confidential information will be protected?
    Secretary Yellen. Protecting taxpayer information is the 
highest priority of the Internal Revenue Service. The 
ProPublica information represented an illegal revelation of 
taxpayer information. It is an illegal act and it is being 
investigated thoroughly by independent entities, law 
enforcement, and the inspector generals of Treasury and the 
IRS, and there really cannot be tolerance for that. We are 
proposing to invest in the IRS so that they can modernize their 
systems and put in place better controls that will protect 
taxpayer information.
    Just to be clear, we do not know that the ProPublica 
information came from the IRS. That has not been established. 
And we are talking about a small amount of information, not 
every transaction that is less than $600. Banks already report 
to the IRS on Form 1099-R----
    Senator Hagerty. I am aware of that.
    Secretary Yellen. ----the amount of interest, and we are 
just asking for two additional pieces of information, aggregate 
inflows and aggregate outflows from the account during the 
year.
    Senator Hagerty. Again, far more detail about it, 
Americans' private transactions. And again, I will say I 
appreciate the fact that you are looking for accountability 
within the IRS. We have seen a great lack of accountability in 
this Administration. Just look at what is happened in 
Afghanistan, zero accountability. Look at what is happened at 
out border, zero accountability. The American public is 
concerned and I very much appreciate the efforts that you are 
taking and I hope that you get to the bottom of this so it 
never happens again.
    Thank you, Madame Secretary.
    Chairman Brown [presiding]. Senator Warnock from Georgia is 
recognized.
    Senator Warnock. Thank you so very much. Thank you so much, 
Mr. Chairman, and thank you, Chairman Powell and Secretary 
Yellen, for being here.
    Yesterday, it was reported that the Regional Federal 
Reserve Bank presidents in Dallas and Boston are resigning 
following earlier reports that they were actively trading their 
private investments while the bank was intervening in the 
markets. Throughout the COVID-19 pandemic, many experts have 
underscored the importance of maintaining the independence of 
the Central Bank. Independence, of course, is necessary before 
the pandemic, after the pandemic, during the pandemic.
    Even though neither serves now as voting members of the 
Federal Open Market Committee, this is a blow to the image of 
the Central Bank serving as an impartial and independent agency 
charged with maintaining stability in pricing and employment. 
Chairman Powell, what immediate actions have you taken to 
ensure the impartiality of the Fed, and what systems already 
that are in place failed here and how do you plan to fix them 
going forward?
    Mr. Powell. Our need to sustain the public's trust is the 
essence of our work. We want the public to understand that we 
work for all Americans. So we do not like to be having these 
concerns raised. It is really something that is very, very 
concerning. So as soon as I learned of it, I directed our staff 
to undertake a review of our practices.
    We have had in place a set of practices around investments 
and trading and disclosure that seems to have worked for a long 
time, only it is clearly really not working now and we 
understand now that we need to raise modifier practices and we 
are in the process of creating ideas and recommendations for 
that. That is one thing that we are doing. We are also looking 
carefully at the trading that was done to make sure that it is 
in compliance with our rules and with the law.
    Senator Warnock. The rules seem to have broken down. Do you 
think there needs to be any changes in the trade?
    Mr. Powell. Yes. I am 100 percent sure there is a need for 
those and there will be. I do not know precisely what they will 
be, but the appearance is just obviously unacceptable. Even if, 
as appears to be the case, these trades were in compliance with 
the existing rules, that just tells you the problem is that the 
rules and the practices and the disclosure needs to be improved 
and that is what we are working on. We will rise to this moment 
and address this forthrightly.
    Senator Warnock. I agree. Confidence in the Central Bank is 
essential, and I look forward to working with you on this issue 
and also working with Chairman Brown, who is working on 
legislation.
    Let me change topics. I am a strong advocate for working 
and middle-class families and we successfully pushed to include 
an expansion of the vital Child Tax Credit program in the 
American Rescue Plan. I think it is really important as some 
folks are talking about this $3.5 trillion package that what we 
are talking about here with the Child Tax Credit is a tax cut, 
and that does not get said often enough. I think it has 
something perhaps to do with the kind of attitude about working 
people, ordinary people, poor people. It is a tax cut.
    Experts say that this tax cut would cut child poverty in 
half nationwide, and 97 percent of families with children 
qualify. So this is about lifting the burdens of our neighbors. 
If made permanent, this tax cut for families would push poverty 
in a typical year down below 10 percent in 47 States, including 
Georgia.
    Secretary Yellen, should Congress make this program 
permanent and if so, what kind of long-term benefits will this 
have for our Nation's economy and families?
    Secretary Yellen. Well we certainly would like to find a 
way to make it permanent. It is a very important support for 
children and their families. We saw just after one payment that 
the share of families reporting that there was not enough to 
eat in the household dropped by 24 percent, and it is clear 
that families are spending this on their children for clothing, 
for food.
    And, you know, the security that our children have whether 
they grow up insecure, in families that do not have enough to 
provide for them, make all the difference to their success in 
life. So this program that will provide a steady source of 
income, along with other supports in the sort of Build Back 
Better agenda, including 2 years of preschool, childcare 
support, I think these are critical investments to make sure 
that families with children can support them and they can 
succeed in their lives.
    Senator Warnock. You said they use the money to buy things 
like food, I believe you said----
    Secretary Yellen. Yes.
    Senator Warnock. ----clothing. What, in your estimation, is 
the impact of that on the economy, on a consumer economy? Does 
that help or hurt?
    Secretary Yellen. Well of course it is positive. It 
supports spending in the economy that creates jobs in the 
process.
    Senator Warnock. And what would be the impact of adding 
mandatory work requirements if we extend this and made it 
permanent?
    Secretary Yellen. Well we would not be in favor of 
mandatory work requirements. The truth is that the vast 
majority, over 90 percent of families that require this 
assistance are working, have workers, and you have, in 
addition, grandparents, for example, who are no longer in the 
workforce or people who are disabled, may not be working and 
cannot work, who are also getting support that they need to 
take care of children.
    Chairman Brown. Thank you, Senator Warnock.
    Senator Warnock. Thank you.
    Chairman Brown. The Senator from North Dakota, Mr. Cramer, 
is recognized.
    Senator Cramer. Thank you, Chairman Brown. Thank you, 
Senator Toomey. Thanks to both of you for being here and I 
cannot resist. For some reason, I am just not surprised, Madame 
Secretary, that working for money is something that your 
Administration is against. I mean part of the reason we have 
this no longer transitory inflation, Mr. Chairman, is because 
we keep giving money away like it grows on trees and we 
increase the demand for products while diminishing the supply.
    I want to get to another point, related however, Secretary. 
You made addressing climate change a high priority in your 
term. It is a central point of your term. You and John Kerry, 
the President's climate czar, have encouraged banks and 
investment institutions to form this net zero banking alliance. 
By the way, net zero, Mr. Chairman, what that means is we are 
going to transfer our climate guilt to other people who do not 
have a climate conscience. I would rather set a goal, a global 
goal, and hold the real polluters accountable rather than 
reducing our economy and putting us at a disadvantage.
    But anyway, the President has urged banks to provide as 
much support for alternative energy projects as possible, 
which, of course, presumes at the expense of current energy 
projects. And that could obviously force financial institutions 
to put political and social agendas ahead of their investors 
and ahead of their banks, ahead of the American economy. And 
that is why I have been such a harsh critic of these very 
arbitrary ESG statements put out by banks.
    But in light of this weak unemployment and recovery 
numbers, the fact that this inflation, that I never believed it 
was transitory, clearly is not any longer, do you think it is 
really a good idea for private businesses to be forced by a 
Government official to make decisions about where they should 
or should not put their money, jeopardizing jobs, jobs in our 
energy sector? Because guess what is up? The price of gasoline, 
the price of oil, the price of electricity is skyrocketing. And 
there is no worse tax.
    Mr. Warnock wants to call Child Tax Credit a tax cut, and 
he complains that we do not say that often enough. We do not 
say it because it is not a tax cut. It is a subsidy. It is a 
subsidy. Now, you can argue whether it is a good subsidy or a 
bad subsidy, but calling it a tax cut is not fair. What we are 
doing is driving the price of all of these fuel sources up, 
transferring our climate guilt, and then hamstringing our own 
financial institutions with these arbitrary rules.
    So in light of what is going on with unemployment, now I 
know you want to just tax people a whole bunch more and pay 
people not to work so maybe unemployment is not a problem, but 
is it? Couldn't we please rethink this strategy, Madame 
Secretary?
    Secretary Yellen. Well look, climate change is an 
existential threat and it is a very high priority of President 
Biden's and of mine to address it, but no one is forcing banks 
or other financial institutions to make investments that they 
do not think are profitable and desirable. There is enormous 
interest in the financial community in making investments that 
will be profitable in sustainable investments.
    And what we want to do, and we are working through FSOC to 
do this, is to make sure that investors have the kind of 
information that will enable them to make investment decisions 
that they want to make that are profitable. And----
    Senator Cramer. So you do not think they are capable of 
getting their own information at risk and opportunity so you 
have to have a czar and a secretary and other czars give them 
information that might be helpful to their decision--all the 
while, by the way, Russia, Venezuela, Saudi Arabia, they get 
the benefit of all of this. I mean when our President has to 
call on OPEC+ to help bring the price of gasoline down by 
increasing production, all the while we shut off our own, 
whether by fiat or by innuendo, that does not seem like a great 
strategy to me. I think you are wrong.
    I will yield back. Thank you, Mr. Chairman.
    Chairman Brown. Thanks, Senator Cramer. As we close, 
Senator Toomey has some remarks and then I will make a closing 
statement.
    Senator Toomey. Thank you, Mr. Chairman. I just feel 
compelled to go back one more time and touch on this issue of 
the debt ceiling. I have to confess I have been shocked to hear 
our Treasury Secretary and some of my colleagues tell us today 
that raising the debt ceiling and additional borrowing that 
that permits is 100 percent about covering spending that was 
committed to in the past, as thought the spending that has not 
yet occurred this year somehow is not going to cause a deficit, 
somehow that spending will not require borrowing? The spending 
that has not yet occurred but is going to occur absolutely is 
going to increase the amount that we are going to have to 
borrow. And when we go on an unprecedented, blowout spending 
spree, it is going to increase spending by that much more.
    I mean just think about it. Imagine that this $3.5 trillion 
spending bill, let's imagine Senator Sanders had his way and it 
was $6 trillion. Do we seriously think that would have no 
impact on the amount of money our Government would have to 
borrow? How ridiculous. Of course it does.
    And so the truth of the matter is our Democratic colleagues 
do not want the American people to associate this huge spending 
binge they have been on and want to continue on with the debt 
that will be required in part to pay for it, and we are not in 
favor of either one. And that is why, Mr. Chairman, I think you 
are going to need to use the procedures readily available to 
you to raise the debt ceiling just as you intend to pursue all 
this spending, which is with a simple majority vote.
    Chairman Brown. Thank you, Senator Toomey. Of course, we 
all know that 3 years ago, 45 Democrats joined a number of 
Republicans with a Republican President, a Republican Senate, a 
Republican House to pay our debts. We believed it was our 
patriotic duty. We all took an oath of office swearing to the 
obeisance thereof of what we believed and American values and 
we paid our debts. We did it then in a bipartisan overwhelming 
vote and we should do it, and we know that Senator McConnell 
does not seem to think that.
    Let me get one thing straight though about what we have 
talked about. The infrastructure we have had, investments we 
passed in a bipartisan bill we are working on now are fully 
paid for. It is simple. Instead of American taxpayers racking 
up debt due to corporate handouts and tax cuts for wealthy 
CEOs, those corporations, those billionaires for the first time 
are finally going to help us pay for the investment we need in 
our greatest asset, the American people. It is not just nurses 
and teachers and firefighters that are paying their taxes. It 
is time that the wealthiest people in this country paid their 
fair share.
    Corporate greed is a big reason why we need this investment 
in the first place. For decades, we had a corporate business 
model, I mentioned that in my opening statement, where they 
plow all their cash into stock buybacks and bonuses and other 
schemes where the money ends up in their pockets instead of 
funding the real economy.
    The economy of a year ago may have looked pretty good from 
a corporate boardroom or may have looked pretty good from the 
Dirksen Office Building, but anyone who got, as Lincoln would 
say, their public opinion baths would know that so many 
workers, entire neighborhoods, entire towns were not seeing the 
gains, those stock market gains, translate into opportunity for 
them and their family.
    We are changing that. One of the best things about our 
economy today is for the first time in decades, the first time 
in some people's memory, workers are starting to gain a little 
power in our economy, over their schedules, over their wages, 
over their benefits. They are going to gain a whole lot more 
power when we invest in jobs in their towns and childcare and 
housing and the Child Tax Credit and education and workplace 
protections, and everything workers need to feel stable and 
think, just so they know, finally in this country, they are 
getting a fair shake.
    I thank Secretary Yellen for joining us, thank Chairman 
Powell for joining us. The meeting is adjourned.
    [Whereupon, at 12:30 p.m., the hearing was adjourned.]
    [Prepared statements and responses to written questions 
supplied for the record follow:]
              PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
    We all remember the dark days of 2008, and the painful years that 
followed. Secretary Yellen and Chair Powell, you both helped us deal 
with the aftermath in your roles at the Federal Reserve.
    When the biggest banks were in trouble, Washington sprung to 
action--``we have no choice, we can't allow these banks to fail,'' 
everyone said.
    But millions of families were allowed to fail.
    American workers bailed out the financial industry, but their 
livelihoods were not treated with the same urgency. Recovering their 
jobs--let alone empowering them to demand better ones--would have to 
wait for years.
    By the end of 2013, the stock market had its best year in almost 
two decades, while nearly 11 million people were still out of a job.
    The question before us today is the same question we've been 
grappling with for a year: are we going to learn from our past 
mistakes?
    Americans do not have to settle for another Wall Street-first 
recovery. We have the tools to do things differently--the only question 
is whether we're going to use them, for as long as it takes.
    So far, we have worked to learn the lessons of the past, and do 
better by American workers. That's what the CARES Act and the American 
Rescue Plan were all about.
    We put money in families' pockets--stimulus checks and the Earned 
Income and the Child Tax Credit were spent in local supermarkets and 
shopping centers on food and back-to-school supplies.
    Treasury helped State and local governments get emergency rental 
assistance to 420,000 families in August alone and provided $950 
million to help homeowners who are behind on their mortgage.
    The result has been record job growth--job creation in the first 7 
months of the Biden administration is nearly double any previous first-
year President.
    It's not just the jobs numbers--it's also the quality of those 
jobs.
    For the first time in decades, workers are starting to gain a 
little power in our economy--power to negotiate higher wages, better 
working conditions, and more control over their schedules and their 
futures.
    Progress, to be sure. Yet we have a long way to go.
    We are still down 5.6 million jobs since before the pandemic.
    Corporations are using the pandemic as an excuse to ``cut costs''--
and we know that by ``costs'' they always mean jobs or wages or 
retirement contributions, never CEO bonuses or stock buybacks.
    Instead of hiring back loyal workers as business expands, companies 
are outsourcing or contracting out the work, and paying people half as 
much.
    The Fed, for its part, has taken extraordinary action over the past 
year-and-a-half to stabilize our economy.
    But many of the Fed's efforts helped stabilize markets much more 
than they stabilized working families.
    Those actions have been a bonanza for Wall Street. Big corporate 
mergers are at an all-time high, and the biggest banks have had one of 
their most profitable years ever--during a global pandemic.
    The same companies that benefited from the Fed's actions want to 
``restructure'' their workforce, and complain about a ``skills gap,'' 
while refusing to cut into their stock buyback budgets to expand 
training programs or offer truly high wages.
    This ought to be a reminder that we're still in the very early 
stages of recovery--and that the same old Wall Street system is not 
good enough.
    Chair Powell, you have talked about your commitment to competitive 
labor markets, yet you have said that the test for full employment is 
``all but met.''
    Tell that to the working mother who was forced to quit her job 
because she couldn't afford childcare, or even find childcare.
    Tell that to the server who worked for decades at a major hotel 
chain, only to lose her job during the pandemic, and then be offered 
the same job by a contractor paying half the wages with no benefits.
    Tell that to a worker in my hometown in Mansfield, who for decades 
has watched companies close down factories and move good-paying, union 
jobs abroad--only to have them replaced, when they were replaced at 
all, by low-wage, non-union jobs at a Big Box store.
    Now is not the time to declare victory.
    Americans have watched this story unfold over and over again.
    Crash. Recession. Rapid Wall Street recovery. Years of slow, 
painful, uneven job recovery.
    And always within the same corporate system that treats quarterly 
stock prices as the only measurement that matters, and treats workers 
as a cost to be minimized.
    How many times are we going to continue to do this?
    How many times are Americans going to have to watch history repeat 
itself?
    We cannot declare the recovery complete until all workers can find 
a job that pays them fair wages and treats them with dignity.
    The Fed cannot pull back every time workers gain a tiny bit of 
power to demand higher wages.
    The Fed cannot continue to rubberstamp mergers and allow corporate 
consolidation to go unchecked, and then wonder why job growth isn't 
reaching whole regions of the country.
    Full employment means a truly competitive labor market--one where 
everyone can get a job, and employers compete for workers.
    We have not seen that kind of labor market in decades--but we can. 
That is our job--in Congress, at Treasury, at the Fed.
    I also need to say a quick word about the games Republicans are 
playing with people's livelihoods.
    The debt limit is not about future spending--it's about meeting 
obligations we've already made, like the bipartisan, overwhelmingly 
popular CARES Act--the reason we're holding this hearing today.
    Every single one of my Republican colleagues who served on this 
Committee last year voted for the CARES Act. Every single one of them 
voted for the $2 trillion tax cut for their wealthy friends. They 
didn't seem to have a problem with the debt limit then.
    But now they don't want to pay the bill.
    The partisan game is pretty transparent.
    We need to pay our bills on time. And we've always done it 
together. Treasury Secretaries--past and present, and across the 
political spectrum--are sounding the alarm about the economic 
devastation they're threatening.
    And China is watching with glee, all too eager to see the dollar 
tarnished as the world's reserve currency.
    We can't play politics with the full faith and credit of the United 
States.
    Finally, Chair Powell, I understand you've initiated a review of 
the ethics and financial disclosure rules at the Fed after we learned 
of stock trades that two Federal Reserve Bank Presidents made during 
the pandemic.
    I have a bill with Senators Merkley and Warnock--the Ban Conflicted 
Trading Act--that would ban members of Congress from buying or selling 
any individual stocks. I think the same should apply to Fed officials 
and I'm introducing a bill to do that.
    Your job, the Fed's job, members of Congress' job is to serve the 
public, not their stock portfolios.
                                 ______
                                 
            PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
    Thank you, Mr. Chairman. Secretary Yellen and Chair Powell, 
welcome.
    Last year, Congress, on bipartisan basis, forcefully responded to 
the threat of economic collapse caused by the pandemic and resulting 
lockdowns. That response, together with the Fed's aggressive monetary 
policy support and the end to lockdowns, enabled the U.S. economy to 
fully recover. Our economy today is not only larger than it was before 
the pandemic, but we're now running above prepandemic GDP forecasts for 
2021.
    Unfortunately, Democrats are trying to ram through a reckless tax 
and spending bill that will threaten economic growth. Policies include 
massively expanding the welfare State, raising taxes on U.S. employers, 
and diminishing investment by increasing taxes on capital gains.
    Let's be clear about the purpose behind these proposals: It's not 
to spur economic recovery--the economy is strong. Nor is it an 
antipoverty plan--the programs are not limited to the poor. It's to 
reconfigure the relationship between the Federal Government and the 
middle class. It's about socializing many ordinary responsibilities 
that families have always assumed.
    Instead of raising taxes to partially fund economically harmful 
programs, we should work to return to the best economy of my lifetime, 
which we experienced before COVID hit. We had the lowest unemployment 
rate in 50 years--including record low unemployment rates for Black and 
Hispanic Americans--real median household income at an all-time high, 
and strong wage growth, above the rate of inflation, particularly for 
lowest income earners.
    This was achieved by reforming the tax code, lowering tax rates, 
and lightening regulatory burdens. Now the Democrats are proposing to 
reverse all of these policies.
    Chair Powell, as you know, the Fed has clear and narrow mandates: 
To conduct monetary policy that promotes stable prices, maximum 
employment, and moderate long-term interest rates, and to conduct 
banking supervision and maintain an efficient payment system.
    As Chair Powell has articulated, these are ``narrow but important'' 
responsibilities. It's therefore concerning to see the Fed, especially 
its regional banks, wade into politically charged areas like global 
warming and racial justice. These efforts undermine the Fed's 
independence and distract from the Fed's actual responsibilities like 
controlling inflation.
    Speaking of which, the Fed's excessively accommodative monetary 
policy, emergency policies long after the emergency has passed, 
produced the inflation I have feared, and the Fed did not expect. We're 
now seeing rates of inflation considerably higher than the Fed 
projected. And it is hurting businesses, consumers, and workers.
    You don't have to take my word for it. Here's what the CFO of 
Costco said last week: ``Inflationary factors abound: higher labor 
costs, higher freight costs, higher transportation demand, along with 
container shortages and port delays, increased demand in certain 
product categories, various shortages of everything from computer chips 
to oils and chemicals.''
    To address this threat, I urge the Fed to accelerate the process of 
normalizing monetary policy so that it does not fall further behind the 
curve in responding to inflation than it already has.
    I'm also concerned Treasury may be headed down a similar path of 
exceeding its authority. To much fanfare, the Biden administration has 
announced an international tax agreement that consists of two pillars.
    Pillar one is an unprecedented change that would allow foreign 
countries to tax American companies based on their sales overseas. It's 
a tax revenue transfer from us to them. Unsurprisingly, this is the 
priority for other countries, who have long sought this tax transfer.
    Pillar two is a global minimum tax on multinationals' foreign 
income. This is the Biden administration's attempt to justify 
burdensome tax increases on U.S. companies. Unsurprisingly, this is the 
Administration's priority and is part of its efforts to dismantle our 
successful 2017 tax reforms.
    The Administration is imploring other countries to implement a 
global minimum tax that will harm their own workers and businesses. By 
doing so, the Administration has implicitly acknowledged that their 
proposed multinational tax increases will make U.S. workers and 
businesses less competitive, if other countries either don't implement 
a global minimum tax of their own, or implement a significantly lower 
rate than what the Administration is proposing.
    But there's a real possibility that other countries will not 
implement a global minimum tax for at least two reasons. First, the EU 
can only implement this global minimum tax by unanimous consent, which 
they don't have. Second, these countries have only reluctantly agreed 
to pillar two in return for pillar one, which is the transfer of U.S. 
tax revenue to them. But implementing pillar one in the U.S. requires a 
treaty ratified by two-thirds of the Senate--and that's not going to 
happen.
    The Administration has implicitly admitted that their global tax 
hike will be a disaster for the U.S. if the rest of the world does not 
follow suit. There's a very substantial risk that the rest of the world 
will not follow suit. And yet Democrats are charging ahead with this 
destructive tax increase in their reconciliation bill that they're 
going to try to pass any day now.
    Secretary Yellen and Chair Powell, I look forward to discussing 
these and other issues with you today.
                                 ______
                                 
                 PREPARED STATEMENT OF JANET L. YELLEN
                 Secretary, Department of the Treasury
                           September 28, 2021
    Chairman Brown, Ranking Member Toomey, Members of the Committee: 
It's a pleasure to testify today. We are in the midst of a fragile but 
rapid recovery from the pandemic-induced recession. While our economy 
continues to expand and recapture a substantial share of the jobs lost 
during 2020, significant challenges from the Delta variant continue to 
suppress the speed of the recovery and present substantial barriers to 
a vibrant economy. Still, I remain optimistic about the medium-term 
trajectory of our economy, and I expect we will return to full 
employment next year.
    A rebound like this was never a foregone conclusion. In fact, the 
American recovery is stronger than those of other wealthy Nations. One 
key factor for our overperformance is the policy choices that Congress 
has made over the past 18 months. Those choices include the passage of 
the CARES Act, the Consolidated Appropriations Act, and the American 
Rescue Plan.
    Treasury, as you know, was tasked with administering a large 
portion of the relief dollars in those bills, and when we last met, our 
Department was busy standing up programs to help individual families, 
State governments, and organizations of every size in between. While we 
still have much more work to do, we have made significant progress, and 
I wanted to give you an update.
    Let's start with families. In July, our Department started sending 
the monthly expanded Child Tax Credit payments to the families of 
nearly 60 million children across the country. To date, $46 billion 
dollars in payments have been made, and we're already seeing the 
impact. Analysis by the Census Bureau found that after the first 
payments in July, food insecurity among families with children dropped 
24 percent.
    As for State, local, tribal, and territory governments, COVID-19 
decimated their budgets. There were mass layoffs, and to end the health 
and economic emergencies, we knew that communities would need funding 
to hire educators to bring kids back to school, for example, or 
frontline workers to administer the vaccine. The American Rescue Plan 
included $350 billion to that end, and those dollars are indeed helping 
the machinery of local governments get up-and-running. States and 
localities can rely on relief money that is available instead of 
resorting to painful budget cuts.
    Congress rightly designed the State and local program with 
flexibility in mind. I think many of us knew the recovery could run up 
against some unforeseen challenges, and we wanted communities to be 
able to devote resources where and when they saw fit. I want to note 
that this flexibility is paying off now, especially with the spread of 
the Delta variant. Harris County, Texas, for instance, has used this 
funding to boost its immunization rate, offering $100 to each person 
who gets their first vaccine dose.
    For the relief dollars not yet out the door, Treasury is doing 
everything it can to expedite their delivery. The Emergency Rental 
Assistance Program is one example. Prior to the pandemic, there was 
essentially no national infrastructure to get money from Government 
coffers to renters and landlords. Building that infrastructure has been 
a massive undertaking for States, localities, and tribes.
    The program is scaling up quickly, with 1.4 million payments made 
to help struggling renters keep a roof over their heads. Still, too 
much of the money remains bottlenecked at the State and local levels. 
That's why our Treasury team has worked to eliminate every piece of red 
tape possible in order to ensure more payments can get to renters and 
landlords, but States and localities must also work to remove barriers 
that can speed up distribution of rental assistance funds.
    I'll end my remarks there except to reiterate what I've 
communicated many times these past several weeks: It is imperative that 
Congress swiftly addresses the debt limit. If it does not, America 
would default for the first time in history. The full faith and credit 
of the United States would be impaired, and our country would likely 
face a financial crisis and economic recession.
    We must address this issue to honor commitments made by this and 
prior Congresses, including those made to address the health and 
economic impact of the pandemic. It's necessary to avert a catastrophic 
event for our economy.
    Senators, the debt ceiling has been raised or suspended 78 times 
since 1960, almost always on a bipartisan basis. My hope is that we can 
work together to do so again--and to build a stronger American economy 
for future generations. Thank you, and I'm pleased to take your 
questions.
                                 ______
                                 
                 PREPARED STATEMENT OF JEROME H. POWELL
       Chairman, Board of Governors of the Federal Reserve System
                           September 28, 2021
    Chairman Brown, Ranking Member Toomey, and other Members of the 
Committee, thank you for the opportunity to discuss the measures we 
have taken to address the hardship wrought by the pandemic. Our health 
care professionals continue to deliver our most important response, and 
we remain grateful for their service. Progress on vaccinations and 
unprecedented fiscal policy actions are also providing strong support 
to the recovery.
    Since we last met, the economy has continued to strengthen. Real 
gross domestic product rose at a robust pace in the first half of the 
year, and growth is widely expected to continue at a strong pace in the 
second half. The sectors most adversely affected by the pandemic have 
improved in recent months, but the rise in COVID-19 cases has slowed 
their recovery.
    Household spending rose at an especially rapid pace over the first 
half of the year but flattened out in July and August as spending 
softened in COVID-sensitive sectors. Additionally, in some industries, 
near-term supply constraints are restraining activity.
    As with overall economic activity, conditions in the labor market 
have continued to improve. Demand for labor is very strong, and job 
gains averaged 750,000 per month over the past 3 months. In August, 
however, gains slowed markedly, with the slowdown concentrated in 
sectors most sensitive to the pandemic. The unemployment rate was 5.2 
percent in August, and this figure understates the shortfall in 
employment, particularly as participation in the labor market has not 
moved up from the low rates that have prevailed for most of the past 
year.
    Factors related to the pandemic, such as caregiving needs and 
ongoing fears of the virus, appear to be weighing on employment growth. 
These factors should diminish with progress on containing the virus.
    The economic downturn has not fallen equally on all Americans, and 
those least able to shoulder the burden have been the hardest hit. In 
particular, despite progress, joblessness continues to fall 
disproportionately on lower-wage workers in the service sector and on 
African Americans and Hispanics.
    Inflation is elevated and will likely remain so in coming months 
before moderating. As the economy continues to reopen and spending 
rebounds, we are seeing upward pressure on prices, particularly due to 
supply bottlenecks in some sectors. These effects have been larger and 
longer lasting than anticipated, but they will abate, and as they do, 
inflation is expected to drop back toward our longer-run 2 percent 
goal.
    The process of reopening the economy is unprecedented, as was the 
shutdown. As reopening continues, bottlenecks, hiring difficulties, and 
other constraints could again prove to be greater and more enduring 
than anticipated, posing upside risks to inflation. If sustained higher 
inflation were to become a serious concern, we would certainly respond 
and use our tools to ensure that inflation runs at levels that are 
consistent with our goal.
    The path of the economy continues to depend on the course of the 
virus, and risks to the outlook remain. The Delta variant has led to a 
surge in cases, causing significant human suffering and slowing the 
economic recovery. Continued progress on vaccinations would help 
support a return to more normal economic conditions.
    The Fed's policy actions are guided by our dual mandate to promote 
maximum employment and stable prices for the American people, along 
with our responsibilities to promote the stability of the financial 
system. In response to the crisis, we took broad and forceful measures 
to support the flow of credit in the economy and to promote the 
stability of the financial system at the onset of the pandemic. Our 
actions, taken together, helped unlock more than $2 trillion of funding 
to support businesses large and small, nonprofits, and State and local 
governments between April and December of 2020. This, in turn, helped 
keep organizations from shuttering and put employers in a better 
position to keep workers on and to hire them back as the recovery 
continues.
    These programs have served as a backstop to key credit markets and 
helped to restore the flow of credit from private lenders through 
normal channels. We have deployed these lending tools to an 
unprecedented extent. Our emergency lending tools require the approval 
of the Treasury and are available only in unusual and exigent 
circumstances, such as those brought on by the crisis.
    Many of these programs were supported by funding from the 
Coronavirus Aid, Relief, and Economic Security (CARES) Act. Those 
facilities provided essential support through a very difficult year and 
are now closed.
    The Federal Reserve completed its sales of assets from the 
Secondary Market Corporate Credit Facility on August 31. We were able 
to wind down the facility rapidly and efficiently, with no adverse 
impact on credit conditions. The Federal Reserve also recently closed 
the Paycheck Protection Program Liquidity Facility to new lending, and 
the facility is now in runoff mode. Similarly, we are managing the 
paydown of assets in our other CARES Act facilities as they wind down 
over time. We continue to analyze the facilities' efficacy and to 
review the lessons learned.
    To conclude, our actions affect communities, families, and 
businesses across the country. Everything we do is in service to our 
public mission. We at the Fed will do all we can to support the economy 
for as long as it takes to complete the recovery. Thank you. I look 
forward to your questions.

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