[Senate Hearing 117-698]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 117-698


  THE STATE OF THE AMERICAN ECONOMY: A YEAR OF UNPRECEDENTED ECONOMIC 
                        GROWTH AND FUTURE PLANS

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

                                HEARING

                               before the

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

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                                   ON

  EXAMINING THE CURRENT STATE OF THE AMERICAN ECONOMY, AND THE FUTURE 
                         ECONOMIC GROWTH PLANS

                               __________


                           FEBRUARY 17, 2022

                               __________

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





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

                               ______
                                 

                 U.S. GOVERNMENT PUBLISHING OFFICE

52-911 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

                      Cameron Ricker, Chief Clerk

                      Shelvin Simmons, IT Director

                        Pat Lally, Hearing Clerk

                                  (ii)












                            C O N T E N T S

                              ----------                              

                      THURSDAY, FEBRUARY 17, 2022

                                                                   Page
Opening statement of Chairman Brown..............................     1
        Prepared statement.......................................    41

Opening statements, comments, or prepared statements of:
    Senator Toomey...............................................     4
        Prepared statement.......................................    42

                               WITNESSES

Cecilia Rouse, Chair, Council of Economic Advisers; accompanied 
  by Jared Bernstein, Member, Council of Economic Advisers; and 
  Heather Boushey, Member, Council of Economic Advisers..........     6
    Prepared statement...........................................    44
    Responses to written questions of:
        Senator Cortez Masto.....................................    46
        Senator Daines...........................................    47

                                 (iii)











 
  THE STATE OF THE AMERICAN ECONOMY: A YEAR OF UNPRECEDENTED ECONOMIC 
                        GROWTH AND FUTURE PLANS

                              ----------                              


                      THURSDAY, FEBRUARY 17, 2022

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10 a.m., via Webex and in room 538, 
Dirksen Senate Office Building, Hon. Sherrod Brown, Chairman of 
the Committee, presiding.

          OPENING STATEMENT OF CHAIRMAN SHERROD BROWN

    Chairman Brown. The Committee on Banking, Housing, and 
Urban Affairs will come to order.
    Today's hearing is in the hybrid format. Our witnesses are 
in person. Members have the option to appear either in person 
or virtually.
    Every day, Americans get up, go to work, and do their jobs. 
But as we know this week our Republican colleagues refuse to do 
theirs.
    On Tuesday, this Committee met to vote on five outstanding 
nominees for the Federal Reserve. Republicans did not show up. 
Not a one. Instead, they went AWOL in the fight against 
inflation.
    At this pivotal moment in our economic recovery, everyone 
understands that we need a full Federal Reserve board--it would 
be the first time in nearly a decade where all seven members 
sat, confirmed members sat at the Fed--to help tackle 
inflation. Republicans have no solutions. Only political 
stunts. Americans do not want more political theatrics. They 
want actions and solutions to bring down costs.
    We will not stop fighting for these nominees. These 
nominees--I will just tell you what they have all done. They 
have met with every Senator, every single Senator who asked for 
a meeting, on Committee, off the Committee. They met with 
Committee staff, majority and minority. They offered to meet 
with many of my colleagues who refused to meet with them, and 
some of them then boycotted the vote. They answered every 
question posed to them at the hearing. They answered every 
question submitted for the record, more than 200 of them, in a 
timely matter. One nominee even answered questions submitted 
after the deadline.
    If we are going to continue growing our economy, we need 
all seven Governors in place. We need these professionals, 
working and debating and making decisions about monetary 
policy, and interest rates, and jobs, and tackling inflation.
    I implore my Republican colleagues to show up and vote. 
Vote yes, vote no, just show up and vote. It is your job. I 
implore--and the American people expect--for you do your jobs, 
just like they do every day.
    Let me read a few headlines from the past few weeks:
    ``Strong Jobs Report Shows Resilient Economy'', ``January 
Jobs Report Crushes Expectations'', ``Biden Sets First-Year 
Record With 6.6 Million Jobs Added''.
    In my State, long derided as the ``Rust Belt,'' Ohioans 
have been waking up to headlines like these:
    ``Intel Picks Ohio for Largest Chip Factory in the World'', 
``Hyperion Fuel-Cell Company To Open Largest Columbus Factory 
in a Decade'', ``GE Aviation Lands $6.8 Billion Engine Deal in 
Sign of Rebound From Pandemic'', ``Intel's Investment: 
Gamechanger for Ohio Jobs''.
    America is in the midst of unprecedented economic growth. 
Our GDP grew by 5.7 percent last year, the strongest annual 
growth in 40 years. For the first time in two decades--and this 
is, I think, particularly significant--our economy grew faster 
than the economy of China.
    Job creation hit an all-time high. We added 6.4 million 
jobs last year, an average of more than half a million jobs 
every single month. We saw the fastest drop ever in the 
unemployment rate. American entrepreneurs started more than 5 
million new businesses in 2021, another record.
    Raw jobs numbers of course do not tell the whole story. 
They do not tell you how good the job is, what kind of wage it 
pays. On that front, though, the news is perhaps even better. 
Wages are rising, particularly for hourly workers who have been 
left behind in past economic recoveries. Workers are finally 
starting to share in more of the economic growth that they 
create.
    American families' disposable incomes were higher in 2021 
than they were before the pandemic, even adjusting for 
inflation. As Assistant Secretary of Treasury Ben Harris said 2 
weeks ago, ``Household balance sheets were exceptionally 
healthy due in part to the American Rescue Plan, other 
Government pandemic assistance, and brisk wage growth.''
    All of this progress was possible because of the American 
Rescue Plan. We promised shots in arms, money in pockets, and 
workers back on the job, and the Rescue Plan delivered.
    We know that challenges remain. For all the progress we 
have made, we cannot deny that many of the people we serve say 
they do not feel it. People are exhausted. They are tired of 
this pandemic, they are tired of the anxiety, they are tired of 
the way that it has divided neighbors, divided schools, and 
divided families.
    The number one thing we can do to improve our economy and 
improve people's lives is to defeat this pandemic, and we are 
on the right course. Cases and hospitalizations are dropping. 
Because of the American Rescue Plan, a great majority of 
Americans are now vaccinated. Everyone can get a booster shot. 
We no longer have to live in fear.
    We also know that the pandemic has caused inflation to run 
too high. Workers feel it every time they go the grocery store. 
Inflation is a real problem and one that we, as a country, need 
to address directly. It is all the more reason why we need a 
full Federal Reserve board.
    The pandemic has revealed that our supply chains are too 
long and too fragile. It causes higher prices in some 
industries. No one wants to have to go to three different 
stores to get all their shopping done, or to have every option 
they try to buy on backorder for months. It is maddening, it is 
draining, it is frustrating for the American public.
    We know how to fix it--you make more things in America. For 
too long, our trade policy and our tax policy have encouraged 
corporations to move production overseas. It has cost us 
millions of jobs, especially in the States of Pennsylvania and 
Ohio. It has contributed to our supply chain problems today. It 
is time to bring those supply chains back home.
    The House and Senate have passed bills to spur domestic 
manufacturing, research, and development. They would allow us 
to better compete with countries like China. They would support 
the production of key inputs like semiconductors. We should put 
a comprehensive bill on the President's desk soon.
    We also took an important step to speed up our supply 
chains by passing the Bipartisan Infrastructure Bill to improve 
our roads, and our bridges, and ports, making it easier and 
more efficient for American manufacturers to get products to 
market.
    As important as all of these steps are, Government is not 
the only actor here. Corporate consolidation is reducing 
competition, giving consumers fewer choices and workers fewer 
options. Nobody explains better in the meatpacking industry 
than my colleague from Montana, Senator Tester, what has 
happened there. Too often corporations increase prices while 
cutting an even larger check for executives and shareholders.
    The Wall Street Journal tells us that two-thirds of the 
largest publicly traded companies have reported larger profits 
in 2021 than in 2019. In recent weeks, CEOs have bragged to 
Wall Street about their ability to increase prices on 
consumers.
    Let us be clear. Raising prices is a choice, is a decision 
that corporations make. They could make a different choice. 
They could reduce the amount of stock buybacks. Millionaire 
executives could actually take a bit of a pay cut, or even just 
get a slightly smaller raise this year.
    But there is nothing forcing them to make a better choice, 
because there is not enough competition in the economy. We need 
an economy that works for everyone, not just those at the very 
top. We cannot declare the recovery complete until all workers 
can find a job that pays them fair wages, that treats them with 
dignity, and that allows them to keep up with the cost of 
living.
    Today we will hear from all three members of the 
President's Council of Economic Advisers: Chair Rouse, Dr. 
Bernstein, and Dr. Boushey. These are skilled economists who 
understand that behind all the charts and models and tables are 
real people with hopes, dream, and ambitions.
    As Chair Rouse said in January, the actions that the Biden 
administration has taken have led to, quote, ``unprecedented 
improvement in our economy and important investments made in 
its future productive capacity.'' I look forward to hearing 
more about this year of unprecedented growth, the current state 
of the economy, and plans to continue this expansion.
    Ranking Member Toomey.

         OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY

    Senator Toomey. Thank you, Mr. Chairman. I have to start by 
observing it is a little bit rich to be lectured by the 
Chairman about not attending a markup of nominees when the 
Chairman personally led the Democratic boycott of the Senate 
Finance Committee markup of two Trump nominees. There were 
several other Democrats on the Committee who participated in 
that boycott. I guess what is good for the goose is not good 
for the gander.
    It is also rich to hear wailing and gnashing of teeth about 
vacancies on the Fed board and this newfound Democratic concern 
over inflation. First of all, I and my Republican colleagues 
have been on record for well over a year warning about 
inflation risks, warning about the excessive spending. 
Democrats criticized us for wanting to normalize interest rates 
and Fed policy. And yet here our Democratic colleagues are 
pushing for yet another inflation-fueling spending blowout 
bill.
    The fact is the Fed is fully functional. The FOMC has 9 of 
its 12 members in place. They could raise rates today if they 
wanted to. They could do it tomorrow. They could do it at any 
time.
    But what is really ironic is that it is the Chairman's 
decision not to move five nominees forward. We made it clear, 
and I made it clear last week to the Chairman repeatedly, 
publicly, and privately, we are perfectly happy to vote on five 
of the six nominees. That would be four Fed Governors and the 
director of the FHFA. If we did, actually most of them would 
get considerable Republican support. They would move on.
    And if there were a concern about vacancies on the Fed, the 
Chairman could fix that very quickly. He chooses not to. He 
prefers to have the vacancies. That is his choice.
    It is also interesting how some of my Democratic colleagues 
have been so passionate about ending the revolving door. I 
think you could argue some have practically made a career out 
of railing against the revolving door, where people go from a 
powerful Government regulator to go work for the industry that 
they regulated, they enrich themselves, and then maybe they 
come back to do it for another loop. Is there a more 
archetypical example than Ms. Raskin?
    Senator Warren recently tweeted and called Randy Quarles 
``corrupt'' because after he left the Fed he went back to the 
firm, the private equity firm that he had founded himself. So I 
guess it is corrupt if a Republican does that, but the rules do 
not seem to apply in the other direction.
    The Chairman said that the candidates answered the 
questions. Let me be very clear. Ms. Raskin was far less than 
candid with us. She failed to disclose that she even was a 
director of Reserve Trust. She failed to disclose the $1.5 
million she made for that service. She failed to disclose 
hundreds of pages of writing and hours of speeches.
    When she was asked how did she get on the board of Reserve 
Trust in the first place, she said she could not recall, which 
is odd because the founder and chairman says in an article in 
today's Wall Street Journal that he has known the Raskins for 
decades.
    When Ms. Raskin was asked if she ever contacted the Fed on 
behalf of Reserve Trust, first she evaded the question 
repeatedly, but then eventually she replied by saying she could 
not recall.
    Well, that is funny, because the Kansas City Federal 
Reserve President recalled the conversation very well. The 
chairman of Reserve Trust recalled the conversation. He was not 
even part of it. But we are supposed to believe that Ms. Raskin 
just could not recall.
    And let me remind everybody why this is important. Reserve 
Trust is a fintech company based in Colorado, and it applied 
for something that is extremely valuable: a master account at 
the Fed. To my knowledge, there is not a single fintech in 
America that has gotten that, and unsurprisingly, they were 
denied. Their application was turned down. Then, Ms. Raskin on 
the board, called the Fed, and shortly thereafter, the Fed does 
a 180-degree reversal and approves the master account.
    To the best of my knowledge, as of today, there is a grand 
total of one fintech in America that has a master account with 
the Fed and it is Reserve Trust.
    So we asked an obvious question. Why the reversal? Why the 
180-degree change? What changed?
    First we get stonewalled. Then we finally get a partial 
answer from the Federal Reserve Bank of Kansas City. Let me 
just quote one sentence that summarizes it. The Federal Reserve 
Bank of Kansas City says, ``After its denial''--and that is a 
reference to the denial of the master account application--
``after this denial, RTC changed its business model and the 
Colorado Division of Banking reinterpreted the State's law in a 
manner that meant RTC met the definition of a depository 
institution.'' That is from the Federal Reserve Bank of Kansas 
City.
    My problem with that is on Tuesday night, the Colorado 
Division of Banking says that is not true. And this is what 
they said, and I quote, ``We consider the statement that the 
division reinterpreted State law as a misrepresentation of our 
practice.''
    So it remains entirely unclear what happened here. All we 
know is that Ms. Raskin was in the middle of it. The firm on 
whose board she sat applied for a very, very valuable account 
with the Fed. They were turned down. She intervenes, they get 
approved, and we cannot get an explanation of what happened 
here.
    Is that fair to all the other fintechs across America that 
would also like to have master accounts, and they have been 
turned down? How is that fair to anybody? And how is this 
Committee doing its job if we do not insist on getting some 
answers to this question? But we get stonewalled. We get 
answers from the nominee that she cannot recall, and we get 
basically nothing from the Fed.
    So, Mr. Chairman, it is your choice if you want to continue 
to preclude the possibility of having four nominees from the 
Fed confirmed and the FHFA Director. We are quite happy to 
process those nominees. But we want answers before we vote on 
Ms. Raskin.
    Let me just close with a quote justifying a boycott of a 
recent markup of nominees. And I quote, ``By refusing to demand 
honest, transparent information about the business dealings of 
these nominees the Committee failed to do its job on behalf of 
the American people.'' That is Sherrod Brown, February 1, 2017.
    Chairman Brown. Thank you, Senator Toomey. I do not want 
this to be back-and-forth, because we have witnesses here for a 
real reason. But let me just say two quick things. One is our 
not showing up in the Finance Committee and the HELP Committee 
to discuss and actually ultimately vote on two, as it turned 
out, particularly one corrupt Cabinet nominee, Dr. Price, who 
was in office only about 4 or 5 months and resigned under a 
scandal, did not stop the Committee from voting. It was a 
protest that they had not answered nearly enough of our 
questions. They did not give the kind of response that Sarah 
Bloom Raskin, Governor Raskin and others gave, the fulsome 
kinds of answer they gave to dozens and dozens of questions. So 
we were protesting that, but did not block a vote because the 
majority could still go ahead. That is the difference in this. 
And the Banking Committee has never done that.
    The second issue on voting on four noms--and I know that is 
Senator Toomey's contention over and over--he knows, we all 
know that that would set a precedent, of the Ranking Member can 
decide, based on answers to questions that a nominee gave. I do 
not like the answers to climate change especially is one that 
has offended many, many Republican Members. Then if a Ranking 
Member can say, ``I do not like the answers to the questions,'' 
then simply withhold a quorum, it means the Ranking Members 
then choose whom we are going to vote on. So any Ranking 
Member, whether it is Finance or Banking or Veterans or any 
other committee, can simply say, ``I did not like his answers. 
I did like her answers. We are not going to show up to vote,'' 
then essentially the Ranking Member determines whom we are 
going to vote on.
    So we are voting on all five of these Federal noms. We are 
voting on FHFA. They are very qualified. That is our intention 
when we get back in March.
    To our witnesses--Dr. Rouse, Dr. Bernstein, Dr. Boushey--we 
welcome you to the Committee. I believe this will be our first 
hearing in a long time, as long as I can remember, with the 
full CEA before the Committee.
    Chair Rouse, please begin your testimony. Thank you for 
joining us.

    STATEMENT OF CECILIA ROUSE, CHAIR, COUNCIL OF ECONOMIC 
 ADVISERS; ACCOMPANIED BY JARED BERNSTEIN, MEMBER, COUNCIL OF 
  ECONOMIC ADVISORS; AND HEATHER BOUSHEY, MEMBER, COUNCIL OF 
                       ECONOMIC ADVISORS

    Ms. Rouse. Chairman Brown, Ranking Member Toomey, Members 
of the Committee, thank you for inviting me and my colleagues, 
Heather Boushey and Jared Bernstein, here to testify today.
    Just over a year ago, President Biden entered office with a 
full agenda, a pledge not only to fight the pandemic and 
support economic recovery, but also to rebuild our economy for 
sustainable and more widely shared growth. Success was not pre-
ordained. The country faced a still-raging pandemic, a weak 
economic recovery, and historic job loss.
    Thanks to the collective efforts of the Administration, 
Congress, and the Federal Reserve, we have been able to recover 
with strength and speed. And importantly, we have begun to lay 
the groundwork for an economy that is stronger, more resilient, 
and more equitable.
    Over the last year, millions of Americans have gained 
protection from the worst of COVID-19, businesses have been 
able to resume activity, and children are back at their school 
desks. Economic recovery has been strong. In 2021, GDP grew 
faster than it has in almost 40 years and the U.S. job market 
gained more than 6.7 million jobs. Unemployment is down to 4 
percent, years earlier than projected. Child poverty is likely 
to be reduced by almost 40 percent in 2021.
    The American Rescue Plan was a critical component of this 
recovery. It served as an insurance policy to address the 
uncertainty of a global pandemic, and support the economy as 
the virus, and the tools to tamp it down, evolved. The 
emergency measures worked, resulting in a robust economic 
turnaround. Families and businesses have had the means and 
resources to cope in the short-term. Ultimately, workers and 
small businesses have avoided the lasting damage we typically 
see when economic crises are allowed to linger.
    But as President Biden has made abundantly clear, helping 
Americans weather the pandemic is simply part one of his 
economic vision. The Administration's strategy encompasses what 
the President and Treasury Secretary Yellen have called 
``modern supply side economics,'' that is, we must make 
investments in our economy to boost labor supply, raise 
productivity, reduce inequality, and create strong, sustainable 
growth.
    The Bipartisan Infrastructure Law is a historic step toward 
realizing that vision, providing long-overdue investment in our 
Nation's roads, bridges, water systems, and broadband 
infrastructure. We commend the bipartisan work of many on this 
Committee for making these necessary investments, and know your 
Governors, mayors, and constituents are grateful.
    Unlike the American Rescue Plan, which was short-run relief 
designed to be spent out over the course of the pandemic 
emergency, the infrastructure law will be spent out across the 
country over years, building and strengthening the foundation 
our economy needs to increase its productive capacity.
    Other administrative actions this year will also contribute 
to long-term economic growth. Examples include the whole-of-
Government approach to increasing competition in markets, 
addressing climate change, and fostering greater equity.
    Of course, challenges remain. The gains in our economy have 
taken place against the backdrop of a once-in-a-century 
pandemic economy, where what we know about downturns and 
recoveries has been tested. Vigilance is required to ensure we 
do not backslide when curveballs like Omicron come our way.
    And Americans are feeling the pinch of inflation--at the 
pump, in grocery stores, and in the marketplace. The pandemic 
itself has been a major driver. Consumers have shifted their 
spending from services to goods and global supply chains have 
been severely tested. A lack of workers has stymied the supply 
of goods and services as well.
    In the near-term, the principal tools to curb inflation 
rest with the Federal Reserve, which is why it is critical to 
confirm the five highly qualified nominees now. The 
Administration also has some tools it can employ, as 
demonstrated in recent actions to improve supply chain 
disruptions at the ports and increase the capacity of the 
trucking industry.
    In the longer term, we must make real investments, be that 
in our roads and bridges, or people and ideas. Sustainable 
growth will only come about if we are able to increase economic 
capacity and allow more Americans to participate productively 
in our economy. The economic challenges of 2022 must, of 
course, be met, but we must also lay a foundation for future 
generations.
    In doing so, we must create an economy that rewards work, 
not wealth. The Administration's economic agenda aims to ensure 
that those in the middle class, who have largely been left out 
of economic investments for the past 40 years, will finally 
benefit, ensuring that growth is more broadly shared.
    We need Congress to act on the President's full economic 
agenda to achieve these goals: providing necessary funding to 
continue to address the pandemic and keep the economy 
functioning; passing USICA to bolster competition and build 
resiliency into the market; enabling the energy transition to 
curb climate change; and making Build Back Better a reality so 
that families can afford the needs of everyday life, like 
prescription drugs and childcare. As noted by 17 Nobel Prize 
winning economists, these long-term investments not only build 
a stronger economy but also ease longer-term inflationary 
pressures.
    President Biden's economic vision is predicated on the fact 
that the economic status quo has not worked for all Americans. 
For decades, it largely benefited those at the very top. We 
share his vision for a stronger and more equitable economic 
future for our country. Thank you.
    Chairman Brown. Thank you, Madam Chair. I have two 
questions for you and I hope to get, if answers are short 
enough, to Dr. Boushey and then Dr. Bernstein.
    Chair Rouse, many American workers and families are 
concerned about high prices at the grocery store and the gas 
station. What is your assessment of inflation right now? What 
is the best way to fight it?
    Ms. Rouse. Well thank you very much, Mr. Chairman. So we 
understand that inflation is affecting consumers' pocketbooks 
with higher prices, at the pump, grocery stores, from various 
goods. Our view is we expect inflation to moderate over the 
coming year, because we believe that the factors that have been 
causing high inflation will begin to ease as COVID cases 
gradually decrease.
    You know, inflation is fundamentally a mismatch between 
supply and demand, which has partially reflected a change in 
demands as consumers have shifted their spending to goods. So 
what we need to do is we have to accommodate demand. We know 
that we have to have increased supply. Producers have been 
increasing their prices because of the constrained supply. So 
we need to ensure that the ports are strong, that we have 
robust investment in our infrastructure.
    I will say in the short term this really is in the purview 
of the Federal Reserve, which is why confirming the nominees is 
so very important. The Administration is doing what it can to 
increase supply chains, to get more workers back to work, 
including truckers with apprenticeship programs, and other 
efforts. In the medium term, the competition agenda is so very 
important because we know concentration, in concentrated 
markets that gives some price pressure for firms. It reduces 
innovation. It can cause lower wages for workers.
    Importantly, the President's economic vision of investing 
in infrastructure and people and ideas is really the long-term 
solution, building economic capacity for addressing longer-term 
price pressures.
    Chairman Brown. Thank you. My friend and colleague, Rob 
Portman, called the Bipartisan Infrastructure Bill a 
deflationary bill, that it will help drive down prices for 
Americans consumers. Do you agree with that?
    Ms. Rouse. What I agree is that the Bipartisan 
Infrastructure Law makes critical investments in our roads, 
ports, bridges, broadband, takes lead out of pipes. Those are 
important investments which increase our economic capacity. By 
increasing capacity we can accommodate more demand, and so 
therefore it helps to ease inflationary pressures.
    Chairman Brown. Thank you. Dr. Boushey, your work as an 
economist is focused on how we fix problems with inequality in 
the economy, whether by race, class, or gender, or even where 
you live. The stock market always seems to bounce back first 
from a downturn while the lowest-paid workers who experience 
the biggest job losses are also the slowest to reap the 
benefits of the economic growth that they essentially created.
    How do we ensure that economic recovery reaches all 
workers, from steel workers in rural Ohio to newly unionizing 
baristas at Starbucks, and not just those at the top?
    Ms. Boushey. Thank you. Thank you, Chairman. That is a 
great question and a good place to start. You know, the 
President has been very clear on this issue. In fact, in his 
address to Congress last year he said that his economic agenda 
focuses on building an economy from the bottom up and middle 
out, and really making sure that we see strong, stable, and 
shared economic growth. And that is why it was so important 
when he first came into office to focus on getting our 
economy--addressing the pandemic and getting us back to full 
employment.
    That is why the American Rescue Plan was so important. 
There are charts behind us that show some of the successes, 
getting 6.7 million workers into jobs, and importantly, many of 
the gains, particularly in wages, have been felt by workers at 
the bottom end of the wage spectrum. So when you get folks back 
to work it has this pulling-up effect.
    Now, of course, that has not solved all of the issues 
around inequities, and I want to point out a couple of other 
things that we have focused on early on. One thing that the 
Administration focused on was making sure that the PPP program, 
the Payroll Protection Program, actually went to those who 
needed it the most, and there is now research showing that 
actually once the Administration came into office more business 
owners of color and women were able to access that program. So 
that is one way.
    And what shows is that you actually need to have a focused 
attention, which is why President Biden, as Chair Rouse said, 
these whole-of-Government approaches to equity, to addressing 
climate change, and to issues around market structure and 
competition, because it is only through making sure that all of 
our policies are focused on both being inclusive and making 
sure that those at the top are not able to be unduly rewarded 
will we be able to have that kind of strong, stable, shared 
growth.
    I want to just end with a couple of notes, to echo what 
Chair Rouse said. Certainly the Bipartisan Infrastructure Law 
is an important downpayment on equity, in a variety of ways, 
but I cannot stress enough how important Build Back Better is, 
that more fulsome agenda, to make sure that we are addressing 
the needs around care and climate across the U.S. economy.
    Chairman Brown. Thank you, Dr. Boushey. Dr. Bernstein, 
quickly--and sorry, I do not have a lot of time left--the 
pandemic revealed longstanding weaknesses in our supply chain, 
as you know. What should Congress and the Administration do to 
make supply chains more resilient and bring prices down for 
consumers?
    Mr. Bernstein. Thank you for the question. As was 
mentioned, the Administration is already engaged and working 
with the ports and working with the trucking sector doing all 
we can to help ameliorate some of these pressures that are 
showing up in our elevated inflationary reads. The Ports of 
L.A. and Long Beach process 40 percent of the Nation's 
containerized imports. They actually broke their 2018 record 
last year for annualized imports by 13 percent. The number of 
containers sitting on the docks for 9 days has come down by 60 
percent, and so on. In the interest of time perhaps we will be 
able to get back to this.
    But underscoring what both of my colleagues said, by 
investing in the Nation's infrastructure, whether it is roads, 
bridges, electric vehicles, climate we help to strengthen 
supply chains by onshoring some critical capacity that is now 
very much dependent on offshore arrangements. We also help to 
bolster not just supply chains but build in the kind of 
resiliency that has clearly been missing. Certainly microchips 
are a great example of that, and USICA is very important policy 
solution in that regard.
    Chairman Brown. Thank you. Senator Toomey.
    Senator Toomey. Thank you, Mr. Chairman. In 2019, wages 
were rising, and they were rising faster than prices. And wages 
were rising faster for low-income workers than they were for 
upper-income workers. So we had workers--unemployment reached 
record lows also--and workers were able to improve their 
standard of living because their income was rising faster than 
their expenses.
    Now we are in a situation where wages are rising but prices 
are rising faster, and the reality is for most workers they are 
falling behind because the cost of the things they need to buy 
every week is going up faster than any increase in their 
income.
    So the Bureau of Labor Statistics, on February 10th, 
summarized it pretty neatly. They say, and I quote, ``Real 
average hourly earnings decreased 1.7 percent, seasonally 
adjusted, from January '21 to January '22. The change in real 
average hourly earnings, combined with a decrease of 1.4 
percent in the average work week, resulted in a 3.1 percent 
decrease in real average weekly earnings over this period.''
    I know that is not the intention, but is it not true--and I 
will start with Dr. Rouse--that most low- and middle-income 
workers have experienced a bigger rise in the cost of the 
things they need to buy than in their incomes?
    Ms. Rouse. Well, I appreciate the concern very much, 
Senator, and we are all very concerned about inflation and 
appreciate that that is, you know, the purview of the Fed in 
the short term, and it is important that we have a full slate 
of Governors.
    I just would like to point out the chart on the far right.
    Senator Toomey. OK, yeah, I am sorry, but look. We all know 
that the number of Governors is adequate to do whatever they 
need to do about inflation, so let us not go there.
    Ms. Rouse. OK. So let us look at this chart on the far 
right.
    Senator Toomey. But can you confirm the simple fact that 
for most workers' wages are not rising as fast as prices?
    Ms. Rouse. So some recent estimates by economists Emmanuel 
Saez and Zucman suggest that actually, if we look at the bottom 
50 percent of workers, that their market income, before taxes 
and benefits, is greater now than it was in Q4 2019, and if you 
look after taxes and benefits that they are actually ahead.
    Senator Toomey. So we saw the number of 7.5 percent as the 
most recent annual rate of inflation. We also know that low- 
and middle-income people have a worse experience than that 
because they pay a disproportionate amount of their income for 
things that are rising more rapidly than 7.5 percent, like 
gasoline, like groceries.
    Are you telling me that you think that the average worker 
in America is more than keeping up with inflation?
    Ms. Rouse. So what we know is that--look, inflation is 
not--we do not want to see this level of inflation going 
forward, and that is why the President is focused on doing what 
he can. The Federal Reserve is likely to adjust how its posture 
has been toward inflation. But we do know that household 
balance sheets, because of the efforts of the Federal 
Government, the Federal Reserve have been maintained through 
this pandemic, which is what is reflected in this chart on the 
left.
    Senator Toomey. OK. I am surprised that we cannot candidly 
acknowledge the obvious. Wages are not growing as fast as 
prices for the large majority of workers. These workers are 
falling behind. Yes, if you have a lot of accumulated assets, 
they have appreciated in value, and you are probably doing 
fine. But the Americans I am concerned about in this case are 
those who do not have huge accumulated assets.
    Let me ask a question of Dr. Boushey. Contrary to what I 
occasionally hear, it is an objective fact that the 2017 tax 
reform made the American income tax code more progressive. We 
lowered the burden for everybody and in the process changing 
rules shifted the percentage, the largest percentage, to more 
upper-income people.
    My understanding is the Administration supports legislation 
that would raise the SALT deduction from the $10,000 limit that 
we put for rich people to deduct their high State and local 
taxes to $80,000. I do not know any working-class people who 
have $80,000 worth of State and local taxes, and yet it looks 
like the Administration supports that.
    My understanding, from joint tax, that the top 10 percent 
of income earners would get about 88 percent of the benefit of 
lifting the SALT cap. So why does the Administration want to 
have this huge giveaway to wealthy people who choose to live in 
expensive jurisdictions?
    Ms. Boushey. So the Administration has not come out with a 
position on the SALT tax at this point, and I am not here to 
negotiate that with you today.
    Senator Toomey. I am sorry. Maybe I----
    Ms. Boushey. But what I can tell you----
    Senator Toomey. Did you not endorse the Build Back Better 
legislation? The House-passed bill includes----
    Ms. Boushey. So the President's framework has been very 
clear on his priorities in terms of tax reform----
    Senator Toomey. OK, I understand, so----
    Ms. Boushey. ----and he has a very robust agenda.
    Senator Toomey. I just want to be clear. You do not support 
the House-passed bill.
    Ms. Boushey. I just said that I am not here to negotiate 
that particular piece of the legislation here today, but the 
President has put out----
    Senator Toomey. That does not sound like much of an 
endorsement, OK.
    Ms. Boushey. ----a very fulsome agenda around tax reform, 
focusing on taxing wealth and not work, and focused on taxing 
folks making more than $400,000 a year.
    Senator Toomey. OK. Thank you, Mr. Chairman.
    Chairman Brown. Senator Tester is recognized.
    Senator Tester. Beautiful thing. I like that. Thank you 
very, very much. Just a couple of things, and I do not want to 
get into an extended debate on this. I do want to get to the 
economy and I want to thank you all for being here.
    But, you know, when Reserve Trust got their master account 
they were not classified as a fintech. It was 3 years later 
they did that. And then there is an outfit by the name of Jack 
Henry that did the same thing.
    But what is more important here is to know that when a 
Secretary, a very important Secretary, came to my office during 
the Trump administration and I asked him about disclosure and 
conflicts of interest, he looked at me and said, ``That is none 
of you guys' business.'' A very important Secretary. And he did 
not answer any of the question because he did not think I 
needed to know any of the questions when I had him in my 
office. I could have tried to organize so we did not have a 
vote on him, but the truth is I just voted no and that was 
that. That is the first question.
    The second thing is that, Senator Toomey, I know you have 
great skills, and so do folks across the aisle, to be able to 
come in here and try to persuade minds. And I know it is 
difficult because it is difficult from our side to change you 
guys' minds too. But part of showing up is having that debate, 
and part of showing up is having that debate before we have the 
vote, and God only knows what could have happened and did not 
happy because nobody showed up.
    The last thing I would say is that I think you are giving 
Sarah Bloom Raskin way, way, way too much credit. I serve with 
a lot of folks here, and I am sure when I get out of this 
position they will continue to say, ``Jon, would you consider 
this or consider that,'' in whatever position I am in, whether 
it is being a farmer in Montana or a meatcutter or whatever. 
And I would do the same thing that I think anybody on this 
Committee would do, and that is, ``I will take a look at it. I 
will give you a fair shake, but I ain't just going to do what 
you tell me to do.''
    And you guys are making the assumption that Sarah Bloom 
Raskin made a request and they just rolled. I am going to tell 
you, if that is the case, we have got the wrong people on these 
regional Feds. We ought to take a look at replacing all of 
those. Because if that is the process that is used for giving a 
master account, then we have got bigger problems than Sarah 
Bloom Raskin.
    That is all, and I do not want to talk about any of that 
anymore. We just to try to make the Senate functional, and not 
showing up does not add to the functionality of the U.S. 
Senate, which I think we can all agree is pretty damned 
dysfunctional at this moment in time.
    I want to talk about childcare, because it is something I 
hear about almost all the time when I go back to Montana. And I 
want to talk about housing, which is what I almost always talk 
about when I go back to Montana. And the question I am going to 
ask you is pretty simple, really, when it comes to childcare, 
and I do not care who answers is. I think we have got a huge 
problem, and I think folks have figured it out. Because of the 
pandemic, when they were staying at home, they looked at their 
bottom line and said, ``Hey, I have got more money not paying 
childcare and not working than busting my hump working and 
paying for childcare.''
    So the question becomes, if we are going to have affordable 
childcare--and accessible childcare, because that is important, 
I think, absolutely important in rural America but probably 
important in urban America too--if we are going to have 
affordable childcare, how do we do that? How do we do that, or 
do we just assume the private sector will take care of the 
problem? And if we do, how long will that take? Because my 
grandkids are actually in high school now, and when they were 
in childcare it was over $10,000 a head for them to be in 
childcare 10 years ago.
    So does anybody want to respond to how we make childcare 
more affordable and more accessible, and what role the 
Government should play in that?
    Ms. Boushey. I am happy to take that question, Senator, and 
this is such an important issue and that is why addressing 
childcare was both an important part of the American Rescue 
Plan and also an important part of Build Back Better.
    So, I mean, here is the thing. You know, childcare 
businesses are out there every day, trying to provide a service 
to American families. It is a service that is incredibly 
expensive to provide, especially to get the kind of quality 
childcare workers that families need, and families cannot 
afford those costs. And so the crux of what the President 
proposed in Build Back Better was to make it affordable for 
families to be able to pay for childcare by capping the amount 
of income that families have to pay while, at the same time, 
subsidizing those businesses so that they could provide high-
quality care, with qualified care providers, to families all 
across the United States.
    And, you know, we are already seeing just how challenged 
that industry is right now. The number of workers in childcare 
has fallen over the course of the pandemic as childcare centers 
have really struggled to make ends meet. We have seen now that 
the money from the American Rescue Plan is going out to those 
providers, out to over 150,000 providers nationwide, to help 
them cover their costs during the pandemic.
    But all of this, it is about kids' well-being, and we know 
that quality childcare is important for our future economy but 
it also about making sure that parents can get to work. You 
know, we have questions about making sure that labor supply 
gets back to where it was prepandemic, and a lot of that is 
about addressing this childcare crisis in America.
    Senator Tester. Thank you. I am out of time. I would love 
to get to housing and I would love to get to some job training 
issues, but I will turn it back to the Chairman and Ranking 
Member. Thanks, you guys.
    Chairman Brown. Thank you, Senator Tester.
    Senator Rounds is recognized, from South Dakota, from his 
office.
    Senator Rounds. Thank you, Mr. Chairman. Let me just begin 
by saying I appreciate the opportunity to participate this way, 
and I would like to focus on inflation and the causes of it, 
and I would like our witnesses to talk a little bit about the 
differences between what may very well be demand side 
challenges versus supply side.
    My constituents in South Dakota, like Americans across the 
country are being squeezed by higher prices across the board. 
Consumer prices in January were up 7.5 percent from a year ago. 
Energy prices overall were 27 percent higher in January than 
they were 1 year earlier. Electricity prices have jumped 10.7 
percent. National gas prices have soared 40 percent since 
January of 2021, reaching the highest level since August of 
2014.
    Right now the CPI indications are at about 7.5 percent 
nationally, and PPI basically 9.7 percent, which would suggest 
that there is going to be additional, or at least there is more 
inflation in our future rather than less.
    My question, Dr. Rouse, is what portion of this, in your 
analysis, how much of this is due to demand side, where the Fed 
would basically have a role versus the supply side, which, as 
you indicated in your testimony earlier, this perhaps, you 
know, the President having some things to do and the Fed having 
some things to do. First of all, would you agree that the 
supply side basically would rest more on the Presidential side 
and the demand side more on the Federal Reserve side?
    Ms. Rouse. Well, thank you for the question. So the way 
that I see it is that we have inflation because it was 
important for the Federal Government to support households, 
workers, businesses through the pandemic. That is to maintain 
demand. We see this in countries around the world that could 
afford to do so, that they protected their constituents through 
the pandemic. Supply was not able to accommodate that demand 
and inflation fundamentally comes when you have a mismatch 
between supply and demand.
    So there have been various estimates that have been put 
out, where we say the confidence interval is very wide, but we 
know that as we get through the pandemic we will see regulation 
in both of them.
    And so what I would say is that as we are expecting that, 
as we work through this pandemic, that the price pressures will 
ease. You know, outside forecasters are expecting inflation to 
be about half by this time next year.
    Senator Rounds. Dr. Rouse, if I could I really did not mean 
it to--it is not intended as a gotcha question. I am just 
curious. When we talk about inflation we know that it is both 
sides, and look, we recognize that we did what we could during 
the pandemic to be able to make sure that our economy could 
recover as quickly as possible.
    My question is just right now with inflation where it is at 
how do we go about addressing it? If we are serious about 
addressing it, how do we do that if we cannot determine how 
much the Federal Reserve should do versus how much the 
Administration should do? That is my question. If you do not 
have that information or if that is not part of the studies, 
why not?
    Ms. Rouse. So the Federal Reserve is an independent agency, 
and they are studying and they will determine the speed and the 
size of their response.
    I will note that on a fiscal side that the fiscal impulse 
has already turned rather negative, so we are already not 
putting as much fiscal resources into the economy, which will 
actually be slowing down the economy relative to where it has 
been over the last 2 years. And we expect that as people come 
back into the workforce, as the pandemic is under control, that 
will ease some constraints. Getting people back to work will 
help on the supply side. And as the pandemic is addressed 
around the world, in particular, that will help bring more 
goods as well. So there is a role to play for the Federal 
Reserve in terms of fiscal policy in helping us to normalize 
through this pandemic.
    Mr. Bernstein. Senator, let me just say a couple of words 
if I might, if that is OK.
    Senator Rounds. Thank you very much. I appreciate it. My 
only concern on this is I really think it is difficult to bring 
this under control if we do not recognize how much of this is 
actually due to supply side issues versus demand side. I think 
part of that is the cost of petroleum, which is going to impact 
everybody, and I think when we are not talking about what is 
happening right now, when we talk about shutting down oil and 
gas leases on Federal land and so forth, that sends a message 
to futures, cost on crude and so forth. That may very well work 
well for Mr. Putin because right now he is getting record 
profits out of the oil and gas that he is producing, while at 
the same time, back here at home, what we are seeing is 
increasing prices for our consumers.
    I just think that needs to be taken into account, and may 
not be a popular thing to talk about right now with the 
Administration. I think the American people should understand 
that a lot of the inflationary trends that we are seeing are 
due to the inflationary pushes on the supply side, which is 
restricting the ability of us to have prices right now down to 
where they were a year or a year and a half ago.
    So I am kind of surprised at the split between the supply 
side and the demand side has not been a little bit more of the 
discussion that we should be having if we really want to get it 
under control.
    Mr. Chairman, my time has expired.
    Chairman Brown. Dr. Bernstein, please answer briefly.
    Mr. Bernstein. I will try to be brief because I actually 
like the way you teed the question up and I think that our view 
reflects much of the way you framed this, in the sense that 
both demand and supply are clearly playing a role. The Federal 
Reserve, of course, works more through the demand channel, and 
as you suggested, our work is and can help further on the 
supply channel.
    The answer to the question of how much should each do, each 
should do everything it can until inflationary pressures 
normalize. What that means on the side of the Government, and 
Congress definitely has a very important role to help here, is 
to focus on the near-, medium-, and longer-term supply chain 
constraints. In the near term, as I have mentioned, we have 
intervened extensively in the ports, through trucking. Our 
competition agenda is, as Chair Rouse suggested, intended to 
help ease consumer prices in those sectors.
    And then over the medium term, we very much believe that 
investing in domestic semiconductor capacity is so important, 
particularly regarding cars, a real source of auto pressure. We 
talked a little bit about housing. That has the largest weight 
in the consumer price index.
    And over the longer term, the infrastructure bill and the 
measures in Build Back Better are designed both to increase the 
economy's supply side, productive capacity, and help reduce 
costs that consumers face.
    So I think your framework is actually the correct one, and 
I think between the work of the Federal Reserve and Government 
trying to expand productive capacity and supply side, we can 
ease those pressures, perhaps as the forecast suggests, by the 
end of this year.
    Chairman Brown. Thank you.
    Senator Menendez is recognized, from New Jersey.
    Senator Menendez. Thank you, Mr. Chairman. You know, I did 
not come here to talk about SALT, but since the Ranking Member 
raised it let me just say, if I was Pennsylvania I would like 
the way things are. Pennsylvania gets $15 billion more from the 
Federal Treasury than it contributes to the Federal Treasury, 
so if we could do that. I would be happy to make a deal with 
all of my colleagues that have a problem with SALT, that we 
will just get back whatever we send, and New Jersey would be 
very happy.
    Because there are maker States like New Jersey that invest 
in education and research and development and infrastructure 
that helps to drive the economy and sends billions to the 
Federal Treasury more than it gets in return. So it is a maker 
State. And then there those States that I call moocher States 
that get a lot more than it sends to the Federal Treasury.
    So if you want to continue to have States that are maker 
States, that are blue-chip States, that make money for the 
Federal Treasury, then just continue to ax the State and local 
property tax deduction, which is the longest-serving part of 
the Federal code in terms of a deduction, and you will see 
those States be less of maker States, so that you can continue 
to mooch off of it.
    But let me move to the more current issue of the time. 
There is no doubt that American families are feeling the pain 
of inflation as supply shortages have wreaked havoc on the 
world economy. However, that pain has been magnified by 
companies that are hiding behind the headline inflation figures 
to justify raising prices and profits on the backs of hard-
working Americans. And let us be clear. Corporations are not 
the ones hurting right now.
    Here is a transcript of Kimberly Clark's last earnings call 
a few weeks ago. CEO Mike Hsu stated that the company took, 
quote, ``decisive action to offset the impact of higher costs 
with significant pricing actions.'' He was not kidding. The 
price of a 50-pack of Kimberly Clark N95 masks more than 
doubled, from $23.19 to $57.15, from last October to January. 
And the company's plan for the future is not to deliver relief 
to consumers but to resume stock buybacks, quote, ``as soon as 
we get the excess cash-flow.''
    It is amazing to seek profit beyond simply hiding behind 
the issue of inflation.
    Dr. Bernstein, are you seeing this occur in other sectors 
of the economy as well?
    Mr. Bernstein. Yeah. Profit rates and profit margins are 
highly elevated for firms across many sectors of the economy. 
That is a short answer to your question. I guess putting it in 
the context of our discussion--and by the way, I did want to 
correct something that Senator Toomey said. Actually, while you 
are correct about the year-over-years numbers, last month real 
wages actually beat inflation.
    But I wanted to talk about this in the context of wage 
growth and inflation. It is commonly argued that wage growth is 
a source of inflation, and that is potentially true based on a 
full set of other factors that contribute to inflation, 
including productivity growth and the share of national income 
that is going to labor or to profits. And it is completely 
coherent within the algebra of how wages and inflation interact 
that non-inflationary wage growth can be paid for out of 
reduced profit margins, and I think that is relevant to----
    Senator Menendez. Well, I just cited one quarterly profit 
call. There are many others in which clearly the companies are 
using the guise of inflation to ratchet up their earnings, and 
that is unconscionable and we have to think about ways in which 
that transparency can take place so that consumers know. It is 
pretty astounding.
    Let me ask one other question. Even as we talk about a 
growing economy, we have a labor shortage across the economy, 
which is contributing also, in my mind, to rising inflation and 
unmet consumer demand. There are currently nearly 11 million 
job openings nationwide across low-wage and high-skilled 
industries. Immigrants are ready and willing to fill those 
jobs. We had the Secretary of Energy in New Jersey the other 
day at one of our research and development centers. Four of the 
six people who made presentations were clearly immigrants to 
the United States, leading the way in innovation.
    Unfortunately, there are over 1.6 million immigrants that 
still have pending work permit applications before USCIS and 
over 8 million immigrants that are stuck in the broader visa 
backlog. Leading business groups, including the American 
Business Immigration Coalition, agree that robust immigration 
legalization provisions are urgently needed to address our 
significant labor shortage.
    What would each of you say is the role of immigrant workers 
in mitigating the current labor shortage and rising inflation?
    Ms. Rouse. Well, thank you, Senator Menendez, from the 
great State of New Jersey. So we completely agree, and the 
President, from day one of his Administration, he sent a bill 
to Congress to modernize the immigration system. He has also 
issued an Executive order directing a top-down review of 
barriers to access in our legal immigration system, as you 
know, on which U.S.-based employers rely to fill these critical 
labor needs.
    So in response to that order, agencies have worked to 
create efficiencies in the work permit process, expediting work 
permit approvals for health professionals, extended the period 
for which such permits are valid, and are actively considering 
other administrative actions to expand the labor supply.
    So immigration is part of the solution here. I will add 
that part of our labor supply challenge was going to happen 
just due to the natural demographics of our society. This 
pandemic hit at the height of our--pretty much at the height of 
the baby boom, as they were retiring, and we have seen some 
excess retirements.
    I will add that a key part of getting people back to work 
will be addressing the pandemic and ensuring we have the tools 
so that people can get back to work safely and not risk their 
health.
    But there is no question that facilitating and dealing with 
the backlog of these visas is top of mind. The President's team 
is working on it, and that is part of the solution as well.
    Chairman Brown. Thank you, Senator Menendez.
    Senator Daines, from Montana, is recognized from his 
office.
    Senator Daines. Chairman Brown, thank you. I just want to 
start off by echoing Ranking Member Toomey's comments earlier 
about the markup that was supposed to occur this week. It is 
truly a shame, in my opinion, that we did not move forward and 
get five of the six nominees approved. I wrote a letter in 
August supporting Chairman Powell's renomination, and I know 
given past concerns from my colleagues on the other side of the 
aisle about the use of the revolving door, frankly I am a bit 
surprised that they would not share a desire to fully vet this 
nominee before moving forward.
    Turning to my statement, 2021 was the year of rampant 
inflation, growing from 1.4 percent at the start of President 
Biden's term now to over 7.5 percent. Inflation grew faster, 
and has continued to grow faster than wages for the vast 
majority of workers, meaning that paychecks are effectively 
shrinking every month as this continues.
    On an annualized basis, real average hourly earnings 
dropped 1.7 percent. And, of course, other parts of the economy 
are feeling the pain. Homebuilder confidence. I grew up the son 
of a homebuilder. Their confidence fell for the second straight 
month, in large part due to spiking lumber and steel prices as 
well as months-long waits for cabinets, garage doors, 
countertops, and just about everything else you would find in a 
standard home.
    Energy prices are rising, gas is up 40 percent year over 
year, fuel oil is up 46 percent year over year, and up 9.5 
percent in just the last month. And I just found it frankly 
startling we are seeing significant increases of Russian diesel 
being imported now at a time when we are watching the Russians 
invade Ukraine.
    This, of course, not going unnoticed by Montanans and 
Americans across the country. Consumer sentiment is lower now 
than it was at the beginning of the pandemic. In fact, 
according to a recent Gallup poll, 71 percent of individuals 
living in households with incomes of $40,000 or less say that 
price hikes have caused their family financial hardship--71 
percent.
    Of course, we were all told, all throughout 2021, by 
President Biden's administration this inflation was transitory. 
I have not heard the word ``transitory'' lately, and many of us 
on this side of the aisle were questioning this belief this 
would be transitory. We did not buy it, and sadly, our 
predictions now have come true.
    They are continuing to insist that a peak is just around 
the corner. Well even if it is, I have not seen anything that 
suggests that 7.5 percent is far too high. We just do not need 
inflation to peak soon. We need it to plummet.
    Now to a few questions. Looking back at the economy in 
February of 2020, we saw what I would describe as a 
``Goldilocks economy.'' We had wage growth across the board. 
Inflation was in check. Wages were actually growing the fastest 
for individuals at the bottom of the wage spectrum. To me, this 
broad-based, non-inflationary growth was about as good as it 
gets.
    My question for the panel is this. Would you agree that the 
pre-pandemic economy, from February of 2020, is better than the 
economic picture as we sit here today? A simple yes or no will 
suffice.
    Ms. Rouse. I will agree that the prepandemic economy on net 
was looking fairly strong. However, that prepandemic economy 
reflected many years of rather anemic growth. It was 
reflecting, even in terms of wage growth at the median, we had 
seen a little bit but there had been decades where at the 
median there had not been robust wage growth. We know that 
there were gaps by race and ethnicity that had been 
longstanding.
    So I would argue that while, in February of 2020, the bones 
of the economy were strong that there were weaknesses there 
that this President felt we should address, which is why his 
economic agenda is designed to increase the economic capacity 
in order to generate more robust, sustainable growth that can 
be more equitably shared.
    Mr. Bernstein. I will weigh in on your question as well. 
The labor market is actually tighter now than it was then, by 
some metrics. The unemployment rate was lower then than it is 
now, although not by much--3.5 versus 4 percent. There are far 
more job openings now than there were then. The GDP, probably 
the most commonly cited indicator of economic health and 
growth, is considerably faster now than it was then, which is 
consistent----
    Senator Daines. Dr. Bernstein, are you suggesting we are 
better off right now than we were in February of 2020?
    Mr. Bernstein. It is not a simple yes-no question, is what 
I am more than suggesting. It is what I am articulating here.
    There is a set of economic indicators--job openings, GDP 
growth. Child poverty--child poverty was actually lower when 
you factor in the interventions in the rescue plan in 2021, 
probably than it was in 2020. We only have estimates of that so 
far. And that is very much a function of the President's Rescue 
Plan. By pulling the recovery forward, by getting shots in arms 
and checks in pockets----
    Senator Daines. Dr. Bernstein, I just firmly disagree with 
that. We had $1 trillion of unspent COVID dollars at the end of 
2020, and then, on a purely partisan basis, our colleagues 
pushed another $2 trillion of Federal spending into the economy 
in Q1----
    Mr. Bernstein. Senator----
    Senator Daines. ----and we were warned this was going to 
have an inflationary effect. So anyway, I just respectfully 
disagree.
    Mr. Bernstein. OK. Well, I understand your point but let me 
just----
    Senator Daines. The balance sheet now----
    Chairman Brown. Senator Daines--Dr. Bernstein, hold on.
    Senator Daines. I am out of time.
    Mr. Bernstein. I want to answer the question that you----
    Chairman Brown. Dr. Bernstein, wait a minute. Senator 
Daines, is that your last question?
    Senator Daines. Well, I think I am out of time, Chairman 
Brown. I want to respect the Committee.
    Chairman Brown. Dr. Bernstein, a very short answer.
    Senator Daines. I just respectfully disagree.
    Mr. Bernstein. I am trying to answer the question that you 
posed, Senator, and ticking off a set of indicators that are 
actually doing better now than they were then, in the context 
of a once-in-a-hundred year pandemic, which I think is a 
remarkable achievement for our Administration and those in 
Congress who helped us.
    Senator Daines. Well, keep in mind the Federal balance 
sheet right now is trillions of dollars higher than it was 
before. Anyway, thank you.
    Chairman Brown. Senator Warner, from Virginia, is 
recognized from his office.
    Senator Warner. Thank you, Mr. Chairman, and I appreciate 
this Committee's nontransitory--transitory but relentless focus 
on this issue. And I would point out to my colleague, I spent a 
lot of time working with the former President's Treasury 
Secretary, Senator Mnuchin, where we put about $5 trillion, 
under President Trump, into COVID relief. We are talking about 
what is potentially driving inflation. And I think those 
investments, I was proud to work with him on those investments, 
and I think they frankly saved this country from not only a 
recession but potentially a depression.
    I want to come to a topic that I think a couple of Members 
have mentioned but I do not think have drilled down on, and 
that is our housing shortage. We have seen rents go up 13.5 
percent nationwide over the last year. In some markets it has 
gone up 20 percent. We have seen home prices double over the 
last decade.
    A lot of this is frankly due to housing shortages. We now 
have a housing shortage of about 1.7 million units, and that 
grows by about 150,000 units each year. And everything I have 
heard, at least, is that shortage is particularly acute not at 
the upper ends, not even on the rental side at the highest-end 
rental. It really is the most acute at low-income housing.
    And that is one of the reasons why I am working with the 
Chairman and many of us on the Committee. We had a robust 
housing package in the second part of the President's 
initiative that would have gone toward this supply issue. 
Because if you are looking at housing costs driving upwards of 
a third of CPI, and housing is a huge component of low- and 
moderate-income folks' basic nut they have got to meet each 
month, you know, if we really want to take on systemically and 
not on a transitory basis but on a relentless basis the 
question of inflation, we have got to increase housing supply.
    So Dr. Bernstein--and I would be happy to hear from other 
members of the panel as well--what should we be doing on 
housing supply? And I was going to ask two questions. I will 
try to ask just one, recognizing I would like to hear from the 
whole panel. Housing supply, won't that address inflation? It 
will not happen overnight but this is a long-term problem that 
has been developing over a decade.
    And beyond just direct Government programs there are tax 
initiatives, like LIHEAP and others, LIHTC and others, that I 
think make some sense. You know, private sector, then 
bipartisan support of LIHTC gives that kind of incentive for 
low housing construction to developers. Should we not use these 
in our toolbox if we are really going to take on, not in a 
short-term but in a long-term basis inflation?
    Mr. Bernstein. Yes. That is an extremely important set of 
questions, and let me begin by thanking you for your leadership 
on this work as well as others on the Committee.
    Let me start by just saying why this is so important, 
underscoring some of the points that you made, Senator. There 
is a long-term supply shortfall in the housing sector, and you 
mentioned 150,000 units each year deficient supply. Multiply 
that by 10 and you get to the number that you are suggesting in 
terms of a shortfall. This is a market failure that is 
particularly acute in the bottom half of the market. And why? 
It is because the math does not always add up for people to 
build, for builders to build, along with the problem of 
exclusionary zoning problems. This makes this key to the 
President's equity agenda, especially in rural areas and 
communities of color.
    And the third issue you correctly raised was inflation. 
Shelter is the largest single component in the CPI. Housing 
experts Jim Parrott and Jim Zandi recently wrote, quote, ``If 
policymakers are serious about reining in inflation then they 
have little choice but to take on the shortfall in housing 
supply.''
    What can we do? The Administration is already actively 
using its executive powers to increase housing supply and 
access. We have coordinated with various agencies--Fannie, 
Freddie, HUD, Treasury--to create, deliver, or preserve 100,000 
affordable units over the next 3 years.
    But the Administration toolbox, Senator, as you well know, 
is not nearly big enough to deal with the supply shortage that 
goes back a decade, at least. Investments that we make now will 
pay off for many years to come. Ideas that we have put on the 
table, many of which you have helped champion, have a long 
history of bipartisan support. And they involve the tax credits 
that help to incentivize building on the supply side, where too 
often middle- and low-income housing does not pencil out, given 
land, permitting materials, and cost, again which predated the 
pandemic; resources to help build and renovate houses; and 
resources to build housing infrastructure through Community 
Development Block Grants, which includes action on exclusionary 
zoning.
    I can say more about any of those details. It would 
probably a whole other hearing to go through them in the way 
they deserve, but let me stop there for now.
    Senator Warner. And I think we have run out of time so I 
would welcome any of my Republican colleagues who want to work 
with me on bipartisan tax policy that actually incents the 
increase of supply. If we do not want to take a transitory 
approach and we want to take a long-term approach to deal with 
inflation we have got to increase the supply of housing, 
particularly for low- and moderate-income people.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Warner.
    Senator Scott, from South Carolina, is recognized.
    Senator Scott. Thank you, Mr. Chairman, and thank you all 
for showing up this morning. It has been a fairly feisty 
hearing it sounds like to me, watching this back in the office 
and paying attention to the comments.
    I will say, there must be millions of kitchen table 
economists, also known as parents, all over the country, asking 
what in the world is the value of an economist degree in 
Washington, DC? Because if we are failing to answer the simple 
question that Senator Daines asked, which is are we better off 
today than we were a year ago, the answer is emphatically 
``no.'' That is not a question that people at the kitchen table 
are asking in a serious manner.
    When you ask yourself if the average person in this country 
whether inflation was better this month than wages, the 
cumulative effect of inflation in an average household in the 
country, when your gas prices are up 40 percent and your 
utilities are up 20 percent, the answer is ``no.'' If you had a 
4 percent increase in your wages and a 7 percent increase in 
inflation, the bottom line is that your spending power is down, 
not up. If, in fact, you can look at inflation as an additional 
tax on those folks with fixed incomes, are they better off, the 
answer is ``no.''
    This is not a hard question to even dig into. This is a 
simple question that is clear. When your food is higher, and 
your clothing is higher, and your utilities are higher, and 
your gas is higher, to suggest that we are anything other than 
worse off this year than we were last year, you do not even 
have to believe me, as me. Ask the President's approval 
ratings, the lowest ever. Why? It is because the average 
American family is suffering through an incredible crisis that 
they do not have to hear what you are saying. They can see with 
their own eyes the disappearing dollars in their accounts. This 
is not hard to see. This is easy to see.
    What we should be asking ourselves is how do we make it 
better, not pretending as if it is not bad. It is really bad, 
and getting worse. When you are at a 40-year high in inflation, 
this is not something that the average person says, ``I don't 
really understand what inflation is anymore.'' They do not even 
ask the question, ``What is the definition of transitory'' 
because this is not transitory.
    So the question I would pose, if I had a question, that is 
for all three of you is, how do we tell the American people 
that the inflationary impact is not devastating to someone like 
the woman who raised me, a single mother, who is looking at her 
account go down and her challenges go up? How do we say to that 
person that there is somehow, some way, good news in the 
current economy? And frankly, the confusion that is going to be 
caused at tax time, when we accelerated the tax refunds through 
the $300 monthly payment, that leads to confusion and a delay 
in refunds, because we thought there was a better way to deal 
with the Child Tax Credit. I think that is going to add more 
confusion to this economy, less confidence in this economy 
going forward.
    So I hear what you are saying, and I think the average 
American is literally sitting there asking themselves, this 
cannot be the Banking Committee in the U.S. Senate, unable to 
come to the conclusion that we came to in January of 2021, 
February of 2021, March of 2021, January of 2022, February of 
2022, and we are going to be saying the same thing in March of 
2022 as well.
    So I would love to hear how inflation is not having the 
negative impact that every other person in the country seems to 
be fully going through right now.
    Ms. Rouse. Senator Scott, look, we understand. The 
President understands your kitchen table economics and what 
people are concerned about around the table. Part of the 
challenge is we are in, we hope, only a 100-year pandemic. We 
have been living with this for 2 years. In this country we have 
had 900,000 deaths. The case is we are still living with this 
pandemic.
    What is hard for all of us to understand and appreciate is 
what would have happened without the American Rescue Plan, 
without the other efforts of the Federal Government and the 
Federal Reserve to rescue this economy and ensure that we got 
through whole. I appreciate that is a very hard counterfactual 
to contemplate.
    I am not saying that we are exactly where we want to be, 
but as we have highlighted we have had the strongest recovery, 
you know, on record. We are doing better than our peers. 
Unemployment has fallen dramatically. I would remind the 
kitchen table economists that when the President took office 
the economy was almost 9.5 million jobs short of where it was 
when the pandemic started, and we have recovered almost all of 
those jobs. So now people who want a job can get a job, that 
unemployment has fallen more quickly than it ever has in a 
recovery.
    And so while we have challenges, there is no doubt, and the 
President is focused on doing what he can in the short term to 
try to ease supply challenges, to nominate the Federal Reserve 
nominees--and Senator Toomey, I will not say anything more 
about that. But we know that we need to get inflation under 
control. There is no question about it.
    I think that the number one way that the President needs to 
be focused on, and we all need to be focused on, is getting 
this pandemic under control.
    Senator Scott. Thank you, ma'am.
    Ms. Rouse. That this is all driven by the pandemic.
    Senator Scott. Mostly because Chairman Brown is going to 
cut me off in a second, so I just want to finish up here, 
because I think it is really important. I think you make some 
really good points. Proving a counterfactual is implementation.
    I, like many of my colleagues, would love to have been able 
to vote for four members of the Federal Reserve and get answers 
on the fifth one. I do think that unemployment has fallen, 
without any question, partially because the long-term 
unemployed should be absorbed in those numbers as well. As we 
all know, especially you all better than I, that the more 
people who are in the long-term unemployment line, the lower 
your unemployment rate goes.
    And I will finally finish with this--because you have been 
very gracious, Chairman, with my time, and I appreciate that 
more than I can say--that the $1.9 trillion COVID relief 
package that had about 10 percent for COVID-related health, 1 
percent for vaccines, and $1.6 or $1.7 trillion for spending 
that actually helped to fuel the inflationary impact that we 
are now trying to recover from has also been problematic.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Scott.
    Senator Van Hollen, from Maryland, is recognized.
    Senator Van Hollen. Thank you, Mr. Chairman, and I do hope 
we will vote on the Federal Reserve nominees. Vote yes, vote 
no, but let's vote on all of them.
    We passed the American Rescue Plan just about a year ago 
because the pandemic had hit our economy hard. It had hit 
workers hard. Millions of Americans were out of work. And as 
you have testified today, and as the fact show--and I think 
those factors are uncontested--we have seen jobs come roaring 
back, over 6.6 million jobs, a record in the United States. We 
have seen very robust, real GDP growth of 5.7 percent in 2021.
    Now one of the reasons we passed the American rescue plan 
was because families' incomes were being squeezed when they 
were out of work. That included the $1,400 individual payments, 
did it not, Dr. Rouse?
    Ms. Rouse. Yes, it did.
    Senator Van Hollen. And I keep hearing from our colleagues 
about how the real purchasing power of American families went 
down in 2021. It did not. Is it not the case that real 
disposable income grew in 2021?
    Ms. Rouse. Well, so again I will just refer to our chart 
here, which is some new evidence from economists at U.C. 
Berkeley, and would suggest, especially for the bottom 50 
percent, that if you look at their market wages before tax and 
before benefits, that they are better off today than in the 
last quarter of 2019. And then when you add in benefits and 
after taxes they are ahead.
    So we know that inflation is a challenge, but household 
balance sheets have weathered it well.
    Senator Van Hollen. Well, so look. If I am a household and 
what I look at is what is my purchasing power this year over 
last year, and is it not a fact that real purchasing power went 
up in 2021?
    Ms. Rouse. It did. So these data suggest it did for most 
families, but we have to acknowledge that inflation has also 
been a challenge and has eaten into some of that purchasing 
power. But because due to the record GDP growth there has been 
a very strong recovery, so that household balance sheets are 
strong and many Americans are better off today than they were 
at the beginning of the year.
    Senator Van Hollen. All right. And so, you know, as I look 
at that, when you factor in the individual payments from the 
American Rescue Plan, when you factor in the other relief, you 
know, taken together with people's wages, the data indicate 
that we have seen a growth in disposable, after-tax income, and 
especially so for lower-wage individuals.
    Let us get to where we are now, because, you know, there 
has been a lot of year-over-year comparison with respect to 
real wages. And I think, Dr. Bernstein, I think I heard you 
clarifying something that had been said earlier. But if you 
look at January's figures with respect to real wages, what do 
we see?
    Mr. Bernstein. I will tell you what we see but I will also 
give you the beloved CEA caveat, which is that we never read 
too much into any 1 month. We are always looking for trends. 
However, we also look closely at the jobs report, and it did 
show, in January, that the hourly wage beat the pace of 
inflation. I think the hourly wage was up, if I am remembering 
correctly, 0.7 percent; inflation was up 0.6 percent. Now that 
is 1 month.
    But it is indicative of trends that you have heard about 
from all of us here today. The strength of the job market, that 
was a month where we had an upside surprise in job gains of 
467,000 jobs, well above what was expected, and a job market 
that was powering through Omicron, that was very much upon the 
land that month.
    We should also underscore what Chair Rouse was just talking 
about, that when the job market tightens up as much as it has, 
bargaining power, leverage among working people goes up 
disproportionately for those in the bottom half. And that is 
one of the factors that is behind the stronger wage growth in 
the bottom half and what you see there, vis-a-vis market 
incomes and disposable incomes.
    Senator Van Hollen. So really quickly, if we are successful 
at beating this pandemic--more and more it does look like 
Omicron is on the downward trend, although you never know what 
will happen--but one of the issues we have seen, of course, is 
during the pandemic people purchased a lot more goods relative 
to what they purchased in services. In other words, that 
balance changed.
    Can we expect that as people get back out and can go to 
restaurants and movies that that pressure, that price pressure 
on goods will come down, and how would that impact inflation, 
potentially?
    Mr. Bernstein. That is certainly the dominant expectation, 
and it is one of the main reasons why forecasts for inflation 
predict that inflation will grow about half as fast at the end 
of this year than it did last year. That goods-service 
rebalancing helps in that regard because inflation in the goods 
sector, due to the dynamic that you are describing, has vastly 
surpassed that in the service sector.
    But we will have to see, and look, forecasts have been 
wrong. And I think the thing that we are trying to stress here 
today, that both in terms of our Administration's actions in 
terms of strengthening supply chains in the near term--our work 
at the ports, our work at the trucks--and our legislative 
agenda, including the Bipartisan Infrastructure Law and many of 
the productive capacity-enhancing measures in the Build Back 
Better agenda are extremely important to ease longer-term 
inflationary pressures.
    Senator Van Hollen. Thank you. Thank you all. Thank you, 
Mr. Chairman.
    Chairman Brown. Thank you, Senator Van Hollen.
    Senator Tillis, from North Carolina, is recognized form his 
office.
    Senator Tillis. Thank you, Mr. Chairman. Unlike what 
Chairman Brown insists, I think I can have competing concerns 
at the same time. I think I can be concerned that the Biden 
administration's policies are propelling inflationary pressures 
higher, while I also believe that Ms. Raskin should provide 
answers to important questions. Thirty-six separate ``I do not 
recall'' statements are simply unacceptable. To suggest that 
these concerns are somehow mutually exclusive I believe is 
ridiculous.
    Just this morning, Chairman Brown insisted his Finance 
Committee boycott in 2017 was because, and I quote, ``They had 
not answered nearly enough of our questions.'' Well, let us 
review Ms. Raskin under this standard, just articulated by the 
Chairman earlier in this Committee.
    To date, Ms. Raskin has failed to provide numerous answers. 
Ms. Raskin began by failing to list her time at Reserve Trust, 
claiming to not even recall how she got the job. Ms. Raskin 
failed to answer repeated questions at her nomination hearing 
about her conduct lobbying her former colleagues at the Fed 
while at Reserve Trust.
    Subsequently, Ms. Raskin provided 36 identical ``I do not 
recall'' responses to questions for the record. Ms. Raskin 
finally canceled and did not reschedule a meeting with 
Committee staff, and said that we could clear these issues up 
and get real answers to important questions.
    So misrepresenting my objection to Ms. Raskin as simply not 
liking her shows a lack of understanding of my concerns.
    Now, Mr. Chairman, or for the witnesses, I have been 
listening to the entire Committee hearing in my office, and I 
was really struck by what Senator Scott was saying. He used the 
term ``kitchen table economist.'' Well, I will use the term 
``trailer park economist,'' because I was one of those back in 
the '70s, when I saw spiraling inflation, wrong-minded policies 
from the administration, gas prices that were to a point where 
I could not afford to fill up a 12-gallon gas tank at about $5 
at a time.
    That trailer park that I grew up in is still standing in 
Nashville, and I will guarantee you if I went there today and I 
presented the graphics that are behind the witnesses and said, 
``You are better, right? We have had a historic recovery. We 
just saw the strongest recovery on record,'' which was just 
stated by one of the witnesses a few minutes ago, my guess is 
they are feeling the same way that I did when failed policies 
of the past put us in this position. For us to suggest that 
people are not struggling, for us to suggest that somehow that 
buying power of those folks that are living in the same trailer 
park that I did is somehow stronger just absolutely conflicts 
with real-world experiences that we see out there every single 
day.
    Mr. Chair, I also have to restate what Senator Toomey said 
earlier. For witnesses on at least more than two occasions to 
suggest that the way that we are going to fix the inflation 
problem is to get these board members confirmed, really, either 
they do not understand that we have a functioning board that 
can take action today or they do not want to acknowledge that 
fact because of an agenda to have these other four nominees 
confirmed before we get answers to questions. And, 
incidentally, we were prepared to vote on five out of the six 
nominations in the markup, until the Chairman decided to go all 
the way with the sixth nomination, Ms. Raskin, where we have 
serious concerns.
    For the witnesses, 55 percent of the CEOs believe that we 
have an inflation problem. Why is it that you think we do not, 
or why is it that you think that this should not be top of mind 
for President Biden's administration? Why is it, because you 
have mentioned Build Back Better several times, why is it that 
you think flooding a zone with even more liquidity is somehow 
going to fix the fundamental problems we have with this 
economy?
    Ms. Rouse. Thank you, Senator. So the President is very 
focused on the concern of price increases. He understands that 
the price of milk and gas have gone up, and that that is a real 
challenge for families. This is a President who cares about the 
middle class. That is his whole economic agenda.
    Senator Tillis. If I may, because I want to try and be 
respectful of the Chairman's time, but because I have heard you 
and others say that Build Back Better is the solution to the 
problem but I see several economists who say that it would 
cause inflationary pressures over the long term. It would take 
not months or weeks to recover from it but we would get back 
maybe to reducing inflation over the course of years. How on 
earth can we think that that is the right way to go about 
fixing the real-world problems that we have today?
    Ms. Rouse. So look. Seventeen Nobel Prize-winning 
economists agree that Build Back Better is actually the 
antidote to inflation going forward, because it----
    Senator Tillis. Yeah, going forward, but how soon?
    Ms. Rouse. Because it----
    Senator Tillis. Are some of these same economists saying 
that that could be a matter of years?
    Ms. Rouse. The point is that Build Back Better is not 
stimulus. It is not meant to be deficit financed. The President 
has proposed that it be paid for and be fiscally responsible. 
It makes critical investments, and those investments will not 
cause inflation. In fact, they increase the capacity.
    So it is not inflationary. I am not sure who you are 
referring to, but we know that this is ways to make everyday 
costs affordable for families, the very families you were 
referring to, in prescription costs, in childcare, and to 
ensure that people can get back to work, and so that our 
economy has got faster growth and it is more equitably shared. 
Yes, it takes time to build and to make those kinds of 
investments, but that is the kind of sustainable growth that we 
seek going forward.
    Senator Tillis. Well, Mr. Chair, thank you for the time. I 
can just tell you that those folks that I am going to go visit 
back in that trailer park over the next week or so are probably 
going to say, ``I do not have years to recover. I have months, 
maybe weeks to recover,'' and we have to focus on the short-
term crisis that we find ourselves in today.
    Thank you, Mr. Chair.
    Chairman Brown. Thank you, Senator Tillis.
    Senator Smith, from Minnesota, is recognized.
    Senator Smith. Thank you, Mr. Chair and Ranking Member 
Toomey.
    So I am sitting here and listening to this discussion, and 
to listen to my Republican colleagues you would think this 
economy in the United States is going to hell in a handbasket, 
as my mother would say. And yet I am looking at the information 
here that we have got. In the first year of President Biden's 
term economy has created over 6 million jobs, the unemployment 
rate has fallen to 4 percent, 3.1 percent in my State of 
Minnesota, wages increased by 4.5 percent as well.
    I note that according to numbers released in January by the 
U.S. Census Bureau an astounding 5.4 million new business 
applications were filed in 2021. So this says to me that the 
American people are hopeful and are feeling that they can 
achieve something in today's economy.
    Now I am not saying that inflation, nor do I hear any of 
you saying that inflation is not an issue that we need to pay 
attention to. But let me dive into this a little bit.
    A good friend of mine once said that for every complicated 
question there is a simple answer that is almost always wrong, 
and that seems to me to be the case when it comes to some of 
the conclusions that my Republican friends are attempting to 
draw when it comes to inflation.
    So, Dr. Boushey, let me start with you. The question is why 
is inflation going up. One simple answer pushed by my 
Republican colleagues is that President Biden and the Democrats 
have invested too much in the American people and that is why 
inflation is going up. Is that the right conclusion to reach, 
Dr. Boushey?
    Ms. Boushey. Well, here is the thing. We are recovering 
from a historic pandemic. As Chair Rouse said, everything about 
our economy right now starts with that fact, that we have to 
get the pandemic under control. That is why we had the economic 
challenges. It is why we needed to take those historic actions 
to support families through this crisis. And it is why, at this 
point, even though we have supported families and 6.7 million 
people have a job today that did not a year ago--an incredible 
achievement, one that forecasters did not think that we would 
be able to do.
    But that has meant that demand and supply are not in 
alignment, and, because of the pandemic, it has been hard for 
suppliers to get goods to shelves and people are not going out 
and doing things, buying services, at the same level that they 
used to. They are not going out to eat. They are not doing 
those things. They are buying stuff, but the pandemic has made 
it difficult for those things to get to market.
    And there are examples all across the economy, but it is an 
imbalance in supply and demand. And it is because families have 
been supported through this pandemic. You know, that is a core 
part of the problem. They have jobs and so they can go out and 
buy these goods and demand them.
    So yes, it is a complicated issue but it does not mean that 
the economy is all bad.
    Senator Smith. Well, and it is not the correct assumption 
to draw, or conclusion to draw that the actions that we have 
taken are the reason why inflation is going up.
    Dr. Rouse, this chart here shows that the inflation-
adjusted income is rising for Americans in the bottom 50 
percent of the economy. So what conclusion can we draw, based 
on what Dr. Boushey just said, about whether the strong action 
that we have taken has created more opportunity in the American 
economy as we have been struggling with this pandemic?
    Ms. Rouse. Well, when Congress took action because of the 
pandemic there were two choices, right. Many people have been 
concerned about the spending, that we could not afford it, but 
there are two choices. We know that because we had to power 
down the economy, if action had not been taken that actually 
would have shrunk economic activity.
    Senator Smith. Right.
    Ms. Rouse. And so, therefore, we would have found ourselves 
with people with less income. We would have had less economic 
growth. Our economy would be smaller.
    Instead, Congress, with you all and the prior 
Administration, this Administration, the Federal Reserve, 
thought it was more important to support the economy so that we 
could come out actually even stronger. In fact, the IMF has 
recently updated their forecasts, projecting that the U.S. 
economy will be stronger in 2024 than it was before, because of 
our actions.
    So what was important was to maintain the economic activity 
so that we could get through this downturn stronger than when 
we came in. So that was the rationale.
    Senator Smith. Thank you. And Dr. Bernstein, I mean, are 
not Americans better off than they were a year ago? Do we not 
have millions more Americans vaccinated? Do we not have most of 
our students back in school? Are not millions more Americans 
back at work?
    Mr. Bernstein. Absolutely. And I want to underscore a point 
that you are making, using the graph that you held up. If you 
actually look back at the heart of the pandemic in 2020, where 
you see that big dip in the red line and a big increase in the 
other color line, which I am color-blind so I do not know what 
color it is--I will call it blue--that gap there is a good 
example of exactly what you are raising. Absent the fiscal 
support, incomes would have looked much more like the red line 
as opposed to the blue line. So this is really trying to 
underscore the quote, what it would look like without the 
support that Chair Rouse was talking about. So yes.
    I think the thing that we never want to lose sight of is 
that, yes, families face an inflation challenge that the 
President underscores every time he talks about it, and we are 
not sitting there watching that. We are doing everything we 
can--near term, medium term, long term--with your help, to try 
to ameliorate those pressures.
    Senator Smith. Well, and there is more that we want to do 
that we would like help from our Republican colleagues to do, 
like lowering prescription drug prices, like lowering the cost 
of childcare, like transitioning to clean energy so that our 
utility rates are lower. And so I think those are the things 
that we can do that we are already doing, thanks to the 
leadership of the President.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Smith.
    Senator Ossoff, from Georgia, is recognized from his 
office.
    Senator Ossoff. Thank you, Mr. Chairman. Thank you to our 
panelists. Thank you for your service.
    Ms. Rouse, I would like to discuss the affordable housing 
crisis faced by Georgians with you for a moment. Statewide home 
prices were up 19 percent year over year in December. I hear 
from constituents every day in places like Macon, Columbus, and 
Atlanta about the dream of home ownership and the ability to 
afford rental properties is becoming increasingly unattainable.
    Of course, this is not a new phenomenon. The affordable 
housing crisis has been growing and brewing for over a decade.
    First question for you please, Ms. Rouse, is will you 
commit to joining for a call or meeting with me, with Macon-
Bibb Mayor Lester Miller, and Columbus Mayor Skip Henderson and 
Atlanta Mayor Andre Dickens to discuss how the White House can 
help support our efforts in Georgia to increase the supply of 
affordable housing?
    Ms. Rouse. OK. You are putting me on the spot, Senator. 
What I will say--and I am open to considering the invitation--
but we completely understand that the housing crisis is a 
longstanding crisis and it was not created by this pandemic but 
it was exacerbated by the pandemic, and that there has been a 
long-run mismatch between the supply of housing and the demand. 
And that is why the Administration has put a focus on this, 
through Build Back Better as well as, you know, things that the 
Administration can do through administrative action. There is a 
discussion of tax credits and other supports, zoning and land 
use.
    So we understand the very importance of housing. We need to 
solve this problem. It is not unrelated to the discussion of 
inflation, and we need more affordable housing.
    Senator Ossoff. Ms. Rouse, thank you for that. What I am 
asking is not for a policy commitment. I am asking for a 
commitment for a phone call or a meeting with me, with Atlanta 
Mayor Andre Dickens, Macon-Bibb Mayor Lester Miller, Columbus 
Mayor Skip Henderson, to discuss how the White House can 
support our efforts in Georgia to increase the supply of 
affordable housing.
    Ms. Rouse. I would be happy to join such a phone call.
    Senator Ossoff. Thank you so much. I appreciate that.
    Dr. Boushey, with business incubators located in cities 
like Augusta, Alpharetta, and Duluth, Georgia, is a place where 
entrepreneurship is thriving. We have diverse immigrant 
communities who are contributing to the growth of 
entrepreneurship and small businesses. An interesting fact 
about Georgia: We have the seventh-highest percentage of 
minority-owned startups in the country, and the bipartisan 
infrastructure legislation permanently authorized the Minority 
Business Development Agency, which will help minority 
entrepreneurs with technical assistance and access to capital.
    How does, in your view, limited access to capital affect 
the growth of minority-owned businesses, and innovation more 
broadly? What policies might you suggest Congress can implement 
or the Administration can undertake to address this issue?
    Ms. Boushey. Well that is a great question. Small 
businesses are the lifeblood of the economy all across these 
United States, so it is an important part of our economy that 
we need to support.
    One of the things I want to note is that attention to who 
has access to capital is something that the Administration has 
been focused on since day one. When the President came into 
office he, as a part of his efforts to focus on equity, a 
whole-of-Government approach to equity, one of the things that 
we focused on was making sure that the Paycheck Protection 
Program, the support that went out to small businesses actually 
reached the intended businesses.
    There is actually new academic research out, that just came 
out a couple of weeks ago, showing that those new efforts that 
were really targeted at reaching the most vulnerable small 
businesses, businesses led by owners of color and women, that 
we were successful in doing that, more so than previous 
iterations of the PPP program.
    So that gives me some hope that with a focused attention on 
questions of equity and putting that together with making sure 
that small businesses have access to what they need that we can 
do that.
    Senator Ossoff. Thank you, Dr. Boushey.
    Dr. Bernstein, I have had the pleasure of visiting and 
working technical colleges and technical training institutions 
across the State of Georgia over the last year, since I took 
office. For example, I was with the leadership over at Gwinnett 
Technical College to understand more about the exciting 
workforce training programs they offer students, new 
innovations in robotic welding, they are offering training 
opportunities.
    You know, my view and the view of many in my State is that 
we need to make it easier for Americans to access technical 
training, technical colleges, vocational training, to develop 
the skills that are necessary for steady, good-paying work in 
rapidly evolving industries with increasing applications of 
technology.
    How, in your view, Dr. Bernstein, do workforce and 
technical training help improve productivity, opportunity in 
our overall economy?
    Mr. Bernstein. They do so by making probably one of the 
most important connections we can make in the labor market, 
which is the skills of the workforce aligning with the demands 
of employers, particularly in sectors and areas where that 
demand is growing and those, of course, disproportionately tend 
to be in technical areas. So training workers for those jobs is 
so important, and the way you framed it is exactly right.
    Decades ago--I have been involved in this for a long time--
training was much too disconnected to job openings. It was more 
sort of getting yourself together, getting your act together in 
a way to be able to go out for work. We are much more focused 
now on employment-based training, connecting workers with 
employers' demands.
    Two other quick points. One, unions can be an essential 
force in making this connection, particularly through 
apprenticeship programs, and it is my understanding--I am 
trying to think back of all the different proposals we have 
made in this space--I do not think the Biden administration has 
made a workforce proposal that does not include 
apprenticeships. So a combination of unions, apprenticeships, 
and the kind of technical training that you suggested is 
absolutely integral to good jobs at good wages.
    Chairman Brown. Senator Ossoff, thank you, and happy 
birthday a day late, Senator Ossoff.
    Senator Cortez Masto, from Nevada, is recognized from her 
office.
    Senator Cortez Masto. Thank you, Mr. Chair, and thank you 
to the panelists here today.
    Let me just State the obvious, because I think some of my 
Republican colleagues obviously are out there stating the 
obvious, which is families and individuals are dealing with 
higher prices. What I did not hear from some of my colleagues 
was how do we address it? How do we find solutions working 
together to address it in the short term and long term?
    I know one way to address it is to show up. I do not 
understand why my colleagues did not show up to the hearing the 
other day to reappoint Jerome Powell in the Federal Reserve, 
Lael Brainard to the Federal Reserve, and look at three new 
positions. I have not heard of their concerns about those 
individuals so it just disappoints me that they did not show 
up.
    Why is this important? Because the Federal Reserve has the 
important monetary tools to help us address inflation, which we 
see corresponding to the high prices our families are dealing 
with right now. I see them in my State. I talk to my families. 
I talk to individuals. I see it at the gas pump when I fill up 
my tank. I see it in my own family, when my mother was going 
food shopping and she is telling me the prices, and I see it 
when I am shopping or my husband is shopping.
    So the obvious is there, but what are we going to do about 
it? And so this is the conversation I appreciate the panelists 
being here today, because unfortunately some of my colleagues 
are more about stating the obvious, not finding solutions.
    But here is the area I want to focus on. Because of the 
high prices that I see in my State, including housing, this is 
an area that I have been talking to many within my State about 
how do we increase that supply chain to address the high 
housing prices. Dr. Bernstein, you talked a little earlier 
about this with Senator Warner, and highlighted the fact that 
we do have, whether it is 5 million or 7 million, we have a 
housing shortage here, and what can we do about working 
together with the Administration?
    I appreciate your comments that we need to continue, and 
you are coordinating, and the Administration is coordinating 
with Fannie Mae, Freddie Mac, and Federal home loan banks that 
we are looking at continuing low-income housing tax credit, and 
it is important to continue that in the BBB.
    Let me ask you this. In the Build Back Better bill there 
were some housing components that are actually going to address 
the housing supply chain, and there are a number of them, not 
just increasing the low-income tax housing credit authority, 
but there is reduction of bond financing threshold from 50 
percent to 25 percent to address it. There is 50 percent basis 
boost for properties serving extremely low-income households 
that we are looking at.
    We are looking at closing the qualified contract loophole 
to prevent the premature loss of units to early terminations 
from the program. We are looking at protecting nonprofit 
sponsors' ability to purchase properties at year 15. We are 
looking to coordinate housing credit and renewable energy tax 
credits. We are even looking at our Tribal communities that we 
know need affordable housing and looking at area 30 percent 
basis boosts.
    These were all proposals that we were looking at in Build 
Back Better, and I can tell you, I am talking to members in my 
community about this proposal. This makes sense to increase the 
housing supply.
    My disappointment is my Republican colleagues are not even 
there, working with us. I am hopeful that they hear this and 
are going to help us address this issue instead of just 
pointing fingers.
    But can I ask you, based on the proposals that you have 
heard and some others, does that make sense? Are we working in 
the right area, the part of what we were looking at in Build 
Back Better to address that housing supply and address this 
issue in the short term and long term?
    Mr. Bernstein. Not only does it make sense, but I do not 
see how we achieve the housing goals that you articulated, and 
that historically, partisans on all sides of the aisle have 
shared. As you have suggested, much of the policies that you 
are talking about typically involve increasing access to 
housing finance, more often than not targeted at the bottom 
half of the housing market, which is where the supply 
constraints have been most acute. And historically these have 
been bipartisan-supported measures. These, in many cases, are 
subsidies that go to builders, whose housing deals simply do 
not pencil out in the absence of the kinds of measures you are 
talking about.
    Now we have tried, as you know, in our Administration, to 
leverage funds for the capital magnet fund, to work with the 
FHFA to increase LIHTC equity investment caps significantly in 
order to again increase affordable financing for that sector of 
the market. And as you mentioned, in Build Back Better there 
are extensive tax credits for the supply side, grants to 
rebuild and renovate, and community block grants to renovate 
infrastructure related to housing, as well as to push back on 
exclusionary zoning.
    Finally, what is particularly important about the comments 
that you have made is that every intervention that you have 
just elevated is on the supply side of the housing market. 
There is a demand side, and, you know, we can think about that 
and worry about that too. But the emergency is really on the 
supply side, and the financing policies that we have discussed 
answer the mail precisely there.
    Senator Cortez Masto. Thank you. And I know I have run out 
of time and I will submit the rest of my questions for the 
record because I do have concerns about what the Administration 
is doing to restore international travel and our trade 
[inaudible] and prevent future instability in the hospitality 
sector.
    But let me say this. This is a time for people showing up, 
working together to find solutions, not to state the obvious to 
families, individuals that they already know. It is time to 
show up. It is time to have solutions, come to the table and 
work together. Clearly there are solutions that are out there, 
but we need our colleagues to show up.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Cortez Masto.
    Senator Warren, from Massachusetts, is recognized.
    Senator Warren. Thank you, Mr. Chairman, and Mr. Chairman, 
before I jump into my questions I would like to urge my 
Republican colleagues who are taking the time to attend the 
hearing today to also do their jobs and vote on the five 
outstanding Fed nominees. If you are going to talk to the 
witnesses today about inflation, for example, then you should 
be just as motivated to actually fight inflation by making sure 
that the Fed has all hands on deck, and that means voting these 
nominees through right now.
    So let me turn to my questions. During President Biden's 
first year in office, the economy added a record 6.6 million 
jobs, more jobs than those added in the first years of the past 
four Republican Presidents combined. Workers are benefiting 
too, with wages growing at their strongest pace in years. And 
this is particularly impressive because 1 year ago many 
economists were predicting that at this point we would still be 
caught up with high unemployment and slow economic growth as 
the world struggled to deal with the fallout from the pandemic.
    But this good news has also brought some bad news--
inflation. Now you might think inflation would also be bad for 
companies. After all, an increase in cost of doing business 
would likely eat into a company's bottom line. But that is not 
happening. In fact, the CEOs of some of the biggest companies 
have been bragging to their investors that inflation has 
created a terrific opportunity for them to boost profits.
    Take the grocery chain, Kroger. Kroger has seen its 
business boom during the pandemic, with its stock price rising 
nearly 40 percent over the past year. Kroger's CEO recently 
told investors that, quote, ``A little bit of inflation is 
always good in our business,'' end quote.
    So Dr. Boushey, would you agree that it is easier for 
companies like Kroger to raise prices in an inflationary 
environment because consumers are generally aware that prices 
are going up and that lets companies hide behind inflation to 
expand their profits?
    Ms. Boushey. Well as you know, Senator, President Biden is 
very attuned to kitchen table budget issues, and he has been 
very focused on asking the regulatory agencies to be on the 
alert for price gouging. And I have in front of me a long list 
of things that have been happening over the past year on his 
work to make sure that markets are competitive and fair.
    But let me just note one, which is the Department of 
Justice and the USDA have worked together to set up a website 
where farmers and ranchers can say where they see problems in 
their industry, and that is just one of many things. So it is 
an important issue.
    Senator Warren. So an important issue. But the point I am 
trying to make here is the companies get to kind of draft in 
behind the inflation, and I take it you agree that that is what 
is going on here.
    OK. I see you nodding your head yes. I will take that as a 
yes.
    Let me go to another example. In a call with investors last 
week, the CEO of Tyson Foods, one of the big four conglomerates 
that controls as much as 85 percent of the meat market, said 
they have, quote, ``restructured our pricing approach,'' end 
quote, and are, quote, ``asking them''--the consumers--``to pay 
for inflation,'' end quote.
    Dr. Bernstein, if all Tyson was doing was raising prices to 
offset their production costs due to inflation, would you 
expect their profit margins to stay roughly the same?
    Mr. Bernstein. Roughly the same.
    Senator Warren. Roughly the same.
    Mr. Bernstein. Their price increases would offset their 
cost increases----
    Senator Warren. Right.
    Mr. Bernstein. ----which would hold their profits.
    Senator Warren. OK. So their profits should stay roughly 
the same.
    Mr. Bernstein. Roughly the same.
    Senator Warren. If that is all that was going on.
    Of course, that is not what happened. Tyson nearly doubled 
its profit margin over the year, to 11.3 percent, only the 
fourth time in the last 30 years that the company has achieved 
double-digit profit margins.
    And Tyson is not making record profits because it is 
selling more. In fact, it is making record profits because it 
is charging more. The number of beef products it sold declined 
6 percent over the year while the price of beef went up 32 
percent.
    So let us do one more example here. Another phrase we hear 
thrown around is ``pricing power.'' In a recent interview, the 
CEO of Chipotle said, ``We are pretty fortunate with the 
pricing power that we have,'' end quote, and that, quote, ``If 
we need to take more pricing we have room to do it. To date we 
have seen no resistance from our customers,'' end quote.
    Now this sounds a lot to me like what Fed Chair Powell said 
when he was here last month. Big companies are, quote, 
``raising prices because they can.''
    So Chair Rouse, let me ask you. For those of us who do not 
speak economist, is it right to say that when executives talk 
about pricing power they are referring to a company's ability 
to raise prices and extract profits out of consumers without 
worrying about losing business?
    Ms. Rouse. I would say it is fair to say that a company has 
pricing power when raising prices will not cause them to lose 
too many customers.
    Senator Warren. And could I just ask--I know I am out of 
time--what is it that gives companies pricing power? Does 
concentration in an industry give companies more pricing power?
    Ms. Rouse. So market concentration does tend to create more 
pricing power, which is one reason why increasing competition 
is such an important component of the Administration's economic 
agenda, because we know that increased competition also helps 
workers, spurs innovation, and generally helps markets function 
better.
    Senator Warren. Well, thank you very much. I appreciate it. 
Thank you, Mr. Chairman. And I just want to say, I am glad the 
Biden administration is not standing by. We can go after this 
concentrated power, industry by industry, and that is what will 
help bring prices down.
    Chairman Brown. Thank you, Senator Warren.
    Senator Warnock, from Georgia, is recognized.
    Senator Warnock. Thank you so very much, Mr. Chairman.
    Rising costs for families, as my colleague as indicated, is 
a persistent problem, and it is one that I am hearing from 
Georgians about every day. And it seems to me that part of 
fighting against rising costs is ensuring that Federal Reserve, 
the independent agency charged with managing inflation, has the 
leadership necessary in place. It seems a contradiction to me 
to talk about rising costs and to leave the Federal Reserve 
hamstrung.
    So I would encourage my colleagues on the other side of the 
aisle to join us in holding a vote on the five qualified, 
diverse nominees in front of us.
    I have introduced a bill with my colleagues to suspend the 
Federal gas tax, and in our bill Treasury would ensure that 
these savings at the pump are passed on to Georgians, cutting 
their gas costs. Still, every day we see headlines that large 
corporations and their wealthy investors have sought to take 
advantage of market volatility to pad their bottom line and 
enrich themselves while hard-working Americans are the ones 
making difficult decisions with their pocketbooks. They are 
seeing record profits. Consumers in Georgia are paying record 
prices.
    Dr. Bernstein, can you talk about some of the consequences 
of market concentration and corporate consolidation in this 
economy and over the past decades, and has this made 
corporations more powerful?
    Mr. Bernstein. Questionably so in terms of industries that 
are highly concentrated. We have mentioned meatpacking, and you 
just heard Chair Rouse talk about some of the pricing 
implications of concentration, particularly an increase in 
price levels relative to an industry situation with 
considerably less concentration. So we share your intuition 
there.
    Senator Warnock. Dr. Rouse, would you share that opinion?
    Ms. Rouse. Absolutely. It is why the President signed an 
all-of-Government effort. He signed an EO last summer to try to 
increase competition. We have seen increasing concentration, 
and I believe it is three-quarters of industries. We know that 
with increased concentration not only are firms able to raise 
prices relative to a more competitive market but it generates 
less innovation, it can be worse for workers, and generally not 
good for our economic health.
    Senator Warnock. It is one of the reasons why I have been 
urging a Federal investigation into apparent price gouging by 
international cargo carriers. We look at the supply chain 
issues. Of course, that is an important nexus point, and that 
price gets passed on to the rest of us. Can you say something 
about that, Dr. Boushey?
    Ms. Boushey. Yes, that a good [inaudible].
    Senator Warnock. OK. Let me move on to another question. 
The expanded Child Tax Credit, the largest tax cut in American 
history for working and middle-class families. Let me say that 
again because I think that gets lost in the conversation, and 
when you say expanded Child Tax Credit the average person may 
not know what you are talking about. We are talking about the 
largest tax cut for working and middle-class families in 
American history. And it seems to me that making this tax cut 
permanent would go a long way. It would certainly cut childhood 
poverty in half all across our country.
    Now I have heard arguments that this tax cut would 
contribute to the rising costs we are all experiencing, but 
when I talk to Georgians I hear that this money goes toward 
everyday expenses. Georgians have told me that the tax credit 
helped them to pay for health expenses, pay off debt, buy a 
coat for their kid.
    Dr. Rouse, do you think that the concerns that the expanded 
Child Tax Credit would add to rising costs are justified?
    Ms. Rouse. So the Child Tax Credit we know has immense 
benefits for children, both in the immediate term in terms of 
reducing food insecurity, child hunger, child poverty. It 
improves their educational outcomes. It generates outcomes. 
These similar kinds of programs generate positive benefits as 
adults. They are more likely to work, increasing labor supply. 
As adults they have less criminal activity. So it has 
tremendous benefits for the children and improves the mental 
health of their parents. So there are tremendous benefits 
there.
    We do not believe that the Child Tax Credit would be 
increasing inflation, in particular, because the increase is 
just so small that it is modest relative to the size of the 
economy. And furthermore, under the President's plan, any 
increase in the expansion of the Child Tax Credit would be paid 
for. So we do not share that concern, and we believe that the 
benefits of the Child Tax Credit is part of an overall effort 
to invest in children. Again, it is an important investment for 
increasing the economic capacity.
    Senator Warnock. So it is a net benefit to the economy and 
the economies of these families.
    Ms. Rouse. Absolutely.
    Senator Warnock. OK. Thank you.
    Chairman Brown. Thank you, Senator Warnock.
    Senator Reed, from Rhode Island, is recognized.
    Senator Reed. Thank you very much, Mr. Chairman, and I 
thank the panel for their testimony and insights today.
    Dr. Rouse, labor participation rates are falling while 
demand for labor is increasing. Do you have any insights into 
why labor participation rates are falling and what we might do 
to raise them up?
    Ms. Rouse. Well hello, Senator Reed. So labor force 
participation fell at the beginning of the pandemic, but 
actually we have had one of the fastest recoveries in labor 
force participation on record. So if we look at prime-age labor 
force participation, those are Americans 25 to 54, has 
recovered 2.1 percentage points of the 3.1 percentage points 
that were lost at the onset of the pandemic.
    We know that participation is a little slower to recover 
than unemployment, after a recession, but our participation 
growth has actually been relatively strong.
    What you are probably referring to is we also see record 
numbers of job openings, so we have a very tight labor market. 
So there is no question that some people are not participating 
due to concern out of the pandemic, but let us also keep in 
mind that at the onset of the pandemic we were almost at the 
height of the baby boom retiring. So even just looking at what 
would have been the change in labor force participation in our 
labor force without the pandemic, we would have seen a decline. 
In addition, with the pandemic we have seen excess retirements.
    So many people, I think, will be coming back as the 
pandemic gets under control, but let's face it, we do have a 
labor force challenge in this country. Declining fertility, 
immigration has been stymied due to the prior administration. 
And then with the pandemic we need to find ways to be improving 
our labor force participation and our labor supply because that 
is part of economic growth.
    Senator Reed. Related to that, as nominal wages are rising 
because of the tight labor market, as we see more people coming 
back with the end of the pandemic, we hope, can we sustain this 
nominal wage growth?
    Ms. Rouse. You are right, Senator, that right now a lot of 
the wage growth is due to the fiscal support, and what I call 
``pandemic economics.'' So we see wages rising in nominal 
terms.
    But honestly, the President's economic agenda--so this 
includes the Bipartisan Infrastructure Law, and it includes 
USICA, it includes Build Back Better, which are designed to 
make important investments in our economy--should have the 
benefit of increasing labor productivity so that what we have 
are sustained wage gains that are due from increasing labor 
productivity and therefore sustainable, and should be 
benefiting those at the lower end of the wealth income and rate 
distribution, those in the middle, therefore more equitably 
shared.
    Senator Reed. In fact, the President's program is very 
specifically directed at trying to maintain wage growth for 
low-income, middle-income Americans, very deliberately and very 
consciously.
    Ms. Rouse. It is. It is not only by ensuring that the kinds 
of jobs that they have are well compensated and high-paying 
jobs but also by lowering--making everyday costs more 
affordable--prescription costs, childcare costs--so that just 
overall family well-being and household balance sheets are 
growing and sustainable.
    Senator Reed. Thank you.
    Dr. Bernstein, you spoke very insightfully about the 
housing crisis we are facing today. First a question. With the 
anticipated rate increases by the Federal Reserve, do you think 
that will cool housing prices significantly?
    Mr. Bernstein. Historically, increase in the Federal funds 
rate show up fairly quickly in mortgage rates, and we are 
seeing some of that, and yes, that puts some dampening pressure 
on the growth in home prices.
    Senator Reed. But the rise in housing prices has been so 
significant that even with a dampening housing is out of reach 
of many Americans, way up into the middle class. This is not 
just an issue of----
    Mr. Bernstein. Yeah. So that is exactly the right way to 
think of it, in my view. We have referenced that a few times in 
the hearing today, the idea that the Fed, the work of the Fed 
tends to operate through the demand side channel. What is 
really plaguing the housing market, particularly the bottom 
half, is the supply side. And there we have tried to do what we 
can and have helped to support the creation, delivery, and 
preservation of about 100,000 affordable housing units over the 
next few years.
    But the task, the challenge of literally a decade of 
insufficient housing supply, particularly in the bottom half, 
is nothing that any Administration can do by itself. It 
requires bipartisan support through the kinds of measures that 
we have been talking about today, and measures that this 
Committee, again, historically, on both sides, have supported, 
particularly when it comes to housing finance and ensuring that 
deals in the bottom half can occur.
    Senator Reed. I would add another factor here, is that 
there is a critical role for State and local government, 
because land use planning and other factors might be as big a 
constraint on the housing supply. But I think the 
Administration's commitment and also through the money we have 
given to States, Governors' commitments to increase affordable 
housing, is significant. It is now a front-page issue. Ten 
years ago it was----
    Mr. Bernstein. You are exactly right to raise zoning. I do 
not think we solve this problem without dealing with 
exclusionary zoning issues.
    Chairman Brown. Thank you, Senator Reed, for your insight.
    Senator Toomey, in closing.
    Senator Toomey. Thank you, Mr. Chairman. I will just 
observe briefly, I think it is simply indisputable that with 
inflation running at a 40-year high, 7.5 percent annual 
inflation rate, wages are not keeping up, and that means 
Americans are falling behind.
    I think it is also very clear that super-easy money and too 
much spending by Congress are two of the principal causes. It 
appears as though there is going to be some reining in of the 
former. It is just really important that we not engage in yet 
another spending spree, which will only make it worse. Thank 
you.
    Chairman Brown. Thank you, Senator Toomey. Thank you to 
Chair Rouse, especially, and also, of course, to Dr. Bernstein 
and Dr. Boushey, for sharing your insights today about the 
strength of our economy and making it work better for all 
Americans, and I know you emphasize that always.
    Our goal is simple. We want everyone to be able to get a 
job that pays good wages and can afford to raise a family and 
retire with dignity. We want the cost of living to be 
affordable so people's paychecks are not eaten away by 
expenses. We are making tremendous progress on jobs, as you and 
those charts certainly point out, giving workers more options, 
more power to negotiate higher pay and better working 
conditions. You all understand the importance and the advantage 
of carrying a union card.
    Our charge now is to keep that progress. If you work hard 
you ought to be able to afford a middle-class life. It is that 
simple. It is something President Biden for sure understands. I 
look forward to continuing our efforts to make sure our economy 
reflects the dignity of work.
    For Senators who wish to submit questions for the record 
these questions are due 1 week from today, February 24. To the 
members of the CEA, please submit your responses to questions 
for the record within 45 days from the day you receive them.
    Thank you again for your testimony. This Committee is 
adjourned.
    [Whereupon, at 12:14 p.m., the hearing was adjourned.]
    [Prepared statements and responses to written questions 
supplied for the record follow:]
              PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
    Every day, Americans get up, go to work and do their jobs. But our 
Republican colleagues refuse to do theirs.
    On Tuesday, this Committee met to vote on five outstanding nominees 
for the Federal Reserve. But Republicans didn't show up. Instead, they 
went AWOL in the fight against inflation.
    At this pivotal moment in our economic recovery, everyone 
understands that we need a full Federal Reserve board--the first one in 
nearly a decade--to help tackle inflation. Republicans engage in 
political stunts but have no solutions. Americans don't want more 
political theatrics, they want solutions to bring down costs.
    We will not stop fighting for these nominees. These nominees have 
met with every Senator who asked for a meeting. They met with staff of 
senators who asked. They met with Committee staff--majority and 
minority. They offered to meet with many of my colleagues who refused 
to meet with them--and then boycotted the vote. They answered every 
question posed to them at the hearing. They answered every question 
submitted for the record, more than 200 of them, in a timely matter. 
One nominee even answered questions submitted after the deadline.
    If we're going to continue growing our economy, we need all seven 
Fed Governors in place. We need these professionals--working and 
debating and making decisions--about monetary policy, and interest 
rates, and jobs, and tackling inflation.
    I implore my Republican colleagues to show up and vote--vote yes, 
vote no, just show up and vote. It's your job. I implore--and the 
American people expect--for you do your jobs, just like they do every 
day.
    Let me read a few headlines from the past few weeks: ``Strong Jobs 
Report Shows Resilient Economy''; ``January Jobs Report Crushes 
Expectations''; ``Biden Sets First-Year Record With 6.6 Million Jobs 
Added''.
    In my State--long derided as the ``Rust Belt''--Ohioans have been 
waking up to headlines like these: ``Intel Picks Ohio for Largest Chip 
Factory in the World''; ``Hyperion Fuel-Cell Company To Open Largest 
Columbus Factory in a Decade''; ``GE Aviation Lands $6.8 Billion Engine 
Deal in Sign of Rebound From Pandemic''; ``Intel's Investment: 
Gamechanger for Ohio Jobs''.
    America is in the midst of unprecedented economic growth.
    Our GDP grew by 5.7 percent last year--the strongest annual growth 
in nearly 40 years. For the first time in two decades, our economy grew 
faster than China's.
    Job creation hit an all-time high. We added 6.4 million jobs last 
year--an average of more than half a million jobs a month. We saw the 
fastest drop ever in the unemployment rate.
    American entrepreneurs started more than 5 million new businesses 
in 2021--another record.
    Of course raw jobs numbers alone don't tell the whole story--they 
don't tell you how good the job is, what kind of wage it pays.
    And on that front, the news is even better. Wages are rising--
particularly for hourly workers who have been left behind in past 
economic recoveries. Workers are finally starting to share in more of 
the economic growth they create.
    American families' disposable incomes were higher in 2021 than they 
were before the pandemic, even adjusting for inflation. As Assistant 
Secretary of Treasury Ben Harris said 2 weeks ago, ``household balance 
sheets were exceptionally healthy due in part to the American Rescue 
Plan, other Government pandemic assistance, and brisk wage growth.''
    All of this progress was possible because of the American Rescue 
Plan. We promised shots in arms, money in pockets, and workers back on 
the job.
    And the Rescue Plan delivered.
    Of course we know that challenges remain. For all the progress 
we've made, we can't deny that many of the people we serve say they 
don't feel it.
    People are exhausted. They're tired of this pandemic, they're tired 
of the anxiety, they're tired of the way that it's divided neighbors, 
divided schools, divided families.
    The number one thing we can do to improve our economy and improve 
people's lives to to defeat this pandemic.
    And we are on the right course. Cases and hospitalizations are 
dropping. Because of the American Rescue Plan, most Americans are 
vaccinated. Everyone can get a booster shot. We no longer have to live 
in fear.
    We also know that the pandemic has caused inflation to run too 
high. Workers feel it every time they go the grocery store or fill up 
the gas tank.
    Inflation is a real problem and one that we, as a country, need to 
address head on. It's all the more reason why we need a full Federal 
Reserve board.
    The pandemic has revealed that our supply chains are too long and 
too fragile. It's causing higher prices in some industries. No one 
wants to have to go to three different stores to get all their shopping 
done, or to have every option they try to buy on backorder for months. 
It's maddening, it's draining, it's frustrating.
    We know how to fix it--make more things in America.
    For too long, our trade policy and our tax policy have encouraged 
corporations to move production overseas. It's cost us millions of 
jobs, and it's contributing to our supply chain problems today.
    It's time to bring those supply chains back home.
    The House and Senate have both passed bills to spur domestic 
manufacturing, research, and development. They would allow us to better 
compete with countries like China, and would support the production of 
key inputs like semiconductors. We should put a comprehensive bill on 
the President's desk as soon as possible.
    We also took an important step to speed up our supply chains by 
passing the bipartisan infrastructure bill. It will improve our roads, 
bridges, and ports--making it easier and more efficient for American 
manufacturers to get products to market.
    As important as all of these steps are, Government is not the only 
actor here.
    Corporate consolidation is reducing competition, giving consumers 
fewer choices and workers fewer options. It allows corporations to 
increase prices while cutting an ever larger check for their executives 
and shareholders.
    The Wall Street Journal tells us that two-thirds of the largest 
publicly traded companies have reported larger profits in 2021 than in 
2019. In recent weeks, CEOs have bragged to Wall Street about their 
ability to increase prices on consumers.
    Let's be clear: raising prices is a choice corporations make. They 
could make a different choice: they could reduce the amount of stock 
buybacks. Millionaire executives could take a pay cut--or even just get 
a slightly smaller raise this year.
    But there's nothing forcing them to make a better choice, because 
there isn't enough competition in the economy.
    We need an economy that works for everyone--not just those at the 
very top.
    We cannot declare the recovery complete until all workers can find 
a job that pays them fair wages, that treats them with dignity, and 
that allows them to keep up with the cost of living.
    Today we will hear from all three members of the Council of 
Economic Advisers--Chair Rouse, Dr. Bernstein and Dr. Boushey.
    These are skilled economists who understand that behind all the 
models, charts, and tables are real people with hopes, dream, and 
ambitions.
    As Chair Rouse said in January, the actions that the Biden 
administration has taken have led to ``unprecedented improvement in our 
economy and important investments made in its future productive 
capacity.''
    I look forward to hearing more about this year of unprecedented 
growth, the current state of the economy, and plans to continue this 
expansion.
                                 ______
                                 
            PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
    Mr. Chairman, I'll start by observing it's a little bit rich to be 
lectured by the Chairman about not attending a markup of nominees when 
the Chairman personally led the Democratic boycott of the Senate 
Finance Committee markup of two Trump nominees. There were several 
other Democrats on the Committee who participated in that boycott. I 
guess what's good for the goose is not good for the gander.
    It's also rich to hear wailing and gnashing of teeth about 
vacancies on the Fed board and this newfound Democratic concern over 
inflation. First of all, I and my Republican colleagues have been on 
record for well over a year warning about inflation risk, warning about 
the excessive spending.
    Democrats criticized us for wanting to normalize interest rates and 
Fed policy. And yet here our Democratic colleagues are pushing for yet 
another inflation fueling spending blowout bill.
    The fact is the Fed is fully functional. The FOMC has 9 of its 12 
members in place. They could raise rates today if they wanted to. They 
could do it tomorrow. They could do it at any time.
    But what's really ironic is that it's the Chairman's decision not 
to move five nominees forward. We made it clear and I made it clear 
last week to the Chairman repeatedly, publicly, and privately. We're 
perfectly happy to vote on five of the six nominees. That would be four 
Fed governors and the director of the FHFA. If we did, actually most of 
them would get considerable Republican support. They'd move on.
    And if there were a concern about vacancies on the Fed, the 
Chairman could fix that very quickly. He chooses not to, he prefers to 
have the vacancies. That's his choice.
    It's also interesting how some of my Democratic colleagues have 
been so passionate about ending the revolving door. I think you could 
argue some have practically made a career out of railing against the 
revolving door, where people go from a powerful Government regulator to 
go work for the industry that they regulated, enrich themselves and 
then maybe they come back to do it for another loop. Is there a more 
archetypical example than Ms. Raskin?
    Senator Warren recently tweeted and called Randy Quarles 
``corrupt'' because after he left the Fed, he went back to the firm, 
the private equity firm that he had founded himself. So I guess it's 
corrupt if a Republican does that. But the rules don't seem to apply in 
the other direction.
    The Chairman said that the candidates answered the questions. Let 
me be very clear: Ms. Raskin was far less than candid with us. She 
failed to disclose that she even was a director of Reserve Trust. She 
failed to disclose the 1.5 million dollars she made for that service. 
She failed to disclose hundreds of pages of writing and hours of 
speeches.
    When she was asked how did she get on the board of Reserve Trust in 
the first place, she said she couldn't recall. Which is odd because the 
founder and Chairman says in an article in today's Wall Street Journal 
that he's known the Raskins for decades.
    When Ms. Raskin was asked if she ever contacted the Fed on behalf 
of Reserve Trust, first she evaded the question repeatedly. But then 
eventually she replied by saying she couldn't recall.
    Well, that's funny, because the Kansas City Federal Reserve 
President recalled the conversation very well. The chairman of Reserve 
Trust recalled the conversation. He wasn't even part of it. But we're 
supposed to believe that Ms. Raskin just couldn't recall.
    And let me remind everybody why this is important. Reserve Trust is 
a fintech company based in Colorado. And it applied for something 
that's extremely valuable: a master account at the Fed. To my 
knowledge, there's not a single fintech in America that has gotten 
that.
    And unsurprisingly, they were denied. Their application was turned 
down. Then, Ms. Raskin who was on the board, called the Fed. And 
shortly thereafter, the Fed does a 180 degree reversal and approves the 
master account.
    To the best of my knowledge, as of today, there's a grand total of 
one fintech in America that has a master account with the Fed and it is 
Reserve Trust.
    So we asked an obvious question. Why the reversal? Why the 180 
degree change? What changed?
    First we get stonewalled. Then we finally get a partial answer from 
the Federal Reserve Bank of Kansas City. Let me just quote one sentence 
that summarizes it. The Federal Reserve Bank of Kansas City says, 
``after its denial''--and that's a reference to the denial of the 
master account application--``after this denial [Reserve Trust Company] 
changed its business model and the Colorado Division of Banking 
reinterpreted the State's law in a manner that meant RTC met the 
definition of a depository institution.''
    That's from the Federal Reserve Bank of Kansas City. My problem 
with that is on Tuesday night, the Colorado Division of Banking says 
that's not true. And this is what they said, and I quote, ``we consider 
the statement that the division reinterpreted State law as a 
misrepresentation of our practice.''
    So it remains entirely unclear what happened here. All we know is 
that Ms. Raskin was in the middle of it. The firm on whose board she 
sat applied for a very, very valuable account with the Fed. They were 
turned down. She intervenes, they get approved, and we can't get an 
explanation of what happened here.
    Is that fair to all the other fintechs across America that would 
also like to have master accounts, and they've been turned down? How is 
that fair to anybody?
    And how is this Committee doing its job if we don't insist on 
getting some answers to this question? But we get stonewalled. We get 
answers from the nominee that she can't recall. And we get basically 
nothing from the Fed.
    So, Mr. Chairman, it's your choice if you want to continue to 
preclude the possibility of having four nominees from the Fed confirmed 
and the FHFA Director. We are quite happy to process those nominees. 
But we want answers before we vote on Ms. Raskin.
    Let me just close with a quote justifying a boycott of a recent 
markup of nominees. And I quote, ``by refusing to demand honest 
transparent information about the business dealings of these nominees 
the Committee failed to do its job on behalf of the American people.'' 
That is Sherrod Brown, February 1, 2017.
                                 ______
                                 
                  PREPARED STATEMENT OF CECILIA ROUSE
                  Chair, Council of Economic Advisers
                           February 17, 2022
    Chairman Brown, Ranking Member Toomey, Members of the Committee: 
Thank you for inviting me and my colleagues, Heather Boushey and Jared 
Bernstein, here to testify today.
    Just over a year ago, President Biden entered office with a full 
agenda: a pledge not only to fight the pandemic and support economic 
recovery, but also to rebuild our economy for sustainable and more 
widely shared growth. Success was not pre-ordained: the country faced a 
still-raging pandemic, a weak economic recovery, and historic job loss.
    Thanks to the collective efforts of the Administration, Congress, 
and the Federal Reserve, we have been able to recover with strength and 
speed. And importantly, we have begun to lay the groundwork for an 
economy that is stronger, more resilient, and more equitable.
    Over the last year, millions of Americans have gained protection 
from the worst of COVID-19, businesses have been able to resume 
activity, and children are back at their school desks. Economic 
recovery has been strong. In 2021, GDP grew faster than it has in 
almost 40 years and the U.S. job market gained 6.7 million jobs. 
Unemployment is down to 4 percent--years earlier than projected. Child 
poverty is likely to be reduced by almost 40 percent in 2021.
    The American Rescue Plan (ARP) was a critical component of this 
recovery. It served as an insurance policy to address the uncertainty 
of a global pandemic, and support the economy as the virus--and the 
tools to tamp it down-evolved. The emergency measures worked, resulting 
in a robust economic turn-around. Families and businesses have had the 
means and resources to cope in the short-term; ultimately, workers and 
small businesses have avoided the lasting damage we typically see when 
economic crises are allowed to linger.
    But as President Biden has made abundantly clear, helping Americans 
weather the pandemic is simply part one of his economic vision. The 
Administration's strategy encompasses what the President and Treasury 
Secretary Yellen have called ``modern supply-side economics''--that is, 
we must make investments in our economy to boost labor supply, raise 
productivity, reduce inequality, and create strong, sustainable growth.
    The Bipartisan Infrastructure Law is a historic step toward 
realizing that vision, providing long overdue investment in our 
Nation's roads, bridges, water systems, and broadband infrastructure. 
We commend the bipartisan work of many on this Committee for making 
these necessary investments, and know your governors, mayors, and 
constituents are grateful.
    Unlike the ARP, which was short-run relief designed to be spent out 
over the course of the pandemic emergency, the infrastructure law will 
be spent out across the country over years, building and strengthening 
the foundation our economy needs to increase its productive capacity.
    Other Administrative actions this past year will also contribute to 
long-term economic growth. Examples include the whole-of-Government 
approach to increasing competition in markets, addressing climate 
change, and fostering greater equity.
    Of course, challenges remain. The gains in our economy have taken 
place against the backdrop of a once-in-a-century pandemic economy, 
where what we know about downturns and recoveries has been tested. 
Vigilance is required to ensure we do not backslide when curveballs 
like Omicron come our way.
    And Americans are feeling the pinch of inflation--at the pump, in 
grocery stores, and in the marketplace. The pandemic itself has been a 
major driver: consumers have shifted their spending from services to 
goods and global supply chains have been severely tested. A lack of 
workers has stymied the supply of goods and services as well.
    In the near-term, the principal tools to curb inflation rest with 
the Federal Reserve, which is why it is critical to confirm the five 
highly qualified nominees now. The Administration also has some tools 
it can employ, as demonstrated in recent actions to improve supply 
chain disruptions at the ports and increase the capacity of the 
trucking industry.
    In the longer-term, we must make real investments--be that in our 
roads and bridges, or people and ideas. Sustainable growth will only 
come about if we are able to increase economic capacity and allow more 
Americans to participate productively in our economy. The economic 
challenges of 2022 must, of course, be met, but we must also lay a 
foundation for future generations.
    In doing so, we must create an economy that rewards work, not 
wealth. The Administration's economic agenda aims to ensure that those 
in the middle class, who have largely been left out of economic 
investments for the past 40 years, will finally benefit, ensuring that 
growth is more broadly shared.
    We need Congress to act on the President's full economic agenda to 
achieve these goals: providing necessary funding to continue to address 
the pandemic and keep the economy functioning; passing USICA to bolster 
competition and build resiliency into the market; enabling the energy 
transition to curb climate change; and making Build Back Better a 
reality so that families can afford the needs of everyday life-like 
prescription drugs and childcare. As noted by 17 Nobel Prize winning 
economists, these long-term investments not only build a stronger 
economy but also ease longer-term inflationary pressures.
    President Biden's economic vision is predicated on the fact that 
the economic status quo has not worked for all Americans--for decades, 
it largely benefited those at the very top. We share his vision for a 
stronger and more equitable economic future for our country.
               RESPONSES TO WRITTEN QUESTIONS OF
 SENATOR CORTEZ MASTO FROM CECILIA ROUSE, JARED BERNSTEIN, AND 
                        HEATHER BOUSHEY

Q.1. Hospitality and Tourism--Nevada's hospitality sector has 
had persistently higher than average unemployment; nearly twice 
as many leisure and hospitality workers are out of work 
compared with the national average across industries. In 
addition, emerging variants and lagging vaccinations rates have 
led to only a partial return of business travel, trade shows, 
and international travel has occurred. For instance, attendance 
at the Consumer Electronics Show, a significant annual 
convention and source of operating revenue, fell by more than 
75 percent due to concerns about the emerging variant: Omicron. 
\1\ Many businesses in the tourism and hospitality industry 
have faced narrower margins and have had to reduce their 
offerings due to supply chain constraints.
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     \1\ https://www.reviewjournal.com/business/conventions/ces/ces-
attendance-down-more-than-75-organizers-say-2509439/
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    What is the Biden administration doing to restore 
international travel and our trade shows and prevent future 
instability in the hospitality sector?

A.1. Starting on November 8, 2021, the Biden administration 
implemented a new international travel system that helped 
restore safe travel to the United States from the 33 countries 
that were previously subject to limitations on travel. The 
implementation of this new system contributed to an increase in 
international travel to the United States while protecting the 
American people by putting in strict, consistent protocols 
around the world.
    While incoming land border crossings into the U.S. have not 
recovered to their prepandemic levels, the 12.85 million 
passenger and pedestrian crossings in February 2022 are a large 
increase from last year's volumes, reflecting increases through 
2021 and particularly strong increases in the third quarter. 
Air travel is also well on its way to recovering to its 
prepandemic level. As of April 3, 2022, the total amount of 
passengers flying in America was nearly 90 percent of what it 
was on the same day in 2019. In 2021, air travel on April 3rd 
was only two-thirds its 2019 level, and in 2020--during a 
period of intense lockdown--it was only 5 percent of what it 
was in April, 2019.

Q.2. How can we strengthen and shorten our supply chains for 
the inevitable next wave or next Pandemic? Where should we 
prioritize investments in new domestic and global supply 
capacity, including manufacturing and transportation?

A.2. As the question suggests, shortening supply chains 
(reducing lead time) is a key way of increasing resilience. 
Important strategies for doing so are for firms to better 
understand the structure of their supply chains (visibility), 
invest in backup capacity (redundancy), and improve their 
ability to solve problems and substitute between inputs 
(agility), as well as vertically integrating components of the 
production process. Private firms are increasingly aware of the 
value of investments in these capabilities.
    However, sometimes market failures make it unlikely that a 
private firm will invest enough in resilience; factors giving 
rise to market failures include the importance of resilience 
for national and climate security and the frequency with which 
investments in supply chain resilience made by one firm benefit 
other firms as well. The U.S. Government should prioritize 
investments in industries where market failures such as the 
above are present, and/or are key to meeting national goals. 
Such industries include semiconductors, clean energy, and 
health (medicines, vaccines, and personal protective 
equipment). In addition to industry-specific investments such 
as these, the Government should also invest in improved 
capability to monitor supply chains, develop and diffuse best 
practices for managing supply chains, and help finance 
innovation and workforce training, especially by the small 
suppliers that make up a significant portion of U.S. supply 
chains.
    Much more detail on these issues of supply chain resilience 
will be available in chapter 6 of the ``Economic Report of the 
President'', forthcoming in mid-April.

Q.3. Immigration--The CEO of the U.S. Chamber of Commerce 
recently shared that immigration reform could help reduce 
inflation and address the labor shortages that we're currently 
seeing in key industries.
    What is the impact that immigration reform would have on 
inflation, labor shortages, job creation, and economic growth?

A.3. Reform that increases immigration to the United States 
would likely increase economic growth and job creation in the 
long run, a conclusion supported by a comprehensive review of 
research on immigration conducted by the National Academies of 
Sciences. Immigrants are both potential employees and potential 
customers for existing businesses. They also increase 
innovation and entrepreneurship. Over time, this adds up to a 
larger economy with more jobs and a higher standard of living.
    Immigration reform that makes it easier for undocumented 
immigrants already in the United States to work legally could 
also address more immediate labor shortages and potentially 
help reduce inflation. Right now, these immigrants are already 
contributing to demand for goods and services, which may put 
upward pressure on prices in some cases. However, their ability 
to contribute to supply, and to fill jobs in critical sectors 
that are experiencing labor shortages, is limited by their lack 
of legal authorization to work. Granting such authorization 
would free them to do jobs that use their skills well, 
including jobs that employers are currently having difficulty 
filling.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR DAINES
    FROM CECILIA ROUSE, JARED BERNSTEIN, AND HEATHER BOUSHEY

Q.1. Do you believe corporate greed is causing the inflation we 
are seeing throughout the economy?

A.1. Healthy market competition is fundamental to a well-
functioning U.S. economy. Basic economic theory demonstrates 
that when firms have to compete for customers, it leads to 
lower prices, higher quality goods and services, greater 
variety, and more innovation.
    There is evidence that in the United States, markets have 
become more concentrated and perhaps less competitive across an 
array of industries: four beef packers now control over 80 
percent of their market, domestic air travel is now dominated 
by four airlines, and many Americans have only one choice of 
reliable broadband provider. There are a number of reasons for 
these trends towards greater concentration, including 
technological change, scale economies, the increasing 
importance of ``winner take all'' markets, and more lenient 
Government oversight over the last 40 years.
    When there is insufficient competition, dominant firms can 
use their market power to charge higher prices, offer decreased 
quality, and block potential competitors from entering the 
market-meaning entrepreneurs and small businesses cannot 
participate on a level playing field and new ideas cannot 
become new goods and services. There is also evidence that 
dominant firms use market power to suppress wages, labor 
standards, and labor's share of income generated by the firm.

Q.2. Mark Zandi, the chief economist for Moody's Analytics, was 
highly critical of Democratic proposals like suspending the gas 
tax and pulling out pieces of BBB in order to combat inflation. 
He said ``None of these ideas so far will help to a meaningful 
degree, and could do some harm because they could juice up 
demand at a time supply is constrained by the pandemic and 
worsen inflation.'' Do you agree with Dr. Zandi's assessment?

A.2. Elevated inflation has been a shared pandemic experience 
among virtually all advanced economies. One cause is strong 
consumer demand overall, and particularly strong demand for 
goods that are specifically experiencing disrupted supply 
chains and other supply constraints. Many of these supply 
constraints will likely ease as the pandemic situation itself 
improves. Other supply constraints reflect dynamics that pre-
date the pandemic and will require long-term efforts to ease by 
expanding the productive capacity of the economy. The 
Bipartisan Infrastructure Law advances this by making critical 
long-term investments in areas like ports and transportation. 
Other pieces of the Administration's agenda would further 
expand the U.S. economy's capacity as well, such as through 
increasing women's labor force participation through the 
provision of more accessible, affordable childcare and elder 
care. The Administration in the FY 2023 Budget proposed a 
combination of investments and offsets that would net reduce 
the deficit by $1 trillion over 10 years. These outcomes would 
help ease long-term inflationary pressure over time.

Q.3. In your testimony, you stated that ``President Biden's 
economic vision is predicated on the fact that the economic 
status quo has not worked for all Americans--for decades, it 
largely benefited those at the very top.'' Does 40-year high 
inflation impact middle-class Americans or those at the very 
top more?

A.3. Inflation can have different impacts on households across 
the income distribution, partly because of differences in the 
mix of goods and services purchased, and partly because of 
differences in the share of their income that is absorbed by 
necessities such as food and shelter.
    While there appear to be relatively small differences in 
the average price increases faced by middle-income households 
compared to upper-income households, price changes do not tell 
the entire story of differences in household well-being. The 
increase in prices should be compared to increases in wages and 
income that also occurred during 2021.
    Researchers from University of California-Berkeley, as part 
of the Realtime Inequality Project, estimate that income from 
just labor income (wages and employee benefits) and returns on 
investments (excluding Government transfers and taxes) 
increased for adults across the income distribution, even after 
adjusting for inflation. Adults in the bottom 50 percent of the 
income distribution experienced the strongest growth, with 
their real annualized incomes rising by 10.1 percent between 
December 2020 and December 2021.
    Real income growth was 2.5 percent for adults with income 
between the 50th and 90th percentile), and 6.3 percent for 
upper-income adults (those above the 90th percentile). This 
means that incomes grew at a rate that exceeded the historic 
price inflation in 2021, and to a greater extent for households 
with incomes up to the median.
    An alternative measure is disposable income, which factors 
in taxes and Government benefits. Though the patterns are 
similar, when comparing annualized real disposable income in 
December 2021 to income in December 2020, growth will tend to 
be lower, in part because many COVID-19 relief programs sunset 
at some point during 2021. Growth in real disposable income was 
5.2 percent for adults in the bottom 50 percent, and 2.6 
percent for individuals above the 90th percentiles. And for 
middle-income individuals, between the 50th and 90th 
percentile, real disposable income actually decreased somewhat, 
by 1.1 percent, again primarily due to the roll-off of COVID-19 
relief.

Q.4. The Committee for a Responsible Federal Budget recently 
released analysis, citing CBO data, that if interest rates rise 
by one percentage point higher than was anticipated in CBO's 
July 2021 economic forecast, average annual interest costs will 
increase by $209 billion per year. That would bring total 
interest costs from now through 2031 to $7.3 trillion. What do 
you think the chances are of a 1 percent increase in net 
interest costs above the current baseline, and do you think 
that level of spending on interest is sustainable?

A.4. One of the best measures of the sustainability of Federal 
interest payments is the ratio of real net interest payments 
relative to GDP. Real net interest--the Federal Government's 
annual interest payments after adjusting for inflation--
directly measures the cost of servicing the Nation's debt: the 
real resources that are going toward servicing the existing 
stock of debt, instead of investing in the future.
    Real interest has averaged about 1 percent of the economy 
since 1980 and was about 2 percent in the 1990s. Since then, 
the effective real interest rate on Federal debt has fallen 
ten-fold, from over 4 percent to 0.4 percent in the 2010s. As a 
result, real interest has fallen--and real interest costs are 
expected to remain negative in 2022. The economic assumptions 
in the President's FY 2023 Budget anticipate that real interest 
rates will rise over the coming decade, using projections in 
line with private forecasters. Nevertheless, under these 
assumptions, the President's policies would keep real interest 
at or below the historical average over the coming decade. This 
means that we have the capacity to make critical investments 
that expand the productive capacity of the economy while also 
keeping real interest cost burdens low by historical standards. 
The fact that the President's policy agenda, as presented in 
the FY23 budget, includes measures to more than offset the 
costs of his proposals is also consistent with the budget's 
interest rate forecast.
    There are two-sided risks around any interest rate 
projection. The Administration's projections reflect the path 
of rates under which, in our view, the uncertainty around 
economic risks is roughly balanced. Interest rates may come in 
higher than expected, for example if productivity growth proves 
stronger than anticipated. Rates may come in lower than 
expected due to, for example, unanticipated economic shocks. 
Over the last 20 years, Administrations of both parties, the 
Congressional Budget Office, and private sector forecasts have 
all, on average, overestimated interest rates in their 
projections. Put another way, actual interest rates have 
consistently come in below projections on average.

Q.5. The Joint Committee on Taxation found that the BBB bill 
would have added $750 billion to the debt in the first 5 years, 
yet the Administration has repeatedly insisted it would help 
bring down inflation. Can you explain to me how adding $750 
billion to the debt in 5 years would reduce inflation? Or were 
you all suggesting that inflation would come down 5 years after 
the bill is enacted?

A.5. The President's FY 2023 Budget proposes investments that 
boost economic growth, reduce cost pressures, and promote 
shared prosperity in a way that improves the fiscal outlook of 
the United States and reduces fiscal risks over the long term. 
Under the Budget's policies, deficits would continue to decline 
from recent levels. Deficits would fall from 15 percent of GDP 
in 2020 to 5.8 percent of GDP this year and then decline 
further and remain below 5 percent of GDP through the 10-year 
window. Moreover, under the Budget's policies, the medium-term 
economic burden of Federal debt would remain low.
    At the same time, the United States does face fiscal 
challenges over the long term-driven largely by demographic 
pressures on health and retirement programs, an inequitable tax 
system, and rising health care costs. There is also uncertainty 
about the interest rate outlook. The Budget's proposals 
prudently address these future challenges by reforming the tax 
system and more than paying for all new policies, reducing 
deficits over the long run. The Budget proposes capacity-
enhancing legislation and commits to fully paying for it; it 
also proposes additional investment and revenue policy that 
lower deficits by $1 trillion over the next 10 years.
    Overall, the Budget details an economically and fiscally 
responsible path forward-addressing the long-term fiscal 
challenges facing the Nation while making investments that 
produce stronger economic growth and broadly shared prosperity 
well into the future.

Q.6. Concerning, supply chain problems in the trucking 
industry, does the Biden administration believe that current 
solutions to alleviate employee shortages are able to fix long 
term industry shortages?

A.6. Current solutions, such as the Safe Driver Apprenticeship 
Pilot Program, can be helpful in the near term, but ensuring an 
adequate supply of drivers longer term may require a broader 
effort. Working conditions in trucking have deteriorated over 
the last several decades, and turnover is high compared to 
other industries. Drivers are often misclassified as self-
employed and forced to bear costs personally that would 
normally be covered by an employer. The average driver is also 
about four years older than the average worker overall, which 
could suggest coming retirements and limited entry into the 
industry by young workers may be a concern going forward. 
Improving job quality is likely key to generating interest in 
the industry among workers and maintaining an adequate supply 
of skilled drivers. In addition, longer-term efforts can help 
make more efficient use of truckers' time, thus reducing the 
number of truckers needed. For example, currently truckers can 
spend hours per day (often unpaid) waiting to load or unload 
their trucks. Public- and private-sector efforts to improve 
supply-chain functioning (for example, by paying truckers for 
waiting time) may help improve this situation.

Q.7. When do you believe inflation will stop rising? When do 
you forecast inflation will return to 2 percent?

A.7. In the very near-term, the Russian invasion of Ukraine 
will put upward pressure on consumer prices, especially food 
and energy. The Administration is taking a wide range of 
actions to mitigate these pressures, including the announcement 
of a historic 1 million barrel/day release on average from the 
Strategic Petroleum Reserve for the next 6 months. The duration 
of this pressure is uncertain and dependent on, above all, the 
status of the conflict and the closer realignment of supply and 
demand throughout many sectors of the economy.
    Over the longer-run, the Federal Reserve, private 
forecasters, market-implied forwards, and household surveys all 
broadly expect inflationary pressures to ease over time. For 
example, the March 2022 Blue Chip Consensus Forecast of CPI 
inflation is that it will decline to 2.3 percent at an 
annualized rate in 2023 Q4, a pace historically consistent with 
the Federal Reserve's 2 percent PCE target. This outlook 
largely reflects three factors: (1) the gradual unsnarling of 
supply chains as the pandemic comes under control and consumer 
demand renormalizes; (2) the shift of fiscal policy from 
tailwind to headwind as pandemic support fades; (3) the effects 
of shifts in monetary policy by the Federal Reserve, which 
remains the primary line of defense against inflation.

Q.8. In your testimony, you note that consumers have shifted 
their spending from services to goods. The implication is that 
the inflation we are seeing is being driven at least in part by 
above-trend demand for goods, and that if demand moves from 
goods to services, inflation will decrease. What gives you 
confidence that demand for goods will subside? Could it be 
possible that consumer behavior has permanently shifted toward 
a higher demand for goods? If so, what implications does that 
have for supply chains?

A.8. The Administration is paying close attention to the 
evolution of consumer demand as the economy heals. The level of 
aggregate inflation-adjusted consumer spending, as measured by 
real personal consumption expenditures (PCE), is roughly back 
to its prepandemic trend. The composition of consumer spending 
remains different than prepandemic, however, with the share of 
PCE going to services being lower than before 2020 while the 
share to goods is higher. The lower services spending as of 
February 2022 is primarily being driven by lower spending in 
recreational services and health services, the latter of which 
is being in part driven by delays in elective surgeries and 
dental visits. We expect that many services categories will 
renormalize towards prepandemic consumption shares as services 
reopen and COVID-19 risk fades. Conversely, we expect demand 
for goods will also likely taper towards shares closer to those 
that prevailed before the pandemic. The big issue we are 
watching is whether aggregate demand exceeds aggregate supply 
moving forward.