[Senate Hearing 118-147]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 118-147

                  REDUCING INEQUALITY, FUELING GROWTH:
                     HOW PUBLIC INVESTMENT PROMOTES
                           PROSPERITY FOR ALL

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

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                          UNITED STATES SENATE

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________


                           September 20, 2023

                               __________


           Printed for the use of the Committee on the Budget







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                            www.govinfo.gov

                               ______
                                 

                 U.S. GOVERNMENT PUBLISHING OFFICE

53-786                    WASHINGTON : 2024










                        COMMITTEE ON THE BUDGET

               SHELDON WHITEHOUSE, Rhode Island, Chairman

PATTY MURRAY, Washington             CHARLES E. GRASSLEY, Iowa
RON WYDEN, Oregon                    MIKE CRAPO, Idaho
DEBBIE STABENOW, Michigan            LINDSEY O. GRAHAM, South Carolina
BERNARD SANDERS, Vermont             RON JOHNSON, Wisconsin
MARK R. WARNER, Virginia             MITT ROMNEY, Utah
JEFF MERKLEY, Oregon                 ROGER MARSHALL, Kansas
TIM KAINE, Virginia                  MIKE BRAUN, Indiana
CHRIS VAN HOLLEN, Maryland           JOHN KENNEDY, Louisiana
BEN RAY LUJAN, New Mexico            RICK SCOTT, Florida
ALEX PADILLA, California             MIKE LEE, Utah

                   Dan Dudis, Majority Staff Director
        Kolan Davis, Republican Staff Director and Chief Counsel
                   Mallory B. Nersesian, Chief Clerk 
                  Alexander C. Scioscia, Hearing Clerk








                            C O N T E N T S

                              ----------                              

                     WEDNESDAY, SEPTEMBER 20, 2023
                OPENING STATEMENTS BY COMMITTEE MEMBERS

                                                                   Page
Senator Sheldon Whitehouse, Chairman.............................     1
    Prepared Statement...........................................    31
Senator Charles E. Grassley, Ranking Member......................     3
    Prepared Statement...........................................    33

                    STATEMENTS BY COMMITTEE MEMBERS

Senator Chris Van Hollen.........................................    20
Senator Mike Braun...............................................    21
Senator Tim Kaine................................................    23
Senator Ben Ray Lujan............................................    25

                               WITNESSES

The Honorable Benjamin Harris, Vice President and Director of 
  Economic Studies, The Brookings Institution, and Former 
  Assistant Secretary for Economic Policy and Chief Economist, 
  United States Department of the Treasury.......................     5
    Prepared Statement...........................................    36
Ms. Shayna Strom, President and CEO, Washington Center for 
  Equitable Growth...............................................     7
    Prepared Statement...........................................    47
Mrs. Veronica Puentes, Assembly Technician, New Flyer of America, 
  and Steward, Communications Workers of America Local 7304......     9
    Prepared Statement...........................................    59
Dr. Veronique de Rugy, George Gibbs Chair and Senior Research 
  Fellow, Mercatus Center at George Mason University.............    10
    Prepared Statement...........................................    64
Dr. Tyler Goodspeed, Kleinheinz Fellow, Hoover Institution, 
  Stanford University............................................    12
    Prepared Statement...........................................    72

                                APPENDIX

Responses to post-hearing questions for the Record
    Hon. Harris..................................................    74
    Ms. Strom....................................................    76
     Dr. de Rugy.................................................    79
    Dr. Goodspeed................................................    82
Charts submitted by Chairman Sheldon Whitehouse..................    85









 
                  REDUCING INEQUALITY, FUELING GROWTH:
                     HOW PUBLIC INVESTMENT PROMOTES
                           PROSPERITY FOR ALL

                              ----------                              


                     WEDNESDAY, SEPTEMBER 20, 2023

                                           Committee on the Budget,
                                                       U.S. Senate,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice at 10:03 a.m., 
in the Dirksen Senate Office Building Room SD-608 Hon. Sheldon 
Whitehouse, Chairman of the Committee, presiding.
    Present: Senators Whitehouse, Kaine, Van Hollen, Lujan, 
Grassley, Johnson, Marshall, Braun and R. Scott.
    Also present: Democratic Staff: Dan Dudis, Majority Staff 
Director; Joshua P. Smith, Budget Policy Director; Dan RuBoss, 
Senior Tax and Economic Advisor and Member Outreach Director; 
Tyler Evilsizer, Senior Budget Analyst.
    Republican Staff: Chris Conlin, Deputy Staff Director; 
Krisann Pearce, General Counsel; Ken Acuna, Professional Staff 
Member; Chad Miller, Professional Staff Member; Ryan Flynn, 
Staff Assistant.
    Witnesses:
    The Honorable Benjamin Harris, Vice President and Director 
of Economic Studies, The Brookings Institution, and Former 
Assistant Secretary for Economic Policy and Chief Economist, 
United States Department of the Treasury
    Ms. Shayna Strom, President and CEO, Washington Center for 
Equitable Growth
    Mrs. Veronica Puentes, Assembly Technician, New Flyer of 
America, and Steward, Communications Workers of America Local 
7304
    Dr. Veronique de Rugy, George Gibbs Chair and Senior 
Research Fellow, Mercatus Center at George Mason University
    Dr. Tyler Goodspeed, Kleinheinz Fellow, Hoover Institution, 
Stanford University

          OPENING STATEMENT OF CHAIRMAN WHITEHOUSE \1\
---------------------------------------------------------------------------

    \1\ Prepared statement of Chairman Whitehouse appears in the 
appendix on page 31.
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    Chairman Whitehouse. Welcome everyone. Let me call to order 
this hearing of the Senate Budget Committee entitled Reducing 
Inequality Fueling Growth: How Public Investment Promotes 
Prosperity for All. We thank the witnesses for being here and 
our ranking member.
    The point of today's hearing is to illustrate that income 
inequality not only is an injustice in and of itself, but it 
actually impedes economic growth. Economic growth is essential 
for our nation and its people: Fostering a climate where new 
ideas can turn into technological advancements, where healthy 
competition thrives, where good work is rewarded--that's the 
heart of modern capitalism.
    But while economic growth is a big positive, it's harmed by 
economic inequality. Economic inequality constricts economic 
growth, and undermines economic stability. Evidence shows that 
reduced economic inequality promotes economic growth. 
Investments that reduce economic inequality, that address 
climate change, that create jobs, that bolster physical 
infrastructure, and that improve the quality of our healthcare 
system, those are how we make our economy and our budget 
stronger and more stable.
    Inequality worsened markedly in the United States (U.S.) in 
the 1980s, and by 2019, the top 10% had captured almost 75% of 
our nation's wealth. Over the same time, the wealth held by the 
bottom 50%, half of all Americans, collapsed to just 2%. The 
effects have been pernicious.
    Children fare worse in countries with worse levels of 
income inequality across health, education, and overall 
wellbeing. And it sticks through time. In the United States, 
children born to parents at the bottom of the income 
distribution level--at the bottom of income distribution have 
less than a 10% chance of reaching the top fifth.
    In Canada, family upward mobility is almost twice that. The 
ability of children to out earn their parents, which was once 
nearly a guarantee in American life, is now down to just 50/50. 
Just the flip of a coin. There's a better way to do things. We 
can make the kind of public investments to grow the economy and 
ensure more people benefit from that growth.
    More good jobs, meaningful progress to decarbonize our 
economy before the harms arise, families able to afford 
prescription drugs and the other necessities of life. Our 
economic legislation, the American Rescue Plan, the 
Infrastructure Investment and Jobs Act, the Chips and Science 
Act, the Inflation Reduction Act (IRA), they all strengthened 
our economy by investing in workers, families, and small 
businesses.
    And the effect? The effect was terrific. Our recovery from 
the pandemic-induced recession was faster than anyone 
predicted. Today, our labor market is historically strong and 
real wages are rising and returning to their pre-pandemic trend 
for many workers. By contrast, it took more than a decade to 
recover from the Great Recession.
    Our investments in healthcare and expanded nutrition 
benefits and in the expanded Child Tax Credit kept families 
afloat during the pandemic. Renewable energy and infrastructure 
investments helped jumpstart our economic recovery and paved 
the way for the strongest labor market we've seen in decades. 
Poverty, and especially child poverty, fell to record low 
rates.
    The share of people aged 25 to 54 who are working is the 
highest it's been since 2001. These investments have been good 
for workers, especially unionized workers, and they have been 
good for business. As Mrs. Puentes, a union steward, will 
testify, she's seen the benefits firsthand and so has her 
employer, New Flyer of America, a leading manufacturer of 
electric buses.
    New Flyer stated that the bipartisan infrastructure law 
was, ``a once-in-a-generation bill that has translated to 
unprecedented demand for our buses and coaches driving 
improvements to public transportation throughout the United 
States that will benefit employees, customers, and riders 
across the country for years to come''.
    This is a win for Mrs. Puentes, of course, it's also a win 
for our economy and by reducing fossil fuel use is a win for 
our safety. However, the failure to extend the Child Tax Credit 
expansion has caused the child poverty rate to jump to more 
than double.
    More than 6 million people, perhaps up to 40% of whom are 
kids, have been kicked off Medicaid since the pandemic era 
continuous enrollment provision ended. And we are on the 
precipice of a government shutdown because House Republicans 
won't honor promises they made in the bipartisan agreement they 
signed on to just this spring. The Congressional Budget Office 
(CBO) says the proposed cuts from House Republicans are so 
severe that they would kill half a million jobs and reduce 
gross domestic product (GDP) growth by $138 billion next year 
alone. The House Budget Committee is marking up a budget 
resolution they claim will balance the budget by cutting $16 
trillion over 10 years. But they violate the laws of 
arithmetic. Using the same old, tired, trickle-down playbook, 
they're seeking to balance the budget on the backs of regular 
folks while delivering huge tax cuts for businesses, Republican 
funders, and billionaires. Their massive tax giveaways are 
based on fantasy math. The math just doesn't add up.
    With 10 days left to fund the government before a shutdown 
House Republicans have reneged on the bipartisan agreement and 
released a deal-breaking budget that would harm national safety 
and security, attacks essential government programs, would 
drive up economic inequality, and undermines our economic 
growth.
    Trickle-down economics through tax cuts for the rich is a 
proven failure. Investing in healthcare, infrastructure, 
growth, and safety--that actually works. And it works better 
when we reduce income inequality. We've seen what works, now is 
the time to do it. Senator Grassley.

           OPENING STATEMENT OF SENATOR GRASSLEY \2\
---------------------------------------------------------------------------

    \2\ Prepared statement of Senator Grassley appears in the appendix 
on page 33.
---------------------------------------------------------------------------
    Senator Grassley. Yeah. Thank you, Mr. Chairman. I 
appreciate the subject of today's hearing because I've spent my 
Senate career advancing policies that improve the livelihood of 
ordinary Americans. As former chairman of the finance 
committee, I've personally shepherded legislation that has 
delivered tax relief to working families and made the tax code 
more progressive.
    Today's hearing title suggests though that the Biden 
administration's overspending and corporate cronyism have led 
to prosperity for all. Well, I just wrapped up my annual 
meetings across Iowa's 99 counties, and I can tell you that 
Iowans aren't buying into this proposition that--it's brought 
prosperity for all, and they're not alone.
    We have a clear majority of Americans disapproving of the 
President's handling of the economy. Just talk to ordinary 
folks. They'll tell you that their paychecks don't go as far as 
they used to. And that the American dream seems further out of 
reach. So let's look at a few facts. Thanks to the spending 
binge and energy policy blunders of the majority party and the 
President's party, consumer prices have risen more than 17% 
since President Biden took office. Inflation remains well above 
the Fed's target, and price hikes have accelerated the past two 
years.
    And even if we get inflation down to what the Fed wants at 
2%, don't forget the $7,000 a year that's already in the 
economy as increased costs for families. It's going to be there 
forever. 2% inflation isn't going to reduce that at all. Yet to 
hear Democrats tell it, it seems that they expect praise for 
prices not being even higher. Inflation isn't the only problem 
with this economy. Just last week, the Census Bureau announced 
that real median household income fell $1,750 last year, and 
are down $3,670 from 2019. And you can see those figures on the 
chart.
    According to Bloomberg, the average middle class adult has 
seen a staggering $33,000 drop in real wealth since the Fed 
started hiking interest rates. Moreover, skyrocketing mortgage 
rates have made home ownership the least affordable it's been 
in nearly 40 years. When you enact bad policies, what do you 
expect? You get bad outcomes. President Biden claims that his 
economic strategy is about growing the economy from the bottom 
up, but when you look at many of his policies, the ones who 
will benefit happen to be the wealthy and the well connected. 
According to Mr. Harris's own Brookings Institute, the 
President's student loan policies are costly, poorly targeted, 
and provide substantial benefits to highly educated and well-
off borrowers.
    Then there's the so-called Inflation Reduction Act, which 
even President Biden now admits wasn't about reducing 
inflation. In fact, it has and will increase prices. According 
to the non-partisan Congressional Budget Office, that bill was 
chocked full of corporate handouts and regressive new tax 
subsidies that even Democrat economists say will 
disproportionately benefit the wealthy.
    With that said, Mr. Chairman, I don't doubt that everyone 
on this committee wants prosperity for all Americans, but I 
think the President's economy and policies aren't the answer to 
that. Experience shows us the best way to promote prosperity 
for all is through pro-growth policies that empower ordinary 
people rather than Washington.
    Republicans took that approach in the years immediately 
preceding the pandemic and the results were an economy where 
Americans saw gains. Not only did we have historically low 
unemployment, but inflation was stable, interest rates were 
affordable, and wages were rising faster than prices.
    In fact blue collar workers saw the biggest wage gains. As 
a result the Census Bureau, the Congressional Budget Office, 
and the Federal Reserve all reported that inequality fell and 
incomes went up, and look at the chart to back this up.
    Instead of raising taxes like my Democrat colleagues, we 
lowered taxes across the board while making the tax code more 
progressive. The 2017 tax law built upon 20 years of Republican 
lead tax cuts that have removed millions of low to moderate 
income Americans from the tax rolls.
    As a result, the bottom 20% of the households have seen 
their average Federal tax drop from over 7% to only 0.5% today. 
The working class has already been at the center of Republican 
tax relief efforts. I welcome today's witnesses and look 
forward to hearing from their testimony and asking them 
questions.
    Chairman Whitehouse. Our first witness is the Honorable 
Benjamin Harris. Dr. Harris recently joined the Brookings 
Institution as its Vice President and Director of Economic 
Studies. Previously, Dr. Harris served as Assistant Secretary 
for Economic Policy and Chief Economist at the U.S. Department 
of the Treasury. Earlier in his career, he served as the chief 
economist and economic advisor to then Vice President Joe 
Biden. Dr. Harris, welcome.
    Next we have Shayna Strom, president and CEO, Washington 
Center for Equitable Growth, a nonprofit research and grant 
making organization. Ms. Strom previously served as the Chief 
Deputy National Political Director at the American Civil 
Liberties Union and in multiple senior roles at the Office of 
Management and Budget under President Obama. Ms. Strom, thank 
you for joining us today.
    We will also hear from Veronica Puentes. Mrs. Puentes is an 
assembly technician at a New Flyer, electric bus manufacturing 
plant in St. Cloud, Minnesota. She's a Communications Workers 
of America member, and steward of CWA Local 7304. Mrs. Puentes, 
we very much appreciate your taking the trouble to join us.
    Then we have Veronique de Rugy, George Gibbs chair and 
senior research Fellow at the Mercatus Center at George Mason 
University. Dr. de Rugy is also a nationally syndicated 
columnist. She has been a resident fellow at the American 
Enterprise Institute, a policy analyst at the Cato Institute, 
and a research fellow at the Atlas Economic Research 
Foundation. Dr. de Rugy, welcome.
    Finally, Dr. Tyler Goodspeed, a Kleinheinz Fellow at the 
Hoover Institution at Stanford University. Dr. Goodspeed served 
on the President Council of Economic Advisors from 2019 to 
2021, including as the Council's acting Chairman beginning in 
2020. Prior to his appointment, Dr. Goodspeed served as the 
council's chief economist for macroeconomic policy. Thank you 
for being here.
    Dr. Harris, please proceed. All of your full written 
statements will be made a matter of the record for this 
hearing. So you can confine yourself to the five minutes that 
will allow us to ask questions.

STATEMENT OF THE HONORABLE BENJAMIN HARRIS, VICE PRESIDENT AND 
 DIRECTOR OF ECONOMIC STUDIES, THE BROOKINGS INSTITUTION, AND 
   FORMER ASSISTANT SECRETARY FOR ECONOMIC POLICY AND CHIEF 
    ECONOMIST, UNITED STATES DEPARTMENT OF THE TREASURY \3\
---------------------------------------------------------------------------

    \3\ Prepared statement of Hon. Harris appears in the appendix on 
page 36.
---------------------------------------------------------------------------
    Dr. Harris. Thank you, Chairman Whitehouse, Ranking Member 
Grassley, and members of the committee for inviting me to 
testify at this important hearing today. I'm honored to appear 
before the committee to discuss ways that social investments 
can work towards the dual goals of reducing inequality while 
strengthening America's economic future. My testimony today 
will focus on policy strategies to promote sustained long-term 
economic growth. In particular, I will discuss a new 
perspective on growth termed modern supply side economics, 
which was introduced by Treasury Secretary Janet Yellen in a 
virtual keynote address to the World Economic Forum in January, 
2022.
    The primary goal of this testimony is to advance and 
elaborate on key elements of modern supply side economics, 
laying out six principle pillars of this strategy. To frame any 
discussion concerning economic growth, it's important to first 
note, the United States is projected to continue a period of 
modest but steady economic growth over the next decade.
    In the latest economic projections, CBO projects that real 
GDP growth will measure between 1.7% and 2.7% annually between 
2024 and 2033. While these ranges are within recent historical 
experience, achieving faster growth cannot only improve 
livelihoods, but also partially mitigate our government's long-
term fiscal challenges.
    The heart of these growth challenges relates to two key 
macroeconomic factors. The first is sluggish growth in the 
labor force, which is expanding very slowly for the foreseeable 
future. A second key factor constraining economic growth is 
productivity.
    Subpar productivity growth has been a long-term challenge 
to the United States and advanced economies in general with 
slow productivity growth characterizing the economy since the 
1970s with only brief exceptions. These long-term challenges 
not withstanding is important to recognize The United States 
generally fared better than our competitors in the aftermath of 
the pandemic.
    This relative success reflects a more robust turnaround in 
domestic consumption in the United States, which has typically 
not been the case among our competitors. Importantly too, the 
U.S. has experienced a much stronger rebound in the labor 
market while also maintaining core inflation rates that are 
lower than many other countries.
    With that background, I'll now turn to modern supply side 
economics. Modern supply side economics, and traditional supply 
side economics share the common key goal of expanding the 
productive capacity of the economy or the aggregate amount of 
goods and services that can be produced by U.S. firms and 
workers.
    However, there are many key differences, with the central 
difference being the specific channel for boosting various 
factors of production like capital and labor. The central 
elements of traditional supply side economics approach to 
boosting factors of production are threefold. One, the levels 
of investment are high--the levels of investment are highly 
responsive to changes in tax rates, including corporate taxes 
and taxes on individual income, investment income. Two, that 
sweeping deregulation can reduce barriers to economic activity 
and promote growth. And three, the government intervention is a 
poor avenue for pursuing long-term growth.
    In part because ultra-low--low tax rates on capital are a 
necessary condition for maximizing the deployment of capital. 
Over time, government intervention obviously requires raising 
revenues to support various public programs. In my view, these 
various approaches are not well supported by the academic 
literature and by empirical evidence.
    In stark contrast, modern supply side economics aims to 
make the economy more productive through more fit--through more 
directly raising factors of production and by mitigating the 
cost of economic shocks from events like climate change and 
energy disruptions. In my written testimony, I lay out six key 
elements of modern supply side economics.
    I'll list them here. These elements are one, Federal 
policies can dramatically reduce barriers to work and raise the 
quantity of labor in the economy. Two, legal immigration should 
be regarded as an economic growth strategy. Three, more equal 
distribution of capital, all else equal can raise economic 
output. Four, the rate of aggregate investment is not 
especially sensitive to the tax rate on capital.
    Five, addressing climate change can both mitigate risks and 
boost growth by investing in the green energy transition, and 
sixth, more robust competition can spur faster growth. Thank 
you for the opportunity to testify today. I look forward to 
discussing strategies for promoting faster and more inclusive 
growth. Thank you.
    Chairman Whitehouse. Thank you very much. Ms. Strom, please 
proceed with your statement.

 STATEMENT OF SHAYNA STROM, PRESIDENT AND CEO, THE WASHINGTON 
                CENTER FOR EQUITABLE GROWTH \4\
---------------------------------------------------------------------------

    \4\ Prepared statement of Ms. Strom appears in the appendix on page 
47.
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    Ms. Strom. Chairman Whitehouse, Ranking Member Grassley, 
and members of the committee, thank you for the opportunity to 
testify. I am the president and CEO of the Washington Center 
for Equitable Growth, a nonprofit research and grant making 
organization dedicated to advancing evidence backed ideas and 
policies that promote strong, stable, and broad-based economic 
growth.
    Today, I want to make two important points. First, high 
levels of economic inequality are not only detrimental to the 
millions of people left behind economically, but they're also 
detrimental to strong, stable, and broad-based economic growth. 
Second, the economic policies pursued by the Federal government 
since the start of the pandemic, especially significant public 
investments and income supports had a notably positive impact 
on many of those obstacles to growth and have resulted in 
strong economic outcomes.
    To make sense of the American economy over the last several 
decades, you have to start with the insight that I mentioned a 
moment ago: very high inequality is itself an impediment to 
growth. This is true for a number of reasons. For example, a 
more equitable economy supports people to develop the skills 
and knowledge to be productive members of society. This is one 
of the reasons that investing in children is so powerful. In 
addition, economic research shows that low and middle income 
households spend more out of every dollar they make as compared 
to higher income households. That additional consumption is 
good for the economy it creates demand that encourages 
businesses to invest in innovation and further production.
    Unfortunately, over the past four decades, the United 
States experienced a rapid increase in inequality. According to 
one estimate, between 1979 and 2019 the bottom 90 percent of 
individuals lost 9 percent of their share of national income, 
an enormous transfer of income from working and middle class 
families to those at the top. This rapid increase in income 
inequality had negative impacts on Americans who were left 
behind. A child born in 1940 had a 90 percent chance to earn 
more income than their parents by the time they were age 30. 
But a child born in 1980 had just a 50 percent chance to do the 
same.
    And, as we now expect, the rapid rise of inequality harmed 
economic growth. The fortunes of the rich did not trickle down 
as promised, but simply resulted in stagnant pay for everyone 
else. Average economic growth was lower in the recent decades 
when inequality was increasing than it was in the recent 
decades when inequality was falling.
    The good news is that we are now starting to see some real 
progress to reduce inequality and strengthen the economy. 
Social supports provided to families during the pandemic and 
economic investments that the federal government is making have 
contributed to putting households on firmer financial footing, 
helping them find high-quality jobs and stabilizing and growing 
the overall economy.
    New metrics published by the Bureau of Economic Analysis 
(BEA) show that between 2019 and 2021, the share of disposable 
income earned by the bottom half of households rose nearly 2 
full percentage points, the highest share of income for that 
group since BEA's first year of data. And as inequality has 
come down, the American economy has soared. Employment 
recovered faster than in any of our previous three recessions, 
prime age employment is at a 20 year high, and median real 
wages, adjusted for inflation and demographic changes, are back 
on the upward path they were on in 2019.
    I attribute much of that success to the significant 
investments you and your colleagues made in the American people 
during and in the aftermath of the pandemic. The enhanced Child 
Tax Credit (CTC), boosted Supplemental Nutrition Assistance 
Program (SNAP) benefits, and enhanced Unemployment Insurance 
helped stabilize household finances during the pandemic. 
Expansion of the CTC, for example, lifted 2.1 million children 
out of poverty, and last week's child poverty report 
demonstrates what happens when that investment expires.
    These investments weren't just good for families. 
Economists credit these programs for keeping consumption in the 
economy afloat during the pandemic. Moreover, compare today's 
economic recovery to the last one. After the Great Recession, 
it took about 7 years to get unemployment back to where it had 
been before the Great Recession began. This time, it took only 
2 years, even though unemployment spiked much higher.
    To drive down inequality and encourage growth, it is clear 
that we have to invest in our public infrastructure, including 
investments in people. I've included more examples of how 
government investment can spur innovation and benefit the 
economy in my written testimony.
    As you consider the 2024 appropriations bills, I would urge 
you to continue to protect these investments in our economy. 
Economic inequality in the U.S. remains elevated, but by 
investing in people and in our infrastructure, we can achieve 
strong, stable, and broad-based economic growth that will lift 
up everyone in our country. I look forward to your questions. 
Thank you.
    Chairman Whitehouse. Thank you very much. Mrs. Puentes, 
we're delighted to have you here. Thank you so much. Please 
make your statement.

 STATEMENT OF VERONICA PUENTES, ASSEMBLY TECHNICIAN, NEW FLYER 
  OF AMERICA, AND STEWARD, COMMUNICATIONS WORKERS OF AMERICA 
                         LOCAL 7304 \5\
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    \5\ Prepared statement of Mrs. Puentes appears in the appendix on 
page 59.
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    Mrs. Puentes. Good morning, Chairman Whitehouse, Ranking 
Member Grassley and members of the committee. Thank you for the 
opportunity to testify before you today. My name is Veronica 
Puentes. I'm an assembler technician at New Flyer in Crookston, 
Minnesota. I'm a mother to seven children and I'm a grandmother 
of four.
    I'm a union steward and a member of Communications Workers 
of America, Local 7304, but most importantly, I'm a child of 
God. I have worked at New Flyer for 12 years. At my facility, 
we manufacture electric buses.
    I work in the finish department where I fix any last minute 
problems before the finished electric bus is sent to the 
quality inspectors and shipped to its final destination. My 
life has not always been easy. I spent my childhood traveling 
between Texas and Minnesota because my parents were migrant 
workers.
    I became a mother and struggled with addiction issues at a 
very young age. I headed down a destructive path. I ended up 
serving two years at the Minnesota Correctional Facility, and 
during that time, I deepened my relationship with Christ and 
enrolled myself in programs to build my skills and better 
myself in hopes for a better future for myself and for my 
children.
    Finding a good paying stable job was the first step to turn 
my life around. I was lucky to land a job at New Flyer. I owe 
it all to God and our Union, both of which have given me a 
second chance. The Union doesn't care about who you are. They 
will give you a fair chance regardless of your background.
    For example, our union enforce a non-discrimination policy 
when hiring so that returning citizens are given a chance to 
interview and be hired. I went from making $8.50 as a 
housekeeper to $13 an hour when I worked at New Flyer. With the 
regular wage increases our union contract, I started a savings 
account, began to pay off my debt, and eventually bought a car 
and house.
    I finally had a chance of stability. As Congress debates 
funding our government, it is important to continue the 
critical investments made through the infrastructure bill and 
the Inflation Reduction Act. So many workers like me across the 
country are benefiting from the good Union jobs created by the 
investments from these laws. There was a time my coworkers and 
I were concerned about our facility and would it shut down, 
which was stressful for all of us. It would be extremely 
difficult for me to find another job with a good wage, 
benefits, and workplace protections because of my background. 
The success of the plant is also important to our local 
community.
    Crookston is a small rural town with the population of a 
little over 7,000. People come from all over to work at New 
Flyer because union manufacturing jobs like mine provide better 
pay and benefits than any other job site in the area. If this 
facility closed, it would devastate our local community with 
job losses and loss of financial revenue and investment.
    But thanks to the infrastructure bill and the IRA, our 
facility has been busy fitting--filling orders for electric 
buses for all across the country. Workers no longer stress 
about losing their jobs. The IRA makes it easier for state and 
local government to invest in electric buses.
    The infrastructure bill includes $5 billion for state and 
local governments to buy or lease U.S. built zero emission, and 
low emission electric buses. The grant program helps improve 
local air quality and also expanding affordable and accessible 
transportation for communities across the country.
    The increased demand for electric buses means that we have 
a lot of new job openings at the facility, but it is not enough 
to create jobs. Congress must ensure that all jobs created 
through Federal investment are union jobs that will provide 
workers with good, quality life. The future of this economy is 
green jobs and union jobs.
    I'm a prime example of how unions can be a life-changing 
opportunity for someone struggling to get by. I love my job, 
and I'm proud of the work I do to create a sustainable, clean 
public transportation system for all Americans. I am working on 
electric buses that will connect people to their schools, work, 
the grocery store, and their loved ones.
    This world is changing and we must adapt. The investments 
from the infrastructure bill and the IRA guarantee our facility 
will thrive for years to come. And if our facility prospers, 
that means my family and Crookston will continue to flourish as 
well.
    God bless America, for the Lord knows that we are one 
nation under God. And thank you again for the opportunity to 
testify before you today. I look forward to any questions you 
may have.
    Chairman Whitehouse. Thank you, Mrs. Puentes. Dr. de Rugy.

  STATEMENT OF DR. VERONIQUE DE RUGY, GEORGE GIBBS CHAIR AND 
      SENIOR RESEARCH FELLOW, GEORGE MASON UNIVERSITY \6\
---------------------------------------------------------------------------

    \6\ Prepared statement of Dr. de Rugy appears in the appendix on 
page 64.
---------------------------------------------------------------------------
    Dr. de Rugy. Chairman Whitehouse, Ranking Member Grassley, 
and members of this committee, thank you for having me today to 
talk about an important topic about how to fuel growth, 
especially for lower income Americans. I have three points. 
Rather than targeting inequality, our policy should be to try 
to make those who struggle the most better off.
    Second, Americans continue to struggle, unfortunately, 
under the weight of government spending and inflation. And 
third, the return on investment from government spending is 
generally lower than returns from private sector investment, 
especially during times--outside of time of emergency.
    So first, concern about income and wealth inequality, while 
valid in some instances, should not make us overlook that what 
matters the most is the wellbeing of lower income Americans. 
Unfortunately, the President's policy, the sum of which he 
calls Bidenomics, aren't helping much on that front.
    For instance, the cornerstone of Biden's economic agenda is 
government subsidized factory investment and manufacturing. 
However, manufacturing is a sector that employs 8% of 
Americans, the plurality of whom are workers with bachelor 
degrees and higher. Moreover, manufacturing only accounts for 
11% of the economy.
    So even if the sector were growing, which it's not, it's 
been contracting for the last 10 months, the benefit wouldn't 
be widely shared across the economy. Companies often big and 
rich will be the one benefiting from the subsidies for 
projects, many of which would've happened even without the 
subsidies.
    For instance, about half of the Inflation Reduction Act 
projects were in the works before the bill was even passed. And 
the private green energy market was booming even before the 
subsidy, in part because of large demand for electric vehicles 
(EVs) and for electric buses.
    Other subsidies overwhelmingly benefit affluent consumers 
of electric cars and charging stations. Finally, all these new 
spending will be subjected to all the new political 
requirements that will increase the cost of whatever technology 
is produced. And that too will hurt lower income Americans.
    Second, Americans are still struggling. Real growth was 
2.1% in the second quarter, and unemployment is low. But these 
numbers are the flip side of an economy that's been 
overstimulated with too much spending and inflation, which 
started in 2021. Progress has been made on inflation, but it's 
not over, and people feel it.
    Their real wages are down, again, that hurts lower income 
Americans the most. Over 50% of a typical family budget is 
devoted to food, energy, and shelter, all of which have seen 
large increases in prices since 2021 and are still growing by 
5% a year.
    Inflation adjusted medium household income has declined by 
roughly $2,000 leaving Americans worse off. Excess spending 
contributed to inflation and produced enormous deficit and a 
record level of debt, $33 trillion since Monday.
    The prospect of gigantic never ending deficit during good 
times is also making investors nervous as demonstrated by the 
rise in yields on benchmark 10-year treasury notes. Other 
boring costs are also rising, such as mortgage rates and car 
loan rates.
    Unfortunately, all these negative trends, inflation, high 
debt, higher interest rate, and the certainty of a slowing 
economy in the future impose a heavy burden on all Americans, 
especially lower income Americans. What's more, there are no 
signs that the erosion of governance in Washington evoked by 
the created agency Fitch, when it announced the downgrade of 
treasury debt, will get better. Third, the administration 
argues that its public sector investment will eventually create 
growth and jobs for ordinary Americans. But the economic 
literature generally finds that government spending and time of 
full employment crowds out private sector.
    The Congressional Budget Office analysis of infrastructure 
legislation finds that moving $1 of investment from the private 
sector to $1 of government infrastructure investments means 
giving up half of the rate of return. In addition, every 
deficit funded Federal dollars in infrastructure shrinks 
private investment by $0.33 according to CBO.
    This is likely an understatement because of the massive 
supply constraints investor face when wanting to build 
infrastructure projects. So in conclusion, reducing inequality 
is a noble goal, but a reduction in inequality doesn't 
guarantee the wellbeing of low income Americans.
    Growing the economy is the best way to do this. The 
government needs to evaluate which policies are contributing to 
that growth and which ones are harming it. I'm looking forward 
to your questions.
    Chairman Whitehouse. Dr. Goodspeed.

  STATEMENT OF DR. TYLER GOODSPEED, KLEINHEINZ FELLOW, HOOVER 
              INSTITUTION, STANFORD UNIVERSITY \7\
---------------------------------------------------------------------------

    \7\ Prepared statement of Dr. Goodspeed appears in the appendix on 
page 72.
---------------------------------------------------------------------------
    Dr. Goodspeed. Thank you, Chairman Whitehouse, Ranking 
Member Grassley, members of the committee. I want to focus my 
remarks this morning on a set of empirical observations about 
the pattern of real earnings growth in the United States since 
the 2008-2009 recession, which I think are as essential for an 
intellectually open discussion about inequality in this 
country.
    From the start of the economic recovery in July 2009 
through the end of 2016, the U.S. labor market was 
characterized by a highly unequal recovery. On an inflation 
adjusted basis, weekly wage growth for managers outpaced that 
of workers.
    Real weekly wage growth for the top 10th of the wage 
distribution was more than double that for the bottom 10th of 
the wage distribution. Real weekly wage growth for those with a 
college degree outpaced that for workers without a college 
degree.
    However, beginning in 2017, the Trump administration, 
working with colleagues on the Hill, implemented a tax and 
regulatory agenda designed to incentivize private domestic 
capital formation, enhance labor demand by lowering the 
relative value of multinational enterprises' outside options, 
and incentivize greater labor force participation in part by 
lowering marginal rates and by nearly doubling the standard 
deduction, as the Ranking Member pointed out, bringing more 
Americans out of Federal tax liability altogether.
    In stark contrast to the economic recovery in the seven and 
a half years through 2016, in 2017, 2018, and 2019, it was then 
the case that real weekly wage growth for workers was more than 
double that of managers. Real weekly wage growth for the bottom 
10th of the distribution was more than double that for the top 
10th.
    While real wages grew across the board, real weekly wage 
growth for those without a college degree outpaced that for 
workers with a college degree. And in the aftermath of historic 
tax reform in 2017, labor compensation's share of total 
economic output increased and income inequality--whether 
measured by 90:10, 80:20, Gini coefficient--income inequality 
in 2018, 2019 decreased.
    In 2019, real median household income--the typical family's 
income after inflation--increased by $5,220, the largest 
increase in a single year on record, and a bigger increase in 
one year than cumulatively during the 16 years through 2016 
combined.
    In the three years through 2019, real median household 
income grew more than three times faster than during the seven 
years through 2016 combined. Looking at wealth in the three 
years through 2019, real wealth for the top 1% of the 
distribution rose at an annual rate of 5.4%. Not bad. Real 
wealth for the bottom 50% grew at an annual rate of 16.1%.
    And in the aftermath of 2017 tax reform, the bottom 50%'s 
share of total real wealth rose, that of the top 1% fell. The 
official poverty rate reached its lowest level on record with 
the number of Americans living in poverty declining by 6.6 
million in the three years through 2019, including almost 3 
million children.
    Unfortunately, since the end of 2020, though real weekly 
wage growth for production workers and workers without a 
college degree has been relatively stronger than real weekly 
wage growth for managers and workers with a college degree, in 
absolute terms, real weekly wage growth has declined.
    It has been negative across the board for all these groups. 
In 2022, real median household income declined by $1,750. That 
was a bigger decline than during the 2020 recession, and during 
the 2001 recession, in the early 2000s. The share of household 
income earned by the top 5% has risen.
    The share held by the bottom 20%, 40%, and 60% has fallen. 
And there are today more Americans living in poverty than there 
were not only in 2019, but more even than in 2020 during the 
depths of the pandemic. And there are more children in poverty 
today than there were in 2019. Nobel laureate Milton Friedman 
once warned that one of the great mistakes is to judge policies 
and programs by their intentions rather than their results. 
However noble the intentions of recent policy may have been, it 
was the results of the economic policy agenda implemented in 
2017, 2018, 2019 that generated robust real wage gains and 
declining inequality.
    And I think that if we are seriously interested in 
answering fundamental questions about inequality and growth, 
then we ought to at the very least, be curious about why 2018 
and 2019 stand out so uniquely over the past 15 years. Thank 
you.
    Chairman Whitehouse. Thanks very much Dr. Goodspeed. Ms.--
Mrs. Puentes, again, welcome.
    Mrs. Puentes. Thank you.
    Chairman Whitehouse. You've had quite a journey that 
brought you here, not just immediately, but across the span of 
your life.
    Mrs. Puentes. Yes.
    Chairman Whitehouse. When you joined the labor union, what 
were the most powerful effects in your life, both economically 
and in terms of your confidence and security for yourself and 
for your family?
    Mrs. Puentes. It's one of the best things that--that I've 
been a part of. I knew nothing about a union until I started 
working for New Flyer. And it has changed not only my life, but 
many lives of my members. That also it has shown me unity to 
its fullest, that when we come together, we can make a 
difference.
    So me working with my fellow coworkers, union members, the 
executive board, doing everything that we can together to make 
not only the company better, but the union better has, with the 
help of God and the Union, it's just taken me places I never 
thought that I'd be.
    I mean, here I am before you today testifying and saying 
how important this infrastructure bill is to not only me, but 
my coworkers, to New Flyer, St. Cloud, Aniston, Crookston. 
There's many members of us who rely on this, and we appreciate 
that.
    We appreciate not feeling that we're drowning. That we are 
finally above water. That everything's going to be okay. We're 
not going to shut our doors thanks to this bill. So that is 
what the union has done for me.
    Chairman Whitehouse. Well, thank you very much.
    Mrs. Puentes. Thank you.
    Chairman Whitehouse. Dr. Harris, you mentioned climate 
mitigation and risks in the course of your testimony, and 
there's been some discussion about inflation. I'd love to hear 
your opinion on the correlation between climate risk and 
inflation.
    It strikes me that insurance costs are a pretty elementary 
household cost, and we're seeing them soar as insurance 
companies have to grapple with new and unprecedented fire and 
flooding risks that are caused by climate change, driven by 
carbon pollution.
    It strikes me that we are seeing in certain areas, reduced 
production of food products because of, again, flooding and 
drought and climate disruptions. And when production reduces 
and demand stays the same, guess what? Prices go up.
    We are seeing health costs go up for families, both from 
the pollution associated with burning fossil fuel, but also 
from the disasters and the health effects of those disasters 
associated with burning fossil fuel. What are your thoughts on 
the role that climate change plays in the inflation that we 
continue to see?
    Dr. Harris. Thank you for that question, Mr. Chairman, I 
think you're exactly right on the positive correlation between 
climate change and inflation. And just so a few further points 
on that. The first good example I think is around energy 
production. And we can look for example, at rising energy 
prices, not just due to, for example, Russia's aggression 
Ukraine, which spiked the price of crude quite sharply in the 
wake of the invasion, but also more broadly due to various 
disruptions.
    The perfect example is what happened in Texas several years 
ago with that climate event that not only costs the lives of 
between 200 and 700 people from Texas, but also costs between 
$80 and $130 billion according to a report from regulators. So, 
you know, I think that with energy production, there's a real 
opportunity to address climate change and actually to drive 
down prices.
    So if you look for example, at various models, looking at 
the impact of cheaper electricity coming out of the IRA, you 
see that after 10 years, it'll drive down electricity costs for 
American families by 2.2%. After 20 years, that more than 
doubles to around 5%.
    These are meaningful cuts. And so not only is legislation 
like the IRA reducing the harmful costs of these climate 
disruptions, but also making electricity cheaper for American 
families.
    Chairman Whitehouse. I would add that one of the 
characteristics of our dependence on fossil fuel is that we 
then become dependent on pricing decisions that are made by a 
foreign cartel. The notion that we can have energy independence 
in the United States with fossil fuel is a complete fantasy 
because the price of fossil fuel is set by a foreign cartel 
that plays with production in order to drive up price.
    And then we've seen over and over again that American 
fossil fuel companies, over and over again, presented with a 
choice between following the cartel inflated price and charging 
American consumers more, or continuing to run a profitable 
business and letting the real market dictate the price of their 
product.
    Inevitably, they ride up with the cartel pricing. And 
that's one of the reasons we've seen such astonishing profits 
associated with the price gouging that the cartels opened up 
and that the American oil companies followed. And with that, 
let me turn to my Ranking Member for his questions, Senator 
Grassley, and we'll proceed from there.
    Senator Grassley. Dr. Goodspeed, you were acting chairman 
of the President's Council of Economic Advisors in 2020. We've 
had witnesses on this panel point out in their testimony that 
the U.S. recovered from the pandemic recession faster than 
other countries, and they tend to attribute it to the 
Bidenomics.
    What role did the fact that our pre-pandemic economy was 
the strongest it's been in years play in the speed of recovery 
rather than the inflationary policies of this administration?
    Dr. Goodspeed. Thank you, Senator. So I think it is 
instructive to note that by the end of 2020, the U.S. economy 
had already regained 84% of the lost output during those 
horrific months of March and April, 2020, and by the end of the 
year had already regained almost 60%, 6 in 10 of the jobs lost 
during those horrific months of March and April.
    And part of that was the Swift response of Congress working 
with the White House to pass measures such as the paycheck 
protection program and the employee retention tax credit. But I 
think another factor was the strength of the pre-COVID U.S. 
labor market.
    We actually, in the 2021 economic report of the president 
conducted a simulation in which we shocked, we imposed the same 
COVID shock on the 2016 labor market with the 2016 unemployment 
rate, and 2016 probabilities of transition between 
unemployment, employment, and not in the labor force.
    And in that simulation, the unemployment rate by fall 2020 
was still three percentage points higher than what it actually 
was. And that corresponds to almost 5 million more Americans 
that would've been in unemployment--would've been unemployed 
were we not blessed with the strong labor market of February, 
2020.
    Senator Grassley. I've authored several major tax laws. 
I've seen the results letting working families and businesses 
keep more of their hard earned money. So Dr. Goodspeed, could 
you discuss some of the pro-growth provisions of our 2017 tax 
bill, the effect it had on the economy?
    But more important than that, general comment, is what 
would happen if we allowed the law's tax relief to expire, what 
effect that would have on middle income families?
    Dr. Goodspeed. So one of the historically anomalous 
features of the economic recovery in the seven and a half years 
through 2016 was that we had 1.6 million prime age American 
workers leave the labor force, despite the fact that that 
population was growing. And firms were not investing enough to 
replace depreciation of existing capital per worker.
    And so we actually had a negative contribution of so-called 
capital deepening to labor productivity growth. In the 
aftermath of 2017, in contrast, we saw business investment rise 
to a level that was about 10% above that, which would be 
predicted by pre-2017 trend.
    We saw, as noted in my testimony in 2019, bigger real 
median household income gains in one year than in the 16 years 
combined through 2016. We saw labor force participation rates 
rise across the board, but in particular, rise for older 
workers and rise for prime age women for whom work may have 
required the incurrence of childcare costs. So all that would 
go away if--if these provisions----
    Senator Grassley. If you go to the second part of my 
question about the, if we let this lapse what'll happen to the 
middle class?
    Dr. Goodspeed. If we let this lapse, I think that we would 
see a return to the sort of recovery that prevailed from July, 
2009 through the end of 2016, with weak real wage growth, 
declining labor force participation--including among prime age 
workers--and weak business investment.
    Senator Grassley. Dr. de Rugy, Democrats like to claim any 
government spending they happen to like as an investment. We 
saw this in the so-called Inflation Reduction Act. What are 
some of the major ways Bidenomics so-called investments have 
undermined our economy and American's livelihood?
    Dr. de Rugy. Thank you, Senator. I mean first I'd like to 
note that, I mean, what these investments, which is, estimated 
to be like subsidies between $1.2 trillion and $2.1 trillion 
when you put them all together, what they're doing is that 
they're--they're attempting to change the sectorial composition 
of the economy rather than actually growing the economy or 
declining inflation or reducing growth.
    What that means, another way to talk about this is to say 
they're picking winners and losers. And that means shifting 
basically capital away from unsubsidized companies and 
unsubsidized sector towards subsidized sectors, and towards 
subsidized consumers--some subsidized consumers of particular 
goods in a way.
    So that the literature--I mean, what--when we've looked at 
particular programs that do just that, we see that it may be 
beneficial for the companies receiving the subsidies. Certainly 
in the short term it does, but in the--it's not--it doesn't 
mean it's a net growth for the--it's a net--net benefit for the 
economy.
    In fact, usually it is not. There's another added problem 
with these subsidies is that they tend to benefit big 
companies. As I've mentioned that we're already in the process 
of doing this, for instance whether it's for the Inflation 
Reduction Act, a lot of these companies were, I mean, a lot of 
these projects were already in the works.
    I mean, there was a booming economy, and an enormous demand 
of investing in green energy and consumer demand for green 
energy. But the problem is this enormous amount of spending is 
taking place in an environment that hasn't been freed from a 
lot of the restraints imposed by some regulations or some 
government action.
    The bottleneck for immigration permitting reform is badly 
needed because you can--you know, decide to spend a lot of 
money in building a factory. If it takes you three, or four, or 
five years to even get the permission to build this factory. 
You're going to be in problem.
    And then of course, the implementation of these investments 
for those who benefit from the subsidies now face added 
requirements like providing--building childcare on the 
facilities, prevailing wage, all sorts of things.
    And the problem is if we had removed all these impediment 
to investments beforehand, again, because there was so much 
interest in building green energy, there was some geopolitical 
tension, and because of the pandemic a lot of companies felt 
that it was time to rebalance and move back to the U.S. or 
elsewhere out of China.
    If we didn't have all these requirements and impediment to 
investment, we would've seen much, much more private investment 
in these sectors than we see today. And we may not even have 
needed any of the government incentives.
    But again, I mean, I think the real problem is going to be 
that effectively because you haven't the job hasn't been done 
before, it's like putting, you know, a hose on a fire hydrant 
and just turning on the water. And it's just not going to go 
that great.
    Chairman Whitehouse. If you don't mind, Senator Grassley, I 
think we have lost our colleagues who are here, including to a 
foreign relations markup that is waiting for a quorum. So it's 
not clear that they'll be back. So, I didn't get a chance to 
ask Ms. Strom a question, so I will have a second round with 
her if you'd like to have a second round to engage with your 
witnesses. That would be fine.
    Senator Grassley. I'll have two more questions.
    Chairman Whitehouse. Terrific. And then we'll wrap it up. 
So you mentioned in your testimony, Ms. Strom, the general 
economic burden of climate change costs on the economy. Your 
testimony focused very much on the issue of income and economic 
inequality. Could you connect the dots with how the economic 
burdens on the general economy of climate change flow through 
to the issue of economic inequality?
    Ms. Strom. Absolutely. Thank you for that question, 
Senator. I should note that climate change will have a really 
significant impact on the economy. A recent estimate is that 
climate change could lower world GDP by 4 percent to 18 percent 
within 30 years depending on how aggressively we tackle it now. 
And the Office of Management and Budget (OMB) has estimated 
that climate change could reduce Federal revenues by $2 
trillion annually by 2100. It is certainly the case that low-
income people bear the cost of climate change in a very 
significant way. For example, rising heat leads workers to--it 
leads both to lost productivity and also it leads to more 
injuries, more problems in the workplace.
    And also, lower-income individuals often will bear the 
costs even more significantly. So, what I would say is, again, 
you know, reducing inequality and mitigating climate change go 
hand in hand. And it is also the case, as I mentioned in my 
testimony, that reducing inequality itself helps to improve 
economic growth.
    Chairman Whitehouse. And I had an exchange with Dr. Harris 
about how climate change is driving inflation. We talked about 
how the prevalence of disasters and the unpredictability of 
those disasters is dramatically driving up insurance costs, 
which go right to a family's budget.
    How interference with crop growth from drought and flooding 
reduces production and is predicted to reduce production 
considerably more, which then would raise food prices. That the 
health harms from climate change, both from just pollution in 
the air and from the direct physical disasters that ensue of 
wildfires and so forth raises healthcare costs for families and 
for the community.
    And that the longer we continue to depend on fossil fuel, 
the more we subject ourselves to unfair improper cartel pricing 
which hits American families pocketbook at the pump as they're 
gouged by American oil companies, which choose to ride the 
cartel pricing up rather than just make reasonable profits and 
protect Americans' pocketbooks with reasonable pricing.
    What is your take on that interaction between the climate 
risks that you've talked about and the inflation factors that 
we're seeing in the economy?
    Ms. Strom. Absolutely. I would agree with my fellow 
witness, about the impacts that climate change has on 
inflation. And I would also note, as you mentioned, that one of 
the ways that we could most ensure that we are not as sensitive 
to the kinds of climate risks we are seeing right now, the 
impacts on gas prices and that kind of thing, is to invest in 
mitigating climate change. I was very glad to see the Inflation 
Reduction Act pass; and I think it's an important step toward 
ensuring that our energy future is better. You know, a clean 
planet is one of the most important assets that we can leave 
for our children; and again, I believe it ultimately will be 
very impactful on things like inflation.
    Chairman Whitehouse. So in addition to helping Mrs. Puentes 
continue to make wonderful electric buses in Minnesota, good 
climate policies will reduce income inequality, boost our 
economy, and help reduce inflation.
    Ms. Strom. Yes, that is correct.
    Chairman Whitehouse. Got it. Okay. Thanks very much. We may 
have a late arrival, but go ahead with your questions and if 
there are late arrivals when you're done, we can give them a 
turn. And if not, then I'll close the hearing.
    Senator Grassley. I'll start with you, Dr. de Rugy, you 
pointed out in your testimony very well, the unsustainable 
fiscal path and--and we have--got to do something about the 
Federal debt. And it's growing.
    And it's going to continue to grow if we--even more as a 
percent of gross national product. So, I don't want you to go--
give me a long dissertation on what the economic literature 
says about how the countries should best put their fiscal house 
in order. But is it--is it better to rely on tax hikes or 
spending restraints?
    Dr. de Rugy. It's what the literature is showing is--sorry. 
Thank you. What the literature is showing is that fiscal 
consolidation packages that are made mostly of spending cuts 
are better than those made mostly of tax increases. And they're 
better in many ways.
    So for the long terms, it--they--the spending cut ones grow 
the economy. So that's, you know, that's not in question. But 
in the short term even if there's a slowdown with a fiscal 
adjustment that is based on spending cuts, it's going to be 
milder and not as long lived as a package that is based on tax 
increases.
    The problem is, that is a political one. Is like in 
literature, what you--when you look at how many countries have 
successfully--who have adopted fiscal adjustment have 
successfully adopted the one that leads to debt to GDP ratio, 
you see that actually most of them 80% adopt the kind that is 
mostly based on tax increases. And that's because of the grip 
of special interest, which led us to this problem in the first 
place.
    Senator Grassley. Thank you. I'm going to ask Dr. Harris, 
going to give a quote from Adam Looney, and then if you 
disagree with it, I'll give you a chance to respond what 
analysis you have that would say that he was wrong. He quotes 
about the president's student loan.
    ``Costly, poorly targeted to help Americans who struggle 
financially, provide substantial benefit to highly educated and 
well off borrowers, and exacerbate negative incentives in the 
market for institutions of higher education.''
    Dr. Harris. Thank you, Senator. So Adam Looney is a non-
resident senior fellow at the Brookings Institution. It's 
difficult for me to respond to your very good question without 
knowing exactly what provision he's referring to. If he's 
referring to, for example, income-based repeat----
    Senator Grassley. Well then why don't I ask you to respond 
in writing?
    Dr. Harris. Thank you, sir. I appreciate that.
    Senator Grassley. Yes. Before you go to the next person, if 
I could just kind of sum up here so I can--I can leave.
    Chairman Whitehouse. Gladly. I'd be sorry to see you leave. 
But you're welcome to sum up.
    Senator Grassley. Okay. Well, it's kind of a case of the 
fact that I want to respond to what the administration and the 
Democrats are trying to make things look as good as they are 
when I think they're very bad. I think the facts are clear that 
Bidenomics has failed lower and middle income Americans.
    So I'll give these points. Prices are up 17.4% since Biden 
took office. Real wages are down three and one tenth percent 
under Biden. Real incomes are down $3,670 since 2019. Middle 
class wealth down $33,000 per adult since interest rate hikes 
started.
    In contrast, under pro-growth policies that we have put in 
place, median net income grew 18% between 2016 and 2019. Real 
median income grew $5,220 from 2018 to 2019, the largest 
increase on records. Median household income after taxes and 
transfers reached an all-time high in 2019. So I thank you for 
listening to me.
    Chairman Whitehouse. I thank you, Senator Grassley. Senator 
Van Hollen, followed by Senator Braun, followed by Senator 
Kaine, if he's here, or Senator Lujan, if he's not. Chris.

                STATEMENT OF SENATOR VAN HOLLEN

    Senator Van Hollen. Thank you. Thank you, Mr. Chairman. 
Thank all of you for your testimony here today. I think the 
facts are in, when it comes to trickle-down economics. It was a 
failed ideology. The idea that if you give big tax cuts to very 
rich and very wealthy people, somehow that will trickle down 
and lift everybody else up, has been a proven failure.
    What happened is that the very wealthy got even richer, and 
everybody else sort of was running in place. In other words, a 
rising tide lifted the yachts, but the boats got stranded. So, 
I want to again, emphasize, I think the main theme of this 
hearing, which is that by making important public investments 
whether in education, whether in transportation, other areas, 
we can in fact help both have growth with more short shared 
prosperity.
    Now that involves, of course, revenues to make investments. 
And it is important to take a look at what we call tax 
expenditures, right? Which is the--this tax spending side. When 
a particular group of people gets a better tax break than 
everybody else, that is the same as transferring revenue income 
directly to them.
    And so I just wanted to go through a couple of them because 
the Biden administration has put forward a plan that both 
invests but also raises revenue in a way that stabilizes the 
debt over a period of time. So, I want to focus first on the 
capital gains taxes, because right now we tax capital gains at 
lower rates than normal income.
    Implying that we value money made from money more than we 
value money made from hard work through wages. And if you look 
at the benefits right now of the discrepancy in the rate we tax 
income versus how we deal with capital gains, you'll see that 
70% of the value of that tax break goes to the wealthiest 1% in 
our country.
    So Mr. Harris, I have a question for you, because when we 
talk about raising revenues in these ways, by closing tax 
breaks, getting rid of tax expenditures to the wealthy folks we 
often hear from our colleagues, no, no, no, no. That's going to 
hurt economic growth.
    Again, that's the trickle-down theory. If you don't keep 
this tax break for wealthy people, it's going to somehow hurt 
other people even when we use those revenues for investments to 
help everybody. So, Mr. Harris, just--is there--is there a 
downside to changing these kinds of tax policies that primarily 
benefit the very wealthy?
    Dr. Harris. Thank you senator for that question. I think 
that in general, there are two main takeaways when we talk 
about the reforms that you referenced, particularly with 
respect to the taxation of capital income. One is on rates. And 
so the notion that if we raise rates to be equal to the current 
levels on labor income, that it would somehow result in this 
massive withdrawal of investment in the United States.
    I think is not well founded by the evidence. There've been 
experiments both at the Federal and state level when we've seen 
cuts to tax rates on capital income, and that has not resulted 
in a flow of new investments. So I think the empirical evidence 
is pretty clear on that, particularly at the rates to which 
you're talking about. Secondly, the design of our taxation on 
capital is actually counterproductive. And a really good 
example about that is the fact that we exempt all capital gains 
at death. Which leave investors to go ahead and hold onto 
investors, which might--might not be productive and ultimately 
harm economic growth. So they can actually be counterproductive 
to investment.
    Senator Van Hollen. So you, you anticipated my next 
question, right? Because there's the issue of the fact that 
capital gains get a preferential rate compared to regular 
income through wages. But it's even more lopsided because of 
our current policy that doesn't deal with stepped up basis. The 
President's proposal actually combines the two. Do you think 
that that is the right approach?
    Dr. Harris. Yes, sir. I do think that is the right 
approach. In particular because it's important when you're 
talking about any sort of revenue raising initiative to think 
about what that revenue would go for and whether that revenue 
goes towards deficit reduction, we think is incredibly 
important, or the type of investments that this hearing is 
focused on.
    The net impact of that--that increase in revenue coupled 
with those investments can from my view, only be seen as net 
positive for the U.S. economy.
    Senator Van Hollen. And with those changes to capital gain 
rates, and I should emphasize that the President's plan, I 
think says that this only applies to people over a million 
dollars in capital gains. Is there any, if we did that change, 
would that affect people's 401K tax--approach to taxes?
    Dr. Harris. So the president has not called for any direct 
change to the tax treatment of 401Ks to my knowledge. So the 
argument would have to be again, that higher capital gains 
rates would be so--would make investors so allergic to 
investing in the U.S. economy that they would pull out all of 
that capital. I just don't think the evidence is there to 
suggest that.
    Senator Van Hollen. Got it. Thank you. Thank you, Mr. 
Chairman,
    Chairman Whitehouse. Senator Braun.

                   STATEMENT OF SENATOR BRAUN

    Senator Braun. Thank you, Mr. Chairman. I want to take off 
right where Senator Van Hollen left off. That epic debate about 
where our economy comes from. I mentioned it many times here 
that regardless of our revenue--our tax rate, our revenues 
stubbornly stay around 18% of our GDP.
    One time, and Senator Van Hollen cited it a couple sessions 
ago that we did that in the Clinton years to where we were able 
to raise revenue to the tune of about 20% of our GDP. But 
statistically, over 50 years, it's around 17.5% to 18%. Kind of 
as a given, if statistically it's that way other than two years 
out of 50.
    So generally you raise the rates, you flush a little more 
into the treasury, but your economic growth rate starts to 
measurably flatten or go down. When you cut the rates, you take 
money away from the treasury, but generally your economic 
growth rate starts to go up a little bit.
    It begs the question, is our economy one that can ever be 
government centric when the stats seem to show otherwise? And 
then what do you do with something that's a given? And I want 
you to address, I'm going to ask two of you to respond to it. 
Mr. Harris and Mr. Goodspeed, the business plan.
    When I got here five years ago, government had already due 
to Republicans and Democrats gotten into structural trillion 
dollar deficits annually. Debated Bernie Sanders on the floor, 
one of my most enjoyable moments since I've been in the Senate 
about the modern monetary theory. Please explain to me the 
arithmetic once we price the five percentage points that 
interest costs have gone up for everyone, either the government 
or the private sector, how does that work out? And I remind you 
that 1% of 30 trillion is 300 billion. Interest rates have gone 
up 5%. And currently this committee right here, which does 
nothing on budgeting, is dealing with total discretionary, 
domestic, and defense that totals about 1.7 trillion. You know 
what 5% on 30 trillion would be, that's 1.5 trillion I believe 
in interest costs. We're just beginning as this debt roll to 
have, along with Medicare Trust Fund going broke in four years.
    That's more government. I am a believer in raising wages 
and good benefits, and helping the people that need it the 
most, not corporate America. But this looks like a house of 
cards, that there's no way you could grow it into something 
that would be sustainable. I'm going to start with Mr. 
Goodspeed, and then I want at least like a minute or two for 
Mr. Harris to answer as well. Go ahead.
    Dr. Goodspeed. Thank you, Senator. Yes. So I--I think that 
to the--to Senator Van Hollen's point about tax expenditures. 
One of the things that we did in the 2017 tax law was classic 
tax policy 101. You lower marginal rates to incentivize 
investment, incentivize labor force participation, and you pay 
for that in part by closing tax expenditures.
    So two of the tax expenditures that we closed or limited in 
2017 were the deduction for state and local taxes and the 
mortgage interest deduction. Those are two tax expenditures 
that cost hundreds of billions of dollars a year and massively 
skewed toward the highest income households.
    Now, the result of that approach of lowering marginal rates 
was to increase GDP, the gross output of the U.S. economy by 
$300 billion over what the Congressional Budget Office had 
projected in its final 2016.
    Senator Braun. And it was paying for itself, it looked like 
to me, right before COVID hit. Would you agree with that? In 
terms of the 150 billion a year that the whole--the thing was 
supposedly costing from the CBO?
    Dr. Goodspeed. I think if you look at the upward revision 
in the congressional budget office's 10 year forecast, most of 
that upward revision in growth was attributable to the 
corporate tax changes.
    Senator Braun. Okay.
    Dr. Goodspeed. So I can see that the $333 billion in 
corporate tax changes were likely paying for themselves----
    Senator Braun. And before you run out of time, what about 
the idea that we can extrapolate this into the future in terms 
of what it does, in terms of causing a fiscal crisis when we 
got--have this much debt now being held by the Federal 
government?
    Dr. Goodspeed. Well, we have this much debt being held by 
the government, 31% of which matures in less than one year. 
Historically, after 1945, we had a debt to GDP ratio above a 
hundred percent, but we were also occasionally running budget 
surpluses. And we had a lot of growth tailwinds.
    Senator Braun. We were investors and savers then, not 
consumers and spenders. And there was a work ethic. Mr. Harris.
    Dr. Harris. So I agree with you, Senator, that we do have a 
long-term. I--that we have a long-term fiscal imbalance that 
does threaten the U.S. economy. In part because we don't know 
exactly what will happen to interest rates.
    And if interest rates spike more than they are at the 
current level, they'll crowd out private investments. So it's a 
real concern. That's one of the reasons why I've been publicly 
opposed to the Tax Cuts and Jobs Act (TCJA) because it costs 
nearly $2 trillion and would cost more if extent----
    Senator Braun. Over 10 years. And it used to be 1.5 
trillion, but I'll give you the 200 billion a year. That is 
true chump change. Aren't you more worried about the more 
global consideration of what running through the Biden 
administration, they're the only ones that put out a blueprint, 
$2 trillion deficits as far out as we can see annually.
    And that's a trillion every 6 months. Doesn't that somehow 
argue against what you're trying to promote through a more--I'm 
not saying it's perfect in terms of the other system. I don't 
think it's helping the people that need it the most. I'm not 
for helping big corporations, I'm for helping the average 
person on the street.
    But what we've generated is inflation and debt that no 
country can sustain. How is that a good long-term business 
plan?
    Dr. Harris. So I've been encouraged----
    Chairman Whitehouse. Given the time--go ahead and answer. 
But we're well into Senator Kaine's time now. So if you could 
keep it short.
    Dr. Harris. I'll be very brief. I've been encouraged by the 
Biden administration's anti-deficit proposals, including a 
proposal to extend the solvency of the Medicare Trust fund by a 
generation, largely through changes in prescription drug policy 
and also through revenue raisers on corporations and people 
making more than $400,000.
    Senator Braun. I'll believe it when I see it, and hope that 
does work. But it looks like we're in trouble as a nation in my 
mind.
    Chairman Whitehouse. Senator Kaine.

                   STATEMENT OF SENATOR KAINE

    Senator Kaine. Thank you. We are in--by many measures of--
of significant and historic recovery, 13.5 million jobs since 
President Biden has taken office. 800,000 new manufacturing 
jobs and growing. I know some suggest that okay, there was 
going to be a period of recovery after COVID, and some, you 
know, demean the manufacturing job growth by saying it's just 
8% of the economy.
    But Mr. Harris, you touched upon this in your testament. 
I'd like you dig in further. How has the recovery in the United 
States since the darkest days of COVID compared to 
international peers?
    Dr. Harris. So we are the envy of the world economy. We 
have grown faster. You've seen stronger consumption growth, in 
part because the recovery packages that was passed by this body 
were designed to do exactly that. Was maintain consumption 
throughout the recovery. This is one of the first recoveries 
we've had where there was virtually no scarring.
    And it's in stark contrast to what we saw out of the last 
recession when there was severe scarring, I think we corrected 
for many of those problems. Secondly, while inflation was worse 
in the United States for a period, in our economic peers, 
they've largely caught up. And that's because many of the 
inflation drivers are global in nature.
    They're rising food prices, they're rising energy prices 
and many other factors we've discussed. So in general, on an 
international scale, we are the envy of the world. We're 
growing faster, we're more stable, and our inflation rates look 
similar.
    Senator Kaine. My chief worry about the economy right now 
is the labor market. Everywhere I go in Virginia, whether it's 
my Ag sector, or my manufacturers, or hoteliers, hospitals, 
ship builders, hard to hire people. Hard to hire people. And I 
don't think there is a single answer to that. I think it's, you 
know, better skills training.
    It is immigration reform that is focused on the workforce. 
Our birth rate is not going to change. If it did, we wouldn't 
see it for 25 years. So I think immigration reform is really 
important. But another component that I think is really 
important is affordable childcare.
    The number of workers that are out of the workforce, so 
they're not showing up in an unemployment rate because they're 
out of the workforce because they can't find high quality, 
affordable childcare, is significant. And these are often 
people with very high levels of skills and they really want to 
be in the workforce.
    And it would be great if they could for the economy and for 
their families and their own sense of wellbeing and 
productivity. But if they can't find high quality, affordable 
childcare, they're not in. And even people who are in the 
workforce, but who are worried about childcare, I spent a lot 
of time on military bases and I talked to sailors--naval 
aviators at Oceania Air--Naval Station in Virginia Beach, for 
example.
    And they say, the absence of childcare means I find 
something, but I don't feel that comfortable with it. So 5% of 
my brain when I'm at work and I'm really supposed to be 
focusing on the defense of the nation, about 5% of my brain is 
like, I don't know if my childcare situation is very good. So 
talk a little bit about the connection between affordable high 
quality childcare and labor market productivity.
    Dr. Harris. So I agree 100% that too expensive childcare 
and too hard to find childcare is a major economic issue, 
particularly for women, but not exclusively. It's, there's just 
not enough of it. We saw many childcare centers contract the--
the supply of childcare contract over the pandemic.
    So you've taken a bad situation, you've made it worse. The 
average American family with the child under five spends 13% of 
their income on childcare. So for a lot of, you know, in a lot 
of instances purely for second earners, it doesn't make 
financial sense for them to go into the labor market.
    So if you came to me and you said, I want to boost labor 
force participation, what's the single best thing I can do? I 
would probably say make childcare affordable. And you can do 
that through a host of different strategies. You can subsidize 
childcare, you can subsidize employers to build childcare, 
which is actually where workers want it. They want it at the 
place of employment. Or you can invest in major block grants 
that go to states and let them use their discretion. But 
childcare is 100% an economic issue, and I see it as the best 
avenue for raising labor.
    Senator Kaine. And it's likely to get worse at the end of 
this month because the childcare stabilization funds that were 
put in place during the COVID public health emergency expire. 
There's estimates that suggest about 80,000 kids in Virginia 
could lose childcare spots if these funds expire.
    And about 2,800 childcare workers could lose their jobs as 
the market contracts, we already don't have enough. It's going 
to get worse if we don't do something about it. It's funny, 
I've never asked this question before, and I'm kind of 
surprised I haven't. Dr. Goodspeed is the Hoover Institution 
named after Herbert Hoover?
    Dr. Goodspeed. It is.
    Senator Kaine. Okay. Thanks, Mr. Chair.
    Chairman Whitehouse. Senator Lujan.

                   STATEMENT OF SENATOR LUJAN

    Senator Lujan. Thank you, Mr. Chairman. Now, recent census 
data show that after the pandemic relief programs like the 
expanded Child Tax Credits and others that expired resulted in 
a increase sobering 13.5 million--sorry, 15 million people in 
poverty. So my question, Ms. Strom, is yes or no, is it true 
that the same census data found that child poverty more than 
doubled from 2021 to '22 from a historic low of 5.2% to 12.4%?
    Ms. Strom. Absolutely, I believe that's correct. It is the 
case that the enhanced Child Tax Credit lifted 2.1 million 
children out of poverty, and I think the Census report shows us 
what happens when that expires.
    Senator Lujan. And it seems like old inequalities that 
existed before the pandemic snapped back after pandemic 
programs expired. Black child poverty rose from 8.3 percent to 
18.3 percent. Latino child poverty rose from 8.4 percent to 
19.5 percent as examples. Ms. Strom, yes or no, is it true that 
Congress could have kept an additional 3 million children out 
of poverty had it extended the American Rescue's Child Tax 
Credit?
    Ms. Strom. Extending the Child Tax Credit would indeed have 
a significant impact on children in poverty. There have been 
studies that have shown that making the enhanced Child Tax 
Credit permanent would have benefits to society that are 10 
times the cost of the program.
    So I believe that making the enhanced Child Tax Credit 
permanent is one significant thing you can do to help raise 
children out of poverty.
    Senator Lujan. I appreciate that. And Mrs. Puentes. Yes or 
no, if a family has difficulty paying the bills, buying 
groceries, or struggling with medical conditions, does it make 
raising children more difficult and stressful?
    Mrs. Puentes. Yes, very. I've found that--I've realized in 
my community, even talking with family and friends. It's hard 
nowadays just for one person to live off of just their income. 
And let's say you have a single father or a single mother, it's 
very hard to make ends meet with that.
    And I know that personally, because when I was a single 
mother working as a housekeeper, I barely had food in my 
fridge. I had to go eat at my mother's place or my sister's 
place. And until I started to work at New Flyer, started to 
make more income, met my husband, got married, we now have--
there's two of us who work for the same company.
    And now we're good. We're not--we're not stressed. But if 
that were to be taken away from, it is very hard for just a 
single parent to make it. Very.
    Senator Lujan. I appreciate Mrs. Puentes. Ms. Strom, yes or 
no. While working people struggle, is it true that billionaires 
are a third richer now than they were before the pandemic?
    Ms. Strom. It is certainly the case that economic 
inequality has increased significantly. And I will say again, 
that the programs that were put in place during the pandemic 
and to counter the pandemic luckily had an impact on reducing 
inequality overall.
    But certainly the extent to which the wealthy in this 
country are not paying their fair share of taxes is one of the 
really significant problems. The Council of Economic Advisors 
had released a report showing that the wealthiest 400 
billionaires, I believe it's paid 8.2 percent of in effective 
individual income taxes, which is significantly lower than most 
other you know, Americans pay today.
    And so that truly means that the wealthiest people in 
society are paying much less into the federal coffers.
    Senator Lujan. And as a follow of that, how does child 
poverty and this striking inequality undermine long-term 
economic growth?
    Ms. Strom. Child poverty has a really significant impact on 
economic growth. So, as I had mentioned in my testimony, one of 
the ways that economic inequality reduces economic growth is 
that you're not investing enough in human capital.
    And investing in children is one of the best ways you can 
invest in human capital. So, when children have more, you know, 
when they can thrive, when they can go on to go to college and 
make a better income, it's better for society as a whole. It 
makes them a more productive member of society. That's why 
there have been studies like that by Hilary Hoynes who found 
that investing, for example, in SNAP benefits has 62 times the 
impact for society of the cost of SNAP. So for every dollar 
spent on SNAP, you get $62 in benefit for society. And that's 
when you take into consideration the fact that SNAP benefits 
make it more likely that children will go to college and, you 
know, other--other types of success in life in other kinds of 
ways.
    Senator Lujan. And Mrs. Puentes, how has your union job 
changed your ability to care for your children and what does it 
mean for their future?
    Mrs. Puentes. Once again, everything; right? Because I 
get--because of my union, I get better healthcare coverage. And 
which not only healthcare coverage but better wages. And it 
keeps us feeling stable, secure. Wages, healthcare, my 401K.
    Being able to match 6%, I mean, I just feel comfortable. 
And that's exactly what the union has done for me. It makes me 
feel--that's why I say I'm proud to work at where I do. And the 
union has to do with that. It's just given me a sense of 
everything's going to be okay.
    Senator Lujan. I appreciate that. Thank you Chairman.
    Chairman Whitehouse. I've offered Senator Braun one other 
round before we close. Senator Braun, please proceed.
    Senator Braun. Thank you, Mr. Chairman. I think it's such 
an interesting conversation we're in. And for most of us 
everything you've said, of course you'd aspire to do that 
through your own business. If you do offer your employees great 
pay and great benefits, you don't have turnover.
    And sadly, it seems like the only ones winning in this 
whole equation to where you just don't want to fight tooth and 
nail for it would be big business, and big government. When you 
look at it. And I know the solution so often is to turn to big 
government, but it is not sustainable. If you took the wealth 
of the six richest Americans now. It's about $600 billion.
    That's a lot for any six people to have. Of course, you 
dissolve it, it's not that much when you start trying to turn 
it into liquidity and you divide that into the number of 
Americans it'll give you about 2,000 a piece. That's not the 
solution. I think we all know it.
    You got to have entrepreneurs, but somehow you got to 
figure out how to balance it better. And until we find that 
equation. The one I'm looking for is how main street, how 
employees benefit without having to turn to the federal 
government. That's the place of last resort to go to.
    But I think I'm going to win the argument on the business 
plan not working out there, and it creates a false hope. We 
need to be finding out where we change America. Do you think 
it's going to be from here down, borrowing $2 trillion a year? 
No one has given me a good argument on how we do some of the 
things that we're talking about without bankrupting the 
country.
    So we're in a tricky spot in terms of how to find that 
right formula so that the average American benefits, the 
average small business owner does, and the blue collar worker. 
Whoever on either side of the aisle gets that figured out is 
going to, I think, come up with that new plan. It didn't work 
the way Hoover had it going.
    I don't know that it's working the way we are now, even if 
good intentions underpin it. So I'd like to ask Ms. Strom and 
Dr. de Rugy, do you have any ideas? Weigh in. Do you think the 
answer is here, or do you think the answer has to come from a 
more granular place where you're not borrowing from future 
generations like we are here to accomplish the goals we're all 
interested in? Start with you Ms. Strom.
    Ms. Strom. Thank you for that question, Senator. I think 
there are two important points to make in response to that. The 
first is that our children inherit not only our debts, but also 
our assets. So smart investment in the future helps our 
children to have a better future.
    The other thing I would say--I noticed you talked about 
entrepreneurs, and I think that, the fact that you're 
emphasizing the importance of entrepreneurs is exactly the 
reason that we should care about things like inequality. 
There's a famous study that looked at U.S. patent holders and 
examines U.S. patent holders, where they came from and how they 
compare to students who, when they were younger were getting 
the same test scores, and finds that low income children who 
did really well in school patent at a much lower rate. And the 
researchers called those people ``lost Einsteins'' people who 
really had the opportunity to innovate and add to society, to 
add to the incredible innovation that our society can create. 
But in fact, they weren't able to do so because they weren't 
exposed to innovation and they weren't exposed to the types of 
people who patented things when they were younger.
    Senator Braun. Very good. And I see where you're coming 
from there. And then it would beg the question of maybe how we 
educate our kids better, and whether that ought to be driven 
from here or, you know, from a more grassroots point of view, 
local and state governments. I think, again, you're making the 
point, it's where do we craft the best solution, Dr. de Rugy.
    Dr. de Rugy. So, I mean, so it's a really good question, 
but I think there is a case to be made for the government to 
spend money to help people and to boost, jumpstart the economy. 
But what we know from the literature is that the only chance we 
have for this to actually not be shrinking the private sector 
and to be productive is when we're in a recession.
    Also we need an environment like the multiplier. Those, you 
know, the buck for the buck that you get for the government 
investment is going to be lower as our debt grows. There's a 
pretty significant literature on this. There are conditions 
under which the government investments is going to actually be 
productive.
    And let's not forget, I mean the Congressional Budget 
Office put out, it looked at--there are two studies actually. 
It looked at the infrastructure legislations and tried to 
actually see what we're leaving on the table when we're 
actually having the government do the spending compared to the 
private sector. And it's half of the rate of return.
    Senator Braun. When the government does it?
    Dr. de Rugy. When the--yeah, than----
    Senator Braun. Okay.
    Dr. de Rugy [continuing]. Compared to when the--the--the--
the private sector does it. And while you know, you get--you 
get----
    Senator Braun. So right there. I think that begs an 
important question. I've always advocated that businesses need 
to do more to invest in their own communities----
    Dr. de Rugy. But they are.
    Senator Braun [continuing]. If they want less government. 
And they are--and they are. But is that done at the corporate 
level the way we'd like to see it? Or is it done more 
percentage wise at the main street level? And I believe it's 
the latter. And then before we use up too much time here, how 
can we possibly do this through a Federal government that's 
doing it on a house of cards and a mountain of debt?
    Dr. de Rugy. We actually--there's an enormous risk. So 
we've reached 33 trillion of debt. I think the number came out 
on Monday. In the next 30 years, the Federal government is 
going to have to convince investors to borrow four times this, 
$120 trillion.
    Senator Braun. The markets would not allow that.
    Dr. de Rugy. So, I mean, and again, you know, higher debt 
eventually even in the best country in the world drags the 
economy. And that is, you know, that's unquestionable and it 
will hurt. In the same way as economic growth is the best way 
to lift people out of poverty, the lack of economic growth not 
only hurts lower income the most, but also it gives--there's 
more intolerance, less embracing of social democracy and a lot 
of the values that we all care about and that are represented 
with this country. So--so it's--it's a problem we need to--
well, you need to take care of this debt that we have.
    Senator Braun. Thank you. It's the beginning of a 
conversation. It's going to take a while to figure out. And I'm 
glad you're all here to discuss it today though. Thank you.
    Chairman Whitehouse. Thanks Senator Braun, and I appreciate 
the sincerity of your interest in all of this, and it's good to 
have you here. I'll make a brief closing remark just because 
Mrs. Puentes is here, and because we are here at a time when 
your brothers and sisters in the United Auto Workers are 
fighting for increased pay and benefits, and better working 
conditions.
    A strike which I hope is successful and brief. One of the 
things that I recall seeing over and over again are graphs that 
show American gross domestic product shooting upwards. American 
corporate profits, shooting upwards, American CEO pay, shooting 
upwards, American productivity, shooting upwards. You can layer 
graph over graph and see all of those increases.
    And then lagging along the bottom of the chart is wages. 
And I think we're long overdue for a significant secular 
across-the-board upward shift in working wages. We are already 
starting to see it, I think from workforce pressures. Even fast 
food restaurants have to pay more, hiring bonuses, salaries up, 
wherever, all around Rhode Island entry level positions are now 
commanding more pay. And this is going to be, I think, a very 
significant correction, but a very positive correction and a 
very overdue one. And I think there's a good chance that it 
gets led by labor unions. And there's the possibility that this 
United Automobile, Aerospace, and Agricultural Implement 
Workers of America (UAW) effort becomes a sort of catalytic 
moment for corporate America to realize that they've got to pay 
their workers more.
    You cannot have 500 times the salary of your entry level 
employees as a CEO. A thousand times the salary of your entry 
level employees, a CEO, that is not sustainable. And I think 
while there'll be some dislocations as we make that wage 
adjustment upward, we'll come out of that a stronger, fairer, 
and better country.
    So to you, thank you for being here, Mrs. Puentes, and to 
your labor brothers and sisters who are on the line for labor 
workers everywhere, good luck. As I said, may be successful and 
may it be brief. Thank you very much. If anybody has questions 
for the witnesses, the usual rules apply about getting the 
questions in.
    And I'd urge the witnesses to turn answers around quickly 
if you receive questions for the record. And with that, the 
hearing is adjourned. Thank you all very much.
    (Whereupon, at 11:40 a.m., Wednesday, September 20, 2023 
the hearing was adjourned.)

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