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tv   Treasury Secretary and Federal Reserve Chair Testify on CARES Act Oversight  CSPAN  December 1, 2021 1:02am-3:38am EST

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[inaudible conversations]
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committee banking housing and urban affairs will come to order.r. today's hearing is in the highbred format witnesses or in person members have the option to appear in person are virtually for those joining remotely a few reminders once you start speaking there will be a slight delay before yours featured please click the mute button to minimize background noise all of you have been through this before. our speaking order will be as usual by seniority of those who checked in before the gavel came down either in anperson or virtually and they seniority of members arriving later alternate between republicans and democrats. last week many americans sat down to celebrate thanksgiving and i start with taking a moment to think the workers made that possible farmworkers grocery store workers
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autoworkers delivery workers and longshore workers and so many others who touch our lives. so the treasury secretary should always keep in mind of the biden/harris administration the economy is bouncing back getting strongerst every day and the unemployment has dropped weekly unemployment claims dropped 200,000 last week the lowest level not just since the pandemic began by and over 50 years since 1969. of course the jobs numbers alone until the whole story or how good the job is or the wage that it pays and on that front is even better workers are starting to get more power in our economy. lasher corporations call their workers essential than many
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turned and cut hazard pay if they offered it at all and cut corners on safety to make sure the profits didn't take a hit. that were stay laid off loyal employees in the midst of a public health crisis they cannot make those record profits without someone to do the work. today american workers are demanding what they have earned. after years of stagnant wages and no control over their schedules and for each other and asking for their fair share of the profits. uaw one better pay and retirement benefits after a five week strike at john deere. it was good for nonunion employees which is typical forget about the near pay. corporations cut cost even when they are already plenty profitable. executives reward themselves
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with stock buybacks and then to afford lower prices. and those thatan inflation fears of wall street banks to manage to making record profits. that is the biggest us company shot above $3 trillion this year and now just starting to get back on their feet and other passed a higher cost than cut into the already large profits. to rethink the old system to bring down cost for families the biggest cost in many cases decades housing healthcare prescription drugs and the
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democratic agenda will bring down these cost and the american rescue plan to put shots in arms and money and pockets including the child tax credit the largest tax cuts for working families ever so millions of families can keep up with the cost of living 90 percent of families in pittsburgh and cleveland and toledo and ohio those that are getting at least a $3000 tax cut. we passed the bipartisan infrastructure bill to revitalize manufacturing here in the us to secure supply chains to create millions of good jobs in two weeks ago the house passed build backlp better and other household costs and extend the child tax credit now the senate must act the ongoing pandemic has long-standing weaknesses and
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secretary ellen keeping and i on this and the faster we willea see these disruptions the already see some progress the bipartisan infrastructure plan helps to speed up the supply chain in the long run asking the resiliency act to be sure and strengthen us supply chains also a simple are short-term fix available corporations could lower their prices executives could get a slightly smalleral pay bump and they could be put on hold instead of raising cost for customers that so they face take asm slightly smaller pay bump instead of raising cost
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for t consumers there is no inexorable lot and those that continue to rise and perpetuity corporations can get away with it. we know this and they have too much power in our economy that makes it all the more vital to pull back and empowering workers and those that are fully and those that are significantly making job gains as they take on full-time that is increasingly unacceptable and those that were full employment so those who
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benefit of the growth from wall street greed instead of doing wall street's bidding the treasury department and this congress we all need to support the institution that work at serving their neighbors to contribute to the economy that means the path to homeownership and institutions and to make sure that workers have power in their economy sharing in the prosperity they create. corporations and their allies and there's a whole lot of them want you to believe we have to cheat choose between high wages and low prices that is a false choice and then you can afford the things you need to live childcare and healthcare and education and go she's our economy can be a reflection of those from all
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walks of life from every corner of the country president biden announced to read nominate chairman powell from the federal reserve to help lead the economy to the pandemic and work with both of them in the next federal reserve nominees to reflect the diversity with gender ander race with a diversity of our country look forward to hear how they plan w to rebuild the economy to work for everyone. >> thank you. chairman powell congratulations on your nomination. i like forward to supporting syour confirmation chairman powell acted swiftly and with the sensible regulatory reforms to have regulatory growth look at the last two
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years the economy with the real world stress test during the worst days of the pandemic. we came out with the best capitalize banking system in american history why support chairman powell's nomination i am concerned who posit - - the president may nominate others on the hood they have nominated so far just considering the radical nominee as the comptroller of the currency the top banking regulator they are to have exceptional qualifications and the appreciation for the feds narrow statutory role on monetary policy and banking we need fed nominees who are focused not on social policy that rather the amount of inflation we are experiencing a 31 year high the consumer price index increased year-over-year with
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the cost of a thanksgiving meal which rose 14 percent over last year to the pond where gas has reached as high as six dollars a gallon in some places. inflation that is eroding the paycheck every day even though wagesks are growing inflation is growing faster and that causes workers to fall further and further behind. i worry about the works wonders the risks of higher inflation since january the fed has decidedy, to continue emergency policy adding fuel long after that economic emergency has passed. quantitative easing should be emin emergencies only and we are well past thepp need for such support our economy took a nosedive a by the third quarter 2020 it is largely recovered in
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november 2021 but the fed is still buying more than $100 billion of bondsth each month the fed started to taper a year ago but instead it will buy the bonds through next june and the interest rates which arere near zero it is still a wait-and-see approach i am wed see relieved the chairman has spoken about the heightened risk and those to control it and unfortunately the biden administration and her democratic colleagues are not willing to do their part to limit inflation and said they exacerbate the problem and then blame inflation on that companies they were leaving money on the table and then thought to raise prices this is the fifth that congressional politics are contributing for the price
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hikes take energy prices kicking off the presidency by taking measures to curb the nation energy supply to terminate construction of the keystone pipeline placed the indefinite ban on new oil and gas lease on federal land and meanwhile administration propped up demand for energy with the march 2211.$9 trillion stimulus bill it's no wonder that americans are seeing skyrocketing energy prices when you decrease supply and then subsidize demand prices go up its basic economics unfortunately the administration has not learned his lesson is so pushing a multi- trillion dollar tax and spend plan to contribute to more inflation and damage our economy. a massive expansion of the welfare state and it will partially be paid for with a large tax increase hurting american families making it a less competitive place to do
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business the intent is to transform the relationship between the federal government and the middle class and about socializing many ordinary responsibilities middle income families have assumed including free preschool free paid leave democrats are attempting to hide the enormity and according to the nonpartisan model the house versionbi will cost four.$6 trillion over ten years if the bills temporary provisions are made permanent as senator manchin hashe noted democrats are using shell games to hide the true cost i hope they will reconsider with their misguided efforts to double down on the reckless spending. >> thank you senator i will introduce today's witnesses
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hearing from treasury secretary ellen federal chair and the agencies continued to build a resilient economy working for all americans thank you for your service and congratulations again andou thank you for your testimony today. >> . >> chairman brown and ranking member to me and members of the committee it is a pleasure to testify today november has been a significant month for the economy and it is a large part part of the reason why so the networks for many years. and i'm grateful on the night of november 5th members of both parties came together to
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pass the largest infrastructure package in american history. november 5th was a consequential day because earlier that morning we received a verybs favorable jobs report, 531,000 jobs never wise to make one piece of economic data but in this case it was in addition to the mounting body of evidence pointing to a clear conclusion of an economic recovery is on track averaging half a million new jobs since january and gdp exceeds the pre- pandemic levels. our unemployment rate is at the lowest level since the start of the pandemic and our economy is on pace to reach full employment two years faster than the cbo had estimated.
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of course the progress of our economy can't be separated from our partners against the pandemicre and that we are all following the news of the am a crimere - - all micron variant but what remains true is the best protection againsts the virus is the vaccine. people should get vaccinated and get boosted. at this point i'm confident our recovery remains strong and it is quite remarkable when put into context we should not forget last winter the risk was going to slip into a prolonged recession. so millions more people cannot find a job or losing the roof over their head it is clear what has separated us from
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that counterfactual are those measures congress has enacted of the c.a.r.e.s. act and then the american rescue plan act but their effective implementation. treasury as you know the path administering the relief fund provided by congress andde under those bills during the last quarterly hearing and then on other measures. first, the american rescue plan expanded child tax credit to be sent out every month since july was $77 billion
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meanwhile the emergency rental assistance program has significantly expanded those that need assistance over 2 million households it helps keep eviction rates above pre- pandemic levels this month we released guidelines for the $10 billion state small business credit initiative program and that would provide targeted branding and investments to help small businesses go —- growing create well-paying jobs as consequential as it was
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december promises to be more so. facing congress in very different directions the first is the debt limit. i cannot overstate how critical it is but if we do not we will eviscerate the current recovery. and then as critical payments are social security checks and military paychecks to not reach their bank accounts and that would likely be followed by a deep recession. also the build back better agenda i applaud the house and i am hopeful that the senate will soon follow.
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and then for example and the child care crisis in this country letting parents return to work these investments will lead to a gdp in the long-term with increasing the national debt and then the offsets those over time and that america will recover from the pandemic and now with this bill we have the chance to ensure america thrives in the post pandemic world were happy to take your questions. >> thank you for joining us. >> thank you for the opportunity to testify today. the economy has continued to strengthen those restraining previously rapid growth in
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business spending two intensifies light on —- supply chain disruptions keepingob people from returning to work are looking for a job. and those that continue to support the demand. recent data suggest the post- september decline in cases corresponded to a pickupck an economic growth and gdp appears on track to grow 5 percent in at the fastest pace in many years. as with overall economic activity conditions in the labor market continuedav to improve the delta variant contributed to slower job growth as factors related to the pandemic such as caregiving needs and fears of the virus cap some people out of the labor force despite the strong demand for workers october side job growth of 530,000 and the unemployment rate fell at four.6 percent
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indicating a rebound in the pace of the labor market improvement there is still ground to cover for labor force participation we expect congress on —- progress to continue it has not fallen equally and then with that joblessness continue to fall disproportionately on african-americans. and pandemic related supply and demand imbalance has contributed to notable price increase. and those that make it difficult for producers to me as strong demand and then also push inflation upward running well above the goal with the price index up 5 percent of the 12 months ending october most forecasters that will
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move down significantly as supply and demand imbalances it is difficult with the supply constraints that now appears the factor pushes inflation upward well into nextxt year. in addition with the rapid improvement of the labor market it is diminishing and wages rising at a brisk pace. we understand how inflation imposes significant burdens especially on those less able to meet the higher cost of essentials like food and housing and transportation. we are committed to the price stability goal and use tools to support the economy and a strong labor market to prevent higher inflation to become entrenched. the recent rise of covid-19 cases and the emergence of the omicron variant poses downside economic activity and increased uncertainty for inflation.
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greater concerns of the virus could reduce the willingness to work in person which would slowif progress in the labor market to intensify supply chain disruption but to conclude we understand actions affect businesses across the country everything we do iss in service to our public mission and the federal do everything we can topp support a full recovery with their price stability goal. thank you very much. >> so on the debt ceiling we have two more weeks is a her families and small businesses. i want to ask you about something else the walle street journal reported two weeks ago with those larger profit margins in 2021 than 2019 before covid-19. the top ceos made 351 times the income a typical worker made even during the ongoing
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pandemic facing the supply chain issues they refused to cut their profits. and then also getting themselves raises four years without impacting and those that everything else for most workers has been rising for years. secretary young and you said the bipartisan infrastructure bill and build back better will bring the cost down for most americans can you explain that? >> yes. that build back better plan contains support for households to help address the most burdens sound and rapidly rising costs that they face.un for example the cost of childcare which is virtually unaffordable for many american families. there is subsidies for quality
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childcare to bring down the cost for the great majority of american families. universal pre- k for three and four -year-olds and the child tax credit. all of that will bring down the cost of childcare and for families that are facing crushing burdens for example with very high rental costs in many areas and the additional money to get to the child tax credit will help them keep the roof over their families heads and as i indicated in my opening remarks is alreadyfo helping them put food on the table.ab with respect to cost of caring
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for the elderly the build back better has support for those who are disabled and the elderly and subsidies an increase of the tell grant. and money forti education and workforce training that will make it more affordable these are the most burdensome items. >> but then.
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>> i would say it this way. generally the higher prices we are seeing are related to the supply and demand imbalances that can be traced directly back toan the pandemic and the reopening of the economy but it is also the case for price increases have spread more broadly in the last few months across the economy and the risk of higher inflation has increased. >> the dollar is controlled by the american people stable coins with issue after issue we have tech firms put ahead of the public interest with our privacy and competition. is it risky to let control of
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our many fall to the hands of these companies? >> i believe stable coins can result in some greater efficiencies and the payment system and could contribute to easier and more efficient payments but only if they are adequately regulated. and the presidents working group that i chair recently issued a report indicating that there are significant risk associated with these currencies with risks to the payment system and risks related to the concentration of economic power and called upon congress to put in place for the stable coins a regulatory framework that would make them safe and with
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those similar services such as banks. >> chairman power do you agree with that? >> yes i do. >> it is important to look at historical perspective and in the early 2000 and the over-the-counter derivatives and those push to say a cloud of illta legal uncertainty with the regulations that they could discourage innovation thand growth later that thinking lobby argued subprime mortgages with a decreased borrower choice and reduce access to capital the financial crisis inquiry
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commission cited derivatives in the subprime mortgage as a factor in the crisis and it looks again like the financial industry uses the same argument for stable coins and decentralized finance platforms all of this on the itcommittee and both parties should understand historical parallel and should listen to the bipartisan panel. >> thank you mr. chairman since the top of the debt ceiling came off let me remind us of what we know well that are democratic colleagues can raise the debt limit all by themselves anytime they want and there's nothing republicans could do to stop them the tools have been available to them all year long and in fact republicans have offered to expedite the process. there's only one reason or democratic colleagues use
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reconciliation for the debt i limit because they have to specify the amount of debt they want to inflict on the american economy they want to avoid accountability for this terrible spending spree by obfuscating and not specifying a dollar amount we should be very clear what is going on. mr. powell under the targeting it remainsns at 2 percent nowim it's an average over that unspecified timeframe. the fed preferred inflation metric is 2 percent over the past five years nearly 3 percent of the past two years it's above target and then to have that emergency monetaryoo policy it looks like the framework is a weakening of the fence commitment and i know you believe this is transitory but everything is transitory how long does
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inflation have to run above your target before the fed decides maybe it is not so transitory? it has now been met as a test inflation has run well above 2 percent if you look back a few years it averages 2 percent so i think we can say that was not the case going into this episode many years since we had inflation at 2 percent. so the word transitory has different meanings to different people and for many it carries a sense of short-lived and we use it to mean it won't leave a permanent mark in form of higher inflation is probably a good time to retire that to explain clearly what we mean.
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>> it still strikes me as extraordinary that the economy is long past with expansion we have record high asset prices and housing is leading the way where many houses are just unaffordable but yet the federal purchase $35 million of mortgage-backed securities in december alone and scheduled to continue to purchase mortgage-backed securities for months on end of ithe strongly urge you to reconsider the pace of the tapering. i want to follow up on those points of the presidents working group they were defined the stable coins designed to maintain a stable value to a fiat currency and have the potential to be used as a that covers every major
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stable claim that exist right now and it is perplexing the working group that all the required to be issued by depository institutions only but yet as you know the mechanisms by which the value of the stable coin is maintained they vary significantly. some look like depository institutions others of like money market accounts others look like something wholly new. linus they all be regulated the same way and treated as depository institutions? >> they all have the potential to be used as a means of payment regardless of how they are used when they are introduced and the structure
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that they espoused and adhere to is that they have a stable value relative to a fiat currency that is really what depository institutions guarantee. >> i would suggest we just think this through the fundamentally different design suggest there might be different regulatory approaches. i'm going to run out of time but pillar one of the biden administration international tax agreement would bee the most significant change in 100 years but to implement that every one of the bilateral tax treaties would need to be modified there is no historical precedent for bypassing the senate treaty seprocess. i ask you to acknowledge the administration would need to come to the senate for treaty
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approval and responded the treasury has yet to determine if it would be needed or not and implementing color wine would require modifications to the existing tax treaties and those must be approved by two thirds of the senate the executive branch cannot ignore the senate that is our constitutional responsibility thank you mr. chairman. >> thank you mr. chairman and thank you to secretary ellen for being for being our guest speaker last week and i learned something there i always do she is the only person it has been chairman of the presidents council of economic advisers chairman of the federal reserve and secretary of treasury thank you madame secretary let me stand my congratulations to your appointment to the
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federal reserve. we have seen as we study job growth but the labor participation rate remains depressed. andwe until we get that participation rate up higher we will have the complaint of the inability for workers and then. >> and what is the causes of the participation rate and how rectify those? expected to raise surprising dropping six.5 percent participation hasn moved up /1sideways which is surprising when unemployment insurancebe
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and schools reopened and vaccination we all thought there would be a significant increase of labor supply and it hasn't happened then you ask why there is tremendous uncertainty but a big part of that is clearly linked to the ongoing pandemic they are reluctant to go backnt to work order to leave their caregiving responsibilities because schools may be closing so it is an issue and it will take longer to get labor force participation back were not going back to the same economy. and really labor force participation is a lagging indicator and we are on track to have that happen so that means to get back to the great labor market to see a long expansion and then have price stability and the risk of high
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inflation is a major risk to getting back to such a labor market. >> . >> madame secretary thank you for maximizing your flexibility of the emerging rental assistance program that has been very helpful to get the returns and in one area it's very difficult and that is a homeless population can you look at and try to develop the guidelines to emphasize how funds can be used for homelessness
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pushing for support of a $2 trillion social spending package and that even excepts the gimmicks that it hides real cost that could be several trillion more in spending over the next ten years. most of that spending does nothing to ameliorate the problems of rising inflation
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you will simply add fuel to the inflation fire i am very concerned the administration is not taking the threat seriously and with i energy prices and acting regulatory policies that are threat do you agree inflation is a serious threat to our economy and how do you intend to address patient? - - inflation? >> it has grown but my baseline expectation is still that will move back down over the course of next year closer to the target but i think what you have seen is our policy adapt and it will continue to adapt we will use our tools to make sure higher inflation does not become entrenched.
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>> i noted in your opening statement you indicated inflation pressures i will linger well into next year. you stand by that? >> yes. we can now seer certainly to the middle of next year with the expectation we are forecasting it is not a perfect art. but yes into the middle of next year that that is the expectation of what has happened it has been pushed out repeatedly as supply-side problems have not improved. >> if congress would pass another 2 trillion in spending mixed with an increase of taxes with that add to inflationary pressures. >> just now we have a long-standing policy of not commenting on active, legislation.
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>> you indicated there would be a report by the fed on the discussion paper with digital currencies and that has been endelayed several times are the reasons foror that delay? >> i think very soon in the coming weeks just trying to get it right and find the time to get it right as you know. >> thank you mr. chairman and it's good to see you secretary ellen and congratulations chair powell on your reappointment. actually think the feds activities during the pandemic with those aggressive bond purchases could've been a complete economic meltdown and
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molly did spend in excess of $5 million mostly in an extraordinary bipartisan way with president trump and president biden think history will teach those actions but it will be well-regarded for the world economy but as you have indicated we see the economy come back ways on the build back better but i have seen since the fomc meeting that the fed signaled a shift to move back from the very aggressive use and announce the tapering of thosetr bond
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purchases as the economy continues to strengthen. which factors most influence that decision and how long do you think it will take the fed to wind down these purchases quick. >> we have not madeha a decision that the most recent data particularly since the november fomc meeting shows elevated inflation pressures with that labor supply and also strong spending that signals significant growth in the coming months remember that every dollar ofdo asset purchase as accommodation to the economy that at this point it is very strong and inflationary pressures are high and then to consider wrapping up the paper of our forces which we announced at the november meeting a few months sooner.
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and i suspect we will discuss that in a couple of weeks between now and then we will see how the labor market report and get a sense of the new covid variant before we make that decision. >> clearly i was surprised you were surprised coming back in september that we did not see more folks we enter the labor force. i believe that tapering and accelerating serves as an insurance policy if you see these potential overheating of the economy and hoping he was more aggressively that also looking at the new variance with covid, what factors we
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have to maintain is obviously congress move very quickly under president trump and secretary mnuchin with thehe onset of covid hopefully they don't have to come back. but with the new variance coming on board what are the markers you are looking at two determine how that might influencegh that activity? >> at this point we are all looking at the same thing was certainly not one of those that i talk to them but it's about transmissibility the ability of the existing vaccines to address any new variant and we don't know what i am told by experts me will know quite a bit about those answers within one month but only then can we make an assessment of the impact on
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the economy. for now it is a risk to the baseline it's not bakeded into the forecast. >> i'm down to the last 20 seconds i will raise the issue i always raised was secretary ellen and chairman powell that the very smart action that took place with president trump on investment with minority depository institutions and then to make that investment and now you are implementing that we've seen a great rate for the program with the chair wind with a low and moderate income individuals. with this demand exceeding what else can we do to shore up these institutions maybe we
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can take this for the record how we can look at securitization so we can increasese liquidity. thinking mr. chairman. >> we would be glad to work with you to discuss possibilities. i think the infusion of funds is historic and will make a tremendous difference to the ability to support businesses particularly in minority areas we have seen a huge take up of the funds that are provided and then working through applications and try to make decisions on investments
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shortly but itti shows it is a program that has the potential to make an enormous difference to the landingwe we are happy to work with you to be more effective. >> you can just say yes you will work with me. >> yes i will work with you. >> thank you mr. chairman. first of all chairman powell, congratulations on your renomination and you look forward to supporting your nomination you provided stability during a challenging time. secretary on it's good to see you once again thank you for your service to our country i asked to when you would say enough is enough when it comes to the debt and deficit that you acknowledged it becomes an issue when it exceeds 100 percent of gdp a level we have already had but you also
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said since the cost of servicing our debt has been negative our debt has been less burdensome however due to skyrocketing inflation i think it's a matter of time before we have the interest rate environment. to start sounding some alarm bells with regard to the financing of our national debt? sec. yellen: i wouldn't want to sound alarm bells. i think we are in a sustainable debt path, but president biden was very clear when he proposed the build back better plan that it should be fully financed as the infrastructure bill was, and that is what see po found that the fiscal plans -- that cpo
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found that the fiscal plans put forth in infrastructure and build back better will not worsen the debt or deficit path and indeed by the end of the 10 year horizon, build back better lowers deficits and yields very great benefits, beyond the 10 year horizon, particularly from the investment in the irs to enhance its ability to close the tax gap and collect revenues that are due under our tax code. it is the fiscally responsible plan that makes matters better rather than worse. sen. rounds: the reason for my question is, and it is not just a matter of whether we have a half trillion dollars that will have to be financed or more during a 10 year time period as the money comes back in her programs that are four to five years in duration under the
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proposal, but rather, we have 29 trillion plus dollars that will not only be refinanced during that time period, may very well be financed at a higher rate. treasuries right now have run anywhere from 1.54 to 1.24%, but they are going to trend upwards and there are people who will suggest that treasuries may hit 3.5% over the next 18 months. do you think that would be a reasonable expectation? sec. yellen: the the forecasts t were included most recently in the midsession review assumed that interest rates would move up over time over the 10 year horizon in line with the forecasts of blue-chip and other private-sector sector forecasters and even then, given
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the expectation that real interest rates are likely to remain low, low levels that prevailed for important structural reasons that we've seen plentiful savings at the global level and week investment demand. even with interest rates moving up, the interest burden of the debt remains quite manageable. there are scenarios in which interest rates could move up more than that and we could be in a position, there is a chance the interest burden could be difficult for us to manage. i believe we could have the capacity. sen. rounds: chairman powell, i recognize you've been consistent , you manage based upon your
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direction which is full unemployment and a 2% interest rate goal. does the fed take into account the impact on national debt servicing when it considers interest rate decisions? chrm. powell: certainly the cost of programs, it all goes into our model. you mentioned credit risk, there isn't any credit risk baked into treasuries at this time and i wouldn't expect that there would be certainly in the foreseeable future. sen. rounds: when you look at this, do you project the treasuries will rise over the next 18 months? chrm. powell: generally that is something that staff has been forecasting ever since i got to the fed 10 years ago and it really hasn't happened. as the secretary mentioned you have a global -- a series of long-running global forces that
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are leading to lower sustained interest rates. how long will they last? it is hard to say. for now we have lower inflation trends. currently at the moment we have high inflation. the markets are baking in a return to lower inflation. sen. rounds: thank you. mr. chairman, thank you for your time and thank you for your answers. >> one of the central pillars of the house passed version of the build back better act as an expanded childcare support program that would provide direct working families. madam secretary, would expanding access to childcare services improve the labor force participation rate and overall economic outcomes among women? sec. yellen: senator, i believe
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that it will succeed in having that impact. one of the reasons the labor force participation especially of women in the united states is now lower than that in many developed countries once upon a time we were the leader. now we have fallen behind in the major difference between the united states and on -- other developed countries is our support for child care, paid leave, things that enable women to participate in the labor markets. so i believe the provisions, the subsidies for child care and the universal two years pre-k, both of those things i believe will enhance labor force participation. there are a number of studies that show that the treasury office of economic policy
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recently issued a paper that summarized some of the evidence and recently the congressional budget office in assessing build back better issued a statement that indicated this was likely to boost labor force participation. sen. menendez: i agree. one study suggests the rising cost of childcare resulted in an estimated third team percent decline in the unemployment of mothers of children of the age of five. another study found one major city started offering two years of free public preschool, the percentage of young mothers displayed in the labor force increased by 10% so you have real life realities of that. one of the things that i'm looking forward to and this is the effect on minorities -- on minority families. a study from october and the
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washington post, black men and women are twice as likely as their white peers to report they are unable to look for work. there is evidence here that the currently broken childcare system is especially harmful particularly to the most vulnerable members of society. i sent you a letter along with chairman brown and several of our senate colleagues asking if you work -- to work closely with search committees to find and select diverse candidates for the open presidents position. we haven't had as hispanic in this role. can you give us an update on how that search is going. including the steps. >> those searches are just getting going. the higher headhunters and i know the process well.
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it will involve extensive outreach. and openness to different kinds of candidates and it is essential that we believe diverse candidates identify and be given every chance to do well and win those processes. i can take you through the details of it. it is something we are pretty committed to. sen. menendez: i would like to see that. the fed has a serious diversity problem, particularly at the leadership level. a lack of minority representation hurts the ability to do its job. it is a stent -- essential the fed has in place individuals that understand how an uneven recovery will impact the minority community. i look at this as the beginning as i hope it relates to diversity.
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i hope we will have a successful result. i understand the process that includes good qualified candidates i hope it will lead to successful result. let me turn to you on the same question. how have you empowered the treasuries first counselor for racial equity to diversify the treasury department, something i've raised with you several times. i like to understand what the goals were, what are the immediate goals. sec. yellen: she is empowered to review and look for ways to enhance not only our internal hiring and diversity efforts, but also to review the programs we have whether it's the
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emergency programs by the arp or tax codes and the way it's administered more broadly. we faster to undertake a review of ways in which these programs can be changed. they may have unintended negative consequences on diversity or on minority communities. we are asking to look for ways to improve what we do with internally in treasury and with respect to the many programs we conduct. sen. menendez: thank you mr. chairman. >> senator tillis is recognized from his office perhaps. he may have turned his camera off. senator kennedy is recognized.
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sen. kennedy: mr. chairman want to start with you. i understand owen is clairvoyant , but i think it's fair to say the experts who have been advising you about the future rate of inflation have pre-much the same credibility. the late-night psychic hotlines you see on tv. is the fed considering increasing the pace of its tapering. it is ravaging our people.
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chrm. powell: what we missed about inflation was we didn't predict the supply-side problems and those are highly unusual and very nonlinear and it's really hard to predict these things. that's why all the professional forecasters had much lower inflation projections. you ask about the taper. as i mentioned earlier since the last meeting we've seen basically elevated pressures. we've seen labor market data without improvement in labor supply. i've seen strong spending data. remembering every dollar of asset purchases does increase accommodation. we now look at an economy that's very strong and inflationary pressures that are high. that means it's appropriate i think for us to discuss in our next meeting whether it will be
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appropriate to wrap up our purchases if you munch -- a few months earlier. in those two weeks we will get more data. sen. kennedy: thank you. madam secretary, you and i do not agree on everything, but i have great respect for your intellect and experience. and i understand you have a job to do. i would be remiss if i did not point out that in my opinion, there is no fair-minded person in the milky way who believes the infrastructure bill and build back better bill are not going to require the american people to incur substantial debt. and here's my question. and i'm looking for a number.
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how much in the biden administration's opinion is too much debt? at what point as you incur debt will the biden administration say ok that is it. we can borrow anymore or it's going to hurt the american people. sec. yellen: first of all i want to say that i disagree your assessment of build back better. it is fully paid for, or even more than fully paid for in cbo completed a comprehensive review of it in which they found essentially the same thing and i believe it was important that it be fully paid for. i think no single metric is appropriate for evaluating
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whether or not the level of debt in an economy is reasonable and sustainable. we used two -- we are use to or looking at debt to gdp ratios and using those kinds of metrics and looking around the world, many economists have found the debt to gdp ratios of 100 or more tend to be associated with significant problems. sen. kennedy: are we had 100 and more? sec. yellen: we are, but we are in different times and that's why it's important to recognize there is no single metric that is right especially in the world a very low interest rates. it is appropriate to look at the burden of that debt on society which is better measured by real interest burden of the debt and that is exceptionally low. negative currently, but when
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interest rates normalize. sen. kennedy: let me ask you this. you gave a great speech in september of 2019, it was an interview and i ordered a copy at the time. you said -- i thought this was such a wise statement. you said the former fed chair said she is not worried about the debt to gross to mastic product ratio in the united states right now but added i'm worried about the trajectory of where it is going. it is not stable. we are not living within our means right now. debt is going to escalate and that will create problems down the road. but most important is the demographic way the lies ahead of us will essentially over the
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next 30 years double spending on social security, medicare, medicaid as a share of gdp. because of the aging population and on the health care side medical expenses, of things put us on a trajectory of a completely sustainable path. it's $29 trillion now. you're going to add three more with build back better. why is that not true today? sec. yellen: i want to repeat again build back better is fully paid for and will not add to the debt or deficit. sen. kennedy: you and i just don't agree on that. sec. yellen: cbo certainly agrees with what i said. i think we do have problems eventually in financing medicare and social security, which need to be addressed. sen. kennedy: thank you mr. chairman.
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>> senator van hollen is recognized. >> thanks both of you for your service and chairman powell, congratulations. secretary yellen i want to pick up where you left off. i remember three years ago with this committee and the budget committee talking about the republican tax breaks for big corporations. at that time the congressional budget office did assess that it would add to trillion dollars to the deficit, is that not true? sec. yellen: that is my recollection that that was the kind of number they gave. sen. van hollen: it is interesting to hear so many of my colleagues from three years ago didn't give a dam about adding $2 trillion to the debt now talking about the build back better bill which as you said, does not add to the debt at the end of the 10 years.
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the congressional budget office its analysis. one of the ways it does not add to the debt is that we close some of those big tax breaks for multinational corporations who like to park their profits in tax havens and we got rid of some of the incentives and that bill which encouraged u.s. companies to ship jobs and equipment overseas, isn't that the case? sec. yellen: that is the case. sen. van hollen: can you talk about your efforts to establish a 15% global minimum rate in order to prevent the race to the bottom? sec. yellen: for decades what we have seen is the countries have been engaged in a race to try and attract more multinational firms to do business in their countries by cutting corporate tax rates. if you look at the pattern across the globe, you see the corporate tax rates have simply
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been trending down. the consequence of that is corporations have paid less and less tax in the united states and elsewhere. and countries like the united states and other countries are raising less and less money through taxation on corporations. united states corporate taxes will fall into around 1% of gdp as a consequence of this. this international tax agreement that's been endorsed by a think 137 countries who have agreed to hold hands and say enough is enough, we need to raise taxes to support infrastructure spending, to support investment in people and make our economies productive to grow over time.
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corporations that are profitable and successful need to pay their fair share. so we want to be able to tax companies at a reasonable rate and to stop this race to the bottom and that is what the 15% global minimum achieves. from our point of view, we are the only country right now that has a global minimum tax. it is half of what companies that operate only in the united states or multinationals pay on their u.s. income. that big differential really encourages multinational companies based in the u.s. to issue their profits abroad. by raising our own rate from 10.5 to 15, we narrow that differential with just purely
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domestic firms, right now on an unfair playing field versus multinationals. they can ship their activities abroad. the global agreement boosts competitive. sen. van hollen: i think it makes common sense and it's important for u.s. businesses. there's is also a provision in the bill that's us folks who are making $10 million every year should pay little bit more in taxes. i think that makes sense. you mentioned some of the items you would invest those in braid is fully paid for. including lowering childcare costs, say no family should pay more than 8% on childcare costs. there's also as you mentioned the provision with respect to the child tax credit. this is one of the largest tax cuts for middle and lower income
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families ever, is it not? we are talking about $3600 per year per child, per family which will expire on december 31 we do not extended as part of the build back better legislation. so we are talking about losing corporate tax loopholes, asking folks to make more than $10 million a year to pay a bit more so we can lower the cost and it's all paid for. sec. yellen: that is correct. sen. van hollen: thank you madam secretary and mr. chairman. >> senator tillis is recognized. >> thank you for being here. chair powell i am glad to see your nomination is been sent forth. this may be a legitimate yes or no question. do you all both agree congress needs to provide a solution to affect or transfer for legacy
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contracts with option allen moving forward? chrm. powell: yes. sec. yellen: yes. sen. tillis: chair powell, i want to make sure i understand your perspective on inflation and how it is calculated by the fed. the federal government provide subsidies to every american renter so their out-of-pocket rent was the same as it was 12 months ago even though the sticker price on the rental unit has gone up. would that mean the fed would say no to inflation of rents? chrm. powell: i'm not sure exactly how to collect the data but the question would be what is the landlord receiving would be my guess. sen. tillis: the landlord is receiving more in spite of the
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fact the rent payment would've been subsidized. chrm. powell: i will come back to you, i don't know the answer on that. sen. tillis: secretary yellen, what would be your position? sec. yellen: i would agree with chair powell's comments. sen. tillis: it would be interesting to get that. we were going to use another example. if we subsidize the cost of the turkey, is the turkey cheaper or is it 14% more expensive. i have another question for you chair powell. we had the original covid virus, we have had delta, we've had some variance that have not been designated as a variant of concern. we have the omicron now which is being viewed as a variant of concern and after that we will have maybe a pi variant. i'm a bit worried the administration has a policy of zeroing out covid, that the goal
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here is to remove a virus that's likely to be around for as long as we are alive. but i feel like we are still in this mode where monetary policy or fed policy is heavily instructed by the risk of another onslaught of the virus. we took the first wave, now we are dealing with subsequent waves. at what point do we get back to a more normal execution of fed policy that is not influenced by may the next threat as if it is suggesting we are going back to where we were last year. i don't think most people think we would treat a variant the way we had to treat this new virus that's among us. what way do we get away from c -- seeing the market and fed appear to react and implement policies the looks more like what we had to do last year with
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something new affecting our economy? chrm. powell: we are not thinking and i am not thinking the effect on the economy will be remotely comparable what happened -- with what happened last march. we have tried to adapt, we are focused on maximum employment and price stability. we try to adapt our policy as we move along. part of the world, we are going to see this disease being around for probably a long time. the economic effects will diminish. we will have our ability to understand this but we are not at all thinking we haven't made progress on the economy. sen. tillis: i think it would be helpful for the administration to may be be more specific to the american people and to understand the covid is going to be among us. it's a new virus that's going to be here and we have to deal with.
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we can have expectations we would react anyway we did last year. now we have to deal with the fact it is among us. first i would like unanimous consent for a washington post fact-check on the economist nobel winners the president biden has cited as the build back better plan actually being non-inflationary. i think if you read further into the letter and hear the comments by those economists they say longer-term it may produce inflation but shorter-term it may increase -- reduce inflation but shorter-term it may increase inflation. i like unanimous consent to submit the fact-check and say secretary yellen i think there are laudable goals and some of what's put in to the build back better plan, but i do not think they are sustainable. i think the way they have been passed out of the house are problematic. i tend to agree with senator kennedy that we have other
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pressing problems, promises we have already made to the american people with respect to medicare, medicaid and social security that our promises we have already made and if we continue to add more and more stressors on our debt and deficit, those will be promises that are broken and once we get on found footing maybe we should consider other ways to help others. >> senator warren for massachusetts is recognized. sen. warren: in the early 2000's the fed stood by and failed to use its authorities to regulate and supervise big banks in this country and the result was a financial crash that costs millions of families their jobs, millions their homes, millions their savings. that's why i believe digital regulation is an essential part of the fed's job. chair powell you recently said it would be appropriate for a
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new person to come in and look at the current state of regulation and supervision and suggests appropriate changes. is that still your position? chrm. powell: yes. sen. warren: the press also reported this is your agreement to defer to the vice chair supervision. i want to ask you a specific example of how that deference would work in practice. if you are confirmed and if the new vice chair for supervision suggests a regulatory actions you disagree with, will you bring that matter for the full federal reserve board for consideration? chrm. powell: let me just say what the law does is it gives the vice chair for supervision the authority to set the regulatory and supervisory agenda. i would expect a perfectly
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normal and good constructive working relationship with the new vice chair of supervision. i would not see myself as stopping those kinds of proposals from reaching the board since the law seems to indicate that's the job. sen. warren: i'm just trying to be clear on your understanding of it. so you would bring it before the full board even if you personally disagreed? chrm. powell: that would be my general intent yes. i can't cover every possible conceivable situation, but yes that is my understanding. it's the only other office that has specific legislative grant is the vice chair for supervision. sen. warren: so you would do it and feel like you were legally bound to do it. chrm. powell: that is how i read the law. sen. warren: if the vice chair for supervision recommends regulatory action with which you disagree such as undoing a rule that the vice chair brought the
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you voted in favor of. what does it mean to defer under such circumstances. i just want to understand your thinking. chrm. powell: i don't think i used the term defer. you mentioned that was a press report. we are a commission structure. the person is not comptroller of the currency where they are the sole voiceprint every vice chair for supervision and those who held the job before it was a formal job have to convince the other members of the board. that's how it works and that's how i would expected to work though and forward. sen. warren: i appreciate that but your specific language was that you would respect that authority which is why many in the press interpreted that to defer and that's why trying to understand what respect that authority means. chrm. powell: i would say a couple of things. respect the authority to bring these proposals.
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a person who arrives nominated by the president and confirmed by this body with particular views i would say that person is entitled to a degree of deference but i would not overstate. they will still have to convince the members of the board to vote for whatever that person is proposing. sen. warren: just one more example. if the person proposed new capital requirements to incorporate banks exposures to climate risk, would you a lot vote for that? chrm. powell: i would have to see what you were specifically talking about. sen. warren: that is very helpful. i appreciate your answers. the last four years will the fed was chipping away at regulations piece by piece, emerging threats to our financial system continues to grow. climate change, climate change is on pace to depress global economic output by as much as
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$23 trillion annually by 2050. the market cap of cryptocurrency market is now $3 trillion, six times bigger than it was just a year ago. explosive growth with the most no regulation and no guard rails to protect investors or the financial system. the crash scenario rights itself. financials to grow bigger by the day. black rock alone manages nearly twice as much money as the entire economy of japan while the fed refuses to declare them basic net -- significant financial institution. the list goes on. this is why a believe the fed must take a much more active role in regulation. failing to do so puts our entire economy at risk thank you mr. chairman print >> senator hagerty of tennessee is
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recognized. >> i appreciate you holding the hearing today. thank you for your testimony. chair powell i want to congratulate you on your recent renomination and look forward to hearing what's coming up. i also appreciate we will be seeing the fed's report of the digital dollar soon. that is not for americans to take a lead. secretary yellen i would like to pose my first question to you. every move president put mistaken so -- president biden is taken so far has improved russia's position. from capitulating on treaties to not only enforcing mandatory sanctions to hold nord stream 2, russia and putin now with leverage vis-a-vis our partners in ukraine they haven't had since the fall of the soviet union. natural gas prices in europe have been soaring and now in
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real time just like watching a fatal car crash in slow motion you're seeing russia build up an unprecedented number of troops on the border of ukraine. secretary yellen i want to make certain you have all the authority you need from congress to deter and if necessary to punish putin if russia invades ukraine. after what happened in 2014 we can be caught flat-footed again. sec. yellen: we do have authority to impose sanctions. we have imposed sanctions and the president signed in i believe it was april and executive order expanding treasuries authority to impose sanctions and we are aware of the buildup and i believe has
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acted with authority to actively move sanctions. sen. hagerty: i'm pleased to hear you have the authorities you need. i'm curious to hear what the biden administration strategy is to stop this train wreck that appears to be happening at the border. sec. yellen: we are very cognizant of what's happening and are involved in discussions with the appropriate set of steps will be. sen. hagerty: with all due respect i hope we can talk much more than discussions about real strategy to send a very strong message to putin. this is the largest buildup we have seen against -- since the fall of the soviet union. they are taking a very aggressive posture and i would encourage you to send a strong message that we will be capable of and you have the authority to
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do what you need to buy civic and the applying financial pressure on that regime. sec. yellen: agreed if that's appropriate. sen. hagerty: i'll turn to another topic we discussed before. we talked about the leak of confidential taxpayer information to pro-public done in early 2021 for political purposes. you testified it is an illegal act that being investigating -- investigated thoroughly. given that testimony, have the leakers been identified? sec. yellen: there are independent agencies oath treasury, the inspector general as well as the fbi and doj that are conducting investigations. we are not privy, nothing has been reported out yet from those investigations that i am aware of.
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i believe those investigations are moving forward. sen. hagerty: i take that as no update. after the scandal the cured -- occurred in 2021, i appreciate the fact there is an investigation underway i would say this, until we have the results in true accountability i cannot imagine how the biden administration encouraging a 10 times increase in the audit capacity of the irs when there. this is the d.c. swamp at its best. sec. yellen: we do not know what the source of the leak of that information was. i would say it is premature to indicate that it came from the irs. sen. hagerty: i think that underscores my case prayed we can even underscore the case. we know it was irs information. there is zero accountability. this is the swamp. my constituents can't condone this aspect of the build back better plan which gives even
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more authority and a tenfold increase in the budget. sec. yellen: we have an enormous tax cap over the next decade its estimated actual tax collections will be 7 trillion below what is due and the irs has been starved of resources over the last decade so that they are not able to conduct meaningful audits of either high income individuals or conflicts -- complex partnerships or corporations and that is where most of the tax gap laws, these are very important resources that are needed to make sure that the wealthiest individuals and corporations, particularly comply with this -- the laws and pay their fair share. sen. hagerty: i would encourage good management here so we make sure those resources are focused
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in the direction they should be rather than attacking conservative groups and ordinary americans. >> senator cortez masto's recognized. >> welcome. chairman powell, congratulations on your renomination. i also want to express my appreciation to the federal reserve staff. and the treasury department paired we have passed over the last couple of years several covid relief packages. they were bipartisan supported. and the money was immediately put out to help our families and businesses. your staff have taken extraordinary effort not only to avoid an economic collapse during this deadly pandemic, but getting billions of dollars in relief and loans to help manage the economy and help families is a tremendous feat and we should
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not forget that. thank you to your staff who work so hard as well. let me talk about something that is impacting my state is the supply chain disruption and i know you are all working on this. president biden announced a plan to address supply chain disruptions. it is clear low vaccination rates, repeated outbreaks and it overreliance on chinese imports for delays and shortages. where has president biden's initiatives have been successful and where are some of the sticking points that might persist past the second half of next year? sec. yellen: president biden, the administration has created a supply chain disruption task force in june and it has been working broadly to identify the places where the white house
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could make a contribution to be effective. i think we are beginning to see progress at the point. as you know, president biden worked with the ports of los angeles and long beach where there have been long delays in unloading ships waiting for many days to be able to offload their containers. they have agreed to remain open 24/7, which they are now doing and also the administration has worked with major retailers that were leaving containers for long periods of time on the docks without picking them up to make sure they can expedite movement of those containers away from the ports.
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in other areas, in savannah, the president has worked to establish locations away from the ports where containers could be brought and moved and deposited to create more room at the docks to keep cargo moving. so there are just a wealth of interventions and working really with private sector. these are private sector participants who are responsible for the supply chain, but bringing together parties we are looking at ways that maybe we could work with states and cities to expedite the licensing commercial drivers license, to raise the supply use of truck
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drivers which are in short supply. a lot of this is related to the pandemic and it comes back to increasing vaccinations, boosters, getting the pandemic under control so that demand pattern shifts back to more normal towards services and away from goods. but there are a wealth of interventions that the white house is involved in. sen. cortez masto: i think there's also a role for congress to continue to support not only the administration, but legislation we could pass to actually help address this as well which is why supply chain resiliency act has been introduced by several of my colleagues. it creates an office of supply chain resiliency at the commerce department charged with monitoring researching and addressing vulnerable supply chains prayed it will provide
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loans, loan guarantees and grants to manufacturers to allow them to address supply chain bottlenecks. we should be paired for this knowing this has happened for the future short-term and long-term. i know my time is up. i will submit the rest of my questions to you for future response as well paid thank you again. >> senator scott from south carolina. sen. scott: thank you for being here with us this morning. i was singing abut a conversation with south carolinians about the consequences of elections. we've heard elections have consequences. perhaps no finer point that elections have consequences is simply losing a single seat in georgia. january 5. the result of one lost seat in georgia may cost taxpayers just this year $5 trillion in
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additional spending. one single seat, $5 trillion in additional spending. $1.9 trillion on a covid relief package that had 1% for vaccines in less than 9% for covid related help. $1.2 trillion for the instructor package with only 10% of that $1.2 trillion going into roads and bridges in the next five years. now we are talking about overheating the economy with another $2 trillion. elections have consequences. it is stunning and what i heard this morning is hard to process back at home in south carolina. what i've heard so far as this administration wants you to believe what they say and not what you see and are experiencing. what you see with your own eyes.
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they say by putting another $2 trillion into the economy it will make things more affordable for you. but what you see and are experiencing is inflation in part caused by trillions of dollars of government spending and the anticipation of even more money. in other words when inflation is over 6% and your wage growth is under 3%, you are buying it -- your buying power is going down, not up and they want you to believe that spending more money is going to solve this problem. south carolinians on a fixed income like social security averaging around $1500 per month , they are spending because of this transitory inflation one third of their social security
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income on putting gas in their cars, heating their houses and fixing up the places they live in. chairman powell, is it your impression the biden administration is a clear understanding that rising prices are hitting people the hardest who are on social security, families struggling paycheck-to-paycheck and single moms? chrm. powell: it is not appropriate for me to comment on what the biden administration thinks. i will say that -- i can talk about what i do. i think that is right. i think if you think about families that are living paycheck-to-paycheck, they are feeling high gas prices. soon enough heating oil prices, food prices, they are certainly feeling that. this is our job, our role is to make sure this higher inflation
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does not become entrenched. sen. scott: i know someone else may address this point, but trying to figure out the complexity of the labor force per dissipation rate. since the pandemic we've had a loss of about 1.7% of the labor force participation. what we sometimes miss is the fact when you have fewer people looking for work the unemployment rate goes down because your long-term unemployment rate goes up which means your labor force on participation rate goes down. let me follow up on the points about expanding the power the irs. and your response. giving the irs more power to catch tax cheats by starting with the irs bank reporting proposal seems -- at best. the original proposal literally said if you are a successful
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lemonade stand operator making $12 a week putting $600 into your checking and savings account would cause that account to be reported to the irs. so than they revamped the proposal to $10,000. if you're making minimum wage working on most full-time, your accounts would then also be transferred or at least available for heightened inspection by the irs. if you are looking to catch complex business partnerships cheating their taxes -- you do not need the irs bank reporting proposal. can you tell the american people where these still support any form of irs bank reporting requirements your department proposed earlier this year? which would provide the irs currently undisclosed taxpayer
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information for the purpose of targeting essentially every single working american admin wage or higher. deal -- do you still support that are not? chrm. powell: i do support -- sec. yellen: i do support that. i think it is important the irs has visibility into income streams and that is an important way of improving tax compliance. it is not -- sen. scott: let me ask you a question. if you're looking to catch tax cheats why would you start something as low as $600 and then revamp it to $10,000? if you're trying to find millionaires and billionaires who are not running lemonade stands and they are certainly not making minimum wage. when you create a new approach to the irs search through our account records and our financial institutions. sec. yellen: it is not searching through any -- sen. scott: to forward our
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information sec. yellen: to the irs. sec. yellen: i'm sorry it is not detailed information. sen. scott: information going to the irs -- aggregated information going to the irs is the scariest proposal and there's no way it has to be anywhere near the threshold that you started with in order to find a way to take accountability for those complex organizations. >> senator scott your time has expired. ♪ if we are going to have it -- sen. scott: if we are going to have a conversation you're going to have a dialogue. >> you've had the dialogue. sec. yellen: we worked to narrow the scope of the reporting and in particular to wage earners and federal beneficiaries. the initial proposal was intended to be comprehensive, the requirement asked for
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exactly two pieces of information, aggregate inflows and aggregate outflows over the course of the year for each account where financial institutions already report interest income earned if it exceeds -- the burden on financial institutions was minimal and there was no attempt to target income earners whose actionable incomes are below $400,000. but the low reporting requirement was meant to make evasion more difficult by opening multiple accounts. >> senator soft from georgia is recognized. >> thank you mr. chairman and thank you to our witnesses. congratulation on your renomination chair powell. the fed is beating to taper it -- beginning to 10 taper its program.
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around $90 billion in december according to the current schedule we've seen created by the fed the asset purchases. chair powell what is the specific economic purposes does this bond buying continue to serve? chrm. powell: we are actually at our next meeting going to have a discussion about accelerating that taper by a few months and in the intermediary we will see more data on inflation on employment and we will see more about the development of the omicron variant. the purpose at the very beginning was all about market function and the purchases did a great job of restoring market function. when we said to continue the program until substantial further progress was made the idea was to support the economy in a way that lower longer-term
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interest rates do. it served that purpose. now the economy is strong and inflationary pressures are high so we are looking to discuss the flexibility of a faster conclusion and wrap up to those purchases. sen. ossoff: with aggregate demand quite strong, demand exceeding supplies on durable goods in certain markets, capital markets are highly liquid. what economic purpose, i am not disputing there is one, but what economic purpose does this continued bond buying serve today in the months to come recognizing as you stated you and your colleagues be reassessing the pace of the taper. chrm. powell: the purpose it has been serving lately for the most part has been supporting economic activity. the point i am making is the need for that has clearly diminished as the economy has
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continued to strengthen as we have seen continue significant inflationary pressures and that's why we are announcing we would taper and it's why we are saying we would discuss somewhat faster taper at our next meeting. sen. ossoff: when future crises arise as they no doubt will, this specific method, quantitative easing, bond purchases beyond typical federal market operations targeting interest rates, what have been the benefits of using this technique? does it not for example while it provides additional liquidity to capital markets worsen inequality by driving up equity and asset valuations and shifting cash to the balance sheets of major financial institutions? chrm. powell: i think the record from this and the last episode is that asset purchases which
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work through much of the same channels as regular interest rate changes, the difference is when you're at the lower boundary you can lower interest rates anymore, what do you do? you can promise to hold rates lower for longer and that will affect rates and then you can actually buy bonds directly which lowers long-term rates. it is part of the toolkit. as long as we will be near the effective lower boundary, asset purchases are part of the toolkit. the equality -- inequality point does not bear up under scrutiny. essentially what's happening is companies are experiencing lower longer-term rates to advance their operations, the longer term debts in our economy will benefit from those longer term rates. supporting economic activity through many of the same channels. i think the idea that these promote inequality is not well
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supported and we never hear about that -- we meet with community groups and communities who never come in and complain about quantitative easing. sen. ossoff: thank you for sharing your point of view. i would like to ask you what you currently assess to be the most significant systemic threats to financial stability in the united states? chrm. powell: i would say the banking system is strong, there are some issues to address in the capital markets but i would not say they rise to the level of grave systemic importance. we always think about cyber risk as being the one that is so difficult to quantify and for which it is hard to have a great playbook. that is the one i tend to lose sleep over. sen. ossoff: thank you chair powell. mr. chairman. >> senator daines of montana is recognized for five minutes.
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>> thank you for being here as well. congratulations chairman powell for your renomination. we spoke last august and congratulations you will have my support. i would like to start by expressing my concern with inflation we are seeing in the economy. my concern with the administration and democratic colleagues continuing to plow ahead with the very reckless tax and spending proposal as if inflation did not exist. back to where we were earlier this year, senator scott made the comments about elections having consequences. the consequences are we have policy outcomes with consequences. even though we had nearly a trillion dollars in unspent covid relief dollars coming in 2021, the democrats march forward with $1.9 trillion purely partisan spending package. this is cash canons shooting
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across the economy. so we created demand by injecting borrowed money in the economy. now the democrats are looking at jamming through this 1.75, $1.8 trillion reckless spending bill. many believe the true cost of that bill is somewhere between $4 trillion and $5 trillion because they played games of truncating these programs to trying get the number under $2 trillion. the point is this. injecting all of this money in the economy at the same time strict supply-side due to mandates or shutdowns, we now have the perfect storm created by the biden administration for inflation. not to mention issues of inflation. seeing a 47% increase in heating costs this winter. the the propers that the democrats
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are -- the proposals that the democrats are trying to ram through will have about $740 billion in deficits over the first five years. secretary yellen, you said it's paid for. i don't think the c.b.o. actually said that. even if you add in the massive tax break they'll be giving to the coastal elites the democrats put in because their donored screamed so loud. it's not fully paid for. the c.b.o. stated that. and giving the i.r.s. $80 billion to hire 80,000 more agents should be chilling. this is a massive expansion of government. it has additional taxes on small businesses that i believe will only exacerbate the inflation fire. it's why so many montanans and americans are experiencing these inflation harms every day. chairman powell, core p.c.e. and
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c.p.i. readings, two main indicators for inflation, jump to 30-year highs of 4.1% and 6.2% respectively. needless to say, we're seeing much higher inflation rates than the fed projected, but, yet, the fed indicated that inflation will come down in the near future. several months ago we were concerned about inflation and probably had a different view of where the inflation forecast was going than the fed had at that time. given that inflation has run hotter than the fed projected, what in hindsight would you say the fed underestimated in the previous forecast? and second, what economic factors have changed to give you confidence in your projection that inflation will come down in the near term? chair powell: so i'd love to blame our models, but it's a
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poor craftsman that blames his tools. i will tell you what all the forecasters missed. it's the same thing. it's the collapse of -- call it just enormous supply side problem with semi conductor chips and lumber and all those things. we saw high demand coming and some high inflation coming. what really happened is this demand hit kind of a hard constrained in the form of these supply constraints. that's not in the model. we live and learn. it's hard to model something that is nonlinear and it is incredibly infrequent. there's no precedent for it. senator daines: i spent 20 years in business. there are two rules. the forecast is always wrong. and further out the forecast the wrong it is. i guess it's true. what have we learned from that? what is adjusted from your model now what has happened in the last six months giving you confidence that the further forecast is accurate?
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chair powell: we have learned a lot how to model, for example, a pandemic. we didn't think much about that. you'll never hear us say we have great confidence in our forecast. what you hear us saying there's tremendous uncertainty around our forecast. and we have been saying that for some time. and also, we said that we do see these inflationary pressures as now being sustained well into next year. we do expect them, though, to subside in the second half of next year. by the way, that is very widely held in the forecasting community which admittedly has much to be humble about. senator daines: do you think about deficits and debt, $2 trillion debt, will that have impact on inflation? chair powell: i don't want to comment on fiscal policy. it's up to you and -- senator daines: do you think the rapid rise in debt is a threat as it relates to inflation? chair powell: i would just say, if i can stay in my role.
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unfunded spending tends to be stimulative, i think, in the short term. it does. i would just say, we do need to return to a more sustainable fiscal path. the timing and the means of doing that are really not up to the fed. senator daines: mr. chairman, i know before i close, i want to quickly touch just other banking -- senator brown: close. you can make a comment. no more questions. we are well over time. senator daines: short comment to make. while montanans are concerned about this, we've seen reports and some of my colleagues on this side of the aisle are concerned about the comptroller. i would oppose this nomination so we can fulfill this important nomination. senator brown: smor test -- senator tester is recognized from his office. senator tester: thank you, mr. chairman. hopefully you can hear me. i want to thank secretary yellen and chairman powell for being on. i think it's interesting,
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though, mr. chairman, before i get to the -- to get to the folks who are prebted, when -- presented, when we gave tax breaks to millionaires there was no talk about debt then. this will turn around the economy. it was going to move forward. the fact is the debt was created by republicans. i think it's a little bit disingenuous to talk about debt when it fits your needs. the fact of the matter is we have a debt problem in this country. we need to work to fix it by giving tax breaks to billionaires is not a way to fix the debt problem. i want to talk about housing for secretary yellen. look, we have housing challenges all over this country. we have particular housing challenges that not a lot of folks are talking about. in indian country and in some of the more rural and frontier
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areas of our state of montana. i believe throughout the country. we've done some stuff for housing, but the truth is, the impact of covid-19, the impact of poverty, particularly the indian country areas, is a big problem. could you give me some indications on how we should be addressing this issue? this is an issue high up on your radar screen as far as something that needs to be done? secretary yellen: i think the issue of affordable housing is one that has plagued our country for many years. it certainly predates the pandemic, but the pandemic really dramatically impacted the income of many, especially low-income workers, that already
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were tremendously challenged by the affordability or lack thereof of housing. so in the short term, the emergency rental assistance, money that was made available, is helping these households but that those funds aren't -- can't be used to solve the longer run problems that we have. but the build back better package, really, that's where the president has proposed policies to address what is really a crisis in housing affordability. and that proposal contains, really, the most ambitious investments in affordable housing production that this country has ever seen. so i'm hopeful that will be
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helpful. the funds that were available -- made available to state and local governments in the a.r.p. can also be used to address longer term problems with respect to housing affordability. senator tester: some of the headlines in the paper today in montana, at least, was that housing inventory has caused an increase in prices. in other words, the inveb ven -- inventory is low, supply is low, it's driving prices up. it's basic economics, really. with build back better, do you see a significant investment in supply for workforce, housing, and affordable housing? secretary yellen: yes, i think it's mainly directed at affordable housing. in total, i think the housing related provisions mount to almost $150 billion. so i think that is substantial support to raise the supply of
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affordable housing in this country. senator tester: so if you -- and maybe this is going to be -- i have to ask it anyway because you have been around a bit, secretary yellen. have you had a chance to take a look to see how much money that $150 billion, if implemented correctly, could leverage for housing? you there? secretary yellen: sorry. is this for me -- senator tester: this is for you, secretary yellen. secretary yellen: sorry. the question was -- senator tester: the question is, have you had a chance to look to see how much $150 billion could leverage for affordable housing? secretary yellen: i don't have those numbers at my fingertips but i can get back to you on it. i am sure there are estimates of that. senator tester: ok. very good. well, i just want to thank you, both, for being here. secretary powell, congratulations on the nomination. we'll move on that.
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thank you, mr. chairman. chair brown: thank you, senator tester. senator kramer of north dakota is -- senator crammer of north dakota is recognized -- senator cramer of north dakota is recognized. senator cramer: thank you. i look forward to supporting your confirmation. first thing i want to do, mr. chairman, is correct the record that got real fuzzy when senator kennedy asked secretary yellen a couple of times about debt and deficit and she said that the build back better plan is completely paid for. she said the c.b.o. agrees with her. senator daines touched on it. i want to read directly from the congressional budget office's score. c.b.o. estimates that enhancing this legislation would result in a net increase in the deficit totaling $360 billion through 2022 through 2032 period. that's the 10 years. i have the chart year by year. it's $155 billion next year
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alone. it continues for five years. and then in the last four, it shows some -- you know -- turn-around. of course, all of that five years of revenue or beyond the first five years, is built on the premise these programs aren't going to be continued which we know any casual observer of american politics knows once these programs start they're never going to be cut again. but even presuming -- the presumption is built in, it's a $367 billion deficit. according to this congressional budget office's score on the better -- build back better plan. now, i want to get back to an earlier question that senator menendez asked you, secretary yellen. basically he said, would a lot of these programs in the build back better plan actually increase workforce participation? things like child tax credit, childcare credit.
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you talked a little bit just now about -- senator tester called it workforce housing. you called it affordable housing. important distinction because those words matter a lot. so my question is -- if all of those credits, all of those giveaways, all of those incentives will help increase workforce participation, is there a work requirement tied to all of those? secretary yellen: i'd like to start by correcting what i believe you said about the c.b.o. senator cramer: i read the score from the congressional budget office. secretary yellen: you didn't read it completely. it says $360 billion over 10-year effect on the deficit. it's in notes it does not include the revenue that would come from enhanced resources for tax enforcement. they estimated that at $207 billion. and have indicated that their
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scoring of that does not take account of behavioral changes that would result from a regime of stricter tax enforcement and treasury put out its own estimate on that. so even in their own -- krairm kraim i -- senator cramer: i want to talk about incentivizing workforce requirements. are there requirements attached in the build back better plan in the house? secretary yellen: there are places where there are no workforce requirements. like the child tax credit. but the vast majority, the overwhelming preponderance of these credits, the child tax credit, do work. but in some cases -- senator cramer: we are talking
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about a workforce participation rate that needs to be increased. do they require people to get them to work or will this be added onto whatever they are already getting regardless of their employment situation? there aren't. there aren't. you know, earlier, secretary yellen, why build back better does not increase inflation or actually his question was -- will it bring down costs? you went on to explain all the ways it brings down costs except you really didn't. in north dakota, the inflation rate is over 7%. over 7%. because we appropriately last year stimulated the economy both the legislative, the congress, the president, the federal reserve through its policies. did it appropriately. not knowing what the outcome would be. by the time we got to early this year, the winds of inflation was already blowing. the economy was already expanding. democrats added $2 trillion to
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debt and deficit as well as stimulating the economy without any requirement on the other side. now we're doing another whatever it's going to be $2 trillion to $4 trillion to $5 trillion that the democrats will push through. and i -- i know that my time is up and i know that chairman powell doesn't ask questions about pending legislation -- answer questions about pending legislation. at least not recently. so i'm asking to ask him this. do you know of any economists or reputable economic model where you know more stimulus of money into a situation reduces the cost of a product? it made -- to be fair, secretary yellen, it may help people pay for some things but the cost does not come down when there's more money. chairman powell, do you know of any economic model where costs come down when people have more money to spend on it? chair powell: it's really hard to answer that in the abstract. there are forms of really investment that create more capacity in the economy.
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senator cramer: i would agree with that which is why i supported the infrastructure package. i think that invests in the infrastructure that moves an economy and pays people to work to build it and to use it rather than not pay them to work. thank you, mr. chairman. chair brown: thank you. senator sinema is recognized from her office. senator sinema: thank you, mr. chairman. thank you to our witnesses for being here today. secretary yellen and chair powell, it's good to speak with you both again. arizonans are increasingly concerned about supply chain disruptions and inflation. as we know, global supply chains were and continue to be fragmented and dysfunctional due to the pandemic. in the bustle of the holiday season, families are frustrated to see delayed shipments and empty shelves. ongoing disruptions reduce available supply of goods which tends to push prices higher creating inflationary pressures. i'd like to hear both of you on this question. how much do you attribute it to global supply chain deflection? secretary yellen, if you could respond first.
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secretary yellen: we are seeing disruption around the world. the united states is not alone on seeing an increase in inflation. i think most countries are seeing disruptions that result from the pandemic. we've had a huge shift away from spending on surfaces like going out to restaurants, traveling, staying in hotels, and a shift toward goods that need to be produced that many of which are imported. this is true in the united states and in other countries as well. another impact of the pandemic that we're seeing here and other countries are reduction in labor supply because many people who have jobs that involve
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face-to-face contact don't yet feel comfortable going back to work. and childcare is disruptive. so labor supply has been constricted. and this dramatic shift toward goods away from services combined with reduced labor supply. and, you know, problems of when it's hard -- it's suddenly hard because of supply chain problems to get needed components for manufacturing or to stock shelves that tends to incentivize more ordering to build inventories which adds to the problem. so, you know, i think both of these -- both of these factors play in to inflation in the united states and also to other countries. senator sinema: thank you. secretary powell?
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the inflationary effects around durable goods and other goods, which is really where the main inflation is coming from, certainly in core inflation, you would be at a substantially lower level of inflation. in addition, you are seeing energy prices going up. it's not really a supply chain issue mostly, but some of it is. but those are -- that's another -- if you look at headline inflation, that's going to be one of the big factor driving up headline inflation. senator sinema: thank you. now, as you know, government is extremely limited to resolve supply chain issues which is working relationship between private businesses. with that being said, i know the administration has taken steps to address some of the logistic issues at our ports. congress recently passed the bipartisan infrastructure
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investment jobs act which makes a historic and necessary investment in our port infrastructure like roads, bridges, transit, ports and broadband. republican senator portman said it will reduce inflation. secretary yellen, do you agree that this bipartisan infrastructure deal will reduce inflation? secretary yellen: well, i think over time the infrastructure bill will increase the efficiency of our economy, modernize our ports, our rails, improve our roads and bridges, and enhance the potential output of the economy, raise our ability to supply goods and services efficiently and in that sense over time will lower inflationary pressures. senator sinema: thank you. and my last question for you, chair powell. in february, i asked if the fed needed to achieve all three of the goals it set out, full
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employment, 2% inflation, and outlook of greater than 2% inflation before raising interest rates and you said yeah. now, recognizing that the fed has made some initial moves by tapering bond purchases, is the answer you gave me in february on interest rates still true today? chair powell: there's still a three-part test. that is still true. one goal is to reach 2% inflation and another was to achieve inflation above 2% for some time, i would say this is a decision for the committee to make but i think the committee -- i think in coming meetings, we will wind up saying that those -- that those inflation conditions have been met. senator sinema: thank you. thank you, mr. chairman. chair brown: senator warnock from georgia is recognized. senator warnock: thank you so very much, mr. chairman. secretary yellen, it's good to see you. and congratulations, chairman powell, on your nomination for a
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second term as chair of the fed. i look forward to supporting your nomination. and continuing to work with you to ensure that georgia families and businesses and workers continue to recover from the pandemic. and that working together we can ensure we have a labor market that includes historically overlooked communities. so we have an economy that works for all americans. earlier this month, georgia's department of labor reported that the state's unemployment rate is now at 3.1%. this is the lowest rate in the state's recorded history. this is good news and it indicates that emergency economic relief programs in the cares act and the american rescue plan have been working. certainly working in georgia. still, georgia's economy is not out of the woods yet.
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small businesses continue to tell me that they're having difficulty hiring while the labor force is still not what it was prior to the pandemic. secretary yellen, the labor participation rate fell in the outset of the pandemic, and it has remained flat over the past year, even as aid programs ended and the economy reopened. particularly among women, which is why some called the pandemic she-demic, if you will. women have been hit hard by this, especially women and parents with small children. what else should congress do to help bring workers back into the labor force? secretary yellen: so, i would say in the short run, vaccinations and increasing the number of people who have boosters to get the pandemic under control to reduce the number of cases.
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that's the single most important thing we need to do to create an environment in which people feel it's safe to work. a substantial number of people say that they're not looking for work for covid-related reasons. in some cases, even people who are fully vaccinated but who engage in face-to-face contact in their jobs are concerned about exposing themselves to covid risks. i think you see that for schools, childcare centers, retail and food services. over medium to longer term, many of the provisions of build back better, particularly those affecting childcare, the availability of elder care, and care for the disabled, support
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for childcare, those things promote labor force participation. senator warnock: chairman powell, would you add your perspective to this? chair powell: yes. i guess i would just say on participation, it has been a bit of a surprise that we haven't had more of a recovery and i really think the single most important thing is to get past the pandemic. then, we're really going to know how permanent this is. people get surveyed and they do say substantial numbers of people are concerned about going back to work at a time when the pandemic is still moving around. so i think that's the key. more vaccination, more boosters. senator warnock: so getting the pandemic under control through vaccinations and if i'm understanding you correctly, the care economy, supporting families with elder care,
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childcare, that you think that will actually strengthen labor market participation and not the opposite? chair powell: you know, i don't want to get into -- any particular legislation but, yes, i think there's good research, as the secretary pointed out a while ago, earlier in the hearing, there's good research showing that the u.s. has fallen behind, for example, in female labor force participation. you ask why. you do comparisons to other countries. one of the differences that shows up is statistically significant is the availability of childcare. senator warnock: i believe in the dignity of work. it frustrates me, quite frankly, to hear forks moralize about the importance of work while not supporting workers. and their ability to participate in the labor work. i think closing the coverage gap, which is part of build back better, will also help enable and strengthen workers, even as they strengthen the american economy. thank you all so very much.
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chair brown: as we close, senator toomey. senator toomey: thank you. just a few points to wrap up. first, i'd like to respond to my friend and colleague, the senator from montana, that brought up tax reform. in the wake of our 2017 tax reform, we had the strongest economy in 50 years. we had all-time record low unemployment. we had wages growing. growing fastest for the lowest income workers. we had inflation that was modest. and in fact, we were narrowing the gap between high-income and low-income people. oh, and by the way, tax revenue collected by the federal government was growing. i also want to touch on the important point that senator cramer correctly made. the c.b.o. has not said the build back better bill will be fully paid for. he correctly noted that it would result in an increase in the deficit totaling $367 billion over the 10-year period. not counting any additional revenue. that would be generated by
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additional funding for tax enforcement. but when you take that number into account as well, which is $207 billion, you are still left with $160 billion estimated increase in the deficit over the 10 years. but it's actually much worse than that. because by design, the spending in this bill is heavily front loaded with the expectation that supposedly expiring programs will actually be continued. if you look at c.b.o.'s numbers, for the first five years, the deficit increases by $804 billion. that is $804 billion in additional deficits which means $804 billion increasing in the debt we would take on which is why our democratic colleagues need such a big number by which to raise the debt ceiling. and why they are so unwilling so far to use the tool that is available to them to pass the debt ceiling increase with a simple majority vote, the
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reconciliation tool, because it also requires that they specify just how much debt they want to run up. so mr. chairman, i think it's important to set the record straight on those matters. chair brown: i thank the ranking member. as the ranking member mentioned, the debt ceiling, i'd like to make a comment. the last time congress debt with a deet ceiling was 209 -- debt ceiling was 2019. with a republican president, a republican house and a republican senate, more than 40 of my democratic colleagues joined me and others to vote to do the right thing for our country. there was such little concerned about the debt when my colleagues passed the $2 trillion tax cut give aways to millionaires and corporations. senator toomey and i sat on the finance committee. they were not concerned. i would reiterate, as secretary yellen, and the nonpartisan
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congressional office, the bill is paid for. secretary yellen responded to greatly detailed questions with the answer to that, and we heard it. now republicans would rather hold our full faith and credit hostage than pay the bills they racked up, perhaps we all racked up, and that's not acceptable. one final point on inflation. just this morning, bloomberg released a story with a headline that pretty much says it all. saddest profits since 1950 debunk wage inflation story of c.e.o.'s. saddest profit since 1950, debunk wage inflation. the f.t.c. shocked no one. bank profits are up. the idea that these corporations can't afford to pay workers higher wages, wages don't reflect the value of the work they do to make these companies profitable is ridiculous. they want the fed to pull back. let's be clear by pullback, by
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tapering what they really mean is they want fewer jobs available. that's what happened after the last crisis. the fed pulled back to support too soon. some families never recovered. we can't make that mistake again. for senators who wish to submit questions for the record, they're due one week from today, tuesday, december 7. secretary yellen, chair powell, you have 45 days to respond to any of those questions. thank you. again, the committee is adjourned. [captions copyright national cable satellite corp. 2021] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit] >> washington .
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host: we are joined from mandan, north dakota. former senator heidi heitkamp is with us to talk about rural voters in the 2022 election. good morning, senator. guest: good morning, how are you? host: good morning. your one country project is to look at issues important to rural voters. you are the founder. talk about it and what your mission is doing. guest: i want to start out by giving people a history lesson of the politics of the great


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