May 27, 2021
Janet Yellen Testimony on Inflation, Treasury Department Funding Transcript May 27
Treasury Secretary Janet Yellen testified before a House Appropriations panel on May 27, 2021. She addressed concerns about inflation and urged for increased Treasury Department funding. Read the transcript of the hearing testimony here.
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Mike Quigley: (00:00)
… first time before this sub-committee. Madam Secretary, thank you for being here today.
Janet Yellen: (00:06)
Mike Quigley: (00:06)
The Department of the Treasury plays a vital role in stabilizing and supporting the U.S. economy. That did not go unnoticed as the sub-committee in Congress put together much needed relief packages to support individuals, families, businesses, industry, states, territories, tribes, counties and others affected by the COVID pandemic. We test treasury with leading much of the federal government’s relief, and I commend you and the hardworking staff at the department. You have worked tirelessly to implement these programs that have proved a critical lifeline to so many Americans struggling through these difficult times. We realize, however, that much more work remains to be done to ensure the economy that works for everyone. The fiscal year 2022 budget for the Department of the Treasury reflects that, requesting 14.9 billion, an increase of 1.4 billion over fiscal year 2021.
Mike Quigley: (01:04)
Within this amount, the administration and requests 13.2 billion for the Internal Revenue Service, an increase of 1.2 billion. In addition, the administration requests a $417 million discretionary cap adjustment for tax enforcement as part of a multi-year initiative to increase tax compliance and raise revenues. I’m eager to hear how these funds will help the IRS better identify those that are underpaying their tax obligations, and fulfill the goals outlined in Treasury’s report on the American Families Plan tax compliance agenda.
Mike Quigley: (01:42)
I’m also happy I to see for the first time in four years the budget requests does not propose to eliminate funding for community development financial institutions. This year’s budget supports CDFI at 330 million, a $60 million increase to drive capital and expand economic opportunity in distressed communities. I look forward to hearing about the expansion of this program, as well as the department’s roll out of 12 billion in emergency stimulus funds to CDFIs and minority depository institution to rebuild an invigorating low-income and underserved areas impacted by the pandemic.
Mike Quigley: (02:22)
I’m also pleased to see a significant increase in funding for the financial crimes enforcement network, to support the department’s effort to combat money laundering and safeguard financial system. The anti money laundering act of 2020, which was enacted at the beginning of this year is the first comprehensive revision to anti money laundering and countering the financial financing of terrorism laws in nearly 20 years.
Mike Quigley: (02:51)
The budget requests 191 billion for FinCEN and increase of 64 million to implement the numerous reforms mandated in this act. I look forward to discussing how these new authorities and additional funds will help treasury and FinCEN protect the integrity of the US financial system. Before I turned to secretary Yellen for her statement, I would like to recognize our ranking member, Mr. Womack, for his opening remarks.
Steve Womack: (03:17)
Thank you, Mr. Quigley, for the opportunity, and welcome to the committee, Secretary Yellen. First, let me congratulate you on your confirmation, and thank you on behalf of all of us for your many, many years of public service. You are the secretary of the treasury during a very challenging time as the country struggles with the economic impact of the global health pandemic. I appreciate the hard work all the staff at treasury have done over the past year to provide relief to struggling Americans. I’m hopeful that as more Americans are vaccinated, the economy will continue to dramatically improve. It wasn’t long ago, we were experiencing record growth, thanks to a lot of pro growth policies. In 2020, I supported all the bi-partisan COVID relief packages enacted, which provided economic relief to millions of Americans, along with addressing health needs, such as providing PPE, conducting testing in vaccine development.
Steve Womack: (04:16)
However, I’m concerned that the latest relief package was enacted using reconciliation to avoid having to work with Republicans. Much of the spending included in that package has nothing to do with COVID, which is why the majority party could not get Republican support. As the country recovers from the pandemic and the economy starts to grow, I’m concerned that this excessive level of federal spending by the administration will lead to both inflation and massive debt that will hinder the recovery and burden future generations of Americans. I was hoping that the administration’s fiscal year 22 budget requests would begin to limit federal spending. Instead, the request proposes higher spending. The department requesting a double digit percent increase over fiscal 21. I’m certainly troubled with the administration’s tax proposals. I don’t see how increasing taxes on American corporations will help the economy grow, how it will create jobs, or help American companies compete globally. It’s also concerning that the department and financial regulators are getting involved in activities that are beyond your core mission.
Steve Womack: (05:24)
For example, the IRS is spending more and more of its efforts on providing social safety net benefits instead of its fundamental duty of collecting taxes, processing returns, and conducting audits. Furthermore, the administration’s new executive order on climate change and financial risks will have a far reaching impact on the entire financial sector, on consumers, investors, on federal loan and procurement policies. As I said in yesterday’s hearing, such sweeping policy changes should not be addressed unilaterally by the administration.
Steve Womack: (05:59)
Another area of great concern is the administration’s negotiations with Iran on a nuclear deal. While Hamas is raining down Iranian made rockets on Israel, I think it’s reckless and unconscionable to try to appease Iran and its proxies. We must stand with Israel and hold Hamas and Iran accountable. I oppose the department weakening any sanctions against Iran.
Steve Womack: (06:25)
In conclusion, I won’t be supporting the level of spending included in the president’s budget request. However, I do look forward to working with you, Chairman Quigley, and the other members of this committee in a bipartisan fashion to provide the department with a reasonable level of resources to accomplish your important core missions. I also look forward to working with you on the policy concerns that I’ve raised today. Once again, Madam Secretary, welcome to the committee. Chairman Quigley, thank you so much for the opportunity, and I yield back my time.
Mike Quigley: (06:59)
Thank you, Mr. Womack. Thank you, Secretary Yellen, for being here today. With that objection, your full written testimony will be entered into the record. With that in mind, we would ask you to please summarize your opening statement in approximately five minutes. Please begin.
Janet Yellen: (07:16)
Thank you, Chairman Quigley, ranking member Womack. Thank you for inviting me to join you today. I look forward to your questions, but first I want to briefly discuss the state of our economy and the state of the treasury department. I believe that one depends on the other. Our economy is recovering from the pandemic, but we still have a long road ahead of us. For this reason, I expect that economists will look back on this Congress’s decision to enact the American Rescue Plan and judge it very favorably. You had an option to provide just a few months of relief or continued support to see us through to the end of the crisis, and you chose the latter thanks to ARP and its predecessor legislation I’m confident that people will make it to the other side of the pandemic.
Janet Yellen: (08:14)
But as you know, in order for these dollars to effectively reach their intended targets, we have to stand up and manage new federal programs. The Treasury has been tasked with much of this work. We’re proud to do it. The challenge is, while our portfolio has grown to match the urgency of this moment, our annual budget has not grown in tandem, and the funding provided to administer new programs is temporary. Not accounting for inflation, our annual budget and still at the same inactive level as 2010, and critical policy offices like domestic finance, economic policy and tax policy have seen their budgets cut by as much as 20% since 2016.
Janet Yellen: (09:05)
The mismatch is very stark when you take a moment to scan the new bodies of work we have undertaken. Treasury has built a $350 billion program to help state local and tribal government start operating normally again. The national security loan program has distributed more than $700 million to contractors who were critical for our nation’s defense. The CERTS program will provide $2 billion to bus and ferry programs. There are two separate multi-billion dollar programs to help people pay their rent and mortgages. And of course, treasury administers economic impact payments. The IRS entered the pandemic as an agency that processes tax filings and returns once a year, and it managed to marshal its forces to disperse more than 460 million payments, totaling approximately $800 billion across three separate tranches.
Janet Yellen: (10:13)
And now the IRS is preparing to make monthly payments over the expanded child tax credit to families of more than 88% of American children. Our team has done valiant work implementing these programs with the resources at our disposal, but we cannot continue to be good stewards of this recovery and tackle the new bodies of work the Congress assigns to us in the years beyond with a budget that was designed for 2010.
Janet Yellen: (10:43)
Tomorrow, our administration will release its formal budget, and there is several critical areas where funding is needed. For instance, the financial crimes and enforcement network, FinCEN, is tasked with building a massive database that collects and secures beneficial ownership information. The Congress has not yet provided any funding to do it. Then there are the community development financial institutions. Congress has dramatically expanded funding for CDFIs with supplemental appropriations, and rightly so. These institutions are very effective at injecting capital into areas the financial sector hasn’t traditionally served well, but it’s challenging to the CVFI fund to distribute greater resources and scale these programs without additional administrative funding.
Janet Yellen: (11:43)
The IRS is in need of additional resources too. Over the next 10 years, the American people could see roughly $7 trillion fall through the cracks of our tax system. Why? Because many of the country’s wealthiest tax payers do not pay their full tax bill. And the IRS is not nearly staffed up enough to ensure compliance. Today the IRS has fewer auditors than in any time since World War II. Our proposal would give the IRS the funding it needs. For fiscal year 2022, it includes $13.2 billion from discretionary appropriations, plus $417 million for the first year of program integrity allocation as part of the multi-year American Families Plan. The speed and strength of our recovery and our economy long-term depend on a fully funded treasury. I look forward to working with you to make that happen
Mike Quigley: (12:53)
Thank you so much. We will now begin with questions. Madam Secretary, let me begin talking about your sanctions enforcement efforts. Last month, treasury took multiple sanction actions against the Russian government and individuals in Russia, and other entities in response to a number of malign activities, including but not limited to meddling in the 2020 elections, the poisoning of Alexi Navalny, the Solar Winds cyber attack. And in the past I’ve shown, expressed concern about their overseas accounts, the Kremlin using to undermine these effectiveness. Can you talk a little bit about the challenges in enforcing the sanctions you’re asked to push forward?
Janet Yellen: (13:42)
Well, with… Thank you for that question. Let me just start with Russia and say that we’re firmly committed to using the full breadth of Treasury’s authorities to target the range of Russian malign activities, included those you mentioned. And we do believe that this poses a very significant threat to US national security. Where generally treasury believes in the warranted, strategic and judicious use of sanctions, we see them as a very powerful tool to discourage malign actors, promote accountability, and propel positive changes in behavior of foreign enemies and adversaries. And we think that they have significantly advanced US national security.
Janet Yellen: (14:42)
But I’ve asked my deputy secretary, Wally Adeyemo, to lead a review of our sanctions program and policy to make sure that we use sanctions strategically with a clearly defined goals, and implemented as part of a broader integrated strategy. He is going to be focusing on identifying conditions that make for the successful use of sanctions, and trying to understand what other complimentary actions need to be taken. He tried to develop a framework through which to evaluate potential sanction’s actions, and look at the possibility of coordinating more closely with other countries so that the sanctions that we impose are more powerful and have a larger effect.
Mike Quigley: (15:49)
Sure. And I think the coordination with our allies is essential, but can you at least, so folks watching can then help understand the kind of tactics we see, not just Russia, but others use to evade these efforts?
Janet Yellen: (16:07)
Well, certainly there are efforts at evasion of sanctions, and this is something that we try to redress to the maximum extent possible. When we’re working jointly with our allies, the odds, the difficulty of evading sanctions becomes higher. And that’s one important reason I think we need to collaborate with other countries in imposing these sanctions.
Mike Quigley: (16:41)
Just make sure as you go forward that you let us know what kind of resources you need in a changing world to move forward on all those efforts.
Janet Yellen: (16:55)
Thank you. I think that our budget includes funding to make sure that we are. This is an expanding a portfolio, it’s become much more important in recent years and the resources we’ve devoted to it have increased substantially.
Mike Quigley: (17:15)
Very good, thank you. Mr. Womack.
Steve Womack: (17:20)
Thank you. Madam Secretary, there is no secret that I oppose the Iran nuclear deal and supported the withdrawal from it. And personally, I think it’s reckless and pretty much unconscionable for the administration to start negotiating with Iran to reinstate the nuclear agreement, particularly given the known support to Hamas in what we’ve witnessed recently in Israel. I believe we need to stand with Israel. So here’s my question on, as we carry the sanctions issue just a little bit further, what’s Treasury’s role in this particular skirmish on sanctions with Iran and Hamas, and what are you doing to ensure that money is not moving from that state actor to its proxy in an effort to attack our friends in Israel?
Janet Yellen: (18:20)
So we have a set of sanctions that have long been in place on Hamas, and it’s something that treasury is working effectively to make sure that we carry out. We try to constrain Hamas’s activities, we have worked with other countries, including countries in the Middle East to make sure that there it’s harder for Hamas to evade the sanctions we’ve put in place. So this is in a very active area of engagement. With respect to Iran, I think you know the president is looking at negotiations that might succeed in bringing Iran back to full performance of its commitments under the JCPOA, and has indicated that the United States is prepared to do the same if Iran agrees to that. So we will carefully review what sanctions relief would be appropriate if Iran takes the appropriate steps.
Steve Womack: (19:48)
Are you anticipating the weakening of sanctions against Iran?
Janet Yellen: (19:52)
Well, if Iran returns to full compliance, then we would do the same.
Steve Womack: (20:02)
It’s kind of hard to expect that they’re going to return to full compliance when we see this bombardment that recently took place in Israel, so I hope for the best there. Real quick question about inflation, and you knew this question was going to come. The Bureau Of Labor Statistics recorded earlier this month and over the last year, the consumer price index rose by 4.2%, largest 12 month increase since September of 08. And as you and I talked in our previous meeting, I’m concerned that in the post pandemic economy that inflation is going to rear its ugly head. We can talk about tax increases all day long, but the inflation spiral that seems to be hitting right now is indeed a tax increase on working families. So how high will the CPI have to increase before you believe we’ve got a problem facing America right now from an inflationary standpoint?
Janet Yellen: (21:04)
Well, I certainly agree that we don’t want inflation to pick up and be embedded in the American economy going forward. I came of age and studied economics in the 1970s, and I remember what that terrible period was like and no one wants to see that happen again. And we obviously have to watch the current situation very closely, and the treasury and economists and the White House are certainly monitoring inflation trends very carefully. My judgment right now is that the recent inflation that we’ve seen will be temporary. It’s not something that’s endemic. I expect it to last, however, for several more months, and to see high annual rate of inflation through the end of this year.
Janet Yellen: (22:08)
We have an economy that was struck by a very severe and unusual shock. It caused very substantial shifts in spending patterns away from services and toward durable goods and commodities. And the high inflation reading in the CPI that we saw last month, partly reflects the fact that service prices, for example, airline seats prices, hotels, recreation, where prices fell dramatically at the beginning of the pandemic. As our economy is coming back these prices, they’re still below where they were pre pandemic, but they’re moving up. That was part of the inflation. And there were bottlenecks, also. We have a shortage of chips, a semiconductor shortage. We saw an unusual move up in used car prices, in part because of the shutdown that’s had to occur in some auto plants. And we had rental car companies that in order to survive the pandemic sold off their inventories. Now that demand is coming back we saw a surge in rental car prices.
Janet Yellen: (23:37)
So I think as the economy gets back online, it’s going to be a bumpy process. But I do believe, though, we’ll see some adjustments. I don’t think this is endemic inflation, and we have tools to address it and it will be important to do so.
Steve Womack: (23:54)
Yeah. And I thank the Secretary. Chairman, I know I’m way out of time, but I hope you’re right, Madam Secretary, that it’s short-lived. But because-
Steve Womack: (24:03)
I hope you’re right, Madam Secretary, that it’s short lived. But because of the amount of money that’s in this pipeline that’s going to go for years to come, I’m afraid that this amount of federal spending is going to keep the inflationary spirals for a while. Anyway, I yield back my time. Thank you.
Mike Quigley: (24:16)
Thank you. Mr. Bishop?
Rep. Bishop: (24:23)
Thank you very much, Mr. Chairman. And thank you, Madam Yellen, for coming and appearing with us, and for all of your work over the years. I’d like to talk with you briefly about the CDF hiring minority depository institutions. A 2018 SBA report found that minority-owned businesses typically pay higher interest rates, and experience more frequent loan denials, than white-owned businesses, and as a result, minority entrepreneurs are less likely to apply for loans due to fear of denial.
Rep. Bishop: (25:04)
This disparity in access to credit was exacerbated during the coronavirus pandemic, with a recent study finding that Black-owned businesses suffered the sharpest rate of closures in the first part of 2020. To help alleviate these disparities, the American Rescue Plan provided a historic $9 billion investment into community development and [inaudible 00:25:27] institutions and minority depository institutions, through the Emergency Capital Investment Program. [inaudible 00:25:33] that is with an update of the implementation of this program, and what steps Treasury is taking to ensure that these funds will build capacity to provide access to capital for these underserved small and minority businesses?
Janet Yellen: (25:49)
Well, thank you for that question, Representative Bishop. I think the Emergency Capital Investment Program is a tremendously important initiative, that will really strengthen the capacity of CDFIs to increase their lending and investments in low-income, rural and minority communities for many years to come. And injecting capital into these institutions will enable them to, there will be a leveraging effect. They’ll be able to tremendously expand their lending activities.
Janet Yellen: (26:34)
We’re in the process of putting this program into place right now. We’ve had extensive engagement with stakeholders, and we’re beginning to accept applications. We originally had an application deadline for these funds of May 7th, and what we heard is that extending the deadline was important to these institutions, to give them adequate opportunity to understand the details before applying. We’ve now extended the application deadline to July 6th. But this is a very important series of investments, and we want to make sure that the money that we provide will do the maximum possible, particularly in the most distressed areas.
Rep. Bishop: (27:36)
Thank you, ma’am. Let me shift quickly to the Child Tax Credit. The Rescue Plan expanded the Child Tax Credit by increasing the credit to $3,000 for children six to 17, $3,600 for under six, and for the 2021 tax year, the IRS recently announced that the monthly payments would begin in July for those families that are eligible. There’s been discussion that we should extend the credit beyond 2021, and President Biden’s families plan would extend it through 2025. If Congress were to extend the tax credit, does the IRS have the resources needed to implement the credit beyond 2021, and what do you have to suggest to us that we could do to help improve the tax credit beyond 2021?
Janet Yellen: (28:27)
Well, thank you. You know, the IRS is doing a terrific job in implementing the Child Tax Credit program. It’s really never been called on in the past to implement a program that involves monthly payments to recipients, but it’s quickly figured out how to do that, and it’s expected that a very large share of the money that will be owed for the Child Tax Credit will be paid out in July. The first payments go out in July. We’ve also worked with the IRS and other agencies to make sure that some of the neediest children, whose parents don’t file tax returns and don’t otherwise have much contact with the IRS, that they’re aware of the program and their eligibility for it. We want to make sure, and we’re working through a variety of community groups to get the information to them.
Janet Yellen: (29:44)
We have requested a substantial increase in funding for the IRS for many different purposes, including the ability to administer programs like this in an ongoing basis, to improve enforcement, to improve taxpayer service. IRS has really been crimped for funds, and it’s a very high priority in the budget submission.
Rep. Bishop: (30:14)
Thank you very much. My time has expired. Mr. Chairman, I yield back, and I appreciate your indulgence.
Mike Quigley: (30:15)
Thank you. Mr. Stewart, you are recognized.
Mr. Stewart: (30:29)
All right. Thank you. Thank you, Secretary, for being with us. This has already been expressed. Thank you for your many years of service. Although I think we don’t see the world exactly the same politically, you’ve been someone that I’ve admired over the years, and we’re grateful for your service today.
Janet Yellen: (30:44)
Mr. Stewart: (30:45)
We do live in interesting times. I think a lot of us would like to make them a little less interesting. I’d like to express two concerns, if I could, and then ask two questions. I’ll just ask them both at the same time, and let you respond. The debt in spending is the primary reason I ran for Congress eight years ago. This is a time when the challenges we had then seem rather small compared to the times we have now. And by the way, I’ve been consistent on this. In the previous administration under President Trump, I encouraged him personally, and I encouraged the administration to be far more serious about our debt, and the spending that we had under their administration as well. So, this isn’t something where I’ve been hot and cold depending on who’s in the presidency.
Mr. Stewart: (31:26)
I think we’re in the middle of a catastrophe in the making, as has been expressed by I think our ranking member Chairman Womack, or Ms. Womack and others. Inflation scares the life out of me, and I think it’s a result of policies, which leads me to my question. That is, in a time when the administration is suggesting what is trillions of dollars on top of already trillions of dollars of debt, when you have incredibly loose monetary policy, when you have disincentives to produce… Which we clearly have, and we’re seeing that now in our unemployment rate… You said earlier, Madam Secretary, that you believe inflation will be transitory.
Mr. Stewart: (32:06)
And my question, my first question is this: Given what I just explained, how could we expect this to be transitory? And if you would just put a pin in that, because my question… Again, how can we expect inflation to be transitory under the policies that we’re seeing on the monetary and fiscal side, as well as the economic outcome from that on the employment… My second question is a little more personal, but it affects millions of Americans. A member of my family, my daughter, who’s just a young couple starting out, finishing college. They are waiting a year and a half for their tax return not from this year, from the year before. And I’m told by some members of the IRS, some leaders in the IRS, there are six million Americans who are waiting for tax returns from, again, not this year. The year before.
Mr. Stewart: (32:54)
I know that COVID interrupted some of the work schedules, but I’m wondering, A, are you aware of that? And what can you tell these Americans? For a young couple, or for many working families, the $2,000 or $3,000 tax return is a lot of money to them, and to be waiting 18 months for it is just completely unacceptable. I wonder if you would address that, as well.
Janet Yellen: (33:16)
Sure. Let me start with the inflation question that you asked. You know, the economy suffered a severe shock. Employment plummeted. And also, we’ve had very healthy job gains in recent months. We’re still over eight million jobs below where we were pre-pandemic. There is still health concerns, childcare concerns, a variety of reasons that people aren’t moving instantly into jobs now that the economy has opened up. Lots of people lost permanent jobs, and need to figure out what to do, which new jobs to take. But there remains a lot of slack in our economy, and as we get the pandemic under control, and schools and childcare reopens and goes back to normal, I think we’ve provided in the ARP the relief that people need to get through this period without their finances being completely decimated, and I fully expect them to go back to work.
Janet Yellen: (34:41)
Now, it is a large package. We had to balance the risk of permanent scarring and a long recovery, things we really didn’t want to have happen, with a small chance that this package could be inflationary. I don’t believe it will be inflationary, but we’re watching that carefully, and have tools to address it.
Janet Yellen: (35:07)
Now, the President has proposed a jobs package in the families plan. And the headline figures on those programs are large, but it’s important to recognize that they are programs that will last over eight or 10 years. And the President has proposed a way to pay for those programs, to put in place tax increases on corporations and on wealthy individuals that would I believe be fiscally responsible, and even lead to lower deficits in the out years as the spending winds down.
Janet Yellen: (35:51)
Interest rates are very low. While debt to GDP ratios have gone up because of the pandemic spending, interest rates are exceptionally low, and even after recovery, we’ve been in a world… This is true throughout the developed world. We have had very low interest rates, and most economists believe that that will continue. So, you know. Beyond 2030, we will have challenges related to an aging population and Social Security and Medicare we need to address. But I believe over the next decade that the interest burden is very manageable, and the debt, and I hope that there will be substantial portion that’s paid for.
Janet Yellen: (36:42)
On the IRS question you mentioned, I know the backlogs are very large. It’s a matter of concern to me, to people in Treasury, and to the IRS. It is a burden for individuals who suffer that. In part, the backlog has to do with paper returns and problems that arose when the pandemic made it difficult, essentially meaning the IRS had to work remotely, and they’re working through that.
Mr. Stewart: (37:23)
Well, thank you. Mr. Quigley, I know we’re out of time. I’ll just conclude, Secretary. I pray you’re right on the pandemic. I have a degree in economics. I know it’s way more art than science. But I think we’ve let a genie out of the bag here that’s going to be very, very hard to put back, and we look forward to reviewing where we are in a year. And again, I hope that you are right when we see you again. And please pressure the IRS. Again, it’s important for these families. And Mr. Quigley, I yield back. Thank you.
Mike Quigley: (37:51)
Thank you. We are pleased to be joined by the Chairwoman of the Full Appropriations Committee to ask questions. Chairwoman DeLauro, you are recognized.
Chairwoman DeLauro: (38:02)
Thank you very, very much, Mr. Chairman. Let me just say welcome, Secretary Yellen. It’s wonderful to see you. I would just make a comment first off. I was disappointed from the Senate Republican proposal to gut the Child Tax Credit to pay for the infrastructure package. This would practically double child poverty and increase taxes on middle class families, and I would just say, not on our watch. Secretary Yellen, I want to say a thank you to you for your leadership and your commitment to making the expanded and improved Child Tax Credit a reality. You know, and I remain committed, we all do remain committed to making the Child Tax Credit permanent.
Chairwoman DeLauro: (38:46)
Let me just ask a few questions, and I’ll ask them all at once and give you time to respond. Can you provide an update with where Treasury and IRS are with respect to the Child Tax Credit, the non-filer portal and the update portal? Let me just ask what resources will Treasury need to make the monthly Child Tax Credit payments a success, and what we would need to move beyond 2025? What are Treasury and IRS’s plans to reach non-filing families? Will this include a dedicated phone line and staff? What about the rollout of the portals? And in essence, what kind of services will be available for non-filers, and when do we anticipate the rollout of the portals? I guess overall that’s what’s the communication plan for being able to deal with outreach for people to take it, who are eligible to be able to access these?
Janet Yellen: (40:14)
Well, thanks so much, Chair DeLauro, and I want to thank you for your leadership on this issue, which has been tremendously important. As you know, the Child Tax Credit makes a huge difference to childhood poverty, and what was provided in the ARP, the Rescue Plan, is estimated that’s the most important contributor to this year having the child poverty rate. So, it’s a very important program. We want it to succeed. IRS has been working very hard to ensure that it can get monthly payments out starting in July, and it is quite confident that the bulk of the payments that are due, over 80% will be able to be distributed evenly.
Janet Yellen: (41:14)
But as you indicate, non tax filers are much more of a challenge. The IRS anticipates launching a simplified tool to enable non-filers to be able to apply for the Child Tax Credit. They’re doing something along the lines of the EIP non-filer portal that was deployed last year, but are trying to redesign it in a way that will be easy to use, and significantly more people will be able to access it. It does need more information than was required for the EIP.
Janet Yellen: (42:04)
But what’s most important for these non-filers, and that includes some of the poorest families with the greatest need, is they need to learn about this program. They need to apply for it. They need to be made aware of what’s available for them. And in a way, this is a whole of government effort. The IRS is working hard with nonprofits, homeless shelters, nonprofits that work with homeless people, low income people, to increase awareness. Other agencies in government are working with us to do that outreach. We regard that outreach, particularly to those non-filers, to be a very critical piece of making this an effective program.
Chairwoman DeLauro: (43:04)
Mm-hmm (affirmative). Do we have any idea, Secretary Yellen, about when there might be the rollout of the portals?
Janet Yellen: (43:15)
I can’t give you a precise date. I think all I can-
Chairwoman DeLauro: (43:18)
I get it.
Janet Yellen: (43:19)
All I can say is soon.
Chairwoman DeLauro: (43:21)
Soon. And I’m appreciative of the partnerships that you are making reference to. I understand you have about 4,000 community partnerships, as well as trying to identify zip codes that have higher incidences of non-filers. So I think that these pieces are very critically important, because it is now the outreach of this. And I’m making this assumption, that the Department will have a full scale communications-
Janet Yellen: (43:57)
Chairwoman DeLauro: (43:58)
… effort in getting the word out in this effort. I would also, please… And we can be in touch, because my time is out, and I want to be mindful of my other colleagues… But what additional resources will Treasury need to make the monthly Child Tax Credit payments a success? If you want to get back to me on that, I would really very much welcome that information. It will be critically important.
Janet Yellen: (44:28)
Thank you very much. We want this to be a success, and we’ll get back to you on details. But as you know, the budget proposal includes substantial additional funding for IRS to be able to undertake activities like this.
Chairwoman DeLauro: (44:46)
Thank you very, very much. I yield back, and I’m sorry I went over my time, Mr. Chair.
Mike Quigley: (44:53)
Thank you, Madam Chairwoman. Mr. Joyce?
Rep. Joyce: (44:57)
Thank you, Chairman Quigley. Always touch to follow Madam Chair in such a meeting, but Madam Secretary, thank you for being here today. This is something that I’ve heard in the last administration, as well as now with this administration, that I wanted to ask a question about. Treasury has a rule in working with the State Department to craft international sanctions policies. There’s a manufacturing company in my district that relies on a supplier in Belarus for a unique product that’s difficult to find elsewhere in the world. In April, the Treasury Department, in consultation with the State Department, decided to wind down authorization for several companies in Belarus to do business with Americans. The short timeframe for this policy change was implemented has created big supply chain problems for this northeast Ohio business.
Rep. Joyce: (45:45)
Considering the recent developments in Belarus last week… And I understand the administration’s desire to impose sanctions on the inappropriate actors. Or appropriate, depending on your definition. But what I want to do, get into today, is how the Treasury evaluates the potential harm sanctions might have on American businesses? And additionally, what steps does Treasury take to ensure that sanctions policies they choose do more harm to the intended bad actors overseas than they do on our businesses here at home?
Janet Yellen: (46:14)
Well, thank you, Representative Joyce. I mean, with respect to this specific situation of a firm in your district, my staff has I believe been in contact with your office about it, and really want to work with you. I mean, in this specific case, when the sanctions went into effect there was a 45 day wind down period to allow U.S. businesses to conclude dealings, and prevent undue or immediate harm to them. That is often the case when there are sanctions, that we don’t want to catch American businesses where… There’s always the ability to ask OFAC for an exception, to explain a particular situation and why it should be something that a license should be issued to continue. That’s OFAC. OFAC is ready and willing and able to work with individuals or firms that have a problem, and believe they deserve exemptions.
Janet Yellen: (47:40)
And then I’d say more generally we’re always worried about allowing humanitarian aid to be delivered, and in many instances where there are sanctions programs in effect, great efforts are made to ensure that…
Janet Yellen: (48:03)
… made to ensure that humanitarian aid can continue to flow. This is sometimes quite difficult, but it is a priority. And OFAC and the Treasury Department want to work to make sure that… We want these sanctions to hit malign actors and to change the behavior of countries that are engaging in actions that harm the United States, but not to harm the individuals within these countries. We don’t want the burden to fall there.
Rep. Joyce: (48:41)
Thank you very much. I appreciate your concern there. A second thing I have a minute here to address. Obviously, I’m not going to run through the tax rate structures with you, but had corporations here in the district that had locations in say Ireland or England or somewhere else just to avoid the taxes here in America. And I know you’re a proponent of raising the corporate tax here. When I went to see those CEO of the business after we lowered the tax rate, because they had just, a year or two earlier, had made their move over to Ireland he said, “No. We’re not moving back home because just this, we continue to change our tax rate depending on administrations and majorities.” Now, I think this puts American workers and American companies at a disadvantage if we continue to have a rate that fluctuates. And don’t you think that this puts us at a disadvantage with foreign competitors as we look to make a strong post pandemic economic recovery?
Janet Yellen: (49:44)
Well, we certainly want to provide a tax environment where planning is possible. And so frequent changes in the rules are something that’s very undesirable from business’s point of view. But I believe we have to assist them… I mean, in the case you described, there are very valid reasons for firms wanting to have operations abroad sometimes in low tax jurisdictions. Ireland is, for many companies, a good place to locate, to do business in the EU. But what we want to avoid is companies moving their operations or rejiggering their accounting and profits to take advantage of tax shelters and for those decisions to be based on the different tax rates that they face in different parts of the world. We were working… We have proposed to try to close loopholes in our own system that encourage or permit that, but we’re simultaneously attempting to negotiate a treaty through the OECD negotiations that would create a global minimum tax that all countries put into effect that would stop what’s been, essentially, a race to the bottom. So that it’s competitive attractions of different countries and that influence location decisions and not tax competition.
Rep. Joyce: (51:32)
Well, I know I’m out of time, Mr. Chair and Madam Secretary. Thank you much for your time today. I just have one last quick aside to what Chris Stewart brought up before. I know if I’m 17 days later on payment of taxes, you charge me interest. Those people who haven’t gotten paid for 18 months, will they get interest?
Janet Yellen: (51:52)
I’m not sure.
Rep. Joyce: (51:53)
Janet Yellen: (51:54)
Mr. Chairman: (51:56)
Janet Yellen: (51:57)
Mr. Chairman: (51:59)
Mike Quigley: (52:01)
Thank you, Mr. Chairman, and thank you, Madam secretary, not just for being here, but for your lifetime of service. Really appreciate that. I have a very important issue to my state of Wisconsin. We sent a letter to you a couple of weeks ago from Ron Kind, Gwen Moore and myself. And I believe Senator Tammy Baldwin also sent you a letter regarding the American Rescue Plan. When we signed it into law, it talks about assistance based on some Bureau of Labor Statistics unemployment data. And CRS estimated, when we signed the bill into law on May 11th, that Wisconsin would receive 3.2 billion based on that unemployment data covering what we put in the law. The three month period ending with December, 2020. Since then, however, the Treasury Department has decided to use subsequent BLS data in the issuance of its interim final rule. And that lowered Wisconsin’s allocation to 2.5 billion. That’s a $700 million hit.
Mike Quigley: (53:00)
And we already… It’s been a tough year with COVID. Our governor was already working on how to get that allocation out there. My first question is, is there a way with when we passed the law, we knew what the statistics were and what we were expecting, now it has changed and it’s going to cost us greatly. The second question is also Section 9901 of the American Rescue Plan said that you have the authority to separate payments to states into two trenches, but you’re not required to. And that’s another concern we had for our state is especially if we’re going to be hit on this giant decrease on the amount, getting it over two pieces makes it even harder rather than a single piece. So I guess the two questions, is there a way to try to use the data as the bill was actually passed? As CRS said it would be 3.2 billion. And secondly, is there a way to do it in a single payment rather than two payments?
Janet Yellen: (53:56)
So Representative Pocan, I understand that this is a huge change from what was expected in Wisconsin based on the CRS numbers-
Mr. Chairman: (54:10)
If someone could mute. They might have a background if someone isn’t muted. Sorry.
Janet Yellen: (54:14)
No problem. So I understand this is a huge problem. We’ve looked at this very carefully. I’m afraid we are following the law. CRS indicated that their numbers were preliminary. And the Bureau of Labor Statistics, we have to use their numbers. And they revise the numbers significantly for the last three months of the year. Actually the revised numbers were available when the bill was passed and I believe they were available to CRS. So this was a huge change. I understand it’s a blow. On that, I honestly don’t… We’ve looked at this very carefully and would be happy to review with you the details of how we came up with this number, but I don’t think we have much scope there.
Janet Yellen: (55:14)
I think with respect to splitting the payments, the law specified generally that Treasury could split payments and make exceptions and provide one payment only for states that had experienced very, very large increases in their unemployment rate. So many states are receiving two payments over time. I think our view, they’re about 12 months apart. All local governments will and most states will. We see splitting payments as encouraging recipients to adapt to new developments that could arise over the coming 12 months. There can be changes in the nature of the public health emergency and it’s negative economic impacts. But most states in all localities will receive it in two tranches.
Mike Quigley: (56:17)
I just see perhaps you might be able to look at an exception also for a situation like Wisconsin, if we aren’t going to get the 700 million additional that I think people are expecting. Perhaps in a situation like, that also might be a good argument to try to do it in a single payment. We just hope you’d consider that. I know that was a request from Senator Baldwin and Ron Kind of Gwen Moore and I. And then [inaudible 00:56:45] I don’t think I have time to ask the question on why we’re auditing people on their earned income tax credit at a greater rate than people who are at the very top wage-earners. Was going to ask that. So let me just ask this.
Janet Yellen: (56:57)
We’ll try to do a quick second round, Mr. Pocan, if we can get-
Mike Quigley: (57:02)
I’ve got another hearing I’m staring [crosstalk 00:57:04] I was just going to ask, in the 10, 12 seconds I had, are we still going to keep the penny?
Janet Yellen: (57:13)
I don’t think there’s active consideration of getting rid of the penny. But on the audit, there is a major proposal here that we’re trying to increase the audit resources available to the IRS. And they will be focused on high income taxpayers in corporations and not on individuals whose actual income is below $400,000.
Mike Quigley: (57:46)
Great. Thank you. Thank you very much, Mr. Chairman. Appreciate it.
Mr. Chairman: (57:50)
No problem. Ms. Torres.
Chairwoman DeLauro: (57:53)
Thank you, Mr. Chairman, and thank you Secretary Yellen for joining us today. I really do hope that we have a second round because I have a couple of very, very important issues to touch on. Secretary Yellen, I was chairwoman of the Housing and Community Development Committee in California as a state legislator during the housing crisis of 2009 to 2011. We drew down, at that time, $2 billion from the Hardest Hit Fund to support homeowners in need. Last April SIGTARP released a report stating that there were hundreds of millions, if not billions, in funding leftover from the Hardest Hit Fund that was established during that recession. These funds were supposed to go to help unemployed homeowners for their mortgages. Unless otherwise obligated, they will revert to Treasury general fund. These funds should be used for Congress original intent and that was to keep Americans from becoming homeless.
Chairwoman DeLauro: (59:10)
I have a bill, The Keep Your Home to Prevent Homelessness Act, which would do just that. Transfer the funds to the Housing Trust Fund to help homeowners, renters and individuals experiencing homelessness immediately. The inspector general has also urged Treasury not to let these funds go to waste and instead to reuse these funds using its existing authorities, instead of moving them to the general account. I hope that we don’t have a need for my bill. I hope that you will see that these funds should revert back to the states who had to turn them back over you. And I hope that you will allow them to utilize them or to continue to use this funding for its intended purpose. Will you commit, Secretary Yellen, to using these funds right away to help vulnerable Americans in this housing crisis instead of sending the funds back to Treasury’s general account?
Janet Yellen: (01:00:16)
So thanks for that question. Concerns about homelessness and housing insecurity are really… these are key priorities for President Biden and for those of us in Treasury. And we are trying to provide critical relief to homeowners and to renters who’ve been impacted by the pandemic and more generally promoting housing stability for vulnerable households. We’re working hard to get money out through the Emergency Rental Assistance program and the Homeowner Assistance Fund. And I think as you probably know, the jobs program allocates a good deal of money to low-income housing in distressed communities. With respect to the TARP funds, virtually all of them have been spent or obligated. There really just isn’t very much money there or essentially any money that can be used for this purpose. All of it has been essentially obligated. And I think focusing on the new pots of money that we have, and trying to use those very effectively, and we’re happy to talk with you about this and to work on that with you.
Chairwoman DeLauro: (01:01:50)
Yes. I want to be respectful to the rest of my colleagues. I have a very lengthy second question, but I will follow up with you on this because it is my understanding that California and several other states returned millions of dollars in unspent money because simply they ran out of time. We helped about 96,000 people stay in their home or help them with a down payment for an apartment to prevent homelessness. There is a homeless epidemic across the US and these funds were already appropriated for that. And I hope that you will not just simply turn them over to your general fund. With that, Mr. Chairman, I will yield back so that I can have an opportunity in the second round.
Mr. Chairman: (01:02:40)
We’ll get you. Sounds good. Ms. Lawrence.
Ms. Lawrence: (01:02:47)
Thank you, Mr. Chair. And thank you, Madam Treasury Secretary for being here with us today. My question is that like many other components of the American Rescue Plan, the State Small Business Credit Initiative represents a historic investment to bolster business creation and enhance economic development. Can you talk about the implementation of this program, especially why this funding may not be available to the states and Indian tribes until next year and how Treasury is working to ensure that this funding gets to the businesses that need it the most, especially our disadvantaged businesses?
Janet Yellen: (01:03:42)
Well, this is an important program. President Biden is very supportive of it. And we’re working to get those funds out and to make them available. I can have my staff, would be helpful follow what more with your office to discuss implementation details.
Ms. Lawrence: (01:04:11)
My second question kind of goes back to Sanford Bishop’s, but as we know, the community development, financial institution and minority depositary make up community leaders that provide capital to the small businesses in the community that face challenges getting loans, especially in the underserved markets. How can we strengthen the standing of the CDFIs and the MDIs to ensure that the mission leaders reach their target markets and put us on a path to sustain an equitable economic recovery? And I want to say in the city of Detroit, which I represent, the small businesses that have been the economic engine of bringing the city of Detroit back has had the most challenge. And I’m so proud of the leadership of this administration to direct funds to the MDIs and the CDFIs. But I need to hear from you, how are we going to meet the targets? Because while the money is available, what are you doing above just making it available to make sure we hit our targets?
Janet Yellen: (01:05:29)
Well, we have a great deal of money now that was made available in the bills that Congress passed in December. There’ll be $9 billion to invest in CDFIs and MDIs. And there was $3 billion in emergency funding that we’ve worked very hard to get out the door to make sure that CDFIs have the ability to lend in some of the communities that were most hard hit during the pandemic. Our budget is requesting additional funds for the CDFI fund in Treasury to partly to help us make sure that all of the money that’s available is used in an effective manner and makes a difference in the most vulnerable and hardest to serve communities. So the CDFI fund Treasury provides technical assistance and support to CDFIs. We try to look at programs that are working well and give technical advice and work with CDFIs to make sure that they are engaging in lending that’s structured in a way that will be very effective. So I agree with you. It’s not just a matter of the amount of the money, but how we help that money be used in ways that really make a difference.
Ms. Lawrence: (01:07:14)
So I would like to make a request, if I can utilize local or federal staff to come in and do some outreach in our community to help guide through some of the common roadblocks and remove any through training and monitoring that we are reaching our goals. I would really… I’ll reach out to you for that. Thank you so much.
Janet Yellen: (01:07:38)
We look forward to working with you. Thank you.
Ms. Lawrence: (01:07:43)
Thank you. I yield back, Mr. Chair.
Mr. Chairman: (01:07:45)
Gentlelady yields back. Ms. Kirkpatrick, please.
Ms. Kirkpatrick: (01:07:50)
Thank you, Mr. Chairman and thank you, secretary. I was going to ask that question about CDFIs but that’s already been done so let me move on to another question. One of the things I hear most from my constituents is they feel the economy is rigged in favor of the wealthy and powerful. This is understandable given the severe economic inequality in our country, which has only been worsened by the pandemic. Part of what drives this perception is the sense that wealthy individuals are often able to skirt tax requirements and avoid paying their fair share. This undoubtedly is true and more must be done to address it. I was extremely pleased to review the recently released American Families Plan tax compliance agenda, which takes aim at reducing the severity of our tax debt and cracking down on wealthy tax evaders. Could you please go through what you see as being the most important pillars of the tax compliance agenda, as well as whatever other initiatives you see as critical to rebalancing the scales towards the average American taxpayer?
Janet Yellen: (01:09:30)
Well, thank you for that question, Representative Kirkpatrick. The Treasury and the Biden administration feel very strongly about having a tax code and enforcement of that tax code that’s fair and doesn’t unduly burden working people at the expensive corporations and wealthy individuals. And what Treasury has found the estimated tax gap over the next 10 years is $7 trillion. Now, when an individual earns wages and they’re reported as a W2 or other things that are reported to Treasury, the tax gap there is almost non-existent. The amounts that are paid or reported on people’s tax returns. But it’s where there is not very good reporting and independent information provided to the IRS that compliance is lower. And that’s among wealthy taxpayers who receive income in forms that isn’t reported on a W2 or smaller corporations or partnerships. So the proposal has a number of different planks.
Janet Yellen: (01:11:06)
First of all, the enforcement budget has just shrunk to the point where it’s almost impossible to undertake complex tax negotiations and to hire people with the requisite skills. So the audit rates on wealthy individuals and corporations have declined utterly massively. And we’re requesting funds to change that, to make sure that those resources are available and on a multi-year basis so that they have the resources they need. The IRS also needs information so that it knows where the lack of compliance would be. And our tax compliance proposal is proposing that the IRS-
Janet Yellen: (01:12:03)
… is proposing that the IRS be allowed to collect a little bit of additional information that would be very valuable in targeting auditing resources, in particular banks and other financial institutions routinely report to the IRS the amount of interest paid on accounts. If they were to just report two additional pieces of information, the aggregate of inflows into an account and the aggregate of outflows from that account directly to the IRS, that information, those two pieces of information would be immensely helpful in targeting resources.
Janet Yellen: (01:12:51)
It would probably also increase voluntary compliance. Knowing that that information was being provided would be an incentive to comply and report income. There also needs to be a modernization of IT systems at the IRS, and there are tools like artificial intelligence that can be deployed effectively, especially with that information to help target auditing resources. So we estimate overall, that we could, over a 10-year budget window collect an additional $700 billion with the proposals in this budget and the Family’s Plan.
Mike Quigley: (01:13:45)
Ms. Kirkpatrick: (01:13:46)
Great answer. Thank you! I really appreciate that you took the time to be here with us today to discuss these important issues and want to wish you the very best. Take care.
Janet Yellen: (01:13:58)
Thank you very much, representative Kirkpatrick.
Mike Quigley: (01:14:01)
The general lady yields back. Mr. Womack, we’re going to try to do what’s left, who’s still left, a quick second round, are of interest to ask any additional question, sir?
Steve Womack: (01:14:14)
Yes. Thank you, Chairman Quigley. Again, Madam Secretary, thank you for your time here this morning. I want to follow up, my colleague, Chris Stuart talked a little bit about deficits and debt, and of course you can’t have an issue like that discussed and being a former budget chairman and a ranking member on the Budget Committee, not at least weigh in on the subject.
Janet Yellen: (01:14:41)
Steve Womack: (01:14:41)
There are so many questions and I’ve just got a limited amount of time. In judging from the spending proposal that we expect to get from the Administration and the longterm, the multi-year deficits that are going to be projected, are you concerned about this deficit spending? Are you concerned about what will happen to interest rates? We talked about that a little bit earlier. That should any reasonable economists would expect that those interest rates are going to rise over time, but just the fact that we are putting so much more of a debt burden on future generations, it’s going to lead to future tax increases on them, help me understand where Treasury is in this entire discussion?
Mike Quigley: (01:15:38)
Mr. Ranking member, I want to make sure you know, you’re not going to be rushed as the Ranker, you can go ahead and finish your thoughts and your questions.
Janet Yellen: (01:15:45)
So it’s critically important that we have a responsible fiscal policy and not burden our children and their children with tax increases that will rob them of chances to achieve prosperity.
Steve Womack: (01:16:06)
But at what point in time, will the Administration look to reducing federal spending, as part of our longterm solution to this challenge?
Janet Yellen: (01:16:20)
So I think we need to discuss what metrics we should be looking at and discussing in evaluating the fiscal program. Traditionally, we would be talking about numbers like the debt to GDP ratio, and that’s already at around 100%, and over the next 10 years in the budget that will be presented tomorrow, is estimated to rise a little bit higher. I know those are high numbers traditionally and worrisome. So it’s not wrong to be focusing on those, but that doesn’t, in and of itself, tell you whether or not a program is fiscally responsible. I think a better metric is the real interest payments on the debt as a share of GDP. So interest rates matter and a way of thinking about the burden of the debt and deficits on the economy is how many resources does the Federal Government need to pay interest on the debt. The real interest rate right now is negative.
Janet Yellen: (01:17:36)
In that sense, actually there is no interest burden of the debt given that the 10-year treasury rate is currently 1.6%. Financing costs are very low. In real terms with inflation around 2%, the real interest costs currently are negative. Now that will increase over time, but at least over the span of the budget that we’re going to be presenting tomorrow, it remains well within and under historic norms. I think it needs to stay that way. [crosstalk 01:18:21] metrics that I’m looking at to judge the sustainability of federal finances. [crosstalk 01:18:31] We have a problem with respect to deficits after 2030, due to an aging population, social security and Medicare. We’ll need to come back and address that. The President’s proposal you’ll see will have a temporary period of spending and permanent increases that beyond the budget window, will result in lower deficits and more tax revenue to support those expenditures. I believe it is a fiscally responsible program, but you’re very right to ask these questions and it’s important to be judged fiscally responsible.
Steve Womack: (01:19:17)
Well, as someone who believes, as my colleague said earlier, a lot of us ran for Congress because of these kinds of matters. We do think that deficits and debt do matter. As an appropriator, I will tell you, I am deeply concerned about the upward trend of the net interest on our debt and how much money that’s taking away from the spending capabilities on the discretionary side for government that actually needs to be resourced and funded, particularly national security issues and the like at an adequate level. Again, thank you for your time this morning, as always, we look forward to the continued working relationship and I yield back.
Janet Yellen: (01:20:00)
Mike Quigley: (01:20:00)
Mr. Bishop, are you still with us?
Rep. Bishop: (01:20:05)
I am, sir.
Mike Quigley: (01:20:06)
Sir, please go ahead, if you have another question.
Rep. Bishop: (01:20:10)
Yes. Madam Secretary, the COVID 19 pandemic taught us that access to broadband is essential everywhere. Then across the Southwest and middle Georgia still lack access to that. We need significant investment in broadband infrastructure so that we can connect every household to the internet, and that’s throughout rural America, particularly. In the Rescue Plan, we included a $12 billion with the Capital Projects Fund, which has been implemented by Treasury. The program provides states and local municipalities with funds for broadband infrastructure. I know that Treasury has not yet released guidance on the program, but can you provide us with some insight as to how our local governments will be able to utilize the fund for broadband infrastructure and what Treasury is doing to assure that our rural communities, our small rural communities, will be able to have access to the program?
Janet Yellen: (01:21:08)
So this is a complex and important program and Treasury is taking the time to make sure we understand how best to structure the program, but we hope to issue full guidance on the Capital Projects Fund soon and begin taking applications this summer. It’s important that this money be used as the law intended to serve underserved households and businesses, those that lack connections that are capable of delivering minimum speeds. When investments are made, would put in place rules to ensure that those investments will go beyond the minimum and will provide capacity, yet modern standards, that will enable it to work for many years to come, things like video conferencing and remote schooling. Education opportunities require high quality investments in broadband and we’re trying to get that right, but the funds will be made available.
Rep. Bishop: (01:22:40)
Thank you and telemedicine?
Janet Yellen: (01:22:40)
Rep. Bishop: (01:22:41)
Thank you, Madam Secretary. I’ve got 26 seconds, but I will yield it back, Mr. Chairman. Thank you very [inaudible 01:22:51].
Mike Quigley: (01:22:52)
Thank you so much. Mr. Stuart, you’re recognized, if you have additional questions.
Mr. Stewart: (01:22:57)
Yes, I do. I’ll be brief, Madam Secretary, a couple of times you’ve mentioned today that if inflation actually isn’t just transitory, that the Fed had several tools. It seems to me that the tools are all very painful, the Fed could raise interest rates. We could cut spending, but I mean, if we have an interest rate, as you’ve mentioned here, one of the benefits right now, and one of the things that lessons people’s concerns about debt is that we’re paying such an incredibly low interest rate, but we certainly anticipate that’s not going to be the case forever. I wish you’d through what the tools that the Treasury has and what would be the implications, what would be the impact of those tools upon the American people?
Janet Yellen: (01:23:44)
Well, I mean, some of the recent inflation we’ve seen over the last couple of months have to do with bottlenecks and supply shortages. Those are things that we’re trying to deal with in the Federal Government, but the core responsibility for controlling inflation over time rests with the Federal Reserve. Short-term interest rates are at near zero levels. The Fed’s own projections indicate that a more normal level that they think will prevail in the long run is around 2.5%. That’s still a very low level by historical standards, but most market participants anticipate that as the economy recovers and we get back to pre-pandemic, full employment conditions, eventually it will become appropriate for short term interest rates to rise above rock bottom levels and the budget that will be presented tomorrow also assumes that over time interest rates will revert to low, but still more normal levels than we have now.
Mr. Stewart: (01:25:12)
Okay. I just want to make sure I understand your response and maybe I’ll reframe my question to make sure we’re talking about same thing. So if we find out that inflation isn’t transitory and we’re looking a year from now at the same inflation rate that we have now, or potentially even higher, even six months from now, is there anything that… And I know the Fed’s outside of your direct control, but is there anything that the US government could do to control inflation other than raising interest rates, which would, as we all know, would be incredibly painful for anyone who’s trying to buy a car, trying to buy a home, or for the Federal Government, who’s trying to finance this debt.
Janet Yellen: (01:25:48)
Well, the Biden proposals with respect to the Jobs Plan and the Family’s Plan are really proposing long run investments in this economy that will expand the supply potential and boost potential output, investments in R&D and education and training and infrastructure, in support to working families that will boost labor force participation. From our side, from the fiscal side, I think those supply boosting proposals and investments will also help on the inflation side.
Mr. Stewart: (01:26:36)
Well again, thank you. Our time is short on the second round, and I’ve expressed my respect for you, that’s sincere, but I fear that you’re wrong. I fear for all of us, if it turns out that we don’t get this right, but-
Mike Quigley: (01:26:50)
Mr. Stuart, if you have another question, please go ahead.
Mr. Stewart: (01:26:54)
No. No, that’s fine. That’s my primary concern and I want to be respectful of the Secretary’s time as well. So thank you both.
Mike Quigley: (01:27:00)
All right. Thank you! Miss Torres?
Chairwoman DeLauro: (01:27:08)
Mike Quigley: (01:27:08)
Torres, I’m going to yield you my time in the second round, which will give you a couple more minutes, but if you could still keep it close to five, that would be appreciated.
Chairwoman DeLauro: (01:27:17)
Yes. Thank you so much! So Chairman and Secretary Yellen, I want to turn to the situation in the Northern Triangle. We will not see any meaningful, sustainable progress towards addressing migration from the Northern Triangle until we tackle the root cause of migration, including rampant corruption and the degradation of the rule of law.
Chairwoman DeLauro: (01:27:41)
I am pleased that the Biden Administration is placed placing anti-corruption measures at the center of our foreign policy and assistance towards the region. The Global Magnitsky Act is one of the most effective tools we have in our arsenal to fight corruption, and your department plays a major role in sanctions under that act. However, to date, only a handful of individuals have been sanctioned under the Global Magnitsky Act from the Northern triangle, specifically. The two recent Guatemalan designations were already well-known and targeted. If we want to be impactful, we need to expand our targets to reflect the depth of corruption and challenge to rule of law in the region. So is Treasury’s current focus on the Northern Triangle and commitment of personnel dedicated to the region adequately reflect of the Biden Administration’s prioritization of the region and emphasis on anti-corruption? With as many specifics as possible, can you tell me why Treasury hasn’t sanctioned more individuals from the Northern Triangle?
Janet Yellen: (01:29:05)
Well, I mean, what I can tell you is that the Biden, Harris Administration is committed to helping Northern Triangle countries combat corruption and improving economic and security conditions. As you know, the Vice President has been tasked with leading an effort that will use many tools of government and sanctions are one of them. We work closely with the State Department in implementing sanctions. We are trying to use the Global Magnitsky Act and bring financial pressures to bear when there are human rights violations and corruption. We recently sanctioned a current and a former Guatemalan government official for their roles in corruption that builds on the Global Magnitsky Human Rights Accountability Act. We did this in conjunction with the United Kingdom, and we certainly are ready and willing to cooperate with State in imposing sanctions when we can identify appropriate targets and think they’ll be effective.
Chairwoman DeLauro: (01:30:31)
Okay, So in the past, I’ve heard that from Treasury, that there is not sufficient evidence to build cases and that this is a significant roadblock. However, the State Department has a list of individuals that they have deemed corrupt. Are Treasury and State in consensus about the standard needed to sanction individuals? I know that you said that you were talking to them, but does not include consensus on what deems a person to be corrupt? Can you explain a little bit about that?
Janet Yellen: (01:31:11)
So I maybe can’t give you as much detail are you’re seeking here, and it probably makes sense for me to put some of our staff at OFAC in touch with you. What I can say, is that we work closely with… We implement sanctions, we work closely with State Department. We have certain legal requirements. I’m not aware of disagreements between State and Treasury on this, but I’ll put you in touch with people who can give you more detail, in terms of this answer.
Chairwoman DeLauro: (01:31:52)
Thank you. So I would very much appreciate that, as I am requesting additional funding to ensure that you have the resources that you need to do your job in this field. Thank you. I yield back.
Mike Quigley: (01:32:08)
Thank you. Mr. Womack, I believe everyone who had questions in the second round completed them. Do you have anything to say in closing?
Steve Womack: (01:32:17)
I do not, other than to say thanks again to the Secretary for her time this morning. Appreciate it.
Mike Quigley: (01:32:23)
Thank you. Madam Secretary, we appreciate your service and your generous time today. [crosstalk 01:32:31]. I’m sorry?
Ms. Lawrence: (01:32:33)
I would like to ask a question.
Mike Quigley: (01:32:34)
Oh, I was told by staff that you didn’t. Please go ahead.
Ms. Lawrence: (01:32:37)
Okay. Beginning in 2022, the women faces will appear on quarters for the first time and the public will help choose who will be minted. Can you discuss where we are in that process and how the public can weigh in?
Janet Yellen: (01:32:58)
Yes, I believe there is website, I’m not positive. I’ll get you details on this, but we are soliciting public input on this, on the quarter program. I’ve approved two women to appear on the quarters so far, Maya Angelou and Sally Ride. I believe there’s a website where you can provide input, but we are looking for public input. I think it’s an important program.
Ms. Lawrence: (01:33:37)
I just would ask if you could send me that information so we can promote it and thank you so much, I’m very excited about this. Thank you, Mr. Chair. I yield back.
Mike Quigley: (01:33:47)
Thank you! Thank you so much. Again, Madam secretary, we thank you for your service. Thank you for giving us so much of your time today. We look forward moving forward together, and without objection, this hearing is adjourned. Thank you so much.
Janet Yellen: (01:34:03)
Thank you Chair Quigley, thank you everybody.
Mike Quigley: (01:34:05)
Thanks for your time.