Speaker 1 (00:00):
... temporarily halt or provide for a tariff exemption process for specific tariffs on home building supplies.
Secretary Lutnick (00:10):
It's a broad, complex issue. If we want to make furniture in America, you have to protect furniture makers. That type of question is a very detailed and complex one and worthy of discussion, and I'm glad to sit with you in your office to talk about it. What do we want to make in America? And whatever we don't want to make in America, we should try to do inexpensively to the extent we can.
Speaker 1 (00:34):
Well, thank you. I look forward to the conversation. My concern is that overwhelmingly, the supply of things like softwood lumber from Canada and a wallboard or gypsum board from Mexico are being constrained by tariffs. These are close allies that work with us through the USMCA framework. They've pushed back hard on the tariffs that are being imposed on their products that are exported into our market. Canada's the largest export market from most American states. I think at a time when there's very little we can actually do in the short term to reduce the cost of housing, this is something we might work together on. Last a closing comment, if I might, Mr. Secretary.
(01:14)
Senator Van Holland asked about your engagements with your former neighbor, Mr. Epstein. I was encouraged to see your declaration that in 2005, you concluded he was a disgusting man with whom you should have no contact.
(01:28)
I wish many others reached that conclusion upon meeting him. But it troubles me that you took your family to lunch on his island, that you had appointments with him. Please disclose everything. Put this to rest because this is an issue of grave concern to my constituents. President Trump ran on releasing the Epstein files. You said casually, "Well, I looked at my name and how it appeared in them, as does everyone." No. Everyone isn't worried about their names being in the Epstein files. I know he was your neighbor. That was a coincidence, but please disclose everything that's relevant here so that we have a chance to work together and move on.
Secretary Lutnick (02:07):
To the best of my memory, I met him when he moved next door to me and I met him two other times in 14 years. None within six years of that first meeting and then a year and a half later and none thereafter. And in the presence of my wife and as Senator Van Hollen said, under no circumstances, is there a single word that I've done anything remotely wrong in any possible regard.
(02:36)
I did not have anything you could call a relationship, anything you could call an acquaintance. I literally met him three times over 14 years with widespread in between. That's all I can remember. That's all there is in the documents. I didn't look through the documents with any fear whatsoever because I know and my wife knows that I have done absolutely nothing wrong in any possible regard.
Speaker 1 (03:05):
Thank you for answering our questions today.
Speaker 4 (03:08):
Senator Merkley.
Speaker 2 (03:11):
Thank you, Mr. Secretary. We are finding in Oregon that at places where we were trying to get microwave relays that it is now workable to use satellite for broadband. And in my rural town halls, people are starting to give reports and the strategies are adjusting, but still a variety of strategies are appropriate in different places, as you've pointed out. Federal poverty level, my colleague suggested that the 11% is an overstatement of people living in poverty. I would suggest the exact opposite. That federal poverty level calculation, are you familiar with how that's put together?
Secretary Lutnick (03:50):
Not exactly as I sit here.
Speaker 2 (03:52):
Okay. Well, when it was put together, food was approximately one third of the cost of basic living. So it's based on food times three. That's the calculation. So over that time, the other components that are necessary for life like housing and healthcare and daycare have gone up enormously. When you take those into account, the 11% really understates dramatically the number of families in America that are struggling with the fundamentals.
(04:22)
I'd like to encourage you to take a look at that formula. I think it should be rewritten to reflect what kind of the basket of goods are necessary to have a basic life in America so we could have a much more accurate picture. This formula explains why folks cite, "Well, not very many people are struggling. Isn't that great?" When the reality on the ground, I live in a blue collar community, I travel every part of my state.
(04:47)
The reality is a tremendous number of families are struggling. And if we don't adjust our policies to understand that and we don't even have an accurate way of calculating it, we're really failing to understand the basic economics and challenges of families in America.
Secretary Lutnick (05:06):
I'm happy to sit with you and go through the details of that. I think more knowledge, more specificity is always helpful, and I appreciate going through that with you.
Speaker 2 (05:15):
Great. I look forward to that. And I just encourage you to have your team look at that formula and then look at what a much better formula would be to reflect what's going on in our country. Last time we talked, we talked about the manufacturer extension program and you agreed to get together for a meeting, but before that meeting was planned, the Oregon MEPs were funded, which was great because small business striving to do manufacturing is essential to a vibrant economy, but only part of that money has been dispersed in Oregon.
(05:51)
And I understand some of the grants in other states have not been dispersed at all. We're now in the situation where in fiscal year '25, we had 175 million allocated to the manufacturing extension program. Do you know how much of that's been dispersed now?
Secretary Lutnick (06:10):
I do not know offhand.
Speaker 2 (06:13):
Can you try to get the rest of it out the door, whatever hasn't been dispersed?
Secretary Lutnick (06:18):
I'll be glad to look at it and get together with your office and discuss it. Sure.
Speaker 2 (06:21):
Yeah. Thank you. And I really would like to see for what we're now doing for FY26. I think I'm not sure where the disconnect is because the president talks about wanting to have manufacturing. I've done a Made in Oregon manufacturing tour of my state, done a number of times over different years, and these small businesses that do all kinds of different things are great employers in small towns and medium towns, and sometimes they become big businesses over time. Why is it that the MEP program hasn't been like a shining star of the first thing that you wanted to get out the door?
Secretary Lutnick (07:07):
I think the problem has been that the Inspector General's office, many of these locations have had problems with the offices that executed that. There's been more than you would expect issues of waste, fraud and abuse from these offices. And I think the objectives of the program are sound. I think the execution needed better oversight, and I think that's one of the things we are deeply focused on, is trying to clean that up, and that has been an issue that we've had to address.
Speaker 2 (07:39):
Great. So I appreciate you taking a close look at that and look forward to this... Last time we were planning to meet, you took action before we met. That was great. I hope that can happen again. I want to just summarize the reason, and I can hear the angst in your voice over the Epstein files. The reason people are bothered is because last year you said you'd cut off all contact, but there are eight incidences of interaction in the files after 2005.
(08:17)
In 2009, you wanted to speak with Epstein. You asked for his phone number. In 2011, there was the appointment for drinks. In 2012, you were planning a trip to the private island with your family. That sounds like somebody you know well enough to call up and say, "Let's get our families together. Let's visit each other." In 2013, the exchange of information about an article relating to intellectual property and gambling, topics that you have an interest in.
(08:52)
You've both signed up for an investment. It's not clear if you had conversations about that same investment, but you were neighbors, you made the same investment, maybe, maybe not.
(09:05)
And then in '15, Mr. Paulson... In 2017, Mr. John Paulson wrote to Epstein saying, "Hey, why don't you contribute to this event? You're a close friend of the Lutnicks and it's honoring Lutnick." Again, that may not have been you personally involved in that, but I know from many events when people are raising money, they say, "Who do all do you know that might contribute if I'm honored and one supplies a list?"
(09:38)
And so I guess collectively it suggests that when you said you cut off all contact in 2005, that was probably not a full and complete accounting. And again, no suggestion of wrongdoing on your part and propriety, if you will, but I do think kind of restating that and clarifying to people that you understand, that your statement you made last year might not have accurately portrayed. And then there was also the communication regarding the museum across the street being put up and that action needed to be taken and what should we do.
(10:13)
So that's eight different instances. Just encourage you to be completely frank and open with everyone, correct the record as needed, and again, no wrongdoing on your part. Thank you.
Speaker 3 (10:29):
Thank you, Mr. Chairman. Welcome, Mr. Secretary. It is nice to see you here today. I look forward to being able to visit with you about some of the programs in the commerce department. So thank you for being here. In December, I wrote to NTIA with over a dozen of my Senate colleagues, including Chairman Moran. And this letter urged the agency to ensure that states would be allowed to retain and to maximize their bead funding allocation in compliance with the bipartisan infrastructure law, which I supported.
(11:03)
I know Chairman Moran has also touched on this in his questions with you this morning, but first and foremost, do you agree that states should be able to retain those broadband infrastructure dollars as is consistent with the law?
Secretary Lutnick (11:21):
We will hue to the law, for sure. I think the best use of those funds, I think we need to talk about and try to come up with the best idea, but we have saved the American taxpayers $21 billion, and I think it behooves us to work hard to make sure the next use of those funds are the best they can be for the American taxpayer.
Speaker 3 (11:46):
And I agree that you need to follow the law, but with the bipartisan infrastructure law, I personally think it was laid out pretty clearly on how those funds need to be maximized. And I happen to think that states are the places that we experiment. I'm a strong supporter of federalism and every state is different to be able to use those funds in a way that address the differences in our state.
(12:19)
So I look forward to being able to visit with you more about that and make a good case to you about it, sir. So thank you. In December, I also wrote a separate letter to NTIA, and I encouraged the agency to allow precision agriculture connectivity to be an eligible use of the BEAD non-deployment dollars.
(12:44)
Optimizing last mile deployments with last acre connections is critical for agricultural states like Nebraska. This eligibility would leverage the deployment plans that NTIA has already approved, enhancing networks and driving economic development throughout rural America.
(13:06)
And these are goals that the infrastructure law explicitly outlined. So will you work with me to ensure that precision agriculture considerations are addressed within eligible uses for the remaining BEAD funds?
Secretary Lutnick (13:24):
I look forward to talking with you and addressing precision agriculture. It sounds something worthwhile, and we will spend time together learning it and figuring out the best way to do things.
Speaker 3 (13:35):
Wonderful. I'd love to have you, host you in Nebraska with the university to be able to see all the really cool stuff that technology can do with precision agriculture and how that's going to not just benefit ag producers and states, ag states like mine, but how it's going to be able to manage our resources, whether it's water or land and feed the world. So let me host you in Nebraska.
Secretary Lutnick (14:07):
Sounds like fun.
Speaker 3 (14:08):
Yay. Okay. And Mr. Secretary, after the benefit of the bargain rounds, there's estimated to be over $20 billion in uncommitted bead funding funds that are remaining. And as you imagine, for senators like me who strongly supported the infrastructure law, we believe that funding needs to be put to best use, again, by staying in states to close that divide. I know you've talked about how NTIA has a public listening session tomorrow to inform its determinations, but would you please discuss some of the initial proposals that the department is considering at this time for using those non-deployment funds?
Secretary Lutnick (15:01):
Sure. The department has received ideas, for example, to invest in polls in locations that don't have sufficient polls to get access directly to communities. That would be an example. Another example is to invest in public safety so that the police, the firemen, the local community can do a much better job communicating with each other in times of crisis. So that would be another example of how you could do better investment in the communication infrastructure.
(15:40)
So those are two examples that just come to mind quickly, but tomorrow we will get a broad group of examples and I think we'll be much better served just talking to you and yourselves and your staff, if they'd like to talk to us, we'd be glad to learn their ideas.
Speaker 3 (15:58):
Great. I think telehealth is a wonderful investment to be able to help communities across the board, cybersecurity. Obviously, you're very well aware of the issues that businesses, communities, government faces with regard to being hacked, interfered with on our systems. So cybersecurity, I think is another great area to be able to look at as well. So I look forward to having conversations with you and I appreciate your work. Thank you.
Senator Peters (16:38):
Thank you, Mr. Chairman. Hello, Secretary Lutnick. I have a couple questions related to the BEAD program, but I have another question, a couple that I'd like to ask you about what I think is probably one of your principal responsibilities as Secretary of Commerce, and that's the conducting of the US census. I'm a ranking member of Homeland Security and Government Affairs. We oversee that. And as you know, it's a monumental undertaking that requires an awful lot of upfront effort.
(17:04)
And last week, some information came to my attention I'm concerned about is that the Census Bureau announced that it's going to cancel four of the six sites for the 2026 census test, which was supposed to start next month. Canceling these tests and firing the people in your department who are already hired, they're already there, hired to complete it with no advanced notice, I think one, first off is wasteful at best, and worst, it seems as if there could be an effort to sabotage this effort, which I hope is not the case.
(17:39)
I believe that we can't have an accurate 2030 census, it's one of the largest, most complicated task in our federal government, without proper preparation. We've seen that over many, many years. This is a template that we've had to follow. We need an accurate count of everyone who lives in America to ensure that communities and families receive the funding that they need for schools, for healthcare, for first responders, infrastructure, and so much more.
(18:04)
And fully carrying out these tests is a necessary part of making sure that we're able to actually pull that off. So given these facts, I just need a yes or no answer. Will you commit to undoing the cancellations of these four testing sites and commit to completing a complete census test, which is an essential step in being able to do the full-blown version a few years from now?
Secretary Lutnick (18:29):
I appreciate the question and I agree with you, the test is vital and important, but I'd like you to understand, we are for the first time ever going to use the post office. The United States Post Office is going to execute the 2026 test, and the survey we're going to use is the American Community Survey.
(18:53)
So we are going to go out with a more sophisticated census and we're going to use the... We've made a deal with the post office, so we're going to pay the post office to execute that, but you can imagine the efficiency of already having hundreds of thousands of people who already work for the federal government, who already have cars, who already pay for the gas, and they already know where everybody lives. So this is one of my big moves for efficiency. We are testing 2026 to see, can the post office do it?
(19:26)
Because our objective is, I think the post office can do the census in 2030, do a better job because they go to 169 million homes every day. They should be able to do the census brilliantly and for far more efficiently. And the test, as you correctly pointed out, is coming very, very shortly in 2026.
(19:49)
So I'm happy to talk to you about it and go through it with you together so you can best understand what our plan is.
Senator Peters (19:55):
Well, I appreciate that because obviously this is a big change, and if it doesn't go well, that has
Senator Peters (20:00):
Catastrophic impact. So I would hope you would also commit as you're doing this, but moving forward, is that you will make all the planning results of the '26 Census Test available to the public and to Congress so we can fully evaluate this together and that we can perform our oversight function. Would that be something you'd be willing to agree to today? Fully transparent with the test.
Secretary Lutnick (20:21):
I'll certainly take that under advisement, but it makes perfect sense for us to talk about it and make sure. This is a test of a new idea. Let's see how it goes, but I'd be happy to meet with you and your staff and go through it because that makes sense.
Senator Peters (20:34):
Yeah. I appreciate it. And if it's not going well, it's hard to... Time is a wastin'. So it's important for us to really have a good sense of what's going to be going on.
Secretary Lutnick (20:43):
Sorry. But that's why it's vital to do the test in 2026 for the 2030 Census. That's why this test is vital.
Senator Peters (20:50):
And it's also vital that we assess it fully to understand that's actually working so we can make a course correction if necessary. Also on the topic of Census has been reported that your department plans to add a question to the Census Test, asking people their citizenship status. The Supreme Court has already overturned past efforts to include a citizenship question on the Census, and it's because the Constitution, it's a great document, the US Constitution requires the Census Bureau count "the whole number of persons in each state" regardless of citizenship status. The Census Bureau's own research, your own Census Bureau's own research has shown that asking immigrant questions on the Census will make it less accurate by making people, including citizens, less likely to participate. And that will be especially true now given the racial profiling, abuse of power, the violence that Americans are witnessing on the streets of America right now.
(21:44)
And so given the hard evidence that asking immigration related questions actually sabotages the success of the Census and the constitutional questions related to that as well, yes or no, will you commit to leaving a citizenship question off of the questionnaire? Will you take that off?
Secretary Lutnick (22:10):
Senator, it's a longer answer. I don't know how you'd like me to play it. It's not a yes or no. Sorry.
Senator Peters (22:17):
With that objection, Mr. Chairman, you [inaudible 00:22:18] can answer the question. It is an important one.
Senator Moran (22:20):
Yes, go ahead.
Secretary Lutnick (22:24):
You correctly point out that citizenship is not in the constitution for the apportionment, right? The most important thing, which is the 435 seats and the 435 electoral votes are not predicated on citizenship. It's not a necessary factor to determine apportionment. What the questionnaire is, I don't know, and we've not decided. But I agree with you, citizenship is not in the constitution for apportionment.
Senator Peters (23:00):
But just to the question, the other part, is that your own department has evidence to show that it has a chilling effect on people even participating in the Census, including citizens. And if they're not participating, then that is going to have an impact on their local community's ability to access public health benefits, education benefits, and a long list, which I know you're very well of. It is very troubling and it's based on objective studies done by the Census Bureau. Having that on that test is going to undercount citizens based on research that has [inaudible 00:23:35]. Doesn't that trouble you?
Secretary Lutnick (23:40):
I'm not familiar with that being true, but I'll look into it.
Senator Peters (23:44):
Appreciate it. Thank you, Mr. Chairman.
Senator Moran (23:46):
Senator Reed.
Senator Reed (23:48):
Well, thank you very much, Mr. Chairman. Welcome, Mr. Secretary. Mr. Secretary, you've referred and referenced that dozens of states have submitted complete plans for deployment dollars under BEARD and signed final agreements. Rhode Island, my state, has done that. They signed their final agreement nearly two months ago, but they have not got any funding and they have no indications of what lies ahead. Can you clarify the situation? What's the hold up?
Secretary Lutnick (24:21):
If your state has signed the agreement, they should be able to draw funds. There is nothing... Once we send you the document, if you sign it, you can draw funds from the grant process. There should be nothing in the way. And I'm happy as I leave here to go find out how I can help you fix that, because if you've signed that, there should be nothing in your way to receive the grant proceeds.
Senator Reed (24:47):
And if you want a person to deliver it, Newport's a nice place to deliver it.
Secretary Lutnick (24:53):
Yes, it is.
Senator Reed (24:54):
Yes, it is. Until you became Secretary, you led the investment bank Cantor Fitzgerald. And Cantor Fitzgerald has still maintaining significant business size with Tether, a stablecoin issuer, domiciled and El Salvador. And under the GENIUS Act, which was enacted last year, Tether is permitted to freely offer and sell its stablecoin token in the United States without needing a license from US regulators and without needing to meet any US anti-money laundering and sanctions compliant requirements or obtain an audit. All it needs to do is demonstrate that El Salvador's stablecoin regulations are similar to the United States. And I think this is a huge risk because Tether has been identified as helping to fund Hamas, North Korean WMD proliferation, ransomware attacks, Russian arms dealers, et cetera. Now, you said in your confirmation hearing, "I believe US dollar backed stablecoins should be fully audited." Does this include Tether? And if so, why has Tether not been audited?
Secretary Lutnick (26:11):
Two things for you. I am, of course, completely divested from all things business. I'm just worried about the United States of America. My understanding is that Tether has launched a US, fully approved under the GENIUS Act, stablecoin. So I think the only Tether stablecoin in America will be the fully approved under the GENIUS Act stablecoin. And generally speaking, I absolutely agree with you. Tether should be audited. I don't have anything to do with it, but I agree with you that Tether should be audited.
Senator Reed (26:47):
Well, we both agree. And so I think it's an indication perhaps that the GENIUS Act has to be sharpened up a bit because there is no legal requirement for them to be audited and they can still operate freely in the United States. But that's a topic probably for another hearing. Let me move on to the value of the dollar, Mr. Secretary. It's hit a four-year low. In fact, it's fallen 10% since the administration took office. And general question, how do we maintain our economic prominence in the world with a weakening dollar? I know some people will point out and say, "Well, that's good in some respects because it brings investments to the United States, jobs." But in addition to weakening dollar, we've seen that manufacturing jobs are falling too. So what is your response to these issues about the falling dollar?
Secretary Lutnick (27:42):
The dollar over many years has been manipulated higher in order to keep the US economy from exporting to the rest of the world, right? That's the idea. It's more expensive for everyone else in the world to buy our products and it's cheaper for us to buy theirs. When the Trump administration and the president called out this fact that we were running $1.2 trillion trade deficits. I mean, the rest of the world was selling us stuff and using our dollars to buy our country from beneath us. Remember in 1985, we owned more of the rest of the world than they owned of us. And now the rest of the world owns 26 trillion more of us than we own of them.
(28:27)
So the idea is the dollar where it is now is just more natural. We are exporting more, and that's why our GDP has grown so much, right? We had 4.4% GDP growth in the third quarter. I think, personally, my opinion is I think the fourth quarter will be over 5%, and I think we reasonably could get over 6% in the first quarter because our exports are growing, the weaker dollar, our imports have shrunk, because of tariffs, and that's GDP growth.
Senator Reed (28:57):
Well, you say that our economy has been sort of stepping back from foreign investment, purchasing, et cetera, but the president touts every time he meets with a foreign leader, how much money they're going to invest, i.e., buy American property, buy American facilities, et cetera. Is there a contradiction?
Secretary Lutnick (29:19):
Building in America rather than us buying their products that they build overseas. When you build a product overseas, you're employing these foreign countries people. When you build in America, you have to employ Americans to build the product. You build in America and you employ Americans to build your product is something that the president is pushing for. Stop importing. Let's build manufacturing. In America, you're going to see enormous manufacturing job growth coming over the course of 2026 in my-
Senator Reed (29:48):
We haven't seen it yet, but I hope you're right. May I ask one more question, Mr. Chairman?
Senator Moran (29:52):
Senator Reed.
Senator Reed (29:53):
Thank you. The Trump administration has approved sale of NVIDIA H200 chips to China. I can tell you, I just came from the Armed Service Committee. I've served on that committee for 30 plus years. [inaudible 00:30:09] uniform military officers, they are quite concerned. In fact, they believe this is a very dangerous situation of giving China literally a leg up in technology. And Congress is requiring NVIDIA to self-certify that the H200 ships sold to China are not for military intelligence end use. Well, how will you, at Department of Commerce, track the final end use of these chips to ensure that they're not used to military intelligence uses and how will you enforce these conditions?
Secretary Lutnick (30:45):
The licensed terms are very detailed. They've been worked out together with the state department. And those terms NVIDIA must live with and must [inaudible 00:31:00] to.
Senator Reed (31:01):
Do you believe the Chinese will live with them? Did you trust the Chinese to follow-up and to be... The contract that they've executed with NVIDIA?
Secretary Lutnick (31:16):
I'll leave that opinion to the President of the United States.
Senator Reed (31:19):
Well, I think it's a tragic, difficult and wrong decision because again, not only will the Chinese exploit, as they've demonstrated for the last several decades, any type of intellectual property they get their hands on. But I think also this might apply to those proposed sales of the United Arab Emirates, because it's quite easy for them to include it in a device, sell the device to China, have the Chinese take apart the device and get the chip. And they could say, "Oh, we didn't sell the chips to China." I think you've got a serious problem here, Mr. Secretary. And without oversight by the Department of Commerce, real oversight, these chips will be misused to the detriment of our military forces. Thank you, Mr. Chairman.
Senator Moran (32:06):
Thank you, Senator Reed. Mr. Secretary, just I'm going to ask a question or two, and so is Senator Van Hollen, and then we'll be done. You have used the phrase allowed by law sufficiently a number of times that had caused me to look to see what the law says when talking about how the unspent money will be spent. And there is a long list of items under use of funds. The last one is number six, any use determined necessary by the assistant secretary to facilitate the goals of the program. Is that what you refer to when you say anything allowed by law? Is that discretion?
Secretary Lutnick (32:52):
I think the idea is to meet with the constituencies yourselves and try to come up with the smartest use of the funds. Make sure it stays within the statute, of course. But what is the smartest use? We have proven, I think to this committee, that we are good stewards of the American taxpayer's dollar and we will continue to do that. So we will work together to come up with the best ideas. I suggested a few that had just come to us, but I think we will work it out in a way that is smart.
Senator Moran (33:26):
Do you have any doubt that what they'll still be significant portions of the country and consumers that when BEAD is fully implemented, absent the "unspent funds," there'll still be plenty of opportunities to provide broadband to the American consumer? Or do you think that BEAD with the money that's been made available will meet the needs of the country for broadband services?
Secretary Lutnick (33:52):
My understanding is each state gave us the complete list, the complete total of those who needed to be served, and we are serving universal broadband access. So this is to cover every single person as of the date we did it. That is the objective, and that is what I think we are going to achieve. We are going to give broadband internet connectivity to every single person that every state said was in need, we will deliver.
Senator Moran (34:23):
And that does not necessitate the use of the unspent funds to reach that goal.
Secretary Lutnick (34:29):
It does not. And each of the broadband offices of the states agrees.
Senator Moran (34:36):
So in my opening statement, I talked about the amount of money allocated to Kansas originally, and then with the change in the direction, the policy, that it was... Much less was demanded. So that less money presumably meets the goal of providing everything that Kansas needs. It's just took less money to do it?
Secretary Lutnick (34:58):
Correct, because we used competition. Biden administration had selected one way to do it, and there was very little competition and a huge amount of red tape. If you bring competition in between fiber, fixed wireless and satellite, you get much better economics, as we all know. So we got much better economics for solving the same performance standards and covering every single person. This is universal coverage at a much better deal.
Senator Moran (35:32):
I think my final question and then I'll turn to Senator Van Hollen. The BEAD program or any federal broadband deployment program, those resources, those grant dollars are taxable to the provider that receives the funds. And under current law, when a broadband deployment or provider is initiating the plan to rely upon federal funds, that provider has to account for 21% of that award being paid back in federal taxes. And I introduced, with a number of my colleagues, the Broadband Grant Tax Treatment Act, which excludes certain grants, including BEAD from those dollars being taxable. I think you've testified or indicated before you support that legislation. I'm back at making the effort to see we get it passed, and I want to get your reaction and see if my understanding is that you're supportive of eliminating the tax on the proceeds of grants to those providers. You still support that position, if you previously did?
Secretary Lutnick (36:41):
I think that kind of opinion is best served with yourselves, right? Whether you choose... On an appropriation that you've given, we've executed it, whether you think we should tax it or not, I'll leave it to your committee. I think it is best served by yourselves.
Senator Moran (36:56):
Well, unfortunately, we'll have to leave it to another committee than this one, at least initially. But it does diminish the dollars that are available and the interest in participating in the program is diminished as you try to figure out how you make this profitable for the provider.
Secretary Lutnick (37:12):
If you let us give it out tax-free, I promise you I could do it for less than 21 billion.
Senator Moran (37:19):
It's another option. Senator Van Hollen.
Senator Van Hollen (37:23):
Thank you, Mr. Chairman. I just want to start by sharing the concerns and statement made by the chairman. I think you've heard it from other members of this committee as well. Yeah. The benefit of the bargain was struck at the time we passed the infrastructure bill. I've heard you refer on a number of occasions to new ideas. Having worked with the states, including my state of Maryland, for a long time on this, Mr. Secretary, I think the important thing is to make sure that they get the benefit of the bargain. And I think you're hearing on a bipartisan basis, this committee is going to scrutinize that very closely. There are just a couple of questions I have before we close. One is just to follow-up on one of your responses with respect to the Epstein file, specifically the visit you and your family took to Epstein's private island in 2012. And I think you also said you went on his yacht, is that right? Or both? No.
Secretary Lutnick (38:26):
No.
Senator Van Hollen (38:26):
Okay.
Secretary Lutnick (38:27):
I didn't say that.
Senator Van Hollen (38:29):
At that time, I think you mentioned that you were accompanied by your wife and kids and nannies. My question is, do you know whether the nanny that you had on that trip was the same nanny that Jeffrey Epstein expressed interest in meeting?
Secretary Lutnick (38:49):
No, I have no idea about that whole thing. I mean, I don't recall it having anything to do with me. And I don't know that, no.
Senator Van Hollen (38:58):
It's just this guy was a convicted sex offender and obviously not a great place for kids and nannies. Was Ghislaine Maxwell on the island at that time?
Secretary Lutnick (39:09):
No.
Senator Van Hollen (39:09):
No. So turning now to the issues of the high speed internet and broadband, let me just say, I appreciated your very emphatic response to Senator Shaheen about Starlink, SpaceX or any other entity not being able to change the terms of the deal after the fact. I thought that was a really clear and defined statement. So, I do want to ask you about another rider, you described that as a rider, that seems to have been referenced, at least in the president's executive order, with respect to AI. The order directs you, the Secretary of Commerce, to study whether the department can withhold federal, rural broadband funding from states with unfavorable AI laws.
Senator Van Hollen (40:00):
... pause. Mr. Secretary, that would be a rider. Is there any place in the law that you've seen that that could be a condition of providing the funds that we're talking about here today?
Secretary Lutnick (40:13):
I'm not sufficiently familiar to answer, unfortunately.
Senator Van Hollen (40:17):
Okay. Well, I appreciate if you can get back to us because you properly described what Starling's trying to do as a rider after the fact. This would be a clear rider after the fact, and there's just no justification or legal grounds for applying this conditions when the condition did not exist in the underlying law.
(40:41)
Let me ask you about the GAO. The GAO has informed the committee that Department of Commerce is declining to answer questions regarding certain investigations and audits. As you know, GAO is empowered by the Congress as a congressional watchdog to look into fraud, waste and abuse. They have very broad jurisdiction. I'm just asking, Mr. Secretary, can you commit that your department will comply and work with GAO and cooperate with GAO in their work?
Secretary Lutnick (41:19):
My understanding is driven by our general counsel who's instructed us how to respond and we will respond according to whatever the rules are as informed by my general counsel.
Senator Van Hollen (41:34):
Okay. Well, I hope, Mr. Chairman, that we have a shared interest in making sure that GAO can conduct a proper oversight of the department. It comes with every administration. And so it seems to me that's something that the department should comply with.
(41:52)
Let me just briefly follow up on questions from Senator Coons and Senator Reed regarding the export of very high-end US technologies, high-end chips, which of course are important to power AI. I was very concerned... Well, first of all, I was happy to see early in administration, the adoption of the affiliates rule. So when you say we are not going to allow the export of a high-end technology to one entity, that we also make sure that we don't export those same high-end technologies to their subsidiaries or other related entities because it made sense that if you're going to close the front door, you shouldn't open the back door.
(42:43)
For the life of me, Mr. Secretary, I can't understand why that was repealed. Could you take a moment and let me know why and whether you plan to reinstate the affiliates rule?
Secretary Lutnick (42:55):
The complex relationship between the United States and China is in the hands of the President of the United States and Secretary of State, and they help us and instruct us, and we follow their lead.
Senator Van Hollen (43:13):
It's interesting, Mr. Secretary, we had our trade ambassador here, and I asked him questions about this, and he said to ask you. Now you're telling me I should ask Secretary Rubio or the president. You are in charge ultimately of... Well, the president of course is ultimately in charge, but the export controls policies to this administration, frankly, have been very confusing when it comes to chips. I mean, we all know about the episode that the president went to the UAE after his sons traveled there and the deal that went down, but I am focused now on China. You're asking me to go ask the Secretary of State about why the affiliates rule was dropped.
Secretary Lutnick (44:04):
What I'm saying is it is a very nuanced and complex relationship between the United States and China. The President is driving that relationship. We all are familiar with the weaponization of critical minerals and rare earths and magnets. And so the resolution of those topics is really with the President of the United States and Secretary of State as they work through the nuance of the broad relationship between China and the United States. And that's what I'm saying. It's not a particular topic. It's a broad, very nuanced topic that rests in the hands of the President of the United States. And I think he has done it. He has handled that situation, I think, brilliantly.
Senator Van Hollen (44:53):
Well, we'll have to disagree on that. I see the chairman has his finger on the button. I'm going to submit some questions regarding the issue of the Trump administration's decision to take a stake in the rare earth sector. I think it was US rare earth, and I will be following up for the record on that, Mr. Secretary.
(45:12)
Thank you, Mr. Chairman.
Speaker 5 (45:14):
Senator Murkowski.
Senator Murkowski (45:16):
Thank you, Mr. Chairman. And welcome to the committee, Mr. Secretary. Good to see you.
(45:22)
I want to talk about the pending BEAD final proposal. Alaska is one of the states that has not yet been approved by NTIA for the final BEAD decision. I'm told that we've got until February 11th, so this week, to get three undecided projects under the BSL threshold. So just a couple questions in this vein this morning. As I have shared with you in the communications and the conversations we've had in my office, Alaska has looked at the BEAD program as this one-time opportunity for us to really try to address the digital divide that we see in very rural spaces. The restructuring notice that came out last year has made it a little bit difficult, I'll just say, for the Alaska broadband officer, this is what they're telling me in terms of just what they feel are some of the changing goalposts. So they're trying to figure out how we, again, get maximum yield out of this very important program.
(46:47)
As you know, construction seasons are not 365 days a year. I need your commitment that, that we will see approval of Alaska's proposals promptly so that we can get to work in this upcoming construction season.
Secretary Lutnick (47:06):
I'm happy to make such a commitment.
Senator Murkowski (47:08):
Great. I appreciate that.
(47:11)
The non-statutory cost threshold per BSL in Alaska has shifted multiple times in my communications with NTIA. Can you tell me what per BSL cost threshold is being used in Alaska with regard to the final BEAD proposal? What we need to know is, what's the threshold and can we count on the fact that it's not going to be changing on us yet again?
Secretary Lutnick (47:42):
My understanding is that actually Alaska's on the one yard line. I mean, we're just about there. I think the only issue was that island.
Senator Murkowski (47:51):
There's three islands.
Secretary Lutnick (47:53):
But I'm-
Senator Murkowski (47:54):
St. Paul, St. Lawrence, and McGrath. McGrath is not an island. It may as well be an island because it's...
Secretary Lutnick (48:00):
My understanding was the conversations were with respect to the island and that we were very, very close to a solution between us. So my expectation was, in fact, it may be resolved today or tomorrow.
Senator Murkowski (48:14):
Okay. That would be great. And I'm sure your teams will be working with us to give more information.
(48:23)
Let's talk just a sec about the unspent funds. It's my understanding that the final provisional awards approved by NTIA are going to award the states much less than their original BEAD allocations. I don't know how much is actually left on the table. The question that I have is, what happens to it? Is it returned to the Treasury? How much is intended to return to the Treasury? What are the plans for the funds?
(49:03)
We're looking at it from the perspective of, look, everything in Alaska, and you know this, everything is just so high cost. Every dollar matters. We get it. We're operating under the assumption that Congress intended all these funds to be dispersed in a smart and a wise way. We get that. But a question for you in terms of what the plans are for unspent funds and just a commitment that these remaining funds be allocated in a way that are used to do exactly what we intended with this program, which is to strengthen all aspects of communication, particularly when it comes to our emergency or public safety communication in these rural areas where you just have these incredible gaps, but also within the critical mile infrastructure.
(50:03)
So we know we want to be smart with our money, but these were funds that were directed for a very specific reason. The need is huge. And in many cases, it's just a little more expensive than maybe in the lower 48.
Secretary Lutnick (50:23):
We have no plans for rescission.
Senator Murkowski (50:26):
Okay. There's a difference though between rescission and unspent funds.
Secretary Lutnick (50:30):
We have $21 billion. We have executed universal broadband, gotten every state, covering each and every person that every state asked to cover, yours included. We will have 21 billion remaining. So we are starting tomorrow, a listening tour. We have 900 people signed up for tomorrow. We will meet with your office and your staff if you would like. What are your best ideas? You've said it, I think, very, very well. Let's do it smart. Let's do it efficiently. Let's do it effectively. We have covered everybody who needed it in the United States, universally, at that high performance standards that you set for 21 billion less. We have now a great opportunity. We have $21 billion. Let's design together the smartest thing to do with that money for the benefit of your state and for all of the states of America. I think that is our objective, and we start that tomorrow.
Senator Murkowski (51:30):
Okay. Well, I will look forward to those follow-on conversations, both with regards to the Alaska-specific projects and then on the going forward. Again, I recognize that we are... The way I say it is we've never been the benefit of the bargain in many cases because we're just so high cost. And it's not because it's waste, fraud or abuseful. It is just far out there. So this is an opportunity that we have to really do right by all Alaskans, even in the most remote of remote places. And we look forward to working with you to address their needs as well.
(52:12)
Thank you, Mr. Chairman.
Speaker 5 (52:15):
Mr. Secretary, anything you'd like to add?
Secretary Lutnick (52:19):
I just appreciate you having me here and thank you.
Speaker 5 (52:22):
Thank you. Thank you for being here. Thanks for accepting our invitation. Thanks for your attention to issues that are really important to our constituents in the country. There are no further questions. Senators may submit additional questions for the subcommittee's official hearing record. We request that NTIAs, the secretary's responses occur within 30 days, and the subcommittee stands and recess subject to the call of the chair.
Speaker 6 (01:00:00):
(silence)