[Congressional Record Volume 169, Number 70 (Wednesday, April 26, 2023)] [House] [Pages H1960-H1977] From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
Date: 2023-04-26
Chamber: HOUSE
Mr. VAN ORDEN: my favorite part of this building is not the rotunda or Statuary Hall or even this Chamber. It is a simple quote painted above a door downstairs. It is, ``When tillage begins, other arts follow. The farmers, therefore, are the founders of human civilization.'' It was written byDaniel Webster in 1840. It is just simply time for some more truth- telling. It is disingenuous to say publicly that we are ``all of the above'' for American energy if we do not embrace biofuels. Simultaneously, it is disingenuous to set policy that de facto abolishes petrochemicals and yet admits that we will be dependent on them for at least another decade. Both positions have been made in this Chamber. I find this to be either duplicitous or foolish, and I choose to be neither. Our first President, who overlooks this body, was clear about public policy and agriculture. ``It will not be doubted . . . agriculture is of primary importance. In proportion as nations advance in population and other circumstances of maturity this truth becomes more apparent, and renders the cultivation of the soil more and more an object of public patronage.'' This was written 9 years after the signing of the Declaration of Independence, and when Washington says ``more and more'' he acknowledges that agriculture has always been an object of public patronage and must always be. The initial writing of this bill did not acknowledge that. It did not stand with the farmers, and I will always stand with our farmers. Early this morning, our Conference made great strides in recognizing our farmers by including elements of my amendment that protect our corn growers and biofuel industries. With that said, if this final bill as returned from the Senate includes further provisions that do not show the proper respect for our farmers, our national security, or the future of nuclear energy, I will not vote for its passage. There will be no further negotiations from my office. To be clear, I voted for Kevin McCarthy for Speaker because I believed that he was the person called at this moment to lead this Conference and this body, and I don't feel that my 15 votes were in error. I have full confidence that he will take the opportunity to keep his word to this body and to the American people, and this confidence was earned by his willingness to remove several devastating provisions from this bill. I remind my friends, as Members of this body, we did not take an oath to the Republican Party or the Democratic Party, we didn't take an oath to the President. We all took the same oath to the Constitution. With this oath came a responsibility to the people that we represent. In reference to this current discussion on the debt ceiling, our first President articulated this in a manner that for such a young country can only be described as timeless: ``No pecuniary consideration is more urgent than the regular redemption and discharge of the public debt. On none can delay be more injurious or an economy of time more valuable.'' By President Biden refusing to negotiate with this body, he is adding to a growing train of usurpations of the constitutional authority vested in us by the people that sent us here to represent them. This is no more appropriate now than it was when Thomas Jefferson wrote it. It is our obligation to get Speaker McCarthy to the table. It is Speaker McCarthy's burden to get the President to a place that can both meet our collective obligations articulated by George Washington and to secure the future for both our progenitors and our progeny. I will support this bill. I will vote in favor of it, and I encourage all my colleagues to join me in doing so. Mr. McGOVERN. Mr. Speaker, I yield myself such time as I may consume. I am a little confused after the last speech. Mr. Speaker, with the way the gentleman from Oklahoma (Mr. Cole), my friend, has been talking, you might think that President Biden caused inflation all on his own. That is just simply not the case, and everybody here knows that. Mr. Speaker, I include in the Record an article from the nonpartisan, nonprofit Economic Policy Institute titled: ``Rising Inflation is a Global Problem, U.S. Policy Choices Are Not to Blame.''  [From the Economic Policy Institute, Aug. 4, 2022]  Rising Inflation is a Global Problem. U.S. Policy Choices Are Not to Blame  (By Josh Bivens, Asha Banerjee, And Mariia Dzholos)  key takeaways  An international comparison among OECD countries shows that rising inflation is a global phenomenon, not unique to the United States. This fact argues strongly that high inflation in the U.S. has not been driven by any unique American policy--not the American Rescue Plan and other generous fiscal relief during the pandemic recession and recovery nor anything else U.S.- centric. Some have argued that the global rise of inflation means that many countries--including the U.S.--overstimulated their economies and generated excess aggregate demand. But this explanation is not supported by the data. The countries with larger declines in unemployment over the past 18 months have not seen larger inflation spikes. Consumer price data for June 2022 showed another month of rapid inflation, with overall inflation rising 9.1 percent year-over-year and core inflation (which doesn't include volatile energy and food prices) rising by 5.9 percent. This level of inflation has obviously become a major political issue this year. But however this issue resonates politically, as an economic matter a common narrative that blames the Biden administration and its policy choices for causing the inflation is deeply misleading. This is not simply a case for exonerating the Biden administration's choices--how the recent inflationary outbreak is interpreted will have huge consequences for how policymakers respond. A loud chorus of economic analysts and influential policymakers continue highlighting the need for the Federal Reserve to continue raising interest rates sharply to slow growth to ``rein in'' inflation. This approach risks terrible consequences and threatens to cast aside the amazing policy achievement of a full jobs recovery from the pandemic recession. In the COVID-19 recession, the economy lost over 22 million jobs. But by June 2022 (after 28 months), the level of employment in the U.S. matched the last month pre-pandemic (February 2020). Compare this with job growth after the Great Recession of 2008-09, when it took more than six years (75 months) to regain the just under 9 million jobs lost and match pre-recession employment levels. The far faster recovery from the COVID-19 recession was significantly driven by a much more aggressive fiscal policy response. This more aggressive fiscal response is often blamed for the inflation outbreak over the past 18 months. The most persuasive evidence casting doubt on this interpretation is a comparison of inflation between the U.S. and a large set of other rich countries that undertook a wide array of fiscal responses. Despite the different fiscal responses, essentially all of these countries have experienced a rapid acceleration of core inflation. This means that today's inflation is not a uniquely U.S. problem, and therefore not connected to the necessary and effective economic policies that spearheaded the rapid economic recovery we see today. In Figure A, we focus on core inflation (stripping out the prices of energy and food) because that is widely considered a better target for basing decisions about macroeconomic stabilization. Energy and food prices are not just volatile, they are also set on global markets, meaning that their price changes carry very little information about whether the U.S. economy specifically is currently experiencing macroeconomic imbalances. It's also useful to highlight core inflation because much commentary has claimed that inflation in other advanced economies is overwhelmingly about energy and food prices, and far less about core prices. This claim is not supported by the data in Figure A. As Figure A shows, all but one Organization for Economic Co-operation and Development (OECD) country saw an acceleration in core inflation. More significantly, this international comparison tells us that the U.S. is not an outlier in its experience with accelerating core inflation (the one obvious outlier in this data--Turkey--is currently experiencing inflation over 40 percent and is not included in the figure). The U.S. is on the higher side of inflation experiences, but far from the top and not that far above the average (or even the median) for all other OECD countries. The upshot of the figure is clear: A global phenomenon-- accelerating inflation--demands a global explanation, and ``Biden policies'' obviously do not provide that. Some have argued that the global rise in inflation is actually just evidence that the excess demand growth they see as driving inflation is also global. Of course, even this perspective provides some small bit of exoneration for American policymakers: if every advanced country in the entire world made similar policy decisions, then it seems hard to argue that the American approach was an avoidable mistake. But, another cut at the international data casts doubt on a simple story of macroeconomic imbalances driving the global inflation surge. Specifically, countries with larger declines in unemployment over the past 18 months have not seen larger inflation spikes. In Figure B below, the vertical axis is the acceleration of core inflation relative to pre-pandemic trend that we showed previously in Figure A. On the horizontal axis, we subtract the average unemployment rate of March-May 2022 from the average unemployment rate that prevailed in 2018-2019. This can be taken as an indicator of how much unemployment has improved in a country in the     recent period relative to pre-pandemic conditions. The higher the number on the horizontal axis, the lower is current unemployment relative to pre-pandemic averages. If one interprets unemployment that is lower today than pre-pandemic times as evidence of strong demand growth, one would expect to see a positive relationship between the improvement in unemployment (horizontal axis) and the acceleration of inflation (vertical axis). But there is no such significant relationship (in fact, there is a weak relationship the other way, with countries with higher unemployment relative to pre- pandemic times seeing higher inflation). This finding should further complicate the claim that the ``macroeconomic overheating'' argument should simply be applied globally. And if there is not strong evidence that today's global inflation is simply driven by excess global demand, the payoff to strongly reining in demand could be quite small, and the damage caused by this quite large. Rather than the specific policies of the Biden administration driving inflation, the roots of today's inflation are a more complicated cocktail of other forces: from the spike in raw material, energy, and commodities prices due in large part to the Russian invasion of Ukraine, to lingering supply chain disruptions and distorted consumer demand patterns stemming from the pandemic. These shocks and their unexpectedly large ripple effects are the global explanation for rising inflation. Again, this is not an academic exercise or simply providing political cover for any particular policymaker. Instead, there is real economic danger from misdiagnosing the inflation problem. An engineered, unnecessary recession will only cause more economic pain to those still just recovering from the COVID-19 recession, and will undercut the strong economic recovery underway.  Mr. McGOVERN. Mr. Speaker, I include in the Record an article by Mark Zandi of Moody's Analytics which states that Speaker McCarthy's radical cuts would meaningfully increase the likelihood of a recession and result in 780,000 fewer jobs by the end of 2024 compared with a clean bill to avoid a default.  [From Moody's Analytics]  The Debt Limit Drama Heats Up  (By Mark Zandi and Bernard Yaros)  The political drama over the Treasury debt limit is suddenly heating up. With April tax receipts coming in weaker than expected, at least so far, it appears that the X-date, when the Treasury will run out of the cash needed to pay the government's bills on time, may hit as soon as early June. House Speaker Kevin McCarthy's recent unveiling of proposed legislation to increase the limit is thus none too soon. In exchange for increasing the debt limit just enough so that it will not be a problem again until about this time next year, the Speaker wants to significantly cut discretionary spending over the next decade, impose stricter work requirements on healthcare, food and other assistance for low-income households, and roll back much of the Biden's administration's agenda on climate change and student lending. In this note, we assess the macroeconomic consequences of the Speaker's debt limit legislation.  The X-date  The Treasury debt limit--the maximum amount of debt that the Treasury can issue to the public or to other federal agencies--was hit on January 19, and since then the Treasury has been using ``extraordinary measures'' to come up with the additional cash needed to pay the government's bills. Nailing down precisely when these extraordinary measures will be exhausted, and Treasury will run out of cash and thus be unable to pay everyone on time--the so-called X-date--is difficult. It depends on the timing of highly uncertain tax receipts and government expenditures. Since Moody's Analytics began estimating the X-date early this year, we have thought it to be in mid-August. But April tax receipts are running 35 percent below last year's pace, which is meaningfully weaker than anticipated. And despite weaker tax refunds than anticipated, it appears that the X- date may come as soon as early June. If not, and Treasury is able to squeak by with enough cash, then the X-date looks more likely to be in late July. That is because Treasury will get a cash infusion from non-withheld tax payments around the June 15 estimated tax deadline, and then another tranche of extraordinary measures will become available, providing Treasury with a few more weeks of cash.  Investors take notice  Regardless, time is running out for lawmakers to act and increase or suspend the debt limit, and global investors are suddenly focusing on the risks posed if they do not act in time. Credit default swaps on Treasury securities--the cost of buying insurance in case Treasury fails to pay its debt on time--have jumped in recent weeks. At close to 100 basis points, CDS spreads on six-month and one-year Treasury securities are already substantially more than in 2011 when that debt limit drama was so unnerving it caused rating agency Standard & Poor's to strip the U.S. of its AAA rating. This may overstate investors' angst as the CDS market for buying insurance in the case of a Treasury default is not actively traded, and it does not take much trading to push up the cost of insurance. A few hedge funds speculating on the CDS could drive up the cost since they are purchasing something akin to a lottery ticket. Moreover, the current spread remains far from signaling that investors are attaching much of a probability on a default. For context, during the European debt crisis in 2011, the CDS spread on the sovereign debt of stressed countries in the periphery of the euro zone, including Greece, topped out at 1,400 basis points. Even the CDS for core euro zone countries such as Germany and France were more than 200 basis points at the time. That said, the run up in Treasury CDS should not be dismissed out of hand. The recent sharp decline in one-month Treasury bill yields also signals mounting investor angst. As it has become clear in recent days that April tax receipts were coming in weak and the X-date may be just a few weeks away, investors have piled into the safety of one-month Treasury securities. Yields have plummeted, from 4.75 percent at the start of April to less than 3.4 percent currently. At the same time, yields on three-month Treasury bills have continued to rise. The difference between one- and three- month Treasury bill yields has never been as wide. Global investors thus appear to be attaching non-zero odds that the debt limit drama will end with a default sometime in June or July.  House Republican proposal  It is thus none too soon that House Speaker McCarthy unveiled the ``Limit, Save, Grow Act of 2023'' on April 19. House Republicans hope the legislation will put political pressure on President Biden to negotiate changes in fiscal policy in exchange for an increase in the debt limit. The president continues to reject these efforts, arguing for a so-called clean debt limit increase--an increase in the debt limit without substantive changes to policy. His position is that increasing the debt limit is necessary to pay the government's bills resulting from past fiscal policy decisions, over which there can be no negotiation. Speaker McCarthy's proposed legislation would increase the debt limit by $1.5 trillion or until March 31, 2024, whichever comes first. In exchange, it would cut government spending by $4.5 trillion over the next decade and implement a number of consequential changes to fiscal policy. The most significant spending cuts would come by setting fiscal 2024 discretionary spending equal to fiscal 2022 spending levels. Annual spending growth would then be capped at 1 percent for the next decade. While not stipulated in the legislation, Republicans would likely work to exclude discretionary spending on defense and veterans' benefits from the cuts, putting the burden of the cuts on nondefense, non-VA discretionary programs. If nondefense discretionary outlays were to bear the full brunt of the proposed budget cuts, they would fall to 2 percent of GDP by fiscal 2033, the lowest since at least the early 1960s. The Speaker's debt limit legislation also works to roll back a number of President Biden's policy initiatives. On energy policy, the legislation would focus on increasing fossil fuel supplies through the enactment of House Republicans' energy package, which aims to boost oil and gas production and mining by cutting down on the time it takes to greenlight energy projects. It would also end tax breaks for clean-energy projects and qualifying electric vehicles included in the Inflation Reduction Act. On student lending, the legislation would prevent a couple of key executive orders by the Biden administration, including the White House's plan to provide up to $20,000 in student loan forgiveness for some borrowers. That hit a roadblock last year when it was met with several legal challenges, and the Supreme Court is expected to decide its fate later this year. An income-driven repayment plan rolled out by the Education Department earlier this year is also in the crosshairs. The Speaker's legislation also imposes restrictions on income support programs, including work requirements on Medicaid recipients who do not have children, an increase in the age limit for work rules under Supplemental Nutrition Assistance Program (food assistance), and a requirement that states report on work outcomes under the Temporary Assistance for Needy Families program. It eliminates much of the additional funding provided to the IRS last year to help increase tax enforcement efforts and improve taxpayer services, and it rescinds unspent COVID-19 relief funds. And the legislation would also require congressional approval before major regulations could take effect.  macroeconomic impacts  The Limit, Save, Grow Act of 2023 would cut into near-term economic growth if passed into law. Compared with a scenario that includes a clean debt limit increase and no other significant changes to fiscal policy under current law, real GDP in the year ending in the fourth quarter of 2024 would be 0.65 percentage point lower. That is, in the Clean Debt Limit scenario, real GDP is expected to grow 2.25 percent in the year compared with 1.6 percent if Speaker McCarthy's legislation becomes law. While the economy skirts recession in both scenarios, recession risks are uncomfortably high, with a consensus of economists and many investors and business executives expecting a downturn beginning late this year or early next. The timing of the government spending cuts in the Limit, Save, Grow Act     is thus especially inopportune as it would meaningfully increase the likelihood of such a downturn. Indeed, under the legislation, GDP growth is so weak that employment declines in the first three quarter of 2024, and the unemployment rate rises by more than a percentage point to 4.6 percent by the fourth quarter of 2024. Compared with the Clean Debt Limit scenario, by year-end 2024, employment is 780,000 jobs lower, and the unemployment rate is 0.36 percentage point higher. The significant government spending cuts in the Limit, Save, Grow Act are substantial headwinds to near-term economic growth. The cuts reduce nondefense outlays by $120 billion in fiscal 2024 compared with the Clean Debt Limit scenario, equal to about half a percentage point of GDP. The multipliers on this spending--the change in GDP a year after a change in spending--are estimated to be just over 1, as the programs suffering budget cuts are essential government services and tend to benefit lower-income households that quickly spend any support they receive from the government. Adding to the economic headwinds created by the legislation is the considerable uncertainty created by having to address the debt limit again a year from now. Given that 2024 is a presidential election year, that future debt limit drama may well be even more heated than the current one. This is sure to weigh on investor, business and consumer confidence and thus economic activity.  Mr. McGOVERN. Mr. Speaker, I yield 1 minute to the distinguished gentleman from Pennsylvania (Mr. Deluzio).