[House Hearing, 116 Congress] [From the U.S. Government Publishing Office] PAYCHECK SECURITY: ECONOMIC PERSPECTIVES ON ALTERNATIVE APPROACHES TO PROTECTING WORKERS' PAY DURING COVID-19 ======================================================================= VIRTUAL HEARING BEFORE THE SUBCOMMITTEE ON NATIONAL SECURITY, INTERNATIONAL DEVELOPMENT AND MONETARY POLICY OF THE COMMITTEE ON FINANCIAL SERVICES U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED SIXTEENTH CONGRESS SECOND SESSION __________ JULY 7, 2020 __________ Printed for the use of the Committee on Financial Services Serial No. 116-100 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] ______ U.S. GOVERNMENT PUBLISHING OFFICE 43-193 PDF WASHINGTON : 2021 HOUSE COMMITTEE ON FINANCIAL SERVICES MAXINE WATERS, California, Chairwoman CAROLYN B. MALONEY, New York PATRICK McHENRY, North Carolina, NYDIA M. VELAZQUEZ, New York Ranking Member BRAD SHERMAN, California ANN WAGNER, Missouri GREGORY W. MEEKS, New York FRANK D. LUCAS, Oklahoma WM. LACY CLAY, Missouri BILL POSEY, Florida DAVID SCOTT, Georgia BLAINE LUETKEMEYER, Missouri AL GREEN, Texas BILL HUIZENGA, Michigan EMANUEL CLEAVER, Missouri STEVE STIVERS, Ohio ED PERLMUTTER, Colorado ANDY BARR, Kentucky JIM A. HIMES, Connecticut SCOTT TIPTON, Colorado BILL FOSTER, Illinois ROGER WILLIAMS, Texas JOYCE BEATTY, Ohio FRENCH HILL, Arkansas DENNY HECK, Washington TOM EMMER, Minnesota JUAN VARGAS, California LEE M. ZELDIN, New York JOSH GOTTHEIMER, New Jersey BARRY LOUDERMILK, Georgia VICENTE GONZALEZ, Texas ALEXANDER X. MOONEY, West Virginia AL LAWSON, Florida WARREN DAVIDSON, Ohio MICHAEL SAN NICOLAS, Guam TED BUDD, North Carolina RASHIDA TLAIB, Michigan DAVID KUSTOFF, Tennessee KATIE PORTER, California TREY HOLLINGSWORTH, Indiana CINDY AXNE, Iowa ANTHONY GONZALEZ, Ohio SEAN CASTEN, Illinois JOHN ROSE, Tennessee AYANNA PRESSLEY, Massachusetts BRYAN STEIL, Wisconsin BEN McADAMS, Utah LANCE GOODEN, Texas ALEXANDRIA OCASIO-CORTEZ, New York DENVER RIGGLEMAN, Virginia JENNIFER WEXTON, Virginia WILLIAM TIMMONS, South Carolina STEPHEN F. LYNCH, Massachusetts VAN TAYLOR, Texas TULSI GABBARD, Hawaii ALMA ADAMS, North Carolina MADELEINE DEAN, Pennsylvania JESUS ``CHUY'' GARCIA, Illinois SYLVIA GARCIA, Texas DEAN PHILLIPS, Minnesota Charla Ouertatani, Staff Director Subcommittee on National Security, International Development and Monetary Policy EMANUEL CLEAVER, Missouri, Chairman ED PERLMUTTER, Colorado FRENCH HILL, Arkansas, Ranking JIM A. HIMES, Connecticut Member DENNY HECK, Washington FRANK D. LUCAS, Oklahoma BRAD SHERMAN, California ROGER WILLIAMS, Texas JUAN VARGAS, California TOM EMMER, Minnesota JOSH GOTTHEIMER, New Jersey ANTHONY GONZALEZ, Ohio MICHAEL SAN NICOLAS, Guam JOHN ROSE, Tennessee BEN McADAMS, Utah DENVER RIGGLEMAN, Virginia, Vice JENNIFER WEXTON, Virginia Ranking Member STEPHEN F. LYNCH, Massachusetts WILLIAM TIMMONS, South Carolina TULSI GABBARD, Hawaii VAN TAYLOR, Texas JESUS ``CHUY'' GARCIA, Illinois KATIE PORTER, California SYLVIA GARCIA, Texas C O N T E N T S ---------- Page Hearing held on: July 7, 2020................................................. 1 Appendix: July 7, 2020................................................. 37 WITNESSES Tuesday, July 7, 2020 Cook, Lisa D., Professor, Department of Economics, James Madison College, Michigan State University............................. 6 Garcia, Lily Eskelsen, President, National Education Association (NEA).......................................................... 7 Stiglitz, Joseph, Professor of Economics, Columbia University.... 9 Zuluaga, Diego, Associate Director, Financial Regulation Studies, Cato Institute................................................. 11 APPENDIX Prepared statements: Cook, Lisa D................................................. 38 Garcia, Lily Eskelsen........................................ 42 Stiglitz, Joseph............................................. 46 Zuluaga, Diego............................................... 51 Additional Material Submitted for the Record Cleaver, Hon. Emanuel: Written statement of Hon. Pramila Jayapal, a Representative in Congress from the State of Washington................... 53 Letter and attachment from the National Women's Law Center (NWLC)..................................................... 56 Garcia, Hon. Sylvia: April 29, 2020, sign-on letter to Speaker Pelosi and Democratic Leader Schumer.................................. 62 April 29, 2020, letter urging Congress to pass the Paycheck Guarantee Act, from the Economic Policy Institute and 100 economists................................................. 65 Porter, Hon. Katie: April 29, 2020, sign-on letter to Speaker Pelosi and Democratic Leader Schumer.................................. 62 Op-ed by Mark Zandi.......................................... 71 PAYCHECK SECURITY: ECONOMIC PERSPECTIVES ON ALTERNATIVE APPROACHES TO PROTECTING WORKERS' PAY DURING COVID-19 ---------- Tuesday, July 7, 2020 U.S. House of Representatives, Subcommittee on National Security, International Development and Monetary Policy, Committee on Financial Services, Washington, D.C. The subcommittee met, pursuant to notice, at 12:08 p.m., via Webex, Hon. Emanuel Cleaver [chairman of the subcommittee] presiding. Members present: Representatives Cleaver, Perlmutter, Himes, Sherman, Vargas, Gottheimer, San Nicolas, Wexton, Garcia of Illinois, Porter, Garcia of Texas; Hill, Williams, Emmer, Gonzalez of Ohio, Timmons, and Taylor. Ex officio present: Representative McHenry. Chairman Cleaver. The Subcommittee on National Security, International Development and Monetary Policy will come to order. First, I want to thank you, Clem. I appreciate all of the work that you and Petrina have done to make this hearing and many other hearings possible. We couldn't do it without both of you. The subcommittee is now in order. Without objection, the Chair is authorized to declare a recess of the subcommittee at any time. Also, without objection, members of the full Financial Services Committee who are not members of this subcommittee are authorized to participate in today's hearing. Members are reminded to keep their video function on at all times, even when they are not being recognized by the Chair. Members are also reminded that they are responsible for muting and unmuting themselves, and to mute themselves after they are finished speaking. Consistent with the regulations accompanying H. Res. 965, staff will only mute Members and witnesses as appropriate when not being recognized by the Chair to avoid inadvertent background noise. Members are reminded that all rules relating to order and decorum apply to this remote hearing. Today's hearing is entitled, ``Paycheck Security: Economic Perspectives on Alternative Approaches to Protecting Workers' Pay During COVID-19.'' I now recognize myself for 4 minutes for an opening statement. In February, before a pandemic was declared and the economic livelihood of Americans was placed in peril, I sent a letter, asking the White House, the Treasury Department, and the Federal Reserve how they planned to prevent a crisis from occurring due to COVID-19. I asked them what their strategy was to help protect American's health and the national economy. It would be months until that letter that I wrote with Chairmen Meeks, Green, and Clay would receive a response. Unfortunately, by that time it was clear, at least to me, that there was no plan. Because we did not plan, we have become a part of the virus' plan. Congress was forced to take unprecedented steps to rescue our economy and provide emergency assistance to American families and front-line workers through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. We provided nearly every American money to feed their families. We rushed resources for COVID-19 testing and personal protective equipment (PPE) to hospitals. We created the Paycheck Protection Program (PPP) as a short-term lifeline to keep small businesses alive and their employees on the payroll. Just last week, we heard from Fed Chairman Powell that the CARES Act was able to, ``provide direct help to people, businesses, and communities,'' and ``made a critical difference.'' It prevented the kind of mass layoffs and evictions that threatened millions and millions of Americans. Despite that significant bill, it has become profoundly clear that our initial response will not be enough and was not administered the way we intended. The U.S. has suffered the largest increase in unemployment of any major economy on the planet. The unemployment rate was over 13 percent in May, more than 16 percent after accounting for various measurement issues, and closer to 20 percent when workers with reduced hours are included. Additionally, the clock is ticking on the expiration of many provisions of the CARES Act, as economists and public health experts are telling us that the outlook is getting worse. This week, a report written by Moody's Chief Economist Mark Zandi highlighted that the prospects are high that we will suffer what may well be considered an economic depression. His analysis leverages Federal Reserve and Congressional Budget Office's research that initially assumed that COVID-19 would be tapering off and double-digit unemployment would persist into next year. However, with a resurgence of COVID-19 around the United States, in Florida, Texas, Georgia, and my home State of Missouri, businesses are being forced to shutter again, driving a possible second round of economic catastrophe. Throughout the course of this crisis, both the economic and health consequences of COVID-19 have fallen disproportionately on low- and middle-income families and communities of color. The Inspector General for the Small Business Administration (SBA) highlighted that the CARES Act required rural minority- and women-owned businesses to be prioritized for PPP loans, but based on their analysis, they were not. By mid-April, 440,000 Black business owners had shuttered their company for good, a 41 percent plunge. By comparison, 17 percent of White-owned businesses closed during that same period. The New York Times successfully sued the CDC to release the COVID-19 information, based on ethnicity and race, and learned last week that Blacks and Latinos were 3 times more likely to be infected with COVID-19 and twice as likely to die. When you combine these facts with data from the Brookings Institution, that low-income communities of color are more likely to serve as essential front-line workers with higher rates of exposure, this second dangerous wave could be cataclysmic for the working poor in our country. The remedy that Mark Zandi prescribed in his report, which is echoed by the Federal Reserve Chairman, many of our witnesses today, and even by President Trump, is simple: There is a need for more congressional action that places employees first. The Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, which passed the House in May and is waiting in the Senate, would go a long way in preventing the kind of catastrophe that leading economists are predicting. Further, a bill sponsored by my friend, Congresswoman Jayapal, the Paycheck Recovery Act of 2020, would go a long way in aiding those who need it most. Congresswoman Jayapal has offered a statement, which I would like to enter into the record. Without objection, it is so ordered. I will now recognize the ranking member of the full Financial Services Committee, Ranking Member McHenry, for 5 minutes. Mr. McHenry. Thank you for the recognition. My understanding was, it would be for a shorter period of time, but I will thank you for yielding. And first, let me say thank you for yielding, and thank you for being a good leader of this subcommittee. The frustrating part is to listen to the opening statement, and to recognize that this serves as a legislative hearing on a bill that represents what is absolutely wrong with this Congress' and some of my Democrat colleagues' responses to COVID-19. They want to be hyper-partisan rather than trying to remake the bipartisan success of the CARES Act. Rather than coordinate between the House and the Senate and the White House, what they want to do is just up the ante because they view it as good politics. And I have to tell you, responding to the American people's concerns is the best way for us to be good stewards of the taxpayers and also good stewards of our constituents. Through the bipartisan success of the CARES Act, we have deployed rapid support to our fellow Americans. The Administration has done a great job of implementing it, and we have portions of America that are reopening. We still have enormous challenges ahead, and that is the reason why we should continue our bipartisan work. Instead, we are here today considering a partisan COVID- response bill by a far-left progressive Member that seeks to hold American workers and employees hostage unless they consent to a laundry list of unpopular social mandates from the far- left wing. The bill that this hearing is about was so far to the left that it wasn't even part of that left-wing package called the HEROES Act that a couple of Democrats weren't even willing to go along with that partisan approach. This bill is nothing more than protecting Democrats' left flanks, and instead, we should get serious about crafting legislation that will get the American people back to work and grow our economy, not codify a partisan wish list. So, it is quite frustrating, as a policymaker, that we are wasting this subcommittee's time by having a hearing like this, when we should be crafting and working through the things that will have a very good impact and get people back to work, and keep people safe and healthy. I think that should be our focus, rather than really a laundry list of left-wing ideas that this bill--that this hearing is about. Let's stay focused on getting the American people back to work. Let's not focus on social mandates and extraneous partisan measures, and let's get back to the work that the American people want us focused on. With that, I yield back. Chairman Cleaver. Thank you, Mr. McHenry. I did yield you too much time, not that you used it all. So, I apologize that we didn't present you with less time. But nonetheless, we will now go to the ranking member of the subcommittee, Mr. Hill. Mr. Hill. Thank you, Chairman Cleaver. I appreciate you convening this virtual hearing, and I appreciate this distinguished list of witnesses for their expertise. Today, we are discussing the paycheck security topic with a specific focus on H.R. 6918, the Paycheck Recovery Act of 2020, sponsored by Representative Jayapal, which would require the Treasury Secretary to provide grants to small businesses that have been impacted by COVID-19. Before making my comments on the legislation, I, too, want to make some procedural comments. This legislation should not be moving through this committee, let alone this subcommittee. The essence of this bill is to create a grant Paycheck Protection Program for small businesses, which implies that the Small Business Committee should be managing this effort. I understand the bill was referred to our committee because it involves the Treasury. However, we are using our very limited subcommittee time to discuss a partisan bill, sponsored by a Member who is not on this committee. It is just disappointing that there are plenty of bipartisan bills that we should notice and have influence over our direct work in international institutions, sanctions, and monetary policy. Now, let me turn my attention to the topic of the hearing at hand. The Federal Government responded to COVID-19 by authorizing nearly $2 trillion of direct spending, 65 percent of what we spend in a full year, including $454 billion to the Treasury's Exchange Stabilization Fund, which can be leveraged up to 10 times. Therefore, we have nearly $7 trillion, Mr. Chairman, of resources available to help get our economy back to full capacity, as we fight this virus, almost 35 percent of GDP. All that said, the money is still flowing, and before we start creating new programs, we ought to assess the current programs that we have and the amount of money that we have gotten out into the economy. H.R. 6918 would create a program at Treasury to provide grants to small businesses. As a former Treasury official, I have long opposed Treasury becoming just another program agency in the Cabinet. And if we have learned anything about the CARES Act that we passed, it is that the Government is not always well-equipped to carry out programs on a broad-based scale. Look at the PPP program, how it is operated, versus the Economic Injury Disaster Loan Program. Using the banks, the PPP program, while not perfect, got over $500 billion of assistance out to our small businesses, preserving millions of jobs in just a month, whereas the Economic Disaster Loan Program still suffers from a bureaucratic approach that is limited in its effectiveness. The PPP program, Mr. Chairman, has $134 billion of available funding. Let's focus on improving that program to help our small businesses over the weeks to come, and let's fix the idle program in the right way. Further, I would like to mention the role that State and local governments play. Our State of Arkansas used CARES Act funding to set up its own program for small businesses, the Arkansas Ready for Business Grant Program. It received over 2,300 applicants within 1 hour, and helped over 200,000 Arkansas employees across the State stay at work. Ninety-four percent of those businesses had 50 employees or less, and a quarter were minority-owned and women-owned. So, Mr. Chairman, I think we have the solutions here to help our small businesses and provide guidance to our State and local governments, and let's fix the idle program and the PPP program so that more small businesses can be helped as we continue to fight this terrible virus across our country. Thank you for the time, and I yield back the balance of my time. Chairman Cleaver. Thank you, Mr. Hill. And I want to apologize again for the mismanagement of the time early on with you and Mr. McHenry. Today, we welcome the testimony of Ms. Lisa Cook, Ms. Lily Eskelsen Garcia, Mr. Joseph Stiglitz, and Mr. Diego Zuluaga. First, Ms. Cook is a professor of economics and international relations at Michigan State University, and is a member of the American Economic Association's executive committee. Previously, she served as a Senior Economist on the Obama Administration's Council of Economic Advisers. As an authority on international economics, she has also advised policymakers from the Nigerian and Rwandan governments. Thank you for appearing before this committee. Second, Ms. Eskelsen Garcia is the president of the National Education Association (NEA), the largest union in the United States. Prior to holding this position, she served as the NEA's secretary treasurer and vice president. A life-long educator and advocate, Ms. Garcia served as a member of the Clinton Administration's White House strategy session on improving Hispanic education, and was named a member of the President's Advisory Commission on Educational Excellence for Hispanics. Thank you for appearing before the committee. Third, Mr. Stiglitz is an economist and professor at Columbia University. He was the chief economist of the World Bank, and Chair of President Clinton's Council on Economic Advisers. He is the founder of the Initiative for Policy Dialogue, a think tank on international development, and he is a recipient of the Nobel Memorial Prize in Economic Sciences, and the prestigious John Bates Clark Medal. Thank you for appearing. And finally, Mr. Zuluaga is the associate director of financial regulation studies at the Cato Institute's Center for Monetary and Financial Alternatives. Prior to holding this position, he was the head of financial services and tech policy at the Institute of Economic Affairs in London. He has written on a variety of financial regulatory topics, and his work has been featured in a number of reputable media publications. Thank you for appearing before this committee. Witnesses are reminded that your oral testimony will be limited to 5 minutes. A chime will go off at the end of your time, and I would ask that you respect the Members' and other witnesses' time by wrapping up your oral testimony as quickly as possible. And without objection, your written statements will be made a part of the record. Ms. Cook, you are now recognized for 5 minutes to give an oral presentation of your testimony. STATEMENT OF LISA D. COOK, PROFESSOR, DEPARTMENT OF ECONOMICS, JAMES MADISON COLLEGE, MICHIGAN STATE UNIVERSITY Ms. Cook. Thank you, Chairman Cleaver, Ranking Member Hill, and members of the Subcommittee on National Security, International Development and Monetary Policy. The coronavirus pandemic and the resulting human, economic, and financial crises are unfolding at breakneck speed. Nonetheless, the rent and bills of Americans were and are still due. The quick action of Congress has gone a considerable way to lessen or postpone the pain associated with this pandemic- induced recession, specifically, these measures: adding $600 per week to unemployment checks; providing assistance to small businesses through the PPP; and giving Americans a direct payment of $1,200. With an unemployment rate of 11 percent, we have now entered the history books with the second highest unemployment rate than at any other time since 1940. The unemployment rate for African Americans is 15.4 percent, and for Hispanic Americans, it is 14.5 percent. These data are especially disturbing because Black and Hispanic wealth fell significantly during the Great Recession, making it more difficult to weather the COVID recession. By early June, 44 percent of adult Latino renters and 41 percent of Black renters, compared to 21 percent of White renters, reported not being able to pay their rent. Twenty percent of rental households face eviction by September 30th. A wave of bankruptcies could ensue if small businesses cannot stay afloat, renters cannot pay their rent, and landlords cannot pay their mortgages. Early evidence shows that the direct Federal payments of up to $1,200 per adult and $500 per child are a critical, first lifeline for many households in the U.S. economy, allowing them to purchase food and pay their bills. To minimize the likelihood that a liquidity crisis for these households becomes a bankruptcy crisis for them and for the economy, Congress should authorize another round of direct payments along with extended unemployment benefits. By mid-June, of the businesses that were listed on Yelp, 140,000 of those closing since March 1st were closed by mid- June. Thirty-five percent of shopping and retail businesses listed had closed their doors permanently. Fifty-three percent of restaurants listed had closed their doors permanently. Forty-one percent of African-American businesses report being closed, compared to 35 percent overall. In the only survey providing demographic data on PPP loan recipients, a report by Color of Change indicates that 45 percent of Black and Latino businesses will close by the end of the year, without more relief. Prior to reopening, States that recovered, that received more PPP loans and with more generous unemployment benefits had less severe declines and faster recoveries. Macroeconomists are expecting a slower recovery. Given that consumer spending is 70 percent of GDP, it is clear that more and extended help to the American people and small businesses will be urgently needed. I agree with the economic security project and colleagues who signed their letter, that regular, lasting, direct stimulus payment would be a critical part of ensuring that the economic recovery does not grind to a halt. In addition, more aid to State and local governments is desperately needed now, to continue to fight the pandemic and to prepare for job losses stemming from impending austerity budgets being adopted by State and local governments. This relief should be directed at healthcare providers, community colleges, universities, mental health, and other social services, universal broadband, and the arts. Any and all relief to the American people should be authorized and disbursed with all deliberate speed. Thank you. [The prepared statement of Ms. Cook can be found on page 38 of the appendix.] Chairman Cleaver. Thank you very much. Ms. Garcia, you are now recognized for 5 minutes. STATEMENT OF LILY ESKELSEN GARCIA, PRESIDENT, NATIONAL EDUCATION ASSOCIATION (NEA) Ms. Eskelsen Garcia. Thank you, Chairman Cleaver, Ranking Member Hill, and members of the subcommittee. This is an important opportunity, and I really appreciate your time. My name is Lily Eskelsen Garcia. I am a 6th grade teacher from Utah, and I am the current president of the National Education Association (NEA). And as NEA's president, I am honored to represent more than 3 million educators, teachers, education support professionals, specialized instructional staff, K-12 schools, preschool to graduate school, including university and college campuses. NEA also represents educators in the Department of Defense schools, college students who are planning to become educators, those student teachers, retired educators, and public employees in local and State Government. I am so proud, but I am not the least bit surprised by how NEA members have risen to this moment, and demonstrated resilience, creativity, and team work, as we have tried to cultivate in our students those same characteristics. We have been called on to organize car caravans through student neighborhoods to deliver a message: Even though our school building is closed, we are still learning, and we are still here for you. We have helped parents who, overnight, had to become their kids' substitute teachers, and I have had more than one of my members who has cried with me over how worried they are about their students, because school was the only stable place in their lives. And as we speak today, governors and mayors are taking note of very steep budget cuts that are going to harm our students. This is the result of the pandemic, not someone who didn't plan for something no one even knew would come. Without Federal assistance, we are going to see massive educator layoffs, and that is going to be incredibly harsh, especially for those who struggle the most to make ends meet, even during normal times, such as our wonderful, amazingly devoted, education-support professionals. These are the lunch ladies, the school bus drivers, the maintenance staff. Many of these workers stayed on the job, putting themselves in harm's way to deliver meals to students and families, to drop off work packets to students, and to keep our schools sanitized and safe. According to the Bureau of Labor Statistics, nearly 900,000 public education jobs have already been lost because of budget cuts. By comparison, more than 350,000 education jobs were lost due to the Great Recession. In other words, COVID-19 has done more damage in 3 months than a recession that lasted for a year-and-a-half did. If this damage goes unchecked, nearly 2 million educators could lose their jobs over the next few years. According to NEA's analysis--and we studied the same numbers that school boards are receiving all over the country--this could represent one-fifth of the entire workforce that powers public schools and higher education institutions. The COVID-19 recession could be 6 times worse for education than the 2008 financial crisis. Our nation now has 1.4 million more K-12 students than we had in 2008, but we have 135,000 fewer educators than we had 12 years ago. These layoffs could stem from pandemic-related budget cuts. It is just going to worsen an already dire situation. No community is going to go unaffected. But the schools in wealthy communities are more likely to weather the storm, while schools in poorer communities, that are already struggling, might not. Job losses in these schools would profoundly affect low- income students whose schools rely on Title I funding to reduce class size, hire specialists, and offer a rich curriculum. We know that we are going to need more, and we thank the House for taking the bold action to pass the HEROES Act. We call on Mitch McConnell in the Senate to please abandon the wait-and-see, till-we-get-around-to-it approach. The Senate needs to hit the panic button. I thank you for your time, and I am happy to answer any questions. [The prepared statement of Ms. Eskelsen Garcia can be found on page 42 of the appendix.] Chairman Cleaver. Thank you, Ms. Eskelsen Garcia. I now recognize Mr. Stiglitz for 5 minutes. STATEMENT OF JOSEPH STIGLITZ, PROFESSOR OF ECONOMICS, COLUMBIA UNIVERSITY Mr. Stiglitz. Thank you very much. Sad to say, the U.S. response to COVID-19 has been disappointing. We have done a much poorer job than other countries, both in maintaining the health of our country and that of our economy. And the two are related. There will not be a strong recovery until the pandemic is brought under control. Congress responded to the pandemic with a massive amount of assistance. It succeeded in preventing much suffering that would have otherwise occurred, but in many ways the programs were badly designed and badly implemented, with much of the money not going to where it was most needed, and with the unemployment rate soaring far higher than elsewhere. This put strains on our unemployment insurance system, resulting in many of the unemployed not receiving money for weeks and weeks. The increase in unemployment is especially inopportune in the United States, because so many depend on employer-provided health insurance. Losing health coverage in the midst of a pandemic is a calamity. The program of assistance was predicated on there being a short shutdown, in other words, a V-shaped recovery. Such beliefs appear now to be utter fantasy. With the pandemic continuing the pace, no one thinks that we will be back to normal by the end of the month. There are a few principles and priorities that should guide the next package of assistance. First, because we cannot have a healthy economy without a healthy population, health should be given priority. While some of your earlier programs did this, there were important lacunae. It was, for instance, foolish, shortsided, and unconscionable not to have ensured that everyone was provided with paid sick leave. We don't want people with the disease going to work and spreading the disease, but with so many Americans living paycheck-to-paycheck, it was inevitable that that would happen without paid sick leave. As another example, there are likely to be large increases in demand for Medicaid. And the States will be suffering large losses in tax revenue, as was just pointed out. With States having balanced-budget frameworks, only the Federal Government can help them meet these needs. Second, hysteresis effects are enormous. Bankrupt firms don't become unbankrupt when the pandemic is over. Balance sheets of households and firms often take a long time to recover. That is why you did the right thing in responding quickly and massively. But all of these investments in our future will be for naught if assistance is not continued so long as the pandemic and its economic aftermath persists. There is a third powerful force that will depress the economy: precautionary behavior. As long as there is uncertainty, both about the course of the disease and the economy, there will be a reluctance to spend, either by firms or households. In the previous downturns like that of 2008, we provided assurances to workers that there would be extended unemployment insurance so long as the unemployment rate remained elevated. We need to do that now, and we have to provide similar assistance assurances for all of the other critical assistance that we provided. We also need to provide income-contingent loans, where repayment and the duration of the loan automatically adjust to the circumstance of the economy and the firm, providing an automatic stabilizer to the economy. Thus, there must be a commitment, in the famous words of Mario Draghi, to do, ``whatever it takes.'' But at the same time, we must spend our money well, which is why the design of the program is so important. As I wrote in my Roosevelt Institute Policy Brief in April, even before the passage of the CARES Act, the alternative approach of direct payments to employers to retain workers seemed more likely to be more effective than the disparate programs included in that bill. The evidence over the last few weeks seems consistent with those expectations, and the evidence since then, both in those countries around the world that adopted these programs--and let me emphasize, these are not left-wing countries that adopted programs similar to H.R. 6918, the bipartisan Paycheck Recovery Act--and the United States, which took an alternative course, strongly reinforce the conclusion I had reached at that time. Both the forecast that additional funding would be needed, and that the PPP program would not be as effective as had been hoped have unfortunately been more than fully realized. I went on to argue that the Paycheck Recovery Program represents a significant improvement over the existing PPP. It is simpler to administer, with more of the money going to where it is needed, and considerably less costly and more effective. Some will say, yes, we should have adopted the Paycheck Guarantee Program, but that is water over the dam. It is now too late. That argument might have had some validity if, as thought at the time these measures were adopted, the pandemic had been of short duration. But since then, it has flared up, and there is a good chance that it will be with us for a long time. As I have already said, we will need to maintain some kind of support, and this program is the best way forward. Among the virtues of the program I cited is its transparency, its administerability, its comprehensiveness, its power to get the money where it is needed, in prescribing important links between workers and employers, its ability to deliver money in a timely way, and its role as an automatic stabilizer. I want to conclude with two more general comments. First, our assistance to the economy has to be far more comprehensive. There were some important sectors that did not receive the assistance they needed. One sector is States and localities. I already referred to the severe budgetary constraints that they faced. These authorities are responsible for many of the services on which so many of our citizens depend, including education--which has been discussed--and health and welfare. But cutbacks in spending will greatly weaken our economy, in that the law has multiplier effects. It is austerity from below. In previous downturns, we have seen the devastating macroeconomic effects. Already, layoffs of government workers are among the large sources of increasing unemployment. We will not have a robust recovery without adequate support for this vital sector of our economy. One of the virtues of the Paycheck Recovery Act is that it allows States and localities to access grants. Second, our aspirations to not be in recovery in which some time, some say in 2022, when we get back to where we were in late 2019, we simply pick up where we left off. Never has government played such a role in economy, not even in the Great-- Chairman Cleaver. Mr. Stiglitz? Mr. Stiglitz. --Recession. Citizens have the right-- Chairman Cleaver. Your time has expired Mr. Stiglitz, thank you. Thank you very kindly. I appreciate it. [The prepared statement of Mr. Stiglitz can be found on page 46 of the appendix.] Chairman Cleaver. Mr. Zuluaga, you are now recognized for 5 minutes. STATEMENT OF DIEGO ZULUAGA, ASSOCIATE DIRECTOR OF FINANCIAL REGULATION STUDIES, CATO INSTITUTE Mr. Zuluaga. Chairman Cleaver, Ranking Member Hill, and members of the subcommittee, thank you for the opportunity to testify before you today. My name is Diego Zuluaga, and I am the associate director of financial regulation studies at the Cato Institute. America's 30.7 million small businesses have taken a very severe hit from the COVID-19 pandemic. The share of small businesses reporting that the health emergency has had a large negative effect on them was 37.7 percent in late June, down just 14 percentage points from 8 weeks earlier. Another survey found in April that 1.8 percent of small businesses have permanently closed because of the pandemic which, if true, would mean that more than 550,000 firms are gone forever. Yet economic activity and employment are so far recovering faster than many expected. Early action to support small businesses through the Paycheck Protection Program has helped. According to my estimates, around 77 percent of small businesses with employees had gotten a PPP loan by June 30th. And while the proportion of employing small businesses with a PPP loan varies considerably across States, nowhere is it below 60 percent. By allowing millions of small businesses to keep paying their workers, as well as utility and rent bills, the Paycheck Protection Program has prevented a greater destruction of livelihoods and valuable business relationships than has actually happened. It doesn't follow, however, that a program of grants, based on lost revenue, will assist the recovery. I believe, on the contrary, that it will hinder the recovery by delaying businesses' necessary adaptation to changing consumer demand. The pandemic has not just caused all sorts of businesses to suffer losses. It it has also led to permanent changes in economic activity, mainly because production processes and consumer preferences have shifted in response to new health risks. Restaurants are cooking more meals for take-away and outdoor consumption. More retail activity is moving online, as are larger transactions such as home purchases. These changes are unavoidable and permanent. Any recession involves the reallocation of workers across firms and industries. But because of the pandemic's wide- ranging consequences, recovery from the present recession will likely involve a larger redeployment of workers and capital than previous downturns. Attempting to freeze America's productive structure in its pre-COVID-19 state will, therefore, only delay the return to full employment and steady growth. The bounce-back will be swifter, on the other hand, the more quickly businesses adapt to the new conditions. I don't at all mean to suggest that government policy can't play any additional valuable role, but it can best do so by removing barriers to geographic mobility and business investment. Instead of rigid support programs that impede mobility and risk prolonging financial insecurity, workers need flexible support in the face of uncertain economic conditions. A program of direct grants to cash-strapped households, whether or not their members are employed, would address paycheck insecurity while preserving the incentive to adapt to the post-pandemic economy. A conditional grant program, on the other hand, would tie up capital and labor in firms whose long-term viability is far from assured. Besides delaying adaptation, conditional grant programs are costly to administer, as officials must verify applicants' declarations and monitor the use of funds. These programs also raise fairness concerns. Why should laid-off employees, who find new work, not be entitled to a reward, whereas those lucky enough to keep their job, get a bonus? Why should taxpayers support businesses while the national unemployment rate remains above the threshold but not thereafter? The macroeconomic arguments about supporting demand are unpersuasive since direct, unconditional cash grants would have at least the same effect on demand, for two reasons. First, a larger share of available funds would go to recipients instead of program administrators. And second, because grant funds would go to the least well- off, regardless of employment status, and the least will have consumed more of their disposable income, the immediate impact on aggregate demand might be greater. Congressional action, to support the solvency of small businesses in the most dire weeks of the pandemic, has enabled a speedier recovery than many expected. Now, the goal should be to encourage adaptation so American workers and businesses can resume productive activity. Achieving this goal will require their ingenuity, on which we can count, but also flexible, change-friendly support from policymakers. Thank you. I will be happy to answer your questions. [The prepared statement of Mr Zuluaga can be found on page 51 of the appendix.] Chairman Cleaver. Thank you very much. I will now recognize myself for 5 minutes for questions. This morning, I woke up to the news that Mexico is now closing some of its borders to the United States because we are losing this battle with COVID-19, and apparently we are losing worse than anybody else. If we believe we are losing and it is okay, then we will never win. But I am troubled by what I am seeing and reading, and it is probably a little embarrassing--it should be to the whole country--but The New York Times headlines yesterday read, ``European Workers Draw Paychecks and American Workers Scrounge for Food.'' Dr. Stiglitz, you are a renowned economist and former chief economist, and you have had some outspoken comments on this whole issue of COVID-19 and the crisis that it has created for the United States, and comparing them to others. Do you believe that Mark Zandi's report assessment that the prospects are higher that we may suffer from an economic depression? What is your analysis of his analysis? Mr. Stiglitz. Yes. I am very concerned. The fact, as I said in my testimony, is that we are not getting a V-shaped recovery. And even moderate economists, like the Chairman of the Federal Reserve, do not think we are going to be back to where we were at the end of 2019, until sometime in 2022, if we do everything right. And if we don't do things right, if we follow Herbert Hoover and don't provide the assistance the economy needs, then we are setting ourselves up for another depression, for a severe economic downturn. Chairman Cleaver. Thank you. Somebody said that, now I guess Mexico will build a wall to protect itself from us, so I guess something good can come out of something bad. But I would like to know, Ms. Eskelsen Garcia, what is going on with educators? How are they faring in this COVID-19 world? What kind of difficulties are they experiencing and what are the prospects of opening schools in September in the current atmosphere? Ms. Eskelsen Garcia. You can't see the back of our head. We have been pulling our hair out for, like, 4 months now, and we are so frustrated. We love our students. I am a 6th grade teacher. I had 39 kids in my room--39--12-year-olds one year. That was not healthy on the best day of the year, but we have millions now facing overcrowded classrooms, trying to figure out how do you make that work coming back in the fall. When they told us to leave the building, it was like someone pulled the fire alarm. Everybody grabbed what they could, and ran out, and the next day, we were trying to figure out how we could deliver--to 52 million public school students--reading, writing, and arithmetic online. It has been incredibly challenging. Under the best of circumstances, it is frustrating. That is when you have Wi-Fi in the home, and mom and dad have a laptop or a tablet, and it is just kind of annoying. But it can be alarming when you get into communities of poverty, where the only technology in some homes was mom's telephone, and she took it with her to work, because she stocked shelves in a grocery store, and the kids didn't even have adult supervision in their home. And so our members, these are America's educators, have said, we raced out and had to make up things and do the best we could to have a meaningful, educational experience for our students. But now they are alarmed because they see politicians--I know I am talking to some politicians here--but they see people who are making decisions to race back into that school without the proper plan to distance, to disinfect, to have the PPE, to have the health checks and the COVID testing. And it is like, no, no, no, we have to warehouse those kids, put those 39 kids back into my classroom and don't worry, don't worry that somehow they will be at risk, or put their own families at risk, put their teachers and the lunch lady and the janitor at risk. And so-- Chairman Cleaver. Thank you. Ms. Eskelsen Garcia. --we are scared. We are scared. Chairman Cleaver. Yes, understandably so. Thank you very much. The Chair now recognizes the ranking member of the subcommittee, Mr. Hill, for 5 minutes. Mr. Hill. Thank you, Mr. Chairman. I appreciate it. This is a very interesting discussion. Mr. Zuluaga, would you tell me what you think, having watched the PPP program put out $500 billion into the economy, helping millions of people stay employed--here in Arkansas, it was $3 billion--three and a half billion dollars for about 40,000 businesses. We have $134 billion left in that program. With work in the House and work in the Senate, we extended that date now to August 8th, which I want to thank Marco Rubio for his leadership, and thank my friends in the House for not blocking that earlier in the week, last week. What should we change in that program to make it more helpful to people who are still fighting various shutdown issues in some States, while others are doing better? What should we change in that program? Mr. Zuluaga. I think additional flexibility, in terms of the timing within which the funds can be spent would be quite helpful, as would probably adjusting the percentages that may be allocated to the different types of expenses authorized. Increasingly, it seems that it is going to take longer for the pandemic to get resolved, and maybe the timing is different in different States, and as a result of that, it would be useful to give funds that, for example, help businesses change their premises to become safer for what is to come over the next few months, at least before we have a vaccine. In addition to that, I would say that what is left of the PPP is about proportional to the share of employing small businesses that haven't gotten a PPP loan just yet. There is still funding available, and I think that program has worked well so far. Mr. Hill. If a business was still significantly down because they are in a hotspot and in trouble, and say revenues are still down 50 percent, or something off, would you allow a business to go back and get a second PPP loan? Mr. Zuluaga. I would. Because I think the key distinction here is between a supply shop, something that makes a business that is otherwise perfectly viable and has the same customer base as it did before, from being able to be in business as a result of a new outbreak, or because the second wave or something like that, distinguish that from a demand shop, which is, the longer this goes on, and the more people change for it, the more people decide to move from cities to the suburbs or to other parts of the country, the more the changes in demand and industrial patterns become permanent. And in that case, sustaining existing industrial structure is counterproductive because you don't get the adaptation that needs to happen. Mr. Hill. And the issue of the $600 of unemployment compensation that is on top of the States' existing unemployment compensation benefits, Members are really looking at how should that be extended or modified before the end of the month? This is an important component of the next legislative effort that we collectively make, hopefully on a bipartisan basis. What are your thoughts about the unemployment compensation, the pandemic piece, the $600 extra per week? Mr. Zuluaga. I think it is still unclear as to whether there is a disincentive effect in raising the unemployment benefit in, for example, making the PPP work. Because in some places and for some businesses, it became more attractive for workers to earn unemployment benefits than to remain and work, particularly given the insecurity of going to work in the midst of a pandemic. So, I think even though it may be well-intentioned to boost those incomes, it is probably more helpful to have a direct support that is regardless of your employment status, because in that case, you don't get those incentive effects. And from the analysis I have done of the PPP program so far, it seems to be the case that in some States, taking of PPP was less, and there was a relationship with those posted unemployment benefits. Mr. Hill. Yes. Thank you for that. Ms. Eskelsen Garcia, I want to thank you for your leadership at the NEA. I spent a lot of time talking to my teachers, and there is nothing more fun than 6th graders. I don't know if I want 39 of them all day, but I want to thank you for leading the NEA this year and helping be a constructive voice to try to find bipartisan support for what our teachers need to go back to the classroom. Would you agree, though, that we really need to get kids back in school, and that it is better in so many ways? Do you agree with that? Ms. Eskelsen Garcia. There is no parent, no Republican parent, no Democratic parent,who wants their kid in an unsafe situation. And so here is the good news--we don't have to do it in an unsafe way. People keep asking me the question, they will say, okay, overcrowded classrooms, we need hand sanitizers, and we need PPE, and we need all of these things while we are talking about maybe laying off almost 2 million educators. That is unimaginable. But they said, obviously, we have to talk about whether we should close that unsafe school or open that unsafe school. Wrong choices. We need to make those schools safe. We need-- Mr. Hill. Thank you. Ms. Eskelsen Garcia. --to make sure we have everything that teacher needs and that the parents want to keep those kids safe. Mr. Hill. Thank you so much. I yield back. Chairman Cleaver. Actually, Mr. Hill, if you would like to proceed with another question, please feel free to do so. We went a bit longer earlier, so you are welcome to go ahead with another question if you have one. Mr. Hill. I yield back, Mr. Chairman. Chairman Cleaver. Okay, thank you. Mr. Perlmutter, you are now recognized for 5 minutes. Mr. Perlmutter. Thank you, Mr. Chairman. And to Mr. Zuluaga, I think you were saying two things, and I kind of agreed with both of them, even though they are opposite of one another. You said the PPP has generally been pretty good, and I would agree, and that it ought to be extended and some people ought to get a second loan, and maybe I agree with that. And I should just let you know that I practiced bankruptcy law, business bankruptcy law, for 25 years before I got elected to Congress. And what I am worried about is, you say, well, it is the demand shock. Now, economists have the advantage of hindsight as to what the demand shock is. We are seeing unavoidable, permanent changes, but you really don't know it for a while. So, I am worried that we are going to continue to throw good money after bad with respect to a lot of businesses that aren't going to make it, no matter what we do. I agree with some of your statements, and I appreciate the desire to tap into ingenuity and improvisation and innovation. That is all right, but we are in an emergency situation right now. We came through 3 months of hell, and we still have some ahead of us. Mr. Stiglitz, you didn't get to finish your statement. I want to hear your closing remarks, and then I have some questions for Ms. Garcia and Ms. Cook. Mr. Stiglitz. Thank you very much for giving me this chance to finish. What I wanted to say is that we need to have a vision of what kind of economy we want coming out, and agreeing with what has been said, there are going to be structural changes. We are going to be worried about another pandemic. Those are some of the examples. The aviation sector is going to be weaker. But as we think about providing money, we ought to be thinking about, how do we move the economy to the future economy? Part of that is, we want to have more of a knowledge sector. Our comparative advantage as an economy is our technology. It is really what makes it strong. And one of the very disturbing aspects of what has happened is, we haven't given support to our knowledge sector, to education. We heard from Ms. Eskelsen Garcia about how the number of teachers has gone down. Our universities are being devastated. All of the sources of the revenues are going down. The decision yesterday of ICE to make it more difficult for foreign students to come to the United States--one of the things that has made us strong is having the most talented people come to the United States and often stay to study and to start up a lot of our new enterprises. We are making that extraordinarily difficult. ICE has just made a policy statement to encourage them to stay here on their visas. So what I wanted to urge is, as you think about spending money, have a comprehensive view, making sure that no sector is devastated, and that we have a vision of what kind of economy that we want emerging in 2022. Mr. Perlmutter. Okay. Thank you very much. Ms. Eskelsen Garcia, Ms. Cook, my wife is an NEA lifetime retiree, and she has been called back 3 times, and she is making a list of things that she thinks, as a math teacher in high school, need to be done for her to be able to teach and deal with the potential hazards of the virus. But she also knows tax revenue is way down--State, local, and school districts. I will start with Ms. Cook. You were talking about a number of things to try to avoid a wave of bankruptcies. I think they are coming anyway. But I feel like we really have to support our State, local, and school districts, or we are going to hit a wall by the end of this summer. How would you react to that? And you need to unmute. I still can't hear you, Ms. Cook. I am not sure what is going on with your audio. Chairman Cleaver. Ms. Cook? Mr. Perlmutter. We can talk about it offline. I am just worried we are going to hit a brick wall at the end of this month. To all of our economists, and to the head of the NEA, when the unemployment runs out, when State and local school districts are broke, we will have problems and huge layoffs, and we are going to have to deal with it. And I will yield back to the Chair. Chairman Cleaver. Mr. Perlmutter, we had a technical problem. Ms. Cook, if you would like to respond to Mr. Perlmutter's question, please proceed. I am doing this a little bit lax because we are still experimenting with things. So, Ms. Cook, please? Mr. Perlmutter. And you will need to unmute. I am not hearing anything, Mr. Chairman. Chairman Cleaver. Ms. Cook, if you can hear me-- Mr. Perlmutter. There you go. Ms. Cook. I absolutely agree with you. We want to avoid the problems that we saw in the Great Recession--the fiscal cliff that led to so much pain, so much suffering, and so much unemployment because State and local governments laid off so many people, because we didn't come to help, because Congress didn't come to help, because there wasn't enough aid. And all of the problems that we are talking about, from the schools, to the universities, to community colleges, to the arts, and certainly healthcare workers--all of these support the economy. This is 70 percent of GDP. It is consumer spending. All of them need support. And I think it would be foolhardy to think that they are adopting austerity budgets, the State and local governments that are adopting austerity budgets, that they won't follow through. They have a hard budget constraint. So, I think that aid has to be quick, it has to be now, and this is from learning the lessons of 2008 and 2009. Thank you. Mr. Perlmutter. Thank you very much. I yield back, Mr. Chairman. Chairman Cleaver. Thank you. The Chair now recognizes Mr. Williams for 5 minutes. Mr. Williams. Thank you, Mr. Chairman. I appreciate your bringing everybody together today, and thanks to all of the witnesses. We saw some promising economic data come out last week, with over 4.8 million jobs being added to the economy during this month of June. We still have a long way to go before we are back to the pre-pandemic levels, but from the data, it looks like the economy is bouncing back sooner than many people had predicted. Unfortunately, the legislation that is attached to this hearing today, the Paycheck Recovery Act by Congresswoman Jayapal, is not a realistic path forward that would help continue this growth trend. The bill contains such a radical proposal that they were not even, as we have heard, included in the $3 trillion partisan HEROES Act that was passed in May. So, Mr. Zuluaga, do you think that drastic new government interventions would be the best way to get our economy to recover quickly? Mr. Zuluaga. I don't think it would help. The thing, I think, that we need the most right now is flexibility. We have seen from the start of the pandemic that relaxing regulation-- how about, for example, educational licensing, or the practice of telemedicine, or where one can purchase different types of food and drink, that all of those things are helpful in terms of getting the economy moving even in the context of a lot of uncertainty about the future. And, to the extent that you are introducing new rigidities by tying support to one's pre-pandemic employment status, I think that can make recovery more difficult, and it can make people's financial position more precarious rather than more assured. Mr. Williams. Okay. We have heard everyone talking about the need for another aid package--that is constantly what we hear--to come through Congress before August. However, Congress, as we have said, has already allocated $2.2 trillion from the CARES Act and other bills that we have passed relating to the coronavirus, but the Paycheck Protection Plan Program, as we know, still has over $130 billion that is currently untapped. So, again, Mr. Zuluaga, how would or how should Congress be looking at the economy to make sure that the industries in most need of assistance receive it, while the other money we have already injected in the economy makes its way into the system? Mr. Zuluaga. I would pay attention to where the need is, particularly in terms of local shutdowns of activity or places where the pandemic has had a resurgence at the State level. I think it is useful because that is an indicator that that activity has stopped because of health emergency rather than because of the response, the medium-term and longer-term responses to the health emergency. As you indicated, there is still funding left over in the PPP, and I mentioned earlier how additional flexibility in terms of how one can spend amounts and so forth could be helpful. Mr. Williams. Okay. Small business owners, of which I am one--I have been a small business owner, still am, for 50 years--are the engines of job growth of our economy. Unfortunately, I have heard from many businesses across Texas that they are concerned that they are going to be sued if they attempt to reopen and some individuals get the coronavirus, even if they follow all of the State and local and Federal safety guidelines. We need to pass liability protections in the next coronavirus relief bill so that this economic recovery will not be hijacked by trial lawyers. I believe this is the major thing we have to do as we move forward. So, again, Mr. Zuluaga, how important is passing liability protections to protect businesses who are trying to open safely, to getting our economy back on track? Mr. Zuluaga. Congressman, thank you for the question, but I am not a lawyer, so I cannot respond with expertise. I would say that, as with other areas, having flexibility here for employers, particularly those operating in good faith, is essential to speeding up the recovery. Mr. Williams. I think our economy can and will get going. I am one of those who thinks we could see growth in the fourth quarter, and actually, into next year, even better. But I will say that liability protection is important regardless of what the business is, because if employers are going to get back to hiring people and getting the income going, Main Street America deserves that liability protection. So, I think it is very, very important. With that in mind, Mr. Chairman, I yield back. Chairman Cleaver. Thank you, Mr. Williams. The Chair now recognizes Mr. Himes for 5 minutes. Mr. Himes. Thank you, Mr. Chairman, and thank you to our witnesses today. This is a very interesting and important conversation, given the ongoing difficulties in the economy. I was a little sad to hear my Republican colleague say that Ms. Jayapal's proposal is somehow way out there on the fringe. It simply gives money to employers that have suffered 10 percent declines in revenue, to pay their employees. It looks a lot to me like the PPP program that we are all praising right now. And, by the way, my understanding is that it has been employed with some success in countries like Australia and New Zealand, maybe in Israel, hardly left-wing places. But I have a different concern about the program, which has been a larger concern I have had with the efforts we have made across-the-board with the PPP, and with many of the efforts on the part of the Federal Reserve, including the primary and secondary purchases that they are making. Other than the unemployment insurance and the direct branch to individuals, this has been a very business-oriented recovery. And I understand the attraction of trying to help small businesses, but the reality is, as Mr. Perlmutter said, an awful lot of businesses are going under anyway, already have, and certainly will. And that is not a happy thing, but there is a process of bankruptcy that often will keep a business operating and people employed while a company rejiggers its capital structure. So my question is--and let me start with Professor Stiglitz on this, and, if I have time, I would like to maybe hear from Dr. Cook and Mr. Zuluaga, but why should we not be focused on delivering money directly to the individuals who need it? In other words, if you are unemployed, you get money. If you never had a job, you would get money. When you go business-focused PPP, an awful lot of people will have paid their lease payments, will have paid for insurance. God only knows a lot of the efforts of the Federal Reserve are there to make bondholders whole. Professor Stiglitz, let me start with you. Why should we not reorient around what is clearly, to me, an obligation to the government, which is to keep American citizens--not businesses, large or small--directly whole as efficiently as we can? Mr. Stiglitz. I agree very much with your overall sentiment, and I think congressional response has to have a balance, but let me explain why I think the Paycheck Recovery Program is a good way of helping, because maintaining the link between workers and their firms is important for the recovery. We know that when that link gets broken, the recovery will be impaired. We also know that our unemployment insurance system has not been able to manage well this constant surge of newly unemployed. People have had to wait weeks and weeks to get the money. We also know, as I mentioned in my talk, that in America, more than in these other countries, workers depend on employer- provided health insurance, and, if they get disconnected from their firm, they then go on Medicaid or on very expensive Cobra provisions. And so, this is actually an efficient way of delivering money to a lot of lower-income individuals. Remember, the way the program is set up, it only goes to people whose income is less than a certain amount, and you could obviously jigger that amount. So, it is actually directing money via an efficient, you might say, administrating process, to low-income and middle- income workers who need it. It actually uses the existing set of relationships to disperse money. That is the way to think about it. Mr. Himes. Thank you, Professor. I appreciate it. Mr. Zuluaga, I only have 30 seconds, but you caught my attention, because you were sort of arguing in favor of direct aid to individuals. How do you respond to Professor Stiglitz's value placed on maintaining the employer-employee connection for purposes of health insurance, training, et cetera? Mr. Zuluaga. I think, in specific circumstances, it is very important, particularly when you have short-term disruptions and you have very few other changes to the underlying structure of the economy, because then that intangible capital doesn't get destroyed by whatever is happening around it. But increasingly, as time goes on and as people start making decisions about their future lives on the basis of the experience, those relationships become no longer sustainable, regardless of what you do with funding. Mr. Himes. Okay. Thank you, Mr. Chairman. I yield back. Chairman Cleaver. Mr. Gonzalez, you are now recognized for 5 minutes. Mr. Gonzalez of Ohio. Thank you, Chairman Cleaver. And thank you, everybody, for your testimony today on this important topic. I want to start by commenting--I don't know if this was intentional. I think I have heard a couple of times that maybe we shouldn't be so focused on business bankruptcies, and I just fundamentally disagree with that. I think we need to be focused on bankruptcies, period, whether it is in the household sector, in the business sector, or the government sector. And having bankruptcies in any of those sectors and on a massive scale, I would argue, is net negative for the recovery and just in general. But I want to start, Mr. Stiglitz, with a question to you. In your written testimony, you have a comment here, ``We need to provide income-contingent loans where repayments and the duration of the loan automatically adjust to the circumstances of the economy and the firm.'' I think that is an interesting concept. It is different from H.R. 6918. I am just curious, could you flesh that out a little bit for me? What do you mean specifically there? How would you see that administered? Just kind of drill down on that for me if you could. Mr. Stiglitz. Good. Thank you very much for the question. The point I have tried to emphasize is that no one knows the course of this pandemic, as we have seen. We thought in the beginning, it would be very short. We are now going through a very difficult time in certain States. We don't know whether, back in New York, we will have another wave. So, there's a lot of uncertainty. And we want homes and households to begin to spend as the economy recovers, but one of the things that dampen that spending is they don't know what is going to happen. So what I am proposing is that there be a lending program, a program that says, look, if there is a second wave or a third wave, fourth wave, a perpetual wave, we will suspend your payment conditional on the state of the pandemic, and it could be made very State-specific, national specific. But it builds in an automatic stabilizer, gives them some certainty. Some of the things that we are talking about, restructuring in response to the need to social distance, some of the investments that were needed. This would encourage them to do it, and then, if it turns out they have to shut down anyway, they will say, okay, you don't have to make a repayment until the economy starts going again. It really gives the flexibility that we need. Mr. Gonzalez of Ohio. Thank you. And then, Ms. Eskelsen Garcia, a question for you. I share the goal of needing to support, first off, our State and local governments, but also, in particular, our schools, so that we can get our children back in the classroom safely. In your proposal, you talk about $170 billion in the education stabilization fund, $56 billion for PPE. Can you just walk me through kind of where those numbers came from, because I am somebody who believes, if we don't get our kids back, the economy is going to suffer, but, boy, there are some massive long-term ramifications there, and--but we need to do it safely, so just expand on that if you could? Ms. Eskelsen Garcia. And thank you for that, because, finally, I heard someone say we have to open schools safely, and it will cost money. We have 4 million, more or less, folks who work inside those schools, and that is the teachers, the paraprofessionals, the school principals, the counselors, and, if you are lucky enough to have one, a school nurse. So, we have looked at that. We have looked at the cost of what it costs for a hospital to buy the protective gear that you need. I will tell you it is probably a low ball, because we also need--I used to ask parents if they would donate Kleenex, toilet paper, and soap. We have always run out of soap for the kids in the bathrooms. Now, we are going to need something much more sophisticated to disinfect and sanitize. There is no budget for that. And the most expensive part is going to be--we have thought of some very, very creative ways that you can distance kids, but it means that you have to creatively use the space--the library, the gym--or you have to look at split sessions, and that means you might have to run the school buses twice a day instead of just that one round trip. So, we have put all of that into the calculation of what we are going to need just to maintain what we have right now. And, like I said, it is probably on the low side. Mr. Gonzalez of Ohio. Great. Thank you. I yield back. Chairman Cleaver. Thank you. The Chair now recognizes Mr. Sherman for 5 minutes. Mr. Sherman. Thank you. And, Mr. Chairman, thank you for your opening comment about how apparently, by mishandling COVID, we might be able to persuade Mexico to build the wall. While we are talking about spending money and getting the economy going, I want to put in a strong pitch for the $5 billion in the HEROES Act for doing the research necessary to ameliorate this disease. As it happens, our professional medical researchers are at home because all of the non-COVID research projects have been suspended. And, every time I ask a medical researcher or medical expert about this disease, how is it transmitted, et cetera, the answer is always, well, we need to research this, we need to research that. There is no better way to fight the economic effects of COVID than to actually defeat the disease. Part of that would also be to make sure that everybody has enough sick days. It is very easy to tell people, ``Stay home if you have a fever,'' and we provided funding for smaller employers to have sick days, but everybody needs sick days, and some people used up their sick days on other illnesses. Professor Stiglitz, when I first got to Congress, the focus was on the enormous Federal budget deficit, that deficits cause inflation, that they cause high interest rates, and, yet, the inflation is running lower than we want it to. Interest rates are so low that savers are very frustrated. And we can avoid future interest on the debt if we monetize the debt, that is to say, we have the Fed own the debt instead of issuing it to the public. The world seems to have an insatiable desire for U.S. dollars. Is our thinking now emoted on deficits? Can we spend trillions of dollars, monetize the debt--that is to say, have the Fed own it instead of selling it out to those who would expect interest payments--and get through this crisis? Mr. Stiglitz. I am not worried about the deficit. The interest rates are very low. Servicing the debt costs essentially nothing. And, as you said, history shows that the enormous increase in the balance sheet of the Fed after 2008 did not cause any inflation. When you go to war, you don't ask the question: Can we afford it? We are at war with this virus, and we have to win this war, and we don't want our economy destroyed as we are fighting the virus. So, I don't think you really have any choice. At the same time, you want to spend the money well, and that is why I think the Paycheck Recovery Act is really a good bill, because it actually targets the money very effectively. It doesn't spend billions of dollars in paying the banks to administer the program and administer it in a way that the money goes to those who are well-connected. It does it in a-- the recovery program doesn't--can disperse money very very quickly. So, to me, I do always worry about spending money well, and one of the things I like about this particular bill is that it seems to actually have been very thoughtful about getting money where we need it and get a big bang for the buck. Mr. Sherman. Ms. Eskelsen Garcia, I think you have done a good job of illustrating why we need more funds for our schools to be able to reopen safely. I point out also that many schools, particularly here in Los Angeles, will not open in August, and they need technology for home learning. And, while that is happening, you need a lot of money to reopen, you need a lot of money for distance learning. While you have those increased costs, we have a tremendous decline in revenue for State and local governments. I would like to ask whether the $90 billion State fiscal stabilization fund grants to support State funds of education in the HEROES Act is helpful, and to what degrees it is-- Ms. Eskelsen Garcia. We have asked for $175 billion for--an extra $4 billion for technology and the E-rate. And so, to answer your question, we need everything we can get, and the thought of not getting any help at all--if you just gave us what you gave Shake Shack, that would be a giving. That is what I am thinking, is this is no different. We are talking about massive layoffs. We are talking about your public schools facing, are we able to open with any plan? And we can't do it without extra resources. We just can't. Chairman Cleaver. Thank you. Thank you, Ms. Eskelsen Garcia. The Chair now recognizes Mr. Timmons for 5 minutes. Mr. Timmons. Thank you, Mr. Chairman. I appreciate you holding this hearing, and it is good to see you all, even if it is on video conference. I was going to end my remarks talking about debt, but, given the previous questions, I would like to also begin with it. The cost of our debt last year was $593 billion. Next year, I would imagine that we are going to spend more on our interest payment on our debt than on the entire Department of Defense budget. So, debt is not free. It does come with a cost, and it is something that we need to be mindful of. That said, it is not the time to pinch pennies. We need to get help to the people who need it, we need to get help to businesses, and we need to get the help to individuals who have lost their jobs. Those two endeavors are not mutually exclusive. As the owner of multiple small businesses--I have a gym, a Yoga studio, and a real estate development--I am very fortunate that we had a good year, last year. Between our cash reserves and the PPP loan that we got, we are likely going to make it. I say, ``likely,'' because, if this goes past April, May, if we don't have a vaccine before then, we probably won't make it. I have a number of small business owners who have reached out, and they have said, if we re-close the economy, they will just file bankruptcy. They have to close up shop, and it is a reality that a large percentage of small businesses will not survive this. And it is not right that the government has shut everyone down. I realize that we had to flatten the curve, slow the spread, but we need to get help to the businesses that have been affected by this, and we need to get help to individuals who have lost their jobs. Those two things are not mutually exclusive. And I look forward to the conversations around the phase 4 legislation. Obviously, there does have to be a component of business liability protections. If you tell a business they can reopen, and then you tell them they are going to get sued because they reopened, even though they are following best practices, that is not consistent. So we need to reopen, but we have to do it safely. Mr. Zuluaga, I would like to hear your thoughts on phase 4 legislation and what you think is the most effective way to get that relief to those who need it most? Mr. Zuluaga. Sure. Thank you for the question. I think focusing the business support on the areas that are shut down or have experienced a second wave is very important, because that is where the supply shop is happening and where the help is going to be most useful. Besides that, I would focus on incentivizing reentry into employment. I think some of the protections you mentioned to businesses that are getting back into business and want to do so safely and want to buy the protective equipment and so forth is important so that there is no legal uncertainty. But, in addition to that, I would say, if there is going to be spending on supporting demand generally, it should be unrestricted. It shouldn't be conditional on business regulations and on businesses taking on new regulatory burdens that didn't exist before. I think that is the wrong approach, because, right now, we face a little bit of uncertainty in businesses, particularly because of all the uncertainty in the future, and they need that flexibility. Mr. Timmons. So you would agree that the additional $600 of unemployment insurance benefits that those who lost their jobs have received, that perhaps we need to have a more surgical method to facilitate workforce reentry to encourage workforce reentry? Mr. Zuluaga. I would indeed focus on incomes. I would look at how much people are earning and, below a cutoff, I would suggest some financial support regardless of their employment status rather than boost unemployment benefits, because I think there can be a disincentive to work, and it can cause people to become more and more removed from the labor market, which we don't want. Mr. Timmons. Okay. Just to be clear, I want to help these people, but we have to get back to work, and we need to do it in a strategic and surgical way. I think the CARES Act overall was great, but there were a lot of shortcomings that we could have modified the approach, and it would have had a better impact, and it would have helped people, and it would have helped businesses. And, again, I think that is the whole point of phase 4 legislation. We have to be very intentional about helping those who need it without casting a larger net. And, like I said, I am going to end the way I began--$7 trillion is what we probably have spent thus far. We are going to have $30 trillion in debt by the middle of next year, if not shortly after that. We can't keep spending money that isn't ours. It is our children's, and it is our grandchildren's money. Now is not the time to pinch pennies, but now is also not the time to spend recklessly. So we need to make sure that our dollars have the effect that we want, we need to get people back to work, and we have to do it safely, and I am just praying for a vaccine in November or December as opposed to April. With that, Mr. Chairman, thank you for holding this hearing, and I yield back. Chairman Cleaver. Thank you. The Chair now recognizes Mr. Vargas for 5 minutes. Mr. Vargas. Thank you very much, Mr. Chairman, for holding this hearing, and I thank the ranking member, as well. I appreciate it very much. When I first came to Congress, I sat on the Agriculture Committee, and the Farm Bill was up that year, and they wanted to make deep cuts to the Supplemental Nutrition Assistance Program (SNAP). Of course, I was very much against that and argued against that. That is the old food stamp program. And I happened to quote the Bible by Matthew 25:33-46, where it says, ``for I was hungry, and you gave me something to eat,'' and went on and on. But, anyway, a colleague of mine from Tennessee took issue with that, and I think he quoted 2nd Thessalonians, saying: ``If a man will not work, he shall not eat.'' But what I didn't know in that conversation was that my friend from Tennessee had received $3.6 million from the Federal Government for his farm and his family's farm. The New York Times pointed that out the next day, and I went and had a conversation with him. I said, ``I find it somewhat hypocritical that you don't want us to feed hungry people, and, yet, you put $3.6 million of government money in your pocket. How do you balance that?'' He said, ``Well, we are a business, and they are just people.'' I said, ``Oh, okay. I understand.'' That is his view, and that is fine. Now, I am on this committee, and I have heard people pontificate lots of times about the Troubled Asset Relief Program (TARP), saying, ``Oh, no, no. Let the businesses sink. We should never subsidize them. If they can't make it, let them sink.'' Yet, that view has changed somewhat now, for some of my colleagues, and I think that is good. But it seems to be the same thing. You don't mind putting money in the hands of the businesses, but when it comes to putting that money in the hands of the people who need it, the employees, there is a problem. I think that is what this bill basically does. It says, ``These people are unemployed. We have to help them.'' Professor Stiglitz, am I wrong on that? The ideology says, well, because this is socialism, and we are against socialism. I have been to New Zealand. I have been to Australia. They didn't seem very socialist to me, but maybe I am wrong about that. Could you comment? Mr. Stiglitz. No. You are absolutely right. I have talked to government officials in many of these countries, and these are not radical countries. This is not Venezuela or anything like that. These are middle-of-the-road, center-left, center- right governments, by the way, in which there is across-the- board support for these programs. And it is that across-the- board support that has created a kind of solidarity that allows the disease to be curbed, because they respect each other, trusting government. And, as a result of curbing the disease, the economy is back, and that really echoes what Ms. Eskelsen Garcia said: If you have a safe environment, people can go back to work, and you can go back to school. Mr. Vargas. Thank you. I agree. I did want to ask Ms. Eskelsen Garcia, though--I have to tell you that I am very much in favor of reopening the schools when it is safe. The reality is that not only do children get educated in the schools, but it would also help the parents with childcare, to be frank. A lot of people can't work if their kids can't go to school. That is what I hear from my educators here in San Diego and from school board members. They want to open the schools, but they only want to do it safely. And yet, they are constrained because they get money from the State Government, and, if the State doesn't have the money, they can't help out the schools. Could you comment on that? Ms. Eskelsen Garcia. It is not rocket science. It is basic adding and subtracting. School boards are hitting the panic button. They are being told all over the country, ``Do not expect what you thought you were going to have next year. Start cutting your budgets.'' We already have people who are getting pink slips at a time when we need all hands on deck. There is no other funding source than the Federal Government. We cannot hold a bake sale and hire people back. If it was bad for business to have to have massive layoffs, how can it not be even worse to have massive layoffs of the only people who can open the schools safely? There are some folks who don't see how that connects, that you can't open schools safely if you don't have enough people and you don't have the supplies that you are going to need to do it. Let's do it safely. We can do it. Mr. Vargas. I agree. Thank you very much. Thank you, Mr. Chairman. Chairman Cleaver. Thank you. The Chair now recognizes Mr. Taylor for 5 minutes. Mr. Taylor. Thank you, Mr. Chairman. I really appreciate this hearing. Thank you, everybody, for being here. I just want to kind of take us back a little bit and think about the economic step that we as a Federal Government took toward our economy. We basically put our economy in a coma, basically went to a shelter-in-place strategy really across the country, and then took a series of steps to try to--when we put the economy in a coma, what do we need to do? One of the things we did is we did the PPP program. We increased unemployment benefits. We created a series of different programs that were absolutely massive, in the trillions of dollars across-the- board. One of the things that we did that I think is really important is we forbeared on mortgages, and we did that basically in two ways. One was going to Fannie Mae and Freddie Mac by statute and telling them, ``You need to forbear people's home mortgage payments. Obviously, if people aren't working, they are not earning revenue, and they can't make their mortgage payments.'' And the second way we did that is by going to the banks through the Office of the Comptroller of the Currency (OCC) and creating guidance for them that said, ``Hey, you guys can forbear on your mortgages, right?'' So those two steps were really massive and really allowed about a little over $30 trillion of debt in this country to forbear. A place where we have not seen forbearance is in the real estate space, and particularly the collateralized mortgage- backed security market, they don't really--they have not been given guidance from on high. The Federal Government hasn't passed legislation. They haven't really taken a step to allow or encourage them to forbear. I think that they feel some market pressure to do that, some public pressure to do that, but we are not really seeing that. A group of 105 Members--and many of you who are in this hearing right now were part of this--signed the letter to the Treasury and to the Fed encouraging them to come up with some kind of facility, probably using their Section 13(3) authority, to encourage forbearance on commercial real estate loans so that those properties are not foreclosed. And, just so everybody is clear on what we are about to see, I think we are about to see a wave of foreclosures starting this fall going into next year that some analysts estimate will be 2 or 3 times worse than anything we have ever seen before. So, it is very serious. It is coming at us at a relatively quick pace. In other words, it is going to happen so fast that, by the time we are here to pass--we pass a lot a day--it would be very difficult for it to be implemented fast enough to forbear on all of the different pieces of foreclosures that are coming up. So my question, Mr. Zuluaga, is: Do you think that getting mortgages in a place where they are forbearing while we are putting the economy in a coma makes sense in order to try to keep things going for the other side--we get to the other side of this from an epidemiological point of view? Mr. Zuluaga. I think it can work. There is a risk that you will get delinquencies accumulating at the end of the period, and this is something that we are still uncertain about with regard to Fannie and Freddie, for example. They have had forbearance for a long time. And, actually, the forbearance rates, even though the take-up was high, the actual mortgages in forbearance are much less than most of us expected, which is good news. Mr. Taylor. Right. Mr. Zuluaga. I think forbearance can help, but, so long as we don't have much certainty around when the recovery is going to take place, we are really then hiding delinquencies as forbearances and potentially defaults, and, eventually, when foreclosures are again allowed, that may happen again. Mr. Taylor. Sure. And I guess, as part of this conversation, it is important that, being from Dallas, Texas, we remember the Resolution Trust Corporation (RTC) days, when the RTC, through the FDIC, went in and programatically foreclosed every property that was in default and then just liquidated it, and it really collapsed values within that market. It was a very brutal experience for everybody involved and really harmed a lot of jobs. I think the important thing here is that, particularly in the hospitality space, of the first 24 million Americans who lost their jobs, 6 million were working in hospitality. And so, that industry has been really, really injured, very harmed. It is going to be a while until it recovers, and so, if we could give them a liquidity bridge to get to the other side so they can start paying their mortgage, so--we lend them money to pay their mortgage. I was talking to one hotel operator yesterday who was looking at the legislation that we are working on. I have a member of this committee working on filing that bill later this week. And he is saying, ``Look, without this bill, I am probably going to lose every single property I own. With this bill, I probably can keep every property that I own.'' What is important about that is it means they can pay the money back and that those jobs will be saved. Mr. Chairman, I yield back. Chairman Cleaver. The gentleman yields back. The Chair now recognizes Mr. San Nicolas for 5 minutes. Mr. San Nicolas. Thank you, Mr. Chairman, and thank you for holding this very important hearing. For me, I sat back, and I observed the discussions, and I listened to the ideas, and I looked at the recommended policy provisions that were being put forward, and I think that one of the first things we need to reconcile is somewhat of the undertone of our witness testimony here today, and that is the question of whether or not we really view this current set of circumstances as something that requires permanent adaptation, or are we looking at a white squall event that we just need to get through in order to return to a place of normalcy in our economy and in our daily lives? And, Mr. Zuluaga, you mentioned that a lot of the necessary adaptation--that was a phrase you repeated over and over again, that businesses need to adapt, and I am a little concerned about that, because, right now, the adaptations that we are seeing, for example, are 50 percent occupancies in restaurants. We are seeing lines being drawn on sidewalks leading into businesses, keeping people apart. And I am worried that, if we adapt in a way that results in permanent changes, we are going to actually hinder our ability to recover. And so I wanted to enter into my comments with that context, because, as we all know, our economy in this country is predominantly consumer-driven. What the consumer needs in order for them to be able to have the confidence to drive our economy with their own spending is they need certainty. Any kind of uncertainty paralyzes them, and, right now, while we have done a good job as a Congress putting forward stopgap measures, it hasn't done a lot to ameliorate the uncertainty of our consumers when they look out 3 months, 6 months, or 1 year ahead. On July 25th, our eviction moratoriums are going to expire. On July 31st, the extra $600 in Federal Pandemic Unemployment Compensation (FPUC) is going to go away. On August 8th, the PPP is no longer going to be available. And so, when we have all of this uncertainty out there, it is going to make our consumers afraid of spending the money that we are even providing now. And so, I appreciate my colleague's bill that we are kind of discussing here today, because it kind of helps us provide a sense of certainty for our consumer. But I think one of the biggest things on the horizon for all of our consumers is, how are they going to pay for their housing? And I wanted to thank my colleagues for moving H.R. 7301 recently to try and address the housing concern. Dr. Cook, I really appreciated your testimony. You came at us with a lot of hard data and information that was very concrete. I would like to focus in more on what you mentioned earlier about the 20 percent evictions that we are looking at having to deal with on September 30th. If you can elaborate more on that, and potentially what that might do in terms of a domino effect, spilling over into our housing, a second housing crisis that we have already just--we have been through in 2008? Ms. Cook. Thank you for your question. So, yes, this is something that I am certainly concerned about. Twenty percent of rental households face eviction by September 30th, and, as you know, there are moratoria everywhere, but these are coming to a close now. And this is happening in the fourth largest city in America, in Houston, and these courts are working through these cases. So, I think this is certainly something that has to be taken quite seriously, and what we know is, from the surveys of homeowners, of renters and of homeowners, 44 percent of Latino renters and 41 percent of African Americans won't be able to pay their rent. That is somebody's mortgage that is not going to get paid, and a multifamily home, for example, a multifamily mortgage that won't be paid. So, 40 percent of those mortgages are Fannie and Freddie mortgages, but there are a lot that aren't. And, even with these being covered by Fannie and Freddie, there is a problem of enforcement. The individuals have to figure out whether these mortgages are Fannie and Freddie mortgages. So, there is a lot of danger, I think, ahead if this isn't straightened out now. Mr. San Nicolas. Thank you, Dr. Cook. And, quickly, Dr. Stiglitz, we saw that the housing crisis was created back in 2008 from a bottom-up problem--I am sorry-- a top-down problem in the debt. Is it possible we are going to have a similar bottom-up problem with these renters not being able to pay? Mr. Stiglitz. Oh, very much. Whenever you have a major crisis like this, it spreads throughout the economy, and even good loans turn out to be bad, and you can wind up with a problem in the financial system, which is why-- Mr. Hill. Time, Mr. Chairman. Chairman Cleaver. Thank you. Thank you, Dr. Stiglitz. The Chair now recognizes Ms. Wexton for 5 minutes. Ms. Wexton, you need to unmute your--we will proceed with Mr. Garcia, and we will come back to you, Ms. Wexton, if we can. Mr. Garcia, you are now recognized for 5 minutes. Mr. Garcia of Illinois. Thank you, Chairman Cleaver and Ranking Member Hill, for convening this hearing, and a bipartisan proposal--I am referring to the Payroll Recovery Act, as it has support from across the aisle in both the House and the Senate, and this discussion about protecting workers' paychecks is urgent and badly needed for my constituents here in Chicago and for working-class communities like mine across the country. From what our panelists have shared today--and thank you for joining us today--it sounds like we haven't done enough in Congress to help ordinary people during this crisis and to prevent a deeper collapse. Unfortunately, I am not surprised, because many people in my community are getting more and more worried. Wall Street got the guarantees they needed, but my neighbors are in a very precarious situation. The additional unemployment benefits provided by the CARES Act expire this month, and so does the bill's protections against eviction. Many businesses in my district that were supposed to close temporarily are now announcing permanent closures. I have lived in my neighborhood for 50 years, and I was stunned by the scale of suffering and loss that my community faced during the great financial crisis of 2008-2009. We had barely started to recover from that crisis when COVID-19 hit. Ms. Eskelsen Garcia, you mentioned a looming crisis facing our public sector workers. Many of my constituents are public sector employees, and even more rely on teachers and social workers, nurses, and librarians every day. Cuts in public services fall disproportionately on communities like mine. Can you talk about the cuts that you are hearing about at the bargaining table and how those cuts will disproportionately affect poor and Black and Brown communities across the country? Ms. Eskelsen Garcia. I have heard from people from Hawaii to Wyoming to New York to Florida. Everybody is alarmed by either school districts saying, we have four 3rd grade classes of 32 kids. We are going to not replace the 3rd grade teacher who is retiring, and so we will redistribute those kids, and we will end up with 40 kids or more in a classroom. Or they are saying, we are going to lay off the band teacher. We are going to lay off the foreign language teacher. We are going to lay off counselors. At a time where we need every single person to help us open those schools safely, they are facing budget cuts that will mean massive layoffs in every community. This will ripple through the economy and have the double effect of saying-- something that people say is essential to getting people back to work, a healthy public school open, will be almost impossible to accomplish, and, in some areas, completely impossible to accomplish. Mr. Garcia of Illinois. Thank you. For Mr. Stiglitz, the COVID-19 pandemic demonstrated how connected the world is, but also how disconnected the response to the virus has been in different countries. Unfortunately, I think the virus could expand the gap between richer countries and poorer countries, and the burden of additional debt put on countries in Latin America, for example, could slow down our global economic recovery. In April, I introduced the Systemic Risk Mitigation Act to support an International Monetary Fund (IMF) issuance of special drawing rights, better known as SDRs, to help countries' access the currency they need during this crisis. I was glad to see that Senator Durbin introduced a similar bill in the Senate last week. Professor, do you worry that our global economic downturn will get worse without some form of international stimulus, and do you think special drawing rights would help? Mr. Stiglitz. Yes. We live in a very interconnected world, and a downturn in the rest of the world will inevitably affect us a great deal. And right now, Latin America is one of the hotspots, and so the downturn there will have a big effect on us. I have been advocating very strongly for a special issuance of SDRs. If the United States supported it, they can issue $500 billion, and it wouldn't cost American taxpayers a thing, but it would be of enormous benefit to American citizens, because it would be a boost to our economy as it helps the rest of the world, and it would help us in our diplomacy enormously. Mr. Garcia of Illinois. Thank you. I yield back, Mr. Chairman. Chairman Cleaver. Thank you. Ms. Wexton, are you able to get on now? Ms. Wexton, you are recognized for 5 minutes. We still can't hear you. Mr. Garcia of Illinois. Mr. Chairman, I have one more question if-- Chairman Cleaver. Ms. Porter, you are now recognized for 5 minutes. Ms. Porter. Thank you so much. Mr. Stiglitz, in an April 2020 Roosevelt Institute report, you identified four design problems with the PPP, and I would like to talk about those, because one of the most common questions I get is, why support a paycheck guarantee approach if we have already done the PPP? So, I would like to spend our time kind of trying to answer that question. First, in your Roosevelt Institute report, you mentioned the randomness of who was going to get helped, and we certainly saw that. Some industries got help while others were left behind. Industries like construction and professional firms that weren't very impacted got PPP loans while other industries, that are really suffering, were left behind. Second, you mentioned that those who were best-connected, most likely to know about the program, were more likely to get relief. That certainly happened. Congress went back and tried to adjust the PPP loan by setting aside money for some of our community lenders to try to address that. I want to pick up on the third thing that you identified as a problem with the PPP, that the Paycheck Recovery Act would take a distinctly different approach. You flagged the introduction and the use of banks as intermediaries in the PPP as a problem. What is the problem with having lenders be intermediaries, and how is the Paycheck Recovery Act different? Mr. Stiglitz. That is a great question. The point is that having the banks as the intermediaries meant that those who were most connected with the banks got first in line. And I saw this very vividly. Small business owners, but very small, called up their bank, and they couldn't get an answer. And there were others who were very well-connected, and it wasn't just random. Some sectors that were very badly affected didn't get as much money as some sectors that were not very badly affected. I also pointed out that we were paying the banks an awful lot of money to administer it. So, in fact, our taxpayers' money wasn't going to where we--small businesses. It was going to the banks. Ms. Porter. Yes. As I look at it, we paid the banks an average fee of around 1 percent. It is something in the neighborhood of $6 billion, taxpayer dollars, that went to these banks for a loan program in which they took on no credit risk and did no assessment of the applications. So, it just seems like that $6 billion could be buying a lot of actual help for American families right now. You also raised concerns with the PPP's lack of clarity and transparency, and I have been pushing hard with regard to making more data about the PPP transparent. Can you tell me why you think the Paycheck Recovery Act would be more clear and would be more transparent and could avoid some of the problems and abuses that we have seen with the PPP? Mr. Stiglitz. The basic idea of the Paycheck Recovery Program is it is defined by clear rules of who can get access. You just apply, and, if you are eligible, there is a set of eligibility criteria. You know exactly what the formula is. And so, it is available to everybody; not first-come, first-served. It is available to everybody who meets certain criteria, so we know that whether or not you are a minority, you get it. On the other hand, when you go through the banks, it depends on who has the connections with the banks. I have been very disturbed that it took a lawsuit under the Freedom of Information Act to get the information about where the money was going. We, as citizens, should have the basic right to get that kind of information without having to sue. Ms. Porter. Yes, and I think one of the things I want to highlight for everyone who is listening is, for my colleagues, that the small businesses across the country agree with these concerns about the PPP and recognize that a Paycheck Recovery Act remains a necessary step to helping make sure that we are keeping people on payroll. When I talk to constituents, they don't want to be on unemployment. They don't want to be applying for these programs. They want a paycheck. They want to be able to continue to make ends meet for their families. They want to know they are going to have a job to go back to. That is the help that they are looking for. They are looking for help in continuing to get that paycheck and to have that dignity and provide for their families. Mr. Chairman, I would like to submit for the record an April 29th letter from over 30 national, State, and regional small business organizations calling for the passage of the Paycheck Recovery Act, as well as an op-ed written by Mark Zandi. Chairman Cleaver. Without objection, it is so ordered. Ms. Porter. Thank you, and I yield back. Chairman Cleaver. Thank you. Ms. Wexton, you are now recognized for 5 minutes, I hope. Ms. Wexton. I hope that I am now unmuted. Chairman Cleaver. Yes. Ms. Wexton. Great. Thank you very much, Mr. Chairman. And thank you to the witnesses for coming before us today. I want to touch on the issue of expanded unemployment benefits a little bit more. As has been noted, they are set to expire on July 31st. And, in my home State of Virginia, the weekly unemployment benefit is only $378, so it is not the lowest in the country, but it is not enough for a family to live on, so the additional $600 a week provided by the CARES Act has been a huge benefit to people just to be able to pay their rent and their car payments and things like that. But many are claiming that this benefit is way too generous. Larry Kudlow, one of the President's economic advisors, says we are paying people not to work, and that we are disincentivizing people to not return to work. That is a lot of double negatives there, but I think he is saying that it is too much money for people, that they are living large on $600 a week. And we are hearing from various talking heads that employees are refusing to come back to work, and that employers are struggling to bring people back to work because of this extra $600 a week. Now, we had Federal Reserve Chairman Jerome Powell before us a couple of weeks ago, and I asked him this very question. I asked him if he was seeing anything in the data or business activity surveys that supported this claim, and he said that he did not see anything like that, and he opined that more likely what is happening is that people in the service economy jobs are more reluctant to go back to work because they don't feel safe, because they are likely going to come in contact with a lot of people, and a lot of them are not going to be wearing masks because that is not mandated in a lot of places, and a lot of employers are not requiring that they do so. That is pretty consistent with what I am hearing, as well as people who are having trouble accessing childcare. Many childcare centers have closed, and they don't have those options anymore. And it is not just in the service economy that the jobs are lost. From April to May in Virginia, we have seen thousands of jobs lost across the sectors, including 1,300 manufacturing jobs, nearly 2,600 healthcare and education jobs, 5,900 State Government jobs, and 15,000 local government jobs. Ms. Eskelsen Garcia, you mentioned the 900,000 public education jobs already lost nationwide because of local budget cuts. Those people don't have the option of returning to work even if they wanted to. So, Professor Cook, do you think that now is the time to pull back on this enhanced unemployment support? Ms. Cook. Absolutely not. If we are learning the lessons of 2008-2009, now is the time to augment that support, not to withdraw it, because we will be looking at even higher unemployment numbers. There are still 19 million people receiving unemployment benefits. This is unprecedented for the modern era, for the post-1940 era. The unemployment rate is 11 percent. So, this is not the time to withdraw support from State and local governments, especially given the health crisis. The health crisis is not over, and all of these hospitals, the healthcare providers, they need the support. We are going to need a lot of mental health support once this is all over for people to be able to go back to work. I think that has been underrated and has been underestimated. People are going to need a lot of support to be able to go back to work whenever that happens, whenever it is safe to do so. Ms. Wexton. Professor Stiglitz, do you agree that it is not the time to pull back on that support? It would be wonderful if we could maintain that employer-employee relationship, but many people are not going to have that option, so what is your position on these enhanced unemployment benefits, whether we should let them expire? Mr. Stiglitz. I agree very much with Professor Cook. I don't believe that we should allow those to expire. The fact is that, with a high probability, we will have significantly elevated unemployment levels for a long time. And in many, many States, the basic levels of unemployment insurance are among the poorest in the western world, and the coverage doesn't cover a lot of people. And that is one of the things that you did in the CARES Act, is extend the coverage. So, both in terms of amount and the coverage, both of those were deficient, and you addressed that in the CARES Act. Ms. Wexton. Thank you. And you guys are in good company, because one of the things that Chairman Powell indicated was that he thought that resetting that to zero would have an extremely detrimental effect not only on the economy as a whole, but on our recovery, so thank you very much. And, with that, I will yield back, Mr. Chairman. Chairman Cleaver. Thank you. We apologize for the technical problem, whatever it was. I now recognize the gentlewoman from Texas, Ms. Garcia, for 5 minutes. Ms. Garcia of Texas. Thank you, Mr. Chairman, and thank you for allowing me to join you in this very important hearing. I have been listening, and it just reminds me of some of the debates we had at the beginning of all this where we were trying to figure out where do we start, what do we do, and we focused on making sure that we address the health pandemic, because, no matter what, we still have to address the health issues, make sure our hospitals are ready, the frontliners, they are working at the hospitals and providing the care, and the research that is necessary to find the treatment. And then, we decided to make sure that we put money in people's pockets, like Mr. Himes said earlier, and to make sure that they were able to buy the things that they needed, which is why we had to support businesses. So, I think you can't do one without the other. They are so connected that I want to focus on the need for the Paycheck Recovery Act, because I know that, in my own family, it took my brother maybe 3 weeks of calling and online applications, et cetera, to even get on unemployment insurance, and then he loses benefits, he loses his longevity pay, he loses so much. I think there is still a need for us to take a serious look at the Paycheck Recovery Act, and I wanted to start with Ms. Eskelsen Garcia. Every time I heard you being addressed, I looked up, because I thought it was me. But you signed onto a letter, Mr. Chairman, and I do want to ask unanimous consent that it be submitted for the record, a letter supporting the Paycheck Recovery Act. And that clearly said that, we know there have been three packages, but there are still layoffs. The economy is still in a freefall. Working families are still hurting. They are worried about putting food on the table. They are worried about their rent. They need a paycheck. They need a job, as my colleague, Representative-- Chairman Cleaver. Without objection, it is so ordered. Ms. Garcia of Texas. Thank you. Do you continue to believe that the relief packages passed by Congress so far are insufficient given the scale of this public health and economic crisis? Ms. Eskelsen Garcia. Is this for me? Ms. Garcia of Texas. Yes, ma'am. From one Garcia to another. Ms. Eskelsen Garcia. Gracias. I kept thinking, too, there are a couple of Garcias on here. Great name. But I don't want to say that it is enough, give us this, and life will be rosy. This is a beginning, and we know we can't do what we have to do with less, and we are facing our funding falling off a cliff. So, this is something that can at least stop the bleeding, and we are willing to be incredibly creative about what we can do, but we will not be able to open schools in so many districts in a safe way without some significant help, and, as was said, we have already lost, since this pandemic began, almost a million support staff. This might be the bus drivers, the paraprofessionals who aren't delivering instruction with a Zoom call the way a teacher is. They have just been told, ``You don't have a job,'' like everyone else who has been told, ``You don't have a job.'' Ms. Garcia of Texas. We may not get them back, but if they would have stayed on payroll, as the Paycheck Recovery Act would do, that would be most helpful. So, you feel like workers still need the Payroll Recovery Act? Ms. Eskelsen Garcia. Yes, I do. And part of it too is, yes, the workers that I represent but their family members, and by the way, our students, and their parents who are out of a job. Anything that impacts a community impacts that child and that school, so this is more than just the teacher or the bus driver. These are the parents of our students who are just trying to put food on the table. Ms. Garcia of Texas. Yes. Thank you. Now, I have a question for Mr. Stiglitz. What are your thoughts on the Paycheck Recovery Act? Do you think there is a need for that today, as States are still struggling? I know my State of Texas is reaching a crisis point, my City of Houston. Do we still need a Paycheck Recovery Act? Mr. Stiglitz. Is that for me? Ms. Garcia of Texas. Yes. Mr. Stiglitz. Yes, very much so. One of the things that I emphasized is that the previous CARES Act wasn't comprehensive enough, didn't provide enough support to the State and localities. And it was so clear that the revenues of the States and localities would plummet, and with the balanced-budget frameworks, they were going to be strangled. And they provided essential services--education, health, welfare--and the suffering that would result, and the macroeconomic effects, I call it in my testimony, ``austerity from below,'' which would have large, multiplier effects, and it would mean that we would not have a robust recovery. So it is, in my mind, absolutely essential for not just businesses, but also the States and local communities, educational institutions, the research foundations. It is not just businesses that are having a hard time now. Ms. Garcia of Texas. I agree. Chairman Cleaver. Thank you. Ms. Garcia of Texas. And Mr. Chairman, I would like unanimous consent to submit for the record an April 29th letter to Speaker Pelosi from 100 economists supporting the Paycheck Recovery Act. Chairman Cleaver. Without objection, it is so ordered. Ms. Garcia of Texas. Thank you, sir. I yield back. Chairman Cleaver. Thank you. And I would like to thank the witnesses for their testimony today. The Chair notes that some Members may have additional questions for this panel, which they may wish to submit in writing. Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to these witnesses and to place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous materials to the Chair for inclusion in the record. This hearing is adjourned. Thank you, everybody. [Whereupon, at 2:13 p.m., the hearing was adjourned.] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]