The Senate Appropriations Committee held a hearing about the Department of Treasury's budget request for FY2025 and received testimony from Sec. Janet Yellen
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00:00:00and partner. We and our staff have maintained a solid working relationship based on mutual respect
00:00:07and Senator, I look forward to continuing our good work together this year. Madam Secretary, welcome.
00:00:14Welcome back to this subcommittee. You of course are here to talk about the fiscal year 2025
00:00:23budget request, but I want to first thank you for the work you and your team did on the fiscal year
00:00:2824 request, because the input and discussions between our teams, both Senator Hagerty's team
00:00:36and my team and your team, helped us deal with the tight budget I think in the best way we could.
00:00:43So I want to thank you and your team for that. As we look to this year's budget request, fiscal year
00:00:482025, the Treasury Department requests $14.4 billion, which is an increase of $180 million
00:00:57or one percent over the last fiscal year. I look forward, Madam Secretary, to hearing more from you
00:01:04today about how this request can advance the Treasury Department's important missions here
00:01:10at home and abroad. The Department of Treasury plays a central role supporting a strong economy
00:01:17and promoting opportunity for all Americans, and it does this through a variety of efforts
00:01:24and variety of initiatives. Madam Secretary, I do want to commend you and the President for your
00:01:29efforts to address the lack of affordable housing, a challenge that predates the pandemic but
00:01:36continues with us to this day. The lack of housing supply has driven up costs to where now nearly
00:01:42half of all renting households spend more than 30 percent of their income on housing costs, so I was
00:01:48pleased to see the Treasury Department continue to take and propose steps as recently as March
00:01:54to increase the stock of affordable housing at lower costs through a variety of proposals, including
00:02:00tax credits. With respect to the IRS, which of course is a major part of the overall
00:02:07Department of Treasury budget, the request this year is for $12.3 billion in discretionary funds,
00:02:14essentially flat funding, with last year. Of course, the Inflation Reduction Act did provide
00:02:21substantial resources to the IRS, and I'm pleased to see those additional resources are already
00:02:27making an important difference, and I know, Madam Secretary, you'll talk a little bit
00:02:31more about them, but they include, in summary, dramatic improvement to taxpayer services,
00:02:37really beginning to modernize antiquated IRS systems, and of course utilize the resources
00:02:43to make sure that very, very wealthy people, millionaires, billionaires, and big corporations
00:02:50pay more of the taxes that are already due and owing on the enforcement side. On the taxpayer
00:02:57services front, the IRS has made a number of improvements, reducing call wait times for
00:03:03taxpayers, adding more customer service representatives, reducing the backlog of paper
00:03:08returns, and staffing up taxpayer assistance centers. I want to thank you and the team at the
00:03:14IRS for your efforts to do that. I also do want to salute you for the success of the recently
00:03:22concluded year-long direct file pilot program, which allowed taxpayers in 12 states the option
00:03:30of filing their federal tax returns online for free directly to the IRS, and I was pleased to
00:03:35see the announcement of the plan to extend that nationwide. All Americans deserve a free and easy
00:03:43filing option, and I'm pleased to see the progress the IRS is making on that. On the enforcement side,
00:03:50we have estimates ranging from $500 billion to a trillion dollars a year that are due and
00:03:57owing but not paid. To be clear, this is not about going after small businesses or households
00:04:06earning less than $400,000 a year, and you've made that very clear, Madam Secretary. The Inflation
00:04:13Reduction Act, of course, has also made a big investment in our clean energy objectives,
00:04:19helping generate over $850 billion in clean energy and manufacturing investment from the private
00:04:26sector. And I want to thank you and your team for the work that you are doing to implement the
00:04:32provisions of that legislation. On the global front, and Senator Hagerty and I have worked
00:04:37together on a number of global initiatives, I want to applaud your continued efforts to implement
00:04:44tough sanctions on Russia, including the price cap to reduce Russian oil revenues as Putin continues
00:04:51his attacks on the people of Ukraine. I'd like to highlight your commendable work implementing
00:04:56the Rebuilding Economic Prosperity and Opportunity for Ukrainians, or REPO,
00:05:01Act. You've made it clear that the United States will work to build consensus with our G7 allies
00:05:06on a plan to utilize the value of immobilized Russian sovereign assets to help address the
00:05:13issues within Ukraine. There's much more, of course, to talk about on the international front
00:05:18as well as the domestic front, which we will get to in questions. But let me end where I began
00:05:24by thanking you, Madam Secretary. Thank you for your team. It's wonderful to have you back. And
00:05:29let me turn it over now to Senator Hagerty for his opening statement. Well, Chairman Van Hollen,
00:05:35I want to thank you for holding this hearing, and I look forward to having many more during
00:05:38the course of this fiscal year. The agencies within the jurisdiction of this subcommittee
00:05:42have a far-ranging impact on the American economy and on the operations of the federal government.
00:05:48As the ranking member of the subcommittee, I look forward to working alongside you and
00:05:52our colleagues to conduct rigorous oversight to strengthen U.S. financial institutions
00:05:57and ensure that the dollars that the taxpayers have entrusted to us are spent responsibly.
00:06:02I also want to welcome our witness, Secretary Yellen. Thank you for appearing before this
00:06:06subcommittee, Secretary. It's a critical time for our economy. I'm glad to see you here today.
00:06:11The Department of the Treasury has a fundamental role in managing our nation's debt
00:06:14and collecting its taxes. The President, with the advice and consent of the Senate,
00:06:18has conferred upon you a great responsibility and obligation to provide sound economic guidance.
00:06:24At the same time, it's your duty to respect the rights of taxpayers who rely on you to treat
00:06:28them fairly. The Department has a deep impact on a broad range of issues, from issuing debt,
00:06:35to reviewing foreign investments, to imposing sanctions. Sanctions under the Trump administration
00:06:40worked, but they're not working now because this administration has deliberately relaxed
00:06:46enforcement. When I served as U.S. Ambassador to Japan, I helped implement the maximum pressure
00:06:52campaign against Iran. In particular, because Japan was a major buyer of Iranian oil,
00:06:58I persuaded then-Prime Minister Abe to support U.S. secondary sanctions and stop buying Iranian
00:07:04crude oil. President Trump's maximum pressure campaign against Iran yielded powerful results.
00:07:11Iran's revenue from the export of crude oil products dropped from $60 billion in 2018
00:07:16to below $20 billion in 2019, to below $8 billion in 2020. President Biden, however,
00:07:23has abandoned the maximum pressure strategy under the Biden administration.
00:07:26Iran's revenue from exports of oil products has risen to over $100 billion.
00:07:31Iran is the world's biggest state sponsor of terrorism, and they've used this financial
00:07:35windfall to increase funding and support for Hamas, for Hezbollah, and for the Houthis.
00:07:43Think about the Houthis that are attacking ships in the Red Sea,
00:07:47Hezbollah, Hamas, menacing our ally Israel every day. Sanctions only work when they're enforced.
00:07:54Another area that I'm deeply concerned about is that the department may have let politics
00:07:58influence the amount of debt issued and the manner in which the Treasury issues its debt.
00:08:03Any action that fails to provide stability and minimize risk to taxpayers deviates from
00:08:08the department's core mission, and I'm concerned about the risk that this presents.
00:08:12In regard to the IRS, I'm concerned about their spending decisions.
00:08:16The IRS is using one-time funding to hire 1,700 people on a permanent basis,
00:08:23staff that it can't afford and would need to furlough without a new transfer authority
00:08:28from this committee. The current IRS budget assumes this one-time spending would be made
00:08:33permanent. That forces Congress to make a difficult decision in the future, either provide billions of
00:08:39dollars of more funding or potentially fire hundreds, if not thousands, of IRS employees.
00:08:46The IRS needs to figure out how to operate within the funds that Congress has already appropriated
00:08:51and within the authority that Congress has already authorized.
00:08:55Another show game that the IRS is playing is with direct file. The IRS, the General Services
00:09:01Administration and the U.S. Digital Service jointly developed the direct file, but the IRS
00:09:06either cannot or they will not share the total cost of direct file with the Congress. The IRS
00:09:13reported its own cost at only $24 million. Still, that works out to be $179 per successfully filed
00:09:21return, but that excludes the cost to GSA and to the USDS. When combined, the total cost to the U.S.
00:09:29government, and that's not just the IRS, of a successfully filed return could easily exceed
00:09:35the most expensive commercial off-the-shelf tax preparation software. It doesn't look like a good
00:09:41economic result for American taxpayers. Additionally, 3.3 million taxpayers were
00:09:46curious enough, at least, to inquire about direct file. They actually began the eligibility
00:09:51screening process, but of those 3.3 million taxpayers, only 140,000 actually succeeded in
00:09:59filing a return. And yet the IRS isn't curious about why the other 3.2 million didn't complete
00:10:05the direct file process, and they don't seem to have any plans to ask why. I don't understand why
00:10:11you would agree to make direct file permanent without understanding why the program has only
00:10:16a 4 percent adoption rate. Finally, I think American taxpayers would also like to understand
00:10:22why the IRS leaker, Charles Littlejohn, who started serving his prison sentence,
00:10:27was charged with only one count of unlawful tax return disclosure. He stole more than 8,000 tax
00:10:34returns over a period of two years. He did it for the purposes of damaging his victim's reputation
00:10:40and affecting the outcome of the presidential election. Based on the sentencing hearing
00:10:44transcript, the lack of charges seemed to frustrate the judge, and it's certainly baffling to me.
00:10:50Secretary Yellen, I hope you'll address these and other concerns, and I look forward to your
00:10:53testimony. Thank you. Thank you, Senator. Secretary Yellen, you're well known to this
00:11:00committee, so I'm going to keep my introduction very brief. Secretary Yellen is the first person
00:11:05to have led the White House Council of Economic Advisers, the Federal Reserve,
00:11:10and the Department of Treasury. Madam Secretary, the floor is yours. Thank you, Senator Van Hollen.
00:11:18Chairman Van Hollen, Ranking Member Hagerty, and members of the subcommittee, thank you for the
00:11:24invitation to testify and for your support of the Treasury Department. Over the past three years,
00:11:31Treasury has helped drive a historic economic recovery and put our economy on a strong path
00:11:39for the medium and long term. GDP growth has been strong, growing 3 percent over the past
00:11:46four quarters. Inflation has declined substantially since its peak, even as we have more work to do
00:11:55to address high costs and give families more breathing room. The labor market is remarkably
00:12:02healthy, and companies have announced over $850 billion in clean energy and manufacturing
00:12:11investments since the start of this administration, including in places that historically had not
00:12:18received significant investment or where investment had declined. To support this,
00:12:25Treasury has played a leading role in implementing the American Rescue Plan and the Inflation
00:12:31Reduction Act. We have also been focused on taking action beyond our borders to strengthen
00:12:38America's economic leadership and national security. I'm heartened that Congress passed
00:12:45crucial support for Ukraine and for other allies. Treasury continues to impose sanctions
00:12:53to constrict Russia's ability to wage war, and we're working with our partners to unlock the
00:12:59economic value of immobilized Russian sovereign assets. Treasury is also using the tools at our
00:13:07disposal to respond to conflict in the Middle East and to responsibly manage the U.S.-China
00:13:14economic relationship, including making sure that American workers and firms can compete on a level
00:13:22playing field and protecting our national security. Let me now highlight several key requests in the
00:13:31President's fiscal 2025 budget that will enable Treasury to continue advancing America's economic
00:13:39interests. First, the budget requests $12.3 billion in discretionary resources for the
00:13:48Internal Revenue Service. Thanks to IRA funding and annual appropriations, we have already seen
00:13:57unprecedented improvements. This filing season, we made it easier for taxpayers to file their taxes
00:14:05and get the credits they're owed, including by providing 11,000 additional hours of in-person
00:14:13assistance. 140,000 taxpayers saved millions in tax preparation fees through the pilot of direct
00:14:22file, an easy and free way to file taxes online directly with the IRS. We have also increased
00:14:31enforcement to make sure wealthy taxpayers and large corporations pay their fair share,
00:14:38collecting millions in unpaid tax debt from millionaires. We need resources so that we
00:14:45continue, we can continue saving the American people time and money and helping reduce the
00:14:52deficit. The IRS is inviting all states to participate in direct file as soon as next
00:14:59filing season and intends to expand it to support all of the most common tax situations
00:15:07over the next few years. And we will keep working to close the tax gap driven by wealthier Americans,
00:15:15which costs us over $600 billion a year. Second, the budget requests funds to allow Treasury
00:15:23to address emerging threats, such as $312 million for Treasury's departmental offices,
00:15:32including to support investment security in sensitive technologies and the stability of
00:15:39the financial system, and $150 million to enhance cybersecurity and protect our systems
00:15:47against intrusion by maligned state actors. And third, the budget requests $231 million
00:15:56for the Office of Terrorism and Financial Intelligence, which provides critical
00:16:02financial intelligence and sanctions-related economic analysis, including to support
00:16:09sanctions related to Hamas, Iran, and Russia. It also requests $216 million for the Financial
00:16:18Crimes Enforcement Network to protect the financial system and combat illicit finance.
00:16:26Thank you. I'm happy to now take your questions.
00:16:29Thank you, Madam Secretary. And we'll do, you know, five-minute rounds, seven-minute rounds,
00:16:36seven-minute rounds, so seven-minute rounds per member. I do want to start on some of your
00:16:43more recent work with respect to meeting with our G7 partners and others to address what seems to be
00:16:52an increase or ongoing transfer of technology from China to Russia to support Putin's
00:17:03war machine efforts. I think that while China has not provided any direct military support
00:17:11in the form of weapons, we have seen, according to American assessments, a large surge of Chinese
00:17:21sales to Russia of machine tools, microelectronics, and other technology that Moscow is using to
00:17:29produce missiles, tanks, aircraft, and other weaponry for the use in the war against Ukraine.
00:17:35I know the President and our allies a number of years ago made it clear that any direct
00:17:43military support from China to Russia would be seen as a red line. While this is not direct
00:17:51military transfers – and I do want to make that clear based on what we know today – what's
00:17:57happening, you know, is clearly benefiting the Putin war machine. So, Madam Secretary, can you
00:18:03talk about how we can work with our allies, whether we collectively impose sanctions on
00:18:09Chinese companies that are engaged in this kind of transfer or other options on the menu that
00:18:16you're looking at? Yes, we, as you noted, are very concerned. There are substantial exports. We've
00:18:26seen an increase in exports from China to Russia and particularly of certain dual-use goods that
00:18:37may be critical to Russia's war effort. And let me say that I have been extremely clear at the highest
00:18:46levels of the Chinese government that this is something we will not tolerate and that we intend
00:18:55to sanction this activity. We're putting sanctions both in place on firms that are engaged in this
00:19:04activity and a new executive order allows us to sanction financial firms that are promoting
00:19:16the export of these dual-use items or military goods to China. We know that our sanctions
00:19:24will be most effective if we work closely with our allies and this is something I have discussed
00:19:33with all of our – all of my finance minister colleagues – the need for us to coordinate our
00:19:42sanctions behavior. I know that this set of concerns was recently conveyed by President Macron,
00:19:51by President von der Leyen, and by Chancellor Schultz in their recent engagement.
00:19:57I don't have anything to preface this. I will just say we're committed to working
00:20:07closely with our allies on this issue and believe it's essential to reduce
00:20:14the flow of these goods to Russia. Well, I appreciate that update and I do hope
00:20:20action will be taken soon because the trajectory, as you indicated and as I outlined,
00:20:27is clearly in the wrong direction and these dual-use items, as you described them,
00:20:33are being put to use by Putin directly to advance and support the war against the people of Ukraine.
00:20:41So I think concerted action is necessary to be effective and I hope it will be taken
00:20:47soon. On a related matter, we, United States, have worked with our allies to try to prevent
00:20:54the transfer of very high-end technologies to China in the first place, whether they be very
00:21:01high-end semiconductors, AI, other technologies. And part of that strategy has been implemented
00:21:11through the Department of Commerce, as you well know, to try to put in place some outbound
00:21:20investment screening to prevent U.S. companies, some of the companies in our
00:21:29allied countries, from investing in China in areas that could then be used by the PRC
00:21:36for military purposes. That requires joint action in order to be effective. So, Madam Secretary,
00:21:43can you just speak to where we are in the effort to develop very clear boundaries and guidelines
00:21:50when it comes to outbound investment, number one, and number two, our key allies?
00:21:57So, as you know, we completed an advance notice of proposed rulemaking on outbound.
00:22:05We have received many comments, which were
00:22:15very supportive of proposed rulemaking. And really, over the last year or more, we have
00:22:23been hearing from our allies about the necessity of doing similar kinds of investment screening.
00:22:34And this would apply both to inbound investment screening, something similar to our CFIUS process,
00:22:43and also outbound screening. And we have ongoing discussion. Our allies are looking at this
00:22:55carefully, working on their own systems. I think all of us recognize that this is something where
00:23:04joint action is more effective. And we continue to focus on trying to help our allies get up to
00:23:13speed on this as well. Well, I appreciate that. You know better than anybody that capital flows
00:23:19can move really at the speed of light across borders. So,
00:23:29Senator Haynes.
00:23:29Secretary Yellen.
00:23:38We're the most privileged Treasury Secretaries to issue and manage U.S. debt.
00:23:43Given rising deficits, this is an increasingly difficult task. Nonetheless, proper management
00:23:48of our nation's debt keeps our funding costs low and maintains the dollar status as the
00:23:53world's reserve currency. In light of this, I'm very concerned about the
00:24:00fact that the Treasury Borrowing Advisory Committee estimates that U.S. debt will comprise
00:24:0415 to 20 percent of the total U.S. debt. But right now, T-bill supply is 25 percent above that range.
00:24:12This means that the Department has issued more than $1 trillion in short-term bills that normally
00:24:17would have been issued as longer-term notes and bonds. This surge in bill issuance severely
00:24:22impedes the market's ability to price risk. It also typically only occurs during recessionary
00:24:28periods. And I'm perplexed by this decision to issue so much on the short end of the curve while
00:24:32yields are inverted. Given current yields, excessive reliance on bills costs taxpayers
00:24:38more money and interest expenses because of the need to roll over short-term financial rates.
00:24:44It also constrains our country's ability to respond to future economic shocks.
00:24:49And perhaps most alarmingly, this approach to debt management undermines the Treasury's
00:24:53credibility because it creates the perception that the administration could be easing financial
00:24:58conditions for political purposes. This chart will help us visualize what I'm talking about.
00:25:04What you can see here is during the 2008 crash, a spike in the issuance of short-term bills.
00:25:12Again, in 2020, you see the next spike in short-term bill issuance right here.
00:25:17Again, we've got the pandemic in 2020. We've got the Great Recession in 2008.
00:25:23Now we see
00:25:31that's not the case.
00:25:35Second, it could be that you're waiting to lock in longer-term issuances until the Fed has cut rates.
00:25:46And you're waiting to time the market in this manner. But the most dangerous
00:26:03could be that you're suppressing rates in order to ease financial conditions in the,
00:26:09sorry, to ease financial conditions for President Biden in an election year leading up to November.
00:26:13And I think that creates an extreme concern. Which one of these three would it be, Secretary
00:26:19Yellen? Well, first of all, let me say we never time the market. A tenet of Treasury debt management
00:26:28is that issuance should be regular and predictable, and that's appropriate over time.
00:26:35And yet it's spiking. You can see from the chart that it's spiking right now.
00:26:39Well, we had a substantial increase in the deficit in connection with the pandemic.
00:26:46But what underlies the decision to do it so much weighted toward the short end,
00:26:51while the yield curve is inverted?
00:26:52Actually, if you look at history, the weighted average maturity of Treasury debt overall
00:27:02is about 71 months, and that is above the long-run average, which is shorter at 61 months.
00:27:13And issuance of bills, in spite of what you're showing there, is in line with historical
00:27:21averages as a percent of overall issuance. Treasury bills with a maturity of one
00:27:31year or less currently represent just under 22 percent of Treasury debt, and the long-run
00:27:39average is 22.4. It's very close to being in line with the guidelines suggested by market
00:27:50participants who take part in the Treasury Borrowing Advisory Committee and the primary dealers.
00:27:57I would very much like to get a better understanding of this, and I've introduced
00:28:00legislation that would have the Treasury report to us, report to this committee,
00:28:05on the debt issuance process and how you're thinking about it so we can get a better
00:28:10understanding, because the concerns that I raised are real. I hear them very often,
00:28:14and I think it would be quite helpful for us to clarify this.
00:28:17We would be glad to do that.
00:28:18Thank you. Thank you. Let's turn our discussion to sanctions now, Secretary Yellen.
00:28:24Iran is the world's foremost state sponsor of terrorism. They send hundreds of millions
00:28:29of dollars per year to terrorist proxies like Hamas, Hezbollah, the Houthis who have murdered
00:28:34scores of American citizens and who desire to wipe Israel from the face of the map.
00:28:39Secretary Yellen, is it the policy of the Biden administration to minimize revenue
00:28:43that Iran derives from illicit oil sales?
00:28:48Yes, it is. And I agree with what you just said. It is our priority to
00:28:58sanction Iran to diminish its ability to export oil.
00:29:05You said it's a priority. However, I just went through the results of the maximum pressure
00:29:10campaign. We had Iran down to below $8 billion in exports in the previous administration.
00:29:16In this administration, the sanctions enforcement has failed miserably. They're back up over $100
00:29:22billion. What's changed then? If the policy hasn't changed, what has?
00:29:26Well, we've continued to take action against those in Iran who are facilitating the export
00:29:34of oil. There is a shadow fleet that it's proven difficult for our sanctions to touch.
00:29:44Our sanctions are most effective when they target financial institutions, but we continue to take
00:29:52sanctions actions. We are very active in addressing terrorist financing by the Iranian regime.
00:30:02I'm running short of time, Secretary. I'd just like to close with this comment.
00:30:06I've been involved in the imposition of sanctions. It's hard work. The program right now is not
00:30:12working, obviously, because what we've seen is illicit oil sales dramatically increase
00:30:16under this administration. I understand that there are complex reasons why that may be the case,
00:30:21but it requires difficult work, hard work. I encourage this administration to take its
00:30:25sanctions enforcement seriously because we're failing right now. Thank you. Thank you, Mr.
00:30:29Chairman. Thank you. Thank you, Senator Hagerty. Senator Coons.
00:30:32Senator Van Hollen, Chairman Van Hollen, thank you. I'm thrilled to see your leadership here
00:30:38at FSGG, Ranking Member Hagerty. Madam Secretary, thank you for the chance to
00:30:44work closely with you in the last year in my role as Chair of State and Foreign Operations.
00:30:49We had a great partnership in meeting our commitments to the multilateral development
00:30:53banks in unlocking 21 billion to the IMF through the PRGT and in finding ways to help developing
00:31:00countries deal with the consequences of COVID, of heightened debt, of the consequences of Russia's
00:31:07aggression in Ukraine, and principally meet competition from the PRC, which is seeking to
00:31:13capitalize on the vulnerabilities of developing countries. So I look forward to working with you
00:31:19on continuing that work. I just returned from a trip to Southeast Asia, where I got to meet with
00:31:24the leadership of the Asian Development Bank and look at how the Luzon Economic Corridor
00:31:30may well be a key part of our Indo-Pacific strategy. Focusing on the issues before us
00:31:35for this year's appropriation, though, for your committee, your department.
00:31:40When Congress passed the Chips and Science Act, a key part of our goal was revitalizing American
00:31:45semiconductor manufacturing. I was just in Taiwan and the Philippines and met with leaders in
00:31:50semiconductor manufacturing. I'm concerned about Treasury's implementation of tax credits
00:31:57and making sure that they reach upstream players in the semiconductor industry.
00:32:02I was encouraged by your recent remarks in a House hearing that Treasury and Commerce are
00:32:07working together to cover the entire supply chain. When do you think we could expect final
00:32:13rules that would make credit available to manufacturing facilities that are producing
00:32:18semiconductor materials that are critical component parts of the semiconductor supply chain?
00:32:24So this is an issue that we're working on very hard. We're trying to get the
00:32:30final rules out as quickly as possible. This is an issue that we explicitly,
00:32:39how far up the supply chain to go. We asked for comment on this. We have received a great deal
00:32:46of feedback. We understand the need for certainty on the part of businesses, and we'll try to get
00:32:53the regulations out just as soon as possible. But we are working closely with the Department
00:33:00of Commerce. They have direct funding, and we want to make sure that we are providing adequate
00:33:06support. I respect and understand, and I've talked to the Secretary, the role that Commerce has
00:33:11in the grant funding for fabs. My concern is that we also support the other businesses and
00:33:16industries that are a part of semiconductor manufacturing. Let me move on. There's some
00:33:22key decisions also not yet made in terms of 45V rulemaking. There are, I think, seven
00:33:29regional hydrogen hubs that have been chosen through the Inflation Reduction Act that will
00:33:34help support regional economic renewal across the country. My concern is that we need to hit the
00:33:40right balance in 45V to actually provide the opportunity for takeoff for a future hydrogen
00:33:48industry in the United States. I do not think that it's assured that that will happen. The hubs,
00:33:54which were selected eight months ago, can't move ahead without certainty about how this investment
00:34:00profile will look. Does Treasury need more resources in order to finalize the 45V rulemaking?
00:34:06Is that part of the limitation in terms of getting these rules out? It's not a matter of resources.
00:34:13It's really a matter of the complexity of the issues that are involved here and
00:34:22the working through. I believe there were over 40,000 comments received on the guidance that
00:34:31we put out on 45V. We recognize the issues that the hydrogen hubs face and are working hard. We're
00:34:42working jointly with the Department of Energy and also with EPA to try to figure out how to
00:34:50address this. We've received a lot of comments making suggestions which we're taking seriously.
00:34:59I know some of the comments you've received are from my region, from Delaware, from Pennsylvania,
00:35:04from New Jersey, where the Mach 2 regional hub leadership is very concerned about what impact
00:35:10the Treasury rules will have on whether or not they're going to be viable. I would urge careful
00:35:16consideration of those comments. I understand and we will. Let me conclude, if I could,
00:35:20with an issue I think of real interest to both of us, which is financial inclusion and the
00:35:25development of a national strategy. Too many Americans still lack access to basic financial
00:35:31services. Those with access are unable to effectively reap the benefits of access
00:35:37to financial services. This is something the financial services and some of the consumer
00:35:43advocacy groups in my state have long been passionate about. Treasury, I think, is nearing
00:35:50the completion of the strategy that was required in last year's bill. It's an opportunity to make
00:35:56sure federal agencies are coordinating with each other, with the private sector, with state and
00:36:01local governments, with non-profit groups, and Treasury will have to keep leading in the
00:36:07implementation of this strategy for financial inclusion. What do you see as the most important
00:36:12steps in finalizing and implementing your financial inclusion strategy, and how could we be helpful
00:36:18in Congress? So you have been extremely helpful. Let me say how much I appreciate your leadership
00:36:24on this issue. We've made a lot of progress. We've been engaging in robust public and stakeholder
00:36:35outreach and engagement. We've met with over 150 stakeholder organizations, and we're hoping to
00:36:44finalize these recommendations this summer. Well, thank you, Madam Secretary. We're going
00:36:51to have a very busy summer, finalizing some rules, some strategy, and then moving forward
00:36:55with them, and I appreciate the opportunity to partner with you across these three important
00:37:00areas. Thank you, Senator. Senator Kennedy. Thank you, Mr. Chairman. Madam Secretary,
00:37:07always good to see you. Likewise.
00:37:11Right now, in our current fiscal year, by hour, I mean the federal government,
00:37:21we're running about, looks like about a 1.1 trillion dollar deficit. Is that correct?
00:37:28About 1.6, I believe. 1.6 trillion. I'm sorry, it's even worse than I thought.
00:37:35And that, of course, means that we're spending 1.6 trillion dollars more than we're taking in
00:37:44in revenues. Is that right? That's correct. Okay. And we're filling the hole by borrowing money.
00:37:51Is that correct? That's correct.
00:37:53That's correct.
00:37:57Now, if you personally were borrowing money,
00:38:03would you rather pay 5.4 percent interest or 4.4 percent interest?
00:38:12The less, the better. Ma'am? The less, the better. Okay. Then why aren't you doing that
00:38:20with federal borrowing?
00:38:27Well, in federal borrowing, our objective is to issue at least cost over time
00:38:36and not try to time the market. Yeah, but you are timing the market. You issued a
00:38:42press release back in November that you were going to try to time the market. I mean, right now,
00:38:47you can issue three-month treasuries, these are yesterday's yields, at roughly 5.4 percent.
00:38:57Yes.
00:39:02So, but you could issue a 10-year treasury note for 4.4 percent and save, let me just finish,
00:39:11and save the taxpayer a lot of money. And then last November, you said,
00:39:20you issued a press release, you said, we're going to start borrowing more short-term debt
00:39:28than we normally would. At the beginning of 2023, our short-term debt was about 15 percent.
00:39:37And last November, you said, we're going to increase that to about, and now it's about 22,
00:39:4223 percent. Correct. You're costing the taxpayers billions. Why are you doing that?
00:39:50So, Senator, it, you say it costs 5.4 percent. That's what it costs this year.
00:39:57No, that's what it cost yesterday. Yes, but when you issue 10-year bonds,
00:40:04you're locking in the 10-year rate over 10 years. And that 10-year rate, the reason that holders
00:40:14of 10-year treasury bonds are willing to accept a 4.3, 4.4 percent yield is because when those
00:40:27same individuals could be investing at 5.4 percent. Madam Secretary. No, I'm sorry, I don't
00:40:34like to. Madam Secretary, that's just no offense. That's double talk. It is a double talk.
00:40:41I mean, maybe it's my fault. Maybe it's my fault. Today, you can borrow for three months at 5.4
00:40:52percent, but instead you're choosing, strike that. Today, you can borrow for 10 years at 4.4 percent.
00:41:00Instead, you're choosing to borrow at 5.4 percent. Market participants believe that. That makes no
00:41:06sense. Market participants believe that short-term interest rates will come down, and they will come
00:41:12down to a level substantially below the current 10-year rate. You are trying to time the market.
00:41:18And so, no, it isn't a question of timing the market. It's we issue across the curve in a
00:41:25regular and predictable way. You announced last November, I can show you the press release,
00:41:32where you said that we have decided to start issuing an inordinately large amount of
00:41:42short-term debt, didn't you? We did make an announcement. And because of the inverted yield
00:41:50curve, that means that you're going to pay more in interest on short-term debt than, say,
00:41:5610-year debt. Only for a short time. Now, that's a fact, okay? You can go check the numbers of
00:42:02Treasuries yesterday. First, that would cost taxpayers a lot more money in interest,
00:42:10and number two, you're working at cross-purposes with the Federal Reserve, because what you're
00:42:17doing is stimulating the market. You're pumping money into the economy. And Jay Powell is over
00:42:23here beavering away, trying to reduce inflation. And you're beavering away, trying to increase it
00:42:32by paying an interest rate that is 100 basis points higher than you would have to pay.
00:42:38And the only reason I can figure that y'all are doing that is to try to give the economy a sugar
00:42:46high five months before an election. Why else would anybody want to borrow at 5% when you can borrow
00:42:52at 4%? Well, there is a good reason that investors are willing to accept just over 4% on a 10-year
00:43:03Treasury bond when they can earn 5.4% on a one-year Treasury bill. I'm not worried about
00:43:10the investor. I'm not worried about the investor. I'm worried about the taxpayer. It's the same
00:43:14logic. And let me ask you again, because I'm going to run out of time, and look, you're smarter than
00:43:19me. I know that. But I can grasp this concept. You're borrowing at 5% when you could borrow at
00:43:284% to deficit spend. And it makes absolutely no sense to me why you would do that, other than
00:43:37you try to artificially stimulate the economy and help nobody get elected. If I borrow at 4%,
00:43:42if I borrow at 4.5%, I'm locking in that cost over 10 years. But you just said you weren't
00:43:49trying to time the market. You are trying to time the market. It isn't trying to time the market,
00:43:55because this is something that is a regular part of our policy. When short-term rates are high,
00:44:06and long-term rates are lower, the reason for that is that market participants expect short
00:44:13rates to go down, and they expect them to decline over 10 years to substantially under 4.5%. So even
00:44:22if we pay more this year than it would cost to borrow at a 10-year rate of 4.5%, the expected
00:44:31cost over the 10-year life of that borrowing can be the same or less than it would be if we issued
00:44:39a 10-year note. Now, we're not trying to time the market. We have a policy that we want to
00:44:47hold the issuance of short-term bills in line with recommendations of the Treasury Borrowing
00:44:55Advisory Committee. Can I say something now? Madam Secretary, I'm going to say it again,
00:45:02you're a lot smarter than me. But my mama didn't raise a fool, and if she did, it was one of my
00:45:09brothers. And what you're doing, you know it and I know it, and all those people sitting behind you
00:45:15know it. You're paying 5% to borrow money when you could pay 4% to borrow money. You announced
00:45:23you were going to do that back in November 2023. You're working cross-purposes with Jay Powell.
00:45:30You're not working. And the reason you're doing this, the reason you're doing this is to try to
00:45:36give the economy a sugar high five months before an election. Now, you know that, and I know that.
00:45:42There's nothing about issuing short-term debt that creates a sugar high for the economy.
00:45:47My chairman says I'm out of time. It's good to see you.
00:45:53He's such an affable, he's just very nice. Madam, I'm going to continue with the questioning now,
00:45:58if I may. You want to go ahead and restart? But anyway, good to have you. Thank you for your
00:46:03service. And first of all, I want to talk about the Bureau of Fiscal Service Management as far
00:46:09as the office in Parkersburg, West Virginia. The employees are not coming back to work.
00:46:15Now, I know that Senator Romney and I have introduced a piece of legislation
00:46:19that would say that at least 60% of the time they have to be in their office at work.
00:46:26And I think that basically a relatively small increase above the 50% mark mandated by the
00:46:32Office of Management and Budget, OMB, has said 50% of the time. I don't know if you know this
00:46:36or not, but that office in Parkersburg, West Virginia, people only have to be there two days
00:46:41of pay period. Two days of pay period. What they end up doing, they come at the end of the first
00:46:46pay period, stay two days. The beginning of the second pay period, stay two days. There are four
00:46:50days out of a total of two pay period. It's ridiculous. Absolutely ridiculous. And it's
00:46:56destroying the economy and the people that should be coming to work. They're living anywhere and
00:47:01they fly in. And this has got to stop. And you have to stop it, Madam Secretary, because it's
00:47:07not going to happen unless you clamp down tight. The rules say OMB, at least 50%. We'll accept 50%.
00:47:13At least I get them there 10 days out of 20. Okay? I appreciate the problem that this is
00:47:20causing. And I know that you've written a letter to Treasury about this.
00:47:25We have specifics now we can help you all with. And now my next round is going to be,
00:47:30I want to be as respectful as I can because I totally disagree with what you are doing,
00:47:34implementing the EV credits. The what? The EV credits, electric vehicle credits.
00:47:38I know that because we wrote the bill. My committee wrote the bill completely.
00:47:43I know. And we wrote the intent of the bill. We
00:47:45have all the findings of what we did and how we did it. But let me just show this right here,
00:47:49Madam Secretary. The bill was very much written so that we would bring America back, bring
00:47:54manufacturing back to America, that we would not be relied, we would not be relying on
00:47:59unreliable supply chains, especially the countries of four concerns, China, Russia,
00:48:04Iran, and North Korea. And as we know, Russia has, I mean, China has dominated the critical
00:48:09minerals industry. But here's what you all have done. Your permanent rules, these are
00:48:13your permanent rules, came from you all. This is how we wrote the bill. It's in the bill, specific.
00:48:19First year, 20, 23, 40%. You all cut it in half to 20.
00:48:22I'm sorry, I can't. Okay, this is here. This is 40%.
00:48:29Let's get it up there closer. You can see how it does. Okay. First year, second year, third year.
00:48:33You've cut everything in half, everything in half. It makes no sense because you're going to get
00:48:38sued on all of this from people who have been damaged. The manufacturers that are investing
00:48:43money that thought that they would not be inundated with lower prices, unfair competition,
00:48:48especially from China, you've given them a, you've given them the ability to come after them
00:48:54now. Okay, you can see this all the way through. So what, what, what do you think we've cut this
00:49:00in half? You're talking about the requirements, requirements of what should be from batteries,
00:49:08battery components, processing and for minerals, sourcing and processing. You've even tried to
00:49:13change the definition of processing to where some of the manufacturing can be done and considered
00:49:18in processing. You've done that. We have all of that. The only thing I'm trying to be very
00:49:23respectful, you are going to be sued and you're, we're going to do a writ of mandamus, you know,
00:49:29amicus brief to, to help the people that are suing because this is how we wrote the bill.
00:49:34We wanted it to be America. We wanted it to be with free trade agreement countries. We wanted
00:49:38not to be reliant on China. This absolutely allows China in the market and staying in the market for
00:49:44the entire extent of the IRA. I'm sorry, you know, we put out the FIOC restrictions that pertain
00:49:52to China and those restrictions mean that, um, this, this year, uh, you can't have battery
00:50:01components that are made in China and next year, um, a vehicle. Why did you cut it in half then?
00:50:09Why did you cut it in half? Cut what? You cut basically requirement of how much had to come
00:50:13from where this had to come from America free trade agreements. This can come from non for
00:50:18anywhere else in the world. This is what's happening. I can go into it in detail, but this
00:50:23is, I have been raising absolutely holy cane from day one. Now I, we, we wrote the IRA as a very
00:50:31balanced bill to have energy as far as basically, if we're going to basically change our entire
00:50:37transportation mode, it's the first time in the history of the United States of America.
00:50:41We can not basically provide all the components for transportation mode. We're willing to be
00:50:46reliant on, especially of China, which had a total lock on the EVs. We share the objective
00:50:54that you have, which is to rid ourselves of dependence on China. Who on your staff changed
00:51:00this in half? I'm not sure. I think we need to have a technical discussion. We've been calling
00:51:05you because anybody here, you, any of you on this? Because, um, I believe that the rules we wrote,
00:51:14um, are in accord with what's in the statute. I'm trying to be as respectful as I can. They
00:51:20absolutely are not. They absolutely. And I'm encouraging every manufacturer to sue you.
00:51:27Well, and I will do the meekest brief on behalf and it will show you exactly how we wrote to
00:51:31bill the intent of the bill, and you'll lose every suit. I know that. So in order to avoid
00:51:37all of that, why can't we just basically implement the bill the way it was written?
00:51:41And I've said this, you all and basically the administration, and these are people I've known
00:51:46forever. You're trying to implement a bill you never passed. This is not the BBB. This is the IRA.
00:51:54Well, we shared the objective that you had in writing the bill, and I believe we have
00:52:00implemented it in accordance with what's in the law. Senator Coons based on the hydrogen hub. Okay,
00:52:07now let me explain the hydrogen hub. We wrote that in the bipartisan infrastructure bill,
00:52:12and then we came back and funded it in the IRA. This is how we wrote. This is how we wrote to
00:52:19bill. This is how we wrote. We're happy to share all this with you. I think hopefully some of your
00:52:24staff knows this. Where did additionality come in? Where did time matching come in? Where did
00:52:31regionality come in? Who made that up? Well, we never have one iode of a word in that written.
00:52:37We wrote the bill, but then all of a sudden these are the conditions to get the credits. Now with
00:52:43that, where's the other? Let me show you this one. This is from the seven hubs. Every one of the hubs
00:52:51have written to you all. Now, can you have the California hub and a West Virginia hub that agree?
00:52:58Something's wrong. We must be on the right track, but you all, every hub to agree said it's no longer
00:53:04commercially viable if you do what you're doing. Implementation of the hydrogen rules. This is what
00:53:10we're dealing with. It's killing us. We shouldn't be fighting within ourselves. Just implement,
00:53:16write the rules the way the bill was incented to write. We wrote it.
00:53:21Well, the hydrogen rule has to abide by the Clean Air Act definition of life cycle.
00:53:31The whole thing is, is basically, and that means taking account of indirect emissions,
00:53:37which is where the complications come into play. The administration doesn't want anything
00:53:41that comes out of the ground. I'm fighting them tooth and nail. We're producing more energy
00:53:45than ever in the history of the United States of America. If it wasn't for that, your inflation
00:53:49would be sky high. Prices of gas would be at five dollars. And what we're doing, because we're using
00:53:54blue hydrogen, is where they're going nuts on. That's it. But you're going to have to have it
00:53:58in this mix or we will not be energy independent. We recognize that there's an issue with respect
00:54:04to the hydrogen hubs, and we've asked explicitly in the guidance we put out how people suggest
00:54:14addressing it. And we're reviewing the comments. I'm out of time, but I would love to sit down.
00:54:21We're trying to give you the benefit of the doubt on so many things, trying to work with you,
00:54:25but it just seems that's impossible because they're hell-bent on implementing things that
00:54:30were never intended in the bill and were not written in the IRA or any of the bipartisan
00:54:34infrastructure bill. And we're going to continue to fight to make sure that you confirm, you know.
00:54:40Well, I would like to have... We'd be happy to do that. ...understand why you think we've halved.
00:54:46Well, we can definitely show you word by word. And I hope that whoever's in this audience with
00:54:51you right now or whoever wrote some of these things, I would like to have them in the room too.
00:54:56Yes, I agree. All right. I'm sorry.
00:55:00Madam Secretary, I apologize. I had to leave to join a hearing with FBI Director Wray. It's good
00:55:07to be back. And I recognize the chair of the full committee, Senator Murray.
00:55:13Thank you very much, Chair Van Hollen. Thank you, Secretary Yellen, for joining us. We all know
00:55:19that Treasury plays a pretty crucial role keeping our economy strong and stable and strengthening
00:55:25our families' financial security as well. And it plays an indispensable role in keeping our
00:55:30country safe. That's why I have been insisting that we find a solution to address the extremely
00:55:36tight spending caps we are facing and that any increase in defense spending is at least
00:55:41matched by a much-needed boost in domestic priorities here at home. For starters, Treasury
00:55:47is responsible for absolutely vital sanctions enforcement work to choke off funds to our
00:55:54adversaries like Russia and Iran, not to mention drug cartels and traffickers. It also regulates
00:56:00banks to keep our economy sound, protect our families, and prevent Main Street from paying
00:56:06for Wall Street's mistakes. So I want you to know I'm going to keep working with my colleagues to
00:56:10underscore the need to increase vital non-defense resources at Treasury and so many other agencies.
00:56:18So with that, I do have some questions for you. I wanted to ask you about the
00:56:22Inflation Reduction Act. It invested significant resources in the IRS to improve and modernize
00:56:28the agency, and we have seen immediate benefits like call wait times decreasing from 28 minutes
00:56:35to three minutes, new enforcement initiatives to ensure large corporations and the ultra-wealthy
00:56:41are paying their fair share, and new tools like the direct file, which has made it easier than
00:56:47ever for people to file their taxes and get their refunds. Nearly 14,000 people in Washington State
00:56:54used direct file for their taxes this year, and I'm really excited that the IRS is going to be
00:56:59expanding it to all 50 states next year. It is paramount we preserve these achievements through
00:57:05the annual appropriations process now. So I wanted to ask you, how does the FY25 budget request
00:57:12build upon the success of IRA investments? Well, direct file was made possible by resources
00:57:20in the Inflation Reduction Act. They enabled us to invest in the IRS and deliver world-class service
00:57:30and develop the direct file, and we intend to continue using those resources to support direct
00:57:41file. We've recently decided to make it permanent. We'll extend to all 50 states. Hopefully they'll
00:57:49all want to partner with IRS and that those resources will be critical to covering the cost.
00:58:00Did your budget request, does your budget request allow, enable you to be able to expand it to all
00:58:0550 states? Yes, in the sense the request includes both an appropriation, annual appropriations,
00:58:17and also an increase in mandatory funding for the IRS, and that combination would enable us to do that.
00:58:26Okay, very good. The Inflation Reduction Act has tasked the Treasury Department with an indispensable
00:58:33role in fighting the climate crisis. That law included a suite of clean energy tax credits,
00:58:39including the 45V for the production of clean hydrogen. Now, unfortunately, your proposed 45V
00:58:46rulemaking has thrown up some major roadblocks, which a vast coalition, including states, industry,
00:58:53labor, have made very clear they're not workable. Washington State is home to one of the cleanest
00:58:59grids and some of the strongest state climate legislation in the country, and is already seeing
00:59:05some of the investments put on hold as a result of the proposed rule. It is no exaggeration to say
00:59:12that getting this rulemaking right may deliver tens of thousands of high-wage jobs while reducing
00:59:18emissions. So I want to ask you how you plan to address the concerns you're hearing and make sure
00:59:24that the final 45V rule helps rather than hinders the development of clean hydrogen projects.
00:59:31Thank you for that question. We've heard a great deal of input on the issue of hydrogen hubs.
00:59:39We asked for input when we issued proposed regulations on how we could identify
00:59:51circumstances where there's minimal risk of significant induced grid emissions. And one
00:59:59of the issues there is how to take account of state policies. And so we have received input
01:00:08and we're going to take that input into account as we revise the regulation. Okay, so can you
01:00:15assure me when the final regulation comes out, we will see a better regulation to make sure our
01:00:20states can actually use these investments? We will certainly try to address this issue.
01:00:24Okay, I will look forward to seeing that. It's really critical for our hydrogen hub.
01:00:28I hear you. Two years ago, I helped pass a sweeping bipartisan retirement bill, Secure 2.0 Act.
01:00:37It's really important to me that Americans can retire with dignity. So I want to thank you for
01:00:42Treasury's guidance on the emergency savings. I know stakeholders are anxiously awaiting further
01:00:48guidance on provisions like the student loan match. Do you have at Treasury sufficient resources to
01:00:54implement these popular bipartisan measures? Yes, we do. And we appreciate the support that
01:01:00you provided us this fiscal year and we don't need additional resources. This is something we're
01:01:07going to get done. Okay, very good. And finally, in the American Rescue Plan, Democrats expanded the
01:01:14child tax credit and lifted 5.3 million people out of poverty. That expansion nearly cut child
01:01:20poverty rates in half from the previous year, but that progress is being reversed with the expiration
01:01:27now of the CTC. I helped reintroduce that child care tax credit, which would expand and make it
01:01:34permanent. Can you talk about the immediate and long-term benefits expanding the CTC would have
01:01:42on working and middle-class families? Well, I think it would be dramatic. And as you pointed out,
01:01:48in 2021, CTC is credited with having, it's the leading driver behind a 46% reduction in child
01:01:59poverty. There were record lows in black, Hispanic, and Native American and Asian and white child
01:02:07poverty. And, you know, beyond the immediate reduction in child poverty, research also suggests
01:02:16that this kind of income support brings long-term gains in children's health, education, and earnings.
01:02:25So I think this is something that can have a profound effect on children and their well-being
01:02:34and futures. Talk a little bit about how the President's budget request addresses child poverty.
01:02:41Well, the President has requested in this budget request to expand the child tax credit
01:02:53and to make permanent full refundability and also advanceability. So we certainly would
01:03:01like to see the amounts increased and see full refundability. Okay. I really appreciate it. Thank
01:03:08you very much. And thank you, Mr. Chairman. Thank you, Madam Chairman. And now we'll hear from the
01:03:13Vice Chair of the Full Appropriations Committee, Senator Collins. Thank you very much, Mr. Chairman.
01:03:20Welcome, Madam Secretary. Thank you, Senator. The IRS is relying on automation very heavily to answer
01:03:30taxpayers' questions. This filing season, about half of the callers received an automated response
01:03:41while the other half were able to speak with a customer service representative. Now, I understand
01:03:50that there are certain taxpayer service functions that can be automated, and that can be an efficient
01:03:59and good way to serve the customer. But many taxpayers want to have contact with a live person,
01:04:10want to not deal with going through a menu, trying to figure it out, or they may have a more complex
01:04:19system. So how can the IRS increase the availability of customer service representatives
01:04:29to those taxpayers who want to speak with someone rather than go through a complicated menu
01:04:36that may not answer their question? So I will confess I'm not sure exactly how people are routed
01:04:45when they call the main number. But what I can tell you is that the amount of resources,
01:04:53the number of customer service representatives, and the service that's been achieved through the
01:05:02IRA investments, many, many people, more people are reaching live operators who answer their
01:05:11questions. Call wait times have declined on average to three minutes, and a standard metric
01:05:20that IRS uses, the level of service increased above 85 percent, which is just a vast improvement
01:05:30from where we were two years ago. Taxpayer assistance centers are being staffed. There's
01:05:39a great deal more available in terms of customer service. I'm not positive just what happens when
01:05:50people reach an automated thing, but I can look into that. Thank you. I'd appreciate that.
01:05:59Let me bring up a related issue. As of May 5th, the IRS expects its employees to return to the
01:06:07office for half of all their work days. My first question would be why only half?
01:06:15Well, you know, the guidelines that we've put in effect for all Treasury employees, including IRS,
01:06:22conform with OMB and administration guidance, which is half. Now, in many cases, and this
01:06:32certainly applies to IRS employees, I mean, what's required for many people is to be there
01:06:39full time. And this is true for large numbers of IRS employees. It's true for our employees
01:06:49who work in the Bureau of Engraving and Printing and the mint and manufacturing processes. So
01:06:56this differs. It's only half if that's something that's compatible with
01:07:05getting the job done. So our guidance throughout Treasury employees is we need to see what's
01:07:13necessary to effectively serve the American public. And only when telework is compatible with that
01:07:23is it permitted. Well, I looked at the latest data from the Treasury Inspector General for
01:07:32Tax Administration, and the Inspector General found that IRS employees teleworked 22 percent
01:07:42of the time, worked in person 37 percent of the time, and engaged in some sort of hybrid work
01:07:5140 percent of the time on average during the first quarter of the fiscal year.
01:07:58So I'm trying to reconcile the data that's reported by the Inspector General to the IRS's
01:08:08goal of having its employees work half of their workdays in the office. It seems to me that the
01:08:16Inspector General found that they are not working half of their workdays in the office.
01:08:23You know, some of the employees are covered by collective bargaining agreements. They're
01:08:29members of the union. And to enforce those rules requires an agreement with the union.
01:08:38Let me just ask you one final question, and let me suggest that I think those contracts need to be
01:08:53renegotiated with the taxpayers' interests in mind. Agreed.
01:09:00Let me ask you about the main Treasury building. It has been identified as an underutilized
01:09:10building by the GAO in July. And I apologize if this has already been brought up by anyone.
01:09:20By GAO's estimate, less than 50 percent of the usable space was being utilized. Now,
01:09:30I understand that's an historic building, and that may pose some challenges to using
01:09:41the entire building. But it concerns me that we're paying for a costly building if it's being
01:09:52so dramatically underutilized, when less than half of the building is being utilized.
01:10:01Is that due to the fact that people are working from home? Does the Treasury Department need to
01:10:10downspace its offices or bring more people back? What are your comments on that?
01:10:19We are looking at our space requirements carefully. There are some programs that are
01:10:25growing and need more space and some that need less. I believe that we have, as a lease has
01:10:34expired, I'd need to get back to you with the details, but have relinquished one Treasury
01:10:42building. Main Treasury building, I'm not aware. My impression was that it was fully utilized,
01:10:51but I will get back to you with details on that. We are certainly looking at our space needs,
01:10:57but it's not simple because there are programs that are growing while others are shrinking,
01:11:06have their needs are shrinking. Thank you. Thank you, Mr. Chairman.
01:11:11Thank you, Madam Vice Chair and Madam Secretary. I have a few more questions here that I'd like
01:11:19to get to. We talked a little bit earlier about your ongoing efforts to implement the REPO Act,
01:11:29the Rebuilding Economic Prosperity and Opportunity for Ukrainians Act, using some of the
01:11:37Russian assets to help the people of Ukraine. Could you just update the committee on where that
01:11:46effort stands in discussions with our partners at the G7 and elsewhere?
01:11:52Yes. Well, I personally believe that it's necessary and urgent for our international coalition
01:12:02to find a way to unlock the economic value of those immobilized Russian sovereign assets
01:12:10to support Ukraine. And the REPO Act was an important step. It enables us to do a whole
01:12:21variety of useful things. We want to work, if possible, and I believe it is possible,
01:12:28with our partners in the G7 and the European Union to settle on a coordinated way to unlock
01:12:38the value of these assets. And the G7 leaders will be meeting in June in just a couple of weeks
01:12:48in Apulia in Italy, and we're working together to try to find a way forward. Now, the European Union
01:12:59has taken a very important step that there are substantial assets at Euroclear, which
01:13:12the assets are frozen, they're Russian sovereign assets. Euroclear is earning interest on these
01:13:19assets. It doesn't belong to Russia, and it had been accruing to Euroclear. And the European Union
01:13:29has now taken action to take that, it's called the windfall profits, and to dedicate most of it
01:13:40for Ukraine. So that's a flow that amounts to somewhere in the three to five billion range
01:13:47per year, and will accrue as long as they remain immobilized. We have been discussing the
01:13:55possibility of giving Ukraine, the G7, a loan and allowing the windfall, this flow of windfall
01:14:06profits, to be used to pay off those, the loans that would be given. And this is an approach that
01:14:14seems to be commanding considerable support. So we're hopeful that this can be worked into
01:14:23something to be presented to the leaders at the G7, the upcoming G7 meeting.
01:14:30Well, I want to commend you and the Deputy Secretary and others on coming up with these
01:14:35creative, innovative proposals. Thank you. To garner the support of other countries that we
01:14:43need to work with as part of this effort. Another ongoing effort, as you know, which was launched
01:14:50a number of years ago now, was to put a price cap on Russian oil in order to reduce Russian oil
01:14:59revenues overall without impacting the global market price for oil. Those efforts have been,
01:15:09I think, somewhat successful. I think there's room for improvement. But could you provide a
01:15:14very brief update on where that effort stands? Yes. So first year, the price cap, I think,
01:15:22was very successful. We saw a 40% decline in the Kremlin's oil revenues. And as you mentioned,
01:15:32the second goal is keep the market well supplied. Russia continued to sell oil. Now,
01:15:42Russia was able, after that, to build up a fleet, a so-called shadow fleet, and to find ways,
01:15:50often to provide services like insurance that Western had been provided by Western companies
01:16:00and by providing those services, they were able to continue selling oil, particularly to India
01:16:10and China. This was a considerable expense for Russia to have to do that. And there remains a
01:16:20significant discount on Russian oil. So essentially, although the oil continues to be
01:16:31sold, we forced Russia to make a hard choice, either abide by the cap and sell at a very low
01:16:40price or invest massively resources, drawing money away from the war effort. One estimate is that
01:16:51Russia has to pay $36 a barrel to actually export a barrel of oil. So even if they're getting more
01:17:01than the $60 price cap, their expenses are considerable. Recently, their top oil official,
01:17:10the Deputy Prime Minister, attested that price cap enforcement, which we've made stricter recently,
01:17:21has been costly to Russian energy exports and is driving down their profits. So
01:17:30we do have the Russians saying that they're being harmed by this. We've upped our sanctions
01:17:38activity. We sanctioned Russia's largest shipping company. We've required stricter
01:17:49enforcement by Western service providers that they're abiding by the price cap. And those steps
01:17:56seem to be effective. So I would describe the price cap as continuing to be somewhat effective
01:18:04at limiting Russia's revenue, and that includes driving up their expenses to sell this oil.
01:18:12Thank you, Madam Secretary. I also have one question, which I think will be a simple yes or
01:18:20no, but there's a lot of misinformation going around with respect to the Biden administration's
01:18:28effort to use some of the resources from the Inflation Reduction Act to go after only very
01:18:37high-end, very wealthy people who have not paid their taxes that are due and owing. So I just
01:18:45want to confirm for the record that your direction to the IRS was that audit rates are not to increase
01:18:52relative to historic levels for small businesses or households earning less than $400,000 a year.
01:19:01That was my directive, and Commissioner Werfel has committed that he will not increase audit rates
01:19:11for families earning under $400,000 or small business taxpayers. They will not rise above
01:19:192018 levels. And does the administration have any future plans to alter that very clear direction?
01:19:26No. The resources are intended to go after wealthy individuals who are not
01:19:36meeting their tax responsibilities, complex partnerships, and corporations,
01:19:42which is where most of the tax gap is estimated to originate.
01:19:49Well, thank you for that. I do have one final area that I just want to
01:19:54convey some thoughts about, and then maybe you and your team can get back to me later. I want
01:20:00to applaud you and the Biden administration for issuing the executive order on imposing
01:20:07certain sanctions on persons undermining peace, security, and stability in the West Bank. This was
01:20:13the executive order issued by the President February 1st of 2024. The chairman of three
01:20:21committees with jurisdiction over this area, Senator Cardin on the Foreign Relations Committee,
01:20:26Senator Reid, Armed Services Committee, Senator Warner, and the Intelligence Committee have all
01:20:31written to the administration commending this action and urging you and the President and the
01:20:37Secretary of State to consider further actions with respect to addressing extremist settler violence
01:20:45on the West Bank, which, as you know, has created a very, very dangerous and combustible situation.
01:20:57Combustible is actually not the right word because it's already combusting, and really hope
01:21:02that the administration will use its authorities to send very clear signals as to what's acceptable
01:21:09and what is not. In that regard, though, I would just bring to your attention a New York Times
01:21:16magazine piece from May 16th. It's the cover story. It goes into great detail not only about extremist
01:21:24settler violence, but the conditions under this very extreme Netanyahu government that have allowed
01:21:32a lot of that violence to continue. And it especially talks about the actions of Mr. Smotrich,
01:21:41who wears two hats. One is as the Minister of Finance, where, as you know, he has really tried
01:21:49to prevent the Palestinian Authority's own tax revenues that are collected by Israel from being
01:21:55returned to the Palestinian Authority. Thank you for your efforts to keep the pressure on because
01:22:02that just creates more and more instability. The PA, as you know, actually works with the
01:22:08United States and Israel on security cooperation, among other things. And so undermining and
01:22:14unfunding them obviously creates an even more unstable situation. But in addition to that
01:22:24hat that he wears as Minister of Finance, Smotrich also has a very important portfolio overseeing
01:22:33the West Bank. And in this New York Times magazine piece, which, by the way, was written by two
01:22:40veteran investigative reporters, including an Israeli investigative reporter, it says, and I
01:22:47quote, one document describes a meeting in March when Major General Yehuda Fox, the head of Israel's
01:22:55Central Command responsible for the West Bank, gave a withering account of efforts by Bezalel
01:23:04Smotrich, an ultra-right leader and the official in Prime Minister Benjamin Netanyahu's government
01:23:10with oversight over the West Bank, to undermine law enforcement in the occupied territory.
01:23:17Since Smotrich took office, Fox wrote against, again, Fox is with the IDF, Central Command,
01:23:24since Smotrich took office, Fox wrote, the effort to clamp down on illegal settlement
01:23:28construction has dwindled, quote, to the point where it has disappeared, unquote. Moreover,
01:23:35Fox said Smotrich and his allies were thwarting the very measures to enforce the law that the
01:23:40government had promised Israeli courts it would take. So Madam Secretary, my point is this. As I
01:23:48read this executive order and what actions qualify to be sanctioned, it says those covered
01:23:59actions include directing, enacting, implementing, enforcing, or failing to enforce policies that
01:24:05threaten the peace, security, or stability of the West Bank. And by my reading, Mr. Smotrich's
01:24:12actions clearly meet that definition and that test. So I would urge the administration
01:24:22to consider imposing these sanctions on Mr. Smotrich. I think it's the right thing to do
01:24:30to send a signal that the kind of instability that he is creating, both through his efforts
01:24:37to cut off all funding to the PA – and I will say that he said in a letter to Prime Minister
01:24:43Netanyahu with respect to the Palestinian Authority, this is a quote, we must bring about
01:24:47its downfall. That is in direct contradiction and violation of U.S. policy and at least
01:24:54my understanding of the policy of the government of Israel, and yet you have this individual
01:25:01taking those actions against the Palestinian Authority, which the President, President Biden,
01:25:07of course, has seen as a partner in a government once we get the hostages freed and bring about a
01:25:17ceasefire in Gaza as a partner with respect to governance in Gaza. So I would suggest that these
01:25:25actions he's taking, both to, quote, dismantle the PA as well as to encourage and enable extremist
01:25:36settler violence and the expansion of settlements that are deemed illegal under even Israeli
01:25:43law, it seems to me it's an action that the administration should consider and I would
01:25:48recommend it taking. I don't expect an answer today, but I would, Madam Secretary, ask you
01:25:53for your commitment to meet with me and my team to talk about this issue. I would be glad to do
01:25:59that and let me say we share your concerns about what's happening in the West Bank.
01:26:06As you mentioned, we have taken some actions. I've been very disturbed about the withholding
01:26:15of these revenues and at, I think, I guess it was week before last, our G7 finance ministers
01:26:24meeting, our communique expressed joint concerns about this. I've written a letter to
01:26:38Prime Minister Netanyahu expressing my concerns about this and the general deterioration
01:26:46of economic conditions in the West Bank and I would be glad to have follow-up conversations
01:26:54with you and your staff on this matter, but please know that we are also deeply,
01:27:00deeply concerned by and disturbed by what's happening here. Thank you, Madam Secretary. I
01:27:06have been following and appreciate the efforts you've taken and look forward to continuing to
01:27:11work with you and your team on this. Thank you, of course, for being here today and the hearing
01:27:17record will remain open until Tuesday, June 12th to allow senators to submit additional questions
01:27:24for the record. Thank you again for joining us. Thank you for your service. This hearing is adjourned.