▶ 0:20:16Chair Crapo: The committee will come to order. Today, we will consider the nomination of michael faulkender to be deputy secretary of the treasury. Mr. faulkender, congratulations on your well-deserved nomination, and thank you for your willingness to serve in this important position for the U.S. treasury department is responsible for overseeing several issues of importance to the united states economy.
▶ 0:20:43Chair Crapo: This includes economic policy and financial markets, managing the U.S. government's finances and debt, the social security and medicare trust fund, and financial sanctions, to name just a few. The deputy treasury secretary plays a primary role in the formulation and execution of treasury policies and programs, aspects that are a very part of the department's activity.
▶ 0:21:10Chair Crapo: Along with secretary be ssent, deputy secretary will help with progrowth tax policy that will allow all americans to compete on the global stage. If confirmed, I look forward to you to -- I look forward to working with you to a achieve these goals. Mr.
▶ 0:21:37Chair Crapo: Faulkender previously served under the treasury department during the first trump administration. He worked under key policy discussions, like the c.a.r.e.s. Act, among other key provisions. He was awarded the alexander hamilton award for distinguished leadership, the highest award granted at treasury. As a university professor and leading economist, Mr.
▶ 0:22:04Chair Crapo: Faulkender's work has focused on an array of topics relevant to the position for which he has been nominated, including investment considerations for multinational corporations, the corporate capital structure, risk management, corporate liquidity, and executive compensation. Mr. faulkender, I have reviewed your background and responses to all of the questions during the rigorous due process.
▶ 0:22:26Chair Crapo: Based upon your public and private sector experience, academic credentials, and areas of focus and training, you are highly qualified to serve as deputy secretary of the treasury in this administration. As ranking member for the last four years, I both supported and opposed nominees put forth by the biden administration, but I have never objected to a nomination hearing.
▶ 0:22:51Chair Crapo: The finance committee has an arduous nomination process, and once the nominee completes all the steps, he or she deserves a public hearing followed by a vote. I thank Mr. faulkender for his cooperation and responsiveness during this exacting process that he has met with members of staff of this committee, has gone through our rigorous reviews, and has been open in answering all of our questions.
▶ 0:23:21Chair Crapo: My colleagues have sent several letters requesting information on department of government efficiency related work at treasury and the irs, and it is important that treasury and the irs be transparent about their actions. To date, meaningful information has been provided on both topics, and I expect this will continue.
▶ 0:23:43Chair Crapo: For example, on february 4, 2025, treasury provided a letter outlining the review and access of treasury infrastructure and payment systems. On february 12, treasury divided a follow-up letter detailing the four treasury involve these -- employees involved in pending legal cases related to the administration's government efficiency initiative.
▶ 0:24:11Chair Crapo: On february 20 six, treasury provided to memorandum of agreement between opm and irs, where opm detailed to the irs. During the committee's due diligence meetings, Mr. faulkender stated that if he was confirmed, he went ensure the requested beer for -- briefing would be provided to congress as well as be responsive to all questions put forward by members of congress, including this committee.
▶ 0:24:40Chair Crapo: As a reminder, I and other republicans sent several letters to the treasury and the irs during the biden administration, with questions on numerous issues, including the organization of the economic cooperative and development, safeguarding taxpayer information, the american rescue plan, and reducing returned inventory tax during the season, to name a few. Many times, I did not receive a response, for months.
▶ 0:25:12Chair Crapo: Mr. faulkender, I appreciate your commitment to respond to members of this committee, including as a part of this hearing. Congratulations again on your nomination, and I look forward to working with you. I now recognize ranking member wyden for his opening remarks.
▶ 0:25:27Sen. Wyden: Thank you very much, Mr. chairman. Mr. and colleagues, this is no typical hearing for the finance committee. It is our understanding Mr. faulkender has been at the treasury department since day one of this trump term, essentially performing the deputy secretary role in an unofficial capacity. He is in the building. Together with secretary bessent, he's got his hands on the economic levers.
▶ 0:25:57Sen. Wyden: So I'm going to begin by taking stock of how the trump in administration's economic policies are performing today. Inflation expectations, climbing ominously. Consumer confidence, the worst it has been since the pandemic. First quarter gdp forecast, tumbling from a projection of 4% growth to a 2.8% contraction.
▶ 0:26:29Sen. Wyden: Unemployment numbers, starting to climb. Stock markets, scary. Housing starts, sinking into the basement. And a hope of -- host of leading economic experts and business leaders and sounding the alarm over the damage trump's tariffs are going to do to our economy is families and businesses get walloped with price increases.
▶ 0:26:57Sen. Wyden: In short, my view is the trump administration is driving america's economy into a wall, and typical families and small businesses are strapped in as the crash test dummies.
▶ 0:27:16Sen. Wyden: Between all of that and what elon musk and his unaccountable staffers are doing all around the federal government, it sure looks to me like the prospect for recovery in the near-term are slim.
▶ 0:27:29Sen. Wyden: Late last night, the treasury department responded to a list of my oversight questions with answers that mostly ducked and dodged and avoided giving real information, but they did finally confirm, colleagues, that doge personnel infiltrated the treasury department payment system with the intent to cut off U.S. aid payments authorized by the congress.
▶ 0:27:52Sen. Wyden: Doge has grabbed hold of key systems in the treasury department and irs, there is also a real danger they're going to break them. The most intimate data belonging to americans and businesses in this country may be exposed, if it has not been already. I have real questions over whether taxpayer privacy laws have already been violated, with treasury trump officials now covering up.
▶ 0:28:23Sen. Wyden: So I want to say, Mr. chairman, I believe the finance committee needs to have a senate hearing to look into these privacy issues, and when I say "privacy," I mean the security of your family and your finances.
▶ 0:28:42Sen. Wyden: Musk personnel reportedly wanted a get out of jail free card, giving them access to sensitive taxpayer data they can weapons all over the government, targeting people and communities. Now, the trump administration has already announced sweeping layoffs at the irs.
▶ 0:29:03Sen. Wyden: These layoffs are kurt elling or even shutting down efforts to go after tax cheating involving -- curtailing or even shutting down efforts to go after tax cheating involving private jets, and high net worth individuals, without even bothering to file taxes. Earlier this week, there was a report that the trump administration is seeking even more layoffs, cuts of up to 50%.
▶ 0:29:32Sen. Wyden: That would be a nightmare for working people who follow the law, because taxpayer service would crumble, and nobody could get their refunds on time. But it would be christmas morning for the ultra-wealthy tax chief, who never have to worry about getting caught, even if they did not pay a penny. Trump officials tried to defend this recklessness by claiming they are making things more efficient, and they will replace manpower with machinery.
▶ 0:29:56Sen. Wyden: The reality is, cutting irs enforcement funding with a whole bunch of rich crooks off the hook. It does not save money, it increases the deficit. You don't fire a bunch of people tasked with improving them. In the last few weeks, the treasury department made a mockery of checks and balances and basically ignored our oversight. Mr. faulkender has been around for this chaos.
▶ 0:30:25Sen. Wyden: But today's hearing in effect becomes as much about oversight as it does the faulkender nomination. This may be the only opportunity in the near future when the committee is going to be able to hear directly from a trump official on the harm the administration's economic policy and Mr. musk's illegal power grab.
▶ 0:30:48Sen. Wyden: As americans see the chaos unfolding around them and retirement accounts shrinking, people are wondering whether this is incompetence or malice on the part of elon musk and the trump administration. My view is, it may be both, but I think hard-working americans deserve better, and I look forward to this hearing, and I'm certain, Mr. faulkender, my colleagues have a lot of challenging questions this morning. Thank you, Mr. chairman.
▶ 0:31:17Chair Crapo: Thank you, senator wyden. In a moment, Mr. faulkender will share his opening statement, but before that, I have four obligatory questions we ask all nominees before this committee. The first is, is there anything that you are aware of in your background that might present a conflict of interest with the duties of the office to which you have been nominated?
▶ 0:31:38Mr. Faulkender: No.
▶ 0:31:41Chair Crapo: Do you know of any reason, personal or otherwise, that would in any way prevent you from fully and honorably discharging the responsibilities of the office to which you have been nominated?
▶ 0:31:48Mr. Faulkender: No.
▶ 0:31:52Chair Crapo: Do you agree without reservation to respond to any reasonable summons to appear and testify for any duly constituted committee of the congress if you are confirmed?
▶ 0:32:00Mr. Faulkender: Yes.
▶ 0:32:04Chair Crapo: And finally, do you commit to provide a prompt response in writing to any question addressed to you by any senator on this committee?
▶ 0:32:11Mr. Faulkender: Yes.
▶ 0:32:12Chair Crapo: Thank you, Mr. faulkender, and you can proceed with your opening statement.
▶ 0:32:17Mr. Faulkender: Thank you, Mr. chairman. Chairman crapo, ranking member wyden, distinguished members of the committee, monitor to be with you as the nominee for deputy secretary of the treasury. I'm grateful to president trump and secretary bessent for this extraordinary opportunity to serve our country and for placing their faith in me. I would like to take a moment to recognize my two daughters, who are with me today.
▶ 0:32:42Mr. Faulkender: They have been my biggest supporters, and there is no question I would not be before you today without their love and encouragement. I would like to thank my family watching this on line and my colleagues in academia, especially at the university of maryland, who have supported my scholarship and professional development for over two decades. Four days after the attacks on september 11, 20 21, I was in washington, D.C. for the very first time.
▶ 0:33:08Mr. Faulkender: I found myself standing in front of the treasury building and will never forget the patriotism and potential of our nation I felt on that day. And president trump's first term, I had the honor of serving in the very building as the assistant secretary for economic policy. In that role, I advised the secretary on all domestic and international matters that impact of the economy. During the covid-19 pandemic, I assisted in the negotiation of the c.a.r.e.s.
▶ 0:33:33Mr. Faulkender: Act, and was the senior official that led the paycheck protection program viewed as secretary bessent said at his confirmation hearing, when the world is in trouble, they look to 1500 pennsylvania avenue. I have the deepest respect and appreciation for the dedication of the career staff and the department. Their work is critical to providing a best in class service to the american people and ensuring the implementation of the present's agenda.
▶ 0:34:02Mr. Faulkender: If confirmed, I look forward to working closely with them and all of president trump's appointees to advance in america first economic agenda. From 2017 to 20 the U.S. built a thriving economy that was a model for the rest of the world appeared we implemented progrowth policies through tax reform, streamlined regulation, and critical investments across our nation.
▶ 0:34:27Mr. Faulkender: We realized energy independence for the first time in 70 years and commenced a much rebalancing of our relationship with china. The result was an economic revival in traditionally underserved communities that generated shared prosperity with the lowest income issues, large increased and real wages, and liquor -- record low poverty levels.
▶ 0:34:50Mr. Faulkender: Our country has a's unprecedented growth, and many american communities who were most in the benefit if you'd a return to that economy as the baseline for this administration, not simply the goal. Right now, america has an affordability crisis. Inflation remains persistent, mortgage rates and the cost of housing are too high, food prices have not returned to their pre-pendant of levels, families are paying more than ever before, and our underserved communities feel forgotten again.
▶ 0:35:18Mr. Faulkender: We must redouble our efforts to rebuild america by promoting policies to support and benefit all americans. Improved affordability comes from generating abundance and embracing innovation. Last year, I heard from some in the technology sector that europe had recently been a more conducive environment for innovation than the united states. That stops now.
▶ 0:35:41Mr. Faulkender: We have the best workers in the world, and we must recommit ourselves to being the best place is going to start new businesses, building factories, and research groundbreaking new technologies. By re-privatizing the economy, shrinking the regulatory overreach coming from big government socialism, slashing the inflationary spending, making progrowth tax reform permit, and rebalancing our trade arrangements, we will realize the golden age the president has promise.
▶ 0:36:11Mr. Faulkender: At the same time, the treasury department's tip of the spear in addressing some of our world's most pressing national security challenges. During president trump's first term, sanctions against iran stripped away its ability to promote terrorism in the middle east.
▶ 0:36:32Mr. Faulkender: If confirmed, I will strengthen maximum pressure, and we must go after the cartels that are placing our children with fentanyl, propping up the smuggling of people into our country, and causing the rampant crime that has turned every state into a border state. Under the leadership of president trump and secretary bessent, I'm excited for the opportunity to work with the members of this committee, to advance progrowth economic policies and targeted national security strategies that will greatly benefit the american people.
▶ 0:37:00Mr. Faulkender: It is a great privilege to appear before you today, and I look forward to taking your questions.
▶ 0:37:03Chair Crapo: Thank you, Mr. faulkender. I'm sure you've noticed in the daily news that president trump's efforts to improve efficiency in the federal government and to get rid of waste fraud and abuse. Though I understand you had a limited role currently in advising secretary bessent on these issues, I would like to give you an opportunity to provide your perspective on his efforts. For example, what is your understanding of the focus of the president's efforts?
▶ 0:37:36Chair Crapo: How does one ensure the taxpayer money is well spent? And what is your understanding that current and planned initiatives at the treasury and the irs are all necessary and customary safeguards in place to protect the integrity of treasury's payment systems and processes as well as personally identifiable information.
▶ 0:37:54Mr. Faulkender: Thank you, Mr. chairman. As you noted, I'm currently serving as a counselor to the secretary. In that role, I do not have any administrative or budgetary authority. I merely advise the secretary on policies he may implement. As part of preparing for today, I've been briefed on some of the activities that we are engaged in at both the bureau for service and at the irs.
▶ 0:38:22Mr. Faulkender: It is my understanding that the objective is to improve the effectiveness of the systems and provide lower levels of customer service, privacy, and protections that they have promised.
▶ 0:38:38Mr. Faulkender: When it comes to the bureau of service, the gao has reported that a number in the government have failed their audit for lack of control p my understanding of what if occurring at the bureau of fiscal services they are working to increase the required information that is provided when a department or agency submits a payment for processing by treasury.
▶ 0:39:03Mr. Faulkender: In the past, various fields were allowed to remain vacant or incomplete, and what some of the changes are is to require, for instance, that every payment had the account symbol corresponding to the payment that is being made. The purpose of this is to help departments better understand how money is being spent and be more accountable to congress and to the american people for those funds.
▶ 0:39:31Chair Crapo: Thank you. There is a broad agreement that despite decades of effort and billions of dollars of funding of irs I.t. Systems, that they fall far short of what taxpayers deserve. Mismanagement and poor planning have significantly contributed to the irs' I.t. Problem.
▶ 0:39:51Chair Crapo: For example, in january of this year, the gao highlighted how most irs modernization plans, dealing with this archaic system , have failed to include this key component we have talked about him a plan for actually retiring the outdated system. This echoes similar concerns that my colleagues and I have voiced over the years, that we have an insufficient irs strategic operating plan.
▶ 0:40:19Chair Crapo: Meanwhile, despite well-intentioned efforts, the irs oppose the ability to serve taxpayers has barely budged. This is despite -- the irs' ability to serve taxpayers has barely budged to this is despite the reconciliation bill, but most which went to super sizing irs enforcement.
▶ 0:40:41Chair Crapo: I understand secretary bessent is interested in taking a different approach at the irs, both by trimming waste and also planning for and investing in real technological change. I understand that all evaluations and modernization work will be undertaken using usual and customary safeguards, including not exposing any taxpayer's personally identifiable information.
▶ 0:41:05Chair Crapo: I also understand secretary bessent is fully committed to ensuring that the tax filing season will not be disrupted by these processes. Can you confirm my understanding and provide any additional detail about efficiency and modernization at the irs?
▶ 0:41:17Mr. Faulkender: Yes Mr. , chairman. The secretary's objective is to assure the american people have a 2025 experience when they interact with the irs, and they prioritize collection, customer service, and privacy. The challenge that we have is that both democrat and republican administrations have recognized that the irs is built on top of 1960's systems.
▶ 0:41:49Mr. Faulkender: In fact, when I met with the deputy secretary who served during the biden administration, one of the main items he discussed with me was the need to address irs modernization. What we are doing is asking for a review of what systems are being built at the irs.
▶ 0:42:13Mr. Faulkender: We have people who have worked with financial institutions and technology companies to understand how to build modern systems architecture, and it makes sense to have them come in and look at the contracts that have been fine for part of this modernization to ensure that the right systems, the right system architecture, is being created, to provide that level of 2025 service to the american people.
▶ 0:42:32Chair Crapo: Thank you. Senator wyden.
▶ 0:42:35Sen. Wyden: Thank you very much, Mr. chairman. Mr. faulkender, last night in response to questions I asked a month ago, the drug administration admitted that doge infiltrated the treasury payment system to stop congressionally authorized usaid payments. In my view, this stomps all over the congress' article one power of the purse.
▶ 0:43:00Sen. Wyden: So my question is, in your view, does the president of the united states have the power to impound funds?
▶ 0:43:09Mr. Faulkender: Thank you, senator. I enjoyed meeting with you in your office earlier this week. My understanding of what treasury's responsibility is is to process payments, and if a payment file comes over from an authorized department or agency, the processes -- the treasury bureau processes that payment.
▶ 0:43:30Sen. Wyden: That's not my question. Does the president of the united states has the power to impound funds?
▶ 0:43:37Mr. Faulkender: Senator, I'm not a lawyer on this. I do not know the legal authority of the president when it comes to impoundment.
▶ 0:43:44Sen. Wyden: Well,, I will tell you, what I have seen is basically throwing the checks and balances, which make our special system so unique, it is the department just throwing them in the garbage can feed I also asked treasury whether elon musk has ever gained access to the treasury payment system data.
▶ 0:44:08Sen. Wyden: Treasury answer, and I quote here, "to the best of our knowledge, no." it sure seems to me that the american people deserve a yes or no answer to that. I'm going to move on, because we have more to do, but certainly, if you want to respond to some of my colleagues, you can do that. 7000 irs employees have been fired.
▶ 0:44:36Sen. Wyden: Around 1000 of those employees are veterans, so they have been hammered twice over. You are already in the building a secretary bessent's lieutenant. Is there any validity to the reports that the administration is looking to cut the irs workforce by half?
▶ 0:44:53Mr. Faulkender: Senator, I'm not aware of a plan, nor have I been briefed on any plan to cut the number of employees at the irs by half. I'm familiar with the layoffs that have occurred so far, but I have not been briefed on any plan to go farther than that.
▶ 0:45:10Sen. Wyden: In your view, would it be a mistake to have the irs workforce by half? Would we be hampered in terms of service and getting refunds and I kind of thing? What would be the implication, in your view, you were there for trump 1, you know a lot about this department. Would it be injurious to the country to cut the irs workforce by half?
▶ 0:45:35Mr. Faulkender: Senator, and my first time of service at the treasury, I did not have a role in working with the irs. As part of coming in, we have asked for a full evaluation of the efficiencies and the systems at the irs, so that we can make informed decisions as to the personnel levels.
▶ 0:45:55Sen. Wyden: That answer suggests to me that you are leaving open the option to do it. I think that is a mistake. I think it should be taken off the table. I think with time from whenever area, the -- for one other question for the irs criminal investigation division has got about 2300 field agents, who are the best in the business to take down drug cartels, money laundering, cryptocurrency scans, and sanction evaders.
▶ 0:46:24Sen. Wyden: The administration set has said going after these individuals is a priority. Instead, it appears highly trained accountants are doing that instead of complex financial investigations that they are uniquely trained to do. Do you believe that taking irs criminal agents away from stated investigations into cartels and fentanyl trafficking is going to harm national security and public safety?
▶ 0:46:52Mr. Faulkender: Senator, as we discussed in your office, the criminal investigators at the irs play a critical role in investigating things like fentanyl trafficking and some of the drug activity that takes place. My understanding that we are working with dhs foreign task forces to take on the cartels and the illegal immigration that has occurred and the effects it is having in all 50 states.
▶ 0:47:18Sen. Wyden: One last question, if I might. You and I talked about the clean energy tax credits. They were written in this committee. They constitute the biggest investment in fighting climate change in american history. What is your position on this? Because you and I talked generally about this. I think it would be a great mistake, and the communities that would be hit the most are ones in pretty conservative areas, that have seen economic rejuvenation as a result.
▶ 0:47:47Sen. Wyden: What is your position on the clean energy tax credit?
▶ 0:47:50Mr. Faulkender: Senator, I very much enjoyed that conversation we had viewed as we discussed, I support in all of the above energy strategy. Wind or solar are the optimal power source for that area, that is fine. I think we should take the same approach and not put a foam on a scale when it comes to the source of energy that in a particular locality chooses to power itself by.
▶ 0:48:15Sen. Wyden: The law specifically stipulates technological neutrality, so nobody is putting their thumb on the scale. Basically what we are saying is, let's give science a chance to come up with new approaches, and that is why we have technological neutrality. I hope you will look at it again, and we would appreciate a written answer to getting your support. Thank you, Mr. chairman.
▶ 0:48:39Chair Crapo: Thank you. Senator grassley.
▶ 0:48:42Sen. Grassley: I will start with a letter I sent to secretary bessent maybe a couple of weeks ago, and I still don't have an answer. I ask you this subject to let the administration know that I'm very serious about how we respond to ill-treated whistleblowers.
▶ 0:49:04Sen. Grassley: Irs supervisory special agent gary shea flea and joel sigler made lawful disclosures about the irs playing politics and the hunter biden tax case. After sticking their nets -- their necks out at the justice department's direction, the irs remove them and their team from the investigation.
▶ 0:49:29Sen. Grassley: I've been told that senior irs management rollover for the department of justice are still in charge. I've also been told they have not stopped retaliating against shapley and ziegler.
▶ 0:49:51Sen. Grassley: The background of this as I'm kind of tired, after six weeks of the administration giving whistleblowers back their jobs that they were unjustly relieved from or as a result of, and in this particular case, they are on the payroll. If you look at what they are doing, what their jobs are is tantamount to a demotion.
▶ 0:50:19Sen. Grassley: So I have this question, you would agree with me that retaliation is a violation of federal law and has no place in government? I think you would say yes to that.
▶ 0:50:30Mr. Faulkender: Yes.
▶ 0:50:31Sen. Grassley: So then, if confirmed, give me concrete steps you would take to put an end to this retaliation on day one that you are in. But what I'm hoping an answer to that question is to make it very simple. It will probably be a couple of weeks yet before your vote is before the united states senate, probably next week before another vote, nothing against you, because you are qualified for this?
▶ 0:51:01Sen. Grassley: And I want you to be in the job, and you should be serving the taxpayers as deputy, but the point is that we should not have to wait for you to get to the job to get justice for these people. So in case it is not done on day one, what would you do?
▶ 0:51:19Mr. Faulkender: Senator, thank you for the letter you sent outlining your concerns. I know that our staff is speaking with your staff. We will collaborate. If confirmed, I will work to make sure the situation is addressed, and I will make sure we have strong whistleblower protections if I'm confirmed as deputy secretary.
▶ 0:51:42Sen. Grassley: I know that is your answer. I just can't believe when people were doing a good job for decades working for the irs, and they were well-qualified and got good reports, that -- you've got to work with us to get people back to what they were doing before they became whistleblowers! It just does not make sense. Let me go on. I don't think you can do much more there.
▶ 0:52:16Sen. Grassley: Now, getting back to what senator wyden said about more employees, I don't want to get on that subject, but there is a tool that I got passed in 2005 or 2006, for whistleblowers to report taxes that are not paid. That has bought $6 billion back into the federal treasury, and I don't think that -- $6 billion back into the total treasury since then.
▶ 0:52:43Sen. Grassley: I and I don't think the irs is using the job as successfully as they should. I hope you will review it, make full use of it, and don't leave a bunch of whistleblowers out there saying the government is not collecting taxes and having them wander, in some cases for 10 years, how is the irs handling this information I gave them?
▶ 0:53:09Sen. Grassley: So can I count on you to be smarter than the whistleblower program, and work to ensure it is used to its full potential?
▶ 0:53:16Mr. Faulkender: Senator, I'm still learning about this program, but I assure you I will learn more about it and work with you to make sure we get the maximum benefit out of this program.
▶ 0:53:25Sen. Grassley: Mr. faulkender, iran is the world's largest state-sponsored terrorism. The biden administration approved iranian funds just weeks before hamas' october attack on israel to it if confirmed, how you plan to tackle the iranian threat?
▶ 0:53:49Mr. Faulkender: Thank you, senator. President trump has already called upon treasury to re-implement the maximum pressure campaign against iran. So the team will continue to look for new targets for us to provide sanctions against, and we are looking to return to the reduction in export activity that iran had during the trump administration, in order to remove iran's ability to fund terrorist activity.
▶ 0:54:17Chair Crapo: Senator bennet.
▶ 0:54:19Sen. Bennet: Thank you, Mr. chairman. Thank you, Mr. faulkender. Thank you for being here, and thank you for our meeting earlier this week that I know the deficit is a concern of yours, as it is of mine. Do you, can you tell us when the last time this government had a surplus was?
▶ 0:54:38Mr. Faulkender: If memory serves them it was right around the turn of the millennium.
▶ 0:54:43Sen. Bennet: Do you know who was present when we last had a surplus?
▶ 0:54:48Mr. Faulkender: My recollection is that it was bill clinton.
▶ 0:54:52Sen. Bennet: It was president clinton. Do you recall what percentage of gdp we had, we were collecting as revenue versus what we were spending as a government?
▶ 0:55:01Mr. Faulkender: Those particular years, I believe we were in the 18 to 19 range.
▶ 0:55:10Sen. Bennet: Just to make it easy for people, your relatives watching, just to make it easy, gravity and cost lined up as a percentage of our overall economy, and that meant we had a surplus appeared we have not had a surplus sense, would you agree that that is true?
▶ 0:55:28Mr. Faulkender: Yes, we have not had a surplus since.
▶ 0:55:33Sen. Bennet: Would you agree that every year during the last trump administration -- this is an unusual situation, because we almost have ever had a president who was present, than in russia, that a president comes back. The last year that there was a trump administration, the deficit of the united states went up.
▶ 0:55:51Mr. Faulkender: My recollection is we ran deficits each of those years.
▶ 0:55:57Sen. Bennet: It did. They grew every year. I appreciate your candor. And that was after people sat in that chair, just like you, and said that they were going to enact what they called "progrowth tax policy," or tax reform, is how I think you put it. , which I think is code for cutting taxes for the wealthiest people in the country, because if you look at the distribution, that is what it is.
▶ 0:56:27Sen. Bennet: The argument was only then that it would pay for itself. Do you agree with that, with the argument you're administration made when donald trump was president the last time?
▶ 0:56:38Mr. Faulkender: Senator, when you look at the revenue numbers that came in, they exceed the forecast --.
▶ 0:56:43Sen. Bennet: Do you agree the argument was it would pay for itself the last time you were here?
▶ 0:56:50Mr. Faulkender: My recollection is the argument --.
▶ 0:56:53Sen. Bennet: It did. The treasury department did come and we heard that again from Mr. bessent when he was here. We heard him say he was going to solve this problem, Mr. chairman , when he was here, by cutting discretionary spending. He was going to deal with what is now a deficit that is a deficit that is 6% of our gdp by cutting discretionary spending.
▶ 0:57:18Sen. Bennet: We are the president say the other night he would never touch medicaid, that he would ram his tax cuts through for everybody, he said come in america. America should know, though, by the way, the last time he did this, 55% of the benefits went to the top 5% of americans. It turned out that the congressional budget office was correct when it said that it would blow a $2 trillion hole in our deficit.
▶ 0:57:46Sen. Bennet: So in my mind, it's no different than him and I said this before, I will not belabor it, it is no different than any mayor of any city in america saying, we are going to go out and borrow more money than we've ever borrowed before come in the history of my town. And I would say, well, that makes me nervous, what are you going to spend that on, mayor? Are you going to spend that money on schools? No. On mental health?
▶ 0:58:17Sen. Bennet: No. On parks or public spaces? No. Of unaffordability? No. We are going to give it to the two richest neighborhoods in the community and hope that it will trickle down to everybody else. There's a reason why no mayor in america has ever done that, ever, in our country, and the reason is they cannot lie about the deficit, because they have to balance their budget.
▶ 0:58:45Sen. Bennet: And now we are in a situation where we got a 6%, where the deficit is now is 6%, and the biggest contributor to that has been the tax cuts that were supposed to "pay for themselves." do you think there's any way to meaningfully reduce our deficit just by cutting discretionary spending in our budget?
▶ 0:59:12Mr. Faulkender: Senator, when secretary bessent talks about gutting the deficit down to 3% of gdp, it's by implementation of the president of the full economic plan. . Part of that is spending reduction, part of that is growth, part of that is tariff policy, part of that is deregulating the economy, part of that is unleashing american energy abundance. It is the cumulative activity of those things that secretary bessent realizes.
▶ 0:59:39Sen. Bennet: We will be back here, and we will have a conversation, but I will say, this case is a very unusual case, when the sum of those parts that you just described are actually going to add up to something much less than itself, which is blowing a massive new hole in the deficit, just as it did the last time your predecessor sat here and made exactly the same argument. Thank you, Mr. chairman. I'm grateful for the time.
▶ 1:00:08Chair Crapo: Thank you. Senator lankford.
▶ 1:00:15Sen. Lankford: Mr. chairman, thank you. Mr. faulkender, thank you for standing up to do this again. You have a great career at the university of maryland. You have all kinds of great credentials, you taught all over the country, you served the nation for the treasury, so you know full well the speed and the work to go back in again, so I appreciate you stepping back in again. You are qualified to take on this task. On the economics, I want to drill down on a couple of things.
▶ 1:00:43Sen. Lankford: President trump's president trump' spoke in a joint address of congress, passing a bipartisan tax issue. It does not change the amount of revenue coming into the treasury, it changes the timing of the revenue coming into the treasury, but it makes a tremendous impact on the economics of the nation on that.
▶ 1:01:08Sen. Lankford: Literally, it is scored as a multibillion-dollar cost to the government, because in year 7, 8, 9, the money is not coming in as fast as they could actually count for years 11, 12, 13, they just don't account for those. So it looks like a huge cost, and my colleagues will say, "that is a giant hole in the deficit," when full expensing is actually done, does it change the amount of revenue coming into the treasury, and what is the economic impact of that?
▶ 1:01:34Mr. Faulkender: Thank you for the question, senator. I enjoyed meeting with you. If you go over what we call the infinite horizon, there's very little change in the growth that comes in because it is essentially delaying the recognition of that revenue, and because most of the budgeting in congress is done in 10-your windows, anything that would have come up without appreciation, come in in 7, 8, 9, 10, it makes budgets look
▶ 1:02:06Mr. Faulkender: More costly than it would over the full implementation horizon.
▶ 1:02:12Sen. Lankford: Thank you. Bipartisan frustration with secretary yellen who was tryg to create a tax structure for the world that would dramatically increase taxes on american companies and allow foreign entities to be able to take more american dollars, really hurting our economy and benefiting theirs. We finally got to a point where we made clear to her, you cannot create tax policy.
▶ 1:02:38Sen. Lankford: One of the worst aspects as they allowed china out of it. China got to be exempt of it. This was a long series where, for instance, subsidies muggy weather for solar, manufacturing to china, to be able to compete against american companies. You agree to raise pressure on iran and try to give maximum pressure on that. In the treasury department, where is your plan dealing with china and the economic competition?
▶ 1:03:10Mr. Faulkender: Thank you, senator. China is one of the greatest challenges we face. One of the successes of the first trump administration was to reorient policy among many of our policies, to reassess our reliance on china that had emerged and so our objective would be to work with our partners to engage in policies here at home in order to on shore many of those activities.
▶ 1:03:37Mr. Faulkender: As we saw during the pandemic, there are certain critical industries where china has a near monopoly, providing various components that americans are relied upon. And those could be weaponized against us if we were to engage in any kind of challenges with the chinese. And so using tax policies and regulatory policies and tariff policies, to return to the united states and reduce china's ability to blackmail the west.
▶ 1:04:01Sen. Lankford: Thank you. Sitting side-by-side in some of the conversations here, under the biden administration, they were facing court action because they were giving away student loan dollars. They were not allowing or making sure people did not have to pay their rent and say no one can foreclose on anyone, no matter how they stay there and can't pay their rent. They are creating tax policies out of thin air and not coming out of congress to be able to do that.
▶ 1:04:30Sen. Lankford: You are facing challenges today because you want to reduce regulations in the country. You want to be able to actually provide greater transparency, and for some reason, saying that treasury should, american people should be able to follow the money at treasury, the same as treasury has to be able to follow the money everywhere else, now in this upside down world, more transparency at treasury is now a problem, and you are being attacked for literally saying, we don't want to know where the money was going, don't listen.
▶ 1:05:02Sen. Lankford: That just seems backward in my world. On the regulatory front, this is especially true, because the biden administration was a dramatic increase on regulatory cost on that, how does that affect our economy out of Mr.
▶ 1:05:15Faulkender: Senator, there are some estimates coming from one of my former colleagues of the last administration, mulligan, that it reduced regulatory burdens on the average household by around $10,000 whereas the regulatory burden in the last four years in success of $40,000 being imposed upon them.
▶ 1:05:37Faulkender: There's an enormous amount of time and money that goes into compliance, so we need to make sure we economize those things and use regulations smartly, to make sure the american people are safe, but at the same time, not impose such burdens that it creates enormous cost that get passed on in the form of higher costs. That higher prices.
▶ 1:05:57Sen. Lankford: Thank you. Thank you, Mr. chairman.
▶ 1:06:02Chair Crapo: Senator whitehouse.
▶ 1:06:08Sen. Whitehouse: Mr. faulkender, I would like to go over what I said to you when we met privately, with respect to very dark economic storm clouds that are on the horizon, that relate to climate change, in which the administration is unable to address seriously or soberly, because with massive political funding behind it, it has made it an article to deny climate change, indeed to say
▶ 1:06:38Sen. Whitehouse: Falsely, a lie, that climate change is a hoax. We have actually been and three eras, and the scientists got it right, even the ones paid by exxon got it right.
▶ 1:06:59Sen. Whitehouse: Congress has failed to act on the dangers the scientists predicted, and we failed to do so because of the improper pressure of the fossil fuel industry, where dark money political contributions through probably the biggest disinformation campaign americans ever seen, all serious bipartisan efforts on climate was scratched.
▶ 1:07:23Sen. Whitehouse: So having the scientists do their job, having congress failed cataclysmic late and doing their job, now we are at stage three, where the chickens come home to roost, and the predicted consequence is begin to happen. As you and I discussed, the place that is most evident now is the place where the entire american industry is obliged to look forward truthfully at what the future portends.
▶ 1:07:48Sen. Whitehouse: Not the fake hoax of the fossil fuel industry, that everything will be fine if we keep a living -- keep polluting, but the reality that making actuarial risk judgments have a fiduciary duty to take into account. And if you look at that, the storm warnings are severe.
▶ 1:08:06Sen. Whitehouse: The chief economist at freddie mac has said we are heading for an insurance collector on property values that will cascade into a mortgage classroom coastal property values that will cascade into a crash in coastal property values that will be so significant economically that will cascade out into the full economy in the same way that the mortgage meltdown in 2008 cascaded out into the economy.
▶ 1:08:37Sen. Whitehouse: Since then, the wildfire risks have stood up, like the evil sibling of coastal risks, and adds to the danger of insurance market and entirely new areas far away from our coast. -- coasts. Just in the banking committee here two weeks ago, the fed chair said intended 15 years, there will be areas in this country where you cannot get a mortgage any longer. That is a pretty stern warning that something has to change. And they are not alone.
▶ 1:09:05Sen. Whitehouse: The financial stability board, which is the entity that warns the international banking system of systemic dangers has made, the same warning that as cost of claims increased because of climate change, increasing premiums for making insurance unaffordable, producing coverage.
▶ 1:09:30Sen. Whitehouse: In extreme cases, insurers may withdraw from market segments altogether, which they are already doing in florida and california, as it becomes uneconomical to offer insurance, an intern turn, this could trigger second effects that could make the financial system less resilient, I.e. The whole financial system at risk, which they described at the very front as climate-related vulnerabilities in the financial system when triggered by climate shock could threaten financial stability.
▶ 1:09:59Sen. Whitehouse: Right behind that comes the cbo report, bipartisan report, in which they say property owners, mortgage lenders, insurance companies, and the federal government will their losses and wildfires, and they will undermine our financial system.
▶ 1:10:17Sen. Whitehouse: The economist magazine in april put on its cover the warning that climate change, damaging insurance markets, imperils the largest asset class on the planet come of estate, and predicts a $25 trillion hit to real estate. The lie that climate change is a hoax is no longer just an act of political malfeasance, it is now an act of economic malfeasance.
▶ 1:10:50Sen. Whitehouse: And I've taken my time this morning to put you on notice and secretary bessent on notice that these storm clouds are real, they are out there, we are sailing into them, he you had better be prepared. I'm going to give you this whole volume of documentation of risks, which treasury seems come under this administration, to be outright ignoring.
▶ 1:11:14Sen. Whitehouse: For those who report to on the credibility of these multiple reports and warnings, I urge you to take this seriously, and I thank the chair for letting me go a moment over my time.
▶ 1:11:23Chair Crapo: Thank you. Senator hassan.
▶ 1:11:26Sen. Hassan: Thank you, Mr. chair. Thank thcongratulations on your nomination, and thank you for your willingness to serve. I appreciate the time you took in my office yesterday, and I just want to follow-up on a couple of those issues. So, I will start with a question I'm asking every nominee, if directed by the president of the united states take action that would break the law, would you follow the law or follow the president's direction?
▶ 1:11:54Mr. Faulkender: Thank you, senator. I enjoyed talking with you yesterday, and I will follow the law.
▶ 1:12:01Sen. Hassan: Thank. Dr. faulkender, if the president instructed you to force the irs to provide the white house with the personal financial information of his political opponents, would you comply?
▶ 1:12:10Mr. Faulkender: Senator, as you discussed, I would consult with our general counsel to understand with the law is come and I would follow the law.
▶ 1:12:18Sen. Hassan: Thank you. Just a reminder to folks, president nixon's white house counsel once complained in an internal memo that we've been unable to obtain information or possession of the irs regarding our political enemies, and it was wrong then for president nixon's white house to attempt to do that, and it would be wrong now. I appreciate your answer.
▶ 1:12:43Sen. Hassan: Elon musk has attempted to gain total access to the private personal data of american citizens stored at the irs. Is there any private personal information at the irs that you believe elon musk should not have access to?
▶ 1:12:57Mr. Faulkender: Senator, it is not my understanding that elon musk has any access to irs. We have key people who have gone through standard on boarding at the irs. What is detail from opm, one is a treasury employee.
▶ 1:13:16Mr. Faulkender: They have received the same on boarding effort and leading tra training, access to taxpayer information, as the memorandum of agreement between the office of personnel management and irs says, it is the secretary's intent that that person not have access to taxpayer information.
▶ 1:13:36Sen. Hassan: In my question is, if elon musk demands it, will you stand up to him? Do you think there is personal information at the irs, understanding that the people working there now have gone through ethics training and the like, but elon musk has a habit of tweeting and all of a sudden getting what he demands by a from this administration.
▶ 1:13:58Mr. Faulkender: Senator, only those authorized for irs information will get access to irs information.
▶ 1:14:08Sen. Hassan: Thank you. Earlier this year, elon musk gained access to the treasury system that processes all federal payments, giving elon musk the ability to block any payment by the federal government. A federal district court judge has temporarily blocked his illegal access. If this court order were lifted, would you allow elon musk access to treasury's payment system?
▶ 1:14:29Mr. Faulkender: Senator, elon musk does not have access to the payment system. Only people who are authorized treasury employees who have access to the information.
▶ 1:14:38Sen. Hassan: Elon musk has enormous conflicts of interests, right? I think he has something like $30 billion in federal contracts. C1 -- if elon musk and I can hear president trump say it,
▶ 1:15:11Sen. Hassan: President trump says anyone is authorized if I say for security clearance. If he says elon musk is authorized, what are you going to do?
▶ 1:15:20Mr. Faulkender: I would make sure only people who are authorized are granted access.
▶ 1:15:28Sen. Hassan: I will follow up on that. You are seeing you will prevent elon musk for blocking payments for his own political purposes. How will you do that?
▶ 1:15:41Mr. Faulkender: As with any treasury employee, their access is subject to oversight. It is my understanding that there are disciplinary activities that we can take if those procedures are violated.
▶ 1:15:54Sen. Hassan: But what happens to elon musk if he violates them?
▶ 1:15:58Mr. Faulkender: This is a hypothetical that I have not consulted with general counsel on exactly how one would go about doing that. I commit that if confirmed, I would work with the general counsel's office and the irs to make sure appropriate safeguards are followed.
▶ 1:16:16Sen. Hassan: Thank you for that. I am almost out of time. I will say this to the chairman and my colleagues. My questions for nominees have changed considerably. What I am looking for and there have been some encouraging answers from this witness, people with character and the belief in the rule of law who will stand up to an administration that seems to be very willing to ignore the rule of law and that is putting it mildly.
▶ 1:16:46Sen. Hassan: We have a president who is already violated the control act. Elon musk has been his prime agent in doing that. What is most important to me and the american people is that if we cannot get elon musk to come to this committee or come to the government oversight committee and the health committee, we have been asking for him to come so that we can understand what he's doing because he is effectively running the executive branch for the entire united states of america, we are looking for people who will not
▶ 1:17:18Sen. Hassan: Be bowled over by the fact that elon musk is the richest and apparently most powerful man in the world. Thank you. >> senator cortez masto.
▶ 1:17:28Sen. Cortez Masto: Thank you. Where are you currently employed?
▶ 1:17:37Mr. Faulkender: I am currently employed to the university of maryland detailed to the treasury. There is a personal act that is often used for academics when they serve in various government positions.
▶ 1:17:55Sen. Cortez Masto: In that detail is that where you stated earlier to one of my colleagues that your current role is counselor to the secretary of treasury?
▶ 1:18:04Mr. Faulkender: I am detailed to be the counselor until confirmed.
▶ 1:18:08Sen. Cortez Masto: Was it inadvertent that you did not report that on your statement of information questionnaire? I did not see that on the questionnaire. Was that inadvertent?
▶ 1:18:21Mr. Faulkender: My understanding was that the documentation are provided in the questionnaire and the ethics form shows that I am a counselor. I may have filled out the questionnaire before the inauguration and at that time I was not yet detailed.
▶ 1:18:37Sen. Cortez Masto: When did you become detailed?
▶ 1:18:40Mr. Faulkender: January 21.
▶ 1:18:42Sen. Cortez Masto: So you would have filled out the questionnaire prior to?
▶ 1:18:46January Mr. Faulkender: Mr.
▶ 1:18:48Faulkender: 21st I began filling it out prior to january 21.
▶ 1:18:51Sen. Cortez Masto: Interesting. Let me jump to the topic of privacy. Section 6103 of the tax code prohibits the release of tax information by the irs with very narrow exceptions such as when a court order has been issued in the criminal investigation of a specific person.
▶ 1:19:10Sen. Cortez Masto: There have been concerning reports that you have heard about that members of doge and the department of homeland security have been attempting to access databases of confidential tax and personal information held by the irs. My question to you is will you commit to fully following the law even if other agencies are pushing treasury and irs for access to that confidential information?
▶ 1:19:37Mr. Faulkender: I know that all employees working with doge are also working with the office of general counsel at the treasury and the irs and I commit that I will follow the law.
▶ 1:19:48Sen. Cortez Masto: I am not sure what that means by the members of doge because they should not have access to this information but you will follow the law to ensure that individuals like members of doge and homeland security who should not have access to this information under the law do not have it, correct?
▶ 1:20:03Mr. Faulkender: I will consult with the general counsel in everything I do to make sure I am in compliance with the law.
▶ 1:20:10Sen. Cortez Masto: We report to this committee any attempt by any organization to gain access covered by 6103?
▶ 1:20:17Mr. Faulkender: I will commit to following the law and that will include any disclosure requirements that the law would have me engage in.
▶ 1:20:26Sen. Cortez Masto: Ok. On february 9, 2024 you wrote an article for the america first policy institute that did an analysis of a tax bill proposed by senator wyden and congressman smith.
▶ 1:20:41Sen. Cortez Masto: You praise part of the bill that repealed the employee retention credit because of "rampant cases of ineligible businesses fraudulently claiming the credit." as you make personnel decisions at treasury in who you will hire and not higher, would you have concerns about hiring someone who made money urging businesses to ignore the advice of their accountants and apply for the ertc eligibility credit?
▶ 1:21:12Mr. Faulkender: I would look to hire people who have gone through a full vetting and have complied with the law.
▶ 1:21:18Sen. Cortez Masto: So it does not matter whether or not they made money off of telling people that it was ok to apply even though they were ineligible and went after that credit?
▶ 1:21:29Mr. Faulkender: I would commit to firing -- hiring people of high quality who have the capability to do the role and to make sure they are of good character.
▶ 1:21:40Sen. Cortez Masto: You make a lot of comments about following the law. Let me ask you this. I appreciate that as an attorney. If after trump is out of office and there is a potential investigation about whether he followed the law or not, we do comply with that investigation and continue to work with those investigators?
▶ 1:22:04Mr. Faulkender: I'm hesitant to think about such an investigation in a hypothetical but I will follow the left the coal legal obligations that I have if confirmed to this position.
▶ 1:22:15Sen. Cortez Masto: To work with those investigators?
▶ 1:22:18Mr. Faulkender: I would seek counsel to make sure I am in compliance with my obligations.
▶ 1:22:23Sen. Cortez Masto: The biden administration treasury department implemented a new outbound investment security rule that prohibits and imposes requirements on certain types of investments by U.S. entities and chinese companies. -- high-tech investments by U.S. entities and chinese companies. Do you support this rule and the concept of the outbound investment provisions?
▶ 1:22:49Mr. Faulkender: I have received a preliminary briefing. I understand there are three sectors to which this is being evaluated. It is early in the reporting process. Conceptually it makes sense to me. We need to look at are these the only three sectors that we want to limit ourselves to. Are there others we should do? Does the current compliance regime implemented make sense?
▶ 1:23:16Mr. Faulkender: My understanding is we have three employees who are focused on this right now that may need to expand it. It is very early in the program. I don't want to say it was initially structured ideal. I will continue investigating it as it is going into its implementation stage and having to work with your office to see what improvements we can make.
▶ 1:23:39Sen. Cortez Masto: I appreciate that. Thank you.
▶ 1:23:41Mr. Faulkender: Senator blackburn.
▶ 1:23:44Sen. Blackburn: Thank you and congratulations on your nomination. We are glad that you are here. I know you have done some work on tying benefits like the child tax credit to work.
▶ 1:24:06Sen. Blackburn: I think if we are going to incentivize people to get into the workforce, we have to remove incentives that are keeping them out of the workforce and I think we are all concerned about rampant fraud that we have seen in some of these programs and especially from the pandemic and of course doge is helping to root that out.
▶ 1:24:33Sen. Blackburn: Getting the fraud out of benefits should be a first step when we look at making these programs solvent. I would like for you to talk about what you would do to restore integrity in the benefits system and bring forth concepts like tying benefits to work that would elevate our work force rate -- workforce
▶ 1:25:03Sen. Blackburn: Participation rate.
▶ 1:25:03Mr. Faulkender: Thank you. Part of the objectives are to root out the fraud and that is why improving the payment systems so that departments and agencies are responsible and have more tools to identify potential sources of fraud and reduce them. When it comes to benefits, I agree with you that ensuring that we do not create dis- incentives to work.
▶ 1:25:32Mr. Faulkender: It is important that we encourage people to be part of the labor force. What we do not want to do is create dis-incentives whereby they decide not to be in the workforce. Work requirements are irrelevant component to include in those programs.
▶ 1:25:53Sen. Blackburn: Let me ask you about some of these foreign tax games that we are seeing that are discriminatory in nature and hurtful to U.S. competitiveness. The oecd's pillar one, pillar two, the gmt. You are looking at U.S. companies paying nearly 40% of the burden when it comes to the pillar two taxes.
▶ 1:26:23Sen. Blackburn: You've got companies like china that because they our state don't -- because they are state owned, they are paying nothing. This hurts us and also some countries that are putting in place dst's. That is something else that hurts us, disadvantaged us. Talk about what you can do to reassert U.S.
▶ 1:26:51Sen. Blackburn: Leadership on the global stage in dealing with these unfair taxes.
▶ 1:26:56Mr. Faulkender: Thank you. Pillar one looking at digital service taxes at the oecd, pillar two, the global minimum tax. The concern we have is that both of them disproportionately targeted american firms, that there are not enough safeguards in those negotiations to recognize the tax structure that we have in the united states.
▶ 1:27:18Mr. Faulkender: That is why the president issued an executive order calling on the treasury to reevaluate our participation in these negotiations and to make sure that number one the united states firms are not disproportionately discriminated against in the way that other countries tax U.S. multinational activities in those countries. Second, we want to make sure that the sovereignty of the united states is retained here at home.
▶ 1:27:45Mr. Faulkender: It is not the case that global organizations set tax law. It is the united states congress that sets tax law and that is what was so discouraging about the approach the previous administration took to his negotiations with the oecd.
▶ 1:27:57Sen. Blackburn: The previous administration also came up with a corporate transparency act which broadly would have disadvantaged mainstream businesses, small business owners, burdened them with paperwork and caused them to expose information that ought not have been exposed. I appreciate that the trump administration and treasury has withdrawn that.
▶ 1:28:28Sen. Blackburn: I think it is important for treasury to keep an eye on main street and small businesses. In that regard, what would your initiative be?
▶ 1:28:39Mr. Faulkender: Secretary bessent expressed that it is main street that needs an opportunity to thrive. That means finding the right balance between national security and burdens that we are imposing on america's small businesses. The largest businesses out there can afford all of the compliance activities and burdens that are imposed upon them. It is the smaller businesses that have a smaller customer base to spread those costs over that are harmed.
▶ 1:29:06Mr. Faulkender: That's why treasury is going to reevaluate the rule that was implemented, the rules implementing cta, we will reevaluate those to make sure that the right tailoring takes place.
▶ 1:29:15Sen. Blackburn: Thank you Mr. chairman.
▶ 1:29:17Chair Crapo: Senator cantwell.
▶ 1:29:20Sen. Cantwell: I will try to be as brief as I can. Thank you so much. I had similar conversations with the secretary of treasury on markets. Every day I'm getting up and all I'm doing is reading the front pages, more than the front pages but every day in the majority of newspapers in my state our comments about the tariffs.
▶ 1:29:49Sen. Cantwell: We are very very dependent -- we are very trade dependent. Now I feel we are having chaos about what are we doing. One day it is about fentanyl. One day it is about emergency services. One day we will go back to this. I'm trying to get your views. Apples, potatoes and wheat are the largest exports in our state representing over $3 billion worth of agricultural products throughout the world.
▶ 1:30:20Sen. Cantwell: So I am trying to understand if you understand the uncertainty that is being created right now with these tariffs. If you get that it is hard for businesses to even follow what is the predictability and certainty about what the president is even doing or proposing because it is changing every day.
▶ 1:30:42Mr. Faulkender: . Thank you as secretary bessent has talked about, there are three objectives with tariffs. They are a source of revenue to the federal government. The second is they are to address long-standing inequities in the way that other countries have provided subsidies, manipulated their currencies, engaged in technology theft and then the third is as a negotiating tactic, in order to
▶ 1:31:15Mr. Faulkender: Get other countries to address some of the concerns that the united states has and using access to U.S. consumers as an opportunity to obtain concessions. When you look at the president's approach on canada and mexico, it was very much to get them to focus on the fentanyl crisis, on the fact that 100,000 americans are dying --
▶ 1:31:40Sen. Cantwell: Do you think that canada was our fentanyl problem?
▶ 1:31:44Mr. Faulkender: I have not had access to the data on that. My understanding is that some of it comes from canada. I agree with you that more it comes from mexico.
▶ 1:31:55Sen. Cantwell: A lot more. You are saying it is about revenue. I heard this from the first trump administration. You wanted to pay for infrastructure by doing tariffs. I disagreed. You never got an infrastructure bill. We did get an infrastructure bill.
▶ 1:32:11Sen. Cantwell: What I tried to express many times and I hope our colleagues will join us in trying to work with the administration or show that this is a congressional responsibility is that tariffs really do hurt our economy. When those and retaliatory tariffs shut down the apple market, $120 million market alone, that we had to get the tariffs removed. They are just recovering from that. Now we are starting this again.
▶ 1:32:42Sen. Cantwell: So the fact that -- does the president believe that opening markets is a key goal? Does he believe in opening markets?
▶ 1:32:52Mr. Faulkender: I think the objective is to ensure that manufacturers here in the united states faced similar conditions when the export as when foreign manufacturers import to the united states. There is very much a focus on reciprocity and that can mean higher tariffs for both countries. It can also mean lower tariffs for both countries.
▶ 1:33:15Mr. Faulkender: I would be perfectly fine with an outcome where reciprocal tariffs because other nations to lower their tariff rates and grant greater access to their markets for our manufacturers.
▶ 1:33:29Sen. Cantwell: I definitely disagree with the president on this. I believe in the innovation economy. I believe we will set the mark, deploy faster and grow faster. We were seeing the results of that. Now with a very integrated global economy with supply chains you are disrupting with these tariffs, that is not even my question. My question was does he understand the level of chaos that is happening now because people cannot even follow what is game plan is.
▶ 1:34:00Sen. Cantwell: I appreciate that you have illuminated that it is about revenue, that is is about inequities. Now you are saying it is about concessions. I really hope to understand how much damage is being done every day to the agricultural sector. It is not that rich people will not buy farmland. They will buy farmland. We will just have a lot less farmers. I hope we can all help work on this in the future.
▶ 1:34:27Chair Crapo: Thank you senator cantwell. I get to ask questions now. Good to have you here this morning. Congratulations on your nomination and your willingness to serve our country. I appreciate the conversation we had in my office yesterday discussing the upcoming tax cliff and the responsibility we have to avoid a $4.6 trillion tax increase.
▶ 1:34:58Chair Crapo: You said it well on the issue of permanence. You said we don't want to defer a $4.6 trillion tax increase. We want to make sure it does not happen. It is imperative we succeed in passing this bill. As you said in our conversation, permanently passing this bill and preventing this tax hike on our small businesses and families is one of the most important missions we have going forward. President trump did great things during his last term.
▶ 1:35:28Chair Crapo: This congress we will again deliver on his promises to the american people and submit his legacy by making this historic tax cut permanent. I have been vocal about the need for clarity in the tax code and probably lead a letter alongside the chairman of this committee as well as our majority leader john thune and six other members of his committee saying just that.
▶ 1:35:58Chair Crapo: After the crushing inflation, the last administration gave assurance that we will fight to keep their hard earned dollars in their pockets and not the government's. How does permanence in the tax code and removing that uncertainty going forward grow our economy and actually benefit taxpayers?
▶ 1:36:21Mr. Faulkender: Thank you, senator. I also enjoyed speaking with you yesterday. The benefit of permanence is that when businesses make long-term capital decisions, they are wanting to project the benefits of those investments, not just over the short horizon for which a tax code might be in place but they want to think about it over the entire duration of that capital allocation.
▶ 1:36:45Mr. Faulkender: When you consider that a significant number of our businesses file their taxes not through the corporate code but through the individual code because they are partnerships or sole proprietors, it is the individual tax rate that applies to the outcomes of those investments that they are making in the small enterprises.
▶ 1:37:06Mr. Faulkender: Just as we made the corporate income tax rate per minute in 2017 legislation, it is important to come back and make permanent these rates and the past reductions that will expire at the end of this year.
▶ 1:37:22Chair Crapo: During our discussion quote is one of my heroes milton friedman and the milton friedman quote is this "you shared part of this. It is very important. I went back and looked at the context of it. Milton friedman said this, "keep your eye on one thing and one thing only.
▶ 1:37:51Chair Crapo: How much the government is spending because that's the true tax. " it is well said. The key to sanity is not just making tax cuts permanent but doing so in a responsible way.
▶ 1:38:09Chair Crapo: We have a once in a decade opportunity, perhaps a once in a generation opportunity to bring back economic greatness which is why I believe we need to be as impassioned about cutting spending as we are at preventing a massive tax increase. I am working with my colleagues here in the senate and the house to deliver that. After the passage of the tax cuts and jobs act of 17, we saw one of the greatest economies in the history of our country.
▶ 1:38:38Chair Crapo: Of course, we had the black swan event of covid. We cut taxes. Wages increased. Household income rose by $5,000. It was across every demographic. Minorities benefited greatly from this. Revenues hit an all-time high. Tax revenues. Unfortunately the democrats reckless tax and spend agenda wiped out many of those gains. How would cutting spending unleash the american economy?
▶ 1:39:07Mr. Faulkender: Thanks senator. As your comments suggest, if you look at the physical challenge that we have, over the 50 years prior to the pandemic, federal spending averaged just over 20% of gross domestic product. Since then it has been approximately 23%. That spending has the potential to crowd out private investment.
▶ 1:39:34Mr. Faulkender: Most larger deficits, remove capital that could be available for private enterprise and small businesses. That is why as secretary bessent has discussed, if you look at the government and government adjacent sectors, they have done well over the last couple of years. The purely private sector, they have been stagnant over the last couple of years. Part of that possibly is arising from the fact that all of this spending is crowding out capital liquidity going into the private sector.
▶ 1:40:10Sen. Warren: President trump had exactly one big legislative accomplishment in his first term, a giant tax cut for millionaires, billionaires and massive corporations. In fact, it was so giant that a big hunk of it lasted only eight years and still cost $2 trillion .
▶ 1:40:36Sen. Warren: Now the eight years are up so republicans want to do another tax cut for the ultra-wealthy which congress's nonpartisan budget score says will cost $4.6 trillion this time. Congressional republicans say they care about the deficit. They have a plan to fix things up. Here's their story.
▶ 1:41:02Sen. Warren: Because they already have eight years of tax cuts that ran up the dead, republicans claim that more years of tax cuts will be free. A name to this gimmick the current policy baseline. They should have named it magic math. It is so nuts that when we need to figure out the cost of tax cuts, the senate has never never switched to it over using real math.
▶ 1:41:31Sen. Warren: If confirmed, you will play a role in whatever tax deal republicans put together. Let's talk about math. Magic math and real math. Does renaming tax cuts produce any additional revenue?
▶ 1:41:50Mr. Faulkender: Does renaming them?
▶ 1:41:54Sen. Warren: Calling them something different. Does that produce additional revenue?
▶ 1:41:58Mr. Faulkender: I don't think renaming something changes. If it changes behavior, it has the potential to change revenues.
▶ 1:42:07Sen. Warren: So you are saying renaming tax cuts produce additional revenue?
▶ 1:42:12Mr. Faulkender: I cannot imagine that it would unless it causes people to behave differently.
▶ 1:42:17Sen. Warren: I will take that as a no. Claiming that somehow losing $4.6 trillion in tax revenue is free is just plain nuts. Congressional republicans are hoping they can fool people long enough to deliver giveaways to their wealthy donors before anyone figures it out at the end of the day, republicans cannot repeal math. A bunch of tax cuts for billionaires will cost $4.6 trillion.
▶ 1:42:49Sen. Warren: Congressional republicans do not like that answer. I am wondering if they love magic math so much, I want to ask the same question in reverse. If the republicans idea of magically not counting the cost of tax cuts for billionaires makes sense, what about not counting the cost of tax cuts for ordinary people? That is for extending the child tax credit?
▶ 1:43:17Sen. Warren: According to republicans magic math, extending the tax cuts is free, shooting -- shouldn't a temporary expansion of the child tax credit also be free?
▶ 1:43:29Mr. Faulkender: Thank you. The tax cuts and jobs act increased the child tax credit from $1000 to $2000. If we allow the tax cut to expire, it was mean that the tax cut will go back to the $1000.
▶ 1:43:46Sen. Warren: The question I'm asking, if it is free to extend tax cuts for billionaires, isn't it also free to extend tax cuts for poor kids?
▶ 1:43:55Mr. Faulkender: I am not familiar with magic math but what I do know is that the american people look at the current tax code, what they paid last year and what they paid this year as the current environment. The question is when we talk about extending it, I would argue that extending the tcja is making sure the american people do not incur an increase.
▶ 1:44:19Sen. Warren: So you do think that renaming the tax cuts will produce $4.5 trillion of revenue?
▶ 1:44:28Mr. Faulkender: I did not say that it had any impact on the bottom line deficit. When you ask me what a baseline is, to me the baseline is what I am currently doing.
▶ 1:44:39Sen. Warren: I am not asking you that. I am asking you what it costs to put in $4.5 trillion in tax cuts. If republican magic math works, then why not extend it to everything we spend money on? How about money we spent last year on roads and bridges or childcare subsidies and workers who processed social security checks? Of course not. No one is going to do that.
▶ 1:45:06Sen. Warren: Congressional republicans want to use magic math to pass giant tax cuts and then try to tell the american people those tax cuts cost nothing. Hard-working americans understand that $4.6 trillion for a billionaire tax cut is not free. Congressional republicans are trying to sell magic math so they can help billionaires. Unfortunately the american people are just not buying that. Thank you. >> my colleague from new mexico.
▶ 1:45:37Sen. Warren: >> thank you Mr. chairman and thank you for coming by the office and getting a chance to visit a little bit. When we talked about the department of government efficiency's access to treasury payment system, you said, "it is not treasuries roll to stop authorized payments." does treasury have the legal authority to stop payments authorized by congress?
▶ 1:46:05Mr. Faulkender: Thank you. I also enjoyed meeting with you. It is not my understanding that treasury stops payment. Treasury stops processes weakly approved payments. >> if you were asked to stop payment systems authorized by congress, would you stop those payments?
▶ 1:46:24Mr. Faulkender: It is my understanding that departments and agencies are the ones who authorize the payments that are sent to treasury. Congress authorizes a pool of money for a department or an agency. There are contract officers and procurement officers at those department and agencies that are allowed to approve use of that money and then they send a file to treasury and treasury processes it. That is my understanding of treasuries role in this. >> that explanation sounds like a note to me so I appreciate that.
▶ 1:46:55Mr. Faulkender: If you were asked by doge to use treasury payments to stop payments to usaid, would you comply?
▶ 1:47:00Mr. Faulkender: It is my understanding that usaid is part of the state department and that what occurs is that the state department approves those payments. >> I appreciate that as well. Mr. faulkender, you once taught at the university of pennsylvania, correct?
▶ 1:47:19Mr. Faulkender: Yes I was a visiting faculty member teaching a graduate course on empirical methods. >> I believe this is a program that president trump also attended?
▶ 1:47:30Mr. Faulkender: I taught in the phd program so I do not believe that president trump attended the phd program. >> I am not suggesting he received a phd. I appreciate that clarification. Thank you for that clarification.
▶ 1:47:46Mr. Faulkender: I was interested to read recently that the university of pennsylvania warden school found that president trump's tax proposal would increase primary deficits by 5.1 trillion dollars.
▶ 1:48:05Mr. Faulkender: The reason I'm asking that question, senate republicans are planning to pass a $5.1 trillion, my constituents have told me a text scan for the wealthy that they believe it will only cost zero dollars. I am trying to understand this better. I want to simplify by saying do you read here in washington, D.C.? Do you rent a place to live?
▶ 1:48:31Mr. Faulkender: I live in bethesda. I rent. >> if someone's rent is $2000, let's use that as a base amount and the landlord raises the red by $50 per month, going forward is the rent only $50?
▶ 1:48:51Mr. Faulkender: My understanding is that under baseline scoring by cbo, spending does continue even though we only pass when your authorizations whereas taxes follow current law. If you are going to extend spending even though it has not been authorized, if the baseline incorporates higher spending even though it has not been authorized, why wouldn't we extend current activity for the tax code? That is my understanding of the discussion.
▶ 1:49:20Mr. Faulkender: At the end of the day, this is a position -- decision for congress as to who uses the baseline. That is not something that I if confirmed, would have any role in determining. >> that is not what I asked. That is what senator warren asked. If your rent went up by $50, is the cost to you next month $50 or the cost you are paying now plus $50?
▶ 1:49:45Mr. Faulkender: In your question, my rent payment would be $2050. >> I appreciate that. The reason I ask the question is we will keep things simple for all of us involved so we can call balls and strikes. It feels that the books are being cooked. Call it whatever term you can put on this. I am surprised that this is where we are with these accounting gimmicks.
▶ 1:50:17Mr. Faulkender: I have said in this committee before and I have set other times, if we want to get our fiscal house in order, we need to reinstitute paygo. Under bill clinton, it was a simple program. You paid as you go. If you had a piece of legislation that cost one dollar, you would have to cut a dollar or create revenue to pay for that dollar. I don't know why congress has abandoned this.
▶ 1:50:44Mr. Faulkender: It got taken away by republicans when they took over a few decades ago. Then we had to put it back when we were in the majority. It seems to me that this is something we should all agree upon. I know that we will sit here and explain as you did to my oversimplified question about rent as well but with all of these things, if folks will get to fully pay for these programs and I appreciate the
▶ 1:51:15Mr. Faulkender: Conversation that my republican colleagues in the freedom committee are having in the house right now, they will have to cut programs to get to this $5.1 trillion. Do you support cutting medicaid to pay for president trump's tax scam?
▶ 1:51:29Mr. Faulkender: It is congress that makes spending decisions. It is not the treasury.
▶ 1:51:35Sen. Warren: I have other questions based on the conversation that we had around using all tools available at the treasury department to stop the flow of fentanyl. I will submit those for the record. I appreciate the conversation we had and the commitment to use all tools that exist to be able to stop the flow as well. Thank you for the time. >> without objection, your views will be put into the record.
▶ 1:52:01Sen. Warren: The next three here would be senator tillis, senator smith and senator welch.
▶ 1:52:06Sen. Tillis: Thank you Mr. chair. Mr. faulkender thank you for being here and congratulations to lauren and catherine for being here. Your dad will get confirmed. I look forward to supporting your confirmation. I need answers to questions still. For example, are you familiar with the intangible income provisions and how important are they to you?
▶ 1:52:32Mr. Faulkender: They are an important tool to make sure that U.S. operators have an incentive to engage in economic activity here instead of having that activity occur abroad. Can you briefly describe if you have the information at your fingertips how that activity changed after passage of tcja and what could possibly happen if we did not extend it?
▶ 1:52:56Mr. Faulkender: Prior to the tax cuts and jobs act, they would face a tax rate of 35%. If they engaged in activity abroad and had that activity recognized in a low tax jurisdiction, it could be minimal, single digits if not closer to zero. What that does is it encourages that activity to occur abroad rather than domestically.
▶ 1:53:21Mr. Faulkender: What the tax cuts and jobs act did was simultaneously brought down the rate for corporate activity here from 35 to 21 and it raised the tax rate that would be paid on having that activity occur abroad. You reduce the wedge that is the differential when it comes to where that activity is located thereby increasing the benefit of that activity occurring here. So the outcomes are that we have not seen tax inversions take place.
▶ 1:53:51Mr. Faulkender: A tax inversion is when a U.S. company gets acquired by a foreign company largely for the purpose of having its activities tax abroad rather than domestically. We saw those come to an end. We sought more than $1 trillion repatriated back to the united states following the enactment of the tax cuts and jobs act.
▶ 1:54:09Sen. Tillis: Thank you for that. Under president trump's first administration, I think it called for a 14 person staff. Secretary yellen requested a budget for 44 staffers, three times. I don't know if you have looked at that yet but that seems like a big jump.
▶ 1:54:36Sen. Tillis: Can I get you to commit to looking into that before you assume that you need three times more people than apparently the first trump administration thought we needed in that role?
▶ 1:54:44Mr. Faulkender: I commit to you that we will find ways to be good stores of taxpayer dollars and make sure that any activity we engage in is done efficiently.
▶ 1:54:57Sen. Tillis: With respect to doge, give me an idea of -- this is not even may be in your lane but I am interested based on your past experience. Doge is going to produce some one time and maybe some ongoing benefits. The one-time benefits are decisions that could be made by the administration.
▶ 1:55:24Sen. Tillis: Do you have any insight into some of the projects to date that will require statutory authority to have staying power and fully derive some of the efficiency the administration is trying to achieve?
▶ 1:55:35Mr. Faulkender: What treasury is mostly focused on right now is providing additional tools to all departments and agencies to better understand where their money is going by enacting process changes for payment files.
▶ 1:55:51Mr. Faulkender: Each of these departments and agencies, many of whom are failing audits right now will better understand how their dollars are being used and it is that better management, by having better information, they can better manage the resource and have more informed appropriations requests when they come back to congress because they can better identify how money is being used.
▶ 1:56:13Sen. Tillis: Thank you very much. We have a lot of people running around. It is not for lack of interest. I think it is critically important. I look forward to supporting your confirmation on the floor. Congratulations to you and your family for the honor of being nominated. Thank you, Mr. chair.
▶ 1:56:33Sen. Smith: Thank you, chair crapo. Thank you for being here. Thanks for your willingness to serve our country. I would like to start with something that is not brought up a lot of finance committee which is the issue of tribal relations.
▶ 1:56:53Sen. Smith: The treasury department has made great progress toward improving its government to government relationships with tribal nations including establiing the tribal, treasury tribal advisory committee and the tribal affairs office. This has benefited tribal nations and it is very important to minnesota and has helped the treasury department work better.
▶ 1:57:12Sen. Smith: I want to focus on this and ask will you commit to ensuring that the treasury department does uphold its government to government relationships with tribal nations and maintaining this stretch of poorly mandated advisory committee?
▶ 1:57:24Mr. Faulkender: Senator, I was the treasury point of contact for tribal consultations in the first trump administration. I attended a travel event in the minnesota. I was present at the initial meeting of the treasury tribal advisory committee. I commit to you that we will continue to recognized tribes as governments and work with them to address their revenue issues that they have with the treasury department.
▶ 1:57:55Mr. Faulkender: It was partially under my leadership that we recognize that an office focused on the unique issues of tribes was a more appropriate organizational structure than it was when I first entered.
▶ 1:58:06Sen. Smith: I am aware of your leadership on this and I want to thank you for that and I think it is important that the office of tribal affairs stays in place. You will make sure that if doge boys come in and decide that this is a place to find so-called deficiencies that you will stand up to that.
▶ 1:58:26Mr. Faulkender: Senator, it makes sense to have people who are specialized in these activities because the issues for tribes are unique. It makes sense to have a separate set of specialists who focus on that. It would not be inefficient to eliminate that specialization.
▶ 1:58:46Sen. Smith: I am not trying to trap you on this. I just want to make sure that people who understand how this works are making the decisions about how to staff it and how to manage it and how to organize it and not folks who are coming from another place. Let me find my notes. Let me ask you this question. There is a lot of talk right now about the debt ceiling. The debt ceiling was breached in january.
▶ 1:59:15Sen. Smith: We are in the process of evaluating this massive budget reconciliation bill. I know that the treasury is currently deploying extraordinary measures to delay default on our national debt. I want to ask you about the interplay between that challenge and also was happening at the irs. The administration has begun firing 6000 irs employees last month. The reports are that doge is also working on a plan to cut the irs workforce in half.
▶ 1:59:45Sen. Smith: I want you to address for us what the logic is behind those staff reductions and what impact you think that will have on the national debt that we are grappling with.
▶ 1:59:57Mr. Faulkender: Thank you. As I mentioned earlier, I know that the secretary has proved some initial reductions in the irs. They were not in the taxpayer services area. The secretary has committed to there being no disruption to this year's filing season.
▶ 2:00:19Mr. Faulkender: Those reductions would take us back down to irs personnel levels that we had during the first trump administration where we continued to successfully collect revenues. I am not anticipating that there will be any disruption in our ability to engage in this filing -- to engage in collections at the irs is filing season and thereafter.
▶ 2:00:41Mr. Faulkender: I have not been briefed on any plan other than what I just described as far as a further reduction in personnel at the irs.
▶ 2:00:49Sen. Smith: I am sure you are aware that in the inflation reduction act congress substantially increased the staffing in irs enforcement. Just as an example of the impact and the efficiencies of that, through that work we were able to achieve $1 million in increased enforcement from about 1600 high wage millionaire
▶ 2:01:20Sen. Smith: Delinquent taxpayers, high wage folks who were not paying their taxes thanks to the work of the irs and additional enforcement of the irs, we were able to accomplish that. Can you acknowledge that that was a good return on investment for us to make, to make sure that we have accountability and people are just paying what they are owed?
▶ 2:01:40Mr. Faulkender: I have not been briefed on what additional revenues came in as a result of that. Where we can agree is probably the best way to get better collections is to improve the modernization of the systems so that rather than working off of 1960's systems, we could actually have irs enforcement activities focused on where fraud is most likely taking place.
▶ 2:01:59Sen. Smith: I know I am out of time, Mr. chair. These numbers come from the irs press release. I am sure they are accurate and I think -- if you don't have people doing the enforcement, then you will not get the enforcement that you need. That is a different issue from technology. Thank you. >> it is good to see you again.
▶ 2:02:25Sen. Smith: I have two pickup where my friend, the senator from minnesota -- you would agree that the irs has antiquated systems?
▶ 2:02:37Mr. Faulkender: Yes. >> do you agree with independent assessments yet not adding a single tax but actual enforcement of existing laws could generate you over a ten-year period in excess of $500 billion? Do you think those assessments are accurate?
▶ 2:03:03Mr. Faulkender: I am skeptical of those numbers that there is that amount that we can incrementally collect. As I mentioned to the previous set of christians -- previous set of questions, we can best improve enforcement by having better data so that we have tax enforcement people going where the pockets of tax evasion --
▶ 2:03:27Sen. Warner: We talked about this in the office. Just the idea of taxpayer services, if it appears that it is open season and will cut back 50,000 folks even with additional technology, we come to about this. I was a business guy for a long time. I think it would be a stupid business decision.
▶ 2:03:59Sen. Warner: We did not come to an agreement but many of my republican friends talked about this at times and recognized that there were additional dollars in the irs that can save taxpayer money because we would have better enforcement. I echo completely that we need new systems. I am concerned and I will not beat you up the way everybody else is. I believe they already have all the doge boys. It is making our country less safe.
▶ 2:04:29Sen. Warner: On just plain dollars and cents basis. I think the notion that the 12,000 people who have been fired will make no difference if that number goes up to 50,000 will make no difference. It defies the reality that all of us on both sides of the aisle had and we may have had different numbers on how much investment but the irs was woefully under invested in.
▶ 2:05:00Sen. Warner: We need to upgrade our systems and bring back modern technology. I am extraordinarily afraid that we are going to take a giant step back. Bring again a thoughtful approach on any of these issues would make sense. I don't believe that is taking place but I do want to touch on one thing I think we agree on. I want to make sure I can get the chairman nodding on this. We have been partners on this.
▶ 2:05:27Sen. Warner: Cfi's -- cdfi's, under the first trump administration they made record investments. $12 billion. We have seen that field expand nine to 10 fold over the last decade. It is a broadly bipartisan issue. We have 28 members on this caucus.
▶ 2:05:51Sen. Warner: We have looked at things like can we get a secondary market started in cdfi debt that can further expand that opportunity. We have tried to get a coalition to get dollars deposited. I asked secretary bessent on this question. Would you continue to work with me and us on cdfi's? >> you do have me nodding on this.
▶ 2:06:20Sen. Warren: I want to make sure. I was hoping I could get you nodding on the irs conversation.
▶ 2:06:26Mr. Faulkender: I am happy to reiterate what we discussed in your office which is that for the last six months of the first trump administration, cdfi's reported to me. They exist because there are geographies in our country where there are underrepresented to people in largely rural areas where the infrastructure cost did not bear to the stolen branches. I commit to you.
▶ 2:06:56Sen. Warner: It is not simply rural. We can litigate that another time. We were talking about you on the tax debate. Current law versus current policy. I believe if any business entity said we will presume that we did not have to pay for the cost of production increases because that is our current policy even
▶ 2:07:27Sen. Warner: Though those policies are supposed to end at a certain point, and oh you operated on those principles rather than the current law. I think donald trump at host would say, "you're fired" because the idea that you will cover up $4 trillion of tax cuts and not count it is the kind of accounting that I hope we can get away from.
▶ 2:07:58Sen. Warner: We have a debt that is now at 36 trillion dollars. It is fiscally responsible. I hope we can have a robust discussion on that. Thank you. >> I would just say there is a big difference between saying you will not pay for something and saying you will not raise $4 trillion of taxes on people.
▶ 2:08:17Sen. Warner: We spent a lot of time on these subjects. This is the kind of congressional did not look here when we take your money there. Just because a tax cut is putting place or a spending program is putting place, the notion that we will count that forever is fiscally irresponsible. We have to have that discussion. >> yes, we will.
▶ 2:08:40Sen. Cassidy: I really enjoyed the conversation. I want to follow up on this. President trump said he wants a balanced budget. Treasury secretary scott bessent said he wants the debt to gdp ratio of 3%.
▶ 2:08:58Sen. Cassidy: I applaud that because as we know home mortgages, student loan debt, credit card debt, car financing is all related to the underlying mortgage rate and the underlying treasury rate and increased debt can push that up. If we allow that treasury rate to rise and mortgage and car and credit card and student loan debt rates rise, that is a backdoor tax on middle america.
▶ 2:09:25Sen. Cassidy: My people would be paying more and home ownership is just a little bit out. When the president spoke the other night of restoring the american dream, I really saw that. That leads me to the question, knowing that mortgage rates recently hit a 25 year high, and knowing our fiscal trajectory, what are the implications if our debt continues to rise upon those mortgage cars, student loan and credit card rates?
▶ 2:09:55Mr. Faulkender: Thank you. I enjoyed our discussion earlier this week. If you look at the impacts of the affordability crisis on the american people over the last four years, the inflation numbers really understate the impact because the impact of higher mortgage rates are not included in the inflation calculation. If they were actually included, the numbers are twice as bad as the reported statistics.
▶ 2:10:23Mr. Faulkender: That is exactly for the mechanism that you described. The higher interest rates that we are paying on government debt, those are the rates that are the base rate when you set mortgage rates and other consumer credit rates. That is why the secretary has talked very much about getting our deficits down because he sees himself, he has described himself as the world's largest bond salesman.
▶ 2:10:47Mr. Faulkender: He is the one who is responsible for making sure that we can continue to finance it and as I have testified in front of congress before, it is not just about a direct savings to the federal government from reducing interest costs. The larger piece is what you described. It is the pass on rate to consumer credit rates that are a much more significant impact on family budgets.
▶ 2:11:10Sen. Cassidy: It is reasonable to say that under some scenarios that our national debt will rise from $36 trillion to $65 trillion over the next 10 years. We want to avoid that. But if it does that, as much as you can, what would you project would be the impact upon a mortgage rate, a car note, etc.?
▶ 2:11:33Mr. Faulkender: If debt levels were to rise at that pace, you would likely see in your rates, longer-term federal rates, continue to rise well above the rates that most americans have seen recently. That would push mortgage rates higher and as I think people know, one of the problems with mortgage rates so high is that people are now trapped in their homes. They cannot move elsewhere for a new job because they would have to sell their house, lose their mortgage rate because they cannot take it with them.
▶ 2:12:03Mr. Faulkender: We have people trapped in their current economic situation because rates have gotten higher. They have gotten as high as they have. If these debt levels were to be realized, we should expect mortgage rates, consumer credit rates to be even higher than they are today.
▶ 2:12:20Sen. Cassidy: So it is reasonable for me to say that your encouragement to congress is that we look at how we reduce that indebtedness as opposed to increasing that indebtedness?
▶ 2:12:31Mr. Faulkender: Yes that's why the secretary has called for us to put ourselves on the path to get down to 3% of gdp as a target deficit rate. That is a number that would be sustainable in terms of a debt to gdp ratio in the long-term.
▶ 2:12:47Sen. Cassidy: Thank you for that. I was intrigued that you previously served and issued the annual report on the social security trustees report.
▶ 2:12:57Mr. Faulkender: Yes.
▶ 2:12:58Sen. Cassidy: The president called for a sovereign wealth fund, using oil and gas to pay for social security benefits. What you think about the idea of having a sovereign wealth fund separate from the social security trust fund, separate, with all risk borne by the fund but use it as other countries do to invest in the broader economy to bailout social?
▶ 2:13:23Sen. Cassidy: We know that social is going insolvent in eight years at which point bylaw beneficiaries benefits will decrease by 21 and 25%. Thoughts on that?
▶ 2:13:31Mr. Faulkender: As you indicated the president signed an executive order asking treasury and congress to work together to generate a report with recommendations on the creation of sovereign wealth fund and as secretary bessent described, it would help us recognize the assets of the federal government and the ability of potentially better utilizing those assets to contribute to solving our nations fiscal situation.
▶ 2:13:55Sen. Cassidy: What about dedicating those to bailing out social because social is going solvent in eight years?
▶ 2:14:02Mr. Faulkender: It would be the determination of congress.
▶ 2:14:05Sen. Cassidy: Sounds good. Thank you. >> next is senator warnock and then the very patient senator welch.
▶ 2:14:18Sen. Warnock: Thank you very much. Last week house republicans took the first steps to renew tax cuts for the ultra-wealthy. Based on their own budget, these tax cuts are going to cost americans $4.5 trillion.
▶ 2:14:40Sen. Warnock: According to the treasury department, the entire bottom half of working families is folks making less than $75,000 per year will see less than 8% of the benefits. They will be stuck with almost 100% of the burden to pay for these cuts since republicans in congress are planning to cut programs like medicaid, food assistance, pell grant to afford their massive giveaway to the rich.
▶ 2:15:11Sen. Warnock: Mr. faulkender, I am looking for a number. If republicans/$800 billion from medicaid as their own budgets suggest, how many of the 70 million americans on medicaid will lose their healthcare coverage?
▶ 2:15:26Mr. Faulkender: Thank you. Medicaid is not a program overseen by treasury so I have not looked at the impacts. I am not familiar with any cuts to medicaid.
▶ 2:15:37Sen. Warnock: Do you agree that we might want to know how many americans would lose medicaid with $800 billion taken from medicaid?
▶ 2:15:48Mr. Faulkender: I am not familiar with cuts to medicaid. But I am familiar with is the tax cuts and jobs act actually increased the progressivity of the tax code and increase the percentage of tax proceeds paid by the top 1%.
▶ 2:16:06Sen. Warnock: Is it a good idea to take families off of medicaid and how many families are you comfortable cutting from medicaid to get the tax code for the wilshire's -- for the richest of the rich?
▶ 2:16:19Mr. Faulkender: I think that having people find self-sufficiency and getting into jobs that allow them to have their employer provided health insurance to them is a much better outcome than having government provide.
▶ 2:16:31Sen. Warnock: So you think medicaid is a bad idea?
▶ 2:16:37Mr. Faulkender: I think people are realizing self-sufficiency and getting off of government dependency is a good thing.
▶ 2:16:40Sen. Warnock: Does that include the children who benefit?
▶ 2:16:41Mr. Faulkender: I think children benefit when their parents are employed, yes.
▶ 2:16:44Sen. Warnock: Let me talk about something that you and I do agree on and that is our debt is too high. Even after taking will healthcare -- taking away healthcare and education programs from families which I think is a bad idea and I am not hardened by the fact that your answer to the millions of americans who need medicaid is that they should find some other path regardless of their circumstances, I am not hardened by that at all.
▶ 2:17:16Sen. Warnock: You and I do agree that our debt is too high which adds to the birds and the cost of everyday americans trying to afford a house, a car, trying to make their lives work. Still republicans do not have a plan to pay for their part of the republican budget bill. That is a bad idea. I am worried we will add to the federal debt and thanks to these higher interest rates that we have already discussed, that will result in runaway debt.
▶ 2:17:48Sen. Warnock: Children today will not be able to afford a car or mortgage years from now. As an alternative approach in 2013 congress on a bipartisan basis extended the bush tax cuts for anyone except those making more than $400,000 per year. This decision made by republicans and democrats working together and finding compromise saved the treasury $600 billion.
▶ 2:18:16Sen. Warnock: If confirmed, would you support a bipartisan compromise that cuts taxes for working families but not billionaires?
▶ 2:18:23Mr. Faulkender: Senator, I would support making sure that america's small businesses do not see a tax increase which is what would happen if we allowed the tax cuts and jobs act to expire.
▶ 2:18:35Sen. Warnock: Would you support a bipartisan compromise that cuts taxes for working families but not billionaires?
▶ 2:18:40Mr. Faulkender: I would support full extension of the tax cuts and jobs act to ensure that america's families did not face a tax increase.
▶ 2:18:48Sen. Warnock: Like me, you are concerned about the debt, you would extend the tax cut to billionaires?
▶ 2:18:54Mr. Faulkender: If the secretary said when he went through his confirmation hearing we have a spending problem, not a revenue problem. Revenues are coming in line with historic numbers. It is spending that has greatly exceeded the historic average.
▶ 2:19:08Sen. Warnock: I think the folks who are losing their medicaid right now, who are without healthcare and who as a result of that might not be able to work with disagree. Thank you so much.
▶ 2:19:25Sen. Welch: Thank you very much, Mr. chairman. I am getting concerned about where the economy is going. There are a number of things that I think we cannot ignore. The consumer confidence numbers are dramatically dipping. If you know, our economy depends on consumer confidence and folks buying things because they think they will be able to pay for them. Inflation is ramping up.
▶ 2:19:55Sen. Welch: It is not going down. Unemployment figures are going up, 244,000 jobless last month. The payroll numbers, 77,000 private sector jobs according to adp, that is the worst numbers since well over a year ago. These are all signals that I know people in your job pay enormous amount of attention to you.
▶ 2:20:22Sen. Welch: I also think there are some policies creating an enormous amount of anxiety certainly in vermont and that is the tariffs. 25% tariffs with canada and mexico. Is there apprehension on your part at all that these tariffs which would be in vermont, 25 to 45 cents per gallon higher in gasoline prices? We import a lot of petroleum from canada.
▶ 2:20:54Sen. Welch: We import a lot of electricity from canada. Folks will see a higher electricity bill at the end of the month when they are trying to balance their checkbook. Home heating fuel, we get a lot of that from canada. That is true for new hampshire as well. How will that not have a very punitive impact on the folks I represent in vermont?
▶ 2:21:16Mr. Faulkender: The president's economic plan includes --
▶ 2:21:25Sen. Welch: I asked a very specific question. My costs go up for gas, electricity and home heating fuel. A vermonter says how will we handle this? This is not good for us. I am asking you how will we handle this. They don't want to hear about the president's economic plan. They want to know how they will pay their home heating bill.
▶ 2:21:46Mr. Faulkender: The way we will do that is bring down energy prices by unleashing american energy. Bring down the cost of food and other aspects that vermonters and americans rely upon by bringing down regulation.
▶ 2:22:03Sen. Welch: You could have regulation without higher tariffs, right?
▶ 2:22:07Mr. Faulkender: I think the president's objective is to address long-standing inequities in our international trade practices.
▶ 2:22:15Sen. Warnock: I am talking about canada.
▶ 2:22:17Mr. Faulkender: As the president has explained, the candidate tariffs are to get them to focus on the fentanyl crisis.
▶ 2:22:25Sen. Welch: I understand that on the southern border. We have full cooperation with canada. They hate fentanyl just as much as we hate fentanyl. So you are telling me the president is willing to make vermonters pay $.40 per gallon more for gasoline, it may be 10 to 15% higher for electricity and 10% to 15% higher for home heating fuel for shareholders -- for medical producers to pay 25%
▶ 2:22:55Sen. Welch: More for the equipment they use, debt that is ok with the president?
▶ 2:22:58Mr. Faulkender: The president is looking to get canadians to do more to address the fentanyl crisis that cost american lives.
▶ 2:23:05Mr. Faulkender: You are talking about the president's goal. I am asking you as an economist. There is a price that vermonters will pay with these increased tariffs in canada. Is that right or is that somehow magically wrong?
▶ 2:23:20Mr. Faulkender: To the extent that the promise of these tariffs will compel the canadians to take better effort to address the role in the fentanyl crisis to the president will be willing to remove those tariffs to extract that assistance.
▶ 2:23:35Sen. Welch: I will try to make this clear. Will a 25% increase in tariffs on those items I mentioned, home heating fuel, electricity, gasoline, mean that vermonters pay more for home heating fuel, gasoline and electricity?
▶ 2:23:55Mr. Faulkender: It depends upon whether the canadians take the steps the president is looking for and whether those tariffs remain in place.
▶ 2:24:02Sen. Welch: The tariffs are in place. I am just asking whether those 25% tariffs, whatever reasons the president has for doing it, vermonters may accept that. But will vermonters pay more as a result of those tariffs?
▶ 2:24:20Mr. Faulkender: It is with a ways. -- split three ways. Some of it will be absorbed by the canadian producers. Some may find its way into the prices and a one-time adjustment.
▶ 2:24:34Sen. Welch: I will try to translate that I can't. Will vermonters pay more or less?
▶ 2:24:42Mr. Faulkender: There could be an adjustment in the price that is paid if the tariffs remain in place criminally. If the canadian government were to make changes such that the president releases the tariffs, you would not see it show.
▶ 2:24:56Sen. Welch: I yield back.
▶ 2:24:58Chair Crapo: Thank you very much. Senator welch, with regard to your current line of questioning, there has been some announcement today from the administration. I believe secretary lutnick, they're looking at adjusting this tariffs. We will see how this plays out. Mr. faulkender, I had one more question for you. Senator widen has another question.
▶ 2:25:27Chair Crapo: I will not ask mine because it was on the tcja and you enter that in your responses to other questions. I appreciated your answers. Senator wyden, will get to be the wrapup.
▶ 2:25:44Sen. Wyden: I will be brief. In this committee we face so often two lanes. One lane is the economic lane. Nearly always when I'm home and I have town meetings the second word is bill. It might be medical bill. It might be grocery bill. It might be electric bill.
▶ 2:26:10Sen. Wyden: That is the number one kind of issue people talk about in their kitchens and living rooms. The administration's tariff policy will raise an awful lot of bills on americans. Small businesses, consumers, people who are shopping. It will cause more inflation. Today we asked about it every which way. I still did not really get any kind of answers. The chairman made a very legitimate point.
▶ 2:26:40Sen. Wyden: He said the administration will do something today. They have been making tons of adjustments because this is such a flawed policy. It is really particularly in my part of the world are one out of four jobs depends on trade and they pay better than entree jobs. -- non-trade jobs. This is bad news.
▶ 2:27:05Sen. Wyden: I asked you about the president's authority to impound congressionally authorized managers, because that is all about the power of the purse. Article one. You said to me when I asked you about it that you were not a lawyer. You did not have a position on it.
▶ 2:27:27Sen. Wyden: Well, I've got something from a foxbusiness interview from a year ago when you are asked the same question, whether impounding funds -- the president empowering funds would be a bad thing. On foxbusiness, your response was no, not at all. I will put this in the record. You of course have a chance to clean something up.
▶ 2:27:54Sen. Wyden: There seems to be a big difference between what you told us this morning about the president's power to impound funds and what you told foxbusiness. You have a couple of days as is tradition to make sure we know what your views are. Let me tell you, I will send additional questions in writing where I asked about matters like having enough criminal investigators. I think we are losing out on stopping some of the fraudsters.
▶ 2:28:25Sen. Wyden: I look forward to your response.
▶ 2:28:26Chair Crapo: Thank you, senator. Mr. faulkender, thank you again for appearing before us today. You are undoubtedly qualified to serve as the next deputy secretary of the treasury. I look forward to voting in favor of your nomination. Similarly, I urge my colleagues to do the same. With that, I remind my colleagues that the deadline for submitting any questions for the record is 5:00 p.m. On monday, march 10.
▶ 2:28:53Chair Crapo: With that, the finance committee stands adjourned.