Sen. Sherrod Brown grills Powell, Yellen on raising the debt ceiling

Federal Reserve Chair Jereome Powell and U.S. Treasury Secretary Janet Yellen testify at a hearing on the state of the nation's COVID-19 recovery.

Video transcript

SHERROD BROWN: Madam Secretary, last night, my Republican colleagues blocked efforts to provide critical disaster relief to millions of Americans, to keep the government open, and to raise the debt ceiling so that the government can pay our bills on time, something we've always done bipartisanly, including right after the Republicans passed their deficit-busting corporate tax giveaway via reconciliation. Be brief, if you would. What would be the impact on our economy if they block all efforts to raise the debt ceiling?

JANET YELLEN: Chairman Brown, failing to increase the debt limit would have catastrophic economic consequences. It would cause the government to default on its obligations, which is a literally unprecedented event in American history. It would be disastrous for the American economy, for global financial markets, and for millions of families and workers whose financial security would be jeopardized by delayed payments.

For example, nearly 50 million seniors would or could stop receiving Social Security payments or see them delayed. Our troops would not know when their paychecks would come. 30 million families who rely on the child tax credit would not receive the monthly payment on time.

Unemployment would surely rise. And as we saw in 2011, even coming very close to the deadline without raising the debt ceiling can undermine the confidence of financial markets in the creditworthiness of the United States. It led to a debt downgrade and soaring interest rates, which ends up raising payments on mortgages, auto loans, and credit cards.

SHERROD BROWN: Thank you. You made clear that the debt ceiling's about money we've already spent, like the CARES Act that Republicans in Congress voted for and that President Trump signed into law. And now they want to run out and pay the bill. We know it's just wrong. They know it's just wrong.

Chair Powell, the most recent jobs report, as you point out, saw unemployment decreasing generally, but it also showed a continued racial unemployment gap, and the unemployment is rising for Black member-- Black workers. You committed in erring on the side of lower unemployment and a more competitive labor market. Thank you for that.

But last week, you announced that policy tightening will begin in November with tapering, that interest rate targets will increase next year. Why take away economic support just when workers are getting back on their feet and starting to see glimmers of real wage growth and when the recovery has failed to reach so many Black workers?

JEROME POWELL: Right now we're buying $120 billion worth of securities every month. And all of those purchases add to accommodation. They are increasing accommodation. And we had set a test for beginning to taper those purchases of substantial further progress towards our statutory goals. We haven't met that yet. But as I mentioned, I think we've all but met it.

On the path that we're looking at, we would continue to add accommodation, not subtract it, until well into the middle of next year. And we think that's appropriate given the strength of the economy. The test for raising interest rates is substantially higher. And you know, we want to see-- just as you indicated at the beginning, we want to see a labor market-- that you both indicated, a labor market that's very strong. We want to see the kinds of reductions in disparities and the kind of things that we did see before the pandemic arrived.

SHERROD BROWN: Thank you. Secretary Yellen, the conservative Niskanen Center said the expansion of the child tax credit would result in billions of dollars in spending, hundreds of thousands of jobs in local communities, particularly rural communities. We know raising a child is work. And most of the parents getting CTC are really doing two jobs, at home and in the paid labor force. So set the record straight briefly, if you would. Does the expanded child tax credit, particularly a fully refundable child tax credit, does it increase labor force participation and boost local economies?

JANET YELLEN: I believe that it does. I think the evidence shows that very strongly that it helps parents take care of their children. As I mentioned in my opening statement, we've seen that hunger, the number of families that feel they don't have-- their children don't have enough to eat drop substantially after the first round of payments. We see that parents are using the CTC payments to pay for basic needs, including food and clothing. And of course, it can be used for child care and provide the kind of support that enables parents to take jobs, to work, to contribute--

SHERROD BROWN: And thank you. Thank you for the way that you and Treasury have gotten those checks out monthly starting in July. Thank you for that. Last question. Chair Powell, "The New York Times" reported in February only 2 out of 417 economists employed by the Board of Governors, 2 out of 417, are Black.

I appreciate you made diversity at the Fed a priority. I agree with what you said in that article-- institutions that focus on diversity and do it well are the successful institutions in our society. Cutting it even closer, over its 108-year history, no Black woman has ever served on the Board of Governors, not one, ever. Do you think the Board of Governors would be a more successful institution if a Black woman had a voice-- if Black women had a voice and a seat at the table? Should we make that a priority?

JEROME POWELL: I would strongly agree that we want everybody's voice heard around the table, and that would certainly include Black women. And we, of course, have no role in the selection process, but we'd certainly welcome.

SHERROD BROWN: Secretary Yellen, do you agree with that, that it's time we had a Black woman on the Board of Governors?

JANET YELLEN: I do. I think diversity is extremely important. And that would certainly be a very welcome achievement.

SHERROD BROWN: Thank you.