[Senate Hearing 117-737]
[From the U.S. Government Publishing Office]
S. Hrg. 117-737
CHILDCARE AND OTHER POLICY TOOLS TO COMBAT BOTTLENECKS AND INFLATION
=======================================================================
HEARING
before the
SUBCOMMITTEE ON
ECONOMIC POLICY
of the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
ON
EXAMINING AMERICA'S CHILDCARE CRISIS AND HOW WE CAN BRING DOWN COSTS
FOR AMERICAN FAMILIES
__________
APRIL 26, 2022
__________
Printed for the use of the Committee on Banking, Housing, and Urban
Affairs
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available at: https: //www.govinfo.gov /
______
U.S. GOVERNMENT PUBLISHING OFFICE
53-442 PDF WASHINGTON : 2023
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
SHERROD BROWN, Ohio, Chairman
JACK REED, Rhode Island PATRICK J. TOOMEY, Pennsylvania
ROBERT MENENDEZ, New Jersey RICHARD C. SHELBY, Alabama
JON TESTER, Montana MIKE CRAPO, Idaho
MARK R. WARNER, Virginia TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts MIKE ROUNDS, South Dakota
CHRIS VAN HOLLEN, Maryland THOM TILLIS, North Carolina
CATHERINE CORTEZ MASTO, Nevada JOHN KENNEDY, Louisiana
TINA SMITH, Minnesota BILL HAGERTY, Tennessee
KYRSTEN SINEMA, Arizona CYNTHIA LUMMIS, Wyoming
JON OSSOFF, Georgia JERRY MORAN, Kansas
RAPHAEL WARNOCK, Georgia KEVIN CRAMER, North Dakota
STEVE DAINES, Montana
Laura Swanson, Staff Director
Brad Grantz, Republican Staff Director
Cameron Ricker, Chief Clerk
Shelvin Simmons, IT Director
Pat Lally, Hearing Clerk
______
Subcommittee on Economic Policy
ELIZABETH WARREN, Massachusetts, Chair
JOHN KENNEDY, Louisiana, Ranking Republican Member
JACK REED, Rhode Island TIM SCOTT, South Carolina
CHRIS VAN HOLLEN, Maryland THOM TILLIS, North Carolina
TINA SMITH, Minnesota KEVIN CRAMER, North Dakota
JON OSSOFF, Georgia STEVE DAINES, Montana
Gabrielle Elul, Subcommittee Staff Director
Natalia Riggin, Republican Subcommittee Staff Director
(ii)
C O N T E N T S
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TUESDAY, APRIL 26, 2022
Page
Opening statement of Chair Warren................................ 1
Prepared statement........................................... 31
Opening statements, comments, or prepared statements of:
Senator Kennedy.............................................. 3
WITNESSES
William E. Spriggs, Professor of Economics, Howard University,
and Chief Economist, AFL-CIO................................... 6
Prepared statement........................................... 32
Melissa Colagrosso, Owner and Director, A Place To Grow
Children's Center.............................................. 8
Prepared statement........................................... 38
Brian Riedl, Senior Fellow, The Manhattan Institute.............. 10
Prepared statement........................................... 39
Responses to written questions of:
Senator Kennedy.......................................... 44
Walt Rowen, President of Susquehanna Glass Company, and Cochair,
Small Business for America's Future............................ 11
Prepared statement........................................... 40
Kathleen Sgamma, President, Western Energy Alliance.............. 13
Prepared statement........................................... 41
Responses to written questions of:
Senator Kennedy.......................................... 45
(iii)
CHILDCARE AND OTHER POLICY TOOLS TO COMBAT BOTTLENECKS AND INFLATION
----------
TUESDAY, APRIL 26, 2022
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Subcommittee on Economic Policy,
Washington, DC.
The Subcommittee met at 2:31 p.m., via Webex and in room
538, Dirksen Senate Office Building, Hon. Elizabeth Warren,
Chair of the Subcommittee, presiding.
OPENING STATEMENT OF CHAIR ELIZABETH WARREN
Chair Warren. This hearing will come to order.
Good afternoon and welcome to today's hearing on Childcare
and Other Policy Tools to Combat Bottlenecks and Inflation.
Now we have heard a lot about inflation over the past 6
months and rightfully so. When prices go up, whether it is
because of corporate price gouging or because of pandemic
related disruptions in the supply chain, it hurts hardworking
American families. We need to get inflation under control, and
we need to do it in the smartest way possible. Too many
analysts seem to think that there is only one tool in the tool
box, urging the Fed to drive the economy into a recession by
increasing interest rates. We need to think smarter, and that
starts with diagnosing some of what has gone wrong.
The pandemic wrought havoc on supply chains for food, cars,
appliances, all kinds of goods, and Russia's invasion of
Ukraine disrupted oil and gas markets. Meanwhile, giant
corporations have figured out that they can pad their profit
margins by using inflation as a cover to raise prices more than
justified, making the whole economy worse off in the process.
So what can we do? Well, first, we should do everything we
can to promote competition, to break up monopolies, and to end
the opportunities for corporate profiteering to drive up
prices. The Administration has been acting quickly, and they
have my full support on this.
Next, we need to increase supply across the board. We need
to fix supply chains and bring more production home. We also
need to invest in green technologies so that Americans are not
held hostage to the whims of oil-rich dictators.
All those are good steps, but there is another piece of the
puzzle that we should focus on. We can bring down inflation if
we increase our labor supply. More workers earning a fair wage,
with good benefits, means more productivity, and that means
more downward pressure on prices.
As we return to many of the activities we enjoyed before
the pandemic started, Americans are once again eating out,
going to the movies, and traveling, and businesses are looking
to hire. Those businesses need servers and line cooks. They
need retail clerks, hotel staff, barbers, bus drivers, you name
it. Factories that are trying to run full shifts or even a
second shift need workers. The transportation industry,
including drivers and schedulers and planners, need workers.
Small businesses, from insurance agencies to lawn care outfits,
need workers. And across the board, a tight labor market will
mean prices stay higher longer.
And that is where childcare comes in. One of the biggest
barriers that is holding back the economy right now is that
workers who want to rejoin the workforce, who want to respond
to a help wanted ad, or want to show up for a second shift
cannot do so if they do not have childcare. A Census Bureau
study released last year found that one in five working parents
left the workforce or reduced their hours solely due to
childcare and one in four women who became unemployed during
the pandemic said the reason was a lack of childcare.
Now some economists are worried that inflation could become
a longer-term problem and actually increase in parts of the
economy experiencing these worker shortages, especially if we
do not get more people into the labor force. But to get people
into the workforce, working parents need childcare, and we are
still about 117,000 childcare workers short compared to our
prepandemic levels.
Childcare providers want to hire more staff so they could
offer more slots to families and get things back to normal, but
they cannot. Most childcare providers could not afford to pay
as much as the gas station down the street paid before the
pandemic, and it is even harder now. And when they cannot hire
enough childcare workers, they cannot add more slots, and that
means they cannot serve more kids and more families. So that
means parents cannot go back to work, and that makes it harder
for businesses like restaurants and cleaning services and car
repair outfits to find enough workers to meet demand, and that
contributes to higher prices for consumers.
Fixing this problem will provide jobs for millions of
Americans, especially women. It will help small businesses and
unlock economic growth, and it will cut inflation both in the
short term and in the long term. It is a win-win-win-win
situation.
And that is why I am fighting to pass a legislative package
that includes the investments that we need to improve and
expand the availability of childcare. The proposal that the
congressional Democrats have developed will provide much needed
help for childcare providers, allowing them to hire more
workers and to offer higher quality care to more families. It
will provide direct assistance to families for childcare,
making one of a family's biggest expenses more affordable.
Universal childcare is pro-family and pro-business. This
proposal would help cut inflation by allowing millions of
Americans to return to work.
So I very much appreciate our witnesses joining us today to
discuss America's childcare crisis and how we can bring down
costs for American families.
So next, I will turn to Ranking Member Senator Kennedy for
your opening remarks.
OPENING STATEMENT OF SENATOR JOHN KENNEDY
Senator Kennedy. Thank you, Madam Chair. I want to thank
first our witnesses for being here today.
I want to make three observations. First, I agree with our
Chair that one way to reduce inflation is to increase your
labor force participation rate. The more people looking for
jobs and attending those jobs the better.
If you do not have a job, you are not healthy, you are not
happy, and you are not free. It is that simple because I think
human experience is such that most people understand that doing
is more satisfying than having. Government can give you things,
but you feel better about yourself when you can earn them and
support your family and be a meaningful part of community.
I do worry about our labor force participation rate. It has
not recovered from the pandemic. There are a variety of reasons
for that. Some of our people decided to retire, but I think
some of our people have--well, I do not know. I honestly do not
know the answer to the problem. Some say that it is our
generous Government benefits, and certainly our benefits were
increased during COVID, but those are starting to--the
increases are starting to dissipate. Logically, you should see
more people going back to work. So I think increasing the labor
force participate rate for childcare workers and for all
Americans is a win-win-win.
Number two, let me say a word about inflation, and then I
will say something about childcare. There are a number of
reasons for the inflation that we have now. Certainly, the war
in Ukraine has contributed to it. We have seen the increases in
commodity prices. We have seen the increases in agricultural
exports. I mean, both Ukraine and Russia are big exporters of
food, sunflower oil, for example, wheat. The lockdowns in China
have had a huge impact in terms of inflation.
I confess I do not understand the Communist Party of
China's approach to trying to get control of COVID. Maybe it
will work. I do not think it will, ultimately, but it has
certainly had an impact on supply chains.
In my opinion, the two biggest causes of inflation that we
are seeing right now in the United States--and this inflation
predates the war, certainly--are our loose monetary policy and,
for lack of a better way of saying it, loose fiscal policy. The
current inflation that we have now has characteristics of both
cost-push inflation and demand-pull.
And I will not go into all of the characteristics of the
loose monetary policy we have had. We had to loosen our
monetary policy in order to survive the slowdown from COVID,
but I think even the Federal Reserve, if it were represented
here today, would tell you that they did not take inflation
seriously enough, soon enough, they should have started
tightening monetary policy, they should have taken their foot
off the accelerator of quantitative easing, and they should
have raised interest rates sooner.
But I think the other part of that equation is the loose
fiscal policy, if you will. We had to spend a lot of money
during COVID to keep the economy afloat and to keep our people
afloat. We spent $7 trillion, probably more, but I think that
is a pretty accurate figure.
In my opinion, the last $1.9 trillion was not necessary,
but the President said it was an emergency COVID bill. I did
not see the emergency. The spending was going to occur over 10
years. I did not see much--of the $1.9 trillion, $80 billion
was spent on public health.
But the point is--and it was not just that bill; it was the
accumulation. Seven trillion dollars is a lot of money.
It is clear to me--I do not think this will happen, but
what we ought to do in the U.S. Congress right now is freeze
spending. Freeze all spending. I am not saying do not spend any
money. We have a budget. Do not increase that budget. That is
the amount of money we are going to spend. What is in our
budget, period. Freeze spending except for defense spending and
give the Federal Reserve the chance to do its job. Now I do not
live in La La Land. That is not likely to happen.
Right now, there is a discussion of a China bill. We need
to spend, I am told by the advocates, $250 billion to $400
billion to compete with China, which I see the bill primarily
as a subsidy for big tech, but that is just one person's point
of view.
So those are my thoughts on inflation.
Let me say a word about childcare. Yes, childcare is very
expensive, and it is a real burden, especially for middle
income and lower-income Americans, and I am all for putting our
heads together and trying to figure out how to reduce the cost.
Here is what I have never seen the wisdom of, though.
President Biden, in his Build Back Better bill, basically said
his solution to reducing the cost of childcare is to have the
Federal Government take it over, have the Federal Government
make it twice as expensive. If you are going to pay childcare
workers like you pay school teachers, you are going to spend a
lot more money. And once the Federal Government takes it over
and makes it twice, in some cases three times as expensive, we
are going to send the bill to the American people.
That does not make any sense to me. That is not a solution.
That is just prolonging the problem. And that, for what it is
worth, is my point of view.
We are in the middle of a vote. If I have to leave, I will
come back, but we have got another vote at some point.
And I did not mean to talk that long, but let me thank you
again for coming today.
[Pause.]
Senator Kennedy. Time out.
[Pause.]
Senator Kennedy. Do you want me to introduce the witnesses
or wait for Elizabeth?
[Discussion off the record.]
Senator Kennedy [presiding]. Senator Warren had to take an
emergency phone call, so we are going to wait a few minutes.
[Pause.]
Senator Kennedy. Well, shoot, I am just going to keep
talking then. I would be interested in hearing from you today
about any thoughts you have specifically on childcare, what we
can do to try to reduce the cost. I mean, it is very expensive,
and in a world where both parents either choose or have to work
in order to support their family, it does become a factor.
And I think it is something worth pursuing, and I can see
the wisdom of having the Federal Government asking the American
taxpayer to do its part if childcare is really a priority for
the Congress, and I think it ought to be.
But here is what never happens around here. I do not think
any fair-minded person believes there is not waste in the
Federal budget. There clearly is; there clearly is.
Now the Federal budget is a little bit like a cow. There is
fat on a cow, but it is not at the very end of the cow or in
the very middle of the cow. It is marbled throughout.
And so reducing spending to find money for childcare would
require us to do a lot of hard work and look at every single
program and ask if that program has metrics. Most of them do
not. And if it does have metrics, ask if the program is meeting
its metrics. That, to me, would be a rational approach.
That is not what I think is going to happen. I can tell you
I am not just going to pick on my Democratic friends. There is
no appetite for that on the Republican side. The folks on my
side talk a really good game. You know, we need to reduce
spending and get rid of the waste in spending. And you say, OK,
let us go. And they say, oh, well, not just yet.
It is like going to heaven. They all want to go to heaven,
but they are not ready to make the trip just yet, and that is
the problem we have.
And I think if we spent a reasonable amount of time taking
a look at our Federal spending, including defense--look, I am
going to say again we need to freeze spending, but we are going
to have to--in this world, we are going to have to spend more
on defense. But I do find it somewhat embarrassing that the
Department of Defense has never been audited, never been
audited.
Anyway, I have stalled long enough. The Chair is back, and
she will introduce our witnesses.
Chair Warren [presiding]. Good, good, good. Thank you very
much, Senator Kennedy. I really appreciate your comments.
So we have got a great set of witnesses here to share their
views on American competitiveness and appreciate each of you
being here today.
So first, joining us virtually, we have the Honorable Dr.
William Spriggs, who is Professor of Economics at Howard
University and Chief Economist at the AFL-CIO, as well as
former Assistant Secretary of Labor for Policy. Dr. Spriggs is
a leading expert on many critical issues for American workers,
including monetary policy, inflation, unemployment, and
inequality.
Second, we have Melissa Colagrosso, who runs a childcare
center in Oak Hill, West Virginia. Ms. Colagrosso and her
husband started this family owned business almost 30 years ago,
and today she provides family oriented childcare to over 100
children. And you can tell us if you are providing to the
children of children that you once provided care for. Is the
answer yes?
Ms. Colagrosso. [No audible response.]
Chair Warren. That is pretty terrific.
Third, we have Walt Rowen, who is the President of the
Susquehanna Glass Company and Cochair of Small Business for
America's Future. Susquehanna Glass is a family owned and
operated business which was founded in 1910 by Mr. Rowen's
grandfather and his great uncle.
Joining us remotely, we also have Kathleen Sgamma, who is
President of the Western Energy Alliance, which represents
independent oil and gas producers from the western part of the
United States.
And finally, we have Brian Riedl, who is a senior fellow at
the Manhattan Institute, focusing on budget, tax, and economic
policy.
And again, thank you all for being here with us today. I
look forward to hearing your testimony.
So, Dr. Spriggs, let us start with you. We can go in the
order I did the introductions. You are recognized for 5
minutes, and of course, you can always add more to the written
record if you wish.
Dr. Spriggs, take it away.
STATEMENT OF WILLIAM E. SPRIGGS, PROFESSOR OF ECONOMICS, HOWARD
UNIVERSITY, AND CHIEF ECONOMIST, AFL-CIO
Mr. Spriggs. Thank you very much, Chairwoman Warren. I
deeply apologize, but I have had a horrible cold over this
weekend. So I apologize that my testimony was late and that I
am not there in person, but no one wants my cold.
I want to thank you for the invitation to give testimony to
your Committee today on the issue of improving resiliency of
the American economy. I am happy to offer this testimony on
behalf of the AFL-CIO, America's house of labor, representing
the working people of the United States, and based on my
expertise as a professor at Howard University's Department of
Economics.
The size of a labor force is the key determinant of
economic growth. Even in a world where machines and computers
can do so much, in the final analysis, the determinant of the
size of the economy is the number of workers behind the
computers and machines and in front of customers to deliver
services. The size of our labor force, however, has some
variance. When wages rise or there is greater certainty of
landing a job, the labor force participation rate grows in
response.
The growth in opportunities for women for the latter half
of the 20th century fueled a rapid growth of women's labor
force participation. That dramatically increased the labor
force and potential size of our economy, and that allowed for
continued stable growth with moderate inflation. But women's
labor force participation peaked in 2000 and has stumbled
since.
The collapse in economic activity in the first quarter of
2020 in response to the COVID crisis unleashed a chain of
events that disrupted normal economic activity. The global
pandemic, unlike other shocks, had a simultaneous effect on the
world economies. Necessary precautions that delayed the spread
of the disease and successfully mitigated worse loss of life
significantly altered consumption. So while the initial impact
was a drop in all consumption, the gradual reopening of some
activity led to different patterns of consumption than before
the pandemic.
In the quick response by Congress, we were able to
stabilize the economy, and the American Rescue Plan extended
support to ensure the effects of COVID would not scar the
American economy into 2021, with the fastest growth in decades
and the strongest recovery of the labor market on record.
But we still struggle from the disruptions, and those
disruptions had disparate impacts on women. In particular,
those areas of the economy that needed to shut down were
services that involved a large share of the women's labor
force. Women were half the labor force prior to the COVID
shutdowns, and they are important, therefore, because they are
half the labor force.
The U.S. labor force participation rate for women, however,
is woefully below standard for the OECD. When we compare
women's labor force participation in the United States to our
partners, we are number six out of the top seven Nations. Only
Italy has a labor force participation rate that is lower. That
is because the other countries have the infrastructure to
increase and give a pathway for women to work.
Most notably and woefully, the United States almost does
not appear on any chart when it comes to public investment in
early childhood education. We are so far to the right in the
chart. We are so low in those investments that you almost need
a telescope to see that, oh, Cypress and Turkey are, too. The
rest of us, every other industrialized, advanced country spends
a greater share of GDP investing in their children.
And if we look at the record across a wide range of
economic research and economists of all stripes, we know that
that investment in the case of the United States our own record
on our own programs have huge returns because they lower crime,
they make healthier citizens, they make higher-earning
children, they do everything good when they return money to the
economy. So it is inexcusable.
But we rely on the market instead, and the problem is since
2000 the real wages at the middle for women has simply not kept
up with inflation of childcare costs. And that is why we need
to change our reliance only on the market because the market is
pricing women out of childcare availability.
We need to also look at issues that can rebound the
industry right now, which is still hundreds of thousands of
workers short, about 10 percent short, of where it had been.
Many still have not been able to reopen. We can change that
labor supply. We can get back to historic levels of women's
labor force participation for the United States by making the
right investments and by being wise in those investments
because they pay off.
Chair Warren. Thank you very much, Dr. Spriggs. We really
appreciate your testimony here today.
Now, Ms. Colagrosso, you are recognized for 5 minutes.
STATEMENT OF MELISSA COLAGROSSO, OWNER AND DIRECTOR, A PLACE TO
GROW CHILDREN'S CENTER
Ms. Colagrosso. Good afternoon. Thank you, Senator Warren
and Senator Kennedy and the Senate Banking Committee, for
inviting me to tell my story today.
My husband and I opened A Place To Grow in 1995. We had a
toddler and an infant, and we knew that we needed to work. I
had worked in my college years, throughout several childcare
centers, and I knew the difference that a quality early
childhood experience could make in my children's lives. There
was not one in our rural community, so our adventure began.
The challenges of opening a childcare business still are
the same today. They begin with the reality that the math does
not add up. The projections of income for a childcare business
are not enough to convince a loan officer or a potential
investor to invest in beginning a business like that. So my
husband and I, we took out a second loan on our home and
continued to pursue the goal of providing a safe place for our
children to grow while I could also earn a paycheck.
Projections fall short. The reality is the provider
payments and subsidies payments that the Childcare Development
Block Grant provides for low-income working families are not
enough to cover the cost. They do not cover the full cost of
care at all but certainly not high quality care. So if the
prices charged to families outside of that subsidy system are
meant to make up for it, but yet they outprice what workers in
the community can afford, then revenue falls short.
Let me give you an example. Sometimes you can see this
easier if you see some numbers. The subsidy rate for care for
an infant is $36 per day. The ratio for safe infant care is one
teacher per every four infants, but really best is--three is
considered best practice, but we will go with four. That means
if have four infants that are on the subsidy program the max we
would receive would be $144 for that day of care.
So now we need a teacher, and if we pay that teacher just
$10 a day, which is clearly far below a fair wage for a teacher
taking care of infants, we are facing a personnel cost of $120
a day with taxes.
But wait, we still might need to cover rent, insurance,
utilities. Maybe we need a second teacher for breaks.
So clearly, the math just does not add up.
Our business did indeed show a loss 23 out of the 25 years
of business, but our business also continued to grow to meet
the needs of the community. We increased our original capacity
from 30 to 100 children. We achieved national accreditation
from the National Association for the Education of Young
Children, and we built a strong staff with a commitment to
serve families.
Yet, we struggled to make the payroll. Often, we had to
borrow. We took out personal loans for things like building
repairs or equipment, but yet we keep going. We keep going
because working families in our community depend on our center,
and as you mentioned, Senator Warren, our children are bringing
their children back to us. We are part of the community.
When the pandemic hit, we immediately felt panic as
everyone did. I was met with parents in tears, who pleased with
us, please stay open. They needed to work, and our community
needed them to work. They needed paramedics and respiratory
therapists and doctors. They had to go to work. So our staff
made a commitment to take all precautions but continue to care
for the children.
Fortunately, some serious help came in quickly from the
Small Business Administration. We used the SBA Economic Injury
Disaster Loans to pay off our high interest debt, cover the
utilities, and make our building mortgage. That got us through
the beginning. Then the Payroll Protection Program came, and we
were able to stay open so those essential workers could rely on
us and our staff could rely on their paychecks.
Then businesses stepped in, and we had four businesses in
our little community that contacted us and asked if they could
pay us directly for the childcare of their employees because
they needed them to work and with schools closed suddenly
people had a need for childcare that may not have before.
So they made it that--finally, the long-term help came, and
that made it possible for us to reassure families that we would
not be closing. Working together, we made the math add up.
The American Rescue Plan Act, or ARP Act funds, that were
passed directly to childcare have enabled me to stay open long
term, since the beginning of the pandemic. I have been able to
maintain my commitment to high quality by supporting our
educators, maintaining our facilities, and meeting the social
and emotional needs of our children. I am currently able to
fund continuing education for our teachers--that was a
wonderful benefit--retention bonuses for all of my staff, as
well as paid sick leave, which is only smart during a pandemic
to include. I have been able to reduce caseloads for teachers
and add additional assistant teachers to provide a higher level
of care. We have an abundance of children who have suffered
trauma due to the opioid crisis, due to the COVID-19 pandemic,
as well as a vast array of special education needs in our
community.
In addition, the ARP Act funds that the State has used to
subsidize families' childcare have allowed more parents to
access childcare and go back to work. This is how the childcare
system should work.
As our parents have learned of my travels here today,
several asked that I share stories. They are desperate to tell
how much they appreciate the assistance. I have time for just
one real quick.
One grateful mom expressed, ``Having the subsidy help is a
major blessing. Without it, I am not sure I could send both of
my kids full-time. Childcare is expensive and necessary. We
would sometimes have to choose between paying our childcare
bill or our utilities or our groceries. Parents must work.''
Most families in our area ``need both parents working to make
ends meet. We have wonderful jobs,'' and yet ``we still
struggle. The kids love their teachers, and they are constantly
learning and growing from their relationships with their
teachers and friends.''
As you can hear, childcare is keeping our economy moving.
A Place To Grow's current enrollment consists of children
being cared for by grandparents, foster children, children with
special needs, low-income families, working-class families, as
well as upper-income professionals. We have quite a village,
and this village works together to help each other when there
is a need. Right now, they need our elected officials to
recognize the value of childcare. It gives them the ability to
go to work.
The business of childcare is necessary for all other
businesses. The shortage of workers being experienced by
businesses nationwide is connected to the shortage of childcare
programs.
In addition, this is an urgent need. We cannot wait to
invest in childcare because the relief funding is here right
now, but there is this looming cliff that we are about to all
fall off when they funding is gone. Without collaborative work
and Federal investments now, our village may collapse. I beg
you, please, please help us make the math add up.
Thank you for your time and consideration, and I look
forward to your questions.
Chair Warren. Thank you very much, Ms. Colagrosso. I really
appreciate it.
Mr. Riedl, you are recognized for 5 minutes.
STATEMENT OF BRIAN RIEDL, SENIOR FELLOW, THE MANHATTAN
INSTITUTE
Mr. Riedl. Thank you. Good afternoon, Chairwoman Warren,
Ranking Member Kennedy. Thank you for inviting me to
participate in today's hearing.
Inflation is currently creating significant economic pain
for American families and businesses. With the inflation rate
soaring to 8.5 percent, the highest rate in 41 years, real
wages have fallen 2.7 percent. Moody's Analytics and Penn-
Wharton both estimate that inflation is causing the average
American $300 per month. A Harris poll reveals 84 percent of
Americans are cutting back on key purchases. And the problem is
deepening every month.
Inflation has been driven by numerous factors, but fiscal
and monetary policy are the lead causes. Since the beginning of
the pandemic, the Federal Reserve has poured $4.8 trillion into
the economy, more than doubling its balance sheet. Now a lot of
this was necessary to keep the economy afloat during the
pandemic, but it was also excessive as the Fed was still buying
mortgage-backed securities as recently as last month.
The Fed's actions have worked in tandem with overly
aggressive fiscal policy, providing more than $2 trillion in
new personal benefits, an average of $16,000 per household.
Again, a healthy portion of this spending was needed and
justified by the pandemic and the economy. But policies such as
$11,400 in relief checks for the typical family of four, a
child credit expansion of $1,600 per child, a $600 enhancement
of weekly unemployment benefits, and a continued student loan
payment pause were often excessive and poorly targeted.
The Federal Reserve notes that consumer spending on an
annualized basis has leaped by $2 trillion since the pandemic
and $1 trillion since last summer. No wonder supply chains are
overwhelmed. Families have $2.7 trillion in additional savings
right now than they would have with the pandemic, which on one
level is great news, but there is not enough production in the
economy to handle the new spending, and so we are getting
inflation. And as these savings are spent down, there is going
more inflation in the pipeline.
A major culprit is last year's $1.9 trillion American
Rescue Plan. At the time of enactment, CBO estimated that the
baseline economy would operate $420 billion below capacity last
year and then gradually close the output gap by 2025. While
some stimulus was justified, lawmakers shot a $1.9 trillion
bazooka into a $420 billion output gap, and this was just weeks
after a $900 billion stimulus bill had been passed at the end
of the summer. Economics on the left and right, including
Lawrence Summers and Mark Zandi and Jason Furman, warned that
excessive stimulus would bring inflation. I think they have
been proven right.
Yet, other actions have worsened inflation. The Biden
administration has hiked tariffs on Canadian lumber and added
tariffs on building materials. It renewed President Trump's
tariffs on solar panels, extended the tariffs on Chinese
imports, and imposed tariff quotas on steel. It imposed Buy
America provisions, raising the cost of infrastructure and is
working to expand Davis-Bacon policies that raise the cost of
Government contracts. The White House is defending the Jones
Act that raises shipping costs and also allowing a higher
ethanol blend in gasoline that will raise food prices. We also
had student loan payments deferred well past the cost that
could be justified simply by the low unemployment rate.
Many of these policies can be defended and justified as
achieving other very important policy goals, but cumulatively,
they do significantly worsen inflation as well that is already
sinking under the weight of fiscal policy, monetary policy,
supply chain disruptions, and the war in Ukraine.
The Peterson Institute for International Economics
calculates that even a 2 percentage point reduction in tariffs
would lower the inflation rate by 1.3 percent and save $800 per
household annually.
Current economic factors show that inflation will not
likely recede soon by itself and may even accelerate in the
near term. There is no easy path to bringing down inflation,
but the first rule should be do no harm. That means resisting
calls for more aggressive Federal spending as well as ensuring
that businesses can operate efficiently without expensive
tariffs and overregulation because if inflation does persist
and real wages continue to fall and really harm families it is
going to soon cost jobs and create economic chaos that endanger
all the good things you want Government to do.
Thank you.
Chair Warren. Thank you, Mr. Riedl.
Mr. Rowen.
STATEMENT OF WALT ROWEN, PRESIDENT OF SUSQUEHANNA GLASS
COMPANY, AND COCHAIR, SMALL BUSINESS FOR AMERICA'S FUTURE
Mr. Rowen. Good afternoon, Chairwoman Warren, Ranking
Member Kennedy. My name is Walt Rowen, and I am the owner of
Susquehanna Glass Company in Columbia, Pennsylvania. And, I am
the Cochair of the Small Business for America's Future, a
national coalition of small business owners and leaders working
to give the small business community a voice at every level of
Government. We are committed to ensuring policymakers, like you
prioritize Main Street by advancing and just and equitable
economic framework that works for us, our employees, and our
communities.
Susquehanna Glass is a family owned business. We are in the
glass decorating business, and we have been in operation for
110 years. I look pretty good for 110, don't you think? We
employ around 60 people; 50 percent of them are women,
normally.
COVID affected most small business owners, I included. The
pandemic highlighted how reliant small businesses are on their
employees having predictable schedules and how dire the need is
for affordable and accessible childcare. I know from firsthand
experience that until there is access to adequate childcare for
workers small businesses and the country as a whole will
struggle to recover from the economic challenges presented by
the pandemic.
Many of my workers have to stay home with their kids on
snow days and school holidays because they do not have
childcare options. The pandemic, however, put a spotlight on
how dependent our employees are on care providers and schools
to earn a living. For example, one of my key employees, Alexis,
lost 2 weeks without pay during our peak season, Christmas time
last year, when her primary care provider, her father in law
was exposed to COVID and had to quarantine for 2 weeks. So
Alexis stayed home for 2 weeks because she did not have any
childcare options in my hometown. This happened multiple times
for many of my key employees over the last 2 or 3 years.
This is a reality that plays out in Main Street small
businesses across the country every day. It hurts employee
financially and hampers small business success. The impact of
childcare issues on Main Street is real. In a national survey
of more than 1,000 business owners from our network, 56 percent
of small business owners said they lost business income as a
result of childcare issues. It is no wonder 66 percent of the
small business community says they believe the Federal
Government has a role in supporting universal access to
affordable, high quality childcare.
At the beginning of the pandemic, my business shut down
from the middle of March until June of 2020, when we gradually
began to bring folks back. I am a manufacturer. I cannot work
from home. My people have to be in the factory, making the
products that we produce. While were able to make due with a
smaller workforce for a short period of time, as our backlog of
orders grew, we needed to hire more people, which just became
more and more difficult.
During the holiday season, which is my peak season, for
instance, I could have used between 10 and 15 people more to
meet my demand. It was impossible to get that type of short
term, seasonal wage mostly because of the family issues related
to the pandemic. The stress COVID put on the system clearly
demonstrated how interconnected the success of business is with
their employees' access to reliable childcare.
Because of COVID, we had to increase prices for the first
time in 5 years primarily due to supply chain interruptions but
also reduced production capacity, which connects back into the
childcare issue.
Part of the reason for this is because we simply cannot
find people at an entry-level job situation because many, many
times entry-level people are young people, often women, and
they are the people that have the children, the young children.
So as long as childcare is unaffordable, they cannot work.
When I was young, my mother stopped working to take care of
my three siblings and me until we were all in school. She
ultimately spent about 10 years out of the workforce. This
experience made her passionate as an advocate for providing
families with affordable childcare. She banded together with a
community of leaders in Columbia and formed the Columbia Day
Care Center, a nonprofit organization that offered subsidized
childcare based on a family's income. Many of our employees
took advantage of the program, but after decades of providing
great day care for our community, the organization lost its
funding and had to close in 2005, a demonstration that we need
ongoing investment to ensure communities have affordable and
professional day care options.
And the testimony we just heard from Melissa will show very
glaringly the inadequacy of the economic model in a strictly
private venture. It just does not work.
The bottom line is that employees, Main Street businesses,
and communities would all benefit from good childcare options.
Small business owners like me recognize this and support the
Federal Government's taking a role in helping to provide it. We
know that this would be a smart investment in our Nation's
economic success because we are investing in our communities
and we are investing in our people.
Small businesses create two-thirds of all the new jobs and
employ half of all workers. Advancing legislation to create
affordable childcare would bolster America's Main Street
businesses and their workers and enable them to lead all of us
to prosperity.
I would like to thank you very much for the opportunity to
testify here today on an unbelievably critical issue to all of
us. Thank you.
Chair Warren. Thank you very much, Mr. Rowen. I really
appreciate your testimony and your being with us today.
And finally, our fifth witness, Ms. Sgamma, you are
recognized for 5 minutes.
STATEMENT OF KATHLEEN SGAMMA, PRESIDENT, WESTERN ENERGY
ALLIANCE
Ms. Sgamma. Thank you, Madam Chair, Ranking Member Kennedy.
Since day one, President Biden has pursued a climate change
agenda meant to constrain American oil and natural gas
production and consumption. Starting with the cancellation of
the Keystone Pipeline, followed by the leasing ban on Federal
lands, the President was intent on restricting American oil and
natural gas, particularly on Federal lands and waters, where he
has the most control.
But a funny thing happened. Climate change policies meant
to make energy prices necessarily skyrocket achieved their
intentions. Energy prices started to rise last year, and the
Administration started to feel the heat last summer. The first
reaction was to ask Russia and OPEC to increase their
production, and the policies meant to overregulate American oil
and natural gas production continued.
When Russia and OPEC failed to heed that request, we in the
American oil and natural gas industry made the case that we
would be happy to increase production but for policies
specifically designed to prevent us from doing so. Still, the
policies continued.
Fast-forward to February with the Russian invasion, and
prices jumped even higher. The fallacy of an agenda meant to
constrain American energy production was exposed. The President
could help ease inflation by backing off these policies and
even encouraging American oil and gas production.
Energy prices are fundamental to all facets of the economy,
including to childcare as we heard earlier because childcare
workers need to drive to work like the rest of us. Very few
goods and services, if any, are made and produced in the United
States without the use of oil and natural gas. So because oil
and natural gas are so fundamental to the economy, when prices
for them are high, it creates inflationary pressures throughout
the economy.
One of the most basic ways the President could curb
inflation is to encourage American oil and natural gas.
Currently, production is down. Production of oil is down about
800,000 barrels of oil a day from the high point of 12.3
million in 2019. My industry is doing its part to bring down
gasoline prices by increasing production, and the Energy
Information Administration forecasts American producers will
increase production by up to nearly 12.5 million barrels of oil
per day by the end of the year.
We could reach that goal and even replace the 670,000
barrels of oil from Russia, that we used to get from Russia, if
the Administration would reverse course on policies such as
stopping the constraints on Federal lands and waters. There was
a lease just announced, but it was the most begrudging
announcement yet. Acreage was down 80 percent, and costs were
up 50 percent. And of course, if you increase costs for
something, you get less of it. So that clearly is intended to
get less Federal oil production.
We could reverse policies and actually approve pipelines
and other rights of way so that we can put in place the
infrastructure that enables us to capture natural gas and
reduce methane emissions.
I would suggest one of the most fundamental things is to
call off efforts to deny access to capital and lending to the
oil and natural gas industry, and one of the best ways to do
that is call off the SEC's Climate Change Disclosure Rule,
which is specifically meant to discourage American oil and gas
production.
He should back off on the regulatory overreach agenda,
which again is meant to constrain American oil and gas
production, and desist with things like the Social Cost of
Carbon, which is meant to necessarily increase energy prices.
I would suggest Congress should do its part, too, by not
advancing legislation that has been kicked around for quite
some time about taxing methane emissions. Methane is controlled
by EPA regulation. It should not also be taxed and become a new
revenue stream, to capture it and remove those emission
sources, not try to create a revenue stream.
So, appreciate the opportunity to testify today. We can
help bring down inflationary pressures throughout the economy
if we reverse course as a society and encourage American oil
and gas production. Thank you.
Chair Warren. Thank you very much. Appreciate your being
here.
So I am going to start with round one on our questions. The
American economy depends on working parents. Working parents
depend on childcare. But our childcare system is in crisis, and
that is keeping parents out of the workforce, which, in turn,
limits our productive capacity and contributes to inflation.
Even before the pandemic, over half the families with young
kids lived in childcare deserts, areas where there just simply
are not enough childcare slots. Then COVID hit, forcing
thousands of childcare providers to close their doors, many of
them for good.
Today, when families can find a childcare option, it is
often too far away, has a years' long waiting list, and costs
more than mom earns anyway. And that is a big part of why in
America women's labor force participation is so low compared
with other developed countries, and it is getting worse. Today,
women's labor force participation is lower than it was two
decades ago.
Ms. Colagrosso, you run a childcare center in West
Virginia, so let us start with a really basic question, and
then we will build on this. Why do people need childcare? What
are the main reasons that parents bring children to you?
Ms. Colagrosso. Mostly parents bring their children to
childcare because they need, or they want, to work. They want
to provide a better life for their families, so they may take
on a second job. But they want to work or pursue a career or
maybe open a small business.
Chair Warren. Yeah.
Ms. Colagrosso. For employment reasons.
Chair Warren. So these are people that are doing all the
things we want them to do.
Ms. Colagrosso. Yes.
Chair Warren. For both themselves, as Senator Kennedy says,
to have the opportunity to work and contribute to our economy,
but parents need childcare because they want to work. If
parents can and want to stay home to care for their children,
that is great, but many folks want and need to work to make
ends meet, to save for a rainy day, to set aside money for
their own kids to be able to go to college. But without
affordable childcare, parents, especially moms, have to make
excruciating decisions.
Mr. Rowen, you described your glass decorating small
business that you run. I want to see some samples before we get
out of here. I hope you have pictures.
But you were describing it--but I would just like ask it as
part of the--make sure we get all of this on the record. What
happens when your workers are not able to find a childcare
provider with an opening or at a price that they can afford?
Mr. Rowen. Well, it is an instant response. So the story I
gave you of Alexis, she is one of my production supervisors,
and her father-in-law, who was the childcare provider for her.
Lexi is one of my best employees, dependable, loyal. She has
worked for me forever. But the minute something happens with
her childcare--and we run a family business, and we say it is a
family business in lots of ways. And one of the ways that we
say is that if you are a parent and your child is sick your
place is not here at work, it is at home, so you go home and
take care of your child.
Now that does not apply to everybody, and it cannot be a
business model for everybody, but that is what happens when
parents--if a parent does not have a childcare alternative or
an option. They cannot work.
Chair Warren. Yeah. So they are just gone.
Mr. Rowen. Everything stops for them. Financially, it is a
catastrophe for them and for the business because we have
people that come in and need--fit different models that have to
be produced.
Chair Warren. Right, right. You have deadlines to meet?
Mr. Rowen. Absolutely.
Chair Warren. All right. And, Dr. Spriggs, you are an
economist who studies the labor market. When workers have to
cut hours, work part-time instead of full-time or leave the
workforce entirely because of childcare, does that mean the
lack of affordable childcare is reducing labor force
participation? I just want to build all the blocks here.
Mr. Spriggs. It absolutely does, and because women are half
the labor force, even if we have an effect on only 4 percentage
points of women's labor force participation, that is 2
percentage points more of a total labor force. That is a lot of
workers. That is a lot of output. And that changes the equation
even for the Federal Reserve in considering: Are we in a tight
labor market? Should we start slowing the economy?
Chair Warren. So let me ask you on this because I want to
draw this point out. About what is the broader impact on our
economy, on our productive capacity, when there is reduced
labor force participation caused by a lack of affordable
childcare?
Mr. Spriggs. So there are a couple of layers. One we
instantly, of course, have a smaller economy because we have
fewer workers. That means we have fewer people to put behind
machines, provide services. Second, once you have shrunk the
economy, now it is going to grow from a smaller base. And then
third, you have what the Fed has to consider.
If Congress does not build the infrastructure to get
everybody to work, then the Fed's hands are kind of tied. They
have to slow the economy before we would want them to slow the
economy. So the length of our expansions become shorter, so we
get a smaller economy, slower future growth, and a slower--a
smaller future economy, and we slow the length of our
expansions. That is lose, lose, and lose.
Chair Warren. And, Dr. Spriggs, just so I am sure, we are
having just a little bit of trouble understanding you, and I
just want to make sure I have got this. How many workers are we
leaving on the sideline compared to our peer countries, the
ones that actually invest in childcare, and what is the impact
of leaving those workers on the sideline on our GDP? Do you
have some numbers around that?
Mr. Spriggs. There are a couple of estimates from anywhere
from 1 percent of GDP to 1.5 percent of GDP.
Chair Warren. Wow.
Mr. Spriggs. If you think about Canada, to our north, where
they do make the investments in their children that we do not,
this means a much higher labor force participation rate for
their women. Anywhere from 10 percent would be a good estimate.
And so we are talking about hundreds of millions of dollars
that we are leaving on the table because we are not utilizing
our workers to their maximum.
Chair Warren. So is the estimate I--like I said, we are
having a little trouble hearing you on our end. Is the estimate
that about 5.2 million missing workers in America compared with
other countries that provide childcare assistance? Is that
about the right number?
And I think I heard you say 1 percentage point to a
percent-and-a-half in terms of the impact on the GDP. Do I have
those numbers right?
Mr. Spriggs. Yes. And the 500,000, the number of workers
that are missing, that is kind of conservative because we are
only looking at prime-age workers and, of course, a lot of
women who need childcare are below the age of 25, and so we are
missing some workers who are in the age group that actually
need childcare because their children are the youngest. So that
is a conservative estimate of how many workers we are missing
compared to Canada.
And I am using Canada because it is right next door. We
share the same sort of history, timeline, and we have many of
the same companies, many of the same industries.
Chair Warren. Right.
Mr. Spriggs. It just shows the difference we could have if
we had the right policies.
Chair Warren. Wow. So think about that. That is really
powerful, Dr. Spriggs; 5.2 million missing workers--and we have
actually graphed that here--and nearly a percentage point off
the GDP. And that percentage point really matters. You know,
over the last decade, average annual GDP growth has been about
2 percentage points. One point higher compounds over time, and
it would mean both a stronger economy and more opportunities
for millions of people.
Right now, Americans are getting hit by record shortages
and price increases. It is clear that we need to increase the
supply of everything, from food to cars to health care
supplies. So, Dr. Spriggs, let me ask you one more question
about this. If we invested in childcare and unlocked all of
this labor supply and productive capacity, would that help
prevent further inflation?
Mr. Spriggs. It will reduce the pressure for inflation in
the future, and that is just being the cold-hearted view of the
labor force. Economists know that investing in American
children--all of the programs that we have had have a high rate
of return because in the future they reduce costs for the
Government on the order of eight to nine times because the
investment in the children also pays off. Those children are
heathier. Crime goes down. They own homes. They are less likely
to be poor and need Government transfers. Those children are
also part of the benefit in the equation.
Chair Warren. Oh, thank you very much, Dr. Spriggs. You
know, we are talking about how without childcare millions of
parents cannot work. I know this all too well. I nearly quit
school, and later I nearly quit my first big full-time job all
because I could not find childcare. I would not have made it
without help from my Aunt Bea [phonetic], and thank you, Aunt
Bea.
But not everybody has an Aunt Bea to make this work or a
grandparent who is able to make all of it work, and that is why
it is so critical that we invest in high quality, affordable
childcare for every American family. It is going to lower the
cost for those families and help make our economy more
productive, and with childcare to unlock productive capacity,
it is going to help prevent shortages and cut back on price
increases across the economy.
Thank you.
I apologize to my fellow Members here for going long, but I
am so glad to have these experts with us.
Senator Kennedy.
Senator Kennedy. Mr. Rowen, what do you propose--is it
Rowen? I cannot see.
Mr. Rowen. Yes, Rowen.
Senator Kennedy. I am sorry.
Mr. Rowen. Yes, it is Rowen.
Senator Kennedy. What do you--your employees have trouble
finding affordable childcare?
Mr. Rowen. That is correct.
Senator Kennedy. What do you think we ought to do about the
problem?
Mr. Rowen. Well, as I said in my introductory opening,
there have been solutions over the years. My mother was
involved in an organization that created a nonprofit childcare
operation. It worked on pay-by-need. It did have a--it used
funds from the United Way, which were charitable funds.
But I also believe that it needs more Government funding to
keep the economic model for as Melissa was explaining.
Senator Kennedy. Do you think the American taxpayer needs
to subsidize childcare?
Mr. Rowen. I believe, if correctly explained, the American
taxpayer would understand that an investment by the Government
in good childcare would dramatically improve the economic
condition of all of our small businesses and corporate
businesses to the point where we would have a bigger, larger
workforce which would be more productive, more stable, and
everybody would benefit. So the value of the investment--as a
business owner, I understand investment. The value of that
investment would be far greater than the cost of it today, and
if explained properly to the American public----
Senator Kennedy. I get it. How many employees do you have?
Mr. Rowen. I run between 50 and 75 to 85.
Senator Kennedy. OK. What does a starting employee make in
your company?
Mr. Rowen. Two years ago, $9 an hour.
Senator Kennedy. How about----
Mr. Rowen. Today, about $12 an hour. Minimum wage in
Pennsylvania is $7.25.
Senator Kennedy. So the starting pay for a person in your
company----
Mr. Rowen. Today, when they walk in.
Senator Kennedy. ----is $12 an hour.
Mr. Rowen. That is what I have to be paying to get somebody
to come in.
Senator Kennedy. Well, of course, they cannot afford health
care. I mean, childcare.
Mr. Rowen. Are you insinuating I pay too little?
Senator Kennedy. How much money did you take out of your
company last year? What was your salary?
Mr. Rowen. My personal salary was $100,000.
Senator Kennedy. OK. Did you take out any money--are you an
LLC?
Mr. Rowen. I am a Subchapter S Corporate.
Senator Kennedy. OK. You are a Sub S. So you took out
some--in addition to your salary, you had to pay taxes. So
presumably, you took out profits. How much did you take out
there?
Mr. Rowen. My company lost over $300,000 last year.
Senator Kennedy. OK. So your total take from your company
was $100,000.
Mr. Rowen. Actually, my total take--because as a Subchapter
S my business income is my income.
Senator Kennedy. Right.
Mr. Rowen. Was negative $200,000.
Senator Kennedy. OK. So you had a--is that aberrational, or
is that----
Mr. Rowen. I hope so. Yes, it is.
Senator Kennedy. Well, prepandemic, how much did you take
out?
Mr. Rowen. My average over, say, a 25-year period of time
for my company has been somewhere between--the profit for the
company that is then to be paid taxes on has been somewhere
$45,000 and maybe 150 to $200,000.
Senator Kennedy. OK. Well, look, I am not trying to pick on
you, and congratulations on having a family business.
Let me just give you this point of view. Of course,
childcare is too expensive. Everybody up here wants less
expensive childcare. Everybody up here supports children and
prosperity, too.
Here is a rational way to go about it, probably not the way
Congress would go about it, but it is a rational way. There are
some things you cannot quantify. You cannot quantify the self
well-being of having a job. I do not care how much money
Government gives you. You cannot quantify the feeling of self
worth that a person receives from being gainfully employed and
supporting his or her family and being a meaningful part of his
community. Follow me here.
Mr. Rowen. Senator, I would like to add one thing.
Senator Kennedy. Sure.
Mr. Rowen. I have been in my business for over 45 years. I
am in a small business community. I know every one of my
employees, and I can quantify with them when I look them in the
eye what a good job means.
Senator Kennedy. Right.
Mr. Rowen. And I watch them cry when they cannot come to
work because they do not have childcare.
Senator Kennedy. I understand. So there is a part of this
you cannot quantify, in my opinion. I meant what I said
earlier; a person without a job is not healthy, that person is
not happy, and that person is not free. And, yeah, Government
can give you a cell phone, but you are going to feel much
better about yourself if you earn the money to buy a cell
phone. OK?
There is a part of this you can quantify. A rational
approach, therefore, would be to say, OK, if Government
subsidized the cost of childcare in America, what would that
mean in terms of GDP? How many additional people would go to
work? How many fewer lost ``my child is sick'' days would we
have in America? What would be the impact on productivity? All
that can be quantified.
And you take that number, the cost, or the benefit rather,
and you compare it to the cost, and if the benefit
substantially outweighs the cost you would go forward.
The question would then become: How do you pay for it?
Well, if we say this is a priority, a meaningful place to start
if you respect taxpayer dollars--and we all do--is to say, OK,
we are going to comb through our budget. We are going to
basically scrub our budget before we just go borrow more money
and try to find out what in our current budget is a lower
priority than affordable childcare. We never do that. We never
do that. I mean, we just do not do that. Neither side does
that.
When we put together a budget, Mr. Rowen, we do not do it
like you do at your business. Our fight over budget is how much
extra money we are going to give to the bureaucracy every year.
We do not have any metrics.
In the real world, if you are doing a lousy job, you get
fired. In Government, if you are doing a lousy job, it must
mean that you do not have enough money, so we give you more
money. That is the way it works.
Let me just finish my thought. So that would be a rational
play.
And then once we really try to scrub the budget and find
the money, then if it is not enough, given our other competing
priorities, we could talk about, well, is it something that we
ought to add on an operating--as an operating expense and
borrow money. That would be a rational way, but that is not
what is before us.
What is before us--let me just take the President's Build
Back Better plan. You know what the childcare provisions in
that would cost? Seventy-five billion dollars a year. What do
you think that is going to do to inflation?
And that is not $75 billion that we could find by scrubbing
the budget. That is not touching the budget. Nobody wants to
touch the budget. We just want to add to it.
We do not even have 5 percent of $75 billion. We have got
to go borrow that. Do you see the problem?
I do not think anybody has--at least I do not have--a
problem with the end result, with the objective here, but the
answer is not just to say, oh, OK, we will just add $75 billion
a year extra to our operating account based on the assumption
that all the money we are spending right now is well spent and,
yeah, we will just borrow more. That is not the answer. It was
not the answer before inflation.
But let me tell you what will happen right now if we go
pass Build Back Better. And there are some good things in Build
Back Better. You know the impact of that on inflation? You
think 85 percent inflation is high? Get ready for 15 percent
inflation. And the problem.
Anyway, that is the end of my speech.
Mr. Rowen. You mentioned that in small business we do not
do things like Government, and that is very true. I might have
lost money last year, but then make a decision this year to
spend $50,000 on a piece of equipment that I cannot afford. So
I have to borrow for it, but I know that $50,000 worth of
equipment will make $300,000 worth of equipment--or, products,
that I will make $50,000 in profit. So I will pay for that
piece of equipment in 1 year and then own that equipment for 10
years and make $50,000 every year after that. So I make
$500,000 because I made an investment that is the correct one
at the right time.
It is not----
Senator Kennedy. I will bet you one of the first things you
do, though, is you do not just assume that you need to go
borrow the money to buy that equipment. The first thing you do
is sit down with your operating budget and see if you cannot
find a place to cut. That is the first thing you do.
Mr. Rowen. We do that all the time, absolutely. And I agree
with you.
Senator Kennedy. We do not. We do not, and that is the
problem.
Chair Warren. Thank you.
Senator Reed. Well, thank you very much, Madam Chair.
Ms. Colagrosso, we are looking at a situation where
childcare is extraordinarily expensive for everybody. And the
irony is that the childcare workers were only making minimum
wage or sometimes slightly above that and we would insist, and
we do by regulation, that they be well trained, that they be
well screened, et cetera. So how do you manage to support your
staff while you are providing affordable care like that to
children?
Ms. Colagrosso. Prior to the pandemic, it was definitely
difficult. People that work in childcare have another incentive
most of the time in reality, just like I did. I went into the
business a little bit on the selfish side. I needed a place for
my own children. And also, we just enjoy the work.
So there is an expectation that we are not there for the
paycheck. I often say to people when I am interviewing, if you
are here for the paycheck, you can go down the road to the
convenience store and make a better paycheck, and not to say
that that is OK, but that is the reality.
What we have been amazed about is that when we got the
pandemic relief funds and I could pass those bonuses on and
help with education and help with sick time, that how
stabilized the staff came and more professional. It becomes a
career, and that is what we really want to fund.
I understand that that is an issue of expense, in some
communities much higher expense than other communities, but
ultimately, we want the quality to be there and support those
staff that do stay in the industry.
Senator Reed. What strikes me is in Rhode Island if you
have, for example, two teachers in the public school systems
and they have three children they really cannot afford
childcare because it is, up there, probably that is about
$50,000 a year, and I am not exaggerating.
Ms. Colagrosso. Yeah.
Senator Reed. Mr. Spriggs, thank you. You bring a--excuse
me, I am going to get my glasses on, sir.
Mr. Rowen, thank you. You bring a very practical, very
pragmatic view to this issue, and from listening to you I think
you have made the point quite clearly that this really is an
investment. It is an investment that will pay back over the
life of the child, which is probably 75 years, and in fact if
we do not make that investment, there is real potential that
that child could end up being unemployable because they do not
have the proper social development and educational development.
And I think you are absolutely right. So I do not know if you
want to further comment.
Mr. Rowen. Well, thank you. Yes, I do believe it is an
investment. It is not just an investment in a child. It is an
investment in a family. It is an investment in America's
business community, and it is an investment to all of us for
our future.
Senator Kennedy has said many times--and I 100 percent
agree with him--that the value of work exceeds the value of
being given something that you did not earn.
What I think about--the way I think about childcare is I--
and as I said earlier, we employ young people because they are
entry-level people. That means they are either the first time
they are working or they are coming back into the workforce,
especially for women. Women are having children when they
young. They are out of the workforce for a certain period of
time, and then they want to come back into the workforce.
One of the first things we want to do is help that woman,
that new reentered worker, learn how to be a great worker. If
we can build a good workforce, we will do extremely well. We
will do well as businesses, and we will do well as an economy.
But the most important aspect of a good worker is
dependability. They come to work on time. They come day after
day, month after month, and if they like what they do, they
will stay forever. You cannot have a dependable worker if they
have to go home every time their child is sick or they can
never come in because they do not have an affordable childcare
alternative. It is very simple.
Senator Reed [presiding]. Well, thank you very much. We all
believe in the value of work. And it is those people who do not
earn a living and do not work that is interesting, but I just
wonder if in that case why some of my Republican colleagues
want to repeal the estate tax because that simply is giving a
lot of people who never earned the money the money. I cannot
understand it, but that is an aside.
Let me, on behalf of the Chairwoman, recognize Senator
Smith.
Senator Smith. Well, thank you very much--I was going to
call you Chair Reed--Senator Reed, and thank you so much to our
panelists for being here today. And, I want to thank Chair
Warren for holding this important hearing.
You know, I just got back from 2 weeks in Minnesota, and I
can tell you every place I went in the State and every sector
of the economy and every region of the State people were
talking about--and especially businesses, Mr. Rowen, were
talking about the linked challenges of workforce and childcare,
and they totally see that link. And what they are telling me
is, Tina, we have a supply problem. We do not have enough
spots. We do not have enough places for the children and the
families that need them. This is especially a challenge in
rural communities, both the childcare shortage as well as the
workforce shortage, again, connected.
And we also know--and I am looking at you, Ms. Colagrosso--
that the costs are extremely high, but at the same time
childcare centers and their workers are literally struggling to
survive, struggling to support their families. As you said,
this is a labor of love. This is not a get rich quick or slow
scheme, to run a childcare center.
Ms. Colagrosso. Right.
Senator Smith. It is a labor of love, but it needs to work
financially in order for us to have any kind of a supply of
childcare in this country.
And of course, we have not been talking about this
specifically, but we know what the data tells us about the
connection between brain development and opportunities for kids
to have exposure to early learning, and we know that those
opportunities are much less likely to be there for poor kids
and kids of color. So this is a moral and ethical issue as well
as an economic issue which we have been talking about today.
So I mean, I know from what I have heard from my
constituents in Minnesota that our childcare system is
fundamentally broken for parents, for children, and for
businesses that are looking to recruit and retain talent as
well as for providers.
So I want to just say, though, Senator Kennedy is not here,
and I appreciated, Mr. Rowen, him directing his questions to
you as a businessperson. I started out my career in business as
well.
And I am going to come to you in just a minute, Dr.
Spriggs, but I do just want to point out and correct for the
record that the childcare provisions, like the other provisions
in the bill formally known as Build Back Better, were paid for.
They were not paid for by borrowing, which is actually how we
paid for the Infrastructure and Jobs Act that was much more
based on borrowing. It was paid for, and I think that that is
important to put out there, if you believe that that borrowing
is somehow fueling inflation. I believe that the thing that is
fueling inflation is much more to do with the shortage of
supply of so many things, as Senator Warren said.
But, Dr. Spriggs, let me just come to you if I could. The
U.S. Chamber of Commerce has noted that--and you noted this as
well--that women are participating in the labor force at the
lowest rate since the 1970s. In the spring of 2020, 3.5 million
mothers left their job, driving the labor force participation
rate for working moms from around 70 percent to about 55
percent. Now in Minnesota, we have one of the highest
participation rates for women in the country, and we saw our
numbers go down as well. The number is improving, but it has
not completely rebounded.
So, Dr. Spriggs, could you just talk to us a little bit
about this? Women are half the workforce, half the labor force.
What impact on economic productivity does the lack of childcare
have on women in the workforce? And maybe--because Senator
Warren addressed this a bit, maybe you could focus specifically
on the challenges particularly for low-wage workers in
particular.
Mr. Spriggs. Thank you, Senator, for the question. And just
like Mr. Rowen was saying, this is an investment and it is an
infrastructure investment. We would not turn to a business and
say, ``The bridge fell off. It fell apart. Our roads have been
destroyed by a flood. We want small businesses to pick up the
bill.'' We expect that Government will provide the roads so
that workers have a way to get to the job.
Now we have the same problem. Women need labor force
infrastructure. They need the Government to have the
infrastructure that allows them to participate on a regular
basis.
So when workers are absent, when workers just simply cannot
apply for a job, this shrinks our labor force. It means that
businesses cannot get the people they want or they cannot get
reliable work, and that hurts their productivity. They either
do not have workers who have the skill or the teamwork ability
because they have not been there every day or they are not
dependable. That hurts as much as if we had unreliable
transportation. It is the way for someone to get to work.
And that is how we have to look at this investment, and it
pays off. It meets the barrier of: Is this Government
spending--and economists have studied this to death----
Senator Smith. Right.
Mr. Spriggs. ----does this Government spending pay for
itself? Does it get us more workers, and does it improve the
productivity of our children, who are our future workforce?
Senator Smith. Exactly. This is----
Mr. Spriggs. And this does both.
Senator Smith. This is the business concept of return on
investment, and you are articulating it just exactly right.
Let me ask you this, though, some people say, ``Well, if
childcare is important--and I get that we need to have
childcare, but I question whether we have to subsidize it.'' I
mean, Dr. Spriggs, do we subsidize kindergarten? Do we
subsidize third grade?
Mr. Spriggs. Yes. This is all in how one wants to wrap our
heads around it. When you look at it from the perspective of an
investment in our children, this is not really subsidizing. We
know--we have way too much literature that proves--early
childhood education helps children when they reach
kindergarten. It makes a difference in their performance, and
it is long-lasting. It is not just a one-off. It is long
lasting, which is why we know from our studies of a long term
impact we get workers who are more reliable when they are
adults, they are healthier when they are adults, they are less
likely to commit crime when they are adults.
All of this pays off, and so it is worth it to invest in
our children like the rest of the world does. Our Nation, as I
pointed out in my testimony, is not on the chart. We are not
even on the chart. We only have Cypress and Turkey that invest
less in their children.
Senator Smith. Yeah.
Mr. Spriggs. Everybody else gets it. Everybody else gets
that you have to invest in your own children to get them to be
productive, ready for school, ready to start. And we know that
there is a difference in the children who get that preparation,
and in the context of this hearing, we know there is a
difference in those companies that can get workers and can get
workers who are reliable.
Senator Smith. I think you are making a point that I want
to just put a fine point on, which is that in addition to all
of the issues we have talked about, you know, family stability,
family income, you know, development of our children, that this
is really a global economic competitiveness issue and that we
are at a disadvantage if we are not making these investments in
our children and in the capacity of people to work in this
country as other countries are.
I want to just--since Chair Warren has not returned and I
have a little time, I am going to--actually, I want to talk a
little bit with Ms. Colagrosso.
In my home State of Minnesota, people are returning to
work, wages are going up, and that is a good thing. And we are
doing everything we can to focus--Democrats are doing
everything we can to focus on lowering costs for families.
We have discussed how the lack of affordable childcare--
this is something that the Minneapolis Federal Reserve has
written extensively about--has forced many parents to drop out
of the workforce. In fact in Minnesota, people say that
childcare is seen as a bigger challenge even than housing,
where the cost is also going up really substantially.
So, Ms. Colagrosso, you talked in your testimony about the
challenges of hiring and retaining staff. And I know that we
should just point out that there are existing Federal----
Ms. Colagrosso. Oh, yeah.
Senator Smith. ----and State programs to help families
support childcare, you know, pay for childcare. Can you just we
have got the Child Care Development Block Grant program. We had
the American Rescue Plan dollars to help stabilize childcare
centers during the crisis. There is State level programs.
Could you just tell us a little bit about what it is like
to deal with those different Federal programs? Do they meet the
need? What level of complexity do they provide--do they create
for you and for the families that you are working with?
Ms. Colagrosso. It absolutely takes a lot of work to
understand the programs and to pull them together. I know there
are a lot of providers and certainly home-based providers and
community providers in small, rural areas that do not--are not
able to access those funds. They do not have the ability to
research the programs and pull them together in the way that I
did. In a lot of ways, that was why a lot of them have closed
down when the pandemic happened.
No one was reaching out and saying, here is the resources
for you. It is going to be OK. We are going to get through it.
But--and I know the families--I hear a lot of families that
do not even realize the subsidies are out there, and I have had
families who have lost their subsidy payment because of the
complexity of paperwork, not turning something in they did not
realize they needed to turn in, improperly filling out a piece
of paper, and then they lose their subsidy. So we do what we
can to help, and our State has done what they can to help
providers, but it is a complex system of pulling funds
together.
Senator Smith. And what impact would it have on the
families that you provide if there was a more sort of cohesive,
robust, you know, well-funded system to help them afford
childcare?
Ms. Colagrosso. Yeah, I think any money we can put into it
robust is very exciting, but obviously, it would be a large
change for small businesses in our area, for families. This is
an investment, as we have all said. And making it a simple
system and a robust system will answer a lot of problems, I am
sure.
Senator Smith. Thank you. Thank you. And I am going to
pause the hearing. I am going to recess the hearing until Chair
Warren returns, and so with that, this Committee will be in
recess.
[Recess.]
Chair Warren [presiding]. Sorry. We are all trying to do
votes, and that gets us coming and going. I apologize for
taking people's time. I still have a couple of series of
questions I would like to ask about if we can do that.
One of the focuses on the provider perspective. So we have
talked about how childcare is a critical pillar of our economy.
It lets parents go to work, knowing that their babies will be
cared for. For decades though, the United States has just
underinvested in childcare, essentially, crossing our fingers
and hoping that families will find a way to figure this out,
but families cannot do it because, as you have explained, Ms.
Colagrosso, the numbers just do not add up.
In many States, the cost of childcare outstrips the cost of
college. Many parents are already priced out of childcare,
which makes it cheaper for them to stay at home, and those
parents who were scraping together enough money to pay for
childcare simply cannot afford to pay another dollar more.
Meanwhile, childcare providers are clearly not getting
rich. The fees may choke parents, but they are barely enough
for childcare providers to make it from 1 month to the next.
And one way that childcare providers have kept this going is by
paying childcare workers the absolute minimum that they can,
not because they are trying to be mean to childcare workers but
because it is the only way they can try to hold this together.
And the consequence is childcare workers leave every year. Even
before COVID, about 30 percent of childcare workers were
leaving the field every year.
Add this up, and we just have a massive shortage of
childcare that is getting worse and getting worse and getting
worse.
So, Ms. Colagrosso, you have run a childcare center in West
Virginia for almost 30 years. I know that you know this issue.
Are you able to serve all of the families who come to you
looking for care?
Ms. Colagrosso. No. We have waiting lists for every age
group, all the way from infants up through school age. Some of
those are months long. On a regular basis, I have somebody call
who has a job, new job to start, and we cannot help them, so
they have to turn down the job.
Chair Warren. So the need is vastly outstripping the supply
in your area, and we know the numbers show that is true all
around the country. So let me ask the question. Could you just
raise wages so that you could provide more childcare slots?
Ms. Colagrosso. Yeah, I would love to raise wages because
ultimately that is--you know, the people that work for me
deserve that, but I could not raise the wage of the subsidy.
That takes somebody at a higher pay grade than me.
Chair Warren. OK. So let me just stop and make sure
everybody understands what you are talking about. If the family
is of low or moderate income, and the pay--the Government,
either State or Federal Government, is helping subsidize, that
amount is already fixed.
Ms. Colagrosso. Yeah. We do not get to decide that amount.
That is a daily rate.
Chair Warren. That is for us to do.
Ms. Colagrosso. For contract, right?
Chair Warren. OK.
Ms. Colagrosso. And so then if I had to raise the families
that are outside of subsidy that much, I could not raise it
enough to influence my employees' wages and still have people
be able to afford it.
Chair Warren. Right.
Ms. Colagrosso. People in our community would not even be
able to afford the childcare at all, which is some of what you
are seeing across the country.
Chair Warren. Right.
Ms. Colagrosso. People just say, I cannot afford it, so I
will just stay home.
Chair Warren. Yep. And let me ask you just one more just to
give us a little more flavor around this. How do the wages you
pay compare with other entry-level jobs in your region?
Ms. Colagrosso. They are much lower, unfortunately. I
cannot pay as much as Sheetz. That is the convenience store
down the road. They are paying $18 an hour for entry level.
Before the pandemic, I hired in entry-level employees at
minimum wage, which is $8.75 an hour in West Virginia. Now,
just as Mr. Rowen mentioned, we have to offer a little bit
more, so I am offering $12 an hour, but I am really not able to
afford that. So when the relief money is gone, that will not
happen. That is just because I have some relief money to get
people in the door.
Chair Warren. So working at a local convenience store pays
more than you can afford to pay the people who are taking care
of our children.
Ms. Colagrosso. Correct.
Chair Warren. You know, I think it is clear that childcare
workers across this country are shamefully underpaid, and the
providers are barely staying afloat. This is a broken system,
and the only way it is going to get better is if the Government
steps up.
So let me ask about one more piece in this. West Virginia
has a preschool funding program. So, Ms. Colagrosso, that means
you get significant Government funding for one part of your
business. So does that mean that you can afford to pay those
teachers more and that you are able to retain them?
Ms. Colagrosso. Absolutely. In West Virginia, we do a
contracted collaborative program, so childcare and public
school work together. And so I do get that public education
dollar, and that goes directly into the staff, the employees.
So I pay that teacher and that aide equivalent to the
kindergarten teachers in our country.
Chair Warren. And does that mean you have more teachers and
less turnover?
Ms. Colagrosso. Just for that classroom.
Chair Warren. Just for that.
Ms. Colagrosso. Right. Unfortunately, the others, infants
and toddlers and 2-year-olds and 3-year-olds, they do not see
that additional funding, but my Pre-K----
Chair Warren. So then let me ask about that. What would it
mean if you have Federal assistance to be able to pay your
staff equivalently for taking care of 3-months-olds or 2-year-
olds?
Ms. Colagrosso. It would be an incredible improvement in
the childcare program and the quality. The number one
determiner for infants and toddlers of quality is the same
person, consistency, low turnover. They need to make those
bonds with the people that are caring for them and the families
need those bonds, but infants especially and toddlers.
Chair Warren. Yeah. Thank you very much. Thank you very
much for the work you do. It is critically important work, and
I just want to see us support it as we go forward.
I would also like a follow-up, if I can, Mr. Rowen. You
were having a conversation with Senator Kennedy about--who
seemed to agree that childcare is very important, but the
question is how do we pay for it. So I just want to ask you a
little bit more about that.
Mr. Rowen, in 2020, Google paid an effective tax rate of
13.5 percent, and in that same year 55 other highly profitable,
giant corporations paid zero in Federal corporate income taxes.
So let me just ask, do you pay more than that?
Mr. Rowen. Pretty consistently, yes. And all small
businesspeople that are running a successful business and
making profit will be paying a higher rate than the 13 percent
that Google was paying.
Chair Warren. Or the zero percent that the 55 are paying.
Mr. Rowen. Or the zero percent, right.
Chair Warren. Yes.
Mr. Rowen. And the only way that makes any sense if those
corporations are virtually on the verge of going out of
business and not making any money. But how are they doing that
year after year after year?
Chair Warren. Yeah.
Mr. Rowen. I think there was a study by the SBA that pegs
the average small business rate of taxation at somewhere around
19, almost 20, percent. So right there, with Google and average
small businesspeople, you have got what? A 7-percent
difference. That just does not sound equitable or fair to me,
and I do not think--if most Americans would know those numbers,
they would agree.
Chair Warren. Yeah, it does not sound fair----
Mr. Rowen. It is not.
Chair Warren. ----because it is not fair. Exactly right.
So one of the proposals that Democrats have put on the
table is a 15 percent minimum tax just for corporations that
make more than a billion dollars in profits, and that is in
their book reporting, right, not in how many loopholes they
work through on this. It turns out that that would raise about
$320 billion. So let us just hold that number. If I had Katie
Porter's whiteboard, I would put that right up here.
And then I would add under it how much we could save if we
actually invested in the IRS. And the IRS could go after the
wealthy tax cheats, not just poor people whose numbers do not
match up between their W-2 forms and what they were able to
report, where someone has made a mistake, but if they actually
spent their time on the folks who are engaged in the most
sophisticated of the tax dodges and simply enforced current
law, not just fancy changes in law. The best estimate on that
from the Treasury Department is that would raise another $400
billion. This is over 10 years.
So $320 billion plus $400 billion gives us about $720
billion. I think that estimate that Senator Kennedy was using
for the full-scale, all the way, permanent version of childcare
was about $75 billion a year. So it looks like to me we are not
quite there on those numbers, but very, very close just on two
things. Enforce the current tax laws and put a 15 percent
minimum tax for the billionaire corporations, and we could pay
for childcare.
And that is without having to talk about how you pay for
childcare by increasing GDP by a percentage point, how we pay
for childcare by bringing, as Dr. Spriggs suggested, about 5.2
million new workers back into our economy.
Mr. Rowen.
Mr. Rowen. One of the things I always say is different
between the small businessman, businessperson, and a corporate
businessperson is I live and work and am in visual contact with
my employees all the time. I just know them. They know me. So I
am much more invested in their personal lives and understand
the consequences of the decisions that I make or that the
business makes as we go forward.
Corporate people are not quite like that. Now I am not
taking that completely away from them. But what you just talked
about, if you had a minimum 15 percent to the corporations as--
--
Chair Warren. More than a billion dollars.
Mr. Rowen. More than a billion.
Chair Warren. This is not for small business, yeah.
Mr. Rowen. You probably will get pushback from the
corporate people that run the business, but I will also tell
you that the corporate--the people that work in those
corporations would go, thank you----
Chair Warren. Yeah.
Mr. Rowen. ----because they will finally get the same
benefits that we are talking about that filter down all of our
young families that effectively would be benefiting from this
change.
Chair Warren. Well, Mr. Rowen, you give us the perfect way
to wrap this up. This is about the role of Government in
helping make this economy work for everyone. Right now, it
works great if you are a corporation that is making more than a
billion dollars in profits and paying nothing in taxes, but it
is not working so great if you are running a small business and
your employees cannot find childcare. It is not working so
great if you are trying to run a childcare business. And, it is
not working so great if you are one of the parents who cannot
get into the workforce or cannot take a full-time job or cannot
take an extra job because you cannot find the childcare to put
you in a position to do that.
And that is our job here in Congress. We could do a lot
better in making this economy work, not just for a handful at
the top but for everyone.
I want to thank you all for being here today. I want to
thank those who joined us online for being with us.
And with that, Senators who may wish to submit questions
for the record, questions are due 1 week from today, Tuesday,
May 3rd. For our witnesses, you will have 45 days to respond to
any questions. Thank you all again.
This hearing is adjourned.
[Whereupon, at 4:23 p.m., the hearing was adjourned.]
[Prepared statements and responses to written questions
supplied for the record follow:]
PREPARED STATEMENT OF CHAIR ELIZABETH WARREN
This hearing will come to order.
Good afternoon, and welcome to today's hearing on ``Childcare and
Other Policy Tools to Combat Bottlenecks and Inflation''.
Now, we've heard a lot about inflation over the last 6 months, and
rightfully so. When prices go up--whether it is because of corporate
price gouging, or because of pandemic-related disruptions in the supply
chain, it hurts hard-working American families.
We need to get inflation under control--and we need to do it in the
smartest way possible. Too many analysts seem to think there's only one
tool in the toolbox: urging the Fed to drive the economy into a
recession by increasing interest rates.
We need to think smarter, and that starts with diagnosing some of
what's gone wrong. The pandemic wrought havoc on supply chains for
food, cars, appliances--all kinds of goods. And Russia's invasion of
Ukraine disrupted oil and gas markets. Meanwhile, giant companies have
figured out that they can pad their profit margins by using inflation
as a cover to raise prices more than justified--making the whole
economy worse off in the process.
So, what can we do?
Well first, we should do everything we can to promote competition,
to break up monopolies, and to end the opportunities for corporate
profiteering to drive up prices. The Administration has been acting
quickly, and they have my full support on this.
Next, we need to increase supply--across the board. We need to fix
supply chains and bring more production home. We also need to invest in
green technologies so that Americans are not held hostage to the whims
of oil-rich dictators.
All those are good steps, but there's another piece of the puzzle
that we should focus on. We can bring down inflation if we increase our
labor supply. More workers, earning a fair wage with good benefits,
means more productivity and that means more downward pressure on
prices.
As we return to many of the activities we enjoyed before the
pandemic started, Americans are once again eating out, going to the
movies, and traveling--and businesses are looking to hire. Those
businesses need servers and line cooks, they need retail clerks, hotel
staff, barbers, bus drivers, you name it. Factories that are trying to
run full shifts--or even a second shift--need workers. The
transportation industry, including drivers, schedulers, and planners,
needs workers. Small businesses--from insurance agencies to lawn care
outfits--need workers. And across the board, a tight labor market will
mean prices stay higher longer.
And that's where childcare comes in. One of the biggest barriers
that is holding back the economy right now is that workers who want to
rejoin the workforce--who want to respond to a help-wanted ad or want
to show up for a shift--can't do so if they don't have childcare. A
Census Bureau study released last year found that one in five working
parents left the workforce or reduced their hours solely due to
childcare. And one in four women who became unemployed during the
pandemic said the reason was a lack of childcare.
Now some economists are worried that inflation could become a
longer-term problem and actually increase in parts of the economy
experiencing these worker shortages, especially if we don't get more
people into the labor force. But to get people into the workforce,
working parents need childcare, and we're still about 117,000 childcare
workers short compared to our prepandemic levels.
Childcare providers want to hire more staff so they can offer more
slots to families, and get things back to normal--but they can't. Most
childcare providers couldn't afford to pay as much as the gas station
down the street paid before the pandemic, and it's even harder now. And
when they can't hire enough childcare workers, they can't add more
slots, and that means they can't serve more kids and families.
So that means that parents can't go back to work. And that makes it
harder for businesses like restaurants, and cleaning services, and car
repair outfits to find enough workers to meet demand. And that
contributes to higher prices for consumers.
Fixing this problem will provide jobs for millions of Americans,
especially women. It will help small businesses and unlock economic
growth. And it will cut inflation, both short term and the long term.
It is a win-win-win-win situation.
That's why I'm fighting to pass a legislative package that includes
the investments that we need to improve and expand the availability of
childcare. The proposal that the Congressional Democrats have developed
will provide much-needed help for childcare providers, allowing them to
hire more workers and to offer high quality care to more families. It
will provide direct assistance to families for childcare, making one
families' biggest expenses more affordable.
Universal childcare is pro-family and pro-business. This proposal
would help cut inflation by allowing millions of Americans to return to
work.
So, I very much appreciate our witnesses joining us today to
discuss America's childcare crisis, and how we can bring down costs for
American families.
______
PREPARED STATEMENT OF WILLIAM E. SPRIGGS
Professor of Economics, Howard University, and Chief Economist, AFL-CIO
April 26, 2022
Thank you, Chair Warren, for this invitation to give testimony
before your Committee today on the issue of improving the resiliency of
the American economy. I am happy to offer this testimony on behalf of
the AFL-CIO, America's house of labor, representing the working people
of the United States; and based on my expertise as a professor in
Howard University's Department of Economics.
The size of our labor force is the key determinant of economic
growth. Even a world where machines and computers can do so much, in
the final analysis, the determinate of the size of the economy is the
number of workers behind the computers and machines and in front of
customers to deliver services. The size of our labor force however has
some variance. When wages rise, or there is greater certainty of
landing a job, the labor force participation rate grows in response.
The growth in opportunities for women, from the latter half of the 20th
Century fueled a rapid growth in women's labor force participation.
That dramatically increased the labor force and potential size for our
economy. That allowed for continued stable growth with moderate
inflation. But women's labor force participation peaked in 2000 and has
been stumbled since then.
The collapse in economic activity in the first quarter of 2020 in
response to the COVID crisis unleashed a chain of events that disrupted
normal economic activity. The global pandemic, unlike other shocks, had
a simultaneous affect on the world economies. Necessary precautions
that delayed the spread of the disease and successfully mitigated worse
loss of life, significantly altered consumption. So, while the initial
impact was a drop in all consumption, the gradual reopening of some
activity led to different patterns of consumption than before the
pandemic. The greatest loss of jobs was in services that required
customer interaction and so the brunt of job losses fell on women. Some
labeled this a ``shecession,'' because women took the deepest hit,
compared to prior downturns that were cyclically sensitive and
dominated by the loss of jobs in sectors dominated by men like
construction and manufacturing. We are in the midst of continuing to
recover in many of those sectors.
It took the quick decisive steps of the Families First Act and the
CARES Act to stabilize the economy. These initial steps addressed the
obvious shortcomings of an inadequate unemployment insurance system,
the lingering effects of the Great Recession that left household
balance sheets woefully weak and revealing the lack of resiliency among
households to income shocks, the lack of paid sick leave, the
difficulties of main street businesses in accessing liquidity even in a
time of low interest rates, and the fragility of State and local
government infrastructure. These necessary pieces did not anticipate
the subsequent waves of COVID and how long the support proved to be
needed. So, fortunately, the American Rescue Plan extended support to
ensure the effects of COVID would not scar the economy. The American
economy ended 2021 with its fastest growth in decades and the strongest
recovery of the labor market on record.
But we began this year with the world still struggling with COVID
and all the disruptions that have now revealed the scars and fragility
of a global system. The continued disruptions to supply chains plague
all Nations. All advanced economies face higher rates of price changes
than in the pre-COVID era. This is a natural functioning of markets;
price pressures appear every time there is a shock to supply and is not
related to differences in fiscal responses.
There are specific reasons the U.S. measure of prices has run
higher than for other countries. The U.S. product markets have been
criticized for having higher levels of concentration than in Europe
because of weaker antitrust enforcement. (Covarrubias, Gutierrez, and
Philippon 2019) (Gutierrez and Philippon 2018) (Baker 2003) (Alemani,
et al. 2013) (Karabell 2020) Higher levels of concentration make it
easier for firms to raise prices, but also make an industry more
vulnerable to supply shocks should one firm's workforce be hit harder
by COVID.
Most other Nations' response to COVID was the aggressive use of job
retention schemes. These programs directly subsidized firms keeping
their workforces during COVID and lowered the frictions being
experienced in the United States of trying to recruit workers that were
sent to their best devices. Among OECD Nations, the U.S. unemployment
rate spiked significantly higher than for other countries, and while
U.S. unemployment rates have settled near their pre-COVID level as they
have on average for the OECD, total labor hours in the U.S. still have
not recovered as they have on average in the OECD--this reflects lower
labor force participation rates in the U.S. The U.S. has low female
labor force participation because it lacks the infrastructure of
policies to support the care economy present in most OECD Nations.
Protecting individuals, through beefing up the coverage and generosity
of unemployment benefits helped to facilitate shifting workers to
sectors that faced rising demand during the initial stages of the COVID
crisis but has now slowed the recovery of those sections that had
initially faced the greatest spikes in unemployment. And the lack of
protection from the virus, and weak paid sick leave coverage in the
United States, meant several industries faced greater losses of workers
than other OECD countries. (Chen, et al. 2021) (Bureau of Labor
Statistics 2021) Fewer workers died in other OECD countries.
Policies do matter in getting labor force participation to rebound.
During COVID, problems in safely educating our children caused
disruptions to public schools operating. The effect of schooling and
childcare significantly impacted hours worked by parents, exacerbating
the gender gap in hours worked. (Garcia and Cowan 2022) (Collins, et
al. 2021) Many women have recovered from that initial shock. But, the
more pronounced impacts have been on women holding lower wage jobs,
both because their jobs involve working in-person, and the struggle to
balance the need for childcare and that many of their employers are
still recovering. Because of their disproportionate representation in
nursing care and other frontline positions, Black women have suffered
more noticeably because of disparate exposure to COVID-19. (Goldin
2022)
Comparing the United States to other countries, clearly policy
matters. The fragility of our economy, and women's labor force
participation, was a problem before the COVID crisis. Prior to the
COVID crisis, women were near half the U.S. payroll. So, their
importance to the economy is crucial. We must have smart policies to
have a strong economy that can compete globally. The U.S. is only
slightly above the OECD average for prime age (25 to 54 years old)
women's labor force participation, and ranks sixth among the G7
Nations, only ahead of Italy and very noticeably behind our neighbor
Canada. Figure 1 shows this for 2015 in the pre-COVID era.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
There are glaring gaps in the labor force infrastructure of the
United States when it comes to women's participation. These include
being the only Nation without paid maternity leave among OECD
countries, a lack of job protections like paid sick leave, and no
Federal policies to assure access to early childcare. Our overreliance
on the market is hurting women because the median wages of women are
not keeping pace with childcare prices. Some have estimated the cost to
the potential of U.S. economy of inadequate childcare infrastructure on
lower women's labor force participation or reduced work hours as
costing $67 billion a year. (Belfield 2018) A report from McKinsey
estimates just the cost of loss income to workers alone, and thus a
direct loss of economic capacity, from reduced labor force
participation as half of that cost. (Dua, et al. 2021)
Not coincidentally, 2017 OECD comparative data show that public
investment in childcare and early education, as a percentage of GDP is
virtually the lowest in the United States among advanced economies. The
U.S. invests an embarrassing amount compared to the average for the
OECD. Investments in early childhood education, in the United States
context, have proven to show a very high rate of return, not just
because they could increase women's labor force participation, but
because of the improved productivity and positive outcomes for
children. The extensive research shows reduced expenditures on crime,
improved health outcomes, reduced poverty in adulthood that lowers
Government transfer costs, increased earnings in later life that
increases tax revenue. In all, a dollar invested in early childhood
education returns almost ninefold reductions in future costs. (Lynch
and Vaghul 2015) (Hendren and Sprung-Keyser 2019) (Rolnick and
Grunewald 2003) (Garcia, et al. 2016) (Cannon, et al. 2017) Figure 2
shows the U.S. as the outlier. The consensus is that the same is true
in other countries, and a key reason other countries make these
investments, though at much higher levels than in the United States.
(OECD n.d.)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Because of very low public investment in our children, the U.S.
relies heavily on the market to determine our childcare investment.
Figure 3 shows the relationship between the growth in real (adjusting
for inflation) median hourly wages of women and the Consumer Price
Index (CPI) for childcare. Since 2000, the gap between the rising costs
of childcare and real wages is driving a deep wedge for working women.
The price of childcare is rising faster than the price of other goods
and causing stress for the typical working mother to choose decreases
in other items (clothing, rent, food, etc.) and childcare. For others,
it means being chased out of the labor market.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The crisis in affordability of childcare shows in data in every
State. Child Care Aware of America, a network of childcare resource and
referral agencies, track the price of childcare to assist families in
locating family services. Based on a standard set by the U.S.
Department of Health and Human Services, childcare should not exceed 10
percent of family's budget to be affordable. According to their
analysis, in 2020, in only six States was the average price of a year
of childcare less than 10 percent the median household income. But,
even for many families in those States, childcare was a burden. For
instance, they report that in Louisiana, where center based childcare
costs the equivalent of 9.5 percent of median household income, single
parents pay 42 percent of their income on center-based childcare, and
married parents with two children who are at the poverty line pay 65.3
percent of their income. (Child Care Aware of America 2022)
The affordability crisis has created a huge challenge in getting
childcare centers reopened. The price gap still creates stress for
workers, but also as centers look for workers. This gap in recovery has
ripple effects throughout the economy because the shortage of center-
based care prevents workers in other sectors from getting work. Figure
4 shows the slow recovery of employment in childcare centers, as
reported by the U.S. Bureau of Labor Statistics.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The coalition Child Care Relief surveyed availability of childcare
providers in July 2021 and showed high percentage of centers were still
closed. For instance, in Massachusetts, they reported that 44 percent
of centers were still closed. In Maryland, 18 percent were still
closed. (Children Care Relief n.d.)
The debate now, before the Federal Reserve Open Market Committee is
determining how big is the U.S. labor force. Their current stated view
is that we have reached the capacity of the labor market. They may well
concede that if we had better childcare infrastructure labor force
participation of women would be bigger, but it is up to Congress to
address that structural barrier, not them. The intent of their current
policy is to slow economic growth because they believe continued growth
at the current pace will exacerbate inflation by pushing demand for
workers beyond the supply of labor.
So, actions by Congress to fail to make investments in early
childhood education goes beyond failing our children. It also goes
directly to how we set economic policy, the rate of growth we can have
and the size of our economy. An economy that is larger benefits us all.
And as future growth paths are exponential, a smaller economy today
compounds a disadvantage in the future. Which as in the current
situation ignites a debate to slow growth, perhaps prematurely.
But there is also the issue of addressing the depths of the issues
in addressing the continued crisis in childcare that has been
developing this century. The current crisis has made clear the low pay
and low working conditions of childcare workers makes it difficult for
the industry to compete for good workers, or any workers. This must be
addressed to keep turnover rates low, and the industry's ability to
recruit and retain the best workers.
A large share of workers do not work standard 9-to-5 jobs. While
close to 75 percent of workers start their work between 6 a.m. and 10
a.m., the rest have hours that make finding childcare difficult. And
helping working parents on these alternate schedules can add to the
flexibility of workers.
In our construction infrastructure, it is key to make jobs
available for working women, too. Ensuring that large shares of
positions are open to apprenticeships will help increase the supply of
construction workers and ease labor bottlenecks now and for the future.
But that would also mean ensuring designing childcare into construction
infrastructure projects.
The United States has a lot of fiscal space to make proper
investments. The investment in our children is always the best, wisest
and most long running investment we can make as a Nation. But it is
also important, that America make the investment in labor force
infrastructure, create pathways to get to a larger workforce and larger
economy. As we age as a Nation, the sustainability of Social Security
and Medicare depend on the worker to dependent ratio. As we age, we
need to make investments to increase the number of workers. And to
ensure our economic expansions can last longer we need to maximize our
labor force. In 2000, we showed we can have a much higher share of
workers. We should not lose that vision for lack of foresight to make
the right investments.
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______
PREPARED STATEMENT OF MELISSA COLAGROSSO
Owner and Director, A Place To Grow Children's Center
April 26, 2022
Thank you, Senator Warren and the Senate Banking Committee for
inviting me to share my story today.
I am the owner and director of A Place To Grow Children's Center in
Fayette County, WV. My husband and I opened A Place To Grow in 1995. We
had an infant and a toddler. We both needed to work to provide for our
children. I had worked during my college years in several childcare
centers, and I knew the difference a high-quality early education
program could make in our children's lives. No such programs existed in
our rural community. So, our adventure began.
The challenges of opening a childcare business began with the
reality that the math does not always add up. Projections were not
always enough to convince loan officers and potential business funders
to invest. We secured a 2nd mortgage on our home and continued to
pursue our goal of providing a safe, educational place for our children
to grow.
The reality is the provider payments or subsidies funded through
the Child Care and Development-Block Grant (CCDBG) for low income,
working families are not sufficient to cover the full cost of high-
quality childcare. And if the prices charged to families outside of
subsidy are too high and out of reach in our community, our revenue
falls short.
Let me give you a basic example of the challenges we face:
The subsidy rate for the care for infants is $36 per day.
The ratio for safe infant care is 1 teacher for every 4 infants,
and 3 is the best practice.
That means that we receive $144 per day in subsidy payments.
If we pay the teacher only $10/hour, which is already below a fair
wage, we are likely facing a personnel cost of $120, with taxes
included.
Wait . . . do we need to pay rent? How about utilities? Insurance?
An additional teacher for breaks or long shifts?
Quite simply, the math does not add up.
Our business did indeed show a significant loss 23 out of the first
25 years in business. But our business also continued to grow to meet
the needs of the community.
We increased our original license capacity from 30 to 100
children.
We achieved accreditation from the National Association for
the Education of Young Children.
We built a strong staff with a commitment to serve
families.
Yet, we struggled to make payroll and often had to borrow for
things like building repairs or equipment. We keep going because
working families in our community depend on our center.
When the pandemic hit, we immediately felt panic. I was met with
parents in tears, pleading with us to stay open. Parents needed to
work. Our community needed them to work. Our staff made a commitment to
take all precautions but continue to care for our children.
Fortunately, some help came quickly from the Small Business
Administration. We used the SBA Economic Injury Disaster loans to pay
off our high interest debt and cover utilities and our building
mortgage. Then, the Payroll Protection Program came. We were able to
stay open so those essential workers could rely on us, and our staff
could rely on their paychecks. Then businesses stepped in. We had 4
businesses contact us to arrange to pay us directly for their
employee's children to attend. Finally, longer term relief came in the
form of relief funding to stabilize families and childcare programs.
This made it possible for us to reassure families that we would not be
closing.
Working together made the math add up.
The American Rescue Plan Act or ARP Act funds passed directly to
childcare have enabled me to stay open. I've been able to maintain my
commitment to high-quality childcare by supporting our educators,
maintaining our facilities, and meeting the social and emotional needs
of our children. I am currently able to fund continuing education for
our teachers, retention bonuses for all staff, as well as paid sick
leave--something that is smart for health reasons during an ongoing
pandemic. I have been able to reduce caseloads and add additional
assistant teachers to provide a higher level of care for the abundance
of children who have suffered trauma due to the Opioid crisis, the
COVID-19 pandemic, as well as a vast array of special educational
needs.
In addition, the ARP Act funds that the State has used to subsidize
family's childcare have allowed more parents access childcare and then
go back to work. This is how the childcare system should work.
As our parents have learned of my travels here today, several asked
that I share their stories. I have time for one.
One grateful mom expressed ``Having the subsidy help is a major
blessing. Without it I am not sure that I could send both of my kids
full time. Childcare is expensive and necessary. We would sometimes
have to choose between paying our childcare bill or utilities or
groceries. Parents must work. Most need both parents working to make
ends meet. We have wonderful jobs and we still struggle. The kids love
their teachers, and they are constantly learning and growing from their
relationships with their teachers and friends.''
As you can hear, childcare keeps our economy moving.
A Place To Grow's current enrollment consists of children being
raised by grandparents, foster children, children with special needs,
low-income families, working class families, as well as upper income
professionals. This village works together to help each other when
there is a need. Right now, they need our elected officials to
recognize the value of childcare which gives them the ability to work.
The business of childcare is necessary for all other businesses. The
shortage of workers being experienced by businesses nationwide is
connected to the shortage of childcare programs.
In addition, this is an urgent need. We cannot wait to invest in
childcare. The relief funding is there today, but with a looming,
quickly approaching end. Without collaborative work, and Federal
investment now, our village may collapse.
Please help us make the math add up.
Thank you for your time and consideration.
______
PREPARED STATEMENT OF BRIAN RIEDL
Senior Fellow, The Manhattan Institute
April 26, 2022
Good afternoon, Chairwoman Warren, Ranking Member Kennedy, and
Members of the Subcommittee. Thank you for inviting me to participate
in today's hearing.
Inflation is currently creating significant economic pain for
American families and businesses. With the inflation rate soaring to
8.5 percent--the highest rate in 41 years--real wages have fallen 2.7
percent. Moody's Analytics and Penn-Wharton estimate that inflation is
costing the average household $300 per month. A Harris poll reveals
that 84 percent of Americans are cutting back on key purchases. And the
problem is deepening every month.
Inflation has been driven by numerous factors, but fiscal and
monetary policy are the lead causes. Since the beginning of the
pandemic, the Federal Reserve has pumped $4.8 trillion into the
economy, more than doubling its balance sheet. Some of this was
necessary to keep the economy afloat, but it was excessive, as the Fed
was still buying mortgage-backed securities as recently as last month.
The Fed's actions have worked in tandem with overly aggressive
fiscal policy providing more than $2 trillion in new benefits--an
average of $16,000 per household. Again, a healthy portion of this
spending was justified by the pandemic and the economy. But policies
such as $11,400 in relief checks for a typical family of four, a child
credit expansion as high as $1,600 per child, a $600 per week
enhancement of unemployment benefits, and a continued student loan
payment pause were often excessive and poorly targeted.
The Federal Reserve notes that consumer spending (annualized) has
leaped by $2 trillion since the pandemic began and $1 trillion since
last summer. No wonder supply chains are overwhelmed. Families also
have $2.7 trillion in savings exceeding what would have been expected
without the pandemic, yet the economy has not produced trillions more
in goods and services for them to purchase. And as families spend those
savings, consumer spending will surge even higher--and drive even more
inflation.
A major culprit is last year's $1.9 trillion American Rescue Plan.
At the time, the Congressional Budget Office estimated that the
baseline economy would operate $420 billion below capacity in 2021, and
then gradually close that output gap by 2025. While some stimulus was
justified, lawmakers shot a $1.9 trillion bazooka at a $420 billion
output gap. And this was just weeks after the December 2020 stimulus
law poured in $900 billion. Economists on the left and right, such as
Lawrence Summers, warned this excessive stimulus would bring inflation.
They were right.
Yet other actions have also worsened inflation. The Biden
administration has hiked tariffs on Canadian lumber, and added tariffs
on other building materials. It renewed President Trump's tariffs on
solar panels, extended the tariffs on Chinese imports, and imposed
tariff quotas on steel. It imposed Buy America provisions raising the
cost of infrastructure, and is working to expand Davis-Bacon policies
that raise the cost of Government contracts. The White House is
defending the Jones Act that raises shipping costs, and allowing a
higher ethanol blend in gasoline that will raise food prices. It has
also deferred student loan payments well past the point justified by
the unemployment rate.
Many of these policies can be defended as achieving other important
policy goals. But cumulatively, they significantly worsen an inflation
problem that is already sinking under the weight of fiscal policy,
monetary policy, supply chain disruptions, and the war in Ukraine. The
Peterson Institute for International Economics calculates that even a
2-percentage point reduction in tariffs could lower inflation 1.3
percent and save $800 per household.
Current economic factors show that inflation will not likely recede
by itself and may even accelerate in the near-term. There is no easy
path to bringing down inflation, but the first rule should be to do no
harm. That means resisting calls for more aggressive Federal spending
as well as ensuring that businesses can operate efficiently without
expensive tariffs and overregulation. Because if inflation persists and
real wages continue to fall, it will soon cost jobs and create economic
chaos that endanger all the good things you want Government to do.
Thank you.
______
PREPARED STATEMENT OF WALT ROWEN
President of Susquehanna Glass Company, and Cochair, Small Business for
America's Future
April 26, 2022
My name is Walt Rowen, owner of Susquehanna Glass in Columbia, PA,
and Cochair of Small Business for America's Future--a national
coalition of small business owners and leaders working to provide small
businesses a voice at every level of Government. We're committed to
ensuring policymakers prioritize Main Street by advancing a just and
equitable economic framework that works for small business owners,
their employees, and their communities.
Susquehanna Glass is a family owned glass decorating business that
has been in operation for 111 years. We employ 60 people, 50 percent of
whom are women. The cascade of problems prompted by COVID-19 affected
most small business owners, myself included. One pressing issue in
particular that has been underscored by the pandemic is how reliant
small businesses are on their employees having predictable schedules--
and how dire the need is for affordable and accessible childcare.
Women, especially, have been forced out of the labor pool due to the
lack of access to affordable childcare. I know from firsthand
experience that until there is access to adequate childcare for
workers, small businesses, and the country as a whole, will struggle to
recover from the economic challenges presented by the pandemic.
I see the impacts of inadequate childcare options at Susquehanna
Glass all the time. Many of our workers have to stay home with their
children on every school snow day and school holiday because they can't
afford daycare, or don't have childcare options. The pandemic, however,
truly shone a light on just how dependent our employees are on care
providers and schools to earn a living. For example, one of my key
employees, Alexis, lost 2 weeks without pay during our peak season last
year when her primary childcare provider, her father-in-law, was
exposed to COVID and had to quarantine. Alexis had to stay home because
there were not affordable or available childcare options. This happened
multiple times with many of our key employees. This is a reality that
plays out in Main Street small businesses across the country all the
time. It hurts employees financially and hampers small business
success.
The impact of the lack of affordable childcare on Main Street is
real. In a national survey of 1,060 small business owners by Small
Business for America's Future, 55 percent of small business owners said
the lack of affordable, high-quality childcare for employees has had a
negative impact on their business. Fifty-two percent said they
experienced employee turnover as a result of a lack of affordable
childcare; 56 percent said they've lost business income as a result of
childcare issues; and 45 percent said they've avoided hiring an
employee due to scheduling complications. These numbers, combined with
recent U.S. Bureau of Labor report showing that just 39,000 additional
women participated in the workforce in January compared to 1 million
men--highlight the need for a bipartisan solution to help support the
backbone of our Nation's economy--Main Street entrepreneurs. It's no
wonder 66 percent of small business owners said they believe the
Federal Government has a role in supporting universal access to
affordable, high-quality childcare.
Indeed, my business continues to see the impact of inadequate
childcare. At the beginning of the pandemic, we shut down from the
middle of March until June of 2020, when we gradually began to bring
folks back. While we were able to make due with a smaller workforce for
a short period of time, we needed to hire to address our backlog of
orders. But we couldn't get all of our people back for a number of
reasons--one of the main ones being childcare. During the holidays, for
instance, I could have used 10-15 more people to maximize production
and income, but couldn't find all the people we needed because of
childcare and other issues. The stress COVID put on the system clearly
demonstrated how interconnected the success of my business is with my
employees' access to affordable, reliable childcare.
One step we've had to take is to increase prices on our products
for the first time in 5 years because of supply-chain disruptions and
reduced production capacity. Part of the reason for this is because we
simply have had a hard time finding people to fill positions due to the
lack of affordable childcare options.
As the father of three and a small business owner, I understand the
challenges that come from running a business and taking care of a
family. And as one of four children growing up in a small community, I
personally witnessed the importance of good childcare. When I was
young, my mother stopped working to take care of my siblings and I
until we were in school. She ultimately spent 10 years out of the
workforce. This experience made her a passionate advocate for providing
families with affordable childcare. She banded together with community
leaders to open the Columbia Day Care Center--a nonprofit organization
that offered subsidized childcare based on a family's income. Some
Susquehanna Glass employees took advantage of the program, but after
decades of providing affordable and accessible daycare, the
organization lost its funding and had to close in 2005--a demonstration
that we need ongoing investment to ensure our communities have well
resourced and affordable childcare options for families.
The bottom line is that employees, Main Street businesses, and
communities all require affordable, accessible, and reliable childcare
to thrive. Small business owners like me recognize this, and as
multiple Small Business for America's Future small business surveys
have shown, they see and support the Federal Government taking a role
in helping to provide it. We know this would be a smart investment in
our Nation's economic success. Small businesses create two-thirds of
all new jobs and employ half of all workers. Advancing legislation to
create affordable childcare would bolster America's Main Street
businesses and their workers and enable them to lead us all to
prosperity.
I'd like to thank each of you for the opportunity to testify today
on such a critical issue for hard working small business owners across
the country.
______
PREPARED STATEMENT OF KATHLEEN SGAMMA
President, Western Energy Alliance
April 26, 2022
Since day one, President Biden has pursued a climate change agenda
meant to constrain American oil and natural gas production and
consumption. Starting with the cancelation of the KeystoneXL pipeline
followed a week later by the leasing ban, the President was intent on
restricting American oil and natural gas. On Federal lands and waters
where the Federal Government has the most control, he has pledged
eliminating it altogether.
But a funny thing happened. Climate change policies meant to make
energy prices ``necessarily skyrocket'' achieved their intentions.
Energy prices started to rise last year, and the Administration started
to really feel the heat last summer. The first reaction was to ask
Russia and OPEC to increase their production in June. The policies
meant to overregulate American oil and natural gas production
continued.
When Russia and OPEC failed to heed that request, we in the
American oil and natural gas industry made the case that we would be
happy to increase production, but for policies specifically designed to
prevent us from doing so. Still the policies continued.
Fast forward to February of this year when Russian tanks rolled
across the border of Ukraine and prices jumped even higher. The reality
of Europe's and the United States' reliance on the stable sources of
reliable, 24/7 energy that oil and natural gas provide became crystal
clear. The fallacy of an agenda meant to constrain American energy was
exposed. Rather than backing down on policies purposefully meant to
hinder American oil and natural gas, the White House pivoted to blaming
my industry for high energy prices.
The President could help ease inflation by backing off these
policies and even encouraging American production. However, we have
seen few meaningful signs, other than rhetorical, that a reversal is in
the cards. Just last week, lease sales were announced for the first
time in the 15 months, but it was the most begrudging announcement
possible. The Interior Department was at pains to emphasize that the
sales are only happening because of a court order last June. Ten months
later, the department has whittled the acreage down by 80 percent and
increased the cost by 50 percent. Limiting access and increasing the
royalty rate by such a substantial percentage will have the intended
effect: when you tax something more, you get less of it. The
Administration continues to show it is not serious about increasing
production, reducing energy prices, and controlling inflation.
Energy prices are fundamental to all facets of the economy. Very
few goods and services, if any, are made and provided to consumers
without the use of oil and natural gas. Anything manufactured requires
oil and natural gas for materials and component feedstock, industrial
energy, electricity, and transportation. Online ordering, processing,
and delivery of any good or service and the entire supply chain relies
on a vast information technology network based on the computer chip,
itself made from petroleum. Nearly every business that claims to use
100 percent renewable electricity, besides those in places like the
Pacific Northwest or Western New York were there is sufficient
hydropower, is engaged in greenwashing and at best pays renewable
energy credits as dispensation for using reliable energy from oil,
natural gas, coal, and nuclear to keep operations running.
Because oil and natural gas are so fundamental to the economy, when
prices for them are high it creates inflationary pressures throughout
the economy. One of the most basic ways the President could curb
inflation is to encourage American oil and natural gas production. Even
if you ignore a year of steadily rising oil prices and blame Putin for
today's high prices, what better way to bring them down than by
increasing American production and displacing lost Russian imports?
Currently, American oil production is down about 800,000 barrels of
oil per day (bopd) to 11.5 million from the high point of 12.3 million
in 2019. \1\ My industry is doing its part to bring down gasoline
prices by increasing production. The Energy Information Administration
(EIA) forecasts American producers will increase production by nearly
12.5 million bopd by the end of 2022. We could reach that goal and even
help replace the 670,000 bopd we previously imported from Russia if the
Administration could reverse course, such as:
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\1\ ``Short-Term Energy Outlook'', EIA, Table 4a, April 2022. 2019
data from EIA historical production statistics.
Move forward with leasing and permitting on Federal lands.
There are currently 4,579 permits to drill awaiting approval.
While there are also 9,000 outstanding approved permits to
drill, there are many factors that cause companies to wait to
drill those wells, if at all. The biggest factor is the
uncertainty in the permitting process which compels the
acquisition of permits often years before they are needed. A
stable system that isn't beset by litigation and bureaucratic
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delays would reduce the need to build up large inventories.
Approve timely Rights of Way (ROW) for natural gas
gathering lines. A drilling permit is not the only Government
approval required before a well can be drilled. ROWs can take
years to acquire before companies can put in natural gas
gathering systems. With the pressure not to flare from
regulators and investors, most companies cannot drill before
gathering lines are in place. Timely approvals of ROWs would
enable companies to develop sooner.
Call off efforts to deny capital and lending to the oil and
natural gas industry. Activist investors, encouraged by an
Administration intent on expanding its financial regulatory
powers, have worked to debank and decapitalize the industry.
Many companies, particularly the small independents who drill
the majority of wells, are having difficulty acquiring the
credit and capital necessary to develop. By rescinding the
Security and Exchange Commission's overreaching climate change
disclosure rule and calling off other bureaucratic efforts to
deny financing to the industry the President could send a
strong signal to the market that investments in oil and natural
gas are safe and new production would move forward.
Approve pipelines such as the KeystoneXL and natural gas
pipelines that supply Liquefied Natural Gas (LNG) terminals.
The Administration has worked with anti-oil-and-gas activists
to slow pipeline infrastructure. Without pipelines to move the
oil and natural gas produced, wells cannot be developed. Ensure
the rescinded Federal Energy Regulatory Commission (FERC)
natural gas pipeline certification policy is not resurrected
through rulemaking.
Back off the regulatory overreach agenda which is intended
to increase costs and reduce production. For example, the
Department of the Interior is planning regulation to increase
leasing costs and royalty rates and EPA is undergoing methane
regulation that would shut down potentially hundreds of
thousands of the low-producing wells that provide 8 percent of
American production. \2\ The uncertainty of all the new red
tape puts a damper on new investment and development today,
especially on Federal lands where the burden is highest.
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\2\ ``Percentage Depletion: Economic Impact of Its Elimination'',
Energy and Industrial Advisory Partners on behalf of the National
Stripper Well Association, 2021.
Desist with the Social Cost of Carbon (SCC). There is no
legal mandate for it and It is specifically meant to increase
the cost of reliable energy. A SCC can be used to make
regulation that is otherwise upside down in a cost/benefit
analysis and make it seem like it is beneficial, even if it
increases the cost of the energy that meets 80 percent of
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Americans' energy needs.
Congress should do its part too by not advancing
legislation to tax methane emissions. The methane fees that
have been proposed would amount to a tax on natural gas, as
measuring the small leakages targeted by the fee is technically
infeasible and hence, the tax would necessarily be levied on
production volumes or basin leak-rate averages. Further, the
fee would be unprecedented, as emissions are already controlled
by EPA regulation designed to identify leaks, fix them, and
remove the emissions from the atmosphere, not attempt to
measure and create a revenue stream out of them.
Western Energy Alliance encourages the Administration and Congress
to work together with my industry to reverse many of these policies.
Together we can increase American production and help control
inflation.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR KENNEDY
FROM BRIAN RIEDL
Q.1. The Biden's COVID relief bill, the American Rescue Plan,
included $2 trillion in Federal stimulus. Economists, left and
right, agreed that this stimulus would accelerate inflation. As
you know, the Federal Reserve is doing all that in can to cool
down this economy by raising interest rates.
What should Congress and the Administration do to do their
part to combat inflation?
A.1. The first rule is do no harm. That means avoiding big
spending bills, such as Build Back Better, that would worsen
inflation. It is also another reason to stop the student loan
payment moratorium that is inflationary and no longer justified
by the unemployment rate. From there, Congress should address
the Biden (and Trump) administration's price-hiking tariffs, as
well as the Buy America, Davis-Bacon, and Project Labor
Agreement regulations that are raising prices in the economy
and hiking costs for the Federal Government.
Q.2. Would you consider the BBB emergency spending? Will the
BBB help tamp down the rate of inflation Americans are
witnessing? Or ease supply chain bottlenecks? Expand
Government?
A.2. There is nothing in Build Back Better that meets the legal
standard of emergency spending (which is that it be
``necessary, sudden, urgent, unforeseen, and temporary'').
Rather, its proposals are drawn from the longstanding liberal
wish list. And BBB would of course worsen inflation, as
evidenced by the $791 billion net cost in the first 5 years as
scored by CBO. Build Back Better would theoretically be
modestly disinflationary after the fifth year when the
legislation runs surpluses, but that unrealistically assumes
that Congress would just let the benefit provisions expire
within a few years. In fact, the economists at Penn-Wharton
calculate that Build Back Better would--if extended--lead to a
significant (and permanent) increase in the price level. The
bill expands Government by trillions of dollars when Washington
already faces $112 trillion in baseline deficits over the next
three decades, and does nothing to ease supply chain
bottlenecks.
Q.3. The Democrats have proposed a one-size-fits-all approach
to childcare. They have overregulated childcare small
businesses, forcing them to jump through hoops or close their
doors to meet their standards.
Do these proposals increase the supply of childcare
services to working families?
A.3. Advocates claim that this proposal will increase the
supply of childcare services for families through Government
subsidies. However, the Democratic plan limits which providers
will be eligible for subsidies (such as excluding most
churches), which may drive nonsubsidized providers out of
business. Furthermore, the expensive compliance and ``living
wage'' regulations would raise costs for providers and make it
more difficult to stay afloat.
Q.4. Do these proposals make childcare more affordable?
A.4. They absolutely do not make childcare more affordable. The
large family subsidies will increase demand, pushing up prices.
On the supply side, the proposal would limit the type of
childcare providers who are eligible for subsidies (such as
preventing church-based providers) which will push up prices.
The statutes, rules, and certifications will require extra
compliance staff, and those costs will be passed on to families
through higher prices. Most importantly, the ``living wage''
regulations on staff pay would raise childcare costs by 80
percent. Overall, economist Casey Mulligan estimates that the
Democrats' childcare proposal would raise prices by 120
percent, or $27,000 for a family with an infant and 4-year-old.
Similarly, the left-wing People's Policy Project estimates that
prices for the middle class would rise by $13,000 per child.
And using taxpayer subsidies to cover these rising costs does
not reduce the inflationary effects, but merely transfers the
costs to other taxpayers.
Furthermore, during the hearing the majority repeatedly
asserted that a key way to reduce inflation would be to
increase the labor force participation rate (through childcare
subsidies to help more parents work). Yet standard economics
teaches no such relationship between the labor force
participation rate and inflation. Yes, higher workforce
participation pushes out the economy's supply curve, lowering
the price level. Yet the income these new workers earn and
spend pushes out the demand curve and raises prices. These
simultaneous supply and demand expansions together raise
output, but the price effects cancel each other out, leaving
inflation roughly unchanged. For proof, look no further than
the 1965-1980 period that produced a rapid increase in female
labor force participation without any disinflationary effects
(in fact, inflation soared over that period for multiple
reasons). Increasing workforce participation is economically
positive and raises output, but almost any economist will
confirm that it does not necessarily reduce inflation.
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RESPONSES TO WRITTEN QUESTIONS OF SENATOR KENNEDY
FROM KATHLEEN SGAMMA
Q.1. Rising energy prices hurt rural families the most as they
are the ones who drive farther distances. This Administration
has been at war with domestic energy production by canceling
the Keystone XL Pipeline, banning new oil and gas leases on
Federal lands and waters, and appointing bank regulators who
try to shame and limit financing to oil and gas companies, all
while begging OPEC to increase its oil production to lower our
gas prices.
Can you elaborate on how these actions are making life,
especially for rural families, less affordable?
A.1. I agree that high gasoline prices are a real hardship to
most Americans, but may particularly harm those in rural
communities who generally travel longer distances. I would add
that the President's ban on leasing is hurting rural Americans
in particular, since the vast majority of Federal onshore
development occurs in rural areas. There are oil and natural
gas communities like Duchesne and Uintah counties in Utah and
Rio Blanco County in Colorado where over 80 percent of the land
is Federal. Federal policies like the leasing ban wreck havoc
on the economies of these rural counties. The Wyoming Energy
Authority commissioned a study from a University of Wyoming
professor who finds that the ban on leasing killed 32,719 jobs
and just under $5 billion in GDP in eight Western States last
year.
Q.2. Without a 5-year lease plan, Louisiana is set to lose over
$1 billion in State revenue, cost 14,000 Louisiana jobs, and
result in a 20 percent reduction in energy produced, over that
time period. That doesn't sound like a plan to decrease
inflation for Louisiaians.
Simply, can you explain the benefits these lease sales will
have for all Americans not just the people in my home State?
A.2. According to a study from API and NOIA, continued offshore
lease sales would support 372,000 jobs, $31.4 billion in GDP,
and $7.4 billion in Government revenues annually. By producing
2.62 million barrels of oil a day, that offshore production
helps bring down prices at the pump for consumers. However,
since this Administration has not even proposed a new 5-year
leasing plan, offshore production will decline by an annual
average of 500,000 barrels per day, decreasing employment by
115,942 jobs and reducing GDP by $10 billion. Of course, this
decrease in supply will put upward pressure on energy prices,
which will drive inflation in the economy overall.
Q.3. As you stated in your opening statement, the Biden
administration has begged some of America's biggest enemies to
increase their oil production (OPEC, Iran, Russia, Venezuela).
Many of whom have significantly less environmental standards
for energy production. America's oil and gas industry produces
significantly cleaner energy and has the ability to fill this
production gap. Yet the Biden administration continues to add
additional layers of regulation on the American energy
industry.
Can you explain how these regulations continue to drive
energy prices higher and production down?
A.3. The Biden administration has pursued several policies that
are making it more difficult to develop oil and natural gas in
this country. One example is overturning the modest reform to
the National Environmental Policy Act (NEPA) from the Trump
administration that would have helped to reduce the time to
complete environmental analysis under NEPA. Long NEPA
timeframes have for decades made building roads, bridges,
pipelines, and other infrastructure considerably more
expensive. NEPA is often used to delay oil and natural gas
projects for years, making it more difficult to bring new
production online. NEPA litigation continues to delay projects
on Federal lands. NEPA regulations that further delay
infrastructure projects put upward pressure on inflation.
Another example is the SEC's proposed climate change
disclosure rule. Although not yet finalized, it creates
uncertainty among financial institutions as their investments
in oil and natural gas could be eroded by SEC, which seeks to
use its regulatory powers to drive down production. Proposed
EPA methane regulations could result in the premature
abandonment of many of the 760,000 marginal wells that together
provide about 8 percent of American oil and natural gas
production.
Q.4. Increased energy prices are being felt in every corner of
America and every step of our supply chain. Farmers are paying
more money to fuel their tractors to harvest the fields, truck
drivers are paying more money to deliver these good, all the
way down to fueling your car to go buy groceries. These
increased gas prices are being passed down to the consumer at
every turn. The oil and gas industry plays a fundamental role
in how our economy functions. When those prices increase, our
economy suffers the consequences.
How will addressing these record high energy prices help
drive down inflation and supply chain issues?
A.4. Energy prices are fundamental to all facets of the
economy. Very few goods and services, if any, are made and
provided to consumers without the use of oil and natural gas.
Anything manufactured requires oil and natural gas for
materials and component feedstock, industrial energy,
electricity, and transportation. Online ordering, processing,
and delivery of any good or service and the entire supply chain
relies on a vast information technology network based on the
computer chip, itself made from petroleum. Increasing oil and
natural gas production in the United States would bring down
energy prices and hence, the energy input costs for just about
every good and service.