WASHINGTON – Today, during a hearing to review the Fiscal Year 2024 budget for the U.S. Department of Treasury, U.S. Senator Martin Heinrich (D-N.M.) asked Treasury Secretary Janet Yellen about the relative role of the Trump tax cuts in creating the current structural deficit.
Secretary Yellen responded that “the Trump tax cuts added hugely to the deficit. As I recall, it was something like $2 trillion over ten years. And so, that is a major contributor to the deficits that we have.”
Also during the hearing, Senator Heinrich, the Chairman-Designate of the U.S. Congressional Joint Economic Committee (JEC), expressed he was pleased the Biden administration and regulators acted quickly to ensure small banks and depositors didn’t take the brunt of the recent Silicon Valley Bank (SVB) failure, but believes this disaster could have been prevented.
When Congress voted to roll back key provisions in 2018, Senator Heinrich, then-Vice Chair of the JEC, warned weakening these rules would put the health of the banking system at risk. He released a JEC report
that named SVB Financial Group as one of the banks that would face nearly none of the enhanced regulations originally put in place by Dodd-Frank.
Secretary Yellen acknowledged that the 2018 legislation “weakened bank regulation
.” Senator Heinrich recently cosponsored
the Secure Viable Banking Act to repeal Title IV of the Economic Growth, Regulatory Relief, and Consumer Protection Act.
During the hearing, Senator Heinrich also pointed to how the bank run on SVB took place in the digital space. Secretary Yellen said that “we’ve never seen deposits flee at the pace they did from Silicon Valley Bank” and compared the online situation to shouting “fire in a movie theater.” She agreed that in this current, modern world, upgraded oversight models should be put in place.
At the end of his questioning, Senator Heinrich raised concerns regarding a House Republican bill that would force the Treasury department to prioritize covering debt held by foreign debt holders like the Chinese government, before it funds the U.S. Departments of Defense and Veterans Affairs, or every other federal funding priority outside of Social Security and Medicare.
Senator Heinrich asked Secretary Yellen her thoughts on these Republican plans to prioritize foreign investment over current and former military service members. She agreed that it is not logistically feasible for Treasury to prioritize payments given how Treasury operates. “That’s why I say prioritization is default by another name. Not paying any of our bills is default,” added Yellen.