'This Is Not A Gotcha Question': David Schweikert Presses Janet Yellen About Low Cash Balances

4 months ago

At today's House Ways and Means Committee hearing, Rep. David Schweikert (R-AZ) questioned Treasury Sec. Janet Yellen about cash balances.

Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:

https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript

Stay Connected
Forbes on Facebook: http://fb.com/forbes
Forbes Video on Twitter: http://www.twitter.com/forbes
Forbes Video on Instagram: http://instagram.com/forbes
More From Forbes: http://forbes.com

Transcript

00:00Mr. Chairman, Madam Secretary, first in this discussion, conversation, my basic principle

00:10is at the scale we must borrow at, we want stability.

00:17We want liquidity.

00:20We don't need any hiccups out there.

00:24And if some of this is a little off, you can pass me off to staff.

00:30But first I want to touch on cash balances.

00:35And part of this is there's a couple of reports out there that basically say statutory mechanics,

00:43when the current authority for borrowing starts to run out, we should be doing an operating

00:49cash balance of around $23 billion.

00:52That seems dramatically too low.

00:58In previous years, you would run, the Treasury would, like in 2023, $600 billion cash balance.

01:05Today you're running over $900 billion.

01:12This is actually more of a mechanical, technical question.

01:15Do you need us, as the Ways and Means Committee, to update any statutory authorities or mechanics

01:23of what type of operating balance do you need to maximize stability?

01:29You saw the blip we had yesterday when you did your refunding announcements.

01:34And that was only, what, a $41 billion tick up for that quarter.

01:39What do we do to maximize interest rate efficiency?

01:43Do you need any additional authority?

01:45I don't think we need legislation.

01:47We have standing policy on operating cash balances.

01:54And I believe around $500 billion would be a normal level, given the volume of our payments.

02:00But you've been running dramatically higher than that traditional $500, $600 billion.

02:06I think in the previous quarter you were running in the mid-$800s.

02:09Now you're running over $900.

02:10I think it depends on what our flow of expenses are, can vary over time.

02:18And of course it has ups and downs as we, you know, tax collections are bunched around April 15th.

02:27But what caused our cash balances to run to exceptionally low levels

02:34in the past was the failure of Congress to raise the debt limit.

02:39But where I was going with that is there's an analysis that the statutory authority actually requires you to go down to $23 billion.

02:46And that may be one of your legal team saying, okay, you have the authority to ignore that interpretation of the statute.

02:55So look, this is not a gotcha question.

02:58This is I want to know what we can do to help maximize stability.

03:03I'd be glad to get back to you with details on that.

03:07But I would say during my time, the major threat I've seen to our cash balance is that when Congress fails to raise the debt ceiling in a timely way,

03:20we have absolutely no alternative but to run down our cash balances.

03:26Otherwise, we would be unable to pay our bills.

03:29Understood.

03:30I have a whole chart on your extraordinary measures and what's in your balances.

03:35I was just sitting here playing, and I have much smarter people on staff.

03:41Like your billionaire tax.

03:43Okay, great politics.

03:44Do I read it properly in your testimony?

03:47It's a 0.01%.

03:50Okay, fine.

03:52But that works out to, over the next 10 years, on an average of 0.143% of GDP.

04:02This year, our burn rate is close to 9.6% of GDP.

04:10My fear is the politics of theatrics and the actual math.

04:18We do a crappy job telling each other the truth and telling the public the truth of the fiscal.

04:24Because you gave some brilliant speeches when you were Federal Reserve Chairwoman

04:30on this type of debt future.

04:36And we're hitting numbers that we weren't supposed to hit for 10 years.

04:41When we did a quick analysis of some of the President's tax proposals,

04:47we were coming up when we did the economic effects of about 0.5, 0.6% of GDP.

04:54Okay, but if we're burning over 9% of GDP in borrowing,

04:59and this is in a time this year where tax receipts are up, what, 7%?

05:05I'm not sure.

05:06Just how much they're up.

05:07I just, my fear is, as a committee,

05:10in that we're not telling each other the truth of the scale of the borrowing stress.

05:16We're basically, the United States and China,

05:19we're consuming much of the world's available capital.

05:22I really wish we could have a more adult conversation of the scale of,

05:30this is almost hitting a dystopian levels of numbers.

05:33And with that, Mr. Chairman, I yield back.

'This Is Not A Gotcha Question': David Schweikert Presses Janet Yellen About Low Cash Balances

Category

Transcript

Recommended