Yahoo Finance Presents: Chairman Richard Neal

The chairman of the House Ways and Means committee joins Yahoo Finance's Jessica Smith to discuss whether there will be a stimulus bill this year, the chances of Joe Biden's tax plan becoming law, and his long push to reform the American retirement system.

Video Transcript

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JESSICA SMITH: Welcome to "Yahoo Finance Presents." I'm Jessica Smith. Joining me now is Congressman Richard Neal of Massachusetts. He is the chairman of the House Ways and Means Committee. Chairman, thank you so much for joining us.

RICHARD NEAL: Glad to be with you, Jessica.

JESSICA SMITH: I want to start with an issue that you're deeply involved in on Ways and Means, and that's unemployment insurance. We have several programs that are set to expire at the end of the year. One that allows gig workers and other contractors to access unemployment benefits, the other gives 13 weeks of extra benefits to laid-off workers. What are the consequences if Congress does not act and lets those programs expire?

RICHARD NEAL: Well, I think it's imperative that we not let them expire to begin with. But secondly, it was one of the more creative approaches that has ever taken place under the tent of unemployment compensation. We did provide a supplement, but we also included people that heretofore had not been eligible in the past for unemployment insurance. I'd go so far as to say that the CARES Act saved the American economy.

Obviously, we were trying to buy time when we developed the plan and drafted the parameters of the CARES Act. But of all the provisions that we put together, I think perhaps one of the most important, if not the most sound, was the extension and expansion of unemployment insurance. I think it allowed people not only to make rent payments and mortgage payments, but it also allowed those to simultaneously embrace liquidity and create demand.

JESSICA SMITH: So what are the chances that those programs get expired when we've seen negotiators try to come to a deal for months now with no success?

RICHARD NEAL: Well, again, I hope that this impasse can be overcome. And perhaps that December 11th target date, when we have to put into position and place some extension of budgetary considerations, that there might be an opportunity there to attach a targeted relief package, in terms of unemployment insurance. We can't let unemployment insurance expire.

This has been, by the way, Jessica, a learning experience for me, and I thought I knew a lot about unemployment insurance. And the bit of the patchwork system across the country, I was reminded about, because of the geographic diversity of the Ways and Means Committee, when members informed me that in the state of Florida, for example, an individual who is unemployed could qualify for, I believe, the ceiling was in the basic benefit $247 a week. That's less than $15,000 a year. And with the supplement that we attached to it, that would have allowed the individual to at least get out of some of the normal expenditures and savings of their lives.

But now, when you look at a state like Massachusetts, which has a far more generous initiative, I spoke with Governor Baker on Friday about these provisions. And we both concluded that we have to embrace an expansion and an extension of unemployment insurance.

On that issue, incidentally, I don't think Speaker Pelosi and Secretary Mnuchin were far apart. I think the speaker wanted the supplement to continue along the lines of the $600. I think Secretary Mnuchin was at $400 or $500. So I think, philosophically, there wasn't really that great impasse that has been reported. I think it was more to do with the rest of the package and how extensive and how long it ought to last.

JESSICA SMITH: Speaker Pelosi has rejected doing this piece by piece. But if it meant getting these programs extended and dealing with maybe some of the other important issues here, would you be willing to take a smaller deal at this point?

RICHARD NEAL: Well, I think we want to look at this. But remember, the speaker's position was not so much that she was advocating for a larger or smaller deal as much as she was advocating for the opportunity to get this over the goal line. So the HEROES Act, which passed in May, was about $3.4 trillion. And she said, in terms of negotiation, that she would go to $2 trillion.

But she wanted a shorter period of time. She wanted to get to the end of January. So I think that that, if you were to read something into it, would there be an opportunity to address a couple of these issues-- if not more-- that might be it.

JESSICA SMITH: I want to switch gears a little bit to tax policy. President-elect Biden has campaigned on raising taxes on the richest Americans and on corporations. That would start in your committee. So how do you try to begin to work to try and implement some of those policies, especially if you might have a Republican Senate?

RICHARD NEAL: Well, you've described a challenge, but couple that with the fact that I was opposed to the December of 2017-- I think-- the tax package that the Republicans did. And I thought that it was very much directed toward relief for people who didn't need it and who, in fact, weren't asking for it.

The decision to cut the top rate from 39.6% 37% was something that I never even understood as being part of the discussion. I think when the administration saw what happened to the SALT deduction, they decided that they wanted to offer some relief on that basis. And that's why they cut the top individual rate.

Bill Clinton's rate was 39.6%, Barack Obama's rate was 39.6%, and I think that a 39.6% rate for top earners is important. Little bit of the history, if you recall-- Jack Lew and David Camp, who was the chairman of the Ways and Means Committee, way back. They were trying to figure out what a corporate rate would look like between 28% and 25%. Again, President Trump and the Republicans decided on a 21% rate.

I was looking for harmonization with OECD rates. And I think that for the G20 or certainly for European Union, that would have made a good deal of sense for us, understanding that the corporate rate had to be changed, but not to go to 21%. So I think that the timing of the president elect's proposals and suggestions are going to be part of the discussion in the committee. And we're going to have to wait and see what that process will mean.

It also means that timing on these sorts of considerations, in an economic downturn, seeking new revenue-- that would be a bit of a challenge. So I think that until I have a chance to talk with Janet Yellen, who I was thrilled with her new assignment as Secretary of the Treasury-- I think that much of this is just going to be subject to speculation at the moment.

JESSICA SMITH: I did want to ask you about Janet Yellen and get your thoughts on her potential nomination, here. How do you anticipate working with her on these issues like taxes?

RICHARD NEAL: Well, I was delighted with the appointment, first of all. I do think there's something to be said for institutional memory. She worked in the Clinton administration, she was chairperson of the Federal Reserve Board, and now she's to be the Secretary of the Treasury. And I also can tell you this, that she helped me shape my views and ideas and thoughts as it related to, not just tax policy, but also in developing the CARES Act. She couldn't have been any better with her thoughts.

And I think that Speaker Pelosi and I both took earnestly and seriously what she had to say. And in both instances about liquidity and demand, she was very assertive about getting money into the hands of the people who needed it immediately.

JESSICA SMITH: And as you and potentially the Treasury Secretary Yellen work on some of these tax issues, do you think that there is going to be any room for compromise on some of them, whether it be looking at the provisions from the 2017 bill that are set to expire-- I know Biden has talked about expanding tax credits-- where are some areas that you might be able to really find compromise on taxes when it comes to working across the aisle?

RICHARD NEAL: Well, you described it earlier. Much of it's going to be based upon what the Senate looks like in just a few weeks. And it's going to call for, obviously, I think, some creative thinking. Despite what our Republican friends point out, revenue as a percent of gross domestic product is considerably lower than the norms. And-- but I also think, if you're President Biden, you're probably going to be very careful about how you approach revenue issues.

I do think that interest rates right now are at record lows. It's a bad time for savers, but a good time for borrowers. And I think that ought to relate to infrastructure expenditure. I think there's room here to expand the earned income tax credit. I would look for a more robust child credit. I think we've learned a pretty painful lesson here in the pandemic about women who had to leave the workforce to take care of children, how difficult it is for them to try to get back into the workforce.

So there are a lot of moving parts here, but not to miss the point that Janet Yellen is a mainstream economic thinker. And I think she will reflect the institutional knowledge that Joe Biden and the people around him have. And that, by the way, is the path that I've tried to chart on the Ways and Means Committee, as chairman.

JESSICA SMITH: One area where there has been some compromise, some agreement, is on retirement reform. I know you and ranking member Brady introduced another bill that built on last year's SECURE Act. Do you think that that has any chance of getting through during the lame duck period? And why is it that this issue seems to be something that lawmakers can compromise on in this time where there is so much gridlock?

RICHARD NEAL: Well, first of all, I think that it's been, for me, a career issue. I've stayed with this-- I've been reminding people that one of my first forays into retirement savings was, I proposed raising the individual retirement account ceiling from $2,500 to $5,000. And Mr. Rostenkowski was the chairman of the committee at the time. He was not impressed. But it did increase my name recognition with him. And just a couple of years later, I got it done.

And I've been in favor of making it easier for people to set aside prescribed numbers of dollars. I think the tax system should favor retirement savings, which we've embraced. Kevin Brady's been a very good partner on this. He shares my views about retirement savings.

But here's what I think we need to look at. The average social security benefit is $16,000 a year. That means that half the people that receive social security are receiving less than $16,000 a year. So $300 a week doesn't go very far. So using the tax system to encourage people to start saving earlier with the employee-- the employer match-- is essential.

And people are living longer. They're going to work longer. So we intend to raise the required minimum distribution age to 75 from 72. The last round of the SECURE Act was the most important advance in retirement savings in 15 years. And we intend to get this up and going. It's ready to go. I think we could do it in a lame duck session. But it's more likely now that it would be right after the first of the year. But I don't see any reason why we couldn't have this done and on the new president's desk in late winter.

JESSICA SMITH: If you did have a magic wand and you could do something more on retirement and beyond this bipartisan bill, what would be on your wish list of something that you'd really want to get done there?

RICHARD NEAL: Well, clearly, I think that at some point we're going to need to look at the whole idea of raising social security benefits. I think that what's important to remember here is the number of people in America who solely rely upon social security for retirement savings. The genius of Roosevelt's social security plan was that, certainly, everybody in their youth pulled the wagon, because in old age, they might have to sit in the wagon. So there was this generational compact that related to social security.

But I think that President Biden did indicate during the campaign that he's open to the discussion. I'm open to the discussion. What it means, I'm not quite so sure yet, but think of it this way-- you can outlive an annuity. You cannot outlive social security. And the efficiency of social security is manifest in the millions of Americans who depend upon it every month. So I think that the tax system, as I noted, should be used for the purpose of encouraging savings at an earlier stage of life, embracing the genius, again, of compounded interest, and encouraging the whole idea of personal savings to augment retirement as well.

So it is a three-legged stool, but I also have been adamant in not cutting social security or proposals that would cut social security. And I think enhancing retirement savings through the tax code reinforces that premise.

JESSICA SMITH: OK, I think we're going to have to leave it there. Again, Congressman Richard Neal from Massachusetts, chairman of the Ways and Means Committee, thank you so much for joining us.

RICHARD NEAL: Thank you, Jessica, for your time.