Hearing of the House Financial Service Committee: Semi Annual Monetary Policy Report to the Congress
February 11, 2004 Wednesday
HEADLINE: HEARING OF THE HOUSE FINANCIAL SERVICE COMMITTEE
SUBJECT: SEMIANNUAL MONETARY POLICY REPORT TO THE CONGRESS
CHAIRED BY: REPRESENTATIVE MICHAEL OXLEY (R-OH)
WITNESSES: FEDERAL RESERVE BOARD CHAIRMAN ALAN GREENSPAN
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REP. CAROLYN MALONEY (D-NY): Thank you, Mr. Chairman. And good morning, Mr. Greenspan.
As Americans watch the hearing today, for many their greatest economic concerns are the loss of 3 million private-sector jobs and a record-breaking $521 billion deficit. Despite improvement in some economic statistics, including GDP growth, the economy continues to perform extraordinarily poorly for the many people without jobs and for the large number of people with jobs who aren't enjoying any wage growth.
The Fed has done its part by putting its foot on the gas. The federal funds rate is effectively zero. But we still have a net job loss of 2.2 million jobs, and President Bush is on track to be the first president since Herbert Hoover to end his term with fewer jobs than when he started.
The president claims to have a plan for both the jobs crisis and the deficit. The administration now says 2.6 million jobs will be created this year and that their budget will cut the deficit in half in five years. Yet a year ago the administration estimated that nearly 2 million jobs would be created in the second half of 2003, and only 200,000 jobs were produced.
Even worse, the president's chief economist is now praising the outsourcing of U.S. jobs to foreign countries. Headlines across the country responded with astonishment this week, reading, "Bush Supports Shift of Jobs Overseas," and here we have some of the headlines across the country.
On the spending side, the president's new budget is a total fiction. Already the claim that it will cut the deficit in half in five years has been panned by Goldman Sachs, the Concord Coalition, the Committee for Economic Development, and Decision Economics, all of whom continue to forecast $500 billion deficits and more into the future.
The administration claims it will control spending by limiting domestic discretionary spending to under 1 percent this year; but domestic discretionary spending is only 15 percent of the entire budget, not enough to make a serious impact.
The budget also totally misleads by leaving out spending we know is coming, including but not limited to post-election funding for our troops in Afghanistan and Iraq; the long-term cost of the president's number-one domestic priority: making tax cuts permanent; the cost of fixing the alternative minimum tax; the president's Mars space initiative, and more.
Chairman Greenspan, I hope you will address the problems of the job deficit and the budget deficit at length in your testimony today. Thank you for being here.
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REP. CAROLYN B. MALONEY (D-NY): Thank you, Mr. Chairman.
And Dr. Greenspan, we all have a great deal of respect for your knowledge of the economy. And that is why I have to ask why is the economy so bad for so many of my constituents? Even though the economic indicators look good, the GDP growth is up, there's been improvement in many areas, but still, there are no jobs. And I represent a highly educated and skilled constituency. And still, highly educated skilled people cannot find jobs. And this is very, very troubling. I know that you have lowered interest rates 13 times since President Bush was elected, and interest rates are at a historic low. But some observers believe that you are keeping a low federal fund rate because of the stagnant job situation. The economy needs to create 125,000 to 150,000 jobs a month just to keep up with the growing labor force, and last month we created only 112,000 jobs. So my question is, how heavily is the job situation and job stagnation affecting the Federal Reserve interest rate policy? I know that there are many different variables. I'm not talking about the other variables. But what we're seeing is all the other variables are going up, yet the jobs are continuing to fall, basically. We're-we can't even get up to where we began when President Bush took office. So my question is, is it-is it the job stagnation that is keeping this historic low rate?
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REP. MALONEY: So given what you've said today in your testimony, and given the fact that you have accommodated this with a very low federal funds rate, a historically low one-and is it safe to say that you disagree with the report that came out yesterday from the Bush administration's economic policy advisors that next year we will create 2.6 million jobs? That's what this report says. That's what the report came out.
MR. GREENSPAN: I haven't read the specific --
REP. MALONEY: Well, it says we're going to create 2.6 million jobs.
MR. GREENSPAN: Yeah. I haven't read the specific details of their forecast. My impression is that they have a significant decline in the rate of productivity advance from where it has been recently. And if you get the --
REP. MALONEY: Do you agree or disagree?
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REP. MALONEY: So given what you've said today in your testimony, and given the fact that you have accommodated this with a very low federal funds rate, a historically low one-and is it safe to say that you disagree with the report that came out yesterday from the Bush administration's economic policy advisors that next year we will create 2.6 million jobs? That's what this report says. That's what the report came out.
MR. GREENSPAN: I haven't read the specific --
REP. MALONEY: Well, it says we're going to create 2.6 million jobs.
MR. GREENSPAN: Yeah. I haven't read the specific details of their forecast. My impression is that they have a significant decline in the rate of productivity advance from where it has been recently. And if you get the --
REP. MALONEY: Do you agree or disagree?
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