Hearing of the House Budget Committee - Economic Outlook and Current Fiscal Issues

HEADLINE: HEARING OF THE HOUSE BUDGET COMMITTEE

SUBJECT: ECONOMIC OUTLOOK AND CURRENT FISCAL ISSUES

CHAIRED BY: REP. JIM NUSSLE (R-IA)

WITNESSES: FEDERAL RESERVE CHAIRMAN ALAN GREENSPAN

REP. HENRY BROWN, JR. (R-SC): Thank you, Mr. Chairman.

And, Chairman Greenspan, I'd like to continue along with the same line of questioning. It's been estimated there's been 2 million fewer jobs in America today if we had not adopted the tax relief act in the last three years. What's your opinion of that?

MR. GREENSPAN: I don't know where that number comes from and I couldn't comment on it because it requires a whole series of assumptions. But clearly, I think that the tax cut has had an effect on the economy, a positive effect, and I've commented accordingly. But translating that effect into jobs given, how variable the productivity numbers are, is in my judgment very tough to do.

REP. BROWN: Then if you could give me an estimate of how you feel the economy might sustain if we allowed the tax cuts to expire.

MR. GREENSPAN: Well, I've said on many occasions that, in my judgment, I think it would-that they should not-that they should be continued because I think, over the long run, they will benefit this economy. I'm not thinking in terms of the short run. I don't think that's an issue. I'm thinking strictly in terms of the long- term viability of this economy.

REP. BROWN: And I know we've been trying to track numbers; you know. the $5.6 billion-trillion surplus (sic), and you know, trying to track it over a 10-year period. And it seems to me that it's difficult to try to project what's going to happen next year, much less trying to project what's going on down -- 10 years down the road. In light of that-in the light of the way our budget is structured-do you feel that we would be better served if we had a different level of accounting, say, asset accounting rather than expensing everything on a year-to-year basis?

MR. GREENSPAN: It's possible that we could improve a good deal of what we're doing, and our accounting is not covering all the areas of contingent liabilities which we have.

I'm not sure, however, that that creates the political will that is involved in the process, unless you have a budget process structure which automatically requires trade-offs not only on outlays and taxes, but guarantee programs and other forms by which the federal government preempts real resources.

And what I found when I was involved with the Social Security Commission in 1983, we were going nowhere until all of a sudden we locked ourselves into a specific ultimate goal, which meant we either had to change the receipt side or the benefit side. Everybody agreed to what that difference had to be. And once you got to that point, the trade-offs gradually ground to a point where there was virtual unanimity, not quite unanimity but a very high majority for a single set of recommendations.

And that's why I emphasizes process, because if you take any single program and put it on the table and try to argue whether or not it's desirable or not, it will always end up being desirable. It's only when it's matched against another one-you have a choice, either this one or this one, you cannot have both-that you actually make the true choices.

REP. H. BROWN: Let me shift gears just a bit. We keep hearing all the time about spending Social Security proceeds. If we didn't spend the Social Security proceeds, then what could we do with the proceeds?

MR. GREENSPAN: You're referring to the trust fund --

REP. H. BROWN: Yes, sir.

MR. GREENSPAN: I must say that from a point of view of budget control, I think the unified budget is the appropriate balance against which this committee ought to be functioning. I think that the various trust funds we set up are intragovernmental trust funds and they don't really create anything with respect to decisionmaking. And if, frankly, they were all eliminated, I would find that nothing would be lost. So I'm not a fan of trust funds except when they are used to constrain expenditures, which they do on occasion, but that's only because people take them more seriously than I think they really are.

REP. H. BROWN: Thank you very much.