Nussle, Greenspan Share Outlook on Economy

Nussle, Greenspan Share Outlook on Economy

Federal Reserve Chairman Alan Greenspan offered testimony today at a Capitol Hill hearing convened by House Budget Committee chairman and Iowa Congressman Jim Nussle. Nussle discussed the importance of continuing to create jobs and improve the economy for Iowans. Greenspan agreed the economy is improving and noted the need to control spending and keep tax rates low. Excerpts from Nussle's prepared opening statement include:

"...It's been about a year and a half since you last testified before this committee, and at that time, our nation was still in the early stages of recovering from the terrorist attacks and their aftermath; we were facing uncertainties about war in Iraq; and we had an economy still struggling to gain traction.

"No one should underestimate the challenges we've had to overcome in the past three years... Today, we're in a much different -- and certainly, much better -- position. The economy is showing robust growth, and strong growth is expected to continue. In the 3rd quarter of 2003, we saw GDP growth at 8.2 percent -- the highest surge in 20 years. And that was followed in the 4th quarter with a growth rate of 4 percent -- still strong by historical standards.
*Housing starts are running at their highest level in 20 years.

*Mortgage interest rates continue to run at their lowest levels in over three decades, and the bank prime rate is at its lowest level in 45 years.

*Inflation has been running at its lowest rate in nearly four decades.

*U.S. real exports of goods and services rose in the fourth quarter at a 19 percent rate -- the fastest pace in 7 years.

*We've seen a significant increase in the stock market. The Dow Jones industrials average is up 40 percent since March of last year.

*In addition, and most important, labor markets are improving. For the past 20 straight weeks, unemployment insurance claims have remained below the benchmark regarded by economists as the sign of an improving labor market.

*And the unemployment rate is down to 5.6 percent from 6.3 percent last June.

"And these figures aren't just abstractions -- all of them represent something real that's happening in the economy. But the most important reality of economic growth -- the one that matters most to the people we represent -- is jobs. We need an economy that produces steadily expanding job opportunities -- so that everyone who wants to work can work; and so that every working person knows they can get ahead, and improve their own and their family's lives. Even on this front, we're beginning to see gains: Payroll employment has increased by 366,000 jobs over the past five months.

"... there are still too many of our constituents -- too many Americans -- who want to work, but can't find a job. So we're not done.

"... I'll note that the tax cuts we passed last year are still working to help boost the economy as we speak. Millions of American taxpayers will be pleasantly surprised this tax season by the bigger than expected refund checks -- money they get to keep in their pockets to spend as they see fit.

"... in addition to getting and keeping the economy going, we've got to get our hands around the other piece of the puzzle, and that is controlling federal spending. It matters. If you're going to say that deficits matter, you'd better believe that spending matters. All spending must get paid for, either through taxes or borrowing -- and both are burdens on the economy. And for that simple reason alone, controlling spending is itself a policy for sustaining economic growth.

I anticipate that a discussion of this will likely be a good part of this hearing, and I'm certainly interested to hear the thoughts from both sides of the aisle on how we can successfully accomplish that spending restraint.
"Finally, the last time you appeared before us, you strongly urged this Committee and this Congress to renew the then-expiring discretionary spending caps and PAYGO spending controls. As you know, those laws were allowed to lapse. I strongly support reviving statutory controls..."