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

Federal News Service September 8, 2004 Wednesday

HEADLINE: HEARING OF THE HOUSE BUDGET COMMITTEE

SUBJECT: ECONOMIC OUTLOOK AND CURRENT FISCAL ISSUES

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

WITNESS: FEDERAL RESERVE CHAIRMAN ALAN GREENSPAN

BODY:

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REP. RICHARD NEAL (D-MA): Thank you, Mr. Chairman.

Nice to see you again, Chairman Greenspan. And considering that we all take such great satisfaction in what it is that you have to say, and I follow it closely every single day, and certainly you're without peer as it relates to reflecting on the state of markets across not only America but the entire world, I'm just going to refer to you from now on as "Your Excellency" with your commentary.

Now-but let me ask you a couple of questions based on some observations. I think you would agree that we're fighting two wars with three tax cuts.

MR. GREENSPAN: I can count, but I don't know what I'm counting, necessarily. (Laughter.)

REP. NEAL: Okay. Would you acknowledge, based upon your suggestion back in February that the Budget Committee consider cutting Social Security because of the budget situation and demographic pressures caused by the imminent retirement of the baby-boom generation, would you acknowledge that the Social Security trust fund or the financial status of Social Security has been weakened by a decision to yank $2.3 trillion out of the budget over the next 10 years?

MR. GREENSPAN: Congressman, as I indicated in my prepared remarks, Social Security is out of balance and will require certain adjustments, either on the tax side, or on the benefit side, or on a number of other related areas.

The problem that I have is that everyone acknowledges that there is a gap, but no one agrees that anything that will close the gap is acceptable.

REP. NEAL: Except, Mr. Chairman, we did take $2.3 trillion out of the budget over the next decade. Has that strengthened or weakened the Social Security program?

MR. GREENSPAN: I don't know how to answer that, largely because I think that the Social Security program should stand on its own. And if you have a system in which there are and should be trust funds, those revenues, as was indicated by one of your colleagues, in my judgment, ought to be segregated.

REP. NEAL: Mr. Chairman, let me follow up on that. We are in the midst of a war in Iraq, as we would all acknowledge. And Larry Lindsey, the president's chief economic adviser at the time, said it might cost up to $300 billion. That looks now as though it's going to be a low figure. He lost his job for saying that.

My point is that we have a natural disaster occurring in Florida as we speak, where there's going to be up to $40 billion or more required to help those folks out-deservedly so. We're in the midst of an international crisis fighting a war in Iraq and fighting a war in Afghanistan with troops stationed in Bosnia and Haiti. We've increased defense spending by significant numbers, as an overwhelming majority of this Congress voted for, myself included, and we've all acknowledged that there have been downturns in this economy-bumps along the road. And then we hear that Social Security has problems, that Medicare has problems. And to fail to connect the dots between the problems that we have and the obligations we're going to have and the $2.3 trillion that has been yanked from the economy over 10 years strikes me as being irresponsible.

Now, there were a number of things that we did in the '90s that took some courage. Bush one, Clinton twice, the majority of Congress, including the Republican leadership, for the most part they voted for those positions. Certainly the Republican leadership in the Senate voted for those positions. And now we find ourselves back in a situation with a mounting deficit, international obligations that are going to incur huge costs for the American people, a Social Security position that's been jeopardized, money for Florida-and we hear about a trip to Mars. Could you do all of this with the tax cuts that we've embraced?

MR. GREENSPAN: Well, Congressman, I think you've made the case for restoring PAYGO. Those types of problems that you assert would, if the Congress agreed with your priorities, would not exist if we had a mechanism in which the Congress was forced to choose between A and B rather than just go along doing both A and B.

REP. NEAL: And lastly-and thank for your-I'll go back and reread your comments so-to seek that clarity that's necessary. But I want to say this lastly, that there is a clever game that's played here, as you know very well, and that is members who preach fiscal responsibility run to the appropriators faithfully, asking that their favorite program be funded. The easiest way, as Mr. Nussle and I have discussed in the past, to perhaps speak to the issue you've raised is to publish the letters of those who ask for spending.

Put it out there. They go back to the appropriators, they ask for money, and then they go back home and preach fiscal discipline at the same time, as Mr. Nussle and I discussed, they attend ground-breakings and ribbon cuttings.

Thank you, Your Excellency.

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