Opening Statement: U.S. Senate Committee on Banking, Housing, and Urban Affairs "The Second Monetary Policy Report to the Congress for 2007"

Statement

Opening Statement: U.S. Senate Committee on Banking, Housing, and Urban Affairs "The Second Monetary Policy Report to the Congress for 2007"

Mr. Chairman. I want to thank you for holding this hearing and I want to thank Chairman Bernanke. As chairman of the Joint Economic committee, I'm always interested in hearing your thoughts on the current state of the economy and appreciate your availability on so many issues when we reach out to you.

As I said in the past, we live in interesting economic times and you face a number of important challenges in setting a course for monetary policy that will achieve the multiple goals of high employment, balanced economic growth and low inflation. Right now there are certain reasons to be concerned about where we find ourselves. In the short term, even with the likely improvements in the second quarter, overall economic growth in the first half of the year has been disappointing to say the least.

Most forecasters have revised downward their expectations for economic growth through the rest of the year. The administration continues to run high budget deficits that threaten our future stability to compete with the rest of the world and our trade gap, particularly with China, remains immense and growing at a rapid rate. Energy prices are hovering at record highs, feeding our trade gap and fueling anxiety among middle class families. The collapse of parts of the housing market, which you call a correction, has become a serious drag on our economic growth and a threat to economic security of too many American families.

And while I welcome The Fed's new pilot program to monitor independent subprime brokers, I don't think consumers will truly be safe from irresponsible and deceptive lending practices until we enact tougher federal laws to prevent the subprime mess from happening again. As indications of the weakness in the housing market continue to mount, there's an urgent need for better protections for existing and aspiring homeowners, although I do want to thank -- the Appropriations Committee did put $100 million in for the work-out, work-outs, so non-profits can do work-outs that Senators Casey, Brown and I had asked them to do.

Most importantly, as you have recognized, we have an economy whose rewards seem more and more to be going to fewer and fewer privileged Americans. We are facing the greatest concentration of income since 1928, right before the Crash and the beginning of the Depression when 24 percent of all income went to the richest 1 percent. It's now close to 22 percent and will pass the 24 percent if present trends continue, all too soon.

At a time when the wealthy in this country have been doing extremely well -- the wealthiest in this country have been doing extremely well, the American middle class, the engine of our economy, has not been as fortunate. Most Americans have not seen the benefits of working harder in their paychecks. Between 2000 and 2006, the typical worker's earnings grew less than 1 percent after counting for inflation while productivity increased a whopping 18 percent. And now that economic growth seems to be slowing, it's fair to ask whether most middle class Americans will slip even farther behind.

The dramatic increase in productivity and its failure to raise wage rates is a great conundrum for our economy that needs all of our attention. I don't pretend that there are easy solutions to the troubling challenges facing our economy, but we need to remember that our collective focus must be on achieving strong, sustainable, long- term economic growth that can be shared by all families in this country, not just those in the top 1 or 5 percent. Unless economic fortunes in this country grow together rather than apart, we can't be confident about our children's economic futures.

I look forward to your testimony and thank you, Mr. Chairman, for the time.

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