Hearing of the House Committee on Education and Labor: Building an Economic Recovery Package: Creating and Preserving Jobs in America

Statement

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REP. JOE COURTNEY (D-CT): Thank you, Mr. Chairman.

I want to thank you for holding this hearing.

Leading up to the vote on October 4th, the hype that was being presented in support of that measure -- that it was somehow the answer to our economic ailments -- obviously, in the events over the last few weeks have demonstrated, we have much more deep-seated broad based problems and this hearing, I think, is timely, giving some voice to that -- particularly from Ms. Stevens.

Again, thank you for your testimony.

Dr. Bernstein, I wanted to focus a bit on the state fiscal relief issue, which you talked about. The governor of Connecticut, where I come from, just announced a special session of the legislature in the next few weeks to talk about $300 million in spending reductions, deficit reductions. Governor Duval Patrick up the road in Massachusetts has announced $1 billion of deficit reduction.

And the feeling from most people in those states is that, really, this is just the first round of deficit reduction. That there's actually going to be harder choices being made.

You talked about, in your testimony, the impact of this trend that it would, quote, "deepen the negative cycle". And I was wondering if you could just elaborate a little bit more about how that aggravates a recession.

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REP. COURTNEY: So in 2001 after 9/11 there was an infusion to states which your testimony mentioned. Again, your comment was that in retrospect it appears that it probably got there a little too late. And I guess, you know, sitting here on October 23rd, we passed a stimulus measure on September 26th which did have an infusion to the states. Obviously we've lost a month. If this -- if this initiative doesn't move forward until after a new president is sworn in, we're talking January.

I guess you know seeing states already having to move now to adjust these problems, I guess -- I mean time is of the essence.

MR. BERNSTEIN: I believe it was -- it wasn't -- I don't think it was 2001. I think it was 2003, and that's exactly what we want to avoid; you're right. The sooner the better, particularly from the perspective of states.

REP. COURTNEY: And I guess when you mentioned the infrastructure piece as well, I mean the time frame even for some of the stuff that is right on the shelf and ready to move is 30 to 90 days, so every sort of delay that Washington experiences is just going to keep pushing back the anti-recessionary benefit of these kinds of ideas.

MR. BERNSTEIN: Right. As Ron Blackwell described there is a vicious cycle. And as employment falters, and as assets depreciate, households have less income. They consumer less. The economy faces that much more negative downward pressure.

REP. COURTNEY: I hope the administration that came in here with great urgency last September is listening. I yield back.

REP. MILLER: Thank you.

Mr. Sarbanes.

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REP. COURTNEY: So then, your testimony is then that this loss was not the result of any new policy?

MR. MILLARD: Correct. The decline in our portfolio is a -- the portfolio was approximately 70 percent equities in September a year ago. And it is -- other than the fact that equities have dropped, we have not changed our allocation yet. We have interviewed managers; we have prepared to make transition, but we haven't moved anything yet. We'll do so very, very deliberately.

Obviously, I can't say, specifically, too much, like 'tomorrow we're going to sell' -- and nothing's happening tomorrow (laughs) -- 'x-amount of fixed income.' We would not want to say that to the world at large.

Oh, did I say it wrong? Sorry, I think I had mixed the 70 and the 30. It was 70 percent fixed income last September, and it has stayed approximately 70 percent fixed income other than the fact that equities have gone down. We did not make the shift yet, even though we have prepared ourselves to do so.

REP. COURTNEY: Okay, I guess the other question I would just like to follow up on was that, again, your comment that past recessions have not necessarily been a -- you know, triggered a run on the plans, necessarily. Given -- I assume you were here for at least a portion of the other testimony -- just your own, you know, analysis of where we're headed over the next 18 months, 24 months?

I mean, do you have any concern that this is going to be a little -- that that, sort of, you know, feeling that recessions don't necessarily cause a problem -- it may be different this time, given the fact that pension plans are taking a huge hit out there?

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