Federal News Service - Hearing of the House Budget Committee - Transcript

Federal News Service

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

LOCATION: 210 CANNON HOUSE OFFICE BUILDING, WASHINGTON, D.C.

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REP. ROBERT SCOTT (D-VA): Thank you, Mr. Chairman.

And, Mr. Greenspan, I appreciate your patience.

I had a couple of charts I wanted to-on this one. This is a time period going back to Herbert Hoover and number of the job growth since Herbert Hoover, a time period that includes Pearl Harbor, World War II, the Korean War, Vietnam War, Cold War, hostages in Iran, Persian Gulf War. Does that accurately reflect the number of jobs created by each administration, showing this administration is the worst since Herbert Hoover?

MR. GREENSPAN: Yes, and I also would think that if you put up a productivity chart of a similar nature, you would find that this has been the period amongst all those various different presidential regimes that has had the highest rate of growth of productivity.

And the trouble, unfortunately, is that one is causing the other. And that's something, as I mentioned earlier with respect to the productivity issue and the shallowness of the recession, which has been the major contributor to job loss.

REP. SCOTT: Well, without the explanation, this does show the job loss the worst in --

MR. GREENSPAN: Well that's an accurate chart. Is that what you're asking? Yes.

REP. SCOTT: Thank you.

The next one is-you're familiar with this chart that shows the deficit. The green in the middle is the Clinton administration when we had pay-go. Does this chart represent a $650 billion deterioration in the budget, is that chart accurate, to the best of your knowledge?

MR. GREENSPAN: As far as I can judge.

REP. SCOTT: Okay. Next is the present value of the Social Security and Medicare deficits and the present value of this administration's tax cut. It shows that the administration's tax cut, the present value of those is significantly more than the Social Security shortfall and the Medicare shortfall combined. Does that reflect a choice that we had-we can cut taxes or we can take care of Medicare, Social Security?

MR. GREENSPAN: I'm not-I can't confirm those numbers. I don't know whether they're accurate or not. But just reiterate my notions of earlier that what has been missing in this budgetary process for a number of years, since, in fact, September 2002, is the necessity to make choices.

REP. SCOTT: Okay. Well, that-and the final chart shows that we have in the last few years increased new debt by $638 billion. The portion purchased by foreigners, approximately $729 billion. Can you say what the foreign policy and national security implications are of a substantial portion of our debt being owned by foreigners?

MR. GREENSPAN: It's an interesting question which we, obviously, at the Federal Reserve have given considerable thought to because, clearly, we, at the end of the day are responsible for the American financial system. We're the lender of last resort in that sense.

It turns out that a very large part of the foreign purchases-I assume-is that the federal debt numbers you have up there, foreign purchases of federal debt ---

REP. SCOTT: Yes.

MR. GREENSPAN: -- or all debt? I'm sorry?

REP. SCOTT: Yes.

MR. GREENSPAN: It's federal debt?

REP. SCOTT: Yeah, federal debt, U.S. debt.