[Congressional Record Volume 142, Number 87 (Thursday, June 13, 1996)]
[Senate]
[Pages S6214-S6216]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 NOMINATION OF ALAN GREENSPAN TO BE CHAIRMAN OF THE BOARD OF GOVERNORS 
                     OF THE FEDERAL RESERVE SYSTEM

  The Senate continued with the consideration of the nomination.
  Mr. GRASSLEY. Mr. President, I am very pleased to support the 
reappointment of Alan Greenspan to the chairmanship of the Federal 
Reserve Board. If we want to do something about the economy, if we want 
to do something about creating jobs and keeping the economy moving, it 
seems to me that the first step we can take is the quick approval of 
the nomination of Alan Greenspan. It has been on the agenda quite a 
while. I think that we ought to move forward.
  I have had a chance to observe several Chairmen of the Federal 
Reserve Board. I look at what these Chairmen do not in the way of 
specific policy but in the way of bringing stability, in the way of 
bringing confidence, to the system. It seems to me that Alan Greenspan 
has been very good at bringing confidence to the system. Confidence is 
very important in a free market economy. Particularly where a 
Government like ours is so dominate in the economy, with about 23 
percent of the gross national product being our Federal budget. The 
fact that we may make erratic decisions in Government, or unpredictable 
decisions, or even send the signal that we might be about to make some 
bad decision, can have a very tremendous impact upon the economy; 
whether the President makes the decision, or whether the Congress makes 
it. The public is very suspicious of the Government making 
irresponsible decisions in an election year. All of this brings a lack 
of confidence in Government action, having a very detrimental impact 
upon the economy.
  So when you have a steady hand like Chairman Greenspan tends to have, 
it seems to me that it builds confidence. He has given a very good 
stewardship to the American financial system. He has had a very 
consoling influence over the economy. He has had a sound policy.
  If we are going to build the economy and create jobs, it means that 
we need to approve this type of steady person to be Chairman of the 
Federal Reserve Board. The fact that we are raising some questions 
about whether he should be confirmed and that we are taking so long to 
get him confirmed, seems to me to be disconcerting to a lot of people 
who otherwise, if they had confidence that Congress is going to make 
responsible decisions, would move forward with those business, 
economic, and investment decisions that are going to create jobs.
  So I think the reappointment of Alan Greenspan is nothing but good 
news for jobs and for the economy. He has had the confidence of three 
Presidents of different philosophies. I believe he has proven himself 
to be an effective inflation fighter. Big Government types might be 
disappointed in the announcement. But the fact is that Chairman 
Greenspan has held the line on inflation, and that has been a big part 
of helping the economy grow.
  The economy I believe grows because Greenspan himself is a 
personality. There is a certain amount of confidence building in what 
he does. He kind of leadership exudes confidence through his 
personality. This confidence is so necessary for job creation, or I 
should say for the investment that brings about job creation.

[[Page S6215]]

  We have just spent a lot of time talking about balancing the budget. 
This very day we passed a budget resolution balancing the budget in 6 
years. Unfortunately, not 7 years like we were talking about last year, 
because we lost that opportunity when the President of the United 
States vetoed the first balanced budget act that a Congress had passed 
in a generation. He vetoed it on December 5.
  If you wonder if Congress can pass a balanced budget, yes. Congress 
can do it. But we cannot do it over a Presidential veto. So we start 
out again as we did today to balance the budget.
  If we balance the budget, if we create a situation where Government 
is going to live within its means--and a policy of living within our 
means is a much more predictable policy and sends a more clear signal 
about the economy--then people are going to have more confidence in 
what Congress is going to be doing in the future. Just balancing the 
budget will reduce interest rates by 2 percent. Chairman Greenspan has 
said that. That is going to have a very positive impact upon investment 
and job creation, particularly in small business where 70 percent of 
the jobs are created in our economy.
  But when Congress has not balanced the budget for a generation--27 
years to be exact--when Congress is fiscally irresponsible over such a 
long period of time, the public has to have confidence that there is 
some nonpolitical entity out there that is going to be a counterbalance 
to the irresponsible fiscal decisions made by the elected branch of 
Government--the Congress and the President.
  The more Congress acts with fiscal responsibility, the less 
significant is the job of the Federal Reserve Board to offset the bad 
decisions made by the Congress.
  If the people who raise questions about the impact of the Federal 
Reserve, and what they would consider negative impacts of the Federal 
Reserve on the economy, would put their muscle and shoulder behind 
having a sound fiscal policy passed by the Congress of the United 
States, then they would not have to be so concerned about the Federal 
Reserve. There would be less concern of inflation and less for the 
Federal Reserve to do. The more satisfied the Chairman would be, and 
the less there would be observation by the financial centers of the 
world about what he might be saying. We would all be working together 
to build the confidence that it takes to create jobs and to encourage 
investment to do it.

  So we, in this body, ought to be putting our energy to not so much 
fighting the appointment of Chairman Greenspan but to being more 
fiscally responsible. Those particularly on the other side of the aisle 
should have encouraged their President to sign the first Balanced 
Budget Act that had been passed in a generation to get us on the road 
to fiscal responsibility and to build the confidence that encourages 
investment and creates jobs. Further, they should stop putting on the 
shoulders of our children and grandchildren our living high on the hog 
in this generation. The immoral aspect of our being materialistic and 
not caring about who pays for the bill has, more sadly, deprived our 
children and grandchildren of the American dream. They deserve a life 
without being saddled with paying for an out-of-control Government.
  Alan Greenspan has been a strong and consistent advocate of our 
balancing the budget. While we have been spending time debating, 
Chairman Greenspan has been on the front line fighting the results of 
big Government spending, the deficit and the potential inflation that 
that brings about, especially high interest rates. The Federal 
Government is more and more every day in the line seeking credit--we 
always tend to be first in the credit line and the Federal Government 
will pay whatever it takes to borrow what is needed--affecting interest 
rates. And the private sector borrowers, who are next in line, are 
going to pay more than what the Federal Government pays to borrow 
money. There is going to be less investment and less jobs created 
because of that. Because he is an inflation fighter, because he helps 
build confidence, he has saved jobs by keeping inflation in check and 
he has helped to provide a steady climate for business to grow.
  There is a recent Journal of Commerce editorial that states, ``the 
Fed and Mr. Greenspan have done their jobs well. The economy has been 
growing at a decent rate.''
  The editorial goes on to quote the chairman of the Senate Banking 
Committee, Senator D'Amato, that Americans have ``benefited from a 
lengthy period of stable, predictable prices, making purchase and 
investment decisions much more efficient.''
  The big Government types in Washington think that only the Federal 
Government can spend money efficiently. The Federal Government can 
spend money very efficiently, but the efficiency with which we spend 
the money is more related to the rapidity with which we spend money, 
and not the efficiency with how much we get out of each dollar that is 
being spent. There is going to be more economic progress made by that 
dollar being spent in the private sector than being spent in the public 
sector. More jobs will be created as a result of the private sector, 
and that is the efficiency that Senator D'Amato speaks about.
  I know there are those who would still like nothing more than to 
start up the Government printing presses and to push more money into 
the economy, to reflate, as some people would say. But inflation is the 
result. And inflation is a sales tax on the consumers of America. It is 
an expense on interest being borrowed. It is just another tax that is 
the most regressive tax that you can have. It is a tax applied 
regardless of ability to pay.
  For those people on the other side of the aisle who are always 
talking about: We have to tax the high incomes, tax the wealthy, tax 
the corporations, be progressive in the taxation--I wish they were as 
concerned in the war against inflation as Chairman Greenspan is, of how 
regressive the tax of inflation is upon the poor people of America.
  Those who want to start up the printing presses believe that is the 
way to make the economy grow, a way to solve economic problems. That 
was the old way for Government to do business. It is still too much a 
part of Government, but not as much of a part, as it has been under a 
lot of other people. All of the previous Chairmen's jobs were more 
difficult because of an irresponsible Congress for a generation, I 
might say. I do not tend to blame the Federal Reserve Board. They are 
always acting after the fact. They are always looking at what is a 
responsible Congress doing, or, rather is it being irresponsible? The 
blame ought to rest with us, but it is always easier to push it off 
onto somebody else.

  So, all Americans can be thankful that Chairman Greenspan does not 
walk down the path of inflation, of inflating our way out of the 
problem. For all Americans today recognize the wisdom of fiscal 
responsibility. That is why we have 80 percent of the people of America 
who expect us to pass a constitutional amendment requiring a balanced 
budget. It does not matter whether that is fiscal responsibility in the 
Congress or in the administration, because they know, if we do that, we 
are going to have a responsible monetary policy.
  It is ironic, perhaps, that when he was first nominated to the 
Federal Reserve by President Reagan, many thought that Mr. Greenspan 
would not be aggressive enough against inflation. We must remember that 
he was replacing one of those legendary inflation fighters of all 
times, former Chairman Paul Volcker. All of us remember how Chairman 
Volcker tamed sky-high interest rates that were hurting ordinary 
Americans. Many were fearful of a return to that time. Now, being 
nominated to a third term, the criticism is being leveled from the 
opposite direction. ``Alan Greenspan is being too tough on inflation,'' 
these critics say. ``Alan Greenspan should lower interest rates and 
free up money,'' they say.
  There is one way to lower interest rates effectively to the benefit 
of the American people and American businesses. That way is to have a 
sound fiscal policy in the Congress of the United States. It is the 
best way to build confidence. I suppose somebody could argue you do not 
always have to have a balanced budget to have a sound fiscal policy 
because I suppose you could measure it over the long haul, but over the 
long haul we have been totally irresponsible, year after year, for 27 
years.

[[Page S6216]]

  It might sound idealistic, but at least, if you have a balanced 
budget and the public can predict you are going to live within a 
balanced budget, that helps to build confidence. Because the more we 
can do in Government that lends to predictability, the more confidence 
we are going to build. So, that way is to balance the Federal budget. 
Nothing could be more beneficial to the American economy than if we in 
Congress could get our own spending habits under control.
  During the debate on the farm bill last year, and this gets back to 
interest rates being lower as a result of our balancing the budget, I 
had an opportunity to ask the Food and Agriculture Policy Research 
Institute, an institute working in tandem between the University of 
Missouri and Iowa State University--I asked the Institute what benefit 
it would be to agriculture if Congress balanced the budget. This 
institute replied that, if the Federal budget were balanced by the year 
2002, the yearly benefit to agricultural economy would be $2.3 billion 
due to interest rate reductions. On top of that increased cash flow 
from increased economic activity would be another $300 million yearly 
into the profitability of agriculture. So this adds up to a total 
increase of $2.6 billion per year, just for agriculture, if Congress 
balances the budget.
  The Institute's findings are based on the Congressional Budget Office 
estimate that short-term interest rates would decrease 1.1 percent, and 
long-term interest rates would decline 1.7 percent. That is still under 
what Chairman Greenspan said that interest rates would go down to if we 
were to balance the budget. Everybody knows, whether it is small 
business or agriculture, interest rates are extremely important to 
profitability. Farming happens to be a very highly capital intensive 
industry. Land is expensive and getting more expensive, and farm 
machinery is expensive. The lower the interest rates the better for our 
farmers. Small business benefits as well. We all understand the need of 
lower interest rates.
  But, again, it is better to achieve those lower interest rates 
through congressional action on a balanced budget, not on some 
inflationary action by the Federal Reserve.
  A recent editorial in the Washington Post said it so well--that 
editorial states:

       There will always be a debate about how fast the economy 
     can safely be allowed to grow and where the balance point 
     exists between the risk of renewed inflation and lingering 
     slack. The more success the Fed has had in combating 
     inflation, lately, the more that risk has seemed to recede. 
     But that hardly means that the board's policies have been 
     wrong.

  The editorial continues:

       Our own sense is that the board has both less latitude and 
     less fine control of the economy than some of the rhetoric 
     surrounding its decisions would suggest. Its ability to tilt 
     in the direction of growth is further constrained by Congress 
     itself. The budget deficit they have compiled in recent years 
     has given the board little choice but to lean on the brakes 
     as an offset. Mr. Greenspan seems to have done the job in 
     navigating a narrow channel.

  I think that says it better than anything I can say. But it 
reemphasizes, from the Washington Post editorial, the significant 
difficulty of Chairman Greenspan's job and the Federal Reserve's job of 
fighting inflation when Congress is fiscally irresponsible.
  If we want the economy to grow, we do that by having a predictable 
fiscal policy, and that is best done when we are committed to balancing 
the budget year after year after year. In turn, people then can look at 
the Federal Reserve and say they do not have a very important job; 
their job is less significant than our decisionmaking of business 
investment and the number of jobs that would be created, bringing about 
a stable economy.
  Congress has not been responsible. So in the meantime, we have to 
have a master who can stabilize the economy. It seems to me that Alan 
Greenspan serves that purpose. We have seen real growth. We have seen 
real confidence. We have seen people investing more money in the stock 
market daily. We have seen new highs achieved in the stock market. If 
you do not think that is an important indicator, the President is 
talking about it all the time as a measure of why he should be 
reelected.
  But if we want to encourage growth, we have no further to look than 
ourselves in this body and the other body. Balancing the Federal budget 
will promote and ensure economic growth. Confirming Alan Greenspan to a 
new term as Chairman of the Federal Reserve will keep inflation under 
control and promote economic stability. The American people need this 
stability because it is the only way we are going to create the jobs we 
have to create to keep the American dream alive.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Hawaii is recognized.
  Mr. AKAKA. Mr. President, I ask unanimous consent to speak as in 
morning business for 10 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. AKAKA. I thank the Chair.
  (The remarks of Mr. Akaka pertaining to the introduction of S. 1878 
are located in today's Record under ``Statements on Introduced Bills 
and Joint Resolutions.'')
  Mr. AKAKA. Mr. President, I yield the floor.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. LOTT. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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