[Congressional Record Volume 142, Number 124 (Wednesday, September 11, 1996)]
[Extensions of Remarks]
[Page E1562]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




[[Page E1562]]



                              THE ECONOMY

                                 ______
                                 

                          HON. LEE H. HAMILTON

                               of indiana

                    in the house of representatives

                     Wednesday, September 11, 1996

  Mr. HAMILTON. Mr. Speaker, I would like to insert my Washington 
Report for Wednesday, September 11, 1996, into the Congressional 
Record.

                          The Economic Outlook

       As I travel around the 9th District, Hoosiers continue to 
     ask me about the economy and its outlook. They wonder about 
     the outlook for jobs and our international competitiveness, 
     but most recognize that the economy is in better shape now 
     than it was several years ago. They hear a lot about 
     proposals to change our economic policy, stimulate growth 
     through major new tax cuts, and ease up on our deficit 
     reduction effort. They question whether this is the time to 
     make a major change in economic policy.
       On many measures, the economy today is in good shape. 
     Unemployment is near a 25-year low, and so is inflation. The 
     stock market is booming, growth of the overall economy is 
     solid, and Federal Reserve officials have been optimistic 
     enough about inflation to leave interest rates unchanged. Of 
     course there are some problems. Income inequality has 
     worsened over the past several years, and wages, which have 
     been stagnant since the early 1980s, are just now starting to 
     rise again.
       But overall, progress has been made. In January 1993, the 
     federal budget deficit was spiraling upward while the economy 
     was in the slowest recovery of the postwar era. The President 
     and Congress passed the 1993 deficit reduction package which 
     has led to a dramatic drop in the deficit and has helped 
     produce a steady, sustainable economic recovery. Critics were 
     saying that the package would cause a recession and higher 
     unemployment, but it has had just the opposite effect, 
     boosting the economy in several key ways. My view is that 
     whatever adjustments we might make to our economic policy, we 
     should not waver from our central goal of reducing the 
     deficit, balancing the budget, and creating the conditions 
     for non-inflationary growth in the American economy. We must 
     avoid policies that threaten to again balloon the deficit.


                       Performance of the economy

                           Deficit Reduction

       Washington has been obsessed with deficits for more than a 
     decade. American voters have consistently rated the budget 
     deficit as one of their top public policy concerns. So the 
     good news is that the deficit has declined significantly 
     since passage of the 1993 deficit reduction package. The 
     deficit this fiscal year will be $116 billion. That's almost 
     $50 billion less than last year and far below the deficit 
     peak of $290 billion in 1992. That will make the deficit 
     as a share of the economy, at 1.5%, the lowest since 1974, 
     and the lowest of all the major industrialized countries. 
     We must continue on to our goal of a balanced budget.

                            Economic growth

       The pace of the current expansion of the economy is solid 
     and modest, growing at a 2.5% rate since 1993. This is better 
     than the 1.5% growth rate in the previous four years, and 
     slightly above the average of the major industrialized 
     nations. Growth in the second quarter of 1996 was at a robust 
     4.8% rate, but that should moderate in the last half of the 
     year. After 65 months, the cycle of expansion that the 
     economy is enjoying has already outlasted all but two of the 
     other eight post-war expansions. Even so, the economy is 
     growing in a balanced way, and inflation, which has killed 
     off a number of previous economic expansions, has not 
     occurred. Strong, non-inflationary growth will do much to 
     improve the outlook for working Americans.

                                  Jobs

       Job growth continues to remain strong. The economy has 
     created nearly 10 million new jobs in the last four years. 
     Most of these were good jobs paying above-average wages, and 
     most were in the private sector, an indication of a 
     revitalized economy. In 1995, more than 50,000 net jobs were 
     created in Indiana. Leading the way in Hoosier job growth was 
     the manufacturing sector, with a 7% increase in employment. 
     This means the strong rebound in manufacturing jobs is 
     continuing, after heavy losses between 1989 and 1993.

                              Unemployment

       Strong job growth has helped bring the unemployment rate 
     down to its lowest level in years. Since the beginning of 
     1993, the national unemployment rate has dropped from 7.1% to 
     5.1%. In Indiana, the news is even better, where the economy 
     has outperformed the national economy, resulting in an 
     unemployment rate of just 4.2%. Experts expect the 
     unemployment rate to remain steady through 1997.

                               Inflation

       Inflation, which peaked at 6.1% in 1990, has remained below 
     3% in recent years. During 1995, the inflation rate was only 
     2.5%, and it is expected to remain around 3% through 1997. 
     The Federal Reserve has done a good job of keeping inflation 
     in check.

                              Productivity

       While not as robust as in the 1950s and 1960s, productivity 
     continues to show solid gains, and the United States remains 
     the most productive nation in the world. The lower interest 
     rates resulting from deficit reduction have boosted business 
     investment and productivity.

                                 Wages

       A continuing problem is that while we have created millions 
     of new jobs and the national income is rising, wages for the 
     average family have not kept pace with inflation. Since 1968, 
     while the incomes of middle class and poor families have 
     dropped in real terms, the income of households in the top 
     20% of the population has increased by almost 50%. Although 
     there are signs that wages for the average worker have begun 
     to improve, our policies must ensure that all Americans 
     benefit from economic growth. The recent increase in the 
     minimum wage is a positive step in the right direction.

                             Trade deficit

       Another disappointment is the trade deficit. Even though 
     the U.S. is exporting a record amount of goods and services, 
     we still import over $100 billion more than we export. This 
     trade gap is expected to narrow as improved economic growth 
     in Europe and elsewhere improves the ability of other 
     countries to buy U.S. products. And recently the monthly 
     trade deficit did improve by 20%.
       We have made significant progress in the last four years, 
     and most forecasters expect the economy to continue on its 
     path of modest growth, low inflation, and low unemployment. 
     That is good news. We have to continue working to reduce the 
     budget deficit. But, we must do it in a way that does not 
     jeopardize our economic gains. We need to make sure that any 
     proposed tax cuts are fully paid for, up front, and do not 
     balloon the deficit. We have to continue investing in 
     education, research, and infrastructure. These are things 
     that help build a foundation for the long-term economic 
     health of the country. The bottom line for me is that the 
     policies we follow should improve the lives of average 
     working families. I think we are on the right path, but there 
     is more work to be done.

                          ____________________