[Congressional Record Volume 143, Number 40 (Tuesday, April 8, 1997)]
[House]
[Page H1292]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




[[Page H1292]]



 RECENT FEDERAL RESERVE OPEN MARKET COMMITTEE DECISIONS RAISE SERIOUS 
                               QUESTIONS

  The SPEAKER pro tempore (Mr. Thornberry). Under the Speaker's 
announced policy of January 21, 1997, the gentleman from Massachusetts 
[Mr. Frank] is recognized during morning hour debates for 5 minutes.
  Mr. FRANK of Massachusetts. Mr. Speaker, the recent decision by the 
Federal Reserve Open Market Committee to raise interest rates in itself 
raises two very serious questions, one substantive and one procedural. 
The substantive question is will America be permitted to grow 
economically at a rate sufficient to overcome some of our most pressing 
social problems or will the Federal Reserve be allowed to snuff out 
that growth? And that is also the procedural question, because we have 
a nonelected body consisting of seven members who were at least 
appointed by the President and confirmed by the Senate and four others, 
regional bank presidents who are officers of private corporations in 
effect, the Federal regional banks, making the single most important 
economic judgment that will be made in America this year, and that 
simply cannot be allowed to go forward.
  Alan Greenspan is a man of good will, and he is doing what he thinks 
is right. But what he thinks right strikes many of us as profoundly 
wrong. When Mr. Greenspan testified before the House Committee on 
Banking and Financial Services we asked him, several of us, whether 
there was any evidence of inflation given the growth that we have seen 
in recent years. His answer candidly was no. I asked him if he did not 
agree that he had in fact himself been too pessimistic in his analysis 
of the ability of the economy to grow without generating inflation. He 
admitted that he had been too pessimistic, he has been wrong over these 
past years.
  We reached a level of unemployment far lower than what Mr. Greenspan 
and others of the Federal Reserve thought we could reach without 
triggering inflation; the inflation did not come. Mr. Greenspan decided 
nevertheless, with the support of the others on that committee, to 
raise interest rates to slow down growth. In other words, Mr. Greenspan 
has told us we are creating too many jobs in America. Many of us of 
course feel that our problem has been that we have not created enough 
jobs.
  We made a decision last year; I did not agree with it, but the 
country made it, to make drastic changes in the welfare system. 
Everyone agrees that that will work only if the people who have been on 
welfare are able to be absorbed into the work force. Mr. Greenspan and 
his colleagues have just taken a step which will make it very much more 
difficult. Obviously, the people on welfare are among the last to be 
hired. They are people with skill deficiencies and other problems. An 
economy which is not growing rapidly simply will not assimilate them.
  We just heard a previous speaker complain about NAFTA. Trade is a 
very controversial issue in this country. There are many who believe 
that we ought to be increasing international trade, but increasing 
international trade creates both winners and losers in America. An 
economy which is growing, an economy in which new jobs are being 
created is better able to deal with the transitions of international 
trade. By clamping down on growth, by announcing that America simply 
will not be allowed to grow as rapidly as it has been growing because 
of his fear of an inflation which he acknowledges he cannot yet point 
to, Mr. Greenspan not only cuts out the benefit of that growth but 
exacerbates other problems.
  We have a dispute over how deeply we have to cut important programs 
to reach a balanced budget. Those disputes turn in part on differing 
estimates between the Congressional Budget Office and the Office of 
Management and Budget about the rate of growth. Again Mr. Greenspan has 
just said to us there will be less growth, there will therefore be less 
revenue and the painful decisions involved in getting the deficit to 
zero by 2002 will become more painful.
  There is a legitimate question for this country as to what risks we 
want. Many of us believe that a combination of trends have made it 
possible for us to grow more rapidly than in the past without 
inflation. Mr. Greenspan and some of his colleagues in the central bank 
apparatus believe that the risks of inflation are so great that they do 
not want to find out whether or not that is true. They have decided we 
will not continue to see how long we can grow without inflation 
actually arising. He did what he said was a preemptive strike, but 
which looked to many of us like a self-fulfilling prophecy. Not only is 
that wrong it seems to be substantively, but from the standpoint of 
democracy that is not a decision that a handful of appointed officials 
and private bank officials ought to make.
  So I will be working with many of my colleagues to ask this body 
through its Committee on Banking and Financial Services, through other 
committees and through the floor itself to address this issue: the 
question of what degree of growth we will strive for. The question of 
when we will choke off growth because of an anticipation of inflation 
that has not yet appeared must not be left to a handful of bankers or a 
handful of any other appointed officials. It must be done through the 
democratic process.
  The possibility that America can increase the rate of growth that is 
noninflationary, which has appeared to many of us to be more and more 
likely over the past few years, cannot be snuffed out this easily, and 
I hope, through a variety of means, that we will be allowed to bring to 
the floor of this House, before the Federal Open Market Committee meets 
again, this issue so it can be debated as it ought to be in a 
democratic society.

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