[Congressional Record Volume 143, Number 61 (Monday, May 12, 1997)]
[House]
[Pages H2481-H2485]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  MONETARY POLICY OF THE UNITED STATES

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 7, 1997, the gentleman from Massachusetts [Mr. Frank] is 
recognized for 60 minutes.
  Mr. FRANK of Massachusetts. I am encouraged, Mr. Speaker, by articles 
that appeared in the financial sections of the Washington Post and the 
New York Times over the past few days and, in particular, by a speech 
given by Chairman Alan Greenspan to see that we are now having a 
genuine debate, thoughtful, on the merits, about the monetary policy of 
the United States.
  Chairman Greenspan, to his credit, in a speech he gave on May 8, last 
Thursday to the business school at NYU, acknowledged that the recent 
decision by the Federal Open Market Committee to raise interest rates 
by a quarter percent had generated what he called more than the usual 
share of attention and criticism.

                              {time}  1245

  And he went on to say, I believe the critics deserve a response. I 
mean quite sincerely to welcome this, because what Chairman Greenspan 
then proceeded to give was a response, reasoned, on the merits, 
imputing no ill motives to anyone. I would hope we could continue this 
debate and I would hope we could continue it in the way in which I 
think it has been carried on.
  This is a serious policy disagreement about very important issues. I 
regard Alan Greenspan as one of the great public servants of our time, 
a man who has devoted himself to the difficult, challenging and, from 
his standpoint, not terribly financially rewarding position of Chairman 
of the Federal Reserve, as he has performed in public positions before.
  I disagree with much of what he is doing, but I recognize his 
motivation as a genuine desire to do best for the economy. And I honor 
him for his willingness to conduct the debate. Indeed, I wish some of 
Mr. Greenspan's defenders shared Mr. Greenspan's commitment to a public 
debate.
  One thing I must say I regret, Mr. Speaker, is that we are having 
this discussion in a somewhat artificial fashion. I and others take the 
floor of Congress to voice our criticisms of what the Federal Reserve 
has done. The Democratic leader, the gentleman from Missouri, convened 
a press conference a few weeks ago in which several Members of this 
body and the other body spoke out on our views. Letters have gone back 
and forth.
  The one thing we have not had is a forum in which Chairman Greenspan 
and other members of the Federal Reserve System can speak out, be 
challenged and questioned and, in some cases, affirmed by Members of 
Congress; a forum in which people in the organized labor community, the 
AFL-CIO, and the business community, the Chamber of Commerce and the 
National Association of Manufacturers, all three of those organizations 
have differed with Chairman Greenspan, a forum in which they could 
voice their criticisms or their agreement; others could do that.
  This is a situation which cries out for a hearing by the Congress. 
Unfortunately, the chairman of the House Committee on Banking and 
Financial Services has told us essentially that he does not share the 
view that the current debate over whether or not the Federal Reserve 
ought to continue trying to slow down the economy is a suitable one for 
the Congress to engage in at this time.
  A few weeks ago, joined by the gentleman from New York [Mr. LaFalce], 
I sent a letter which was signed by all but one of the Democratic and 
Independent members of the Committee on Banking and Financial Services, 
and the one who did not sign at the time has since indicated his 
agreement with us. So the 26 combined Democratic and Independent 
members of the Committee on Banking and Financial Services have asked 
the chairman to have a hearing on this subject.
  The Committee on Banking and Financial Services, under the rules of 
the House, has jurisdiction over the Federal Reserve. We have not 
proposed legislation at this point. We asked for the kind of debate we 
have been trying to have, which Chairman Greenspan, to his credit, 
participated in last May, which, also to his credit, Laurance Meyer, 
one of the members of the Board of Governors of the Fed engaged in on 
April 24.
  So rather than them making speeches and us then answering the 
speeches, nowhere near each other, we asked this be done in a forum, a 
congressional

[[Page H2482]]

hearing. The chairman of the committee wrote back and said that he 
thought this would be tampering with the independence of the Federal 
Reserve System and second-guessing them.
  He is wrong, Mr. Speaker. He is, I understand, thinking that he is 
protecting the Fed, but I think we ought to be clear. It seems to me he 
is protecting people who need not that sort of protection.
  Alan Greenspan and Laurance Meyer and the other members of the 
Federal Reserve System are not hypertense, frail, intellectually 
challenged individuals who are unable to defend themselves in a public 
forum. Indeed, as Mr. Greenspan and Mr. Meyer pointed out, their 
viewpoint is served well by a chance to argue.
  The worst situation is the one we have had in the past, in which the 
Federal Reserve issues pronouncements and the rest of us are simply 
supposed to meekly acquiesce to them.
  Indeed, the newspapers bear some of the responsibility here. I was 
pleased in the past couple of months to see the newspapers, 
particularly in the financial pages, breaking out of what seemed to me 
to be an inappropriate kind of situation in which genuine debate about 
monetary policy was somehow discouraged.
  Members of Congress are encouraged to debate war and peace and 
unemployment and environmental protection and civil liberties, but when 
it comes to discussing what is the appropriate trade-off between fear 
of inflation and desire to reduce unemployment, somehow that was not 
considered fit for debate. To voice one's disagreement with decisions 
of the Federal Reserve, that was considered Fed bashing.
  Indeed, the President of the United States is criticized, these days 
all Presidents are criticized by the press for almost anything, but the 
Washington Post criticized President Clinton, it seemed to me, last 
week because he gave a speech in the rain. And the Washington Post 
seemed to think there was something unseemly about giving a speech in 
the rain in a rain forest.
  But there was one exception. Presidents who in the past, or members 
of their administration, who have dared to express disagreement with 
the Federal Reserve Board have been criticized by the press, 
ironically, for speaking out on an issue. This is the one issue where 
Presidents are supposed to not say anything. It is the issue where the 
press attacks them if they do not duck, and I think that is wrong. I 
think we have seen clear evidence that that was wrong.
  By the way, 10 years ago the Federal Reserve used to have a meeting 
of the Federal Open Market Committee, decide to raise interest rates 
and then not tell anybody officially for some time. The markets and 
everybody else were left to guess for weeks whether that happened. 
Minutes were never published.
  The former chairman of the House Committee on Banking and Financial 
Services, the gentleman from Texas [Mr. Gonzalez], led a crusade for 
years against those practices. He said, no, they were being unduly 
secretive.
  The gentleman from Texas was told by the guardians of the Federal 
Reserve, the people who would protect the Federal Reserve from general 
democratic debate, that, ``Oh, no, you must not say that, you must not 
do that, you must not interfere with this secrecy. You are breaching 
the wall and, oh, terrible things will happen.''
  Well, in tribute to the persistence of the gentleman from Texas, and 
also I believe to the intellectual force of his arguments that 
fundamental economic decisions in a democracy ought not to be so 
secretly made and so protected from discussion, the Federal Reserve 
relented. We now get announcements on the same day of their decision, 
and we get minutes published with some time lag, and none of the 
negative effects predicted by the critics of those moves have taken 
effect.

  We can go back, as staff of the minority on the House Committee on 
Banking and Financial Services has done, and compile the list of 
comments people made at the time about how disruptive it would be to 
have this publicity. They were all wrong. The publicity has been good. 
It has been useful and it has been healthy.
  So I want to return to the question of the chairman of the Committee 
on Banking and Financial Services and urge him to reconsider; 26 of the 
56 members of the Committee on Banking and Financial Services have 
asked him now for a hearing. There are constraints against members of 
one party trying to push a chairman into doing something of their own 
party.
  I have spoken to several Republican Members who, I believe, want 
there to be hearings. A couple of them, I hope, will succeed in 
prodding the chairman into it. One or two were afraid to be seen as 
unduly pushing. We should have had that hearing a couple of weeks ago.
  There has been an interesting debate. There have been speeches on 
April 24 by Mr. Meyer, and Mr. Greenspan on May 8; a press conference 
that we have had here. There is interesting and genuine intellectual 
disagreement, and factual questions, and questions of what the statute 
ought to be and how to interpret it. They are very important. The 
single most important economic decisions being made this year-to-date 
have been made by the Federal Reserve.
  Maybe there will be a budget deal of great proportions and that may 
become a single more important factor, but the Federal Reserve is 
making very important economic decisions and they are going undebated 
in Congress in the kind of structured way that ought to be the crowning 
glory of a democracy in which there is give and take and back and 
forth.
  People could be watching on C-SPAN the members of the Federal Reserve 
and Members of Congress who agree and disagree debate the question of 
whether or not there is a fixed rate of unemployment below which we get 
inflation; whether or not there have been genuine productivity 
increases in the economy sufficient so that we can now get more 
employment at a lower inflation rate. All of those issues need to be 
talked about. Whether or not, if we are not months and months ahead of 
the slightest outbreak of inflation, we will somehow lose control of 
the situation.
  All of those should be debated, and the chairman or the Committee on 
Banking and Financial Services mistakenly says no, that is second-
guessing the Fed and tampering with its independence. He did in his 
letter to us acknowledge that we could have a hearing in July. He 
pointed out the statute requires that. That was no concession on his 
part.
  Well, the Federal Open Market Committee will meet next week. We do 
not know what they are going to do. Fortunately, thanks to the 
gentleman from Texas, who worked so hard on this, we will know the day 
they do it what they did, but we will not have had any structured 
discussion about the pros and cons and what the elected officials think 
and what the public thinks before that.
  And then there is going to be another meeting in July and, according 
to the chairman's timetable, there will be two meetings of the Federal 
Open Market Committee before we again deal with it. But what if they 
raise again next week? Do we still sit and not debate this in Congress? 
What if they do not? Would it not be helpful for them to have a forum 
to say, look, here is why we think things are looking better?
  So I welcome the fact we are now having debate. And I started to say 
before I am glad the newspapers have joined in. I, myself, have been 
pleased to have had a chance to talk to the financial pages of The 
Washington Post and the Boston Globe on this subject, while others who 
have disagreed with me were quoted.
  The New York Times, I must say, Mr. Speaker, has been a little 
laggard here. We had the press conference, which I thought was somewhat 
interesting, with the Democratic leader and former Democratic 
Presidential candidate, the Senator from Iowa, and some others, very 
thoughtful spokesmen on economic issues, the senior Senator from North 
Dakota, the gentleman from New York [Mr. Hinchey], myself, and the 
junior Senator from Rhode Island, and the New York Times did not appear 
to quote a word of any of our criticisms of the decision to raise the 
rates until the chairman decided he wanted to respond.
  It was interesting. We will find reference to our criticisms of the 
Federal Reserve's decision to raise rates in the New York Times on 
Friday and Saturday. It was never independently reported, as nearly as 
I can see, but when

[[Page H2483]]

Mr. Greenspan decided to respond, then I guess it would have been a 
little odd to have reported his response to our criticism without at 
least acknowledging the fact we had made the criticism. But I think the 
New York Times' attitude there bespeaks this old sense that the Fed and 
monetary policy are things of great delicacy. The roughness of 
democratic debate somehow would be fatal to them.
  Mr. Greenspan, to his credit, understands that is nonsense, and I 
hope that the New York Times business pages, having reported the debate 
now that Mr. Greenspan appears to have given them implicitly the OK to 
do it, will continue to report the debate even when Mr. Greenspan is 
not ready for their pronouncements.
  I also note it was interesting that once again the defenders came 
into play. In Saturday's New York Times there is an article, not of a 
news sort, of an analysis sort, which says that indeed Mr. Greenspan 
has been far more supportive of jobs and far less willing to restrict 
growth than some people thought. And there was even a quote from, I 
think it was Mr. Blinder, a former vice chair of the Fed, in which he 
said Mr. Greenspan has been more supportive of growth even than he has 
seemed to be and that his words have indicated.
  It reminded me a little bit of the great comment by Mark Twain that 
the music of Wagner is better than it sounds. Apparently Mr. Greenspan 
is more progrowth than we can tell from watching him. That is 
encouraging. But once again that is the kind of issue that we should be 
debating.
  Now, Mr. Speaker, I want to turn to that debate. I wish I did not 
have to spend all this time debating whether we should have a debate, 
but again I have to say to some extent the newspapers have been 
reluctant. It seemed to me the New York Times was reluctant to allow 
this debate until Mr. Greenspan signaled it could go forward. It was 
almost as if reporting criticism of him in his absence was, I do not 
know, sacrilegious. And it is certainly the case that the chairman of 
the Committee on Banking and Financial Services continues to be 
resistant to allowing this discussion to go forward.

                              {time}  1300

  Mr. Greenspan, in his speech on May 8, says once again that he 
acknowledges that there was no sign of inflation. What is interesting 
is what he says and what he implicitly refutes. The most striking thing 
to me about this is the difference between the April 24 speech of Mr. 
Meyer and the May 8 speech of Mr. Greenspan.
  For example, Mr. Meyer on April 24 explicitly reaffirms his belief in 
the existence of the concept known as the NAIRU, the nonaccelerating 
inflation rate of unemployment. That is a concept which says that there 
is a number in the unemployment figure which we can go below only if we 
are prepared to see inflation. If we get unemployment too low, this 
says, inflation inevitably results. Mr. Meyer is one of the members of 
the Board of Governors, one of the seven.
  Mr. Greenspan told the Committee on Banking and Financial Services 
when we were last able to talk to him, because it was a hearing that 
had to be held statutorily, the chairman could not prevent it from 
happening; Mr. Greenspan said that he did not believe in the NAIRU, he 
did not believe in that concept, the notion that there was a fairly 
clear number fixed somewhere. Maybe not a clear but a fixed number 
which, if you went below it, would cause inflation. Frankly, many of us 
were pleased to hear him say that because we had thought that the 
Federal Reserve not only believed in such a concept but for many years, 
and this is very relevant as we analyze what is happening here, for 
many years it seemed clear that the Federal Reserve thought 6 percent 
was the number. It seemed clear that the Federal Reserve, certainly a 
lot of economists who were supporters of the Fed's approach wrote that 
6 percent was the number, and that if we got unemployment down below 6 
percent that we would be having serious problems. That, of course, 
means millions and millions of Americans out of work. I believe 1 
percent is 1,360,000. So we are talking about 7 or 8 million people out 
of work, who are trying to find work, as defined, not counting people 
who have gotten discouraged and are not even trying.
  Then the unemployment rate began to drop, and it dropped to 5.5 
percent. And no inflation appeared. This is important. We are not 
talking about whether or not once we get below the number, we have been 
lucky not to see any inflation temporarily. The unemployment rate has 
clearly been significantly below what mainstream Federal Reserve 
opinion thought was the inflation accelerator for some time and it has 
not happened.
  Finally, it went below 5.5. It went to 5.2. Then it went to 4.9. At 
5.2 the Fed jumped in. It did seem clear that that 0.3 percent, at 
least for Mr. Meyer, was kind of the trigger point. Understand, 0.3 
percent of unemployment, and Mr. Meyer in his April 24 speech said that 
while he would rather not see more unemployment, he did not consider it 
a bad result if the Fed made the mistake of being tight when it need 
not be as opposed to the mistake of not being tight when it should have 
been. He said, an increase in the modest unemployment rate of 0.3 
percent, is what I am imputing is what he means, that that was not a 
bad result although it was not his preferred result. He said many 
people, implicitly people at the Fed, thought that was a good thing. 
That is 400,000 people out of work, 418,000 people out of work. That is 
not a bad thing, that is a terrible thing. That is devastation for 
perhaps 1 million families. We simply cannot allow that degree of 
casualness.
  Mr. Greenspan tries to repair the damage. Mr. Greenspan implicitly 
repudiates, it seems to me, much of what Mr. Meyer said. Mr. Greenspan 
said, ``No, no, no, we are not indifferent to unemployment. I wanted to 
raise interest rates because I think that is the best way to prevent 
unemployment.''
  I think once again, Mr. Speaker, we have seen why we need to have 
hearings. Is there or is there not a belief in the concept of the 
nonaccelerating inflation rate of unemployment? Mr. Greenspan says no; 
Mr. Meyer says yes. That is perfectly legitimate for members of a board 
to disagree. What is not legitimate is for the Congress not to be able 
to have a public debate about this.
  But then let me go back to Mr. Greenspan. He does have one strawman 
in here, Mr. Speaker, and I think in general he does a very fair job of 
debating this, as I said, accepting the bona fides of the opposition as 
we accept his; but he says at one point, while he acknowledges that 
there have been structural changes in the economy which allow us to 
have more employment, less unemployment, without inflation, he does 
say, however, ``Our production system and the notion of capacity are 
far more flexible than they were 10 or 20 years ago.'' That is his 
concession, or his acknowledgment. I should not say concession; that is 
his acknowledgment that we can be more productive and therefore have 
less unemployment without inflation.
  But he then goes on to say, ``Nonetheless, any inference that our 
productive capacity is essentially unlimited is clearly unwarranted.'' 
Mr. Speaker, that inference is not only unwarranted, it is uninferred. 
That is an unworthy strawman. No one I know of, and I have been very 
critical of the decision to raise interest rates and of the Fed's 
general orientation, and I have worked with a lot of the others who 
have been critical, no one has come close to suggesting that our 
productive capacity is unlimited, or even essentially unlimited.
  We have said that the evidence is clear that the Fed has been unduly 
pessimistic, that there are significant structural changes that allow 
us to do better than we have been doing, and we believe on that basis 
that the decision to raise by 0.25 percent was a mistake.
  Mr. Greenspan says here, more carefully than Mr. Meyer, ``Well, maybe 
it was a mistake, but if it was, it was a pretty small mistake and it 
will not have any serious negative consequences.'' That I agree with, 
if it is the only mistake. But that is part of the question. Have we 
here confronted the situation in which we have got one 0.25 percent 
increase, or is this the first of several? And we will be having a 
meeting again next week and we will have a meeting again in 6 weeks. 
The problem is that if you read Mr. Meyer's approach, if you believe in 
a nonaccelerating inflation rate of unemployment, then when the 
unemployment rate dropped to 4.9 percent, that would

[[Page H2484]]

argue strongly for a further increase. If you read Mr. Greenspan's 
approach, there is not the same kind of argument as many in the market 
believe.
  One thing that is relevant here is that in one of the articles, I 
guess Saturday's New York Times, defending Mr. Greenspan against the 
accusation that he is a little indifferent to unemployment, one of the 
people quoted in his defense said people do not realize that he stood 
up to great pressures within the Federal Reserve system to raise 
interest rates more.
  That is a fair point. Mr. Greenspan is not the entire Federal 
Reserve. Chairmen are very dominant there, but there are other 
Governors. There are the presidents of the regional banks, five of whom 
have a vote, though they are not in any way public officials, but they 
have a vote on this very important economic question.

  That seems to me also a fit subject for a hearing. What is the 
situation there? Mr. Meyer believes in a NAIRU. Mr. Greenspan does not. 
The believers in a NAIRU are probably going to be more hawkish, because 
to them good news is bad news. If you believe in that concept, that 
there is a nonaccelerating inflation rate of unemployment, then every 
bit of progress we make in reducing unemployment is bad news. I think 
we ought to know whether it is that which is motivating people or not.
  Take Mr. Greenspan's defenders at their word. They say Mr. Greenspan 
is himself flexible on this and understands the importance of jobs, but 
he is under pressure from his colleagues. How much pressure is he under 
from colleagues who believe in a concept known as the NAIRU whereby 
progress in getting unemployment down to 4.9 percent argues strongly 
for an increase even, and this is important, even in the total absence 
of inflation, not just the absence of inflation currently but in the 
absence of indicators of inflation, in the absence of increases in the 
employment cost increase, in commodity prices. That is the point.
  Read Mr. Meyer's speech and read Mr. Greenspan's speech. In neither 
speech do they argue, either one of them, that there were any 
significant indicators of inflation about to come. Mr. Greenspan does 
talk about early indicators of tightening in the labor market. But we 
still have lagging wages.
  Indeed, to show how noninflationary things are and to get back to the 
point of checking up on what people said, just as we had people at the 
Fed say if you publish the minutes, if you simultaneously announce what 
the FOMC did, it will be destructive to economic stability. We had an 
argument about the minimum wage in this Chamber right here in the 
previous Congress, and many people, the majority leader and others, 
said if you raise the minimum wage, it will be disastrous for the 
employment figures of low wage people, and some people said it will be 
inflationary. Raise the minimum wage and you will have an inflationary 
effect because it will ripple up through the wage base and it will 
cause unemployment.
  We did raise the minimum wage. What has happened since we raised the 
minimum wage? Inflation has remained at an extraordinarily low level 
and unemployment has dropped significantly. According to the figures 
that I have seen, the one area where there was some increase in wages, 
other than at the very top where things have been doing pretty well, 
one area where there was some increase in wages was precisely among the 
beneficiaries of the minimum wage increase. Raising the minimum wage 
appears to have worked very, very well. It brought about some increases 
in income for working people at the low end of the spectrum and it did 
it without causing any unemployment and without causing any inflation. 
In fact, simultaneous with the implementation of the minimum wage, we 
have seen an unprecedented degree of low unemployment without any 
inflationary impact. The increase in the minimum wage did not cause 
that, but that was not why we raised the minimum wage. We did not raise 
the minimum wage to drop unemployment or to hold down inflation. We 
raised the minimum wage to provide some social justice to hardworking 
people. The argument was that by doing that, we would be increasing 
inflation and increasing unemployment, and those who made that argument 
were wrong. It is now demonstrable, that having raised the minimum 
wage, we were able to increase social justice, provide money to working 
people who badly needed it to support their families, and they still 
cannot support them at a decent level, but they come closer, and we did 
it without any of those negative consequences.
  All of these are relevant. They are relevant because I must say it is 
clear to anyone who has followed the Federal Reserve that the arguments 
of the people who are dominant at the Federal Reserve were such that 
one would have expected the increase in the minimum wage to have had 
negative effects. Tell people 2 years ago at the Federal Reserve that 
we were going to raise the minimum wage and get unemployment down to 
4.9 percent and have the high growth that we have had, relatively high 
growth, and they would have guaranteed that there would have been 
inflation, and they were wrong.
  We are all wrong from time to time when we deal with these kinds of 
uncertainties. I do not cite their being wrong to disqualify them from 
the debate. I do say this, though: When you have been wrong on a 
central question, when you have been exceedingly excessively 
pessimistic about the ability of the economy to grow without inflation 
and if unemployment had dropped without inflation, then you ought to be 
more reluctant than they are to repeat their errors, because that is 
what we are now having. We are having the Federal Reserve raise 
interest rates and slow down growth based on the same kind of analysis 
which has been proven wrong in the past.
  I do believe, even in Mr. Greenspan's speech, and it is more 
thoughtful and balanced, I believe, than Mr. Meyer's, there is still an 
underestimate of the pain of higher unemployment. It is especially the 
case as we deal with the welfare bill. The welfare bill, with regard to 
people on AFDC, and in one little noticed part, little noticed as far 
as the public is concerned, the part that restricts food stamps to 
single individuals between 18 and 55 to 3 months out of every 3 years, 
what this does is greatly increase the penalty for being unemployed in 
this society. Under that welfare bill, people who are not working will 
find their lives unbearable. There simply will be no honest way they 
can sustain themselves.
  We know that the people on food stamps and the people on AFDC on the 
whole would be the least likely to get hired. An economy which is not 
rapidly growing and creating a lot of jobs is not an economy in which 
the people whose benefits were severely restricted by last year's 
welfare bill will find work. When the economy drops to 4.9 percent, it 
is realistic to think about putting these people to work. If it goes 
back up to 5.5, which I must say I am convinced Mr. Meyer thinks is a 
NAIRU and which as I read the New York Times apparently a lot of other 
people at the Federal Reserve thinks is a NAIRU, these are people who 
think an unemployment rate of 5.2 is a temporary aberration. Again, 
remember, they did raise the interest rates including Mr. Greenspan. If 
they thought 5.2 unemployment were sustainable without causing 
inflation, they would not have raised interest rates. They clearly 
believe we have got unemployment, at least temporarily, lower than it 
can be. What they are then doing is saying, ``OK, we'll have to go back 
up.'' That will reverse our chances of reducing welfare.
  The New York Times on Sunday, I think it was, or Saturday, talked 
about the progress in reducing the welfare rolls. They quoted a study 
by the President's Council of Economic Advisers, Janet Yellen, herself 
a former member of the Fed, and the largest single factor contributing 
to the reduction in welfare rolls was economic growth. Forty percent.

                              {time}  1315

  Mr. Speaker, if in fact people at the Fed are right, those who think 
that Mr. Greenspan has not been hawkish enough, and I would like to 
have a hearing to know exactly who is who and what is what. You know, 
they are going to be appointing two new members, the President has 
appointed two new members, and there will be confirmation hearings, I 
hope, in the other body.
  Interestingly, the last time the other body had confirmation 
proceedings,

[[Page H2485]]

when the Senator from Iowa [Mr. Harkin] tried to have hearings on this 
subject, have a debate on the floor of the Senate, he was told, as we 
have been told here in the House, that that was not appropriate.
  Well, we have learned from the New York Times' defense of Mr. 
Greenspan on Saturday there is a disagreement within the Fed. There is 
pressure in the Fed on Mr. Greenspan to be tougher. There is Mr. Meyer, 
who believes in a nonaccelerating inflation rate of employment. Should 
that not be debated? Should we not know what the two new members think 
about this, on this critical subject?
  Mr. Speaker, we still have a very fundamental issue before us. Mr. 
Greenspan's speech is a justification of a decision to raise interest 
rates in the total absence of any signs of inflation because the danger 
of not acting, he says, are too great, and it really comes down to 
basically we cannot stand this much prosperity, things are too good to 
be true, although he does acknowledge that there may be reasons for it. 
A 0.25 percent increase is one thing. A series is another. Whether or 
not there is a nonaccelerating rate of inflation, a nonaccelerating 
inflation rate of unemployment, whether or not there have been 
permanent productivity gains, whether or not the overestimate that some 
see in the Consumer Price Index in fact means that there is a similar 
over estimate of inflation. Inflation may be even less if you believe 
what they say than it is in the economy. What is the balance within the 
Federal Reserve on this?
  And one other question because the implicit justification for raising 
rates in the absence of any inflation is a little bit of inflation will 
absolutely spiral out of control. It is the chain reaction theory. We 
are told that 400,000 more people unemployed is a small price to pay 
because the alternative would be not choking off inflation way before 
it appears because once it appears it is too late.
  Well, that also ought to be debated. That also ought to be talked 
about. Once again that is a throwback to an earlier time. All those 
factors which have retarded inflation logically retard the growth of 
inflation as well, and those are again issues that this House ought to 
be debating. What we ought to have is in fact a hearing, and maybe we 
even ought to bring out a resolution about some of these subjects 
because the important questions that effect this economy are being 
decided by the Fed, and they are being decided because of the refusal 
of the leadership of this House to schedule hearings on it in that kind 
of very, very restricted fashion.
  Mr. Speaker, obviously the chairman of the Committee on Banking and 
Financial Services has succeeded in holding off a hearing before the 
next meeting of the Federal Open Market Committee, which will be a week 
from tomorrow. I urge Members to read Mr. Meyer's speech, read Mr. 
Greenspan's speech. There is a serious debate going on in this country 
about what we can and cannot do.
  One thing we should understand, if the pessimists at the Federal 
Reserve are right, what that means is we have grown these past months, 
maybe years, more quickly than we can sustain. So those who think that 
we have problems yet to be seriously resolved, those who want to make 
more progress in absorbing welfare recipients and people on food 
stamps, understand the implications of what the Federal Reserve is 
saying, not yet, too soon. We must do this more slowly. There are other 
implications. We will be back debating trade questions.
  We now, I think, have a consensus. Some people try to deny it when we 
debated NAFTA and GATT. Trade does help some people and hurt others. 
Even those who believe that overall trade helps the economy, as I do, 
must acknowledge that there will be hard-working on the whole lower 
income people in this country who will be hurt by trade, people in the 
garment and textile industry, people, as was recently documented on the 
Texas-New Mexico border. There was an article about difficulties in El 
Paso.
  A rational way to go forward, as a Washington Post editorial argued a 
while ago on behalf of fast track for trade, is to go ahead with trade 
but to use our resources, particularly the increased wealth that we are 
gaining, to try to deal with those who are getting hurt. Let us do some 
compensation. One of the things that the New York Times recently talked 
about with regard to people from El Paso is the difficulty people have 
in qualifying for trade adjustment assistance.
  Why this difficulty? Why do we make people jump through these hoops? 
We know people are getting hurt. Why not err on the side of helping 
people who want to work go to work? Well, the Federal Reserve's 
decision is again central to this. People who lose their job because of 
trade are much less likely to find new jobs in an economy in which the 
central bank believes that there is a nonaccelerating inflation rate of 
unemployment and who believe that the economy has been growing too fast 
lately and that what we need is fewer jobs. If you do not have a rapid 
growth economy, if you do not have significant job creation, then you 
make difficult obviously the problems of the welfare recipients. You 
also greatly exacerbate the resistance to trade that people deplore 
because those who face a loss of jobs in a slow growth economy are not 
going to be easily persuaded to go ahead with that and allow it to 
happen in the hopes that they will be retrained and be given new jobs. 
These are all the kinds of questions we need to deal with.
  And the final point has to do with the budget deal. We had a budget 
deal announced 10 days ago. It appears to have been somewhat 
disannounced since then. And on Thursday, when it was announced, many 
of us were extremely critical. On Friday, some of the points on which 
we were most critical were alleviated. I still believe as I have seen 
that deal, it is a mistake for reasons I will go into at some other 
time, but the extra growth that produced a couple hundred billion 
dollars more revenue was helpful. Actually if we have a few more days 
like we had 10 days ago, I suppose this economy would be in great 
shape. We appear to have grown more in a few hours on that one Thursday 
when we found $225 million over a few years than any Nation has ever 
grown in history. But once again that was a result of economic growth 
that at least a substantial number of people in the Federal Reserve 
think was too rapid.
  And here's a paradox. We are told that we can have this budget deal 
fueled by a level of economic growth, which at least some people in the 
Federal Reserve think is unsustainably high. Now what are we going to 
do about that? What is the solution here? Do we have a majority at the 
Federal Reserve prepared to put on the brakes so we cannot generate the 
revenues which the Congressional Budget Office is now calling for?

  If you read Mr. Greenspan's speech of May 8, maybe; if you read Mr. 
Meyer's speech of April 24, probably; and once again that is an 
important subject about which we ought to be having a hearing.
  So, Mr. Speaker, I appreciate Mr. Greenspan's willingness to debate 
the issue. I read his defense of this decision to cut off growth, not 
cut it off, but slow growth down, and I come away grateful for his 
willingness to engage in the debate, but unpersuaded because at the 
core, as in Mr. Meyer's speech, he essentially acknowledges that what 
we had was a fear that something that is not now happening might happen 
in the future because they really cannot believe that things can go 
this well.
  Well, they have believed that for some time, and they have been going 
this well, and I am hoping that we can get Mr. Greenspan and his 
colleagues to be willing to accept a little victory. But while 
obviously there is room for decent people of good will to differ about 
this, there ought not to be room for difference about whether or not 
this is a subject to be debated in Congress.
  And I will close as I began, Mr. Speaker, by welcoming Mr. 
Greenspan's vigorous and thoughtful and respectful entrance into this 
debate and by regretting the fact that because the Republican 
leadership of the House does not appear to me to have enough confidence 
in the democratic processes, that this debate is going on largely 
outside of our Chambers.

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