[Congressional Record Volume 144, Number 34 (Tuesday, March 24, 1998)]
[House]
[Page H1413]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




           URGING THE FEDERAL RESERVE TO LOWER INTEREST RATES

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from New York (Mr. Hinchey) is recognized for 5 minutes.
  Mr. HINCHEY. Mr. Speaker, on Tuesday of next week, March 31, the 
Federal Open Market Committee of the Federal Reserve Board will meet. 
This is a critically important meeting, for out of this meeting the 
FOMC will recommend short-term interest rates for the foreseeable 
future.
  There are urgings coming to the Federal Reserve now from monetarists 
that watch the Federal Reserve Board, and those urgings are that the 
Federal Reserve should increase interest rates. If they do so, that 
would be a very serious mistake. It would be a serious mistake if these 
times were ordinary or normal. But, in fact, they are not ordinary nor 
normal, for we are beginning to experience the profound negative 
economic consequences of the financial crisis that is sweeping across 
east Asia. I say we are ``beginning'' to feel those effects, and we 
will continue to feel them and the full brunt of those effects will not 
express themselves on our economy until some time later this year, 
perhaps within the next 6 months to a year.
  The effect of the downturn result from this financial crisis in east 
Asia is going to be to suppress prices, and it is estimated that it 
will cost us substantially in terms of our own economic growth.
  Our economic growth rate now, which is in excess of 3 percent, could 
fall by more than 2 percentage points. In other words, we could be 
experiencing economic growth of only 1 percent or, at worst, our 
economic growth could fall into the negative range.
  We can begin now to buttress our economy from the negative effects of 
the financial crisis sweeping across east Asia if we act now. One of 
the ways, one of the most important ways that we can act is for the 
Federal Reserve now to lower interest rates. Interest rates at this 
particular moment are high by historical standards, high in real terms; 
in other words, high in terms of inflation. The inflationary rate 
currently in our economy is essentially zero. We are experiencing 
virtually no inflation whatsoever. Nevertheless, real interest rates 
are abnormally high in that particular context.
  Mr. Speaker, people will remember that in 1994 and 1995, the Federal 
Reserve raised interest rates six times during that period. Back then, 
that was a mistake and it cost us in terms of our economic growth. We 
would have recovered from the recession more fully and more quickly if 
the Federal Reserve had not raised those interest rates. But they did 
so. And those raised interest rates now stand.
  Mr. Speaker, we have interest rates today that are higher than they 
ought to be, and the Federal Reserve should lower them. They should 
lower them in any case, but particularly they should lower them in 
light of the fact that we are going to feel these profound consequences 
from the economic crisis sweeping across east Asia.
  What are those profound consequences? They will be, as I have 
indicated, a substantial loss in the rate of our economic growth. They 
will have the effect of depressing prices for goods manufactured in the 
United States. They will increase our trade deficit.
  Mr. Speaker, the trade deficit in goods alone is already increasing 
markedly, one might say dramatically. The trade deficit, for example in 
January in goods alone, was $18.8 billion. That is a record for a 
single month. We have never had a trade deficit for goods alone as high 
as $18.8 billion ever before. That is up by more than a billion dollars 
from $17.7 billion in December of last year. So we see already that the 
trade deficit in goods is going up and going up substantially.
  As that trade deficit goes up, as the full effect of the 
overproduction in East Asia comes into our market, the price of our 
goods is going to drop. That is going to cost us jobs. It is estimated 
that the cost in jobs could be as much as 1 million. We could lose as 
many as 1 million jobs in our economy as a result of the financial 
crisis in east Asia if we fail to act.
  One of the most important ways available to us to act to head off 
this substantial loss in economic growth, the substantial increase in 
the trade deficit, and the substantial loss in jobs is through our 
monetary policy. The Federal Open Market Committee has the ability to 
control monetary policy, and they can lower interest rates next Tuesday 
when they meet.
  I am now circulating a letter to the Members of the House asking them 
to join me in this letter to the Chairman of the Federal Reserve Board, 
Alan Greenspan, asking him to exert his influence in the Federal 
Reserve and in the Federal Reserve Open Market Committee to lower 
interest rates. It is critical that we do so in order to head off the 
dire consequences of this economic crisis.

                          ____________________