Mr. Chairman, I am very pleased to have this opportunity to hear the distinguished Chairman of the Federal Reserve Board, Alan Greenspan, present his views on the conduct of monetary policy and the state of our economy.
While economic turmoil engulfs much of the Pacific Rim, the U.S. economic recovery continues to roll on. We have produced over 13 million new jobs since 1991. The economy has been
expanding for over 7 years now, and economic growth seems likely to continue into the future. Importantly, inflation was actually zero last month, which is just the latest evidence that inflation
is under control.
The budget news is, if anything, even better. The President actually proposed a balanced budget
this year. That is, it seems to me, an accomplishment worth celebrating, especially when you
consider that the deficit was $280 billion just 7 years ago. Now we are actually talking about
budget surpluses -- perhaps 10 years of surpluses. We still have a number of major fiscal policy
challenges to face --particularly the challenges related to the demographic changes now
underway -- but we have achieved a remarkable amount of progress since President Clinton was
first elected in 1992.
This good news is also a tribute to the cooperation between the Administration and the Federal
Reserve, and to a blend of fiscal and monetary policies that worked together to promote the
interests of the American people. The President, Chairman Greenspan, and Secretary Rubin all
deserve a commendation from this Committee for the roles they played in producing this
economic and budget success.
Despite the fact that the economy is generally strong, inflation is in abeyance, and the budget
deficit is in retreat, we do not have the time to be complacent. In fact, we are already rapidly
running out of time to address the challenges now on the horizon.. The time to act to ensure that
Social Security and Medicare will be there for future generations of retirees is now. I therefore
hope this Committee will go beyond the relatively good news that we can reasonably expect over
the next few years, and begin to have an honest dialogue about what is on the horizon, and the
challenges the future holds for us and our children.
As I have stated in this Committee before, I think we need to focus on two interrelated issues, enhancing retirement security and creating public policies that encourage greater efficiency
in our economy and higher rates of economic growth. There is no issue more important than
retirement security; there is no issue more important to the future of every American. The challenges we face in ensuring that future generations of Americans will be able to enjoy the same kind of retirement security that current retirees have are immense. Social Security, the cornerstone of retirement security in this country, is currently underfunded and needs substantial reform to fulfill its mission in a future where there will only be two working Americans for every retiree, instead of the three there are now, and the five there were not very many years ago. And ensuring that Social Security will continue to serve the needs of Americans in the future becomes even more important as we consider the impact of the changeover in private pension plans from defined benefit plans to defined contribution plans -- a change that could add to the uncertainty facing future generations of retirees. Despite the good news on the deficit reduction front,
private savings rates in the U.S. are still far too low. Balancing the budget has yet to help increase the individual savings rate.
As we attempt to come to grips with these issues, however, it is worth keeping in mind that
the health care and retirement programs, which, together with the huge run-up in debt service
costs, are driving the increases in federal spending, are amazing successes. Poverty among
the elderly is currently at the lowest level since we have been keeping statistics, in no small part
because of the retirement and health security provided by Social Security, Medicare and
Medicaid. It is impossible to underestimate the difference these federal programs have made in
the lives of literally tens of millions of Americans, and to our country generally. What makes the
achievement even more remarkable is that we have accomplished this goal while holding Social
Security administrative costs below I per cent of benefits paid, and Medicare administrative costs
below 3 per cent of benefits paid -- levels far below anything the private sector has been able to
We in this Committee can make an important contribution in addressing all of these issues.
This Committee plays the key role in protecting the savings of the American people, and we have
jurisdiction over our financial system, which is critically important to both our future economic
health and the retirement security of American families. I hope we will meet our responsibilities,
and play our part in addressing the challenges resulting from demographic changes and rising
health care costs. If we do the right thing now, then we can be sure that the generations that will
follow us will have what all of us have had -- the opportunity to achieve more and live better
than our parents did.
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