Mr. Chairman, I am very pleased to have this opportunity to be here today as the Committee considers the nomination of Janet Yellen to be the Chairman of the Council of Economic Advisors. Janet Yellen is a distinguished economist. She has a solid background both in academia and in government, and I am sure she will serve the President and our country with distinction.
There are a number of economic issues facing our country that will have an enormous impact on kind of future the American people will enjoy, and the quality of the analysis and advice the federal government gets from the CEA will have an enormous impact on the policy choices we make. I therefore think it is critical that the CEA be headed by an economist of her distinction.
The challenges the future holds for the United States are daunting, even though the current economic news is generally good. The economy continues to expand, and according to the Congressional Budget Office, in the report it released last month entitled, "The Economic and Budget Outlook: Fiscal Years 1998 - 2007", economic growth seems likely to continue into the future. And the Labor Department announced last week that the Wage Cost lndex rose only 0.8 per cent in the fourth quarter of 1996, indicating that the current recovery is not likely to overheat, and that a return of inflation is unlikely.
The budget news is also much better than it was not very many years ago. The budget deficit in FY '96 was only slightly more than one-third of what it was in 1982 -- down from over $290 billion then to only $107 billion in FY '96. And the Congressional Budget Office's newest projections of federal baseline deficits over the next 10 years are "one-third lower than last year's."
Despite the fact that the economy is generally strong, inflation is in abeyance, and the budget deficit is in retreat, the longer-term outlook illustrates that we are rapidly running out of time to address the challenges now on the horizon. CBO's summary analysis pointed out that "Despite the improved outlook through 2007...... the budget situation will start to deteriorate rapidly only a few years later with the retirement of the first baby boomers and the continued growth of per-person health care costs."
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. The projections for the rate of economic growth over the next decade are also far too low, only 2.1 per cent.
The CEA has an important role in helping the Congress and the President address these budget issues, and in helping us create a foundation for a future including higher economic growth, higher standards of living, and expanded opportunity for every American.
I want to conclude by stating one final truth, which is that the demographic, budget, and
fiscal challenges we face are not unique to the United States. The entire industrialized world has
to address the same set of issues. Change is therefore imperative. We can no more ignore the
need for change -- now -- than we can ignore the enormous changes now underway in the world
economy. These momentous changes require real leadership, which is why the position of Chairman of
the Council of Economic Advisors is so important. Based on Janet Yellen's record to date, I am confident
she will meet these new challenges, and that she will be an excellent Chairman of the CEA. I am pleased
to support her nomination, and I hope this Committee will act promptly to recommend her to the full
Senate.
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