I would like to thank Chairman Greenspan for appearing before the Banking Committee this morning. I always look forward to hearing his views on the state of monetary policy and the economy.
Under his guidance, the Federal Reserve has done a tremendous job of focusing on a stable and sound monetary policy that is essential for strong economic growth. There is no doubt that Mr. Greenspan's solid leadership has produced confidence and certainty among investors throughout the world.
Chairman Greenspan, when you became Federal Reserve Chairman in August of 1987, gold was $461 per ounce and thirty-year treasury bond yields were almost 9%. Today, gold prices are down to around $350, thirtyyear treasuries are trading around 6.6%, and for the past five years, inflation has remained around 3%.
I firmly believe that the main reason for low inflation is your careful management of monetary policy. Your dedication to price stability is apparent, and you should be commended for the current state of low inflation.
As we have discussed in previous hearings, I believe that monetary policy is most effective when focused on a single goal of price stability. Unfortunately, under the current Humphrey-Hawkins law, the Fed is expected to follow numerous mandates that in the long-run could be very damaging to the economy. Easing monetary policy for short-term gains will only lead to higher price levels in the future. This is why I intend to reintroduce the Economic Growth and Price Stability Act, which would limit the Federal Reserve's mandate to the primary goal of price stability.
Even with relatively low inflation and interest rates, the economy is not performing to its potential. We have seen our economic growth rate fall from a robust 4.4 percent average during the last five expansions to around 2.5 percent since 1992. One of my concerns is that we have become complacent about current growth levels.
Of course, many incorrectly blame the Federal Reserve for slow economic growth. However, the Federal Reserve should remain focused on price stability. Chairman Greenspan and I certainly would agree that simply printing more money or artificially holding down interest rates is not the way to boost long-term economic growth.
Genuine growth comes from hard work, creative ideas, improved productivity, and capital formation. Therefore, we must be sure our fiscal policies foster and reward saving, investing, and risk taking while the Federal Reserve is best focused on reducing inflation.
I believe our economy can and should grow faster. Stronger growth would mean more jobs, better paychecks, and a higher standard of living for all Americans. And, faster growth would help in the effort to balance the budget by boosting revenues without raising taxes. Stronger economic growth would bring new opportunities to all Americans. This is something every policymaker should strive for.
I believe the best way to achieve stronger growth is to remove the fiscal burdens that have been placed on this economy. In recent years, major tax hikes, excessive regulations, and increased government spending have taken their toll on the economy and the American family. The Federal Reserve has done an outstanding job with monetary policy and controlling inflation. Now, it's time for Congress and the Administration to do their part by pursuing a more pro-growth fiscal policy.
I'm optimistic to see our current budget debate focused on bipartisan support for balancing the budget through less spending and lower taxes. With lower tax burdens, less regulation and a balanced budget, this economy can maximize its potential.
I welcome Chairman Greenspan and I'm anxious to
hear his analysis.
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