Hearing of the House Financial Services Committee - Semiannual Monetary Policy Report to the Congress

Federal News Service

February 11, 2004 Wednesday

HEADLINE: HEARING OF THE HOUSE FINANCIAL SERVICE COMMITTEE

SUBJECT: SEMIANNUAL MONETARY POLICY REPORT TO THE CONGRESS

CHAIRED BY: REPRESENTATIVE MICHAEL OXLEY (R-OH)

LOCATION: 2128 RAYBURN HOUSE OFFICE BUILDING, WASHINGTON, D.C.

WITNESSES: FEDERAL RESERVE BOARD CHAIRMAN ALAN GREENSPAN

BODY:
REP. BERNARD SANDERS (I-VT): Thank you, Mr. Chairman.

Mr. Greenspan, nice to see you again. I always enjoy your presentations, as you know. And I never cease being astounded about how your observations about our economy are so far removed from the reality that I see every day in my state-middle-class people-and what I see al over the country. It's like we live in two different worlds.

You talk about optimism. I see in my state and around this country that the middle class is shrinking; that ordinary people are working longer hours for lower wages. I see that since 2001, 3 million more Americans have become poor. I see more and more Americans without any health insurance. I see retirees now losing the benefits that corporate American promised to them. I see older workers worried about the pensions that they were promised, but which they may never get. And that's what I see. That's the bad news.

But the good news, which I haven't talked about enough, is that many of your friends, the wealthiest people in this country, are doing phenomenally well. While over the last 27 years, the real income of the bottom 90 percent of American taxpayers actually fell by 7 percent, the income of the top 1 percent rose by 148 percent, and the income of the richest one-one-hundredth of 1 percent, the really good friends of yours, they rose by 599 percent. So maybe that's the difference in perception. Some of us go out, we talk to middle class people and working people.

Now, Mr. Greenspan, over the last three years the U.S. has lost almost three million good-paying manufacturing jobs, representing 16 percent of our total factory workforce. Manufacturing employment has gone down 43 consecutive months, which hasn't happened since the Great Depression. Due to our disastrous trade policies, which you advocate for very, very strongly, American companies have shipped millions of decent-paying jobs overseas to countries like China where, if workers try to form a union they get fired; they try to protect the environment, they may go to jail. People like the CEO of General Electric, Jeffrey Immelt, and many others stand up proudly to advocate how they're going to shut down plants in America and move to China. And while decent-paying manufacturing jobs in this country decline, the largest employer in the United States is now Wal-Mart, who pays people-which pays people poverty wages, fights unions ruthlessly, and provides miserable benefits. A new study came out, as you may be aware, that indicated that the new jobs being created in this country, primarily service jobs, Wal-Mart-type jobs, pay 21 percent less than the old jobs that we are losing. Not only are we losing manufacturing jobs, we're now losing white collar information technology jobs, because they're going to India.

Now, last year, in what I thought was an incredible statement, you stated, and let me quote it, quote: "Is it important for an economy to have manufacturing? There is a big dispute on this issue. If there is no concern about access to foreign producers of manufactured goods, then I think you can argue it does not really matter whether or not you produce them or not," end of quote, Mr. Alan Greenspan. In other words, according to you, it doesn't matter whether we get our goods purchased in China from people making 20 cents an hour, or they're produced in the United States from people making $20,000 -- $20 an hour.

Now, interestingly-and this is my question-the Bush administration apparently agrees with you. According to the Seattle Times, the Bush administration believes, and I quote, "The movement of American factory jobs and white collar work to other countries is part of a positive transformation that will enrich the U.S. economy." So my question is, do you agree with the Bush administration that it doesn't matter if we lose good-paying manufacturing and information technology jobs and they're replaced by low-wage Wal-Mart jobs?

MR. GREENSPAN: Congressman, let me actually agree with some of your figures but give you a different perspective on what creates them.

First of all, if all of the jobs are being lost in the United States over the years-and this goes back to the problems we used to have where we were losing jobs to low-wage Japan, then we were losing jobs to low-wage Mexico, then to low-wage China, now the Mexicans are complaining that they're losing jobs to low-wage China. Through all of this, the real wage of the average American has been rising, and rising at a reasonably strong clip. The question that you I think properly raise is the income distribution question, because it is the case that people at the lower end of the skill spectrum have had very considerable difficulty in raising their real wages, where those at the upper end have shown significant so-called skill premiums.

And what this turns out to be, regrettably, is a problem of a mismatch between a growing-more sophisticated conceptual capital stock, meaning the means by which we produce goods and services in this country is ever increasingly more ideas and skills, and less physical input and manual labor. That's been the long-term --

REP. SANDERS: I don't mean to interrupt you, sir, but-and I wish we had more --

REP. OXLEY: The gentleman's time has expired.

REP. SANDERS: You didn't answer my question.

REP. OXLEY: The gentleman's time has-the gentleman --

REP. SANDERS: Do you agree with the president --

REP. OXLEY: The gentleman's time has expired.

REP. SANDERS: Do you agree with the president that it's a good idea that we lose good-paying jobs?

REP. OXLEY: The gentleman from the first state, Governor Castle.

REP. MICHAEL CASTLE (R-DE): Thank you.

REP. SANDERS: Can he answer the question?

REP. OXLEY: The gentleman's time has expired.

MR. GREENSPAN: I can't answer the question without answering the question, and I'm trying to do that.

REP. SANDERS: Well, you didn't answer the question.