Statement of Rep. Carolyn B. Maloney Ranking Member Domestic Monetary Policy, Technology, and Economic Growth Subcommittee House Financial Services Committee February 28, 2001
Thank you Chairman Oxley. Welcome Chairman Greenspan.
As the person in the country whose job is to read the direction of the economy many years into the future, it is particularly appropriate that you are appearing before the Committee on the morning after the President's speech.
To justify the size of his tax cut, the President is relying heavily on the CBO forecast of a $5.6 trillion surplus over 10 years.
As Chairman Greenspan can tell us, forecasting the economy months into future, let alone 10 years into the future, is a process wrought with guesswork and error. Risking our budget surpluses with a tax cut based on a 10-year projection reminds me of another Bush program.
Perhaps we should call the President's approach "faith-based budgeting."
With all respect to Chairman Greenspan, the Fed's recent actions have shown just how difficult it can be to forecast the economy. The Fed may have contributed to the current economic slowdown by raising interest rates six times from June 1999 to May 2000.
As late as the December Federal Open Market Committee meeting the Fed maintained a neutral stance on the pace of economic growth -- forcing them to act dramatically with a full point rate cut when they changed their position last month.
CBO's own report on the surplus states that, due to uncertainty resulting from current economic conditions, "The longer-term outlook is also unusually hard to discern at present." (The Budget and Economic Outlook: Fiscal Years 2002-2011, Congressional Budget Office, Chapter 5, "The Uncertainty of Budget Projections.")
While the outlook for the next ten years is uncertain we can be sure that in the ten years following (from 2011-2021) the country faces fiscal challenges of a historic level as we deal with entitlement pressures brought on by the retirement of the Baby-boomers.
In light of this uncertainty and our aging population, I urge my colleagues to follow a prudent budget course that returns money to all of the American people in a tax cut but does so in a manner that allows us to continue to pay down the debt while not touching any of the Social Security and Medicare surpluses.
Thank you Mr. Chairman, I look forward to Chairman Greenspan's comments on these and other issues.