House Budget Committee Hearing: The State of the U.S. Economy
Chairman Paul Ryan – Opening Remarks As Prepared for Delivery
Before we begin, I want to welcome Rep. Bob Woodall from Georgia to the House Budget Committee. He will be officially on board this afternoon after the adoption of the House resolution. I ask unanimous consent that Rep. Woodall be permitted to participate in this morning’s important hearing. Without objection.
Thank you, Chairman Bernanke, for coming before our Committee today to talk about the state of the economy.
The U.S. economy continues to suffer from slow growth and unemployment remains unacceptably high.
Continued uncertainty about our economic future is hindering job creation today.
Washington is creating much of this uncertainty, and the explosive growth of our federal debt is by far the biggest source of this uncertainty.
By sowing doubt about future tax rates, interest rates, and price stability, government is hindering businesses’ ability to plan and invest, creating a drag on economic growth today.
The purpose of today’s hearing is to discuss the fiscal and monetary policies that have led us here.
On the fiscal side, the CBO projects a $1.5 trillion deficit this year with publicly-held debt rising to 69 percent of GDP by the end of the year – up from 40 percent at the end of 2008.
In a few short years, the CBO projects government spending to drive our debt to crisis levels, overwhelming the entire economy and drowning the next generation in red ink.
Endless borrowing is not a strategy. We must restore the foundations of economic growth – low taxes, spending restraint, reasonable regulations, and sound money – to help restart the engines of economic growth and job creation.
We must not neglect the “sound money” part of the equation. The Federal Reserve has undertaken another round of quantitative easing – purchasing Treasury bonds in an attempt to lower borrowing costs and stimulate the economy.
My concern is that the costs of the Fed’s current monetary policy – the money creation and massive balance sheet expansion – will come to outweigh the perceived short-term benefits.
These costs may come in the form of asset bubbles and price pressures. We are already witnessing a sharp rise in a variety of key global commodity and basic material prices, and we know that some producers and manufacturers here in the United States are starting to feel cost pressures as a result.
According to the core price indexes that the Fed watches closely, these cost pressures have not yet been passed along to consumers – but the inflation dynamic can be quick to materialize and painful to eradicate once it takes hold. The steepening of the yield curve this week certainly adds to these worries.
I’m concerned that normalizing monetary policy when the time comes may be difficult – not only for the pure technical challenges of shrinking the Fed’s substantial balance sheet or correctly judging economic turning points, but also for political reasons.
It is hard to overstate the consequences of getting this wrong. The dollar is the world’s reserve currency and this has given us tremendous benefits.
For the sake of our economy in particular and the global recovery as a whole, it is vital that we focus on dollar stability if we are to prevent the kind of beggar-thy-neighbor currency conflicts that can destroy economic recoveries.
Our currency should provide a reliable store of value – it should be guided by the rule of law, not the rule of men.
There is nothing more insidious that a country can do to its citizens than debase its currency.
Chairman Bernanke: We know you know this. The Fed’s exit strategy and future policy – it will determine how this ends.
We know you are concerned about this nation’s fiscal trajectory. We have asked you to come here today because our fiscal policy is on a dangerous track. That is well established.
But, many of us fear our monetary policy is on a similar track as well.
I firmly believe that a course correction here in Washington is sorely needed to help get us back on the right track. While it won’t be easy, Americans have risen to greater challenges and prevailed in the past.
Thank you for your indulgence and at this time, I would like to yield to the Ranking Member, Mr. Van Hollen.