Tom Harkin

Mr. HARKIN

Mr. HARKIN. What is the unanimous-consent request?

Mr. HARKIN. Mr. President, how much time remains?

Mr. HARKIN

Mr. HARKIN. Mr. President, I wanted to discuss NAIRU because I think it is very important, because I think it is acting as a straitjacket. I think that Mr. Greenspan and the economists at the Fed are looking at NAIRU and abusing it. And in so doing, they are abusing what I believe to be the capacity of our economy to grow. I believe there is an equal body of evidence and data to suggest that we can reduce unemployment and at the same time reduce inflation. I believe it is worth the relatively small risk to go ahead and get these interest rates down, stimulate the economy. Let us have some growth. Why is it that we have to accept growth of 2 to 2.5 percent? That is like saying, ``America, a C-average is fine.'' I believe America can do a B-plus, and A. We can do it without inflation. That is why I want to talk about NAIRU. I will continue next Thursday on the Greenspan nomination. I will use my time at that time to finish my comments on NAIRU. I thank the Chair and I thank the Senator from Florida. I yield the floor.

Mr. HARKIN. Mr. President, the minority staff of the Joint Economic Committee prepared some charts that I think are illustrative of what has been wrong with Mr. Greenspan's leadership at the Federal Reserve. The first chart simply shows the speed by which the Federal Reserve lowered rates. I already went over that chart. I am going to put that back up because it goes with these other charts. Again, this first chart shows the speed at which the Federal Reserve reduces interest rates to get us out of recession. Going all the way back to 1957, the Fed acted very strongly to reduce interest rates. But in 1990, coming out of that recession, Chairman Greenspan did not act decisively and, thus, interest rates stayed abnormally high. Here is another chart. Let's see how fast the economy recovered. This is sort of the flip side of that last chart. This shows the growth of payroll employment from the bottom of the recession compared to those previous years going back to World War II. So here is the bottom of the recession; here is coming out of it. In the previous seven recessions, we see employment gaining rapidly. In fact, the average of the past seven, in the first 2 years after the depth of a recession, we have employment gains of over 7-percent growth. What happened after the 1990 recession? Here is Mr. Greenspan: We had no growth, no growth for almost 13, 14 months; negative growth. And then, finally, we came out a little bit, and after 24 months, we had about 1 percent growth in employment coming out of that recession. Again, my point being that Mr. Greenspan, first, did not recognize we were in a recession; second, when it became apparent we were in a recession, he acts too timidly to bring us out of that recession. On the other hand, if inflation is threatening, the brakes are slammed on at the first sign of a hint of inflation, not real inflation, but the threat of inflation. But when it is jobs and unemployment, well, we can linger for a while. The result is a very dismal record in getting employment back up after a recession. One year after a recession--1 year after a recession--basically no jobs at all. The third chart that I have shows another related fact, change in the unemployment rate. In the other seven recessions, we see considerable improvement in lowering unemployment, the proportion of the work force without jobs. That, unfortunately, was not the case for the 1990 recession. On average, for the seven recessions prior to 1990, the unemployment rate dropped about 20 percent off the rate at the end of each recession, and we see that here. There was a tremendous reduction in unemployment in the last seven previous recessions. What happened after the 1990 recession? Instead of going down, we went the wrong direction. Unemployment actually went up. It came down a little bit and leveled off after a couple of years, but still not back at even the rate at which unemployment was at the height, or I should say the depth, of the recession. So we were going the wrong way. We had very little recovery at all. Again, we need to have a balanced policy that says, ``My gosh, if we are going to recover from a recession, we have to reduce unemployment.'' We did in all the previous seven, but not in the one in 1990. Again, my point being that Mr. Greenspan acted too timidly and not in the right direction to get that unemployment down. So now I return to where I started today, and that is the 1994-95 period. We have a recession. Mr. Greenspan does not act decisively enough. We linger with high unemployment, we linger with low growth, no new jobs added, and then we come in to 1993, 1994, 1995. It has been almost axiomatically accepted around here and in America that if we lower the budget deficit, interest rates will come down. That is almost like a mantra that we all enunciate all the time: ``If we can reach a balanced budget, interest rates will come down and that will save the American people a lot of money.'' ``Reduce that budget deficit and we'll get the interest rates down.'' Well, OK. In 1993, the first year of the Clinton administration, bold action was taken to reduce the deficit. Now, you can argue about whether it was a tax increase and all that. We can get into that, and we can debate that, too. The fact is that the deficit started coming down. It started coming down--actually, I will even give President Bush credit-- actually, the deficit started coming down in late 1992 and early 1993. Part of that had to do some with Bush and his policies; some of it had to do with the fact when Clinton came in, the President and the Congress started talking about a budget that would begin cutting the deficit. Based on that, we thought interest rates would come down. The budget was passed that year and started to go into effect in October 1993. So in October 1993, the budget that we passed went into effect. The deficit started to accelerate down. In 2 years, the deficit was cut by over 40 percent in 2 years. It is now down--well, right now I can say compared to when Mr. Clinton came into office, the budget deficit is about 60 percent less. The budget deficit is coming down. You would think if the deficit is coming down, surely interest rates must come down, too. But after passing the budget of 1993, we kept our deficit coming down. Mr. Greenspan, in February of 1994, started raising interest rates seven times in one year, from 3 to 6 percent. As our deficit was coming down, Mr. Greenspan was raising our interest rates. My point is that it is not axiomatic, it is not absolutely certain that if we reach a balanced budget we will have lower interest rates. We will have lower interest rates if, and only if, we have a Federal Reserve System, and a Chairman, that will respond to those actions and reduce those interest rates as the deficit comes down. Obviously, there have to be other factors. When I say that even if we have a balanced budget and we have inflation that they should not raise interest rates--of course not, the Federal Reserve should respond to that. If we have inflation threatening, if inflation is there, yes, they have to put on the brakes. I am just saying in this period of time, we had no inflation threatening, we had high rates of unemployment, underemployed people in America, low wage growth, wage stagnation, we had a reducing deficit and we had a Chairman of the Fed raising interest rates. Please, somebody explain that to me. It defies logic. It can only happen if the philosophy that Fed Chairman has is that if he sees a mirage in the distance of the threat of inflation, he must raise interest rates. I believe that does our country a disservice because we have the capacity to grow in America. We have the capacity to grow. We have people who want to work. As I said, 348,000 jobs were created last month; but 500,000 people went out and looked for a job. People want to go to work. Businesses want to expand. Just read the article from the National Association of Manufacturers. Businesses want to expand. They want to grow. But the policies of the Federal Reserve System is keeping that from happening. To truly understand the Fed's 1994 seven consecutive rate increases, we have go back to the summer of 1993. Mr. Greenspan announced that he was abandoning the M2 indicator. I am not going to get into that. That is why we get into all these arcane economic terms. But he said he was abandoning the M2 indicator in favor of ``real interest rates.'' Despite the fact that this M2 indicator fell short of its midpoint targets in 6 consecutive years, giving indications of a possible recession, Mr. Greenspan instead feared that long-term rates were too low in comparison to short-term interest rates. As Mr. Greenspan noted in his September 1, 1993, testimony, short- term rates were nearly zero, and long-term rates were much higher. According to Mr. Greenspan, ``This configuration indicates to market participants that short-term real rates will have to rise as the headwinds diminish if substantial inflationary imbalances are to be avoided.'' That was his testimony before the House Subcommittee on Economic Growth and Credit Formation, September 1, 1993. OK. So for 1993, the Fed predicted a GNP rise of 2.5 percent and 2.5 to 3.25 percent for 1994. Despite the low projected growth rates and the fact that 8 million people were unemployed and another 4 million were involuntarily employed part time, Mr. Greenspan feared inflationary pressures because of this discrepancy between short-term and long-term rates. According to Prof. James Galbraith, this was the only justification for rate increases in 1994 and 1995. According to Mr. Galbraith, three points in Greenspan's February 22, 1994, Humphrey-Hawkins written testimony, made 3 weeks after Mr. Greenspan initiated the first of seven rate increases, clearly show that the Fed could not have raised rates on inflation-fighting policy grounds alone. No. 1, Mr. Greenspan said, ``On the inflation front, the deterioration evident in some indicators in the first half of 1993 proved transitory.'' No. 2, there was no clear evidence that expansion in 1993 was excessive and was going to carry over to 1994. This is Mr. Greenspan's testimony. No. 3, inflation had been falling, as Mr. Greenspan himself even noted. I am going into this because it has been said that this increase by Mr. Greenspan in interest rates and keeping them high--it has only come down a quarter of a point since February 1995 --is because of the threat of inflation. But in Mr. Greenspan's own words and in his written testimony, he basically says there was not inflation. No. 1, Mr. Greenspan said, ``On the inflation front, the deterioration evident in some indicators in the first half of 1993 proved transitory''--transitory, not long term. But for the year as a whole, 1993, the Consumer Price Index rose 2.75 percent, the smallest increase since the big drop in oil prices, since 1986. Broader inflation measures covering purchases by businesses as well as consumers rose even less. Again, these were transitory, not permanent, developments. The second point, there was no clear evidence that expansion in 1993 was excessive and was going to carry over to 1994. Again, Mr. Greenspan's own testimony: ``Nonetheless, markets appear to be concerned that a strengthening economy is sowing the seeds of an acceleration of prices later this year by rapidly eliminating the remaining slack in resource utilization.'' However, he went on to say, ``But it is too early to judge the degree of the underlying economic strength in the early months of 1994.'' Wait a minute. Mr. Greenspan, in his testimony, says, `` * * * markets appear to be concerned that a strengthening economy is sowing the seeds of an acceleration of prices later this year.'' However, he says, ``But it is too early to judge the degree of the underlying economic strength in the early months of 1994.'' In February 1994, he starts raising interest rates, when he says ``it is too early'' to judge it. That is why I say, Mr. Greenspan raises interest rates, slams on the economic brakes, not when inflation is threatening, but when, in the distant horizon, he sees a mirage of possible inflation. That does a disservice to our country. Many of the indicators at that time gave little evidence of rising inflation. An editorial in the March 14, 1994 Business Week, made it clear that Mr. Greenspan had gone too far in his rate increases. Since Greenspan raised short-term interest rates by 25 basis points . . . That was the first of seven increases-- Long bonds rates have risen nearly twice as much, jumping to about 6.8%. Instead of soothing the savage beasts at the bond market, the Greenspan move appears to have induced a frenzy. What has gone wrong, and how can it be fixed? It's tempting to say-- This is the article from Business Week I am quoting here-- It's tempting to say that Greenspan's preemptive strike against inflationary expectations was wrong from the start. Worse, Greenspan added to confusion in the markets by admitting that the conventional monetary measures were no longer reliable and that he was turning to more exotic measures, including that ``arcane metal,'' gold. What is going on here? Business Week says, ``Not so,'' in terms of his preemptive strike against inflationary expectations, because they are saying there was not any inflation. What really spooked the markets was his subsequent confession that he believed monetary policy had been too loose, too long. Monetary policy had been too loose for too long. The markets inferred that Greenspan's strike was only the first in a series of attacks against inflation. Market players around the world concluded that the Fed would push interest rates much higher in the months ahead. Business Week was right on the mark, because in the weeks and months ahead, that is exactly what Mr. Greenspan did. This, again, is according to Business Week. This is not my judgment. Business Week, in their editorial said, what spooked the markets was not really a preemptive strike against inflation since there was little threat of inflation. Let us go back to these charts. Mr. Greenspan, according to Business Week, says that he thought that monetary policy had been too loose for too long. This is 1993. Here is the recession, as I pointed out, of 1990, which he did not see until we were 6 months into it. Then, as Fed Chairman, he has a responsibility to try to get us out of that recession by lowering interest rates. As I pointed out, this is what happened in the previous seven recessions. In each of these instances, interest rates came down as much as 50 percent in 5 months, 50 percent in 12 months. Mr. Greenspan did not reduce interest rates 50 percent until 30 months out--about 31 months out, to be correct about it. That takes us up to about 1993, I guess. Yet he says the monetary policy was ``too loose for too long,'' and thus starts tightening up and raising interest rates. ``Business Week'' was right, in March 1994. They expected him to keep raising it, and, quite frankly, he did. ``Worse,'' they go on, ``Greenspan added to confusion in the markets by admitting that the conventional monetary measures were no longer reliable and that he was turning to more exotic measures,'' of the economy, ``including that `arcane metal,' gold.'' Mr. President, last year in testimony before the Banking Committee in response to a question by Senator Sarbanes, Mr. Greenspan admitted that, yes, he would be in favor of returning to the gold standard. Now, he admitted that he would probably be the only vote on the Federal Reserve to do that, but that was his philosophy. Perhaps we ought to have debate about that. I wonder how many Senators here would like to have a vote on returning to the gold standard. How many votes do you think that would get here on the Senate floor? I do not know if we would get any. I do not know if anybody really feels we ought to return to the gold standard. Maybe that was OK in the past, but we live in a different world. This is a global economy. We have turned away from using the gold standard as a basis. I am just saying the Fed Chairman's philosophy is locked into that. He admitted it as recently as 1 year ago. There was little justification for the rate increases. The economy quickly reacted in a predictably negative way. Instead of nipping inflation to help the markets, the seven rate increases threw the market into a tailspin. Perhaps one of the most telling indicators was that unemployment for years preceding 1994 was above the assumed NAIRU. Here we come again to the non accelerating inflation rate of unemployment that I talked about earlier, that the Fed seems to be looking at. Prior to 1994, this was above the widely-assumed limit of 6 percent. In 1991 unemployment was 6.7 percent, in 1992 it was 7.4 percent, and in 1993 unemployment was 6.8 percent. Yet somehow he says we have to raise interest rates. The third and final point about why the 1994 rate increases were unnecessary was this: The threat of inflation had been falling. To say again, the threat had actually been falling. Again, here is Mr. Greenspan in his February, 1995 Humphrey-Hawkins testimony: Fiscal and monetary policy are important among those forces and have contributed to the decline in inflation expectations in recent years along with decreases in long-term interest rates. The actions taken last year to reduce the Federal budget deficit have been instrumental in this regard. That was a very interesting statement by Mr. Greenspan last year. There are two points that need to be made here. First, I do not necessarily disagree with him about discarding M2 as an indicator in favor of real interest rates. What we do have a concern about is M-2 showed that the money supply was shrinking and the economy might be slowing. Instead of focusing on other indicators that might show a slowing of the economy, Mr. Greenspan grasped on to real interest rates. The discrepancy between short and long-term rates was evident and could be clearly used as a justification for raising rates. That is what he said. Second, it should be clarified and reinforced that Mr. Greenspan and the Fed labeled the rate increases as a preemptive strike and not a reaction to accelerating inflation that would have clearly justified an increase in interest rates. Let me read the July 10, 1995, article from ``U.S. News & World Report'' by Mortimer Zuckerman. In his July 10, 1995, editorial, he says: Ouch! The squeeze is back. In May 101,000 jobs disappeared. The workweek for most Americans is falling while the number of people filing claims for unemployment is rising. Don't blame it on the business cycle: The current slump is the handiwork of the Federal Reserve Board, an institution that is signally failing the nation. The Fed raised short- term interest rates seven times in roughly a year, doubling their levels and whacking key rate-sensitive industries such as housing and autos. Boom, the robust expansion of '94 has turned into the stagnation of mid- '95. Why, you may ask, did the Fed do this? It surely was not responding to inflation. Unit labor costs, the basic fuel of inflation, grew by less than 1 percent last year (and actually fell by 2.3 percent in manufacturing). Inflation at the retail level has been running at 3 percent or less for three years, the best performance in three decades--and the experts, including Fed Chairman Alan Greenspan, believe even that is overstated by as much as a full percentage point because of statistical flaws. Now, I'm reading from the U.S. News & World Report, July editorial, by Mortimer Zuckerman. No, what the Fed had in mind was an attack on inflationary expectations--the notion that, if left unchecked, the economic buoyancy of late 1993 would surge into '94 and lead to rapidly increasing prices rather than to rapidly increasing jobs. The economic buoyancy, this is the economic buoyancy that Mr. Zuckerman is talking about, not an economic boom, but at least we are talking about getting better. Too slow, but by 1993, 3 years out from the recession, we were finally starting to get a little bit better. Mr. Zuckerman goes on: Overlooked or simply ignored were several mitigating factors--that major corporations were still laying off tens of thousands of employees . . . As I mentioned, the unemployment rate for 1993 was 7.4 percent. That was up from the year before. Again, another example of the Federal Reserve not fighting unemployment by failing to reducing interest rates after the last recession. Also overlooked was ``that real wages for most Americans were declining, that a true world economy had radically altered the ways and means of production.'' Now, what was supposed to be a ``soft landing'' to slower growth is fast turning into something else. Real retail sales, the most important factor in our economy, dropped at an annual rate of 1.9 percent in the first two months of the second quarter. . . Consumer confidence plunged a dramatic 9 percentage points in the past month. . . . The latest Fed failure underlines its mismanagement of the monetary side of the economy over the past five years. These are not my words. These are the words of Mr. Zuckerman, editor of ``U.S. News & World Report.'' In the last decade of the 20th century, too little, too late, seems to be engraved in its institutional seal. In 1989, it sowed the seeds for the recession of 1990-91, then slowed the recovery by not easing up quickly enough. Again, evidenced by that chart. ``Is the Fed flying blind?'' Mr. Zuckerman asks. You have to wonder. Its view is that the sustainable level of economic growth is 2.5 percent. But the notion that any growth rate above this level would cause an increase in the rate of inflation through shortages of labor, materials and manufacturing capacity, is questionable. The Fed underestimates the actual rise in manufacturing capacity put in place and overestimates the dangers of wage inflation given the historic shift in the balance of bargaining power between management and labor, the large number of people working part time or on temporary jobs and the continued corporate restructuring. Beyond that, economic globalization has provided the United States with additional capacity and cheap labor to expand production without price increases. Mr. Zuckerman says: We can have growth higher than 2.5 percent and an unemployment rate lower than 6 percent and still not have an inflationary surge. In the 1960's, after all, we had an unemployment rate of 4.8 percent with an average inflation of only 2.3 percent. The Fed should review its performance in the '60's and '80's. Five years into the expansion of the '60's, when growth seemed to stall, the Fed moved rapidly and cut interest rates by 2 full points, extending the expansion to a record nine years. The 1980's expansion turned into the second longest in postwar history, again because the Federal Reserve cut rates when it first spotted signs of economic weakness in 1984 and 1986. That was under Chairman Volcker. Mr. President, in sum, the rate increases in 1994 and 1995 can be interpreted as another example of Mr. Greenspan searching for excuses to raise rates as a justification to eliminate inflation. Again, I am going to refer to this chart as often as I can. The American people ought to know this. In 1 year, February 1994 to February 1995, he doubled interest rates. Since February 1995, to this date--actually to June 1996--they have only come down 3 quarters of a point, with no inflation threatening. The Associated Press story reported November 12, 1994: Economists representing interests from labor unions to big corporations accused the U.S. Central Bank on Friday of pursuing an ill-advised monetary policy by fighting a phantom inflation threat to appease bond traders on Wall Street. Lawrence Chimerine--I am sorry if I mispronounced the name-- the chief economist at the Economic Strategy Institute, a business-backed think tank in Washington, DC, said that long- term interest rates have risen faster since February of 1994 when the Federal Reserve started its increases than at any other time in U.S. history. Any further ratcheting up of interest rates really runs the risk of overkill and a recession. That was said on November 12, 1994. I believe there were two other rate increases after that period of time. It should be noted that the Fed raised rates--I am sorry, it was 3 days after this story was written, and again in February 1995--two more times. In the aftermath of the rate increases, the Investors Business Daily had this to say about Mr. Greenspan's efforts. This is an editorial in Investors Business Daily, dated April 17, 1995: If former Defense Secretary, Robert McNamara, can own up to his horrendous errors on Vietnam, why can't Federal Reserve Chairman Alan Greenspan end his misguided campaign against inflation? The McNamara memoir published last week . . . is a stunning admission of failure. He confesses that his over-reliance on numbers and failure to understand the human consequences of his actions led to the tragedy we know today as Vietnam. McNamara was one of the postwar ``whiz kids'' who thought they'd elevated management to a science. The former President of Ford Motor Company, he thought his number-crunching expertise, statistics, and arcane mathematical formulae were all he needed to ``manage'' a war. Pride? Arrogance? Some failures can't be described with mere words. The bottom line on that Vietnam ``strategy'' is some 58,000 names on a black wall in Washington, DC, and continued tyranny in Southeast Asia. We were struck by McNamara's admission of error because his fascination with data is shared by Fed Chairman Greenspan-- who is waging a long, costly and misguided war of his own. Like McNamara, Greenspan is arrogantly using his numbers expertise to fight the last war--the 1970's battle against inflation. And just as McNamara's antiseptic ``body counts'' seemed to blind him to both the failure and the human costs of his plan for winning the war, Greenspan seems to miss the costs to the real economy--jobs, incomes, goods and services--of his campaign against phantom inflation. We've heard all the arguments for continuing the battle: The U.S. is enjoying the best of all possible worlds, with rapid growth and low inflation. The Fed appears to have engineered a ``soft landing''-- How many times we have heard that phrase? in which the economy drops gently onto a long, slow glidepath of steady, noninflationary expansion. We don't buy it. I am still quoting from Investors Business Daily. As the last recession showed, a soft landing can very easily turn into a crash landing, or a victory into a rout. After seven interest rate hikes in a little over a year, the Fed is flirting with disaster. Businesses--as opposed to coupon-clippers--are plainly worried. Monetary policy in this country is controlled by bond traders who live in high-rises and are completely out of touch with reality. The words of a radical? Hardly. Jerry Jasinowski, the president of the National Association of Manufacturers, said that six months ago, before the last two rate hikes. Others in business echo his comments. The signs of a slowdown are now widespread. Retail sales are weak, auto sales are declining, durable goods orders have rolled over, new-home sales have tanked, money supply is headed south and the index of leading economic indicators is signaling sluggish growth at best. . . . As most economists know, it takes six months to two years for the full effects of a Fed tightening to be felt. The Fed's recent tightening binge--an unprecedented doubling of rates in just 13 months--probably won't finish hitting home until 1996. Meanwhile, inflation remains nowhere to be seen--despite the constant fears of bond market vigilantes who believe jobs, prosperity and hyperinflation are somehow linked. That was Investors Business Daily, and that was in 1995. Similar to 1974, when the WIN--the whip inflation now--policy helped inflation along by raising taxes on oil, the interest rate increases in 1994 may have made it more difficult to actually fight inflation in the future because they raised the price of obtaining a car loan, home mortgage, or a student loan. The 1994 increase failed on all counts, including even Mr. Greenspan's. According to the University of Denver economist, Randall Wray, ``The Fed's policy shift after February 1994 was a resounding failure by Mr. Greenspan's own criteria. Long-term rates immediately rose. The Fed's action led to a run out at the long end of the market, causing an estimated $1 trillion loss.'' Thus, long-term rates have been high because the market quite correctly feared other rate increases and not because of high expected inflation. Once these became reality, the bond market plummeted and stock prices experienced volatility because additional rate hikes were feared. He went on to note that real economic growth for 1994 turned out to be less than the bottom of the Fed's predicted range. By the end of 1995, the economy was growing at a rate less than 1 percent. As data accumulated that the economy was slowing, the Fed reversed course and lowered short-term rates by one-quarter of 1 percent three times. Thus, we get down to 5.25 percent. There is little evidence to suggest that small reductions would have any significant effect on the economy. However, the frequent interventions were sufficient to keep the markets guessing. In late February of this year, Greenspan sent shock waves through the markets when he suggested that policy might tighten, but he was forced to immediately clarify his position by indicating that policy was likely to loosen. But there is more. In a January 2, 1995, editorial in the Washington Post, Mr. Gerome Weinstein of Columbia University observed that six increases in interest rates in less than a year suggest that Mr. Greenspan has forgotten that the economy does not change course quickly or easily. An interest rate change can be expected to take about 18 months to work its way through the complexity of the economy before it has a lasting effect. Six increases in 11 months would suggest that Mr. Greenspan and the Fed are impatient. Mr. President, why do I go through all of this? Why have I cited all of these economists--Mr. Zuckerman of U.S. News & World Report, Mr. Jasinowski of the National Association of Manufacturers, and a host of other writers? Why go into all of this? Because, as I have said many times, there is a common thread that ties Mr. Greenspan's actions together as we have seen again and again and again from his days as Chairman of the Council of Economic Advisers to the present. Mr. Greenspan has consistently shown the same two tendencies. First, he misjudges the signs of an oncoming recession. Mr. Greenspan often comes to the correct economic conclusions, but way, way too late. Chief economist David Jones stated that Greenspan is so preoccupied with arcane numbers, he tends to miss big trends. As a result, he often makes the right moves but at the wrong time. Timing is not his strong suit. According to U.S. News & World Report editor Mortimer Zuckerman, Alan Greenspan and his board at the Federal Reserve make ladies who read tea leaves pretty hot. The Fed foresaw a dangerous boom in 1989, tightened interest rates, and got a long recession instead. The second aspect of the common thread throughout Mr. Greenspan's adult life is that he does not act decisively enough to pull the economy out of recessions because of his inordinate fear of inflation. Again, let us go back. Remember the 1974 whip inflation now plan, the WIN plan. As Chairman of the Council of Economic Advisers, Mr. Greenspan designed an economic plan that raised taxes, worked to limit consumption, and resulted in an unemployment rate of 9 percent. According to Mr. Zuckerman, the same held true in 1991. I quote: Having rushed to that wrong conclusion-- The dangerous boom of 1989. they dithered for so long in correcting it that we did not come out of the recession until 1991-1992. In 1994, when recovery was really starting to happen, they went back to their tea leaves and got in the ratchet reflection mode, again battling a phantom inflation, an inflation they admitted was not there. It was an expectation. Editorial, August 7, 1995, U.S. News & World Report. Again, what I talk about is the mirage on the horizon of possible inflation. In fact, Mr. Greenspan even seems to publicly ignore statistics that might indicate that he does not need to raise rates to fight inflation. For example, in his Humphrey-Hawkins testimony on February 27, 1995, Greenspan did not read the most optimistic portion of his prepared remarks. I want to comment on that. There were prepared remarks that Mr. Greenspan had. But in his testimony of February 27, 1995, he kind of skipped over it. Here is what it said. These developments do not suggest that the financial tender needed to support the ongoing inflation process is in place. An amazing statement by Mr. Greenspan, someone who has just raised interest rates--doubled over a year, seven rate hikes. In February 1995, at the end of the last rate hike, he says in his written testimony that: These developments do not suggest that the financial tender needed to support the ongoing inflation process is in place. What is going on here, Mr. President? Mr. Greenspan, in his written testimony, says that it is not there, that the financial tender needed to support the ongoing inflation process is not there. We have high interest rates. Again, I am referring to the crucial 1995 Humphrey-Hawkins testimony and Greenspan's rejection of the idea that the economy's potential for the sustained growth rate was much above the current level of about 2.5 percent. Here again are Mr. Greenspan's own words. But while most analysts have increased their estimates of America's long-term productivity growth, it is still too soon to judge whether that improvement is a few tenths of a percentage point annually or even more, perhaps moving us closer to the more vibrant pace that characterized the early post-World War II period. It is fair to note, however, that the fact that labor and factory utilization rates have risen as much as they have in the past year or so does argue that the rate of increase in potential is appreciably below the 4 percent growth rate of 1994. Again, that is his testimony before the Banking Committee of February 22, 1995. So, Mr. President, a common thread is misjudging what is happening and then mishandling how to pull us out of the recession because of his absolute fear of inflation. Mr. President, I think what we see here is a Fed Chairman whose economic philosophy--again, I say this with all due respect. I hold no personal animus at all toward Mr. Greenspan. People speak of him in highly glowing terms. I have had, as far as I know, only one meeting with him in my life in my office, when he was gracious enough to ask for a meeting. He came down to my office. Several of us met in our office with him, several Senators. It was a fascinating discussion. We were just kind of getting into it when the bells rang and we had to go vote. But I believe our job as Senators is not to approve people, to put them into a position simply because they may be nice people or they have a lot of friends or they move in acceptable social circles. Our job, I believe, especially in this important position, Chairman of the Federal Reserve Board, is to look at the record of the person who is nominated to fill that position. What has been that person's economic record? How accurate have they been in the past? What is their philosophy? And, especially, we must ask those questions if it is a person who has been Chairman of the Fed and seeks to be renewed in that position. I think we, in this body, have been too prone to just rubberstamp those nominees who have come to us for positions on the Federal Reserve Board, and especially as Chairman. I will admit, in all candor and frankness, that I voted for Mr. Greenspan, on one occasion, to be in the Fed. I will admit, in all candor, I did not look at the record all that much either. But this time, with what has happened in 1993, 1994, 1995, with the efforts of this administration to reduce the deficit and the efforts of this Congress, and I speak of both Republicans and Democrats, in biting the bullet--oh, we may have our differences on where to trim and what to cut, but I think basically Members of this Congress have worked hard to reduce the deficit. And I believe the administration has, too. More needs to be done. The administration has acted courageously to reduce the size of the Federal Government. But if what we are rewarded with is the Chairman of the Fed keeping interest rates unduly high, keeping the economy from growing, then perhaps our work will be in vain. We have the potential to grow in this country. Everyone that I know sees it out there. It does not take an economist to go out on Main Street, to go in our businesses, to talk to working families, to know that that pent-up energy is there, that ability is there. You can use the figures, and they are there. They show this: Our manufacturing sector is ready to go; small business is ready to move; our average working families are ready for a wage increase, which they need and can use, and which need not be inflationary. The size of the labor force can grow substantially in the future. But, I am sorry to say, the Chairman of the Fed is not allowing that to happen. I yield the floor and suggest the absence of a quorum.

Mr. HARKIN. In the interest of comity--I understand that we have problems after 3:45. I will cut my comments short. I just want to finish one thing on NAIRU. It is now 3:40. I know that we have a problem here. I want to be accommodating. So I will just wrap up my remarks very shortly. In like 60 seconds I will yield to the Senator.

Mr. HARKIN. Mr. President, let me begin by commending my good friend, the Senator from Nevada, Senator Reid, for his diligence and hard work in examining the Federal Reserve's operations. Senator Reid has worked with the GAO to look into the Federal Reserve's business practices. Some startling examinations have been uncovered because of the efforts of Senator Reid and Senator Dorgan. I must say the information that they have uncovered is startling. I urge my colleagues to carefully review all that the Senator from Nevada has said today, both regarding the nomination before us and the logic of considering future legislation that might go to these questions. Massive management lapses appear to be going on--accounting errors, excessive costs of operation, a multibillion dollar slush fund and other oversights. There are many, many important questions that Senators Reid and Dorgan have uncovered, with the GAO's help. They are to be commended for asking the GAO for this investigation. As I said the other day, Mr. President, the Federal Reserve is not a separate branch of Government like the executive branch or the judiciary. But even so, we have the power of the purse strings. Even if the executive branch squanders money, and things like that, we look at it. We have hearings. We look into that and we take action. We should also do that with the Federal Reserve. I will not stand here and say that all of the items uncovered by the GAO are something that requires us to take a certain action right now. But certainly they warrant further investigation. I hope that we will fulfill our obligations to follow through on those GAO reports. We will be having more to say about that next week, to look at the operations of the Federal Reserve and perhaps make some changes in the law on how the Federal Reserve operates. Again, I repeat, the Federal Reserve System is a creature of Congress. It exists only because Congress enacted a law to erect a Federal Reserve System. Obviously, Congress has the right, the power, the duty and the obligation to change and alter that law to fit different times and circumstances or to make the Federal Reserve, I believe, more accountable to the American people. So I just want to commend Senator Reid for his diligent work in this area. Mr. President, I rise on the second day of debate on the nomination of Alan Greenspan as Chairman of the Federal Reserve Board. As I have said many times, this is a critically important nomination that deserves the Senate's full consideration. The Federal Reserve Chairman is widely recognized to be the single most important economic decision maker in the country--let me repeat that--the single most important decision maker, in terms of our economy, more important than the President, more important than 535 Members of Congress. It is the obligation and the duty of this body to thoroughly review and debate the record and policies of any nominee to this vital post. We started this 3-day debate yesterday. At that time, I outlined my concerns about the record of Alan Greenspan, both as Chairman of the Council of Economic Advisers in the 1970's and as Chairman of the Federal Reserve from 1987 to the present time. As I said yesterday, this is not about personalities. It is about policies. It is about laying the facts on the table and taking an objective view of the Greenspan record. This debate is not really about one man; it is about a much larger issue that touches the lives of every American family. Yes, there are a lot of complicated economic terms and intricate statistics and charts that we have talked about and that we will talk about some more. But we should not get lost in the complexities. Perhaps one of the reasons we do not debate more often than we do economic policy and Federal Reserve policies and nominations that come to the Board, and their views, is because economics is, as they say, the dismal science. Sometimes it is hard to cut through all of the data and charts and the statistics. But, again, when you strip it all away, strip away the complexities, it boils down really to this. When you get to the heart of it, what we are really talking about is very simple, fundamental things. We are talking about real people, individuals and their families, trying to make a payment on their house, or trying to buy a house, trying to buy a new car, families trying to work with their bank to get the funds to put in next year's crop, if they are farmers, or maybe to get a loan to operate their small business for next year. That is what this debate is about. It is about wages, about how much will our working people make in the next year? It is about families. That is why we are having this debate. That is why I insisted on this debate. This debate is about raising the living standards and real wages of hard-working Americans. That, I believe, stands as our primary economic challenge. But the policy of the Federal Reserve under Chairman Greenspan has stood in the way. Under current law, the Federal Reserve is obligated to conduct a balanced monetary policy so as to reconcile reasonable price stability with full employment and strong, stable economic growth. But the Federal Reserve, led by Mr. Greenspan, job growth and the living standards of average Americans have been sacrificed in the blind pursuit of inflation control. The Greenspan Fed has raised interest rates, not when inflation was at the door, but when it did not even threaten. In 1994, in the midst of seven straight interest-rate increases, Chairman Greenspan himself acknowledged there was little evidence of rising inflation. Mr. President, the decisions of a Fed Chairman affect every pocketbook and every family budget in America. The decisions of this Chairman have cost American families lost income, lost opportunities. The essential fundamental question I believe boils down to this: Why will Alan Greenspan not give working families a raise? That is really what it boils down to. The Greenspan Fed has stifled economic growth and the incomes of average Americans. Interest rates have been kept artificially high and middle-class families and businesses have been forced to pay the price. It is time for the Federal Reserve to pursue a more balanced policy based on raising economic growth and increasing jobs, alongside continued vigilance against inflation. America ought to have a forward-looking Fed Chairman who recognizes the importance of expanding opportunities for our economy and our people in today's global market. We need strong leadership, committed to higher growth and incomes, fuller employment, and lower, more stable interest rates to improve the quality of life for average Americans. We have not gotten that with Mr. Greenspan. There is what I call a common thread in the thinking and the actions and the policies of Mr. Greenspan over the years. It did not start yesterday. It will not end tomorrow or next week. Ripe from his days as chairman of the Counsel of Economic Advisers up to today, Mr. Greenspan has consistently shown the same two tendencies: First, he often misjudges the signs of an oncoming recession; second, he does not act decisively enough to pull the economy out of the recession because of his fear of inflation. The bottom line is that Chairman Greenspan has a long history of focusing solely on inflation to such an extent that all focus on expanding our economy has been lost. The mindset today is that 2 percent growth is acceptable, the economy cannot grow any faster, maybe 2.5 percent at the maximum, but we cannot have the 3 percent growth of the 1970's or the 4 percent growth of the 1960's. That is the mindset. I ask, why? What is wrong with America? Is productivity going up? Are people working harder than ever? We are getting new products on the markets, the information revolution has hit us all over this country. We have all kinds of new inventions and devices, labor saving devices, not to mention pharmaceuticals and drugs to help make our lives better. We have the information revolution, computers, even in education--all of this lending itself to a robust America, ready to go. That is the America I see out there, an America that wants to work, that wants to grow, that wants to give families a better deal, that wants to raise the wages of our working families, yes, that wants to reduce unemployment. That is the America that is out there. If this harness is kept on by the strict monetary policies of the Federal Reserve, that inherent ability of America to grow will be stifled. Thus, I say that what is happening at the Fed is a disservice to all of America, to us in our generation and certainly to the next and future generations who require our economy to grow for their education, for their livelihood, and for their jobs in the next century and beyond. Yesterday, I had an opportunity to explore in detail much of Mr. Greenspan's previous labor. I displayed a chart that showed Mr. Greenspan's record as Chairman as compared to others. It is dubious, at best. I went back to the Fed Chairman Mr. McCabe from 1948 to 1951, William McCheseny Martin, Mr. Burns, Mr. Miller, Mr. Volcker and now Mr. Greenspan. I pointed out our real growth in the country during their terms. You see 6.1 percent, 3.6 percent, 3.3 percent, 4.5 percent; and it is lower under Volcker, 2.5 percent, and under Greenspan, 2.2 percent. Looking at Mr. Volcker, he came in facing a 13.2 inflation rate before he started, and he cut it in half during his term. In bringing that down, we had a low growth rate, but still, it was 2.5 percent. Look at Mr. Greenspan, inflation before he came in was 4.1 percent, lower than almost at any time in any of these previous tenures. He has only reduced inflation to 3.2 percent--about 25 percent. Mr. Volcker cut it in half. Look at Mr. Greenspan's growth rate--2.2 percent. Using a comparison analysis, Mr. Greenspan's stewardship at the Fed is lacking, compared to those who came before him. That 2.2 percent growth rate is abysmal when you look at the growth rates under previous Chairmen. If he had high inflation rate and then cut it in half, maybe you could accept low growth. But I find it difficult to accept this low of a growth rate with minimal reductions in inflation--4.1 percent to 3.2 percent. Look at how Greenspan compares to the past. I said yesterday, people say, ``Well, our economy has matured. We cannot grow like we did in the 1950's or 1960's or 1970's. We cannot grow at that rate anymore.'' The recent efforts of the Federal Reserve have reminded me of the invention of the wheel. The people who invented the wheel they probably said, ``We have the wheel. We do not need anything else.'' I bet they were happy with the wheel, and they thought that was the best thing, and they thought they did not need anything else. Those who say that America's economy has matured and we cannot grow at this rate I believe are saying the same thing. It reminds me of the person who once said, maybe the head of the Patent Office said, ``Everything that can be invented has been invented. There will not be any new inventions.'' That was about 80 or 90 years ago. Well, our economy can grow a lot faster. That is why we are having this debate. We can bring more people into the labor force. In addition, I also discussed yesterday Mr. Greenspan's misguided and ill-advised policy recommendations to President Ford that deepened our country's recession in the mid-1970's. The record shows Mr. Greenspan cost jobs and further weakened our economy. I also discussed Mr. Greenspan's forecasting record as a private economist in the early 1980's. As I pointed out yesterday, he was wrong on inflation. He was wrong on interest rates. He was wrong on bond issues. Then chairman of the Banking Committee, Senator Riegle, pointed out in Mr. Greenspan's 1987 confirmation hearings: You had an opportunity to be a forecaster with Greenspan and O'Neil. As you know, you put your forecast to a direct test in the private sector. The fact is that the firm only survived a few years. And according to a Forbes article of April 20, 1987, in 1985, his full first full year of business, O'Neil and Greenspan turned in one of the least impressive records of all pension funds advisers. In 1990, Mr. Greenspan was again way off in his economic forecasts, as I pointed that out yesterday. On October 2, 1990, at an Open Market Committee hearing meeting, Mr. Greenspan had this to say is from the minutes of that meeting. I still think we're in a situation in which there are forecasts of thunderstorms, and everyone is saying, ``Well, the thunder has occurred and the lightning has occurred and it's raining,'' but nobody has stuck his hand out the window. And the point is, it isn't raining. The point is, as best I can judge, that the third quarter GNP figures in the green book are not phony. I think they are relatively hard numbers. They can get revised. They are put down more and more, but the economy has not yet slipped into a recession. Now, that was in October 1990. I want to note that the recession began in July 1990--a month before Iraq invaded Kuwait. Yet, in October, Mr. Greenspan was still saying it is not raining out. I want to note that Mr. Greenspan's forecast improved after that. On December 18, 1990, Mr. Greenspan said confidently, ``At some point, we are going to come out of this.'' So between October 2 and December 18, Mr. Greenspan found out it really was raining, but it was much too late. He said, ``At some point, we are going to come out of this.'' He was right. The recession officially ended in March 1991. So, Mr. President, that is the record. Those are the facts. Today, I want to focus on a few more important aspects of the Greenspan record. I will zero in on the Greenspan rate increases of 1990 and 1994. First of all, I think I am going to refer to this now, and then I will come back to it later. Many times, I talk to people and say, ``Do you know that, in 1 year, from February 1994 to February 1995, Mr. Greenspan had seven rate increases in the Federal funds rate? He raised those interest rates 100 percent.'' People look at me like I came from another planet. They say, ``No, of course not, nobody raises interest rates 100 percent.'' I said, ``Yes, he did.'' Mr. President, here are the figures. In February 1994, the Federal funds rate was 3 percent; in February 1995, 6 percent. Well, that is 100 percent. It is a doubling any way you look at it. That was in 1 year, from February 1994 to February 1995. From February 1995 until today--we are talking about almost 16 months--what has happened? Interest rates have only come down three-quarters of a point, to 5.25. That is still way higher than they were in February 1994. This is what is causing the stagnation in America and what is causing wages to be stagnant. This is what is causing the slow growth in our economy. I want to spend a little more time, also, discussing unemployment, something called the nonaccelerating inflationary rate of unemployment, or NAIRU. Perhaps this is one of the reasons nobody wants to debate economic policy. You get these kinds of terms--NAIRU. Let us discuss NAIRU and see if we can strip away all the fancy talk and see what it is all about. Let us begin with the words of Robert Eisner, a former president of the American Economics Association, when he said, ``Neither the fiscal stimulus of structural budget deficits, nor the monetary stimulus directed at reducing unemployment in the United States have yet caused permanently accelerating inflation, or much inflation at all.'' I am going to repeat that. ``Neither the fiscal stimulus of structural budget deficits, nor the monetary stimulus directed at reducing unemployment in the United States have yet caused permanently accelerating inflation, or much inflation at all. Most of the inflation of the postwar period has come from supply shocks--chiefly, the great run-up of petroleum prices in the 1970's and early 1980's.'' Now, we talked about this nonaccelerating inflation rate of unemployment. That means that, well, if you bring unemployment down too far, then employers will have to bid up the wages. By bidding up the wages, that will cause price increases because they have to pay higher wages, and that causes a round of inflation. Many economists simply do not agree with that. That is what Mr. Eisner is saying. He is saying, nothing that monetary policy has done to reduce unemployment has permanently caused accelerating inflation. I believe Mr. Eisner is right. But that fear of inflation is the driving force of the Federal Reserve today, and, particularly, Mr. Greenspan. He has become ``Mr. Chairman Slow Growth,'' ``Chairman Stagnant Wages,'' and ``Chairman Unemployment Is Good for America.'' Mr. Greenspan has an economic philosophy that simply does not focus on the problems of average people. We are seeing an interesting pattern at the moment. The 30-year bond, and many other interest rates, have been rising for several weeks, and many bond market leaders have been wringing their hands about the possibility of rising inflation. But the economy, at this moment, does not give much indication of accelerating inflation. Our economy can be much more vibrant without the threat of inflation. It can expand. Unlike Chairman Greenspan, I do not see that as a bad thing to be stopped. Our economy ought to expand and grow, and unemployment ought to come down and, yes, wages ought to go up. Some people talk about a 4-percent growth for the quarter that we are in right now. Well, it initially came out that we had a 2.8 percent growth for the first quarter of this year. All the articles said that was incredible, booming growth, 2.8-percent. It was later revised to 2.3 percent. I do not think that is booming growth at all. I am told most economists see growth in the second half of the year at a far slower pace. I am going to paint with the same brush both the administration and the Federal Reserve. I believe the administration is accepting too low a growth rate, a bit over 2 percent. I believe that has been fostered and bolstered by the Federal Reserve, which also sees growth at around 2 percent. Here we are, Mr. President, 348,000 jobs were created last month when half a million started to look for work, showing that our work force can indeed grow. As you said, we are straining. It is out there. People want to work. Productivity is going up. We want to get out there and work. But despite this kind of good economic news--that is, that more people are looking for work and that our economy is going to grow a little bit--we continue to hear the drumbeat of gloom and doom from the Federal Reserve and from the barons of the bond market. Now, again, I suppose that maybe Mr. Greenspan himself, and his supporters, would say he does not have a choice. If the Federal Reserve does not raise interest rates, then the bond market will see that the Federal Reserve lacks the will to fight inflation, they will dump bonds and flee the market, and long-term interest rates will skyrocket. That is what they say. A lot of bond traders repeat that refrain. But I point out that they repeat that refrain because of the actions taken by Mr. Greenspan over the last several years. Mr. President, I believe that a balanced Federal Reserve policy would not see a long-term climb in bond rates--that is, if we had a balanced policy. If that was reiterated and distinctly spelled out, I do not think we would see a long-term climb in bond rates. You get the long- term climb in bond rates because, if there is good news in the economy, the bond traders rush in to dump the bonds because they believe that Mr. Greenspan is going to slap on higher interest rates right away. That is what they believe, so they react accordingly. I know this may sound kind of confusing, but when you get right down to it, it is really, again, very simple. It has to do with whether or not we will have a balanced policy of growth and low unemployment, alongside a policy of fighting inflation. Let me read an article in the February 5 New York Times by Lewis Uchitelli. He is talking about the Federal Reserve that voted to raise interest rates when they did it for the seventh time in a year back in 1995. In keeping interest rates high, he talked about how this speared inflation. He goes on to say, In this ritualistic dialog between the Fed and the bond market, which everyone pretends is not happening, the reason for the Fed's existence is sometimes overlooked. Aside from fighting inflation, the Fed's mission, specified by Congress, is to keep the economy growing and Americans employed. That goal can get lost in any dialog with the bond market, which puts slowing the economy to fight inflation ahead of putting the unemployed to work. There you have it. You cannot say it any better than that. Yet, Congress has stipulated in law that the Federal Reserve is to also fight unemployment and to take that into account. We have a bill in the Banking Committee that would take out of the law the provision that says the Fed should take into account unemployment in making its decisions and should only then look at inflation. Well, it is before committee, but I do not think it will get past the floor. Mr. Greenspan has indicated support for that approach. He has indicated support for legislation that would take out of the law a requirement that the Fed look at unemployment in making its decisions. Well, again, I talk about his mindset and his philosophy--his economic philosophy. I do not believe anybody ought to be Chairman of the Federal Reserve who supports a policy of ignoring unemployment and only focusing on inflation in setting their policy. I would like to read a short statement again from the business sector of our country, a statement by the National Association of Manufacturers. The first was on June 11, 1996. This is 5 days ago. This is from the National Association of Manufacturers: The decline in producer prices, after several months of rapid increases, confirms that inflation is not a threat. The spike in wholesale prices during the first 5 months of 1996 was caused mainly by the relative price of energy. Excluding the volatile food and energy components, the core rate of inflation was consistently lower. Some energy prices, such as gasoline, are now leveling off while others, such as heating oil, are declining. Energy prices should decline even more later in the year as Iraqi oil comes onto the market. This decline will put downward pressure on both the producer and consumer price indexes in coming months. For the year as a whole, producer prices should rise only about 2.8 percent. These favorable inflation numbers mean that the Federal Reserve has no reason to raise interest rates at their July meeting. The Federal Reserve should hold rates where they are and reserve the option of lowering later in the year. Yet, we have heard all kinds of hints and comments made by members of the Federal Reserve that, indeed, rates will go up in July. A group called the Business Council, a group of chief executives of 100 of the largest corporations in our Nation, did a recent survey which is reported in the May 18 New York Times. Nearly half of them stated that it was harder to raise prices in their industry than it was 6 months ago. Only 9 percent said it was easier. So over half of them said it was harder to raise prices. Almost all of the respondents urged the Federal Reserve to stimulate the economy by lowering rates. The article quoted John Walsh, the CEO of the General Electric Co., as saying: ``We do not see industrial prices or labor pressures driving inflation upward.'' Mr. Greenspan did not see the terrible recession and skyrocketing unemployment in late 1974 as he advocated fiscal restraint as President Ford's chief economic adviser. Mr. Greenspan did not see the recession in 1990. And what did Mr. Greenspan see? He saw inflation in some tea leaves in 1994 when he doubled the interest rates from 3 percent to 6 percent in one year. From February 1994 to February 1995, he doubled the interest rates. Low inflation. He so indicated that himself. Is this the balanced kind of approach that we want from a Chairman of the Federal Reserve? I say no. We need someone who has more of a balanced approach. We need someone who will give the economy a chance to grow, who will give Americans a chance to increase their incomes so as to have a better life. If inflation starts to rise, then, yes, it is responsible to raise rates and do it in a timely and effective manner. But America does not need a low growth Chairman of the Fed who slams his foot on the economic brakes because of some mirage of inflation that may take place in the future. Mr. President, I wanted to revisit the topic of Mr. Greenspan's actions concerning the 1990 recession. I spoke about that yesterday. I spoke about it earlier, when in October 1990, as the minutes now reveal, because--again, I want to point this out. By law, the minutes of the Federal Open Market Committee are kept sealed for 5 years. I hope we can revisit that at some time. I do not believe they should be sealed for 5 years--maybe a year, but certainly not 5 years. But now, in looking at the minutes of the 1990 meeting of the FOMC, we find in October Mr. Greenspan saying that--well, to paraphrase it: ``We hear the thunder, we hear the lightning. People say there is thunder and lighting, but we stuck our hand out the window and it is not raining,'' in response to whether or not we are in a recession. The fact is, the recession started in July 1990. This is October 1990. Mr. Greenspan says we are not in a recession. It was not until December 1990 that Mr. Greenspan finally admitted, 6 months later, that we were in a recession. So we had the recession of 1990. Mr. Greenspan finally recognized it. His response, ``Well, sometime we will come out of it.'' How does the recovery from that recession compare to the other recessions that we have had since the end of World War II? The Greenspan Fed was very late in moving to lower interest rates to create a more accommodating policy and lift us out of that recession, and that was harmful to the recovery. This is a pretty busy chart. Again, maybe this is one of the reasons we do not engage in economic policy discussion around here more, because sometimes it does get confusing. But, again, it is really simple when you strip it away. What this chart shows is the percent decline in interest rates following the bottom of a recession. In other words, you get into a recession, you cut interest rates to stimulate the economy, and get out of the recession. How fast do you cut the interest rates to get out of a recession? Here we see that, in the recessions of 1960, 1969, 1957, 1973, and 1981, we see dramatic drops in interest rates to get us out of those recessions. For example, in the 1957 recession interest rates declined by 50 percent in 5 months--5 months. Here is 1973. In 1960 there was a 50 percent decline in about 12 months; the same in 1981. In all these times we came out of a recession in a fairly short period of time. Why? Because the Fed Chairmen took action to stimulate the economy, get our people back to work, reduce unemployment, and get us out of the recession. Let us look at the recession of 1990. That is this flat line over here. We do not get a 50 percent cut in interest rates until almost 34 months, almost 3 years after the depth of that recession. So, again, I have been comparing Mr. Greenspan's actions with those of other Fed Chairmen since World War II. I compared earlier GDP growth. Now I am comparing his actions recovering from a recession, compared to other times. It was too slow, too timid, too much of a struggle, to get out of that recession. It is too long a period of time. And what that means is that families are hurt, people are unemployed, and the economy starts building in a slower rate of growth than what we otherwise need. I believe that is also what is affecting us even yet today. So, you can see he was much too timid in reducing those interest rates. Let me read an article by the Nobel laureate economist, Paul Samuelson, who is a professor at MIT. It appeared in the September 1993 issue of ``Challenge'' magazine. It is titled ``Leaning Against What Inflationary Wind?'' The U.S. economy is not on the verge of overheating at present. If and when the changes, it will be a good time to pump gently on the brakes. That time is not now. Mr. Samuelson goes on to say: After a dozen years of structural budget deficits and low private sector saving by U.S. families and corporations, economic history and economic science concur in the diagnosis that monetary policy rather than fiscal policy should be the major macroeconomic weapon for assuring a healthy 1993-96 recovery and for restoring the share of capital formation in the American economy. I will repeat that. What Mr. Samuelson is saying is that monetary policy has to be the engine, rather than fiscal policy. Why? Because we have these huge budget deficits. There is little we can do. And we have years of low savings rates. We do not have that pool to draw on. So it has to be monetary policy. Mr. Samuelson goes on to say. The last five years will go down in the textbooks of economic history as a period of disappointing performances by central banks. America's central bank, the Federal Reserve, began the decade of the 1980s with a stellar report card. Under Chairman Paul Volcker, from 1979 to 1982, remarkable progress was made in wringing out of our economy the double- digit stagflation that had built up in the 1970s. Then in 1982 and 1983, as I shall describe for its peculiar relevance today, the Fed fires up the American locomotive in a prudent way, leading the United States and the global economies into a needed expansion. What Mr. Samuelson is saying, basically, is that--he says--he talks about the Bundesbank. In particular, the revered Bundesbank has brought on unified Germany a serious recession that it never expected to occur. Outside of Germany, directly and indirectly, the bias of the Bundesbank toward preoccupation with inflation to the neglect of real growth and unemployment has led to a lasting slump for Common Market and other European countries. In the end, the dream of a Maastricht Treaty that would unify the European economy was dashed by Bundesbank intransigence. Unemployment rates in Spain, Italy, and Ireland soared. Waiting upon the German credit expansion that never came, Britain, Italy, and Spain were forced out of the European Monetary Union. Countries like France that accommodated the Bundesbank have been penalized by double-digit unemployment rates. Sweden, with its interest rate forced temporarily up to a 500 percent annual rate in order to have the Kroner look the Mark in the eye, is a spectacle no sage ever expected to see again in the modern world. . . . Where an Italy or a Spain face genuine international constraints, Japan's wounds have been self-inflicted and gratuitous. And in wounding herself, Japan has also wounded the U.S. bilateral imbalance with Japan, contributing significantly to the puny 0.7 of 1 percent annual rate of American real GDP growth in the 1993 first quarter. Where it not for involuntary piling up of inventory accumulation, our final real GDP would actually have been declining in 1993's first quarter. I did not mean to get bogged down in that, but really what he is talking about is he is talking about what the Bundesbank did in Germany in terms of focusing only on inflation and ignoring what is happening with unemployment and growth. Then he goes on to say: Alas, the Federal Reserve has shared in this central bank saga of acting too little and too late against macroweakness on Main Street, U.S.A. It can be said, soberly and with statistical significance, that the defeat of George Bush in 1992 and the Republican disappointments in the Senate and the House are the direct result of Federal Reserve misdiagnosis of the seriousness of the 1990-92 state of U.S. demand. Again, Main Street, USA, has not, in town meetings, given the Federal Reserve such a mandate to do what they have done. Nor has a committee of the two Houses, nor a majority vote in either of the Houses. This is Mr. Samuelson: I believe this to be important not as a matter of history or of general philosophy. It is important because the money market has every reason to believe--even without leaks to the press after Open Market Committee meetings--that this Federal Reserve (the only one we have) is only too prone to (1) engineer higher short-term interest rates, or (2) countenance such higher rates (a) at the first signs of a healthy real recovery--say, a 3.25 percent (annual) growth rate for two successive quarters, or (b) at the first signs of some acceleration of price-level indexes. Mr. Samuelson, I think I said it correctly. Basically it is important, not as a matter of history or philosophy, it is important to America because the Federal Reserve is prone to, No. 1, engineer higher interest rates, or, No. 2, countenance such high interest rates at the first sign of a healthy recovery, if we go anywhere above--he said up to 3.25 percent, but it looks as if we go over 2.5 percent they are ready to slam on the brakes. (Mr. MACK assumed the chair.)

Mr. HARKIN. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. HARKIN. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. HARKIN. Mr. President, I just have one more item I want to cover. It should not take me more than maybe 10 minutes, I hope, and then I will be finished with my statement for today. I know others wanted to know about that. I understand there are some problems. I want to be as accommodating as possible. I want to cover, however, just briefly, for the record, the issue of NAIRU. I said earlier today I was going to get into that, and I want to talk about NAIRU, the nonaccelerating inflation rate of unemployment, and what it is and why it seems to have such a hold on us. So what is NAIRU? Let me just read some comments, and I will get into NAIRU for a few minutes. Dana Mead, the chief executive of Tenneco and chairman of the National Association of Manufacturers, had it right when he said that ``NAIRU is to economics what the Nehru jacket is to fashion--outdated.'' Robert Eisner, professor emeritus at Northwest University, whom I quoted earlier today several times, argues that one can actually reduce inflation by keeping unemployment under its natural rate. He developed this argument in an article entitled ``Our NAIRU Limit.'' That was in the American Prospect magazine, spring of 1995. I thought I would quote a little of it to talk about NAIRU and what it is. First of all, Mr. Eisner says, starting his article: We mustn't have it too good. Too much growth--too little unemployment--is a bad thing. These are not the idle thoughts of economic nail-biters; they are the economic policy of the United States. After real growth of domestic product hit 4.5 percent in the last quarter of 1994 and unemployment dipped to 5.4 percent in December-- Guess what? the Federal Reserve moved on February 1 to raise interest rates for the seventh time in less than a year. Why? To slow a too rapid rate of growth and stop or reverse the fall in unemployment. Why do that? To fight inflation. Ordinary people may wonder. . . Hard nosed economic analysts and business leaders are also raising questions. They point to technological advances and downsizing in U.S. industry and suggest that productivity and output potential may well be rising more rapidly than the 2.5 percent long-term growth rate that Greenspan and others think marks the outer limit for economic growth. Furthermore, as people lose old, high-paying jobs and look desperately even for lower-paying employment-- We know how true that is-- there is slack in the labor force. Perhaps most important, increasing globalization and world competition may limit the ability of American firms to raise prices and workers to push for higher wages. These heretical observations have so far failed to dent the dominant dogma haunting economic policy. The central tenet of that dogma is a concept familiarly known among economists as the NAIRU--the ``nonaccelerating-inflation-rate of unemployment.'' While unknown to the general public, the NAIRU has become one of the most powerful influences on economic policy this century. My recent work, however, shows that even on the basis of a conventional model used to estimate the NAIRU, there is no basis for the conclusion that low unemployment rates threaten permanently accelerating inflation. And, according to an alternative model more consistent with the data, inflation might actually be lower at lower unemployment levels than we are experiencing today. The basic proposition of the NAIRU is simple: Policymakers cannot use deficit spending or an increase in the money supply to reduce unemployment below some ``equilibrium'' rate, except at the cost of accelerating inflation. The concept of the NAIRU, derived from Milton Friedman's notion of a ``natural rate of unemployment,'' rejects the assumed trade-off between unemployment and inflation described by the Phillips curve, named after A.W. Phillips, an innovative economist from New Zealand. Thus, according to the NAIRU, fiscal or monetary policies aimed at reducing unemployment would leave us like a dog chasing its tail. If policy were aimed at keeping total spending sufficiently high to keep unemployment below its ``natural rate,'' inflation would rise more and more rapidly. In this view, the only way to reduce unemployment, except possibly in the short run, is to change conditions affecting the supply of labor-- for example, by cutting the minimum wage, reducing or eliminating unemployment benefits, or upgrading the skill of workers. On the contrary, he says, that we ought to be trying to reduce unemployment, not only by supply-side measures, but by ensuring that the economy is not starved for adequate aggregate demand or productivity for increasing public investment. NAIRU--Non-Accelerating Inflationary Rate of Unemployment, which we are shackled by it. Later in his study, Eisner goes on to replicate CBO's August 1994 economic and budget outlook and comes to a very important conclusion. And I quote: It takes still higher unemployment to break the back of inflation. But high enough unemployment does eventually turn inflation negative. . . The low-unemployment paths shown, however, offer quite a different picture. At 5.8 percent unemployment, contrary to Alan Greenspan's fears, there is no accelerating inflation. By the end of the century, inflation settles at about 4.4 percent. Strikingly, at lower unemployment rates, inflation is no higher. At 4.8 percent unemployment, the simulation shows inflation coming down to 3.6 percent. At 3.8 percent unemployment, inflation comes down to 2.9 percent. At 2.8 percent unemployment, inflation at the end of 1999 is down to 2.1 percent. Eisner also argues the long-term rate of growth will increase with higher employment levels. Over a longer period we should be educating and investing in human capital. . . . We should be bringing millions of workers who are essentially out of the labor force into the labor force. We can make them productive and get them off welfare. There is a lot of production that can take place because of that. So, again, a completely contrary concept of what Mr. Greenspan is saying. Mr. Eisner, and others, through models that they have developed and simulations, show an alternative analysis--that through lower rates of unemployment--higher rates of full employment, you might say--that inflation actually comes down. Again, I believe there is so much pent- up energy and ability in the American work force that we can grow faster. But regardless of future predictions of the effect of unemployment on inflation, it is clear, I believe, that the NAIRU is overestimated. The 1996 economic report of the President stated that: For over a year now the unemployment rate has fluctuated narrowly around 5.6 percent, yet the core rate of inflation has remained roughly stable rather than risen. The economic report goes on to say: This recent evidence strongly argues that the sustainable rate of unemployment has fallen below 6 percent, perhaps to the range of 5.5 to 5.7 percent. The Administration's forecast falls on the conservative end of this range by projecting the unemployment rate of 5.7 percent over the near term. This same paragraph also states: Wage inflation, as measured by the employment cost index, also remains stable. It is entirely possible that the rate could be adjusted downward. James Robinson, former CEO of American Express, echoes the words of Dana Mead. Like that Nehru jacket, the NAIRU concept is outdated. In fact I would say that NAIRU is a jacket itself--it's like a straitjacket on our economy. This is what Mr. Robinson had to say: That frame of reference for growth, called maximum sustainable capacity by economists, was largely developed in the 1950's, 1960's, and 1970's. Today, the parameters of growth are substantially expanded. The deeper integration and breadth of competition that has come to the global economy on only the past decade have opened the way to more robust growth even among the developed Nations. The Fed has been cautious to a fault. It makes a tragic mistake by erring on the side of slow growth, denying Americans a more dynamic economy, diminishing living standards, and cutting off capital to emerging markets. Prof. James Galbraith builds on this point when he argues: In fact NAIRUvians-- I like that word. NAIRUvians have never successfully predicted where the barrier would be hit. That is a minimum level of unemployment. The estimated NAIRU tracks actual unemployment. Professor Galbraith says they do not know where that barrier is, that minimum level of unemployment. He says: [Moreover] the estimated NAIRU tracks actual unemployment. When unemployment increases, conservative economists raise their NAIRU. When it decreases, they predict inflation, and if inflation doesn't occur, they cut their estimated NAIRU. There exists a long and not-very-reputable literature of such estimates. For example, notable NAIRU supporter Paul Krugman: Places present estimates of the NAIRU from about 5 to about 6.3 percent, with most estimates clustered between 5.5 and 6 percent. Mr. President, I understand that the Senator from Florida wanted to get some housekeeping items done. I will yield to him whatever time he may consume for that.

Mr. HARKIN

Mr. HARKIN. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. HARKIN. This was in the December 7, Asian Wall Street Journal. Mr. Rohatyn is talking about budget forecasts. Let me just start where he says: That's because the economic assumptions made by both sides are faulty. The Congressional Budget Office forecast is for 2.3 percent annual growth for the seven-year period; the administration's is for 2.5 percent annual growth. Both forecasts are undoubtedly wrong. That is not their greatest sin, however, because all forecasts are wrong, especially when they go beyond next year. Their greatest sin is to accept, and implicitly condemn, the United States to our present growth rate. Let me repeat that. What Mr. Rohatyn said is that to forecast and to set our policies based upon 2.3 percent or 2.5 percent growth for several years, that is not the greatest sin, he says, he stated the greatest sin is to accept and implicitly condemn the United States to our present growth rate. Despite Wall Street's love affair with slow growth, the vast majority of the business community believes this to be far short of the economy's real capacity for noninflationary growth, as well as being inadequate to meet the Nation's private and public investment needs. Mr. Rohatyn goes on, he says: What is pushing us toward accepting lower growth? Part of the problem is faulty economic measurements. Both Federal Reserve Chairman Alan Greenspan and a distinguished panel of economists have said that U.S. actual inflation rate may be more than 50 percent below the official measurement of the Consumer Price Index. This means inflation may be a less immediate danger. Furthermore, the Bureau of Labor Statistics has decided that the methodology of growth rate measurements is faulty and needs to be revised downward. Once this is adjusted it may ease fears that we're growing ``too fast.'' Mr. Rohatyn goes on to say: It would be a tragic mistake for the U.S. to join the rest of the developed world in a set of economic policies combining low growth, high real interest rates, and fiscal contraction--the prescription seemingly favored by both Congress and the White House. The net result of these policies will not be balanced budgets, but higher deficits and serious social strains, because they will lead to less growth, and hence lower Government revenues. Every major American social and economic problem requires stronger economic growth for its solution. This includes improvements in public education as well as increasing private capital investment and savings; balancing the budget and maintaining a social safety net; improving the economic conditions in the big cities and reducing racial tensions as a result. The economic and social pressures of global capitalism can be offset only by higher rates of economic growth. Even when global competition was less severe, and social problems less daunting, the U.S. did not generate sufficient jobs in Government revenues at less than 3 percent to 3\1/2\ percent annual growth in gross domestic product. There is only one explanation, for the U.S. government's reluctance to adopt a higher growth objective: the inordinate fear of inflation resulting from higher growth. The view that the economy's capacity for noninflationary growth is limited to 2\1/2\ percent is strongly supported by the financial community and the treasury and the Federal Reserve, all rightly anxious to protect the securities and currency markets. But business leaders strongly believe we can achieve higher growth with little risk of higher inflation. It is totally appropriate to fight inflation. It is counterproductive to limit economic growth unnecessarily. (Mr. THOMPSON assumed the chair.)

Mr. HARKIN. I wanted to read a few of the lines from this editorial. We may have an exciting new contrary indicator: Alan Greenspan's predictions. Our search of the record has never found him to be right about what the economy, inflation or interest rates were going to do. We could go back further back, but let's begin with a much noted-1981 speech. As a private and well-connected economist, Greenspan declared that inflation would not decline any time soon. Whoops, inflation was about to drop from 12 percent a year down to 4 percent. In 1982 he wrote a letter of commendation for Charles Keating. He also made an impassioned plea to Congress, asking for more freedom for the savings and loan industry. Years later, the S&L's went bust at great cost to the taxpayers. Keating wound up in jail. The same year, Mr. Greenspan's published economic forecasts said bond yields would fall one-quarter of a percent from the previous year-end level. In fact, they fell 3\1/2\ percent. But the drop in inflation was only temporary, he argued in May of 1983. The extraordinary Volcker-induced inflation calm, he insisted, was about to end. In fact, inflation stayed quite steady at 4 percent through 1987 and the end of the Volcker regime. Also in 1983, Mr. Greenspan said long-term interest rates would increase 20 basis points. This proved to be his best forecast ever: Rates did rise--but by 1 percent, not the meager .2 percent that he predicted. At the start of 1984, he forecast that for the next 3 years bond yields would rise from 5 to 55 basis points. Listen to this. At the start of 1984, he forecast that for the next 3 years bond yields would rise from 5 to 55 basis points. They actually dropped each year from 123 to 199 basis points. Well, the article goes on. I will have more to say about this article. I do not know the author of the article, but he correctly, I think, captured the record of Mr. Greenspan. Again, I want to talk about this because the bottom line is that Chairman Greenspan has this long history of focusing solely on inflation to such an extent that all focus on expanding our economy has been lost. So what do we have today? We have a mindset at the Fed that 2-percent growth is acceptable--2 percent--that the economy cannot grow any faster; maybe 2.5, but that is getting close to the limits, but that we cannot have the 3-percent growth of the 1970's or the 4 percent growth of the 1960's. That is the mindset at the Fed. Mr. President, I believe we ought to do more to promote stronger economic growth, and at the very least we should not put our economy in a harness when there is such a tremendous potential for growth in America today. Saying that America can grow at 2 or 2.5 percent is like saying that we are going to accept a C average when we know we can do a B-plus or an A. I would not let my kids get by with that, and neither would you, and neither would anyone else. We should not let America get harnessed in these shackles when all of the indications are out there that, with a better monetary policy at the Fed, our manufacturing sector will expand, we will get new plant and new equipment, we will have some wage growth for average working families that will not be inflationary, and our farmers will be able to have a better deal, because they borrow a lot of money, and especially our small main street businesses. They are the ones in our main streets of our small towns that have to borrow money at higher rates of interest. They need a break, too. It is small businesses that employ most of the people, the ones that are getting the new jobs out there. They should not be shackled by this low-growth mentality that we see evidenced by the Chairman of the Fed. I urged President Clinton to appoint someone with a greater orientation toward economic growth, someone with a greater concern for the need to increase the incomes of average Americans, and someone who would strive toward keeping the unemployment low. There is a constant flow of articles written about relatively minor changes in tax policy or in the amount of spending for a number of relatively trivial Federal programs. Yet, the questions of our monetary policy and what we do about the supply of money and interest rates are just not being written about or discussed. That is one of the reasons I took the position which I did when this nomination came to the Senate back in March--that we needed articles written about him, that we needed voices heard around the country to start talking about the monetary policy of the Fed, to bring it out of the shadows and into the sunlight. We have seen more and more articles and more and more economists speaking out and business people speaking out saying that we ought to have a better growth policy at the Fed. Because of the huge deficits run up in the 1980's to the present, fiscal policy changes in the amount of Government spending and taxes have become pretty ineffective in our efforts to stimulate the economy during poor economic times. We cannot afford to increase the deficit even when we are entering a recession. One of the reasons, I feel, for reaching a balanced budget and then to perhaps run a small surplus is so that we can restore this capability--this capability of the Federal Government to be able to respond to recessions in a meaningful manner. So with such a huge deficit and high debt load, we cannot do that. We need to get to that balanced budget and reduce the debt load of the United States so that we can begin to invest more in our infrastructure. I do not mean just our physical infrastructure; I mean our human infrastructure such as education. This dependence that we have today on monetary policy and the extent that we have any control over it whatsoever is set by the Federal Reserve System. There is little doubt that the Chairman of the Federal Reserve and the policies he espouses are crucial to our economy. What will be the balance between our concerns for inflation and our concern about economic growth and unemployment? Rising interest rates mean a tremendous downward pressure causing the economy to slow. Higher interest rates mean higher costs of doing business, or running a farm. It means smaller profits. It means buying a home or a car is more difficult for working families. If you have an adjustable rate mortgage, as more and more people do these days, it means a bigger chunk of money will be going to the mortgage and less money will be available to your family for other needs like education. It also means we have rising interest rates; high interest rates. It means more unemployed people and the social unrest and harm that this causes. When we talk about family values, few things are as destructive to a family as unemployment. It strains marriages, causes divorces, and our children suffer. This stricture on our monetary policy also means fewer pay increases and a lower standard of living even for those who do not lose their jobs. People ask a lot of times, and I read articles, about why in America today with our seemingly wonderful economy that the stores are full of goods, and prices in most cases are pretty decent, why is it that there seems to be this unrest among the American people? Mr. President, it was there in 1992. It was there in 1994, and it is still there in 1996. It can all be summed up by saying that the average working families are stagnant in their incomes. Their wages are not increasing as fast as prices. They are incurring more and more of a debt load and paying higher and higher interest rates for the money they borrow. I believe this is leading to great social unrest and will continue to lead to great social unrest unless we have a change in monetary policy at the Fed. Federal Reserve policy has a considerable impact on the health of the economy, the level of unemployment, and the ability of average Americans to improve their incomes. So I am happy to say that I have seen some increase in the number of substantive articles in this area over the past few months. I believe that is one of the benefits of the delay that we have had. I hope that we see more articles in the future. Mr. President, Mr. Greenspan has had a long history in key economic positions; as chairman of the Council of Economic Advisers under President Ford, and as Chairman of the Federal Reserve since 1987. He is a known quantity. He is, I believe, proud of his reputation as a so- called inflation hawk. By that I mean he consistently emphasizes the need to fight inflation. Unfortunately, his policies seem cold to the needs of families to see a little more income come in and to not lose their job. I am not saying he does not care. I am just saying that his orientation toward fighting inflation is, in my view, almost obsessive. It seems to blind him to the need to react to signs of recession or to the societal inequities that his policies lead to. Mr. President, the current law of the land is that the Federal Reserve is to balance concerns about inflation on the one side and full employment and production on the other. These goals are in law, placed in law by the Full Employment and Balanced Growth Act of 1978. It is still the law of the land. Prior to the 1978 act, I understand there was no specific mention of inflation in the law at all. It was not in the Employment Act of 1946 or laws prior to that, going all the way to the founding law of the Federal Reserve in 1913. Now Mr. Greenspan wants to overturn that balance. He actually supports the concept of eliminating the requirement that the Federal Reserve consider the need for full employment and production. He wants to focus solely on the goal of very low inflation. That is not a balanced policy, in my view, and I think we need, at this point in our history, a Federal Reserve Chairman with more balance. Mr. President, I now want to get back to looking at the results of some of Mr. Greenspan's policies at the Federal Reserve and what have been the results of his policies during his tenure at the Federal Reserve System. I have a series of charts and some other things I would like to refer to here at this point in time. Let us take a look, first, at this chart. This is, ``Economic Performance Under Greenspan.'' We have compared the years 1959 through 1987, in aggregate, versus his tenure at the Fed from 1987 to the present. We have different indices here. We have: GDP, real GDP, income per capita, payroll jobs, and productivity. The green bar represents the pre-Greenspan years. The orange bar depicts the Greenspan years. Let us look at real GDP. During the years, cumulative years--and there were some that were pretty bad in there, too. There were some good and some bad. But during the years prior to Mr. Greenspan, real GDP averaged 3.4 percent per year. That is from 1959. The only reason we picked 1959 is because we changed the way we calculate the GDP. Those figures only go back to 1959. GDP averaged 3.4 percent. Under Mr. Greenspan, it has only averaged 2.2 percent growth, in real GDP. Let us look at per capita income. The average prior to Mr. Greenspan's tenure, 2.5 percent growth in per capita income; under Mr. Greenspan, 1.2 percent average growth in per capita income. Let us look at payroll jobs, growth of jobs, new jobs. Prior to Mr. Greenspan, an annual average of 2.4 percent growth in new jobs; with Mr. Greenspan, 1.7 percent growth in real jobs. But this is one of the most telling of all, and that is the last bar on this graph. It has to do with productivity. Productivity prior to Mr. Greenspan averaged 2.3 percent. Under him, it has averaged 1.1 percent. That is crucial. It is through productivity growth that we get our ability to increase incomes of people with little inflation risk. I suppose there are some who say there are other reasons for this. That may be true that there are other factors that influence this, but I believe that in each one of these, the key, let us say the one domino that you push that knocks over all the rest, is the actions taken by the Federal Reserve in each one of these areas, because it has to do with the monetary policy and what our monetary policy is. I would like to turn to another chart, which was in an article written by Rosanne Cahn. I will read parts of that article. This article was in a publication, issued by CS First Boston. This is an economic treatise put out by CS First Boston, May 31, 1996, by Ms. Rosanne Cahn. Again, I do not know Ms. Cahn. Let me read some of this before I turn to the chart, because it will tell you what this chart shows. Ms. Kahn writes, in the May 31, 1996, CS First Boston report on the economy, ``Grow Is Not a Four-Letter Word.'' The Federal Reserve acts like it's wrong for the economy to grow at a reasonable rate. The bond market, conditioned by a stern parent, deteriorates so rapidly in response to strong growth that it may not even be necessary for the Fed to raise short-term rates anymore. Like a child catching itself in a naughty deed, it punishes itself by sitting in the corner in advance of a parent's reprimand. Between 1950 and 1989, U.S. annual growth averaged 3.6 percent, with one-third of the years above 4 percent. The 1990's, at a 1.8 percent average annual rate, have been the slowest 6-year period since 1950. We wonder why there is unrest around America? The immediate post-war recession and the beginning of the Great Depression were the only 6-year periods with worse records since 1929. The rate that rocked the bond market this year was first published at 2.8 percent. . . . That was first quarter. I remember when it came out, oh, my gosh, a huge surge in growth, 2.8 percent. Later on we found out that it had to be revised down to 2.3 percent. Ms. Cahn asked, ``Can't we grow faster without jacking up bond yields by a percentage point?'' These are not this Senator's words. These are words written by Rosanne Cahn in this article. Chairman Alan Greenspan's record on growth is the worst of all post-war Fed Chairmen, with no meaningful progress on inflation. Maybe, Mr. Greenspan argued, we have not had growth because we have had great progress on inflation. Well, that is not so. As shown, growth during his leadership has been, as I pointed out on the earlier chart, a paltry 2.2 percent--right down here, real GDP growth, 2.2 percent, with inflation in the year before he took over at 4.1 percent and inflation averaging 3.2 percent. Paul Volcker, right before him, real GDP growth, 2.5 percent, kind of paltry but a little bit better than Greenspan's. But look what Mr. Volcker did with inflation. You can say, ``Yeah, he didn't have much growth,'' but look at inflation. The year before he came in, inflation was 13.2 percent. He brought it down to 6.2 percent during his term. He cut it in half. If you go back through, you can see the same thing. What has happened is in each of these cases--then you see here the real higher GDP growth rates during the other terms--what happened is that Mr. Greenspan really has not cut inflation by that much, but he has stifled the economy with low growth. So, if we are going to be suffering with low growth, well, inflation 4.1, we should probably be down to zero inflation. We are not. So, again, we are suffering low growth without any real attack on inflation and no real headway made there at all. Ms. Cahn goes on to say: Some would assert that the U.S. economy's rate of expansion is constrained by its maturity. That argument has been made throughout history. I particularly like this part. For example, after the invention of the wheel, cavepeople presumably thought that there was nothing more they needed. Today, penetration of cellular phones and home computers is low, so buying them should keep consumers busy until the next new products/services are invented. By some measure, there's not much wrong with the U.S. economy. For example, full employment has been achieved according to some experts. Why quibble over one percent? Anyone who is willing to give up a percentage point per year of income growth for the next six years can stop reading now. Multiply that by 100 million households and it adds up to real money. Other wonderful things happen with a strong economy. The Federal budget deficit shrinks . . . For example, if growth were 1 percentage point per year faster for the next 6 years, that would reduce the deficit by $120 billion, according to Congressional Budget Office (CBO) estimates, or bring it close to balance. Households' debt problems evaporate if incomes grow without new debt being added. Income distribution disparities might or might not narrow, depending on structural factors behind the higher growth. However, the poor would certainly become less poor as the economy expanded rapidly. So what is the problem? Why not go for growth? Ms. Cahn goes on to say: Prices are determined by the intersection of supply and demand. As demand gets closer to supply, inflation heats up. Inflation is bad because it allegedly causes distortions in the economy, and eventually accelerates enough to destabilize the economy. Most problems caused by inflation are infeasible to quantify; many are subtle or hidden. Therefore, no one has taken a stab at measuring the costs of inflation. However, adults who lived through the 1970s and early-1980s recognize double-digit inflation imposes serious burdens on the U.S. economy. Without quantifying the cost of inflation, it is impossible to determine the rational policy choice between inflation and growth. Besides, no one knows what number to put on full resource utilization, though many will argue vigorously for or against a specific one. In 1993 most analysts contend that NAIRU (non-accelerating inflation rate of unemployment) was above 6 percent; now some say 6 percent and many say 5\1/2\ percent. In mid-1960s, debate focused on 5 percent, 4\1/2\ percent and 4 percent. The policy dilemma is compounded by the long lag between when the economy reaches full employment and when wage inflation picks up. Under such uncertainty, what is a wise monetary policymaker to do? We'll never know, because the Feds' anti-inflationary fervor is more religious than intellectual. Even if the above difficulties are serious, perhaps there is a more favorable inflation/employment trade-off than the Fed will allow, without taking too much risk in the area of uncertainty. I think what Ms. Cahn basically has said here is that you have to have a balance, you have to have a balance between caution on inflation and making sure that we have adequate growth, and to just have this almost religious fervor against inflation can send us into a tailspin in terms of real GDP growth per capita income and the well-being of working Americans. Mr. President, I want to talk just a minute more about NAIRU, the nonaccelerating inflation rate of unemployment, and what that means. A lot of people say, ``Well, we can't have lower unemployment because that will push wages up and that will cause inflation.'' Maybe that might have been true in the sixties, and it may have been true in the seventies, but we live in a different global economy today that a lesser unemployment rate and concurrently some wage increases for hard- working Americans can be offset. We are in a global market. If they push too high, obviously businesses will tend to take their jobs offshore. Likewise, if the price of goods gets too high because the supply and demand is getting too close, well, then, because of the global economy, more goods can come in from overseas. So we do not have the kind of economic mix that we had in the sixties and seventies. I might add one other thing. We did not have in those years either the kind of mass marketing and mass wholesaling that we have today, like the Wal-Mart syndrome that we have in America today. That, too, acts as a buffer, as a damper on the push on inflation if, in fact, supply and demand gets too close. I now want to turn to a couple of articles by Mr. Felix Rohatyn. The first appeared in Time magazine in May, May 20, 1996. Mr. Rohatyn is a well-respected investment banker, perhaps the best kind of an economist, not one who lives in an ivory tower but one who is out there in the real world and has been very successful in what he does. I first met Mr. Rohatyn over 20 years ago. Actually it has been 21 years ago, I think, when I was a Member of the House of Representatives. I represented a very rural district in Iowa, and that was about the time when New York City needed some help from the Federal Government in order to avoid defaulting in its financial obligations. I did not have much interest in that. In fact, I was predisposed to vote against the so-called bailout of New York City. Then Mr. Rohatyn--I do not know what his position was at the time-- came down to speak to us on behalf of the city government of New York City at the time. For a very then-young freshman Member of the House of Representatives who was very much predisposed to vote against a bailout of New York City, I listened with great attention to what Mr. Rohatyn had to say about New York, why it was in the position it was in, how it was going to get out, why it was in the best interest of our country to pass the New York City bailout bill and how New York would pay back every dime on the dollar and how it would lead to greater growth in the future for that city. I voted for the New York City bailout. It probably was not the smartest thing for a Congressman from a rural district in Iowa to do, but I did, and I defended it. It turns out he was right and we were right to do what we did at that time. So I have had a great deal of respect for Mr. Rohatyn over all those years, because I felt he had a commonsense, hands-on judgment of really what was happening in the marketplace. I believe he understands economics very well, but he understands it both in the theoretical aspect and in the actual aspect. The one thing I have always admired about Mr. Rohatyn is that he has always believed that America can do better, that we can grow better and not be just obsessed with the fear of inflation. Anyway on May 20, in Time magazine Mr. Rohatyn wrote the following--I will not read it all, but I think there are some passages in here I want to read for the Record. The title is ``Fear of Inflation Is Stifling the Nation. An outdated obsession is depriving us of greater wealth.'' Mr. Rohatyn writes, on May 20, not even a month ago-- As recently as March, most observers were concerned that the economy might be headed for recession. Many expected the Federal Reserve to lower interest rates. Suddenly the great concern is that the economy may be growing too fast. Earlier this month, the Commerce Department reported that the economy grew at a rate of 2.8% during the first quarter of the year. The bond and stock markets treated this very good news as if it were an unwelcome visitor, and declined sharply. Fickle behavior in financial markets is nothing new, but this latest episode illustrates a deeper problem. It has become an article of faith among policymakers and on Wall Street that if the economy grows at an annual rate above 2% or 2\1/2\%, inflation will rise, perhaps uncontrollably. As illustrated by recent events, such conventional wisdom has become almost a self-fulfilling limitation. When growth rises above this level, investors, spooked by a belief that the Federal Reserve will soon be ``forced'' to raise short-term interest rates in order to prevent an outbreak of inflation, rush to sell bonds. This pushes long-term interest rates up. The result is that prospects for future growth are dampened. And he points out parenthetically--``(And should the Fed do nothing, bondholders sell because they fear the central bank is no longer vigilant against inflation.)'' The irony is that these economic statistics, which so frightened the markets, actually tell us that higher growth is possible without inflation. The real rate of inflation for the first quarter was 2.1%, with no sign of any upward pressure; actual growth was understated because of the General Motors strike and the winter blizzard. And remember, inflation statistics are generally believed to be overstated at least 0.5%. So perhaps the real rate of inflation was not 2.1 percent. It could have been closer to about 1.5 or 1.6 percent. What the first-quarter results make clearer is that the economy can grow more than 3% while holding real inflation below 2%. The same can be said about unemployment. The latest unemployment figures came in at 5.4%; that's well below the 6% unemployment figure that is supposed to trigger inflation through demands for higher wages, according to the standard view. That is the NAIRU view. . . . This view fails to take into account the forces of global competition. American workers no longer compete for jobs only with one another, but with workers worldwide, and that tends to dampen wage demands at home. Wage inflation is not a real threat, but we keep treating it as such. Sure, one quarter isn't a trend, but there is nothing in these numbers to provoke fear of inflation; on the contrary, they should have been the basis for satisfaction and the determination to do better. I guess that is what I like about Mr. Rohatyn. He believes we can do better, that a C average is not good enough for America. The conventional wisdom, however, is so embedded in the financial community that the National Economic Council chairman, Laura D'Andrea Tyson, felt understandably compelled to reassure the markets by announcing that the Administration's growth forecast for the year was unchanged from its original 2.2%. It should not be necessary to tell Wall Street that the economy isn't as good as it looks. Perhaps this is an argument I have with the Clinton administration. If they are accepting a 2.2-percent growth forecast, and if that is acceptable to the Clinton administration, all I can say is it is unacceptable to me, and it ought to be unacceptable to this country. We need a higher growth rate than that. Mr. Rohatyn goes on to say: There was a time when 2.8% would have been considered a modest rate of growth; today it is considered dangerously robust. The sad reality is that it is still below our real needs. Many corporate leaders don't agree with this notion of dragging the anchor just as soon as the economy has the wind behind it. They understand how we can sustain high growth based on the muscular productivity improvements they are generating in their own businesses. In today's environment of rapid technological innovation and international integration, we should be willing to be bolder, both in fiscal and monetary policy. Our excessive fear of inflation has a huge price: stagnating wages for the vast majority of American workers, the decline of our cities and the deepening of our social and economic ills. Although there is no single answer to these problems, increasing wealth and incomes hardly seems like a bad way to start. As President Kennedy said, ``A rising tide lifts all boats.'' The difference between then and now is that the tide is not rising as fast--and it certainly is not raising all boats equally. Without more growth we are simply setting the stage for a battle over the same pie. We need higher growth if we are to balance the budget without unacceptable cuts to social programs, or without letting our infrastructure crumble. Only a growing economy lets us generate the revenues needed by the public sector while reducing the tax burden on the private sector. The Clinton Administration is entitled to a great deal of credit for cutting the federal deficit in half, while putting the economy on a path of stable, moderate growth. But it's time for Administration and congressional leaders to take advantage of the current momentum to reach for a higher level. It's also time for Wall Street and the Federal Reserve to stop kicking up interest rates reflexively every time the economy shows signs of momentum. The notion that we must choose between growth and inflation is a false choice. Global competition as well as new technologies has set new parameters on every aspect of the economy. A 3%-to-3\1/2\% growth rate is not only an achievable national objective; it is an economic and social necessity. Mr. President, I ask unanimous consent that that article be printed in its entirety in the Record.

Mr. HARKIN. Mr. President, finally we have gotten to the nomination of Alan Greenspan to be Chairman of the Federal Reserve Board. I have been waiting for several months for this opportunity, to have the opportunity to debate not just the nomination but what this nomination means for the American people. I am very pleased that we finally have a reasonable opportunity to debate this nomination, the nomination of the most important Presidential nomination to come before this Congress, the nomination of Alan Greenspan to serve as Chairman of the Federal Reserve System. I have been pushing for this debate for months, and I want to thank the Republican and Democratic leaders for scheduling this 3-day debate. This debate about Chairman Greenspan's policies and their impact on our economy, about how we can get our economy to grow faster, about how we can create more jobs and raise incomes, zeros in on the most important issues that we face. Before we get into substance, I want to be clear about one thing. This issue has never been about personalities. It is about policy. It is about making sure that this body gives thorough consideration to the nomination of the Chairman of the Federal Reserve System, the single most important economic decisionmaker in our land. Over the course of today and tomorrow and next Thursday, I and others on our side hope to cover at least the following areas. First, we want to talk about a policy of growth versus a policy of no growth that has been prevalent at the Fed for the last several years and that is prevalent today. We wish to talk about the record of Alan Greenspan. I will go into his record at some length. Why? Because he has been Chairman of the Fed now for two terms. I think it is legitimate for us to ask: Has his stewardship, has his running of the Federal Reserve, been such that we, the Congress and the Senate, should reward him with another 4-year term? We would ask that of any person nominated by the President to fill an important position. We certainly should ask it of Alan Greenspan and look at his record. Third, we hope to talk about the impact on our budget and what we do here over the next several years and the impact on our economy of decisions made by the Federal Reserve Board, especially the Open Market Committee. Fourth, a recent GAO study that recently came out in preliminary form--the final version of that, I guess, will be out next Thursday--I believe raises substantial questions about how the Federal Reserve System is operating. Let us also be clear about another thing, Mr. President. The Federal Reserve Board is a creature of Congress. Yes, it is independent, and I believe it should be independent, but it is not a separate branch of Government enshrined in the Constitution. It is not like the judiciary or like the executive branch or the legislative branch. It is, in whole, a creature of the U.S. Congress. As such, it must be responsive to the Congress, responsive to the American people through Congress. I believe it is our duty to examine closely the policies of the Federal Reserve and to suggest through the legislative process changes that we may wish to make in the Federal Reserve System. I will be talking about one thing later, for example, the fact that the minutes of the Federal Open Market Committee are held secret for 5 years. Why 5 years? Maybe there is a legitimate reason to keep them withheld for a period of time, but certainly not 5 years. I think that needs to be reexamined. Maybe 1 year, but not 5 years. Having said that, I will say we have gone back in the minutes of 5 years, 8 years, and 10 years ago and looked at the minutes, that quite frankly revealed some pretty interesting comments by the nominee now before the Senate. We will be talking about that at some length later, also. Those are the items we wish to cover in this debate. Again, I want to thank both the Republican and Democratic leaders for working this out. It is something that is going to take some time because this is a complex subject, but, I believe, a very important subject, one that really ought to command the attention not only of the Senate, but of the American people. The real point, I believe here, Mr. President, is to start a national dialog and to deliberate and not simply rubberstamp this important nomination, as well as other nominations to the Federal Reserve. The Chairman is the single most important. Again, I think that is our duty and our obligation. Let me say I consider this debate that we begin today a victory for this body and a victory for the American people. So we did not just rubberstamp and put someone through of this importance without raising serious policy questions about the Federal Reserve and how it is operated. Mr. President, raising the living standards and real wages of ordinary Americans stands as our primary economic challenge. The policy of the Federal Reserve under Chairman Greenspan has stood in the way. Under current law, the Federal Reserve is obligated to conduct a balanced monetary policy, so as to reconcile reasonable price stability with full employment and strong, stable, economic growth, and balance. But under the Greenspan Fed, job growth and the living standards of average Americans have been sacrificed in the blind pursuit of inflation control. The Greenspan Fed has raised interest rates not when inflation was knocking at the door or threatening, but when there was not even any specter of inflation. In 1994, in the midst of six straight rate increases, Chairman Greenspan himself acknowledged there was no evidence of rising inflation. Mr. President, I raise a lot of eyebrows at a lot of meetings when I talk about the Fed and why I wanted to have this debate. When I tell people, Mr. President, in 1 year, from February 1994 to February 1995, that Alan Greenspan raised interest rates 100 percent, people look at me like I arrived from another planet. They say, ``That is impossible.'' It is true. Look at the record. The Federal funds rate went from 3 percent in February 1994 to 6 percent in 1995, a 100-percent increase in 1 year, with no inflation threatening. I will have more to say about that later. Since that time, it has only come down three-quarters of a point. Again, no inflation threatening. I believe that is leading this country to an economy where we see more and more millionaires every month, but average working families are stuck in a rut. They are working harder, spouses are working, and yet they are not getting ahead. I will have more data on that as we go through the debate in terms of what wage increases have been in the last few months, several months, last couple of years, what prices have done, to show the average working family is not only not getting ahead, they are falling behind in this great economy. Our stores are chock full of goods, and yet for some reason, the American family is not getting ahead. One of the reasons they are not getting ahead is because their debt load is too great. We hear a lot of talk around here about cutting taxes, because the American people feel they are overburdened with taxes. They do and they are. I submit there is another burden that they are carrying that is weighing them down, and that is the burden of debt and the high interest rates that they are paying. There is no reason for those high interest rates now. Again, I intend to go into this in great depth over the next few days. Mr. President, 100-percent increase in interest rates in 1 year, and they are still there. Mr. President, the decisions of a Fed Chairman touch every pocketbook and every family budget in America. The decisions of this Chairman have cost American families in lost wages and lost opportunities. The Greenspan Fed has stifled economic growth and the incomes of average Americans. Interest rates have been kept artificially high, and middle- class families and businesses have been forced to pay the price. It is time for the Federal Reserve to pursue a more balanced policy based on raising economic growth and increasing jobs alongside continued vigilance against inflation. America at this point in our history ought to have a forward-looking Fed Chairman who recognizes the importance of expanding opportunities for our economy and our people in today's global market. We do not live in the 1970's. We have changed considerably since that time. We need strong leadership, committed to higher growth and incomes, fuller employment, and lower, more stable interest rates to improve the quality of life for average Americans. We have not gotten that with Alan Greenspan. There is what I call a common thread, Mr. President, in the thinking and the actions, and the policies of Mr. Greenspan over the years. It did not start yesterday. It will not end tomorrow or next week. Ripe from his days as Chairman of the Counsel of Economic Advisers under President Ford, until today, Mr. Greenspan has consistently shown the same two tendencies, as evidenced by the public record. First, he often misjudges the signs of an oncoming recession. Second, he does not act decisively enough to pull the economy out of recession because of an inordinate fear of inflation. Again, I will discuss both of these issues in greater detail throughout my remarks. Let me ask unanimous consent to have printed in the Record at this point, Mr. President, a guest editorial that was in the Investor's Business Daily, May 1, 1996. It is headlined ``Greenspan's Rotten Record,'' by Mr. Don Hays. I do not know Mr. Hays.

Mr. HARKIN. Mr. President, I thank my colleague from North Dakota for his eloquent remarks a few moments ago in regard to the pending nomination of Mr. Alan Greenspan to continue as Chairman of the Federal Reserve Board, a position he has now held for 8 years. The nomination is for another 4 years. When I turned over the floor to Mr. Dorgan I had said at the time that I wanted to begin a process of going through Mr. Greenspan's history and I thought I might do it somewhat sequentially and then tomorrow I will pick up on a little bit more of his background regarding his early years. Because, not that I want to go back into ancient history, but I think you can see a pattern here throughout his entire adult lifetime of, quite frankly, being wrong on the economy and misjudging what is taking place. Again, it is my observation that, when you find people who are consistently wrong in a certain area, more often than not it happens because, I think, that person is more closely linked with an ideology or a certain philosophy, and therefore cannot accept facts as they really are, but they tend to be molded into an ideology, they tend to be molded into a conceptual framework and it impacts their view of the actual or real facts or real world as it might be. I think Mr. Greenspan's focus on getting as close to zero inflation as possible has molded his economic thinking, forecasting views, observations, prognostications, in such a way that they do not really comport with what is happening. Thus, the seemingly endless string of errors that he has made since the earliest times. I quoted earlier from the Investors Business Daily about some of those items. I will now go over a few more, before I yield the floor for the day. But let us start here with the time when Mr. Greenspan was the head of the Council of Economic Advisers for President Ford. President Ford introduced his whip inflation now, plan. I remember the little buttons, the ``WIN'' buttons: whip inflation now. He took a lot of his advice and consultation from Alan Greenspan. Let me say Jerry Ter Horst, Jerry Ford's press secretary, said this about Mr. Greenspan and the WIN plan, whip inflation now, and I am quoting Mr. Ter Horst, who was President Ford's press secretary. To be blunt about it, the President has lost confidence in their ability, [meaning the economic advisers' ability] to predict the future. He feels he has received inaccurate advice and, having been burned politically and publicly because of it, Ford has adopted a ``show me'' attitude toward his economic counselors while listening more seriously to the advocates of direct Federal action to overcome the country's economic crisis. This fall, when he fashioned the anti-inflation package he presented Congress following his series of economic summit meetings, Ford relied heavily on the forecasts of his consultants, including economic council chairman Alan Greenspan. They assured him that rising prices and production costs were the prime enemy of a healthy America. He was advised that, while a recession lurked distantly on the horizon, it was not an imminent prospect that would confront him immediately. Well, what happened is just the opposite of what was happening--what Mr. Greenspan had predicted. Let us look here at the recession of 1974- 1975. This is a question in an interview with U.S. News & World Report, November 4, 1974. Keep in mind the President introduced his plan in October. Question. Are you prepared to say we are in a recession now? Answer. I would say that as of September, the last month for which we have actual figures--the answer is no. That is November 4. The fact is that GDP fell at a rate of 4.2 percent in the third quarter of 1974, it fell--not grew--fell 2.8 percent in the fourth quarter of 1974, and it fell 5.8 percent in the first quarter of 1975. So, here we are, we have a GDP falling at these rates in the third quarter, which he had the figures then, and the fourth quarter in which he was in the middle of at this time. GDP is falling and he says no, we do not have a recession. There is no recession out there. So, again, I think that is why President Ford lost confidence. Let us look at unemployment. Mr. Greenspan was completely off in his estimates for the unemployment level for mid-1975. Instead of the 6.5 percent ceiling as he predicted, unemployment reached 9 percent in May 1975. It should be noted that when President Ford introduced his ``Whip Inflation Now'' in October 1974, the unemployment rate was 6 percent. Here again, the same U.S. News & World Report interview, November 1974. Question. Do you have a projection for unemployment for mid-1975? Answer. I have several, and they all show an unemployment rate of more than 6 percent. It could be as high as 6.5 percent. Reality: For December 1974, the next month, the unemployment rate reached 7.2 percent. For May 1975, the unemployment rate reached 9 percent. Again, Mr. Greenspan was off by more than a considerable amount. In a March 16, 1975, editorial, the New York Times stated: But the administration has consistently underestimated the force of the recession and the rise of unemployment. The first version of President Ford's economic program offered, after his time-wasting economic summits last fall, would have deepened the recession by going all out against inflation, just as inflation was starting to slacken and the recession worsen. Again, who was advising the President to go all out against inflation? Mr. Alan Greenspan. At a time when we were going into a recession--we already had the figures--at a time when unemployment was increasing dramatically, Mr. Greenspan says that we have to whip inflation--forget about unemployment--and we fell into a very bad recession. This editorial went on to criticize the tight money policies and the lack of focus on unemployment of the Ford administration that lasted into 1975. Again, I will finish the quote from this article. It says: But why should inflation be a threat to an economy functioning far below its full capacity? The administration's own economic assumptions, stated in his fiscal 1976 budget projections, are that unemployment will continue to hover around 8 percent for the next 3 years. Mr. Greenspan says it is only going to be 6.5 percent, do not forget. If the administration were to walk away from its own long- term forecast of unemployment, it cannot walk away from the existing joblessness, the worst in the postwar period, and the high probability that unemployment will increase over the next few months. In fact, unemployment stayed high and did not get back down to 6 percent until May 1978. So, we had a long recessionary period there. Summarizing the strategy of Greenspan and Ford, the economist Hobart Rowan noted: Ford and Greenspan were willing to drag the Nation through a long period of recession and stagnation in which layoffs would mount, profits shrink and business expansion be postponed, all in the hope that austerity would cure the inflationary mess. That is a quote from the Nation, by Hobart Rowan. The concern about inflation over employment continued well into 1975 when the Ford administration was beginning its economic plans and predictions for 1976. Now we are past 1974; we are now into 1975. Walter Heller, who was President Kennedy's chairman of Council of Economic Advisers, said: The fear of inflation is still so dominant in Washington today that it is evidently destroying policymakers' faith in the recuperative powers of the American economy and blinding their sensitivity to the governing plight of the unemployed. Transfixed by this fear, the White House and Federal Reserve authorities are greeting the earliest signs of modest recovery from the deepest of all postwar recessions as if prosperity was just around the corner. The hellfires of a new inflation are about to engulf us and let the devil take the hindmost the job beast. President Ford justifies his veto of the emergency jobs bill last month in good part that economic recovery would be well along by the end of 1975, and much of the bill's impact would not be felt until 1976. As we know, unemployment did not come back down again until 1978. Those are a few of the things that Mr. Greenspan said during the recession of 1974-75. Inflation was at a high period and should have been of concern. But, Greenspan's focus was only on that point. It was not balanced. Let us jump ahead to the recession of 1990-91. This is the transcript from the minutes of the Federal Open Market Committee, August 21, 1990. Earlier in the day, I said they keep these minutes sealed for 5 years. We now have these minutes from that August 21 meeting. Mr. Greenspan says: I think there are several things we can stipulate with some degree of certainty; namely, that those who argue that we are already in a recession I think are reasonably certain to be wrong. August 21, 1990. The reality: The National Bureau of Economic Research, the official arbiter of when recessions begin and end, determined the recession began in July 1990. In fact, Mr. Greenspan went on after that, later on--and I will get those minutes--when he went clear into November basically stating that there was really no recession at hand. In his testimony at his confirmation hearings in 1987 before the Senate Banking Committee, Senator Riegle had the following exchange with Mr. Greenspan. This is Mr. Riegle: Now, in the first place, when you were chairman of the Council of Economic Advisers during the Ford administration, the council had a dismal forecasting record. I have here a study by the Joint Economic Committee which showed in 3 years--1976, 1977, 1978--the forecasts of the agency which you headed, Mr. Greenspan, were wrong by the biggest margin of any in the 11 years 1976 through 1986. They tied the record for being wrong in 1978. They were almost as bad in 1977, and they were way off in 1976. That's on growth. I am still quoting from Mr. Riegle's question. When it comes to Treasury bill rate forecasting interest rates, there you broke all records for the entire period . . . when you estimated that you predicted that the Treasury bill rate in 1978 would be 4.4 percent. It actually was 9.8 percent. You were off by a huge margin. In 1977, you predicted it would be 5.3 percent; it was 8.8 percent. Again, way off. 1976 wasn't quite as bad, but you were off then. Again, Mr. Riegle, continuing on with his question, says: Then we come to your forecast on inflation of the Consumer Price Index. There, again, Mr. Greenspan, you broke all records. 1978 was the worst forecasting year that you had. You estimated the rate of increase in the CPI would be 4.5 percent. It was 9.2 percent. And you were way off in 1977 and 1976. What was Dr. Greenspan's response? Well, if they're written down, those are the numbers. As if it just did not matter. The source of this is testimony of Alan Greenspan before the Senate Banking Committee on July 21, 1987. So, Mr. Greenspan's private record in the early 1980's was just as bad. After Ford's defeat in 1976, Greenspan returned to his economic consulting firm: Townsend, Greenspan. There he continued to make inaccurate predictions about which direction the economy was heading. In 1982, Mr. Greenspan's published economic forecasts said bond yields would fall one- quarter of a percent from the previous year-end level. In fact, they fell 3\1/2\ percent. But the drop in inflation was only temporary, he argued, in 1983. The Fed-Volcker-induced inflation calm, he insisted, was about to end. In fact, inflation stayed quite steady at 4 percent to the end of 1987 and the end of the Volcker regime at the Fed. Also in 1983, Mr. Greenspan said: Long-term interest rates would increase 20 basis points. This proved to be his best forecast ever. Rates did rise, but by a full 1 percent, not the meager two-tenths of a percent that he predicted. At the start of 1984, Mr. Greenspan forecast that for the next 3 years, bond yields would rise from 5 to 55 basis points. They actually dropped from 123 to 199 basis points. So even in his private years, when we look at his forecasts, they were way, way off. Let us look at the rate increases in 1990. As Chairman of the Federal Reserve, Greenspan's forecasting abilities continued to leave much to be desired. Again, according to the June 9, 1995 Investors' Business Daily: In February 1989, despite clear evidence of a slowdown, the Greenspan Fed pushed its benchmark interest rate higher, to 9.75 percent. The Federal Open Market Committee based its decision on staff advice that the recession was low, according to the minutes from that period. The Fed did not start easing rates again until June, too late to avoid a recession. In fact, transcripts indicate that the Fed was contemplating interest rate increases for much of the earlier part of 1990. During the August 21, 1990 Federal Open Market Committee hearing, there was much discussion about the possibility that the U.S. economy had slipped into a recession. Backed up by his economists, Greenspan believed there was significant evidence that showed the economy was not in a recession; it was merely sluggish. And thus his quote here: I think there are several things we can say with some degree of certainty; namely, that those who argue that we are already in a recession I think are reasonably certain to be wrong. He goes on to say in the sense that we do have weekly data that suggests, as others have mentioned, that there was no evidence of deterioration in what was a very sluggish pattern. Yet, the recession started in July of 1990. Now, you might say this is a little early. Two months later, at an October 2, 1990, Federal Open Market Committee hearing, Mr. Greenspan used a meteorological analogy to strengthen his argument that the U.S. economy had not slipped into recession. Mind you, we started the recession in July. We are now in October, about 3 months into the recession. And here is what Mr. Greenspan said: I still think we're in a situation in which there are forecasts of thunderstorms, and everyone is saying, ``Well, the thunder has occurred and the lightning has occurred and it's raining,'' but nobody has stuck his hand out the window. And the point is, it isn't raining. The point is, as best I can judge, that the third quarter GNP figures in the green book are not phony. I think they are relatively hard numbers. They can get revised. They are being put down more and more, but the economy has not yet slipped into a recession. The actual words of Mr. Greenspan, October 2, 1990. I will not get into the thunder and lightning and the rain and all that kind of stuff. What he was saying is, oh, there is all this talk about a recession but, he said, I have looked at the numbers and it is not there. We had been in a recession for 3 months. He was very wrong. The economy actually went into a recession in July 1990, a month before Iraq invaded Kuwait, by the way. Not only did Mr. Greenspan miss the oncoming recession, he missed it when he was in the middle of it. And he did little to reverse its negative effects. In testimony before the Senate Banking Committee he rejected measures to put Americans back to work by saying proposals by Democrats to stimulate economic growth by pumping more Federal money into public works programs were ``risky'' and ``probably counterproductive.'' Instead, he denied the economy had gone flat and predicted a moderate 2.5 percent growth rate that year rising as high as 3 percent in 1993. The GDP only grew 2.2 percent in 1993. Even Senator D'Amato said at a July 1992 hearing: I believe the Federal Reserve has acted in an almost timid manner. You, (Mr. Greenspan) don't know what's taking place on Main Street. That is a quote of my colleague from New York, Senator D'Amato. That was quoted in the Indianapolis Star, July 22, 1992. I think that brings us to a period of time that I want to dwell on at some length tomorrow, that is, the period of 1994 into 1995. As I said earlier today, when I tell people that Mr. Greenspan raised interest rates 100 percent in one year, February 1994 to February 1995, people cannot believe it. They have never heard of such a thing. Yet, here is what happened. The Federal funds rate in February 1994 was 3.05 percent. In May they went to 4.25; March they went to 3.5; April, 3.75; in May of 1994 to 4.25. So from February to May, that is one, two, three--that is four increases already. And in August another increase. November another increase. February another increase. By the time February of 1995 came around, the Federal funds rate was 6 percent, up from 3.05 percent 1 year earlier. A 100 percent increase in 1 year. And again, why? Was there inflation? Even Mr. Greenspan during that period of time said he did not really see inflation. I will have those quotes and I will have those words. But I just wanted to make the point here before I close--I see I have some other people on the floor who want to speak; probably about other items--that Mr. Greenspan was wrong when he was head of the Council of Economic Advisers. He was wrong when he was in private business. Now as Chairman of the Fed, when we are in the midst of a recession, he says he does not see it happening. Then in 1994, with little threat of increasing inflation, he raises interest rates 100 percent. That hit working families hard. It slowed our economy down. I think it is a large part of some of the problems we have now with the stagnation in our wages. Mr. Greenspan can have all kinds of reasons why he raised the interest rates. But the fact is, there was absolutely no inflation threatening at all at that period of time. I am going to have more to say tomorrow about 1994 and 1995. I will have the quotes from Mr. Greenspan when he basically said that he did not think there was any inflation threatening. But he went ahead and raised interest rates. What has happened? You might say, OK, interest rates went up 100 percent. But that was February 1995. Since February 1995, throughout now, we have had not seen inflation increase. So have interest rates come back down? Three-quarters of a point. Three-quarters of a point. In fact, the last time they came down, in January, I believe a quarter of a point, there was all this talk about how the Fed was now reducing interest rates. But the fact is, as Mort Zuckerman pointed this out in his editorial--I will read that tomorrow also--in U.S. News & World Report, pointing out that actually there was not a decrease in interest rates. It was an increase in interest rates. Why? Because during the previous period of time, inflation had fallen more than a quarter of a point. Inflation fell by more than a quarter of a point and interest rates only came down a quarter point. Real interest rates were still high. It was not a real reduction, a reduction in real interest rates. We have had this 100 percent increase in interest rates, 1994 to 1995. Since that time Mr. Greenspan has only reduced interest rates three-quarters of a point. So I believe American working families, American workers, the middle class, the real middle class in America, is overburdened by too much debt and too high interest rates. It is sapping our economy and hurting our small businesses. It is hurting our productive sector, and it is hurting farming and manufacturing. As I said, it is hurting our working families. It is hurting the real middle-class America, not Congressman Heineman's middle class, but the real middle class. The Congressman from North Carolina stated last year that he believed the real middle class were people who made between $300,000 and $700,000 a year. That is not the real middle class. The real middle class is feeling really pinched these days. They are pinched by high interest rates that do not need to be there. They are only there because Mr. Greenspan, I believe, has an inordinate, unhealthy fear of the specter of inflation. That has caused the kind of hair-trigger approach that they have at the Fed that any time there is even the specter on the horizon of inflation, they will move to increase interest rates, to the point now, that the bond markets react even before they do it because they think they are going to do it. So I am going to discuss the 100 percent increase in interest rates, 1994 to 1995, why that happened, why at least I think it happened, and the fact that interest rates should have come back down to that previous level by now and could come down, not in one fell swoop, but could have over a period of time. That could have really strengthened our economy. As I said, that is nothing personal. I agree with Mr. Dorgan. I have nothing personal against Mr. Greenspan. I assume he is a very bright, intelligent individual. But I believe that his policies, I believe that his mindset, are locked in the past. After all, this is an individual who as late as last year in committee on the record said that he did, indeed, believe in going back to the gold standard, he would support going back to the gold standard. Well, I do not know how many economists believe that. But I think you get that kind of mindset that says, yes, he would like to be on the gold standard again. Well, that may have been a good thing at one time, but the world has moved, the economy has moved. We are in a little different situation today. I daresay anyone who believes that we ought to go back to the gold standard is the same kind of person who would have this inordinate attitude that we must keep relatively high interest rates no matter what, even if inflation is less than 2 percent. I believe it does a disservice to our economy, it does a disservice to America, and it does a disservice to our next generation of young people coming along. We need to grow this economy. We can do all we want here in the Congress. Because of budget constraints, there is nothing we are going to do that could in any way affect the growth of our economy as much as lowering interest rates by the Fed could. That probably will not happen as long as we have Mr. Greenspan. (The remarks of Mr. HARKIN pertaining to the introduction of S. 1876 are located in today's Record under ``Statements on Introduced Bills and Joint Resolutions.'')

Mr. HARKIN. There was another article by Mr. Rohatyn. This one was in the Wall Street Journal, last December. In this article he talks about the growth assumptions that we have made and the affect it has on policy. I just want to read a couple of parts of it. I will not read the whole article, but I ask unanimous consent that it be printed in the Record.

Mr. HARKIN. I just want to read one other part of that article. Ms. Hill said that: Mr. Greenspan, in appearances before Congress, insists that the Fed is open to higher growth and employment and is not targeting any specific unemployment rate such as 5.5 percent. But he defends the Fed's decision to dramatically raise interest rates in 1994 when unemployment fell below 6 percent, saying it was accompanied by a big pickup in commodity prices. * * * * * While many economists agree with the Fed, some say it has not fully taken into account two factors that have increased the economy's employment potential: the aging of Baby Boom workers and the stiff, worldwide competition in trade that has unfolded since the end of the Cold War. She quotes Mr. Ed Yardeni, chief economist with C.J. Lawrence, Inc., in New York who said: Mr. Yardeni notes that unemployment dropped as low as 4 percent in the 1960s without inflation. The same thing could happen in the 1990s, but for different reasons, he said. So, again, I said at the outset of my comments, I think Mr. Greenspan's economic perceptions are locked in the 1960's and 1970's. And the world has changed dramatically since that point in time. So, let us say--let us assume that the floor on unemployment is not 5.5 percent. Let us just say it is 5 percent, half a percent lower. The National Bureau of Economic Research, a distinguished group that is recognized as the arbiter of when recessions begin and end, recently published a working paper which might explain part of the problem. It is entitled, ``How Precise are Estimates of the Natural Rate of Unemployment,'' NAIRU. To explain this point I would like to use the hypothetical example of a political poll, which we are kind of all familiar with. For example, if a poll says that 60 percent of the American people believe x, it basically means that 60 percent plus or minus a certain percentage actually believe x. NAIRU, nonaccelerating inflation rate of unemployment, and other economic statistics, work the same way. So I was surprised to learn that the range of NAIRU is plus or minus 2.6 percent of unemployment. That means that when NAIRU is assumed to be 6.2 percent in 1990, the natural rate of unemployment is actually somewhere between 5.1 percent and 7.7 percent. I would like to point out that each one-tenth of one point of unemployment represents about 132,000 people who do not have a job, many of whom have families. What this means is that a Federal Reserve decision to tighten credit through higher interest rates to slow the economy down does a couple of things that impact Americans. Some become unemployed, more than would otherwise have become unemployed. Every tenth of a percent almost equals more than the entire working age population of the capital city of Iowa, Des Moines. Second, it keeps the cost of wages down. That is the real goal. Increased unemployment is an indirect goal, although it is not stated that way, but what they are really after is keeping wages from rising to prevent inflation. We must keep in mind, however, that employees' hourly wages have fallen in 1995 dollars from $12.85 in 1978 to $11.46 per hour in 1995, a drop of 11 percent. And while that is happening, our productivity is going up. Not as much as it should. But productivity is, in fact, going up in our country at a time when wages are going down. So now we are told we have to keep tight reins on the economy or it will overheat and damage the economy. At what point will the economy overheat and damage our economy? Should we really be worried if unemployment comes down to 5 percent, 4.8, 4.6 or maybe even 4.5 percent? Is there really any fear that that will cause inflation? There are many who do not believe so, and I happen to be one of those. I believe we can reduce the rate of unemployment in this country, provide for more jobs and better wages without increasing inflation. I guess the concern I have with Mr. Greenspan is he always seems to come down on one side of this debate, stopping inflation at any cost, and will not let the economy grow as it should. Mr. President, I said when I started my comments that I would at some point go over Mr. Greenspan's history, and I do want to do that, but I see in the Chamber the Senator from North Dakota, who has been a great leader in this effort to get a more reasonable balance at the Fed, who has been an eloquent spokesman for a more balanced policy and for lower rates of interest and for a growth in our economy. I see the Senator is present on the floor. At the conclusion of his remarks, or perhaps tomorrow, when we are in session tomorrow, I wish to trace for the record and for Senators and for the public Mr. Greenspan's record from the time that he was Chairman--well, I may even go back further when he was one of Ayn Rand's disciples in New York. I may even go back to that. But I want to trace his history from the time he was chairman of the Council of Economic Advisers through his private years, when he was private and he was stating what the economy would do, and to show also through this period of time as Chairman of the Fed how, quite frankly, Mr. Greenspan just simply has been wrong. I say that with no malice. I just say that is the record. I wish to trace that record in some detail in the hours and days that follow. I, again, see my colleague and again, as I say, one of the great spokesman for a better balance at the Fed and for more growth in our economy and one of the great fighters for small businesses and our farmers present on the floor. I yield whatever time he might consume.

Mr. HARKIN. Mr. President, I think Mr. Rohatyn, really in both those articles, has really outlined what our policy ought to be at the Federal Reserve. That is, a policy of balance. That is what he is arguing for. He is not saying, forget about inflation. He is saying, when there is no inflation, when the fear of inflation is low and inflation is way down, below 2 percent, we can take some risks for more growth. Like the story about the turtle that only makes progress when he sticks his head out from underneath the shell. Of course, he is most vulnerable at that point. The turtle could live his entire life closed up in a shell. He would not get very far, but he would be safe. Like the turtle, we have to stick our necks out once in a while for growth. If we see inflation coming, yes, then we can retreat. But to retreat before inflation is threatened is to condemn America to slow growth, is to condemn American families to low wages and high unemployment. It means that we will have a tougher time balancing our budget, or it means if we do want to balance the budget, we are going to cut very deeply into social safety net programs. We will cut into education, we will cut into health, we will cut into Medicare, and we will start cutting to balance the budget. That will exacerbate and make worse social unrest that we already see starting out there. We must have a policy of growth. The Federal Government cannot do it by itself. We have no magic here to do that. Yes, we can cut budgets, and we are. We can cut the deficit, and we are. We can streamline Government. I commend the Clinton administration for what it has done to streamline Government. It was the Clinton administration that started the reorganization of the Federal Government. It was President Clinton who suggested we trim the size of the Federal bureaucracy to its lowest point since John Kennedy was President. Yes, we can take those steps, and we are taking those steps, but unless we have growth in our economy, those cuts are going to get harder and harder in the future. It will be harder to make politically, but it will be harder on people with real needs, whether it is an elderly person who is ill or maybe an elderly person that needs heating oil in the wintertime and we do not have enough money to pay and to help them buy that heating oil to keep warm in the winter. It is a family that has a child that needs a Head Start Program and cannot get it because we do not have the money for it. We simply do not. Or maybe it is a young couple starting out, both of them are working, and they would like to save to buy a new home. They cannot to it because the interest rates are too high. That is what is ahead for us if we do not have growth in our economy. As I said, we have limited resources at our fingertips here in the Congress to do that. We cut the deficit, we cut the size of the Federal Government, we can streamline, but in the end it has to be the Federal Reserve and its monetary policy to reduce the interest rates that will allow the private sector to expand. By allowing the private sector to expand and grow with new plants and new equipment and, yes, wage growth for hard-working families, that will create the kind of revenues that the Federal Government takes in to help meet our obligations to those less fortunate. Mr. President, Rohatyn points out the increasing social unrest that will happen if we continue on with the tight money policy under Mr. Greenspan. Mr. President, I do think we should have monetary goals that allow for 3 percent, maybe 3\1/2\ percent growth, a percent higher than what we have. Of course, as I said, if it was achieved, we would see our revenues climb as profits and income increase, and many program costs would fall. Again, I commend President Clinton for the approaches he has taken to reduce the budget deficit and to reduce the size of the Government. Next, I want to discuss some of the recent news impacting on interest rates, how the perceptions of the Federal Reserve and its actions have shaped the market's reaction to the news, and why I believe Alan Greenspan's historic pattern of actions is not helpful for our economy to grow. I would like to know how approving his renomination and his hair-trigger reaction toward raising interest rates makes talk of a growing economy from a supply side tax cut totally impossible. There are those who say we need to have this big tax cut now, as if somehow this tax cut is going to lend itself to a supply side growth in our economy. But if you have high interest rates, unreasonably high interest rates, tight money policy, then that will not happen. Tax cuts will just simply go for higher interest payments. That is all they will go for. If you want to really get the economy moving, yes, you should get our rate of interest down, and then have targeted tax cuts to working families. That would really spur the economy. To do it without lowering interest rates is counterproductive. If the Federal Reserve is going to look at a reduction of revenue without immediate offsetting reductions in spending as inflationary, then interest rates are likely to increase and higher interest rates will send the economy into a dive, further exacerbating the deficit. In that environment, the ability to promote any kind of a supply side tax reduction that benefited the economy becomes highly suspect. One of the very strange things to most people who read the newspapers is how the bond and stock markets now tend to go down when there is significant good news about the economy as a whole, as I just read from a couple of articles. The reason is because they believe as soon as the economy gets better, interest rates will rise. Will they rise because of fear of inflation, or do they think they will rise because of a hair-trigger orientation toward raising interest rates at the Federal Reserve? I believe a very large component is the fear of the Federal Reserve increases in its interest rates and not the fear of inflation. I suppose Mr. Greenspan's supporters would say the answer is if the economy overheats, there will be a bottleneck in the economy, shortages of goods, the inability to deliver them on time, shortages in employees. This, of course, will result in higher prices for wages paid, and thus inflation. Inflation will increase and erode the value of long-term bonds. The bond market will therefore demand higher interest rates to slow the economy and reduce inflation, and clearly higher interest rates reduce consumer demands, increase business costs and lower profits. Under Mr. Greenspan's Federal Reserve, I believe there is a perception, cultivated by him, that he does have a hair trigger and if there is ever any early sign at all of any inflation, they will raise interest rates. Unfortunately, it is more than true. He may claim it calms the markets, but I think he is leading the charge to higher rates in a slower economy. Sometimes we have seen this hair trigger operate when signs of inflation are ephemeral, at best. The bonds and stock markets both initially hit the skids when the Bureau of Labor Statistics issued its report on May unemployment last Friday. What did the report say? Mr. President, 348,000 jobs were added to the payroll. In addition, there was an upward revision in the April employment figures by 163,000; about 500,000 additional jobs in America over a 2-month period. There was about 40,000 less than that because statistics counted higher for election day in many States, so we are talking about 460,000. There was a huge 549,000 increase in the work force in May. Half a million people wanted to get into the job market. They wanted to work in April. Only two-thirds found jobs. I hear people say, ``My gosh, look at all the new jobs we have created. We are up to 500,000 in a couple of months.'' But what they point out is that in May, there was a 549,000 increase in the work force, and what we found is that over that period of time, about 460,000 new jobs. So only about two-thirds of the people looking for work found work. So, in actuality, the unemployment rate increased from 3.6 to 5.6 percent in May. Again when you tell people that, they say, ``Wait a minute. I have been reading about all of these new jobs created.'' That is true. That is only one side of the ledger. You must look at the other side of the ledger and how many people are looking for work. This is about a third more looking for work than actually found jobs. So unemployment actually increased. With a fear that increased jobs will yield to bottlenecks, this news says there are a lot more people looking, providing competition for the growing number of job positions that become available. What about the direct measure of inflation--rising wages? We talked about unemployment; let us talk about wages. In the March figures released in April, wages increased by 7 cents. On Friday, the new figure said, after adjustments after the past 2 months, wages only increased by a penny an hour. The economy, they said, did very well in April. Generally, economists felt it was a pretty good month and a pretty good quarter of the year. There is a widely held view that the economy will not do as well in the second half. What is the problem with rising bond prices? It is the Federal Reserve. Everyone in the market understands Mr. Greenspan's character. So the 30-year Federal bond interest rate increased by 13 basis points last Friday largely on the bet that the Federal Reserve rate increase was on the way. We keep hearing that, at the next meeting of the Federal Open Market Committee, there is going to probably be an increase. First of all, unemployment actually went up. Rising wages is only about a penny an hour. Why? Yet, bond interest rates increased by 13 basis points. Why is all of this important? It is important because, in the short term, the fear and the expectation of Federal Reserve rate hikes mean higher mortgage rates and other interest costs even before possible Federal Reserve action. If the Federal Reserve increases the interest rates, which in recent years is almost automatically followed by increases in the prime rates of banks, then the cost of doing business or operating a farm will increase. The cost to consumers who want to buy things increases. But the most important effect of Mr. Greenspan's Federal Reserve policy is it blocks faster economic growth. As I said, Mr. Greenspan talked about the desirable growth at a bit over 2 percent a year. Many economists say that our economy could grow well over 3 percent, as Mr. Rohatyn does, without triggering higher inflation. Many say we could sustain that rate for a longer period of time. But I think it can be said with certainty, a 1-percent increase in growth for 1 year means an extra $75 billion added to the economy and the following year and each year thereafter. If we sustain that higher growth for 2 years, then we are talking about an extra $150 billion in the size of the economy per year; 3 years, $225 billion a year added; 4 years--you get my point. What this would mean in cumulative effects to the economy is nothing short of startling. A larger economy means more in wages and a better quality of life for Americans. I believe it is worth a try. Mr. Rohatyn believes it is worth a try, and so do many, many economists. Especially business people think it is worth a try. I think we should allow the economy to grow at the strongest rate possible. Of course, this means we must lower interest rates. Again, is there a risk of inflation? Yes; not as great as the risk would have been 20 years ago in the 1970's. As I pointed out, we have a world market in goods, we have a world market in labor, and we have new, more massive retailing and discounting in America that we never had 20 years ago. Plus we have a large pool not only of unemployed but underemployed. That is another point that I am going to be talking about later. We can look at the unemployed figures. They say, ``Well, it is 5.6-percent unemployment. But there are a lot of people--and we all know it because we talked to our constituents--there are a lot of people out there who are underemployed. They have a job, but it is not the job they want, and it is not the job paying them the wage that their education and their abilities might otherwise argue for. But they are taking it because there is nothing else. It is not uncommon for a family with the husband working one or two jobs, the spouse, the wife, working one or two jobs, and one or more of the children working. Many of those second jobs are lower wage, many times minimum-wage, jobs. So there is, I think, a great deal of underemployment. So, if we were able to spur economic growth to buy new plants and equipment, new opportunities, I believe that a lot of the underutilized jobs would move to other sectors and a lot of the underemployed people would take those jobs. So again, it argues against any kind of tightness in the labor market that would argue for inflation. So, yes, there is a chance, there is a risk. As I said, it is like the turtle. The turtle never makes progress until it sticks its neck out. Of course, that is when it is most vulnerable. A turtle can spend its whole life clammed up in its shell, but it would never get anywhere. We can spend the rest of this century and a good portion of the early part of the next century clammed up in our shell, too, while other nations outstrip us, while other nations' growth rates exceed ours, and while we condemn our people to a lower standard of living. That is really what this is about. Some people say, ``Well, you mean to tell me it is all wrapped up in one person, Mr. Greenspan?'' My answer is, yes, a lot of it; not all of it, but a lot of it because of the power of the Federal Reserve Chairman and because of the monetary policy of the Federal Reserve. Some would say that cannot be true. Alan Greenspan does not want the economy to grow more quickly? Is that a fair statement? Mr. Greenspan does not believe that the risk of inflation is worth what could be substantial job growth and higher income. He has spent his entire professional life fighting for that view. I believe he is so oriented toward that view, blinded by that view, that he failed to act decisively to bring the U.S. economy out of two of the most serious recessions in the post-World War II era. In 1974, while chairman of President Ford's Council of Economic Advisers, and in 1990, as Chairman of the Federal Reserve, both times he failed to act decisively to bring the U.S. economy out of serious recessions. In February 1994, he started a series of seven interest- rate increases with no real sense of inflation. Perhaps on the horizon there may have been a mirage of inflation sometime in the future. Last Thursday's Washington Post had an interesting article written by John Berry. It said the Federal Reserve officials did not intend to orchestrate a signal on the prior Wednesday, on May 29, that the Fed wanted to raise interest rates at their July 3 meeting. But we have seen a number of statements last week on exactly that point, a few days before the article. Some of those statements said that the Federal Reserve was not intending to raise rates, and inflation looks like it is under control; the economy is not going out of hand. But I note that the bond and stock markets did take some of the remarks made by Fed officials made on May 29 very seriously. Susan Phillips, a member of the board, and Al Brodous a member of a Richmond bank, indicated that they were seeing inflationary pressures in the economy. When the news came out that the 30-year bond moved up, stocks quickly dipped when the economists were heard on Wall Street. Speaking in Washington, according to the Wall Street Journal, Phillips was concerned about rising commodity prices and Brodous was concerned about the tightness in the labor market. On Friday, 2 days later, the 30-year bond was still 13 basis points higher, affecting real people. Mortgage rates were also up sharply. The beginning of last week saw lots of statements of denial, and the culmination was John Berry's piece in the Washington Post, and the 30-year bond returned to near its prior level. My point in telling this is not to say that Fed officials purposely organized an effort to send a signal or not. That is not the point. It is to say that everyone in the market knows about Mr. Greenspan's hair trigger. If you are going to have large sums that will be invested in the bond market, that view is highly to your advantage. It keeps the chances of inflation way down. Unfortunately, it keeps the economy hobbling along and wages close to stagnant. What is good for bondholders is not necessarily always good for America, and not necessarily always good for the average American. At the end of last week the 30-year bond was about 15 basis points higher than it was a few days before. Mortgage rates went up. And, unfortunately, there is now a reasonable chance that the Federal Reserve might increase rates on July 3. That is all being bandied about. Again, why? What is there out there that would even cause someone to think that the Federal Reserve might raise interest rates? The labor market is not tight. There is no inflation inherently threatening at all. Yet they are talking about it. What was the truth, anyway--commodity prices? They have been stable for months. On the day Ms. Phillips made her comments, the IPC stood at 253. A month before, at the end of April, it was around 256. This is the Index of Prices for Commodities. So how could that statement be made that there is a tightening in commodities when, in fact, the index came down three points, from 1 month to the other? Oil came down to about $20 a barrel from its peak of about $25 a couple of months ago. Oil prices are coming down, to the refinery. Unfortunately we have not seen much at the gas pump yet. So where is the climb in commodity prices? They are generally going down more than up. Let us look at the labor markets. Again, what do we see? Unemployment was up. Unemployment was up 5.4 percent for April, but unemployment has been in a range of 5.4 to 5.8 percent since October, 1994. And in 1994 many at the Fed were saying that anything below 6-percent unemployment would likely cause higher inflation. Wrong. Perhaps, if we would not send interest rates skyrocketing, we might discover we could sustain strong growth without accelerating inflation, bringing unemployment down actually to 5 percent. In recent months the Help Wanted Index has also been low. This is a clear indication that employers are not having difficulty finding employees. A weak Help Wanted Index is something that might be expected in a slumping economy. More important, a weak Help Wanted Index is also one more indication that inflation is not threatening because employers will not have to increase wages and benefits to attract employees. And we all know that employee wages and compensation are one of the greatest causes of inflation. So why the hair trigger? There is little reason, in my view, that fair-minded, balanced experts should want to raise interest rates at this time. Just over the last couple of days we have received some good news about inflation. The CPI went up by .3 percent, core CPI went up only .2 percent, producer prices went down .1 percent. Yet the airwaves have been all filled with talk that the Fed may raise rates. Why? Because of Mr. Greenspan's hair trigger. I would like to now go through some of Alan Greenspan's actions in the past concerning interest rates, that might explain the perceptions of the bond and stock markets. First I want to talk briefly about a constant called NAIRU. I referred to it earlier, the nonaccelerating inflation rate of unemployment. Under this concept, as unemployment falls below a certain point, bottlenecks occur because the country runs out of skilled employees. As a result, employers must begin to offer increased pay and greater benefits to attract employees. As a result of this, producers must raise their prices to keep pace with the increased costs of doing business. Thus, this leads to inflation. This model argues that if monetary policy is structured in such a way as to keep unemployment below its natural level, runaway inflation will result at an accelerating rate that could be reversed by only painfully high levels of unemployment. The conventional wisdom held by Mr. Greenspan is that the current natural rate of unemployment is around 6 percent. I want to be as fair as I can. Mr. Greenspan said he has no specific rate in mind, that he just watches the details. But for a long time the word was that this NAIRU, if I can call it that, was at least 6 percent. Below that rate, we would see escalating inflation. But unemployment went below 6 percent about 20 months ago and there is still no impact. Now the accountants are saying that NAIRU is maybe 5.8 percent, or 5.5 percent. There was an interesting article by Patrice Hill earlier this month in the June 4 Washington Times on that point. I just wanted to read a little bit from that article. This was in the Washington Times dated June 4, by Patrice Hill. Is the Federal Reserve keeping unemployment unnecessarily high and preventing more than a million workers from finding jobs? A number of analysts say yes, the Fed may be depriving workers because of a too-cautious belief that if it loosen the money tap and lets the unemployment rate fall below its current level of 5.4 percent, the would trigger wage and price inflation. ``The Fed is probably shortchanging the economy,'' said Maury Harris, chief economist with Paine Webber Inc. in New York pointing to a succession of relatively inflation-free economic reports. In the 1980's, inflation reared its ugly head when unemployment dropped to between 5.5 and 6 percent, so the Fed and many economists still see that level of unemployment as a ``danger zone'' where inflation lurks. They fear the demand for workers will start outstripping the number of people seeking work, driving up wages, the cost of business, and ultimately, fueling inflation. But Fed critics in Congress and in economic circles note that unemployment has hovered in the 5.5 percent range for two years now, with little sign of a pickup in wage growth or inflation. In fact, ``wage stagnation'' is frequently singled out as a problem. Mr. Harris and a growing number of prominent analysts say unemployment could drop still further--to between 4 percent and 5 percent--without triggering inflation. And that would make life better for a lot of people--a one-point drop in unemployment puts a little over a million back to work. Mr. President, I ask unanimous consent that article be printed at this point in the Record.

Mr. HARKIN

Mr. HARKIN. Mr. President, I rise today to offer the Move It or Lose It Health Coverage Act. This is a straightforward bill that says if Members of Congress fail to move health insurance portability for Americans in a way that can be signed into law, then they will lose the health insurance portability that they now enjoy. If we don't pass it for America, we lose it for ourselves. My legislation is designed with one goal in mind: to build up the pressure to provide greater health security for millions of American families. Mr. President, when many Members of Congress leave office today, they can take their health care with them. No need to worry about preexisting condition exclusions or waiting periods or cancellations of policy if they become sick. It's all taken care of. Everything's covered. Not so for far too many working families. Millions of Americans today face preexisting condition exclusions because they change jobs, lose jobs, or work for employers who change insurance policies. The legislation I offer today says plain and simple--as long as health insurance portability is denied to working Americans, it ought to be denied to Members of Congress as well. Holding office shouldn't insulate anyone from all the health insurance concerns that face working families in America every day. And I am hopeful that this bill I offer today will provide the incentive needed for all of us to come together and pass responsible health insurance reform legislation for all Americans. So my bill says that until Congress passes the Kassebaum-Kennedy health insurance measure or similar legislation, the coverage provided to Members of Congress through the Federal Employees Health Benefits Program [FEHBP] will be modified in several ways so that we know what so many others are facing. First, health insurers participating in the FEHBP would be allowed to include preexisting condition exclusions in health plans covering Members of Congress. Second, insurers would be free to refuse to issue coverage or renew coverage provided to a Member because of current health, or preexisting medical condition. Carriers would be free to include these restrictions and limitations in any health plan covering a current or retired Member of Congress. And, third, current Members of Congress would no longer receive taxpayer-subsidized health coverage after leaving office. Mr. President, the Kassebaum-Kennedy health insurance reform bill passed this body 100 to 0. Not one Senator voted against it. But now that legislation--and those important reforms--are languishing. It is time to unite together to give the American people some of the same protections and health security that we have. If health insurance portability is good enough for Members of Congress, it ought to be good enough for working Americans, too. And we must go about passing the Kassebaum-Kennedy reform in the same spirit that it was introduced and approved by the Senate the first time around--with strong bipartisan support and without controversial provisions that will keep it from being signed into law. Let us pass what the American people want: a clean bill of health. A clean bill of security for American families. And make no mistake, Mr. President. If the Kassebaum-Kennedy legislation is reduced from the commonsense bill that it was when it left the Senate to merely a partisan, political bill, then there will be no winners and American families will lose. There is plenty of room to reach common ground by using common sense. It was in that spirit that I acted over 1 month ago to call for a carefully designed pilot project for medical savings accounts. And it is in that spirit that I offer my legislation today. The Kassebaum-Kennedy bill which passed the Senate unanimously is truly a modest proposal. It does not fix many of the flaws in the current health care system. But it represents an important step toward reforming health care and injecting some fairness into the system. It would offer some welcome relief for American families worried about losing their health insurance. Specifically, it would allow families to switch health plans without facing preexisting conditions. And it would assure that they won't be dropped and their coverage will be renewed even if they become sick. The General Accounting Office estimates that 25 million Americans would be helped by portability reforms contained in the Kassebaum- Kennedy health insurance bill. We can not afford to deny this basic reform to the American people. We have passed common sense change before. We must do so again. The American people demand and deserve no less. It is time to deliver. I ask unanimous consent that the bill be printed in the Record.

Mr. HARKIN

Mr. HARKIN. Mr. President, I rise today to speak in opposition to S. 1635, the so-called Defend America Act. I know supporters call it the Defend America Act, but I'm going to call it what it is--the De-Fund America Act. Why do I call it that? Because its main effect will be to add tens of billions of dollars, if not more, to the deficit over the next 15 years, without increasing the security of the United States one bit. As a strong supporter of a balanced budget amendment to the Constitution, I cannot support this bill. I do not know how anyone can bring this fiscal black hole to the floor, and with a straight face bring up consideration of the balanced budget amendment in the same week. Something is wrong with that picture. As an editorial in the Des Moines Register said on May 6, 1996, ``[b]ackers [of this version of National Missile Defense] find it most profitable to start with a few billion, and when it's gone, point to the past expenditures as justification for future shovelings down the same rathole.'' The same editorial says that De-Fund America Act booster, Representative Curt Weldon, told industrial supporters, ``[i]f you keep relying on the facts and logic, then we're going to lose this battle.'' I couldn't agree more. I ask unanimous consent that the editorial be printed in the Record at the conclusion of my remarks.

Mr. HARKIN. According to the CBO, the ballistic missile shield mandated by the De-Fund America Act will cost between $30 and $60 billion just to develop and deploy. Ironically, the very same people who insisted that President Clinton rely on the CBO in the budget negotiations are the ones now claiming that the CBO can't be trusted on the De-Fund America Act. The defunders think the CBO numbers are too high. I should state here that I don't necessarily trust the CBO numbers either--I think the numbers are way too low. For one thing, the CBO has not yet come out with specific numbers on how much this technology will cost to operate, but it has told my staff that the operational cost will be an additional ``hundred of millions dollars a year during the early stages.'' I suspect the total figure will exceed $100 billion once all of the costs are calculated. Mr. President, we've already spent about $100 billion in 1996 dollars to build a technological defense against ballistic missiles. During the Reagan star wars years alone, the United States taxpayers forked over $38 billion. Proponents of this act are quick to point out that it is not star wars. And I agree. It is not even star wars. Like most sequels, this one is not as good as the original, and the price of admission has increased. The proponents of the De-Fund America Act want the taxpayers to fritter away another $100 billion on a still unrealistic but wimpier version of President Reagan's fantasy. The defunders also claim we have no defense against intercontinental ballistic missiles. Mr. President, it is true that we do not have a way to shoot down intercontinental missiles after they have been launched. But we do have a demonstrated cost-effective means of eliminating them. Existing arms control agreements have already resulted in the destruction of over 300 intercontinental ballistic missiles and over 800 ballistic missile launchers, and the removal of over 3,800 nuclear warheads from deployment. Furthermore, these agreements have persuaded Kazakhstan, Ukraine, and Belarus to give up nuclear weapons altogether. In fact, just yesterday President Clinton announced that the last nuclear warhead was removed from the Ukraine. The De-Fund America Act is like a million-dollar mansion consisting of a leaky roof but no walls. It may provide very expensive protection from sky-diving intruders, but it leaves the occupants unprotected from the more mundane threats. Mr. President, Americans know all too well that weapons of mass destruction are more likely to arrive by rented truck than ICBM. Wasting $60 to $100 billion on this not-even-star-wars program is fiscally irresponsible. I urge my colleagues to oppose S. 1635, the De-Fund America Act. Exhibit 1 [From the Des Moines Register, May 6, 1996] ``Defraud America Week'' Somebody forgot to tell Congress that the Cold War ended. Somebody also forgot to tell Congress that even if Russia were still a superpower with the demonic intention of destroying the United States, a ``Star Wars'' system would offer little if any defense. Somebody forgot to tell Congress that the nation is trying to face up to its deficit problems, trying to economize by dumping wasteful, illogical, unworkable projects. But congressional Republicans are sailing blithely onward, their vision apparently clouded by the same hypnotic hype that put Star Wars on the drawing boards 12 years and 29 billion wasted dollars ago. They have launched an effort to deploy a national missile defense system by 2003. A spending bill comes up for consideration next week. Total cost is unknown. Backers find it most profitable to start with a few billion, and when it's gone, point to past expenditures as justification for future shovelings down the same rat hole. Whose missiles will it defend us against? Questions like that are out of order. According to a publication of the Union of Concerned Scientists, Pennsylvania Congressman Curt Weldon, organizer of the Congressional Missile Defense Caucus, told industrial supporters last year, ``If you keep relying on the facts and logic, then we're going to lose this battle.'' The Star Wars pushers are calling next week ``Defend America Week.'' A wag suggests ``Defraud America Week.''

Mr. HARKIN

Mr. HARKIN. Mr. President, I am today introducing legislation to make a minor modification in the rules applicable to the early termination of Conservation Reserve Program contracts. This bill will provide greater flexibility in the management of CRP acreage and increase opportunities for livestock production using land that has been enrolled in CRP, while continuing to protect against soil erosion and to conserve the natural resource base. The Federal Agricultural Improvement and Reform Act of 1996 established a new early termination option for holders of CRP contracts. Participants who entered into a contract before January 1, 1995, may terminate the contract at any time if the contract has been in effect for at least 5 years. Certain lands considered to be of high environmental value are not eligible for the early termination option. The act specifically disallows the early termination of contracts on land having an erodibility index of more than 15, a restriction that also was included in the rules for the early CRP termination option offered this spring through administrative action independent of the farm bill. The restriction on early removal of the more highly erodible land from the CRP is obviously designed to reduce the potential for returning land to crop production where doing so presents a higher risk of damaging levels of soil erosion. Of course, a principal purpose of the CRP was to remove highly erodible land from production in order to conserve soil, so it is reasonable to ensure that early terminations of CRP contracts do not nullify the benefits of the CRP or negate the investment in conservation made by taxpayers through CRP payments. While the prohibition against early termination of contracts on land having an erodibility index higher than 15 seems reasonable in general, it does not take much sense to livestock producers who would like to remove land from the CRP in order to use it for haying or grazing. The nationwide emergency release of CRP for grazing and haying has relieved a good deal of the concern regarding access to CRP acres for livestock feed--but only for this year. There is a real need for a longer term resolution of this matter. My bill would simply allow the Secretary to waive the restrictions on the types of land that may be removed from the CRP under the early termination option if the Secretary determines that the land will be used only for haying, grazing or other use not involving the destruction of vegetable cover. By ensuring that the vegetable cover is not destroyed, protection against soil erosion will be maintained. In addition, any such waiver can be made only if the Secretary determines that the land will be used only in a manner that adequately protects the natural resource base. As discussed, the waiver authority contained in this bill is designed specifically to deal with the prohibition against early termination of CRP contracts on land with an erodibility index higher than 15. There may be some other instances in which a waiver meeting the requirements of this bill could be granted, but they would be tightly limited by the requirement that vegetable cover not be destroyed and that the natural resource base be adequately protected. Mr. President, this bill is a commonsense solution that will provide more reasonable options to CRP contract holders for returning land to economic use while maintaining vegetable cover and protecting the natural resource base. I hope my colleagues will support this legislation and that it will be enacted at the earliest opportunity. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. HARKIN

Mr. HARKIN. Mr. President, I am today introducing legislation to make a minor modification in the rules applicable to the early termination of Conservation Reserve Program contracts. This bill will provide greater flexibility in the management of CRP acreage and increase opportunities for livestock production using land that has been enrolled in CRP, while continuing to protect against soil erosion and to conserve the natural resource base. The Federal Agricultural Improvement and Reform Act of 1996 established a new early termination option for holders of CRP contracts. Participants who entered into a contract before January 1, 1995, may terminate the contract at any time if the contract has been in effect for at least 5 years. Certain lands considered to be of high environmental value are not eligible for the early termination option. The act specifically disallows the early termination of contracts on land having an erodibility index of more than 15, a restriction that also was included in the rules for the early CRP termination option offered this spring through administrative action independent of the farm bill. The restriction on early removal of the more highly erodible land from the CRP is obviously designed to reduce the potential for returning land to crop production where doing so presents a higher risk of damaging levels of soil erosion. Of course, a principal purpose of the CRP was to remove highly erodible land from production in order to conserve soil, so it is reasonable to ensure that early terminations of CRP contracts do not nullify the benefits of the CRP or negate the investment in conservation made by taxpayers through CRP payments. While the prohibition against early termination of contracts on land having an erodibility index higher than 15 seems reasonable in general, it does not take much sense to livestock producers who would like to remove land from the CRP in order to use it for haying or grazing. The nationwide emergency release of CRP for grazing and haying has relieved a good deal of the concern regarding access to CRP acres for livestock feed--but only for this year. There is a real need for a longer term resolution of this matter. My bill would simply allow the Secretary to waive the restrictions on the types of land that may be removed from the CRP under the early termination option if the Secretary determines that the land will be used only for haying, grazing or other use not involving the destruction of vegetable cover. By ensuring that the vegetable cover is not destroyed, protection against soil erosion will be maintained. In addition, any such waiver can be made only if the Secretary determines that the land will be used only in a manner that adequately protects the natural resource base. As discussed, the waiver authority contained in this bill is designed specifically to deal with the prohibition against early termination of CRP contracts on land with an erodibility index higher than 15. There may be some other instances in which a waiver meeting the requirements of this bill could be granted, but they would be tightly limited by the requirement that vegetable cover not be destroyed and that the natural resource base be adequately protected. Mr. President, this bill is a commonsense solution that will provide more reasonable options to CRP contract holders for returning land to economic use while maintaining vegetable cover and protecting the natural resource base. I hope my colleagues will support this legislation and that it will be enacted at the earliest opportunity. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. HARKIN

Mr. HARKIN. Senator Domenici is proposing a second-degree amendment which increases funding for education, job training and health by $2 billion and funding for nondefense discretionary programs by $5 billion overall. The Domenici amendment is not all the funding we need for the programs including title I and Head Start and I would propose the options in my amendment; however I do support this amendment and its modification because it is an important step in the right direction. I do support the amendment.

Mr. HARKIN. Mr. President, all I want to say is this is still below the CBO freeze. Period.

Mr. HARKIN

Mr. HARKIN. I see.