House Budget Committee Hearing on The State of the U.S. Economy
by Chairman Paul Ryan of Wisconsin
Thank you, Chairman Bernanke, for coming before our Committee today to talk about the state of the economy.
Nothing is more critical to today’s economy than restoring real job and business growth. Yet for almost three years, the U.S. economy has remained mired in a slow-growth, high-unemployment trap.
The President and his party’s leaders say things are getting better. Yet we continue to hear from families and businesses in our districts who tell us that this kind of talk is completely disconnected from reality.
The fact is that this administration told us its stimulus plan would keep unemployment from ever rising above 8 percent. In reality, it climbed as high as 10 percent, and today it stands at 8.5 percent.
Worse, the CBO confirmed just yesterday that it is projecting economic growth to remain sluggish and the unemployment rate to hover near 9 percent through 2014.
So the obvious question is this: Why did the President’s policies fail?
I think when you get out and talk to families and businesses, the answer becomes clear: The President’s policies added hundreds of billions to our annual deficits. As a result, the explosive growth of our debt created tremendous uncertainty about our fiscal and economic future.
When government sows doubt about future tax rates, interest rates, and price stability, it undermines that feeling of future security that businesses and families need in order to plan and invest – and this is puts a drag on economic growth.
There is a monetary side to this uncertainty as well. The Fed has announced it’s going to continue to hold interest rates at extremely low levels through 2014.
I think this policy runs the great risk of fueling asset bubbles, destabilizing prices, and eventually eroding the value of the dollar. The prospect of all three is adding to uncertainty and holding our economy back.
And I fear that normalizing monetary policy when the time comes will be incredibly difficult – not just technically difficult, but politically difficult as well.
For instance, I was greatly concerned to hear the Fed recently announce that it would be willing to accept higher-than-desired inflation in order to focus on the other side of its dual mandate, which is promoting employment.
This is not because unemployment is a lesser concern – far from it. It is because the Fed’s tools for promoting employment are limited, imprecise, and can have highly undesirable unintended consequences.
By contrast, the Fed is uniquely positioned to protect the currency, and I would find it very disturbing if that role were being diminished. The inflation dynamic can be quick to materialize and painful to eradicate once it takes hold.
For the sake of our economy in particular and the global recovery as a whole, it is vital that we focus on stability and certainty – especially when it comes to the value of the dollar.
I firmly believe that a course correction here in Washington is sorely needed to help get us back on the right track. While it won’t be easy, Americans have risen to greater challenges and prevailed in the past.
With that, I would like to yield to the Ranking Member, Mr. Van Hollen.