Skip to main content

Newsroom

Sep 30 2003

Bennett Seeks Answers from Chairman Greenspan on Current Economic Condition

Questions Fed Chairman on post-war economy, specter of deflation

Washington, DC– Senator Bob Bennett (R-Utah), Chairman of the Joint Economic Committee (JEC), welcomed Federal Reserve Chairman Alan Greenspan to testify today at a hearing on the future of the U.S. economy. Today’s hearing brought the first testimony from Chairman Greenspan since the most recent meeting of the Federal Open Market Committee of the Federal Reserve and his first appearance before the committee under Bennett’s chairmanship.

In his remarks, Bennett sought clarification of recent Fed statements on the economy. Specifically, Bennett pressed Greenspan to clarify recent comments on the probability of deflation and what the consequences would be.

“The United States’ economy is fundamentally different and far more resilient that economies currently facing deflation, such as Japan,” said Bennett. “We don’t face the same risks; but we shouldn’t take any chances.”

Chairman Greenspan concurred and pointed out that “the risk of the U.S. entering into deflation is minor, but the consequences would be substantial.” He highlighted how the cultural differences in Japan’s economy have influenced the current economic situation, but cautioned the U.S. must identify what tools are necessary to fend off deflation and to attack any underlying forces that lead to deflation.

Bennett later asked Greenspan about his view of the effectiveness of jobs and growth legislation currently under consideration in Congress and what economic policy should be enacted to spur long-term economic growth. According to the Fed Chairman, “The taxation of capital is misguided. Removing the taxation of capital will enhance the revenue base.”

“We are near an agreement on a bold jobs and growth package. We need to act quickly to give it final approval and send it to the president for signature,” said Bennett. “But beyond tax cuts, it is time to begin work on what tools we must use to grow our economy and prepare for the future.”

The Joint Economic Committee is a unique joint Senate-House committee created in 1946 to study and
advise Congress on economic policy. For copies of today’s testimony or for other information, visit the
JEC online at https://www.jec.senate.gov.
WASHINGTON, DC – The U.S. Senate today overwhelmingly passed legislation sponsored by Sen. Bob Bennett calling on the Senate Finance Committee and the Joint Economic Committee (JEC) to hold hearings and consider legislation providing for overhaul of the Internal Revenue Code and implementation of a federal flat tax.

“Since my ‘92 campaign, when I called for a simplified tax code and a 1040 form the size of a postcard, I’ve been working to convince my colleagues that this is something we should consider,” said Bennett, who chairs the JEC. “An overwhelming majority of the Senate today said we should study this proposal and has named my committee as a key point for this debate. I’m gratified that my calls for this reform are gaining support and will be considered in the Senate.”

The Bennett Amendment, also sponsored by Sen. Arlen Specter (R-PA) and Sen. Charles Grassley (R-IA), chairman of the Senate Finance Committee, passed by an overwhelming 70-30 vote. It calls for the Senate Finance Committee and the JEC to undertake a comprehensive analysis of tax simplification proposals, including flat tax proposals, and to conduct appropriate hearings and consider appropriate legislation.

When discussing tax simplification options, Bennett noted some estimates that show the flat tax will expand the economy by $2 trillion over seven years. He also noted that the current Internal Revenue Code is over 17,000 pages and 6,900,000 words.

“Americans spend more than $194 billion and five billion hours each year complying with a tax code that has grown out of control. We must provide for a more productive use of our time and money,” Bennett said.

“It’s time to demystify the tax system, and consideration of a flat tax is a good place to start,” he said. “It is simple and fair and could be a strong addition to the other economic boosts in the Jobs and Growth Package we’re voting on today. JEC is uniquely qualified to do this analysis. “

The Bennett Amendment passed as part of the Jobs and Economic Growth Reconciliation Bill which is expected to pass the Senate today. It will then go to a conference with the House.
Washington, DC – Senator Bob Bennett (R-Utah), chairman of the Joint Economic Committee (JEC), released a report today showing dividend tax relief helps everybody, not just taxpayers who currently receive taxable dividends.

“Ending the double taxation of dividends will help anybody who benefits from faster economic growth and higher stock prices. Simply looking at those who receive taxable dividends doesn’t reveal the whole picture,” Bennett said.

The report argues “static” analyses are flawed because they only account for how tax payments are currently distributed across income levels. “The taxpayer actually writing the check to the I.R.S. doesn’t always bear the economic burden of the tax,” Bennett explained.

For example, Congress currently exempts from income taxes the interest of many bonds issued by state and local governments. Since mostly high-income people buy the bonds, a static analysis would show the tax relief going to them. However, the JEC report shows the real winners are state and local governments that can finance their building projects cheaper because the bond market responds to the tax relief with lower interest rates for their bonds.

Ending the double taxation of dividends will work much the same way. Among other things, it will reduce the cost of capital, making it cheaper and easier for companies to raise money for new investments and new employees.

"Few people complain about tax-exempt bonds as only helping the rich," Bennett remarked. "Ending the double taxation of dividends takes advantage of the same economic phenomenon to benefit investors and the entire economy."

JEC is a unique joint Senate-House committee created by the Employment Act of 1946 to study and advise Congress on economic policy.

To view the executive summary and the full report, visit https://www.jec.senate.gov.
Washington, DC – Senator Bob Bennett (R-Utah), chairman of the Joint Economic Committee, said today dynamic analyses by the Congressional Budget Office (CBO) confirm pro-growth tax relief – such as ending the double taxation of dividends – will help the economy.

“CBO analyzed the entire budget, rather than only the economic growth package,” said Bennett. “A fair reading of CBO’s report shows spending and some tax reductions can negate the economic benefits of pro-growth tax relief.”

Bennett based his remarks on a new examination of the CBO report released today by the Joint Economic Committee (JEC). Among other things, JEC’s examination of the CBO report reveals:

• In the short-run, the president’s budget would increase real gross domestic product by 1.3 percent in 2004.

• In the long-run, negative effects of spending and some tax reductions would offset the positive effects of pro-growth tax relief like ending the double taxation of dividends.

• If Congress significantly cut back the president’s economic growth package, the remaining spending increases in the budget might actually hurt the economy in the long-run.

“The last thing we should do is reduce the pro-growth tax relief in the president’s budget and increase the spending, yet many in Congress propose doing exactly that,” Bennett explained.

The Congressional Budget Office released the dynamic analyses last week as part of a final version of their report, “An Analysis of the President’s Budgetary Proposals for Fiscal Year 2004.”

The Joint Economic Committee is a unique joint Senate-House committee created to study the economy and advise Congress on economic policy. To view JEC’s 3-page examination of the CBO report, visit the committee’s website at https://www.jec.senate.gov.
Washington, DC – The Joint Economic Committee, chaired by Senator Bob Bennett (R-Utah), today issued “10 Facts About Oil Prices,” a report which puts into perspective the current volatility of the U.S. oil markets.

“We’ve experienced the first recession of the information age, not the last recession of the industrial age,” Bennett said. “While no one can dispute that high oil prices have been bad news for consumers and raise significant concerns for our economy, oil does not play the role it once did in terms of economic impact.”

Among other issues, the report reviews the following points:

• Oil prices are currently about $30 per barrel. However, for a past comparison, oil prices in the late 1970s reached $60 per barrel (adjusted for inflation).

• While “spot” oil prices increased yesterday for oil delivered now, “futures” decreased by nearly $1 per barrel of oil. The latter suggests the market believes oil prices will fall to more reasonable levels in the near future.

• Of the last nine recessions, oil price spikes have preceded or accompanied eight of the recessions. However, other negative factors collaborated with the price spikes.

• The U.S. economy has become more fuel efficient. For example, consumers spend less money on fuel as a percentage of wage and salary income.

• A large factor in how oil markets would respond to any major Iraqi oil disruption is the ability and willingness of Saudi Arabia to increase its production.

The Joint Economic Committee is a unique joint Senate-House committee created to study the economy and advise Congress on economic policy. For copies of today’s report or for other information, visit the JEC online at https://www.jec.senate.gov.
Washington, DC – A hearing of the Joint Economic Committee, chaired by Senator Bob Bennett (R-Utah), unearthed a number of creative ideas for financing roads and reducing congestion that Congress could use this year when drafting a new surface transportation program.

“Amidst the routine debate over the program’s budget and spending formulas, some voices can be heard suggesting innovative and creative ideas,” Bennett said.

For example, a wide spectrum of witnesses endorsed an idea of allowing drivers to pay for the use of high-occupancy vehicle (HOV) lanes.

“Shift the operating principle of HOV lanes to HOT lanes – that’s high-occupancy toll lanes,” explained Robert Poole, director of transportation studies at the Reason Foundation. “Convert them to high-speed premium lanes which drivers can use by paying a market price and which truly high-occupant vehicles – buses and vanpools – can use for free.”

Micheal Replogle, transportation director for Environmental Defense, said: “HOT lane critics often unfairly bash them as ‘Lexus Lanes,’ serving only the rich. Several real-world HOT lanes look more like ‘Lumina Lanes,’ used by people of widely varying incomes who occasionally need to bypass traffic delays that disrupt their social, family, or work life.”

Bennett cited a report estimating time spent in traffic jams and wasted fuel cost the U.S. economy $67.5 billion in 2000. “This cost is what I call ‘the ghost tax of congestion,’ always following us around where ever we go,” Bennett remarked.

“Transportation makes up roughly ten percent of our nation’s economy, but the importance of the transportation sector far exceeds its share of output,” Bennett explained. “In a world of ‘just-in-time’ delivery and customized production, companies cannot afford to wait for their parts to arrive or for their finished products to be delivered.”

Congress is scheduled soon to re-authorize the Transportation Equity Act for the 21st Century (TEA-21). The Joint Economic Committee (JEC) is a unique joint Senate-House committee created to study and advise Congress on economic policy. For copies of today’s testimony or for other information, visit the JEC online at https://www.jec.senate.gov.
Washington, DC – Senator Bob Bennett (R-Utah), chairman of the Joint Economic Committee, made the following comments at the committee’s employment hearing today.

Regarding the February 2003 employment report:

“The economy has been growing, but too slowly to help many of our nation’s workers.”

“Today’s numbers reinforce the need for a bold economic growth package.”

“Congress should enact a plan that helps create jobs for those who are out of work today and strengthens the economy for years to come. A quick, temporary fix is not in order. We would fail our responsibilities if we adopt a limited package only to find ourselves in the same situation a year or two down the road.”

Regarding the president’s proposal for new personal re-employment accounts:

“Obviously the best remedy for the unemployed is a job. Most of us would much rather earn a paycheck than be given an unemployment check.”

“The basic structure of our unemployment insurance program has not appreciably changed for many years, and economists tell us that there is much room for improvement. The administration has made an innovative attempt along these lines with its proposal to create personal re-employment accounts. They would focus on the most important need – supporting efforts to find a new job.”

The Joint Economic Committee is a unique joint Senate-House committee created to study and advise Congress on economic policy. For copies of today’s testimony or for other information, visit the JEC online at https://www.jec.senate.gov.
Washington, DC—A Joint Economic Committee report released today explored ideas to fund future transportation improvements. According to the report, toll lanes can be a vital component to ensuring safe, less congested roads. With the number of drivers increasing and traffic congestion worsening every year, states are facing a growing challenge to finance new roads and relieve gridlock on existing roads.

“Most large cities desperately need new and improved highways to deal with the dramatic increases in traffic that have occurred in recent years,” said Chairman Bennett. “By giving states the flexibility to explore innovative practices, we give drivers the opportunity to enjoy better roads and make better choices in their daily commutes.”

One alternative states might explore is the implementation of modernized toll lanes, through which federal, state, and local governments can offset a significant increase in surface transportation expenditures. Rather than the traditional toll booth, these toll lanes could utilize technologies such as transponders that electronically charge a fee and do not impede the flow of traffic. Additionally, the toll charge could be varied based on the current congestion level on the
road, thereby encouraging drivers to use mass transit during peak travel times.

The report noted successful toll lane projects that have already been put into place. Domestically, perhaps the most successful pilot project is the High Occupancy Toll (HOT) lanes project on Interstate 15 in San Diego. The project has led to several dramatic improvements in road performance, and an increase in the number of people carpooling. Overseas, London has introduced a congestion pricing scheme that charges vehicles entering the central city. The
average driving speed in London’s central city has increased 37 percent and the total number of cars entering Central London has decreased by 20 percent.

Currently, there is a bill in Congress that addresses this issue. The Freeing Alternatives for Speedy Transportation (FAST) Act (H.R. 1767) would remove the current prohibition on tolls for federal highways, as well as ensure that states would not be penalized for coming up with innovative ways to fund transportation construction.

The report is available online at https://www.jec.senate.gov, or call Rebecca Wilder at (202) 224-0379.
Washington, DC—The Joint Economic Committee (JEC) released a report today that puts current deficits into historical perspective and discusses how spending restraint and a growing economy are critical to reducing future deficits.

“The current deficits reflect a near ‘perfect storm’ that has rocked government finances in recent years,” said JEC Chairman Bob Bennett. “Revenues plummeted due to a weak economy and a sharp drop in the stock market. At the same time spending has increased because of terrorism, new homeland security requirements, and two wars. Our economy is large enough to recover from these events, but only if we can practice fiscal restraint.”

Recent projections by the Office of Management and Budget (OMB) show a potential budget deficit of $455 billion this year. Although the current deficit is large in nominal dollars, today’s JEC report points out that in order to have an accurate picture, deficits should be measured relative to the size of the economy. It is important to account for the economy’s capacity to absorb the deficits and the government’s ability to finance them. Both of these factors depend on
the size of the economy. When measured as a percentage of the gross domestic product (GDP), today’s deficits are still below the peaks of the 1980s and 1990s.

“Continued increases in the deficit could pose significant economic problems if they persist,” said Bennett. “It is important to have an understanding of how these deficits arose and to put them in proper perspective. In doing so, we can more effectively implement policies to rebound from current deficits. The reason for the deficits prescribes their solution.”

Fifty-three percent – the largest chunk – of the budget deterioration in fiscal year 2003 has been due to overall economic weakness, declines in the tax base, and other technical estimate changes. Spending increases account for 24 percent of the deterioration. Tax relief and economic growth legislation of the last two years have contributed only 23 percent of declines in projected surpluses. In fact, the economy has fared much better than it would have because of these progrowth actions.

“The economy is beginning to show signs of renewed growth,” said Bennett. “Congress has enacted timely pro-growth legislation. Now is the time for a renewed commitment to spending restraint.”

Sep 30 2003

Prescription Drugs Are Only One Reason Why Medicare Needs Reform

Improved Efficiency, More Choice Necessary to Protect Medicare for Future Generations

Washington, DC— According to a report released today by the Joint Economic Committee, Medicare faces enormous fiscal challenges as the “Baby Boom” generation retires and as the program expands to cover prescription drugs. Congress is now focused on the need to extend prescription drug coverage to Medicare beneficiaries. That need is certainly important, but it is not the only reason that Medicare needs reform.

“Medicare is an incredibly inflexible program that is unable to adapt to rapid advances in modern health care,” said Chairman Bennett. “As we debate how to provide a prescription drug benefit to the program, we must keep an eye on the end goal -- to make Medicare more efficient, more flexible, and more responsive to the needs of all Americans.”

The Joint Economic Committee report highlights three key areas that must be addressed to ensure that Medicare will be able to serve an aging population and future generations: improving the long-term financial viability of the program, making Medicare more responsive to health care advances, and introducing choice and competition.

Medicare lags far behind other insurers in providing prescription drug coverage, disease management programs, and a host of other advances. Reforming Medicare to create a more selfadjusting, innovative structure could improve both the efficiency and quality of the medical care provided. That can be accomplished partly by allowing beneficiaries greater choice and introduce greater competition between plans. Giving Medicare beneficiaries greater choice has
at least two key advantages: It allows the beneficiaries to be the primary customer, rather than the government or a former employer. It also creates powerful incentives for all Medicare plans, public or private, to provide the highest quality health care and the most competitive price.