large, must slow its rate of pace, meaning production must rise relative to consumption.

But once you go beyond that, it is difficult to read the signals. It could go either way. And if the judgment is that it is going to be softer than the Congress would like, clearly a stimulus program would be helpful in that regard.

Senator SNOWE. Thank you.

Mr. GREENSPAN. But I am not sure how one could argue either side very effectively.

Senator SNOWE. Thank you.

Mr. GREENSPAN. Unqualifiedly, I should say.
Senator SNOWE. I appreciate that.

Thank you, Mr. Chairman.

Chairman CONRAD. Senator Byrd.

Senator BYRD. Thank you, Mr. Chairman. And thank you, Chairman Greenspan. As I said last year, I am always very impressed with your testimony.

Mr. GREENSPAN. Thank you, sir.

Senator BYRD. I wish we had more time, but I can understand the time constraint.

This year promises to be a very difficult year for the budget and appropriations process. The projected return to deficit budgeting, the recession, the midterm elections, and the demands for increased homeland security and for supporting our military have left a very dark cloud looming over the entire budget process this year. The political cross-fire that we have seen so far will only serve to exacerbate the tensions between the two political parties and between the legislative and executive branches. Make no mistake, I am no supporter of the tax cut that we passed last year. I was one of its most vocal and fiercest opponents. My wife and I returned our rebate to the Bureau of Public Debt.

But the reality of the situation as I see it os that today's political environment does not allow at this time for the repeal or delay of the tax cuts we enacted last year. That is not to say that some future Congress or President will not want to or have to revisit last year's changes to the tax code. It simply means that it is highly unlikely that the 107th Congress and this President will do it.

And anybody who knows anything at all about the Senate rules knows that to be the case, and the President can say, "Over my dead body," to use his euphemistic approach, will they increase taxes. He can say that because it takes 60 votes in the Senate to pass such legislation repealing last year's tax cut. Sixty votes. The Democrats, if they all voted together, wouldn't have but 51 votes. So he can be sure that his body will not be dead and that the repeal of that tax cut will not be enacted, this year at least.

What is more, it does no good to advocate unrealistically low spending levels that nobody expected to be enacted. It sets up a game of chicken, with the loser being the one who thinks he is first and admits the reality that spending levels have been set unrealistically low.

I can see the handwriting on the wall. With the rhetoric that we have heard so far from the legislative and the executive branches, we are setting the stage for months of wasted time, feuding over proposals that have no chance of becoming law, and eventually will

result in an omnibus bill at the end of the year, and that is a prescription for overspending.

We need to focus our efforts on crafting a budget resolution that is practical and realistic in its assumptions about tax cuts and spending. Anything else only serves to exacerbate the contentious atmosphere that already surrounds this year's budget and appropriations debate.

So with that said, Chairman Greenspan, I suppose you would agree that unnecessary delays in the budget and appropriations process, like we saw last year, is a negative overall for the economy.

Mr. GREENSPAN. I agree with that, Senator.

Senator BYRD. Second, under the Budget Act, reductions in taxes and increases in mandatory spending are supposed to be paid for. And yet, over the last 3 years, over $160 billion of tax cuts and mandatory programs expansions have been wiped off the so-called pay-as-you-go scorecard. So there is a free lunch without that scorecard.

In your testimony, you indicate that Congress should consider mechanisms that would limit tax and spending initiatives. Do you believe the pay-as-you-go provisions of the Budget Act should be extended?

Mr. GREENSPAN. I very much do, Senator.

Senator BYRD. Mr. Chairman, I am getting clear answers to specific questions.

Senator SARBANES. It is a miracle. [Laughter.]
Senator BYRD. Miracles do happen.

Now, Chairman Greenspan, there has been talk here about trigger mechanisms, and Mrs. Murray raised the question with respect to Social Security as to whether or not there would come a time when the expected recipients, and especially those in the babyboom generation, can look forward to receiving their check. I am paraphrasing it, changing it a little bit.

Would the long-term problems facing the Social Security and Medicare system justify the trigger mechanism you mentioned in your testimony?

Mr. GREENSPAN. You mean actually having triggers on benefits and the like? I am sorry. Is that the

Senator BYRD. Well, I am wondering if the long-term problems facing the Social Security and Medicare system justify a trigger mechanism that you mentioned in your testimony last year as well as in this year. We are all concerned about Social Security

Mr. GREENSPAN. I am sorry. I don't understand. Triggers can be on specific programs or be more generic. Are you referring to a trig ger on the Social Security program or the broader trigger to protest Social Security?

Senator BYRD. I think I am referring to the trader wigger

Mr. GREENSPAN. I do think that because so max. die Pederal budget, as you know, has becoze ULLMETAzary, well, we us to call "uncontrollables that I is very impratt that we have a mechanism which enables the trend drenga and okay match the goal of the Congre na iyun & jaar batam vt.xm as you may recall 41 year ago when yn old pa 1 yeara ap propriations and do something who y allerera de sent your ve

cause you didn't have a lot of continuing programs going on-because we don't have that, I think something of the nature of the trigger probably will ultimately turn out to be essential if the Congress is going to try to guide where the long-term fiscal programs are going to go.

Senator BYRD. Mr. Chairman, I would like to ask one more question.

Chairman CONRAD. Go ahead. You didn't have an opportunity yesterday. You waited very patiently. Please, go ahead.

Senator BYRD. Thank you, Mr. Chairman.

Mr. Chairman, Dr. Greenspan, I strongly supported new money for homeland defense last year, and I would have utilized more of our resources for that purpose. The Administration opposed going beyond the $40 billion overall that we passed in the supplemental, of which, in the last $20 billion which was to be included in the last appropriation bill, and was, I sought more money for New York and for homeland defense. As I see it, there is no difference in homeland defense and defense in the usual sense. Homeland defense is something new, but it is defense. It is the defense of our country and our people.

Now, having said that, the Administration opposed the new increase at that time. Now the Administration is coming back saying more, more, more, and I am likely to support more, more, more, because some of the same problems that existed when we had our appropriation bill last year still exist. Many of them do. So we will have to spend more for homeland defense.

But this anticipated increase for the military side, I understand it may be $48 or $49 billion over last year. That would be a 15 percent increase over last year. In other words, 2003, if we add $49 billion, which we hear the President may propose in his State of the Union address, or at least in his budget when he sends it up here, that would represent a 15 percent increase over 2002. 2002 represented a 15 percent increase over 2001, and so here in 2 years, we are talking about increases of 10 percent and then 15 percent.

This is something that I only raise here to indicate that we had better take a look, a close look, at what we are doing in defense spending. I hear a lot of talk about spending. I assume that those who are concerned about spending are also talking about defense spending. I am one of the hawks who have been around here 50 years this year when it comes to defense. But I am becoming a little nervous as I hear that we are going to spend more and more and more on the military.

It is going to have to come out of somewhere, out of somebody else's hide. We have just established that we should stay with the pay-as-you-go theory. So I am not getting to a question, but I am just expressing some sense of caution.

Finally, I hope that we Senators and all who have listened and those who have not had the privilege of listening to what you said today will go back and read again what you said. And I hope that those who talk about a stimulus package will particularly pay attention to what you have said today in your testimony concerning short-term stimulus, long-term stimulus, et cetera, et cetera. I

think it is very worthwhile-not only very worthwhile reading but good advice.

Finally, may I utter a word of caution? Do you, as someone for whom I have tremendous respect-you used the word "fast-track" when you responded to a question here. I hope that you will not use the term "fast-track." It is all right to use the term "expedited," expedited rules or expedited handling of whatever legislation we are talking about. But I hope that you will not use the term "fasttrack" in the sense that I think you used it, and that is with respect to trade legislation.

Let me just read you one provision from the United States Constitution, and it comes from the first paragraph of Section 7 of Article I of the United States Constitution. Here it is: "All bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other bills."

Now, there is the power, there is the origination, if I may use it, in the Constitution, the power of the Senate to amend, not only revenue bills but as on other bills.

Now, when you are talking about fast-track-and we will get into this in another place, at another time, and it will be quite a long speech that I will be prepared to make on this thing. When we talk about fast-track, we are talking about denying the United States Senate its right, its authority, its power to amend trade bills, "as on other bills."

I know there are those who would say, well, the Congress has a right to delegate. We are not delegating here. That is not delegating. Fast-track is taking away from the Senate a basic constitutional right and power, namely, the power and right and prerogative to amend.

So if you would accept my suggestion in the spirit in which it is offered, please don't use the term "fast-track" in answering a legitimate question like that when it is being asked here concerning a trigger.

That is all I have to say, except I would like to ask, if I might, how do you see the trade deficit in this whole equation? Last year, the trade deficit just in the month of November was $27.9 billion, and for the first 11 months of 2001, the trade deficit was $349 billion, and in the year 2000, it was $375 billion. So it looks as though we are well on our way in 2001 to eclipsing the trade deficit of $375 billion in 2000.

Would you have any comment?

Mr. GREENSPAN. Well, Senator, first let me say I heard your words, and the word "fast-track" will not re-emerge from my lips. [Laughter.]

Senator BYRD. Thank you.

Mr. GREENSPAN. I have been worried about the trade deficit for many years. It is a problem which should be creating more difficulty with respect to our international financial position, but it hasn't. And the reason it hasn't is that the investment capabilities within United States companies have attracted a sufficiently large amount of capital, investment capital from, abroad to maintain the financing year after year after year.

I assume at some point it has to come to a halt, but I have been saying that for a number of years, and I am impressed with the attractiveness of American investment opportunities. It seems end

less.

Senator BYRD. Thank you. Thank you, Mr. Chairman.

Chairman CONRAD. Senator Domenici.

Senator DOMENICI. Let me say to my Senator on my side, I have not asked yet and I have to leave to get ready to go to New Mexico. So I will go as quickly as I can.

First, Dr. Greenspan, within the last 2 or 3 years, as you testified before this committee and other committees of the United States Congress, you referred to the United States economy in very positive tones and positive words describing the phenomenon of about 10 years of sustained growth without inflation, with sustained productivity increases during that period of time, and you and many chose to call it "a new economy." And

Mr. GREENSPAN. I don't think I ever used that term, but others have.

Senator DOMENICI. What did you use to describe the kind of economy we had?

Mr. GREENSPAN. An economy going through a major technological change, which occurs periodically. I wouldn't call it "new” because it has happened in the past.

Senator DOMENICI. All right. So for that description and for those who call it a new economy, where are we now? Some things have been washed out and some things remain there, which would indicate that we have a very powerful American economy. How do you describe it now in terms of its potential for future things that are positive and good for America?

Mr. GREENSPAN. Well, Senator, as I commented in my prepared remarks, by all of the evidence that we have, the exploitation of the major technological opportunities were only partially completed at the point when risk premiums rose and the cost of capital rose and we had a significant retrenchment.

But even recent surveys suggest that plant managers indicate that of the technology available to them, only about half has been put in place, and so there is still a very considerable amount of opportunities, real rates of return out there, and in that regard I think that productivity gains will continue certainly in excess of what they did in the quarter century prior to 1995. And, indeed, the remarkable sustaining of growth in output per hour during the last year or two, during the period of significant retrenchment in economic growth, is suggestive of the fact that underlying this very significant weakness in economic activity there is still a strong underlying productivity growth.

Senator DOMENICI. So as we begin to put together a budget, hopefully it could be done by working together on both sides, and maybe with the President, and have something harmonious, as we did immediately following the terrorist activity. I believe that was a short period of time, Dr. Greenspan, when the American people were most proud of us. I am not sure that the results will be as good as we had led everybody to believe when we were doing it. But at least we did it expeditiously, we did it together, and we did