Mr. SAXTON. Well, Mr. Chairman, thank you very much for holding this hearing this morning. Let me return the kudos to you, because I remember, about 1 year ago having been here and having you raising the issue of Y2K well in advance of the turn of the century. Subsequent to that, you became the chairman of a special committee or task force to take care of Y2K. And the first year went by without a glitch. So congratulations on a job well done. Senator BENNETT. Thank you. Let me just interject. It went by without some reported glitches. We now know there was a fairly widespread number of problems around the world, which other governments, for their own reasons, decided not to tell anybody about, because they did not want to be embarrassed. Mr. SAXTON. Mr. Chairman, thank you. I have a written statement which I would like to ask be included in the record. Senator BENNETT. Without objection, it will be included. FISCAL YEAR 2001 BUDGET REQUEST AND COMMITTEE RESEARCH Mr. SAXTON. And I have with me today our chief economist, Chris Frenze. He is actually the chief economist to the vice chair man. And also, Howard Rosen is with us from the minority staff. We are pleased to be here to speak as a bipartisan team. Mr. Chairman and members of the subcommittee, it is a pleasure to be here once again to express my strong support for the fiscal year 2001 budget request of the Joint Economic Committee, as set forth, of course, by this year's chairman, Senator Mack. As you know, the JEC is essentially Congress' own in-house think tank. We examine a wide variety of economic and related issues. This budget request will support the JEC's focus on quality research and economic analysis required by Congress and the public. The committee's research is widely cited. And as you mentioned, our website has been given a top rating by the Congressional Management Foundation. Committee research covers a broad array of fiscal, monetary and international economic issues. One case in point that I might like to mention is the research and analysis that we have done on Federal Reserve policy over the last several years. This policy has focused on keeping inflation in check, and subsequently has resulted in relatively low interest rates. And so we have been pleased to be able to do research and pass along that information to Members of the House and the Senate and the public who are interested. We also have spent a fair amount of time in examining the International Monetary Fund, how it operates, the cloak of secrecy that the IMF seems to keep itself shrouded in, and issues that have to do with the effects of IMF policy around the world. Mr. Frenze and I were part of a codel last year that went to Russia to examine in some detail the IMF policies and their effect or lack of effect on the Russian economy, and have subsequently made some recommendations about how IMF policy in our opinion ought to be changed. Most recently, we have spent the last couple of days reviewing oil prices in the northeast, and the resulting economic problems. As I was saying to you before the hearing started, Mr. Chairman, just a few weeks ago, the price of home heating oil was in the neighbor hood of 80 cents. Today it is around $2. And the reasons for that are not clear at this point. As you have mentioned, Mr. Chairman, we have requested a 3.6percent increase. And I might just say, by way of history on the budgetary sides of the JEC, in the early 1990s, in fact in 1992, our budget then was just over $4 million. By 1995, because of cost saving efforts, our budget was shrunk to about $2.75 million. And so we are in the year 2000 just over $3 million and have requested no increase except for a cost-of-living adjustment for our staff. PREPARED STATEMENT So with that, Mr. Chairman, if you have any questions, I will be more than happy to try to respond. Senator BENNETT. Thank you very much. [The statement follows:] PREPARED STATEMENT OF HON. JIM SAXTON Mr. Chairman and Members of the Subcommittee, it is a pleasure once again to express my strong support for the fiscal year 2001 budget request of the Joint Economic Committee (JEC). As you know, the JEC is essentially Congress' own in-house think-tank examining a wide variety of economic and related issues. This budget request will support the JEC's focus on quality research and economic analysis required by Congress and the public. The Committee's research is widely cited, and our website has been rated one of the top three committee websites on Capitol Hill by the nonpartisan Congressional Management Foundation. Committee research covers a broad array of fiscal, monetary, and international economic issues. A case in point is our intensive examination of Federal Reserve monetary policy over the last three years. Through hearings with Chairman Greenspan, and a series of research papers, the Committee analyzed the specific content of the most successful monetary policy in U.S. history. Our research concluded that Federal Reserve policy in recent years has essentially been one of informal inflation targeting. In our hearings Chairman Greenspan has agreed that informal inflation targeting is the essence of his Federal Reserve policy. Since this monetary policy has proved so effective and beneficial to our economy, it is important to provide Congress with an explanation of inflation targeting and how it works. I also believe it would be beneficial to set more formal inflation targets and institutionalize this procedure so it is not dependent upon individual personalities. Inflation targets are ranges setting permissible changes in some broad price index. For example, one might choose to set a formal inflation target of 0 to 2 percent. Monetary policy is then geared to achieve this inflation target over the designated time frame. As documented in JEC research papers, many other nations have adopted inflation targeting, and the results have been very positive. Our research has also explained how inflation targets can be achieved through use of forward-looking price indicators that reflect signs of potential future inflation. Another focus of the JEC has been the two-year research program on the International Monetary Fund (IMF). The IMF plays an important role in international economics and finance, but its own financial operations and policy actions had not been transparently presented to policymakers and the public. The JEC review of IMF operations raised a number of important questions about the IMF that could not be answered by public documents. Thus we began to raise the issue of the lack of IMF transparency. Our research had permitted us to draw a number of conclusions about IMF operations, but many of these could not be confirmed through publicly available information. The Committee's research repeatedly was hampered by a lack of IMF transparency that veiled detailed financial information. With the assistance of the General Accounting Office, the JEC was able to gain access to this information and make it readily available through public hearings. We now know that the U.S. provides over one quarter of the IMF's usable funds, that the G-10 account for 77 percent of these funds, and that most IMF members provide little if any of these funds. We have also found that the IMF interest subsidies are even greater than was first thought. Our research has found that the IMF has gone far afield in making loans for a wide variety of development and structural purposes unrelated to the appropriate functions of the IMF. These loans are made to borrowers at extremely low interest rates considering the tasks involved. For example, the IMF is lending to Russia and Indonesia at interest rates below the cost of credit to the U.S. government. This doesn't make any economic or financial sense. By the way, these Russian and Indonesian loans account for one third of the credit extended by the IMF. Several policy implications follow from our research as well as the recent research of others. The IMF should focus on crisis lending only, it should discontinue longerterm development lending, and the pervasive interest rate subsidies should be discontinued. In other words, the IMF should make only short-term loans in economic emergencies at market interest rates. This was the idea behind legislation offered in 1998 that would have mandated use of market interest rates by the IMF. Although its application was narrowed to apply only to some IMF loans, a version of this legislation has become law. Further reforms related to the IMF became law in 1999. Moreover, last month Secretary Summers made an important speech in which he argued that the IMF interest rates were too low, and that the IMF should focus on emergency lending. It is my hope that the emerging consensus on IMF reform will lead to a broadening of the 1998 legislation curbing IMF interest subsidies. This 1998 legislation, based on JEC research, has not been fully implemented by the IMF, in my opinion. However, even a partial implementation of reforms leading to reform of IMF interest rates will save billions of taxpayer dollars over time. If the applicability of this legislation were broadened through future reform efforts, whether through legislation or consensus within the IMF, further savings would be achieved. One reason I mention this point is to highlight the tangible results possible from research in very abstract and difficult areas. Progress has been achieved in improving the way the IMF has operated, and more reform appears likely. Although the amount of the resulting savings is hard to precisely determine, they would be sufficient to cover the cost of JEC appropriations many times over. Thank you for the opportunity to appear before you this morning. Senator BENNETT. We have been joined by Senator Feinstein. And let me formally, on this first hearing of the year, welcome Senator Feinstein and say how delighted I am that she is the ranking member on this subcommittee. She has been wonderful to work with in the past year. And I am sure we will have the same kind of relationship this year. Senator, we would be happy to have any statement you would like to make. Senator FEINSTEIN. Well, thank you very much, Mr. Chairman. I have been very pleased to be able to work with you. I have found you just a pleasure to work with and very diligent and a great chairman of this subcommittee. If I may, I would like to put my statement in the record. [The statement follows:] PREPARED STATEMENT OF SENATOR DIANNE FEINSTEIN Thank you, Mr. Chairman. I very much look forward to working again this year with Chairman Bennett in developing the fiscal year 2001 appropriations bill for the Legislative Branch. I am pleased to join you, Mr. Chairman, in welcoming our colleague from the House, Congressman Jim Saxton, who will be presenting testimony during the first portion of this morning's hearing as Vice Chairman of the Joint Economic Committee. And, following that, I also look forward to hearing from our CBO Director, Mr. Crippen. Mr. Chairman, since this is our first subcommittee hearing on the Senate side, I would ask that I be allowed this morning just a few extra moments for my personal comments before we get underway. I would like to say that it has been such a pleasure to serve with you, Mr. Chairman, on the Legislative Branch Appropriations Subcommittee, and I very much look forward to continuing our work this year to craft a funding bill for fiscal year 2001: which sufficiently addresses the needs and concerns of this branch of government which is responsible for writing the laws of our land, which endeavors to preserve some of the historic treasures associated with the Congress and our Nation's Capitol, as well as the Library of Congress; and which provides realistic funding for the various support offices of the Congress, upon whom we depend so much for our research and statistical data, investigative reports, and comprehensive budget analyses that help us as legislators to make the best choices for our citizens; as well as those whom we rely upon for our printing requirements, documents control, facilities management and security. Mr. Chairman, thank you for allowing me these few extra moments to extend my comments. I look forward to hearing the testimony of our two panelists this morning. Senator FEINSTEIN. And, I do have a question of the Congressman. Is this the appropriate time? Senator BENNETT. Surely. Go ahead. Senator FEINSTEIN. Good morning. Senator FEINSTEIN. Why is this effort even necessary? I mean, why is it not redundant or duplicative of things that are already, or could be done, say, by CRS? Mr. SAXTON. The fact of the matter is that the Joint Economic Committee is Congress' own think tank, as I indicated early in my testimony. We have the luxury, if you will, of concentrating on issues that can be dealt with in a fashion that permits us to do indepth research. For example, there has been a lot of discussion among Members of Congress about the IMF. And I would like to say that much of the basis of that discussion was research that was done by the Joint Economic Committee. When we started to research the International Monetary Fund 22 or 3 years ago, very few people in Congress knew how the IMF operated. I remember the President not too long ago giving one of his Saturday speeches or addresses to the country about the IMF. And he started out by saying, "I'd like to talk to you about the IMF, and it's not a bowling machine." We have been able to shed a great deal of light on the IMF. The understanding that exists today in both Houses of Congress to a large extent is a result of JEC studies and reports on the IMF: how it operates, its policies, and its effect, or lack thereof, positive or negative, on many economies around the world. The same is true in understanding Fed monetary policy. When we began to look at fed monetary policy, we found that inflation was used as a target, and the control of inflation did a great deal to stabilize our economy and help it grow. And we have issued a number of reports on inflation targeting and other monetary issues. Not unlike the IMF, the institutional knowledge that exists today in the Congress on inflation targeting came to some extent, I would like to think to a large extent, from the Joint Economic Committee. And those, among other issues, are things that I think we have done that are very important. Senator FEINSTEIN. Let me just say something with great respect. I have never received a report. I have been here 7 years. I did not even know the committee did this report before today. And, if it does great things, it sure keeps it to itself. I mean, I will be very candid with you. I do not know why we need a Joint Economic Committee. If I want to learn about the IMF, it would not occur to me to go here. I mean, there are think tanks all over Washington. Why do we need our own think tank? Mr. SAXTON. Well, let me say that we will be more than happy to share the reports that have been done. On the House side, we do send them out to each Member of Congress on a periodic basis. Senator FEINSTEIN. Do we on the Senate side? Are they sent out, Mr. Chairman? Senator BENNETT. I am not aware of how that is done, and I am a member of the Joint Economic Committee. So I had better find out. Mr. SAXTON. I am just reminded that the Congressional Management Foundation has cited our website, the Joint Economic Committee website, as one of the three best committee websites on Capitol Hill. This is another way that we have chosen to disseminate the information and make it available. Senator FEINSTEIN. But, have there been reports sent out on the Senate side? Mr. SAXTON. I would have to defer to Senator Mack, who is the full committee chairman. Senator FEINSTEIN. Thank you very much. [The information follows:] LETTER FROM JIM SAXTON Chairman ROBERT F. BENNETT, CONGRESS OF THE UNITED STATES, Subcommittee on Legislative Branch, Senate Appropriations Committee, S-125, The Capitol, Washington, DC. DEAR MR. CHAIRMAN: Thank you for the recent opportunity to testify on the fiscal 2001 appropriation request of the Joint Economic Committee (JEC). After reviewing the record, it became clear that there were some remaining issues that needed to be addressed in writing. I would respectfully request that this letter be made part of the hearing record. In addition, please include the attached research materials in the printed record if you deem it desirable to do so. During the hearing, questions were raised by another member of the subcommittee that suggest some clarification about the functions of the Joint Economic Committee may be useful. The questions raised the issue of whether JEC research on the International Monetary Fund (IMF), for example, was really needed since a member could request a memo on this subject from the Congressional Research Service (CRS). My response essentially was that JEC research on the IMF, as well as other topics, permits greater depth and thus provides much more information than would be possible in even a very fine CRS memo. My statement was a general one and since this question was unexpected I did not have full supporting documentation available at that moment. Enclosed please find the 8 JEC studies, together with printed and bound records of 5 JEC hearings on the International Monetary Fund (IMF). Additional information is available on our JEC website, rated one of the top three committee websites on Capitol Hill by the nonpartisan Congressional Management Foundation. Those who follow issues related to the IMF are very aware of this JEC research and the effects it has had on the institution and its reform. This research was the basis of IMF reform legislation passed by Congress in 1998 and 1999 that will save taxpayers many millions of dollars over time. As a former IMF research director recently wrote, "the Fund's jerry-built structure of financial provisions has meant that almost nobody outside and, indeed, few inside, the Fund understand how the organization works * * *." I believe that Congress should understand how the IMF works because of the important financing and policy making role played by the U.S. Congress has appropriated $50 billion for the IMF, and thus has a responsibility to know how this money is being used. The factual record shows that this research program has provided much more original information on the financial structure and operations of the IMF to Con |