Thank you, Mr. Chairman. Chair Yellen, I am pleased you are here today for this important and timely discussion. I look forward to your testimony in advance of the Federal Open Market Committee’s meeting at which you will decide whether or not to raise the federal funds rate. I am interested in hearing your perspective on the following issues and others: 

• What current trends do you find most important in helping you assess the short- and long-term challenges facing our economy?
• How can the Federal Reserve time future rate increases so we don’t jeopardize the current economic recovery or hurt American families?
• What do you think of the legislation recently passed by the House that would compromise the independence of the Fed?

Recovering from the Great Recession

Before I turn to these issues, I think it’s important to put this hearing in context. At the end of the Bush administration, just a little less than 7 years ago, we faced what former Fed Chairman Ben Bernanke called “[…] the worst financial crisis in global history, including the Great Depression.” We have come a long way since that economic cataclysm. And that progress is in no small part due to bold actions by the non-partisan, non-political Federal Reserve. In the month when President Bush left office we lost almost 820,000 private-sector jobs. Over the past year, we have gained an average of 226,000 jobs per month. In fact, we have added 13.5 million private-sector jobs over a record-breaking 68 consecutive months. This chart shows this impressive growth—I’d like to enter it into the record. In October 2009, unemployment reached 10.0 percent.Since then it has been cut in half – it now stands at 5.0 percent. There were about 7 unemployed workers for every job opening in July 2009. Now there are 1.4 unemployed workers per job opening, the lowest this ratio has been since early 2001. Real GDP fell 4.2 percent between the end of 2007 and the second-quarter of 2009But GDP has increased by more than 14 percent since then. Growth has been positive in 23 of the last 25 quarters. Average home prices dropped 19 percent between 2007 and 2011. But now they are back up to where they were in 2007. About $17 trillion in wealth evaporated between the summer of 2007 and the beginning of 2009. All of those losses have been recovered, and now total wealth is about $10 trillion higher than it was at the onset of the financial crisis.

The Federal Reserve played a key role in the recovery

The Federal Reserve played an extraordinary role turning around the economy. The Fed quickly acted to lower rates to almost zero and has held them there for about seven years, which has been a principal factor in the economic recovery. The Fed did this despite the opposition of those who claimed that inflation was on the horizon – and who were later proven wrong. Then, having exhausted the conventional tools of monetary policy, the Fed deployed several rounds of quantitative easing aimed at keeping long-term rates low and further stimulating the economy. These efforts helped haul our country out of the depths of the Great Recession. But without the Fed’s actions, things would be very different today. A recent study by economists Alan Blinder and Mark Zandi found that efforts by the Federal Reserve and the Obama administration—with support from Democrats in Congress—dramatically reduced the severity and length of the Great Recession. Specifically, the report found that without their joint efforts:

• the recession would have lasted twice as long,
• the unemployment rate would have reached nearly 16 percent, and
• we would have lost twice as many jobs, more than 17 million.

I’d like to enter the Blinder-Zandi report into the record.

Congress hampered the recovery

Ironically, Republicans in Congress made recovery more difficult. As former Federal Reserve Chairman Ben Bernanke wrote in his new book: “The economy needed help from Congress—if not from additional spending (on roads and bridges for example), then at least in areas such as retraining unemployed workers.” But the Republican-led Congress demanded deep spending cuts at a time when we needed aggressive fiscal policy to boost the economy. They ended up doing more to hurt than to help. And now Republicans complain that the economic recovery has been too slow.

The FORM Act

Now they have gone a step further. Two weeks ago, Republicans in the House passed legislation—the FORM Act—that would fundamentally hamper the Fed’s ability to conduct monetary policy. It would limit the Fed’s independence, for example, by forcing it to determine target interest rates using a mathematical formula, while ignoring a broad range of important economic indicators. Chair Yellen, as you have noted before, if the Fed had been forced to follow such a rule in recent years, quote “[…] millions of Americans would have suffered unnecessary spells of joblessness over this period.” If the FORM Act had been a law during the time of the recession, the Federal Reserve would not have been able to take the aggressive steps needed to help pull our nation out of the greatest economic catastrophe since the Great Depression.

Conclusion

I hope today that we can focus on the critical issue before us—how the Federal Reserve should act to strengthen our economic recovery. But if necessary, we must clearly show that efforts to hamstring the Fed are misguided. Chair Yellen—thank you for appearing before the Joint Economic Committee today. I look forward to your testimony.