The head of the U.S. central bank, Alan Greenspan, told Congress Thursday that he sees some tentative signs of recovery in the still depressed U.S. economy. Mr. Greenspan appeared before the Senate Budget Committee.
Mr. Greenspan detects recent improvements in economic activity. He says excess inventories are being used up and that that almost certainly suggests a coming rebound in industrial production, which has been down for 12 consecutive months. He says consumer spending is holding up rather well, in part because of the benefits of lower oil and natural gas prices and low interest rates that have helped the housing and auto sectors.
But Mr. Greenspan says considerable negatives remain in place. These include rising unemployment and losses from the stock market, which temper household spending and consumer confidence. Mr. Greenspan says it is hard to predict how the economy will perform in 2002.
"With the potential at least that the economy may be more tepid than we would like later in this year, some form of stimulus program probably would be useful," he said. "But we don't know that yet. In other words it is very difficult to judge exactly how this year is going to develop."
Congress has been deadlocked over an $80 billion tax cut and spending program designed to stimulate an economy which has been declining for nearly 12 months. Mr. Greenspan says while the stimulus program would have been useful three months ago, he's not sure if it is needed now. He worries about its impact on the budget, which because of the war against terrorism and the recession, has rapidly shifted from surplus to deficit.
Asked about the collapse of the Enron energy trading company in Texas, Mr. Greenspan said he is surprised and encouraged that the public is so interested in the case.
"I think it [the public interest] that because the whole structure of American business is so fundamentally based on trust that any abrogation of that trust creates a real furor. Which it should," he said. "Think of the worst outcome, namely that we went through this entire episode and nobody cared."
Enron allegedly deceived investors by concealing its financial losses. As the company was collapsing two months ago executives enriched themselves while thousands of employees were losing their life's savings. A leading accounting firm, Arthur Anderson, may be complicit in the scandal as its consultants earned millions advising Enron while at the same time its accountants audited the books.