WASHINGTON, Oct. 17 (UPI) -- Amid a congressional push to pass a large post-Sept. 11 attack economic stimulus package, Federal Reserve Chairman Alan Greenspan testified to the Joint Economic Committee on the current state of the U.S. economy.
The House and Senate are considering a possibly near-$100 billion stimulus package, which lawmakers hope will jumpstart the almost stalled U.S. economy. This would be in addition to the $40 billion disaster-relief and military package already partially allocated, and the $15 billion airline bailout package.
In his testimony, Greenspan expressed continued optimism in the long-term growth potential of the U.S. economy, despite the economic aftershocks from the attacks.
"The foundations of our free society remain strong and I am confident we will recover and prosper as we have in the past," Greenspan said.
He added that before the devastating terror attacks -- which have had broad economic ramifications -- that some upswing was starting to become evident in this year's slowed U.S. economy.
"To be sure, the signs were tentative but, on the whole, encouraging," Greenspan said.
This possible economic upturn, however, was halted in its tracks Sept. 11.
"In the days following the attack, the level of (economic) activity declined significantly. The shock was most evident in the consumer markets" said Greenspan of the almost complete temporary halt to any buying by American.
Both motor vehicle sales, and sales at major chain stores fell off noticeably. The airline and travel industries also suffered severe cutbacks," he added.
While American consumers have in part resumed their buying, there is still the issue of low consumer confidence, layoffs, and declines in a number of industries. While there are no exact estimates yet as to the complete economic effects of the Sept 11 attacks, lawmakers have been working on an economic stimulus package that ranges between $75 billion and $100 billion in business and personal tax breaks, business bailouts, and help for the unemployed.
The $100 billion figure is based on the expectation of various economic experts and lawmakers that any stimulus package needs to account for 1 percent of American's yearly $10 trillion gross domestic product -- the sum of all goods and service produce -- to have an economic effect.
At question for lawmakers, and economic experts such as Greenspan is what kind of stimulus will have the necessary, immediate, short-term impact, and what will also help, and not impede, long-term growth.
"Nobody has the capacity to fathom fully how the effects of the tragedy of Sept. 11 will play out in the economy," Greenspan said. "But in the weeks ahead, as the initial shock continues to wear off, we should be able to better gauge how the ongoing dynamics of these events are shaping the immediate economic outlook."
Greenspan expressed the belief, that in the long term, even without a stimulus package, the prospects for U.S. economic growth were not sidetracked by the attacks.
"We have to be cautions that any stimulus (package), is on net balance, actually stimulus," he said.
Greenspan signaled his approval of a temporary increase to the expensing allowances by businesses particularly in view of the currently weak climate for business investment.
He advised that an elimination of the capital gains tax would have a positive long-term effect on the economy.
Because of the sudden emergency closure of the House because of the ongoing anthrax scare, the economic stimulus package is now pushed back for consideration until next week.
