- The Washington Times - Thursday, February 24, 2000

Congress should let more foreign workers into the United States and guard against growing protectionism to keep the economic prosperity going, Federal Reserve Chairman Alan Greenspan said yesterday.

Citing the nationwide labor shortage as the greatest threat to the record-long economic expansion, Mr. Greenspan for the first time called on Congress to increase the cap on skilled workers who are allowed into the country, saying that would act as a "safety valve" to keep the economy from overheating.

The Fed chairman endorsed a bill sponsored by Sen. Phil Gramm, Texas Republican and chairman of the Senate banking committee, that would raise from 65,000 to 195,000 the number of high-tech workers who could immigrate to the United States annually and exempt American-educated workers with higher degrees in technical areas from all immigration caps.

While acknowledging that Congress must deal with sometimes strong sentiment against foreign workers and trade, Mr. Greenspan told the banking committee that economists see only benefits from the "internationalization" of the economy.

"The benefits of bringing in people to do the work here, rather than doing the work elsewhere, to me, should be pretty self-evident," he said, because the economy can keep growing only if American businesses have the workers they need to keep expanding. Shortages of skilled workers have been especially acute in rapidly growing high-tech areas.

Mr. Greenspan also urged Congress to resist the movement for protection from foreign imports, saying they also have been an important escape valve for the red-hot economy because imports have been filling consumer demand for goods that American businesses do not have the resources to produce.

"The forces against globalization can significantly undercut this remarkable surge in prosperity that we are observing," Mr. Greenspan warned, noting that the feelings of insecurity that prompt Americans to oppose increased trade and immigration are on the rise, as evidenced by the breakdown of the world trade talks in Seattle last year.

"As we are creating an ever more complex, sophisticated, accelerating economy, the necessity to have the ability to bring in resources and people from abroad to keep it functioning in the most effective manner increasingly strikes me as relevant policy."

Few senators at the hearing yesterday defended the anti-trade sentiment seen in Seattle, but several questioned the Fed's recently announced goal to impose higher interest rates to keep Americans from loosely spending the wealth they have been accumulating in the stock market.

Mr. Greenspan last week laid out a new theory that is guiding the Fed's actions. He said today's technology boom has caused a surge in productivity and higher prices for the stocks of American corporations that benefit from the new technologies.

Soaring stock prices, in turn, have sharply increased the wealth of American households to unprecedented levels in the 1990s. Although that is one reason Americans feel so prosperous today, Mr. Greenspan said, it presents a problem for the Fed because consumers are furiously spending down their wealth.

The spending binge has caused personal savings to drop to record lows and the trade deficit to burgeon at record rates that cannot last for much longer. That is why the Fed is trying to slow spending and the economy, he said.

Republicans and Democrats questioned the new theory behind the Fed's actions and whether the central bank is correctly addressing the problem. Sen. Connie Mack, Florida Republican and chairman of the Joint Economic Committee, suggested that the Fed should stick to eliminating inflation, which Mr. Greenspan acknowledged has been largely absent, and stop worrying about the growing wealth of Americans.

That prompted an exasperated response from Mr. Greenspan, who said unprecedented developments in the economy are forcing the Fed to change its focus.

"We have a new economy. It is different. It is behaving differently, and it requires a different type of monetary policy to maintain its stability of growth than we had in the past," he said.

Other legislators questioned whether the Fed should be "targeting" the stock market, which the chairman emphatically denied he was doing. At one point, Mr. Greenspan said the Fed was only ratifying increases in interest rates already seen in the credit markets, particularly in the rates on corporate bonds.

Sen. Paul Sarbanes, Maryland Democrat, said Mr. Greenspan was endangering the job prospects of minorities, who have just begun to climb the ladder of success, by using the "blunt instrument" of higher interest rates to stifle what appears to be excessive spending by a minority of well-to-do Americans.

But Mr. Greenspan denied that the Fed intends to drive up unemployment. He asserted that the poorest Americans have benefited the most from the expansion because they are finding jobs and seeing their incomes grow for the first time in decades.

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