Bunning Questions Greenspan's Economic Caution

By Bruce Sullivan | July 7, 2008 | 8:25 PM EDT

Washington (CNSNews.com) - Kentucky Republican Senator Jim Bunning questioned Federal Reserve Chairman Alan Greenspan as to whether he is being overly cautious about the continued growth of the current economic boom, now the longest in US history.

"Why do we want to contain the growth and wealth effect in this country?" Bunning asked Greenspan after he testified before the Joint Committee on Banking, Housing and Urban Affairs and gave no indication that the Fed would ease up on interest rates, which it has raised four times in less than one year.

In delivering the second part of his monetary report to Congress, Greenspan said he is worried the economy is growing too fast and indicated that further interest hikes were on the horizon in order to reel the economy in gradually.

"Those profoundly beneficial forces driving the American economy to competitive excellence are also endangering a set of imbalances that, unless contained, threaten our continuing prosperity," Greenspan stated to the committee.

But Bunning told Greenspan that the economy is currently experiencing unprecedented low levels of unemployment and inflation, and might suffer more from the Federal Reserve Board's interest rate hikes than from anything else.

"Please don't try to fix and economy that isn't broken," Bunning implored of Greenspan. "You could easily slam the doors shut on economic growth altogether," Bunning added.

Greenspan agreed with Bunning that there never has been such a sustained period of economic expansion in U.S history, and he said that the job of the Federal Reserve is to sustain that growth as long as possible by modulating the money supply.

"Our basic purpose if to keep that process going," said Greenspan.

Financial markets responded optimistically to Greenspan's remarks. In early afternoon trading the NASDAQ rose sharply, and the Dow Jones industrial average was up slightly.

see related story