Unit 1
Text 1
“The intensification of political risks makes discerning the economic path ahead especially difficult.” Alan Greenspan's testimony to the Senate Committee on Banking on February 4th was notable for its caution. The chairman of the Federal Reserve, America’s central bank, is not going to offer hostages to fortune at such a sensitive time for the world’s biggest economy. Indeed, so circumspect has Mr. Greenspan become that he was unwilling to guarantee that a successful resolution to the Iraq crisis would see the economy surge ahead.
But the testimony does not believe the American recovery has run out of steam. Mr. Greenspan and his colleagues are still modestly upbeat about the prospects for 2003, reckoning that by the fourth quarter of the year the economy will have grown by 3% or more compared with the last quarter of 2002. But the continuing reluctance of companies to invest, now exacerbated by the global political uncertainties, has made the Fed hesitate.
Mr. Greenspan has talked about the economy going through a soft patch before. Now, though, there appears to be a new dimension to his caution. On Capitol Hill he acknowledged the possibility that what now looks like temporary setbacks might, once the Iraq-related problems are resolved, turn out to be “persisting imbalances that have been misidentified as transitory”.
If that were to be the case, Mr. Greenspan reckons that the authorities would have to explore conventional ways of stimulating the economy—through fiscal and monetary policy—and also look at further improving America's economic flexibility. The Fed chairman is convinced that freer global trade, national economic deregulation and gains in information technology have already contributed to the economy's ability to withstand—and recover from—shocks.
Neither President George Bush nor many of Mr. Greenspan's audience in Congress would be particularly thrilled to hear him argue that tax and spending policies have the potential to affect economic flexibility—especially since the Fed chairman went on to urge the politicians to reestablish fiscal discipline. Mr. Greenspan went so far as to say that, in his view, fiscal stimulus package was premature—and would be until the extent of the impact of war worries on the economy became clearer.
The Fed chairman is a skilled political operator and he was careful to focus his testimony in the long term. He gave warning that the current system of budget-accounting seriously underestimated the government's future liabilities. In the end, Mr. Greenspan reckons that a government can always—and might be forced to—raise taxes, even if that harms economic growth; cutting spending is always far more difficult because of the inbuilt political resistance to such cuts. That is why Mr. Greenspan wants action now to restrain spending and curb budget deficits.
1. What is the text mainly about?
A. Mr. Greenspan’s new policies in face of possible war with Iraq.
B. Mr. Greenspan’s cautions remarks about economic prospects.
C. Mr. Greenspan’s criticism of President Bush’s fiscal package.
D. Mr. Greenspan’s testimony to the Congress about his work.
2. What does Mr. Greenspan’s testimony try to show?
A. The political uncertainties make it more difficult to judge economic prospects.
B. Mr. Bush’s fiscal stimulus is mature enough to be carried out.
C. Mr. Greenspan is optimistic about the economic prospect.
D. Economic setbacks in the US are temporary.
3. Why does the Fed hesitate about the economic prospects?
A. Because politics in the world is uncertain.
B. Because companies are reluctant to invest.
C. Because war with Iraq is likely to break out.
D. Because Mr. Bush is going to carry out fiscal stimulus.
4. What is the new dimension to Mr. Greenspan’s caution in the testimony?
A. The economic prospects may become uncertain.
B. Economic setbacks may become transitory imbalances.
C. Temporary setbacks may become everlasting imbalances.
D. Economic setbacks may last for a long time.
5. What are Mr. Greenspan’s views on President George Bush’s fiscal stimulus package?
A. It is too hasty to be carried out.
B. It is too difficult to carry out.
C. It harms economic growth.
D. It underestimates the government’s liabilities.
