WASHINGTON (MktNews) - The following is a transcript of the remarks of Federal Reserve Chairman Alan Greenspan on the subject of consumer confidence, in response to a question posed Wednesday during his testimony before the Senate Banking Committee:

GREENSPAN: "Senator, most of the major estimates of consumer confidence, proxies for actual psychological consumer confidence, if I may put it that way, employ some sort of measure of what either is the expected unemployment rate at some future point or whether you yourself or members of your family are likely to be laid off. And there's even on sophisticated one, what is the probability you will be laid off. So that they actually embody that specific notion within their statistical measure. There's no question that the issue of layoffs has got to be a factor in determining the propensity of people to spend money to do a number of commitments which require the maintenance of an income. So the answer I would give to you is that, yes, layoffs do tend to impact on consumer confidence. We've had a significant pickup in initial claims on insured unemployment which is the broadest measure that we have got on layoffs and indeed it is doubtless impacting to a certain extent on consumer confidence, at least in the proxies that are effectively employed using that. But we have not yet seen any real serious deterioration in the actions people take. And I think what you have to argue is that the ultimate measure of consumer confidence is not the statistical calculations we make about proxies of what tends to correspond to our judgments of consumer confidence, but what'll do people do. And so far they have exhibited a fairly high degree of confidence. To be sure consumer expenditures have not been going up in any material way, but they've held their own."

SEN. SCHUMER: The worry is that after month after month of people reading of these layoffs, worrying about them more in their own families, the neighbor down the street or whatever, that it would affect the consumer's spending.

GREENSPAN: "That's been our history, senator, and I think that it is clearly an issue which, for example, we at the Federal Reserve watch very closely."

SEN. SCHUMER: But so far, we haven't seen that. Has the measure of layoffs accelerated over the last three months that we wouldn't see it yet even if it were going to occur or has it been sort of steady the last six or seven months?

GREENSPAN: "No, the rate of layoffs has gone up and that is, as I've said, the broadest measure we have of layoffs is initial claims and that as you know has gone from under 300,000 a week to in excess of 400,000, so that all the measures that we pick up on the weekly basis in those insured data, short of employment data systems, as well as our much broader employment series, does show a pickup in the issue of ..."

SEN. SCHUMER: It seems to me we ought to start worrying a little more about, I don't know what we can do about it. Although it relates to another question, but if one were looking generally at the economy, the level of worry one should have about consumer spending continuing should increase, should be higher today than it was a few months ago?

GREENSPAN: "No, I think I agree with that, that's a correct view, but I think there's an interaction here which is also very complex."

SEN. SCHUMER: No question. Let me ask you this, given the decline in productivity which we have discussed.

GREENSPAN: "The rate of growth of productivity."

SEN. SCHUMER: Didn't it actually decline in one quarter?

GREENSPAN: "It went down in the first quarter, but I would suspect that it will not be continuing in the second quarter."

SEN. SCHUMER: Given the decline in, at minimum, the rate of growth of productivity and I hope you're right.

GREENSPAN: "I agree with that."

SEN. SCHUMER: And how important that is to long-term growth. This is the question that Evan Bayh asked. But should we be more worried today about the size of the tax cut, which I believe at some point you said an effective rate higher than the $1.35 (trillion) ... I read somewhere that you, I think, said it was closer to $2 trillion in its overall amount given interest.

GREENSPAN: "I don't believe I said that."

SEN. SCHUMER: No. I didn't read it directly from you. I read it on a memo that you had said it and I hadn't read anywhere where you said it, so strike that.

GREENSPAN: "Well, let me just say this. I've never made such a calculation."

SEN. SCHUMER: But given the change that we've seen in the economy over the last several months since the tax bill was proposed and since it was signed do we have greater worry about our status as a surplus government as opposed to a deficit government?

GREENSPAN: "It depends what happens to the expenditure side of the budget."

SEN. SCHUMER: Let's say it grows at the rate of inflation.

GREENSPAN: "Well, clearly if you take $1.35 trillion out of a current services surplus, the actual surplus available less expenditures will be less than the current services surplus. I mean, that's arithmetic, I acknowledge that.

SEN. SCHUMER: But you're not worried at this point that we're going to, even though the economy is not as strong as when the initial tax cut was proposed or even the $1.35 trillion was arrived at. You're not worried about us sliding back into deficit?

GREENSPAN: "I'm not, senator."

SEN. SCHUMER: You're more optimistic than I am.