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Greg Mankiw
Greg Mankiw
Chairman of the Council of Economic Advisers


Latest Economic Numbers

October 8, 2004

Greg Mankiw

Good afternoon everyone and welcome to "Ask the White House". It's a pleasure to be here today to answer your questions about the economy.

R.D., from McClenagan writes:
Dr. Mankiw, Your thoughts on today's job figures? Is the economy truly expanding and growing as the President claims it is? The job numbers still seem a bit weak, why? Thanks a lot

Greg Mankiw
Hi R.D. -

Today's jobs figures confirm that the economy is continuing to grow and add jobs. The economy turned the corner during the summer of 2003, when the President’s Jobs and Growth bill went into effect. Since August 2003, the economy has created more than 1.9 million jobs (including the benchmark revision announced by the BLS today). The unemployment rate has fallen from its peak of 6.3 percent to 5.4 percent. The current unemployment rate is well below the average of each of the past three decades.

Yes, the economy is certainly expanding and growing. Over the past year, GDP has grown at a 4.8 percent annual rate, one of the fastest rates in nearly twenty years. Private forecasters see continued solid growth in the remainder of 2004 and in 2005.

The President has said many times that he will not be satisfied until every American who wants a job can find a job. We have the policies in place to create an environment in which business can expand and create good jobs. That is why we have seen consistent job gains over the past 13 months and why the consensus of private economic forecasters sees continued economic growth ahead.

Ryan, from Hoffman Estates, Illinois writes:
How will the Tax Relief that President Bush signed into law this past week benefit our economy?

Greg Mankiw
The President has said many times that he wants to make tax relief permanent. Recently, he has signed a bill into law that moves substantially toward achieving that goal.

Tax relief has been a crucial part of the President’s economic agenda. A family of four earning $40,000 has received tax relief of more than $1900.

Lower taxes expand the economy in the short run by increasing the aggregate demand for goods and services. When people have more money in their pockets, they spend some of it. And when businesses see more customers coming through their doors, they hire more workers.

In the long run, lower tax rates expand the supply side of the economy by enhancing the incentives for work, saving, and investment.

Having inherited an economy sliding into recession, the President wanted to offer tax relief to provide short-run stimulus. But he also wanted to provide a solid foundation for long-term, sustainable economic growth.

Rhonda, from Lexington writes:
We haven't received a Child Tax Credit check this year. Will we? Is the $1,000 permanent?

Greg Mankiw
Increasing the child tax credit to $1,000 has been an important part of the President’s tax relief for working families. The child credit will not, however, come as a separate check in the mail, but will be included as part of your normal tax return. You will pay lower income taxes, or receive a bigger income tax refund, every April 15.

Earlier this week, the President signed a new law that makes sure that the $1,000 credit will remain in place in the next five years. Of course, the President’s goal is to make it permanent.

Joseph, from Washington DC writes:
Thank you for taking my question, Sir. I was wondering if you were worried about the deficits and government spending crowding out investment in the economy and leading to a rise in interest rates. I am a first year student at Georgetown Univeristy and have only just started my econ major, so I am sure the issue is vastly more complex than I now understand it to be. Sorry if the question is stupid as a result. Thank you. Joseph

Greg Mankiw
Hi, Joseph. Your question is actually very important. The President is very concerned about the deficit and has a plan to cut it in half over the next five years. As you suggest, one reason to be concerned about deficits is that they can put upward pressure on interest rates and crowd out investment. This is why, as the President has said, spending restraint is so vital. Spending restraint is the best way to bring down the deficit.

Steve, from Fort Lauderdale writes:
What do you think the future of the U.S. economy is?

Greg Mankiw
The economic future of the United States is bright. Productivity growth over the past few years has been very strong, and productivity growth is the ultimate determinant of higher real wages and rising living standards.

Although we always face challenges, the fundamentals of long-run economic growth are very much in place. Our economic system rewards hard work and entrepreneurship. It harnesses the creativity of the American people. That creativity will ultimately ensure a continued and expanding prosperity.

Robert, from LA, CA writes:
In your opinion what is the most pressing issue to the US economy for the near future. Why is this a problem and what are some things that the government could do to prevent this from happening or correct the issue afterward.



Greg Mankiw
Thanks for your question, Robert.

There are many economic challenges ahead. In a recent speech, I talked about the three T’s: taxes, trade, and tort reform. By keeping taxes low, avoiding the temptation to retreat into economic isolationism, and removing the burden of frivolous law suits, we can create an environment for economic growth and the creation of good jobs.

FYI, you can find the speech here:


Greg Mankiw
Thank you everyone for your questions today. It has been my pleasure to talk with you about the economy today and the challenges ahead.