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Welcome to "Ask the White House" -- an online interactive forum where you can submit questions to Administration officials and friends of the White House. Visit the "Ask the White House" archives to read other discussions with White House officials.

Dr. Edward Lazear
Dr. Edward Lazear
Chairman of the Council of Economic Advisers

March 10, 2006

Dr. Edward Lazear
Hi everybody. Glad to join you in this "Ask the White House" forum about the U.S. economy and today's jobs report. The Labor Department reported today that 243,000 payroll jobs were added in February of this year. About 5 million jobs have now been added in the past two and a half years. I welcome your questions about today's report and other economic issues. Thanks, Ed.

Chris, from Indiana writes:
I heard on the news that there was a jobs report released today. Who issued it and what did it say?

Dr. Edward Lazear
The Bureau of Labor Statistics in the Labor Department released a monthly report this morning on the employment situation. It includes a variety of data on payroll jobs, the unemployment rate, hours worked, as well as information on particular sectors of the economy.

Job growth was very strong, indeed higher than the expected level. This is good news because it signals that the growth in the economy is being felt in the labor market as well the product markets. This means that the economic growth is likely to continue and that worker wages will rise.

louis, from verona, wisconsin writes:
With fuel and heating costs insurance costs and other costs going through the roof, why is it that the US continues to say that inflation is "in check"? Why are interest rates moving up as this causes inflation (higher mortgage rates) also??

Dr. Edward Lazear
Some prices are more volatile than others. Energy is historically a commodity where price movements tend to be quite pronounced. Last year experienced very large increases, but those energy cost increases were not transmitted to the costs of other goods. As a result, the "core" rate of inflation was quite low at 2.1%.

Energy prices are not to be ignored. They do pinch the budgets of families and businesses, and could eventually show up in the prices of other goods as well (leading to inflation). It is for that reason that the President is focused on ensuring that we have a long-term, secure, supply of energy. For example, in the President's State of the Union Address he proposed an Advanced Energy Initiative to help diversify our sources of energy.

Mary, from Lafayette, Pa. writes:
What exactly is the role of the CEA? How do you differ from the Fed Chairman?

Dr. Edward Lazear
Congress created the Council of Economic Advisers in 1946 to help advise the President and White House staff on a wide variety of economic issues. In essence, CEA acts as internal consultants to make sure the President has the best and unbiased advise we can give.

Our work touches on issues like health care, taxes, immigration, financial services, and trade. In short, any issue that may help grow the economy and increase the standards of living of Americans are fair topics for CEA consideration.

The Fed, on the other hand, plays an active role in determining the monetary policy of the United States. It is independent of the White House and sets its policies to ensure that inflation is kept in check, while balancing that goal against employment and output growth.

Gregory, from Los Angeles writes:
Mr. Chairman, Doesn't our faltering economy, rising debt, and increasing trade defict with foreign countries signal that we need a tax increase on the largest incomes to meet our future needs?

Los Angeles, CA Daniel Murphy Catholic High Sshool 10th grade

Dr. Edward Lazear
Tax increases do not create economic growth. The role of taxation is to provide the revenue necessary to finance the work that government does. But virtually all economists recognize that taxation imposes burdens on the economy. The goal of a good tax policy is to finance the government while minimizes the economic harm associated with raising the revenue. In order to encourage economic growth, it is essential to keep tax rates low. Rates have been reduced under this the President and the effects on the economy have been significant. Economic growth has been very impressive and productivity growth, on which worker raises are based, has been superb. As a result, it is important to maintain low tax rates and not to move in the other direction.

Randy, from Georgia writes:
How can the US economy be considered strong when we have such a large foreign trade imbalance?

Dr. Edward Lazear
The trade deficit bears watching, but remember that there is another side to the trade deficit. A cause of the trade deficit is the fact that the US is such a strong economy. We're buying many more goods and services because are economy is growing so quickly, while our trading partners who are not growing as quickly are buy less.

As a result, those outside the US as well as Americans want to invest in American capital. In order for them to invest, they must give us something in return. What they give us is their goods in larger amounts than we give them. Foreign investment in the United States contributes to productivity growth and productivity growth contributes to worker wage growth.

Note also that one-in-five jobs in the US is associated with exports. Consequently, it is important to maintain an open trade environment where American firms have access to foreign markets in addition to foreign goods having access to ours.

The Administration is working to reduce barriers abroad so goods and services can flow more freely, and Americans can sell abroad.

Mike, from Arlington, VA writes:
Is the White House worried the current spike in jobless claims will continue in the near future?

Dr. Edward Lazear
Jobless claims last week rose slightly to 303,000, up 8000 from the previous week. But weekly jobless claims are notoriously volatile and the number that we generally believe to have more economic significance is the 4 week average. That number is at 293,000, which is considerably below the 333,000 average during 2005. And 2005 was a good year for job growth so not much should be read into last week's minor uptick. More important is the fact the the level of jobless claims is still low.

David, from Lexington KY writes:
Dr Lazear what is the short, intermediate and long term effects of the deficit?

Dr. Edward Lazear
Budget deficits over the long run pose a serious problem. Deficits in the short run can be caused by a number of factors, some of which relate to unanticipated adverse events like natural disasters or wars. To finance the costs of dealing with those events, it would be unwise to try to pay for them all at once. But it is necessary that we bring the budget deficit down. The President is committed to cutting the deficit in half by 2009. In the long run, we will need to get control of our entitlement spending (Social Security, Medicare, Medicaid) to reduce the budget deficits. We cannot solve this problem by raising taxes.

Dr. Edward Lazear
Thanks to all of you for your questions.

I have been fortunate to be able to join the Administration when the economy is strong. Growth is high, productivity is high and improving, and the labor market looks very good. I am grateful for the opportunity to work with the President to build on this sound foundation.

I look forward to interacting with you in the future.