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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.

Greg Mankiw
Chairman of the Council of Economic Advisers
May 7, 2004

Greg Mankiw
Hello. It is great to be with you again on "Ask the White House." I look forward to taking your questions.

Dean, from Key West writes:
What do you make of today's job numbers?

Greg Mankiw
Today’s job report confirms that the economy is on track for a robust recovery. The President signed his jobs and growth tax relief act into law last May and the labor market turned in August. Since August the economy has created over 1.1 million new jobs according to the payroll survey and even more according to the household survey.

Carol, from Manhattan writes:
I see that Gene Sperling downplayed today's economic news. How do you respond to his statement that, "we're in a very deep hole on job market."

Greg Mankiw
Hi Carol

The President inherited an economy that was heading into a recession. The end of the high-tech bubble together with corporate governance scandals and terrorist attacks put downward pressure on economic activity and employment.

Monetary and fiscal policy makers responded vigorously to counteract these contractionary forces. Interest rate cuts by the federal reserve and tax cuts passed by Congress and signed by the President have helped put the economy on the road to recovery. We are now seeing the results.

The President has said many times that he will not be satisfied until every American who wants a job can find one. We are not yet satisfied but the jobs report released today shows that the economy is now heading into the right direction. The unemployment rate has fallen from its peak of 6.3 percent last summer to 5.6 percent now.

We expect employment to continue growing and the unemployment rate to continue its downward trend.

Rob, from Long Island writes:
What's your outlook for the rest of the year?

Greg Mankiw
Hello Rob

The administration does an official forecast twice a year. The forecast is a joint product from the Council of Economic Advisors, from the Treasury Department and the Office of Management and Budget.

Our last official forecast was completed last December. At that time, we expected that growth in real GDP would be 4.0 percent from the 4th quarter of 2003 to the 4th quarter of 2004. It looks now like growth might be a bit above that forecast.

We will be releasing a new administration forecast together with the mid-session review of the budget in July.

Stone, from Savannah writes:
Do you imagine the fed will raise interest rates now?

Greg Mankiw

Although I don’t comment on fed policy, the administration does make a projection for interest rates as part of our forecast. In our last forecast, we projected that interest rates would rise as the economy recovered. This is a normal cyclical phenomenon.

That is, interest rates tend to fall in recessions and rise in booms. So with our economy booming today, one would naturally expect the demand for credit to increase and therefore, interest rates to rise along with economic activity.

Parker, from Davidson College writes:
How serious of a problem do you consider the budget deficit to be?

Greg Mankiw
Hi Parker

It is nice to hear from someone from Davidson. I gave a talk there a few years ago and was very impressed by the students and the quality of education you are getting.

The budget deficit is a concern, but it is also understandable development in light of the events of the past few years. Whenever an economy heads into a recession tax revenues fall. In addition, the terrorist attacks led to increased spending on defense and homeland security. Finally, the President’s tax cuts did contribute to the budget deficit but they also are partly responsible for the robust economic recovery that we are currently experiencing.

As the President has said, it is an important policy priority to reduce the budget deficit over time. He has said he would like to reduce the deficit in half in five years and has presented a budget to Congress to accomplish that goal.

Over the longer term, an aging population will put budgetary pressure on the federal government as an increasing number of elderly become eligible for the entitlement programs. That is why it is imperative to modernize these programs so they are sustainable for future generations.

Maura, from Houston, Texas writes:
Pools indicate that the majority of people are not informed of the good economic News. Liberal Media is unlikely to expread such news. How is the White House planning for tooting its own Horn?

Greg Mankiw
Economists like me follow the data closely. But most people are not as attuned to the day-to-day release of economic statistics. As a result, public perceptions of the economy can sometimes lag reality. Over time, as people notice that jobs are easier to find and that their incomes are growing I fully expect the good economic news that we are receiving to be reflected in polls in the general public.

Greg Mankiw
It's been great taking your questions once again. I look forward to doing this again in the future.

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