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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.
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February 9, 2004
Greg Mankiw Karen, from Germantown, MD
writes: Greg Mankiw These shocks led to a recession, which surely would have been deeper if the President had not responded with his pro-growth fiscal policy. The tax cuts maintained consumer spending and helps stimulate investment spending in a difficult time. The unemployment rate reached a peak of 6.3 percent this summer and, shortly after the President signed his Jobs and Growth tax relief package, started declining.
The unemployment rate is now 5.6 percent and heading downward. The administration and most private forecasters expect strong growth in incomes and employment in 2004. Michelle, from San Diego
writes: Greg Mankiw An open world trading system is generally a positive contribution to economic prosperity. It increases living standards both at home and abroad. That is the reason the President has actively pursued trade agreements to open up markets abroad.
At the same time that we pursue a more open trading system around the world, we have to acknowledge that any economic change, including those that come from trade, can cause painful dislocations for some workers and their families. The goal of policy should be not to stop change but to ease the transition of workers into new, growing industries. The Presidents initiative to support education at community colleges is one example.
Rodney, from Detroit writes: Questions: 1.) Is the President and his Administration aware of how rapidly and agressively the auto industry and other manufacturing based industries are moving operations to low cost countries (China, India, Malaysia, Indonesia)? (Go to Home Depot or Target and try to find something made in North America, let alone the US.) 2.) How does the President's Six Point Plan for the US Economy address the continued outflow of US jobs to countries such as China? 3.) How does the current weak US dollar help export opportunites when countries such as China peg their currency to the US dollar? Thank you. Greg Mankiw Your questions are answered in great detail in the Economic Report of the President (click here). Chapter two in particular addresses the challenges faced by manufacturing industries. The recent recession experienced particular weakness in business investment . Much of the President's tax relief has been aimed at reducing the cost of capital in order to stimulate investment growth. We are starting to see the results.
The chapter in the economic report also discusses specifically how the President's Six Point Plan will aid manufacturing industries. I encourage you to read it. Justin, from Indiana, PA writes: From everything that I have learned so far, I know that two ways to stimulate economic growth are to cut taxes or to increase government spending. Each of these practices I know comes with risks if recovery is too slow. My question is this; how economically dangerous is it to give a tax cut in the middle of a major military operation? I'm sure you know that President Bush will be the first person to do so since the Civil War. I am deeply concerned, not for myself, but for the financial stability of my children (20 years from now). I suppose my real question is the following: In your highly educated, and off the record opinion, would I be better off moving to Canada? I thank you very much for your time. I also thank you for making your text books so informative without being convoluted. Even I understood then, and for that feat alone, you should win a prize. Greg Mankiw On your economic question: the President's job is to set priorities - and restoring job growth was priority number one. However, he is committed both to getting America back to work and to reducing the budget deficit over time. The tax cuts were aimed to stimulate aggregate demand in the short run and promote sustained growth in aggregate supply in the long run. As the economy recovers, more tax revenue will flow in. Together with spending restraint, this will lead to reduced budget deficit. Michelle, from Houston, Texas writes: Greg Mankiw
The alternative to higher taxes is spending restraint. The budget the President released last week puts high priority to defending the homeland and providing sufficient funds for national defense. Non-defense, non-homeland security discretionary spending grows at a rate of less than one percent. Through this spending restraint, he will reduce the budget deficit in half over the next five years. Gautam, from Bothell, WA
writes: Greg Mankiw There is a wide range of views among professional economists about how much deficits affect interest rates. My own view is that deficits do, other things equal, tend to put upward pressure on interest rates, which in turn puts downward pressure on investment spending. That is one of the reasons why reducing the budget deficit is a priority for this Administration. Manfred, from Evanston writes: Greg Mankiw Since the Jobs and Growth tax relief package was passed and signed in law in May, the economy has shown robust growth. Real GDP in the last half of 2003 showed its best six-month performance in about 20 years. Forecasts for real GDP growth in 2004 are about four percent, compared to an historical average since 1960 of 3.3 percent.
The United States is growing faster than most developed economies around the world. This is in part due to our vibrant free market economy and to the expansionary monetary and fiscal policies we have pursued. Hernst, from Silver Spring, MD 20904
writes: Why does not the Bush administration champion more the fact that they took us out of a recession created by the previous administration, despite the impact of Sept 11? Greg Mankiw You are also right that the President inherited an economy that was entering a recession. In addition, the terrorist acts of 9/11 had economic as well as broader geopolitical implications. In the face of these circumstances, the President has set priorities. His first economic priority is to get America back to work and we are making progress in that direction. The next priority is to reduce the budget deficit over time and the President's budget submitted last week demonstrates how that will be accomplished.
Fortunately, the U.S. economy has bright prospects based upon the creativity of the American people and their spirit of entrepreneurship. Valerie, from Bell Canyon, California
writes: Greg Mankiw
Greg Mankiw |