James, from Indiana Wesleyan University writes:
What is the biggest threat to the U.S. Economy?

Dr. Edward Lazear
Good question. Our economy is among the most flexible and resilient in the world. It's important we keep this flexibility so we can ensure high levels of economic growth that translate into higher standards of living for our workers.

The biggest threat to our economy is that we will limit its flexibility, retreat to economic isolationism, or raise taxes -- all of which would stifle economic growth and impede rising living standards. Fortunately, the President understands these issues and will work hard to ensure he and Congress prevent any of these negative scenarios from becoming a reality.

In the near term, a couple of factors that have received significant media attention are housing and energy prices. But there is good news on these fronts. Gasoline prices have declined the past few weeks, and moderation in housing construction has been offset by non-residential and business investment.

Mike, from Wayne, PA writes:
I have heard over and over that the only Americans doing well in this economy are the millionaires, and they are the reason why the tax receipts are high, and that 'middle-class' Americans are hurting. What has been the wage growth for all incomes during the Bush Boom? Thanks for your time and service.

Dr. Edward Lazear
There has been a long-term historic trend of increasing differences between the rich and the poor. This began in the late 1970s and has continued.

Most economists, myself included, believe the main reason is that the returns to investing in skills has gone up. We should be happy that our investments in skills are paying off. However, we worry if some in our society are unable to acquire the skills necessary to allow them to compete in our technologically advanced economy. Much of this can be remedied by improvements in K-12 education. This has been a central focus for the President, and indeed, he began his term by passing the No Child Left Behind (NCLB) Act to improve disadvantaged schools.

More recently, wages of production workers have begun to grow at rates consistent with past economic expansions. Much of the growth has been devoted to high energy prices, but rapidly falling gasoline prices the past few weeks should mean that the typical worker enjoys more buying power.

Peter, from Buena Park, CA writes:
Dr. Lazear: Thank you for your time. What does the council exactly do? Thanks.

Dr. Edward Lazear
The Council is made up of three members -- appointed by the President and confirmed by the Senate. The Council is supported by a team of professional economists on loan from universities and other federal agencies.

We are the President's economists. On a broad array of issues we provide the President expertise on economic impacts that will help him weigh various factors and make policy decisions. We discuss with him the state of the economy and many of the policy issues covered in today's chat.

Daniel, from Lakeville, CT writes:
Do you have any tips for a beginning economics student in high school? Thanks.

Dr. Edward Lazear
Study hard. Both the President and I believe that discipline is the most important ingredient to success in any field.

Economics is enjoyable because it helps people understand unintended consequences. And understanding incentives is crucial.

Economics is valuable for a wide variety professions, regardless of what you do after high school.

Andrew, from Ann Arbor, Michigan writes:
Dear Mr. Lazear, Thank you for responding to our questions. I have a few questions about the short- and long-term prospects for the economy (answer whichever you like). First, what are the causes for the huge increases in college costs, and what are the government's plans for curbing them? Second, how will the government try to rein in the nation's soaring health care costs? Is a single-payer or socialized system, along the lines of those in Canada or western Europe, or Medicare and the VA system, on the table? Third, how does the government plan to reconcile expensive entitlement programs, very low tax rates, and continued spending on defense and the war on terrorism? And lastly, the President is (rightly) proud of our country's strong economic growth and low unemployment. What the administration never seems to address, however, is the growing gap between rich and poor and the declining purchasing power of the poor and middle class. What can the government do to arrive at a better income distribution? Thank you for responding to my questions.

Dr. Edward Lazear
Lots of good questions. I'm going to respond to your question about health care.

One problem with our health system is that doesn't provide the best incentives to use health care wisely. The President last month signed an executive order that will improve transparency and provide more information to health consumers. By putting consumers and providers in the driver seat, better choices will be made and costs will be better contained.

Health Saving Accounts (HSAs) are also a positive step in this direction because consumers then benefit directly from wise spending decisions.

This speaks to your other question as well. In order to get entitlement spending under control it is necessary to create better incentives for health care spending.