Saturday, October 11, 2003

Mankiw Brushes All Your Fears Aside

Dr. Greg Mankiw, Chairman of the Council of Economics Advisors, the so-called, "nerdiest part of the Executive Office of the President," answers two questions on economic organization and the current deficit.

Justin, from Anderson, SC writes:

I would like to ask the president what measures is he taking to help out the economy and make job oppurtunities better for the people of the country? Also I want to know when I am getting ready to retire will I have social security or will there not be one anymore?

Dr. Gregory Mankiw:

These are two excellent questions.

Regarding your first question, the President has put forward a six point plan to further strengthen the economy. It includes streamlining regulations, making healthcare costs more affordable and predictable, reducing the burden of frivolous lawsuits, ensuring a reliable energy supply, opening up markets around the world, and enabling families and businesses to plan for the future with confidence by making the tax cuts permanent.

On your second regarding Social Security, you are right that Social Security will need to be strengthened to make sure it is sustainable for future generations. The President has often spoken of the importance of personal accounts in Social Security as a key element of reform. The President's Budget from February of this year called the unfunded liabilities of the current entitlement programs "the real fiscal danger." This is absolutely correct. These are vital programs for Americans -- the key is to make sure they have a strong foundation and are available for future generations.

Justin, from Argillite, Ky writes:

What are the steps that the Administration can take to fix the deficit and how do you think it will play out for the next fiscal year?

Dr. Gregory Mankiw:

The administration views the deficit as a concern, and the President has said that he would like to reduce it in half over the next five years. This will involve a combination of more rapid economic growth, which will bring in more tax revenue, and spending restraint.

The primary reason we have a deficit today is that the economy slowed substantially beginning in 2000 and through 2001. This accounts for about half of the deterioration of the fiscal outlook from January 2001 to today. About one-quarter of the change is due to increased spending, primarily on defense and homeland security. The remaining one-quarter is attributable to tax cuts.

When evaluating budget deficits, one has to set priorities. The President has made clear that has first priority is having an economy that is creating jobs for Americans. Reducing the budget deficit is a priority as well, but it is not the only priority.

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  • Wow, it is all so easy, I feel so much better now.

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