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On the Road to Economic Recovery and Productivity, with Lingering Concerns over Inequality

Economic Policymaking in the Obama Administration

Speaker: Jason Furman, Chairman, Council of Economic Advisers
Presider: Thomas R. Keene, Editor-at-Large, Bloomberg News
December 17, 2013

Event Description

With the federal budget deficit rapidly shrinking and the United States seemingly on the road to sustained economic growth, Jason Furman, chairman of the Council of Economic Advisers, discusses the economic policy priorities of the Obama administration and what lies ahead for the U.S. economy. Despite the fact that the post-financial crisis recovery has been rapid by historical standards, growing inequality and stagnant productivity growth remain as areas where there is more work to be done.

Event Highlights

Furman on the long-term trend in the U.S. economy towards greater inequality:

"And you look at the combination of the two of these, which is the growth rate overall slowing and then less of that growth going to the middle class and to households at the bottom, and the combination of those two trends are about equally responsible for the slower growth we've seen in the typical household's income over the last several decades."

Furman on GDP growth and the importance of increasing worker productivity:

"I think some of those comparisons with the past [GDP growth rate] are just demography. So when you had your working-age population growing more quickly, your overall growth rate's going to be more—it's going to be faster, and our demography now, we have baby boomers retiring. That's reducing our workforce growth and reducing our growth rate. The part that I'm most worried about is what I was talking about, which is the productivity growth, how much you're getting for given work or how much you're getting potentially for given amounts of capital. And I think we can do a lot better."

Furman on the post-financial crisis recovery in the United States and the recent narrowing of the federal budget deficit:

"Our deficit, as I said, came down from—by nearly 6 percent of GDP in four years. That's the fastest deficit reduction we've seen since the end of World War II. Our deficit is coming down really quickly in the short run, and it's not just the short run. If you look at the long-run outlook, we have a lot of demographic challenges, we have a lot of challenges in terms of health care, but what people don't appreciate is, we've actually done a lot to deal with those. Whether it's spending, whether it's reducing Medicare in the Affordable Care Act, higher tax rates on high-income households in the tax deal at the beginning of this year, add all of that up, and our long-run deficit, the fiscal gap, is only 1.7 percent of GDP now, which is a lot better than we've estimated it to be for the last ten or fifteen years."

This meeting was part of the C. Peter McColough series on International Economics.


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