R. Glenn Hubbard
Excerpts from a Monitor breakfast on the outlook for the US economy.
By David T. Cook
R. Glenn Hubbard is the chairman of the president's Council of Economic Advisers. During the previous Bush administration, he was Deputy Assistant Treasury Secretary. He holds a doctorate from Harvard University.
On his forecast for the economy:
"The president has had the economy at the top of his list since the beginning.... In the president's budget we have been assuming ... long term growth in the economy, a little over 3 percent. Frankly I think it is higher than that."
"I will say the private sector forecasts look very reasonable in their pattern which is a slower growth at the beginning of the year, accelerating throughout the year."
On the risks to the economy:
"There is considerable concern among many economists - and I would put myself in that group - that the recovery that is widely talked about among business economists faces some significant downside risks. Leading that set of downside risks is the timing of an investment recovery.
"You all know the consumer was the star of the downturn and has remained the star in the beginning of the recovery. The question is a turn around in business investment. Most economists see a turn around in investment - at least in equipment and software spending throughout 2003....but when one talks to business leaders, one gets a sense that uncertainty in the economic environment has ... led to quite a bit of caution. Some of that uncertainty is also figuring into consumers' decisions as well."
On what might happen to the economy without the president's plan:
"The president's view is that this is stimulating the confidence of business people, of investors, of consumers. And I think we risk, without a quite activist fiscal policy right now, a bit of a funk. And I think that is a concern to him."
On how uncertainty about possible war with Iraq could hurt the economy:
"Were we to see ... a three-quarter delay in the investment recovery ... we could be looking at shaving between half and a full percentage point off GDP growth."
On whether a specific cost for a war with Iraq was factored into the president's economic plans:
"It wouldn't surprise anyone here to think that there were a whole variety of factors in the international economy that comprise those conversations....Of course we have taken a look at a variety of scenarios both in our forecast for the economy and in the desirability of any proposals the president might make. I can't be more specific than that because no decisions have been made."
On what the federal government should do to help with the states' budget problems:
"We believe that the best route for states is raising economic growth. You can go state by state for reasons states are in trouble. I don't mean to minimize it. But some of these reflect state decisions as well. And I think the best thing the federal government can do, since it is not in the business of trying to micromanage states, is to try and promote a better environment for economic growth. And that is what the president is trying to do. "
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