The Prospects for the U.S. Economy and Its Major Issues: A View from the Council of Economic Advisers

Abstract

The U.S. economy is transitioning from a rescue phase to a recovery phase. It is easy to forget the depth of the crisis that required the rescue and easy to be impatient about the recovery. So far, the recovery has the hallmarks of a traditional recovery led by exports, fixed investment, and innovation. Issues of the federal deficit and debt loom over long-term prospects, however. Nonetheless, it should be kept in mind that the deficits are largely a product of the deep and prolonged economic slump and would diminish as a share of GDP as the economy grows stronger. This does not, however, mitigate the need to take serious action on reducing the structural deficit in a way that has bipartisan support and is smart in preserving the conditions for economic growth and fairness. Other concerns, such as oil prices, financial conditions in Europe, and the housing market must continue to be monitored and addressed.