Q&A Gregory Mankiw

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In an interview with TIME, Gregory Mankiw, chairman of the President's Council of Economic Advisers, responded to some of the concerns economists have raised about the deficit.

Why aren't you as worried about the deficit as other economists?

The deficit's a concern. When we think about spending programs, other things equal, it will add to the deficit. That's one of the downsides.

How soon should we expect a rise in interest rates?

As we get more robust growth over the next few years, I expect interest rates will probably come up a bit. The effect is moderate. That's one of the reasons why we are concerned. Budget deficits are one of the priorities, but putting people back to work is also a priority.

Will we see job growth this year?

Definitely.

But you're still counseling patience?

The tax cuts have only been in effect for a couple of months. Forecasts for growth in the second half are very strong. There's historically a very strong correlation between growth in real GDP and developments in the labor market.

Do you expect this recovery to differ from typical business cycles?

In this recession we've had very, very high productivity growth. That raises the bar that you need GDP growing [to increase jobs]. But I think once we get GDP growing fast enough, employment should start coming back.

What about those jobs that have moved abroad?

I'm not going to comment on which sectors precisely you're going to see job growth. What's important is to get people working again, not to get people working at precisely the same jobs they had in the past.

TIME's economists worry about fiscal discipline.

The President has talked about spending discipline as a very important priority. That's how we want to get the budget deficit down. The President says he wants to cut the budget deficit in half in five years. First, we want to get growth back up; then second, get spending under control.

There's a particular concern now about Social Security.

Demographic change is putting pressure on the budget in the very long run. It's something we need to deal with. The President is very focused on entitlements. In the last campaign he talked about Social Security. You're seeing it now when he talks about Medicare; you're talking about substantial reforms.

Does reform mean cuts in benefits in the long run?

I don't have a specific plan to lay out.

Why make the tax cuts permanent?

There's a very important long-run supply-side effect of tax cuts — to improve the incentive for work, for capital accumulation. Those long-run effects only occur if people expect these tax cuts to be permanent.