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President Bush's top economic adviser said the U.S. economy is experiencing a lull and could be close to a recession, at a speech at the Kennedy School of Government last night.
"We have an economy that at best is in a lull, that at best will skirt a recession," said Michael Boskin, Chairman of the Council of Economic Advisers to the White House.
Boskin, who said he held a "cautiously optimistic" view, criticized what he called two "longstanding myths" about the U.S. economy.
"I think there is a lot of misinformation about the United States economy," said Boskin, adding that Americans should overcome an overblown fear of two major economic concerns, which he called the result of misinformation--increasing deindustrialization and slowing productivity.
"We can't take long-term growth for granted, but we have too much gloom and too little hard work to enhance our chances to grow," said Boskin.
Areas where the U.S. could work harder to improve productivity must include technology, the investment rate and the labor force, said Boskin, who was educated at the University of California at Berkeley and Stanford University.
Boskin, however, said the skill level of America's work force is an area that demands special attention.
"The real concern is the future of our labor force," said Boskin, citing the "tremendous flexibility and dynamism of our labor market" as a chief asset in the U.S.
"The thing that worries me the most is the deplorable state of primary and secondary education in the United States," said Boskin.
"We cannot remain the world's leading economy...without equipping...future labor with the skills they'll need."
Turning to an international issue, Boskin said the President's handling of the crisis in the Persian Gulf has prevented a great downturn in the U.S. economy.
"Had the international coalition not formed we would be headed into a deep recession," he said.
Boskin suggested that if the United States had not taken immediate action by sending troops into the area the price of oil would now be between 50 and 80 dollars a barrel. The price of oil-per-barrel currently lies in the $30-range.
Boskin said that the two main economic results of a resolution to the Gulf crisis would now include a fall in the price of oil, and a return to the "path of a sensible decline on defense spending."
And once the crisis is finished, the U.S. has the ability to resolve its economic challenges, despite the increasingly global nature of economics today, Boskin said. "I'm cautiously optimistic that we will...deal with challenges the United States confronts."
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