The U.S. economic recovery is strong and set to accelerate in 2015, but dangers lie ahead in slow productivity growth and inequality, the White House said Thursday.
There is “every reason to believe the U.S. can have another good year economically in 2015,” if policymakers avoid major mistakes, Obama economic adviser Jason Furman said Thursday morning.
Furman was speaking after the release of the Economic Report of the President, which projected the growth in U.S. output to accelerate from 2.1 percent in 2014 to 3 percent this year and next, and remain above the recent trend through 2018.
The Obama administration sees the unemployment rate, currently at 5.7 percent, falling below 5 percent by 2017.
The report recapitulates many of the policy agenda items laid out by the Obama administration in its fiscal 2016 budget released earlier this month and adds detail about the White House’s broader view of long-term economic trends and developments.
A major concern identified by Obama’s economic team is the underlying trend toward lower productivity, higher inequality and falling labor force participation.
“We need to do more to restore the link between hard work and opportunity for every American,” the president wrote in a note accompanying the report.
In other words, strong economic growth might not translate to higher middle-class incomes without policy changes, according to the White House.
“The policies of this administration have substantially reduced income inequality relative to what you otherwise would have had,” Furman said Thursday, citing Obama-era tax cuts for middle-class and low-income families, and higher rates on high earners, along with Obamacare and other polices.
Nevertheless, he added, decades-long policy and institutional changes in the U.S. have been driving up inequality.
Obama would address the underlying problem of slowing productivity with a platform of proposals, including expanded trade, infrastructure spending and higher education proposals.
With labor force participation at roughly 63 percent, the lowest rate since the late 1970s, the report also recommends a range of measures to bring more people into the job search, including not only immigration reform but also policies, such as paid sick and family leave and child care tax credits, that would make it easier for two-worker families to stay in the labor market.
The release of the report Thursday provided another occasion for congressional Republicans to distance themselves from Obama and criticize his economic management.
“Instead of pushing the same old policies that have left middle-class families behind, President Obama ought to work with Republicans on better solutions to create robust growth and opportunities for all,” said a Cory Fritz, a spokesman for House Speaker John Boehner.
“The economy is improving, Mr. President, but don’t celebrate yet,” said Kevin Brady, a Texas Republican and the top House Republican on the Joint Economic Committee. “This recovery is still missing 5.5 million private-sector jobs and has left an economic hole the size of Australia.”
