Here’s the Deal

An interview with Laura Tyson

Mother Jones asked Laura Tyson, head of President Clinton’s Council of Economic Advisers, how the administration views the nation’s economic health. In an exclusive interview, she expressed concern about long-term economic trends, but disputed that gains in productivity would cause increased unemployment.

MJ: Has substantial unemployment become a permanent part of the economy?

Tyson: Most of the increase in unemployment that occurred between 1989 and 1993 was due to the slowdown in the growth rate of the economy, rather than any structural changes. In other words, there’s a fairly significant cyclical component to the unemployment of the last few years.

It’s true that the United States has too high a level of what you might call “cyclically insensitive” unemployment. If we got the economy back on an expansion path of 3 percent a year, we might bring unemployment down to 5.5 percent. That’s a high rate, and we want to do something about that.

Even more, we have to worry about the quality of jobs and the income they generate. For years, real wages have continued to fall, median family incomes have stagnated, and incomes for the bottom 20 percent of American families have fallen.


If the economy is doing well, then the jobs will create themselves.

MJ: What’s the administration doing about it?

Tyson: First, the earned-income tax credit will be phased in this April. It’s designed to guarantee that the worker who works full time and supports a family of four can bring that family above the poverty level.

Second, we can create jobs. The fact that we’ve now doubled the number of jobs we’re creating per month will generate some income growth for American families.

Third is investment–not only in infrastructure, but in people. There are a whole variety of education programs that we’re pushing: Head Start, school-to-work transition programs, improvements in education standards, and, in particular, a worker-retraining program. And we’re not looking just for public investment; we want to encourage private-sector investment as well.

MJ: Last February, the president suggested that investment should take priority over deficit reduction. Have your priorities changed?

Tyson: No. We all agreed that some short-term spending was needed ahead of deficit reduction, but we were defeated. Our plan contained a stimulus package that was meant to be up-front government spending before deficit reduction.

[But] in the last decade a consensus developed that the most important thing to do to put us on a sustainable path of economic growth is to reduce the deficit. I wish we could spend more money, but in the new budget we’re already asking for a substantial amount for investment programs.

MJ: What should be done for American workers, particularly in the manufacturing sector?

Tyson: The real problem for the economy is to generate attractive employment alternatives so that people can move from industries with increasing unemployment to new industries with new technologies. If the economy is doing well, then the jobs will create themselves. Structural and technological change will generate new demands, which will generate new jobs and higher wages.

MJ: So you’re optimistic?

Tyson: Look, we’re trying to be very realistic. The economy now seems to be on a path of moderate growth, which will gradually bring the unemployment rate down. A year ago, people were talking about a jobless recovery. Now they’re talking about a recovery with moderate job growth.

We aren’t ignoring the longer-term problems. These are trends we want to change and reverse. We can’t change them in a few months, but we can change them in a few years if we’re consistent in our approach and committed to more investment and more education.


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