While Federal Reserve chairman Alan Greenspan warned that "substantial and excessive deficits" could harm the economy, US President George W. Bush heard more encouraging words from hand-picked economists.
Bush invited private economists to reassure him -- and to try to persuade the country -- that the deep tax cuts he engineered are helping create jobs at a time when the unemployment rate is at a nine-year high of 6.4 percent.
The economists, who included two Reagan White House officials, told Bush what he wanted to hear -- "how the growth and tax package has had such a very positive impact on the economy," Commerce Secretary Donald Evans said.
Democrats argued otherwise.
"This administration's economic policy is a failure, a total failure," said Congressman Dick Gephardt of Missouri, a candidate for the Democratic presidential nomination. "This is about as dismal and poor a performance in economics as I can remember in the history of this country."
Republicans worry that a sour economy will weaken Bush's political support and undercut his re-election hopes.
The economists summoned to the White House said they saw no short-term harm in the deficits, which the administration projects will soar to a record US$455 billion this year and US$475 billion next year.
"I think the deficits at this point are having a positive impact," Martin Feldstein, an economics professor at Harvard University who was an adviser to President Ronald Reagan, told reporters after meeting Bush. He said the deficits have to be controlled in the long term.
"If there is any time in which one ought to have a deficit, it is a time where there is economic slack and a job market that is not recovering the way we would like to see it recover," Princeton University economist Burton Malkiel said.
Greenspan, in testimony to the Senate Banking Committee, cautioned that long-term deficits could be harmful.
"There is no question that if you run substantial and excessive deficits over time you are draining savings from the private sector, and other things equal, you do clearly undercut the growth rate of the economy," Greenspan said.
He also warned of economic problems the country will face in the next decade when the 75 million baby boomers begin retiring.