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US Economic Outlook Not Encouraging as Poverty Increases - 2004-08-27

There were mixed signs this week about the state of the U.S. economy with oil prices down slightly from record highs and the economic growth rate somewhat smaller than had initially been reported for the April to June quarter. There is also evidence that more Americans are falling into poverty.

A government agency this week said poverty, as well as the number of people without health insurance increased in the United States last year. The Census Bureau says over 12 percent of Americans are below the poverty line, a 0.05 percent increase since 2002.

Nearly 16 percent lack health care coverage. A spokesman for President Bush's re-election campaign said the report does not include the faster pace of job creation and economic growth for 2004 that it believes have recently lifted many people out of poverty.

The Commerce Department report on gross domestic product was in line with expectations, showing a revised 2.8 percent growth in the second quarter. The initial report had shown three percent growth.

Adam Posen of Washington's Institute for International Economics views the figures as evidence that the U.S. economy is slowing down. He expects overall growth for 2004 will be below the 4 to 4.5 percent predicted by the Bush administration.

"I'm on the low end of the consensus estimates,? he said. ?I expect U.S. growth for the year to be three, or perhaps 2.5 to 3 percent. I think the oil price rise is going to take a few tenths percent right off the top. And I think the stimulative effect of the tax cuts that have caused long-term damage to the deficit-has already run out."

Oil prices held steady Friday at around $43 per barrel, a considerable decline from the nearly $50 level of a week ago.

At a conference in the western U.S. state of Wyoming, Federal Reserve Board Chairman Alan Greenspan said the government must not overpromise the Social Security benefits it will be able to pay future retirees, as the large post-war generation approaches retirement age.

Mr. Greenspan, himself 78, is urging Congress to consider raising the retirement age from the current 62 for women and 65 for men. The central bank chairman also suggested the United States must remain receptive to immigrants to help the country adjust to the aging of the workforce.

Mr. Greenspan has also been critical of the huge expenditures associated with increased prescription drug benefits added to the government health care program for the elderly. Both political parties are reluctant to reform Social Security.