NEW YORK (CNN/Money) -
The economy will grow at a faster rate by year-end, when the Bush administration's tax cut plan kicks in, Treasury Secretary John Snow said Tuesday.
Snow, in prepared comments for Money magazine's Money Summit in New York, said he sees annual gross domestic product growth near 3.5 percent by the latter part of 2003. GDP is the broadest measure of the nation's economy.
"I think the real pickup is going to happen in the second half of this year," he said.
But Snow added that the higher rate of growth will not completely fix the labor market. He said unemployment could rise as high at 6.3 percent by the end of the year before the economy picks up enough to create jobs. Snow, however, sees this unemployment spike as temporary.
"Bottom line is: I am confident we're going to see those 'Help Wanted' signs go up again in greater and greater numbers," Snow said.
The Treasury secretary did say, however, that the tax cuts that Bush signed into law last month will affect job creation as early as this year.
Turning to global growth, Snow urged other industrialized nations to take "bold" actions, "including fundamental structural reforms where necessary," to spur growth and contribute to overall prosperity.
In response to a question, Snow dismissed concerns that state government tax hikes and job cuts would undercut the stimulative effects of federal tax cuts. He said a stronger economy would increase the flow of tax revenue to states, adding up to $20 billion in stimulus.
And in response to a question about the effect of budget deficits on interest rates, Snow acknowledged that high deficits could crowd out private borrowing and push interest rates higher, but only if the deficits were going to be very large and last a very long time, which he doubted is currently the case.
"The deficits are modest, manageable, and will recede to zero," Snow said.
He warned however, that the long-term underfunding of Social Security and Medicare programs could be a real nightmare, one that gathers in strength every year and should be addressed soon.
"We need to get sober-minded people looking at the facts and realizing that if we wait it becomes impossible to deal with the situation," Snow said.
Snow appeared with CNN anchor Lou Dobbs at a session of the summit. The summit's sponsor, Money magazine, is a venture partner of CNN/Money.