By Cecilia J. Keehan

Economist Paul Erdman, a New York Times contributor, takes a “let it be” approach to today’s economic picture. He said stocks, bonds and real estate are not going to bring the high rates they did in the past.

Economist Paul Erdman spoke to a packed audience at the Morning Forum of Los Altos May 3, on the topic “The Economy: The Future Looks Hazy.” Erdman, a contributor to The New York Times, The Washington Post and Bloomberg magazines, is a favorite with Morning Forum members. He speaks to the group on a more or less annual basis.

Speaking of the economy, Erdman said that if he were in Washington, he’d let things be as they are. The International Monetary Fund is selling a lot of gold, so that is not a good place to make a bundle of money, but there is not a crisis yet, he said.

Speaking of other types of investments, he said they have performed as well for us as for any generation in the United States. Bonds, stocks, real estate, etc., are not going to bring the high rates of 6 percent or 7 percent that they did in the past, he said. It will be difficult to make very good returns with interest rates going up a bit more.

Erdman is no supporter of the president’s private funds proposal, which he called “a very dumb idea.” He said there are no near-term problems for Social Security, which he noted was the only risk-free investment as we know. He predicted the system would be saved for as long as it has to be saved.

The Social Security system has to be tweaked, and we will be waiting for two things: a change in the threshold - 66, 67, 68 and a move up to 70 years as time goes on, he suggested. This will be a matter for the president and Congress in the future.

Addressing real estate, he wondered whether there was a bubble. Prices are at historic highs, he noted, yet he found no evidence of their decline. There is decreasing competition in stocks and bonds, but they won’t collapse soon, he predicted. Commercial real estate rates are beginning to rise and 2005 is looking good, he said.

Overall for 2005, economic growth is looking good, with rates of inflation low enough. Erdman thinks that the dollar will sink a little, prices will rise a little, and the year as a whole will bring what he called a “Goldilocks economy - not too hot, not too cold, but just about right.”

U.S. unemployment rates are low when compared to Germany, which has problems with an overall rate of unemployment at 11 percent, and France, with unemployment at 10 percent. For these countries, economic growth is a problem, and they will have difficulty funding their retirement programs.

We have low unemployment, Erdman said, but we are somewhat undertaxed, especially the very rich. We are going to have to pitch in a little more, he suggested.

The economist believes that health care is going to be a much bigger problem than Social Security. We get the best medical care in the world, and we are going to have to pay just a little more in taxes to enjoy life here, he said.

Morning Forum is a members-only lecture series held at the United Methodist Church of Los Altos. To get on a waiting list for membership, write to Morning Forum, P.O. Box 274, Los Altos, CA 94023-0274.