By Denny Gulino

WASHINGTON (MktNews) - President Bush's chief economic adviser Larry Lindsey Thursday told a group of economists that he can think of one way to boost manufacturing -- shorter depreciation schedules -- but made no reference to the plea from manufacturing groups to stop emphasizing the benefits of a strong dollar.

With the White House now buffeted by the campaign of top manufacturing trade groups opposed to the dollar's level against other major currencies, the Treasury earlier in the day repeated that U.S. dollar policy is unchanged.

The dollar slipped to a three-week low against the euro earlier Thursday on further suggestions by the National Association of Manufacturers that the "high dollar" is having a detrimental impact on industry.

Lindsey, however, said his long study of manufacturing problems is leading him to the conclusion that the industry faces tax and financing disadvantages.

"I will keep an open mind on this, but more and more as I look at it, the depreciation schedules are too long," he said.

"Not that another jigger in the depreciation schedules is the right alternative in fundamental reform in this area, this is an observation that it's too long," Lindsey said.

Lindsey, in his speech and in the question and answer period after, identified several long-term challenges for government policy, including the current account deficit, the savings rate, Medicare and Social Security reform, an examination of government sponsored enterprises like Fannie Mae and Freddie Mac and their effect on the financing system and the nation's health care system, placing ultimate solutions somewhere in the distant future.

Asked by Fed gadfly, consultant Bert Ely his opinion on Fannie Mae and Freddie Mac, Lindsey said he commended the efforts of Rep. Richard Baker in his bid to focus on "legitimate" concerns about the mortgage giants and he said Fed Chairman Alan Greenspan had also done work on examining these questions. Later, Lindsey returned to the topic, but only to place the GSEs among the list of policy projects that were made especially difficult to solve because of their far-reaching political ramifications.

The most difficult, he said, would be health care, which now has half of the entire industry's production priced by government through the Medicare system. Solving that problem he said, "will make Social Security look easy."

He interjected at one point when asked about monetary policy, that he followed a rule that said, "thou shalt not criticize" the Fed.

Asked whether the administration had sought to address the fact that steel companies are supporting hundreds of thousands of retirees, he said the recent White House call for a probe of imports was not linked to the fact that for every five retirees in steel there was one employed person. He said, ultimately, he agrees with Treasury Secretary Paul O'Neill that the main problem is global overcapacity in the industry and that he feels that international cooperation is needed to "rationalize" steel markets.

On tax matters, Lindsey said the current cut in rates "came at the right time," but there are still many tax policy questions to be resolved. Rather than criticize the Alternative Minimum Tax, he said he recognizes that it has a "legitimate" purpose, but that it needs improvement and the administration's tax policy has already tried to compensate for the AMT at lower income levels.

He also chose not to criticize the credit card industry when asked if it encouraged high household debt. He said that high credit card debt is preferable to the alternative, the lack of access to personal finance. Credit cards, he said, have been valuable in allowing ordinary people to "smooth" their financing needs.

He acknowledged to a questioner that the current account deficit is not sustainable. He said that the U.S. private sector spent 7% of gross domestic product more than it earned last year, but saw the problem of the current account gap and low savings rate as questions to be addressed in the indefinite future.