Economic Report of the President 1994 - The American Presidency ...

And, perhaps most fundamentally of all, the Administration hasembarked on a comprehensive investment agenda designed to raiseproductivity, which is the wellspring of higher living standards inthe long run.This chapter explains the Administration's economic strategy andexamines some of the specific policy initiatives that have been undertakento pursue that strategy. The chapters that follow providemuch more detail.THE LEGACY OF THE RECENT PASTThe policies of any new Administration are dictated in part bythe challenges it faces and the problems it inherits from the past.Because America's current problems are both short run and longrun in nature, the solutions must be, too.INADEQUATE RECOVERY FROM RECESSIONShort-run cyclical problems are, almost by definition, transitory.But when the American macroeconomy performs poorly, that onefact seems to overwhelm all others and crowd out consideration oflonger run problems. In fact, the U.S. economy has been operatingwell below its productive capacity for years now. From 1989through 1992, real GDP grew only 1.5 percent per year, and thecivilian unemployment rate (by what was the standard measureuntil this year—Box 1-1) has remained above 6 percent since November1990. Under such circumstances, public concerns with economicpolicy tend to be summarized in a single word: jobs.Box 1-1 .—The New Measure of UnemploymentBeginning with its February 4 announcement of the January1994 unemployment rate, the Bureau of Labor Statistics haschanged its principal measure of joblessness* The changes, reflectingtechnical improvements in the household survey usedto estimate unemployment (Chapter 3 contains more details),are expected to increase the measured unemployment rate byabout 0.5 to 0.6 percentage point, although the precise amountis impossible to know. All unemployment numbers used in thisReport are measured on the old, traditional basis.As Chart 1-1 shows, the recovery that began in the second quarterof 1991 has been exceptionally slow by historical standards—so slow, in fact, that the unemployment rate was still rising morethan a year into the "recovery." Only in mid-1993 did unemploymentfall back to its rate at the recession trough. Growth has beennot only slow but extremely uneven, proceeding in fits and starts22