Economic Report of the President

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ConclusionThe last year has seen the U.S. economy strengthen from recovery into asolid and sustainable expansion. With the near-term outlook bright, thisprovides an opportunity to put renewed focus on longer-term economic challenges.The President’s agenda is focused on these challenges—on taking theactions needed to bring about a better economic future shared by allAmericans. The President’s policies are designed to foster rising livingstandards at home, while encouraging other nations to follow our lead.Overview | 29
C H A P T E R 1The Year in Review and the Years AheadThe recovery of the U.S. economy blossomed into a full-fledged expansionin 2004, with solid output growth and steady improvement in the labormarket. Payroll employment increased by about 2.2 million jobs, the largestannual gain since 1999, and the economy expanded 3.7 percent during the fourquarters of the year. The economy made these advances even as energy pricessoared, the Federal Reserve raised interest rates, and the demand-side effects offiscal policy stimulus began to recede in the second half. Such continued growthindicates that the economy has shifted from a policy-supported recovery to aself-sustaining, healthy expansion.This chapter reviews the economic developments of 2004 and discusses theAdministration’s forecast for the years ahead. The key points in this chapter are:• Real gross domestic product (GDP) grew solidly during 2004. Businessinvestment in equipment and software accelerated, and consumerspending growth remained strong.• Labor markets strengthened during the year. The unemployment ratecontinued to decline, and employers created more than 2 million new jobs.• Inflation rose from the extremely low levels of 2003, partly because of rapidincreases in energy prices. Nevertheless, core consumer price index (CPI)inflation has remained in the moderate 2 percent range, and inflationexpectations remain low.• The Administration’s forecast calls for the economic expansion tocontinue this year, with real GDP growing faster than its historicalaverage and the unemployment rate continuing to decline. The economyis expected to continue on a path of strong, sustainable growth.Developments in 2004 and the Near-Term OutlookReal GDP grew a robust 3.7 percent during the four quarters of 2004,above the average historical pace. (Real GDP growth was 4.4 percent on ayear-over-year basis comparing GDP for 2004 as a whole with GDP for 2003as a whole.) Growth was supported by gains in consumer spending, businessfixed investment, and, to a lesser extent, housing investment, inventory accumulation,and government spending. Net exports (exports less imports) helddown growth in all four quarters as the trade deficit rose in the third quarterto a record high as a percentage of GDP. Strengthening economic growthamong our trading partners led to an increase in exports, but imports31
Page 1 and 2: Economic Reportof the PresidentTran
Page 3 and 4: C O N T E N T SECONOMIC REPORT OF T
Page 5 and 6: ECONOMIC REPORT OF THE PRESIDENTTo
Page 7 and 8: the playing field is level for our
Page 9 and 10: LETTER OF TRANSMITTALCOUNCIL OF ECO
Page 11 and 12: Monetary Policy ...................
Page 13 and 14: Encouraging FDI ...................
Page 15 and 16: 3-4. The Equivalence of Sales Taxes
Page 17 and 18: Real GDP expanded by 3.7 percent du
Page 19 and 20: Options for Tax ReformChapter 3, Op
Page 21 and 22: and better Nation for it. A compreh
Page 23 and 24: Innovation and the Information Econ
Page 25 and 26: ecause they do not expect family me
Page 27: The Administration has pushed aggre
Page 31 and 32: Consumer SpendingConsumer spending
Page 33 and 34: easons for this correlation are dis
Page 35 and 36: 2003, a number of countries that to
Page 37 and 38: ProductivityRecent productivity gro
Page 39 and 40: The projected path of inflation as
Page 41 and 42: strengthen. The forecast is based o
Page 43 and 44: The growth rate of the economy over
Page 45 and 46: In sum, potential real GDP is proje
Page 47 and 48: C H A P T E R 2Expansions Past and
Page 49 and 50: The behavior of real GDP is similar
Page 51 and 52: of faltering may be attributable to
Page 53 and 54: most recent expansions have shown r
Page 55 and 56: middle of 2003. The more moderate r
Page 57 and 58: 1.2 percent. Employment continued t
Page 59 and 60: SummaryModerate recessions are foll
Page 61 and 62: permanent cuts should permanently r
Page 63 and 64: and the Jobs and Growth Tax Relief
Page 65 and 66: Federal government revenues had bee
Page 67 and 68: Fiscal policy played an especially
Page 69 and 70: C H A P T E R 3Options for Tax Refo
Page 71 and 72: High Compliance CostsThe complexity
Page 73 and 74: a reasonable estimate is that a 10
Page 75 and 76: Excess BurdenBecause taxes distort
Page 77 and 78: Box 3-3 — continuedThe bottom 40
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more uniform or pure version of the
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of being collected all at once at t
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would have to differ from state tax
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owner claimed it was for business,
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The current set of saving incentive
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the current system. In addition, so
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C H A P T E R 4ImmigrationIn recent
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TABLE 4-1.— Foreign-Born Share of
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immigrants (also called illegal or
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largest group of immigrants was bor
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employment costs, including wage fl
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Chapter 4 | 103
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wages fall in response to immigrati
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immigrants from Latin America do re
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addition, as migrants leave the cou
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include siblings and adult children
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despite the tremendous growth in th
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The TWP would allow new foreign wor
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C H A P T E R 5Expanding Individual
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This phenomenon, known as the “tr
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producing more of that good. Simila
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In 2002, the President proposed “
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provide evidence of increased profi
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schools are four times as efficient
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low administrative costs, estimated
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Box 5-2: The Benefits of Land Title
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development plan designed by others
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C H A P T E R 6Innovation and theIn
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E-mail is the most common online ac
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Changed circumstances, such as new
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Illegal Acts on the InternetThe Int
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or develop new markets, which can l
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inflation factor for the price cap
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U.S. households connecting to local
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garbling their transmissions. To li
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from 51.3 percent in December 1999
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for their property rights. The Admi
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C H A P T E R 7The Global HIV/AIDS
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Chart 7-1 Estimated HIV Infection L
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There is no cure for HIV/AIDS, thou
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AIDS is more damaging to a househol
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and risk reduction have helped redu
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only one price, the drug companies
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Box 7-1 — continuedfocused on the
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Box 7-2 — continuedenhancing coor
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ConclusionThe United States and cou
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Good Two. In Ricardo’s simple mod
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The Impact of Trade on Labor Market
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The U.S. Advantage in Services Trad
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U.S. firms is associated with a cor
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anked the second-best country out o
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the Chinese government agreed to el
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Trade LiberalizationTariffs and oth
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ConclusionThe United States is the
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LETTER OF TRANSMITTALCOUNCIL OF ECO
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Report to the President on theActiv
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The Council continued its efforts t
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The Staff of the Council of Economi
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John List and Ted Gayer provided co
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Appendix BSTATISTICAL TABLES RELATI
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PageB-32. Gross saving and investme
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PageB-94. Relation of profits after
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NATIONAL INCOME OR EXPENDITURETABLE
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TABLE B-2.—Real gross domestic pr
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TABLE B-3.—Quantity and price ind
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TABLE B-5.—Contributions to perce
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TABLE B-6.—Chain-type quantity in
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TABLE B-7.—Chain-type price index
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TABLE B-8.—Gross domestic product
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TABLE B-10.—Gross value added by
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TABLE B-12.—Gross domestic produc
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TABLE B-13.—Real gross domestic p
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TABLE B-14.—Gross value added of
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TABLE B-16.—Personal consumption
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TABLE B-18.—Private fixed investm
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TABLE B-20.—Government consumptio
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TABLE B-22.—Private inventories a
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TABLE B-24.—Foreign transactions
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TABLE B-26.—Relation of gross dom
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TABLE B-28.—National income by ty
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TABLE B-29.—Sources of personal i
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TABLE B-30.—Disposition of person
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Year or quarterTABLE B-32.—Gross
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TABLE B-33.—Median money income (
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TABLE B-35.—Civilian population a
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TABLE B-36.—Civilian employment a
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TABLE B-38.—Unemployment by demog
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TABLE B-40.—Civilian labor force
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TABLE B-42.—Civilian unemployment
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TABLE B-44.—Unemployment by durat
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TABLE B-46.—Employees on nonagric
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TABLE B-47.—Hours and earnings in
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Year orquarterTABLE B-49.—Product
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PRODUCTION AND BUSINESS ACTIVITYTAB
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Year ormonthTABLE B-53.—Industria
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Year or monthTABLE B-55.—New cons
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TABLE B-57.—Manufacturing and tra
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TABLE B-59.—Manufacturers’ new
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Year ormonthTABLE B-61.—Consumer
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TABLE B-62.—Consumer price indexe
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TABLE B-64.—Changes in consumer p
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TABLE B-65.—Producer price indexe
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TABLE B-67.—Producer price indexe
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TABLE B-68.—Changes in producer p
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TABLE B-70.—Components of money s
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TABLE B-71.—Aggregate reserves of
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TABLE B-73.—Bond yields and inter
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TABLE B-74.—Credit market borrowi
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TABLE B-75.—Mortgage debt outstan
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TABLE B-77.—Consumer credit outst
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TABLE B-79.—Federal receipts, out
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TABLE B-81.—Federal receipts, out
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TABLE B-83.—Federal and State and
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TABLE B-85.—State and local gover
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End of yearor monthTABLE B-87.—U.
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End of monthTABLE B-89.—Estimated
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TABLE B-91.—Corporate profits by
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TABLE B-93.—Sales, profits, and s
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YearComposite(Dec. 31,2002=5,000) 3
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YearAGRICULTURETABLE B-97.—Farm i
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TABLE B-99.—Farm output and produ
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Year ormonthTABLE B-101.—Agricult
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INTERNATIONAL STATISTICSTABLE B-103
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TABLE B-104.—U.S. international t
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TABLE B-106.—U.S. international t
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TABLE B-108.—Industrial productio
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TABLE B-110.—Foreign exchange rat
Page 334:
TABLE B-112.—Growth rates in real
show all

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