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• More effective statistical use can be made of existing data. In particular,amending relevant legislation to enable full implementation of theConfidential Information Protection and Statistical Efficiency Act(CIPSEA) could greatly improve the quality of Federal statistics.24 | Economic Report of the <strong>President</strong>
C H A P T E R 1The Year in Review and the Years AheadThe expansion of the U.S economy continued for a sixth consecutiveyear in 2007. Economic growth was solid at 2.5 percent during thefour quarters of the year, slightly below the pace during 2006. Payroll jobgrowth set a record for continuous growth, eclipsing the previous record of48 months. This economic growth came despite a reorientation of the U.S.economy away from housing investment and toward exports and investmentin business structures. The persistent tumble in housing investment subtractedroughly a percentage point from real Gross Domestic Product (GDP) growthduring the four quarters of the year. Although the quarterly pattern of realGDP was uneven, with strong growth in the second and third quarters andweak growth in the first and fourth quarters, much of the quarter-to-quartervariation can be attributed to net exports, a volatile component of GDP. Inthe wake of mounting problems with the performance of subprime (definedas higher risk) mortgages, financial markets from August onward wereunsettled because of concerns about the risk entailed in holding some typesof mortgage-backed securities, as well as fears about the financial health ofsome firms and the possibility of contagion to the nonfinancial economy. Toinsure against the downside risks from these financial and housing-relateddevelopments, the <strong>President</strong> called for an economic growth package to boostconsumption, business investment, and labor demand.The core CPI (consumer prices excluding food and energy) as well as theprice index for GDP (covering everything produced in the United States)suggested that inflation had moved lower and into the moderate range bythe end of 2007. Food price inflation climbed, however, while energy pricesjumped toward the end of the year. In response to these output and inflationdevelopments, the Federal Reserve held the Federal funds rate flat throughAugust. The Federal Reserve then lowered its policy rate by a percentagepoint from September through December and another 1¼ percentage pointin January to ease liquidity concerns in financial markets disturbed by themortgage market tumble, and to bolster real activity. The Federal Reserve alsotook other liquidity-enhancing measures, including cutting the discount rateat which it lends to banks, and initiating a new auction approach to providecollateralized loans to banks.This chapter reviews the economic developments of 2007 and discussesthe Administration’s forecast for the years ahead. The key points of thischapter are:25
Page 1 and 2: EconomicReportof thePresidentTransm
Page 4 and 5: C O N T E N T SPageECONOMIC REPORT
Page 7 and 8: ECONOMIC REPORT OF THE PRESIDENTTo
Page 9: $2 billion to a new international c
Page 13: LETTER OF TRANSMITTALCouncil of Eco
Page 16 and 17: chapter 3. the causes and consequen
Page 18 and 19: appendixesA. Report to the Presiden
Page 20 and 21: 2-5. Mortgage Lending Today........
Page 22 and 23: Chapter 1: The Year in Reviewand th
Page 24 and 25: Chapter 3: The Causes and Consequen
Page 26 and 27: • Tax reductions in 2001 and 2003
Page 30 and 31: • Real GDP posted solid 2.5 perce
Page 32 and 33: elative to non-energy prices, while
Page 34 and 35: nonconforming mortgages in 2007. In
Page 36 and 37: In addition to incomes and mortgage
Page 38 and 39: Business InventoriesInventory inves
Page 40 and 41: Indeed, the growth in foreign econo
Page 42 and 43: During the 12 months of 2007, the u
Page 44 and 45: output measures announced in the an
Page 46 and 47: and government purchases. In contra
Page 48 and 49: Table 1-1.—Administration Economi
Page 50 and 51: Box 1-3 — continuedParticipation
Page 52 and 53: finalized), below its 1963-2006 ave
Page 55 and 56: C H A P T E R 2Credit and Housing M
Page 57 and 58: lends a debtor money today, which t
Page 59 and 60: Box 2-1 — continuedPrime loan: Lo
Page 61 and 62: Box 2-2 — continuedNRSROs. Critic
Page 63 and 64: Box 2-3 — continuedMortgage defau
Page 65 and 66: Box 2-3 — continuedmortgage defau
Page 67 and 68: Corporate bond yields also rose rel
Page 69 and 70: conduits in that SIVs have less acc
Page 71 and 72: International ImplicationsA notable
Page 73 and 74: come together to create a coordinat
Page 75 and 76: home is forgiven, that portion is t
Page 77 and 78: alternatives offered in the convent
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to such a change in wealth, which a
Page 81:
lending. FHA Modernization will enc
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Economists often call attention to
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Box 3-1: Trade in ServicesDiscussio
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Box 3-2: The Current Account Defici
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Growth in Domestic ProductionA seco
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Exports and Foreign Direct Investme
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in CFIUS’s role in protecting nat
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these goods than if they were produ
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y import competition are electrical
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C H A P T E R 4The Importance of He
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Box 4-1: Health Effects on Job Prod
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health care spending growth. Rising
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While the study focused on spending
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Box 4-2 — continuedand without pr
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effective price of zero. Even if a
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deduction for health insurance to a
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To reduce the extent to which high-
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Administration supports broad adopt
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C H A P T E R 5Tax PolicySocieties
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in 2000. Tax revenues increased str
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Alternative Minimum TaxPrior to 196
Page 125 and 126:
The Impact of Recent Tax Reductions
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35 percent marginal tax rate on the
Page 129 and 130:
C corporations fall under the corpo
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Significance of Tax Cuts to Individ
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Box 5-1: Marriage Penalty BasicsIt
Page 135 and 136:
The Structure of Business TaxesDesp
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investments are made. A more modest
Page 139 and 140:
able to defer $35 of tax liability
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C H A P T E R 6The Nation’s Infra
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A monopolistic bridge owner may cho
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etween places to accommodating grow
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the same time. At hours when many d
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BridgesOn August 1, 2007, the I-35W
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where shippers have an alternative
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Freight shipments into and out of t
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Box 6-2: Delays at New York City Ai
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uilt, the marginal cost of transmis
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access was in mobile wireless conne
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Infrastructure PolicyThough the U.S
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could shorten the wait by adding an
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In 2005, the Federal Aviation Admin
Page 167 and 168:
C H A P T E R 7Searching for Altern
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The first U.S. oil well was drilled
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Most of the oil consumed in the Uni
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Also, depending on the fuel and tec
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Table 7-1. —Estimated Average Lev
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Nevada. The facility is expected to
Page 179 and 180:
Wind PowerWind power supplies about
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amounts of electricity, it could be
Page 183 and 184:
years, as corn-based ethanol produc
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the power, range, and convenient fu
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other petroleum products is project
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To help meet the growing demand for
Page 191 and 192:
C H A P T E R 8Improving Economic S
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The second largest Federal statisti
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As shown in Chart 8-3, spending on
Page 197 and 198:
Monetary and fiscal policymakers al
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service-sector output much more fre
Page 201 and 202:
Box 8-1: How to Reverse a Decline i
Page 203 and 204:
Information Protection and Statisti
Page 205 and 206:
forward instead of the growth rate
Page 207:
Appendix AREPORT TO THE PRESIDENT O
Page 210 and 211:
Council Members and Their Dates of
Page 213 and 214:
Report to the President on theActiv
Page 215 and 216:
The Council also prepared in-depth
Page 217 and 218:
The Staff of the Council of Economi
Page 219:
Jane Tufts, Bruce Kaplan, and Anna
Page 223 and 224:
C O N T E N T SNational Income or E
Page 225 and 226:
Prices—ContinuedPageB-63. Changes
Page 227 and 228:
General NotesDetail in these tables
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Table B-1.—Gross domestic product
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Table B-2.—Real gross domestic pr
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Table B-4.—Percent changes in rea
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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-9.—Real gross domestic pr
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Table B-11.—Real gross value adde
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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-15.—Gross value added and
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Table B-17.—Real personal consump
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Table B-19.—Real private fixed in
Page 255 and 256:
Table B-21.—Real government consu
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QuarterTable B-23.—Real private i
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Table B-25.—Real exports and impo
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Table B-27.—Relation of national
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Table B-28.—National income by ty
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Table B-29.—Sources of personal i
Page 267 and 268:
Table B-31.—Total and per capita
Page 269 and 270:
Table B-32.—Gross saving and inve
Page 271 and 272:
Population, Employment, Wages, and
Page 273 and 274:
Table B-35.—Civilian population a
Page 275 and 276:
Table B-37.—Civilian employment b
Page 277 and 278:
Table B-39.—Civilian labor force
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Table B-41.—Civilian employment/p
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Table B-43.—Civilian unemployment
Page 283 and 284:
Table B-45.—Unemployment insuranc
Page 285 and 286:
Table B-46.—Employees on nonagric
Page 287 and 288:
Table B-48.—Employment cost index
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Table B-50.—Changes in productivi
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Table B-52.—Industrial production
Page 293 and 294:
Table B-54.—Capacity utilization
Page 295 and 296:
Table B-56.—New private housing u
Page 297 and 298:
Table B-58.—Manufacturers’ ship
Page 299 and 300:
PricesTable B-60.—Consumer price
Page 301 and 302:
Table B-61.—Consumer price indexe
Page 303 and 304:
Table B-63.—Changes in special co
Page 305 and 306:
Year or monthTable B-65.—Producer
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Table B-66.—Producer price indexe
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Table B-67.—Producer price indexe
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Year and monthMoney Stock, Credit,
Page 313 and 314:
Table B-70.—Components of money s
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Table B-72.—Bank credit at all co
Page 317 and 318:
Table B-73.—Bond yields and inter
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Table B-74.—Credit market borrowi
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Table B-76.—Mortgage debt outstan
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Government FinanceTable B-78.—Fed
Page 325 and 326:
Table B-80.—Federal receipts and
Page 327 and 328:
Table B-82.—Federal and State and
Page 329 and 330:
Table B-84.—Federal Government cu
Page 331 and 332:
Table B-86.—State and local gover
Page 333 and 334:
Table B-88.—Maturity distribution
Page 335 and 336:
Corporate Profits and FinanceTable
Page 337 and 338:
Table B-92.—Corporate profits of
Page 339 and 340:
Table B-94.—Relation of profits a
Page 341 and 342:
Year or monthTable B-96.—Common s
Page 343 and 344:
Table B-98.—Farm business balance
Page 345 and 346:
YearTotalTable B-100.—Farm input
Page 347 and 348:
Table B-102.—U.S. exports and imp
Page 349 and 350:
Table B-103.—U.S. international t
Page 351 and 352:
Table B-105.—U.S. international t
Page 353 and 354:
Table B-107.—International invest
Page 355 and 356:
Table B-109.—Civilian unemploymen
Page 357 and 358:
Table B-111.—International reserv
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