E C O N O M I C R E P O R T O F T H E P R E S I D E N T

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PageLife Expectancy and Health .................................................... 170Increasing Diversity Across Families ............................................... 172Diversity in Family Structure .................................................. 172Diversity of Income and Hours of Work ................................. 175The Rising Earnings of Women with Children ....................... 177Challenges Families Face................................................................. 182The “Money Crunch” ............................................................. 182Boosting the Financial Resources of Families toLessen the Money Crunch .................................................... 185The “Time Crunch”................................................................ 190Increasing the Flexibility of Paid Work to Lessenthe Time Crunch................................................................... 194Conclusion ..................................................................................... 197CHAPTER 6. OPPORTUNITY AND CHALLENGE IN THE GLOBAL ECONOMY .. 199The Fall and Rise of the Global Economy ...................................... 202The Growing Importance of Trade.......................................... 202The Rise of International Capital Flows.................................. 205The Forces Behind Globalization.................................................... 208The Role of Technology .......................................................... 209The Role of Policy................................................................... 210The Benefits of a Global Economy................................................. 213Globalization and Living Standards......................................... 214Globalization and Growth....................................................... 216The Challenges of Globalization..................................................... 217Spreading the Benefits of Trade ............................................... 217Managing Capital Flows and the Macroeconomy ................... 225The Trade and Current Account Deficits ................................ 231Conclusion ..................................................................................... 236CHAPTER 7. MAKING MARKETS WORK FOR THE ENVIRONMENT ................ 239Environmental Problems Since 1900.............................................. 240A Brief History of Environmental Problems............................ 240` Environmental Pollution and Development............................ 241Designing Policies to Address Environmental Pollution.................. 246Traditional Regulatory Approaches to AddressEnvironmental Pollution....................................................... 247Incentive-Based Approaches to AddressEnvironmental Pollution....................................................... 248Important Issues in Designing Incentive-Based Instruments........... 250Uncertainty About Costs and Benefits .................................... 250Contents | 15
PageHeterogeneity in Abatement Benefits...................................... 252Heterogeneity in Abatement Costs.......................................... 253Scope of the Emissions Trading Market................................... 253Restrictions on Trading ........................................................... 254Liability................................................................................... 254Banking and Borrowing .......................................................... 255Tradable Permits and Charges in Practice ....................................... 255Permit Trading: Emissions Trading Policy Under theClean Air Act ........................................................................ 256Permit Trading: RECLAIM..................................................... 257Permit Trading: Sulfur Dioxide Trading Program .................... 259Permit Trading: Phasedown of Leaded Gasoline...................... 260Charges: Unit-Based Pricing of Residential Solid Waste .......... 261Implications of the U.S. Experience ........................................ 263Applying the Lessons Learned: Global Climate Change ................. 265Flexibility Mechanisms in the Kyoto Protocol......................... 266Cost-Effectiveness of Kyoto Protocol FlexibilityMechanisms .......................................................................... 267Expanding the Scope of Trading to More Countries ............... 268Expanding the Scope of Trading to More GreenhouseGases..................................................................................... 268Quantitative Restrictions on Trading....................................... 270Liability Rules for Trading....................................................... 270Making Trading Across Countries Work ................................. 270Conclusion ..................................................................................... 274CONCLUSION. A CENTURY OF CHANGE: NEW OPPORTUNITIESFOR THE FUTURE ........................................................................ 277A Look Back................................................................................... 278The American Economy Today ...................................................... 279The Drivers of Change and the Challenges Ahead.......................... 280Conclusion ..................................................................................... 283APPENDIXESA. Report to the President on the Activities of the Councilof Economic Advisers During 1999 ...................................... 285B. Statistical Tables Relating to Income, Employment, andProduction ............................................................................ 29916 | Economic Report of the President
Page 1 and 2: E C O N O M I CR E P O R TO F T H E
Page 3 and 4: C O N T E N T SPageECONOMIC REPORT
Page 5 and 6: ECONOMIC REPORT OF THE PRESIDENTTo
Page 7 and 8: my State of the Union address, I pr
Page 9 and 10: hard-pressed families—with additi
Page 11 and 12: LETTER OF TRANSMITTALCOUNCIL OF ECO
Page 13: PageSources of Business Cycle Moder
Page 17 and 18: Page2-3. Net Worth and the Personal
Page 19 and 20: PageLIST OF BOXES2-1. The CPI-U-RS,
Page 21 and 22: These successes notwithstanding, th
Page 23 and 24: $33,740, Americans today can acquir
Page 25 and 26: those in the highest decile rose 0.
Page 27 and 28: Data on poverty also show progress.
Page 29 and 30: Over the years, government support
Page 31 and 32: asis, the current expansion also sh
Page 33 and 34: The current expansion, by contrast,
Page 35 and 36: InflationAccelerating inflation pos
Page 37 and 38: it was argued, must be shifting the
Page 39 and 40: is that the direction of technologi
Page 41 and 42: Challenges for the FutureThis chapt
Page 43 and 44: in the new labor market. The chapte
Page 45 and 46: disruptive in some cases. Finally,
Page 47 and 48: C H A P T E R 2Macroeconomic Policy
Page 49 and 50: Chapter 2 | 51
Page 51 and 52: usiness cycle has changed over the
Page 53 and 54: cent over the four quarters of 1999
Page 55 and 56: framework that continues to pay dow
Page 57 and 58: The labor force participation rate
Page 59 and 60: Box 2-1.—continuedof no substitut
Page 61 and 62: feed directly into the index. Moreo
Page 63 and 64: funds rate (the interest rate that
Page 65 and 66:
nesses with below-investment-grade
Page 67 and 68:
From 1989 to 1999, corporate earnin
Page 69 and 70:
ital includes the value of intellec
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of gross personal saving to GDP has
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The beginnings and ends of U.S. bus
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introduced in 1913 and Social Secur
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Of course, it is premature to decla
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Box 2-3.What Did We Learn from the
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TABLE 2-3.— Accounting for the Pr
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future extrapolates long-term trend
Page 85 and 86:
Over the past 6 years, the CPI-U-RS
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work enables job hunters to work wh
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Chart 2-17 shows how this could hap
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of professional economic forecaster
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Administration’s forecast is used
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Innovations during the 20th century
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transformations the Internet and e-
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Another industry that saw major cha
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One example is the “lean” produ
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Box 3-1. Measuring the Economy in a
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Box 3-2. Implementing Local Competi
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of fiber optic cable deployed by te
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How Information Technology IsChangi
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total investment in information tec
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For e-retailers, the Internet repla
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suppliers for surplus quantities of
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However, the same technology that d
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value of each network to its users.
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many possible uses but that depends
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Maintaining CompetitionAnother way
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Similarly, by reducing barriers to
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Formal education was a far less imp
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The Transformation of the Labor Mar
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Americans has risen almost 10-fold
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diploma (Chart 4-5). That same year
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ensuring equal opportunity for all
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those of men (again looking at full
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Box 4-1. The Role of Government Pol
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severe disabilities. For example, a
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Box 4-2.—continuedOther policy in
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equirements of jobs. To right this
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uild and maintain a world-class ele
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Class Size Reduction. Average class
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During this Administration, the Fed
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years ago. In 2000, 13.1 million st
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through a period of unpaid training
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The first major mandatory training
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a 30-year low, labor force particip
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ConclusionTwo key developments—th
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TABLE 5-1.—Contrasting American F
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opened up for women to work and as
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The increased prevalence of single-
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to an increasing share of the popul
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Box 5-1.—continuedAlthough most f
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For the past 50 years, the median i
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gle mothers the median rose from $1
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TABLE 5-3.— Share of Women with C
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income growth over the last 30 year
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consumption patterns have changed,
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Increases in the Minimum WageThe mi
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Box 5-4.The National Strategy to Re
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or older, and of those 85 or older,
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of single-parent families increased
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caregivers for the elderly say thei
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would allow all workers who get tim
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C H A P T E R 6Opportunity and Chal
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Meanwhile innovations in transporta
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But to look at U.S. trade only in t
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Data from the U.S. computer industr
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net indebtedness of about 18 percen
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capital flows. Coupled with other d
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forces to play themselves out. In t
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The Benefits of a Global EconomyThe
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Domestic production can expand when
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In short, increased globalization b
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key sectors such as finance, teleco
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international trade is not a zero-s
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As these data suggest, not all WTO
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For example, preferential U.S. trad
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By contrast, in 1998 output fell on
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Box 6-3.The New International Finan
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The key objective of the initiative
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Chapter 6 | 233
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demand for exports. It would be a m
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integrating with the world economy
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The past century of experience in a
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242 | Economic Report of the Presid
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Box 7-1.—continuedand energy pric
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Box 7-2.—continuedproviding usefu
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Incentive-Based Approaches to Addre
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compliance costs may fall by less t
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Box 7-4.—continuedroughly 5 to 15
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so a system of multipollutant tradi
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sulfur dioxide trading program. The
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coastal zone. Trades can occur with
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Permit Trading: Phasedown of Leaded
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To address the problems associated
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Box 7-5. Individual Quotas for Fish
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A landmark international agreement
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However, the country could cut ener
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Quantitative Restrictions on Tradin
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comprehensive domestic trading syst
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Box 7-9.—continuedthe use of ener
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C O N C L U S I O NA Century of Cha
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More than 40 percent of the work fo
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growth and are credited with helpin
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have much to gain from continuing t
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Appendix AREPORT TO THE PRESIDENT O
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Council Members and Their Dates of
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previously served as the New Centur
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(antidumping, countervailing duties
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with a number of developing countri
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Michael Treadway provided editorial
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Appendix BSTATISTICAL TABLES RELATI
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POPULATION, EMPLOYMENT, WAGES, AND
Page 296 and 297:
AGRICULTURE:PageB-95. Farm income,
Page 298 and 299:
NATIONAL INCOME OR EXPENDITURETABLE
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TABLE B-2.—Real gross domestic pr
Page 302 and 303:
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
Page 308 and 309:
TABLE B-7.—Chain-type price index
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TABLE B-8.—Gross domestic product
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Year orquarterGrossdomesticproductT
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TABLE B-12.—Gross product of nonf
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TABLE B-14.—Personal consumption
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TABLE B-16.—Private gross fixed i
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TABLE B-18.—Government consumptio
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TABLE B-20.—Private inventories a
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Year orquarterTABLE B-22.—Foreign
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TABLE B-24.—Relation of gross dom
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Year orquarterTABLE B-26.—Nationa
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TABLE B-27.—Sources of personal i
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TABLE B-28.—Disposition of person
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TABLE B-30.—Gross saving and inve
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TABLE B-31.—Median money income (
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TABLE B-33.—Civilian population a
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TABLE B-34.—Civilian employment a
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TABLE B-36.—Unemployment by demog
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TABLE B-38.—Civilian labor force
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TABLE B-40.—Civilian unemployment
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TABLE B-42.—Unemployment by durat
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TABLE B-44.—Employees on nonagric
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TABLE B-45.—Hours and earnings in
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Year orquarterOutput per hourof all
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PRODUCTION AND BUSINESS ACTIVITYTAB
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TABLE B-51.—Industrial production
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Year or monthTABLE B-53.—New cons
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TABLE B-55.—Manufacturing and tra
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Year or monthTotalTABLE B-57.—Man
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Year ormonthTABLE B-59.—Consumer
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TABLE B-60.—Consumer price indexe
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TABLE B-62.—Changes in consumer p
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TABLE B-63.—Producer price indexe
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TABLE B-65.—Producer price indexe
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TABLE B-66.—Changes in producer p
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TABLE B-68.—Components of money s
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TABLE B-69.—Aggregate reserves of
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Year andmonthBills(new issues) 13-m
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TABLE B-72.—Credit market borrowi
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TABLE B-73.—Mortgage debt outstan
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TABLE B-75.—Consumer credit outst
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TABLE B-77.—Federal budget receip
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TABLE B-79.—Federal receipts, out
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TABLE B-81.—Federal and State and
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TABLE B-83.—State and local gover
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TABLE B-85.—Interest-bearing publ
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End of monthTABLE B-87.—Estimated
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TABLE B-89.—Corporate profits by
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TABLE B-91.—Sales, profits, and s
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Year or monthTABLE B-93.—Common s
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AGRICULTURETABLE B-95.—Farm incom
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TABLE B-97.—Farm output and produ
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Year ormonthTABLE B-99.—Indexes o
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Year orquarterExportsINTERNATIONAL
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TABLE B-102.—U.S. international t
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TABLE B-104.—U.S. international t
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TABLE B-106.—Industrial productio
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PeriodTABLE B-108.—Foreign exchan
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TABLE B-110.—Growth rates in real
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