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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The 1996 welfare reform law invested an additional $4 billion over 6 yearsto provide more child care assistance for families moving from welfare towork and for other low-income parents. (Child care assistance is discussedfurther below.) The new State Children’s Health Insurance Program providesfunds to help States expand health care coverage of uninsured children, andnew Medicaid rules allow States to expand Medicaid to cover more lowincomefamilies who work, including more two-parent families.Finally, Individual Development Accounts (IDAs) empower low-incomefamilies to save for a first home, to enroll in postsecondary education, or tostart a new business.As a result of welfare reform and the strong economy, by June 1999 thenumber of welfare recipients nationwide had fallen to 6.9 million, 51 percentless than in 1993. That number represents 2.5 percent of the total population,the lowest proportion since 1967. All 50 States met the overall workparticipation requirements of the welfare reform legislation. Twenty-sevenStates were awarded bonus funds for their superior results in reformingwelfare. Reports by the 46 States competing for the bonus indicate that morethan 1.3 million welfare recipients nationwide went to work in the12-month period from October 1997 through September 1998. Retentionrates are also promising: 80 percent of those who got jobs were still working3 months later. States reported an average earnings increase of 23 percent forformer welfare recipients, from $2,088 in the first quarter of employment to$2,571 in the third quarter. Among those remaining on welfare, theproportion working has nearly quadrupled, from 7 percent in 1992 to27 percent in 1998.At least one independent study confirms these conclusions, finding thatalmost 70 percent of welfare leavers said they went off welfare because ofincreased earnings or a new job. When women move to paying jobs, theydevelop the skills needed to produce higher sustainable incomes over theirlifetimes and to reduce the intergenerational cycle of dependency. In addition,the Administration’s initiative to reduce teen pregnancy (Box 5-4) playsa role in breaking the cycle of dependency and increasing the well-being offamilies by reducing the number of children born to teen mothers.Social Security and MedicareSocial Security is a key source of income for most recipients: in 1996 it wasthe main source of income for 66 percent of beneficiaries; it represented atleast 90 percent of income for 30 percent of beneficiaries; it was the solesource of income for 18 percent. Social Security benefits provide 81 percentof total income for those in the lowest fifth of the income distribution of theelderly, and they are the largest single source of income for all but theChapter 5 | 187
Box 5-4.The National Strategy to Reduce Teen PregnancyFrom 1980 to 1991 the overall birth rate to teens aged 15-19 rose from53.0 to 62.1 per 1,000. Since then, however, this trend has been improving.Nationwide, this rate declined by 18 percent from 1991 to 1998, andteen birth rates have fallen in every State and across ethnic and racialgroups. For a subset of this group, girls aged 15-17, the 1998 birth ratewas at its lowest on record. In addition, teen pregnancy rates are at theirlowest since 1976, the earliest year for which data on this group are available.Yet despite these recent improvements, teen pregnancy remains aproblem, since the financial resources and opportunities of unwed teensand their children are significantly less than those of other families.Each year more than 900,000 pregnancies occur among Americanteenagers. A collection of studies on teen parenthood found that roughlyfour-fifths of teen mothers end up on welfare. The children of adolescentmothers were found to have poorer health outcomes and were 50percent more likely to be of low birthweight. In addition, the sons of adolescentmothers were found to be 2.7 times as likely to be incarceratedas the sons of mothers who delayed pregnancy, and the daughters ofadolescent mothers were one-third more likely to become teen mothersthemselves.On January 4, 1997, the President announced a comprehensive nationalstrategy to reduce teen pregnancy in this country. The new initiative,led by the Department of Health and Human Services (HHS), respondedto a call from the President and the Congress for a national strategy toprevent out-of-wedlock teen pregnancies. It also responded to a directive,under the welfare reform act, to ensure that at least 25 percent ofcommunities in this country have teen pregnancy prevention programsin place. Key efforts under this initiative include the following:• Implementing New Efforts Under Welfare Reform. Under the welfarereform law signed by the President on August 22, 1996, unmarriedminor parents are required to stay in school and live at home, or inan adult-supervised setting, in order to receive assistance. The lawencourages the creation of Second Chance Homes, supportive andsupervised living arrangements that provide teen parents with theskills they need to become good role models and providers for theirchildren, giving them guidance in parenting and in avoiding repeatpregnancies.• Supporting Promising Approaches and Building Partnerships. TheAdministration continues to support innovative teen pregnancy preventionstrategies tailored to the unique needs of communities.HHS-funded programs supporting teen pregnancy prevention havebeen established in about 34 percent of the 4,752 Census-definedcommunities in the United States. In addition, HHS has built partcontinuedon next page...188 | Economic Report of the President
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E C O N O M I CR E P O R TO F T H E
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C O N T E N T SPageECONOMIC REPORT
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ECONOMIC REPORT OF THE PRESIDENTTo
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my State of the Union address, I pr
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hard-pressed families—with additi
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LETTER OF TRANSMITTALCOUNCIL OF ECO
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PageSources of Business Cycle Moder
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PageHeterogeneity in Abatement Bene
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Page2-3. Net Worth and the Personal
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PageLIST OF BOXES2-1. The CPI-U-RS,
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These successes notwithstanding, th
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$33,740, Americans today can acquir
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those in the highest decile rose 0.
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Data on poverty also show progress.
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Over the years, government support
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asis, the current expansion also sh
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The current expansion, by contrast,
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InflationAccelerating inflation pos
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it was argued, must be shifting the
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is that the direction of technologi
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Challenges for the FutureThis chapt
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in the new labor market. The chapte
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disruptive in some cases. Finally,
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C H A P T E R 2Macroeconomic Policy
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Chapter 2 | 51
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usiness cycle has changed over the
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cent over the four quarters of 1999
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framework that continues to pay dow
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The labor force participation rate
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Box 2-1.—continuedof no substitut
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feed directly into the index. Moreo
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funds rate (the interest rate that
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nesses with below-investment-grade
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From 1989 to 1999, corporate earnin
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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
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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
Page 133 and 134: diploma (Chart 4-5). That same year
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Page 139 and 140: Box 4-1. The Role of Government Pol
Page 141 and 142: severe disabilities. For example, a
Page 143 and 144: Box 4-2.—continuedOther policy in
Page 145 and 146: equirements of jobs. To right this
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Page 149 and 150: Class Size Reduction. Average class
Page 151 and 152: During this Administration, the Fed
Page 153 and 154: years ago. In 2000, 13.1 million st
Page 155 and 156: through a period of unpaid training
Page 157 and 158: The first major mandatory training
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Page 161 and 162: ConclusionTwo key developments—th
Page 163 and 164: TABLE 5-1.—Contrasting American F
Page 165 and 166: opened up for women to work and as
Page 167 and 168: The increased prevalence of single-
Page 169 and 170: to an increasing share of the popul
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Page 173 and 174: For the past 50 years, the median i
Page 175 and 176: gle mothers the median rose from $1
Page 177 and 178: TABLE 5-3.— Share of Women with C
Page 179 and 180: income growth over the last 30 year
Page 181 and 182: consumption patterns have changed,
Page 183: Increases in the Minimum WageThe mi
Page 187 and 188: or older, and of those 85 or older,
Page 189 and 190: of single-parent families increased
Page 191 and 192: caregivers for the elderly say thei
Page 193 and 194: would allow all workers who get tim
Page 195 and 196: C H A P T E R 6Opportunity and Chal
Page 197 and 198: Meanwhile innovations in transporta
Page 199 and 200: But to look at U.S. trade only in t
Page 201 and 202: Data from the U.S. computer industr
Page 203 and 204: net indebtedness of about 18 percen
Page 205 and 206: capital flows. Coupled with other d
Page 207 and 208: forces to play themselves out. In t
Page 209 and 210: The Benefits of a Global EconomyThe
Page 211 and 212: Domestic production can expand when
Page 213 and 214: In short, increased globalization b
Page 215 and 216: key sectors such as finance, teleco
Page 217 and 218: international trade is not a zero-s
Page 219 and 220: As these data suggest, not all WTO
Page 221 and 222: For example, preferential U.S. trad
Page 223 and 224: By contrast, in 1998 output fell on
Page 225 and 226: Box 6-3.The New International Finan
Page 227 and 228: The key objective of the initiative
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Page 231 and 232: demand for exports. It would be a m
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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
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AGRICULTURE:PageB-95. Farm income,
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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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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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