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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also associated with large structural deficits—and large actual deficits as well.This expansionary fiscal policy was accompanied by a tight monetary policy,and this combination of policies contributed to relatively high real interestrates and declining net national saving and domestic investment.Chapter 1 | 33
The current expansion, by contrast, started with a large structural deficit andturned it around, to the point that there is now a structural surplus, as Federalspending has been kept in check while revenues have risen. Monetary policy,meanwhile, has been given the freedom to encourage real growth while keepinginflation low. Interest rates, as a result, have been lower than they would havebeen. Indeed, real interest rates in this expansion have been considerably lowerthan in the 1980s expansion. Using survey data to measure inflation expectationssuggests that real short-term interest rates have been about half what theywere in the 1980s expansion, and real long-term rates are about a third lower.Lower interest rates have stimulated investment spending, and this investmenthas, in turn, boosted capacity growth and raised productivity—two key factorsthat have helped keep inflation in check.Although the current account (the balance of trade in goods and services plusnet factor income and net transfers) moved into deficit in both the 1980s andthe 1990s, the forces behind these shifts were different. In the 1980s both netnational saving and net domestic investment declined as a percentage of GDP,so that foreign borrowing was used, directly or indirectly, to finance consumptionand Federal budget deficits rather than investment. In the 1990s, bycontrast, net national saving increased, and the capital inflow has helped financean investment boom.Key Features of the ExpansionDriven by technological advance, more open markets, and investment inphysical capital and human skills—all with the ongoing support of Federalpolicy—this expansion is on track to become the longest ever. In 1999, theninth year of the expansion, GDP grew by 4.0 percent, and 2.7 million payrolljobs were created. The expansion remained youthful-looking and vigorousdespite its chronological age. How did the engines of this expansion, justdescribed, translate their energy into such a sustained performance?Productivity GrowthThe start of an expansion is usually a period of rapid productivity growth.Companies set up factories and offices that are designed to produce a certaintarget level of output. In a recession, output falls below this target, plantsoperate less efficiently, and productivity falls. Companies may also retain valuedworkers that are not needed today but will be needed when the upturncomes, and this, too, lowers average productivity. The surge of productivitygrowth at the start of an expansion occurs as businesses are again able tomake better use of their workers and their physical capital.34 | 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 and 14: PageSources of Business Cycle Moder
Page 15 and 16: PageHeterogeneity in Abatement Bene
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: asis, the current expansion also sh
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
Page 71 and 72: of gross personal saving to GDP has
Page 73 and 74: The beginnings and ends of U.S. bus
Page 75 and 76: introduced in 1913 and Social Secur
Page 77 and 78: Of course, it is premature to decla
Page 79 and 80: Box 2-3.What Did We Learn from the
Page 81 and 82: TABLE 2-3.— Accounting for the Pr
Page 83 and 84:
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
Page 127 and 128:
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
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
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net indebtedness of about 18 percen
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capital flows. Coupled with other d
Page 207 and 208:
forces to play themselves out. In t
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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
Page 229 and 230:
Chapter 6 | 233
Page 231 and 232:
demand for exports. It would be a m
Page 233 and 234:
integrating with the world economy
Page 235 and 236:
The past century of experience in a
Page 237 and 238:
242 | Economic Report of the Presid
Page 239 and 240:
Box 7-1.—continuedand energy pric
Page 241 and 242:
Box 7-2.—continuedproviding usefu
Page 243 and 244:
Incentive-Based Approaches to Addre
Page 245 and 246:
compliance costs may fall by less t
Page 247 and 248:
Box 7-4.—continuedroughly 5 to 15
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so a system of multipollutant tradi
Page 251 and 252:
sulfur dioxide trading program. The
Page 253 and 254:
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
Page 267 and 268:
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
Page 273 and 274:
More than 40 percent of the work fo
Page 275 and 276:
growth and are credited with helpin
Page 277 and 278:
have much to gain from continuing t
Page 279 and 280:
Appendix AREPORT TO THE PRESIDENT O
Page 281 and 282:
Council Members and Their Dates of
Page 283 and 284:
previously served as the New Centur
Page 285 and 286:
(antidumping, countervailing duties
Page 287 and 288:
with a number of developing countri
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Michael Treadway provided editorial
Page 291:
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
Page 300 and 301:
TABLE B-2.—Real gross domestic pr
Page 302 and 303:
TABLE B-3.—Quantity and price ind
Page 304 and 305:
TABLE B-5.—Contributions to perce
Page 306 and 307:
TABLE B-6.—Chain-type quantity in
Page 308 and 309:
TABLE B-7.—Chain-type price index
Page 310 and 311:
TABLE B-8.—Gross domestic product
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Year orquarterGrossdomesticproductT
Page 314 and 315:
TABLE B-12.—Gross product of nonf
Page 316 and 317:
TABLE B-14.—Personal consumption
Page 318 and 319:
TABLE B-16.—Private gross fixed i
Page 320 and 321:
TABLE B-18.—Government consumptio
Page 322 and 323:
TABLE B-20.—Private inventories a
Page 324 and 325:
Year orquarterTABLE B-22.—Foreign
Page 326 and 327:
TABLE B-24.—Relation of gross dom
Page 328 and 329:
Year orquarterTABLE B-26.—Nationa
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TABLE B-27.—Sources of personal i
Page 332 and 333:
TABLE B-28.—Disposition of person
Page 334 and 335:
TABLE B-30.—Gross saving and inve
Page 336 and 337:
TABLE B-31.—Median money income (
Page 338 and 339:
TABLE B-33.—Civilian population a
Page 340 and 341:
TABLE B-34.—Civilian employment a
Page 342 and 343:
TABLE B-36.—Unemployment by demog
Page 344 and 345:
TABLE B-38.—Civilian labor force
Page 346 and 347:
TABLE B-40.—Civilian unemployment
Page 348 and 349:
TABLE B-42.—Unemployment by durat
Page 350 and 351:
TABLE B-44.—Employees on nonagric
Page 352 and 353:
TABLE B-45.—Hours and earnings in
Page 354 and 355:
Year orquarterOutput per hourof all
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PRODUCTION AND BUSINESS ACTIVITYTAB
Page 358 and 359:
TABLE B-51.—Industrial production
Page 360 and 361:
Year or monthTABLE B-53.—New cons
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TABLE B-55.—Manufacturing and tra
Page 364 and 365:
Year or monthTotalTABLE B-57.—Man
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Year ormonthTABLE B-59.—Consumer
Page 368 and 369:
TABLE B-60.—Consumer price indexe
Page 370 and 371:
TABLE B-62.—Changes in consumer p
Page 372 and 373:
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
Page 378 and 379:
TABLE B-68.—Components of money s
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TABLE B-69.—Aggregate reserves of
Page 382 and 383:
Year andmonthBills(new issues) 13-m
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TABLE B-72.—Credit market borrowi
Page 386 and 387:
TABLE B-73.—Mortgage debt outstan
Page 388 and 389:
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
Page 394 and 395:
TABLE B-81.—Federal and State and
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TABLE B-83.—State and local gover
Page 398 and 399:
TABLE B-85.—Interest-bearing publ
Page 400 and 401:
End of monthTABLE B-87.—Estimated
Page 402 and 403:
TABLE B-89.—Corporate profits by
Page 404 and 405:
TABLE B-91.—Sales, profits, and s
Page 406 and 407:
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
Page 414 and 415:
Year orquarterExportsINTERNATIONAL
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TABLE B-102.—U.S. international t
Page 418 and 419:
TABLE B-104.—U.S. international t
Page 420 and 421:
TABLE B-106.—Industrial productio
Page 422 and 423:
PeriodTABLE B-108.—Foreign exchan
Page 424:
TABLE B-110.—Growth rates in real
show all

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