Economic Report of the President

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PageThe Problem of Uncompetitive Sectors 58Challenges to U.S. Trade Policy 60Exchange Rates and the Balance of Payments 61Causes of the Dollar's Strength 61An Undervalued Yen? 65Effects of a Strong Dollar on U.S. Trade 66Responses to the Strong Dollar 67Macroeconomic Problems in Europe 70The International Debt Problem 72Debt-Financed Growth in the 1970s 72Causes of the Liquidity Problem 73Implications of the Debt Problem 74CHAPTER 4. INCREASING CAPITAL FORMATION 77The Historical Record 78An International Perspective 80The Importance of Capital Formation 82Measuring National Saving 85Budget Deficits and Saving 86Tax Rules and Personal Saving 87Financial Regulation and Private Saving 89The Role of International Capital Flows 90The Allocation of Capital 91Tax Policy and Investment 92Conclusions 95CHAPTER 5. THE BURDEN OF ECONOMIC REGULATION 96A Brief History of Economic Regulation 96The Traditional Rationale for Economic Regulation.... 98Problems of Economic Regulation 100Energy Policy 102Steps Toward a Market-Oriented Oil Policy 102Natural Gas Pricing and Allocation 102Emergency Preparedness 106Transportation and Communications 108Effects of Aviation Deregulation 109Effects of Partial Deregulation in Surface Transportation110Further Deregulation of Surface Transportation 112Common Carrier Telecommunications 114Broadcasting 115Deregulation of Financial Markets 115Depository Institutions 116Stock Exchanges 119Opportunities for Further Deregulation in the FinancialIndustry 12114
PageConclusions 122CHAPTER 6. REVIEW OF 1982 AND THE ECONOMIC OUTLOOK 124Overview of 1982 124Major Sectors of Aggregate Demand 126Personal Consumption Expenditures 127Residential Investment 128Business Fixed Investment 129Inventory Investment 130The Farm Economy 130Foreign Trade 132Government Purchases of Goods and Services 132Labor Market Developments 133Wages, Productivity, and Prices.. 134Credit Markets 136Interest Rates 137Monetary Developments 139Prospects for 1983 142Prospects and Policies Beyond 1983 143APPENDIXESA. Report to the President on the Activities of the Councilof Economic Advisers During 1982 147B. Statistical Tables Relating to Income, Employment andProduction 157List of Tables and ChartsTables2-1. Median Family Income by Unemployment and FamilyStatus, 1981 302-2. Educational and Labor Market Activities of Youth Aged16 to 19, by Sex, October 1981 423-1. Structure of the U.S. Balance of Payments, as Percent ofGNP, 1960-80 553-2. Trade Balances by Commodity Group as Percent ofGDP, United States, Japan, and the European EconomicCommunity, 1980 573-3. Trade Balances by Region as Percent of GDP, UnitedStates and Japan, 1980 583-4. U.S. Trade Balances by Sector as Percent of GDP,1972-79 583-5. Real Appreciation of the Dollar Against Major Currenciesto August 1982 663-6. Economic Performance by Major Industrial Countries,1973-82 713-7. Employment and Unemployment in the European EconomicCommunity, 1973-80 7215
Page 5: CONTENTSPageECONOMIC REPORT OF THE
Page 9 and 10: ECONOMIC REPORT OF THE PRESIDENTTo
Page 11 and 12: Monetary policy will play a critica
Page 13 and 14: Interest Rates and the U.S. Trade D
Page 15: THE ANNUAL REPORTOF THECOUNCIL OF E
Page 19: CONTENTSPageCHAPTER 1. FROM RECESSI
Page 23 and 24: CHAPTER 1From Recession to Recovery
Page 25 and 26: slowed somewhat in the 1970s regard
Page 27 and 28: nal GNP growth is reflected in a sl
Page 29 and 30: inflation. More specifically, the A
Page 31 and 32: inflation rate, or with a 12 percen
Page 33 and 34: 1988, an increase of about one-four
Page 35 and 36: CHAPTER 2The Dual Problems of Struc
Page 37 and 38: frequently associated with poor hea
Page 39 and 40: Chart 2-2Distribution of Unemployme
Page 41 and 42: Chart 2-4Distribution of Unemployme
Page 43 and 44: These findings suggest several conc
Page 45 and 46: Wage RigidityA number of studies sh
Page 47 and 48: that these measures may have caused
Page 49 and 50: Most young people find jobs or leav
Page 51 and 52: to employers who hire youths. Tax c
Page 53 and 54: defined broadly to include individu
Page 55 and 56: ship between incomplete experience
Page 57 and 58: CHAPTER 3The United States in the W
Page 59 and 60: with 2.6 percent in the other Organ
Page 61 and 62: TABLE 3-1 .—Structure ofthe U.S.
Page 63 and 64: TABLE 3-2.—Trade balances by comm
Page 65 and 66: concentrate on doing what it does r
Page 67 and 68: the United States will depress pric
Page 69 and 70: Chart 3-3Real Exchange Rates Of Maj
Page 71 and 72:
AN UNDERVALUED YEN?The explanations
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arily reduced the international com
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nancial markets. These transactions
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TABLE 3-6.—Economic performance b
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were undoubtedly a highly favorable
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of lenders that some debtors will n
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CHAPTER 4Increasing Capital Formati
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ate of net investment was required,
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able share in Japan and 56 percent
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During the 1970s, productivity grow
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MEASURING NATIONAL SAVINGDomestic s
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TAX RULES AND PERSONAL SAVINGMany e
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on consumption taxation might also
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Nevertheless, a number of economic
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tion permitted businesses to deprec
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A final problem under current tax l
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fleeted efforts to deal with proble
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egulation was probably not applicab
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Aeronautics Board, for example, the
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system resulted. Price controls, wh
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NGPA, both controlled and decontrol
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Price and allocation controls only
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nications industries through the re
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Several major pieces of legislation
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tempt to set cartel rates would be
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computer information and advertisin
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of computer technology to the payme
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trend by widening the sources and u
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changes. That is, members can arbit
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ceived to be a consequence of exces
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lowest point in the post-World War
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ing. Partly in response to the drop
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Chart 6-3Ratio of Consumer Installm
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Chart 6-4RATIO1.85Real Inventory/Sa
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percent increase in real defense pu
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8.8 percent in 1981. These declines
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housing. Borrowing by the nonfinanc
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orous competitor for credit as usur
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1982 their share had risen to over
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TABLE 6-9.—Economic outlook for 1
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A critical element in achieving hea
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LETTER OF TRANSMITTALCOUNCIL OF ECO
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Report to the President on the Acti
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ety of interagency and internationa
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ence J. Kotlikoff (Yale University)
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CONTENTSNATIONAL INCOME OR EXPENDIT
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B-70. Mortgage debt outstanding by
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NATIONAL INCOME OR EXPENDITURETABLE
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TABLE B-2.—Gross national product
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19291933193919401941194219431944194
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TABLE B-5.—Changes in GNP and GNP
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TABLE B-ll.—Gross national produc
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TABLE B-13.—Output, costs, and pr
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TABLE B-14.—Personal consumption
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TABLE B-16.—Gross and net private
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TABLE B-18.—Inventories and final
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TABLE B-20.—Relation of national
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TABLE B-21.—National income by ty
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TABLE B-22.—Sources of personal i
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TABLE B-24.—Total and per capita
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Year or quarterTotalTotalTABLE B-26
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POPULATION, EMPLOYMENT, WAGES, AND
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TABLE B-29.—Noninstitutional popu
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TABLE B-31.—Selected employment a
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TABLE B-33.—Civilian unemployment
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TABLE B-35.—Unemployment by reaso
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TABLE B-37.— Wage and salary work
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TABLE B-39.—Average weekly earnin
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TABLE B-41.—Changes in productivi
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TABLE B-43-—Industrial production
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TABLE B-45.—Capacity utilization
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TABLE B-46.—New construction acti
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TABLE B-48.—Nonfarm business expe
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TABLE B-50.—Manufacturers' shipme
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Year or monthAllitemsPRICESTABLE B-
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TABLE B-53.—Consumer price indexe
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TABLE B-55.—Changes in consumer p
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TABLE B-57.—Producer price indexe
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MONEY STOCK, CREDIT, AND FINANCETAB
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TABLE B-63.—Commercial bank loans
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TABLE B-64.—Total funds raised in
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TABLE B-66.—Aggregate reserves of
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TABLE B-67 .—Bond yields and inte
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TABLE B-69.—Consumer installment
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TABLE B-71-—Mortgage debt outstan
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TABLE B-72.—Federal budget receip
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TABLE B-74.—Relation of Federal G
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TABLE B-76.—Federal Government re
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TABLE B-78.—State and local gover
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TABLE B-80.—Estimated ownership o
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CORPORATE PROFITS AND FINANCETABLE
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Year or quarterTABLE B-84.—Corpor
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TABLE B-86.—Relation of profits a
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TABLE B-88.—Determinants of busin
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TABLE B-9Q.~Current assets and liab
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TABLE B-92.—Common stock prices a
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AGRICULTURETABLE B-94.—Farm incom
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TABLE B-96.—Farm input use, selec
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TABLE B-98.—U.S. exports and impo
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INTERNATIONAL STATISTICSTABLE B-100
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TABLE B-101.—U.S. international t
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TABLE B-103.—U.S. merchandise exp
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TABLE B-105.—International invest
Page 289 and 290:
TABLE B-107.— World trade balance
Page 291 and 292:
TABLE B-109.—Growth rates in real
Page 293:
TABLE B-lll.—Unemployment rate, a
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Economic Report of the President

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