Economic Report of the President

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List of Tables and Charts—ContinuedTables4-1. Alternative Measures of Capital Formation, 1951-82 794-2. Comparison of Capital Formation in Six OECD Countries,1971-80 814-3. Net Saving as Percent of GNP, 1951-81 854-4. Investment Incentives under Different Tax Laws 936-1. Growth in Major Sectors of Real GNP, 1978-82 1276-2. Real Household Income, Consumption, Saving, andResidential Investment, 1978-82 1286-3. Labor Market Developments, 1978-82 1336-4. Changes in Wages and Compensation, 1978-82 1346-5. Productivity, Costs, and Prices in the Nonfarm BusinessSector, 1978-82 1356-6. Price Changes, 1978-82 1366-7. Funds Raised by the Nonfinancial Sector of the Economy,1978-82 1366-8. Components of Ml and M2, 1978-82 1416-9. Economic Outlook for 1983 1436-10. Projections of Economic Goals, 1983-88 144Charts2-1. Distribution of Unemployment by Age and Sex 322-2. Distribution of Unemployment by Family Status 332-3. Distribution of Unemployment by Race 342-4. Distribution of Unemployment by Reason 352-5. Distribution of Unemployment by Duration 363-1. Structural Changes in the Current Account Balance 553-2. Composition of Trade, 1980 573-3. Real Exchange Rates of Major Currencies Against theDollar 633-4. International Real Short-Term Interest Rate Differentials644-1. Measures of Capital Formation 804-2. International Comparison of Investment and ProductivityGrowth, 1971-80 824-3. Three-Month Treasury Bill Rate and Regulation Q,Maximum Rate on Savings Accounts 906-1. Interest Rates 1256-2. Index of Leading Indicators and Real GNP 1266-3. Debt Burden Ratio 1296-4. Real Inventory/Sales Ratio and Industrial Production 1316-5. Nominal and Real 3-Month Treasury Bill Yield 13816
CHAPTER 1From Recession to Recovery andGrowthTHE MAJOR ECONOMIC ACHIEVEMENT OF 1982 was a dramaticreduction of inflation to its lowest rate in a decade. The 4.6percent increase in the gross national product (GNP) implicit pricedeflator between the fourth quarters of 1981 and 1982 was less thanhalf the 10.2 percent rate of increase between the fourth quarters of1979 and 1980. This decline in inflation has moderated the earlierwidespread fears that inflation would accelerate. While some of thisimprovement in inflation was transitory, reflecting such special factorsas the appreciation of the exchange value of the dollar, the largestshare was almost certainly due to a decline in the underlying rateof inflation. The reduced rate of inflation is a major step toward theAdministration's goals of full employment, healthy economic growth,and price stability.The progress made in reducing inflation, however, was accompaniedby a painful slowdown of the economy. Beginning in July 1981,the Nation suffered the second of two back-to-back recessions thatbrought the unemployment rate to 10.8 percent in December 1982.At that time, approximately 5 million more people were unemployedthan in January 1980, when the first of the two recessions began.The increase in long-term unemployment poses a particularlysevere problem. In January 1980, about 550,000 people had beenunemployed for more than 6 months. In December 1982 there weremore than four times as many. Long-term unemployment is particularlyserious in that it causes substantial financial hardship and is associatedwith a loss of job skills that may reduce future income significantly.Some temporary decline in real economic activity was probably unavoidablein the process of reversing the upward trend of inflation.The United States entered the 1980s with a high rate of inflation andwith widespread public expectations that the rate would remain high,and perhaps increase. As high inflation persisted, it became embeddedin the plans and contracts of firms and workers, and lowering itinvolved a painful process. The decline of real GNP since early 198117
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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
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Page 19 and 20: CONTENTSPageCHAPTER 1. FROM RECESSI
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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
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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
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TABLE B-107.— World trade balance
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TABLE B-109.—Growth rates in real
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TABLE B-lll.—Unemployment rate, a
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