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ECONOMIC REPORT OF THE PRESIDENT

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Percent 30 Figure 1-11

Percent 30 Figure 1-11 Share of Workers with a State Occupational License 25 2008 20 15 10 5 0 1950s 1960s 1970s 1980s 1990s 2000 2008 Source: Council of State Governments (1952); Greene (1969); Kleiner (1990); Kleiner (2006); and Kleiner and Krueger (2013), Westat data; CEA calculations. second half of the 20 th century, from less than 5 percent in the early 1950s to 25 percent by 2008, as shown in Figure 1-11. Although state licenses account for the bulk of licensing, the addition of locally and Federally licensed occupations further raises the share of the workforce that is licensed to 29 percent. While licensing can play an important role in protecting consumer health and safety, there is evidence that some licensing requirements create economic rents for licensed practitioners at the expense of excluded workers and consumers—increasing inefficiency and potentially also increasing inequality. First, the employment barriers created by licensing raise wages for those who are successful in gaining entry to a licensed occupation by restricting employment in the licensed profession and lowering wages for excluded workers. Estimates find that unlicensed workers earn 10- to 15-percent lower wages than licensed workers with similar levels of education, training, and experience (Kleiner and Krueger 2010). Second, research finds that more restrictive licensing laws lead to higher prices for goods and services, in many cases for lower-income households, while the quality, health and safety benefits do not always materialize (Kleiner 2015). Finally, some state-specific licensing requirements create unnecessary barriers to entry for out-of-state licensed practitioners, reducing mobility across state lines (Johnson and Kleiner 2014). Inclusive Growth in the United States | 43

Housing and Land-Use Restrictions There is evidence that land-use regulation may also play a role in the presence of increased economic rents. Such regulation in the housing market can serve legitimate, welfare-enhancing purposes, such as restrictions that prohibit industrial activities from occurring alongside or within residential neighborhoods or limitations on the size of a dwelling due to a fragile local water supply. But when excessive and primarily geared toward protecting the interests of current landowners—including their property values—landuse regulations decrease housing affordability and reduce nationwide productivity and growth. These are impacts detailed in Chapters 2 and 6 of this Report, respectively. The presence of rents in the housing market, moreover, may also restrict labor mobility and exacerbate inequality. One main indication that land-use regulation gives rise to economic rents is that, in the aggregate, real house prices are higher than real construction costs, and this differential has increased since at least the early 1980s, as shown in Figure 1-12. In fact, Glaeser, Gyourko, and Saks (2005) find that more stringent land-use regulations have driven house price appreciation in excess of construction costs since 1970, before which time quality improvements actually drove much of the price increases. Further, in a large and growing set of U.S. cities—including major population centers such as New York and Los Angeles and high-productivity cities like San Francisco— home prices are usually at least 40 percent above construction costs. (Glaeser and Gyourko 2003). In addition, rental payments in the housing market in these areas often rise faster than wages. The Interplay of Inequality and Growth The relationship between inequality and growth continues to be the subject of much debate in the economics literature. The traditional finding for canonical policy responses to inequality, like progressive taxation and income support for low-income households, is that there is a tradeoff between equity and efficiency, the famous “leaky bucket” coined by Arthur Okun (1975). There has also been a long-standing macroeconomic debate about the consequences of inequality, with one traditional view being that more inequality leads to more savings by high-income households and thus a higher level of output (Duesenberry 1949). The current theory and evidence at both a micro and macro level is considerably more ambiguous than these traditional views and suggests a number of mechanisms by which inequality can be harmful to growth. As discussed above, one clear-cut example is that to the degree that inequality is 44 | Chapter 1

  • Page 1 and 2: ECONOMIC REPORT OF THE PRESIDENT To
  • Page 4: C O N T E N T S ECONOMIC REPORT OF
  • Page 8 and 9: economic report of the president To
  • Page 10 and 11: when a hardworking American loses h
  • Page 12: the annual report of the council of
  • Page 16 and 17: C O N T E N T S CHAPTER 1 INCLUSIVE
  • Page 18 and 19: CHAPTER 5 TECHNOLOGY AND INNOVATION
  • Page 20 and 21: APPENDIXES A. Report to the Preside
  • Page 22 and 23: 3.4. Percent Gap Between Actual and
  • Page 24 and 25: 6.6. Relationship between Output Gr
  • Page 26 and 27: C H A P T E R 1 INCLUSIVE GROWTH IN
  • Page 28 and 29: To promote inclusive growth, both c
  • Page 30 and 31: Percent 20 15 Figure 1-1 Share of I
  • Page 32 and 33: Table 1-1 Increase in Income Share
  • Page 34 and 35: Figure 1-3 Distribution of Househol
  • Page 36 and 37: narrows the pool of human capital t
  • Page 38 and 39: over the past several decades has b
  • Page 40 and 41: Figure 1-6a The "Great Gatsby Curve
  • Page 42 and 43: Figure 1-7 Change in Employment by
  • Page 44 and 45: and sellers—consumer and producer
  • Page 46 and 47: Percent 15 10 Figure 1-9 Corporate
  • Page 50 and 51: Figure 1-12 Real Construction Costs
  • Page 52 and 53: promoting equality of opportunity;
  • Page 54 and 55: the division of rents, they can red
  • Page 56 and 57: C H A P T E R 2 THE YEAR IN REVIEW
  • Page 58 and 59: cold weather.1 The economy rebounde
  • Page 60 and 61: Box 2-1: Impact of Oil Price Declin
  • Page 62 and 63: Roughly speaking, the decline in th
  • Page 64 and 65: Percent of GDP 10 Figure 2-3 Federa
  • Page 66 and 67: Figure 2-5 Government Purchases as
  • Page 68 and 69: 13 percent of GDP. Until 1990, Stat
  • Page 70 and 71: of new purchases.2 The increase in
  • Page 72 and 73: Figure 2-8 Actual and Consensus For
  • Page 74 and 75: Figure 2-10 Rates of Part-Time Work
  • Page 76 and 77: less than a tenth of the overall de
  • Page 78 and 79: Business fixed investment grew 3.1
  • Page 80 and 81: Percent 10 Figure 2-14 Personal Sav
  • Page 82 and 83: BEA revises the official statistics
  • Page 84 and 85: Index* 100 Figure 2-16 Real Income
  • Page 86 and 87: Box 2-5: Are Official Estimates of
  • Page 88 and 89: of consumer surplus, which should,
  • Page 90 and 91: Figure 2-19 National House Price In
  • Page 92 and 93: Box 2-6: Constraints on Housing Sup
  • Page 94 and 95: and also was estimated in recent re
  • Page 96 and 97: market. Nevertheless, the construct
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    Figure 2-23 Net Investment as a Sha

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    Percent 80 Figure 2-25 Total Payout

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    Figure 2-28 Foreign Real GDP and U.

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    Figure 2-30 Sources of Productivity

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    Figure 2-32 Nominal Wage Growth Ove

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    Figure 2-35 Long-Term Inflation Exp

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    Percent 18 Figure 2-36 Nominal 10-Y

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    Table 2-1 Selected Interest Rates,

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    are close to those projected by the

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    International Economics (Petri and

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    History Forecast 1953:Q2 to 2015:Q3

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    inflation up to 2007 and then expec

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    Upside and Downside Forecast Risks.

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    earlier forecasts. Figure 3-1 shows

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    Real GDP/WAP Growth 2011-2014 Figur

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    economists would expect capital dee

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    Figure 3-i Actual and Forecasted Wo

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    affected the demographic trajectory

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    over the first three quarters of 20

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    Percentage Points 35 30 Figure 3-7

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    the President for a discussion of t

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    Box 3-2: Market Volatility in the S

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    potential for rapid spillovers betw

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    absorb unexpectedly high losses. In

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    Box 3-3: Commodity Prices and Infla

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    In November 2015, the IMF voted to

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    Billions of U.S. Dollars 250 200 15

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    U.S. exports are 12.5 percent of th

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    Box 3-4: The Importance of the Tran

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    The challenging environment for U.S

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    child’s environment. Despite the

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    and Rossin-Slater 2015).5 These adv

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    Figure 4-2 Official Poverty Rate fo

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    Figure 4-3 Likelihood of Scoring Ve

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    Percent 100 90 80 70 60 50 40 30 20

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    Figure 4-7 Achievement Gap is Large

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    Hours per Week 24 22 20 Figure 4-9

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    Percent 65 Figure 4-11 Preschool En

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    Box 4-1: Gender Differences in Earl

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    Card and Rothstein 2007; Dickerson

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    depend on how parents choose to inv

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    y many factors, which makes it diff

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    Box 4-3: Federal Early Childhood Pr

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    program served over 45 million Amer

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    Reauthorization Act of 2015, signed

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    document that desegregation of hosp

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    to alleviate hunger by supplementin

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    adulthood (Hoynes, Schanzenbach, an

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    of preschoolers support their child

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    program and up to 15 years after co

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    a longer period than is true of mos

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    to be higher today than in the past

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    Figure 4-18 Most Early Childhood Pr

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    the preschool programs in Georgia a

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    test scores by 6 to 9 percent of a

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    Figure 4-20 Increase in Probability

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    increased earnings by 31 percent (F

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    Figure 5-1 Labor Productivity Growt

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    Competition and Dynamism Play a Cri

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    adopts pre-existing technology or k

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    Figure 5-2 Quantity and Volume of V

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    Box 5-2: Occupational Licensing One

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    in consumer welfare as they erode t

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    Finally, some workers may acquire s

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    Box 5-3: Major Research Initiatives

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    Figure 5-5 Federal and Nonfederal R

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    Figure 5-7 Federal Research and Dev

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    Figure 5-10 Percent of Patent Appli

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    percent of all cases in 2009 to ove

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    (Bloom, Sadun, and Van Reenen 2012)

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    Figure 5-12 Estimated Annual Shipme

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    was relatively flat through the 200

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    In contrast, recent papers by Autor

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    services, such as 4G LTE. At the sa

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    Box 5-5: The On-Demand Economy “O

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    vision of services that may not hav

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    Figure 5-17 Household Income and Ho

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    about half since ConnectED was laun

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    C H A P T E R 6 THE ECONOMIC BENEFI

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    enefits to a wide set of consumers

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    Figure 6-1 Composition of Public Sp

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    Age, Years 29 27 Figure 6-3 Average

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    Type CAN FRA DEU ITA JPN GBR USA 20

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    Box 6-1: Clean Energy and Transport

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    Industry Government Investment Dire

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    infrastructure investment is crucia

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    Box 6-2: Elasticity of Output to Pu

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    and output ignore potential inter-t

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    Thus, ideas are exchanged, workers

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    kilometers of road) in 1983 resulte

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    Prospects for Increased Infrastruct

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    Figure 6-6 Relationship between Out

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    there is a clear demand for an infr

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    user fees or shadow tolls.11 Throug

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    to transportation facilities caused

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    Tax-Exempt Bonds Transportation inf

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    Recent Legislation In December 2015

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    enefit freight movements. The Act a

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    C H A P T E R 7 THE 70 TH ANNIVERSA

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    and composition of the labor force,

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    it, “[t]he CEA and its chairman h

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    jected reductions in the deficit. I

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    example, the Environmental Protecti

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    Keyserling and the Council particip

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    Countercyclical Policy in Other Adm

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    In designing the Recovery Act, one

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    incorporating risk and discounting

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    and Freddie had lots of friends in

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    (USEC). USEC was responsible for pr

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    can be reported to him as the perce

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    By contrast, Keyserling had activel

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    goals of the government in their ar

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    Gather, Analyze, and Interpret Info

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    the unemployment insurance system w

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    an informational basis for appropri

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    had experience working in governmen

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    emained. I joined forces with Budge

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    Of course, relying on short-term ac

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    Carson, Ann. 2015. “Prisoners in

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    Kleiner, Morris M. and Alan B. Krue

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    Congressional Budget Office (CBO).

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    Kocin, Paul J. and Louis Uccellini.

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    Fajgelbaum, Pablo and Amit Khandelw

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    World Bank. 2016. “Global Economi

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    Belfield, Clive R., Milagros Nores,

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    Campbell, Jennifer A., Rebekah J. W

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    Council of Economic Advisers. 2014.

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    Eissa, Nada and Jeffrey B. Liebman.

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    Hastings, Justine S. and Ebonya Was

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    Kalil, Ariel, Rebecca Ryan, and Mic

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    Maxfield, Michelle. 2013. “The Ef

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    Olds, David, John Eckenrode, Charle

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    Solon, Gary. 1992. “Intergenerati

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    Wherry, Laura R., Sarah Miller, Rob

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    Bloom, Nicholas, Mark Schankerman,

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    Graham, Stuart JH, Cheryl Grim, Tar

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    Melitz, Marc J. 2003. “The Impact

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    ______. 2015. “Patent Assertions:

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    Congressional Budget Office. 2009.

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    Peshkin, David G., Todd E. Hoerner,

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    ______. 2001. Designing U.S. Econom

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    Krueger, Alan B. 2000. “Honest Br

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    Weidenbaum, Murray L. 1983. “An E

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    letter of transmittal Council of Ec

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    Council Members and Their Dates of

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    The Members of the Council Sandra E

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    In May, the Council issued a report

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    Nirupama S. Rao . . . . . . . . . .

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    Jessica Schumer resigned from her p

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    C O N T E N T S GDP, INCOME, PRICES

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    General Notes Detail in these table

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    Table B-1. Percent changes in real

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    Table B-2. Gross domestic product,

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    Table B-4. Growth rates in real gro

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    Year or quarter Total Table B-6. Co

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    Table B-8. New private housing unit

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    Table B-10. Changes in consumer pri

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    Table B-11. Civilian labor force, 1

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    Year or month Table B-13. Unemploym

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    Table B-14. Employees on nonagricul

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    Year or quarter Table B-16. Product

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    Table B-18. Federal receipts, outla

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    Table B-20. Federal receipts, outla

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    Table B-22. State and local governm

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    End of month Table B-24. Estimated

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    Table B-25. Bond yields and interes

ECONOMIC REPORT OF THE PRESIDENT
Economic Report of the President 1994 - The American Presidency ...
ECONOMIC REPORT OF THE PRESIDENT