ECONOMIC REPORT OF THE PRESIDENT

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C O N T E N T S CHAPTER 1 INCLUSIVE GROWTH IN THE UNITED STATES. ................. 21 FORMS OF ECONOMIC INEQUALITY: INCOME, WEALTH, AND OPPORTUNITY. ......................... 23 Income Inequality. ............................................ 23 Wealth Inequality. ............................................ 28 Inequality of Opportunity. ..................................... 30 The Interplay of the Forms of Inequality. ...................... 34 SOURCES OF INEQUALITY: COMPETITIVE MARKETS AND ECONOMIC RENTS. ............... 34 The Competitive Channel. ..................................... 36 The Rents Channel. ........................................... 38 THE INTERPLAY OF INEQUALITY AND GROWTH. ................ 44 POLICIES TO PROMOTE INCLUSIVE GROWTH. ................... 46 Strengthening Aggregate Demand. ............................. 47 Promoting Equality of Opportunity. ........................... 48 Reducing Market Power Concentration and Rent-Seeking Behavior. ..................................................... 48 Protecting Families Against the Consequences of Inequality While Fostering Mobility. ..................................... 49 CONCLUSION: THE 2016 ECONOMIC REPORT OF THE PRESIDENT. ............... 50 CHAPTER 2 THE YEAR IN REVIEW AND THE YEARS AHEAD . ............... 51 POLICY DEVELOPMENTS. ......................................... 54 Fiscal Policy . ................................................. 54 Monetary Policy. .............................................. 60 LABOR MARKET. .................................................. 65 OUTPUT. ......................................................... 71 11
Consumer Spending. .......................................... 74 Housing Markets. ............................................. 79 Investment. ................................................... 91 Net Exports. .................................................. 96 PRODUCTIVITY. .................................................. 96 WAGE GROWTH AND PRICE INFLATION. ........................ 100 FINANCIAL MARKETS. ........................................... 103 THE OUTLOOK. .................................................. 106 Forecast over the Next Three Years. ........................... 106 Forecast over the Long Term. ................................. 109 CONCLUSION. ................................................... 117 CHAPTER 3 THE GLOBAL MACROECONOMIC SITUATION. ................. 119 SOURCES OF THE BROADER SLOWDOWN . ...................... 120 DEVELOPMENTS IN 2015. ........................................ 129 Euro area . ................................................... 129 United Kingdom . ............................................ 133 Japan. ....................................................... 133 Emerging markets . ........................................... 134 U.S. TRADE. ...................................................... 145 CONCLUSION. ................................................... 152 CHAPTER 4 INEQUALITY IN EARLY CHILDHOOD AND EFFECTIVE PUBLIC POLICY INTERVENTIONS . .............................. 153 INTRODUCTION. ................................................ 153 THE ECONOMICS OF INVESTING EARLY AND THE CONSEQUENCES OF EARLY LIFE DISADVANTAGE . .............. 155 Pathways for Returns to Early Investments. ................... 155 Inequality in Early Health and Human Capital Investments .. 156 The Role of Public Investment in Early Childhood. ............ 172 POLICY INTERVENTIONS THAT IMPROVE CHILDREN’S OUTCOMES. ..................................................... 175 Direct, Indirect and In-Kind Investments in Early Health and Human Capital. ............................................. 176 Income and Other Near-Cash Transfer Programs . ............ 200 CONCLUSION. ................................................... 206 12 | Annual Report of the Council of Economic Advisers
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 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 48 and 49: Percent 30 Figure 1-11 Share of Wor
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
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Figure 2-5 Government Purchases as
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13 percent of GDP. Until 1990, Stat
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of new purchases.2 The increase in
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Figure 2-8 Actual and Consensus For
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Figure 2-10 Rates of Part-Time Work
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less than a tenth of the overall de
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Business fixed investment grew 3.1
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Percent 10 Figure 2-14 Personal Sav
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BEA revises the official statistics
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Index* 100 Figure 2-16 Real Income
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Box 2-5: Are Official Estimates of
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of consumer surplus, which should,
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Figure 2-19 National House Price In
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Box 2-6: Constraints on Housing Sup
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and also was estimated in recent re
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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
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ECONOMIC REPORT OF THE PRESIDENT

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