ECONOMIC REPORT OF THE PRESIDENT

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Figure 1-3 Distribution of Household Wealth (Survey of Consumer Finances), 1989-2013 Percent of Total Household Wealth 60 2013 50 Top 3 Percent 40 30 Bottom 90 Percent 20 Top 4th-10th Percentiles 10 1989 1992 1995 1998 2001 2004 2007 2010 2013 Source: Federal Reserve Board of Governors, Survey of Consumer Finances. of households have held more than 50 percent of aggregate wealth since 2007 (Bricker et al., 2014). This share has been on a consistent uptrend since the late 1980s. The next 7 percent of households in the wealth distribution hold roughly 25 percent of aggregate wealth, a share that been fairly stable time during this period. Notably, the loss in wealth share experienced by the bottom 90 percent of households, which in 2013 held only 25 percent of all wealth is accounted for by the rise in share captured by the top 3 percent. This is not a uniform spreading of the wealth distribution; it is a rising concentration of wealth at the very top. An alternative analysis by Emmanuel Saez and Gabriel Zucman finds that the rise in wealth inequality is due to the very top of the wealth distribution. Using capital income reported on tax returns, they estimate that the share of wealth held by the top 0.1 percent of households has more than tripled, from 7 percent of total household wealth in 1979 to 22 percent in 2012—reversing a decline over the prior decades.1 As shown in Figure 1-4, the wealth share of these households (approximately 160,000 families with average net wealth per family above $20.6 million) is now nearly as large as it was in 1929 (Saez and Zucman 2015). 1 Any method to measure wealth is imperfect and unlike income, individuals are not required to report the value of their wealth each year, so there is no administrative data to use as a benchmark for the distribution, the two methods discussed here each have their advantages and disadvantages. (Bricker et al 2015, Saez and Zucman 2015). Inclusive Growth in the United States | 29
Figure 1-4 Distribution of Household Wealth (Saez-Zucman), 1913–2012 Percent of Total Household Wealth 40 35 30 Bottom 90 Percent 25 20 Top 1 Percent to Top 0.1 Percent 2012 15 10 5 Top 0.1 Percent 0 1913 1923 1933 1943 1953 1963 1973 1983 1993 2003 2013 Source: Saez and Zucman (2015). Saez and Zucman argue that this increase in wealth concentration is compounded by an increase in differences in saving rates across wealth classes (for instance, wealthier individuals save a larger percentage of their income). More generally, they hypothesize that income inequality has a “snowballing effect” on the wealth distribution: a larger share of income is earned by top wealth holders, who then save at higher rates, which pushes wealth concentration up; this dynamic leads to rising capital-income concentration and contributes to even greater top income and wealth shares. Rising wealth inequality is perhaps best understood as the ultimate outcome of economic growth that leaves the middle class behind. But it is also an important cause of income inequality. In part, it directly reinforces itself because concentrated wealth leads to concentrated capital income. But more importantly, it helps entrench a broader inequality of opportunity that blocks the path to full economic participation for wide swaths of the potential U.S. labor force and innovation force. Inequality of Opportunity The traditional argument that inequality results from normal economic competition rests on the notion that competition for unequally distributed rewards encourages production. But when inequality has become so entrenched that it passes across generations and limits opportunity, it 30 | 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 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
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
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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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