ECONOMIC REPORT OF THE PRESIDENT

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Figure 2-xi Household Debt Service, 1990–2016 Percent of Disposable Income 14 Total Debt Service 12 10 2016:Q2 8 6 Mortgage Debt Service Consumer Debt Service 4 2 0 1990 1995 2000 2005 2010 2015 Source: Federal Reserve Board. In addition to lower debt balances and strong asset returns, low interest rates have further supported household finances. Debt service costs as a fraction of disposable personal income, which reflects the current burden of carrying debt including interest and principal payments, fell from 13 percent in 2007 to only 10 percent in 2013. This leaves households with more cash to spend. As shown in Figure 2-xi, the debt service-to-income ratio has held steady at this new lower level since 2013, with mortgage expenses continuing to decline while servicing costs for consumer debt—which includes automobile, student, and credit card debt—having increased somewhat. Strong household balance sheets, together with low debt servicing costs, help to support consumption growth. As shown in Figure 2-xii, though household debt has begun to grow once more it is still growing very slowly—on a four-quarter basis, growth is still lower than in any period between 1971 and 2007. These developments, along with strong growth in employment and wages, have allowed households to increase their consumption. In particular, spending on durable goods—which are more likely to be paid for with borrowing and thus sensitive to balance sheet and interest rate considerations—accounted for 26 percent of personal consumption growth from 2014 through 2016:Q3, despite making up only 11 percent of expenditures. A large portion of this growth in durable goods spending comes from sales of motor vehicles, The Year in Review and the Years Ahead | 97
which fell sharply in the Great Recessions and were slow to recover until more recently. Figure 2-xii Household Debt and Real Consumer Spending Growth, 1970–2016 Four-Quarter Percent Change 20 16 12 Household Debt 8 4 2016:Q3 0 Real PCE -4 -8 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Source: Bureau of Economic Analysis; Federal Reserve Board. Earlier gains in household net worth (that is, assets less debts, also referred to as household wealth), such as the moderate increases in equity wealth so far in 2016, also supported consumer-spending growth in 2016 (Figure 2-15). The wealth-to-income ratio remained elevated in 2016, following a marked increase during 2013. Changes in net worth have been spread unevenly across households, though, and these disparities may have implications for families and macroeconomic activity. Housing Markets The housing market recovery continued in the first quarter of 2016, but residential investment was a drag on economic growth in the second and third quarters. In 2016, sales of newly constructed single-family homes and single-family housing starts, bolstered by strong labor market conditions and low mortgage interest rates, averaged their highest annual level through the first 10 months of a year since 2007. However, growth in new construction slowed from its 2015 pace: total housing starts and permits zig-zagged around their 2015 level. Real residential investment decreased 1.7 percent 98 | Chapter 2
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ECONOMIC REPORT OF THE PRESIDENT To
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C O N T E N T S ECONOMIC REPORT OF
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economic report of the president To
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eforms in history. Banks have sharp
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the annual report of the council of
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C O N T E N T S CHAPTER 1: EIGHT YE
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. THE ECONOMIC RATIONALE FOR FEDERA
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2.4. Government Purchases as Share
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4.iii. Premium for the Benchmark Pl
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6.18. Systemic Risk (SRISK) 2005-20
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C H A P T E R 1 EIGHT YEARS OF RECO
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Figure 1-1 Actual and Consensus For
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Figure 1-3 Real Hourly Wage Growth
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Figure 1-4 Real GDP per Capita: Eur
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Figure 1-6 Household Net Worth in t
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Figure 1-8 Global Trade Flows in th
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Subsequent revisions to fourth-quar
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Percent 6 Figure 1-9 Fiscal Expansi
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substantial costs to the Federal Go
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worked to promote innovation and in
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expansion, a period of low producti
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The 2017 Economic Report of the Pre
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Chapter 4: Reforming the Health Car
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Page 56 and 57: Figure 1-13 Borrowers in Income Dri
Page 58 and 59: success of the financial rescue and
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Page 64 and 65: Figure 1-16 Labor Productivity Grow
Page 66 and 67: Labor Force Participation Household
Page 68 and 69: number of steps to ensure that econ
Page 70 and 71: C H A P T E R 2 THE YEAR IN REVIEW
Page 72 and 73: Percent 11 Figure 2-1 Unemployment
Page 74 and 75: allowing for additional investments
Page 76 and 77: Percentage Point 0.6 0.4 Figure 2-3
Page 78 and 79: public, largely highway constructio
Page 80 and 81: The size of the Federal Reserve’s
Page 82 and 83: Figure 2-5 Private-Sector Payroll E
Page 84 and 85: fell 80 percent from September 2014
Page 86 and 87: Figure 2-8 Rates of Part-Time Work,
Page 88 and 89: Figure 2-v Prime-Age Male Labor For
Page 90 and 91: Output Real GDP grew 1.6 percent ov
Page 92 and 93: Figure 2-11 Compensation and Consum
Page 94 and 95: Table 2-i Optimal Weighting for Hou
Page 96 and 97: esults suggest that, to a first app
Page 98 and 99: Figure 2-viii Real GDP, Average and
Page 100 and 101: Figure 2-13 Consumer Sentiment and
Page 104 and 105: Ratio to Annual DPI 1.10 1.05 Figur
Page 106 and 107: Figure 2-17 National House Price In
Page 108 and 109: Index 220 Figure 2-19 Housing Affor
Page 110 and 111: Figure 2-21 Composition of Growth i
Page 112 and 113: Figure 2-23 Capital Services per Un
Page 114 and 115: Box 2-7: Explanations for the Recen
Page 116 and 117: Figure 2-xv Business Fixed Investme
Page 118 and 119: Figure 2-26 Foreign Real GDP and U.
Page 120 and 121: somewhat generalizable (Box 2-8), b
Page 122 and 123: prices weakened and the global econ
Page 124 and 125: inadequate demand has contributed t
Page 126 and 127: Figure 2-31 Nominal Wage Inflation
Page 128 and 129: Figure 2-33 Real Hourly Wage Growth
Page 130 and 131: Index 6 Figure 2-36 Financial Condi
Page 132 and 133: Percent 4.0 Figure 2-38 Nominal Lon
Page 134 and 135: Dollars per Barrel 80 Figure 2-40 B
Page 136 and 137: Figure 2-41 IMF World Real GDP Grow
Page 138 and 139: against the Mexican peso, the Chine
Page 140 and 141: United Kingdom It has been a turbul
Page 142 and 143: for example, Japan has grown almost
Page 144 and 145: Figure 2-45 Credit to Nonfinancial
Page 146 and 147: Meanwhile, core inflation (excludin
Page 148 and 149: kept rates low across a wide range
Page 150 and 151: Investments in surface transportati
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Table 2-2 Supply-Side Components of
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Conclusion The economy continued to
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not increased from 1973 to 2013, in
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developments; individual behavior;
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action affecting income inequality
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have occurred. In doing so, these p
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Percent 24 21 18 15 12 9 6 African
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without the policy response.5 These
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Box 3-2: Income Inequality and the
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unable to obtain insurance at any p
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Figure 3-7B Percent 50 Uninsured Ra
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and have not expanded Medicaid foun
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Box 3-3: Safety Net Policies as Ins
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Millions of People 18 Figure 3-8 Im
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Figure 3-9 Effective Tax Rates for
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Box 3-4: Additional Actions to Make
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$294 million in newly appropriated
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15 10 5 0 -5 -10 -15 Figure 3-12 Pe
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Administration with those of previo
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as a share of potential GDP by Pres
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Figure 3-17 Changes in the Distribu
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30 25 20 15 10 5 0 Single Source: C
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ate on capital gains and dividends
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C H A P T E R 4 REFORMING THE HEALT
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eneficiaries have received cumulati
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form of lower premium costs and ind
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Percent 25 20 Creation of Medicare
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Figure 4-3 Health Insurance Coverag
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90 80 70 60 50 40 30 20 10 0 25 55
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Percent Uninsured 25 CHIP Created 2
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Legislative actions subsequent to C
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Percent Uninsured 40 35 Figure 4-7
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ecause of the ACA’s provision all
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Box 4-2: Dynamics in the Individual
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projected during the debate over th
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whelming majority of Marketplace en
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Figure 4-v Change in Benchmark Prem
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20 Figure 4-10 Share of Workers in
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percent during the decade preceding
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Panel A: Share with a Personal Doct
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Box 4-3: Interpreting Results from
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Fortunately, the OHIE is not the on
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Figure 4-14 Uncompensated Care as a
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Figure 4-15 Uninsured Rate by Popul
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Figure 4-17 Monthly Gain in Private
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Change in Working-Age Employment to
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this cross-sectional relationship b
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ecent discussions of macroeconomic
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Figure 4-23 Life Expectancy at Birt
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Figure 4-24 Mortality Rate vs. Medi
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more to cover Medicare patients tha
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example, through CMMI, the Administ
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orient payment around the entirety
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Percent of Payments 60 Figure 4-26
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covered under ACO contracts at the
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Additional Steps to Reform the Heal
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legislation that overrides the reco
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Figure 4-28 Health Care Price Infla
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Figure 4-30 Trends in Real Prices f
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average growth rate of real per enr
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Figure 4-34 Growth in Real Costs fo
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made a large, readily quantifiable
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in states experiencing weaker and s
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distribution, holding fixed both sp
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individuals among individuals 65 an
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Figure 4-40 Average Real Deductible
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Figure 4-41 Real Per-Enrollee Presc
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educe the growth rate of Medicare s
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improvements will strengthen ACOs
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-5 0 -2 Figure 4-42 Cumulative Perc
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Woolhandler 2015). These analysts a
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productivity on the job. These bene
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Figure 4-46 Premiums and Cost Shari
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(KFF 2016). Another fifth of tradit
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2030 2028 2026 2024 2022 2020 2018
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C H A P T E R 5 INVESTING IN HIGHER
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Gainful Employment regulations. To
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Thousands of 2015 Dollars 900 800 7
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externalities, credit constraints,
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Figure 5-4 Earnings by Age and Educ
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Figure 5-5 Variation in Earnings by
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Box 5-1: Anti-Poverty Efforts and E
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careers. Some of the effects of the
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eligibility cutoff likewise finds s
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Box 5-2: Federal Investments in K-1
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Evaluations of early local Promise
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America’s College Promise Playboo
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Dollars 45,000 40,000 35,000 30,000
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pre-payment penalty. Second, by tyi
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equirements, pushed efforts associa
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Figure 5-16 Size of Outstanding Loa
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Figure 5-17 Average Monthly Payment
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Figure 5-18 Distribution of Key Out
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Figure 5-20 Earnings by Family Inco
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to student needs and improve test s
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Box 5-5: Making Sure Students Enter
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prior, the early FAFSA reform helps
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Figure 5-ii Number of Institutions
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Figure 5-23 Gainful Employment Earn
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Additionally, Pell Grants can be be
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C H A P T E R 6 STRENGTHENING THE F
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with no easy way to get the funds f
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public has limited information, run
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value added of the sector has gradu
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managers. Thus, after fees, savers
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Too Many Resources in Finance? Beyo
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of the firm after the purchase affe
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Percent 100 Figure 6-2 Mortgage Ori
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Figure 6-4 Case-Shiller Home Price
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Figure 6-7 Global OTC Derivative Ma
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consumer and investor protections.
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Figure 6-iv Top 5 Banks as Share of
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cult to replace with services from
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Are U.S. Banks Too Big? The questio
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The three federal banking agencies
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Risk Taking The Dodd-Frank Act took
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Box 6-3: The Performance of Communi
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Figure 6-ix Return on Assets of Ban
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egulators can take a more holistic
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Figure 6-13 Repo and Reverse Repo,
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Figure 6-15 Private Funds Reporting
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Days 60 Figure 6-16 Weighted-Averag
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Figure 6-18 Systemic Risk (SRISK),
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In the absence of another financial
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lower funding costs in 2007-09, “
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through the Dodd-Frank Act and othe
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Prior to the financial crisis, one
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asis.24 One of the advantages of ce
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findings from the NRSRO examination
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Prior to the crisis, enforcement of
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Box 6-5: Addressing the Problem of
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Table 6-i Sources of Investment Adv
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financial system and the systems of
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Box 6-6: The JOBS Act While it was
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Figure 6-23 S&P 500, 2003-2016 Inde
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Figure 6-27 Mortgage Delinquency an
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It created the FSOC to consider ris
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energy efficient and lower greenhou
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of domestic actions to reduce green
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people and vegetation (U.S. Global
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investment are much higher than the
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Delaying Action on Climate Change I
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uses and land management activities
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Carbon Pollution Standards for Powe
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a projected range of $16 billion to
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these resulted in insignificant cha
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Figure 7-4 Corporate Average Fuel E
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diesel fuel and jet fuel. The Vehic
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Box 7-3: Building Resilience to Cur
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sources in the oil and gas sector,
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emissions and total greenhouse gas
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Figure 7-7 Energy Intensity of Real
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Figure 7-10 U.S. Petroleum Consumpt
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Figure 7-12 Energy Intensity Transp
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Figure 7-14c Energy Intensity Comme
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Figure 7-16 U.S. Energy Consumption
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2008 to 7 percent in 2015. Figure 7
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Index, 2008 =0 0.1 0.0 -0.1 Figure
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Figure 7-23 Decomposition of Emissi
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three determinants of emissions? If
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Percent 100 80 Figure 7-26 Sectoral
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characteristics, and management tre
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oil and gas sector) were subsequent
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while creating new jobs and raising
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such as using similar methodologies
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Box 7-4: Supporting Increased Penet
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sector, the fee would incentivize p
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to be used to decompose emissions i
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Reinvestment Act.” NBER Working P
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D’Amico, Stefania, et al. 2012.
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______. 2016. “Chapter 3: Develop
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Chetty, Raj, et al. 2014. “Where
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NBER Working Paper 22170. Cambridge
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American Hospital Association and H
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Cantor, Joel C., et al. 2012. “Ea
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______. 2012a. “Direct Spending a
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Dranove, David, Craig Garthwaite, a
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Wars: Global Solutions for Developi
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Huang, Jidong, and Frank J. Chaloup
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McWilliams, J. Michael. 2016. “Ch
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Pinkovskiy, Maxim. 2014. “The Imp
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______. 2016. “Certification of M
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Arcidiacono, Peter, V. Joseph Hotz,
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Bulman, George, and Caroline Hoxby.
Page 523 and 524:
______. 2015a. “Economic Costs of
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Dobbie, Will, and Roland G. Fryer J
Page 527 and 528:
Committee on Health, Education, Lab
Page 529 and 530:
Jepsen, Christopher, Kenneth Troske
Page 531 and 532:
Marcotte, Dave E., et al. 2005. “
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Reynolds, Arthur J., et al. 2011.
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Chapter 6 Acharya, Viral. V., Deniz
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Fama, Eugene F., and Kenneth R. Fre
Page 539 and 540:
Wheelock, David C., and Paul W. Wil
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______. 2016a. “The Economics of
Page 543 and 544:
______. 2016c. Short Term Energy Ou
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Interagency Working Group on the So
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Office of Management and Budget (OM
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A P P E N D I X A REPORT TO THE PRE
Page 553 and 554:
Council Members and Their Dates of
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Report to the President on the Acti
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consulting with a wide variety of o
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In October, the Council released a
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Research Economists David Boddy . .
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A P P E N D I X B STATISTICAL TABLE
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GOVERNMENT FINANCE, INTEREST RATES,
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Year or quarter Table B-1. Percent
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Table B-2. Gross domestic product,
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Table B-3. Quantity and price index
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Table B-5. Real exports and imports
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Year Total Table B-7. Real farm inc
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Table B-9. Median money income (in
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Labor Market Indicators Table B-11.
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Year or month Table B-12. Civilian
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Table B-14. Employees on nonagricul
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Year or month Table B-15. Hours and
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Government Finance, Interest Rates,
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Table B-19. Federal receipts and ou
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Table B-21. Federal and State and l
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Table B-23. U.S. Treasury securitie
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Year and month Bills (at auction) 1
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Year and month Table B-26. Money st
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ECONOMIC REPORT OF THE PRESIDENT

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