ECONOMIC REPORT OF THE PRESIDENT

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Figure 2-45 Credit to Nonfinancial Sector (Public and Private), 2000–2016 Percent of GDP 280 240 USA 2016:Q1 200 160 India China Brazil 120 80 40 South Africa Russia 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: Bank for International Settlements. driven more by private consumption. However, more recently, China may be postponing its longer-term goal of rebalancing in order to stabilize growth in the near term after growth fell from 7.2 percent in the four quarters ended in 2014:Q4 to 6.7 percent in the four quarters ended in 2016:Q3. In 2016, credit growth has been rapid, increasing financial risks, with credit to the non-financial sector as a percent of GDP now exceeding that of major emerging market economies (see Figure 2-45), real estate prices hitting record highs, and distressed bank assets rising. Against this backdrop, the Chinese renminbi (RMB) has been gradually depreciating since mid-2015 against both the dollar and a weighted basket of currencies. Net capital outflows, which had stabilized in the spring and early summer, edged up again in the third quarter and uncertainty about the course of policy in the near term may be putting downward pressure against the RMB. China’s current account surplus is well below its recent peak, but has been considerably above levels the IMF assesses to be appropriate, and it still constitutes a substantial portion of the world’s current account surpluses. As China’s economy grew to 15 percent of global GDP in 2015, targeted industrial policies have made it the world’s largest manufacturer and the dominant producer of some key goods in the global marketplace, as well as a major source of demand for an array of goods, magnifying the effects of changes in its domestic economy on global prices and growth. Delays in The Year in Review and the Years Ahead | 139
adjusting to changing dynamics in the world economy have led to excess capacity in some industries where China is a dominant player. Adjusting to these factors poses additional challenges for policymakers. Economic growth in India continues at a solid pace of a projected 7.4 percent over the 4 quarters of 2016 (IMF 2016b). Private consumption has been a major driver in economic growth, contributing 4.3 percentage points to its 7.3 percent real GDP growth rate in the four quarters through 2016:Q3. Lower inflation and fiscal consolidation over the past year has created additional policy space for India to stimulate growth should a crisis occur. Macroeconomic risks revolve around inflationary pressure stemming from increasing commodity prices, which could weigh on the current account and fiscal deficit (OECD 2016). Inefficiencies remain in the public sector, with India’s poor still lacking health care coverage, educational attainment, and access to financial services (IMF 2016a). Further, inequality in India remains high. The Outlook GDP Growth over the Next Three Years After growing roughly 2.6 percent on average during the four quarters of 2013 and 2014, real GDP growth averaged 1.9 percent during the four quarters of 2015 and 1.8 percent at an annual rate during the first three quarters of 2016. The Administration forecast (finalized on November 9, 2016) projects an acceleration to 2.4-percent growth during the four quarters of 2017. The Administration forecast is the same as the CBO’s August 2016 forecast and slightly above the Blue-Chip November consensus forecast of 2.2 percent. All forecasts implicitly or explicitly make assumptions about the future course of economic policy. The Administration’s forecast is based on a baseline that assumes enactment of the President’s policies, most of which were spelled out in the budget released in February 2016. In contrast, the CBO forecast assumes that current laws are unchanged while the Blue Chip implicitly reflects the expectations that private forecasters have about what policies will actually be enacted in the future. The Administration’s forecast expects that forces that influence investment and government spending point to faster growth in 2017 than in the recent past, while consumer spending will moderate somewhat and international forces will likely be a drag on growth. With a strengthening State and local sector, State and local fiscal actions will likely be somewhat expansionary in 2017. 140 | 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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to the ACA and other factors. The A
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than 98 percent of Americans should
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Figure 1-13 Borrowers in Income Dri
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success of the financial rescue and
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einforced U.S. leadership in the ru
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Partnership (OGP), a global partner
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Figure 1-16 Labor Productivity Grow
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Labor Force Participation Household
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number of steps to ensure that econ
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C H A P T E R 2 THE YEAR IN REVIEW
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Percent 11 Figure 2-1 Unemployment
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allowing for additional investments
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Percentage Point 0.6 0.4 Figure 2-3
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public, largely highway constructio
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The size of the Federal Reserve’s
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Figure 2-5 Private-Sector Payroll E
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fell 80 percent from September 2014
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Figure 2-8 Rates of Part-Time Work,
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Figure 2-v Prime-Age Male Labor For
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Output Real GDP grew 1.6 percent ov
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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 102 and 103: Figure 2-xi Household Debt Service,
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 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
Page 152 and 153: Table 2-2 Supply-Side Components of
Page 154: Conclusion The economy continued to
Page 157 and 158: not increased from 1973 to 2013, in
Page 159 and 160: developments; individual behavior;
Page 161 and 162: action affecting income inequality
Page 163 and 164: have occurred. In doing so, these p
Page 165 and 166: Percent 24 21 18 15 12 9 6 African
Page 167 and 168: without the policy response.5 These
Page 169 and 170: Box 3-2: Income Inequality and the
Page 171 and 172: unable to obtain insurance at any p
Page 173 and 174: Figure 3-7B Percent 50 Uninsured Ra
Page 175 and 176: and have not expanded Medicaid foun
Page 177 and 178: Box 3-3: Safety Net Policies as Ins
Page 179 and 180: Millions of People 18 Figure 3-8 Im
Page 181 and 182: Figure 3-9 Effective Tax Rates for
Page 183 and 184: Box 3-4: Additional Actions to Make
Page 185 and 186: $294 million in newly appropriated
Page 187 and 188: 15 10 5 0 -5 -10 -15 Figure 3-12 Pe
Page 189 and 190: Administration with those of previo
Page 191 and 192: as a share of potential GDP by Pres
Page 193 and 194: 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
Page 392 and 393:
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
Page 402 and 403:
lower funding costs in 2007-09, “
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through the Dodd-Frank Act and othe
Page 406 and 407:
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
Page 414 and 415:
Box 6-5: Addressing the Problem of
Page 416 and 417:
Table 6-i Sources of Investment Adv
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financial system and the systems of
Page 420 and 421:
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
Page 435 and 436:
investment are much higher than the
Page 437 and 438:
Delaying Action on Climate Change I
Page 439 and 440:
uses and land management activities
Page 441 and 442:
Carbon Pollution Standards for Powe
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a projected range of $16 billion to
Page 445 and 446:
these resulted in insignificant cha
Page 447 and 448:
Figure 7-4 Corporate Average Fuel E
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diesel fuel and jet fuel. The Vehic
Page 451 and 452:
Box 7-3: Building Resilience to Cur
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sources in the oil and gas sector,
Page 455 and 456:
emissions and total greenhouse gas
Page 457 and 458:
Figure 7-7 Energy Intensity of Real
Page 459 and 460:
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
Page 471 and 472:
Figure 7-23 Decomposition of Emissi
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three determinants of emissions? If
Page 475 and 476:
Percent 100 80 Figure 7-26 Sectoral
Page 477 and 478:
characteristics, and management tre
Page 479 and 480:
oil and gas sector) were subsequent
Page 481 and 482:
while creating new jobs and raising
Page 483 and 484:
such as using similar methodologies
Page 485 and 486:
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
Page 491 and 492:
Reinvestment Act.” NBER Working P
Page 493 and 494:
D’Amico, Stefania, et al. 2012.
Page 495 and 496:
______. 2016. “Chapter 3: Develop
Page 497 and 498:
Chetty, Raj, et al. 2014. “Where
Page 499 and 500:
NBER Working Paper 22170. Cambridge
Page 501 and 502:
American Hospital Association and H
Page 503 and 504:
Cantor, Joel C., et al. 2012. “Ea
Page 505 and 506:
______. 2012a. “Direct Spending a
Page 507 and 508:
Dranove, David, Craig Garthwaite, a
Page 509 and 510:
Wars: Global Solutions for Developi
Page 511 and 512:
Huang, Jidong, and Frank J. Chaloup
Page 513 and 514:
McWilliams, J. Michael. 2016. “Ch
Page 515 and 516:
Pinkovskiy, Maxim. 2014. “The Imp
Page 517 and 518:
______. 2016. “Certification of M
Page 519 and 520:
Arcidiacono, Peter, V. Joseph Hotz,
Page 521 and 522:
Bulman, George, and Caroline Hoxby.
Page 523 and 524:
______. 2015a. “Economic Costs of
Page 525 and 526:
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. “
Page 533 and 534:
Reynolds, Arthur J., et al. 2011.
Page 535 and 536:
Chapter 6 Acharya, Viral. V., Deniz
Page 537 and 538:
Fama, Eugene F., and Kenneth R. Fre
Page 539 and 540:
Wheelock, David C., and Paul W. Wil
Page 541 and 542:
______. 2016a. “The Economics of
Page 543 and 544:
______. 2016c. Short Term Energy Ou
Page 545 and 546:
Interagency Working Group on the So
Page 547 and 548:
Office of Management and Budget (OM
Page 550:
A P P E N D I X A REPORT TO THE PRE
Page 553 and 554:
Council Members and Their Dates of
Page 556 and 557:
Report to the President on the Acti
Page 558 and 559:
consulting with a wide variety of o
Page 560 and 561:
In October, the Council released a
Page 562 and 563:
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
Page 571 and 572:
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
Page 579 and 580:
Table B-9. Median money income (in
Page 581 and 582:
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
Page 595 and 596:
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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