ECONOMIC REPORT OF THE PRESIDENT

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C O N T E N T S CHAPTER 1: EIGHT YEARS OF RECOVERY AND REINVESTMENT. .... 21 THE RECOVERY IN REVIEW. ....................................... 22 Employment and Wages. ........................................ 22 Output and Economic Growth. .................................. 25 Equity Markets, House Prices, Household Wealth, and Other Measures. ................................................ 26 THE CRISIS AND THE RESPONSE. ................................... 28 A Once-in-a-Lifetime Crisis. ..................................... 28 The Policy Response. ............................................ 30 THE 2017 ECONOMIC REPORT OF THE PRESIDENT: PROMOTING STRONGER, MORE INCLUSIVE, AND MORE SUSTAINABLE GROWTH . 43 Chapter 3: Reducing Inequality. ................................. 43 Chapter 4: Reforming the Health Care System. .................... 45 Chapter 5: Investing in Higher Education. ........................ 47 Chapter 6: Strengthening the Financial System. ................... 51 Chapter 7: Addressing Climate Change. .......................... 53 FOUR CONTINUED STRUCTURAL CHALLENGES: PRODUCTIVITY, INEQUALITY, PARTICIPATION, AND SUSTAINABILITY. .............. 57 Productivity Growth. ........................................... 58 Income Inequality. ............................................. 59 Labor Force Participation. ...................................... 61 Economic Sustainability. ........................................ 61 CONCLUSION. ..................................................... 63 CHAPTER 2: THE YEAR IN REVIEW AND THE YEARS AHEAD. ........ 65 POLICY DEVELOPMENTS. .......................................... 68 Fiscal Policy ................................................... 68 Monetary Policy. ............................................... 70 LABOR MARKET. .................................................. 76 OUTPUT. .......................................................... 85 Consumer Spending. ............................................ 85 Housing Markets. .............................................. 98 Investment. ................................................... 104 Net Exports. .................................................. 108 PRODUCTIVITY. .................................................. 113 WAGE AND PRICE INFLATION. .................................... 122 FINANCIAL MARKETS. ............................................ 125 Equity Markets. ............................................... 126 Interest Rates and Credit Spreads. .............................. 127 Energy Prices. ................................................. 130 THE GLOBAL MACROECONOMIC SITUATION. ..................... 130 Global Headwinds and Trade. .................................. 132 Developments in 2016. ......................................... 134 THE OUTLOOK. .................................................. 140 11
GDP Growth over the Next Three Years. ......................... 140 GDP Growth over the Long Term. .............................. 143 CONCLUSION. .................................................... 149 CHAPTER 3: PROGRESS REDUCING INEQUALITY. ................... 151 THE RECOVERY ACT: RESTORING GROWTH. ...................... 156 Reducing Unemployment and Earnings Inequality. ............... 158 Supporting Struggling Families. ................................. 162 THE AFFORDABLE CARE ACT: PROVIDING AFFORDABLE, ACCESSIBLE HEALTH INSURANCE. ................................ 165 Reducing Disparities in Health Coverage and Health Status. ....... 166 Reducing Poverty and Income Inequality. ........................ 170 ENACTING A FAIRER TAX CODE. .................................. 171 Cutting Taxes to Support Work, Reduce Poverty, and Strengthen Opportunity. ....................................... 171 Restoring Tax Rates to Their Level in the 1990s and Increasing Progressivity. ....................................... 174 Reducing Poverty and Income Inequality. ........................ 175 THE OBAMA ADMINISTRATION’S RECORD IN HISTORICAL CONTEXT. ........................................................ 177 The Combined Impact of Changes in Tax Policy and the ACA Coverage Provisions. ........................................... 177 Obama Administration Achievements Relative to Other Federal Action in Recent Decades. ...................................... 183 A Partial Reversal of Increasing Inequality. ...................... 187 NEXT STEPS TO FURTHER BOOST INCOMES, EXPAND OPPORTUNITY, AND REDUCE INEQUALITY. ....................... 188 Making Work Pay. ............................................ 189 Investing in Children and Families. ............................. 189 Reforming the Tax System. ..................................... 191 CONCLUSION .................................................... 192 APPENDIX: DISTRIBUTION OF CHANGES IN TAX POLICY SINCE 2009 AND ACA COVERAGE PROVISIONS. .................... 193 CHAPTER 4: REFORMING THE HEALTH CARE SYSTEM. ............. 195 INTRODUCTION. ................................................. 195 EXPANDING AND IMPROVING HEALTH INSURANCE COVERAGE. ...................................................... 199 Barriers to Obtaining Health Insurance Coverage Before the Obama Administration. ....................................... 200 Reforms to Expand Health Insurance Coverage. .................. 206 Economic Consequences of Broader Health Insurance Coverage. ... 223 REFORMING THE HEALTH CARE DELIVERY SYSTEM. ............... 243 Health Care Costs and Quality Before the Affordable Care Act. .... 243 Reforms to the Health Care Delivery System Under the Obama Administration. ............................................... 247 Recent Trends in Health Care Costs and Quality. ................. 261 Economic Benefits of a Better Health Care Delivery System. ....... 289 CONCLUSION. .................................................... 298 CHAPTER 5: INVESTING IN HIGHER EDUCATION. .................. 299 INTRODUCTION. ................................................. 299 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: eforms in history. Banks have sharp
Page 12: the annual report of the council of
Page 18 and 19: . THE ECONOMIC RATIONALE FOR FEDERA
Page 20 and 21: 2.4. Government Purchases as Share
Page 22 and 23: 4.iii. Premium for the Benchmark Pl
Page 24 and 25: 6.18. Systemic Risk (SRISK) 2005-20
Page 26 and 27: C H A P T E R 1 EIGHT YEARS OF RECO
Page 28 and 29: Figure 1-1 Actual and Consensus For
Page 30 and 31: Figure 1-3 Real Hourly Wage Growth
Page 32 and 33: Figure 1-4 Real GDP per Capita: Eur
Page 34 and 35: Figure 1-6 Household Net Worth in t
Page 36 and 37: Figure 1-8 Global Trade Flows in th
Page 38 and 39: Subsequent revisions to fourth-quar
Page 40 and 41: Percent 6 Figure 1-9 Fiscal Expansi
Page 42 and 43: substantial costs to the Federal Go
Page 44 and 45: worked to promote innovation and in
Page 46 and 47: expansion, a period of low producti
Page 48 and 49: The 2017 Economic Report of the Pre
Page 50 and 51: Chapter 4: Reforming the Health Car
Page 52 and 53: to the ACA and other factors. The A
Page 54 and 55: than 98 percent of Americans should
Page 56 and 57: Figure 1-13 Borrowers in Income Dri
Page 58 and 59: success of the financial rescue and
Page 60 and 61: einforced U.S. leadership in the ru
Page 62 and 63: Partnership (OGP), a global partner
Page 64 and 65: 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
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Table 2-i Optimal Weighting for Hou
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esults suggest that, to a first app
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Figure 2-viii Real GDP, Average and
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Figure 2-13 Consumer Sentiment and
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Figure 2-xi Household Debt Service,
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Ratio to Annual DPI 1.10 1.05 Figur
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Figure 2-17 National House Price In
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Index 220 Figure 2-19 Housing Affor
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Figure 2-21 Composition of Growth i
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Figure 2-23 Capital Services per Un
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Box 2-7: Explanations for the Recen
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Figure 2-xv Business Fixed Investme
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Figure 2-26 Foreign Real GDP and U.
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somewhat generalizable (Box 2-8), b
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prices weakened and the global econ
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inadequate demand has contributed t
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Figure 2-31 Nominal Wage Inflation
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Figure 2-33 Real Hourly Wage Growth
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Index 6 Figure 2-36 Financial Condi
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Percent 4.0 Figure 2-38 Nominal Lon
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Dollars per Barrel 80 Figure 2-40 B
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Figure 2-41 IMF World Real GDP Grow
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against the Mexican peso, the Chine
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United Kingdom It has been a turbul
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for example, Japan has grown almost
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Figure 2-45 Credit to Nonfinancial
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Meanwhile, core inflation (excludin
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kept rates low across a wide range
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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.
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______. 2015a. “Economic Costs of
Page 525 and 526:
Dobbie, Will, and Roland G. Fryer J
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Committee on Health, Education, Lab
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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
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Wheelock, David C., and Paul W. Wil
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______. 2016a. “The Economics of
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______. 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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