ECONOMIC REPORT OF THE PRESIDENT

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Evaluations of early local Promise programs show that these programs can significantly improve high school graduation, college enrollment, and college graduation rates. A number of research studies have examined the effects of Kalamazoo Promise, the first place-based Promise program. Initiated in 2005, Kalamazoo Promise offers full in-state college tuition to graduates of the Kalamazoo Public Schools in Michigan who have enrolled in the district for at least four years. Using variation in high school eligibility, length of enrollment in the school district, and/or the timing of the program’s announcement and implementation, researchers have found that the program reduced suspensions in high school, improved high school credit completion, led to students sending their test scores to more selective instate institutions, and substantially increased college enrollment and graduation (Andrews, DesJardins and Ranchhod 2010; Bartik and Lachowska 2013; Bartik, Hershbein, and Lachowska 2015; Miller-Adams 2009). Research suggests that the program has had a high rate of return, particularly for African American students (Bartik, Hershbein, and Lachowska 2016). Carruthers and Fox (2016) likewise find large positive effects of another Promise program. Knox Achieves covered the gap between tuition and fees and grant aid from Federal, State, and institutional sources to firstyear community college students making an immediate transition between high school and one of Tennessee’s public community colleges or technology centers. Comparing outcomes before and after the program began between students in eligible districts and students in non-eligible districts, Carruthers and Fox find large impacts on high school graduation and college enrollment, with some shift from the four-year to two-year sector. The positive effects of high school graduation and college enrollment were strongest for lower-achieving and lower-income students. Given the success of Knox Achieves, 27 counties adopted the program to expand eligibility to nearly half of Tennessee’s population in 2014, and the program became the model for the state-wide Tennessee Promise program rolled out in 2015, which guarantees free community college tuition and fees to high school seniors who sign up, apply for financial aid, and meet with a mentor. Analyses of Promise programs in New York, Pittsburgh, El Dorado, and New Haven also show sizeable effects on educational outcomes (Scrivener et al. 2015; Page and Iritri 2016; Ritter and Ash 2016; Gonzalez et al. 2014; Daugherty and Gonzelez 2016). The economics literature suggests that program design matters, and some Promise initiatives may see less success. For example, LeGower and Walsh (2014) suggest that merit-based Promise programs may have more limited effects on college access as they disproportionately benefit wealthier and white households. An analysis of one program, which provides free Investing in Higher Education | 319
Box 5-3: Expansions of Early Education Programs The Administration has been committed to helping students access a high-quality education at all levels of schooling, and the President’s calls for universal preschool and a child care guarantee for working families with young children serve as critical complements to his other proposals. Gaps in educational achievement occur early in life and grow over time, so it is critical to ensure that all children receive the educational foundation to succeed in school and life. On nearly every measure of school readiness, from health to early human capital, children born into low-income households enter kindergarten at a substantial disadvantage relative to their higher-income peers. Indeed, disparities in physical and mental health, cognition, and socio-emotional and behavioral skills develop in children as young as 9 months (Halle et al. 2009). By the time children enter school around age 5, those in poor households are nearly four times more likely to score “very low” on assessments of math skills and over four times more likely to score “very low”’ on reading skills than their peers in more well-off households (Isaacs 2012). This gap remains relatively constant through the beginning of high school, suggesting that achievement gaps in later years are established in the earliest years of childhood (CEA 2016a). Research shows that enrollment in high-quality early childhood education accelerates cognitive and non-cognitive development during primary school years (see CEA 2016a for a review), and can lead to significantly better outcomes later in life—such as greater educational attainment and earnings and less involvement with the criminal justice system (for example, Heckman et al. 2010; Reynolds et al. 2011; Campbell et al. 2012). That is why, in addition to calling for preschool for all and high-quality care for all infants and toddlers, the Obama Administration has worked with Congress to increase investments in early childhood programs by over $6 billion from FY 2009 to FY 2016, including highquality preschool, Head Start, early Head Start, child care subsidies, evidence-based home visiting, and programs for infants and toddlers with disabilities. Since 2009, 38 States and the District of Columbia have increased investments in preschool programs by more than $1.5 billion. community college only to students with at least a 3.0 high school GPA who test out of remediation, found that these conditions limited eligibility to only about 15 percent of the city’s high school graduates (Page and Scott- Clayton 2015; Fain 2014). Additionally, research finds that reducing the cost of lower-quality options can worsen outcomes for students, so attention to college quality in the context of lowering prices to students is essential (Peltzman 1973). A recent Department of Education report (2016a), the 320 | Chapter 5
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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
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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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Page 294 and 295: Woolhandler 2015). These analysts a
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Page 304 and 305: C H A P T E R 5 INVESTING IN HIGHER
Page 306 and 307: Gainful Employment regulations. To
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Page 310 and 311: externalities, credit constraints,
Page 312 and 313: Figure 5-4 Earnings by Age and Educ
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Page 316 and 317: Box 5-1: Anti-Poverty Efforts and E
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Page 322 and 323: Box 5-2: Federal Investments in K-1
Page 326 and 327: America’s College Promise Playboo
Page 328 and 329: Dollars 45,000 40,000 35,000 30,000
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Page 334 and 335: Figure 5-16 Size of Outstanding Loa
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Page 338 and 339: Figure 5-18 Distribution of Key Out
Page 340 and 341: Figure 5-20 Earnings by Family Inco
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Page 344 and 345: Box 5-5: Making Sure Students Enter
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Page 348 and 349: Figure 5-ii Number of Institutions
Page 350 and 351: Figure 5-23 Gainful Employment Earn
Page 352 and 353: Additionally, Pell Grants can be be
Page 354 and 355: C H A P T E R 6 STRENGTHENING THE F
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Page 364 and 365: Too Many Resources in Finance? Beyo
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Page 368 and 369: Percent 100 Figure 6-2 Mortgage Ori
Page 370 and 371: Figure 6-4 Case-Shiller Home Price
Page 372 and 373: 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
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Dobbie, Will, and Roland G. Fryer J
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Committee on Health, Education, Lab
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Jepsen, Christopher, Kenneth Troske
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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
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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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