ECONOMIC REPORT OF THE PRESIDENT

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Box 6-6: The JOBS Act While it was an imperative to correct the market failures and excesses in the pre-2008 financial system, an important aspect of financial regulatory reform is ensuring funds can be channeled to entrepreneurs who have productive uses for capital. In April of 2012, the President signed into law the Jumpstart Our Business Startups (JOBS) Act, a bipartisan bill that enacts many of the President’s proposals to encourage startups and support the nation’s small businesses. The Act allows for “crowdfunding”, expands “mini-public offerings,” and creates an “IPO on-ramp”, all of which allow for easier funding of small businesses while maintaining important investor protections. As implemented by the Securities and Exchange Commission, “crowdfunding” allows startups and small businesses to raise up to $1 million annually from many small-dollar investors through web-based platforms, democratizing access to capital. Investor protections include a requirement that crowdfunding platforms must be registered with a self-regulatory organization and regulated by the SEC. In addition, investors’ annual combined investments in crowdfunded securities are limited based on an income and net worth test. SEC rules implementing the crowdfunding portion of the JOBS Act became effective in May 2016 making it possible for entrepreneurs across the country to raise smalldollar investments from ordinary Americans. Prior to the JOBS Act, the existing “Regulation A” exemption from certain SEC requirements for small businesses seeking to raise less than $5 million in a public offering was seldom used. The JOBS Act raises this threshold to $50 million, streamlining the process for smaller innovative companies to raise capital consistent with investor protections. The SEC rules implementing this portion of the Act became effective in the summer of 2015. The JOBS Act makes it easier for young, high-growth firms to go public by providing an incubator period for a new class of “Emerging Growth Companies.” During this period, qualifying companies will have time to reach compliance with certain public company disclosure and auditing requirements after their initial public offering (IPO). Any firm that goes public already has up to two years after its IPO to comply with certain Sarbanes-Oxley auditing requirements. The JOBS Act extended that period to a maximum of five years, or less if during the on-ramp period a company achieves $1 billion in gross revenue, $700 million in public float, or issues more than $1 billion in non-convertible debt in the previous three years. Additionally, the JOBS Act changed some existing limitations on how companies can solicit private investments from “accredited inves- Strengthening the Financial System | 415
tors,” tasked the SEC with ensuring that companies take reasonable steps to verify that such investors are accredited, and gave companies more flexibility to plan their access to public markets and incentivize employees. Taken together, the components of the JOBS Act has the potential to enable entrepreneurs and small businesses to raise capital not previously available to them, increasing overall levels of capital formation in the economy. Americans’ net wealth. Measures of volatility or financial market stress are all largely contained as well. Finally, there is evidence – from firm loans to home mortgages – that capital is being channeled towards productive uses. Implementation of the Jumpstart Our Business Startups (JOBS) Act (see Box 6-6) has made it easier for entrepreneurs and small businesses to raise capital and grow. Performance in financial markets is driven by economic fundamentals as well as factors related to the markets themselves. The fact that markets have been up does not mean that the Dodd-Frank Act has been a success any more than would declining markets represent a failure of financial reform. But the recovery of markets and their ability to serve the core roles they play in the economy is an indicator of the success of the financial rescue and reform efforts in this Administration. General Measures of Financial Sector Health The stock market has more than recovered from the losses suffered during the financial crisis. One broad measure of U.S. stock market performance, the S&P 500 index, fell from a peak of over 1,500 in Fall 2007 to a trough below 700 in March 2009, a decline of more than 50 percent. Since then the market has recovered all of that loss and risen above 2,150 in Fall 2016 (Figure 6-23). Forward-looking measures of equity market volatility are relatively low. Derived from options on the S&P 500 index, the VIX is a measure of expected volatility over the life of the option. The VIX, also referred to as the “fear index”, is well below the crisis peak of over 60 percent (Figure 6-24). As of November 2016, the VIX was at 15.2 percent, which is below its 17-year pre-crisis average of almost 19 percent. Measures of bond market health have also recovered from the financial crisis. The bond market analogue of the VIX, the Merrill Lynch Option Volatility Estimate (MOVE) Index, is a yield curve weighted index of the implied volatility on 1-month Treasury. The MOVE has fallen from its 416 | Chapter 6
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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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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
Page 370 and 371: Figure 6-4 Case-Shiller Home Price
Page 372 and 373: Figure 6-7 Global OTC Derivative Ma
Page 374 and 375: consumer and investor protections.
Page 376 and 377: Figure 6-iv Top 5 Banks as Share of
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Page 380 and 381: Are U.S. Banks Too Big? The questio
Page 382 and 383: The three federal banking agencies
Page 384 and 385: Risk Taking The Dodd-Frank Act took
Page 386 and 387: Box 6-3: The Performance of Communi
Page 388 and 389: Figure 6-ix Return on Assets of Ban
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Page 392 and 393: Figure 6-13 Repo and Reverse Repo,
Page 394 and 395: Figure 6-15 Private Funds Reporting
Page 396 and 397: Days 60 Figure 6-16 Weighted-Averag
Page 398 and 399: Figure 6-18 Systemic Risk (SRISK),
Page 400 and 401: In the absence of another financial
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Page 404 and 405: through the Dodd-Frank Act and othe
Page 406 and 407: Prior to the financial crisis, one
Page 408 and 409: asis.24 One of the advantages of ce
Page 410 and 411: findings from the NRSRO examination
Page 412 and 413: 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
Page 418 and 419: financial system and the systems of
Page 422 and 423: Figure 6-23 S&P 500, 2003-2016 Inde
Page 424 and 425: Figure 6-27 Mortgage Delinquency an
Page 426: It created the FSOC to consider ris
Page 429 and 430: energy efficient and lower greenhou
Page 431 and 432: of domestic actions to reduce green
Page 433 and 434: 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
Page 443 and 444: 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
Page 449 and 450: diesel fuel and jet fuel. The Vehic
Page 451 and 452: Box 7-3: Building Resilience to Cur
Page 453 and 454: 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
Page 461 and 462: Figure 7-12 Energy Intensity Transp
Page 463 and 464: Figure 7-14c Energy Intensity Comme
Page 465 and 466: Figure 7-16 U.S. Energy Consumption
Page 467 and 468: 2008 to 7 percent in 2015. Figure 7
Page 469 and 470: 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
Page 505 and 506:
______. 2012a. “Direct Spending a
Page 507 and 508:
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
Page 517 and 518:
______. 2016. “Certification of M
Page 519 and 520:
Arcidiacono, Peter, V. Joseph Hotz,
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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
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Interagency Working Group on the So
Page 547 and 548:
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
Page 558 and 559:
consulting with a wide variety of o
Page 560 and 561:
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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