[House Report 105-393]
[From the U.S. Government Publishing Office]



105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    105-393
_______________________________________________________________________


 
                     THE 1997 JOINT ECONOMIC REPORT

                               __________

                              R E P O R T

                                 of the

                        JOINT ECONOMIC COMMITTEE

                     CONGRESS OF THE UNITED STATES

                                 on the

                          1997 ECONOMIC REPORT

                            OF THE PRESIDENT





November 8, 1997.--Committed to the Committee of the Whole House on the 
             State of the Union, and ordered to be printed


                        JOINT ECONOMIC COMMITTEE

    [Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]

      House of Representatives                     Senate
JIM SAXTON, New Jersey,              CONNIE MACK, Florida,
  Chairman                             Vice Chairman
THOMAS W. EWING, Illinois            WILLIAM V. ROTH, Jr., Delaware
MARK SANFORD, South Carolina         ROBERT F. BENNETT, Utah
MAC THORNBERRY, Texas                ROD GRAMS, Minnesota
JOHN DOOLITTLE, California           SAM BROWNBACK, Kansas
JIM McCRERY, Louisiana               JEFF SESSIONS, Alabama
FORTNEY PETE STARK, California       JEFF BINGAMAN, New Mexico
LEE H. HAMILTON, Indiana             PAUL S. SARBANES, Maryland
MAURICE D. HINCHEY, New York         EDWARD M. KENNEDY, Massachusetts
CAROLYN B. MALONEY, New York         CHARLES S. ROBB, Virginia
                 Christopher Frenze, Executive Director
                 Howard Rosen, Minority Staff Director


                         LETTER OF TRANSMITTAL

                              ----------                              

                     Congress of the United States,
                                  Joint Economic Committee,
                                  Washington, DC, November 8, 1997.
Hon. Newt Gingrich,
Speaker of the House, House of Representatives,
Washington, DC.
    Dear Mr. Speaker: Pursuant to the requirements of the 
Employment Act of 1946, as amended, I hereby transmit the 1997 
Joint Economic Report. The analyses and conclusions of this 
Report are to assist the several Committees of the Congress and 
its Members as they deal with economic issues and legislation 
pertaining thereto.
            Sincerely,
                                                Jim Saxton,
                                                          Chairman.


                            C O N T E N T S

                              ----------                              
                                                                   Page
Economic Growth in 1997..........................................     1
Joint Economic Committee Majority................................     3
    The Roots of the Current Expansion...........................     5
Summaries of Selected Joint Economic Committee Majority Staff 
  Studies........................................................    17
    Monetary Policy..............................................    19
        Lessons From Inflation Targeting Experience..............    19
        The Importance of the Federal Reserve....................    19
        Establishing Federal Reserve Inflation Goals.............    19
        A Response to Criticisms of Price Stability..............    19
        Transparency and Federal Reserve Monetary Policy.........    20
    Tax Policy...................................................    21
        Taxes and Long-Term Economic Growth......................    21
        The Administration's Proposal for a Tuition Tax Credit...    21
        The Welfare-to-Work Tax Credit...........................    21
        The Inefficiency of Targeted Tax Policies................    21
        The Economic Effects of Capital Gains Taxation...........    21
        Optimal Capital Gains Tax Policy: Lessons From the 1970s, 
          1980s and 1990s........................................    22
        Payroll Taxes and the Redistribution of Income...........    22
    Other Selected Topics........................................    22
        Tradable Emissions.......................................    22
        College Affordability: Tuition Tax Credits vs. Saving 
          Incentives.............................................    22
        Budget Process Reform....................................    23



105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    105-393
_______________________________________________________________________


                     THE 1997 JOINT ECONOMIC REPORT

                                _______
                                

 November 8, 1997.--Committeed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

_______________________________________________________________________


 Mr. Saxton, from the Joint Economic Committee, submitted the following

                              R E P O R T

 Report of the Joint Economic Committee on the 1997 Economic Report of 
                             the President

                        Economic Growth in 1997

    The economic expansion that began in the second quarter of 
1991 continues to generate economic and employment gains, even 
as the inflation rate continues to decline. Economic growth has 
been solid over the last four quarters, and employment growth 
has been sufficient to push the civilian unemployment rate 
below 5 percent. The overall economic situation is sound and 
the outlook for continued growth remains healthy.
    Among the positive labor market indicators are the lowest 
unemployment rate in 24 years, near-record highs in the 
employment-population ratio and labor force participation rate, 
and continued growth in payroll employment (according to the 
Bureau of Labor Statistics, establishment survey). On the other 
hand, continued stagnation in earnings and income for middle 
and low-income workers, according to a variety of measures, 
remains a concern.
    The sustained economic growth of recent years has 
contributed to reducing the federal budget deficit and has 
improved the fiscal situation at the state level as well. 
Furthermore, the healthy economic environment eases the 
implementation of policy changes such as deficit reduction and 
welfare reform. A sustained and stable economic expansion is an 
ideal time to address other structural issues in federal policy 
as well.
    The challenge for federal policy is to build on the 
progress made to date in removing impediments to economic 
expansion, improving the potential for economic growth and 
raising U.S. living standards.

Joint Economic Committee

    The operations of the Joint Economic Committee (JEC) have 
been focused on the needs of Congress and the public in the 
105th Congress. The goals of maximum efficiency, quality, and 
productivity have guided the Committee in meeting resource 
constraints and managing Committee functions and procedures. As 
a result, the Committee has enjoyed a very productive year, and 
we are naturally pleased that JEC research products and 
hearings have been well received. In the First Session of this 
Congress, the JEC released more than 25 studies and reports and 
held 17 hearings.
    The emergence of the information age over the last two 
decades has caused enormous changes in the economy and in the 
dissemination of information. As a result, brevity and 
timeliness are at a premium. Consequently, the format of JEC 
research products has changed in the 105th Congress. Shorter 
studies substantively addressing issues raised in the Economic 
Report of the President as well as other issues before Congress 
have proven quite effective. This emphasis on substance, 
reliability, timeliness, and conciseness will continue to be 
characteristic of the JEC in the next session of Congress.
    In conclusion, 1997 has been a successful year for the 
Joint Economic Committee. We are looking forward to another 
constructive year when Congress returns in 1998.

                                   Representative Jim Saxton,
                                           Chairman.
                                   Senator Connie Mack,
                                           Vice Chairman.
                                   Senator Jeff Bingaman,
                                           Ranking Minority Member.





                               
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