[Economic Report of the President (1996)]
[Administration of William J. Clinton]
[Online through the Government Publishing Office, www.gpo.gov]

[DOCID: f:Appen.A._]
Economic Report of the President - - - - - - - - - - - - H. Doc. 104-161
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Appendix A
REPORT TO THE PRESIDENT ON THE ACTIVITIES
OF THE
COUNCIL OF ECONOMIC ADVISERS DURING 1995




LETTER OF TRANSMITTAL

Council of Economic Advisers
Washington, D.C., January 29, 1996
Mr. President:
The Council of Economic Advisers submits this report on its
activities during the calendar year 1995 in accordance with the
requirements of the Congress, as set forth in section 10(d) of the
Employment Act of 1946 as amended by the Full Employment and Balanced
Growth Act of 1978.
Sincerely,



Joseph E. Stiglitz,  Chairman
Martin N. Baily,  Member
Alicia H. Munnell, Member

Council Members and their Dates of Service
----------------------------------------------------------------------------------------------------------------
Name                          Position           Oath of office date        Separation date
----------------------------------------------------------------------------------------------------------------
Edwin G. Nourse.....................  Chairman...............  August 9, 1946........  November 1, 1949.
Leon H. Keyserling..................  Vice Chairman..........  August 9, 1946........  .........................
Acting Chairman........  November 2, 1949......  .........................
Chairman...............  May 10, 1950..........  January 20, 1953.
John D. Clark.......................  Member.................  August 9, 1946........  .........................
Vice Chairman..........  May 10, 1950..........  February 11, 1953.
Roy Blough..........................  Member.................  June 29, 1950.........  August 20, 1952.
Robert C. Turner....................  Member.................  September 8, 1952.....  January 20, 1953.
Arthur F. Burns.....................  Chairman...............  March 19, 1953........  December 1, 1956.
Neil H. Jacoby......................  Member.................  September 15, 1953....  February 9, 1955.
Walter W. Stewart...................  Member.................  December 2, 1953......  April 29, 1955.
Raymond J. Saulnier.................  Member.................  April 4, 1955.........  .........................
Chairman...............  December 3, 1956......  January 20, 1961.
Joseph S. Davis.....................  Member.................  May 2, 1955...........  October 31, 1958.
Paul W. McCracken...................  Member.................  December 3, 1956......  January 31, 1959.
Karl Brandt.........................  Member.................  November 1, 1958......  January 20, 1961.
Henry C. Wallich....................  Member.................  May 7, 1959...........  January 20, 1961.
Walter W. Heller....................  Chairman...............  January 29, 1961......  November 15, 1964.
James Tobin.........................  Member.................  January 29, 1961......  July 31, 1962.
Kermit Gordon.......................  Member.................  January 29, 1961......  December 27, 1962.
Gardner Ackley......................  Member.................  August 3, 1962........  .........................
Chairman...............  November 16, 1964.....  February 15, 1968.
John P. Lewis.......................  Member.................  May 17, 1963..........  August 31, 1964.
Otto Eckstein.......................  Member.................  September 2, 1964.....  February 1, 1966.
Arthur M. Okun......................  Member.................  November 16, 1964.....  .........................
Chairman...............  February 15, 1968.....  January 20, 1969.
James S. Duesenberry................  Member.................  February 2, 1966......  June 30, 1968.
Merton J. Peck......................  Member.................  February 15, 1968.....  January 20, 1969.
Warren L. Smith.....................  Member.................  July 1, 1968..........  January 20, 1969.
Paul W. McCracken...................  Chairman...............  February 4, 1969......  December 31, 1971.
Hendrik S. Houthakker...............  Member.................  February 4, 1969......  July 15, 1971.
Herbert Stein.......................  Member.................  February 4, 1969......  .........................
Chairman...............  January 1, 1972.......  August 31, 1974.
Ezra Solomon........................  Member.................  September 9, 1971.....  March 26, 1973.
Marina v.N. Whitman.................  Member.................  March 13, 1972........  August 15, 1973.
Gary L. Seevers.....................  Member.................  July 23, 1973.........  April 15, 1975.
William J. Fellner..................  Member.................  October 31, 1973......  February 25, 1975.
Alan Greenspan......................  Chairman...............  September 4, 1974.....  January 20, 1977.
Paul W. MacAvoy.....................  Member.................  June 13, 1975.........  November 15, 1976.
Burton G. Malkiel...................  Member.................  July 22, 1975.........  January 20, 1977.
Charles L. Schultze.................  Chairman...............  January 22, 1977......  January 20, 1981.
William D. Nordhaus.................  Member.................  March 18, 1977........  February 4, 1979.
Lyle E. Gramley.....................  Member.................  March 18, 1977........  May 27, 1980.
George C. Eads......................  Member.................  June 6, 1979..........  January 20, 1981.
Stephen M. Goldfeld.................  Member.................  August 20, 1980.......  January 20, 1981.
Murray L. Weidenbaum................  Chairman...............  February 27, 1981.....  August 25, 1982.
William A. Niskanen.................  Member.................  June 12, 1981.........  March 30, 1985.
Jerry L. Jordan.....................  Member.................  July 14, 1981.........  July 31, 1982.
Martin Feldstein....................  Chairman...............  October 14, 1982......  July 10, 1984.
William Poole.......................  Member.................  December 10, 1982.....  January 20, 1985.
Beryl W. Sprinkel...................  Chairman...............  April 18, 1985........  January 20, 1989.
Thomas Gale Moore...................  Member.................  July 1, 1985..........  May 1, 1989.
Michael L. Mussa....................  Member.................  August 18, 1986.......  September 19, 1988.
Michael J. Boskin...................  Chairman...............  February 2, 1989......  January 12, 1993.
John B. Taylor......................  Member.................  June 9, 1989..........  August 2, 1991.
Richard L. Schmalensee..............  Member.................  October 3, 1989.......  June 21, 1991.
David F. Bradford...................  Member.................  November 13, 1991.....  January 20, 1993.
Paul Wonnacott......................  Member.................  November 13, 1991.....  January 20, 1993.
Alan S. Blinder.....................  Member.................  July 27, 1993.........  June 26, 1994.
Laura D'Andrea Tyson................  Chair..................  February 5, 1993......  April 22, 1995.
Joseph E. Stiglitz..................  Member.................  July 27, 1993.........  .........................
Chairman...............  June 28, 1995.........  .........................
Martin N. Baily.....................  Member.................  June 30, 1995.........  .........................
Alicia H. Munnell...................  Member.................  January 29, 1996......  .........................
----------------------------------------------------------------------------------------------------------------

Report to the President on the Activities of the Council of Economic
Advisers During 1995

The Council of Economic Advisers was established by the Employment
Act of 1946 to provide the President with objective economic analysis
and advice on the development and implementation of a wide range of
domestic and international economic policy issues.

The Chairman of the Council

Joseph E. Stiglitz, who had been a Member of the Council since 1993,
was appointed Chairman on June 28, 1995. Dr. Stiglitz replaced Laura
D'Andrea Tyson who was appointed Assistant to the President for Economic
Policy at the National Economic Council. Dr. Stiglitz is on leave from
Stanford University, where he is the Joan Kenney Professor of Economics.
Dr. Stiglitz is responsible for communicating the Council's views on
macro and microeconomic issues directly to the President through both
oral and written briefings and reports. Dr. Stiglitz represents the
Council at meetings of the National Economic Council and the National
Security Council and at daily White House senior staff meetings. He also
participates in a range of other formal and informal meetings with the
President, senior White House staff, and other senior government
officials. Finally, Dr. Stiglitz is the Council's chief public
spokesperson. He guides the work of the Council and exercises ultimate
responsibility for the work of the professional staff.

The Members of the Council

Martin N. Baily is a Member of the Council of Economic Advisers. Dr.
Baily is on leave from the University of Maryland where he is Professor
of Economics.
Alicia H. Munnell is also a Member of the Council of Economic
Advisers. Dr. Munnell had previously served in the Administration as
Assistant Secretary for Economic Policy at the Department of the
Treasury and had served as Senior Vice President and Director of
Research at the Federal Reserve Bank of Boston.
The Chairman and Members work as a team on most economic policy
issues. There is, however, an informal division of subject matter among
the Members. Dr. Baily and Dr. Munnell share responsibility for domestic
macroeconomic analysis, the Administration's economic forecast, and
budget and tax issues. Dr. Baily is responsible for international
economic issues and certain microeconomic issues, including technology
and agriculture. Dr. Munnell has primary responsibility for health care,
welfare reform, environmental, and labor issues. Finally, all three
Council Members participate in the deliberations of the National
Economic Council (NEC). Dr. Stiglitz is one of six members of the NEC
Principals Committee.

WEEKLY ECONOMIC BRIEFING

Dr. Stiglitz continued to conduct a weekly briefing for the
President, the Vice President, and the President's other senior economic
and policy advisers. Dr. Baily and Dr. Munnell also were active
participants. The Council, in cooperation with the Office of the Vice
President, prepares a written Weekly Economic Briefing of the President,
which serves as the basis for the oral briefing. The briefing includes
analysis of current economic developments, more extended treatments of a
wide range of economic issues and problems, and summaries of economic
news on different regions and sectors of the economy.

MACROECONOMIC POLICIES

One of the primary functions of the Council is to advise the
President on all major macroeconomic issues and developments. The
Council prepares for the President, the Vice President, and the White
House senior staff a comprehensive series of memoranda monitoring key
economic indicators and analyzing current macroeconomic events.
The Council, the Department of the Treasury, and the Office of
Management and Budget--the economic ``Troika'' --are responsible for
producing the economic forecasts that underlie the Administration's
budget proposals. The Council, under the leadership of Drs. Baily and
Munnell, initiates the forecasting process twice each year. The first
forecast is included in the Federal budget document published in
February and the second forecast is published in the summer as part of
the Administration's Mid-Session Review. In preparing these forecasts,
the Council consults with a wide variety of outside sources, including
leading private sector forecasters.
In 1995, the Council spent a substantial amount of time on budget
and tax issues. The Council participated in the preparation of the
President's balanced budget proposal. The Council also participated
extensively in meetings on a range of budget issues, including Medicare
and Medicaid, discretionary spending priorities, the Administration's
tax proposals, and the elimination of corporate subsidies and loopholes.
In addition, the Council participated in consultations with the
Congressional Budget Office (CBO) on the economic assumptions that were
developed for the 7-year balanced budget plan.
The Council prepared, with the Department of Labor, a report titled
``Educating America: An Investment for Our Future,'' which presented the
overwhelming evidence on the beneficial impact of education on our
workers and on our economy. The Council also prepared a report titled
``Supporting Research and Development to Promote Economic Growth: The
Federal Government's Role,'' which describes the Federal role in
research and development (R&D) and the importance of R&D investments to
economic growth. These reports presented the case for protecting our
Federal Government's investments in education and technology.
The Council continued its efforts to improve the American public's
understanding of economic issues and the Administration's economic
agenda through regular briefings with the economic and financial press
corps, periodic discussions with outside economists and forecasters, and
presentations to outside organizations.

INTERNATIONAL ECONOMIC POLICIES

Because international trade and financial developments are
increasingly important to the U.S. economy, they have played an
important role in the Administration's foreign policy and economic
agenda. The Council has been an active participant in the National
Economic Council/National Security Council international economic policy
process, providing both technical and analytical support and policy
guidance. In 1995, the Council's role included policy development and
planning for the G-7 Economic Summit in Halifax, the APEC leaders
meeting in Osaka, the Denver Ministerial for the Hemispheric Initiative
and the U.S.-EU Summit in December. The Council also participated at the
policy and analytical level in preparation for trade negotiations,
including those with Japan on autos and auto parts, and with China on
market access and intellectual property.
The Council has focused on the impacts of international trade and
financial developments on overall U.S. economic performance and on U.S.
financial markets. The Council has used its expertise on developments in
other countries to identify lessons, successes as well as failures, to
be gleaned from policy initiatives undertaken elsewhere. The Weekly
Economic Briefing of the President regularly includes articles on
international events and issues. In addition, the Council, along with
the Department of the Treasury, issued a white paper in November titled
``U.S. Trade Policy with Japan: Assessing the Record.''
Because of the increasing importance of international economic
issues to the U.S. economy, the Council has increasingly been called
upon to represent the United States at international meetings and other
forums. Dr. Stiglitz was asked to give the keynote address at the U.S.-
R.O.C. Economic Conference in Anchorage in September and participated in
meetings of the Joint Economic Development Group with Israel in
September.
The Council plays a leading role in U.S. participation in the
Organization for Economic Cooperation and Development (OECD). The
Council heads the U.S. delegation to the semiannual Economic Policy
Committee meetings, and Dr. Stiglitz is the Committee's Chairman. In
that role, Dr. Stiglitz has led an effort to refocus the Economic Policy
Committee meetings and the OECD's Economics Department's activity in
order to make their work more timely and relevant to member country
policy discussions. Dr. Baily was a member of the OECD's Working Party 3
on macroeconomic policy coordination, and Dr. Munnell led the U.S.
delegation for Working Party 1 on microeconomic and structural issues.

MICROECONOMIC POLICIES

The Council was an active participant on microeconomic policy issues
in 1995. Dr. Stiglitz is a member of the Regulatory Working Group, which
addresses numerous policy issues related to regulatory reform. Dr.
Stiglitz was deeply involved in preparation of the new ``best practice''
guidelines for economic assessments of regulatory impacts, issued by the
Office of Management and Budget. The Council also participated in a
range of other Administration efforts to reform regulation.
The Council was an active participant in the Administration's
``Reinventing Government'' effort, which has made government agencies
more efficient and more performance oriented, and has revised and
eliminated thousands of pages of regulations. The Council was active in
efforts to restructure government agencies and programs, such as the
Federal Aviation Administration and the housing programs of the
Department of Housing and Urban Development. The Council was also deeply
involved in developing the Administration's pension simplification
proposal, which will make it easier and less costly for employers--
especially small businesses--to set up retirement plans that deliver
tax-favored retirement benefits to all employees.
The Council was heavily involved in efforts to implement
comprehensive and procompetitive reform of telecommunications policy.
These efforts are reflected in the sweeping new telecommunications
legislation passed by the Congress in early 1996. The Council also
played an important role in ongoing efforts to restructure INTELSAT, an
international satellite consortium, to promote more competition in the
market for satellite communications services while preserving universal
access to such services.
The Council was active in various issues affecting natural resources
and the environment. The Council assisted the Vice President in
developing a program for reinventing environmental regulation. As part
of that effort, the Council helped to develop options for expanding the
use of market-based policies for air pollution control. The Council was
involved in addressing administrative and legislative changes to the
Nation's programs for managing hazardous wastes and cleaning up
contaminated sites. The Council also participated in ongoing assessments
of policies for addressing climate change. The Council was actively
involved in the preparation of the Administration's positions on
reauthorization of the Farm Bill, and Dr. Baily chaired an interagency
group responsible for developing options to fund land acquisition and
restoration projects in the Everglades.
Dr. Stiglitz and Dr. Munnell played key roles in assessing the
implications of welfare reform policy, including the consequences of
block grants. They also participated in the Administration's efforts to
anticipate the impact of welfare reform on child poverty rates. In
addition, Dr. Munnell participated in working groups on urban policy and
initiatives for children.
Dr. Baily co-chaired a group studying the state of our Nation's
economic statistics. This effort was designed to improve the quality and
understanding of government economic statistics.

The Staff of the Council of Economic Advisers

The professional staff of the Council consists of the Chief of
Staff, the Senior Statistician, thirteen senior economists, six staff
economists, and two research assistants. The professional staff and
their areas of concentration at the end of 1995 were:

Chief of Staff and General Counsel

Michele M. Jolin

Senior Economists

S. Lael Brainard....    International Economics
Steven N. Braun.....    Macroeconomics and Forecasting
Robert S. Dohner....    International Economics
George B. Frisvold..    Agriculture
Thomas J. Kane......    Labor, Welfare, and Education
Eileen Mauskopf.....    Macroeconomics and Finance
Mark J. Mazur.......    Public Finance
Robert G. Murphy....    Macroeconomics and the Weekly Economic Briefing
of the President
Peter R. Orszag.....    International Economics
Raymond Prince......    Environment and Natural Resources
Marius Schwartz.....    Regulation, Industrial Organization, and
Antitrust
Louise M. Sheiner...    Public Finance
Michael A. Toman....    Environment and Natural Resources

Senior Statistician

Catherine H. Furlong

Staff Economists

Michael A. Ash......    Labor, Education, and Public Sector
Carrie S. Cihak.....    International Economics
Jonah B. Gelbach....    Public Finance and the Weekly Economic Briefing
of the President
Valerie A. Mercer...    Macroeconomics
Andrea Richter......    International Economics and the Weekly Economic
Briefing of the President
Scott J. Wallsten...    Industrial Organization, Science & Technology,
and Regulation

Research Assistant

Ronald C. Chen......    Macroeconomics and the Weekly Economic Briefing
of the President

Statistical Office

Mrs. Furlong directs the Statistical Office. The Statistical Office
maintains and updates the Council's statistical information, oversees
the publication of the Economic Indicators and the statistical appendix
to the Economic Report, and verifies statistics in Presidential and
Council memoranda, testimony, and speeches.
Susan P. Clements...    Statistician and Information Systems
Linda A. Reilly.....    Statistical Assistant
Brian A. Amorosi....    Research Assistant
Margaret L. Snyder..    Statistical Aide

The Administrative Office

Elizabeth A. Kaminski............    Administrative Officer
Catherine Fibich.................    Administrative Assistant

Office of the Chairman

Alice H. Williams...    Executive Assistant to the Chairman
Sandra F. Daigle....    Executive Assistant to the Chairman and
Assistant to the Chief of Staff
Lisa D. Branch......    Executive Assistant to Dr. Baily
Francine P.
Obermiller..........    Executive Assistant to Dr. Munnell

Staff Secretaries

Mary E. Jones
Rosalind V. Rasin
Mary A. Thomas

Mrs. Thomas also served as executive assistant for the Weekly
Economic Briefing of the President.
Michael Treadway provided editorial assistance in the preparation of
the 1995 Economic Report. Robert E. Cumby, Georgetown University, and
David M. Cutler, Harvard University, served as consultants during the
year. Student assistants during the year were Matthew W. Alsdorf, Stacy
M. Bondanella, Christopher L. Boyster, Loren A. Briggs, Michele M.
Campbell, William P. Cowin, David B. Edelstein, William B. Ferretti, Amy
C. Fisher, Barbara J. Hawkins, Michael G. Rand, Michael D. Rosenbaum,
Toby Stickler, Megan R. Sweeney, Gregory P. Wolf, and Ari Zweiman. The
following student assistants joined the Council in January to assist
with the preparation of the Economic Report: Joseph W. Corrigan, Jason
Imfeld, Samuel Krasnow, Mary Lesh, Robert P. Martin, and Michael Pond.

DEPARTURES

Thomas P. O'Donnell, who served as Chief of Staff, resigned in April
1995 to accept a position as Chief of Staff at the National Economic
Council.
The Council's senior economists, in most cases, are on leave of
absence from faculty positions at academic institutions or from other
government agencies or research institutions. Their tenure with the
Council is usually limited to 1 or 2 years. Most of the senior
economists who resigned during the year returned to their previous
affiliations. They are Michael R. Donihue (Colby College), Robert D.
Innes (University of Arizona), Sally M. Kane (National Oceans and
Atmospheric Administration, Department of Commerce), David I. Levine
(University of California, Berkeley), Ellen E. Meade (Board of Governors
of the Federal Reserve System), Jay S. Stowsky (University of
California), and David W. Wilcox (Board of Governors of the Federal
Reserve System). Jonathan B. Baker went on to a new position at the
Federal Trade Commission.
Staff economists are generally graduate students who spend 1 year
with the Council and then return to complete their dissertations. Those
who returned to their graduate studies in 1995 are: Kimberly A. Clausing
(Harvard University), Maya N. Federman (Harvard University), Carolyn
Fischer (University of Michigan), Christopher L. Foote (University of
Michigan), F. Halsey Rogers (University of California, Berkeley and The
Brookings Institution) and Eric D. Wolff (Massachusetts Institute of
Technology). Clark Dees served for 2 years as a Research Assistant at
the Council. He is now at the University of Virginia.

Public Information

The Council's Annual Report is the principal medium through which
the Council informs the public of its work and its views. It is an
important vehicle for presenting the Administration's domestic and
international economic policies. Annual distribution of the Report in
recent years has averaged about 45,000 copies. The Council also has
primary responsibility for compiling the monthly Economic Indicators,
which is issued by the Joint Economic Committee of the Congress and has
a distribution of approximately 10,000.