[Economic Report of the President (1998)]
[Administration of William J. Clinton]
[Online through the Government Printing Office, www.gpo.gov]

[DOCID: f:app_a1._]
Economic Report of the President - - - - - - - - - - - - H. Doc. 105-176
[From the online service of the the U.S. Government Printing Office]
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Economic Report of the President






Transmitted to the Congress
February 1998



together with
THE ANNUAL REPORT
of the
COUNCIL OF ECONOMIC ADVISERS




UNITED STATES GOVERNMENT PRINTING OFFICE

WASHINGTON : 1998
______________________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Mail Stop: SSOP, Washington, D.C. 20402-9328



CONTENTS
-----------

ECONOMIC REPORT OF THE PRESIDENT .......................................1

ANNUAL REPORT OF THE COUNCIL OF ECONOMIC ADVISERS* .....................7

Chapter 1. Promoting Prosperity in a High-Employment Economy ..........19

Chapter 2. Macroeconomic Policy and Performance .......................43

Chapter 3. The Economic Well-Being of Children ........................89

Chapter 4. Economic Inequality Among Racial and Ethnic Groups ........119

Chapter 5. Improving Economic Efficiency: Environmental and
Health Issues .....................................................155

Chapter 6. Recent Initiatives in Antitrust Enforcement ...............195

Chapter 7. The Benefits of Market Opening ............................215

Appendix A. Report to the President on the Activities of the
Council of Economic Advisers During 1997 ..........................261

Appendix B. Statistical Tables Relating to Income, Employment, and
Production ........................................................273

________________________
*For a detailed table of contents of the Council's Report, see page 11










ECONOMIC REPORT
OF THE PRESIDENT




ECONOMIC REPORT OF THE PRESIDENT

To the Congress of the United States:

For the last 5 years this Administration has worked to strengthen our
Nation for the 21st century, expanding opportunity for all Americans,
demanding responsibility from all Americans, and bringing us together
as a community of all Americans. Building a strong economy is the
cornerstone of our efforts to meet these challenges.

When I first took office in 1993, the Federal budget deficit was out
of control, unemployment was unacceptably high, and wages were
stagnant. To reverse this course, we took a new approach, putting in
place a bold economic strategy designed to bring down the deficit and
give America's workers the tools and training they need to help them
thrive in our changing economy.

Our strategy has succeeded: the economy has created more than 14
million new jobs, unemployment is at its lowest level in 24 years, and
core inflation is at its lowest level in 30 years. Economic growth in
1997 was the strongest in almost a decade, and the benefits of that
growth are being shared by all Americans: poverty is dropping and
median family income has gone up nearly $2,200 since 1993. We also saw
the biggest drop in welfare rolls in history. Many challenges remain,
but Americans are enjoying the fruits of an economy that is steady and
strong.

THE ADMINISTRATION'S ECONOMIC STRATEGY

From the beginning, this Administration's economic strategy has had
three crucial elements: reducing the deficit, investing in people, and
opening markets abroad.

Deficit reduction. In 1993 this Administration's deficit reduction
plan set the Nation on a course of fiscal responsibility, while making
critical investments in the skills and well-being of our people. When
I took office, the deficit was $290 billion and projected to go much
higher. This year the deficit will fall to just $10 billion and
possibly lower still. That is a reduction of more than 95 percent,
leaving the deficit today smaller in relation to the size of the
economy than it has been since 1969. And this year I have proposed a
budget that will eliminate the deficit entirely, achieving the first
balanced budget in 30 years.

Beyond that, it is projected that the budget will show a sizable
surplus in the years to come. I propose that we reserve 100 percent of
the surplus until we have taken the necessary measures to strengthen
the Social Security system for the 21st century. I am committed to
addressing Social Security first, to ensure that all Americans are
confident that it will be there when they need it.

Investing in our people. In the new economy, the most precious
resource this Nation has is the skills and ingenuity of working
Americans. Investing in the education and health of our people will
help all Americans reap the rewards of a growing, changing economy.
Those who are better educated, with the flexibility and the skills
they need to move from one job to another and seize new opportunities,
will succeed in the new economy; those who do not will fall behind.

That is why the historic balanced budget agreement I signed into law
in 1997 included the largest increase in aid to education in 30 years,
and the biggest increase to help people go to college since the G.I.
Bill was passed 50 years ago. The agreement provided funds to ensure
that we stay on track to help 1 million disadvantaged children prepare
for success in school. It provided funding for the America Reads
Challenge, with the goal of mobilizing a million volunteers to promote
literacy, and it made new investments in our schools themselves, to
help connect every classroom and library in this country to the
Internet by the year 2000.

The balanced budget agreement created the HOPE scholarship program, to
make completion of the 13th and 14th years of formal education as
widespread as a high school diploma is today. It offered other tuition
tax credits for college and skills training. It created a new
Individual Retirement Account that allows tax-free withdrawals to pay
for education. It provided the biggest increase in Pell grants in two
decades. Finally, it provided more funds so that aid to dislocated
workers is more than double what it was in 1993, to help these workers
get the skills they need to remain productive in a changing economy.

But we must do more to guarantee all Americans the quality education
they need to succeed. That is why I have proposed a new initiative to
improve the quality of education in our public schools--through high
national standards and national tests, more charter schools to
stimulate competition, greater accountability, higher quality
teaching, smaller class sizes, and more classrooms.

To strengthen our Nation we must also strengthen our families. The
Family and Medical Leave Act, which I signed into law in 1993, ensures
that millions of people no longer have to choose between being good
parents and being good workers. The Health Care Portability and
Accountability Act, enacted in 1996, ensures that workers can keep
their health insurance if they change jobs or suffer a family
emergency. We have also increased the minimum wage, expanded the
earned income tax credit, and provided for a new $500-per-child tax
credit for working families. To continue making progress toward
strengthening families, the balanced budget agreement allocated $24
billion to provide health insurance to up to 5 million uninsured
children--the largest Federal investment in children's health care
since Medicaid was created in 1965.

Opening markets and expanding exports. To create more good jobs and
increase wages, we must open markets abroad and expand U.S. exports.
Trade has been key to the strength of this economic expansion--about a
third of our economic growth in recent years has come from selling
American goods and services overseas. The Information Technology
Agreement signed in 1997 lowers tariff and other barriers to 90
percent of world trade in information technology services.

To continue opening new markets, creating new jobs, and increasing our
prosperity, it is critically important to renew fast-track negotiating
authority. This authority, which every President of either party has
had for the last 20 years, enables the President to negotiate trade
agreements and submit them to the Congress for an up-or-down vote,
without modification. Renewing this traditional trade authority is
essential to America's ability to shape the global economy of the 21st
century.

SEIZING THE BENEFITS OF A GROWING, CHANGING ECONOMY

As we approach the 21st century the American economy is sound and
strong, but challenges remain. We know that information and technology
and global commerce are rapidly transforming the economy, offering new
opportunities but also posing new challenges. Our goal must be to
ensure that all Americans are equipped with the skills to succeed in
this growing, changing economy.

Our economic strategy--balancing the budget, investing in our people,
opening markets--has set this Nation on the right course to meet this
goal. This strategy will support and contribute to America's strength
in the new economic era, removing barriers to our economy's potential
and providing our people with the skills, the flexibility, and the
security to succeed. We must continue to maintain the fiscal
discipline that is balancing the budget, to invest in our people and
their skills, and to lead the world to greater prosperity in the 21st
century.


/s/ William J. Clinton

THE WHITE HOUSE

FEBRUARY 10, 1998




THE ANNUAL REPORT
OF THE
COUNCIL OF ECONOMIC ADVISERS






LETTER OF TRANSMITTAL

Council of Economic Advisers
Washington, D.C., February 10, 1998

Mr. President:

The Council of Economic Advisers herewith submits its 1998 Annual
Report in accordance with the provisions of the Employment Act of 1946
as amended by the Full Employment and Balanced Growth Act of 1978.

Sincerely,


/s/ Janet L. Yellen
Janet L. Yellen,
Chair


/s/ Jeffrey A. Frankel
Jeffrey A. Frankel,
Member


/s/ Rebecca M. Blank
Rebecca M. Blank,
Member-Nominee