[Economic Report of the President (1999)]
[Administration of William J. Clinton]
[Online through the Government Printing Office, www.gpo.gov]




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Appendix A
REPORT TO THE PRESIDENT ON THE ACTIVITIES
OF THE
COUNCIL OF ECONOMIC ADVISERS DURING 1998

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LETTER OF TRANSMITTAL

Council of Economic Advisers
Washington, D.C., December 31, 1998
Mr. President:
The Council of Economic Advisers submits this report on its
activities during the calendar year 1998 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,


Janet L. Yellen,
Chair
Jeffrey A. Frankel,
Member
Rebecca M. Blank,
Member

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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......  August 1, 1997.
Janet L. Yellen.....................  Chair..................  February 18, 1997.....  .........................
Jeffrey A. Frankel..................  Member.................  April 23, 1997........  .........................
Rebecca M. Blank....................  Member.................  October 22, 1998......  .........................
----------------------------------------------------------------------------------------------------------------


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Report to the President on the Activities of the Council of Economic
Advisers During 1998

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 Chair of the Council

Janet L. Yellen continued to chair the Council during 1998. Before
becoming Chair of the Council, Dr. Yellen served as a Member of the
Board of Governors of the Federal Reserve System. Dr. Yellen is on leave
from the Haas School of Business at the University of California,
Berkeley, where she is the Eugene E. and Catherine M. Trefethen
Professor of Business Administration. Dr. Yellen is responsible for
communicating the Council's views on economic matters directly to the
President through personal discussions and written reports. She also
represents the Council at Cabinet meetings, meetings of the National
Economic Council (NEC), daily White House senior staff meetings, budget
team meetings with the President, and other formal and informal meetings
with the President, senior White House staff, and other senior
government officials. Dr. Yellen is the Council's chief public
spokesperson. She directs the work of the Council and exercises ultimate
responsibility for the work of the professional staff.

The Members of the Council

Jeffrey A. Frankel is a Member of the Council of Economic Advisers.
Dr. Frankel is on leave from the University of California, Berkeley,
where he is a Professor of Economics. He previously directed the program
on International Finance and Macroeconomics at the National Bureau of
Economic Research and is a former Senior Fellow at the Institute for
International Economics.
Rebecca M. Blank is also a Member of the Council of Economic
Advisers. Dr. Blank is on leave from Northwestern University, where she
is a Professor of Economics. Dr. Blank previously served as the first
Director of the Northwestern University/University of Chicago Joint
Center for Poverty Research and was a member of the research faculty at
Northwestern University's Institute for Policy Research.

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The Chair and Members work as a team on most economic policy issues.
Dr. Frankel was primarily responsible for the Administration's economic
forecast, macroeconomic analysis, international economic issues, and
certain microeconomic issues, including those relating to natural
resources, the environment, and industrial organization. Dr. Blank was
primarily responsible for policy analysis relating to the budget and
taxation, labor, retirement security, health care, welfare reform, and
child and family issues. She also worked closely with the President's
Initiative on Race. The Chair and Members participate in the
deliberations of the NEC, and Dr. Yellen is a member of the NEC
Principals Committee.
WEEKLY ECONOMIC BRIEFINGS
Dr. Yellen and the Members continued to prepare the Weekly Economic
Briefing of the President of the United States for the President, the
Vice President, and the President's other senior economic and policy
advisers. The Council, in cooperation with the Office of the Vice
President, prepares the written briefing, which provides analysis of
current economic developments, more extended discussions of a wide range
of economic issues and problems, and summaries of economic developments
in different regions and sectors of the economy.
MACROECONOMIC POLICIES
A primary function 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
almost daily memoranda that report key economic data and analyze current
economic events.
The Council, the Department of the Treasury, and the Office of
Management and Budget--the Administration's economic ``troika''--are
responsible for producing the economic forecasts that underlie the
Administration's budget proposals. The Council, under the leadership of
the Members, initiates the forecasting process twice each year. In
preparing these forecasts, the Council consults with a variety of
outside sources, including leading private sector forecasters.
In 1998 the Council continued to take part in discussions about a
range of budget issues, including Medicare reform, discretionary
spending priorities, and the Administration's tax proposals. The Council
also participated in discussions of proposals to strengthen the Social
Security system, and development of the President's proposal to save
Social Security for the 21st century.
The Council participates in the Working Group on Financial Markets,
an interagency group that monitors developments related to financial
markets and the banking sector. The group includes representatives from
the Treasury, the Federal Reserve, the NEC, and various regulatory
agencies. The Council also participated in a

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working group studying bankruptcy reform, and in another on the
macroeconomic implications of the Y2K problem.
The Council continued its efforts to improve the public's
understanding of economic issues and the Administration's economic
agenda through regular briefings with the economic and financial press,
frequent discussions with outside economists, and presentations to
outside organizations. Drs. Yellen, Frankel, and Blank also regularly
exchanged views on the macroeconomy with the Chairman and Members of the
Board of Governors of the Federal Reserve System.
INTERNATIONAL ECONOMIC POLICIES
The Council was an active participant in 1998 in the international
economic policymaking process through the NEC and the National Security
Council, providing both technical and analytical support and policy
guidance.
The Council took an active role in developing policies to respond to
financial turmoil in Asia, Russia, and Latin America, including, for
example, the Asian Growth and Recovery Initiative, designed to
accelerate the restructuring of bank and corporate debt in some
countries affected by the Asian crisis. The Council also monitored
closely the effects of the Asian crisis on U.S. trade. In addition, the
Council actively participated in the development of proposals to reform
the international financial architecture.
The Council was involved in a range of other international economic
issues, including evaluating and explaining the case for trade
liberalization, U.S. trade remedy laws (antidumping, countervailing
duties, safeguards, and Section 301 actions), sanctions policy, and the
agendas of multilateral and regional forums such as the World Trade
Organization and the Asia-Pacific Economic Cooperation forum. Dr. Yellen
testified before the Senate Finance Committee on the causes and
consequences of the U.S. trade deficit.
The Council continued its annual meetings with the Economic Planning
Agency of Japan and the State Development and Planning Commission of
China, the Council's counterparts in those countries, and began to meet
with France's new Council of Economic Analysis. In May, Dr. Yellen led a
delegation of U.S. economic officials, including representatives of the
Departments of Commerce and Treasury and the Board of Governors of the
Federal Reserve System, to China to continue discussions about China's
economy and economic reforms. Dr. Yellen also participated in the
President's trip to China in June, and in November she traveled to
Japan, as part of the President's official visit, to discuss Japan's
economy and economic reforms.
The Council often represents the United States at international
meetings and forums. It is a leading participant in the Organization for
Economic Cooperation and Development (OECD), the principal forum for
economic cooperation among the high-income industrial

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countries. The Council heads the U.S. delegation to the semiannual
meetings of the OECD's Economic Policy Committee; Dr. Yellen serves as
that committee's chair. Dr. Yellen also represented the United States at
the 1998 OECD Ministerial and participated in the OECD's High Level
Group on Sustainable Development. In 1998 Dr. Frankel participated in
the OECD's Working Party 3 on macroeconomic policy coordination. Dr.
Blank led the U.S. delegation to the OECD's Working Party 1, which
focuses on budget and other microeconomic issues. Dr. Steven N. Braun,
Director, Macroeconomic Forecasting at the Council, led the U.S.
delegation to the OECD annual examination of the United States.
MICROECONOMIC POLICIES
During 1998 the Council was an active participant in a range of
microeconomic policy discussions. The Council participated in various
interagency discussions on labor market issues, health care, education,
urban issues, child care, statistical policy, and welfare reform. The
Council also participated in working groups on the minimum wage,
pensions, training initiatives for displaced workers, immigrant visas,
unemployment insurance reform, and farm policy.
The Council was actively involved in the President's Initiative on
Race. It coordinated the production and release of a document presenting
important indicators of social and economic well-being by race and
ethnicity for use by a national audience including educators and
policymakers. In October the Council helped coordinate a major
conference on racial trends in the United States, sponsored by the
President's Initiative on Race and organized by the National Research
Council.
In June 1998 the Council issued a report titled Explaining Trends in
the Gender Wage Gap. The report concluded that although the gap between
women and men's wages has narrowed substantially since the signing of
the Equal Pay Act in 1963, a significant wage gap remains, which cannot
be explained by differences between male and female workers in labor
market experience and in the characteristics of jobs they hold.
In the areas of regulation and competition policy, the Council
helped develop important Administration initiatives to improve the
performance of markets, both domestically and internationally. On the
domestic front the Council provided background information for and
participated in a review of merger effects and related policy issues,
and participated in interagency reviews of competition and pricing in
various sectors of the transportation market. Dr. Yellen testified
before the Senate Judiciary Committee on the economic impact of

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mergers in the United States. The Council also participated in a working
group on consumer privacy policy, and in another group on natural
disaster insurance. The Council worked to consider questions raised by
proposed tobacco legislation. It was also engaged in issues related to
the privatization of the U.S. Enrichment Corporation.
The Council has been active on several matters relating to
telecommunications. It has worked with the Office of the Vice President
to examine increases in growth and competition in the U.S.
telecommunications industry, and participated in interagency working
groups to review a variety of regulatory matters. The Council played an
active role in developing the Administration's response to proposed
legislation to reform the global satellite industry and worked with
other agencies to develop competitive principles designed to increase
consumer benefits from satellite communications. The Council took part
in interagency efforts to increase competition and efficiency in
electric power markets in a manner consistent with important
environmental and social objectives.
The Council was active in a range of policy discussions on natural
resources and the environment, including implementation of the Clean Air
Act, as it applies to automobiles, power plants, and other pollution
sources. It was involved in the development and analysis of the
Administration's global climate change policy. After the negotiation of
the Kyoto Protocol, the Council responded to requests from the Congress
and the public to analyze the economic impact of the climate change
agreement. The Council led the preparation and release of the
Administration's economic analysis, titled The Kyoto Protocol and the
President's Policies to Address Climate Change: Administration Economic
Analysis, which was released in July. Dr. Yellen testified on six
occasions before several House and Senate committees regarding the
Administration's findings. The Council has been particularly active in
developing and promoting plans for the international trading of
emissions permits and other market mechanisms to achieve the targets of
the Kyoto Protocol most efficiently. To advance these plans, Members and
staff traveled to and consulted with officials from Argentina, China,
France, and the Republic of Korea.

The Staff of the Council of Economic Advisers

The professional staff of the Council consists of the Chief of
Staff, the Senior Statistician, nine senior economists, the Senior
Advisor to the Council, five staff economists, and three research
assistants. The professional staff and their areas of concentration at
the end of 1998 were:

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Chief of Staff and General Counsel

Michele M. Jolin
Senior Economists

Steven N. Braun.....    Director, Macroeconomic Forecasting
Douglas W. Elmendorf    Macroeconomics and Financial Markets
Elise H. Golan......    Agriculture and Natural Resources
Stephen Polasky.....    Environment and Natural Resources
Cordelia W. Reimers.    Labor, Social Policy, and Education
Nouriel Roubini.....    International Economics
Robert F. Schoeni...    Labor, Social Policy, and Welfare
Howard A. Shelanski.    Regulation, Industrial Organization, and
Antitrust
Charles F. Stone....    Macroeconomics and Editor, Weekly Economic
Briefing of the President
Senior Advisor to the Council

Joseph E. Aldy......    Global Environment and Natural Resources
Senior Statistician

Catherine H. Furlong
Staff Economists

Ryan D. Edwards.....    Macroeconomics
Quindi C. Franco....    Environment and Natural Resources
Nora E. Gordon......    Labor and Social Economics
Bert I. Huang.......    Labor and Microeconomics
Matthew R. McBrady..    International Economics
Research Assistants

Andrew R. Feldman...    Weekly Economic Briefing of the President and
Labor
Raymond P. Guiteras.    Weekly Economic Briefing of the President and
International Economics
Summer L. Scott.....    Macroeconomics
Statistical Office

Mrs. Furlong directs the Statistical Office. The Statistical Office
maintains and updates the Council's statistical information, oversees
the publication of the monthly Economic Indicators and the statistical
appendix to the Economic Report, and verifies statistics in Presidential
and Council memoranda, testimony, and speeches.

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Susan P. Clements...    Statistician
Linda A. Reilly.....    Statistician
Brian A. Amorosi....    Research Assistant
Administrative Office

Catherine Fibich....    Administrative Officer
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. Frankel
Francine P.
Obermiller..........    Executive Assistant to Dr. Blank
Staff Secretaries

Mary E. Jones.......    International Economics, Labor, and Health Care
Rosalind V. Rasin...    Environment, Industrial Organization, and Public
Finance
Mary A. Thomas......    Macroeconomics
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 1999 Economic Report. Michael A. Toman, Resources for the Future,
served as a consultant during the year.
Anne M. Piehl and Timothy Waidmann provided expertise in the
preparation of a report prepared by the Council for the President's
Initiative on Race entitled Changing America: Indicators of Social and
Economic Well-Being by Race and Hispanic Origin. Jenepher W. Moseley
provided editorial assistance in the preparation of this report.
Student interns during the year were Robert P. Bamsey, Gregory A.
Bedard, Carol L. Capece, Michael A. Egner, Heather L. Jambrosic, Jason
K. Nuzzo, Jenny E. Pippin, Annette M. Richter, Rachel E. Rubinfeld,
Kristen M. Scarafia, Jasmin K. Sethi, and Matthew C. Weinzierl. The
following student interns joined the Council in January to assist with
the preparation of the Economic Report: Enrique J. Alonso, David S.
Felman, Matthew S. Milner, and Nathaniel F. Stankard.
DEPARTURES
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. Many of the senior
economists who resigned during the year returned to their previous

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affiliations. They are Christopher D. Carroll (The Johns Hopkins
University), Aaron S. Edlin (University of California, Berkeley), Jon D.
Haveman (Purdue University), and Sanders D. Korenman (Baruch College of
the City University of New York). Keith O. Fuglie returned to the U.S.
Department of Agriculture, and he has since accepted a position with the
International Potato Center. Senior economists who resigned during the
year and accepted new positions are Maria J. Hanratty (University of
Minnesota), Randall W. Lutter (American Enterprise Institute and the
AEI-Brookings Joint Center for Regulatory Studies), Adele C. Morris
(Department of the Treasury), and Jeremy B. Rudd (Department of the
Treasury).
Staff economists are generally graduate students who spend 1 year
with the Council and then return to their universities to complete their
dissertations. Those who returned to their graduate studies in 1998 are
Mark R. Hopkins (University of Wisconsin-Madison) and Mark C. Rainey
(Massachusetts Institute of Technology). Amy N. Finkelstein began
graduate studies at the Massachusetts Institute of Technology and Sarah
J. Reber at Harvard University. After serving as a research assistant at
the Council, Zachary M. Candelario accepted a position at Mars and
Company. Research assistants who began graduate studies in 1998 are
Melissa A. Clark (Princeton University) and Ha Yan Lee (London School of
Economics). Daniel K. Chang began studies at Georgetown University Law
Center.

Public Information

The Council's Annual Report is an important vehicle for presenting
the Administration's domestic and international economic policies. It is
now available for distribution as a bound volume, on CD-ROM, and on the
Internet, where it is accessible at http://www.access.gpo.gov/eop. The
Council also has primary responsibility for compiling the monthly
Economic Indicators, which is issued by the Joint Economic Committee of
the Congress. The Internet address for the Economic Indicators is
www.access.gpo.gov/congress/cong002.html.