[Economic Report of the President (2000)]
[Administration of William J. Clinton]
[Online through the Government Printing Office, www.gpo.gov]


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Economic Report of the President




Transmitted to the Congress
February 2000



together with
THE ANNUAL REPORT
of the
COUNCIL OF ECONOMIC ADVISERS



UNITED STATES GOVERNMENT PRINTING OFFICE

WASHINGTON : 2000
________________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Mail Stop: SSOP, Washington, D.C. 20402-9328


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CONTENTS

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

ANNUAL REPORT OF THE COUNCIL OF
ECONOMIC ADVISERS*................................................ 9

Chapter 1. Sustaining a Record-Breaking Expansion................. 21

Chapter 2. Macroeconomic Policy and Performance................... 49

Chapter 3. Technology and the American Economy.................... 97

Chapter 4.  Work and Learning in the 21st Century................ 129

Chapter 5. The Changing American Family.......................... 165

Chapter 6. Opportunity and Challenge in the
Global Economy................................................. 199

Chapter 7. Making Markets Work for the Environment............... 239

Conclusion. A Century of Change: New Opportunities
for the Future.................................................. 277

Appendix a. Report to the President on the Activities of the
Council of Economic Advisers During 1999........................ 285

Appendix b. Statistical Tables Relating to Income, Employment,
and Production.................................................. 299

_________________
* For a detailed table of contents of the Councilï¿½s Report, see page 13


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ECONOMIC REPORT
OF THE PRESIDENT


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ECONOMIC REPORT OF THE PRESIDENT

To the Congress of the United States:

Today, the American economy is stronger than ever. We are on the brink of
marking the longest economic expansion in our Nationï¿½s history. More than 20
million new jobs have been created since Vice President Gore and I took
office in January 1993. We now have the lowest unemployment rate in 30
years--even as core inflation has reached its lowest level since 1965.

This expansion has been both deep and broad, reaching Americans of all
races,  ethnicities, and income levels. African American unemployment
and poverty are  at their lowest levels on record. Hispanic unemployment
is likewise the  lowest on record, and poverty among Hispanics is at its
lowest level since  1979. A long-running trend of rising income inequality
has been halted in the  last 7 years. From 1993 to 1998, families at the
bottom of the income  distribution have enjoyed the same strong income
growth as workers at the top.

In 1999 we had the largest dollar surplus in the Federal budget on record
and the largest in proportion to our economy since 1951. We are on course
to achieve more budget surpluses for many years to come. We have used this
unique opportunity to make the right choices for the future: over the past
2 years, America has paid down $140 billion in debt held by the public. With
my plan to continue to pay down the debt, we are now on track to eliminate
the Nation's publicly held debt by 2013. Our fiscal discipline has paid off
in lower interest rates, higher private investment, and stronger
productivity growth.

These economic successes have not been achieved by accident. They rest
on the three pillars of the economic strategy that the Vice President and
I laid out when we took office: fiscal discipline to help reduce interest
rates and spur business investment; investing in education, health care,
and science and technology to meet the challenges of the 21st century;
and opening foreign markets so that American workers have a fair chance
to compete abroad. As a result, the American economy is not only strong
today; it is well positioned to continue to expand and to widen the circle
of opportunity for more Americans.


The Administration's Economic Strategy

Our economic strategy was based on a commitment, first, to fiscal
discipline. When the Vice President and I took office, the U.S. Government
had

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a budget deficit of $290 billion. Today we have a surplus of $124
billion. This fiscal discipline has helped us launch a virtuous circle
of strong investment, increasing productivity, low inflation, and low
unemployment.

Second, we have remained true to our commitment to invest in our people.
Because success in the global economy depends more than ever on highly
skilled workers, we have taken concerted steps to make sure all Americans
have the education, skills, and opportunities they need to succeed. That
is why, even as we maintained fiscal responsibility, we expanded our
investments in education, technology, and training. We have opened the
doors of college to all Americans, with tax credits, more affordable student
loans, education IRAs, and the HOPE Scholarship tax credits. So that working
families will have the means to support themselves, we have increased the
minimum wage, expanded the Earned Income Tax Credit (EITC), provided access
to health insurance for people with disabilities, and invested in making
health insurance coverage available to millions of children.

Third, we have continued to pursue a policy of opening markets. We have
achieved historic trade pacts such as the North American Free Trade
Agreement and the Uruguay Round agreements, which led to the creation of
the World Trade Organization. Negotiations in the wake of the Uruguay
Round have yielded market access commitments covering information
technology, basic telecommunications, and financial services. We have
engaged in bilateral initiatives with Japan and in regional initiatives
in Europe, Africa, Asia, the Western Hemisphere, and the Middle East. We
have also actively protected our rights under existing trade agreements
through the World Trade Organization and helped maintain the Internet as
a tax-free zone.

Meeting the Challenges of the Future

Despite the economyï¿½s extraordinary performance, we must continue working
to meet the challenges of the future. Those challenges include educating
our children, improving the health and well-being of all our citizens,
providing for our senior citizens, and extending the benefits of the
economic expansion to all communities and all parts of this Nation.

We must help our children prepare for life in a global, information-
driven economy. Success in this new environment requires that children have
a high-quality education. That means safe, modern schools. It means making
sure our children have well-trained teachers who demand high standards.
It means making sure all schools are equipped with the best new
technologies, so that children can harness the tools of the 21st century.

First and foremost, our children cannot continue trying to learn in
schools that are so old they are falling apart. One-third of all public
schools need extensive repair or replacement. By 2003 we will need an
additional 2,400 schools nationwide to accommodate these rising
enrollments. That is why, in

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my State of the Union address, I proposed
$24.8 billion in tax credit bonds over 2 years to modernize up to 6,000
schools, and a $1.3 billion school emergency loan and grant proposal to
help renovate schools in high-poverty, high-need school districts.

Second, if our children are to succeed in the new digital economy, they
must know how to use the tools of the 21st century. That is why the Vice
President and I have fought for initiatives like the E-rate, which is
providing $2 billion a year to help schools afford to network their
classrooms and connect to the Internet. The E-rate and our other
initiatives in education technology have gone a long way toward giving
all children access to technology in their schools. But there is still a
great ``digital divide'' when children go home. Children from wealthy
families are far more likely to have access to a computer at home
than children from poor or minority families. That is why, in my budget,
I propose a new Digital Divide initiative that will expand support for
community technology centers in low-income communities; a pilot project
to expand home access to computers and the Internet for low-income families;
and grants and loan guarantees to accelerate the deployment of high-speed
networks in underserved rural and urban communities.

Third, we must continue to make college affordable and accessible for
all Americans. I have proposed a college opportunity tax cut, which would
invest $30 billion over 10 years in helping millions of families who now
struggle to afford college for their children. When fully phased in, this
initiative would give families the option to claim a tax deduction or a tax
credit on up to $10,000 of tuition and fees for any postsecondary education
in which their members enroll, whether college, graduate study, or training
courses. I have proposed increases in Pell grants, Supplemental Educational
Opportunity Grants, and Work Study. I have also proposed creating new
College Completion Challenge Grants to encourage students to stay in college.

We have seen dramatic advances in health care over the course of the 20th
century, which have led to an increase in life expectancy of almost 30
years. But much remains to be done to ensure that all have and maintain
access to quality medical care. That is why my budget expands health care
coverage, calls for passing a strong and enforceable Patientsï¿½ Bill of
Rights, strengthens and modernizes Medicare, addresses long-term care,
and continues to promote life-saving research.

My budget invests over $110 billion over 10 years to improve the
affordability, accessibility, and quality of health insurance. It will
provide a new, affordable health insurance option for uninsured parents
as well as accelerate enrollment of uninsured children who are eligible
for Medicaid and the State Children's Health Insurance Program. The
initiative will expand health insurance options for Americans facing
unique barriers to coverage. For example, it will allow certain people
aged 55-65 to buy into Medicare, and it

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will give tax credits to workers
who cannot afford the full costs of COBRA coverage after leaving a job.
Finally, my initiative will provide funds to strengthen the public
hospitals and clinics that provide health care directly to the uninsured.
If enacted, this would be the largest investment in health coverage since
Medicare was created in 1965, and one of the most significant steps we can
take to help working families.

As our Nation ages and we live longer, we face new challenges in Medicare
and long-term care. Despite improvements in Medicare in the past 7 years,
the program begins this century with the disadvantages of insufficient
funding, inadequate benefits, and outdated payment systems. To strengthen
and modernize the program, I have proposed a comprehensive reform plan
that would make Medicare more competitive and efficient and invest $400
billion over the next 10 years in extending solvency through 2025 and adding
a long-overdue, voluntary prescription drug benefit.

The aging of America also underscores the need to build systems to provide
long-term care. More than 5 million Americans require long-term care because
of significant limitations due to illness or disability. About two-thirds of
them are older Americans. That is why I have proposed a $27 billion
investment over 10 years in long-term care. Its centerpiece is a $3,000 tax
credit to defray the cost of long-term care. In addition, I propose to expand
access to home-based care, to establish new support networks for caregivers,
and to promote quality private long-term care insurance by offering it to
Federal employees at group rates.

We must continue to make this economic expansion reach out to every corner
of our country, leaving no town, city, or Native American reservation behind.
That is why I am asking the Congress to authorize two additional components of
our New Markets agenda. The first is the New Markets Venture Capital Firms
program, geared toward helping small and first-time businesses. The second
is America's Private Investment Companies, modeled on the Overseas Private
Investment Corporation, to help larger businesses expand or relocate to
distressed inner-city and rural areas. Overall the New Markets initiative
could spur $22 billion of new equity investment in our underserved
communities.

I am also proposing a new initiative called First Accounts, to expand
access to financial services for low- and moderate-income Americans. We
will work with private financial institutions to encourage the creation
of low-cost bank accounts for low-income families. We will help bring
more automated teller machines to safe places in low-income communities,
such as the post office. And we will educate Americans about managing
household finances and building assets over time.

To further increase opportunities for working families, I am proposing
another expansion of the EITC to provide tax relief for 6.4 million

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hard-pressed families--with additional benefits for families with three
or more children. We have seen the dramatic effects that our 1993 expansion
of the EITC had in reducing poverty and encouraging work: 4.3 million people
were directly lifted out of poverty by the EITC in 1998 alone. More single
mothers are working than ever before, and the child poverty rate is at
its lowest since 1980.

Our initiatives to open overseas markets will continue. We have
successfully concluded bilateral negotiations on Chinaï¿½s accession to the
World Trade Organization and now seek congressional action to provide China
with permanent normal trade relations. The United States will also work to
give the least developed countries greater access to global markets. We will
participate in the scheduled multilateral talks to liberalize trade in
services and agriculture and will continue to press our trading partners
to launch a new round of negotiations within the World Trade Organization.

We have a historic opportunity to answer the challenges ahead: to increase
economic opportunity for all American families; to provide quality,
affordable child care, health care, and long-term care; and to give our
children the best education in the world. Working together, we can meet
these great challenges and make this new millennium one of ever-increasing
promise, hope, and opportunity for all Americans.





THE WHITE HOUSE
FEBRUARY 10, 2000


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THE ANNUAL REPORT OF THE COUNCIL OF ECONOMIC ADVISERS

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LETTER OF TRANSMITTAL

Council of Economic Advisers,
Washington, D.C., February 10, 2000.

Mr. President:
The Council of Economic Advisers herewith submits its 2000 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,



Martin N. Baily,
Chairman



Robert Z. Lawrence,
Member



Kathryn L. Shaw,
Member-Nominee