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



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CONTENTS
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Page
Chapter 1. Sustaining a record-breaking expansion............     21

Growth and Inequality: A Century-Long Perspective.........     23

The Golden Years of Equitable Growth...................     24

Growth Undermined: Stagflation, Rising Inequality,
and Deficits..........................................     25

The Return to Broad-Based Growth in a
Record-Breaking Expansion.............................     26

The Engines of the 1990s Expansion........................     28

Information and Other Technology......................     28

Competition and Trade.................................     30

Education, Skills, and Work Incentives................     30

Pro-Investment Policies...............................     31

Key Features of the Expansion.............................     34

Productivity Growth...................................     34

Inflation.............................................     36

Questioning the Causes of Inequality......................     37

Is the Dream Restored?....................................     40

Challenges for the Future.................................     42

Stabilizing the Macroeconomy..........................     42

Enhancing Productivity................................     42

Promoting Skills, Education, and Development..........     43

Supporting the Diverse American Family................     44

Exploiting the Potential of Globalization.............     45

Maintaining the Environment Efficiently...............     46

Conclusion................................................     47

Chapter 2. macroeconomic policy and performance..............     49

The Year in Review........................................     53

Components of Spending................................     53

Labor Markets and Inflation...........................     58

Financial Markets.....................................     64

Saving and Investment.....................................     72

Trends in Saving......................................     72

Saving and Asset Accumulation.........................     73

The End of the Business Cycle?............................     74

The Changing Nature of Business Cycles in the
United States........................................     75


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Sources of Business Cycle Moderation..................     76

Do Expansions Die of Old Age?.........................     77

An Expansion is Only as Old as It Feels, and This
One Still Feels Young................................     77

The Economic Outlook......................................     79

What Has Caused Productivity Growth to Rise?..........     80

The Outlook for Productivity..........................     84

Supply-Side Components of GDP.........................     85

Budget Effects of a High-Investment
Economy..............................................     86

What Has Held Inflation in Check?.....................     87

The Near-Term Outlook.................................     92

Chapter 3. technology and the american economy...............     97

Innovation and Economic Change: A Look Back ..............     99

Innovation and Change in the American Economy Today.......    103

Developments in Telecommunications....................    105

How Information Technology is Changing the Economy........    112

Managing Information Flows............................    113

Retail E-Commerce.....................................    115

Business-to-Business E-Commerce.......................    116

Information Technology and the Theory of the Firm.....    118

Information Technology and Network Effects............    120

The Role for Government Policies..........................    122

Support for Research and Development..................    123

Technology Initiatives in the Budget..................    124

Maintaining Competition...............................    126

Conclusion................................................    127

Chapter 4. work and learning in the 21st century.............    129

The Transformation of the Labor Market....................    132

The Rising Importance of Skills and Education.........    132

Growth in Opportunities...............................    137

Preparing the American Work Force for the 21st Century....    144

Building Foundations: Educating America's Youth.......    146

The Continuing Challenge: Reeducating and Retraining..    157

Conclusion................................................    164

Chapter 5. the changing american family......................    165

Key Trends Shaping the American Family....................    167

Female Labor Force Participation......................    168

Family Formation and Dissolution......................    168


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Life Expectancy and Health............................    170

Increasing Diversity Across Families......................    172

Diversity in Family Structure.........................    172

Diversity of Income and Hours of Work.................    175

The Rising Earnings of Women with Children............    177

Challenges Families Face..................................    182

The ``Money Crunch''..................................    182

Boosting the Financial Resources of Families to
Lessen the Money Crunch..............................    185

The ``Time Crunch''...................................    190

Increasing the Flexibility of Paid Work to Lessen
the Time Crunch......................................    194

Conclusion................................................    197

Chapter 6. opportunity and challenge in the global economy...    199

The Fall and Rise of the Global Economy...................    202

The Growing Importance of Trade.......................    202

The Rise of International Capital Flows...............    205

The Forces Behind Globalization...........................    208

The Role of Technology................................    209

The Role of Policy....................................    210

The Benefits of a Global Economy..........................    213

Globalization and Living Standards....................    214

Globalization and Growth..............................    216

The Challenges of Globalization...........................    217

Spreading the Benefits of Trade.......................    217

Managing Capital Flows and the Macroeconomy...........    225

The Trade and Current Account Deficits................    231

Conclusion................................................    236

Chapter 7. making markets work for the environment...........    239

Environmental Problems Since 1900.........................    240

A Brief History of Environmental Problems.............    240

Environmental Pollution and Development...............    241

Designing Policies to Address Environmental Pollution.....    246

Traditional Regulatory Approaches to Address
Environmental Pollution..............................    247

Incentive-Based Approaches to Address
Environmental Pollution..............................    248

Important Issues in Designing Incentive-Based Instruments.    250

Uncertainty About Costs and Benefits..................    250


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Heterogeneity in Abatement Benefits...................    252

Heterogeneity in Abatement Costs......................    253

Scope of the Emissions Trading Market.................    253

Restrictions on Trading...............................    254

Liability.............................................    254

Banking and Borrowing.................................    255

Tradable Permits and Charges in Practice..................    255

Permit Trading: Emissions Trading Policy Under the
Clean Air Act........................................    256

Permit Trading: RECLAIM...............................    257

Permit Trading: Sulfur Dioxide Trading Program........    259

Permit Trading: Phasedown of Leaded Gasoline..........    260

Charges: Unit-Based Pricing of Residential Solid Waste    261

Implications of the U.S. Experience...................    263

Applying the Lessons Learned: Global Climate Change.......    265

Flexibility Mechanisms in the Kyoto Protocol..........    266

Cost-Effectiveness of Kyoto Protocol Flexibility
Mechanisms...........................................    267

Expanding the Scope of Trading to More Countries......    268

Expanding the Scope of Trading to More Greenhouse
Gases................................................    268

Quantitative Restrictions on Trading..................    270

Liability Rules for Trading...........................    270

Making Trading Across Countries Work..................    270

Conclusion................................................    274

conclusion. a century of change: new opportunities
for the future.............................................    277

A Look Back...............................................    278

The American Economy Today................................    279

The Drivers of Change and the Challenges Ahead............    280

Conclusion................................................    283

Appendixes

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

B. Statistical Tables Relating to Income, Employment, and
Production ..........................................    299


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list of tables


1-1.  Growth in GNP, Business Sector Output per Hour, and
Number of Employees for Selected Periods.............     41

2-1.  Growth of Real GDP and its Components During
1998 and 1999........................................     53

2-2.  The Late-Expansion Economy and the Current Expansion..     78

2-3.  Accounting for the Productivity Acceleration in the
1990s................................................     83

2-4.  Accounting for Growth in Real GDP, 1960-2007..........     85

2-5.  Administration Forecast...............................     87

3-1.  Cost of Internet Access in 1999.......................    111

3-2.  Information Technology Investment per Worker in the
15 Most Information Technology-Intensive
Industries, 1996.....................................    113

4-1.  Share of Women Employed in Selected Occupations in
1950 and 1999........................................    139

5-1.  Contrasting American Families Then and Now............    166

5-2.  Educational Distribution of Women with Children.......    179

5-3.  Share of Women with Children Who Worked in Previous
Year, by Education...................................    180

7-1.  Number of Communities Adopting Unit-Based Pricing
Residential Solid Waste Collection Programs..........    262


list of charts

1-1.  Growth in Income per Capita and Business Sector
Output per Hour......................................     23

1-2.  Growth in Real Compensation per Hour
(Nonfarm Business Sector)............................     26

1-3.  Growth in Mean Real Family Income by Quintile.........     27

1-4.  Real Private Investment in Equipment as a Share of
Real GDP.............................................     29

1-5.  Trade as a Share of GDP During Expansions.............     31

1-6.  Contributions to Economic Growth During Expansions....     32

1-7.  Federal Budget Receipts and Outlays...................     33

1-8.  Structural Federal Budget Balances During Expansions..     33

1-9.  Growth in Nonfarm Business Sector Output per Hour
During Expansions....................................     35

1-10.  Core Inflation Rates During Expansions................     36

1-11.  Capacity Utilization in Manufacturing During
Long Expansions......................................     37

2-1.  Unemployment Rate.....................................     51

2-2.  Inflation Rate........................................     51

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2-3.  Net Worth and the Personal Consumption Rate...........     55

2-4.  Inventory-to-Sales Ratio (Manufacturing and Trade)....     56

2-5.  Federal Budget Surplus................................     57

2-6.  Growth of Real Compensation per Hour
(Nonfarm Business Sector)............................     62

2-7.  Capacity Utilization (Manufacturing)..................     63

2-8.  Equity Prices.........................................     65

2-9.  Yields on Treasury Securities.........................     66

2-10.  Cumulative Real Returns in the Top Six Bull
Markets Since 1802...................................     68

2-11.  Real Stock and Bond Returns Since 1801................     69

2-12.  Net National Saving and Net Domestic Investment.......     72

2-13.  Gross National Saving.................................     73

2-14.  Fluctuations in Output, Inflation, and Unemployment...     76

2-15.  Labor Productivity (Nonfarm Business Sector)..........     79

2-16.  Sources of Revisions to Real GDP Growth...............     82

2-17.  The Phillips Curve, Productivity, and the NAIRU.......     91

3-1.  Household Adoption of Selected Technologies Since
1900.................................................    100

3-2.  Contribution of Computers and Telecommunications
Purchases to GDP Growth..............................    105

3-3.  Real Private Direct Investment in Communications
Equipment............................................    109

3-4.  Households with Access to E-Mail at Home, by Income...    111

3-5.  Real Net Stock of Information Technology Equipment
in the Private Sector................................    112

3-6.  Real Inventory-to-Sales Ratios for Selected Product
Categories...........................................    115

3-7.  Business-to-Business E-Commerce.......................    117

3-8.  Patents Granted Since 1900............................    122

4-1.  Composition of Employment by Major Sector Since 1900..    130

4-2.  High School Graduation Rates of 25- to 29-Year-Olds
by Race and Ethnicity................................    133

4-3.  College Completion Rates of 25- to 29-Year Olds by
Race and Ethnicity...................................    133

4-4.  Median Weekly Earnings of Male Workers by Educational
Attainment...........................................    135

4-5.  Ratios of Median Weekly Earnings of Male College
Graduates to Earnings of High School Graduates and
Dropouts.............................................    136

4-6.  Ratios of Median Annual Earnings of Female Workers to
Earnings of Males....................................    139


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4-7.  Ratios of Median Annual Earnings of African American
Workers to Earnings of White Workers.................    143

4-8.  Average Scores on the Scholastic Assessment Test
(SAT)................................................    148

4-9.  Shares of Public Schools with Internet Access by
Poverty Status.....................................    152

5-1.  Labor Force Participation of Women....................    169

5-2.  Shares of Population Aged 35-54 Who Are Widowed
or Divorced..........................................    170

5-3.  Birth Rates for Married and Unmarried Females.........    171

5-4.  Composition of Families by Family Structure...........    172

5-5.  Grandchildren in Grandparents' Homes by Presence
of Parents...........................................    174

5-6.  Median Family Income by Family Structure..............    176

5-7.  Income Distributions for Families with Children by
Family Structure, 1998...............................    177

5-8.  Distribution of Annual Hours Worked by Families
with Children, 1998..................................    178

5-9.  Time Available to Custodial Parents After Paid Work
and Sleep............................................    191

6-1.  GDP and Export Growth Rates for Group of Seven
Countries Since 1700.................................    200

6-2.  U.S. Trade Relative to GNP Since 1900.................    203

6-3   U.S. Trade by Sector in 1998..........................    204

6-4.  Capital Flows Into and Out of the United
States Relative to GNP...............................    206

6-5.  Average U.S. Tariff Rates Since 1900..................    211

6-6.  GDP per Capita in the United States and Selected
Major Economies......................................    213

6-7.  Saving, Investment, and the Current Account Balance...    233

6-8.  U.S. and Foreign GDP Growth and U.S. Net Exports......    233

6-9.  Real Effective Exchange Rate of the Dollar and
the Trade Deficit....................................    234

7-1   Sulfur Dioxide and Nitrogen Oxide Emissions per
Unit of GNP Since 1900...............................    242

7-2   Carbon Dioxide Emissions per Unit of GNP Since 1900...    242

7-3    South Coast Air Basin Exceedances of Federal
Ozone Standard......................................    258

7-4   Emissions from Phase I Facilities in the Sulfur
Dioxide Trading Program..............................    260

7-5   Lead Emissions........................................    261


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list of boxes

2-1.  The CPI-U-RS, a Consumer Price Index with More
Consistent Methodology...............................     60

2-2.  Economic Impact of Y2K Preparations...................     64

2-3.  What Did We Learn from the GDP Benchmark Revision?....     81

3-1.  Measuring the Economy in an Era of Technological
Change...............................................    106

3-2.  Implementing Local Competition Provisions in the
1996 Telecommunications Act..........................    108

3-3.  Holding an Online Auction.............................    119

4-1.  The Role of Government Policy in Improving the
Economic Status of African Americans.................    142

4-2.  Helping Areas Left Behind: Opening New Markets........    145

4-3.  The Administration's Education Goals..................    149

4-4.  The Role of Community Colleges........................    155

4-5.  Using Technology to Help Workers: America's
Career Kit...........................................    163

5-1.  The Importance of Fathers.............................    173

5-2.  The Diversity of American Households..................    175

5-3.  Women Professionals, the Rat Race, and the
Time Crunch..........................................    181

5-4.  The National Strategy to Reduce Teen Pregnancy........    188

6-1.  Multinational Corporations and Globalization..........    207

6-2.  China's WTO Accession: Opening Foreign Markets,
Extending the Rule of Law, and Encouraging Growth and
Development..........................................    221

6-3.  The New International Financial Architecture..........    229

7-1.  Structural Economic Change and Carbon Dioxide
Emissions............................................    243

7-2.  Taking Account of the Environment.....................    245

7-3.  Emissions Trading: An Illustrative Example............    249

7-4.  Should Regulators Allocate or Sell Tradable Permits?..    251

7-5.  Individual Quotas for Fisheries Management............    264

7-6.  Expanding the Scope of the Market Through Developing
Country Participation................................    269

7-7.  The EU Bubble Allocation and Restrictions on Kyoto
Protocol Mechanisms..................................    271

7-8.  The Renewable Portfolio Standard......................    272

7-9.  Climate Research and Development and Information
Programs.............................................    273