[Economic Report of the President (2001)]
[Administration of George W. Bush]
[Online through the Government Printing Office, www.gpo.gov]


107th Congress, 1st Session..................................... H. Doc. 107-2

 
Economic Report of the President


Transmitted to the Congress
January 2001


together with
THE ANNUAL REPORT
of the
COUNCIL OF ECONOMIC ADVISERS

UNITED STATES GOVERNMENT PRINTING OFFICE

WASHINGTON : 2001

____________________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov   Phone: (202) 512-1800   Fax: (202) 512-2250
Mail Stop: SSOP, Washington, DC 20402-0001
ISBN 0-16-050616-6


C O N T E N T S
----------
Page

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

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

Chapter 1. The Making of the New Economy ........................ 19

Chapter 2. Macroeconomic Policy and Performance ................. 55

Chapter 3. The Creation and Diffusion of the New Economy ........ 95

Chapter 4. The New Economy in a Global Context ................. 145

Chapter 5. Living in the New Economy ........................... 187

Conclusion: Achievements and Challenges in the New Economy ..... 245

Appendix A. Report to the President on the Activities of the
Council of Economic Advisers During 2000 ...................... 255

Appendix B. Statistical Tables Relating to Income, Employment,
and Production ................................................ 269

_______________________
* 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:

I am pleased to report that the American economy today is strong. We
are enjoying the longest economic expansion ever recorded, with more
than 22 million new jobs since 1993, the lowest unemployment rate in
30 years, the lowest female unemployment rate in 40 years, the lowest
Hispanic and African-American unemployment rates ever recorded, and the
highest home ownership rate on record.

This economic expansion has been not only unusually long, but also
broad and deep. For the first time in decades, wages are rising at
all income levels. We have the lowest child poverty in 20 years and
the lowest poverty rate for single mothers ever recorded. Since 1993
the median family income has gone up more than $6,000, and for African-
American families it has risen even more. The number of families who
own stock has grown by 40 percent.

Our current economic strength is the result not of chance, but of a
choice the American people made 8 years ago. At that time, 10 million
of our fellow citizens were out of work. Interest rates were high. The
Federal budget deficit was $290 billion and rising. And the Federal debt
had quadrupled in the previous 12 years, imposing a crushing burden
on our economy and on our children.

The American people chose to change direction, and empowered by that
choice, Vice President Gore and I put in place a new economic strategy:
fiscal discipline, greater investment in our people, and expanded trade.
The result of that three-part strategy has been 8 years of prosperity
and progress. Continuing with this proven strategy is the best way to
keep that prosperity and progress going.

The Administration's Economic Agenda

Our strategy has been based, first and foremost, on a commitment to
fiscal discipline. By first cutting and then eliminating the deficit,
we have helped to create a virtuous cycle of lower interest rates,
greater investment, more jobs, higher productivity, and higher wages.
In the process we have gone from the largest deficits in history to the
largest surpluses in history. We have extended the life of the Medicare
trust fund to 2025--when I was elected President, it was scheduled
to go bankrupt in 1999. And we have paid off $362.5 billion in debt.

Second, our strategy has focused on investing more in education, health
care, and science and technology, to strengthen our people's capacity
to make the most of the new opportunities of the 21st century. We have
doubled funding for Head Start, provided after-school opportunities and
mentoring to more than a million young people, and begun putting 100,000
new, well-trained teachers in the early grades to lower class size. These
investments, combined with an insistence on high standards for all
students and accountability for results, have helped improve student
achievement nationwide: reading, math, and SAT scores are all up. And
with the largest expansion of college aid since the G.I. Bill, more
students than ever are going on to college.

We have also invested in our people through targeted tax relief, to
help Americans meet the challenges of work and child rearing. Last year
alone, our HOPE Scholarship and Lifetime Learning tax credits helped 10
million families pay for college. Our expansion of the Earned Income Tax
Credit will help 15 million families work their way toward the middle
class. And 25 million families will get a $500 child tax credit. The
typical American family today is paying a lower share of its income in
Federal income taxes than at any time during the past 35 years.

Since 1993 we have increased funding for long-term research and
development--investments that lead to more economic growth, more
high-wage jobs, more cures for diseases, and a cleaner environment.
Funding for the National Institutes of Health, for instance, has nearly
doubled over the past 7 years.

Meanwhile we have continued to make important investments in our
Nation's communities. Our Empowerment Zone tax credits are bringing
new business and new jobs to our hardest pressed communities, from the
inner cities to Appalachia to the Mississippi Delta to Native American
communities. With the help of 100,000 more community police officers
funded for our streets, and commonsense measures such as the Brady law
and the assault weapons ban that keep guns out of the wrong hands, crime
has fallen to a 26-year low. Under the State Children's Health
Insurance Program, 2 million previously uninsured children now have
health coverage.

Third, our economic strategy has focused on opening markets around the
world. Today, with more than 300 new trade agreements in place, including
the North American Free Trade Agreement and the Uruguay Round agreements,
American workers and firms are competing in more markets than ever before,
and our economy is stronger for it.

Continuing Our Economic Strategy

Last year we took important new actions to secure our economic future,
guided by the same three-part strategy. We normalized trade with China,
a move that will open China's markets to American products from wheat to
cars to consulting services. It will also ensure that American companies
will be better able to sell goods in China without having to move
factories or investments there. Congress also passed, and I signed,
a 2001 budget that maintains our commitment to fiscal discipline. Under
this new budget we will continue to pay down the debt. If we stay on this
path, we can make America debt-free by 2012 for the first time since
Andrew Jackson was President in 1835, thereby keeping interest rates
low and prosperity going strong.

The 2001 budget also continues our strategy of investing in our people.
It includes the largest-ever increase in funding for the National
Science Foundation and major increases in funding for education. A new,
$1.2 billion investment will help thousands of school districts make
emergency repairs and renovations to our children's classrooms. We have
increased by 25 percent the funding dedicated to our goal of hiring
100,000 new, highly qualified teachers, to reduce class size. We have
nearly doubled funding for after-school programs to help more than 1.3
million students, while increasing support for teacher training and for
turning around failing schools. And to open the doors of college even
wider, we have increased the maximum Pell grant to an all-time high of
$3,750--up nearly $1,500 since 1993.

The new budget also includes our historic New Markets and Renewal
Communities Initiative, the most significant effort ever to help
hard-pressed communities lift themselves up through entrepreneurship
and access to new capital. With our New Markets tax credit, 40
Empowerment Zones, and 40 renewal communities, this initiative will
spur billions in private investment in communities that have not yet
shared in our great economic revival.

This is a unique moment in U.S. history, a time of unrivaled prosperity
and progress, with few internal crises or external threats. We have the
responsibility to use our good fortune wisely. If we maintain our
current economic strategy, we can sustain our prosperity, expand the
circle of opportunity, meet the long-term challenges of this new century,
and provide our children the chance to live their dreams.

William J. Clinton

THE WHITE HOUSE
January 2001


THE ANNUAL REPORT
OF THE
COUNCIL OF ECONOMIC ADVISERS


LETTER OF TRANSMITTAL

Council of Economic Advisers,
Washington, D.C., December 29, 2000.

Mr. President:

The Council of Economic Advisers herewith submits its 2001 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