[Economic Report of the President (2003)] [Administration of George W. Bush] [Online through the Government Printing Office, www.gpo.gov] Appendix A REPORT TO THE PRESIDENT ON THE ACTIVITIES OF THE COUNCIL OF ECONOMIC ADVISERS DURING 2002 LETTER OF TRANSMITTAL Council of Economic Advisers, Washington, D.C., December 31, 2002. Mr. President: The Council of Economic Advisers submits this report on its activities during the calendar year 2002 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, Robert Glenn Hubbard, Chairman Randall S. Kroszner, Member 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. Laura D'Andrea Tyson Chair February 5, 1993 April 22, 1995. Alan S. Blinder Member July 27, 1993 June 26, 1994. Joseph E. Stiglitz Member July 27, 1993 Chairman June 28, 1995 February 10, 1997. Martin N. Baily Member June 30, 1995 August 30, 1996. Alicia H. Munnell Member January 29, 1996 August 1, 1997. Janet L. Yellen Chair February 18, 1997 August 3, 1999. Jeffrey A. Frankel Member April 23, 1997 March 2, 1999. Rebecca M. Blank Member October 22, 1998 July 9, 1999. Martin N. Baily Chairman August 12, 1999 January 19, 2001 Robert Z. Lawrence Member August 12, 1999 January 12, 2001 Kathryn L. Shaw Member May 31, 2000 January 19, 2001 R. Glenn Hubbard Chairman May 11, 2001 Mark B. McClellan Member July 25, 2001 November 13, 2002 Randall S. Kroszner Member November 30, 2001 Report to the President on the Activities of the Council of Economic Advisers During 2002 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 Chairman of the Council R. Glenn Hubbard continued to chair the Council during 2002. Dr. Hubbard is on a leave of absence from Columbia University, where he is the Russell L. Carson Professor of Economics and Finance and Co-Director of the Entrepreneurship Program in the Graduate School of Business and Professor of Economics in the Faculty of Arts and Sciences. He is a Research Associate at the National Bureau of Economic Research. He also served as Senior Vice Dean of the Graduate School of Business at Columbia University. Dr. Hubbard is responsible for communicating the Council's views on economic matters directly to the President through personal discussions and written reports. He represents the Council at Cabinet meetings, meetings of the National Economic Council, daily White House senior staff meetings, budget team meetings with the President, and other formal and informal meetings with the President. He also travels within the United States and overseas to present the Administration's views on the economy. Dr. Hubbard is the Council's chief public spokesperson. He directs the work of the Council and exercises ultimate responsibility for the work of the professional staff. The Members of the Council Randall S. Kroszner is the other current Member of the Council of Economic Advisers. Dr. Kroszner is on leave from the University of Chicago's Graduate School of Business, where he is Professor of Economics. He is also on leave from his positions as Editor of the Journal of Law & Economics and Associate Director of the George J. Stigler Center for the Study of the Economy and the State at the University of Chicago. Dr. Kroszner is also a Faculty Research Fellow at the National Bureau of Economic Research. He represents the Administration at a variety of international and domestic meetings. The Council's third Member, Mark B. McClellan, left the Council in November 2002 upon his appointment by the President to be Commissioner of the Food and Drug Administration. The Chairman and the Members work as a team on most economic policy issues. Dr. Hubbard was primarily responsible for the Administration's economic forecast, macroeconomic analysis, budget and taxation policy, and retirement security. Dr. Kroszner's responsibilities included international finance and trade issues for both emerging markets and developed economies, macroeconomic forecasting, and a number of microeconomic issues, including those relating to corporate governance, financial markets, energy, environment, transportation, and the costs of regulation. Macroeconomic Policies As is its tradition, the Council devoted much time during 2002 to assisting the President in formulating economic policy objectives and designing programs to implement them. In this regard the Chairman kept the President informed, on a continuing basis, of important macroeconomic developments and other major policy issues through regular briefings. 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. In addition, they prepare weekly discussion and data memoranda for the Vice President and senior White House staff. 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 Chairman and 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 2002 the Council took part in discussions on a range of macroeconomic issues, with a particular focus on issues relating to tax policy. The Council provided analytical support for major fiscal initiatives such as the Job Creation and Worker Assistance Act of 2002 and the President's January 2003 proposal to strengthen the economy. The Council worked closely with the Office of Management and Budget, the Treasury, the Federal Reserve, and the National Economic Council, as well as other government agencies, in providing analyses to the rest of the Administration. The Council continued its efforts to improve the public's understanding of economic issues and of the Administration's economic agenda through regular briefings with the economic and financial press, frequent discussions with outside economists, and presentations to outside organizations. The Chairman and Members also regularly exchanged views on the economy with the Chairman of the Board of Governors of the Federal Reserve System. International Economic Policies The Council was involved in a range of international economic issues. Discussions on trade policy matters involved a number of industries as well as broader trade liberalization initiatives in various multilateral, regional, and bilateral forums. The Council participated in the development of U.S. positions during the concluding stages of free trade agreements with Chile and Singapore as well as in ongoing negotiations under the auspices of the World Trade Organization and with regard to the proposed Free Trade Agreement of the Americas. The Council participated in international finance discussions involving a number of emerging market economies. A particular focus of the Council was in developing an analytical framework for a pro-growth agenda for emerging markets. The Council participated in the development of the President's Millennium Challenge Account, which will increase aid to low- and middle-income countries that have a demonstrated commitment to pro-growth policies and institutions. The Council is a leading participant in the Organization for Economic Cooperation and Development (OECD), the principal forum for economic cooperation among the high-income industrial countries. The Chairman heads the U.S. delegation to the semiannual meetings of the OECD's Economic Policy Committee (EPC) and serves as the EPC Chairman as well as Chairman of the Ad Hoc Group on Sustainable Development. In 2002 Dr. Kroszner participated in the OECD's Working Party 3 meeting on macroeconomic policy and coordination, and Council staff participated in the OECD's Working Party 1 meeting on microeconomic policies. Dr. Kroszner also participated in the annual OECD review of U.S. economic policy. Members regularly met with representatives of the Council's counterpart agencies in foreign countries, as well as with foreign trade ministers, other government officials, and members of the private sector. The Council represented the United States at other international forums as well, including meetings of the Asia-Pacific Economic Cooperation (APEC) forum. The Council played a key role in organizing an APEC-led initiative focused on corporate restructuring, initial results of which were presented at a conference in Singapore. Microeconomic Policies A wide variety of microeconomic issues received the Council's attention during 2002. The Council actively participated in the Cabinet-level National Economic Council, dealing with issues related to energy, the environment, homeland security and cybersecurity, technology, telecommunications, and transportation, among others. Dr. McClellan was extensively involved in formulating policy concerning health care and various aspects of welfare policy. Dr. Kroszner participated in a series of discussions on energy and environmental policies, financial market issues, corporate governance reform, regulation, and numerous issues relating to specific industries including lumber, steel, and transportation. The Council participated in discussion on a range of environmental issues in 2002. A particular focus was on climate change initiatives, including partnerships with other countries and negotiations associated with the Kyoto Protocol. The Council also played an integral role in regulatory discussions, including the revision of the OMB Guidelines for the Conduct of Regulatory Analysis and the Format of Accounting Statements; Dr. Kroszner co-chaired this process with the Director of the Office of Information and Regulatory Affairs. This document establishes guidelines for Federal government agencies on how to undertake economic analysis of proposed regulations. Corporate governance reform was an important focus of the Council's efforts in 2002. Members and staff analyzed various underlying problems in corporate governance and engaged in discussions within the Administration and with outside organizations in the United States and other countries about policies to enhance accountability, disclosure, and enforcement. The Council was also involved in discussions relating to the Postal Service, Amtrak, the airlines, government-sponsored enterprises, bankruptcy reform, and a host of technology-related issues such as cybersecurity, fusion energy initiatives, computer reservation systems, and issues related to broadband. The Council participated extensively in discussions related to labor market and social policies. Issues included prescription drug benefits, reform of the Medicare system, medical malpractice liability, unemployment insurance, and the President's proposal to offer reemployment accounts to certain unemployed individuals. The Council was also involved in discussions relating to financial institutions, agriculture, and the economic effects of ports disputes. The Staff of the Council of Economic Advisers The professional staff of the Council consists of the Chief of Staff, the Chief Economist, the Director of Macroeconomic Forecasting, the Senior Statistician, eight senior economists, five staff economists, and five research assistants. The professional staff and their areas of concentration at the end of 2002 were: Chief of Staff Phillip L. Swagel Chief Economist Douglas J. Holtz-Eakin Director of Senior Macroeconomic Forecasting Statistician Steven N. Braun Catherine H. Furlong Senior Economists Cindy R. Alexander Industrial Organization, Corporate Finance, and Regulation S. Brock Blomberg International Finance Robert J. Carroll. Public Finance Robert N. Collender Regulation, Energy, Finance, and Agriculture Christopher L. Foote. Macroeconomics Thomas C. DeLeire Labor, Health, and Education John A. List Environment and Regulation Michael O. Moore International Trade Staff Economists D. Clay Ackerly Health Care and Labor Anne L. Berry Regulation and Industrial Organization Catherine L. Downard International Finance Brian H. Jenn Labor, Regulation, and Public Finance Peter H. Woodward International Finance and Financial Markets Research Assistants Shelley D. de Alth International Trade Leandra T. DeSilva Environment and Regulation Christine L. Dobridge Macroeconomics Paul S. Landefeld Macroeconomics and Public Finance Adam R. Saunders Macroeconomics, Public Finance, and Regulation 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 of the President, and verifies statistics in Presidential and Council memoranda, testimony, and speeches. Linda A. Reilly Statistician Brian A. Amorosi Statistical Assistant Dagmara A. Mocala Research Assistant Administrative Office The Administrative Office provides general support for the Council's activities. This includes financial management, human resource management, and travel, facility, security, information, and telecommunications management support. Catherine Fibich Administrative Officer Rosemary M. Rogers Administrative Assistant John W. Arnold Information Management Assistant 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. Kroszner Stephen M. Lineberry. Executive Assistant to Dr. McClellan Staff Support Mary E. Jones Executive Assistant for International Economics, Labor, Health, Environment, and Regulation Mary A. Thomas-Parker Program Assistant for Macroeconomics, Industrial Organization, and Agriculture Diana E. Furchtgott-Roth served as Chief of Staff for the first half of 2002 and subsequently as Special Advisor to the Council. Michael Treadway provided editorial assistance in the preparation of the 2003 Economic Report of the President. Katherine Baicker, Rex W. Cowdry, John G. Matsusaka, and William B. Vogt provided consulting services to the Council during 2002. Student interns during the year were M. Caroline Beasley, Jason P. Brinton, Alexander Chan, Carol L. Cohen, Brian C. Grech, Laura C. Hanlon, Clarette S. Kim, David Y. Lin, Matthew Nestorick, Samuel C. Roddenberry, Douglas A. Smith, Kevin P. Sweeney, Thomas B. Valuk, Peter H. Woodward, and Aimee C. Zullo. Sarah R. Darley, Evan M. Newman, and Adam R. Sorkin joined the staff of the Council in January as student interns. Departures Diana E. Furchtgott-Roth accepted a position as Chief Economist at the Department of Labor in early 2003. Douglas J. Holtz-Eakin left the Council at the end of January 2003 to become the Director of the Congressional Budget Office. 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. Some of the senior economists who resigned during the year returned to their previous affiliations. They are Katherine Baicker (Dartmouth College), Peter M. Feather (U.S. Department of Agriculture, Economic Research Service), William R. Melick (Kenyon College), and William A. Pizer (Resources for the Future). Others went on to new positions. They are Jeffrey R. Brown (University of Illinois at Urbana-Champaign), Carolyn L. Evans (Board of Governors of the Federal Reserve System), Andrew J. Filardo (Bank for International Settlements), and Wallace P. Mullin (George Washington University). Staff economists are generally graduate students who spend 1 year with the Council and then return to complete their dissertations. Those who returned to their graduate studies in 2002 are Irena I. Asmundson (Stanford University) and Katherine R. Baylis (University of California, Berkeley). Judson L. Jaffe accepted a position at Analysis Group/Economics. Those who served as research assistants at the Council and resigned during 2002 are M. Marit Rehavi (London School of Economics), Heather C. McNaught (Department of Justice), and Jason M. Zhao. Mary A. Thomas-Parker, Program Assistant, retired after nearly 26 years of Federal service, the last 13 years of which were with the Council. During 2002 the Council lost a valued colleague. Susan P. Clements, who served as a Statistician in the Statistical Office, passed away in August 2002; she had retired in June 2002 for health reasons. Public Information The Council's annual Economic Report of the President is an important vehicle for presenting the Administration's domestic and international economic policies. It is now available for distribution both as a bound volume and on the Internet, where it is accessible at 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. The Council's home page is located at www.whitehouse.gov/cea/index.html.