[Economic Report of the President (2007)]
[Administration of George W. Bush]
[Online through the Government Printing Office, www.gpo.gov]



110th Congress, 1st Session..................................................H. Doc. 110-2

 
Economic Report
of the President



Transmitted to the Congress
February 2007



together with
THE ANNUAL REPORT
of the
COUNCIL OF ECONOMIC ADVISERS


UNITED STATES GOVERNMENT PRINTING OFFICE
WASHINGTON : 2007


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-13: 978-0-16-077918-3


CONTENTS
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Page

ECONOMIC REPORT OF THE PRESIDENT.................................. 1
ANNUAL REPORT OF THE COUNCIL OF ECONOMIC ADVISERS*................ 7

CHAPTER 1. THE YEAR IN REVIEW AND THE YEARS AHEAD ................ 23

CHAPTER 2. PRODUCTIVITY GROWTH.................................... 45

CHAPTER 3. PRO-GROWTH TAX POLICY.................................. 63

CHAPTER 4. THE FISCAL CHALLENGES FACING MEDICARE ................. 85

CHAPTER 5. CATASTROPHE RISK INSURANCE ............................ 105

CHAPTER 6. THE TRANSPORTATION SECTOR: ENERGY AND INFRASTRUCTURE
USE............................................................... 125

CHAPTER 7. CURRENCY MARKETS AND EXCHANGE RATES ................... 149

CHAPTER 8. INTERNATIONAL TRADE AND INVESTMENT .................... 167

CHAPTER 9. IMMIGRATION............................................ 189

APPENDIX A. REPORT TO THE PRESIDENT ON THE ACTIVITIES
OF THE COUNCIL OF ECONOMIC ADVISERS DURING 2006................... 207

APPENDIX B. STATISTICAL TABLES RELATING TO INCOME, EMPLOYMENT, AND PRODUCTION........................................................ 221

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* 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:

Economic growth in the United States has been above the historic
average and faster than any other major industrialized economy in the
world. January was the 41st month of uninterrupted job growth produced
by this economy, in an expansion that has thus far added more than
7.4 million new jobs. Unemployment is low, inflation is moderate,
and real wages are rising.  Our economy is on the move and we can keep
it that way by continuing to pursue sound economic policy based on
free-market principles.

Sound economic policy begins with low taxes. We should work together
to spend the taxpayers' money wisely and to tackle unfunded liabilities
inherent in entitlement programs such as Social Security, Medicare,
and Medicaid. I have laid out a detailed plan in my budget to
restrain spending, cut earmarks in half by the end of this session,
and balance the budget by 2012 without raising taxes. The tax relief
of the past few years has been a key ingredient in growing our
economy, and it should be made permanent.

Our growing economy is dynamic. The rise of new technologies, new
competition, and new markets abroad is changing how we do business.
We need to take action in four key areas to keep America's economy
flexible and dynamic.
First, we must break down barriers to trade so our workers can sell
more goods and services to the 95 percent of the world's customers
who live outside of our borders. Global trade talks like the Doha
Round at the World Trade Organization have the potential to level
the playing field so that we can compete on fair terms in foreign
markets, while helping lift millions of people out of poverty around
the world.

The only way we can complete the Doha Round and make headway on
other trade agreements is to extend Trade Promotion Authority, which
is set to expire on July 1st. This authority is essential to
completing good trade agreements. The Congress must renew it if we
are to improve our competitiveness in the global economy.

Second, we must work to make private health insurance more
affordable and to give patients more choices and control over their
health care. One of the most promising ways to do this is by
reforming the tax code. We must end the unfair bias against
individuals who buy insurance on their own. I propose creating a
standard deduction for every American who buys health insurance,
whether they get it through their jobs or on their own. In a
changing economy, we need a health care system that is flexible
and consumer-oriented. With this reform, more than 100 million
Americans who are now covered by employer-provided insurance will
benefit from lower tax bills. Those who now purchase health
insurance on their own would save money on their taxes. Millions
of others who now have no health insurance at all would find basic
private coverage within their reach. My proposal also taps the
innovation of States in making basic, affordable insurance available
to all by creating Affordable Choices grants to help ensure the
poor and the sick have access to private health insurance.

Third, we must continue to diversify our energy supply to benefit
our economy, national security, and environment. In my State of the
Union Message, I set an ambitious goal of reducing gasoline usage
in the United States by 20 percent over the next 10 years. Meeting
this goal will require significant changes in supply and demand, but
we should let the market decide the best mix of technologies and
fuels to most efficiently attain it. On the supply side, I propose
a higher and reformed fuel standard that would include renewable
and other alternative fuels. We should also allow environmentally
friendly exploration of oil and natural gas. On the demand side, I
propose enhancing Corporate Average Fuel Economy standards for cars
and extending the current rule for light trucks, so that we can
reduce the amount of gasoline that our passenger vehicles consume,
and do so in a more efficient way.

Fourth, a strong and vibrant education system is vital to maintaining
our Nation's competitive edge in the world and extending economic
opportunity to every citizen here at home. Five years ago, we rose
above partisan differences to enact the No Child Left Behind Act,
preserving local control, raising standards, holding schools
accountable for results, and providing more choice. This year, we
must reauthorize and strengthen this good law while preserving its
core principles.

Strong productivity growth underlies much of the good economic news
from the past few years and the policies discussed above. Productivity
growth helps to increase our standards of living and improve our
international competitiveness. To maintain this progress, we must
pursue a variety of pro-growth policies, including those contained
in the American Competitiveness Initiative and comprehensive
immigration reform.

These and other issues are discussed in the 2007 Annual Report of
the Council of Economic Advisers. The Council has prepared this
Report to put into broader context the economic issues that underlie
my Administration's policy decisions. I commend it to you.



THE WHITE HOUSE
FEBRUARY 2007





THE ANNUAL REPORT
OF THE
COUNCIL OF ECONOMIC ADVISERS






LETTER OF TRANSMITTAL


COUNCIL OF ECONOMIC ADVISERS
Washington, D.C., February 13, 2007

MR. PRESIDENT:
The Council of Economic Advisers herewith submits its 2007 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,





Edward P. Lazear
Chairman



Katherine Baicker
Member



Matthew J. Slaughter
Member