[Economic Report of the President (2008)]
[Administration of George W. Bush]
[Online through the Government Printing Office, www.gpo.gov]


 
CONTENTS

Page
overview ....................................................      17

Chapter 1. the year in review and the years ahead ...........      25
Developments in 2007 and the Near-Term Outlook ......      27
Consumer Spending and Saving ................      27
Housing Prices ..............................      29
Residential Investment ......................      30
Business Fixed Investment ...................      32
Business Inventories ........................      34
Government Purchases ........................      34
Exports and Imports .........................      35
Employment ..................................      37
Productivity ................................      38
Prices and Wages ............................      40
Financial Markets ...........................      42
The Long-Term Outlook Through 2013 ..................      43
Growth in GDP over the Long Term ............      43
The Composition of Income over the Long Term.      47
Conclusion ..........................................      48

Chapter 2. credit and housing markets .......................       51
What are Credit Markets? ............................       52
Recent Developments in Mortgage Markets .............       53
Credit Market Disruptions in 2007 ...................       61
Credit Market Link to Mortgages .............       61
Flight to Quality ...........................       62
Contraction of the Asset-Backed Commercial
Paper Market ...............................       64
Slower Merger and Acquisition Activity ......       65
Equity Markets ..............................       66
International Implications ..................       67
Policy Response to Credit Market Disruptions ........       67
Policy Response to Housing Market Challenges ........       68
Addressing Current Challenges ...............       68
Strengthening the Mortgage Market for
the Future .................................       71
Macroeconomic Implications ..........................       74
Conclusion ..........................................       76

Chapter 3. the causes and consequences of export growth .....       79
The Causes of Recent Export Growth ..................       80
Foreign Income Growth .......................       83
Growth in Domestic Production ...............       86
Exchange Rates ..............................       86
Trade Costs and Barriers ....................       86
Exports and Foreign Direct Investment ...............       88
Multinationals and Trade ....................       90
The Benefits of Trade and Expanding Export Markets ..       91
Trade and Labor Markets .............................       93
Conclusion ..........................................       95

Chapter 4. the importance of health and health care .........       97
Health and the Demand for Health Care ...............       98
Demand for Health ...........................       98
The Production of Health ....................       98
Trends in Health Spending ...................      100
Trends in Life Expectancy ...................      101
Trends in Health Insurance Coverage .........      103
Addressing Challenges in the Health Care System .....      104
Moral Hazard and Cost Control ...............      106
Controlling Costs Through Competitive
Insurance Markets ...........................     110
Improving Quality and Costs Through
Information and Reimbursement ...............     111
Promoting Healthy Behavior ...................     113
Conclusion ...........................................     114

Chapter 5. tax policy ........................................     115
The Size of Government: A Historical View ............     116
Expiration of the 2001 and 2003 Tax Cuts .....     118
Alternative Minimum Tax ......................     119
Real Bracket Creep ...........................     119
Withdrawals from Tax-Deferred Accounts .......     120
The Impact of Recent Tax Reductions ..................     121
Labor Supply .................................     122
Saving and Investment ........................     123
Corporate Financial Policy and Governance ....     125
Significance of Tax Cuts to Individuals ......     127
Economic Benefits of Lower Taxes .............     128
The Structure of Business Taxes ......................     131
Conclusion ...........................................     136

Chapter 6. the nation's infrastructure .......................     137
The Basic Challenge of Infrastructure Policy .........     138
Current State of the Nation's Infrastructure .........     140
Roads ........................................     140
Bridges ......................................     145
Railways .....................................     146
Container Ports ..............................     148
Aviation .....................................     149
The Electrical Grid ..........................     152
Telecommunications ...........................     154
Infrastructure Policy ................................     157
How Should Infrastructure Be Paid For? .......     158
How Should Government Set Priorities
for Infrastructure Projects? ................     158
When Should the Government Regulate or
Provide Infrastructure? .....................     159
What Are the Proper Roles for State and Federal
Government? .................................     161
Conclusion ..........................................     162

Chapter 7. searching for alternative energy solutions ........     163
Energy Sources .......................................     164
Fossil Fuels .................................     165
The Need To Diversify ........................     168
Alternative Energy Production ........................     170
Alternatives for Generating Electricity ......     170
Alternatives for Transportation ..............     177
The Road Forward .....................................     182
Policy Tools .................................     183
Current Efforts ..............................     184
Conclusion ...........................................     185

Chapter 8. improving economic statistics .....................     187
An Overview of the U.S. Statistical System ...................     188
The Importance of Statistical Systems ................     192
Keeping Up with a Changing Economy ...................     193
Improving the Value of Existing Statistical Data .....     196
Conclusion ...........................................     202


appendixes

A.      Report to the President on the Activities of the
Council of Economic Advisers During 2007 .............     203
B.	Statistical Tables Relating to Income, Employment,
and Production ....................................     217
list of tables
1-1.	Administration Economic Forecast ......................     44
1-2.	Supply-Side Components of Real GDP Growth, 1953-2013 ...    45
4-1.	Additional Life-Years Due to Reduced Mortality
from Selected Causes, for US by Decade,
1950-2000 (years) .....................................    102
5-1.	Comparing the Marginal Tax Rate for a Career Changer
Under Two Illustrative Tax Policies ....................   123
5-2.	Estimated Distributional Effects of 2001-2006 Tax Cuts
in 2007 ................................................   127
5-3.	Effective Marginal Tax Rates on Investment ..............   132
7-1.	Estimated Average Levelized Costs (2006 $/megawatthour)
for Plants Entering Service in 2015 ....................   171

list of charts

1-1.	Consumption and Net Worth Relative to Disposable
Personal Income (DPI) .................................    28
1-2.	Net Debt Issuance .......................................    33
1-3	Output per Hour in the Nonfarm Business Sector ..........    39
1-4.	Consumer Price Inflation ................................    40
2-1.	Percent of Mortgages 90 Days Past Due or In the
Process of Foreclosure .................................    57
2-2.	Conforming and Jumbo Mortgage Rates, 30-Year Fixed Rate
Mortgages ..............................................    60
2-3.	Three-month London Interbank Offered Rate and Rates on
3-Month Treasury Bills .................................    62
2-4.	Spread Between Corporate Bond Yields and Rates on
10-Year Treasury Notes .................................    63
2-5.	Commercial Paper Outstanding ............................    65
2-6.	Value of Announced Merger and Acquisition Deals .........    66
2-7.	Monthly FHA Mortgage Endorsements .......................    73
2-8.	Lending Standards .......................................    75
3-1.	U.S. Exports As a Share of Gross Domestic Product .......    80
3-2. 	Average Annualized Growth in U.S. Exports to Trading
Partners, 2003-2006 ....................................    81
3-3.	Real Growth in U.S. Exports and Foreign Gross Domestic
Product ................................................    85
3-4.	Growth of U.S. Goods Exports to Free Trade Agreement
Partners, 2005-2006 ....................................    88
3-5.	Imports and the Unemployment Rate, 1960-2006 ............    94
4-1.	National Health Expenditures As a Share of Gross
Domestic Product .......................................   100
4-2.	Life Expectancy at Birth and at Age 65 ..................   101
4-3.	Health Insurance Coverage by Source:  1987 to 2006 ......   103
5-1.	Federal Receipts ........................................   117
5-2.	Federal Receipts Projections ............................   118
5-3.	Real Personal Dividend Income ...........................   127
5-4.	Federal Outlays Projections .............................   130
6-1.	Vehicle Miles Traveled and Lane-Miles of Road in U.S.,
1980-2005 ..............................................   142
6-2. 	Annual Delay per Peak-Period Traveler, by Urban Area Size,
1982-2005 ..............................................   143
6-3.	Condition of U.S. Highway Bridges, 1992-2006 ............   145
6-4.	Distribution of U.S. Freight Shipments by Mode ..........   147
6-5.	Container Trade at U.S. Marine Ports ....................   148
6-6.	Average Travel Time, New York (LGA) to Atlanta (ATL)
1988-2006 ..............................................   150
6-7.	High-Speed Internet Lines in the United States by Type
of Connection, 1999-2006 ...............................   155
6-8. 	Wireless Communications Infrastructure in the U.S.,
1985-2007 ..............................................   157
7-1.	U.S. Energy Consumption and Production (2006) ...........   166
7-2.	U.S. Energy Consumption by Source and Sector (2006) .....   166
7-3.	U.S. CO2 emissions from Energy Consumption (2006) .......   169
8-1.	Budget Authority for Principal Statistical Agencies,
Fiscal Year 2007 .......................................   189
8-2.	Real Federal Appropriations for Economic Statistics .....   190
8-3.	Federal Statistical Appropriations for 5- and 10- Year
Censuses ...............................................   191

list of boxes

1-1.	Indirect Effects of the Housing Sector ..................    30
1-2.	Macroeconomic Effects When Oil Price Increases Are Induced
by Foreign Demand .....................................    36
1-3.	Aging and the Pattern of Labor Force Participation ......    45
2-1.	Definitions of Select Mortgage Terms ....................    54
2-2.	Credit Rating Agencies ..................................    56
2-3.	Geographic Variations in Housing Markets ................    58
2-4.	Securitization and Structured Finance ...................    60
2-5.	Mortgage Lending Today ..................................    69
3-1.	Trade in Services .......................................    82
3-2.	The Current Account Deficit .............................    84
3-3.	Open Investment and the United States ...................    89
4-1.	Health Effects on Job Productivity ......................    99
4-2.	Government Health Care Programs .........................   104
5-1.	Marriage Penalty Basics .................................   129
5-2.	Expensing versus Corporate Rate Reductions ..............   133
6-1.	The Interstate Highway System ...........................   141
6-2.	Delays at New York City Airports ........................   151
7-1.	Oil Prices ..............................................   167
7-2.	The Blend Wall ..........................................   179
8-1.	How to Reverse a Decline in Statistical Infrastructure:
Improving the Sample for the Consumer Price Index ......   197
8-2.	The Confidential Information Protection and Statistical
Efficiency Act (CIPSEA) ...............................   199