CHAPTER 1. PROMOTING OPPORTUNITY AND SHARED, SUSTAINABLE
GROWTH ......................................................... 21
THE ECONOMY FIVE YEARS AFTER THE CRISIS ........................ 23
HOW WE GOT HERE: THE ADMINISTRATION'S RESPONSE TO THE CRISIS ... 26
SOURCES OF OPPORTUNITY IN 2014 AND BEYOND ...................... 28
Cyclical Factors ............................................ 29
Structural Trends ........................................... 30
Long-Term Fiscal Sustainability ............................. 33
THE CHALLENGES THAT REMAIN AND THE PRESIDENT'S PLANS
TO ADDRESS THEM ................................................ 34
Continuing to Restore the Economy to its Full Potential ..... 34
Expanding the Economy's Potential ........................... 37
Promoting Economic Opportunity .............................. 40
CONCLUSION ..................................................... 43
CHAPTER 2. THE YEAR IN REVIEW AND THE YEARS AHEAD .............. 45
KEY EVENTS OF 2013 ............................................. 46
Aggregate Output Growth During the Year ........................ 46
Fiscal Policy .............................................. 47
Monetary Policy ............................................ 50
Financial Markets ........................................... 51
International Developments .................................. 53
DEVELOPMENTS IN 2013 AND THE NEAR-TERM OUTLOOK ................. 56
Consumer Spending ........................................... 56
Business Investment ......................................... 59
State and Local Governments ................................. 62
International Trade ......................................... 64
Housing Markets ............................................. 67
Energy ...................................................... 72
Labor Markets ............................................... 76
Wage Growth and Price Inflation ............................. 81
THE LONG-TERM OUTLOOK .......................................... 84
The 11-Year Forecast ........................................ 84
Growth in GDP over the Long Term ............................ 86
CONCLUSION ..................................................... 89
CHAPTER 3. THE ECONOMIC IMPACT OF THE AMERICAN RECOVERY AND
REINVESTMENT ACT FIVE YEARS LATER .............................. 91
THE 2007-09 RECESSION AND THE EARLY POLICY RESPONSES ........... 93
Initial Policy Responses .................................... 94
AN OVERVIEW OF THE RECOVERY ACT AND SUBSEQUENT JOBS MEASURES ... 95
The Recovery Act ............................................ 96
Subsequent Jobs Measures .................................... 99
Automatic Countercylical Measures .......................... 100
Total Fiscal Response ...................................... 103
NEAR-TERM MACROECONOMIC EFFECTS OF THE RECOVERY ACT AND
SUBSEQUENT FISCAL LEGISLATION ................................. 103
Model-Based Estimates of the Macroeconomic Effects of the
Recovery Act and Subsequent Fiscal Legislation ............. 105
Cross-State Evidence ....................................... 111
International Comparison ................................... 114
Benchmarking the Economy's Performance Since 2009 .......... 114
EFFECTS OF THE RECOVERY ACT IN PROVIDING RELIEF FOR
INDIVIDUALS ................................................... 117
Tax Cuts for Families ...................................... 118
Unemployment Insurance ..................................... 119
THE EFFECT OF THE RECOVERY ACT ON LONGrTERM GROWTH ............ 122
Protecting and Expanding Investments in Physical Capital ... 123
Protecting and Expanding Investments in Human Capital ...... 126
Investments in Technology and Innovation ................... 128
Fiscal Sustainability and the Recovery Act ................. 131
CONCLUSION .................................................... 132
APPENDIX А .................................................... 134
COMPONENTS OF THE RECOVERY ACT AND SUBSEQUENT FISCAL
MEASURES ...................................................... 134
Tax Relief ................................................. 134
Aid to Affected Individuals ................................ 136
State Fiscal Relief ........................................ 137
Investments ................................................ 138
Subsequent Fiscal Measures ................................. 139
APPENDIX В .................................................... 141
FISCAL MULTIPLIERS: THEORY AND EMPIRICAL EVIDENCE ............. 141
Forward-Looking Models with Rigidities ........................ 141
Time Series Evidence ....................................... 143
Cross-Sectional Multipliers ................................ 145
CHAPTER 4. RECENT TRENDS IN HEALTH CARE COSTS, THEIR IMPACT
ON THE ECONOMY, AND THE ROLE OF THE AFFORDABLE CARE ACT ....... 147
RECENT TRENDS IN HEALTH CARE COSTS ............................ 150
WHAT IS HAPPENING NOW, AND WHAT WILL HAPPEN NEXT? ............. 156
The Role of the 2007-09 Recession .......................... 156
Non-ACA Factors Affecting Health Spending Growth ........... 160
The Role of the Affordable Care Act ........................ 162
ECONOMIC BENEFITS OF SLOW HEALTH SPENDING GROWTH .............. 171
Higher Living Standards .................................... 171
Lower Deficits ............................................. 173
Higher Employment and Economic Growth ...................... 176
CONCLUSION .................................................... 178
CHAPTER 5. FOSTERING PRODUCTIVITY GROWTH ...................... 179
TRENDS IN TOTAL FACTOR PRODUCTIVITY ........................... 181
Labor Productivity, Total Factor Productivity, and
Multifactor Productivity ................................... 181
Postwar U.S. Productivity Growth ........................... 182
PRODUCTIVITY GROWTH AND INEQUALITY GROWTH ..................... 189
Trends in Inequality, Productivity Growth, and
Compensation ............................................... 189
Technological Change and Inequality ........................ 190
POLICIES TO FOSTER PRODUCTIVITY GROWTH AND TO HELP ENSURE
THAT EVERYONE BENEFITS FROM IT ................................ 193
TELECOMMUNICATIONS AND PRODUCTIVITY GROWTH .................... 197
Innovation and Investment .................................. 197
Four Key Areas for Telecommunications Policy ............... 198
Challenges to Broad Adoption of Telecommunications
Technology ................................................. 209
PATENTS ....................................................... 212
Standard-Essential Patents ................................. 213
Patent Assertion Entities .................................. 215
CONCLUSIONS ................................................... 217
CHAPTER 6. THE WAR ON POVERTY 50 YEARS LATER: A PROGRESS
REPORT ........................................................ 221
MEASURING POVERTY: WHO IS POOR IN AMERICA? .................... 223
Measuring Poverty .......................................... 223
The Official Poverty Measure ............................... 223
The Supplemental Poverty Measure ........................... 225
Who is Poor? ............................................... 228
Employment ................................................. 229
Education Level ............................................ 230
Children ................................................... 230
The Elderly ................................................ 230
Women ...................................................... 232
Race and Ethnicity ......................................... 232
People with Disabilities ................................... 233
Rural and Urban Communities ................................ 233
ASSESSING THE WAR ON POVERTY .................................. 234
Context .................................................... 234
Correcting the Historical Account of Poverty Since the
1960s ...................................................... 240
Measuring the Direct Impact of Antipoverty Efforts ......... 242
THE ROLE OF ANTIPOVERTY PROGRAMS: A CLOSER LOOK ............... 245
Antipoverty Effects of Specific Programs ................... 245
The Effects of Antipoverty Programs on Work and Earnings ... 248
Economic Mobility .......................................... 252
Intergenerational Returns .................................. 255
THE OBAMA ADMINISTRATION'S RECORD AND AGENDA TO STRENGTHEN
ECONOMIC SECURITY AND INCREASE OPPORTUNITY .................... 258
Taking Immediate Action During the Economic Crisis ......... 258
Expanding Health Care Security ............................. 259
Rewarding Work ............................................. 260
Empowering Every Child with a Quality Education ............... 262
Creating Jobs and Growing Our Economy ..................... 265
Investing in and Rebuilding Hard-Hit Communities ........... 265
CONCLUSION .................................................... 266
CHAPTER 7. EVALUATION AS A TOOL FOR IMPROVING FEDERAL
PROGRAMS ...................................................... 269
CONDUCTING RIGOROUS IMPACT EVALUATIONS IN FEDERAL PROGRAMS .... 271
Estimation of Causal Effects of a Program or Intervention .. 272
Other Criteria for High-Quality, Successful Impact
Evaluations ................................................ 274
Lower-Cost Ways for Impact Evaluations to Facilitate
Real-Time Learning ......................................... 275
IMPACT OF THE EVIDENCE-BASED AGENDA ........................... 277
Uses of Evaluation ........................................ 278
Building Evidence when Existing Evidence is Limited ........ 283
FURTHERING THE EVIDENCE AGENDA ................................ 286
Legislative Support for Evaluation ......................... 287
Building Evaluation into the Design of Programs ............ 290
Developing the Capacity to Link to Other Administrative
and Survey Data Sources .................................... 294
Facilitating Researcher Access to Federal Data while
Protecting Privacy ......................................... 296
CONCLUSION .................................................... 297
REFERENCES .................................................... 299
APPENDIXES
A. Report to the President on the Activities of the Council
of Economic Advisers During 2013 ........................... 345
B. Statistical Tables Relating to Income, Employment, and
Production ................................................. 359
FIGURES
1.1 Monthly Change in Private Nonfarm Payrolls, 2007-2014 ..... 22
1.2 U.S. Merchandise and Overall Trade Deficits, 2000-2013 .... 24
1.3 Major Deficit Reduction Episodes Over a Four-Year Period
Since the Demobilization from WWII ........................ 24
1.4 Real GDP Per Working-Age Population in 2007-2008 Banking
Crisis Countries, 2007-2013 ............................... 27
1.5 Quarterly Effect of the Recovery Act and Subsequent
Fiscal Measures on Employment, 2009-2012 .................. 27
1.6 Change in Poverty Rate from 2007-2010, With and Without
Tax Credits and Benefits .................................. 29
1.7 Domestic Crude Oil Production and Net Imports, 2000-2013 .. 31
1.8 Growth in Real Per Capita National Health Spending,
1961-2013 ................................................. 33
1.9 Unemployment Rate by Duration, 1994-2014 .................. 35
1.10 Growth in Real Average Hourly Earnings for Production
and Nonsupervisory Workers, 2007-2014 ..................... 36
1.11 Real Median Family income, 1980-2012 ...................... 36
1.12 Building Permits for New Residential Units, 1960-2014 ..... 38
1.13 Growth in Total Factor Productivity, 1953-2012 ............ 39
1.14 Share of National Income Earned by Top 1 Percent, 1915-
2012 ...................................................... 41
1.15 Growth in Productivity and Average Wage, 1947-2013 ........ 41
2.1 Mean GDP Growth, 2007-2013 ................................ 47
2.2 Federal Budget Deficit, 1950-2015 ......................... 50
2.3 Interest Rates, 2010-2014 ................................. 52
2.4 Treasury Bills Maturing in Late October-Early November,
2013 ...................................................... 53
2.5 Current Account Balance by Country, 2000-2013 ............. 55
2.6 Cumulative Flows into Mutual and Exchange-Traded Funds
Investing in Emerging Markets, 2010-2014 .................. 56
2.7 Household Deleveraging, 1990-2013 ......................... 58
2.8 Consumption and Wealth Relative to Disposable Personal
Income (DPI), 1952-2013 ................................... 58
2.9 Business Investment and the Acceleration of Business
Output, 1965-2013 ......................................... 62
2.10 Real State and Local Government Purchases During
Recoveries ................................................ 63
2.11 State and Local Pension Fund Liabilities, 1952-2013 ....... 64
2.12 Trade in Goods and Services, 2007-2013 .................... 65
2.13 U.S. Exports Growth, 2009-2013 ............................ 65
2.14 Current Account Balance, 1985-2013 ........................ 66
2.15 Housing Starts, 1960-2013 ................................. 71
2.16 National House Price Indexes, 2000-2013 ................... 71
2.17 Cumulative Over- and Under-Building of Residential and
Manufactured Homes, 1996-2013 ............................. 73
2.18 Petroleum Net Imports, 1980-2015 .......................... 74
2.19 Monthly Crude Oil Production and Net Imports, 1990-2013 ... 74
2.20 Wind and Solar Energy Production, 2000-2013 ............... 75
2.21 U.S. Per Capita Consumption of Gasoline and Real
Gasoline Prices, 2000-2013 ................................ 76
2.22 Unemployment Rate, 1979-2014 .............................. 78
2.23 Nonfarm Payroll Employment, 2007-2014 ..................... 78
2.24 Unemployment Rate by Duration, 1990-2014 .................. 79
2.25 Predicted vs. Actual Manufacturing Payroll Employment,
2000-2014 ................................................. 80
3.1 Recovery Act Programs by Functional Categories ............ 98
3.2 Recovery Act and Subsequent Fiscal Measures by
Functional Category ...................................... 102
3.3 Automatic Stabilizers and the Budget Balance, 2009-2013 .. 102
3.4 Fiscal Expansion as a Percentage of GDP .................. 103
3.5 Estimates of the Effects of the Recovery Act on the
Level of GDP, 2009-2013 .................................. 109
3.6 Estimates of the Effects of the Recovery Act on
Employment, 2009-2013 .................................... 109
3.7 Quarterly Effect of the Recovery Act and Subsequent
Fiscal Measures on GDP, 2009-2012 ........................ 110
3.8 Quarterly Effect of the Recovery Act and Subsequent
Fiscal Measures on Employment, 2009-2012 ................. 110
3.9 Change in Nonfarm Employment ............................. 113
3.10 Disposable Personal Income With and Without the ARRA ..... 119
3.11 Recovery Act Cumulative Public Investment Outlays,
2009-2013 ................................................ 124
3.12 Advanced Renewable Electric Power Net Generation,
2000-2012 ............................................... 129
4.1 Growth in Real Per Capita National Health Expenditures,
1961-2013 ................................................ 154
4.2 General and Health Care Price Inflation, 1960-2013 ....... 154
4.3 Growth in Real Per Enrollee Health Spending by Payer ..... 157
4.4 Medicare 30-Day, All-Condition Hospital Readmission
Rate, 2007-2013 .......................................... 166
4.5 Inflation-Adjusted Premiums for Medicare Parts В and D,
2000-2014 ................................................ 173
4.6 Recent CBO Projections of Medicare and Medicaid Outlays .. 176
4.5 Nonfarm Private Business Productivity Growth, 1949-2012 .. 185
5.2 15-Year Centered Moving Average of Annual Growth Rates
for Labor and Multifactor Productivity, 1956-2005 ........ 187
5.3 Growth in Productivity and Average Wage, 1947-2013 ....... 190
5.4 Basic Research Expenditures in the U.S. by Source
Funding, 2010 ............................................ 195
5.5 Composition of Total R&D Spending as a Share of GDP,
1953-2011 ................................................ 196
5.6 Relative Investment of the Telecommunications Sector,
2011 ..................................................... 199
5.7 Exclusive and Shared Allocation of Radio Spectrum ........ 202
5.8 Federal Agencies with Most Spectrum Assignments .......... 203
5.9 Percentage of Households with Access to Download Speeds
of 6 Megabytes per Second or Greater ..................... 209
5.10 Patents Issued in the U.S. by Technological Category ..... 213
6.1 Trends in the Official Poverty Measure, 1959-2012 ........ 235
6.2 Average Real Household Income by Quintile, 1967-2012 ..... 236
6.3 Women's 50-10 Wage Gap vs Real Minimum Wage, 1973-2012 ... 238
6.4 Official vs Anchored Supplemental Poverty Rates, 1967-
2012 ..................................................... 243
6.5 Trends in Market and Post-Tax, Post-Transfer Poverty
1967-2012 ................................................ 244
6.6 Trends in Market and Post-Tax, Post-Transfer Deep
Poverty, 1967-2012 ....................................... 246
6.7 Percentage Point Impact on SPM Child Poverty for
Selected Years ........................................... 250
6.8 Percentage Point Impact on Deep SPM Child Poverty for
Selected Years ........................................... 250
6.9 Real Per Capita Expenditures on Select Programs,
1967-2012 ................................................ 254
6.10 Economic Mobility for Children from First Income
Quintile ................................................. 256
6.11 Recovery Act and Subsequent Extensions: Cumulative
Person-Years Kept from Poverty, 2008-2012 ................ 261
7.1 Outlays for Grants to State and Local Governments,
1992-2012 ................................................ 281
7.2 Inventory of Beds for Homeless and Formerly Homeless
People, 2007-2012 ........................................ 287
TABLES
2.1 Administration Economic Forecast .......................... 85
2.2 Supply-Side Components of Actual and Potential Real GDP
Growth, 1952-2014 ......................................... 87
3.1 Forecasted and Actual Real GDP Growth and Unemployment
Rate ...................................................... 95
3.2 An Overview of Recovery Act Fiscal Impact ................. 99
3.3 Recovery Act Programs by Functional Categories ............ 99
3.4 Fiscal Support for the Economy Enacted After the
Recovery Act ............................................. 101
3.5 Estimated Output Multipliers for Different Types of
Fiscal Support ........................................... 108
3.6 Estimates of the Effects of the Recovery Act on the
Level of GDP ............................................. 112
3.7 Tax Relief and Income Support in the Recovery Act and
Subsequent Measures, 2009-2012 ........................... 118
3.8 Recovery Act Long Term Growth Investment by Category ..... 123
3.9 Recovery Act Outlays, Obligations, and Tax Reductions .... 135
3.10 Recovery Act Fiscal Stimulus by Functional Category ...... 136
3.11 Fiscal Support for the Economy Enacted After the
Recovery Act ............................................. 140
3.12 Summary of Cross-Sectional Fiscal Multiplier Estimates ... 146
4.1 Real Per Capita NHE Annual Growth Rates by Payer and
Spending Category ........................................ 151
4.2 Recent Trends in Several Indicators of Health Care
Spending and Price Growth ................................ 155
5.1 Sources of Productivity Improvement, Nonfarm Private
Business, 1948-2012 ...................................... 184
5.2 Nonfarm Private Business Growth .......................... 186
5.3 Average Annual Rates of Change in the Nonfarm Business
Sector ................................................... 191
6.1 Poverty Rates by Selected Characteristics, 1959-2012 ..... 229
6.2 Poverty Rate Reduction from Government Programs, 2012 .... 248
BOXES
Box 2-1: The 2013 Comprehensive Revision to the National
Income and Product Accounts .......................... 60
Box 2-2: Administration Trade Policy Initiatives .............. 68
Box 2-3: The Climate Action Plan .............................. 77
Box 2-4: Unemployment Duration and Inflation .................. 82
Box 2-5: Immigration Reform and Potential GDP Growth .......... 88
Box 3-1: Other Administration Policy Responses to the
Economic Crisis ..................................... 104
Box 3-2: The U.S. Recovery in Comparative International and
Historical Context .................................. 116
Box 4-1: Two Measures of Growth in Health Care Costs:
Spending and Prices ................................. 152
Box 4-2: How Will the ACA's Coverage Expansion Affect Total
Spending Growth? .................................... 163
Box 4-3: The Cost Slowdown and АСА Reforms are Reducing
Medicare Beneficiaries' Out-of-Pocket Costs ......... 172
Box 4-4: Premiums on the АСА Marketplaces are Lower than
Projected ........................................... 175
Box 5-1: Measuring Multifactor Productivity .................. 183
Box 5-2: Does Inequality Affect Productivity? ................ 194
Box 5-3: Just-in-Time Manufacturing .......................... 200
Box 5-4: Spectrum Investment Policies ........................ 204
Box 5-5: Electronic Health Records ........................... 210
Box 5-6: The Leahy-Smith America Invents Act ................. 216
Box 5-7: Pay-For-Delay Settlements in Pharmaceutical
Patent Cases ........................................ 218
Box 6-1: Flaws in the Official Poverty Measure ............... 224
Box 6-2: A Consumption Poverty Measure ....................... 226
Box 6-3: Women and Poverty ................................... 231
Box 6-4: Social Programs Serve All Americans ................. 237
Box 6-5: Raising the Minimum Wage ............................ 262
Box 7-1: Impact Evaluations, Process Evaluations, and
Performance Measurement ............................. 270
Box 7-2: Using Behavorial Economics to Inform Potential
Program Improvements ................................ 277
Box 7-3: "Rapid Cycle" Evaluations in Center for Medicare
and Medicaid Innovation ............................. 279
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