ERP1992 Appendixes 1

Appendix AREPORT TO THE PRESIDENT ON THE ACTIVITIES

OF THECOUNCIL OF ECONOMIC ADVISERS DURING 1991

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LETTER OF TRANSMITTAL

COUNCIL OF ECONOMIC ADVISERSWashington, D.C., December 31, 1991

MR. PRESIDENT:The Council of Economic Advisers submits this report on its

activities during the calendar year 1991 in accordance with therequirements of the Congress, as set forth in section 10(d) of theEmployment Act of 1946 as amended by the Full Employment andBalanced Growth Act of 1978.

Sincerely,

Michael J. Boskin, ChairmanDavid F. Bradford, MemberPaul Wonnacott, Member

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Council Members and their Dates of Service

Name

Edwin G NourseLeon H Keyserling

John D Clark

Roy BloughRobert C TurnerArthur F. BurnsNeil H JacobyWalter W. StewartRaymond J Saulnier

Joseph S. DavisPaul W McCrackenKarl BrandtHenry C WallichWalter W. HellerJames TobinKermit GordonGardner Ackley

John P. LewisOtto EcksteinArthur M Okun

James S DuesenberryMerton J PeckWarren L SmithPaul W McCrackenHendrik S HouthakkerHerbert Stein

Ezra SolomonMarina v N WhitmanGary L. SeeversWilliam J FellnerAlan GreenspanPaul W MacAvoyBurton G. MalkielCharles L SchultzeWilliam D NordhausLyle E. GramleyGeorge C. EadsStephen M. GoldfeldMurray L. WeidenbaumWilliam A NiskanenJerry L. JordanMartin FeldsteinWilliam PooleBeryl W. SprinkelThomas Gale MooreMichael L MussaMichael J. BoskinJohn B. TaylorRichard L SchmalenseeDavid F. BradfordPaul Wonnacott

Position

ChairmanVice ChairmanActing ChairmanChairmanMember .Vice ChairmanMemberMemberChairmanMemberMemberMemberChairmanMemberMemberMemberMemberChairman .MemberMemberMemberChairmanMemberMemberMemberChairmanMemberMemberMemberChairmanMemberMemberChairmanMemberMemberMemberMemberChairman....MemberMemberChairman

MemberMemberMemberChairmanMemberMemberChairmanMember. . .ChairmanMemberMemberChairmanMemberMemberMember

Oath of office date

August 9 1946August 9 1946November 2, 1949May 10, 1950August 9, 1946May 10, 1950June 29, 1950September 8 1952March 19, 1953September 15 1953December 2, 1953April 4 1955December 3 1956May 2, 1955December 3 1956November 1 1958May 7 1959January 29, 1961January 29 1961January 29, 1961August 3 1962November 16, 1964May 17, 1963September 2, 1964November 16 1964 ....February 15, 1968February 2 1966February 15 1968July 1 1968February 4 1969February 4, 1969February 4 1969January 1, 1972September 9 1971March 13 1972July 23, 1973October 31 1973September 4, 1974June 13 1975July 22, 1975January 22 1977March 18 1977March 18 1977June 6, 1979August 20, 1980February 27 1981June 12 1981July 14, 1981October 14, 1982December 10 1982April 18 1985July 1 1985August 18 1986February 2 1989June 9 1989October 3 1989November 13 1991November 13 1991

Separation date

November 1 1949.

January 20, 1953.

February 11, 1953.August 20, 1952.January 20 1953.December 1, 1956.February 9 1955.April 29, 1955.

January 20 1961October 31, 1958.January 31 1959January 20, 1961.January 20 1961November 15, 1964.July 31, 1962December 27, 1962.

February 15, 1968.August 31, 1964.February 1, 1966.

January 20, 1969.June 30, 1968.January 20 1969January 20, 1969.December 31 1971July 15, 1971.

August 31, 1974.March 26, 1973.August 15 1973April 15, 1975.February 25 1975January 20, 1977.November 15 1976January 20, 1977.January 20, 1981.February 4 1979May 27, 1980January 20, 1981.January 20, 1981.August 25 1982March 30 1985July 31, 1982.July 10, 1984January 20 1985January 20 1989May 1 1989September 19 1988.

August 2 1991June 21 1991


Report to the President on the Activities of theCouncil of Economic Advisers During 1991

THE MISSION OF THE PRESIDENT'S Council of Economic Ad-visers, which was established by the Employment Act of 1946, is toprovide the President with the best possible economic advice, to de-velop and recommend economic policies to the President, and to ap-praise programs and activities of the Federal Government as theypertain to the health of the Nation's economy. In addition to theCouncil's role in directly advising the President, the Council is rep-resented, usually by the Chairman, at Cabinet meetings, meetingsof the Economic Policy Council, the Domestic Policy Council, andthe Council on Competitiveness, and at National Security Councilmeetings on issues of economic importance.

Michael J. Boskin continued to serve as Chairman in 1991. Dr.Boskin is on a leave of absence from Stanford University, where heis the Burnet C. and Mildred Finley Wohlford Professor of Econo-mics. The President nominated David F. Bradford and Paul Won-nacott as the two other Members of the Council on September 6,1991. After Senate confirmation, Dr. Bradford and Dr. Wonnacottwere sworn in on November 13, 1991. Dr. Bradford is on a leave ofabsence from Princeton University, where he is a Professor of Eco-nomics and Public Affairs. Dr. Wonnacott came to the Councilfrom the University of Maryland, where he was a Professor of Eco-nomics. Richard L. Schmalensee resigned as a Member on June 21,1991, to return to the Massachusetts Institute of Technology, wherehe is the Gordon Y Billard Professor of Economics and Manage-ment and Director of the Center for Energy and EnvironmentalPolicy Research. John B. Taylor resigned as a Member on August2, 1991, and returned to Stanford University, where he is a Profes-sor of Economics.

As in previous years, the Council in 1991 continued to stress theimportance of maximizing sustainable economic growth to raiseAmerican living standards, setting ambitious but realistic long-term economic goals, and removing barriers to market forces. In itsinteractions with various outside groups—the Congress, the busi-ness community, international organizations, the press—as well aswithin the Administration, the Council continued to emphasize theAdministration's fiscal, monetary, regulatory, and trade policyprinciples. This year's Economic Report follows the previous twoEconomic Reports of this Administration in outlining these princi-


pies and indicating how they contribute to strong economic growthand improved standards of living.

The recession that began in the second half of 1990, following thelongest peacetime expansion in the Nation's history, continued asthe U.S. economy entered 1991. The recession appeared to end inthe spring, with the beginning of a very modest recovery boostingproduction, employment, and spending into the summer. Totaloutput grew in the second and third quarters and recovered aboutone-half of the decline that occurred during the recession. In mid-summer, however, the economy flattened out, and production, em-ployment, and spending faltered late in the year.

The first years of the 1990s served as a reminder that the econo-my faces the risk of setbacks from external shocks and other dis-turbances. Economic expansions do not end on their own; they endas a result of the working-off of economic imbalances, inappropri-ate economic policies, or external shocks to the economy. The 1990-91 recession was associated with all three: Attempts by households,corporations, and the Federal Government to work off imbalancesand reduce debt created structural adjustment problems for theeconomy. The lagged effects of a restrictive monetary policy initiat-ed in 1988 to contain inflationary pressures, along with a creditcrunch, engendered a slowdown in growth beginning in 1989. TheIraqi invasion of Kuwait in August 1990 produced a sharp rise inworld oil prices, followed by a plummeting in business and con-sumer confidence.

In the Council's view, the Nation faces serious challenges andcannot take economic growth for granted. Abiding by sound eco-nomic policy principles is therefore all the more important. TheAdministration's policies are designed to support sustained in-creases in the standard of living by raising the Nation's long-runproductivity growth. Such policies include a pro-growth fiscalpolicy that enhances incentives for entrepreneurship, saving, andinvestment and continues to reduce the multiyear structuralbudget deficit; a trade policy that promotes growth through open-ing markets worldwide; and a regulatory policy that avoids unnec-essary burdens on business and consumers. The Administrationalso supports a monetary policy that promotes real growth whilemaintaining low and stable inflation. Implementing these policieswould greatly improve the prospects for growth in the U.S. econo-my in 1992 and beyond.

MACROECONOMIC POLICIES

Throughout the year, the Council emphasized the importance ofcredible, systematic fiscal and monetary policies as a key to miti-gating the recession and ultimately sustaining maximum economicgrowth. The Council briefed the President and participated in regu-


lar discussions on macroeconomic policy issues with the Depart-ment of the Treasury, the Office of Management and Budget(OMB), and other members of the President's economic team. TheCouncil also regularly exchanged information and met with theFederal Reserve Board on monetary policy issues and the economicoutlook.

The Council, Treasury, and OMB—the "Troika"—continued toproduce the Administration's economic forecasts and projections.Two official forecasts are published each year: one at the start ofthe year, which is used as part of the President's budget, and oneas part of the mid-session budget review in July. The Councilchairs the Troika's forecasting group. In preparing its forecasts, theTroika continued the practice, initiated in the first year of the Ad-ministration, of indicating that the forecasts and resulting budgetcalculations have a considerable degree of uncertainty.

The Council continued to work to improve the general under-standing of economics and the quality of economic informationthrough a comprehensive series of memoranda and briefing paperson economic events for the President and the White House SeniorStaff, regular briefings for the White House press on major eco-nomic news, and meetings with outside economists, forecasters, fi-nancial analysts, and business executives. The Chairman and theother Council Members appeared before numerous other organiza-tions to explain the Administration's economic principles, policies,and outlook.

Dr. Boskin continued to chair the Working Group on the Qualityof Economic Statistics. Based on the report of the working group,the President approved a list of 25 recommendations for improvingeconomic statistics. During 1991 the Council worked closely withthe major Federal statistical agencies to implement these recom-mendations.

The Council was one of the leading participants in the formula-tion of the Administration's economic policies through various Cab-inet and sub-Cabinet working groups. In testimony to the Congressand in talks to business and other groups, the Chairman and Coun-cil Members stressed the importance of lowering the structuralFederal budget deficit, shifting the composition of Federal spendingtoward investment in productive infrastructure and research anddevelopment, and maintaining and improving the structure of in-centives in the tax system to work, save, invest, and innovate.

INTERNATIONAL ECONOMIC POLICIES

International economic issues again occupied a substantial partof the Council's time during 1991. The Chairman and CouncilMembers stressed the benefits of free trade and open markets forgoods, services, and investment, and they emphasized the risk to

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world economic growth posed by rising protectionism. The Councilparticipated in formulating Administration policy on the UruguayRound of the General Agreement on Tariffs and Trade, the pro-posed North American free-trade agreement, the Enterprise for theAmericas Initiative, and many other issues pertaining to interna-tional trade policy. The Council also participated in formulatingAdministration positions on legislation in the international area.

The Council's involvement in economic reform in Eastern Europeand the former Soviet Union increased during 1991. Dr. Boskin wasone of the three coordinators of U.S. assistance to Eastern Europe.He also chaired a working group on economic reform in the formerSoviet Union and held numerous discussions in Washington withofficials from the former Soviet bloc.

Dr. Boskin traveled to Paris as part of the U.S. delegation to theOrganization for Economic Cooperation and Development (OECD)Ministerial Meeting. He also served as Chairman of the OECD Eco-nomic Policy Committee. Dr. Wonnacott led the U.S. delegation tothe Economic and Development Review Committee at the OECD toassess U.S. economic policy. He was also a member of the U.S. dele-gation to the OECD Working Party 3 on macroeconomic policy co-ordination. Dr. Bradford headed the U.S. delegation to the OECDWorking Party 1 meetings on microeconomic and structural issues.

The Council provided the President and the White House SeniorStaff with regular briefings and analytical materials on interna-tional developments and participated in preparations for the Eco-nomic Summit in London.

The Council also participated in discussions on a wide range ofissues—including developing-country debt, economic reform inEastern Europe, and macroeconomic policy coordination—withother members of the Administration, the Federal Reserve, theWorld Bank, the International Monetary Fund, and representa-tives of other countries. The Council Members and the CouncilSenior Staff conducted numerous briefings on the U.S. economy forvisiting officials and scholars.

MICROECONOMIC POLICIES

The Administration considered and proposed action this year ona wide range of microeconomic issues. In its work in this area, theCouncil repeatedly stressed that government regulation must passcareful cost-benefit tests and that where regulation is appropriate,it should be formulated to allow workers and firms maximum flexi-bility, as well as to provide incentives to meet social goals in theleast costly manner. The Council worked with other agencies toensure that the rules implementing the newly enacted amend-ments to the Clean Air Act balance costs and benefits in protectingthe environment and minimize the costs of regulation to the maxi-


mum extent possible. The Council was also instrumental in ensur-ing that other legislative initiatives were designed to achieve re-forms in a more cost-effective manner. The Council emphasized theprinciples of promoting flexibility, enhancing incentives, and plac-ing maximum reliance on the private sector in a wide range ofpolicy areas.

As a member of the Environmental Policy Review Group, Dr.Bradford dealt with a wide range of environmental issues, includ-ing analysis of the emissions allowance trading system under theClean Air Act, global change, and reauthorization of the ResourceRecovery and Conservation Act and the Comprehensive Environ-mental Response, Compensation, and Liability Act. He also partici-pated in a variety of working groups on health care policy, incomedistribution, financial institution reform and regulation, publicdebt auctions, tax policy, telecommunications, energy markets, jobtraining reform, automobile insurance, science and technologypolicy, drug policy, and empowerment.

PUBLIC INFORMATION

The Chairman and Council Members regularly testify before theCongress, make public speeches, and hold news briefings. In addi-tion, the Council produces two publications a year for the public.

The Economic Report of the President is the principal mediumthrough which the Council informs the public of its work and itsviews. It is an important vehicle for presenting the Administra-tion's domestic and international economic policies. Annual distri-bution of the Economic Report in recent years has averaged about45,000 copies. The Council assumes primary responsibility for themonthly Economic Indicators, which is issued by the Joint Econom-ic Committee of the Congress and has a distribution of approxi-mately 10,000.

THE COUNCIL AND THE STAFF

The Chairman is responsible for communicating the Council'sviews on economic developments to the President through personaldiscussions and written reports. The Chairman also represents theCouncil at daily White House Senior Staff meetings, at budgetreview group meetings with the President, and at many otherformal and informal meetings with the President and White HouseSenior Staff, as well as with other senior government officials. TheChairman guides the work of the Council and is ultimately respon-sible for directing the work of the professional staff.

Members of the Council are responsible for the full range ofissues within the Council's purview and for the direct supervisionof the work of the professional staff. Members represent the Coun-cil at a wide variety of interagency and international meetings and


assume major responsibility for selecting issues for Council atten-tion.

The small size of the Council permits the Chairman and theMembers to work as a team on most policy issues. There is, howev-er, an informal division of subject matter. Dr. Bradford is primarilyresponsible for microeconomic and sectoral analysis, includinganalyses of regulatory issues. Dr. Wonnacott is primarily responsi-ble for international issues and macroeconomic analysis, includingeconomic projections.

PROFESSIONAL STAFF

The Council's advice to the President depends on the analyticaland empirical studies of its professional staff. The Council has ben-efited from an extraordinarily capable staff during 1991. The pro-fessional staff currently consists of the Special Assistant to theChairman and Senior Staff Economist, a Staff Assistant to theChairman, a Senior Statistician, 10 Senior Staff Economists, 7Junior Staff Economists, and a Research Assistant. The profession-al staff and their respective areas of concentration at the end of1991 were:

Special Assistant to the Chairman and Senior Staff Economist

Harry G. Broadman International Trade and Investment,Science and Technology, and Regulation

Staff Assistant to the Chairman

Shelley A. Slomowitz

Senior Staff Economists

David S. Bizer Financial Markets, Banking, and InsuranceRandall W. Eberts Labor Markets and EducationWilliam G. Gale Public FinanceJoseph W. Glauber Agriculture and International TradeAndrew S. Joskow Regulation and EnergyJohn H. Kitchen Macroeconomics and ForecastingSpencer D. Krane Macroeconomics, Monetary Policy, and

Quality of StatisticsCatherine L. Mann International Macroeconomics and the

former Soviet BlocRaymond L. Squitieri Energy and EnvironmentRobert W. Staiger International Trade

Senior Statistician

Catherine H. Furlong

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Junior Staff Economists

Jeffrey S. Gray Labor Markets, Education, and PublicFinance

John A. Higgins MacroeconomicsThomas N. Hubbard Regulation and Natural ResourcesPhilip I. Levy International TradeNancy L. Maritato Public Finance and Labor MarketsDerek H. Utter International Macroeconomics and FinanceMichael G. Williams Public Finance and Financial Markets

Research Assistant

Kimberly J. O'Neill Forecasting, Macn>economics, and PublicFinance

David G. Fernandez (Princeton University) served as a JuniorStaff Economist during the summer of 1991. K. C. Fung (Universityof California, Santa Cruz) joined the Council as a Senior Staff Econ-omist in January 1992.

Mrs. Furlong is assisted in the operation of the Statistical Officeby Susan P. Clements, Linda A. Reilly, and Margaret L. Snyder.The Statistical Office maintains and updates the Council's statisti-cal information system and is responsible for overseeing the publi-cation of the Economic Indicators and the statistical appendix tothe Economic Report of the President, as well as for the verificationof statistics in memoranda, testimony, and speeches.

Martha V. Gottron provided editorial assistance in the prepara-tion of the 1992 Economic Report.

SUPPORTING STAFF

The Administrative Office, which provides general support forthe Council's activities, consists of Elizabeth A. Kaminski, Adminis-trative Officer, and Catherine Fibich, Administrative Assistant.

The Secretaries for the Council during 1991 were Alice H. Wil-liams and Sandra F. Daigle (Secretaries to the Chairman), Lisa D.Branch (Secretary to Dr. Wonnacott), and Francine P. Obermiller(Secretary to Dr. Bradford). The Secretaries for the Council's staffwere Mary E. Jones, Rosalind V. Rasin, Mary A. Thomas, andJanet J. Twyman.

Brian Amorosi, H. Brill Bundy, David J. Kogut, Ian B. Goldberg,and Lissa J. Rideout served as Student Assistants during 1991.Dorothy Bagovich served as a Statistical Assistant during the prep-aration of the 1992 Economic Report.

DEPARTURES

The Council's Senior Staff Economists, in most cases, are onleave of absence from faculty positions at academic institutions orfrom other government agencies or research institutions. Their


tenure with the Council is usually limited to 1 or 2 years. Most ofthe Senior Staff Economists who resigned during the year returnedto their previous affiliations. They are Nicole S. Ballenger (U.S. De-partment of Agriculture), Michael W. Horrigan (Bureau of LaborStatistics), Charles J. Jacklin (Stanford University), Adam B. Jaffe(Harvard University), Robert B. Kahn (Board of Governors of theFederal Reserve System), Ralph M. Monaco (U.S. Department ofAgriculture), and John K. Scholz (University of Wisconsin). Otherswent on to new positions: They are Richard E. Baldwin (GraduateInstitute of International Studies in Geneva), Howard K. Gruen-specht (U.S. Department of Energy), Peter F. Kostiuk (KPMG PeatMarwick), and James A. Wilcox (Board of Governors of the FederalReserve System).

Junior Staff Economists generally are graduate students whospend 1 year with the Council and then return to complete theirdoctoral programs. Those who returned to their graduate studies in1991 are Eric D. Craft (University of Chicago), Alison F. Del Rossi(University of Pennsylvania), Brian J. Hall (Harvard University),and Arik M. Levinson (Columbia University). Mark A. Condon(Urban Institute) and Naomi S. Smith went on to new positions.

Natalie V. Rentfro, Statistical Assistant, retired in 1991 afterhaving served the Council for 20 years; she returned in 1992 toassist in the preparation of this Economic Report. Stefanie J.Reiser, Staff Assistant to the Chairman, resigned to join the Wash-ington staff of the Governor of California.


Documents

ERP1992 Appendixes 1