ERP1999 Appendixes 1

Appendix AREPORT TO THE PRESIDENT ON THE ACTIVITIES

OF THECOUNCIL OF ECONOMIC ADVISERS DURING 1998

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


LETTER OF TRANSMITTAL

COUNCIL OF ECONOMIC ADVISERSWashington, D.C., December 31,1998

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

ties during the calendar year 1998 in accordance with the require-ments of the Congress, as set forth in section 10(d) of the EmploymentAct of 1946 as amended by the Full Employment and BalancedGrowth Act of 1978.

Sincerely,Janet L. Yellen, ChairJeffrey A. Frankel, MemberRebecca M. Blank, Member

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Council Members and Their Dates of Service

Name

Edwin G NourseLeon H Keyserling

JohnD Clark

Roy BloughRobert C TurnerArthur F. BurnsNeilH.JacobyWalter W StewartRaymond J Saulnier

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

John P Lewis . . .Otto EcksteinArthur M.Okun

James S. DuesenberryMertonJ.PeckWarren L SmithPaulW McCrackenHendrikS Houthakker .Herbert Stein

Ezra SolomonMarina v N WhitmanGary L SeeversWilliam J FellnerAlan GreenspanPaulW MacAvoyBurton G MalkielCharles L SchultzeWilliam D NordhausLyle E GramleyGeorge C EadsStephen M GoldfeldMurray L. Weidenbaum . .. .William A NiskanenJerry L JordanMartin FeldsteinWilliam PooleBeryl W SprinkelThomas Gale MooreMichael L MussaMichael J BoskinJohn B TaylorRichard L. SchmalenseeDavid F. BradfordPaul WonnacottLaura D Andrea TysonAlan S. BlinderJoseph E. Stiglitz

Martin N.BailyAlicia H MunnellJanet L YellenJeffrey A. FrankelRebecca M. Blank

Position

ChairmanVice ChairmanActing ChairmanChairmanMemberVice ChairmanMemberMemberChairmanMemberMemberMemberChairmanMemberMemberMemberMemberChairmanMember . . . .MemberMemberChairmanMemberMemberMemberChairmanMember . ..MemberMemberChairmanMemberMemberChairmanMemberMemberMemberMemberChairmanMemberMemberChairmanMemberMemberMemberMemberChairmanMemberMember .ChairmanMemberChairmanMemberMemberChairmanMemberMemberMemberMemberChairMemberMemberChairmanMemberMemberChairMemberMember

Oath of office date

August9, 1946August 9, 1946November 2 1949May 10 1950August 9 1946May 10, 1950June 29 1950Septembers 1952 ..March 19, 1953September 15, 1953December 2 1953April 4 1955December 3, 1956May 2, 1955Decembers 1956November 1, 1958May? 1959January 29 1961January 29, 1961January 29, 1961Augusts 1962November 16, 1964May 17 1963September 2, 1964November 16, 1964February 15 1968February 2 1966February 15, 1968Julyl 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 1977 .March 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 1989Octobers 1989November 13, 1991November 13 1991Februarys 1993July 27, 1993July 27, 1993June 28, 1995June 30 1995January 29 1996February 18 1997April 23, 1997October 22. 1998

Separation date

November 1 1949.

January 20 1953

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

January 20, 1961.October 3 1,1 958.January 31 1959January 20, 1961.January 20 1961Novemberl5 1964July 31, 1962December 27, 1962.

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

January 20 1969June 30 1968January 20, 1969.January 20 1969December 3 1,1971July 15, 1971

August 31 1974March 26 1973August 15 1973.April 15 1975February 25 1975January 20 1977November 15, 1976.January 20 1977January 20, 1981.February 4 1979May 27 1980January 20 1981January 20 1981August 25, 1982.March 30 1985July 31 1982July 10, 1984.January 20 1985January 20 1989Mayl 1989September 19 1988January 12 1993August 2 1991June 21 1991January 20, 1993.January 20 1993April 22 1995June 26, 1994.

February 10, 1997.August 30 1996August 1 1997

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Report to the President on the Activities of theCouncil of Economic Advisers During 1998

The Council of Economic Advisers was established by the Employ-ment Act of 1946 to provide the President with objective economicanalysis and advice on the development and implementation of a widerange of domestic and international economic policy issues.

The Chair of the Council

Janet L. Yellen continued to chair the Council during 1998. Beforebecoming Chair of the Council, Dr. Yellen served as a Member of theBoard of Governors of the Federal Reserve System. Dr. Yellen is onleave from the Haas School of Business at the University of California,Berkeley, where she is the Eugene E. and Catherine M. Trefethen Pro-fessor of Business Administration. Dr. Yellen is responsible for com-municating the Council's views on economic matters directly to thePresident through personal discussions and written reports. She alsorepresents the Council at Cabinet meetings, meetings of the NationalEconomic Council (NEC), daily White House senior staff meetings,budget team meetings with the President, and other formal and infor-mal meetings with the President, senior White House staff, and othersenior government officials. Dr. Yellen is the Council's chief publicspokesperson. She directs the work of the Council and exercisesultimate responsibility for the work of the professional staff.

The Members of the Council

Jeffrey A. Frankel is a Member of the Council of Economic Advisers.Dr. Frankel is on leave from the University of California, Berkeley,where he is a Professor of Economics. He previously directed the pro-gram on International Finance and Macroeconomics at the NationalBureau of Economic Research and is a former Senior Fellow at theInstitute for International Economics.

Rebecca M. Blank is also a Member of the Council of EconomicAdvisers. Dr. Blank is on leave from Northwestern University, whereshe is a Professor of Economics. Dr. Blank previously served as thefirst Director of the Northwestern University/University of ChicagoJoint Center for Poverty Research and was a member of the researchfaculty at Northwestern University's Institute for Policy Research.

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The Chair and Members work as a team on most economic policyissues. Dr. Frankel was primarily responsible for the Administration'seconomic forecast, macroeconomic analysis, international economicissues, and certain microeconomic issues, including those relating tonatural resources, the environment, and industrial organization.Dr. Blank was primarily responsible for policy analysis relating to thebudget and taxation, labor, retirement security, health care, welfarereform, and child and family issues. She also worked closely with thePresident's Initiative on Race. The Chair and Members participate inthe deliberations of the NEC, and Dr. Yellen is a member of the NECPrincipals Committee.

WEEKLY ECONOMIC BRIEFINGS

Dr. Yellen and the Members continued to prepare the WeeklyEconomic Briefing of the President of the United States for the Presi-dent, the Vice President, and the President's other senior economicand policy advisers. The Council, in cooperation with the Office of theVice President, prepares the written briefing, which provides analysisof current economic developments, more extended discussions of awide range of economic issues and problems, and summaries of eco-nomic developments in different regions and sectors of the economy.

MACROECONOMIC POLICIES

A primary function of the Council is to advise the President on allmajor macroeconomic issues and developments. The Council preparesfor the President, the Vice President, and the White House senior staffalmost daily memoranda that report key economic data and analyzecurrent economic events.

The Council, the Department of the Treasury, and the Office ofManagement and Budget—the Administration's economic "troika"—are responsible for producing the economic forecasts that underlie theAdministration's budget proposals. The Council, under the leadershipof the Members, initiates the forecasting process twice each year.In preparing these forecasts, the Council consults with a variety ofoutside sources, including leading private sector forecasters.

In 1998 the Council continued to take part in discussions about arange of budget issues, including Medicare reform, discretionaryspending priorities, and the Administration's tax proposals. The Coun-cil also participated in discussions of proposals to strengthen theSocial Security system, and development of the President's proposal tosave Social Security for the 21st century.

The Council participates in the Working Group on FinancialMarkets, an interagency group that monitors developments related tofinancial markets and the banking sector. The group includes repre-sentatives from the Treasury, the Federal Reserve, the NEC, andvarious regulatory agencies. The Council also participated in a

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working group studying bankruptcy reform, and in another on themacroeconomic implications of the Y2K problem.

The Council continued its efforts to improve the public's under-standing of economic issues and the Administration's economic agendathrough regular briefings with the economic and financial press,frequent discussions with outside economists, and presentations tooutside organizations. Drs. Yellen, Frankel, and Blank also regularlyexchanged views on the macroeconomy with the Chairman andMembers of the Board of Governors of the Federal Reserve System.

INTERNATIONAL ECONOMIC POLICIES

The Council was an active participant in 1998 in the internationaleconomic policymaking process through the NEC and the NationalSecurity Council, providing both technical and analytical support andpolicy guidance.

The Council took an active role in developing policies to respondto financial turmoil in Asia, Russia, and Latin America, including, forexample, the Asian Growth and Recovery Initiative, designed to accel-erate the restructuring of bank and corporate debt in some countriesaffected by the Asian crisis. The Council also monitored closely theeffects of the Asian crisis on U.S. trade. In addition, the Council activelyparticipated in the development of proposals to reform theinternational financial architecture.

The Council was involved in a range of other international economicissues, including evaluating and explaining the case for trade liberal-ization, U.S. trade remedy laws (antidumping, countervailing duties,safeguards, and Section 301 actions), sanctions policy, and the agen-das of multilateral and regional forums such as the World Trade Orga-nization and the Asia-Pacific Economic Cooperation forum. Dr. Yellentestified before the Senate Finance Committee on the causes and con-sequences of the U.S. trade deficit.

The Council continued its annual meetings with the EconomicPlanning Agency of Japan and the State Development and PlanningCommission of China, the Council's counterparts in those countries,and began to meet with France's new Council of Economic Analysis. InMay, Dr. Yellen led a delegation of U.S. economic officials, includingrepresentatives of the Departments of Commerce and Treasury andthe Board of Governors of the Federal Reserve System, to China tocontinue discussions about China's economy and economic reforms.Dr. Yellen also participated in the President's trip to China in June,and in November she traveled to Japan, as part of the President'sofficial visit, to discuss Japan's economy and economic reforms.

The Council often represents the United States at internationalmeetings and forums. It is a leading participant in the Organizationfor Economic Cooperation and Development (OECD), the principalforum for economic cooperation among the high-income industrial

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countries. The Council heads the U.S. delegation to the semiannualmeetings of the OECD's Economic Policy Committee; Dr. Yellen servesas that committee's chair. Dr. Yellen also represented the UnitedStates at the 1998 OECD Ministerial and participated in the OECD'sHigh Level Group on Sustainable Development. In 1998 Dr. Frankelparticipated in the OECD's Working Party 3 on macroeconomic policycoordination. Dr. Blank led the U.S. delegation to the OECD'sWorking Party 1, which focuses on budget and other microeconomicissues. Dr. Steven N. Braun, Director, Macroeconomic Forecasting atthe Council, led the U.S. delegation to the OECD annual examinationof the United States.

MICROECONOMIC POLICIES

During 1998 the Council was an active participant in a range ofmicroeconomic policy discussions. The Council participated in variousinteragency discussions on labor market issues, health care, educa-tion, urban issues, child care, statistical policy, and welfare reform.The Council also participated in working groups on the minimumwage, pensions, training initiatives for displaced workers, immigrantvisas, unemployment insurance reform, and farm policy.

The Council was actively involved in the President's Initiative onRace. It coordinated the production and release of a document pre-senting important indicators of social and economic well-being by raceand ethnicity for use by a national audience including educators andpolicymakers. In October the Council helped coordinate a major con-ference on racial trends in the United States, sponsored by the Presi-dent's Initiative on Race and organized by the National ResearchCouncil.

In June 1998 the Council issued a report titled Explaining Trendsin the Gender Wage Gap. The report concluded that although the gapbetween women and men's wages has narrowed substantially sincethe signing of the Equal Pay Act in 1963, a significant wage gapremains, which cannot be explained by differences between male andfemale workers in labor market experience and in the characteristicsof jobs they hold.

In the areas of regulation and competition policy, the Council helpeddevelop important Administration initiatives to improve the perfor-mance of markets, both domestically and internationally. On thedomestic front the Council provided background information for andparticipated in a review of merger effects and related policy issues,and participated in interagency reviews of competition and pricing invarious sectors of the transportation market. Dr. Yellen testifiedbefore the Senate Judiciary Committee on the economic impact of

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mergers in the United States. The Council also participated in a work-ing group on consumer privacy policy, and in another group on natur-al disaster insurance. The Council worked to consider questions raisedby proposed tobacco legislation. It was also engaged in issues relatedto the privatization of the U.S. Enrichment Corporation.

The Council has been active on several matters relating to telecom-munications. It has worked with the Office of the Vice President toexamine increases in growth and competition in the U.S. telecommu-nications industry, and participated in interagency working groups toreview a variety of regulatory matters. The Council played an activerole in developing the Administration's response to proposed legisla-tion to reform the global satellite industry and worked with otheragencies to develop competitive principles designed to increase con-sumer benefits from satellite communications. The Council took partin interagency efforts to increase competition and efficiency in electricpower markets in a manner consistent with important environmentaland social objectives.

The Council was active in a range of policy discussions on naturalresources and the environment, including implementation of theClean Air Act, as it applies to automobiles, power plants, and otherpollution sources. It was involved in the development and analysis ofthe Administration's global climate change policy. After the negotia-tion of the Kyoto Protocol, the Council responded to requests from theCongress and the public to analyze the economic impact of the climatechange agreement. The Council led the preparation and release of theAdministration's economic analysis, titled The Kyoto Protocol and thePresident's Policies to Address Climate Change: Administration Eco-nomic Analysis, which was released in July. Dr. Yellen testified on sixoccasions before several House and Senate committees regarding theAdministration's findings. The Council has been particularly active indeveloping and promoting plans for the international trading of emis-sions permits and other market mechanisms to achieve the targets ofthe Kyoto Protocol most efficiently. To advance these plans, Membersand staff traveled to and consulted with officials from Argentina,China, France, and the Republic of Korea.

The Staff of the Council of Economic Advisers

The professional staff of the Council consists of the Chief of Staff,the Senior Statistician, nine senior economists, the Senior Advisor tothe Council, five staff economists, and three research assistants. Theprofessional staff and their areas of concentration at the end of 1998were:

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Chief of Staff and General Counsel

Michele M. Jolin

Senior Economists

Steven N. Braun Director, Macroeconomic ForecastingDouglas W. Elmendorf Macroeconomics and Financial MarketsElise H. Golan Agriculture and Natural ResourcesStephen Polasky Environment and Natural ResourcesCordelia W. Reimers Labor, Social Policy, and EducationNouriel Roubini International EconomicsRobert F. Schoeni Labor, Social Policy, and WelfareHoward A. Shelanski Regulation, Industrial Organization, and

AntitrustCharles F. Stone Macroeconomics and Editor,

Weekly Economic Briefing of the President

Senior Advisor to the Council

Joseph E. Aldy Global Environment and Natural Resources

Senior Statistician

Catherine H. Furlong

Staff Economists

Ryan D. Edwards MacroeconomicsQuindi C. Franco Environment and Natural ResourcesNora E. Gordon Labor and Social EconomicsBert I. Huang Labor and MicroeconomicsMatthew R. McBrady International Economics

Research Assistants

Andrew R. Feldman Weekly Economic Briefing of the Presidentand Labor

Raymond P. Guiteras Weekly Economic Briefing of the Presidentand International Economics

Summer L. Scott Macroeconomics

Statistical Office

Mrs. Furlong directs the Statistical Office. The Statistical Officemaintains and updates the Council's statistical information, overseesthe publication of the monthly Economic Indicators and the statisticalappendix to the Economic Report, and verifies statistics in Presiden-tial and Council memoranda, testimony, and speeches.

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Susan P. Clements StatisticianLinda A. Reilly StatisticianBrian A. Amorosi Research Assistant

Administrative Office

Catherine Fibich Administrative Officer

Office of the Chairman

Alice H. Williams Executive Assistant to the ChairmanSandra F. Daigle Executive Assistant to the Chairman and

Assistant to the Chief of StaffLisa D. Branch Executive Assistant to Dr. FrankelFrancine P. Obermiller Executive Assistant to Dr. Blank

Staff Secretaries

Mary E. Jones International Economics, Labor, andHealth Care

Rosalind V. Rasin Environment, Industrial Organization, andPublic Finance

Mary A. Thomas Macroeconomics

Mrs. Thomas also served as executive assistant for the WeeklyEconomic Briefing of the President.

Michael Treadway provided editorial assistance in the preparationof the 1999 Economic Report. Michael A. Toman, Resources for theFuture, served as a consultant during the year.

Anne M. Piehl and Timothy Waidmann provided expertise in thepreparation of a report prepared by the Council for the President'sInitiative on Race entitled Changing America: Indicators of Social andEconomic Well-Being by Race and Hispanic Origin. Jenepher W.Moseley provided editorial assistance in the preparation of this report.

Student interns during the year were Robert P. Bamsey, Gregory A.Bedard, Carol L. Capece, Michael A. Egner, Heather L. Jambrosic, JasonK. Nuzzo, Jenny E. Pippin, Annette M. Richter, Rachel E. Rubinfeld,Kristen M. Scarafia, Jasmin K. Sethi, and Matthew C. Weinzierl. Thefollowing student interns joined the Council in January to assist with thepreparation of the Economic Report: Enrique J. Alonso, David S. Felman,Matthew S. Milner, and Nathaniel F. Stankard.

DEPARTURES

The Council's senior economists, in most cases, are on leave ofabsence from faculty positions at academic institutions or from othergovernment agencies or research institutions. Their tenure with theCouncil is usually limited to 1 or 2 years. Many of the senioreconomists who resigned during the year returned to their previous

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affiliations. They are Christopher D. Carroll (The Johns Hopkins Uni-versity), Aaron S. Edlin (University of California, Berkeley), Jon D.Haveman (Purdue University), and Sanders D. Korenman (BaruchCollege of the City University of New York). Keith O. Fuglie returnedto the U.S. Department of Agriculture, and he has since accepted aposition with the International Potato Center. Senior economists whoresigned during the year and accepted new positions are Maria J.Hanratty (University of Minnesota), Randall W. Lutter (AmericanEnterprise Institute and the AEI-Brookings Joint Center for Regula-tory Studies), Adele C. Morris (Department of the Treasury), andJeremy B. Rudd (Department of the Treasury).

Staff economists are generally graduate students who spend 1 yearwith the Council and then return to their universities to completetheir dissertations. Those who returned to their graduate studies in1998 are Mark R. Hopkins (University of Wisconsin-Madison) andMark C. Rainey (Massachusetts Institute of Technology). Amy N.Finkelstein began graduate studies at the Massachusetts Institute ofTechnology and Sarah J. Reber at Harvard University. After servingas a research assistant at the Council, Zachary M. Candelario accepteda position at Mars and Company. Research assistants who begangraduate studies in 1998 are Melissa A. Clark (Princeton University)and Ha Yan Lee (London School of Economics). Daniel K. Changbegan studies at Georgetown University Law Center.

Public Information

The Council's Annual Report is an important vehicle for presentingthe Administration's domestic and international economic policies. Itis now available for distribution as a bound volume, on CD-ROM, andon the Internet, where it is accessible at http://www.access.gpo.gov/eop.The Council also has primary responsibility for compiling the monthlyEconomic Indicators, which is issued by the Joint Economic Committeeof the Congress. The Internet address for the Economic Indicators iswww.access.gpo.gov/congress/cong002.html.

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Documents

ERP1999 Appendixes 1