Feb 28 2017
The Obama Administration’s final Economic Report of the President and the Annual Report of the Council of Economic Advisers (Report) continues the pattern of previous reports that have misdiagnosed the reasons for our slow economic recovery and advocated misguided policies as a response. These policies have led to a steady decline in America’s economic potential. The Joint Economic Committee (JEC) Majority offers a different vision that will unleash our economy’s capacity to grow, produce, create jobs, boost wages, and compete in the 21st century.
Read the entire Chairman’s Views section here.
Chapter 1: Assessing the Economic Recovery
Over the last eight years, the United States experienced a lackluster economic recovery from a severe recession. For all of the emphasis that the 2017 Economic Report of the President and the Annual Report of the Council of Economic Advisers (CEA) (ERP, or Report) places upon the Obama Administration’s efforts to combat the effects of the recession, much less economic progress occurred than the Report claims.
Read all of Chapter 1: Assessing the Economic Recovery here.
Chapter 2: Macroeconomic Outlook
The Report broadly estimates that the economy is closing the output gap—the difference between what the economy could produce and what it is actually producing. However, key determinants of long-run economic growth—labor, investment, and productivity—indicate the presence of a growing untapped potential, which the Committee Majority believes results from policy constraints. Certainly, appropriate fiscal and regulatory reforms would allow the economy to grow faster in both the short and long run.
Read all of Chapter 2: Macroeconomic Outlook here.
Chapter 3: Addressing Inequality in the Context of Mobility
The Report reminds us that President Obama named inequality as the “defining challenge of our time.” However, it conflates reductions in income inequality with ensuring “that all Americans have the opportunity to succeed.” By arguing this throughout the chapter, the Obama Administration revealed a belief that it’s possible to essentially compress the top and bottom of the income distribution without considering incentives and risk-taking behaviors, stages of life and the economic mobility that attends it, geographic differences, and many other important factors that might lead naturally to income inequality. Meanwhile, the Report ignores the need to lift people out of long-term poverty.
Read all of Chapter 3: Addressing Inequality in the Context of Mobility here.
Chapter 4: Confronting Health Care Challenges
The ACA was an attempt by the Obama Administration to make health insurance more affordable and prevalent through a top-down design reliant on a complex web of regulations, taxes, and incentives. However, the shrinking individual marketplaces, one of the pillars of the ACA, shows the failure of this government-centered approach.
Real all of Chapter 4: Confronting Health Care Challenges here.
Chapter 5: Addressing Higher Education
The Report states that, on average, individuals with a higher level of education earn more money, are more likely to be in the labor force, and are less likely to be unemployed. It presents predictable data on earnings, labor force participation, and unemployment for various levels of educational attainment. Furthermore, the Obama Administration argues that, since there are benefits to the individual and the nation and so-called “market failures” in higher education financing, an economic rationale exists for Federal support of higher education. None of this is surprising.
Read all of Chapter 5: Addressing Higher Education here.
Chapter 6: Strengthening the Financial and Regulatory System
The Report attributes the financial crisis to market failures but does not fully explain the institutional framework in which the market operated. The government created that framework and has been extensively involved in shaping the conduct of market participants. When the framework malfunctions, the government cannot pretend to bear no responsibility.
Read all of Chapter 6: Strengthening the Financial and Regulatory System here.
Chapter 7: Addressing Climate Change
Beyond rhetoric about U.S. leadership in greenhouse gas emission control and advancing nonbinding international goals for emissions reduction, the applied aspect of Obama Administration climate policy focused on the domestic economy. But domestic-only policies can lead to increased emissions abroad as a result of so-called carbon leakage, i.e., from production shifting to other countries with lesser controls. The domestic focus also misses that international trade and foreign direct investment can lead to technology diffusion that can lower emissions in other countries.
Real all of Chapter 7: Addressing Climate Change here.
Chapter 8: The Missing Chapter on Tax Reform
Tax policy affects individuals, businesses, and the broader economy in ways that either help or hinder American prosperity. An economy operating at full potential needs its working age population in the workforce (labor supply), businesses willing and able to hire and equip workers with the best equipment and know-how (capital investment), and technological innovation that empowers workers to produce more per hour (productivity). Given the declines in labor force participation and sluggish productivity growth during the Obama Administration described in Chapter 2 combined with tax increases on capital that will be discussed in this chapter, the current forecast of slow economic growth should not be surprising.
Read all of Chapter 8: The Missing Chapter on Tax Reform here.
Click here for the entire Joint Economic Report.
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