What Is the Economic Report of the President?:
The Economic Report of the President is prepared by the Council of Economic Advisors (CEA) as part of the Federal Budget Process. It is submitted to show the economic background that supports the President’s Annual Budget Request.
What Does the Economic Report of the President Say About the U.S. Economy?
The Economic Report of the President admits that the economy is hitting a rough patch. It thanks Congress for passing the President's Economic Stimulus Package. It also mentions the Hope Now mortgage refinance alliance as another measure which will address the Subprime Mortgage Crisis.
The report also suggests four additional measures that need to be taken to ensure continued economic health:
- It asks for continued free trade agreements, despite the demise of the Trade Promotion Authority and the Doha Trade Talks.
- Allow tax deductions for individuals to purchase private health insurance.
- It advocates measures that support diversification away from oil, including increased research into alternative fuels.
- It advocates user fees to support the cost of maintaining infrastructure.
- It requests the continuation of the President’s earlier tax cuts, EGTRRA and JGTRRA.
Review of the U.S. Economy in 2007:
The report admits the end of the Goldilocks economy that the country experienced from 2004-2006. Specifically:
- Job growth slowed through the year.
- Unemployment rose to 5%.
- GDP growth averaged only 2.5%.
- The decline in residential housing construction drove down GDP, and was not entirely offset by an increase in exports and business fixed investment.
- Core inflation dropped to 2.4%, which is higher than the Federal Reserve’s target. In addition, CPI including food and oil prices rose.
- Wage gains of 3.7% were offset by inflation. In other words, wage increases didn't keep up with the cost of living.
Outlook for the U.S. Economy Through 2012:
The CEA forecast is similar to most economists - continued slow growth through 2008, with an upturn towards the end of the year. It optimistically expects a return in 2009 to robust GDP growth of 3% per year.
In 2008, unemployment is expected to increase above 5%, which is high. However, it will drop to below 5% by 2009.
This mildly optimistic scenario is forecast to continue through 2012.
What Else Does the Economic Report of the President Say?:
The Report credits the declining dollar for the rise in exports, which has fueled two-thirds of GDP growth. Although it states the common belief that the current Banking Liquidity Crisis will not extend past financial markets, it does admit that it will crimp consumption and personal wealth. In other words, the entire economy will continue to suffer until the markets regulate. Interestingly, it admits that the markets and the Fed are best equipped to deal with the current economic downturn, and that fiscal policy is too slow to react quickly.
(Source: White House Web Site, Fact Sheet: Economic Report of the
President)
