erp1996 appendixes 1

?261

Appendix AREPORT TO THE PRESIDENT ON THE ACTIVITIES

OF THECOUNCIL OF ECONOMIC ADVISERS DURING 1995

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

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LETTER OF TRANSMITTAL

COUNCIL OF ECONOMIC ADVISERS

Washington, D.C., January 29, 1996MR. PRESIDENT:

The Council of Economic Advisers submits this report on itsactivities during the calendar year 1995 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,

Joseph E. Stiglitz, ChairmanMartin N. Baily, MemberAlicia H. Munnell, Member


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Council Members and their Dates of Service

Name Position Oath of office date Separation date

Edwin G. Nourse ....................... Chairman .................................. August 9, 1946 ......................... November 1, 1949.Leon H. Keyserling .................... Vice Chairman .......................... August 9, 1946 .........................

Acting Chairman ....................... November 2, 1949 ....................Chairman .................................. May 10, 1950 ........................... January 20, 1953.

John D. Clark ............................ Member ..................................... August 9, 1946 .........................Vice Chairman .......................... May 10, 1950 ........................... February 11, 1953.

Roy Blough ................................ Member ..................................... June 29, 1950 ........................... August 20, 1952.Robert C. Turner ....................... Member ..................................... September 8, 1952 ................... January 20, 1953.Arthur F. Burns ......................... Chairman .................................. March 19, 1953 ........................ December 1, 1956.Neil H. Jacoby ........................... Member ..................................... September 15, 1953 ................. February 9, 1955.Walter W. Stewart ..................... Member ..................................... December 2, 1953 .................... April 29, 1955.Raymond J. Saulnier ................. Member ..................................... April 4, 1955 ............................

Chairman .................................. December 3, 1956 .................... January 20, 1961.Joseph S. Davis ......................... Member ..................................... May 2, 1955 ............................. October 31, 1958.Paul W. McCracken ................... Member ..................................... December 3, 1956 .................... January 31, 1959.Karl Brandt ............................... Member ..................................... November 1, 1958 .................... January 20, 1961.Henry C. Wallich ....................... Member ..................................... May 7, 1959 ............................. January 20, 1961.Walter W. Heller ........................ Chairman .................................. January 29, 1961 ...................... November 15, 1964.James Tobin .............................. Member ..................................... January 29, 1961 ...................... July 31, 1962.Kermit Gordon ........................... Member ..................................... January 29, 1961 ...................... December 27, 1962.Gardner Ackley .......................... Member ..................................... August 3, 1962 .........................

Chairman .................................. November 16, 1964 .................. February 15, 1968.John P. Lewis ............................ Member ..................................... May 17, 1963 ........................... August 31, 1964.Otto Eckstein ............................. Member ..................................... September 2, 1964 ................... February 1, 1966.Arthur M. Okun ......................... Member ..................................... November 16, 1964 ..................

Chairman .................................. February 15, 1968 .................... January 20, 1969.James S. Duesenberry ............... Member ..................................... February 2, 1966 ...................... June 30, 1968.Merton J. Peck ........................... Member ..................................... February 15, 1968 .................... January 20, 1969.Warren L. Smith ........................ Member ..................................... July 1, 1968 .............................. January 20, 1969.Paul W. McCracken ................... Chairman .................................. February 4, 1969 ...................... December 31, 1971.Hendrik S. Houthakker .............. Member ..................................... February 4, 1969 ...................... July 15, 1971.Herbert Stein ............................. Member ..................................... February 4, 1969 ......................

Chairman .................................. January 1, 1972 ........................ August 31, 1974.Ezra Solomon ............................ Member ..................................... September 9, 1971 ................... March 26, 1973.Marina v.N. Whitman ................ Member ..................................... March 13, 1972 ........................ August 15, 1973.Gary L. Seevers ......................... Member ..................................... July 23, 1973 ............................ April 15, 1975.William J. Fellner ...................... Member ..................................... October 31, 1973 ...................... February 25, 1975.Alan Greenspan ......................... Chairman .................................. September 4, 1974 ................... January 20, 1977.Paul W. MacAvoy ....................... Member ..................................... June 13, 1975 ........................... November 15, 1976.Burton G. Malkiel ...................... Member ..................................... July 22, 1975 ............................ January 20, 1977.Charles L. Schultze ................... Chairman .................................. January 22, 1977 ...................... January 20, 1981.William D. Nordhaus ................. Member ..................................... March 18, 1977 ........................ February 4, 1979.Lyle E. Gramley ......................... Member ..................................... March 18, 1977 ........................ May 27, 1980.George C. Eads ......................... Member ..................................... June 6, 1979 ............................. January 20, 1981.Stephen M. Goldfeld ................. Member ..................................... August 20, 1980 ....................... January 20, 1981.Murray L. Weidenbaum ............. Chairman .................................. February 27, 1981 .................... August 25, 1982.William A. Niskanen .................. Member ..................................... June 12, 1981 ........................... March 30, 1985.Jerry L. Jordan ........................... Member ..................................... July 14, 1981 ............................ July 31, 1982.Martin Feldstein ........................ Chairman .................................. October 14, 1982 ...................... July 10, 1984.William Poole ............................ Member ..................................... December 10, 1982 .................. January 20, 1985.Beryl W. Sprinkel ....................... Chairman .................................. April 18, 1985 .......................... January 20, 1989.Thomas Gale Moore .................. Member ..................................... July 1, 1985 .............................. May 1, 1989.Michael L. Mussa ...................... Member ..................................... August 18, 1986 ....................... September 19, 1988.Michael J. Boskin ...................... Chairman .................................. February 2, 1989 ...................... January 12, 1993.John B. Taylor ........................... Member ..................................... June 9, 1989 ............................. August 2, 1991.Richard L. Schmalensee ........... Member ..................................... October 3, 1989 ........................ June 21, 1991.David F. Bradford ..................... Member ..................................... November 13, 1991 .................. January 20, 1993.Paul Wonnacott ......................... Member ..................................... November 13, 1991 .................. January 20, 1993.Alan S. Blinder .......................... Member ..................................... July 27, 1993 ............................ June 26, 1994.Laura D’Andrea Tyson ............... Chair ......................................... February 5, 1993 ...................... April 22, 1995.Joseph E. Stiglitz ...................... Member ..................................... July 27, 1993 ............................

Chairman .................................. June 28, 1995 ...........................Martin N. Baily .......................... Member ..................................... June 30, 1995 ...........................Alicia H. Munnell ...................... Member ..................................... January 29, 1996 ......................


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Report to the President on the Activities of the Councilof Economic Advisers During 1995

The Council of Economic Advisers was established by the Em-ployment Act of 1946 to provide the President with objective eco-nomic analysis and advice on the development and implementationof a wide range of domestic and international economic policy is-sues.

The Chairman of the Council

Joseph E. Stiglitz, who had been a Member of the Council since1993, was appointed Chairman on June 28, 1995. Dr. Stiglitz re-placed Laura D’Andrea Tyson who was appointed Assistant to thePresident for Economic Policy at the National Economic Council.Dr. Stiglitz is on leave from Stanford University, where he is theJoan Kenney Professor of Economics. Dr. Stiglitz is responsible forcommunicating the Council’s views on macro and microeconomic is-sues directly to the President through both oral and written brief-ings and reports. Dr. Stiglitz represents the Council at meetings ofthe National Economic Council and the National Security Counciland at daily White House senior staff meetings. He also partici-pates in a range of other formal and informal meetings with thePresident, senior White House staff, and other senior governmentofficials. Finally, Dr. Stiglitz is the Council’s chief public spokes-person. He guides the work of the Council and exercises ultimateresponsibility for the work of the professional staff.

The Members of the Council

Martin N. Baily is a Member of the Council of Economic Advis-ers. Dr. Baily is on leave from the University of Maryland wherehe is Professor of Economics.

Alicia H. Munnell is also a Member of the Council of EconomicAdvisers. Dr. Munnell had previously served in the Administrationas Assistant Secretary for Economic Policy at the Department ofthe Treasury and had served as Senior Vice President and Directorof Research at the Federal Reserve Bank of Boston.

The Chairman and Members work as a team on most economicpolicy issues. There is, however, an informal division of subjectmatter among the Members. Dr. Baily and Dr. Munnell share re-sponsibility for domestic macroeconomic analysis, the Administra-


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tion’s economic forecast, and budget and tax issues. Dr. Baily is re-sponsible for international economic issues and certain micro-economic issues, including technology and agriculture. Dr. Munnellhas primary responsibility for health care, welfare reform, environ-mental, and labor issues. Finally, all three Council Members par-ticipate in the deliberations of the National Economic Council(NEC). Dr. Stiglitz is one of six members of the NEC PrincipalsCommittee.

WEEKLY ECONOMIC BRIEFING

Dr. Stiglitz continued to conduct a weekly briefing for the Presi-dent, the Vice President, and the President’s other senior economicand policy advisers. Dr. Baily and Dr. Munnell also were activeparticipants. The Council, in cooperation with the Office of the VicePresident, prepares a written Weekly Economic Briefing of thePresident, which serves as the basis for the oral briefing. The brief-ing includes analysis of current economic developments, more ex-tended treatments of a wide range of economic issues and prob-lems, and summaries of economic news on different regions andsectors of the economy.

MACROECONOMIC POLICIES

One of the primary functions of the Council is to advise thePresident on all major macroeconomic issues and developments.The Council prepares for the President, the Vice President, and theWhite House senior staff a comprehensive series of memorandamonitoring key economic indicators and analyzing current macro-economic events.

The Council, the Department of the Treasury, and the Office ofManagement and Budget—the economic ‘‘Troika’’ —are responsiblefor producing the economic forecasts that underlie the Administra-tion’s budget proposals. The Council, under the leadership of Drs.Baily and Munnell, initiates the forecasting process twice eachyear. The first forecast is included in the Federal budget documentpublished in February and the second forecast is published in thesummer as part of the Administration’s Mid-Session Review. Inpreparing these forecasts, the Council consults with a wide varietyof outside sources, including leading private sector forecasters.

In 1995, the Council spent a substantial amount of time on budg-et and tax issues. The Council participated in the preparation ofthe President’s balanced budget proposal. The Council also partici-pated extensively in meetings on a range of budget issues, includ-ing Medicare and Medicaid, discretionary spending priorities, theAdministration’s tax proposals, and the elimination of corporatesubsidies and loopholes. In addition, the Council participated inconsultations with the Congressional Budget Office (CBO) on the


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economic assumptions that were developed for the 7-year balancedbudget plan.

The Council prepared, with the Department of Labor, a report ti-tled ‘‘Educating America: An Investment for Our Future,’’ whichpresented the overwhelming evidence on the beneficial impact ofeducation on our workers and on our economy. The Council alsoprepared a report titled ‘‘Supporting Research and Development toPromote Economic Growth: The Federal Government’s Role,’’ whichdescribes the Federal role in research and development (R&D) andthe importance of R&D investments to economic growth. These re-ports presented the case for protecting our Federal Government’sinvestments in education and technology.

The Council continued its efforts to improve the Americanpublic’s understanding of economic issues and the Administration’seconomic agenda through regular briefings with the economic andfinancial press corps, periodic discussions with outside economistsand forecasters, and presentations to outside organizations.

INTERNATIONAL ECONOMIC POLICIES

Because international trade and financial developments are in-creasingly important to the U.S. economy, they have played an im-portant role in the Administration’s foreign policy and economicagenda. The Council has been an active participant in the NationalEconomic Council/National Security Council international economicpolicy process, providing both technical and analytical support andpolicy guidance. In 1995, the Council’s role included policy develop-ment and planning for the G-7 Economic Summit in Halifax, theAPEC leaders meeting in Osaka, the Denver Ministerial for theHemispheric Initiative and the U.S.¥EU Summit in December.The Council also participated at the policy and analytical level inpreparation for trade negotiations, including those with Japan onautos and auto parts, and with China on market access and intel-lectual property.

The Council has focused on the impacts of international tradeand financial developments on overall U.S. economic performanceand on U.S. financial markets. The Council has used its expertiseon developments in other countries to identify lessons, successes aswell as failures, to be gleaned from policy initiatives undertakenelsewhere. The Weekly Economic Briefing of the President regularlyincludes articles on international events and issues. In addition,the Council, along with the Department of the Treasury, issued awhite paper in November titled ‘‘U.S. Trade Policy with Japan: As-sessing the Record.’’

Because of the increasing importance of international economicissues to the U.S. economy, the Council has increasingly beencalled upon to represent the United States at international meet-ings and other forums. Dr. Stiglitz was asked to give the keynote


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address at the U.S.-R.O.C. Economic Conference in Anchorage inSeptember and participated in meetings of the Joint Economic De-velopment Group with Israel in September.

The Council plays a leading role in U.S. participation in the Or-ganization for Economic Cooperation and Development (OECD).The Council heads the U.S. delegation to the semiannual EconomicPolicy Committee meetings, and Dr. Stiglitz is the Committee’sChairman. In that role, Dr. Stiglitz has led an effort to refocus theEconomic Policy Committee meetings and the OECD’s EconomicsDepartment’s activity in order to make their work more timely andrelevant to member country policy discussions. Dr. Baily was amember of the OECD’s Working Party 3 on macroeconomic policycoordination, and Dr. Munnell led the U.S. delegation for WorkingParty 1 on microeconomic and structural issues.

MICROECONOMIC POLICIES

The Council was an active participant on microeconomic policyissues in 1995. Dr. Stiglitz is a member of the Regulatory WorkingGroup, which addresses numerous policy issues related to regu-latory reform. Dr. Stiglitz was deeply involved in preparation of thenew ‘‘best practice’’ guidelines for economic assessments of regu-latory impacts, issued by the Office of Management and Budget.The Council also participated in a range of other Administration ef-forts to reform regulation.

The Council was an active participant in the Administration’s‘‘Reinventing Government’’ effort, which has made governmentagencies more efficient and more performance oriented, and has re-vised and eliminated thousands of pages of regulations. The Coun-cil was active in efforts to restructure government agencies andprograms, such as the Federal Aviation Administration and thehousing programs of the Department of Housing and Urban Devel-opment. The Council was also deeply involved in developing theAdministration’s pension simplification proposal, which will makeit easier and less costly for employers—especially small busi-nesses—to set up retirement plans that deliver tax-favored retire-ment benefits to all employees.

The Council was heavily involved in efforts to implement com-prehensive and procompetitive reform of telecommunications policy.These efforts are reflected in the sweeping new telecommunicationslegislation passed by the Congress in early 1996. The Council alsoplayed an important role in ongoing efforts to restructureINTELSAT, an international satellite consortium, to promote morecompetition in the market for satellite communications serviceswhile preserving universal access to such services.

The Council was active in various issues affecting natural re-sources and the environment. The Council assisted the Vice Presi-dent in developing a program for reinventing environmental regu-


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lation. As part of that effort, the Council helped to develop optionsfor expanding the use of market-based policies for air pollution con-trol. The Council was involved in addressing administrative andlegislative changes to the Nation’s programs for managing hazard-ous wastes and cleaning up contaminated sites. The Council alsoparticipated in ongoing assessments of policies for addressing cli-mate change. The Council was actively involved in the preparationof the Administration’s positions on reauthorization of the FarmBill, and Dr. Baily chaired an interagency group responsible for de-veloping options to fund land acquisition and restoration projects inthe Everglades.

Dr. Stiglitz and Dr. Munnell played key roles in assessing theimplications of welfare reform policy, including the consequences ofblock grants. They also participated in the Administration’s effortsto anticipate the impact of welfare reform on child poverty rates.In addition, Dr. Munnell participated in working groups on urbanpolicy and initiatives for children.

Dr. Baily co-chaired a group studying the state of our Nation’seconomic statistics. This effort was designed to improve the qualityand understanding of government economic statistics.

The Staff of the Council of Economic Advisers

The professional staff of the Council consists of the Chief of Staff,the Senior Statistician, thirteen senior economists, six staff econo-mists, and two research assistants. The professional staff and theirareas of concentration at the end of 1995 were:

Chief of Staff and General Counsel

Michele M. Jolin

Senior Economists

S. Lael Brainard .................. International EconomicsSteven N. Braun .................. Macroeconomics and ForecastingRobert S. Dohner ................. International EconomicsGeorge B. Frisvold ............... AgricultureThomas J. Kane ................... Labor, Welfare, and EducationEileen Mauskopf .................. Macroeconomics and FinanceMark J. Mazur ..................... Public FinanceRobert G. Murphy ................ Macroeconomics and the Weekly Economic

Briefing of the PresidentPeter R. Orszag .................... International EconomicsRaymond Prince ................... Environment and Natural ResourcesMarius Schwartz .................. Regulation, Industrial Organization, and

AntitrustLouise M. Sheiner ................ Public FinanceMichael A. Toman ............... Environment and Natural Resources


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Senior Statistician

Catherine H. Furlong

Staff Economists

Michael A. Ash ..................... Labor, Education, and Public SectorCarrie S. Cihak .................... International EconomicsJonah B. Gelbach ................. Public Finance and the Weekly Economic

Briefing of the PresidentValerie A. Mercer ................ MacroeconomicsAndrea Richter ..................... International Economics and the Weekly

Economic Briefing of the PresidentScott J. Wallsten .................. Industrial Organization, Science &

Technology, and Regulation

Research Assistant

Ronald C. Chen .................... Macroeconomics and the Weekly EconomicBriefing of the President

Statistical Office

Mrs. Furlong directs the Statistical Office. The Statistical Officemaintains and updates the Council’s statistical information, over-sees the publication of the Economic Indicators and the statisticalappendix to the Economic Report, and verifies statistics in Presi-dential and Council memoranda, testimony, and speeches.Susan P. Clements .............. Statistician and Information SystemsLinda A. Reilly ..................... Statistical AssistantBrian A. Amorosi ................. Research AssistantMargaret L. Snyder ............. Statistical Aide

The Administrative Office

Elizabeth A. Kaminski ........ Administrative OfficerCatherine Fibich .................. Administrative Assistant

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. BailyFrancine P. Obermiller ....... Executive Assistant to Dr. Munnell

Staff Secretaries

Mary E. JonesRosalind V. RasinMary A. Thomas

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


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Michael Treadway provided editorial assistance in the prepara-tion of the 1995 Economic Report. Robert E. Cumby, GeorgetownUniversity, and David M. Cutler, Harvard University, served asconsultants during the year. Student assistants during the yearwere Matthew W. Alsdorf, Stacy M. Bondanella, Christopher L.Boyster, Loren A. Briggs, Michele M. Campbell, William P. Cowin,David B. Edelstein, William B. Ferretti, Amy C. Fisher, Barbara J.Hawkins, Michael G. Rand, Michael D. Rosenbaum, Toby Stickler,Megan R. Sweeney, Gregory P. Wolf, and Ari Zweiman. The follow-ing student assistants joined the Council in January to assist withthe preparation of the Economic Report: Joseph W. Corrigan, JasonImfeld, Samuel Krasnow, Mary Lesh, Robert P. Martin, and Mi-chael Pond.

DEPARTURES

Thomas P. O’Donnell, who served as Chief of Staff, resigned inApril 1995 to accept a position as Chief of Staff at the NationalEconomic Council.

The Council’s senior economists, in most cases, are on leave ofabsence from faculty positions at academic institutions or fromother government agencies or research institutions. Their tenurewith the Council is usually limited to 1 or 2 years. Most of the sen-ior economists who resigned during the year returned to their pre-vious affiliations. They are Michael R. Donihue (Colby College),Robert D. Innes (University of Arizona), Sally M. Kane (NationalOceans and Atmospheric Administration, Department of Com-merce), David I. Levine (University of California, Berkeley), EllenE. Meade (Board of Governors of the Federal Reserve System), JayS. Stowsky (University of California), and David W. Wilcox (Boardof Governors of the Federal Reserve System). Jonathan B. Bakerwent on to a new position at the Federal Trade Commission.

Staff economists are generally graduate students who spend 1year with the Council and then return to complete their disserta-tions. Those who returned to their graduate studies in 1995 are:Kimberly A. Clausing (Harvard University), Maya N. Federman(Harvard University), Carolyn Fischer (University of Michigan),Christopher L. Foote (University of Michigan), F. Halsey Rogers(University of California, Berkeley and The Brookings Institution)and Eric D. Wolff (Massachusetts Institute of Technology). ClarkDees served for 2 years as a Research Assistant at the Council. Heis now at the University of Virginia.

Public Information

The Council’s Annual Report is the principal medium throughwhich the Council informs the public of its work and its views. Itis an important vehicle for presenting the Administration’s domes-


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tic and international economic policies. Annual distribution of theReport in recent years has averaged about 45,000 copies. TheCouncil also has primary responsibility for compiling the monthlyEconomic Indicators, which is issued by the Joint Economic Com-mittee of the Congress and has a distribution of approximately10,000.


erp1996 appendixes 1

Documents