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Economic Report of the President • February 2008

Economic
Report
President
of the

Transmitted to the Congress February 2008
Together with the Annual Report
of the Council of Economic Advisers

ERP_Cover_Proofs with green barcode.indd 1

1/30/2008 11:49:44 AM

Economic Report
of the President

Transmitted to the Congress
February 2008
together with

THE ANNUAL REPORT
of the

COUNCIL OF ECONOMIC ADVISERS
UNITED STATES GOVERNMENT PRINTING OFFICE
WASHINGTON : 2008
For sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: (866) 512-1800; DC area (202) 512-1800
Fax: (202) 512-2104 Mail Stop: IDCC, Washington, DC 20402-0001
ISBN 978-0-16-079822-1

C O N T E N T S
Page

ECONOMIC REPORT OF THE PRESIDENT..............................................

1

ANNUAL REPORT OF THE COUNCIL OF ECONOMIC ADVISERS*....

7

CHAPTER 1. THE YEAR IN REVIEW AND THE YEARS AHEAD............

25

CHAPTER 2. CREDIT AND HOUSING MARKETS...................................

51

CHAPTER 3. THE CAUSES AND CONSEQUENCES OF EXPORT
GROWTH.........................................................................................................

79

CHAPTER 4. THE IMPORTANCE OF HEALTH AND HEALTH
CARE.................................................................................................................

97

CHAPTER 5. TAX POLICY............................................................................ 115
CHAPTER 6. THE NATION’S INFRASTRUCTURE.................................. 137
.
CHAPTER 7. SEARCHING FOR ALTERNATIVE ENERGY
SOLUTIONS.....................................................................................................

163

CHAPTER 8. IMPROVING ECONOMIC STATISTICS............................. 187
APPENDIX A. REPORT TO THE PRESIDENT ON THE ACTIVITIES
OF THE COUNCIL OF ECONOMIC ADVISERS DURING 2007............. 203
.
APPENDIX B. STATISTICAL TABLES RELATING TO INCOME,
EMPLOYMENT, AND PRODUCTION........................................................ 217
.

* For a detailed table of contents of the Council’s Report, see page 11

Economic Report of the President  |  iii

ECONOMIC REPORT
OF THE PRESIDENT

ECONOMIC REPORT OF THE PRESIDENT

To the Congress of the United States:

Over the past 6 years of economic expansion, the American economy
has proven its strength and resilience. Job creation grew uninterrupted for
a record period of time, inflation remains moderate, unemployment is low,
and productivity continues to grow. The economy is built upon a strong
foundation, with deep and sophisticated capital markets, flexible labor
markets, low taxes, and open trade and investment policies.
Americans should be confident about the long-term strength of our
economy, but our economy is undergoing a period of uncertainty, and there
are heightened risks to our near-term economic growth. To insure against
these risks, I called upon the Congress to enact a growth package that is
simple, temporary, and effective in keeping our economy growing and our
people working.
There is more we should do to strengthen our economy. First, we must
keep taxes low. Unless the Congress acts, most of the tax relief that we have
delivered over the past 7 years will be taken away and 116 million American
taxpayers will see their taxes rise by an average of $1,800. The tax relief of
the past few years has been a key factor in promoting economic growth and
job creation and it should be made permanent. We must also work together
to tackle unfunded obligations in entitlement programs such as Social
Security, Medicare, and Medicaid. I have laid out a detailed plan in my
Budget to restrain spending, cut earmarks, and balance the budget by 2012
without raising taxes.
Second, we must trust Americans with the responsibility of homeownership and empower them to weather turbulent times in the market. My
Administration has acted aggressively to help credit-worthy homeowners
avoid foreclosure. We launched a new initiative called FHASecure to help
families refinance their homes. I signed legislation to protect families from

Economic Report of the President  |  3

higher taxes when lenders forgive a portion of their home mortgage debt.
We have also brought together the HOPE NOW alliance, which is helping
many struggling homeowners avoid foreclosure by facilitating the refinancing
and modification of mortgages. The Congress can do more to help American
families keep their homes by passing legislation to reform Freddie Mac and
Fannie Mae, modernize the Federal Housing Administration, and allow
State housing agencies to issue tax-free bonds to help homeowners refinance
their mortgages.
Third, we must continue opening new markets for trade and investment.
We have an unprecedented opportunity to reduce barriers to global trade
and investment through a successful Doha round. The Congress should
also approve our pending free trade agreements. I thank the Congress for
its approval of a good agreement with Peru, and ask for the approval of
agreements with Colombia, Panama, and South Korea. These agreements
will benefit our economy by providing greater access for our exports and
supporting good jobs for American workers, and they will promote America’s
strategic interests. I have asked the Congress to reauthorize and reform trade
adjustment assistance so that we can help those workers who are displaced by
trade to learn new skills and find new jobs.
Fourth, we must make health care more affordable and accessible for all
Americans. I have proposed changes in the tax code that would end the bias
against those who do not receive health insurance through their employer and
would make it easier for many uninsured Americans to obtain insurance. This
reform would put private health care coverage within reach for millions. My
Budget also improves access to health care by increasing the power of small
employers, civic groups, and community organizations to negotiate lowerpriced health premiums. These policies would encourage competition among
health plans across State lines, help reduce frivolous lawsuits that increase
patients’ costs, and promote the use of health savings accounts.
Fifth, we must increase our energy security and confront climate change.
Last year, I proposed an ambitious plan to reduce U.S. dependence on oil
and help cut the growth of greenhouse gas emissions. I am pleased that the
Congress responded, and I was able to sign into law a bill that will increase fuel
economy and the use of alternative fuels, as well as set new efficiency mandates
on appliances, light bulbs, and Federal Government operations. In my State of
the Union Message, I proposed that we take the next steps to accelerate technological breakthroughs by funding new technologies to generate coal power that
captures carbon emissions, advance emissions-free nuclear power; and invest
in advanced battery technology and renewable energy. I am also committing

4  |  Economic Report of the President

$2 billion to a new international clean technology fund that will help
developing nations make greater use of clean energy sources. Additionally,
my Budget proposes to protect the economy against oil supply disruptions by
doubling the capacity of the Strategic Petroleum Reserve.
Finally, a strong and vibrant education system is vital to maintaining our
Nation’s competitive edge and extending economic opportunity to every
citizen. Six years ago, we came together to pass the No Child Left Behind
Act, and no one can deny its results. Now we must work together to increase
accountability, add flexibility for States and districts, reduce the number of
high school dropouts, and provide extra help for struggling schools.
Many of these issues are discussed in the 2008 Annual Report of the
Council of Economic Advisers. The Council has prepared this Report to help
policymakers understand the economic conditions and issues that underlie
my Administration’s policy decisions. By relying on the foundation and
resilience of our economy, trusting the decisions of individuals and markets
and pursuing pro-growth policies, we should have confidence in our prospects
for continued prosperity and economic growth.

THE WHITE HOUSE
FEBRUARY 2008

Economic Report of the President  |  5

THE ANNUAL REPORT
OF THE
COUNCIL OF ECONOMIC ADVISERS

LETTER OF TRANSMITTAL
	

	

Mr. President:

Council of Economic Advisers
Washington, D.C., February 12, 2008

The Council of Economic Advisers herewith submits its 2008 Annual
Report in accordance with the provisions of the Employment Act of 1946 as
amended by the Full Employment and Balanced Growth Act of 1978.
Sincerely,

Edward P. Lazear
Chairman

Economic Report of the President  |  9

C O N T E N T S

Page

overview..............................................................................................	

17

chapter 1. the year in review and the years ahead.......................	
	 Developments in 2007 and the Near-Term Outlook......................	
		 Consumer Spending and Saving................................................	
		 Housing Prices..........................................................................	
		 Residential Investment..............................................................	
		 Business Fixed Investment.........................................................	
		 Business Inventories..................................................................	
		 Government Purchases..............................................................	
		 Exports and Imports..................................................................	
		 Employment.............................................................................	
.
		 Productivity...............................................................................	
		 Prices and Wages.......................................................................	
		 Financial Markets......................................................................	
	 The Long-Term Outlook Through 2013.......................................	
		 Growth in GDP over the Long Term.......................................	
		 The Composition of Income over the Long Term....................	
	 Conclusion.....................................................................................	

25
27
27
29
30
32
34
34
35
37
38
40
42
43
43
47
48

chapter 2. credit and housing markets..........................................	
	 What are Credit Markets?...............................................................	
	 Recent Developments in Mortgage Markets...................................	
	 Credit Market Disruptions in 2007................................................	
		 Credit Market Link to Mortgages.............................................	
		 Flight to Quality.......................................................................	
		 Contraction of the Asset-Backed Commercial Paper Market.....	
		 Slower Merger and Acquisition Activity....................................	
		 Equity Markets..........................................................................	
		 International Implications.........................................................	
	 Policy Response to Credit Market Disruptions...............................	
	 Policy Response to Housing Market Challenges.............................	
		 Addressing Current Challenges.................................................	
.
		 Strengthening the Mortgage Market for the Future..................	
.
	 Macroeconomic Implications..........................................................	
	 Conclusion.....................................................................................	

51
52
53
61
61
62
64
65
66
67
67
68
68
71
74
76
  11

chapter 3. the causes and consequences of export growth........	
	 The Causes of Recent Export Growth............................................	
		 Foreign Income Growth............................................................	
		 Growth in Domestic Production...............................................	
		 Exchange Rates. ........................................................................	
.
		 Trade Costs and Barriers...........................................................	
	 Exports and Foreign Direct Investment..........................................	
		 Multinationals and Trade..........................................................	
	 The Benefits of Trade and Expanding Export Markets...................	
	 Trade and Labor Markets...............................................................	
	 Conclusion.....................................................................................	

79
80
83
86
86
86
88
90
91
93
95

chapter 4. the importance of health and health care................	
	 Health and the Demand for Health Care.......................................	
		 Demand for Health...................................................................	
		 The Production of Health.........................................................	
		 Trends in Health Spending.......................................................	
		 Trends in Life Expectancy.........................................................	
		 Trends in Health Insurance Coverage.......................................	
	 Addressing Challenges in the Health Care System..........................	
		 Moral Hazard and Cost Control...............................................	
		 Controlling Costs Through Competitive Insurance Markets.....	
		 Improving Quality and Costs Through Information and
		
Reimbursement.......................................................................	
		 Promoting Healthy Behavior.....................................................	
	 Conclusion.....................................................................................	

97
98
98
98
100
101
103
104
106
110

chapter 5. tax policy.........................................................................	
	 The Size of Government: A Historical View...................................	
		 Expiration of the 2001 and 2003 Tax Cuts...............................	
		 Alternative Minimum Tax. .......................................................	
.
		 Real Bracket Creep....................................................................	
		 Withdrawals from Tax-Deferred Accounts................................	
	 The Impact of Recent Tax Reductions...........................................	
		 Labor Supply.............................................................................	
		 Saving and Investment..............................................................	
		 Corporate Financial Policy and Governance.............................	
.
		 Significance of Tax Cuts to Individuals.....................................	
		 Economic Benefits of Lower Taxes. ..........................................	
.
	 The Structure of Business Taxes.....................................................	
	 Conclusion.....................................................................................	

115
116
118
119
119
120
121
122
123
125
127
128
131
136

12  |  Economic Report of the President

111
113
114

chapter 6. the nation’s infrastructure..........................................	
	 The Basic Challenge of Infrastructure Policy..................................	
	 Current State of the Nation’s Infrastructure...................................	
		 Roads........................................................................................	
		 Bridges......................................................................................	
		 Railways....................................................................................	
		 Container Ports.........................................................................	
		 Aviation. ...................................................................................	
.
		 The Electrical Grid....................................................................	
		 Telecommunications.................................................................	
	 Infrastructure Policy.......................................................................	
		 How Should Infrastructure Be Paid For?. .................................	
.
		 How Should Government Set Priorities for Infrastructure
		
Projects?..................................................................................	
		 When Should the Government Regulate or Provide
		
Infrastructure?.........................................................................	
		 What Are the Proper Roles for State and Federal
		
Government?. .........................................................................	
.
	 Conclusion.....................................................................................	

137
138
140
140
145
146
148
149
152
154
157
158

chapter 7. searching for alternative energy solutions...............	
	 Energy Sources...............................................................................	
.
		 Fossil Fuels................................................................................	
		 The Need To Diversify.............................................................	
	 Alternative Energy Production........................................................	
		 Alternatives for Generating Electricity....................................... 	
		 Alternatives for Transportation.................................................	
.
	 The Road Forward.........................................................................	
.
		 Policy Tools..............................................................................	
		 Current Efforts..........................................................................	
	 Conclusion.....................................................................................	

163
164
165
168
170
170
177
182
183
184
185

chapter 8. improving economic statistics......................................	
An Overview of the U.S. Statistical System...........................................	
	 The Importance of Statistical Systems............................................	
.
	 Keeping Up with a Changing Economy.........................................	
	 Improving the Value of Existing Statistical Data............................	
	 Conclusion.....................................................................................	

187	
188
192
193
196
202

158
159
161
162

Contents  |  13

A.	
		
B.	
		

appendixes
Report to the President on the Activities of the Council of
Economic Advisers During 2007. .............................................	 203
.
Statistical Tables Relating to Income, Employment,
and Production..........................................................................	 217	

list of tables
1-1.	 Administration Economic Forecast. ..........................................	
.
1-2.	 Supply-Side Components of Real GDP Growth, 1953-2013....
4-1.	 Additional Life-Years Due to Reduced Mortality from Selected
		 Causes, for US by Decade, 1950-2000 (years)..........................	
.
5-1.	 Comparing the Marginal Tax Rate for a Career Changer
		 Under Two Illustrative Tax Policies..........................................	
5-2.	 Estimated Distributional Effects of 2001-2006 Tax Cuts
		 in 2007. ....................................................................................	
.
5-3.	 Effective Marginal Tax Rates on Investment.............................	
7-1.	 Estimated Average Levelized Costs (2006 $/megawatthour) for
		 Plants Entering Service in 2015................................................	
.

44
	45
102
123
127
132
171

list of charts
1-1.	 Consumption and Net Worth Relative to Disposable
		 Personal Income (DPI). ............................................................	 28
.
1-2.	 Net Debt Issuance.....................................................................	 33
1-3	 Output per Hour in the Nonfarm Business Sector....................	 39
1-4.	 Consumer Price Inflation..........................................................	 40
2-1.	 Percent of Mortgages 90 Days Past Due or In the Process of
		 Foreclosure................................................................................	 57
2-2.	 Conforming and Jumbo Mortgage Rates, 30-Year Fixed Rate
		 Mortgages. ................................................................................	 60
.
2-3.	 Three-month London Interbank Offered Rate and Rates on
		 3-Month Treasury Bills.............................................................	 62
2-4.	 Spread Between Corporate Bond Yields and Rates on 10-Year .
		
		 Treasury Notes..........................................................................	 63
2-5.	 Commercial Paper Outstanding................................................	 65
2-6.	 Value of Announced Merger and Acquisition Deals..................	 66
2-7.	 Monthly FHA Mortgage Endorsements....................................	 73
2-8.	 Lending Standards.....................................................................	 75
3-1.	 U.S. Exports As a Share of Gross Domestic Product.................	 80
3-2. 	Average Annualized Growth in U.S. Exports to Trading
		 Partners, 2003-2006..................................................................	 81
3-3.	 Real Growth in U.S. Exports and Foreign Gross Domestic
		 Product.....................................................................................	 85
14  |  Economic Report of the President

3-4.	 Growth of U.S. Goods Exports to Free Trade Agreement
		 Partners, 2005-2006..................................................................	
3-5.	 Imports and the Unemployment Rate, 1960-2006...................	
.
4-1.	 National Health Expenditures As a Share of Gross Domestic
		 Product.....................................................................................	
4-2.	 Life Expectancy at Birth and at Age 65.....................................	
4-3.	 Health Insurance Coverage by Source: 1987 to 2006..............	
.
5-1.	 Federal Receipts........................................................................	
.
5-2.	 Federal Receipts Projections......................................................	
5-3.	 Real Personal Dividend Income................................................	
5-4.	 Federal Outlays Projections.......................................................	
6-1.	 Vehicle Miles Traveled and Lane-Miles of Road in U.S.,
		 1980-2005................................................................................	
.
6-2. 	Annual Delay per Peak-Period Traveler, by Urban Area Size,
		 1982-2005................................................................................	
.
6-3.	 Condition of U.S. Highway Bridges, 1992-2006......................	
6-4.	 Distribution of U.S. Freight Shipments by Mode.....................	
6-5.	 Container Trade at U.S. Marine Ports......................................	
6-6.	 Average Travel Time, New York (LGA) to Atlanta (ATL)
		 1988-2006................................................................................	
.
6-7.	 High-Speed Internet Lines in the United States by Type of
		 Connection, 1999-2006............................................................	
6-8. 	Wireless Communications Infrastructure in the U.S.,
		 1985-2007................................................................................	
.
7-1.	 U.S. Energy Consumption and Production (2006)...................	
7-2.	 U.S. Energy Consumption by Source and Sector (2006)..........	
.
emissions from Energy Consumption (2006)...........	
.
7-3.	 U.S. CO2
8-1.	 Budget Authority for Principal Statistical Agencies, Fiscal
		 Year 2007..................................................................................	
8-2.	 Real Federal Appropriations for Economic Statistics.................	
8-3.	 Federal Statistical Appropriations for 5- and 10- Year
		 Censuses....................................................................................	
list of boxes
1-1.	 Indirect Effects of the Housing Sector.......................................	
1-2.	 Macroeconomic Effects When Oil Price Increases Are Induced
		 by Foreign Demand..................................................................	
1-3.	 Aging and the Pattern of Labor Force Participation..................	
2-1.	 Definitions of Select Mortgage Terms.......................................	
2-2.	 Credit Rating Agencies..............................................................	
2-3.	 Geographic Variations in Housing Markets..............................	
2-4.	 Securitization and Structured Finance.......................................	

88
94
100
101
103
117
118
127
130
142
143
145
147
148
150
155
157
166
166
169
189
190
191

30
36
45
54
56
58
60

Contents  |  15

2-5.	 Mortgage Lending Today..........................................................	
3-1.	 Trade in Services.......................................................................	
3-2.	 The Current Account Deficit....................................................	
3-3.	 Open Investment and the United States. ..................................	
.
4-1.	 Health Effects on Job Productivity............................................	
4-2.	 Government Health Care Programs..........................................	
5-1.	 Marriage Penalty Basics.............................................................	
5-2.	 Expensing versus Corporate Rate Reductions............................	
6-1.	 The Interstate Highway System. ...............................................	
.
6-2.	 Delays at New York City Airports.............................................	
7-1.	 Oil Prices..................................................................................	
.
7-2.	 The Blend Wall.........................................................................	
8-1.	 How to Reverse a Decline in Statistical Infrastructure:
		 Improving the Sample for the Consumer Price Index...............	
8-2.	 The Confidential Information Protection and Statistical
		 Efficiency Act (CIPSEA)...........................................................	

16  |  Economic Report of the President

69
82
84
89
99
104
129
133
141
151
167
179
197
199

Overview

T

he U.S. economy retains a solid foundation, even as it faces challenges
ahead. Toward the end of 2007, there were increasingly mixed economic
indicators (see Chapters 1 and 2). Economic growth is expected to continue
in 2008. Most market forecasts suggest a slower pace in the first half of 2008,
followed by strengthened growth in the second half of the year. The inherent
resilience of our economy has enabled it to absorb multiple shocks in recent
years, but the President does not take this growth for granted. Recognizing
the near-term risks of a broader economic slowdown, the President called
on the Congress to enact an economic growth package to protect the health
of our economy and encourage job creation. Much of this Report examines
contributions of pro-growth economic policies and market-based reforms
that can further strengthen our economy and allow more Americans to
benefit from continued economic expansion.
The United States’ commitment to fair and open trade and investment
policies is an important factor in our international competitiveness and
in the dynamic nature of our economy; export performance has played a
notable and growing role in economic growth in recent years (see Chapter
3). Lower tax rates have also contributed to economic performance by easing
the burden on labor and capital and enabling consumers to allocate resources
more efficiently (see Chapter 5). There remains considerable opportunity to
strengthen our economic position by enacting a short-term economic growth
package, and by addressing key challenges in the housing and credit markets,
rising health care costs, infrastructure financing and the need to diversify our
energy portfolios (see Chapters 2, 4, 6, and 7). A mixed economic picture
also underscores the need for accurate measures of economic performance.
Improvements to economic statistics programs could contribute to a greater
understanding of the economy for public policymakers and private decision
makers (see Chapter 8).

17

Chapter 1: The Year in Review
and the Years Ahead
Economic expansion continued for the sixth consecutive year in 2007.
This economic growth came despite a weak housing sector, credit tightening,
and high energy prices. Sustained growth has resulted from U.S. economic
flexibility, openness and other pro-growth policies. Projections of weaker
growth in the first half of 2008 and near-term risks of a broader economic
slowdown, however, led the President to call on the Congress to enact a shortterm economic growth package. Chapter 1 reviews the past year and discusses
the Administration’s forecast for the years ahead. The key points are:
•	 Real GDP posted solid 2.5 percent growth during the four quarters of
2007, similar to the pace of a year earlier. Compared with the preceding
years of the expansion, the continued reorientation of aggregate demand
resulted in more growth from exports and business fixed investment,
while residential investment flipped from contributing positively to GDP
growth from 2003 to 2005 to subtracting from it in 2006 and 2007.
•	 Labor markets were tight in the first half of 2007, but conditions
slackened somewhat in the second half, with job growth slowing and the
unemployment rate edging up to 4.7 percent in the third quarter and to
5.0 percent by December.
•	 Energy prices dominated the movement of overall inflation in the
consumer price index (CPI), with large increases toward the end of the
year. Core consumer inflation (which excludes food and energy inflation)
moved down from 2.6 percent during the 12 months of 2006 to 2.4
percent in 2007. Food prices rose appreciably faster than core prices.
•	 Nominal wage gains of 3.7 percent for production workers were offset
by the unexpected rise in energy prices. These nominal gains, however,
exceeded measures of expected price inflation implying an expectation
of real wage gains during the next several years.
•	 The Administration’s forecast calls for the economic expansion to
continue in 2008, but at a slower pace. Slower growth is anticipated for
the first half of the year, and the average unemployment rate for 2008 is
projected to move up from the 2007 level. In 2009 and 2010, real GDP
growth is projected to grow at 3 percent, while the unemployment rate
is projected to remain stable and below 5 percent.
•	 The contraction of the secondary market for some mortgage securities
and the ensuing write-downs at major financial intermediaries are a new
downside risk to this expansion. As of the end of 2007, however, these
developments had not greatly affected the nonfinancial economy outside
of the housing sector.

18  |  Economic Report of the President

Chapter 2: Credit and Housing Markets
In the summer of 2007, the ongoing contraction in the U.S. housing
market worsened and credit markets experienced a substantial disruption.
Chapter 2 reviews the developments in the housing and credit markets, and
describes public and private responses. The key points are:
•	 Rising delinquencies in subprime mortgages revealed an apparent underpricing of risk and raised concerns about which market participants were
exposed to that risk, but the subprime market was not the only cause for
the contraction in credit markets.
•	 The Federal Reserve provided liquidity and took measures to support
financial stability in the financial markets in the wake of the disruptions
in the credit markets.
•	 The Administration focused its response on housing markets and helping
homeowners avoid foreclosure—in particular, subprime borrowers
facing increases in the interest rate on their adjustable-rate mortgages.
•	 Participants in the credit and housing markets are actively addressing
challenges that were revealed during the summer of 2007. Markets
are generally better suited than government to adapting to changes
in the economic environment; markets can respond quickly to new
information, while government policy often reacts with a lag or has a
delayed impact.
•	 Financial innovations in the mortgage and credit markets have provided
a range of economic benefits, but not without some costs. Over time,
markets tend to retain valuable innovations and repair or eliminate
flawed innovations.
•	 The macroeconomic effects of the downturn in housing and the credit
market disruptions may occur through several channels, including the
direct effect on residential investment, the reduction of wealth on personal
consumption, and tighter lending standards on business investment.

Overview  |  19

Chapter 3: The Causes and Consequences of
Export Growth
One noteworthy development in recent years has been the rapid growth
of U.S. exports. This growth has provided clear benefits to entrepreneurs
and workers in export-oriented industries, and to the economy as a whole.
Chapter 3 identifies the primary factors that have driven recent export growth
and discusses several longer-term trends that have lifted exports over time.
More broadly, the chapter addresses the benefits that flow from open trade
and investment policies as well as some related challenges. The key points of
this chapter are:
•	 The United States is the world’s largest exporter, with $1.5 trillion in goods
and services exports in 2006. The United States was the top exporter of
services and the second largest exporter of goods, behind only Germany.
•	 In recent years, factors that have likely contributed to the growth in
exports include rising foreign income, the expansion of production in
the United States, and changes in exchange rates. One reflection of that
growth is that exports accounted for more than a third of U.S. economic
growth during 2006 and 2007.
•	 Over time, falling tariffs and transport and communication costs have
likely lowered the cost of many U.S. goods in foreign markets, boosting
demand for U.S. exports.
•	 Open trade and investment policies have increased access to export
markets for U.S. producers. Increased investment across borders by U.S.
companies facilitates exports.
•	 Greater export opportunities give U.S. producers incentives to innovate
for a worldwide market. Increased innovation and the competition that
comes from trade liberalization help raise the living standard of the
average U.S. citizen.
•	 Nearly all economists agree that growth in the volume and value of
exports and imports increases the standard of living for the average
individual, but they also agree that the gains from trade are not equally
distributed and that some individuals bear costs. The Administration has
proposed policies to improve training and support to individuals affected
by trade disruption.

20  |  Economic Report of the President

Chapter 4: The Importance of Health and
Health Care
The American health care system is an engine for innovation that develops
and broadly disseminates advanced, life-enhancing treatments and offers
a wide set of choices for consumers of health care. The health care system
provides enormous benefits, but there remain substantial opportunities for
improvements that would reduce costs, increase access, and improve quality,
thus providing even greater health for Americans. Chapter 4 examines the
economics of health and health care. The key points in this chapter are:
•	 Health can be improved not only through the appropriate consumption
of quality health care services, but also through individual behaviors and
lifestyle choices such as quitting smoking, eating more nutritious foods,
and getting more exercise.
•	 Health care has enhanced the health of our population; greater efficiency
in the health care system, however, could yield even greater health for
Americans without increasing health care spending.
•	 Rapid growth in health care costs and access to health insurance continue
to present challenges to the health care system.
•	 Administration policies focus on reducing cost growth, improving
quality, and expanding access to health insurance through an emphasis
on private sector and market-based solutions.

Chapter 5: Tax Policy
Economists and policymakers have long debated the appropriate role of
the government in a market economy. The government can provide public
services and transfer payments to lower-income individuals, but these benefits
often come at the cost of higher taxes and lower economic output. The key
points in this chapter are:
•	 The ratio of federal taxation in the United States to gross domestic product
(GDP) has fluctuated around an average value of 18.3 percent over the
past 40 years; despite the President’s 2001 and 2003 tax relief, this ratio
was 18.8 percent in 2007, above the 40-year average. Under current law
revenues are predicted to grow faster than the economy in coming years,
raising the level of taxation well above its historical average.

Overview  |  21

•	 Tax reductions in 2001 and 2003 have considerably lowered the
tax burden on labor and capital income and reduced distortions to
economic decisions. Making these tax cuts permanent can greatly
improve long-term economic outcomes.
•	 In addition to contributing to growth, the tax cuts of 2003 also
improved the efficiency of the tax structure primarily by reducing the
double taxation of corporate income.
•	 The business tax structure in the United States still creates substantial
distortions. To attract investment from abroad and compete more
effectively in foreign markets, the United States must consider how best
to address distortions created by the structure of business taxes, as other
countries have done.

Chapter 6: The Nation’s Infrastructure
Our economy depends on infrastructure that allows goods, people,
information, and energy to flow throughout the nation. As our economy
grows and our infrastructure faces growing demand, policy should support
investments that ensure that existing capacity is used as efficiently as possible.
Chapter 6 discusses some of the economic issues associated with major
transportation, communication, and power transmission systems. The key
points in this chapter are:
•	 Infrastructure typically requires large capital investments to build and
maintain capacity. Once built, however, the cost of allowing an extra
person to use the capacity is typically low. This often means that
infrastructure cannot be provided efficiently by a competitive market
and many types of infrastructure are instead provided by Governmentregulated companies or, in some cases, by the Government itself.
•	 Demands on the U.S. infrastructure grow as the economy expands, and
Government policies often determine how effectively infrastructure can
accommodate that growth. Properly designed user fees can help ensure
efficiency by revealing information about what infrastructure consumers
value most.
•	 The price people pay for using infrastructure should reflect the extra
cost associated with its use. This includes the cost of maintaining the
infrastructure itself, as well as delays caused by increased congestion.
•	 The private sector plays an important role in providing infrastructure.
However, lack of competition in markets for infrastructure raises
concerns about market power, so that Government oversight is
sometimes necessary. The Government must continually reassess the
need for oversight in the face of changing market conditions.

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Chapter 7: Searching for Alternative
Energy Solutions
Energy is used for many purposes in our economy: electricity generation, transportation, industrial production, and direct uses by homes and
businesses. Energy security and environmental concerns motivate the consideration of policies that diversify our sources of energy. Chapter 7 outlines
options for changing the way we produce and consume energy in two sectors
of our economy: electricity generation and transportation. The key points in
this chapter are:
•	 The current suite of available alternative energy sources is an important
part of achieving our goal, but a number of technical, regulatory, and
economic hurdles must be overcome to use them fully.
•	 There are several promising, but currently unproven, methods of
producing and delivering energy that, if successfully developed and
deployed, will greatly enhance our Nation’s energy portfolio.
•	 Appropriate and limited government action can play a useful role in
helping to realize our energy security goals.

Chapter 8: Improving Economic Statistics
Statistical systems have substantial value for both public policymakers and
private decision makers. Chapter 8 examines several key issues in economic
statistics, including the role of Federal statistical programs in a dynamic
economy, the importance of continuity in statistical series, and ways to
improve the value of existing statistical data.
The key points are:
•	 Robust statistical systems produce products that are important to understanding the changing state of the economy and to formulating sound
policy. But statistical systems, like physical infrastructures, become
obsolete or depreciate with time if they are not maintained.
•	 Statistical measures must keep up with the changing nature of the
economy to be relevant and useful. For example, it is important that
these measures reflect new and growing industries (such as hightechnology industries or services) and intangible capital (such as research
and development).
•	 Disruptions in a statistical series render it much less useful to policymakers and other data users. Thus, continuity in statistical series is an
important goal.

Overview  |  23

•	 More effective statistical use can be made of existing data. In particular,
amending relevant legislation to enable full implementation of the
Confidential Information Protection and Statistical Efficiency Act
(CIPSEA) could greatly improve the quality of Federal statistics.

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C H A P T E R

1

The Year in Review and the Years Ahead

T

he expansion of the U.S economy continued for a sixth consecutive
year in 2007. Economic growth was solid at 2.5 percent during the
four quarters of the year, slightly below the pace during 2006. Payroll job
growth set a record for continuous growth, eclipsing the previous record of
48 months. This economic growth came despite a reorientation of the U.S.
economy away from housing investment and toward exports and investment
in business structures. The persistent tumble in housing investment subtracted
roughly a percentage point from real Gross Domestic Product (GDP) growth
during the four quarters of the year. Although the quarterly pattern of real
GDP was uneven, with strong growth in the second and third quarters and
weak growth in the first and fourth quarters, much of the quarter-to-quarter
variation can be attributed to net exports, a volatile component of GDP. In
the wake of mounting problems with the performance of subprime (defined
as higher risk) mortgages, financial markets from August onward were
unsettled because of concerns about the risk entailed in holding some types
of mortgage-backed securities, as well as fears about the financial health of
some firms and the possibility of contagion to the nonfinancial economy. To
insure against the downside risks from these financial and housing-related
developments, the President called for an economic growth package to boost
consumption, business investment, and labor demand.
The core CPI (consumer prices excluding food and energy) as well as the
price index for GDP (covering everything produced in the United States)
suggested that inflation had moved lower and into the moderate range by
the end of 2007. Food price inflation climbed, however, while energy prices
jumped toward the end of the year. In response to these output and inflation
developments, the Federal Reserve held the Federal funds rate flat through
August. The Federal Reserve then lowered its policy rate by a percentage
point from September through December and another 1¼ percentage point
in January to ease liquidity concerns in financial markets disturbed by the
mortgage market tumble, and to bolster real activity. The Federal Reserve also
took other liquidity-enhancing measures, including cutting the discount rate
at which it lends to banks, and initiating a new auction approach to provide
collateralized loans to banks.
This chapter reviews the economic developments of 2007 and discusses
the Administration’s forecast for the years ahead. The key points of this
chapter are:

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• Real GDP posted solid 2.5 percent growth during the four quarters of
2007, similar to the pace of a year earlier. The reorientation of aggregate demand that began in 2006 continued in 2007. Compared with
the preceding years of the expansion, this reorientation included more
growth from exports and business fixed investment, while residential
investment flipped from contributing positively to GDP growth from
2003 to 2005 to subtracting from it in 2006 and 2007.
• Labor markets were tight in the first half of 2007 with job growth
averaging 107,000 per month and the jobless rate at 4.5 percent. Labor
market conditions slackened somewhat in the second half, with job
growth slowing to 82,000 per month and the unemployment rate edging
up to 4.7 percent in the third quarter and to 5.0 percent by December.
• Energy prices, which tend to be volatile, dominated the movement of
overall inflation in the consumer price index (CPI), with large increases
toward the end of the year. Core consumer inflation (which excludes
food and energy inflation) moved down from 2.6 percent during the
12 months of 2006 to 2.4 percent in 2007. Food prices rose appreciably
faster than core prices.
• Nominal wage gains of 3.7 percent for production workers were offset
by the unexpected rise in energy prices. These nominal gains, however,
exceeded measures of expected price inflation such as those from the
market for the Department of Treasury’s inflation-protected securities,
about 2.2 percent. As a consequence, the pace of nominal wage increases
implies an expectation of real wage gains during the next several years.
In the long run, real wages tend to increase with labor productivity.
• The Administration’s forecast calls for the economic expansion to
continue in 2008, but at a slower pace than in the earlier years of this
expansion. Slower growth is anticipated for the first half of the year,
and the average unemployment rate for 2008 is projected to move up
from the 2007 level. In 2009 and 2010 real GDP growth is projected at
3 percent, thereafter slowing, while the unemployment rate is projected
to remain stable and below 5 percent in the 2009–10 period.
• The contraction of the secondary market for some mortgage securities
and the ensuing write-downs at major financial intermediaries are a new
downside risk to this expansion. As of the end of 2007, however, these
developments had not greatly affected the nonfinancial economy outside
of the housing sector (which had already been in decline for a year or so
before the onset of the mortgage financing problems).
• To insure against the downside risks from these new financial developments, the President proposed tax relief and changes to depreciation
schedules that reduce the cost of business investment. The policy
changes are expected to boost real GDP growth and job creation.

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Developments in 2007 and the
Near-Term Outlook
The economy went through a period of rebalancing that began in 2006
and extended into 2007, with faster growth in business structures investment
and exports offsetting pronounced declines in homebuilding, while consumer
spending growth edged lower.

Consumer Spending and Saving
Real consumer spending slowed to a 2.5 percent growth rate during the
four quarters of 2007, somewhat below the growth rates during the preceding
4 years of expansion and below the average rates of the preceding 30 years.
Nominal consumer spending (that is consumer spending without adjusting
for inflation) pulled back from its 16-year pattern of rising faster than disposable income, and the personal saving rate for the year as a whole ticked up
from 0.4 to 0.5 percent. Factors that had pushed down the saving rate during
recent years shifted into neutral: the wealth-to-income ratio plateaued and
the unemployment rate (which is related to consumer confidence) stopped
falling. Energy costs rose rapidly, but consumers continued to purchase
similar quantities of energy, which kept the personal saving rate low. The
general decline in the personal saving rate during the past 5 years (despite the
uptick in 2007) continued a long-term trend that began in the 1980s.

Energy Expenditures
World demand for crude oil increased by 5.5 million barrels per day to
85 million barrels per day between 2003 and the first three quarters of 2007.
The United States accounted for only a fraction (0.7 million barrels per day)
of this increase, while demand in other OECD countries generally fell. (The
OECD, or Organization for Economic Cooperation and Development,
comprises 30 key developed economies.) The increase in non-OECD
demand totaled 5.3 million barrels per day, with China’s per-day consumption alone growing by 2.0 million barrels. In the face of this increase in world
oil demand, consumers paid higher prices to maintain their consumption.
Crude oil prices rose again in 2007. The spot price for West Texas
Intermediate (a benchmark variety of crude oil) rose to an average of $91
per barrel in the fourth quarter from an average of $66 per barrel in 2006.
The price of natural gas, which rose sharply in 2005, then fell during 2006,
was little changed on balance in 2007, while electricity prices continued their
upward trend.
With the rise in energy prices, the share of energy in total purchases rose
sharply. From 2003 to 2007, consumer energy prices increased 41 percent

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relative to non-energy prices, while real consumption of energy per household
fell only 3 percent (according to data from the National Income and Product
Accounts). As a result, energy expenditures, which were about 5 percent of
consumer purchases in 2003, rose to 6 percent of consumer purchases in 2006
and 2007. Between 2004 and 2006, consumers appear to have maintained
both energy and nonenergy consumption by reducing their personal saving,
which by 2007 (although up from 2006) averaged only 0.5 percent of disposable personal income. This continued rapid rise in energy prices suggests that
consumers’ adaptation to these prices remains unfinished. Consumers have
chosen to respond to the energy-price shock by using savings to buffer some
of its effects, but this response is probably temporary.

Wealth Effects on Consumption and Saving
Household wealth rose rapidly relative to disposable personal income
from 2002 through the second quarter of 2007, supporting the growth of
consumption and a decline in the saving rate. Over the 2002–07 period, the
ratio of household wealth to annual-income increased 0.7 years, to 5.7 years of
accumulated income (that is, consumers collectively accumulated an extra 70
percent of a years’ income). During the late 1990s and again during 2004–06,
a strong rise in household net worth coincided with a sizable increase in
consumer spending relative to disposable personal income (Chart 1-1).

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Unlike recent years, however, the 2007 gains did not reflect large increases
in housing wealth (net of mortgage debt), which peaked—relative to
income—in the first half of 2006, and has edged lower since (see Chart
1-1). The housing price rise of 1.8 percent during the year that ended with
the third quarter of 2007 was a substantial deceleration from the 11 percent
annual rate during the 3 preceding years and was less than the growth of
income. Stock-market wealth rose during the four quarters through the third
quarter of 2007 (the most recent wealth data) and accounted for all of the
four-quarter gain. By the third quarter of 2007, the overall wealth-to-income
ratio was well above its 50-year average.

Projected Consumer Spending
Looking ahead, the path of consumer spending is projected to reflect the
recent flattening of the wealth-to-income ratio. Real consumer spending
during the four quarters of 2008 is expected to grow 2.1 percent, down
from an average of about 3 percent during the past 3 years. This projected
rate is less than the projected 2008 growth of real disposable personal income
(household income less taxes, adjusted for inflation), and so the saving rate
is forecasted to continue edging up in 2008. After that, real consumption is
projected to increase at about the same pace as real GDP and real income.

Housing Prices
Nationally, nominal house price appreciation slowed to a crawl in 2007,
and house prices fell when corrected for inflation. An inflation-adjusted
version of the housing price index (the nominal version of which is compiled
by the Office of Federal Housing Enterprise Oversight (OFHEO) from home
sales and appraisals during refinancing) increased at an average annual rate of
6.3 percent from 2000 to 2005. It then slowed to 4.0 percent during the four
quarters of 2006, and declined at a 3.2 percent annual rate during the first
three quarters of 2007. (These inflation-adjusted prices are deflated by the
consumer price index.) The homes covered by this OFHEO-created housing
price index are those which are financed or refinanced by one of the government-sponsored housing enterprises and must therefore have mortgages
below the conforming loan limit (currently $417,000). Another relevant
measure of home prices (the S&P/Case-Shiller Index), has fallen 6.7 percent
in real terms during the year that ended with the third quarter of 2007; this
index covers a smaller portion of the country than the OFHEO measure but
is more comprehensive with regard to homes with large mortgages.
The deceleration of housing prices along with falling standards for
subprime mortgages in 2005 and 2006 has led to a rising delinquency rate for
subprime adjustable-rate mortgages (where the rate on the mortgages resets
after an initial period), which severely disrupted the secondary market for

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nonconforming mortgages in 2007. In contrast, the market for conforming
mortgages continued to function well. (Conforming loans must meet certain
loan-to-value and documentation requirements in addition to being below
the conforming loan limit.) See Chapter 2, “Credit and Housing Markets”
for a more extensive analysis.

Residential Investment
Every major measure of housing activity dropped sharply during 2006 and
2007, and the drop in real residential construction was steeper than anticipated in last year’s Report. Housing starts (the initiation of a homebuilding
project), new building permits, and new home sales have fallen more than
40 percent since their annual peaks in 2005. The drop in home-construction
activity subtracted an average of almost 1 percentage point at an annual rate
from real GDP growth during the last three quarters of 2006 and the four
quarters of 2007. Furthermore, even if housing starts level off at their current
pace, lags between the beginning and completion of a construction project
imply that residential investment will subtract from GDP growth during the
first half of 2008.
During 2007, as in 2006, employment in residential construction fell, as
did production of construction materials and products associated with new
home sales (such as furniture, large appliances, and carpeting). Yet despite
these housing sector declines, the overall economy continued to expand (see
Box 1-1).

Box 1-1: Indirect Effects of the Housing Sector
Thus far, the sharp drop in homebuilding has not prevented robust
activity outside of the housing sector. Employment fell in sectors related
to new home construction and housing sales. Despite these repercussions, overall payroll employment continued to increase, and real
consumer spending continued to move upward through the end of 2007.
The unemployment rate, however, increased, by 0.6 percentage point
during the 12 months of the year.
Although residential investment fell sharply, real GDP growth during
2007 was sustained by increases in other forms of investment. As
shown in the chart below, private and public nominal nonresidential
construction (that is, construction of office buildings, shopping centers,
factories, and other business structures) grew rapidly during the year.
continued on the next page

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Box 1-1 — continued
Nonresidential construction draws from some of the same resources
(such as construction labor and materials) as the residential construction
sector. The high level of residential investment during the past couple of
years may have limited the growth of investment in nonresidential structures. While the case for housing crowding out other sectors is strongest
for nonresidential investment, residential investment competes with all
other sectors of production in credit and labor markets. A drop in the
share of the economy engaged in housing could provide some room for
other sectors to grow.

The housing market could also affect the rest of the economy through
the wealth channel. That is, declines in housing prices could reduce
household net worth and thereby reduce consumption. The increase in
housing prices during 2000–2005 contributed noticeably to the gain in
the ratio of household wealth to income (shown earlier in Chart 1-1) and
supported growth in consumer spending. In contrast, gains in housing
wealth came to a virtual halt during 2007.

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In addition to incomes and mortgage rates, the number of homes built is
underpinned by demographics. Homebuilding during 2004 and 2005 averaged about 2.0 million units per year, in excess of the 1.8- or 1.9-million
unit annual pace of housing starts that would be consistent with some
demographic models for a decade-long period, leading to an excess supply of
houses on the market. More recently, the 1.2 million unit pace during the
fourth quarter of 2007 is well below this long-term demographic target. The
pace of homebuilding has now been below this level for long enough that the
above-trend production of 2004 and 2005 has been offset by the more recent
below-trend production. Yet the construction of new homes continued to fall
rapidly through year-end 2007, with the undershooting possibly reflecting
uncertain prospects for house prices as well as elevated inventories of unsold
new and existing homes. Once prices become firm and inventories return
to normal levels, home construction should rebound, but it is difficult to
pinpoint when this will occur. The residential sector is not expected to make
positive contributions to real GDP growth until 2009.

Business Fixed Investment
During the four quarters of 2007 real business investment in equipment
and software (that is, measured at constant prices) grew 3.7 percent, a bit
faster than the 2006 pace but notably slower than the 8 percent average
pace during the 3 preceding years. Its fastest-growing components during
2007 included computers, software, and communication equipment while
investment in industrial equipment grew slowly. Transportation equipment,
however, fell substantially due to environmental regulations (on particulate
matter emissions issued in 2000 but effective in 2007) that raised truck prices
in 2007 and led trucking firms to advance heavy truck purchases into 2006
from 2007.
In contrast to residential investment, real business investment in nonresidential structures grew at a strong 16 percent annual rate over the four
quarters of 2007. The gains during 2007 were the second consecutive year
of strong growth, which was a marked reversal from the declines during the
period from 2001 to 2005. Nearly 70 percent of total growth in nonresidential structures was accounted for by office buildings, lodging facilities,
power facilities, and petroleum and natural gas exploration and wells. This
sector maintained its ability to borrow funds needed for construction, as net
borrowing for nonfinancial corporate commercial mortgages rose 6.5 percent
at an annual rate during the first three quarters of 2007.
One risk to the near-term investment forecast is that the recent turmoil in
the market for mortgage-backed securities may somehow reduce the funds
available for business investment. Most new investment—at least for the
corporate sector as a whole—is being financed with internally generated funds

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for new investment (undistributed profits plus depreciation, also known as
cash flow) which were at normal levels through the third quarter of 2007. As
for the amount that nonfinancial firms must borrow to finance investment
(the financing gap), the flows showed no shortfall, at least through the third
quarter of 2007 (Chart 1-2). A shortage of investment funds, though possible,
appears unlikely. Corporations have been able to finance investment directly
through the bond market without penalty as interest rates on 10-year highgrade corporate bonds in the second half of 2007 were little different from
the first half of the year. Nevertheless the market for investment funds merits
close attention as yields on lower-grade corporate bonds have edged up, the
number of newly announced leveraged buyouts have fallen sharply, and the
October survey of senior loan officers reported tighter lending standards for
loans to large and small companies.
Business investment growth is projected to remain solid in 2008, although
probably below the 7½ percent growth rate during the four quarters of
2007. Continued growth in output combined with a tight labor market is
expected to maintain strong demand for new capital. In the longer run, real
business investment is projected to grow slightly above the growth rate of
real GDP.

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Business Inventories
Inventory investment was volatile during the past year or so and had a
noticeable influence on quarter-to-quarter fluctuations in real GDP, especially the weakness in the first and fourth quarters and the strength in the
third quarter. Inventories of motor vehicles on dealer lots and in transit were
an important contributor to these fluctuations as they were liquidated during
the first half of 2007, and built up in the third quarter before being liquidated
again in the fourth quarter. Real nonfarm inventories grew at only an average
0.2 percent annual pace during 2007, a growth rate that is well below the pace
of real GDP growth over the same period. Coming off a long-term decline,
the inventory-to-sales ratio for manufacturing and trade (in current dollars)
rose in late 2006 before being reduced sharply in 2007.
Manufacturing and trade inventories appear to be roughly in line with
sales as of November 2007 and do not appear to require dramatic swings in
production. Inventory investment is projected to be fairly stable during the
next several years, as is generally the case for periods of stable growth. The
overall inventory-to-sales ratio is expected to continue trending lower.

Government Purchases
Real Federal consumption and gross investment grew 1.6 percent during
2007, a slowdown from the 2006 pace. Quarterly fluctuations in this
spending category were considerable, with nearly all the volatility due to the
defense component. Defense spending plunged in the first quarter of 2007
but grew rapidly during the second and third quarters of the year.
The defense appropriations act for fiscal year (FY) 2007 provided
$70 billion for operations in Afghanistan and Iraq. The FY 2007 supplemental appropriation for defense provided an additional $107 billion for
ongoing operations in Afghanistan and Iraq. Another $70 billion in emergency funding for FY 2008 was provided in the consolidated appropriations
act. The first continuing resolution for FY 2008 and the defense appropriations act for FY 2008 provided $17 billion for mine-resistant vehicles and
other funding for Afghanistan and Iraq. Another supplemental appropriation
for operations in Afghanistan and Iraq is likely for FY 2008.
Nominal Federal revenues grew 12 percent in FY 2006 and 7 percent in
FY 2007. These rapid growth rates exceeded growth in outlays and GDP as a
whole, and the U.S. fiscal deficit as a share of GDP shrank from 3.6 percent
in FY 2004, to 1.9 percent in FY 2006, to 1.2 percent in FY 2007.
Real State and local government purchases rose 3 percent during 2007,
the second consecutive year of moderate growth. This followed 3 years of
little change. In the wake of the 2001 recession, this sector fell sharply into
deficit in 2002. Revenues began to recover in 2003, and the sector was out of
deficit by 2005, allowing for an increase in state and local consumption and
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investment in 2006 and 2007. This pattern of delayed response to downturns
resembles the pattern during the business-cycle recovery of the 1990s.
The State and local government sector slipped into a small deficit over
the first three quarters of 2007 reflecting strong growth in outlays that were
not matched by an increase in revenues. In 2008, only slow growth can be
anticipated for this sector’s consumption and gross investment because of
decelerating housing prices and their effects on property tax receipts—which
comprise about 20 percent of this sector’s revenues.

Exports and Imports
Real exports of goods and services grew 8 percent during the four quarters
2007, the fourth year of annual growth in excess of 7 percent. The pace of
export expansion reflects rapid growth among our trading partners, expanded
domestic production capacity, and changes in the terms of trade associated
with exchange rate trends between 2002 and 2006 that made American goods
cheaper relative to those of some other countries (Chapter 3 analyzes recent
export growth in greater detail). Real GDP among our advanced-economy
trading partners (that is, the other 29 member countries of the OECD) is
estimated to have grown at rates of 3.3 and 2.7 percent during the four
quarters of 2006 and 2007, respectively, after growing at an average pace of
2.4 percent during the preceding 3 years. In addition, the economies of some
of our major emerging-market trading partners such as China, Singapore,
and India are growing at rates of 8 to 11 percent per year, although these
countries receive only about 8 percent of our exports. The OECD projects
that real GDP among our advanced-economy trading partners will slow to
a still-solid 2.4 percent growth rate during the four quarters of 2008. The
International Monetary Fund projects that real GDP among the group of
emerging market economies will slow to a still-strong 7.4 percent growth rate
for 2008 as a whole.
The fastest growth in U.S. goods and services exports was to India, but
exports to China, Africa, and the Middle East also grew rapidly. Despite
the rapid growth of exports to these emerging economies, the European
Union (EU) remains the major overseas export destination, consuming over
25 percent of our exports. By country, Canada accounts for the largest share
of U.S. exports, at over 19 percent.
Real imports grew 1.4 percent annual rate during 2007, the slowest pace
since 2001. Real imports of nonpetroleum goods grew 1.2 percent during
2007, also the slowest rate of increase since 2001. Real petroleum imports
have edged up 2.5 percent during 2007, while nominal imports surged
49 percent due to rising oil prices. The rise in oil prices has been less of a drag
on the U.S. economy than similar rises have been because it has been offset
by the strong growth in foreign economies, which has boosted U.S. exports.

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Indeed, the growth in foreign economies is what has largely induced the
multi-year increase in oil prices (Box 1-2).

Box 1-2: Macroeconomic Effects When Oil Price Increases Are
Induced by Foreign Demand
The cost of imported crude oil increased nearly $40 per barrel from
2003 to 2007, the largest dollar increase on record. Earlier price increases
in 1973, 1979, and 1990 were followed by recessions, a development
that has not occurred during the current episode. What has happened
recently that has allowed the United States to maintain strong growth in
the face of this price surge?
Economic growth outside the United States increased about 2.1
percentage points from the 3.5 percent annual growth rate during the
15 years from 1989 to 2003 to a 5.6 percent annual rate during the 4
years from 2004 to 2007 according to estimates from the International
Monetary Fund. The increase in real GDP growth among our trading
partners probably caused an increase in both the demand for oil and the
price of oil, and also an increase in U.S. exports to our trading partners.
Rapidly growing countries (China, Russia, India, and Thailand) accounted
for much of the increase in oil demand during the 4 years from 2002 to

continued on the next page

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Box 1-2 — continued
2006 as shown in the chart. Countries showing the largest increases in oil
consumption tended to be those showing the largest growth rates during
the past 4 years. In addition, U.S. exports grew rapidly to those countries
that have recently signed and implemented free trade agreements with
the United States (as discussed in Chapter 3).
An increase in real output growth among our trading partners of about
1 percent can be expected to increase our exports by about 1 percent as
well. The cumulative 9 percent higher growth among our trading partners (2.1 percent for each of 4 years) could thus have generated as much
as $120 billion per year of exports. In comparison, the $40-per-barrel oil
price increase added about $150 billion per year to the Nation’s bill for
oil imports (at 3.7 billion barrels of oil per year).

The current account deficit (the excess of imports and income flows
to foreigners over exports and foreign income of Americans) averaged
5.5 percent of GDP during the first three quarters of 2007, down from
its 2006 average of over 6 percent. The decline in the current account
deficit reflects strong export growth and moderate import growth, although
domestic investment continues to exceed domestic saving, with foreigners
financing the gap between the two.

Employment
Nonfarm payroll employment increased by 1.14 million jobs during 2007,
an average pace of about 95,000 jobs per month. The unemployment rate
rose slightly over the same period, ticking up 0.6 percentage point to 5.0
percent. The average unemployment rate in 2007 was 4.6 percent, equal to
the 2006 average. Both the 2007 average and the December 2007 level of
the unemployment rate were below the prevailing rates in each of the three
decades of the 1970s, 1980s, and 1990s.
The service-providing sector accounted for all of the year’s job gains, as
construction employment fell due to continued weakness in the housing
market and manufacturing employment continued its downtrend for the
tenth consecutive year. (Despite the job losses, manufacturing output
continues to increase because of rapid productivity growth.) Employment in
mining (which includes oil drilling) rose 5.5 percent during 2007. The goodsproducing sector has accounted for a diminishing share of total employment
in each of the past five decades. Education and health services (which
constituted 13 percent of employment at the end of 2007) added the largest
number of jobs, accounting for 47 percent of total job growth.

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During the 12 months of 2007, the unemployment rate for the major
education groups edged up; it increased 0.3 percentage point for those
holding at least a bachelor’s degree, 0.4 percentage point for those whose
education ended with a high school degree or those with some college, and
1.0 percentage point among those who did not finish high school. By race and
ethnicity, the unemployment rate for black Americans rose by 0.7 percentage
point, and was about 4 percentage points above the rate for whites, a smaller
margin than during most of the past 35 years. Unemployment rates among
whites rose 0.4 percentage point, and among Hispanics rose 1.4 percentage
points. By sex, the jobless rate for both adult men and adult women increased
0.5 percentage point to 4.4 percent in December 2007.
The median duration of unemployment edged up from 7.5 to 8.4 weeks
during the 12 months of 2007, following a substantial decline during the
preceding 2 years. The number of long-term unemployed (those who
are jobless for 15 weeks or more) rose by 426,000 over the same period.
Although this is not a welcome development, increases in unemployment
rates (and implicitly increases in duration as well) were built into last year’s
Administration forecast as the low jobless rates at the end of 2006 were not
judged to be sustainable in the long run.
The Administration projects that employment will increase at an average
pace of 109,000 jobs per month during the four quarters of 2008, before
picking up to 129,000 jobs per month in 2009. In the longer run, the
pace of employment growth will slow, reflecting diminishing rates of labor
force growth due to the retirement of the baby-boom generation. The
Administration also projects that the unemployment rate will edge up from
2007 to 2008 as a whole, before returning to 4.8 percent in 2010, the middle
of the range consistent with stable inflation in the long run.

Productivity
Productivity growth has a standard cyclical pattern. It usually falls during a
recession, grows rapidly during the early stages of a recovery, but then slows
as the recovery matures. The current business cycle began on an unusual
note, with strong productivity growth of 4.6 percent at an annual rate (rather
than the usual decline) during the three quarters of the 2001 recession. After
that, the pattern of productivity followed a more-usual business-cycle pattern
with strong (3.1 percent annual rate) growth during the first 3 years of the
expansion, followed by a slowing to a 1¾ percent annual rate during the
most recent 3-year period. Averaging across the entire 6½-year period since
the business-cycle peak in the first quarter of 2001, labor productivity has
increased at a 2.7 percent annual rate. This pace is not significantly different
from the pace between 1995 and 2001. As can be seen in Chart 1-3, a trend

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line with a 2.6 percent annual rate of growth from 1995 to 2007 captures
most of the movement of productivity over this period.
The continuation of this roughly 2.6 percent growth in labor productivity is striking, given a flat or diminished contribution from capital
deepening (the increase in capital services per hour worked). The 1995 to
2001 acceleration may be plausibly accounted for by a pickup in capital deepening and by increases in organizational capital (the investments businesses
make to reorganize and restructure themselves, in this instance in response
to newly installed information technology). After 2001, a reduced rate of
capital deepening—on its own—would have suggested a slowing in the rate
of productivity growth. Productivity growth in the recent period therefore
appears to be supported by factors that are more difficult to measure than the
quantity of capital, such as intangible investments in technology and business
practices.
Productivity growth is projected to average 2.5 percent per year during
the 6-year span of the budget projection (Table 1-2, later in this chapter),
which is about the same as the average annual pace since 1995. The projected
growth rate is slightly below the 2.6 percent annual pace discussed in last
year’s Report, and reflects the downward revisions to real GDP and other

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output measures announced in the annual revisions to the National Income
and Product Accounts in July 2006 and July 2007.

Prices and Wages
As measured by the consumer price index (CPI), overall inflation rose
from 2.5 percent during the 12 months of 2006 to 4.1 percent during 2007
(Chart 1-4), with the increase due to an acceleration of food and energy
prices. Energy prices accelerated from a 2.9 percent increase in 2006 to a
17.4 percent increase in 2007. Food prices increased 4.9 percent during
2007, up sharply from the 2.1 percent pace of the previous year. Core CPI
prices (that is, excluding food and energy) increased 2.4 percent during 2007,
down from a 2.6 percent increase a year earlier.
Prices of petroleum products climbed 29.4 percent during 2007 while
natural gas prices fell slightly. Electricity prices increased 5.2 percent, which
was less than the rate of increase a year earlier. As of late-January 2008,
futures prices show that market participants expect crude oil prices to edge
down during 2008 from their current high level while natural gas prices are
expected to rise.
The rapid increase in food prices during 2007 reflects worldwide agricultural supply and demand conditions, such as the drought in Australia (a
major wheat exporter), the demand for corn-based ethanol, and short-supply

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conditions for dairy herds. The supply constraints during 2007 for wheat and
dairy products appear temporary and are expected to return toward normal
during 2008.
The 0.2 percentage point deceleration of core CPI prices was accounted
for primarily by rent of shelter, which slowed to a 3.1 percent rate of
increase from a 4.3 percent rate of increase during the 12 months of 2006.
The Administration projects that the CPI will increase 2.1 percent in 2008,
slightly less that the 2.4 percent rate of increase of the core CPI during 2007;
energy and food prices are expected to be little changed in 2008 following
their recent large increases.
Hourly compensation (which was about 62 percent of nonfarm business
output) has increased at roughly the same 3 percent rate in 2007 as during
the preceding 2 years according to the Employment Cost Index (ECI) for
the private sector. The wage and salary index grew 3.3 percent, little changed
from 3.2 percent a year earlier, while growth of hourly benefits slowed to
2.4 percent. Another measure of hourly compensation from the productivity
and cost dataset increased slightly faster than the ECI.
Unit labor costs (labor compensation per unit of output) have put little, if
any, upward pressure on inflation thus far, and it appears unlikely that they
will over the next year. Unit labor costs grew only 0.7 percent at an annual
rate during the first three quarters of 2007 which is less than the 2.6 percent
growth in the GDP price index during the same interval.
Average hourly earnings of production or non-supervisory workers (who
constitute about 80 percent of total employment on nonfarm payrolls)
increased 3.7 percent (in nominal terms) during the 12 months through
December 2007—somewhat below the pace a year earlier of 4.3 percent.
These nominal hourly earnings were outstripped by the 4.4 percent increase
in the overall CPI for wage earners, and so real earnings fell 0.7 percent
during 2007 (following a 1.8 percent gain in 2006). Even so, the recent pace
of these nominal wage increases is above various measures of expected price
inflation (such as those implied by the market for inflation-indexed Treasury
securities), and suggests that employers and employees expect a gain in real
earnings in 2008. The situation is similar to a year ago, but during 2007,
price inflation was higher than expected because of sharp and unanticipated
increases in food and energy prices. In the long run, real hourly compensation
increases with productivity growth, which is projected to remain solid.
Among the many available measures of inflation, the Administration
forecast focuses on two: the consumer price index and the price index for
GDP. The CPI measures prices for a fixed basket of consumer goods and
services. It is widely reported in the press, and is used to index Social Security
benefits, the individual income tax, Federal pensions, and many privatesector contracts. The GDP price index covers prices of all final goods and
services produced in the United States, including consumption, investment,
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and government purchases. In contrast to the CPI, its weights are not fixed,
but move to reflect changes in spending patterns. Of the two indexes, the
CPI tends to increase more rapidly, in part because it measures a fixed basket
of goods and services; the GDP price index increases less rapidly because it
reflects the shifting of household and business purchases away from items
with increasing relative prices and toward items with decreasing relative
prices. Additionally, the GDP price index (which includes investment goods)
places a larger weight on computers, which tend to decline in price (on a
quality-adjusted basis), while the CPI places a much larger weight on rent
and energy.
The “wedge,” or difference between the CPI and the GDP measures of
inflation, has implications for Federal budget projections. A larger wedge
(with the CPI rising faster than the GDP price index) raises the Federal
budget deficit because Social Security and Federal pensions rise with the
CPI, while Federal revenue tends to increase with the GDP price index. For
a given level of nominal income, increases in the CPI also cut Federal revenue
because they raise the brackets at which higher income tax rates apply and
affect other inflation-indexed features of the tax code.
Is rising inflation a problem for the United States? Although the CPI
accelerated to a 4.1 percent rate of increase during 2007, the acceleration was
entirely a result of food and energy price increases that are not likely to be
repeated. Nor do market participants expect it to be repeated, as is evident
from the well-anchored long-run consumer price inflation expectations in
the market for inflation-indexed securities. Furthermore, most of the price
increases for petroleum do not reflect prices charged by workers or firms in
the United States because 65 percent of petroleum is imported. The GDP
price index better captures the prices that Americans are charging for their
labor and services, and it decelerated to a 2.6 percent increase during 2007
from a year-earlier pace of 2.7 percent. Prices for business investment—which
is not captured in the CPI—slowed noticeably in 2007. In sum, long run
inflation expectations remain stable, and inflation as measured by the broadbased GDP price index remained moderate in 2007.

Financial Markets
The Wilshire 5000 (a broad stock market index) increased 3.9 percent
during 2007, while the Standard and Poor 500 (an index of the 500 largest
corporations) increased 3.5 percent. This was the fifth consecutive year of
stock market gains, and it followed 3 years of declines.
Yields on 10-year Treasury notes ended 2006 at 4.6 percent—near the low
end of the historical range—and fell another 46 basis points during 2007. These
yield dropped further in January. The low level of these long-term interest rates
was due in part to low and stable long-run inflation expectations.

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The Administration’s forecast of short-term interest rates is roughly based
on financial market data as well as a survey of economic forecasters at the date
that the forecast was developed in mid-November. The near-term forecast has
been overtaken by events as interest rates have fallen notably since the forecast
was finalized. Whatever the starting point, the Administration projects the
rate on 91-day Treasury bills to edge up gradually to 4.1 percent by 2011
and then remain at that level. At that level, the real rate (that is, the nominal
rate less the rate of inflation) on 91-day Treasury bills would be close to its
historical average.
The yield on 10-year Treasury notes on November 15 (when the forecast
was finalized) was 4.17 percent. The January decline in this yield means that
this near-term forecast has also been overtaken by events. The Administration
expects the 10-year rate to increase, eventually reaching a normal spread
of about 1.2 percentage points over the 91-day Treasury-bill rate by 2012.
An increase in yield also appears to be expected by market participants (as
evidenced by higher rates on 20-year Treasury notes than on notes with
10-year maturities). As a result, yields on 10-year notes are expected to increase
somewhat further, reaching a plateau at 5.3 percent from 2012 onward.

The Long-Term Outlook Through 2013
During the sixth year of expansion in 2007, the composition of demand
was reshuffled, a process that is likely to continue in 2008. The period of
somewhat slower-than-normal growth that began in 2007 is likely to continue
into 2008. Thereafter, the economy is projected to expand at a roughly steady
rate at or just below 3.0 percent. Having reached a level of resource utilization consistent with stable inflation by the end of 2007, inflation will remain
in the low-to-moderate range currently suggested by core inflation rates.
Payroll job growth is expected to remain solid while the unemployment rate
is expected to be little changed over the projection interval (Table 1-1). The
forecast is based on conservative economic assumptions that are close to the
consensus of professional forecasters. These assumptions provide a sound
basis for the Administration’s budget projections.

Growth in GDP over the Long Term
The Administration projects that, following a slight pickup of growth from
2008 to 2009, real GDP will increase at a slowly diminishing rate from 2009
through 2013, due to the expected retirement of the baby-boom generation.
Indeed, real GDP is projected to decelerate from a 3.0 percent growth rate
during the four quarters of 2009 to 2.8 percent by 2013. The average growth
rate during this interval is roughly in line with the consensus of private
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Table 1-1.—Administration Economic Forecast

1

Year

Nominal
GDP

Real GDP
(chaintype)

GDP price
index
(chaintype)

Consumer
price
index
(CPI-U)

Unemployment
rate
(percent)

Percent change, Q4-to-Q4
2006 (actual)........
2007.....................
2008.....................
2009.....................
2010.....................
2011.....................
2012.....................
2013.....................

5.4
5.1
4.8
5.1
5.0
5.0
4.9
4.9

2.6
2.7
2.7
3.0
3.0
2.9
2.8
2.8

2.7
2.3
2.0
2.0
2.0
2.0
2.0
2.0

Interest
rate,
91-day
Treasury
bills2
(percent)

Interest
rate,
10-year
Treasury
notes
(percent)

Nonfarm
payroll
employment
(average
monthly
change,
Q4-to-Q4,
thousands)3

Level, calendar year
1.9
3.9
2.1
2.2
2.3
2.3
2.3
2.3

4.6
4.6
4.9
4.9
4.8
4.8
4.8
4.8

4.7
4.4
3.7
3.8
4.0
4.1
4.1
4.1

4.8
4.7
4.6
4.9
5.1
5.2
5.3
5.3

192
129
109
129
118
112
102
92

Based on data available as of November 15, 2007.
Secondary market discount basis.
3
The figures do not reflect the upcoming BLS benchmark which is expected to reduce 2006 and 2007 job growth by a
cumulative 300,000 jobs.
Sources: Council of Economic Advisers, Department of Commerce (Bureau of Economic Analysis and Economics and
Statistics Administration), Department of Labor (Bureau of Labor Statistics), Department of the Treasury, and Office of
Management and Budget.
1
2

forecasters for those years. After 2008, the year-by-year pace is close to the
estimated growth rate of potential real GDP, a measure of the rate of growth
of productive capacity. (An economy is said to be growing at its potential
rate when all of its resources are utilized and inflation is stable. The supplyside components of potential GDP growth are presented in Table 1-2 and
are discussed below.) The unemployment rate is projected to be roughly flat
in 2008 and 2009 at around its December 2007 level before edging back
down to 4.8 percent thereafter. As discussed below, potential GDP growth is
expected to slow in the medium term as productivity growth reverts toward
its long-run trend (about 2.5 percent per year), and to slow further during
the period from 2008 to 2011 as labor force growth declines due to the retirement of the baby-boom generation.
The growth rate of the economy over the long run is determined by its
supply-side components, which include population, labor force participation,
the ratio of nonfarm business employment to household employment, the
length of the workweek, and labor productivity. The Administration’s forecast for the contribution of the growth rates of different supply-side factors
to real GDP growth is shown in Table 1-2.
The labor force participation rate generally fell from 2001 to 2007 and
is projected to trend lower through 2013. The recent behavior stands in
contrast to the long period of increase from 1960 through 1996. Looking
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Table 1-2.—Supply-Side Components of Real GDP Growth, 1953–2013
[Average annual percent change]
1953 Q2
to
1973 Q4

1973 Q4
to
1995 Q2

1995 Q2
to
2001 Q1

2001 Q1
to
2007 Q3

2007 Q3
to
2013 Q4

1) Civilian noninstitutional population aged 16+1 ...........................
2) PLUS: Civilian labor force participation rate...............................

1.6
0.2

1.4
0.4

1.2
0.1

1.2
-0.3

0.9
-0.2

3) EQUALS: Civilian labor force2......................................................
4) PLUS: Civilian employment rate .................................................

1.8
-0.1

1.8
0.0

1.4
0.3

0.9
-0.1

0.7
0.0

5) EQUALS: Civilian employment2 ...................................................
6) PLUS: Nonfarm business employment as
a share of civilian employment2,3 .....................................

1.7

1.8

1.6

0.8

0.7

-0.1

0.1

0.4

-0.5

0.0

7) EQUALS: Nonfarm business employment ..................................
8) PLUS: average weekly hours (nonfarm business) .......................

1.6
-0.3

1.9
-0.3

2.0
-0.1

0.4
-0.2

0.7
0.0

9) EQUALS: Hours of all persons (nonfarm business)4 ....................
10) PLUS: Output per hour (productivity, nonfarm business)4 ...........

1.3
2.5

1.6
1.5

1.9
2.4

0.2
2.7

0.7
2.5

11) EQUALS: Nonfarm business output4 ...........................................
12) PLUS: Ratio of real GDP to nonfarm business output5................

3.8
-0.2

3.1
-0.2

4.3
-0.5

2.9
-0.3

3.2
-0.4

13) EQUALS: Real GDP ......................................................................

3.6

2.8

3.8

2.6

2.8

Item

4

Adjusted by CEA to smooth discontinuities in the population series since 1990.
BLS research series adjusted to smooth irregularities in the population series since 1990.
3
Line 6 translates the civilian employment growth rate into the nonfarm business employment growth rate.
4
Nonfarm employment, workweek, productivity, and output sourced from the BLS productivity and cost database.
5
Line 12 translates nonfarm business output back into output for all sectors (GDP), which includes the output of farms and
general government.
Note: 1953 Q2, 1973 Q4, and 2001 Q1 are NBER business-cycle peaks.
Detail may not add to total because of rounding.
Sources: Council of Economic Advisers, Department of Commerce (Bureau of Economic Analysis) and Department of Labor
(Bureau of Labor Statistics).
1
2

Box 1-3: Aging and the Pattern of Labor Force Participation
The overall labor force participation rate trended up to 67.1 percent
in 1997, and after holding steady between 1997 and 2000, has generally
edged lower during the past 7 years. Men’s labor force participation rates
fell fairly steadily through 2004. Women’s labor force participation rose
steadily through 1999, and has edged lower since then.
continued on the next page

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Box 1-3 — continued

Participation in the labor force (by working or by looking for a job)
declines as people age through their 50s and 60s as is shown for women
in the chart below. As a result, the overall rate of labor force participation
is projected to decline as the baby-boom cohorts (those born between
1946 and 1964) advance into age brackets with much lower participation
rates.
Female participation rises rapidly from age 20 to 24, drops off during
the child-rearing years, and then rises again to a maximum in the
40 to 50 age bracket, as shown in the chart above. Looking at how the
shape of this age-participation profile has evolved shows some striking
changes: The participation rates of women in their 40s moved upward
rapidly from the cohorts born in 1928 to those born in 1948, but has not
risen any further in the years since. Also, the dip in participation during
the child-rearing years has become less pronounced. Neither of these
patterns of evolution suggests that the pre-1999 trend of rising female
participation will re-emerge. Although participation of women over age
55 rose dramatically from the cohort born in 1938 to the cohort born in
1948, the age-participation profile of the cohort born in 1958 suggests
that this trend of rising participation of older women is unlikely to
continued on the next page

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Box 1-3 — continued

continue. This follows because the 1958 cohort shows no advance in
participation at age 49 (their age in 2007) compared with somewhat
older cohorts (such as the 1948 or 1953 cohorts shown in the chart),
hinting that the rising participation rates for older women has plateaued.
Also, the drop in participation during the child-rearing years has almost
vanished, leaving only a little room for further increase among 25- to-35year-old women.

ahead, the participation rate is projected to decline, reflecting the aging of the
baby-boom cohorts, leading to more retirements and a likely increase in the
share of people on disability pensions (Box 1-3).

The Composition of Income over the Long Term
The Administration’s economic forecast is used to estimate future government revenues, a purpose that requires a projection of the components
of taxable income. The income-side projection is based on the historical
stability of labor compensation as a share of gross domestic income (GDI).
During the first half of 2007, the labor compensation share of GDI was 56.9
percent (according to the preliminary data available when the projection was
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finalized), below its 1963–2006 average of 58.0 percent. From this jumpoff point, the labor share is projected to slowly return toward its historical
average, reaching 57.7 percent by 2013. (Another definition of the labor
share—including the imputed wages of the self-employed—is higher, about
62 percent for the nonfarm business sector.)
The labor compensation share of GDI consists of wages and salaries (which
are taxable), nonwage compensation (employer contributions to employee
pension and insurance funds, which are not taxable), and employer contributions for social insurance (which are not taxable). The Administration
forecasts that the wage and salary share of compensation will change little
between 2007 and 2013.
As the labor share of GDI increases toward its historical average, the capital
share of GDI is expected to edge down from its currently high level before
eventually reaching its historical average in 2012. Profits during the first half
of 2007 were about 11.6 percent of GDI, well above their post-1959 average
of roughly 9 percent. Book profits (also known in the national income
accounts as profits before tax) are expected to decline as a share of GDI. The
GDI share of other taxable income (rent, dividends, proprietors’ income,
and personal interest income) is projected to edge up slightly over the next
2 years.

Conclusion
The economy entered a period of rebalancing in 2006 and 2007, as higher
growth of nonresidential investment and exports offset the lower rates of
housing investment. This rebalancing—and the reduced rate of growth that
goes with it—is projected to continue in 2008. The bipartisan economic
growth package called for by the President would provide insurance against
the near-term risks of any broader economic slowdown related to financial
and housing-related developments by providing a boost to consumption,
business investment, and job creation. The economy is projected to settle
into a steady state in which real GDP grows at about 2.9 percent per year,
the unemployment rate stays around the level consistent with stable inflation
(about 4.8 percent) and inflation remains moderate and stable (about 2.3 on
the CPI). Consumer spending is projected to grow in line with disposable
income, and business investment and exports are projected to grow a bit faster
than GDP as a whole. Economic forecasts are subject to error, and unforeseen
positive and negative developments will affect the course of the economy
over the next several years. Given the economy’s strong basic structure, free
mobility of labor, relatively low taxes, well-balanced capital markets, and
openness to trade, prospects for continued growth in the years ahead remain

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good. Later chapters of this Report explore how pro-growth policies such as
tax reform, fiscal restraint, open commerce, and market-based reforms can
enhance our economic performance.

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C H A P T E R

2

Credit and Housing Markets

I

n the summer of 2007, the contraction in the U.S. housing market worsened
and credit markets experienced a substantial disruption. Default rates on
subprime mortgages—particularly more recent vintages of adjustable-rate
mortgages—rose rapidly. As a result, investors became worried about how
much risk they had exposed themselves to by purchasing financial securities backed by these mortgages. Financial disruptions rippled through the
U.S. and world financial markets as yields on many private debt securities
rose sharply, while investor demand for those securities dramatically fell.
As investors sought the safety of government securities, demand for U.S.
Treasury securities spiked upward, driving down their yields.
The Administration and the Federal Reserve independently responded to
the subprime mortgage problem and the financial market disruptions. The
Administration’s policy response addressed problems in the subprime lending
market and sought to improve the long-run functioning of the housing and
credit markets through programs such as FHASecure and HOPE NOW.
FHASecure expands the Federal Housing Administration’s (FHA) ability to
offer home mortgage loan refinancing options by giving it the additional
flexibility to help not only homeowners who are current on their mortgage
payments, but also borrowers in default who had made timely mortgage
payments before their loan interest rates reset. HOPE NOW is an example
of the government encouraging members of the private sector—including
lenders, loan servicers, mortgage counselors, and investors—to identify and
reach out to at-risk borrowers and help more families stay in their homes.
The Federal Reserve addressed the risks to the economy from financial
market disruptions by increasing liquidity and lowering interest rates, and
it addressed problems in the subprime mortgage market by joining with its
fellow supervisory agencies to work on new consumer protection rules and to
issue guidance to lending institutions.
Despite the magnitude of the disruption in financial markets, the impact
on the broader real economy was, at least through the fourth quarter of 2007,
largely confined to residential investment, which had been weak for about
2 years. Nonetheless, the tightening of credit standards raises the possibility
that spending by businesses and consumers could be restrained in the future.
Declines in housing wealth may also limit consumer spending.

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The credit market disruptions appear to reflect a general repricing of risk that
was triggered, though not solely caused, by subprime mortgage delinquencies,
which were in turn a partial result of declines in housing appreciation. New
financial products, such as certain mortgage-backed securities, also added a
layer of complexity to the recent credit market disruptions. These securities
markedly expanded liquidity in the mortgage markets and provided many
Americans a previously unavailable opportunity to own their own homes.
The key points from this chapter are:
• Rising delinquencies for subprime mortgages revealed an apparent
underpricing of risk and raised concerns about which market participants were exposed to that risk, but the subprime market was not the
only cause for the contraction in credit markets.
• The Federal Reserve provided liquidity and took measures to support
financial stability in the financial markets in the wake of the disruptions
in the credit markets.
• The Administration focused its response on housing markets and helping
homeowners avoid foreclosure—in particular, subprime borrowers
facing increases in the interest rate on their adjustable-rate mortgages.
• Participants in the credit and housing markets are actively addressing
challenges that were revealed during the summer of 2007. Markets
are generally better suited than government to adapting to changes
in the economic environment; markets can respond quickly to new
information, while government policy often reacts with a lag or has a
delayed impact.
• Financial innovations in the mortgage and credit markets have provided
a range of economic benefits, but not without some costs. Over time,
markets tend to retain valuable innovations and repair or eliminate
flawed innovations.
• The macroeconomic effects of the downturn in housing and the credit
market disruptions may occur through several channels, including the
direct effect on residential investment, the reduction of wealth on personal
consumption, and tighter lending standards on business investment.

What Are Credit Markets?
There are two primary ways to finance any economic activity: through
equity or through debt. With equity financing, investors take ownership shares
in an economic venture, such as investing in a new company, and receive
some fraction of the future returns. With debt or credit financing, a creditor

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lends a debtor money today, which the debtor must repay with interest in the
future. Credit comes in many different forms: credit cards, automobile loans,
mortgages, corporate bonds, and government bonds. Securities whose value
is derived from underlying assets are called derivatives or derivative securities.
Credit markets are the markets in which loans and their derivative securities
are traded.
Consider mortgages. Suppose a person wants to purchase a house, but
does not have enough cash on hand to buy it. The prospective borrower (the
debtor) uses his available cash as a down payment and approaches a lender
(the creditor), who lends the borrower the remaining money needed to cover
the cost of the house. Over time, the borrower earns income from his job
and pays off the mortgage (debt). Because money today is worth more than
money tomorrow, the lender charges interest on the amount of the loan
(the principal). The interest rate must be set high enough to compensate the
lender for bearing the risks associated with the loan but low enough to make
the loan attractive to the borrower.
Mortgages, like most forms of credit, are subject to three forms of risk:
credit risk (the risk that the debtor will default on the loan), interest rate risk
(the risk that market interest rates will fluctuate), and prepayment risk (the
risk that the borrower will pay off the loan early). Lenders make money by
charging borrowers interest payments on top of the periodic repayments of
principal. Therefore, the lender is worse off if these interest payments stop,
such as when the borrower defaults on a loan or pays off the loan early in an
environment of low interest rates. Mortgage lenders may also face the risk of a
loss of principal if a property is foreclosed upon. Loans with greater risk have
higher interest rates to compensate the lender for bearing more risk.

Recent Developments in Mortgage Markets
From 2001 to 2007, there was a substantial increase in the use of subprime
mortgages. (Box 2-1 defines “subprime mortgages” and other mortgage
market terminology.) The share of mortgage originations that were subprime
increased from 5 percent in 2001 to more than 20 percent in 2006. Subprime
mortgages carry a greater risk than prime mortgages. Many subprime
borrowers have poorer credit histories and less reliable sources of income than
prime borrowers; they may provide little or no documentation of income or
assets from which they can pay the mortgage; and they tend to have high
loan-to-value ratios. As a result, compared with prime borrowers, subprime
borrowers are more likely to default on their loans.

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Box 2-1: Definitions of Select Mortgage Terms
Adjustable-rate mortgage (ARM): Adjustable-rate mortgages have
an initial period with a fixed interest rate, after which the interest rate
adjusts at set periods. For example, a 3/1 ARM would have a set interest
rate for 3 years, but after that the interest rate would adjust every year.
The adjusted interest rate is a function of some “index” market interest
rate, such as the London Interbank Offer Rate.
Conforming loan limit: The charter-required limit, as determined by
Federal regulators, placed on the size of loans that can be purchased by
Fannie Mae and Freddie Mac.
Default: A borrower defaults on a mortgage when he or she fails to
make timely monthly mortgage payments or otherwise comply with
mortgage terms. A mortgage is generally considered in default when
payment has not been made for more than 90 days. At this point, foreclosure proceedings against the borrower become a strong possibility.
Delinquency: A borrower is delinquent on a mortgage when he or she
fails to make one or more scheduled monthly payments.
Fannie Mae: Fannie Mae is the registered service mark of the Federal
National Mortgage Association, a U.S. Government-sponsored enterprise. Fannie Mae buys mortgage loans that meet certain criteria from
primary mortgage lenders and sells mortgage-backed securities with
guaranteed principal and interest payments. In return for this guaranty,
investors pay a fee to Fannie Mae. Fannie Mae also holds some of the
mortgages it purchases, and mortgage-backed securities it originates, in
its portfolio.
Fixed-rate mortgage (FRM): A mortgage with an interest rate that
remains the same throughout the life of the loan.
Foreclosure: A legal process in which a lender seeks recovery of
collateral from a borrower (in the case of home mortgages, the home
itself is the collateral), with several possible outcomes, including that
the borrower sells the property or the lender repossesses the home.
Foreclosure laws are based on the statutes of each State.
Freddie Mac: Freddie Mac is the registered service mark of the Federal
Home Loan Mortgage Corporation, a U.S. Government-sponsored enterprise. Freddie Mac buys mortgage loans that meet certain criteria from
primary mortgage lenders and sells mortgage-backed securities with
guaranteed principal and interest payments. In return for this guaranty,
investors pay a fee to Freddie Mac. Freddie Mac also holds some of the
mortgages it purchases, and mortgage-backed securities it originates, in
its portfolio.
Jumbo loan: A loan that exceeds the conforming loan limit.
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Box 2-1 — continued
Prime loan: Loans made to borrowers that meet stringent lending and
underwriting terms and conditions. Prime borrowers have good credit
records and meet standard guidelines for documentation of debt-toincome and loan-to-value ratios.
Reset: An interest rate on an adjustable-rate mortgage is said to have
reset whenever it is adjusted, or moved, in the direction of the market
interest rate that it tracks.
Subprime loan: Loans that meet less stringent lending and underwriting terms and conditions. Subprime borrowers may have weaker
credit histories characterized by payment delinquencies; previous
charge-offs, judgments, or bankruptcies; low credit scores; high debtburden ratios; high loan-to-value ratios; or little to no documentation to
prove income.
Workout: An adjustment to, or renegotiation of, a loan a lender
makes with a borrower, usually with the purpose of avoiding a default
or foreclosure on the loan. Types of workouts include modifications to
the original loan contract, forbearance agreements (agreements that
postpone payments), forgiveness of some debt, and short sales (the
lender accepts the proceeds from the home’s sale as settlement for the
debt even if the proceeds do not cover the entire mortgage amount).

Strong house price appreciation in much of the country beginning in 2003
provided confidence that riskier borrowers could easily refinance mortgages,
using their built-up equity, should they be unable to keep up with their
monthly mortgage payments. This expectation of house price appreciation,
coupled with an increasingly competitive lending environment, led lenders
to relax their underwriting standards and offer products with features that
lowered monthly payments. Loans with low initial payments, including
subprime loans, helped further feed house price appreciation, and increased
the risk of eventual default and foreclosure due to their future interest rate
resets. Some subprime loans were traditional fixed-rate mortgages (FRMs)
that specified a fixed interest rate throughout the life of the loan, while others
were adjustable-rate mortgages (ARMs), with interest rates that followed a
market interest rate, such as the London Interbank Offer Rate (LIBOR), the
interest rate at which banks lend to one another using the London market.
About 70 percent of subprime ARMs were 2/28 or 3/27 hybrid ARMs. A
2/28 hybrid ARM, for example, has 2 years of payments at a fixed introductory interest rate, after which it resets to a higher floating rate, and then floats
for the remaining 28 years.
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At the same time, the dollar volume of private mortgage-backed securities
issued by private sector entities grew rapidly beginning in 2001. Investors
were attracted to these securities because of their seemingly high risk-adjusted
returns; ARMs apparently shifted interest rate risk from the lender to the
borrower, whose mortgage payments would vary according to market interest
rates. This provided continued liquidity support for the further expansion of
mortgage lending, including poorly underwritten subprime lending. Lenders
sold loans on the secondary market, passing risks on to investors who relied
primarily on ratings of the securities provided by third-party rating agencies.
There are two important caveats to keep in mind when thinking about credit
risk in the mortgage markets. First, defaults and foreclosures are expected
even in the best of times. Some individual borrowers will experience difficulties—such as job loss—that may lead them to default on their mortgages.
Eliminating defaults and foreclosures caused by such difficulties would be
nearly impossible, and efforts to do so by raising credit thresholds would have
the unfortunate effect of restricting access to credit—and, therefore, to home
ownership—for many prospective borrowers. Second, in well-functioning
markets, risks are priced. There is nothing wrong or unnatural about the
possibility of higher default and delinquency rates, provided the borrower
and lender enter the transaction fully informed. Lenders and investors can
compensate for increased risk by setting an appropriately high interest rate.
Of course, if information on credit risk is imperfect, the demand for loans in
the secondary market will be affected. For example, if credit rating agencies
or investors underestimate the default risk of subprime securities, the market
may underprice subprime risk, leading to an excess quantity of subprime
credit. See Box 2-2 for background on the credit rating agencies.
Box 2-2: Credit Rating Agencies
The securities credit rating industry began in 1909, but it was not until
the 1930s that regulators began mandating the use of credit ratings. For
example, banks cannot invest in bonds that are rated below investment
grade; insurance companies are required to link their capital requirements to the ratings of the bonds they invest in; and the Securities and
Exchange Commission’s capital requirements require broker-dealers to
hold investment-grade bonds in their portfolios.
In order to regulate these ratings the Securities and Exchange
Commission created the National Recognized Statistical Rating
Organization designation (NRSRO) in 1975. Since then, the NRSRO
category has become a de facto license, and like all licenses, it aims
to enforce quality but in fact restricts quantity, by granting monopoly
power to the incumbent firms. Currently, seven firms are designated
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Box 2-2 — continued
NRSROs. Critics have described the criteria for entry into the NRSRO
designation as opaque, effectively blocking new entry.
The industry came under scrutiny after a large energy company was
rated “investment grade” 5 days before its bankruptcy. In September
2006, the Credit Rating Agency Reform Act was passed to increase
transparency and competition in the rating industry. Under the new act,
a credit rating firm whose ratings have been used by at least 10 investors
for 3 years can apply for registration as an NRSRO.
Although the new law is still being implemented, some contend that
barriers to entry are still high, and conflicts of interest between the rater
and the issuer persist. The President’s Working Group on Financial
Markets is examining the need for reform of the credit rating agencies.

In 2006, defaults on mortgages began to increase, but, as shown in
Chart 2-1, the rise in default rates was concentrated in ARMs, particularly
subprime ARMs, while default rates for FRMs were relatively unchanged.
The performance of subprime mortgages was particularly poor for more
recent vintages. Subprime mortgages originated in 2005 and 2006 have
defaulted much more quickly than those originated in 2003 and 2004, for
example. By July of 2007, escalating subprime ARM default rates led lenders
to sharply curtail new originations of subprime loans.

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The current rise in defaults reflects a combination of factors, including
flat or falling home prices, weaker underwriting standards (including higher
loan-to-value ratios), regional economic weakness, and interest rate resets
on subprime ARMs. About 1.8 million owner-occupied loans in subprime
mortgage pools are scheduled to reset in 2008 and 2009. For mortgages
issued in the past several years, defaults are occurring well before interest rates
reset, which suggests soft housing prices and weak underwriting standards
may be more important factors. As housing prices began to falter, flat or
falling home prices combined with weaker underwriting standards meant that
borrowers lost their “equity cushion” and had more difficulty refinancing or
selling their homes. Borrowers who had purchased homes (particularly homes
for investment purposes) but now owed more than the properties were worth
had incentives to stop making mortgage payments in order to minimize
their financial losses. Rising interest rates increased the probability of default
and foreclosure for borrowers with adjustable-rate mortgages because their
monthly payments grew as rates were climbing. The relative importance of
these factors may vary geographically, as discussed in Box 2-3.
Worries in late summer about exposure to risk increased in the markets
for other mortgages as well. In particular, interest rates on jumbo mortgages
(mortgages in excess of the “conforming loan limit” of $417,000) rose, and
jumbo mortgage originations slowed. Chart 2-2 shows the increase since the
summer of 2007 in interest rates for fixed-rate jumbo mortgages relative to
fixed-rate conforming mortgages.

Box 2-3: Geographic Variations in Housing Markets
Home prices vary significantly from neighborhood to neighborhood,
State to State, and region to region. In 2006, for example, the median
sale price for an existing home sold in the western United States was
well over $300,000 compared with just $170,000 in the Midwest. Within
California, the median price in San Jose was $775,000, while the median
price a few hours away in Sacramento was only $375,000.
Home prices increased from 2001 to 2007 and boomed from 2003 to
2006, rising over 35 percent on average across the Nation, but those
gains also showed large regional variations. House prices rose most
dramatically in the southeastern and western United States and, to
a lesser extent, in New England and the mid-Atlantic. Likewise, the
subsequent deceleration (or outright declines) in house prices in 2007
also varied, with the largest changes occurring in those places that had
previously shown the most rapid appreciation or were experiencing
prolonged economic weakness.
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Box 2-3 — continued

Mortgage default rates have also varied substantially across regions.
Falling house prices and high loan-to-value ratios have likely lifted delinquency rates in places that had experienced substantial run-ups in prices
(such as Las Vegas and Miami), while economic weakness has likely
lifted delinquencies in some Midwestern cities.

Concerns about risk also affected the secondary market in which mortgages
are bought and securitized, that is, bundled together and sold as a single
security (see Box 2-4). The government-sponsored enterprises (GSEs), Fannie
Mae and Freddie Mac, securitize the majority of prime mortgages below the
conforming loan limit. The secondary market for GSE-securitized mortgages
remained active through 2007, presumably largely because some investors
believe that these securities have an implicit guarantee from the U.S. Federal
Government, even though no such guarantee exists. In contrast, the securitization of jumbo mortgages slowed as investors shied away from securities not
created by the GSEs.

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Box 2-4: Securitization and Structured Finance
Securitization is the transformation of a collection of individual assets
into tradable securities. These “asset-backed securities” are created
by financial institutions—including banks and government-sponsored
enterprises—from pools of assets, such as mortgages, car loans, credit
card loans, corporate receivables, and student loans.
Mortgages make up a large fraction of asset-backed securities.
Traditionally, a lender makes a loan to a borrower, in what is called the
primary market. In the secondary market, a financial institution buys
multiple loans, which, taken together, are essentially a bundle of cash
flows. The simplest mortgage-backed security is a pass-through security, for which the interest and principal payments of the individual loans
pass through to the holders of the new securities.
Securitization has two major economic benefits: increased risk
diversification and increased available capital. With securitization, an
investor with $400,000 can own 1 percent portions of 100 $400,000 mortgages rather than having to purchase a single such mortgage. If a single
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Box 2-3 — continued
mortgage defaults, the investor bears a $4,000 loss instead of a full
$400,000 loss. If investors are risk-averse, this diversification makes
them better off. A security can also include portions of diverse types
of mortgages, which further spreads risk if the payment performance
on the individual mortgages is not perfectly correlated. Securitization
benefits lenders by enabling them to sell loans to those investors who
can better handle the risks associated with mortgage borrowers. The
sale of mortgages provides lenders with cash that they can then use
to supply more mortgages. Investors benefit from the availability of
additional securities.
The second economic benefit of securitization is an increase in
available capital. More risk-diversified securities draw additional investors into the market, expanding the amount of capital in the market.
This increased supply of credit may result in a lower cost of credit
for borrowers, which, everything else remaining equal, makes home
ownership more accessible.

Credit Market Disruptions in 2007
There were significant disruptions in financial markets in the summer of
2007. Problems became evident in June and July, when several hedge funds
reported large losses and a large mortgage lender faced mounting problems.
In late July, demand for U.S. Treasury securities jumped due to a “flightto-quality” as investors shied away from mortgage-related assets, and to a
lesser degree, corporate bonds and other relatively riskier assets. The shift
away from corporate bonds resulted in a wider spread between interest rates
on U.S. Treasuries and those on corporate bonds, following several years of
narrow spreads. Conditions in financial markets worsened in early August,
when several hedge funds experienced large losses. One European fund even
stopped investor redemptions, saying that it was not possible to value certain
securities. The disruptions led investors to try to maintain highly liquid
positions and to focus on assets that were perceived as less risky and more
easily priced.

Credit Market Link to Mortgages
The housing and credit markets are linked through the securitization
of mortgages. The resulting mortgage-backed securities are often further
packaged into other, more complicated, financial securities. Originations
of mortgages that could not be purchased and securitized by Fannie Mae
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and Freddie Mac slowed sharply in the summer, as investors worried about
exposure to risk. This contraction in the secondary market for mortgages
had implications for mortgage originations: When banks are unable to sell
mortgages they originate, they have fewer funds available for further originations. In addition, banks may be unwilling to hold some of the mortgages
they originate because their appetite for risk may differ from that of the
investors who previously bought their loans. Securitization problems also
emerged for jumbo mortgages, which are not purchased by Fannie Mae and
Freddie Mac.

Flight to Quality
When credit markets became disrupted, investors engaged in a “flight
to quality,” as indicated by the large increase in demand for U.S. Treasury
securities. Because investors have high confidence that the U.S. Government
will not default on its debt, the demand for U.S. Treasury securities—which
include a variety of bills, notes, and bonds—tends to rise during periods of
increased financial uncertainty. This increased demand pushes down Treasury
yields (which move inversely with prices) relative to private lending rates such
as the London Interbank Offered Rate, as shown in Chart 2-3.

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Corporate bond yields also rose relative to U.S. Treasury securities. The
higher yield on a corporate bond reflects, among other things, the relatively
higher likelihood of default (credit risk), the risk of not being able to find a
buyer for the bond (liquidity risk), and the potential for default to be correlated with other macroeconomic factors (systemic risk). The spread between
the interest rates on corporate bonds and U.S. Treasury notes is therefore a
barometer of risk in the market. In late July 2007, these credit spreads spiked
upwards, even though they still remained low by historical standards, as
Chart 2-4 illustrates.
Financial market participants also showed a preference for making shorterterm, rather than longer-term, loans to one another. This preference reflected
a concern among some participants that they might unexpectedly need cash
and therefore did not want to have it wrapped up in longer-term loans. Some
participants also worried about the potential risk of default among their
borrowers. As a result, the costs of borrowing for longer terms rose relative to
overnight borrowing.

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Contraction of the Asset-Backed Commercial
Paper Market
Another credit market that contracted in 2007 was the asset-backed
commercial paper (ABCP) market. As of January 16, 2008, the ABCP market
was an $800 billion market, roughly 45 percent of the $1.8 trillion U.S.
commercial paper market, which itself is roughly one-fifth the size of the
$9 trillion U.S. corporate bond market. Corporations issue short-term loans,
called commercial paper, to smooth temporary fluctuations in cash flows; the
commercial paper market is one market for short-term financing for firms.
For example, suppose a firm needs to make certain seasonal payments and
has a current cash flow constraint. The firm issues commercial paper into
the market in exchange for cash, then repays the loan in 30 or 60 days. This
loan is unsecured in that it does not specify collateral in case of default. For
blue-chip firms, default is unlikely. However, any firm that defaults on a
commercial paper loan is almost surely on the brink of bankruptcy because
the default signals to the market that it doesn’t have enough cash to pay off
the most immediate of its financial obligations.
Commercial paper that is secured by assets (such as a firm’s receivables,
auto loans, or mortgage-backed securities) is known as asset-backed commercial paper. For example, if an automobile manufacturer sells cars but does
not receive payment for the cars for 1 month, its receivables account will
document the expected cash flow 1 month into the future. Therefore, a
bank can issue to the market commercial paper backed by the receivables of
the firm. If the firm defaults on its obligations, the holder of the ABCP can
receive some payment from the receivables of the firm.
Usually, ABCP is issued by a special-purpose vehicle or conduit sponsored by
a bank that buys assets—such as receivables from multiple corporations—and
issues commercial paper backed by these assets to the outside market. Because
ABCP conduits issue short-term debt to finance longer-term assets, they
must continue to issue new commercial paper to repay maturing commercial
paper (a process called rolling). Special-purpose vehicles can provide corporations with relatively low-cost access to the short-term financing available in
commercial paper markets. These vehicles are not subject to the regulatory
capital charge that is mandated for banks that extend credit directly to
borrowers. For example, a bank that makes a direct loan to an automobile
manufacturer would have to hold capital against that loan. But a bank that
sponsored a special-purpose vehicle (which it did not own) could keep the
manufacturer as a customer (and earn some fees) without bearing the credit
risk of a direct loan and without facing a capital charge. Structured investment
vehicles (SIVs) are a type of conduit that issues both commercial paper and
medium-term notes to finance the purchase of assets. SIVs differ from ABCP

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conduits in that SIVs have less access to backup credit facilities (called liquidity
support) in case they are unable to meet their short-term debt obligations.
The credit market disruptions seriously shook the ABCP markets. Investors
began to differentiate more between the various types of ABCP and they
demanded higher returns on ABCP that had less liquidity support. As a
result of this greater investor scrutiny and investor reluctance to purchase
commercial paper issued by entities with limited or no backstop liquidity,
the volume of outstanding ABCP shrank more than 35 percent, from
$1,180 billion in early August 2007 to about $750 billion in late December
2007 (Chart 2-5). Increased concern about risk associated with ABCP and
risk in general prompted a flight to quality as investors shifted to low-risk
short-term Treasuries. Because ABCP is used to fund SIVs, the reduced
demand for ABCP forced banks to either bring the underlying assets (and
their associated liabilities) back onto their balance sheets or reduce the size of
their SIVs by selling off the assets.

Slower Merger and Acquisition Activity
The relatively low cost of credit contributed to a boom in mergers and
acquisitions (M&A) in recent years, but announced M&A deals slowed

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sharply following the credit disruptions in mid-2007. The aggregate value of
announced M&A deals fell off sharply in late summer after having climbed
to the highest levels since 2000–2001, as shown in Chart 2-6. Over the
12 months through August 2007, the value of M&A deals were about
$1.65 trillion, but over the following 3 months these deals totaled just
$498 billion at an annual rate. Banks that were underwriting leveraged buyouts
(LBOs)—whereby a company or investor uses debt to finance the purchase
of another company’s assets—found that buyers were no longer as willing to
purchase the debt associated with LBOs, which meant that banks had to keep
more of the debt on their own books, possibly limiting the ability of some
banks to make further loans.

Equity Markets
Equity markets continued to function amid the disruptions in the
credit markets, but implied stock price volatility—an indicator of investor
uncertainty—jumped during the summer and remained sensitive to news
about credit market developments. Unlike many credit market instruments that trade infrequently and are hard to price, stocks trade in high
volumes and are continually repriced, making them much more transparent
financial instruments.

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International Implications
A notable aspect of the disruptions in the U.S. credit and housing markets
was that it was felt globally. Subprime losses appeared not only in the United
States but also in the portfolios of banks and investors in Europe, Australia,
and Asia, demonstrating how interconnected global capital markets have
become. This international diversification provided a clear benefit as the
impact of subprime losses were shared, rather than concentrated solely on
U.S. investors and financial institutions. In some cases, European banks
were more severely affected, at least initially, by the credit market disruptions
than were U.S. banks. Lastly, both the European Central Bank and the U.S.
Federal Reserve boosted liquidity in similar, and effectively simultaneous,
actions (discussed later in this chapter).

Policy Response to Credit Market Disruptions
The mortgage and credit market disruptions of the summer of 2007 shook
investor confidence. As in previous financial disruptions, however, these
markets again demonstrated their resilience and flexibility. The possibility
of gains from trade forces markets to adjust quickly and self-correct. In
many cases, the Federal Reserve has better tools at its disposal for addressing
certain credit market problems than do fiscal policymakers. For example, the
Federal Reserve can act to stave off certain types of liquidity problems, such as
short-term cash availability at major banks, but not other liquidity problems,
such as a lack of trading in asset-backed commercial paper that results from
investors’ doubts about the value of the paper.
The Federal Reserve took a variety of actions in the second half of 2007
to maintain financial stability and encourage continued economic growth.
In early August 2007, the Federal Reserve used open market operations to
inject large amounts of liquidity into financial markets. The Federal Funds
rate—the interest rate at which U.S. banks lend to other banks overnight—
fell below the target rate. On August 17, 2007, the Federal Reserve made
credit more easily available by enacting a 50-basis-point reduction in the
discount rate, the interest rate that banks are charged when they borrow from
the Federal Reserve’s discount window. The Federal Reserve also permitted
the provision of term financing for terms as long as 30 days, and reiterated
the Federal Reserve’s policy of accepting a broad range of collateral for loans
from the discount window, including home mortgages and related assets.
On September 18, 2007, the Federal Reserve reduced the discount rate by
an additional 50 basis points and lowered the target Federal Funds rate by
50 basis points. On October 31, 2007, the Federal Funds rate and the
discount rate were lowered another 25 basis points.

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The Federal Reserve Bank of New York’s Open Market Trading Desk
announced on November 26 that it would increase the availability of credit
in financial markets by conducting certain open market operations for terms
that extended past the end of the year. On December 11, 2007, the Federal
Funds rate and discount rate were cut another 25 basis points. The following
day, the Federal Reserve announced two new actions, in coordination with
other central banks actions, that were designed to boost liquidity. The first
action was a series of term fund auctions—short-term loans—to depository
institutions. The second action was the establishment of temporary currency
arrangements with the European Central Bank and the Swiss National Bank
that make dollars available to these banks to alleviate dollar funding pressures
in their jurisdictions. The Federal Reserve cut rates further in January 2008.

Policy Response to Housing Market Challenges
Housing market policies have been of two types. First are policies that are
created to encourage market participants to make use of tools they already
possess and provide targeted assistance to borrowers. Second are those that are
designed to make changes to the future functioning of the housing market.
Policies should be crafted in a manner that avoids unnecessarily restricting
access to credit and financial market innovation. Some policies encourage
developing private market solutions, such as recommending that lenders
develop a mortgage workout plan with borrowers rather than progressing
through the foreclosure process. Box 2-5 discusses the challenges of workouts.
Policies may also be designed to offer targeted assistance, such as increasing
access to FHA-insured loans for subprime borrowers facing interest rate
resets. To strengthen the market for the future, other policies address fundamental problems that markets may be slow to address themselves, such as
better disclosure of loan terms, total settlement charges, and other mortgage
characteristics. In addition, policies that require or provide incentives for
lenders and investors to perform quality due diligence would promote true
risk-based pricing in the subprime sector, and could make this sector more
competitive.

Addressing Current Challenges
The Administration has worked with lenders, loan servicers, mortgage
counselors, and investors to develop private sector solutions. The HOPE
NOW initiative is an effort to encourage private sector servicers, housing
counselors, and investors to work together. The goal is to provide relief to
homeowners. The Administration has encouraged market participants who
historically have not shared information, resources, or business practices to
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come together to create a coordinated plan to help homeowners. Importantly,
HOPE NOW has no budgetary cost to the Federal Government. HOPE
NOW participants have agreed on a new set of industry-wide standards
designed to help streamline the mortgage workout process for borrowers with
adjustable-rate mortgages who can afford their current mortgage payments,
but will have trouble when their interest rates rise. The standards aim to help
keep these borrowers’ mortgages affordable in three ways: refinancing their
existing loans into new private mortgages, moving them into FHASecure
loans, or freezing their current interest rates for 5 years. HOPE NOW also
has an informational component, which has increased outreach to borrowers
through mailings, and has supported a toll-free hotline, 1-888-995-HOPE,
to provide 24-hour mortgage counseling in multiple languages.
Box 2-5: Mortgage Lending Today
Securitization has helped drive the expansion of home ownership,
available credit, and the selection of mortgage products throughout the
Nation. Before securitization was a prominent market force, the mortgage
industry was characterized by the portfolio lending model. Under this
model, a bank made a loan to a borrower and the loan remained on the
bank’s balance sheet until the loan was paid off. The bank serviced the
loan, meaning that it collected interest and principal payments from the
borrower, throughout the duration of the loan. If the borrower became
delinquent or defaulted on the mortgage, the bank would evaluate the
economic feasibility of a mortgage workout plan with the borrower—
perhaps by modifying terms or establishing a repayment program for
missed payments—versus working through the foreclosure process.
Expanded use of mortgage securitization has partly eclipsed the
portfolio lending model and has drawn in new market participants. Now
a German businessperson can invest in a hedge fund that purchases
mortgage-backed securities, which themselves are pools of mortgages
from lenders in Minnesota. The German businessperson is investing
in mortgages and supporting the availability of credit for a teacher in
Minnesota who wants to buy her first home. Thus securitization provides
liquidity and risk diversification in an increasingly integrated world.
The rise of securitization has meant that a third party is needed to
service the bundled loans, that is, collect payments from borrowers
and distribute payments to investors. Loan servicing has developed
into a sophisticated industry. Loan servicers can be commercial banks,
community banks, investment banks, and/or third-party corporations.
Servicers typically transfer interest and principal payments to master
servicers or loan trustees before these payments reach the actual
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Box 2-5 — continued
investors. The servicer makes mortgage payments on behalf of the
borrower, and retains a portion of the payment as its own revenue.
A Pooling and Servicing Agreement (PSA) dictates the rules on loan
modifications between the lender, the investor, and the servicer.
One challenge is that PSAs often have different terms, which may
make large-scale loan modifications more difficult for servicers to
accomplish. To solve this problem, there has been a recent movement to
allow servicers more freedom to modify loans for distressed borrowers.
In the summer of 2007, a private sector group representing servicers,
lenders, and financial institutions issued guiding principles for the
securitization and servicing industries. These principles are intended to
increase the uniformity of contracts across the Nation. Less variation in
contracts allows servicers to develop uniform practices for dealing with
renegotiation, lowering the costs of modifying loans.

The Administration launched a new program at the FHA called FHASecure
as a targeted response aimed at keeping families in their homes. The FHA was
created in 1934 to insure (but not originate) mortgages for qualified low- and
moderate-income borrowers, with less-than-perfect credit and little savings
for a down payment. This insurance boosts home ownership by enabling
borrowers who may have been priced out of the mortgage market to acquire
housing on more affordable terms. The FHA works through a network of
approved lenders and guarantees that if the borrower defaults on the loan, the
FHA will pay the lender the full outstanding balance of the loan. Unlike many
subprime lenders, most of the FHA’s risk is covered by charging mortgage
insurance premiums, not through significantly higher interest rates.
FHASecure can help some creditworthy borrowers who are affected by
subprime interest rate resets to refinance their mortgages. The FHASecure
program applies both to homeowners who are current on their mortgage
payments and borrowers who made timely mortgage payments before their
loans reset but are now in default. A borrower in default must also have
sufficient income to make future mortgage payments under a fixed-rate
FHA-insured loan, and a history of on-time mortgage payments before their
current loan reset. Making FHA mortgage refinancing options available to
more homeowners will help reduce the number of foreclosures and can help
bring greater stability to local housing markets.
The President signed a bill to temporarily change the current Federal tax
code so that cancelled mortgage debt is not treated as taxable income. Under
prior law, if the value of a home declines, and a portion of the debt on the

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home is forgiven, that portion is treated like taxable income for the borrower.
For example, suppose a homeowner owes $120,000 on a mortgage, and
the home’s value falls to $100,000. If the mortgage lender agrees to take
$100,000 from the proceeds of the home’s sale and forgive the rest of the
debt, the old tax code treated the $20,000 of forgiven debt as income on
which the homeowner must pay taxes. Under the new law, the homeowner
need not pay taxes on the forgiven debt.
The Administration has also proposed legislation to allow State and local
governments to temporarily broaden their tax-exempt bond programs to
include mortgage refinancings. Under current law, State and local governments are allowed to issue tax-exempt bonds, called “qualified mortgage
bonds,” to finance new mortgage loans to first-time home buyers, with
some limits on which mortgages can be covered. If passed, this legislation
would reduce the cost of State and local housing agency programs that
aim to refinance borrowers facing unaffordable rate resets into lower-cost
fixed-rate mortgages.

Strengthening the Mortgage Market for the Future
High default rates, which have contributed to recent market disruptions,
are more likely if consumers do not understand the terms of their loans.
Transparency in mortgage lending helps borrowers find affordable mortgages
and avoid predatory lending. Transparent markets lower the chance that
borrowers will default on loans. The Administration is working on a new rule
under the Real Estate Settlement Procedures Act (RESPA) that would simplify
shopping for loans and reduce settlement costs for consumers. RESPA was
originally passed in 1974 to protect mortgage borrowers from unnecessarily
high settlement charges. This new rule would simplify and improve disclosure
requirements for mortgage settlement costs, making it easier for borrowers to
shop for loans. The rule would establish a new standard Good Faith Estimate
form that loan originators would be required to provide to borrowers in all
RESPA-covered transactions. The aim of the rule is to communicate complex
information to borrowers so that borrowers will be able to shop effectively for
the best loan for them, and understand the obligations they are undertaking
when financing a home with a mortgage.
The Federal Reserve is also working to improve transparency through a
review of the rules for mortgage lending under the Truth in Lending Act.
In December 2007, the Federal Reserve published proposed rules under
Regulation Z of the Truth in Lending Act to make mortgage lending more
transparent. The new rules would prohibit seven misleading advertising
practices, such as using the term “fixed” to refer to a rate that can change, and
would require truth-in-lending disclosures to borrowers early enough to use
while shopping for a mortgage.

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The Federal Reserve is using its rule-making authority under the Home
Ownership and Equity Protection Act (HOEPA) to address unfair or
deceptive mortgage lending practices. In December 2007, the Federal
Reserve proposed—in addition to the rules regarding transparency discussed
above—new rules under the Truth in Lending Act that would address unfair
mortgage lending. For example, the rules would require subprime lenders to
verify income and assets before making a loan and would prohibit subprime
lenders from making loans without considering borrowers’ ability to repay
them. The rules would also prohibit all lenders from paying mortgage
brokers yield spread premiums—fees paid by a lender to a broker for higherrate loans—without notifying the consumer in advance and from coercing
appraisers to misrepresent the value of a home.
The Administration’s proposed FHA Modernization legislation aims to
reform the FHA to better reflect the way in which the private mortgage
market operates, particularly the way it prices risk. From September 2003 to
February 2005, FHA loan volume fell precipitously, from 135,000 mortgage
endorsements in September 2003 to just 40,000 in February 2005, as Chart
2-7 shows. The drop reflects several factors, including low interest rates that
made unassisted mortgages affordable for more families, the private sector’s
increased use of automated underwriting that allowed the private sector to
offer loans on favorable terms to more home buyers, and the increased use of
subprime mortgages. In general, it is a positive development when the private
sector is offering favorable terms to borrowers who previously would have
turned to the FHA. Unfortunately, some borrowers are still underserved,
particularly in the subprime market. The FHA’s mission is to serve borrowers
who are at the margins of home ownership by offering safe, affordable options
without compromising underwriting standards. In recent years, the FHA’s
outdated statutory authority has limited the agency’s ability to keep pace with
the evolving mortgage market. As a result, borrowers opted for the innovative
products and risk-based pricing that were available in the private sector.
FHA Modernization, which was first proposed in the Administration’s
2007 budget, is designed to restore a choice to home buyers who cannot
qualify for prime financing. The three major elements of FHA reform are to:
(1) Allow the FHA to price insurance premiums based on borrower risk; (2)
Raise loan limits in high-cost markets so that more families can be served; and
(3) Lower the down payment requirements.
Currently, the premiums for FHA mortgage insurance do not vary
according to a borrower’s credit risk or to the expected cost from defaults.
This causes better borrowers to subsidize weaker borrowers (a process called
cross-subsidization). Charging the same price for all borrowers is a form
of average-cost pricing, while charging different prices according to cost
(here, risk) is a shift toward marginal-cost pricing, which is more efficient.
On top of this, cross-subsidization has driven lower-risk borrowers to seek
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alternatives offered in the conventional market. The proposed risk-based
pricing addresses this issue by reducing the cost of FHA mortgages for lowerrisk borrowers. Risk-based pricing will also enable borrowers to know why
they are paying certain costs and what they can do to help lower these costs
in the future. The incentives for families to improve their credit histories or
save for a down payment are important elements of risk-based pricing. While
full risk-based pricing requires a Congressional act to raise the premium
caps, a partial, limited version of risk-based pricing can take place through
regulation. The new flexibility under the FHASecure program includes these
regulatory changes in risk-based pricing, and the Administration has called
on Congress to pass the broader FHA Modernization legislation to fully
implement risk-based pricing.
The second piece of FHA modernization would allow the FHA to insure
higher-priced homes. Under current law, the FHA may insure loans that are
up to 87 percent of the conforming loan limit. In certain high-cost States, this
limit is below the median home price in the State. For example, in California
the median home price in 2006 was $500,000, which is more than the
current FHA cap of $363,000. Therefore in certain States, the FHA cannot
insure many of the homes in the State. The Modernization bill broadens the
reach of the FHA program by removing the 87 percent cap and allowing the
FHA to insure up to 100 percent of the conforming loan limit.
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Finally, the third piece of FHA modernization would eliminate the down
payment requirements. Currently, an FHA mortgagor is required to make a
3 percent cash contribution at settlement to be applied to the cost of acquisition of the property. The Administration’s proposal removes this 3 percent
requirement. Just like risk-based pricing, the change in down payment
requirements moves away from the “one size fits all” approach and provides
the FHA with the flexibility to insure a variety of mortgage products for
different purposes and different borrowers.

Macroeconomic Implications
The potential macroeconomic effects of the housing market weakness and
the credit market disruptions may operate through several channels, including
residential investment, personal consumption, and business investment. In
addition, the production of some manufactured goods used in construction
has been weak, and employment in some finance-related sectors has fallen
off. Many economists would agree that the downturn in the housing market
has likely had some effects on consumption and business investment, but the
magnitude of the effects are unknown.
The effect on residential investment is the easiest to quantify. Between
the fourth quarter of 2005 and the fourth quarter of 2007, real residential
investment dropped about 29 percent and subtracted an average of nearly
0.9 percentage point per quarter at an annual rate from real GDP growth.
Single-family housing starts peaked at more than 1.8 million units in January
2006 and then fell more than 55 percent, to below 800,000 units, in
December 2007. Inventories of unsold homes are at elevated levels: the inventory-to-sales ratio for existing single-family homes in December 2007—at
9.2 months’ supply—was down from the previous few months but still near
highs last reached in 1991. As prices for new and existing homes adjust to
clear excess inventories, housing starts will stop declining and the drag on
GDP growth from residential investment will lessen.
A second effect of the downturn in housing is the potential effect on
personal consumption and saving. For many households, their house
is their primary asset and a significant source of wealth. A considerable
academic literature has shown that increases in wealth tend to boost
consumption, though the estimated magnitude of these so-called “wealth
effects” is imprecise and may depend upon the type of asset (such as stock
market wealth versus housing wealth). In the case of housing wealth, some
calculations suggest that a $100 billion decline in the value of the housing
stock would reduce the long-run level of annual consumption by between
$4 billion and $8 billion. Importantly, consumption responds only gradually

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to such a change in wealth, which affords fiscal and monetary policy the time
to provide an offset.
A third effect of the recent credit market disruptions is that lending standards
have been tightened (Chart 2-8) for mortgages and other types of consumer
loans as well as for commercial real estate and other types of business lending.
Tighter lending standards tend to reduce residential investment by making it
more difficult to obtain mortgages. Consumption expenditures are also likely
to be lower for two reasons. First, new homeowners may need to save more
for their down payments than had previously been the case, which reduces
consumption during the period in which they are saving. Second, existing
homeowners may find it more difficult to borrow against their home equity
or to engage in cash-out refinancings that previously might have boosted their
short-term consumption.
On the business side, tighter lending standards would tend make
investment more expensive. Historically, business fixed investment has
exceeded the internally generated funds of corporations (also known as cash
flow) by a substantial margin. The gap between these two measures is financed
by issuing equity or taking on corporate debt such as corporate bonds or bank
loans. In recent years, this gap has been considerably smaller, which suggests

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corporations have not needed to borrow funds from other sectors as much as
they did in the past. However, this gap is reemerging and firms may need to
borrow more in the future, at which point tighter lending standards might
become more limiting, though this effect has not been apparent through the
third quarter of 2007.

Conclusion
All economic activity requires flows of capital between different parties at
different times. This borrowing and lending activity takes place constantly in
the world credit markets. These markets are essential to every well-functioning
economy because they shift capital from those who supply it (creditors) to
those who demand it (debtors). Credit markets include a wide variety of
instruments, such as corporate bonds, government bonds, and money market
instruments (commercial paper, certificates of deposit, and repurchase agreements, among others). The Federal Reserve’s monetary policies influence the
general price of borrowing and lending in the economy. Lenders can charge a
higher interest payment to compensate themselves for bearing additional risk.
Like any market, the credit markets bring together a diverse set of buyers and
sellers, and the price of the debt instrument represents an exchange between
these two parties.
The summer of 2007 witnessed a contraction in the credit markets that
caused the price of borrowing to rise and the quantity of some types of debt
offered to the market to shrink. This contraction took place in several markets,
including the mortgage lending market and the asset-backed commercial
paper market. As markets evolve and adapt to economic conditions, prices
and quantities will adjust. The impact on the nonfinancial real economy has
been muted to date, notwithstanding the decline in residential investment
over the past 2 years. However, the effects of declining home prices in some
parts of the country and the tightening of credit standards is likely to have at
least some effect on consumer and business spending as time passes.
Monetary policy actions can offset some of the weakening in aggregate
demand that results from disruptions in the housing and credit markets, and
other government policies can offer targeted assistance. FHASecure and FHA
Modernization are leading examples of targeted assistance to homeowners
and subprime borrowers facing the possibility of foreclosure on their homes.
These borrowers purchased their homes during a period in which lenders
underpriced risk and offered subprime mortgages at low prices to too many
borrowers. FHASecure can help those eligible borrowers who were caught
off guard by rapidly evolving credit markets and, in some cases, predatory

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lending. FHA Modernization will encourage a more flexible and better
functioning, risk-based mortgage lending market for those with low and
moderate incomes.
Beyond such targeted responses, the best course of action is often to
simply allow markets to adjust. Financial markets are in a constant process of
pricing risk. Economic factors fluctuate daily, and the prices of traded debt
instruments reflect investors’ attitudes toward the risks associated with these
fluctuations. By their very nature, markets have a remarkable resilience and
can adapt rapidly to changing economic circumstances, as demonstrated by
the response of the markets to the credit market disruptions that began in the
summer of 2007. Policies that attempt to protect market participants from
the discipline of the market risk delaying necessary adjustments and creating a
potential moral hazard problem by giving lenders and borrowers less incentive
to make prudent financial decisions in the future.
Markets naturally self-correct, rewarding good strategies and punishing bad
ones. Government actions may be less effective at differentiating between the
two and may prevent markets from creating products that benefit consumers.
In addition, any government actions mitigating the outcomes of risky
behavior may create perverse incentives for reckless decisions by borrowers
and investors who may come to rely on government interventions. Allowing
the market to price mortgage risk will help ensure that subprime mortgages
are available to those who can afford to repay them. With enhanced transparency, the market can weed out poor financial products while encouraging
positive financial innovations, a process that is crucial to maintaining
U.S. competitiveness in the global financial community.

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C H A P T E R

3

The Causes and Consequences
of Export Growth

T

he rapid growth of U.S. exports has been one of the most important
economic developments of the past few years. In the 3 years from the
end of 2003 to the end of 2006, real exports grew at an annual average rate of
8.3 percent, more than twice as fast as the overall U.S. economy. This growth
has provided clear benefits to the entrepreneurs, owners, and workers of
firms in export-oriented industries and, more broadly, to the U.S. economy
as a whole. This chapter identifies the factors that have driven recent export
growth and discusses several longer-term trends that have lifted exports over
time. More broadly, the chapter also addresses the benefits that flow from
open trade and investment policies as well as some related challenges.
The key points of this chapter are:
• The United States is the world’s largest exporter, with $1.5 trillion
in goods and services exports in 2006. The United States was the top
exporter of services and second-largest exporter of goods, behind only
Germany.
• In recent years, factors that have likely contributed to the growth in
exports include rising foreign income, the expansion of production in
the United States, and changes in exchange rates. One reflection of that
growth is that exports accounted for more than a third of U.S. economic
growth during 2006 and 2007.
• Over time, falling tariffs and transport and communication costs have
likely lowered the cost of many U.S. goods in foreign markets, boosting
demand for U.S. exports.
• Open trade and investment policies have increased access to export
markets. Increased investment across borders by U.S. companies facilitates exports.
• Greater export opportunities give U.S. producers incentives to innovate
for a worldwide market. Increased innovation and the competition that
comes from trade liberalization help raise the living standard of the
average U.S. citizen.
• Nearly all economists agree that growth in the volume and value of
exports and imports increases the standard of living for the average
individual, but they also agree that the gains from trade are not equally
distributed and some individuals bear costs. The Administration has
proposed policies to improve training and support to individuals affected
by trade disruption.

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Economists often call attention to the benefits of trade that result from
importing goods and services, benefits that have been well-documented in
previous issues of the Economic Report of the President. Building on that prior
work, this chapter focuses on exporting and the benefits that arise from
exporting goods and services. Some of the benefits are well known. Others,
however, have come to be known more recently as researchers have combined
new data with trade theory to provide a better understanding of international
trade and international transactions.

The Causes of Recent Export Growth
In 2006, the United States exported nearly $1.5 trillion worth of goods
and services. Nominal exports grew by 13 percent from 2005 to 2006, while
nominal gross domestic product (GDP) grew 6 percent; 2006 was the third
consecutive year in which nominal exports grew faster than the economy as
a whole. Chart 3-1, which displays nominal exports as a share of nominal
GDP, shows that such rapid export growth is impressive, but also that it is
not uncommon for growth in exports to outpace growth in GDP. Exports
have grown faster than the economy for much of the past 20 years. That trend
was interrupted by the worldwide economic slowdown in 2001 and 2002,
but resumed in 2003.

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From 2003 to 2006, the countries and regions contributing to our export
growth were also relatively dispersed. Chart 3-2 displays the average annual
growth rate of nominal exports to eight different regions. Export growth was
positive in each of these regions, and with the exception of Japan, exports
increased faster than nominal U.S. output. The fastest-growing markets for
U.S. exporters were India and China, where U.S. exports grew at an average
annual rate of nearly 27 and 25 percent, respectively. These growth rates
imply that exports to India more than doubled and exports to China nearly
doubled over this period. Export growth to Eastern Europe and Africa also
exceeded 20 percent per year.
America’s export growth has occurred not only in traditional export
sectors, such as machinery, high-technology products, and agricultural goods.
America’s services exports have been growing strongly as well, especially
private services such as education, finance, business services, professional
services, and technical services (Box 3-1). Between 1997 and 2006, the
nominal value of private services exports increased by 70 percent, compared
with 51 percent for goods exports. Private services comprise 77 percent of
U.S. private GDP, so expanding services markets is important to enable
continued export growth.

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Box 3-1: Trade in Services
Discussions of trade often focus on goods, but trade also involves a
wide variety of services such as banking and finance, insurance, information management, medical, legal, tourism, and transportation services.
The United States is the world’s largest exporter of services, exporting
more than $400 billion worth of services in 2006, almost double the
amount exported by the United Kingdom, the second largest exporter.
The United States runs a trade surplus in services, one indicator that
it has a relative advantage over other countries; in 2006, U.S. services
exports exceeded imports by nearly $80 billion. Still, services are not
traded to the same extent that goods are. Even though private services
account for 77 percent of U.S. private GDP, they account for only
28 percent of U.S. exports.
Services have some features that make them more complicated to
trade than goods. Most important, goods can be produced, stored,
shipped, and consumed at different points in time, but many services
must be produced and used simultaneously. Nevertheless, the same
basic economic principles that apply to trade in goods also apply to trade
in services. The main factors used in the production of many services are
skilled labor and high-tech capital, two resources the United States has
in abundance. As a result, the United States has an advantage compared
to other countries in producing many types of goods and services that
rely heavily on these two resources.
Trade in services has benefited from two relatively recent developments. First, advances in telecommunications and information
technology have lowered the costs of providing and acquiring services.
Thus, while these technical advances may have resulted in the relocation of some business, professional, and technical services, the United
States still maintains a sizable trade surplus in these services. In 2006,
exports of business, professional, and technical services grew almost
15 percent, to more than $96 billion, and trade in those services
generated a surplus of $38 billion. Second, the establishment of facilities
abroad by U.S. companies has allowed our business-services providers
more direct contact with their customers in other countries.
However, large barriers to trade in services remain. In order to remove
these barriers, the Administration is pursuing further liberalization of
services trade in the Doha Development Agenda negotiations, multilateral negotiations by members of the World Trade Organization aimed
at lowering trade barriers worldwide. Recent free-trade agreements
have also included substantial liberalization of the services sectors. One
study estimates the long-run effect of a worldwide move to completely
free trade in services could translate into enormous economic gains for
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Box 3-1 — continued
the United States, boosting real GDP by 4.4 percent. In today’s dollars,
GDP would increase by about $580 billion, roughly $1,940 per person.
The large income gains that are estimated to come from liberalizing
services trade reflect the advantage the United States has in producing
services relative to other countries, the large share of the U.S. economy
represented by services, and the world’s relatively high barriers to
services trade.

Four factors have contributed to the strong U.S. export performance. First,
our trading partners’ income growth has boosted their demand for U.S.
products. Second, increased productive capacity in the United States has
expanded our ability to serve foreign demand. Third, changes in exchange
rates since 2002 made American goods cheaper on world markets. Finally,
the longer-run decline in transportation costs, lower tariffs, and the removal
of other barriers to trade have made it easier for U.S. products to penetrate
export markets. Together, these factors not only affect exports, but they also
influence the current account, a broader measure of trade and a part of the
balance of payments between the United States and the rest of the world (see
Box 3-2).

Foreign Income Growth
Perhaps the most important factor driving the recent increase in exports has
been the growth of income of our main trading partners. As income increases
around the world, demand for U.S. products increases as well. This relationship is depicted in Chart 3-3, which shows the real growth of exports and
foreign GDP. There are several aspects of this graph that are noteworthy.
First, foreign GDP growth and U.S. export growth tend to rise or fall
together. As other countries become richer, they demand more goods and
services, including U.S. goods and services. Strong worldwide expansions, such
as those in the late 1980s and the mid-1990s, led to strong U.S. export growth.
Weakness in the world economy, such as that during 1998 and 2001, led to
weak export growth or even declines. Recent years have experienced a period of
strong worldwide growth led by fast-growing emerging markets such as China,
relatively strong growth in Europe, and faster GDP growth in Latin America;
this growth has been a key driver of rapid U.S. export growth.

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Box 3-2: The Current Account Deficit
The current account measures the value of international trade in goods
and services, investment income flows, and unilateral international
transfers. Trade in goods and services is the single largest component
of the current account. In 2006, the trade deficit was $759 billion and the
current account deficit was $811 billion; that is, the trade deficit accounted
for 93 percent of the current account deficit. Exports have grown much
faster than imports, and this helped narrow the current account deficit
in absolute terms and relative to GDP, as shown in the chart. In the
fourth quarter of 2005, the current account deficit totaled $863 billion at
an annualized rate, or 6.8 percent of GDP. In the third quarter of 2007,
the current account deficit fell to $714 billion at an annualized rate, or
5.1 percent of GDP, as export growth greatly exceeded import growth.

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Second, export growth is much more volatile than foreign GDP growth.
Exports grew much faster than the world economy during the expansions
of the 1980s, the mid-1990s, and the past few years. But export growth
fell below worldwide economic growth during the worldwide slowdowns
in 1998 and 2001. This type of volatility occurs because changes and
expected changes in foreign output typically lead to large changes in investment in those economies; investment is strongly related to demand for
capital goods—plants and equipment used in production—and consumer
durables—goods used over time, such as refrigerators—which U.S. production helps satisfy. Most U.S. exports of goods are capital goods, consumer
durable goods, and inputs that are used to produce them, and are therefore
very sensitive to changes in foreign GDP. Capital goods and consumer
durables account for 61 percent of nonenergy U.S. merchandise exports.
Industrial supplies, which are often used in the production of capital goods
and durable goods, account for 14 percent of nonenergy U.S. exports. For
example, in 2006, the United States exported almost $85 billion worth of
automobiles, auto parts, tractors, and trucks; $46 billion worth of electronic
circuits; more than $43 billion worth of airplanes and aircraft; and nearly
$21 billion worth of parts and components for office machinery.

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Growth in Domestic Production
A second factor that has contributed to the growth in exports is the
expansion of the U.S. economy. As the U.S. economy’s productive capacity
expands, its ability to produce goods and services for export likely expands as
well. A key factor in increasing U.S. production, and therefore U.S. capacity
to export, has been the growth of labor productivity. Gross output produced
per hour of work increased in 88 percent of manufacturing industries from
2004 to 2005, the most recent years for which data are available. Over a
longer horizon, output per worker increased in all but 1 of about 85 manufacturing industries. In 2005, 60 percent of manufacturing industries had labor
productivity increases of at least 4 percent. The gains were especially high
in computer and computer-peripherals manufacturing, apparel and knitting
mills, and agricultural chemicals. The growth in output in these sectors has
helped to satisfy world demand.

Exchange Rates
From January 2002 through December 2007, the dollar has depreciated
23 percent in nominal terms against a weighted average of currencies. In
other words, the cost of buying other currencies has increased by about
23 percent on average. In real terms—controlling for international differences
in inflation rates—the average real exchange rate has depreciated by nearly
22 percent; that is, individuals abroad can exchange goods produced in their
country and receive about 22 percent more U.S. goods now compared to 2002.
Changes in the terms of trade associated with recent exchange rate trends made
American goods cheaper relative to those of some other countries.

Trade Costs and Barriers
Falling transportation costs, improved communications, and the removal
of tariff and nontariff barriers have also supported the growth in trade. Both
exports and imports have benefited.
Over the last half century, there have been dramatic declines in shipping
costs as well as striking improvements in the quality of shipping among
developed economies. The nature of trade for some emerging economies may
now be changing to take advantage of these improvements. Studies indicate
that improvements in infrastructure may lower the costs of trade a great deal.
The ratio of the value of exports upon arrival to the value when shipped
gives a rough measure of the costs associated with freight and insuring the
good while in transport. For some export markets there have been noticeable
declines in transportation costs, as measured by this ratio. For example,
from 2003 to 2006, the average cost of shipping goods to Africa and China
decreased by 14 and 12 percentage points, respectively. From 2003 to 2006,

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for five of the eight regions identified in Chart 3-2, the cost of importing
goods from the United States has fallen.
In addition to falling transportation costs, communication costs have
declined, facilitating the growth in trade. One example is the growth of
e-commerce. One study finds that, on average, the growth in the number of
Internet hosts in an economy helped increase that economy’s annual export
growth from 1997 to 1999. As more of the world’s population has gained
access to the Internet, the market for U.S. goods and services has expanded
and exports have likely increased as well.
Trade liberalization has also been important. Some of the growth of trade
can be attributed to successful multilateral reductions in trade barriers through
the World Trade Organization (WTO) and its predecessor, the General
Agreement on Tariffs and Trade. The United States continues to work with
other nations to advance the Doha Development Agenda negotiations, as
well as to liberalize trade regionally and bilaterally. When this Administration
took office, the United States had free-trade agreements (FTAs) implemented
with only 3 countries, Canada, Mexico, and Israel; a fourth, with Jordan,
had been signed but was not yet approved by Congress. Through 2007,
the Administration has implemented FTAs or completed negotiations with
17 countries. Congress has approved agreements with 14 of these countries,
most recently with Peru, while those with Colombia, Panama, and South
Korea are awaiting Congressional approval.
Do FTAs contribute to export growth? Over the last 20 years, there has
been a virtual explosion in the number of FTAs. Worldwide, there are now
more than 200 regional FTAs in force. For many of these FTAs, the removal
of tariffs and other trade barriers occurs over 5-year phases and often takes
nearly 15 years to have full effect. Recent research shows that in the short
run, the average FTA has increased trade between bilateral trading partners
by 32 percent after 5 years, 73 percent after 10 years, and 114 percent after
15 years. After 15 years, the average FTA appears to have had no additional
effect on trade growth. Therefore, the long-run effect of the average FTA has
been roughly a doubling of trade between the two trading partners. In the case
of recent U.S. FTAs, nearly all of the tariff cuts and nontariff liberalization
occur early in the agreement, and later stages have more modest phase-outs.
As a result, we may expect to see much of the increases in trade coming in the
first 5 to 10 years of the agreement. As is evident from Chart 3-4, U.S. export
growth to recent FTA partners in 2006 from 2005 has, for most countries,
been higher than total U.S. export growth. Overall, the FTA partners have
been major contributors to the growth in exports. In 2006, the United States
exported goods to more than 200 economies. Exports to our 13 trading
partners in the FTAs that had been signed and implemented through that
year accounted for one-third of the growth of U.S. goods exports between
2005 and 2006.
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Exports and Foreign Direct Investment
Many different types of companies engage in international trade. In one
form of international trade, U.S. companies invest abroad and operate facilities in foreign countries. Cross-border investment to control a business (with
control generally defined as having a 10 percent or greater ownership stake) is
known as foreign direct investment (FDI), and FDI facilitates exports.
The United States is strongly committed to open investment (Box 3-3),
and the world is more aware of the benefits of open investment today than
it was in the past. For much of the early post–World War II era, many
countries placed heavy restrictions on investment in both directions. Policies
on inbound investment restricted the sectors in which foreign businesses
could invest or the level of ownership they could take. Some policies barred
acquisitions, and others made it difficult for investors to send profits or
capital home.
Spurred in part by the rapid growth of the internationally oriented East
Asian economies, by European integration, and by the stagnation of many
closed economies, countries have reduced barriers to foreign investment and
most now actively seek it. Today, liberalization continues in both developing
and advanced economies. In 1992, the United Nations Conference on
Trade and Development recorded 77 national regulatory changes around the
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Box 3-3: Open Investment and the United States
As a matter of policy, the United States has a longstanding commitment to welcoming foreign direct investment and securing fair, equitable,
and nondiscriminatory treatment for U.S. investors abroad. On May 10,
2007, the President issued a Statement on Open Economies reaffirming
this commitment, and noted that the Administration is committed to
ensuring that the United States continues to be the most attractive place
in the world to invest.
This policy stems from recognition of the benefits of open investment.
These benefits include the introduction of new technologies, processes,
and management techniques into the economy; increased competition
that lowers prices for consumers and leads to quality improvements;
and the creation of greater international trade and knowledge linkages.
Foreign affiliates in the United States tend to have more need for
higher-skilled labor than many other firms, paying at least 25 percent
greater compensation than private firms that are domestically owned,
thus creating an incentive for U.S. workers to keep building skills and
to compete for these well-paying jobs. U.S. investment abroad can also
strengthen the U.S. economy. It can increase exports, thereby improving
U.S. job opportunities. Increased exports provide incentives for firms
to hire more people into the more productive, higher-wage industries.
Increased trade thereby results in higher average wages for U.S. workers.
In addition, there is evidence that firms that invest abroad also increase
their domestic investment, and that one activity helps the other.

world that were favorable to FDI. It recorded a peak of 234 such changes in
both 2002 and 2004, and a still-robust level of 147 in 2006. But the move
toward openness has experienced setbacks as well. In 2006, countries made
37 regulatory changes that were unfavorable to FDI (20 percent of all
changes), the highest rate since 1992. Some of these unfavorable changes
included restrictions in certain sectors or efforts to nationalize certain sectors,
especially natural resource industries.
Another issue facing open investment is that in some limited circumstances,
the acquisition of a domestic company by a foreign investor could pose risks
to the national security of the host country. For example, such a problem
could arise if an adversary of the host country wanted to buy a domestic
military contractor. The United States addresses this issue through the interagency Committee on Foreign Investment in the United States (CFIUS),
which considers only genuine national security concerns, not economic or
other interests. The Foreign Investment and National Security Act of 2007
(FINSA) clarified and improved the CFIUS process and the Act was passed
by Congress with strong bipartisan support, reaffirming Congressional trust
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in CFIUS’s role in protecting national security in a manner consistent with
the U.S. commitment to open investment. In passing FINSA, Congress
stated that the new law is meant “to ensure national security while promoting
foreign investment and the creation and maintenance of jobs.”

Multinationals and Trade
The United States is both the single leading recipient and leading source of
foreign direct investment in the world. In 2006, total cumulative FDI in the
United States was almost $1.8 trillion, 15 percent of the world total. That
same year, total cumulative FDI from U.S. companies to the rest of the world
was almost $2.4 trillion, or 19 percent of the world total.
To understand FDI and how it creates channels for trade, understanding
some terms is useful. Firms that carry out direct investment abroad and own
companies or branches in more than one country are known as multinational
companies, or multinationals. The company that is the headquarters of the
firm does the investing and is known as the parent. The parent company is
located in the home country. The foreign company that the parent owns is
known as the foreign affiliate and is located in the host country. The parent
might own as much as 100 percent or as little as 10 percent of the foreign
affiliate and still be considered a direct investor. Affiliates that are more than
half-owned by direct investors are known as majority-owned foreign affiliates.
Ownership chains can be complicated: Sometimes a U.S. parent is owned by
foreign investors, and is therefore also a foreign affiliate.
The vast majority of U.S. trade is carried out by companies that are part
of multinationals. In 2005, the export of goods by U.S. parent companies,
by U.S. affiliates of foreign companies, and by unaffiliated companies in the
United States to U.S.-owned affiliates abroad amounted to $621 billion, or
69 percent of all U.S. goods exports. Most of these exports—
$416 billion—came from U.S. parent companies not otherwise owned by
foreign companies, but foreign-owned affiliates in the United States also
exported a great deal—$169 billion. A large portion of this multinationalrelated trade took place within multinationals, that is, between parent companies
and affiliates. Goods exports from U.S. parent companies to their foreign
affiliates and U.S.-based affiliates to their foreign parent companies totaled
$267 billion, 30 percent of all U.S. goods exports.
Multinationals are not only goods exporters. They also play an increasing
role in the export of services. Between 1997 and 2006, services exports from
U.S. parent companies to their foreign affiliates and from U.S. affiliates to
their foreign parent companies grew from $51.8 billion to $103.3 billion, or
from 22 percent to 26 percent of all U.S. private services exports. Together,
they accounted for almost one-third of all the growth in U.S. private services
exports. Of the $103.3 billion, U.S. parent companies sold $73.1 billion

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worth of services to their foreign affiliates, 79 percent more in nominal terms
than in 1997. Services exports from U.S.-based affiliates of foreign companies
to their foreign parent companies grew even faster. In 2006, these affiliates
sold $30.2 billion worth of services to their foreign parent companies, a
175-percent nominal increase from 1997.

The Benefits of Trade and Expanding
Export Markets
Promoting free trade is a top priority of this Administration. Trade
liberalization, whether it involves multilateral agreements that lower barriers
among all the world’s countries, or bilateral agreements that permit deeper
integration such as by harmonizing laws or institutions, provides a host of
economic benefits: lower prices and expanded consumer choice, a larger
market for U.S. exports, increased domestic productivity, and closer ties to
people and nations around the world. Economists often emphasize the gains
from trade from importing goods and services that are relatively more difficult
for the domestic economy to produce, but there are also benefits to be gained
through exporting.
International trade involves transactions between individuals or firms that
reside in different countries. As in any voluntary transaction, the participants
in international trade expect to benefit because they value what they receive in
the exchange more than what they give. The gains in each individual transaction then aggregate into gains for the economy as a whole. The United States
benefits from exporting because it allows us to trade goods that are abundant
in national production for goods that are relatively more costly to produce
domestically.
Another benefit of policies that encourage free trade and expand markets is
that trade encourages specialization and the division of labor. Specialization
provides near-term benefits because economies have different endowments
of resources and their workforces possess different skills and talents. For
example, the United States has a relatively large population of highly skilled
workers, but very little tropical land. As a result, the United States exports
business and financial services to the world and imports coffee from a variety
of tropical countries, such as Colombia.
Specialization raises the living standard for the average citizen because
it allows people to consume more goods and services. Exporting allows an
economy to use its relatively abundant resources to produce goods and services
and export them to economies where the resources required to produce such
goods and services are relatively scarce. Because goods are shipped to markets
where they are relatively scarce, the United States receives a higher price for

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these goods than if they were produced and sold only in domestic markets.
This increased income allows U.S. citizens to buy more goods and services,
including goods and services that are produced in other countries. One study
finds that the two major trade agreements of the 1990s—the Uruguay Round
of the World Trade Organization and the North American Free Trade
Agreement—contribute between $1,300 and $2,000 in annual benefits for
the average American family of four.
Some specialization takes the form of interindustry specialization—one
country specializes in some goods; another country in others. However, a
large proportion of trade involves similar goods within an industry. Such
intra-industry trade can occur for several reasons. One of the primary reasons
for intra-industry trade is that each producer tailors a product to a specific
target audience. In doing so, their output is consumed by a fraction of
the total market for that product. Therefore, intra-industry trade typically
leads to more varieties; that is, different countries produce goods within the
same industry, but they may produce a product with different features or a
different style. One recent study that investigates the growth of new varieties
from all types of products imported by the United States from 1972 to 2001
finds that new varieties have increased threefold. The welfare gain from this
increase in varieties is roughly equal to $900 per person.
The innovation, introduction of new varieties, and expanded competition
that come from broadening trade also promote world economic development.
As resources are shifted from unproductive sectors to more productive sectors
as a result of innovation in an economy such as that of the United States, it
becomes more difficult for the country to produce all the goods, new and
old. The new goods typically use skilled labor more intensively than the older
goods. The production of these new goods in the United States increases the
demand for skilled workers and the wages paid to those workers. The increase
in the wage paid to skilled workers benefits the United States, not only
because it raises the incomes of our workers, but also because it increases the
incentives for individuals to acquire more skills. Human capital accumulation
is one of the engines that drives economic growth. When the United States
begins devoting more resources to producing the new, more profitable goods,
it will likely discontinue producing older, less skill-intensive goods, and these
goods will need to be produced abroad. Although these older goods were less
skill-intensive in the United States, they typically are more skill-intensive in
the economy that begins to produce them. This creates greater rewards for
skilled workers, which encourages human capital accumulation and promotes
growth as well for both trading partners. These benefits are not necessarily
equally distributed, as will be discussed in the next section.
Specialization, the division of labor, innovation of products for world
markets, and the upgrading of skill that is brought about by trade all create
gains in the economy. Are these gains from trade measurable? In fact, research
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does show that across countries, relative to their income, countries that trade
more tend to have higher per capita incomes than those that trade less, and
that more trade is a cause of this higher income.

Trade and Labor Markets
The United States has long been committed to free trade and continues to
pursue policies and agreements to promote trade liberalization. The consensus
among economists is that, in the aggregate, the economic benefits of trade
liberalization greatly outweigh its costs. At an individual level, however,
those benefits and costs may not be evenly distributed. Some people may
particularly benefit—for example, workers who get higher-paying jobs when
exporters expand their production—while others bear costs—for example,
workers who are displaced because of import competition.
It is important to consider the distributional implications of trade liberalization and, in particular, the impact on workers who may be displaced by
import competition. However, it is also important to emphasize that trade
liberalization has little, if any, effect on overall employment. In particular,
increases in imports are not associated with a higher unemployment rate or
lower workforce participation. Chart 3-5 shows the ratio of imports to GDP
since 1960, along with the unemployment rate. If trade were a major factor
affecting the economy’s ability to maintain full employment, these measures
would tend to move in tandem. The increase in imports as a percentage of
GDP over the past several decades has not led to any noticeable trend in the
unemployment rate. Over the past decade, the U.S. economy has experienced
historically low unemployment, while imports have grown considerably.
Indeed, in recent years, imports as a share of GDP have increased, but this has
not resulted in any significant trend in the overall unemployment rate.
Along with trade and trade policies, other factors, such as changes in
consumer tastes, domestic competition, and productivity increases, contribute
to the churning of the labor market. These other factors can have effects that
are similar to those of import competition on the labor market, often on
similar individuals and sectors. For example, the United States has seen a
vast increase in domestic manufacturing output while the manufacturing
workforce has been declining. Import competition in manufacturing industries has played less of a role in the decline of manufacturing employment
than has the rapid increase in labor productivity.
The cost for workers in import-competing industries is that increased
imports—due to changes in the world economy or policy efforts to liberalize
trade—may cause some to lose their jobs or receive lower wages. Among
manufacturing industries, the U.S. industries that appear to be most affected

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by import competition are electrical machinery, apparel, motor vehicles, and
non-electrical machinery. Similar to workers displaced from manufacturing
more generally, workers displaced from import-competing manufacturing
industries tend to have lower earnings upon reemployment. These adverse
effects are more a function of such factors as education, skills, and age, rather
than something intrinsic to the increase of imports due to trade liberalization.
In this way, such trade-induced effects are similar to labor market effects
induced by technological change.
While trade liberalization may lead to job loss in some import-competing
sectors, it also creates jobs in the industries that produce the goods and services
the United States exports and in industries that use imported inputs, and the
benefits to the economy resulting from trade liberalization are far greater
than the costs. Increased trade does, however, adversely affect some workers.
The President recognizes that these workers need help with retraining and
reemployment and has called for a reauthorization and reform of the Trade
Adjustment Assistance (TAA) program to meet the needs of these displaced
workers. The Administration is committed to supporting effective and
improved trade-adjustment assistance to workers who are displaced due to
import competition.

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Despite the overall benefits of trade, there are some who propose suspending
our efforts to liberalize trade and even increasing trade barriers as a remedy
for the adverse effect of trade on some workers. Increased protectionism,
however, has proven itself ineffective as a means to address these concerns.
In fact, the cost of protectionism often greatly outweighs the benefits. One
study reports that, at the time of the analysis, on average, each job saved in
21 sectors protected by such trade restrictions as high tariffs, import quotas,
and other measures cost consumers $170,000 per year in higher prices and
reduced purchasing.
Increased protectionism can also have unintended negative effects on
domestic industries that use goods produced by protected industries as inputs
to their own production. The majority of U.S. imports are intermediate
goods; trade restrictions raise the price of these goods and directly harm
other domestic industries. By increasing the cost of inputs, protection of
one industry can have adverse effects on employment of other industries.
Protectionism can also cause companies that use the protected inputs to move
jobs and production out of the United States.

Conclusion
Over the last few years there has been a dramatic increase in U.S. exports.
This growth is in large part due to increases in foreign demand, increased
domestic production, changes in the terms of trade, and reductions in the
cost of international transactions. The U.S. economy has benefited substantially from increased trade and, in particular, from the rapid growth of its
exports. Exporting firms are typically fast growing and pay higher wages.
Thus, increased exports translate into positive benefits for workers in exportoriented industries.
Being more engaged in global trade provides other benefits as well. Trade
helps keep prices low and allows for a wider variety of goods and services.
Several studies have revealed that there are sizable costs to limiting trade,
and benefits to expanding trade. The Administration has worked to lower
trade barriers and open markets for U.S. producers through multilateral,
regional, and bilateral negotiations. At the global level, the Administration
is aggressively pursuing a successful conclusion to the World Trade
Organization’s Doha Development Agenda, which has the potential to lower
trade barriers around the world and help millions of people escape poverty.
The Administration is also seeking to advance broad trade agreements in
the Americas and the Asia-Pacific region and bilateral free-trade agreements.
Bilateral free-trade agreements have been especially progressive in terms of
opening markets for services trade, an area in which the United States has a
distinct advantage relative to other countries.
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C H A P T E R

4

The Importance of Health and
Health Care

T

he American health care system is an engine for innovation that develops
and broadly disseminates advanced, life-enhancing treatments and offers
a wide set of choices for consumers of health care. The current health care
system provides enormous benefits, but there are substantial opportunities
for reforms that would reduce costs, increase access, enhance quality, and
improve the health of Americans.
An individual’s health can be maintained or improved in many ways,
including through changes in personal behavior and through the appropriate
consumption of health care services. While there is substantial health care
spending in the United States, the importance of health does provide a strong
rationale for this level of spending. But because health care financing and
delivery are often inefficient, there are opportunities to advance health and
access to health care services without further growth in spending. To improve
the efficiency of health care financing and delivery, the Administration has
pursued policies that would increase incentives for individuals to purchase
consumer-directed health insurance plans. The Administration has also
worked to link provider payments to performance, thus rewarding efficient
delivery of health care. In the President’s State of the Union Address,
he proposed changing the tax treatment of health insurance, offering all
Americans a standard deduction for buying health insurance. Such a change
could play an important role in increasing the efficiency of the American
health care system and expanding health insurance coverage.
The key points in this chapter are:
• Health can be improved not only through the consumption of health
care services, but also through individual behavior and lifestyle choices
such as quitting smoking, eating more nutritious foods, and getting
more exercise.
• Health care has enhanced the health of our population; greater efficiency
in the health care system, however, could yield even greater health for
Americans without increasing health care spending.
• Rapid growth in health care costs and limited access to health insurance
continue to present challenges to the health care system.
• Administration policies focus on reducing cost growth, improving
quality, and expanding access to health insurance through an emphasis
on private sector and market-based solutions.

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Health and the Demand for Health Care
The demand for health care is unlike the demand for most consumer
products and services because while the desire for consumer products
and services comes from direct consumption, the desire for health care
is not derived directly from the consumption of the medical procedures
themselves; rather, it comes from the direct value of improved health that is
produced by health care. For example, demand for an MP3 player is based
on the enjoyment that an MP3 player brings to a consumer, but few would
choose to get a laparoscopic cholecystectomy for the same reason. Rather, a
consumer’s desire to have her gallbladder removed is directly related to the
positive impact the operation is likely to have on her health. Understanding
how health is produced, demanded, and valued is a useful starting point for
evaluating the health care system and health care policy.

Demand for Health
People demand health because of its role in facilitating and providing
happiness. Health can be defined along two dimensions: the length of life
(longevity) and the quality of life. A person derives value from the quality of
life directly and indirectly: directly because one’s level of health affects the
enjoyment of goods and leisure and indirectly because one’s level of health
enhances productivity (Box 4-1). Enhanced productivity can be rewarded
in the labor market through higher wages. The indirect effect of health
on productivity suggests that health is an important component of human
capital investment. Consistent with the basic principle of our economic
system, consumers exercise choice in purchasing health care and other goods
and services.

The Production of Health
Health care is only one of the factors that determine health. Other factors
include individual behaviors, environmental factors, social factors, education,
income, and genetics. If we think of an individual as a producer of health,
the key production inputs are the time and money spent on health-improving
activities and health care. Health-improving activities can include individual
choices regarding exercise, nutrition, and lifestyle. Health care can include
hospital care, outpatient visits to medical providers, nursing home care, and
medication. Because health can deteriorate from accidents, sudden disease,
and the effects of aging, health care inputs are needed not only to maintain
current levels of health but also possibly to restore health following an illness
or injury.

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Box 4-1: Health Effects on Job Productivity
Health can affect job productivity through absenteeism and presenteeism. Absenteeism, not being present at the place of work as a result
of injury or illness, prevents an individual from contributing to output,
and may also affect the ability of coworkers to be productive when tasks
require collaboration. Presenteeism is the loss of at-work productivity
caused by a lack of physical or mental energy needed to complete
tasks, increased workplace accidents, and the possible spread of illness
to fellow employees. There is evidence that both of these factors are
costly. According to the Current Population Survey (CPS), 2.3 percent of
workers will have an absence from work during a typical week due to
injury or illness. Several studies estimating the extent to which presenteeism affects productivity indicate that, on average, the productivity
loss caused by some of the most common conditions (such as allergies,
depression, musculoskeletal pain, and respiratory disorders) is between
5 and 18 percent.
Investment in improving and managing health offers opportunities
to mitigate some of these costs. An increasing number of employers
are instituting at-work wellness programs that provide targeted health
management. These programs range from monetary penalties for those
with unhealthy lifestyles (such as smoking or uncontrolled diabetes) to
subsidizing access to exercise facilities. The benefits are shared by the
worker (higher earnings, better quality of life) and the employer (enhanced
productivity and decreased health care expenditures). Evidence of the
success of these programs, while incomplete and variable, suggests
that at-work wellness programs can improve worker health outcomes
and provide a positive return to employers. One long-term study of a
particularly comprehensive wellness program shows that health care
expenditures fell by an average of $225 per employee per year (mostly
due to fewer doctor visits and hospital stays), but it took several years
to realize these benefits.

Studies of trends in health-improving activities show a mixed picture on
whether Americans are investing more in their health. A recent study finds
that Americans are smoking less and controlling their cholesterol and blood
pressure better (through a combination of health-improving activities and
medical inputs). In contrast, there has been a dramatic increase in obesity in
the United States in both adults and children during the past few decades.
Obesity has more than doubled since the late 1970s, from 15 percent to
34 percent among adults. Among children ages 6 to 19, the incidence of

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being overweight has tripled. Obesity is an indicator of unhealthy behavior
because it often reflects a lack of exercise and overconsumption of unhealthy
foods. Also, obesity is associated with a higher risk of many diseases and
health conditions, including hypertension, Type 2 diabetes, coronary heart
disease, and some cancers.

Trends in Health Spending
Americans are investing more in their health as measured by health care
expenditure. In 2006, Americans spent over $7,000 per capita on health care,
up from $2,400 in 1980 and $800 in 1960 (all in 2006 dollars). National
health care spending has grown more rapidly than the economy as a whole,
so health care accounts for an increasing share of the overall economy
(Chart 4-1). National health care spending now accounts for about 16 percent
of gross domestic product (GDP), up from 9.1 percent in 1980 and only
5.2 percent in 1960.
The primary factor that tends to drive health care expenditure growth is
the development and diffusion of new technologies. Knowledge about health
and health care conditions continues to expand over time, generating an
expanding inventory of new or improved products, techniques, and services.
Medical technology may account for about one-half or more of real long-term

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health care spending growth. Rising incomes are a second important factor
because as income increases, a greater proportion of income is typically spent
on health care. The aging of the population and increasing disease prevalence
is a third important factor contributing to expenditure growth in the United
States. Other cited factors include more rapid wage growth in the health
sector, greater insurance coverage supported by large government subsidies
through both government-sponsored programs and tax subsidies, and the low
share of health expenses paid out-of-pocket by health consumers.

Trends in Life Expectancy
Life expectancy is only one of many outcome measures for health, but
because it has been reliably and consistently measured over time, it offers a
unique historical view of trends in health. United States life expectancy trends
since 1900 both from birth and from age 65 are shown in Chart 4-2. In the
two panels of this chart, we see life expectancy gains throughout the century.
Progress in life expectancy at birth was rapid in the first half of the century,
growing from 48 to 68 years. Between 1950 and 1970, life expectancy at birth
grew gradually, reaching only 71 by 1970. Progress picked up in the 1970s,
with life expectancy reaching age 78 by 2004. There is a contrasting pattern
for the life expectancy among those who live to age 65. Life expectancy at age

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65 showed little progress until the 1930s; in the subsequent 4 decades, life
expectancy at 65 rose 3 years to 15 (meaning that in 1930 a person who was
65 could expect to live to age 77, while in 1970 a 65-year-old person could
expect to live to age 80). Starting in the 1970s, the pace of improvement
accelerated. By 2004, life expectancy at age 65 was 18.5 additional years; a
gain of 3.5 years of life over the past 3.5 decades.
Innovations in health and health care can explain the patterns in longevity.
Changes in the first half of the 20th century came largely through progress
in reducing malnutrition, improving sanitation, and containing infection
through improved public health measures and the use of antibiotic agents such
as penicillin. After about 20 years of gradual improvement in life expectancy,
the rising longevity from 1970 reflects progress in treating life-threatening
ailments prevalent among those over 50. As shown in Table 4-1, the largest
single contributor to increased longevity has been reduced mortality from
heart disease (3.6 years); reduced mortality from strokes added another
1.3 years to life expectancy. Reduced mortality from those two conditions has
thus added nearly 5 years to the life expectancy of Americans.
Research suggests that the lower mortality from heart disease and strokes is
primarily attributable to advances in intensive medical therapies, non-acute
medications to manage high blood pressure and high cholesterol, and changes
in individual behavior to reduce risk factors such as smoking and high-fat
diets. Improvements in medical treatments alone are believed to account
for at least 3 of the 5 years of the life expectancy gain that is attributable to
reduced mortality from heart diseases and strokes.
To put these substantial benefits of extending life into a perspective that
accounts for the increased spending on health care, it is useful to assess the
tradeoff between the cost of the treatments and the benefits of longer life. An
influential study has done this and found the benefits of increased spending
on cardiovascular treatments to be about four times as large as the costs.
Table 4-1.—Additional Life-Years Due to Reduced Mortality
from Selected Causes, for US by Decade, 1950-2000
(years)
1950-1960
Infant Mortality ...............
Heart Disease..................
Cancer .............................
Stroke ..............................
Accidents.........................
Other................................
Total.................................

1960-1970

1970-1980

1980-1990

1990-2000

Total

0.47
0.38
0.01
0.15
0.14
0.66
1.80

0.35
0.55
-0.05
0.24
-0.09
0.00
1.00

0.67
0.96
-0.09
0.52
0.27
0.55
2.93

0.22
1.08
-0.05
0.31
0.27
-0.28
1.54

0.16
0.67
0.30
0.07
0.09
0.40
1.68

1.87
3.63
0.16
1.29
0.66
1.33
8.96

Source: Murphy, K.M., and Topel, R.H. The Value of Life and Longevity (2006). Journal of Political Economy, vol. 11, No. 5,
871-904.

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While the study focused on spending on cardiovascular disease, the basic
conclusion—aggregate health-spending increases have provided positive
returns—is true more broadly. Using the same framework, the total increase
in health care spending since 1950 can be justified, in monetary terms, by
the life expectancy gains from cardiovascular treatment and neonatal care
alone. Gains from other treatment advances (not to mention benefits other
than life extension, such as a higher quality of life) thus imply that, over the
past half-century, the benefits from greater health care spending in the United
States have exceeded their costs. However, the benefits of greater health care
spending in relation to costs have not been as favorable since 1980, suggesting
potentially diminishing returns from health care spending.

Trends in Health Insurance Coverage
Health insurance helps shield families from the financial risk of the
unanticipated health expenses of serious illness or injury, and facilitates access
to the health care system, thereby improving health outcomes. Given those
benefits, it is a major concern that at any given time, 16 percent of Americans
report that they lack health insurance. The primary driver of declining enrollment in private insurance has been the increasing cost of health care and this
decline contributes to the rising proportion of uninsured (Chart 4-3).

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Addressing Challenges in the
Health Care System
The trends in the U.S. health care system suggest that the rapid growth in
health care costs will persist. Health care costs will pose an increasing challenge
for consumers of health care and health insurance as expenditures in this sector
make up a greater share of household consumption. Taxpayers will also face an
increasing challenge as the budgetary burden of Federal and State health care
programs continues to expand. (See Box 4-2 for an overview of government
health care programs.) Reducing health care cost growth and increasing access
while improving health care quality are the goals of Federal health care policy.
The Administration’s objective has been to develop market-oriented policies to
meet these goals by fostering the innovation, flexibility, and choice that are the
best aspects of the American health care system. Market-oriented policies must
address potential market failures that are at the root of the challenges in the
health care system. These problems include insufficient information available
to patients, health providers, and insurers; access barriers for lower-income
or disadvantaged Americans; and two specific market failures that arise in
insurance markets: moral hazard and adverse selection. Moral hazard is the
tendency for individuals to overuse certain types of health care when insurance
covers a sizable fraction of the costs; adverse selection is the tendency for
insurance to be purchased by those persons who are most likely to need it (and
who thus have higher costs). Policies aimed at mitigating these problems can
enhance the ability of our market-oriented health care system to achieve the
goals of controlled cost growth, improved access to health insurance coverage,
and high-quality health care.

Box 4-2: Government Health Care Programs
About 46 percent of health care spending is funded by Federal and
State Governments through various health programs. The main government-funded health programs are designed to serve specific populations
and include Medicare, Medicaid, the State Children’s Health Insurance
Program (SCHIP), and the Veterans Health Administration (VHA).
Medicare was enacted in 1965 and covers nearly all individuals aged
65 and older (as well as some younger individuals with disabilities or
specific illnesses). Medicare today consists of three basic parts. Part A is
hospital insurance, which covers stays in hospitals and nursing facilities.
Part A is primarily funded by a 2.9 percent payroll tax (1.45 percent each
for workers and employers). Part A is generally provided automatically
continued on next page

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Box 4-2 — continued
and without premiums for persons age 65 and older who are eligible for
Social Security or Railroad Retirement benefits. Part B is supplementary
medical insurance which covers doctor visits and other outpatient
services. Part B is voluntary and enrollees pay a monthly premium, yet
94 percent of those eligible elect to enroll. Part D, Medicare’s prescription drug benefit which started in 2006, is available on a voluntary basis
to individuals who qualify for Medicare Part A, and requires a monthly
premium for those beneficiaries who do not qualify for the low-income
subsidy. Unlike other parts of Medicare, Part D is administered by a
partnership between private insurers and Medicare officials to provide
choice of prescription drug plans to beneficiaries and to allow for price
competition. Part B and Part D are funded by a combination of premiums
from beneficiaries and government revenues (Part D also receives some
resources from the States). In 2007, there were 43.4 million beneficiaries
enrolled in Part A, 40.6 million in Part B, and 24.4 million in Part D.
Under Fee-for-Service Medicare, health care providers are reimbursed
by the Federal Government at predetermined rates for services
provided. However, Medicare beneficiaries can opt to enroll in a private
Medicare plan under Medicare Advantage through local coordinated
care plans offered mostly by local health maintenance organizations
(HMOs) and preferred provider organizations (PPOs), regional PPOs, and
private fee-for-service providers. Local coordinated care plans make up
72 percent, regional PPO plans 3 percent, and private fee-for-service
plans 21 percent of Medicare Advantage plans.
Medicaid was also established in 1965 as a health care program for
low-income individuals, in particular those with children. Medicaid
is administered by the States, and is funded by both the Federal
Government and the States. Like traditional Medicare, Medicaid also
reimburses private providers for services at predetermined rates and
allows recipients to enroll in Medicaid managed care plans in many
States. However, unlike Medicare, these predetermined rates are
determined at the State level. In 2006, there were 45.7 million enrollees
in Medicaid, of whom 65 percent were in managed care plans. The
State Children’s Health Insurance Program (SCHIP) was created in 1997
to cover children from low-income families who do not qualify for
Medicaid. SCHIP is also administered by the States and funded by both
Federal and State Governments, but the Federal contribution towards
spending is higher for SCHIP than for Medicaid. In 2006, there were
6.6 million enrollees in SCHIP.
While Medicare, Medicaid, and SCHIP are publicly funded programs,
most health care services are delivered by private providers not employed
by the government. In contrast, the Veterans Health Administration
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Box 4-2 — continued
(VHA) delivers health care to veterans through a system that is run by
the Department of Veterans Affairs. The VHA is a truly public health
care system in the sense that the Federal Government owns the VHA
hospitals and employs the health care providers.
Rising health care costs are creating budget pressures for government health care programs. Currently, Federal spending on Medicare
and Medicaid totals about 4 percent of GDP, or about 20 percent of the
Federal budget. Rising health care costs, however, will likely raise those
figures in coming decades. If spending grows 1 percent per year faster
than GDP (which is somewhat slower than the historical rate of growth
over the past 40 years), for example, the Office of Management and
Budget projects that in 25 years, spending on these two programs alone
could reach 8 percent of GDP. Such spending growth, if it came to pass,
would require either unprecedented levels of taxation or dramatic reductions in other government activities.

Moral Hazard and Cost Control
In most markets, consumers decide what to purchase by comparing the
benefit of a good or service relative to its cost. In the health care sector,
however, consumers often do not learn the prices of goods and services until
bills are received weeks or months later. Because health insurance polices
cover most health care costs, including the costs of routine, predictable health
care services, consumers have little incentive to try to access and act on price
information. This moral hazard effect encourages overuse of certain types of
heath care, gives little incentive for consumers to consider costs in their search
for a provider, and distorts incentives for technological change.
Overuse of health care can occur when the perceived cost of a service is less
than the actual cost and, as a result, the service may be used even when its value
is less than its cost. This happens, for example, with health insurance coverage
that shields consumers from the true cost of a service by having them pay none
or only a portion of its cost. To illustrate, consider a consumer’s decision to
purchase a migraine therapy that costs $100 to produce. If the symptoms are
serious enough and would be relieved by the therapy, the consumer might
be willing to pay more than $100 for the therapy. The consumer would thus
purchase the therapy regardless of how much of the $100 cost was covered by
insurance, and the purchase would not be overconsumption. If the customer
had milder symptoms, however, insurance may induce overconsumption.
Suppose, for example, that the consumer would only be willing to pay $25 to
relieve the symptoms. If insurance covered the entire $100 cost, the consumer
would purchase the therapy since the $25 benefit exceeds the consumer’s
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effective price of zero. Even if a $10 copayment was required by the insurance
benefit, the purchase would still take place. Because the social cost of $100
exceeds the $25 benefit, this purchase would not be socially beneficial and
would therefore be considered overconsumption.
Because consumers are less sensitive to the prices of the health care services
they consume, the competitive forces that typically keep prices down are
weakened. Imagine two hospitals that provide the same service, but hospital
A charges $1,000 and is located in an older facility, while hospital B charges
$2,000 but is located in an updated facility with a wide array of amenities
and equipment on site. Given these choices, a consumer facing the actual
price may prefer hospital A, but in a world where few costs are shared with
the patient, most people would choose hospital B. This gives hospital B few
incentives to control costs given that convenience or amenities have a greater
influence on consumer choice than price.
New technological innovations enter a market in which consumers rarely
pay more than 10 to 20 percent of the market price out-of-pocket. This influences the value of the innovations that are developed and marketed. If a new
product is only slightly more effective than an existing product, for example,
it may be highly demanded even if it is priced well above existing alternatives.
Because there is a market for new technology with little additional benefit
over existing treatments, innovators have sufficient incentive to create new
technologies with little marginal value.
Health insurers and their sponsors (employers) recognize that insurance
reduces consumer incentives to be responsive to costs. Insurers use a variety
of cost-control mechanisms such as utilization review, pre-approval, and drug
formularies to attempt to manage costs and, in part, counteract the lack of cost
consciousness by consumers. But those mechanisms can only partly offset the
problem. In addition, insurance benefits are designed to limit moral hazard
by sharing the costs of services received with the beneficiary. Design features
to accomplish this goal include deductibles, copayments, and coinsurance.
Deductibles, the dollar amount that a consumer will have to pay before the
insurer pays for any medical expenses, are often less than $500. Copayments
are a fixed fee paid per visit or per prescription. Coinsurance is a percentage of
the cost of the service that is the responsibility of the consumer.
These cost sharing mechanisms are underutilized because of a bias created
by the tax code. The health insurance premium of employees paid by
employers is exempt from income and payroll taxes, but individual spending
through deductibles, copayments, and coinsurance is taxable. As a result, there
is a tax incentive for employers to compensate employees through generous
health insurance plans that limit cost sharing. Thus, the tax code reduces
the incentive for optimal health insurance design and ultimately encourages
individuals to purchase more health care services than they would otherwise.
Health Savings Accounts (HSAs), enacted into law by this Administration
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in 2004, and the standard deduction for health insurance first proposed by
this Administration in 2007, both provide a mechanism for eliminating the
tax bias against greater cost sharing. These policies are intended to offer the
private sector more opportunities to control costs through greater consumer
awareness of the cost of health insurance premiums and health care services.

Health Savings Accounts
Health Savings Accounts are savings accounts of pre-tax dollars, funded
by individual or employer contributions, that can be used toward current
and future out-of-pocket medical expenses. HSAs are designed to be used
in conjunction with high-deductible health plans, reducing reliance on
insurance for routine health expenses. The funds in the HSA can be used to
pay these routine health expenses directly. Because unspent funds belong to
the individual and can accumulate over time, HSAs lead the individual to
play a more active role as a health care consumer. In January 2007, HSAs
covered 4.5 million people, which is an increase of 1.3 million since January
2006, and 3.5 million since March 2005.
As the consumer plays a greater role and becomes more aware of routine
health expenses, provision of inefficient care should be reduced; incentives for
providers to adopt cost-effective therapies should increase; and possibly, some
health care prices may decline, which may even benefit consumers in traditional insurance plans. Yet the benefit of moving to a high-deductible policy
with an HSA will vary in that chronically ill individuals with persistently high
spending may find these policies less desirable because their out-of-pocket
spending would be consistently high. Consumers in lower tax brackets will
derive a smaller tax benefit from HSAs because the value of tax exemption
depends on a consumer’s marginal tax rate (the tax paid on the next dollar a
worker earns).

A Standard Deduction for Health Insurance to Replace the
Tax Exemption
The lack of consumer sensitivity to health care prices occurs not just
through the consumption of health care services, but through the consumption of health insurance as well. The tax exemption of employer-sponsored
health insurance premiums is inefficient because, by providing a larger tax
break to families with more-generous employer-sponsored health insurance
policies, there is an incentive for health insurance to cover more services than
employees would otherwise demand. This occurs because employees can
increase after-tax compensation by accepting more of their compensation in
the form of health insurance.
The President has proposed to replace the current open-ended tax exclusion
for employment-based health insurance with a flat $15,000 standard

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deduction for health insurance to all families (or $7,500 for individuals),
whether that insurance was obtained through their employer or on their own.
The amount of this standard deduction would be independent of the actual
amount spent on the premium, so families who obtain insurance policies for
less than $15,000 (but whose policy satisfies a set of minimum requirements
for catastrophic coverage) would still have an exemption for the full $15,000
of compensation from income and payroll taxes. The annual increase in
the standard deduction for health insurance would be linked to inflation as
measured by the Consumer Price Index.
This policy has two key effects: 1) It would reduce the inefficiency of the
current tax treatment of employment-based health insurance and would allow
individual consumers to benefit from reducing the cost of their insurance;
and 2) it would provide for equitable tax treatment for health insurance
purchased inside and outside of employment. The first effect can be shown
in the following example. Consider a family of four with an annual income of
$50,000 and a health insurance policy worth $10,000 that is sponsored by an
employer. Because the marginal tax rate of this family is roughly 30 percent,
the current tax exemption for the cost of this insurance policy provides a
$3,000 tax break to the family. Another family with the same income and an
employer-sponsored health insurance policy worth $20,000 currently receives
a tax break of $6,000. One advantage of the proposed standard deduction is
that it provides the same tax treatment to all types of health insurance plans.
Under the proposed plan, both families would qualify for the flat $15,000
standard deduction and receive the same tax savings of $4,500. The flat tax
break provides a strong incentive to obtain health insurance coverage, and it
would allow families to reap the tax benefits of health insurance policies with
optimal cost-sharing features. Because the tax break is not more generous
for those who choose expensive health insurance plans (unlike the tax
exemption), consumers will become more conscious of cost when purchasing
health insurance and health care.
Health insurance purchases by families and individuals with or without access
to employment-based health insurance would receive the same tax benefits
under this policy. Currently, tax treatment of health insurance premiums
is inequitable because it does not offer the same tax break to families and
individuals without access to employment-based insurance, who must instead
purchase a private plan in the individual health insurance market. The family
considered above with an annual income of $50,000 receives a $3,000 tax
break for a health insurance policy worth $10,000 sponsored by an employer,
but no tax break for a similar health insurance policy purchased through the
individual insurance market. Under the Administration’s proposal, those who
are currently insured in the individual health insurance market would see a
reduction in taxes commensurate with those insured in the group market. As

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a result, those who are currently uninsured because they have no access to
employment-based insurance, would be given a strong incentive to purchase
coverage. An uninsured family of four earning $50,000, for example, would
receive a tax benefit of $4,500 if they purchased health insurance in the
individual market (the value of the $15,000 standard deduction if the family
faces a 30 percent marginal tax rate). That tax break would cover nearly half
the cost of a family health insurance plan costing $10,000.
The availability of a tax deduction for the purchase of health insurance for
individuals and families who are not offered employer-sponsored coverage
will make health insurance more affordable for millions of Americans. The
Administration estimates that the standard deduction would provide 3 to
5 million individuals with health insurance who did not have it previously.
Even with a standard deduction, challenges for affordable coverage remain
for individuals with low incomes or with substantial risk of high health
expenditures. The Administration’s Affordable Choices Initiative addresses
these remaining challenges. The initiative facilitates State efforts to make
health insurance more affordable for individuals with persistently high
medical expenses or limited incomes. Currently, subsidies and payments from
the Federal Government are funneled through providers; the objective is to
redirect funding toward individuals.

Controlling Costs Through Competitive
Insurance Markets
The effective functioning of a competitive marketplace for health insurance
requires addressing adverse selection. Adverse selection arises when insurance
is most attractive to those persons most likely to need it. If the premium is
based on the population average and the policy disproportionately attracts
those who spend more than the average, the policy will lose money for the
insurer. The policy will then either increase in price or not last in the market.
In the extreme, some consumers do not purchase insurance because the only
policy available to them is priced for the most expensive consumers.
The problems can be most severe in insurance markets involving small
firms and individuals without access to group coverage, because large risk
pools mitigate many of the forces that can lead to adverse selection. (However,
adverse selection can arise in broad risk pools when competing health plan
choices are made available.) To varying degrees, States can minimize adverse
selection by permitting providers in the market for individual insurance to
rate each individual on the basis of his or her medical risk and past health care
expenditure. As a consequence, individuals with chronic illnesses have to pay
higher premiums, be denied coverage altogether, or be denied coverage for
the condition which is making them ill.

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To reduce the extent to which high-risk individuals face higher premiums
and to improve the availability of certain health insurance benefits, States
have imposed a range of restrictions on insurance underwriting practices
as well as coverage mandates on nongroup (and in many cases on group)
health insurance plans. These regulations generally include guaranteed issue
laws that require insurers to issue insurance to any eligible applicant without
regard to current health status or other factors, and community rating laws
that prohibit insurers from varying premium rates based on health status and
restrict the amount by which insurers are allowed to vary rates based on characteristics such as age or gender. Although these regulations tend to reduce
insurance premiums for high-risk individuals, they also increase premiums
for lower risk individuals. Those premium increases can have the unintended
consequence of encouraging people to wait until they have a health problem
before enrolling. If such adverse selection reduces participation of healthier
people, premiums will increase and the voluntary insurance market may cease
to operate effectively. The result may be less insurance coverage and only
limited premium reductions for those who are chronically ill, as those who are
healthier choose to forgo coverage entirely rather than pay higher premiums.
The approach of the Administration is one that encourages lower premiums
particularly in the individual and small group markets, where adverse
selection poses the greatest challenges for competitive insurance markets.
The Administration supports a national market for health insurance rather
than State-specific markets. This would effectively make insurance available
to individuals and small groups under conditions that resemble those now
available to employees of many large corporations, which, by self-insuring,
are exempt from State insurance regulations and instead operate under the
Federal insurance law provisions of the Employee Retirement and Income
Security Act (ERISA). Health insurance policies with lower premiums would
be more readily available because health insurance policies would not be
subject to costly State mandates and regulations. The Administration also
supports Association Health Plans—plans that allow small groups to band
together to purchase insurance subject to Federal rather than State regulations—because they would reduce adverse selection problems encountered by
small employers, achieve economies of scale in negotiating lower rates with
participating insurers, and allow for greater participation in a competitive
choice system of health insurance plans.

Improving Quality and Costs Through Information
and Reimbursement
Because of the complexities of medicine, patients must often rely on experts
to determine their diagnosis and select treatments. If the incentives for the
expert are different from those that would produce the greatest benefit for the
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patient, however, the services delivered by the expert may not always be of
the greatest benefit to the patient. For example, doctors may have incentives
to overstate the value of expensive tests, and most patients lack the expertise
to assess these claims.
Physicians determine needed services for patients. Because these decisions
are in part subjective, diagnoses and treatments often differ across physicians,
sometimes in ways that are not in the patient’s or society’s best interest.
For example, the frequency of spinal surgery is almost eight times higher in
some parts of the United States than in others, even though the percentage
of people who have back problems does not vary widely between regions.
These types of geographic variations in quantity of care exist across a wide
range of treatments, yet few differences in outcomes can be detected. Overuse
of health care services is one problem, and underuse is another. A classic
study evaluated the rate at which clinicians followed processes of care widely
recommended through national guidelines and the medical literature. When
averaged across all phases of care for the most common or lethal conditions,
it was determined that nearly half of patients who met conditions for effective
clinical care failed to receive appropriate care.
There is great potential to improve quality and/or reduce costs through
reforms that improve information on quality and costs, and align provider
payments so that providers are rewarded for the health outcomes of the
patients rather than just for the services they perform.

Information on Effectiveness
One of the key impediments to more effective health care delivery is a
lack of relevant information—for patients, providers, and payers—on the
comparative effectiveness and efficiency of health care options. Such information would be particularly useful for services that are in common practice,
generate high costs, employ rapidly changing technologies for which multiple
alternative therapies exist, and are in areas with substantial uncertainty.
The wide geographic variations in the use of procedures suggest that better
information on the effectiveness of different styles of medical practice could
result in substantial cost savings.

Health Information Technology
Health information technology (health IT) allows comprehensive management of medical information and the secure exchange of medical information
between health care consumers and providers. Broad use of health IT has the
potential to help dramatically transform the delivery of health care, making it
safer, more effective, and more efficient. While a number of large health care
organizations have realized some of these gains through the implementation
of multifunctional, interoperable health IT systems, to date, experimental
evidence supporting the broad benefits from health IT is more limited. The
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Administration supports broad adoption of health IT as a normal cost of
doing business, including policies that will encourage physicians and others to
adopt electronic health records and through furthering technologies for safe,
secure health information exchange.

Value-based Purchasing
Pay for performance or value-based purchasing is a payment model that
encourages health care providers to meet certain performance measures for
quality and efficiency. A recent example is eliminating payments for negative
consequences of care. The Centers for Medicare and Medicaid Services
(CMS) implemented a provision of the Deficit Reduction Act of 2005, which
prevents Medicare from giving hospitals higher payment for the additional
costs of treating certain “hospital-acquired conditions”—conditions that
result from medical errors or improper care and that can reasonably be
expected to be averted. Now big insurers are following Medicare’s lead and
are moving to ban payments for care resulting from grave mistakes. These
changes remove a perverse incentive for hospitals: improving patient safety
could reduce revenues and profits. As a result, these reforms should trigger
safety improvements and enhance the efficiency of the health care system.

Transparency of Price and Quality Information
Transparency of information on price and quality has been a priority of
this Administration. Medicare has provided incentives to providers to submit
performance information to CMS and many of these performance measures
have been made available on the CMS website so that consumers can compare
the quality of providers as they seek care. The administrators and sponsors of
Medicare and other Federal health insurance programs have been directed to
share with beneficiaries information about prices paid to health care providers
and the quality of the services they deliver. The commitment is to transform
Medicare by always seeking to improve the connection between expenditures
and positive health outcomes without increasing Medicare spending.

Promoting Healthy Behavior
Encouraging healthy behaviors, such as exercising more, eating better,
controlling weight gain, and quitting smoking, may be a cost-effective alternative to increased spending on health care. One way to encourage healthy
behavior is through health education. For example, much of the beneficial
effect of prenatal care is simply related to education about healthy behavior
while pregnant. A better understanding of the risks of high cholesterol and
blood pressure (and how to reduce those risks through healthy behavior) is
credited with being a very highly efficient way to improve health outcomes.
Administration policies that aim to increase consumer sensitivity to health

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care costs have a positive indirect consequence in that they may induce an
increase in healthy behaviors.

Conclusion
The health care system in the United States has helped improve the health
and well-being of Americans. As health care costs continue to rise, enormous
opportunities exist to increase the value of health care and improve health
insurance coverage. Addressing these fundamental problems and fulfilling
the potential of our health care system will require innovative polices to help
Americans get the care that best meets their needs, and to create an environment
that rewards high-quality, efficient care. While Federally sponsored health
insurance for the most vulnerable Americans through Medicare, Medicaid,
and SCHIP remains a priority, private markets offer the best opportunities
for controlling costs and providing innovative policies to enhance efficiency,
quality, and access. Efficiency of health spending would be improved if tax
code reforms were enacted. Reforms could level the playing field between
employer-provided and individual health insurance, thus boosting insurance
coverage. At the same time, reforms could reward consumers for purchases of
higher deductible plans with reasonable copayments that provide insurance
for costly medical necessities, but do not encourage unwarranted procedures.
By addressing concerns of adverse selection, insurance markets can become
more competitive, thereby promoting innovation, choice, access, and
efficiency. Finally, health care quality can be addressed by improving the
transparency of health care information and by tying reimbursement to the
performance of providers.

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C H A P T E R

5

Tax Policy

S

ocieties face two basic questions with regard to tax policy. The first question
concerns the amount of revenue that should be raised. That is, what is the
appropriate level of taxation? The level of taxation ultimately reflects views
about the appropriate size of government. If a society believes that the government should play a large role in the economy, then a high level of tax revenue
is necessary. While taxes are necessary to finance the public sector, they have
a considerable cost to the economy because they distort incentives and result
in lost value of output to society. Without taxes, individuals would decide
where to allocate resources depending on where those resources are most
productive. Taxes give individuals an incentive to reduce their tax burden by
avoiding activities that are taxed; as a result, decisions about working, saving,
investing, and spending are influenced by tax considerations, resulting in the
loss of output that would have created value for producers, consumers, and
workers. The distortions created by taxes have important implications for
economic growth and the well-being of Americans.
The second question about tax policy concerns how the tax burden should
be distributed across different members of society and different types of
activities. That is, what is the appropriate structure of taxation? Different tax
structures impose different costs on the economy in terms of the distortions
they create. A more efficient tax structure raises a given amount of revenue
with less distortion. Different tax structures also give rise to different distributions of after-tax income, and some distributions of income may be viewed
as more fair than others. A related issue is the timing of taxes. The use of
government debt allows the tax burden to be spread across time, raising
questions about how to tax different activities and individuals at different
points in time.
The key points of this chapter are:
• The ratio of Federal taxation in the United States to gross domestic
product (GDP) has fluctuated around an average value of 18.3 percent
over the past 40 years; despite the President’s 2001 and 2003 tax relief, this
ratio was 18.8 percent in 2007, above the 40-year-average. Under current
law, revenues are predicted to grow faster than the economy in coming
years, raising the level of taxation well above its historical average.
• Tax reductions in 2001 and 2003 have considerably lowered the tax
burden on labor and capital income and reduced distortions to economic
decisions. Making these tax cuts permanent can greatly improve
long-term economic outcomes.
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• In addition to contributing to growth, the tax cuts of 2003 also
improved the efficiency of the tax structure primarily by reducing the
double taxation of corporate income.
• The business tax structure in the United States still creates substantial
distortions. To attract investment from abroad and compete more
effectively in foreign markets, the United States must consider how best
to address distortions created by the structure of business taxes, as other
countries have done.

The Size of Government: A Historical View
Economists and policymakers have long debated the appropriate role
of the government in a market economy. The government provides some
services—such as national defense and law enforcement—that are clearly
essential for economic growth, but other functions of government, such as
large redistributions of income, are more controversial. A large public sector
imposes a cost on the economy primarily because the taxes that are required
to finance government programs distort labor supply, saving, and investment
decisions, resulting in lost value of output to society. Thus, our Nation
faces a tradeoff: a larger government can provide more public services and
transfer payments (payments that are not in exchange for goods or services) to
lower-income individuals, but these benefits often come at the cost of lower
economic output and well being.
The cost from tax distortions can be considerable. One recent study
suggests that raising an additional dollar of revenue from the individual
income tax costs the economy approximately 30 to 50 cents. That is, if taxes
increase by $1, taxpayers bear a cost of $1.30 to $1.50 – the $1 in revenue and
30 to 50 cents from accompanying distortions. This additional cost of 30-50
cents is known as deadweight loss. Any government services that are funded
with this revenue would have to have a benefit to society of at least $1.30 to
justify the increase in taxes.
One measure of the role of government is the size of government spending
relative to the economy. Over the past 40 years, Federal expenditures have
averaged 20.7 percent of GDP. Government activities can be financed by
current taxes or borrowing (which will necessitate higher future taxes or lower
future spending). Chart 5-1 shows that over the past 40 years, the ratio of
Federal taxes to GDP has fluctuated around an average value of 18.3 percent.
The ratio rose well above that level in the late 1960s, the early 1980s, and the
late 1990s. Each of these periods was then followed by several years in which
the ratio fell below its long-term average. Recent swings have been particularly
pronounced with the ratio reaching a post-World War II high of 20.9 percent

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in 2000. Tax revenues increased strongly relative to GDP from 1992 to 2000
as a result of rising real incomes, increases in capital gains realizations, and the
tax increases of the early 1990s. Tax revenues as a share of GDP tend to rise
when real incomes rise and fall when real incomes fall. Beginning in 2001,
tax revenues began to decline as the economy slipped into recession and real
incomes declined. The ratio of tax revenues to GDP fell to 16.3 percent (a
40-year low) in 2004. Since that time, tax revenues have grown faster than
the economy, resulting in a tax-to-GDP ratio of 18.8 percent in 2007, once
again above its 40-year average.
While the Federal tax-to-GDP ratio has not exhibited any consistent trend
in the past 40 years, it is projected to grow over the next 10 years. Under
current law, the President’s tax relief of 2001 and 2003 will expire at the end
of 2010. At this time, there will be a significant increase in the tax-to-GDP
ratio. Moreover, even in the absence of any legislative changes, there is a
tendency for the tax-to-GDP ratio to rise. (While the ratio may not rise every
year, there is an upward trend over time.) In the past, significant tax cuts
(in 1964, 1981, and 2001 to 2003) have maintained the tax-to-GDP ratio
at a relatively stable level. The solid line in Chart 5-2 shows the projected
tax-to-GDP ratio if the President’s 2001 and 2003 tax relief is not extended.

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Several factors will contribute to rising revenue in the near term, including
the expiration of the 2001 and 2003 tax cuts, the Alternative Minimum Tax
(AMT), real tax bracket creep, and withdrawals from tax-deferred accounts.

Expiration of the 2001 and 2003 Tax Cuts
The tax cuts of 2001 and 2003 (discussed in detail below) reduced individual tax rates on ordinary income, dividends, and capital gains; increased
the child tax credit; reduced the “marriage penalty” (the additional tax that
some couples pay as a result of getting married); and began a phase-out of the
estate tax. These provisions are set to expire at the end of 2010. If they do, the
tax-to-GDP ratio would climb from the 18.8 percent it reached in 2007 to
approximately 20 percent. Making the tax cuts permanent would lower this
ratio to the 18 to 19 percent range (the dashed line in Chart 5-2), although
the ratio would still continue above the 40-year average of 18.3 percent by
the end of the 10-year period depicted in the figure.

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Alternative Minimum Tax
Prior to 1969, a handful of high-income taxpayers used deductions and
exemptions to substantially reduce or eliminate their income tax liability.
This outcome was perceived as unfair, and to address this problem, the
Alternative Minimum Tax (AMT) was established. In its current form, the
AMT requires taxpayers to compute their tax liability a second way using a
broader definition of income that reduces or eliminates many of the deductions and exemptions allowed in the calculation of regular income tax. The
taxpayer must pay the greater of the two tax liabilities. In 1970, only 20,000
taxpayers were subject to the AMT. However, in recent years, the AMT
increasingly affects middle-income families, primarily because its parameters
are not indexed for inflation. Those who are most vulnerable include families
with many children (giving rise to a large number of exemptions) and
families in high-tax states (giving rise to a large deduction for state taxes).
The solution thus far has been to pass a series of temporary “patches” to limit
the scope of the AMT. The most recent patch keeps the number of AMT
filers stable through 2007 at about 4 million—the same as in 2006—instead
of the increase to 25 million that would have occurred had the patch not
been enacted. The Administration proposes a similar patch for 2008 in the
Budget that will continue to keep the aggregate number of AMT taxpayers
roughly constant. If the AMT is not patched in future years, the number of
taxpayers affected will continue to climb, resulting in a rising tax-to-GDP
ratio. Indexing the AMT parameters for inflation and extending the tax cuts
would lower the tax-to-GDP ratio below the dotted line in Chart 5-2, unless
the revenue loss from AMT indexation were made up via additional taxes.

Real Bracket Creep
Federal taxes as a whole are progressive, meaning that a family’s average
tax rate (total taxes paid as a percentage of income) rises as its income rises.
Recently released estimates suggest that in 2005, taxpayers in the bottom
20 percent of the income distribution faced an average Federal tax rate of
4.3 percent, while taxpayers in the top 20 percent faced an average Federal tax
rate of 25.2 percent. (This analysis takes into account individual income taxes,
payroll taxes, corporate income taxes, and excise taxes.) Over time, people’s
nominal incomes (not adjusted for changes in purchasing power) tend to
grow. Part of this growth is due only to inflation, but part of it represents an
increase in purchasing power (real income growth) as productivity improves
and we become more prosperous as a nation. Regular income tax brackets
(but not AMT brackets) are indexed for inflation, which prevents people
from moving up to higher brackets because of inflation (a phenomenon called
nominal bracket creep). However, as people’s real incomes grow, they become
subject to higher tax rates. This is called real bracket creep. The implication is
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that, even without explicit tax increases, the median income family (that is,
the family whose income places them in the middle of the income distribution) will face a rising average tax rate over the years because median incomes
are likely to grow faster than inflation. This will tend to increase the ratio of
Federal revenues to GDP.

Withdrawals from Tax-Deferred Accounts
A large amount of individual saving occurs through tax-deferred savings
vehicles, including defined benefit pension plans (which provide a specified
benefit at retirement) and tax-deferred savings accounts, such as 401(k)
plans and traditional Individual Retirement Accounts (IRAs). Individual and
employer contributions to these tax-deferred savings vehicles are deductible at
the time the contribution is made, and accumulate tax free until retirement.
After retirement, payments from these savings vehicles—including benefits
paid by defined benefit plans and withdrawals from tax-deferred accounts—
are taxable. In comparison, withdrawals from other types of accounts—for
example, ordinary savings accounts and Roth IRAs—do not require payment
of income tax on the withdrawal, and deposits in these accounts are not tax
deductible. At the end of 2002, there was about $9.0 trillion in tax-deferred
retirement plans on which tax would be paid at withdrawal. With the aging
of the population that is projected to occur, there will be an increase in such
payments, resulting in increased government revenue. These withdrawals are
different from the previous three factors for two reasons. First, they cause
a temporary surge in revenue driven by a demographic shift. Second, their
impact will occur over a somewhat longer period than depicted in Chart 5-2.
According to a recent study, these withdrawals are likely to increase income
tax receipts by about 0.25 percent of GDP over the next 25 years, and twice
that amount by the end of 75 years.
The factors discussed above—the expiration of the 2001 and 2003 tax
cuts, the expansion of the AMT, real bracket creep, and withdrawals from
tax-deferred savings accounts—are built into the tax code. In addition to
these internal factors, there are also external pressures for taxes to increase
in the future. Total Federal expenditures in 2007 were 20 percent of GDP.
However, entitlement programs like Medicare, Medicaid, and Social Security
are facing financial pressures from rising medical costs and an aging population. Based on current law, projected benefits under these programs could
push entitlement spending alone to 20 percent of GDP in 2080, compared
to 10.6 percent in 2007. In the absence of needed reforms to reduce projected
spending, this would necessitate unprecedented levels of taxation, deficit
spending, or dramatic reductions in the fraction of economic activity devoted
to other government activities.

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The Impact of Recent Tax Reductions
Taxes transfer resources from individuals to the government. The transfer
itself does not represent a net cost to society: any money given up by taxpayers
is gained by the government and can be used to fund government programs
or transfer payments. However, taxes impose a considerable burden on the
economy for several reasons. First, taxes interfere with the efficient allocation
of resources by changing the rewards from working, saving, and investing.
In the absence of taxes, individuals and firms would allocate resources to
activities where they would be most productive. When taxed, individuals
alter their behavior. For example, high tax rates on labor income induce
individuals to reduce their labor supply, because the incentive for working
is lower. High tax rates on capital income (the return earned on capital
investments) discourage investment in new capital. A reduction in investment
lowers the ratio of capital to labor and in turn reduces worker productivity
and wages. As a result of these distortions to work, saving, and investment
behavior, output is lost—output that would have created value for producers,
consumers, and workers. This loss of output is called the deadweight loss of
taxation. As discussed above, raising an additional dollar via the individual
income tax imposes a direct cost of $1 on taxpayers (which merely represents
a transfer to the government) and a deadweight loss of 30 to 50 cents from
the lost value of output to society. Second, high tax rates may also encourage
some taxpayers to underreport their incomes, giving rise to equity concerns
and requiring higher taxes on those who do comply in order to maintain
revenue. (While most taxpayers pay the taxes they owe, there is still a gap
between the amount of taxes that should be paid and the amount that is
actually paid.) Finally, taxes have large compliance costs that reflect the
resources taxpayers use to determine and pay their tax liability (including the
value of time spent keeping records and doing calculations). In 2004, compliance costs were estimated to be $85 billion for individual income taxes and
$40 billion for businesses other than sole proprietorships.
The tax cuts of 2001 and 2003 significantly lowered the tax burden on
labor and capital income and reduced distortions. The dividend and capital
gains rate cuts enacted in 2003 had an additional benefit to the economy
by improving the efficiency of the tax structure. By reducing the existing
preference for corporate debt financing over equity financing, these tax
cuts reduced the distortion of corporate finance decisions and improved
corporate governance.

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Labor Supply
Taxes effectively decrease the wage that workers receive for providing
labor and therefore distort labor supply decisions by changing the incentive
for working. These distortions create efficiency losses. The tax cuts of 2001
significantly decreased the tax rates that workers pay on their earned income,
thereby reducing the efficiency losses created by the distortion of their labor
supply decisions.
Individuals decide to work based upon whether take-home earnings exceed
the value of the leisure they forgo (for this discussion, leisure includes any
activities outside the labor market). Take-home pay declines as the average
tax rate, that is, the fraction of income paid in taxes, rises. Hence, higher
average tax rates mean that fewer individuals choose to work. Moreover,
higher marginal tax rates—the fraction of additional income paid in taxes—
reduce the incentive for working more hours or in a higher-skilled profession.
Increases in both average and marginal tax rates distort labor supply and skill
investment decisions and thus generate efficiency losses.
Individuals vary in their responsiveness to average and marginal tax rates,
so the efficiency losses from taxes differ by group. Studies show that single
mothers and married women are particularly sensitive to high average tax
rates. Their cost of working is higher because of child care and other home
production demands. The 2001 tax cuts lowered average tax rates at all points
of the income distribution, thereby making work decisions more efficient
(that is, closer to what they would be in the absence of tax distortions). A
recent study suggests that the 2001 tax cuts led single mothers to allocate
more of their time to market work. In contrast, several studies suggest that
men and single women without children are not affected much by average tax
rates when deciding whether to work. The responsiveness of married women
to high average tax rates has been falling over time as they become more
attached to the labor market (as men have more traditionally been).
High marginal income tax rates may discourage workers from working
more hours, choosing higher-paid occupations, and investing more in
education and other skills that would increase their earnings. To see why
higher marginal tax rates have these effects, imagine a worker with only a
bachelor’s degree deciding between a career as a 40-hour-per-week accountant
in a small firm paying around $40,000 per year versus a career as a 70-hourper-week self-employed consultant with an MBA earning around $80,000
per year. Suppose that the worker would pay $4,000 per year in taxes in the
accounting job and $18,000 per year in the consulting job. After taxes, the
additional income for the more demanding career would be $26,000 per year.
The marginal tax rate would be 35 percent (see Table 5-1).
Now suppose a change in tax policy reduces taxes for the accounting job
to $1,000 and increases taxes for the consulting job to $21,000. Instead of a

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35 percent marginal tax rate on the additional $40,000 in pre-tax income,
there would be a 50 percent marginal tax rate. This change in tax policy
reduces the additional return to the more demanding career from $26,000 to
just $20,000 per year, a 23 percent drop in the return to the more lucrative
career (see Table 5-1).
Factoring in 30 more hours per week working, the greater stress in the
consulting job, and the costs of getting the MBA, this tax policy change could
induce this worker to choose the less demanding career, thereby creating an
efficiency loss. So even if this change in tax policy is revenue neutral (that is,
the policy does not change overall average tax rates), the higher marginal taxes
would reduce overall economic efficiency because they alter the way wages
allocate workers to jobs and decrease incentives to choose higher-paying
careers with longer hours, greater intensity demands, and more costly skill
investments. The tax cuts in 2001 and 2003 generally reduced marginal tax
rates and reduced these distortions, thereby encouraging workers to become
more productive.

Saving and Investment
When individuals receive income, they can either spend it on current
consumption or save it to fund future consumption. Individual savings gets
channeled into capital investments. For example, an individual may save by
buying financial assets, such as stocks or bonds. Firms use the funds raised
from selling stocks and bonds to finance capital investments, such as buildings
or equipment. These investments generate income, which individual savers
receive in the form of interest payment on bonds, or dividends and capital
gains on stocks. Investment plays an important role in improving the wellbeing of Americans, as increases in the amount of capital per worker result in
productivity increases and economic growth.

Table 5-1.—Comparing the Marginal Tax Rate for a Career Changer
Under Two Illustrative Tax Policies

Earnings............................................
Taxes ................................................
After Tax Earnings ............................
Change in Earnings
(MBA minus Accountant) ...........
Change in Taxes ...............................
Marginal Tax Rate ............................
Change in After Tax Earnings...........

Initial Tax Policy
Accountant
MBA Consultant
$40,000
$80,000
$4,000
$18,000
$36,000
$62,000
$40,000
$14,000
35%
$26,000

New Tax Policy
Accountant
MBA Consultant
$40,000
$80,000
$1,000
$21,000
$39,000
$59,000
$40,000
$20,000
50%
$20,000

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An important tax policy issue concerns the treatment of income generated
by capital investments. Taxes on capital income discourage saving by individuals and investment by businesses. This lowers the capital-to-labor ratio
and harms long-run economic growth. Currently, when firms earn income
from their capital investments, they may be subject to a firm-level tax on
this amount (after subtracting depreciation and interest costs). In addition,
individual savers, who provide the funds used to finance these investments,
pay income tax on the return on their savings (which includes dividends,
capital gains, interest, and rent). As a result, capital income is often taxed at
both the firm and the individual level, resulting in double taxation.
Individuals save so they can consume resources in the future, rather than
today. Firms invest so that they will be more productive and profitable in
the future. Taxes on capital income lower the return to saving and investment, thereby favoring current consumption over future consumption. For
example, suppose a corporation is considering the purchase of a machine
that will be financed by selling additional shares of stock, and that the rate of
return on the investment—net of depreciation, or the reduction in the value of
the machine—is 10 percent. Suppose further that individual savers are willing
to purchase the shares if they receive a return of at least 6 percent. That is,
they are willing to sacrifice $1 of current consumption (by buying the shares)
in exchange for $1.06 of consumption 1 year from now. The investment is
socially beneficial because it generates a 10 percent rate of return, and the
savers providing the funds would have settled for 6 percent. At the firm level,
the income generated by the machine is subject to the corporate income
tax. If the corporate tax rate is 35 percent, and the firm is allowed to deduct
actual depreciation, then the after-tax return generated by the machine is
6.5 percent. Suppose the firm then pays its shareholders the entire 6.5 percent
return in the form of dividends. If the dividend income tax rate is 15 percent,
savers are left with a 5.5 percent after-tax return. The rest of the initial
10 percent return (4.5 percent) goes to the government. Because the
5.5 percent after-tax return is less than the 6 percent that the individual
savers require to be willing to forgo current consumption, the investment is
not made even though the total return is still 10 percent (4.5 percent to the
government plus 5.5 percent to the savers). Consequently, taxes on capital
income distort saving and investment decisions. Longer time horizons tend
to magnify this distortion because lower after-tax returns get compounded
over time.
Firm-level taxes on capital income vary depending on the organizational
form of the firm. Some business income, including that of sole proprietorships,
Subchapter S corporations, and partnerships, is taxed under the individual
income tax system. These firms are known as flow-through businesses because
they face no firm-level tax; instead, the firms’ income flows through to their
owners, who pay personal income tax on it. On the other hand, Subchapter
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C corporations fall under the corporate tax system. C corporations (hereafter
simply referred to as corporations) pay a firm-level tax on the firm’s income
after deducting costs including wages, interest payments, raw materials,
and depreciation.
Current U.S. tax policy is a hybrid of an income tax and a consumption
tax. Some capital income is exempt from tax, as it would be under a consumption tax. For example, at the individual level, the return to saving through
individual retirement accounts (IRAs) and employer-sponsored retirement
plans accumulates free of tax. According to recent estimates, about 35 percent
of the return to household financial assets effectively receives consumption
tax treatment. The remainder is subject to income tax treatment. At the firm
level, firms can often take advantage of accelerated depreciation provisions—
which allow them to deduct depreciation from their income before it actually
occurs—to lower their tax liability. Accelerated depreciation lowers the tax
burden on investment.
The tax reductions of 2001 and 2003 have significantly reduced the tax
burden on capital income. By lowering individual income taxes, the 2001
tax cut lowered the top marginal tax rate on flow-through businesses from
39.6 percent to 35 percent. Individuals also pay these reduced tax rates on
their interest income. The 2001 tax cuts also included a phased-in elimination of the estate tax (or tax imposed on assets left to one’s heirs). Since the
estate tax is a tax on wealth, if it were permanently eliminated, it could be
expected to increase saving and investment. The tax cuts of 2003 included
cuts in dividend and capital gains taxes. As discussed below, if these tax cuts
are made permanent, they will have a substantial impact on investment and
long-run economic growth.

Corporate Financial Policy and Governance
Tax reforms can result in considerable economic benefits even when they do
not lower the overall tax burden. This outcome is accomplished by improving
the efficiency of the tax structure, so that the same amount of revenue can be
raised with less distortion. The reverse can be true as well: a revenue neutral
change, or even a tax cut, can reduce well-being if it is poorly structured.
The tax cuts of 2003 improved the efficiency of the business tax structure
by reducing the high tax burden on corporate equity that results from double
taxation. For funding investment in new capital, firms generally have a choice
between debt (issuing bonds) and equity (retaining earnings or issuing new
shares of stock). Corporations pay tax on their revenue minus their costs.
Costs include wages, interest, raw materials, and depreciation. Corporate
profit is then either paid out to shareholders as dividends, or reinvested
in the company (eventually resulting in capital gains for shareholders).
Shareholders are taxed at the individual level on any dividends they receive,

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and on any capital gains they realize when they sell the stock. Double taxation
of corporate income imposes a particularly high burden on equity-financed
corporate investment. In comparison, because interest payments are deductible to the firm (and taxable to bondholders), corporate debt is only subject
to one layer of taxation. Therefore, corporations have a strong incentive to
use debt financing, rather than equity financing, for new investment. The
overuse of debt financing increases the chances of bankruptcy: when a firm
has high debt payments, there is a greater probability that the firm’s income
will be insufficient to cover these payments. Bankruptcies subject investors to
additional costs and risks.
The tax cuts of 2003 also reduced the tax bias against paying dividends
compared to retaining earnings. Prior to 2003, long-term capital gains were
taxed at a maximum rate of 20 percent, while dividends were potentially
subject to the top individual income tax rate (38.6% in 2002). In addition,
capital gains income has another tax advantage over dividend income: taxes
are deferred until the asset is sold. Thus, capital gains can accumulate tax free,
while dividends are taxed when they are paid out. Through compounding,
the difference in tax can be substantial, especially over a long period of time.
The tax cuts of 2003 lowered the top tax rate on both qualified dividends
and long-term capital gains (capital gains on assets held for more than a year)
to 15 percent. While capital gains still have a tax advantage over dividends as
a result of deferral, the differential treatment has been reduced considerably.
This policy change appears to have had a marked impact on firm behavior. As
shown in Chart 5-3, the growth in dividend income received by households
increased substantially after 2003. In the 20 years prior to 2003, dividend
income grew at an average rate of 5.9 percent per year; following the 2003 tax
cut, growth increased to an average of 13.7 percent per year. This result has
been confirmed in a number of formal studies. (The 2004 spike in the graph
represents a special one-time dividend paid by Microsoft Corporation.)
This increase in dividend payments reflects the reduction in the tax
bias against dividends. Paying dividends can have a number of benefits
for corporate governance, and there is an efficiency loss when the tax code
discourages firms from using dividends when they are appropriate. First,
dividends can be used to return funds to shareholders, who can decide how to
reinvest them, rather than leaving funds in the hands of corporate managers.
Because a portion of managers’ pay is independent of the firm’s performance,
managers’ interests generally differ from the interests of shareholders, so
managers may have an incentive to use retained earnings in a way that does
not maximize the value of the firm. Second, paying dividends can help firms
signal their profitability to investors. Thus, corporate governance may suffer
if the tax code penalizes dividends relative to capital gains.

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Significance of Tax Cuts to Individuals
The tax cuts since 2001 lowered taxes overall and across all income groups.
Average Federal tax rates (which include income, payroll, corporate, and estate
taxes) are estimated at 21.7 percent in 2007, but would have been 23.8 percent
in the absence of the tax cuts (see Table 5-2). For taxpayers in the bottom
20 percent of the income distribution, Federal tax rates are 3.4 percent, which
is lower than the 3.7 percent they would be in the absence of the tax cuts.
In addition, over 5 million taxpayers in 2007 are projected to have had their
Federal income tax liability completely eliminated by the tax cuts.
Table 5-2.—Estimated Distributional Effects of 2001-2006 Tax Cuts in 2007
Average Federal Tax Rates
Lowest
Quintile
With Tax Cuts ......................................
Without Tax Cuts.................................

Second
Quintile

Third
Quintile

Fourth
Quintile

Top
Quintile

All

3.4
3.7

7.3
9.0

14.4
16.4

18.8
20.7

25.9
28.2

21.7
23.8

Share of Federal Taxes
Lowest
Quintile
With Tax Cuts ......................................
Without Tax Cuts.................................

Second
Quintile

Third
Quintile

Fourth
Quintile

Top
Quintile

All

0.4
0.4

2.1
2.3

7.4
7.7

17.0
17.0

73.0
72.4

100.0
100.0

Source: Urban Institute/Brookings Institution Tax Policy Center.

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The tax cuts increased the share of Federal taxes being paid by highincome taxpayers; the top 20 percent of taxpayers are estimated to have paid
73.0 percent of overall Federal taxes in 2007, but would have paid a somewhat
lower share, 72.4 percent, without the tax cuts (see Table 5-2). Conversely,
the tax cuts decreased the share of Federal taxes being paid by moderate
and middle-income taxpayers; the second and third quintiles (from 20 to
60 percent in the income distribution) are estimated to have paid 9.5 percent
(2.1 percent plus 7.4 percent) of overall Federal taxes in 2007, but would
have paid 10.0 percent (2.3 percent plus 7.7 percent) without the tax cuts.
In addition to distorting work and skill investment decisions, the tax system
can also distort marriage decisions. As discussed in Box 5-1, a progressive tax
system cannot simultaneously treat all families with the same income equally
and be marriage-neutral. This has resulted in a tax system with marriage
bonuses (mostly for couples with dissimilar incomes) and marriage penalties
(mostly for couples with similar incomes), although on net it encourages
marriage (even before the 2001 tax cuts). It should be noted that both
marriage bonuses and penalties distort marriage decisions and potentially
generate efficiency losses. However, if marriage generates some greater social
good that should be subsidized, marriage bonuses may improve efficiency
on net.
The 2001 tax cuts, in general, increased marriage subsidies and reduced
marriage penalties in the tax system by: (1) expanding the Earned Income
Tax Credit (EITC) for married couples only, (2) expanding the 15 percent
bracket only for married couples, (3) expanding the standard deduction only
for married couples, and (4) doubling the child tax credit and making it
partially refundable. Recent research estimates that the tax cuts, on average,
increased the subsidization of marriage by the tax system by about $1,000 per
year, although the effect for a particular family depends on family income,
number of children, and the share of family income earned by each spouse. It
is estimated that these tax changes should eventually increase marriage rates
by about 1 to 4 percentage points.

Economic Benefits of Lower Taxes
The previous sections focused on specific ways in which taxes can distort
individual behavior. The analysis suggests that recent tax cuts have reduced
distortions to labor supply, saving, investment, and corporate governance. A
recent study projects that the introduction of the 2003 tax cuts resulted in an
immediate increase in GDP in 2003. But because the cuts are temporary, they
will have less impact on decisions that generate payoffs far in the future than
they would if they were permanent. For example, the decision to undertake
education depends on the effect of education on wages over potentially long
careers. Thus, they can only have a limited impact on long-term economic

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Box 5-1: Marriage Penalty Basics
It is widely acknowledged that a tax system cannot simultaneously
accomplish the following three goals:
1. Progressivity: average income tax rates rise with family income
2. Family neutrality: families with equal incomes pay equal taxes
3. Marriage neutrality: taxes paid by a family do not depend on
marriage
The inherent conflicts in these three goals can be illustrated by considering a few examples. Consider a couple without children with one
spouse who earns $60,000 and another who does not work. Under 2007
tax law, that couple pays $5,592 in Federal income taxes, but would pay
a total of $9,236 if they were not married and both were filing individually. The resulting marriage bonus of $3,644 is generated because the
nonworking spouse serves as a tax deduction for the higher earning
spouse. The current tax system is not marriage-neutral.
Alternatively, suppose that each spouse earns $30,000, resulting in
the same family income of $60,000. Current tax law is family-neutral, so
this couple pays the same $5,592 as above. If the tax system is changed
so that all individuals file separately, each spouse pays $2,796 for a total
of $5,592. That is the same as they would pay on a family income of
$60,000 but is $3,644 less than the combined tax liability of the family
above. A progressive tax system that has all taxpayers file individually
cannot be family-neutral.
Finally, if the tax system is changed so that all taxpayers pay 10 percent
on all of their income, taxes are $6,000 for each family regardless of
whether the couple is married or how the earnings are split between
the two spouses. The tax system is marriage- and family-neutral, but it
would no longer be progressive, because the average tax rate would be
10 percent for all taxpayers.

performance. Making them permanent can substantially improve economic
efficiency. The Treasury Department estimates that if the tax cuts of 2001 and
2003 were made permanent and paid for by reductions in future government
spending, economic output would increase by 0.7 percent in the long run.
However, the benefits to the economy might be offset if the extension of the
tax cuts results in additional government borrowing or future tax increases,
rather than spending cuts. The Treasury Department also estimates that if
the tax cuts were made permanent but offset by other revenue raising tax
measures in the future, then economic output would decline by 0.9 percent

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in the long run. The concern about long-term financing for the tax cuts is
particularly important because of the likelihood of rising spending pressures
in the future. The Office of Management and Budget projects, for example,
that under current law total noninterest Federal spending could reach
25 percent of GDP by 2080, compared with 18.2 percent today. The
breakdown of projected spending in Chart 5-4 shows that the main driving
force behind this increase is the growth in spending on entitlement programs,
primarily Medicare, Medicaid, and Social Security, which could reach
approximately 20 percent of GDP by 2080. The benefits of making the tax
cuts permanent might also be offset if the tax cuts are financed by a reduction
in efficient government spending (spending whose benefits exceed both the
direct cost to the taxpayer and the deadweight loss).

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The Structure of Business Taxes
Despite recent reforms, the business tax structure still creates a number of
distortions in its treatment of capital income. To the extent that the U.S. tax
system resembles an income tax, it encourages current consumption rather
than saving. Beyond this, however, the tax system imposes differential tax
burdens on different types of investments, thereby leading to a misallocation
of resources. Ideally, firms should undertake investments that generate the
highest rate of return, independent of taxes. If all investment returns are taxed
at the same rate, then the projects with the highest returns will still be selected
(although investment overall will fall because investment returns overall are
taxed). However, if different kinds of investments face different tax rates, then
a lower-return project may be selected over a higher-return project because
the after-tax return could be higher for the lower-return project.
As noted above, the tax burden on investment is affected by both firm-level
taxes (such as the corporate income tax) and individual-level taxes on the
return to saving (such as dividend and capital gains taxes). The complexity of
the tax code makes it difficult to measure the true tax burden on investment
returns. For example, corporate earnings are taxed at a maximum Federal
rate of 35 percent. However, that tax burden is reduced by accelerated
depreciation, special tax preferences for certain activities, and the interest
deduction. Also, while some kinds of savings are subject to personal income
tax, other kinds (for example, retirement savings accounts) accumulate tax
free. A standard approach to quantifying the distortions is to compute the
effective marginal tax rate, which measures the percentage difference between
the before-tax and after-tax returns on a new investment, taking into account
the complexities of the tax code, and both firm- and individual-level taxes.
The effective marginal tax rate is most relevant when a firm decides whether
to undertake a new investment.
Table 5-3 shows the effective marginal tax rates on different kinds of
investments. It is clear from the table that tax rates vary considerably across
investments, depending on the type of capital involved and the method of
financing. Equity-financed corporate investment faces the highest effective
tax rate of 40 percent. This is still the case even though the tax cuts of 2003
substantially reduced the double taxation of corporate equity. The tax rate on
debt-financed corporate investment is actually negative, a result of the interest
deduction combined with accelerated depreciation allowances. Noncorporate
investments face a low tax rate because noncorporate firms are treated as
flow-through entities and are not subject to double taxation. Owner-occupied
housing faces a very low tax rate. The return to an owner-occupied home is the
rental value of the home to the occupant, which is not subject to income tax.

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These results suggest several distortions. First, housing is favored relative to
other capital. While there may be reasons to favor owner-occupied housing,
its benefits must be weighed against the value of other kinds of capital.
Second, there is a distortion across different types of business investment.
For example, equipment is lightly taxed relative to structures and inventories.
Third, taxes distort a firm’s choice of organizational form. The corporate
form of organization is unattractive from a tax standpoint, leading firms to
become flow-through entities even in situations in which the corporate form
would allow the most effective use of resources. Finally, there is a distortion
to corporations’ financing decisions, with debt receiving a tax advantage
over equity.
There are two broad directions for reform. First, efficiency could be
improved by reducing the disparate tax treatment of different kinds of investment. There are a number of reforms that could help to achieve this goal.
For example, the Treasury Department estimates that if special preferences
were eliminated, the corporate tax rate could be reduced from 35 percent to
31 percent and still raise the same amount of revenue. Further integration of
the personal and corporate tax systems would alleviate the double taxation
of corporate income. For example, some countries in the Organization for
Economic Cooperation and Development (OECD), including the United
Kingdom, Canada, and Mexico address the double taxation of capital income
by giving investors a tax credit for taxes paid at the corporate level. Second,
reducing the tax burden on investment can improve long-run economic
performance by increasing the ratio of capital to labor, thereby boosting labor
productivity and earnings. There are two ways to reduce the tax burden on
investment at the firm level. One is to reduce the corporate tax rate, and the
other is to allow full or partial expensing of new investment. Full expensing
allows the firm to fully deduct the cost of new investments at the time the

Table 5-3.—Effective Marginal Tax Rates on Investment
Type of Investment
Economy (overall) ....................................................................
Business Sector.......................................................................
Corporate Sector .................................................................
Method of Financing.......................................................
Debt ............................................................................
Equity..........................................................................
Type of Asset ..................................................................
Equipment ..................................................................
Structures ...................................................................
Land ............................................................................
Inventories..................................................................
Noncorporate sector ...........................................................
Owner-occupied housing ........................................................

Effective Marginal Tax Rate
17%
26
29
-2
40
25
34
33
33
20
4

Source: Department of the Treasury (Office of Tax Analysis).

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investments are made. A more modest approach would be to allow partial
expensing, under which a firm could immediately deduct a fraction of the
investment’s cost. As shown in Box 5-2, full expensing reduces the firm-level
tax on new investments to zero.

Box 5-2: Expensing versus Corporate Rate Reductions
Consider a firm that purchases a machine for $100. A year later, the
machine produces output worth $50. The firm then sells the machine for
$60. Thus, the return from investing $100 in the machine is 10 percent
(the firm earns $50 + $60 = $110). The firm can finance the initial $100
investment by borrowing (debt), by reinvesting earnings, or by issuing
new shares.
Assume that the firm either reinvests earnings or issues new shares
(equity financing). Under an income tax, the firm’s net income is $10,
the value of the machine’s output ($50) plus the proceeds from selling
the machine ($60) minus the cost of the machine ($100). If the corporate income tax rate is 35 percent, the firm pays $3.50 in tax on its $10
income, leaving it with $6.50 after taxes (a 6.5 percent after-tax return).
Thus, an income tax creates a distortion to the investment decision by
lowering the after-tax return on the investment.
In contrast, full expensing allows the firm to deduct the entire $100
cost of the machine up front. Thus, the firm’s taxes go down by $35
when it makes the investment, and the effective cost of the machine
is $65, rather than $100. The firm earns $50 from the machine’s output
plus $60 from the sale of the machine, and the total income of $110 is
taxed at a rate of 35 percent (because the firm already deducted the
cost of the machine upon purchase). Thus, the tax paid is $38.50, and
the firm’s after-tax income is $71.50. The rate of return is ($71.50 - $65) /
$65 = 10 percent, which is the same as it would have been without a tax.
Effectively, full expensing makes the government a partner in the investment: the government pays for 35 percent of the investment’s cost (via
the deduction), and receives 35 percent of its return.
To be most effective in reducing distortions, full expensing would
need to be combined with elimination of the interest deduction. Suppose
interest payments remain deductible under the full-expensing approach
described above and the firm borrows money to fund half of the
machine’s cost ($50) at a 10 percent interest rate. The effective cost of
the machine is $65 due to expensing. Therefore, the firm spends $15 of
its own funds ($65 - $50 = $15) for the machine. Next year, the machine
generates $110 of income, and the firm pays $55 to the lender (principal
continued on next page

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Box 5-2 — continued
plus interest). The firm deducts the interest payment of $5 from its
income, resulting in taxable income of $105. At a 35 percent tax rate,
the firm’s tax liability is $36.75. The firm is left with a profit of $18.25,
a return of 22 percent on its initial $15 investment. Thus, the tax on the
investment’s return is negative (the investment receives a subsidy from
the government). If the interest deduction were not allowed, the firm’s
tax bill would be $38.50 (just as above), and the profit after repaying the
lender $55 and paying taxes would be $16.50, a 10 percent rate of return.
With full expensing and no interest deductibility, there is no distortion to
either the investment decision or the financing decision.
Another alternative is to reduce the corporate rate. Using the same
example as above, consider the impact of reducing the corporate tax
rate from 35 percent to 10 percent. The firm makes its $100 investment,
and next year pays tax on its net income of $10. This leaves the firm with
an after-tax return of 9 percent. Since the after-tax return is still below
the before-tax return, there is a distortion to the investment decision.
However, there is less of a distortion than with the 35 percent tax rate.

In recent years, other countries have taken the approach of cutting the
corporate tax rate. A tax rate cut affects all capital, both new and old. In
comparison, expensing is targeted to new investment only. Thus, expensing
generates a greater increase in investment for any given revenue reduction.
Another difference between tax rate cuts and expensing arises because firms
sometimes earn returns on their investments that are above the normal,
ordinary return. To illustrate this, consider the example in Box 5-2, in
which a $100 investment yields a 10 percent rate of return. Suppose that
the next best use of the firm’s funds would produce a return of 5 percent.
The return of 5 percent represents the opportunity cost of the funds, also
known as the normal return. As long as the investment return is above the
normal return, the firm will undertake the project; thus, taxing any returns
that exceed the opportunity cost of funds (called supra-normal returns) does
not create any distortions. Expensing exempts only the normal return from
taxation; supra-normal returns are subject to taxation. In the example, $5 of
the investment’s payoff represents compensation for the firm’s opportunity
cost, and $5 represents a supra-normal return. If the corporate tax rate is
35 percent, full expensing would give the firm a deduction worth $35 this
year, and require it to pay a tax of $38.50 next year. Effectively, the firm is

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able to defer $35 of tax liability for 1 year. The value to the firm of deferring
the tax until next year is $1.75 (5 percent of $35). However, next year, the
firm must pay $3.50 in additional taxes. Thus, the firm has effectively paid a
tax of $1.75 (the $3.50 of additional taxes minus the $1.75 value of deferral),
which represents a tax of 35 percent on the $5 supra-normal return. Note that
taxing the supra-normal return does not result in any distortions, because the
firm’s decision to undertake the investment does not depend on the tax. If
the normal return were instead 10 percent, then the deferral of tax would be
worth $3.50 to the firm, and there would be no effective tax on the investment return. In contrast to expensing, a corporate tax rate cut lowers the tax
on both normal and supra-normal returns.
The efficiency of the business tax structure in the United States is particularly
important as other countries undertake major corporate tax reforms. Capital
is mobile across international borders, and the business tax environment is
important in ensuring that the United States continues to attract investment
from abroad, and that U.S. firms can compete effectively in foreign countries.
In the mid-1980s, the average statutory corporate tax rate (weighted by
GDP) across OECD countries was 44 percent. The U.S. tax reform of 1986,
which reduced the corporate tax rate from 46 percent to 34 percent, made
the United States a relatively low-tax country at the time of the reform. Since
that time, however, the OECD-average corporate tax rate has fallen below
that of the United States. These comparisons refer to statutory tax rates. The
United States has relatively generous accelerated depreciation provisions and
a multitude of business-level exemptions and deductions that reduce the
tax burden on investment below the statutory rate. However, the effective
marginal tax rate on corporate investment is still high: compared to other
G7 countries (France, Germany, the United Kingdom, Canada, Italy, and
Japan), the United States imposes an above-average marginal effective tax
rate on corporate investment for domestic debt and equity holders in the
top individual income tax bracket. In contrast, the U.S. average corporate tax
rate (the total amount of corporate taxes paid as a percentage of corporate
operating surplus) is low relative to other countries. This fact highlights the
inefficiency and complexity of the corporate tax system. The marginal tax rate
represents the additional tax burden a firm faces when it undertakes a new
investment; therefore, it is the relevant tax rate for new investment decisions.
This distortion is larger in the United States than in other countries. Despite
the larger distortion, the corporate tax raises less revenue in the United States
than in other countries, as evidenced by the fact that the average tax rate
is lower. The implication is that investment incentives could be improved
without a reduction in government revenue.

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Conclusion
The analysis in this chapter has focused on both the level and structure
of taxation. Over the past 40 years, Federal revenues have fluctuated around
18.3% of GDP. Under current law, however, tax revenues are scheduled to
rise much faster than GDP in coming years. Furthermore, over longer periods
of time, projected growth in entitlement spending will put pressure on taxes
to rise. Because taxes distort incentives, these trends have important implications for economic growth. Extending the tax cuts of 2001 and 2003 would
improve labor supply and savings incentives and result in less distortion of
corporate finance decisions. Combined with control of entitlement spending,
and a long-term solution to the Alternative Minimum Tax, this can have a
beneficial effect on long-run growth.
The tax cuts of 2001 and 2003 have also improved the efficiency of the
tax structure, particularly with respect to the double taxation of corporate
income. However, the structure of business taxation still creates a number of
distortions and puts the United States at a competitive disadvantage globally.
Even revenue-neutral reforms can result in economic gains if they remove
unnecessary distortions.

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C H A P T E R

6

The Nation’s Infrastructure

O

ur economy depends on infrastructure that allows goods, people,
information, and energy to flow throughout the Nation. This infrastructure—ports, roads, airports, communication networks, power lines, and
many other systems—represents an important input into the economy. Just
as firms must use labor and raw materials to produce output, they must also
use airports and power lines. Similarly, consumers rely on cell phone towers
and highways in their daily lives.
Infrastructure is often provided either directly by government agencies or by
firms regulated by the government. Accordingly, the quantity and quality of
infrastructure available to a firm or consumer often depends on government
policy in addition to market forces. In recent years, the United States has experienced growing demands on its infrastructure, thanks to economic growth
and successful deregulation in sectors that are heavy users of infrastructure.
The policy challenge is how best to respond to these increased demands.
“Infrastructure” is a broad term, and this brief chapter does not provide
a comprehensive review of all of the U.S. infrastructure systems. Instead, it
discusses some of the economic issues associated with major transportation,
communication, and power transmission systems, and some of the policy
challenges in each. The key points of this chapter are:
• Infrastructure typically requires large capital investments to build and
maintain capacity. Once built, however, the cost of allowing an extra
person to use the capacity is typically low, as long as the number of
users is less than the infrastructure’s capacity. This cost structure often
means that infrastructure cannot be provided efficiently by a competitive
market. As a result, many types of infrastructure are instead provided
by Government-regulated companies or, in some cases, by the
Government itself.
• Demands on the U.S. infrastructure grow as the economy expands, and
Government policies often determine how effectively infrastructure can
accommodate that growth. Properly designed user fees can help ensure
efficiency by revealing information about what infrastructure consumers
value most.
• The price people pay for using infrastructure should reflect the extra
cost associated with its use. This includes the cost of maintaining the
infrastructure itself, as well as delays caused by increased congestion.

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• The private sector plays an important role in providing infrastructure.
However, lack of competition in markets for infrastructure raises
concerns about market power, so that Government oversight is
sometimes necessary. Government must continually reassess the need for
oversight in the face of changing market conditions.

The Basic Challenge of Infrastructure Policy
As the economy grows, demands on our infrastructure increase. Since
1980, vehicle traffic on U.S. roads has nearly doubled, passenger-miles of air
traffic have increased by more than 150 percent, and ton-miles of freight on
U.S. railroads have increased by more than 80 percent. The Nation’s growing
demand for energy resources, together with a greater emphasis on new sources
of power, is placing new demands on our energy infrastructure. And the
growth of the Internet and information technology means that telecommunications networks are becoming more central to the U.S. economy.
Infrastructure systems—whether pipelines, roads, fiber optic networks, or
port facilities—require large investments in long-lived capacity. Once this
capacity is in place, however, small increases in usage may cost relatively
little to provide. Marginal cost refers to the extra cost associated with a small
increase in production of a good. Infrastructure investments produce goods,
like passenger trips or phone calls, that typically have low marginal cost as long
as total demands on the infrastructure do not approach the capacity it was
designed to support. Once usage approaches capacity, however, marginal cost
can increase substantially as extra use makes the entire system less effective.
These features create certain policy challenges that are common to many
types of infrastructure. To illustrate these challenges, imagine a growing city
where construction of a new bridge across a river is being considered. The
bridge will provide significant benefits relative to the existing options for
crossing the river—for example, taking a ferry or traveling several miles to
cross at another point.
One possibility is that a private party will construct the bridge, planning
to earn a profit by charging tolls. If the private sector builds a bridge, the
market for river crossings at any given point will likely be provided by a single
monopolist. This is because providing a bridge involves economies of scale: it
is cheaper to build a single bridge that serves 20,000 people per day than two
bridges that each serve 10,000 people per day. Because of economies of scale,
the market for bridge crossings is called a natural monopoly. Even if there are
no artificial barriers to market entry, a monopoly is likely to emerge simply
because a single firm can produce the good more cheaply than multiple
firms could.

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A monopolistic bridge owner may choose to charge prices that are too high
from society’s perspective. A monopolist will choose a toll that generates the
highest possible profit, even though the cost of allowing an extra person to
cross the bridge may be very close to zero. This means lost opportunities: some
people will choose not to cross because of the high toll, even though the cost
of allowing them to cross is very small. The people who choose not to cross
may waste time and fuel traveling to a toll-free bridge, or may choose not to
cross, perhaps visiting friends less often or not shopping at stores that would
require a bridge crossing. Economists refer to this type of foregone benefit as
a deadweight loss, and it is a key economic reason for preventing monopoly
pricing. To avoid this deadweight loss, government often attempts to prevent
monopoly pricing of infrastructure, either by regulating the price or by
providing the infrastructure itself. While government involvement can address
monopoly concerns, it can create other inefficiencies: regulators may lack the
information necessary to make efficient choices and may make decisions based
on political considerations rather than on a cost-benefit analysis.
If the government builds and operates the bridge, it must make a number
of decisions. First, the government must decide how to pay for the bridge.
One approach is simply to charge a toll, for each use of the bridge, that is
high enough to cover the average cost of providing the bridge. This approach
seems sensible: the bridge will be paid for by those people who use it, and
their willingness to pay for the bridge reveals that it passes a cost-benefit
test. However, this approach is likely to create some inefficiency, because the
average cost of providing the bridge will be higher than the extra cost each
person imposes when he or she crosses at uncongested times. Thus, some
people will choose not to cross even though it would cost the government
little or nothing to allow them to cross. This can create a deadweight loss
similar to the loss that occurs when a monopolist chooses the toll, though the
deadweight loss will generally be smaller than under monopoly pricing.
One response to this problem would be to charge a two-part tariff: a fixed
charge for a permit to use the bridge, in addition to a per-use toll that would
be low to reflect the small marginal cost of using the bridge. This approach
creates efficient incentives for those consumers who obtain permits, because
the toll they pay for each crossing reflects only the cost of their use. However,
some drivers will choose not to obtain a permit, and their failure to use the
bridge is a deadweight loss.
Other issues arise if the bridge becomes congested. Suppose that, at peak
hours, so many people attempt to use the bridge that traffic jams develop.
At such times, each person who uses the bridge contributes to the delay that
everyone on the bridge suffers. Congestion means that, from society’s perspective, the marginal cost of bridge trips is no longer small: each additional trip
makes traffic slower, adding to the delay costs of everyone using the bridge.

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When the bridge becomes congested, users of the bridge may urge the
government to invest in expanding its capacity. If people can use the bridge
for free, frequent users are likely to insist that greater investment is a good
idea, while those who do not use the bridge will object to spending tax
dollars on the project. If the bridge is financed by tolls that are the same
at all times of day, people who use the bridge at peak times will receive the
benefit of extra capacity, even though they do not bear the full cost of the
expansion. People who use the bridge at uncongested times will pay more in
tolls to finance the expansion, but receive no benefit. Thus, peak-time users
may support expansion even if the benefits to society do not outweigh the
construction costs.
Setting aside the question of whether the bridge should be expanded,
the congestion described above reflects a system that encourages inefficient
choices. Each person who uses the bridge decides when to cross without
considering the costs this creates for others because of increased congestion.
Addressing this inefficiency can help ensure that existing capacity is used as
efficiently as possible.
The questions of building the bridge—who should provide it, how it
should be paid for, and when new capacity should be constructed—are all
present to different degrees in debates about the major infrastructure systems
in the United States. The next section gives an overview of some of these
systems and some of the specific issues they face.

Current State of the Nation’s Infrastructure
This section discusses aspects of the U.S. transportation, energy, and
communications infrastructure. Economic growth has meant increased
demand for transportation, raising questions about how best to address
congestion. In energy and communications, changes in technology and market
structure are transforming the way that infrastructure serves these sectors.

Roads
Roads play a central role in the U.S. economy. Both firms and consumers
depend on cars and trucks in their everyday economic lives. Most U.S. freight
shipments take place by road; for example, trucks handle over 70 percent of
U.S. freight shipments (by value). On average, drivers travel 29 miles by car
each day and spend almost an hour a day behind the wheel. Americans use
roads in all parts of their daily lives, from commuting to work to shopping
and visiting friends.
The amount of traffic on U.S. roads has been increasing steadily for decades.
As traffic has increased, priorities have shifted from building new connections
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between places to accommodating growing traffic on existing routes (see
Box 6-1). Although Federal, State, and local governments have built new roads
and added lanes to existing roads, new construction has not kept up with the
increases in traffic. Chart 6-1 shows that vehicle miles traveled in the United
States have almost doubled since 1980, whereas total lane-miles of road have
expanded by less than 6 percent. Put somewhat differently, each mile of road
serves more traffic. For example, on urban highways the average number of
vehicles using a given mile of road each day has increased from 3,785 in 1980
to 5,527 in 2005. We would not necessarily expect new road investment
to match increases in miles driven, because a mile of road that serves 500
vehicles per day may easily accommodate 1,000 vehicles per day without any
new construction. But at peak hours, the number of drivers attempting to use
many urban roads approaches or exceeds the roads’ maximum capacity. In
2004, almost two-thirds of peak-hour travel on urban interstates took place
on roads carrying at least 80 percent of their theoretical maximum number of
vehicles. More than a third of travel on urban interstates took place on roads
carrying at least 95 percent of their theoretical maximum.

Box 6-1: The Interstate Highway System
The Interstate Highway System began when President Eisenhower
signed the Federal-Aid Highway Act of 1956, which authorized $25 billion
for the construction of 41,000 miles of interstate highway designed to
a common standard. One of the original motivations for construction
was to move materials and troops in times of emergency. President
Eisenhower originally hoped to finance the system with tolls, but the
system was instead financed through a fuel tax because of concern that
tolls in less densely populated areas would be insufficient to cover the
cost of those roads.
The Interstate System has come to play a central role in our Nation’s
economic life and has lowered the cost of transporting goods around
the United States. The construction of the Interstate System may have
made important contributions to economic growth, although there is no
consensus among economists regarding highways’ economic effects,
and it is therefore difficult to say what parts of the Interstate System
have benefits that outweigh their costs. Today, the local objective of
reducing congestion in urban areas has replaced the National objective
of connecting distant markets and providing for National defense. Now
that interstates connect the country, the priority is to find ways of using
these resources as efficiently as possible, and in particular to address
congestion on the most heavily traveled interstate corridors.

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When traffic approaches a road’s capacity, the road becomes congested,
resulting in real costs for drivers and businesses. The extra fuel consumed in
all urban areas amounts to 2.87 billion gallons per year—about 2 percent of
U.S. gasoline consumption. On average, commuters in urban areas lose almost
38 hours per year due to traffic congestion, and in the largest cities congestion
costs the average commuter 54 hours per year. In the largest urban areas,
over 40 percent of travel takes place under congested conditions. Congestion
is worst in the Nation’s largest cities, but is increasing in urbanized areas of
every size. Chart 6-2 shows that congestion is increasing even in urbanized
areas with fewer than 500,000 residents.
Traffic congestion is the predictable result of a situation in which a scarce
resource—road space at rush hour—is made freely available to everyone.
Individual drivers choose to travel at the time they find most convenient.
When they travel at congested times, however, they contribute to the wasted
time, fuel, and increased pollution borne by everyone else on the roadway.
Individual drivers do not take this cost into account, so they use the road
even though the social costs they create may be greater than the individual
benefits they receive. This is the “tragedy of the commons”: when a resource
is freely available to anyone who wants to use it, it is overused, potentially
leaving everyone worse off.
With highway traffic, as with other types of infrastructure, the problem is
not simply that so many people use a road, but that they choose to use it at
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the same time. At hours when many drivers want to travel, a certain amount
of delay can be optimal, given the benefits that many drivers receive from
traveling at their most preferred time. But as a road becomes very crowded,
small increases in the number of cars can cause large decreases in the speed of
traffic. When too many people attempt to enter road space at one time, traffic
flow “collapses,” meaning that a road is able to handle fewer cars in a given
amount of time. Spreading out the times at which drivers enter a roadway can
permit higher speeds, allowing a road to handle more traffic with the same
amount of pavement.
One response to road congestion is to build more roads or widen existing
roads. While new construction can be justified in many cases, it is not the
solution to all congestion. Road construction is expensive; each additional
lane can cost millions of dollars per mile. Furthermore, the tragedy of the
commons applies to new capacity as well as to existing capacity. If a new lane
makes a road less congested at peak hours, drivers who had previously avoided
travel at peak hours will start to use the road at those times. This increase
in rush-hour drivers means that the road will again become congested.
This phenomenon is often referred to as the “fundamental law of highway
congestion”: increased capacity induces new traffic at peak times, so that
moderate increases in capacity do not eliminate congestion.
A solution that does address the tragedy of the commons is to charge a price
for using a road that reflects the extra delay each driver causes. Congestion
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pricing refers to a policy of charging tolls that reflect how crowded a road is
at particular times. When drivers are required to pay such a toll, some drivers
will choose to travel at less crowded times, take less crowded routes, or take
alternative means of transportation. Those for whom it is especially important
to travel a particular route at a particular time will pay the toll and be able to
travel without inefficient levels of delay.
Congestion pricing has proven effective in many areas in reducing congestion and increasing traffic flows. For example, on a busy 10-mile stretch of
State Route 91 in Orange County, California, drivers can choose between
free lanes and toll lanes, for which prices adjust during the day on a schedule
designed to maintain a free flow of traffic. Speeds in the toll lanes exceed
60 miles per hour even at the busiest time of day, with the result that, at
the busiest part of the rush hour, each toll lane can produce almost twice as
many vehicle trips each hour as the nontoll lanes. Because prices discourage
drivers from entering the toll road when it is already crowded, traffic does not
become so dense that flows collapse, and the road is able to serve more drivers
during any given period of time.
More and more urban areas are becoming interested in using congestion
pricing as a way to alleviate clogged roadways. As part of its Congestion
Initiative, the Department of Transportation has developed Urban Partnership
Agreements with five cities across the country, working with local authorities to mitigate the increasing congestion. In August 2007, the Secretary of
Transportation announced the selection of Miami, Minneapolis/St. Paul,
New York, San Francisco, and Seattle as the cities chosen from dozens of
applicants to receive a share of $850 million in Federal funds to help alleviate
highway congestion and the mounting costs it imposes. Each of these cities
has developed plans to use some form of congestion pricing to reduce
traffic delays. For example, New York City is proposing “cordon pricing,”
following an approach that has been successfully implemented in London
and Stockholm. Between 6:00 a.m. and 6:00 p.m. on weekdays, cars would
pay $8 per day to drive in the busiest parts of Manhattan, while trucks would
be charged $21. Vehicles driving in the area could be identified by electronic
“E-Z Pass” readers or, for vehicles without the readers, through a license plate
recognition system using digital cameras.
New York’s plan is targeted at a heavily congested urban area; other cities
have followed different approaches targeted at certain roads or stretches of
road that are especially congested. On SR-520 in the Seattle area, regional
planners are proposing to use demand-based toll rates both to alleviate
peak-hour congestion and to raise funds to replace a high-traffic bridge over
Lake Washington. Under the plan, toll rates would be updated in real time
to reflect current traffic conditions, and in-vehicle transponders and supplemental cameras would collect the toll while drivers travel at highway speed.

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Bridges
On August 1, 2007, the I-35W Bridge in Minneapolis collapsed, killing
13 people. This was the first collapse of this magnitude since May 2002, when
a barge collided with a bridge in Oklahoma, causing the collapse of a section
of I-40 and killing 14 people. The recent tragedy focused national attention
on the condition of our highway bridges. Bridge repair and maintenance are
important for two reasons: to ensure safety and to maintain or increase the
capacity of a bridge to carry traffic.
There are nearly 600,000 bridges in the United States. Bridges are inspected
using the National Bridge Inspection Standards, in most cases every 2 years.
The Department of Transportation collects this information in the National
Bridge Inventory, a database of information on bridge conditions. About
12 percent of the bridges in the United States are classified as “structurally
deficient” by the Department of Transportation, meaning that the bridge
is subject to certain weight or other restrictions due to its condition. This
share has been shrinking as States have focused greater resources on bridge
maintenance and repair (see Chart 6-3). These numbers suggest that bridges
have become a higher priority for States in recent years.

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Ongoing inspection and maintenance is especially important for bridges.
Infrastructure investments should be based on a cost-benefit analysis. In
some cases, new projects might seem more appealing to decisionmakers than
routine maintenance, but maintenance is essential. One way to encourage
investment in projects with the greatest return is to ensure greater transparency in reporting the costs and benefits of different infrastructure projects.
For example, by publicly identifying the bridges in greatest need of repair, the
National Bridge Inventory may help generate political support for targeting
resources where they are most productive.

Railways
Railroads have played a central role in our Nation’s history, linking markets
over long distances and helping create a national economy. Rail continues to
be an important mode of freight transportation, particularly for heavy bulk
materials such as coal. Chart 6-4 shows that railroads carry almost one-third
of the Nation’s freight, measured in terms of ton-miles, but because rail
tends to be used for lower-priced goods, this represents a small fraction of
the total value of goods shipped. In 1980, the Staggers Rail Act deregulated
the freight rail industry. At the time, observers expected prices to increase,
but in fact deregulation unleashed significant efficiencies and lower rates.
After decades without changes in rates or traffic, shipping rates have fallen
substantially in real terms since 1985, while the volume of freight rail traffic
has nearly doubled. In the last few years, rising fuel prices have made rail
an attractive alternative to trucking, because railways are about three times
more fuel efficient than trucks. Increasing highway congestion may also have
contributed to increasing demand for rail. As a result of the increased demand
for rail shipping, its real price has increased for the first time in many years,
and railroads are investing increasing amounts in new capacity.
Railroads serve a variety of customers who face different sets of options
for shipping their freight. Some routes are served by only one railroad, while
other routes are served by competing railroads. Some products (such as goods
in containers) can be economically shipped by road, whereas others (such as
coal) may be prohibitively expensive to truck over long distances.
Like roads and other infrastructure, rail systems are very capital intensive,
and railroads must pay the cost of maintaining their rail lines and other capital
stock regardless of the amount of freight they carry. This creates difficulties
for railroads that serve competitive markets. To remain profitable overall, the
total revenue from all shipments must cover the railroad’s capital costs. But
a particular shipment will increase a railroad’s profit as long as revenue from
that shipment is greater than the marginal cost of that shipment. In markets

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where shippers have an alternative to rail, this means that railroads will offer
rates to some shippers that do not cover a full share of their capital costs. They
make up for this by charging prices that cover more than a shipment’s share of
capital costs in markets where shippers do not have economical alternatives.
Understandably, many shippers in these markets complain that they pay
shipping rates substantially higher than those paid by shippers in more
competitive markets. However, the railroads’ ability to charge different rates
to different shippers plays a vital role in enabling railroads to maintain the
large capital investments needed to operate a railroad. If railroads were forced
to charge the same price for all freight, many shippers that have alternative
shipping options would respond to an increase in rail rates by shifting toward
road, water, or other transportation. This reduction in revenue would make
railroad capital investments less profitable, and the likely result would be
reductions in investment and in rail capacity. In the long run, the result
could be even higher shipping rates for those who continued to use rail
transportation.

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Container Ports
Over 800 billion dollars worth of goods, representing over 40 percent of
U.S. trade, passes through U.S. seaports each year. Container trade—that
is, goods packed in containers that can be moved from ships to trucks or
trains without being unpacked—continues to grow dramatically, more than
doubling in the United States since 1995. All of those goods pass through a
relatively small number of facilities. A complex system of cranes, berths, skilled
labor, warehouses, and ground transportation facilities is necessary to transfer
goods from oceangoing ships to the domestic transportation network.
Increases in global containerized trade have meant an increase in the
size of container ships. In the late 1980s, shipping companies introduced
the first container ships that were too large to use the Panama Canal, and
today such “post-Panamax” ships represent at least 30 percent of container
shipping capacity. As ships have gotten bigger, port traffic has become more
concentrated among those ports with waterways and port facilities capable
of handling such large vessels. Today, the 10 busiest U.S. ports handle
85 percent of U.S. container traffic, up from 78 percent in 1995. Chart 6-5
shows that increased concentration has been most noticeable at the 3 busiest
U.S. ports (Los Angeles, Long Beach, and New York), where the share of
National container traffic increased from 41 percent in 1995 to 49 percent
in 2005.

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Freight shipments into and out of the United States will continue to grow
along with the growth in U.S. trade. This increase in trade flows will place
tremendous demands not only on port facilities, but also on the land-based
systems that carry traffic to and from the port. For example, the ports of Los
Angeles and Long Beach together handle container traffic representing over
10,000 truckloads each day (not to mention goods shipped in tankers, dry
bulk, and other ships). All of this traffic must be accommodated on the roads
and railways serving the port.
Increased demands on port facilities are creating opportunities for smaller
ports to expand their traffic. For example, the Port of Savannah, Georgia,
more than tripled its container traffic between 1995 and 2005. Savannah’s
growth reflects significant investments in expanding warehouses, docks, and
rail yards, as well as the desire of shippers to avoid congestion at the larger
ports in New York and Los Angeles. Increased U.S. sea trade also creates
opportunities for ports in Mexico and Canada, which can connect by road or
rail to U.S. markets. For example, a new container port in the town of Prince
Rupert, British Columbia, opened in 2007, offering facilities for the largest
container ships and rail connections to Chicago and the Midwest.
Faced with growing demands, congested ports have implemented innovative strategies for reducing the attendant strain on local infrastructure. The
Ports of Los Angeles and Long Beach developed a program called “PierPass,”
designed to move traffic to off-peak periods during the nights and weekends.
Carriers unloading during peak hours pay a surcharge of $100 for a 40-foot
container, and proceeds from the surcharge fund port operations during
the weekend and overnight. According to the program, 36 percent of the
container volume at the Los Angeles–Long Beach complex is now moved
during the off-peak shifts, removing 60,000 trucks from the roads during
rush hour each week.

Aviation
Since 1975, the real price of air transportation has fallen, while the number
of miles traveled by air has grown by almost 300 percent. An important part of
these changes was the deregulation of the airline industry in 1978. By permitting airlines to introduce new flights and schedules, deregulation introduced
competitive forces that have led to entry by discount carriers and reductions
in the real price of air travel. In 2006, air travel generated approximately
$164 billion in revenue, equivalent to approximately 1.2 percent of GDP.
Air travel requires not only planes, but also runways, terminals, and an air
traffic control system to maintain a safe distance between planes. The capacity
of these systems has not increased as rapidly as the growth of air traffic. Our
air traffic control system is largely based on antiquated technology. New
investments in infrastructure have been hampered by several factors, including

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political opposition from communities near airports and the fact that air
traffic control is provided by a government bureaucracy that has no financial
incentive to respond efficiently to increased demand for its services.
Growing traffic has created congestion in both the Nation’s airspace and
its airports. The result has been longer flight times and increased delays.
Airlines have accounted for congestion, in part, by building more time into
their schedules, although delays have grown despite the longer schedules.
Chart 6-6 shows that the average scheduled time for a flight from New
York’s La Guardia airport to Atlanta’s Hartsfield-Jackson International
Airport has increased from 2 hours and 18 minutes in 1988 to 2 hours and
34 minutes in 2006. The average delay has also increased from 12 minutes
in 1988 to over 20 minutes in 2006. This has been the trend for the busiest
routes in the continental United States: for the 10 city pairs with the highest
number of airline passengers, scheduled times have increased by an average
of 14 minutes, and delay has increased by an average of 6 minutes. Delays
have also become more severe: for these same routes, the number of flights
that are delayed by more than 60 minutes has increased from 2.7 percent to
7.4 percent. The summer of 2007 saw especially severe flight delays, with
particularly acute problems in New York (see Box 6-2).

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Box 6-2: Delays at New York City Airports
Some of the worst air traffic congestion in the United States occurs
in the New York City area. Problems in New York have a large impact
on delays nationwide, because a large proportion of U.S. flights travel
to, from, or over New York airspace. Delays in New York became especially acute in the summer of 2007, after restrictions were lifted on
landings and takeoffs at John F. Kennedy International Airport. With no
limitations on how many flights could be scheduled into the airport, the
number of scheduled flights increased by 20 percent, and far more flights
were scheduled to arrive during peak periods than the airport could
handle. The result was long delays: only 56 percent of flights arrived on
time during the summer of 2007, with especially severe delays in the
peak hours.
In September 2007, the President called on the Secretary of
Transportation to seek solutions to mounting air traffic congestion
and the frustrations it creates for passengers. The Federal Aviation
Administration convened an Aviation Rulemaking Committee to explore
ways of relieving congestion, including market-based mechanisms
such as congestion pricing or auctions for the right to land or take off
at congested times. In December, the Department of Transportation
announced that it would limit the number of flights to and from New
York airports beginning in spring 2008, while continuing to pursue
market-based approaches to reducing congestion in the near term.
History has shown that such market-based solutions can work. In
1968, for example, the Port Authority of New York and New Jersey
implemented a congestion-pricing fee on small aircraft by raising
the minimum landing fee during peak hours. As expected, travelers
responded to the price incentives: general aviation peak hour activity
declined by 30 percent, reducing delays at the region’s airports.

The Federal Aviation Administration, working with other agencies, has
begun an effort to expand capacity by upgrading the air traffic control system.
The Next Generation Air Transportation System (NextGen) would use satellites and digital communications to provide both controllers and pilots with
a much more accurate picture of where planes are in the airspace. Together
with other technologies, these upgrades have the potential to reduce the
amount of separation necessary for safe flight, allowing more planes to use a
given amount of space and increasing the system’s capacity.
Airport congestion reflects capacity constraints and indicates a failure to
manage and price that capacity in a way that reflects the costs each plane
creates for air traffic control and for other users of congested space. Each
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plane that lands or takes off at a busy airport takes up roughly the same
amount of space and time regardless of size, but the fees paid for using an
airport are much higher for larger planes. The airport fees that airlines pay
each time they land are based on the weight of a plane, and the national
air traffic control system is funded largely by taxes on airline tickets. Both
approaches mean that a regional jet carrying 50 passengers pays much less
than a large jet carrying 200 passengers, even though each creates roughly the
same burden for air traffic control and the same amount of congestion in the
airspace. Similarly, fees are the same whether the airport is busy or empty,
even though scheduling an arrival at a busy time can generate significant costs
for other users. This system creates the wrong incentives, encouraging airlines
to use inefficiently small aircraft and to schedule too many flights at the most
popular airports and times of day.
The market-based mechanisms discussed earlier in this chapter can help
encourage airlines to use airport infrastructure more efficiently. Different
options are available for using market-based mechanisms to manage airport
congestion. One is to change the structure of landing fees so that planes pay
more to land at more congested times and airports. Similar to congestion
pricing on roadways, this would encourage airlines and others to schedule
flights at times when the airports and airspace are less crowded. Another
approach would be to fix the number of landing and takeoff slots available
during the busiest times of day, and auction the right to use those slots. Slots
would, in effect, be leased for a fixed period of time, with slots turning over
and being reauctioned on a regular basis to accommodate new entrants and
promote competition. Assigning slots through a market process would have a
similar effect to congestion-based fees, because the price of slots at the most
popular times would be greater than those at less popular times. Under either
approach, airlines would have an incentive to schedule flights at less busy
times, and passengers who attach high value to flying at busy times of day
would be able to pay a premium to schedule flights at those times with greater
confidence that flights will be able to depart on time.
Market-based mechanisms could also improve efficiency when airport
capacity is reduced as a result of bad weather or other temporary problems. For
example, airlines could pay a premium for the right to land with higher priority
when capacity is reduced. Airlines that pay for higher priority could advertise
their higher reliability, whereas other airlines might offer price discounts to
travelers who were willing to accept a higher probability of delay.

The Electrical Grid
Although they transport electricity rather than goods or people, power lines
share important characteristics with roads and other infrastructure. Building
transmission lines requires a large capital investment. Once this capacity is

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built, the marginal cost of transmission is low as long as the amount of power
being delivered is less than the capacity of the lines.
The transmission of electric power was once primarily a local affair: a
utility generated electricity and distributed it on its own power lines to the
surrounding area, with rates set by a local regulator. But over time, the United
States has moved from this local model to one in which the Nation is covered
by grids of high-voltage transmission lines, and power generated in one place
may be used hundreds of miles away. While some power plants continue to
serve a particular local population, others take advantage of the grid to sell
their electricity on a wholesale market.
By permitting power to be generated in low-cost areas and delivered to
high-cost areas, the national electrical grid can allow generating capacity to be
used much more efficiently. For example, on the West Coast, long-distance
transmission lines allow hydroelectric power from Washington State to be
transmitted to California to help meet peak summer demand. Long-distance
transmission can make alternative energy sources more viable as the United
States attempts to reduce its dependence on fossil fuels (see Chapter 7). For
example, production of significant amounts of wind power is economically
feasible only in certain areas of the country. Similarly, it is easier to site power
plants in certain areas. Long-distance power lines mean that electricity can be
produced in areas where production is most efficient and delivered to areas
where it is most needed.
The legacy of State-regulated local utilities creates obstacles to developing
an efficient national electrical grid. One problem is fragmented ownership of
power lines. Different parts of the electrical grid are owned and maintained
by a large number of investor-owned utilities and other entities, so that power
may need to pass through lines belonging to multiple parties before reaching
its destination. This can create coordination problems. Each utility must
decide independently how much to invest in the capacity of its power lines,
even though these decisions will affect many other parts of the network. It
may not make sense for one party to invest in greater capacity unless others
make similar investments.
Such problems are exacerbated by the fact that different regulators govern
different parts of the electrical grid. Utility investments often must be
approved by State or local regulators applying rules designed for the model of
a local utility. Regulators in one State may not have incentives to account for
the benefits of new transmission capacity for residents of other States. In fact,
regulators in an area where production costs are low may object to making
it easier for local power generators to sell in areas where production costs
are high, because more power will flow to the high-cost market, potentially
raising wholesale prices in the local market in the short run. In the long run,
however, making trade in electricity easier will lead to greater generating
capacity in areas where electricity can be generated at lowest cost. The Federal
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Government has taken steps to coordinate interstate transmission projects
by giving the Department of Energy the authority to designate certain
transmission corridors as high priority and to help develop new capacity in
those areas.

Telecommunications
Not long ago, the U.S. telecommunications infrastructure consisted largely
of copper wires used to transmit the human voice. Today, information travels
any number of ways—satellites, cellular systems, and fiber optic cable, to name
some examples—and industry continues to develop new communication
technologies. New choices mean consumers and businesses enjoy the benefits
of competition among providers. As information technology becomes faster
and cheaper, communication infrastructure is allowing workers to telecommute and consumers to shop online.

Broadband Internet Service
Broadband refers to Internet connections that can transmit data at high
speeds (the Federal Communications Commission defines a high-speed
connection as one that allows transfer rates greater than 200 kilobits per
second in at least one direction, but many connections are much faster than
this). As recently as 1999, broadband access was very rare, but by 2007
nearly half the country had a broadband connection at home, and the United
States had over 80 million high-speed connections. Until 2005, almost all
broadband users had either a cable modem or a digital subscriber line (DSL)
connection, but recently, mobile wireless subscriptions have increased rapidly
(see Chart 6-7).
Like other forms of infrastructure, broadband capacity requires large capital
expenditures, and once capacity is installed, the marginal cost of delivering
data over a line is close to zero. Telecommunications companies have invested
large amounts to expand broadband infrastructure, installing new highcapacity transmission lines and investing in new technology to send data over
existing telephone and cable wires.
Despite large fixed costs of deployment, there are multiple broadband
providers competing for subscribers in most U.S. markets. The Federal
Communications Commission (FCC) reports that by the end of 2006, over
80 percent of U.S. ZIP codes were served by at least four broadband service
providers. Nationwide, 79 percent of local telephone subscribers had access to
DSL, and 96 percent of cable subscribers had access to cable Internet service.
Broadband service provision remains an extremely dynamic area, and
telecommunications providers are exploring new models to determine what
type of broadband provision can produce the greatest benefits for consumers.
For example, last year, the fastest-growing category of high-speed Internet

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access was in mobile wireless connections—a category that grew from about
3 million connections at the end of 2005 to over 20 million connections at
the end of 2006. Broadband providers are also offering dramatically higher
transmission speeds, enabling consumers to access new services such as
streaming video and voice-over Internet protocol (VOIP). The tremendous
value the Internet creates for consumers has provided strong incentives for the
private sector both to invest in building out the Internet infrastructure and to
innovate in finding new ways of serving the market.

Wireless Communication
Wireless technology, such as that used in cellular phones, has been one of
the most dynamic sectors of the economy in recent years, with considerable
growth in both the number of users and the quality of services. Today, the
United States has 243 million wireless subscribers, up from 16 million at the
end of 1993. Several wireless service providers compete to offer communication features that will attract new customers, such as the opportunity to
share pictures, download news and other information, or view a map of their
current location and directions to their destination.
Wireless communications systems transmit radio signals using specific
frequencies of the radio spectrum. If different signals were to use the same
frequency, the result would be interference that prevents communication.
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To prevent interference, the Government regulates who can use each part of
the spectrum. Private sector users obtain licenses from the FCC that grant
exclusive permission to transmit signals in a certain area. Certain frequencies
are reserved for use by Government agencies, and use of this spectrum is
coordinated through the National Telecommunications and Information
Administration in the Department of Commerce.
The right to use spectrum is a scarce resource, with many competing
demands. Early in the history of radio, the U.S. Government began allocating
the right to use spectrum through an administrative process, in which
different potential users applied for licenses and the FCC attempted to
determine which use would generate the greatest social benefit. This approach
requires the Government to evaluate an enormous amount of information
about the competing benefits of using resources in different ways. Markets
can help solve this problem, because the prices people are willing to pay for a
scarce resource reflect all the information they possess about how the resource
can be best used.
Recognizing these benefits from market allocation, the U.S. Government
has moved to a system in which the right to use spectrum for wireless communication is awarded through auctions. In 1994, the FCC began a series of
auctions for the rights to use spectrum for personal communication services.
Since then, the FCC has held about 70 spectrum auctions, generating nearly
$60 billion in revenue and opening up new opportunities for firms to offer
wireless services.
The spectrum auctions have put the right to use spectrum in the hands of
those who believe they can use it to generate the greatest value. By creating
clear property rights to use particular frequencies, the auctions have given
companies the incentives to invest in the resources they have obtained. The
result has been a rapid build-out of networks of towers for cellular communication. Chart 6-8 shows that the number of wireless transmitters in the
United States has grown from about 20,000 in 1995 to 210,000 in 2007—an
increase of 22 percent per year.
Through the President’s Spectrum Management Initiative, the
Administration has sought ways to ensure that spectrum is used in the way
that generates the greatest value. One way to do this is to create incentives
for Government users of spectrum to consider the opportunity cost of the
spectrum they use. Currently, Government agencies obtain spectrum licenses
through an administrative process—in contrast to other valuable resources,
such as electricity and labor, for which they must pay. Policies that lead
agencies to recognize the cost of using spectrum will encourage them to free
up this resource when there are others who could use it more efficiently.

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Infrastructure Policy
Though the U.S. infrastructure systems face a diverse set of issues, they
have certain features in common, such as high capital costs and limitations to
capacity that create the potential for congestion. This section discusses some
of the key policy questions that are common to many forms of infrastructure.
First, how should infrastructure be paid for? The price of infrastructure
should reflect marginal cost, but this may not be sufficient to cover capital
costs. Second, how should policymakers set priorities for infrastructure
investment? In many cases, the government can look to markets for ideas as
to how to best identify which projects have the greatest return. Third, should
infrastructure be provided by the private or public sector? Policymakers can
often choose between government provision and private sector provision with
some degree of government regulation. Fourth, when should infrastructure
be provided at the Federal level, and when is it better provided at the State
or local level?

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How Should Infrastructure Be Paid For?
As discussed at the beginning of this chapter, efficient use of any good or
service requires that the price people pay for using the good or service equals
the extra cost they impose when they use it. If the price is lower than this cost,
people will have an incentive to overuse the good or service. For example, if
electricity is available for free, consumers may leave lights on when they are
not using them. If the price is higher than the extra cost of providing the
good, it will be underused, creating a deadweight loss.
For much infrastructure, the marginal cost of extra use may be very low
or close to zero when use is well below capacity. This creates a dilemma in
financing infrastructure because encouraging efficient use means setting the
price equal to marginal cost. If this price is at or near zero, revenue will not
cover the cost of providing infrastructure, requiring either a higher price or
some other source of revenue. For some forms of infrastructure, firms address
this problem with a two-part tariff: a fixed fee for access to the infrastructure,
in addition to a per-use fee that reflects the marginal cost of providing the
infrastructure. For example, telecommunications providers typically charge
users a monthly subscription fee but allow users to transmit as much data
as they like at little or no extra charge, reflecting the fact that once a user is
connected to the network, extra data transmission involves little or no extra
costs. This approach creates efficient incentives for those consumers who
subscribe, while still allowing telecommunications providers to finance the
cost of their investment.
When roads or other infrastructure become congested, the efficient
response is to charge fees that reflect the cost each additional user imposes
on others. Congestion prices can lead to efficient decisions about whether
and when to use infrastructure and yield information about where additional
capacity would be most valuable.
Efficient tolls can also generate revenue that can help pay for infrastructure.
Fees collected through congestion pricing can be used to fund expansion of
existing infrastructure and reduce current indirect taxes and fees. Under the
right circumstances, efficient tolls will be sufficient to completely fund new
infrastructure construction—meaning that congestion is reduced, while at
the same time roads are financed almost entirely by the drivers who use them
during the busiest periods.

How Should Government Set Priorities for
Infrastructure Projects?
In competitive markets, firms decide whether to invest in new capacity
based on the value that capacity creates for consumers. For example, imagine
a coffee shop that has long lines during the morning rush. The shop’s owner

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could shorten the wait by adding an extra cashier. This would cost money,
but would please her customers, potentially leading to greater sales. The
owner will add a cashier if the extra coffee she can sell will generate enough
revenue to justify the extra expense.
In areas in which infrastructure investment is made by private parties,
such as broadband or wireless communications, companies undertake exactly
this type of analysis. Similarly, when the government decides whether to
undertake new infrastructure investment, it should conduct an analysis
similar to that of the coffee shop owner, comparing the costs of a new project
to the benefits it generates for users. Rigorous cost-benefit analysis should
be used to determine whether the benefits of a particular project outweigh
its cost and whether the benefits of dollars spent are greater than the social
benefits from spending money in other areas.
Private sector firms use the prices consumers are willing to pay to measure
the benefits of extra investment. When the government makes investment
decisions, however, there is frequently no market price that reflects how
much consumers are willing to pay for greater capacity or for a particular
new project. When infrastructure is provided for free, one cannot infer from
heavy use that users attach a high value to using certain infrastructure. Free
access also makes it difficult to evaluate users’ stated preferences. For example,
residents of a particular area may be strong supporters of expanding a freeway
serving their community, given that they are able to use that freeway at no
additional charge. But this support is not responsive to the real question that
a policymaker would want to answer, which is whether those residents would
support the construction project if they had to bear all of its associated costs,
in addition to receiving the benefits.
The problem of determining the value users receive from infrastructure
projects is another argument on behalf of user fees that reflect marginal cost.
When users pay for the infrastructure they use, we can be more confident that
the infrastructure produces benefits that reflect the cost.

When Should the Government Regulate or Provide
Infrastructure?
As discussed earlier in this chapter, infrastructure is often a natural monopoly,
meaning that one firm can serve the market more cheaply than multiple firms
could. This may create a role for the government to prevent the distortions
that result from monopoly pricing. However, large capital costs by themselves
do not necessarily imply natural monopoly; when a market is large, it may
support multiple firms even though the costs of participating in the market
are high. When several firms compete to provide a service, government
regulation is not needed to prevent monopoly prices.

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Technological innovation has the potential to fundamentally alter the
makeup of markets, and government regulation should adapt to changes
in market structure. Markets once dominated by monopolies can become
competitive over time due to innovation. Regulations should be eliminated
as markets become more competitive.
A good example of this phenomenon is telecommunications. Although the
industry was once dominated by a single firm or by a few large firms, today
numerous providers compete to provide customers with voice, Internet,
and video over numerous platforms, including telephone (DSL), cable,
fiber-optic, satellite, wireless, and even the electric grid. In the face of such
innovation and digital convergence, the government must reassess legacy
regulatory regimes and replace regulation with competition wherever possible
to most efficiently maximize consumer welfare.
When infrastructure provision is a natural monopoly, economic theory
provides no clear answer to the question of whether infrastructure is better
provided directly by the government or by a regulated monopolist. In
both cases, decisions will be insulated from market discipline. Government
regulation of a private firm involves some duplication of effort, because the
regulator must examine firm decisions to prevent abuses of monopoly power.
But a government agency may not have incentives to produce efficiently,
because it does not have the profit motive of the private sector. Private firms
may also be able to provide management with stronger incentives to increase
efficiency.
Empirical studies of privatization around the world have shown that, in
general, private firms in various industries produce and invest more efficiently
than state-owned enterprises. Although these privatizations have occurred in
a wide variety of different countries and industries, privately run enterprises
on average produce more efficiently and invest more in their industry. Recent
U.S. experiences have also demonstrated that, in some cases, there can be
benefits to greater private sector involvement in provision of transportation
infrastructure.
Some urban areas, wanting to improve congested roads in the face of tight
budgets, have turned to private investors to build and operate toll roads. In
1990, for example, Virginia authorized a private investment partnership to
construct the Dulles Greenway, a 14-mile stretch of highway in a congested
part of the Washington, D.C., metropolitan area. The partnership was authorized to collect tolls that would provide no more than a reasonable return on
the invested funds. Since construction in the mid-1990s, the road has become
an integral part of the region’s transportation network, carrying over 50,000
vehicles each day in 2006.

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In 2005, the Federal Aviation Administration contracted with Lockheed
Martin to take over operation of the FAA’s Automated Flight Service Stations.
These stations provide general aviation pilots with weather briefings, updates
on airport closings, flight plan assistance and emergency communications.
The contractor has successfully consolidated operations and reduced costs,
and the FAA projects that it will save $2.2 billion over the contract’s first
5-year period. The FAA continues to monitor the stations to ensure quality
and service levels.
Although private firms have strong incentives to produce efficiently, some
argue that they will tend to provide a lower quality of service than the government, because higher quality may yield lower profits. This concern suggests
that when government contracts with a private firm to provide public infrastructure, it should pay careful attention to the terms of the contract to ensure
that the firm can be held accountable for the quality of the infrastructure.

What Are the Proper Roles for State and Federal
Government?
Both the Federal and State Governments provide and regulate infrastructure. For example, most funding for road construction and maintenance is
provided by the States, although substantial funds are also raised through
Federal taxes on fuel and other transportation goods and then distributed to
the States. Similarly, electricity transmission is regulated both by the Federal
Energy Regulatory Commission and by State utility regulators.
There are advantages to making decisions about infrastructure policy at
the State level. State Governments can tailor infrastructure decisions to local
preferences and conditions, rather than providing a single one-size-fits-all
policy for the entire country. States that implement policies that their citizens
dislike will fail to attract new people and businesses.
Federal provision or regulation can be important when infrastructure in
one State provides benefits to residents of other States. For example, power
lines transmit electricity across State borders, but State electricity regulators
may think only about how regulation affects their own citizens. Federal regulation may be more appropriate when State infrastructure produces national
benefits. Similarly, State Governments make decisions about infrastructure
investment based on the benefits to their own citizens, and will be reluctant
to make investments with their own taxpayers’ money if a large share of the
benefits goes to out-of-state residents. The Federal Government should take
into account the total benefits to the Nation, so when infrastructure projects
provide significant cross-state benefits, it may be best to set infrastructure
policy at the Federal level.

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Conclusion
Infrastructure policy is not simply an engineering problem of how best to
build the systems to meet the country’s needs. Although Government may
play an important role because infrastructure provision is often a natural
monopoly, economic incentives matter and must be taken into account. There
are two central questions of infrastructure policy. First, what investments in
new capacity generate benefits that exceed their costs? Second, how can we
ensure that the capacity we invest in is used in the most efficient way possible?
By subjecting infrastructure policy decisions to these threshold questions and
using market-based solutions where action is taken, Government—at the
local, State and Federal levels—will increase certainty that future investments
in infrastructure are socially worthwhile and allocated appropriately.

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C H A P T E R

7

Searching for Alternative
Energy Solutions

T

he United States consumes a great deal of energy in support of the
world’s largest economy. It produces over 70 quadrillion British Thermal
Units (or “Btu,” a measure of energy) of primary energy per year—mainly
from coal, natural gas, petroleum, and nuclear power—and it consumes
100 quadrillion Btu, more than any other country in the world. The difference—30 quadrillion Btu—is imported, mostly in the form of petroleum.
For energy security reasons, the United States seeks to diversify its energy
sources and fuels. One way to do this is to pursue the use and development
of domestically-produced alternative energy sources. The United States has
also been concerned about the environmental effects of current energy use,
particularly the emission of air pollutants and carbon dioxide (CO2). For this
reason, the United States has pursued the use of alternative energy sources
that have the potential to produce lower emissions than traditional fossil fuels
(coal, natural gas, and petroleum), which are the source of about 85 percent
of the energy consumed in the United States. Therefore, both energy security
and environmental concerns motivate the consideration of policies that
diversify our sources of energy. For purposes of this discussion, alternative
energy will be defined as alternatives to fossil fuels and will include renewable
energy sources (hydroelectric, geothermal, solar, wind, and biomass), as well
as nuclear power and emerging technologies.
Alternative energy sources are not the only way to address energy security
and environmental concerns. Improved energy efficiency could reduce our
energy demand as well as reduce pollution. Environmental concerns could
also be addressed by developing ways to use fossil fuels in a less polluting
manner, such as through clean coal and carbon capture and storage (CCS)
technologies. These are both very important solutions that the Administration
is pursuing in tandem with alternative energy solutions; however, this chapter
will focus on alternatives to fossil fuel.
This chapter will concentrate on two sectors: electricity generation and
transportation. These are not the only two sectors that could benefit from
alternative energy. Primary energy consumption (that is, the direct use of
energy before it has been subjected to any conversion) can be divided into
five major sectors: electricity generation, transportation, and energy end use
by industry, commerce and residences. The potential for the direct use of
alternative energy by industry, commerce and residences is important; but,

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because nearly 70 percent of petroleum is used in the transportation sector
and the vast majority of coal is used for electricity generation, this chapter will
largely focus on these two sectors.
Alternatives for electricity generation include nuclear power, hydropower,
biomass, wind, geothermal, and solar power. Alternatives in the transportation sector include developing domestically-produced transportation fuels
such as ethanol and biodiesel, and finding new ways to power our cars, such
as using electricity for plug-in hybrids or using hydrogen to deliver energy.
Our goal over the next several decades is to change the way in which we
produce and consume energy for electricity generation and transportation so
as to diversify our energy sources. The key points of this chapter are:
• The current suite of available alternative energy sources is an important
part of achieving our goal, but a number of technical, regulatory, and
economic hurdles must be overcome to use them fully.
• There are several promising, but currently unproven, methods of
producing and delivering energy that, if successfully developed and
deployed, will greatly enhance our Nation’s energy portfolio.
• Appropriate and limited government action can play a useful role in
helping to realize our energy security goals.

Energy Sources
The drive for alternative energy is almost a return to our roots, because
energy derived from wood biomass is perhaps the oldest source of energy. Two
hundred years ago, wood supplied nearly all of our energy needs. It is only
over the past two centuries that fossil fuels—fuels formed from the remains of
plants and animals—began to dominate as our preferred energy source.
Coal began to be used as a fuel in the 1700s for a number of reasons,
including the fact that it burned cleaner and hotter than wood charcoal. Its use
spread to the United States during the Industrial Revolution in the early 19th
Century, increased with the introduction of steamships and steam-powered
railroads, and finally was used for electricity generation in the 1880s.
The market for natural gas developed from ‘town gas,’ synthesized from
coal and used for street and house lighting during the 1800s, and in the
1820s the first well was dug to extract natural gas. In the 1890s, electricity
began to replace natural gas for lighting purposes, but beginning in the
1940s, a continental-scale pipeline system evolved to distribute these reserves
to urban areas for residential space and water heating, and ultimately for
power generation.

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The first U.S. oil well was drilled in 1859 in Western Pennsylvania, which
spawned the domestic oil industry. After World War II, domestic oil production continued to rise, but failed to keep pace with accelerating consumption.
The United States became a net importer of crude oil in 1950. The huge
post-war expansion of petroleum consumption in Europe and the Far East
was met from foreign sources, notably Iran and Saudi Arabia, while the United
States itself became increasingly dependent on petroleum imports. U.S. oil
production peaked in 1970, and since then declining domestic oil production
and rising domestic consumption have increased petroleum imports. While
there have been significant gains in energy efficiency, economic growth in the
United States has led to large increases in aviation, trucking, and automobile
transportation, and has resulted in increased oil consumption.
While fossil fuels have been the primary source of energy for over a
century, alternative energy has been used throughout our history. The first
electric car was constructed as early as the 1830s. Hydropower in the form of
waterwheels for milling has been used throughout the world for centuries but
dramatically increased in the United States in the 1800s with advancements
in turbine technology. The first use of hydroelectric power occurred in 1880
at the Wolverine Chair Factory in Grand Rapids, Michigan, and the first U.S.
commercial hydroelectric power plant opened in 1882 on the Fox River in
Wisconsin. In 1888, the first large windmill was used to generate electricity in
Cleveland, Ohio. In 1896, Henry Ford’s first car was constructed to run on
ethanol. The first commercially available solar water heaters were produced
in California in the 1890s. The basis for nuclear power originated in 1942
when Enrico Fermi and other scientists created the first self-sustaining
nuclear reactor at the University of Chicago, and the world’s first full-scale
commercial reactor opened in Cumberland, England in 1956. Today, we
continue our search for alternative energy solutions in order to diversify our
energy portfolio.

Fossil Fuels
Petroleum accounts for 40 percent of the Nation’s total energy consumption (see Chart 7-1), the largest share of any fuel type, and produces almost
40 quadrillion Btu of energy. (A gallon of gasoline contains about 115,000
Btu, while a kilowatt-hour of electricity is equal to 3,413 Btu.) The United
States consumes about 20.7 million barrels of petroleum per day, making
us the largest oil consuming country in the world. In fact, the United States
consumes about 25 percent of the 84.7 million barrels consumed each day
worldwide, almost three times the amount of oil consumed by China, the
second largest oil-consuming nation. However, China’s oil consumption has
grown at an average rate of 6.3 percent per year since 1982 compared to an
average rate of 1.3 percent per year for the United States.

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Most of the oil consumed in the United States is used in the transportation
sector, absorbing 69 percent of U.S. oil consumption in 2006. The rest is
used by the residential, commercial, and industrial sectors, and for electricity
generation (see Chart 7-2). The largest domestic sources of oil production
are offshore wells in the Gulf of Mexico, and wells in Texas, Alaska, and
California. Imported oil primarily comes from Canada, Mexico, Saudi
Arabia, Venezuela, and Nigeria; and petroleum is the largest imported energy
source for the United States. Because of this reliance on oil, changes in its
price can affect the U.S. economy, and in 2008, the price of oil hit record
levels (see Box 7-1).

Box 7-1: Oil Prices
In 2008, the nominal price for crude oil reached its highest level ever.
This increase was due to several economic, geopolitical, and environmental factors such as growing world demand, limited supply growth,
smaller inventories, security concerns in oil producing countries, and a
decline in the value of the U.S. dollar.
Some fear that high oil prices reflect a peak in oil production and
predict an imminent decline in production in the near future. This type
of prediction often assumes static or growing consumption with limited
additional discovery or production. As the price of oil rises, however,
there is an economic incentive to find new sources or improve extraction techniques. Enhanced oil recovery (EOR) is one example of this
type of response. EOR is any technique that can increase the amount
of oil that can be recovered from an oil field, but it is most commonly
associated with gas injection, particularly using CO2, which forces the oil
to the surface. The Department of Energy estimates that state-of-the-art
EOR could potentially add an additional 89 billion barrels to the total
recoverable oil resources of the United States, although not all of that is
necessarily economically recoverable.
Even if production has peaked, we are unlikely to abruptly run out
of oil. As the price rises over time, producers will have an incentive to
retain some of the resource to sell at a later date and consumers will
have an incentive to transition away from oil consumption. Over time,
the price rise will make the adoption of alternative energy sources more
and more likely.

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The next largest fuel types are coal and natural gas, comprising 23 percent
and 22 percent of consumption respectively. In 2006, coal production in
the United States reached a record 1,161 million short tons (one short ton
equals 2000 pounds), while consumption was 1,114 million short tons. This
coal produced 23.8 quadrillion Btu of energy, the vast majority of which was
used for electricity generation by the power sector. Coal continues to be a
major fuel source for the United States largely due to its domestic abundance.
The United States has 18,880 million short tons of recoverable coal reserves
at producing mines and an estimated 263,781 million short tons of total
recoverable reserves. Domestic coal production comes primarily from three
geographical regions—Western, Interior, and Appalachian—and there is a
small amount of both imported and exported coal.
In 2006, the United States consumed 21.9 trillion cubic feet (Tcf) of natural
gas. By comparison, total world natural gas consumption was 105.5 Tcf, with
the United States and Russia combined consuming 36 percent of the world
total. U.S. natural gas consumption produced 22.4 quadrillion Btu of energy,
with 69 percent used by residential, commercial, and industrial sources and
29 percent used for electricity generation. Domestic gas production comes
mainly from the Gulf of Mexico and older-producing areas in Texas,
Oklahoma, and Louisiana. Imports, which make up 16 percent of consumption, come mainly by pipeline from Canada.

The Need To Diversify
For more than a century, fossil fuels have satisfied the bulk of America’s
demand for energy. However, a move to alternative energy sources can hold
a number of benefits.
One of the reasons for shifting away from fossil fuels is improved energy
security. This term can have multiple meanings, but it is often applied to
the desire to reduce the Nation’s vulnerability to oil supply disruptions from
political or terrorist actions or natural disaster. However, because there is a
world market for oil and a world price, the price of oil rises in the case of a
disruption no matter the source of supply, be it foreign or domestic. Thus,
energy security in this context cannot be obtained by simply shifting from one
supplier to another. It requires diversifying the fuels consumed in our energy
portfolio, which reduces the amount by which a disruption in any one energy
source can affect the economy. In this context, alternative energy technologies
for both electricity production and for transportation can dampen the impact
of sharply rising prices, and thus provides an energy security benefit.
A second major benefit of alternative energy is that some alternative energy
sources have a lower environmental impact than traditional fossil fuels. At the
point of generation, wind, nuclear, hydropower, and solar sources produce no
local air pollution, such as sulfur dioxide (SO2) and nitrogen oxides (NOx).
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Also, depending on the fuel and technology used, alternative energy can
reduce CO2 emissions. In 2006, the United States emitted approximately
5.9 billion metric tons of energy-related CO2, almost 73 percent of which
were generated by fossil fuel use for transportation and electricity generation.
Approximately one-third of all energy-related CO2 in the United States came
from petroleum use in the transportation sector and 38 percent came from
coal and natural gas used to generate electricity (see Chart 7-3). Appropriately
chosen alternative energy sources in the transportation and electricity generation sectors may help reduce these emissions.
A third potential benefit of alternative energy is that some believe that it
may eventually compete with or cost less than fossil fuels. It is worth noting,
however, that reduced energy cost, whether achieved through improved
energy efficiency or less expensive energy supply, will result in increased
energy demand, a phenomenon known as the rebound effect. For example,
the Department of Transportation sets mandatory Corporate Average Fuel
Economy (CAFE) standards for passenger cars and light trucks. When fuel
efficiency standards are raised, vehicles use less gasoline per mile; but, because

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the increased fuel efficiency reduces the cost of driving, people drive more.
This leads to less gasoline savings than implied by the change in fuel efficiency.
The economic literature puts the rebound effect between 10 percent and
20 percent, which means that a 10 percent improvement in fuel efficiency would
actually only produce an 8 to 9 percent improvement in energy consumption.

Alternative Energy Production
While some of the electricity produced in the electric power sector is
generated using alternative energy sources, the majority (71 percent) is
generated from fossil fuels. In the transportation sector, almost all of the
energy consumed comes from fossil fuels. Developing alternative energy
sources in these two sectors could move us down the road to enhanced energy
security and lower pollution.

Alternatives for Generating Electricity
In the United States, electricity is generated using a wide variety of energy
sources, both traditional and alternative. One factor affecting which type of
electricity plant will be built at any given time is economics: which energy
source will produce the greatest economic return over the lifetime of the
plant. However, it is difficult to compare plants that differ in both cost and
generation capacity. One way to assess this economic return is to compare
the levelized cost of electricity (LCOE)—the present value of the total cost of
building and operating a generating plant over its financial life, converted
into equal payments and amortized over the expected annual generation
from the plant. Table 7-1 provides the estimated national average LCOE for
various types of electricity generating plants entering service in 2015. The
final column of Table 7-1 gives the national average total system LCOE,
while the four columns prior to the last give the components that make up
this total system cost.
Conventional coal-fired power plants have an average real LCOE of
approximately $61 per megawatt hour produced, which is the lowest cost
of all electricity generation methods presented. Natural-gas combined cycle
plants have an average LCOE of between $65 and $68 per megawatt hour
produced, and are closely competitive with coal-fired power plants. On
an average LCOE basis, alternative energy based electricity generation is
more expensive than both coal and natural gas-based plants, which partially
explains their lack of penetration in the market.
The LCOE, however, is not the only consideration in choosing which
type of plant to build. Because the demand for electric power varies by time
of day and season and because electricity is difficult to store, plants may
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Table 7-1. —Estimated Average Levelized Costs
(2006 $/megawatthour) for Plants Entering Service in 2015

Plant Type

Fossil Fuel Based Electricity Generation..............
Coal-fired .............................................................
Conventional Coal ..............................................
Advanced Coal ...................................................
Advanced Coal with CCS ...................................
Natural Gas-fired ...................................................
Conventional Combined Cycle ...........................
Advanced Combined Cycle.................................
Conventional Combustion Turbine .....................
Advanced Combustion Turbine ..........................
Alternative Energy Based Electricity Generation ..
Advanced Nuclear .................................................
Geothermal............................................................
Biomass .................................................................
Wind ......................................................................
Solar Thermal ........................................................
Solar PV .................................................................
Conventional Hydropower.....................................

Capacity
Factor (%)

Levelized
Capital
Cost

Variable
Fixed
Operations
Operations
Trans& Main& Mainmission
tenance
tenance
Investment
Cost (includ(O&M) Cost
ing fuel)

Total
System
Levelized
Cost

85
85
85

$31.4
36.9
52.0

$3.6
5.1
6.0

$22.3
18.4
22.3

$3.6
3.5
3.5

$60.9
63.9
83.8

87
87
30
30

14.1
13.8
25.7
24.0

1.6
1.5
4.5
3.9

48.7
45.8
72.5
61.9

3.7
3.7
10.8
10.8

68.1
64.8
113.4
100.6

90
90
83
35
31.2
21.7
................

50.7
47.9
48.3
64.6
122.8
268.8
................

8.4
20.1
8.6
9.6
20.7
6.1
................

8.2
0.0
18.9
0.0
0.0
0.0
................

2.5
4.9
4.0
8.2
10.5
13.0
................

69.7
72.9
79.8
82.5
154.0
287.9
................

Source: Department of Energy (Energy Information Administration).

be designed to provide base load power (a constant supply of power), peak
load power (when demand is the highest), or to serve as “merchant” plants,
selling electricity in the commercial market when it is profitable to do so.
The second column in Table 7-1 gives the average capacity factor, which is
the ratio of the actual energy produced in a given period to the hypothetical
maximum energy output of the plant. While natural gas combustion turbines
have a lower capacity factor and a higher LCOE than other fossil fuel based
plants, they are attractive as peak load or intermediate load (between base
load and peak load) plants. Additionally, fuel prices vary regionally due to
transportation costs and resources.
Other factors may also be important in determining what type of plant
is built. For example, many states have renewable portfolio standards that
require minimum additions to capacity from renewable electricity technologies and there may be tax incentives for alternative energy power generation.
The values in Table 7-1 do not reflect these factors. Power producers
may also consider environmental factors that could affect technology
investment decisions. These considerations may depend on a regulatory
environment that differs substantially in different regions of the country.
Investors may be concerned that future policies could increase the cost of
coal or make it more difficult to dispatch coal-fired power. Finally, LCOE

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estimates are subject to additional uncertainty not discussed here. For
example, actual fuel prices may differ from those assumed for the LCOE
estimates. The “best” power generation technology may vary throughout the
country, but the LCOE gives some indication of the relative cost of various
types of electricity generating plants.

Nuclear Power
There are currently 104 commercial nuclear power reactors in the United
States, and they generate approximately 20 percent of the Nation’s electricity.
While the United States has the largest nuclear capacity of any nation, no
new commercial reactor has been ordered and approved for construction
since 1978, and all of the plants ordered after 1973 have been cancelled.
The last plant to come online was the Watt’s Bar reactor in Tennessee in
1996. Despite this, the total nuclear capacity per plant in the Nation has
increased over time due to uprating, a process by which a plant is upgraded
and then a more highly enriched fuel and/or a higher percentage of new
fuel is used to generate more power. The Nuclear Regulatory Commission
(NRC) has approved 114 power uprate proposals to date and is currently
reviewing 13 additional uprate proposals, which would add an additional
1,220 megawatts of electric power. According to NRC, they could receive
24 additional applications for power uprates by 2012. However, there is a
limit to our uprate potential, and more reactors will be needed if the United
States chooses to get more of its electricity from nuclear power plants. To
date, the NRC has received applications for 4 units and a partial application
for a fifth unit, and expects to receive applications for as many as 32 units
over the next three years. However, there is no requirement that a reactor be
built for every license granted.
One advantage to nuclear power is that it has low operating cost, so the
cost differential between limited output and full capacity is small. These
plants operate at close to full capacity and provide a reliable base load, which
is a constant supply of the electricity to power lines. Another advantage of
nuclear power is that it can produce power using a relatively small amount of
fuel without producing air pollutants or CO2 emissions.
A few of the disadvantages to nuclear power include the length of time
required to build a new plant, high capital costs, and the cost of liability
insurance. In addition to these economic disadvantages, nuclear power faces a
number of obstacles including social opposition to its use, partially due to fears
generated from the partial meltdown of the core of the power plant at Three
Mile Island in 1979 and the disaster at the Chernobyl nuclear power plant in
Ukraine in 1986, as well as additional safety concerns. There is also concern
about the current lack of long term storage for the radioactive waste generated
that must be properly contained for centuries. In 2002, the President signed
a resolution to allow for the storage of nuclear waste at Yucca Mountain in
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Nevada. The facility is expected to begin accepting waste in 2017, although
limits on funding the facility have in the past delayed the opening and may
do so again in the future. Additionally, the Nuclear Waste Policy Act limits
the amount of waste that can be stored at the facility to 63,000 metric tons of
commercial spent nuclear fuel, and it is estimated that the commercial nuclear
facilities currently operating in the United States will produce this much spent
fuel before 2017. Unless the capacity at Yucca Mountain is increased by statute
or a second site is opened, we will face challenges in storing the commercial
spent nuclear fuel generated from nuclear plants.
One possible solution to the storage issue is nuclear recycling. Virtually
all of today’s nuclear power is generated in an “open fuel cycle” in which
enriched uranium fuel is used once and then disposed of. However, only
part of this fuel is actually consumed in the process and the residual still has
potential energy. Spent nuclear fuel can be recycled to recover some of this
remaining energy, and this is done in several nations. A second type of nuclear
plant using an “advanced burner reactor” can be designed to consume the
residual, producing a “closed fuel cycle” process. It is important, however,
that any such recycling program be implemented in such a way so as not
to produce weapons-grade nuclear material. This is the central goal of the
Global Nuclear Energy Partnership (GNEP) announced by the President in
the 2006 State of the Union Address.

Hydropower
Hydropower, which is used almost exclusively to generate commercial electricity, is the largest renewable energy source used by the electric power sector.
In 2006, the United States consumed 2.9 quadrillion Btu of conventional
hydroelectric power, about 42 percent of all renewable energy consumption.
The State of Washington generates the most hydropower among all states,
followed by California, Oregon, and New York. Hydropower works by
powering turbines with either the force of the current or the fall of water from
a reservoir or dam.
The advantage of hydropower is that it is a well-understood renewable power
source that can supply both peak load demand, by reserving available water
for high value periods, as well as base load demand. Hydroelectric plants do
not produce air emissions and there are some positive externalities associated
with them because the reservoirs and dams can provide irrigation benefits,
recreational opportunities, and flood control. However, hydropower also
produces negative ecological effects. Hydropower’s largest disadvantages are
its negative impact on the surrounding environment, low dissolved oxygen in
the water, impacts on the fish and the riverbank habitat, and alteration of fish
migration corridors (e.g. salmon runs). Even if the environmental concerns
are removed, however, there is limited ability to expand hydropower beyond
what is currently available. The total U.S. hydropower capacity, including
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pumped storage facilities, is about 98 gigawatts, and the Department of
Energy estimates that there are only 30 gigawatts of undeveloped capacity
remaining in the entire 50 states.

Biomass
Biomass is organic material from plants and animals, such as wood, crops,
manure, and some garbage, and is second only to hydroelectric power in
providing renewable electricity to the United States. Biomass, excluding
biofuels, makes up about 2.5 percent of the Nation’s total energy consumption
and comprises almost 37 percent of the total renewable energy consumption
in the country. Sixty-four percent of this biomass is used directly by the
industrial sector to generate power. Only a small portion is used by the power
sector to generate electricity.
The main advantage to biomass is that it is a renewable source of energy
that can be used either as a dedicated fuel to generate electricity or can be
co-fired with other fossil fuels. Compared with coal, biomass produces fewer
CO2, SO2, and NOx emissions. If biomass is grown specifically for electricity
generation, in a closed loop system, then the only CO2 emissions come from
the harvesting, transportation, and processing operations.
The main disadvantage to electricity generation using biomass is that it
currently has an average LCOE above generation using fossil fuels. This is due
to a number of factors, including the cost of obtaining the raw material. Also,
biomass energy consumption is technically not a zero-emission process.

Geothermal Power
Geothermal energy is contained in underground reservoirs of steam, hot
water, and hot dry rocks. Large geothermal power plants use this energy to
generate electricity by drilling below the earth’s surface in order to release or
produce steam, which is used to power turbine generators. After the steam
condenses, the water can be injected back into the ground to be used again.
Geothermal energy currently makes up about 5 percent of the total renewable
production of the country, but it only supplies about 0.4 percent of the
Nation’s electricity. It is considered an attractive resource because it requires
a relatively small plant footprint, requires no storage, has no fuel costs,
and can provide continuous base load power. A study by the Government
Accountability Office reports that there are at least 400 undeveloped wells
and hot springs with potential for future electricity production.
Geothermal power, however, is limited in its ability to provide large amounts
of electricity to the country. To be viable, geothermal power requires access
to permeable rock systems filled with steam or water at temperatures from
300 to 700 degrees. Sites that meet these conditions are much more prevalent
on the West Coast than in other parts of the country. Also, geothermal sites
can produce some local pollutants and small amounts of CO2.
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Wind Power
Wind power supplies about 4 percent of our renewable energy and less
than 1 percent of the Nation’s electricity, a small percentage compared to
large wind users such as Denmark, Spain, Portugal, and Germany. However,
the use of wind power in the United States is on the rise, and appears to be
poised for dramatic increases in the future. In 2006, wind capacity increased
by 29 percent, and the United States has led the world in capacity additions
in recent years. An estimated 4 gigawatts of wind capacity were added in
2007. This growth is due to the fact that, in some areas, wind is now cost
competitive with other sources of energy production, largely because of a
government tax credit of 1.9 cents for each kilowatt hour produced (not
reflected in Table 7-1).
Wind power is desirable because it is a domestic source of power with no
fuel costs or emissions. It has become increasingly popular for two reasons.
First, the current generation of windmills produces more power from a given
wind resource than past technologies. The amount of electricity generated
from a windmill is determined by a number of factors including the turbine
size and the capacity factor. The size of the turbine dictates the potential
output of the windmill, and the average turbine size has approximately
doubled since 2000 to about 1.6 megawatts. The windmill’s capacity factor
is its actual energy output divided by its potential output. The average
capacity factor has shown substantial improvement and is now roughly
35 percent. Second, windmills are increasingly popular because they can be
placed on farms, providing a source of lease income, without having a large
impact on the surrounding farming activity.
The ability of wind power to grow as an alternative energy source is affected
by a number of factors. First, the capacity factor is very sensitive to the average
wind speed and it can drop dramatically for sites with less optimal wind
profiles, meaning less electricity from each windmill. Second, to maximize
the market potential, wind-generated electricity must be integrated with the
overall power grid, the system of power lines and transformers that distribute
electricity. When wind farms are located in rural areas, some electricity is lost
during the transmission to homes and businesses. In addition, since wind
energy is generated only when the wind blows and the electricity cannot
be economically stored at this time, wind is an intermittent energy source.
Finally, there is some public opposition to wind power. Because of the height
of the turbine, wind plants produce a large visual footprint, and there is a
potential effect on migratory bird and bat populations.

Solar Power
Solar power has captured the imagination of alternative energy advocates
and lends itself to creative demonstration projects like the installation of

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solar panels on the roof of the West Wing of the White House. Solar power
is attractive because its output closely aligns with peak electricity demand.
The fact is, though, beyond some niche markets, solar power is not yet an
economically competitive method of supplying large amounts of electricity.
Solar power currently comprises 1 percent of the total renewable energy
production and it produces a negligible amount of the Nation’s electricity.
This is largely because solar power has a levelized cost of electricity above
other energy sources.
Solar power generation generally comes in two forms: photovoltaic and
thermal. Photovoltaic generation involves the direct conversion of light
energy into electricity through the use of semiconducting material like silicon.
This technology already has some commercial success for low-power devices
like calculators and emergency phones, but is a relatively expensive method
of producing large amounts of electricity. At present, photovoltaic generation is generally used when grid connection is difficult or impossible, such
as for satellites. However, progress has been made in reducing the cost and
improving the efficiency of silicon-based photovoltaic cells as well as newer,
thin-film technologies. Photovoltaics can be used for distributed electricity
generation at homes and businesses, and may eventually serve as an alternative
to bulk power provided by the electricity sector.
Solar thermal devices use direct heat from the sun, concentrating it in some
manner to produce heat. Solar power plants focus heat in troughs, dishes, or
large power towers to generate electricity, in what is called “concentrating
solar power” (CSP) technology. If combined with thermal storage, CSP could
reduce the problem of an intermittent power supply. However, currently,
CSP plants are expensive. They also require a large amount of space and are
considered aesthetically unappealing by some, and thus could be sited away
from population centers. This means that there would be transmission losses
in moving the electricity to population centers.

Summary of Alternatives for Generating Electricity
There are many alternative sources of energy for generating electricity.
Some of them are more promising than others due to costs and other technological barriers. Nuclear power’s LCOE is closest to coal and natural gas
production and is currently best suited to produce large amounts of electricity
without using fossil fuels, but it requires large and expensive plants and is
often socially unpopular. Hydropower currently provides the majority of the
Nation’s renewable electricity production, but it is very limited in its ability
to expand. Biomass, geothermal, and wind power are close to economically
competitive with nuclear and fossil fuel production and have the potential for
expanded use, provided that the constraints described above can be overcome.
Finally, while solar power is currently an expensive way to produce large

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amounts of electricity, it could be an important source of alternative energy
if costs can be reduced.

Alternatives for Transportation
Twenty-eight percent of the energy consumed by the United States is
used for transportation: cars, trucks, planes, trains, and ships. Unlike the
energy used to generate electricity (of which 31 percent is generated using
non-fossil fuels), transportation relies almost entirely on petroleum-derived
fuels. As with electricity generation, a great emphasis has been placed on
finding alternative transportation fuel sources for both energy security and
environmental reasons.
One solution is to find an alternative fuel to use in our cars and trucks.
At present, corn-based ethanol is the largest alternative fuel source, but
other fuels, like biodiesel, are also available. Our current vehicle fleet can
burn a gasoline mixture containing up to 10 percent ethanol without any
modification; flexible fuel vehicles are already being sold that can operate
on 85 percent ethanol; and other alternative fuel vehicles, such as natural
gas-powered vehicles, have long been used in niche markets. In addition,
investments in second generation biofuels, like cellulosic technologies to
convert non-food crop residues, grasses, and forest biomass, are on the rise.
Another alternative energy solution for transportation is to design a
different type of car. Hybrid vehicles are part of the current car stock, but
other advanced technologies are under development including hydrogenpowered vehicles and plug-in hybrids that would allow consumers to charge
on-board batteries and achieve a limited range using electricity.

Corn-Based Ethanol
Ethanol is a fuel made from grains and biomass that can be used as a
gasoline supplement for automobiles. By far, the most common raw material
or feedstock used to produce ethanol in the United States is corn. Since 1978
major manufacturers of fuel tanks have provided the same warranties for use of
both unblended gasoline and ethanol blends up to E10 (10 percent ethanol and
90 percent gasoline). Flex-fuel vehicles (FFVs) can use blends containing more
than 10 percent ethanol, such as E85, and auto manufacturers can produce
FFVs at only a small additional cost. In 2007, of a total 229 million light-duty
cars and trucks on the road, an estimated 5.5 million were FFVs, and this
portion will likely grow. It is estimated that by 2030, approximately 10 percent
of the total U.S. car and truck sales will be FFVs. However, of approximately
170,000 fueling stations in the United States, only 1,183 offer E85, so flex-fuel
vehicles have a harder time locating stations offering this fuel.
Ethanol has a number of advantages over oil. First, it is domestically
produced, so its use decreases the impact from a disruption in the oil market.

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Second, the production of ethanol releases less carbon monoxide emissions
(but can increase other pollutants such as nitrogen oxides and non-exhaust
volatile organic hydrocarbon) than gasoline use. Finally, depending on how
it is produced, ethanol may reduce CO2 emissions.
Since January 1999, annual ethanol production has increased more than
300 percent, from 1.5 billion gallons to an estimated 6.3 billion gallons in
2007. Including new and expanding plants, one industry group estimates
that the United States may soon have the capacity to produce more than
13 billion gallons of ethanol annually. Four major factors have driven the
dramatic growth in this market. First, high oil prices have increased the
demand for an alternative fuel. While ethanol has one-third less energy
content than gasoline, oil prices are high enough for ethanol to compete with
gas on an energy-equivalent basis. However, as oil and ethanol prices move,
so will the significance of this factor. Second, the elimination of MTBE—a
gasoline additive used to produce cleaner fuel in cities with smog problems
that was found to contaminate groundwater—has increased the demand for
ethanol as a substitute oxygenating agent. Third, there are financial incentives
for ethanol production. There is a 51-cent per gallon Federal tax credit for
blending ethanol into gasoline (and an associated 54-cent per gallon tariff
on imported ethanol) and additional subsidization in some states. Finally,
the Energy Policy Act of 2005 mandated the use of 7.5 billion gallons of
renewable fuel by 2012, much of which was expected to be met with ethanol.
The recently passed Energy Independence and Security Act of 2007 increases
this mandate to 36 billion gallons of renewable fuel by 2022, which will likely
increase the demand for ethanol.
There are a number of concerns about ethanol. First, some worry that
production will outstrip the capacity to blend ethanol into the gasoline supply.
(See Box 7-2) Second, the current oil pipeline infrastructure is not capable of
transporting ethanol, so it must be shipped by truck, train, and barge. To
remain cost competitive, ethanol plants are generally located within 50 miles
of where the corn is grown. Ninety percent of the productive capacity is in
eight Midwestern States while 80 percent of the U.S. population (and thus,
the ethanol demand) lives along the coastline. Rail transport capacity from
the Midwest to the coasts is limited, and dedicated ethanol barges (to move
ethanol from the Midwest to the Gulf Coast) will take time and money to
construct. Third, there are environmental concerns about ethanol production
depleting groundwater aquifers and water pollution from fertilizers used to
grow crops for biofuels. Finally, there are fiscal concerns, particularly the cost
of the 51-cent per gallon blender’s credit.
The growing demand for corn-based ethanol as fuel is affecting the overall
corn market. Most of the adjustment will take place over the next couple of

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years, as corn-based ethanol production responds to market signals. Over
time, other markets will adjust to higher corn demand, and ethanol substitutes will come online. The Department of Agriculture estimates that acres
of planted corn increased to 93.6 million in marketing year 2007/08 and
corn production increased to 13.1 billion bushels, an increase of almost 24
percent from marketing year 2006/07. Corn prices are also projected to rise
to as much as $3.75 per bushel by 2009/2010 before stabilizing, and the U.S.
share of global corn trade is projected to fall to less than 60 percent.
Increased production of ethanol will also affect other crops, particularly
soybeans because it competes with corn for cropland. Land devoted to
soybeans is expected to decrease from 71 million acres now to 69 million acres
by 2009/2010, and the price of soybeans is expected to rise from $5.66 per
bushel in 2005 to $7.30 by 2009/2010 before stabilizing. Livestock production will also face higher costs as grain prices rise and the price of its final
product (meat, eggs, and milk) will follow. Corn farmers will obtain higher

Box 7-2: The Blend Wall
In the United States, nearly all of the ethanol produced is blended into
E10 fuel. In 2005, nearly 4 billion gallons of ethanol were blended into
137 billion gallons of gasoline. By 2007, ethanol production is estimated
to have grown to 6.3 billion gallons, and the total capacity could eventually reach 13 billion gallons per year. Some worry that production will
ultimately outstrip the capacity to blend ethanol into E10. (By definition,
ethanol cannot exceed 10 percent of the gasoline pool if it is blended
exclusively into E10.) This limit to the use of ethanol (basically, where
ethanol supply exceeds demand) is referred to as a “blend wall.”
There are a number of reasons why the blend wall is unlikely to pose
a significant problem. The United States consumes around 140 billion
gallons of gasoline per year, meaning that almost 14 billion gallons of
ethanol can be used for E10 alone. In addition, if all existing FFVs used
E85, they would consume an additional 3.5 billion gallons of ethanol.
Therefore, the total potential demand for ethanol blending is currently
around 17.5 billion gallons, and this amount will grow as more FFVs are
produced. Even extrapolating the rapid growth in ethanol production,
potential demand is well above the production capacity. As the supply
of ethanol grows (reducing the price of ethanol) or as the price of oil
rises, ethanol looks increasingly attractive compared to oil, and more
trucks and rail cars will be devoted to distribution and more E85 pumps
will be installed in order to capture the profits of an economically
valuable commodity.

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prices for their products, but livestock producers will face higher production
costs; and government counter-cyclical payments and market loans will likely
decrease due to higher commodity prices. On net, however, it is likely farm
incomes will rise as consumer prices rise.

Cellulosic Ethanol
Cellulosic ethanol is similar to corn-based ethanol, but it can be produced
from a variety of biomass feedstocks such as agricultural plant wastes,
industrial plant wastes (such as sawdust and wood pulp), and crops grown
specifically for fuel production (such as switchgrass). Because cellulosic
ethanol can come from a variety of raw materials, it can be produced in nearly
every region of the country and has the potential to supply more fuel per acre
than corn. Cellulosic ethanol production also produces less greenhouse gas
(CO2, methane, and nitrous oxide) emissions than either gasoline or cornbased ethanol.
While clearly desirable from both an energy security and an environmental
perspective, cellulosic ethanol is not yet commercially available because the
conversion technology is only in its introductory stages and is expensive.
There are currently no commercial cellulosic ethanol refineries in operation
in the United States, but the Department of Energy has announced that it
will invest $385 million over the next four years in a cost-sharing program
with private companies to fund six biorefinery projects located in California,
Georgia, Florida, Kansas, Idaho, and Iowa. By 2012, these refineries are
expected to produce 130 million gallons of cellulosic ethanol each year at less
than $2 a gallon.

Biodiesel
Biodiesel is a renewable fuel that can be made by chemically combining
natural oils and fats with an alcohol. It can be used by vehicles that use
diesel fuel, and it is typically blended with petroleum diesel at levels up to
20 percent. Most U.S. biodiesel is made from either soybeans or yellow
grease from restaurant cooking oil. Like ethanol, biodiesel is a domestically
produced fuel and, depending on how it is produced, its use generates about
two-thirds less greenhouse gas emissions than petroleum-based diesel. At
present, however, it is economically viable only because of a $1 per gallon tax
credit for blending biodiesel from virgin oil (oil in its first-use) and a $0.50
per gallon credit for blending with recycled oil.

Alternative Vehicles
An alternative to developing new fuels is to develop a different type of
car that uses less gasoline. Two such vehicles currently exist. Conventional
hybrid vehicles combine the internal combustion engine of a standard vehicle
with the battery and electric motor of an electric vehicle. This gives them
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the power, range, and convenient fueling of conventional vehicles, but lower
emissions and better gas mileage. Hybrid passenger cars first became available
in the United States in 2000 and have gained an increasing share of the U.S.
car market, growing to 2.1 percent of the U.S. car sales in 2007. Part of this
is due to a tax credit introduced in 2006 for purchasing a hybrid vehicle. This
credit of up to $3,400 varies by model and is based on both the lifetime fuel
savings and the fuel efficiency of the car measured against a 2002 baseline.
However, in order to limit cost to the taxpayer while providing incentive to
multiple automakers, this tax credit is phased out for each car manufacturer
once it has sold over 60,000 eligible vehicles. A number of manufacturers
have already reached this limit.
A second type of alternative vehicle is one powered by natural gas. Though
major auto makers sell natural gas-powered cars in Europe, Asia, and South
America, they have not sold well in the United States. There are about
150,000 natural gas vehicles in the United States (compared to 5 million
worldwide), most of which belong to corporate or government fleets. The low
demand for these vehicles is due, in part, to a shorter driving range, smaller
trunks due to larger fuel tanks, and a lack of retail stations selling natural gas.
However, increased use of natural gas-powered vehicles could both provide
both greater fuel diversity and lower CO2 emissions.

Plug-in Hybrids
Plug-in hybrid cars are a different type of vehicle that has the potential to both
improve energy security and decrease pollution. Unlike conventional hybrids,
which only recharge the electric battery through braking recovery, a plug-in
hybrid is also charged with electricity delivered to the home or business. As a
consequence, the vehicle can displace gasoline consumption with electricity
that it draws from the grid. Some models under development would run
on electricity for about 40 miles. Since 50 percent of personal automobiles
travel 20 miles or less daily, plug-in hybrids may consume substantially less
gasoline than a conventional hybrid. A recent study suggests that if plug-in
hybrids were to be widely adopted and powered with low-carbon generated
electricity, they could mitigate a large portion of the Nation’s CO2 emissions
from transportation.
The major hurdle to the commercialization of the plug-in hybrid vehicle is
the battery. Technology barriers include the battery cost, size and weight, power
density, durability, reliability, and safety. With continued improvements,
however, plug-in hybrids could eventually become commercially feasible.

Hydrogen-Based Fuel Cell Vehicles
Hydrogen can be used as a fuel with its chemical energy converted to
electricity in a fuel cell. Pressurized hydrogen gas is forced through a catalyst
and is split into positively charged hydrogen ions and electrons. The hydrogen
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ions are combined with oxygen to form water and the electrons are used to
generate electricity.
There are many possible uses of fuel cells, including primary electricity
generation from stationary fuel cells, as well as hydrogen-based fuel cell
vehicles. In a fuel cell vehicle, a series of fuel cells generate electricity to
power the car’s electric motor, and there is no exhaust other than water
vapor. Since hydrogen can be produced domestically, fuel cells could provide
domestically-fueled vehicles that produce no CO2 or other harmful emissions
from the tailpipe.
While hydrogen has great potential as an alternative fuel, it does face
some limitations. Currently, it is more expensive than other energy sources.
Production, storage, and delivery are the largest cost categories associated
with hydrogen-based energy. Hydrogen can be produced in small quantities
where it is needed, such as at a vehicle refueling station, but the production cost can be high. In contrast, larger, centralized facilities can produce
hydrogen at a lower cost, but the delivery costs are high. Additionally, the full
infrastructure has not been built to accommodate hydrogen fuel, and there
are safety concerns with hydrogen pipelines and dispensing systems.

Summary of Alternatives for Transportation
While the United States currently blends corn-based ethanol, the transportation sector still depends on petroleum as its primary energy source. Changes
to either the fuel we use or the vehicles themselves will be necessary if we
are to substantially reduce this dependency. On the fuel side, we can reduce
our reliance on oil by developing alternative fuel like cellulosic ethanol and
biodiesel. On the vehicle side, we can develop vehicles that simply do not
require gasoline, such as plug-in hybrids or hydrogen-fueled vehicles. Done
carefully, these measures will not only enhance energy security but could also
reduce CO2 emissions.

The Road Forward
What we do over the next few years will dictate how quickly we can move
away from fossil fuel consumption. The Energy Information Administration
projects that, absent any additional action, primary energy consumption in
the United States will increase 24 percent to 123.8 quadrillion Btu by 2030,
an average annual increase of 0.9 percent per year. Total consumption of coal
is projected to grow from 1,114 short tons in 2006 to 1,682 short tons in
2030. Natural gas is expected to increase from 21.8 trillion cubic feet in 2006
to 23.4 trillion cubic feet in 2030. Total consumption of liquid fuels and

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other petroleum products is projected to grow from 20.7 million barrels per
day in 2006 to 24.9 million barrels per day in 2030. Total electricity sales are
projected to grow from 3,821 billion kilowatt hours in 2006 to 5,149 billion
kilowatt hours in 2030, an average annual increase of 1.3 percent.
Some alternative energy will enter the market as a result of market prices,
and as the market fluctuates there will be additional economic incentives to
diversify our energy portfolio. If research and development leads to lower
renewable energy prices, then sources such as wind power and geothermal
energy may eventually become fully cost competitive. Fuel efficiency is
expected to increase not only as a result of an increase in the Corporate
Average Fuel Economy standards, but also due to price-driven consumer
demand and the introduction of more advanced vehicles into the market.
Combined total consumption of marketed renewable fuels (including ethanol
for gasoline blending) is projected to grow from 6.8 quadrillion Btu in
2006 to 11.5 quadrillion Btu in 2030, with ethanol consumption growing
especially rapidly. However, for alternative energy to dramatically penetrate
the market, technological and other hurdles must be overcome.

Policy Tools
There are a number of policy tools available to any administration interested in promoting alternative energy and enhancing energy security. The
traditional approach is to use research and development grants to subsidize
the development of new technologies that are then adopted by the private
sector. An alternative is to establish a mandate, through legislation or regulation, and require the private sector to meet it. While both approaches may be
useful for advancing the adoption of alternative energy, some worry that these
approaches dictate which technology must be adopted. Also, while mandates
do not involve direct government expenditure, they are not free. Consumers
may have to pay higher prices for some alternative energy in order for the
United States to receive the energy security and environmental benefits.
Another approach is to try to overcome the cost gap between conventional
and more expensive alternative sources. This can be done through either tax
credits or subsidies equal to the cost differential between the two technologies. In either case, there is a public cost either directly through the subsidy
or indirectly through the revenue loss on allowed credits. Loan guarantees
are another possible tool that can encourage investment by shifting risk
to the government, but at the price of some moral hazard: if the government assumes too much of the financial risk, investors may take on highly
speculative projects that have little hope of success, shifting the cost onto the
Federal taxpayers.

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Market-based mechanisms such as cap-and-trade and Pigovian taxes are
another possible way to encourage the switch to alternative energy, provided
that these programs are workable and can meet the desired objective. Cap-andtrade programs dictate the total permissible emissions or total input desired
(the cap) and allow companies to trade the right to make those emissions
or produce those quantities (the trade). Trading assures that the desired
outcome will be achieved at the lowest cost. For example, the Renewable
Fuels Standard (RFS) set in 2005 required that 7.5 billion gallons of gasoline
be replaced with renewable fuel by 2012. Obligated parties were to demonstrate compliance with the program by acquiring credits (called renewable
identification numbers (RINs)) representing the amount of renewable fuel
blended into conventional gasoline or used in its neat (unblended) form.
Under the trading program, however, obligated parties could purchase these
credits from other obligated parties rather than acquire them themselves.
An alternative approach is to set a fixed fee (sometimes called a Pigovian
tax) for each unit of the traded good. This is theoretically equivalent to a capand-trade program when the costs and benefits of the program are known. A
hybrid approach is a cap-and-trade program with a safety valve, in which the
trading of credits occurs normally, but obligated parties can choose to pay a
fee (the safety valve) to demonstrate compliance rather than trading. In 2007,
the President proposed that the 2005 RFS be increased to 35 billion by 2017,
but proposed an automatic safety valve to protect against unforeseen increases
in the prices of alternative fuels or their feedstock.
One final policy tool that has shown occasional promise is the use of
inducement prizes. When a specific goal is known, the government may
choose to award a prize for successfully reaching this goal as a way to spur
technological innovation. For example, the government could offer a prize for
overcoming the technical barriers associated with the commercialization of
hydrogen and fuel cells. Prizes are desirable because they focus on rewarding
the actual achievement of the goal using whatever technology gets to the
solution first, whereas subsidies, grants, and contracts might only be dispersed
to existing technology.

Current Efforts
Diversifying our energy sources and fuels will not come quickly or cheaply
and may require incentives for some of the alternative energy options
discussed in this chapter. Over the past several years, there have been a
number of successful programs promoting alternative energy. In 2006, the
President announced his Advanced Energy Initiative, which called for a
22 percent increase in funding for clean-energy research and a significant
reduction in our oil imports over time.

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To help meet the growing demand for base load electricity generation,
there are a number of programs aimed at expanding nuclear energy. The
Nuclear Power 2010 program is a joint government and industry effort to
develop advanced nuclear plant technology and reduce the technical, regulatory and institutional barriers to the deployment of new nuclear power plants.
The United States is also part of two broad international efforts related to the
development of nuclear power. The Generation IV International Forum is a
cooperative effort to develop competitively priced nuclear energy systems that
address nuclear safety, waste, proliferation, and public perception concerns.
The goal is to have these systems available for international deployment by
2030. The Global Nuclear Energy Partnership is a group of nineteen countries
that seek to expand the use of nuclear energy for peaceful purposes through a
proliferation-resistant closed nuclear fuel cycle. Under this program, nations
with secure, advanced nuclear capabilities would provide fresh fuel and
reprocessing services to other nations who agree to employ nuclear energy for
power generation purposes only.
Other efforts are aimed at improving electricity generation from renewable
sources. The Department of Energy’s Wind Energy Program is focused on
the development of technology to make wind power cost-competitive in
various areas of the country and to help reduce the barriers to electric grid
interconnections. The goal of the Solar America Initiative is to make solar
energy cost-competitive with conventional forms of electricity by 2015.
Finally, the recently passed Energy Independence and Security Act of 2007
takes a significant step in the direction of implementing the President’s Twenty
in Ten plan, which was aimed at reducing domestic gasoline consumption by
20 percent in 10 years. Under this Act, mandatory fuel standards require
the production of 36 billion gallons of renewable and alternative fuels by
2022. Also, the Corporate Average Fuel Economy standards will be raised
to 35 miles per gallon by 2020, a 40 percent increase from the present level.
Because fuel economy standards reduce oil consumption directly (including
the rebound effect) and renewable fuels are produced domestically and may
generate less CO2 than oil, both of these measures produce energy security
and environmental benefits.

Conclusion
Both energy security and environmental concerns motivate the consideration
of policies that move toward alternative energy sources. Currently, 85 percent
of our energy consumption comes from fossil fuels, and energy consumption
is projected to increase 24 percent by 2030. This means that the incentive to
find alternative energy solutions is growing.

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Fortunately, some solutions exist. With regard to electricity generation,
nuclear power is close to cost competitive and could contribute a larger share
to our Nation’s energy portfolio. Even though there are some constraints
on their use, we should utilize our biomass, geothermal, and wind energy
potential where it is economically viable. On the horizon, technological
advances and cost reductions might bring in solar power. With regard to
transportation, corn-based ethanol and other alternatives already reduce our
gasoline consumption. The introduction of cellulosic ethanol in the next few
years could reduce it further. In the longer term, introducing new vehicles
like plug-in hybrids and hydrogen-based fuel cell cars could dramatically
reduce our oil consumption. While none of these solutions can resolve fully
our energy security and environmental concerns, together, they provide a
potential portfolio of solutions to our search for alternative energy.

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C H A P T E R

8

Improving Economic Statistics

S

tatistical systems have substantial value for both public policymakers and
private decisionmakers. Administration and Congressional policymakers
rely on statistics for budget decisions and related fiscal policy choices, and the
Federal Reserve System relies on statistics for formulating sound monetary
policy. Private firms combine internal company data with publicly provided
statistics to make sales projections and investment decisions. In addition,
contracts often use price or wage indexes to adjust payments for inflation.
Statistical systems, like physical infrastructure, become obsolete or
depreciate with time. In a dynamic market-based economy, like that of the
United States, new industries emerge, old industries contract, and firms
find new ways of organizing and conducting their activities. The challenge
for those who manage statistical systems is to keep pace with changes in the
economy by continually evaluating the relevance and reliability of the statistics that are produced. In addition, it is important to maintain the continuity
of statistical time series to facilitate meaningful historical comparisons. Up-todate, relevant statistics are critical to the public policy process: they help frame
policy debates by providing a sense of the size and scope of an issue, as well as
the likely benefits and costs associated with a given policy action.
Advisory committees and researchers drawn from other parts of the
government and academia help statistical agencies maintain the high quality
of the data they collect and publish. They provide advice and engage in
academic-style research that ensures that collected data are useful and relevant
to issues people care about. Their work also enhances future data products by
suggesting ways to improve the statistical system.
The statistical community in government, business, and academia
recognizes that statistical agencies can improve the quality, usefulness, and
efficiency of their statistical operations through cross-agency sharing of
selected business data. Such interagency data sharing facilitates the synchronization of data across agencies, which in turn improves the comparability
of different datasets and makes the statistical products of all agencies more
valuable. For example, a measure of industry input (such as labor hours)
often comes from one agency, while a measure of industry output comes
from another agency. If each agency classifies a given firm as belonging
to a different industry, then the productivity (output per input) of both
industries may be mismeasured. By sharing classification data, agencies can
reconcile these differences to ensure that the firm is classified in a consistent
manner. In addition to improving the accuracy of government statistics, data
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synchronization may reduce the reporting burden on survey respondents,
thereby improving the efficiency of the Federal statistical system.
The key points in this chapter are:
• Robust statistical systems produce products that are important to
understanding the changing state of the economy and to formulating
sound policy. But statistical systems, like physical infrastructures, become
obsolete or depreciate with time if they are not maintained.
• Statistical measures must keep up with the changing nature of the
economy to be relevant and useful. For example, it is important that
these measures reflect new and growing industries (such as high-technology industries or services) and intangible capital (such as research and
development).
• Disruptions in a statistical series render it much less useful to policymakers and other data users. Thus, continuity in statistical series is an
important goal.
• More effective statistical use can be made of existing data. In particular,
amending relevant legislation to enable full implementation of the
Confidential Information Protection and Statistical Efficiency Act
(CIPSEA) could greatly improve the quality of Federal statistics.

An Overview of the U.S. Statistical System
The U.S. statistical system comprises many organizations inside and
outside the U.S. government that produce statistics. Of particular interest
in this chapter are Federal statistical agencies (whose principal function is to
collect, compile, analyze, and disseminate statistics) and associated organizations, such as the Federal Reserve Board, that produce economic data to
inform policy decisions. As of 2007, these organizations produced 38 statistical releases designated as “principal Federal economic indicators.” These
indicators include everything from agricultural prices to new home sales, the
unemployment rate, and gross domestic product (GDP).
Among the Federal statistical agencies, the largest is the Department of
Commerce’s Census Bureau, which accounted for 39 percent of spending
by principal statistical agencies in fiscal year 2007, as shown in Chart 8-1.
Spending on statistics by the Federal Reserve and many regulatory and
program agencies, as well as by nongovernmental organizations, is excluded
from this calculation. The Census Bureau’s spending expands even more
during years leading up to the Decennial Census. Although the Decennial
Census receives a great deal of attention, the Census Bureau conducts
numerous other surveys much more frequently.

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The second largest Federal statistical agency, at 23 percent of spending,
is the Department of Labor’s Bureau of Labor Statistics (BLS), which
produces, on a monthly and quarterly basis, the vast majority of U.S. data
on employment and prices that are used to provide timely assessments
of the current state of the economy. A combined 20 percent of spending
is accounted for by the agencies responsible for preparing statistics on
education, agriculture, and health.
The Department of Commerce’s Bureau of Economic Analysis (BEA) is
a relatively small statistical agency, with just 3 percent of spending. Its data
products rely substantially on input data collected by other agencies and
include the National Income and Product Accounts, which are among the
most comprehensive measures of the size and current performance of the
U.S. economy. Construction of the national accounts (which includes GDP)
makes the BEA a consumer of vast amounts of data from the Census Bureau
(such as import and export data) and the BLS (such as wage and salary data),
as well as many other public and private sources.
Statistical data may be collected on a regular basis (monthly, quarterly, or
annually) or on a relatively infrequent basis (every 5 or 10 years, for example).
Chart 8-2 shows the pattern of real spending by several statistical agencies

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on economic statistics that are produced at least once per year. Examples
include the monthly employment report from the BLS; monthly data on
durable goods orders and new home sales, quarterly data on services, and
official annual estimates of income and poverty from the Census Bureau; and
quarterly GDP from the BEA. Chart 8-3 shows the pattern of real spending
for several Census Bureau programs that are produced on an infrequent
basis (the Decennial Census or the 5-year Economic Census and Census of
Governments). In both charts, expenditures on these programs were adjusted
for inflation with the Office of Management and Budget’s deflator for “all
other” Federal outlays (primarily salaries and expenses for nondefense agencies). As shown in Chart 8-2, spending on economic statistics has largely kept
up with inflation. Real spending by the BLS has decreased slightly since 2004,
after a period of steady growth that began in 1997. The three statistical agencies in Chart 8-2 account for about 50 percent of the total spending on
economic statistics (excluding the Decennial Census and periodic spending
by the Census Bureau). Total spending on economic statistics by other
agencies has remained level.

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As shown in Chart 8-3, spending on programs with a 5- or 10-year
production cycle exhibits a clear pattern: spending climbs in preparation
for the survey during the years immediately preceding the survey, peaks
during the year of the survey, and then falls quickly upon completion. For
example, real spending (in 2007 dollars) on the Decennial Census, which
measures the size of the U.S. population, rose from about $110 million in
1997 to over $5.3 billion in 2000, before quickly falling back. The slight
upward trend in decennial funding in the last several years was partly for
the development of the American Community Survey, discussed later in this
chapter. The 5-year budget cycle of the Economic Census, which measures
output and related statistics in the business sector, is also apparent, though
the year-to-year changes in spending are considerably smaller. The Census of
Governments—which collects data on government organizations, finances,
and employment—also picks up every 5 years, but the annual level of
spending on this program is relatively small (less than $10 million), so the
variations are less noticeable.

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Unlike the 5- and 10-year censuses, which are fairly well understood,
funding requests for other statistical initiatives, such as new products or
needed updates to existing programs, are easily misunderstood. For example,
a major redesign of an existing survey’s methodology ideally involves running
two surveys concurrently (one with the old methodology and one with the
new methodology) for a brief period of time so that the effect of the change
in methodology can be isolated. Understanding this effect is essential if results
from the redesigned survey are to be meaningfully compared to those of the
survey being replaced.

The Importance of Statistical Systems
Providing accurate information to households, firms, and policymakers is
an important role of government statistical agencies. Most decisionmakers
in private industry, in Federal, State, and local governments, and in private
households, rely in some way on data collected by Federal agencies. Federal
economic statistics are designed to be consistent, unbiased, and reliable over
time. These statistics can prove particularly useful if their availability and
analysis allow a costly problem to be prevented or remedied more quickly
and efficiently.
Private decisionmakers benefit from high-quality statistical systems because
they improve the value of the information upon which firms and individuals
base their decisions. For example, in formulating investment decisions, industries may use data on final demand or on the output of other industries that
buy their output. A firm may examine a variety of labor market data, such as
wage rates and educational attainment in the region, when deciding where to
open new branches of the company. Airport authorities may study regional
economic prospects when considering expansion decisions. Worker organizations and employers may track inflation trends and factor these price changes
into their expectations for nominal wage gains. Popular press accounts based
on occupational earnings may help students choose colleges, fields of study,
or other training that will have long-term implications for their career paths.
State and local governments rely on a wide variety of statistical data to
benchmark their performance, to plan for the future, and to readjust their
allocation of resources. For example, a State that finds its high school
dropout rate rising relative to other States may opt to devote more resources
to education. Likewise, a city that finds its crime rate rising relative to other
localities may choose to devote more resources to law enforcement. States and
cities may study data on local population growth to assess the need for new
transportation systems, schools, and other types of physical infrastructure.

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Monetary and fiscal policymakers also rely on high-quality, publicly
available data for understanding the changing state of the economy, for
formulating sound policy on a wide range of macro- and microeconomic
issues, and for economic forecasting. For example, monetary policy depends
on accurate measures of resource utilization, current employment and unemployment trends, productivity trends, inflation trends (including unit labor
costs), and housing market developments. If inflation estimates are overstated,
monetary policy might be unnecessarily restrictive. Similarly, if productivity
is overstated, policymakers may think that the economy’s productive capacity
is expanding quickly enough to accommodate rising output without being
inflationary, and the resulting monetary policy may not be restrictive enough
to limit the risk of inflation. Fiscal policy depends on accurate measures of
GDP growth, potential GDP growth, labor markets, and demographic change
to forecast future government outlays and revenues. If productivity is growing
more slowly than believed, then revenue projections may be too high, and as
a result, policymakers may adopt spending plans that are inconsistent with
overall budget goals. Thus, a clear understanding of the true trends in these
variables is critical to making sound budget projections.

Keeping Up with a Changing Economy
There are many ongoing efforts to update the statistical infrastructure
to better reflect the changing economy and to more accurately reflect the
economy as it stands now. These efforts include maintaining the relevance
of statistical classification systems, better measuring the changing population,
improving the measurement of the service-sector output, and measuring the
contribution of investment in intangible assets (such as research and development) to economic growth.
Statistical systems rely heavily on the classification of activities, and over
time classification structures are changed to better reflect the economy.
Sometimes the changes are incremental, such as when an industry is split into
two more detailed industries. Other changes are more substantial, such as the
transition from the Standard Industrial Classification (SIC) system to the
North American Industry Classification System (NAICS). Despite the benefits of NAICS—such as better coverage of advanced technology industries,
as well as better international comparability—the transition was nonetheless
disruptive to statistical agencies and data users. In particular, the transition
to NAICS broke the historical continuity of many data series. Further, the
official use of NAICS began in 1997 but not all data series incorporated
NAICS classification in the same year. Statistical agencies have extended

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many of their statistics backward in time on a NAICS basis, but doing so is
difficult and time-consuming. There is sometimes inadequate information
to cleanly separate SIC-reported industry data into the redefined industries
and the greater industry detail under NAICS. Many statistics produced by
the BEA and BLS, for example, have been extended back to 1992 or 1990,
respectively, and a few series go back further. The Federal Reserve Board
extended its industrial production and capacity utilization statistics back to
1972 based on the results of an extensive microdata reclassification research
project that was conducted with the Census Bureau’s Center for Economic
Studies. Despite the improvements that came with NAICS, it can be argued
that the classification system has yet to fully capture the character of modern
economies. For example, the shift over time from manufacturing to services
is still not fully reflected in the level of detail collected, or even in the number
of defined industries: The 2007 NAICS recognized nearly 17 percent more
private service industries than manufacturing industries (550 versus 472),
even though the gross output of private services was about 3 times larger than
that of manufacturing in 2005.
The Census Bureau recently introduced the American Community Survey
(ACS) to provide more current data on our Nation’s population and its characteristics. With a sample size of approximately 3 million addresses, the ACS
collects important demographic, housing, social, and economic information
for use in the administration of Federal programs and the distribution of
Federal spending. The ACS is the Nation’s largest household survey and will
eliminate the need for the Decennial Census long form in future censuses
by providing data for the same detailed geographic locations as the long
form. Unlike the long form, however, it will provide single-year estimates for
geographic areas with populations of 65,000 or more annually, rather than
estimates every 10 years. Smaller geographic areas will be sampled over 3- and
5-year intervals, allowing the Census Bureau to produce estimates down to
the census tract or block group. For policymakers who need to make decisions
affecting the lives of large numbers of people, having up-to-date estimates
of population characteristics is critical to understanding a program’s likely
beneficiaries and its likely costs.
Another recent improvement to the Federal statistical system has been
more accurate and timely measurement of service-sector output. In 2004,
the Census Bureau introduced the new Quarterly Services Survey (QSS),
the first new principal Federal economic indicator in nearly 30 years. Prior
to the introduction of this survey, the 13 private service sectors—which
together account for about 55 percent of GDP—were measured, at most,
once per year, if covered by the Service Annual Survey. Even at the annual
frequency, the available surveys account for just 30 percent of GDP. The only
comprehensive measures of service-sector output come every 5 years during
the Economic Census. Therefore, the QSS is important because it measures
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service-sector output much more frequently, which keeps the measures of
service-sector activity in the National Income and Product Accounts more
current. Even so, the QSS covers a limited portion of the service sector,
which means there is room for improvement by broadening the coverage of
the survey.
Efforts aimed at understanding the contribution to economic growth of
investment in intangible assets, such as spending on research and development (R&D), is another example of the work being done to make statistics
better reflect the state of the economy. The BEA, with the support of the
National Science Foundation, created a R&D satellite account of the U.S.
national accounts, which treats R&D as an investment rather than an
expense. Accounting for R&D in this fashion would have boosted the
average annual change in real GDP from 1995 to 2004 by nearly one-quarter
percentage point, to 3.3 percent. The BLS has created statistical measures
of business employment dynamics that help explain the contributions to
net changes in employment that come from job losses versus job gains. As
the length of the time series increases, these employment measures will be
useful for understanding changes in employment over the business cycle. For
example, a policy response to a decrease in net employment that results from
an increase in gross job losses (i.e., greater layoffs or voluntary separations)
may be different from one that results from a decrease in gross job gains (i.e.,
weaker hiring). The former might reflect transitory industry shifts, while the
latter might suggest a generally weaker macroeconomic situation.
Other efforts to better reflect the changing economy include work at the
Federal Reserve Board, the BLS, and the BEA to improve price measures to
better represent the rapid pace of technological change in high-technology
products like computers. When adjusted for improvements in quality, prices
are estimated to fall much faster, which raises measures of real output.
Attempts to keep up with the changing economy are complicated by efforts
to maintain consistent time series. Long time series are valuable for making
historical comparisons and inferring long-run relationships among economic
variables. When a time series is short, it is hard to know if there is anything
exceptional about a current event. The strength of any conclusions that are
drawn is a direct function of variation in data. Short time series have too little
cyclical variation. Similarly, panel data—which follows a group of persons,
households, or firms over time—are valuable for inferring changes over time
from cross-sectional changes due, say, to different population composition.
There are a variety of ways in which economic measures can fail to keep up
with the changing nature of the economy. Examples include:
• Firms’ increased substitution of purchased services for secondary activities previously done within the firm (such as payroll processing) means
that some statistics, such as employment, will document this change
as a shift to services. In this example, the data accurately capture the
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•

•

•

•

current use of services, but the data do not reflect the change in the use
of services correctly, as the earlier data classified all activity within the
firm (including payroll processing) by the predominant activity of the
firm (i.e., construction, manufacturing, etc.).
Established industries tend to receive a disproportionate share of
attention compared to new, growing industries. Industry and product
classification codes are more likely to be kept than eliminated, while new
industries and products are often poorly measured and tracked, at least
initially.
The growth of professional employer organizations—companies that
provide employees to firms on a contractual basis—has led to datareporting problems and, consequently, to inaccurate employment and
wage data for industries and localities. Professional employer organizations that report employment centrally, rather than separately for each
client, can obscure both the industry and location of the workers and
our understanding of employment change and dynamics, negatively
affecting data from BLS, the Census Bureau, the BEA, and all derived
products.
The prices for some items may fail to fully reflect changes in the quality
of the items. Improvements in quality, if properly accounted for, tend
to boost measured real output. The split between consumer and business
spending on some products may be updated infrequently, which can
lead to misstatements about which components of GDP are growing
more rapidly. Both factors tend to result in less reliable estimates of real
spending by consumers and businesses.
Housing and geographic samples for the consumer price index (CPI)
become outdated as the population distribution shifts (see Box 8-1).

Improving the Value of Existing Statistical Data
Federal Government statistical agencies are focusing on three ways to
improve the value of existing statistical data: Improve the detail in publicly
available data products, facilitate well-defined and secure research on the
underlying microdata, and synchronize data produced across agencies.
Government agencies strive to improve the usefulness of their data products
by providing greater detail while protecting the confidentiality of respondents. The Census Bureau, for example, employs several techniques to avoid
disclosing individually identifiable data. Synthetic data, modeled on original
data, retain the needed statistical properties of the original data but protect
the confidentiality of respondents by modifying all or selected variables. The
Census Bureau creates synthetic data to obscure the underlying demographic
data used in its “On the Map” feature. This feature creates maps showing
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Box 8-1: How to Reverse a Decline in Statistical Infrastructure:
Improving the Sample for the Consumer Price Index
The housing and geographic area samples for the Consumer Price
Index (CPI), currently based on 1990 Decennial Census data, are overdue
for an update. Each year these samples become more out of date, in
that the samples do not reflect almost 20 years of population growth,
demographic changes, and new housing construction. Because of its
widespread use to estimate price changes, the accuracy of the CPI
influences a range of economic variables in both the public and private
sectors. For example, within Federal programs, the CPI is used to adjust
Social Security payments, civilian and military retirement payments, and
individual income tax brackets for inflation. A study by the Congressional
Budget Office found that a 1 percentage point reduction in the growth
rate of CPI estimates beginning in January 2006 would have reduced the
Federal budget deficit or surplus by $14 billion by the end of 2007 and
$153 billion by 2015.
The Administration has proposed to update the 1990 Decennial
Census–based housing sample used by the BLS with data from the
Census Bureau’s new, continuously conducted American Community
Survey (ACS) and/or private sector sources. With continuous updating,
the sample would never be more than 3 years old. This change would
increase the accuracy of the CPI by creating a more representative
housing sample, reduce respondent attrition, and reduce potential bias
by more accurately reflecting new construction. Moreover, using the ACS
to update the geographic sample on which the CPI is based would result
in estimates that more accurately reflect the geographic distribution of
the population and its characteristics.

commuting patterns and workforce data—where people live and work by age,
earnings, and industry—for geographic areas selected by the user. Another
method used is noise addition—the controlled introduction of variation from
reported levels to detailed data that otherwise could not be published, with
small compensating adjustments to other data in the same series. The Census
Bureau uses this method to ensure that an individual company’s data cannot
be readily inferred from published Survey of Business Owners data or other
estimates.
Government statistical agencies benefit when researchers can subject the
data and the methodology behind the statistics to academic scrutiny in a
secure research environment that maintains security of the data, restricts
access to the level of data essential for an authorized project, and protects the
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confidentiality of respondents. The analysis of underlying data by academics
is an inexpensive way for statistical agencies to improve their data products.
For example, academic researchers typically investigate relationships among
variables in a single survey, or in several surveys, that are not examined during
routine data-processing procedures. Their nonstandardized data reviews can
uncover anomalies that should be resolved before the data are released, or
provide the basis for future improvements in standardized data-processing
routines. In addition, this third-party scrutiny adds to the credibility of the
data products. For example, the Census Bureau’s Research Data Centers
(RDCs) provide secure, restricted access to Census Bureau data for authorized researchers. Likewise, the BLS researcher access program provides
secure, restricted access to BLS data. In both cases, researchers must undergo
a strict approval process and face significant penalties for violating the laws
protecting the confidentiality of responses to government surveys.
Previous research at the RDCs has led to new data products and changed
thinking about many important economic issues. For example, an important
strand of academic work separated net employment flows—the published
employment changes with which people are familiar—into gross job creation
and gross job destruction. The quarterly BLS Business Employment Dynamics
data release—which reports the number and rates of gross jobs gained at
opening and expanding establishments, as well as the number and rates of
gross jobs lost at closing and contracting establishments—is an example of
a new data product that grew out of this work. Importantly, the Business
Employment Dynamics data release is tabulated from already collected
company data records, thus creating no additional respondent burden. It is
an important example of drawing upon academic research to improve the use
of existing data in order to create new data products.
A third way that the Government can improve the value of existing data—
and the method that offers the most substantial opportunities—is to allow the
BEA, BLS, and Census Bureau to link their business data, while maintaining
confidentiality. This linking would result in more accurate and reliable
economic indicators, lower budget costs for the agencies, and lower response
burdens for survey respondents. For example, at present, both the Census
Bureau and the BLS ask firms to break out employment and payroll data by
establishment in the Company Organization Survey and Multiple Worksite
Report, respectively. If these agencies could share their business data, these
two surveys, which are mailed to multiunit companies, could be combined,
reducing the response burden of these firms and reducing survey costs for the
statistical agencies.
The Administration recognizes that the sharing of key business data among
Federal statistical agencies has tremendous potential for exploiting synergies
among the agencies and for improving the quality of Federal statistics. In
2002, with Administration support, the Congress passed the Confidential
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Information Protection and Statistical Efficiency Act (CIPSEA), described
in Box 8-2, whose stated purposes were: 1) To protect the confidentiality of
information collected by Federal agencies for statistical purposes, and 2) to
improve the efficiency of the Federal statistical system by authorizing limited
sharing of business data among the Census Bureau, the BEA, and the BLS
for exclusively statistical purposes. In 2007, the Office of Management and
Budget issued implementation guidance for CIPSEA. The first part—data
protection—has been effectively implemented across agencies, but the second
part—improving statistical efficiency—cannot be fully enabled without
additional legislation. Because business tax data (such as company name
and address) are used to construct the Census Bureau’s business list, many
Census Bureau data products are considered to be comingled with tax information. Therefore, full implementation of CIPSEA would require changes
to the portion of the Internal Revenue Service (IRS) code that authorizes the
statistical use of business tax data.

Box 8-2: The Confidential Information Protection and Statistical
Efficiency Act (CIPSEA)
The two parts of CIPSEA are confidential information protection and
statistical efficiency.
Confidential information protection: Subtitle A establishes standardized safeguards to protect the confidentiality of data collected by Federal
agencies for exclusively statistical purposes. These safeguards include
the assurance that information will not be used against a respondent in
any government action and that inappropriate disclosure of confidential
data will be considered a felony and carry significant criminal penalties.
In other words, data collected for statistical purposes cannot be used for
tax, immigration, or other enforcement purposes.
Statistical efficiency: Subtitle B authorizes the sharing of business data
among the Census Bureau, the Bureau of Economic Analysis, and the
Bureau of Labor Statistics for exclusively statistical purposes in order to:
• Reduce the paperwork burdens imposed on businesses that provide
requested information to the Federal Government;
• Improve the comparability and accuracy of Federal economic statistics
by allowing these agencies to reconcile differences in business lists; to
develop consistent classifications of businesses into industries; and to
improve coverage; and
• Increase understanding of the U.S. economy (including key industries and regions), develop more accurate measures of the impact of
technology on productivity growth, and enhance the reliability of the
Nation’s most important economic indicators, such as the National
Income and Product Accounts.

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A major goal of fully implementing CIPSEA is to better reconcile the
BLS Business Establishment List—based on State unemployment insurance
records—and the Census Bureau’s Business Register—based, in part, on IRS
records. One study found that over 30 percent of single-establishment firms
had different 6-digit NAICS industry codes in the two lists, and another
study revealed large discrepancies in measures of industry-level employment
across surveys.
The failure to coordinate data across agencies can lead to noticeable
inaccuracies, especially when one needs to calculate a measure that combines
data from two agencies. For example, the implications of discrepancies in
establishment classifications are particularly acute when measuring labor
productivity, which is an important statistic for economic policymakers,
including those who project the Federal budget. Labor productivity is the
ratio of output, measured by the Census Bureau, and hours worked, as
measured by the BLS. Accurate productivity estimates depend upon these
labor and hours worked measures being given consistent industry classifications, which is unlikely if the underlying business lists are inconsistent.
Differences in industry classification would also result in discrepancies
in the rate of real GDP growth reported by key sectors. For example, in
the Computer and Electronic Product Manufacturing Subsector (NAICS
334), the growth in real value added in 2002 would have been 15.6 percent
if payroll data from the Census Bureau’s Economic Census had been used.
Instead, the growth in real value added was published as 7.4 percent, a
statistic based on payroll data from the BLS. Without carefully analyzing
the confidential business lists used for the Economic Census and the BLS
payroll data, it is difficult to know which payroll measure should be used.
Some efforts to share data have proven useful in reducing inconsistencies and
reducing burden. The BLS has shared industry identifiers with the Census
Bureau since 1992 and geographic identifiers since 2002, particularly for new
and small businesses. These industry codes covered over 3 million businesses
in 2007 alone and now account for about 30 percent of the Census Bureau’s
business codes. Expanding data sharing would extend this work and further
improve consistency and accuracy of key data series.
A 2006 report noted that data sharing might highlight opportunities for
understanding data reporting that would better focus resources on activities
that would improve the measurement of national economic activity (such as
the reporting of stock options). The National Income and Product Accounts
provide two measures of national activity, one based on total output (GDP)
and one based on total income (gross domestic income or GDI). In theory,
these measures should be equal. In practice, they differ by a measurement
error called the statistical discrepancy. The statistical discrepancy can be
persistent: From 1995–2000 real GDI grew 0.6 percentage point faster than
real GDP, on average, per year. If the growth rate of the GDI were projected
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forward instead of the growth rate of GDP, the budget implications could be
substantial. An analysis of fiscal year 2006 by the Office of Management and
Budget found that if the GDP were persistently understated by 1 percent,
the projected cumulative budget deficit would be overstated by $530 billion
over a 5-year period.
Better measures of business formation are needed to understand the
changing composition of the business sector and the factors that contribute
to business and job creation. Data synchronization would help agencies track
business formation more accurately and on a more timely basis by reconciling the business lists from the Census Bureau and the BLS. For example,
the Census Bureau’s Business Register relies heavily on the Economic
Censuses (conducted every 5 years) for information on business structure. In
the intervening years, however, the Census Bureau makes use of its annual
Company Organization Survey, which covers all employers with more than
250 employees, but only a sampling of smaller companies. The Census
Bureau’s Business Register generally does a good job identifying ownership
links among establishments (e.g., when a single firm owns establishments in
two different States). However, the information on ownership is weaker for
smaller firms because only a subset of these businesses is surveyed during the
years between the 5-year censuses. Firm restructuring often contributes to
the difficulty of tracking parent–subsidiary relationships. The BLS Business
Employment Dynamics accurately measures the universe of business openings and closings on a quarterly frequency but may not always successfully
track parent–subsidiary relationships. Combining the strengths of the Census
and BLS business lists would improve the ability to discern whether a new
establishment is an entirely new firm or a new branch of an existing firm, and
therefore improve understanding of business dynamics.
Data synchronization could also help reconcile differences between similar
statistics produced by separate agencies. For example, the BLS publishes
wages and salary data based on its Quarterly Census of Employment and
Wages business list and the Census Bureau publishes payroll data in its
County Business Patterns series. A comparison of 2003 private wages and
salaries revealed that these two measures differed by significant amounts.
For example, the BLS measure of wages and salaries in New Mexico was
4.2 percent higher than the Census Bureau measure, while in Alaska, the
BLS measure was 9.5 percent lower. At the national level, BLS data were
0.6 percent (or $25.1 billion) lower than County Business Patterns data, but
they were 2 percent (or $6.7 billion) lower for New York. Understanding the
sources of these differences (such as differences in reporting and coverage)
may yield improved regional measures that would have several implications:
• Distribution of Federal funds to the States: BEA per capita personal
income data, based largely on BLS data, are used in the formula that
calculates how to distribute the Federal share of Medicaid funding to
Chapter 8

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| 201

2/5/08 1:24:19 PM

States. Wages and salaries and wage-related components account for
two-thirds of personal income. In 2003, State private wage levels based
on BLS data were $2.5 billion higher in Texas and $7.1 billion lower in
Washington than levels based on the Census Bureau’s County Business
Patterns.
• State tax and budget planning: The dollar difference between BLS and
Census measures of wage and salary growth from 2001 to 2002 would
result in significantly different projections of State and local government income taxes received: a $165 million discrepancy in New Jersey
and a $193 million discrepancy in Massachusetts. The $1.2 billion wage
growth difference in New York would yield a $173 million discrepancy
in projected State and local tax revenue.

Conclusion
The quality of public policy debates depends, in large part, on the availability
of relevant and reliable statistical data. Consistent data series ensure that newly
gathered data can be meaningfully compared to previously collected data. At
the same time, it is also important that the statistical system maintain the
flexibility to create new data products that keep up with the changing nature
of the dynamic global economy. The infrastructure required to develop and
produce these data, like any infrastructure, requires continuous investment
to maintain and improve the system, but not all data improvements are
costly. For example, existing economic data on businesses could be improved
through the full implementation of the Confidential Information Protection
and Statistical Efficiency Act without increasing the reporting burden for
respondents, without compromising the confidentiality of the data collected
by the Federal statistical agencies, and without significantly raising costs
of the data collection and tabulation. Maintaining solid statistical systems
ensures that public policymakers and private decisionmakers will have access
to the information needed to understand our dynamic economy.

202 |

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Economic Report of the President

2/5/08 1:24:19 PM

Appendix A
REPORT TO THE PRESIDENT ON THE ACTIVITIES
OF THE
COUNCIL OF ECONOMIC ADVISERS DURING 2007

LETTER OF TRANSMITTAL

	
	

Council of Economic Advisers
Washington, D.C., December 31, 2007

Mr. President:

The Council of Economic Advisers submits this report on its activities
during calendar year 2007 in accordance with the requirements of the Congress,
as set forth in section 10(d) of the Employment Act of 1946 as amended by the
Full Employment and Balanced Growth Act of 1978.
Sincerely,
Edward P. Lazear, Chairman		

Appendix A  |  205

Council Members and Their Dates of Service
Name

Position

Oath of office date

Edwin G. Nourse		

Chairman....................................... 	

August 9, 1946............................	

Leon H. Keyserling		

Vice Chairman.............................. 	

August 9, 1946............................

		

Acting Chairman.......................... 	
.

November 2, 1949......................

		

Chairman....................................... 	

May 10, 1950...............................	

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

206  |  Economic Report of the President

Separation date
November 1, 1949

January 20, 1953

Council Members and Their Dates of Service
Name

Position

Oath of office date

Separation date

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

Laura D’Andrea Tyson		

Chair............................................... 	

February 5, 1993.........................	

April 22, 1995

Alan S. Blinder		

Member......................................... 	

July 27, 1993...............................	

June 26, 1994

Joseph E. Stiglitz		

Member......................................... 	

July 27, 1993...............................

		

Chairman....................................... 	

June 28, 1995..............................	

February 10, 1997

Martin N. Baily		

Member......................................... 	

June 30, 1995..............................	

August 30, 1996

Alicia H. Munnell		

Member......................................... 	

January 29, 1996........................	

August 1, 1997

Janet L. Yellen		

Chair............................................... 	

February 18, 1997.......................	

August 3, 1999

Jeffrey A. Frankel		

Member......................................... 	

April 23, 1997..............................	

March 2, 1999

Rebecca M. Blank		

Member......................................... 	

October 22, 1998........................	

July 9, 1999

Martin N. Baily		

Chairman....................................... 	

August 12, 1999..........................	

January 19, 2001

Robert Z. Lawrence		

Member......................................... 	

August 12, 1999..........................	

January 12, 2001

Kathryn L. Shaw		

Member......................................... 	

May 31, 2000...............................	

January 19, 2001

R. Glenn Hubbard		

Chairman....................................... 	

May 11, 2001...............................	

February 28, 2003

Mark B. McClellan		

Member......................................... 	

July 25, 2001...............................	

November 13, 2002

Randall S. Kroszner		

Member......................................... 	

November 30, 2001....................	

July 1, 2003

N. Gregory Mankiw		

Chairman....................................... 	

May 29, 2003...............................	

February 18, 2005

Kristin J. Forbes		

Member......................................... 	

November 21, 2003....................	

June 3, 2005

Harvey S. Rosen		

Member......................................... 	

November 21, 2003....................

		

Chairman....................................... 	

February 23, 2005.......................	

June 10, 2005

Ben S. Bernanke		

Chairman....................................... 	

June 21, 2005..............................	

January 31, 2006

Katherine Baicker		

Member......................................... 	

November 18, 2005....................	

July 11, 2007

Matthew J. Slaughter		

Member......................................... 	

November 18, 2005....................	

March 1, 2007

Edward P. Lazear		

Chairman....................................... 	

February 27, 2006.......................

Appendix A  |  207

Report to the President on the
Activities of the Council of Economic
Advisers During 2007
The Council of Economic Advisers was established by the Employment Act
of 1946 to provide the President with objective economic analysis and advice
on the development and implementation of a wide range of domestic and
international economic policy issues.

The Chairman of the Council
Edward P. Lazear continued to chair the Council during 2007. Dr. Lazear
is on a leave of absence from the Stanford Graduate School of Business where
he is the Jack Steele Parker Professor of Human Resources Management and
Economics. He also served as the Morris Arnold Cox Senior Fellow at the
Hoover Institution.
Dr. Lazear is responsible for communicating the Council’s views on economic
matters directly to the President through personal discussions and written
reports. He represents the Council at daily White House senior staff meetings,
a variety of inter-agency meetings, Cabinet meetings, and other formal and
informal meetings with the President. He also travels within the United States
and overseas to present the Administration’s views on the economy. Dr. Lazear
is the Council’s chief public spokesperson. He directs the work of the Council
and exercises ultimate responsibility for the work of the professional staff.

The Members of the Council
The Council’s two other Members were Katherine Baicker who left the
Council in July 2007 to become Professor of Health Economics in the
Department of Health Policy and Management at Harvard School of Public
Health, and Matthew J. Slaughter who left the Council in March 2007 to
return to the Tuck School of Business at Dartmouth College as Associate
Professor of Business Administration.
The President nominated Dennis W. Carlton and Donald B. Marron to fill
these two vacancies.

Appendix A  |  209

Macroeconomic Policies
As is its tradition, the Council devoted much time during 2007 to assisting
the President in formulating economic policy objectives and designing programs
to implement them. In this regard the Chairman kept the President informed,
on a continuing basis, of important macroeconomic developments and other
major policy issues through regular macroeconomic briefings. The Council
prepares for the President, the Vice President, and the White House senior
staff regular memoranda that report key economic data and analyze current
economic events. Council staff also regularly provides assistance with economic
data to other offices within the Executive Office of the President.
The Council, the Department of the Treasury, and the Office of Management
and Budget—the Administration’s economic “troika”—are responsible for
producing the economic forecasts that underlie the Administration’s budget
proposals. The Council, under the leadership of the Chairman and the Chief
Economist, initiates the forecasting process twice each year. In preparing these
forecasts, the Council consults with a variety of outside sources, including
leading private sector forecasters.
In 2007, the Council took part in discussions on a range of macroeconomic
issues. The Council contributed significantly to discussions on the macroeconomic impact of this year’s housing and credit market disruptions, and provided
analysis and support for the Administration’s economic growth package.
The Council works closely with the Department of the Treasury, the
Federal Reserve, and other government agencies in providing analyses to the
Administration on these topics of concern. It also works closely with the
National Economic Council, the Domestic Policy Council, the Office of
Management and Budget, and other offices within the Executive Office of the
President in assessing the economy and economic policy proposals.

International Economic Policies
The Council was involved in a range of international trade and finance issues,
and was an active participant in discussions at the global, regional, and bilateral
levels, including the U.S. Trade Policy Review, conducted by the World Trade
Organization. On the international trade front, the Council provided empirical
analysis of forthcoming free trade agreements and met with policymakers and
business leaders in support of the Peru, Colombia, Panama, and South Korea
free trade agreements.
Further involvement included extensive analysis related to U.S. economic
interaction with China. The Council provided analysis for the Department
of the Treasury-led Strategic Economic Dialogue in Beijing, where a host of
bilateral economic issues with China were discussed, ranging from financial
liberalization, to energy and the environment, to bilateral trade relations.

210  |  Economic Report of the President

The Council also prepared in-depth analyses for the President’s international
itinerary, including travel to the Middle East and Europe, as well as the annual
Asia Pacific Economic Cooperation (APEC) summit in Australia.
In the area of investment and security, the Council took part in discussions
on the implementation of the Foreign Investment and National Security
Act of 2007, which clarified and improved the operations of the Committee
on Foreign Investment in the United States (CFIUS). The Council also
participated in discussions of individual cases before CFIUS.
The Council participated in discussions concerning the need for greater
international financial and trade liberalization with both advanced and
emerging market economies. Council Members regularly met with economists
and policy officials of foreign countries, finance ministers, other government
officials, and members of the private sector to discuss prevailing issues relating
to the global economy.
The Council is a leading participant in the Organization for Economic
Cooperation and Development (OECD), the principal forum for economic
cooperation among the high-income industrial economies. Chairman Lazear,
along with other senior Council members, participated in the OECD’s
Economic Policy Committee (EPC) meeting, as well as the Working Party
meetings on macroeconomic policy and coordination.

Microeconomic Policies
A wide variety of microeconomic issues received Council attention during
2007. The Council actively participated in the Cabinet-level National
Economic Council and Domestic Policy Council meetings, dealing with issues
including health care, labor, energy policy, legal reform, the environment,
education, pensions, transportation, and technology.
The Council was active in the examination of health care policy related to
the tax treatment of health insurance, health information technology adoption,
health insurance for children, veterans health, potential reforms to Medicare,
and the promotion of transparency in health price and quality. The Council
examined the causes and consequences of rising health care costs and reviewed
potential remedies including greater consumer involvement in health care,
opening access to insurance across state lines, and improving the connection
between health care expenditure and positive health outcomes.
The Council was also active in energy and environmental policy discussions,
where it analyzed energy markets, fuel economy issues, and alternatives to
oil. This included issues such as the President’s Advanced Energy Initiative,
bio-energy, the Renewable Fuels Standard, Corporate Average Fuel Economy
(CAFE), the Strategic Petroleum Reserve, regulatory reforms, global climate
change, and the international trade of energy.

Appendix A  |  211

The Council examined transportation policies relating to airports, hybrid
vehicles, and congestion pricing. The Council also played a role in the analysis
of policy for telecommunications, broadband, and spectrum allocation.
Council staff also examined agricultural issues and patent reform.
The Council participated in discussions related to catastrophic risk insurance
relating to natural disasters and attacks. The Council also participated in ongoing
policy discussions relating to the government’s role in terrorism risk insurance.
On labor policy, the Council was involved in the development of the
President’s comprehensive immigration policy and other proposed immigration reforms. The Council also assisted in Administration evaluation of
higher education policies, as well as in the examination of the No Child Left
Behind program.
The Council was active in tax policy discussions relating to individual
income tax, business tax credits, and corporate taxation, as well as tax issues
related to entitlement programs like Social Security. Many additional tax
policy discussions were involved in other microeconomic discussions including
labor, insurance, pensions, and health care.

212  |  Economic Report of the President

The Staff of the Council of Economic Advisers
The professional staff of the Council consists of the Chief of Staff, the Chief
Economist, the Director of Macroeconomic Forecasting, the Director of the
Statistical Office, nine senior economists, and seven junior staff of staff economists, analysts and research assistants. The professional staff and their areas of
concentration at the end of 2007 were:

Chief of Staff
Pierce E. Scranton
Chief Economist
Keith Hall
Consultant
Donald B. Marron
	
	
	

Director of	
Macroeconomic Forecasting	
Steven N. Braun 	

Scott Baier..................	
.
Erik Durbin................	
Charles Griffiths.........	
Daniel E. Polsky.........	
.
Korok Ray. .................	
.
Dan Rosenbaum.........	
Howard Shatz.............	
Sita Slavov. .................	
.
John Stevens...............	

Director
Statistical Office
Adrienne T. Pilot

Senior Economists
International Finance
Legal, Transportation, Regulation
Agriculture, Environment, Natural Resources
Health
Public Finance, Technology
Labor, Immigration, Education, Welfare
International Trade
Tax, Budget
Macroeconomics, Labor, Small Business

Elizabeth Akers...........	 Labor

Staff Economist

Analyst
Kristopher J. Dawsey..	 Macroeconomics

Appendix A  |  213

Mark W. Clements.....	
Joshua K. Goldman....	
.
Elizabeth M. Schultz...	
Brian T. Waters..........	
Chen Zhao..................	

Research Assistants
International Finance and Trade	
Microeconomics and Regulation
International Finance and US Finance/Banking
Public Finance and Macroeconomics
Health and Labor

Statistical Office
The Statistical Office administers and updates the Council’s statistical information. Duties include preparing material for and overseeing publication of the
monthly Economic Indicators and the statistical appendix to the Economic Report
of the President. Staff verifies statistical content in Presidential memoranda and
produces background materials for economic analysis. The Office also serves as
the Council’s liaison to the statistical community.
Brian A. Amorosi........	 Program Analyst
Dagmara A. Mocala....	 Program Analyst
Administrative Office
The Administrative Office provides general support for the Council’s activities.
This includes financial management, ethics, human resource management,
travel, operations of facilities, security, information technology, and telecommunications management support.
Rosemary M. Rogers...	 Administrative Officer
Archana A. Snyder......	 Financial Officer
Doris T. Searles . ........	 Information Management Specialist

Alice H. Williams.......	
.
Sandra F. Daigle.........	
		
Lisa D. Branch............	
Mary E. Jones.............	

Office of the Chairman
Executive Assistant to the Chairman
Executive Assistant to the Chairman
and Assistant to the Chief of Staff
Executive Assistant to the Member
Executive Assistant to the Member

Staff Support
Sharon K. Thomas......	 Administrative Support Assistant and Assistant to the
		 Chief Economist
Gary Blank, who served as Chief of Staff, left the Council in August
of 2007 to accept a position with Fidelity Investments as Vice President,
Policy Analysis.
214  |  Economic Report of the President

Jane Tufts, Bruce Kaplan, and Anna Paganelli provided editorial assistance
in the preparation of the 2008 Economic Report of the President.
Student Interns during the year were: Aaron Epstein, Elisabeth E. Fosslien,
Marc Held, Jonathan Jardine, Ashley Jelinek, Kyle Jurado, Jessica Levy,
Danyank Lok, Robin Lyu, David Marold, Anthony Ng, Ethan Parker, Jeannine
Regalia, William Ross, Kyle Smith, and Zachary Watson.
Our Fellow during the year was Deepa Dhume.

Departures
The Council’s senior economists, in most cases, are on leave of absence from
academic institutions, government agencies, or private research institutions.
Their tenure with the Council is usually limited to 1 or 2 years. The senior
economists who resigned during the year were: William Collins (Vanderbilt
University), Erik Heitfield (Federal Reserve Board), Bradley Herring (Emory
University), Christine McDaniel (Department of the Treasury), Kristin McCue
(Census Bureau), Robert Martin (Federal Reserve), David Richardson (TIAACREF), and Maryann Wolverton (EPA). The economist who resigned during
the year was Benjamin Ho (Cornell University).
The economists are supported by a team of junior staff made up of analysts
and research assistants who generally work with the Council for 1 or 2 years
before returning to school or other endeavors. The analysts who resigned
during 2007 were: Dagmara Tchalakov, Lucas Threinen, Diana Wielocha,
and Jonathan Wolfson. Those who served as research assistants at the Council
and resigned during 2007 were: Eric Cragun, Nikola Kojucharov, and
Gregory Stein.

Public Information
The Council’s annual Economic Report of the President is an important vehicle
for presenting the Administration’s domestic and international economic
policies. It is available for purchase through the Government Printing Office,
and is viewable on the Internet at www.gpoaccess.gov/eop. The Council
also publishes the monthly Economic Indicators, which is available on-line at
www.gpoaccess.gov/indicators. The Council’s home page is located at
www.whitehouse.gov/cea.

Appendix A  |  215

Appendix B
STATISTICAL TABLES RELATING TO INCOME,
EMPLOYMENT, AND PRODUCTION

C O N T E N T S
National Income or Expenditure
B–1.	
B–2.	
B–3.	

B–4.	
B–5.	
B–6.	
B–7.	
B–8.	
B–9.	
B–10.	
B–11.	
B–12.	
B–13.	
B–14.	
B–15.	
B–16.	
B–17.	
B–18.	
B–19.	
B–20.	
B–21.	
B–22.	
B–23.	
B–24.	
B–25.	
B–26.	
B–27.	
B–28.	
B–29.	
B–30.	
B–31.	

Page

Gross domestic product, 1959–2007������������������������������������������������������������������  
Real gross domestic product, 1959–2007�����������������������������������������������������������  
Quantity and price indexes for gross domestic product, and percent changes,
1959–2007��������������������������������������������������������������������������������������������������������  
Percent changes in real gross domestic product, 1959–2007�������������������������������  
Contributions to percent change in real gross domestic product, 1959–2007�����  
Chain-type quantity indexes for gross domestic product, 1959–2007�����������������  
Chain-type price indexes for gross domestic product, 1959–2007����������������������  
Gross domestic product by major type of product, 1959–2007��������������������������  
Real gross domestic product by major type of product, 1959–2007��������������������  
Gross value added by sector, 1959–2007������������������������������������������������������������  
Real gross value added by sector, 1959–2007������������������������������������������������������  
Gross domestic product (GDP) by industry, value added, in current dollars
and as a percentage of GDP, 1976–2006�����������������������������������������������������������  
Real gross domestic product by industry, value added, and percent changes,
1976–2006��������������������������������������������������������������������������������������������������������  
Gross value added of nonfinancial corporate business, 1959–2007���������������������  
Gross value added and price, costs, and profits of nonfinancial corporate
business, 1959–2007������������������������������������������������������������������������������������������  
Personal consumption expenditures, 1959–2007������������������������������������������������  
Real personal consumption expenditures, 1990–2007����������������������������������������  
Private fixed investment by type, 1959–2007�����������������������������������������������������  
Real private fixed investment by type, 1990–2007����������������������������������������������  
Government consumption expenditures and gross investment by type,
1959–2007��������������������������������������������������������������������������������������������������������  
Real government consumption expenditures and gross investment by type,
1990–2007��������������������������������������������������������������������������������������������������������  
Private inventories and domestic final sales by industry, 1959–2007�������������������  
Real private inventories and domestic final sales by industry, 1959–2007�����������  
Foreign transactions in the national income and product accounts,
1959–2007��������������������������������������������������������������������������������������������������������  
Real exports and imports of goods and services, 1990–2007�������������������������������  
Relation of gross domestic product, gross national product, net national
product, and national income, 1959–2007��������������������������������������������������������  
Relation of national income and personal income, 1959–2007��������������������������  
National income by type of income, 1959–2007������������������������������������������������  
Sources of personal income, 1959–2007�������������������������������������������������������������  
Disposition of personal income, 1959–2007������������������������������������������������������  
Total and per capita disposable personal income and personal consumption
expenditures, and per capita gross domestic product, in current and real
dollars, 1959–2007��������������������������������������������������������������������������������������������  

224
226
228
229
230
232
234
236
237
238
239
240
242
244
245
246
247
248
249
250
251
252
253
254
255
256
257
258
260
262
263

Appendix B – Contents  |  219

National Income or Expenditure—Continued

Page
B–32.	 Gross saving and investment, 1959–2007�����������������������������������������������������������   264
B–33.	 Median money income (in 2006 dollars) and poverty status of families and
people, by race, selected years, 1993–2006���������������������������������������������������������   266

Population, Employment, Wages, and Productivity
B–34.	
B–35.	
B–36.	
B–37.	
B–38.	
B–39.	
B–40.	
B–41.	
B–42.	
B–43.	
B–44.	
B–45.	
B–46.	
B–47.	
B–48.	
B–49.	
B–50.	

Population by age group, 1929–2007�����������������������������������������������������������������  
Civilian population and labor force, 1929–2007������������������������������������������������  
Civilian employment and unemployment by sex and age, 1960–2007���������������  
Civilian employment by demographic characteristic, 1960–2007�����������������������  
Unemployment by demographic characteristic, 1960–2007�������������������������������  
Civilian labor force participation rate and employment/population ratio,
1960–2007��������������������������������������������������������������������������������������������������������  
Civilian labor force participation rate by demographic characteristic,
1965–2007��������������������������������������������������������������������������������������������������������  
Civilian employment/population ratio by demographic characteristic,
1965–2007��������������������������������������������������������������������������������������������������������  
Civilian unemployment rate, 1960–2007�����������������������������������������������������������  
Civilian unemployment rate by demographic characteristic, 1965–2007������������  
Unemployment by duration and reason, 1960–2007������������������������������������������  
Unemployment insurance programs, selected data, 1978–2007��������������������������  
Employees on nonagricultural payrolls, by major industry, 1960–2007��������������  
Hours and earnings in private nonagricultural industries, 1960–2007����������������  
Employment cost index, private industry, 1990–2007����������������������������������������  
Productivity and related data, business and nonfarm business sectors,
1959–2007��������������������������������������������������������������������������������������������������������  
Changes in productivity and related data, business and nonfarm business
sectors, 1959–2007��������������������������������������������������������������������������������������������  

Production and Business Activity
B–51.	
B–52.	
B–53.	
B–54.	
B–55.	
B–56.	

Industrial production indexes, major industry divisions, 1959–2007������������������  
Industrial production indexes, market groupings, 1959–2007����������������������������  
Industrial production indexes, selected manufacturing industries, 1967–2007���  
Capacity utilization rates, 1959–2007����������������������������������������������������������������  
New construction activity, 1964–2007���������������������������������������������������������������  
New private housing units started, authorized, and completed and houses sold,
1959–2007�������������������������������������������������������������������������������������������������������������������  
B–57.	 Manufacturing and trade sales and inventories, 1967–2007�������������������������������  
B–58.	 Manufacturers’ shipments and inventories, 1967–2007��������������������������������������  
B–59.	 Manufacturers’ new and unfilled orders, 1967–2007������������������������������������������  

Prices

267
268
270
271
272
273
274
275
276
277
278
279
280
282
283
284
285
286
287
288
289
290
291
292
293
294

B–60.	 Consumer price indexes for major expenditure classes, 1960–2007��������������������   295
B–61.	 Consumer price indexes for selected expenditure classes, 1960–2007�����������������   296
B–62.	 Consumer price indexes for commodities, services, and special groups,
1960–2007��������������������������������������������������������������������������������������������������������   298

220  |  Economic Report of the President

Prices—Continued
B–63.	
B–64.	
B–65.	
B–66.	
B–67.	
B–68.	

Changes in special consumer price indexes, 1960–2007�������������������������������������  
Changes in consumer price indexes for commodities and services, 1929–2007���  
Producer price indexes by stage of processing, 1959–2007����������������������������������  
Producer price indexes by stage of processing, special groups, 1974–2007����������  
Producer price indexes for major commodity groups, 1959–2007����������������������  
Changes in producer price indexes for finished goods, 1965–2007���������������������  

Money Stock, Credit, and Finance

B–69.	 Money stock and debt measures, 1965–2007�����������������������������������������������������  
B–70.	 Components of money stock measures, 1965–2007�������������������������������������������  
B–71.	 Aggregate reserves of depository institutions and the monetary base,
1965–2007��������������������������������������������������������������������������������������������������������  
B–72.	 Bank credit at all commercial banks, 1965–2007�����������������������������������������������  
B–73.	 Bond yields and interest rates, 1929–2007���������������������������������������������������������  
B–74.	 Credit market borrowing, 1999–2007����������������������������������������������������������������  
B–75.	 Mortgage debt outstanding by type of property and of financing, 1949–2007����  
B–76.	 Mortgage debt outstanding by holder, 1949–2007���������������������������������������������  
B–77.	 Consumer credit outstanding, 1959–2007���������������������������������������������������������  

Government Finance

B–78.	 Federal receipts, outlays, surplus or deficit, and debt, fiscal years, 1940–2009����  
B–79.	 Federal receipts, outlays, surplus or deficit, and debt, as percent of gross
domestic product, fiscal years 1934–2009����������������������������������������������������������  
B–80.	 Federal receipts and outlays, by major category, and surplus or deficit,
fiscal years 1940–2009���������������������������������������������������������������������������������������  
B–81.	 Federal receipts, outlays, surplus or deficit, and debt, fiscal years 2004–2009�����  
B–82.	 Federal and State and local government current receipts and expenditures,
national income and product accounts (NIPA), 1959–2007������������������������������  
B–83.	 Federal and State and local government current receipts and expenditures,
national income and product accounts (NIPA), by major type, 1959–2007�������  
B–84.	 Federal Government current receipts and expenditures, national income
and product accounts (NIPA), 1959–2007 ������������������������������������������������������  
B–85.	 State and local government current receipts and expenditures, national income
and product accounts (NIPA), 1959–2007��������������������������������������������������������  
B–86.	 State and local government revenues and expenditures, selected fiscal years,
1938–2005��������������������������������������������������������������������������������������������������������  
B–87.	 U.S. Treasury securities outstanding by kind of obligation, 1969–2007��������������  
B–88.	 Maturity distribution and average length of marketable interest-bearing
public debt securities held by private investors, 1969–2007�������������������������������  
B–89.	 Estimated ownership of U.S. Treasury securities, 1993–2007�����������������������������  

Page
299
300
301
303
304
306
307
308
310
311
312
314
316
317
318
319
320
321
322
323
324
325
326
327
328
329
330

Corporate Profits and Finance

B–90.	 Corporate profits with inventory valuation and capital consumption
adjustments, 1959–2007������������������������������������������������������������������������������������   331
B–91.	 Corporate profits by industry, 1959–2007����������������������������������������������������������   332

Appendix B – Contents  |  221

Corporate Profits and Finance—Continued

B–92.	 Corporate profits of manufacturing industries, 1959–2007��������������������������������  
B–93.	 Sales, profits, and stockholders’ equity, all manufacturing corporations,
1965–2007��������������������������������������������������������������������������������������������������������  
B–94.	 Relation of profits after taxes to stockholders’ equity and to sales, all
manufacturing corporations, 1959–2007�����������������������������������������������������������  
B–95.	 Historical stock prices and yields, 1949–2003����������������������������������������������������  
B–96.	 Common stock prices and yields, 2000–2007����������������������������������������������������  

Agriculture

B–97.	 Farm income, 1945–2007����������������������������������������������������������������������������������  
B–98.	 Farm business balance sheet, 1950–2006������������������������������������������������������������  
B–99.	 Farm output and productivity indexes, 1948–2004��������������������������������������������  
B–100.	 Farm input use, selected inputs, 1948–2007�������������������������������������������������������  
B–101.	 Agricultural price indexes and farm real estate value, 1975–2007�����������������������  
B–102.	 U.S. exports and imports of agricultural commodities, 1950–2007��������������������  

International Statistics

B–103.	 U.S. international transactions, 1946–2007�������������������������������������������������������  
B–104.	 U.S. international trade in goods by principal end-use category, 1965–2007������  
B–105.	 U.S. international trade in goods by area, 1999–2007����������������������������������������  
B–106.	 U.S. international trade in goods on balance of payments (BOP) and
Census basis, and trade in services on BOP basis, 1981–2007����������������������������  
B–107.	 International investment position of the United States at year-end,
1999–2006��������������������������������������������������������������������������������������������������������  
B–108.	 Industrial production and consumer prices, major industrial countries,
1980–2007��������������������������������������������������������������������������������������������������������  
B–109.	 Civilian unemployment rate, and hourly compensation, major industrial
countries, 1980–2007����������������������������������������������������������������������������������������  
B–110.	 Foreign exchange rates, 1985–2007��������������������������������������������������������������������  
B–111.	 International reserves, selected years, 1972–2007�����������������������������������������������  
B–112.	 Growth rates in real gross domestic product, 1989–2008�����������������������������������  

222  |  Economic Report of the President

Page
333
334
335
336
337
338
339
340
341
342
343
344
346
347
348
349
350
351
352
353
354

General Notes
Detail in these tables may not add to totals because of rounding.
Because of the formula used for calculating real gross domestic
product (GDP), the chained (2000) dollar estimates for the
detailed components do not add to the chained-dollar value
of GDP or to any intermediate aggregate. The Department of
Commerce (Bureau of Economic Analysis) no longer publishes
chained-dollar estimates prior to 1990, except for selected series.
Unless otherwise noted, all dollar figures are in current dollars.
Symbols used:
p Preliminary.
	
	
... Not available (also, not applicable).
Data in these tables reflect revisions made by the source agencies through January 29, 2008. In particular, tables containing
national income and product accounts (NIPA) estimates reflect
revisions released by the Department of Commerce in July 2007.

Appendix B – General Notes  |  223

National Income or Expenditure

Table B–1.—Gross domestic product, 1959–2007
[Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates]
Personal consumption expenditures

Year or quarter

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Gross
domestic
product

506.6
526.4
544.7
585.6
617.7
663.6
719.1
787.8
832.6
910.0
984.6
1,038.5
1,127.1
1,238.3
1,382.7
1,500.0
1,638.3
1,825.3
2,030.9
2,294.7
2,563.3
2,789.5
3,128.4
3,255.0
3,536.7
3,933.2
4,220.3
4,462.8
4,739.5
5,103.8
5,484.4
5,803.1
5,995.9
6,337.7
6,657.4
7,072.2
7,397.7
7,816.9
8,304.3
8,747.0
9,268.4
9,817.0
10,128.0
10,469.6
10,960.8
11,685.9
12,433.9
13,194.7
11,405.5
11,610.3
11,779.4
11,948.5
12,154.0
12,317.4
12,558.8
12,705.5
12,964.6
13,155.0
13,266.9
13,392.3
13,551.9
13,768.8
13,970.5

Gross private domestic investment
Fixed investment

Total

317.6
331.7
342.1
363.3
382.7
411.4
443.8
480.9
507.8
558.0
605.2
648.5
701.9
770.6
852.4
933.4
1,034.4
1,151.9
1,278.6
1,428.5
1,592.2
1,757.1
1,941.1
2,077.3
2,290.6
2,503.3
2,720.3
2,899.7
3,100.2
3,353.6
3,598.5
3,839.9
3,986.1
4,235.3
4,477.9
4,743.3
4,975.8
5,256.8
5,547.4
5,879.5
6,282.5
6,739.4
7,055.0
7,350.7
7,703.6
8,195.9
8,707.8
9,224.5
8,010.1
8,135.0
8,245.1
8,393.3
8,488.8
8,632.6
8,810.5
8,899.3
9,034.7
9,183.9
9,305.7
9,373.7
9,540.5
9,674.0
9,785.7

Durable
goods

42.7
43.3
41.8
46.9
51.6
56.7
63.3
68.3
70.4
80.8
85.9
85.0
96.9
110.4
123.5
122.3
133.5
158.9
181.2
201.7
214.4
214.2
231.3
240.2
280.8
326.5
363.5
403.0
421.7
453.6
471.8
474.2
453.9
483.6
526.7
582.2
611.6
652.6
692.7
750.2
817.6
863.3
883.7
923.9
942.7
983.9
1,023.9
1,048.9
969.6
974.8
986.9
1,004.1
1,009.7
1,036.0
1,044.1
1,005.7
1,042.6
1,042.8
1,053.8
1,056.5
1,074.0
1,074.7
1,081.6

Nondurable
goods

148.5
152.8
156.6
162.8
168.2
178.6
191.5
208.7
217.1
235.7
253.1
272.0
285.5
308.0
343.1
384.5
420.7
458.3
497.1
550.2
624.5
696.1
758.9
787.6
831.2
884.6
928.7
958.4
1,015.3
1,083.5
1,166.7
1,249.9
1,284.8
1,330.5
1,379.4
1,437.2
1,485.1
1,555.5
1,619.0
1,683.6
1,804.8
1,947.2
2,017.1
2,079.6
2,190.2
2,343.7
2,516.2
2,688.0
2,284.2
2,327.7
2,353.5
2,409.3
2,432.1
2,484.3
2,557.0
2,591.3
2,622.1
2,692.2
2,732.4
2,705.4
2,759.4
2,822.7
2,846.3

Services

126.5
135.6
143.8
153.6
162.9
176.1
189.0
203.8
220.3
241.6
266.1
291.5
319.5
352.2
385.8
426.6
480.2
534.7
600.2
676.6
753.3
846.9
950.8
1,049.4
1,178.6
1,292.2
1,428.1
1,538.3
1,663.3
1,816.5
1,960.0
2,115.9
2,247.4
2,421.2
2,571.8
2,723.9
2,879.1
3,048.7
3,235.8
3,445.7
3,660.0
3,928.8
4,154.3
4,347.2
4,570.8
4,868.3
5,167.8
5,487.6
4,756.3
4,832.4
4,904.6
4,979.9
5,047.0
5,112.3
5,209.4
5,302.4
5,370.0
5,448.9
5,519.5
5,611.8
5,707.1
5,776.5
5,857.8

See next page for continuation of table.

224  |  Economic Report of the President

Total

78.5
78.9
78.2
88.1
93.8
102.1
118.2
131.3
128.6
141.2
156.4
152.4
178.2
207.6
244.5
249.4
230.2
292.0
361.3
438.0
492.9
479.3
572.4
517.2
564.3
735.6
736.2
746.5
785.0
821.6
874.9
861.0
802.9
864.8
953.4
1,097.1
1,144.0
1,240.3
1,389.8
1,509.1
1,625.7
1,735.5
1,614.3
1,582.1
1,664.1
1,888.6
2,077.2
2,209.2
1,769.6
1,875.6
1,929.7
1,979.5
2,029.6
2,024.7
2,078.5
2,176.0
2,221.1
2,239.0
2,224.1
2,152.4
2,117.3
2,139.1
2,162.9

Nonresidential
Total

74.6
75.7
75.2
82.0
88.1
97.2
109.0
117.7
118.7
132.1
147.3
150.4
169.9
198.5
228.6
235.4
236.5
274.8
339.0
412.2
474.9
485.6
542.6
532.1
570.1
670.2
714.4
739.9
757.8
803.1
847.3
846.4
803.3
848.5
932.5
1,033.3
1,112.9
1,209.5
1,317.8
1,438.4
1,558.8
1,679.0
1,646.1
1,570.2
1,649.8
1,830.0
2,040.3
2,162.5
1,732.6
1,806.6
1,864.7
1,916.1
1,960.4
2,012.5
2,072.7
2,115.5
2,176.8
2,179.5
2,161.3
2,132.4
2,118.9
2,133.9
2,127.5

Total
46.5
49.4
48.8
53.1
56.0
63.0
74.8
85.4
86.4
93.4
104.7
109.0
114.1
128.8
153.3
169.5
173.7
192.4
228.7
280.6
333.9
362.4
420.0
426.5
417.2
489.6
526.2
519.8
524.1
563.8
607.7
622.4
598.2
612.1
666.6
731.4
810.0
875.4
968.7
1,052.6
1,133.9
1,232.1
1,176.8
1,066.3
1,077.4
1,154.5
1,272.1
1,397.7
1,100.4
1,135.5
1,172.7
1,209.5
1,233.1
1,255.7
1,287.0
1,312.6
1,367.3
1,391.2
1,415.2
1,417.1
1,431.4
1,469.1
1,500.1

Structures
18.1
19.6
19.7
20.8
21.2
23.7
28.3
31.3
31.5
33.6
37.7
40.3
42.7
47.2
55.0
61.2
61.4
65.9
74.6
93.6
117.7
136.2
167.3
177.6
154.3
177.4
194.5
176.5
174.2
182.8
193.7
202.9
183.6
172.6
177.2
186.8
207.3
224.6
250.3
275.2
282.2
313.2
322.6
279.2
277.2
298.2
334.6
405.1
284.0
293.5
303.4
312.0
323.3
328.8
334.2
352.0
375.7
400.2
416.1
428.4
439.6
464.5
483.1

Equipment and
software
28.4
29.8
29.1
32.3
34.8
39.2
46.5
54.0
54.9
59.9
67.0
68.7
71.5
81.7
98.3
108.2
112.4
126.4
154.1
187.0
216.2
226.2
252.7
248.9
262.9
312.2
331.7
343.3
349.9
381.0
414.0
419.5
414.6
439.6
489.4
544.6
602.8
650.8
718.3
777.3
851.7
918.9
854.2
787.1
800.2
856.3
937.5
992.6
816.4
842.0
869.3
897.4
909.7
926.9
952.9
960.5
991.7
991.1
999.1
988.7
991.8
1,004.5
1,017.1

Residential
28.1
26.3
26.4
29.0
32.1
34.3
34.2
32.3
32.4
38.7
42.6
41.4
55.8
69.7
75.3
66.0
62.7
82.5
110.3
131.6
141.0
123.2
122.6
105.7
152.9
180.6
188.2
220.1
233.7
239.3
239.5
224.0
205.1
236.3
266.0
301.9
302.8
334.1
349.1
385.8
424.9
446.9
469.3
503.9
572.4
675.5
768.2
764.8
632.2
671.1
692.0
706.6
727.3
756.8
785.7
803.0
809.4
788.2
746.1
715.3
687.5
664.8
627.3

Change
in
private
inventories
3.9
3.2
3.0
6.1
5.6
4.8
9.2
13.6
9.9
9.1
9.2
2.0
8.3
9.1
15.9
14.0
–6.3
17.1
22.3
25.8
18.0
–6.3
29.8
–14.9
–5.8
65.4
21.8
6.6
27.1
18.5
27.7
14.5
–.4
16.3
20.8
63.8
31.1
30.8
72.0
70.8
66.9
56.5
–31.7
11.9
14.3
58.6
36.9
46.7
37.0
69.0
65.0
63.4
69.3
12.2
5.8
60.5
44.3
59.5
62.8
20.0
–1.6
5.1
35.4

Table B–1.—Gross domestic product, 1959–2007—Continued
[Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates]
Net exports of
goods and services

Government consumption expenditures
and gross investment

Year or quarter

Federal
Net
exports Exports Imports

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

0.4
4.2
4.9
4.1
4.9
6.9
5.6
3.9
3.6
1.4
1.4
4.0
.6
–3.4
4.1
–.8
16.0
–1.6
–23.1
–25.4
–22.5
–13.1
–12.5
–20.0
–51.7
–102.7
–115.2
–132.7
–145.2
–110.4
–88.2
–78.0
–27.5
–33.2
–65.0
–93.6
–91.4
–96.2
–101.6
–159.9
–260.5
–379.5
–367.0
–424.4
–499.4
–615.4
–714.6
–762.0
–543.2
–603.1
–632.6
–682.6
–671.1
–679.8
–725.0
–782.4
–763.3
–780.4
–799.1
–705.3
–714.2
–714.2
–694.7

22.7
27.0
27.6
29.1
31.1
35.0
37.1
40.9
43.5
47.9
51.9
59.7
63.0
70.8
95.3
126.7
138.7
149.5
159.4
186.9
230.1
280.8
305.2
283.2
277.0
302.4
302.0
320.5
363.9
444.1
503.3
552.4
596.8
635.3
655.8
720.9
812.2
868.6
955.3
955.9
991.2
1,096.3
1,032.8
1,005.9
1,040.8
1,182.4
1,309.4
1,467.6
1,140.9
1,172.8
1,187.3
1,228.6
1,260.8
1,301.2
1,316.0
1,359.6
1,406.6
1,447.4
1,484.5
1,531.9
1,549.9
1,598.7
1,685.7

22.3
22.8
22.7
25.0
26.1
28.1
31.5
37.1
39.9
46.6
50.5
55.8
62.3
74.2
91.2
127.5
122.7
151.1
182.4
212.3
252.7
293.8
317.8
303.2
328.6
405.1
417.2
453.3
509.1
554.5
591.5
630.3
624.3
668.6
720.9
814.5
903.6
964.8
1,056.9
1,115.9
1,251.7
1,475.8
1,399.8
1,430.3
1,540.2
1,797.8
2,023.9
2,229.6
1,684.1
1,775.8
1,820.0
1,911.2
1,931.9
1,981.0
2,041.0
2,141.9
2,169.9
2,227.8
2,283.6
2,237.2
2,264.0
2,312.9
2,380.4

Total

110.0
111.6
119.5
130.1
136.4
143.2
151.5
171.8
192.7
209.4
221.5
233.8
246.5
263.5
281.7
317.9
357.7
383.0
414.1
453.6
500.8
566.2
627.5
680.5
733.5
797.0
879.0
949.3
999.5
1,039.0
1,099.1
1,180.2
1,234.4
1,271.0
1,291.2
1,325.5
1,369.2
1,416.0
1,468.7
1,518.3
1,620.8
1,721.6
1,825.6
1,961.1
2,092.5
2,216.8
2,363.4
2,523.0
2,169.1
2,202.8
2,237.3
2,258.2
2,306.7
2,339.8
2,394.8
2,412.5
2,472.1
2,512.5
2,536.1
2,571.4
2,608.3
2,670.0
2,716.5

Total
65.4
64.1
67.9
75.3
76.9
78.5
80.4
92.5
104.8
111.4
113.4
113.5
113.7
119.7
122.5
134.6
149.1
159.7
175.4
190.9
210.6
243.8
280.2
310.8
342.9
374.4
412.8
438.6
460.1
462.3
482.2
508.3
527.7
533.9
525.2
519.1
519.2
527.4
530.9
530.4
555.8
578.8
612.9
679.7
756.4
825.6
878.4
932.5
806.2
821.9
839.4
835.0
864.0
870.4
896.0
883.4
921.5
926.9
932.0
949.7
946.6
969.5
990.3

National Nondefense defense
53.8
53.4
56.5
61.1
61.0
60.3
60.6
71.7
83.5
89.3
89.5
87.6
84.6
87.0
88.2
95.6
103.9
111.1
120.9
130.5
145.2
168.0
196.3
225.9
250.7
281.6
311.2
330.9
350.0
354.9
362.2
374.0
383.2
376.9
362.9
353.7
348.7
354.6
349.6
345.7
360.6
370.3
392.6
437.1
497.2
550.7
588.7
624.3
536.5
546.5
564.9
555.0
577.7
585.0
604.3
587.7
610.8
620.6
620.7
645.2
634.8
654.5
673.5

11.5
10.7
11.4
14.2
15.9
18.2
19.8
20.8
21.3
22.1
23.8
25.8
29.1
32.7
34.3
39.0
45.1
48.6
54.5
60.4
65.4
75.8
84.0
84.9
92.3
92.8
101.6
107.8
110.0
107.4
120.0
134.3
144.5
157.0
162.4
165.5
170.5
172.8
181.3
184.7
195.2
208.5
220.3
242.5
259.2
274.9
289.8
308.2
269.7
275.3
274.5
280.0
286.2
285.4
291.7
295.7
310.7
306.3
311.3
304.5
311.7
315.0
316.8

State
and
local
44.7
47.5
51.6
54.9
59.5
64.8
71.0
79.2
87.9
98.0
108.2
120.3
132.8
143.8
159.2
183.4
208.7
223.3
238.7
262.6
290.2
322.4
347.3
369.7
390.5
422.6
466.2
510.7
539.4
576.7
616.9
671.9
706.7
737.0
766.0
806.3
850.0
888.6
937.8
987.9
1,065.0
1,142.8
1,212.8
1,281.5
1,336.0
1,391.2
1,485.0
1,590.5
1,362.9
1,381.0
1,397.9
1,423.2
1,442.7
1,469.5
1,498.7
1,529.0
1,550.6
1,585.7
1,604.1
1,621.7
1,661.7
1,700.5
1,726.2

Final
sales of
domestic
product

Percent change
from preceding
period
AddenGross
dum:
domesGross
tic
Gross
national Gross domespurchases 1 product 2 domestic
tic
purproduct chases 1

502.7
523.2
541.7
579.5
612.1
658.8
709.9
774.2
822.7
900.9
975.4
1,036.5
1,118.9
1,229.2
1,366.8
1,486.0
1,644.6
1,808.2
2,008.6
2,268.9
2,545.3
2,795.8
3,098.6
3,269.9
3,542.4
3,867.8
4,198.4
4,456.3
4,712.3
5,085.3
5,456.7
5,788.5
5,996.3
6,321.4
6,636.6
7,008.4
7,366.5
7,786.1
8,232.3
8,676.2
9,201.5
9,760.5
10,159.7
10,457.7
10,946.5
11,627.3
12,397.0
13,148.0
11,368.6
11,541.3
11,714.4
11,885.0
12,084.7
12,305.2
12,553.1
12,645.0
12,920.3
13,095.5
13,204.1
13,372.3
13,553.5
13,763.6
13,935.0

506.2
522.2
539.8
581.5
612.8
656.7
713.5
783.9
829.0
908.6
983.2
1,034.6
1,126.5
1,241.7
1,378.6
1,500.8
1,622.4
1,826.9
2,054.0
2,320.1
2,585.9
2,802.6
3,141.0
3,275.0
3,588.3
4,035.9
4,335.5
4,595.6
4,884.7
5,214.2
5,572.5
5,881.1
6,023.4
6,371.0
6,722.4
7,165.8
7,489.0
7,913.1
8,405.9
8,906.9
9,528.9
10,196.4
10,495.0
10,894.0
11,460.2
12,301.3
13,148.5
13,956.7
11,948.7
12,213.3
12,412.0
12,631.1
12,825.1
12,997.2
13,283.8
13,487.8
13,727.9
13,935.4
14,065.9
14,097.6
14,266.1
14,483.0
14,665.1

509.3
529.5
548.2
589.7
622.2
668.5
724.4
792.9
838.0
916.1
990.7
1,044.9
1,134.7
1,246.8
1,395.3
1,515.5
1,651.3
1,842.1
2,051.2
2,316.3
2,595.3
2,823.7
3,161.4
3,291.5
3,573.8
3,969.5
4,246.8
4,480.6
4,757.4
5,127.4
5,510.6
5,837.9
6,026.3
6,367.4
6,689.3
7,098.4
7,433.4
7,851.9
8,337.3
8,768.3
9,302.2
9,855.9
10,171.6
10,500.2
11,017.6
11,762.1
12,502.4
13,252.7
11,501.7
11,683.1
11,862.3
12,001.1
12,224.0
12,385.1
12,645.7
12,755.0
13,027.5
13,218.9
13,311.9
13,452.4
13,615.1
13,839.4
14,071.6

8.4
3.9
3.5
7.5
5.5
7.4
8.4
9.5
5.7
9.3
8.2
5.5
8.5
9.9
11.7
8.5
9.2
11.4
11.3
13.0
11.7
8.8
12.2
4.0
8.7
11.2
7.3
5.7
6.2
7.7
7.5
5.8
3.3
5.7
5.0
6.2
4.6
5.7
6.2
5.3
6.0
5.9
3.2
3.4
4.7
6.6
6.4
6.1
6.8
7.4
6.0
5.9
7.1
5.5
8.1
4.8
8.4
6.0
3.4
3.8
4.9
6.6
6.0

8.5
3.2
3.4
7.7
5.4
7.2
8.6
9.9
5.8
9.6
8.2
5.2
8.9
10.2
11.0
8.9
8.1
12.6
12.4
13.0
11.5
8.4
12.1
4.3
9.6
12.5
7.4
6.0
6.3
6.7
6.9
5.5
2.4
5.8
5.5
6.6
4.5
5.7
6.2
6.0
7.0
7.0
2.9
3.8
5.2
7.3
6.9
6.1
8.0
9.2
6.7
7.2
6.3
5.5
9.1
6.3
7.3
6.2
3.8
.9
4.9
6.2
5.1

1 Gross domestic product (GDP) less exports of goods and services plus imports of goods and services.
2 GDP plus net income receipts from rest of the world.

Source: Department of Commerce (Bureau of Economic Analysis).

Appendix B – National Income or Expenditure  |  225

Table B–2.—Real gross domestic product, 1959–2007
[Billions of chained (2000) dollars, except as noted; quarterly data at seasonally adjusted annual rates]
Personal consumption expenditures

Year or quarter

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Gross
domestic
product

2,441.3
2,501.8
2,560.0
2,715.2
2,834.0
2,998.6
3,191.1
3,399.1
3,484.6
3,652.7
3,765.4
3,771.9
3,898.6
4,105.0
4,341.5
4,319.6
4,311.2
4,540.9
4,750.5
5,015.0
5,173.4
5,161.7
5,291.7
5,189.3
5,423.8
5,813.6
6,053.7
6,263.6
6,475.1
6,742.7
6,981.4
7,112.5
7,100.5
7,336.6
7,532.7
7,835.5
8,031.7
8,328.9
8,703.5
9,066.9
9,470.3
9,817.0
9,890.7
10,048.8
10,301.0
10,675.8
11,003.4
11,319.4
10,543.6
10,634.2
10,728.7
10,796.4
10,878.4
10,954.1
11,074.3
11,107.2
11,238.7
11,306.7
11,336.7
11,395.5
11,412.6
11,520.1
11,658.9

Gross private domestic investment
Fixed investment

Total

1,554.6
1,597.4
1,630.3
1,711.1
1,781.6
1,888.4
2,007.7
2,121.8
2,185.0
2,310.5
2,396.4
2,451.9
2,545.5
2,701.3
2,833.8
2,812.3
2,876.9
3,035.5
3,164.1
3,303.1
3,383.4
3,374.1
3,422.2
3,470.3
3,668.6
3,863.3
4,064.0
4,228.9
4,369.8
4,546.9
4,675.0
4,770.3
4,778.4
4,934.8
5,099.8
5,290.7
5,433.5
5,619.4
5,831.8
6,125.8
6,438.6
6,739.4
6,910.4
7,099.3
7,295.3
7,561.4
7,803.6
8,044.1
7,475.1
7,520.5
7,585.5
7,664.3
7,709.4
7,775.2
7,852.8
7,876.9
7,961.9
8,009.3
8,063.8
8,141.2
8,215.7
8,244.3
8,302.2

Durable
goods

��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
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��������������
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��������������
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��������������
��������������
��������������
��������������
��������������
��������������
��������������
453.5
427.9
453.0
488.4
529.4
552.6
595.9
646.9
720.3
804.6
863.3
900.7
964.8
1,020.6
1,084.8
1,137.4
1,180.5
1,066.2
1,071.3
1,091.5
1,110.1
1,116.0
1,146.3
1,163.5
1,123.8
1,167.8
1,170.2
1,186.3
1,197.6
1,223.2
1,228.4
1,241.9

Nondurable
goods

Services

��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
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��������������
��������������
��������������
��������������
��������������
��������������
1,484.0
1,480.5
1,510.1
1,550.4
1,603.9
1,638.6
1,680.4
1,725.3
1,794.4
1,876.6
1,947.2
1,986.7
2,037.1
2,103.0
2,177.6
2,255.4
2,337.7
2,156.7
2,164.9
2,181.4
2,207.5
2,226.8
2,247.2
2,260.9
2,286.8
2,312.3
2,325.6
2,343.9
2,368.8
2,386.6
2,383.8
2,396.8

��������������
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��������������
��������������
��������������
��������������
��������������
��������������
��������������
2,851.7
2,900.0
3,000.8
3,085.7
3,176.6
3,259.9
3,356.0
3,468.0
3,615.0
3,758.0
3,928.8
4,023.2
4,100.4
4,178.8
4,311.0
4,427.3
4,545.5
4,262.9
4,294.6
4,325.2
4,361.1
4,381.3
4,401.3
4,449.1
4,477.5
4,501.0
4,531.6
4,554.0
4,595.5
4,630.7
4,656.7
4,689.5

See next page for continuation of table.

226  |  Economic Report of the President

Total

266.7
266.6
264.9
298.4
318.5
344.7
393.1
427.7
408.1
431.9
457.1
427.1
475.7
532.1
594.4
550.6
453.1
544.7
627.0
702.6
725.0
645.3
704.9
606.0
662.5
857.7
849.7
843.9
870.0
890.5
926.2
895.1
822.2
889.0
968.3
1,099.6
1,134.0
1,234.3
1,387.7
1,524.1
1,642.6
1,735.5
1,598.4
1,557.1
1,613.1
1,770.2
1,869.3
1,919.5
1,685.3
1,766.3
1,800.5
1,828.8
1,852.6
1,834.3
1,865.3
1,924.9
1,945.4
1,948.5
1,928.2
1,856.2
1,816.9
1,837.4
1,859.9

Residential

Change
in
private
inventories

��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
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��������������
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��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
298.9
270.2
307.6
332.7
364.8
353.1
381.3
388.6
418.3
443.6
446.9
448.5
469.9
509.4
560.2
597.1
569.5
540.5
561.7
567.5
570.9
578.3
596.4
606.4
607.2
606.1
587.5
555.0
529.4
506.3
490.7
463.3

����������������
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����������������
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����������������
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����������������
����������������
����������������
����������������
����������������
����������������
15.4
–.5
16.5
20.6
63.6
29.9
28.7
71.2
72.6
68.9
56.5
–31.7
12.5
14.3
54.3
33.2
40.3
35.0
64.9
60.1
57.2
63.4
10.1
5.9
53.6
38.4
51.4
53.9
17.4
.1
5.8
30.6

Nonresidential
Total

��������������
��������������
��������������
��������������
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��������������
��������������
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��������������
��������������
��������������
��������������
��������������
��������������
��������������
886.6
829.1
878.3
953.5
1,042.3
1,109.6
1,209.2
1,320.6
1,455.0
1,576.3
1,679.0
1,629.4
1,544.6
1,596.9
1,712.8
1,831.4
1,874.7
1,647.9
1,698.7
1,736.7
1,767.7
1,785.3
1,819.8
1,854.9
1,865.6
1,901.4
1,892.3
1,869.6
1,835.5
1,815.2
1,829.3
1,826.0

Total

Structures

Equipment and
software

��������������
��������������
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��������������
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��������������
��������������
��������������
��������������
��������������
��������������
��������������
595.1
563.2
581.3
631.9
689.9
762.5
833.6
934.2
1,037.8
1,133.3
1,232.1
1,180.5
1,071.5
1,081.8
1,144.3
1,225.8
1,306.8
1,099.1
1,127.5
1,160.7
1,189.7
1,199.5
1,214.1
1,239.5
1,250.0
1,289.7
1,303.2
1,319.4
1,314.8
1,321.7
1,356.6
1,387.3

��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
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��������������
��������������
��������������
��������������
��������������
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��������������
��������������
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��������������
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��������������
��������������
��������������
��������������
��������������
��������������
��������������
275.2
244.6
229.9
228.3
232.3
247.1
261.1
280.1
294.5
293.2
313.2
306.1
253.8
243.5
246.7
247.8
268.6
242.9
246.5
248.7
248.6
249.8
248.9
244.8
247.7
256.5
266.4
273.3
278.3
282.6
299.5
311.1

��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
355.0
345.9
371.1
417.4
467.2
523.1
578.7
658.3
745.6
840.2
918.9
874.2
820.2
843.1
905.1
991.8
1,050.6
861.9
887.4
920.0
951.2
960.0
977.4
1,011.1
1,018.7
1,050.2
1,050.1
1,057.6
1,044.4
1,045.3
1,057.4
1,073.5

Table B–2.—Real gross domestic product, 1959–2007—Continued
[Billions of chained (2000) dollars, except as noted; quarterly data at seasonally adjusted annual rates]
Net exports of
goods and services

Government consumption expenditures
and gross investment

Year or quarter

Federal
Net
exports

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
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2007:  I ������������������
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Exports

Imports

Total

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–54.7
–14.6
–15.9
–52.1
–79.4
–71.0
–79.6
–104.6
–203.7
–296.2
–379.5
–399.1
–471.3
–518.9
–593.8
–618.0
–624.5
–549.1
–591.1
–602.7
–632.3
–624.4
–601.0
–604.1
–642.6
–640.1
–626.6
–633.8
–597.3
–612.1
–573.9
–533.1

77.2
90.6
91.1
95.7
102.5
114.6
117.8
126.0
128.9
139.0
145.7
161.4
164.1
176.5
209.7
226.3
224.9
234.7
240.3
265.7
292.0
323.5
327.4
302.4
294.6
318.7
328.3
353.7
391.8
454.6
506.8
552.5
589.1
629.7
650.0
706.5
778.2
843.4
943.7
966.5
1,008.2
1,096.3
1,036.7
1,013.3
1,026.1
1,126.1
1,203.4
1,304.1
1,101.8
1,119.4
1,128.0
1,155.3
1,172.4
1,199.3
1,205.6
1,236.4
1,270.6
1,288.4
1,306.6
1,350.9
1,354.7
1,379.5
1,441.2

101.9
103.3
102.6
114.3
117.3
123.6
136.7
157.1
168.5
193.6
204.6
213.4
224.7
250.0
261.6
255.7
227.3
271.7
301.4
327.6
333.0
310.9
319.1
315.0
354.8
441.1
469.8
510.0
540.2
561.4
586.0
607.1
603.7
645.6
702.1
785.9
849.1
923.0
1,048.3
1,170.3
1,304.4
1,475.8
1,435.8
1,484.6
1,545.0
1,719.9
1,821.5
1,928.6
1,650.9
1,710.5
1,730.8
1,787.7
1,796.8
1,800.3
1,809.7
1,879.0
1,910.7
1,915.0
1,940.4
1,948.2
1,966.8
1,953.4
1,974.3

714.3
715.4
751.3
797.6
818.1
836.1
861.3
937.1
1,008.9
1,040.5
1,038.0
1,012.9
990.8
983.5
980.0
1,004.7
1,027.4
1,031.9
1,043.3
1,074.0
1,094.1
1,115.4
1,125.6
1,145.4
1,187.3
1,227.0
1,312.5
1,392.5
1,426.7
1,445.1
1,482.5
1,530.0
1,547.2
1,555.3
1,541.1
1,541.3
1,549.7
1,564.9
1,594.0
1,624.4
1,686.9
1,721.6
1,780.3
1,858.8
1,904.8
1,931.8
1,946.3
1,981.4
1,925.4
1,931.8
1,939.4
1,930.6
1,936.8
1,942.5
1,957.6
1,948.2
1,971.8
1,976.5
1,980.2
1,997.2
1,994.7
2,014.8
2,033.6

Total
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������������
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������������
������������
659.1
658.0
646.6
619.6
596.4
580.3
573.5
567.6
561.2
573.7
578.8
601.4
643.4
687.1
715.9
726.5
742.3
709.5
713.7
724.5
716.0
721.0
722.2
737.3
725.5
740.4
737.4
739.2
752.3
740.2
751.0
764.0

National Nondefense defense
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479.4
474.2
450.7
425.3
404.6
389.2
383.8
373.0
365.3
372.2
370.3
384.9
413.2
449.0
475.0
482.4
491.5
470.2
472.5
484.8
472.7
478.1
481.1
492.7
477.7
485.5
488.2
486.4
505.8
491.6
501.7
513.9

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178.6
182.8
195.4
194.1
191.7
191.0
189.6
194.5
195.9
201.5
208.5
216.5
230.2
238.0
240.7
243.9
250.7
239.1
241.0
239.4
243.2
242.7
240.9
244.3
247.8
254.8
249.0
252.7
246.1
248.4
248.9
249.6

State
and
local
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868.4
886.8
906.5
919.5
943.3
968.3
990.5
1,025.9
1,063.0
1,113.2
1,142.8
1,179.0
1,215.4
1,217.8
1,215.8
1,219.6
1,239.0
1,215.9
1,218.1
1,214.7
1,214.4
1,215.7
1,220.1
1,220.3
1,222.5
1,231.3
1,238.9
1,240.9
1,244.9
1,254.2
1,263.5
1,269.6

AddenFinal
Gross
dum:
sales of domestic Gross
domespurnational
tic
1
prodproduct chases
uct 2
2,442.7
2,506.8
2,566.8
2,708.5
2,830.3
2,999.9
3,173.8
3,364.8
3,467.6
3,640.3
3,753.7
3,787.7
3,893.4
4,098.6
4,315.9
4,305.5
4,352.5
4,522.3
4,721.6
4,981.6
5,161.2
5,196.7
5,265.1
5,233.4
5,454.0
5,739.2
6,042.1
6,271.8
6,457.2
6,734.5
6,962.2
7,108.5
7,115.0
7,331.1
7,522.3
7,777.8
8,010.2
8,306.5
8,636.6
8,997.6
9,404.0
9,760.5
9,920.9
10,036.5
10,285.1
10,619.8
10,966.9
11,275.9
10,507.1
10,568.5
10,666.6
10,737.0
10,813.0
10,940.4
11,064.8
11,049.5
11,196.1
11,252.1
11,279.7
11,375.8
11,411.6
11,512.8
11,626.4

2,485.9
2,529.6
2,587.6
2,751.4
2,866.0
3,023.2
3,228.6
3,450.3
3,545.1
3,727.5
3,844.1
3,837.4
3,974.2
4,192.8
4,399.1
4,343.8
4,297.0
4,575.0
4,818.5
5,081.5
5,206.8
5,108.9
5,244.7
5,175.1
5,477.6
5,951.6
6,215.8
6,443.6
6,644.1
6,857.9
7,060.8
7,161.6
7,101.2
7,338.9
7,577.2
7,911.3
8,098.4
8,405.7
8,807.6
9,272.5
9,767.7
10,196.4
10,290.1
10,517.7
10,815.5
11,261.4
11,613.1
11,937.1
11,086.3
11,216.9
11,322.8
11,419.2
11,493.8
11,546.9
11,670.0
11,742.0
11,871.3
11,926.1
11,963.6
11,987.1
12,018.7
12,088.9
12,188.3

2,457.4
2,519.4
2,579.3
2,736.9
2,857.2
3,023.6
3,217.3
3,423.7
3,510.1
3,680.0
3,792.0
3,798.2
3,927.8
4,136.2
4,383.6
4,367.5
4,348.4
4,585.3
4,800.3
5,064.4
5,240.1
5,227.6
5,349.7
5,249.7
5,482.5
5,869.3
6,093.4
6,290.6
6,500.9
6,775.2
7,015.4
7,155.2
7,136.8
7,371.8
7,568.6
7,864.2
8,069.8
8,365.3
8,737.5
9,088.7
9,504.7
9,855.9
9,933.6
10,079.0
10,355.3
10,746.0
11,064.7
11,370.1
10,633.0
10,701.4
10,804.9
10,844.4
10,941.9
11,014.7
11,151.2
11,151.1
11,294.0
11,362.5
11,375.9
11,447.8
11,466.7
11,580.0
11,744.6

Percent change
from preceding
period
Gross
Gross
domes- domestic
tic
purproduct chases 1
7.1
2.5
2.3
6.1
4.4
5.8
6.4
6.5
2.5
4.8
3.1
.2
3.4
5.3
5.8
–.5
–.2
5.3
4.6
5.6
3.2
–.2
2.5
–1.9
4.5
7.2
4.1
3.5
3.4
4.1
3.5
1.9
–.2
3.3
2.7
4.0
2.5
3.7
4.5
4.2
4.5
3.7
.8
1.6
2.5
3.6
3.1
2.9
3.0
3.5
3.6
2.5
3.1
2.8
4.5
1.2
4.8
2.4
1.1
2.1
.6
3.8
4.9

7.1
1.8
2.3
6.3
4.2
5.5
6.8
6.9
2.7
5.1
3.1
–.2
3.6
5.5
4.9
–1.3
–1.1
6.5
5.3
5.5
2.5
–1.9
2.7
–1.3
5.8
8.7
4.4
3.7
3.1
3.2
3.0
1.4
–.8
3.3
3.2
4.4
2.4
3.8
4.8
5.3
5.3
4.4
.9
2.2
2.8
4.1
3.1
2.8
3.6
4.8
3.8
3.4
2.6
1.9
4.3
2.5
4.5
1.9
1.3
.8
1.1
2.4
3.3

1 Gross domestic product (GDP) less exports of goods and services plus imports of goods and services.
2 GDP plus net income receipts from rest of the world.

Source: Department of Commerce (Bureau of Economic Analysis).

Appendix B – National Income or Expenditure  |  227

Table B–3.—Quantity and price indexes for gross domestic product, and percent changes,
1959–2007
[Quarterly data are seasonally adjusted]
Percent change from preceding period 1

Index numbers, 2000=100
Gross domestic product (GDP)
Year or quarter

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Real GDP
GDP
(chain-type chain-type
quantity price index
index)
24.868
25.484
26.077
27.658
28.868
30.545
32.506
34.625
35.496
37.208
38.356
38.422
39.713
41.815
44.224
44.001
43.916
46.256
48.391
51.085
52.699
52.579
53.904
52.860
55.249
59.220
61.666
63.804
65.958
68.684
71.116
72.451
72.329
74.734
76.731
79.816
81.814
84.842
88.658
92.359
96.469
100.000
100.751
102.362
104.931
108.748
112.086
115.304
107.402
108.325
109.287
109.977
110.812
111.583
112.808
113.143
114.482
115.175
115.481
116.080
116.254
117.349
118.763

20.754
21.044
21.281
21.572
21.801
22.134
22.538
23.180
23.897
24.916
26.153
27.538
28.916
30.171
31.854
34.721
38.007
40.202
42.758
45.762
49.553
54.062
59.128
62.738
65.214
67.664
69.724
71.269
73.204
75.706
78.569
81.614
84.457
86.402
88.390
90.265
92.115
93.859
95.415
96.475
97.868
100.000
102.402
104.193
106.409
109.462
113.005
116.568
108.180
109.185
109.807
110.677
111.745
112.455
113.422
114.398
115.363
116.350
117.030
117.527
118.750
119.527
119.837

GDP
implicit
price
deflator
20.751
21.041
21.278
21.569
21.798
22.131
22.535
23.176
23.893
24.913
26.149
27.534
28.911
30.166
31.849
34.725
38.002
40.196
42.752
45.757
49.548
54.043
59.119
62.726
65.207
67.655
69.713
71.250
73.196
75.694
78.556
81.590
84.444
86.385
88.381
90.259
92.106
93.852
95.414
96.472
97.868
100.000
102.399
104.187
106.404
109.462
113.000
116.567
108.175
109.178
109.793
110.671
111.726
112.446
113.405
114.389
115.357
116.347
117.026
117.522
118.745
119.519
119.826

Personal consumption
expenditures (PCE)

PCE
Real GDP
GDP
PCE
less food
chain-type and energy (chain-type chain-type
price index price index quantity price index
index)
20.432
20.767
20.985
21.232
21.479
21.786
22.103
22.662
23.237
24.151
25.255
26.448
27.574
28.528
30.081
33.191
35.955
37.948
40.410
43.248
47.059
52.078
56.720
59.859
62.436
64.795
66.936
68.569
70.947
73.755
76.972
80.498
83.419
85.824
87.804
89.654
91.577
93.547
95.124
95.978
97.575
100.000
102.094
103.542
105.597
108.392
111.588
114.675
107.163
108.179
108.703
109.521
110.119
111.037
112.205
112.989
113.480
114.670
115.406
115.143
116.129
117.345
117.873

1 Quarterly percent changes are at annual rates.

Source: Department of Commerce (Bureau of Economic Analysis).

228  |  Economic Report of the President

21.031
21.382
21.640
21.911
22.175
22.497
22.771
23.246
23.915
24.931
26.089
27.270
28.538
29.462
30.533
32.825
35.543
37.716
40.112
42.756
45.735
49.869
54.215
57.776
60.823
63.352
65.778
68.244
70.772
73.838
76.884
80.156
83.292
86.130
88.332
90.372
92.388
94.124
95.644
96.895
98.343
100.000
101.904
103.705
105.175
107.338
109.670
112.130
106.442
107.142
107.601
108.169
108.858
109.422
109.878
110.520
111.078
111.871
112.519
113.052
113.730
114.116
114.682

Personal consumption
expenditures (PCE)

Gross domestic product (GDP)

7.1
2.5
2.3
6.1
4.4
5.8
6.4
6.5
2.5
4.8
3.1
.2
3.4
5.3
5.8
–.5
–.2
5.3
4.6
5.6
3.2
–.2
2.5
–1.9
4.5
7.2
4.1
3.5
3.4
4.1
3.5
1.9
–.2
3.3
2.7
4.0
2.5
3.7
4.5
4.2
4.5
3.7
.8
1.6
2.5
3.6
3.1
2.9
3.0
3.5
3.6
2.5
3.1
2.8
4.5
1.2
4.8
2.4
1.1
2.1
.6
3.8
4.9

1.2
1.4
1.1
1.4
1.1
1.5
1.8
2.8
3.1
4.3
5.0
5.3
5.0
4.3
5.6
9.0
9.5
5.8
6.4
7.0
8.3
9.1
9.4
6.1
3.9
3.8
3.0
2.2
2.7
3.4
3.8
3.9
3.5
2.3
2.3
2.1
2.0
1.9
1.7
1.1
1.4
2.2
2.4
1.7
2.1
2.9
3.2
3.2
3.7
3.8
2.3
3.2
3.9
2.6
3.5
3.5
3.4
3.5
2.4
1.7
4.2
2.6
1.0

GDP
implicit
price
deflator
1.2
1.4
1.1
1.4
1.1
1.5
1.8
2.8
3.1
4.3
5.0
5.3
5.0
4.3
5.6
9.0
9.4
5.8
6.4
7.0
8.3
9.1
9.4
6.1
4.0
3.8
3.0
2.2
2.7
3.4
3.8
3.9
3.5
2.3
2.3
2.1
2.0
1.9
1.7
1.1
1.4
2.2
2.4
1.7
2.1
2.9
3.2
3.2
3.7
3.8
2.3
3.2
3.9
2.6
3.5
3.5
3.4
3.5
2.4
1.7
4.2
2.6
1.0

PCE
chain-type
price index
1.6
1.6
1.0
1.2
1.2
1.4
1.5
2.5
2.5
3.9
4.6
4.7
4.3
3.5
5.4
10.3
8.3
5.5
6.5
7.0
8.8
10.7
8.9
5.5
4.3
3.8
3.3
2.4
3.5
4.0
4.4
4.6
3.6
2.9
2.3
2.1
2.1
2.2
1.7
.9
1.7
2.5
2.1
1.4
2.0
2.6
2.9
2.8
3.5
3.8
2.0
3.0
2.2
3.4
4.3
2.8
1.7
4.3
2.6
–.9
3.5
4.3
1.8

PCE
less food
and energy
price index
2.2
1.7
1.2
1.3
1.2
1.5
1.2
2.1
2.9
4.2
4.6
4.5
4.6
3.2
3.6
7.5
8.3
6.1
6.4
6.6
7.0
9.0
8.7
6.6
5.3
4.2
3.8
3.7
3.7
4.3
4.1
4.3
3.9
3.4
2.6
2.3
2.2
1.9
1.6
1.3
1.5
1.7
1.9
1.8
1.4
2.1
2.2
2.2
2.4
2.7
1.7
2.1
2.6
2.1
1.7
2.4
2.0
2.9
2.3
1.9
2.4
1.4
2.0

Table B–4.—Percent changes in real gross domestic product, 1959–2007
[Percent change from preceding period; quarterly data at seasonally adjusted annual rates]
Personal consumption expenditures

Year or quarter

1959 ���������������������
1960 ���������������������
1961 ���������������������
1962 ���������������������
1963 ���������������������
1964 ���������������������
1965 ���������������������
1966 ���������������������
1967 ���������������������
1968 ���������������������
1969 ���������������������
1970 ���������������������
1971 ���������������������
1972 ���������������������
1973 ���������������������
1974 ���������������������
1975 ���������������������
1976 ���������������������
1977 ���������������������
1978 ���������������������
1979 ���������������������
1980 ���������������������
1981 ���������������������
1982 ���������������������
1983 ���������������������
1984 ���������������������
1985 ���������������������
1986 ���������������������
1987 ���������������������
1988 ���������������������
1989 ���������������������
1990 ���������������������
1991 ���������������������
1992 ���������������������
1993 ���������������������
1994 ���������������������
1995 ���������������������
1996 ���������������������
1997 ���������������������
1998 ���������������������
1999 ���������������������
2000 ���������������������
2001 ���������������������
2002 ���������������������
2003 ���������������������
2004 ���������������������
2005 ���������������������
2006 ���������������������
2004:  I �����������������
      II ����������������
      III ���������������
      IV ���������������
2005:  I �����������������
      II ����������������
      III ���������������
      IV ���������������
2006:  I �����������������
      II ����������������
      III ���������������
      IV ���������������
2007:  I �����������������
      II ����������������
      III ���������������

Gross
domestic
product

7.1
2.5
2.3
6.1
4.4
5.8
6.4
6.5
2.5
4.8
3.1
.2
3.4
5.3
5.8
–.5
–.2
5.3
4.6
5.6
3.2
–.2
2.5
–1.9
4.5
7.2
4.1
3.5
3.4
4.1
3.5
1.9
–.2
3.3
2.7
4.0
2.5
3.7
4.5
4.2
4.5
3.7
.8
1.6
2.5
3.6
3.1
2.9
3.0
3.5
3.6
2.5
3.1
2.8
4.5
1.2
4.8
2.4
1.1
2.1
.6
3.8
4.9

Gross private domestic investment

Exports and
imports of goods
and services

Government consumption
expenditures and gross
investment

Nonresidential fixed
Total

5.6
2.8
2.1
5.0
4.1
6.0
6.3
5.7
3.0
5.7
3.7
2.3
3.8
6.1
4.9
–.8
2.3
5.5
4.2
4.4
2.4
–.3
1.4
1.4
5.7
5.3
5.2
4.1
3.3
4.1
2.8
2.0
.2
3.3
3.3
3.7
2.7
3.4
3.8
5.0
5.1
4.7
2.5
2.7
2.8
3.6
3.2
3.1
4.4
2.4
3.5
4.2
2.4
3.5
4.1
1.2
4.4
2.4
2.8
3.9
3.7
1.4
2.8

NonDurable durable
goods goods

12.1
2.0
–3.8
11.7
9.7
9.3
12.7
8.4
1.6
11.0
3.5
–3.2
10.0
12.7
10.3
–6.9
.0
12.8
9.3
5.3
–.3
–7.8
1.2
–.1
14.6
14.6
10.1
9.7
1.7
6.0
2.2
–.3
–5.6
5.9
7.8
8.4
4.4
7.8
8.6
11.3
11.7
7.3
4.3
7.1
5.8
6.3
4.9
3.8
5.8
1.9
7.8
7.0
2.2
11.3
6.2
–13.0
16.6
.8
5.6
3.9
8.8
1.7
4.5

4.1
1.5
1.8
3.1
2.1
4.9
5.3
5.5
1.6
4.6
2.7
2.4
1.8
4.4
3.3
–2.0
1.5
4.9
2.4
3.7
2.7
–.2
1.2
1.0
3.3
4.0
2.7
3.6
2.4
3.3
2.8
1.6
–.2
2.0
2.7
3.5
2.2
2.6
2.7
4.0
4.6
3.8
2.0
2.5
3.2
3.5
3.6
3.6
4.6
1.5
3.1
4.9
3.5
3.7
2.5
4.7
4.5
2.3
3.2
4.3
3.0
–.5
2.2

Services

5.3
4.5
4.2
5.0
4.6
6.1
5.3
5.0
4.9
5.2
4.8
4.0
3.9
5.7
4.7
2.3
3.7
4.1
4.3
4.7
3.1
1.8
1.7
2.1
5.5
4.1
5.6
2.9
4.3
4.0
3.0
2.9
1.7
3.5
2.8
2.9
2.6
2.9
3.3
4.2
4.0
4.5
2.4
1.9
1.9
3.2
2.7
2.7
4.1
3.0
2.9
3.4
1.9
1.8
4.4
2.6
2.1
2.7
2.0
3.7
3.1
2.3
2.8

Total

8.0
5.7
–.6
8.7
5.6
11.9
17.4
12.5
–1.4
4.5
7.6
–.5
.0
9.2
14.6
.8
–9.9
4.9
11.3
15.0
10.1
–.3
5.7
–3.8
–1.3
17.7
6.6
–2.9
–.1
5.2
5.6
.5
–5.4
3.2
8.7
9.2
10.5
9.3
12.1
11.1
9.2
8.7
–4.2
–9.2
1.0
5.8
7.1
6.6
–2.6
10.7
12.3
10.3
3.3
5.0
8.6
3.4
13.3
4.2
5.1
–1.4
2.1
11.0
9.3

Structures
2.4
7.9
1.4
4.5
1.1
10.4
15.9
6.8
–2.5
1.5
5.4
.3
–1.6
3.1
8.2
–2.1
–10.5
2.4
4.1
14.4
12.7
5.8
8.0
–1.7
–10.8
14.0
7.1
–11.0
–2.9
.6
2.0
1.5
–11.1
–6.0
–.7
1.8
6.4
5.6
7.3
5.1
–.4
6.8
–2.3
–17.1
–4.1
1.3
.5
8.4
–.3
6.1
3.6
–.2
2.1
–1.6
–6.3
4.8
15.0
16.4
10.8
7.4
6.4
26.2
16.4

Equipment
and
software
11.9
4.2
–1.9
11.6
8.4
12.8
18.3
16.0
–.7
6.2
8.8
–1.0
1.0
12.9
18.3
2.6
–9.5
6.2
15.1
15.2
8.7
–3.6
4.3
–5.2
5.4
19.8
6.4
1.9
1.4
7.5
7.3
.0
–2.6
7.3
12.5
11.9
12.0
10.6
13.8
13.3
12.7
9.4
–4.9
–6.2
2.8
7.4
9.6
5.9
–3.4
12.4
15.5
14.3
3.8
7.4
14.5
3.1
13.0
–.1
2.9
–4.9
.3
4.7
6.2

Residential Exports Imports
fixed

25.4
–7.1
.3
9.6
11.8
5.8
–2.9
–8.9
–3.1
13.6
3.0
–6.0
27.4
17.8
–.6
–20.6
–13.0
23.6
21.5
6.3
–3.7
–21.2
–8.0
–18.2
41.4
14.8
1.6
12.3
2.0
–1.0
–3.0
–8.6
–9.6
13.8
8.2
9.6
–3.2
8.0
1.9
7.6
6.0
.8
.4
4.8
8.4
10.0
6.6
–4.6
4.0
16.7
4.2
2.4
5.3
13.1
6.9
.5
–.7
–11.7
–20.4
–17.2
–16.3
–11.8
–20.5

10.3
17.4
.5
5.1
7.1
11.8
2.8
6.9
2.3
7.9
4.8
10.7
1.7
7.5
18.9
7.9
–.6
4.4
2.4
10.5
9.9
10.8
1.2
–7.6
–2.6
8.2
3.0
7.7
10.8
16.0
11.5
9.0
6.6
6.9
3.2
8.7
10.1
8.4
11.9
2.4
4.3
8.7
–5.4
–2.3
1.3
9.7
6.9
8.4
10.0
6.5
3.1
10.0
6.0
9.5
2.1
10.6
11.5
5.7
5.7
14.3
1.1
7.5
19.1

10.5
1.3
–.7
11.3
2.7
5.3
10.6
14.9
7.3
14.9
5.7
4.3
5.3
11.3
4.6
–2.3
–11.1
19.5
10.9
8.7
1.7
–6.6
2.6
–1.3
12.6
24.3
6.5
8.6
5.9
3.9
4.4
3.6
–.6
7.0
8.8
11.9
8.0
8.7
13.6
11.6
11.5
13.1
–2.7
3.4
4.1
11.3
5.9
5.9
12.3
15.2
4.8
13.8
2.1
.8
2.1
16.2
6.9
.9
5.4
1.6
3.9
–2.7
4.4

Total

3.4
.2
5.0
6.2
2.6
2.2
3.0
8.8
7.7
3.1
–.2
–2.4
–2.2
–.7
–.4
2.5
2.3
.4
1.1
2.9
1.9
2.0
.9
1.8
3.7
3.3
7.0
6.1
2.5
1.3
2.6
3.2
1.1
.5
–.9
.0
.5
1.0
1.9
1.9
3.9
2.1
3.4
4.4
2.5
1.4
.7
1.8
1.5
1.3
1.6
–1.8
1.3
1.2
3.2
–1.9
4.9
1.0
.8
3.5
–.5
4.1
3.8

Federal

3.1
–2.7
4.2
8.5
.1
–1.3
.0
11.0
9.9
.8
–3.4
–7.4
–7.7
–4.1
–4.2
.9
.3
.0
2.1
2.5
2.4
4.7
4.8
3.9
6.6
3.1
7.8
5.7
3.6
–1.6
1.5
2.0
–.2
–1.7
–4.2
–3.7
–2.7
–1.2
–1.0
–1.1
2.2
.9
3.9
7.0
6.8
4.2
1.5
2.2
6.1
2.4
6.2
–4.6
2.8
.7
8.6
–6.2
8.4
–1.6
.9
7.3
–6.3
6.0
7.1

State
and
local

3.8
4.4
6.2
3.1
6.0
6.8
6.7
6.3
5.0
5.9
3.4
2.8
3.1
2.2
2.8
3.8
3.7
.7
.4
3.3
1.5
–.1
–2.0
.1
1.2
3.6
6.2
6.4
1.5
3.7
3.4
4.1
2.1
2.2
1.4
2.6
2.6
2.3
3.6
3.6
4.7
2.7
3.2
3.1
.2
–.2
.3
1.6
–1.0
.7
–1.1
–.1
.4
1.5
.0
.7
2.9
2.5
.7
1.3
3.0
3.0
1.9

Note.—Percent changes based on unrounded data.
Source: Department of Commerce (Bureau of Economic Analysis).

Appendix B – National Income or Expenditure  |  229

Table B–5.—Contributions to percent change in real gross domestic product, 1959–2007
[Percentage points, except as noted; quarterly data at seasonally adjusted annual rates]
Personal consumption expenditures

Year or quarter

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Gross
domestic
product
(percent
change)

7.1
2.5
2.3
6.1
4.4
5.8
6.4
6.5
2.5
4.8
3.1
.2
3.4
5.3
5.8
–.5
–.2
5.3
4.6
5.6
3.2
–.2
2.5
–1.9
4.5
7.2
4.1
3.5
3.4
4.1
3.5
1.9
–.2
3.3
2.7
4.0
2.5
3.7
4.5
4.2
4.5
3.7
.8
1.6
2.5
3.6
3.1
2.9
3.0
3.5
3.6
2.5
3.1
2.8
4.5
1.2
4.8
2.4
1.1
2.1
.6
3.8
4.9

Gross private domestic investment
Fixed investment

Total

3.55
1.73
1.30
3.11
2.56
3.71
3.91
3.50
1.81
3.50
2.27
1.42
2.38
3.80
3.05
–.47
1.42
3.48
2.68
2.76
1.52
–.17
.90
.87
3.65
3.44
3.31
2.62
2.17
2.66
1.86
1.34
.11
2.18
2.23
2.52
1.81
2.31
2.54
3.36
3.44
3.17
1.74
1.90
1.94
2.56
2.24
2.15
3.12
1.73
2.46
2.93
1.68
2.40
2.82
.84
3.00
1.63
1.88
2.68
2.56
1.00
2.01

Durable
goods

0.97
.17
–.31
.89
.77
.77
1.07
.73
.13
.93
.31
–.28
.81
1.07
.90
–.61
.00
1.04
.80
.47
–.03
–.65
.09
.00
1.07
1.15
.83
.83
.16
.53
.19
–.02
–.46
.44
.59
.66
.36
.64
.70
.93
.99
.63
.37
.61
.50
.53
.40
.31
.49
.16
.64
.57
.18
.90
.51
–1.13
1.23
.07
.43
.30
.67
.14
.35

Nondurable
goods

Services

1.25
.44
.53
.90
.59
1.33
1.43
1.46
.42
1.19
.69
.61
.47
1.11
.82
–.51
.37
1.24
.60
.91
.65
–.04
.29
.23
.80
.93
.61
.78
.52
.70
.59
.33
–.05
.43
.56
.71
.44
.51
.53
.78
.89
.74
.40
.50
.64
.71
.72
.74
.92
.31
.62
.97
.71
.74
.50
.93
.91
.47
.64
.86
.61
–.10
.46

See next page for continuation of table.

230  |  Economic Report of the President

1.33
1.12
1.08
1.31
1.20
1.61
1.42
1.31
1.26
1.38
1.28
1.08
1.09
1.61
1.33
.65
1.05
1.19
1.27
1.38
.90
.52
.51
.65
1.79
1.36
1.87
1.01
1.50
1.43
1.07
1.03
.62
1.31
1.09
1.14
1.01
1.15
1.31
1.66
1.56
1.80
.97
.79
.80
1.32
1.12
1.11
1.71
1.25
1.21
1.39
.79
.76
1.81
1.05
.86
1.10
.81
1.52
1.28
.96
1.20

Total

2.80
.00
–.10
1.81
1.00
1.25
2.16
1.44
–.76
.90
.90
–1.04
1.67
1.87
1.96
–1.30
–2.98
2.84
2.43
2.16
.61
–2.12
1.59
–2.55
1.45
4.63
–.17
–.12
.51
.39
.64
–.53
–1.20
1.07
1.21
1.93
.48
1.35
1.95
1.63
1.33
.99
–1.39
–.41
.54
1.48
.91
.45
.30
3.00
1.26
1.04
.89
–.64
1.15
2.13
.78
.13
–.70
–2.50
–1.36
.71
.77

Nonresidential
Total

1.94
.13
–.04
1.24
1.08
1.37
1.50
.87
–.28
1.00
.90
–.31
1.10
1.81
1.46
–1.04
–1.71
1.42
2.18
2.04
1.02
–1.21
.39
–1.22
1.17
2.68
.89
.20
.09
.52
.47
–.32
–.94
.79
1.14
1.30
.94
1.34
1.42
1.60
1.36
1.09
–.50
–.84
.51
1.10
1.09
.39
–.07
1.88
1.41
1.14
.68
1.26
1.28
.38
1.27
–.32
–.80
–1.19
–.70
.49
–.11

Total
0.73
.52
–.06
.78
.50
1.07
1.65
1.29
–.15
.46
.78
–.06
.00
.92
1.50
.09
–1.14
.52
1.19
1.69
1.23
–.04
.74
–.51
–.16
2.05
.82
–.36
–.01
.57
.61
.05
–.57
.32
.83
.91
1.08
1.01
1.33
1.28
1.09
1.06
–.52
–1.06
.10
.56
.70
.68
–.28
1.00
1.16
1.00
.36
.51
.87
.35
1.31
.44
.53
–.15
.22
1.12
.96

Structures
0.09
.28
.05
.16
.04
.36
.57
.27
–.10
.06
.20
.01
–.06
.12
.31
–.09
–.43
.09
.15
.54
.52
.27
.40
–.09
–.57
.60
.32
–.50
–.11
.02
.07
.05
–.39
–.18
–.02
.05
.17
.16
.21
.16
–.01
.21
–.07
–.55
–.11
.03
.01
.24
–.01
.15
.09
.00
.06
–.04
–.17
.12
.39
.45
.31
.23
.20
.78
.52

Equipment and
software
0.64
.24
–.11
.61
.46
.71
1.07
1.02
–.05
.41
.58
–.07
.07
.81
1.19
.18
–.70
.43
1.04
1.15
.71
–.30
.34
–.42
.41
1.44
.50
.15
.10
.55
.54
.00
–.18
.50
.85
.87
.91
.85
1.12
1.12
1.11
.85
–.44
–.51
.21
.53
.69
.44
–.27
.85
1.07
1.01
.30
.55
1.04
.23
.92
–.01
.21
–.38
.02
.34
.44

Residential
1.21
–.39
.01
.46
.58
.30
–.15
–.43
–.13
.53
.13
–.26
1.10
.89
–.04
–1.13
–.57
.90
.99
.35
–.21
–1.17
–.35
–.71
1.33
.64
.07
.55
.10
–.05
–.14
–.37
–.37
.47
.31
.39
–.14
.33
.08
.32
.27
.03
.02
.22
.41
.53
.39
–.29
.21
.89
.24
.14
.32
.75
.42
.03
–.05
–.76
–1.33
–1.04
–.93
–.62
–1.08

Change
in
private
inventories
0.86
–.13
–.05
.57
–.08
–.13
.66
.58
–.49
–.10
.00
–.73
.58
.06
.50
–.27
–1.27
1.41
.25
.12
–.41
–.91
1.20
–1.34
.29
1.95
–1.06
–.32
.42
–.14
.17
–.21
–.26
.29
.07
.63
–.46
.02
.54
.03
–.03
–.10
–.88
.43
.04
.39
–.18
.06
.37
1.12
–.14
–.11
.21
–1.90
–.14
1.74
–.49
.46
.10
–1.31
–.65
.22
.89

Table B–5.—Contributions to percent change in real gross domestic product,
1959–2007—Continued
[Percentage points, except as noted; quarterly data at seasonally adjusted annual rates]
Government consumption expenditures
and gross investment

Net exports of goods and services
Year or quarter

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Net
exports
0.00
.72
.06
–.21
.24
.36
–.30
–.29
–.22
–.30
–.04
.34
–.19
–.21
.82
.75
.89
–1.08
–.72
.05
.66
1.68
–.15
–.60
–1.35
–1.58
–.42
–.30
.17
.82
.52
.43
.69
–.04
–.59
–.43
.11
–.14
–.34
–1.16
–.99
–.86
–.20
–.69
–.44
–.68
–.23
–.08
–.75
–1.50
–.42
–1.07
.26
.83
–.10
–1.41
.13
.49
–.25
1.25
–.51
1.32
1.38

Exports
Total
0.45
.78
.03
.25
.35
.59
.15
.36
.12
.41
.25
.56
.10
.42
1.12
.58
–.05
.37
.20
.82
.82
.97
.12
–.73
–.22
.63
.23
.54
.78
1.24
.99
.81
.63
.68
.32
.85
1.04
.91
1.30
.27
.47
.93
–.60
–.23
.12
.93
.70
.88
.95
.64
.31
.97
.60
.95
.22
1.07
1.19
.61
.62
1.51
.13
.85
2.10

Goods
–0.02
.76
.02
.17
.29
.52
.02
.27
.02
.30
.20
.44
–.02
.43
1.01
.46
–.16
.31
.08
.68
.77
.86
–.09
–.67
–.19
.46
.20
.26
.56
1.04
.75
.56
.46
.52
.23
.67
.85
.68
1.11
.18
.29
.84
–.48
–.28
.12
.60
.53
.73
.49
.48
.42
.49
.40
.92
.14
.87
1.10
.49
.56
.73
.07
.53
1.96

Imports
Services
0.48
.02
.01
.08
.06
.07
.13
.09
.10
.10
.05
.12
.11
–.01
.11
.12
.10
.05
.11
.15
.06
.11
.21
–.06
–.03
.17
.02
.28
.21
.20
.24
.26
.16
.16
.09
.18
.19
.22
.19
.09
.18
.09
–.12
.06
.00
.33
.17
.16
.46
.16
–.11
.49
.20
.03
.08
.20
.10
.13
.07
.78
.05
.33
.14

Total
–0.45
–.06
.03
–.47
–.12
–.23
–.45
–.65
–.34
–.70
–.29
–.22
–.29
–.63
–.29
.18
.94
–1.45
–.92
–.78
–.16
.71
–.27
.12
–1.13
–2.21
–.65
–.84
–.61
–.42
–.47
–.39
.06
–.72
–.91
–1.29
–.93
–1.05
–1.64
–1.43
–1.46
–1.79
.40
–.46
–.56
–1.61
–.92
–.96
–1.70
–2.14
–.73
–2.04
–.34
–.12
–.32
–2.47
–1.07
–.12
–.88
–.26
–.63
.47
–.72

Goods
–0.48
.05
.00
–.40
–.12
–.19
–.41
–.49
–.17
–.68
–.20
–.15
–.33
–.57
–.34
.17
.87
–1.35
–.84
–.67
–.14
.67
–.18
.20
–1.00
–1.83
–.52
–.82
–.39
–.36
–.38
–.26
.01
–.77
–.85
–1.18
–.87
–.94
–1.45
–1.20
–1.31
–1.55
.39
–.41
–.56
–1.33
–.86
–.83
–1.32
–1.92
–.69
–1.78
–.43
–.13
–.32
–2.22
–.83
–.12
–.84
.09
–.57
.42
–.67

Federal
Services
0.03
–.11
.02
–.07
.00
–.04
–.04
–.16
–.16
–.03
–.09
–.07
.04
–.06
.05
.00
.07
–.10
–.07
–.11
–.02
.04
–.09
–.08
–.13
–.39
–.13
–.02
–.22
–.07
–.10
–.13
.05
.05
–.06
–.11
–.06
–.11
–.19
–.23
–.15
–.25
.01
–.05
.00
–.27
–.06
–.13
–.37
–.21
–.05
–.26
.09
.01
.00
–.26
–.24
.00
–.03
–.35
–.06
.05
–.05

Total
0.76
.03
1.07
1.36
.58
.49
.65
1.87
1.68
.73
–.06
–.55
–.50
–.16
–.08
.52
.48
.10
.23
.60
.37
.38
.19
.35
.77
.70
1.41
1.27
.52
.27
.52
.64
.23
.11
–.18
.00
.10
.18
.34
.34
.67
.36
.60
.80
.47
.27
.14
.35
.29
.25
.30
–.35
.25
.22
.60
–.37
.92
.18
.14
.66
–.09
.79
.74

Total
0.42
–.35
.51
1.07
.01
–.17
.00
1.24
1.17
.10
–.42
–.86
–.85
–.42
–.41
.08
.03
.00
.19
.22
.20
.39
.42
.35
.63
.30
.74
.55
.36
–.15
.14
.18
–.02
–.15
–.35
–.30
–.20
–.08
–.07
–.07
.14
.05
.23
.43
.44
.29
.11
.15
.41
.17
.43
–.33
.19
.05
.59
–.46
.57
–.11
.06
.50
–.46
.41
.50

National
defense

Nondefense

–0.23
–.17
.45
.63
–.25
–.40
–.19
1.21
1.19
.16
–.49
–.83
–.97
–.61
–.39
–.05
–.06
–.02
.07
.05
.17
.25
.38
.48
.50
.35
.60
.47
.35
–.03
–.03
.00
–.07
–.32
–.33
–.27
–.19
–.07
–.13
–.09
.08
–.02
.15
.29
.37
.27
.07
.09
.36
.09
.49
–.48
.22
.12
.46
–.59
.31
.11
–.07
.74
–.54
.39
.47

0.65
–.18
.06
.44
.26
.23
.19
.03
–.02
–.06
.06
–.03
.12
.18
–.02
.13
.09
.03
.12
.16
.03
.14
.04
–.13
.13
–.05
.14
.08
.01
–.12
.17
.18
.06
.17
–.02
–.03
–.01
–.02
.06
.02
.06
.07
.08
.14
.08
.03
.03
.06
.06
.08
–.06
.15
–.02
–.07
.13
.13
.27
–.22
.14
–.24
.08
.02
.03

State
and
local
0.34
.39
.56
.29
.57
.65
.66
.63
.51
.63
.37
.31
.36
.26
.33
.44
.45
.09
.04
.38
.17
–.01
–.23
.01
.13
.40
.67
.71
.17
.42
.39
.46
.24
.26
.17
.30
.30
.26
.41
.41
.54
.31
.37
.37
.02
–.02
.04
.19
–.12
.09
–.13
–.01
.05
.17
.01
.09
.35
.29
.08
.16
.36
.37
.24

Source: Department of Commerce (Bureau of Economic Analysis).

Appendix B – National Income or Expenditure  |  231

Table B–6.—Chain-type quantity indexes for gross domestic product, 1959–2007
[Index numbers, 2000=100; quarterly data seasonally adjusted]
Personal consumption expenditures

Year or quarter

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Gross
domestic
product

24.868
25.484
26.077
27.658
28.868
30.545
32.506
34.625
35.496
37.208
38.356
38.422
39.713
41.815
44.224
44.001
43.916
46.256
48.391
51.085
52.699
52.579
53.904
52.860
55.249
59.220
61.666
63.804
65.958
68.684
71.116
72.451
72.329
74.734
76.731
79.816
81.814
84.842
88.658
92.359
96.469
100.000
100.751
102.362
104.931
108.748
112.086
115.304
107.402
108.325
109.287
109.977
110.812
111.583
112.808
113.143
114.482
115.175
115.481
116.080
116.254
117.349
118.763

Gross private domestic investment
Fixed investment

Total

23.067
23.702
24.191
25.389
26.436
28.020
29.791
31.484
32.422
34.284
35.558
36.381
37.770
40.082
42.048
41.729
42.688
45.041
46.950
49.012
50.204
50.065
50.779
51.493
54.436
57.325
60.303
62.749
64.840
67.468
69.369
70.782
70.903
73.224
75.672
78.504
80.623
83.382
86.533
90.896
95.537
100.000
102.537
105.340
108.249
112.197
115.791
119.359
110.917
111.590
112.555
113.724
114.393
115.370
116.521
116.878
118.140
118.843
119.652
120.801
121.906
122.331
123.190

Durable
goods

10.822
11.041
10.622
11.865
13.017
14.222
16.025
17.377
17.648
19.594
20.289
19.631
21.593
24.336
26.849
25.001
24.996
28.187
30.809
32.435
32.325
29.788
30.149
30.128
34.535
39.577
43.577
47.785
48.616
51.549
52.686
52.532
49.564
52.470
56.577
61.321
64.011
69.025
74.935
83.432
93.192
100.000
104.327
111.752
118.214
125.652
131.748
136.735
123.502
124.094
126.432
128.580
129.271
132.777
134.775
130.170
135.263
135.542
137.413
138.720
141.680
142.283
143.852

Nondurable
goods

33.491
33.994
34.621
35.710
36.463
38.248
40.277
42.487
43.157
45.126
46.326
47.436
48.294
50.422
52.068
51.020
51.771
54.301
55.609
57.687
59.226
59.137
59.839
60.409
62.417
64.898
66.665
69.060
70.715
73.016
75.044
76.209
76.033
77.553
79.619
82.369
84.152
86.300
88.605
92.154
96.374
100.000
102.027
104.614
108.002
111.833
115.828
120.051
110.759
111.178
112.026
113.369
114.360
115.404
116.110
117.438
118.749
119.434
120.370
121.650
122.563
122.419
123.090

See next page for continuation of table.

232  |  Economic Report of the President

Services

20.794
21.720
22.626
23.747
24.830
26.345
27.749
29.129
30.552
32.148
33.691
35.038
36.400
38.469
40.274
41.216
42.743
44.475
46.392
48.558
50.044
50.921
51.773
52.865
55.760
58.026
61.303
63.111
65.843
68.506
70.555
72.583
73.812
76.379
78.540
80.854
82.973
85.420
88.270
92.011
95.652
100.000
102.403
104.366
106.363
109.726
112.687
115.696
108.502
109.309
110.088
111.003
111.516
112.026
113.241
113.964
114.563
115.341
115.911
116.969
117.865
118.527
119.360

Total

15.367
15.362
15.261
17.197
18.351
19.863
22.650
24.644
23.517
24.887
26.338
24.608
27.413
30.658
34.249
31.729
26.111
31.387
36.130
40.486
41.776
37.182
40.615
34.918
38.172
49.420
48.963
48.629
50.130
51.309
53.369
51.574
47.378
51.223
55.795
63.358
65.340
71.123
79.961
87.821
94.647
100.000
92.103
89.724
92.949
102.003
107.709
110.607
97.109
101.776
103.748
105.377
106.749
105.692
107.484
110.913
112.095
112.274
111.106
106.955
104.690
105.875
107.172

Nonresidential
Total

15.736
15.870
15.820
17.248
18.584
20.378
22.459
23.745
23.306
24.935
26.486
25.931
27.894
31.246
34.101
31.971
28.541
31.356
35.863
40.205
42.473
39.708
40.591
37.737
40.491
47.331
49.823
50.403
50.682
52.352
53.928
52.803
49.379
52.312
56.788
62.079
66.090
72.018
78.657
86.657
93.884
100.000
97.047
91.997
95.110
102.012
109.080
111.657
98.148
101.175
103.439
105.287
106.333
108.386
110.481
111.118
113.245
112.705
111.354
109.325
108.113
108.956
108.756

Total
10.760
11.371
11.299
12.284
12.966
14.504
17.031
19.160
18.900
19.746
21.246
21.134
21.135
23.072
26.429
26.653
24.022
25.200
28.045
32.243
35.489
35.388
37.398
35.981
35.518
41.788
44.561
43.287
43.259
45.520
48.063
48.302
45.712
47.179
51.287
55.999
61.885
67.661
75.820
84.232
91.980
100.000
95.817
86.969
87.804
92.873
99.490
106.062
89.210
91.512
94.211
96.558
97.355
98.545
100.603
101.457
104.679
105.770
107.090
106.711
107.277
110.109
112.597

EquipStructures ment and
software
36.530
39.433
39.966
41.775
42.239
46.626
54.058
57.751
56.284
57.102
60.189
60.364
59.370
61.201
66.200
64.785
57.984
59.390
61.841
70.769
79.731
84.350
91.074
89.528
79.865
91.016
97.502
86.817
84.340
84.885
86.583
87.867
78.091
73.423
72.891
74.180
78.903
83.354
89.432
94.019
93.619
100.000
97.737
81.029
77.735
78.760
79.127
85.770
77.550
78.708
79.410
79.371
79.776
79.460
78.179
79.094
81.898
85.063
87.270
88.849
90.241
95.639
99.330

6.065
6.322
6.200
6.917
7.500
8.457
10.007
11.609
11.532
12.250
13.334
13.201
13.332
15.052
17.812
18.268
16.529
17.562
20.208
23.284
25.318
24.407
25.445
24.122
25.420
30.462
32.397
33.011
33.463
35.987
38.624
38.636
37.643
40.387
45.428
50.846
56.930
62.981
71.641
81.137
91.437
100.000
95.136
89.265
91.747
98.505
107.935
114.332
93.800
96.575
100.124
103.519
104.477
106.368
110.030
110.863
114.291
114.276
115.100
113.662
113.753
115.075
116.821

Residential
37.820
35.129
35.227
38.604
43.154
45.662
44.329
40.362
39.092
44.421
45.733
42.998
54.789
64.526
64.112
50.877
44.271
54.698
66.440
70.623
68.032
53.636
49.336
40.378
57.093
65.566
66.604
74.776
76.269
75.496
73.204
66.887
60.460
68.825
74.446
81.621
79.005
85.331
86.947
93.597
99.254
100.000
100.357
105.149
113.977
125.343
133.608
127.433
120.936
125.696
126.994
127.747
129.413
133.463
135.695
135.860
135.615
131.465
124.190
118.462
113.301
109.791
103.665

Table B–6.—Chain-type quantity indexes for gross domestic product, 1959–2007—Continued
[Index numbers, 2000=100; quarterly data seasonally adjusted]
Exports of goods and services
Year or quarter

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Imports of goods and services

Total

Goods

Total

Goods

7.043
8.266
8.309
8.729
9.353
10.454
10.747
11.492
11.757
12.681
13.294
14.723
14.973
16.096
19.131
20.643
20.512
21.408
21.923
24.234
26.637
29.506
29.868
27.586
26.875
29.068
29.951
32.259
35.742
41.469
46.233
50.394
53.736
57.439
59.291
64.447
70.982
76.930
86.082
88.164
91.969
100.000
94.565
92.430
93.599
102.723
109.775
118.957
100.502
102.108
102.897
105.385
106.943
109.401
109.976
112.780
115.898
117.528
119.182
123.222
123.568
125.833
131.458

6.198
7.651
7.689
8.031
8.662
9.849
9.901
10.589
10.638
11.481
12.082
13.460
13.408
14.849
18.259
19.709
19.252
20.165
20.429
22.712
25.396
28.422
28.114
25.573
24.838
26.801
27.790
29.217
32.456
38.572
43.172
46.810
50.042
53.785
55.534
60.937
68.070
74.086
84.717
86.614
89.907
100.000
93.871
90.143
91.771
100.011
107.542
118.234
97.543
99.250
100.747
102.503
103.963
107.322
107.823
111.059
115.123
116.953
119.047
121.811
122.091
124.072
131.498

6.908
7.000
6.953
7.742
7.951
8.374
9.265
10.642
11.417
13.118
13.866
14.457
15.229
16.943
17.729
17.327
15.402
18.413
20.426
22.196
22.565
21.066
21.620
21.348
24.041
29.893
31.833
34.561
36.602
38.039
39.706
41.139
40.905
43.748
47.576
53.256
57.539
62.544
71.037
79.299
88.391
100.000
97.291
100.601
104.693
116.546
123.425
130.683
111.867
115.903
117.279
121.135
121.756
121.994
122.630
127.321
129.472
129.764
131.483
132.014
133.272
132.363
133.780

5.403
5.314
5.307
6.092
6.339
6.757
7.714
8.930
9.400
11.342
11.963
12.432
13.474
15.307
16.388
15.932
13.924
17.073
19.153
20.871
21.229
19.653
20.058
19.554
22.210
27.584
29.310
32.314
33.812
35.181
36.686
37.770
37.741
41.263
45.423
51.466
56.104
61.337
70.172
78.364
88.078
100.000
96.833
100.377
105.294
117.173
124.937
132.446
112.096
116.476
118.033
122.089
123.052
123.368
124.133
129.196
131.232
131.589
133.574
133.389
134.755
133.770
135.360

Government consumption expenditures and gross investment
Federal

Services
9.641
9.797
9.857
10.535
11.070
11.733
12.926
13.814
14.905
16.049
16.646
18.128
19.527
19.404
20.775
22.396
23.773
24.476
26.055
28.234
29.103
30.919
34.211
33.263
32.710
35.627
36.051
41.325
45.502
49.616
54.723
60.480
64.082
67.590
69.726
74.097
78.793
84.483
89.509
92.077
97.207
100.000
96.302
98.104
98.148
109.451
115.342
120.897
107.836
109.197
108.243
112.529
114.325
114.592
115.341
117.109
117.960
119.103
119.698
126.828
127.335
130.293
131.576

Services
15.462
16.669
16.385
17.150
17.137
17.579
18.096
20.395
22.887
23.298
24.767
26.059
25.317
26.390
25.500
25.472
24.367
26.049
27.347
29.297
29.700
29.037
30.711
32.346
34.958
43.724
47.050
47.638
53.205
55.010
57.678
61.430
59.849
58.321
60.026
63.421
65.492
69.094
75.600
84.222
90.038
100.000
99.706
101.824
101.857
113.589
116.149
122.180
110.835
113.211
113.712
116.597
115.549
115.396
115.396
118.254
120.981
120.953
121.341
125.445
126.172
125.643
126.189

Total
41.489
41.553
43.639
46.329
47.522
48.563
50.028
54.430
58.604
60.436
60.290
58.833
57.553
57.128
56.926
58.360
59.675
59.940
60.598
62.383
63.549
64.790
65.381
66.530
68.964
71.273
76.240
80.885
82.873
83.940
86.110
88.869
89.872
90.342
89.513
89.525
90.015
90.896
92.588
94.354
97.987
100.000
103.412
107.969
110.644
112.210
113.050
115.092
111.839
112.212
112.649
112.138
112.500
112.830
113.710
113.161
114.533
114.807
115.022
116.007
115.865
117.028
118.121

Total
68.666
66.779
69.564
75.492
75.540
74.530
74.508
82.737
90.960
91.681
88.525
81.997
75.686
72.574
69.519
70.134
70.360
70.388
71.880
73.681
75.465
79.043
82.818
86.018
91.726
94.550
101.957
107.754
111.674
109.898
111.594
113.873
113.679
111.713
107.056
103.050
100.254
99.091
98.066
96.970
99.122
100.000
103.908
111.169
118.712
123.693
125.524
128.255
122.580
123.306
125.175
123.710
124.566
124.787
127.388
125.353
127.919
127.414
127.708
129.977
127.886
129.756
132.000

National
defense
89.447
87.977
91.851
97.412
95.085
91.304
89.403
102.205
115.571
117.416
111.604
101.477
89.980
82.921
78.322
77.714
76.977
76.706
77.597
78.259
80.648
84.160
89.486
96.244
103.158
108.186
117.355
124.871
130.779
130.161
129.518
129.472
128.050
121.708
114.860
109.259
105.093
103.648
100.733
98.650
100.515
100.000
103.936
111.578
121.239
128.282
130.268
132.722
126.964
127.588
130.930
127.647
129.104
129.926
133.051
128.990
131.114
131.848
131.347
136.577
132.744
135.488
138.775

Nondefense
33.305
30.672
31.599
38.144
42.217
45.880
48.995
49.501
49.059
47.912
49.186
48.674
50.961
54.551
54.213
57.023
58.965
59.523
62.089
65.947
66.640
70.373
71.310
67.888
71.398
70.035
74.169
76.764
76.984
73.037
79.075
85.651
87.700
93.749
93.087
91.957
91.613
90.955
93.320
93.985
96.646
100.000
103.859
110.441
114.181
115.441
116.992
120.234
114.695
115.604
114.821
116.644
116.405
115.535
117.182
118.847
122.227
119.453
121.209
118.046
119.140
119.414
119.747

State
and
local
26.999
28.182
29.918
30.839
32.696
34.913
37.252
39.590
41.589
44.048
45.534
46.797
48.232
49.291
50.694
52.603
54.536
54.937
55.137
56.938
57.775
57.736
56.577
56.607
57.268
59.322
63.003
67.064
68.041
70.582
72.994
75.991
77.600
79.318
80.459
82.543
84.728
86.668
89.770
93.014
97.409
100.000
103.162
106.354
106.557
106.384
106.721
108.418
106.393
106.586
106.291
106.265
106.378
106.763
106.776
106.968
107.745
108.407
108.584
108.935
109.748
110.564
111.096

Source: Department of Commerce (Bureau of Economic Analysis).

Appendix B – National Income or Expenditure  |  233

Table B–7.—Chain-type price indexes for gross domestic product, 1959–2007
[Index numbers, 2000=100, except as noted; quarterly data seasonally adjusted]
Personal consumption expenditures

Year or quarter

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Gross
domestic
product

20.754
21.044
21.281
21.572
21.801
22.134
22.538
23.180
23.897
24.916
26.153
27.538
28.916
30.171
31.854
34.721
38.007
40.202
42.758
45.762
49.553
54.062
59.128
62.738
65.214
67.664
69.724
71.269
73.204
75.706
78.569
81.614
84.457
86.402
88.390
90.265
92.115
93.859
95.415
96.475
97.868
100.000
102.402
104.193
106.409
109.462
113.005
116.568
108.180
109.185
109.807
110.677
111.745
112.455
113.422
114.398
115.363
116.350
117.030
117.527
118.750
119.527
119.837

Gross private domestic investment
Fixed investment

Total

20.432
20.767
20.985
21.232
21.479
21.786
22.103
22.662
23.237
24.151
25.255
26.448
27.574
28.528
30.081
33.191
35.955
37.948
40.410
43.248
47.059
52.078
56.720
59.859
62.436
64.795
66.936
68.569
70.947
73.755
76.972
80.498
83.419
85.824
87.804
89.654
91.577
93.547
95.124
95.978
97.575
100.000
102.094
103.542
105.597
108.392
111.588
114.675
107.163
108.179
108.703
109.521
110.119
111.037
112.205
112.989
113.480
114.670
115.406
115.143
116.129
117.345
117.873

Durable
goods

45.662
45.444
45.551
45.755
45.915
46.142
45.721
45.517
46.228
47.749
49.067
50.148
51.975
52.531
53.301
56.676
61.844
65.278
68.129
72.038
76.830
83.277
88.879
92.358
94.181
95.550
96.620
97.685
100.465
101.921
103.717
104.561
106.080
106.756
107.840
109.978
110.672
109.507
107.068
104.152
101.626
100.000
98.114
95.766
92.366
90.696
90.018
88.857
90.927
90.986
90.415
90.454
90.470
90.375
89.735
89.491
89.276
89.110
88.827
88.213
87.799
87.488
87.091

Nondurable
goods

22.765
23.089
23.227
23.412
23.683
23.986
24.423
25.232
25.830
26.820
28.062
29.446
30.359
31.373
33.838
38.702
41.735
43.346
45.911
48.985
54.148
60.449
65.130
66.955
68.386
70.004
71.543
71.273
73.731
76.206
79.842
84.226
86.779
88.105
88.973
89.605
90.629
92.567
93.835
93.821
96.173
100.000
101.531
102.089
104.145
107.626
111.561
114.989
105.918
107.530
107.903
109.153
109.234
110.570
113.113
113.328
113.405
115.763
116.576
114.210
115.620
118.413
118.751

See next page for continuation of table.

234  |  Economic Report of the President

Services

15.485
15.887
16.173
16.466
16.701
17.016
17.334
17.810
18.349
19.128
20.106
21.175
22.340
23.304
24.381
26.345
28.595
30.603
32.933
35.464
38.316
42.332
46.746
50.528
53.799
56.680
59.295
62.040
64.299
67.493
70.708
74.197
77.497
80.684
83.345
85.748
88.320
90.844
93.305
95.319
97.393
100.000
103.257
106.018
109.379
112.929
116.726
120.725
111.582
112.532
113.406
114.198
115.204
116.165
117.100
118.434
119.316
120.252
121.209
122.122
123.252
124.055
124.921

Total

29.474
29.619
29.538
29.558
29.467
29.634
30.107
30.726
31.538
32.714
34.264
35.713
37.493
39.062
41.172
45.263
50.847
53.654
57.677
62.381
68.027
74.424
81.278
85.455
85.237
85.845
86.720
88.599
90.289
92.354
94.559
96.379
97.749
97.395
98.521
99.813
100.941
100.520
100.157
99.035
98.972
100.000
101.013
101.640
103.191
106.686
111.155
115.090
105.010
106.217
107.246
108.271
109.653
110.407
111.493
113.065
114.175
114.891
115.335
115.958
116.532
116.426
116.325

Nonresidential
Total

28.262
28.414
28.325
28.346
28.267
28.440
28.926
29.536
30.364
31.582
33.140
34.565
36.306
37.865
39.958
43.890
49.384
52.244
56.342
61.101
66.642
72.887
79.670
84.047
83.912
84.399
85.457
87.501
89.118
91.431
93.641
95.542
96.960
96.670
97.805
99.133
100.292
100.028
99.785
98.861
98.888
100.000
101.023
101.660
103.313
106.845
111.404
115.352
105.165
106.382
107.404
108.429
109.837
110.618
111.759
113.403
114.485
115.169
115.592
116.162
116.718
116.636
116.498

Total
35.114
35.275
35.076
35.087
35.088
35.268
35.672
36.206
37.129
38.431
40.018
41.908
43.880
45.367
47.115
51.658
58.763
62.018
66.258
70.695
76.440
83.198
91.245
96.295
95.432
95.195
95.936
97.566
98.435
100.625
102.731
104.695
106.314
105.411
105.487
106.008
106.239
105.011
103.696
101.421
100.057
100.000
99.683
99.513
99.591
100.896
103.778
106.961
100.123
100.729
101.048
101.686
102.816
103.439
103.846
105.009
106.025
106.764
107.267
107.789
108.301
108.293
108.140

EquipStructures ment and
software
15.923
15.904
15.810
15.941
16.085
16.316
16.791
17.398
17.943
18.835
20.074
21.390
23.040
24.704
26.619
30.295
33.911
35.571
38.651
42.382
47.313
51.740
58.880
63.566
61.939
62.468
63.940
65.168
66.199
69.016
71.707
74.015
75.355
75.330
77.602
80.388
83.879
86.045
89.381
93.474
96.257
100.000
105.403
110.030
113.872
120.912
135.013
150.806
116.960
119.118
122.026
125.544
129.388
132.114
136.453
142.098
146.516
150.294
152.344
154.071
155.637
155.199
155.392

50.882
51.305
51.025
50.774
50.495
50.474
50.520
50.654
51.776
53.167
54.645
56.657
58.340
59.044
60.047
64.474
74.001
78.355
83.011
87.391
92.932
100.868
108.077
112.293
112.530
111.547
111.413
113.178
113.796
115.216
116.657
118.168
119.854
118.444
117.243
116.572
115.224
112.451
109.120
104.259
101.366
100.000
97.708
95.956
94.912
94.600
94.527
94.485
94.708
94.872
94.477
94.344
94.759
94.827
94.240
94.281
94.423
94.379
94.470
94.667
94.892
95.002
94.751

Residential
16.630
16.743
16.769
16.795
16.663
16.796
17.272
17.899
18.521
19.504
20.853
21.526
22.775
24.158
26.297
29.011
31.706
33.743
37.147
41.696
46.374
51.394
55.587
58.564
59.908
61.630
63.219
65.868
68.561
70.928
73.211
74.930
75.912
76.836
79.941
82.754
85.769
87.610
89.843
92.239
95.780
100.000
104.633
107.240
112.372
120.587
128.653
134.288
117.027
119.511
121.984
123.826
125.811
126.933
129.599
132.270
133.546
134.137
134.390
135.076
135.736
135.459
135.367

Table B–7.—Chain-type price indexes for gross domestic product, 1959–2007—Continued
[Index numbers, 2000=100, except as noted; quarterly data seasonally adjusted]
Exports and imports
of goods
and services

Government consumption expenditures
and gross investment
Federal

Year or quarter
Exports

Imports

Total
Total

1959 �����������������
1960 �����������������
1961 �����������������
1962 �����������������
1963 �����������������
1964 �����������������
1965 �����������������
1966 �����������������
1967 �����������������
1968 �����������������
1969 �����������������
1970 �����������������
1971 �����������������
1972 �����������������
1973 �����������������
1974 �����������������
1975 �����������������
1976 �����������������
1977 �����������������
1978 �����������������
1979 �����������������
1980 �����������������
1981 �����������������
1982 �����������������
1983 �����������������
1984 �����������������
1985 �����������������
1986 �����������������
1987 �����������������
1988 �����������������
1989 �����������������
1990 �����������������
1991 �����������������
1992 �����������������
1993 �����������������
1994 �����������������
1995 �����������������
1996 �����������������
1997 �����������������
1998 �����������������
1999 �����������������
2000 �����������������
2001 �����������������
2002 �����������������
2003 �����������������
2004 �����������������
2005 �����������������
2006 �����������������
2004:  I �������������
      II ������������
      III �����������
      IV �����������
2005:  I �������������
      II ������������
      III �����������
      IV �����������
2006:  I �������������
      II ������������
      III �����������
      IV �����������
2007:  I �������������
      II ������������
      III �����������

29.433
29.846
30.300
30.375
30.307
30.556
31.529
32.481
33.725
34.461
35.627
36.993
38.358
40.146
45.425
55.965
61.682
63.707
66.302
70.342
78.808
86.801
93.217
93.645
94.015
94.887
91.983
90.639
92.874
97.687
99.310
99.982
101.313
100.892
100.898
102.033
104.376
102.988
101.232
98.905
98.313
100.000
99.624
99.273
101.429
104.997
108.803
112.537
103.567
104.785
105.273
106.362
107.552
108.506
109.171
109.983
110.725
112.359
113.641
113.424
114.433
115.912
116.992

21.901
22.110
22.110
21.849
22.273
22.743
23.059
23.596
23.688
24.048
24.675
26.135
27.739
29.682
34.841
49.847
53.997
55.622
60.523
64.798
75.879
94.513
99.594
96.235
92.629
91.829
88.813
88.871
94.251
98.774
100.944
103.826
103.420
103.552
102.671
103.634
106.412
104.529
100.816
95.353
95.960
100.000
97.497
96.341
99.685
104.526
111.117
115.610
102.047
103.872
105.212
106.973
107.565
110.075
112.811
114.018
113.576
116.339
117.689
114.834
115.114
118.408
120.572

15.404
15.597
15.909
16.314
16.669
17.132
17.588
18.330
19.099
20.128
21.341
23.079
24.875
26.788
28.743
31.646
34.824
37.118
39.694
42.235
45.775
50.761
55.752
59.414
61.778
64.955
66.970
68.175
70.056
71.899
74.139
77.139
79.787
81.719
83.789
86.002
88.358
90.491
92.139
93.469
96.079
100.000
102.544
105.507
109.849
114.754
121.435
127.334
112.657
114.028
115.361
116.971
119.102
120.462
122.335
123.839
125.379
127.125
128.076
128.757
130.765
132.527
133.588

16.450
16.590
16.871
17.228
17.597
18.191
18.658
19.330
19.913
20.995
22.130
23.915
25.957
28.495
30.449
33.162
36.615
39.217
42.180
44.785
48.231
53.299
58.476
62.446
64.612
68.426
69.974
70.352
71.200
72.704
74.677
77.142
80.232
82.602
84.788
87.061
89.503
91.982
93.533
94.511
96.884
100.000
101.907
105.631
110.094
115.322
120.914
125.622
113.641
115.164
115.863
116.621
119.840
120.512
121.534
121.770
124.463
125.686
126.097
126.244
127.886
129.098
129.622

National Nondefense defense
16.257
16.383
16.619
16.940
17.320
17.822
18.314
18.950
19.518
20.539
21.664
23.321
25.387
28.319
30.396
33.217
36.460
39.117
42.079
45.035
48.628
53.908
59.229
63.392
65.617
70.290
71.621
71.554
72.281
73.631
75.528
78.010
80.821
83.628
85.313
87.412
89.598
92.379
93.716
94.643
96.886
100.000
102.002
105.792
110.751
115.932
122.034
127.027
114.112
115.679
116.521
117.417
120.846
121.590
122.654
123.046
125.802
127.106
127.618
127.582
129.153
130.454
131.069

16.591
16.798
17.296
17.808
18.116
19.036
19.408
20.190
20.815
22.116
23.251
25.478
27.400
28.780
30.394
32.819
36.746
39.209
42.152
43.983
47.099
51.683
56.516
60.020
62.038
63.577
65.740
67.395
68.616
70.609
72.826
75.260
79.100
80.411
83.728
86.375
89.351
91.216
93.192
94.268
96.880
100.000
101.739
105.345
108.898
114.218
118.807
122.959
112.813
114.250
114.661
115.147
117.957
118.487
119.427
119.355
121.927
122.990
123.204
123.714
125.503
126.539
126.876

State
and
local
14.475
14.738
15.093
15.564
15.911
16.234
16.685
17.507
18.488
19.475
20.780
22.488
24.087
25.524
27.477
30.500
33.481
35.563
37.872
40.359
43.944
48.858
53.709
57.140
59.666
62.336
64.739
66.624
69.361
71.485
73.940
77.357
79.681
81.300
83.294
85.472
87.778
89.709
91.414
92.934
95.667
100.000
102.868
105.435
109.712
114.431
121.758
128.370
112.088
113.369
115.077
117.191
118.677
120.443
122.825
125.087
125.938
127.998
129.271
130.272
132.499
134.586
135.969

Final
sales of
domestic
product

20.581
20.872
21.108
21.398
21.629
21.963
22.368
23.010
23.729
24.752
25.988
27.369
28.741
29.994
31.673
34.517
37.789
39.987
42.546
45.551
49.322
53.806
58.859
62.489
64.958
67.399
69.494
71.060
72.985
75.519
78.383
81.440
84.286
86.237
88.226
90.108
91.965
93.736
95.320
96.428
97.847
100.000
102.406
104.197
106.430
109.487
113.040
116.603
108.206
109.212
109.830
110.699
111.770
112.484
113.459
114.446
115.405
116.388
117.065
117.553
118.773
119.555
119.860

Gross domestic
purchases 1

Total

20.365
20.646
20.865
21.139
21.385
21.725
22.102
22.724
23.389
24.380
25.580
26.964
28.351
29.619
31.343
34.546
37.761
39.938
42.634
45.663
49.669
54.876
59.896
63.296
65.515
67.822
69.760
71.338
73.527
76.043
78.934
82.144
84.836
86.828
88.730
90.583
92.483
94.145
95.440
96.060
97.556
100.000
101.994
103.583
105.966
109.235
113.225
116.920
107.787
108.893
109.637
110.622
111.605
112.571
113.846
114.878
115.645
116.850
117.575
117.609
118.702
119.809
120.330

Percent change 2

Less
food and
energy

Gross
domestic
product

��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
62.221
64.685
67.106
69.232
71.474
73.716
76.429
79.151
82.109
84.942
87.169
89.211
91.213
93.176
94.616
95.865
96.797
98.165
100.000
101.882
103.796
105.749
108.587
111.924
115.203
107.379
108.272
108.969
109.728
110.804
111.507
112.247
113.136
114.018
114.909
115.612
116.274
117.156
117.600
118.141

1.2
1.4
1.1
1.4
1.1
1.5
1.8
2.8
3.1
4.3
5.0
5.3
5.0
4.3
5.6
9.0
9.5
5.8
6.4
7.0
8.3
9.1
9.4
6.1
3.9
3.8
3.0
2.2
2.7
3.4
3.8
3.9
3.5
2.3
2.3
2.1
2.0
1.9
1.7
1.1
1.4
2.2
2.4
1.7
2.1
2.9
3.2
3.2
3.7
3.8
2.3
3.2
3.9
2.6
3.5
3.5
3.4
3.5
2.4
1.7
4.2
2.6
1.0

Gross domestic
purchases 1
Total
1.2
1.4
1.1
1.3
1.2
1.6
1.7
2.8
2.9
4.2
4.9
5.4
5.1
4.5
5.8
10.2
9.3
5.8
6.8
7.1
8.8
10.5
9.1
5.7
3.5
3.5
2.9
2.3
3.1
3.4
3.8
4.1
3.3
2.3
2.2
2.1
2.1
1.8
1.4
.6
1.6
2.5
2.0
1.6
2.3
3.1
3.7
3.3
4.3
4.2
2.8
3.6
3.6
3.5
4.6
3.7
2.7
4.2
2.5
.1
3.8
3.8
1.8

Less
food and
energy
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
4.0
3.7
3.2
3.2
3.1
3.7
3.6
3.7
3.5
2.6
2.3
2.2
2.2
1.5
1.3
1.0
1.4
1.9
1.9
1.9
1.9
2.7
3.1
2.9
3.5
3.4
2.6
2.8
4.0
2.6
2.7
3.2
3.2
3.2
2.5
2.3
3.1
1.5
1.9

1 Gross domestic product (GDP) less exports of goods and services plus imports of goods and services.
2 Quarterly percent changes are at annual rates.

Source: Department of Commerce (Bureau of Economic Analysis).

Appendix B – National Income or Expenditure  |  235

Table B–8.—Gross domestic product by major type of product, 1959–2007
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Goods

Year or quarter

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Gross
domestic
product

Final
sales of
domestic
product

Change
in
private
inventories

506.6
526.4
544.7
585.6
617.7
663.6
719.1
787.8
832.6
910.0
984.6
1,038.5
1,127.1
1,238.3
1,382.7
1,500.0
1,638.3
1,825.3
2,030.9
2,294.7
2,563.3
2,789.5
3,128.4
3,255.0
3,536.7
3,933.2
4,220.3
4,462.8
4,739.5
5,103.8
5,484.4
5,803.1
5,995.9
6,337.7
6,657.4
7,072.2
7,397.7
7,816.9
8,304.3
8,747.0
9,268.4
9,817.0
10,128.0
10,469.6
10,960.8
11,685.9
12,433.9
13,194.7
11,405.5
11,610.3
11,779.4
11,948.5
12,154.0
12,317.4
12,558.8
12,705.5
12,964.6
13,155.0
13,266.9
13,392.3
13,551.9
13,768.8
13,970.5

502.7
523.2
541.7
579.5
612.1
658.8
709.9
774.2
822.7
900.9
975.4
1,036.5
1,118.9
1,229.2
1,366.8
1,486.0
1,644.6
1,808.2
2,008.6
2,268.9
2,545.3
2,795.8
3,098.6
3,269.9
3,542.4
3,867.8
4,198.4
4,456.3
4,712.3
5,085.3
5,456.7
5,788.5
5,996.3
6,321.4
6,636.6
7,008.4
7,366.5
7,786.1
8,232.3
8,676.2
9,201.5
9,760.5
10,159.7
10,457.7
10,946.5
11,627.3
12,397.0
13,148.0
11,368.6
11,541.3
11,714.4
11,885.0
12,084.7
12,305.2
12,553.1
12,645.0
12,920.3
13,095.5
13,204.1
13,372.3
13,553.5
13,763.6
13,935.0

3.9
3.2
3.0
6.1
5.6
4.8
9.2
13.6
9.9
9.1
9.2
2.0
8.3
9.1
15.9
14.0
–6.3
17.1
22.3
25.8
18.0
–6.3
29.8
–14.9
–5.8
65.4
21.8
6.6
27.1
18.5
27.7
14.5
–.4
16.3
20.8
63.8
31.1
30.8
72.0
70.8
66.9
56.5
–31.7
11.9
14.3
58.6
36.9
46.7
37.0
69.0
65.0
63.4
69.3
12.2
5.8
60.5
44.3
59.5
62.8
20.0
–1.6
5.1
35.4

Total

Total

Final
sales

237.6
246.6
250.1
268.1
280.1
300.9
329.4
364.5
373.9
402.6
432.0
446.9
472.9
516.6
597.1
643.3
691.4
777.5
851.5
961.0
1,078.1
1,145.7
1,288.2
1,277.3
1,365.0
1,549.6
1,607.4
1,657.0
1,751.3
1,903.4
2,066.6
2,155.8
2,184.7
2,282.3
2,387.8
2,563.8
2,661.1
2,807.0
3,007.7
3,143.4
3,311.3
3,449.3
3,412.6
3,442.4
3,524.2
3,707.1
3,874.3
4,092.4
3,636.5
3,688.2
3,729.8
3,774.0
3,820.2
3,854.5
3,910.7
3,911.9
4,020.4
4,089.2
4,128.8
4,131.3
4,170.5
4,243.9
4,335.6

233.6
243.4
247.2
262.0
274.5
296.0
320.2
350.9
364.0
393.6
422.8
444.9
464.7
507.5
581.2
629.3
697.7
760.4
829.1
935.2
1,060.1
1,152.0
1,258.3
1,292.2
1,370.8
1,484.2
1,585.6
1,650.5
1,724.2
1,884.9
2,038.9
2,141.3
2,185.1
2,266.0
2,367.0
2,500.0
2,630.0
2,776.3
2,935.7
3,072.6
3,244.4
3,392.8
3,444.3
3,430.5
3,509.9
3,648.5
3,837.4
4,045.8
3,599.5
3,619.2
3,664.9
3,710.6
3,750.9
3,842.4
3,904.9
3,851.4
3,976.1
4,029.7
4,066.0
4,111.3
4,172.1
4,238.8
4,300.1

Durable goods
Change
in
private
inventories
3.9
3.2
3.0
6.1
5.6
4.8
9.2
13.6
9.9
9.1
9.2
2.0
8.3
9.1
15.9
14.0
–6.3
17.1
22.3
25.8
18.0
–6.3
29.8
–14.9
–5.8
65.4
21.8
6.6
27.1
18.5
27.7
14.5
–.4
16.3
20.8
63.8
31.1
30.8
72.0
70.8
66.9
56.5
–31.7
11.9
14.3
58.6
36.9
46.7
37.0
69.0
65.0
63.4
69.3
12.2
5.8
60.5
44.3
59.5
62.8
20.0
–1.6
5.1
35.4

Final
sales
86.3
90.2
90.2
99.4
106.0
116.4
128.4
142.0
146.4
158.7
171.1
173.6
181.1
202.4
236.6
254.5
284.5
321.2
363.8
413.2
472.0
500.1
542.2
539.7
578.1
650.2
711.0
739.9
764.9
841.8
917.1
950.2
944.1
986.1
1,047.9
1,125.0
1,202.2
1,298.0
1,409.1
1,487.8
1,576.5
1,653.3
1,630.3
1,559.9
1,574.1
1,615.7
1,722.9
1,798.5
1,597.2
1,591.7
1,624.3
1,649.7
1,672.8
1,725.6
1,761.6
1,731.8
1,793.9
1,792.0
1,799.5
1,808.7
1,831.3
1,861.7
1,886.9

Change
in
private
inventories 1
2.9
1.7
–.1
3.4
2.6
3.8
6.2
10.0
4.8
4.5
6.0
–.2
2.9
6.4
13.0
10.9
–7.5
10.8
9.5
18.2
12.8
–2.3
7.3
–16.0
2.5
41.4
4.4
–1.9
22.9
22.7
20.0
7.7
–13.6
–3.0
17.1
35.7
33.6
19.1
39.9
42.8
40.0
36.1
–41.8
15.1
11.1
35.2
31.1
20.4
29.7
41.8
41.3
27.8
47.8
1.5
14.8
60.2
15.4
24.5
42.0
–.3
.9
–26.6
10.5

Nondurable goods
Final
sales
147.3
153.2
157.0
162.6
168.5
179.7
191.8
208.9
217.6
234.8
251.7
271.3
283.6
305.1
344.6
374.8
413.2
439.2
465.3
522.0
588.1
651.9
716.1
752.5
792.7
834.0
874.6
910.6
959.3
1,043.1
1,121.9
1,191.1
1,241.0
1,279.8
1,319.1
1,375.0
1,427.8
1,478.3
1,526.6
1,584.8
1,667.9
1,739.5
1,814.0
1,870.7
1,935.8
2,032.8
2,114.5
2,247.2
2,002.3
2,027.4
2,040.6
2,060.9
2,078.1
2,116.8
2,143.4
2,119.6
2,182.2
2,237.7
2,266.4
2,302.6
2,340.8
2,377.0
2,413.3

Change
in
private
inventories 1
1.1
1.6
3.0
2.7
3.0
1.0
3.0
3.6
5.0
4.5
3.2
2.2
5.3
2.7
2.9
3.1
1.2
6.3
12.8
7.6
5.2
–4.0
22.5
1.1
–8.2
24.0
17.4
8.4
4.2
–4.3
7.7
6.8
13.2
19.3
3.7
28.1
–2.4
11.7
32.1
28.0
26.9
20.4
10.0
–3.2
3.2
23.4
5.8
26.3
7.2
27.2
23.7
35.6
21.4
10.7
–9.0
.3
29.0
35.0
20.8
20.3
–2.5
31.7
25.0

Services 2

206.5
217.9
231.0
249.7
265.0
284.3
305.0
335.3
369.1
407.4
444.4
481.9
525.8
574.8
622.7
691.0
780.2
856.6
952.7
1,059.7
1,171.9
1,322.5
1,487.7
1,633.2
1,802.9
1,957.8
2,154.1
2,325.7
2,490.5
2,685.3
2,888.7
3,113.7
3,311.3
3,532.7
3,711.7
3,901.2
4,098.4
4,312.7
4,548.4
4,789.8
5,081.8
5,425.6
5,725.6
6,031.4
6,367.4
6,778.1
7,213.8
7,664.8
6,633.2
6,730.3
6,824.7
6,924.3
7,047.8
7,135.4
7,283.3
7,388.9
7,502.3
7,608.6
7,706.9
7,841.3
7,968.1
8,100.0
8,221.1

Structures

62.5
61.9
63.6
67.8
72.7
78.4
84.7
88.0
89.6
100.0
108.3
109.7
128.4
146.9
162.9
165.6
166.7
191.2
226.8
273.9
313.3
321.3
352.6
344.5
368.7
425.8
458.7
480.1
497.6
515.0
529.0
533.5
499.9
522.7
557.8
607.3
638.1
697.1
748.2
813.8
875.3
942.1
989.8
995.8
1,069.2
1,200.7
1,345.8
1,437.5
1,135.9
1,191.8
1,224.8
1,250.1
1,286.0
1,327.5
1,364.8
1,404.7
1,441.9
1,457.1
1,431.2
1,419.7
1,413.4
1,424.9
1,413.8

1 Estimates for durable and nondurable goods for 1996 and earlier periods are based on the Standard Industrial Classification (SIC); later estimates are based
on the North American Industry Classification System (NAICS).
2 Includes government consumption expenditures, which are for services (such as education and national defense) produced by government. In current
dollars, these services are valued at their cost of production.
Source: Department of Commerce (Bureau of Economic Analysis).

236  |  Economic Report of the President

Table B–9.—Real gross domestic product by major type of product, 1959–2007
[Billions of chained (2000) dollars; quarterly data at seasonally adjusted annual rates]
Goods

Year or quarter

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Gross
domestic
product

Final
sales of
domestic
product

Change
in
private
inventories

2,441.3
2,501.8
2,560.0
2,715.2
2,834.0
2,998.6
3,191.1
3,399.1
3,484.6
3,652.7
3,765.4
3,771.9
3,898.6
4,105.0
4,341.5
4,319.6
4,311.2
4,540.9
4,750.5
5,015.0
5,173.4
5,161.7
5,291.7
5,189.3
5,423.8
5,813.6
6,053.7
6,263.6
6,475.1
6,742.7
6,981.4
7,112.5
7,100.5
7,336.6
7,532.7
7,835.5
8,031.7
8,328.9
8,703.5
9,066.9
9,470.3
9,817.0
9,890.7
10,048.8
10,301.0
10,675.8
11,003.4
11,319.4
10,543.6
10,634.2
10,728.7
10,796.4
10,878.4
10,954.1
11,074.3
11,107.2
11,238.7
11,306.7
11,336.7
11,395.5
11,412.6
11,520.1
11,658.9

2,442.7
2,506.8
2,566.8
2,708.5
2,830.3
2,999.9
3,173.8
3,364.8
3,467.6
3,640.3
3,753.7
3,787.7
3,893.4
4,098.6
4,315.9
4,305.5
4,352.5
4,522.3
4,721.6
4,981.6
5,161.2
5,196.7
5,265.1
5,233.4
5,454.0
5,739.2
6,042.1
6,271.8
6,457.2
6,734.5
6,962.2
7,108.5
7,115.0
7,331.1
7,522.3
7,777.8
8,010.2
8,306.5
8,636.6
8,997.6
9,404.0
9,760.5
9,920.9
10,036.5
10,285.1
10,619.8
10,966.9
11,275.9
10,507.1
10,568.5
10,666.6
10,737.0
10,813.0
10,940.4
11,064.8
11,049.5
11,196.1
11,252.1
11,279.7
11,375.8
11,411.6
11,512.8
11,626.4

12.3
10.4
9.4
19.5
18.0
15.4
29.3
42.1
30.3
27.4
27.0
5.0
22.3
23.1
35.0
25.9
–11.3
30.7
38.5
41.1
25.1
–8.0
34.9
–17.5
–6.4
71.3
23.7
8.3
30.3
20.3
28.3
15.4
–.5
16.5
20.6
63.6
29.9
28.7
71.2
72.6
68.9
56.5
–31.7
12.5
14.3
54.3
33.2
40.3
35.0
64.9
60.1
57.2
63.4
10.1
5.9
53.6
38.4
51.4
53.9
17.4
.1
5.8
30.6

Total

Total

700.7
721.1
726.7
773.8
803.4
856.4
927.3
1,005.2
1,006.4
1,047.9
1,082.2
1,076.3
1,105.7
1,180.5
1,299.5
1,288.1
1,263.7
1,359.8
1,423.2
1,515.6
1,577.9
1,567.1
1,634.5
1,559.7
1,625.4
1,810.9
1,851.3
1,906.0
1,984.9
2,108.9
2,223.3
2,252.7
2,221.5
2,307.8
2,394.8
2,550.6
2,639.0
2,772.4
2,971.3
3,132.7
3,312.6
3,449.3
3,390.9
3,432.5
3,538.3
3,705.4
3,866.2
4,057.9
3,644.0
3,674.9
3,734.2
3,768.6
3,807.8
3,844.3
3,898.9
3,913.7
4,004.2
4,049.6
4,083.3
4,094.5
4,096.6
4,150.9
4,266.8

Durable goods

Nondurable goods

Final
sales

Change
in
private
inventories

Final
sales

Change
in
private
inventories 1

Final
sales

Change
in
private
inventories 1

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��������������
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��������������
��������������
��������������
��������������
��������������
��������������
��������������
2,244.3
2,228.9
2,297.7
2,380.3
2,493.9
2,614.9
2,747.4
2,904.6
3,063.7
3,246.4
3,392.8
3,421.9
3,419.7
3,521.7
3,645.6
3,827.9
4,011.8
3,605.2
3,604.4
3,667.7
3,705.1
3,737.4
3,831.9
3,891.1
3,851.2
3,959.0
3,990.5
4,021.5
4,076.2
4,100.1
4,147.0
4,233.5

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��������������
��������������
��������������
��������������
��������������
��������������
��������������
15.4
–.5
16.5
20.6
63.6
29.9
28.7
71.2
72.6
68.9
56.5
–31.7
12.5
14.3
54.3
33.2
40.3
35.0
64.9
60.1
57.2
63.4
10.1
5.9
53.6
38.4
51.4
53.9
17.4
.1
5.8
30.6

��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
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��������������
��������������
��������������
��������������
��������������
��������������
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��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
��������������
872.8
852.7
894.7
949.8
1,016.4
1,096.9
1,193.8
1,317.4
1,431.8
1,554.3
1,653.3
1,655.6
1,610.8
1,669.4
1,744.7
1,867.2
1,960.3
1,719.4
1,714.6
1,759.1
1,785.9
1,808.4
1,865.5
1,912.8
1,882.0
1,948.0
1,949.9
1,963.8
1,979.4
2,007.5
2,048.3
2,092.5

��������������
��������������
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��������������
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��������������
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7.2
–13.6
–3.0
16.4
33.4
31.0
17.8
38.5
42.4
40.4
36.1
–42.4
15.5
11.2
34.1
29.5
18.5
29.6
40.8
39.7
26.3
45.5
1.6
14.3
56.5
14.2
22.2
37.8
–.4
.8
–23.4
9.3

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1,402.1
1,410.3
1,434.3
1,457.7
1,501.4
1,536.9
1,566.5
1,593.4
1,634.2
1,692.6
1,739.5
1,766.1
1,806.3
1,850.5
1,900.9
1,965.6
2,057.2
1,884.9
1,888.4
1,909.2
1,921.0
1,931.7
1,970.8
1,985.3
1,974.6
2,018.6
2,046.2
2,063.2
2,100.5
2,099.2
2,108.8
2,151.5

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3.5
6.1
8.7
1.5
12.6
–1.2
4.5
32.4
29.8
28.1
20.4
10.3
–2.8
3.3
20.8
5.1
21.7
6.5
24.9
21.2
30.8
19.0
8.1
–7.3
.7
23.7
29.0
17.4
16.9
–.6
25.7
20.6

Services 2

1,391.1
1,433.0
1,489.4
1,574.3
1,642.4
1,720.1
1,803.6
1,916.7
2,034.8
2,140.4
2,212.2
2,255.4
2,313.6
2,393.7
2,461.3
2,522.8
2,612.1
2,676.9
2,770.5
2,874.9
2,943.3
3,004.2
3,062.5
3,120.0
3,251.0
3,341.1
3,520.8
3,671.0
3,797.3
3,930.9
4,049.5
4,170.0
4,251.2
4,373.7
4,457.5
4,558.3
4,654.7
4,765.6
4,901.1
5,057.5
5,245.1
5,425.6
5,553.2
5,693.4
5,810.8
5,972.7
6,112.3
6,255.0
5,922.1
5,954.0
5,989.4
6,025.4
6,059.8
6,081.2
6,146.4
6,161.8
6,199.1
6,230.4
6,261.7
6,329.0
6,361.8
6,411.2
6,460.9

Structures

392.8
389.1
399.9
422.8
451.3
481.7
505.8
506.4
499.0
529.7
536.5
513.4
561.0
602.7
615.6
551.8
501.7
548.7
600.6
658.3
677.0
627.8
619.2
566.1
607.1
689.2
725.1
735.9
739.2
737.9
732.8
718.3
662.8
688.3
709.3
746.0
753.5
803.1
835.7
879.1
913.0
942.1
945.6
922.1
952.3
1,001.4
1,035.0
1,033.6
979.7
1,006.7
1,010.0
1,009.2
1,019.0
1,037.1
1,040.3
1,043.4
1,054.5
1,050.7
1,023.7
1,005.4
989.4
996.7
986.2

1 Estimates for durable and nondurable goods for 1996 and earlier periods are based on the Standard Industrial Classification (SIC); later estimates are based
on the North American Industry Classification System (NAICS).
2 Includes government consumption expenditures, which are for services (such as education and national defense) produced by government. In current
dollars, these services are valued at their cost of production.
Source: Department of Commerce (Bureau of Economic Analysis).

Appendix B – National Income or Expenditure  |  237

Table B–10.—Gross value added by sector, 1959–2007
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Business 1
Year or quarter

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Gross
domestic
product

506.6
526.4
544.7
585.6
617.7
663.6
719.1
787.8
832.6
910.0
984.6
1,038.5
1,127.1
1,238.3
1,382.7
1,500.0
1,638.3
1,825.3
2,030.9
2,294.7
2,563.3
2,789.5
3,128.4
3,255.0
3,536.7
3,933.2
4,220.3
4,462.8
4,739.5
5,103.8
5,484.4
5,803.1
5,995.9
6,337.7
6,657.4
7,072.2
7,397.7
7,816.9
8,304.3
8,747.0
9,268.4
9,817.0
10,128.0
10,469.6
10,960.8
11,685.9
12,433.9
13,194.7
11,405.5
11,610.3
11,779.4
11,948.5
12,154.0
12,317.4
12,558.8
12,705.5
12,964.6
13,155.0
13,266.9
13,392.3
13,551.9
13,768.8
13,970.5

Total

408.2
420.4
432.0
464.5
488.7
525.6
571.4
625.1
654.5
714.5
770.3
803.6
869.9
959.0
1,079.4
1,166.9
1,268.5
1,423.7
1,593.5
1,813.4
2,032.9
2,191.1
2,459.4
2,520.7
2,747.2
3,071.8
3,290.8
3,468.8
3,669.9
3,948.6
4,243.2
4,462.6
4,569.3
4,840.4
5,096.2
5,444.0
5,700.6
6,056.7
6,471.9
6,827.1
7,243.4
7,666.7
7,841.2
8,040.5
8,411.5
8,987.5
9,603.2
10,192.8
8,757.6
8,930.7
9,058.1
9,203.6
9,367.4
9,503.6
9,715.2
9,826.7
10,027.6
10,173.9
10,242.7
10,327.1
10,435.6
10,604.7
10,761.8

Nonfarm 1

390.9
402.3
413.7
446.1
470.2
508.2
551.5
604.3
634.4
694.0
747.5
779.9
844.5
929.4
1,032.7
1,122.6
1,222.8
1,380.7
1,549.9
1,762.7
1,972.8
2,139.7
2,394.5
2,460.3
2,702.3
3,007.7
3,227.4
3,409.4
3,608.4
3,887.2
4,169.7
4,386.0
4,499.5
4,761.7
5,025.6
5,362.4
5,632.0
5,966.0
6,383.8
6,748.2
7,174.7
7,595.1
7,768.0
7,969.7
8,323.2
8,872.8
9,502.4
10,097.2
8,640.2
8,811.0
8,948.6
9,091.4
9,265.0
9,399.7
9,616.9
9,727.9
9,935.7
10,086.6
10,146.6
10,219.8
10,319.0
10,479.8
10,627.2

Households and institutions

Farm

17.3
18.2
18.3
18.4
18.5
17.3
19.9
20.8
20.1
20.5
22.8
23.7
25.4
29.7
46.8
44.2
45.6
43.0
43.5
50.7
60.1
51.4
65.0
60.4
44.9
64.2
63.4
59.4
61.6
61.3
73.6
76.6
69.9
78.7
70.6
81.6
68.5
90.7
88.1
78.9
68.8
71.5
73.1
70.8
88.3
114.7
100.9
95.7
117.4
119.7
109.4
112.2
102.4
103.9
98.3
98.9
92.0
87.3
96.1
107.3
116.6
124.9
134.6

Total

40.1
43.9
46.7
50.4
53.6
56.9
61.0
65.8
70.9
76.5
84.3
91.4
100.9
109.9
120.0
131.7
145.4
158.1
172.8
193.8
217.4
249.9
283.7
315.3
344.0
376.2
406.0
438.0
478.4
525.1
569.6
618.9
660.7
697.9
732.0
771.3
815.5
852.2
895.8
949.7
1,012.3
1,080.7
1,160.4
1,227.3
1,269.2
1,350.0
1,404.7
1,500.3
1,321.7
1,338.1
1,366.3
1,373.8
1,383.5
1,396.6
1,408.9
1,429.9
1,464.3
1,490.2
1,512.3
1,534.5
1,560.0
1,588.9
1,614.5

Households

29.8
32.3
34.3
36.7
38.8
40.8
43.3
45.9
48.8
51.6
55.6
59.4
65.1
70.3
76.0
82.5
90.3
98.1
107.3
120.4
135.0
155.5
176.8
195.7
211.7
230.2
249.6
267.4
287.6
312.8
337.0
362.9
383.4
397.2
413.7
439.5
463.3
484.7
509.6
538.0
576.4
615.6
662.0
687.7
699.9
744.9
773.3
834.2
734.4
739.2
751.3
754.6
763.4
769.0
773.1
787.9
811.2
829.1
844.6
851.9
864.8
883.0
897.7

Nonprofit
institutions
serving
households 2
10.3
11.7
12.4
13.6
14.8
16.1
17.7
19.9
22.1
25.0
28.7
32.0
35.7
39.5
44.0
49.2
55.1
60.0
65.6
73.4
82.5
94.4
106.9
119.6
132.4
146.0
156.4
170.6
190.8
212.4
232.6
256.0
277.3
300.7
318.3
331.7
352.1
367.5
386.2
411.7
435.9
465.1
498.4
539.6
569.3
605.1
631.4
666.1
587.3
598.9
615.0
619.2
620.2
627.6
635.8
642.0
653.1
661.1
667.7
682.5
695.2
705.9
716.8

General government 3

Total

58.3
62.0
66.0
70.7
75.5
81.1
86.7
96.9
107.2
119.0
130.0
143.6
156.4
169.4
183.3
201.4
224.5
243.5
264.6
287.5
313.0
348.6
385.3
419.0
445.4
485.2
523.5
556.1
591.2
630.1
671.5
721.6
765.9
799.4
829.3
857.0
881.6
908.0
936.7
970.3
1,012.7
1,069.6
1,126.4
1,201.8
1,280.1
1,348.4
1,425.9
1,501.5
1,326.2
1,341.5
1,355.0
1,371.0
1,403.0
1,417.2
1,434.7
1,448.8
1,472.6
1,490.9
1,511.8
1,530.7
1,556.3
1,575.2
1,594.2

Federal

31.9
33.1
34.4
36.5
38.4
40.7
42.4
47.3
51.7
56.4
60.0
64.1
67.8
71.6
74.0
79.6
87.3
93.8
102.1
109.7
117.6
131.3
147.4
161.3
171.3
192.1
205.1
212.6
223.4
234.9
246.6
258.9
275.0
282.1
286.3
286.2
284.7
288.6
290.9
293.1
300.9
315.4
325.7
352.9
383.9
412.6
438.9
458.6
406.2
411.9
414.4
417.8
436.8
436.9
440.2
441.7
454.1
457.4
460.6
462.3
470.8
474.6
479.3

State
and
local
26.5
28.9
31.6
34.2
37.1
40.4
44.2
49.6
55.5
62.5
70.0
79.5
88.6
97.9
109.3
121.8
137.1
149.7
162.6
177.8
195.4
217.3
237.9
257.7
274.1
293.1
318.4
343.5
367.8
395.2
424.9
462.6
490.9
517.3
543.0
570.7
596.9
619.3
645.8
677.2
711.8
754.2
800.8
848.9
896.2
935.8
987.0
1,042.9
920.0
929.6
940.6
953.2
966.2
980.2
994.5
1,007.1
1,018.5
1,033.5
1,051.2
1,068.5
1,085.5
1,100.5
1,114.9

Addendum:
Gross
housing
value
added
36.9
39.9
42.8
46.0
48.9
51.6
54.9
58.2
62.1
65.9
71.3
76.7
83.9
91.1
98.3
106.8
117.2
126.6
140.3
155.2
172.5
199.4
228.4
255.4
277.4
301.1
332.9
359.5
385.5
415.5
443.8
478.1
508.5
531.0
549.1
582.0
613.3
638.0
667.7
700.2
747.8
794.3
849.8
876.7
878.2
929.1
964.2
1,038.2
915.5
921.9
937.5
941.4
952.3
958.9
963.7
981.8
1,009.9
1,031.4
1,050.5
1,060.9
1,077.4
1,099.3
1,117.6

1 Gross domestic business value added equals gross domestic product excluding gross value added of households and institutions and of general
government. Nonfarm value added equals gross domestic business value added excluding gross farm value added.
2 Equals compensation of employees of nonprofit institutions, the rental value of nonresidential fixed assets owned and used by nonprofit institutions serving
households, and rental income of persons for tenant-occupied housing owned by nonprofit institutions.
3 Equals compensation of general government employees plus general government consumption of fixed capital.
Source: Department of Commerce (Bureau of Economic Analysis).

238  |  Economic Report of the President

Table B–11.—Real gross value added by sector, 1959–2007
[Billions of chained (2000) dollars; quarterly data at seasonally adjusted annual rates]
Business 1
Year or quarter

Gross
domestic
product

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

2,441.3
2,501.8
2,560.0
2,715.2
2,834.0
2,998.6
3,191.1
3,399.1
3,484.6
3,652.7
3,765.4
3,771.9
3,898.6
4,105.0
4,341.5
4,319.6
4,311.2
4,540.9
4,750.5
5,015.0
5,173.4
5,161.7
5,291.7
5,189.3
5,423.8
5,813.6
6,053.7
6,263.6
6,475.1
6,742.7
6,981.4
7,112.5
7,100.5
7,336.6
7,532.7
7,835.5
8,031.7
8,328.9
8,703.5
9,066.9
9,470.3
9,817.0
9,890.7
10,048.8
10,301.0
10,675.8
11,003.4
11,319.4
10,543.6
10,634.2
10,728.7
10,796.4
10,878.4
10,954.1
11,074.3
11,107.2
11,238.7
11,306.7
11,336.7
11,395.5
11,412.6
11,520.1
11,658.9

Total

1,716.0
1,748.8
1,782.8
1,897.7
1,985.4
2,111.7
2,260.6
2,413.6
2,459.5
2,581.7
2,660.3
2,659.3
2,761.5
2,939.8
3,145.0
3,101.3
3,071.2
3,272.9
3,456.2
3,673.3
3,796.7
3,756.1
3,859.5
3,743.1
3,944.3
4,286.3
4,484.5
4,652.0
4,815.5
5,023.0
5,206.6
5,287.0
5,245.4
5,456.5
5,625.9
5,905.3
6,076.8
6,356.0
6,693.8
7,017.1
7,376.8
7,666.7
7,691.0
7,806.9
8,050.3
8,387.0
8,692.2
8,965.9
8,263.2
8,352.3
8,434.8
8,498.0
8,576.2
8,646.0
8,762.5
8,784.0
8,902.6
8,958.5
8,972.9
9,029.8
9,033.9
9,130.9
9,258.2

Nonfarm 1

1,684.1
1,713.5
1,747.8
1,867.0
1,954.3
2,086.0
2,233.5
2,393.2
2,434.1
2,561.5
2,639.1
2,636.0
2,736.2
2,918.4
3,131.5
3,089.1
3,037.5
3,249.1
3,431.1
3,656.8
3,774.2
3,736.1
3,814.7
3,691.9
3,932.8
4,254.3
4,434.2
4,606.2
4,769.8
4,987.7
5,162.3
5,237.9
5,194.7
5,395.2
5,576.0
5,841.4
6,030.2
6,300.4
6,627.2
6,955.3
7,314.2
7,595.1
7,625.7
7,736.9
7,974.3
8,304.3
8,604.3
8,877.5
8,176.3
8,276.4
8,354.9
8,409.6
8,490.6
8,557.4
8,674.6
8,694.7
8,815.3
8,867.9
8,885.0
8,941.8
8,949.2
9,042.6
9,167.6

Households and institutions

Farm

Total

21.2
22.4
22.6
22.1
22.8
22.1
23.5
22.7
24.5
23.6
24.5
25.1
26.4
26.4
26.2
25.6
30.5
29.1
30.7
29.6
32.2
31.1
41.0
43.1
26.9
37.2
46.7
44.9
45.5
40.9
46.4
49.3
50.0
57.5
50.6
60.9
49.6
56.1
64.4
61.6
62.9
71.5
65.6
70.1
76.0
82.1
87.0
87.5
84.2
76.8
80.2
87.4
84.9
87.7
87.0
88.3
86.3
89.8
86.9
87.1
84.2
87.2
89.2

261.7
279.6
291.5
307.7
320.4
333.7
350.2
366.3
381.6
400.4
417.8
425.0
443.0
460.7
476.3
493.9
513.7
521.5
528.3
552.4
576.7
606.9
626.5
647.2
665.9
687.8
700.1
718.5
745.7
780.6
812.3
841.2
865.3
882.6
904.8
923.1
945.1
957.8
983.5
1,010.4
1,042.3
1,080.7
1,110.0
1,130.9
1,129.1
1,165.6
1,183.1
1,221.5
1,158.4
1,161.0
1,171.1
1,171.8
1,174.4
1,180.5
1,184.5
1,193.1
1,209.2
1,219.4
1,228.5
1,228.8
1,238.7
1,248.4
1,257.7

Households

161.6
171.4
179.6
189.8
197.7
205.7
215.2
224.0
233.1
239.3
249.1
254.7
266.5
277.7
287.5
299.9
308.0
313.3
316.2
335.1
350.4
372.9
384.7
391.8
399.4
413.3
423.2
428.7
440.3
457.1
471.5
483.2
497.8
502.6
507.9
524.7
534.3
540.8
554.0
563.8
590.7
615.6
634.8
634.2
629.4
661.9
675.1
710.4
656.3
657.9
666.9
666.5
668.0
672.5
674.7
685.1
701.2
710.1
715.5
714.6
720.3
725.8
732.0

Nonprofit
institutions
serving
households 2
97.8
106.6
109.6
115.4
120.0
125.4
132.6
140.2
146.5
161.0
168.8
170.0
176.1
182.4
188.2
193.1
205.2
207.5
211.6
216.3
225.3
232.8
240.5
254.4
265.7
273.6
275.9
289.1
304.8
323.1
340.6
357.9
367.5
379.9
396.9
398.4
410.8
417.0
429.5
446.9
451.6
465.1
475.1
496.6
499.6
504.1
508.7
513.0
502.4
503.4
504.7
505.8
506.9
508.6
510.4
509.0
509.7
511.3
515.0
516.0
520.3
524.5
527.7

General government 3

Total

514.5
532.2
550.9
572.5
589.5
609.7
630.3
669.7
705.2
732.7
751.3
754.1
755.3
753.8
757.2
772.6
785.1
791.8
800.1
815.5
824.2
836.0
840.6
849.2
854.6
865.2
890.0
911.9
931.8
956.0
978.8
1,003.9
1,014.3
1,017.7
1,019.8
1,019.9
1,020.6
1,022.1
1,030.0
1,041.0
1,051.4
1,069.6
1,089.3
1,110.4
1,123.9
1,129.4
1,139.1
1,146.5
1,126.4
1,127.0
1,129.7
1,134.5
1,136.8
1,137.7
1,139.6
1,142.4
1,141.1
1,143.6
1,149.3
1,152.1
1,154.3
1,156.8
1,161.5

Federal

279.4
284.6
290.5
302.5
305.2
308.2
310.4
330.7
352.2
358.1
359.0
343.6
327.8
311.8
300.1
299.2
297.5
297.9
298.8
302.5
302.3
307.0
311.7
316.8
324.2
331.5
341.0
347.0
356.1
360.5
364.9
371.6
373.8
366.0
358.9
347.2
334.1
325.0
318.8
315.2
312.7
315.4
317.0
323.3
331.9
335.2
337.4
336.9
334.3
333.9
335.2
337.4
337.8
336.9
336.7
338.1
335.3
335.5
338.3
338.4
337.4
336.8
339.9

State
and
local
236.7
249.3
262.1
271.8
285.9
303.1
321.5
340.6
354.9
376.2
393.4
410.8
427.5
442.3
457.8
474.4
488.9
495.3
502.9
514.6
523.7
530.8
530.6
534.0
531.8
535.0
550.3
566.3
577.2
596.9
615.3
633.6
641.7
652.6
661.6
673.1
686.5
697.2
711.2
725.8
738.7
754.2
772.3
787.1
791.9
794.1
801.6
809.7
792.0
793.0
794.3
796.9
798.8
800.6
802.8
804.1
805.8
808.2
811.0
813.8
817.0
820.2
821.8

Addendum:
Gross
housing
value
added
195.0
207.3
219.2
232.8
244.3
255.4
268.9
281.0
294.0
304.6
318.7
328.9
343.8
360.1
373.0
390.7
402.7
408.3
418.3
436.8
453.9
481.9
501.0
514.7
526.2
543.0
564.4
574.9
588.8
606.2
620.3
635.7
657.2
666.2
669.9
690.8
705.7
712.1
726.5
735.5
767.2
794.3
815.1
809.0
789.9
825.6
841.2
883.3
818.0
820.7
832.2
831.5
833.4
838.3
840.5
852.7
872.0
882.8
889.3
888.9
895.4
902.2
909.7

1 Gross domestic business value added equals gross domestic product excluding gross value added of households and institutions and of general
government. Nonfarm value added equals gross domestic business value added excluding gross farm value added.
2 Equals compensation of employees of nonprofit institutions, the rental value of nonresidential fixed assets owned and used by nonprofit institutions serving
households, and rental income of persons for tenant-occupied housing owned by nonprofit institutions.
3 Equals compensation of general government employees plus general government consumption of fixed capital.
Source: Department of Commerce (Bureau of Economic Analysis).

Appendix B – National Income or Expenditure  |  239

Table B–12.—Gross domestic product (GDP) by industry, value added, in current dollars and as a
percentage of GDP, 1976–2006
[Billions of dollars; except as noted]
Private industries
Year

Gross
domestic
product

Total
private
industries

Agriculture,
forestry,
fishing,
and
hunting

Manufacturing
Construction

Mining

Total
manufacturing

Durable
goods

Nondurable
goods

Utilities

Wholesale
trade

Retail
trade

Value added
1976 �����������
1977 �����������
1978 �����������
1979 �����������
1980 �����������
1981 �����������
1982 �����������
1983 �����������
1984 �����������
1985 �����������
1986 �����������
1987 �����������
1988 �����������
1989 �����������
1990 �����������
1991 �����������
1992 �����������
1993 �����������
1994 �����������
1995 �����������
1996 �����������
1997 �����������
1998 �����������
1999 �����������
2000 �����������
2001 �����������
2002 �����������
2003 �����������
2004 �����������
2005 �����������
2006 �����������

1,825.3
2,030.9
2,294.7
2,563.3
2,789.5
3,128.4
3,255.0
3,536.7
3,933.2
4,220.3
4,462.8
4,739.5
5,103.8
5,484.4
5,803.1
5,995.9
6,337.7
6,657.4
7,072.2
7,397.6
7,816.9
8,304.3
8,747.0
9,268.4
9,817.0
10,128.0
10,469.6
10,960.8
11,685.9
12,433.9
13,194.7

1,556.2
1,739.4
1,977.0
2,217.7
2,405.8
2,702.5
2,792.6
3,043.5
3,395.1
3,637.0
3,842.9
4,080.4
4,399.1
4,732.3
4,997.8
5,138.7
5,440.4
5,729.3
6,110.5
6,407.2
6,795.2
7,247.5
7,652.5
8,127.2
8,614.3
8,869.7
9,131.2
9,542.3
10,194.3
10,861.5
11,556.0

50.2
51.3
59.8
70.6
62.0
75.4
71.3
57.1
77.1
77.1
74.2
79.8
80.2
92.8
96.7
89.2
99.6
93.1
105.6
93.1
113.8
110.7
102.4
93.8
98.0
97.9
95.4
114.4
142.2
128.8
125.4

37.5
43.4
49.5
58.4
91.3
122.9
120.0
103.1
107.2
105.4
68.9
71.5
71.4
76.0
84.9
76.0
71.3
72.1
73.6
74.1
87.5
92.6
74.8
85.4
121.3
118.7
106.5
143.3
171.3
225.7
262.4

85.3
85.6
86.2
86.5
86.2
86.4
85.8
86.1
86.3
86.2
86.1
86.1
86.2
86.3
86.1
85.7
85.8
86.1
86.4
86.6
86.9
87.3
87.5
87.7
87.7
87.6
87.2
87.1
87.2
87.4
87.6

2.7
2.5
2.6
2.8
2.2
2.4
2.2
1.6
2.0
1.8
1.7
1.7
1.6
1.7
1.7
1.5
1.6
1.4
1.5
1.3
1.5
1.3
1.2
1.0
1.0
1.0
.9
1.0
1.2
1.0
1.0

2.1
2.1
2.2
2.3
3.3
3.9
3.7
2.9
2.7
2.5
1.5
1.5
1.4
1.4
1.5
1.3
1.1
1.1
1.0
1.0
1.1
1.1
.9
.9
1.2
1.2
1.0
1.3
1.5
1.8
2.0

Percent
1976 �����������
1977 �����������
1978 �����������
1979 �����������
1980 �����������
1981 �����������
1982 �����������
1983 �����������
1984 �����������
1985 �����������
1986 �����������
1987 �����������
1988 �����������
1989 �����������
1990 �����������
1991 �����������
1992 �����������
1993 �����������
1994 �����������
1995 �����������
1996 �����������
1997 �����������
1998 �����������
1999 �����������
2000 �����������
2001 �����������
2002 �����������
2003 �����������
2004 �����������
2005 �����������
2006 �����������

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

85.5
94.2
111.5
127.0
130.3
131.8
128.8
139.8
164.4
184.6
207.7
218.2
232.7
244.8
248.5
230.2
232.5
248.3
274.4
287.0
311.7
337.6
374.4
406.6
435.9
469.5
482.3
496.2
539.2
607.9
630.0

386.7
438.6
489.9
543.8
556.6
616.5
603.2
653.1
724.0
740.3
766.0
811.3
876.9
927.3
947.4
957.5
996.7
1,039.9
1,118.8
1,177.3
1,209.4
1,279.8
1,343.9
1,373.1
1,426.2
1,341.3
1,352.6
1,359.3
1,427.9
1,483.9
1,549.7

230.2
265.0
303.4
331.1
333.9
370.4
353.4
379.3
443.5
449.2
459.3
483.8
519.0
543.2
542.7
540.9
562.8
593.1
647.7
677.2
706.5
755.5
806.9
820.4
865.3
778.9
774.8
771.8
807.5
840.9
882.8

156.5
173.6
186.5
212.7
222.7
246.1
249.8
273.8
280.5
291.1
306.7
327.5
357.9
384.1
404.7
416.6
433.8
446.8
471.1
500.0
502.9
524.3
537.0
552.7
560.9
562.5
577.9
587.5
620.4
643.0
666.9

41.5
45.9
50.4
51.9
60.0
70.7
81.7
91.6
102.3
109.2
114.4
123.0
122.8
135.9
142.9
152.5
157.4
165.3
174.6
181.5
183.3
179.6
180.8
185.4
189.3
202.3
207.3
220.0
240.3
249.5
273.4

122.7
134.9
153.4
175.8
188.7
208.3
207.9
222.9
249.4
268.3
278.5
285.3
318.1
337.4
347.7
360.5
378.9
401.2
442.7
457.0
489.1
521.2
542.9
577.7
591.7
607.1
615.4
637.0
686.7
723.7
762.2

144.0
158.5
177.6
193.2
200.9
221.0
229.9
261.6
293.6
318.7
336.6
349.9
366.0
389.0
398.8
405.5
430.0
458.0
493.3
514.9
543.8
574.2
598.6
635.5
662.4
691.6
719.6
751.5
776.9
812.7
848.0

2.3
2.3
2.2
2.0
2.2
2.3
2.5
2.6
2.6
2.6
2.6
2.6
2.4
2.5
2.5
2.5
2.5
2.5
2.5
2.5
2.3
2.2
2.1
2.0
1.9
2.0
2.0
2.0
2.1
2.0
2.1

6.7
6.6
6.7
6.9
6.8
6.7
6.4
6.3
6.3
6.4
6.2
6.0
6.2
6.2
6.0
6.0
6.0
6.0
6.3
6.2
6.3
6.3
6.2
6.2
6.0
6.0
5.9
5.8
5.9
5.8
5.8

7.9
7.8
7.7
7.5
7.2
7.1
7.1
7.4
7.5
7.6
7.5
7.4
7.2
7.1
6.9
6.8
6.8
6.9
7.0
7.0
7.0
6.9
6.8
6.9
6.7
6.8
6.9
6.9
6.6
6.5
6.4

Industry value added as a percentage of GDP (percent)
4.7
4.6
4.9
5.0
4.7
4.2
4.0
4.0
4.2
4.4
4.7
4.6
4.6
4.5
4.3
3.8
3.7
3.7
3.9
3.9
4.0
4.1
4.3
4.4
4.4
4.6
4.6
4.5
4.6
4.9
4.8

21.2
21.6
21.3
21.2
20.0
19.7
18.5
18.5
18.4
17.5
17.2
17.1
17.2
16.9
16.3
16.0
15.7
15.6
15.8
15.9
15.5
15.4
15.4
14.8
14.5
13.2
12.9
12.4
12.2
11.9
11.7

12.6
13.1
13.2
12.9
12.0
11.8
10.9
10.7
11.3
10.6
10.3
10.2
10.2
9.9
9.4
9.0
8.9
8.9
9.2
9.2
9.0
9.1
9.2
8.9
8.8
7.7
7.4
7.0
6.9
6.8
6.7

8.6
8.5
8.1
8.3
8.0
7.9
7.7
7.7
7.1
6.9
6.9
6.9
7.0
7.0
7.0
6.9
6.8
6.7
6.7
6.8
6.4
6.3
6.1
6.0
5.7
5.6
5.5
5.4
5.3
5.2
5.1

1 Consists of agriculture, forestry, fishing, and hunting; mining; construction; and manufacturing.
2 Consists of utilities; wholesale trade; retail trade; transportation and warehousing; information; finance, insurance, real estate, rental, and leasing;

professional and business services; educational services, health care, and social assistance; arts, entertainment, recreation, accommodation, and food services;
and other services, except government.
Note.—Value added is the contribution of each private industry and of government to gross domestic product. Value added is equal to an industry’s gross
output minus its intermediate inputs. Current-dollar value added is calculated as the sum of distributions by an industry to its labor and capital which are
derived from the components of gross domestic income.
See next page for continuation of table.

240  |  Economic Report of the President

Table B–12.—Gross domestic product (GDP) by industry, value added, in current dollars and as a
percentage of GDP, 1976–2006—Continued
[Billions of dollars; except as noted]
Private industries—continued

Year

Transportation
and
warehousing

Information

Finance,
insurance,
real estate,
rental,
and
leasing

Professional
and
business
services

Educational
services,
health care,
and
social
assistance

Arts,
entertainment,
recreation,
accommodation,
and food
services

Other
Government
services,
except
government

Private
goodsproducing
industries 1

Private
servicesproducing
industries 2

Value added
1976 �������������
1977 �������������
1978 �������������
1979 �������������
1980 �������������
1981 �������������
1982 �������������
1983 �������������
1984 �������������
1985 �������������
1986 �������������
1987 �������������
1988 �������������
1989 �������������
1990 �������������
1991 �������������
1992 �������������
1993 �������������
1994 �������������
1995 �������������
1996 �������������
1997 �������������
1998 �������������
1999 �������������
2000 �������������
2001 �������������
2002 �������������
2003 �������������
2004 �������������
2005 �������������
2006 �������������

68.8
76.2
86.7
96.6
102.3
109.9
105.9
117.8
131.4
136.3
145.6
151.1
161.1
164.1
169.4
178.2
186.6
201.0
218.0
226.3
235.2
253.7
273.7
287.4
301.6
296.9
304.6
316.6
344.6
358.5
385.4

63.5
71.1
81.4
90.3
99.0
112.7
123.6
140.0
147.1
162.9
173.1
185.0
194.0
210.4
225.1
235.2
250.9
272.6
294.0
307.6
335.7
347.8
381.6
439.3
458.3
476.9
483.0
489.1
530.6
570.5
598.8

272.1
304.0
347.4
390.3
442.4
498.4
539.9
604.6
670.2
729.7
795.1
840.3
910.1
975.4
1,042.1
1,103.6
1,177.4
1,241.5
1,297.8
1,383.0
1,470.7
1,593.3
1,684.6
1,798.4
1,931.0
2,059.2
2,141.9
2,244.6
2,378.8
2,549.0
2,756.6

1976 �������������
1977 �������������
1978 �������������
1979 �������������
1980 �������������
1981 �������������
1982 �������������
1983 �������������
1984 �������������
1985 �������������
1986 �������������
1987 �������������
1988 �������������
1989 �������������
1990 �������������
1991 �������������
1992 �������������
1993 �������������
1994 �������������
1995 �������������
1996 �������������
1997 �������������
1998 �������������
1999 �������������
2000 �������������
2001 �������������
2002 �������������
2003 �������������
2004 �������������
2005 �������������
2006 �������������

3.8
3.8
3.8
3.8
3.7
3.5
3.3
3.3
3.3
3.2
3.3
3.2
3.2
3.0
2.9
3.0
2.9
3.0
3.1
3.1
3.0
3.1
3.1
3.1
3.1
2.9
2.9
2.9
2.9
2.9
2.9

3.5
3.5
3.5
3.5
3.5
3.6
3.8
4.0
3.7
3.9
3.9
3.9
3.8
3.8
3.9
3.9
4.0
4.1
4.2
4.2
4.3
4.2
4.4
4.7
4.7
4.7
4.6
4.5
4.5
4.6
4.5

14.9
15.0
15.1
15.2
15.9
15.9
16.6
17.1
17.0
17.3
17.8
17.7
17.8
17.8
18.0
18.4
18.6
18.6
18.4
18.7
18.8
19.2
19.3
19.4
19.7
20.3
20.5
20.5
20.4
20.5
20.9

105.1
122.7
141.9
164.0
186.3
213.2
230.9
262.5
303.8
340.8
378.8
414.1
466.3
518.0
569.8
579.3
626.7
659.1
698.4
743.1
810.1
896.5
976.2
1,064.5
1,140.8
1,165.9
1,189.0
1,248.9
1,338.2
1,453.2
1,560.9

84.0
93.8
106.4
120.5
139.7
159.9
177.9
198.3
214.1
231.3
252.0
286.5
309.1
347.0
386.7
424.8
463.5
488.0
511.1
533.3
552.5
573.1
601.5
634.5
678.4
739.3
799.6
857.3
916.3
961.5
1,022.3

51.9
58.8
67.9
77.1
83.5
93.5
100.9
112.0
121.2
134.3
144.9
152.1
165.9
180.2
195.2
202.2
216.2
225.5
235.0
248.3
264.4
289.8
306.0
327.8
350.1
361.5
381.5
398.9
427.5
448.4
479.8

42.8
46.1
53.2
58.2
62.6
68.5
70.7
79.2
89.3
98.0
107.2
112.3
124.4
133.9
142.6
144.2
153.0
163.7
173.2
180.9
188.1
197.4
211.1
217.8
229.1
241.5
252.5
265.3
273.9
288.1
301.1

269.1
291.5
317.7
345.7
383.7
425.9
462.4
493.1
538.1
583.3
620.0
659.1
704.7
752.0
805.3
857.2
897.3
928.1
961.8
990.4
1,021.6
1,056.8
1,094.5
1,141.2
1,202.7
1,258.3
1,338.4
1,418.4
1,491.6
1,568.7
1,649.4

559.8
627.5
710.6
799.7
840.2
946.6
923.3
953.1
1,072.7
1,107.4
1,116.7
1,180.8
1,261.3
1,341.0
1,377.4
1,352.8
1,400.0
1,453.4
1,572.4
1,631.4
1,722.4
1,820.8
1,895.4
1,958.9
2,081.5
2,027.5
2,036.9
2,113.3
2,280.6
2,446.2
2,567.5

996.4
1,111.9
1,266.4
1,417.9
1,565.6
1,755.9
1,869.3
2,090.5
2,322.3
2,529.5
2,726.1
2,899.5
3,137.8
3,391.4
3,620.4
3,785.9
4,040.5
4,275.9
4,538.0
4,775.8
5,072.8
5,426.8
5,757.1
6,168.3
6,532.8
6,842.2
7,094.3
7,429.1
7,913.7
8,415.2
8,988.5

14.7
14.4
13.8
13.5
13.8
13.6
14.2
13.9
13.7
13.8
13.9
13.9
13.8
13.7
13.9
14.3
14.2
13.9
13.6
13.4
13.1
12.7
12.5
12.3
12.3
12.4
12.8
12.9
12.8
12.6
12.5

30.7
30.9
31.0
31.2
30.1
30.3
28.4
26.9
27.3
26.2
25.0
24.9
24.7
24.5
23.7
22.6
22.1
21.8
22.2
22.1
22.0
21.9
21.7
21.1
21.2
20.0
19.5
19.3
19.5
19.7
19.5

54.6
54.7
55.2
55.3
56.1
56.1
57.4
59.1
59.0
59.9
61.1
61.2
61.5
61.8
62.4
63.1
63.8
64.2
64.2
64.6
64.9
65.3
65.8
66.6
66.5
67.6
67.8
67.8
67.7
67.7
68.1

Industry value added as a percentage of GDP (percent)
5.8
6.0
6.2
6.4
6.7
6.8
7.1
7.4
7.7
8.1
8.5
8.7
9.1
9.4
9.8
9.7
9.9
9.9
9.9
10.0
10.4
10.8
11.2
11.5
11.6
11.5
11.4
11.4
11.5
11.7
11.8

4.6
4.6
4.6
4.7
5.0
5.1
5.5
5.6
5.4
5.5
5.6
6.0
6.1
6.3
6.7
7.1
7.3
7.3
7.2
7.2
7.1
6.9
6.9
6.8
6.9
7.3
7.6
7.8
7.8
7.7
7.7

2.8
2.9
3.0
3.0
3.0
3.0
3.1
3.2
3.1
3.2
3.2
3.2
3.3
3.3
3.4
3.4
3.4
3.4
3.3
3.4
3.4
3.5
3.5
3.5
3.6
3.6
3.6
3.6
3.7
3.6
3.6

2.3
2.3
2.3
2.3
2.2
2.2
2.2
2.2
2.3
2.3
2.4
2.4
2.4
2.4
2.5
2.4
2.4
2.5
2.4
2.4
2.4
2.4
2.4
2.3
2.3
2.4
2.4
2.4
2.3
2.3
2.3

Note (cont’d).—Value added industry data shown in Tables B–12 and B–13 are based on the 1997 North American Industry Classification System (NAICS).
GDP by industry data based on the Standard Industrial Classification (SIC) are available from the Department of Commerce, Bureau of Economic Analysis.
Source: Department of Commerce (Bureau of Economic Analysis).

Appendix B – National Income or Expenditure  |  241

Table B–13.—Real gross domestic product by industry, value added, and percent changes,
1976–2006
Private industries
Year

Gross
domestic
product

Total
private
industries

Agriculture,
forestry,
fishing,
and
hunting

Manufacturing
Mining

Construction

Total
manufacturing

Durable
goods

Nondurable
goods

Utilities

Wholesale
trade

Retail
trade

Chain-type quantity indexes for value added (2000=100)
1976 �����������
1977 �����������
1978 �����������
1979 �����������
1980 �����������
1981 �����������
1982 �����������
1983 �����������
1984 �����������
1985 �����������
1986 �����������
1987 �����������
1988 �����������
1989 �����������
1990 �����������
1991 �����������
1992 �����������
1993 �����������
1994 �����������
1995 �����������
1996 �����������
1997 �����������
1998 �����������
1999 �����������
2000 �����������
2001 �����������
2002 �����������
2003 �����������
2004 �����������
2005 �����������
2006 �����������

46.256
48.391
51.085
52.699
52.579
53.904
52.860
55.249
59.220
61.666
63.804
65.958
68.684
71.116
72.451
72.329
74.734
76.731
79.816
81.814
84.842
88.658
92.359
96.469
100.000
100.751
102.362
104.931
108.748
112.086
115.304

43.911
46.088
48.802
50.606
50.321
51.720
50.422
52.785
56.789
59.383
61.137
63.367
66.299
68.710
69.905
69.779
72.363
74.291
77.765
79.722
83.179
87.362
91.662
96.183
100.000
100.908
102.354
105.068
109.198
112.910
116.819

44.589
46.430
45.057
48.573
47.543
59.731
62.961
43.338
57.105
69.555
68.605
71.483
64.678
71.099
74.689
75.398
83.114
72.838
84.616
73.099
80.041
88.315
86.287
89.163
100.000
93.661
98.767
106.173
113.287
118.862
119.941

80.136
86.262
88.929
79.749
89.978
90.260
86.329
81.175
88.849
93.077
87.529
91.661
99.992
97.072
96.157
97.638
95.694
97.020
105.327
105.681
98.850
102.463
101.682
104.300
100.000
94.715
88.719
87.922
88.770
86.639
91.943

1976 �����������
1977 �����������
1978 �����������
1979 �����������
1980 �����������
1981 �����������
1982 �����������
1983 �����������
1984 �����������
1985 �����������
1986 �����������
1987 �����������
1988 �����������
1989 �����������
1990 �����������
1991 �����������
1992 �����������
1993 �����������
1994 �����������
1995 �����������
1996 �����������
1997 �����������
1998 �����������
1999 �����������
2000 �����������
2001 �����������
2002 �����������
2003 �����������
2004 �����������
2005 �����������
2006 �����������

5.3
4.6
5.6
3.2
–.2
2.5
–1.9
4.5
7.2
4.1
3.5
3.4
4.1
3.5
1.9
–.2
3.3
2.7
4.0
2.5
3.7
4.5
4.2
4.5
3.7
.8
1.6
2.5
3.6
3.1
2.9

5.9
5.0
5.9
3.7
–.6
2.8
–2.5
4.7
7.6
4.6
3.0
3.6
4.6
3.6
1.7
–.2
3.7
2.7
4.7
2.5
4.3
5.0
4.9
4.9
4.0
.9
1.4
2.7
3.9
3.4
3.5

–2.8
4.1
–3.0
7.8
–2.1
25.6
5.4
–31.2
31.8
21.8
–1.4
4.2
–9.5
9.9
5.0
.9
10.2
–12.4
16.2
–13.6
9.5
10.3
–2.3
3.3
12.2
–6.3
5.5
7.5
6.7
4.9
.9

–0.1
7.6
3.1
–10.3
12.8
.3
–4.4
–6.0
9.5
4.8
–6.0
4.7
9.1
–2.9
–.9
1.5
–2.0
1.4
8.6
.3
–6.5
3.7
–.8
2.6
–4.1
–5.3
–6.3
–.9
1.0
–2.4
6.1

73.128
74.057
78.442
81.174
74.626
67.939
59.460
62.805
72.200
79.043
81.818
82.448
85.435
87.646
86.543
79.137
80.026
82.010
86.586
86.312
90.694
93.267
97.087
99.411
100.000
100.163
98.201
96.189
96.430
99.028
93.070

43.369
46.745
49.157
50.843
48.190
50.480
46.795
50.455
55.084
56.582
56.516
60.746
64.212
65.033
64.299
63.412
65.508
68.255
73.496
76.819
79.682
84.518
90.181
94.104
100.000
94.436
97.066
98.168
103.653
104.681
107.738

34.910
37.736
40.159
40.808
38.476
39.563
35.645
37.953
44.042
45.187
45.550
48.859
52.843
53.696
52.963
51.496
52.742
55.173
60.173
65.218
69.120
75.335
84.355
89.627
100.000
94.031
95.663
98.169
103.873
108.970
115.551

59.644
64.010
66.062
70.282
67.152
72.303
69.864
76.660
76.466
78.688
77.515
83.572
85.425
86.109
85.419
85.835
89.669
92.943
98.369
97.783
98.443
100.438
99.762
101.298
100.000
95.034
99.056
98.265
103.468
99.416
98.377

60.220
59.909
59.583
54.661
51.968
51.733
50.698
52.706
57.341
60.940
64.406
72.315
70.613
79.002
84.447
85.285
85.362
85.814
89.518
93.835
95.405
91.161
90.481
94.672
100.000
95.081
99.144
105.990
112.076
109.578
107.085

31.994
33.611
37.065
39.888
39.782
42.074
42.096
43.770
47.143
49.523
54.486
53.070
56.444
58.603
57.318
59.387
65.037
67.135
71.346
70.800
77.261
85.648
95.431
100.412
100.000
107.003
108.059
110.380
112.614
114.637
116.594

36.890
38.412
40.654
40.701
38.907
40.035
39.951
44.123
48.265
51.232
54.187
52.138
56.545
58.838
59.794
59.483
62.960
65.351
69.806
72.974
79.407
86.039
90.399
95.686
100.000
106.970
109.294
113.559
116.533
123.659
129.820

11.1
7.3
3.2
6.4
–4.5
7.7
–3.4
9.7
–.3
2.9
–1.5
7.8
2.2
.8
–.8
.5
4.5
3.7
5.8
–.6
.7
2.0
–.7
1.5
–1.3
–5.0
4.2
–.8
5.3
–3.9
–1.0

–0.9
–.5
–.5
–8.3
–4.9
–.5
–2.0
4.0
8.8
6.3
5.7
12.3
–2.4
11.9
6.9
1.0
.1
.5
4.3
4.8
1.7
–4.4
–.7
4.6
5.6
–4.9
4.3
6.9
5.7
–2.2
–2.3

3.5
5.1
10.3
7.6
–.3
5.8
.1
4.0
7.7
5.0
10.0
–2.6
6.4
3.8
–2.2
3.6
9.5
3.2
6.3
–.8
9.1
10.9
11.4
5.2
–.4
7.0
1.0
2.1
2.0
1.8
1.7

7.7
4.1
5.8
.1
–4.4
2.9
–.2
10.4
9.4
6.1
5.8
–3.8
8.5
4.1
1.6
–.5
5.8
3.8
6.8
4.5
8.8
8.4
5.1
5.8
4.5
7.0
2.2
3.9
2.6
6.1
5.0

Percent change from year earlier
7.3
1.3
5.9
3.5
–8.1
–9.0
–12.5
5.6
15.0
9.5
3.5
.8
3.6
2.6
–1.3
–8.6
1.1
2.5
5.6
–.3
5.1
2.8
4.1
2.4
.6
.2
–2.0
–2.1
.3
2.7
–6.0

10.6
7.8
5.2
3.4
–5.2
4.8
–7.3
7.8
9.2
2.7
–.1
7.5
5.7
1.3
–1.1
–1.4
3.3
4.2
7.7
4.5
3.7
6.1
6.7
4.4
6.3
–5.6
2.8
1.1
5.6
1.0
2.9

10.3
8.1
6.4
1.6
–5.7
2.8
–9.9
6.5
16.0
2.6
.8
7.3
8.2
1.6
–1.4
–2.8
2.4
4.6
9.1
8.4
6.0
9.0
12.0
6.2
11.6
–6.0
1.7
2.6
5.8
4.9
6.0

1 Consists of agriculture, forestry, fishing, and hunting; mining; construction; and manufacturing.
2 Consists of utilities; wholesale trade; retail trade; transportation and warehousing; information; finance, insurance, real estate, rental, and leasing;
professional and business services; educational services, health care, and social assistance; arts, entertainment, recreation, accommodation, and food services;
and other services, except government.
See next page for continuation of table.

242  |  Economic Report of the President

Table B–13.—Real gross domestic product by industry, value added, and percent changes,
1976–2006—Continued
Private industries—continued

Year

Transportation
and
warehousing

Information

Finance,
insurance,
real estate,
rental,
and
leasing

Educational
services,
health care,
and
social
assistance

Professional
and
business
services

Arts,
entertainment,
recreation,
accommodation,
and food
services

Private
goodsOther
Government producing
services,
industries 1
except
government

Private
servicesproducing
industries 2

Chain-type quantity indexes for value added (2000=100)
1976 �������������
1977 �������������
1978 �������������
1979 �������������
1980 �������������
1981 �������������
1982 �������������
1983 �������������
1984 �������������
1985 �������������
1986 �������������
1987 �������������
1988 �������������
1989 �������������
1990 �������������
1991 �������������
1992 �������������
1993 �������������
1994 �������������
1995 �������������
1996 �������������
1997 �������������
1998 �������������
1999 �������������
2000 �������������
2001 �������������
2002 �������������
2003 �������������
2004 �������������
2005 �������������
2006 �������������

41.733
43.462
45.697
48.252
47.232
46.178
43.855
49.486
52.121
52.715
53.021
55.690
57.990
59.507
62.281
65.060
68.758
71.988
77.827
80.473
84.585
88.373
91.454
95.301
100.000
97.354
99.531
101.534
110.780
115.372
121.419

26.473
28.460
31.532
34.231
36.394
38.257
38.155
41.017
40.717
42.039
42.672
45.764
47.649
51.150
53.420
54.441
57.568
61.445
65.223
67.996
72.714
74.559
82.252
95.467
100.000
104.034
106.263
109.430
122.221
136.236
146.005

46.720
47.363
50.358
52.965
55.414
56.573
56.986
58.734
61.282
62.812
63.965
65.941
68.652
70.359
71.877
73.051
74.863
76.931
78.506
80.732
82.893
86.786
90.201
94.994
100.000
103.858
104.800
107.288
110.433
115.771
122.523

31.391
34.086
36.884
39.387
40.529
41.554
41.345
44.142
48.913
52.748
56.860
60.050
64.420
68.787
72.073
69.786
72.008
73.224
75.430
77.382
82.053
87.432
91.976
96.898
100.000
99.346
99.192
103.554
107.750
112.083
116.324

1976 �������������
1977 �������������
1978 �������������
1979 �������������
1980 �������������
1981 �������������
1982 �������������
1983 �������������
1984 �������������
1985 �������������
1986 �������������
1987 �������������
1988 �������������
1989 �������������
1990 �������������
1991 �������������
1992 �������������
1993 �������������
1994 �������������
1995 �������������
1996 �������������
1997 �������������
1998 �������������
1999 �������������
2000 �������������
2001 �������������
2002 �������������
2003 �������������
2004 �������������
2005 �������������
2006 �������������

8.5
4.1
5.1
5.6
–2.1
–2.2
–5.0
12.8
5.3
1.1
.6
5.0
4.1
2.6
4.7
4.5
5.7
4.7
8.1
3.4
5.1
4.5
3.5
4.2
4.9
–2.6
2.2
2.0
9.1
4.1
5.2

5.2
7.5
10.8
8.6
6.3
5.1
–.3
7.5
–.7
3.2
1.5
7.2
4.1
7.3
4.4
1.9
5.7
6.7
6.1
4.3
6.9
2.5
10.3
16.1
4.7
4.0
2.1
3.0
11.7
11.5
7.2

2.7
1.4
6.3
5.2
4.6
2.1
.7
3.1
4.3
2.5
1.8
3.1
4.1
2.5
2.2
1.6
2.5
2.8
2.1
2.8
2.7
4.7
3.9
5.3
5.3
3.9
.9
2.4
2.9
4.8
5.8

5.6
8.6
8.2
6.8
2.9
2.5
–.5
6.8
10.8
7.8
7.8
5.6
7.3
6.8
4.8
–3.2
3.2
1.7
3.0
2.6
6.0
6.6
5.2
5.4
3.2
–.7
–.2
4.4
4.1
4.0
3.8

54.419
57.878
60.672
63.234
66.887
68.455
68.856
71.153
72.366
73.629
75.166
80.273
80.570
84.002
87.047
89.285
91.728
92.199
92.413
93.503
94.144
94.809
95.603
97.304
100.000
103.186
107.527
112.257
115.949
118.053
122.229

45.554
48.641
52.049
53.512
52.407
54.193
55.695
59.784
62.194
66.167
69.642
68.742
71.515
73.872
76.063
74.232
77.250
78.787
80.604
83.542
86.796
90.310
93.446
96.836
100.000
99.292
101.022
104.138
108.114
109.534
112.916

70.997
71.231
75.107
75.703
74.411
72.329
69.103
72.470
77.498
80.936
82.885
84.221
89.044
92.188
94.369
91.258
92.502
95.195
98.624
99.714
99.072
99.291
101.871
100.236
100.000
98.337
98.667
100.615
100.770
100.185
99.877

74.283
74.973
76.694
77.721
79.023
79.328
79.456
80.178
81.038
83.172
85.105
86.753
88.812
90.984
93.215
93.658
94.134
94.055
94.407
94.250
94.768
95.864
96.923
98.009
100.000
100.794
102.467
103.776
104.252
104.977
105.447

49.103
52.269
54.587
56.085
53.880
55.783
52.029
53.361
59.454
62.569
62.534
66.173
69.104
70.366
69.858
68.214
70.330
72.128
77.818
79.572
82.596
87.229
91.878
95.402
100.000
95.654
96.853
97.402
101.328
102.678
103.543

41.544
43.258
46.163
48.120
48.764
49.923
49.794
52.637
55.727
58.104
60.576
62.256
65.186
68.033
69.877
70.319
73.074
75.047
77.745
79.773
83.377
87.407
91.591
96.434
100.000
102.584
104.107
107.496
111.692
116.164
121.078

4.1
.3
5.4
.8
–1.7
–2.8
–4.5
4.9
6.9
4.4
2.4
1.6
5.7
3.5
2.4
–3.3
1.4
2.9
3.6
1.1
–.6
.2
2.6
–1.6
–.2
–1.7
.3
2.0
.2
–.6
–.3

1.6
.9
2.3
1.3
1.7
.4
.2
.9
1.1
2.6
2.3
1.9
2.4
2.4
2.5
.5
.5
–.1
.4
–.2
.5
1.2
1.1
1.1
2.0
.8
1.7
1.3
.5
.7
.4

8.0
6.4
4.4
2.7
–3.9
3.5
–6.7
2.6
11.4
5.2
–.1
5.8
4.4
1.8
–.7
–2.4
3.1
2.6
7.9
2.3
3.8
5.6
5.3
3.8
4.8
–4.3
1.3
.6
4.0
1.3
.8

4.7
4.1
6.7
4.2
1.3
2.4
–.3
5.7
5.9
4.3
4.3
2.8
4.7
4.4
2.7
.6
3.9
2.7
3.6
2.6
4.5
4.8
4.8
5.3
3.7
2.6
1.5
3.3
3.9
4.0
4.2

Percent change from year earlier
4.7
6.4
4.8
4.2
5.8
2.3
.6
3.3
1.7
1.7
2.1
6.8
.4
4.3
3.6
2.6
2.7
.5
.2
1.2
.7
.7
.8
1.8
2.8
3.2
4.2
4.4
3.3
1.8
3.5

7.6
6.8
7.0
2.8
–2.1
3.4
2.8
7.3
4.0
6.4
5.3
–1.3
4.0
3.3
3.0
–2.4
4.1
2.0
2.3
3.6
3.9
4.1
3.5
3.6
3.3
–.7
1.7
3.1
3.8
1.3
3.1

Note.—Data are based on the 1997 North American Industry Classification System (NAICS).
See Note, Table B–12.
Source: Department of Commerce (Bureau of Economic Analysis).

Appendix B – National Income or Expenditure  |  243

Table B–14.—Gross value added of nonfinancial corporate business, 1959–2007
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Net value added

Year or
quarter

1959 �������������
1960 �������������
1961 �������������
1962 �������������
1963 �������������
1964 �������������
1965 �������������
1966 �������������
1967 �������������
1968 �������������
1969 �������������
1970 �������������
1971 �������������
1972 �������������
1973 �������������
1974 �������������
1975 �������������
1976 �������������
1977 �������������
1978 �������������
1979 �������������
1980 �������������
1981 �������������
1982 �������������
1983 �������������
1984 �������������
1985 �������������
1986 �������������
1987 �������������
1988 �������������
1989 �������������
1990 �������������
1991 �������������
1992 �������������
1993 �������������
1994 �������������
1995 �������������
1996 �������������
1997 �������������
1998 �������������
1999 �������������
2000 �������������
2001 �������������
2002 �������������
2003 �������������
2004 �������������
2005 �������������
2006 �������������
2004:  I ���������
      II ��������
      III �������
      IV �������
2005:  I ���������
      II ��������
      III �������
      IV �������
2006:  I ���������
      II ��������
      III �������
      IV �������
2007:  I ���������
      II ��������
      III �������

Gross
value
Conadded sumpof nonfinancial tion
of
corpofixed
rate
capital
business 1

266.0
276.4
283.7
309.8
329.9
356.1
391.2
429.0
451.2
497.8
540.5
558.3
603.0
669.5
750.8
809.8
876.7
989.7
1,119.4
1,272.9
1,415.9
1,537.1
1,746.0
1,806.2
1,933.0
2,167.5
2,302.0
2,387.5
2,557.1
2,771.6
2,912.3
3,041.5
3,099.7
3,236.0
3,397.8
3,669.5
3,879.5
4,109.5
4,401.8
4,655.0
4,950.8
5,272.2
5,293.5
5,371.7
5,558.4
5,956.4
6,319.4
6,689.4
5,778.1
5,907.6
6,038.5
6,101.4
6,170.9
6,291.1
6,349.9
6,465.6
6,594.1
6,639.8
6,739.1
6,784.5
6,865.0
6,938.0
6,988.4

21.1
22.6
23.2
23.9
25.2
26.4
28.4
31.5
34.3
37.6
42.4
46.8
50.7
56.4
62.7
74.1
87.9
97.0
110.5
127.8
147.3
168.2
191.5
211.2
217.6
230.7
247.4
255.3
266.5
281.6
301.6
319.2
341.4
353.6
363.4
391.5
415.0
436.5
467.1
493.3
523.8
567.8
646.8
643.6
657.5
687.4
742.3
772.8
667.8
673.7
717.8
690.3
701.0
712.7
808.4
747.1
754.2
767.6
779.5
789.8
795.7
800.1
802.0

Addenda:

Net operating surplus

Total

244.9
253.8
260.5
285.9
304.7
329.7
362.8
397.4
416.8
460.2
498.1
511.5
552.4
613.2
688.1
735.7
788.7
892.7
1,008.8
1,145.1
1,268.6
1,368.9
1,554.5
1,594.9
1,715.4
1,936.8
2,054.6
2,132.2
2,290.6
2,490.0
2,610.7
2,722.3
2,758.3
2,882.3
3,034.4
3,278.0
3,464.5
3,673.0
3,934.7
4,161.7
4,427.0
4,704.3
4,646.7
4,728.2
4,900.9
5,269.0
5,577.1
5,916.6
5,110.3
5,234.0
5,320.7
5,411.1
5,469.9
5,578.4
5,541.5
5,718.6
5,839.9
5,872.2
5,959.6
5,994.7
6,069.3
6,138.0
6,186.4

Taxes
Comon
pensa- production tion and
of
imports
employ- less
ees
subsidies

170.8
180.4
184.5
199.3
210.1
225.7
245.4
272.9
291.1
321.9
357.1
376.5
399.4
443.9
502.2
552.2
575.5
651.4
735.3
845.3
959.9
1,049.8
1,161.5
1,203.9
1,266.9
1,406.1
1,504.2
1,583.1
1,687.8
1,812.8
1,914.7
2,012.9
2,048.4
2,154.1
2,244.8
2,381.5
2,509.8
2,630.8
2,812.9
3,045.6
3,267.7
3,544.4
3,595.9
3,611.9
3,703.2
3,865.2
4,078.5
4,316.7
3,770.5
3,826.4
3,899.1
3,965.1
3,992.2
4,034.6
4,115.3
4,171.7
4,249.2
4,269.2
4,306.4
4,442.1
4,494.1
4,528.3
4,583.3

24.4
26.6
27.6
29.9
31.7
33.9
36.0
37.0
39.3
45.5
50.2
54.2
59.5
63.7
70.1
74.4
80.2
86.7
94.6
102.7
108.8
121.5
146.7
152.9
168.0
185.0
196.6
204.6
216.8
233.8
248.2
263.5
285.7
302.5
318.8
349.6
356.9
369.1
385.5
398.7
416.6
443.4
439.1
465.5
488.5
523.9
558.7
584.9
512.5
519.9
526.3
537.0
545.3
556.3
563.7
569.4
576.1
583.9
587.3
592.1
599.7
607.8
614.2

Total

49.7
46.8
48.4
56.8
62.9
70.2
81.4
87.6
86.4
92.8
90.8
80.7
93.4
105.6
115.8
109.1
133.1
154.7
178.9
197.0
200.0
197.6
246.4
238.1
280.5
345.7
353.8
344.5
386.0
443.4
447.9
445.8
424.2
425.7
470.8
546.9
597.8
673.1
736.3
717.4
742.7
716.5
611.8
650.8
709.2
879.9
940.0
1,015.0
827.4
887.7
895.3
909.1
932.4
987.5
862.5
977.5
1,014.6
1,019.1
1,065.9
960.5
975.6
1,001.8
988.8

Net
interest Business
and
current
miscel- transfer
laneous paypayments ments
2.9
3.2
3.7
4.3
4.7
5.2
5.8
7.0
8.4
9.7
12.7
16.6
17.6
18.6
21.8
27.5
28.4
26.0
28.5
33.4
41.8
54.2
67.2
77.4
77.0
86.0
91.5
95.1
96.4
109.8
142.0
146.2
135.9
111.3
102.0
101.0
115.2
111.9
124.0
143.8
160.2
191.7
204.0
167.4
152.6
138.9
132.5
133.2
140.1
141.7
138.8
135.0
135.8
132.5
131.1
130.7
131.8
135.0
132.3
133.6
136.0
136.2
136.9

1.3
1.4
1.5
1.7
1.7
2.0
2.2
2.7
2.8
3.1
3.2
3.3
3.7
4.0
4.7
4.1
5.0
7.0
9.0
9.5
9.5
10.2
11.4
8.8
10.5
11.7
16.1
27.3
29.9
27.4
23.0
25.4
26.7
25.2
29.6
30.0
30.2
38.0
39.0
35.2
45.0
48.4
50.6
54.0
64.4
59.3
58.3
67.6
64.0
65.0
40.2
68.1
73.2
74.9
19.2
65.9
67.5
66.7
67.2
68.9
58.5
59.2
60.0

Corporate profits with inventory valuation and capital
consumption adjustments

Total

45.5
42.2
43.2
50.8
56.5
63.0
73.3
77.9
75.2
80.0
74.9
60.9
72.1
83.0
89.4
77.5
99.6
121.7
141.4
154.1
148.8
133.2
167.7
151.9
192.9
248.0
246.3
222.1
259.7
306.2
282.9
274.3
261.5
289.2
339.2
415.9
452.5
523.2
573.4
538.3
537.6
476.4
357.2
429.4
492.1
681.6
749.1
814.3
623.3
681.0
716.3
706.0
723.4
780.2
712.2
780.8
815.3
817.5
866.4
757.9
781.1
806.4
792.0

Taxes
on
corporate
income

Profits
after
tax 2

20.7
19.1
19.4
20.6
22.8
23.9
27.1
29.5
27.8
33.5
33.3
27.3
30.0
33.8
40.4
42.8
41.9
53.5
60.6
67.6
70.6
68.2
66.0
48.8
61.7
75.9
71.1
76.2
94.2
104.0
101.2
98.5
88.6
94.4
108.0
132.9
141.0
153.1
161.9
158.6
171.2
170.2
111.7
97.0
135.7
191.0
263.4
288.2
173.1
190.0
201.1
199.6
250.2
260.5
261.2
281.7
278.3
288.8
300.6
285.2
298.6
321.6
310.0

24.8
23.1
23.8
30.2
33.8
39.2
46.2
48.4
47.3
46.5
41.6
33.6
42.1
49.2
49.0
34.7
57.7
68.2
80.9
86.6
78.1
65.0
101.7
103.1
131.2
172.0
175.2
145.9
165.5
202.3
181.7
175.8
172.9
194.8
231.2
283.1
311.4
370.1
411.5
379.7
366.3
306.2
245.5
332.3
356.4
490.7
485.7
526.0
450.2
490.9
515.2
506.4
473.2
519.6
450.9
499.1
537.0
528.6
565.8
472.7
482.5
484.7
482.0

Profits
before
tax

43.4
40.1
39.9
44.6
49.7
55.9
66.1
71.4
67.6
74.0
71.2
58.5
67.4
79.2
99.4
110.1
110.7
138.2
159.4
183.7
197.0
184.0
185.0
139.9
163.3
197.6
173.4
149.7
209.8
260.4
238.7
239.0
222.4
258.2
303.3
380.1
419.3
458.5
494.2
449.4
457.9
423.9
310.6
336.3
425.4
662.4
937.8
1,043.2
579.0
661.7
701.9
706.8
889.5
937.8
923.1
1,000.8
1,019.3
1,061.9
1,101.4
990.4
1,024.9
1,070.5
1,024.5

Inven- Capital
tory
convalua- sumption
tion
adjustadjustment
ment

–0.3
–.2
.3
.0
.1
–.5
–1.2
–2.1
–1.6
–3.7
–5.9
–6.6
–4.6
–6.6
–19.6
–38.2
–10.5
–14.1
–15.7
–23.7
–40.1
–42.1
–24.6
–7.5
–7.4
–4.0
.0
7.1
–16.2
–22.2
–16.3
–12.9
4.9
–2.8
–4.0
–12.4
–18.3
3.1
14.1
20.2
1.0
–14.1
11.3
–2.2
–13.6
–43.1
–36.2
–36.3
–33.7
–51.9
–39.6
–47.2
–45.3
–19.4
–32.9
–47.0
–31.4
–57.7
–35.2
–21.0
–40.2
–54.7
–20.3

2.3
2.3
3.0
6.1
6.8
7.7
8.4
8.5
9.1
9.7
9.6
8.9
9.3
10.5
9.5
5.6
–.5
–2.4
–2.2
–5.9
–8.1
–8.7
7.4
19.5
37.1
54.3
72.8
65.3
66.2
68.0
60.6
48.2
34.2
33.8
39.9
48.3
51.5
61.6
65.0
68.7
78.7
66.6
35.2
95.3
80.3
62.4
–152.5
–192.7
77.9
71.2
53.9
46.4
–120.8
–138.2
–178.0
–173.0
–172.7
–186.7
–199.7
–211.6
–203.6
–209.4
–212.1

1 Estimates for nonfinancial corporate business for 2000 and earlier periods are based on the Standard Industrial Classification (SIC); later estimates are
based on the North American Industry Classification System (NAICS).
2 With inventory valuation and capital consumption adjustments.
Source: Department of Commerce (Bureau of Economic Analysis).

244  |  Economic Report of the President

Table B–15.—Gross value added and price, costs, and profits of nonfinancial corporate business,
1959–2007
[Quarterly data at seasonally adjusted annual rates]
Price per unit of real gross value added of nonfinancial corporate business (dollars) 1, 2

Gross value added of
nonfinancial corporate
business (billions
of dollars) 1
Year or quarter
Current
dollars
1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

266.0
276.4
283.7
309.8
329.9
356.1
391.2
429.0
451.2
497.8
540.5
558.3
603.0
669.5
750.8
809.8
876.7
989.7
1,119.4
1,272.9
1,415.9
1,537.1
1,746.0
1,806.2
1,933.0
2,167.5
2,302.0
2,387.5
2,557.1
2,771.6
2,912.3
3,041.5
3,099.7
3,236.0
3,397.8
3,669.5
3,879.5
4,109.5
4,401.8
4,655.0
4,950.8
5,272.2
5,293.5
5,371.7
5,558.4
5,956.4
6,319.4
6,689.4
5,778.1
5,907.6
6,038.5
6,101.4
6,170.9
6,291.1
6,349.9
6,465.6
6,594.1
6,639.8
6,739.1
6,784.5
6,865.0
6,938.0
6,988.4

Chained
(2000)
dollars
980.4
1,012.0
1,033.6
1,120.7
1,186.7
1,270.3
1,375.1
1,472.6
1,508.9
1,604.8
1,667.6
1,649.9
1,716.6
1,846.4
1,957.7
1,925.4
1,898.8
2,050.0
2,200.0
2,344.1
2,418.7
2,394.6
2,491.5
2,430.6
2,545.1
2,772.8
2,896.3
2,963.3
3,119.6
3,300.7
3,361.8
3,404.0
3,376.2
3,479.5
3,575.5
3,797.9
3,977.4
4,196.4
4,469.3
4,725.4
5,011.0
5,272.2
5,224.5
5,269.7
5,387.5
5,652.3
5,806.6
6,012.1
5,546.9
5,618.5
5,721.3
5,722.6
5,727.5
5,802.8
5,808.3
5,887.8
5,966.9
5,965.7
6,039.7
6,076.2
6,089.6
6,133.4
6,202.3

Total

0.271
.273
.274
.276
.278
.280
.284
.291
.299
.310
.324
.338
.351
.363
.384
.421
.462
.483
.509
.543
.585
.642
.701
.743
.759
.782
.795
.806
.820
.840
.866
.894
.918
.930
.950
.966
.975
.979
.985
.985
.988
1.000
1.013
1.019
1.032
1.054
1.088
1.113
1.042
1.051
1.055
1.066
1.077
1.084
1.093
1.098
1.105
1.113
1.116
1.117
1.127
1.131
1.127

Compensation
of
employees
(unit
labor
cost)
0.174
.178
.179
.178
.177
.178
.178
.185
.193
.201
.214
.228
.233
.240
.257
.287
.303
.318
.334
.361
.397
.438
.466
.495
.498
.507
.519
.534
.541
.549
.570
.591
.607
.619
.628
.627
.631
.627
.629
.645
.652
.672
.688
.685
.687
.684
.702
.718
.680
.681
.681
.693
.697
.695
.709
.709
.712
.716
.713
.731
.738
.738
.739

Corporate profits with inventory
valuation and capital consumption
adjustments 4

Unit nonlabor cost

Total

0.051
.053
.054
.053
.053
.053
.053
.053
.057
.059
.065
.073
.077
.078
.081
.093
.106
.106
.110
.117
.127
.148
.167
.186
.185
.185
.190
.196
.195
.197
.213
.222
.234
.228
.228
.230
.230
.228
.228
.226
.229
.237
.257
.253
.253
.250
.257
.260
.249
.249
.248
.251
.254
.255
.262
.257
.256
.261
.259
.261
.261
.261
.260

ConTaxes on Net intersumption production est and
of
misceland
fixed
laneous
imports 3 payments
capital
0.022
.022
.022
.021
.021
.021
.021
.021
.023
.023
.025
.028
.030
.031
.032
.038
.046
.047
.050
.055
.061
.070
.077
.087
.085
.083
.085
.086
.085
.085
.090
.094
.101
.102
.102
.103
.104
.104
.105
.104
.105
.108
.124
.122
.122
.122
.128
.129
.120
.120
.125
.121
.122
.123
.139
.127
.126
.129
.129
.130
.131
.130
.129

0.026
.028
.028
.028
.028
.028
.028
.027
.028
.030
.032
.035
.037
.037
.038
.041
.045
.046
.047
.048
.049
.055
.063
.067
.070
.071
.073
.078
.079
.079
.081
.085
.093
.094
.097
.100
.097
.097
.095
.092
.092
.093
.094
.099
.103
.103
.106
.109
.104
.104
.099
.106
.108
.109
.100
.108
.108
.109
.108
.109
.108
.109
.109

0.003
.003
.004
.004
.004
.004
.004
.005
.006
.006
.008
.010
.010
.010
.011
.014
.015
.013
.013
.014
.017
.023
.027
.032
.030
.031
.032
.032
.031
.033
.042
.043
.040
.032
.029
.027
.029
.027
.028
.030
.032
.036
.039
.032
.028
.025
.023
.022
.025
.025
.024
.024
.024
.023
.023
.022
.022
.023
.022
.022
.022
.022
.022

Total

0.046
.042
.042
.045
.048
.050
.053
.053
.050
.050
.045
.037
.042
.045
.046
.040
.052
.059
.064
.066
.062
.056
.067
.062
.076
.089
.085
.075
.083
.093
.084
.081
.077
.083
.095
.110
.114
.125
.128
.114
.107
.090
.068
.081
.091
.121
.129
.135
.112
.121
.125
.123
.126
.134
.123
.133
.137
.137
.143
.125
.128
.131
.128

Taxes on
corporate
income
0.021
.019
.019
.018
.019
.019
.020
.020
.018
.021
.020
.017
.017
.018
.021
.022
.022
.026
.028
.029
.029
.028
.026
.020
.024
.027
.025
.026
.030
.031
.030
.029
.026
.027
.030
.035
.035
.036
.036
.034
.034
.032
.021
.018
.025
.034
.045
.048
.031
.034
.035
.035
.044
.045
.045
.048
.047
.048
.050
.047
.049
.052
.050

Profits
after
tax 5
0.025
.023
.023
.027
.028
.031
.034
.033
.031
.029
.025
.020
.025
.027
.025
.018
.030
.033
.037
.037
.032
.027
.041
.042
.052
.062
.060
.049
.053
.061
.054
.052
.051
.056
.065
.075
.078
.088
.092
.080
.073
.058
.047
.063
.066
.087
.084
.087
.081
.087
.090
.088
.083
.090
.078
.085
.090
.089
.094
.078
.079
.079
.078

1 Estimates for nonfinancial corporate business for 2000 and earlier periods are based on the Standard Industrial Classification (SIC); later estimates are
based on the North American Industry Classification System (NAICS).
2 The implicit price deflator for gross value added of nonfinancial corporate business divided by 100.
3 Less subsidies plus business current transfer payments.
4 Unit profits from current production.
5 With inventory valuation and capital consumption adjustments.
Source: Department of Commerce (Bureau of Economic Analysis).

Appendix B – National Income or Expenditure  |  245

Table B–16.—Personal consumption expenditures, 1959–2007
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Durable goods

Year or
quarter

1959 ������������
1960 ������������
1961 ������������
1962 ������������
1963 ������������
1964 ������������
1965 ������������
1966 ������������
1967 ������������
1968 ������������
1969 ������������
1970 ������������
1971 ������������
1972 ������������
1973 ������������
1974 ������������
1975 ������������
1976 ������������
1977 ������������
1978 ������������
1979 ������������
1980 ������������
1981 ������������
1982 ������������
1983 ������������
1984 ������������
1985 ������������
1986 ������������
1987 ������������
1988 ������������
1989 ������������
1990 ������������
1991 ������������
1992 ������������
1993 ������������
1994 ������������
1995 ������������
1996 ������������
1997 ������������
1998 ������������
1999 ������������
2000 ������������
2001 ������������
2002 ������������
2003 ������������
2004 ������������
2005 ������������
2006 ������������
2004:  I ��������
      II �������
      III ������
      IV ������
2005:  I ��������
      II �������
      III ������
      IV ������
2006:  I ��������
      II �������
      III ������
      IV ������
2007:  I ��������
      II �������
      III ������

Personal
consumption
expenditures
317.6
331.7
342.1
363.3
382.7
411.4
443.8
480.9
507.8
558.0
605.2
648.5
701.9
770.6
852.4
933.4
1,034.4
1,151.9
1,278.6
1,428.5
1,592.2
1,757.1
1,941.1
2,077.3
2,290.6
2,503.3
2,720.3
2,899.7
3,100.2
3,353.6
3,598.5
3,839.9
3,986.1
4,235.3
4,477.9
4,743.3
4,975.8
5,256.8
5,547.4
5,879.5
6,282.5
6,739.4
7,055.0
7,350.7
7,703.6
8,195.9
8,707.8
9,224.5
8,010.1
8,135.0
8,245.1
8,393.3
8,488.8
8,632.6
8,810.5
8,899.3
9,034.7
9,183.9
9,305.7
9,373.7
9,540.5
9,674.0
9,785.7

Total 1

42.7
43.3
41.8
46.9
51.6
56.7
63.3
68.3
70.4
80.8
85.9
85.0
96.9
110.4
123.5
122.3
133.5
158.9
181.2
201.7
214.4
214.2
231.3
240.2
280.8
326.5
363.5
403.0
421.7
453.6
471.8
474.2
453.9
483.6
526.7
582.2
611.6
652.6
692.7
750.2
817.6
863.3
883.7
923.9
942.7
983.9
1,023.9
1,048.9
969.6
974.8
986.9
1,004.1
1,009.7
1,036.0
1,044.1
1,005.7
1,042.6
1,042.8
1,053.8
1,056.5
1,074.0
1,074.7
1,081.6

Nondurable goods

Motor
vehicles
and
parts

Furniture
and
household
equipment

18.9
19.7
17.8
21.5
24.4
26.0
29.9
30.3
30.0
36.1
38.4
35.5
44.5
51.1
56.1
49.5
54.8
71.3
83.5
93.1
93.5
87.0
95.8
102.9
126.5
152.1
175.9
194.1
195.0
209.4
215.3
212.8
193.5
213.0
234.0
260.5
266.7
284.9
305.1
336.1
370.8
386.5
407.9
429.3
431.7
436.8
444.9
434.2
432.5
431.6
436.5
446.7
442.9
459.0
462.7
415.1
432.7
431.8
437.6
434.8
444.5
441.5
437.5

18.1
18.0
18.3
19.3
20.7
23.2
25.1
28.2
30.0
32.9
34.7
35.7
37.8
42.4
47.9
51.5
54.5
60.2
67.2
74.3
82.7
86.7
92.1
93.4
106.6
119.0
128.5
143.0
153.4
163.7
171.6
171.6
171.7
178.7
193.4
213.4
228.6
242.9
256.2
273.1
293.9
312.9
312.1
323.1
331.5
355.7
378.2
404.1
347.8
352.8
358.6
363.7
369.3
375.3
380.7
387.6
400.6
401.8
405.1
409.0
414.2
414.5
418.6

Total 1

148.5
152.8
156.6
162.8
168.2
178.6
191.5
208.7
217.1
235.7
253.1
272.0
285.5
308.0
343.1
384.5
420.7
458.3
497.1
550.2
624.5
696.1
758.9
787.6
831.2
884.6
928.7
958.4
1,015.3
1,083.5
1,166.7
1,249.9
1,284.8
1,330.5
1,379.4
1,437.2
1,485.1
1,555.5
1,619.0
1,683.6
1,804.8
1,947.2
2,017.1
2,079.6
2,190.2
2,343.7
2,516.2
2,688.0
2,284.2
2,327.7
2,353.5
2,409.3
2,432.1
2,484.3
2,557.0
2,591.3
2,622.1
2,692.2
2,732.4
2,705.4
2,759.4
2,822.7
2,846.3

Food

80.6
82.3
84.0
86.1
88.2
93.5
100.7
109.3
112.4
122.2
131.5
143.8
149.7
161.4
179.6
201.8
223.2
242.5
262.6
289.6
324.7
356.0
383.5
403.4
423.8
447.4
467.6
492.0
515.2
553.5
591.6
636.8
657.5
669.3
691.9
720.6
740.9
768.7
796.2
829.8
873.1
925.2
967.9
1,001.9
1,046.0
1,113.1
1,183.8
1,259.3
1,090.5
1,104.0
1,117.0
1,140.8
1,153.0
1,174.5
1,193.9
1,213.8
1,236.4
1,245.9
1,263.2
1,291.7
1,312.2
1,322.7
1,342.4

1 Includes other items not shown separately.
2 Includes imputed rental value of owner-occupied housing.

Source: Department of Commerce (Bureau of Economic Analysis).

246  |  Economic Report of the President

Clothing
and
shoes

Gasoline
and
oil

26.4
27.0
27.6
29.0
29.8
32.4
34.1
37.4
39.2
43.2
46.5
47.8
51.7
56.4
62.5
66.0
70.8
76.6
84.1
94.3
101.2
107.3
117.2
120.5
130.9
142.5
152.1
163.1
174.4
185.5
198.9
204.1
208.7
221.9
229.9
238.1
241.7
250.2
258.1
270.9
286.3
297.7
297.7
303.5
310.9
325.0
341.7
357.2
323.6
321.1
324.6
330.6
336.2
342.1
340.2
348.6
351.3
354.9
359.6
363.2
371.1
368.4
372.4

11.3
12.0
12.0
12.6
13.0
13.6
14.8
16.0
17.1
18.6
20.5
21.9
23.2
24.4
28.1
36.1
39.7
43.0
46.9
50.1
66.2
86.7
97.9
94.1
93.1
94.6
97.2
80.1
85.4
88.3
98.6
111.2
108.5
112.4
114.1
116.2
120.2
130.4
134.4
122.4
137.9
175.7
171.6
164.5
192.7
231.4
280.7
318.6
211.0
233.0
232.5
249.3
245.7
262.8
309.4
304.8
297.7
341.2
351.0
284.4
296.2
349.4
341.9

Services

Fuel
oil
and
coal

4.0
3.8
3.8
3.8
4.0
4.1
4.4
4.7
4.8
4.7
4.6
4.4
4.6
5.1
6.3
7.8
8.4
10.1
11.1
11.5
14.4
15.4
15.8
14.5
13.6
13.9
13.6
11.3
11.2
11.7
11.9
12.9
12.4
12.2
12.4
12.8
13.1
14.3
13.3
11.5
11.9
15.8
15.4
14.2
16.9
18.3
21.1
21.6
17.5
17.3
18.4
19.8
20.3
20.5
21.8
22.0
20.2
22.1
22.2
21.9
24.7
24.2
24.0

Household
operation
Total 1

126.5
135.6
143.8
153.6
162.9
176.1
189.0
203.8
220.3
241.6
266.1
291.5
319.5
352.2
385.8
426.6
480.2
534.7
600.2
676.6
753.3
846.9
950.8
1,049.4
1,178.6
1,292.2
1,428.1
1,538.3
1,663.3
1,816.5
1,960.0
2,115.9
2,247.4
2,421.2
2,571.8
2,723.9
2,879.1
3,048.7
3,235.8
3,445.7
3,660.0
3,928.8
4,154.3
4,347.2
4,570.8
4,868.3
5,167.8
5,487.6
4,756.3
4,832.4
4,904.6
4,979.9
5,047.0
5,112.3
5,209.4
5,302.4
5,370.0
5,448.9
5,519.5
5,611.8
5,707.1
5,776.5
5,857.8

Housing 2

45.0
48.2
51.2
54.7
58.0
61.4
65.4
69.5
74.1
79.8
86.9
94.1
102.8
112.6
123.3
134.8
147.7
162.2
180.2
202.4
227.3
256.2
289.7
315.2
341.0
374.5
412.7
448.4
483.7
521.5
557.4
597.9
631.1
658.5
683.9
726.1
764.4
800.1
842.6
894.6
948.4
1,006.5
1,073.7
1,123.1
1,161.8
1,226.8
1,298.7
1,381.3
1,201.8
1,219.0
1,235.2
1,251.2
1,271.2
1,289.5
1,307.4
1,326.8
1,347.8
1,371.1
1,392.5
1,413.9
1,435.1
1,455.4
1,474.9

Total 1

18.7
20.3
21.2
22.4
23.6
25.0
26.5
28.1
30.0
32.3
35.0
37.8
41.1
45.4
49.9
55.8
64.0
72.5
81.8
91.2
100.3
113.7
126.8
142.5
157.0
169.4
181.8
187.7
195.4
207.3
221.1
227.3
238.6
250.7
269.9
286.2
298.7
318.5
337.0
350.5
364.8
390.1
409.0
407.7
429.4
449.0
481.0
501.6
441.6
445.5
450.9
457.8
464.9
470.1
487.4
501.7
496.8
496.7
503.3
509.7
520.0
526.2
533.3

Electricity
and
gas
7.6
8.3
8.8
9.4
9.9
10.4
10.9
11.5
12.2
13.0
14.1
15.3
16.9
18.8
20.4
24.0
29.2
33.2
38.5
43.0
47.8
57.5
64.8
74.2
82.4
86.5
90.8
89.2
90.9
96.3
101.0
101.0
107.4
108.9
118.2
120.7
122.2
129.4
131.3
129.8
130.6
143.3
156.7
152.5
167.3
175.4
198.7
209.8
173.2
173.3
174.4
180.8
185.4
188.7
203.9
216.9
208.8
206.6
211.3
212.7
220.6
223.5
227.3

Trans- Medical
porcare
tation

10.6
11.2
11.6
12.3
12.9
13.8
14.7
15.9
17.4
19.3
21.6
24.0
26.8
29.6
31.6
34.1
37.9
42.5
48.7
53.4
59.9
65.2
70.3
72.9
81.1
93.2
104.5
111.1
120.9
133.4
142.0
147.7
145.3
157.7
172.7
190.6
207.7
226.5
245.7
259.5
276.4
291.3
292.8
288.4
297.3
308.2
324.2
340.6
303.5
306.4
309.4
313.5
317.2
322.1
326.7
331.0
334.7
338.4
342.5
346.8
349.6
355.1
362.5

16.4
17.7
19.0
21.2
23.0
26.4
28.6
31.5
34.7
40.1
45.8
51.7
58.4
65.6
73.3
82.3
95.6
109.1
125.3
143.1
161.0
184.4
216.7
243.3
274.3
303.2
331.5
357.5
392.2
442.8
492.5
556.0
608.9
672.2
715.1
752.9
797.9
833.5
873.0
921.4
961.1
1,026.8
1,113.8
1,206.2
1,300.5
1,395.5
1,492.6
1,587.7
1,357.7
1,383.4
1,409.3
1,431.5
1,454.8
1,477.0
1,503.9
1,534.8
1,558.3
1,578.6
1,596.1
1,617.9
1,656.9
1,674.6
1,695.0

Table B–17.—Real personal consumption expenditures, 1990–2007
[Billions of chained (2000) dollars; quarterly data at seasonally adjusted annual rates]
Durable goods

Year or
quarter

1990 ������������
1991 ������������
1992 ������������
1993 ������������
1994 ������������
1995 ������������
1996 ������������
1997 ������������
1998 ������������
1999 ������������
2000 ������������
2001 ������������
2002 ������������
2003 ������������
2004 ������������
2005 ������������
2006 ������������
2004:  I ��������
      II �������
      III ������
      IV ������
2005:  I ��������
      II �������
      III ������
      IV ������
2006:  I ��������
      II �������
      III ������
      IV ������
2007:  I ��������
      II �������
      III ������

Personal
consumption
expenditures
4,770.3
4,778.4
4,934.8
5,099.8
5,290.7
5,433.5
5,619.4
5,831.8
6,125.8
6,438.6
6,739.4
6,910.4
7,099.3
7,295.3
7,561.4
7,803.6
8,044.1
7,475.1
7,520.5
7,585.5
7,664.3
7,709.4
7,775.2
7,852.8
7,876.9
7,961.9
8,009.3
8,063.8
8,141.2
8,215.7
8,244.3
8,302.2

Total 1

453.5
427.9
453.0
488.4
529.4
552.6
595.9
646.9
720.3
804.6
863.3
900.7
964.8
1,020.6
1,084.8
1,137.4
1,180.5
1,066.2
1,071.3
1,091.5
1,110.1
1,116.0
1,146.3
1,163.5
1,123.8
1,167.8
1,170.2
1,186.3
1,197.6
1,223.2
1,228.4
1,241.9

Nondurable goods

Motor
vehicles
and
parts

Furniture
and
household
equipment

256.1
226.6
244.9
259.2
276.2
272.3
285.4
304.7
339.0
372.4
386.5
405.8
429.0
442.1
450.8
451.3
437.3
448.9
445.7
450.9
457.8
449.6
464.4
470.7
420.4
435.7
434.3
439.5
439.6
451.5
448.2
442.3

119.9
121.1
127.8
141.1
156.8
173.3
193.4
216.3
244.7
280.7
312.9
331.8
364.3
397.8
445.1
492.2
550.9
429.1
438.8
451.7
460.8
472.6
483.4
499.0
513.8
536.8
544.4
555.4
566.9
579.9
585.9
601.0

Total 1

1,484.0
1,480.5
1,510.1
1,550.4
1,603.9
1,638.6
1,680.4
1,725.3
1,794.4
1,876.6
1,947.2
1,986.7
2,037.1
2,103.0
2,177.6
2,255.4
2,337.7
2,156.7
2,164.9
2,181.4
2,207.5
2,226.8
2,247.2
2,260.9
2,286.8
2,312.3
2,325.6
2,343.9
2,368.8
2,386.6
2,383.8
2,396.8

Food

784.4
783.3
787.9
802.2
821.8
827.1
834.7
845.2
865.6
893.6
925.2
940.2
954.6
977.7
1,009.4
1,050.0
1,091.8
1,000.8
1,003.4
1,008.9
1,024.7
1,032.9
1,043.1
1,056.3
1,067.6
1,080.7
1,084.4
1,091.4
1,110.7
1,115.3
1,111.4
1,115.0

Clothing
and
shoes

Gasoline
and
oil

188.2
188.8
199.2
207.4
218.5
227.4
238.7
246.0
263.1
282.7
297.7
303.7
318.3
334.2
350.7
372.6
391.1
349.5
345.6
350.2
357.5
363.4
372.3
372.3
382.3
386.2
388.0
393.3
397.0
405.1
407.5
413.7

141.8
140.3
146.0
149.7
151.7
154.5
157.9
162.8
170.3
176.3
175.7
178.3
181.9
183.2
186.7
186.1
186.8
186.0
187.2
186.5
187.0
187.8
186.1
184.3
186.1
187.2
187.1
188.3
184.8
184.1
182.8
183.2

Services

Fuel
oil
and
coal

16.7
16.6
17.0
17.4
18.2
18.7
18.4
16.9
16.0
16.4
15.8
15.2
15.5
15.4
14.6
13.2
12.0
14.9
14.7
14.6
14.0
14.2
13.5
13.0
12.3
11.6
12.1
11.8
12.4
14.1
13.1
12.4

Household
operation
Total 1

2,851.7
2,900.0
3,000.8
3,085.7
3,176.6
3,259.9
3,356.0
3,468.0
3,615.0
3,758.0
3,928.8
4,023.2
4,100.4
4,178.8
4,311.0
4,427.3
4,545.5
4,262.9
4,294.6
4,325.2
4,361.1
4,381.3
4,401.3
4,449.1
4,477.5
4,501.0
4,531.6
4,554.0
4,595.5
4,630.7
4,656.7
4,689.5

Housing 2

802.2
820.1
832.7
841.8
869.3
887.5
901.1
922.5
948.8
978.6
1,006.5
1,033.7
1,042.1
1,051.9
1,083.8
1,118.3
1,148.3
1,073.3
1,079.7
1,087.1
1,095.1
1,104.4
1,113.9
1,123.3
1,131.6
1,139.7
1,146.0
1,151.0
1,156.6
1,163.7
1,171.6
1,178.9

Total 1

266.4
269.9
277.4
291.1
303.3
312.9
327.3
340.4
357.1
371.9
390.1
391.0
393.2
398.8
408.5
416.5
412.9
405.5
407.1
408.8
412.8
413.8
413.3
422.2
416.4
406.3
410.9
415.4
419.1
420.1
421.6
427.9

Electricity
and
gas
117.4
121.1
120.4
126.8
128.8
130.2
134.7
133.7
136.7
138.1
143.3
140.9
144.9
147.5
149.1
153.2
148.5
149.8
148.6
147.2
150.9
151.6
150.7
157.8
152.9
143.7
147.0
150.9
152.5
153.1
153.6
158.5

Trans- Medical
porcare
tation

195.7
186.3
194.2
202.5
218.4
231.8
247.5
263.2
272.0
283.4
291.3
288.0
280.2
280.6
284.6
287.8
291.2
282.3
284.3
285.0
286.6
287.2
287.6
287.8
288.7
290.2
289.5
291.0
294.1
296.0
299.2
301.7

797.6
824.5
863.6
877.2
887.1
906.4
922.5
942.8
970.7
989.0
1,026.8
1,075.2
1,136.6
1,180.8
1,216.5
1,258.2
1,300.3
1,199.0
1,210.3
1,223.3
1,233.5
1,240.4
1,250.3
1,264.0
1,278.1
1,291.2
1,298.2
1,301.4
1,310.5
1,323.2
1,330.8
1,338.0

1 Includes other items not shown separately.
2 Includes imputed rental value of owner-occupied housing.

Note.—See Table B–2 for data for total personal consumption expenditures for 1959-89.
Source: Department of Commerce (Bureau of Economic Analysis).

Appendix B – National Income or Expenditure  |  247

Table B–18.—Private fixed investment by type, 1959–2007
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Nonresidential

Residential

Equipment and software

Year or quarter

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Private
fixed
investment

74.6
75.7
75.2
82.0
88.1
97.2
109.0
117.7
118.7
132.1
147.3
150.4
169.9
198.5
228.6
235.4
236.5
274.8
339.0
412.2
474.9
485.6
542.6
532.1
570.1
670.2
714.4
739.9
757.8
803.1
847.3
846.4
803.3
848.5
932.5
1,033.3
1,112.9
1,209.5
1,317.8
1,438.4
1,558.8
1,679.0
1,646.1
1,570.2
1,649.8
1,830.0
2,040.3
2,162.5
1,732.6
1,806.6
1,864.7
1,916.1
1,960.4
2,012.5
2,072.7
2,115.5
2,176.8
2,179.5
2,161.3
2,132.4
2,118.9
2,133.9
2,127.5

Total
nonresidential

46.5
49.4
48.8
53.1
56.0
63.0
74.8
85.4
86.4
93.4
104.7
109.0
114.1
128.8
153.3
169.5
173.7
192.4
228.7
280.6
333.9
362.4
420.0
426.5
417.2
489.6
526.2
519.8
524.1
563.8
607.7
622.4
598.2
612.1
666.6
731.4
810.0
875.4
968.7
1,052.6
1,133.9
1,232.1
1,176.8
1,066.3
1,077.4
1,154.5
1,272.1
1,397.7
1,100.4
1,135.5
1,172.7
1,209.5
1,233.1
1,255.7
1,287.0
1,312.6
1,367.3
1,391.2
1,415.2
1,417.1
1,431.4
1,469.1
1,500.1

Structures

Information processing equipment
and software
Structures

Total
Total

18.1
28.4
19.6
29.8
19.7
29.1
20.8
32.3
21.2
34.8
23.7
39.2
28.3
46.5
31.3
54.0
31.5
54.9
33.6
59.9
37.7
67.0
40.3
68.7
42.7
71.5
47.2
81.7
55.0
98.3
61.2 108.2
61.4 112.4
65.9 126.4
74.6 154.1
93.6 187.0
117.7 216.2
136.2 226.2
167.3 252.7
177.6 248.9
154.3 262.9
177.4 312.2
194.5 331.7
176.5 343.3
174.2 349.9
182.8 381.0
193.7 414.0
202.9 419.5
183.6 414.6
172.6 439.6
177.2 489.4
186.8 544.6
207.3 602.8
224.6 650.8
250.3 718.3
275.2 777.3
282.2 851.7
313.2 918.9
322.6 854.2
279.2 787.1
277.2 800.2
298.2 856.3
334.6 937.5
405.1 992.6
284.0 816.4
293.5 842.0
303.4 869.3
312.0 897.4
323.3 909.7
328.8 926.9
334.2 952.9
352.0 960.5
375.7 991.7
400.2 991.1
416.1 999.1
428.4 988.7
439.6 991.8
464.5 1,004.5
483.1 1,017.1

4.0
4.9
5.3
5.7
6.5
7.4
8.5
10.7
11.3
11.9
14.6
16.6
17.3
19.5
23.1
27.0
28.5
32.7
39.2
48.7
58.5
68.8
81.5
88.3
100.1
121.5
130.3
136.8
141.2
154.9
172.6
177.2
182.9
199.9
217.6
235.2
263.0
290.1
330.3
363.4
411.0
467.6
437.0
399.4
406.7
429.6
457.4
480.9
424.1
426.3
430.3
437.9
448.4
455.0
460.6
465.7
479.1
479.0
484.9
480.5
497.6
507.7
512.6

1 Includes other items not shown separately.

Source: Department of Commerce (Bureau of Economic Analysis).

248  |  Economic Report of the President

Computers
and
peripheral
equipment
0.0
.2
.3
.3
.7
.9
1.2
1.7
1.9
1.9
2.4
2.7
2.8
3.5
3.5
3.9
3.6
4.4
5.7
7.6
10.2
12.5
17.1
18.9
23.9
31.6
33.7
33.4
35.8
38.0
43.1
38.6
37.7
44.0
47.9
52.4
66.1
72.8
81.4
87.2
96.0
101.4
85.4
77.2
77.8
80.3
89.0
91.3
77.7
77.4
80.6
85.5
86.0
88.7
88.7
92.6
91.7
91.7
91.6
90.4
96.6
96.6
95.7

Software

0.0
.1
.2
.2
.4
.5
.7
1.0
1.2
1.3
1.8
2.3
2.4
2.8
3.2
3.9
4.8
5.2
5.5
6.3
8.1
9.8
11.8
14.0
16.4
20.4
23.8
25.6
29.0
34.2
41.9
47.6
53.7
57.9
64.3
68.3
74.6
85.5
107.5
124.0
152.6
176.2
174.7
167.6
171.4
183.0
193.8
203.3
180.9
180.3
183.7
187.0
190.0
194.3
194.7
196.3
199.9
202.6
204.9
205.9
210.5
216.1
218.5

Other

4.0
4.6
4.8
5.1
5.4
5.9
6.7
8.0
8.2
8.7
10.4
11.6
12.2
13.2
16.3
19.2
20.2
23.1
28.0
34.8
40.2
46.4
52.5
55.3
59.8
69.6
72.9
77.7
76.4
82.8
87.6
90.9
91.5
98.1
105.4
114.6
122.3
131.9
141.4
152.2
162.4
190.0
177.0
154.5
157.5
166.4
174.6
186.2
165.5
168.6
166.0
165.4
172.4
172.0
177.1
176.7
187.5
184.7
188.4
184.3
190.5
195.0
198.4

Industrial
equipment

Transportation
equipment

Other
equipment

8.5
9.4
8.8
9.3
10.0
11.4
13.7
16.2
16.9
17.3
19.1
20.3
19.5
21.4
26.0
30.7
31.3
34.1
39.4
47.7
56.2
60.7
65.5
62.7
58.9
68.1
72.5
75.4
76.7
84.2
93.3
92.1
89.3
93.0
102.2
113.6
129.0
136.5
140.4
146.4
147.0
159.2
146.7
135.7
140.7
139.7
156.1
166.7
132.8
136.5
143.2
146.5
152.6
150.7
158.2
162.8
161.5
168.5
169.2
167.5
168.1
176.0
180.6

8.3
8.5
8.0
9.8
9.4
10.6
13.2
14.5
14.3
17.6
18.9
16.2
18.4
21.8
26.6
26.3
25.2
30.0
39.3
47.3
53.6
48.4
50.6
46.8
53.5
64.4
69.0
70.5
68.1
72.9
67.9
70.0
71.5
74.7
89.4
107.7
116.1
123.2
135.5
144.0
167.6
160.8
141.7
126.3
118.3
142.9
159.5
171.9
123.1
138.3
148.9
161.3
153.0
157.0
166.1
161.7
177.6
169.5
172.4
168.0
162.9
153.3
153.3

7.6
7.1
7.0
7.5
8.8
9.9
11.0
12.7
12.4
13.0
14.4
15.6
16.3
19.0
22.6
24.3
27.4
29.6
36.3
43.2
47.9
48.3
55.2
51.2
50.4
58.1
59.9
60.7
63.9
69.0
80.2
80.2
70.8
72.0
80.2
88.1
94.7
101.0
112.1
123.5
126.0
131.2
128.8
125.7
134.5
144.0
164.6
173.2
136.4
140.8
146.9
151.8
155.7
164.2
168.0
170.4
173.5
174.0
172.6
172.7
163.2
167.5
170.5

Total
residential 1

28.1
26.3
26.4
29.0
32.1
34.3
34.2
32.3
32.4
38.7
42.6
41.4
55.8
69.7
75.3
66.0
62.7
82.5
110.3
131.6
141.0
123.2
122.6
105.7
152.9
180.6
188.2
220.1
233.7
239.3
239.5
224.0
205.1
236.3
266.0
301.9
302.8
334.1
349.1
385.8
424.9
446.9
469.3
503.9
572.4
675.5
768.2
764.8
632.2
671.1
692.0
706.6
727.3
756.8
785.7
803.0
809.4
788.2
746.1
715.3
687.5
664.8
627.3

Total 1

27.5
25.8
25.9
28.4
31.5
33.6
33.5
31.6
31.6
37.9
41.6
40.2
54.5
68.1
73.6
64.1
60.8
80.4
107.9
128.9
137.8
119.8
118.9
102.0
148.6
175.9
183.1
214.6
227.9
233.2
233.4
218.0
199.4
230.4
259.9
295.6
296.5
327.8
342.8
379.3
417.8
439.5
461.9
496.3
564.5
667.0
759.2
755.2
624.0
662.7
683.5
698.0
718.5
747.8
776.7
793.7
799.9
778.6
736.4
705.7
677.8
655.2
617.7

Single
family

16.7
14.9
14.1
15.1
16.0
17.6
17.8
16.6
16.8
19.5
19.7
17.5
25.8
32.8
35.2
29.7
29.6
43.9
62.2
72.8
72.3
52.9
52.0
41.5
72.5
86.4
87.4
104.1
117.2
120.1
120.9
112.9
99.4
122.0
140.1
162.3
153.5
170.8
175.2
199.4
223.8
236.8
249.1
265.9
310.6
377.6
433.5
416.0
353.2
374.4
388.1
394.5
410.4
424.1
441.3
458.3
463.7
437.7
399.5
363.1
334.1
319.1
296.8

Table B–19.—Real private fixed investment by type, 1990–2007
[Billions of chained (2000) dollars; quarterly data at seasonally adjusted annual rates]
Nonresidential

Residential

Equipment and software

Year or quarter

1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Private
fixed
investment

886.6
829.1
878.3
953.5
1,042.3
1,109.6
1,209.2
1,320.6
1,455.0
1,576.3
1,679.0
1,629.4
1,544.6
1,596.9
1,712.8
1,831.4
1,874.7
1,647.9
1,698.7
1,736.7
1,767.7
1,785.3
1,819.8
1,854.9
1,865.6
1,901.4
1,892.3
1,869.6
1,835.5
1,815.2
1,829.3
1,826.0

Total
nonresidential

595.1
563.2
581.3
631.9
689.9
762.5
833.6
934.2
1,037.8
1,133.3
1,232.1
1,180.5
1,071.5
1,081.8
1,144.3
1,225.8
1,306.8
1,099.1
1,127.5
1,160.7
1,189.7
1,199.5
1,214.1
1,239.5
1,250.0
1,289.7
1,303.2
1,319.4
1,314.8
1,321.7
1,356.6
1,387.3

Structures

Information processing equipment
and software
Structures

Total

275.2
244.6
229.9
228.3
232.3
247.1
261.1
280.1
294.5
293.2
313.2
306.1
253.8
243.5
246.7
247.8
268.6
242.9
246.5
248.7
248.6
249.8
248.9
244.8
247.7
256.5
266.4
273.3
278.3
282.6
299.5
311.1

Computers
and
peripheral
equipment 1

100.7
105.9
122.2
138.2
155.7
182.7
218.9
269.9
328.9
398.5
467.6
459.0
437.4
462.7
505.7
554.3
595.9
494.2
499.3
507.5
521.7
537.4
548.8
560.5
570.6
589.8
592.1
602.0
599.6
623.3
638.5
648.7

������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
�������������

Total

355.0
345.9
371.1
417.4
467.2
523.1
578.7
658.3
745.6
840.2
918.9
874.2
820.2
843.1
905.1
991.8
1,050.6
861.9
887.4
920.0
951.2
960.0
977.4
1,011.1
1,018.7
1,050.2
1,050.1
1,057.6
1,044.4
1,045.3
1,057.4
1,073.5

Software

39.9
45.1
53.0
59.3
65.1
71.6
84.1
108.8
129.4
157.2
176.2
173.8
169.7
177.3
193.6
205.7
213.0
190.5
190.5
193.9
199.3
201.6
206.0
206.7
208.3
211.0
212.1
213.8
215.1
219.9
225.6
228.0

Other

80.1
79.6
84.4
90.9
99.4
107.0
117.2
127.3
143.2
158.0
190.0
181.7
161.1
167.1
181.1
191.5
204.8
179.2
183.0
181.2
181.0
188.9
188.3
194.6
194.2
206.3
203.3
207.1
202.6
209.2
213.4
216.8

Industrial
equipment

Transportation
equipment

Other
equipment

109.2
102.2
104.0
112.9
122.9
134.9
139.9
143.0
148.1
147.9
159.2
145.7
134.5
138.4
134.0
144.3
149.6
129.1
131.5
136.9
138.7
142.8
139.4
145.9
149.2
147.0
152.0
150.9
148.4
147.3
152.9
156.0

81.0
78.8
80.2
95.1
111.4
120.6
125.4
135.9
145.4
167.7
160.8
142.8
126.0
113.8
130.6
145.1
155.2
112.0
125.5
137.0
147.9
138.2
142.0
153.2
147.0
160.3
153.3
156.3
150.9
144.8
135.3
136.3

96.0
82.0
81.6
89.3
96.5
101.7
105.6
115.8
125.7
126.7
131.2
126.9
122.9
130.4
138.3
151.9
156.2
132.7
135.3
140.8
144.5
145.7
151.6
154.2
156.1
157.8
157.9
155.2
153.7
144.8
148.0
150.2

Total
residential 2

298.9
270.2
307.6
332.7
364.8
353.1
381.3
388.6
418.3
443.6
446.9
448.5
469.9
509.4
560.2
597.1
569.5
540.5
561.7
567.5
570.9
578.3
596.4
606.4
607.2
606.1
587.5
555.0
529.4
506.3
490.7
463.3

Total 2

292.6
264.0
301.4
326.4
358.6
346.8
375.1
382.4
411.9
436.6
439.5
441.1
462.2
501.2
551.2
587.7
560.0
531.8
552.8
558.5
561.7
569.1
587.1
597.0
597.6
596.3
577.9
545.5
520.1
497.1
481.6
454.3

Single
family

154.2
135.1
164.1
179.7
198.9
180.6
197.3
196.6
218.1
234.2
236.8
237.1
246.3
272.6
305.3
328.3
302.7
295.4
305.6
310.1
310.1
317.5
325.7
332.3
337.9
338.5
318.8
291.1
262.4
240.2
231.2
215.5

1 For information on this component, see Survey of Current Business Table 5.3.6, Table 5.3.1 (for growth rates), Table 5.3.2 (for contributions), and Table 5.3.3
(for quantity indexes).
2 Includes other items not shown separately.
Source: Department of Commerce (Bureau of Economic Analysis).

Appendix B – National Income or Expenditure  |  249

Table B–20.—Government consumption expenditures and gross investment by type, 1959–2007
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Government consumption expenditures and gross investment
Federal

State and local

National defense
Year or quarter

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Total

110.0
111.6
119.5
130.1
136.4
143.2
151.5
171.8
192.7
209.4
221.5
233.8
246.5
263.5
281.7
317.9
357.7
383.0
414.1
453.6
500.8
566.2
627.5
680.5
733.5
797.0
879.0
949.3
999.5
1,039.0
1,099.1
1,180.2
1,234.4
1,271.0
1,291.2
1,325.5
1,369.2
1,416.0
1,468.7
1,518.3
1,620.8
1,721.6
1,825.6
1,961.1
2,092.5
2,216.8
2,363.4
2,523.0
2,169.1
2,202.8
2,237.3
2,258.2
2,306.7
2,339.8
2,394.8
2,412.5
2,472.1
2,512.5
2,536.1
2,571.4
2,608.3
2,670.0
2,716.5

Total

65.4
64.1
67.9
75.3
76.9
78.5
80.4
92.5
104.8
111.4
113.4
113.5
113.7
119.7
122.5
134.6
149.1
159.7
175.4
190.9
210.6
243.8
280.2
310.8
342.9
374.4
412.8
438.6
460.1
462.3
482.2
508.3
527.7
533.9
525.2
519.1
519.2
527.4
530.9
530.4
555.8
578.8
612.9
679.7
756.4
825.6
878.4
932.5
806.2
821.9
839.4
835.0
864.0
870.4
896.0
883.4
921.5
926.9
932.0
949.7
946.6
969.5
990.3

Total

53.8
53.4
56.5
61.1
61.0
60.3
60.6
71.7
83.5
89.3
89.5
87.6
84.6
87.0
88.2
95.6
103.9
111.1
120.9
130.5
145.2
168.0
196.3
225.9
250.7
281.6
311.2
330.9
350.0
354.9
362.2
374.0
383.2
376.9
362.9
353.7
348.7
354.6
349.6
345.7
360.6
370.3
392.6
437.1
497.2
550.7
588.7
624.3
536.5
546.5
564.9
555.0
577.7
585.0
604.3
587.7
610.8
620.6
620.7
645.2
634.8
654.5
673.5

Consumption
expenditures
40.1
41.0
42.7
46.6
48.3
48.8
50.6
60.0
70.0
77.2
78.2
76.6
77.1
79.5
79.4
84.5
90.9
95.8
104.2
112.7
123.8
143.7
167.3
191.2
208.8
232.9
253.7
268.0
283.6
293.6
299.5
308.1
319.8
315.3
307.6
300.7
297.3
302.5
304.7
300.7
312.9
321.5
342.4
381.7
436.8
482.9
515.8
544.8
472.7
480.4
494.1
484.5
508.1
511.9
529.8
513.3
535.7
540.0
542.0
561.5
555.7
573.8
589.6

Structures
2.5
2.2
2.4
2.0
1.6
1.3
1.1
1.3
1.2
1.2
1.5
1.3
1.8
1.8
2.1
2.2
2.3
2.1
2.4
2.5
2.5
3.2
3.2
4.0
4.8
4.9
6.2
6.8
7.7
7.4
6.4
6.1
4.6
5.2
5.1
5.7
6.3
6.7
5.7
5.1
5.0
5.0
4.6
4.4
5.3
5.6
5.9
6.3
5.7
5.3
5.7
5.7
6.0
5.9
5.9
6.0
5.5
6.0
6.1
7.5
6.6
7.0
7.7

Source: Department of Commerce (Bureau of Economic Analysis).

250  |  Economic Report of the President

Gross investment

Nondefense

Gross investment
Equipment
and
software
11.2
10.1
11.5
12.5
11.0
10.2
8.9
10.5
12.3
10.9
9.9
9.8
5.7
5.7
6.6
8.9
10.7
13.2
14.4
15.3
18.9
21.1
25.7
30.8
37.1
43.8
51.3
56.1
58.8
53.9
56.3
59.8
58.8
56.3
50.1
47.2
45.1
45.4
39.2
39.9
42.8
43.8
45.6
51.0
55.2
62.2
67.0
73.2
58.0
60.8
65.1
64.7
63.6
67.2
68.6
68.4
69.6
74.6
72.6
76.2
72.4
73.6
76.2

Total

11.5
10.7
11.4
14.2
15.9
18.2
19.8
20.8
21.3
22.1
23.8
25.8
29.1
32.7
34.3
39.0
45.1
48.6
54.5
60.4
65.4
75.8
84.0
84.9
92.3
92.8
101.6
107.8
110.0
107.4
120.0
134.3
144.5
157.0
162.4
165.5
170.5
172.8
181.3
184.7
195.2
208.5
220.3
242.5
259.2
274.9
289.8
308.2
269.7
275.3
274.5
280.0
286.2
285.4
291.7
295.7
310.7
306.3
311.3
304.5
311.7
315.0
316.8

Consumption
expenditures
9.8
8.7
9.0
11.3
12.4
14.0
15.1
15.9
17.1
18.3
20.2
22.1
24.9
28.2
29.4
33.4
38.7
41.4
46.5
50.6
55.1
63.8
71.0
72.1
77.7
77.1
84.7
90.3
90.6
88.9
99.7
111.7
119.7
129.8
134.2
140.1
143.2
143.8
153.0
153.9
162.2
177.8
189.5
209.9
226.0
240.8
252.7
268.0
236.9
240.8
240.6
245.0
251.0
249.8
254.3
255.8
269.2
266.7
271.3
264.9
274.0
276.0
278.1

Gross investment
Structures
1.5
1.7
1.9
2.1
2.3
2.5
2.8
2.8
2.2
2.1
1.9
2.1
2.5
2.7
3.1
3.4
4.1
4.6
5.0
6.1
6.3
7.1
7.7
6.8
6.7
7.0
7.3
8.0
9.0
6.8
6.9
8.0
9.2
10.3
11.2
10.5
10.8
11.2
9.8
10.6
10.6
8.3
8.3
9.9
10.1
9.4
9.4
10.5
9.3
9.8
9.6
9.0
9.1
8.7
9.5
10.2
10.1
10.0
10.1
11.6
10.2
10.1
10.5

Equipment
and
software
0.2
.3
.6
.8
1.2
1.6
1.9
2.1
1.9
1.7
1.7
1.7
1.7
1.8
1.8
2.2
2.4
2.7
3.0
3.7
4.0
4.9
5.3
6.0
7.8
8.7
9.6
9.5
10.4
11.7
13.4
14.6
15.7
16.9
16.9
14.9
16.5
17.9
18.5
20.2
22.4
22.3
22.5
22.8
23.1
24.6
27.7
29.7
23.6
24.7
24.2
25.9
26.1
26.8
28.0
29.8
31.4
29.6
29.9
28.0
27.5
28.9
28.1

Total

Consumption
expenditures

44.7
47.5
51.6
54.9
59.5
64.8
71.0
79.2
87.9
98.0
108.2
120.3
132.8
143.8
159.2
183.4
208.7
223.3
238.7
262.6
290.2
322.4
347.3
369.7
390.5
422.6
466.2
510.7
539.4
576.7
616.9
671.9
706.7
737.0
766.0
806.3
850.0
888.6
937.8
987.9
1,065.0
1,142.8
1,212.8
1,281.5
1,336.0
1,391.2
1,485.0
1,590.5
1,362.9
1,381.0
1,397.9
1,423.2
1,442.7
1,469.5
1,498.7
1,529.0
1,550.6
1,585.7
1,604.1
1,621.7
1,661.7
1,700.5
1,726.2

30.7
33.5
36.6
39.0
41.9
45.8
50.2
56.1
62.6
70.4
79.9
91.5
102.7
113.2
126.0
143.7
165.1
179.5
195.9
213.2
233.3
258.4
282.3
304.9
324.1
347.7
381.8
417.9
440.9
470.4
502.1
544.6
574.6
602.7
630.3
663.3
696.1
724.8
758.9
801.4
858.9
917.8
969.8
1,025.3
1,073.8
1,120.3
1,197.2
1,276.5
1,099.2
1,110.2
1,124.8
1,147.0
1,162.9
1,182.3
1,208.9
1,234.7
1,247.4
1,270.0
1,287.7
1,300.8
1,326.7
1,355.9
1,374.3

Structures

12.8
12.7
13.8
14.5
16.0
17.2
19.0
21.0
23.0
25.2
25.6
25.8
27.0
27.1
29.1
34.7
38.1
38.1
36.9
42.8
49.0
55.1
55.4
54.2
54.2
60.5
67.6
74.2
78.8
84.8
88.7
98.5
103.2
104.2
104.5
108.7
117.3
126.8
139.5
143.6
159.7
176.0
192.4
205.9
212.0
220.3
236.7
260.5
213.0
220.4
222.5
225.3
229.1
236.2
238.7
242.8
250.7
262.3
262.4
266.4
279.2
288.0
294.8

Equipment
and
software
1.1
1.2
1.3
1.3
1.5
1.8
1.9
2.1
2.3
2.4
2.7
3.0
3.1
3.5
4.1
4.9
5.5
5.7
5.9
6.6
7.8
8.9
9.5
10.6
12.2
14.4
16.8
18.6
19.6
21.5
26.0
28.7
28.9
30.1
31.2
34.3
36.7
36.9
39.4
43.0
46.4
49.0
50.6
50.2
50.3
50.6
51.1
53.6
50.7
50.4
50.6
50.9
50.8
51.0
51.2
51.6
52.5
53.4
53.9
54.5
55.9
56.6
57.0

Table B–21.—Real government consumption expenditures and gross investment by type, 1990–2007
[Billions of chained (2000) dollars; quarterly data at seasonally adjusted annual rates]
Government consumption expenditures and gross investment
Federal

State and local

National defense
Year or quarter

1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Total

1,530.0
1,547.2
1,555.3
1,541.1
1,541.3
1,549.7
1,564.9
1,594.0
1,624.4
1,686.9
1,721.6
1,780.3
1,858.8
1,904.8
1,931.8
1,946.3
1,981.4
1,925.4
1,931.8
1,939.4
1,930.6
1,936.8
1,942.5
1,957.6
1,948.2
1,971.8
1,976.5
1,980.2
1,997.2
1,994.7
2,014.8
2,033.6

Total

659.1
658.0
646.6
619.6
596.4
580.3
573.5
567.6
561.2
573.7
578.8
601.4
643.4
687.1
715.9
726.5
742.3
709.5
713.7
724.5
716.0
721.0
722.2
737.3
725.5
740.4
737.4
739.2
752.3
740.2
751.0
764.0

Total

479.4
474.2
450.7
425.3
404.6
389.2
383.8
373.0
365.3
372.2
370.3
384.9
413.2
449.0
475.0
482.4
491.5
470.2
472.5
484.8
472.7
478.1
481.1
492.7
477.7
485.5
488.2
486.4
505.8
491.6
501.7
513.9

Consumption
expenditures
404.9
404.4
383.5
367.2
350.6
338.1
332.2
328.1
319.8
324.6
321.5
334.1
356.7
387.5
407.6
411.7
416.6
405.6
406.4
414.7
403.7
410.1
410.3
420.4
406.1
413.6
412.5
412.6
427.7
417.4
426.2
436.0

Gross investment

Nondefense

Gross investment
Equipment
and
software

Structures
8.6
6.4
7.0
6.4
7.1
7.4
7.7
6.4
5.5
5.2
5.0
4.4
4.2
4.8
4.8
4.7
4.6
5.1
4.6
4.8
4.7
4.9
4.7
4.6
4.6
4.2
4.5
4.5
5.4
4.7
4.9
5.4

64.2
61.8
58.7
51.1
46.8
43.7
43.8
38.9
40.1
42.5
43.8
46.4
52.6
56.9
63.3
67.2
72.4
59.7
62.0
66.3
65.3
63.8
67.5
69.1
68.5
69.4
73.9
71.4
74.9
71.3
72.4
74.4

Total

178.6
182.8
195.4
194.1
191.7
191.0
189.6
194.5
195.9
201.5
208.5
216.5
230.2
238.0
240.7
243.9
250.7
239.1
241.0
239.4
243.2
242.7
240.9
244.3
247.8
254.8
249.0
252.7
246.1
248.4
248.9
249.6

Consumption
expenditures
156.5
158.4
168.2
166.0
167.3
164.7
161.1
166.6
164.8
168.1
177.8
185.8
197.3
204.5
206.7
207.9
212.6
205.9
206.5
205.6
208.6
208.1
206.2
208.0
209.5
215.3
211.4
214.8
208.8
212.5
212.0
213.1

Gross investment
Structures
10.6
11.8
13.2
14.1
12.7
12.6
12.7
10.9
11.5
11.1
8.3
8.0
9.3
9.3
8.2
7.5
7.9
8.4
8.7
8.3
7.6
7.5
7.1
7.6
8.0
7.8
7.6
7.6
8.5
7.4
7.3
7.5

Equipment
and
software
12.9
13.7
15.0
15.0
13.3
14.7
16.4
17.5
19.8
22.3
22.3
22.7
23.5
24.2
25.9
29.1
31.3
24.8
26.0
25.5
27.3
27.4
28.2
29.5
31.4
33.1
31.1
31.4
29.5
29.1
30.7
29.9

Total

Consumption
expenditures

868.4 714.2
886.8 729.0
906.5 746.5
919.5 761.4
943.3 780.6
968.3 798.4
990.5 812.8
1,025.9 834.9
1,063.0 866.4
1,113.2 900.3
1,142.8 917.8
1,179.0 941.2
1,215.4 969.4
1,217.8 969.8
1,215.8 970.8
1,219.6 977.7
1,239.0 990.9
1,215.9 969.2
1,218.1 969.6
1,214.7 970.7
1,214.4 973.5
1,215.7 973.9
1,220.1 976.2
1,220.3 979.2
1,222.5 981.4
1,231.3 985.3
1,238.9 988.1
1,240.9 992.7
1,244.9 997.5
1,254.2 1,002.5
1,263.5 1,007.4
1,269.6 1,010.7

Structures

132.1
136.5
137.0
133.9
134.9
139.5
146.3
155.8
155.6
167.0
176.0
186.0
193.5
194.7
191.2
187.7
191.3
192.6
194.8
190.2
187.0
187.9
189.7
186.8
186.2
190.2
194.0
190.9
189.9
193.0
196.5
198.7

Equipment
and
software
25.0
24.8
25.9
26.8
29.5
31.7
32.7
36.1
41.2
45.9
49.0
51.7
52.5
53.4
54.0
54.6
57.7
54.2
53.7
54.0
54.2
54.0
54.4
54.6
55.4
56.5
57.4
58.3
58.7
60.1
60.9
61.5

Note.—See Table B–2 for data for total government consumption expenditures and gross investment for 1959-89.
Source: Department of Commerce (Bureau of Economic Analysis).

Appendix B – National Income or Expenditure  |  251

Table B–22.—Private inventories and domestic final sales by industry, 1959–2007
[Billions of dollars, except as noted; seasonally adjusted]
Private inventories 1
Quarter
Total 2
Fourth quarter:
1959 ����������������
1960 ����������������
1961 ����������������
1962 ����������������
1963 ����������������
1964 ����������������
1965 ����������������
1966 ����������������
1967 ����������������
1968 ����������������
1969 ����������������
1970 ����������������
1971 ����������������
1972 ����������������
1973 ����������������
1974 ����������������
1975 ����������������
1976 ����������������
1977 ����������������
1978 ����������������
1979 ����������������
1980 ����������������
1981 ����������������
1982 ����������������
1983 ����������������
1984 ����������������
1985 ����������������
1986 ����������������
1987 ����������������
1988 ����������������
1989 ����������������
1990 ����������������
1991 ����������������
1992 ����������������
1993 ����������������
1994 ����������������
1995 ����������������
NAICS:
1996 ����������������
1997 ����������������
1998 ����������������
1999 ����������������
2000 ����������������
2001 ����������������
2002 ����������������
2003 ����������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Farm

Mining,
utilities,
and
construction 2

Manufac- Wholesale
turing
trade

Retail
trade

Other
industries 2

Nonfarm 2

Final
sales
of
domestic
business 3

Ratio of private
inventories
to final sales of
domestic business
Total

Nonfarm

132.9
136.2
139.6
147.2
149.7
154.3
169.3
185.7
194.9
208.2
227.7
236.0
253.9
283.9
352.2
406.3
409.3
440.1
482.4
571.4
668.2
739.8
779.2
774.1
797.6
869.3
876.1
858.0
924.2
999.2
1,044.4
1,082.3
1,057.2
1,082.4
1,115.8
1,194.3
1,257.0

42.1
42.7
44.3
46.7
44.2
42.1
47.1
47.4
45.8
48.9
53.1
52.7
59.5
74.0
102.8
88.2
90.3
85.8
91.0
119.7
135.6
141.1
127.5
131.5
132.5
131.8
125.9
112.9
119.8
130.2
129.6
133.4
123.2
132.9
132.1
134.3
130.9

����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
�����������������

47.7
48.7
50.1
53.2
55.1
58.6
63.4
73.0
79.9
85.1
92.6
95.5
96.6
102.1
121.5
162.6
162.2
178.7
193.2
219.8
261.8
293.4
313.1
304.6
308.9
344.5
333.3
320.6
339.6
372.4
390.5
404.5
384.1
377.6
380.1
404.3
424.5

16.5
16.9
17.3
18.0
19.5
20.8
22.5
25.8
28.1
29.3
32.5
36.4
39.4
43.1
51.7
66.9
66.5
74.1
84.0
99.0
119.5
139.4
148.8
147.9
153.4
169.1
175.9
182.0
195.8
213.9
222.8
236.8
239.2
248.3
258.6
281.5
303.7

20.5
21.9
21.3
22.7
23.9
25.2
28.0
30.6
30.9
34.2
37.5
38.5
44.7
49.8
58.4
63.9
64.4
73.0
80.9
94.1
104.7
111.7
123.2
123.2
137.6
157.0
171.4
176.2
199.1
213.2
231.4
236.6
240.2
249.4
268.6
293.6
312.2

6.1
6.1
6.6
6.6
7.1
7.7
8.3
8.9
10.1
10.6
12.0
12.9
13.7
14.8
17.7
24.7
25.9
28.5
33.3
38.8
46.6
54.1
66.6
66.8
65.2
66.9
69.5
66.3
69.9
69.5
70.1
71.0
70.5
74.3
76.5
80.6
85.6

90.8
93.5
95.2
100.5
105.5
112.2
122.2
138.3
149.1
159.3
174.6
183.3
194.4
209.9
249.4
318.1
319.0
354.2
391.4
451.7
532.6
598.7
651.7
642.6
665.1
737.6
750.2
745.1
804.4
869.1
914.7
948.9
934.0
949.5
983.7
1,060.0
1,126.1

31.6
32.7
34.3
36.0
38.3
41.2
45.3
47.8
50.3
55.4
59.1
62.4
68.0
76.3
84.3
90.4
101.7
111.9
124.8
144.7
160.1
175.0
187.7
195.8
216.8
234.8
250.7
265.7
279.3
305.6
324.4
337.6
347.6
372.7
393.6
416.8
439.2

4.20
4.17
4.07
4.09
3.91
3.75
3.73
3.88
3.87
3.76
3.85
3.78
3.73
3.72
4.18
4.49
4.02
3.93
3.86
3.95
4.17
4.23
4.15
3.95
3.68
3.70
3.49
3.23
3.31
3.27
3.22
3.21
3.04
2.90
2.83
2.87
2.86

2.87
2.86
2.78
2.79
2.75
2.73
2.70
2.89
2.96
2.87
2.95
2.94
2.86
2.75
2.96
3.52
3.14
3.17
3.14
3.12
3.33
3.42
3.47
3.28
3.07
3.14
2.99
2.80
2.88
2.84
2.82
2.81
2.69
2.55
2.50
2.54
2.56

1,284.4
1,329.5
1,346.8
1,442.2
1,535.9
1,458.3
1,507.8
1,567.3
1,605.5
1,650.4
1,680.7
1,715.0
1,756.5
1,759.1
1,797.5
1,842.3
1,853.6
1,901.2
1,925.8
1,935.8
1,991.2
2,020.4
2,043.8

136.3
136.7
120.3
124.2
132.1
126.1
135.8
151.2
157.0
165.2
157.6
156.7
159.2
155.2
159.3
164.1
157.0
156.7
165.3
166.8
197.0
196.8
210.7

31.1
33.7
37.3
39.6
44.5
47.5
49.4
58.5
60.4
62.9
65.2
69.4
70.8
75.3
81.1
90.9
83.2
81.7
83.0
84.1
88.2
92.1
88.6

421.0
431.7
431.5
457.7
477.0
437.9
443.6
447.0
457.5
470.7
485.7
495.1
512.9
511.4
526.7
539.0
548.8
569.9
572.4
570.0
577.5
590.2
590.3

285.1
303.1
313.3
337.4
359.0
338.6
348.0
359.8
368.9
376.3
386.8
397.2
410.0
414.2
423.0
432.6
441.4
459.2
467.9
477.0
487.9
494.3
500.6

328.7
337.5
353.6
383.8
409.0
395.6
419.3
436.4
445.7
456.9
464.7
472.8
479.1
478.1
481.6
489.3
495.4
502.3
503.8
504.2
504.9
509.4
515.3

82.1
86.9
90.9
99.5
114.4
112.6
111.7
114.3
116.1
118.2
120.7
123.7
124.5
125.0
125.8
126.4
127.8
131.3
133.4
133.6
135.7
137.7
138.3

1,148.1
1,192.9
1,226.5
1,318.0
1,403.8
1,332.2
1,372.0
1,416.1
1,448.5
1,485.1
1,523.1
1,558.2
1,597.3
1,603.9
1,638.2
1,678.1
1,696.6
1,744.5
1,760.5
1,769.0
1,794.2
1,823.7
1,833.0

469.1
495.6
526.8
556.7
583.6
598.7
601.0
639.0
648.1
658.2
667.5
678.6
689.5
704.1
718.4
723.0
739.5
749.3
754.0
763.0
772.7
783.5
792.0

2.74
2.68
2.56
2.59
2.63
2.44
2.51
2.45
2.48
2.51
2.52
2.53
2.55
2.50
2.50
2.55
2.51
2.54
2.55
2.54
2.58
2.58
2.58

2.45
2.41
2.33
2.37
2.41
2.23
2.28
2.22
2.24
2.26
2.28
2.30
2.32
2.28
2.28
2.32
2.29
2.33
2.33
2.32
2.32
2.33
2.31

1 Inventories at end of quarter. Quarter-to-quarter change calculated from this table is not the current-dollar change in private inventories component of
gross domestic product (GDP). The former is the difference between two inventory stocks, each valued at its respective end-of-quarter prices. The latter is
the change in the physical volume of inventories valued at average prices of the quarter. In addition, changes calculated from this table are at quarterly rates,
whereas change in private inventories is stated at annual rates.
2 Inventories of construction, mining, and utilities establishments are included in other industries through 1995.
3 Quarterly totals at monthly rates. Final sales of domestic business equals final sales of domestic product less gross output of general government, gross
value added of nonprofit institutions, compensation paid to domestic workers, and space rent for owner-occupied housing. Includes a small amount of final sales
by farm and by government enterprises.
Note.—The industry classification of inventories is on an establishment basis. Estimates through 1995 are based on the Standard Industrial Classification
(SIC). Beginning with 1996, estimates are based on the North American Industry Classification System (NAICS).
Source: Department of Commerce (Bureau of Economic Analysis).

252  |  Economic Report of the President

Table B–23.—Real private inventories and domestic final sales by industry, 1959–2007
[Billions of chained (2000) dollars, except as noted; seasonally adjusted]
Private inventories 1
Quarter
Total 2
Fourth quarter:
1959 ����������������
1960 ����������������
1961 ����������������
1962 ����������������
1963 ����������������
1964 ����������������
1965 ����������������
1966 ����������������
1967 ����������������
1968 ����������������
1969 ����������������
1970 ����������������
1971 ����������������
1972 ����������������
1973 ����������������
1974 ����������������
1975 ����������������
1976 ����������������
1977 ����������������
1978 ����������������
1979 ����������������
1980 ����������������
1981 ����������������
1982 ����������������
1983 ����������������
1984 ����������������
1985 ����������������
1986 ����������������
1987 ����������������
1988 ����������������
1989 ����������������
1990 ����������������
1991 ����������������
1992 ����������������
1993 ����������������
1994 ����������������
1995 ����������������
NAICS:
1996 ����������������
1997 ����������������
1998 ����������������
1999 ����������������
2000 ����������������
2001 ����������������
2002 ����������������
2003 ����������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Farm

Mining,
utilities,
and
construction 2

Manufac- Wholesale
turing
trade

Retail
trade

Other
industries 2

Nonfarm 2

Final
sales
of
domestic
business 3

Ratio of private
inventories
to final sales of
domestic business
Total

Nonfarm

428.1
438.5
448.0
467.4
485.4
500.8
530.1
572.2
602.5
629.9
656.9
661.9
684.2
707.3
742.2
768.1
756.8
787.5
826.0
867.1
892.2
884.3
919.2
901.7
895.3
966.6
990.3
998.5
1,028.8
1,049.1
1,077.4
1,092.8
1,092.3
1,108.7
1,129.4
1,193.0
1,222.8

106.9
108.3
110.4
111.8
112.9
109.8
111.8
110.7
112.8
116.1
116.1
114.2
117.5
117.9
119.3
115.7
120.4
119.1
125.0
126.7
130.2
124.3
132.5
138.6
124.4
129.6
135.3
133.5
126.1
115.4
115.4
120.9
119.4
125.1
119.1
130.3
119.6

����������������
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����������������
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����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
����������������
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����������������
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143.5
145.4
149.8
159.8
165.9
175.1
187.4
212.5
229.3
239.8
250.9
250.9
247.9
254.6
273.5
294.1
286.7
300.4
308.8
322.9
335.3
335.7
340.2
325.0
324.5
352.8
346.6
342.9
351.1
367.6
381.4
390.0
383.5
378.9
382.4
394.1
407.8

57.6
59.1
60.7
63.4
68.4
72.5
77.4
87.7
94.7
98.0
105.1
113.0
119.1
124.6
128.1
139.7
133.7
142.7
154.1
166.9
175.0
180.0
185.1
183.0
182.7
198.5
204.9
213.2
220.6
229.7
233.6
242.0
246.4
254.8
261.0
276.7
289.9

63.9
68.2
66.9
71.5
75.3
79.3
87.1
94.1
94.1
101.9
108.9
109.0
123.6
133.1
143.7
141.6
134.6
144.9
153.2
163.3
163.3
158.7
167.5
163.7
177.0
198.6
214.0
217.4
238.5
246.1
260.5
258.9
259.5
264.1
279.4
299.9
312.0

29.8
30.8
33.9
33.8
36.2
38.4
40.1
41.1
46.0
47.3
49.7
50.3
52.1
54.7
57.5
61.3
62.9
63.6
68.4
72.5
72.4
71.2
79.2
76.8
75.9
77.0
81.4
84.4
86.6
85.2
81.4
78.3
81.4
83.9
86.9
91.1
93.3

298.7
307.5
314.4
332.7
349.7
369.4
396.8
442.0
470.4
494.1
521.9
529.7
548.3
572.5
609.1
644.2
625.0
659.0
691.1
732.0
753.5
753.5
779.0
754.4
764.6
831.2
848.7
858.8
896.5
929.2
958.0
971.2
972.2
982.5
1,010.2
1,062.2
1,103.5

131.3
134.3
140.1
145.4
153.9
163.2
177.2
180.9
185.3
195.1
198.9
201.3
211.5
228.8
236.9
228.2
238.7
250.5
263.6
283.2
289.8
289.6
287.2
286.1
307.6
324.6
339.4
352.2
362.6
381.6
392.5
394.0
394.6
415.7
429.8
447.2
464.2

3.26
3.27
3.20
3.21
3.15
3.07
2.99
3.16
3.25
3.23
3.30
3.29
3.24
3.09
3.13
3.37
3.17
3.14
3.13
3.06
3.08
3.05
3.20
3.15
2.91
2.98
2.92
2.84
2.84
2.75
2.75
2.77
2.77
2.67
2.63
2.67
2.63

2.27
2.29
2.24
2.29
2.27
2.26
2.24
2.44
2.54
2.53
2.62
2.63
2.59
2.50
2.57
2.82
2.62
2.63
2.62
2.58
2.60
2.60
2.71
2.64
2.49
2.56
2.50
2.44
2.47
2.43
2.44
2.46
2.46
2.36
2.35
2.38
2.38

1,251.6
1,322.7
1,395.3
1,464.2
1,520.7
1,488.9
1,501.4
1,515.7
1,524.4
1,540.7
1,555.7
1,570.0
1,585.8
1,588.3
1,589.8
1,603.2
1,612.8
1,625.7
1,639.1
1,643.5
1,643.5
1,645.0
1,652.6

126.4
129.3
130.7
127.8
126.4
126.5
124.0
124.4
125.5
128.7
129.9
130.3
129.2
128.9
129.3
129.8
130.0
128.7
128.0
128.9
130.1
131.1
132.1

33.6
36.1
43.3
42.7
41.1
51.7
48.1
53.4
51.9
51.8
53.0
53.9
54.3
56.0
55.9
55.7
55.4
57.0
58.2
59.6
60.6
61.1
60.5

409.9
430.7
449.3
466.3
474.2
452.8
447.0
437.5
437.4
438.9
438.6
440.1
447.9
448.0
448.9
451.7
452.7
455.8
458.0
457.6
456.3
455.3
456.1

273.3
298.3
320.9
340.6
358.2
347.5
348.8
349.6
351.6
354.7
361.8
367.6
374.2
377.7
379.3
384.1
388.5
394.3
403.3
404.9
406.0
406.0
409.5

325.9
340.6
357.9
385.5
407.1
396.3
420.6
436.4
442.6
449.8
454.0
458.6
461.2
458.8
458.1
464.3
468.3
470.3
470.6
470.6
467.3
468.1
471.2

82.7
88.1
94.0
101.3
113.7
113.9
112.5
113.9
115.3
116.5
118.1
119.5
119.0
118.5
117.5
117.2
118.0
119.4
120.7
121.2
121.8
121.9
122.0

1,125.2
1,193.7
1,264.9
1,336.4
1,394.3
1,362.4
1,377.6
1,391.6
1,399.2
1,411.8
1,425.7
1,439.8
1,457.0
1,459.9
1,460.9
1,473.8
1,483.3
1,497.7
1,512.1
1,515.5
1,514.0
1,514.4
1,520.9

488.3
509.2
538.0
563.4
581.0
583.6
582.5
609.7
613.8
618.3
625.1
630.9
635.7
645.9
654.2
653.4
663.8
668.0
668.8
675.4
677.4
683.7
691.0

2.56
2.60
2.59
2.60
2.62
2.55
2.58
2.49
2.48
2.49
2.49
2.49
2.49
2.46
2.43
2.45
2.43
2.43
2.45
2.43
2.43
2.41
2.39

2.30
2.34
2.35
2.37
2.40
2.33
2.37
2.28
2.28
2.28
2.28
2.28
2.29
2.26
2.23
2.26
2.23
2.24
2.26
2.24
2.24
2.21
2.20

1 Inventories at end of quarter. Quarter-to-quarter changes calculated from this table are at quarterly rates, whereas the change in private inventories
component of gross domestic product (GDP) is stated at annual rates.
2 Inventories of construction, mining, and utilities establishments are included in other industries through 1995.
3 Quarterly totals at monthly rates. Final sales of domestic business equals final sales of domestic product less gross output of general government, gross
value added of nonprofit institutions, compensation paid to domestic workers, and space rent for owner-occupied housing. Includes a small amount of final sales
by farm and by government enterprises.
Note.—The industry classification of inventories is on an establishment basis. Estimates through 1995 are based on the Standard Industrial Classification
(SIC). Beginning with 1996, estimates are based on the North American Industry Classification System (NAICS).
See Survey of Current Business, Tables 5.7.6A and 5.7.6B, for detailed information on calculation of the chained (2000) dollar inventory series.
Source: Department of Commerce (Bureau of Economic Analysis).

Appendix B – National Income or Expenditure  |  253

Table B–24.—Foreign transactions in the national income and product accounts, 1959–2007
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Current receipts from rest of the world

Current payments to rest of the world
Imports of goods
and services

Exports of goods
and services
Year or quarter

Total
Total

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

27.0
31.9
32.9
35.0
37.6
42.3
45.0
49.0
52.1
58.0
63.7
72.5
77.0
87.1
118.8
156.5
166.7
181.9
196.6
233.1
298.5
359.9
397.3
384.2
378.9
424.2
414.5
431.9
487.1
596.2
681.0
741.5
765.7
788.0
812.1
907.3
1,046.1
1,117.3
1,242.0
1,243.1
1,312.1
1,478.9
1,355.2
1,311.6
1,377.6
1,619.9
1,853.5
2,159.0
1,548.4
1,598.1
1,633.9
1,699.2
1,759.8
1,824.5
1,874.1
1,955.4
2,039.9
2,136.3
2,194.3
2,265.7
2,302.0
2,412.9
2,541.3

22.7
27.0
27.6
29.1
31.1
35.0
37.1
40.9
43.5
47.9
51.9
59.7
63.0
70.8
95.3
126.7
138.7
149.5
159.4
186.9
230.1
280.8
305.2
283.2
277.0
302.4
302.0
320.5
363.9
444.1
503.3
552.4
596.8
635.3
655.8
720.9
812.2
868.6
955.3
955.9
991.2
1,096.3
1,032.8
1,005.9
1,040.8
1,182.4
1,309.4
1,467.6
1,140.9
1,172.8
1,187.3
1,228.6
1,260.8
1,301.2
1,316.0
1,359.6
1,406.6
1,447.4
1,484.5
1,531.9
1,549.9
1,598.7
1,685.7

ServGoods 1 ices 1

16.5
20.5
20.9
21.7
23.3
26.7
27.8
30.7
32.2
35.3
38.3
44.5
45.6
51.8
73.9
101.0
109.6
117.8
123.7
145.4
184.0
225.8
239.1
215.0
207.3
225.6
222.2
226.0
257.5
325.8
369.4
396.6
423.5
448.0
459.9
510.1
583.3
618.3
687.7
680.9
697.2
784.3
731.2
697.6
724.4
818.3
907.0
1,030.5
787.6
811.7
826.0
848.0
869.2
904.0
911.1
943.7
985.4
1,016.4
1,047.8
1,072.3
1,084.0
1,115.2
1,191.3

6.3
6.6
6.7
7.4
7.7
8.3
9.4
10.2
11.3
12.6
13.7
15.2
17.4
19.0
21.3
25.7
29.1
31.7
35.7
41.5
46.1
55.0
66.1
68.2
69.7
76.7
79.8
94.5
106.4
118.3
134.0
155.7
173.3
187.4
195.9
210.8
228.9
250.2
267.6
275.1
294.0
311.9
301.6
308.4
316.4
364.1
402.4
437.1
353.2
361.1
361.3
380.7
391.5
397.2
404.9
415.9
421.2
431.0
436.7
459.6
465.9
483.5
494.4

Income
receipts

Total

4.3
4.9
5.3
5.9
6.5
7.2
7.9
8.1
8.7
10.1
11.8
12.8
14.0
16.3
23.5
29.8
28.0
32.4
37.2
46.3
68.3
79.1
92.0
101.0
101.9
121.9
112.4
111.4
123.2
152.1
177.7
189.1
168.9
152.7
156.2
186.4
233.9
248.7
286.7
287.1
320.8
382.7
322.4
305.7
336.8
437.5
544.1
691.4
407.5
425.4
446.5
470.6
499.1
523.3
558.1
595.9
633.3
688.9
709.7
733.8
752.2
814.2
855.6

28.2
28.7
28.6
31.1
32.6
34.7
38.8
45.1
48.6
56.3
61.9
68.5
76.4
90.7
109.5
149.8
145.4
173.0
205.6
243.6
297.0
348.5
390.9
384.4
410.9
511.2
525.3
571.2
637.9
708.4
769.3
811.5
752.3
824.9
882.5
1,012.5
1,137.1
1,217.6
1,352.2
1,430.5
1,585.9
1,875.6
1,725.6
1,769.9
1,889.8
2,244.0
2,588.5
2,953.2
2,087.7
2,214.4
2,253.1
2,420.9
2,474.3
2,534.6
2,548.8
2,796.4
2,826.2
2,948.0
3,044.3
2,994.1
3,058.1
3,143.4
3,232.2

ServTotal Goods 1 ices 1

22.3
22.8
22.7
25.0
26.1
28.1
31.5
37.1
39.9
46.6
50.5
55.8
62.3
74.2
91.2
127.5
122.7
151.1
182.4
212.3
252.7
293.8
317.8
303.2
328.6
405.1
417.2
453.3
509.1
554.5
591.5
630.3
624.3
668.6
720.9
814.5
903.6
964.8
1,056.9
1,115.9
1,251.7
1,475.8
1,399.8
1,430.3
1,540.2
1,797.8
2,023.9
2,229.6
1,684.1
1,775.8
1,820.0
1,911.2
1,931.9
1,981.0
2,041.0
2,141.9
2,169.9
2,227.8
2,283.6
2,237.2
2,264.0
2,312.9
2,380.4

15.3
15.2
15.1
16.9
17.7
19.4
22.2
26.3
27.8
33.9
36.8
40.9
46.6
56.9
71.8
104.5
99.0
124.6
152.6
177.4
212.8
248.6
267.8
250.5
272.7
336.3
343.3
370.0
414.8
452.1
484.8
508.1
500.7
544.9
592.8
676.8
757.4
807.4
885.3
929.0
1,045.5
1,243.5
1,167.9
1,189.3
1,283.9
1,499.5
1,702.0
1,880.4
1,399.0
1,481.3
1,519.3
1,598.4
1,619.2
1,662.8
1,717.0
1,808.9
1,828.7
1,879.8
1,933.3
1,879.9
1,902.7
1,947.2
2,007.3

7.0
7.6
7.6
8.1
8.4
8.7
9.3
10.7
12.2
12.6
13.7
14.9
15.8
17.3
19.3
22.9
23.7
26.5
29.8
34.8
39.9
45.3
49.9
52.6
56.0
68.8
73.9
83.3
94.3
102.4
106.7
122.3
123.6
123.6
128.1
137.7
146.1
157.4
171.5
186.9
206.3
232.3
231.9
241.0
256.2
298.3
322.0
349.2
285.1
294.6
300.7
312.8
312.7
318.1
323.9
333.1
341.1
348.0
350.3
357.3
361.4
365.7
373.2

Income
payments

1.5
1.8
1.8
1.8
2.1
2.3
2.6
3.0
3.3
4.0
5.7
6.4
6.4
7.7
10.9
14.3
15.0
15.5
16.9
24.7
36.4
44.9
59.1
64.5
64.8
85.6
85.9
93.6
105.3
128.5
151.5
154.3
138.5
123.0
124.3
160.2
198.1
213.7
253.7
265.8
287.0
343.7
278.8
275.0
280.0
361.3
475.6
633.4
311.3
352.6
363.5
417.9
429.0
455.6
471.2
546.3
570.4
625.0
664.7
673.7
689.0
743.5
754.4

Current taxes and
transfer payments
to rest of the world (net)

Total

4.3
4.1
4.2
4.3
4.4
4.3
4.7
5.0
5.4
5.7
5.8
6.3
7.6
8.8
7.4
8.1
7.6
6.3
6.2
6.7
8.0
9.8
14.1
16.7
17.5
20.5
22.2
24.3
23.5
25.5
26.4
26.9
–10.6
33.4
37.3
37.8
35.4
39.1
41.6
48.8
47.2
56.1
47.0
64.5
69.7
84.9
89.0
90.1
92.4
86.0
69.6
91.7
113.4
98.0
36.6
108.2
85.9
95.2
96.0
83.2
105.1
86.9
97.4

From
persons
(net)
0.5
.5
.5
.5
.7
.7
.8
.8
1.0
1.0
1.1
1.3
1.3
1.4
1.5
1.3
1.3
1.3
1.3
1.5
1.6
1.8
5.5
6.6
6.9
7.8
8.2
9.0
9.9
10.6
11.4
12.0
13.0
12.3
14.2
15.4
16.2
18.0
21.0
24.6
28.3
31.5
33.0
40.0
40.2
43.1
47.3
48.9
43.0
43.7
43.6
42.2
49.2
46.6
45.8
47.6
45.3
49.9
49.5
50.6
50.4
50.5
52.2

From
government
(net)

Balance
on
current
From account,
busi- NIPA 2
ness
(net)

3.8
3.5
3.6
3.6
3.6
3.4
3.7
4.0
4.1
4.4
4.4
4.7
5.9
7.0
5.2
5.8
5.6
3.9
3.5
3.8
4.3
5.5
5.4
6.7
7.2
9.2
11.1
12.2
10.3
10.4
10.4
10.0
–28.6
17.1
17.8
15.8
10.1
14.1
10.9
11.2
11.6
13.5
9.5
14.3
17.6
19.2
27.1
20.3
27.1
16.5
17.1
16.1
31.7
19.5
23.3
34.0
18.3
24.1
25.4
13.6
34.5
15.0
22.2

0.1
.1
.1
.1
.1
.2
.2
.2
.2
.3
.3
.4
.4
.5
.7
1.0
.7
1.1
1.4
1.4
2.0
2.4
3.2
3.4
3.4
3.5
2.9
3.2
3.4
4.5
4.6
4.8
5.0
3.9
5.4
6.6
9.1
7.1
9.7
12.9
7.3
11.2
4.5
10.3
11.9
22.6
14.6
20.9
22.2
25.8
8.9
33.4
32.5
31.9
–32.5
26.5
22.3
21.2
21.1
18.9
20.2
21.5
23.0

–1.2
3.2
4.3
3.9
5.0
7.5
6.2
3.9
3.6
1.7
1.8
4.0
.6
–3.6
9.3
6.6
21.4
8.9
–9.0
–10.4
1.4
11.4
6.3
–.2
–32.1
–86.9
–110.8
–139.2
–150.8
–112.2
–88.3
–70.1
13.5
–36.9
–70.4
–105.2
–91.0
–100.3
–110.2
–187.4
–273.9
–396.6
–370.4
–458.3
–512.3
–624.1
–735.1
–794.1
–539.4
–616.3
–619.2
–721.6
–714.5
–710.1
–674.7
–841.0
–786.3
–811.7
–850.1
–728.4
–756.0
–730.5
–690.9

1 Certain goods, primarily military equipment purchased and sold by the Federal Government, are included in services. Beginning with 1986, repairs and
alterations of equipment were reclassified from goods to services.
2 National income and product accounts (NIPA).
Source: Department of Commerce (Bureau of Economic Analysis).

254  |  Economic Report of the President

Table B–25.—Real exports and imports of goods and services, 1990–2007
[Billions of chained (2000) dollars; quarterly data at seasonally adjusted annual rates]
Exports of goods and services

Year or quarter

1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Total

552.5
589.1
629.7
650.0
706.5
778.2
843.4
943.7
966.5
1,008.2
1,096.3
1,036.7
1,013.3
1,026.1
1,126.1
1,203.4
1,304.1
1,101.8
1,119.4
1,128.0
1,155.3
1,172.4
1,199.3
1,205.6
1,236.4
1,270.6
1,288.4
1,306.6
1,350.9
1,354.7
1,379.5
1,441.2

Imports of goods and services

Goods 1

Goods 1

Total
367.2
392.5
421.9
435.6
478.0
533.9
581.1
664.5
679.4
705.2
784.3
736.3
707.0
719.8
784.4
843.5
927.4
765.1
778.5
790.2
804.0
815.4
841.8
845.7
871.1
903.0
917.3
933.7
955.4
957.6
973.1
1,031.4

Durable
goods
226.3
243.1
262.5
276.1
309.6
353.6
394.9
466.2
481.2
503.6
569.2
522.2
491.2
499.8
558.6
612.0
682.3
542.5
555.8
565.3
570.8
581.8
603.5
616.4
646.2
665.0
673.2
685.5
705.5
707.5
719.5
763.6

Nondurable
goods
145.1
153.7
163.6
162.4
170.1
181.1
186.7
198.7
198.5
201.7
215.1
214.2
216.1
220.3
227.1
234.3
249.5
223.6
224.1
226.4
234.3
235.0
240.0
232.4
229.8
242.4
248.2
252.5
255.0
255.2
259.0
273.7

Services 1

188.7
199.9
210.8
217.5
231.1
245.8
263.5
279.2
287.2
303.2
311.9
300.4
306.0
306.2
341.4
359.8
377.1
336.4
340.6
337.7
351.0
356.6
357.5
359.8
365.3
368.0
371.5
373.4
395.6
397.2
406.4
410.4

Total

607.1
603.7
645.6
702.1
785.9
849.1
923.0
1,048.3
1,170.3
1,304.4
1,475.8
1,435.8
1,484.6
1,545.0
1,719.9
1,821.5
1,928.6
1,650.9
1,710.5
1,730.8
1,787.7
1,796.8
1,800.3
1,809.7
1,879.0
1,910.7
1,915.0
1,940.4
1,948.2
1,966.8
1,953.4
1,974.3

Total
469.7
469.3
513.1
564.8
640.0
697.6
762.7
872.6
974.4
1,095.2
1,243.5
1,204.1
1,248.2
1,309.3
1,457.0
1,553.6
1,646.9
1,393.9
1,448.3
1,467.7
1,518.1
1,530.1
1,534.0
1,543.6
1,606.5
1,631.8
1,636.3
1,661.0
1,658.7
1,675.6
1,663.4
1,683.2

Durable
goods
264.7
266.1
294.0
328.8
383.1
427.1
472.8
550.3
621.8
711.7
820.7
769.4
801.0
835.3
954.4
1,034.2
1,126.7
897.8
948.9
971.1
999.7
1,002.1
1,020.4
1,040.5
1,073.8
1,105.5
1,118.0
1,138.4
1,144.7
1,141.8
1,136.8
1,172.1

Nondurable
goods

Services 1

218.4
215.9
231.9
248.0
266.0
277.0
295.2
326.4
355.7
384.3
422.8
435.1
447.4
474.2
505.2
525.2
534.4
496.9
502.0
500.3
521.6
530.3
519.0
511.9
539.3
537.2
532.0
537.5
531.1
547.3
541.0
532.6

142.7
139.0
135.5
139.4
147.3
152.1
160.5
175.6
195.6
209.1
232.3
231.6
236.5
236.6
263.9
269.8
283.8
257.5
263.0
264.1
270.8
268.4
268.1
268.1
274.7
281.0
281.0
281.9
291.4
293.1
291.9
293.1

1 Certain goods, primarily military equipment purchased and sold by the Federal Government, are included in services. Beginning with 1986, repairs and
alterations of equipment were reclassified from goods to services.
Note.—See Table B–2 for data for total exports of goods and services and total imports of goods and services for 1959-89.
Source: Department of Commerce (Bureau of Economic Analysis).

Appendix B – National Income or Expenditure  |  255

Table B–26.—Relation of gross domestic product, gross national product, net national product, and
national income, 1959–2007
[Billions of dollars; quarterly data at seasonally adjusted annual rates]

Year or quarter

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Gross
domestic
product
506.6
526.4
544.7
585.6
617.7
663.6
719.1
787.8
832.6
910.0
984.6
1,038.5
1,127.1
1,238.3
1,382.7
1,500.0
1,638.3
1,825.3
2,030.9
2,294.7
2,563.3
2,789.5
3,128.4
3,255.0
3,536.7
3,933.2
4,220.3
4,462.8
4,739.5
5,103.8
5,484.4
5,803.1
5,995.9
6,337.7
6,657.4
7,072.2
7,397.7
7,816.9
8,304.3
8,747.0
9,268.4
9,817.0
10,128.0
10,469.6
10,960.8
11,685.9
12,433.9
13,194.7
11,405.5
11,610.3
11,779.4
11,948.5
12,154.0
12,317.4
12,558.8
12,705.5
12,964.6
13,155.0
13,266.9
13,392.3
13,551.9
13,768.8
13,970.5

Plus:
Income
receipts
from rest
of the
world
4.3
4.9
5.3
5.9
6.5
7.2
7.9
8.1
8.7
10.1
11.8
12.8
14.0
16.3
23.5
29.8
28.0
32.4
37.2
46.3
68.3
79.1
92.0
101.0
101.9
121.9
112.4
111.4
123.2
152.1
177.7
189.1
168.9
152.7
156.2
186.4
233.9
248.7
286.7
287.1
320.8
382.7
322.4
305.7
336.8
437.5
544.1
691.4
407.5
425.4
446.5
470.6
499.1
523.3
558.1
595.9
633.3
688.9
709.7
733.8
752.2
814.2
855.6

Less:
Income
payments
to rest
of the
world
1.5
1.8
1.8
1.8
2.1
2.3
2.6
3.0
3.3
4.0
5.7
6.4
6.4
7.7
10.9
14.3
15.0
15.5
16.9
24.7
36.4
44.9
59.1
64.5
64.8
85.6
85.9
93.6
105.3
128.5
151.5
154.3
138.5
123.0
124.3
160.2
198.1
213.7
253.7
265.8
287.0
343.7
278.8
275.0
280.0
361.3
475.6
633.4
311.3
352.6
363.5
417.9
429.0
455.6
471.2
546.3
570.4
625.0
664.7
673.7
689.0
743.5
754.4

Equals:
Gross
national
product
509.3
529.5
548.2
589.7
622.2
668.5
724.4
792.9
838.0
916.1
990.7
1,044.9
1,134.7
1,246.8
1,395.3
1,515.5
1,651.3
1,842.1
2,051.2
2,316.3
2,595.3
2,823.7
3,161.4
3,291.5
3,573.8
3,969.5
4,246.8
4,480.6
4,757.4
5,127.4
5,510.6
5,837.9
6,026.3
6,367.4
6,689.3
7,098.4
7,433.4
7,851.9
8,337.3
8,768.3
9,302.2
9,855.9
10,171.6
10,500.2
11,017.6
11,762.1
12,502.4
13,252.7
11,501.7
11,683.1
11,862.3
12,001.1
12,224.0
12,385.1
12,645.7
12,755.0
13,027.5
13,218.9
13,311.9
13,452.4
13,615.1
13,839.4
14,071.6

Source: Department of Commerce (Bureau of Economic Analysis).

256  |  Economic Report of the President

Less: Consumption of fixed capital
Total
53.0
55.6
57.2
59.3
62.4
65.0
69.4
75.6
81.5
88.4
97.9
106.7
115.0
126.5
139.3
162.5
187.7
205.2
230.0
262.3
300.1
343.0
388.1
426.9
443.8
472.6
506.7
531.3
561.9
597.6
644.3
682.5
725.9
751.9
776.4
833.7
878.4
918.1
974.4
1,030.2
1,101.3
1,187.8
1,281.5
1,292.0
1,336.5
1,436.1
1,609.5
1,615.2
1,373.7
1,394.3
1,534.5
1,442.0
1,466.6
1,492.4
1,903.9
1,574.9
1,574.8
1,602.8
1,628.8
1,654.4
1,670.9
1,683.4
1,690.9

Private
38.6
40.5
41.6
42.8
44.9
46.9
50.5
55.5
59.9
65.2
73.1
80.0
86.7
97.1
107.9
126.6
147.8
162.5
184.3
212.8
245.7
281.1
317.9
349.8
362.1
385.6
414.0
431.8
455.3
483.5
522.1
551.6
586.9
607.3
624.7
675.1
713.4
748.8
800.3
851.2
914.3
990.8
1,075.5
1,080.3
1,118.3
1,206.0
1,357.0
1,347.5
1,150.9
1,166.8
1,302.3
1,203.8
1,224.9
1,246.5
1,637.9
1,318.9
1,314.8
1,337.2
1,358.7
1,379.3
1,389.6
1,397.4
1,400.9

Government
14.5
15.0
15.6
16.5
17.5
18.1
18.9
20.1
21.6
23.1
24.8
26.7
28.3
29.5
31.4
35.9
40.0
42.6
45.7
49.5
54.5
61.8
70.1
77.1
81.7
87.0
92.7
99.5
106.7
114.1
122.2
130.9
139.1
144.6
151.8
158.6
165.0
169.3
174.1
179.0
187.0
197.0
206.0
211.6
218.2
230.2
252.4
267.7
222.7
227.4
232.3
238.2
241.8
245.9
266.0
256.0
260.1
265.6
270.1
275.1
281.3
286.0
290.0

Equals:
Net
national
product
456.3
473.9
491.0
530.5
559.8
603.5
655.0
717.3
756.5
827.7
892.8
938.2
1,019.7
1,120.3
1,256.0
1,353.0
1,463.6
1,637.0
1,821.2
2,054.0
2,295.1
2,480.7
2,773.3
2,864.6
3,130.0
3,496.9
3,740.1
3,949.3
4,195.4
4,529.8
4,866.3
5,155.4
5,300.4
5,615.5
5,912.9
6,264.7
6,555.1
6,933.8
7,362.8
7,738.2
8,200.9
8,668.1
8,890.2
9,208.3
9,681.1
10,326.0
10,893.0
11,637.5
10,128.1
10,288.8
10,327.8
10,559.1
10,757.4
10,892.6
10,741.8
11,180.1
11,452.7
11,616.1
11,683.1
11,798.0
11,944.2
12,156.0
12,380.8

Less:
Statistical
discrepancy
0.5
–.9
–.6
.4
–.8
.8
1.6
6.3
4.6
4.6
3.2
7.3
11.6
9.1
8.6
10.9
17.7
25.1
22.3
26.6
46.0
41.4
30.9
.3
45.7
14.6
16.7
47.0
21.7
–19.5
39.7
66.2
72.5
102.7
139.5
142.5
101.2
93.7
70.7
–14.6
–35.7
–127.2
–89.6
–21.0
48.8
19.1
5.4
–18.1
38.0
40.8
10.0
–12.2
–11.1
–10.3
27.2
15.7
–20.9
–2.6
–2.5
–46.6
–66.3
–40.8
74.8

Equals:
National
income
455.8
474.9
491.6
530.1
560.6
602.7
653.4
711.0
751.9
823.2
889.7
930.9
1,008.1
1,111.2
1,247.4
1,342.1
1,445.9
1,611.8
1,798.9
2,027.4
2,249.1
2,439.3
2,742.4
2,864.3
3,084.2
3,482.3
3,723.4
3,902.3
4,173.7
4,549.4
4,826.6
5,089.1
5,227.9
5,512.8
5,773.4
6,122.3
6,453.9
6,840.1
7,292.2
7,752.8
8,236.7
8,795.2
8,979.8
9,229.3
9,632.3
10,306.8
10,887.6
11,655.6
10,090.0
10,248.0
10,317.8
10,571.3
10,768.5
10,903.0
10,714.6
11,164.5
11,473.6
11,618.7
11,685.6
11,844.6
12,010.5
12,196.8
12,306.0

Table B–27.—Relation of national income and personal income, 1959–2007
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Less:

Year or quarter

1959 ������������������������
1960 ������������������������
1961 ������������������������
1962 ������������������������
1963 ������������������������
1964 ������������������������
1965 ������������������������
1966 ������������������������
1967 ������������������������
1968 ������������������������
1969 ������������������������
1970 ������������������������
1971 ������������������������
1972 ������������������������
1973 ������������������������
1974 ������������������������
1975 ������������������������
1976 ������������������������
1977 ������������������������
1978 ������������������������
1979 ������������������������
1980 ������������������������
1981 ������������������������
1982 ������������������������
1983 ������������������������
1984 ������������������������
1985 ������������������������
1986 ������������������������
1987 ������������������������
1988 ������������������������
1989 ������������������������
1990 ������������������������
1991 ������������������������
1992 ������������������������
1993 ������������������������
1994 ������������������������
1995 ������������������������
1996 ������������������������
1997 ������������������������
1998 ������������������������
1999 ������������������������
2000 ������������������������
2001 ������������������������
2002 ������������������������
2003 ������������������������
2004 ������������������������
2005 ������������������������
2006 ������������������������
2004:  I ��������������������
      II �������������������
      III ������������������
      IV ������������������
2005:  I ��������������������
      II �������������������
      III ������������������
      IV ������������������
2006:  I ��������������������
      II �������������������
      III ������������������
      IV ������������������
2007:  I ��������������������
      II �������������������
      III ������������������

Plus:

Corporate
Net
profits
Taxes
Contribu- interest
with
Business
on
tions
National inventory
and
current
for
income valuation production
misceltransfer
and
governlaneous
and capital imports
ment
payments payments
con(net)
less
social
on
sumption subsidies insurance
assets
adjustments
455.8
474.9
491.6
530.1
560.6
602.7
653.4
711.0
751.9
823.2
889.7
930.9
1,008.1
1,111.2
1,247.4
1,342.1
1,445.9
1,611.8
1,798.9
2,027.4
2,249.1
2,439.3
2,742.4
2,864.3
3,084.2
3,482.3
3,723.4
3,902.3
4,173.7
4,549.4
4,826.6
5,089.1
5,227.9
5,512.8
5,773.4
6,122.3
6,453.9
6,840.1
7,292.2
7,752.8
8,236.7
8,795.2
8,979.8
9,229.3
9,632.3
10,306.8
10,887.6
11,655.6
10,090.0
10,248.0
10,317.8
10,571.3
10,768.5
10,903.0
10,714.6
11,164.5
11,473.6
11,618.7
11,685.6
11,844.6
12,010.5
12,196.8
12,306.0

55.7
53.8
54.9
63.3
69.0
76.5
87.5
93.2
91.3
98.8
95.4
83.6
98.0
112.1
125.5
115.8
134.8
163.3
192.4
216.6
223.2
201.1
226.1
209.7
264.2
318.6
330.3
319.5
368.8
432.6
426.6
437.8
451.2
479.3
541.9
600.3
696.7
786.2
868.5
801.6
851.3
817.9
767.3
886.3
993.1
1,231.2
1,372.8
1,553.7
1,184.0
1,227.4
1,218.7
1,294.8
1,376.7
1,404.0
1,297.9
1,412.5
1,515.5
1,575.5
1,592.5
1,531.2
1,547.7
1,642.4
1,621.9

40.0
43.4
45.0
48.2
51.2
54.6
57.8
59.3
64.2
72.3
79.4
86.7
95.9
101.4
112.1
121.7
131.0
141.5
152.8
162.2
171.9
190.9
224.5
226.4
242.5
269.3
287.3
298.9
317.7
345.5
372.1
398.7
430.2
453.9
467.0
513.5
524.2
546.8
579.1
604.4
629.8
664.6
673.3
724.4
759.3
819.2
863.1
917.6
801.1
814.2
823.6
837.9
845.1
859.7
870.4
877.0
900.1
916.2
922.9
931.1
943.8
956.8
967.8

13.8
16.4
17.0
19.1
21.7
22.4
23.4
31.3
34.9
38.7
44.1
46.4
51.2
59.2
75.5
85.2
89.3
101.3
113.1
131.3
152.7
166.2
195.7
208.9
226.0
257.5
281.4
303.4
323.1
361.5
385.2
410.1
430.2
455.0
477.7
508.2
532.8
555.2
587.2
624.2
661.4
702.7
731.1
750.0
778.6
828.8
874.8
927.6
810.8
822.9
836.1
845.5
861.0
867.9
881.7
888.5
918.8
920.1
926.8
944.6
969.8
972.2
981.5

9.6
10.6
12.5
14.2
15.2
17.4
19.6
22.4
25.5
27.1
32.7
39.1
43.9
47.9
55.2
70.8
81.6
85.5
101.1
115.0
138.9
181.8
232.3
271.1
285.3
327.1
341.3
366.8
366.4
385.3
432.1
442.2
418.2
388.5
365.7
366.4
367.1
376.2
415.6
487.1
495.4
559.0
566.3
520.9
524.7
491.2
558.0
598.5
497.3
491.8
483.9
491.8
534.0
546.7
568.5
583.0
592.9
611.0
594.2
596.0
599.6
592.4
599.3

1.8
1.9
2.0
2.2
2.7
3.1
3.6
3.5
3.8
4.3
4.9
4.5
4.3
4.9
6.0
7.1
9.4
9.5
8.4
10.6
13.0
14.4
17.6
20.1
22.5
30.1
34.8
36.6
33.8
34.0
39.2
39.4
39.9
42.4
40.7
43.3
46.9
53.1
49.9
64.7
67.4
87.1
92.8
84.3
83.8
83.0
66.5
90.2
84.8
86.6
67.0
93.6
94.3
96.1
–.3
75.8
89.1
88.6
91.4
91.8
91.8
92.8
94.4

Current
surplus
of
government
enterprises
1.0
.9
.8
.9
1.4
1.3
1.3
1.0
.9
1.2
1.0
.0
–.2
.5
–.4
–.9
–3.2
–1.8
–2.6
–1.9
–2.6
–4.8
–4.9
–4.0
–3.1
–1.9
.8
1.3
1.2
2.5
4.9
1.6
5.7
7.6
7.2
8.6
11.4
12.7
12.6
10.3
10.1
5.3
–1.4
.9
1.7
–4.2
–15.1
–13.9
–2.5
–3.3
–4.7
–6.5
–8.5
–10.4
–27.7
–13.9
–11.7
–13.4
–14.5
–16.0
–17.8
–15.0
–12.2

Wage
accruals
less
disbursements

0.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.6
.0
–.1
–.5
.1
.1
.1
.3
–.2
.0
.1
.0
–.4
.2
–.2
.0
.0
.0
.0
.1
–.1
–15.8
6.4
17.6
16.4
3.6
–2.9
–.7
5.2
.0
.0
.0
15.0
–15.0
5.0
7.5
–3.5
–21.5
–25.0
–10.0
.0
.0
.0
20.0
–20.0
.0
.0
50.0
.0
25.0
25.0

Personal
income
receipts
on
assets

34.6
37.9
40.1
44.1
47.9
53.8
59.4
64.1
69.0
75.2
84.1
93.5
101.0
109.6
124.7
146.4
162.2
178.4
205.3
234.8
274.7
338.7
421.9
488.4
529.6
607.9
654.0
695.5
717.0
769.3
878.0
924.0
932.0
910.9
901.8
950.8
1,016.4
1,089.2
1,181.7
1,283.2
1,264.2
1,387.0
1,380.0
1,333.2
1,336.6
1,432.1
1,617.8
1,796.5
1,359.8
1,384.4
1,420.1
1,564.1
1,527.6
1,590.0
1,643.9
1,709.5
1,725.6
1,795.7
1,828.1
1,836.6
1,882.9
1,930.0
1,976.2

Equals:

Personal
current
transfer
receipts

24.2
25.7
29.5
30.4
32.2
33.5
36.2
39.6
48.0
56.1
62.3
74.7
88.1
97.9
112.6
133.3
170.0
184.0
194.2
209.6
235.3
279.5
318.4
354.8
383.7
400.1
424.9
451.0
467.6
496.6
543.4
595.2
666.4
749.4
790.1
827.3
877.4
925.0
951.2
978.6
1,022.1
1,084.0
1,193.9
1,286.2
1,351.0
1,422.5
1,520.7
1,612.5
1,404.9
1,415.3
1,432.7
1,437.1
1,480.6
1,505.2
1,560.6
1,536.2
1,572.5
1,599.1
1,630.6
1,647.7
1,710.7
1,717.1
1,742.3

Personal
income

392.8
411.5
429.0
456.7
479.6
514.6
555.7
603.9
648.3
712.0
778.5
838.8
903.5
992.7
1,110.7
1,222.6
1,335.0
1,474.8
1,633.2
1,837.7
2,062.2
2,307.9
2,591.3
2,775.3
2,960.7
3,289.5
3,526.7
3,722.4
3,947.4
4,253.7
4,587.8
4,878.6
5,051.0
5,362.0
5,558.5
5,842.5
6,152.3
6,520.6
6,915.1
7,423.0
7,802.4
8,429.7
8,724.1
8,881.9
9,163.6
9,727.2
10,301.1
10,983.4
9,482.8
9,629.6
9,770.9
10,025.5
10,074.1
10,234.1
10,328.6
10,567.4
10,787.1
10,915.5
11,030.9
11,200.2
11,469.2
11,577.3
11,746.7

Source: Department of Commerce (Bureau of Economic Analysis).

Appendix B – National Income or Expenditure  |  257

Table B–28.—National income by type of income, 1959–2007
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Proprietors’ income with
inventory valuation and capital
consumption adjustments

Compensation of employees
Wage and salary accruals
Year or quarter

National
income
Total
Total

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Supplements to wages
and salaries

455.8
474.9
491.6
530.1
560.6
602.7
653.4
711.0
751.9
823.2
889.7
930.9
1,008.1
1,111.2
1,247.4
1,342.1
1,445.9
1,611.8
1,798.9
2,027.4
2,249.1
2,439.3
2,742.4
2,864.3
3,084.2
3,482.3
3,723.4
3,902.3
4,173.7
4,549.4
4,826.6
5,089.1
5,227.9
5,512.8
5,773.4
6,122.3
6,453.9
6,840.1
7,292.2
7,752.8
8,236.7
8,795.2
8,979.8
9,229.3
9,632.3
10,306.8
10,887.6
11,655.6
10,090.0
10,248.0
10,317.8
10,571.3
10,768.5
10,903.0
10,714.6
11,164.5
11,473.6
11,618.7
11,685.6
11,844.6
12,010.5
12,196.8
12,306.0

281.0
296.4
305.3
327.1
345.2
370.7
399.5
442.7
475.1
524.3
577.6
617.2
658.9
725.1
811.2
890.2
949.1
1,059.3
1,180.5
1,336.1
1,500.8
1,651.8
1,825.8
1,925.8
2,042.6
2,255.6
2,424.7
2,570.1
2,750.2
2,967.2
3,145.2
3,338.2
3,445.2
3,635.4
3,801.4
3,997.2
4,193.3
4,390.5
4,661.7
5,019.4
5,357.1
5,782.7
5,942.1
6,091.2
6,325.4
6,656.4
7,029.6
7,448.3
6,505.6
6,596.7
6,709.7
6,813.6
6,890.5
6,961.3
7,088.5
7,178.3
7,328.7
7,371.9
7,442.5
7,649.9
7,764.9
7,826.9
7,917.7

259.8
272.9
280.5
299.4
314.9
337.8
363.8
400.3
429.0
472.0
518.3
551.6
584.5
638.8
708.8
772.3
814.8
899.7
994.2
1,121.2
1,255.8
1,377.6
1,517.5
1,593.7
1,684.6
1,855.1
1,995.5
2,114.8
2,270.7
2,452.9
2,596.3
2,754.0
2,823.0
2,964.5
3,089.2
3,249.8
3,435.7
3,623.2
3,874.7
4,182.7
4,471.4
4,829.2
4,942.8
4,980.9
5,127.7
5,379.5
5,672.9
6,025.7
5,257.4
5,329.7
5,422.8
5,508.1
5,559.1
5,614.0
5,720.4
5,797.9
5,925.6
5,958.4
6,015.8
6,203.0
6,294.4
6,343.9
6,418.5

Government

46.1
49.2
52.5
56.3
60.0
64.9
69.9
78.4
86.5
96.7
105.6
117.2
126.8
137.9
148.8
160.5
176.2
188.9
202.6
220.0
237.1
261.5
285.8
307.5
324.8
348.1
373.9
397.0
422.6
451.3
480.2
517.7
546.8
569.2
586.8
606.2
625.5
644.4
668.1
697.3
729.3
774.7
815.9
865.9
904.4
943.1
980.9
1,020.6
933.1
940.8
946.4
952.2
971.0
977.2
984.1
991.4
1,004.4
1,013.8
1,027.0
1,037.2
1,051.7
1,061.9
1,072.9

Other

Total

213.8
223.7
228.0
243.0
254.8
272.9
293.8
321.9
342.5
375.3
412.7
434.3
457.8
500.9
560.0
611.8
638.6
710.8
791.6
901.2
1,018.7
1,116.2
1,231.7
1,286.2
1,359.8
1,507.0
1,621.6
1,717.9
1,848.1
2,001.6
2,116.2
2,236.3
2,276.2
2,395.3
2,502.4
2,643.5
2,810.2
2,978.8
3,206.6
3,485.5
3,742.1
4,054.5
4,126.9
4,115.0
4,223.3
4,436.4
4,691.9
5,005.1
4,324.3
4,388.9
4,476.5
4,555.9
4,588.1
4,636.8
4,736.3
4,806.6
4,921.1
4,944.6
4,988.8
5,165.7
5,242.7
5,281.9
5,345.6

21.1
23.6
24.8
27.8
30.4
32.9
35.7
42.3
46.1
52.3
59.3
65.7
74.4
86.4
102.5
118.0
134.3
159.6
186.4
214.9
245.0
274.2
308.3
332.1
358.0
400.5
429.2
455.3
479.5
514.2
548.9
584.2
622.3
670.9
712.2
747.5
757.7
767.3
787.0
836.7
885.7
953.4
999.3
1,110.3
1,197.7
1,276.9
1,356.8
1,422.6
1,248.2
1,266.9
1,286.9
1,305.5
1,331.3
1,347.2
1,368.1
1,380.4
1,403.1
1,413.5
1,426.7
1,446.9
1,470.5
1,483.0
1,499.2

See next page for continuation of table.

258  |  Economic Report of the President

Employer Employer
contribu- contributions for tions for
employee government
pension
social
and
insurance insurance
funds
13.3
14.3
15.2
16.6
18.0
20.3
22.7
25.5
28.1
32.4
36.5
41.8
47.9
55.2
62.7
73.3
87.6
105.2
125.3
143.4
162.4
185.2
204.7
222.4
238.1
261.5
281.5
297.5
313.2
329.6
355.2
377.8
407.1
442.5
472.4
493.3
493.6
492.5
497.5
529.7
562.4
609.9
642.7
745.1
815.6
868.5
927.7
970.7
848.7
861.4
874.9
889.1
908.9
921.6
935.6
944.6
955.2
965.5
975.4
986.7
999.2
1,010.9
1,022.7

7.9
9.3
9.6
11.2
12.4
12.6
13.1
16.8
18.0
20.0
22.8
23.8
26.4
31.2
39.8
44.7
46.7
54.4
61.1
71.5
82.6
88.9
103.6
109.8
119.9
139.0
147.7
157.9
166.3
184.6
193.7
206.5
215.1
228.4
239.8
254.1
264.0
274.9
289.5
307.0
323.3
343.5
356.6
365.2
382.1
408.3
429.1
451.8
399.5
405.5
412.0
416.4
422.5
425.7
432.5
435.8
447.9
448.0
451.3
460.2
471.3
472.1
476.4

Total

50.7
50.8
53.2
55.4
56.5
59.4
63.9
68.2
69.8
74.3
77.4
78.4
84.8
95.9
113.5
113.1
119.5
132.2
145.7
166.6
180.1
174.1
183.0
176.3
192.5
243.3
262.3
275.7
302.2
341.6
363.3
380.6
377.1
427.6
453.8
473.3
492.1
543.2
576.0
627.8
678.3
728.4
771.9
768.4
811.3
911.6
969.9
1,006.7
879.3
908.7
914.1
944.4
948.8
971.1
967.1
992.6
1,000.1
1,013.5
1,003.6
1,009.8
1,027.4
1,038.4
1,048.7

Farm

10.0
10.5
11.0
11.0
10.8
9.6
11.8
12.8
11.5
11.5
12.6
12.7
13.2
16.8
28.9
23.2
21.7
17.0
15.7
19.6
21.8
11.3
18.7
13.1
6.0
20.6
20.8
22.6
28.7
26.8
33.0
31.9
26.7
34.5
31.2
33.9
22.7
37.3
34.2
29.4
28.6
22.7
19.7
10.6
29.2
37.3
30.8
19.4
40.3
39.6
33.0
36.5
30.1
34.0
30.9
28.2
20.8
14.6
18.1
23.9
29.1
33.1
38.6

Nonfarm

40.6
40.3
42.2
44.4
45.7
49.8
52.1
55.4
58.4
62.8
64.7
65.7
71.6
79.1
84.6
89.9
97.8
115.2
130.0
147.1
158.3
162.8
164.3
163.3
186.5
222.7
241.5
253.1
273.5
314.7
330.3
348.7
350.4
393.0
422.6
439.4
469.5
505.9
541.8
598.4
649.7
705.7
752.2
757.8
782.1
874.3
939.1
987.4
839.1
869.1
881.1
908.0
918.6
937.1
936.2
964.4
979.3
998.9
985.5
985.8
998.3
1,005.3
1,010.0

Rental
income
of
persons
with
capital
consumption
adjustment

16.2
17.1
17.9
18.8
19.5
19.6
20.2
20.8
21.2
20.9
21.2
21.4
22.4
23.4
24.3
24.3
23.7
22.3
20.7
22.1
23.8
30.0
38.0
38.8
37.8
40.2
41.9
33.5
33.5
40.6
43.1
50.7
60.3
78.0
95.6
119.7
122.1
131.5
128.8
137.5
147.3
150.3
167.4
152.9
133.0
118.4
42.9
54.5
140.4
126.0
105.5
101.7
87.6
74.5
–49.8
59.3
59.0
55.4
52.9
50.9
53.2
62.1
68.4

Table B–28.—National income by type of income, 1959–2007—Continued
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Corporate profits with inventory valuation and capital consumption adjustments
Profits with inventory valuation adjustment and
without capital consumption adjustment
Year or quarter

Profits
Total
Total

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

55.7
53.8
54.9
63.3
69.0
76.5
87.5
93.2
91.3
98.8
95.4
83.6
98.0
112.1
125.5
115.8
134.8
163.3
192.4
216.6
223.2
201.1
226.1
209.7
264.2
318.6
330.3
319.5
368.8
432.6
426.6
437.8
451.2
479.3
541.9
600.3
696.7
786.2
868.5
801.6
851.3
817.9
767.3
886.3
993.1
1,231.2
1,372.8
1,553.7
1,184.0
1,227.4
1,218.7
1,294.8
1,376.7
1,404.0
1,297.9
1,412.5
1,515.5
1,575.5
1,592.5
1,531.2
1,547.7
1,642.4
1,621.9

53.5
51.5
51.8
57.0
62.1
68.6
78.9
84.6
82.0
88.8
85.5
74.4
88.3
101.2
115.3
109.5
135.0
165.6
194.7
222.4
231.8
211.4
219.1
191.0
226.5
264.6
257.5
253.0
301.4
363.9
367.4
396.6
427.9
458.3
513.1
564.6
656.0
736.1
812.3
738.5
776.8
759.3
719.2
766.2
894.5
1,161.6
1,543.4
1,769.5
1,094.6
1,147.7
1,159.7
1,244.3
1,513.0
1,559.3
1,495.4
1,605.9
1,708.8
1,784.6
1,816.2
1,768.2
1,775.6
1,876.8
1,859.4

Profits
before
tax

Taxes
on
corporate
income

53.8
51.6
51.6
57.0
62.1
69.1
80.2
86.7
83.5
92.4
91.4
81.0
92.9
107.8
134.8
147.8
145.5
179.7
210.4
246.1
271.9
253.5
243.7
198.5
233.9
268.6
257.4
246.0
317.6
386.1
383.7
409.5
423.0
461.1
517.1
577.1
674.3
733.0
798.2
718.3
775.9
773.4
707.9
768.4
908.1
1,204.7
1,579.6
1,805.8
1,128.3
1,199.6
1,199.3
1,291.5
1,558.3
1,578.7
1,528.3
1,653.0
1,740.2
1,842.3
1,851.4
1,789.2
1,815.8
1,931.5
1,879.7

23.7
22.8
22.9
24.1
26.4
28.2
31.1
33.9
32.9
39.6
40.0
34.8
38.2
42.3
50.0
52.8
51.6
65.3
74.4
84.9
90.0
87.2
84.3
66.5
80.6
97.5
99.4
109.7
130.4
141.6
146.1
145.4
138.6
148.7
171.0
193.7
218.7
231.7
246.1
248.3
258.6
265.2
204.1
192.6
243.3
307.4
392.9
453.9
282.5
307.1
302.5
337.3
389.0
393.8
373.1
415.6
432.8
460.0
470.4
452.4
452.5
490.1
469.4

Inventory
valuation
Undis- adjusttributed ment
profits

Profits after tax
Net
dividends

Total
30.0
28.8
28.7
32.9
35.7
40.9
49.1
52.8
50.6
52.8
51.4
46.2
54.7
65.5
84.9
95.0
93.9
114.4
136.0
161.3
181.9
166.3
159.4
132.0
153.3
171.1
158.0
136.3
187.2
244.4
237.7
264.1
284.4
312.4
346.1
383.3
455.6
501.4
552.1
470.0
517.2
508.2
503.8
575.8
664.8
897.3
1,186.7
1,351.9
845.8
892.5
896.7
954.2
1,169.4
1,184.9
1,155.2
1,237.3
1,307.3
1,382.4
1,381.0
1,336.8
1,363.3
1,441.4
1,410.2

12.6
13.4
13.9
15.0
16.2
18.2
20.2
20.7
21.5
23.5
24.2
24.3
25.0
26.8
29.9
33.2
33.0
39.0
44.8
50.8
57.5
64.1
73.8
77.7
83.5
90.8
97.6
106.2
112.3
129.9
158.0
169.1
180.7
187.9
202.8
234.7
254.2
297.6
334.5
351.6
337.4
377.9
370.9
399.2
424.7
539.5
601.4
698.9
473.9
500.7
528.5
654.8
566.0
588.1
612.6
638.7
662.5
685.6
711.1
736.4
759.4
784.2
807.7

17.5
15.5
14.8
17.9
19.5
22.7
28.9
32.1
29.1
29.3
27.2
21.9
29.7
38.6
55.0
61.8
60.9
75.4
91.2
110.5
124.4
102.2
85.6
54.3
69.8
80.3
60.5
30.1
74.9
114.5
79.7
95.0
103.7
124.5
143.3
148.6
201.4
203.8
217.6
118.3
179.9
130.3
132.9
176.6
240.1
357.8
585.3
653.0
371.9
391.8
368.3
299.3
603.4
596.8
542.6
598.6
644.9
696.8
670.0
600.3
603.9
657.2
602.5

–0.3
–.2
.3
.0
.1
–.5
–1.2
–2.1
–1.6
–3.7
–5.9
–6.6
–4.6
–6.6
–19.6
–38.2
–10.5
–14.1
–15.7
–23.7
–40.1
–42.1
–24.6
–7.5
–7.4
–4.0
.0
7.1
–16.2
–22.2
–16.3
–12.9
4.9
–2.8
–4.0
–12.4
–18.3
3.1
14.1
20.2
1.0
–14.1
11.3
–2.2
–13.6
–43.1
–36.2
–36.3
–33.7
–51.9
–39.6
–47.2
–45.3
–19.4
–32.9
–47.0
–31.4
–57.7
–35.2
–21.0
–40.2
–54.7
–20.3

Net
interest Taxes
on
Capital
and
con- miscel- producsump- laneous tion
and
tion
payadjust- ments imports
ment

2.2
2.3
3.0
6.2
6.8
7.9
8.6
8.6
9.3
10.0
9.9
9.2
9.7
10.9
10.2
6.2
–.2
–2.3
–2.3
–5.8
–8.5
–10.2
7.0
18.6
37.8
54.0
72.9
66.5
67.5
68.7
59.2
41.2
23.3
21.1
28.8
35.7
40.7
50.1
56.2
63.1
74.5
58.6
48.1
120.1
98.7
69.7
–170.6
–215.8
89.4
79.7
59.0
50.5
–136.3
–155.2
–197.5
–193.5
–193.3
–209.1
–223.7
–237.0
–227.9
–234.4
–237.4

9.6
41.1
10.6
44.6
12.5
47.0
14.2
50.4
15.2
53.4
17.4
57.3
19.6
60.8
22.4
63.3
25.5
68.0
27.1
76.5
32.7
84.0
39.1
91.5
43.9 100.6
47.9 108.1
55.2 117.3
70.8 125.0
81.6 135.5
85.5 146.6
101.1 159.9
115.0 171.2
138.9 180.4
181.8 200.7
232.3 236.0
271.1 241.3
285.3 263.7
327.1 290.2
341.3 308.5
366.8 323.7
366.4 347.9
385.3 374.9
432.1 399.3
442.2 425.5
418.2 457.5
388.5 483.8
365.7 503.4
366.4 545.6
367.1 558.2
376.2 581.1
415.6 612.0
487.1 639.8
495.4 674.0
559.0 708.9
566.3 728.6
520.9 762.8
524.7 807.2
491.2 863.8
558.0 921.6
598.5 967.3
497.3 844.8
491.8 857.1
483.9 867.8
491.8 885.5
534.0 899.5
546.7 917.7
568.5 930.0
583.0 939.2
592.9 953.3
611.0 965.9
594.2 971.2
596.0 978.9
599.6 990.8
592.4 1,004.1
599.3 1,014.4

Less:
Subsidies

1.1
1.1
2.0
2.3
2.2
2.7
3.0
3.9
3.8
4.2
4.5
4.8
4.7
6.6
5.2
3.3
4.5
5.1
7.1
8.9
8.5
9.8
11.5
15.0
21.2
21.0
21.3
24.8
30.2
29.4
27.2
26.8
27.3
29.9
36.4
32.2
34.0
34.3
32.9
35.4
44.2
44.3
55.3
38.4
47.9
44.6
58.5
49.7
43.7
42.9
44.2
47.6
54.3
58.1
59.6
62.2
53.2
49.7
48.3
47.8
47.0
47.3
46.6

Busi- Current
ness surplus
current
of
transfer governpayment
ments enter(net)
prises

1.8
1.9
2.0
2.2
2.7
3.1
3.6
3.5
3.8
4.3
4.9
4.5
4.3
4.9
6.0
7.1
9.4
9.5
8.4
10.6
13.0
14.4
17.6
20.1
22.5
30.1
34.8
36.6
33.8
34.0
39.2
39.4
39.9
42.4
40.7
43.3
46.9
53.1
49.9
64.7
67.4
87.1
92.8
84.3
83.8
83.0
66.5
90.2
84.8
86.6
67.0
93.6
94.3
96.1
–.3
75.8
89.1
88.6
91.4
91.8
91.8
92.8
94.4

1.0
.9
.8
.9
1.4
1.3
1.3
1.0
.9
1.2
1.0
.0
–.2
.5
–.4
–.9
–3.2
–1.8
–2.6
–1.9
–2.6
–4.8
–4.9
–4.0
–3.1
–1.9
.8
1.3
1.2
2.5
4.9
1.6
5.7
7.6
7.2
8.6
11.4
12.7
12.6
10.3
10.1
5.3
–1.4
.9
1.7
–4.2
–15.1
–13.9
–2.5
–3.3
–4.7
–6.5
–8.5
–10.4
–27.7
–13.9
–11.7
–13.4
–14.5
–16.0
–17.8
–15.0
–12.2

Source: Department of Commerce (Bureau of Economic Analysis).

Appendix B – National Income or Expenditure  |  259

Table B–29.—Sources of personal income, 1959–2007
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Proprietors’ income with
inventory valuation and capital
consumption adjustments

Compensation of employees, received
Wage and salary
disbursements
Year or quarter

Supplements to
wages and salaries

Personal
income
Total
Total

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

392.8
411.5
429.0
456.7
479.6
514.6
555.7
603.9
648.3
712.0
778.5
838.8
903.5
992.7
1,110.7
1,222.6
1,335.0
1,474.8
1,633.2
1,837.7
2,062.2
2,307.9
2,591.3
2,775.3
2,960.7
3,289.5
3,526.7
3,722.4
3,947.4
4,253.7
4,587.8
4,878.6
5,051.0
5,362.0
5,558.5
5,842.5
6,152.3
6,520.6
6,915.1
7,423.0
7,802.4
8,429.7
8,724.1
8,881.9
9,163.6
9,727.2
10,301.1
10,983.4
9,482.8
9,629.6
9,770.9
10,025.5
10,074.1
10,234.1
10,328.6
10,567.4
10,787.1
10,915.5
11,030.9
11,200.2
11,469.2
11,577.3
11,746.7

281.0
296.4
305.3
327.1
345.2
370.7
399.5
442.7
475.1
524.3
577.6
617.2
658.3
725.1
811.3
890.7
949.0
1,059.2
1,180.4
1,335.8
1,501.0
1,651.8
1,825.7
1,925.9
2,043.0
2,255.4
2,424.9
2,570.1
2,750.2
2,967.2
3,145.2
3,338.2
3,445.3
3,651.2
3,794.9
3,979.6
4,177.0
4,386.9
4,664.6
5,020.1
5,352.0
5,782.7
5,942.1
6,091.2
6,310.4
6,671.4
7,024.6
7,440.8
6,509.1
6,618.2
6,734.7
6,823.6
6,890.5
6,961.3
7,088.5
7,158.3
7,348.7
7,371.9
7,442.5
7,599.9
7,764.9
7,801.9
7,892.7

Private
industries

Government

259.8
272.9
280.5
299.4
314.9
337.8
363.8
400.3
429.0
472.0
518.3
551.6
584.0
638.8
708.8
772.8
814.7
899.6
994.1
1,120.9
1,256.0
1,377.7
1,517.5
1,593.7
1,685.0
1,854.9
1,995.7
2,114.8
2,270.7
2,452.9
2,596.3
2,754.0
2,823.0
2,980.3
3,082.7
3,232.1
3,419.3
3,619.6
3,877.6
4,183.4
4,466.3
4,829.2
4,942.8
4,980.9
5,112.7
5,394.5
5,667.9
6,018.2
5,260.9
5,351.2
5,447.8
5,518.1
5,559.1
5,614.0
5,720.4
5,777.9
5,945.6
5,958.4
6,015.8
6,153.0
6,294.4
6,318.9
6,393.5

213.8
223.7
228.0
243.0
254.8
272.9
293.8
321.9
342.5
375.3
412.7
434.3
457.4
501.2
560.0
611.8
638.6
710.8
791.6
901.2
1,018.7
1,116.2
1,231.7
1,286.2
1,359.8
1,507.0
1,621.6
1,717.9
1,848.1
2,001.6
2,116.2
2,236.3
2,276.2
2,411.1
2,496.0
2,625.9
2,793.8
2,975.2
3,209.5
3,486.2
3,736.9
4,054.5
4,126.9
4,115.0
4,208.3
4,451.4
4,686.9
4,997.6
4,329.3
4,408.9
4,501.5
4,565.9
4,588.1
4,636.8
4,736.3
4,786.6
4,941.1
4,944.6
4,988.8
5,115.7
5,242.7
5,256.9
5,320.6

46.1
49.2
52.5
56.3
60.0
64.9
69.9
78.4
86.5
96.7
105.6
117.2
126.6
137.6
148.8
161.0
176.1
188.8
202.5
219.7
237.3
261.5
285.8
307.5
325.2
347.9
374.1
397.0
422.6
451.3
480.2
517.7
546.8
569.2
586.8
606.2
625.5
644.4
668.1
697.3
729.3
774.7
815.9
865.9
904.4
943.1
980.9
1,020.6
931.6
942.3
946.4
952.2
971.0
977.2
984.1
991.4
1,004.4
1,013.8
1,027.0
1,037.2
1,051.7
1,061.9
1,072.9

See next page for continuation of table.

260  |  Economic Report of the President

Total

21.1
23.6
24.8
27.8
30.4
32.9
35.7
42.3
46.1
52.3
59.3
65.7
74.4
86.4
102.5
118.0
134.3
159.6
186.4
214.9
245.0
274.2
308.3
332.1
358.0
400.5
429.2
455.3
479.5
514.2
548.9
584.2
622.3
670.9
712.2
747.5
757.7
767.3
787.0
836.7
885.7
953.4
999.3
1,110.3
1,197.7
1,276.9
1,356.8
1,422.6
1,248.2
1,266.9
1,286.9
1,305.5
1,331.3
1,347.2
1,368.1
1,380.4
1,403.1
1,413.5
1,426.7
1,446.9
1,470.5
1,483.0
1,499.2

Employer Employer
contribu- contributions for
employee tions for
pension government
and
social
insurance insurance
funds
13.3
14.3
15.2
16.6
18.0
20.3
22.7
25.5
28.1
32.4
36.5
41.8
47.9
55.2
62.7
73.3
87.6
105.2
125.3
143.4
162.4
185.2
204.7
222.4
238.1
261.5
281.5
297.5
313.2
329.6
355.2
377.8
407.1
442.5
472.4
493.3
493.6
492.5
497.5
529.7
562.4
609.9
642.7
745.1
815.6
868.5
927.7
970.7
848.7
861.4
874.9
889.1
908.9
921.6
935.6
944.6
955.2
965.5
975.4
986.7
999.2
1,010.9
1,022.7

7.9
9.3
9.6
11.2
12.4
12.6
13.1
16.8
18.0
20.0
22.8
23.8
26.4
31.2
39.8
44.7
46.7
54.4
61.1
71.5
82.6
88.9
103.6
109.8
119.9
139.0
147.7
157.9
166.3
184.6
193.7
206.5
215.1
228.4
239.8
254.1
264.0
274.9
289.5
307.0
323.3
343.5
356.6
365.2
382.1
408.3
429.1
451.8
399.5
405.5
412.0
416.4
422.5
425.7
432.5
435.8
447.9
448.0
451.3
460.2
471.3
472.1
476.4

Total

50.7
50.8
53.2
55.4
56.5
59.4
63.9
68.2
69.8
74.3
77.4
78.4
84.8
95.9
113.5
113.1
119.5
132.2
145.7
166.6
180.1
174.1
183.0
176.3
192.5
243.3
262.3
275.7
302.2
341.6
363.3
380.6
377.1
427.6
453.8
473.3
492.1
543.2
576.0
627.8
678.3
728.4
771.9
768.4
811.3
911.6
969.9
1,006.7
879.3
908.7
914.1
944.4
948.8
971.1
967.1
992.6
1,000.1
1,013.5
1,003.6
1,009.8
1,027.4
1,038.4
1,048.7

Farm

10.0
10.5
11.0
11.0
10.8
9.6
11.8
12.8
11.5
11.5
12.6
12.7
13.2
16.8
28.9
23.2
21.7
17.0
15.7
19.6
21.8
11.3
18.7
13.1
6.0
20.6
20.8
22.6
28.7
26.8
33.0
31.9
26.7
34.5
31.2
33.9
22.7
37.3
34.2
29.4
28.6
22.7
19.7
10.6
29.2
37.3
30.8
19.4
40.3
39.6
33.0
36.5
30.1
34.0
30.9
28.2
20.8
14.6
18.1
23.9
29.1
33.1
38.6

Rental
income
of
persons
with
capital
Nonfarm consumption
adjustment

40.6
40.3
42.2
44.4
45.7
49.8
52.1
55.4
58.4
62.8
64.7
65.7
71.6
79.1
84.6
89.9
97.8
115.2
130.0
147.1
158.3
162.8
164.3
163.3
186.5
222.7
241.5
253.1
273.5
314.7
330.3
348.7
350.4
393.0
422.6
439.4
469.5
505.9
541.8
598.4
649.7
705.7
752.2
757.8
782.1
874.3
939.1
987.4
839.1
869.1
881.1
908.0
918.6
937.1
936.2
964.4
979.3
998.9
985.5
985.8
998.3
1,005.3
1,010.0

16.2
17.1
17.9
18.8
19.5
19.6
20.2
20.8
21.2
20.9
21.2
21.4
22.4
23.4
24.3
24.3
23.7
22.3
20.7
22.1
23.8
30.0
38.0
38.8
37.8
40.2
41.9
33.5
33.5
40.6
43.1
50.7
60.3
78.0
95.6
119.7
122.1
131.5
128.8
137.5
147.3
150.3
167.4
152.9
133.0
118.4
42.9
54.5
140.4
126.0
105.5
101.7
87.6
74.5
–49.8
59.3
59.0
55.4
52.9
50.9
53.2
62.1
68.4

Table B–29.—Sources of personal income, 1959–2007—Continued
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Personal income receipts
on assets

Personal current transfer receipts
Government social benefits to persons

Year or quarter
Total

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

34.6
37.9
40.1
44.1
47.9
53.8
59.4
64.1
69.0
75.2
84.1
93.5
101.0
109.6
124.7
146.4
162.2
178.4
205.3
234.8
274.7
338.7
421.9
488.4
529.6
607.9
654.0
695.5
717.0
769.3
878.0
924.0
932.0
910.9
901.8
950.8
1,016.4
1,089.2
1,181.7
1,283.2
1,264.2
1,387.0
1,380.0
1,333.2
1,336.6
1,432.1
1,617.8
1,796.5
1,359.8
1,384.4
1,420.1
1,564.1
1,527.6
1,590.0
1,643.9
1,709.5
1,725.6
1,795.7
1,828.1
1,836.6
1,882.9
1,930.0
1,976.2

Personal
interest
income

Personal
dividend
income

22.0
24.5
26.2
29.1
31.7
35.6
39.2
43.4
47.5
51.6
59.9
69.2
75.9
82.8
94.8
113.2
129.3
139.5
160.6
184.0
217.3
274.7
348.3
410.8
446.3
517.2
556.6
589.5
604.9
639.5
720.2
755.2
751.7
723.4
699.6
716.8
763.2
793.0
848.7
933.2
928.6
1,011.0
1,011.0
936.1
914.1
895.1
1,018.9
1,100.2
888.1
885.9
894.0
912.3
964.0
1,004.4
1,033.8
1,073.3
1,065.7
1,112.7
1,119.7
1,102.8
1,126.1
1,148.4
1,171.1

12.6
13.4
13.9
15.0
16.2
18.2
20.2
20.7
21.5
23.5
24.2
24.3
25.0
26.8
29.9
33.2
32.9
39.0
44.7
50.7
57.4
64.0
73.6
77.6
83.3
90.6
97.4
106.0
112.2
129.7
157.8
168.8
180.3
187.4
202.2
234.0
253.2
296.2
333.0
349.9
335.6
376.1
369.0
397.2
422.6
537.0
598.9
696.3
471.8
498.5
526.1
651.8
563.6
585.7
610.1
636.2
659.9
682.9
708.4
733.8
756.8
781.6
805.0

Total

24.2
25.7
29.5
30.4
32.2
33.5
36.2
39.6
48.0
56.1
62.3
74.7
88.1
97.9
112.6
133.3
170.0
184.0
194.2
209.6
235.3
279.5
318.4
354.8
383.7
400.1
424.9
451.0
467.6
496.6
543.4
595.2
666.4
749.4
790.1
827.3
877.4
925.0
951.2
978.6
1,022.1
1,084.0
1,193.9
1,286.2
1,351.0
1,422.5
1,520.7
1,612.5
1,404.9
1,415.3
1,432.7
1,437.1
1,480.6
1,505.2
1,560.6
1,536.2
1,572.5
1,599.1
1,630.6
1,647.7
1,710.7
1,717.1
1,742.3

Total

22.9
24.4
28.1
28.8
30.3
31.3
33.9
37.5
45.8
53.3
59.0
71.7
85.4
94.8
108.6
128.6
163.1
177.3
189.1
203.2
227.1
270.8
307.2
342.4
369.9
380.4
402.6
428.0
447.4
476.0
519.9
573.1
648.5
729.8
775.7
812.2
858.4
902.1
931.8
952.6
988.0
1,041.6
1,143.9
1,248.9
1,316.7
1,396.1
1,483.1
1,585.3
1,379.8
1,392.6
1,396.2
1,415.7
1,456.0
1,479.4
1,491.1
1,505.8
1,546.9
1,573.3
1,603.2
1,618.0
1,683.1
1,689.4
1,714.4

Old-age,
survivors,
disability,
and
health
insurance
benefits
10.2
11.1
12.6
14.3
15.2
16.0
18.1
20.8
25.8
30.5
33.1
38.6
44.7
49.8
60.9
70.3
81.5
93.3
105.3
116.9
132.5
154.8
182.1
204.6
222.2
237.8
253.0
268.9
282.6
300.2
325.6
351.8
381.7
414.4
443.4
475.4
506.8
537.7
563.2
575.1
588.9
620.8
668.5
707.5
741.3
788.0
845.3
946.4
775.8
783.2
790.4
802.8
828.4
842.7
850.6
859.5
917.4
940.1
956.1
972.0
999.4
1,020.1
1,034.6

Government unemploy- Veterans
ment
benefits
insurance
benefits
2.8
3.0
4.3
3.1
3.0
2.7
2.3
1.9
2.2
2.1
2.2
4.0
5.8
5.7
4.4
6.8
17.6
15.8
12.7
9.1
9.4
15.7
15.6
25.1
26.2
15.9
15.7
16.3
14.5
13.2
14.3
18.0
26.6
38.9
34.1
23.5
21.4
22.0
19.9
19.5
20.3
20.3
31.7
53.2
52.8
36.0
31.3
29.9
42.6
35.7
33.6
32.2
32.3
30.9
30.6
31.5
30.2
29.2
30.0
30.3
31.8
31.7
31.7

4.6
4.6
5.0
4.7
4.8
4.7
4.9
4.9
5.6
5.9
6.7
7.7
8.8
9.7
10.4
11.8
14.5
14.4
13.8
13.9
14.4
15.0
16.1
16.4
16.6
16.4
16.7
16.7
16.6
16.9
17.3
17.8
18.3
19.3
20.1
20.1
20.9
21.7
22.5
23.4
24.3
25.1
26.7
29.6
32.0
34.5
36.9
39.5
33.9
34.2
34.7
35.2
36.7
36.8
37.1
37.1
38.8
39.3
39.7
40.3
41.6
43.0
43.5

Family
assistance 1

0.9
1.0
1.1
1.3
1.4
1.5
1.7
1.9
2.3
2.8
3.5
4.8
6.2
6.9
7.2
8.0
9.3
10.1
10.6
10.8
11.1
12.5
13.1
12.9
13.8
14.5
15.2
16.1
16.4
16.9
17.5
19.2
21.1
22.2
22.8
23.2
22.6
20.3
17.9
17.4
17.9
18.4
18.1
17.7
18.4
18.4
18.2
18.2
18.5
18.4
18.3
18.3
18.2
18.2
18.2
18.2
18.2
18.2
18.3
18.3
18.4
18.5
18.7

Other

4.5
4.7
5.1
5.5
5.9
6.4
7.0
8.1
9.9
11.9
13.4
16.6
20.0
22.7
25.7
31.7
40.2
43.7
46.7
52.5
59.6
72.8
80.2
83.4
91.0
95.9
102.0
109.9
117.3
128.8
145.3
166.2
200.8
234.9
255.3
270.0
286.7
300.4
308.3
317.3
336.7
357.0
398.9
440.9
472.2
519.2
551.3
551.3
509.0
521.1
519.2
527.3
540.3
550.7
554.7
559.5
542.4
546.4
559.2
557.0
591.8
576.1
585.9

Less:
Contributions
Other
for
current
governtransfer
ment
receipts,
social
from
business insurance
(net)
1.3
1.3
1.4
1.5
1.9
2.2
2.3
2.1
2.3
2.8
3.3
2.9
2.7
3.1
3.9
4.7
6.8
6.7
5.1
6.5
8.2
8.6
11.2
12.4
13.8
19.7
22.3
22.9
20.2
20.6
23.5
22.2
17.9
19.6
14.4
15.1
19.0
22.9
19.4
26.0
34.1
42.4
50.0
37.3
34.3
26.4
37.6
27.2
25.1
22.7
36.5
21.4
24.6
25.8
69.5
30.4
25.7
25.9
27.4
29.7
27.6
27.8
28.0

13.8
16.4
17.0
19.1
21.7
22.4
23.4
31.3
34.9
38.7
44.1
46.4
51.2
59.2
75.5
85.2
89.3
101.3
113.1
131.3
152.7
166.2
195.7
208.9
226.0
257.5
281.4
303.4
323.1
361.5
385.2
410.1
430.2
455.0
477.7
508.2
532.8
555.2
587.2
624.2
661.4
702.7
731.1
750.0
778.6
828.8
874.8
927.6
810.8
822.9
836.1
845.5
861.0
867.9
881.7
888.5
918.8
920.1
926.8
944.6
969.8
972.2
981.5

1 Consists of aid to families with dependent children and, beginning in 1996, assistance programs operating under the Personal Responsibility and Work
Opportunity Reconciliation Act of 1996.
Source: Department of Commerce (Bureau of Economic Analysis).

Appendix B – National Income or Expenditure  |  261

Table B–30.—Disposition of personal income, 1959–2007
[Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates]
Percent of disposable
personal income 2

Less: Personal outlays

Year or quarter

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Personal
income

392.8
411.5
429.0
456.7
479.6
514.6
555.7
603.9
648.3
712.0
778.5
838.8
903.5
992.7
1,110.7
1,222.6
1,335.0
1,474.8
1,633.2
1,837.7
2,062.2
2,307.9
2,591.3
2,775.3
2,960.7
3,289.5
3,526.7
3,722.4
3,947.4
4,253.7
4,587.8
4,878.6
5,051.0
5,362.0
5,558.5
5,842.5
6,152.3
6,520.6
6,915.1
7,423.0
7,802.4
8,429.7
8,724.1
8,881.9
9,163.6
9,727.2
10,301.1
10,983.4
9,482.8
9,629.6
9,770.9
10,025.5
10,074.1
10,234.1
10,328.6
10,567.4
10,787.1
10,915.5
11,030.9
11,200.2
11,469.2
11,577.3
11,746.7

Less:
Personal
current
taxes

42.3
46.1
47.3
51.6
54.6
52.1
57.7
66.4
73.0
87.0
104.5
103.1
101.7
123.6
132.4
151.0
147.6
172.3
197.5
229.4
268.7
298.9
345.2
354.1
352.3
377.4
417.4
437.3
489.1
505.0
566.1
592.8
586.7
610.6
646.6
690.7
744.1
832.1
926.3
1,027.0
1,107.5
1,235.7
1,237.3
1,051.8
1,001.1
1,046.3
1,209.1
1,354.3
1,008.1
1,024.5
1,062.1
1,090.7
1,166.4
1,195.5
1,223.5
1,251.0
1,318.6
1,342.6
1,355.2
1,401.0
1,454.7
1,477.6
1,489.2

Equals:
Disposable
personal
income

350.5
365.4
381.8
405.1
425.1
462.5
498.1
537.5
575.3
625.0
674.0
735.7
801.8
869.1
978.3
1,071.6
1,187.4
1,302.5
1,435.7
1,608.3
1,793.5
2,009.0
2,246.1
2,421.2
2,608.4
2,912.0
3,109.3
3,285.1
3,458.3
3,748.7
4,021.7
4,285.8
4,464.3
4,751.4
4,911.9
5,151.8
5,408.2
5,688.5
5,988.8
6,395.9
6,695.0
7,194.0
7,486.8
7,830.1
8,162.5
8,680.9
9,092.0
9,629.1
8,474.7
8,605.1
8,708.9
8,934.8
8,907.7
9,038.6
9,105.1
9,316.4
9,468.5
9,572.9
9,675.8
9,799.2
10,014.5
10,099.7
10,257.5

Total

323.9
338.8
349.6
371.3
391.8
421.7
455.1
493.1
520.9
572.2
621.4
666.2
721.2
791.9
875.6
958.0
1,061.9
1,180.2
1,310.4
1,465.8
1,634.4
1,807.5
2,001.8
2,150.4
2,374.8
2,597.3
2,829.3
3,016.7
3,216.9
3,475.8
3,734.5
3,986.4
4,140.1
4,385.4
4,627.9
4,902.4
5,157.3
5,460.0
5,770.5
6,119.1
6,536.4
7,025.6
7,354.5
7,645.3
7,987.7
8,499.2
9,047.4
9,590.3
8,299.5
8,432.9
8,553.7
8,710.6
8,819.0
8,970.8
9,153.9
9,245.7
9,384.0
9,542.9
9,677.1
9,757.2
9,917.5
10,069.2
10,200.9

1 Consists of nonmortgage interest paid by households.
2 Percents based on data in millions of dollars.

Source: Department of Commerce (Bureau of Economic Analysis).

262  |  Economic Report of the President

Personal
consumption
expenditures
317.6
331.7
342.1
363.3
382.7
411.4
443.8
480.9
507.8
558.0
605.2
648.5
701.9
770.6
852.4
933.4
1,034.4
1,151.9
1,278.6
1,428.5
1,592.2
1,757.1
1,941.1
2,077.3
2,290.6
2,503.3
2,720.3
2,899.7
3,100.2
3,353.6
3,598.5
3,839.9
3,986.1
4,235.3
4,477.9
4,743.3
4,975.8
5,256.8
5,547.4
5,879.5
6,282.5
6,739.4
7,055.0
7,350.7
7,703.6
8,195.9
8,707.8
9,224.5
8,010.1
8,135.0
8,245.1
8,393.3
8,488.8
8,632.6
8,810.5
8,899.3
9,034.7
9,183.9
9,305.7
9,373.7
9,540.5
9,674.0
9,785.7

Personal
interest
payments 1
5.5
6.2
6.5
7.0
7.9
8.9
9.9
10.7
11.1
12.2
14.0
15.2
16.6
18.1
19.8
21.2
23.7
23.9
27.0
31.9
36.2
43.6
49.3
59.5
69.2
77.0
90.4
96.1
93.6
96.8
108.2
116.1
118.5
111.8
107.3
112.8
132.7
150.3
163.9
174.5
181.0
204.7
212.2
196.4
182.5
191.3
217.7
238.0
180.4
186.1
195.0
203.5
208.3
217.5
222.4
222.6
227.1
231.0
242.3
251.6
243.3
259.5
275.8

Personal
current
transfer
payments
0.8
.8
1.0
1.1
1.2
1.3
1.4
1.6
2.0
2.0
2.2
2.6
2.8
3.1
3.4
3.4
3.8
4.4
4.8
5.4
5.9
6.8
11.4
13.6
15.0
16.9
18.6
20.9
23.1
25.4
27.8
30.4
35.6
38.3
42.7
46.3
48.9
52.9
59.2
65.2
73.0
81.5
87.2
98.2
101.5
112.1
121.8
127.8
109.1
111.8
113.6
113.8
122.0
120.6
121.0
123.7
122.2
128.0
129.1
131.8
133.7
135.7
139.3

Equals:
Personal
saving

Personal outlays

Total

26.7
26.7
32.2
33.8
33.3
40.8
43.0
44.4
54.4
52.8
52.5
69.5
80.6
77.2
102.7
113.6
125.6
122.3
125.3
142.5
159.1
201.4
244.3
270.8
233.6
314.8
280.0
268.4
241.4
272.9
287.1
299.4
324.2
366.0
284.0
249.5
250.9
228.4
218.3
276.8
158.6
168.5
132.3
184.7
174.9
181.7
44.6
38.8
175.1
172.2
155.2
224.2
88.7
67.8
–48.8
70.8
84.5
30.0
–1.4
42.0
97.0
30.5
56.7

92.4
92.7
91.6
91.7
92.2
91.2
91.4
91.7
90.5
91.6
92.2
90.6
89.9
91.1
89.5
89.4
89.4
90.6
91.3
91.1
91.1
90.0
89.1
88.8
91.0
89.2
91.0
91.8
93.0
92.7
92.9
93.0
92.7
92.3
94.2
95.2
95.4
96.0
96.4
95.7
97.6
97.7
98.2
97.6
97.9
97.9
99.5
99.6
97.9
98.0
98.2
97.5
99.0
99.2
100.5
99.2
99.1
99.7
100.0
99.6
99.0
99.7
99.4

Personal
consumption
expenditures
90.6
90.8
89.6
89.7
90.0
89.0
89.1
89.5
88.3
89.3
89.8
88.1
87.5
88.7
87.1
87.1
87.1
88.4
89.1
88.8
88.8
87.5
86.4
85.8
87.8
86.0
87.5
88.3
89.6
89.5
89.5
89.6
89.3
89.1
91.2
92.1
92.0
92.4
92.6
91.9
93.8
93.7
94.2
93.9
94.4
94.4
95.8
95.8
94.5
94.5
94.7
93.9
95.3
95.5
96.8
95.5
95.4
95.9
96.2
95.7
95.3
95.8
95.4

Personal
saving

7.6
7.3
8.4
8.3
7.8
8.8
8.6
8.3
9.5
8.4
7.8
9.4
10.1
8.9
10.5
10.6
10.6
9.4
8.7
8.9
8.9
10.0
10.9
11.2
9.0
10.8
9.0
8.2
7.0
7.3
7.1
7.0
7.3
7.7
5.8
4.8
4.6
4.0
3.6
4.3
2.4
2.3
1.8
2.4
2.1
2.1
.5
.4
2.1
2.0
1.8
2.5
1.0
.8
–.5
.8
.9
.3
.0
.4
1.0
.3
.6

Table B–31.—Total and per capita disposable personal income and personal consumption
expenditures, and per capita gross domestic product, in current and real dollars, 1959–2007
[Quarterly data at seasonally adjusted annual rates, except as noted]
Disposable personal income
Year or quarter

Total
(billions of dollars)
Current
dollars

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

350.5
365.4
381.8
405.1
425.1
462.5
498.1
537.5
575.3
625.0
674.0
735.7
801.8
869.1
978.3
1,071.6
1,187.4
1,302.5
1,435.7
1,608.3
1,793.5
2,009.0
2,246.1
2,421.2
2,608.4
2,912.0
3,109.3
3,285.1
3,458.3
3,748.7
4,021.7
4,285.8
4,464.3
4,751.4
4,911.9
5,151.8
5,408.2
5,688.5
5,988.8
6,395.9
6,695.0
7,194.0
7,486.8
7,830.1
8,162.5
8,680.9
9,092.0
9,629.1
8,474.7
8,605.1
8,708.9
8,934.8
8,907.7
9,038.6
9,105.1
9,316.4
9,468.5
9,572.9
9,675.8
9,799.2
10,014.5
10,099.7
10,257.5

Chained
(2000)
dollars
1,715.5
1,759.7
1,819.2
1,908.2
1,979.1
2,122.8
2,253.3
2,371.9
2,475.9
2,588.0
2,668.7
2,781.7
2,907.9
3,046.5
3,252.3
3,228.5
3,302.6
3,432.2
3,552.9
3,718.8
3,811.2
3,857.7
3,960.0
4,044.9
4,177.7
4,494.1
4,645.2
4,791.0
4,874.5
5,082.6
5,224.8
5,324.2
5,351.7
5,536.3
5,594.2
5,746.4
5,905.7
6,080.9
6,295.8
6,663.9
6,861.3
7,194.0
7,333.3
7,562.2
7,729.9
8,008.9
8,147.9
8,396.9
7,908.7
7,955.1
8,012.2
8,158.8
8,089.8
8,140.9
8,115.4
8,246.0
8,344.2
8,348.6
8,384.5
8,510.7
8,623.9
8,607.1
8,702.6

Personal consumption expenditures

Per capita
(dollars)
Current
dollars
1,979
2,022
2,078
2,171
2,246
2,410
2,563
2,734
2,895
3,114
3,324
3,587
3,860
4,140
4,616
5,010
5,498
5,972
6,517
7,224
7,967
8,822
9,765
10,426
11,131
12,319
13,037
13,649
14,241
15,297
16,257
17,131
17,609
18,494
18,872
19,555
20,287
21,091
21,940
23,161
23,968
25,469
26,224
27,145
28,020
29,517
30,616
32,115
28,922
29,300
29,576
30,265
30,106
30,477
30,622
31,252
31,693
31,970
32,231
32,561
33,206
33,413
33,850

Total
(billions of dollars)

Chained
(2000)
dollars

Current
dollars

9,685
9,735
9,901
10,227
10,455
11,061
11,594
12,065
12,457
12,892
13,163
13,563
14,001
14,512
15,345
15,094
15,291
15,738
16,128
16,704
16,931
16,940
17,217
17,418
17,828
19,011
19,476
19,906
20,072
20,740
21,120
21,281
21,109
21,548
21,493
21,812
22,153
22,546
23,065
24,131
24,564
25,469
25,687
26,217
26,535
27,232
27,436
28,005
26,990
27,087
27,210
27,636
27,342
27,450
27,293
27,661
27,930
27,881
27,930
28,280
28,595
28,475
28,719

317.6
331.7
342.1
363.3
382.7
411.4
443.8
480.9
507.8
558.0
605.2
648.5
701.9
770.6
852.4
933.4
1,034.4
1,151.9
1,278.6
1,428.5
1,592.2
1,757.1
1,941.1
2,077.3
2,290.6
2,503.3
2,720.3
2,899.7
3,100.2
3,353.6
3,598.5
3,839.9
3,986.1
4,235.3
4,477.9
4,743.3
4,975.8
5,256.8
5,547.4
5,879.5
6,282.5
6,739.4
7,055.0
7,350.7
7,703.6
8,195.9
8,707.8
9,224.5
8,010.1
8,135.0
8,245.1
8,393.3
8,488.8
8,632.6
8,810.5
8,899.3
9,034.7
9,183.9
9,305.7
9,373.7
9,540.5
9,674.0
9,785.7

Chained
(2000)
dollars
1,554.6
1,597.4
1,630.3
1,711.1
1,781.6
1,888.4
2,007.7
2,121.8
2,185.0
2,310.5
2,396.4
2,451.9
2,545.5
2,701.3
2,833.8
2,812.3
2,876.9
3,035.5
3,164.1
3,303.1
3,383.4
3,374.1
3,422.2
3,470.3
3,668.6
3,863.3
4,064.0
4,228.9
4,369.8
4,546.9
4,675.0
4,770.3
4,778.4
4,934.8
5,099.8
5,290.7
5,433.5
5,619.4
5,831.8
6,125.8
6,438.6
6,739.4
6,910.4
7,099.3
7,295.3
7,561.4
7,803.6
8,044.1
7,475.1
7,520.5
7,585.5
7,664.3
7,709.4
7,775.2
7,852.8
7,876.9
7,961.9
8,009.3
8,063.8
8,141.2
8,215.7
8,244.3
8,302.2

Per capita
(dollars)
Current
dollars
1,793
1,835
1,862
1,947
2,022
2,144
2,283
2,446
2,555
2,780
2,985
3,162
3,379
3,671
4,022
4,364
4,789
5,282
5,804
6,417
7,073
7,716
8,439
8,945
9,775
10,589
11,406
12,048
12,766
13,685
14,546
15,349
15,722
16,485
17,204
18,004
18,665
19,490
20,323
21,291
22,491
23,860
24,712
25,483
26,445
27,868
29,322
30,765
27,336
27,699
28,001
28,431
28,690
29,109
29,631
29,853
30,241
30,671
30,999
31,147
31,634
32,005
32,293

Chained
(2000)
dollars
8,776
8,837
8,873
9,170
9,412
9,839
10,331
10,793
10,994
11,510
11,820
11,955
12,256
12,868
13,371
13,148
13,320
13,919
14,364
14,837
15,030
14,816
14,879
14,944
15,656
16,343
17,040
17,570
17,994
18,554
18,898
19,067
18,848
19,208
19,593
20,082
20,382
20,835
21,365
22,183
23,050
23,860
24,205
24,612
25,043
25,711
26,277
26,828
25,511
25,607
25,761
25,961
26,056
26,217
26,410
26,423
26,650
26,748
26,862
27,052
27,241
27,275
27,398

Gross domestic
product
per capita
(dollars)
Current
dollars
2,860
2,912
2,965
3,139
3,263
3,458
3,700
4,007
4,189
4,533
4,857
5,064
5,427
5,899
6,524
7,013
7,586
8,369
9,219
10,307
11,387
12,249
13,601
14,017
15,092
16,638
17,695
18,542
19,517
20,827
22,169
23,195
23,650
24,668
25,578
26,844
27,749
28,982
30,424
31,674
33,181
34,755
35,476
36,296
37,626
39,735
41,869
44,007
38,924
39,532
40,004
40,473
41,078
41,533
42,237
42,621
43,396
43,933
44,194
44,500
44,935
45,552
46,103

Chained
(2000)
dollars
13,782
13,840
13,932
14,552
14,971
15,624
16,420
17,290
17,533
18,196
18,573
18,391
18,771
19,555
20,484
20,195
19,961
20,822
21,565
22,526
22,982
22,666
23,007
22,346
23,146
24,593
25,382
26,024
26,664
27,514
28,221
28,429
28,007
28,556
28,940
29,741
30,128
30,881
31,886
32,833
33,904
34,755
34,645
34,837
35,361
36,300
37,052
37,752
35,983
36,209
36,436
36,570
36,766
36,936
37,245
37,259
37,618
37,760
37,764
37,865
37,842
38,113
38,475

Population
(thousands) 1

177,130
180,760
183,742
186,590
189,300
191,927
194,347
196,599
198,752
200,745
202,736
205,089
207,692
209,924
211,939
213,898
215,981
218,086
220,289
222,629
225,106
227,726
230,008
232,218
234,333
236,394
238,506
240,683
242,843
245,061
247,387
250,181
253,530
256,922
260,282
263,455
266,588
269,714
272,958
276,154
279,328
282,459
285,490
288,451
291,311
294,096
296,972
299,833
293,018
293,691
294,455
295,222
295,878
296,567
297,339
298,105
298,754
299,432
300,196
300,950
301,590
302,266
303,028

1 Population of the United States including Armed Forces overseas; includes Alaska and Hawaii beginning in 1960. Annual data are averages of quarterly
data. Quarterly data are averages for the period.
Source: Department of Commerce (Bureau of Economic Analysis and Bureau of the Census).

Appendix B – National Income or Expenditure  |  263

Table B–32.—Gross saving and investment, 1959–2007
[Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates]
Gross saving
Net saving
Year or quarter

1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2004:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2005:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2006:  I ������������������
      II �����������������
      III ����������������
      IV ����������������
2007:  I ������������������
      II �����������������
      III ����������������

Total
gross
saving

106.2
111.3
114.3
124.9
133.2
143.4
158.5
168.7
170.5
182.0
198.3
192.7
208.9
237.5
292.0
301.5
297.0
342.1
397.5
478.0
536.7
549.4
654.7
629.1
609.4
773.4
767.5
733.5
796.8
915.0
944.7
940.4
964.1
948.2
962.4
1,070.7
1,184.5
1,291.1
1,461.1
1,598.7
1,674.3
1,770.5
1,657.6
1,489.1
1,459.0
1,618.1
1,734.6
1,866.9
1,552.4
1,590.0
1,678.3
1,651.7
1,711.0
1,720.8
1,778.4
1,728.2
1,875.5
1,865.7
1,811.6
1,914.9
1,879.4
1,913.6
1,871.7

Net private saving
Total
net
saving

53.2
55.8
57.1
65.7
70.8
78.4
89.1
93.1
89.0
93.6
100.4
86.0
93.9
111.0
152.7
139.0
109.2
137.0
167.5
215.7
236.6
206.5
266.6
202.2
165.6
300.9
260.7
202.2
234.9
317.4
300.4
258.0
238.2
196.3
186.0
237.1
306.2
373.0
486.6
568.6
573.0
582.7
376.1
197.1
122.5
182.0
125.1
251.7
178.8
195.8
143.7
209.7
244.3
228.3
–125.5
153.3
300.7
262.9
182.8
260.5
208.5
230.2
180.8

Total

46.0
44.3
50.2
57.9
59.7
71.0
79.2
83.1
91.4
88.4
83.7
94.0
115.8
119.8
148.3
143.4
175.8
181.3
198.5
223.5
234.9
251.3
312.3
336.2
333.7
445.0
413.4
372.0
367.4
434.0
409.7
422.7
456.1
493.0
458.6
438.9
491.1
489.0
503.3
477.8
419.0
343.3
324.6
479.2
515.0
551.1
428.2
447.2
597.8
571.8
517.9
516.9
510.4
490.0
263.4
448.9
484.7
460.0
409.7
434.4
432.8
423.5
426.4

Net government saving

Wage
UndisPersonal tributed accruals
less
saving corporate disburseprofits 1
ments
26.7
26.7
32.2
33.8
33.3
40.8
43.0
44.4
54.4
52.8
52.5
69.5
80.6
77.2
102.7
113.6
125.6
122.3
125.3
142.5
159.1
201.4
244.3
270.8
233.6
314.8
280.0
268.4
241.4
272.9
287.1
299.4
324.2
366.0
284.0
249.5
250.9
228.4
218.3
276.8
158.6
168.5
132.3
184.7
174.9
181.7
44.6
38.8
175.1
172.2
155.2
224.2
88.7
67.8
–48.8
70.8
84.5
30.0
–1.4
42.0
97.0
30.5
56.7

1 With inventory valuation and capital consumption adjustments.

See next page for continuation of table.

264  |  Economic Report of the President

19.4
17.6
18.1
24.1
26.4
30.1
36.2
38.7
36.9
35.6
31.2
24.6
34.8
42.9
45.6
29.8
50.2
59.0
73.2
81.0
75.7
49.9
68.0
65.4
100.1
130.3
133.4
103.7
126.1
161.1
122.6
123.3
131.9
142.7
168.1
171.8
223.8
256.9
287.9
201.7
255.3
174.8
192.3
294.5
325.1
384.4
378.6
400.9
427.7
419.6
387.7
302.6
421.7
422.2
312.2
358.1
420.2
430.0
411.1
342.4
335.8
368.0
344.7

Consumption of fixed capital

0.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.4
–.3
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
.0
–15.8
6.4
17.6
16.4
3.6
–2.9
–.7
5.2
.0
.0
.0
15.0
–15.0
5.0
7.5
–5.0
–20.0
–25.0
–10.0
.0
.0
.0
20.0
–20.0
.0
.0
50.0
.0
25.0
25.0

Total

7.1
11.5
6.9
7.8
11.1
7.4
9.9
10.0
–2.4
5.2
16.7
–8.1
–21.9
–8.8
4.4
–4.4
–66.6
–44.4
–31.0
–7.8
1.7
–44.8
–45.7
–134.1
–168.1
–144.1
–152.6
–169.9
–132.6
–116.6
–109.3
–164.8
–217.9
–296.7
–272.6
–201.9
–184.9
–116.0
–16.7
90.8
154.0
239.4
51.5
–282.1
–392.5
–369.1
–303.1
–195.4
–419.0
–376.1
–374.2
–307.1
–266.0
–261.6
–388.9
–295.6
–184.0
–197.0
–226.9
–173.9
–224.3
–193.4
–245.6

Federal

3.3
7.2
2.6
2.5
5.4
1.0
3.3
2.3
–9.4
–2.3
8.7
–15.2
–28.4
–24.4
–11.3
–13.8
–69.0
–51.7
–44.1
–26.5
–11.3
–53.6
–53.3
–131.9
–173.0
–168.1
–175.0
–190.8
–145.0
–134.5
–130.1
–172.0
–213.7
–297.4
–273.5
–212.3
–197.0
–141.8
–55.8
38.8
103.6
189.5
46.7
–247.9
–372.1
–370.6
–318.3
–220.0
–411.1
–374.1
–361.9
–335.4
–298.0
–287.5
–394.3
–293.2
–219.6
–239.9
–239.2
–181.5
–218.5
–206.8
–232.6

State
and
local
3.8
4.3
4.3
5.2
5.7
6.4
6.5
7.8
7.0
7.5
8.0
7.1
6.5
15.6
15.7
9.3
2.5
7.4
13.1
18.7
13.0
8.8
7.6
–2.2
4.9
23.9
22.3
21.0
12.4
17.9
20.8
7.2
–4.2
.7
.9
10.5
12.0
25.8
39.1
52.0
50.4
50.0
4.8
–34.2
–20.4
1.5
15.2
24.6
–7.9
–1.9
–12.3
28.3
32.0
25.9
5.4
–2.5
35.6
42.8
12.3
7.6
–5.8
13.4
–13.0

Total

Private

53.0
55.6
57.2
59.3
62.4
65.0
69.4
75.6
81.5
88.4
97.9
106.7
115.0
126.5
139.3
162.5
187.7
205.2
230.0
262.3
300.1
343.0
388.1
426.9
443.8
472.6
506.7
531.3
561.9
597.6
644.3
682.5
725.9
751.9
776.4
833.7
878.4
918.1
974.4
1,030.2
1,101.3
1,187.8
1,281.5
1,292.0
1,336.5
1,436.1
1,609.5
1,615.2
1,373.7
1,394.3
1,534.5
1,442.0
1,466.6
1,492.4
1,903.9
1,574.9
1,574.8
1,602.8
1,628.8
1,654.4
1,670.9
1,683.4
1,690.9

38.6
40.5
41.6
42.8
44.9
46.9
50.5
55.5
59.9
65.2
73.1
80.0
86.7
97.1
107.9
126.6
147.8
162.5
184.3
212.8
245.7
281.1
317.9
349.8
362.1
385.6
414.0
431.8
455.3
483.5
522.1
551.6
586.9
607.3
624.7
675.1
713.4
748.8
800.3
851.2
914.3
990.8
1,075.5
1,080.3
1,118.3
1,206.0
1,357.0
1,347.5
1,150.9
1,166.8
1,302.3
1,203.8
1,224.9
1,246.5
1,637.9
1,318.9
1,314.8
1,337.2
1,358.7
1,379.3
1,389.6
1,397.4
1,400.9

Government

14.5
15.0
15.6
16.5
17.5
18.1
18.9
20.1
21.6
23.1
24.8
26.7
28.3
29.5
31.4
35.9
40.0
42.6
45.7
49.5
54.5
61.8
70.1
77.1
81.7
87.0
92.7
99.5
106.7
114.1
122.2
130.9
139.1
144.6
151.8
158.6
165.0
169.3
174.1
179.0
187.0
197.0
206.0
211.6
218.2
230.2
252.4
267.7
222.7
227.4
232.3
238.2
241.8
245.9
266.0
256.0
260.1
265.6
270.1
275.1
281.3
286.0
290.0

Table B–32.—Gross saving and investment, 1959–2007—Continued
[Billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates]
Gross domestic investment, capital account
transactions, and net lending, NIPA 2
Gross domestic investment
Year or quarter
Total

1959 ���������������������
1960 ���������������������
1961 ���������������������
1962 ���������������������
1963 ���������������������
1964 ���������������������
1965 ���������������������
1966 ���������������������
1967 ���������������������
1968 ���������������������
1969 ���������������������
1970 ���������������������
1971 ���������������������
1972 ���������������������
1973 ���������������������
1974 ���������������������
1975 ���������������������
1976 ���������������������
1977 ���������������������
1978 ���������������������
1979 ���������������������
1980 ���������������������
1981 ���������������������
1982 ���������������������
1983 ���������������������
1984 ���������������������
1985 ���������������������
1986 ���������������������
1987 ���������������������
1988 ���������������������
1989 ���������������������
1990 ���������������������
1991 ���������������������
1992 ���������������������
1993 ���������������������
1994 ���������������������
1995 ���������������������
1996 ���������������������
1997 ���������������������
1998 ���������������������
1999 ���������������������
2000 ���������������������
2001 ���������������������
2002 ���������������������
2003 ���������������������
2004 ���������������������
2005 ���������������������
2006 ���������������������
2004:  I �����������������
      II ����������������
      III ���������������
      IV ���������������
2005:  I �����������������
      II ����������������
      III ���������������
      IV ���������������
2006:  I �����������������
      II ����������������
      III ���������������
      IV ���������������
2007:  I �����������������
      II ����������������
      III ���������������

106.7
110.4
113.8
125.3
132.4
144.2
160.0
175.0
175.1
186.6
201.5
200.0
220.5
246.6
300.7
312.3
314.7
367.2
419.8
504.6
582.8
590.9
685.6
629.4
655.1
788.0
784.1
780.5
818.5
895.5
984.3
1,006.7
1,036.6
1,051.0
1,102.0
1,213.2
1,285.7
1,384.8
1,531.7
1,584.1
1,638.5
1,643.3
1,567.9
1,468.1
1,507.8
1,637.3
1,739.9
1,848.8
1,590.5
1,630.8
1,688.2
1,639.5
1,699.9
1,710.4
1,805.6
1,743.8
1,854.7
1,863.2
1,809.1
1,868.3
1,813.1
1,872.8
1,946.5

Total

107.8
107.2
109.5
121.4
127.4
136.7
153.8
171.1
171.6
184.8
199.7
196.0
219.9
250.2
291.3
305.7
293.3
358.4
428.8
515.0
581.4
579.5
679.3
629.5
687.2
875.0
895.0
919.7
969.2
1,007.7
1,072.6
1,076.7
1,023.2
1,087.9
1,172.4
1,318.4
1,376.7
1,485.2
1,641.9
1,771.5
1,912.4
2,040.0
1,938.3
1,926.4
2,020.0
2,261.4
2,475.0
2,642.9
2,129.9
2,247.1
2,307.5
2,361.2
2,414.4
2,420.5
2,480.3
2,584.8
2,640.9
2,674.9
2,659.2
2,596.7
2,569.2
2,603.4
2,637.4

Addenda:

Net
Capital lending
acGross Gross
or net
count borrowprivate
domes- govern- transing
ment actions
tic
(–),
invest- invest- (net) 4 NIPA 2, 5
ment 3
ment
78.5
78.9
78.2
88.1
93.8
102.1
118.2
131.3
128.6
141.2
156.4
152.4
178.2
207.6
244.5
249.4
230.2
292.0
361.3
438.0
492.9
479.3
572.4
517.2
564.3
735.6
736.2
746.5
785.0
821.6
874.9
861.0
802.9
864.8
953.4
1,097.1
1,144.0
1,240.3
1,389.8
1,509.1
1,625.7
1,735.5
1,614.3
1,582.1
1,664.1
1,888.6
2,077.2
2,209.2
1,769.6
1,875.6
1,929.7
1,979.5
2,029.6
2,024.7
2,078.5
2,176.0
2,221.1
2,239.0
2,224.1
2,152.4
2,117.3
2,139.1
2,162.9

29.3
28.3
31.3
33.3
33.6
34.6
35.6
39.8
43.0
43.6
43.3
43.6
41.8
42.6
46.8
56.3
63.1
66.4
67.5
77.1
88.5
100.3
106.9
112.3
122.9
139.4
158.8
173.2
184.3
186.1
197.7
215.7
220.3
223.1
219.0
221.4
232.7
244.9
252.2
262.4
286.8
304.5
324.0
344.3
356.0
372.8
397.8
433.8
360.3
371.5
377.8
381.6
384.7
395.8
401.7
408.8
419.8
435.9
435.1
444.2
451.8
464.3
474.4

������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
–0.2
–.2
–.2
–.3
–.3
–.4
–.5
–.3
6.6
4.5
.6
1.3
1.7
.9
.7
1.0
.7
4.8
.8
1.1
1.4
3.2
2.4
4.1
3.9
1.9
1.7
3.8
2.0
10.4
2.0
1.9
1.9
6.9
4.0
2.2
2.5
1.6
1.7
1.6

Statistical
discrepancy

–1.2
0.5
3.2
–.9
4.3
–.6
3.9
.4
5.0
–.8
7.5
.8
6.2
1.6
3.9
6.3
3.6
4.6
1.7
4.6
1.8
3.2
4.0
7.3
.6
11.6
–3.6
9.1
9.3
8.6
6.6
10.9
21.4
17.7
8.9
25.1
–9.0
22.3
–10.4
26.6
1.4
46.0
11.4
41.4
6.3
30.9
.0
.3
–31.8
45.7
–86.7
14.6
–110.5
16.7
–138.9
47.0
–150.4
21.7
–111.7 –19.5
–88.0
39.7
–76.6
66.2
9.0
72.5
–37.5 102.7
–71.7 139.5
–106.9 142.5
–91.9 101.2
–101.0
93.7
–111.3
70.7
–188.1 –14.6
–278.7 –35.7
–397.4 –127.2
–371.5 –89.6
–459.7 –21.0
–515.5
48.8
–626.5
19.1
–739.1
5.4
–798.0 –18.1
–541.3
38.0
–618.0
40.8
–623.0
10.0
–723.6 –12.2
–724.9 –11.1
–712.2 –10.3
–676.6
27.2
–842.9
15.7
–793.2 –20.9
–815.7
–2.6
–852.2
–2.5
–730.9 –46.6
–757.7 –66.3
–732.3 –40.8
–692.4
74.8

Gross government saving
Gross
private
saving

Total

Federal

84.6
84.8
91.8
100.7
104.6
117.9
129.7
138.6
151.3
153.7
156.8
174.1
202.5
216.8
256.3
270.0
323.6
343.8
382.8
436.3
480.5
532.4
630.3
686.0
695.8
830.6
827.3
803.9
822.7
917.5
931.8
974.3
1,042.9
1,100.4
1,083.3
1,114.0
1,204.5
1,237.8
1,303.6
1,328.9
1,333.3
1,334.1
1,400.1
1,559.6
1,633.3
1,757.0
1,785.2
1,794.6
1,748.7
1,738.6
1,820.2
1,720.7
1,735.3
1,736.5
1,901.3
1,767.8
1,799.5
1,797.1
1,768.4
1,813.7
1,822.5
1,820.9
1,827.3

21.6
26.5
22.5
24.3
28.6
25.5
28.8
30.1
19.2
28.3
41.5
18.6
6.4
20.7
35.8
31.5
–26.6
–1.7
14.7
41.7
56.2
17.0
24.4
–56.9
–86.5
–57.2
–59.9
–70.4
–25.9
–2.5
12.9
–33.8
–78.8
–152.1
–120.8
–43.2
–19.9
53.3
157.5
269.8
341.0
436.4
257.5
–70.5
–174.3
–138.9
–50.6
72.3
–196.3
–148.6
–141.9
–68.9
–24.3
–15.7
–122.9
–39.7
76.1
68.6
43.2
101.2
56.9
92.7
44.4

13.6
17.8
13.5
14.0
17.5
13.4
16.0
15.5
4.7
12.5
24.2
.9
–11.9
–7.7
5.8
4.5
–49.3
–30.3
–21.0
–1.5
15.7
–23.6
–19.4
–94.2
–132.3
–123.5
–126.9
–139.2
–89.8
–75.2
–66.7
–104.1
–141.5
–222.7
–195.5
–132.2
–115.1
–59.7
26.7
121.6
188.5
276.6
134.9
–159.1
–281.7
–276.6
–219.2
–114.6
–319.1
–280.4
–267.6
–239.3
–200.8
–189.5
–294.6
–192.0
–116.4
–135.2
–132.9
–74.0
–110.0
–96.6
–121.7

State
and
local
8.0
8.7
9.0
10.3
11.1
12.1
12.8
14.6
14.5
15.8
17.3
17.7
18.3
28.5
30.0
27.0
22.7
28.6
35.7
43.2
40.5
40.6
43.9
37.3
45.8
66.3
67.0
68.8
63.9
72.7
79.6
70.3
62.7
70.6
74.7
88.9
95.2
113.0
130.7
148.2
152.5
159.8
122.6
88.6
107.4
137.7
168.6
186.9
122.9
131.8
125.7
170.4
176.5
173.8
171.7
152.4
192.5
203.8
176.2
175.2
166.9
189.3
166.0

Gross
Net
Net
saving saving
domes- as a
as a
tic
percent percent
invest- of gross of gross
ment national national
income income
54.8
51.6
52.3
62.2
65.0
71.7
84.4
95.5
90.1
96.5
101.8
89.3
104.9
123.7
152.1
143.2
105.6
153.2
198.8
252.7
281.2
236.6
291.2
202.6
243.4
402.4
388.3
388.4
407.3
410.1
428.4
394.2
297.3
336.0
395.9
484.7
498.4
567.1
667.5
741.3
811.2
852.1
656.9
634.4
683.5
825.3
865.5
1,027.7
756.2
852.8
773.0
919.2
947.7
928.1
576.4
1,009.9
1,066.1
1,072.1
1,030.4
942.3
898.3
919.9
946.5

20.9
21.0
20.8
21.2
21.4
21.5
21.9
21.4
20.5
20.0
20.1
18.6
18.6
19.2
21.1
20.0
18.2
18.8
19.6
20.9
21.1
19.7
20.9
19.1
17.3
19.6
18.1
16.5
16.8
17.8
17.3
16.3
16.2
15.1
14.7
15.4
16.2
16.6
17.7
18.2
17.9
17.7
16.2
14.2
13.3
13.8
13.9
14.1
13.5
13.7
14.2
13.7
14.0
13.9
14.1
13.6
14.4
14.1
13.6
14.2
13.7
13.8
13.4

10.4
10.5
10.4
11.1
11.4
11.7
12.3
11.8
10.7
10.3
10.2
8.3
8.4
9.0
11.0
9.2
6.7
7.5
8.3
9.4
9.3
7.4
8.5
6.1
4.7
7.6
6.2
4.6
5.0
6.2
5.5
4.5
4.0
3.1
2.8
3.4
4.2
4.8
5.9
6.5
6.1
5.8
3.7
1.9
1.1
1.5
1.0
1.9
1.6
1.7
1.2
1.7
2.0
1.8
–1.0
1.2
2.3
2.0
1.4
1.9
1.5
1.7
1.3

2 National income and product accounts (NIPA).
3 For details on government investment, see Table B–20.
4 Consists of capital transfers and the acquisition and disposal of nonproduced nonfinancial assets.
5 Prior to 1982, equals the balance on current account, NIPA (see Table B–24).

Source: Department of Commerce (Bureau of Economic Analysis).

Appendix B – National Income or Expenditure  |  265

Table B–33.—Median money income (in 2006 dollars) and poverty status of families and people,
by race, selected years, 1993–2006
Families 1

Year

ALL RACES
1993 ���������������������������������������
1994 ���������������������������������������
1995 ���������������������������������������
1996 ���������������������������������������
1997 ���������������������������������������
1998 ���������������������������������������
1999 3 �������������������������������������
2000 4 �������������������������������������
2001 ���������������������������������������
2002 ���������������������������������������
2003 ���������������������������������������
2004 5 �������������������������������������
2005 ���������������������������������������
2006 ���������������������������������������
WHITE
1993 ���������������������������������������
1994 ���������������������������������������
1995 ���������������������������������������
1996 ���������������������������������������
1997 ���������������������������������������
1998 ���������������������������������������
1999 3 �������������������������������������
2000 4 �������������������������������������
2001 ���������������������������������������
Alone 6
2002 ���������������������������������������
2003 ���������������������������������������
2004 5 �������������������������������������
2005 ���������������������������������������
2006 ���������������������������������������
Alone or in combination 6
2002 ���������������������������������������
2003 ���������������������������������������
2004 5 �������������������������������������
2005 ���������������������������������������
2006 ���������������������������������������
BLACK
1993 ���������������������������������������
1994 ���������������������������������������
1995 ���������������������������������������
1996 ���������������������������������������
1997 ���������������������������������������
1998 ���������������������������������������
1999 3 �������������������������������������
2000 4 �������������������������������������
2001 ���������������������������������������
Alone 6
2002 ���������������������������������������
2003 ���������������������������������������
2004 5 �������������������������������������
2005 ���������������������������������������
2006 ���������������������������������������
Alone or in combination 6
2002 ���������������������������������������
2003 ���������������������������������������
2004 5 �������������������������������������
2005 ���������������������������������������
2006 ���������������������������������������

People below
poverty level

Below poverty level
Median
Female
money
Total
householder
Number income
(mil(in
Number
lions)
2006
(milPercent
Number
Number
dollions)
(milPercent
(milPercent
lars) 2
lions)
lions)

Median money income (in 2006 dollars)
of people 15 years old and over
with income 2
Males
All
people

Yearround
full-time
workers

Females
All
people

Yearround
full-time
workers

68.5 $50,782
69.3 52,173
69.6 53,349
70.2 54,127
70.9 55,823
71.6 57,734
73.2 59,088
73.8 59,398
74.3 58,545
75.6 57,920
76.2 57,751
76.9 57,705
77.4 58,036
78.5 58,407

8.4
8.1
7.5
7.7
7.3
7.2
6.8
6.4
6.8
7.2
7.6
7.8
7.7
7.7

12.3
11.6
10.8
11.0
10.3
10.0
9.3
8.7
9.2
9.6
10.0
10.2
9.9
9.8

4.4
4.2
4.1
4.2
4.0
3.8
3.6
3.3
3.5
3.6
3.9
4.0
4.0
4.1

35.6
34.6
32.4
32.6
31.6
29.9
27.8
25.4
26.4
26.5
28.0
28.3
28.7
28.3

39.3
38.1
36.4
36.5
35.6
34.5
32.8
31.6
32.9
34.6
35.9
37.0
37.0
36.5

15.1 $28,994 $42,700 $15,177
14.5 29,220 42,528 15,425
13.8 29,639 42,299 15,935
13.7 30,498 42,915 16,398
13.3 31,579 44,149 17,164
12.7 32,725 44,782 17,825
11.9 33,026 45,316 18,519
11.3 33,185 45,534 18,807
11.7 33,142 45,709 18,921
12.1 32,768 45,398 18,842
12.5 32,812 45,498 18,920
12.7 32,573 44,476 18,858
12.6 32,300 43,571 19,185
12.3 32,265 44,958 20,014

$30,873
31,298
31,235
31,907
32,602
33,174
33,114
34,098
34,644
34,709
34,700
34,281
34,346
34,989

57.9
58.4
58.9
58.9
59.5
60.1
61.1
61.3
61.6

53,999
55,001
56,023
57,270
58,561
60,558
61,808
62,087
61,574

5.5
5.3
5.0
5.1
5.0
4.8
4.4
4.3
4.6

9.4
9.1
8.5
8.6
8.4
8.0
7.3
7.1
7.4

2.4
2.3
2.2
2.3
2.3
2.1
1.9
1.8
1.9

29.2
29.0
26.6
27.3
27.7
24.9
22.5
21.2
22.4

26.2
25.4
24.4
24.7
24.4
23.5
22.2
21.6
22.7

12.2
11.7
11.2
11.2
11.0
10.5
9.8
9.5
9.9

30,202
30,497
31,390
31,925
32,710
34,151
34,685
34,887
34,439

43,738
43,641
44,027
44,455
45,239
45,948
47,449
47,129
46,454

15,480
15,646
16,179
16,585
17,275
18,056
18,577
18,826
18,964

31,573
32,145
31,875
32,448
33,155
33,728
33,881
35,067
35,132

62.3
62.6
63.1
63.4
64.1

61,229
61,136
60,547
61,262
61,280

4.9
5.1
5.3
5.1
5.1

7.8
8.1
8.4
8.0
8.0

2.0
2.2
2.3
2.3
2.4

22.6
24.0
24.7
25.3
25.1

23.5
24.3
25.3
24.9
24.4

10.2
10.5
10.8
10.6
10.3

34,052
33,690
33,458
33,234
33,843

46,371
46,199
45,467
45,129
45,933

18,871
19,099
18,892
19,281
20,082

35,191
35,291
34,937
35,218
35,525

63.0
63.5
64.0
64.3
65.0

61,023
60,956
60,399
61,062
61,198

5.0
5.2
5.4
5.2
5.2

7.9
8.1
8.5
8.1
8.0

2.1
2.2
2.3
2.4
2.4

22.6
24.2
24.8
25.5
25.0

24.1
25.0
26.1
25.6
25.2

10.3
10.6
10.9
10.7
10.4

33,976
33,609
33,384
33,156
33,673

46,305
46,130
45,350
44,969
45,868

18,834
19,065
18,860
19,229
20,039

35,178
35,278
34,897
35,145
35,490

8.0
8.1
8.1
8.5
8.4
8.5
8.7
8.7
8.8

29,599
33,226
34,116
33,938
35,825
36,323
38,540
39,428
38,263

2.5
2.2
2.1
2.2
2.0
2.0
1.9
1.7
1.8

31.3
27.3
26.4
26.1
23.6
23.4
21.8
19.3
20.7

1.9
1.7
1.7
1.7
1.6
1.6
1.5
1.3
1.4

49.9
46.2
45.1
43.7
39.8
40.8
39.2
34.3
35.2

10.9
10.2
9.9
9.7
9.1
9.1
8.4
8.0
8.1

33.1
30.6
29.3
28.4
26.5
26.1
23.6
22.5
22.7

20,067
20,155
21,027
21,102
22,666
23,867
24,735
24,989
24,446

32,380
32,832
32,576
34,723
33,690
33,936
36,488
35,697
36,353

13,064
14,185
14,399
15,063
16,343
16,228
17,880
18,594
18,543

27,913
27,751
27,691
28,138
28,513
29,479
30,422
30,149
31,087

8.9
8.9
8.9
9.1
9.3

37,573
37,677
37,517
36,627
38,269

1.9
2.0
2.0
2.0
2.0

21.5
22.3
22.8
22.1
21.6

1.4
1.5
1.5
1.5
1.5

35.8
36.9
37.6
36.1
36.6

8.6
8.8
9.0
9.2
9.0

24.1
24.4
24.7
24.9
24.3

24,164
24,102
24,220
23,396
25,064

35,788
36,647
33,858
35,355
35,477

18,749
18,177
18,529
18,209
19,103

30,960
30,281
31,110
31,359
30,936

9.1
9.1
9.1
9.3
9.5

37,695
37,938
37,702
36,761
38,520

2.0
2.0
2.1
2.1
2.0

21.4
22.1
22.8
22.0
21.5

1.5
1.5
1.5
1.5
1.5

35.7
36.8
37.6
36.2
36.4

8.9
9.1
9.4
9.5
9.4

23.9
24.3
24.7
24.7
24.2

24,106
24,046
24,244
23,350
25,075

35,826
36,685
33,849
35,263
35,510

18,684
18,132
18,516
18,172
19,065

31,048
30,339
31,161
31,362
30,984

1 The term “family” refers to a group of two or more persons related by birth, marriage, or adoption and residing together. Every family must include a
reference person.
2 Current dollar median money income adjusted by consumer price index research series (CPI-U-RS).
3 Reflects implementation of Census 2000-based population controls comparable with succeeding years.
4 Reflects household sample expansion.
5 For 2004, figures are revised to reflect a correction to the weights in the 2005 Annual Social and Economic Supplement.
6 Data are for white alone, for white alone or in combination, for black alone, and for black alone or in combination. (Black is also black or African American.)
Beginning with data for 2002 the Current Population Survey allowed respondents to choose more than one race; for earlier years respondents could report only
one race group.
Note.—Poverty thresholds are updated each year to reflect changes in the consumer price index (CPI-U).
For details see publication Series P-60 on the Current Population Survey and Annual Social and Economic Supplements.
Source: Department of Commerce (Bureau of the Census).

266  |  Economic Report of the President

Population, Employment, Wages, and Productivity
Table B–34.—Population by age group, 1929–2007
[Thousands of persons]
Age (years)
July 1
1929 ����������������������
1933 ����������������������
1939 ����������������������
1940 ����������������������
1941 ����������������������
1942 ����������������������
1943 ����������������������
1944 ����������������������
1945 ����������������������
1946 ����������������������
1947 ����������������������
1948 ����������������������
1949 ����������������������
1950 ����������������������
1951 ����������������������
1952 ����������������������
1953 ����������������������
1954 ����������������������
1955 ����������������������
1956 ����������������������
1957 ����������������������
1958 ����������������������
1959 ����������������������
1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 1 ��������������������
2001 1 ��������������������
2002 1 ��������������������
2003 1 ��������������������
2004 1 ��������������������
2005 1 ��������������������
2006 1 ��������������������
2007 ����������������������

Total

Under 5

5-15

16-19

20-24

25-44

45-64

65 and over

121,767
11,734
26,800
9,127
10,694
35,862
21,076
6,474
125,579
10,612
26,897
9,302
11,152
37,319
22,933
7,363
130,880
10,418
25,179
9,822
11,519
39,354
25,823
8,764
132,122
10,579
24,811
9,895
11,690
39,868
26,249
9,031
133,402
10,850
24,516
9,840
11,807
40,383
26,718
9,288
134,860
11,301
24,231
9,730
11,955
40,861
27,196
9,584
136,739
12,016
24,093
9,607
12,064
41,420
27,671
9,867
138,397
12,524
23,949
9,561
12,062
42,016
28,138
10,147
139,928
12,979
23,907
9,361
12,036
42,521
28,630
10,494
141,389
13,244
24,103
9,119
12,004
43,027
29,064
10,828
144,126
14,406
24,468
9,097
11,814
43,657
29,498
11,185
146,631
14,919
25,209
8,952
11,794
44,288
29,931
11,538
149,188
15,607
25,852
8,788
11,700
44,916
30,405
11,921
152,271
16,410
26,721
8,542
11,680
45,672
30,849
12,397
154,878
17,333
27,279
8,446
11,552
46,103
31,362
12,803
157,553
17,312
28,894
8,414
11,350
46,495
31,884
13,203
160,184
17,638
30,227
8,460
11,062
46,786
32,394
13,617
163,026
18,057
31,480
8,637
10,832
47,001
32,942
14,076
165,931
18,566
32,682
8,744
10,714
47,194
33,506
14,525
168,903
19,003
33,994
8,916
10,616
47,379
34,057
14,938
171,984
19,494
35,272
9,195
10,603
47,440
34,591
15,388
174,882
19,887
36,445
9,543
10,756
47,337
35,109
15,806
177,830
20,175
37,368
10,215
10,969
47,192
35,663
16,248
180,671
20,341
38,494
10,683
11,134
47,140
36,203
16,675
183,691
20,522
39,765
11,025
11,483
47,084
36,722
17,089
186,538
20,469
41,205
11,180
11,959
47,013
37,255
17,457
189,242
20,342
41,626
12,007
12,714
46,994
37,782
17,778
191,889
20,165
42,297
12,736
13,269
46,958
38,338
18,127
194,303
19,824
42,938
13,516
13,746
46,912
38,916
18,451
196,560
19,208
43,702
14,311
14,050
47,001
39,534
18,755
198,712
18,563
44,244
14,200
15,248
47,194
40,193
19,071
200,706
17,913
44,622
14,452
15,786
47,721
40,846
19,365
202,677
17,376
44,840
14,800
16,480
48,064
41,437
19,680
205,052
17,166
44,816
15,289
17,202
48,473
41,999
20,107
207,661
17,244
44,591
15,688
18,159
48,936
42,482
20,561
209,896
17,101
44,203
16,039
18,153
50,482
42,898
21,020
211,909
16,851
43,582
16,446
18,521
51,749
43,235
21,525
213,854
16,487
42,989
16,769
18,975
53,051
43,522
22,061
215,973
16,121
42,508
17,017
19,527
54,302
43,801
22,696
218,035
15,617
42,099
17,194
19,986
55,852
44,008
23,278
220,239
15,564
41,298
17,276
20,499
57,561
44,150
23,892
222,585
15,735
40,428
17,288
20,946
59,400
44,286
24,502
225,055
16,063
39,552
17,242
21,297
61,379
44,390
25,134
227,726
16,451
38,838
17,167
21,590
63,470
44,504
25,707
229,966
16,893
38,144
16,812
21,869
65,528
44,500
26,221
232,188
17,228
37,784
16,332
21,902
67,692
44,462
26,787
234,307
17,547
37,526
15,823
21,844
69,733
44,474
27,361
236,348
17,695
37,461
15,295
21,737
71,735
44,547
27,878
238,466
17,842
37,450
15,005
21,478
73,673
44,602
28,416
240,651
17,963
37,404
15,024
20,942
75,651
44,660
29,008
242,804
18,052
37,333
15,215
20,385
77,338
44,854
29,626
245,021
18,195
37,593
15,198
19,846
78,595
45,471
30,124
247,342
18,508
37,972
14,913
19,442
79,943
45,882
30,682
250,132
18,856
38,632
14,466
19,323
81,291
46,316
31,247
253,493
19,208
39,349
13,992
19,414
82,844
46,874
31,812
256,894
19,528
40,161
13,781
19,314
83,201
48,553
32,356
260,255
19,729
40,904
13,953
19,101
83,766
49,899
32,902
263,436
19,777
41,689
14,228
18,758
84,334
51,318
33,331
266,557
19,627
42,510
14,522
18,391
84,933
52,806
33,769
269,667
19,408
43,172
15,057
17,965
85,527
54,396
34,143
272,912
19,233
43,833
15,433
17,992
85,737
56,283
34,402
276,115
19,145
44,332
15,856
18,250
85,663
58,249
34,619
279,295
19,136
44,755
16,164
18,672
85,408
60,362
34,798
282,430
19,188
45,159
16,217
19,195
85,171
62,421
35,078
285,454
19,354
45,202
16,269
19,896
84,973
64,426
35,333
288,427
19,544
45,177
16,335
20,451
84,744
66,582
35,594
291,289
19,783
45,117
16,393
20,887
84,486
68,667
35,958
294,056
20,070
44,978
16,547
21,107
84,331
70,712
36,309
296,940
20,315
44,827
16,690
21,202
84,256
72,862
36,787
299,801
20,418
44,665
17,010
21,252
84,312
74,884
37,260
302,045 ������������������������ ������������������������ ������������������������ ������������������������ ������������������������ ������������������������ ��������������������������

1 Revised total population data are available as follows: 2000, 282,407; 2001, 285,339; 2002, 288,189; 2003, 290,941; 2004, 293,609; 2005, 296,329; and
2006, 299,157.
Note.—Includes Armed Forces overseas beginning with 1940. Includes Alaska and Hawaii beginning with 1950.
All estimates are consistent with decennial census enumerations.
Source: Department of Commerce (Bureau of the Census).

Appendix B – Population, Employment, Wages, and Productivity  |  267

Table B–35.—Civilian population and labor force, 1929–2007
[Monthly data seasonally adjusted, except as noted]
Civilian labor force
Year or month

Civilian
noninstitutional
population 1

Employment
Total

Total

NonAgricultural agricultural

Unemployment

Not in
labor
force

Civilian
labor force
participation rate 2

Thousands of persons 14 years of age and over
1929 ���������������������� ������������������
1933 ���������������������� ������������������
1939 ���������������������� ������������������
1940 ����������������������
99,840
1941 ����������������������
99,900
1942 ����������������������
98,640
1943 ����������������������
94,640
1944 ����������������������
93,220
1945 ����������������������
94,090
1946 ����������������������
103,070
1947 ����������������������
106,018

49,180
51,590
55,230
55,640
55,910
56,410
55,540
54,630
53,860
57,520
60,168

47,630
38,760
45,750
47,520
50,350
53,750
54,470
53,960
52,820
55,250
57,812

10,450
10,090
9,610
9,540
9,100
9,250
9,080
8,950
8,580
8,320
8,256

37,180
28,670
36,140
37,980
41,250
44,500
45,390
45,010
44,240
46,930
49,557

Civilian
employment/
population
ratio 3

Unemployment
rate,
civilian
workers 4

Percent
1,550 ����������������� ������������������ ������������������
12,830 ����������������� ������������������ ������������������
9,480 ����������������� ������������������ ������������������
8,120
44,200
55.7
47.6
5,560
43,990
56.0
50.4
2,660
42,230
57.2
54.5
1,070
39,100
58.7
57.6
670
38,590
58.6
57.9
1,040
40,230
57.2
56.1
2,270
45,550
55.8
53.6
2,356
45,850
56.8
54.5

3.2
24.9
17.2
14.6
9.9
4.7
1.9
1.2
1.9
3.9
3.9

Thousands of persons 16 years of age and over
1947 ����������������������
1948 ����������������������
1949 ����������������������
1950 ����������������������
1951 ����������������������
1952 ����������������������
1953 5 ��������������������
1954 ����������������������
1955 ����������������������
1956 ����������������������
1957 ����������������������
1958 ����������������������
1959 ����������������������
1960 5 ��������������������
1961 ����������������������
1962 5 ��������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 5 ��������������������
1973 5 ��������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 5 ��������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 5 ��������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 5 ��������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 5 ��������������������
1995 ����������������������
1996 ����������������������
1997 5 ��������������������
1998 5 ��������������������
1999 5 ��������������������

101,827
103,068
103,994
104,995
104,621
105,231
107,056
108,321
109,683
110,954
112,265
113,727
115,329
117,245
118,771
120,153
122,416
124,485
126,513
128,058
129,874
132,028
134,335
137,085
140,216
144,126
147,096
150,120
153,153
156,150
159,033
161,910
164,863
167,745
170,130
172,271
174,215
176,383
178,206
180,587
182,753
184,613
186,393
189,164
190,925
192,805
194,838
196,814
198,584
200,591
203,133
205,220
207,753

59,350
60,621
61,286
62,208
62,017
62,138
63,015
63,643
65,023
66,552
66,929
67,639
68,369
69,628
70,459
70,614
71,833
73,091
74,455
75,770
77,347
78,737
80,734
82,771
84,382
87,034
89,429
91,949
93,775
96,158
99,009
102,251
104,962
106,940
108,670
110,204
111,550
113,544
115,461
117,834
119,865
121,669
123,869
125,840
126,346
128,105
129,200
131,056
132,304
133,943
136,297
137,673
139,368

57,038
58,343
57,651
58,918
59,961
60,250
61,179
60,109
62,170
63,799
64,071
63,036
64,630
65,778
65,746
66,702
67,762
69,305
71,088
72,895
74,372
75,920
77,902
78,678
79,367
82,153
85,064
86,794
85,846
88,752
92,017
96,048
98,824
99,303
100,397
99,526
100,834
105,005
107,150
109,597
112,440
114,968
117,342
118,793
117,718
118,492
120,259
123,060
124,900
126,708
129,558
131,463
133,488

7,890
7,629
7,658
7,160
6,726
6,500
6,260
6,205
6,450
6,283
5,947
5,586
5,565
5,458
5,200
4,944
4,687
4,523
4,361
3,979
3,844
3,817
3,606
3,463
3,394
3,484
3,470
3,515
3,408
3,331
3,283
3,387
3,347
3,364
3,368
3,401
3,383
3,321
3,179
3,163
3,208
3,169
3,199
3,223
3,269
3,247
3,115
3,409
3,440
3,443
3,399
3,378
3,281

1 Not seasonally adjusted.
2 Civilian labor force as percent of civilian noninstitutional population.
3 Civilian employment as percent of civilian noninstitutional population.
4 Unemployed as percent of civilian labor force.

See next page for continuation of table.

268  |  Economic Report of the President

49,148
50,714
49,993
51,758
53,235
53,749
54,919
53,904
55,722
57,514
58,123
57,450
59,065
60,318
60,546
61,759
63,076
64,782
66,726
68,915
70,527
72,103
74,296
75,215
75,972
78,669
81,594
83,279
82,438
85,421
88,734
92,661
95,477
95,938
97,030
96,125
97,450
101,685
103,971
106,434
109,232
111,800
114,142
115,570
114,449
115,245
117,144
119,651
121,460
123,264
126,159
128,085
130,207

2,311
2,276
3,637
3,288
2,055
1,883
1,834
3,532
2,852
2,750
2,859
4,602
3,740
3,852
4,714
3,911
4,070
3,786
3,366
2,875
2,975
2,817
2,832
4,093
5,016
4,882
4,365
5,156
7,929
7,406
6,991
6,202
6,137
7,637
8,273
10,678
10,717
8,539
8,312
8,237
7,425
6,701
6,528
7,047
8,628
9,613
8,940
7,996
7,404
7,236
6,739
6,210
5,880

42,477
42,447
42,708
42,787
42,604
43,093
44,041
44,678
44,660
44,402
45,336
46,088
46,960
47,617
48,312
49,539
50,583
51,394
52,058
52,288
52,527
53,291
53,602
54,315
55,834
57,091
57,667
58,171
59,377
59,991
60,025
59,659
59,900
60,806
61,460
62,067
62,665
62,839
62,744
62,752
62,888
62,944
62,523
63,324
64,578
64,700
65,638
65,758
66,280
66,647
66,837
67,547
68,385

58.3
58.8
58.9
59.2
59.2
59.0
58.9
58.8
59.3
60.0
59.6
59.5
59.3
59.4
59.3
58.8
58.7
58.7
58.9
59.2
59.6
59.6
60.1
60.4
60.2
60.4
60.8
61.3
61.2
61.6
62.3
63.2
63.7
63.8
63.9
64.0
64.0
64.4
64.8
65.3
65.6
65.9
66.5
66.5
66.2
66.4
66.3
66.6
66.6
66.8
67.1
67.1
67.1

56.0
56.6
55.4
56.1
57.3
57.3
57.1
55.5
56.7
57.5
57.1
55.4
56.0
56.1
55.4
55.5
55.4
55.7
56.2
56.9
57.3
57.5
58.0
57.4
56.6
57.0
57.8
57.8
56.1
56.8
57.9
59.3
59.9
59.2
59.0
57.8
57.9
59.5
60.1
60.7
61.5
62.3
63.0
62.8
61.7
61.5
61.7
62.5
62.9
63.2
63.8
64.1
64.3

3.9
3.8
5.9
5.3
3.3
3.0
2.9
5.5
4.4
4.1
4.3
6.8
5.5
5.5
6.7
5.5
5.7
5.2
4.5
3.8
3.8
3.6
3.5
4.9
5.9
5.6
4.9
5.6
8.5
7.7
7.1
6.1
5.8
7.1
7.6
9.7
9.6
7.5
7.2
7.0
6.2
5.5
5.3
5.6
6.8
7.5
6.9
6.1
5.6
5.4
4.9
4.5
4.2

Table B–35.—Civilian population and labor force, 1929–2007—Continued
[Monthly data seasonally adjusted, except as noted]
Civilian labor force
Year or month

Civilian
noninstitutional
population 1

Employment
Total

Total

NonAgricultural agricultural

Unemployment

Not in
labor
force

Civilian
labor force
participation rate 2

Thousands of persons 16 years of age and over
2000 5, 6 �����������������
2001 ����������������������
2002 ����������������������
2003 5 ��������������������
2004 5 ��������������������
2005 5 ��������������������
2006 5 ��������������������
2007 5 ��������������������
2004:  Jan 5 �����������
      Feb �������������
      Mar ������������
      Apr �������������
      May ������������
      June �����������
      July ������������
      Aug ������������
      Sept �����������
      Oct �������������
      Nov ������������
      Dec �������������
2005:  Jan 5 �����������
      Feb �������������
      Mar ������������
      Apr �������������
      May ������������
      June �����������
      July ������������
      Aug ������������
      Sept �����������
      Oct �������������
      Nov ������������
      Dec �������������
2006:  Jan 5 �����������
      Feb �������������
      Mar ������������
      Apr �������������
      May ������������
      June �����������
      July ������������
      Aug ������������
      Sept �����������
      Oct �������������
      Nov ������������
      Dec �������������
2007:  Jan 5 �����������
      Feb �������������
      Mar ������������
      Apr �������������
      May ������������
      June �����������
      July ������������
      Aug ������������
      Sept �����������
      Oct �������������
      Nov ������������
      Dec �������������

212,577
215,092
217,570
221,168
223,357
226,082
228,815
231,867
222,161
222,357
222,550
222,757
222,967
223,196
223,422
223,677
223,941
224,192
224,422
224,640
224,837
225,041
225,236
225,441
225,670
225,911
226,153
226,421
226,693
226,959
227,204
227,425
227,553
227,763
227,975
228,199
228,428
228,671
228,912
229,167
229,420
229,675
229,905
230,108
230,650
230,834
231,034
231,253
231,480
231,713
231,958
232,211
232,461
232,715
232,939
233,156

142,583
143,734
144,863
146,510
147,401
149,320
151,428
153,124
146,830
146,692
146,906
146,839
147,058
147,454
147,706
147,585
147,442
147,816
148,180
148,087
147,981
148,308
148,295
148,912
149,276
149,244
149,479
149,826
150,022
150,061
150,099
150,041
150,111
150,505
150,694
150,904
151,126
151,386
151,471
151,799
151,741
152,130
152,403
152,709
152,958
152,725
152,884
152,542
152,776
153,085
153,182
152,886
153,506
153,306
153,828
153,866

136,891
136,933
136,485
137,736
139,252
141,730
144,427
146,047
138,463
138,529
138,421
138,674
138,848
139,174
139,565
139,585
139,500
139,756
140,245
140,138
140,224
140,354
140,563
141,244
141,597
141,708
142,055
142,457
142,429
142,613
142,564
142,778
143,086
143,362
143,619
143,791
144,088
144,369
144,295
144,671
144,846
145,395
145,583
145,949
145,915
145,888
146,145
145,713
145,913
146,087
146,045
145,753
146,260
146,016
146,647
146,211

2,464
2,299
2,311
2,275
2,232
2,197
2,206
2,095
2,198
2,212
2,180
2,240
2,298
2,238
2,216
2,335
2,248
2,214
2,206
2,179
2,115
2,134
2,183
2,240
2,220
2,308
2,299
2,184
2,176
2,184
2,175
2,111
2,169
2,193
2,165
2,235
2,191
2,267
2,264
2,235
2,166
2,163
2,163
2,257
2,225
2,327
2,202
2,053
2,081
1,957
1,997
1,856
2,065
2,089
2,148
2,248

134,427
134,635
134,174
135,461
137,020
139,532
142,221
143,952
136,219
136,341
136,291
136,481
136,553
136,746
137,365
137,240
137,345
137,613
137,987
137,940
138,099
138,198
138,402
139,037
139,364
139,236
139,804
140,306
140,337
140,483
140,357
140,643
140,901
141,118
141,451
141,557
141,859
142,006
142,116
142,492
142,742
143,256
143,384
143,670
143,691
143,535
143,966
143,678
143,799
144,066
144,096
143,928
144,259
143,933
144,503
143,933

Civilian
employment/
population
ratio 3

Unemployment
rate,
civilian
workers 4

Percent
5,692
6,801
8,378
8,774
8,149
7,591
7,001
7,078
8,367
8,162
8,484
8,165
8,210
8,280
8,140
7,999
7,943
8,060
7,935
7,949
7,757
7,954
7,732
7,669
7,679
7,536
7,424
7,369
7,593
7,449
7,535
7,262
7,025
7,143
7,075
7,113
7,038
7,017
7,176
7,128
6,896
6,735
6,820
6,760
7,043
6,837
6,738
6,829
6,863
6,997
7,137
7,133
7,246
7,291
7,181
7,655

69,994
71,359
72,707
74,658
75,956
76,762
77,387
78,743
75,331
75,665
75,644
75,918
75,909
75,742
75,716
76,092
76,499
76,376
76,241
76,553
76,856
76,733
76,942
76,528
76,394
76,667
76,674
76,595
76,671
76,897
77,105
77,384
77,442
77,258
77,280
77,296
77,302
77,285
77,442
77,369
77,678
77,545
77,502
77,399
77,692
78,110
78,150
78,711
78,704
78,628
78,776
79,325
78,955
79,409
79,111
79,290

67.1
66.8
66.6
66.2
66.0
66.0
66.2
66.0
66.1
66.0
66.0
65.9
66.0
66.1
66.1
66.0
65.8
65.9
66.0
65.9
65.8
65.9
65.8
66.1
66.1
66.1
66.1
66.2
66.2
66.1
66.1
66.0
66.0
66.1
66.1
66.1
66.2
66.2
66.2
66.2
66.1
66.2
66.3
66.4
66.3
66.2
66.2
66.0
66.0
66.1
66.0
65.8
66.0
65.9
66.0
66.0

64.4
63.7
62.7
62.3
62.3
62.7
63.1
63.0
62.3
62.3
62.2
62.3
62.3
62.4
62.5
62.4
62.3
62.3
62.5
62.4
62.4
62.4
62.4
62.7
62.7
62.7
62.8
62.9
62.8
62.8
62.7
62.8
62.9
62.9
63.0
63.0
63.1
63.1
63.0
63.1
63.1
63.3
63.3
63.4
63.3
63.2
63.3
63.0
63.0
63.0
63.0
62.8
62.9
62.7
63.0
62.7

4.0
4.7
5.8
6.0
5.5
5.1
4.6
4.6
5.7
5.6
5.8
5.6
5.6
5.6
5.5
5.4
5.4
5.5
5.4
5.4
5.2
5.4
5.2
5.1
5.1
5.0
5.0
4.9
5.1
5.0
5.0
4.8
4.7
4.7
4.7
4.7
4.7
4.6
4.7
4.7
4.5
4.4
4.5
4.4
4.6
4.5
4.4
4.5
4.5
4.6
4.7
4.7
4.7
4.8
4.7
5.0

5 Not strictly comparable with earlier data due to population adjustments or other changes. See Employment and Earnings for details on breaks in series.

6 Beginning in 2000, data for agricultural employment are for agricultural and related industries; data for this series and for nonagricultural employment are
not strictly comparable with data for earlier years. Because of independent seasonal adjustment for these two series, monthly data will not add to total civilian
employment.
Note.—Labor force data in Tables B–35 through B–44 are based on household interviews and relate to the calendar week including the 12th of the month.
For definitions of terms, area samples used, historical comparability of the data, comparability with other series, etc., see Employment and Earnings.
Source: Department of Labor (Bureau of Labor Statistics).

Appendix B – Population, Employment, Wages, and Productivity  |  269

Table B–36.—Civilian employment and unemployment by sex and age, 1960–2007
[Thousands of persons 16 years of age and over; monthly data seasonally adjusted]
Civilian employment
Males
Year or month

1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2007 ����������������������
2006:  Jan �������������
      Feb �������������
      Mar ������������
      Apr �������������
      May ������������
      June �����������
      July ������������
      Aug ������������
      Sept �����������
      Oct �������������
      Nov ������������
      Dec �������������
2007:  Jan �������������
      Feb �������������
      Mar ������������
      Apr �������������
      May ������������
      June �����������
      July ������������
      Aug ������������
      Sept �����������
      Oct �������������
      Nov ������������
      Dec �������������

Total

65,778
65,746
66,702
67,762
69,305
71,088
72,895
74,372
75,920
77,902
78,678
79,367
82,153
85,064
86,794
85,846
88,752
92,017
96,048
98,824
99,303
100,397
99,526
100,834
105,005
107,150
109,597
112,440
114,968
117,342
118,793
117,718
118,492
120,259
123,060
124,900
126,708
129,558
131,463
133,488
136,891
136,933
136,485
137,736
139,252
141,730
144,427
146,047
143,086
143,362
143,619
143,791
144,088
144,369
144,295
144,671
144,846
145,395
145,583
145,949
145,915
145,888
146,145
145,713
145,913
146,087
146,045
145,753
146,260
146,016
146,647
146,211

Total
43,904
43,656
44,177
44,657
45,474
46,340
46,919
47,479
48,114
48,818
48,990
49,390
50,896
52,349
53,024
51,857
53,138
54,728
56,479
57,607
57,186
57,397
56,271
56,787
59,091
59,891
60,892
62,107
63,273
64,315
65,104
64,223
64,440
65,349
66,450
67,377
68,207
69,685
70,693
71,446
73,305
73,196
72,903
73,332
74,524
75,973
77,502
78,254
76,867
76,970
77,237
77,212
77,300
77,353
77,135
77,499
77,945
78,001
78,146
78,324
78,221
78,184
78,297
78,293
78,277
78,243
78,237
78,066
78,229
78,177
78,604
78,260

16-19
years
2,361
2,315
2,362
2,406
2,587
2,918
3,253
3,186
3,255
3,430
3,409
3,478
3,765
4,039
4,103
3,839
3,947
4,174
4,336
4,300
4,085
3,815
3,379
3,300
3,322
3,328
3,323
3,381
3,492
3,477
3,427
3,044
2,944
2,994
3,156
3,292
3,310
3,401
3,558
3,685
3,671
3,420
3,169
2,917
2,952
2,923
3,071
2,917
3,017
3,056
3,075
3,058
3,117
3,116
3,070
3,069
3,037
3,061
3,080
3,086
3,067
3,036
3,011
3,013
2,934
2,951
2,914
2,792
2,897
2,903
2,770
2,761

Unemployment
Females

20
years
and
over

Total

41,543
41,342
41,815
42,251
42,886
43,422
43,668
44,294
44,859
45,388
45,581
45,912
47,130
48,310
48,922
48,018
49,190
50,555
52,143
53,308
53,101
53,582
52,891
53,487
55,769
56,562
57,569
58,726
59,781
60,837
61,678
61,178
61,496
62,355
63,294
64,085
64,897
66,284
67,135
67,761
69,634
69,776
69,734
70,415
71,572
73,050
74,431
75,337
73,850
73,913
74,162
74,154
74,183
74,237
74,065
74,429
74,908
74,940
75,066
75,238
75,154
75,148
75,286
75,279
75,343
75,292
75,324
75,274
75,332
75,274
75,834
75,499

21,874
22,090
22,525
23,105
23,831
24,748
25,976
26,893
27,807
29,084
29,688
29,976
31,257
32,715
33,769
33,989
35,615
37,289
39,569
41,217
42,117
43,000
43,256
44,047
45,915
47,259
48,706
50,334
51,696
53,027
53,689
53,496
54,052
54,910
56,610
57,523
58,501
59,873
60,771
62,042
63,586
63,737
63,582
64,404
64,728
65,757
66,925
67,792
66,219
66,392
66,382
66,579
66,788
67,016
67,160
67,172
66,901
67,394
67,437
67,625
67,694
67,704
67,849
67,420
67,637
67,845
67,808
67,687
68,030
67,838
68,043
67,951

Note.—See footnote 5 and Note, Table B–35.
Source: Department of Labor (Bureau of Labor Statistics).

270  |  Economic Report of the President

16-19
years
1,768
1,793
1,833
1,849
1,929
2,118
2,468
2,496
2,526
2,687
2,735
2,730
2,980
3,231
3,345
3,263
3,389
3,514
3,734
3,783
3,625
3,411
3,170
3,043
3,122
3,105
3,149
3,260
3,313
3,282
3,154
2,862
2,724
2,811
3,005
3,127
3,190
3,260
3,493
3,487
3,519
3,320
3,162
3,002
2,955
3,055
3,091
2,994
3,058
3,110
3,078
3,120
3,132
3,129
3,122
3,041
2,998
3,089
3,108
3,099
3,047
3,018
2,990
2,941
2,926
3,017
3,016
2,861
2,998
3,011
3,063
3,040

Males
20
years
and
over

Total

20,105
20,296
20,693
21,257
21,903
22,630
23,510
24,397
25,281
26,397
26,952
27,246
28,276
29,484
30,424
30,726
32,226
33,775
35,836
37,434
38,492
39,590
40,086
41,004
42,793
44,154
45,556
47,074
48,383
49,745
50,535
50,634
51,328
52,099
53,606
54,396
55,311
56,613
57,278
58,555
60,067
60,417
60,420
61,402
61,773
62,702
63,834
64,799
63,161
63,282
63,303
63,458
63,656
63,887
64,038
64,131
63,904
64,305
64,330
64,525
64,647
64,686
64,859
64,479
64,710
64,828
64,792
64,826
65,033
64,827
64,980
64,912

3,852
4,714
3,911
4,070
3,786
3,366
2,875
2,975
2,817
2,832
4,093
5,016
4,882
4,365
5,156
7,929
7,406
6,991
6,202
6,137
7,637
8,273
10,678
10,717
8,539
8,312
8,237
7,425
6,701
6,528
7,047
8,628
9,613
8,940
7,996
7,404
7,236
6,739
6,210
5,880
5,692
6,801
8,378
8,774
8,149
7,591
7,001
7,078
7,025
7,143
7,075
7,113
7,038
7,017
7,176
7,128
6,896
6,735
6,820
6,760
7,043
6,837
6,738
6,829
6,863
6,997
7,137
7,133
7,246
7,291
7,181
7,655

Total
2,486
2,997
2,423
2,472
2,205
1,914
1,551
1,508
1,419
1,403
2,238
2,789
2,659
2,275
2,714
4,442
4,036
3,667
3,142
3,120
4,267
4,577
6,179
6,260
4,744
4,521
4,530
4,101
3,655
3,525
3,906
4,946
5,523
5,055
4,367
3,983
3,880
3,577
3,266
3,066
2,975
3,690
4,597
4,906
4,456
4,059
3,753
3,882
3,679
3,817
3,776
3,837
3,866
3,747
3,857
3,866
3,600
3,640
3,647
3,680
3,846
3,815
3,700
3,743
3,776
3,859
3,887
3,863
4,008
4,032
3,910
4,188

16-19
years
426
479
408
501
487
479
432
448
426
440
599
693
711
653
757
966
939
874
813
811
913
962
1,090
1,003
812
806
779
732
667
658
667
751
806
768
740
744
733
694
686
633
599
650
700
697
664
667
622
623
590
622
631
602
603
644
646
638
652
619
605
596
594
605
576
594
622
648
592
612
650
643
670
683

Females
20
years
and
over
2,060
2,518
2,016
1,971
1,718
1,435
1,120
1,060
993
963
1,638
2,097
1,948
1,624
1,957
3,476
3,098
2,794
2,328
2,308
3,353
3,615
5,089
5,257
3,932
3,715
3,751
3,369
2,987
2,867
3,239
4,195
4,717
4,287
3,627
3,239
3,146
2,882
2,580
2,433
2,376
3,040
3,896
4,209
3,791
3,392
3,131
3,259
3,089
3,196
3,145
3,235
3,262
3,103
3,210
3,228
2,948
3,021
3,042
3,084
3,252
3,210
3,124
3,149
3,154
3,212
3,295
3,252
3,357
3,389
3,240
3,505

Total
1,366
1,717
1,488
1,598
1,581
1,452
1,324
1,468
1,397
1,429
1,855
2,227
2,222
2,089
2,441
3,486
3,369
3,324
3,061
3,018
3,370
3,696
4,499
4,457
3,794
3,791
3,707
3,324
3,046
3,003
3,140
3,683
4,090
3,885
3,629
3,421
3,356
3,162
2,944
2,814
2,717
3,111
3,781
3,868
3,694
3,531
3,247
3,196
3,346
3,326
3,299
3,276
3,173
3,270
3,319
3,262
3,296
3,095
3,173
3,080
3,197
3,021
3,038
3,086
3,087
3,138
3,250
3,270
3,238
3,258
3,271
3,467

16-19
years
286
349
313
383
385
395
405
391
412
413
506
568
598
583
665
802
780
789
769
743
755
800
886
825
687
661
675
616
558
536
544
608
621
597
580
602
573
577
519
529
483
512
553
554
543
519
496
478
505
497
531
442
412
507
519
542
524
496
485
479
485
461
451
488
479
485
476
480
476
462
475
513

20
years
and
over
1,080
1,368
1,175
1,216
1,195
1,056
921
1,078
985
1,015
1,349
1,658
1,625
1,507
1,777
2,684
2,588
2,535
2,292
2,276
2,615
2,895
3,613
3,632
3,107
3,129
3,032
2,709
2,487
2,467
2,596
3,074
3,469
3,288
3,049
2,819
2,783
2,585
2,424
2,285
2,235
2,599
3,228
3,314
3,150
3,013
2,751
2,718
2,841
2,829
2,768
2,834
2,761
2,763
2,800
2,720
2,772
2,599
2,688
2,601
2,712
2,561
2,588
2,597
2,608
2,653
2,774
2,790
2,762
2,796
2,796
2,954

Table B–37.—Civilian employment by demographic characteristic, 1960–2007
[Thousands of persons 16 years of age and over; monthly data seasonally adjusted]
White 1

Year or month

All
civilian
workers

Total

1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2007 ����������������������
2006:  Jan �������������
      Feb �������������
      Mar ������������
      Apr �������������
      May ������������
      June �����������
      July ������������
      Aug ������������
      Sept �����������
      Oct �������������
      Nov ������������
      Dec �������������
2007:  Jan �������������
      Feb �������������
      Mar ������������
      Apr �������������
      May ������������
      June �����������
      July ������������
      Aug ������������
      Sept �����������
      Oct �������������
      Nov ������������
      Dec �������������

65,778
65,746
66,702
67,762
69,305
71,088
72,895
74,372
75,920
77,902
78,678
79,367
82,153
85,064
86,794
85,846
88,752
92,017
96,048
98,824
99,303
100,397
99,526
100,834
105,005
107,150
109,597
112,440
114,968
117,342
118,793
117,718
118,492
120,259
123,060
124,900
126,708
129,558
131,463
133,488
136,891
136,933
136,485
137,736
139,252
141,730
144,427
146,047
143,086
143,362
143,619
143,791
144,088
144,369
144,295
144,671
144,846
145,395
145,583
145,949
145,915
145,888
146,145
145,713
145,913
146,087
146,045
145,753
146,260
146,016
146,647
146,211

58,850
58,913
59,698
60,622
61,922
63,446
65,021
66,361
67,750
69,518
70,217
70,878
73,370
75,708
77,184
76,411
78,853
81,700
84,936
87,259
87,715
88,709
87,903
88,893
92,120
93,736
95,660
97,789
99,812
101,584
102,261
101,182
101,669
103,045
105,190
106,490
107,808
109,856
110,931
112,235
114,424
114,430
114,013
114,235
115,239
116,949
118,833
119,792
118,078
118,014
118,192
118,412
118,512
118,721
118,878
119,065
119,161
119,523
119,554
119,828
119,742
119,651
120,065
119,505
119,711
119,835
119,713
119,340
119,992
119,883
120,194
119,889

Males Females
39,755
39,588
40,016
40,428
41,115
41,844
42,331
42,833
43,411
44,048
44,178
44,595
45,944
47,085
47,674
46,697
47,775
49,150
50,544
51,452
51,127
51,315
50,287
50,621
52,462
53,046
53,785
54,647
55,550
56,352
56,703
55,797
55,959
56,656
57,452
58,146
58,888
59,998
60,604
61,139
62,289
62,212
61,849
61,866
62,712
63,763
64,883
65,289
64,584
64,488
64,709
64,669
64,671
64,734
64,686
64,913
65,166
65,253
65,315
65,407
65,341
65,281
65,531
65,404
65,393
65,367
65,231
64,923
65,153
65,229
65,412
65,237

19,095
19,325
19,682
20,194
20,807
21,602
22,690
23,528
24,339
25,470
26,039
26,283
27,426
28,623
29,511
29,714
31,078
32,550
34,392
35,807
36,587
37,394
37,615
38,272
39,659
40,690
41,876
43,142
44,262
45,232
45,558
45,385
45,710
46,390
47,738
48,344
48,920
49,859
50,327
51,096
52,136
52,218
52,164
52,369
52,527
53,186
53,950
54,503
53,494
53,526
53,483
53,744
53,841
53,987
54,192
54,152
53,994
54,270
54,239
54,421
54,401
54,370
54,534
54,102
54,318
54,468
54,482
54,417
54,838
54,654
54,782
54,653

Black and other 1
Both
sexes
16-19
3,700
3,693
3,774
3,851
4,076
4,562
5,176
5,114
5,195
5,508
5,571
5,670
6,173
6,623
6,796
6,487
6,724
7,068
7,367
7,356
7,021
6,588
5,984
5,799
5,836
5,768
5,792
5,898
6,030
5,946
5,779
5,216
4,985
5,113
5,398
5,593
5,667
5,807
6,089
6,204
6,160
5,817
5,441
5,064
5,039
5,105
5,215
4,990
5,210
5,215
5,228
5,250
5,269
5,246
5,252
5,176
5,099
5,167
5,195
5,273
5,185
5,118
5,068
5,029
4,969
5,040
5,009
4,805
4,996
4,985
4,863
4,853

Black or African American 1

Total

Males

Females

Both
sexes
16-19

6,928
6,833
7,003
7,140
7,383
7,643
7,877
8,011
8,169
8,384
8,464
8,488
8,783
9,356
9,610
9,435
9,899
10,317
11,112
11,565
11,588
11,688
11,624
11,941
12,885
13,414
13,937
14,652
15,156
15,757
16,533
16,536
16,823
17,214
17,870
18,409
18,900
19,701
20,532
21,253
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������

4,149
4,068
4,160
4,229
4,359
4,496
4,588
4,646
4,702
4,770
4,813
4,796
4,952
5,265
5,352
5,161
5,363
5,579
5,936
6,156
6,059
6,083
5,983
6,166
6,629
6,845
7,107
7,459
7,722
7,963
8,401
8,426
8,482
8,693
8,998
9,231
9,319
9,687
10,089
10,307
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������

2,779
2,765
2,843
2,911
3,024
3,147
3,289
3,365
3,467
3,614
3,650
3,692
3,832
4,092
4,258
4,275
4,536
4,739
5,177
5,409
5,529
5,606
5,641
5,775
6,256
6,569
6,830
7,192
7,434
7,795
8,131
8,110
8,342
8,521
8,872
9,179
9,580
10,014
10,443
10,945
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������

430
414
420
404
440
474
545
568
584
609
574
538
573
647
652
615
611
619
703
727
689
637
565
543
607
666
681
742
774
813
801
690
684
691
763
826
832
853
962
968
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������

Total

Males

Females

Both
sexes
16-19

�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
7,802
8,128
8,203
7,894
8,227
8,540
9,102
9,359
9,313
9,355
9,189
9,375
10,119
10,501
10,814
11,309
11,658
11,953
12,175
12,074
12,151
12,382
12,835
13,279
13,542
13,969
14,556
15,056
15,156
15,006
14,872
14,739
14,909
15,313
15,765
16,051
15,490
15,656
15,709
15,691
15,783
15,700
15,682
15,857
15,649
15,901
15,973
16,091
16,242
16,141
15,979
16,048
15,939
15,989
16,172
16,176
16,046
15,946
15,980
15,961

�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
4,368
4,527
4,527
4,275
4,404
4,565
4,796
4,923
4,798
4,794
4,637
4,753
5,124
5,270
5,428
5,661
5,824
5,928
5,995
5,961
5,930
6,047
6,241
6,422
6,456
6,607
6,871
7,027
7,082
6,938
6,959
6,820
6,912
7,155
7,354
7,500
7,216
7,310
7,340
7,355
7,372
7,327
7,301
7,345
7,298
7,390
7,443
7,548
7,579
7,525
7,385
7,465
7,407
7,406
7,603
7,664
7,536
7,436
7,522
7,470

������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
3,433
3,601
3,677
3,618
3,823
3,975
4,307
4,436
4,515
4,561
4,552
4,622
4,995
5,231
5,386
5,648
5,834
6,025
6,180
6,113
6,221
6,334
6,595
6,857
7,086
7,362
7,685
8,029
8,073
8,068
7,914
7,919
7,997
8,158
8,410
8,551
8,274
8,346
8,369
8,336
8,411
8,373
8,381
8,512
8,351
8,511
8,530
8,543
8,662
8,615
8,595
8,583
8,532
8,583
8,569
8,512
8,510
8,510
8,458
8,491

���������������
���������������
���������������
���������������
���������������
���������������
���������������
���������������
���������������
���������������
���������������
���������������
509
570
554
507
508
508
571
579
547
505
428
416
474
532
536
587
601
625
598
494
492
494
552
586
613
631
736
691
711
637
611
516
520
536
618
566
559
650
602
623
644
630
588
620
583
658
628
627
603
599
592
584
562
561
558
525
541
558
553
556

1 Beginning in 2003, persons who selected this race group only. Prior to 2003, persons who selected more than one race were included in the group
they identified as the main race. Data for “black or African American” were for “black” prior to 2003. Data discontinued for “black and other” series. See
Employment and Earnings for details.
Note.—Beginning with data for 2000, since data for all race groups are not shown here, detail will not sum to total.
See footnote 5 and Note, Table B–35.
Source: Department of Labor (Bureau of Labor Statistics).

Appendix B – Population, Employment, Wages, and Productivity  |  271

Table B–38.—Unemployment by demographic characteristic, 1960–2007
[Thousands of persons 16 years of age and over; monthly data seasonally adjusted]

Year or month

1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2007 ����������������������
2006:  Jan �������������
      Feb �������������
      Mar ������������
      Apr �������������
      May ������������
      June �����������
      July ������������
      Aug ������������
      Sept �����������
      Oct �������������
      Nov ������������
      Dec �������������
2007:  Jan �������������
      Feb �������������
      Mar ������������
      Apr �������������
      May ������������
      June �����������
      July ������������
      Aug ������������
      Sept �����������
      Oct �������������
      Nov ������������
      Dec �������������

All
civilian
workers
3,852
4,714
3,911
4,070
3,786
3,366
2,875
2,975
2,817
2,832
4,093
5,016
4,882
4,365
5,156
7,929
7,406
6,991
6,202
6,137
7,637
8,273
10,678
10,717
8,539
8,312
8,237
7,425
6,701
6,528
7,047
8,628
9,613
8,940
7,996
7,404
7,236
6,739
6,210
5,880
5,692
6,801
8,378
8,774
8,149
7,591
7,001
7,078
7,025
7,143
7,075
7,113
7,038
7,017
7,176
7,128
6,896
6,735
6,820
6,760
7,043
6,837
6,738
6,829
6,863
6,997
7,137
7,133
7,246
7,291
7,181
7,655

White 1
Total
3,065
3,743
3,052
3,208
2,999
2,691
2,255
2,338
2,226
2,260
3,339
4,085
3,906
3,442
4,097
6,421
5,914
5,441
4,698
4,664
5,884
6,343
8,241
8,128
6,372
6,191
6,140
5,501
4,944
4,770
5,186
6,560
7,169
6,655
5,892
5,459
5,300
4,836
4,484
4,273
4,121
4,969
6,137
6,311
5,847
5,350
5,002
5,143
5,065
5,067
4,962
5,017
5,055
5,036
5,061
5,106
4,882
4,865
4,899
4,938
5,154
4,986
4,787
4,928
4,928
5,083
5,232
5,256
5,324
5,268
5,235
5,571

Males
1,988
2,398
1,915
1,976
1,779
1,556
1,241
1,208
1,142
1,137
1,857
2,309
2,173
1,836
2,169
3,627
3,258
2,883
2,411
2,405
3,345
3,580
4,846
4,859
3,600
3,426
3,433
3,132
2,766
2,636
2,935
3,859
4,209
3,828
3,275
2,999
2,896
2,641
2,431
2,274
2,177
2,754
3,459
3,643
3,282
2,931
2,730
2,869
2,761
2,763
2,693
2,764
2,830
2,755
2,748
2,808
2,570
2,626
2,647
2,767
2,871
2,832
2,638
2,731
2,741
2,839
2,921
2,935
3,048
2,959
2,908
3,042

Females
1,077
1,345
1,137
1,232
1,220
1,135
1,014
1,130
1,084
1,123
1,482
1,777
1,733
1,606
1,927
2,794
2,656
2,558
2,287
2,260
2,540
2,762
3,395
3,270
2,772
2,765
2,708
2,369
2,177
2,135
2,251
2,701
2,959
2,827
2,617
2,460
2,404
2,195
2,053
1,999
1,944
2,215
2,678
2,668
2,565
2,419
2,271
2,274
2,304
2,304
2,269
2,252
2,225
2,281
2,313
2,298
2,311
2,239
2,252
2,170
2,284
2,154
2,149
2,197
2,187
2,244
2,311
2,322
2,275
2,309
2,327
2,529

Black and other 1
Both
sexes
16-19
575
669
580
708
708
705
651
635
644
660
871
1,011
1,021
955
1,104
1,413
1,364
1,284
1,189
1,193
1,291
1,374
1,534
1,387
1,116
1,074
1,070
995
910
863
903
1,029
1,037
992
960
952
939
912
876
844
795
845
925
909
890
845
794
805
789
769
777
743
759
819
791
860
816
798
775
811
791
772
776
773
801
834
800
806
834
810
840
815

1 See footnote 1 and Note, Table B–37.

Note.—See footnote 5 and Note, Table B–35.
Source: Department of Labor (Bureau of Labor Statistics).

272  |  Economic Report of the President

Black or African American 1

Total

Males

Females

Both
sexes
16-19

788
971
861
863
787
678
622
638
590
571
754
930
977
924
1,058
1,507
1,492
1,550
1,505
1,473
1,752
1,930
2,437
2,588
2,167
2,121
2,097
1,924
1,757
1,757
1,860
2,068
2,444
2,285
2,104
1,945
1,936
1,903
1,726
1,606
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������

498
599
509
496
426
360
310
300
277
267
380
481
486
440
544
815
779
784
731
714
922
997
1,334
1,401
1,144
1,095
1,097
969
888
889
971
1,087
1,314
1,227
1,092
984
984
935
835
792
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������

290
372
352
367
361
318
312
338
313
304
374
450
491
484
514
692
713
766
774
759
830
933
1,104
1,187
1,022
1,026
999
955
869
868
889
981
1,130
1,058
1,011
961
952
967
891
814
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������

138
159
142
176
165
171
186
203
194
193
235
249
288
280
318
355
355
379
394
362
377
388
443
441
384
394
383
353
316
331
308
330
390
373
360
394
367
359
329
318
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������

Total

Males

Females

Both
sexes
16-19

�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
906
846
965
1,369
1,334
1,393
1,330
1,319
1,553
1,731
2,142
2,272
1,914
1,864
1,840
1,684
1,547
1,544
1,565
1,723
2,011
1,844
1,666
1,538
1,592
1,560
1,426
1,309
1,241
1,416
1,693
1,787
1,729
1,700
1,549
1,445
1,513
1,627
1,629
1,608
1,524
1,516
1,659
1,528
1,574
1,471
1,488
1,455
1,415
1,394
1,439
1,435
1,466
1,467
1,421
1,347
1,437
1,483
1,473
1,577

�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
�������������
448
395
494
741
698
698
641
636
815
891
1,167
1,213
1,003
951
946
826
771
773
806
890
1,067
971
848
762
808
747
671
626
620
709
835
891
860
844
774
752
675
794
790
816
813
756
858
782
788
782
751
674
727
733
790
793
778
775
711
660
718
776
756
829

������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
������������
458
451
470
629
637
695
690
683
738
840
975
1,059
911
913
894
858
776
772
758
833
944
872
818
777
784
813
756
684
621
706
858
895
868
856
775
693
837
833
839
792
710
760
801
747
787
689
736
781
688
661
648
642
688
692
710
687
719
708
717
748

���������������
���������������
���������������
���������������
���������������
���������������
���������������
���������������
���������������
���������������
���������������
���������������
279
262
297
330
330
354
360
333
343
357
396
392
353
357
347
312
288
300
268
280
324
313
300
325
310
302
281
268
230
260
260
255
241
267
253
235
239
280
307
253
216
241
286
242
273
246
239
213
246
241
194
258
242
252
206
238
220
215
234
295

Table B–39.—Civilian labor force participation rate and employment/population ratio, 1960–2007
[Percent 1; monthly data seasonally adjusted]
Labor force participation rate
Year or month

1960 ����������������������
1961 ����������������������
1962 ����������������������
1963 ����������������������
1964 ����������������������
1965 ����������������������
1966 ����������������������
1967 ����������������������
1968 ����������������������
1969 ����������������������
1970 ����������������������
1971 ����������������������
1972 ����������������������
1973 ����������������������
1974 ����������������������
1975 ����������������������
1976 ����������������������
1977 ����������������������
1978 ����������������������
1979 ����������������������
1980 ����������������������
1981 ����������������������
1982 ����������������������
1983 ����������������������
1984 ����������������������
1985 ����������������������
1986 ����������������������
1987 ����������������������
1988 ����������������������
1989 ����������������������
1990 ����������������������
1991 ����������������������
1992 ����������������������
1993 ����������������������
1994 ����������������������
1995 ����������������������
1996 ����������������������
1997 ����������������������
1998 ����������������������
1999 ����������������������
2000 ����������������������
2001 ����������������������
2002 ����������������������
2003 ����������������������
2004 ����������������������
2005 ����������������������
2006 ����������������������
2007 ����������������������
2006:  Jan �������������
      Feb �������������
      Mar ������������
      Apr �������������
      May ������������
      June �����������
      July ������������
      Aug ������������
      Sept �����������
      Oct �������������
      Nov ������������
      Dec �������������
2007:  Jan �������������
      Feb �������������
      Mar ������������
      Apr �������������
      May ������������
      June �����������
      July ������������
      Aug ������������
      Sept �����������
      Oct �������������
      Nov ������������
      Dec �������������

All
civilian Males Females
workers
59.4
59.3
58.8
58.7
58.7
58.9
59.2
59.6
59.6
60.1
60.4
60.2
60.4
60.8
61.3
61.2
61.6
62.3
63.2
63.7
63.8
63.9
64.0
64.0
64.4
64.8
65.3
65.6
65.9
66.5
66.5
66.2
66.4
66.3
66.6
66.6
66.8
67.1
67.1
67.1
67.1
66.8
66.6
66.2
66.0
66.0
66.2
66.0
66.0
66.1
66.1
66.1
66.2
66.2
66.2
66.2
66.1
66.2
66.3
66.4
66.3
66.2
66.2
66.0
66.0
66.1
66.0
65.8
66.0
65