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JGR/CEA (Council of Economic Advisors) (1of 2)
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JGR/CEA (Council of Economic Advisors) (1of 2)
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Records of the Office of Counsel to the President (Reagan Administration)
John Roberts' Subject Files
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Ronald Reagan Presidential Library
Digital Library Collections
This is a PDF of a folder from our textual collections.
Collection: Roberts, John G.: Files
Folder Title: JGR/CEA
(Council of Economic Advisors) (1 of 2)
Box: 15
To see more digitized collections visit:
https://reaganlibrary.gov/archives/digital-library
To see all Ronald Reagan Presidential Library inventories visit:
https://reaganlibrary.gov/document-collection
Contact a reference archivist at: [email protected]
Citation Guidelines: https://reaganlibrary.gov/citing
National Archives Catalogue: https://catalog.archives.gov/
THE WHITE HOUSE
WASHINGTON
January 24, 1984
MEMORANDUM FOR FRED F. FIELDING
FROM:
JOHN G. ROBERTS DSR
SUBJECT:
Proposed Draft of Economic Report
of the President (Prepared by CEA)
Richard Darman has asked for comments on the above-
referenced draft report by noon January 24. Under 15 U.S.C.
§ 1022 (a), the President must transmit to Congress, in the
first twenty days of each regular session, an economic
report, along with the annual report of the Council of
Economic Advisers (CEA) to him. The pertinent statutory
provisions specify that the Economic Report shall include
certain five-year numerical goals, 15 U.S.C. § 1022a,
analyses concerning the composition of the goals and
appropriate apportionment of national production among
certain specified components, 15 U.S.C. § 1022b, and the
principal elements of the President's budget, 15 U.S.C.
§ 1022d (c).
In fact, this material has historically appeared not in the
Economic Report of the President but in the CEA annual
report to the President, which, pursuant to 15 U.S.C.
§ 1022 (a), is submitted to Congress along with the Economic
Report of the President. The Economic Report of the
President is generally devoid of the dry statistical
analyses and econometric models filling the CEA annual
report, and is rather a broad overview of the Administra-
tion's economic program for the layman. This has been true
of the Economic Reports submitted not only by this
Administration but by prior administrations as well.
According to Geoffrey Carliner, Special Assistant to CEA
Chairman Feldstein, CEA has always placed the statutorily
required statistical analyses in its annual report rather
than the Economic Report of the President.
It makes no practical difference whether the statistics
appear in the CEA annual report or in the Economic Report
of the President. Both documents are required to be
submitted to Congress at the same time. 15 U.S.C.
§ 1022 (a). The above-cited statutory provisions, however,
can only be read to require the statistics to appear in the
Economic Report. I do not recommend insisting on technical
compliance with the statute and upsetting the time-honored
practice, repeatedly acquiesced in by Congress, of putting
- 2 -
the dry numbers and analysis in the CEA annual report rather
than the Economic Report. No practical purpose would be
served by such insistence, and such a departure would
ill-serve the President's interest in effectively presenting
his economic program to the Congress and public.
I have no objections to the substance of the Economic
Report. On the most sensitive issue, control of the
deficit, the Report notes Congress has been unwilling to
reduce spending as urged by the President. Accordingly, the
President states he is compelled to wait until after the
election to propose basic reform to obtain significant
deficit reductions.
Attachment
THE WHITE HOUSE
WASHINGTON
January 24, 1984
MEMORANDUM FOR RICHARD G. DARMAN
ASSISTANT TO THE PRESIDENT
FROM:
FRED F. FIELDING
Orig. signed by FFF
COUNSEL TO THE PRESIDENT
SUBJECT:
Proposed Draft of Economic Report
of the President (Prepared by CEA)
Counsel's Office has reviewed the above-referenced draft
report. The statutory provisions requiring submission of
the Economic Report of the President to Congress, together
with the annual report to the President of the Council of
Economic Advisers, specify that the former should include
various statistics and numerical analyses. See 15 U.S.C.
§§ 1022a, 1022b, 1022d (c). It has been the practice of
this and prior administrations, however, to include the
statutorily required material in the CEA annual report
rather than, as would be technically correct, in the
Economic Report of the President. Since this time-honored
practice has been repeatedly acquiesced in by Congress, and
since inclusion of the statutorily required material in one
report rather than the other has no practical significance,
we interpose no objection.
On page 1, line 8, either "our" or "the" should be deleted.
On page 7, line 15, "incomes" should be "income." "
One or more lines appear to be missing between pages 10 and
11.
FFF:JGR:aea 1/24/84
CC: FFFielding/JGRoberts/Subj/Chron
THE WHITE HOUSE
WASHINGTON
January 24, 1984
MEMORANDUM FOR RICHARD G. DARMAN
ASSISTANT TO THE PRESIDENT
FROM:
FRED F. FIELDING
COUNSEL TO THE PRESIDENT
SUBJECT:
Proposed Draft of Economic Report
of the President (Prepared by CEA)
Counsel's Office has reviewed the above-referenced draft
report. The statutory provisions requiring submission of
the Economic Report of the President to Congress, together
with the annual report to the President of the Council of
Economic Advisers, specify that the former should include
various statistics and numerical analyses. See 15 U.S.C.
§§ 1022a, 1022b, 1022d(c). It has been the practice of
this and prior administrations, however, to include the
statutorily required material in the CEA annual report
rather than, as would be technically correct, in the
Economic Report of the President. Since this time-honored
practice has been repeatedly acquiesced in by Congress, and
since inclusion of the statutorily required material in one
report rather than the other has no practical significance,
we interpose no objection.
On page 1, line 8, either "our" or "the" should be deleted.
On page 7, line 15, "incomes" should be "income."
One or more lines appear to be missing between pages 10 and
11.
FFF:JGR:aea 1/24/84
CC: FFFielding/JGRoberts/Subj/Chron
CU
ID #.
WHITE HOUSE
CORRESPONDENCE TRACKING WORKSHEET
o - OUTGOING
H - INTERNAL
I - INCOMING
Date Correspondence 84/01/21
Received (YY/MM/DD)
Name of Correspondent:
Darman, Richard G.
User Codes: (A)
(B)
(C)
Subject: MI Mail Doposed Report Draft of Economic Report of the Resident
prepared by CEA)
ROUTE TO:
ACTION
DISPOSITION
Tracking
Type
Completion
Action
Date
of
Date
Office/Agency
(Staff Name)
Code
YY/MM/DD
Response
Code YY/MM/DD
Co HOLL
ORIGINATOR 84,01,21
/
/
Referral Note:
CU AT 18
D 84/01/21
584,01,24
Referral Note:
12:00N
/
/
/
/
-
Referral Note:
/
/
/
/
-
Referral Note:
/ /
/
/
-
Referral Note:
ACTION CODES:
DISPOSITION CODES:
A Appropriate Action
I - Info Copy Only/No Action Necessary
A Answered
C Completed
C Comment/Recommendation
R - Direct Reply w/Copy
B - Non-Special Referral
S Suspended
D Draft Response
S For Signature
F . Furnish Fact Sheet
X Interim Reply
to be used as Enclosure
FOR OUTGOING CORRESPONDENCE:
Type of Response = Initials of Signer
Code = "A"
Completion Date = Date of Outgoing
Comments:
Keep this worksheet attached to the original incoming letter.
Send all routing updates to Central Reference (Room 75, OEOB).
Always return completed correspondence record to Central Files.
Refer questions about the correspondence tracking system to Central Reference, ext. 2590.
5/81
Document No.
WHITE HOUSE STAFFING MEMORANDUM
DATE: 1/20/84
ACTION/CONCURRENCE/COMMENT DUE BY: 1/24 - NOON
SUBJECT: PROPOSED DRAFT OF THE ECONOMIC REPORT OF THE PRESIDENT
(prepared by CEA)
ACTION FYI
ACTION FYI
VICE PRESIDENT
McFARLANE
MEESE
McMANUS
BAKER
MURPHY
DEAVER
OGLESBY
STOCKMAN
ROGERS
DARMAN
P
SS
SPEAKES
FELDSTEIN
SVAHN
FIELDING
VERSTANDIG
FULLER
WHITTLESEY
HERRINGTON
HICKEY
JENKINS
REMARKS:
Please provide your edits/comments on the attached draft Report to my
office by 12:00 Noon on Tuesday, January 24. Thank you.
RESPONSE:
Richard G. Darman
Assistant to the President
Ext. 2702
1984 JAN 21 AM 9: 49
Received SS
THE CHAIRMAN OF THE
1984 JAN 20 PM 12: 32
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON
January 20, 1984
MEMORANDUM FOR RICHARD DARMAN
ge
FROM:
Geoffrey Carliner
Special Assistant to the Chairman
SUBJECT:
Economic Report of the President
Enclosed is a draft of the Economic Report of the
President and galleys of Chapters 4 and 5 of the Annual
Report of the Council of Economic Advisers. Please let me
have your comments as soon as possible.
Economic Report of the President
I have long believed that the vitality of the American
economy and the prosperity of the American people have been
diminished by the inappropriate policies of the federal
government: unnecessary government regulations that
discouraged initiative and wasted scarce capital and labor; an
inefficient tax system that penalized effort and saving and
investment; excessive government spending that wasted
taxpayers' money and misused our the nation's resources; budget
deficits that reduced capital formation and added to the burden
of the national debt; and monetary policies that produced
frequent business cycles and a path of increasing inflation.
I came to Washington to change these policies. The
needed reforms are far from complete, but substantial progress
can already be seen: the burden of regulation has been
reduced, tax rates have been lowered and the tax structure
improved, government spending on a wide range of domestic
programs has been curtailed, and a sound monetary policy has
been established.
Although the full favorable effect of those reforms on our
nation's rate of economic growth will take time to develop,
some of the benefit of our economic policies is already visible
in the current recovery. The economy's performance in 1983 was
very gratifying to me. The recovery brought with it a sharp
drop in unemployment and a substantial increase in the
-2-
income of American families. The number of people at work
increased by more than four million and the unemployment rate
fell from a high of 10.7 percent in December 1982 to 8.2
percent in December 1983. The 6.1 percent rise in real GNP
last year means that real annual income per person in the
United States rose more than seven hundred dollars.
Reducing unemployment
Despite the substantial reduction in unemployment, the
number of unemployed remains unacceptably high. Continued
economic recovery will mean millions of additional jobs in
the years ahead and further declines in the rate of
unemployment. In 1984 alone, the American economy is expected
to add more than 2.6 million additional jobs. Only a strong
and expanding economy can provide the more than 14 million jobs
by the end of the decade that will be needed to absorb a
growing labor force while achieving a progressively lower
level of unemployment over these next six years.
Although economic growth is by far the most important way
to reduce unemployment, special policies to help the
structurally unemployed and particularly disadvantaged groups
can also be helpful. To help these individuals develop
job-related skills that will lead to productive careers in the
private sector, I proposed the Job Training Partnership Act
that I signed into law in 1982. Last year I proposed
additional measures to increase opportunities for training and
-3-
retraining. Although Congress has enacted some of my
employment proposals, I am still waiting for Congressional
action on others.
of particular concern to me is the unemployment among
teenagers. Such unemployment is not only a problem in itself
but is also indicative of lost opportunities to acquire
on-the-job training and job-related skills. It is widely
recognized that the minimum wage law is a substantial barrier
to the employment of teenagers, especially minority teenagers.
I have proposed that during the summer months the minimum wage
for teenagers should be reduced to 75 percent of the regular
minimum wage. This reform would give many teenagers the
opportunity to get a first job and to acquire skills that would
help them with subsequent employment. With an unemployment
rate of nearly 50 percent among black teenagers and only about
N
20 percent of black teenagers employed, we must act. The
Federal Government must not be the source of barriers to
employment.
Inflation and Monetary Policy
Reducing the rate of inflation was my most immediate
economic goal when I arrived in Washington. In the preceding
24 months, the consumer price level had increased more than 26
percent. Many people feared that the government had lost the
ability to control inflation and that the inflation rate would
continue to spiral higher and higher. Until inflation was
brought under control, a healthy recovery could not get under
way.
-4-
The inflation rate has declined dramatically over the past
three years. In 1983, the consumer price index rose only X.X
percent. Americans can again have confidence in the value of
the dollar and can save for the future without fearing that
the purchasing power of these savings will be destroyed by
inflation. I am firmly committed to the continued pursuit of
economic policies that will keep inflation on a downward path.
The basic requirement for a continued moderation of
inflation is a sound monetary policy. I continue to support
the Federal Reserve in its pursuit of price stability through
sound monetary policy. Last year was a particularly difficult
time for monetary policy because of the substantial changes in
financial regulations. I expect that in 1984 the Federal
Reserve will expand the money stock at a moderate rate that is
consistent with both a sustained recovery and continuing
progress against inflation.
There are those who advocate a faster money growth in an
attempt to depress interest rates. Experience shows, however,
that excessive money growth inevitably leads to an increased
rate of inflation and higher interest rates. The only monetary
policy that can reduce interest rates and keep them down is one
that promotes confidence that inflation will continue to
decline in the years ahead.
-5-
The Dollar and the Trade Deficit
The high interest rates in the United States and our low
rate of inflation continue to make dollar securities an
appealing investment for individuals and businesses around the
world. In addition, the United States has been an attractive
place for investment in equity and for direct business
investment. The result has been a continued rise in the
dollar's exchange value relative to other currencies of the
world.
The sharp rise in the dollar since 1980 has made it
difficult for American businesses and farmers to compete in
world markets and has made it easy for foreign producers to
sell their products in the United States. The decline in U.S.
exports and the substantial rise in our imports has resulted in
record trade deficits in 1982 and 1983. Despite these
problems, I remain committed to the principle of free trade as
the best way to bring the benefits of competition to American
consumers and businesses. It would be totally inappropriate to
respond by erecting trade barriers or by using taxpayer's
dollars to subsidize exports. Instead, we must work with the
other nations of the world to reduce export subsidies and
import barriers that currently hurt U.S. farmers, businesses
and workers.
I am convinced that the dollar's value will eventually
decline to a level at which American goods and services are
-6-
again fully competitive in world markets. But I am firmly
opposed to any attempt to depreciate the dollar's exchange
value by intervention in international currency markets. Pure
exchange market intervention cannot offset the fundamental
factors that determine the dollar's value. Exchange market
intervention would be an exercise in futility that would
probably enrich currency speculators at the expense of American
taxpayers. A combination of exchange market intervention and
expansionary monetary policy could reduce the dollar's exchange
value but only by causing an unacceptable increase in the rate
of inflation. The dollar must therefore be allowed to seek its
natural value without exchange market intervention.
Regulation
One of the four key elements of my program for economic
recovery is a far reaching program of regulatory relief.
Substantial progress has been made during the last three
years The growth of new regulations has been reduced by more
than a third. The demands of government paperwork have been
reduced by several hundred million hours a year. Congress
approved legislation that has led to substantial deregulation
of financial markets and intercity bus transportation. The
Federal Communications Commission, with our support, has
reduced the regulation of broadcasting and of new
communications technology. The benefits of these and prior
-7-
deregulation measures are now increasingly apparent to American
consumers and businesses.
It is also apparent that substantial further deregulation
and regulatory reform will require changes in the basic
regulatory legislation. I urge Congress to act on the several
measures that I proposed last year on natural gas decontrol,
financial deregulation, and reform of private pension
regulation. I continue to be confident that there is a basis
for agreement on measures that would reduce the burden of
federal regulations and protect our shared values.
Tax Reforms
The final installment of the three-year personal tax act
took effect in July, giving a helpful boost to the economic
recovery. The tax rate at each income level is now 23 percent
less than it was in 1980. In 1984, a family with $25,000 of
taxable incomes will pay about $1100 less than it would have
without these tax reductions. Moreover, beginning in 1985, the
tax brackets will be adjusted automatically SO that inflation
will no longer push taxpayers into higher brackets and increase
the share of income taken in taxes.
The Economic Recovery Tax Act of 1981 (ERTA) went beyond
reducing tax rates to establish important reforms in the
structure of the tax system. For businesses, the Accelerated
Cost Recovery System increased the after tax profitability of
investments in plant and equipment. The sharp fall in
-8-
inflation has also increased after-tax profitability. As a
result, investment in business equipment has recently been
quite strong despite the high real interest rates.
For individuals, ERTA reduced the tax discrimination
against saving. The response to the universal eligibility of
Individual Retirement Accounts (IRAs) has been, far greater than
was originally expected. It is estimated that more than 15.
million individuals now use IRAs to save for their retirement.
Last year I proposed to expand the opportunity for all married
women to use IRAs by allowing them to contribute up to $2000 a
year to an IRA even if they have no wage income.
Further reform of our tax system is sorely needed. The
burden of taxation depends not only on the quantity of tax
revenue that is collected but also on the quality of the tax
system. I have asked the Secretary of the Treasury to examine
ways in which our tax system can be made fairer, simpler and
less of a burden on our nation's economy.
Government Spending
One of my principal goals when I came to Washington was to
reverse the dramatic growth of Federal spending on domestic
programs and to shift more resources to our nation's defense.
Although there were many who doubted that this could be done,
it is now clear that both goals are being achieved.
-9-
Outlays for defense had declined to only 5.3 percent of
GNP in 1980, less than one-fourth of total government outlays.
By the current fiscal year, defense outlays have increased to
6.9 percent of GNP and nearly 30 percent of total outlays.
Real defense outlays have grown XX percent since 1980. Our-
spending on defense is, however, still a far smaller percentage
of our national income than it was in 1960 when defense outlays
took 9.1 percent of GNP. Although we must do everything that
we can to avoid waste in defense as in other areas of
#
government, we must also be willing to pay the cost of
providing the military capabiity to defend our country and to
meet our responsibilities as the leading nation of the free
world.
Spending has been cut on a wide range of domestic programs
and activities. Many wasteful bureaucratic activities have
been eliminated and the number of nondefense employees on the
Federal payroll has been reduced. We have examined every area
of Federal Government spending and sought to eliminate
unnecessary and wasteful spending while protecting the benefits
needed by the poor and the aged. As a result, total nondefense
spending now takes a smaller share of our GNP than it did in
1980. Moreover, under present law nondefense spending will
continue to take a declining share of our GNP in the years
ahead.
-10-
This reduction has been accomplished without any decrease
in social security benefits or change in the medicare benefits
for the aged. Spending on all other nondefense activities and
programs has actually declined ten percent in real terms since
1980. Moreover, even with no further reductions in these
activities and programs, their share of GNP in 1986 will be
back to levels of 1965.
I am committed to a continuing search for ways to reduce
government spending. The budget that I am submitting to
Congress calls for significant savings in entitlement programs
and reductions in outlays for other programs that are excessive
or that are not the proper responsibility of the Federal
Government. The spending reductions that I have identified in
this budget would save a total of $ XX billion in the Fiscal
Years 1985 through 1989.
Budget Deficits
I have long believed that our nation's budget must be
balanced. My most serious economic disappointment in 1983 was
therefore the failure of Congress to enact the deficit
reduction proposals that I submitted last January in my budget
for Fiscal Year 1984. We would be much closer to a balanced
budget today if the Congress had enacted all of the spending
cuts that I have requested since assuming office and if the
long recession and the sharp decline in inflation had not
substantially reduced real tax revenue. In last year's budget
-11-
7
deficit on a shaprly declining path that, by 1988, would have
brought the budget deficit to less than two percent of GNP and
put the country on its way to a balanced budget.
The unwillingness of Congress to accept the proposals that
I offered has made it clear to me that we must wait until after
?
this year's election to enact the kind of program that will
substantially reduce and eventually eliminate our budget
deficit. The budget that I' am now sending to Congress proposes
a number of modest but necessary changes in spending programs
and tax rules. The effect of these changes would be to reduce
the deficit by amounts rising from $29 billion in FY 1985 to
$68 billion in FY 1989.
But these reductions are only a small downpayment on the
changes that will be required in future years to reduce net
outlays and decrease the remaining deficit. The deficits
projected in this budget for FY 1986 and beyond are totally
unacceptable to me. They would be a serious threat to our
nation's economic health and a heavy burden to future
generations. I am committed to finding ways to reduce those
deficits and to put the budget on a path that will lead to a
balance between outlays and receipts. In 1985 I will ask
Congress to enact the changes needed to achieve this goal.
-12-
Looking Ahead
As I look ahead I am very optimistic about the prospects
for the American economy. Substantial progress has been made
in reforming the economic policies that will shape our economic
future. If we continue to develop and pursue sound policies,
our nation can achieve a long period of strong economic growth
with low inflation and the American people can enjoy
unprecedented prosperity and economic security.