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MARKER
This is not a textual record. This is used as an
administrative marker by the George Bush Presidential
Library Staff.
Record Group/Collection:
George H.W. Bush Presidential Records
Collection/Office of Origin:
Speechwriting, White House Office of
Series:
Speech File Backup Files
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Alpha File, 1987-1991
OA/ID Number:
13844
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Economic Statistics, 1992
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26
23
3
1
THE WHITE HOUSE
WASHINGTON
September 16, 1992
MEMORANDUM FOR THE EMPOWERMENT BREAKFAST GROUP
FROM:
DEAN SCHULTHEISS Dear
SUBJECT:
Upcoming Breakfasts
We now have assembled a schedule of speakers for the next
several weeks. Please mark your calendars for the breakfasts you
plan on attending. If you could, please call me each Thursday on
456-2471 and let me know if you plan to be with us that Friday so
that I can get a headcount for the Mess.
Our speakers for the next several weeks are as follows:
Sep. 18
Lawrence Kudlow
Former Economic Advisor to OMB Director David
Stockman; Chief Economist; Bear, Stearns and
Company
Sep. 25
Terry Eastland
Resident; Ethics and Public Policy Center
Author of "Energy in the Executive: The Case for
the Strong Presidency"
Oct. 2
Dr. Constantine Menges
Research Professor of International Relations
Director, Programs on Transitions to Democracy;
George Washington University
Oct. 9
Alice Rivlin
Senior Fellow; Brookings Institution
Attached are two recent articles by Mr. Kudlow to prime you
for this Friday's breakfast. Also attached is a review of Mr.
Eastland's book, upon which he will base his discussion on
Presidential leadership.
Remember also that we are once again meeting in the Ward
Room on the ground level of the West Wing -- do not go to room
22. Those of you without Mess accounts should reimburse Diana
Furchtgott-Roth as your meals will be billed to her account.
06/28/92 N.Y.TIMES:06/28/92
Focus on Growth, Not Short Rates
tenths of 1 percentage point since January. These
rates, reflecting investors' expectations of infla-
tion, have a more powerful influence on the econ-
An overdose of new
omy. They have remained stubbornly high, near 8
percent, slowing the recovery in business Invest-
money could renew
ment and housing.
Paradoxically, if the Fed pushes short rates
inflation fears and lead to
down too far, creating an overdose of new money,
then long-term rates would actually rise from
higher long-term rates.
penewed inflation fears. This Is a risk the Presi-
dent ought to consider, for another spike in long-
term rates might well abort- a recovery that is
already slower than usual.
contains more information and wisdom than all
Lower short-term rates would also reduce glob-
the computer models used by the Council of Eco-"
al demand for dollars, as investors buy other
nomic Advisers.
currencies offering higher returns. The dollar's
In the past two years, Fed policies have stabi-
By LAWRENCE A. KUDLOW 161/1
purchasing power and hence the inflation outlook
lized the gold price in a narrow band around $350.2
depend on the willingness of people to hold it. If no
an ounce, while broader commodity indexes have
one wants it, its value plummets, causing prices
also remained steady. These indicators confirm"
P
RESIDENT BUSH may be right about the
and interest rates to rise. The exchange rate has
the Fed's progress against inflation.
need for lower Interest rates, but jawboning
already fallen by 13 percent over the past year, an
The producer price Index has increased by only
the Federal Reserve as he did last week
inflationary omen.
1.1 percent over the past 12 months, the consumer!
could actually undermine his goal of more rapid
Some of the President's advisers are probably
,
price index by 3 percent. Only two years ago, these
economic growth. The public needs pro-growth
telling him that the money supply is growing too
inflation measures were at 6.5 percent to 7 per-"
fiscal policies from the President much more than
slowly. M2, the most closely watched indicator,
cent.
another small decline in short-term interest rates.
which includes most bank deposits and money-
The Fed has already tamed inflation. Giving in to
market funds, has risen by less than 2 percent
B
Y politicizing election-year monetary policy,
political pressure now could jeopardize this
over the past 12 months. But other money supply
the President may well create more uncer-
achievement and the recovery as well.
and bank reserve measures indicate growth rates
tainty, keeping long-term rates sticky de-³
Understanding why requires a look at how short-
of 8 percent to 16 percent.
spite the progress on inflation. If he truly wants to"
term and long-term interest rates have been head-
If the President were communicating more
Improve the prospects for growth, he should en-"
ing in opposite directions. The President asked the
closely with the Federal Reserve board, he would
dorse the Fed's Bretton Woods-style effort to'
Fed to lower short-term rates, which it can control
know that Greenspan & Co. have developed a new
restrain inflation and make the dollar as good as'
by adding or draining the money banks hold as
approach to balancing money supply and demand.
gold.
reserves. Short-term rates have fallen by 4 per-
They use inflation-sensitive market indicators -
Then he should pursue his own growth program,
centage points over the past 20 months to below 4
including such commodity indexes as the price of
with enterprise zones, a reduction in the capital
percent, or near their 30-year lows.
gold - to determine-whether the balance is defla-
gains tax, a spending freeze and a middle-income^
But long-term rates have risen about three-
tionary, inflationary or just right.
tax cut. These measures could take the economy
Their approach makes plenty of sense. In our
from about 2.5 percent growth now to 3.5 or 42,
Lawrence A. Kudlow, a former economic advis-
global, high-speed markets, prices immediately
percent next year without renewed inflation. This'
er to President Reagan, is chief economist at Bear,
change to reflect all the available information.
would be a winning economic policy for the Bush
Stearns & Company.
Every nanosecond, the world market price of gold
Administration in November.
Back to Bretton Woods
By LAWRENCE A. KUDLOW
money strongly suggests that the Fed in-
larly, 6% growth In nominal corporate
higher tax rates on capital Investment,
What Is truly remarkable about the
tends to stay the course. Two percent infla-
earnings leads to about 4% growth In real
personal income and payroll wages, as
3½% Fed discount rate is the near $350 an
tion, along with commodity price stability,
profits. All of this generates quite a re-
well as longer depreciation schedules and
ounce gold price that now accompanies it.
is in effect a zero Inflation rate. This ar-
spectable long-run performance. But only
increases in numerous business and real
In other words, after six discount rate cuts
gues that bond yields can decline signifi-
if expenses are held down and efficiencies
estate taxes, along with a host of new regu-
WALL ST.J.:12/31/91
and a 575 basis point drop in the federal
cantly more over time.
maintained.
latory cost burdens, and a dose of mid-
funds rate over the past three years, com-
The consequences of this revolution in
In response to the Federal Reserve,
1980s cheap money flattened the stock
modity prices are stable. Gold in particu-
monetary policy are enormously positive.
Washington's fiscal policymakers should
market. The economy lapsed back into
lar is down by $86 from its 1988 price.
Low inflation and declining interest rates
accommodate the return to hard money by
stagflation.
True, the dollar exchange rate has lost
are producing significantly reduced inter-
providing stronger incentives for new busi-
In particular, the effective tax rate on
ground, but that is principally a function of
est burdens. Residential housing and other
ness starts, productive work effort, capital
real capital gains jumped back up to aver-
overly tight money in Japan and in Eu-
fixed-asset values are stabilizing. Real
formation and economic growth. The
age 65.5%, putting an end to the rise of
rope, especially Germany. But more im-
household net worth is recovering.
golden age of Bretton Woods and the Rea-
national wealth creation, new business
portant, none of the dollar-based market
The purchasing power of household and
gan 1980s produced the best economic and
starts and new jobs. Since the end of 1988.
price indicators are flashing signs of rising
business income will be substantially im-
stock market performance of the past 40
when the full force of these tax changes
inflation expectations. Meanwhile the de-
took effect, annual real GDP growth has
mand for U.S. money and financial assets
The evidence on gold and money strongly suggests
slumped to 0.6%, new business formation
remains strong, despite the decline in 10-
has fallen by 7.7% and employment growth
year Treasury to 6.8%. The stock market
that the Fed intends to stay the course. This argues
has slowed to 0.2% per year. The after-in-
is once again breaking records.
flation S&P 500 Index has only just reat-
that bond yields can decline significantly more.
tained its August 1987 level.
Lovely Thoughts
All of which raises some lovely thoughts
At this point, both Congress and the
about the serious possibility that Green-
proved. So will the quality of corporate
years. Why? Two reasons. First, low infla-
Bush administration would do well to heed
span and Co. are in fact running a Bretton
earnings. The entire cost structure of the
tion and low interest rates. Second, a low
the recent advice of Fed Chairman Alan
Woods style monetary policy anchored by
U.S. economy has been dramatically re-
effective tax rate on real (inflation-ad-
Greenspan. From the man who has re-
a steady gold price of roughly 10 times
duced, thereby increasing American com-
justed) capital gains, which is the key tax
stored low inflation and declining interest
the old $35 an ounce gold exchange rate.
petiveness in the global marketplace.
incentive required to promote the risk-tak-
rates through a gold-backed dollar comes
Just to reminisce, the golden age of
In short, Greenspan and Co. have deliv-
ing, Innovation and enterprise necessary
this counsel: Reject quick-fixes such as
Bretton Woods, from 1950 to 1966, gener-
ered the monetary equivalent of a sizeable
for long-run economic expansion.
temporary tax rebates. Instead, restore a
ated, nominal gross domestic product
tax cut, which not only improves prospects
With a 25% average tax-rate on nominal
low capital gains tax rate to generate im-
growth of 6% and real growth of 3.6%.
for next year, but for the long run as well.
capital gains, and a 44% average on real
proved economic growth, capital formation
Three-month Treasury bills averaged 3%
All this has been missed by the pessimistic
capital gains, the 1950-1966 Bretton Woods
and productivity.
interest rates, and 10-year Treasury bonds
chorus of economists, pundits and talking
period produced 4.2% average annual real
What Normality Means
averaged 4%. For comparison, over the
heads on television. But it's a key factor
GDP growth, with 2.3% inflation and 10.2%
Mr. Greenspan grew up professionally at
past four years, nominal GDP growth has
nonetheless. Actually, it's the Invisible
annualized growth in the Standard &
Poor's 500 stock-index after inflation. How-
the height of the Bretton Woods period.
declined from roughly 8% to near 4%, the
hand of the next economic recovery.
inflation rate has eased from around 5% to
ever, over the next 15 years major fis-
That period has remained his basic eco-
Governments and businesses should
less than 3%, the interest rate on three-
take great care to understand the full Im-
cal and monetary mistakes drove up the
nomic yardstick. Normality should mean
4% real growth, 2% inflation and a strong
month Treasury bills has fallen from more
pact of 1950s-style money and inflation. It
nominal capital gains tax-rate to an aver-
wealth-creating stock market. Normality
than 9% to 3.7%. and the rate on 10-year
means, for example, that nominal income
age of 37.6%, cheap money created 7% in-
should also include the lowest possible tax
Treasury bonds has slipped from 9.25% to
at all levels, for governments and busi-
flation, and the tax rate on real capital
gains skyrocketed to 129%. As a result, the
rates on capital and labor.
6.8%.
nesses, is likely to grow at a pace closer to
With an improved 1992 tax policy, the
This cannot be a coincidence. It seems
5% and 6% than 8% and 10%.
economy experienced prolonged stagfla-
overwhelmingly likely that the Greenspan
tion and the S&P average declined by 7%
Bretton Woods baseline can be replicated
Both private and public budget planners
Federal Reserve Is deliberately trying to
must recognize this. Top-line corporate
per year after Inflation.
and the U.S. economy can recapture its
bring about 1950s-style low inflation.
revenues will not be inflated to bail out
Not until the supply-side reforms of the
long-term potential to grow. With 10%
At 3.8%. three-month Treasury bills
high-cost enterprises. Recent restructuring
1980s did economic growth, inflation and
yearly real gains, the Dow would be
stand at 26-year lows. At 6.8%, 10-year
announcements by the likes of IBM, Gen-
the stock market return to their old levels.
roughly 3400 in 1992, 3800 in 1993, 4300 in
Treasury notes are at their lowest point
By lowering tax rates on income and capi-
1994 and 4800 in 1995. New business starts,
eral Motors and Citicorp probably reflect
since 1973. Very possibly, if the Fed clearly
this. State and local budget officials must
tal gains, along with movement toward a
jobs and wealth creation would explode.
announced to the public Its commodity
not assume that Inflated tax-revenue
gold-backed dollar, 4% annual economic
Budget deficits would evaporate. Think of
price-rule strategy. long-bond yields would
growth will provide the resources to fund
growth was restored, with 3% inflation and
it. And have a very happy New Year.
be much lower today. Then again, the long
spending programs of questionable merit.
20% annual real stock market gains.
end of the bond market probably wants to
Under the Bretton Woods approach to
But the 1986 tax bill began a new fiscal
see more evidence that price stability is
money, 6% average growth in nominal
policy direction that halted this progress.
Mr. Kudlow is chief economist at Bear,
sustainable. But the evidence on gold and
GDP leads to around 4% real growth. Simi-
Over the four years from 1987 to 1991,
Stearns in New York.
mysteries, the most recent or
three Walter Mosley novels, 1 must admit's can't wait to
"Shot."
ROB SHEPPERSON
see where Easy Rawlins turns up next. And when.
More Power for the President?
What is clear is that the Constitution was framed in the
ENERGY IN THE EXECUTIVE
Eastland prefers the word "efficient" - government.
hope and expectation that all branches would ultimate-
The author claims that Presidents have not exerted
The Case for the Strong Presidency.
ly be subject to the control of the people, and that no
their full constitutional powers, either legislatively or
By Terry Eastland.
branch would be unrestrained by the other two.
administratively. But perhaps, Mr. Eastland to the
392 pp. New York: The Free Press. $22.95.
Justice Oliver Wendell Holmes decried the notion
contrary notwithstanding, we should regret, not ap-
that we should try to look to the expressions of the
plaud, the Presidentially sponsored excursions that
By Philip B. Kurland
founding fathers for the answers to difficult questions
have taken our military forces from Vietnam to the
of constitutional meaning. In 1920, in Missouri V. Hol-
Persian Gulf. And maybe the President has gotten too
land, he wrote: "When we are dealing with words that
much, not too little, of his way in judicial appointments.
ERRY EASTLAND, who was the director of
also are a constituent act, like the Constitution of the
Meanwhile, this century's strong executives, whether in
public affairs in the Justice Department from
United States, we must realize that they have called
central Europe, Russia or the Far East, do not suggest
1985 to 1988, has written what is essentially a
into life a being the developments of which could not
that such governments have much concern for the
brief for the expansion of the powers of the
have been foreseen completely by the most gifted of its
liberties of the people.
American Presidency. The strength of his argument
begetters. It was enough for them to realize or to hope
That does not seem to be a major worry of Mr.
derives from an ambiguity in the Constitution.
that they had created an organism; it-has taken a
Eastland. Nevertheless, I would suggest that freedom
Division of power among the legislative, executive
century and has cost their successors much sweat and
for the people was one "original intent" of the founders
and judicial branches was one of the principal means
blood to prove that they have created a nation. The case
for which there is ample historical support. I am not
used by the framers to avoid a tyranny of Government
before us must be considered in the light of our whole
sure that "Energy in the Executive" is consistent with
functionaries over the people. But the founders did not
experience and not merely in that of what was said a
that goal.
draw hard and fast lines in dividing power among the
hundred years ago."
Though Mr. Eastland is benign, he is clearly com-
three branches of the national Government, or between
The more compelling, and at the same time more
mitted to the concentration of Government authority -
the national Government and the states. They were too
frightening, argument that this book makes for a
a concentration that has tended to grow geometrically
wise to believe that they could conjure up formulas that
stronger executive is the need for more effective - Mr.
each generation since World War II - for the sake of
would be appropriate guides for all times and in all
efficiency in the Presidency. Unfortunately, he does not
places.
offer a balance sheet of costs.
This lack of specificity, however, is also the weak-
That very wise jurist Learned Hand once told us:
ness of "Energy in the Executive." For Mr. Eastland's
"Trial and error is the confession, not indeed of an
case in favor of a strong executive, one that would
Mr. Eastland's case in favor
impotent, but of a wayward, creature, blundering about
dominate even more than it now does, rests on that
in worlds not realized. But the Absolute is' mute: no
chimera of constitutional theory labeled "original in-
tent." Actually, there is as much (or as little) evidence
of a strong Presidency rests
tables from Sinai to guide him; the brazen sky gives no
answers to his prayers
Beware then of the heathen
to support the contention that the fathers of the Consti-
tution would have chosen primacy of place for the
on that chimera of
gods; have no confidence in principles that come to us in
the trappings of the eternal. Meet them with gentle
legislative branch as there is for the executive branch.
constitutional theory labeled
irony, friendly skepticism and an open soul."
One cannot gainsay Mr: Eastland's motives for a
Philip B. Kurland is the William R. Kenan Jr.
'original intent.
better nation through more efficient government by
Distinguished Service Professor Emeritus at the Uni-
way of concentrated power. Yet history and experience
versity of Chicago and the author of "Watergate and the
suggest he is a dreamer. We decided against a benevo-
Constitution."
lent despot in 1776.
THE NEW YORK TIMES BOOK REVIEW
25
BEAR
GROWTH DEFICITS
STEARNS
6250
6000
3% Real GDP Trendline
5750
$1987 billions
5500
5250
CBO
OMB
5000
4750
Actual
4500
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
Source: Dept. of Commerce, OMB, CBO & Bear Stearns
BEAR
INDEX OF NET BUSINESS FORMATION
STEARNS
MONTHLY THRU JUNE 1992
127
126
125
124
+
+
123
¥
122
INDEX (1967-100)
121
120
119
118
117
+
116
+
115
+
114
113
8801
8901
9001
9101
9201
SOURCE: BEA
BEAR
BUSINESS FAILURES
STEARNS
MONTHLY THRU JUNE 1992
9
+
8
7
THOUSANDS
6
5
+
4
3
8801
8901
9001
9101
9201
SOURCE: DUN & BRADSTREET
BEAR
VENTURE CAPITAL COMMITMENTS
STEARNS
EXCLUDING FUNDS OF FUNDS
4.5
4.184
4
3.5
3.332
3
2.947
BILLIONS OF DOLLARS
2.5
2.399
2
1.847
1.5
1.271
1
0.5
0
1986
1987
1988
1989
1990
1991
SOURCE: VENTURE CAPITAL ECONOMICS
THE WHITE HOUSE
Office of the Press secretary
(Detroit, Michigan)
For Immediate Release
September 10, 1992
REMARKS BY THE PRESIDENT
IN QUESTION AND ANSWER SESSION WITH
THE DETROIT ECONOMIC CLUB
Cobo Hall
Detroit, Michigan
1:40 P.M. EDT
OF
The first question deals with the Democratic
Congress. Maintenance of the Democratically-controlled Congress
is highly probable. HOW do you propose working with them more
effectively with them over the next four years?
THE PRESIDENT: Well, I answered that partially in
my comments. Because of -- not only because of the post office
scandal and the bank scandal, there's going to be an enormous
change. I've felt that I've had some difficulties with
confidence in America, but Congress has really had problems. And
the Congress is in a state of change and flux, particularly in
the House of Representatives.
so what I've proposed is that when Congress meets,
the new one, I will get together with all 100 or 150 members and
say, look, you and I have been listening to the same song, the
same American people. They want the kind of changes that I've
outlined here today. And I believe most Americans really do.
And I'll say, now let's get together, lay aside partisanship and
let's, in the first 100 days, enact this agenda.
I'm going to have to move fast, but with a new
Congress I think we'll have something entirely different than the
gridlocked Congress that I've been facing. I really believe that
there's going to be that much change. You've already seen it.
You've already seen it happening in many of these primaries, and
it's still going on.
2
This speech was billed as an economic agenda.
Why now, in the last 60 days of the campaign? why not before?
THE PRESIDENT: Well, as you may know, I've
addressed myself to many of the components of this agenda --
health care, several times taking that case to the American
people; America 2000, our education program; fighting for our
anticrime legislation. so what we've tried to do here today is
bring all the elements together that come under this outline I
put forward; bring them all together in a comprehensive way.
The most significant thing we tried -- that I've
tried to do is to say, it's one global economy. We are in this
now together -- linking international trade to opportunity for
the American worker. Linking international trade and global
peace and security to prosperity for every American job holder.
And it's that concept, that very broad concept that I think is
somewhat different in the presentation today because ingrained in
a lot of this are the very same programs, like enterprise zones
and these others I've clicked off, that I think are absolutely
essential; say nothing of the philosophical difference I have
with Governor Clinton -- tax and spend versus trying to get the
taxing and spending down and get that 24 percent of gross
domestic product out of the government's hand, get it down to 20
percent or get it lower.
MORE
- 2 -
And so it's trying to put a comprehensive plan out
there that encompasses many of the ingredients we've been talking
about.
O:
Last month Governor Clinton was asked about
CAFE standards. He said he'd be flexible. What is your
position?
THE PRESIDENT: Well, I'm not flexible. So we've
got a difference. He has proposed, as I understand it, in his
plan that the CAFE standards go to 40 -- I believe it's 40 miles
per gallon. There's a wealth of opinion that says that would be
devastating to the automobile business. And in the name of
environment, "Vice President Gore" has been talking about the
combustion engine as being the worst threat to society -- I've
got to be careful with how I quote him, but look it up in his
best-selling book. It is scary. It is bad.
And Governor Clinton ought to repudiate him or
certainly ought to clarify his position. He told some business
executives that he was studying the National Academy of Sciences
report. I'm told it's a big, fat thing about this, with a square
root and all these things through it. so when he gets through
reading that, maybe he can take a position on the NAFTA
agreement, which he hasn't read either.
But I'm saying that we don't need to go to the
extreme. My administration has a good, sound environmental
record. But when I went down to Brazil, people of the
environmental community, some of them, jumped all over me and
said I wasn't leading. well, let me be very clear, I am not
going to go adopt standards, whether it's a CAFE standard of this
or whether it's a strange policy regarding an owl, that throw a
lot of Americans out of work. And we might as well understand
that. (Applause.)
And yet we have sound environmental record. I'm not
apologetic about it at all.
&
Why do you hate us trial lawyers so?
(Laughter.)
THE PRESIDENT: I might have to hedge if I'd known
you were one. (Laughter.)
&
There's an editorial here: "We don't destroy
wealth, we just move it around." (Laughter.)
THE PRESIDENT: It's not a question of hating
anybody, it's a question that I think the American people
understand. When I went to a small town in Idaho, I was
expecting to get all kinds of questions on nuclear energy or on
wilderness areas. And the community people, the business
people, Chamber of Commerce people, the main subject on their
minds were these frivolous lawsuits. When I look at health care,
and I see malpractice insurance estimated to cost between $25
billion to $50 billion a year because of tests that doctors have
to give to protect themselves against outrageous suits, I just
think we've gone too far and that we ought to control some of
these liability -- (applause) -- some of the tort claims, some of
these reckless suits. (Applause.)
And I have here a distinct -- far be it from me to
inject a partisan note into this wonderfully nonpartisan audience
-- (laughter) -- but I have a real difference with Governor
Clinton on this one. The trial lawyers of Arkansas put out a
letter saying that he's been with him on everything they ve ever
asked, and don't worry, just go in for the Governor so he'll
protect against legislation that would try to put some caps on
these outrageous suits. We've got a chance right now in the
Senate -- the Kasten bill is coming up of product liability. And
MORE
- 3 -
we've got to continue to fight to get through that gridlock up
there in the Congress some legislation that would at least lower
the burden on the American people, the doctors, whatever it is in
terms of too many lawsuits.
Q
HOW realistic is it to double the size of our
economy by the early years of the next century?
THE PRESIDENT: It's realistic when you consider
that if you use inflation plus real growth, that is not too
heightened a goal. we can do that. And you've got to do the
math on it, but you're talking about seven percent, I think. And
I believe we can do that. We've had anemic real growth. I'm
convinced it is not going to remain anemic in the less than two
percent area. Coming out of the last recession it got up to five
percent.
And so I think the goal is very much achievable. I
might say, I don't want to achieve it by raising inflation,
however. I want to get it achieved by real growth. I mean, you
can run inflationary policies and grow. so I want to be very
careful when I say, one, it's achievable; but, two, I want to
achieve it with real growth not with inflationary growth.
&
What do you say to the American workers who
believe that free trade means jobs lost abroad?
THE PRESIDENT: Well, again, I tried to address
myself to that one. I think that it means jobs increased in this
country. our trade with Mexico has gone way, way up without this
free trade agreement. And in my view, it will go up a lot
further, and that means American jobs.
We've got experts on the auto industry here, but I
am convinced that they are not going to export their factories to
Mexico. There are a lot of considerations. One of them is the
productivity of the American worker. Another one is interest
rates. Another one is capacity, available capacity, in whatever
industry we're talking about.
You're going to raise the environmental standards in
Mexico. And I think you're going to cut down on the cross-
border flow of illegals that I think is burdening a lot of our
country, particularly California. And I believe in my heart of
hearts that what we're going to do is see a massive expansion
into that booming market in Mexico. And it's already happened in
Canada. Our trade with Canada, our largest trading partner, as
everyone here knows better than I, has gone way, way up.
And I'm convinced the same thing would happen for
American agriculture products -- not only with Mexico, but when
we get a finalized agreement with the GATT. Now, that GATT Round
is on hold until after the French vote on Maastricht. But we're
going to keep pushing on it. It has nothing to do with American
politics.
I went up there realizing that the unions would take
a shot at me on finalizing NAFTA right now when we did, getting
an agreement that we can at least get before the Congress. It
transcends domestic politics for me. I am so convinced that it
will increase markets and increase jobs that I don't have to
equivocate, I don't have to hedge, I don't have to read the
National Academy of Sciences studies or whoever's doing it. I
know enough about it from being briefed by a very able Ambassador
Carla Hills to recommend to the American people that we approve
NAFTA and approve it just as soon as we possibly can.
(Applause.)
x
There are a couple more. In black American
newspapers across the country, black Republicans are labeled
Uncle Toms, opportunists and lapdogs for white Republicans. DO
you have words of encouragement for black Republicans under
MORE
- 4 -
attack? For black Americans who are Republican, the agenda's the
same as for any American. Why can't black Republicans desire the
American Dream as not the same dream for all Americans? Please
comment.
THE PRESIDENT: He just answered my question. You
should be able to have the American Dream. And I would ask black
voters across this country -- a good podium right here to do it -
- how well have you done under the Democratic Party? Are you
going to let people take your vote for granted -- promise and
forget, promise and forget; or are you going to try to go with
something that's going to give people an enterprise zone so you
can bring jobs into the inner city? DO you favor the old way of
doing it in housing, where government built these big tenements
that then go downhill real fast, or do you want a shot at the
American Dream and owning your own home?
We've got good programs that offer hope and
opportunity to black America, to minority Americans wherever
they're coming from. And I want to see them enacted. And so I
would say to black Americans, I know it may be tough in your
communities, but you're leaders. You're willing to stand up for
principle. And don't blacks care about tough anticrime
legislation? Aren't their neighborhoods the ones that are
impacted and sometimes the worst because of street crime? Don't
we owe them strong anticrime legislation that backs our police
officers and doesn't leave them neglected? Don't they have a
stake in world peace? Can't a black Republican stand up in his
community and say, I'm delighted that my kid goes to bed at night
without the fear of nuclear war that we had before?
We've got a good agenda. And I'd like to see some
more of them stand up and say, listen, I am with you. We're with
you. And we've got some outstanding black leaders doing just
exactly that who are willing to think anew and not be taken for
granted. (Applause.)
or
When is the debate likely? Are there any
restrictions? How much of the press would you like to be
directly involved?
There were several questions on this. This is one
of them.
THE PRESIDENT: I have no problem with the format we
used before. I mentioned this on the Tom Brokaw show. I'll
debate Governor Clinton. I'm not a professional debater. I'm
not an Oxford man -- (laughter) -- and I think he's good at that.
I mean, he's got more statistics than there are problems.
(Laughter and applause.)
I know I'm up against a formidable debater, but it's
not anything other than -- look, I'll be there. I'll let my
capable staff figure this out, and whatever they recommend, I'll
show up. And I think I've done reasonably well in the debates in
the past. You ought to try taking on Geraldine Ferraro if you
think things were tough. (Laughter.) we go back a ways on these
debates.
so I think there will be debates, and I think --
I've already indicated I think the format was very fair, the way
we've been doing it in the past. But as I said on Brokaw, I know
it's -- you get some intellectuals out there and the Harvard
schools and they all want you to have 25 debates, and I don't
think it's that big a deal. But I'll take my case to the
American people any way I can, including debates.
Q
Well, the last question, Mr. President. Next
time in Detroit could we have breakfast, my treat? My name is
Patrick Campbell from Edward Township. (Laughter.) He addresses
that to you and Mrs. Bush.
MORE
- 5 -
THE PRESIDENT: Well, Patrick, it's tough times.
I'll be glad to accept your offer. (Laughter.)
&
Thank you, Mr. President.
THE PRESIDENT: Thank you all very, very much.
(Applause.)
Thank you. A great pleasure to be with you.
(Applause.)
END
1:54 P.M> EDT
Agenda
for American
Renewal
Gy Bush
George Bush
President of the United States
Agenda
for American
Renewal
1
I.
In wartime, the costs of
Introduction:
Government are always high.
"We
Domestic needs are not fully
are a nation at
The Challenge
met. In times of conflict, a
peace. But being at
good nation tries to look after
America stands at the
its poor, its sick, its elderly, its
peace with others and
edge of a new era, a new cen-
less privileged members, but
being at peace with
tury. Here is my bridge to the
not as completely as it should
other shore: An Agenda for
or would like to.
ourselves are different
American Renewal - diagnos-
ing the economic problems we
things. The one we have
Today, this year, for the
face, setting forth the princi-
first time since December
achieved. The other, we
ples to guide our actions, and
1941, the United States is not
can and will."
explaining the approach I am
engaged in a war, hot or cold.
pursuing.
We are a nation at peace.
Over past weeks I have
But being at peace with others
been discussing some of the el-
and being at peace with our-
ements of my economic agen-
selves are different things.
da. In coming weeks I will be
The one we have achieved.
expanding on my ideas. This
The other, we can and will.
document shows how the
pieces fit together.
The American people rec-
ognize this historical water-
It is important to step
shed. They want and deserve a
back for a moment, to take
peacetime system. of taxation,
stock of where we are as a
a peacetime freedom from un-
great nation in the broader
necessary intrusion into our
sweep of history.
lives, a peacetime commitment
to sound money, a peacetime
The American people have
dedication to unfinished work
just completed the greatest
and unsolved problems close to
mission of all, the triumph of
home.
democratic capitalism over
imperialistic communism.
At the same time,
Mission accomplished.
Americans are aware of epic
changes in the world and the
Throughout history, when
economy: They sense the dis-
long wars end, people have
quiet in many of the industri-
been confronted with the prob-
alized democracies that have
lems of converting to peace-
been our partners in the long
time and establishing a new
struggle. Our own economy
basis for securing peace and
has been going through some
prosperity.
profound changes. And I un-
2
derstand how difficult change
In this country, we have
I will sharpen the competi-
can be, particularly for those
always preferred an entrepre-
tive edge of our businesses by
who feel its effects most direct-
neurial capitalism that grows
encouraging entrepreneurial
ly. Americans sense we face an
from the bottom up, not the
capitalism and small business,
era of great opportunity, but
top down, a capitalism that be-
deploying advances in R&D
that there are also great risks
gins on Main Street and ex-
and technology, and reforming
if we fail to choose wisely.
tends to Wall Street, not the
our legal system S0 it no
other way around.
longer puts us at a global dis-
We must now demonstrate
advantage.
our unique ability to trans-
Nor have we been taken in
form anxiety into regenera-
by the view my opponent
My agenda promotes eco-
tion. Only in America do we
prefers, that Government
nomic security for working
have the people, the resources,
should accumulate capital -
men and women through job
the economic strength - and
by taxing it and borrowing it
training that will ease adjust-
especially the principles and
from the people, and investing
ments and provide people with
ideals - to pick up the chal-
it according to some industrial
new capabilities for work in
lenge.
policy design.
the face of competition and
change. And I will enable fam-
For America to be safe and
My agenda is for an inclu-
ilies to concentrate on building
strong we must meet the
sive America, not an exclusive
for the future by giving them
defining challenge of the '90s:
America - and certainly not a
the means to protect them-
to win the economic competi-
reclusive one. We will chal-
selves against today's cost of
tion - to win the peace.
lenge the world with an inter-
health care, and by making it
national economic and trade
easier to build tomorrow's re-
The United States must be
strategy that will promote free
tirement security. I want our
a military superpower, an ex-
trade arrangements east and
efforts to reach out to all our
port superpower, and an eco-
west, north and south, to
citizens, leaving no one be-
nomic superpower.
strengthen our global econom-
hind, because we will need the
ic reach and complement our
work, aspiration, and energy
My approach is to look
worldwide security presence.
of each and every American.
forward - to open new mar-
At the same time, we need to
kets, prepare our people to
foster the capabilities at home
Finally, since our competi-
compete, to strengthen the
that will keep us in the lead.
tive strength and entrepre-
American family, to save and
neurial spirit must flow from
invest - SO we can win.
Developed economies need
the private sector, I will
developing minds. To help pre-
streamline Government to
This future depends on
pare all our children for a con-
meet changing needs.
economic growth, but not for
stantly changing workplace, I
the few at the expense of the
want to make radical changes
We can empower America
many, not for the present at
in our education system. Each
to reach a grand goal: a $10
the expense of the future.
child should graduate with
trillion economy by the first
skills, self-discipline, and self-
years of the 21st Century.
confidence.
3
When President Reagan
race, we are now able to do
and I assumed office in 1981,
something we have all hoped
the U.S. economy was about
for since the close of World
"The first great
$3 trillion. We've almost dou-
War II - lighten the load of
change in our economy
bled that over the past 12
the defense burden.
years. So I know we can nearly
is ironically due to our
double it again through sus-
In the short run, this ad-
very success in ending
tainable real growth over the
justment has meant cutbacks
coming decade.
and lay-offs in many indus-
the Cold War.
tries that have depended on
we are now able to
With a $10 trillion econo-
defense spending. We must
my, we could provide the re-
ease this transition. But in the
do something we have
sources, private and public, to
medium and long run, reduc-
all hoped for since the
satisfy our most ambitious so-
tions in defense spending will
cial and financial require-
free up many new resources
close of World War II -
ments. We could simultane-
for our people and economy.
lighten the load of the
ously renew America and pay
down our national debt.
Second, it seems that al-
defense burden."
most every time you open the
So now let me turn to how
business pages you can find a
we can meet the challenge and
story about a major U.S. cor-
reach our goal.
poration that is restructuring
itself. Our industries are in
the process of transforming
II.
themselves from old-style hier-
The Context:
archical organizations to so-
Five Changes
called "flattened pyramids."
This new industrial organiza-
Underway in the
tion emphasizes a skills-based
Economy
workplace, "lean production,"
a "just in time" inventory, and
The U.S. economy has
short product cycles rather
been working its way through
than mass production. Our
five profound changes. They
companies are integrating
establish the context for my
R&D, manufacturing, and
agenda.
marketing into a seamless web
of innovation. This is a revolu-
The first great change in
tion as dramatic as the one
our economy is ironically due
when Henry Ford led the
to our very success in ending
country from craft-based pro-
the Cold War. Since our super-
duction to mass manufactur-
power rival of the last half
ing early in this century.
century has dropped out of the
4
"We have to make these
created over 21 million jobs,
entered the 1980s with some
adaptations succeed if
more than all the new jobs in
14,000 commercial banks and
America's industries are to
the other major industrial
4,600 savings and loans. In
keep ahead of their interna-
countries and the rest of
comparison, Canada had about
tional competitors. Strong
Western Europe combined. Yet
160, and Japan had under
sales and productivity increas-
great booms produce excesses,
100. The vast majority of those
es are the prerequisites for
and this time too many compa-
small U.S. banks and S&Ls
creating more jobs, boosting
nies, too many financial insti-
operated in a heavily con-
wages, and upgrading
tutions, and too many house-
trolled environment where
benefits. In fact, it is partly be-
holds took on too much debt.
their costs of funds were limit-
cause of these changes that
ed by ceilings on your pass-
our annual growth in manu-
We have been paying
book accounts. Other regula-
facturing productivity over the
down that debt - and lower
tions restricted competition by
past 10 years was over 50%
interest rates have helped us
imposing costs and inefficien-
higher than in the Carter
do it. Millions of people have
cies on savers and borrowers.
years. It's why American firms
refinanced homes at lower
lead the world in exports.
rates, reducing mortgage pay-
In the late '70s, this out-of-
ments by as much as $1,200 to
date system was buffeted by
Nevertheless,
these
$1,500 a year. When compa-
record interest and inflation
changes also have produced
nies restructured, they paid
rates; it was challenged by
layoffs and relocations among
down debt, strengthened bal-
competition from new financial
both blue and white collar
ance sheets, and positioned
services. As in any other line
workers. Middle-aged bread-
themselves to enjoy greater
of business, the less efficient
winners are wondering
profits when stronger growth
institutions could not survive.
whether their company will be
resumes. This process will
But because our banks and
the next to make announce-
leave our economy leaner and
S&Ls held insured deposit ac-
ments, and they worry about
more powerful. Many firms al-
counts for most hardworking
their jobs, health care, and
ready are. But while that debt
Americans, the streamlining
pension rights. Some are also
was being paid down, people
process had to be managed in
troubled by the prospect that
bought fewer goods, and com-
a way that enabled the
after sacrificing to send their
panies put less money into
Government to protect your
kids to college - often the
new investments and jobs. The
savings. In effect, the
first generation to attend -
process is largely over, but it
Government picked up these
that these children's diplomas
has left consumers and compa-
costs SO your savings would be
may not be golden tickets to
nies a little cautious.
safe.
security.
Fourth, we entered the
This process, too, is near-
Third, the 1980s wiped
'80s with a banking system de-
ing its end. A strong economy
away the dismal economic per-
signed 50 years earlier - an
must have a good banking and
formance of the late '70s. We
incongruous relic in an era
financial system SO entrepre-
enjoyed the longest peacetime
when billions of dollars can be
neurs can get capital, busi-
expansion in U.S. history, last-
sent around the world in a mi-
nesses and farms can get
ing seven and a half years. We
crosecond. The United States
loans, and families can buy
5
homes and cars. We will have
Two, it means that if
a more competitive and effi-
America is going to be strong
"No
nation is an
cient financial system that will
and growing in the 21st
serve companies and families
Century, we must be ready,
island today. We are
better. Over the next few
able, and willing to compete
years, the Government will ac-
around the globe. We need to
part of a global
tually gain revenues from the
encourage entrepreneurial
economy. To grow is to
sales of billions of dollars of
capitalism and investment at
assets that it acquired from
home, and at the same time
trade; to expand is to
banks and S&Ls as it protect-
ensure that our labor force re-
compete. One
ed savers. But this process has
mains the best in the world.
left lenders cautious. Business
manufacturing job out
borrowing rates and mortgage
Three, we need to seize op-
of every six depends
rates are way down, but it's
portunities to develop new
still too hard for small busi-
markets, particularly in areas
directly on our exports.
nesses to gain access to capital
that have potential for
One acre out of every
and credit. We are still taxing
significant growth in the fu-
capital too much.
ture. One of the other benefits
three is sowed for sale
of the end of the Cold War is
abroad."
The final economic change
the extraordinary potential to
is perhaps the most far-reach-
expand trade and sales to hun-
ing of all: No nation is an is-
dreds of millions of potential
land today. We are part of a
customers who not long ago
global economy. To grow is to
were the captives of our
trade; to expand is to compete.
enemies.
One manufacturing job out of
every six depends directly on
our exports. One acre out of
III.
every three is sowed for sale
Start with
abroad.
Strengths
This international econom-
ic interdependence has three
In developing an agenda
implications.
for the future, we should take
a clear-eyed look at our
One, when growth slumps
strengths as well as weakness-
abroad, it drags our economy
es: Not surprisingly, the other
down with it. Both Western
side has conveniently skipped
Europe (espécially Germany)
over our country's many
and Japan are going through
strengths. Frankly, they want
major readjustments - and
you to believe America is over
that has contributed to our
the hill and past its prime. But
sluggishness.
they have no more right to
6
convince you the economy is
own homes, as compared
falling. We must know our
worse than it is for political
with 59% in Japan and
strengths before we build on
advantage than I have to un-
40% in Germany.
them. Over the past 12 years,
derstate the problems. So let
we increased the U.S. economy
me just note several key facts.
The U.S. sends more of its
by about $2.8 trillion - that's
students on to higher edu-
like creating the total size of
The Misery Index - the
cation - 68% - than any
the German economy twice
sum of inflation and unem-
other country, well above
over. So I know our goal of a
ployment - is down to
the 32% rate in Germany
$10 trillion economy is attain-
10.8% today, from 19.6%
able.
and 30% in Japan. And
in 1980.
52% of these U.S. students
are women, as compared
We're also in a strong posi-
Inflation has fallen to
with 26% in Japan and
tion internationally. But we're
roughly 3%, the lowest in
38% in Germany.
going to need the national
adaptability and capability to
a quarter of a century (ex-
keep leading our competitors.
cept for 1986).
With exports of $622 bil-
And we must have the courage
lion, the U.S. is the world's
of our convictions to say "no"
Interest rates are at a 20
largest exporting nation.
to the wrong sort of changes
year low. Mortgage rates
Exports increased by 40%
for the future - false promis-
are now in the 8% range,
during my Administration.
es based on false premises -
half the rate President
changes we cannot afford at
Reagan encountered in his
We produce 25% of the
this key moment in the world
first year. Thanks to these
world's total output with
economic competition.
low rates, more people can
5% of the world's popula-
afford to own a home today
tion.
than at any time since
IV.
1973.
The productivity of
Guiding
American workers is ap-
Principles
While unemployment is
proximately 26% above
still far too high, the share
those in Germany and 30%
Before outlining the
of the working age popula-
above those in Japan.
specifics of my agenda, I want
tion with jobs during my
to set out four guiding princi-
administration has aver-
I do not mean to suggest
ples. An effective strategy
aged 62.2%, the highest in
either that everything is well
must be dynamic. As new
U.S. history.
or that we do not need to lead
problems or opportunities pre-
and manage the changes tak-
sent themselves, we will need
The United States has the
ing place in the world and at
to make adjustments. Guiding
highest home ownership
home more actively. We do.
principles will ensure we fol-
rate of all major industri-
low a consistent path and help
alized countries: 66% of
But you can't chart the
shape our policies into the
U.S. households own their
stars if you think the sky is
future.
7
First, start with the ba-
for helping people, for re-
sics: We are a nation of special
sponding to their needs. And
"We
individuals, not special inter-
we've seen that these are ap-
have to keep to
ests. Individuals gain primary
proaches that work.
the fundamentals of
strength, protection, and in-
spiration from their families
We prefer a hand up to a
sound economic
and communities, not the legal
handout. We want to empower
growth: lower tax rates,
system or Government social
people to make their own
services. People find their
choices, to break away from
limits on Government
friends and their enjoyment in
dependency. We want to give
spending, greater
voluntary association with
individuals and families eco-
one another, not in some bu-
nomic security by giving them
competition, less
reaucrat's paint-by-numbers
the capital, the capabilities,
economic regulation,
dream.
and the confidence to decide
for themselves. We want
sound money, and more
Individuals, families, com-
everyone to have a stake in so-
munities. That's where we
open trade that can free
ciety, to own property, so
start.
everyone will build something
tremendous private
with it for themselves and our
Second, we have to keep to
country. Whereas my oppo-
initiative and growth."
the fundamentals of sound
nent's approach may place a
economic growth: lower tax
premium on redistribution and
rates, limits on Government
"leveling," our programs will
spending, greater competition,
unleash initiative, reward suc-
less economic regulation,
cess, and encourage excel-
sound money, and more open
lence. Our approach is to give
trade that can free tremen-
people the power to work,
dous private initiative and
save, and be their best.
growth.
Finally, all our policies
Experience has shown that
must be brought together ef-
these are the steps we need to
fectively if we are to prosper
take to create jobs, raise
as a people and succeed as a
wages, spur entrepreneurs, ex-
nation. America must have ap-
pand capital and investment,
propriate new approaches for
and build businesses.
the changes at home - just as
we've launched new policies to
Third, in the '90s Govern-
lead and manage change
ment can build on these fun-
abroad. We must recognize the
damentals by offering opportu-
interrelationship between do-
nity and hope for individuals,
mestic and foreign policy -
families, and communities.
between economic and security
There is a conservative agenda
policy. At the same time, we
8
must execute our agenda more
This is how America will
excellent American customers.
effectively with a new
create a $10 trillion economy.
Equally important, the inte-
Congress, state and local gov-
gration of United States,
ernments, and the private sec-
Mexican, and Canadian capa-
tor. Our aim must be to press
V.
bilities will improve our global
our policies together, as a
Challenging
competitiveness by enabling
package, to make America se-
the World:
American firms. to purchase
cure and strong.
inputs at lower costs. This will
A Strategic
help U.S. firms to stay in the
Therefore, my Agenda for
Global Economic
forefront of high wage, high
American Renewal mandates
and Trade Policy
value-added production.
action on six interconnected
fronts. Because we face com-
During the Cold War, we
Our geopolitical position is
plex problems, no one solution
also advantageous. The United
built a global security struc-
will suffice. The whole of these
States is both a Pacific and a
ture to contain and counter
elements will be a solution
the Soviet Union and commu-
European power; our political
greater than the sum of its
and security ties link us with
nist aggression. We forged mil-
parts:
the largest and most rapidly
itary alliances across the
Atlantic and Pacific that un-
growing economies across both
Challenging the World: A
oceans. Our trans-Pacific trade
derpinned that structure. In
Strategic Global Economic
the post-Cold War era, we
already exceeds our Atlantic
and Trade Policy
trade; that's one reason why
need a strategic global eco-
we helped launch an organiza-
nomic and trade policy that
tion for Asia-Pacific Economic
Preparing Our Children
will ensure our position as an
Cooperation that will further
for the 21st Century
economic and export super-
strengthen our economic ties
Economy
power as well.
with that region. Our own
neighbors - from Central
We are well positioned to
Sharpening Business'
America to Chile - want to
achieve this goal. We enjoy the
Competitive Edge: En-
build bridges of trade with us
largest fully integrated market
couraging Entrepreneurial
SO they can build better
in the world; this gives us
Capitalism
economies for their people.
leverage with other countries
that want access to our mar-
"The ball of liberty,"
Promoting Economic Se-
ket. Once the Congress enacts
Jefferson once wrote, "is now
curity for Working People
the North American Free
SO well in motion that it will
Trade Agreement (NAFTA),
roll around the globe." He was
our position will be further
Leaving No One Behind:
right.
strengthened. NAFTA will
Economic Opportunity for
open an important market, a
Every American
Freedom has rolled
Mexican economy whose
through Eastern Europe, the
growth prospects will quickly
"Rightsizing" Government
former Soviet Union, and
transform its expanding in-
Latin America - and the ball
dustries and consumers into
9
is now in our court. Free peo-
1993 because of those special
ple and free markets develop
interests who herd together
hand in hand. People value
with a protectionist purpose.
"Free people and free
American values. People want
The global trade negotiations,
markets develop hand
to buy what we have to sell.
in turn, could be very close to a
English is the language of
breakthrough if the United
in hand. People value
freedom and business.
States continues to act as a
American values. People
strong world leader. There is a
Our political and economic
proposed draft text that estab-
want to buy what we
ties are complemented by the
lishes the outlines of a
have to sell. "
appeal of American culture all
significant new GATT agree-
around the world. This is a
ment. Once we assure cuts in
new "soft power" we can em-
the subsidized agricultural
ploy. Today, our movies,
trade along the lines of that
music, and videos are among
text - to enable our farmers to
our top-selling exports.
secure their competitive advan-
tage - I believe we will be able
Finally, as the primary
to complete the Uruguay
founder and the most signi-
Round agreement.
ficant proponent of the GATT
global trading system, we con-
An improved global trad-
tinue to have a strong hand as
ing system is, however, only a
long as we use it to truly open
base for freer trade, for
markets, including our own.
stronger investment ties, for
The key to America's growth,
increased global growth. We
expansion, and innovation has
need to start to develop a
always been our openness to
strategic network of free trade
trade, investment, ideas, and
agreements [FTAs] across the
people.
Atlantic and the Pacific and in
our own hemisphere. This net-
Therefore, the next steps in
work will stand in sharp con-
my strategic trade policy are to
trast to the backward blocs of
secure Congressional agree-
economic isolation. If we are to
ment to NAFTA and to com-
be a true export superpower,
plete the global trade negotia-
we cannot be tied down to one
tions - the SO called Uruguay
region. Instead, my intent is to
Round negotiations in GATT.
use our attractive domestic
Our NAFTA agreement will
market as the basis of a mus-
open doors for American busi-
cular free trade policy that
nesses, workers, and con-
will strengthen America's
sumers. It will create good jobs.
global economic reach and
Nevertheless, I expect a tough
complement our worldwide se-
fight in the Congress in early
curity presence.
10
By focusing on opening
slovakia by the end of my sec-
I will ensure that our
markets, I also believe we can
ond term. And I would explore
ExIm Bank and the Overseas
reduce structural barriers to
the possibility of a connection
Private Investment Corpora-
competition in North America,
between NAFTA and the
tion (OPIC) work with teams
Western Europe, Japan, and
ASEAN FTA, or AFTA. It will
of our ambassadors to develop
elsewhere. Competition will
not take long for other coun-
trade and investment opportu-
encourage entrepreneurial
tries to begin to express their
nities for U.S. firms. We've al-
capitalism - at the expense of
interest in new trade and busi-
ready begun this with the six
entrenched interests -
ness ties with us. For example,
ASEAN countries - and it's
spurring even greater global
leaders in Australia and Korea
working. I will particularly
growth.
have already spoken of their
stress helping America's small
interest in forging closer eco-
businesspeople to develop
More specifically, I will
nomic ties.
trading opportunities. These
need to secure from the
companies look small - but
Congress additional trade ne-
Some see new threats, oth-
they trade big. I know. I start-
gotiating authority within the
ers see old enemies. I see new
ed my own. And I have visited
first half of 1993. To overcome
markets, new opportunities,
small factories all across the
the special interests and the
new jobs.
United States that first sur-
protectionists, I will need a
vived and then prospered by
mandate from the American
As we develop this eco-
taking on the foreign competi-
people. If America is going to
nomic and trading network for
tion. I know Americans can do
be an export and economic su-
the 21st Century, I will fight
it.
perpower, the U.S. President
hard to promote American
must take a strong stand on
trading interests. For exam-
the negotiation of trade and
ple, I am committed to a siz-
VI.
economic agreements. The
able Export Enhancement
Preparing Our
Congress will read vacillation
Program [EEP] to ensure that
Children for the
and equivocation as weakness,
our farmers can go head-to-
and the national interest will
head with the European
2lst Century
lose out to the logrolling trade-
Community's subsidized agri-
Economy
offs of Congressional business
cultural exports. We know
as usual. That's one very big
from our experience with mili-
In the 21st Century our
issue at stake in this election.
tary security that the key to
greatest national resource will
economic security must be
be our people. Materials, ma-
With new negotiating au-
based on "Peace Through
chines, and methods will come
thority, I will pursue new
Strength" - not unilateral
and go, but the American
trading and economic opportu-
disarmament. That's why I re-
worker will remain the key to
nities in Latin America under
cently announced the largest
our economic security. Since
my Enterprise for the
quantity of wheat ever avail-
the workplace of the 21st
Americas Initiative, starting
able under our EEP program
Century will be constantly
with Chile. I would also like to
- almost 30 million metric
changing, we need to prepare
work towards FTAs with
tons to 28 customers.
the American people to adapt
Poland, Hungary, and Czecho-
to and direct the process of
11
change. Therefore, our kids
tion Assistance program (WIC)
must arrive at school ready to
has grown 258% between 1980
grow, and they need schools
and 1992; my request for an
laterials, machines,
where they will learn how to
additional $240 million for
and methods will come
keep learning all their lives.
1993 brings the annual cost to
$2.8 billion.
and go, but the
Our New American
American worker will
Schools will help prepare our
I have also increased fund-
children to become the con-
ing for the Head Start pro-
remain the key to our
tributing citizens of tomorrow.
gram by 127% - for a total of
economic security. Since
Equally important, we want to
$2.8 billion in 1993. That in-
enhance children's sense of
cludes an additional $600 mil-
the workplace of the
self-worth, their confidence,
lion increase for next year -
21st Century will be
their sense of participation in
an unprecedented 27% annual
a larger community and soci-
jump - SO that a year of Head
constantly changing, we
ety. This is the conservative
Start will be available for
need to prepare the
philosophy of empowerment,
every eligible four-year old
helping people to help them-
whose parents want to partici-
American people to
selves.
pate. (Under my budget, al-
most 800,000 children will re-
adapt to and direct the
I want to do my best to
ceive a year of Head Start be-
process of change.
help all children come into the
fore entering elementary
world as truly "created equal."
school.)
Therefore, our kids must
That's why I am more than
arrive at school ready to
doubling funding for a Healthy
Child immunizations are
Start initiative that targets
also vital to safeguard our
grow, and they need
communities with high infant
kids' health. Every year since
schools where they will
mortality rates. We are also
1981-82, 95% or more of the
increasing prenatal care, nu-
children entering elementary
learn how to keep
trition services, and substance
school have been immunized
learning all their lives.'
abuse treatment for pregnant
against the vaccine-pre-
women. And I want everyone
ventable diseases. Now we are
to spread the word that every
focusing greater attention on
parent must share the gift of
preschool children. My 1993
good health with their chil-
budget calls for an 18% in-
dren.
crease in child immunization
grants.
We need to focus especial-
ly on the preschool years, SO
I want the United States
that children coming to school
to offer opportunity and en-
are healthy and curious.
courage excellence; we must be
Funding for the Women,
fully capable of competing in a
Infants and Children Nutri-
global economy. Therefore, it
12
is imperative that our educa-
meet world-class standards.
school choice off the adminis-
tional system prepare and
We are moving ahead with the
trator's desk and put it back
point the way for our children.
development of these stan-
on the kitchen table. Choice is
As in the past, education
dards in math, science,
critical to the success of the
should be the ladder that the
English, history, geography,
whole, integrated overhaul of
child of modest means can
arts, and civics.
our educational system.
climb to better him or her self.
Competition, the underlying
Second, we need voluntary
principle for this radical re-
Our current school system
national achievement tests to
form, will not work unless we
is falling short of these needs
measure the progress of our
give consumers the ability to
- and the poor are hurt most.
students. That way we can
choose.
Only 19 out of 66 public high
compare the performance of
schools in Chicago graduate
different schools in helping
Wealthy families already
more than half their students,
our children achieve the na-
have this choice for their chil-
and many of these graduates
tional standards.
dren. Many of the people that
can barely read or write.
you saw at the Democratic
Third, we need to give
National Convention have this
Our educational establish-
schools the flexibility to be-
choice for their children. Why
ment is caught in a sort of
come educational entrepre-
shouldn't you have this choice
time warp, a system created
neurs - to figure out the best
for your children?
for another age when the
ways to motivate our children,
needs were not the same, chil-
use technology, include par-
Chicago's public school
dren grew up differently, and
ents, and involve new types of
teachers - 46% of them -
adults rarely changed jobs.
teachers. We will create
send their kids to private
"Education Enterprise Zones."
schools. But my opponent and
Money alone is not the an-
There is no particular reason
his special interest supporters
swer - the United States al-
why schools have to end at
don't think you should have
ready spends more per pupil
3 p.m. SO that students can sit
the same choice unless you are
than any other country but
in front of the TV for five
privileged enough to afford it.
Switzerland. And funding for
hours a day. We need to free
the Education Department has
school administrators and
One of the greatest educa-
increased 41% over my term.
teachers from rules, regula-
tional innovations in this
tions, and reports that have
country was the passage of the
The answer is a radical
become a poor substitute for
GI Bill after World War II. No
overhaul of our educational
student achievement; we can
one told my generation that a
system. If we want to change
do away with red tape once we
vet couldn't go to Notre Dame
our country, we've got to
institute a new testing system
or Brigham Young or Baylor or
change our schools. That's
that evaluates schools not on
Howard or Yeshiva.
what my America 2000 pro-
the basis of how many forms
gram is all about.
they complete, but of how
So I want a "GI Bill for
many minds they prepare.
Children" to help give lower
Our kids can't beat world
and middle income families
class competition if they can't
Finally, we must take
the means to select any school:
13
public, private, or religious. I
tablishment and special inter-
also want scholarships avail-
ests that want to resist this
able to be spent on after-
revolution. A new system of
ealthy families
school, Saturday and summer
education in this country is
already have this choice
academic programs.
probably the most important
ingredient over time in mak-
for their children. Many
For those who argue that
ing America the winning eco-
of the people that you
my approach will weaken the
nomic and export superpower
public school system, I would
in the post-Cold War era.
saw at the Democratic
remind them that the first GI
National Convention
Bill was a tremendous boon for
This must not only be my
public universities. Or listen
agenda, but yours, too. I will
have this choice for their
to Starr Parker, a small busi-
fight to give parents in
children. Why shouldn't
ness owner actively promoting
America the right to choose
choice in the Black communi-
the school their children will
you have this choice for
ty, who put it this way: "The
attend, but you need to help,
your children?"
rich have choice now. When I
too. After you check out of
was on welfare, there was no
work, check into your child's
way I could put my child in
homework. Talk to your child's
school. It's time we stop con-
teacher. Join your local PTA.
demning the poor to a monop-
My approach - America 2000
oly education system."
- relies on parental, business,
and community involvement
We've already made
in creating new schools that
significant progress in starting
break the mold.
this radical reform agenda.
Some 44 states, and over 1700
I put the family at the cen-
communities, have already
ter of our society. Government
adopted my new national edu-
must try to help families -
cation strategy - America
not replace them. When it
2000. Indeed, this progress of-
comes to choices for our chil-
fers a good example of my
dren, parents really do know
commitment to pursue my
best. We should increase the
agenda whether or not
range of choices available to
Congress dawdles. If Congress
parents, and Government as-
balks, I will work with gover-
sistance should be targeted to
nors, state legislators, commu-
those families most in need.
nity officials, and the private
sector.
The other side may talk
about similar problems, but
I hope the new Congress
they are approaching them
will not remain an apple pol-
with a fundamentally different
isher for the educational es-
ideology. You can see the con-
14
trast not only in education,
business in Texas. I also call it
the competitive edge of
but in health care, or in the
common sense.
American business:
debate that took place over my
child care proposal, which. we
You allow people to keep
strengthen small business;
fought for and managed to
most of what they produce,
enact into law. The opposition
and they will produce more
prefers uniformity to variety
than they can use, the rest
support civilian R&D
and choice. Because they place
being capital. You invite peo-
linked to a research exten-
a higher value on "leveling" so-
ple to risk failure by allowing
sion network; and
ciety, they will tend to rely on
them to keep the rewards of
Government bureaucracies to
success, and they will keep
reform our costly legal
offer "standard service." My
trying until they succeed.
system.
approach to education, child
A.
care, health care, and other
When capital is taxed
topics- is to rely on a diverse
lightly, it becomes abundant.
Strengthen
Small Business
private sector to supply the
When it is taxed heavily, as it
service and to empower fami-
is now, it becomes scarce,
Small business is the
lies to make their own choices.
available only to those at the
backbone of a growing econo-
I don't want to pull everyone
top, who need it least of all.
my. Small businesses create
down to make them equal. I
That's not what I want. Even
two thirds of our new jobs;
want to give everyone the tools
Jesse Jackson put it this way:
they account for 39% of our
to climb as high as they can
"Subtract capital from capital-
GNP.
dream.
ism and all that's left is the
'ism'." If capital were abun-
I am seeking to aid small
dant, labor would become
businesses by reducing costly
VII.
scarcer. And the unemploy-
tax and regulatory burdens,
Sharpening
ment lines would shrink.
increasing access to credit,
That's what I want.
Business'
and removing barriers to com-
petition.
Competitive
So I want to cut the capital
Edge:
gains tax and index it for
I have taken steps de-
Encouraging
inflation. I want to create en-
signed specifically to ease the
Entrepreneurial
terprise zones in inner city
tax burden on small business-
and rural areas. I want to
Capitalism
es. For example, the IRS has
make the R&D tax credit per-
proposed regulations to allow
manent. I want to provide an
small businesses to deposit
Our ultimate success as an
additional first-year deprecia-
payroll taxes on a monthly
economic superpower is depen-
tion allowance for purchases of
basis. And it has released a
dent on encouraging the entre-
property.
ruling allowing over 16 million
preneurial spirit of our private
sole proprietors to deduct tax
businesses. I call it entrepre-
Those are fundamentals.
preparation fees as a business
neurial capitalism, and I saw
In addition, there are three
expense rather than as a limit-
it work when I started a small
other ways we need to sharpen
ed itemized deduction.
15
I want to build on these
billion in general business
actions. For example, we are
loan guarantees through SBA
"I
working on a Single Wage
in 1992 - an increase of more
am seeking to aid
Reporting System that would
than 50% above 1991.
small businesses by
permit businesses to report
state and federal wage infor-
SBA's New England
reducing costly tax and
mation through a single enti-
Lending and Recovery Project
regulatory burdens,
ty, thereby consolidating tax
is a pilot effort that extends
reporting requirements and
credit to viable small firms
increasing access to
reducing the burden.
when access is limited because
credit, and removing
banks are having difficulty. If
In coming weeks I will talk
it works well and is needed,
barriers to
more about ways we can en-
I'll expand the project to other
courage small businesspeople
competition."
regions. We also have worked
and the jobs they create.
with bank regulators to base
real estate values on income
On the regulatory front, I
earning potential rather than
have extended for one year the
liquidation value. We have
freeze on paperwork and un-
taken steps to restructure the
necessary federal regulation
small business investment
that I imposed last winter; the
program, the only venture cap-
federal regulatory weight hits
ital program in the Govern-
small businesses particularly
ment. And we are developing
hard. I have also instructed
ways to offer special financing
federal agencies to look for
to exporting entrepreneurs.
ways to modify existing regu-
lations that impose a special
Through its procurement
economic burden on small
assistance program, SBA
business. For example, to in-
helped small businesses se-
crease access to capital for
cure federal contracts worth
small businesses, the SEC has
over $35 billion in FY 90 -
announced proposals to reduce
almost 20% of all prime con-
and in some cases eliminate
tracts let during that year.
the public disclosure require-
ment for small companies is-
To ensure that small busi-
suing stock.
nesses can help their commu-
nities overcome disasters, we
Since small businesses are
will be pressing forward with
particularly vulnerable when
approximately $1.7 billion in
credit is tight, we have to help
low-interest loans to small
them as our financial system
businesses in Florida,
is restructuring. That's why
Louisiana, California, and
we have authorized over $6
elsewhere.
16
Finally, we need to help
Americans invented VCR tech-
a
High
Performance
small business by removing
nology and the FAX machine,
Computing and Communi-
burdens to competition. My
we did not capitalize on their
cations Initiative that will
health care reforms would re-
explosive popularity. Third, we
enable the development of
duce costs for small businesses
need to rely increasingly on
a thousand-fold increase in
without costly Government
flexible, agile manufacturing,
computing capability by
mandates or higher taxes.
rather than old style mass pro-
1996 and a one hundred-
Enactment of my legislation to
duction. We should have the
fold increase in communi-
establish uniform federal law
capability to make a variety of
cations speed.
on product liability would re-
products quickly and economi-
lieve a major competitive
cally - a process character-
an initiative to improve
handicap that is keeping new
ized by short product cycles,
the manufacturing and
products from the market,
but also high quality output.
performance of materials
boosting insurance costs sky
- improvements that will
high, and killing jobs.
Taken together, these de-
enable advances in a wide
velopments emphasize decen-
range of other technolo-
B.
tralization - an approach ex-
Support Civilian R&D
gies.
actly opposite to my oppo-
nent's "national industrial
To be the world's economic
policies" led by Government
an expanded program in
leader tomorrow, we clearly
bureaucrats. We need to get
biotechnology research
have to invest in R&D and
technology development, pro-
with applications in
new technologies today. Given
duction, and marketing closer
health, agriculture, and
the pace of change, we have to
to the consumer, not further
environmental protection.
both come up with new inven-
away. Moreover, my oppo-
tions and organize ourselves to
nent's call for a cut in support
the establishment of the
deploy new technology without
for university-based research
U.S. Advanced Battery
delay.
will hurt the development of
consortium, a jointly-fund-
cutting edge technology.
ed four-year effort to de-
The changes in industrial
velop an advanced battery
organization that I described
My agenda will increase
for an emissions-free
earlier have three major impli-
funding for basic research and
electric car.
cations for technology develop-
complement that work with a
ment. First, the more rapid
focus on applied research and
product development cycle
a significant increase in
development. Despite cuts by
our aeronautics research
places a premium on bringing
Congress, we have managed to
an idea quickly from the lab to
budget, underscoring the
increase funding for basic re-
the marketplace. Second, we
importance we place on
search by 26% since 1989 - to
the U.S. aeronautics in-
need to put new technologies
a record level. We are support-
to work in all applications in
dustry in an increasingly
ing applied R&D through a
order to reap the full competi-
competitive global market
series of new, high pay-off
tive and economic benefits
investments in critical
place.
from our R&D. While
technologies:
17
the establishment of seven
C.
regional manufacturing
Reform Our
technology centers for the
Legal System
"America has
distribution of modern
suffered a civil litigation
manufacturing tools, such
Our competitive edge will
as computer-aided design,
be dulled if businesses are con-
explosion. Over the past
numerically-controlled ma-
tinually handicapped by a
30 years, federal
chines, and robotics.
legal system that serves
lawyers but frightens people.
lawsuits have almost
These efforts to develop
Therefore, another component
tripled. Instead of being
and apply new technologies
of my agenda is a reform of the
need to be complemented by
American civil justice system.
fast, fair, and affordable,
the identification and removal
our civil justice system is
of barriers to the private sec-
America has suffered a
tor's ability to bring new prod-
civil litigation explosion. Over
slow, expensive, and
ucts and services to the mar-
the past 30 years, federal law-
putting us at a global
ket. That's why my regulatory
suits have almost tripled.
reform efforts - including a
Instead of being fast, fair, and
disadvantage."
process that subjects regula-
affordable, our civil justice
tions to a competitiveness
system is slow, expensive, and
analysis while still protecting
putting us at a global disad-
health and safety, and a pro-
vantage.
posal to "sunset" regulations
- are critical to supporting
Long delays in dispute res-
our enhanced technology
olution waste valuable judicial
development.
resources, force early settle-
ment by those who cannot af-
Just take one example: my
ford to wait, discourage those
opponent has proposed a
who have meritorious suits,
major new Federal Govern-
and encourage frivolous suits
ment investment in the field of
by those who hope to leverage
national telecommunications
unjust settlements. High puni-
networks at the exact time
tive damage awards are
that our private sector is seek-
passed on to consumers
ing to develop such a network
through higher prices, job
on its own, but has been
cuts, higher insurance, and
stopped from doing SO by fed-
fewer new products.
eral regulations.
According to a soon-to-be
released study by the National
Association of Manufacturers,
Americans spend up to $200
billion a year just on direct
18
costs to lawyers. That does not
nation's civil justice system
our competition. To be able to
even count lawyers on payrolls
through: alternatives to feder-
contribute and concentrate,
or the money spent on court
al civil trials such as alterna-
working men and women will
settlements.
tive dispute resolution; incen-
want to know that they can
tives for pre-litigation settle-
enjoy economic opportunity
Our legal system is killing
ment, including pre-complaint
and security. We can only
our international competitive-
notification; and a "loser pays"
achieve true security by devel-
ness. Other nations do not face
rule requiring the loser to pay
oping people's capability, not
high domestic litigation costs.
the winner's legal fees in suits
dependency. And we can best
Foreign companies only need
involving federal diversity
supply security through the
6% of the product liability in-
jurisdiction.
private sector, not Govern-
surance our firms must carry
ment bureaucracies.
because we do not have uni-
We also need to continue
form state standards for prod-
our work with the states to en-
It will be Government's
uct liability and punitive
courage fundamental change
role to expedite workers' ad-
damages.
at the state and local level.
justments in a fast-changing
marketplace, provide people
The litigation explosion af-
Lawyers, especially trial
the means to work and take
fects everyone. High liability
lawyers, are a powerful vested
care of their families, and arm
costs have closed playgrounds
interest in our society. They
people to face the future by
and pools, forcing kids on to
are well represented in
empowering them to make
the street with nothing to do.
Congress and high on the lists
their own choices. In particu-
Some companies are afraid to
of political contributors. My
lar, we can enable families to
offer products at home that
opponent knows them very
focus on building a future by
are available overseas because
well. But this is a problem too
alleviating their fears. about
they fear the liability.
important to leave to the
one of the single biggest costs
lawyers and their friends in
and problems that can knock
My product liability re-
high places. We must sue each
them back: health care. And
form legislation confronts the
other less and care for each
we can help foster retirement
trial lawyers head on. I want
other more.
security through encouraging
to stop wide variation among
portable pension savings.
states' product liability rules;
stop important products from
VIII.
A.
being kept off the market; stop
Promoting
Job Training
excessive litigation costs with
Economic
more money going to lawyers
Given the rapidity of
than to injured consumers; cut
Security for
change in the international
excessive insurance rates; and
Working People
and domestic marketplace, we
end excessive consumer costs.
have to prepare people for the
The American businesses
prospect of changing jobs and
My "Access to Justice Act
of the 21st Century will need
learning new skills many
of 1992" is intended to restore
workers who will bring them
times throughout the course of
fairness and efficiency to the
to life and keep them ahead of
a productive life. Therefore,
19
we need a range of job training
of adding new skills and train-
and placement services - for
ing; and (3) a tripling of the re-
"Work means more
young people, factory workers,
sources currently devoted to
white collar employees, and
training and worker adjust-
than income to
particularly during this peri-
ment, an allocation of $10 bil-
od, defense industry workers.
lion over five years.
Americans. It is also
fundamental to
That's why one important
This proposal builds on my
portion of my recently-an-
January plan to streamline
people's self-esteem,
nounced workforce adjustment
the federal job training system
their self-confidence,
initiative is designed to shift
through "one-stop shopping" in
the Government away from
every community. Experience
and the respect of
the old narrowly defined, ex-
has demonstrated that the
others. These are
pensive, and less effective
most effective training and
trade adjustment assistance
placement services are those
attitudes, values, that /
that paid people off without
closely developed with local
want to encourage. /
giving them real help to get
employers through private in-
back the work.
dustry councils. That way the
want all Americans to
training is designed to develop
be builders - for their
Work means more than in-
skills that employers know
come to Americans. It is also
they will need.
families, their
fundamental to people's self-
communities, their
esteem, their self-confidence,
My expanded job training
and the respect of others.
efforts will also be specially
country."
These are attitudes, values,
designed to help those who
that I want to encourage. I
may need to change jobs or
want all Americans to be
careers as a result of NAFTA
builders - for their families,
or other trade agreements
their communities, their coun-
and the downsizing of our de-
try. To encourage the work
fense-related industries. But
ethic, we need to make every
we will ensure that we offer
effort to match people with the
training and placement to all
jobs created by our entrepre-
workers.
neurial capitalism.
These dislocated workers
The three key features of
would be eligible to receive
my job training proposal are:
three types of assistance: (1)
(1) universal coverage, S0 all
transition-assistance that in-
dislocated workers will have
cludes skills assessment, coun-
access to basic transition as-
seling, job-search assistance,
sistance and training support;
and job referral; (2) training
(2) skill grant vouchers of up
assistance in the form of skill
to $3000 to help meet the costs
grants; and (3) transition
/
20
income support where neces-
tured, paid, work-experience
B.
sary for workers completing
program. I want student ap-
Affordable
retraining.
prentices to receive both a
Health Care for
high school diploma and a
All Americans
I've also proposed a
widely recognized certificate of
specially-targeted Youth Skills
skill competency. Students
The economic security of
Initiative.
will also have the opportunity
men and women requires a
to continue training at the
major reform of the U.S.
A new Youth Training
post-secondary level.
health care system. The pre-
Corps will provide economical-
sent system provides high
ly and socially disadvantaged
I started my Apprentice-
quality, high-tech medicine,
young people with intensive
ship Program as a demonstra-
but at an unacceptable price:
vocational training through 55
tion program in 6 states; in my
spending has increased at a
residential YTC centers na-
second term, I will expand it to
rate two to three times the
tionwide; these centers will be
all 50.
rest of the economy; thirty-
located primarily in rural
four million Americans have
areas and will seek to utilize
Finally, I will more than
no health insurance; and mil-
converted defense facilities,
double the size of the present
lions more are afraid to
putting them to good use. The
JROTC program, a very suc-
change jobs for fear of losing
YTC will draw from the mili-
cessful and popular partner-
their health insurance.
tary's high level of leadership
ship between the military and
and training expertise by giv-
schools. JROTC emphasizes
My program will build on
ing a hiring preference to indi-
self-discipline, values, citizen-
the strengths of the system -
viduals leaving our armed
ship, personal responsibility,
consumer choice, innovation,
forces. The discipline that tri-
and staying in school - it's a
and state of the art medicine
umphed in Desert Storm can
first class alternative to drugs
- while controlling costs and
win at home, too.
and gangs. My goal is to estab-
expanding access.
lish 2,900 JROTC units by
I will also complement the
1994. Initially, we will expand
I want to guarantee access
YTC with a "Treat and Train"
this program in inner-city high
to health insurance for all poor
program to strengthen exist-
schools, but I want to make
families through tax credits
ing youth drug training pro-
JROTC available to every high
(or vouchers for those who
grams.
school across the country that
don't pay taxes) sufficient to
requests it. This program is
pay for a basic health insur-
To help meet the needs of
another way in which we can
ance plan ($3,750 for a family).
young people not planning to
relate the successful experi-
Other low and middle income
go on to college, I will expand
ence of America's veterans to
families would get tax relief to
the National Youth Appren-
the next generation.
partially offset the cost of their
ticeship Program that I began
health insurance. In total,
in January. This program of-
some 95 million Americans
fers high school juniors and se-
will benefit.
niors a combination of class-
room instruction and a struc-
21
My program also includes:
Taken together, my pro-
gram would cut health care
provisions that encourage
"I
costs by $394 billion over five
believe we can
small businesses to develop
years through preventive care,
provide access to
less costly health care in-
malpractice reform, reducing
surance networks for their
defensive medicine, encourag-
affordable health care
employees by combining re-
ing enrollment in cost-effective
for all Americans, while
sources to achieve broader
health plans, arming con-
risk sharing, economies of
sumers with information
preserving choice for
scale, and purchasing
about cost and quality, and
patients and their
power;
eliminating administrative
waste and unnecessary paper-
families in selecting
"job lock" protection for em-
work.
doctors, hospitals,
ployees and their families
SO that they will not lose
I believe we can provide
health care programs,
coverage if and when a per-
access to affordable health
son changes jobs;
care for all Americans, while
and employment."
preserving choice for patients
guaranteed insurability SO
and their families in selecting
that people with "preexist-
doctors, hospitals, health care
ing" illnesses cannot be de-
programs, and employment.
nied a job or health cover-
My approach, in contrast with
age on the job;
my opposition, relies on the
private sector to deliver health
care services. But I would
100% tax deductibility of
make the market work for us
health care premiums paid
by the self-employed, as
by enhancing competition,
compared to the present
which will cut costs. My mal-
25% deductibility;
practice reforms would cut
costs further by removing the
fear of lawsuits that leads. to
malpractice reforms that
wasteful procedures.
will reduce the number of
unnecessary procedures
I firmly believe that a
performed on patients and
move to national health insur-
thereby reduce the cost of
ance, as some of my opponents
medical care; and
want, would be a major, irre-
trievable mistake. That course
reforms to encourage wide-
would turn over the health
spread use of electronic
care sector - a full 13% of our
billing to save an estimated
economy - to the Govern-
$11 billion a year in paper
ment. The result would be
costs.
more bureaucracy, rationed
22
care, inefficiency, and, in the
sign a law this summer that
better life for themselves and
end, even higher costs.
incorporated my portability
their children. It's this spirit,
proposal. The new law en-
the commitment to the
My opponent's "play or
hances retirement security by
American Dream, that has
pay" approach winds up in the
permitting workers to transfer
made our country and our SO-
same place as nationalized,
accrued pension benefits di-
ciety the most dynamic in the
bureaucratic health insurance
rectly to an IRA or to their
world.
- but through a different
new employer's pension plan.
route. And it is likely to kill a
If we are going to use that
lot of jobs along the way, espe-
Despite this improvement,
energy to drive us forward into
cially in small businesses.
I believe we must continue to
the 21st Century, we will need
Increasing the costs of labor -
look for ways to make it easier
to tap the aspirations of each
the "play" in his approach -
for workers who change jobs to
and every one of our citizens.
will lead businesses to hire
take pensions with them. We
No one should be left behind
fewer workers. Offering the al-
need to eliminate incentives to
for want of opportunity.
ternative of Government-
"cash out" benefits and in-
crease incentives to save for
Many of the programs that
sponsored health care paid for
I have discussed above -
with new taxes on payrolls -
the future.
health care for all Americans,
the "pay" - will dump the
child care, job training, pen-
problem in the lap of a
Job training, afford-
sion portability, a new compet-
Government bureaucracy with
able health care, retirement
itive school system based on
the costs paid for by business-
security - when combined
community involvement and
es and workers.
with a new system of educa-
choice for all American fami-
tion and entrepreneurial, com-
C.
lies - support my plan to em-
petitive business, we can offer
Pension Portability
power all Americans to make
working men and women real
their own choices and better
economic security in the 21st
I have also been concerned
their lives. But I believe we
Century.
need to do more for certain cit-
about the ability of workers to
izens who have fallen too far
preserve their retirement pen-
behind.
sions as they change jobs. This
IX.
is a growing need because of
Leaving No
My philosophy for en-
the increased likelihood that
most workers will have more
One Behind:
abling all Americans to share
than one employer over the
Economic
the American Dream is sim-
ple: it's based on property and
course of their working years.
Opportunity for
work. Our urban and welfare
Every American
programs must be designed to
I proposed an initiative
enable people to break the
last year to increase pension
For over 200 years, the
cycle of poverty, get back on
portability, expand pension
most exceptional aspect of
their feet, get back to work,
coverage, and simplify the law
American society has been the
and take responsibility for
governing pension plans. And
belief, the hope, that this is a
their own choices and their
I am pleased that I was able to
land where people can make a
own lives.
23
I disagree with the failed
Our "Weed and Seed" effort
logic of "welfare rights" and its
can help reclaim and revitalize
emphasis on entitlement. I
impoverished and embattled
"My
philosophy for
disagree with "income mainte-
communities by eliminating
enabling all Americans
nance" strategies - strategies
the fear of drugs and violence,
that merely maintain poverty
targeting coordinated human
to share the American
and contain potential.
services programs, and im-
Dream is simple: it's
proving the housing stock and
Our goal should not be
infrastructure.
based on property and
more dependence - but rather
work. Our urban and
a new Declaration of
We also need to extend op-
Independence - to help peo-
portunity by enabling lower
welfare programs must
ple develop the human and
income families to build assets
financial capital to share the
be designed to enable
- for example, by allowing aid
American Dream. We have
recipients to accumulate high-
people to break the
taken the first step with our
er savings without losing their
implementation of the welfare-
eligibility.
cycle of poverty, get
to-work logic of the Family
back on their feet, get
Support Act of 1988. We have
And we need to expand
been encouraging flexible and
homeowner opportunities for
back to work, and take
innovative implementation
lower and middle income fami-
responsibility for their
through waivers that enable
lies. For example, HOPE
states to develop new pro-
grants enable more inner-city
own choices and their
grams to enhance parental
people to own their own
own lives. "
and family responsibility and
homes. Our $5,000 tax credit
to insist on education and job
for first-time home buyers
training for those on welfare.
would help; SO would permit-
Welfare policies won't work
ting voucher recipients to
unless people do.
apply their rental subsidies to-
ward the purchase of a home.
In our inner cities, we
need to restore hope by clear-
We can enhance the
ing away the handicap of
choice, quality, and avail-
crime, building a core of prop-
ability of housing through af-
erty owners, creating business
fordable rent subsidies in the
incentives, restoring infra-
form of housing vouchers, and
structure, and focusing our
through our "Perestroika in
programs on work and
Public Housing" program that
discipline.
widens opportunities for pub-
lic housing tenants to change
Enterprise zones can cre-
the management of troubled
ate solid economic foundations
projects.
in distressed communities.
24
This property and work-
X.
what our nation produced.
based approach need not be
That compares with 17.6% in
more expensive than the tradi-
"Rightsizing"
1965, 19.9% in 1970, 22.0% in
tional welfare bureaucracy.
Government
1975, and 22.3% in 1980. So
For example, over the past 12
not only has Government
years, federal spending for low
My blueprint envisages an
grown as the economy has
income assistance doubled
important Government role to
grown, but Government is tak-
even after inflation - from
make a secure and strong
ing a bigger share. The
$9.1 billion in 1980 to $18.3
America. But it is also impor-
American people are not taxed
billion this year (both in 1992
tant that Government not
too little. The American
dollars). This year, HUD is
siphon off more private re-
Government spends too much.
providing housing assistance
sources than are absolutely
to 4.6 million low-income fami-
necessary to perform the func-
In my acceptance speech I
lies, up from 3.1 million in
tions that will help us win the
noted some of the efforts I will
1980. I have tried to rechannel
economic competition. Because
make to hold down spending. I
some of this funding to vouch-
an overweight Government -
have proposed capping the
ers because they are more
serving itself seconds rather
growth of mandatory spend-
cost effective than con-
than serving the people first -
ing, other than social security.
structing new public housing
will weigh us down in the race
That would still permit spend-
units. Furthermore, families
of a new era.
ing at present levels plus an
wouldn't have to wait five
adjustment for inflation and
years for the units to be built,
Much of my agenda can be
population growth. Yet this
and the vouchers give families
accomplished simply by redi-
cap would save $294 billion
more choice.
recting current funding away
over five years.
from bureaucracies and to-
For too long, Congress has
wards people. My agenda em-
To start to implement this
stubbornly refused to discard
powers people with the means
cap, I have proposed over $72
failed programs that perpetu-
to work, own property, build
billion in specific spending
ate welfare dependency. No
capital, raise families, and be
cuts for "mandatory" programs
doubt, many of these programs
effective contributors within
(FY93-97). If you add these
were well intentioned. But
our private market economy.
proposed cuts to others I have
now we know better. Give us a
Some of my ideas - legal and
previously called for but which
chance to try a different ap-
health care. reforms, for
Congress has not yet enacted,
proach that will empower peo-
example - should even help
my specific cuts would total
ple to help themselves, to
us save money.
about $132 billion over five
build some capital for their
years. I have also proposed
families, to make choices that
Contrary to the assertions
the outright elimination of
develop self-respect and disci-
of some politicians and special
246 specific discretionary
pline. That's the real way to
interest groups, spending as a
programs.
offer economic opportunity for
percentage of the nation's
every American, to leave no
GDP has been going up, not
By way of comparison, my
one behind.
down. In 1991, the Federal
opponent has-specifically pro-
Government spent 23.5% of
posed less than $5 billion in
25
cuts in mandatory programs.
I also believe taxpayers
And he has singled out only
should have the right to direct
"Government should
one program for elimination -
10% of their tax payments to
the honeybee subsidy pro-
reduce debt and spending
be subject to the
gram, which his running mate
through a "check-off" on their
voted four times to retain.
tax forms. If all taxpayers took
discipline of a balanced
the full 10%, the cut would be
budget amendment.
Furthermore, I proposed
about $50 billion. That's only
freezing all other spending,
3% of the Federal budget of
State governments
and I will enforce this freeze
about $1.5 trillion. Since feder-
operate that way.
by vetoing any bill Congress
al spending has been growing
sends me that spends more
at a rate of about 8% per year,
Businesses operate that
than I asked for in my budget.
even this proposed cut would
way. Families operate
still enable spending to grow;
I've asked Congress for the
it would just grow more
that way. And given the
line item veto, a disciplinary
slowly.
breakdown of
tool used effectively by the
governors of 43 states. This
Some editorialists dismiss
Congressional discipline,
veto authority is important not
my checkoff proposal, but the
we need an
only to help cut, but to in-
American people seem to like
crease a President's leverage
it, and I think I know why. My
amendment to ensure
with a Congress that seeks to
proposal traces its roots to an
that the Federal
tax more and spend more.
American tradition. At the
turn of this century, many
Government operates
Government should be
people were concerned that
subject to the discipline of a
the Government establish-
that way, too."
balanced budget amendment.
ment was slipping away from
State governments operate
the people it was supposed to
that way. Businesses operate
serve. This movement led to
that way. Families operate
such venerable "gimmicks" as
that way. And given the
referenda, the right of recall,
breakdown of Congressional
and the direct election of U.S.
discipline, we need an amend-
Senators. The idea of term
ment to ensure that the
limits for Senators and
Federal Government operates
Congressmen, which I fully
that way, too. If we had had
support, is another reform of
such an amendment years ago,
this type. At the time each was
we wouldn't be paying almost
proposed, the conventional
$200 billion dollars a year now
thinkers chuckled at the
on interest for the debt left us
changes. The same is true
by earlier Congresses.
today. Given the complete
breakdown in spending disci-
pline in Congress, it's time
26
that we insist on compensat-
ers. Finally, I believe we can
my agenda.
ing reforms that give the peo-
restructure and reduce the
ple a bigger say in the direc-
size of the Executive Branch
I also am committed to re-
tion of Federal Government
through a consolidation of
ducing the tax burden on the
spending. I say it's time to give
agencies and bureaus that will
American people. I have said
the people the power to cut the
enable us to do our job better.
that I will propose to further
deficit.
Why should the Federal
reduce taxes across-the-board,
Government be the only large
provided we pay for those cuts
The size and structure of
organization in America that
with specific spending reduc-
the Government also needs to
continually adds size and of-
tions that I consider appropri-
be slimmed down and
fices, and never gets rid of
ate, SO that we do not increase
changed. The organization of
anything? Therefore, I will
the deficit.
the Federal Government
submit a streamlined reorga-
reflects ways of doing business
nization plan for the Executive
To illustrate the kinds of
that are now 30 to 50 years
Branch to the new Congress -
tax cuts we could achieve if we
old. Companies all across
and I hope they take the hint,
discipline spending: just con-
America have been restructur-
too.
sider what we could do if
ing, cutting costs, becoming
Congress acted on the $132
more efficient - preparing to
Let me give you an exam-
billion in specific spending re-
be more competitive in a fast-
ple. In many respects, the
ductions that I have already
changing marketplace. I be-
Arms Control and Disarma-
proposed. These savings alone
lieve the Federal Government
ment Agency, or ACDA, is a
could finance an across-the-
can and should do the same
creature of the Cold War. It
board rate cut of 1 percent, a
thing. I believe a streamlining
needs to adapt to the times. Its
reduction of the small busi-
of the Federal Government
highly trained scientists and
ness tax rate from 15% to 10%,
should include three elements:
engineers are a valuable re-
an increase in small business
source. Some of them can sup-
expensing of investment in
First, I will cut the operat-
port our efforts to stem and re-
equipment, and a reduction of
ing budget of the Executive
verse the proliferation of
the capital gains tax.
Office of the President by 33%
weapons of mass destruction.
if Congress agrees to subject
But others may be well suited
In sum, my direction is
its operations to a cut of the
to work at weapons destruc-
clear - I want to spend less
same size. With fewer
tion and defense conversion -
and tax less. My opponent
Congressional staffers badger-
transforming the genius of
wants to spend more and tax
ing the Executive Branch, I
modern day swords into 21st
more.
know we can cut costs by that
Century plowshares.
amount. Second, I believe all
I believe the Federal
federal employees earning
Multiply this idea by a
Government can reallocate its
above $75,000 a year should
hundred, or even a thousand,
almost $1.5 trillion in spend-
be subject to a 5% pay cut;
others. We can get rid of some
ing more effectively if we im-
other Americans have tight-
tasks, conduct others more
plement my agenda. The re-
ened their belts, and SO should
efficiently, and add new ones
ductions in defense spending
the better-paid federal work-
where appropriate to support
that we have already begun
27
will provide some of these
members - all 150 or more -
funds, and I don't want them
before they are besieged by the
"Between the
wasted in a torrent of new
special interests and perma-
spending programs designed
nent staffs.
election and the
by a horde of special interests.
I also believe we need to
convening of a new
I honestly believe that this
take another step to ensure
Congress, / will lay out
is the only way to get the size
that the new Congress does
and spending of Government
not become like the old one.
an implementation plan
under control. I know that se-
The root of the present prob-
for my agenda. / intend
rious-minded people believe
lem is political contributions
we need to increase revenues
from organized special inter-
to be ready to present
to close the deficit. But it won't
ests through political action
the new Congress a
work. I have seen too many
committees, or PACS. In the
times that efforts to close the
run up to the 1980 elections,
first-year plan to carry
deficit by increasing taxes
PACs raised and contributed
have only turned out to give
$55 million to political candi-
out the legislative
Congress a license to spend
dates. In the same time period
proposals described in
more money. There's a reason
before the '90 elections, PACs
for, this. Spending is power for
spent about $160 million. The
this agenda."
Congressmen. That's how they
other party doesn't want to do
show influence, and placate
anything about it, because
their friends, the interest
they are the biggest recipients.
groups. If you give Congress-
I want to put them to the test.
men more tax money, they will
I want a new Congress to stay
spend it.
clean. So an important part of
my new legislative agenda will
be a simple bill to abolish
XI.
PACs subsidized by corpora-
A Strategy for
tions, unions, and trade
Implementation
associations.
This year is an important
I am committed to making
turning point for the United
my program work with Con-
States. We are entering a new
gress. Between the election
era, and for the first time in
and the convening of a new
many years, it appears that
Congress, I will lay out an im-
Congress will have 150 new
plementation plan for my
faces for the President to work
agenda. I intend to be ready to
with. That's why I'm asking
present the new Congress a
for a mandate for my program.
first-year plan to carry out the
That's why I have promised
legislative proposals described
that I will meet with all new
in this agenda:
28
A radical overhaul of
structure, ensure functions
implement my educational re-
American education to em-
fit new needs; and cut
forms while Congress has
phasize excellence, stan-
salaries at higher levels
stalled. We can get a great
dards, competition, entre-
deal done at the state and
preneurial schools, and a
local levels.
Reform of our legal system
"G.I. Bill for Kids" that
will give parents a choice
I will work with governors,
of schools
A package to clear away
state legislatures, local gov-
crime, build business, and
ernments, and the private sec-
My job training programs
put people to work in our
tor to pursue my agenda.
inner cities
While I want a Congress that
can help me do. the job, I'm
My health care reforms
An expansion of Civilian
committed to getting the job
R&D linked to new appli-
done one way or the other.
A package to cut spending,
cations
including a cap on the
growth of mandatory
Ban on PAC contributions
spending, a taxpayers'
"checkoff" to reduce the
debt, a line-item veto, and
Limits on Congressional
a balanced budget amend-
terms
ment
Now I know I may not be
able to get everything I want
Tax cuts paid for through
in the exact way I want it. But
spending reductions and
your support for a mandate to
growth, including reduc-
get it done would give me mo-
tions to spur entrepre-
mentum. I intend to fight for
neurial capitalism and
small business
this agenda, fight as hard as I
can to get as much as I can,
and then come back again to
NAFTA
get more.
New trade negotiating au-
If Congress hesitates on
thority SO we can conclude
some fronts, I intend to keep
new Free Trade Agree-
moving forward. You have
ments across the Atlantic,
seen that we can implement
the Pacific, and in our own
back-to-work welfare reform
hemisphere
by granting waivers that en-
able the states to do the job
more effectively. Similarly, 44
A Government reorganiza-
states and more than 1700
tion plan to streamline the
communities have started to
29
This is my Agenda for
believe people should sue each
American Renewal. With the
other less and care for each
"With
end of the long Cold War, we
other more. I want Govern-
the end of the
can target peace, prosperity,
ment to spend less and tax
long Cold War, we can
and promise at home. The
less. I will fight without hesi-
American people want that.
tation for a free and fair flow
target peace, prosperity,
The American people deserve
of trade, capital, and ideas
and promise at home.
that.
around the world. I believe
America should compete, not
The American people
At the same time, Ameri-
retreat.
want that. The
cans recognize that the great
events of recent years have
I know times have been
American people
shaken the world, and it will
difficult for too many
deserve that.
never be the same. If we are to
Americans. I have sought to
succeed as a nation and as a
explain the causes of these
people, if we are to hold true to
problems and what I will do
all that has made America
about them. Of course you will
"the last, best hope of earth,"
have change. The question is
then our renewal at home
what kind of change. You face
must at the same time enable
a serious choice. And I ask,
us to make the 21st Century
when you step into that voting
another American Century.
booth, please consider careful-
ly which candidate's agenda
My Agenda draws together
for change fits best with your
our people and our Govern-
beliefs, America's experience,
ment to take on this challenge.
and our hopes for lasting
We will create a $10 trillion
peace and prosperity.
economy. We will renew
America. We will win the
peace.
My approach to this chal-
lenge is fundamentally differ-
ent from my opponent's. I
want to stimulate entrepre-
neurial capitalism. I want to
help people by enabling them
to make their own decisions
about health, education, job
training, and child care from a
variety of competing alterna-
tives. I want to supply services
through the private sector. I
BUSH
QUAYLE
92
1030 15th Street, NW
Washington, DC 20005
Paid for by Bush-Quayle '92 General Committee, Inc.
THE WHITE HOUSE
office of the Press Secretary
(Detroit, Michigan)
September 10, 1992
For Immediate Release
REMARKS BY THE PRESIDENT
TO THE DETROIT ECONOMIC CLUB
Cobo Hall
Detroit, Michigan
1:00 P.M. EDT
THE PRESIDENT: Thank you all very, very much. Good
morning to everyone. And, Governor Engler, I'm proud to be with you,
sir, and thank you for that kind introduction. Greetings to Chick
Fisher, your Chairman, and Jerry Warren, both of whom have been most
hospitable to me. I've been here several times before this most
distinguished American forum and I'm delighted to be back.
This morning I am here for a very serious speech,
serious business. And I'm releasing today an agenda for the American
renewal. And I've come here today to introduce it to you and to the
nation.
My agenda diagnoses the economic problems our nation
faces, lays out the principles that should guide us in the years
ahead, and explains the integrated approach that I am pursuing to
meet the challenge.
Over the past weeks I have been discussing certain
elements of my economic agenda, and in the weeks ahead I will be
expanding on those and other ideas. The document that I'm releasing
today shows how the pieces all fit together.
But let's begin this morning by stepping back, taking
stock of where we are as a great nation in the broader sweep of
history.
The American people have just completed the greatest
mission in the lifetime of our country -- the triumph of democratic
capitalism over imperial COMMUNISM.
Today, this year, for the first time since December of
1941, the United states is not engaged in a war, hot or cold.
Throughout history, at the close of prolonged and costly wars.
victors have confronted the problem of securing a new basis for peace
and prosperity. The American people recognize that we stand at such
a watershed.
We sense the epic changes at work in the world and in
the economy, the uneasiness that stirs the democracies who served as
our partners in the long struggle.
We feel the uneasiness in our own homes, our own
communities; and we see the difficulties of our neighbors and friends
who have felt change most directly.
And we know that while we face an era of great
opportunity, we face great risks as well -- if we fail to make the
right choices, if we fail to engage this new world wisely.
But America has always possessed unique powers, and
foremost among them is the power of regeneration -- to transform
MORE
uncertainty into opportunity. only in America do we have the people,
the talents, the principles and ideals to fully embrace the world
that opens before us.
For America to be safe and strong, we must meet the
defining challenge of the 1990s: to win the economic
competition -- to win the peace. We must be a military superpower,
an economic superpower, and an export superpower.
My agenda for renewal asks that we look forward -- to
open new markets, prepare our people to work, strengthen our
families, save and invest so that we can win. our renewal depends on
economic growth -- but growth not for the few at the expense of the
many, not for the present at the expense of the future.
In our country we've always prized an entrepreneurial
capitalism that grows from the bottom up, not the top down; a
prosperity that begins on Main street and extends to Wall Street --
not the other way around.
That's the lesson I learned as a young man, packed up a
Studebaker and moved to Texas after another war, at the start of
another era. I saw jobs, prosperity -- an entire future -- built
with the hands of ordinary men and women with extraordinary dreams.
our nation has never been seduced by the mirage that my
opponent offers -- of a government that accumulates capital by taxing
it and borrowing it from the people -- and then redistributing it
according to some industrial policy. We know that the clumsy hand of
government is no match for the uplifting hand of the marketplace.
MY international economic and trade strategy will
guarantee our position as an export superpower, extending our global
economic reach in tandem with our security presence -- to stretch
beyond our borders so that we can create more jobs within our
borders.
At the same time, we need to foster at home the
capabilities that will keep us in the lead: radical changes in our
education system to prepare our children for a constantly changing
workplace; incentives for the entrepreneurs and new technologies to
sharpen our competitive edge; job training, health care reform, to
promote the economic security of our working men and women; and new
approaches for reaching out to those who have been left behind,
since in the century ahead we will need the talent and the energy of
every single American.
And finally, because our greatest strengths flow not
from government but from the personal initiative of free men and
women, my agenda aims to check the growth of government, and, in some
important ways, to reverse it. Together, the components of this new
agenda should renew America according to her most cherished
principles.
And this renewed America will be empowered toward a
grand goal: to nearly double the size of our economy, to $10
trillion, by the early years of the next century.
To place this agenda in a larger context, let me turn
briefly to five profound changes now at work in our economy. when
Americans gather around the kitchen table at night and talk about how
they' 11 meet a mortgage, or pay the doctor's bill, they' re feeling
these changes in their daily lives. And before the changes have run
their course, they will have forever altered the way Americans buy
and sell, work and create.
The first great change in our economy is ironically
caused by our very success in ending the Cold war. In the short
run, deductions in defense spending have meant painful lay-offs in
MORE
- 3 -
many industries, and we are taking steps to ease this transition.
But in the medium and long run, deductions in defense spending will
free up priceless skills and technologies for peacetime growth.
second, most of our industries are transforming
themselves from old-style hierarchies into flatter organizations.
with fewer layers between customer and executive. The new
organizations emphasize a skill-based workforce, "lean production,"
and shorter production cycles. From castings to computers, this is a
revolution as dramatic as the one made earlier this century, when
Henry Ford led the country from craft-based production to mass
manufacturing.
While these changes are essential to maintaining our
competitive edge, they come with a cost; everyone in this room
knows that -- lay-offs, cutbacks among both white- and blue-collar
workers. These hard-working people need reassurance -- not only
about their economic security, but about preserving the sense of
self-worth that only work can provide. The third change: while the
1980s brought us the greatest peacetime expansion in our history, the
boom also led too many of us to take on too much debt.
We have been paying that down, that debt -- and lower interest rates
have helped us do it. The process is largely over, but consumers and
companies remain cautious.
The fourth change involves our financial system. We
entered the '80s with a 50-year-old banking system, designed for the
days when tellers wore green eye-shades, not for an era when billions
-- billions of investment dollars can cross borders at the speed of
light.
In the late '70s, record interest rates and inflation
rates rocked this anachronistic system. The less efficient
institutions could not survive, obligating the federal government to
protect the savings of millions of Americans.
Now, this process of paying debt down is nearing its
end. Our financial system will become more flexible and efficient.
But for now, lenders are cautious and, despite low interest rates,
small business still can find it hard to get the credit.
But the most far-reaching of these five changes is the
emergence of a global economy. No nation is an island today. one
out of every six manufacturing jobs is directly tied to exports. The
crops sown from one out of every three acres of farmland are sold
abroad.
Consider some implications of the global economy: when
growth slows abroad, as it has recently, our own growth slows as
well. And America will only grow in the next century if we can
compete globally -- in every part of the world. so we must seize
every opportunity to open new markets, particularly those with the
greatest potential for expansion.
Now, in drafting an agenda for America's future, we had
to assess our strengths as well as our weaknesses. Conveniently, the
other side has discovered many weaknesses and very few strengths.
And, of course, they might find temporary political gain in
portraying an America as past her prime, over the hill. But they
have no more right to argue, for partisan purposes, that our economy
is weaker than it is, than I have to understate our problems.
Our strengths are real. NOW, here are some facts. The
Misery Index -- the sum of inflation and unemployment -- is 10.8
percent, down from 19.6 Percent in 1980. Inflation stands at about
three percent. Interest rates are at a 20-year low.
The purchasing power of Americans gives us the highest standard of
living in the world. We enjoy the highest home ownership rate of all
major industrialized countries. And we send 68 percent of our
- 4 -
children on to higher education -- more than any other country -- and
well above Germany's 32 percent and Japan's 30 percent. And with 3
percent of the world's population, we produce 25 percent of the
world's total output -- and 37 percent of its high-tech products.
Now, I don't mean to suggest that all is well -- that we
don't need to lead and manage the changes that are transforming our
economy. But you can't chart the stars if you think the sky is
falling down. Over the past 12 years we have almost doubled the size
of our economy. It's as if we'd created two extra economies the size
of Germany's from scratch.
And how will we meet our goals? Before you hear the
specifics of this agenda, let me tell you a little bit about what I
believe -- because change, if it is to be a force for good, Bust be
guided by principles. And the principles that must guide change are
the principles that never change.
I believe we are a nation of special individuals, not
special interests. Individuals draw their enduring strength from
their families, from their neighbors and communities, not from the
government. so I believe we must never ask government to do what
families and neighbors and individuals can better do for
themselves -- and for one another.
I believe -- because I've seen it economic growth
comes from the small businesswoman who takes a risk on a new product,
from the computer hacker working in a garage, in a cluttered way;
from the merit scholar in South L.A., South Central L.A. with a
future as big as his dreams.
And I believe government owes it to them, and to you, to
keep tax rates low and make them even lower; to keep money sound; to
limit government spending and regulations; and to open the way for
greater competition, and freer trade.
But I do not believe. as some might, that government's
obligation ends there. As a conservative I believe that government
can help people -- offer them hope and opportunity -- by giving them
the means and the confidence to make the decisions that matter in
life.
My background has also prepared me for the task of
bringing our foreign policies and our domestic policies together; to
turn our strength as a world power to our advantage as an economic
power; to match the security we feel militarily with the economic
security that we must build at home. From now on, if America is to
lead the world, we need a leader who knows the territory.
MY agenda for American renewal calls for action on six
interconnected fronts. There's no single cause of our present
situation. There can be no single cure. The whole of our agenda
will be -- must be -- greater than the sum of its parts.
First, challenging the world. During the Cold war, we
built a global security structure with military alliances across the
Atlantic and the Pacific. And in the same way, the post-Cold war era
requires a strategic economic and trade policy -- global in scope,
and built on our foundation as an economic and export superpower.
we are uniquely positioned to achieve this goal. As the
largest fully integrated market in the world, we wield leverage with
other countries that want access to our market. As both a Pacific
and a European power, we are tied to the largest and most rapidly
growing economies across both oceans. And as the strongest nation in
our hemisphere, we are looked to for leadership by free economies
emerging from Chile all the way up to Mexico.
- 5 -
The same holds true for the newly born economies of
Eastern Europe and the former soviet Union, where our values, our
products, even our language, carry a unique appeal. In MOSCOW today,
the lines at McDonald's are longer than the lines at Lenin's Tomb.
The key to America's growth, expansion, and innovation
has always been our openness to trade, investment, ideas, and people.
AS this openness is at last being reciprocated around the world, we
find ourselves again at a special advantage.
The next steps in my strategic trade policy are to
secure congressional approval of the North American Free Trade
Agreement and to complete the global trade negotiations, the GATT
round, creating high-wage American jobs and expanding the pool of
customers hungry for the fruits of American labor.
Let me emphasize: these agreements are steps, not ends
in themselves. And 50 I want to announce today that it is my goal to
develop a strategic network of free trade agreements -- with Latin
America; with Poland, Hungary and Czechoslovakia; and with countries
across the Pacific. And then, as these external barriers fall, I
believe we can help reduce internal barriers to competition as
well -- in North America, Western Europe, Japan, and elsewhere.
Greater competition will encourage entrepreneurial capitalism at the
expense of government power and entrenched interests, spurring
unprecedented economic growth.
Traveling around the country I've seen it happen already
-- particularly in some small businesses, as they strengthen
themselves for international competition. A couple of weeks ago, in
St. Louis, I visited Public safety Equipment -- they're a company --
they make the light-bars that you've seen on police cars. The
president of Public safety told me that a few years ago. they
recognized they could no longer just sell their products in 50
states, leave it at that. And so they took on the world. And now 35
percent of what they make is sold in 48 countries, creating good jobs
right here in the United States of America.
Public safety, and the hundreds of thousands of
companies like it, offer a glimpse into the future I see for all
American business. But a business is only as efficient. as resilient
as innovative, as the people who keep its books and build its
products and devise its strategy. Materials, machines, methods --
they'll come and go, but the American worker will remain the key to
our economic security.
That brings me, then, to the second part of our agenda:
preparing our children.
The workplace of the 21st century will be constantly
changing. I've heard that from many businesspeople sitting right
here at the tables in this hall. We must prepare the American people
for a lifetime of learning, to keep a step ahead of that process of
change. Now, developed nations need developing minds. The burden
will fall on our educational system. As in the past, education
should be the ladder that children can climb to better themselves.
our current school system is not up to the task.
Designed for the 19th century, it will collapse under the weight of
the 21st. And our educational establishment is caught in the same
time warp, where standing still means falling behind.
Money alone is not the answer -- the United states
already spends more per pupil than any other country but Switzerland.
The answer is a radical overhaul of the system itself. If we want to
chance our country, we've got to change our schools.
The catalyst for change -- the one reform that drives
all others -- is school choice, giving children scholarships so that
- 6 -
all parents have the freedom to choose which schools will best serve
their children. Competition 1s the principle that must underlie
education reform, to break the establishment's monopoly on the
system. And competition will not work unless parents are allowed to
choose their children's schools -- whether it's the public school
across town or the parochial school across the street. (Applause.)
Consider just one statistic: in Chicago, 46 percent of
public school teachers send their children to private schools.
Clearly they know something about monopoly education that my opponent
doesn't. Our different approaches to education reform reveal the
grand canyon that divides me and my opponent. You see the same
contrast in child care, or health care, and a host of other issues.
My opponent prefers uniformity to variety and choice, relying on
these government bureaucracies to offer "one-size-fits-all service."
I don't want to pull everyone down to make everyone equal. I want to
give everyone the tools to climb as high as they can dream.
Even as we fix our schools, the question remains: will
there be good jobs for the kids? And that's the third part of my
agenda: sharpening businesses' competitive edge. I learned my
economics the way most of you did -- a lot of late nights sweating
over a balance sheet, or P & L statement, trying to meet a payroll.
And I saw that if people are allowed to keep more of what they
produce, they will produce more. It's common sense.
When capital is taxed lightly, there's more of it. And
when 1t is taxed heavily, it becomes scarce -- available only to
those who are already wealthy, who need it least of all. That's not
the kind of economy that I want.
And if capital were more abundant, labor would be more
in demand, wages would rise, unemployment lines would shrink. That
is the kind of economy that I want. And that's why I want enterprise
zones in our inner cities and in our rural areas. That's why I want
to make this research and development, this R & D tax credit
permanent. And that's why I want to cut the capital gains tax and
index it for inflation. (Applause.)
Those are the fundamentals. I also see three other ways
to sharpen the competitive edge of American business:
-- first, strengthening small business, by cutting
taxes, making sure that credit is available, and by
lifting the deadweight of government regulation;
-- second, supporting civilian R & D, by bringing the
development, production and marketing of technology
closer to the consumer;
-- and third, reforming our legal system. Every year
American business and consumers spend up to $200 billion just in
direct costs to lawyers -- far more than our competitors in Japan and
Europe. And my product liability reform and access to justice act
will restore rationality to the system and stop undermining the
American worker. (Applause.)
This is a fact: We w1ll never lead the world in the
21st century until we learn to sue each other less and care for each
other more. (Applause.)
The fourth part of my agenda: promoting economic
security -- for working men and women.
Again, common sense shows the way: true security will
come only by developing individual capability, not dependency. And
that independence, in turn, comes through the private sector, not the
government.
- 7 -
Government's role will be to ease individuals'
adjustment to a fast-changing marketplace. The average worker today
will change jobs, it's estimated, 10 times over the course of his or
her working life.
so we need a wider and more flexible range of job
training and placement services -- for both the young and old, the
blue and white-collar worker, and now especially for our workers from
the defense industries.
Pensions must be portable -- and health care must be
affordable. Our health care system today, I think everyone here
would agree. provides the best care, but at an unacceptable price.
More than thirty million Americans have no health insurance. Health
care costs are the fastest-rising part of our budget for government,
businesses, and yes. families.
My reforms get to the base of these problems while
preserving and building on our system's strengths -- our state-of-
the-art care, openness to innovation, and consumer choice. Taken
together, my reforms cut health care costs by S394 billion over five
years.
MY opponent's plan could eventually place a full 13
percent of our economy under the control of the federal
government -- meaning more bureaucracy, rationed care, inefficient
service and. in the end, higher costs.
we must enhance competition and market forces, not
restrict them; we must preserve individual choice, not hand decision-
making over to centralized bureaucracies; we must reduce the burden
on employers and employees, not bury them in a tide of new taxes and
government regulations. (Applause.)
The programs I've outlined and that are detailed in this
agenda are based on the principles that will empower all Americans to
make their own choices and better their lives. But I believe we need
to do more for some of our citizens who have been left behind. And
that is the fifth component of this agenda: leaving no one behind.
The American Dream is nothing more than the belief that
all Americans can make a better life for their children. The dream
has made us the most dynamic society in the world; it's yet another
strength we can draw upon for the challenge ahead. And so we must
give every American a shot at making good on the dream.
And I reject the shopworn logic that sees poverty as a
simple lack of income -- a kind of economic shortfall that can be
replaced with a government check. A conservative philosophy of
empowerment must have at its foundation the creation of character,
through the ownership of property, through the dignity of work. That
means sweeping away the nightmare of crime from our cities. building
a core of property owners, creating business incentives, and making
individual discipline and self-reliance the goal of all of our
programs
I call the final component of my agenda -- "rightsizing
government."
You'll recognize that I take the term from the business
world -- which has a lot to teach those of us in government. At a.
time when companies across the country have been restructuring,
increasing efficiency -- all to prepare for the economic competition
of tomorrow -- the federal government faces an obligation to do the
same. (Applause.)
Today the federal government spends nearly twenty-four
cents of every dollar -- twenty-four cents of every dollar of the
nation's income. And that's the fact: government is too big and
- 8 -
spends too much. The size and structure of government are relics of
a different age -- artifacts more suited to the dilemmas of 50 years
ago than the problems of today. Every institution in our society has
learned that by pushing power down through organizations, by using
technology to speed the flow of information, you don't just save
money, you improve productivity. It's time for the government to do
the same.
I will streamline government -- consolidating agencies,
tightening budgets, and cutting the salaries of highly paid federal
employees. And I'll start by cutting the White House budget 33
percent if the Congress cuts its own budget by the same amount.
(Applause.) You might say: Why the linkage? well, with fewer
congressional staff badgering us for endless reports and endless
visits to Capitol Hill, I know we can cut costs by that amount.
(Applause.) And I'll cut the salaries of all federal employees
earning more than $75,000 by 5 percent. Taxpayers have tightened
their belts. The better-paid federal workers should do the same.
The agenda I publish today contains specific proposals
to cut the fat: a cap on the growth in mandatory spending --
without touching social security -- and a freeze on domestic
spending; a balanced budget amendment, a line-item veto -- (applause)
-- and a new mechanism -- disciplinary mechanism -- a check-off box
on tax returns to give the taxpayer the power to cut the deficit. I
will fight to reduce spending and spur growth so we can get this
budget in balance.
And unlike my opponent, I do not believe the American
people are undertaxed. Quite the opposite: I am committed to cutting
taxes across the board. And let me offer an example -- this is just
an example -- as an illustration of what we could do: My cap on the
growth of mandatory spending allows for population growth and
inflation. It specifically exempts Social Security. But that cap
alone, with those caveats, would save about $300 billion over five
years. If we used just $130 billion in specific spending cuts that I
have already proposed -- specific spending cuts of $130 billion that
I have already proposed -- we could cut income tax rates by one
percentage point across the board; reduce the small business tax rate
from 15 percent to 10 percent, and reduce the tax on capital gains.
That's the direction that I want to go: tax less, spend
less, cut the deficit, and redirect our current spending to serve the
interests of all Americans. I honestly believe that this is the way
-- the only way -- to control the size of the federal government.
The facts are painful, but plain: For congressmen, spending is
power. And they will exercise that power until they have spent every
last dime they can squeeze from the working men and women of America.
And it's as simple as this: raising taxes won't cut the deficit.
Here, then, is my agenda for American renewal. It comes
at a time unique in our history, a turning point, a moment when one
era is passing away and another is being born.
In the agenda published today, you'll find 13 proposals
that I intend to achieve in the first year of my second term. I
present them as a single program, a unified strategy to make change
work for America.
over the last three years I've shown how America can
change the world; and we've made a respectable start managing the
change at home. Our primary task now is to target America.
I intend to fight for this agenda, to fight as hard as I
can. with a new Congress that can have as many as 150 new members, I
am optimistic. If congress balks, will move forward anyway -- just
as I have done with education, regulatory and welfare reform. I'll
work with our great governors, like John Engler, with the state and
local governments, with the private sector -- with anyone who shares
the urge to renew our country.
The American people know that the events of recent years
have shaken the world. with the close of the Cold War we can achieve
peace, prosperity and promise at home. The American people want
that. The American people deserve that.
And I want America to seize this moment. I want to
stimulate entrepreneurial capitalism, not punish it; I want to
empower people to make their own choices, not yoke them to new
bureaucracies. I want a government that spends less, regulates less,
and taxes less. And I will fight without hesitation for a free flow
of trade and capital and ideas around the world -- because Americans
never retreat -- we always compete. (Applause.)
My agenda draws together our people and our government
to meet this challenge. We will create a $10-trillion economy. And
we will renew America. And we will win the peace. (Applause.)
I know that times have been very, very difficult for
many Americans. The world that we knew as children -- no matter your
age -- will never be the same. America will change -- that's our
destiny; how it will change will soon be decided.
I ask, as you consider the choice that you face, to
consider carefully whose agenda for change best fits America's
principles, our national experience. and our hopes for lasting peace
and prosperity.
Thank you for your attention. And may God bless our
great country. Thank you. (Applause.)
END
1:40 P.M. EDT
THE WHITE HOUSE
WASHINGTON
September 10, 1992
MEMORANDUM FOR THE DOMESTIC POLICY
REFORM BREAKFAST GROUP
FROM:
DEAN SCHULTHEISS
Dear
SUBJECT:
Upcoming Breakfasts
Along with the passing of summer comes the renewal of our
Friday breakfast series. We will be meeting again every Friday
starting tomorrow, September 11. Hopefully you haven't gotten
too accustomed to sleeping in!
The first item of importance is that we are once again able
to hold our breakfast in the West Wing. Beginning tomorrow,
please come to the Ward Room on the Ground Floor of the West Wing
-- do not go to room 22. As in the past, we will commence at
7:45 and be finished by 8:45 to allow for people to make their
morning staff meetings.
Secondly, with regards to Mess bills, those of you who have
accounts will again be billed individually. Those without will
have their meals billed to Diana Furchtgott-Roth's account. We
will no longer have a continental style breakfast with standard
fee SO everyone is on their own. Therefore, if you don't have an
account, you will need to keep track of your orders and
compensate Diana accordingly as she does not receive an itemized
bill from the Mess. If you need help figuring your bill, please
feel free to contact me on 456-2471.
Finally, our speaker tomorrow is Charles Cooper, an attorney
with the D.C. law firm Shaw, Pittman, Potts and Trowbridge and
also a former assistant attorney general during the Reagan
Administration. He also headed the Federalism Working Group that
produced the Federalism Executive Order. Mr. Cooper most
recently received attention in making a case for the President to
instruct the Treasury Department to index capital gains for
inflation as a way of surmounting the impasse with Congress over
this issue. Two recent articles are attached for your
information.
We've been in contact with a number of other speakers and
will have a schedule for the next several weeks put together
within a few days.
Wall Street Journal
8-31-1992
Capital Gains Tax and Presidential Power
By CHARLES J. COOPER
President Bush may not be able to
How Indexing Would Work
get Congress to go along with his proposal
to cut the capital gains tax, but there is a
simple action he could take on his own
C
onsider the example of a tax-
had in 1982. The value of his asset has
payer who bought a house for
not increased; ft has merely kept pace
authority to make the tax treatment of
$100,000 in 1982 and sells it for
with inflation. In fact, the taxpayer is
capital gains more equitable. He could
$200,000 in 1992. Under the current tax
worse off than If he had not bought
instruct the Treasury to index capital
regime, he is taxed on a "gain" of
the house, since the tax on its sale
gains to inflation.
Until quite recently Congress has im-
$100,000. If, however, inflation has
will eat into his nominal gain.
plicitly recognized and compensated for
caused the general price level to
If the capital gains tax were
the effects of inflation by giving preferen-
double between 1982 and 1992, the
Indexed to inflation, the taxpayer
tial tax treatment to capital gains, either
taxpayer has not realized any
would be taxed just on that portion of
by taxing them at a lower rate or by
Increase in wealth at all: that is,
the gain above inflation. To use the
partially excluding them from taxable in-
there has been no increase in the
same example, if he sold his home for
come. It recognized that otherwise inves-
value of his house. The $200,000 he
$220,000, he would pay tax on only
tors would often be taxed unfairly on
has in 1992 represents the same
$20,000, the portion of the sale price
income that was attributable in some
significant part to inflation. rather than
purchasing power as the $100,000 he
above inflation.
real income, as the example in the nearby
box demonstrates.
until 1957 neither did Treasury regula-
sources Defense Council. Under Chevron, in
Preferential Treatment
tions. In practice, however, Treasury has
order to reject an executive-branch inter-
While this kind of preferential tax
always interpreted cost to mean the
pretation the courts must decide "whether
status was at best a blunt tool to counter
amount, in nominal dollars, paid at the
Congress has directly spoken to the precise
the effects of inflation, it was nonetheless
time of purchase. Regulations issued in
question at issue." There is no doubt that,
recognized as such a tool. It thus largely
1957 formalized this interpretation. Trea-
in the matter of the cost of a capital
obviated, until 1986. the need to establish a
sury's interpretation of cost as purchase
asset. Congress has never spoken.
more accurate counter for inflation, such
price is no doubt a reasonable one. The
Next. says the Chevron decision, "if
as indexation, and the president had no
critical question. however. is whether it is
the statute is silent or ambiguous with
pressing need to take up this issue.
the only reasonable interpretation.
respect to the specific issue, the question
In 1986, however. the Tax Reform Act
Under our system of separated powers.
for the court is whether the agency's
ended preferential treatment for capital
the executive branch has the initial re-
answer is based on a permissible construc-
gains. taxing them at the same rate as or-
sponsibility of interpreting the laws that
tion of the statute." It is permissible, the
dinary income. Although bills providing
Congress makes. Unless clearly forbidden
court said last year in Rust L. Sullivan. as
for indexing have passed at different times
by Congress. Treasury can interpret the
long as "it reflects a plausible construction
over the past decade in both houses of
Tax Code to define cost as adjusted for
of the plain language of the statute and
Congress. none has been enacted.
inflation; that is, it
does not otherwise
It is not surprising. then. that the
can index capital
conflict with Con-
question of the president's regulatory
gains.
Unless clearly forbid-
gress' expressed in-
authority to index capital gains has only
It is important to
tent."
recently come into sharp focus. Earlier this
stress that the ques-
den by Congress, Treasury
Construing cost to
summer I was asked by the National
tion at hand is not
whether a court
can interpret the Tax Code
include the effect of
Chamber Foundation and the National
inflation is at least as
Taxpayer: Union Foundation to examine
would conclude that
to define cost as adjusted for
plausible as Trea-
the issue. Despite initial skepticism. I have
indexation is re-
concluded that the president has the legal
quired under the Tax
inflation; that is, it canindex
sury's purchase-
price interpretation.
authority to adopt a regulation indexing
Code. Rather, the
capital gains.
capital gains.
The only difference
question is whether a
between the two in-
The inquiry begins with the Sixteenth
court would conclude
terpretations is that
Amendment. which in 1913 authorized
that a Treasury regulation indexing capi-
the former measures cost at the time the
Congress to "lay and collect taxes on
tal gains was based on a permissible
capital asset is sold, while the latter meas-
incomes." In 1919, the Supreme Court de-
reading of that statute. While Treasury
ures cost at the time the asset was pur-
fined income as including "profit gained
has consistently interpreted the cost of a
chased. Ask any homeowner how much his
through a sale or conversion of capital
capital asset to mean the asset's original
house cost, and he will tell you what he
assets."
purchase price, this definition is not re-
paid for it-and when he bought it.
The "profit" or "gain" as defined by
quired by law. Nothing in the legislative
Even so, a new Treasury regulation
the Tax Code is the "excess of the amount
history of the past 75 years suggests that
changing the definition of cost from nomi-
realized [from the sale or other disposi-
Congress intended to deny Treasury this
nal dollars to inflation-adjusted dollars
tion of property] over the adjusted basis."
sort of interpretive discretion.
would certainly be a sharp departure from
The "basis" of the property is defined
The right of executive branch agencies
past practice, and some have argued that
simply as its "cost." The meaning of the
to "fill any gap left, implicitly or explicitly.
Congress's failure to enact indexing legis-
word cost is the heart of the matter.
by Congress" in a statute was articulated
lation amounts to a de facto ban. Quite
Congress has never defined cost, and
in 1984 in Chevron U.S.A. v. National Re-
apart from the general point - reiterated
Wall Street Journal
by the Supreme Court in Patterson l.
8-31-1992
McClean Credit Union (1989) - that "con-
gressional inaction cannot amend a duly
(page 2 of 2)
enacted statute," the argument is particu-
larly weak here.
Nowhere in the legislative history of
these proposals did Congress address the
precise issue of the meaning of cost, let
alone endorse Treasury's purchase-price
interpretation. To be sure, by failing to
enact the proposed amendments, Congress
elected not to require Treasury to index
capital gains. But Congress in no way
indicated that Treasury was not permitted
to do so.
In other words, if Congress left any
gaps in the statutory meaning of cost prior
to its consideration of indexation amend-
ments, those gaps were not closed when
it failed to exercise its own discretion to
amend the statute. By failing to fill
in the gap in the meaning of cost, Congress
did not extinguish Treasury's discretion to
do so. Again, the Supreme Court has made
it abundantly clear that executive-branch
agencies are entitled to considerable defer-
ence in interpreting statutes they adminis-
ter.
In Rust v. Sullivan the Supreme Court
upheld the new Health and Human Serv-
ices regulations forbidding clinics that
received federal money from offering
abortion counseling. That such regulations
" 'reverse a longstanding agency policy
and thus represent a sharp break from
the secretary's prior construction of the
statute" was deemed insufficient grounds
for forbidding them. Under Chevron, it
said, HHS was entitled to modify regula-
tions so long as the change was supported
by a "reasoned basis."
A Reasonable Interpretation
In short, Congress has for more than
seven decades left undefined the term
"cost" in the capital gains section of the
Tax Code. The traditional definition of cost
as the nominal dollars spent at the time of
purchase can be changed by the Treasury
to reflect a more realistic method of com-
puting the "gain" that an investor reaps
from the sale of his property. This is at
least as reasonable an interpretation of
cost as the one traditionally used, and thus
entitled to deference by the courts.
The president can correct this serious
deficiency in the way our tax laws are
applied today, if he wishes. And if Con-
gress objects, it can pass a law outlaw-
ing indexing.
Mr. Cooper, a Washington attorney,
was an assistant attorney general in the
Reagan administration.
WALL ST.J.:09/04/92
Capital Gains, as Seen by Congress in 1918
By CHARLES J. COOPER
plain and simple. But if one reads on, the
original cost downward for depreciation.
Can the president order the Treasury
debate gets more sophisticated. and both
despite the fact that "none of the Revenue
Department to index capital gains to infla-
Reps. Fordney and Kitchin acknowledged
Acts provided" for such an adjustment.
that in measuring taxable gain on the sale
The court explicitly rejected the tax-
tion? I outlined the legal argument for that
position in an article on this page Monday.
of property. costs in addition to purchase
payer's argument that cost is limited to
The Justice Department. however. in con-
price are included.
purchase price.
sidering whether the president has that
For example, Rep. Fordney stated:
In short, if the House's rejection in
legal authority. believes the answer is
"If you bought a piece of property five
1918 of an amendment expressly including
"no," citing the 1918 House debate on the
years ago for $100,000. and you sell it today
the cost of improvements in an asset's cost
for $25,000 more than you paid for it. your
basis did not extinguish Treasury's inter-
Revenue Act.
profit over and above the purchase price is
pretive discretion to do so. it is difficult to
In that legislation. Congress defined
$25,000. and you have a profit of $25.000.
see how its rejection of Rep. Hardy's
the "basis" for measuring capital gains as
Now. you may charge up against the
proposal to delete the capital gains provi-
the "cost" of capital assets. Some adminis-
$25,000 profit the taxes which you have
sion extinguished Treasury's interpretive
tration lawyers argue that the comments
paid on that property at the time you
discretion to include in the concept of cost
of the legislators back then make it clear
purchased it until the time you sold it, or
an item such as inflation. As the Supreme
that Congress understood cost to mean the
you may charge up any other expenses
Court recognized just last year in Rust l'.
asset's purchase price. It follows, they
which you have been put to in maintaining
Sullivan: "It is well established that legis-
conclude, that Treasury has no adminis-
or looking after that property. and the net
lative history which does not demonstrate
trative authority to interpret cost to in-
profit is the difference between all those
a clear and certain congressional intent
clude anything other than purchase price,
costs and the price you obtained for
cannot form the basis for enjoining the
such as inflation.
it." Later in the debate. Rep. Fordney
regulations."
Specifically, they cite the debate sur-
added the interest paid on a mortgage to
Which brings us to this final point: If
rounding a Rep. Hardy's proposal to delete
the list of costs of the capital asset.
there are responsible legal arguments on
the capital gains provision entirely. Hardy
Equally illuminating are Rep. Kitchin's
both sides of the issue, shouldn't the
objected to the capital gains tax on several
comments concerning a proposed amend-
lawyers retreat from the field and free the
grounds. including the unfairness of tax-
ment requiring that the cost of improve-
president to make the decision that. in his
ing inflationary gains. As he put it, "In
ments to property. among other things, be
view, best serves the nation's interests?
simple principle and policy, a piece of
included in determining the property's
property bought in 1913. if its exchange
cost basis. The proposed amendment was
value today is to be equal to its exchange
rejected. but not because of disagreement
Mr. Cooper, a Washington lawyer, was
value when it was bought, must bring in
on the proposed treatment of improve-
an assistant attorney general in the Reagan
dollars and cents something like two times
ments. To the contrary. opponents of the
administration.
what it cost."
amendment acknowledged that Treasury
While several congressmen spoke in
had always. and quite properly. included
opposition to Hardy's proposal. none dis-
the cost of improvements in determining
agreed with his point about the unfairness
an asset's cost basis. despite the absence
of taxing inflationary gains. And since his
of any statutory provision authorizing such
proposal would have eliminated taxation
an adjustment.
on all capital gains. not just those attribut-
Indeed. Rep. Kitchin cited his own
able solely to inflation, the House's rejec-
experience in selling a farm. noting that
tion of his proposal can hardly be con-
"the permanent improvements that I had
strued as a determination that inflationary
put on were added to the purchase price of
gains should be taxed.
my farm" in determining its costs for
Some of the comments made in opposi-
capital gains purposes. To punctuate his
tion to Rep. Hardy's proposal. however.
point, he produced the relevant Treasury
echoed Rep. Hardy's comment that taxa-
tax form. which specifically provided that
ble gain is measured by simply subtracting
an asset's cost basis be adjusted for both
the asset's purchase price from its sales
improvements and depreciation.
price. For example. to emphasize his point
The legislative history of the 1918
that an increase in value cannot be
capital gains provision. when read as a
measured until the property is actually
whole, is thus significant for two reasons.
sold. Rep. Kitchin, chairman of the House
First, despite isolated statements implying
Ways and Means Committee. stated: "If
that cost is limited to purchase price, the
you bought a ship in 1916 for $100,000 and
full debate shows that the legislators un-
sell it in 1915 at $200,000 or if you bought
derstood that the cost of a capital asset
Bethlehem stock
in 1915, your income
included items other than the asset's pur-
is the difference between the purchase and
chase price.
selling price and that is the only rule under
Second, the floor debate reflects a con-
which you can administer the law."
gressional recognition that prior to 1918.
Similarly, another opponent of Hardy's
Treasury interpreted the concept of cost to
proposal. Rep. Fordney. argued that the
include items other than purchase price.
value of an investment "is what you
such as improvements and depreciation.
paid for it, and when you sell it this year
No one, least of all Treasury. believed that
the difference between what you paid for it
Treasury's discretion to interpret the con-
and what you get for it is profit, and on that
cept of cost had been extinguished by
you pay an income tax. That is the law. I
passage of the 1918 Act.
cannot make it any plainer than that."
Treasury continued to take account of
These statements are unequivocal. and
economic reality in its interpretation of
if the legislative history of the 1918 Tax
cost. adjusting the property's original pur-
Code ended here, they would indeed pro-
chase price for items such as improve-
vide a firm basis for inferring that at least
ments and depreciation. In a 1927 case
some members of the House understood
(U.S. L. Ludey). the Supreme Court upheld
and intended cost to mean purchase price,
Treasury's authority to adjust an asset's
RGD -- 8/24/92
budyet
PRESIDENT'S PLAN:
QUESTIONS RE SPENDING
Mandatory Cap
terearches
Q.
How much would the President's proposed cap on the growth of
mandatory spending save?
A.
$294 billion over 5 years.
Q.
Does this mean that Social Security would be cut?
A.
The President has specifically exempted Social Security from
both the 5-year cap and from the associated enforcement
mechanism (the sequester that would be triggered if the cap
were exceeded).
Q.
Does the cap require cuts in benefits for poor people,
Medicare recipients (earning less than $100,000), farmers
(earning less than $100,000), or veterans?
A.
No. Such cuts are not required to meet the cap, and the
President has not proposed them. The Midsession Review of
the Budget includes an appendix with a list of options for
meeting the cap. These options are from many sources. Many
of them can be implemented without adversely affecting
benefits for poor people, veterans, etc. (as above).
Additional savings are to be achieved by implementing the
President's health plan. These health savings result from
malpractice reform, administrative reforms, coordinated
care, and competition. Such savings would count toward
meeting the requirements of the cap -- and they would not
reduce health benefits for beneficiaries.
NOTE:
The Clinton health plan says health costs will not grow
"any faster than the average American's income." This
implies about the same rate of growth as would be
called for under the proposed cap. But the Clinton
health savings would be achieved by government
rationing and government price controls -- rather than
by malpractice reform and competition (as in the
President's plan).
Tax Check-off for Debt-and-deficit-reduction
Q.
How much would the tax check-off produce for
debt-and-deficit-reduction?
A.
If all individual income taxpayers elected the full 10
percent, it would reduce the debt and deficit by about $50
billion in the first year.
oi
Does this mean automatic reductions in all programs?
A.
No. It means the legal spending ceilings ("caps") would
automatically be reduced by the amount people check off.
But within those lowered ceilings, Congress and the
President would still set priorities -- raising spending for
some things, lowering it for others, but meeting a total
spending limit that is lowered.
Q. But doesn't this mean draconian cuts somewhere?
A.
The federal budget is at about $1.5 trillion. Savings of
$50 billion would be only 3 percent of that. Federal
spending has been growing at about 8 percent per year. So,
even with the proposed "cut", spending could still grow; it
would just grow more slowly.
New Spending Initiatives
Q. How are initiatives like the new training programs squared
with the proposed restraint on spending?
A. The new training programs are not "entitlements"; they are
discretionary spending. Total discretionary spending is
already subject to an enforceable legal cap. The
President's proposals are intended to be within the total
cap. Initiatives are a reflection of the President's
intended priorities within the cap. (NOTE: The new
training initiatives begin in FY '94. In that year, the
"firewalls" come down; and the cap is on total discretionary
spending. So some domestic spending increases may be offset
by defense decreases -- although others will be offset by
reductions in low-priority domestic programs.)
2
"Specifics"
a
Why hasn't the President proposed specific spending cuts --
in addition to the overall caps?
A.
The President has proposed almost $70 billion in specific
spending cuts for "mandatory" programs (FY 93-97)
(Governor Clinton has specifically proposed less than $5
billion.) The President has also proposed the outright
elimination of 246 specific discretionary programs.
(Governor Clinton has specifically proposed to eliminate
only one such program -- the honey bee subsidy program,
which Senator Gore voted to retain.)
If specific cuts in "mandatory" programs previously proposed
by the President (but not yet enacted) were combined with
this year's specific cuts, they (alone) would total about
$132 billion (over five years).
Relationship to Tax cuts
Q.
Isn't the promise of a tax cut tied to specific spending
cuts a phony -- since specific spending cuts have not been
identified?
A.
More than $130 billion in specific spending reduction has
been identified and formally proposed by the President.
This alone could finance an across-the-board rate cut of one
percent, and a reduction in the small business tax rate from
15% to 10%, and an increase in small business expensing of
investment in equipment, and a reduction in the capital
gains tax.
Additional savings from the mandatory cap and the check-off
(an additional 200-billion-dollars-plus), would be
available for further tax relief and deficit reduction.
3
102d Congress, 2d Session
Economic Indicators
JULY 1992
(Includes data available as of August 4, 1992)
Prepared for the Joint Economic Committee by the
Council of Economic Advisers
UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON : 1992
JOINT ECONOMIC COMMITTEE
(Created pursuant to Sec. 5(a) of Public Law 304, 79th Cong.)
PAUL S. SARBANES, Maryland, Chairman
LEE H. HAMILTON, Indiana, Vice Chairman
SENATE
HOUSE OF REPRESENTATIVES
LLOYD BENTSEN (Texas)
DAVID R. OBEY (Wisconsin)
EDWARD M. KENNEDY (Massachusetts)
JAMES H. SCHEUER (New York)
JEFF BINGAMAN (New Mexico)
FORTNEY H. (PETE) STARK (California)
ALBERT GORE, JR. (Tennessee)
STEPHEN J. SOLARZ (New York)
RICHARD H. BRYAN (Nevada)
KWEISI MFUME (Maryland)
WILLIAM V. ROTH, JR. (Delaware)
RICHARD K. ARMEY (Texas)
STEVE SYMMS (Idaho)
CHALMERS P. WYLIE (Ohio)
CONNIE MACK (Florida)
OLYMPIA J. SNOWE (Maine)
ROBERT C. SMITH (New Hampshire)
HAMILTON FISH, JR. (New York)
STEVEN QUICK, Executive Director
COUNCIL OF ECONOMIC ADVISERS
MICHAEL J. BOSKIN, Chairman
DAVID F. BRADFORD, Member
PAUL WONNACOTT, Member
[PUBLIC LAW 120-81st CONGRESS; CHAPTER 237-1st SESSION]
JOINT RESOLUTION [S.J. Res. 55]
To print the monthly publication entitled "Economic Indicators"
Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That the
Joint Economic Committee be authorized to issue a monthly publication entitled "Economic Indicators," and that
a sufficient quantity be printed to furnish one copy to each Member of Congress; the Secretary and the Sergeant
at Arms of the Senate; the Clerk, Sergeant at Arms, and Doorkeeper of the House of Representatives; two
copies to the libraries of the Senate and House, and the Congressional Library; seven hundred copies to the
Joint Economic Committee; and the required numbers of copies to the Superintendent of Documents for.
distribution to depository libraries; and that the Superintendent of Documents be authorized to have copies
printed for sale to the public.
Approved June 23, 1949.
Charts prepared by the Art Production Section, Design and Graphics Branch,
Office of the Secretary, Department of Commerce.
Economic Indicators, published monthly, is available at $2.75 a single copy
($3.44 foreign), or by subscription at $30.00 per year ($37.50 for foreign
mailing) from:
SUPERINTENDENT OF DOCUMENTS
GOVERNMENT PRINTING OFFICE
WASHINGTON, D.C. 20402
For sale by the U.S. Government Printing Office
Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328
ii
ISBN 0-16-039005-2
TOTAL OUTPUT, INCOME, AND SPENDING
GROSS DOMESTIC PRODUCT
In the second quarter of 1992, according to advance estimates, current-dollar gross domestic product (GDP) rose
3.7 percent (annual rate) or $53.4 billion. Real GDP (GDP in 1987 dollars) rose 1.4 percent and the implicit price
deflator rose 2.4 percent. (Series revised.)
BILLIONS OF DOLLARS (RATIO SCALE)
BILLIONS OF DOLLARS (RATIO SCALE)
6,000
6,000
SEASONALLY ADJUSTED ANNUAL RATES
5,600
5,600
5,200
5,200
GDP
4,800
4,800
IN 1987 DOLLARS
4,400
4,400
4,000
4,000
GDP
IN CURRENT DOLLARS
3,600
3,600
3,200
3,200
2,800
2,800
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
SOURCE: DEPARTMENT OF COMMERCE
COUNCIL OF ECONOMIC ADVISERS
[Billions of current dollars; quarterly data at seasonally adjusted annual rates]
Personal
Gross
Exports and imports of goods
Government purchases
Adden-
and services
Final
Gross
Gross
con-
private
dum:
Period
Federal
sales of
domestic
domestic
sumption
domestic
State
Gross
domestic
product
expendi-
invest-
Net
Total
and
pur-
national
tures
ment
Exports
Imports
National
Non-
Total
product
chases 1
exports
local
defense
defense
product
1982
3,149.6
2,059.2
503.4
-20.6
282.6
303.2
607.6
266.6
193.8
72.7
341.1
3,165.5
3,170.2
3,179.8
1983
3,405.0
2,257.5
546.7
-51.4
276.7
328.1
652.3
292.0
214.4
77.5
360.3
3,410.6
3,456.5
3,434.4
1984
3,777.2
2,460.3
718.9
-102.7
302.4
405.1
700.8
310.9
233.1
77.8
389.9
3,706.1
3,879.9
3,801.5
1985
4,038.7
2,667.4
714.5
-115.6
302.1
417.6
772.3
344.3
258.6
85.7
428.1
4,014.1
4,154.3
4,053.6
1986
4,268.6
2,850.6
717.6
-132.5
319.2
451.7
833.0
367.8
276.7
91.1
465.3
4,260.0
4,401.2
4,277.7
1987
4,539.9
3,052.2
749.3
-143.1
364.0
507.1
881.5
384.9
292.1
92.9
496.6
4,513.7
4,683.0
4,544.5
1988
4,900.4
3,296.1
793.6
-108.0
444.2
552.2
918.7
387.0
295.6
91.4
531.7
4,884.2
5,008.4
4,908.2
1989
5,250.8
3,523.1
832.3
-79.7
508.0
587.7
975.2
401.6
299.9
101.7
573.6
5,217.5
5,330.5
5,266.8
1990 r
5,522.2
3,748.4
799.5
-68.9
557.0
625.9
1,043.2
426.4
314.0
112.4
616.8
5,515.9
5,591.1
5,542.9
1991
,
5,677.5
3,887.7
721.1
-21.8
598.2
620.0
1,090.5
447.3
323.8
123.6
643.2
5,687.7
5,699.3
5,694.9
1982: IV
3,195.1
2,128.7
464.2
-29.5
265.6
295.1
631.6
281.4
205.5
75.9
350.3
3,241.4
3,224.6
3,222.6
1983: IV
3,547.3
2,346.8
614.8
-71.8
286.2
358.0
657.6
289.7
222.8
66.9
367.9
3,527.1
3,619.1
3,578.4
1984: IV
3,869.1
2,526.4
722.8
-107.1
308.7
415.7
727.0
324.7
242.9
81.9
402.2
3,818.1
3,976.2
3,890.2
1985: IV
4,140.5
2,739.8
737.0
-135.5
304.7
440.2
799.2
356.9
268.6
88.3
442.4
4,107.9
4,276.0
4,156.2
1986: IV
4,336.6
2,923.1
697.1
-133.2
333.9
467.1
849.7
373.1
278.6
94.5
476.6
4,355.4
4,469.8
4,340.5
1987: IV
4,683.0
3,124.6
800.2
-143.2
392.4
535.6
901.4
392.5
295.8
96.7
509.0
4,623.7
4,826.2
4,690.5
1988: IV
5,044.6
3,398.2
814.8
-106.0
467.0
573.1
937.6
392.0
296.8
95.2
545.7
5,027.3
5,150.7
5,054.3
1989: IV
5,344.8
3,599.1
825.2
-73.9
523.8
597.7
994.5
405.1
302.5
102.6
589.3
5,314.6
5,418.7
5,365.0
1990:
5,445.2
3,672.4
820.3
-72.1
541.2
613.3
1,024.7
420.3
311.6
108.7
604.3
5,437.1
5,517.4
5,464.1
II
5,522.6
3,715.3
833.0
-59.9
551.2
611.2
1,034.3
424.4
312.9
111.5
610.0
5,484.9
5,582.6
5,537.0
III
5,559.6
3,787.8
805.7
-76.3
555.9
632.2
1,042.4
422.6
308.4
114.3
619.7
5,549.2
5,635.9
5,577.8
IV r
5,561.3
3,818.2
739.0
-67.2
579.7
646.9
1,071.3
438.3
323.2
115.0
633.0
5,592.3
5,628.5
5,592.7
1991: I
5,585.8
3,821.7
705.4
-28.7
573.2
602.0
1,087.5
451.3
332.4
118.8
636.3
5,614.4
5,614.6
5,614.9
II r
5,657.6
3,871.9
710.2
-15.3
594.3
609.6
1,090.8
449.9
325.9
124.0
640.8
5,679.4
5,672.9
5,674.3
III
5,713.1
3,914.2
732.8
-27.1
602.3
629.5
1,093.3
447.2
321.9
125.3
646.0
5,712.9
5,740.3
5,726.4
IV
5,753.3
3,942.9
736.1
-16.0
622.9
638.9
1,090.3
440.8
314.7
126.1
649.5
5,744.2
5,769.3
5,764.1
1992: I
5,840.2
4,022.8
722.4
-8.1
628.1
636.2
1,103.1
445.0
313.6
131.4
658.0
5,855.9
5,848.3
5,859.8
II P
5,893.6
4,053.8
759.8
-29.4
622.1
651.5
1,109.4
446.8
313.2
133.6
662.7
5,892.9
5,923.0
1 GDP less exports of goods and services plus imports of goods and services.
Source: Department of Commerce, Bureau of Economic Analysis.
Note.-Data revised beginning 1989 to reflect the annual revision of the national income and
product accounts. See Survey of Current Business, July 1992.
1
GROSS DOMESTIC PRODUCT IN 1987 DOLLARS
[Billions of 1987 dollars; quarterly data at seasonally adjusted annual rates]
Gross private
Exports and imports of
Government purchases
domestic investment
goods and services
Personal
Federal
Adden-
Final
Gross
Gross
con-
Nonre-
Resi-
Change
dum:
sales of
domestic
Period
domestic
sumption
in
State
Gross
sidential
dential
domestic
product
expendi-
busi-
Net
Ex-
Im-
Total
and
pur-
national
fixed
fixed
National
Non-
product
chases 1
tures
invest-
invest-
ness
exports
ports
ports
Total
local
defense
defense
product
inven-
ment
ment
tories
1982
3,760.3
2,503.7
433.9
124.1
-17.5
-7.4
296.7
304.1
723.6
306.0
221.4
84.7
417.6
3,777.8
3,767.7
3,796.1
1983
3,906.6
2,619.4
420.8
174.2
4.4
-56.1
285.9
342.1
743.8
320.8
234.2
86.6
423.0
3,902.2
3,962.8
3,939.6
1984
4,148.5
2,746.1
490.2
199.3
67.9
-122.0
305.7
427.7
766.9
331.0
245.8
85.1
436.0
4,080.6
4,270.5
4,174.5
1985
4,279.8
2,865.8
521.8
202.0
22.1
-145.3
309.2
454.6
813.4
355.2
265.6
89.5
458.2
4,257.6
4,425.1
4,295.0
1986
4,404.5
2,969.1
500.3
226.2
8.5
-155.1
329.6
484.7
855.4
373.0
280.6
92.4
482.4
4,395.9
4,559.6
4,413.5
1987
4,540.0
3,052.2
497.8
225.2
26.3
-143.0
364.0
507.1
881.5
384.9
292.1
92.9
496.6
4,513.7
4,683.0
4,544.6
1988
4,718.6
3,162.4
530.8
222.7
19.9
-104.0
421.6
525.7
886.8
377.3
287.0
90.2
509.6
4,698.6
4,822.6
4,726.3
1989
4,838.0
3,223.3
540.0
214.2
29.8
-73.7
471.8
545.4
904.4
376.1
281.4
94.8
528.3
4,808.3
4,911.7
4,852.7
1990
4,877.5
3,260.4
538.1
194.8
6.2
-51.8
510.0
561.8
929.9
383.6
283.3
100.3
546.3
4,871.3
4,929.3
4,895.9
1991
4,821.0
3,240.8
500.2
170.2
-9.3
-21.8
539.4
561.2
941.0
388.3
282.8
105.5
552.7
4,830.3
4,842.8
4,836.4
1982: IV
3,759.6
2,539.3
417.2
131.2
-44.9
-19.0
280.4
299.4
735.9
316.0
229.4
86.6
419.9
3,804.5
3,778.6
3,791.7
1983: IV
4,012.1
2,678.2
449.6
190.6
29.3
-83.7
291.5
375.1
748.1
322.2
242.9
79.3
425.9
3,982.8
4,095.8
4,046.6
1984: IV
4,194.2
2,784.8
509.6
198.8
47.9
131.4
312.8
444.2
784.3
341.7
254.3
87.4
442.6
4,146.2
4,325.5
4,216.4
1985: IV
4,333.5
2,895.3
525.5
207.4
30.2
-155.4
312.0
467.4
830.5
363.7
272.1
91.6
466.7
4,303.3
4,488.9
4,349.5
1986: IV
4,427.1
3,012.5
495.5
230.5
-20.1
-156.0
342.9
498.9
864.8
377.5
282.2
95.3
487.3
4,447.2
4,583.1
4,430.8
1987: IV
4,625.5
3,074.7
510.6
223.3
59.9
-136.0
386.1
522.1
893.0
391.6
295.0
96.6
501.4
4,565.6
4,761.5
4,633.0
1988: IV
4,779.7
3,202.9
538.8
225.3
20.9
-102.7
438.2
540.9
894.5
378.4
285.7
92.7
516.1
4,758.7
4,882.4
4,789.0
1989: IV
4,856.7
3,242.0
536.7
208.0
24.9
-67.4
487.7
555.0
912.6
376.1
281.5
94.7
536.5
4,831.8
4,924.1
4,875.1
1990: I'
4,890.8
3,259.5
544.8
210.7
7.5
-58.4
500.2
558.6
926.8
383.4
284.9
98.5
543.4
4,883.3
4,949.2
4,907.8
II
4,902.7
3,260.1
535.6
201.8
32.8
-56.9
508.7
565.6
929.4
385.4
285.1
100.3
544.0
4,870.0
4,959.7
4,915.5
III
4,882.6
3,273.9
542.9
189.1
11.2
-59.3
508.4
567.7
924.8
378.3
277.3
101.0
546.5
4,871.4
4,941.9
4,898.9
IV
4,833.8
3,248.0
529.3
177.5
-26.8
-32.7
522.6
555.3
938.5
387.3
285.8
101.5
551.2
4,860.6
4,866.5
4,861.4
1991: I
4,796.7
3,223.5
507.0
164.1
-25.1
-17.9
515.9
533.8
945.1
394.1
291.8
102.2
551.0
4,821.8
4,814.6
4,822.0
II
4,817.1
3,239.3
503.0
166.9
-20.4
-17.4
536.1
553.5
945.6
393.8
287.6
106.2
551.8
4,837.4
4,834.4
4,831.8
III
4,831.8
3,251.2
498.7
172.6
.6
-31.6
544.2
575.8
940.2
387.2
280.6
106.6
553.0
4,831.2
4,863.4
4,843.7
IV
4,838.5
3,249.0
492.1
177.3
7.5
-20.5
561.4
581.8
933.1
378.2
271.0
107.2
554.9
4,830.9
4,858.9
4,848.2
1992: I
4,873.7
3,289.3
495.8
185.6
-12.6
-21.5
565.4
586.8
937.0
375.3
265.6
109.7
561.8
4,886.3
4,895.2
4,890.7
II P
4,890.5
3,286.6
511.7
189.5
1.0
-35.9
560.0
595.9
937.6
375.6
264.5
111.1
562.0
4,889.5
4,926.4
1 GDP less exports of goods and services plus imports of goods and services.
Source: Department of Commerce, Bureau of Economic Analysis.
NOTE.-See Note, p. 1.
IMPLICIT PRICE DEFLATORS FOR GROSS DOMESTIC PRODUCT
[1987=100; = quarterly data are seasonally adjusted]
Personal consumption
Gross private
Exports and imports of
Government purchases
Gross
expenditures
domestic investment
goods and services
Federal
Period
domestic
Nonresi-
State
product
Durable
Nondura-
Residen-
Total
Services
dential
Exports
Imports
National
Non-
and local
goods
ble goods
tial fixed
Total
fixed
defense
defense
1982
83.8
82.2
90.1
88.6
76.7
95.3
85.2
95.2
99.7
87.1
87.6
85.9
81.7
1983
87.2
86.2
92.4
90.8
81.9
95.1
87.3
96.8
95.9
91.0
91.6
89.5
85.2
1984
91.0
89.6
93.9
93.4
86.2
95.6
89.7
98.9
94.7
93.9
94.8
91.3
89.4
1985
94.4
93.1
95.4
95.9
90.8
96.6
92.0
97.7
91.9
96.9
97.3
95.7
93.4
1986
96.9
96.0
96.9
96.1
95.7
98.4
95.8
96.9
93.2
98.6
98.6
98.6
96.4
1987
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
1988
103.9
104.2
102.0
103.7
105.1
102.8
104.2
105.3
105.1
102.6
103.0
101.4
104.3
1989
108.5
109.3
104.2
109.3
110.6
105.2
107.8
107.7
107.8
106.8
106.6
107.3
108.6
1990
113.2
115.0
105.7
115.9
116.7
107.3
110.7
109.2
111.4
111.2
110.8
112.0
112.9
1991
,
117.8
120.0
107.6
120.1
122.8
108.2
111.8
110.9
110.5
115.2
114.5
117.1
116.4
1982: IV
85.0
83.8
90.6
89.4
79.0
95.3
86.0
94.7
98.5
89.0
89.6
87.7
83.4
1983: IV
88.4
87.6
93.3
91.8
83.7
95.0
88.0
98.2
95.4
89.9
91.7
84.3
86.4
1984: IV
92.2
90.7
94.4
94.1
87.7
96.4
90.7
98.7
93.6
95.0
95.5
93.7
90.9
1985: IV
95.5
94.6
95.9
97.0
92.9
97.3
93.1
97.7
94.2
98.1
98.7
96.4
94.8
1986: IV
98.0
97.0
97.8
96.3
97.3
99.2
97.3
97.4
93.6
98.8
98.7
99.2
97.8
1987: IV
101.2
101.6
101.0
101.5
101.9
100.7
101.5
101.6
102.6
100.2
100.3
100.1
101.5
1988: IV
105.5
106.1
103.1
105.6
107.1
104.0
105.3
106.6
106.0
103.6
103.9
102.6
105.7
1989: IV
110.1
111.0
104.9
110.8
112.7
106.0
108.8
107.4
107.7
107.7
107.5
108.4
109.9
1990: I
111.3
112.7
105.4
113.3
114.2
106.5
110.2
108.2
109.8
109.6
109.4
110.4
111.2
II
112.6
114.0
105.5
114.3
115.8
106.8
110.6
108.4
108.0
110.1
109.7
111.2
112.1
III
113.9
115.7
105.8
116.6
117.6
107.8
111.1
109.3
111.4
111.7
111.2
113.2
113.4
IV
115.0
117.6
106.1
119.3
119.3
108.2
111.0
110.9
116.5
113.2
113.1
113.3
114.8
1991:
116.5
118.6
106.7
119.4
120.8
108.7
111.3
111.1
112.8
114.5
113.9
116.2
115.5
II
117.5
119.5
107.3
119.9
122.1
108.5
111.6
110.9
110.1
114.3
113.3
116.8
116.1
III
118.2
120.4
108.0
120.2
123.4
108.0
112.5
110.7
109.3
115.5
114.7
117.6
116.8
IV
118.9
121.4
108.3
120.8
124.7
107.4
111.8
111.0
109.8
116.6
116.2
117.6
117.1
1992: I
119.8
122.3
108.6
121.4
126.1
107.1
111.7
111.1
108.4
118.6
118.1
119.8
117.1
II
120.5
123.3
109.4
122.2
127.3
106.8
112.1
111.1
109.3
119.0
118.4
120.3
117.9
NOTE.-See Note, p. 1.
Source: Department of Commerce, Bureau of Economic Analysis.
2
CHANGES IN GDP, PERSONAL CONSUMPTION EXPENDITURES, AND
RELATED IMPLICIT PRICE DEFLATORS AND PRICE INDEXES
[Percent change from preceding year or quarter; quarterly data at seasonally adjusted annual rates]-
Gross domestic product
Personal consumption expenditures
Period
Current
Constant
Implicit price
Fixed-weighted
Current
Constant
Implicit price
Fixed-weighted
dollars
(1987) dollars
deflator
price index
dollars
(1987) dollars
deflator
price index
(1987 weights)
(1987 weights)
1981
11.9
1.8
10.0
10.2
1.2
9.0
8.6
1982
3.9
-2.2
6.2
6.1
6.9
1.1
5.7
5.4
1983
8.1
3.9
4.1
3.8
9.6
4.6
4.9
4.3
1984
10.9
6.2
4.4
3.3
9.0
4.8
3.9
3.7
1985
6.9
3.2
r
3.7
3.5
8.4
4.4
3.9
3.8
1986
5.7
2.9
2.6
2.7
6.9
3.6
3.1
3.0
1987
6.4
3.1
3.2
3.1
7.1
2.8
4.2
4.1
1988
7.9
3.9
3.9
3.9
8.0
3.6
4.2
4.3
1989
7.2
2.5
4.4
4.4
6.9
1.9
4.9
4.9
1990
5.2
.8
4.3
4.5
6.4
1.2
5.2
5.3
1991 T
2.8
-1.2
4.1
4.0
3.7
-.6
4.3
4.4
1988: I
6.1
2.6
3.6
3.6
9.9
7.1
2.8
2.7
II
9.1
4.3
4.4
4.5
7.9
2,5
5.2
5.2
III
7.6
2.5
5.1
5.4
8.4
2.9
5.1
5.4
IV
8.1
3.9
3.9
3.7
8.9
4.1
4.7
4.6
1989: I'
8.6
3.2
5.4
5.0
5.1
.1
5.0
5.2
II
6.3
1.8
4.6
4.7
7.0
1.1
5.7
5.9
III
3.8
0
3.8
3.7
6.3
2.9
3.3
3.5
IV
5.1
1.5
3.7
3.6
5.3
.8
4.4
4.3
1990: I'.
7.7
2.8
4.4
5.4
8.4
2.2
6.3
6.4
II
5.8
1.0
4.8
4.6
4.8
.1
4.7
4.4
III
2.7
-1.61
4.7
4.7
8.0
1.7
6.1
6.4
IV r
.1
-3.9
3.9
4.1
3.2
-3.1
6.7
6.8
1991: I'.
1.8
-3.0
5.3
4.7
.4
-3.0
3.4
3.4
II
5.2
1.7
3.5
3.5
5.4
2.0
3.1
3.3
III
4.0
1.2
2.4
3.0
4.4
1.5
3.0
3.0
IV r
2.8
.6
2.4
2.4
3.0
-.3
3.4
3.1
1992:
6.2
2.9
3.1
3.6
8.4
5.1
3.0
3.5
II P
3.7
1.4
2.4
1.6
3.1
-.3
3.3
3.3
NOTE.-See Note, p. 1.
Source: Department of Commerce, Bureau of Economic Analysis.
NONFINANCIAL CORPORATE BUSINESS-OUTPUT, COSTS, AND PROFITS
[Quarterly data at seasonally adjusted annual rates]
Gross domestic product
Current-dollar cost and profit per unit of output (dollars) 1
of nonfinancial
Output
Compen-
corporate business
Corporate profits with inventory
per hour
sation per
(billions of dollars)
Period
Total
Consump-
valuation and capital consumption
of all
hour of
Indirect
tion of
Compen-
Net
adjustments
employees
all
cost and
business
fixed
sation of
interest
(1987
employees
Current
1987
profit 2
taxes 3
employees
Profits
Profits
dollars
capital
dollars)
(dollars)
dollars
Total
tax
after
liability
tax 4
1981
1,749.1
2,035.8
0.859
0.102
0.081
0.573
°0.035
0.067
0.031
0.036
.20.560
11.790
1982
1,803.5
2,002.1
.901
.115
.083
.606
.041
.056
.023
.033
20.827
12.620
1983
1,937.1
2,113.3
.917
.115
:086
.604
.036
.076
.028
.048
21.597
13:037
1984
2,167.3
2,285.0
.949
.109
.089
.619
.038
.094
.032
.062
21.905
13.559
1985
2,295.5
2,366.3
.970
.109
.091
.638
.038
.094
.030
.064
22.144
14.121
1986
2,391.3
2,444.3
.978
.111
.094
.650
.040
.083
.031
.052
22.737
14.770
1987
2,544.6
2,544.6
1.000
.111
.093
.659
.042
.096
.037
.059
23.047
15.181
1988 r
2,764.8
2,684.8
1.030
.111
.096
.676
.045
.102
.038
.064
23.472
15.782
1989
2,913.5
2,718.9
1.072
.117
.101
.706
.054
.094
.037
.057
23.058
16.329
1990
3,036.5
2,740.0
1.108
.120
.106
.737
.054
.091
.034
.057
23.108
17.206
1991
3,073.8
2,698.0
1.139
.126
.115
.759
.053
.085
.030
.055
23.563
17.969
1982: IV
1,807.1
2,000.5
.903
.119
.085
.609
.040
.051
.020
.030
21.103
12.842
1983: IV
2,038.1
2,205.2
.924
.119
.086
.604
.036
.079
.029
.050
21.905
13.233
1984: IV
2,230.0
2,330.3
.957
.111
.090
.624
.041
.091
.027
.064
22.050
13.770
1985: IV
2,341.3
2,399.5
.976
110
.092
.644
.038
.092
.030
.063
22.340
14.395
1986: IV
2,428.4
2,469.0
.984
.112
.094
.655
.042
.080
.035
.045
22.891
15.001
1987: IV
2,625.9
2,602.4
1.009
.110
.093
:665
.042
.099
.038
.060
23.272
15.485
1988: IV r
2,843.2
2,719.0
1.046
.112
.097
.687
.047
.102
.040
.063
23.428
16.008
1989: IV r
2,951.5
2,722.7
1.084
.120
.102
.718
.055
.088
.033
..055
22.998
16.564
1990: I
2,999.6
2,742.0
1.094
.118
.104
.724
.054
.093
.033
.060
22.952
16.724
II
3,053.1
12,763.3
1.105
.118
:104
.730
.054
:098
.034
.065
23.205
17.110
III
3,048.2
2,737.3
1.114
.121
.107
.744
:054
:088
.036
.052
23.062
17.408
IV
-3,045.0
2,717.4
1.121
.123
:109
.750
.055
:083
.033
.050
23.237
17.605
1991: I'
3,037.1
2,683.5
1.132
126
113
.754
.054
.084
.029
.055
23.317
17.723
II
3,062.7
2,687.4
1.140
.127
.114
.760
.053
.086
.030
.056
23.500
17.928
III
3,084.4
2,699.1
1.143
.127
.117
763
.053
.084
.031
.053
23.653
18.083
IV
3,111.1
2,722.0
1.143
.126
.117
.761
.052
.086
.030
.056
23.858
18.201
1992: I'
3,138.1
2,737.6
11:146
.125
:118
.760
.050
.093
.033
:060
24.025
18.272
1 Output is measured by GDP of nonfinancial corporate business in 1987 dollars.
*Data do not reflect GDP revisions of 7/30/92.
2 This is equal to the deflator for gross domestic product of nonfinancial corporate business with
"NOTE.-Data revised beginning 1988-to-reflect the annual-revision of the national income and
the decimal point shifted two places to the left.
3 Indirect business tax and nontax liability plus business transfer payments less subsidies.
product accounts. Earlier data are also subject to revision. See Survey of Current Business, July
1992.
4
With inventory valuation and capital consumption adjustments.
Sources: Department of Commerce (Bureau of Economic Analysis) and Department of Labor
(Bureau of Labor Statistics).
3
NATIONAL INCOME
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Proprietors' income
Corporate profits with inventory valuation and capital
with inventory
Rental
consumption adjustments
valuation and capital
income of
Compen-
consumption
persons
Profits with inventory valuation
adjustments
with
National
sation of
adjustment and without capital
Period
income
capital
consumption adjustment
Capital
Net
employ-
consump-
interest
ees1
consump-
Total
tion
tion
Inventory
Farm
Nonfarm
adjust-
Profits
valuation
adjust-
Total
ment
ment
before tax
adjust-
ment
1983
2,720.8
2,029.4
2.4
184.3
22.1
212.7
202.2
210.7
-8.5
10.4
270.0
1984
3,058.3
2,226.9
21.3
214.7
23.3
264.2
236.4
240.5
-4.1
27.8
307.9
1985
3,268.4
2,382.8
21.5
238.4
18.7
280.8
225.3
225.0
.2
55.5
326.2
1986
3,437.9
2,523.8
22.3
261.5
8.7
271.6
227.6
217.8
9.7
44.1
350.2
1987
3,692.3
2,698.7
31.3
279.0
3.2
319.8
273.4
287.9
-14.5
46.4
360.4
1988
4,002.6
2,921.3
30.9
293.4
4.3
365.0
320.3
347.5
-27.3
44.7
387.7
1989
4,249.5
3,100.2
40.2
307.0
-13.5
362.8
325.4
342.9
-17.5
37.4
452.7
1990 r
4,468.3
3,291.2
41.7
325.2.
-12.3
361.7
341.2
355.4
-14.2
20.5
460.7
1991 r
4,544.2
3,390.8
35.8
332.2
-10.4
346.3
337.8
334.7
3.1
8.4
449.5
1982: IV
2,551.5
1,940.4
10.2
169.6%
24.1
150.3
160.0
168.6
-8.6
-9.6
256.8
1983: IV
2,834.3
2,101.2
6.3
193.8
22.2
229.1
216.2
223.8
-7.6
12.9
281.8
1984: IV
3,134.4
2,288.1
21.9
217.7
24.3
261.3
223.6
220.1
3.5
37.7
321.1
1985: IV
3,341.9
2,442.5
17.8
250.9
14.0
284.9
228.0
231.8
-3.8
56.9
331.9
1986: IV
3,486.0
2,582.5
23.6
260.9
4.7
264.6
225.0
235.7
-10.7
39.6
349.7
1987: IV
3,828.8
2,785.1
42.4
282.6
6.8
343.3
293.4
311.2
-17.8
49.9
368.6
1988: IV
4,127.6
3,004.9
30.9
302.5
2.8
378.3
340.5
372.2
-31.7
37.9
408.1
1989: IV
4,305.2
3,162.8
38.4
311.4
-21.6
354.5
320.6
334.1
13.5
33.9
459.8
1990: I
4,400.7
3,223.7
48.1
319.8
-16.2
367.6
337.4
344.0
-6.6
30.2
457.6
II
4,475.3
3,281.2
43.6
322.7
-13.8
384.0
359.6
355.8
3.8
24.4
457.6
III
4,479.3
3,320.5
32.2
328.8
-9.5
351.4
334.4
367.0
-32.6
17.0
456.0
IV T
4,517.9
3,339.6
42.8
329.7
-9.6
344.0
333.5
354.7
-21.2
10.5
471.4
1991:
4,493.0
3,343.0
34.3
322.2
12.4
349.6
344.2
337.6
6.7
5.3
456.2
II
4,529.2
3,379.6
41.3
329.1
-12.3
347.3
342.2
332.3
9.9
5.1
444.4
III
4,555.4
3,407.0
29.5
337.6
10.3
341.2
331.9
336.7
-4.8.
9.3
450.5
IV
4,599.1
3,433.8
37.9
340.0
-6.6
347.1
333.1
332.3
.7
14.1
446.9
1992: I
4,679.4
3,476.3
40.1
353.6
-4.5
384.0
360.7
366.1
-5.4
23.3
430.0
II p
3,502.4
37.8
359.4
3.0
-15.2
27.9
1 Includes employer contributions for social insurance. (See also p. 5.)
Source: Department of Commerce, Bureau of Economic Analysis.
NOTE.-See Note, p. 1.
PERSONAL CONSUMPTION EXPENDITURES IN 1987 DOLLARS
[Billions of 1987 dollars, except as noted; quarterly data at seasonally adjusted annual rates]
Durable goods:
Nondurable goods
Services
Retail sales of new
Total
passenger cars
personal
Furni-
(millions of units)
Period
consump-
Total
Motor
ture and
Total
tion
Clothing
Fuel
vehicles
house-
Gasoline
Total
Medical.
durable
Other
and
hold
nondura-
Food
and
oil and
Other
expendi-
and oil
services 1
Housing
care
Domes-
tures
goods
ble goods
shoes
coal
parts
ties
Imports
equip-
ment
1983
2,619.4
297.7
138.1
104.3
55.3
900.3
463.4
142.4
75.7
11.1
207.8
1,421.4
415.5
332.6
6.8
2.4
1984
2,746.1
338.5
160.3
115.3
62.9
934.6
472.3
153.1
77.9
11.2
220.0
1,473.0
426.8
341.9
8.0
2.4
1985
2,865.8
370.1
180.2
123.8
66.1
958.7
483.0
158.8
79.2
11.5
226.2
1,537.0
435.9
353.0
8.2
2.8
1986
2,969.1
402.0
193.3
136.3
72.4
991.0
494.1
170.3
82.9
12.1
231.7
1,576.1
442.1
366.2
8.2
3.2
1987
3,052.2
403.7
183.5
144.0
76.2
1,011.1
500.7
174.5
84.7
12.0
239.1
1,637.4
452.5
384.7
7.1
3.2
1988
3,162.4
428.7
194.8
155.4
78.5
1,035.1
513.4
178.9
86.1
12.0
244.7
1,698.5
461.8
399.4
7.5
3.1
1989
3,223.3
440.7
196.4
165.8
78.5
1,051.6
515.0
187.8
87.3
11.4
250.2
1,731.0
469.2
408.6
7.1
2.8
1990
3,260.4.
439.3
192.2
169.5
77.6
1,056.5
520.8
185.9
86.4
10.1
253.4
1,764.6
474.7
423.9
6.9
2.6
1991
3,240.8
414.7
171.0
168.6
75.0
1,042.4
515.8
181.3
85.2
9.7
250.5
1,783.7
478.2
438.8
6.1
2.3
1982: IV
2,539.3
272.3
123.7
96.4
52.3
880.7
458.3
135.7
73.4
10.5
202.8
1,386.2
411.0
327.8
6.0
2.5
1983: IV
2,678.2
319.1
151.6
109.3
58.1
915.2
467.1
147.7
76.9
11.4
212.2
1,443.9
419.7
334.8
7.4
2.6
1984: IV
2,784.8
347.7
164.3
118.7
64.8
942.9
475.1
154.7
79.0
11.1
222.9
1,494.2
431.3
344.9
7.7
2.6
1985: IV
2,895.3
369.6
173.9
128.6
67.1
968.7
488.2
161.7
79.5
11.4
228.0
1,557.1
438.1
359.1
7.0
3.1
1986: IV
3,012.5
415.7
193.6
141.4
80.7
1,000.9
496.9
171.9
84.6
12.4
235.2
1,595.8
444.8
372.0
7.7
3.4
1987: IV
3,074.7
404.7
183.6
145.9
75.2
1,014.6
502.4
174.5
85.4
11.9
240.4
1,655.5
457.0
390.7
6.6
3.3
1988: IV
3,202.9
439.2
197.7
160.3
81.2
1,046.8
518.0
182.8
87.5
12.0
246.4
1,716.9
465.6
403.0
7.5
3.0
1989: IV
3,242.0
436.8
188.3
167.9
80.5
1,058.9
515.6
190.9
88.6
12.0
251.8
1,746.3
471.3
411.8
6.2
2.6
1990:
3,259.5
453.5
202.6
171.8
79.1
1,058.3
518.3
188.6
87.4
9.8
254.3
1,747.7
473.3
418.3
7.2
2.8
II
3,260.1
439.2
192.8
169.7
76.8
1,057.1
521.2
185.6
86.4
10.9
253.0
1,763.7
474.1
422.1
6.8
2.7
III
3,273.9
437.7
191.3
168.9
77.5
1,059.1
521.6
186.2
86.7
10.9
253.7
1,777.1
475.1
426.7
7.1
2.5
IV
3,248.0
426.6
182.0
167.5
77.1
1,051.6
522.0
183.2
85.0
8.8
252.7
1,769.8
476.1
428.6
6.6
2.4
1991: I
3,223.5
412.0
169.6
166.9
75.5
1,043.0
516.4
180.8
83.9
9.4
252.5
1,768.5
476.5
431.9
6.1
2.2
II
3,239.3
411.3
167.2
169.3
74.8
1,046.3
516.3
183.2
86.0
9.8
251.0
1,781.8
477.9
435.6
6.1
2.3
III
3,251.2
419.4
173.3
170.4
75.7
1,044.8
515.0
183.7
86.0
10.0
250.0
1,787.0
478.8
440.5
6.3
2.3
IV
3,249.0
416.1
174.0
167.9
74.2
1,035.6
515.3
177.5
84.7
9.4
248.6
1,797.4
479.8
447.2
6.1
2.2
1992:
3,289.3
432.3
181.5
174.4
76.5
1,049.6
518.9
184.1
85.7
10.2
250.7
1,807.3
481.2
449.6
6.1
2.2
II P
3,286.6
429.3
179.9
174.0
75.3
1,045.4
513.6
184.2
85.7
12.4
249.6
1,812.0
482.8
453.1
6.3
2.2
1 Includes other items, not shown separately.
NOTE.-See Note, p. 1.
Source: Department of Commerce, Bureau of Economic Analysis.
4
SOURCES OF PERSONAL INCOME
Personal income fell $1.9 billion (annual rate) in June after rising $13.9 billion in May. Wages and salaries fell
$4.9 billion in June, in contrast to a rise of $14.4 billion in May. (Series revised.)
BILLIONS OF DOLLARS* (RATIO SCALE)
BILLIONS OF DOLLARS* (RATIO SCALE)
6,000
6,000
5,000
5,000
4,000
4,000
3,000
TOTAL PERSONAL INCOME
3,000
2,000
2,000
WAGE AND SALARY DISBURSEMENTS
1,400
1,400
OTHER INCOME
800
800
TRANSFER PAYMENTS
400
400
1984
1985
1986
1987
1988
1989
1990
1991
1992
SEASONALLY ADJUSTED ANNUAL RATES
SOURCE: DEPARTMENT OF COMMERCE
COUNCIL OF ECONOMIC ADVISERS
[Billions of dollars; monthly data at seasonally adjusted annual rates]
Wage and
Proprietors' income 3
Less:
Total
salary
Other labor
Rental
Personal
Personal
Transfer
Personal
Nonfarm
Period
personal
disburse-
income
income
12
income of
dividend
interest
pay-
contributions
personal
ments
1
Farm
Nonfarm
persons 4
income
income
ments 5
for social
income 6
insurance
1982
2,690.9
1,593.3
165.4
13.5
157.3
21.9
67.1
376.8
408.1
112.3
1983
2,649.8
2,862.5
1,684.7
174.6
2.4
184.3
22.1
77.8
397.5
438.9
119.7
1984
2,832.6
3,154.6
1,849.8
184.7
21.3
214.7
23.3
78.8
461.9
452.9
132.8
1985
3,106.1
3,379.8
1,986.5
191.8
21.5
238.4
18.7
87.9
498.1
485.9
149.1
1986
3,333.2
3,590.4
2,105.4
200.7
22.3
261.5
8.7
104.7
531.7
517.8
162.1
1987
3,545.6
3,802.0
2,261.2
210.4
31.3
279.0
3.2
100.4
548.1
542.2
173.6
3,749.4
1988
4,075.9
2,443.0
230.5
30.9
293.4
4.3
108.4
583.2
576.7
194.5
1989 r
4,023.9
4,380.3
2,586.4
251.9
40.2
307.0
-13.5
126.5
668.2
625.0
211.4
1990 T
4,318.0
4,664.2
2,742.8
271.0
41.7
325.2
12.3
140.3
694.5
685.8
224.8
1991 r
4,599.6
4,828.3
2,812.2
288.3
35.8
332.2
10.4
137.0
700.6
771.1
238.4
4,770.4
1991:
June
T
4,828.1
2,825.3
287.5
36.0
330.1
I
-11.7
136.0
696.8
767.0
239.0
July r
4,770.0
4,827.6
2,814.4
289.1
31.2
337.2
- 11.5
135.9
699.4
771.0
239.1
4,774.3
Aug r
4,847.5
2,825.6
290.6
28.7
337.3
-10.7
135.6
701.8
778.7
240.2
Sept r
4,796.8
4,863.4
2,833.1
292.1
28.6
338.2
-8.6
135.4
704.2
781.5
241.1
Oct T
4,813.0
4,889.3
2,835.4
293.6
40.9
339.7
-
12.3
134.7
703.8
794.1
240.7
Nov T
4,826.5
4,887.4
2,838.5
295.0
29.1
339.5
-4.8
134.3
703.4
793.7
241.2
Dec
r
4,836.5
4,944.9
2,861.2
296.4
43.8
340.7
-2.8
133.8
702.6
811.7
242.5
4,879.3
1992:
Jan r
4,943.2
2,852.8
297.8
30.5
349.0
-4.2
133.6
693.1
835.5
244.9
Feb r
4,890.7
4,988.7
2,884.9
299.2
40.7
354.8
-6.2
133.8
684.4
844.3
247.3
Mar r
4,925.8
5,009.6
2,895.0
300.7
49.0
356.9
-3.2
134.2
676.9
848.2
248.2
Apr r
4,938.2
5,012.4
2,889.5
302.1
47.7
358.9
-1.5
135.4
675.0
853.7
248.4
May r
4,942.2
5,026.3
2,903.9
303.6
35.7
359.0
2.9
136.6
673.2
860.9
249.5
June P
4,968.0
5,024.4
2,899.0
305.0
29.9
360.2
7.7
137.9
671.4
863.8
250.4
4,971.9
1 The total of wage and salary disbursements and other labor income differs from compensation of
employees (see p. 4) in that it excludes employer contributions for social insurance and the excess of
5 Consists mainly of social insurance benefits, direct relief, and veterans payments.
wage accruals over wage disbursements.
6 Personal income exclusive of farm proprietors' income, farm wages, farm other labor income,
2 Consists primarily of employer contributions to private pension and private welfare funds.
and agricultural net interest.
3 With inventory valuation and capital consumption adjustments.
NOTE.-See Note, p. 1.
4 With capital consumption adjustment.
Source: Department of Commerce, Bureau of Economic Analysis.
5
DISPOSITION OF PERSONAL INCOME
According to advance estimates, per capita disposable personal income in 1987 dollars fell in the second quarter
of 1992. (Series revised.)
BILLIONS OF DOLLARS* (RATIO SCALE)
BILLIONS OF DOLLARS* (RATIO SCALE}
4,500
4,500
4,000
DISPOSABLE PERSONAL INCOME
4,000
3,500
3,500
3,000
3,000
PERSONAL OUTLAYS
2,500
2,500
SAVING
2,000
2,000
DOLLARS* (RATIO SCALE)
DOLLARS (RATIO SCALE)
PER CAPITA DISPOSABLE PERSONAL INCOME
18,000
18,000
16,000
1987 DOLLARS
16,000
14,000
14,000
12,000
12,000
CURRENT DOLLARS
10,000
10,000
8,000
8,000
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
*SEASONALLY ADJUSTED ANNUAL RATES
SOURCE: DEPARTMENT OF COMMERCE
COUNCIL OF ECONOMIC ADVISERS
Dispos-
Per capita
Per capita personal
Percent
Population,
Less:
able
disposable personal
consumption
change in
Saving as
including
Personal
Equals:
Less:
Equals:
personal
income
expenditures
real per
percent of
Armed
Personal
Period
tax and
Disposable
Personal
Personal
income in
capita
disposable
Forees
income
nontax
personal
income
outlays 1
saving
1987
Current
1987
disposable
personal
overseas
Current
1987
payments
dollars
dollars
dollars
dollars
dollars
personal
income
(thou=
(billions)
income
sands) 2
Billions of dollars
Dollars
Percent
1982
2,690.9
371.4
2,319.6
2,120.1
199.5
2,820.4
9,989
12,146
8,868
10,782
-0.1
8.6
232,201
1983
2,862.5
368.8
2,493.7
2,325.1
168.7
2,893.6
10,642
12,349
9,634
11,179
1.7
6.8
234,326
1984
3,154.6
395.1
2,759.5
2,537.5
222.0
3,080.1
11,673
13,029
10,408
11,617
5.5
8.0
236,393
1985
3,379.8
436.8
2,943.0
2,753.7
189.3
3,162.1
12,339
13,258
11,184
12,015
1.8
6.4
238,510
1986
3,590.4
459.0
3,131.5
2,944.0
187.5
3,261.9
13,010
13,552
11,843
12,336
2.2
6.0
240,691
1987
3,802.0
512.5
3,289.5
3,147.5
142.0
3,289.5
13,545
13,545
12,568
12,568
-.1
4.3
242,860
1988
4,075.9
527.7
3,548.2
3,392.5
155.7
3,404.3
14,477
13,890
13,448
12,903
2.5
4.4
245,093
1989
4,380.3
593.3
3,787.0
3,634.9
152.1
3,464.9
15,307
14,005
14,241
13.029
.8
4.0
247,397
1990
4,664.2
621.3
4,042.9
3,867.3
175.6
3,516.5
16,174
14,068
14,996
13,044
.4
4.3
249,961
1991'
4,828.3
618.7
4,209.6
4,009.9
199.6
3,509.0
16,658
13,886
15,384
12,824
-1.3
4.7
252,711
Seasonally adjusted annual rates
1982: IV
2,746.8
372.1
2,374.7
2,190.9
183.8
2,832.6
10,189
12,154
9,134
10,895
-0.5
7.7
233,060
1983: IV
2,965.8
371.6
2,594.3
2,417.9
176.3
2,960.6
11,033
12,591
9,980
11,390
7.2
6.8
235,146
1984: IV
3,242.5
413.4
2,829.1
2,606.5
222.6
3,118.5
11,925
13,145
10,649
11,739
1.0
7.9
237,231
1985: IV
3,456.7
448.8
3,007.9
2,828.7
179.2
3,178.7
12,565
13,278
11,445
12,095
1.8
6.0
239,387
1986: IV
3,647.8
478.5
3,169.3
3,018.2
151.1
3,266.2
13,121
13,522
12,101
12,472
-1.7
4.8
241,550
1987: IV
3,918.5
528.6
3,389.9
3,220.1
169.8
3,335.8
13,907
13,685
12,819
12,615
5.2
5.0
243,745
1988: IV
4,195.2
542.0
3,653.2
3,496.7
156.4
3,443.1
14,850
13,996
13,814
13,020
3.2
4.3
246,004
1989: IV
4,469.4
605.1
3,864.3
3,715.5
148.8
3,480.9
15,558
14,015
14,491
13,053
1.8
3.9
248,372
1990: I
4,571.7
609.4
3,962.3
3,789.2
173.1
3,516.8
15,917
14,128
14,752
13,094
3.3
4.4
248,931
II
4,640.5
624.6
4,015.9
3,833.2
182.7
3,523.9
16,092
14,120
14,887
13,063
-.2
4.6
249,558
III
4,692.6
627,3
4,065.3
3,908.0
157.3
3,513.7
16,242
14,038
15,133
13,080
-2.3
3.9
250,303
IV
4,751.9
623.8
4,128.1
3,938.8
189.3
3,511.6
16,443
13,988
15,209
12,938
-1.4
4.6
251,050
1991: I'
4,752.8
616.8
4,136.0
3,943.2
192.8
3,488.7
16,433
13,861
15,184
12,808
-3.6
4.7
251,687
II
4,806.9
617.2
4,189.7
3,994.4
195.3
3,505.2
16,604
13,891
15,345
12,838
.9
4.7
252,329
III
4,846.2
618.6
4,227.6
4,036.6
191.0
3,511.5
16,706
13,876
15,468
12,848
-.4
4.5
253,053
IV
r
4,907.2
622.3
4,284.9
4,065.5
219.4
3,530.8
16,885
13,913
15,537
12,803
1.1
5.1
253,776
1992: I
4,980.5
619.6
4,360.9
4,146.3
214.6
3,565.7
17,143
14,017
15,814
12,930
3.0
4.9
254,388
II p
5,021.0
614.9
4,406.1
4,176.2
229.9
3,572.3
17,275
14,006
15,894
12,886
-.3
5.2
255,051
1 Includes personal consumption expenditures, interest paid by persons, and personal transfer pay-
NOTE.-See Note, p. 1.
ments to rest of the world (net).
Source: Department of Commerce (Bureau of Economic Analysis and Bureau of the Census).
2 Annual data are averages of quarterly data, which are averages for the period.
6
FARM INCOME
In the fourth quarter of 1991, according to current estimates, gross farm income rose $5.2 billion (annual rate) and
net farm income rose $4.6 billion.
BILLIONS OF DOLLARS* (RATIO SCALE)
BILLIONS OF DOLLARS* (RATIO SCALE)
240
240
200
200
160
160
120
120
GROSS FARM INCOME
80
80
60
60
40
40
20
20
NET FARM INCOME
10
10
2
2
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
*SEASONALLY ADJUSTED ANNUAL RATES
SOURCE: DEPARTMENT OF AGRICULTURE
COUNCIL OF ECONOMIC ADVISERS
Billions of dollars; quarterly data at seasonally adjusted annual rates]
Income of farm-operators from farming
Gross farm income
Net farm income
Period
Cash marketing receipts
Value of
Production
Total 1
expenses
Current
Livestock and
inventory
1987 dollars 3
Total
Crops
2
dollars
products
changes
1981
166.3
141.6
69.2
72.5
6.5
139.4
26.9
34.1
1982
164.1
142.6
70.3
72.3
-1.4
140.3
23.8
28.5
1983
153.9
136.8
69.6
67.2
-10.9
139.6
14.2
16.3
1984
168.0
142.8
72.9
69.9
6.0
141.9
26.1
28.7
1985
161.2
144.1
69.8
74.3
-2.3
132.4
28.8
30.5
1986
156.1
135.3
71.6
63.7
- 2.2
125.1
31.0
32.0
1987
168.4
141.8
76.0
65.8
-2.3
128.7
39.7
39.7
1988
174.5
151.1
79.4
71.6
-3.5
133.9
40.6
39.1
1989
190.3
160.9
84.1
76.8
4.3
140.2
50.1
46.2
1990
195.1
170.0
89.6
80.4
2.9
144.3
50.8
45.0
1991
187.7
167.7
85.7
82.0
-1.4
145.8
41.9
35.9
1990: I
199.3
166.0
89.4
76.6
4.7
142.0
57.2
51.6
II
191.5
166.8
87.9
78.9
3.6
143.5
48.0
42.6
III
188.3
173.7
90.7
83.0
2.3
143.8
44.4
39.1
IV
201.6
173.4
90.3
83.1
1.2
147.9
53.6
46.9
1991: I
187.0
165.3
86.0
79.2
-.7
146.1
41.0
35.5
II
186.1
164.1
83.6
80.4
-1.4
148.0
38.0
32.7
III
186.3
174.0
85.9
88.0
1.8
144.3
42.0
36.0
IV
191.5
167.5
87.1
80.3
-2.0
144.8
46.6
39.7
1 Cash marketing receipts and inventory changes plus Government payments, other farm cash
income, and nonmoney income furnished by farms.
3 Income in current dollars divided by the GDP implicit price deflator. Data do not reflect GDP
revisions of July 30, 1992.
2 Physical changes in end-of-year inventory of crop and livestock commodities valued at average
prices during the year.
NOTE.-Data include net Commodity Credit Corporation loans and operator households.
Sources: Department of Agriculture and Department of Commerce.
7
CORPORATE PROFITS
In the first quarter of 1992, according to revised estimates, corporate profits before tax rose $33.8 billion (annual
rate) and profits after tax rose $22.3 billion. (Series revised.)
BILLIONS OF DOLLARS
BILLIONS OF DOLLARS
400
400
SEASONALLY ADJUSTED ANNUAL RATES
350
350
PROFITS BEFORE TAX
300
300
250
250
200
200
PROFITS AFTER TAX
150
150
100
100
TAX LIABILITY
50
UNDISTRIBUTED PROFITS
50
0
0
-50
-50
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
SOURCE: DEPARTMENT OF COMMERCE
COUNCIL OF ECONOMIC ADVISERS
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Profits (before tax) with inventory valuation adjustment 1
Profits after tax
Domestic industries
Inventory
Profits
Nonfinancial
Tax
valuation
Period
before
Undis-
liability
Divi-
Total 2
tax
Total
tributed
adjust-
Finan-
Whole-
dends
ment
Total
profits
cial
Manu-
sale and
Total 3
facturing
retail
trade
1982
166.4
138.6
15.6
123.0
63.1
31.9
176.3
63.1
113.2
70.0
43.2
-9.9
1983
202.2
171.9
24.5
147.4
71.4
38.7
210.7
77.2
133.5
81.2
52.3
-8.5
1984
236.4
205.2
20.3
185.0
86.7
49.7
240.5
94.0
146.4
82.7
63.8
-4.1
1985
225.3
194.5
28.7
165.8
80.1
43.1
225.0
96.5
128.5
92.4
36.1
.2
1986
227.6
194.6
35.8
158.9
59.0
46.3
217.8
106.5
111.3
109.8
1.6
-9.7
1987
273.4
233.9
36.4
197.5
87.0
39.9
287.9
127.1
160.8
106.2
54.6
-14.5
1988
320.3
271.2
41.8
229.4
117.5
37.1
347.5
137.0
210.5
115.3
95.2
-27.3
1989
325.4
266.0
50.6
215.3
108.0
39.7
342.9
141.3
201.6
134.6
67.1
-17.5
1990
341.2
275.5
56.7
218.8
106.9
35.8
355.4
136.7
218.7
149.3
69.4
-14.2
1991
337.8
271.3
60.9
210.4
89.3
44.0
334.7
124.0
210.7
146.5
64.2
3.1
1982: IV
160.0
130.8
23.0
107.8
50.1
33.8
168.6
58.7
109.9
72.5
37.5
-8.6
1983: IV
216.2
182.6
22.1
160.5
90.5
40.7
223.8
82.2
141.6
84.2
57.4
-7.6
1984: IV
223.6
192.9
20.3
172.6
79.2
50.8
220.1
83.8
136.3
83.4
52.9
3.5
1985: IV
228.0
193.5
29.0
164.5
83.3
39.0
231.8
97.6
134.2
97.4
36.9
-3.8
1986: IV
225.0
192.5
34.7
157.8
63.9
43.1
235.7
116.6
119.2
111.0
8.2
-10.7
1987: IV
293.4
246.3
39.4
207.0
98.7
39.3
311.2
135.2
176.0
106.3
69.7
-17.8
1988: IV
340.5
285.9
46.1
239.7
129.3
39.3
372.2
146.2
226.0
121.0
105.0
-31.7
1989: IV
320.6
254.8
52.5
202.3
94.5
39.2
334.1
134.2
200.0
141.3
58.7
-13.5
1990: I
337.4
275.0
57.0
218.0
104.4
36.7
344.0
132.4
211.6
146.1
65.5
-6.6
II
359.6
297.0
57.8
239.2
116.6
41.7
355.8
137.6
218.2
148.7
69.5
3.8
III
334.4
269.7
56.9
212.8
110.6
30.0
367.0
143.0
224.0
150.6
73.4
-32.6
IV ,
333.5
260.2
55.1
205.1
96.3
35.0
354.7
133.7
221.0
151.9
69.1
-21.2
1991: I
344.2
269.4
59.7
209.7
87.6
44.1
337.6
121.3
216.3
150.6
65.7
6.7
II
342.2
275.9
60.7
215.1
90.3
45.5
332.3
122.9
209.4
146.2
63.2
9.9
III
331.9
270.0
63.6
206.4
91.8
41.7
336.7
127.0
209.6
145.1
64.5
-4.8
IV
333.1
270.2
59.7
210.5
87.5
44.5
332.3
125.0
207.4
143.9
63.4
.7
1992: I'.
360.7
292.0
70.1
221.9
97.5
39.9
366.1
136.4
229.7
143:6
86.2
-5.4
II
146.7
-15.2
1 See p. 4 for profits with inventory valuation and capital consumption adjustments.
NOTE.-See Note, p. 1.
2 Includes rest of the world, not shown separately.
Source: Department of Commerce, Bureau of Economic Analysis.
3 Includes industries not shown separately.
8
GROSS PRIVATE DOMESTIC INVESTMENT IN 1987 DOLLARS
According to advance estimates for the second quarter of 1992, nonresidential fixed investment in 1987 dollars
rose $15.9 billion (annual rate) and residential investment rose $3.9 billion. There was a $1.0 billion increase in
inventories, following a decrease of $12.6 billion in the first quarter. (Series revised.)
BILLIONS OF 1987 DOLLARS
BILLIONS OF 1987 DOLLARS
900
900
SEASONALLY ADJUSTED ANNUAL RATES
800
800
700
700
600
GROSS PRIVATE DOMESTIC
600
INVESTMENT
500
500
NONRESIDENTIAL
FIXED INVESTMENT
400
400
RESIDENTIAL
FIXED INVESTMENT
300
300
200
.200
CHANGE IN BUSINESS
INVENTORIES
100
100
0
0
-100
-100
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
SOURCE: DEPARTMENT OF COMMERCE
COUNCIL OF ECONOMIC ADVISERS
[Billions of 1987 dollars; quarterly data at seasonally adjusted annual rates]
Fixed investment
Change in business
Gross
inventories
Period
private
Nonresidential
domestic
investment
Total
Producers'
Residential
Total
Structures
Total
durable
Nonfarm
equipment
1982
540.5
558.0
433.9
181.3
252.6
124.1
-17.5
-20.7
1983
599.5
595.1
420.8
160.3
260.5
174.2
4.4
12.8
1984
757.5
689.6
490.2
182.8
307.4
199.3
67.9
66.2
1985
745.9
723.8
521.8
197.4
324.4
202.0
22.1
19.8
1986
735.1
726.5
500.3
176.6
323.7
226.2
8.5
10.6
1987
749.3
723.0
497.8
171.3
326.5
225.2
26.3
32.7
1988
773.4
753.4
530.8
174.0
356.8
222.7
19.9
26.9
1989
784.0
754.2
540.0
177.6
362.5
214.2
29.8
29.9
1990
739.1
732.9
538.1
179.1
359.0
194.8
6.2
3.7
1991
661.1
670.4
500.2
157.6
342.6
170.2
-9.3
-9.6
1982: IV
503.5
548.4
417.2
173.2
244.0
131.2
-44.9
-46.2
1983: IV
669.5
640.2
449.6
162.6
287.0
190.6
29.3
32.3
1984: IV
756.4
-708.4
509.6
189.5
320.1
198.8
47.9
50.8
1985: IV
763.1
732.9
525.5
198.3
327.2
207.4
30.2
28.0
1986: IV
705.9
725.9
495.5
170.4
325.0
230.5
-20.1
-18.6
1987: IV
793.8
733.9
510.6
177.9
332.7
223.3
59.9
62.1
1988: IV
785.0
764.1
538.8
175.7
363.1
225.3
20.9
30.5
1989: IV r
769.5
744.6
536.7
179.8
356.9
208.0
24.9
31.2
1990:
763.0
755.4
544.8
182.0
362.8
'210.7
7.5
5.9
II
770.2
737.4
535.6
180.1
-355.5
201.8
32.8
27.9
III
743.1
732.0
542.9
181.2
361.7
189.1
11.2
6.6
IV
680.0
706.8
529.3
173.2
356.1
177.5
-26.8
-25.6
1991: I'
646.0
671.1
507.0
166.8
:340.2
164.1
-25.1
24.7
III
649.5
669.8
503.0
162.2
340.8
166.9
20.4
-24.5
III
672.0
671.4
498.7
153.0
345.8
172.6
.6
-1.0
-IV
676.9
669.3
492.1
148.4
343.7
177.3
7.5
11.8
1992: I'
:668.9
681.4
495.8
149.4
346.4
185.6
II P
-12.6
-10.7
702.2
701.2
511.7
148.6
363.1
189.5
1.0
.2
NOTE.-See Note, p. 1.
Source: Department of Commerce, Bureau of Economic Analysis.
9
EXPENDITURES FOR NEW PLANT AND EQUIPMENT
According to the Commerce Department April-May 1992 survey, business spending for new plant and equipment is
expected to rise 4.7 percent in 1992, following a decline of 0.6 percent in 1991.
BILLIONS OF DOLLARS (RATIO SCALE)
BILLIONS OF DOLLARS (RATIO SCALE)
600
600
SEASONALLY ADJUSTED ANNUAL RATES
500
500
400
400
ALL INDUSTRIES
300
300
NONMANUFACTURING
200
200
MANUFACTURING
100
100
2/2/21
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1/SURVEYED QUARTERLY
2/SEE FOOTNOTE 4 BELOW
SOURCE: DEPARTMENT OF COMMERCE
COUNCIL OF ECONOMIC ADVISERS
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Industries surveyed quarterly
Addenda
Manufacturing
Nonmanufacturing
Total
Nonmanufacturing
Period
All
non-
Com-
Manu-
Sur-
Sur-
indus-
Dura-
Non-
farm
1
Trans-
Public
mercial
tries
Total
ble
durable
Total
Mining
busi-
facturing
Total
veyed
veyed
goods
goods
portation
utilities
and
ness
2
quar-
annual-
other
terly
ly 3
1981
324.73
128.68
58.93
69.75
196.06
15.81
12.67
47.17
120.41
358.77
128.68
230.09
196.06
34.04
1982
326.19
123.97
54.58
69.39
202.22
14.11
11.75
53.58
122.79
363.08
123.97
239.11
202.22
36.89
1983
321.16
117.35
51.61
65.74
203.82
10.64
10.81
52.95
129.41
359.73
117.35
242.38
203.82
38.56
1984
373.83
139.61
64.57
75.04
234.22
11.86
13.44
57.53
151.39
418.38
139.61
278.77
234.22
44.55
1985
410.12
152.88
70.87
82.01
257.24
12.00
14.57
59.58
171.09
454.93
152.88
302.05
257.24
44.81
1986
399.36
137.95
65.68
72.28
261.40
8.15
15.05
56.61
181.59
447.11
137.95
309.16
261.40
47.75
1987
410.52
141.06
68.03
73.03
269.46
8.28
15.07
56.26
189.84
461.51
141.06
320.45
269.46
50.99
1988
455.49
163.45
77.04
86.41
292.04
9.29
16.63
60.37
205.76
508.22
163.45
344.77
292.04
52.73
1989
507.40
183.80
82.56
101.24
323.60
9.21
18.84
66.28
229.28
563.93
183.80
380.13
323.60
56.53
1990
532.61
192.61
82.58
110.04
339.99
9.88
21.47
67.21
241.43
591.96
192.61
399.34
339.99
59.35
1991
529.20
183.61
77.95
105.66
345.59
10.02
22.69
66.51
246.37
588.74
183.61
405.13
345.59
59.54
1992 4
553.86
179.21
75.18
104.03
374.65
8.98
24.55
72.81
268.31
179.21
374.65
1990: I
532.50
192.16
86.03
106.14
340.33
9.62
21.84
65.41
243.46
192.16
340.33
II
534.55
195.02
84.15
110.87
339.53
9.77
21.94
64.64
243.18
195.02
339.53
III
534.11
194.05
82.48
111.57
340.06
9.97
21.08
67.68
241.32
194.05
340.06
IV
530.13
189.72
79.03
110.69
340.41
10.12
21.18
70.24
238.87
189.72
340.41
1991: I
535.50
191.13
81.24
109.90
344.37
9.89
23.25
67.04
244.19
191.13
344.37
II
524.57
187.35
79.69
107.66
337.22
10.09
23.05
64.58
239.50
187.35
337.22
III
527.86
177.05
74.51
102.54
350.81
10.09
22.83
66.47
251.42
177.05
350.81
IV
528.88
178.90
76.36
102.54
349.98
10.00
21.65
67.96
250.37
178.90
349.98
1992:
I
536.49
174.21
74.49
99.72
362.28
8.83
21.62
68.81
263.02
174.21
362.28
II 4
558.50
185.23
76.64
108.59
373.27
9.53
25.43
72.99
265.31
185.23
373.27
III 4
557.55
179.63
74.39
105.24
377.92
9.08
25.69
73.95
269.21
179.63
377.92
IV 4
562.89
177.75
75.20
102.55
385.14
8.49
25.45
75.51
275.69
177.75
385.14
1 Excludes forestry, fisheries, and agricultural services; medical services; professional services;
3 Consists of forestry, fisheries, and agricultural services; medical services; professional services;
social services and meinbership organizations; and real estate, which, effective with the April-May
social services and membership organizations; and real estate.
1984 survey, are no longer surveyed quarterly. See last column ("nonmanufacturing surveyed annu-
4 Planned capital expenditures as reported by business in April-May 1992, corrected for biases.
ally") for data for these industries.
2 "All industries" plus the part of nonmanufacturing that is surveyed annually.
Source: Department of Commerce; Bureau of the Census.
10
EMPLOYMENT, UNEMPLOYMENT, AND WAGES
In June, civilian employment fell 82,000 and unemployment rose 471,000.
MILLIONS OF PERSONS*
MILLIONS OF PERSONS*
130
130
SEASONALLY ADJUSTED
126
126
CIVILIAN LABOR FORCE
122
122
118
118
114
114
CIVILIAN
110
EMPLOYMENT
110
106
106
102
102
12
12
UNEMPLOYMENT
8
8
4
4
0
0
1984
1985
1986
1987
1988
1989
1990
1991
1992
*16 YEARS OF AGE AND OVER
SOURCE: DEPARTMENT OF LABOR
COUNCIL OF ECONOMIC ADVISERS
[Thousands of persons 16 years of age and over, except as noted; monthly data seasonally adjusted except as noted by NSA]
Noninstitu-
Civilian employment
Unemployment
Civilian
-tional
Resi-
Labor force
Employ-
population
ment
Nonagricultural
Labor
dent
including
including
Period
Civilian
force
Employ-
Armed
resident
including
15
ment/
resident
Forces
resident
Armed
labor force
Total
Agricul-
Part time
weeks
partici-
Armed
Total
tural
for
and
pation
population
NSA
Forces
Armed
ratio
Forces
Total
Forces
rate
economic
over
NSA
(per-
(per-
reasons 1
cent) 2
cent) 2
1982
173,939
1,668
111,872
101,194
110,204
99,526
3,401
96,125
5,852
10,678
3,485
64.0
57.8
1983
175,891
1,676
113,226
102,510
111,550
100,834
3,383
97,450
5,997
10,717
4,210
64.0
57.9
1984
178,080
1,697
115,241
106,702
113,544
105,005
3,321
101,685
5,512
8,539
2,737
64.4
59.5
1985
179,912
1,706
117,167
108,856
115,461
107,150
3,179
103,971
5,334
8,312
2,305
64.8
60.1
1986
182,293
1,706
119,540
111,303
117,834
109,597
3,163
106,434
5,345
8,237
2,232
65.3
60.7
1987
184,490
1,737
121,602
114,177
119,865
112,440
3,208
109,232
5,122
7,425
1,983
65.6
61.5
1988
186,322
1,709
123,378
116,677
121,669
114,968
3,169
111,800
4,965
6,701
1,610
65.9
62.3
1989
188,081
1,688
125,557
119,030
123,869
117,342
3,199
114,142
4,657
6,528
1,375
66.5
63.0
1990
189,686
1,637
126,424
119,550
124,787
117,914
3,186
114,728
4,860
6,874
1,504
66.4
62.7
1991
191,329
1,564
126,867
118,440
125,303
116,877
3,233
113,644
5,767
8,426
2,323
66.0
61.6
1991:
June
191,173
1,505
127,029
118,414
125,524
116,909
3,286
113,623
5,469
8,615
2,488
66.2
61.6
July
191,443
1,604
126,808
118,333
125,204
116,729
3,244
113,485
5,660
8,475
2,355
66.0
61.5
Aug
191,589
1,616
126,620
118,100
125,004
116,484
3,254
113,230
5,710
8,520
2,417
65.8
61.3
Sept
191,746
1,624
127,214
118,713
125,590
117,089
3,283
113,806
6,040
8,501
2,422
66.1
61.6
Oct
191,903
1,614
127,122
118,481
125,508
116,867
3,204
113,663
6,055
8,641
2,570
66.0
61.4
Nov
192,057
1,605
126,979
118,377
125,374
116,772
3,272
113,500
6,123
8,602
2,623
65.8
61.3
Dec
192,209
1,604
127,223
118,332
125,619
116,728
3,183
113,545
6,084
8,891
2,843
65.9
61.2
1992:
Jan
192,358
1,599
127,645
118,716
126,046
117,117
3,166
113,951
6,429
8,929
3,059
66.1
61.4
Feb
192,469
1,585
127,872
118,628
126,287
117,043
3,232
113,811
6,213
9,244
3,204
66.2
61.3
Mar
192,607
1,585
128,175
118,933
126,590
117,348
3,194
114,155
6,180
9,242
3,185
66.3
61.4
Apr
192,745
1,577
128,407
119,252
126,830
117,675
3,209
114,465
5,910
9,155
3,018
66.3
61.6
May
192,881
1,574
128,734
119,230
127,160
117,656
3,178
114,478
6,210
9,504
3,361
66.5
61.5
June
193,025
1,570
129,119
119,144
127,549
117,574
3,252
114,322
5,824
9,975
3,675
66.6
61.4
1 Persons at work. Economic reasons include slack work, material shortages, inability to find full-
. Data beginning January 1986 not strictly comparable with earlier data because of change in
time work, etc.
estimation procedures.
2 Civilian labor force (or employment) as percent of civilian noninstitutional population.
Source: Department of Labor, Bureau of Labor Statistics.
11
SELECTED UNEMPLOYMENT RATES
In June, the civilian unemployment rate rose to 7.8 percent and the overall unemployment rate rose to 7.7 percent.
PERCENT* (SEASONALLY ADJUSTED)
PERCENT* (SEASONALLY ADJUSTED)
25
25
20
20
TEENAGERS
(16-19)
15
15
BLACK
10
10
BLACK
ALL CIVILIAN WORKERS
MEN 20 YEARS
AND OTHER
AND OVER
5
5
WOMEN 20 YEARS
WHITE
AND OVER
0
0
1988
1989
1990
1991
1992
1988
1989
1990
1991
1992
UNEMPLOYMENT AS PERCENT OF CIVILIAN LABOR FORCE IN GROUP SPECIFIED
SOURCE: DEPARTMENT OF LABOR
COUNCIL OF ECONOMIC ADVISERS
[Monthly data seasonally adjusted]
Unemployment rate (percent of civilian labor force in group)
Unem-
ploy-
By sex and age
By race
By selected groups
Labor
ment
force
All
Period
rate,
civilian
Women
Experi-
time lost
all
Both
Married
Women
Men
Black
enced
Full-
Part-
work-
20 years
who
(per-
work-
sexes
20 years
White
and
Black
ers
16-19
wage and
men,
time
time
cent) 2
ers 1
and
and over
other
salary
spouse
maintain
workers
workers
over
years
workers
present
families
1982
9.5
9.7
8.8
8.3
23.2
8.6
17.3
18.9
9.3
6.5
11.7
9.6
10.5
11.0
1983
9.5
9.6
8.9
8.1
22.4
8.4
17.8
19.5
9.2
6.5
12.2
9.5
10.4
10.9
1984
7.4
7.5
6.6
6.8
18.9
6.5
14.4
15.9
7.1
4.6
10.3
7.2
9.3
8.6
1985
7.1
7.2
6.2
6.6
18.6
6.2
13.7
15.1
6.8
4.3
10.4
6.8
9.3
8.1
1986
6.9
7.0
6.1
6.2
18.3
6.0
13.1
14.5
6.6
4.4
9.8
6.6
9.1
7.9
1987
6.1
6.2
5.4
5.4
16.9
5.3
11.6
13.0
5.8
3.9
9.2
5.8
8.4
7.1
1988
5.4
5.5
4.8
4.9
15.3
4.7
10.4
11.7
5.2
3.3
8.1
5.2
7.6
6.3
1989
5.2
5.3
4.5
4.7
15.0
4.5
10.0
11.4
5.0
3.0
8.1
4.9
7.3
5.9
1990
5.4
5.5
4.9
4.8
15.5
4.7
10.1
11.3
5.3
3.4
8.2
5.2
7.4
6.2
1991
6.6
6.7
6.3
5.7
18.6
6.0
11.1
12.4
6.5
4.4
9.1
6.5
8.3
7.6
1991: June
6.8
6.9
6.5
5.7
19.0
6.1
11.2
12.7
6.6
4.6
9.1
6.6
8.5
7.6
July
6.7
6.8
6.5
5.4
19.9
6.1
10.6
11.9
6.4
4.4
8.5
6.6
8.2
7.6
Aug
6.7
6.8
6.5
5.7
19.0
6.1
11.1
12.4
6.5
4.4
9.4
6.6
8.3
7.7
Sept
6.7
6.8
6.5
5.6
18.2
6.1
11.1
12.3
6.5
4.5
9.0
6.5
8.4
7.7
Oct
6.8
6.9
6.5
5.8
18.9
6.1
11.5
12.8
6.6
4.2
9.4
6.6
8.4
7.7
Nov
6.8
6.9
6.4
5.9
18.7
6.2
11.0
12.3
6.7
4.5
9.1
6.5
8.6
7.9
Dec
7.0
7.1
6.6
6.1
19.3
6.3
11.5
12.7
6.8
4.7
9.1
6.8
8.6
8.1
1992: Jan
7.0
7.1
6.9
5.9
18.3
6.2
12.6
13.7
6.9
4.8
9.0
6.8
9.1
8.1
Feb
7.2
7.3
7.0
6.1
20.0
6.5
12.2
13.8
7.1
5.0
9.5
7.1
8.8
8.3
Mar
7.2
7.3
6.9
6.1
20.6
6.5
12.2
14.1
7.2
4.8
10.0
7.0
9.0
8.3
Apr
7.1
7.2
6.8
6.3
19.2
6.3
12.4
13.9
6.9
4.7
10.2
7.0
8.8
8.3
May
7.4
7.5
7.3
6.1
20.0
6.5
13.1
14.7
7.2
5.1
10.0
7.1
9.5
8.3
June
7.7
7.8
7.4
6.4
23.6
6.8
13.5
14.9
7.3
5.3
10.1
7.5
9.3
8.4
1 Unemployed as percent of total labor force including resident Armed Forces.
Source: Department of Labor, Bureau of Labor Statistics.
2 Aggregate hours lost by the unemployed and persons on part time for economic reasons as per-
cent of potentially available labor force hours.
12
SELECTED MEASURES OF UNEMPLOYMENT AND UNEMPLOYMENT
INSURANCE PROGRAMS
In June, the percentage of the unemployed who had been out of work for less than 5 weeks fell, the percentage
for 5-14 weeks was unchanged, and the percentages for 15-26 weeks and for 27 weeks and over rose. The mean
duration of unemployment rose to 18.6 weeks and the median duration fell to 8.7 weeks.
PERCENT DISTRIBUTION*
PERCENT DISTRIBUTION*
70
70
DURATION OF UNEMPLOYMENT
REASON FOR UNEMPLOYMENT
60
60
LESS THAN
5 WEEKS
JOB LOSERS
50
50
40
5-14
40
WEEKS
REENTRANTS
30
30
JOB LEAVERS
20
20
15-26
WEEKS
10
10
27 WEEKS
AND OVER
NEW ENTRANTS
0
0
1988
1989
1990
1991
1992
1988
1989
1990
1991
1992
SEASONALLY ADJUSTED
SOURCE: DEPARTMENT OF LABOR
COUNCIL OF ECONOMIC ADVISERS
[Monthly data seasonally adjusted, except as noted]
Duration of unemployment
Reason for unemployment:
State
Insured
percent distribution
programs
unem-
Percent distribution
Unemploy-
Number of
ployment,
Period
weeks
all
ment
Less
(thousands)
27
Job
Insured
than
Job
Reen-
New
Initial
regular
5-14
15-26
weeks
Aver-
leav-
Medi-
unem-
5
weeks
weeks
losers
trants
entrants
claims
programs
and
age
ers
ployment
(unadjust-
weeks
an
over
(mean)
ed)
1
Weekly average, thousands
1982
10,678
36.4
31.0
16.0
16.6
15.6
8.7
58.7
7.9
22.3
11.1
4,061
583
4,594
1983
10,717
33.3
27.4
15.4
23.9
20.0
10.1
58.4
7.7
22.5
11.3
3,396
438
3,775
1984
8,539
39.2
28.7
12.9
19.1
18.2
7.9
51.8
9.6
25.6
13.0
2,476
377
2,561
1985
8,312
42.1
30.2
12.3
15.4
15.6
6.8
49.8
10.6
27.1
12.5
2,611
396
2,693
1986
8,237
41.9
31.0
12.7
14.4
15.0
6.9
48.9
12.3
26.2
12.5
2,650
378
2,746
1987
7,425
43.7
29.6
12.7
14.0
14.5
6.5
48.0
13.0
26.6
12.4
2,332
328
2,401
1988
6,701
46.0
30.0
12.0
12.1
-13.5
5.9
46.1
14.7
27.0
12.2
2,081
310
2,135
1989
6,528
48.6
30.3
11.2
9.9
11.9
4.8
45.7
15.7
28.2
10.4
2,158
330
2,205
1990
6,874
46.1
32.0
11.8
10.1
12.1
5.4
48.3
14.8
27.4
9.5
2,522
388
2,575
1991
8,426
40.1
32.3
14.5
13.0
13.8
6.9
54.7
11.6
24.8
8.9
3,342
447
3,407
1991: June
8,615
39.2
32:3
15.7
12.8
14.0
6.9
54.7
12.3
24.4
8.5
3,406
421
3,177
July
8,475
39.8
32.3
14.6
13.2
13.9
6.8
54.7
11.6
24.3
9.4
3,336
418
3,270
Aug
8,520
39.9
31.6
14.8
13.7
14.1
7.2
55.4
10.5
24.9
9.1
3,283
415
2,999
Sept
8,501
39.0
32.7
14.7
13.6
14.2
7.4
56.1
11.0
23.8
9.1
3,267
415
2,795
Oct
8,641
38.2
32.1
16.4
13.4
14.6
7.4
55.1
11.4
24.2
9.4
3,273
418
2,795
Nov
8,602
38.1
31.5
15.1
15.3
14.9
7.7
54.8
11.5
24.6
9.0
3,313
448
2,846
Dec
8,891
37.1
31.0
15.4
16.5
15.3
7.8
56.2
10.3
24.4
9.1
3,317
464
3,565
1992:
Jan
8,929
36.8
29.5
16.1
17.7
16.4
8.1
53.7
11.0
26.4
8.9
3,349
446
4,197
Feb
9,244
33.3
31.7
16.1
18.9
17.0
8.2
57.8
9.8
23:5
8.9
3,324
452
4,199
Mar
9,242
36.0
29.1
15.5
19.4
17.1
8.0
57.3
9.9
24.0
8.8
3,340
440
4,102
Apr
9,155
35.9
30.2
14.4
19.6
17.0
8.8
56.5
11.3
23.1
9.2
3,348
412
3,627
May
9,504
36.4
27.8
14.8
21.1
18.3
9.0
57.7
10.5
22.7
9.0
3,328
407
3,193
June
9,975
35.6
27.8
15.1
21.5
18.6
8.7
56.3
10.4
22.8
10.4
3,249
.415
3,141
1 Includes State (50 States, District of Columbia, Puerto Rico, and Virgin Islands), ex-service-
Source: Department of Labor (Bureau of Labor Statistics and Employment and Training Adminis-
men (UCX), Federal (UCFE), and railroad (RR) programs. Also includes Federal and State ex-
tration).
tended benefit programs. Does not include Federal supplemental compensation program.
13
NONAGRICULTURAL EMPLOYMENT
Total nonagricultural employment as measured by the payroll survey fell 117,000 in June.
MILLIONS OF PERSONS*
MILLIONS OF PERSONS* (ENLARGED SCALE)
30
110
28
ALL NONAGRICULTURAL
100
ESTABLISHMENTS
26
SERVICES
90
24
22
80
SERVICE-PRODUCING
RETAIL TRADE
INDUSTRIES
20
70
18
GOVERNMENT
60
16
MANUFACTURING
50
20
40
18
GOODS-PRODUCING
INDUSTRIES
6
30
4
CONSTRUCTION
20
1988
1989
1990
1991
1992
1988
1989
1990
1991
1992
SEASONALLY ADJUSTED
SOURCE: DEPARTMENT OF LABOR
COUNCIL OF ECONOMIC ADVISERS
Thousands of wage and salary workers; 1 seasonally adjusted]
Goods-producing industries
Service-producing industries
Total
nonagri-
Manufacturing
Trans-
Finance,
Government
Period
cultural
employ-
Total 2
Con-
portation
Whole-
insur-
Retail
Nondur-
Total
struction
Durable
and
sale
trade
ance,
Services
ment
Total
able
public
trade
and real
Total
Federal=
goods
goods
utilities
estate
1982
89,566
23,813
3,905
18,781
11,014
7,767
65,753
5,082
5,296
15,161
5,341
19,036
15,837
2,739
1983
90,200
23,334
3,948
18,434
10,707
7,726
66,866
4,954
5,286
15,595
5,468
19,694
15,869
2,774
1984
94,496
24,727
4,383
19,378
11,479
7,899
69,769
5,159
5,574
16,526
5,689
20,797
16,024
2,807
1985
97,519
24,859
4,673
19,260
11,464
7,796
72,660
5,238
5,736
17,336
5,955
21,999
16,394
2,875
1986
99,525
24,558
4,816
18,965
11,203
7,761
74,967
5,255
5,774
17,909
6,283
23,053
16,693
2,899
1987
102,200
24,708
4,967
19,024
11,167
7,858
77,492
5,372
5,865
18,462
6,547
24,235
17,010
2,943
1988
105,536
25,173
5,110
19,350
11,381
7,969
80,363
5,527
6,055
19,077
6,649
25,669
17,386
2,971
1989
108,329
25,322
5,187
19,442
11,420
8,022
83,007
5,644
6,221
19,549
6,695
27,120
17,779
2,988
1990
109,782
24,960
5,133
19,117
11,130
7,988
84,822
5,808
6,200
19,677
6,729
28,103
18,304
3,085
1991
108,310
23,830
4,685
18,455
10,602
7,852
84,480
5,772
6,069
19,259
6,678
28,323
18,380
2,966
1991:
June
108,227
23,809
4,692
18,420
10,587
7,833
84,418
5,763
6,069
19,268
6,674
28,251
18,393
2,970
July
108,190
23,792
4,674
18,425
10,586
7,839
84,398
5,767
6,064
19,238
6,662
28,289
18,378
2,965'
Aug
108,267
23,791
4,662
18,443
10,582
7,861
84,476
5,773
6,050
19,244
6,661
28,366
18,382
2,970
Sept
108,293
23,755
4,662
18,414
10,557-
7,857
84,538
5,769
6,049
19,220
6,663
28,450
18,387
2,978
Oct
108,285
23,704
4,642
18,388
10,530
7,858
84,581
5,766
6,040
19,175
6,665
28,525
18,410
2,980
Nov
108,139
23,613
4,585
18,361
10,498
7,863
84,526
5,761
6,031
19,130
6,666
28,514
18,424
2,981
Dec
108,154
23,584
4,592
18,329
10,466
7,863
84,570
5,758
6,021
19,112
6,670
28,559
18,450
2,983
1992: Jan
108,100
23,527
4,587
18,283
10,422
7,861
84,573
5,746
6,010
19,118
6,665
28,577
18,457
2,981
Feb
108,142
23,525
4,582
18,290
10,430
7,860
84,617
5,753
6,003
19,143
6,673
28,584
18,461
2,981
Mar
108,200
23,532
4,603
18,278
10,417
7,861
84,668
5,754
5,997
19,092
6,675
28,643
18,507
2,989
Apr
108,377
23,530
4,605
18,279
10,409
7,870
84,847
5,746
5,993
19,177
6,682
28,707
18,542
2,986
May
108,470
23,540
4,627
18,271
10,395
7,876
84,930
5,742
5,990
19,137
6,682
28,820
18,559
2,985
June
p
108,353
23,444
4,595
18,213
10,364
7,849
84,909
5,752
5,974
19,117
6,677
28,805
18,584
2,975
1 Includes all full- and part-time wage and salary workers in nonagricultural establishments who
weather, etc., even if they are not paid for the time off; and which are based on 8 sample of the
received pay for any part of the pay period which includes the 12th of the month. Excludes propri-
working-age population, whereas the estimates in this table are based on reports from employing
etors, self-employed persons, domestic servants, and personnel of the Armed Forces. Total derived
establishments.
from this table not comparable with estimates of nonagricultural employment of the civilian labor
2 Includes mining, not shown separately.
force, shown on p. 11, which include proprietors, self-employed persons, and domestic servants;
which count persons as employed when they are not at work because of industrial disputes, bad
Source: Department of Labor, Bureau of Labor Statistics.
14
AVERAGE WEEKLY HOURS, HOURLY EARNINGS, AND WEEKLY
EARNINGS
PRIVATE NONAGRICULTURAL INDUSTRIES
[For production or nonsupervisory workers; monthly data seasonally adjusted, except as noted]
Average weekly hours
Average gross hourly earnings
Average gross weekly earnings
Manufacturing
Total private
Total private
Current dollars
Percent change from a
Total
nonagricultural 1
nonagricultural 1
year earlier, total
Period
private
Manufac-
private
nonagri-
turing
Manufac-
Construc-
Retail
nonagricultural
3
Total
Overtime
Current
1982
Current
1982
cultural 1
dollars
dollars 2
dollars 2
turing
tion
trade
dollars
Current
1982
dollars
dollars
1982
34.8
38.9
2.3
$7.68
$7.68
$8.49
$267.26
$267.26
$330.26
$426.82
$163.83
4.7
-1.2
1983
35.0
40.1
3.0
8.02
7.79
8.83
280.70
272.52
354.08
442.97
171.13
5.0
2.0
1984
35.2
40.7
3.4
8.32
7.80
9.19
292.86
274.73
374.03
458.51
174.47
4.3
.8
1985
34.9
40.5
3.3
8.57
7.77
9.54
299.09
271.16
386.37
464.46
174.81
2.1
-1.3
1986
34.8
40.7
3.4
8.76
7.81
9.73
304.85
271.94
396.01
466.75
175.80
1.9
.3
1987
34.8
41.0
3.7
8.98
7.73
9.91
312.50
269.16
406.31
480.44
178.80
2.5
-1.0
1988
34.7
41.1
3.9
9.28
7.69
10.19
322.02
266.79
418.81
495.73
183.62
3.0
-.9
1989
34.6
41.0
3.8
9.66
7.64
10.48
334.24
264.22
429.68
513.17
188.72
3.8
-1.0
1990
34.5
40.8
3.6
10.01
7.52
10.83
345.35
259.47
441.86
526.01
194.40
3.3
-1.8
1991
34.3
40.7
3.6
10.33
7.45
11.18
354.32
255.64
455.03
533.02
198.77
2.6
-1.5
1991: June
34.5
40.7
3.6
10:35
7.48
11.17
357.08
258.01
454.62
533.27
200.45
3.0
-1.5
July
34.2
40.7
3.6
10.34
7.46
11.21
353.63
255.14
456.25
533.02
198.93
1.8
-2.4
Aug
34.3
40.9
3.7
10.38
7.47
11.24
356.03
256.32
459.72
533.14
199.91
2.8
-.7
Sept
34.4
40.9
3.7
10.39
7.46
11.25
357.42
256.58
460.13
537.98
200.20
2.7
-.4
Oct
34.3
40.9
3.7
10.40
7.45
11.27
356.72
255.53
460.94
533.78
200.07
3.2
.5
Nov
34.4
40.9
3.7
10.42
7.44
11.30
358.45
255.85
462.17
529.84
202.05
3.0
.2
Dec
34.5
41.0
3.7
10.46
7.45
11.32
360.87
257.03
464.12
538.37
202.62
3.1
..4
1992: Jan
34.3
40.9
3.6
10.46
7.44
11.27
358.78
255.36
460.94
530.22
202.91
3.0
.6
Feb
34.6
41.1
3.7
10.51
7.46
11.34
363.65
258.27
466.07
526.55
205.61
3.9
1.1
Mar
34.5
41.1
3.8
10.55
7.46
11.37
363.98
257.23
467.31
532.87
205.06
4.2
1.2
Apr
34.3
41.1
3.9
10.52
7.42
11.42
360.84
254.47
469.36
535.95
202.77
3.1
.1
May ,
34.6
41.3
4.0
10.56
7.44
11.44
365.38
257.31
472.47
547.71
205.06
3.4
.6
June P
34.3
41.1
3.9
10.58
7.43
11.44
362.89
254.84
470.18
543.09
203.06
1.9
-1.0
1 Also includes other private industry groups shown on p. 14.
3 Based on seasonally unadjusted data.
2 Current dollar earnings divided by the consumer price index for urban wage earners and clerical
Source: Department of Labor, Bureau of Labor Statistics.
workers (on a 1982=100 base).
EMPLOYMENT COST INDEX-PRIVATE INDUSTRY
Index (June 1989 = 100)
Percent change from
3 months earlier
12 months earlier
Period
Total
Wages and
compensa-
Benefits 1
Total
Total
salaries
tion
Wages and
Benefits 1
Wages and
compensa-
compensa-
Benefits
1
salaries
salaries
tion
tion
Not seasonally adjusted
1982: Dec
75.8
77.6
71.4
1.3
1.2
1.4
6.5
6.3
7.2
1983: Dec
80.1
81.4
76.7
1.3
1.1
1.3
5.7
4.9
7.4
1984: Dec
84.0
84.8
81.7
1.3
1.2
1.4
4.9
4.2
6.5
1985: Dec
87.3
88.3
84.6
.6
.6
.5
3.9
4.1
3.5
1986: Dec
90.1
91.1
87.5
.7
.6
.6
3.2
3.2
3.4
1987: Dec
93.1
94.1
90.5
.6
.6
1.0
3.3
3.3
3.4
1988: Dec
97.6
98.0
96.7
1.0
1.0
1.0
4.8
4.1
6.9
1989: Dec
102.3
102.0
102.6
1.1
.8
1.2
4.8
4.1
6.1
1990: Dec
107.0
106.1
109.4
.8
.7
1.0
4.6
4.0
6.6
1991: Dec
111.7
110.0
116.2
.6
.6
.9
4.4
3.7
6.2
Seasonally adjusted
Not seasonally adjusted
1989: Mar
98.9
99.1
98.2
1.1
1.0
1.2
4.6
4.2
5.4
June
99.9
100.0
99.9
1.0
.9
1.7
4.5
4.1
5.6
Sept
101.2
101.1
101.5
1.3
1.1
1.6
4.8
4.3
6.0
Dec
102.4
102.2
103.0
1.2
1.1
1.5
4.8
4.1
6.1
1990: Mar
103.8
103.3
105.2
1.4
1.1
2.1
5.2
4.2
7.2
June
105.0
104.4
106.7
1.2
1.1
1.4
5.2
4.5
6.9
Sept
106.2
105.4
108.3
1.1
1.0
1.5
4.9
4.2
6.8
Dec
107.2
106.2
109.9
.9
.8
1.5
4.6
4.0
6.6
1991: Mar
108.5
107.3
111.4
1.2
1.0
1.4
4.4
4.0
5.8
June
109.7
108.4
113.2
1.1
1.0
1.6
4.4
3.7
6.2
Sept
110.8
109.2
115.1
1.0
.7
1.7
4.5
3.7
6.4
Dec
111.9
110.1
116.7
1.0
.8
1.4
4.4
3.7
6.2
1992: Mar
113.0
111.0
118.4
1.0
.8
1.5
4.2
3.4
6.3
June
113.7
111.5
119.4
.6
.5
.8
3.7
3.0
5.5
1 Employer costs for employee benefits.
Data exclude farm and household workers.
NOTE.-The employment cost index is a measure of the change in the cost of labor, free from the
Source: Department of Labor, Bureau of Labor Statistics.
influence of employment shifts among occupations and industries.
15
PRODUCTIVITY AND RELATED DATA, BUSINESS SECTOR
Output per hour of
Output 1
Hours of all
Compensation per
Real compensation
Unit labor costs
Implicit price
all persons
persons 2
hour 3
per hour 4
deflator
5
Period
Nonfarm
Nonfarm
Business
Business
Nonfarm
business
Nonfarm
Nonfarm
business
Business
Business
Nonfarm
Business
Business
Nonfarm
sector
business
business
business
business
Business
sector
sector
sector
sector
sector
sector
business
sector
sector
sector
sector
sector
sector
sector
1982=100; quarterly data seasonally adjusted
1981
99.9
99.9
102.4
102.4
102.5
102.5
93.0
93.0
98.7
98.8
93.1
93.1
94.5
94.2
1982
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
1983
102.2
102.4
104.1
104.4
101.8
102.0
103.7
103.9
100.5
100.7
101.5
101.5
103.4
104.0
1984
104.6
104.5
112.6
113.0
107.6
108.1
108.1
108.1
100.4
100.4
103.3
103.4
107.7
107.6
1985
106.1
105.4
116.7
116.8
109.9
110.8
113.0
112.6
101.3
101.0
106.5
106.8
111.2
111.6
1986
108.3
107.5
119.9
120.1
110.7
111.8
118.6
118.1
104.4
104.0
109.5
109.9
113.6
114.2
1987
109.4
108.3
124.8
125.0
114.1
115.4
122.7
122.1
104.3
103.7
112.2
112.8
116.6
117.2
1988
110.4
109.2
130.1
130.6
117.9
119.5
128.0
127.2
104.4
103.7
116.0
116.4
120.8
121.4
1989
109.5
108.2
132.4
132.8
120.9
122.7
132.5
131.5
103.1
102.3
121.0
121.5
126.0
126.4
1990
109.9
108.4
132.9
133.2
120.9
122.9
139.9
138.6
103.3
102.3
127.3
127.9
130.8
131.3
1991
110.7
109.1
130.9
131.0
118.3
120.1
146.1
144.8
103.5
102.6
132.0
132.7
135.1
136.0
1982: IV
101.1
101.0
100.0
100.0
98.9
98.9
102.1
102.1
100.6
100.6
101.0
101.1
101.1
101.4
1983: IV
103.0
103.2
107.5
108.1
104.3
104.7
105.2
105.1
100.4
100.3
102.1
101.8
104.8
105.2
1984: IV
105.2
105.1
114.4
114.8
108.7
109.2
109.7
109.7
100.6
100.5
104.3
104.4
109.0
109.0
1985: IV
106.9
105.8
118.0
118.2
110.4
111.7
115.4
114.8
102.2
101.6
108.0
108.4
112.4
112.9
1986: IV
108.0
107.1
120.6
120.8
111.6
112.8
120.6
120.1
105.3
104.9
111.6
112.1
114.6
115.2
1987: IV
110.3
109.1
127.4
127.6
115.5
116.9
125.3
124.6
104.8
104.2
113.6
114.2
117.9
118.5
1988: IV
110.5
109.6
131.7
132.5
119.2
120.9
130.2
129.3
104.3
103.6
117.8
118.0
122.8
123.4
1989: III
109.4
108.1
132.4
132.8
121.1
122.9
132.9
131.8
102.9
102.1
121.5
122.0
126.4
126.9
IV
109.3
108.0
132.2
132.6
121.0
122.8
134.2
133.2
102.8
102.0
122.8
123.3
127.6
128.0
1990: I
109.5
108.0
133.2
133.5
121.6
123.6
136.1
134.8
102.5
101.6
124.3
124.9
128.8
129.2
II
110.3
108.7
133.9
134.1
121.3
123.3
139.1
137.7
103.7
102.7
126.1
126.7
130.2
130.6
III
110.1
108.4
132.9
133.1
120.7
122.8
141.5
140.1
103.7
102.7
128.6
129.3
131.6
132.2
IV
109.9
108.4
131.8
132.0
119.9
121.7
143.1
141.8
103.2
102.2
130.1
130.8
132.5
133.3
1991: I
109.9
108.4
130.2
130.4
118.5
120.2
144.0
142.8
103.0
102.1
131.0
131.7
134.0
134.9
II
110.5
109.0
130.7
130.9
118.4
120.1
145.7
144.5
103.6
102.7
131.9
132.6
135.0
135.7
III
111.0
109.4
131.3
131.4
118.3
120.1
147.0
145.7
103.8
102.9
132.5
133.2
135.6
136.4
IV
111.5
109.8
131.5
131.5
118.0
119.8
148.0
146.5
103.6
102.6
132.8
133.5
135.9
136.9
1992: IP
112.2
110.5
131.9
131.9
117.5
119.4
148.9
147.3
103.5
102.4
132.6
133.3
136.7
137.7
Percent change; quarterly data at seasonally adjusted annual rates
1981
1.3
0.9
1.9
1.6
0.6
0.7
9.4
9.6
-0.8
-0.7
8.0
8.6
10.1
10.1
1982
.1
.1
-2.3
-2.4
-2.5
-2.4
7.6
7.5
1.3
1.2
7.4
7.4
5.8
6.1
1983
2.2
2.4
4.1
4.4
1.8
2.0
3.7
3.9
.5
.7
1.5
1.5
3.4
4.0
1984
2.3
2.1
8.2
8.2
5.7
6.0
4.2
4.0
-.1
-.3
1.9
1.9
4.1
3.5
1985
1.4
.8
3.6
3.4
2.1
2.5
4.5
4.2
.9
.6
3.0
3.3
3.3
3.7
1986
2.0
1.9
2.8
2.8
.7
.9
4.9
4.9
3.0
3.0
2.8
2.9
2.2
2.4
1987
1.0
.8
4.1
4.1
3.1
3.3
3.5
3.4
-.1
-.2
2.5
2.6
2.6
2.6
1988
.9
.9
4.3
4.4
3.3
3.5
4.3
4.1
.1
.0
3.3
3.2
3.6
3.6
1989
-.7
-.9
1.8
1.7
2.6
2.7
3.5
3.4
-1.2
-1.4
4.3
4.3
4.3
4.1
1990
.4
.1
.4
.3
.0
.1
5.6
5.4
.2
.0
5.2
5.3
3.8
3.9
1991
.7
.7
-1.5
-1.6
-2.2
-2.3
4.4
4.5
.2
.3
3.8
3.8
3.3
3.5
1989: III
-1.1
-.2
-.1
.1
1.0
.3
3.2
3.6
0
.4
4.3
3.8
2.7
3.0
IV
-.4
-.5
-.6
-.7
-.2
-.2
4.0
4.1
-.2
-.1
4.4
4.6
3.7
3.5
1990: I
.9
.1
3.0
2.7
2.0
2.6
5.8
5.1
-1.2
-1.8
4.8
5.0
4.0
3.8
II
3.0
2.7
2.0
1.8
-1.0
-.9
9.2
8.9
4.8
4.6
6.0
6.1
4.3
4.5
III
-1.0
-1.2
-3.0
-3.0
-2.0
-1.8
7.1
7.1
0
.0
8.1
8.4
4.4
4.8
IV
-.4
.2
-3.0
-3.1
-2.6
-3.3
4.4
4.8
-2.3
-1.9
4.9
4.6
2.8
3.4
1991: I
-.1
.0
-4.9
-4.9
-4.8
-4.9
2.7
2.9
-.5
-.3
2.9
2.8
4.5
4.8
II
2.0
2.0
1.7
1.6
--4
-.4
4.8
4.9
2.3
2.3
2.7
2.8
2.9
2.5
III
1.9
1.7
1.8
1.6
-.1
-.1
3.5
3.5
.8
.8
1.6
1.7
1.8
2.1
IV
1.8
1.3
ir
.4
-1.2
-.9
2.7
2.2
-.9
-1.3
.9
.9
1.0
1.5
1992: I
2.8
2.7
1.1
1.2
-1.6
-1.5
2.4
2.2
-.4
-.6
-.4
-.5
2.5
2.4
1 Output refers to gross domestic product originating in the sector in 1987 dollars.
5 Current dollar gross domestic product divided by constant dollar gross domestic product.
2 Hours of all persons engaged in the sector, including hours of proprietors and unpaid family
workers. Estimates based primarily on establishment data.
NOTE.-Data relate to all persons engaged in the sector.
3 Wages and salaries of employees plus employers' contributions for social insurance and private
Percent changes are from preceding period and are based on original data; they therefore may
benefit plans. Also includes an estimate of wages, salaries, and supplemental payments for the self-
differ slightly from percent changes based on indexes shown here.
employed.
Data do not reflect GDP revisions of July 30, 1992.
4
Hourly compensation divided by the consumer price index for all urban consumers.
Source: Department of Labor, Bureau of Labor Statistics.
16
PRODUCTION AND BUSINESS ACTIVITY
INDUSTRIAL PRODUCTION AND CAPACITY UTILIZATION
Industrial production and capacity utilization fell in June.
INDEX, 1987 = 100* (RATIO SCALE)
INDEX, 1987 = 100* (RATIO SCALE)
120
130
TOTAL INDUSTRIAL PRODUCTION
FINAL PRODUCTS
115
125
110
120
115
BUSINESS
105
EQUIPMENT
110
100
105
95
CONSUMER
100
GOODS
120
MANUFACTURING
DURABLE
95
115
DEFENSE
110
90
AND SPACE
EQUIPMENT
105
85
NONDURABLE
100
.80
95
PERCENT*
120
88
CAPACITY UTILIZATION RATE
UTILITIES AND MINING
(TOTAL INDUSTRY)
115
86
UTILITIES
A
84
110
82
105
80
100
78
MINING
95
76
1988
-1989
1990
1991
1992
1988
1989.
1990
1991
1992
* SEASONALLY ADJUSTED
SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
COUNCIL OF ECONOMIC ADVISERS
[Monthly data seasonally adjusted]
Total
Industry production indexes, 1987=100
Capacity utilization
industrial
rate, percent 1
production
Manufacturing
Period
Percent
Utilities
Total
Manufac-
Index,
change
Mining
Total
Durable
Nondurable
1987=100 =
from year
industry
turing
earlier
1981
85.7
1.9
80.3
77.4
84.5
114.3
94.3
80.9
78.8
1982
81.9
4.4
76.6
72.7
82.5
109.3
91.8
75.0
72.8
1983
84.9
3.7
80.9
76.8
87.0
104.8
93.6
75.8
74.9
1984
92.8
9.3
89.3
88.4
90.8
111.9
97.0
81.1
80.4
1985
94.4
1.7
91.6
91.8
91.5
109.0
99.5
80.3
79.5
1986
95.3
1.0
94.3
93.9
94.9
101.0
96.3
79.2
79.0
1987
100.0
4.9
100.0
100.0
100.0
100.0
100.0
81.4
81.4
1988
105.4
5.4
105.8
107.6
103.6
101.8
104.4
84.0
83.9
1989
108.1
2.6
108.9
110.9
106.4
100.5
107.1
84.2
83.9
1990
109.2
1.0
109.9
111.6
107.8
102.6
108.0
83.0
82.3
1991
107.1
-1.9
107.5
107.1
107.9
101.1
109.2
79.4
78.2
1991: June
107.3
2.5
107.5
107.3
107.6
102.1
111.5
79.6
78.3
July
108.1
2.1
108.3
108.1
108.6
102.7
110.9
80.0
78.7
Aug
108.0
2.3
108.4
107.8
109.0
101.3
110.7
79.8
78.6
Sept
108.4
-2.0
108.9
108.4
109.6
101.4
109.7
79.9
78.8
Oct
108.4
-1.4
109.0
108.2
110.1
100.7
109.4
79.8
78.7
Nov
108.1
-.2
108.6
107.8
109.6
99.6
111.0
79.3
78.2
Dec
107.4
.2
108.1
107.1
109.5
98.8
107.9
78.7
77.7
1992: Jan
106.6
0
107.4
105.8
109.5
97.8
106.8
78.0
77.0
Feb
107.2
1.4
108.1
107.0
109.6
98.4
106.4
78.3
77.4
Mar T
107.6
2.5
108.5
107.0
110.4
97.5
107.7
78.4
77.5
Apr T
108.1
2.5
108.9
107.5
110.7
99.1
108.1
78.6
77.7
May
r
108.6
2.1
109.6
108.8
110.5
98.9
107.7
78.9
78.0
June p
108.2
.8
109.3
108.4
110.5
97.5
107.4
78.5
77.6
1 Output as percent of capacity.
Source: Board of Governors of the Federal Reserve System.
17
INDUSTRIAL PRODUCTION-MAJOR MARKET GROUPS AND
SELECTED MANUFACTURES
[1987 = 100; monthly data seasonally adjusted]
Products
Materials
Final products
Intermediate products
Consumer goods
Equipment
Period
De-
Busi-
Ener-
Con-
Total
Total
Dura-
Nondur-
fense
Busi-
Total
struction
ness
gy
Total
ble
able
Total
1
and
supplies
sup-
goods
ness
goods
space
plies
equip-
ment
1982
80.8
84.5
68.7
89.7
77.0
72.9
65.7
75.1
72.2
77.0
85.1
100.7
1983
83.0
88.8
79.7
91.9
76.8
71.9
71.8
80.3
80.2
80.3
88.3
98.9
1984
91.0
92.8
91.0
93.4
89.2
85.4
78.9
86.2
86.2
86.2
96.6
103.8
1985
94.2
93.7
91.6
94.4
94.8
91.1
89.4
88.3
89.1
87.7
96.6
103.4
1986
95.7
96.8
94.5
97.6
94.5
93.2
96.0
92.0
93.8
90.7
95.9
99.4
1987
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
1988
105.6
104.0
104.9
103.7
107.6
111.8
98.0
104.4
104.4
104.4
105.6
101.8
1989
109.1
106.7
107.9
106.4
112.3
119.1
97.4
106.8
106.1
107.3
107.4
101.4
1990
110.9
107.3
106.2
107.6
115.5
123.1
97.3
107.7
105.2
109.4
107.8
102.1
1991
109.6
107.5
102.3
109.0
112.2
121.5
91.1
103.4
96.0
108.4
105.5
102.3
1991:
June
110.1
108.0
104.2
109.0
112.8'
121.9
91.0
104.0
97.4
108.5
105.4
103.4
July
110.2
108.3
105.5
109.0
112.8
122.5
90.0
104.0
96.9
109.0
107.0
104.1
Aug
109.8
108.4
104.0
109.6
111.6
121.3
89.8
104.4
96.7
109.7
107.2
103.3
Sept
110.4
109.4
107.7
109.8
111.8
122.2
89.1
104.3
96.5
109.7
107.5
103.6
Oct
110.6
109.7
107.5
110.3
111.9
122.3
89.1
104.1
95.4
110.1
107.4
103.1
Nov
110.6
110.0
106.0
111.1
111.4
121.8
88.8
103.9
95.9
109.4
106.6
102.2
Dec
109.9
109.1
104.6
110.3
110.9
121.4
88.1
103.8
95.0
110.0
105.8
100.4
1992:
Jan
108.7
108.1
101.3
110.0
109.4
119.9
86.7
103.9
95.5
109.9
105.2
100.4
Feb
109.4
108.8
105.3
109.8
110.2
121.0
86.2.
104.0
96.0
109.6
105.8
100.5
Mar
109.8
109.3
106.2
110.2
110.4
121.5
85.6
104.4
96.7
109.7
106.1
100.1
Apr r
110.6
110.1
107.7
110.7
111.3
123.0
84.6
104.0
96.3
109.4
106.7
-101.3
May
r
111.1
110.5
111.1
110.3
112.0
124.2
84.3
104.6
97.3
109.6
107.1
100.9
June p
110.7
110.0
110.2
109.9
111.7
124.0
83.9
104.2
96.1
109.8
106.9
100.1
1 Includes oil and gas well drilling and manufactured homes, not shown separately.
[1987 = monthly data seasonally adjusted]
Durable manufactures
Nondurable manufactures
Primary metals
Transportation
Fabri-
Non-
equipment
Print-
Chemi-
Period
Electri-
Lum-
cated
electri-
Ap-
Iron
cal
Motor
ber and
ing
cals
metal
cal
parel
and
and
Foods
Total
machin-
and
vehi-
prod-
machin-
prod-
prod-
ucts
ery
Total
cles
steel
ucts
ucts
pub-
prod-
ery
and
lishing
ucts
parts
1982
83.2
86.2
83.2
63.9
75.9
64.8
58.8
67.3
90.1
75.2
81.8
87.7
1983
91.0
96.1
85.5
64.3
80.3
72.7
74.5
79.9
93.8
79.0
87.5
90.1
1984
102.4
105.9
93.3
80.8
94.1
83.1
90.6
86.0
95.7
84.5
91.4
92.1
1985
101.8
104.5
94.5
86.8
93.1
91.8
99.0
88.0
92.6
87.6
91.4
94.9
1986
93.8
90.8
93.8
90.4
94.3
96.9
98.5
95.1
96.3
90.7
94.6
97.4
1987
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
1988
110.3
113.8
106.2
113.8
106.5
105.0
105.5
104.6
102.2
103.6
105.4
102.8
1989
109.2
109.3
107.2
121.8
109.5
107.2
104.9
103.0
104.3
108.5
108.5
105.5
1990
108.4
109.9
105.9
126.5
111.4
105.5
96.8
101.6
98.8
111.9
110.3
107.6
1991
99.5
98.0
100.4
123.5
110.1
98.6
90.4
94.2
96.2
112.3
:110.9
108.6
1991: June
96.4
92.9
99.8
123.4
111.5
99.7
92.5
96.7
96.2
111.2
109.6
108.6
July
101.2
99.5
100.9
123.9
111.0
101.3
96.7
94.8
97.8
111.9
111.5
108.3
Aug
102.6
100.6
101.4
123.3
111.5
99.0
91.6
95.3
98.3
112.3
112.3
108.7
Sept
102.3
100.8
101.9
123.1
111.0
102.2
99.5
95.2
98.1
113.3
112.6
109.5
Oct
102.6
102.4
101.9
123.5
109.8
102.4
100.4
93.8
98.7
114.4
113.5
109.4
Nov
103.5
105.6
101.8
122.8
110.7
99.7
95.9
96.4
98.8
114.2
113.0
110.1
Dec
101.3
101.7
101.2
121.9
110.6
98.0
94.6
95.2
99.0
114.5
112.6
109.6
1992: Jan
102.5
105.0
99.7
121:4
110.0
93.8
87.1
97.4
97.5
114.8
112.7
109.2
Feb
102.7
103.7
100.5
121.9
110.7
96.8
93.8
98.8
97.7
114.4
113.4
109.6
Mar
101.4
102.5
100.0
122.9
110.9
96.5
94.2
99.2
97.8
113.8
114.8
110.2
Apr
100.8
101.0
100.6
124.1
110.7
98.0
98.5
97.2
98.0
114.1
115.3
109.9
May
100.8
100.4
102.1
126.2
112.1
99.8
102.7
96.7
99.0
114.4
115.6
109.4
June P
102.3
102.8
101.5
126.2
111.6
98.4
100.1
94.3
98.6
114.3
115.6
108:9
Source: Board of Governors of the Federal Reserve System.
18
NEW CONSTRUCTION
[Monthly data seasonally adjusted]
Private
Construction contracts 3
Total new
Residential
Federal,
Commercial
Period
construction
Commercial
State, and
Total value
and industrial
expenditures
Total
and
Other
local
index
Total 1
New housing
floor space
industrial 2
units
(1987=100)
(millions of
square feet)
Billions of dollars
1983
294.9
231.5
125.5
94.6
57.7
48.2
63.5
75
756
1984
348.8
278.6
153.8
113.8
74.0
50.8
70.2
83
955
1985
377.4
299.5
158.5
114.7
89.8
51.3
77.8
91
1,097
1986
407.7
323.1
187.1
133.2
84.4
51.6
84.6
96
1,016
1987 ,
419.4
328.7
194.7
139.9
84.0
50.1
90.6
100
1,019
1988
432.3
337.5
198.1
138.9
88.0
51.5
94.8
101
973
1989 r
443.4
345.3
196.6
139.2
94.3
54.5
98.1
105
961
1990 r
442:1
334.2
182.9
128.0
96.4
54.9
107.9
95
783
1991 r
401.0
290.7
157.8
110.6
77.0
55.8
110.2
89
545
Annual rates
Annual rates
1991: June ,
394.3
286.3
154.9
107.7
75.7
55.8
107.9
83
438
July r
397.0
287.7
157.0
110.0
74.8
55.9
109.3
89
469
Aug
404.8
291.8
161.5
114.4
74.0
56.3
113.1
92
507
Sept r
406.0
293.6
164.2
117.1
72.9
56.5
112.4
89
408
Oct r
406.1
291.7
164.7
117.5
70.1
56.9
114.4
98
625
Nov
401.2
288.3
164.5
118.0
67.4
56.4
112.9
82
474
Dec r
398.7
287.4
164.1
118.3
67.3
56.0
111.4
97
479
1992: Jan ,
407.1
292.5
169.5
122.0
65.8
57.2
114.6
95
472
Feb r
411.8
294.8
169.8
123.3
66.7
58.3
117.0
102
563
Mar ,
421.5
301.1
172.7
125.9
69.1
59.4
120.4
98
497
Apr r
423.1
305.5
178.9
128.9
65.9
60.7
117.6
94
499
May P
423.4
303.1
178.7
128.5
63.6
60.8
120.3
'87
423
June P
416.9
303.5
180.7
130.1
62.9
59.8
if
113.4
90
525
1 Includes residential improvements, not shown separately.
NOTE.-New construction expenditures series revised beginning 1987.
z Includes hotels and motels.
3 F.W. Dodge series.
Sources: Department of Commerce (Bureau of the Census) and McGraw-Hill Information Systems
Company, F.W. Dodge Division.
NEW PRIVATE HOUSING AND VACANCY RATES
[Thousands of units or homes, except as noted]
New private housing units
New private-homes
Vacancy rate
Period
Units started, by type of structure
for rental
Units
Units
Homes for
Homes sold
sale at end of
housing units
Total
1 unit
2-4 units
5 or more units
authorized
completed
period 1.
(percent)
2
1982
1,062.2
662.6
80.0
319.6
1,000.5
1,005.5
412
253
5.3
1983
1,703.0
1,067.6
113.5
522.0
1,605.2
1,390.3
623
301
5.7
1984
1,749.5
1,084.2
121.4
544.0
1,681.8
1,652.2
639
353
5.9
1985
1,741.8
1,072.4
93.4
576.1
1,733.3
1,703.3
688
346
6.5
1986
1,805.4
1,179.4
84.0
542.0
1,769.4
1,756.4
750
357
7.3
1987
1,620.5
1,146.4
65.3
408.7
1,534.8
1,668.8
671
366
7.7
1988
1,488.1
1,081.3
58.8
348.0
1,455.6
1,529.8
676
368
7.7
1989
1,376.1
1,003.3
55.2
317.6
1,338.4
1,422.8
650
365
7.4
1990
1,192.7
894.8
37.5
260.4
1,110.8
1,308.0
534
321
7.2
1991
1,013.9
840.4
35.6
137.9
948.8
1,090.8
509
283
7.4
Seasonally adjusted annual rates
1991: May
983
830
36
117
988
1,072
511
298
June
1,036
870
26
140
956
1,104
513
296
7.3
July
1,053
881
46
126
971
1,065
505
295
Aug
1,053
881
41
131
940
1,051
522
292
Sept
1,020
864
28
128
974
1,193
499
292
7.6
Oct
1,085
887
49
149
994
1,073
526
289
Nov
1,085
907
33
145
979
1,021
578
286
Dec
1,118
972
46
100
1,073
1,021
578
283
7.3
1992: Jan
1,180
989
28
163
1,106
1,043
667
281
Feb
1,257
1,109
24
124
1,146
1,097
627
269
Mar
1,340
1,068
53
219
1,094
1,127
555
277
7.4
Apr T
1,086
933
27
126
1,058
1,052
535
275
May r
1,205
1,035
30
140
1,054
1,187
530
273
June P
1,167
1,010
47
110
1,032
572
274
7.7
1 Seasonally adjusted.
2 Quarterly data entered in last month of quarter. Series beginning 1989 not comparable with
NOTE.-Beginning 1984, units authorized are for 17,000 permit-issuing places; for 1978-83 data
earlier data.
are for 16,000 places.
Source: Department of Commerce, Bureau of the Census.
19
BUSINESS SALES AND INVENTORIES-Manufacturing and Trade
In May, manufacturing and trade sales fell 0.2 percent and inventories rose $0.5 billion. In June, according to
advance data, retail sales rose 0.5 percent, following a rise of 0.4 percent in May.
BILLIONS OF DOLLARS (RATIO SCALE)
BILLIONS OF DOLLARS* (RATIO SCALE)
1,000
300
900
250
800
700
MANUFACTURING AND
200
RETAIL INVENTORIES
TRADE INVENTORIES
600
500
150
MANUFACTURING
AND TRADE SALES
RETAIL SALES
400
100
300
RATIO
*
1.80
INVENTORY-SALES RATIO
1.70
RETAIL
1.60
200
1.50
MANUFACTURING
1.40
AND TRADE
1.30
1988
1989
1990
1991
1992
1988
1989
1990
1991
1992
*SEASONALLY ADJUSTED
SOURCE: DEPARTMENT OF COMMERCE
COUNCIL OF ECONOMIC ADVISERS
Manufacturing and
Wholesale
Retail
Inventory-sales ratio 4
trade
1
Sales
2
Inventories 3
Period
Manufac-
Inven-
Sales 2
Inven-
Sales 2
tories 3
Durable
Nondura-
-Durable
Nondura-
turing
Retail
tories 3
Total
and
goods
ble goods
Total
goods
ble goods
trade 1
stores
stores
stores
stores
Millions of dollars, seasonally adjusted, except as noted
1982
348,771
575,486
96,357
129,024
89,062
27,966
61,097
134,628
61,316
73,312
1.67
1.49
1983
370,501
591,858
100,440
131,663
197,514
32,571
64,943
147,833
68,856
78,977
1.56
1.44
1984
411,427
651,527
113,502
144,223
107,243
37,873
69,369
167,812
79,074
88,738
1.53
1.49
1985
423,940
665,837
114,816
149,155
114,586
41,510.
73,075
181,881
88,315
93,566
1.55
1.52
1986
431,786
664,654
116,326
155,445
120,803
45,057
75,746
186,510
89,983
96,527
1.55
1.56
1987
459,107
711,745
124,340
165,814
128,442
47,989
80,453
207,836
105,481
102,355
1.50
1.55
1988
496,334
767,387
135,254
180,717
137,539
52,219
85,320
219,274
111,892
107,382
1.50
1.55
1989
522,344
813,018
144,039
188,635
145,580
54,329
91,252
237,599
120,138
117,461
1.53
1.59
1990
540,788
835,985
149,204
196,917
152,126
55,065
97,061
240,217
119,331
120,886
1.53
1.57
1991
533,838
828,184
145,135
198,979
153,562
54,413
99,149
243,162
117,454
125,708
1.55
1.55
1991: May r
535,424
824,177
145,085
195,308
154;686
54,814
99,872
236,336
115,674
120,662
1.54
1.53
June
535,012
820,357
145,511
194,583
154,594
54,877
99,717
234,736
114,017
120,719
1.53
1.52
July
539,729
819,641
147,238
195,217
154,875
54,819
100,056
235;650
114,364
121,286
1.52
1.52
Aug
537,373
819,746
145,710
195,323
153,819
54,080
99,739
236,523
115,121
121,402
1.53
1.54
Sept
539,269
822,401
146,103
194,007
154,330
55,223
99,107
238,842
116,582
122,260
1.53
1.55
Oct
541,247
824,672
145,766
195,371
154,569
55,450
99,119
240,746
117,293
123,453
1.52
1.56
Nov
540,382
825,505
145,310
196,347
154,092
54,722
99,370
240,879
116,873
124,006
1.53
1.56
Dec
531,919
828,184
144,909
198,979
154,280
55,406
98,874
243,162
117,454
125,708
1.56
1.58
1992: Jan
536,977
824,150
145,922
198,730
157,808
56,919
100,889
240,986
115,918
125,068
1.53
1.53
Feb
544,017
824,609
146,366
199,416
159,753
57,961
101,792
241,938
117,259
124,679
1.52
1.51
Mar
545,424
826,204
146,867
198,677
157,873
57,122
100,751
244,288
119,827
124,461
1.51
1.55
Apr r
547,081
828,630
146,947
198,432
158,385
57,442
100,943
247,992
122,884
125,108
1.51
1.57
May p
546,154
829,137
145,670
198,516
159,005
57,878
101,127
247,335
122,758
124,577
1.52
1.56
June p
159,762
58,281
101,481
1 See page 21 for manufacturing.
3 Seasonally adjusted, end of period.
2 Annual data are average of monthly not seasonally adjusted figures; monthly data are seasonal-
4 Annual data are averages of seasonally adjusted monthly ratios.
ly adjusted total for month.
Source: Department of Commerce, Bureau of the Census.
20
MANUFACTURERS' SHIPMENTS, INVENTORIES, AND ORDERS
In June, manufacturers' shipments and new orders rose, while inventories and unfilled orders fell.
BILLIONS OF DOLLARS* (RATIO SCALE)
BILLIONS OF DOLLARS* (RATIO SCALE)
280
SHIPMENTS
240
440
INVENTORIES
200
360
TOTAL
160
DURABLE GOODS
280
TOTAL
120
200
DURABLE GOODS
NONDURABLE GOODS
160
80
120
60
NONDURABLE GOODS
80
BILLIONS OF DOLLARS* (RATIO SCALE)
280
NEW ORDERS
60
240
200
TOTAL
160
DURABLE GOODS
RATIO
*
2.20
120
INVENTORY-SHIPMENTS RATIO
2.00
NONDURABLE GOODS
1.80
80
1.60
60
1.40
1.20
1988
1989
1990
1991
1992
1988
1989
1990
1991
1992
SEASONALLY ADJUSTED
SOURCE: DEPARTMENT OF COMMERCE
COUNCIL OF ECONOMIC ADVISERS
Manufacturers' shipments 1.
Manufacturers' inventories 2
Manufacturers' new orders 1
Manufac-
Durable goods
Manufac-
turers'
Period
turers'
inven-
Durable
Nondurable
Total
Durable
Nondurable
Capital
Nondurable
unfilled
Total
Total
tory-
goods
goods
goods
goods
goods
goods
orders 2
Total
shipments
industries,
ratio 3
non-defense
Millions of dollars, seasonally adjusted, except as noted
1982
163,351
79,212
84,139
311,834
200,423
111,411
162,140
78,064
19,213
84,077
311,889
1.95
1983
172,547
85,481
87,066
312,362
199,831
112,531
175,451
88,140
19,624
87,311
347,272
1.78
1984
190,682
97,940
92,742
339,492
221,304
118,188
192,879
100,164
23,669
92,715
373,524
1.73
1985
194,538
101,279
93,259
334,801
218,211
116,590
195,706
102,356
24,545
93,351
387,087
1.73
1986
194,657
103,238
91,419
322,699
212,027
110,672
195,204
103,647
23,983
91,557
393,403
1.68
1987
206,326
108,128
98,198
338,095
220,786
117,309
209,389
110,809
26,095
98,579
430,287
1.59
1988
223,541
117,993
105,549
367,396
241,356
126,040
227,026
121,445
30,729
105,581
471,942
1.58
1989
232,724
121,703
111,022
386,784
255,911
130,873
235,905
124,906
32,725
110,999
510,112
1.64
1990
239,459
122,387
117,072
398,851
259,746
139,105
240,417
123,324
32,227
117,093
521,811
1.65
1991
235,142
118,548
116,593
386,043
246,966
139,077
233,774
117,063
29,862
116,712
505,631
1.67
1991: June
234,907
118,904
116,003
391,038
252,919
138,119
229,219
113,478
27,558
115,741
509,370
1.66
July
237,616
120,222
117,394
388,774
251,459
137,315
244,580
127,153
34,982
117,427
516,334
1.64
Aug
237,844
121,021
116,823
387,900
250,520
137,380
239,750
122,630
29,462
117,120
518,240
1.63
Sept
238,836
121,958
116,878
389,552
251,319
138,233
233,703
116,528
28,762
117,175
513,107
1.63
Oct
240,912
122,771
118,141
388,555
249,738
138,817
238,542
120,227
29,452
118,315
510,737
1.61
Nov
240,980
122,814
118,166
388,279
249,202
139,077
238,680
120,344
33,067
118,336
508,436
1.61
Dec
232,730
116,869
115,861
386,043
246,966
139,077
229,924
113,920
26,968
116,004
505,631
1.66
1992: Jan
233,247
118,698
114,549
384,434
245,754
138,680
232,467
118,011
30,093
114,456
504,851
1.65
Feb
237,898
121,991
115,907
383,255
244,395
138,860
233,388
117,750
29,463
115,638
500,341
1.61
Mar
240,684
123,503
117,181
383,239
243,787
139,452
237,606
120,187
32,163
117,419
497,263
1.59
Apr r
241,749
123,483
118,266
382,206
242,512
139,694
240,771
122,393
29,901
118,378
496,285
1.58
May P
241,479
122,344
119,135
383,286
242,447
140,839
238,696
119,808
30,469
118,888
493,502
1.59
June p
247,318
126,069
121,249
382,881
241,570
141,311
244,205
123,091
31,160
121,114
490,389
1.55
1 Annual data are average of monthly not seasonally adjusted figures; monthly data are seasonal-
3 Annual data are averages of seasonally adjusted monthly ratios.
ly adjusted total for month. Shipments are the same as sales.
2 Seasonally adjusted, end of period.
Source: Department of Commerce, Bureau of the Census.
21
PRICES
PRODUCER PRICES
In June, the producer price index for all finished goods rose 0.2 percent. Prices of finished consumer foods rose 0.2
percent and prices of other finished consumer goods rose 0.4 percent. Capital equipment prices fell 0.1 percent.
INDEX, 1982 = 100 (RATIO SCALE)
INDEX, 1982 = 100 (RATIO SCALE)
FINISHED GOODS PRICES
SEASONALLY ADJUSTED
130
130
CONSUMER FOODS
120
120
CAPITAL EQUIPMENT
110
110
TOTAL
100
CONSUMER GOODS
100
EXCLUDING FOODS
90
90
1984
1985
1986
1987
1988
1989
1990
1991
1992
SOURCE: DEPARTMENT OF LABOR
COUNCIL OF ECONOMIC ADVISERS
[1982=100; monthly data seasonally adjusted]
Finished goods
Intermediate materials
Crude materials
Finished goods excluding consumer foods
Total
Food-
Period
Total
Con-
finished
Foods
stuffs
finished
sumer
Consumer goods
Capital
con-
Total
and
Other
Total
and
Other
goods
foods
Total
equip-
sumer
feeds
1
feed-
Total
Durable
Nondurable
ment
goods
stuffs
1982
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
1983
101.6
101.0
101.8
101.2
102.8
100.5
102.8
101.3
100.6
103.6
100.5
101.3
101.8
100.7
1984
103.7
105.4
103.2
102.2
104.5
101.1
105.2
103.3
103.1
105.7
103.0
103.5
104.7
102.2
1985
104.7
104.6
104.6
103.3
106.5
101.7
107.5
103.8
102.7
97.3
103.0
95.8
94.8
96.9
1986
103.2
107.3
101.9
98.5
108.9
93.3
109.7
101.4
99.1
96.2
99.3
87.7
93.2
81.6
1987
105.4
109.5
104.0
100.7
111.5
94.9
111.7
103.6
101.5
99.2
101.7
93.7
96.2
87.9
1988
108.0
112.6
106.5
103.1
113.8
97.3
114.3
106.2
107.1
109.5
106.9
96.0
106.1
85.5
1989
113.6
118.7
111.8
108.9
117.6
103.8
118.8
112.1
112.0
113.8
111.9
103.1
111.2
93.4
1990
119.2
124.4
117.4
115.3
120.4
111.5
122.9
118.2
114.5
113.3
114.5
108.9
113.1
101.5
1991
121.7
124.2
120.9
118.7
123.9
115.0
126.7
120.5
114.4
111.1
114.6
101.2
105.5
94.6
1991: June
121.4
124.7
120.2
117.8
123.3
114.2
126.7
120.1
114.2
110.2
114.4
99.3
106.0
91.5
July
121.2
124.0
120.1
117.7
123.5
114.0
126.8
119.8
113.8
108.5
114.1
99.3
104.2
92.4
Aug
121.5
123.4
120.6
118.3
123.8
114.9
126.9
120.2
114.1
110.6
114.3
99.1
102.6
93.1
Sept
121.8
123.3
121.2
119.0
124.3
115.3
127.1
120.4
114.3
110.8
114.5
98.4
104.2
91.1
Oct
122.1
123.3
121.7
119.6
124.4
116.1
127.3
120.8
114.0
111.7
114.2
100.5
104.2
94.2
Nov
122.2
123.1
121.9
119.8
124.6
116.2
127.5
120.9
114.0
112.0
114.1
100.4
103.5
94.5
Dec
122.1
123.0
121.7
119.5
124.7
115.8
127.7
120.7
113.9
111.9
114.0
98.3
102.9
91.6
1992: Jan
121.9
122.5
121.6
119.0
125.4
114.9
128.3
120.2
113.2
110.8
113.3
97.3
104.8
88.8
Feb
122.2
123.7
121.7
119.2
125.2
115.2
128.4
120.6
113.7
112.1
113.8
99.0
106.9
90.2
Mar
122.3
123.2
122.0
119.5
125.6
115.5
128.3
120.7
113.9
111.6
114.0
97.9
106.0
89.1
Apr
122.5
122.8
122.2
119.9
125.8
116.1
128.5
121.0
114.0
111.3
114.1
98.4
104.5
90.7
May
123.0
122.3
123.0
120.7
125.7
117.3
129.2
121.4
114.4
111.2
114.6
99.8
105.4
92.5
June
123.3
122.6
123.3
121.2
125.6
118.1
129.1
121.9
115.2
111.7
115.4
101.1
106.2
94.0
1 Intermediate materials for food manufacturing and feeds.
Source: Department of Labor, Bureau of Labor Statistics.
22
CONSUMER PRICES-ALL URBAN CONSUMERS
In June, the consumer price index for all urban consumers rose 0.3 percent, seasonally adjusted (it rose 0.4 percent
not seasonally adjusted). The index was 3.1 percent above its year-earlier level.
INDEX, 1982-84 - 100 (RATIO SCALE)
INDEX, 1982-84 - 100 (RATIO SCALE)
150
150
SEASONALLY ADJUSTED
140
140
130
130
CONSUMER PRICES-ALLITEMS
120
120
110
110
100
100
90
90
80
80
1984
1985
1986
1987
1988
1989
1990
1991
1992
SEE NOTE ON TABLE BELOW
SOURCE: DEPARTMENT OF LABOR
COUNCIL OF ECONOMIC ADVISERS
[1982-84=100, except as noted; monthly data seasonally adjusted, except as noted]
All items 1
Housing
Transportation
Shelter
All
Not
Sea-
Home-
items
Period
season-
Food
Rent-
Fuel
Appar-
Medi-
Ener-
less
son-
ally
ers'
own-
Mainte-
and
el and
cal
Motor
2
ally
Total 1
nance
Total
1
New
gy
food
adjust-
ers'
other
ed
adjust-
Total
costs
upkeep
fuel
care
and
utili-
cars
and
(NSA)
ed
(Dec.
costs
1982=
(Dec.
repairs
ties
energy
1982=
100)
(NSA)
100)
Rel. imp. 3
100.0
16.0
41.5
27.9
8.0
19.7
0.2.
7.3
6.1
17.0
4.1
3.3.
6.7
7.4
76.6
1982
96.5
97.4
96.9
96.9
96.4
94.9
97.8
97.0
97.4
102.8
92.5
99.2
95.8
1983
99.6
99.4
99.5
99.1
103.0
102.5
99.9
100.2
100.2
99.3
99.9
99.4
100.6
99.9
99.6
1984
103.9
103.2
103.6
104.0
108.6
107.3
103.7
104.8
102.1
103.7
102.8
97.9
106.8
100.9
104.6
1985
107.6
105.6
107.7
109.8
115.4
113.1
106.5
106.5
105.0
106.4
106.1
98.7
113.5
101.6
109.1
1986
109.6
109.0
110.9
115.8
121.9
119.4
107.9
104.1
105.9
102.3
110.6
77.1
122.0
88.2
113.5
1987
113.6
113.5
114.2
121.3
128.1
124.8
111.8
103.0
110.6
105.4
114.6
80.2
130.1
88.6
*118.2
1988
118.3
118.2
118.5
127.1
133.6
131.1
114.7
104.4
115.4
108.7
116.9
80.9
138.6
89.3
123.4
1989
124.0
125.1
123.0
132.8
138.9
137.3
118.0
107.8
118.6
114.1
119.2
-88.5
149.3
94.3
129.0
1990
130.7
132.4
128.5
140.0
146.7
144.6
122.2
111.6
124.1
120.5
121.0
101.2
162.8
102.1
135.5
1991
136.2
136.3
133.6
146.3
155.6
150.2
126.3
115.3
128.7
123.8
125.3
99.4
177.0
102.5
142.1
1991:
June
136.0
136.1
137.3
133.2
145.8
154.6
149.9
126.2
114.4
127.8
123.4
125.5
98.7
176.6
101.1
142.0
July
136.2
136.2
136.6
133.6
146.1
155.0
150.2
126.9
115.0
127.7
123.6
125.7
97.1
177.7
100.6
142.4
Aug
136.6
136.6
136.3
133.8
146.4
155.2
150.5
127.2
115.3
129.2
124.2
125.9
98.0
178.9
101.2
143.0
Sept
137.2
137.1
136.5
134.2
146.9
155.8
151.1
126.8
115.7
130.0
124.2
126.3
97.9
180.0
101.4
143.6
Oct
137.4
137.4
136.4
134.6
147.4
156.3
151.6
126.6
116.2
130.3
124.0
126.2
97.3
181.1
101.4
143.9
Nov
137.8
137.9
137.0
135.0
147.9
156.6
152.1
127.6
116.8
131.1
124.5
126.3
98.2
182.0
102.2
144.4
Dec
137.9
138.2
137.4
135.4
148.4
157.3
152.7
128.1
116.8
129.6
124.8
126.5
98.5
183.3
102.3
144.7
1992:
Jan
138.1
138.3
136.8
135.7
149.1
158.4
153.2
128.0
116.4
130.0
124.4
126.6
96.3
184.5
100.8
145.1
Feb
138.6
138.7
137.2
136.0
149.5
158.9
153.6
128.3
115.9
131.9
124.2
126.7
95.7
186.0
99.9
145.7
Mar
139.3
139.4
137.9
136.5
150.0
158.5
154.5
128.4
116.4
132.7
125.1
127.2
96.6
187.0
100.5
146.4
Apr
139.5
139.7
137.8
136.7
150.2
158.9
154.6
128.0
116.9
131.8
125.7
127.8
96.8
188.0
100.9
146.8
May
139.7
139.9
137.3
136.9
150.4
159.5
154.7
128.1
117.1
132.3
126.1
128.0
97.9
189.0
101.5
147.1
June
140.2
140.3
137.5
137.5
151.1
160.4
155.3
128.5
117.5
132.0
126.7
128.5
101.0
189.8
103.5
147.4
1 Includes items not shown separately.
2 Household fuels-gas (piped), electricity, fuel oil, etc.-and motor fuel. Motor oil, coolant, etc.
NOTE.-Data beginning 1983 incorporate a rental equivalence measure for homeownership costs
also included through 1982.
and therefore are not strictly comparable with figures for earlier periods.
3 Relative importance, December 1991.
Data beginning 1987 and 1988 calculated on 8 revised basis.
Source: Department of Labor, Bureau of Labor Statistics.
23
CHANGES IN PRODUCER PRICES FOR FINISHED GOODS
[Percent change from preceding period; monthly data seasonally adjusted, except as noted by NSA]
Change from preceding period
Change from 3: months earlier, annual rate
Change:from 6 months earlier, annual rate
Change
from
Consumer goods
Consumer goods
Consumer goods
year
earlier,
Period
Total
Capital
Total
Total
total
finished
Exclud-
equip-
finished
Capital
finished
Capital
finished
goods
Foods
ment
ing foods
goods
Foods
Excluding
equipment
goods
Foods
Excluding
equipment
foods
foods
goods
NSA
Change, Dec. to Dec., NSA
1982
3.6
2.0
4.2
3.9
4.1
1983
.6
2.3
-.9
2.0
1.6
1984
1.7
3.5
.8
1.8
2.1
1985
1.8
.6
2.1
2.7
1.0
1986
-2.3
2.8
-6.6
2.1
-1.4
1987
2.2
-.2
4.1
1.3
2.1
1988
4.0
5.7
3.1
3.6
2.5
1989
4.9
5.2
5.3
3.8
5.2
1990
5.7
2.6
8.7
3.4
4.9
1991
-.1
-1.5
-.7
2.5
2.1
Change, month to month
1991: June
-0.2
-0.2
-0.3
0.1
0.7
-0.6
0.7
1.6
-1.1
-0.3
-4.0
3.4
3.5
July
-.2
-:6
-.1
.1
-.7
-4.1
0
1.9
-2.0
-1.3
-4.0
1.8
2.9
Aug
.2
-.5
.5
.1
-.3
-5.0
.7
1.0
-.2
-2.2
-.7
1.6
2.0
Sept
.2
-.1
.6
.2
1.3
-4.4
4.1
1.3
1.0
-2.5
2.4
1.4
.8
Oct
-.2
0
.5
.2
3.0
-2.2
6.6
1.6
1.2
-3.2
3.3
1.8
-.1
Nov
.1
-.2
.2
.2
2.3
-1.0
5.2
1.9
1.0
-3.0
2.9
1.4
-.5
Dec
-.1
-.1
-.3
.2
1.0
-1.0
1.7
1.9
1.2
-2.7
2.9
1.6
-.1
1992: Jan
-.2
-.4
-.4
.5
-.7
-2.6
-2.0
3.2
1.2
-2.4
2.2
2.4
-.4
Feb
.2
1.0
.2
.1
0
2.0
-2.0
2.9
1.2
.5
1.5
2.4
.6
Mar
r
.1
-.4
.3
-.1
.7
.7
0
1.9
1.8
-.2
.8
1.9
.9
Apr
.2
-.3
.3
.2
2.0
1.0
3.1
.6
.7
-.8
.5
1.9
.9
May
.4
--.4
.7
.5
2.6
-4.5
-5.1
2.5
1.3
-1.3
1.5
2.7
1.1
June
.2
.2
.4
-.1
3.3
-1.9
5.8
2.5
2.0
-.6
2.9
2.2
1.5
Source:-Department of Labor, Bureau of Labor Statistics.
CHANGES IN CONSUMER PRICES-ALL URBAN CONSUMERS
[Percent change from preceding period; monthly data seasonally adjusted, except as noted by NSA]
Housing
Transportation
Addendum: All.items, percent change
All
(annual rate)
Shelter
Ap-
items
Fuel-
parel
Medi-
All
Ener-
less
From
Period
Food
items 1
and
and
cal
From
From
From
Total
i
New
Motor
Rent-
Home-
up-
Total
gy2
food
1
previ-
other
care
3
6
fuel
and
year
cars
ous
Total
1
ers'
owners'
utili-
keep
months
months
earlier
costs
ties
energy
quar-
costs
earlier
earlier
ter 3
NSA
Change, December to December, NSA
1982
3.8
3.1
3.6
2.4
9.7
1.6
1.8
1.5
-6.5
11.0
1.3
4.5
6.2
1983
3.8
2.7
3.5
4.7
5.1
4.5
1.8
2.9
3.9
3.4
-1.7
6.4
-.5
4:8
3.2
1984
3.9
3.8
4.3
5.2
5.9
5.1
4.2
2.0
3.1
2.5
-2.4
6.1
.2
4.7
4.3
1985
3.8
2.6
4.3
6.0
6.3
5.9
1.8
2.8
2.6
3.4
3.1
6.8
1.8
4.3
3.6
1986
1.1
3.8
1.7
4.6
5.0
4.6
-5.6
.9
-5.9
5.9
30.7
7.7
-19.7
3.8
1.9
1987
4.4
3.5
3.7
4.8
3.9
5.3
1.6
4.8
6.1
1.8
18.7
5.8
8.2
4.2
3.6
1988
4.4
5.2
4.0
4.5
3.9
4.7
2.9
4.7
3.0
2.1
-2.1
6.9
.5
4.7
4.1
1989
4.6
5.6
3.9
4.9
4.5
5.1
3.2
1.0
4.0
2.3
6.8
8.5
5.1
4.4
4.8
1990
6.1
5.3
4.5
5.2
6.7
4.7
4.0
5.1
10.4
1.4
36.5
9.6
18.1
5:2
5.4
1991
3.1
1.9
3.4
3.9
4.2
3.7
2.9
3.4
-1.5
3.3
16.0
7.9
-7.4
4.4
4.2
Change, month to month
1991: June
0.3
0.4
0.2
0.3
0.3
0.3
-0.1
-0.6
0.2
0.3
0.1
0.7
-0.2
0.3
2.4
3.0
2.9
4.7
July
.1
-.5
.3
.2
.3
.2
.5
-.1
.2
.2
-1.6
.6
-.5
.3
2.4
2.2
4.4
Aug
.3
-.2
.1
.2
.1
.2
.3
1.2
.5
.2
..9
.7
-.6
.4
2.7
2.5
3.8
Sept
.4
.1
.3
.3
:4
.4
.3
.6
0
.3
-.1
.6
.2
:4
2.7
3.0
3.0
3.4
Oct
.2
-.1
.3
.3
.3
.3
.4
.2
-.2
-.1
-.6
.6
0
.2
3.6
3.0
2.9
Nov
.4
.4
.3
.3
.2
.3
.5
.6
.4
.1
.9
.5
.8
.3
3.9
3.3
3.0
Dec
.2
.3
.3
is
.4
.4
0
-1.1
.2
.2
.3
.7
.1
.2
3.6
3.2
3.1
3.1
1992: Jan
.1
-.4
.2
.5
.7
.3
-.3
.3
-.3
.1
-2.2
.7
-1.5
.3
2.6
3.1
2.6
Feb
.3
.3
.2
.3
.3
.3
-.4
1.5
-.2
.1
-.6
.8
-.9
.4
2.3
3.1
2.8
Mar
.5
in
.4
.3
.3
.6
.4
.6
.7
.4
.9
.5
.6
.5
2.9
3.5
3.4
3.2
Apr
.2
-.1
.1
.1
.3
.1
.4
-.7
.5
.5
.2
.5
.4
.3
4.1
3.4
3.2
May
.1
-.4
.1
.1
.4
.1
.2
.4
.3
.2
1.1
.5
.6
.2
3.5
2.9
3.0
June
.3
.1
.4
.5
.6
.4
.3
-.2
.5
.4
3.2
.4
2.0
.2
3.5
2.6
3.1
3.1
1 Includes items not shown separately.
3 Quarterly changes are shown in the last month of the quarter.
2 Household fuels-gas (piped), electricity, fuel oil, etc.-and motor fuel. Motor oil, coolant, etc.,
Source: Department of Labor, Bureau of Labor Statistics.
also included through 1982.
24
PRICES RECEIVED AND PAID BY FARMERS
Prices received by farmers in July were 2.1 percent below their June level. Prices paid by farmers in July were 0.5
percent above their April level. (Data are not seasonally adjusted.)
INDEX, 1977 = 100 (RATIO SCALE)
INDEX, 1977 = 100 (RATIO SCALE)
200
200
180
180
160
160
PRICES PAID
140
140
120
120
PRICES RECEIVED
100
100
80
80
RATION
RATIO
140
140
120
120
RATIO
100
100
80
80
60
60
1984
1985
1986
1987
1988
1989
1990
1991
1992
1,RATIO OF INDEX OF PRICES RECEIVED TO INDEX OF PRICES PAID.
SOURCE: DEPARTMENT OF AGRICULTURE
COUNCIL OF ECONOMIC ADVISERS
[1977=100; not seasonally adjusted]
Prices received by farmers
Prices paid by farmers
Period
All commodities,
Production
Ratio 2
All farm
Livestock and
Crops
services,
items, interest,
Production
products
products
interest, taxes,
taxes, and wage
items
and wage rates 1
rates
1982
133
121
145
159
158
153
84
1983
135
128
141
161
159
152
84
1984
142
138
146
164
161
155
87
1985
128
120
136
162
156
151
79
1986
123
107
138
159
150
144
77
1987
127
106
146
162
152
148
78
1988
138
126
150
170
160
157
81
1989
147
134
160
178
167
165
83
1990
149
127
170
184
172
171
81
1991
146
130
161
189
175
173
77
1991: July
148
135
162
189
174
173
78
Aug
146
133
158
(³
(³
(³)
77
Sept
147
137
157
(³
(³
(³
78
Oct
142
126
158
189
173
172
75
Nov
139
124
153
(³
(³
(³
74
Dec
137
120
153
(³
(³)
(³
72
1992: Jan
138
123
152
189
174
171
73
Feb
142
128
156
(³
(³
(³
75
Mar
143
131
155
(³
(³).
(³)
76
Apr
141
126
155
191
r 175
174
74
May
141
123
157
(³
(³
(³
74
June
140
r 122
r
157
(³
(³
(³)
73
July
137
116
158
192
176
174
71
I Includes items not shown separately.
NOTE.-The official indexes are published on 8 1910-14 base as required by law. The indexes
2 Percentage ratio of index of prices received by farmers to index of prices paid, interest, taxes,
have been converted to a 1977=100 base to facilitate comparison with other indexes.
and wage rates. See also footnote 3.
3 Beginning March 1986, prices paid by farmers are available only for first month in quarter, and
Source: Department of Agriculture.
for each month the received/paid ratio is based on latest data available.
25
MONEY, CREDIT, AND SECURITY MARKETS
MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES
M2 and M3 fell in June.
BILLIONS OF DOLLARS* (RATIO SCALE)
BILLIONS OF DOLLARS* (RATIO SCALE)
4,800
4,800
4,400
4,400
4,000
M3
4,000
3,600
3,600
3,200
3,200
2,800
2,800
M2
2,400
2,400
2,000
2,000
1,600
1,600
1,200
1,200
800
800
M1
600
600
400
400
1984
1985
1986
1987
1988
1989
1990
1991
1992
AVERAGES OF DAILY FIGURES SEASONALLY ADJUSTED
COUNCIL OF ECONOMIC ADVISERS
SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
[Averages of daily figures, except as noted; billions of dollars, seasonally adjusted]
M1
M2
M3
L
Debt
Percent change from year or 6
months earlier 2
M1 plus overnight
RPs and
Sum of currency,
Period
demand deposits,
Eurodollars,
M2 plus large
Debt of
MMMF balances
time deposits,
domestic
travelers' checks,
(general purpose
term RPs, term
M3 plus
nonfinancial
other liquid
M1
M2
M3
Debt
and other
and broker/dealer),
Eurodollars, and
sectors
assets
checkable
MMDAs, and
institution-only
(monthly
deposits (OCDs)
MMMF balances
average) 1
savings and small
time deposits
1982: Dec
474.6
1,951.9
2,440.6
2,850.4
4,672.7
8.7
8.9
9.3
9.3
1983: Dec
521.4
2,186.1
2,693.0
3,154.3
5,209.4
9.9
12.0
10.3
11.5
1984: Dec
552.5
2,374.3
2,987.4
3,528.8
5,963.3
6.0
8.6
10.9
14.5
1985: Dec
620.2
2,569.4
3,203.2
3,830.4
6,830.5
12.3
8.2
7.2
14.5
1986: Dec
724.6
2,811.1
3,494.3
4,134.5
7,751.2
16.8
9.4
9.1
13.5
1987: Dec
750.0
2,910.8
3,681.1
4,339.5
8,520.8
3.5
3.5
5.3
9.9
1988: Dec
786.9
3,071.1
3,923.1
4,677.9
9,316.1
4.9
5.5
6.6
9.3
1989: Dec
794.1
3,227.3
4,059.8
4,891.7
10,060.0
.9
5.1
3.5
8.0
1990: Dec
826.1
3,339.0
4,114.6
4,966.6
10,747.0
4.0
3.5
1.3
6.8
1991: Dec
898.1
3,438.9
4,170.4
4,989.3
11,203.6
8.7
3.0
.1.4
4.2
1991: May
850.9
3,405.6
4,170.5
4,958.3
10,934.0
6.6
4.3
2.7
4.2
June
857.3
3,411.8
4,167.7
4,986.4
10,983.5
7.6
4.4
2.6
4.4
July
860.0
3,407.4
4,157.3
4,991.5
11,017.4
8.2
3.8
1.5
4.5
Aug
866.5
3,409.5
4,156.6
4,985.1
11,056.6
7.2
2.4
-.2
4.3
Sept
872.0
3,411.5
4,152.6
4,974.2
11,094.7
7.1
1.5
-.6
4.3
Oct
880.9
3,417.3
4,158.7
4,977.7
11,135.6
9.1
1.3
-.5
4.6
Nov
891.4
3,430.9
4,166.5
4,990.7
11,177.5
9.5
1.5
-.2
4.5
Dec
898.1
3,438.9
4,170.4
4,989.3
11,203.6
9.5
1.6
'.1
4.0
1992: Jan
910.4
3,448.0
4,174.5
4,982.9
11,231.9
11.7
2.4
.8
3.9
Feb
931.0
3,475.5
4,200.2
5,011.9
11,274.8
14.9
3.9
2.1
3.9
Mar
939.0
3,473.9
4,190.5
5,019.5
11,325.0
15.4
3.7
'1.8
4.2
Apr
942.9
3,468.1
4,175.7
5,010.3
11,373.1
14.1
3.0
'.8
4.3
May
954.5
3,469.5
4,173.2
5,001.2
11,420.0
14.2
2.3
'.3
4.3
June
952.2
3,458.7
4,157.9
12.0
1.2
-.6
1 Consists of outstanding credit market debt of the U.S. Government, State and local-govern-
NOTE.-See P. 27 for components.
ments, and private nonfinancial sectors; data from flow of funds accounts.
Source: Board of Governors of the Federal Reserve System.
2 Annual changes are from December to December and monthly changes are from 6 months earli-
er at a simple annual rate.
26
COMPONENTS OF MONEY STOCK AND LIQUID ASSETS
[Averages of daily figures; billions of dollars, seasonally adjusted, except as noted by NSA]
Over-
Money market
night
mutual fund
repur-
balances
2
chase
Savings
agree-
Gener-
deposits,
Small
Large
Term
Other
Short-
ments
al
including
denom-
denom-
check-
repur-
Term
De-
term
Cur-
mand
able
(RPs),
pur-
money
ination
ination
chase
Euro-
Sav-
Bankers'
Com-
Treas-
Period
net,
pose
Insti-
market
time
time
agree-
dollars
ings
mercial
rency
de-
depos-
accept-
posits
plus
and
tution
deposit
depos-
depos-
ments
(net)
bonds
ury
ances.
its
securi-
paper
over-
broker/
only
accounts
its 3
its 3
(OCDs)
(RPs)
ties
night
dealer
(MMDAs)
Euro-
dollars 1
NSA
NSA
NSA
1982: Dec
132.5
234.0
103.7
39.9
184.5
51.1
398.5
847.2
323.3
33.4
81.7
68.01
183.6
44.5
113.7
1983: Dec
146.2
238.5
131.8
55.6
138.3
42.7
684.0
780.8
324.8
49.9
91.5
71.1
211.9
45.0
133.2
1984: Dec
156.1
243.9
147.2
60.6
167.1
63.7
704.2
884.9
415.6
57.6
82.9
74.2
260.9
45.4
160.8
1985: Dec
167.9
266.7
179.7
73.5
176.1
65.8
814.4
881.7
436.1
62.4
76.5
79.5
298.2
42.0
207.5
1986: Dec
180.8
302.0
235.3
82.3
208.0
86.1
940.1
854.8
439.5
80.6
83.8
91.8
280.0
37.1
231.2
1987:
Dec
197.0
286.8
259.3
84.1
221.7
92.1
937.0
917.5
489.1
106.0
91.0
100.6
253.0
44.3
260.5
1988: Dec
212.3
286.5
280.6
83.2
241.9
91.0
926.2
1,032.9
541.2
121.8
105.7
109.4
269.6
39.8
336.1
1989: Dec
222.6
279.0
285.1
77.6
316.3
107.2
891.2
1,148.5
559.3
99.1
79.5
117.5
325.5
40.1
348.6
1990: Dec
246.8
277.1
293.9
74.7
348.9
133.7
920.7
1,168.7
494.9
89.6.
68.7
126.0
332.7
34.0
359.3-
1991:
Dec
267.3
289.5
333.2
75.3
360.5
179.1
1,042.6
1,063.0
437.1
70.9
57.2
137.9
317.9
23.3
339.7
1991:
May
256.6
278.4
307.8
68:5
367.8
155.2
966.1
1,150.9
483.5
80.4
62.3
131.3
299.5
29.1
327.9
June
257.6
280.1
311.6
67.9
368.8
155.3
976.8
1,140.6
478.3
78.4
61.6
132.4
325.1
28.1
333.0
July
259.3
279.3
313.7
64.9
367.9
155.4
986.1
1,129.5
471.2
78.8
62.7
133.5
332.8
28.1
339.8
Aug
261.3
280.1
317.3
67.3
362.4
158.6
994.1
1,120.8
465.5
78.4
63.6
134.4
330.6
27.2
336.3
Sept
262.9
280.6
320.6
66.4
359.9
162.6
1,002.4
1,111.0
458.5
76.7
61.5
135.2
322.9
25.8
337.7
Oct
264.8
283.8
324.5
69.4
359.3
168:2
1,015.0
1,095.2
450.0
75.5
62.8
136.1
321.5
25.3
336.2
Nov
266.0
287.6
329.7
73.0
359.5
173.6
1,028.7
1,079.2
442.3
73.6
'61.5
137.1
324.7
24.5
337.9
Dec
267.3
289.5
333.2
75.3
360.5
179.1
1,042.6
1,063.0
437.1
70.9
57.2
137.9
317.9
23.3
339.7
1992:
Jan
269.4
293.9
339.0
76.7
360.1
182.4
1,061.2
1,042.9
427.9
70.8
55.3
138.9
311.5
23.2
334.8
Feb
271.6
305.1
346.3
76.5
363.9
188.2
1,083.9
1,019.8
420.7
72.0
55.9
140.1
321.2
22.9
327.5
Mar
271.8
'309.6
349.5
73.0
358.0
185.3
1,098.0
1,002.9
413.0
73.7
57.9
141.2
328.6
22.2
337.0
Apr
273.6
'311.2
350.1
70.8
354.1
189.2
1,111.3
'985.4
405.7
72.3
55.0
142.4
328.9
21.6
341.7
May
274.7
315.2
356.7
66.9
355.0
194.8
1,122.5
968.8
400.8
71.6
52.7
143.5
332.8
22.3
329.4
June
276.2
311.0
357.0-
68.3
353.3
199.7
1,127.1
955.9
396.0
70.0
51.3
1 Includes continuing contract RPs.
NOTE -Travelers checks of nonbank issuers are 8 component of money stock but are not shown
2 Data prior to 1983 are:not seasonally adjusted.
here.
3 Small denomination and large denomination deposits are those issued in-amounts of less than
$100,000 and more than $100,000, respectively.
Source: Board of Governors of the Federal Reserve System.
AGGREGATE RESERVES AND MONETARY BASE
[Averages of daily figures millions of dollars; seasonally adjusted, except as noted by NSA]
Adjusted for changes in reserve requirements
Borrowings of depository
institutions from-the Federal
Reserves of depository institutions
Reserve (NSA)
Period
Nonbor-
Monetary
Nonbor-
rowed plus
base
Extended
Total
Required
Total
Seasonal
rowed
extended
credit
credit
1982: Dec r
23,600
22,966
23,152
23,100
160,127
634
33
186
1983:
Dec
r
25,367
24,593
24,595
24,806
175,467
774
96
2
1984: Dec T
26,878
23,692
26,296
26,023
187,248
3,186
113
2,604
1985: Dec r
31,485
30,167
30,666
30,448
203,601
1,318
56
499
1986: Dec r
39,005
38,179
38,482
37,635
223,732
827
38
303
1987:
Dec
,
38,934
38,157
38,640
37,888
239,967
777
93
483
1988: Dec r
40,468
38,752
39,996
39,420
256,973
1,716
130
1,244
1989: Dec
40,558
40,293
40,313
39,636
267,772
265
84
20
1990:
Dec
41,832
41,506
41,529
40,167
293,287
326
76
23
1991: Dec
45,601
45,409
45,410
44,623
317,254
192
38
1
1991:
June
42,710
42,370
42,377
41,701
305,003
340
222
8
July
42,845
42,238
42,284
41,939
306,794
607
317
46
Aug
43,282
42,517
42,818
42,196
309,132
764
331
300
Sept
43,487
42,841
43,143
42,558
310,929
645
287
302
Oct
44,138
43,877
43,889
43,055
313,281
261
211
12
Nov
44,785
44,677
44,678
43,893
315,332
108
86
1
Dec
45,601
45,409
45,410
44,623
317,254
192
38
1
1992:
Jan
46,186
45,953
45,954
45,183
319,695
233
17
1
Feb
47,746
47,668
47,670
46,681
323,411
77
22
2
Mar
48,476
48,385
48,386
47,447
324,512
91
32
2
Apr
49,001
48,911
48,913
47,863
326,500
90
47
2
May
49,494
49,339
49,339
48,494
328,584
155
98
0
June P
49,234
49,005
49,005
48,321
329,647
229
149
0
1 Data are prorated averages of biweekly (maintenance period) averages of daily figures.
Source: Board of Governors of the Federal Reserve System.
27
BANK LOANS AND SECURITIES
Total commercial bank loans and leases fell 0.1 percent in June; commercial and industrial loans fell 0.6 percent.
BILLIONS OF DOLLARS* (RATIO SCALE)
BILLIONS OF DOLLARS* (RATIO SCALE)
3,200
3,200
ALL COMMERCIAL BANKS
2,800
TOTAL
2,800
2,400
2,400
2,000
2,000
1,600
1,600
LOANS AND LEASES
1,200
1,200
800
800
U.S. GOVERNMENT SECURITIES
400
400
OTHER SECURITIES
200
200
160
160
120
120
1984
1985
1986
1987
1988
1989
1990
1991
1992
SEASONALLY ADJUSTED
SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
COUNCIL OF ECONOMIC ADVISERS
[Billions of dollars, seasonally adjusted ¹]
All commercial banks
Loans and leases
U.S.
Total
Period
Non-
State
Govern-
Other
loans and
Com-
For-
Lease
bank
and
ment
securi-
mercial
securi-
Total 2
Real
For-
finan-
Agri-
eign
financ-
Indi-
Secu-
securi-
ties
and
politi-
ties 2
vidual
cal
eign
official
ties
industri-
estate
rity
cial
cultural
ing
Other
banks
institu-
receiv-
institu-
subdi-
al
tions
ables
tions
visions
1982: Dec
1,400.4
201.7
164.8
1,033.9
392.5
299.9
188.2
25.3
31.2
36.2
0.0
14.7
5.9
13.3
26.8
1983: Dec
1,552.2
259.2
169.1
1,123.9
414.2
331.0
212.9
28.0
30.4
39.2
.0
13.4
9.4
13.7
31.8
1984: Dec
1,722.2
260.2
140.9
1,321.1
473.1
376.2
253.8
34.4
31.3
40.1
46.0
11.6
8.4
16.0
30.2
1985: Dec
1,909.5
270.8
179.0
1,459.8
500.2
425.8
294.7
43.0
32.4
36.1
56.7
9.9
6.3
19.0
35.6
1986: Dec
2,093.2
310.0
193.9
1,589.4
537.0
494.0
315.3
40.3
35.0
31.5
58.5
10.3
6.3
22.4
38.8
1987: Dec
2,238.5
335.8
193.6
1,709.1
567.1
586.9
328.3
34.8
32.0
29.4
52.4
7.8
5.7
24.6
40.1
1988: Dec
2,422.8
363.5
192.4
1,866.9
606.8
670.1
354.5
41.2
32.3
28.7
45.1
7.7
5.0
29.3
46.2
1989: Dec
2,590.8
398.2
181.7
2,010.9
640.2
759.5
374.8
41.5
34.3
29.8
40.0
8.2
3.5
31.8
47.1
1990: Dec
2,730.8
454.1
177.9
2,098.8
643.2
843.3
379.6
44.7
35.7
32.0
33.9
7.5
2.8
32.8
43.3
1991: Dec
2,838.0
562.5
179.3
2,096.2
617.8
873.1
363.5
54.5
40.4
34.0
29.1
7.4
2.4
31.7
42.4
1991:
June
2,773.3
493.5
176.3
2,103.6
625.8
868.5
373.1
49.0
38.6
33.9
31.4
6.3
2:5
33.3
41.1
July
2,773.8
502.4
175.8
2,095.5
623.8
867.3
370.9
47.4
37.7
34.0
31.0
6.4
2.3
32.5
42.3
Aug
2,776.9
512.6
174.4
2,089.9
619.5
866.7
370.3
48.4
36.9
34.3
30.6
6.5
2.2
31.9
42.7
Sept
2,789.1
523.0
176.3
.2,089.8
622.0
868.1
367.3
50.0
37.1
34.5
30.3
6.8
2.3
31.8
39.8
Oct
2,805.5
538.7
177.9
2,088.9
622.6
869.8
364.2
51.1
37.2
34.1
29.7
6.6
2.4
31.6
39.5
Nov
2,822.8
550.8
178.8
2,093.2
621.7
871.9
363.1
53.4
37.8
33:8
29.4
6:9
2.5
31.5
41.1
Dec
2,838.0
562.5
179.3
12,096.2
617.8
873.1
363.5
54.5
40.4
34.0
29.1
7.4
2.4
31.7
42.4
1992: Jan
2,847.3
565.7
178.5
2,103.1
615.9
873.3
363.1
59.5
39.8
33.6
28.0
7.3
2.3
31.5
48.9
Feb
2,847.8
570.4
178.6
2,098.8
611.5
876.9
363.5
57.1
40.8
33.5
28.2
6.8
2.2
31.6
46.7
Mar
2,854.1
578.3
175.9
2,099.9
:608.7
878.6
362.1
60.5
41.3
34.2
28.2
6.5
2.2
31.5
46.1
Apr
2,866.3
589.8
176.1
2,100.3
605.7
880.8
361.0
265.0
40.6
34.1
27.9
6.7
2.1
31.5
45.0
May
2,864.2
598.5
174.3
2,091.4
602.2
882.1
359.4
61.8
40.9
33.9
27.7
7.3
2.1
31.4
42.6
June
2,869.0
607.3
172.7
2,089.0
598.5
881.0
360.0
64.1
40.4
34.2
27.4
8.1
2.1
31.6
41.8
1 Data are prorated averages of Wednesday figures for domestically chartered banks and averages
Excludes loans to commercial banks in the United States.
of month-end data for foreign-related institutions. Data beginning January 1984 are not strictly
Source: Board of Governors of the Federal Reserve System.
comparable with data for earlier periods, largely because beginning January 1984 certain obligations
of States and political subdivisions are included in loans rather than in other securities.
28
SOURCES AND USES OF FUNDS, NONFARM NONFINANCIAL
CORPORATE BUSINESS
[Billions of dollars; quarterly data at seasonally adjusted annual rates]
Sources
Uses
External
Discrepancy
Period
Credit market funds
Capital
Increase in
(sources less
Total
Internal 1
Total
expendi-
financial
uses)
Total
Securities
Loans and
Other 2
tures 3
assets
Total
and
short-term
mortgages
paper
1982
313.5
247.4
66.1
50.7
-4.0
54.7
15.4
339.3
287.5
51.8
-25.8
1983
431.2
292.3
138.9
81.0
45.5
35.5
57.9
428.6
303.5
125.1
2.6
1984
491.4
336.4
155.0
92.5
-13.0
105.5
62.5
504.7
397.5
107.2
-13.3
1985
464.3
352.0
112.3
52.4
-4.6
57.0
59.9
451.7
368.9
82.8
12.7
1986
521.4
336.7
184.7
126.7
60.9
65.8
58.0
502.5
351.3
151.2
19.0
1987
544.9
376.0
168.9
63.0
27.6
35.4
106.0
476.8
365.1
111.7
68.1
1988
586.7
404.4
182.3
63.0
-12.9
75.9
119.2
560.4
396.6
163.8
26.3
1989
549.4
405.0
144.4
42.1
-41.7
83.8
102.3
526.8
422.9
103.9
22.6
1990
470.1
381.5
88.6
16.0
-13.9
29.9
72.6
489.8
403.3
86.5
-19.6
1991
459.9
392.4
67.5
25.0
90.7
-65.7
42.5
435.2
366.1
69.1
24.6
1989: III
473.0
410.5
62.5
6.6
-85.5
92.1
55.9
483.5
415.9
67.6
-10.5
IV
556.1
403.7
152.4
38.9
20.7
18.2
113.5
551.1
430.7
120.4
4.9
1990: I
541.7
393.8
147.9
53.6
-14.0
67.6
94.3
507.7
402.4
105.3
34.0
II
517.1
395.2
121.9
48.8
7.5
41.3
73.2
523.0
415.9
107.1
-5.8
III
443.6
361.2
82.4
-1.9
-49.0
47.1
84.3
529.4
418.2
111.2
-85.7
IV
378.2
375.9
2.3
-36.4
-.4
-36.0
38.6
398.8
376.2
22.6
-20.6
1991: I
447.1
390.9
56.2
8.5
63.1
-54.6
47.7
387.3
346.0
41.3
59.8
II
488.8
390.7
98.1
47.3
109.2
-61.9
50.8
458.2
350.8
107.4
30.6
III
484.7
387.1
97.6
31.6
80.0
-48.4
66.0
493.1
380.8
112.3
-8.4
IV
418.5
400.7
17.8
12.5
110.3
-97.8
5.2
402.2
386.7
15.5
16.3
1992: I"
535.4
415.1
120.3
102.5
119.8
-17.3
17.8
465.6
358.2
107.4
69.9
1 Undistributed profits (after inventory valuation and capital consumption adjustments), capital
the U.S.
consumption allowances, and foreign branch profits, dividends, and subsidiaries' earnings retained
3 Plant and equipment, residential structures, inventory investment, and mineral rights from U.S.
abroad.
Government.
2 Consists of tax liabilities, trade debt, pension fund liabilities, and direct foreign investment in
Source: Board of Governors of the Federal Reserve System.
CONSUMER INSTALLMENT CREDIT
[Millions of dollars; seasonally adjusted]
Installment credit outstanding (end of period)
Net change in installment credit outstanding 1
Period
Total
Automobile
Revolving
Other 2
Total
Automobile
Revolving
Other
2
1982: Dec
325,805
125,945
66,454
133,406
14,546
6,937
5,384
2,224
1983: Dec
368,966
143,560
79,088
146,318
43,161
17,615
12,634
12,912
1984: Dec
442,602
173,564
100,280
168,758
73,636
30,004
21,192
22,440
1985: Dec
517,659
210,238
121,758
185,664
75,057
36,674
21,478
16,906
1986: Dec
572,006
247,772
135,825
188,408
54,347
37,534
14,067
2,744
1987: Dec
608,675
266,295
153,064
189,316
36,669
18,523
17,239
908
1988: Dec 3
662,553
285,364
174,269
202,921
53,878
19,069
21,205
13,605
1989: Dec
716,825
292,002
199,308
225,515
(⁴)
(4)
(4)
(4)
1990: Dec
735,338
284,993
222,950
227,395
18,513
-7,009
23,642
1,880
1991: Dec
727,799
263,003
242,785
222,012
-7,539
-21,990
19,835
-5,383
1991: May
731,724
273,389
232,297
226,038
-1,503
-3,574
1,860
211
June
730,109
270,789
233,399
225,922
1,615
-2,600
1,102
-116
July
728,823
268,897
234,654
225,273
1,286
-1,892
1,255
-649
Aug
727,311
266,620
236,294
224,396
-1,512
-2,277
1,640
-877
Sept
727,449
264,621
238,987
223,842
138
- -1,999
2,693
-554
Oct
729,225
264,420
241,436
223,369
1,776
-201
2,449
-473
Nov
727,960
262,383
242,573
223,004
-1,265
-2,037
1,137
-365
Dec
727,799
263,003
242,785
222,012
-161
620
212
-992
1992: Jan
728,618
263,134
244,288
221,196
819
131
1,503
-816
Feb
728,395
261,659
245,974
220,762
-223
-1,475
1,686
-434
Mar
727,404
262,125
245,259
220,020
-990
466
-714
-742
Apr r
723,821
260,376
245,905
217,541
-3,583
-1,749
646
-2,479
May p
721,412
258,677
246,060
216,675
-2,409
-1,699
155
-865
1 For year-end data, change from preceding year-end; for monthly data, change from preceding
and subsequent months.
month.
4 Because of breaks in series, net change not available.
2 Outstanding loans for mobile homes are now included in "Other" credit and will no longer be
available as a separate credit type.
Source: Board of Governors of the Federal Reserve System.
3 Data newly available in January 1989 result in breaks in many series between December 1988
29
INTEREST RATES AND BOND YIELDS
Interest rates fell in July.
PERCENT PER ANNUM
PERCENT PER ANNUM
14
14
12
12
CORPORATE Ago BONDS
(MOODY'S)
10
10
8
8
TREASURY
BILLS
DISCOUNT
6
RATE
6
FEDERAL
RESERVE
BANK OF
NEW YORK
4
4
2
2
1984
1985
1986
1987
1988
1989
1990
1991
1992
SOURCE: SEE TABLE BELOW
COUNCIL OF ECONOMIC ADVISERS
[Percent per annum]
U.S. Treasury security yields
High-grade
Prime
municipal
New-home
Corporate
Discount rate
Prime rate
Period
Constant maturities 2
bonds
commercial
3-month bills
Aaa bonds
(N.Y. F.R.
charged by
mortgage
(new issues) 1
(Standard &
(Moody's)
paper,
6 months 1
Bank)
4
banks
4
yields
3-year
10-year
Poor's) 3
(FHFB) 5
1981
14.029
14.44
13.91
11.23
14.17
14.76
13.42
18.87
14.70
1982
10.686
12.92
13.00
11.57
13.79
11.89
11.02
14.86
15.14
1983
8.63
10.45
11.10
9.47
12.04
8.89
8.50
10.79
12.57
1984
9.58
11.89
12.44
10.15
12.71
10.16
8.80
12.04
12.38
1985
7.48
9.64
10.62
9.18
11.37
8.01
7.69
9.93
11.55
1986
5.98
7.06
7.68
7.38
9.02
6.39
6.33
8.33
10.17
1987
5.82
7.68
8.39
7.73
9.38
6.85
5.66
8.21
9.31
1988
6.69
8.26
8.85
7.76
9.71
7.68
6.20
9.32
9.19
1989
8.12
8.55
8.49
7.24
9.26
8.80
6.93
10.87
10.13
1990
7.51
8.26
8.55
7.25
9.32
7.95
6.98
10.01
10.05
1991
5.42
6.82
7.86
6.89
8.77
5.85
5.45
8.46
9.32
1991: July
5.58
7.38
8.27
7.03
9.00
6.14
5.50-5.50
8.50-8.50
9.43
Aug
5.39
6.80
7.90
6.89
8.75
5.76
5.50-5.50
8.50-8.50
9.48
Sept
5.25
6.50
7.65
6.80
8.61
5.59
5.50-5.00
8.50-8.00
9.30
Oct
5.03
6.23
7.53
6.59
8.55
5.33
5.00-5.00
8.00-8.00
9.04
Nov
4.60
5.90
7.42
6.64
8.48
4.93
5.00-4.50
8.00-7.50
8.64
Dec
4.12
5.39
7.09
6.63
8.31
4.49
4.50-3.50
7.50-6.50
8.53
1992: Jan
3.84
5.40
7.03
6.41
8.20
4.06
3.50-3.50
6.50-6.50
8.49
Feb
3.84
5.72
7.34
6.67
8.29
4.13
3.50-3.50
6.50-6.50
8.65
Mar
4.05
6.18
7.54
6.69
8.35
4.38
3.50-3.50
6.50-6.50
8.51
Apr
3.81
5.93
7.48
6.64
8.33
4.13
3.50-3.50
6.50-6.50
8.58
May
3.66
5.81
7.39
6.57
8.28
3.97
3.50-3.50
6.50-6.50
8.59
June
3.70
5.60
7.26
6.50
8.22
3.99
3.50-3.50
6.50-6.50
8.43
July
3.28
4.91
6.84
6.12
8.07
3.53
3.50-3.00
6.50-6.00
Week ended:
1992: July 4
3.59
5.33
7.07
6.34
8.16
3.87
3.50-3.00
6.50-6.00
11
3.23
4.99
6.90
6.15
8.08
3.55
3.00-3.00
6.00-6.00
18
3.22
4.87
6.92
6.15
8.09
3.51
3.00-3.00
6.00-6.00
25
3.16
4.80
6.82
6.08
8.06
3.49
3.00-3.00
6.00-6.00
Aug 1
3.18
4.83
6.67
5.88
8.01
3.48
3.00-3.00
6.00-6.00
1 Bank-discount basis.
5 Effective rate (in the primary market) on conventional mortgages, reflecting fees and charges as
2
Yields on the more actively traded issues adjusted to constant maturities by the Treasury De-
well 88 contract rate and assumed, on the average, repayment at end of 10 years.
partment.
3 Weekly data are Wednesday figures.
Sources: Department of the Treasury, Board of Governors of the Federal Reserve System, Feder-
4 Average effective rate for year; opening and closing rate for month and week.
al Housing Finance Board, Moody's Investors Service, and Standard & Poor's Corporation.
30
COMMON STOCK PRICES AND YIELDS
Stock prices rose in July.
INDEX, DEC. 31, 1965=50 (RATIO SCALE)
INDEX, DEC. 31, 1965=50 (RATIO SCALE)
240
240
220
220
200
200
180
180
160
160
140
140
120
120
COMPOSITE STOCK PRICE INDEX
100
(NYSE)
100
80
80
60
60
40
40
1984
1985
1986
1987
1988
1989
1990
1991
1992
PERCENT
PERCENT
20
20
15
EARNINGS-PRICE RATIO ON COMMON STOCKS
15
(S&P)
10
10
5
5
0
0
1984
1985
1986
1987
1988
1989
1990
1991
1992
SOURCES: NEW YORK STOCK EXCHANGE AND STANDARD & POOR'S CORPORATION
COUNCIL OF ECONOMIC ADVISERS
Common stock prices 1
Common stock yields
(percent)
5
New York Stock Exchange indexes (Dec. 31, 1965=50) 2
Standard &
Period
Poor's
Dow-Jones
industrial
composite
Dividend-
index
Earnings-
Composite
Industrial
Transporta-
tion
Utility
Finance
average 3
(1941-
price ratio
price ratio
43=10) 4
1981
74.02
85.44
72.61
38.91
73.52
932.92
128.05
5.20
11.96
1982
68.93
78.18
60.41
39.75
71.99
884.36
119.71
5.81
11.60
1983
92.63
107.45
89.36
47.00
95.34
1,190.34
160.41
4.40
8.03
1984
92.46
108.01
85.63
46.44
89.28
1,178.48
160.46
4.64
10.02
1985
108.09
123.79
104.11
56.75
114.21
1,328.23
186.84
4.25
8.12
1986
136.00
155.85
119.87
71.36
147.20
1,792.76
236.34
3.49
6.09
1987
161.70
195.31
140.39
74.30
146.48
2,275.99
286.83
3.08
5.48
1988
149.91
180.95
134.12
71.77
127.26
2,060.82
265.79
3.64
8.01
1989
180.02
216.23
175.28
87.43
151.88
2,508.91
-322.84
3.45
7.41
1990
183.46
225.78
158.62
90.60
133.26
2,678.94
334.59
3.61
6.47
1991
206.33
258.14
173.99
92.66
150.82
2,929.33
376.18
3.24
4.81
1991: July
208.29
262.48
177.15
90.05
151.60
2,978.19
380.23
3.20
Aug
213.33
268.22
178.52
92.38
157.70
3,006.09
389.40
3.10
Sept
212.55
266.21
177.99
93.72
157.69
3,010.35
387.20
3.15
4.59
Oct
213.10
265.68
187.31
95.25
158.94
3,019.74
386.88
3.14
Nov
213.25
264.89
188.52
96.78
159.78
2,986.12
385.92
3.15
Dec
214.26
266.01
185.47
98.08
159.96
2,958.64
388.51
3.11
3.83
1992: Jan
229.34
286.62
201.55
99.31
174.50
3,227.06
416.08
2.90
Feb
228.12
286.09
205.53
96.18
174.05
3,257.27
412.56
2.94
Mar
225.21
282.36
204.07
94.15
173.49
3,247.42
407.36
3.01
4.01
Apr
224.55
281.60
201.28
94.92
171.05
3,294.08
407.41
3.02
May
228.55
285.17
207.88
98.24
175.89
3,376.79
414.81
2.99
June
224.68
279.54
202.02
97.23
174.82
3,337.79
408.27
3.06
July
228.17
281.90
198.36
101.18
180.96
3,329.41
415.05
3.00
Week ended:
1992: July 4
225.48
279.36
201.28
97.78
179.42
3,330.69
410.43
3.01
11
226.70
279.92
198.65
100.13
180.87
3,316.46
412.43
3.03
18
228.95
282.87
199.58
101.60
181.39
3,346.88
416.56
2.98
25
226.85
280.06
194.78
101.22
179.87
3,292.95
412.42
3.03
Aug 1
230.81
285.32
198.79
102.91
181.76
3,356.23
419.88
2.93
1 Average of daily closing prices.
price ratios based on prices at end of quarter.
2 Includes all the stocks (more than 1,500) listed on the NYSE.
3 Includes 30 stocks.
NOTE.-All data relate to stocks listed on the New York Stock Exchange (NYSE).
4 Includes 500 stocks.
Sources: New York Stock Exchange, Dow-Jones & Company, Inc., and Standard & Poor's Cor-
5
Standard & Poor's series. Dividend-price ratios based on Wednesday closing prices. Earnings-
poration.
31
FEDERAL FINANCE
FEDERAL RECEIPTS, OUTLAYS, AND DEBT
In the first 9 months of fiscal 1992, there was a deficit of $227.7 billion, compared with a deficit of $178.1 billion
a year earlier.
BILLIONS OF DOLLARS
BILLIONS OF DOLLARS
1,600
1,600
RECEIPTS AND OUTLAYS
1,500
1,500
1,400
1,400
1,300
OUTLAYS
1,300
1,200
1,200
1,100
1,100
1,000
1,000
900
900
RECEIPTS 1
800
800
700
700
600
600
0
SURPLUS OR DEFICIT (-) 1
0
-100
-100
-200
-200
-300
-300
-400
-400
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1/INCLUDES ON-BUDGET AND OFF-BUDGET ITEMS.
FISCAL YEARS
SOURCES: DEPARTMENT OF THE TREASURY AND OFFICE OF MANAGEMENT AND BUDGET
COUNCIL OF ECONOMIC ADVISERS
[Billions of dollars]
Total
On-budget
Off-budget
Gross Federal debt
(end of period)
Fiscal year or period
Surplus
Surplus
Surplus
Receipts
Outlays
or deficit
Receipts
Outlays
or deficit
Receipts
Outlays
or deficit
(-)
Total
Held by
(-)
(-)
the public
1976
298.1
371.8
-73.7
231.7
302.2
-70.5
66.4
69.6
-3.2
629.0
477.4
1977
355.6
409.2
-53.7
278.7
328.5
-49.8
76.8
80.7
-3.9
706.4
549.1
1978
399.6
458.7
-59.2
314.2
369.1
-54.9
85.4
89.7
-4.3
776.6
607.1
1979
463.3
503.5
-40.2
365.3
403.5
-38.2
98.0
100.0
-2.0
828.9
639.8
1980
517.1
590.9
73.8
403.9
476.6
-72.7
113.2
114.3
-1.1
908.5
709.3
1981
599.3
678.2
-
-79.0
469.1
543.1
-74.0
130.2
135.2
-5.0
994.3
784.8
1982
617.8
745.8
-128.0
474.3
594.4
120.1
143.5
151.4
-7.9
1,136.8
919.2
1983
600.6
808.4
-207.8
453.2
661.3
-208.0
147.3
147.1
.2
1,371.2
1,131.0
1984
666.5
851.8
-185.4
500.4
686.0
185.7
166.1
165.8
.3
1,564.1
1,300.0
1985
734.1
946.4
-212.3
547.9
769.6
-221.7
186.2
176.8
9.4
1,817.0
1,499.4
1986
769.1
990.3
-221.2
568.9
806.8
-238.0
200.2
183.5
16.7
2,120.1
1,736.2
1987
854.1
1,003.9
-149.8
640.7
810.1
- 169.3
213.4
193.8
19.6
2,345.6
1,888.1
1988
909.0
1,064.1
-155.2
667.5
861.4
- -194.0
241.5
202.7
38.8
2,600.8
2,050.3
1989
990.7
1,144.2
- -153.5
727.0
933.3
-206.2
263.7
210.9
52.8
2,867.5
1 2,189.3
1990
1,031.3
1,251.8
-220.5
749.7
1,026.7
-277.1
281.7
225.1
56.6
3,206.3
2,410.4
1991 1
1,054.3
1,323.8
-269.5
760.4
1,082.1
-321.7
293.9
241.7
52.2
3,599.0
2,687.9
1992 (estimates) 1
1,073.6
1,407.1
-333.5
772.7
1,155.0
382.3
300.9
252.1
48.8
4,009.0
3,011.6
1993 (estimates) 1
1,162.9
1,503.9
-341.0
838.9
1,238.7
- -399.7
324.0
265.2
58.8
4,463.4
3,355.3
Cumulative total, first 9
months:
2
Fiscal year 1991
789.9
968.0
-178.1
566.3
793.7
-227.4
223.6
174.4
49.3
3,487.1
2,591.9
Fiscal year 1992
815.6
1,043.3
-227.7
584.6
863.1
278.5
231.0
180.2
50.8
3,918.8
2,923.2
1 Estimates from Mid-Session Review of the Budget, Office of Management and Budget, July 24,
NOTE.-Data (except as noted) are from Budget of the United States Government, Fiscal Year
1992.
1993, Supplement, issued February 18, 1992, and are on a cash basis.
2 Data from Monthly Treasury Statement.
Sources: Department of the Treasury and Office of Management and Budget.
32
FEDERAL RECEIPTS BY SOURCE AND
OUTLAYS BY FUNCTION
In the first 9 months of fiscal 1992, receipts were $25.7 billion higher than a year earlier and outlays were $75.3
billion higher.
BILLIONS OF DOLLARS
BILLIONS OF.DOLLARS.
600
600
RECEIPTS
INDIVIDUAL INCOME TAXES
500
500
400
400
300
300
CORPORATION
SOCIAL INSURANCE
200
INCOME TAXES
TAXES AND CONTRIBUTIONS
200
OTHER RECEIPTS
100
100
0
0
1,300
1,300
OUTLAYS
1,200
1,200
1,100
1,100
1,000
1,000
NONDEFENSE
900
900-
800
800
700
700
600
600
500
500
400
NATIONAL DEFENSE
400
300
300
200
200
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1/INCLUDES ON-BUDGET AND OFF-BUDGET ITEMS.
FISCAL YEARS
4
SOURCES: DEPARTMENT OF THE TREASURY AND OFFICE OF MANAGEMENT AND BUDGET
COUNCIL OF ECONOMIC ADVISERS
[Billions of dollars]
On-budget-and off-budget receipts
On-budget and off-budget outlays
Social
National defense
Indi-
insur-
Fiscal year
Corpo-
ance
Inter-
Income:
Social
Net
vidual
Total
ration
taxes
Depart-
Medi-
Other
Total
national
Health
securi-
securi-
inter-
Other
income
income
ment of
and
affairs
care
Total
taxes
taxes
Defense,
ty
ty
est
contri-
butions
military
1976
298.1
131.6
41.4
90.8
34.3
371.8
89.6
87.9
6.4
15.7
15.8
60.8
73.9
26.7
82.8
1977
355.6
157.6
54.9
106.5
36.6
409.2
97.2
95.1
6.4
17.3
19.3
61.0
85.1
29.9
93.0
1978
399.6
181.0
60.0
121.0
37.7
458.7
104.5
102.3
7.5
18.5
22.8
61.5
93.9
35.5
114.7
1979
463.3
217.8
65.7
138.9
40.8
503.5
116.3
113.6
7.5
20.5
26.5
66.4
104.1
42.6
119.6
1980
517.1
244.1
64.6
157.8
50.6
590.9
134.0
130.9
12.7
23.2
32.1
86.5
118.5
52.5
131.4
1981
599.3
285.9
61.1
182.7
69.5
678.2
157.5
153.9
13.1
26.9
39.1
99.7
139.6
68.8
133.5
1982
617.8
297.7
49.2
201.5
69.3
745.8
185.3
180.7
12.3
27.4
46.6
107.7
156.0
85.0
125.4
1983
600.6
288.9
37.0
209.0
65.6
808.4
209.9
204.4
11.8
28.6
52.6
122.6
170.7
89.8
122.3
1984
666.5
298.4
56.9
239.4
71.8
851.8
227.4
220.9
15.9
30.4
57.5
112.7
178.2
111:1
118.6
1985
734.1
334.5
61.3
265.2
73.0
946.4
252.7
245.2
16.2
33.5
65.8
128.2
188.6
129.5
131.8
1986
769.1
349.0
63.1
283.9
73.1
990.3
273.4
265.5
14.2
35.9
70.2
119.8
198.8
136.0
142.1
1987
854.1
392.6
83.9
303.3
74.3
1,003.9
282.0
274.0
11.6
40.0
75.1
123.3
207.4
138.7
125.9
1988
909.0
401.2
94.5
334.3
78.9
1,064.1
290.4
281.9
10.5
44.5
78.9
129.3
219.3
151.8
139.4
1989
990.7
445.7
103.3
359.4
82.3
1,144.2
303.6
294.9
9.6
48.4
85.0
136.0
232.5
169.3
159.8
1990
1,031.3
466.9
93.5
380.0
90.9
1,251.8
299.3
289.8
13.8
57.7
98.1
147.3
248.6
184.2
202.7
1991 1
1,054.3
467.8
98.1
396.0
92.3
1,323.8
273.3
262.4
15.9
71.2
104.5
170.8
269.0
194.5
224.6
1992 (estimates) 1
1,073.6
472.1
94.2
410.4
96.9
1,407.1
304.2
291.5
17.7
93.0
120.1
199.9
286.9
199.1
186.2
1993 (estimates) 1
1,162.9
507.0
112.2
444.5
99.2
1,503.9
291.2
278.2
18.2
106.3
132.5
202.3
303.4
210.3
239.7
Cumulative total, first 9 months: 2
Fiscal year 1991
789.9
346.9
76.4
300.1
66.5
968.0
199.1
190.8
13.4
51.5
76.7
129.2
201.2
145.2
151.7
Fiscal year 1992
815.6
349.7
76.7
315.5
73.7
1,043.3
220.9
212.0
13.5
65.5
87.9
151.0
215.1.
150.3
139.2
1 Estimates from Mid-Session Review of the Budget, Office of Management and Budget, July 24,
NOTE.-Data (except as noted) are from Budget of the United States Government, Fiscal Year
1992.
1993, Supplement, issued February 18, 1992, and are on a cash basis.
2 Data from Monthly Treasury Statement.
Sources: Department of the Treasury and Office of Management and Budget.
33
FEDERAL SECTOR, NATIONAL INCOME ACCOUNTS BASIS
In the second quarter of 1992, according to advance estimates, Federal expenditures rose $13.7 billion (annual
rate); receipts data are incomplete. (Series revised.)
BILLIONS OF DOLLARS
BILLIONS OF DOLLARS
SEASONALLY ADJUSTED ANNUAL RATES
1,400
1,400
1,200
EXPENDITURES
1,200
1,000
1,000
800
800
RECEIPTS
600
600
400
400
200
200
0
SURPLUS OR DEFICIT (-)
0
-200
-200
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
CALENDAR YEARS
SOURCE: DEPARTMENT OF COMMERCE
COUNCIL OF ECONOMIC ADVISERS
Billions of dollars; quarterly data at seasonally adjusted annual rates]
Federal Government receipts
Federal Government expenditures
Surplus
Subsidies
or deficit
Grants-
less
Less:
(-),
Corpo-
Indirect
in-aid to
Period
Personal
Contribu-
Trans-
Net
current
Wage
national
rate
business
State
tax and
Total
tions for
Pur-
fer
inter-
nontax
profits
tax and
and
surplus of
accruals
income
Total
social
chases
nontax
pay-
est
Govern-
less
and
tax
local
receipts
insurance
ments
accruals
accruals
paid
ment
disburse-
product
govern-
enter-
ments
accounts
ments
prises
Fiscal year:
1988
955.1
403.8
107.6
59.6
384.1
1,098.5
386.3
430.9
108.4
143.8
28.9
-0.1
-143.3
1989
1,042.4
449.3
118.9
61.7
412.5
1,163.0
398.3
460.5
116.0
160.3
28.0
.0
-120.7
1990 r
1,096.1
479.5
113.9
64.4
438.5
1,249.1
418.1
504.1
128.4
175.1
23.4
.0
-153.0
1991
1,118.2
475.9
104.6
75.1
462.6
1,312.6
446.7
511.9
146.8
183.1
24.2
.0
194.4
Calendar year:
1988
972.3
410.1
111.0
60.9
390.4
1,109.0
387.0
436.3
111.3
146.0
28.4
.0
-136.6
1989 r
1,059.3
461.9
117.1
61.9
418.5
1,181.6
401.6
471.5
118.2
164.8
25.5
.0
-122.3
1990 T
1,107.4
482.6
113.9
66.0
444.9
1,273.6
426.4
513.3
132.3
176.6
25.1
.1
-166.2
1991
1,122.2
473.4
102.5
78.2
468.2
1,332.7
447.3
521.9
153.3
186.9
23.1
-.1
-210.4
1982: IV
632.3
301.6
45.5
49.2
235.9
815.7
281.4
346.0
84.3
86.8
17.3
.0
-183.4
1983: IV
671.1
290.5
65.4
55.4
259.8
855.7
289.7
351.1
86.9
99.2
28.8
.0
-184.6
1984: IV
739.8
323.5
67.0
58.2
291.1
926.6
324.7
360.1
97.7
122.3
22.2
.6
-186.8
1985: IV
803.6
351.8
77.0
56.8
318.0
990.8
356.9
383.8
104.5
129.2
16.4
.0
-187.2
1986: IV
856.8
371.7
91.4
54.8
338:8
1,034.3
373.1
404.2
103.8
131.1
22.1
-.0
-177.5
1987 IV
943.5
:414.8
109.7
59.5
359:4
1,096.3
392.5
419.7
102.9
143.1
37.8
-.2
-152.7
1988: IV
1,000.6
420.0
118.5
61.4
400.7
1,135.5
392.0
444.5
113.0
151.2
34.9
.0
-134.9
1989: IV
1,068.3
470.1
111.3
62.2
424.7
1,209.8
405.1
488.8
121.9
168.9
25.0
.0
-141.5
1990: I
1,086.7
474.0
110.3
64.8
437.6
1,254.5
420.3
504.7
128.1
171.4
29.9
:0
167.8
II
1,109.6
487.2
114.6
65.2
442.7
-1,266.5
424.4
509.8
132.2
176.9
23.2
.0
-156.9
III:
1,119.9
486.6
119.2
65.4
448.8
1,265.5
422.6
513.1
131.2
183.3
15.3
:0
-145.6
IV
1,113.3
482.5
111.7
68.5
450.6
1,307.9
438.3
525.5
137.6
174.8
32.0
.2
-194.6
1991: I.
1,114.6
474.7
100.3
77.3
462.2
1,264.4
451.3
461.6
144.3
182.7
24.8
.2
-149.9
II
1,117.3
473.1
101.6
76.3
-466.3
1,329.4
449.9
514.8
151.9
188.1
24.4
-.4
-212.2
III
1,127.7
473.4
#104.9
78.3
471.1
1,348.7
447.2
545.5
153.4
186.8
15.7
.0
-221.0
IV r
1,129.4
472.2
103.3
80.8
473.2
1,388.1
440.8
565.9
163.6
190.1
27.7
.0
-258.7
1992: I'
1,143.3
468.4
112.2
79.2
483.5
/1,432.5
445.0
609.8
165.1
186.8
25.7
.0
-289.2
II"
462.2
79.8
487.5
1,446.2
446.8
615.4
169.9
-187.1
26.9
.0
NOTE.-See Note, p. 1.
Source: Department of Commerce, Bureau of Economic Analysis.
34
INTERNATIONAL STATISTICS
INDUSTRIAL PRODUCTION AND CONSUMER PRICES-MAJOR
INDUSTRIAL COUNTRIES
Industrial production (1987=100; seasonally adjusted)
Consumer prices (1982-84=100; NSA)
Period
United
United
United
United
Canada
Japan
France
States
Germany
Italy
1
Canada
Kingdom
States
Japan
France
Germany
Italy
Kingdom
1982
81.9
76.5
82.9
97.3
90.3
91.7
86.4
96.5
94.9
98.0
91.7
97.0
87.7
95.4
1983
84.9
81.5
85.5
96.5
90.9
88.9
89.6
99.6
100.4
99.9
100.3
100.3
100.8
99.8
1984
92.8
91.4
93.4
97.1
93.5
91.8
89.7
103.9
104.8
102.1
108.0
102.7
111.5
104.8
1985
94.4
96.5
96.8
97.2
97.7
92.9
94.6
107.6
108.9
104.1
114.3
104.8
121.1
111.1
1986
95.3
95.4
96.6
98.0
99.6
96.2
96.9
109.6
113.4
104.8
117.2
104.7
128.5
114.9
1987
100.0
100.0
100.0
100.0
100.0
100.0
100.0
113.6
118.4
104.9
121.1
104.9
134.4
119.7
1988
105.4
105.5
109.2
104.6
103.9
105.9
103.6
118.3
123.2
105.7
124.4
106.3
141.1
125.6
1989
108.1
105.3
115.9
108.8
108.8
109.2
104.0
124.0
129.3
108.0
128.9
109.2
150.4
135.4
1990
109.2
100.8
121.4
110.9
114.5
109.4
103.4
130.7
135.5
111.4
133.2
112.1
159.6
148.2
1991
p
107.1
96.5
124.1
111.2
118.0
107.1
100.3
136.2
143.1
115.0
137.2
116.0
169.7
156.9
1991:
Apr
105.5
'96.1
123.3
109.8
117.8
103.5
98.7
135.2
142.3
114.7
136.3
114.7
168.0
156.4
May
106.4
'96.9
126.0
109.6
116.9
105.3
98.5
135.6
143.0
115.3
136.6
115.2
170.2
156.9
June
107.3
'97.2
122.8
109.7
121.6
110.6
101.5
136.0
143.7
114.8
136.9
115.8
169.6
157.6
July
108.1
97.4
126.6
110.9
119.5
106.5
101.4
136.2
143.8
114.7
137.4
116.8
171.4
157.2
Aug
108.0
'97.0
122.8
110.9
117.3
104.1
99.8
136.6
143.9
114.9
137.7
116.8
170.3
157.6
Sept
108.4
97.7
123.7
109.6
117.5
107.9
100.2
137.2
143.7
115.1
138.0
117.0
171.0
158.1
Oct
108.4
'97.0
123.9
111.1
117.5
105.8
100.6
137.4
143.4
116.4
138.6
117.4
172.3
158.7
Nov
108.1
96.7
123.8
110.3
117.9
111.6
'100.4
137.8
144.0
116.6
138.9
117.9
173.5
159.3
Dec
107.4
95.3
122.0
'109.2
113.4
104.7
'100.1
137.9
143.4
116.0
139.1
118.0
174.0
159.4
1992: Jan
106.6
'95.4
121.5
'111.0
119.2
108.5
99.1
138.1
144.0
115.8
139.4
118.5
175.4
159.3
Feb
107.2
'95.8
120.6
'110.1
120.3
111.0
100.3
138.6
144.1
115.7
139.8
119.2
175.9
160.1
Mar
107.6
'96.3
117.7
109.8
118.5
110.7
'99.6
139.3
144.6
116.3
140.2
119.7
176.6
160.6
Apr
108.1
96.7
117.6
'111.3
117.6
104.4
'99.9
139.5
144.6
117.5
140.5
120.0
177.3
163.1
May
'108.6
115.7
109.6
118.7
99.0
139.7
144.9
117.6
140.9
120.5
178.3
163.7
June P
108.2
140.2
145.2
141.0
178.9
163.7
1 Data relate to all urban consumers.
Source: National sources as reported by Department of Commerce (Bureau of Economic Analysis
and International Trade Administration, Trade Information and Analysis).
U.S. MERCHANDISE EXPORTS AND IMPORTS
[Billions of dollars; monthly data seasonally adjusted]
Merchandise exports (f.a.s. value) 1
General merchandise imports (customs value) 3
Trade balance
Principal end-use commodity category
Principal end-use commodity category
General
Auto-
Con-
Auto-
Con-
mer-
Indus-
Indus-
Period
Foods,
trial
Cap-
motive
sumer
Cap-
motive
sumer
chandise
Exports
Exports
Foods
trial
(f.a.s) less
(f.a.s)
Total 2
ital
vehi-
feeds,
goods
ital
vehi-
Total
feeds,
goods
imports
sup-
goods
cles,
(non-
sup-
and
2
and
goods
(c.i.f.
imports
less
Other
cles,
(non-
plies
food)
plies
Other
except
parts,
except
parts,
food)
value)
(customs
imports
bever-
and
bever-
and
value)
(c.i.f.)
materi-
auto-
and
except
auto-
and
materi-
except
ages
als
motive
en-
auto-
ages
motive
en-
auto-
als
gines
motive
gines
motive
1982
216.4
31.3
61.7
72.7
15.7
14.3
20.7
244.0
17.1
112.0
35.4
33.3
39.7
6.5
254.9
-27.5
-38.4
1983
205.6
30.9
56.7
67.2
16.8
13.4
20.5
258.0
18.2
107.0
40.9
40.8
44.9
6.3
269.9
-52.4
-64.2
1984
224.0
31.5
61.7
72.0
20.6
13.3
24.0
4 330.7
21.0
123.7
59.8
53.5
60.0
7.8
346.4
-106.7
-122.4
1985
5 218.8
24.0
58.5
73.9
22.9
12.6
27.3
4 336.5
21.9
113.9
65.1
66.8
68.3
9.4
352.5
-117.7
-133.6
1986
5 227.2
22.3
57.3
75.8
21.7
14.2
35.9
365.4
24.4
101.3
71.8
78.2
79.4
10.4
382.3
-138.3
-155.1
1987
254.1
24.3
66.7
86.2
24.6
17.7
34.6
406.2
24.8
111.0
84.5
85.2
88.7
12.1
424.4
-152.1
-170.3
1988
322.4
32.3
85.1
109.2
29.3
23.1
43.4
441.0
24.8
118.3
101.4
87.7
95.9
12.8
459.5
-118.5
-137.1
1989
363.8
37.2
99.3
138.8
34.8
36.4
17.2
473.2
25.1
132.3
113.3
86.1
102.9
13.6
493.2
-109.4
-129.4
1990
393.6
35.1
104.4
152.7
37.4
43.3
20.7
495.3
26.6
143.2
116.4
87.3
105.7
16.1
517.0
-101.7
-123.4
1991
421.7
35.7
109.7
166.7
40.0
45.9
23.7
487.1
26.5
131.0
120.7
84.9
108.0
15.9
508.4
-65.4
-86.6
1991: May
35.0
2.9
9.4
13.7
3.4
3.7
2.0
40.0
2.3
11.3
9.9
6.6
8.5
1.5
41.8
-5.0
-6.8
June
34.7
2.7
8.7
14.3
3.5
3.7
1.9
39.4
2.3
10.6
10.0
6.6
8.4
1.5
41.1
-4.7
-6.4
July
35.2
3.1
9.1
13.7
3.6
3.7
2.0
40.8
2.2
10.7
10.2
7.4
9.1
1.3
42.6
-5.6
-7.4
Aug
34.5
3.0
9.1
13.4
3.3
3.7
1.9
41.1
2.1
10.9
10.0
7.9
8.9
1.3
42.8
-6.6
-8.4
Sept
35.3
3.1
8.6
14.4
3.5
3.8
1.9
41.8
2.2
11.1
10.2
7.4
9.4
1.3
43.6
-6.5
-8.3
Oct
36.8
3.2
9.3
14.4
3.7
4.1
2.1
42.7
2.1
11.1
10.3
7.7
10.0
1.4
44.5
-5.9
-7.6
Nov
37.3
3.2
8.9
15.4
3.6
4.1
2.1
41.4
2.2
10.8
9.9
7.2
9.8
1.4
43.1
-4.1
-5.8
Dec
36.1
3.3
8.9
14.3
3.3
3.8
2.3
41.7
2.3
10.8
10.3
7.2
9.8
1.3
43.4
-5.6
-7.4
1992: Jan
35.5
3.1
9.3
13.9
3.2
3.9
2.0
41.3
2.3
10.6
10.3
7.3
9.5
1.3
43.0
-5.8
-7.6
Feb
37.7
3.6
8.9
15.3
3.6
4.1
2.1
40.9
2.2
10.3
10.3
7.1
9.6
1.5
42.6
-3.3
-5.0
Mar
37.1
3.3
8.8
14.9
3.9
4.0
2.3
42.7
2.3
10.6
10.7
7.5
9.9
1.6
44.4
-5.6
-7.3
Apr
36.4
3.5
8.8
14.3
4.0
3.9
2.0
43.5
2.4
11.2
10.8
7.7
9.8
1.4
45.3
-7.1
-8.9
May
35.5
2.9
8.9
13.8
3.8
4.0
2.1
42.9
2.3
11.3
10.8
7.4
9.8
1.3
44.6
-7.4
-9.1
1 Includes Department of Defense Military Assistance Program grant-aid shipments.
month basis.
2 Includes undocumented exports to Canada through 1988.
S Total arrivals of imported goods other than intransit shipments.
NOTE.-Data shown include trade of the U.S. Virgin Islands.
4 Total includes revisions not reflected in detail.
5 Total exports are on a revised statistical month basis; end-use categories are on a statistical
Source: Department of Commerce, Bureau of the Census.
35
U.S. INTERNATIONAL TRANSACTIONS
The current account deficit fell to $5.3 billion in the first quarter of 1992 from $7.2 billion in the fourth quarter of
1991
BILLIONS OF DOLLARS
BILLIONS OF DOLLARS*
15
15
10
10
BALANCE ON
CURRENT ACCOUNT
5
5
0
0
-5
-5
-10
-10
BALANCE ON GOODS,
SERVICES, AND INCOME
-15
-15
-20
-20
-25
-25
-30
-30
MERCHANDISE
-35
TRADE BALANCE
-35
-40
-40
-45
-45
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
*SEASONALLY ADJUSTED
COUNCIL OF ECONOMIC ADVISERS
SOURCE: DEPARTMENT OF COMMERCE
[Millions of dollars; quarterly data seasonally adjusted, except as noted. Credits (+), debits (-)]
Merchandise 1 2
Services
Investment income
Balance on
Net
Unilateral
Balance
Period
Net
travel and
Other
Receipts
Payments
goods,
Exports
Net balance
military
on U.S.
transfers,
on current
Imports
transpor-
services,
on foreign
Net
services,
net
4
account
transac-
tions 3 4
net 5
assets
assets in
and income
tation
abroad
U.S. 3
receipts
1981 r
237,044
-265,067
-28,023
-844
144
12,552
86,529
-53,626
32,903
16,732
-11,702
5,030
1982 T
211,157
-247,642
-36,485
112
-992
13,209
86,200
-56,412
29,788
5,632
-17,075
-11,443
1983 r
201,799
-268,901
-67,102
-563
-4,227
14,095
85,614
-53,700
31,915
-25,882
-17,741
-43,623
1984
219,926
-332,418
-112,492
-2,547
-8,293
14,277
100,415
-69,572
30,843
-78,212
-20,612
-98,824
1985 r
215,915
-338,088
-122,173
-4,390
-9,709
14,266
91,110
-67,875
23,235
-98,771
-22,950
-121,721
1986 r
223,344
-368,425
-145,081
-5,181
-7,324
18,855
88,998
-73,620
15,378
-123,354
-24,176
-147,529
1987 r
250,208
-409,765
-159,557
-3,812
-6,398
18,400
96,574
-85,629
10,945
-140,421
-23,052
-163,474
1988 r
320,230
-447,189
-126,959
-6,354
-1,370
20,430
119,456
-106,991
12,466
-101,787
-24,869
-126,656
1989
361,697
-477,365
-115,668
-6,838
5,851
26,752
140,692
-126,326
14,366
-75,537
-25,606
-101,143
1990 r
388,705
-497,558
-108,853
-7,818
10,142
29,730
143,547
-124,261
19,287
-57,511
-32,916
-90,428
1991
415,962
-489,398
-73,436
-5,524
17,118
33,701
125,315
-108,886
16,429
-11,710
8,028
-3,682
1990: I'
94,981
-122,360
-27,379
-1,873
2,093
6,984
35,004
-30,676
4,328
-15,847
-6,538
-22,385
II
96,654
-121,461
-24,807
-1,627
2,073
7,237
34,586
-31,386
3,200
-13,924
-7,401
-21,325
III
96,544
-125,434
-28,890
-1,692
2,120
7,461
35,137
-30,913
4,224
-16,777
-7,201
-23,978
IV r
100,526
-128,303
-27,777
-2,627
3,855
8,051
38,821
-31,289
7,532
-10,966
-11,778
-22,744
1991: I
100,636
-118,962
-18,326
-2,564
3,755
8,164
35,498
-28,533
6,965
-2,006
14,199
12,193
II
103,324
-119,721
-16,397
-1,427
3,929
8,280
31,215
-27,284
3,931
-1,684
4,115
2,431
III
104,151
-124,325
-20,174
-994
4,358
8,660
29,904
-26,828
3,076
-5,075
-6,012
-11,087
IV
107,851
-126,390
-- 18,539
-539
5,080
8,596
28,698
-26,240
2,458
-2,945
-4,273
-7,218
1992: IP
107,825
-125,293
-17,468
-228
4,499
9,928
28,891
-24,181
4,710
1,441
-6,744
-5,303
1 Excludes military.
5 Fees and royalties from U.S. direct investments abroad or from foreign direct investments in the
2 Adjusted from Census data for differences in timing and coverage.
United States are excluded from investment income and included in other services, net.
3 Quarterly data are not seasonally adjusted.
4 Includes transfers of goods and services under U.S. military grant programs.
See p. 37 for continuation of table.
36
U.S. INTERNATIONAL TRANSACTIONS-Continued
In the capital accounts, U.S. claims on foreigners reported by U.S. banks decreased $21.7 billion in the first
quarter of 1992, in contrast to an increase of $23.2 billion in the fourth quarter of 1991. U.S. liabilities to private
foreigners reported by U.S. banks, excluding Treasury securities, decreased $4.8 billion in the first quarter,
compared to an increase of $23.5 billion in the fourth quarter.
BILLIONS OF DOLLARS*
BILLIONS OF DOLLARS*
80
80
CHANGE IN
FOREIGN ASSETS
IN THE U.S., NET
60
60
40
40
20
20
CHANGE IN
U.S. ASSETS
ABROAD, NET
0
0
-20
-20
-40
-40
-60
-60
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
*SEASONALLY ADJUSTED
SOURCE: DEPARTMENT OF COMMERCE
COUNCIL OF ECONOMIC ADVISERS
[Millions of dollars; quarterly data seasonally adjusted, except as noted]
U.S. assets abroad, net
Foreign assets in the U.S., net
Statistical discrepancy
U.S. official
[increase/capital outflow (-)]
[increase/capital inflow (+)] 3
Allocations
reserve
of special
Period
Other U.S.
Total (sum
Of which:
U.S.
assets, net 6
U.S.
official
Foreign
Other
drawing
of the items
Seasonal
Govern-
(unadjusted,
Total
ment
private
Total
official
foreign
rights
(SDRs)
with sign
adjustment
end of
reserve
36
assets
assets
assets
reversed)
assets
discrepancy
period)
assets
1981 r
-114,147
-5,175
-5,097
-103,875
83,032
4,960
78,072
1,093
24,992
30,074
1982 T
-122,335
-4,965
-6,131
-111,239
92,418
3,593
88,826
41,359
33,958
1983 r
-58,856
-1,196
-5,006
-52,654
83,380
5,845
77,534
19,099
33,747
1984 r
-29,224
-3,131
-5,489
-20,605
102,010
3,140
98,870
26,038
34,934
1985 T
-34,069
-3,858
-2,821
-27,391
130,966
-1,119
132,084
24,825
43,186
1986 r
-91,069
312
-2,022
-89,360
223,191
35,648
187,543
15,407
48,511
1987 r
-62,402
9,149
1,006
-72,556
229,972
45,387
184,585
-4,096
45,798
1988 T
-92,708
-3,912
2,967
-91,762
219,489
39,758
179,731
-126
47,802
1989 r
-114,944
-25,293
1,271
-90,922
213,693
8,489
205,204
2,394
74,609
1990
-56,321
-2,158
2,304
-56,467
99,379
33,908
65,471
47,370
83,316
1991
-62,220
5,763
3,397
-71,379
66,980
18,407
48,573
-1,078
77,719
1990: I'
42,141
-3,177
-743
46,061
-30,965
-6,450
-24,515
11,209
4,489
76,303
II
-30,682
371
-794
-30,259
30,853
6,134
24,719
21,154
518
77,298
III
-30,964
1,739
-337
-32,366
51,386
14,097
37,289
3,556
-5,605
80,024
IV T
-36,816
-1,091
4,179
-39,903
48,108
20,127
27,981
11,452
600
83,316
1991: I
-640
-353
1,073
-1,360
-7,840
5,650
-13,490
-3,713
4,636
78,002
II
-7,050
1,014
-420
-7,644
2,959
-4,178
7,137
1,660
883
74,940
III
-10,368
3,877
3,180
-17,426
22,933
4,115
18,818
-1,478
-6,137
74,731
IV
-44,158
1,225
-437
-44,947
48,929
12,819
36,110
2,447
613
77,719
1992: I ʳ
555
-1,057
-112
1,724
20,474
20,747
-273
-15,726
3,967
74,657
6 Consists of gold, special drawing rights (SDRs), foreign currencies, and the U.S. reserve posi-
June 1992.
tion in the IMF.
Sources: Department of Commerce (Bureau of Economic Analysis) and Department of the
NOTE.-All data on pp. 36 and 37 reflect revisions as shown in the Survey of Current Business,
Treasury.
37
Contents
TOTAL OUTPUT, INCOME, AND SPENDING
Page
Gross Domestic Product
1
Gross Domestic Product in 1987 Dollars
2
Implicit Price Deflators for Gross Domestic Product
2
Changes in GDP, Personal Consumption Expenditures, and Related Implicit Price Deflators and Price Indexes
3
Nonfinancial Corporate Business-Output, Costs, and Profits
3
National Income
4
Personal Consumption Expenditures in 1987 Dollars
4
Sources of Personal Income
5
Disposition of Personal Income
6
Farm Income
7
Corporate Profits
8
Gross Private Domestic Investment in 1987 Dollars
9
Expenditures for New Plant and Equipment
10
EMPLOYMENT, UNEMPLOYMENT, AND WAGES
Status of the Labor Force
11
Selected Unemployment Rates
12
Selected Measures of Unemployment and Unemployment Insurance Programs
13
Nonagricultural Employment
14
Average Weekly Hours, Hourly Earnings, and Weekly Earnings-Private Nonagricultural Industries
15
Employment Cost Index-Private Industry
15
Productivity and Related Data, Business Sector
16
PRODUCTION AND BUSINESS ACTIVITY
Industrial Production and Capacity Utilization
17
Industrial Production-Major Market Groups and Selected Manufactures
18
New Construction
19
New Private Housing and Vacancy Rates
19
Business Sales and Inventories-Manufacturing and Trade
20
Manufacturers' Shipments, Inventories, and Orders
21
PRICES
Producer Prices
22
Consumer Prices-All Urban Consumers
23
Changes in Producer Prices for Finished Goods
24
Changes in Consumer Prices-All Urban Consumers
24
Prices Received and Paid by Farmers
25
MONEY, CREDIT, AND SECURITY MARKETS
Money Stock, Liquid Assets, and Debt Measures
26
Components of Money Stock and Liquid Assets
27
Aggregate Reserves and Monetary Base
27
Bank Loans and Securities
28
Sources and Uses of Funds, Nonfarm Nonfinancial Corporate Business
29
Consumer Installment Credit
29
Interest Rates and Bond Yields
30
Common Stock Prices and Yields
31
FEDERAL FINANCE
Federal Receipts, Outlays, and Debt
32
Federal Receipts by Source and Outlays by Function
33
Federal Sector, National Income Accounts Basis
34
INTERNATIONAL STATISTICS
Industrial Production and Consumer Prices-Major Industrial Countries
35
U.S. Merchandise Exports and Imports
35
U.S. International Transactions
36
General Notes
Detail in these tables may not add to totals because of rounding.
Unless otherwise noted, all dollar figures are in current dollars.
Symbols used:
P Preliminary.
T Revised.
c Corrected.
Not available (also, not applicable).
NSA not seasonally adjusted.
For sale by the Superintendent of Documents, U.S. Government Printing Office,
Washington, D.C. 20402. Price $2.75 (single copy) ($3.44 foreign).
Subscription price: $30.00 per year; $37.50 for foreign mailing.
38
U.S. GOVERNMENT PRINTING OFFICE : 1992 0-57-817
Document No.
WHITE HOUSE STAFFING MEMORANDUM
6/26/92
DATE:
ACTION/CONCURRENCE/COMMENT DUE BY:
CEA NUMBERS -- MAY PERSONAL INCOME AND OUTLAYS, COMMERCE
DEPARTMENT RELEASE
SUBJECT:
ACTION FYI
ACTION FYI
VICE PRESIDENT
HORNER
SKINNER
MCBRIDE
SCOWCROFT
MOORE
DARMAN
PETERSMEYER
BRADY
PORTER
BROMLEY
SMITH
CALIO
YEUTTER
DEMAREST
FITZWATER
GRAY
HOLIDAY
REMARKS:
For your information.
RESPONSE:
PHILLIP D. BRADY
Assistant to the President
and Staff Secretary
Ext. 2702
EXECUTIVE OFFICE OF THE PRESIDENT
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON, D.C. 20500
THE CHAIRMAN
June 26, 1992
2 JUN 26 A10: 08
MEMORANDUM FOR WHITE HOUSE SENIOR STAFF
FROM:
MICHAEL J. BOSKIN Times
SUBJECT:
May Personal Income and Outlays, Commerce
Department Release, This Morning, 10:00 a.m.
Personal income rose 0.3 percent in May, following a 0.1
percent increase in April. Private analysts had expected a 0.4
percent increase in May.
Real disposable personal income--income adjusted for
inflation and taxes--rose 0.1 percent in May, following a 0.2
percent decline in April and 0.6 percent gains in March and
February.
Consumer spending adjusted for inflation rose 0.3 percent in
May, following a 0.2 percent rise in April. About three-quarters
of the increase in spending in May was accounted for by higher
outlays for motor vehicles and parts. There was little change,
on balance, in spending for other goods, and there was a small
increase in outlays for services.
The graph below shows that the increases in real personal
consumption expenditures the past 2 months did not offset the
large decline in March. The average level of consumer spending
in April and May was only marginally higher than the average in
the first quarter of 1992.
REAL PERSONAL CONSUMPTION EXPENDITURES
3.34
3.33
3.32
3.31
3.30
TRILLIONS OF 1987 DOLLARS
3.29
3.28
3.27
3.26
a
3.25
3.24
B
3.23
3.22
3.21
3.20
MAY 90
SEP 90
JAN 91
MAY 91
SEP 91
JAN 92
MAY 92
PLEASE NOTE EMBARGO RESTRICTIONS
ECONOMIC SNAPSHOT FOR THE WEEK OF JUNE 22--26
June 26, 1992
Today the Commerce Department reported that personal income rose 0.3
percent in May, following a 0.1 percent increase in April. Private analysts had
expected a 0.4 percent increase in May. Real personal consumption expenditures
rose 0.3 percent in May, following a 0.2 percent rise in April.
Yesterday the Commerce Department released the final estimate for real gross
domestic product (GDP) for the first quarter of 1992, which indicated that real GDP
grew at a 2.7 percent annual rate. Private analysts had expected a 2.4 percent
(annual rate) increase--the same as the growth rate reported in last month's
preliminary estimate.
On Wednesday, the Department of Commerce reported that new orders for
manufactured durable goods fell 2.4 percent in May, after increasing 1.9 percent in
April. Private analysts had expected an increase of 0.9 percent. Shipments of
durable goods decreased 1.0 percent in May, after remaining flat in April.
DATA RELEASED THIS WEEK:
Personal income rose 0.3 percent in May, following a 0.1 percent increase
in April. Consumer spending adjusted for inflation rose 0.3 percent in May,
following a 0.2 percent rise in April. The average level of consumer spending in
April and May was only marginally higher, however, than the average in the first
quarter of 1992. (Embargoed until 10:00 a.m., 6-26-92)
Real GDP rose 2.7 percent at an annual rate in the first quarter of 1992,
according to the final estimate by the Department of Commerce. The final
estimate is revised upward from the 2.4 percent increase reported last month.
Private analysts had expected no revision. Inflation, as measured by the GDP fixed-
weight price index, was 3.3 percent at an annual rate, 0.1 percentage point less than
reported in the preliminary estimate.
New orders for durable goods fell 2.4 percent in May after rising 1.9
percent in April. The decrease in May can be accounted for by declines in orders
for aircraft and parts and in defense capital goods. Excluding these items, orders
rose 0.7 percent. Shipments of durable goods fell 1.0 percent in May, after
remaining flat in April.
JUL 28 '92 14:58 FROM
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PAGE. 002/005
OFFICE OF THE UNITED STATES
TRADE REPRESENTATIVE
EXECUTIVE OFFICE OF THE PRESIDENT
WASHINGTON
20506
U.S. EXPORTS CREATE HIGH-WAGE EMPLOYMENT
Summary
Expansion of U.S. exports is likely to increase the overall
average real wage of all American workers, according to an
analysis completed by the U.S. Trade Representative. In a study
of recent wage statistics, USTR's Office of the Chief Economist
found that U.S. workers employed in export-related jobs earn 17%
more than the average worker in the United States. Export-related
wages are higher for manufactured and service jobs. Moreover,
while service-related jobs generally pay less than manufacturing
jobs, service jobs in the export sector were found to pay more on
average than manufacturing jobs in the overall economy.
The policy implications are clear: exports are good for the United
States and good for U.S. workers. Better paying U.S. jobs are
created when foreign markets are open to exports of U.S. goods and
services. Initiatives such as the North American Free Trade
Agreement, the Uruguay Round of the GATT, and bilateral accords
generate growth in exports and an increase in wages for American
workers. Higher paying export jobs are threatened when
protectionist measures close our borders and invite retaliation.
The US must not shrink from international competition, at home or
abroad.
U.S. Average Hourly Wages in 1990:
Export-related jobs pay more and
All Jobs and Merchandise Export-Related Jobs*
are higher skilled than average jobs
$12.00
in the U.S. economy.
Lagend
Exports are also important because:
$10.00
AS Jobs
Export Related Jobs
Since 1988, exports have accounted
$8.00
*(Private Sector,
for 75% of U.S. growth.
Average Hourly Wage
Non-Agricuttural)
$8.00
in 1991. the U.S. was the world's
No. 1 exporter, with $591 billion
$4.00
worth of goods and services
exported. Analysts estimate at least
$2.00
$610 billion in exports for 1992.
Each $1 billion in merchandise
$0.00
All Industries
Manufacturing
Services
exports creates over 19,000 new
jobs.
JUL28 '92 14:59 FROM
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PAGE. 003/005
2
study on U.S. Export Industries and Wages
The Office of the U.S. Trade Representative analyzed data on U.S.
average hourly wages for all jobs and for those jobs directly and
indirectly dependent on U.S. merchandise exports. Jobs indirectly
tied to exports of goods include jobs in service sectors such as
insurance, advertising, and legal and business services.
Key Findings of USTR Study
The average hourly wage in 1990 for U.S. private sector, non-
agricultural workers was $10.02. The average hourly wage for
employment related to merchandise exports, however, was
$11.69, or 16.7 percent higher than the national average.
Export-related jobs in both manufacturing and in services
paid more than their domestic counterparts on average:
10.2 percent more for manufacturing jobs ($11.93 versus
$10.83 per hour) and 19.8 percent more for services jobs
($11.30 versus $9.43 per hour).
Although manufacturing workers still earn more than service
workers, (even among export-related jobs), it is striking
that service workers in export-related jobs earn more on
average ($11.30 per hour) than manufacturing workers overall
in the U.S. economy ($10.83).
U.S. Average Hourly Wages in 1990
For Private Sector. Non-Agricultural Workers
All U.S.
U.S.
Export-Related
Workers
Merchandise
Wages as
Export-Related
a Percent of
Workers
Overall
All Industries
$10.02
$11.69
116.7%
Manufacturing
$10.83
$11.93
110.2%
Services
$9.43
$11.30
119.8%
The strong wage advantage for export-related service workers
is particularly encouraging because most of the recent net
job creation in the U.S. economy has been in the service
sector. In the overall economy, the average hourly wage of
service workers is 87.1 percent that of the average hourly
manufacturing wage. In export-related jobs, however, the
hourly wage of services workers is 94.7 percent that of
manufacturing workers.
JUL28 '92 15:00 FROM
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PAGE. 004/005
4
the inputs and capital goods needed to produce exports, and
downstream to transport U.S. products to the port of exportation.
In other words, the Commerce Department report traces the job-
creating impact of U.S. merchandise exports back to the industries
(service-producing as well as goods-producing) of origin of each
and every U.S. job directly or indirectly dependent on merchandise
exports. In 1990, 3.3 million U.S. full-time equivalent
manufacturing jobs, 3.0 million U.S. full-time equivalent service
jobs and 0.9 million full-time equivalent jobs in other U.S.
sectors (principally agriculture) were required to produce U.S.
merchandise exports worth $423.9 billion.
By matching the number of export-related jobs to average hourly
wage data, it is possible both to calculate the average hourly
wages of U.S. export-related workers and to compare those wages to
U.S. national averages. Such a procedure, in effect, enables an
average wage to be derived by re-weighting the industry
composition of jobs associated with the production of total
domestic output in 1990. The new weights yield the industry
composition required to produce U.S. exports in 1990, Such
calculations have been made at the Office of the U.S. Trade
Representative using wage data for 1990 from Employment and
Earnings, U.S. Department of Labor, Bureau of Labor Statistics,
March 1991.
USTR's calculations match the Labor Department's private-sector,
non-agricultural earnings series to the Commerce Department's
export-related job series. The Labor Department data do not
report earnings for agricultural workers (and the two data series'
definitions of agriculture differ slightly). Nevertheless, it was
possible to match 6.7 million export-related jobs (or 93.3 percent
of Commerce's total of 7.2 million) to the Labor Department's
earnings series. This matching was done with the data
disaggregated into 125 employing industries, representing various
groupings of 2-digit, 3-digit and 4-digit categories in the
Standard Industrial Classification.
Finally, while USTR's study perforce examined jobs tied to
merchandise exports because of the Commerce Department data, there
is every reason to believe that the same pattern of higher wages
in companies exporting services would also prevail.
Supporting Study: USTR's empirical findings are consistent with
other work suggesting that the expansion of U.S. exports is likely
to increase the overall average real wage of all American workers.
with reference to 1983 trade data, Lawrence F. Katz and Lawrence
H. Summers have recently examined employment characteristics (for
direct employment only), including average hourly wages, in U.S.
export- and import-intensive manufacturing industries. Their
empirical evidence is consistent with the wage data developed at
JUL 28 '92 15:00 FROM
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PAGE. . 005/005
5
USTR and supports the view that U.S. export expansion through more
open markets will increase U.S. average real wages.
The authors write that: 1
[w]ages in export-intensive industries are 12 percent
above average after adjusting for skill differences,
while wages in import-intensive industries are 16
percent below average. Roughly similar differentials
are observed for both union and non-union workers. The
widely cited examples of automobiles and steel, where
very high-wage industries face substantial import
penetration and are almost completely unable to export,
appear to be atypical. The general pattern is that
export-intensive industries are the ones with
substantial wage premia.
Reflecting patterns of American comparative
advantage, export-intensive industries in the United
States also employ more skilled workers and do more
research and development than import-intensive
industries
[pages 106-108]
The authors remark with respect to U.S. trade policy:
These results suggest that, for the United States,
policies that succeed in promoting trade and increasing
the volume of both exports and imports will tend to
raise welfare by moving workers from lower- to higher-
wage industries. [page 109]
Contact Point: Office of the Chief Economist
Office of the United States Trade Representative
600 17th Street, NW
Washington D.C. 20506
(202) 395-3583
"can Interindustry Wage Differentials Justify Strategic Trade
Policy?," Lawrence F. Katz and Lawrence H. Summers in Trade
Policies for International Competitiveness, A National Bureau of
Economic Research Conference Report, edited by Robert C. Feenstra,
University of Chicago Press, Chicago and London, 1989.
THE WHITE HOUSE
WASHINGTON
July 16, 1992
MEMORANDUM FOR MEMBERS OF THE DOMESTIC POLICY
REFORM BREAKFAST GROUP
FROM:
DEAN SCHULTHEISS
Alian
SUBJECT:
Reading Material
During the discussion at last Friday's breakfast with Jim
Miller, Charles Kolb promised to circulate an article by Stephen
Moore of the Cato Institute. That article, and others you may
find of interest, are enclosed for your review.
Please be reminded also that our speaker for Friday, July 17
is Bill Niskanen, Chairman of the Cato Institute. Call me this
afternoon on 456-2471 to let me know if you plan on attending.
Also, while we have no speakers scheduled for July 24 or 31
at this time, we do intend to meet and speakers will be lined up
within the next few days. However, we will not be meeting during
the entire month of August as many in our group plan to take
their vacations at this time.
Policy June Analysis
CRISIS? WHAT CRISIS?
GEORGE BUSH'S NEVER-ENDING
DOMESTIC BUDGET BUILD-UP
by Stephen Moore
Ever since the riots in Los Angeles, critics of the Bush
administration have been complaining that it is not spending
enough money to solve America's urban problems. According to
that assessment, Bush, carrying on the Reagan tradition, is
neglecting a wide array of unmet social welfare needs--in
education, low-income assistance, job training, housing, and
health care. It is not just pro-spending special interest
groups that are chastising Bush for his supposed frugality.
In March 100 prominent economists, including 5 Nobel laure-
ates, proposed that "to stimulate vigorous economic recov-
ery, " the president should launch a "$50 billion a year pro-
gram of federal assistance to state and local governments
emphasizing public investment in education and infrastruc-
ture. ⑉1
Unfortunately, if there is one thing the Bush adminis-
tration does not need to be prodded to do, it is to spend and
borrow money. Bush has been increasing real federal domestic
expenditures by 8.7 percent per year, a faster rate of growth
than under any previous president since John F. Kennedy.
Since 1989 Bush has also run up bigger deficits, both in
dollars and as a percentage of GDP, than any other post-World
War II president. If massive growth of government and multi-
billion-dollar deficits were the solution to America's eco-
nomic problems, the nation would be basking in unprecedented
prosperity, and Bush would be widely acclaimed as an economic
miracle worker.
Stephen Moore is director of fiscal policy studies at the Cato
Institute.
CATO
INSTITU 11:
224 Second Seeds
Washington. DC
Page 2
In February 1991 a Cato Institute Policy Analysis first
called attention to the rapid build-up of domestic spending
during Bush's first two years in office.³ This study re-
veals evidence that there had been virtually no slowdown in
Bush's domestic spending spree. In fiscal year 1992 federal
outlays will rise to $1.5 trillion, 8 percent above infla-
tion. Federal spending will consume a post-World War II
record 25.2 percent of gross domestic product this year. In
other words, the 1990 budget agreement and the $200 billion
tax increase have done nothing to slow the Bush spending
binge. If anything, they have accelerated it. Ten damning
details of Bush's fiscal policy mismanagement follow.
1. From the time of Bush's inauguration through the end
of this year the domestic portion of U.S. government
spending, after accounting for inflation, will have
risen by $175 billion. That is a 28 percent real ex-
pansion in just three years. Excluding the cost of the
savings-and-loan bailout, domestic programs are still
up roughly 24 percent in real terms.
2. No president in the last quarter century has in-
creased spending by so much so rapidly. The 8.7 per-
cent rate of annual increase in the real domestic bud-
get under Bush earns him the distinction of being the
biggest spender to occupy the Oval Office since John
Kennedy. This administration is spending at twice the
rate Jimmy Carter's did. (Ironically, vice presiden-
tial candidate Bush helped skewer Carter as a liberal
big spender in 1980.)
3. Costs of domestic programs are rising almost across
the board. Since 1989 appropriations have risen 48
percent for the Departments of Commerce and State, 22.5
percent for the Department of Energy, 36 percent for
the Department of Housing and Urban Development, and 32
percent for the Department of Transportation. Appro-
priations for the Departments of Labor and Health and
Human Services have increased by an astronomical 63
percent.
4. The big lie in Washington in the 1990s is that the
federal government is underinvesting in infrastructure,
education, children's programs, and other war-on-pover-
ty-programs. Since 1989 real spending has risen 8
percent for education, 11 percent for highways, 58
percent for Head Start, 46 percent for food stamps, and
18 percent for child nutrition. In short, Bush has
been a generous benefactor of the Great Society.
Page 3
5. The Bush administration and the 102nd Congress have
even increased the budgets for programs that have the
lowest priority. The budgets of 30 major programs that
the Reagan administration had proposed terminating in
the early 1980s--including the Small Business Adminis-
tration, the Export-Import Bank, the Job Corps, and the
Corporation for Public Broadcasting--will have risen by
an average of 44 percent through 1993. Bush has re-
quested many of those increases.
6. It is not true that Bush is an innocent victim of a
Democratic-controlled Congress. Without question, this
is a free-spending Congress; however, Bush has been
requesting big budget increases. His latest budget
(for FY 1993) requests spending increases of more than
10 percent for the Departments of Education, Housing
and Urban Development, Justice, State, and the Trea-
sury. The Bush budget would increase spending for
virtually every domestic purpose above the inflation
rate; only defense spending would fall.
7. In three years Bush has not vetoed a single spending
bill sent to him by the Democratic Congress because it
cost too much. Clearly, the spending epidemic in Wash-
ington begins in the White House.
8. Federal borrowing continues to skyrocket under Bush,
reversing the progress that had been made in deficit
reduction from 1986 to 1989. When Bush became presi-
dent, the Gramm-Rudman-Hollings path was supposed to
bring the federal deficit down to $64 billion in 1991,
$28 billion in 1992, and $0 in 1993. Instead, the
deficit was $280 billion in 1991, and it will be $400
billion in 1992 and $350 billion in 1993.
9. By veering off the Gramm-Rudman-Hollings track and
then abandoning that spending control mechanism alto-
gether in 1990, Bush has increased the federal debt by
$1 trillion over what it should have been. As a re-
sult, the federal debt will reach $4 trillion this
year.
10. The Democrats' standard line--that large deficits
are a result of the Reagan defense build-up and tax
cuts--no longer has even a glimmer of truth to substan-
tiate it. Defense spending as a share of GDP is now
lower than it was before Reagan became president, and
tax revenues as a share of GDP are exactly at their
1979 level of 19 percent. The increase in the deficit
in the 1990s has been due to Bush's raising domestic
outlays from 13 to 16.5 percent of GDP in three years.
Page 4
Bush's mishandling of fiscal policy is reflected in the
poor performance of the U.S. economy. Under Bush, through
the end of 1991, the U.S. economy grew at a paltry 0.3 per-
cent per year. That is the lowest economic growth rate
under any president since Franklin D. Roosevelt. It is more
than coincidence that, under big-spending Bush, the economy
is not doing well.
Clearly, the key to restoring U.S. prosperity is not
some scheme to spend more federal money and drive the na-
tional debt up further into the stratosphere. Bush has
tried that strategy, and it has produced woeful results.
The road to prosperity is to aggressively, and rapidly, cut
government spending and substantially reduce the tax burden
on American businesses and workers. In short, economic
revival depends foremost on shifting "Bushonomics" into
reverse.
Budget Growth under George Bush
Under Bush, domestic spending, adjusted for inflation,
rose by nearly 10 percent through 1991. Even excluding the
cost of the savings-and-loan bailout, the real rate of in-
crease in domestic spending under Bush was more than 6 per-
cent. That was a far cry from the 3 percent "flexible
freeze" budget strategy he promised in his 1988 campaign.
When first confronted with evidence of profligate
spending, the White House offered reassurance that progress
on the budget was right around the corner.⁴ The administra-
tion's optimism was based on two factors. First, the $150
Billion savings-and-loan bailout would end in 1992, and when
the Resolution Trust Corporation began to sell off the ac-
quired properties and other assets of the failed thrifts
thereafter, the government's balance sheet would further
improve. Second, Office of Management and Budget director
Richard Darman insisted that the 1990 budget deal's tight
spending caps would usher in a new era of budget austerity
in Washington.
We can now conclude with relative certainty that fiscal
progress is not right around the corner. Federal spending
continued to accelerate far ahead of predictions in 1991,
and it will continue to surge in 1992 and 1993. Table 1
shows that this year total real federal outlays will in-
crease by more than $100 billion, or 8.2 percent above in-
flation. Spending as a share of GDP will rise to 25.2 per-
cent--a peacetime record. Figure 1 shows that it took Rea-
gan eight years to reduce federal spending from 24 to 22
Page 5
Table 1
Growth of Federal Spending under Reagan and Bush
Total
(Billion
Percentage
Percent
Year
1992 Dollars)
Increase
of GDP
1981
1,046
22.9
1982
1,085
3.7
23.9
1983
1,138
4.9
24.4
1984
1,150
1.1
23.0
1985
1,233
7.2
23.8
1986
1,267
2.8
23.5
1987
1,240
2.1
22.5
1988
1,262
1.8
22.1
1989
1,294
2.5
22.1
1990
1,344
3.9
22.9
1991
1,363
1.4
23.5
1992 (est.)
1,475
8.2
25.2
Source: "Historical Tables, Budget of the United
States Government for Fiscal Year 1993 Supplement,
Tables 1.1, 1.2, 1.3.
percent of GDP, but in three years Bush will have raised
spending from 22 to 25 percent of GDP. Clearly, the budget
deal is not restraining budget growth. 5
Figure 1
Total Federal Spending as a Percentage of GDP under Reagan and Bush
26
Legend
= Reagan
25.2
25
= Bush
Cato Institute
24.4
23.9
Outlays as Percentage of GDP
23.8
24
23.5
23.5
23.0
22.9
23
22.5
22.1
22.1
22
21
20
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
Fiscal Year
(est.)
Sources: Budget of the United States Government for Fiscal Year 1991; and Budget of the United States Government for
Fiscal Year 1993: Supplement, Table 1.2.
Page 6
The overall spending totals; however, camouflage the
size of the Bush budget build-up in a number of areas.
Domestic spending has been rising much faster than the over-
all spending totals, because the military budget has been
shrinking slowly but steadily since 1987. In 1987 Pentagon
spending accounted for 28 percent of the budget; by next
year that figure will be down to 19 percent. So far, Bush
and the 102nd Congress have shifted the "peace dividend"
from defense to domestic programs. Since 1989 real defense
spending (in 1987 dollars) has declined by $30 billion while
real domestic outlays have risen by an astounding $175 bil-
lion.
One way to fully comprehend Bush's massive domestic
spending build-up is to compare it with Reagan's celebrated
defense build-up in the early 1980s. From 1981 to 1984,
Reagan's first three years, the Pentagon budget rose in real
Table 2
Bush's Domestic Build-Up VS. Reagan's Defense Build-Up
Bush Domestic Spending
Reagan Defense Spending
Percentage
Percentage
Year
Amount
of GDP
Year
Amount
of GDP
1989
$616
13.0
1981
$198
5.3
1990
675
14.0
1982
214
5.9
1991
718
15.2
1983
230
6.3
1992
(est.)
791
16.5
1984
242
6.3
Increase
$175
$ 44
Percentage
increase
28.0%
22.0%
Increase
as percentage
of GDP
3.5%
1.0%
Source: "Historical Tables," Budget of the United States
Government for Fiscal Year 1993: Supplement, Table 6.1.
Note: Dollar amounts are billion 1987 dollars and represent
total nondefense spending minus net interest on national debt.
Page 7
1987 dollars from $200 billion to $243 billion, a 22 percent
increase. From 1989 through 1992 under Bush the domestic
budget will have risen, in 1987 dollars, from $616 billion
to $791 billion, a 28 percent increase. Even more remark-
able, after the first three years of the Reagan defense
build-up, military spending had climbed by roughly one per-
centage point of GDP, from 5.3 to 6.3 percent. After the
first three years of the Bush domestic spending build-up,
civilian programs had grown by an enormous 3.5 percentage
points of GDP, from 13.0 to 16.5 percent (Table 2). After
11 years of Republicans in the White House, the United
States today devotes a larger share of GDP to domestic
spending than ever before.
Bush's Spending in Historical Perspective
Real domestic outlays under Bush (1989-92) have climbed
by 8.7 percent per year. As Figure 2 shows, that makes Bush
the largest spender to sit in the White House in the past 30
years. Bush is outspending Lyndon Johnson, the architect of
the Great Society and the war on poverty. He is spending at
more than double the rate Carter did and at eight times the
Figure 2
Average Annual Real Domestic Spending Increases, by President, 1946-92
9.0
9.0
8.5
8.7
Cato Institute
8.0
7.5
7.3
7.0
6.0
5.5
5.5
5.0
Percent
5.0
4.0
3.5
3.0
2.0
1.0
Includes S&L ballout
Excludes S&L ballout
1.0
0
Truman
Eisenhower
Kennedy
Johnson
Nixon
Ford
Carter
Reagan
Bush
Bush
1946 53
1953 61
1961 64
1964 69
1969 75
1975 77
1977 81
1981 89
1989 92
1989 - 92
Sources: "Historical Tables," Budget of the United States Government for Fiscal Year 1993: Supplement, Table 6.1; and author's calculations.
Note: Domestic spending is total nondefense spending minus interest on the national debt.
Page 8
rate Reagan did. Scott Hodge of the Heritage Foundation
finds that Bush will have increased the domestic budget more
in 4 years than Carter and Reagan combined did in 12 years,
even accounting for inflation. 6 In 1991 dollars, Carter and
Reagan increased domestic programs by $99 billion from 1977
through 1989, whereas Bush will have increased domestic pro-
grams by $179 billion from 1989 through 1993. 7
In defense of the Bush administration, it should be
noted that some of the growth in expenditures during the
past three years has been due to the unavoidable expense of
the savings-and-loan bailout. Between 1989 and 1991 that
rescue cost taxpayers $106 billion, and in 1992 it will cost
another $40 billion. Even if we exclude the costs of the
bailout from the budget analysis, however, Bush is still a
big-spending president. Real domestic expenditures minus
the savings-and-loan bailout are increasing by 7.3 percent
per year under Bush. That still puts Bush in the ranks of
the biggest presidential spenders.
Where Has All the Money Gone?
Under Bush domestic spending has been rising virtually
across the board. Table 3 shows the changes from 1989
through 1992 in the federal government's 13 major appropria-
tions. Spending has decreased only for defense, military
construction, and foreign operations. Every domestic area
has had a double-digit percentage increase, and expenditures
for all areas but agriculture have grown faster than infla-
tion: spending (in current dollars) is up 48 percent for the
Departments of Commerce and State, 36 percent for the De-
partment of Housing and Urban Development and independent
agencies, 63 percent for the Departments of Labor and Health
and Human Services, and 19 percent for the Department of
Education. That build-up of domestic programs paid for by
reductions in defense spending is almost a replay of what
Carter did with the federal budget in the post-Vietnam War
period--though Bush is moving at a faster pace than Carter
did.
Entitlement programs in particular have seen their bud-
gets grow. Entitlements provide benefits to specific tar-
geted groups of people--such as veterans, senior citizens,
the disabled, and the poor. Figure 3 shows the explosive
growth of entitlements since 1989. By the end of fiscal
year 1992, real spending will has risen 46 percent for food
stamps, 72 percent for unemployment insurance, 85 percent
for Medicaid, and 39 percent for Supplemental Security In-
come. The only entitlement program that has not been great-
ly expanded under Bush is Social Security.
Page 9
Table 3
Growth in Appropriations under Bush
1989'
1992'
Change (%)
Agriculture
$ 46.6
$ 52.5
12.7
Commerce/State
14.8
21.9
48.0
Defense
282.0
271.2
-3.8
Education
22.7
27.0
18.9
Energy
17.8
21.8
22.5
Foreign operations
14.3
14.0
-2.1
HUD/independent agencies
59.4
80.9
36.2
Interior
9.9
12.6
27.3
Labor/HHSᵇ
117.7
192.0
63.1
Legislative branch
1.8
2.3
27.8
Military construction
8.8
8.6
-2.3
Transportation
10.8
14.3
32.4
Treasury
16.0
19.9
24.4
Sources: "Congress Cranks Out 13 Bills in Last 8 Days of Session,"
Congressional Quarterly, November 3, 1990, p. 3723; House Committee on
Appropriations, "Actions on Appropriations for Fiscal Years 1991 and
1992, 102nd Congress, 1st Session," November 25, 1991.
a Billions of current dollars
b Excludes Social Security spending.
Figure 3
Real Entitlement Spending Increases under Bush, 1989-92
Aid to Families with
17%
Dependent Children
Child Nutrition
17%
Cato Institute
Food Stamps
46%
Medicaid
85%
Medicare
23%
Social Security
9%
Supplemental
39%
Security Income
Unemployment
72%
Compensation
Housing
17%
0%
20%
40%
60%
80%
100%
Sources: Budget of the Government of the United States for Fiscal Year 1991,
Appendix 1, Part 2; Budget of the United States for Fiscal Year 1993,
Appendix 1, Part 2.
Page 10
Defenders of the Bush administration contend that it
has little authority to limit expenditures on entitlements,
since their benefit levels and eligibility requirements are
established by law. Indeed, it is for that reason that en-
titlement spending is often wrongly described as "mandatory"
and that its rate of growth is falsely labeled "uncontrolla-
ble." The truth is that entitlements are skyrocketing under
Bush for three reasons. First, the recession--caused in
large part by administrative and congressional policies®--is
increasing the number of people served by those programs as
more Americans lose their jobs and see their incomes de-
cline.
Second, entitlements are growing because Bush and Con-
gress have continually changed the laws to expand benefits
and eligibility. The prime example is the lengthening of
the duration of unemployment insurance benefits from 26 to
52 weeks, or more in some cases. Another example is the
gradual expansion of Medicaid achieved by widening eligibil-
ity and by increasing the number of services for which the
federal government reimburses the states. It is no accident
that Medicaid is growing by more than 20 percent per year.
The third, and perhaps most important, reason for the
entitlement explosion is that the 1990 budget agreement re-
moved entitlements from the constraints of broad spending
caps and made them immune to changes in the economy. Under
the Gramm-Rudman-Hollings budget law, entitlements were de
facto capped by overall deficit ceilings. In the GRH era,
had entitlements grown and expanded as they are doing today,
the increases would have forced massive reductions in almost
every area of the budget--including defense and discretion-
ary domestic programs--to meet the deficit ceilings. To
avoid those painful cuts, Congress and Reagan did not allow
entitlements to spiral out of control. In fact, in the GRH
era, real entitlement spending grew by less than 1 percent
per year, whereas it has been growing at a real rate of al-
most 8 percent since 1989.9 That indicates that Congress
and the president can control entitlements if they wish.
But neither Bush nor the current Congress has any desire to
do so.¹⁰
Reaganomics in Reverse
Bush's failure to restrain real domestic outlays is
perhaps best highlighted by examining the budgets of 30 pro-
grams that Reagan had proposed terminating or substantially
cutting in the early 1980s. Those programs were identified
as the most ineffective, wasteful, outdated, and even in
some cases counterproductive of the thousands of federal
Page 11
programs in the budget. Reagan failed to terminate any of
them, but their budgets did shrink in the 1980s. As Table 4
shows, however, many low-priority programs are actually en-
joying healthy budget increases under Bush; average real
growth over the four-year period (1989-93) will be 44 per-
cent, according to the Bush administration's January 1992
budget proposal. It is important to emphasize that in many
cases Bush has requested the increases. Consider these ex-
amples:
* In 1989 the budget for Department of the Interi-
or land acquisition was $204 million. Bush is
asking for $222 million in 1993. With the federal
government already owning close to one-third of
the land in the United States, the government
should be selling property, not purchasing it.
* Funding for adult and vocational education would
rise from $953 million in 1989 to $1.18 billion in
1993 under Bush's latest budget proposal.
* Bush requests that $473 million be spent on
energy conservation in 1993, up from $375 million
in 1989, despite rapid declines in oil prices in
the last three years.
* Federal spending on family planning would surge
from $375 million in 1989 to $483 million in 1993.
* The Corporation for Public Broadcasting will see
its budget climb from $261 million in 1989 to $309
million next year, if the Bush administration has
its way.
* Outlays for the Job Corps would balloon to $898
million in 1993, up from $840 million when Bush
took office.
Clearly, if Bush cannot or will not cut spending on the
most ineffective and indefensible programs, it should come
as no surprise that he is incapable of restraining expendi-
tures elsewhere in the budget.
Page 12
Table 4
Real Funding of Low-Priority Domestic Programs under Bush
Percentage
Increase,
Agency
1989
1991
1992
1993
1989-93
Department of Agriculture
Child nutrition (middle-income subsidies)
670
764
870
782
17
Forest Service land acquisition
68
62
70
87
28
Soil Conservation Service
772
816
870
782
1
Department of Education
Adult and Vocational Education
953
1,126
1,080
1,178
24
Bilingual Education
182
196
220
212
17
Educational Research
261
258
340
386
48
Department of Energy
Energy Supply R&D
2,429
2,252
2,690
2,896
19
Energy Conservation
375
403
460
473
26
Nuclear Physics
295
320
350
347
18
Department of Health and Human Services
National Health Service Corps
57
93
90
116
104
Family Planning
375
413
460
483
29
Department of the Interior
Land acquisition
204
196
260
222
9
Bureau of Indian Affairs (education)
306
517
400
405
32
Department of State and Related International Programs
Peace Corps
170
176
190
203
19
Inter-American Foundation
23
21
20
29
28
Export-Import Bank
57
-93
540
579
920
Agency for International Development
1,476
1,890
2,080
2,606
77
Other Programs
OSHA
272
269
280
280
3
Consumer Product Safety Commission
34
41
40
39
13
Small Business Administration
91
630
460
290
219
Corporation for Public Broadcasting
261
310
330
309
18
Job Corps
840
837
880
898
7
National Labor Relations Board
159
145
160
164
3
ACTION
182
196
190
193
6
(Continued)
Page 13
Table 4 (Continued)
Real Funding of Low-Priority Domestic Programs under Bush
Percentage
Agency
Increase,
1989
1991
1992
1993
1989-93
Grants for airports
1,283
1,591
1,560
1,690
32
Minority Business Development Agency
45
41
40
48
6
Dislocated Worker Assistance
114
543
40
550
385
Equal Employment Opportunity Commission
207
198
40
229
11
Public Housing
1,725
2,624
3,170
3,629
110
Appalachian Regional Commission
125
165
120
125
1
Total
14,009
17,002
18,300
20,238
44.47
Sources: Budget of the United States Government for Fiscal Year 1991, Appendix 1;
Budget of the United States Government for Fiscal Year 1993, Appendix 1.
Note: Outlays in millions of 1992 dollars.
The Myth of Unmet Needs
The pro-spending constituencies in Washington continue
to complain that there are high priorities that are not re-
ceiving adequate funding under Bush. For instance, in the
wake of the Los Angeles rioting, the media have claimed that
the war on poverty has been defunded, thus forcing angry ur-
ban citizens into the streets. On NBC Nightly News Lisa
Myers expressed the notion that the Bush administration has
been reluctant to fund vital social programs: "It was often
said that Ronald Reagan's big budget cuts declared war on
the poor. The most that can be said of George Bush is that
he declared a cease-fire. ⑉11 Items that allegedly fall into
the category of "investments in the future" include infra-
structure, education, children's programs, job training, and
research and development. 12
The truth, unfortunately, is that the Bush administra-
tion has enthusiastically supported virtually all the pro-
grams at the top of the left's spending wish list. Table 5
shows that the combined budget, after accounting for infla-
tion, for 12 "high-priority" social welfare, health, educa-
tion, and infrastructure programs is up almost $20 billion,
or 18 percent, under Bush. The figures in Table 5 would
Page 14
Table 5
The Myth of Unmet Spending Needs (Millions of 1992 Dollars)
Percentage
1989
1992 (est.) Increase
AIDS Research
2,577
4,370
70
Airport Grants
1,283
1,560
22
Child Nutrition
5,176
6,110
18
Education
24,529
26,530
8
Environmental Protection
Agency
5,573
5,950
7
Food Stamps
15,585
22,720
46
Head Start
1,396
2,200
58
Highways
15,335
16,990
11
National Institutes
of Health
7,934
8,510
7
National Science
Foundation
1,975
2,320
17
Subsidized Housing
14,200
15,040
6
Women, Infants, and
Children Nutrition
2,202
2,620
19
Total
97,764
114,920
18
Sources: Budget of the United States Government for Fiscal Year
1991, Appendix 1; Budget of the United States Government for Fiscal Year
1993, Appendix 1.
seem to contradict the conventional notion that problems
with the infrastructure, education, and poverty in America
today are the result of spending too little on them.
Who Is to Blame? Congress or Bush?
Apologists for the Bush administration maintain that
the president is a victim of a spendthrift Congress, and few
would argue that the 102nd Congress has not shown an almost
unquenchable appetite for spending. The National Taxpayers
Union recently reported that the current members of the
102nd Congress had proposed "$22 of new spending for every
$1 of spending cuts. 1113 Enacting all bills before the House
would cost taxpayers $793 billion.
But Bush has played a large part in the Washington
spending epidemic. The U.S. Constitution gives the presi-
dent an immensely powerful device for checking the congres-
sional budget process: the veto power. 14 The veto is a
blunt but effective instrument for blocking unnecessary
Page 15
spending. Many successful presidents have made liberal use
of the veto over the years. Yet after three years Bush has
not vetoed a single piece of legislation because he dis-
agreed with the total spending required. 15 That would seem
to be unimpeachable evidence that if Congress is spend-
thrift, so is George Bush.
Big spending increases for drug enforcement, space ex-
ploration, education, and transportation have been at Bush's
insistence, not over his objections. Even after the huge
across-the-board spending increases from 1989 to 1992, and
despite the restraint supposedly required by the 1990 budget
deal, Bush is still requesting 1993 spending increase of 15
percent for education, 16 percent for HUD, and 8 percent for
HHS (see Table 6). That is the amount of money the Bush
administration wants to spend, not the amount Congress is
forcing it to spend.
Although the problem begins in the White House and at
OMB, the hundreds of Bush political appointees running the
Table 6
Bush's Spending Requests for 1992 and 1993
(Billions of Current-Year Dollars)
Percentage
Agency
1992
1993
Change
Defense
294.7
277.9
-5.7
Education
26.5
30.4
14.7
Health and Human Services
544.1
585.2
7.6
Housing and Urban
Development
24.2
28.1
16.1
Justice
9.4
10.4
10.6
State
4.5
5.2
15.6
Treasury
11.6
12.9
11.2
Environmental Protection
Agency
5.9
6.2
5.1
Source: Daniel Mitchell, "A Damning Record on Budgets,' Wall
Street Journal, February 10, 1992.
"Proposed.
Page 16
bureaucracy are anything but frugal. Almost none of Bush's
people are committed budget cutters. For example, a recent
Washington Post editorial hailed Bush's appointments to the
board of the Legal Services Corporation because "all have
proved committed to the program and a majority support a [50
percent] funding increase. 16 Indeed, the Bush board mem-
bers lobby actively for more LSC funding. Bush's agency
heads throughout the government do the same. Bush's politi-
cal appointees routinely ask the spending committees of Con-
gress to provide their agencies with more money. Congress
virtually always gladly complies.
The Bush Legacy: $4 Trillion in Debt
When Bush approved the $200 billion tax increase of
1990 he said he was doing so because the deficit and the
national debt had become a cancer eating away at America's
economic future. The irony is that no president in the last
40 years has run up debt at the pace Bush has. As Figure 4
shows, the national debt as a share of GDP will average 5.3
percent under Bush, far more red ink than under any presi-
dent since Franklin D. Roosevelt.
Contrary to conventional mythology, the massive build-
up in deficits was both unexpected and avoidable. During
Figure 4
Average Annual Budget Deficit by President
6.0
5.3
Cato Institute
5.0
4.4
Percent of GDP
4.0
3.5
3.0
2.4
2.0
1.6
1.0
1.0
1.0
0.4
-0.8
0
-1.0
Truman
Eisenhower
Kennedy
Johnson
Nixon
Ford
Carter
Reagan
Bush
1946 53
1953 61
1961 64
1964 69
1969 75
1975 77
1977 81
1981 89
1989 - 92
Source: "Historical Tables," Budget of the United States Government for Fiscal Year 1993: Supplement, Table 1.2.
Page 17
Figure 5
Reemergence of Large Budget Deficits under Bush
7
6
Cato Institute
Bush Deficits
5
Percent of GDP
4
Reagan Deficits
3
2
1
0
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
Fiscal Year
(est.)
(est.)
Sources: CBO, "The 1990 Budget Agreement: An Interim Assessment," December 1990; and "Historical Tables," Budget of the United States
Government for Fiscal Year 1993: Supplement, Table 1.2.
Note: The deficit does not include the cost of Operations Desert Shield and Desert Storm.
Reagan's last four years the deficit was steadily declining.
From 1983 through 1989 it fell from $220 billion to $150
billion. As a share of GDP, the decline was even more dra-
matic: from 6 to 3 percent (see Figure 5). No one expected
or predicted a rise in the deficit. At the time of Bush's
inauguration, January 1989, the cBo, rarely an economic
optimist, predicted that the deficit would fall to $135 bil-
lion, or about 2 percent of GDP, by 1992. Instead, the 1992
deficit will be $400 billion and will approach 7 percent of
GDP.
If Bush had not abandoned the Gramm-Rudman-Hollings
deficit reduction act, the huge increase in debt would have
been avoided. Figure 6 shows the folly of Bush's abandon-
ment of that act. Instead of $100 billion, the 1990 deficit
was $220 billion. Instead of $64 billion, the 1991 deficit
was $270 billion. And instead of $28 billion, the 1992
deficit will be $400 billion.
Bush's veering off the Gramm-Rudman-Hollings deficit
reduction track has resulted in a lot of red ink. The four-
year difference between the Gramm-Rudman-Hollings deficit
Page 18
Figure 6
Bush Budget Deficits Compared with Gramm-Rudman-Hollings Requirements
400
350
Cato Institute
Bush Budget Deficits
300
Billion Current-Year Dollars
250
200
150
Revised GRH Deficit Reduction Requirements
100
50
0
1989
1990
1991
1992
1993
Fiscal Year
Sources: CBO, "The 1990 Budget Agreement: An Interim Assessment," December 1990; and "Historical Tables," Budget of the
United States Government for Fiscal Year 1993: Supplement, Table 1.1.
"Deficits for 1992 and 1993 are latest OMB estimates.
targets and the Bush deficits is $1.04 trillion of addition-
al federal debt.
Conclusion
The common complaint about George Bush is that he does
not seem to believe in anything. That is untrue. If his
record tells us anything, it is that he believes in spending
money--and unfortunately he is very good at it.
Bush continues to perpetuate the fraud and fiction that
his administration is serious about reducing the deficit and
the size of government. Yet just six months ago he gleeful-
ly signed a $160 billion budget-busting highway bill and
proclaimed that it would create 4 million new jobs. 17 In
January he announced that, as part of his Keynesian anti-
recession package, he was ordering the Small Business Admin-
Page 19
istration and other domestic agencies to start spending and
loaning money faster--as if they needed encouragement.
This is a president who attempts to justify tens of
billions of dollars of increases in public works projects
and welfare spending as pro-growth "investments in the fu-
ture. " This is a president who just last month unveiled a
multibillion-dollar aid program for the former Soviet repub-
lics and a new education reform package that would offer
Americans a $25,000 line of credit with the federal govern-
ment to finance college tuition and job training. Those are
the proposals of a true believer in the efficacy of big
government.
The facts are clear: unless, or until, George Bush's
spending build-up is ended and then reversed, America will
remain in great economic peril.
Notes
1. John M. Berry, "Economists Urge Investing Stimulus,"
Washington Post, March 31, 1992, p. A-4.
2. Unless otherwise noted, all of the budget numbers in
this study come from Budget of the United States Government
for Fiscal Year 1993 (Washington: U.S. Government Printing
Office, 1992); and Budget of the United States Government
for Fiscal Year 1993: Supplement (Washington: U.S. Govern-
ment Printing Office, February 1992).
3. Stephen Moore, "The Profligate President: A Midterm
Report on Bush's Fiscal Policy," Cato Institute Policy Anal-
ysis no. 147, February 4, 1991.
4. See, for example, "Director's Introduction (and Overview
Tables), " Budget of the United States Government for Fiscal
Year 1993.
5. See Stephen Moore, "All Pain, No Gain,' " National Review,
September 9, 1991, pp. 33-34.
6. Scott Hodge, "What George Bush Is Not Being Told about
Federal Spending," Heritage Foundation Backgrounder no. 886,
March 4, 1992.
7. These numbers exclude the cost of the savings-and-loan
bailout.
8. See, for example, William Dunkelberg and John Skorburg,
"How Rising Tax Burdens Can Produce Recession,' Cato Insti-
tute Policy Analysis no. 148, February 21, 1991; and Jona-
than Rauch, "The Regulatory President,' National Journal,
November 30, 1991, pp. 2902-5.
Page 20
9. Daniel Mitchell, "Dick Darman's Spending Ways," New York
Times, March 29, 1992, p. 13.
10. This point was underscored in April 1992 when two-thirds
of the Senate voted down an overall cap on entitlements for
the next five years. The cap would have simply limited the
total annual entitlement growth rate, excluding Social Secu-
rity, to the rate of inflation, plus caseload growth, plus a
two-percentage-point margin for error. Even if the amend-
ment had passed, entitlements would still have been pro-
jected to grow by $150 billion over the next five years.
See Eric Pianin, "Senate Sidetracks Curb on Entitlement
Funds, Washington Post, April 11, 1992, p. A11.
11. Lisa Myers, NBC Nightly News, May 7, 1992; quoted in
Notable Quotables, Media Research Center, May 25, 1992.
12. Robert Reich, "A Budget Cure-All," New Republic, March
2, 1992, pp. 20-22.
13. National Taxpayers Union, "The Congressional Budget
Tracking System,' Washington, 1992.
14. For a review of president's use of the veto, see James
Gattuso and Stephen Moore, "Reagan's Trump Card: The Veto,"
Heritage Foundation Backgrounder no. 198, March 1985.
15. A review of Bush's veto record can be found in "Bush's
Veto Record, Washington Post, January 21, 1992. p. A21.
16. "Help for Legal Services," Editorial, Washington Post,
April 26, 1992, p. C-6.
17. Bush's belief that government spending creates jobs was
recently harpooned by Washington Post satirist Dave Barry,
who wrote:
The transportation bill had more than $5 billion
worth of special local projects and favors attached
to it by various congresspersons. But this is good,
because these projects will CREATE JOBS. See, when
the GOVERNMENT spends money, it creates jobs; when
the money is left in the hands of TAXPAYERS, God
only knows what they do with it. Bake it into pies,
probably. Anything to avoid creating jobs.
Dave Barry, Washington Post Magazine, February 23, 1992,
p. 36.
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INSTITUTI
ViewPoint
A Classroom or a Pulpit?
Some professors are mistakenly trying to convert students to their creed.
By Lynne V: Cheney '63
A
t the heart of the heated
This faculty member is deter-
debates going on in the
mined to convert his students to his
humanities is a question:
point of view. He has no intention of
What is the purpose of education? The
introducing them to other perspec-
traditional view is that it is about pur-
Philosophers have never
tives. He wants students to share his
suing the truth. and this idea is
conviction that the United States is
enshrined in countless college mottos:
found truth to be an easy
a closed and class-ridden society, and
veritas at Harvard, lux et veritas at Yale
he intends to bring them to this real-
and Indiana Universities. At Colorado
concept, and scholars have
ization under the guise of teaching
College. students still read the words
them how to write.
over Palmer Hall that I remember: "Ye
long acknowledged the ways
Such an approach to teaching-and
shall know the truth and the truth
the ethic it implies-is a sharp departure
shall make you free."
that views can be shaped by
from the way faculty members have
But now what we hear on our
traditionally viewed their responsibil-
campuses is that truth is no more than
experience; but familiar
ities. And it represents as well an
an illusion constructed by some in
entirely new attitude toward students
order to control others. Scholarly
critiques have now become
and their rights. It used to be thought
objectivity, the disinterested seeking
that they, like professors, should have
after information. the impartial weigh-
extreme positions.
academic freedom. They did not come
ing of evidence-these are not ideals to
to the college or university to be indoc-
be sought. but veils to be ripped aside
trinated in the views of their professors.
so that the interests lurking behind
They came to learn about a variety of
them can be exposed.
views on a host of subjects, to explore
Philosophers have never found
and challenge a wealth of ideas on
truth to be an easy concept. and schol-
how to live and what to value.
ars have long acknowledged the ways
Now I suspect that some will try
that views can be shaped by experi-
to tell me that I'm overworrying the
ence; but familiar critiques have now
subject of politics on campus. Not
become extreme positions. Two historians
ther various 'progressive' political agen-
long ago, I heard it put this way: Since
from the University of Pennsylvania have
das." Writing in a recent issue of College
the center and right control most of soci-
debunked the idea that historians should
English, a professor at California
ety, what do you care if the left controls
be judged by the evidence they cite and the
Polytechnic State University at San Luis
the English departments? That is an
way they use it. because:
Obispo makes clear that he sees no prob-
interesting question but it fails to make
we are all engaged in writing a kind of
lem with using the classroom to advance
some crucial distinctions. Frankly, I don't
propaganda. Rather than believe in the
a political agenda. The only question is
care what the politics of people teaching
absolute truth of what we are writing, we
how to do so most effectively, and he
in our English departments or any other
must believe in the moral or political
offers his recommendations:
department are. What does concern me
position we are taking with it
The best starting point is to challenge [stu-
is the classroom being used for political
Historians should assess an argument on
dents'] conditioned belief in their freedom
proselytizing no matter what the view-
the basis of its persuasiveness, its polit-
of choice and mobility within American
point-and not because many conversions
ical utility, and its political sincerity.
society by bringing them to a critical
happen. A few, perhaps, but my impres-
We cannot know the truth, in other
awareness of the constrictions in their
sion is that most students are not
words, so we should forget about the pur-
own class position.
Under the rhetor-
affected politically. The price they pay is
suit of it. Forget about it in scholarship,
ical topic of learning to examine issues
intellectual. They are deprived of oppor-
forget about it in the classroom, forget
from viewpoints differing from their own
tunity to engage in the free and open
about it in life-and advance whatever is
ethnocentric one, they can be exposed to
exchange of ideas that should character-
politically useful. With this rationale for
sources delineating the gross inequities
ize education. They are deprived of
support, some faculty members are now
between the upper class and themselves;
opportunity to know wherein the real
frank advocates of using the classroom for
the odds against their attaining room at
excitement of learning lies.
political purpose. Writing in Harvard
the top; the way their education
has
Educational Review, a professor at the
channeled them toward a mid-level pro-
University of Wisconsin argues that there
fessional and social slot and conditioned
Lynne V. Cheney '63 is the chairman of the
is no longer need for professors like herself
them into authoritarian conformity; and
National Endowment for the Humanities.
to be hesitant in stating their intention "to
their manipulation by the elites control-
This article is adapted from remarks made
appropriate public resources (classrooms,
ling big business, mass politics, media
by Mrs. Cheney to a consortium of
school supplies, teacher/professor salaries,
for consumership, in large part through
Washington, D. C., area universities on
academic requirements and degrees) to fur-
the rhetoric of public doublespeak.
February 25, 1992.
4
Colorado College
tribute to a government pool to do so. In Germany cor-
porations are required to spend 2.3 percent of payroll
Jim Pinkerton and Bill Clinton.
for training: in Sweden and Ireland. 2.5: France, 1.5: and
Japan. 1 percent. In the United States employers spend
an average of ] percent on training. but 70 percent of
that goes for seminars for executives and marketing
employees (often at cushv retreats) rather than produc-
tion workers. Clinton is recommending a 1.5 percent
P ARADIGM'S LOSS
requirement. which may cost corporations as much as
$30 billion a year.
When the "America's Choice" report was completed,
Hillary Clinton became chairman of a task force on
By Mickey Kaus
implementation of its recommendations. In the fall of
1990. she also got the Arkansas Department of Education
n 1988, as director of "opposition research" for the
started on apprenticeship planning, and Bill Clinton
I
Bush-Quayle campaign, James Pinkerton discov-
pushed the resulting legislation into law in 1991. The
ered a furloughed killer named Willie Horton in
state is currently setting up six initial programs to begin
the past of Democratic presidential candidate
this fall. After two years of combined school and train-
Michael Dukakis. The rest is historv. In late 1991, as a
ing and two more years of training and work, students are
policy planner in the Bush White House, James Pinker-
supposed to be capable. certified, (and employed)
ton ventured an opinion about Democratic presidential
health. computer. radio. or machine technicians.
candidate Bill Clinton. "I noted with interest Bill Clin-
ton's New Covenant' speech." Pinkerton told a Wash-
The Bush administration actually beat Arkansas into
ington symposium. "It seems to me that a Republican
the field with six apprenticeship demonstration pro-
could take that speech, change about ten words. and
grams in 1990. created by the Department of Labor's
have a pretty good message for the GOP primaries. not to
Office of Work Based Learning. Training was nowhere
mention the general election."
on Bush's own agenda. though. until Lvnn Martin
At the time, Pinkerton had good reason to like Clin-
became secretary of labor in 1991. She claims that Bush
ton. For more than a year he had been having regular
has become an enthusiast on the subject-and. indeed.
dinners with several Clinton advisers as part of the "New
in some respects his program is bolder than Clinton's.
Paradigm Society." a group founded by Pinkerton and
Bush opposes employer mandates and tax credits.
Democrat Elaine Kamarck to explore the possibility of a
Instead. his "Jobs 2000" legislation places sixty federally
left-right consensus on domestic policy. The New
funded training programs. including high school voca-
Paradigm envisions a form of government activism that
tional education programs and for-profit "proprietary"
would (in Pinkerton's words) "expand individual choice.
schools. under supervision of local private industry
empower the poor, and create decentralized. flexible.
councils to ensure that programs meet their standards
and adaptable institutions" to replace old-stvle "central-
and needs. There's a hitch. however: for-profit trade
ized bureaucracy." Letting parents choose from among
schools are represented by a powerful lobby in Washing-
competing schools and letting public housing tenants
ton. the Career College Association. which has success-
buy their apartments are the paradigmatic New
fully resisted efforts to link eligibility for receipt of fed-
Paradigm schemes.
eral student aid checks with placing students in jobs.
Pinkerton wasn't the first to talk about a New
Bush should be commended for tackling the propri-
Paradigm. Journalist David Osborne coined the term.
etary schools. but he's dreaming if he thinks the $55 mil-
But the NP is the concept that turned Pinkerton from a
lion he has proposed spending-just over s1 million a
gawky political hack into someone Mademoiselle actually
state-will spur apprenticeships, The administration plan
put on its list of "the greatest lovers of the Western
basically calls for better delivery of job training services
world." I remember going to a Christmas party in 1989
that the government currently provides, at a cost of $18
and finding myself in a corner, talking policy with this
billion. Clinton's apprenticeship scheme. which accord-
giraffe-like man who seemed to wear his trousers up
ing to his recent economic plan would cost $1.5 billion in
around his navel. He was funnv and open-minded-at
new funds. is bolder as well as more honest about cost.
the time he was pushing an idealistic plan to give under-
In any case. the "forgotten half" is no longer as forgot-
class kids jobs planting trees. Soon I was attending his
ten as it was. Members of Congress have introduced
"paradigm" meetings. The next November budget direc-
eight other apprenticeship or worker-training packages.
tor Richard Darman sneered at the NP idea in a speech.
Proposals to address the issue will be part of both Repub-
and Pinkerton sneered back. a brilliant career move. A
lican and Democratic platforms. and Ross Perot presum-
Washington Post "Stvle" profile quickly followed. In 1990,
ablv will be along with his own ideas. Between Clinton
when I attended the same Christmas party, there was a
and Bush. however. Clinton is more likely to make non-
distinct buzz in the room. "Jim Pinkerton's here!" "Did
college Americans a priority. After all. it wasn't until he
vou see Jim Pinkerton?" "I think Pinkerton's alreadv
started hollering about it that Bush admitted there was a
left." "No he hasn't." People were elbowing Jody Powell
problem.
out of the way to get to him (just as a decade earlier they
16 THE NEW REPUBLIC JULY 27. 1992
had elbowed others out of the way to get to Jody Powell).
now emphasize that they did it mainly to make connec-
In Pinkerton's expansive view. the NP amounts to noth-
tions. ("It was a clusterfuck." one puts it.)
ing less than a "fourth revolution in American govern-
But you don't have to see the New Paradigm as a new
ment." The first was 1776. the second the creation of a
ideology-or even a new paradigm-to realize that
modern nation in the Civil War. the third the New Deal.
Pinkerton may actually be onto something. The place to
Now. Pinkerton claims. technology and global markets
start, I think, is with a famous essay by Albert O.
are breaking down centralized structures. and the
Hirschman that contrasts two mechanisms by which
"bureaucratic welfare state" is next on the list. "Why can't
organizations are made to respond to their own poor
we use new technology to create a citizen-driven, desk-
performance. One mechanism is "exit." Customers take
top. user friendly, 800-number government?" he asked,
their business elsewhere. Workers take new jobs. The
presciently. last September. before Jerry Brown and Ross
incompetent organization either improves or dies. The
Perot made the idea a cliché.
second mechanism is "voice," in which "dissatisfied con-
Pinkerton dutifully portrays his political patron as the
sumers (or members of an organization). rather than
leader of this revolution. even delivering a recent speech
just [going] over to the competition," choose to "kick
in which he compared George Bush and the NP with
up a fuss' and thereby force improved quality or service
Abraham Lincoln and the end of slavery. (Pinkerton
upon delinquent management."
went on. in all seriousness. to equate Jack Kemp with
"Exit" is the basic recuperative mechanism of the mar-
Harriet Beecher Stowe. and a Congress-bashing Bush
ketplace. "Voice" is generally associated with some form
sound bite last March with the Emancipation Procla-
of politics-with angry parents petitioning their local
mation But Bush. as Pinkerton knows, only talks
school board, for example. In 1969, when Hirschman
about the NP because Pinkerton feeds him the words.
wrote. it's fair to say that "voice" had "exit" on the run.
The presidential candidate who has discussed Pinker-
Advocates of the market were being forced to defend a
ton's idea unbidden. obsessively. is Clinton. His speeches
reliance on "exit" even in the private economy. Indeed,
are clotted with references to "empowerment" and
Hirschman's essav appealed to American left-liberals
"entrepreneurial government." Clinton often cites
because he argued that economic organizations might
Osborne's latest book on the subject. which Pinkerton
become more efficient if there were fewer opportunities
blurbed. In as chair of the Democratic Lead-
for "exit" (and consumers were therefore forced to exer-
ership Council. Clinton delivered a speech Pinkerton
cise their "voice"). Robert B. Reich. another Clinton
could easily have written. "In the Information Age." Clin-
adviser, got so carried away at one point that he called
ton said. Democrats could not relv on "monopoly deci-
reliance on voice over exit "close- to the heart of what sep-
sions handed down from on high by government
arates modern liberals from modern conservatives."
bureaucracies They needed to "reinvent govern-
ment."
f so, it's bad news for modern liberals. because in
Nevertheless. shortly after praising Clinton last year
I
the real world "exit" is now decisively beating out
at a symposium proclaiming an emerging. NP-style, left-
"voice" as a mechanism of accountability. For
right consensus). Pinkerton moved back from the White
example, the Detroit auto companies, whose cus-
House to the Bush campaign staff. from the job of find-
tomers were ineffectively "flitting back and forth"
ing new weltanschauungen to the job of finding new Willie
in 1969, according to Hirschman, finally did get the
Hortons. His mission is now poignantly simple: to
message-not so much from Ralph Nader (a practi-
destrov the one candidate who seems earnestly engaged
tioner of "voice") but from Nissan and Tovota. to whom
with his own New Paradigm idea.
consumers began exiting in droves. "Exit." it turns out.
works. The New Paradigm can simply be seen as the
S that idea worth preserving: It's fair to say that the
argument that the mechanism of "exit" should
I
dominant view of the New Paradigm among insid-
be employed, not just in the private, economic sphere.
ers (the only people who care) is that it's a crock.
but, wherever possible, in the public sphere. We can't
This is the position staked out by Darman. It's also
wait for political "voice" to resuscitate sclerotic ur-
the view of many in the non-DLC wing of Clinton's
ban school systems, the argument goes. any more
camp. some of whom don't take kindly to the idea of
than we could wait for Detroit to reform itself. Let par-
the Governor's aides dining out with GOP hit men.
ents choose their own schools like they choose cars,
"Intellectual faddism." declares Clinton confidant
and the best schools will survive. The worst will
Derek Shearer. Shearer savs he doesn't mind the NP din-
disappear.
ners. but finds the concept itself "useless."
"Exit" doesn't necessarily require an uncontrolled
Others. especially in the press, tend to think its utility
market. In education, the most radical "choice" scheme
is exclusively political. For Bush, of course, the NP pro-
would dispense vouchers that parents could exchange at
vides the appearance of a domestic agenda. For Clinton,
either public or private schools. Affluent parents would
it provides the appearance of heretical innovation. At
undoubtedly take the vouchers, add money of their own,
best. in this view. NP initiatives are useful gimmicks for
and use it to send their kids to exclusive Exeter-like
state and local governments in the Reagan-Bush era of
academies. But another New Paradigmy reform, "char-
tight budgets-but they hardly amount to a new ideol-
ter schools," avoids this defect. Under this plan, teachers
ogy. Even some Democrats who attended the NP dinners
continued on page 22
18 THE NEW REPUBLIC JULY 27, 1992
could establish new "public schools" that would compete
asked him how he would feel about savaging Clinton.
with all the other public schools for parental business.
This happened to be the day, during the New Hampshire
But tuition charges would be prohibited, and the schools
primary campaign, when Clinton's famous "draft letter"
would have to serve all comers on an equal basis. "Exit"
was released. Pinkerton joked that he didn't think he
would do its work-lousy schools would still go out of
would have to worry about his Clinton predicament for
business-but without a money-stratified market.
very long.
If Hirschman's essav is as important as a generation of
But the letter didn't knock Clinton out of the race.
liberals have said it is. then Pinkerton's New Paradigm is
and it didn't take Pinkerton off the hook. If a Willie Hor-
important too. It doesn't eliminate the question of what
ton turns up now in Clinton's closet, will Pinkerton use
government should LEV to do. and there are areas where
it? Of course. When it comes to winning and losing there
1
"exit" doesn't apply. (Can we give drivers a "choice" of
is no new paradigm.
competing highways? But even if the NP only moved the
scrimmage line between "exit" and "voice" a few dozen
vards in the direction of "exit," that might amount to a
semi-revolution in the practice of government. Liberals
My lunch with a condemned man.
like Clinton. who have the keenest interest in seeing that
government works. have the most to gain.
Pinkerton claims that. whatever he said in late 1991,
Clinton "has fallen short" in NP terms. And indeed Clin-
ton's commitment to "choice" and "empowerment," like
SALMON RUSHDIE
so much else about him. has turned out to be a little slip-
pery. The DLC rypes who are most sympathetic to the NP
all sav that Clinton understands the idea. and agrees with
most of its applications. What they doubt is his political
By Geraldine Brooks
will. He has. for example. endorsed parental choice
among existing public schools but not the idea of new
LONDON
"charter" schools. which is far more threatening to teach-
The man from Scotland Yard's Special Branch had a fil-
ers' unions. The "public choice" scheme Clinton imple-
ament of dust clinging to his hair. He'd been checking
mented in Arkansas is especially tepid. requiring stu-
for mullahs in my attic. A disembodied voice crackled
dents at. sav. poor urban schools to obtain the approval
from the radio under his jacket. "Car is entering the
of the rich suburban school they want to attend.) Like-
lane. over." He turned to me. "Do you mind if we leave
wise. Clinton endorses "tenant ownership." but cites a
the door open now?"
program in Tampa that doesn't actually sell off any pub-
When Salman Rushdie comes to lunch. he doesn't
lic housing units. Most conspicuously. Clinton doesn't
knock. He's just suddenly there, a genie with a floppy
dare offend public employee unions by talking about
brown fedora pulled low over his face. His skin has the
contracting government services out to competing pri-
fish-like translucence of a man who doesn't see much
vate firms.
sun. Outside, the warm air was full of roses and honey-
On the other hand. Clinton recently rebuffed New
suckle. It would be nice, I thought. to eat in the garden.
York Mavor David Dinkins' attempt to gut even the "pub-
The Special Branch huddled and discussed the height
lic school choice" provisions of the Democratic platform.
of mv fence. With permission, we sat down under the
Clinton has also converted all of his state's day care sub-
peach tree, but the curious glances of a house painter
sidies into \P-style vouchers. and he favors tradeable
on a ladder across the lane soon forced us inside. We
"pollution credits." an NP approach to environmental-
retreated to the basement kitchen. Over our heads
ism. Bush. savs Osborne, "will mouth [New Paradigm]
floorboards creaked under the weight of pacing body-
things that other people come up with but it's not his
guards. Radio static drifted down the stairs.
core. With Clinton, it is his core." As a Democrat, Clinton
Upstairs, in my study, is a half-written book about
is probably better-positioned to actually implement NP
women and Islam. On the desk are notes for the chapter
ideas. on Nixon-goes-to-China grounds.
about the women of Hezbollah. When I sit down to write,
Pressed. Pinkerton's explanations sound increasingly
the shadow of the Rushdie fatwa falls across the page.
strained. He notes that. at the unions' behest, the words
Last fall I met a Hezbollah leader in a shell-scarred vil-
"entrepreneurial government" were "stricken" from the
lage in southern Lebanon. We sat on his sunny terrace.
Democratic platform. ("It's just a phrase," counters
He stared at a floor tile an inch in front of my shoe. so as
Osborne.) Pinkerton savs he's disappointed at Clinton's
not to be polluted by gazing at a strange woman. When I
willingness to propose a "massive" tax increase. ("That's
told him the title of my book, his black brows knotted.
ridiculous." savs Osborne.) Pinkerton claims Clinton has
"You will have to be very careful." he said gravely. To his
been forced to relv on "the most retrograde elements in
ears, The Prophet's Daughters referred to Muhammed's
the Democratic Party and in American society: big city
four children-Fatima, Zeinab, Ruqaya, and Um
mavors." (Osborne calls that "a very elitist thing to say.")
Kalthum. I explained that I meant the title metaphori-
Earlier this year. at the chummy NP party for Osborne's
cally, encompassing all Muslim women. "Then you
book. Pinkerton gave a more revealing answer when I
should call your book 'Daughters of Islam,`" he said.
22 THE NEW REPUBLIC JULY 27. 1992
Policy June Analysis
AMERICA: WHAT WENT RIGHT
by Richard B. McKenzie
The 1980s gave birth to the second longest peacetime
economic recovery in the United States since World War II.
Yet, in the minds of many Americans, the 1980s were the an-
tithesis of economic renewal. Like the 1920s, the decade of
the 1980s was one of decadence. Like the 1930s, it was a
period of pervasive economic retreat, of widespread retro-
gression for the country and the vast majority of its citi-
zens--or so we have been told repeatedly.
Many policy commentators have claimed that in the 1980s
the competitive position of American firms and their workers
was beaten back both at home and abroad. The decade gave
birth to a new form of "robber barons" Wall Street finan-
ciers, dubbed "paper entrepreneurs' whose new-found wealth
detracted from national production and impoverished the poor
and, more important to the rhetoric of politicians, practi-
cally all of the middle class.
At the end of the 1980s many of the same policy commen-
tators could be heard breathing a sigh of relief in the fond
hope that the 1990s would be radically different. Their
hopes appeared to be greatly buoyed by the fact that Ronald
Reagan, whom they blamed for almost everything that went
wrong in the 1980s, would no longer be in command. With
anyone else in the White House, the country might become a
"kinder, gentler America, " as well as a more productive and
aggressive competitor.
Richard B. McKenzie is Walter B. Gerken Professor of Enterprise and
Society in the Graduate School of Management at the University of
California, Irvine. This paper is drawn from a book, Reality Is
Tricky: The Exorbitant Claims That Misguided Public Policy Debates,
on which the author is working.
CATC
Page 2
But pessimism about the future persisted. After sur-
veying the wanton destruction of property values and the
other social and economic problems in late 1991, one nation-
al columnist and ardent opponent of the Reagan and Bush
administrations observed, "The supply-side turkey has final-
ly come home to roost. A Washington Post columnist added
in early 1992, "American citizens have been battered by
almost daily evidence that good jobs are disappearing in
manufacturing industries--jobs that are likely to be lost
forever as companies that once were the pace-setters in
their fields hunker down for an indefinite period.
The vision many people harbor of the 1980s was careful-
ly crafted by a continuous flow of pronouncements to the
effect that the sorry state of the U.S. economy would, re-
grettably, only get worse--unless America's domestic policy
course were redirected, if not reversed. Such an overhaul,
its advocates maintained, would require greater government
spending on social programs and more aid and protection for
American industries and their workers as they sought to cope
with changing world circumstances. The policy cry became
"tit for tat"; the industrial policies of "Japan, Inc., " and
"Germany, Inc.," were countered by a similarly aggressive
agenda of reforms in this country under the banner of "USA,
Inc."
In spite of the foreboding prophecies, the recommended
policy agenda was, for the most part, spurned by Democrats
and Republicans alike. Nevertheless, the policy chant con-
tinues in the 1990s with ever more threatening assessments
of the country's economic state and its probable dismal
future. Before the recommended reform agenda, articulated
under the rubric of a "new industrial policy,' is seriously
considered--again--as a remedy for the presumed "American
disease, " the rhetoric of economic destruction, decadence,
and decline must be evaluated.
Such an evaluation reveals that the realities of the
American economy during the 1980s stand in sharp contrast
with the rhetoric. Although the decade failed to match most
Americans' fondest dreams of and hopes for economic gains,
it was still the most prosperous decade in recorded American
history. It was hardly a time of wanton destruction, deca-
dence, and decline.
On the contrary, sober consideration of the details of
what actually happened shows that the decade was "none of
the above." More accurately, the decade of the 1980s was
one of renewed industrial competitiveness and modest growth
that brought equally modest economic gains for most Ameri-
cans. Many rich and many poor people made substantial eco-
Page 3
nomic gains and faced significant economic hardships, as has
generally been the case through the millenniums. U.S. pro-
duction did not decline relative to that of the rest of the
world; it held its own. Rather than becoming self-indulgent
and obsessed with the social theology of "me-ism," " Americans
increased their charitable giving at an unprecedented rate.
In short, the country did not fare too badly during the
1980s.
The "Deindustrialization of America"
Policy debates during the late 1970s were often filled
with mournful discussions of "economic malaise, or stagna-
tion, or even more descriptively, "stagflation," meaning
high inflation with slow or no economic growth. Indeed,
during the late 1970s inflation was high by historical stan-
dards, reaching, almost year by year, higher and higher
peaks. Economic growth slowed as productivity growth fell,
in several years, to close to zero. The slowdown was at-
tributable, in part, to the Organization of Oil Producing
States' embargoes and to U.S. energy policies that held down
energy prices and thereby restrained the growth of energy
supplies. The Dow Jones Industrial Average stood at 860 at
the start of 1980, less than 80 points (or 10 percent) above
the start of 1970--a substantial drop when adjusted for
inflation.
Public commentaries on the fate of the U.S. economy
began to take on a more foreboding tone after the turn of
the decade, especially after the advent of the 1981-82 re-
cession, which was itself caused, to a considerable extent,
by the harsh anti-inflation policies the Federal Reserve had
adopted in late 1979. Professor George Lodge of the Har-
vard Business School warned that the country was beset with
a peculiarly "American disease" (a phrase obviously intended
to equate America's problems with those of Great Britain and
its "British disease") and opened his 1984 book on the sub-
ject with a dreadful assessment.
The cold winter of 1982 brought home to Amer-
ica the realization that our economy, once the
wonder of the world, was failing. The power and
efficiency of the industrial system, which since
World War II had been taken for granted, was erod-
ing. The United States was aware, for the first
time, of losing ground in the competitive race
with other developed nations.⁴
The symptoms of the American disease were to be found every-
where, in slow economic growth, rising interest rates,
Page 4
plunging profits, lagging business investment, and stagnat-
ing wealth. "In fact,' Lodge added, "every indicator, so-
cial as well as economic, revealed sickness, " meaning that
the sickness was not solely a product of the recession and
probably would not be cured by normal recovery forces.⁵
Boston College economist Barry Bluestone agreed, in-
sisting with every stroke of his pen that the pace of job
destruction, especially in the industrial sector, was both
alarming and accelerating. He recounted that 31 million
jobs had been destroyed between 1978 and 1982, noting that
"fully one-third of all private sector jobs in 1978 had
disappeared by 1982. 116 By 1984 Bluestone and Bennett Harri-
son had developed their empirical case for job losses suffi-
ciently to declare flatly that America was rapidly "deindus-
trializing," meaning the country was losing its manufactur-
ing base, the supposed heart of the economy.⁷ The primary
causes: the decline of unions, the growing competitiveness
of world markets and the invasion of domestic markets by
imports, and the failure of the U.S. government to adopt
explicit "industrial policies" that would have the effect of
guiding the industrial redevelopment of the country. Har-
vard professor Robert Reich, as well as other academics in
northeastern universities, seconded the call for a national
industrial policy with a more solemn pronouncement: the
country was "unraveling," slowly but surely.8 That theme
struck such a responsive chord that thousands flocked to buy
his book, The Next American Frontier, perhaps because the
Dow Jones average had fallen from just over 1000 in April
1981 to 804 in June 1982.
Now that 'the 1980s are behind us, we can ascertain what
really happened. We know that proposals for a national
industrial policy went down in flaming defeat in the 1984
election with Walter Mondale, who had made such policies the
hallmark of his campaign. Moreover, the economy did not
continue on the economic skids, as had been forcefully pre-
dicted. Instead, economic growth rebounded. Total employ-
ment went up by 19 million between 1980 and 1990, in spite
of all the talk about the destruction of jobs.
Industrial production continued upward. Figure 1 shows
the continuing rise in inflation-adjusted, or real, gross
national product between 1970 and 1990. Indeed, between
1980 and 1990 real GNP expanded by 30 percent. Real per
capita GNP expanded by 18 percent, and Figure 1 reveals that
economic growth began to accelerate at about the same time
many of the initial dreadful predictions were reaching print
in the very early 1980s.
Page 5
Figure 1
Real Gross National Product and Real Gross National Product per Capita, 1970-90
17,000
Legend
4,500
Real GNP per Capita
Real GNP
16,000
4,000
Real GNP (Billions of 1982 Dollars)
15,000
3,500
14,000
3,000
13,000
Real GNP per Capita (1982 Dollars)
2,500
12,000
2,000
11,000
70
72
74
76
78
80
82
84
86
88
90
Sources: Council of Economic Advisers, Economic Report of the President: 1991 (Washington: U.S. Government Printing
Office, February 1991); and author's calculations.
Did the country deindustrialize? Hardly. The Federal
Reserve's production indexes for all industries and for
manufacturing alone are plotted in Figure 2. The figure
shows that the overall industrial production index rose in
line with GNP, by 29 percent, between January 1980 and Sep-
tember 1990 (just before the start of the current reces-
sion). Contrary to all the predictions of the demise of
U.S. manufacturing, the manufacturing index rose both abso-
lutely and relatively, by 37 percent, during the same
period.
Furthermore, real, inflation-adjusted manufacturing
output rose by 38 percent between 1980 and 1989 (the latest
year for which data are available). That means that in 1989
manufacturing output represented a higher percentage of GNP
(22.6 percent) than it did in 1980 (21 percent). For that
matter, as is evident in Figure 3, manufacturing output as a
share of GNP was higher, albeit modestly so, in 1989 than in
any other year (except 1973 and 1988) since 1947. Finally,
the increase in manufacturing over the last two decades has
not been confined to nonconsequential consumer goods. Be-
tween 1967 and 1989 capital goods production (excluding
defense and automobiles) rose from 28 percent to 38 percent
of manufacturing production. During the same period exports
Page 6
Figure 2
Total Industrial Index and Manufacturing Industrial Production Index, 1970-90 (1987=100)
120
Legend
120
= Manufacturing Index
110
= Total Index
110
100
Industrial Production, Total Index
100
90
90
80
80
70
Industrial Production, Manufacturing Index
70
60
60
50
50
70
72
74
76
78
80
82
84
86
88
90
Source: CITIBASE: Citibank economic database (machine-readable magnetic tape file), 1946-present (New York:
Citibank, N.A., 1991).
Figure 3
U.S. Manufacturing Output as a Percentage of Gross National Product, 1947-90
23.0
1989 = 22.6
1950 = 21.4
1960 = 20.3
1970 = 21.0
1980 = 21.1
22.5
22.0
Percent
21.5
21.0
20.5
20.0
19.5
1950
1955
1960
1965
1970
1975
1980
1985
1990
Sources: Council of Economic Advisers, Economic Report of the President: 1991 (Washington: U.S.
Government Printing Office, February 1991): and.author's calculations.
Page 7
of capital goods rose from 20 percent of total capital goods
production to 45 percent, tripling as a share of the coun-
try's gross output.'
The belief that the country was deindustrializing was
aggravated by the view that we were becoming a "service
economy,' which was truly worrisome not only because, the
country was often reminded, "manufacturing matters" but also
because the survival, not just the health, of the service
economy is tied inextricably to the manufacturing sector.
"Lose manufacturing and you lose--not develop--those high-
wage services. #10 Others warned that we "could not really
afford to become a nation of people engaged in selling Egg
McMuffins and insurance to one another. will "Surely the
American people,' a national newspaper editorialized, "are
not willing to become merely a service economy. The Ameri-
can economy is as much built around the sinews and muscle of
the factory line as the white-collar office. 1112 Neverthe-
less, service employment continued to displace manufacturing
employment, coming very close to the long-term trend charted
long before the 1980s, at the same time incomes rose. 13
True, domestic-based manufacturing employment fell from
20.3 million in 1980 to 19.1 million in 1990, or by 6 per-
cent. However, that loss reflects the surge in manufactur-
ing productivity that occurred in many industries during the
1980s in response to both foreign and domestic competitive
pressures. If manufacturing employment had risen in line
with production, it is a safe bet that manufacturing output
would have represented a smaller share of GNP in 1990 than
it actually did, because manufacturing in the United States
would not then have been cost-effective. With the improve-
ment in the cost-effectiveness of manufacturing, U.S. ex-
ports of manufactured goods grew by a remarkable 90 percent
between 1986 and 1992, compared with 25 percent for the rest
of the members of the Organization for Economic Cooperation
and Development. That relative change enabled the United
States to raise its share of the world's manufacturing ex-
ports from 14 percent in 1987 to 18 percent in 1991, thereby
regaining its 1980 share of world manufacturing trade.
Just as important, the manufacturing base of the U.S.
domestic economy is no longer represented by the 50 states;
it is scattered worldwide. While U.S. manufacturing employ-
ment fell as a share of total employment from 20 percent in
1980 to 16 percent in 1990, U.S. manufacturing employment
worldwide held steady at 30 percent of the world total
through at least 1986 (the latest year for which data are
available) 14 That suggests that the decline in manufactur-
ing employment in the United States was part of a world
Page 8
phenomenon, sparked by world competition that U.S. producers
had to meet--and most did meet.
Fears of deindustrialization have been encouraged by
commentaries on the country's low saving and investment
rates during the 1980s. Such commentaries might lead one to
think that the stock market was totally disconnected from
the real world. Few commentators have recognized that the
compound annual rate of growth of real private net worth
(including tangible and financial wealth) was 2.69 percent
during the 1960s and 3.02 percent during the 1970s. During
the 1980-89 period the compound annual rate of growth was
3.43 percent, 14 percent higher than during the 1970s and 28
percent higher than during the 1960s. 15 The growth in
wealth was not concentrated among the "rich, as has been
assumed. According to one study, the wealth of the quintile
of households with the highest incomes grew 49 percent be-
tween 1983 and 1989. During the same period, the growth in
the wealth of the quintile with the lowest incomes was 55
percent. 16
The Relative "Decline of America"
With their deindustrialization fears dashed by the
continuing expansion and without ever acknowledging the
errors in their previous claims, the Chicken Littles of the
country began in the mid-1980s to subtly alter their fore-
boding prophecies. The country was, they professed, in
long-term economic decline, not so much absolutely (it
clearly was not) but relatively--that is, in comparison with
the rest of the world. 17 The collapse of communism and the
current efforts of the former Soviet republics and the for-
mer Eastern bloc countries to duplicate the market system of
the United States speak volumes about the misguided predic-
tions of the proponents of the decline thesis who, neverthe-
less, argue that U.S. political successes obscured the eco-
nomic tumble of the country in the world economy.
Daniel Sharp, president of the American Assembly, wrote
without qualification, "America can't compete. 1918 The chief
evidence offered was the huge balance-of-trade deficits and
the failure of the falling dollar to materially reduce those
deficits. Joel Kurtzman warned that the United States
needed to alter its economic course, principally through
national planning, to "end the steep decline of our nation
so that we can once again assume our position at the helm of
the world's economy. 1119 He argued that if the country had
remained on the path of economic dominance established in
the 1950s, "the world of today would be considerably differ-
ent, with poverty perhaps eradicated from the planet and the
Page 9
American engine of global growth pulling the world to ever
higher levels of wealth. 1120 "The saddest outcome of all,'
wrote Harvard economist Benjamin Friedman, "would be for
America's decline to go on, but to go on so gradually that
by the time the members of the next generation are old
enough to begin asking who was responsible for their dimin-
ished circumstances, they will not even know what they have
lost. ⑉21
Others warned with equal conviction that the global
economy was in "deep trouble, mainly because of U.S. ex-
cesses: excessive budget deficits, excessive trade deficits,
excessive inattentiveness to domestic social ills, and ex-
cessive reliance on military strength. "American policy in
recent years, we were told, had been "more and more ad-
dicted to wishful thinking. Economically,
the era of
comfortable self-indulgence appears near its close. Today
the United States is on a collision course with history.
The American fiscal dilemma must be resolved, and the per-
petual instability of the dollar that is the consequence
must cease. 1122
Through his widely read book, Yale historian Paul Ken-
nedy probably did more than anyone else to substantiate
growing despair over the country's fate. In spite of modern
signs to the contrary, Kennedy argued that America was fol-
lowing a well-worn, historically validated road to economic
decline, if not ruin. 23 According to Kennedy, history is
replete with countries that rose to the status of world
powers, measured by economic and military might, only to
overextend themselves and fall relatively, if not absolute-
ly, to their world neighbors. Kennedy wrote that relative
economic standing among nations is important only because it
largely determines relative political and military might in
the world. 24
According to Kennedy, the relative decline of the
United States was apparent in its declining share of world
gross national product (especially the manufactured goods
component), in its lost industrial jobs, in its growing
trade balance, and in the shrinking share of world trade
dominated by U.S. producers. 25 Indeed, as Kennedy reported,
U.S. production relative to that of the rest of the world
was in decline, given the limited number of years for which
data were cited. 26 For example, in 1945 the United States
accounted for approximately half of the world's aggregate
production. By 1960 the expected economic recovery of war-
torn countries had lowered the U.S. share to 44 percent, and
by 1970 the U.S. share was down to 38 percent. By the early
1980s, when Kennedy must have started writing his book, it
had fallen even further, to 32 percent, which caused Kennedy
Page 10
to claim that "it was still falling. 1127 Of course, it is
hardly surprising that the U.S. share of world GNP fell
after 1945; at that time the rest of the industrialized
world--Japan, Germany, Britain, France, and Italy--had suf-
fered far more from bombing and the other ravages of war
than had the United States. Only if Europe and Japan had
not recovered from World War II could the United States have
maintained its relative position in the world. Even so,
Kennedy spoke too soon.
Future decline was practically assured, according to
Kennedy, unless the United States dramatically reformed its
ways. At the same time, Kennedy doubted the capacity of the
United States to buck historical trends. In fact, he was so
sure of his gloomy prognosis for the country that he main-
tained that the main "task facing American statesmen over
the next decades, therefore, is to recognize that broad
trends are under way, and that there is a need to 'manage'
affairs so that the relative erosion of the United States'
position takes place slowly and smoothly, and is not accel-
erated by polices which bring merely short-term advantage
but longer-term disadvantage.
It is particularly unfortunate that Kennedy and others
looked at so few data points and stopped looking at the data
in the early 1980s. A more comprehensive review of the
available data draws into question the thesis of relative
decline.
Real GNP for the United States and the world (excluding
the United States), as computed and reported by the Central
Intelligence Agency (a principal data source of the studies
cited by Kennedy), does indeed show an expansion of world
and U.S. real GNP. Between 1960 and 1990 world GNP grew by
203 percent, whereas U.S. GNP grew by 150 percent. A long-
term relative decline of sorts is evident in those compari-
sons.
However, when U.S. GNP is computed as a percentage of
the GNP of the rest of the world (world GNP minus U.S. GNP)
year by year, assessments of long-term economic decline
become far more tenuous, if not totally premature. As is
evident in Figure 4, U.S. GNP as a percentage of the GNP of
the rest of the world fell from 1960 through the mid-1970s.
But, somewhere around 1975, U.S. GNP relative to that of the
rest of the world began to level off; the U.S. share held
close to 34 percent in 1975 and 1980 and fell off to under
32 percent in 1982. What may be startling about the data in
Figure 4 is that in the middle and late 1980s U.S. national
production relative to that of the rest of the world began
Page 11
Figure 4
U.S. Gross National Product as a Percentage of That of the Rest of the World, Selected
Years, 1960-90
45.0
1960 = 44.5
42.5
40.0
Percent
1970 = 37.7
37.5
35.0
1980 = 34.3
32.5
1975 = 33.9
1990 = 33.9
1982 = 31.6
30.0
60
62
64
66
68
70
72
74
76
78
80
82
84
86
88
90
Sources: Central Intelligence Agency, Handbook of Economic Statistics (Washington: U.S. Department of
Commerce, National Technical Information Service, 1987, 1988, 1990, and 1991 editions); and author's
calculations.
to rise somewhat, reaching a peak of over 34 percent in 1988
(and remaining just under 34 percent in 1990).
Critics may worry that the argument has been distorted
by comparing the performance of the United States with that
of the rest of the world, which includes a lot of under-
developed countries that grew slowly or retrogressed during
the 1980s. It is true, however, that U.S. national produc-
tion declined relative to that of Japan during the 1980s.
In 1990 the U.S. GNP was 2.6 times Japan's GNP, down from 3
times Japan's GNP in 1980. On the other hand, U.S. GNP grew
from 5.1 times Germany's GNP in 1980 to 5.4 times Germany's
GNP in 1990. During the 1980s U.S. GNP grew relatively but
modestly, from 97 percent of that of the rest of the devel-
oped world (excluding Japan and Germany) in 1980 to 101
percent in 1989 (the latest year for which data are avail-
able).
Real-world investors continued to ignore, for the most
part, the prophets of doom and continued to look at what was
really happening to the economy. Granted, the Dow Jones
Page 12
index fell by more than 700 (or 28 percent) in late 1987, a
precipitous drop that, no doubt, fortified the confidence of
the doomsayers in their dismal predictions. Nevertheless,
the market recovered all of the lost ground by late 1988;
the Dow Jones average reached 2148 in December--two and a
half times its level at the start of the decade.
The "Great U-Turn" in Worker Wages
All of the cheery economic news notwithstanding,
Bluestone and Harrison returned to print in 1988 with a
slightly augmented beat on their dismal analytical drum. 29
They published a new treatise called The Great U-Turn in
which they more carefully explained how the American economy
had, beginning in the early 1970s, begun to make a U-turn on
the road of economic progress. 30 Their book opens with a
foreboding claim, "The standard of living of American work-
ers--and a growing number of their families--is in serious
trouble. For every affluent 'yuppie' in an expensive big-
city condominium,
there are many more people whose
wages have fallen and whose families are finding it more and
more difficult to make ends meet. #131 The evidence, Blue-
stone and Harrison argued, demands that the country "turn
back toward greater planning and away from the treacherous
path of laissez-faire. 1132
A key (but not the only) statistic used to support
their conclusion is the reversal in the real (inflation-
adjusted) average wage of production and nonsupervisory
workers. 33 Everyone knows that the average worker's wage,
in current dollars, has continued to rise. However,
Bluestone and Harrison rightfully argued that the change in
the number of dollars earned per hour can be misleading,
mainly because a dollar of wages cannot buy as much as it
once could. After adjusting for changes in prices, higher
wages might even buy less, in which case one could argue
that workers have suffered a U-turn in their standard of
living.
Bluestone and Harrison plotted average real wages of
workers and included in their book a graph similar to Figure
5. Obviously, the real (inflation-adjusted to 1990 prices)
average worker wage did rise by 28 percent from 1959 ($9.07)
to 1973 ($11.60), after which it fell irregularly by 14
percent, or to $10.02, over the following 17 years. There
is something of an inverted U in the data.
To properly evaluate Bluestone and Harrison's thesis,
the data must be adjusted for inflation in some consistent
manner. The consumer price index (CPI) that Bluestone
Page 13
Figure 5
The "Great U-Turn" In Real Wages of Production Workers, 1959-90, Adjusted by the CPI
12.0
1973 = 11.60
11.5
1978 = 11.41
Wage per Hour (1990 Dollars)
11.0
10.5
10.0
1990 = 10.02
9.5
1959 = 9.07
9.0
60
62
64
66
68
70
72
74
76
78
80
82
84
86
88
90
Sources: Council of Economic Advisers, Economic Report of the President: 1991 (Washington: U.S.
Government Printing Office, February 1991); and author's calculations.
and Harrison use is inconsistent, since the method used for
computing it was abruptly changed in 1983, primarily because
the method used to compute the index until 1983 overstated
the rate of inflation. It did so because the estimated
change in the cost of housing was based on the change in the
purchase price of housing, not the more realistic change in
the imputed rental cost of housing, which has been used
since 1983. Hence, use of the standard CPI in adjusting
wages for the effects of inflation understates the growth in
real wages (or overstates their fall) 34
Bluestone and Harrison's analysis is defective because
it relies on the standard CPI, with its inconsistent methods
of controlling for changes in the cost of housing. Fortu-
nately, statisticians at the Bureau of Labor Statistics have
developed the so-called experimental, although not widely
known, consumer price index (dubbed the CPI-X or, more prop-
erly, the CPI-X-U1), which uses the new method of computing
the cost of housing for all years. The BLS has recomputed
the CPI-X back to 1967, and the Council of Economic Advisers
has extended it back to 1959.
If workers' average real wages are computed using the
experimental price index, the U in Bluestone and Harrison's
Page 14
U-turn is not so "great." Still, there remains some de-
cline in worker real wages, from $11.02 per hour in 1978 to
$10.02 in 1990, or about 9 percent.
Does that mean that workers are, on average, worse off,
albeit slightly? That type of data would certainly suggest
that the obvious answer is an unqualified yes. However,
there are good reasons for doubt. The most important reason
is that per capita disposable income in the United States
grew in real dollar terms by 21 percent between 1978 and
1990. It would have been odd had real wages declined at the
same time real disposable income per capita was growing.
Bluestone and Harrison would probably say that the apparent
discrepancy between the growth in disposable income and the
decline in worker wages reflects the redistribution of the
country's income base from workers to property owners.
The income paradox can, however, be partially explained
by another form of income redistribution; the form in which
earnings are received has shifted from wages to other bene-
fits (employer contributions to social insurance, health and
life insurance, and retirement funds; vacation days; and
many other fringe benefits). Nonwage compensation as a
percentage of wages and salaries rose dramatically in the
1960s and 1970s, from just under 9 percent in 1960 to nearly
21 percent in 1990. The fact of the matter is that workers
were, understandably, gradually taking a larger share of
their earnings in nonwage forms. Many fringe benefits are
nontaxable forms of income.
Moreover, by persistently raising Social Security and
other payroll taxes imposed on employers, Congress has
forced workers to accept lower wages. In 1990 dollars,
average employer real-dollar contributions to social insur-
ance more than tripled between 1960 and 1990, from 4.6 per-
cent of hourly wages and salaries in 1960, to 7.8 percent in
1973, and then to 10.4 percent in 1988. Employers would
just as soon have paid that money to their workers as wages.
Figure 6 shows Bluestone and Harrison's U-turn in real
worker wages, computed using the CPI, that was shown in
Figure 5, but with a difference: the real wage for each year
is computed relative to the 1959 level. That index, repre-
sented by the bottom line, rises from 1.00 in 1959 to 1.28
in 1973 and then falls off to 1.10 in 1990. When fringe
benefits are roughly added to real hourly wages and the
resulting total real compensation per hour is recomputed
using the CPI-X, total real hourly compensation, shown by
the middle line, rises from 1.00 in 1959 to 1.45 in 1978 and
then falls to 1.33, or by 8 percent, in 1990, describing a U
that looks more like an upside-down L.
Page 15
Figure 6
Different Measures of Worker's Hourly Wage, 1959-90
1.8
1987 = 1.73
1.7
1978 = 1.62
1990 = 1.69
1.6
1973 = 1.52
1.5
1978 = 1.45
Index (1959=1)
1.4
1.3
1973 = 1.28
1990 = 1.33
1.2
1.1
1990 = 1.10
1.0
0.9
60
62
64
66
68
70
72
74
76
78
80
82
84
86
88
90
Legend
Real total hourly compensation, all workers, adjusted by the CPI-X.
=
Real hourly wage plus supplements. production workers, adjusted by the CPI-X.
=
Real hourly wage, production workers, adjusted by the CPI.
Sources: Council of Economic Advisers, Economic Report of the President: (Washington: U.S.
Government Printing Office, February 1991); unpublished data from the Council of Economic Advisers;
and author's calculations.
The "average hourly wage" remains defective as a mea-
sure of the income of American workers, mainly because the
wages of 20 or so percent of Americans who are not classi-
fied as "production and nonsupervisory workers" are not in-
cluded. In addition, the increase in the participation of
women and minorities in the labor force and the growing use
of part-time workers during the 1970s and 1980s were factors
that pulled the average wage down, in spite of the fact that
the greater employment of women and minorities meant income
gains for many of their families. That is the case simply
because women, minorities, and part-time workers tend to
earn less than the average. In 1973 women represented 38
percent of the civilian labor force. By 1990 they repre-
sented 45 percent. In 1973 nonwhite workers represented 11
percent of the civilian labor force, whereas they repre-
sented 14 percent in 1990.
Page 16
Moreover, during the 1980s hourly wages gradually gave
way to other forms of compensation, namely salaries and
year-end and production bonuses. 35 In 1973 total hourly
wages represented 57 percent of total wages and salaries,
and in 1989 they represented 49 percent.
If total worker compensation (including all wage and
nonwage benefits) in all forms for all workers is computed
on an average hourly basis and adjusted for inflation by
using the CPI-X, the widely advertised "great U-turn" evapo-
rates totally (see the top line of Figure 6). Probably to
the dismay (and regret) of many "dismal scientists, " that
figure reveals that average worker welfare has continued to
march upward. Real total compensation per hour was $9.61 in
1959, $14.58 in 1973, $15.53 in 1978, and (after peaking at
$16.60 in 1987) $16.25 in 1990. (That growth is represented
in Figure 6 by a rise in the index from 1.00 in 1959, to
1.52 in 1973, to 1.62 in 1978, and to 1.69 in 1990.) How-
ever, the higher measure of income does not account for the
fact that "quality" improvements in the goods and services
Americans buy often result in higher prices. If the consum-
er price index does not properly adjust for quality changes,
which it cannot always do, the computed real wage will un-
derstate any rise in people's true living standard. In the
1980s many American industries greatly elevated "quality" as
a goal, partially because of the growing importance of in-
ternational trade. The fact that quality has become "Job 1"
for many firms probably means that computed real wages un-
derstate the improvement in America's living standard.
Nevertheless, it is evident that the more optimistic
reformulation of average American compensation, reflected in
the top line of Figure 6, indicates that growth slowed sig-
nificantly after 1973. From 1959 to 1973 real compensation
grew at a compound annual rate of slightly more than 3 per-
cent. From 1973 to 1990 real compensation rose at a rate
that was less than two-thirds of 1 percent. The core of the
real economic problem of the 1970s and 1980s was not a U-
turn but a slowdown in the growth of worker wages. No one
has been able to fully explain that slowdown, although most
analysts attribute it, in the most general terms, to a slow-
down in the growth of worker productivity. The slowdown in
the growth of worker productivity has been attributed to low
private savings and investment rates, declines in the per-
formance of American students in public schools, the oil
crises of the 1970s, growth in government regulations (espe-
cially environmental regulations), the decline of unions
with the growing competitiveness of the domestic and inter-
national economies, and growth in social problems (for exam-
ple, crime) since the early 1970s.
Page 17
To deny a "great U-turn" and to acknowledge that there
was a slowdown in the growth of real worker wages is not to
dismiss the problems confronting the American economy. It
is, however, a way of putting the country's problems in
proper perspective in order to avoid unnecessary policy
solutions. Dramatic policies organized to reverse a "great
U-turn" may not be appropriate for bolstering an income
level that is already on the rise. Furthermore, even if
Bluestone and Harrison and others were correct in their
assessment of a U-turn, it is incorrect to deduce that all,
or even a sizable segment of, Americans were falling behind
in real hourly compensation. That is true because averages
are just that, averages, and even though the "average" is
falling, the real hourly compensation of many American
workers (including many low-income workers) may well be
rising.
The "Decade of Greed"
Greed has been a problem since at least biblical times.
Nevertheless, policy critics have maintained that greed was
unabashedly fostered during the 1980s by the Reagan adminis-
tration, which was intent on lowering tax rates to encourage
ostentatious consumption by its principal supporters.³⁶
Worrying that the 1990s would be the decade in which the
bills of the 1980s would come due, Time magazine reporter
Otto Friedrich declared, "The past decade brought growth,
avarice and an anything goes attitude"; he later glibly
summarized the 1980s with five words, "get rich, borrow,
spend, enjoy, and suggested that the dealings of Ivan Boes-
ky, "the diaper king of arbitrage," epitomized the wanton
ways of a whole decade. 37
In The Hunger for More, Laurence Shames added that "the
1980s raised the clamor for more to new heights of shrill-
ness, insistence, and general obnoxiousness, but this, it
can be argued, was in the nature of the final binge, the
storm before the calm.
Supposedly, during the 1980s Americans went on a con-
sumption binge, casting aside their historic concern for the
welfare of others. The fact that the stock market was
pressing 3000 by the late 1980s assured the commentators
that greed was rampant, especially among the market's "paper
entrepreneurs" whose dealings obscured the weakness of the
underlying real economy--or so we were told.
Instead of helping others, American workers, managers,
and owners became more concerned than ever with themselves--
with what they could take in pay from their work and what
Page 18
they could buy to promote what liberal political pundit
Kevin Phillips dubbed "conspicuous opulence." American
university students supposedly began mimicking their parents
and their parents' friends by harboring a "single ambition--
doing something that would make money. 1139 The evidence of-
ten offered in support of the contention that the 1980s were
a decade of greed includes casual references to the jump in
sales of luxury automobiles, the increase in the number of
people earning M.B.A.s (most of whom, presumably, set their
sights on making money on Wall Street), the growth in the
number of self-help books, and the number of Wall Street
brokers who went to prison.
At best, the myopic focus on spectacular examples of
errant behavior during the 1980s does not offer a complete
picture of the whole of America, whose population numbered a
quarter of a billion people by the end of the decade. At
worst, it paints a warped picture of the ways Americans
lived during a decade of renewed growth.
Claims of pervasive greed in the 1980s can be most
easily assessed with reference to Americans' charitable
contributions. 40 Such an assessment reveals that Americans
have always given a modest fraction of their incomes to
charitable causes. However, as the solid line in Figure 7
shows, total charitable giving (measured in 1990 dollars) in
the United States continued to reach record highs throughout
the 1980s.
Americans were unusually generous in the 1980s no mat-
ter how the record is measured. Total charitable contribu-
tions--by living individuals, bequests, corporations, and
foundations--more than doubled from 1955 to 1980, increasing
from $34.5 billion to $77.5 billion (in 1990 dollars), or at
a compounded annual growth rate of 3.3 percent. Between
1980 and 1989 total giving in real dollars expanded by 56
percent to $121 billion, or by a compound annual growth rate
of 5.1 percent. Thus, the yearly rate of growth of total
giving in the 1980s was nearly 55 percent higher than in the
previous 25 years.
The pace of growth of private charitable contributions
by individuals was 68 percent faster in the 1980s (5.2 per-
cent a year) than in the 1970s and earlier years (3.1 per-
cent a year between 1955 and 1980). And it should be noted
that in the 1980s individuals increased their giving by
substantially more than they increased their purchases of
consumer goods in general and of a wide range of goods and
services that might be considered extravagances.
Page 19
Figure 7
Total Giving, Actual and Predicted, 1956-89
130,000
120,000
110,000
100,000
Actual
90,000
Millions of 1990 Dollars
80,000
70,000
Predicted
60,000
50,000
40,000
30,000
1960
1965
1970
1975
1980
1985
Sources: Giving USA: 1990 (New York: AAFRC Trust for Philanthropy, 1990); and author's calculations.
Note: Real total giving predicted by using ordinary least squares regression equation including real GNP per capita,
total government receipts as a percentage of national income, population, and time as the independent variables.
For example, the percentage increase in giving between
1980 and 1989 was 46 percent greater than the percentage
rise in purchases of jewelry and watches, 58 percent greater
than the percentage rise in expenditures on beauty parlors
and health clubs, and 25 percent greater than the percentage
rise in outstanding consumer credit. Private giving also
accelerated during the 1980s while tax payments, which are
frequently intended to serve charitable objectives, contin-
ued upward both in real dollars and as a percentage of na-
tional income.
Charitable contributions by corporations also rose
substantially faster in the 1980s (4.1 percent a year) than
in earlier decades (2.7 percent a year between 1955 and
1980). The upsurge in corporate giving occurred in the
1980s in spite of the fact that corporate before- and after-
tax profits as a percentage of national income continued to
decline. Indeed, corporate giving as a percentage of be-
fore-tax profits spurted upward in the 1980s and remained
above the highs achieved in earlier decades. Bequests and
gifts from foundations also reached record levels in the
1980s.
Page 20
The same upward trend in charitable giving in the 1980s
is visible when the data are adjusted for population growth.
Real per capita giving by individuals rose from $182 a per-
son in 1955 to $284 in 1980 and then, after the recession of
1980-81 ended, spurted to $409 in 1989. The annual rate of
growth in the 1980s was more than twice the rate in earlier
decades.
Charitable giving as a percentage of national income
underwent a U-turn in the late 1970s and early 1980s,
switching from a declining share of national income in the
1970s to an increasing share in the 1980s. Private dona-
tions rose from a historic low of 2.1 percent of national
income in 1979 to 2.7 percent in 1989.
Critics might complain that the growth in private gen-
erosity in the 1980s either was a product of the growth in
income or represented a continuation of the long-term upward
trend in giving. Econometric analysis of the giving data
refutes that view, however. In fact, the lower dashed line
in Figure 7 plots the total giving that would have been
expected in the 1980s had the pattern of giving established
in the 1955-80 period held true.
Annual total giving in constant dollars was, on aver-
age, more than $14 billion, or 16 percent, higher during the
1980s than would have been predicted from the philanthropic
pattern of the late 1950s, the 1960s, and the 1970s. Real
individual giving averaged 18 percent above the predicted
annual levels; real corporate giving was even higher, run-
ning an average 28 percent above predicted levels each year.
Overall, during the so-called decade of greed, Americans
increased their charitable contributions by the equivalent
of one and one-half years of giving over what would have
been predicted from past patterns.
Clearly, there were some well-publicized instances of
conspicuous opulence during the 1980s, but greed has been
around for a very long time. Claims that the 1980s were a
decade of greed, painted frequently with a broad rhetorical
brush, are far too sweeping, bordering on the reckless.
Compared with earlier decades, the 1980s were a decade of
renewed beneficence.
The "Fortunate Fifth"
In their defense of "America's misunderstood welfare
state, Yale professors Theodore Marmor and Jerry Mashaw and
New York attorney Philip Harvey announced that the country's
"economic story is easily told. 1141 They tell the story
Page 21
with what have come to be standard charts that show median
family income first rising more or less steadily from 1947
to the early 1970s, then flattening out, and thereafter
turning downward. Marmor, Mashaw, and Harvey also make
confident claims about the "increasing gap between the
wealthiest and the poorer segments of society" that, along
with a host of other problems, "[continues] to undermine the
public's sense of well-being. 1142 In the more descriptive
words of Greg Duncan, Timothy Smeeding, and Willard Rodgers
in a study for the Levy Institute on Income Inequality, "The
rising tide of economic growth in the 1980s appears to have
lifted the yachts, but neither the tugboats nor the row-
boats. 1143
Robert Reich gives the details on the growing in-
equality.
Controlling for family size, geography, and other
changes, the best estimate
is that between
1977 and 1990 the average income of the poorest
fifth of Americans declined by about 5 percent,
while the richest fifth became about 9 percent
wealthier. During these years, the average in-
comes of American families declined by about 7
percent, while the average income of the richest
fifth of American families increased about 15
percent. That left the poorest fifth of Americans
with 3.7 percent of the nation's total income,
down from 5.5 percent twenty years before--the
lowest portion they have received since 1954. 44
Reich reckons that, unfortunately, "routine production work-
ers, who constitute about a fourth of all workers, and
"routine personal service" providers, who constitute approx-
imately 30 percent of the work force, have skills that can
be relatively easily duplicated by lower paid workers
abroad. Hence, their real wages have suffered with the
advent of the global economy. Many government workers and
defense contractors, who, Reich figures, constitute another
quarter of the labor force, may not face global competition,
but their hopes for wage increases have been dashed by
tightening government budgets.
Only the "most fortunate fifth" of workers, principally
"symbolic analysts" who manipulate data and words, has been
sheltered from foreign competition and been in sufficiently
high demand to exact higher real wages, or so Reich main-
tains. 46 That fortunate fifth of workers--all of whom pre-
sumably have "princely incomes has been able to produce 40
percent of the country's output and to receive comparable
incomes. Those workers, Reich concludes, are the ones who
Page 22
must shoulder the burden of helping less fortunate workers
with, he recommends, greater government-provided education
and health care and greater expenditures on the nation's
infrastructure.
The perceived growth in income disparity has not, how-
ever, been the exclusive concern of the political left.
More moderate, if not conservative, commentators have ac-
cepted the left's basic premises and facts on the nation's
income distribution. New York Times business columnist
Leonard Silk has declared that "there is a widespread aware-
ness that living standards for most people have been stag-
nating and that life is harder for the young than it was for
their parents. 1147 Wall Street Journal reporter Alan Murray
mused: "From 1978 to 1990, those fortunate American house-
holds in the top 5 percent of the income scale saw their
average incomes increase 16 percent, after adjusting for
inflation. But the people in the middle of the income scale
watched their incomes fall slightly," a problem he attrib-
utes partially to "huge" tax cuts for the wealthy and Social
Security tax increases on the middle and lower income
classes.⁴
On economic equality, Washington Post and Newsweek
economics columnist Robert Samuelson has stated flatly:
"There's less of it. We are more a society of haves and
have nots. 1149 A Business Week reporter has echoed the sen-
timents of those journalists, stressing that the "underlying
shifts in income over the past 15 years have been seismic"
and that the growing income disparity threatens long-term
economic growth. "What's more, there don't seem to have
been any economic benefits from the rich having gotten rich-
er, as some economists argued in the early 1980s, when the
Reagan administration first slashed taxes," a presumed major
cause of the growing inequality. 50 Similarly, a Los Angeles
Times labor columnist placed the blame for current economic
problems on the failing "Reagan-Bush 'trickle-down,' supply-
side economic policies" that have helped the rich get rich-
er. "Already generally known is that the real income of
middle-income workers continues to drop and that of the poor
is plummeting, while the income of those at the top of the
economic pile soars. 1,51
Myriad versions of those claims have often been forti-
fied with citations of official data on real median family
income and on shares of income going to each of the five
quintiles of households. As the bottom line in Figure 8
reveals, real median family income, adjusted for inflation
using the standard CPI and set relative to the 1970 level,
did trend downward from 1970 to the late 1980s.
Page 23
Figure 8
Real Median Income with Adjustments for Supplements and Family Size, 1970-86
130
125
120
Index (1970=100)
115
110
105
100
95
90
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
Legend
Adjusted by the CPI.
Adjusted by the CPI-X and for decreasing family size.
Adjusted by the CPI-X and for decreasing family size and increasing supplements.
Sources: Congressional Budget Office, Trends in Family Income: 1970-1986 (Washington: U.S. Government
Printing Office, February 1988); and author's calculations.
Fortunately, the reality of the changing income distri-
bution is far more complicated than the modern prophets of
gloom would have us believe. Although rarely conceded, real
median family income did begin to rebound after 1982. More-
over, that measure of the real median is defective in three
key ways: (1) the method of computing the CPI was changed in
1983, the effect of which was to obscure the growth in real
income (or to accentuate the decline) i (2) the average fami-
ly size fell by 17 percent between 1970 and 1986; and (3)
fringe benefits and other wage supplements, which are not
counted as family income, expanded from 12 percent of total
wages and salaries in 1970 to 20 percent in 1986 (the latest
year for which adjusted data are available).
Researchers at the Congressional Budget Office have
determined that when real median income is recomputed with
the CPI-X and adjusted for the economies associated with
Page 24
smaller families, real median family income trends upward,
rising by 20 percent between 1970 and 1986. (See the middle
set of lines in Figure 8.) When real median income is fur-
ther adjusted to account, in a rough way, for the growth in
nonwage income, the rise during that period may be over 28
percent.
Although such revised data seriously undercut the
critics' empirical props, they have a ready-made comeback:
the median rose only because the rising economic tide
"lifted the yachts, but neither the tugboats nor the row-
boats."
Critics do have some of the facts on changing income
distribution right. The share of total income going to the
quintile of households with the lowest incomes did fall from
4.1 percent in 1970 to 3.9 percent in 1990 (after reaching
4.2 percent in 1980), and the share of income received by
the middle three quintiles fell from 52.7 percent in 1970 to
49.5 percent in 1990. At the same time, the quintile of
households with the highest incomes rose relatively rapidly
during the 1970s and 1980s; their share of income rose from
43.3 percent in 1970 to 46.6 percent in 1990.
The data do offer the surface appearance of a "most
fortunate fifth." But appearances are deceiving. Census
Bureau data reveal that the real mean incomes (adjusted only
for inflation by the CPI-X) of every quintile of households
trended upward during the 1970s and 1980s. Those data
alone indicate that it is grossly misleading to suggest that
changes in income distribution were "seismic," or that the
poor as a group got poorer, or that only the "most fortunate
fifth" gained over the past two decades or even the last
decade.
Critics of changing income distribution delight in
comparing current real household incomes of the quintiles
with the peak achieved in 1973, before the first oil-supply
shock that helped throttle income growth for the rest of the
decade. They stress that the real income of the lowest two
quintiles fell between 1973 and the late 1980s, but they
rarely note the flaw in the price index or the need to make
other adjustments for decreasing household size and increas-
ing nonwage benefits. In addition, the relatively strong
growth in real household income in the middle and late 1980s
is never mentioned, mainly because such an acknowledgement
would undercut the simplistic claim that the downward trend
was all Ronald Reagan's fault.
Even if no other adjustments are made, using the CPI-X
as the deflator reveals that the average incomes of the
Page 25
lowest two quintiles of households actually rose between
1973 and 1989 (just before the current recession) by 4.7
percent and 4 percent, respectively. However, between 1983
and 1989 the average income of the lowest quintile rose 11.1
percent, while the average income of the second quintile
rose by 10.1 percent. The average income of the middle and
fourth quintiles expanded by 10.7 percent and 11.6 percent,
respectively, during the 1983-89 period.
Granted, the average real income of the top quintile
rose by much more, 18.8 percent, but it is naive to assume
that the top quintile is an exclusive club. It is in fact
composed of changing collections of households with changing
collections of household members operating under continually
changing conditions. Students who were in school in the
early 1980s, for example, had jumped several quintiles by
the end of the decade simply by taking their first jobs or
by marrying people with incomes. The very limited research
done on the subject suggests that a sizable share--surely a
third and possibly half--of the households in the top
quintile at the end of the 1980s had been in a lower quin-
tile in earlier years. 53
Moreover, the nature of the quintiles of households
ensures that the top quintile often grows more rapidly than
the lower ones. People in the top quintile who increase
their productivity and hours of work, marry (or stay mar-
ried), or decide to have a nonworking spouse or family mem-
ber go to work (nearly 90 percent of the households in the
top quintiles have two or more income earners, a far higher
percentage than found in the lower quintiles) automatically
raise their quintile's mean household income. Those people
cannot move to a higher category. People in any of the
lower quintiles who do the same can easily move up one or
more quintiles, increasing their own welfare but, in the
process, reducing the mean income of their former quintile.
Overall, the critics have been right in stressing that
the rich have gotten richer, but they are way off base in
suggesting that the rich were rich during all of the 1980s,
or that they became richer at the expense of the rest of the
population, or that their riches were all ill-gotten or
undeserved. It is far more accurate to say that in the
1980s many rich and not-so-rich Americans got richer faster
than other Americans. Some Americans in all quintiles fell
behind. Each end of the income distribution scale was con-
tributing to the economic improvement of the other.
Was the federal tax burden redistributed during the
decade? The answer is both yes and no, depending on the
data series cited and which taxes are included. Federal
Page 26
income tax rates were lowered across the board, but many
exemptions were eliminated. At the same time, Social Secu-
rity taxes, which tend to be particularly onerous to lower
income groups, were persistently raised; higher and higher
rates were paid by both employees and employers on gradually
higher incomes. On balance, when all federal taxes col-
lected directly from individuals are considered, the tax
burden on families with the lowest incomes went from 8.1
percent of their incomes in 1980, to 10.3 percent in 1985,
to 9.3 percent in 1988, to 8.6 percent in 1992 54 The sec-
ond lowest fifth stayed within the narrow range of 15.6 to
15.9 percent in those years. Similarly, the middle fifth
stayed within the narrow range of 19.1 to 19.8 percent, with
no apparent up or down trend over the 1980-92 period. The
second highest fifth declined slightly from 22.9 percent in
1980, to 22.4 percent in 1988, to 22.2 percent in 1992. The
average for the highest fifth fell from 27.5 percent in 1980
to 24.1 percent in 1985, but it then trended upward to 26
percent in 1988 and to 26.8 percent in 1992 55
Throughout the decade real federal tax collections
trended upward in absolute terms. They represented 19.4
percent of gross national product in 1980 and 19.6 percent
in 1990 (after falling to 18.1 percent in 1984). Each of
the lowest four quintiles of families tended to cover a
slightly shrinking share of the growing tax burden. The
share of all federal taxes paid by the lowest quintile of
families went from 1.6 percent in 1980 to 1.3 percent in
1992. The share of the second quintile dropped from 6.9 to
6.0 percent between 1980 and 1992. The middle quintile's
share dropped from 13.2 to 12.1 percent. The fourth quin-
tile's share dropped from 22.1 to 20.0 percent. On the
other hand, the share paid by the highest quintile of fami-
lies rose from 56.1 percent in 1980 to 60.5 percent in 1992,
mainly because of that quintile's relative income growth. 56
Clearly, over the past two decades the country has
experienced a host of economic problems, one of the most
important of which is decreasing real wages for some groups.
Although the available data do not permit an exact determi-
nation of how many Americans lost economic ground during the
last two decades, it is clear that critics have grossly
exaggerated the economic hardship visited on the vast major-
ity of Americans. Furthermore, the critics do not seem to
realize that many of the observed changes in real wages have
been instructive. They have caused people to learn from
their experience and to take corrective action--without
directives from Washington.
Page 27
Conclusion
Hoover Institution economist Thomas Sowell is reported
to have once quipped that "reality is tricky." Indeed, it
is. Regrettably, a host of critics of the 1980s have played-
tricks on their audiences by pretending that reality is
simple. Most of those critics have had some of the facts
correct. Otherwise, they would never have been taken seri-
ously. The mistake they have made all too often is not
getting all of the facts and pretending that their limited
arsenal of facts tells the whole story of the 1980s. They
have managed, however, to distort the impression many Ameri-
cans have of the recent times through which they have lived.
Correcting distorted impressions is crucial; the course of
public policy hinges on it.
A far more reasoned view is that the economy continued
to expand during the 1980s and reached a peak in 1990. The
recession, of course, has since caused production and income
growth to falter. More ominously, it has given new life to
the Chicken Littles, who continue to be taken seriously by
many of our Washington leaders and who continue to predict
that in the 1990s the country will follow its long-charted
path of decline. At the same time, the stock market marches
upward, albeit irregularly. In April 1992 the Dow Jones
Industrial Average was reaching new peaks just under 3,400,
nearly four times the daily average of January 1980-an
expansion factor not achieved since World War II. As is
shown in Figure 9, the stock market tended to pay little
heed to the claims of gloom and doom. Perhaps part of the
rise in the market was fueled by speculation. Perhaps. But
a careful reading of what went on during the 1980s indicates
that there was more substance to the charted stock market
gains than many critics may like to believe.
The 1980s were not the best of times; they could have
been better. But neither were they the worst of times, as
we have too often been wrongfully told. They were a decade
when the Chicken Littles of policy circles invariably fol-
lowed their grossly distorted warnings of economic calamity
with preconceived prescriptions for relief that seemed to
direct, rather than to be derived from, their analyses:
greater federal involvement in the economic affairs of Amer-
icans, more federal regulations and management of internal
and external trade, and expanded federal planning.
Page 28
Figure 9
Dow Jones Industrial Average, Monthly, 1980-91, Juxtaposed with Dismal Predictions
3500
"Only the rich got
richer."
"The 1980s were
3000
a decade of greed."
"U.S. wages have
made a U-turn."
2500
"America is in
long-term
economic
decline."
Index
2000
"Service economy is
wiping out U.S. jobs.'
1500
"U.S. is
deindustrializing."
"America has
a disease."
1000
500
80
81
82
83
84
85
86
87
88
89
90
91
Source: CITIBASE: Citibank economic database (machine-readable magnetic tape file), 1946-present
(New York: Citibank, N.A., 1991).
Fortunately, the reality of the 1980s failed to match
the dismal predictions, and with the whole of Eastern Europe
and the republics of the former Soviet Union seeking to
escape from the clutches of government control, the Chicken
Littles' social agenda remains a vision in search of empiri-
cal justification.
Notes
1. Robert Kuttner, "Supply-Side Turkey Comes Home to
Roost, " Los Angeles Times, October 14, 1991, p. B9.
2. Hobart Rowen, "Abdication of the Democrats," Washington
Post National Weekly, March 2-8, 1992, p. 5.
3. For an extended commentary on deindustrialization, see
Richard B. McKenzie, Competing Visions: The Political Con-
flict over America's Economic Future (Washington: Cato In-
stitute, 1985) i and Richard B. McKenzie, The American Job
Machine (New York: Universe Books, 1988).
Page 29
4. George C. Lodge, The American Disease (New York: Knopf,
1984), p. 3.
5. Ibid., p. 5.
6. Barry Bluestone, "Industrial Dislocation and the Impli-
cations for Public Policy, If Paper prepared for the third
annual policy forum on employability development, "Displaced
Workers: Implications for Educational and Training Institu-
tions," sponsored by the National Center for Research in
Vocational Education, Ohio State University, held in Wash-
ington, September 12-13, 1983, p. 3.
7. Barry Bluestone and Bennett Harrison, The Deindustriali-
zation of America (New York: Basic Books, 1984).
8. Robert B. Reich, The Next American Frontier (New York:
Times Books, 1983), p. 3.
9. Andrew M. Warner, "Does World Investment Determine Amer-
ican Exports?" Working paper, Federal Reserve Board of Gov-
ernors, Washington, January 1992, pp. 18, 19.
10. Stephen S. Cohen and John Zysman, Manufacturing Matters:
The Myth of the Post-Industrial Economy (New York: Basic
Books, 1987), p. 3.
11. John F. McGillicuddy, "The Corporate Pulpit,' Corporate
Board: The Journal of Corporate Governance, July/August
1987, p. 1.
12. "Getting America Moving Again," Editorial, Christian
Science Monitor, January 20, 1987.
13. See Mack ott, "The Growing Share of Services in the U.S.
Economy--Degeneration or Evolution?" Federal Reserve Bank of
St. Louis Review, June/July 1987, p. 15.
14. Kenichi Ohmae, "No Manufacturing Exodus, No Great Come-
back," Wall Street Journal, April 25, 1988, p. 26.
15. The rate of growth is computed for the 1980-89 period
because of a precipitous $700 billion decline in real pri-
vate net worth between 1989 and 1990 that may prove tempo-
rary and a reflection of the recession. Similarly, the rate
of growth for the 1960s may be somewhat distorted by the
falloff in net worth after 1968. The compound rate of
growth was 4.03 percent in the 1960-68 period and 3.06 per-
cent in the 1960-72 period.
Page 30
The compound rates of growth in net worth per capita
were, of course, lower for all decades, but the rate of
growth for the 1980-89 period was higher than for the previ-
ous two decades: 2.42 percent for 1980-89, 1.95 percent for
the 1970s, and 1.4 percent for the 1960s. The data on pri-
vate net worth are from the Federal Reserve's Balance Sheet,
as reported in the Council of Economic Advisers, Economic
Report of the President: 1992 (Washington: U.S. Government
Printing Office, February 1992), p. 423.
16. Greg J. Duncan, Timothy M. Smeeding, and Willard
Rodgers, "Whither the Middle Class? A Dynamic View," Paper
presented a the Levy Institute conference on Income Inequal-
ity, Bard College, June 18-20, 1991.
17. For more details on this issue, see Richard B. McKenzie,
The Decline of America: Myth or Fact? (St. Louis: Center for
the Study of American Business, November 1988).
18. Daniel A. Sharp, "America Is Running Out of Time, " New
York Times, February 7, 1988; reprinted in The World Trade
Imbalance: When Profit Motives Collide (Washington: U.S.
Department of State, Executive Council on Foreign Diplomats,
1988), p. 25.
19. Joel Kurtzman, The Decline and Crash of the American
Economy (New York: W. W. Norton, 1988), p. 212.
20. Ibid., p. 25.
21. Benjamin M. Friedman, Day of Reckoning: The Consequences
of American Economic Policy (New York: Vintage Books, 1988),
p. 300.
22. David. P. Calleo, Harold van B. Cleveland, and Leonard
Silk, "The Dollar and the Defense of the West," Foreign
Affairs 66, no. 4 (Spring 1988) : 860-61.
23. Paul Kennedy, The Rise and Fall of Great Powers: Econom-
ic Change and Military Conflict from 1500 to 2000 (New York:
Random House, 1987).
24. Kennedy admits that he is not arguing that economics is
the sole cause of the rise and decline of great powers:
"There simply is too much evidence pointing to other things:
geography, military organization, national morale, the alli-
ance system, and many other factors can all affect the rela-
tive power of members of the states system.
What does
seem incontestable, however, is that in a long-run-drawn-out
Great Power (and usually coalition) war, victory has repeat-
edly gone to the side with the more flourishing productive
Page 31
base--or, as the Spanish captains used to say, to him who
has the last escudo.' Ibid., p. xxiv.
25. Ibid., pp. 413-37.
26. Ibid., p. 432. As his primary source for data on world
production shares, Kennedy cites P. Bairoch, "International
Industrialization Levels from 1750 to 1980,' Journal of
European Economic History 11 (1980) : 304. Kennedy also
points out that Central Intelligence Agency figures show
that the U.S. share of world output dropped from 25.9 per-
cent in 1960 to 21.5 percent in 1980. Central Intelligence
Agency, Handbook of Economic Statistics (Washington: U.S.
Department of Commerce, National Technical Information Ser-
vice, 1984), p. 4. However, he acknowledges that CIA fig-
ures may be influenced by exchange rate considerations.
Kennedy, p. 608 n. 248.
27. Ibid.
28. Ibid., p. 534.
29. See Richard B. McKenzie, The "Great U-Turn": Another
Economic Myth or New Economic Reality? (Washington: U.S.
Congress, Joint Economic Committee, November 1987) ; or Rich-
ard B. McKenzie, The Mythical "Great U-Turn" in Worker Wages
(St. Louis: Center for the Study of American Business, Wash-
ington University, February 1990).
30. Bennett Harrison and Barry Bluestone, The Great U-Turn:
Corporate Restructuring and the Polarizing of America (New
York: Basic Books, 1988).
31. Ibid., p. 3.
32. Ibid., p. 20. See also Isaac Shapiro and Robert Green-
stein, Selective Prosperity: Increasing Income Disparities
since 1977 (Washington: Center on Budget and Policy Priori-
ties, July 1991).
33. See Bluestone and Harrison, The Great U-Turn, Figure
1.1, p. 6. The authors actually cite "real average weekly
earnings," which has a more pronounced "U" than real average
worker wages, primarily because of the downward trend in the
number of hours worked per week. However, it needs to be
stressed that the downward trend has been in evidence for
most of this century, if not much longer.
Bluestone and Harrison also chart "median family in-
come, If which rose in the 1950s and 1960s and then leveled
off, with ups and downs, in the 1970s. Many of the criti-
Page 32
cisms of Bluestone and Harrison's use of average worker pay
apply with equal force to median family income. Indeed, use
of median family income can be more misleading. A portion
of the reduction in the growth of family income can be at-
tributed to the reduction in family size, which in turn is
related to the aging of the population and the increase in
the divorce rate.
Bluestone and Harrison cite government data on the
turnaround in the gradual reduction in the "poverty rate,"
or the percentage of Americans below the "poverty threshold"
income level, and their own data on the "polarization" of
Americans, or the growing disparity in the incomes of high-
and low-wage earners (resulting in what they describe as a
"missing middle" to the nation's income distribution). The
issue of growing poverty was critiqued by Edgar K. Browning
in his presidential address to the Southern Economics Asso-
ciation, "Inequality and Poverty," Southern Economic Journal
(April 1989) : 819-30. The issue of the "missing middle" has
been addressed by a variety of economists, in and out of
government, including Neal H. Rosenthal, "The Declining
Middle Class: Myth or Reality?" Monthly Labor Review, March
1985, pp. 3-10; and Patrick J. McMahon and John H. Tschet-
ter, "The Declining Middle Class: A Further Analysis,"
Monthly Labor Review, September 1986, pp. 22-27. Points
made by McMahon and Tschetter about the movement of average
real wages apply with greater force to Bluestone and Harri-
son's conclusions drawn from the presumed turnaround in real
median family income.
34. Before 1983 the consumer price index incorrectly as-
sessed the change in the cost of living because changes in
the asset prices of houses, per se, were included. If the
price of new homes went up by 10 percent, then the CPI would
include that information (after properly weighing housing
for its importance in people's budgets). However, most
people who own their own homes do not experience increases
in their "cost of living" in Iine with increases in the
market prices of houses. As a consequence, many economists
reasoned that the CPI overstated the rise in the cost of
living, and that defect was getting worse as inflation ac-
celerated in the 1960s and 1970s. Use of the CPI, especial-
ly in times of relatively rapid inflation, such as the
1970s, in adjusting wages for inflation understates the rise
(or overstates the decline) in real worker wages. Officials
at the Bureau of Labor Statistics concluded that a "better"
way to figure changes in the cost of living from changes in
housing costs was to measure changes in the monthly rental
payments for housing (not in the prices of the houses them-
selves). CPI reports published since 1983 use the new meth-
od. However, the widely used CPIs from before 1983 remain
Page 33
wedded to the old "defective" method of assessing housing
costs.
35. For discussions of how the "average wage" (and many
other statistics) is measured by the BLS, see U.S. Depart-
ment of Labor, Bureau of Labor Statistics, BLS Handbook of
Methods (Washington: U.S. Government Printing Office, Bulle-
tin no. 2285, April 1988).
36. For more details, see Richard B. McKenzie, Was the De-
cade of the 1980s a "Decade of Greed"? (St. Louis: Center
for the Study of American Business, Washington University,
July 1991) i or Richard B. Mckenzie, "Were the 1980s a 'De-
cade of Greed'?" Public Interest, January 1992, pp. 91-96.
37. Otto Friedrich, "Freed from Greed?" Time, January 1,
1990, pp. 76-77.
38. Laurence Shames, The Hunger for More: Searching for
Values in an Age of Greed (New York: Vantage Books, 1991),
p. 27.
39. Kevin Phillips, The Politics of the Rich and Poor:
Wealth and the American Electorate in the Reagan Aftermath
(New York: Random House, 1990), p. 43; emphasis in the orig-
inal.
40. This analysis uses data from Giving USA: 1990 (New York:
American Association of Fund Raising Council Trust for Phi-
lanthropy, 1990). Other data sources for charitable contri-
butions (namely, the Independent Sector and the U.S. Bureau
of Labor Statistics) provide similar, but slightly differ-
ent, pictures of giving during the 1980s. For a graphic
summary of several sources, see "The Demographics of Giv-
ing, American Enterprise, September/October 1991,
pp. 101-4.
41. Theodore R. Marmor, Jerry L. Mashaw, and Philip L. Har-
vey, America's Misunderstood Welfare State: Persistent
Myths, Enduring Realities (New York: Basic Books, 1991),
p. 8. For more details, see Richard B. McKenzie, The "For-
tunate Fifth" Fallacy (St. Louis: Washington University,
Center for the Study of American Business, March 1992).
42. Marmor, Mashaw, and Harvey, p. 8.
43. Duncan, Smeeding, and Rodgers, p. 7.
44. Robert B. Reich, The Work of Nations: Preparing Our-
selves for 21st-Century Capitalism (New York: Vantage Books,
1992), p. 197, cites U.S. Bureau of the Census work on the
Page 34
Current Population Survey and Bureau of Labor Statistics
work on the Consumer Expenditure Survey. More specifically,
he cites Congressional Budget Office, The Changing Distribu-
tion of Federal Taxes, 1977-1990 (Washington: U.S. Govern-
ment Printing Office, February 1987) ; and U.S. House of
Representatives, Ways and Means Committee, Tax Progressivity
and Income Distribution (Washington: U.S. Government
Printing Office, March 26, 1990).
45. Robert B. Reich, "U.S. Income Inequality Keeps on Ris-
ing: As the World Turns," New Republic, May 1, 1989,
pp. 23-28.
46. Ibid., p. 28.
47. Leonard Silk, "Economic Scene: Why Fiscal Policy Has to
Have Soul, New York Times, December 6, 1991, p. C2.
48. Alan Murray, "Tax Cuts the Answer? What's the Question?"
Wall Street Journal, October 28, 1991, p. A1.
49. Robert J. Samuelson, "The Fragmenting of America, Wash-
ington Post National Weekly, August 12-18, 1991, p. 29.
50. Karen Pennar, "The Rich Are Richer--And America May Be
the Poorer," Business Week, November 18, 1991, 85-86.
51. Harry Bernstein, "Surge in Part-Time Workers Ominous,"
Los Angeles Times, December 10, 1991, p. D3.
52. For details, see McKenzie, The "Fortunate Fifth"
Fallacy.
53. For data on income mobility, see Bruce Bartlett, "A
Class Struggle That Won't Stay Put," Wall Street Journal,
November 20, 1991, p. A16. Very similar, but not identical,
statistical shifts are reported in U.S. Congress, Joint
Economic Committee, "Income Mobility and the U.S. Economy:
Open Society or Caste System?" Prepared for Rep. Richard K.
Armey, December 30, 1991. The JEC staff used Bureau of the
Census data as reported in U.S. Department of Commerce,
Bureau of the Census, Current Population Reports, Series P-
70, no. 18: Transition in Income and Poverty: 1985-1986
(Washington: U.S. Government Printing Office, 1990) ; and
U.S. Department of Commerce, Bureau of the Census, Current
Population Reports, Series P-70, no. 24: Transition in In-
come and Poverty: 1987-1988 (Washington: U.S. Government
Printing Office, 1990). See also Greg J. Duncan, Years of
Poverty, Years of Plenty (Ann Arbor: University of Michigan,
Institute for Social Research, Survey Research Center,
1984), p. 13.
Page 35
54. Council of Economic Advisers, Economic Report of the
President: 1992, p. 141. The estimates are based on Con-
gressional Budget Office calculations, which are given only
for the years mentioned here.
55. Ibid.
56. Ibid.
Document No.
WHITE HOUSE STAFFING MEMORANDUM
6/24/92
DATE:
ACTION/CONCURRENCE/COMMENT DUE BY:
CEA NUMBERS -- ADVANCE DURABLE GOODS IN MAY, COMMERCE DEPARTMENT
RELEASE
SUBJECT:
ACTION FYI
ACTION FYI
VICE PRESIDENT
HORNER
SKINNER
MCBRIDE
SCOWCROFT
MOORE
DARMAN
PETERSMEYER
BRADY
PORTER
BROMLEY
SMITH
CALIO
YEUTTER
DEMAREST
FITZWATER
GRAY
HOLIDAY
REMARKS:
For your information.
RESPONSE:
PHILLIP D. BRADY
Assistant to the President
and Staff Secretary
Ext. 2702
EXECUTIVE OFFICE OF THE PRESIDENT
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON, D.C. 20500
THE CHAIRMAN
June 24, 1992
2 JUN 24 A8: 41
MEMORANDUM FOR WHITE HOUSE SENIOR STAFF
FROM:
MICHAEL J. BOSKIN mB
SUBJECT:
Advance Durable Goods in May, Commerce Department
Release, This Morning, 8:30 a.m.
New orders for durable goods fell 2.4 percent in May after
rising 1.9 percent in April. Private analysts had expected an
increase of 0.9 percent in May, not a decrease.
The decrease in May can be accounted for by declines in
orders for aircraft and parts and in defense capital goods.
Excluding these items, orders rose 0.7 percent.
Shipments of durable goods fell 1.0 percent in May, after
remaining flat in April. Shipments of nondefense capital
goods a key measure of producer durable equipment investment--
also fell 1.0 percent in May, after falling 3.3 percent in April.
The graph below shows that new orders for durable goods have
been volatile over the past year. For the past 9 months, new
orders have been less than shipments. As a result, unfilled
orders have been declining, and are now at their lowest level
since May 1989.
DURABLE GOODS ORDERS & SHIPMENTS
140
138
135
134
132
130
128
BILLIONS OF DOLLARS
a
126
11
h
124
Shipments
Id
M
U
122
120
is
H
#
118
I
116
x
a
St
=
114
B
fl
H
New Orders
112
110
B
108
MAY 90
AUG 90
NOV 90
FEB 91
MAY 91
AUG 91
NOV 91
FEB 92
MAY 92
PLEASE NOTE EMBARGO RESTRICTIONS
ECONOMIC SNAPSHOT FOR THE WEEK OF JUNE 22--26
June 24, 1992
Today the Department of Commerce reported that new orders for
manufactured durable goods fell 2.4 percent in May, after increasing 1.9 percent in
April. Private analysts had expected an increase of 0.9 percent. Shipments of
durable goods decreased 1.0 percent in May, after remaining flat in April.
Thursday, the Commerce Department will release the final estimates for real
gross domestic product (GDP) for the first quarter of 1992. Private analysts expect
a 2.4 percent (annual rate) increase--the same as the growth rate reported in last
month's preliminary estimate. On Friday, the Commerce Department will release
data on personal income and personal consumption expenditures for May. Private
analysts expect both income and expenditures to rise 0.4 percent.
DATA RELEASED THIS WEEK:
New orders for durable goods fell 2.4 percent in May after rising 1.9
percent in April. The decrease in May can be accounted for by declines in orders
for aircraft and parts and in defense capital goods. Excluding these items, orders
rose 0.7 percent. Shipments of durable goods fell 1.0 percent in May, after
remaining flat in April. (Embargoed until 8:30 a.m., 6-24-92)
TO BE RELEASED THIS WEEK:
Release
Median Market Expectation
Q-I GDP (Rev.)
(released 6-25-92)
Real GDP
2.4 percent
GDP Deflator
3.1 percent
Personal Income & Spending (May)
(released 6-26-92)
Income
up 0.4 percent
Spending
up 0.4 percent
Document No.
WHITE HOUSE STAFFING MEMORANDUM
6/24/92
DATE:
ACTION/CONCURRENCE/COMMENT DUE BY:
CEA NUMBERS -- ADVANCE DURABLE GOODS IN MAY, COMMERCE DEPARTMENT
RELEASE
SUBJECT:
ACTION FYI
ACTION FYI
VICE PRESIDENT
HORNER
SKINNER
MCBRIDE
SCOWCROFT
MOORE
DARMAN
PETERSMEYER
BRADY
PORTER
BROMLEY
SMITH
CALIO
YEUTTER
DEMAREST
FITZWATER
GRAY
HOLIDAY
REMARKS:
For your information.
RESPONSE:
PHILLIP D. BRADY
Assistant to the President
and Staff Secretary
Ext. 2702
EXECUTIVE OFFICE OF THE PRESIDENT
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON, D.C. 20500
THE CHAIRMAN
June 24, 1992
2 JUN 24 A8: 41
MEMORANDUM FOR WHITE HOUSE SENIOR STAFF
FROM:
MICHAEL J. BOSKIN mp
SUBJECT:
Advance Durable Goods in May, Commerce Department
Release, This Morning, 8:30 a.m.
New orders for durable goods fell 2.4 percent in May after
rising 1.9 percent in April. Private analysts had expected an
increase of 0.9 percent in May, not a decrease.
The decrease in May can be accounted for by declines in
orders for aircraft and parts and in defense capital goods.
Excluding these items, orders rose 0.7 percent.
Shipments of durable goods fell 1.0 percent in May, after
remaining flat in April. Shipments of nondefense capital
goods--a key measure of producer durable equipment investment--
also fell 1.0 percent in May, after falling 3.3 percent in April.
The graph below shows that new orders for durable goods have
been volatile over the past year. For the past 9 months, new
orders have been less than shipments. As a result, unfilled
orders have been declining, and are now at their lowest level
since May 1989.
DURABLE GOODS ORDERS & SHIPMENTS
140
138
136
134
132
130
128
BILLIONS OF DOLLARS
R
B
126
=
Shipments
124
"
M
A
al
122
120
3
"
IN
118
I
116
a
X
114
B
Q
FI
FI
New Orders
112
110
FI
108
MAY 90
AUG 90
NOV 90
FEB 91
MAY 91
AUG 91
NOV 91
FEB 92
MAY 92
PLEASE NOTE EMBARGO RESTRICTIONS
ECONOMIC SNAPSHOT FOR THE WEEK OF JUNE 22--26
June 24, 1992
Today the Department of Commerce reported that new orders for
manufactured durable goods fell 2.4 percent in May, after increasing 1.9 percent in
April. Private analysts had expected an increase of 0.9 percent. Shipments of
durable goods decreased 1.0 percent in May, after remaining flat in April.
Thursday, the Commerce Department will release the final estimates for real
gross domestic product (GDP) for the first quarter of 1992. Private analysts expect
a 2.4 percent (annual rate) increase--the same as the growth rate reported in last
month's preliminary estimate. On Friday, the Commerce Department will release
data on personal income and personal consumption expenditures for May. Private
analysts expect both income and expenditures to rise 0.4 percent.
DATA RELEASED THIS WEEK:
New orders for durable goods fell 2.4 percent in May after rising 1.9
percent in April. The decrease in May can be accounted for by declines in orders
for aircraft and parts and in defense capital goods. Excluding these items, orders
rose 0.7 percent. Shipments of durable goods fell 1.0 percent in May, after
remaining flat in April. (Embargoed until 8:30 a.m., 6-24-92)
TO BE RELEASED THIS WEEK:
Release
Median Market Expectation
Q-I GDP (Rev.)
(released 6-25-92)
Real GDP
2.4 percent
GDP Deflator
3.1 percent
Personal Income & Spending (May)
(released 6-26-92)
Income
up 0.4 percent
Spending
up 0.4 percent
Document No.
WHITE HOUSE STAFFING MEMORANDUM
6/18/92
---
DATE:
ACTION/CONCURRENCE/COMMENT DUE BY:
CEA NUMBERS -- MERCHANDISE EXPORTS AND IMPORTS IN APRIL,
COMMERCE DEPARTMENT RELEASE
SUBJECT:
ACTION FYI
ACTION FYI
VICE PRESIDENT
HORNER
SKINNER
MCBRIDE
SCOWCROFT
MOORE
DARMAN
PETERSMEYER
BRADY
PORTER
BROMLEY
SMITH
CALIO
YEUTTER
DEMAREST
FITZWATER
GRAY
HOLIDAY
REMARKS:
For your information.
RESPONSE:
PHILLIP D. BRADY
Assistant to the President
and Staff Secretary
Ext. 2702
EXECUTIVE OFFICE OF THE PRESIDENT
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON, D.C. 20500
THE CHAIRMAN
2 JUN 18 A8: 50
June 18, 1992
MEMORANDUM FOR WHITE HOUSE SENIOR STAFF
FROM:
MICHAEL J. BOSKINMAY
SUBJECT:
Merchandise Exports and Imports in April, Commerce
Department Release, This Morning, 8:30 a.m.
The merchandise trade deficit increased in April to $7.0
billion, the highest monthly deficit in nearly a year and a half.
In March, the deficit was $5.6 billion. Private analysts had
expected the trade deficit to narrow in April to $5.5 billion.
Merchandise exports fell 1.9 percent in April. Export
performance was mixed across the principal end-use categories.
The largest decline occurred for nonautomotive capital goods and
the largest increase occurred for foods, feeds, and beverages.
Merchandise imports rose 1.6 percent in April. Import
performance also was mixed, with imports of industrial supplies
and materials rising strongly, and imports of "other" merchandise
showing a significant decline.
The graph below shows that the merchandise trade deficit has
been on an upswing in recent months, after hitting a nine-year
low in February. If the larger deficit continues, it would have
a significant negative effect on real GDP in the second quarter.
MERCHANDISE EXPORTS AND IMPORTS
50
Importe
40
Exports
BILLIONS OF DOLLARS
30
20
10
Trade Deficit
o
APR 90
AUG 90
DEC 90
APR 91
AUG 91
DEC 91
APR 92
PLEASE NOTE EMBARGO RESTRICTIONS
ECONOMIC SNAPSHOT FOR THE WEEK OF JUNE 15--19
June 18, 1992
Today the Department of Commerce reported that the merchandise trade
deficit jumped to $7 billion in April from $5.6 billion in March. Merchandise
exports fell nearly 2 percent and imports rose 1.6 percent. If the larger trade deficit
continues, it would have a significant negative effect on real GDP in the second
quarter.
Yesterday the Department of Labor reported that nonfarm business
productivity rose strongly in the first quarter--at a 2.7 percent annual rate. In the
manufacturing sector, however, productivity fell at a 1 percent rate.
Two releases on Tuesday showed strong construction and production activity
in the economy in May. The Commerce Department reported that housing starts
rose 11 percent in May, a stronger-than-expected increase. The increase in May
partially reversed April's decline of more than 17 percent. Starts have been on an
upward trend since January of last year. Separately, the Federal Reserve reported
that industrial production--the output of the Nation's factories, mines, and utilities--
rose for the fourth consecutive month in May.
DATA RELEASED THIS WEEK:
The merchandise trade deficit increased in April to $7.0 billion, the
highest monthly deficit in nearly a year and a half. Private analysts had
expected the trade deficit to narrow to $5.5 billion. (Embargoed until 8:30 a.m.,
6-18-92)
Productivity in the nonfarm business sector rose 2.7 percent at an annual
rate in the first quarter. In manufacturing, productivity fell at a 1 percent rate.
Housing starts rose 11 percent in May to an annual rate of 1.230 million.
Private analysts had expected a smaller increase of 4.9 percent in May. The larger-
than-expected increase in starts in May followed the surprisingly large decline of
over 17 percent in April. Building permits--often an indicator of future housing
starts--fell slightly in May.
Industrial production increased 0.6 percent in May, the fourth
consecutive monthly increase. Private analysts had expected a 0.5 percent increase
in May. For all industry, capacity utilization rose to 79.0 percent in May from 78.7
percent in April. In manufacturing, capacity utilization rose to 78.1 percent in May.
The U.S. current-account balance was a deficit of $5.3 billion in the first
quarter of 1992, compared to $7.2 billion in the fourth quarter of 1991.
Document No.
WHITE HOUSE STAFFING MEMORANDUM
6/17/92
---
DATE:
ACTION/CONCURRENCE/COMMENT DUE BY:
CEA NUMBERS -- PRODUCTIVITY AND COSTS, FIRST QUARTER 1992,
LABOR DEPARTMENT RELEASE
SUBJECT:
ACTION FYI
ACTION FYI
VICE PRESIDENT
HORNER
SKINNER
MCBRIDE
SCOWCROFT
MOORE
DARMAN
PETERSMEYER
BRADY
PORTER
BROMLEY
CALIO
SMITH
DEMARES
YEUTTER
FITZWATER
GRAY
HOLIDAY
REMARKS:
For your information.
RESPONSE:
PHILLIP D. BRADY
Assistant to the President
and Staff Secretary
Ext. 2702
EXECUTIVE OFFICE OF THE PRESIDENT
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON, D.C. 20500
THE CHAIRMAN
June 17, 1992
MEMORANDUM FOR WHITE HOUSE SENIOR STAFF
FROM:
MICHAEL J. BOSKIN mB
SUBJECT:
Productivity and Costs, First Quarter 1992, Labor Department
Release, This Morning, 10:00 a.m.
Productivity in the nonfarm business sector rose 2.7 percent at an annual rate
in the first quarter of 1992. The increase in productivity was attributable to a 1.2
percent rate of increase in output and a 1.5 percent rate of decline in hours worked.
For the manufacturing sector, productivity fell at a 1 percent rate, as the decline in
output exceeded the decline in hours worked.
Hourly compensation in the nonfarm business sector rose 2.2 percent at an
annual rate in the first quarter of 1992; in manufacturing, hourly compensation fell
at a 1.9 percent rate.
The graph below shows that nonfarm business productivity has increased
steadily over the past year, following the low or negative changes that predominated
in the previous 2 years. Manufacturing productivity has been more volatile, showing
strong increases in the middle of last year, before slipping back early this year.
CHANGES IN PRODUCTIVITY
10
9
8
7
MANUFACTURING
6
5
PERCENT CHANGE AT ANNUAL RATE
4
3
X
2
1
0
-1
NONFARM BUSINESS
-2
-3
T
-5
-6
1989:1
1989:3
1990:1
1990:3
1991:1
1991:3
1992:1
PLEASE NOTE EMBARGO RESTRICTIONS
ECONOMIC SNAPSHOT FOR THE WEEK OF JUNE 15--19
June 17, 1992
Today the Department of Labor reported that nonfarm business productivity
rose strongly in the first quarter--at a 2.7 percent annual rate. In the manufacturing
sector, however, productivity fell at a 1 percent rate.
Two releases yesterday showed strong construction and production activity in
the economy in May. The Commerce Department reported that housing starts rose
11 percent in May, a stronger-than-expected increase. The increase in May partially
reversed April's decline of more than 17 percent. Starts have been on an upward
trend since January of last year. Separately, the Federal Reserve reported that
industrial production--the output of the Nation's factories, mines, and utilities--rose
for the fourth consecutive month in May.
Tomorrow the Department of Commerce will release data on merchandise
trade for April. Private analysts expect the trade deficit to narrow slightly.
DATA RELEASED THIS WEEK:
Productivity in the nonfarm business sector rose 2.7 percent at an annual
rate in the first quarter of 1992. For the manufacturing sector, productivity fell at
a 1 percent rate. (Embargoed until 10:00 a.m., 6-17-92)
Housing starts rose 11 percent in May to an annual rate of 1.230 million.
Private analysts had expected a smaller increase of 4.9 percent in May. The larger-
than-expected increase in starts in May followed the surprisingly large decline of
over 17 percent in April. Building permits--often an indicator of future housing
starts--fell slightly in May.
Industrial production increased 0.6 percent in May, the fourth
consecutive monthly increase. Private analysts had expected a 0.5 percent increase
in May. For all industry, capacity utilization rose to 79.0 percent in May from 78.7
percent in April. In manufacturing, capacity utilization rose to 78.1 percent in May.
The U.S. current-account balance was a deficit of $5.3 billion in the first
quarter of 1992, compared to $7.2 billion in the fourth quarter of 1991.
TO BE RELEASED THIS WEEK:
Release
Median Market Expectation
Merchandise Trade Balance (April)
-$5.5 billion
(released 6-18-92)
EXECUTIVE OFFICE OF THE PRESIDENT
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON, D.C. 20500
THE CHAIRMAN
June 16, 1992
MEMORANDUM FOR WHITE HOUSE SENIOR STAFF
FROM:
MICHAEL J. BOSKIN mps
SUBJECT:
Industrial Production and Capacity Utilization in
May, Federal Reserve Release, Today, 9:15 a.m.
Industrial production--the output of the Nation's factories,
mines, and utilities--increased 0.6 percent in May, the fourth
consecutive monthly increase. Private analysts had expected a
0.5 percent increase in May.
Manufacturing production increased 0.7 percent in May, with
production of motor vehicles and parts rising 3.8 percent.
Mining and utilities production fell 0.3 percent.
For all industry, capacity utilization rose to 79.0 percent
in May from 78.7 percent in April. In manufacturing, capacity
utilization rose to 78.1 percent in May.
The first graph below shows that, over the past 4 months,
industrial production has more than regained the loss that
occurred between October and January. In May, industrial
production was 2.2 percent above its year-ago level. The second
graph shows that capacity utilization has increased recently, but
remains below the levels of last fall.
TOTAL INDUSTRIAL PRODUCTION
TOTAL CAPACITY UTILIZATION
112
as
111
8
110
64
100
a
100) (1887 sedent I
108
Persent of Capacity
a2
107
B1
105
80
105
70
104
78
103
77
MAY so
AUG
90
NOV so
FEB
91
MAY 91
AUG 91
NOV 91
FEB
92
MAY 92
MAY 90
AUG
so
NOV 90
FEB
91
MAY 91
AUG 01
NOV 91
FEB
a
MAY 92
EXECUTIVE OFFICE OF THE PRESIDENT
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON, D.C. 20500
THE CHAIRMAN
June 16, 1992
MEMORANDUM FOR WHITE HOUSE SENIOR STAFF
FROM:
MICHAEL J. BOSKIN mps
SUBJECT:
Housing Starts in May, Commerce Department
Release, This Morning, 8:30 a.m.
Housing starts rose 11 percent in May to an annual rate of
1.230 million. Private analysts had expected a smaller increase
of 4.9 percent. The larger-than-expected increase in starts in
May followed the surprisingly large decline of over 17 percent in
April. In May, starts rose in all regions of the country.
Single-family starts rose 9.8 percent in May. Multi-unit
starts, which can be volatile, rose 18.6 percent in May, after
falling nearly 43 percent in April.
Building permits--often an indicator of future housing
starts--fell slightly in May. Permits rose for single-family
houses, but fell for multi-unit housing.
The graph below shows that housing starts recovered strongly
in May from the sharp decline in April, reaffirming the upward
trend from January of last year. Starts have increased 25
percent over the past year.
HOUSING STARTS
1.40
1.30
1.20
Millions of Units (Annual Rate)
1.10
1.00
0.90
0.80
MAY 90
AUG 90
NOV 90
FEB 91
MAY 91
AUG 91
NOV 91
FEB 92
MAY 92
PLEASE NOTE EMBARGO RESTRICTIONS
ECONOMIC SNAPSHOT FOR THE WEEK OF JUNE 15--19
June 16, 1992
Two releases today show strong construction and production activity in the
economy in May. The Commerce Department reported that housing starts rose 11
percent in May, a stronger-than-expected increase. The increase in May partially
reverses April's decline of more than 17 percent. Starts have been on an upward
trend since January of last year. Separately, the Federal Reserve reported that
industrial production--the output of the Nation's factories, mines, and utilities--rose
for the fourth consecutive month in May.
Tomorrow the Department of Labor will report on labor productivity in the
first quarter of this year. On Thursday, the Department of Commerce will release
data on merchandise trade for April. Private analysts expect the trade deficit to
narrow slightly.
DATA RELEASED THIS WEEK:
Housing starts rose 11 percent in May to an annual rate of 1.230 million.
Private analysts had expected a smaller increase of 4.9 percent in May. The larger-
than-expected increase in starts in May followed the surprisingly large decline of
over 17 percent in April. Building permits--often an indicator of future housing
starts--fell slightly in May. (Embargoed until 8:30 a.m., 6-16-92)
Industrial production increased 0.6 percent in May, the fourth
consecutive monthly increase. Private analysts had expected a 0.5 percent increase
in May. For all industry, capacity utilization rose to 79.0 percent in May from 78.7
percent in April. In manufacturing, capacity utilization rose to 78.1 percent in May.
(Embargoed until 9:15 a.m., 6-16-92)
The U.S. current-account balance was a deficit of $5.3 billion in the first
quarter of 1992, compared to $7.2 billion (revised) in the fourth quarter of
1991. (Embargoed until 10:00 a.m., 6-16-92)
TO BE RELEASED THIS WEEK:
Release
Median Market Expectation
Productivity (Q-I)
n/a
(released 6-17-92)
Merchandise Trade Balance (April)
-$5.5 billion
(released 6-18-92)
Document No.
WHITE HOUSE STAFFING MEMORANDUM
7/2/92
DATE:
ACTION/CONCURRENCE/COMMENT DUE BY:
EMPLOYMENT AND UNEMPLOYMENT IN JUNE
SUBJECT:
ACTION FYI
ACTION FYI
VICE PRESIDENT
HORNER
SKINNER
MCBRIDE
SCOWCROFT
MOORE
DARMAN
PETERSMEYER
BRADY
PORTER
BROMLEY
SMITH
CALIO
YEUTTER
DEMAREST
FITZWATER
GRAY
HOLIDAY
REMARKS:
For you information.
RESPONSE:
PHILLIP D. BRADY
Assistant to the President
and Staff Secretary
Ext. 2702
EXECUTIVE OFFICE OF THE PRESIDENT
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON. D.C. 20500
THE CHAIRMAN
July 2, 1992
MEMORANDUM FOR WHITE HOUSE SENIOR STAFF
FROM:
MICHAEL J. BOSKIN mass
SUBJECT:
Employment and Unemployment in June, Labor
Department Release, This Morning, 8:30 a.m.
The civilian unemployment rate rose to 7.8 percent in June
from 7.5 percent in May. The last time the unemployment rate was
this high was March 1984. Private analysts had expected the
unemployment rate to fall to 7.4 percent.
The number of nonfarm payroll jobs fell 117,000 in June,
following four consecutive monthly increases that totalled
370,000 jobs. The large decline is a surprise; private analysts
had expected an increase of 95,000 jobs in June. The decline in
jobs was widespread across industries, with government and
transportation and public utilities showing the only increases.
Total goods-producing employment has now declined for 25 of the
past 28 months.
Average weekly hours fell 0.3 hour in June to 34.3 hours for
total nonfarm private business. In manufacturing, average weekly
hours fell to 41.1 hours in June from 41.3 hours in May. Despite
a decline in June, aggregate weekly production hours in the
second quarter were up 0.7 percent at an annual rate from the
first quarter.
The graph below shows that nonfarm payroll employment has
shown very little improvement over the past 15 months, following
the decline that occurred during the recession.
NONFARM PAYROLL EMPLOYMENT
111.0
110.5
110.0
109.5
MILLIONS OF JOBS
109.0
108.5
108.0
107.5
107.0
JUN 90
SEP
90
DEC 90
MAR 91
JUN 91
SEP 91
DEC 91
MAR 92
JUN 92
PLEASE NOTE EMBARGO RESTRICTIONS
ECONOMIC SNAPSHOT FOR THE WEEK OF JUNE 29-JULY 3
July 2, 1992
Today, the Department of Labor reported that the employment situation
unexpectedly deteriorated in June, with the unemployment rate rising to 7.8 percent
from May's 7.5 percent rate, and nonfarm jobs falling by 117,000. Private analysts
had expected the release to show that the situation in labor markets improved in
June, with the unemployment rate falling to 7.4 percent and the number of nonfarm
payroll jobs increasing by 95,000. In a separate release, the Department of Labor
reported that initial claims for unemployment insurance were 420,000 for the week
ending June 20, down very slightly from the previous week.
Earlier this week the Department of Commerce reported that the index of
leading indicators--designed to show the likely future performance of the economy--
rose in May for the fifth consecutive month. The upward trend in the index of
leading indicators is a sign that the economic recovery, although sluggish and
proceeding in fits and starts, will likely continue. The situation in housing markets,
however, has not been upbeat. Monday the Commerce Department released data
showing that sales of new single-family houses fell 5.6 percent in May. Sales of
new houses have declined for the last 4 months, after increasing significantly from
September 1991 to January 1992.
DATA RELEASED THIS WEEK:
The civilian unemployment rate rose to 7.8 percent in June from 7.5
percent in May. The last time the unemployment rate was this high was March
1984. The number of nonfarm payroll jobs fell 117.000 in June, following four
consecutive monthly increases that totalled 370,000 jobs. Private analysts had
expected an increase of 95,000 jobs in June. The decline in jobs was widespread
across industries, with government and transportation and public utilities showing the
only increases. (Embargoed until 8:30 a.m., 7-2-92)
Initial claims for unemployment insurance fell slightly to 420,000 in the
week ending June 20, from 421,000 in the previous week. (Embargoed until
8:30 a.m., 7-2-92)
The index of leading indicators increased 0.6 percent in May, the fifth
consecutive monthly increase. The increase matched private analysts' expectations.
Sales of new single-family houses fell 5.6 percent in May, to 501,000 units
at an annual rate, after falling 2.7 percent in April. Private analysts had
expected sales to increase 3.8 percent in May.
Document No.
WHITE HOUSE STAFFING MEMORANDUM
-
DATE:
6/30/92
ACTION/CONCURRENCE/COMMENT DUE BY:
CEA NUMBERS - MAY INDEX OF LEADING INDICATORS
SUBJECT:
ACTION FYI
ACTION FYI
VICE PRESIDENT
HORNER
SKINNER
MCBRIDE
SCOWCROFT
MOORE
DARMAN
PETERSMEYER
BRADY
PORTER
BROMLEY
SMITH
CALIO
YEUTTER
SERVICE
BOSKIN
DEMAREST
FITZWATER
GRAY
HOLIDAY
REMARKS:
For your information.
RESPONSE:
PHILLIP D. BRADY
Assistant to the President
and Staff Secretary
Ext. 2702
EXECUTIVE OFFICE OF THE PRESIDENT
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON, D.C. 20500
THE CHAIRMAN
June 30, 1992
MEMORANDUM FOR WHITE HOUSE SENIOR STAFF
FROM:
MICHAEL J. BOSKIN
that
SUBJECT:
May Index of Leading Indicators, Commerce
Department Release, This Morning, 8:30 a.m.
The index of leading indicators increased 0.6 percent in
May, the fifth consecutive monthly increase. The increase
matched private analysts' expectations.
Five of the 11 components of the leading index made positive
contributions, with an increase in sensitive materials prices
making the largest contribution. Six components had negative
effects; the largest negative effects resulted from a decline in
the real money supply and from declines in three components
related to new and unfilled orders.
The index of coincident indicators was unchanged in May, the
third consecutive month of little or no change. Industrial
production and payroll employment made positive contributions to
the index in May, but those increases were offset by a decline in
personal income less transfer payments and a negative statistical
adjustment.
LEADING AND COINCIDENT INDICATORS
155
150
145
Leading Index
1982 - 100
140
138
130
Coincident Index
125
120
MAY 90
SEP so
JAN 91
MAY 91
SEP 91
JAN 92
MAY 92
PLEASE NOTE EMBARGO RESTRICTIONS
ECONOMIC SNAPSHOT FOR THE WEEK OF JUNE 29--JULY 3
June 30, 1992
Today the Department of Commerce reported that the index of leading
indicators--designed to show the likely future performance of the economy--rose in
May for the fifth consecutive month. The upward trend in the index of leading
indicators is a sign that the economic recovery, although sluggish, will likely
continue.
The situation in housing markets has been less upbeat. Yesterday the
Commerce Department released data showing that sales of new single-family houses
fell 5.6 percent in May. Sales of new houses have declined for the last 4 months,
after increasing significantly from September 1991 to January 1992.
Later this week, on Thursday, the Department of Labor will release data on
the employment situation in June. Private analysts expect the release to show that
the situation in labor markets improved in June, with the unemployment rate falling
to 7.4 percent from May's 7.5 percent rate, and the number of nonfarm payroll jobs
increasing by 95,000.
DATA RELEASED THIS WEEK:
The index of leading indicators increased 0.6 percent in May, the fifth
consecutive monthly increase. The increase matched private analysts' expectations.
(Embargoed until 8:30 a.m., 6-30-92)
Sales of new single-family houses fell 5.6 percent in May, to 501,000 units
at an annual rate, after falling 2.7 percent in April. Private analysts had
expected sales to increase 3.8 percent in May.
TO BE RELEASED THIS WEEK:
Release
Median Market Expectation
Employment (June)
(released 7-2-92)
Unemployment rate
7.4 percent
Nonfarm payroll jobs
+95,000