U.S. ECO ONLINE
A SELECTION OF DOCUMENTS RECENTLY PUBLISHED ON THE WEB
No 91 – February/March 2007
Source: PUBLIC AFFAIRS - American Embassy
Sylvie VACHERET
Tel: 01 43 12 48 97
E Mail: vacheretsr@state.gov
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GENERAL INTEREST
Can Higher Education Foster Economic Growth?—A Conference Summary
Chicago Fed Letter – Special Issue - March 2007 – 4 pages
http://www.chicagofed.org/publications/fedletter/cflmarch2007_236a.pdf
“While higher education is being asked to perform more roles in the local economy, specific pathways for influencing local and regional economic transformation are still being identified. On October 30, 2006, the Federal Reserve Bank of Chicago and the Midwest Higher Education Compact held a conference on higher education and economic growth.”
Economic Report of the President
February 12, 2007
http://www.whitehouse.gov/cea/pubs.html
U.S. Economy Outperforms Peer Group from 2001 to 2006
Joint Economic Committee - Report – March 2007 – 2 pages
http://www.house.gov/jec/publications/110/rr110-3.pdf
“From 2001 to 2006, the U.S. economy has generally outperformed the other large developed economies of Canada, the European Union (EU), and Japan. On balance, the U.S. economy compares favorably with its peer group in terms of real GDP growth, real investment in fixed assets, industrial production, employment, labor productivity, and price stability.”
Irwin Kirsch, Henry Braun, Kentaro Yamamoto, and Andrew Sum
America’s Perfect Storm: Three Forces Changing Our Nation’s Future
Educational Testing Service - Policy Information Report - January 2007- 34 pages
http://www.ets.org/Media/Education_Topics/pdf/AmericasPerfectStorm.pdf
The three forces comprising this “perfect storm” are divergent skill distributions, the changing economy and demographic trends. First, there is a wide disparity in literacy and math skills among school-age and adult populations. These groups do not have “sufficient literacy and numeracy skills to fully participate in an increasingly competitive work environment.” Secondly, there have been huge changes in the economy primarily driven by technology and globalization resulting in a shift between capital and labor. Consequently, the shift in “composition of jobs in our country has been increasing economic returns to schooling and skills.” Lastly, there will be sweeping demographic changes where the labor force is projected to grow more slowly over the next 20 years and none of the predicted growth will come from native-born workers—more than half of these immigrants lack a high school diploma. The authors believe that our overall levels of learning and skills must be increased to overcome these disparities.
Hearing on Economic Challenges Facing Middle Class Families
House - Committee on Ways and Means – Hearing - January 31, 2007
http://waysandmeans.house.gov/hearings.asp?formmode=detail&hearing=514
“In recent years, middle-class families have found their economic circumstances increasingly precarious. Many workers face wage stagnation, or even prolonged unemployment, and fewer workers have guaranteed pension benefit plans, causing many to worry about retirement. All of this uncertainty comes at a time when families face increasing costs for education, health care, and energy. This hearing will examine these challenges and related pressures facing middle-class families and their economic future.”
See also: House Committee on Education and Labor hearings:
http://edworkforce.house.gov/hearings/fc013107.shtml
http://edworkforce.house.gov/committee/hearings.shtml
William H. Gates- Chairman, Microsoft Corporation
Strengthening American Competitiveness for the 21st Century
Written Testimony before the Senate Committee on Health, Education, Labor and Pensions - March 7, 2007 – 14 pages
http://help.senate.gov/Hearings/2007_03_07/2007_03_07.html
“When I reflect on the state of American competitiveness today, my immediate feeling is not only one of pride, but also of deep anxiety. Too often, we as a society are sacrificing the long-term good of our country in the interests of short-term gain. Too often, we lack the political will to take the steps necessary to ensure that America remains a technology and innovation leader. In too many areas, we are content to live off the investments that previous generations made for us – in education, in health care, in basic scientific research – but are unwilling to invest equal energy and resources into building on this legacy to ensure that America’s future is as bright and prosperous as its present. America simply cannot continue along this course…”
Matthew Higgins, Thomas Klitgaard, and Cedric Tille
Borrowing without Debt? Understanding the U.S. International Investment Position
Federal Reserve Bank of New York - Staff Report no. 271 - December 2006 – 19 pages
http://www.newyorkfed.org/research/staff_reports/sr271.pdf
“Sustained large U.S. current account deficits have led some economists and policymakers to worry that future current account adjustment could occur through a sudden and disruptive depreciation of the dollar and a sharp drop in U.S. consumption. Two factors that, to date, have cast doubt on such concerns are the stability of U.S. net external liabilities and the minimal net income payments made by the United States on these liabilities. Higgins, Klitgaard, and Tille show that the stability of the external position reflects sizable capital gains stemming from strong foreign equity markets and a weaker dollar--conditions that could be reversed in the future.”
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PRODUCTIVITY
Jonathan L. Willis and Julie Wroblewski
What Happened to the Gains From Strong Productivity Growth?
Economic Review, FRB Kansas City - First Quarter 2007 - 19 pages
http://www.kc.frb.org/publicat/econrev/PDF/1q07will.pdf
“Over the past decade, the United States economy has experienced strong economic growth due in large part to a resurgence in productivity growth. Little attention has been paid, however, to examining how the gains from this growth have been distributed… Willis and Wroblewski examine how the gains from increased productivity growth have been distributed. Their analysis focuses on two questions: Has the increase in productivity growth led to a change in the income shares for capital and labor? And, has the strong productivity growth over the past decade led to a change in the distribution of income across households?”
Dale W. Jorgenson, Mun S. Ho, and Kevin J. Stiroh
A Retrospective Look at the U.S. Productivity Growth Resurgence
Federal Reserve Bank of New York – Report - February 2007 - 37 pages
http://www.newyorkfed.org/research/staff_reports/sr277.pdf
“It is now widely recognized that information technology (IT) was critical to the dramatic acceleration of U.S. labor productivity growth in the mid-1990s. This paper traces the evolution of productivity estimates to document how and when this perception emerged. Early studies concluded that IT was relatively unimportant. It was only after the massive IT investment boom of the late 1990s that this investment and underlying productivity increases in the IT-producing sectors were identified as important sources of growth. Although IT has diminished in significance since the dot-com crash of 2000, the authors project that private sector productivity growth will average around 2.5 percent per year for the next decade, a pace that is only moderately below the average for the 1995-2005 period.”
Dean Baker
Behind the Gap between Productivity and Wage Growth
Center for Economic and Policy Research (CEPR) - . Issue Brief - February 2007 – 6 pages
http://www.cepr.net/documents/publications/0702_productivity.pdf
From early 2001 to the second quarter of 2006, productivity growth increased by 17.9 percent; however, real wages barely moved over this same period. The author explains that the gap has been created by (1) the “redistribution from wages to capital income (primarily profits plus interest),” and (2) the fact that productivity is measured against gross output while income is derived from net output.
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SAVINGS
William Poole
U. S. Saving
Federal Reserve Bank of St. Louis – Remarks - Feb. 15, 2007
http://www.stlouisfed.org/news/speeches/2007/02_15_07.html
“My subject is an important, and puzzling, one. The puzzle is nicely illustrated by recent newspaper stories reporting that the U.S. saving rate is at the lowest level in 73 years—that is, since 1933, the bleakest year of the Great Depression. But let me ask five questions: Are there signs of distress all around, as there were 73 years ago? Has there been a tremendous surge of bankruptcies? Has the United States become a nation of profligate spenders? Are the data wrong? Are the data screwy? My answers to these five questions are no, no, no, no and no. But there are some puzzles to explain, and that is what my remarks are about.”
We Try Hard. We Fall Short. Americans Assess Their Saving Habits
Pew Research Center – Report - January 24, 2007
http://pewresearch.org/pubs/325/we-try-hard-we-fall-short-americans-assess-their-saving-habits
“At a time when the personal savings rate in this country has fallen into negative territory for the first time in modern history, more than three-quarters (77%) of all Americans describe themselves as the kind of person who "always looks for ways to save money." This paradox is not as stark as it may seem, for nearly two-thirds (63%) of Americans also acknowledge they don't save enough, and more than a third say that they often (11%) or sometimes (25%) spend more than they can afford.”
Retirement Savings: How Much Will Workers Have When They Retire?
Congressional Research Service – Report - January 29, 2007 – 41 pages
http://www.opencrs.com/document/RL33845/2007-01-29%2000:00:00
“Over the past 25 years, an important change has occurred in the structure of employer-sponsored retirement plans in the private sector. Although the percentage of the workforce who participate in employer-sponsored retirement plans has remained relatively stable at approximately half of all workers, the type of plan by which most workers are covered has changed from defined benefit (DB) pensions to defined contribution (DC) plans… As a result of the shift from DB plans to DC plans, workers today bear more responsibility for preparing for their financial security in retirement.”
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FISCAL POLICY
Ben S. Bernanke
Fiscal Challenges and the Economy in the Long Term
U.S. House of Representatives - Committee on the Budget – Statement - February 28, 2007
http://budget.house.gov/08Bernanke_testimony.pdf
“To summarize, because of demographic changes and rising medical costs, federal expenditures for entitlement programs are projected to rise sharply over the next few decades. Dealing with the resulting fiscal strains will pose difficult choices for the Congress, the Administration, and the American people. However, if early and meaningful action is not taken, the U.S. economy could be seriously weakened, with future generations bearing much of the cost. The decisions the Congress will face will not be easy or simple, but the benefits of placing the budget on a path that is both sustainable and meets the nation’s long-run needs would be substantial.”
GAO Report: http://www.gao.gov/new.items/d07510r.pdf
2008 Budget
http://www.whitehouse.gov/omb/
On February 5, 2007, the President transmitted to the Congress the FY 2008 Budget, which reduces deficits each year and balances the budget by 2012.
Why Deficits Matter
House – Committee on the Budget – Hearing – January 23, 2007
The Honorable David M. Walker - Comptroller General of the United States, GAO
http://budget.house.gov/hearings/2007/Walker070123.pdf
Dr. Edward M. Gramlich - Richard B. Fisher Senior Fellow, Urban Institute
http://budget.house.gov/hearings/2007/Gramlich070123.pdf
Dr. Edwin M. Truman - Senior Fellow, Peterson Institute for International Economics
http://budget.house.gov/hearings/2007/Truman070123.pdf
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MONETARY POLICY
Monetary Policy Report to the Congress
Board of Governors of the Federal Reserve System - February 14, 2007 – 31 pages
http://www.house.gov/apps/list/hearing/financialsvcs_dem/htmpr021507.pdf
“The U.S. economy turned in another solid performance in 2006, although the pattern of growth was uneven… The monetary policy decisions of the Federal Open Market Committee (FOMC) in 2006 were intended to foster sustainable economic expansion and to promote a return to low and stable inflation.”
The State of the Economy, the State of the Labor Market, and the Conduct of Monetary Policy
House – Committee on Financial Services – Hearing - February 15 &16, 2007
http://www.house.gov/apps/list/hearing/financialsvcs_dem/hr021507.shtml
http://www.house.gov/apps/list/hearing/financialsvcs_dem/ht021607.shtml
Ben S. Bernanke, Chairman, Board of Governors of the Federal Reserve System; Jared Bernstein, Economic Policy Institute;. Ronald Blackwell, AFL-CIO; Rebecca Blank, The Gerald R. Ford School of Public Policy, University of Michigan; James Grant, GRANT'S Interest Rate Observerness list.
Chairman Ben S. Bernanke
Central Banking and Bank Supervision in the United States
FED - Remarks - January 5, 2007
http://www.federalreserve.gov/boarddocs/speeches/2007/20070105/default.htm
“The Federal Reserve, like many central banks, is engaged in a wide range of activities beyond the making of monetary policy. For example, the Fed plays a critical role in the U.S. payments system…; it has substantial responsibilities in the area of consumer protection, including rule-writing and enforcement; it promotes financial stability; and, together with other agencies, it supervises both large and small banking organizations. In this talk I will consider the case for one of these activities--namely, the supervision of the banking system--being conducted, at least in part, by the U.S. central bank.”
Michael D. Bordo and David C.Wheelock
Stock Market Booms and Monetary Policy in the Twentieth Century
Federal Reserve Bank of St. Louis Review, March/April 2007, 89(2), pp. 91-122
http://research.stlouisfed.org/publications/review/07/03/BordoWheelock.pdf
“This article examines the association between stock market booms and monetary policy in the U.S. and nine other developed countries during the 20th century. The authors find, as was true of the U.S. stock market boom of 1994-2000, that booms typically arose during periods of above-average growth of real output and below-average inflation, suggesting that booms reflected both real macroeconomic phenomena and monetary policy. They find little evidence that booms were fueled by excessive liquidity. Booms often ended within a few months of an increase in inflation and consequent monetary policy tightening. They find few differences across the different monetary policy regimes of the century.”
George A. Kahn
Communicating a Policy Path: The Next Frontier in Central Bank Transparency?
Economic Review, FRB Kansas City - First Quarter 2007 - 27 pages
http://www.kc.frb.org/publicat/econrev/PDF/1q07kahn.pdf
“In the last two decades, central banks have taken a variety of steps to increase the transparency of monetary policy. Today, many economists are suggesting ways to further increase transparency. One area of considerable interest is the outlook for the future path of the policy rate. The policy rate is the short-term, typically overnight, interest rate that central bankers use to adjust the stance of monetary policy. While central banks typically announce changes in the policy rate when they occur, very few central banks provide an explicit description of where the policy rate is likely to be set in the future.”
Ronald I. McKinnon
The Worth of the Dollar
Stanford Institute for Economic Policy Research - Policy Brief – February, 2007- 6 pages
http://siepr.stanford.edu/papers/briefs/policybrief_feb07.html
“Shouldn’t the market now discipline the world’s biggest debtor and bid the dollar down to reduce the trade deficit? Essentially, the answer is “no.”
The Treasury Department’s Report to Congress on International Economic and Exchange Rate Policy (IEERP) and the U.S.-China Strategic Economic Dialogue
US Senate Committee on Banking, Housing, and Urban Affairs – Hearing – January 31, 2007
http://banking.senate.gov/index.cfm?Fuseaction=Hearings.Detail&HearingID=247
Henry M. Paulson, Jr. , Secretary of the Treasury
Richard Trumka , Secretary-Treasurer, AFL-CIO
Michael E. Campbell , Vice Chairman, National Association of Manufacturers
Albert Keidel , Senior Associate, Carnegie Endowment for International Peace
Fred Bergsten , Director, Peterson Institute for International Economics
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FINANCE
Thomas Dichter
A Second Look at Microfinance: The Sequence of Growth and Credit in Economic History
Cato Institute – Development Policy Briefing Paper – February 15, 2007 – 16 pages
http://www.cato.org/pubs/dbp/dbp1.pdf
“There is no reason to believe that the nature and sequence of growth and mass credit are fundamentally different for poor countries today than they were in the past. We should not expect microfinance to noticeably affect growth or successful business development.”
Hedge Funds and Systemic Risk in the Financial Markets
House – Committee on Financial Services – Hearing - March, 13, 2007
http://www.house.gov/apps/list/hearing/financialsvcs_dem/ht031307.shtml
Witness List & Prepared Testimony:
E. Gerald Corrigan, Managing Director, Goldman Sachs & Company; and former President of the Federal Reserve Bank of New York • Kenneth D. Brody, Co-Founder and Principal, Taconic Capital Advisors LLC; Chairman, Investment Committee, University of Maryland • James S. Chanos; Founder and President, Kynikos Associates LP • George Hall, Founder and CEO, Clinton Group • Jeffrey L. Matthews; Ram Partners, LP • Andrew Golden, President, Princeton University Investment Company • Professor Stephen J. Brown, David S. Loeb Professor of Finance, New York University, Stern School of Business
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OTHER ECONOMIC POLICIES
John D. Graham
The Evolving Role of the U.S. Office of Management and Budget in Regulatory Policy
AEI/Brookings Joint Center on Regulation - Working Paper - Feb 2007 – 26 pages
http://www.aei-brookings.org/admin/authorpdfs/page.php?id=1364&PHPSESSID=7e1f44665051bd08eaf45c8fbd961661
“Since the early Reagan years, critics have argued that benefit-cost analysis is used by the U.S. Office of Management and Budget (OMB) as a one-sided tool of deregulation to advance the interests of business. This article discloses a little-known fact: OMB also plays a powerful pro-regulation role when agency proposals address market failures and are supported by benefit-cost analysis. Drawing on four case studies from the George W. Bush Administration, the author examines how and why OMB encouraged regulatory initiatives while protecting some rulemakings from opposition by forces inside and outside of the executive branch.”
Subsidies Enforcement Annual Report to the Congress
Office of the United States Trade Representative and the U.S. Department of Commerce. Web posted February 1, 2007 – 59 pages
http://ia.ita.doc.gov/esel/reports/seo2007/seo-annual-report-2007.pdf
Subsidies and other unfair trade-distorting practices continue to challenge the American workers and industries, but the U.S. government is committed to eliminating or neutralizing these practices. This report describes how the U.S. Trade Representative, the Department of Commerce, and other agencies monitor foreign government subsidy practices.
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LOCAL ECONOMIC DEVELOPMENT
The State of Economic Development
House Transportation and Infrastructure – Hearing - January 23, 2007
http://transportation.house.gov/hearings/hearingdetail.aspx?NewsID=20
“The experts will provide testimony on the history of federal economic development programs, the role of the Federal Government in economic development, and suggestions for 21st century investment.”
Robert Atkinson and Howard Wial
The Implications of Service Offshoring for Metropolitan Economies
The Brookings Institution – Study – February 2007 – 28 pages
http://media.brookings.edu/mediaarchive/pubs/metro/pubs/20070131_offshoring.pdf
“An examination of service offshoring—the movement of service jobs overseas—forecasts higher than average job losses in twenty-eight U.S. metropolitan areas between 2004 and 2015. Information technology jobs, and the metropolitan areas where they are concentrated, will be hardest hit. To cushion the service offshoring blow, the paper urges federal, state, and local leaders to together pursue policies that boost productivity and innovation, assist workers who are harmed by offshoring, and modernize approaches to economic and workforce development.”
Wendell Cox and Ronald D. Utt
Housing Affordability: Smart Growth Abuses Are Creating a "Rent Belt" of High-Cost Areas
The Heritage Foundation - Backgrounder #1999 - January 22, 2007
http://www.heritage.org/Research/SmartGrowth/bg1999.cfm
“While the national data reveal that the housing affordability problem is limited to the metropolitan areas of a few states—principally those in coastal areas—these regional price differences could significantly affect public policy and shape future growth and prosperity in the United States.”
The Texas Economy: Almost a Boom
Federal Reserve Bank of Dallas - Southwest Economy - January/February 2007
http://www.dallasfed.org/research/swe/2007/swe0701b.cfm
“The Texas economy turned in a robust performance in 2006. Initial estimates suggest employment increased 3.2 percent and output growth could approach 5 percent. For most any other state, an expansion this strong would constitute a boom. But everything is bigger in Texas, and so are the booms. Overall 2006 economic activity was not on par with the great bursts of growth ignited by construction and energy in the 1970s and 1980s or high tech in the 1990s. Still, the current expansion is impressive, even by Texas standards.”
Made in Texas: The Natural Selection of Manufacturing
Federal Reserve Bank of Dallas - Southwest Economy - January/February 2007
http://www.dallasfed.org/research/swe/2007/swe0701c.cfm
“Texas has emerged as one of the nation’s fastest-growing manufacturing hubs. Between 1990 and 2005, a time frame long enough to encompass an entire business cycle, the state’s factory output grew an average of 5.8 percent a year, eclipsing all other major manufacturing states. A longer-run perspective shows that Texas’ share of the nation’s manufacturing base has been rising for at least four decades—with a particularly pronounced output jump in the past year or so.”
Jed Kolko and David Neumark
Are California’s Companies Shifting Their Employment to Other States?
Public Policy Institute of California – Occasional Paper - February 2007 - 54 pages
http://www.ppic.org/content/pubs/op/OP_207JKOP.pdf
“In this paper we examine the dynamics of businesses headquartered in California. In particular, we ask whether California companies are shifting their operations to other states—in terms of either the number of business establishments or the level of employment—through expansions and contractions of existing establishments, as well as births and deaths of establishments. These types of changes could be informative about the business climate in California—perhaps most importantly changes in births of new establishments, which may be most responsive to economic, regulatory, and other conditions that create variability in profitability across states.”
Rural Sprawl
Federal Reserve Bank of Minneapolis – Fedgazette – January 2007
http://www.minneapolisfed.org/pubs/fedgaz/07-03/
“As city dwellers seek bucolic bliss, sprawl is spreading to the countryside. Problem, or opportunity? Incentive-based tools to protect rural land from sprawl are increasingly popular, but some doubt their effectiveness… This fedgazette feature examines rural sprawl in the Ninth District, the conflicts it's causing, the economics behind it, and policies and programs being used to address it.”
Jason Henderson and Maria Akers
Will Energy Markets Refuel the Rural Economy?
Economic Review, FRB Kansas City - First Quarter 2007 - 22 pages
http://www.kc.frb.org/PUBLICAT/ECONREV/PDF/1q07hend.pdf
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AGRICULTURE – FOOD PRICES
Old Macdonald's Evolving Farm
Federal Reserve Bank of Minneapolis – Fedgazette – January 2007
http://www.minneapolisfed.org/pubs/fedgaz/07-01/livestock.cfm
“Looks like it might be time for Old MacDonald to add a few new animals to his farm—you know, just to keep up with the times. Unusual breeds might not be obvious yet in the pasture, but livestock farming is becoming more than just cattle, pigs and sheep. Though most alternative or niche livestock haven't hit commercial scale yet, some are poised to, and most of these herds are growing.”
Stephan Marette, Roxanne Clemens, and Bruce A. Babcock
The Recent International And Regulatory Decisions About Geographical Indications
Midwest Agribusiness Trade Research and Information Center (MATRIC), Iowa State University - January 2007 – 37 pages
http://www.card.iastate.edu/publications/DBS/PDFFiles/07mwp10.pdf
“As worldwide consumer demand for high-quality products and for information about these products increases, labels and geographical indications (GIs) can serve to signal quality traits to consumers. However, GI systems among countries are not homogeneous and can be used as trade barriers against competition. Philosophical differences between the European Union and the United States about how GIs should be registered and protected led to the formation of a WTO dispute settlement panel. In this paper we discuss the issues behind the dispute, the World Trade Organization (WTO) panel decision, and the EU response to the panel decision leading to the new Regulation 510/2006.”
Ephraim Leibtag
The Impact of Big-Box Stores on Retail Food Prices and the Consumer Price Index Economic Research Service
U.S. Department of Agriculture - December 2006 - 41 pages
http://www.ers.usda.gov/publications/err33/err33.pdf
“Over the past 10 years, the growth of nontraditional retail food outlets has transformed the food market landscape, increasing the variety of shopping and food options available to consumers, as well as price variation in retail food market. This report focuses on these dynamics and how they affect food price variation across store format types.” Based on the Consumer Price Index (CPI), over the past 20 years food prices have increased on average of 3 percent annually, but food prices on similar products can vary by 10 percent or more across store formats.
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Nanotechnology: The Future is Coming Sooner Than You Think
Joint Economic Committee - Study – March 2007 – 21 pages
http://www.house.gov/jec/publications/110/nanotechnology_03-22-07.pdf
“This paper discusses the range of sciences currently covered by nanotechnology. It begins with a description of what nanotechnology is and how it relates to previous scientific advances. It then describes the most likely future development of different technologies in a variety of fields. The paper also reviews the government’s current nanotechnology policy and makes some suggestions for improvement.”
