The Economic Report of the President 2022 together with the Annual Report of the Council of Economic Advisers provides the U.S. Congress and the American people with “timely and authoritative information concerning economic developments and economic trends” for the preceding year and, prospectively, for the years ahead.
Chapter 1: The Public Sector’s Role in Economic Growth 21
Before the Pandemic 25
Ensuring Macroeconomic Stability 29
Macroeconomic Stabilization during the Pandemic 29
Addressing Market Failures 32
Market Failures during the Pandemic 33
Market Failures Beyond the Pandemic 35
Reducing Inequality 38
Inequality Before and Beyond the Pandemic 38
Inequality in the Pandemic 41
Conclusion 42
Chapter 2: The Year in Review and the Years Ahead 45
Fiscal Policy in 2021 49
The Rise in Economic Uncertainty 53
Financial Markets 53
Consumer Sentiment 56
The Economy during the Recession and Recovery: How Do This Recession and Recovery Differ from Others? 56
Consumer Spending 57
Business and Residential Investment 61
Investment in Nonresidential Structures 61
Investment in Equipment 62
Intellectual Property 63
Residential Investment 63
State and Local Purchases 64
Exports and Imports 65
Global Supply Chain Disruptions 66
Inventory Investment 68
Consumer Price Inflation 69
12 | Economic Report of the President Inflation Expectations 70
The Labor Market 71
Ways in Which the Labor Market Appeared Tight in 2021 72
Ways in Which the Labor Market Appeared Loose in 2021 79
Labor Supply and Labor Force Participation 80
The Historical Sluggishness of U.S. LFPR Recoveries 86
Caring for Family Members 86
The Unemployment Rate 87
Reconciling the Paradox 88
The Forecast 89
Macroeconomic Forces during 2022 90
The Forecast over the Long Term 92
The Supply Side of the Long-Term Forecast 94
Conclusion 95
Chapter 3: The U.S. Economy and the Global Pandemic 97
Recovery Amid Global Economic Challenges 98
The Global Pandemic 98
The United States’ Economic Recovery in the Global Context 100
The Challenge of Inflation 102
International Trade, the Economic Recovery, and Lingering COVID-19 Challenges 104
The U.S. Trade Balance 107
International Trade in Goods 111
International Trade in Services 113
Policies to Build an Equitable International Economy 116
Broadening the Gains from Trade 116
Leveling the International Economic Playing Field 118
A Collaborative, Transparent Policymaking Process 121 Conclusion 122
Chapter 4: Investing in People: Education, Workforce Development, and Health 123
Human Capital Is Critical for Economic Growth and Individual Well-Being 125
Economic Report of the President | 13
Measuring the Stock of Human Capital 128
Investing in Education and Skill Development 133
Early Childhood Education and Care 133
K-12 Education 136
Postsecondary Human Capital Development 137
Investing in Health 144
Deploying Human Capital 148
Health 148
Family Support Policies 150
Employment Practices 151
Occupational Licensing 152
Immigration 154
Incarceration 154
Government Personnel Policies 156
Conclusion 156
Chapter 5: Barriers to Economic Equality: The Role of Monopsony, Monopoly, and Discrimination 157
Labor Market Inequality 159
Racial, Ethnic, and Gender Wage Gaps 161
Sources of Earnings Inequality 168
A Lack of Competition in Labor and Product Markets 169
Racial and Gender Discrimination 172
How Inequality Affects Economic Efficiency and Growth 178
Monopsony Power Produces Inefficient Labor Market Outcomes 178
Discrimination Misallocates Talent and Suppresses Innovation 179
Discrimination Reduces Incentives for Human Capital Investment 180
Policies to Address Sources of Labor Market Inequality 180
Promoting Competition 181
Unions and Labor Market Equity 182
The Minimum Wage 183
Full Employment and Tight Labor Markets 184
Care Economy Policies 185
14 | Economic Report of the President Progressive and Equitable Tax Policy 187
Conclusion 189
Chapter 6: Building Resilient Supply Chains 191
21st-Century Supply Chains 192
Vertical Integration with Isolated Industries 193
Outsourcing with Isolated Industries 194
Offshoring and Outsourcing with Isolated Industries 194
Outsourcing with a Central Node 195
Arm’s-Length and Collaborative Relationships 196
Drivers of Change in Supply-Chain Structures 199
Implications of Supply Chain Structures 204
Impact on Innovation 204
Impact on the Macroeconomy 207
The Rising Incidence of Supply-Chain-Related Disasters 210
Private Sector Incentives for Resilience 210
Visibility 211
Redundancy 211
Agility 212
Public Sector Strategies for Promoting Resilience 214
Aggregating and Disseminating Information 215
National Security 216
Indirect Supply Chain Policy 219
Conclusion 220
Chapter 7: Accelerating and Smoothing the Clean Energy Transition 221
Accelerating the Energy Transition 222
Global Efforts to Reduce Greenhouse Gas Emissions 224
Accelerating the Energy Transition in the United State 225
A Smooth Transition to Clean Energy 229
The First Challenge: Supporting Domestic Industries 230
Strategies for Supporting Domestic Industries through the Energy Transition 236
Economic Report of the President | 15 The Second Challenge: Supporting Communities That Rely on a Carbon-Intensive Economy 240
The Geographic Concentration of Fossil-Fuel-Dependent Communities 240
The Inadequacy of Place-Neutral Policies 242
Strategies for Place-Based Policies 244
The Clean Energy Transition Provides Unique Opportunities to Implement Successful Place-Based Policies 246
Discussion and Conclusions 249
Social scientists, social and economic activists, economists, professors, and political scientists.
