The economy is growing at a rapid rate. Employment is likewise expanding. The economy has shown itself to be resilient to significant shocks and most key economic data continue to reflect healthy growth. As Federal Reserve Chairman Bernanke recently testified before the Joint Economic Committee, the economic outlook continues to be positive.

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WASHINGTON, D.C. – The international oil cartel should end its system of production restrictions and plan to expand investments in production capacity when it meets June 1, Chairman Jim Saxton said today.  Although the restrictive practices of the OPEC cartel are not the only reason for high oil prices, they remain important.  A recent report by the nonpartisan Congressional Research Service (CRS) noted that among the events “leading up to the crisis,” were “Decisions by the Organization of Petroleum Exporting Countries (OPEC) cartel, after having reduced production quotas in 2002, to raise them only slowly and reluctantly.”

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   WASHINGTON, D.C. - Iran’s immense oil and gas reserves undermine Iranian government claims that nuclear power is needed for energy production, according to a new report released by Joint Economic Committee Chairman Jim Saxton today. The report, Iran’s Oil and Gas Wealth, is an examination of Iranian oil and gas fields, related energy production, and oil exports. Iran has the second largest conventional oil reserves in the world, with 40 major producing oil fields, of which 27 are on-shore, and 13 off-shore. The report also notes that Iranian oil and gas reserves are significantly underdeveloped, resulting in an enormous energy output gap and a huge potential for peacefully supplying future Iranian energy needs.

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   WASHINGTON, D.C. - The U.S. economy is now much more able to withstand energy price shocks than it was 25 years ago, according to a new Joint Economic Committee study released today by Chairman Jim Saxton. The study, Energy Prices and the Economy, examines how the U.S. economy has become more energy efficient, less energy intensive, and more resilient in recent decades. As a result, past studies suggesting that significant oil price increases would lead to sharp declines in GDP growth were not reliable guides in predicting the course of economic growth in recent years. However, higher energy prices continue to have potential negative economic effects, even if they are much less severe than during the 1970s and early 1980s.

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   WASHINGTON, D.C. - Although some people have expressed dissatisfaction about the performance of the U.S. economy, the economic data show that since 2001 the United States has outperformed every other large developed economy. This report examines the performance of a peer group of large developed economies from 2001 to the present. The peer group includes Canada, Japan, the United States, and the twenty-five member-states of the European Union, but excludes the smaller developed economies of Australia, Iceland, South Korea, New Zealand, Norway, Singapore, Switzerland, and Taiwan. Together, the peer group produced 78 percent of the world’s GDP in 2003.

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   WASHINGTON, D.C. - The Organization of Petroleum Exporting Countries (OPEC) has unduly restricted its production of oil and is a major factor explaining high oil prices, according to a new study released today by Chairman Jim Saxton. The study, OPEC and the High Price of Oil, examines the cartel's oil reserves, production costs, collusive practices, and failure to adequately develop its vast oil fields.

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    Social Security has a serious financial problem that will deteriorate if policymakers do not act to prevent it. While Social Security's income from payroll taxes currently exceeds its outgo in benefit payments, Social Security's trustees project that outgo will exceed income in 2017.

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    The pattern of economic slowdown following the bursting of the stock market bubble in 2000 has been very similar in the major advanced economies, according to a new study released today by Vice Chairman Jim Saxton. After the sharp decline in the stock markets of the advanced economies, investment slowed dramatically, industrial production fell, and unemployment increased in all, according to the new Joint Economic Committee study, International Economic Performance Since the Stock Market Bubble. The study also shows that in the subsequent expansion period, the U.S. economy has performed relatively well compared to the other advanced economies. The study examines the macroeconomic performance of the U.S., European Union, Japan, and Canada.

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    The bursting of the stock market bubble in 2000 has had long-lasting negative effects on business investment and economic growth, according to a new study released today by Joint Economic Committee (JEC) Vice Chairman Jim Saxton. The soaring stock market had encouraged and facilitated increases in business investment up to its peak in early 2000, but the popping of the bubble reversed this process. For most of the period since 2000, business investment has been a drag on economic growth. The new study, Economic Repercussions of the Stock Market Bubble, examines the relationship between the stock market bubble, business investment, and economic growth.

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    Technology advancements and the information revolution have provided enormous benefits to our economy. At the same time, they have also exposed our nation to new vulnerabilities and security threats. Recent terrorist attacks against America have demonstrated the importance of understanding potential threats and developing strategies to counter them.

     Computer networks create new avenues for those with malicious intent. Because many critical activities rely upon telecommunications and computer systems, our economy can be crippled as a result of information warfare and mass disruption of these systems. Physically securing buildings with guards and gates isn't enough to protect systems that can be accessed via cyberspace from anywhere in the world. Infrastructures providing energy, transportation, communications, water, human services, banking and finance, civilian government services, and military services are all at risk.

     We need a better understanding of security and our critical infrastructure, in particular the vulnerabilities resulting from our growing reliance on networked technology. This report represents a range of perspectives on infrastructure protection, from definitions and strategies to business challenges and policy options.

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    This study examines the market for terrorism insurance in the United States, discusses the economic implications of the cost and availability of terrorism insurance and considers the proposed federal role in terrorism insurance. Among the study’s principal findings:

The market for terrorism insurance remains limited.

• Only a small number of insurers are actively providing stand-alone terrorism insurance policies.
• When available, coverage for terrorism losses is expensive, terms of coverage are restrictive and policy limits are often insufficient.

  The problems associated with terrorism insurance pose a significant threat to sustained economic growth.

   

• The lack of terrorism insurance is stopping some business deals, such as real estate and construction projects where terrorism insurance may be necessary to obtain financing.
• The high cost of terrorism insurance (when available) diverts resources from other more productive uses, negatively affecting investment and jobs.
• Low coverage limits in terrorism insurance policies mean that businesses are bearing a huge amount of risk themselves. In the event of another attack similar to that of September 11th, insurance payments will not be available to the same degree to rebuild.
  
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    The events of September 11 stunned Americans not only because of the heinousness of the attacks themselves, but also because of the underlying vulnerability they revealed. The toll such attacks take on open, unprepared, and unsuspecting nations is severe; particularly significant are the economic effects of such acts and the responses they elicit. These effects need to be understood in order to prescribe appropriate economic policy remedies. This study categorizes and briefly summarizes both the short- and long-term economic effects and costs of such terrorist attacks. Prominent among the long-term effects are: (1) the increased transaction costs and inefficiencies imposed on the economy by terrorism, and (2) the fact that increased spending on security necessarily diverts labor and capital resources away from productive private sector activities and toward necessary, but less productive, anti-terrorist activity. Several estimates of the magnitudes of the various costs are briefly summarized. In general, the estimates of the costs surrounding the September 11 terrorism suggest that these costs are significant, but not inordinately large relative to GDP. While these complex estimates of the long-term costs are commendable, there are a number of reasons to be skeptical of their conclusions. In particular, they fail to consider multiple forms of terrorism, important measurement problems, or the cost-related behavior of terrorists. Consequently, terrorism’s long-term costs may be more severe than suggested by many existing estimates. Some timely monetary and fiscal policy responses to such terrorist activity are appropriate.

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    The superior performance of the U.S. economy in the late 1990s has led many commentators to speculate that a "New Economy" has emerged in which heavy investment in information technology (IT) has led to an era of sustained economic growth. Although the recent economic slowdown has dampened some of the enthusiasm for the idea of a New Economy, a fundamental question remains: can the output growth experienced in the late 90's, which was significantly higher than that observed in previous decades, be traced back to IT? This paper addresses this question by looking at the behavior of labor productivity, a key measure of economic well-being that grew at a significantly faster rate in the late '90s. The New Economy hypothesis to be examined is whether investment in IT caused the acceleration in productivity. The evidence suggests a growing consensus on two conclusions:

Information technology is an important factor in the recent acceleration in productivity growth.

Both the production and the use of IT contributed to the productivity revival.

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    After experiencing a remarkably extended period of economic expansion lasting nearly 18 years, the U.S. economy’s growth suddenly slowed substantially in mid-2000. The speed and significance of this slowdown surprised most economists. Some analysts believe this slowdown will be brief; the economy’s growth should turn around and return to healthy growth quite rapidly. Generally, explanations suggested by economists endorsing this view indicate the factors causing the slowdown are temporary, short-lived, and readily reversible. Once policymakers take remedial action to reverse these factors, economic recovery will readily ensue and the slowdown-recovery can be characterized as “V-shaped” in nature.    

    Other economists argue that the factors causing the slowdown are longer-term or structural in nature. These explanations portend a longer, more drawn-out slowdown period followed by a significantly weaker, more sluggish recovery. The slowdown-recovery character of the later view is associated with asset price deflation as well as burdensome debt and can be characterized as “U-shaped” in nature. If this set of conditions best characterizes current circumstances, policymakers should undertake faster, more forceful policy responses using reliable indicators to prevent a more serious, protracted downturn while ensuring no meaningful resurgence of inflation.

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     A key reason for the durability of the expansion owes to the maintenance of macroeconomic policies promoting long-run efficiency and growth without inflation. Appropriate macroeconomic policies evolved from the gradual recognition that monetary and fiscal policies should be directed at different and independent objectives; monetary policy should focus on achieving price stability whereas fiscal policy should focus on open market, growth-promoting tax and spending restraint policies encouraging entrepreneurial activity (i.e., policies promoting aggregate supply).

     More specific reasons for the economy's remarkable sustainability all promote growth without inflation and include the following:

• The growth-enhancing effects of a gradual, credible anti-inflationary Federal Reserve monetary policy.

• The growth-promoting effects of credible government spending restraint.

• The long-term growth effects of an efficiency-promoting incentive structure embedded in the tax code.

• The effects on aggregate supply and capacity of substantial investment in equipment as well as in productivity-enhancing new technologies.

• The specialization and efficiency-promoting effects of increased international integration and open markets (globalization).

    The key reasons for this sustained recovery include:

The economic and financial market stabilizing effects of a credible anti-inflationary monetary policy.

The fact that monetary policy has produced stable growth in total spending, dominating fiscal policy's influence on both aggregate demand and interest rate movements.

    Government serves many useful functions, including some economic ones. The findings here support the view that the growth of government in newly emerging nations and economies tends to increase output. Presumably this reflects the reduction in transactions' costs and the improved environment for investment associated with a rule of law and enforceable property rights. At the same time, in modern times relative American federal government spending has expanded rapidly, reflecting sharp increases in transfer payments. The evidence suggests that large transfer payments in particular have negative consequences for growth. The results for the federal government are confirmed for state and local governments and several other countries. The findings suggest that a federal budget strategy of constraining spending growth below output growth, with particular attention paid to constraining transfer payments, would have positive effects on economic growth.

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      This paper shows that excessively large government has reduced economic growth. These findings present a compelling case that rather than devising new programs to spend any surplus that may emerge from the current economic expansion, Congress should develop a long--range strategy to reduce the size of government so we will be able to achieve a more rapid rate of economic growth in the future.

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    This report examines how tax reduction improves incentives to work, save, and invest and increases long-term productivity and economic growth. The 1960s and 1980s are cited to illustrate the positive effects of tax cuts. Keynesian and free-market perspectives are compared.

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    This revised JEC study examines new evidence of economic stimulation from tax rate cuts at the national level as well as tax changes at the state level. Five case studies comparing relatively high and low income tax states are presented. In each case, the low-tax state outperformed the high-tax state.

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    This report examines the problem of "rent seeking" and how such activity rewards special interests while hurting the American economy. It explains how special interests seek what economists call "rents" that favor their industry. The report makes the case that to avoid the problem of rent seeking and to help restore long-term economic growth, the size of government should be reduced.

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    This report contrasts public sector performance with that of the much more productive private sector. The basic argument of this report is that the federal government is too large, too unproductive, and too burdensome to the American economy.

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This update examines several Leading Economic Indicators (LEI) which gauge the economy's performance.

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    This report expands and builds upon the recent Lowell Gallaway and Richard Vedder study on the optimal size of the federal government, commissioned by the JEC, as well as recent in-house JEC works. It underscores the important point that the way to get our economy going is to reduce federal spending and cut taxes.

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    The Reagan expansion years marked a period of economic progress for middle class Americans. Middle class household income increased 11 percent after adjustment for inflation, and nearly 20 million new jobs were created. Nonetheless, there are those in the Administration who have attempted to portray the 1980s as a period of economic hardship and decline for most Americans. This paper refutes that position, showing that low- and middle-income households moved upward into the next income group.

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    With four years of data now available on the current economic recovery, it is now possible to compare the record of the pro-economic growth policies of Reagan to the tax-and-spend policies of Presidents Bush and Clinton. This substantive, eight-page report shows how the Reagan recovery achieved faster economic growth, created more jobs, generated more revenue, and saw incomes rise faster than the current Bush/Clinton recovery. The report provides crucial ammunition to fight attacks on pro-growth economic policies, such as the tax cuts contained in the Republican budget.

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    When thinking about government spending, often people only consider its benefits. But government spending has costs, too, because the resources government uses have to come from somewhere and could be put to other uses. Research indicates that when these factors are taken into account, it turns out that the cost of raising an additional $1 in taxes is not $1, but closer to $1.40. On the other hand, reducing government spending by $1 can benefit the economy by $1.40, leading to higher economic growth.

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     There are compelling arguments for promoting moderation in the growth of governmental expenditures over time. A potentially politically viable policy for promoting economic growth would be to allow government expenditures to rise modestly over time, but by less than the growth rate in GDP, leading in time to some reduction in governmental expenditures as a percent of GDP. In effect, this has been the experience of the past several years. In addition, the benefits of moderating inflation observed in recent times are arguments for the Federal Reserve continuing to follow its stated objective of promoting price stability. Since taxes tend to automatically rise over time as a percent of GDP (in large part, because of the progressive nature of the income tax), and since tax reduction also tends to reduce the propensity of policy-makers to increase expenditure, a very strong case can be made for a tax cut. Current softness in the economy further supports the case for tax reduction.

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      Government serves many useful functions, including some economic ones. The findings here support the view that the growth of government in newly emerging nations and economies tends to increase output. Presumably this reflects the reduction in transactions' costs and the improved environment for investment associated with a rule of law and enforceable property rights. At the same time, in modern times relative American federal government spending has expanded rapidly, reflecting sharp increases in transfer payments. The evidence suggests that large transfer payments in particular have negative consequences for growth. The results for the federal government are confirmed for state and local governments and several other countries. The findings suggest that a federal budget strategy of constraining spending growth below output growth, with particular attention paid to constraining transfer payments, would have positive effects on economic growth.

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      This paper shows that excessively large government has reduced economic growth. These findings present a compelling case that rather than devising new programs to spend any surplus that may emerge from the current economic expansion, Congress should develop a long--range strategy to reduce the size of government so we will be able to achieve a more rapid rate of economic growth in the future.

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    This study focuses on the effects of excessive federal taxes and spending on the American family, including its effects on family structure, family income, children, and social institutions supporting family life. It provides evidence that the shift in resources towards the Federal government has simply gone too far and that federal restraint in taxes and spending would provide more economic and family income growth over the long run.NOTE: This paper is the fifth in a series of studies on the impact of the welfare state. The other four papers are entitled The Impact of the Welfare State on the American Economy (December 1995), The Impact of the Welfare State on Workers (March 1996), The Impact of the Welfare State on America's Children (May 1996), and The Impact of the Welfare State on Small Business and the American Entrepreneur (JEC Study -- July 1996).

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    This JEC study shows how the size of the welfare state is burdening America's small businesses and entrepreneurs through mounds of taxation and red tape. In addition, the costs of complying with government regulation tends to impose disproportionate costs on small business relative to big business. Furthermore, this study finds that a $100 billion reduction in federal spending growth would boost economic growth by $35-38 billion annually.

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    This is the third in a series of studies examining how excessive federal spending affects different aspects of the economy. Its primary conclusion is that for each $100 billion of non-defense federal spending restraint, 3 million children would be moved out of poverty.

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    This is the second in a series of studies examining how excessive federal spending affects different aspects of the economy. Among its conclusions is that for each one dollar of federal spending restraint, worker wages and benefits would increase by 26 cents.

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    This JEC study by two distinguished economists, Professors Lowell Gallaway and Richard Vedder of Ohio University, examines the impact of the level of federal spending on the American economy. Their analysis shows that every $100 billion reduction in federal spending would produce $138 billion in additional private sector economic growth. Furthermore, their findings indicate that the optimal level of federal spending is approximately 17.6 percent of gross domestic product (GDP). This study also contains a brief history of the growth in the size of the federal government.

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    This JEC report addressess the use of very misleading wage data released by the Department of Labor under then-Secretary Robert Reich and intended to show that real wages have fallen over a 12-month period as a result of Republican policies. A review of the Labor Department figures shows that the original data from the Bureau of Labor Statistics were manipulated in a manner plainly contrary to accepted standards.

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• Costs of Regulation

    Tradable emissions have proven to be an efficient market-based tool for reducing the cost of pollution control. Exchanging emissions in competitive markets with low transactions costs can be used as a way of finding the lowest cost points of abatement in an industry or geographical region. The Congress used this approach in creating tradable sulfur dioxide allowances in the Clean Air Act Amendments of 1990 to reduce the cost of acid rain control, a policy which has demonstrated great success. New pollution control policies would benefit from the use of tradable emissions as a method of reducing a national abatement cost already estimated at over $100 billion.

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    This report expands upon two JEC studies, The Impact of the Welfare State on the American Economy and The Impact of the Welfare State on Workers, which demonstrate that excessive government regulation has hampered economic growth and worker incomes. The report concludes that some economic rationality needs to be introduced to important regulations and that serious economic reform must reduce the size and scope of the federal government.

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• Pension Security

This policy analysis provides a detailed overview of the Administration's practice of promoting Economically Targeted Investments (ETIs).

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    The Administration has taken to advocating Economically Targeted Investments (ETIs). This six-page paper provides a detailed analysis of the ETI approach and concludes that the potential loss over a 30-year period would be more than $43,000 per pension-plan participant.

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    This five-page update describes the Administration's agenda with regard to Economically Targeted Investments (ETIs). It also shows that liberal groups (e.g., the Center for Policy Analysis) are helping to formulate the Administration's ETI policies and are providing the program's driving force.

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    This two-page document provides a brief overview of the topics covered at the JEC briefing that focused on ETIs. JEC staff and Professor Edward Zelinsky of Cardozo Law School discussed the history, present status, and the future of the Labor Department's policy of pushing pension fund managers to invest in Economically Targeted Investments.

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    This is a compilation of selected quotes from Members of Congress, journalists, scholars, and organizations on the issue of Economically Targeted Investments (ETIs).

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    This five-page document offers a variety of useful facts regarding ETIs and answers many common questions about this issue. Divided into six sections, this briefing covers various topics, including how ETIs first came into existence, examples of failed ETIs, and the benefits of enacting H.R. 1594.

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    This two-page brief explains various aspects of the ETI issue: the Clinton strategy, ETIs and the law, early returns, and the solution (H.R. 1594). The summary gives a succinct analysis of the situation and how it affects workers' pensions.

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    This update briefly addresses the Labor Department's promotion of Economically Targeted Investments. ETIs are programs designed to channel private pension investment into so-called socially-desirable projects such as public housing, infrastructure, and public sector job creation.

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    This paper consists of excerpts from the speech given by Speaker Gingrich at the press conference that introduced the Pension Protection Act of 1995 on May 9, 1995.

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    This is a compilation of JEC reports on the issue of increasing the minimum wage. These reports clearly document the economic arguments against an increase in the minimum wage.

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    This report clearly demonstrates that raising the minimum wage actually increases unemployment. It also shows that the majority of minimum wage earners are young people still living with their parents or married individuals in a "two-earner" family.

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    This four-page report explains how raising the minimum wage will result in fewer jobs for young and unskilled workers. It also addresses the errors made by the "Card-Krueger Study," which incorrectly concluded that raising the minimum wage would actually increase employment.

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    This paper is a critical review of Labor Secretary Robert Reich and the Clinton Administration's flawed economic case for an increase in the minimum wage. Both the original "Reich Curve" and the "Nouveau Reich Curve" are explained and discussed.

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    This piece consists of excerpts from Herman Cain's (CEO of Godfather's Pizza) testimony before the JEC hearing on the Clinton Administration's proposal to raise the minimum wage.

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    This is Vice-Chairman Jim Saxton's opening statement before the JEC hearing on the Clinton Administration's proposal to raise the minimum wage.

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    Contrary to the claims of the Clinton Administration, the weight of evidence on the minimum wage shows that increases in the minimum wage cause unemployment. These talking points provide a useful reference to over 100 relevant studies on the minimum wage and its effect on workers and the economy.

The Minimum Wage: Part 1 and Part 2 (Talking Points -- February 16 and 21, 1995)

These two papers offer facts about the minimum wage--who gets it, where they are likely to work, and the income level of their family unit. Facts on the minimum wage are presented in a framework useful for debating the issue. The talking points highlight a number of issues, including: 1) most minimum wage earners work at entry-level jobs; 2) they are not supporting a "family of four"; and 3) most minimum wage earners remain at minimum wage for a relatively brief period of time.

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    This four-page paper summarizes a JEC briefing on the minimum wage. The history of the minimum wage and where it has been applied over time is reviewed.

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    This one-page brief provides an easy-to-understand explanation of how and why a minimum wage increase is misguided economic policy. The analysis explores, from an economic perspective, the inevitable destruction of entry-level jobs and the burden placed on employers of marginal workers.

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    Great attention has been given recently to changes over time in the average incomes of "quintiles," families or households ranked top to bottom by income and divided into fifths. However, such time line comparisons between the rich and the poor ignore a central element of the U.S. economy, which is the extent to which individuals move from one quintile to another. This study is an analysis of data based on income tax returns filed from 1979 through 1988, that show the degree of income mobility in American society renders the comparison of quintile income levels over time virtually meaningless. This study notes that according to the tax data, 85.8 percent of filers in the bottom quintile in 1979 had exited this quintile by 1988. The corresponding mobility rates were 71 percent for the second lowest quintile, 67 percent for the middle quintile, 62.5 percent for the fourth quintile, and 35.3 percent for the top quintile. In fact, an individual who began the 10-year period in the bottom quintile had a greater chance at rising to the top by the end of the period than remaining at the bottom.

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    This JEC study shows that real (i.e., adjusted for inflation) middle class family income, a commonly used method for evaluating changes in economic policy, rose significantly during the Reagan years but stagnated from 1992 to 1994. Data, explanations, and graphs clearly suggest that tax cuts and tax increases are historically associated with periods of rising and declining family income, respectively.

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    This report presents the economic benefits of the Congressional balanced budget plan for a typical young American family. The figures are based on an economic analysis by DRI/McGraw-Hill on the implementation of the Congressional budget plan. By creating economic growth and lower interest rates, the Congressional plan would generate more than $2,300 in savings each year for an average American family.

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    Given wider recognition of the real income growth experienced by low and middle income families in the 1980s, emphasis has been shifted to the disparity in income growth between the richest and poorest among us, as conventionally measured. The key question examined in this study is whether a more equal sharing of a shrinking income stream is preferable to an uneven improvement in income growth. The analysis discredits popular claims about the 1980s by pointing out clear facts such as between 1982 and 1989, the real middle class family income rose 13 percent; and as conventionally measured, the income of all income groups increased during the 1980s, whether 1980, 1981, or 1982 are used as base years.

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