United States.

151 Pages·1990·9.121 MB·English

by  OECD

OECD
OECD
ECONOMIC SURVEYS
UNITED STATES
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ORGANISATIONFORECONOMICCO-OPERATIONANDDEVELOPMENT
Pursuanttoarticle 1 oftheConventionsignedin Parison 14thDecember
1960,andwhichcameintoforceon30thSeptember1961,theOrganisationfor
Economic Co-operation and Development (OECD) shall promote policies
designed:
- toachievethehighestsustainableeconomicgrowthandemploymentand
a rising standard of living in Member countries, while maintaining
financialstability,andthustocontributetothedevelopmentoftheworld
economy;
- to contribute to sound economic expansion in Member as well as
non-membercountriesin theprocessofeconomicdevelopment;and
- to contribute to the expansion of world trade on a multilateral,
non-discriminatorybasis in accordancewith internationalobligations.
The original Member countries of the OECD are Austria, Belgium,
Canada, Denmark, France, the Federal Republic of Germany, Greece,
Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal,
Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United
States. The following countries became Members subsequently through
accessionatthedatesindicated hereafter:Japan (28lhApril 1964), Finland
(28thJanuary 1969), Australia (7thJune 1971) and New Zealand
(29thMay 1973).
TheSocialistFederalRepublicofYugoslaviatakespartinsomeofthework
oftheOECD (agreementof28thOctober 1961).
Publiéégalementen français.
OOECD, 1990
Application forpermission toreproduceortranslate
allorpartofthispublicationshould be madeto:
HeadofPublicationsService, OECD
2,rueAndré-Pascal,75775 PARISCEDEX 16, France.
Contents
Introduction
I. Economic performance and prospects 11
Employment, output and inflation 11
The composition of demand 19
Short-term prospects and risks 26
II. Monetary policy, financial strains and inflation control 30
Monetary policy implementation 30
Strains in the financial sector 37
Inflation expectations and the yield curve 43
III. External adjustment: progress, prospects and policies 47
Progress towards external adjustment 47
External debt and medium-term sustainability 54
Trade policy, the Trade Act and bilateral imbalances 56
IV. Public sector issues 62
A. Spending pressures, revenue constraints and the Federal deficit 62
Spending pressures 65
Defects in budgetary control 70
The need for further tax reform 75
B. National saving, public infrastructure and economic growth 78
The public sector and national saving 78
Public investment and productivity growth 82
Investment in human capital 86
Research and development 89
C. Decentralisation, public choice and efficiency 90
Re-assigning responsibilities to the states 91
Federal grants and tax subsidies 95
Shaping state and local tax systems 100
V. Conclusions 105
Notes and references 1 1 1
Annexe
Calendar of main economic events 122
Statistical annex 127
Structural annex 137
Tables
1. Capacity utilisation and investment 14
2. Regional wage trends, 1983-89 17
3. Accounting for growth in private consumption 19
4. Trends in business fixed investment 21
5. United States production and imports of passenger cars 25
6. Demand, output and prices 27
7. Appropriation account for households 28
8. Directives of the Federal Open Market Committee 34
9. Financing ratios for U.S. non-financial corporations 40
10. Trade and current account balance 49
1 1. Movements in the dollar 51
12. Export and import performance 52
13. Composition of the trade balance 53
14. International investment position 53
15. Rates of return on international investment 54
16. External financial flows 55
17. Medium-term trends in the external balance 56
18. Baseline Budget deficit projections 64
19. Accounting for the Federal deficit 65
20. Impact of reductions in defence spending 68
21. Federal credit and insurance outstanding 71
22. Errors in budget forecasts 75
23. Marginal excess burdens 76
24. Tax expenditures 77
25. International comparisons of budget deficits 79
26. Saving and wealth 80
27. Contribution of public sector capital to output per hour 83
28. Prospective returns on highway investment 85
29. Characteristics of public school teachers 87
30. Number of governmental units 91
31. Federal grants in aid 95
32. Own-source general revenues by level of government, FY 1987 101
33. Progressivity of selected taxes 102
Statistical annex
Selected background statistics 129
A. National product and expenditure 130
B. Labour market (s.a.) 131
C. Costs and prices 132
D. Monetary indicators 133
E. Balance of payments, OECD basis 134
Structural annex
Public sector 138
Financial markets 139
Production structure and performance indicators 140
Labour market indicators 142
Diagrams
1. Real GNP and net exports 12
2. Cyclical indicators 13
3. Employment performance 15
4. Wage, price and productivity trends 16
5. Unemployment trends by state 18
6. Factors influencing consumption 20
7. Investment trends 22
8. Fiscal policy indicators 24
9. Money growth and velocity 31
10. Borrowed reserves and the Federal funds rate 33
11. Interest rates and yield curves 36
12. Business loans and commercial paper 39
13. Junk-bond issues and yield spreads 41
14. Profits and debt-equity ratios of non-financial corporate business 42
15. Yield differentials and the dollar 44
16. Monthly trade deficit 48
17. Indicators of competitiveness 50
18. The size of the general government sector 63
19. Federal debt and debt interest payments 66
20. Public sector capital stock per capita 84
21. School building 88
22. State and local share of government spending 92
23. State and local bond issues and yields 99
BASICSTATISTICSOFTHEUNITEDSTATES
THELAM)
AreacontinentalUnitedStatesplus Populationofmajorcities,includingtheir
HawaîandAlaska(thous.sq.km) 9373 metropolitanareas(1.7.1988estimates):
NewYork 18120000
LosAngeles-Anaheim-Riverside 13770000
Chicago-Gary-LakeCountry 8181000
THEPEOPLE
Population,1989 248777000 Civilianlabourforce1989 123849330
No.ofinhabitantspersq.km 26.5 ofwhich:
Population,annualnetnaturalincrease Employedinagriculture 3378000
(average1978-1989) 2619200 Unemployed 6523000
Annualnetnaturalincrease,percent, Netcivilianimmigration(annualaverage
(1978-1989) 1.02 1985-1988) 666000
PRODUCTION
Grossnationalproductin1989(billionsofUS$) 5200.8 Originofnationalincomein1989(percent
GNPperheadin1989(US$) 20905 ofnationalincome1):
Grossfixedcapitalformation: Agriculture,forestryandfishing 2.4
PercentofGNPin1989 13.3 Manufacturing 19.0
Perheadin1989(USS) 2785.9 Constructionandmining 6.2
Governmentandgovernmententerprises 14.3
Other 58.1
THEGOVERNMENT
Governmentpurchasesofgoodsandservices Compositionofthe101stCongress1989:
1989(percentofGNP) 19.7 House
RevenueofFederal,stateandlocalgovernments of Senate
1989(percentofGNP) 32.4 Representatives2
Federalgovernmentdebtaspercentofreceipts
fromthepublic,1989 101.5 Democrats 259 55
Republicans 174 45
Independents
Undecided
Total 433 100
FOREIGNTRADE
Exports: Imports:
Exportsofgoodsandservicesas Importsofgoodsandservicesas
percentofGNPin1989 12.0 percentofGNPin1989 12.9
Mainexports1989(percent Mainimports1989(percentof
ofmerchandiseexports): merchandiseimports):
Machineryandtransportequipment 42.6 Machineryandtransportequipment 43.5
Foodandliveanimals 8.5 Foodandliveanimals 4.4
Crudematerials(inedible) 7.7 Crudematerials(inedible) 3.2
Chemicals 10.4 Chemicals 4.4
Manufacturedgoods 7.8 Manufacturedgoods 13.1
Allother 23.0 Allother 31.4
1. Withoutcapitalconsumptionadjustment.
2. IndianaandAlabamabothhadonevacancy.
Note: Aninternationalcomparisonofcertainbasicstatisticsisgiveninanannextable.
ThisSurveyisbasedontheSecretariat'sstudyprepared
fortheannualreviewoftheUnitedStatesbytheEconomicand
DevelopmentReviewCommitteeon13thSeptember1990.
After revisions in the light ofdiscussions during the
review, final approval of the Survey for publication was
givenbytheCommitteeon1stOctober1990.
Theprevious Survey ofthe United States was issued
inNovember1989.
Introduction
Sincethe publication ofthe 1989Surveyofthe UnitedStates, theeconomy has
continued to expand, although worries about possible recession have increased.
Output growth has slowed from the unsustainable pace of 1987 and 1988, settling
at around 1'/» per cent in the second half of 1989 and the first half of 1990.
Aggregate employment growth has slowed substantially, with weaknesses concen¬
trated in certain sectors and regions: auto production, residential construction and
the North-East region have been worst affected by the slowdown. The unemploy¬
ment rate, having been unchanged for about a year and a half, has now begun to
rise. Weak near-term growth in aggregate domestic demand was in prospect even
before the oil price shock, which will have an additional deflationary impact.
Despite buoyant net exports, the slow growth of output thus seems likely to con¬
tinue, probably at a rate significantly below potential. The unemployment rate
could edge upfurther, and inflation, having increased in thefirstquarterbecauseof
food and energy price rises, and again in late summer because of the oil price
increase, should eventually stabilise as a result.
Thus far, two factors have helped to support the expansion, which is now well
into its eighth year. The first has been the absence of a stock cycle: the stock-to-
sales ratio has remained both stable and low compared with its historical average.
The second has been the relative steadiness of the "core" inflation rate, which has
been due both to flexibility in wage and price setting and to the success of the
monetary authorities in forestalling the build-up of excess demand. However, the
1980s saw the accumulation of imbalances which need to be unwound. Long-term
interest rates have remained ratherhigh, probably reflecting thedifficultyofreduc¬
ing inflation expectations in the face ofa large federal deficit. In terms ofcreating
the conditions for non-inflationary growth, it remains a problem that monetary
policy has had only modest assistance from fiscal restraint, while havingtocontend
with market concerns about the fragility of the financial system. Progress in
reducing the federal deficit remains slow even abstracting from the mounting costs
ofthe thrift rescue. Togetherwith low personal saving and a generally high level of