By Josh Zumbrun 

President Donald Trump's first official economic report to Congress makes a lengthy case that the U.S. economy has been weak in recent years, not because of the severity of the most recent recession, but because of policy mistakes by Mr. Trump's predecessor.

"The stagnation of America's middle class in the wake of the recession is much worse than believed, and government policy under President Obama should share some of the blame," said Kevin Hassett, the chair of the Council of Economic Advisers, the lead author of the report and the president's top economist. "One explanation for this historical slowdown is that Obama's tax and transfer policies worsened the wound."

The nearly-600 page Economic Report of the President, released Wednesday, is the most detailed analysis of the economy and economic policy by Mr. Trump's staff. By reversing the Obama administration policies, the report argues, the economy will be able to grow 3% a year over the next decade.

"In recent years, the pursuit of alternative policy aspirations at the expense of growth has imposed real economic costs on the American people, in the form of diminished opportunity, security, equity, and even health, " the report said.

Mr. Hassett said the report is also critical of other administrations, noting that trade deals of recent decades were "filled with concessions that relatively feckless negotiators of the past made to our trading partners."

In chapters on taxes, regulation, labor market policies, infrastructure, trade, health and cybersecurity, the Trump administration argued that its policies would provide modest boosts to gross domestic product that, when added up, would be sufficient to shift output onto a higher trajectory over the next decade.

The report repeated an estimate, disputed by Democrats, that recently passed tax legislation will increase average annual household income by $4,000.

Jason Furman, who was chairman of the CEA under President Barack Obama, said the reports' own data undercuts many of its points.

Mr. Furman pointed to data in the report showing that productivity growth had slowed down even more sharply in other advanced economies, and was not a U.S. specific phenomenon. "If anything, this demonstrates the relative strengths of economic policy-making in the Obama administration," Mr. Furman said.

The report reopens the debate on why the labor-force participation rate, defined as the share of Americans working or looking for work, had declined in recent years.

It concluded that while the retirement of the oldest members of the baby boomer generation is reducing the labor-force participation rate, half the decline since the fourth quarter of 2007 has been accounted for by nondemographic factors. The report singled out government transfer payments, such as unemployment insurance, food stamps and disability insurance, as programs that contributed to people remaining out of the labor force.

Mr. Obama's CEA released a report in 2014 arguing that only one-sixth of the decline in labor-force participation could be attributed to factors other than demographics and recovering from a deep recession.

Mr. Furman said Wednesday that data included in the new CEA report show that the decline in labor-force participation, for prime-age men, had been declining since at least 1970. "That is at odds with the report's attempt to pin the blame on Obama's policies," Mr. Furman said.

Mr. Trump's CEA said the volume of regulations under Mr. Obama had reduced growth and raised the amount of time spent complying with regulations from 8.8 billion hours in 2010 to 9.8 billion in 2015. It mentioned environmental and labor regulations as among those that had been particularly detrimental, and said financial regulations had grown needlessly complex.

The CEA also noted that the previous administration's focus on expanding health insurance coverage had ignored the importance of health issues beyond insurance, such as drug abuse, poor diets that lead to obesity and smoking.

Write to Josh Zumbrun at Josh.Zumbrun@wsj.com

(END) Dow Jones Newswires

February 21, 2018 13:28 ET (18:28 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.