THE WHITE HOUSE
Office of the Press Secretary
PRESIDENT CLINTON AND VICE PRESIDENT GORE: FROM AN ERA OF DEFICITS TO AN ERA OF SURPLUSES -- AN ESTIMATED BUDGET SURPLUS OF $39 BILLION IN 1998 May 26, 1998
Today, President Clinton and Vice President Gore Announce An Historic Achievement: After Years of Escalating Deficits, The Office of Management and Budget (OMB) Now Projects The Budget Surplus Will Reach $39 Billion This Year. The key findings of the OMB's Mid-Session Review of the 1999 budget are:
Instead of $357 Billion Deficit, $39 Billion Budget Surplus This Year. When President Clinton and Vice President Gore took office, the Congressional Budget Office (CBO) projected the deficit to be $357 billion this year and heading higher; now, the Administration projects the surplus to be $39 billion this year and growing bigger.
$39 Billion Surplus -- The First in A Generation. In 1992, the deficit was $290 billion -- the biggest dollar deficit in American history. This year, OMB now projects the surplus to be $39 billion -- the first in a generation (1969) and the biggest dollar surplus in American history. As a share of GDP, the budget surplus would be 0.5 percent this year -- the largest since 1957.
Six Years in A Row of Fiscal Improvement -- The First Time in U.S. History. Reaching a surplus in 1998 marks the sixth consecutive year of improved fiscal balance -- the longest period in American history.
Surplus Estimated To Reach Nearly $150 Billion By 2002. President Clinton promised to balance the budget by 2002. The budget will be balanced this year -- four years ahead of schedule -- and the surplus is expected to hit $148 billion in 2002 -- part of what would be the longest and largest sustained debt reduction in our history. And, instead of the $579 billion deficit projected by CBO for 2002, we now project a surplus of $148 billion -- a $727 billion swing.
While Producing the Smallest Government in A Quarter Century, President Clinton Has Expanded Critical Investments in the Future. President Clinton's 1993 Economic Plan included $255 billion in spending cuts over five years -- more than half of the total deficit reduction package. As a result, federal spending as a share of the economy has declined for each of the past six years and is now the lowest in 24 years. However, as spending has been cut in lower priority areas, President Clinton has dramatically increased funding in critical areas, such as education and training, children, the environment, health care, and research and development.
While Eliminating The Budget Deficit, President Clinton Has Provided Tax Relief for Middle-Income Families. Because of the tax cuts for working families signed into law by the President in 1993 and 1997, the typical American family of four will face the lowest federal tax burden in more than two decades (1976). President Clinton proposes to build off this record to provide additional targeted tax relief for child care, education, and the environment.
We Can Not Turn Back: We Have Fixed The Fiscal Deficit, Now We Need To Fix The Generational Deficit. In the State of the Union, President Clinton said that any projected budget surpluses should be reserved until Social Security is reformed. Today's achievement of the first balanced budget in three decades makes President Clinton's call even more timely. President Clinton will oppose any budget that fails to set aside surpluses until we have strengthened Social Security for the 21st century.
For America's Working Families, The Improved Fiscal Situation Means Lower Mortgage Rates And A Brighter Economic Future. Here's what the improved fiscal situation means to typical families:
Lower Deficits Mean a Lower National Debt -- $25,000 Less Debt for a Family of Four. The national debt will be $1.7 trillion lower in fiscal year 1999 than projected in 1993 -- that's $25,000 less debt for each family of four in America.
Lower Deficits Mean Lower Interest and Mortgage Rates -- Saving Families Thousands. Over the past six years, the government's share of total borrowing in U.S. credit markets has fallen to 6 percent from nearly 60 percent -- which, according to the Wall Street Journal (5/7), has played a "major role" in keeping down interest rates. According to the New York Times and Money magazine, lower mortgage rates have saved the 10 million families who refinanced their home mortgages $1,000 to $2,000 per year, on average. [Source: New York Times, 8/3/96; Money, 8/96]
Lower Mortgage Rates Mean Higher Homeownership. Lower mortgage rates -- along with higher family incomes, faster job growth, and the President's National Homeownership Strategy -- have helped raise the national homeownership rate to its highest level in American history. [Source: Bureau of the Census.]
Lower Interest Rates Mean Faster Business Investment Growth. Under President Clinton, real business investment growth has averaged 12.2 percent -- the fastest since John Kennedy was President. [Source: Bureau of Economic Analysis, Department of Commerce.]
Faster Business Investment Growth Means Faster Economic Growth and More Jobs. Faster business investment growth helps expand capacity and has led to faster economic growth and more jobs under President Clinton. Since President Clinton took office, the private sector of the economy has grown 3.7 percent per year -- far stronger than under President Reagan (3.0 percent per year), the economy has added 15.2 million new jobs, and unemployment has fallen to 4.3 percent -- the lowest in 28 years. [Source: Based on data from the Bureau of Economic Analysis, Department of Commerce, and Bureau of Labor Statistics.]
Experts Agree That President Clinton's 1993 Economic Plan Helped Cut the Deficit, Lower Interest Rates, Spur Business Investment, and Strengthen the Economy. The economy and the budget are now working in a virtuous circle -- lower deficits have led to lower interest rates which have led to faster business investment which led to faster growth which led to even lower deficits. Experts agree that President Clinton's 1993 Economic Plan helped create this virtuous circle.
Alan Greenspan, Federal Reserve Chairman, 2/20/96: The deficit reduction in the President's 1993 Economic Plan was "an unquestioned factor in contributing to the improvement in economic activity that occurred thereafter."
Business Week, 5/19/97: "Clinton's 1993 budget cuts, which reduced projected red ink by more than $400 billion over five years, sparked a major drop in interest rates that helped boost investment in all the equipment and systems that brought forth the New Age economy of technological innovation and rising productivity."
Goldman Sachs, March 1998: One of the reasons Goldman Sachs cites for "the best economy ever" is that "on the policy side, trade, fiscal, and monetary policies have been excellent, working in ways that have facilitated growth without inflation. The Clinton Administration has worked to liberalize trade and has used any revenue windfalls to reduce the federal budget deficit."
U.S. News & World Report, 6/17/96: "President Clinton's budget deficit program begun in 1993... [led] to lower interest rates, which begat greater investment growth (by double digits since 1993, the highest rate since the Kennedy administration), which begat three-plus years of solid economic growth averaging 2.6 percent annually, 50 percent higher than during the Bush presidency."
Paul Volcker, former Federal Reserve Chairman, Audacity, Fall 1994: "The deficit has come down, and I give the Clinton Administration and President Clinton himself a lot of credit for that... and I think we're seeing some benefits."
Fortune, 10/3/94: "[The President's 1993] economic plan helped bring interest rates down, spurring the recovery."