THE WHITE HOUSE
Office of the Press Secretary
PRESIDENT CLINTON: CLOSING THE BOOK ON AN ERA OF DEFICITS -- THE FIRST BUDGET SURPLUS IN A GENERATION September 30, 1998
President Clinton Closes The Book On A Generation of Deficits. In 1993, President Clinton put in place a three-part economic strategy to cut the deficit to help reduce interest rates and spur business investment; to invest in education, health care, and technology so that America was prepared to meet the challenges of the 21st century; and to open markets abroad so that American workers would have a fair chance to compete and win across the globe. Today, America's fiscal house is in order. After three decades of budget deficits, today marks the final day of fiscal year 1998 -- the first year the United States government will record a budget surplus since 1969.
Instead of $357 Billion Deficit, About $70 Billion Surplus This Year. When President Clinton took office, the Congressional Budget Office (CBO) projected the deficit to be $357 billion this year; using preliminary information, the Administration expects the surplus to be about $70 billion this year. (The final numbers will be available at the end of October.)
The First Surplus in A Generation. In 1992, the deficit was $290 billion -- the biggest dollar deficit in American history. This year's expected surplus of about $70 billion is the first in a generation (1969) and the biggest dollar surplus in American history. As a share of GDP, the budget surplus would be almost one percent this year -- the largest since the 1950s.
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 all of American history.
Surplus Estimated To Reach $150 Billion By 2002. President Clinton promised to balance the budget by 2002. The budget is not only balanced this year -- four years ahead of schedule -- but is in surplus. Instead of the $579 billion deficit for 2002 projected by CBO in 1993, the Administration projected in May 1998 a surplus of $148 billion for 2002 -- a $727 billion swing.
While Cutting Federal Spending To Its Lowest As A Share of the Economy in a Quarter Century, President Clinton Has Expanded Critical Investments in the Future, Such As Education and Training. 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 6 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 President Clinton, the typical American family of four will face the lowest federal tax burden in over two decades (since 1976). President Clinton proposes to build upon this record to provide additional targeted, paid-for tax relief for child care, education, pensions, affordable housing, and the environment.
We Cannot Turn Back: We Have Fixed The Fiscal Deficit, Now We Need To Fix The Generational Deficit. In his State of the Union address, 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 spending or tax proposal 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 -- $17,000 Less Debt for a Family of Four. The national debt is $1.2 trillion lower now than projected by CBO in 1993 -- that's over $17,000 less debt for each family of four in America.
Lower Deficits Mean Lower Interest and Mortgage Rates -- Saving Families Thousands. Because deficits have disappeared, the government's share of total borrowing in U.S. credit markets has been eliminated, from nearly 60 percent just six years ago. According to the Wall Street Journal (5/7), this has played a "major role" in keeping down interest and mortgage 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-$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 (66.0 percent). [Source: Bureau of the Census.]
Lower Interest Rates Mean Faster Business Investment Growth. Under President Clinton, real business productive investment growth has averaged 12.8 percent annually-- the fastest since John F. Kennedy was President. [Source: Bureau of Economic Analysis, Department of Commerce.]
Lower Interest Rates Mean More New Small Businesses. With lower interest rates, more people are investing in starting small businesses. As a result, in each of the last five years, we have had a record number of new small businesses. [Source: Dun & Bradstreet]
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 3.9 percent per year -- far stronger than under President Reagan (3.0 percent per year), the economy has added 16.7 million new jobs, and unemployment has fallen to 4.5 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."
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] economic plan helped bring interest rates down, spurring the recovery."