THE WHITE HOUSE

Office of the Press Secretary

             PRESIDENT CLINTON and VICE PRESIDENT GORE'S 
                         NEW BUDGET FRAMEWORK 

The President's New Framework has Six Key Components:

1. Balances the budget each year without using Social Security funds.
2. Creates a new Social Security lockbox that keeps Social Security solvent until 2053.
3. Keeps Medicare solvent for over 25 years while adding a new prescription drug benefit.
4. Establishes a Children and Education Trust Fund, while protecting military readiness, education, environment, agriculture, veterans affairs and core government.
5. Calls for USA Accounts -- the largest and most progressive tax relief plan for savings - and targeted tax credits for childcare, long-term care, school construction, new markets investment, and aiding disabled Americans in the workplace.
6. Eliminates debt held by the public by 2015.

A New Social Security Lockbox Strengthens Solvency and Doubles Protection Against Diverting Social Security Resources

• The President, in the State of the Union Address, called for saving the entire amount of the Social Security surplus over the next 15 years for debt reduction and higher returns for Social Security.
• Building on that proposal the President is calling for a new lockbox that provides double protection for Social Security by: (1) ensuring that each year all payroll taxes go to savings and debt reduction for Social Security; and (2) that after a decade of debt reduction from the Social Security lockbox, the interest savings resulting from the debt reduction will be dedicated to lengthening the solvency of Social Security instead of being diverted to other uses.

The President's Plan is the First Budget Proposal that Calls for Balancing the Budget Each Year -- Without Using Social Security Surpluses -- While Strengthening the Solvency of Social Security and Medicare and Still Leaving Resources for Military Readiness, Key Investments in People and Communities, and Significant Tax Relief

• The Republican Budgets sought to answer the President's call to save the surplus for Social Security by setting aside the entire Social Security Surplus. Yet, they (1) failed to lengthen the solvency of Social Security by even a single day; (2) failed to dedicate any resources to strengthening the solvency of Medicare; and (3) called for discretionary budgets that would have resulted in severe cuts in such key priorities as law enforcement, education, health, and environment.

Maintains Commitment to Strengthening Social Security and Medicare First, While Eliminating Our Publicly Held Debt by 2015

• The President's framework continues its commitment to pay down the debt for Social Security and Medicare first before making commitments to spending or new tax cuts. The framework extends Social Security solvency into the second half of the next century and we expect an even greater extension of Medicare than we expected in February -- to at least 2025.
• Between 1981 and 1992, the publicly held debt quadrupled. As a result of new fiscal discipline that has occurred since 1993, the publicly held debt as a percent of GDP has dropped from 50 percent in 1993 to 44 percent in 1998. Under the President's framework to save Social Security, the publicly held debt will be eliminated by 2015.

                       SOCIAL SECURITY LOCK BOX 
            PROTECTS TRUST FUNDS AND STRENGTHENS SOLVENCY

Building on a Commitment To Save Social Security First: In the State of the Union Address, the President called for locking the entire amount of the Social Security surplus over the next 15 years for debt reduction and higher returns for Social Security. Stronger budgetary numbers now allow us to lock in the entire amount of the Social Security surplus each and every year, while still maintaining enough funding to strengthen and extend the solvency of Medicare, make needed discretionary investments, and provide targeted tax cuts.

A Basis To Build On: While the President's framework extends Social Security solvency to 2053, he remains committed to working together with Congress in a bi-partisan fashion to enact reforms to make Social Security solvent for 75 years.

The President therefore calls for a new Social Security lock box that:

• ensures that each year all payroll taxes go to savings and debt reduction for Social Security;
• after a decade of debt reduction from the Social Security lock box, dedicates the interest savings resulting from that debt reduction to extend the solvency of Social Security; and
• provides the basis for bipartisan agreement on debt reduction and Social Security.

How the Social Security Lock Box Would Work:

(1) All current-law Social Security surpluses - an estimated $3.1

     trillion -- would be devoted solely to debt reduction and national
     savings.

(2) As an added protection, the receipts and outlays of the Social

Security Trust Fund would be taken out of the budget.

(3) There will be tough protections, including maintaining the pay/go

     rules to ensure that the Social Security surpluses can not be used
     for any purpose other than Social Security.

(4) After a decade of fiscal responsibility, annual interest savings

     from that cumulative debt reduction would be transferred to the 
     Social Security Trust Fund, instead of being diverted to other 
     spending and tax priorities.  For example, by 2011 we will have 
     reduced the debt by a projected $2.1 trillion, yielding projected 
     interest savings in that year of $107 billion.  This amount will 
     be transferred to Social Security.

THE MID-SESSION REVIEW AND MEDICARE

Challenges Facing Medicare: Medicare is one of our most successful public programs, providing critical health care services to our nation's elderly and people with disabilities. Medicare faces serious challenges, however, in the next century.

• Demographic explosion: Enrollment will double between 1999 (39 million) and 2032 (78 million) as the baby boom generation retires. Not only will there be more elderly, but they will live longer, spending a greater amount of their lives on Medicare.
• Advances in medicine and health: Changing disease patterns, technological advances, and a high value placed on health will also affect Medicare in the next century. As a result, both Medicare and private health spending growth per person are projected to increase at rates considerably above general inflation.

President's Commitment to Strengthening and Improving Medicare: The President has an unparalleled record of strengthening and improving Medicare. When he took office, the Medicare Hospital Insurance (HI) Trust Fund was projected to be bankrupt this year -- 1999. Today, because of improvements enacted in the President's 1993 budget plan and the bipartisan 1997 Balanced Budget Act, the Trust Fund is projected to be solvent through 2015 and the Medicare spending growth rate per beneficiary is below that of private health spending in the next few years.

Plan to Strengthen and Improve Medicare for the 21st Century: Despite this impressive improvement, Medicare is still projected to become insolvent shortly after the baby boom generation retires. Equally as important, Medicare benefits and payment systems still, in large part, reflect the best practices of the 1960s when Medicare was created.

• To address these challenges, the President will submit a proposal that will: (1) make Medicare more competitive and efficient; (2) modernize and reform Medicare's benefits, including the provision of a long-overdue prescription drug benefit; and (3) make an unprecedented long-term financing commitment to the program that, in the context of the President's reform plan, will significantly extend the life of the Medicare Trust Fund.

Today, the President Renews and Extends the Commitment He Made in the State of the Union Address. This framework renews the commitment to dedicating 15 percent of the unified budget surplus to Medicare. Over the 15-year window covered by the President's Framework, more than $700 billion would be dedicated to strengthening and extending the solvency of Medicare - more than the $686 billion from the budget since the surplus has increased.

• Under the latest projections, this would push the forecasted date of insolvency back to later than 2025.

              PRESIDENT CLINTON AND VICE PRESIDENT GORE:               
              WORKING TO HELP CHILDREN AND EDUCATION IN               
                           THE 21ST CENTURY                           
                    AND INVEST IN A SECURE FUTURE                     

Investing in Our Future: A Children and Education Trust Fund: President Clinton's and Vice President Gore's growth and productivity agenda calls for not only significant debt reduction to spur private investment, but also public investment in a secure future and in the skills, education, and health of our youth to ensure that they can graduate from school with the real competencies needed for the workforce.

This is why, even though since 1993, the deficit has been eliminated, funding in Head Start has increased 67 percent, and participation in WIC has increased 30 percent, the President and Vice President are today going further to propose a Children and Education Trust Fund.

Elements of the Trust Fund:

• It dedicates $156 billion in outlays from fiscal years 2001 to 2014 to improve the health and education of children in the opening years of the 21st Century.
• These resources will be in addition to and provide increments above the discretionary levels provided for in the 1997 Balanced Budget Act. Regular appropriations will separately provide at least those base levels.
• The President wants to work with Congress to develop the appropriate allocations among major education and health programs for children.

Programs Included: Among the programs whose resources could be augmented by the Trust Fund are: Head Start, Title I - Education for the Disadvantaged, After-school programs, Class Size Reduction, the Safe Schools/Health Students initiative, Special Education, Pell Grants, Maternal and Child Health Block Grant, childhood immunizations, research on children's health, the Women, Infant and Children Supplementary Nutrition Program, and other education and health programs.

Illustrative Benefits: By way of illustration, this fund could:

• help reach the goal of 1 million Head Start opportunities for low-income children;
• raise the quality of education available to all children through reducing class sizes in the early grades by hiring 100,000 qualified new teachers;
• triple the number of communities that develop and implement comprehensive strategies for ensuring safe and drug-free schools and promoting healthy childhood development; and
• provide primary health care and support services for over 5,000 families living with HIV.

Investing in a Secure Future: The Trust Fund will allow this needed investment while maintaining military readiness ($183 over 15 years), and investing in crime prevention, agriculture, veterans, environmental protection, health research, protecting Americans at home and abroad, and other priorities (($183 over 15 years).

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