THE CLINTON/GORE RECORD ON FISCAL DISCIPLINE:
THE LARGEST DEBT REDUCTION ON RECORD
August 2, 1999
Today, We Learned That We Will Pay Down $87 Billion in Publicly Held
Debt this Fiscal Year - The Largest Pay Down on Record. In the Last Two
Years, We Have Paid Down $142 Billion in Publicly Held Debt.
The Largest Debt Pay Down On Record. We have reduced publicly held debt
approximately $87 billion this fiscal year* - the largest on record
after adjusting for inflation. In the last two years, we have paid down
$142 billion in debt. Since its peak of $3.830 trillion in March of
1997, we will pay down the debt to $3.638 trillion this quarter.
The publicly held debt is now $1.7 trillion less than was projected in
1993 when President Clinton took office.
In 1993, the debt held by the public was projected to rise to $5.38
trillion by 1999, representing 61 percent of GDP, rather than the actual
current $3.64 trillion or 41 percent of GDP, that is $1.74 trillion less
As a result of President Clinton's fiscal discipline, the publicly
held debt has dropped from 50 percent of the nation's economy in 1993 to
41 percent now. Under the President's framework to save Social Security
and strengthen Medicare, the publicly held debt will be eliminated by
2015. The last time the nation was debt free was during the
administration of President Andrew Jackson in 1835.
Real Benefits for American Families and Businesses and a Stronger
Economy Overall. President Clinton's and Vice President Gore's policy
of fiscal discipline has turned our fiscal situation around, and has
changed our task from financing a deficit to managing a surplus. As a
result of this achievement, the Clinton/Gore Administration has already
begun to pay down the nation's debt. This debt reduction means real
benefits for American families and businesses and will help fuel
sustained economic growth.
Lower Interest Rates Provide the Effect of a $2,000 Tax Cut to
Families with a $100,000 Mortgage. Because of the debt reduction,
interest rates will ultimately be lower by an estimated 2.5 percentage
points or more. For a family with a home mortgage of $100,000, that's a
savings of more than $2,000 per year in mortgage payments -- in other
words, families would have a "stealth tax cut" of more than $2,000 per
year because of President Clinton's strategy of maintaining fiscal
discipline. There will be comparable savings on typical car payments
and credit card loans.
Cutting the National Debt Will Lower the Federal Government's Interest
Payments and Make Us Better Able to Respond to Economic Events. When
President Clinton took office, interest payments on the publicly held
federal debt were projected to eat up 27 cents of every budget dollar by
the year 2014. Under the President's proposal, interest payments would
be negligible (two-tenths of a cent) by 2014. This will free up
productive business investments to help our nation sustain its economic
growth. It will also leave the Federal Government more flexibility to
deal with national contingencies. With lower debt or no debt at all,
our nation will be better prepared to respond to the aging of the baby
boom, economic slowdowns, and other contingencies.
Lower Debt Will Help Maintain Long Term Economic Growth. Lower
interest rates encourage more business investment. In the last six
years of responsible budgeting, inflation adjusted investment in plant
equipment has surged, reaching a post World War II record as a share of
GDP. More investment means a broader productive base for the economy,
higher productivity and higher wages, and thus greater prosperity.
Now Is Not The Time To Change Course. The House just passed tax
proposals that would generate $3 trillion in costs from the tax plan in
the second ten years.
The House Republican tax-cut package disguises the fact that it
explodes after 10 years, costing roughly $3 trillion from 2010 to 2019.
After including the resulting interest costs, the plan would cost more
than $5 trillion over 20 Years: The cost of the tax cut is $792 in the
first 10 years and about $3 trillion in the next 10, and the interest on
the additional debt will cost about $1.6 trillion over 20 years, for a
combined total of about $5.5 trillion over 20 years.
Public debt pay down is less than the projected surplus due to
borrowing to support direct loan financing accounts (primarily student
loans) and the change in the government's cash balances.
Note: The $14 billion pay down this quarter consists of $11 billion pay
down of marketable debt and a $3 billion pay down of non-marketable debt
(savings bonds, etc.) announced by Treasury today.