THE WHITE HOUSE
Office of the Press Secretary
PRESIDENT CLINTON URGES FISCAL DISCIPLINE AND DEBT REDUCTION August 4, 1999
Today in the Rose Garden, President Clinton will urge Congress to maintain the fiscal discipline that has helped eliminate the budget deficit and usher in a new era of prosperity. He will reiterate his staunch opposition to a GOP tax plan that will undo that fiscal discipline and imperil our prosperity. The President has championed an approach that puts Social Security and Medicare first by paying down the debt, while also providing a $250 billion tax cut for working Americans.
Lower Interest Rates Provide the Effect of a $2,000 Tax Cut to Families with a $100,000 Mortgage. Because of debt reduction, it is estimated that a family with a home mortgage of $100,000, would save roughly $2,000 per year in mortgage payments -- in other words, families would have a "stealth tax cut" of roughly $2,000 per year because of President Clinton's strategy of maintaining fiscal discipline. There will also be significant savings on typical car payments and credit card loans.
The Largest Debt Pay Down On Record. On Monday, the Treasury Department announced that we will pay down $87 billion in publicly held debt this fiscal year. That is the largest pay-down of debt on record. Over the last two years, we have paid down $142 billion* in publicly held debt. Since its peak of $3.830 trillion in March of 1997, we will pay down the debt to $3.638 trillion this quarter.
Dramatic Change of Course on Debt. 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 than projected. 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 entirely eliminated by 2015. The last time the nation was debt free was during the administration of President Andrew Jackson in 1835. New Tools to Reduce the Debt. Today, the Treasury Department has
proposed new steps to help us manage federal finances in a new era of budget surpluses. They would give the government the same kind of tools -- the same kind of flexibility -- that families and companies have in managing their own finances. They would, in effect, allow us to refinance our debt and pay it down on the best terms possible -- saving taxpayers billions of dollars in the process.
Creating a Stronger Economy and Real Benefits for America's Families. President Clinton 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 continue sustained economic growth.
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.
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.