The White House

Office of the Press Secratary

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|                   THE LARGEST SURPLUS IN HISTORY                     |
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|                        September 27, 1999                            |
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Turning Around Decades of Deficits to Achieve a Budget Surplus of At Least $115 Billion - the Largest Surplus Ever. 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, the Administration estimates that we will have a surplus of at least $115 billion, the largest dollar surplus in history.

• Largest dollar surplus ever, even after adjusting for inflation. The at least $115 billion surplus in 1999 is the largest dollar surplus in American history, breaking the record $69 billion surplus last year. Even after adjusting for inflation, it is still the largest surplus in American history.
• Largest surplus as a share of the economy since 1951. The surplus is expected to be about 1.3 percent of GDP - the largest on this basis since 1951.
• The first back-to-back surpluses since 1956-57. The 1999 surplus of at least $115 billion is the second year in a row of surplus, following a $69 billion surplus in 1998. The last time the Nation had two consecutive budget surpluses was in 1956-57.
• Seven years in a row of fiscal improvement -- the first time in U.S. history. Reaching a surplus in 1999 marks the seventh consecutive year of improved fiscal balance - extending what was already the longest period of sustained fiscal improvement in American history.

Spending Restraint Has Been Key to Ushering in an Era of Surpluses

• Federal spending smallest share of economy since 1974. The spending restraint under President Clinton has brought spending down from 22.5 percent of GDP in 1992 to less than 19.3 percent of GDP in 1999. As a share of the economy, spending has declined every year under President Clinton and is now the lowest in a quarter century. In fact, Federal spending as a percentage of the economy has been lower in every year for which President Clinton submitted a budget than it was for any year under either of the two preceding Administrations. At the same time, President Clinton has increased investments in education and other vital areas for growth.
• Discretionary spending down under President Clinton and up under the previous two Administrations. Real discretionary spending has fallen by more than 1/2 percent per year under President Clinton; from 1980 to 1992, real discretionary spending increased 1.0 percent per year.

These Surpluses Have Led to Debt Reduction and Helped Strengthen of the Economy.

• In 1992 the deficit was $290 Billion and projected to rise to more than $400 billion this year. In January 1993, the Congressional Budget Office projected that the deficit would reach $404 billion in 1999. Instead, as a result of the decisive action the President took in 1993 and 1997, the budget is actually in surplus by more than $115 billion - implying a total improvement relative to the forecast of more than $519 billion in 1999 alone.
• The debt held by the public is $1.7 trillion lower than was projected when the President took office. In 1993, the debt held by the public was projected to balloon to $5.4 trillion by 1999, reaching 61 percent of GDP. Instead, shrinking deficits and a surplus in the last two years have brought the debt down to $3.6 trillion, which is only about 41 percent of GDP.

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 interest rates provide the effect of a $2,000 tax cut to families with a $100,000 mortgage. Because of this policy of debt and deficit reduction, it is estimated that a family with a home mortgage of $100,000 might expect to save roughly $2,000 per year in mortgage payments - in other words, families would have an effective tax cut of roughly $2,000 per year in lower interest costs because of President Clinton's strategy of maintaining fiscal discipline. Interest payments on car payments and credit cards are also lower than they would have been without fiscal discipline.
• Lower debt will help maintain long-term economic growth. Lower interest rates encourage more business investment. Interest rates are lower than they would have been otherwise, helping to fuel a 12.4 percent real annual increase in producers durable equipment investment since 1993 - the sixth year in a row of double digit growth. This compares to 3.4 percent annual growth from 1981-92, a period that saw the debt quadruple.
• Rising investment has contributed to a pickup in labor productivity. Output per hour in the non-farm business sector has grown at a 2.1 percent average annual rate for the last four years and 2.8 percent over the last year alone, a substantial increase from the trend rate of growth of 1.3 percent that prevailed from the 1970s through the early 1990s.

Under the President's Framework to Save Social Security and Strengthen Medicare, the Publicly Held Debt Is Projected to be Eliminated by 2015. The last time the nation was debt free was during the administration of President Andrew Jackson in 1835.

• Interest payments would be eliminated. Currently we spend about 13 cents of every Federal dollar on interest payments. These payments, which were once projected to grow to 28 percent of all federal spending in 2015, would be eliminated under the President's plan.
• Prepare for the retiring baby boomers. Paying off the debt will free up funds for investment, help keep interest rates low, and boost workers' productivity and incomes. This fiscal discipline is the best way to prepare the government, and the Nation, to meet the challenge of the retiring baby boomers.