THE CLINTON-GORE ADMINISTRATION'S BUDGET FRAMEWORK
Table of Contents
The Clinton-Gore Administration's Budget Framework
President Clinton Makes a Constructive Offer to Address Priorities
for American Families in a Framework of Fiscal Discipline
Taking Medicare Off-budget and Dedicating the Resulting Interest
Savings to Extend Its Solvency
Improving the President's Medicare Prescription Drug Benefit and
A1. The Clinton-Gore Administration: Paying Off the Debt By 2012
A2. The Clinton-Gore Economic Record: What a Difference Seven Years
THE CLINTON-GORE ADMINISTRATION'S BUDGET FRAMEWORK
The Clinton-Gore Administration's budget framework continues the
three-part strategy put in place at the beginning of the Administration:
getting our fiscal house in order and keeping it that way, investing in
people, and opening markets abroad. This strategy has helped foster the
longest economic expansion in history, contributing to the lowest
unemployment rate in over thirty years.
Specifically, the budget framework would make investments in key
priorities while putting America on track to eliminate the debt by 2012
-- one year earlier than projected in the February budget.
The Six Key Elements of the Clinton-Gore Administration's Budget
Pay off the debt by 2012
Take Medicare off-budget as the next step in locking in fiscal
discipline and debt reduction
Extend the solvency of Social Security to at least 2057 and
Medicare to at least 2030
Improve the President's prescription drug benefit and health
care provider payments
Establish a $500 billion Reserve for America's Future
Invest in key priorities like education, expand health coverage,
and provide targeted tax relief
(1) Pay off the debt by 2012. The President has a fiscally responsible
plan to pay off the debt held by the public by 2012, one year earlier
than was projected in the February budget.
The $211 billion unified surplus this year will be the largest on
record. In 1992 the deficit was a record $290 billion and the
Congressional Budget Office projected that it would rise to $455 billion
in 2000. Instead, this year the projected surplus is a record $211
billion -- a $666 billion improvement relative to forecast in this one
The on-budget account will be in surplus for the first time since
Medicare was established. In 2000, the on-budget surplus, excluding
both Social Security and Medicare, is projected to be $39 billion. This
is the only surplus on this basis since the Medicare program was
established in 1965.
Debt held by the public will have been paid down by the largest amount
in history: $324 billion. In 1998 and 1999, the debt held by the
public was reduced by $140 billion. OMB is projecting that the
government will pay down an additional $184 billion in debt held by the
public this fiscal year. That will bring the total debt pay-down to
$324 billion -- the largest three-year debt pay-down in American
history, and almost 9 percent of the total in public hands as of the end
of fiscal year 1997.
The President's plan would lock in $2.9 trillion of debt reduction
between now and 2010 and eliminate the debt by 2012. The President
proposes to save the entire Social Security surplus, $2.3 trillion over
10 years, and devote it to paying down the debt held by the public. In
addition, he proposes to save the entire Medicare surplus, $403 billion
over 10 years, and devote it to debt reduction. He also proposes to
further reduce the debt held by the public by dedicating a portion of
the on-budget surplus, based on the interest savings from these
policies, to the solvency of Social Security and Medicare. Over the
next decade these policies would dramatically reduce the debt held by
the public by $2.9 trillion; the remaining debt held by the public would
be eliminated by 2012.
The President's plan would eliminate net Federal interest expenses.
Currently the Federal government spends 12 cents of every dollar on net
interest payments. These payments, which were once projected to grow to
25 percent of all federal spending in 2012, would be completely
eliminated by that date under the President's plan.
(2) Take Medicare off-budget as the next step in locking in fiscal
discipline and debt reduction. Following the leadership of Vice
President Gore, President Clinton is proposing to take Medicare Part A
off-budget. This would mean that the projected $403 billion Medicare
surplus will be off-budget, like the Social Security surplus, and
therefore, no longer counted as part of the funds available for other
purposes. Under this plan, the Medicare surplus will be dedicated to
paying down the publicly held debt to help strengthen the life of the
Building on our progress with Medicare. In 1993, the Medicare Trust
Fund was projected to be exhausted in 1999. The latest estimates by the
Medicare Trustees push the exhaustion date back to 2025. The Medicare
surplus has grown from $4 billion in 1993 to $24 billion in 2000. This
makes taking Medicare off-budget the next logical step in the
Clinton-Gore Administration's fiscal discipline and Medicare policies.
(3) Extend the solvency of Social Security to at least 2057 and Medicare
to at least 2030. The President would ensure that the benefits of the
debt reduction that are due to Social Security and Medicare are used to
extend their solvency by:
Protect Social Security and Medicare surpluses. The President
proposes to protect the Social Security and Medicare surpluses from
being spent on other purposes, locking them away to pay down the debt.
Make transfers based on the interest savings achieved by locking away
the surpluses. The President proposes to go one step further to ensure
that Social Security and Medicare receive the benefit of locking away
their surpluses for debt reduction. According to the Social Security
actuaries, the President's plan would extend the solvency of Social
Security to at least 2057. The President's proposed Medicare solvency
transfers, together with the President's proposals to increase
competition and reduce fraud, extend the solvency of Medicare to at
Republican so-called "lockboxes" do not add a single day to the life
of Social Security or Medicare. Because they would not add any new
resources to Social Security or Medicare, the Republican so-called
"lockboxes" would not extend the life of Social Security by a single
day. Furthermore, they have "trap doors" that would allow these
surpluses to be used for other purposes.
(4) Improve the President's Medicare prescription drug benefit and
provider payments. The framework allocates a net $264 billion over ten
years for Medicare prescription drug benefits and other reforms (with an
additional $115 billion in Medicare solvency transfers that go to debt
reduction). The President will improve his voluntary and affordable
Medicare prescription drug benefit by specifying that no Medicare
beneficiary will pay more than $4,000 in out-of-pocket drug costs;
maintaining the beneficiary premium at the same level even with the
enhanced benefit; starting the program one year earlier; and providing
immediate payments to managed-care plans to provide a prescription drug
benefit, for a total cost of $253 billion over 10 years. The President
is also proposing $40 billion over ten years to further mitigate the
impacts of the Balanced Budget Act of 1997 reductions for Medicare and
Medicaid providers. Finally, the President's proposal maintains the key
elements of the Administration's Medicare reform plan, such as the
increased competition and anti-fraud provisions from the February
budget, saving $29 billion over 10 years.
(5) Establish a $500 billion Reserve for America's Future. The
framework sets aside $500 billion over ten years that could be used for
key national priorities, such as retirement savings, additional targeted
tax cuts, investments in education, research, health and the
environment, or further debt reduction. There are always uncertainties
in budget and economic projections, especially when they cover a long
period into the future. This reserve provides a margin of insurance:
if the surplus is not as large as projected, then any use of the reserve
could be reduced. The allocation of the reserve should be subject to a
full debate over national priorities this year, given the competing
visions of the use of these funds.
(6) Invest in key priorities like education, expand health coverage, and
provide targeted tax relief. The President's budget framework maintains
his commitment to his proposals from the February budget including:
Invest in priorities. The President's framework maintains the FY2001
budget proposals for specific, detailed policies to address the Nation's
priorities in national defense, education, law enforcement, the
environment, and veterans programs. These policies are part of an
overall fiscally prudent level of spending.
Expand health insurance for working Americans. The President's budget
invests $110 billion over 10 years in a number of policies that would
efficiently extend coverage to an additional 5 million uninsured
Americans and expand access to millions more by building on current
options. Together with the State Children's Health Initiative enacted in
1997, up to 10 million uninsured people could be covered.
Provide targeted tax relief for American families. The President's
February budget made detailed proposals for $359 billion of gross tax
cuts over 10 years -- of which $263 billion are paid for out of the
surplus and $96 billion are paid for with corporate loophole closers,
elimination of tax shelters, and other measures. (These cost estimates
are based on the revised economic assumptions and thus differ slightly
from the cost estimates released in the February budget.) The
President's proposals include expanding the Earned Income Tax Credit to
help larger families and to reduce the marriage penalty, increasing the
Child and Dependent Care Tax Credit and making it refundable, making up
to $10,000 of college tuition tax deductible through the College
Opportunity Tax Cut, and helping pay for long-term care with a $3,000
PRESIDENT CLINTON MAKES A CONSTRUCTIVE OFFER TO ADDRESS PRIORITIES FOR
AMERICAN FAMILIES IN A FRAMEWORK OF FISCAL DISCIPLINE
Today President Clinton will make a constructive offer to the Congress
to lock in our fiscal discipline and debt reduction and address
priorities for American families. The President's offer builds on
bipartisan consensus on three issues: we should lock in Social Security
and Medicare surpluses for debt reduction, American families should have
marriage penalty tax relief, and Seniors need an affordable prescription
drug benefit. The President will offer that if the Congressional
leadership agrees to an overall framework of fiscal discipline that
takes Medicare off-budget, the President would be willing to sign
broader marriage penalty relief legislation if the Congress will pass
his prescription drug plan.
The precondition: lock in added debt reduction by taking Medicare
off-budget. The Vice President has proposed taking Medicare off-budget
to ensure that its surpluses are used to reduce the debt. Last week,
the House virtually unanimously endorsed this principal. The President
will ask the Congressional leadership to agree to take Medicare Part A
-- which covers hospital insurance -- truly off-budget. This would
protect the $403 billion Medicare surplus for debt reduction. If this
legislation was combined with a commitment to lock away Social Security
surpluses for debt reduction, as proposed by the President, then the
total debt reduction would be $2.7 trillion over ten years.
Accept the President's proposal for a Medicare prescription drug
benefit. The President has proposed a new, meaningful voluntary
Medicare prescription drug benefit. This long-overdue benefit would
provide coverage for 50 percent of prescription drug costs up to $5,000
when fully phased in. It would provide protections against catastrophic
drug expenses by limiting out-of-pocket spending to $4,000.
Beneficiaries would pay a premium of $25 per month in the first year for
this coverage which would assure access to discounts, needed drugs, and
local pharmacies. This Medicare drug benefit is part of the
Administration's Medicare reform plan that improves provider payments by
$40 billion, makes the program more competitive and efficient, and
extends the life of Medicare's trust fund.
Broader marriage penalty relief legislation. The President is committed
to marriage penalty relief. His February budget included a $43 billion
proposal to provide targeted marriage penalty relief. The President
believes that the Republican marriage penalty proposals, standing alone,
are too large, too untargeted to people who specifically face marriage
penalties, and outside of the context of fiscal discipline. However, if
a broader marriage penalty bill, along the lines reported out by the
Senate Finance Committee or passed by the House of Representatives, is
passed as part of a framework that locks in additional debt reduction by
taking Medicare off-budget and provides the President's proposal for a
Medicare prescription drug benefit, then the President would be willing
to sign it.
TAKING MEDICARE OFF-BUDGET AND DEDICATING THE RESULTING INTEREST SAVINGS
TO EXTEND ITS SOLVENCY
Following the leadership of Vice President Gore, President Clinton is
proposing to take Medicare off-budget. This would mean that, like the
Social Security surplus, the projected $403 billion Medicare surplus
would, like the Social Security surplus, not count towards the on-budget
surplus and therefore could no longer be diverted for other purposes.
Taking the Medicare surplus off-budget would ensure that Medicare is
protected for paying down the debt to help strengthen the life of the
Medicare program. The President would also dedicate the total interest
savings that result from using the Medicare surplus for debt reduction
to its trust fund, contributing towards extending its life to at least
What Taking Medicare Off-budget Means
The Administration projects that if current policies are continued,
Medicare Part A, which covers hospital expenses, will run a surplus of
$403 billion from 2001-10. This surplus is the excess of Medicare
income, principally from the 2.9 percent payroll tax (combined employer
and employee), over benefit payments and administrative costs. The
Medicare surplus has grown from $4 billion in 1993 to $24 billion in
Under previous budget accounting conventions, this Medicare surplus
was treated as part of the total on-budget surplus and was thus
available for new spending on other programs or tax cuts.
By taking Medicare Part A off-budget, the President proposes to make
it unavailable for other spending or tax cuts. Instead, the projected
baseline Medicare surplus would be used to pay down the debt.
Taking Medicare off-budget, like maintaining Social Security
off-budget, honors the social contract of the payroll tax. Workers pay
their payroll taxes today in the expectation that they will receive
Social Security and Medicare benefits in the future. If there are any
surpluses in Social Security or Medicare today, they should be used only
for paying down the debt to strengthen Social Security and Medicare, not
spent on other programs or tax cuts. They should not be used to meet
budget targets or pay for other spending increases or tax cuts.
On-budget Surplus (baseline projections)
Unified Surplus $4.193 trillion
Social Security Surplus - $2.320 trillion
(includes a small Postal Surplus)
Medicare HI Surplus - $0.403 trillion
On-budget Surplus $1.470 trillion
Extending the Solvency of Medicare to at Least 2030
Taking Medicare off-budget does not eliminate the need to make
Medicare more efficient and to provide it with additional resources to
meet future needs. By itself, it does not extend the life of the
Medicare trust fund.
Taking Medicare off-budget helps pay down debt today and increases
investment and growth, helping to prepare the Nation for the challenge
of the retiring baby boom generation. It also results in interest
savings to the Federal government. Instead of using these interest
savings for tax cuts or spending increases, the President proposes to
transfer an amount equal to the total interest savings ($115 billion
over the next ten years) to the Medicare trust fund to extend its
Together with the President's reforms to increase competition and
efficiency and reduce fraud, these transfers extend solvency to at least
2030. This will help Medicare prepare for the doubling of its
enrollment from 39 million in 1999 to 81 million in 2035.
Building on Progress
In 1993, Medicare was projected to become insolvent in 1999. As a
result of strong management, reduced fraud, policy reforms, and
improvements in the economy, today Medicare is projected to be solvent
to 2025 -- as long as any period of projected solvency in Medicare
In 2000, the on-budget surplus, excluding Social Security and
Medicare, is projected to be $39 billion. This is the first time that
there has been a surplus on this basis since the Medicare program was
established in 1965.
Taking Medicare off-budget builds on the fiscal progress we have made
in going from a record unified deficit of $290 billion in 1992 to a
record unified surplus of $211 billion this year.
IMPROVING THE PRESIDENT'S MEDICARE PRESCRIPTION DRUG BENEFIT AND
The President will improve his comprehensive plan to strengthen and
modernize Medicare by investing additional surplus -- available in part
due to lower Medicare growth and a healthier trust fund -- to his
voluntary Medicare prescription drug proposal and increasing of certain
provider payments affected by the Balanced Budget Act of 1997 (BBA).
Specifically, the President will invest an additional $58 billion over
10 years to: (1) specify his limit on out-of-pocket prescription drug
spending at $4,000; (2) maintain the beneficiary premium at the same
level even with the enhanced benefit; (3) start the program one year
earlier; and (4) provide immediate payments to managed care plans to
provide a prescription drug benefit. He will also add $40 billion over
10 years to increase Medicare health care provider payments in the wake
of the BBA. The President will reiterate his commitment to critical
structural reforms that will be needed as the baby boom generation
retires. Finally, he will drop savings proposals that are no longer
needed. Altogether, the President would invest $264 billion over 10
years -- less than one-fifth of the on-budget surplus. Combined with
taking Medicare off-budget and extending the life of its trust fund,
this plan represents the most important set of changes to Medicare in
the program's history.
IMPROVED MEDICARE PRESCRIPTION DRUG BENEFIT
The President will add $58 billion over 10 years ($39 billion over 5
years) to his voluntary, affordable Prescription drug benefit for all
beneficiaries. His original proposal would cover half of all cost up to
$5,000 when fully phased in, at a premium that begins at $25 per month
with extra protections for low-income people. In addition, the
President's February budget set aside a surplus reserve to develop
protections against catastrophic prescription drug costs. He will add
to this plan by:
Specifying that no beneficiary would pay more than $4,000 in
out-of-pocket drug costs. The President's plan would limit beneficiary
spending on prescription drugs to $4,000 per year in 2002, indexed to
drug inflation in subsequent years. This reaffirms the President's
commitment to providing true insurance, enabling beneficiaries to afford
needed drugs when they have high costs.
Limiting premiums to $25 per month even with the benefit improvement.
The President's proposal will dedicate a portion of this new investment
to maintain the monthly premium at the levels that were in his February
proposal, even with the newly specified catastrophic benefit. Thus,
premiums for this coverage would start at $25 per month in the first
year and would increase as the benefit is phased in.
Starting the benefit in 2002, not 2003. The President's plan
accelerates the implementation of the drug benefit to January 1, 2002.
Seniors and people with disabilities need prescription drug coverage as
soon as possible and the new resources available will allow for an
Paying managed care plans to provide prescription drugs in 2001. To
help managed care plans continue to offer prescription drug coverage
next year and stabilize the managed care market, the President proposes
to increase payments to the Medicare+Choice plans in 2001 to explicitly
pay for prescription drug coverage. Plans that provide at least 50
percent coinsurance to $2,000 would be eligible for these subsidies.
Under the President's plan, managed care plans would receive direct
subsidies for the provision of a prescription drug benefit for the first
time in program history. This will increase payments by over $25
billion over 5 years and over $75 billion over 10 years, including $2
billion in 2001.
Altogether, the new total cost of the Medicare prescription drug benefit
would be about $253 billion over 10 years ($79 billion over 5 years).
IMPROVING HEALTH CARE PROVIDER PAYMENTS
The Balanced Budget Act of 1997 (BBA) helped to eliminate the deficit,
created the State Children's Health Insurance Program, and reduced and
restructured Medicare and Medicaid payments to health care providers.
Many of the provider payment changes were justified and have contributed
to improved efficiency and the unprecedented fiscal health of the
Medicare trust fund. However, some of the policies may have the
potential to affect the quality of and access to health care services.
To address this, the President has proposed to dedicate $40 billion over
10 years ($21 billion over 5 years) to a provider payment initiative
designed to ensure adequate reimbursement to hospitals, rural providers,
teaching facilities, home health agencies, nursing homes, managed care
plans, and others.
Increasing provider payments for 2001. About half -- $19 billion over
10 years ($9 billion over 5 years) -- is devoted to specific policies
that are primarily designed to address payment reductions the BBA
scheduled to occur on October 1. This includes: updating inpatient,
home health, and skilled nursing facility payments at the full market
basket update; delaying the further reductions in Medicare and Medicaid
disproportionate share hospital payments; and postponing the 15 percent
reduction to home health agencies.
Setting aside enough funds for permanent and/or targeted policy
solutions. The plan also includes $21 billion over 10 years ($11
billion over 5 years) in unspecified funding for use in developing
additional policies that target and/or permanently correct flawed BBA
The proposal, designed to ensure access to high-quality care, clearly
illustrates that adequate financing for provider payments need not
conflict with necessary funding for a long-overdue, voluntary Medicare
prescription drug benefit.
COMMITMENT TO STRUCTURAL REFORMS TO MEDICARE
Last June, the President proposed a series of far-reaching proposals to
structurally reform Medicare provider payment. Specifically, the plan
would give traditional Medicare essential payment tools to improve
quality and efficiency like adding encouraging disease management and
innovative payment options for doctors and hospital. It would also
create a system called "Competitive Defined Benefit" plan that would
allow managed care plans to compete on price and quality and get paid
based on their bids rather than a complex, statutory formula. He also
proposed in his budget policies, supported by the Inspector General,
General Accounting Office and others, to reduce Medicare fraud, waste
and overpayments. Finally, his plan included rational cost sharing
changes and benefit improvements (e.g., extension of coverage of
immunosuppressive drugs and people with disabilities who go back to
work). These policies remain an important part of the President's plan
to strengthen and modernize Medicare. However, traditional provider
payment policies for 2003 through 2007 appear to no longer be needed
given the reduction in projected Medicare spending and are thus no
longer in the plan. In addition, the plan does not include proposals to
repeal the Balanced Budget Refinement Act managed care risk adjustment
delay, to reduce bad debt payments, and to create preferred provider
arrangements in Medicare. These changes reduce net savings by $30
billion over 10 years. The net Medicare effect of the reform policies
in the package therefore is $29 billion over 10 years ($8 billion over 5
THE CLINTON-GORE ADMINISTRATION:
PAYING OFF THE DEBT BY 2012
LARGEST UNIFIED SURPLUS EVER AND THE ONLY ON-BUDGET SURPLUS SINCEMEDICARE WAS ESTABLISHED
Instead of a $455 billion deficit, a $211 billion surplus this year --
the largest ever. In 1992, the deficit in the Federal budget was $290
billion -- the largest dollar deficit in American history. In January
1993, the Congressional Budget Office projected that the deficit would
grow to $455 billion by 2000. Today, the Office of Management and
Budget is projecting a $211 billion surplus -- the third consecutive
surplus and the largest surplus ever, even after adjusting for
inflation. Compared with original projections, that is $666 billion
less in government drain on the economy and $666 billion more
potentially available for private investment in this one year alone.
Largest unified surplus as a share of the economy since 1948. The
2000 surplus is projected to be 2.2 percent of GDP -- the largest
surplus as a share of GDP since 1948.
Third surplus in a row -- for the first time in over 50 years. The
$211 billion projected surplus in FY2000 follows a surplus of $124
billion in FY 1999 and $69 billion in FY 1998. The last time America
had three surpluses in a row was over fifty years ago in 1947-49. The
FY2000 surplus marks the eighth consecutive year of fiscal improvement,
for the first time in American history --surpassing the pre-Clinton-Gore
best of five straight years.
The second consecutive surplus excluding Social Security. Excluding
Social Security, the surplus is projected to be $63 billion this year.
This is the second consecutive surplus on this basis, for the first time
The first on-budget surplus in the history of Medicare. The on-budget
surplus, which excludes the Social Security and Medicare surpluses, is
projected to be $39 billion this year. This is the only on-budget
surplus on this basis since Medicare was established in 1965.
LARGEST DEBT REDUCTION EVER
The President's plan would eliminate the debt by 2012 -- one year
earlier than previously projected. President Clinton's budget proposes
to reduce the national debt by $2.9 trillion over the next decade and to
eliminate it by 2012, one year ahead of the projection in the February
budget. The President's debt reduction comes from saving the entire
$2.3 trillion Social Security surplus, the entire $403 billion Medicare
surplus, and $192 billion of the on-budget surplus for debt reduction.
Interest payments would be eliminated. Currently we spend 12 cents of
every Federal dollar on interest payments. These payments, which were
once projected to grow to 25 percent of all federal spending in 2012,
would be eliminated under the President's plan by that time.
On track to pay down $324 billion in debt held by the public over
three years. In 1998 and 1999, the debt held by the public was reduced
by $140 billion. OMB is projecting that the government will pay down an
additional $184 billion in debt held by the public this fiscal year
alone. That will bring the total debt pay down to $324 billion -- the
largest three-year debt pay-down in American history. In contrast,
under Presidents Reagan and Bush, the debt held by the public
The debt held by the public is on track to be $2.4 trillion lower in
2000 than was projected when the President took office. In 1993, the
debt held by the public was projected by the Office of Management and
Budget to balloon to $5.85 trillion by 2000. Instead, shrinking
deficits and growing surpluses in the last three years are projected to
bring the debt down to $3.45 trillion in 2000 -- $2.4 trillion less than
expected. In 1993, the debt held by the public was 50 percent of GDP
and projected to rise to 65 percent of GDP in 2000. Instead, it has
been slashed to a projected 35 percent of GDP. Under the President's
plan, it would be completely eliminated by 2012.
As a result, interest payments on the debt in 2000 are $125 billion
lower than projected. In 1993, the net interest payments on the debt
held by the public were projected to grow to $348 billion in 2000. This
Administration's fiscal discipline has slashed this figure to a
projected $223 billion -- a $125 billion improvement for one year alone.
REDUCING SPENDING WHILE CUTTING TAXES FOR MIDDLE-INCOME FAMILIES
Federal spending as a share of the economy is the lowest since 1966.
The spending restraint under President Clinton has brought spending down
from 22.2 percent of GDP in 1992 to a projected 18.5 percent of GDP in
2000 -- the lowest since 1966. At the same time, President Clinton has
increased investments in education, technology and other areas that are
vital to growth.
Non-defense discretionary Federal spending as a share of the economy
is the lowest on record. Since President Clinton took office,
non-defense discretionary spending has fallen from 3.7 percent of GDP in
1992 to 3.3 percent of GDP in 1999 -- the lowest as a share of the
economy on record. Over this period, total discretionary spending fell
from 8.6 percent of GDP to 6.3 percent of GDP, also the lowest on
record. (Comparable data for these categories go back to 1962.)
The smallest Federal civilian workforce in 40 years. The Federal
civilian workforce increased from when President Reagan took office to
when President Bush left office. Since President Clinton and Vice
President Gore took office, the Federal workforce has been cut by
377,000 -- nearly a fifth -- and is now lower than any time since 1960.
While balancing the budget and paying down the debt, the Clinton-Gore
Administration has provided tax relief for working families. The tax
cuts signed into law by the President in 1993 and 1997 -- for example,
the expanded Earned Income Tax Credit, the $500 child tax credit, the
$1,500 HOPE Scholarship Tax Credit, and expanded IRAs have reduced taxes
for American families. The total Federal tax rate for middle-income
families has dropped from 24.5 percent in 1992 to 22.8 percent in 1999
-- that's the lowest tax rate since 1978. For families at one-half the
median income, the effective Federal tax rate has been slashed from 19.8
percent in 1992 to 14.1 percent in 1999 -- that's the lowest tax rate
WHAT FISCAL DISCIPLINE MEANS FOR AMERICA
Goldman Sachs credits deficit and debt reduction with lowering
interest rates by 2 percentage points. "According to the model, the
swing in the federal budget position from a deficit of $290 billion in
1992 to a surplus of $124 billion in 1999 -- roughly matching the
improvement in the general government position -- has lowered
equilibrium bond yields by a full 200 basis points." [Goldman Sachs,
GSWIRE Undistorted by the Budget Surplus, April 14, 2000.]
Lower interest rates have already cut mortgage payments by $2,000 for
families with a $100,000 mortgage. Because of deficit and debt
reduction, it is estimated that a family taking out a home mortgage of
$100,000 expects to save roughly $2,000 per year in mortgage payments.
This has helped raise the homeownership rate to 66.8 percent in 1999
--the highest rate on record.
Lower interest rates cut car payments by $200 annually for families
taking out a typical car loan.
Lower interest rates cut student loan payments by $200 annually for a
person with a typical student loan.
Lower debt will help maintain strong economic growth. With the
government no longer draining resources out of capital markets,
businesses have more funds for productive investment. This has helped
to fuel a 12.6 percent real annual increase in productive equipment and
software investment since 1993 -- the seventh consecutive year of
double-digit growth and the strongest period of growth on record. This
compares to 4.7 percent annual growth from 1981-92, a period that saw
the debt held by the public quadruple.
Rising investment has contributed to a pickup in productivity growth.
Non-farm business productivity has grown at a 2.6 percent average annual
rate for the last five years, and a 3.1 percent average annual rate for
the last three years. This is more than double the 1.4 percent annual
growth from the 1973 through 1990.
WHAT THE EXPERTS SAY
Experts agree that President Clinton's 1993 economic plan helped reduce
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 led to faster business investment, which led to faster growth,
which led to more revenues and lower spending and even lower deficits.
Experts agree that the President's 1993 Economic Plan helped create this
Alan Greenspan, Federal Reserve Board Chairman, 1/04/00 with President
Clinton at Chairman Greenspan's re-nomination announcement: "My
colleagues and I have been very appreciative of your [President
Clinton's] support of the Fed over the years, and your commitment to
fiscal discipline-- has been instrumental in achieving what in a few
weeks -- will be the longest economic expansion in the nation's
Paul Volcker, Federal Reserve Board Chairman (1979-1987), in Audacity,
Fall 1994: "The deficit has come down, and I give the Clinton
Administration and President Clinton himself a lot of credit for that.
[He] did something about it, fast. And I think we are seeing some
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."
Goldman Sachs, March 1998: One of the reasons Goldman Sachs cites for
the "best economy ever" is that "on the policy side, trade, fiscal, and
monetary policies have been excellent, working in ways that have
facilitated growth without inflation. The Clinton Administration has
worked to liberalize trade and has used any revenue windfalls to reduce
the federal budget deficit."
Lehman Brothers, 1/10/94: "Lower deficits, lower long-term rates and
higher real growth was the overall promise. With the data now rolling
in for December 1993, it seems clear that President Clinton delivered on
all three counts..."
THE CLINTON-GORE ECONOMIC RECORD:
WHAT A DIFFERENCE SEVEN YEARS MAKES
After seven and a half years, the results of President Clinton and Vice
President Gore's economic leadership for the American people are clear.
In 1992, when Bill Clinton was elected President, the American economy
was barely creating jobs and wages were stagnant. His bold, three-part
economic strategy focused on establishing fiscal discipline; investing
in education, health care, science and technology; and opening foreign
markets so that American workers have a fair chance to compete abroad.
Seven and a half years later the results of this strategy are clear:
Deficits Replaced By Surpluses: Keeping Us On Track to Be Debt Free by
- 1992. The deficit was $290 billion -- the highest dollar level in
history. When President Clinton took office, the Congressional Budget
Office projected the deficit would grow to $455 billion in 2000.
- Today. In 1999, we had a budget surplus of $124 billion -- the
largest dollar surplus on record. This year the Administration
forecasts a surplus of $211 billion. This is $666 billion less drain by
the government on private financial markets than projected when
President Clinton and Vice President Gore took office. With the
President's plan, we are now on track to eliminate the nation's publicly
held debt by 2012.
Jobs Are Up: 22 Million Created Since January 1993
- 1981-1992. During President Clinton and Vice President Bush's three
terms combined, the economy created only 18.5 million new jobs, despite
the growth of the labor force from the maturation of the baby boom.
Only 2.5 million jobs were created under President Bush, with nearly
half of them in the public sector.
- Today. The economy has created 22.2 million new jobs since January
1993. This is the most jobs ever created under a single President.
There has been an average of 255,000 jobs created per month -- a faster
rate than under any President. And 19.9 million of the new jobs were
created in the private sector, the highest share since Harry Truman was
President (excluding temporary Census workers).
Faster Economic Growth: 3.9 Percent Per Year
- 1981-1992. The economy grew an average 1.7 percent per year under
President Bush and 2.8 percent per year during the Reagan-Bush years.
- Today. Since President Clinton and Vice President Gore took office,
growth has averaged 3.9 percent per year.
Private-Sector Growth Is Up: 4.5 Percent Per Year
- 1981-1992. The private sector of the economy grew 2.9 percent
annually from 1981-1992.
- Today. The private sector of the economy has grown 4.5 percent
annually since 1993.
Equipment and Software Investment Is Growing Faster Than Ever
- 1981-1992. Real equipment and software investment rose just 3.8
percent annually during the previous Administration, and only 4.7
percent annually for the entire Reagan-Bush period.
- Today. Real equipment and software investment is up 12.6 percent per
year under President Clinton -- faster than any Administration on
record. We have seen seven consecutive years of double-digit growth in
equipment and software investment, for the first time on record.
Government Spending: Lowest in Over Three Decades
- 1981-92. Under Presidents Reagan and Bush, Federal government
spending as a share of the economy increased from 21.6 percent in 1980
to 22.2 percent in 1992.
- Today. Under President Clinton, Federal government spending as a
share of the economy has been cut from 22.2 percent in 1992 to a
projected 18.5 percent in 2000 -- its lowest level since 1966.
Taxes for Typical Families: Lowest in Over Two Decades
- 1981-92. The total Federal tax rate for middle-income families rose
from 23.7 percent in 1980 to 24.5 percent in 1992. (Total tax rates
include both the employer and employee portion of the Social Security
and Medicare payroll taxes.)
- Today. Under President Clinton, the total Federal tax rate for
middle-income families has dropped from 24.5 percent in 1992 to 22.8
percent in 1999 -- that's the lowest tax rate since 1978. For families
at one-half the median income, the effective Federal tax rate has been
slashed from 19.8 percent in 1992 to 14.1 percent in 1999 -- that's the
lowest tax rate since 1968.
Homeownership Is Up: The Highest in American History
- 1981-1992. The homeownership rate fell from 65.4 percent in 1981 to
64.2 percent in 1992.
- Today. In 1999, the homeownership rate was 66.8 percent -- the
highest ever recorded.
Inflation is Down: The Lowest Core Rate In 35 Years
- 1981-1992. The underlying core rate of inflation averaged 4.7 percent
- Today. Under President Clinton the core rate of inflation has
averaged 2.6 percent annually -- the lowest of any Administration since
Welfare Rolls Dropped Dramatically: Lowest Since 1969
- 1981-1992. The number of welfare recipients increased by almost 2.5
million (a 22 percent increase) to 13.6 million people.
- Today. Between January 1993 and September 1999, the number of welfare
recipients dropped by 7.5 million (a 53 percent decline) to 6.6 million
-- the lowest level since 1968.
Unemployment Is Down: The Lowest Rate in 30 Years
- 1981-1992. The unemployment rate averaged 7.1 percent and rose to
more than 10 percent in 1982 and 1983.
- Today. In 2000, the unemployment rate has averaged 5.0 percent -- the
lowest rate in over 30 years. The unemployment rate has been below 5
percent for 35 consecutive months.
Unemployment for African-Americans the Lowest on Record
- 1981-1992: African-American unemployment reached 21.2 percent in
January 1983 -- a record high -- and never dropped below 10 percent.
- Today. The African-American unemployment rate has fallen from an
average of 14.2 percent in 1992 to an average of 7.7 percent in 2000 --
the lowest rate on record.
Unemployment for Hispanics Recovered From Record Highs to Achieve Record
- 1981-1992. Hispanic unemployment hit a record high of 15.7 percent in
- Today. The Hispanic unemployment rate has dropped from an average of
11.6 percent in 1992 to an average of 5.8 percent in 2000 -- the lowest
rate on record.
Real Wages Rising Again: Fastest Growth in Two Decades
- 1981-1992. Real average hourly earnings fell 4.3 percent under
Presidents Reagan and Bush.
- Today. Real wages have grown 6.5 percent under President Clinton.
Real wages have grown for five consecutive years -- for the first time
since the 1960s.
Poverty For African-Americans Dropped to Lowest On Record
- 1981-1992. Between 1980 and 1992, the poverty rate for African
American remained at 30 percent or more.
- Today. Since 1993, the African-American poverty rate has dropped from
33.1 percent to 26.1 percent in 1998 -- the lowest level recorded, and
the largest five-year drop in African-American poverty since 1967-1972.
Poverty For Hispanics Dropped to Lowest Since 1979
- 1981-1992. Between 1980 and 1992, the poverty rate for Hispanics
increased from 25.7 percent to 29.6 percent.
- Today. Since 1993, the Hispanic poverty has dropped to 25.6
percent -- the lowest since 1979.
Poverty For Single Mothers is the Lowest On Record
- 1981-1992. Between 1980 and 1992, an additional 2.1 million families
with single mothers were pushed into poverty.
- Today. Under President Clinton, the poverty rate for families with
single mothers has fallen from 46.1 percent in 1993 to 38.7 percent in
1998 -- the lowest level on record.
Family Income Up More Than $5,000 Since 1993
1988-1992. Median family income (in inflation-adjusted 1998 dollars)
fell by $1,864, dropping from $44,354 in 1988 to $42,490 in 1992.
Today. Since 1993, real median family income has increased by $5,046
-- rising to $46,737 in 1998.