President Clinton and Vice President Gore's Economic Plan:
Building the Path to Prosperity for America's Families
August 5, 2000
Seven years ago this week, President Clinton and Vice President
Gore's economic plan was enacted without a single Republican vote. Vice
President Gore broke a tie on August 6, 1993 to pass the measure in the
Senate and President Clinton signed the 1993 Budget Reconciliation into
law four days later. Their bold, three-part strategy established fiscal
discipline; invested in education, health care, science and technology;
and opened foreign markets so that American workers have a fair chance
to compete abroad. Passage of the economic plan was a historic turning
point, reversing 12 years of trickle-down economics and turning the
largest deficit in history into the largest budget surplus in history.
It also committed the country to a path of fiscal discipline that helped
unleash the productive potential of the American people, contributing to
the longest economic expansion in history, including the creation of
over 22 million jobs, the lowest unemployment and inflation rates in a
generation, rising wages and the highest homeownership rates on record.
Today, working families are enjoying the benefits of this comprehensive
plan and the course of fiscal discipline it established.
Clinton-Gore Economic Plan Restored Fiscal Discipline
The previous two administrations drove annual budget deficits to
their highest level in history, piled up more debt in 12 years than the
nation did in the previous 200, and quadrupled the national debt.
Thanks to the 1993 economic plan, President Clinton and Vice President
Gore kept their promise to cut the deficit in half in four years and
produced three back-to-back surpluses for the first time in over 50
years. Fiscal discipline has resulted in real benefits for American
families by keeping interest rates low and productivity high, and by
creating the conditions for the strongest economy in our nation's
Slashed the Federal Deficit
1993 Plan - $500 Billion in Deficit Reduction: When President Clinton
and Vice President Gore took office, the deficit was $290 billion and
expected to grow to $455 billion by 2000. The 1993 economic plan
contained $500 billion of total projected deficit reduction over five
years, including $255 billion in spending cuts. Even before the Balanced
Budget Agreement of 1997 took effect, the deficit had been cut to $22
billion in FY 1997, a 92 percent drop.
Paul Volcker, Former Federal Reserve Board Chairman: "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 benefits." [Audacity, Fall 1994].
Today - On Track to be Debt Free by 2012: Today we have turned the
largest deficit in history into the largest surplus in history and,
under the Administration's budget framework, we are on track to be debt
free by 2012 for the first time since Andrew Jackson's administration.
Lowered Interest Rates and Increased Productivity
1993 Plan - Fiscal Responsibility Produced an Immediate Drop in
Interest Rates: Even though the recession had technically ended when
President Clinton and Vice President Gore took office, America remained
mired in high unemployment and slow economic growth. The passage of the
deficit reducing legislation almost immediately led to a drop in
interest rates, which spurred investment and led to an increase in the
rate of job creation, wage growth and productivity.
According to Federal Reserve Chairman Alan Greenspan, the '93 plan was
"an unquestioned factor in contributing to the improvement in economic
activity that occurred thereafter." [House Banking Committee Testimony,
"Clinton's biggest gift to consumers was the sharp drop in interest
rates in 1993. Following the President's early drive to lower the
deficit, the Federal Reserve cut short term rates while bond traders
drove down long-term rates, sending 30-year fixed mortgages from 8.31
percent in November 1992 to 6.83 percent in October 1993. That's the
lowest overall mortgage rate since 1971." [Money Magazine, August 1996]
"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." [Business Week, 5/19/97]
Today - Families have Enjoyed $2,000 Effective Tax Cut: Wall Street
analysts credit deficit reduction with lowering interest rates by 2 full
percentage points. [Goldman Sachs, GSWIRE Undistorted by the Budget
Surplus, April 14, 2000]. This means that a family taking out a home
mortgage of $100,000 expects to save roughly $2,000 per year in mortgage
payments. Thanks in part to low mortgage rates, the homeownership rate
increased to 67 percent in 1999 --the highest rate on record. Lower
interest rates also cut both car payments and student loan payments by
$200 annually for families taking out typical loans.
Cut Taxes and for Small Businesses to Create Jobs and Build the Economy
1993 Plan - Tax Cuts and Investment Incentives for 90 Percent of Small
Businesses: The economic plan included tax cuts and investment
incentives for small business owners, including a targeted capital gains
tax cut, an extension of health insurance deductions and increased
expensing. Ninety percent of American small businesses were eligible
for a tax cut through incentives to invest in their businesses and
Today - Six Million New Small Businesses: Since President Clinton and
Vice President Gore came to office, the economy has created over 22
million jobs. Over 90 percent of these jobs are in the private sector
and 80 percent of all new jobs have been created by small businesses.
Under the Clinton-Gore Administration, nearly 6 million small businesses
have been created.
Clinton-Gore Economic Plan Invested in the American People
Not only did President Clinton and Vice President Gore reverse the
failed economic polices that had resulted in a sea of red ink, they also
reversed 12 years of neglect of working families. Their economic
strategy invests in America's future by rewarding those who work hard
and play by the rules. Their strategy has transformed America, so that
we now enjoy the lowest crime rate in 25 years, the smallest welfare
rolls in 30 years and the highest child immunization rate in history.
Today, more young people are graduating from high school and going to
college, more Americans enjoy clean air and clean water, and more
Americans are confident about the future of our nation. The 1993
economic plan was the first step in this strategy, cutting taxes for
working families, preserving and protecting Medicare, and making key
investments and reforms in child immunizations, higher education, and
research and development.
Cut Taxes for Working Families
1993 Plan - Expand EITC for 15 Million Working Families: President
Clinton and Vice President Gore included a significant expansion of the
Earned Income Tax Credit in their economic plan to give a boost to
working families who had struggled too long. The plan gave tax cuts to
15 million families, and the average family with two children received
"I thought the Earned Income Tax Credit was the right direction
because it helps people get off of welfare." [Speaker Newt Gingrich,
Atlanta Journal & Constitution, 9/2/93]
"One of the Clinton presidency's biggest accomplishments is also one
of its least ballyhooed. We're talking about the Earned Income Tax
Credit (EITC), which may be as boring as it sounds but which also may
have more beneficial impact on some of the neediest American families
than anything the government has done in decades." [Black, Minneapolis
Today - Lowest Tax Burden for Middle Class Families in a Generation:
Today, the EITC lifts 4.3 million working families out of poverty. And
thanks in part to the expanded EITC and other targeted tax reduction
measures signed by President Clinton, lower and middle class families
bear the lowest income tax burden in 35 years.
Preserved and Protected Medicare
1993 Plan - Investments in Preserving Medicare: When President Clinton
and Vice President Gore took office, Medicare was expected to be
bankrupt by 1999. The economic plan attacked this problem by dedicating
some of the taxes paid by Social Security beneficiaries to the Medicare
trust fund. The 1993 Economic Plan extended the life of the Medicare
Trust Fund by three years to 2002.
Today - Medicare is as Solvent as it has Ever Been: Today, thanks to
additional provisions to combat waste, fraud and abuse and bipartisan
cooperation in the 1997 Balanced Budget Amendment, Medicare is expected
to remain solvent until 2025. In addition, prudent management has kept
Medicare premiums nearly 20 percent lower than they were projected to be
Expanded Childhood Immunizations
1993 Plan - New Commitment to Child Immunization: In 1992, less than
60 percent of two-year-olds were fully immunized - the third lowest rate
in the Western Hemisphere. The Economic plan contained investments to
guarantee the health of children and prevent the easily avoidable costs
of preventable childhood diseases.
The Children's Defense Fund applauded the initiative and its results
saying, "We are delighted that so many more American children are
immunized and fewer American children are getting sick. This is truly a
lifesaving effort. . . . [T]he president and first lady deserve a huge
amount of credit for fighting for the [Vaccines for Children Act] and
the immunization initiative in 1993." [CDF Press Release, 7/23/97]
Today - Highest Child Immunization Rate Ever: Today, the nation's
overall immunization rate for preschool children is at the highest rate
ever recorded. And because childhood vaccination levels in the United
States are at an all-time high, disease and death from diphtheria,
ertussis, tetanus, measles, mumps, rubella and Hib are at or near record
Revitalized Communities with Empowerment Zones
1993 Plan - Created Empowerment Zones and Enterprise Communities: The
Economic Plan contained the Empowerment Zones/Enterprise Communities
initiative. The first effort included nine Empowerment Zones and 95
Enterprise Communities. The plan provided a total of $3.5 billion in
job and wage credits and other incentives to build and revitalize cities
and rural areas.
Today - Over $10 Billion in Investment to Revitalize 135 Communities:
Today the Empowerment Zones/Enterprise Communities initiative has
leveraged $10 billion worth of public and private sector investment in
135 communities across the country.
Reformed Student Loans
1993 Plan - Reforming Student Loans: The economic plan created the
Direct Student Loan Program, which has cut paperwork and reduced costs
for students and families and saved taxpayers money.
Today - Saved Students and Taxpayers Nearly $8 Billion: Lower loan
origination fees have saved students $3.7 billion to date and lower
costs associated with Direct Lending have saved taxpayers $4 billion
over the past five years.
Encouraged Investment in Research, Development and Job Creation
1993 Plan - Incentives for Research and Development: The 1993 economic
plan extended the 20 percent tax credit for research and development
expenditures and made it easier for new companies to take advantage of
the tax credit. The plan also included credits to encourage
employer-provided educational and training assistance and a targeted
jobs tax credit.
Today - Research Breakthroughs Fuel Economic Strength: Since 1993, the
Clinton-Gore Administration has substantially increased the federal
commitment to research. The Administration has made major investments
in areas such as information technology, to develop high-performance
communications and computer equipment; clean energy, to decrease our
reliance on imported oil and fossil fuels; genetic research, including
gene therapies and the Human Genome Project; and biotechnology research
to find cures and treatment for diabetes, AIDS, cancer and mental
illness. Funding for programs in the President's 21st Century Research
Fund has increased by 45 percent since 1993.