    [Budget Supplement]
    [The Budget Message of the President]
    [From the U.S. Government Printing Office, www.gpo.gov]

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                                        RECEIPTS, OUTLAYS, AND SURPLUS OR DEFICIT
                                                (In billions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                                  Estimate
                                                1995  --------------------------------------------------------------
                                               Actual    1996     1997     1998     1999     2000     2001     2002
    ----------------------------------------------------------------------------------------------------------------
    Receipts................................   1,355    1,427    1,495    1,578    1,653    1,734    1,820    1,912
    Outlays.................................   1,519    1,572    1,635    1,676    1,717    1,761    1,812    1,868

    Surplus/Deficit (-).....................    -164     -146     -140      -98      -64      -28        8       44
    ----------------------------------------------------------------------------------------------------------------

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    [[Page 3]]

                       THE BUDGET MESSAGE OF THE PRESIDENT

      To the Congress of the United States:
      The 1997 Budget, which I am transmitting to you with this message,
    builds on our strong economic record by balancing the budget in seven
    years while continuing to invest in the American people.
      The budget cuts unnecessary and lower priority spending while
    protecting senior citizens, working families, and children. It reforms
    welfare to make work pay and provides tax relief to middle-income
    Americans and small business.
      Three years ago, we inherited an economy that was suffering from
    short- and long-term problems--problems that were created or exacerbated
    by the economic and budgetary policies of the previous 12 years.
      In the short term, economic growth was slow and job creation was weak.
    The budget deficit, which had first exploded in size in the early 1980s,
    was rising to unsustainable levels.
      Over the longer term, the growth in productivity had slowed since the
    early 1970s and, as a result, living standards had stagnated or fallen
    for most Americans. At the same time, the gap between rich and poor had
    widened.
      Over the last three years, we have put in place budgetary and other
    economic policies that have fundamentally changed the direction of the
    economy--for the better. We have produced stronger growth, lower
    interest rates, stable prices, millions of new jobs, record exports,
    lower personal and corporate debt burdens, and higher living standards.
      Working with the last Congress in 1993, we enacted an economic program
    that has worked better than even we projected in spurring growth and
    reducing the deficit. We have cut the deficit nearly in half, from $290
    billion in 1992 to $164 billion in 1995. As a share of the Gross
    Domestic Product, we have cut the deficit by more than half in three
    years, bringing the deficit to its lowest level since 1979.
      While cutting overall discretionary spending, we also shifted
    resources to investments in our future. With wages increasingly linked
    to skills, we invested wisely in education and training to help
    Americans acquire the tools they need for the high-wage jobs of
    tomorrow. We also invested heavily in science and technology, which has
    been a strong engine of economic growth throughout the Nation's history.
      For Americans struggling to raise their children and make ends meet,
    we have sought to make work pay. We expanded the Earned Income Tax
    Credit, providing tax relief for 15 million working families. And we
    have given 37 States the freedom to test ways to move people from
    welfare to work while protecting children.
      As the economy has become increasingly global, prosperity at home
    depends heavily on opening foreign markets to American goods and
    services. With this in mind, we secured legislation to implement the
    General Agreement on Tariffs and Trade and the North American Free Trade
    Agreement, and we have completed over 80 other trade agreements. Under
    our leadership, U.S. exports have grown to an all-time high.
      With these policies, we have helped pave the way for a future of
    sustained economic growth, low interest rates, stable prices, and more
    opportunity for Americans of all incomes. But our work is not done.
      Looking ahead, as I said recently in my State of the Union address, we
    must answer three fundamental questions: First, how do we make the
    American dream of opportunity for all a reality for all Americans who
    are willing to work for it? Second, how do we preserve our old and
    enduring values as we move into the future? And, third, how do we meet
    these challenges together, as one America?
      This budget addresses those questions.
    [[Page 4]]

    Creating an Age of Possibility

      I am committed to finishing the job that we began in 1993 and finally
    bringing the budget into balance. In our negotiations with congressional
    leaders, we have made great progress toward reaching an agreement. We
    have simply come too far to let this opportunity slip away.
      A balanced budget would reduce interest rates for all Americans,
    including the young families across the land who are struggling to buy
    their first homes. It also would free up funds in the private markets
    with which businesses could invest in factories and equipment, or in
    training their workers.
      But we have to balance the budget the right way--by cutting
    unnecessary and lower priority spending; investing in the future;
    protecting senior citizens, working families, children, and other
    vulnerable Americans; and providing tax relief for middle-income
    Americans and small businesses.
      My budget does that. It strengthens Medicare and Medicaid, on which
    millions of senior citizens, people with disabilities, and low-income
    Americans rely. It reforms welfare. It cuts other entitlements. And it
    cuts deeply into discretionary spending.
      But while cutting overall discretionary spending, my budget invests in
    education and training, the environment, science and technology, law
    enforcement, and other priorities to help build a brighter future for
    all Americans. We should spend more on what we need, less on what we
    don't.

    Projecting American Leadership

      Across the globe, we live in a time of great opportunity and great
    challenge. With the end of the Cold War, the world looks to the United
    States for leadership. Providing it is clearly in our best interest. We
    must not turn away.
      My budget provides the necessary resources to advance America's
    strategic interests, carry out our foreign policy, open markets abroad,
    and support U.S. exports. It also provides the resources to confront the
    emerging global threats that have replaced the Cold War as major
    concerns--regional, ethnic, and national conflicts; the proliferation of
    weapons of mass destruction; international terrorism and crime;
    narcotics trading; and environmental degradation.
      On the diplomatic front, our successes have been numerous and
    heartening, and they have made the world a safer and more stable place.
    Through our leadership, we are helping to bring peace to Bosnia and the
    Middle East, and we have spurred progress in Northern Ireland. We also
    encouraged the movement toward democracy and free markets in Russia and
    Central Europe, and we led a successful international effort to defuse
    the nuclear threat from North Korea.
      On the military front, we have deployed our forces where we could be
    effective and where it was in our interest to promote stability by
    ending bloodshed (such as in Bosnia) and suffering (such as in Rwanda).
    We also have used the threat of force to ease tensions, such as to
    unseat an unwelcome dictatorship in Haiti and to stare down Iraq when it
    threatened again to move against Kuwait.
      This budget provides the funds to sustain and modernize the world's
    strongest, best-trained, best-equipped, and most ready military force.
    Through it, we continue to support service members and their families
    with quality-of-life improvements in the short term, while planning to
    acquire the new technologies that will become available at the turn of
    this decade.

    Creating Opportunity and Encouraging Responsibility

      The Federal Government cannot--by itself--solve most of the problems
    and address most of the challenges that we face as a people. In some
    cases, it must play a lead role--whether to ensure the guarantee of
    health care for vulnerable Americans, expand access to education and
    training, invest in science and technology, protect the environment, or
    make the tax code fairer. In other cases, it must play more of a
    partnership role--working with States, localities, non-profit groups,
    churches and synagogues, families, and individuals to strengthen
    communities, make work pay, protect public safety, and improve the
    quality of education.
    [[Page 5]]
      To restore the American community, the budget invests in national
    service, through which 25,000 Americans this year are helping to solve
    problems in communities while earning money for postsecondary education
    or to repay student loans. We want to create more Empowerment Zones and
    Enterprise Communities to spur economic development and expand
    opportunities for the residents of distressed urban and rural areas. We
    want to expand the Community Development Financial Institutions Fund to
    provide credit and other services to such communities. With the same
    goal in mind, we want to transform the Department of Housing and Urban
    Development into an agency that better addresses local needs. And we
    want to maintain our relationship with, and the important services we
    provide to, Native Americans.
      In health care, our challenge is to improve the existing and largely
    successful system, not to end the guarantees of coverage on which
    millions of vulnerable Americans rely. My budget strengthens Medicare
    and Medicaid, ensuring their continued vitality. For Medicare, it
    strengthens the Part A trust fund, provides more choice for seniors and
    people with disabilities, and makes the program more efficient and
    responsive to beneficiary needs. For Medicaid, it gives States more
    flexibility to manage their programs while preserving the guarantee of
    health coverage for the most vulnerable Americans, retains current
    nursing home quality standards, and continues to protect the spouses of
    nursing home residents from impoverishment. My budget proposes reforms
    to make private health care more accessible and affordable, and premium
    subsidies to help those who lose their jobs pay for private coverage for
    up to six months. It also invests more in various public health
    services, such as the Ryan White program to serve people living with
    AIDS, and research and regulatory activities that promote public health.
      Because America's welfare system is broken, we have worked hard to fix
    those parts of it that we could without congressional action. For
    instance, we have given 37 States the freedom to test ways to move
    people from welfare to work while protecting children, and we are
    collecting record amounts of child support. But now, I need the help of
    Congress. Together, in 1993 we expanded the Earned Income Tax Credit for
    15 million working families, rewarding work over welfare. Now, my budget
    overhauls welfare by setting a time limit on cash benefits and imposing
    tough work requirements, and I want us to enact bipartisan legislation
    that requires work, demands responsibility, protects children, and
    provides adequate resources to get the job done right--with child care
    and training, giving recipients the tools they need.
      More and more, education and training have become the keys to higher
    living standards. While Americans clearly want States and localities to
    play the lead role in education, the Federal Government has an important
    supporting role to play--from funding pre-school services that prepare
    children to learn, to expanding access to college and worker retraining.
    My budget continues the strong investments that we have made to give
    Americans the skills they need to get good jobs. Along with my ongoing
    investments, my budget proposes a Technology Literacy Challenge Fund to
    bring the benefits of technology into the classroom, a $1,000 merit
    scholarship for the top five percent of graduates in every high school,
    and more Charter Schools to let parents, teachers, and communities
    create public schools to meet their own children's needs.
      As Americans, we can take pride in cleaning up the environment over
    the last 25 years, with leadership from Presidents of both parties. But
    our job is not done--not with so many Americans breathing dirty air or
    drinking unsafe water. My budget continues our efforts to find solutions
    to our environmental problems without burdening business or imposing
    unnecessary regulations. We are providing the necessary funds for the
    Environmental Protection Agency's operating program, for our national
    parks and forests, for my plan to restore the Florida Everglades, and
    for my ``brownfields'' initiative to clean up abandoned, contaminated
    industrial sites in distressed urban and rural communities. And we are
    continuing to reinvent the regulatory process by working collaboratively
    with business, rather than treating it as an adversary.
    [[Page 6]]
      With science and technology (S&T) so vital to our economic future, our
    national security, and the well-being of our people, my budget continues
    our investments in this crucial area. To maintain our investments, I am
    asking Congress to fulfill my request for basic research in health
    sciences at the National Institutes of Health, for basic research and
    education at the National Science Foundation, for research at other
    agencies that depend on S&T for their missions, and for cooperative
    projects with universities and industry, such as the industry
    partnerships created under the Advanced Technology Program.
      To attack crime, the Federal Government must work with States and
    communities on some problems and lead on others. To help communities, we
    continue to invest in the Community Oriented Policing Services (COPS)
    program, which is putting 100,000 more police on the street. We are
    helping States build more prisons and jail space, better enforce the
    Brady bill that helps prevent criminals from buying handguns, and better
    address the problem of youth gangs. At the Federal level, we are leading
    the fight to stop drugs from entering the country and expand drug
    treatment efforts, and we are stepping up our efforts to secure the
    border against illegal immigration while we help to defray State costs
    for such immigration.
      For many families, of course, the first challenge often is just to pay
    the bills. My budget proposes tax relief for middle-income Americans and
    small businesses. It provides an income tax credit for each dependent
    child under 13; a deduction for college tuition and fees; and expanded
    individual retirement accounts to help families save for future needs
    and more easily pay for college, buy a first home, pay the bills during
    times of unemployment, or pay medical or nursing home costs. For small
    business, it offers more tax benefits to invest, provides estate tax
    relief, and makes it easier to set up pensions for employees. It also
    would expand the tax deduction to make health insurance for the self-
    employed more affordable.

    Making Government Work

      As we pursue these priorities, we will do so with a Government that is
    leaner, but not meaner, one that works efficiently, manages resources
    wisely, focuses on results rather than merely spending money, and
    provides better service to the American people. Through the National
    Performance Review, led by Vice President Gore, we are making real
    progress in creating a Government that ``works better and costs less.''
      We have cut the size of the Federal workforce by over 200,000 people,
    creating the smallest Federal workforce in 30 years, and the smallest as
    a share of the total workforce since before the New Deal. We are ahead
    of schedule to cut the workforce by 272,900 positions, as required by
    the 1994 Federal Workforce Restructuring Act that I signed into law.
      Just as important, the Government is working better. Agencies such as
    the Social Security Administration, the Customs Service, and the
    Veterans Affairs Department are providing much better service to their
    customers. Across the Government, agencies are using information
    technology to deliver services more efficiently to more people.
      We are continuing to reduce the burden of Federal regulation, ensuring
    that our rules serve a purpose and do not unduly burden businesses or
    taxpayers. We are eliminating 16,000 pages of regulations across
    Government, and agencies are improving their rule-making processes.
      In addition, we continue to overhaul Federal procurement so that the
    Government can buy better products at cheaper prices from the private
    sector. No longer does the Government pay outrageous prices for hammers,
    ashtrays, and other small items that it can buy cheaper at local stores.
      As we look ahead, we plan to work more closely with States and
    localities, with businesses and individuals, and with Federal workers to
    focus our efforts on improving services for the American people. Under
    the Vice President's leadership, agencies are setting higher and higher
    standards for delivering faster and better service.
    [[Page 7]]
    Conclusion

      Our agenda is working. We have significantly reduced the deficit,
    strengthened the economy, invested in our future, and cut the size of
    Government while making it work better for the American people.
      Now, we have an opportunity to build on our success by balancing the
    budget the right way. It is an opportunity we should not miss.

                                                          William J. Clinton

    March 1996