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


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                I. THE BUDGET MESSAGE OF THE PRESIDENT

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                              Table I-1.  RECEIPTS, OUTLAYS, AND SURPLUS OR DEFICIT                             
                                            (In billions of dollars)                                            
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                                                                                  Estimate                      
                                                     1996  -----------------------------------------------------
                                                    Actual    1997     1998     1999     2000     2001     2002 
----------------------------------------------------------------------------------------------------------------
Receipts.........................................   1,453    1,505    1,567    1,643    1,727    1,808    1,897 
Outlays..........................................   1,560    1,631    1,687    1,761    1,814    1,844    1,880 
                                                                                                                
Surplus/Deficit (-):                                                                                            
  Unified........................................    -107     -126     -121     -117      -87      -36       17 
  On-budget......................................    -174     -199     -197     -205     -183     -139      -93 
  Off-budget.....................................      67       74       76       87       96      103      110 
----------------------------------------------------------------------------------------------------------------

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                   THE BUDGET MESSAGE OF THE PRESIDENT

  To the Congress of the United States:
  The 1998 Budget, which I am transmitting to you with this message, 
builds upon our successful economic program of the last four years by 
balancing the budget while investing in the future.
   My budget reaches balance in 2002 the right way--cutting unnecessary 
and lower-priority spending while protecting our values. It strengthens 
Medicare and Medicaid, improves last year's welfare reform law, and 
provides tax relief to help Americans raise their children, send them to 
college, and save for the future. It invests in education and training, 
the environment, science and technology, and law enforcement to raise 
living standards and the quality of life for average Americans.
   Over the last four years, my Administration and Congress have already 
done much of the hard work of reaching balance in 2002. We have reversed 
the trend of higher deficits that we inherited, and we have gone almost 
two-thirds of the way to reaching balance. Now, I want to work with 
Congress to achieve the final increment of deficit cutting and bring the 
budget into balance for the first time since 1969.

Building a Bridge to the 21st Century

   For four years, my Administration has worked to prepare America for 
the future, to create a Government and a set of policies that will help 
give Americans the tools they need to compete in an increasingly 
competitive, global economy.
   We have worked to create opportunity for all Americans, to demand 
responsibility from all Americans, and to strengthen the American 
community. We have worked to bring the Nation together because, as 
Americans have shown time and again over the years, together we can 
overcome whatever hurdles stand before us.
  Working with Congress and the American people, we have put America on 
the right path. Today, the United States is safer, stronger, and more 
prosperous. Our budget deficit is much smaller, our Government much 
leaner, and our policies much wiser.
   The economic plan that we put in place in 1993 has exceeded all 
expectations. Already, it has helped to reduce the deficit by 63 
percent--from the record $290 billion of 1992 to just $107 billion in 
1996--and it has spurred a record of strong growth, low interest rates, 
low inflation, millions of new jobs, and record exports for four years.
   While cutting the deficit, we also have cut the Federal work force by 
over 250,000 positions, bringing it to its smallest size in 30 years 
and, as a share of the civilian work force, its smallest since the 
1930s. We have eliminated Federal regulations that we don't need and 
improved the ones we do. And we have done all this while improving the 
service that Federal agencies are providing to the American people.
  We have cut wisely. We have, in fact, cut enough in unnecessary and 
lower-priority spending to find the resources to invest in the future. 
That's why we were able to cut taxes for 15 million working families, to 
make college more affordable for 10 million students, to put tens of 
thousands of young people to work through national service, to invest 
more in basic and biomedical research, and to help reduce crime by 
putting more police on the street.
   My plan to reach balance in 2002 provides the resources to continue 
these important investments. We must not only provide tax relief for 
average Americans, but also increase access to education and training; 
expand health insurance to the unemployed and children who lack it; 
better protect the environment; enhance our investments in biomedical 
and other research; beef up our law enforcement efforts; and provide the 
needed funds for a thriving global policy and a strong defense.

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 Putting the Building Blocks in Place

  When my Administration took office in 1993, we inherited an economy 
that had barely grown over the previous four years while creating few 
jobs. The budget deficit had hit record levels, and experts in and out 
of Government expected it to go higher. Savings and investment were 
down, interest rates were up, and incomes remained stagnant, making it 
harder for families to pay their bills.
   We put in place a comprehensive set of policies that are bearing 
fruit. By cutting the deficit from $290 billion to $107 billion last 
year, my economic program (and the strong economy it helped create) has 
brought the deficit to its lowest level since 1981. As a share of Gross 
Domestic Product (GDP), we have our smallest deficit since 1974 and the 
smallest of any major industrialized nation.
   Other parts of my economic policy also are helping to create jobs and 
raise living standards. With regard to trade, for instance, my 
Administration not only completed the Uruguay Round of the General 
Agreement on Tariffs and Trade and the North American Free Trade 
Agreement, but also more than 200 separate trade agreements, helping to 
raise exports to record levels. By opening overseas markets to American 
goods--by encouraging free and fair trade--we are creating high-wage 
jobs at home.
   Taken together, our budget and trade policies have helped to create 
over 11 million new jobs in the last four years. After two decades of 
troubling stagnation, incomes have begun to rise again while inequality 
shrinks. Also, partly due to a strong economy (and partly to our 
policies), poverty, welfare, and crime are down all across America.
   With strong growth, low interest rates, low inflation, millions more 
jobs, record exports, more savings and investment, and higher incomes, 
the Nation is enjoying what such experts as Alan Greenspan, the chairman 
of the Federal Reserve, have described as the healthiest economy in a 
generation.
   Now, our challenge is to complete the job that we began in 1993--to 
bring the budget into balance for the first time since 1969 while 
continuing to invest in the American people. My budget does that.

 Improving Performance in a Balanced Budget World

   Led by the Vice President's National Performance Review, we are truly 
creating a Government that ``works better and costs less.''
   We have cut the Federal work force by over 250,000 positions, 
eliminated over 200 programs and projects, closed nearly 2,000 obsolete 
field offices, cut red tape, and eliminated thousands of pages of 
regulations while dramatically simplifying thousands more. We also are 
providing better service for Americans--at the Social Security 
Administration, the Department of Veterans Affairs, and other agencies.
   Our efforts to balance the budget will continue to put a premium on 
spending wisely. I am determined that we will provide the highest-
quality service to Americans for the lowest price. And I will demand 
that agencies continue to search for better and better ways to achieve 
results for the American people.
   As we move ahead, we plan to follow a series of strategies that build 
upon our successes to date. We will, for instance, restructure agencies 
to make them more flexible and decentralized. We will work to ensure 
that Federal employees and their managers work together to achieve 
common goals. We will expand competition to ensure that agencies perform 
their functions as efficiently as possible.
   Government cannot solve all of our problems, but it surely must help 
us solve many of them. We need an effective Government to serve as a 
partner with States, localities, business and labor, communities, 
schools, and families. Only when we can show the American people that 
Government can, in fact, work better for them can we restore their 
confidence in it. And I am determined to do just that.

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 Creating Opportunity, Demanding Responsibility, and Strengthening 
Community

   I worked with the last Congress to ensure that as many as 25 million 
Americans no longer have to fear that they will lose their access to 
health insurance if they lose their jobs or change jobs; that people no 
longer will be denied coverage because they have preexisting medical 
conditions; that insurance companies will sell coverage to small 
employer groups and to individuals who lose group coverage; and that 
self-employed people will find it easier and cheaper to get health 
insurance. Now, I want to strengthen both Medicare and Medicaid to 
ensure that they continue to serve the tens of millions of Americans who 
rely on them, to expand health care coverage to help the growing numbers 
of American children and families who lack insurance, and to promote 
public health. My budget invests more in biomedical research, in 
programs to combat infectious diseases, in the Ryan White AIDS program 
that provides potentially life-extending drug therapies to many people 
with AIDS, and in community health centers and Indian Health Service 
facilities that serve critically underserved populations.
   We have to ensure that every American has the skills and education 
needed to win in the new economy, and we can do that only if every 
American is ready for a lifetime of continuous learning. My budget 
expands Head Start, increases our investments in Federal elementary and 
secondary education programs, launches a new effort to jump-start needed 
school renovation and construction, and provides funds for America Reads 
to ensure that all children can read well and independently by the end 
of third grade. To expand higher education and training to all 
Americans, I propose HOPE scholarship tax credits of up to $1,500 for 
two years, tax deductions of up to $10,000, the largest increase in Pell 
Grant scholarships in two decades, lower student loan fees and interest 
rates, and the G.I. Bill for America's Workers so they can choose where 
to get the best job training available.
   We do not have to choose between a stronger economy and a cleaner 
environment. Over the last four years, we have produced both. Now, we 
want to go further. In this budget, I am proposing the funds to speed up 
toxic waste clean-ups, to redevelop abandoned and contaminated sites 
known as ``brownfields,'' to improve the facilities at our national 
parks, to advance our salmon recovery efforts, to invest in energy 
efficiency and renewable energy, to further our environmental efforts 
overseas, and to expand our work with States, localities, private 
groups, and others to restore such sensitive ecosystems as the South 
Florida Everglades and California's Bay-Delta area between San Francisco 
and Sacramento.
   We must maintain our leadership in research, the results of which 
have so greatly improved our health and well-being. Federal research, in 
concert with the private sector, creates new knowledge, trains our 
workers, generates new jobs and industries, solves many of our health 
care challenges, strengthens our ability to address environmental 
issues, enables us to teach our children better, and ensures that we can 
maintain a strong, capable national defense. I am proposing to increase 
our investments in basic research in health sciences at the National 
Institutes of Health, in basic research and education at the National 
Science Foundation, in research at other agencies that depend on science 
and technology, and in cooperative ventures with industry, such as 
through the successful Advanced Technology Program and Manufacturing 
Extension Partnerships.
   I want to build on our efforts to fight crime, curb the scourge of 
illegal drugs, and secure the Nation's borders. Crime is falling all 
across America. And, under the Brady Bill that I fought so hard to 
achieve, we have prevented over 100,000 felons, fugitives, and stalkers 
from obtaining guns. Now, I want to make further progress and, in 
particular, target juvenile crime and violence. My budget continues our 
progress toward putting 100,000 more police on the street. It renews our 
efforts to fight drug abuse, particularly by focusing on youth 
prevention programs to reverse the recent trends of softening attitudes 
toward drugs and more drug use by young Americans. It also strengthens 
our efforts to control illegal immigration by stopping those who want to 
enter illegally, 

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quickly removing those who slipped by, and making it 
harder for illegal immigrants to get jobs.
   Because some American communities have grown disconnected from the 
opportunity and prosperity that most of us enjoy, I want to help 
communities attract private investment to spur their revitalization. 
Because permanent solutions must come from the community level, my 
budget proposes to create opportunities and offer incentives for 
individuals and businesses to participate directly in addressing local 
problems. I want to expand my national service program so that more 
Americans can volunteer and earn money for college. I want to expand 
Empowerment Zones and Enterprise Communities, making more and more 
communities eligible for the tax incentives and other support that can 
spur a return of business and jobs. I also want to expand the Community 
Development Financial Institutions Fund to enhance credit and other 
services to distressed areas. In addition, the Nation's capital, which 
suffers from a unique set of challenges, would benefit greatly from the 
groundbreaking proposal that I have previously outlined.
   I am pleased that, today, 2.1 million fewer Americans are on welfare 
than the day I took office, both because of a strong economy and because 
I have helped States to test innovative ways to move people from welfare 
to work and protect children. I am also pleased that I could sign last 
year's welfare reform legislation, because I believe it will promote my 
basic goals of work, family, and responsibility. I have directed my 
Administration to work closely with States so that we can make welfare 
reform succeed. Last year's law, however, also included excessive budget 
cuts, mainly affecting nutrition programs, legal immigrants, and 
children, that had nothing to do with welfare reform. In signing the 
bill, I said that I would seek legislation to address those problems. My 
budget does that.
   Over the last four years, we have provided tax relief to millions of 
working Americans and to small businesses. But I want to go further by 
helping middle-income Americans raise their children, send them to 
college, and save for the future. For those Americans, my tax plan 
offers a $500 per child tax credit for all children under 13, a $1,500-
a-year tax credit to help families send their children to college for 
two years, a $10,000 tax deduction for tuition and fees for higher 
education and training, and expanded Individual Retirement Accounts to 
encourage saving and enable families to cope with unforeseen problems. I 
am also proposing to ensure that homeowners do not have to pay capital 
gains taxes on 99 percent of all home sales. My tax plan would promote 
the hiring of long-term welfare recipients in order to help move people 
from welfare to work, restore the tax credit that encourages business 
research and development, and expand tax credits for Empowerment Zones 
and Enterprise Communities. And it would help finance my tax relief by 
eliminating unwarranted tax loopholes and preferences.
   On the international front, we must continue to project our 
leadership abroad while we advance our national goals. With the Cold War 
over, we have a great opportunity to expand democracy overseas, but we 
will have a much better chance to succeed if we fulfill our 
international commitments. In this budget, I am proposing that we pay 
our arrears to the United Nations and other international organizations, 
so that our leadership is not undermined at this crucial time. But I 
will also insist that these institutions control their budgets and enact 
the reforms that our Government and others have called for. In addition, 
we must continue our support for Russia and the New Independent States 
of the Soviet Union as they make the difficult transition to free 
markets and democracy, and we must be prepared to do whatever we can to 
advance the difficult, but vital, peace process in the Middle East. A 
strong, coherent foreign policy also will help us further our progress 
in opening markets abroad, and my budget proposes strong, continued 
support for the Federal efforts that help to expand exports.
   Finally, our goals both at home and abroad must rest on the firm 
foundation of a strong national defense. It is a strong defense that 
safeguards our interests, prevents conflict, and secures the peace. We 
must ensure that our armed forces are highly ready and armed with the 
best equipment that tech-

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nology can provide. They must be prepared and trained for the new threats to our security--from the proliferation of weapons of mass destruction, to ethnic and regional conflicts, to terrorism and drug trafficking that directly threaten our free and open society. My budget continues to sustain and modernize the world's strongest and most ready military force, a force capable of prevailing in two nearly simultaneous regional conflicts. It fully funds our commitment to maintain the highest levels of training and readiness, and to equip our uniformed men and women with the most advanced technologies in the world. We must never fall short when it comes to defense.

 Conclusion

   Our policies are working. By dramatically cutting the deficit and 
investing in the future, we have helped to spur four years of strong 
economic growth, providing vast new opportunities for millions of 
Americans. Jobs, incomes, savings, investment, exports, and 
homeownership are all up. Crime, poverty, teen pregnancy, and inequality 
are all down. Clearly, we are moving in the right direction.
   But our work is not done. For too long, the Federal Government has 
spent much more than it received, creating deficits that cast doubt on 
both our economic future and our ability to govern. In the last four 
years, we have made huge progress, cutting the deficit by nearly two-
thirds. I urge Congress to help me finish the job and balance the budget 
by 2002--giving the American people the balanced budget they deserve.

                                                      William J. Clinton
    
February 6, 1997