[Budget of the U.S. Government]
[II. Building a Bridge to the 21st Century]
[From the U.S. Government Publishing Office, www.gpo.gov]


 
               II.  BUILDING A BRIDGE TO THE 21ST CENTURY

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  I would like to be remembered as the President who prepared America for . . . the 21st Century where we had   
opportunity available to all Americans who were responsible enough to exercise it; where we lived with the      
diversity of this country and the diversity of the world on terms of respect and honor, giving everyone a chance
to live up to the fullest of his or her own ability in building a stronger sense of community, instead of       
becoming more divided, as so many countries are; and where we continue to be the indispensable Nation in the    
world for peace and freedom and prosperity.                                                                     
                                      President Clinton                                                         
                                      December 13, 1996                                                         
                                                                                                                

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  Nearly a century ago, America struggled through what was, up to then, 
its most profound change--from an economy rooted in the farm to one 
powered by the machine. As our economy changed, so did the lives and 
habits of our people. Once mostly isolated in small areas or small 
communities, Americans moved to towns and cities, transforming how they 
lived, how they worked, and how they related to one another.
  With such change came new challenges. Theodore Roosevelt and then 
Woodrow Wilson--two former governors, the first a Republican and the 
second a Democrat--provided the responses for what eventually became 
known as the Progressive Era. What this burst of Federal activity 
represented was a new way of thinking--of using Government to address 
the wrongs, and shape the future, of a growing Nation.
  Today, the Nation faces an upheaval that is just as great, as its 
economy moves from one rooted in machines to one in which information 
spreads from person to person, city to city, nation to nation, at 
lightning speed. Like the upheaval of 100 years earlier, this one, too, 
is transforming the lives of our people, changing the way we live, the 
way we work, and the way we relate to one another.
  But what worked in the Progressive Era was inadequate for the demands 
prompted by the Great Depression. What worked in the 1930s gave way to a 
new approach prompted by the Cold War. So, what worked then must, in 
turn, give way to a new approach for the times that we now face.
  The Nation stands at one of those truly unique moments in its 
history--a moment that demands new thinking. The traditional debates 
between liberals and conservatives seem not to hold the answers for the 
challenges before us. We should not move left or right; rather, we must 
move forward.
  As the President has said, ``the era of big Government is over.'' And 
we are, in fact, cutting the size and scope of Government as we move 
toward a balanced budget. But, as the President also has said, the issue 
is not solely bigger versus smaller. It is also how to make Government 
better. For if Americans do not want a Government that tries to solve 
every problem, they just as surely do not want one that retreats from 
its proper role.
  Generally speaking, governments do certain things well. They ``promote 
the general welfare'' by safeguarding the public, financing education, 
building roads and bridges, distributing benefit checks, and so on. The 
Federal Government, in particular, defends the Nation against attack, 
engages in international diplomacy, ensures retirement income, provides 
health coverage for the elderly, the poor, and people with disabilities, 
expands access to education and housing, protects the environ-

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ment, encourages business investment, and more.
  But the Federal Government does not--indeed, cannot--do it all. Today, 
Federal spending totals less than 25 percent of the Nation's income, as 
measured by the Gross Domestic Product (GDP). To promote the goals that 
Americans share, the Federal Government must work with State and local 
governments, business and labor, non-profits, communities, schools, and 
families.
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  I believe that the Federal Government should give people the tools and
try to establish the conditions in which they can make the most of their
own lives. That, to me, is the key.                                     
                                                                        
                               President Clinton                        
                               October 6, 1996                          
                                                                        

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  Nor, in this budget, should we think about Government solely in terms 
of what it spends. The Government provides services and benefits in all 
sorts of ways. Not only does it distribute cash and provide services, 
but it also allocates tax incentives to achieve certain goals, such as 
expanded home ownership and more research and development. At the same 
time, it pursues social goals through responsible regulation, such as 
protecting children by reducing their access to cigarettes. (For a 
discussion of the full range of Federal activities, see Section VI, 
``Investing in the Common Good: The Major Functions of the Federal 
Government.'')
  For four years, this Administration has been creating a Government for 
the 21st Century. It is leaner, but not meaner. It spends money more 
wisely. It is no longer wrapped in the red tape and bureaucracy of 
yesterday. And it provides better service to its ``customers,'' be they 
Social Security recipients or victims of natural disasters.

Shrinking the Size of Government

  Nowhere is our success more dramatic than on the fiscal front. The 
budget deficit--for too long a kind of public metaphor for waste and 
mismanagement--had hit a record $290 billion in 1992, the year before 
President Clinton took office. The national debt, meanwhile, had 
quadrupled, to $4 trillion, in the 12 years before the President took 
office. By all accounts, the deficit was on a path ever higher, about to 
heap more debt on our children and grandchildren and to force the 
Government to use more of its taxpayer dollars not for anything useful 
but, rather, to pay interest on the debt.
  Then in 1993, the President worked with Congress to enact his economic 
program of lower deficits and, at the same time, more public investment. 
Largely due to the plan, and to the strong economic performance that it 
has helped to spur, the deficit fell by a whopping 63 percent, to just 
$107 billion in 1996--its lowest level since 1981 and, as a share of 
GDP, its lowest since 1974.
  The plan slowed the growth of entitlements, raised taxes almost 
entirely on the wealthiest 1.2 percent of Americans, and extended the 
annual limits, or ``caps,'' on discretionary spending for five years. 
While helping to dramatically reduce the deficit, the plan also cut 
taxes for 15 million working families, made 90 percent of small 
businesses eligible for tax relief, and invested in the future. (For a 
full discussion of the Administration's fiscal policy, see Section III, 
``Putting the Building Blocks in Place.'')
  By limiting total discretionary spending, the caps put a premium on 
spending wisely--on eliminating wasteful and lower-priority programs 
while emphasizing investments in the Nation's future. Thus, the 
Administration has worked with Congress to invest in education and 
training, and in research, in order to enhance productivity and, in 
turn, promote higher living standards; to protect the environment and 
fight crime in order to improve the quality of life for all Americans; 
and to secure the resources for a global policy that has brought peace 
to certain troublespots and has expanded markets for U.S. goods.
  Facing the challenge of global competition, American businesses are 
forcing themselves to do more with less. The Federal Government is doing 
the same. Led by Vice President Gore's National Performance Review, the 
Administration has worked hard to ``create a Government that works 
better and costs less.''

[[Page 13]]

  As business downsizes, so does the Federal Government. Four years 
after the President and Vice President assumed office, and largely due 
to their efforts, the Federal work force stands at 1.9 million civilian 
employees \1\-- its smallest size in 30 years and, as a share of 
civilian employment, its smallest since 1931. The Administration has cut 
the work force by over 250,000 full-time equivalents (FTE),\2\ and it 
will continue shrinking as the President and Congress finish the job of 
balancing the budget.
---------------------------------------------------------------------------
  \1\ Not included in this figure are 1.5 million uniformed men and 
women and 0.9 million employees of the Postal Service
  \2\ As of September 1996.
---------------------------------------------------------------------------
  The shrinking work force focuses the spotlight on those Federal 
workers who remain on the job. It is they who must work more effectively 
if the Federal Government is to work better. From our efforts to 
reinvent Government, which these workers have led, the Administration 
knows that the vast majority of them want to do a good job. The 
President and Vice President will continue to view them as partners in a 
great quest to give the American people the best Government that they 
can create.
  To the average American, however, the size of Government involves more 
than the size of its budget or of its work force. It involves the 
regulations (or rules) with which millions of businesses and individuals 
must comply. It also involves the responses they receive when they call 
the Government for help.
  Regulations are not inherently good or bad; potentially, they can be 
either. Good rules bring us safer cars and workplaces, cleaner air and 
water, and fairer business practices. But bad rules--those that are too 
costly, too intrusive, and too inflexible--can impede businesses and 
other institutions from doing their jobs.
  The President has sought to develop a more sensible regulatory 
program, one that reduces the burden of existing and new rules while 
improving their effectiveness. Specifically, the Administration has 
nearly reached its goal of eliminating 16,000 pages of regulations and 
dramatically simplifying 31,000 others. In addition, agencies are 
effectively implementing the President's Executive Order 12866 of 1993--
using better data and analysis to make their decisions, considering the 
costs and benefits of alternative ways to reach their goals, and opening 
the decision-making process to those affected by the rules.
  What do Americans find when they call their Government? Compared to 
four years ago, they are likely to find a friendlier, more responsive 
voice on the other end. Agencies are making real progress in improving 
service to their customers, the American people. They are finding new, 
innovative ways to deliver service, and they are reaching out to learn 
more about what their customers want.
  If anything, the challenges will only grow for departments and 
agencies. They face a future of severely constrained resources. As a 
result, the Administration has developed a set of strategies (or tools) 
by which agencies will try to make even more progress in this 
environment. (For a full discussion of these seven tools, see Section 
IV, ``Improving Performance in a Balanced Budget World.'')

Achieving Our Goals

  But can smaller really be better? Can we really do more with less? As 
the Administration has proved across a broad spectrum of areas, the 
answer is a resounding ``Yes!'' The right kind of Government, making the 
right kind of decisions, can have a demonstrably better effect on the 
lives of millions of Americans.
  Opportunity for all, responsibility from all, and a stronger American 
community--those have been the underpinnings for what the Administration 
has sought to achieve. In pursuing these goals, Administration policies 
have helped to produce a strong economy with better jobs, higher 
incomes, more pension and health security, greater educational 
opportunity, safer streets, and a cleaner environment.
  By cutting the deficit, for instance, the President's 1993 economic 
plan helped cut interest rates, spurring strong growth with steady 
prices. The result: over 11 million new jobs (most of them high-wage); 
the lowest inflation of any Administration in 

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over 30 years; the highest 
rate of homeownership in 15 years; rising incomes; falling inequality; 
and record numbers of exports and new small businesses.
  With the 1993 plan limiting spending, the President has worked with 
Congress to spend the available resources most wisely, helping to 
produce real results in education, the environment, research, and law 
enforcement.
  His direct lending program has helped make college more 
          affordable for 10 million students.
  His national service program has enabled 70,000 Americans to 
          earn money for college while building houses, helping children 
          to read, patrolling the streets, and performing other vital 
          community work.
  His investments in research are helping to build new, high-
          powered supercomputers, and to develop drugs that could extend 
          the life expectancy of those with HIV and AIDS.
  His community policing program has already put 64,000 more 
          police (out of 100,000 under the program) on the streets of 
          America's communities, helping to reduce serious and violent 
          crime for five straight years.
  The President worked with Congress to:
   Raise the minimum wage, giving 10 million Americans a pay 
          raise;
  Enact the Family and Medical Leave Act, enabling 67 million 
          workers to take up to 12 weeks of unpaid leave from work to 
          care for a newborn or a sick family member;
  Adopt the Kassebaum-Kennedy bill, ensuring that as many as 25 
          million American workers would not lose their health insurance 
          when they change jobs;
  Reform the Federal pension insurance system, protecting the 
          pensions of over 40 million Americans;
  Take a vital first step ``to end welfare as we know it'' by 
          requiring able-bodied recipients to work;
  Adopt the Brady bill, imposing a five-day waiting period on 
          gun purchases that has already prevented over 100,000 felons, 
          fugitives, and stalkers from buying handguns;
  Ban the import and manufacture of 19 deadly assault weapons, 
          keeping them from would-be killers; and
  Overhaul the immigration system, cracking down on illegal 
          immigration without punishing legal immigrants.
  The Administration also has acted on its own to improve the lives of 
average Americans. It has:
  Approved waivers (before last year's welfare reform law) to 
          let 43 States find innovative ways to move recipients off 
          welfare and into the economic mainstream. (Due to those 
          efforts and a strong economy, 2.1 million fewer Americans are 
          on welfare than when President Clinton took office.);
  Approved waivers to let 15 States pursue major State-wide 
          health reform initiatives under Medicaid;
  Protected the border by deporting a record 206,000 illegal and 
          criminal aliens from 1993 to 1996; and
  Completed the General Agreement on Tariffs and Trade and the 
          North American Free Trade Agreement, as well as over 200 other 
          trade agreements, helping to spur exports to record levels 
          and, in turn, create high-wage jobs at home.
  Our trade agreements, and the benefits they produce, point to a 
growing reality--we live in an increasingly inter-connected world, one 
in which our prosperity at home depends on our leadership abroad. Over 
the last four years, the Administration has reduced tensions in the 
world's troublespots through the deft use of diplomacy and, when 
necessary, the deployment of troops. Democracy in Haiti, peace in 
Bosnia, more dialogue in the Middle East--they are all due to American 
leadership.
  Yet, despite his impressive four-year record of accomplishment both at 
home and abroad, the President understands that his work is not done. 
Most importantly, we must finish the job of balancing the budget. For 
only when we balance the budget can we 


[[Page 15]]

hope to assure a healthy economic 
future for all Americans. And only then can we hope to restore the 
public's confidence in Government.

The Task Ahead: Balancing the Budget

  This budget fulfills the President's commitment to reach balance in 
2002. In fact, under the Administration's economic and technical 
assumptions, it would generate a $17 billion surplus that year.
  The budget builds on the balanced budget proposals that the President 
outlined in his negotiations with the bipartisan congressional 
leadership over the last two years. The negotiations brought the two 
sides close to an agreement, and the President is determined to finish 
the job this year. He views this budget proposal as the next step in the 
march to reach balance.
  Specifically, the President continues to seek cuts in unnecessary and 
lower-priority spending in both discretionary and mandatory programs, 
and to eliminate unwarranted tax loopholes and preferences. His $388 
billion in total savings would do more than bring the budget into 
balance by 2002. They also would provide enough savings to finance a 
modest tax cut to help middle-income Americans raise their children, 
send them to college, and save for the future; and to correct the harsh 
provisions that Congress attached to last year's welfare reform 
legislation.
  Among its major elements, the budget:
  saves $137 billion in discretionary spending, cutting 
          unnecessary and lower-priority programs while investing in 
          education and training, the environment, science and 
          technology, law enforcement, and other priorities that would 
          raise living standards and the quality of life for average 
          Americans (see Chapters 2-6);
  saves $100 billion in Medicare ($138 billion over six years), 
          ensuring the solvency of the Part A trust fund until 2007 
          while maintaining the essential quality of Medicare services 
          for the elderly and people with disabilities (see Chapter 1);
  saves $22 billion in Medicaid, building upon the substantial 
          savings that Federal and State experimentation in this 
          jointly-run program is already generating, and continuing the 
          guarantee of essential health and long-term care coverage for 
          the most vulnerable Americans (see Chapter 1);
  saves $76 billion by ending corporate subsidies and other tax 
          loopholes, extending expired tax provisions, and improving tax 
          compliance (see Chapter 8);
  saves $36 billion by continuing the Administration's 
          successful policy of auctioning segments of the broadcast 
          spectrum (for other proposals on mandatory programs, see 
          below);
  provides $18 billion to correct the harsh provisions that 
          Congress attached to last year's welfare reform law, 
          protecting those in need and helping recipients to find self-
          supporting work (see Chapter 7); and
  cuts taxes by $98 billion, providing tax relief to tens of 
          millions of middle-income Americans and small businesses (see 
          Chapter 8).
  With regard to other mandatory programs, the budget proposes to more 
fully fund the costs of Federal civilian employee retirement; extend 
previously-enacted savings in veterans' benefits; cut subsidies to 
financial institutions that make and hold student loans while reducing 
the costs to borrowers; impose fees to recover the costs of services 
that the Federal Government provides to private businesses; and 
privatize or sell, rather than give away, valuable public resources.
  All budget plans--the President's, Congress', and others--rest on a 
set of assumptions about how the economy will perform over the next five 
years, and about technical matters such as how fast Medicare spending 
will grow. Those assumptions, in turn, help shape projections about the 
future direction of the deficit and, thus, the size of the challenge 
ahead in balancing the budget.
  Since the President took office, the Administration has worked hard to 
develop a set of conservative assumptions each year and, in fact, our 
economic assumptions generally 


[[Page 16]]

have proved too conservative. The economy 
has performed better than most analysts expected in the past four years, 
providing strong growth, low interest rates, and stable prices. The 
Government has received more tax revenues, and spent less on certain 
social programs--and, as a result, the deficit has fallen far more than 
projected.
  The Administration's assumptions also proved more accurate than the 
even-more conservative assumptions of the Congressional Budget Office 
(CBO)--although both sets of assumptions were quite reasonable. The 
Administration is confident that its own assumptions will continue to 
prove the more accurate.
  Nevertheless, the budget includes a mechanism to ensure that the 
President's plan reaches balance in 2002 under OMB or CBO assumptions. 
If OMB's assumptions prove correct, as we expect, then the mechanism 
would not take effect. If, however, CBO proves correct--and the 
President and Congress cannot agree on how to close the gap through 
expedited procedures--then most of the President's tax cuts would 
sunset, and discretionary budget authority and identified entitlement 
programs would face an across-the-board limit.
  With this mechanism in place, the American people can rest assured 
that we will reach balance in 2002--no matter which set of assumptions 
are used in the budget process.
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  Comparisons between this budget and the President's earlier balanced budget plans can be misleading.          
                                                                                                                
  Over the last two years, the President's goal has not changed. He has consistently sought to reach balance by 
2002. But with each passing year, the time frame has, by definition, shrunk. Thus, the seven-year plan that he  
first proposed was followed by a six-year plan, followed by a five-year plan in this budget.                    
                                                                                                                
  Is the task of reaching balance easier now? Yes and no. On one hand, the continued strength of the economy,   
slower spending in key programs (such as Medicare and Medicaid), and savings enacted last year have lowered the 
projected deficits through 2002, reducing the amount of savings needed to reach balance. On the other hand, the 
shorter time frame makes it harder to phase in savings in entitlement programs, thus making the entitlement cuts
deeper than they otherwise would have to be.                                                                    
                                                                                                                

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The Task Ahead: Investing in the Future

  Balancing the budget is not an end in itself. Rather, it helps fulfill 
the President's central economic goal--to raise the standard of living 
for average Americans, both now and in the future.
  So, too, do the spending priorities of this budget. Details matter. 
How the Government spends money--for whom, for what purpose--is just as 
important as whether it does.
  Within tight constraints, the budget continues the President's policy 
of the last four years in shifting Federal resources to education and 
training, science and technology, and other investments to enable 
Americans to get the skills to acquire good jobs, and to give businesses 
the tools to become more competitive, in the new economy. The budget 
also continues to shift resources to the environment and law 
enforcement, raising the quality of life for average Americans.
  For education and training, the budget proposes to fulfill the 
President's commitment to put one million disadvantaged children in the 
Head Start program by 2002; to create safe learning environments for 
more children; to help more school systems extend high academic 
standards, better teaching, and better learning to all students; to 
enable more Americans to serve their communities and earn money for 
college; to bring technology into more classrooms; to expand college 
work-study to one million students by the year 2000; to create a $1,000 
merit scholarship for the top five percent of graduates in every high 
school; to let more parents, teachers, and communities create public 
schools to meet their own children's needs; to make it easier for 
parents and students to borrow and repay college loans; to create the 
largest increase in Pell Grant scholarships in 20 


[[Page 17]]

years; and, finally, 
to provide Skill Grants to adults for job training.
  On other priorities, the budget proposes to maintain environmental 
enforcement; protect national parks and other sensitive resources; and 
provide tax incentives to encourage companies to clean up 
``brownfields''--abandoned, contaminated industrial properties in 
distressed areas. The budget would put 17,000 more police on the street, 
bringing the total to 81,000 and moving closer to the President's goal 
of 100,000 by the year 2000; and it would provide more funds to combat 
juvenile crime and step up the fight against drugs, largely by focusing 
on treatment and prevention aimed at youth. It would increase the number 
of Border Patrol agents and workplace investigations to prevent illegal 
immigration and deter the hiring of illegal immigrants.
  The budget invests in research, including biomedical research at the 
National Institutes of Health, in programs to combat infectious diseases 
at the Centers for Disease Control, 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. The budget funds full participation in the Special 
Supplemental Nutrition Program for Women, Infants, and Children (WIC), 
which would be 7.5 million people by the end of 1998.
  Finally, the budget proposes to add $1 billion to the Community 
Development Financial Institutions Fund over five years to create jobs 
and foster development in low-income urban and rural communities. For 
the same purpose, the budget proposes to expand the number of 
Empowerment Zones and Enterprise Communities, providing tax relief and 
other assistance for distressed urban and rural areas.
  Over the last year, the President also has proposed a series of 
initiatives to more quickly, and more effectively, meet his goal of 
higher living standards and a better quality of life for all Americans.
  Along with his earlier tax deduction proposal of up to $10,000 
          for college tuition and job training, the President proposes a 
          new $1,500-a-year HOPE scholarship tax credit to make two 
          years of college universal. The budget also proposes to 
          increase Pell Grants for lower-income families who lack the 
          tax liability to benefit from the tax cuts.
  The President proposes the America Reads Challenge to help 
          ensure that all children can read by the third grade, and a 
          five-year, $5 billion school construction fund to help States 
          and communities address the serious problem of dilapidated 
          school buildings.
  Building on his earlier proposal to help the unemployed keep 
          their health care coverage for six months, the President now 
          proposes to help expand health care coverage to uninsured 
          children.
  Having taken the first step to reform welfare, the President 
          now proposes to enhance the Work Opportunity Tax Credit to 
          encourage employers to hire long-term welfare recipients.
  The President proposes to reshape the Federal Government's 
          relationship with the District of Columbia by assuming 
          responsibility for certain pension, justice, and other 
          functions. In exchange, the Government no longer would make an 
          annual discretionary payment to the city, and it also would 
          expect the city to be more accountable for how it uses its 
          resources.

A Look Ahead

  A balanced budget; a leaner, more effective Government; investments to 
help secure a brighter future--these are the priorities that pervade 
this budget, and that are outlined in the pages that follow. They are 
the priorities that will, in the President's words that began this 
section, ``prepare America for . . . the 21st Century.''
  But to fully appreciate the President's agenda for the future, it 
helps to know what the Administration has already accomplished. The 
President's economic policies, including a dramatic cut in the deficit, 
have helped to revive an economy that was suffering from over a decade 
of debt and other burdens. It is to that record--four years of 
significant accomplishment--that we now turn.