[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.''
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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.
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\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.
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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
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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
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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
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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.