[Budget of the United States Government]
[II. Preparing the Nation For a New American Century]
[From the U.S. Government Publishing Office, www.gpo.gov]
II. PREPARING THE NATION FOR A NEW AMERICAN CENTURY
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Table II-1. RECEIPTS, OUTLAYS, AND SURPLUS OR DEFICIT
(Dollar amounts in billions)
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Estimates
1997 --------------------------------------------------------------------------------------------------
Actual 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
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Receipts.................................... 1,579.3 1,657.9 1,742.7 1,793.6 1,862.6 1,949.3 2,028.2 2,122.7 2,226.9 2,329.0 2,444.2 2,565.5
Outlays..................................... 1,601.2 1,667.8 1,733.2 1,785.0 1,834.4 1,859.6 1,945.4 2,013.4 2,090.2 2,164.6 2,227.9 2,307.0
Reserve Pending Social Security Reform...... NA NA 9.5 8.5 28.2 89.7 82.8 109.3 136.7 164.3 216.3 258.5
Deficit (-)/Surplus......................... -21.9 -10.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
On-Budget Deficit (-)....................... -103.3 -106.3 -95.7 -104.9 -94.1 -44.6 -62.8 -44.0 -33.8 -15.1 23.7 55.6
Off-Budget Surplus.......................... 81.4 96.3 105.3 113.5 122.3 134.4 145.5 153.3 170.5 179.4 192.6 202.9
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(11)As Percentages of GDP
Receipts.................................... 19.8 19.9 20.1 19.8 19.7 19.7 19.6 19.6 19.7 19.7 19.7 19.8
Outlays..................................... 20.1 20.0 20.0 19.7 19.4 18.8 18.8 18.6 18.5 18.3 18.0 17.8
Reserve Pending Social Security Reform...... NA NA 0.1 0.1 0.3 0.9 0.8 1.0 1.2 1.4 1.7 2.0
Deficit (-)/Surplus......................... -0.3 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
On-Budget Deficit (-)....................... -1.3 -1.3 -1.1 -1.2 -1.0 -0.5 -0.6 -0.4 -0.3 -0.1 0.2 0.4
Off-Budget Surplus.......................... 1.0 1.2 1.2 1.3 1.3 1.4 1.4 1.4 1.5 1.5 1.6 1.6
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II. PREPARING THE NATION FOR A NEW AMERICAN CENTURY
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Imagine an America in which every child has a world-class education; in
which every family can fairly balance the demands of work and child-rearing;
in which we lift living standards here and around the world; in which we
learn to grow our economy and preserve the common environment which is our
home; in which our oldest values of opportunity, responsibility and community
guide us into a new time of greatest opportunity.
President Clinton
September 1997
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It is, as the President said not long ago, ``a time of genuine hope
and earned optimism for America.'' A country that not many years ago was
approaching the 21st Century with uncertainty now looks to it with
strength and confidence, with the knowledge that we can make it a ``New
American Century.''
The Administration's five years of hard work are paying off. Our
economy is strong, our social health is improving, and our place as the
world's undisputed leader for peace and freedom is unchallenged. Our
Federal Government is leaner, more efficient, more effective, and more
connected to the essential values that Americans share--opportunity,
responsibility, and community.
Our economy has grown an average of three percent a year, helping to
create over 14 million new jobs. Unemployment is below five percent,
inflation is under control, and interest rates are low. Investment
growth and consumer confidence are at their highest levels in a
generation. Homeownership has hit record levels. And, after two decades
in which family incomes remained essentially flat, we are making
progress on this most intractable of economic problems as incomes have
begun to rise at all levels.
Violent crime has dropped dramatically for five years in a row, and
the 1996 drop was the largest in 35 years. The welfare rolls have
dropped by record numbers. Poverty and teen birth rates are also down
while, all across America, many of our poorest urban and rural
communities are springing back to life.
Around the world, America remains the world's lone superpower in both
military and economic terms. Our forces, our resources, and our
international influence have helped to keep the peace in war-torn
nations, nurture democratic capitalism in former communist countries,
and open markets for our goods.
Perhaps most striking of all, the budget deficit continues to fall
dramatically and, with this budget, the President proposes to reach
balance in 1999, marking the first balanced budget in 30 years and an
end to an era of continuous deficits that spiraled out of control
through the 1980s and early 1990s.
Implementing the President's Agenda
Five years ago, the President took office against the backdrop of a
sweeping economic transformation both at home and abroad that was
already dramatically changing how Americans lived, how they worked, and
how they related to one another. An economy that had shifted from
agriculture to manufacturing a century earlier was shifting again, this
time from manufacturing to information, technology, and global commerce,
challenging the rhythms of American life.
In this new economy, Americans could no longer rely solely on their
hard work to earn a good living. Now, they would need the skills to run
the computers and other sophisticated equipment that had be
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come the engines of growth. More and more, what they earned in an
increasingly competitive economy depended on their knowledge, their
creativity, their sense of innovation.
In early 1993, as one Administration replaced another, the Federal
Government seemed ill-prepared to meet the challenges that lay at the
Nation's doorstep, paralyzed by a seemingly intractable quandary--how to
reverse more than a decade of record-setting, and still rising, budget
deficits and a soaring national debt.
In sheer dollars, the Nation had never seen anything like it. The
deficit, which had grown to worrisome levels in the mid- to late 1970s,
soared in the early 1980s--first to over $100 billion, then quickly to
over $200 billion. America faced the prospect of $200 billion deficits
``as far as the eye could see,'' in the words of David Stockman,
President Reagan's Budget Director. Over the next decade, Presidents and
Congresses, together or on their own, tried to bring the deficit under
control, but a structural mismatch between revenues and spending
continually out-paced their efforts.
Year after year, the task of cutting the deficit cast a shadow over
domestic, defense, and international policy. In that era, virtually
every policy proposal from the Administration, Congress, or the private
sector first elicited the question, ``How will it affect the deficit?''
The sheer merit of a proposal (e.g., to grow the economy, to address a
social problem) often fell victim to Washington's all-consuming
calculation of short-run cost.
President Clinton understood the need for deficit reduction, and he
exerted the leadership to get it. But he understood just as clearly that
deficit reduction would not suffice. While reducing the deficit, he
would also invest more in the skills and training of the American
people, and he would push aggressively to expand markets for U.S. goods.
The President's 1993 economic plan, which he worked with Congress to
enact, was the centerpiece of his strategy. It slowed the growth of
entitlements, raised taxes almost entirely on the wealthiest 1.2 percent
of Americans, and extended the ``caps'' on discretionary spending for
five years. It cut taxes for 15 million working families and made 90
percent of small businesses eligible for tax relief. And it began an
ongoing effort to invest in education and training and in research in
order to boost productivity and, thus, 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 funds for a global
policy that has brought peace to certain troublespots and expanded
markets for U.S. goods.
Reaping the Benefits
The three elements of the President's plan--(1) reducing the deficit;
(2) investing in the future; and (3) opening markets to expand trade--
were never before tried together, and the strategy met its share of
skeptics. Opponents predicted that the deficit would rise, not fall,
because the economy would sink into recession, or worse. Jobs would
disappear, the critics said, while interest rates and inflation would
soar.
What happened? All elements of the strategy worked beyond even the
Administration's most optimistic hopes. Rather than generate higher
deficits, the plan helped cut the deficit beyond expectations. Rather
than prompt a recession, the plan helped cut interest rates, spurring
steady growth, over 14 million new jobs, record exports, lower
unemployment and inflation, less poverty, less welfare, and less crime.
No element worked better than the first--reducing the deficit. The
fiscal shortfall had hit a record $290 billion in 1992, and the
Administration projected that, without changes in policy, it would hit
$347 billion in 1997. The President's 1993 economic plan was designed to
reduce the accumulated deficits over five years by a total of $505
billion.
What neither the Administration nor anyone else fully anticipated was
how well the economy and economic plan would work together. The plan
reassured financial investors, helping to cut interest rates and, in
turn, spur growth and jobs. With the economy booming, Federal revenues
from corporate and personal income taxes have far exceeded expectations.
And, for the same reason, the Federal Govern
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ment has spent less on unemployment and other benefit programs than it
anticipated.
Higher-than-expected revenues and lower-than-expected spending closed
the deficit gap more quickly than expected. The 1997 deficit came in at
$22 billion, just 0.3 percent of the Gross Domestic Product (GDP). In
dollar terms and as a share of GDP, it was the lowest deficit in a
quarter-century. (For a full discussion of the President's economic
policy, see Section III, ``Creating a Bright Economic Future.'')
Even within the framework of the President's 1993 economic program,
with its annual ``caps'' on total discretionary spending and its pay-as-
you-go rules for financing new entitlements and tax cuts, the
Administration worked with Congress on significant investments in
education and training, the environment, science and technology, law
enforcement, and other priorities to help raise the standard of living
and quality of life for average Americans, both now and in the future.
For example:
The President's commitment to expand Head Start put 830,000
disadvantaged children into the program in 1998, helping to
prepare these children for school and making further progress
toward the President's goal of putting a million children in
Head Start by 2002.
His investments in public schools have helped States and
communities raise academic standards, strengthen
accountability, connect classrooms and schools to the
information superhighway, and promote public school choice by
opening over 700 charter schools.
His national service program has enabled over 100,000
Americans to earn money for college while helping children to
read, working with parents to improve their kids' health,
creating after-school and summer programs, patrolling the
streets, and performing other vital community work.
His historic investments in higher education, from his new
Hope scholarships to his record increases in Pell Grants, are
ensuring that anyone who wants to go to college can afford to
go.
His efforts to help older, dislocated workers buffeted by
economic change have led to a wider array of Federal
retraining benefits and services to which workers can more
easily avail themselves.
His children's health care initiative, the largest investment
in health care for kids since Medicaid was created, will
provide meaningful benefits to up to five million uninsured
children.
His investments in the environment have protected or restored
some of the Nation's most treasured lands, such as Yellowstone
National Park and the Everglades, provided the funds to
conserve others, and accelerated toxic waste clean-ups.
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 COPS program that supports community policing is putting
83,000 more police (out of 100,000 under the program) on the
streets of America's communities, helping to reduce violent
crime for five straight years.
His investments in distressed urban and rural areas have
leveraged billions of dollars in private investment, created
thousands of jobs, and helped bring communities back to life.
Cutting the Size of Government
How could the Administration both cut the deficit dramatically and
invest more in these and other priorities? Not only by building a strong
economy that would boost revenues and lower spending on unemployment and
other benefits, but also by cutting unnecessary or lower-priority
spending, and, led by the Vice President's National Performance Review,
by increasing the efficiency and effectiveness of our Government.
Since 1993, the Administration has worked with Congress to limit
total discretionary spending, partly by eliminating hundreds of programs
and projects. More broadly, in every budget year of this Administration,
total spending has equaled a smaller share of
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GDP than in any year of the previous two Administrations and, in 1999,
spending will drop to 20.0 percent of GDP, its lowest level since the
early 1970s. The Administration has cut the size of the Federal civilian
work force by over 316,000 people, creating the smallest work force in
35 years and, as a share of total civilian employment, the smallest
since 1931.
The Administration, however, is working to create not just a smaller
Government, but a better one, a Government that best provides services
and benefits to its ultimate customers--the American people. It has not
just cut the Federal work force, it has streamlined layers of
bureaucracy. It has not just reorganized headquarters and field offices,
it has ensured that those closest to the customers can best serve them.
To be sure, the job is not over. For 1999, the Administration once
again is turning its efforts to the next stage of ``reinventing'' the
Federal Government. It plans to dramatically overhaul 32 Federal
agencies to improve key services, such as improving student loan
processing and speeding aid to disaster victims. It also plans to tackle
critical challenges, such as ensuring that Government computers can
process the year 2000 date change and making more Government services
available electronically. (For a full discussion of the Administration's
management agenda, see Section IV, ``Improving Performance Through
Better Management.'')
Under the 1993 Government Performance and Results Act, Cabinet
departments and agencies have prepared individual performance plans that
they will send to Congress with the performance goals they plan to meet
in 1999. These plans, in turn, form the basis for the first Government-
wide performance plan, which the Administration is sending Congress
along with this budget. \1\
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\1\ The plan describes the Administration's commitment to fiscal,
management, and program performance. Thus, it includes the following
sections of this budget--Section III, ``Creating a Bright Economic
Future''; Section IV, ``Improving Performance Through Better
Management''; and Section VI, ``Investing in the Common Good: Program
Performance in Federal Functions.''
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Reaching Balance While Investing in the Future
Though the 1993 President's economic plan had exceeded all
expectations in restoring the Nation's fiscal health, the task of
reaching balance would require one final push. That would come with the
historic 1997 Balanced Budget Act (BBA), on which the President and
Congress agreed last summer.
Along with saving $247 billion over five years, the Act also extended
the solvency of Medicare's trust fund for at least 10 years while
providing for the largest investment in higher education since the G.I.
Bill in 1945, the largest investment in children's health care since the
creation of Medicaid in 1965, and a $500-per-child tax credit for about
27 million working families. It also provided tax incentives to restore
distressed urban and rural neighborhoods, launched a $3 billion Welfare-
to-Work jobs initiative, and restored health and disability benefits to
elderly and disabled legal immigrants.
While implementing the BBA, this budget builds on the President's
efforts to invest in the skills of the American people. Thus, it
continues the President's policy of helping working families with their
basic needs--raising their children, sending them to college, and paying
for health care. It also invests in education and training, the
environment, science and technology, law enforcement, and other
priorities to help raise the standard of living and quality of life of
average Americans.
Within tight constraints, the President proposes major initiatives
that will continue his investments in high-priority areas--from helping
working families with their child care expenses to allowing Americans
from 55 to 65 to buy into Medicare; from helping States and school
districts recruit and prepare thousands more teachers and build
thousands more classrooms to addressing the world-wide problem of global
warming. The budget pays for every initiative--in the President's words,
``line by line, dime by dime.''
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Families and Children: For five years, the President has sought to
help working families balance the demands of work and family, and he
proposes a major effort to make child care more affordable, accessible,
and safe. His Child Care Initiative provides tax breaks to help families
pay for care; tax incentives to help businesses create or expand child
care facilities; direct subsidies for over two million poor or near-poor
children; increased funding for before- and after-school programs; and
funds to help States enforce safety and quality, to train child care
staff, to promote early childhood development, and to improve the health
of young children in child care. Also to help working families, the
President proposes tax incentives to encourage small businesses to
create pension plans for more workers.
Health Care: The President has worked hard to expand health care
coverage and improve the Nation's health. The budget gives new insurance
options to hundreds of thousands of Americans aged 55 to 65 and proposes
new initiatives to ensure that as many uninsured children as possible
are covered. In addition, it provides for unprecedented investments in
biomedical research at the National Institutes of Health; advocates
bipartisan national legislation that would reduce tobacco use among the
young; expands access to new AIDS therapies through the Ryan White
program; enables more Medicare recipients to receive promising cancer
treatments by participating more easily in ``clinical trials''; expands
substance abuse prevention and treatment activities; and enhances food
safety. The budget also funds full participation in the Special
Supplemental Nutrition Program for Women, Infants, and Children (WIC),
which will provide benefits to 7.5 million people by the end of 1999.
Education and Training: The President has worked to enhance access
to, and the quality of, education and training. The budget takes the
next step--helping States and school districts to reduce class size by
recruiting and preparing thousands more teachers and to build thousands
more classrooms; and creating new Education Opportunity Zones to provide
needed support for high-poverty, low-achieving urban and rural districts
while holding them accountable to boost student achievement. The budget
also proposes to move further toward the President's commitment to put a
million disadvantaged children in Head Start by 2002; begin field
testing voluntary national tests; mobilize and train reading tutors for
children; help parents, teachers, and communities create more charter
schools that are free of most State regulations; integrate technology
into the classroom as we connect every classroom to the Internet; enable
more Americans to serve their communities and earn money for college;
expand college work-study to a million students; make it easier for
parents and students to borrow and repay college loans; raise the
maximum Pell Grant college scholarship to its highest level ever; expand
assistance to workers dislocated as a result of global trade and
technological change; increase G.I. bill educational benefits for
veterans; and expand resources for veterans who lose their jobs.
The Environment: The Administration, which helped engineer the global
agreement in Kyoto to address climate change, proposes to launch the
U.S. effort with tax incentives and spending that will spur energy
efficiency and help develop low-carbon emission energy sources. The
proposal includes incentives for buying new, highly fuel-efficient cars;
for investing in energy-saving equipment for commercial and residential
buildings; for commuting by public transit or vanpool; and for
developing innovative energy generation techniques, such as biomass,
wind, and photovoltaics. The budget also would restore and rehabilitate
national parks, forests, and public lands and facilities; expand efforts
to restore and protect the water quality of rivers and lakes; continue
efforts to double the pace of Superfund clean-ups; extend the
Brownfields initiative to promote local cleanup and redevelopment;
better protect endangered species; continue to restore Florida's
Everglades and California's Bay-Delta and protect Yellowstone National
Park and California's Headwaters Forest; improve the roads through
national parks; and expand the public's access to information about
environmental conditions in their neighborhoods.
Research: The President has sought to tap the full potential of our
boundless future by investing heavily in basic and applied research.
Along with increasing funds for biomedical research at the National
Institutes of Health, the budget would promote science and engineering
research at the National Science Foundation; support space-related
activities
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that enhance our knowledge of Earth; invest in Federal-private ventures
to more quickly develop cutting-edge technologies that create jobs;
strengthen university-based research; invest in environmental research
on safe food and clean air and water; expand support for energy
efficiency and renewable energy programs; enable Americans to travel
more safely, more quickly, and more efficiently; and put commercial
industry's technical know-how and economies of scale to work for
national defense.
Innovating to Invest
Challenging times demand innovative solutions, and the budget meets
the challenge by proposing three new investment funds for America--for
research, the environment, and transportation--that will focus attention
on these critical priorities. Together, the funds provide $75.5 billion,
a $4.7 billion increase over the 1998 level for the programs they
contain. Because the funds rely on budget offsets to help finance the
spending, they, in effect, apply pay-as-you-go principles to
discretionary spending.
The funds are:
The Research Fund for America, which includes a broad range
of investments in knowledge, including programs of the
National Institutes of Health, the Centers for Disease Control
and Prevention, the National Science Foundation, the National
Aeronautics and Space Administration, the Energy Department,
the Commerce Department's National Institute of Standards and
Technology, Agriculture Department research programs, the
multi-agency Climate Change Technology Initiative, and other
programs. The budget finances this Fund, in part, through
receipts from tobacco legislation and savings in mandatory
programs.
The Environmental Resources Fund for America, which
encompasses the multi-agency Clean Water Initiative; the new
Land, Water, and Facility Restoration Initiative of the
Interior and Agriculture Departments; the Agriculture
Department's water and wastewater program for rural
communities; and the Environmental Protection Agency's
programs for cleaning up hazardous waste sites (within the
Superfund) and upgrading clean water and safe drinking water
infrastructure. The budget finances the Fund, in part, through
an extension of Federal taxes that support the Superfund.
The Transportation Fund for America, which includes the
Transportation Department's highway, highway safety, and
transit programs; the Flight 2000 free flight demonstration
program; and the Federal Aviation Administration's programs,
including Airport Grants. The budget finances the Fund, in
part, through a new Federal aviation user fee.
Looking Ahead
In policy-making terms, the fiscal ground has shifted dramatically in
Washington. No longer will the deficit hover like a dark cloud over all
debate and decisions. No longer will it serve as a symbol of fiscal
incompetence. No longer will it sap the public's confidence in its
national leaders.
Five years into this Administration, the Nation has turned the
corner. A budget that was out of control is now headed toward balance
while investing in the American people and reflecting their values. As a
result, an economy that was adrift is now strong, with the fundamentals
in place to herald an era of continuing prosperity. A Government that
lacked direction is now focused on providing better service, more
efficiently, at lower cost.
To be sure, challenges remain on the fiscal front. For one thing, the
path to balance is predicated on a continued adherence to budget
discipline, as framed first by the 1993 economic program and, more
recently, by the BBA. For another, the challenge of ensuring the
financial solvency of Social Security and Medicare, on which tens of
millions of Americans rely, stands not too far into the future.
In the public and private sectors, meanwhile, prospects for a budget
surplus are spurring a wide array of ideas about how to use it. At this
point, the Government has not yet reached the surplus milestone, and the
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President believes strongly that ``we should not spend a surplus that we
don't yet have.''
More specifically, he believes the Administration and Congress should
not spend a budget surplus for any purpose until we have a solution to
the long-term financing challenge facing Social Security. With that in
mind, the budget proposes a reserve for the projected surpluses for the
years 1999 and beyond.