[Budget of the United States Government]
[II. Charting A Course for the New Era of Surplus]
[From the U.S. Government Publishing Office, www.gpo.gov]
II. CHARTING A COURSE FOR THE NEW ERA OF SURPLUS
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[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Table II-1. RECEIPTS, OUTLAYS, AND SURPLUS
(Dollar amounts in billions)
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Estimates
1998 --------------------------------------------------------------------------------------------------
Actual 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
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Receipts.................................... 1,721.8 1,806.3 1,883.0 1,933.3 2,007.1 2,075.0 2,165.5 2,265.3 2,364.3 2,474.0 2,588.3 2,707.7
Outlays..................................... 1,652.6 1,727.1 1,765.7 1,799.2 1,820.3 1,893.0 1,957.9 2,034.0 2,081.5 2,153.5 2,234.3 2,314.7
Reserve Pending Social Security Reform...... 69.2 79.3 117.3 134.1 186.7 182.0 207.6 231.3 282.8 320.5 354.0 393.1
Surplus..................................... 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
On-Budget Deficit(-)........................ -29.9 -41.7 -12.2 0.2 44.4 31.4 49.8 58.2 103.3 130.7 155.9 188.3
Off-Budget Surplus.......................... 99.2 121.0 129.5 133.9 142.3 150.7 157.8 173.1 179.5 189.8 198.1 204.7
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As Percentages of GDP
Receipts.................................... 20.5 20.6 20.7 20.4 20.3 20.1 20.0 20.0 20.0 20.0 20.1 20.1
Outlays..................................... 19.7 19.7 19.4 19.0 18.4 18.3 18.1 18.0 17.6 17.4 17.3 17.2
Reserve Pending Social Security Reform...... 0.8 0.9 1.3 1.4 1.9 1.8 1.9 2.0 2.4 2.6 2.7 2.9
Surplus..................................... 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
On-Budget Deficit(-)........................ -0.4 -0.5 -0.1 0.0 0.4 0.3 0.5 0.5 0.9 1.1 1.2 1.4
Off-Budget Surplus.......................... 1.2 1.4 1.4 1.4 1.4 1.5 1.5 1.5 1.5 1.5 1.5 1.5
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II. CHARTING A COURSE FOR THE NEW ERA OF SURPLUS
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``Remember where we were six years ago. There were some people who were saying America was in decline. Today,
we have a new surplus. We have wages rising to the highest levels in over 20 years. We have the confidence in
the country soaring. We have an unprecedented opportunity to build for the future.''
President Clinton
October 1998
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At the close of the 20th Century, our economic success is
unparalleled. The Nation is now enjoying the longest peacetime expansion
in its history. This sustained economic strength, coupled with the
renewed and rising confidence of the American people, has, as the
President said recently, given us ``an unprecedented opportunity to
build for the future.''
Reflect, for a moment, on how far we have come. When President
Clinton took office seven years ago, the Federal budget deficit had
exploded to the point that it dominated the Government's ability to make
policy and imposed an insidious burden on our economy. By the close of
1992, the $290 billion deficit--the largest in American history--was
projected to continue spiraling upward without restraint. The economy
suffered--interest rates were high and job creation stalled. Capital
that should been used for productive investments to create new jobs,
instead was used to finance the Government's massive deficit-driven
borrowing.
Now, in what seems an entirely new world, we can look back with pride
at our progress of the past six years, and ahead with confidence as we
consider the path of our success. Today, we have lower interest rates, a
higher level of investment, and unprecedented prosperity. Our economy
has added more than 17 million new jobs. The unemployment rate is the
lowest in 28 years, the percentage of Americans on welfare is the lowest
in 29 years, and the inflation rate is the lowest in 33 years. And
today, more Americans own their own homes than at any time in our
history.
By almost any economic measure, 1998 was a remarkable year for the
United States. But there is nothing more remarkable than the success of
the President's deficit reduction policy, which surpassed even the most
optimistic of early predictions. The President's policy allowed the U.S.
Government to balance its books for the first time in a generation,
producing a budget surplus of nearly $70 billion. Ending an era of red
ink, and moving squarely into the black, the Nation can now go forward
with confidence, secure in the knowledge that we are well prepared to
meet the challenges of the next century. And if we keep our resolve in
the 21st Century, we can continue to produce budget surpluses as far as
the eye can see.
The President's Agenda: The Path to Surplus
Determined to set America on the right path, the President began his
first term spearheading a controversial and courageous program to revive
the Nation's economy. His economic strategy was built upon three
elements: fiscal discipline; investing in policies that strengthen the
American people; and engaging in the international economy.
The President's 1993 economic plan, which he worked with the Congress
to enact, was the centerpiece of this strategy. It cut spending, slowed
the growth of entitlements, and raised taxes on only the very wealthiest
Americans. At the same time, this plan
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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 to boost productivity
and, thus, promote higher living standards.
His three-pronged plan of deficit reduction, trade expansion, and
targeted investments provided resources for people and the economy,
ensuring that key investments for the American people strengthened their
prospects for the future, while taking broader fiscal measures to put
the Nation's economic house on the right track.
Despite critics' predictions that this strategy would fail, causing
recession and even larger deficits, the President's plan built the
foundation for the great prosperity that is America's today. In the
summer of 1997, the President and the Congress joined together in an
historic agreement to finish the job of balancing the budget. The
results of this bipartisan action, the Balanced Budget Act (BBA),
provided the final push, bringing the budget to balance a full four
years earlier than projected. Like the President's 1993 plan, the BBA
also provided for strategic investments in the American people.
Fiscal Discipline and Investments in a Time of Surplus
Last year's budget maintained fiscal discipline by reserving the
surplus until we save Social Security first--and at the same time
provided a strategy of targeted investments to help sustain economic
growth. For example, last year's budget provided resources for:
the first year's investment to reduce class size by hiring
100,000 new teachers. Smaller classes ensure that students
receive more individual attention, a solid foundation in the
basics, and greater discipline in the classroom. In this
year's budget, the President proposes investments in this
area, ultimately to reduce class size in the early grades to a
national average of 18 students.
investments to protect our economic interests at home by
responding to international economies in turmoil. The
disruption in financial markets last year lead to economic
dislocation in Asia, Latin America, and the Soviet Union.
This, in turn, hurt American exporters, farmers and ranchers,
who found that markets overseas were beginning to dry up. With
President Clinton's leadership, Congress approved nearly $18
billion for the International Monetary Fund, a stabilizing
force in the world economy.
a guaranteed, record-level investment for the next five years
in the Transportation Equity Act for the 21st Century to
continue rebuilding America's highways and transit systems,
which are essential to continue the growth of modern commerce.
This legislation also funds programs for highway safety,
transit and other surface transportation, while safeguarding
air quality, and helping former welfare recipients get to
their jobs.
Perhaps the most important accomplishment is what last year's budget
did not do--it did not spend the surplus. At the start of last year, the
President called on the Nation to ``reserve every penny of any surplus
until we have taken all the necessary measures to strengthen the Social
Security system for the 21st Century.'' As part of this plan, the
President also launched a national non-partisan dialogue last year to
spark honest debate and build consensus about this vital issue, leading
up to the next step: resolving the difficult issues of Social Security
in a bipartisan fashion.
The prospects for reform are strengthened by the culmination of last
year's efforts to create an environment for constructive discussion, by
our economy's new record-setting prosperity and by the fact that the
surplus has been reserved for this purpose.
Reaping the Benefits
Throughout his Administration, the President also worked with the
Congress to establish and build upon significant investments in
education and training, the environment, 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
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commitment to funding key domestic investments has:
Advanced cutting-edge research with an increase last year for
the National Institutes of Health of $1.9 billion, for
research including intensified work on diabetes, cancer,
genetic medicine, and the development of an AIDS vaccine.
Established the children's health care initiative, the
largest investment in health care for children since Medicaid
was created. Last year, 47 States began programs designed to
provide meaningful benefits to as many as 2.5 million
uninsured children.
Increased Head Start's ability to provide greater
opportunities for disadvantaged children to participate in a
program which prepares them for grade school. Last year, a
boost in Head Start funding put 835,000 children into the
program, making further progress toward the President's goal
of putting a million children in Head Start by 2002.
Invested in public schools to help States and communities
raise academic standards, strengthen accountability, connect
classrooms and schools to the information superhighway, and
promote public school choice by opening 900 charter schools.
Protected and 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.
Built the COPS program to support community policing. This
year COPS will reach the goal of putting 100,000 more police
on the streets of America's communities. COPS has helped
reduce violent crime for six straight years. The 21st Century
Policing Initiative, proposed in this budget, will expand on
the number of police and provide other law enforcement tools
to the community.
Streamlining Government
A key element in the Administration's ability to expanding strategic
investments, while balancing the budget, is the reinvention of
Government--doing more with less. Efforts led by Vice President Gore's
National Partnership for Reinvention have streamlined Government,
reduced its work force, and focused on performance to improve operations
and delivery of service. And these efforts, by reducing the cost of
government operations, have improved the bottom line and contributed to
our strong economy.
Since 1993, the Administration, working with Congress, has eliminated
and reduced hundreds of unnecessary programs and projects. The size of
Government--that is, the actual total of Government spending--has
equaled a smaller share of GDP than in any year of the previous two
Administrations, and in 2000 will drop to 19.4 percent of GDP, its
lowest level since the early 1970s. The Administration has cut the size
of the Federal civilian work force by 365,000, creating the smallest
work force in 36 years and, as a share of total civilian employment, the
smallest since 1933.
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.
For 2000, 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 performance in key
services, such as expediting 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
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in 2000. These plans provided the basis for the second Goverment-wide
Performance Plan which is contained in this Budget. In 2000, for the
first time, agencies will submit to the President and Congress annual
reports for 1999 that compare actual and target performance levels and
explain any difference between them.
Investing in the Future to Save Social Security
In his State of the Union address, President Clinton proposed a
framework for saving Social Security; it builds upon our successful
fiscal discipline and the resources it has provided to the Nation. The
President's plan devotes some of the surplus--62 percent of the unified
budget surplus for the next 15 years--to the Social Security Trust Fund,
making more than $2.7 trillion available and extending the life of the
system through the middle of the next century.
This plan would also tap the power of private financial markets by
setting aside roughly one-fifth of the surplus that has been transferred
to Social Security for investment in private securities. With these
additional contributions, plus the higher returns earned by private
investments, this plan will keep Social Security safe and strong until
2055. Then, in a bipartisan effort envisioned by the national dialogue
of the last year, the President is urging Congress to join him to make
the difficult but achievable choices to save Social Security until 2075.
In the context of these tough choices, the President also noted the need
to made additional reforms, including reducing the poverty rate for
elderly women and other groups on Social Security who are
disproportionately vulnerable and removing the barriers to work that are
a result of the earnings test.
It is time to fix Social Security now. We are able to do so because
the surplus has been saved for Social Security. Last year's commitment
still stands--not to drain the surplus until Social Security has been
resolved; however, it is also our obligation to look toward the future,
and to plan wisely for the time when Social Security reform has been
accomplished, and we can responsibly allocate the surplus for other
National needs.
Once Social Security is on sound financial footing, we must fulfill
our obligation to save and improve Medicare. The President's framework
will reserve 15 percent of the projected surplus for Medicare, ensuring
that the Medicare Trust Fund is secure for 20 years.
The President is also committed to helping all Americans save and
invest so that they will have additional sources of income in
retirement. Dedicating just over 10 percent of the surplus will fund new
Universal Savings Accounts to help Americans save, allowing them to
invest as they choose and receive matching contributions.
And looking ahead to the Nation's other vital needs that will arise in
the future, the President's plan will reserve 11 percent of the
projected surplus for military readiness, education, and other critical
domestic priorities.
This budget builds on the President's efforts to invest in the skills
of the American people. It continues his policy of helping working
families with their basic needs--raising their children, sending them to
college, and expanding access to 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 Americans.
The President is proposing 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
making every effort to fight tobacco and its use among young people.
Families and Children: For six years, the President has sought to help
working families balance the demands of work and family. In this budget
he proposes a major effort to make child care more affordable,
accessible and safe, by expanding tax credits for middle-income families
and for businesses to expand their
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child care resources, assisting parents who want to attend college meet
their child care needs, and increasing funds with which the Child Care
and Development Block Grant can help more poor and near-poor children.
The budget proposes an Early Learning Fund, which would provide grants
to communities for activities that improve early childhood education and
the quality of childcare for those under age five.
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 it
advocates bipartisan national legislation that would reduce tobacco use
among the young. The President's budget proposes initiatives to help
patients, families and caregivers cope with the burdens of long-term
care; and it helps reduce barriers to employment for individuals with
disabilities. The budget also enables more Medicare recipients to
receive promising cancer treatments by participating more easily in
clinical trials. And it improves the fiscal soundness of Medicare and
Medicaid through new management proposals, including programs to combat
waste, fraud and abuse.
Education: The President has worked to enhance access to, and the
quality of, education and training. The budget takes the next steps by
continuing to help States and school districts reduce class size by
recruiting and preparing thousands more teachers and building thousands
more new classrooms. The President proposes improving school
accountability by funding monetary awards to the highest performing
schools that serve low-income students, providing resources to States to
help them identify and change the least successful schools, and ending
social promotion by funding additional education hours through programs
like the 21st Century Community Learning Centers. The budget also
proposes further increases in the maximum Pell Grant to help low-income
undergraduates complete their college education and more funding for
universal reemployment services to help train or find jobs for all
dislocated workers who need help.
Environment: The Administration proposes an historic inter-agency
Lands Legacy initiative to both preserve the Nation's Great Places and
advance preservation of open spaces in every community. This initiative
will give State and local governments the tools for orderly growth while
protecting and enhancing green spaces, clean water, wildlife habitat,
and outdoor recreation. The Administration also proposes a Livability
Initiative with a new financing mechanism, Better America Bonds, to
further creation of open spaces in urban and suburban areas, improve
water quality, and clean-up abandoned industrial sites. In addition, the
budget 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 cleanups; and better protect endangered species.
International Affairs and Defense: The President has worked to bring
peace to troubled parts of the world, and has played a leadership role
in Northern Ireland, Bosnia, and most recently with the Wye River
agreement on the Middle East. The budget reinforces America's commitment
to peace in the Middle East by providing for an economic and military
assistance package arising from the Wye River Memorandum. The work of
diplomacy, advancing peace and United States interests, has inherent
dangers, as the death toll from the terrorist attacks on two U.S.
Embassies in Africa last year reminds us. The budget proposes increased
funding to ensure the continued protection of American embassies,
consulates and other facilities, and the valuable employees who work
there. It also supports significant increases in funding for State
Department programs to address the threats posed by weapons of mass
destruction. The budget also increases programs that support US
manufacturing exports and continues our long standing policy of opening
foreign markets.
The mission of our Armed Forces has changed in this post-Cold War era,
and in many ways it is more complex. Today, the U.S. military must guard
against major threats to the Nation's security, including regional
dangers like cross-border aggression,
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the proliferation of the technology of weapons of mass destruction,
transnational dangers like the spread of drugs and terrorism, and direct
attacks on the U.S. homeland from intercontinental ballistic missiles or
other weapons of mass destruction. The U.S. Armed Forces are well
prepared to meet this mission. Military readiness--the ability to engage
where and when necessary--is razor sharp, and the budget provides
resources to make sure that it stays that way for years to come. The
budget provides a long-term, sustained increase in defense spending to
enhance the military's ability to respond to crises, build for the
future through programs for weapons modernization, and take care of
military personnel and their families by enhancing the quality of life,
thereby increasing retention and recruitment.
Looking Ahead
There is much to be proud of in America today. We have not simply put
our fiscal house in order by balancing the budget; we have left behind
an era in which the budget deficit, as the President said recently,
``came to symbolize what was amiss with the way we were dealing with
changes in the world.'' Today we have risen to the challenge of change--
by preparing our people through education and training to compete in the
global economy, by funding the research that will lead to the
technological tools of the next generation, by helping working parents
balance the twin demands of work and family, and by providing investment
to our distressed communities in order to bridge the opportunity gap.
If the deficit once loomed over us as a symbol of what was wrong, our
balanced budget is proof that we can set it right. Not only do we have
well-deserved confidence, we have hard-earned resources with which to
enter the next century.
Today, we have an opportunity to address the needs of the future. We
have an obligation to proceed prudently. The President's plan proposes
that most of the surplus be invested in Social Security, thereby saving
the system for generations to come. And while the plan honors his pledge
of last year not to drain the surplus until Social Security has been
saved, it also plans prudently for the future. After Social Security
reform is enacted, the President proposes using additional portions of
the surplus to strengthen Medicare, to encourage Americans to save, and
to provide resources for pressing national needs, including military
readiness, education, and other critical domestic priorities.
There is no more pressing issue facing us as a Nation than the need
to guarantee that Social Security will be there for generations to come.
And there is no better time to act than now while the system is still
strong. This is truly an exceptional moment in America--the economy is
prosperous, the budget is in balance, and the President's commitment to
national dialogue has created conditions for constructive action.
We must seize this moment and work together now, where a solution will
be much easier to reach than waiting until the problem is closer at
hand. We should take this rare opportunity to enact comprehensive,
bipartisan Social Security reform this year--or as the old saying goes,
we should fix the roof now while the sun is shining.
It is time, from our position of strength, to meet this challenge. Or
as the President recently declared at the White House Conference on
Social Security:
``Our economy is indeed a powerful engine of prosperity. In its
wide wake it creates something every bit as important as jobs and
growth--the opportunity to do something meaningful for America's
future and the confidence that we can actually do it--an
opportunity to save Social Security for the 21st Century. I hope
history will record that we seized this opportunity.''