    [Budget of the United States Government]
    [II. Building on the Success of Our Fiscal Discipline]
    [From the U.S. Government Publishing Office, www.gpo.gov]

    [[Page   11]]

              II.  BUILDING ON THE SUCCESS OF OUR FISCAL DISCIPLINE

    [[Page 13]]

              II.  BUILDING ON THE SUCCESS OF OUR FISCAL DISCIPLINE

      ----------------------------------------------------------------------

        We made the tough choices to reduce the deficit and balance the budget the right way. Year in and year out,
    we have resisted politically attractive, but economically unwise tax cuts that would have abandoned this
    commitment and taken us in the wrong direction . . . And in the last two years alone, we had paid down our
    Nation's debt by $140 billion, the largest debt reduction in our Nation's history. We have closed the book on
    deficits and opened the door on a new era of economic opportunity . . . Debt reduction really means a tax cut,
    and a sizeable one, for America's families. It proves that putting our fiscal house in order helps every
    American household.

                                          President Clinton
                                          October 1999

      ----------------------------------------------------------------------
      The dawn of this new century has brought with it extraordinary
    opportunities for the American people. Today, our economic success is
    unparalleled and we are poised to enter the longest economic expansion
    in our Nation's history. From the largest Federal budget deficit in
    history only seven years ago we have produced the largest surplus in
    history. Moreover, with our fiscal house in order, we have started to
    pay down the national debt held by the public, and if we maintain sound
    fiscal policy, we can eliminate the debt in the next 13 years, making
    the United States debt free for the first time since 1835.
       When President Clinton took office seven years ago, the Federal
    budget deficit had exploded. It dominated the Government's ability to
    make policy and imposed an insidious burden on our economy. In 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
    have been used for productive investments to create new jobs instead was
    used to finance the Government's massive deficit-driven borrowing.
      We can now look back with pride at our progress and ahead with
    confidence as we consider the success of our fiscal discipline and the
    opportunity we have to build upon it. Today, we have lower interest
    rates, a higher level of investment, and unprecedented prosperity. Our
    economy has added more than 20 million new jobs. The unemployment rate
    is the lowest in 30 years, the welfare rolls are down by more than 50
    percent since 1993, the core inflation rate is the lowest in 35 years,
    and more Americans own their own homes than at any time in our history.
      Tomorrow holds even greater promise. The President's deficit reduction
    policy has produced historic surpluses and has put us on a path to pay
    down and eliminate the debt. Compare that to the record of the past. In
    the 12 years before the President came to office, the debt had
    quadrupled and equaled nearly 50 percent of the Nation's annual
    production, draining funds that could have been devoted to other uses in
    order to pay the interest costs on the debt. If the President had not
    adopted the policy of aggressive deficit reduction the debt was
    projected to double again, nearing 70 percent of the Nation's economy by
    2001 and imposing nearly $400 billion in interest costs next year.
    Instead, as the debt begins to reverse course and head downward, we have
    an extraordinary opportunity to make America debt free by 2013.

    [[Page 14]]

      The President's plan to save Social Security would protect the entire
    Social Security surplus and dedicate it to debt reduction, and would
    extend the solvency of the program to mid-century. The President also
    proposes to extend the solvency of Medicare until at least 2025, and to
    modernize the program with a needed prescription drug benefit. Paying
    down the debt will improve the Nation's ability to uphold existing
    commitments to Social Security, freeing resources that would have gone
    to interest costs and devoting them instead to extending the solvency of
    the program. The President's sustained commitment to saving Social
    Security already has produced agreement that it is essential to protect
    the Social Security trust fund. It is time to meet the challenges of
    this new century to ensure that we extend the solvency of Social
    Security and uphold our commitments to generations to come by investing
    in the future.

    The President's Agenda: The Path to Prosperity

      The President has achieved one of his first and most important goals:
    to get the economy moving again. He did this by 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, including expanding global trade.
      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 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, international engagement,
    and targeted investments provided resources for the American people. The
    plan both ensured that key investments for the American people
    strengthened their prospects for the future, and took broader fiscal
    measures to put the Nation's economy 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.

    The Record of Fiscal Discipline and Targeted Investments

      The 2000 Budget maintained fiscal discipline, protected the surplus,
    forged a path of debt reduction, and did so while providing resources
    for a strategy of targeted investments to maintain economic growth and
    provide for the future needs of the Nation. The President worked with
    Congress to establish and build upon significant investments in
    education and training, the environment, law enforcement, and other
    priorities. For example, last year the President's commitment has:
      Provided the second 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 its
              second year, the class size initiative has already reduced
              class size in participating schools by an average of five
              students. The proposed investments in this area will reduce
              class size in the early grades to a national average of 18
              students.
      Increased Head Start's ability to provide greater
              opportunities for disadvantaged children to participate in a
              program which prepares them for grade school. In 2000, a boost
              in Head Start funding will put 880,000 children into the
              program, making further progress toward the President's

    [[Page 15]]

              goal of putting a million children in Head Start by 2002.
      Established the 21st Century Policing Initiative, which builds
              upon the success of the President's Community Oriented
              Policing Services (COPS), that added 100,000 police officers
              to local beats and has contributed to the Nation's lowest
              crime rate in 25 years. The 21st Century Policing Initiative
              provides funding for up to an additional 50,000 officers by
              2005, provides significant funds for the latest anti-crime
              technologies, and engages communities in fighting crime by
              funding new community-based prosecutors and partnerships with
              parole officers, school officials, and faith based
              organizations.
      Created Lands Legacy, an historic interagency initiative,
              which strengthens efforts at the local, State, and Federal
              levels to preserve our national heritage by protecting the
              Nation's natural treasures and historic places for Americans
              today and tomorrow. Funding for Federal land acquisition will
              protect for future generations precious natural and historic
              sites, including parks, forests, wildlife refuges, and
              environmentally sensitive lands throughout the Nation.
      Protected and restored some of the Nation's most treasured
              lands, such as Yellowstone National Park, the Everglades, and
              California's redwoods, provided the funds to conserve many
              others, and accelerated toxic waste clean-ups.
      Advanced cutting-edge research with an increase last year for
              the National Institutes of Health of $2.3 billion--a total of
              $7.5 billion since 1993--an increase of 73 percent by 2000, to
              support a portfolio of research including intensified work on
              diabetes, cancer, genetic medicine, and the development of an
              AIDS vaccine.
      Last year, the President also proposed a budget that respected fiscal
    discipline, met the Nation's needs of today, and planned to uphold our
    commitments for the future. In his 2001 Budget, the President maintains
    the course of fiscal discipline, proposes a plan to extend the solvency
    of Social Security and Medicare and provides the resources for targeted
    investments to keep our Nation's economy and its people strong. The
    budget offers balanced tax relief and provides for the pressing needs of
    today, including expanding health care coverage for America's hard
    pressed working families. The budget does so in a way that balances
    these essential needs, and upholds fiscal discipline now and in the
    future.

    Improving Performance Through Better Management

      A key element in the Administration's ability to expand strategic
    investments and keep the budget balanced is improving performance
    through better management. Improved stewardship of the Government can
    help it better achieve its mission and improve the quality of life for
    all Americans. To this end, the President and Vice President have
    streamlined Government, reducing its work force by 377,000, and
    eliminated obsolete or duplicative programs.
      The Administration, however, is working to create not just a smaller
    Government--but a better one, a Government that provides services and
    benefits to its ultimate customers, the American people. When Government
    works for the people--when citizens receive good basic services and have
    faith in the Government that provides them--their trust in Government
    can be restored.
      Therefore, the Administration is forging ahead with new and additional
    efforts to improve the quality of the service that the Government offers
    its customers. It has identified its highest priorities--24 Priority
    Management Objectives (PMOs) that will receive heightened attention to
    ensure positive changes in the way Government works. These PMOs include
    modernizing student aid delivery, implementing IRS reforms, and
    strengthening the management capacity of the Health Care Financing
    Administration, which oversees Medicare. (For a full discussion of the
    Administration's management agenda, see Section V, ``Improving
    Government Performance.'')

    [[Page 16]]

    Investing in the Future to Save Social Security and Medicare

      President Clinton, through his sustained commitment to save Social
    Security, has lead the way and has built support for general agreement
    that it is essential to protect the Social Security trust fund. The next
    challenge in saving Social Security is to secure and dedicate resources
    to extending the solvency of Social Security. The President has 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 proposes to devote the entire Social Security surplus to
    paying down and eliminating more than $3 trillion of debt held by the
    public by 2013. This will produce substantial interest savings that can
    be used to strengthen and extend the solvency of the program. The
    President's plan commits a portion of the benefits that have resulted
    from the successful strategy of fiscal discipline by dedicating the
    interest savings to the Social Security trust fund, extending its
    solvency to the middle of the century.
      It is essential that the Nation uphold its existing commitments to the
    Medicare program, upon which elderly Americans depend, while modernizing
    its prescription drug benefits. The President's plan extends the
    solvency of the Medicare program by relying on the benefits of debt
    reduction to strengthen and extend the life of the program, and
    dedicates $299 billion of the budget surplus over 10 years. This will
    extend the solvency of Medicare to at least 2025, preserving access to,
    and quality of, the program's benefits that are an essential part of our
    Nation's commitment to aged Americans.
       While preparing for the demographic changes of the future, this
    budget also builds upon efforts to invest in the American people, to
    meet the pressing needs of today, and to lay the foundation to meet
    those of the future. The budget continues this 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 expanding access to health care
    for more low-income children and their hard working parents through the
    SCHIP health insurance program; to allowing Americans from 55 to 65 to
    buy into Medicare; to expanding the Earned Income Tax Credit for hard
    working, low-wage families and helping with their child care expenses,
    to helping States and school districts recruit and prepare thousands
    more teachers and build thousands more classrooms; and, to making every
    effort to fight gun violence in our society.

      Families and Children: For seven 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 expand the Earned Income Tax Credit
    to help lift up hard working, low-wage families, to make child care more
    affordable, accessible, and safe by expanding child care tax credits for
    middle-income families and for businesses to expand their child care
    resources, and increasing funds with which the Child Care and
    Development Block Grant can help more poor and near-poor children. The
    budget proposes to create the Early Learning Fund, which would provide
    grants to communities for activities that improve early childhood
    education and the quality of child care for those under age five. It
    also promotes responsible fatherhood both with measures to encourage
    child support and to help fathers enter and stay in the work force to
    meet their responsibility to their families.
      Health Care: The President has worked hard to expand health care
    coverage and improve the Nation's health. His budget proposes a plan to
    extend the solvency of Medicare to 2025, while modernizing the program
    with a needed prescription drug benefit. The budget gives new insurance
    options to hundreds of thousands of Americans aged 55 to 65. In
    addition, it proposes an expansion of the successful SCHIP program to
    reach additional low-income children and their hard working parents.
      The President's budget proposes initiatives to help patients,
    families, and care givers cope with the burdens of long-term care.

    [[Page 17]]

    The budget also enables more Medicare recipients to receive promising
    cancer treatments by participating more easily in clinical trials.

      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 and
    repairing thousands more classrooms. The President proposes improving
    school accountability and supporting student achievement by promoting
    high standards and providing the support to meet them, including 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.
      Environment: The Administration proposes building upon the historic
    interagency Lands Legacy initiative to both preserve the Nation's
    natural and historic treasures and advance preservation of open spaces
    in every community. This budget provides significantly increased funding
    for this effort, and establishes a dedicated and protected source of
    funding to continue these efforts in the years ahead. This initiative
    will give State and local governments tools for orderly growth while
    protecting and enhancing green spaces, clean water, wildlife habitats,
    and outdoor recreation. The Administration also proposes a Livable
    Communities initiative to further creation of open spaces in urban and
    suburban areas, ease traffic congestion, improve water quality, and
    clean up abandoned industrial sites. In addition, the budget proposes
    funding to accelerate efforts to address the threat of global warming,
    including energy-efficient technologies and tax credits for the purchase
    of energy-efficient cars; to restore and rehabilitate national parks,
    forests, wildlife refuges, and other public lands and facilities; to
    expand efforts to restore farmland and protect the water quality of
    rivers and lakes; to continue efforts to increase the number of
    Superfund cleanups; and, to protect endangered species.
      International Affairs and Defense: The President has worked to bring
    peace to troubled parts of the world. He stood firm in the fight against
    the vicious campaign of ethnic cleansing in Kosovo, and now is working
    to restore peace, stability, and democracy there. The United States has
    played a leadership role in Northern Ireland, Bosnia, and the Middle
    East. This budget also provides critical assistance to the people of
    Colombia whose democratically elected Government has developed a multi-
    year strategy to fight narcotics traffickers.
      The 2001 Budget also supports debt relief as a way to help lift up the
    poorest nations of the world, thereby advancing stability, economic
    growth and, in turn, promoting global trade. Attacks on U.S. embassies
    abroad have shown there are inherent dangers in the work of diplomacy.
    This budget builds on last year's multi-year plan, with 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 funding for programs that support
    U.S. 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, 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. This budget builds upon last year's sustained increase in
    funding for military readiness by providing additional resources, and
    builds for the future through programs for weapons modernization, and to
    support military personnel and their families by enhancing the quality
    of life, thereby increasing retention and recruitment.

    [[Page 18]]

    Looking Ahead

      At the start of this new century, the Nation is blessed with
    prosperity and a renewed spirit of confidence. 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 constrained the Government's ability to make wise choices about
    the future.
      Today, our prosperity, purpose, and renewed confidence have prepared
    us to meet new challenges--spreading opportunity to all corners of our
    Nation, continuing to invest in the American people, and holding fast to
    the strategy of fiscal discipline that has been critical to our success.
    We must make efforts to reach those who have not yet been touched by
    this current wave of prosperity, giving all Americans the chance to
    share the values of community, opportunity, and responsibility. We must
    continue to invest in the American people--by preparing them 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. And, while we pursue and meet these
    challenges, we must not lose sight of the critical element that has been
    the source of so much success--our firm commitment to fiscal discipline.
      We now have an opportunity to meet the pressing needs of today and
    provide for the needs of the future. Our strategy of fiscal discipline
    means that with a continuation of sound fiscal policy, we will be able
    to eliminate the debt and extend the solvency of Social Security and
    Medicare while modernizing the Medicare program with a needed
    prescription drug benefit. We can do so while meeting the need for
    targeted investments to keep our economy growing in the future and while
    addressing the pressing needs of today. We are prepared to keep the
    Nation strong by continuing to invest in the American people.
      This is truly an exceptional moment in America--the economy is
    prosperous, the budget is in balance, and we have a unique opportunity
    to plan for the future. Seven years ago, at the start of this
    Administration, few would have imagined that our Nation would enjoy such
    prosperity and opportunity. Today, as we measure and acknowledge the
    remarkable progress of the past seven years, it is our obligation to
    look forward to future generations and to make the best choices possible
    so that they too can share in the extraordinary opportunity and
    prosperity of America.