    [Economic Outlook, Highlights from FY 1994 to FY 2001, FY 2002 Baseline Projections]
    [III. Major Functions of the Federal Government]
    [1.  Introduction]
    [From the U.S. Government Printing Office, www.gpo.gov]

    [[Page 31]]

                                1.  INTRODUCTION

      This section discusses achievements of the Clinton-Gore Administration
    on a function-by-function basis. Other sections of this document discuss
    America's dramatic economic resurgence during the last eight years, the
    elimination of the budget deficit, and growing budget surpluses that
    have created an opportunity to extend the life of the Social Security
    and Medicare trust funds and offered the hope of paying down the debt
    with prudent budget policies. The past eight years have also seen
    remarkable achievements in areas such as education, health care, help to
    working families, crime fighting, science, the environment, national
    security, foreign affairs, and the efficient and effective management of
    the Federal Government.

                   SELECTED HIGHLIGHTS OF THE PAST EIGHT YEARS

    Program Achievements

      Education and Training: This Administration's dedication to improving
    educational and employment opportunities for all Americans is reflected
    in the nearly 80-percent increase in Federal funding for education and
    training programs since 1993 and in major initiatives to improve and
    expand those programs. The Administration restructured elementary and
    secondary education programs to focus on school-wide and school-system
    reforms based on challenging academic standards for all students,
    including initiatives to reduce class size, establish after-school
    programs, improve reading abilities, and renovate crumbling schools. The
    doors to college were opened to more students through increased Pell
    Grants and Work-Study opportunities, reduced student loan costs, new tax
    credits for postsecondary education, and new programs to help
    disadvantaged students prepare for and succeed in college. Workers
    received improved job training services thanks to the Workforce
    Investment Act, which called for a streamlined, customer-focused job
    training system in each community. Finally, the Administration
    established the Corporation for National and Community Service and
    created the AmeriCorps program to engage Americans of all ages in
    community-based service and to help students who serve to pay off their
    student loans.
      Rewarding Work: Perhaps one of the greatest legacies this
    Administration will leave is the effort to ``end welfare as we know it''
    with policies that expand supports for low-income working families. From
    rewarding States for moving welfare recipients into jobs and encouraging
    businesses to hire people from welfare rolls, to expanding the Earned
    Income Tax Credit and improving health coverage through Medicaid and the
    State Children's Health Insurance Program; and from proposing and
    signing the Family and Medical Leave Act to more than doubling funding
    for child care, the President has led the Nation in a holistic effort to
    reform welfare and support working families. By maintaining an historic
    economic recovery, this Administration's efforts led to falling welfare
    rolls, lower unemployment rates and most noteworthy, lower poverty
    rates. Through significant, targeted funding increases and effective
    policies, the Administration has demonstrated its commitment to
    improving the income security of low-income Americans.
      Social Security: Since 1993, the Administration has proposed a series
    of legislative and management initiatives that have helped to prepare
    Social Security for the baby boom generation. President Clinton's 1998
    challenge to ``save Social Security first'' made the continued solvency
    of the Social Security program a national priority and generated
    bipartisan agreement for substantial debt reduction over the next decade
    to prepare the Nation for the needs of the future. Following the Social
    Security Administration's (SSA's) transition to an independent agency in
    1995, the Administration encouraged SSA to promote program improvements
    responsive to a changing population, enhance customer service, and
    emphasize public education efforts. In 1996, the Administration worked
    with the Congress to develop a dedicated funding source to enable SSA to
    improve the integrity of the disability

    [[Page 32]]

    programs by eliminating a backlog of continuing disability reviews.
      Medicare: Throughout the past eight years, this Administration has
    achieved the longest Medicare Trust Fund solvency in a quarter century.
    At the beginning of the Administration, Medicare was projected to become
    insolvent in 1999. Due to the Administration's efforts, the Medicare
    Trust Fund solvency has been extended by a total of 26 years. These
    actions included support of legislation, such as the Health Insurance
    Portability and Accountability Act of 1996 and the Balanced Budget Act
    (BBA) of 1997, as well as important administrative actions, such as
    expanded coverage of routine patient care costs related to clinical
    trials. The Administration's leadership has strengthened the Medicare
    Trust Fund and has laid a strong foundation for future Medicare reform.
      Natural Resources and the Environment: The Administration achieved the
    cleanest environment in a generation amidst an historic economic
    expansion, despite serious environmental problems facing the Nation in
    1993. Among the President's greatest accomplishments was winning
    legislation that will provide $12 billion over six years in
    unprecedented, dedicated funding for the conservation of America's land
    and coastal resources. He also protected more land in the lower 48
    States under the Antiquities Act than any other President. The
    Administration also more than doubled funding to combat global climate
    change through the Climate Change Technology Initiative, almost doubled
    funding to address the Nation's major remaining water quality problems
    through the Clean Water Action Plan, and developed critical rules to
    implement the Plan. In addition, the Administration cleaned up almost
    four times as many Superfund sites as in the previous 12 years, reduced
    wetlands loss by 80 percent, and fought back numerous anti-environmental
    legislative riders that would have traded hard-won environmental
    safeguards for short-term special-interest gains.
      Science and Technology: In 1993, President Clinton took office
    committed to fostering progress and economic growth by expanding
    investment in civilian research and development (R&D). The President's
    economic strategy relied upon the critical element of investing in
    people and proposed targeted investments to help the Nation compete in
    the global economy and improve our quality of life. While aggressively
    pursuing priority research areas, the Administration maintained a
    balanced portfolio of research across agencies and disciplines. The
    Administration's investments sustained and nurtured America's world-
    leading science and technology enterprise, through pursuit of specific
    agency missions and through stewardship of critical research fields and
    scientific facilities; strengthened and expanded access to high quality
    science, mathematics, and engineering education, and contributed to
    preparing the next generation of scientists and engineers; focused on
    activities that required a Federal presence to attain national goals,
    including national security, environmental quality, economic growth and
    prosperity, and human health and well being; and, promoted international
    cooperation in science and technology that strengthened the advance of
    science and achievement of national priorities. In keeping with the
    emphasis on civilian R&D, the Administration increased the share for
    civilian R&D investments, from 42 percent in 1993 to just over 50
    percent in 2001. During this same period, total Federal funding for R&D
    increased from $72.5 billion to $90.2 billion, a 24-percent increase,
    while defense R&D funding received a more modest increase of seven
    percent, from $42.2 billion to $45.0 billion.
      Administration of Justice: The Administration's criminal justice
    policies have helped push crime rates to their lowest levels in 25
    years, including rates of youth violence and violence against women and
    minorities. The Community Oriented Policing initiative has funded over
    100,000 additional community police officers to make our streets safer,
    and has provided local police departments with critical equipment.
    Increased attention to combating gun-related violence at the Federal,
    State, and local level reduced the number of violent crimes committed
    with guns between 1993 and 1998 by 35 percent. Federal law enforcement
    agencies have adapted to new threats, including the criminal misuse of
    new technologies. Our civil rights laws are being vigorously enforced by
    agencies that now receive the

    [[Page 33]]

    funding they need to protect Americans from discrimination.
      Economic Development and Housing Assistance: In a bipartisan effort to
    revitalize impoverished rural and inner-city areas, the Congress
    authorized and funded the Administration's New Markets initiative in
    December 2000. This initiative, administered by the Small Business
    Administration, will provide $250 million in public and private capital
    for rural and urban small business investments, plus technical
    assistance and mentoring services for aspiring entrepreneurs. In
    addition, a 30-percent tax credit will spur investment in a wide range
    of businesses. The New Markets initiative complements the
    Administration's Empowerment Zones (EZs), established in 1994 to
    challenge communities with high unemployment and poverty rates to
    develop and implement innovative strategic plans for revitalization.
    Areas designated as EZs offer tax benefits for businesses, waivers from
    Federal regulations, and grants for job training and other services. The
    thirty-one urban and rural areas designated as EZs have created over
    120,000 new jobs since 1993, and leveraged more than $12 billion in
    additional public and private sector investment in community
    revitalization efforts. Nine new EZs were authorized for 2001, bringing
    the total to forty. The Administration's efforts to expand economic
    opportunity for low-income families also have included increasing the
    supply of portable housing vouchers by over 250,000 from 1993 through
    2001. Housing vouchers help families improve their housing conditions
    and lower their rent payments, and they also help working families or
    families moving from welfare to work relocate to areas of greater
    economic opportunity or move closer to schools, child care, or other
    services.
      Agriculture: The Administration strongly supported family farms,
    fighting to open foreign markets to U.S. commodities. The NAFTA, GATT,
    and China trade agreements secured by the Administration will increase
    farm income significantly for years to come. The Administration
    championed better risk management for farmers, and led the successful
    efforts in 1994 and 2000 to overhaul the Federal crop insurance program
    to provide higher coverage and better value for agricultural producers.
    Through significant increases in the Department of Agriculture's
    conservation programs, the Administration demonstrated that farm
    programs can both improve the environment and boost farm income. In
    addition, the Government reformed the Nation's nearly century-old meat
    and poultry inspection system, to deploy food safety resources based on
    science and risk.
      International Affairs: The Administration's international affairs
    budget policy has responded to the increased demands of globalization in
    the new post-Cold War world. The Administration implemented the Uruguay
    Round, NAFTA, and other major agreements to liberalize trade and
    financial markets, and aided in the construction of a new global
    financial infrastructure to support financial stability and promote
    economic growth. It helped spur recovery from financial crises in Mexico
    and Asia through carefully targeted use of the Exchange Stabilization
    Fund, and by securing new resources for the International Monetary Fund.
    The Administration mobilized resources to fight transnational problems,
    such as the spread of HIV/AIDs and increased threats to the global
    environment. It improved the security of Americans at home and abroad by
    protecting U.S. embassies and fighting international terrorism. As a
    critical element of its effort to pay arrears owed to the United
    Nations, it successfully concluded negotiations to establish a new scale
    of assessments for United Nations dues that will reduce the U.S. share
    of the UN budget and result in substantial future budgetary savings.
    Finally, the Administration responded forcefully to natural disasters
    from Central America to sub-Saharan Africa and manmade conflicts from
    Bosnia and Kosovo to Indonesia, and provided critical support to
    countries attempting the difficult transition to democracy. As a result
    of these policies and programs, the United States continues to play the
    preeminent role in the post-Cold War world.
      National Security: Since 1993, the Administration has ensured the
    Nation's security by sustaining a commitment to support the best
    equipped, best trained, and best prepared fighting force in the world.
    The Nation's strong military posture provided the foundation which
    enabled American leadership to promote peace, freedom, and prosperity
    around the globe. This was demonstrated by our efforts in Bosnia and

    [[Page 34]]

    Kosovo and through the success of humanitarian and other contingency
    operations. The Clinton-Gore Administration provided the necessary
    defense resources to recruit and retain first-rate personnel, maintain a
    high quality of life for military personnel and their families, enhance
    military readiness and operational capabilities, fund current
    contingency operations, and prepare for the future by modernizing
    weapons systems to maintain the Nation's technological advantage into
    the 21st Century. The global danger from nuclear weapons and other
    weapons of mass destruction was reduced by the Administration's efforts
    to shape the strategic landscape through deterrence, arms control
    agreements, continued enforcement of UN sanctions on Iraq, and threat
    reduction assistance programs in Russia and other states of the former
    Soviet Union. The reliability of the Nation's nuclear stockpile was
    maintained and advances were made in the cleanup of radioactive waste
    from fifty years of weapons production. Emphasis was also placed on
    building awareness of, deterring, and meeting the challenge from
    emerging unconventional threats such as terrorism and computer attack.
    The Clinton-Gore Administration's national security efforts in all of
    these areas has shaped a defense posture well adapted to the post-Cold
    War world with military forces positioned to meet the challenges of a
    new century.
      A Falling Interest Burden: In 1993, the Administration inherited a
    large and growing debt, and the prospect of large and growing budget
    deficits for many years into the future. Net interest outlays had grown
    from $14.4 billion (or 1.4 percent of the Gross Domestic Product, or
    GDP) in 1970 to $198.7 billion (or 3.0 percent of GDP) in 1993, and were
    projected to grow still further without a change in policy. Largely as a
    result of fiscal policy actions under this Administration and the strong
    economic performance over the past eight years, the long, upward trend
    for net interest has ended. In dollar terms, net interest began to
    decline in 1998 with the first balanced budget in recent years. As a
    percentage of GDP, net interest will fall from 3.0 percent in 1993 to an
    estimated 2.0 percent in 2001, a reduction of one-third. As a percentage
    of total outlays, net interest will fall from 14.1 percent in 1993 to
    11.2 percent in 2001, freeing resources for other purposes. Moreover,
    the prospect of continuing surpluses implies that net interest outlays
    will continue to fall toward zero over the next few years. This
    improvement is one of the most important reasons for the projected long-
    term stability of the budget, and is a vital foundation for the Nation's
    preparation for the aging of the population, including the impending
    retirement of the baby-boom generation.

    Management Improvement

      The last eight years have seen a dramatic improvement in the
    management of the Federal Government. The Administration not only
    balanced the budget and invested in key priorities for the future, but
    took important steps to help the Government operate more effectively and
    efficiently. Management functions, such as use of information
    technology, procurement, financial management, statistics and regulatory
    reform, are the essentials of governmental operations, whatever an
    organization's missions or functions may be. Doing them very well rarely
    garners attention; failing to do them can destroy program and policy
    effectiveness and public trust as certainly as bad policy decisions or
    inadequate program implementation. Because the Administration has sought
    to integrate budget and management, many significant management
    accomplishments are addressed in the function-by-function chapters that
    follow (examples include human resources in Chapter 18, ``General
    Government,'' and energy efficiency in Chapter 5, ``Energy''). However,
    there are also a number of Government-wide efficiencies and improvements
    that are worth noting.

      Information Technology (IT): Over the past eight years, the
    Administration has emphasized the importance of IT in creating a
    Government that is more accessible and responsive to citizens. Early
    efforts focused on the management of specific agency systems--
    emphasizing off-the-shelf technology, open architecture, and modular
    development. The bipartisan Clinger-Cohen Act codified Administration
    policy by tying IT to agency budget and strategic planning decisions,
    and created the position of Chief Information Officer in each agency. To
    aid agency implementation of the Clinger-Cohen Act, OMB issued a
    Memorandum titled ``Funding Information Systems

    [[Page 35]]

    Investments,'' commonly referred to as ``Raines' Rules'', which
    established decision criteria to evaluate all major information system
    investments proposed in the President's budget.
      The Administration's foremost management objective at the end of the
    decade was to navigate the year 2000 (Y2K) computer conversion, probably
    the single largest technology management challenge in history. The
    Federal Government's Y2K efforts exceeded all expectations--resulting in
    a remarkably trouble free roll-over to the year 2000. In addition, under
    the direction of the President's Council on Year 2000 Conversion, the
    Federal Government also worked with the private sector, State and local
    governments, and international organizations to solve the problem.
      The Administration has also focused on other important IT initiatives,
    including capital planning, computer security, and data sharing. In
    addition, a Presidential Directive led to specific, major
    accomplishments in the arena of electronic government. Every agency now
    offers key information and critical services online, and more are
    launched each week. Moreover, the Administration is working across
    agencies to bring transformational change on a Government-wide basis.
      In September 2000, the Administration launched www.firstgov.gov to
    provide the public with a single, customer-focused web site, where it
    can find every Federal Government on-line resource by topic or by
    agency. Through FirstGov, citizens can search over 27 million web pages
    in less than one-quarter of a second, 24 hours a day, seven days a week.
    People can apply for student loans, find new jobs, find the latest
    health research, and more. The site safeguards communications and
    transactions with the Government, protects privacy, and leverages a
    partnership with the private sector to maximize innovation and
    usability.
      Ensuring privacy and security are essential to fully exploiting the
    potential of the Internet for electronic government and electronic
    commerce. With respect to privacy, the Administration has worked
    aggressively, particularly on privacy safeguards for Federal web sites.
    As a result, virtually all major points of entry to agency web sites
    provide notice to visitors about what information is collected, why the
    information is collected, and what agencies will do with it. With
    respect to security, the Administration has developed a Public Key
    Infrastructure that uses digital signatures to ensure that recipients of
    online information can authenticate senders in a reliable way; this
    infrastructure also enables the public to use common digital signatures
    across agencies. Well over 100,000 digital signatures have already been
    issued, and over the next several months this number will grow
    substantially.

      Procurement: The Administration has reinvented the way the Government
    buys approximately $200 billion annually in goods, services, and
    construction, concentrating on results rather than process, focusing on
    customer satisfaction, and giving people on the front lines the
    opportunity to experiment with innovative ways to do their jobs. Working
    with the Congress, major legislation was enacted that simplified
    procedures for acquisitions, promoted the use of commercial items,
    eliminated many record-keeping and reporting requirements, emphasized
    past performance and best value in contractor selection, and removed
    barriers in negotiations.
      The Administration also introduced other reforms. For example, the
    Government began using performance-based contracting for services,
    holding agencies accountable for cost, schedule, and performance of
    major acquisition programs, and using alternative dispute resolution
    methods to reduce the number of costly and time-consuming bid protests.
    Credit cards were introduced allowing Government employees to purchase
    over 90 percent of all supplies without using contracting offices.
    Federal supply schedules and multi-agency contracts were established
    allowing requirements across agencies to be combined and speeding up the
    acquisition of products and services. Share-in savings contracts were
    created to allow industry to use its investments and creativity to
    reduce energy costs and to be paid out of the savings.
      Other Government-wide successes include the development of a set of
    core acquisition system performance measures to enable, for the first
    time, comprehensive Government-wide and agency assessments of progress

    [[Page 36]]

    toward providing best value to taxpayers. In addition, the
    Administration has established www.fedbizopps.gov, a single point of
    entry to enable all businesses to gain easy access to contracting
    opportunities; www.pro-net.sba.gov, to promote small business
    opportunities; and the GovSales section of www.financenet.gov, to
    provide access to all Government sales of financial assets, real
    property and personal property.

      Financial Management: Over the last eight years, there has been an
    extraordinary transformation in Federal financial management. Eight
    years ago, only a few agencies routinely prepared and issued audited
    financial statements. Now virtually all agencies issue annual audited
    financial statements and more than half of the 24 largest agencies
    received clean audits in 1999, the fourth year of such reporting. (By
    comparison, it took the States over a decade to achieve this result.)
    Similarly, there was no Government-wide audited financial statement in
    the early 1990's; this year marks the third year of an annual
    Government-wide financial statement. In 1993, the Federal financial
    community did not have a set of Government-wide accounting standards.
    The creation of the Federal Accounting Standards Advisory Board (FASAB)
    led to the development and issuance of a complete set of basic
    accounting standards and concepts in 1996. In October 1999, as
    validation of these efforts, the American Institute of Certified Public
    Accountants recognized FASAB standards as ``generally accepted
    accounting principles''. Recognition of FASAB standards by an
    independent, internationally-recognized audit standard-setting authority
    marks a significant milestone. After several years of pilot activities,
    agencies now can combine financial and performance reports, providing
    for the first time a clear picture of what agencies accomplish and at
    what cost.
      Agencies have also begun to install and use modern, integrated
    financial systems that combine accounting requirements with program
    performance, allowing for improved reporting and accountability. These
    systems are being designed to integrate accounting requirements with
    program management needs, allowing for more timely and useful
    information to managers. For example, CFOs are maximizing the use of the
    Internet for credit and debt management programs to conduct secure,
    private, and authenticated Internet transactions for debt management by
    using electronic signature technology, including digital signatures or
    Personal Identification Numbers (PINs), where appropriate. In the
    Federal grants area, OMB and agencies are making it easier for State,
    local, and Tribal governments and non-profit organizations to apply for
    Federal grants and, as recipients, report their progress. The Federal
    Commons initiative--a project to establish a single point of entry
    online for Federal grant programs--is being introduced across Federal
    grant-making agencies.

      Regulatory Reform: The Administration has continued its efforts to
    improve the transparency and analytical bases of the regulatory process.
    In 1993, the President issued Executive Order No. 12866 setting forth
    the guiding principles and the process that the Administration would
    follow in issuing new regulations and reforming existing rules. The
    Executive Order requires that the agencies fully assess the costs and
    benefits of all alternatives, including not regulating, and selecting
    the alternative that maximizes net benefits (unless a statute requires
    another approach). The Executive Order also requires the agencies to
    submit their regulations to OMB for review and coordination with other
    interested agencies before publication. A major emphasis of this program
    was transparency and openness to the public, including small businesses
    and State, local and Tribal governments.
      On March 22, 2000, OMB issued Guidelines to Standardize Measures of
    Costs and Benefits and the Format of Accounting Statements. The
    guidelines lay out the principles and methodology the agencies are to
    use in estimating and presenting the required cost-benefit analyses of
    the their regulations. OMB has also submitted to the Congress for the
    last three years the Report to Congress on the Costs and Benefits of
    Federal Regulations.
      The Administration's efforts to improve regulation have produced
    significant beneficial results. OMB's Report to The President On the
    Third Anniversary of Executive Order 12866: More Benefits Fewer Burdens
    and, for the last three years, the Report to Congress

    [[Page 37]]

    on the Costs and Benefits of Federal Regulations document some of these
    improvements.

      Statistical Policy and Programs: During the past eight years,
    significant strides have been taken to improve the Nation's statistics.
    Most visibly, the 2000 Census was completed on time, under budget, and
    with higher mail response than that of a decade ago. In addition, the
    American Community Survey was initiated to provide accurate and up-to-
    date local area information that will be used by the Federal Government
    to allocate close to $200 billion in Federal funds annually.
      Obsolete standards that underlie our key economic and demographic
    statistics were revised. In cooperation with Canada and Mexico, the 1997
    North American Industry Classification System (NAICS), based on how an
    establishment produces its products, was developed and introduced to
    replace the Standard Industrial Classification, and an enhancement of
    NAICS for 2002 was completed. The Standard Occupational Classification,
    which will be used by all Federal agencies that publish occupational
    data, was completed in 2000. Major revisions to the Government-wide
    Standards for Maintaining, Collecting, and Presenting Federal Data on
    Race and Ethnicity were issued in 1997, and implementation guidance
    based on additional research and analyses subsequently was issued for
    public comment. At the end of 2000, the Administration adopted
    simplified and expanded standards for defining Metropolitan and
    Micropolitan Statistical Areas for use in collecting, tabulating, and
    publishing Federal statistics.
      In 1997, OMB issued the Federal Statistical Confidentiality Order to
    ensure that statistical information will not be used in any Government
    actions against respondents. The Administration also gained bipartisan
    support for its legislative proposal to harmonize statutory protections
    for the confidentiality of statistical data and permit sharing of data
    for statistical purposes among designated agencies. These efforts are
    designed to bolster the confidentiality afforded statistical information
    provided by the public.
      To improve the relevance, accuracy, and timeliness of the Nation's key
    statistical indicators, a number of critical programs were improved.
    These efforts included: formulating a strategic plan for maintaining and
    improving the National Income and Product Accounts; revising the
    Consumer Price Index (CPI) to reflect changes in the geographic
    distribution of the population and in consumers' buying habits and make
    the CPI a more accurate and reliable reflection of economic conditions;
    expanding service sector output, price, and productivity measures; and
    integrating health surveys to capture changes in health care and
    welfare.
      Finally, two reports that bring together key statistics from a variety
    of agencies were inaugurated--America's Children: Key National
    Indicators of Well-Being, an annual monitoring report on the status of
    America's children, and Older Americans: Key Indicators of Well-Being, a
    periodic Federal report that describes the status of the Nation's older
    population; in addition, more than 100 agencies across the Government
    are now partners in FedStats (www.fedstats.gov), the one-stop-shopping
    Internet service that greatly facilitates access for users of Federal
    statistics.

    Program Performance

      The last eight years have also seen a much-needed emphasis on program
    performance for analyzing and funding Federal programs, through this
    Administration's commitment to the Government Performance and Results
    Act (GPRA) of 1993. This legislation was complemented by the
    Administration's National Performance Review initiative, which was
    announced in September 1993 and led by Vice President Gore. This effort
    later became the National Partnership for Reinventing Government.
    Agencies continue to improve the quality and scope of their performance
    data, and this information is increasingly important in budget
    decisions, program management, and organizational accountability.
      Prior to 1993, very few Federal agencies had ever prepared long-range
    plans; their performance measures usually were limited to workload, and
    hidden from public view; and reporting on what programs actually
    accomplished was rare. By the end of 2000, all 14 Cabinet departments
    and about 85 independent agencies had prepared two cycles of strategic
    plans, which are prepared every

    [[Page 38]]

    three years, and four annual plans; and had completed the first set of
    annual reports that compare actual performance against goals set in the
    annual plans. Collectively, these plans and reports set measurable goals
    and objectives for every Government function and major program. All
    plans and reports produced by agencies under GPRA are sent to the
    Congress, and are available to the public.
      In 1993, the Administration initiated the National Performance Review,
    an eight-year effort that focused on creating a Government that works
    better, costs less, and gets results that Americans care about. This
    effort has streamlined the Government work force, eliminated obsolete
    programs and agencies, empowered its employees to cut red tape, and used
    partnerships to get results. The payoff included:
      elimination of 250 obsolete programs (such as the Tea Tasting
              Board) and agencies (like the Interstate Commerce Commission);
      a reduction of 377,000 employees during the course of the
              Administration, resulting in the smallest work force since the
              Eisenhower years;
      the creation of more than 4,000 customer service standards,
              and the use of private-sector customer satisfaction measures,
              which now show the Federal Government is almost equal to the
              service sector in satisfaction levels;
      the use of more than 350 reinvention labs to test innovations
              and more than 850 labor-management partnerships covering two-
              thirds of the work force;
       a reduction of more than 640,000 pages of internal rules;
              and,
      partnerships, such as one between EPA and the 1,300 companies
              in the toxic chemical industry, which reduced emissions by 50
              percent in four years--faster than if EPA had used the
              traditional rulemaking process.
      During this Administration, public trust in the Federal Government
    nearly doubled in the course of only four years, rising from an all-time
    low of 21 percent in 1994 to 40 percent when last measured in 1998 by
    the University of Michigan.
      The performance of the economy, the increased emphasis on performance
    in Government programs, and the achievements discussed in the individual
    function-by-function chapters that follow demonstrate that the American
    public can be proud of its Government's performance over the past eight
    years.

                        THE FUNCTION-BY-FUNCTION CHAPTERS

      Presentations by ``budget function'' are a result of long-standing
    custom and legislation. The functions are categories that emphasize what
    the Federal Government seeks to accomplish, rather than the agency
    conducting the activity. The functions are designed to inform the
    American people about the ultimate purpose of the spending according to
    broad categories. The function categories are also used by the Congress
    in its review and analysis of the budget.
      Table 1-1 and the tables at the beginning of each chapter present data
    by function for 1993, an estimate for 2001, and the corresponding
    increase or decrease. Table 1-1 displays a category for allowances,
    which includes two items for 2001. The first allowance is for a 0.22
    percent across-the-board reduction required by law in discretionary
    budget authority for agencies other than the Department of Defense. The
    reduction for the Department of Defense is included in the estimate for
    the National Defense function. The second allowance is for mandatory
    outlays and reflects legislation to compensate non-Social Security
    beneficiaries for the loss in benefits caused by shortfalls in cost-of-
    living increases due to an error in the calculation of the CPI in 1999.
    The adjustment for Social Security is included in the Social Security
    function.
      The tables display data for the following Federal resources:

      Discretionary Budget Authority: The Budget Enforcement Act (BEA) of
    1990 defines discretionary budget authority as spending authority
    controlled by annual appropriations acts. Most funding for Federal
    agencies and some grants to State and local governments

    [[Page 39]]

    are discretionary. The BEA limits the amount of discretionary budget
    authority that can be appropriated for a fiscal year. In aggregate, this
    spending represents about one-third of total Government spending.
      Mandatory Outlays: The BEA defines mandatory outlays as those
    controlled by laws other than annual appropriations acts. Mandatory
    outlays are primarily for benefit programs for individuals, such as
    Medicare and Medicaid. Mandatory outlays, including outlays for net
    interest, make up about two-thirds of total Government spending. Unlike
    discretionary spending, the BEA does not limit the amount of mandatory
    outlays. Instead, the Act requires that legislated changes for mandatory
    outlays and receipts combined cannot increase the deficit or reduce the
    surplus.
      Credit Activity: The credit data include direct loan disbursements and
    guaranteed loans.
      Direct loan disbursements. Direct loan disbursements are disbursements
    by the Government to a non-Federal borrower that require repayment with
    interest. The amounts shown in the tables do not include repayments. The
    largest categories of direct loan disbursements are by the Department of
    Agriculture to assist farmers, and by the Department of Education to
    assist students attending higher education.
      Guaranteed loans. Guaranteed loans are loan disbursements made by a
    non-Federal entity (e.g., a private bank) where the Government
    guarantees repayment of all or part of the principal or interest. The
    largest categories of guaranteed loans are to increase homeownership and
    to help low-income families afford suitable housing. Most guaranteed
    loans are classified in the function chapters for Commerce and Housing
    Credit, and for Veterans Benefits and Services.

      Tax Expenditures: Tax expenditures are revenue losses due to the
    preferential provisions of the Federal tax laws, such as special
    exclusions, exemptions, deductions, credits, deferrals, or tax rates.
    They are alternatives to other policy instruments, such as spending or
    regulatory programs, as means of achieving Federal policy goals. Because
    of interactions across provisions, the estimates are only rough
    approximations of the total revenue loss for each function and for the
    Federal Government. Most tax expenditures are classified in the Commerce
    and Housing Credit function and the Income Security function.
      In 1993, this Administration achieved a major expansion of the Earned
    Income Tax Credit, which reduces taxes for working families. The
    Administration also achieved a child care tax credit of $500 per child
    for low- and middle-income families in the BBA of 1997. The Act also
    added significant tax expenditures for education, including the Hope and
    Lifetime Learning credits and Educational Individual Retirement Accounts
    (IRAs), and expanded retirement incentives by increasing traditional IRA
    limits and adding Roth IRAs. Capital gains received greater preferences,
    and most gains on owner-occupied home sales were exempted from tax.
    There were also numerous other changes that affected health care,
    energy, community development, science and technology, and other
    functional areas.

    [[Page 40]]

                                        Table 1-1. Federal Resources by Function
                                                (In billions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                                     1993        2001       Change:
                                      Function                                      Actual     Estimate    1993-2001
    ----------------------------------------------------------------------------------------------------------------
    NATIONAL DEFENSE:
      Spending:
        Discretionary budget authority..........................................      276.1       311.0        34.9
        Mandatory outlays.......................................................       -1.3        -0.4         0.9
      Credit Activity:
         Direct loan disbursements..............................................  ..........          *           *
         Guaranteed loans.......................................................  ..........          *           *
      Tax expenditures..........................................................        2.1         2.2           *

    INTERNATIONAL AFFAIRS:
      Spending:
        Discretionary budget authority \1\......................................       21.2        22.7         1.5
        Mandatory outlays.......................................................       -4.3        -8.8        -4.5
      Credit Activity:
         Direct loan disbursements..............................................        1.9         2.9         0.9
         Guaranteed loans.......................................................        9.5        11.1         1.6
      Tax expenditures..........................................................        4.5        18.1        13.6

    GENERAL SCIENCE, SPACE, AND TECHNOLOGY:
      Spending:
        Discretionary budget authority..........................................       17.2        20.8         3.6
        Mandatory outlays.......................................................          *         0.1         0.1
      Tax expenditures..........................................................        3.3         7.7         4.4

    ENERGY:
      Spending:
        Discretionary budget authority..........................................        5.8         3.1        -2.7
        Mandatory outlays.......................................................       -1.2        -3.6        -2.4
      Credit Activity:
         Direct loan disbursements..............................................        1.5         1.9         0.4
         Guaranteed loans.......................................................          *           *           *
      Tax expenditures..........................................................        2.4         2.1        -0.3

    NATURAL RESOURCES AND ENVIRONMENT:
      Spending:
        Discretionary budget authority..........................................       21.4        28.8         7.4
        Mandatory outlays.......................................................        0.2         0.2          -*
      Credit Activity:
         Direct loan disbursements..............................................          *           *           *
      Tax expenditures..........................................................        1.6         1.6          -*

    AGRICULTURE:
      Spending:
        Discretionary budget authority..........................................        4.3         4.8         0.5
        Mandatory outlays.......................................................       16.1        20.4         4.2
      Credit Activity:
         Direct loan disbursements..............................................       11.1        10.9        -0.3
         Guaranteed loans.......................................................        4.6         6.5         1.9
      Tax expenditures..........................................................        0.3         1.1         0.8

    COMMERCE AND HOUSING CREDIT:
      Spending:
        Discretionary budget authority..........................................        4.1         2.9        -1.2
        Mandatory outlays.......................................................      -25.6         3.0        28.5

      Credit Activity:
         Direct loan disbursements..............................................        5.0         1.7        -3.3
         Guaranteed loans.......................................................       79.4       229.6       150.2
      Tax expenditures..........................................................      160.0       254.7        94.6

    [[Page 41]]

    TRANSPORTATION:
      Spending:
        Discretionary budget authority..........................................       14.0        19.1         5.1
        Obligation limitation...................................................       20.4        38.5        18.1
        Mandatory outlays.......................................................        1.7         2.2         0.4
      Credit Activity:
         Direct loan disbursements..............................................          *         0.7         0.6
         Guaranteed loans.......................................................  ..........        0.5         0.5
      Tax expenditures..........................................................        1.8         2.2         0.4

    COMMUNITY AND REGIONAL DEVELOPMENT:
      Spending:
        Discretionary budget authority..........................................        9.6        11.0         1.4
        Mandatory outlays.......................................................        0.8        -0.7        -1.4
      Credit Activity:
         Direct loan disbursements..............................................        2.4         2.3        -0.1
         Guaranteed loans.......................................................        0.3         3.5         3.2
      Tax expenditures..........................................................        0.9         1.4         0.6

    EDUCATION, TRAINING, EMPLOYMENT, AND SOCIAL SERVICES:
      Spending:
        Discretionary budget authority..........................................       38.2        61.1        22.9
        Mandatory outlays.......................................................       13.5        10.7        -2.8
      Credit Activity:
         Direct loan disbursements..............................................        2.7        19.1        16.4
         Guaranteed loans.......................................................       14.8        28.2        13.5
      Tax expenditures..........................................................       21.9        59.5        37.6

    HEALTH:
      Spending:
        Discretionary budget authority..........................................       20.7        38.9        18.2
        Mandatory outlays.......................................................       79.8       138.9        59.1
      Credit Activity:
         Direct loan disbursements..............................................        0.1   ..........       -0.1
         Guaranteed loans.......................................................        0.3           *        -0.3
      Tax expenditures..........................................................       53.3        99.8        46.5

    MEDICARE:
      Spending:
        Discretionary budget authority..........................................        2.8         3.4         0.5
        Mandatory outlays.......................................................      127.9       218.8        90.9

    INCOME SECURITY:
      Spending:
        Discretionary budget authority..........................................       31.9        39.5         7.6
        Mandatory outlays.......................................................      175.9       213.0        37.1
      Credit Activity:
         Direct loan disbursements..............................................        0.1           *        -0.1
         Guaranteed loans.......................................................  ..........        0.1         0.1
      Tax expenditures..........................................................       74.2       131.9        57.8

    SOCIAL SECURITY:
      Spending:
        Discretionary budget authority..........................................        2.6         3.4         0.8
        Mandatory outlays.......................................................      302.0       431.4       129.4
      Tax expenditures..........................................................       23.7        26.0         2.3

    [[Page 42]]

    VETERANS BENEFITS AND SERVICES:
      Spending:
        Discretionary budget authority..........................................       16.2        22.5         6.3
        Mandatory outlays.......................................................       19.8        22.9         3.1
      Credit Activity:
         Direct loan disbursements..............................................        2.2         1.7        -0.5
         Guaranteed loans.......................................................       35.4        29.5        -5.9
      Tax expenditures..........................................................        2.0         3.5         1.5

    ADMINISTRATION OF JUSTICE:
      Spending:
        Discretionary budget authority..........................................       14.6        30.0        15.4
        Mandatory outlays.......................................................        0.3         0.7         0.4

    GENERAL GOVERNMENT:
      Spending:
        Discretionary budget authority..........................................       11.6        14.0         2.4
        Mandatory outlays.......................................................        1.5         2.3         0.7
      Credit Activity:
         Direct loan disbursements..............................................  ..........          *           *
      Tax expenditures..........................................................       37.2        71.3        34.1

    NET INTEREST:
      Spending:
        Mandatory outlays.......................................................      198.7       210.2        11.5
      Tax expenditures..........................................................        1.1         0.5        -0.6

    ALLOWANCES:
      Spending:
        Discretionary budget authority..........................................  ..........       -0.6        -0.6
        Mandatory outlays.......................................................  ..........        0.2         0.2

    UNDISTRIBUTED OFFSETTING RECEIPTS:
      Spending:
        Mandatory outlays.......................................................      -37.4       -47.2        -9.8
                                                                                 -----------------------------------
    FEDERAL GOVERNMENT TOTAL:
      Spending:
        Discretionary budget authority..........................................      512.5       636.5       124.0
        Mandatory outlays.......................................................      868.5     1,214.2       345.7
      Credit Activity:
         Direct loan disbursements..............................................       27.1        41.2        14.1
         Guaranteed loans.......................................................      144.3       309.2       164.9
      Tax expenditures..........................................................      390.2       683.3       293.1
    ----------------------------------------------------------------------------------------------------------------
    * $50 million or less.

    \1\ Excludes $12.1 billion for 1993 for an increase in the U.S. quota at the International Monetary Fund.