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

    [[Page 107]]

                         8.  COMMERCE AND HOUSING CREDIT

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

                         Table 8-1.  Federal Resources in Support of Commerce and Housing Credit
                                              (Dollar amounts in millions)
    ----------------------------------------------------------------------------------------------------------------
                                                                                                            Percent
                                    Function 370                                     1993        2001       Change:
                                                                                    Actual     Estimate    1993-2001
    ----------------------------------------------------------------------------------------------------------------
    Spending:
      Discretionary budget authority............................................      4,092       2,932        -28%
      Mandatory outlays \1\.....................................................    -25,562       2,964          NA
    Credit Activity:
       Direct loan disbursements................................................      5,012       1,670        -67%
       Guaranteed loans.........................................................     79,378     229,578        189%
    Tax expenditures............................................................    160,040     254,680         59%
    ----------------------------------------------------------------------------------------------------------------
    NA = Not applicable.

    \1\ Mandatory outlays in 1993 were offset by nearly $28 billion in deposit insurance collections primarily from
      the sale of assets and insurance premiums.

      ----------------------------------------------------------------------
      During the Clinton-Gore Administration, the homeownership rate reached
    a record high level, increasing investment in the Nation's communities
    and enabling an additional nine million American families to build
    personal equity in a home. Facilitating homeownership is one of many
    ways the Government supports housing and advances commerce. The
    Government provides direct loans and loan guarantees to ease access to
    mortgage and commercial credit; sponsors private enterprises that
    support the secondary market for home mortgages; regulates private
    credit intermediaries; protects investors when insured depository
    institutions fail; promotes exports and technology; collects our
    Nation's statistics; and, offers tax incentives.

    Restoring the Public's Trust in the Department of Housing and Urban
    Development (HUD)

      The Administration improved HUD operations through a concerted and
    persistent management overhaul over the past several years, aiming
    toward a more unified and responsive organization. Today, HUD employees
    have a clearer mission, one that emphasizes customer service and the
    achievement of results. HUD's information and financial systems are
    better. The Department now has the additional tools to assess how its
    intermediaries are performing, set performance goals, and reward and
    penalize on the basis of performance. The end product is a better
    business organization to deliver necessary services to the Nation. As
    the General Accounting Office reported, ``HUD continues to make credible
    progress in overhauling its operations to correct its management
    deficiencies,'' and it credited the HUD Management Reform Plan as ``a
    major contributor to this progress.''

    Providing Mortgage Credit

      The Government provides loans and loan guarantees to increase
    homeownership, and to help low-income families afford suitable
    apartments. Housing credit programs of the Departments of Housing and
    Urban Development (HUD), Agriculture (USDA), and Veterans Affairs (VA)
    supported $123 billion in loan and loan guarantees in 2000, an increase
    of almost 10 percent from 1993. All of these programs have contributed
    to the success of the President's National Homeownership Initiative
    which, along with a strong economy, helped boost national homeownership
    from 63 million in 1993 to 72

    [[Page 108]]

    million in 2000, exceeding the Administration's goal and reaching a
    record level (see Chart 8-1).

      HUD's Federal Housing Administration (FHA): The Mutual Mortgage
    Insurance Fund, run by the FHA, helps increase access to single-family
    mortgage credit across the United States. In 2000, the MMI Fund insured
    over $86 billion in mortgages for almost 900,000 households. During this
    Administration, FHA strengthened the financial health of the MMI Fund
    while guaranteeing more loans for borrowers and reducing the rate of
    property foreclosures. FHA also now serves more underserved borrowers
    than it did at the start of this Administration, e.g., over 80 percent
    of FHA borrowers who purchased their homes in 2000 are first-time
    homeowners, up from 67 percent in 1993, and 42 percent of FHA borrowers
    who purchased their homes in 2000 belong to a minority group, as
    compared to only 23 percent in 1993. As noted in Table 8-2, FHA also
    insures mortgage loans for multi-family housing as part of its General
    Insurance and Special Risk Insurance Fund.

      USDA's Rural Housing Service (RHS): RHS offers direct and guaranteed
    loans and grants to help very low- to moderate-income rural residents
    buy and maintain adequate, affordable housing. The RHS direct loan
    program for single family housing provides subsidized direct loans to
    very-low and low-income rural residents who would be unable to get
    credit elsewhere. The RHS guaranteed loan program for single family
    housing guarantees up to 90 percent of a private mortgage. During this
    Administration, the RHS single family housing programs together provided
    500,000 rural families with decent, safe, affordable homes,
    significantly reducing the number of rural residents living in
    substandard housing. In 1993, RHS financed approximately 42,000 home
    loans, and in 2001 it expects to provide 57,000 loans, a 36-percent
    increase.

    [[Page 109]]

      During this period, RHS also significantly improved its customer
    service to its 650,000 housing borrowers, as well as its financial
    accountability by centralizing the servicing of its single family
    housing direct loan portfolio. Through this effort, RHS established an
    escrow system; reduced operating costs, loan losses, foreclosures and
    delinquency rates; and, brought RHS accounting more in line with the
    commercial sector. These new efficiencies enabled RHS to provide more
    subsidized loans with no additional budget authority. Since 1993, the
    RHS single family housing programs provided almost $30 billion in direct
    loans and loan guarantees.

      Veterans' Affairs (VA): VA recognizes the service that veterans and
    active duty personnel provide to the Nation by helping them buy and
    retain homes. The Government partially guarantees loans from private
    lenders, providing $20 billion in loan guarantees in 2000. One of VA's
    key goals has been to improve loan servicing to avoid veteran
    foreclosures. Over the past several years, VA has decreased foreclosures
    by approximately 10 percent.
      Ginnie Mae: The Congress created Ginnie Mae in 1968 to support the
    secondary market for FHA, VA, and RHS mortgages through securitization.
    Ginnie Mae securitizes the majority of FHA, VA, and RHS mortgages, and
    together with the Government-sponsored enterprises that operate in the
    secondary market for mortgages, provides lenders with the liquidity to
    maintain a steady supply of credit available for housing.
      ----------------------------------------------------------------------

       Table 8-2.  Selected Federal Commerce and Housing Credit Programs:
                    Credit Programs Portfolio Characteristics
                          (Dollar amounts in millions)
    ------------------------------------------------------------------------
                                                   Numbers of
                                                     housing       Dollar
                                       Dollar      units/small    volume of
                                      volume of     business        total
                                    direct loans/  financed by   outstanding
                                     guarantees      loans/        loans/
                                     written in    guarantees    guarantees
                                        2000       written in     as of the
                                                      2000       end of 2000
    ------------------------------------------------------------------------
    Mortgage Credit:
      HUD/FHA Mutual Mortgage             86,274       873,265       449,579
       Insurance Fund.............
      HUD/FHA General Insurance           12,506       154,492        98,888
       and Special Risk Insurance
       Fund.......................
      USDA/RHS single-family loans         3,324        51,400        27,697
      USDA/RHS multi-family loans.           246         7,400        11,397
      VA guaranteed loans.........        20,159       175,559       199,759
                                   -----------------------------------------
        Subtotal, Mortgage Credit.       122,509     1,262,116       787,320

    Business Credit:
      SBA Guaranteed Loans........        13,195        48,422        45,556
      SBA Direct Loans............            27            65            65
                                   -----------------------------------------
        Subtotal, SBA Loans.......        13,222        48,487        45,621
                                   -----------------------------------------
          Total Assistance........       135,731     1,310,603       832,941
    ------------------------------------------------------------------------

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

    Expanding Access to Decent Housing

      The Federal Government provides rental housing assistance through a
    number of HUD and USDA programs. (Spending on housing assistance is
    included in Chapter 14, ``Income Security.'') These rental assistance
    programs provide subsidies for 4.9 million low-income households.
      HUD expanded rental assistance to help more than 250,000 low-income
    families from 1993 through 2001. The number of families

    [[Page 110]]

    with severe housing needs has remained roughly the same from 1993 to
    1999, exceeding five million households throughout the period.
      This Administration proposed historic reforms in the public housing
    and Section 8 rental assistance programs. With bipartisan support, the
    Congress enacted the bulk of these reforms in the Quality Housing and
    Work Responsibility Act of 1998, the first significant housing bill
    passed in several years. The Act promotes income mixing in public
    housing, which reduces concentrations of poverty; gives local public
    housing authorities the flexibility to adopt admissions and rent
    policies that do not penalize working families; and, raises management
    performance standards for assisted-housing providers.
      The Act also reforms HUD's housing voucher program to target more aid
    to those most in need; provides local public housing authorities with
    the flexibility to respond to local price changes in the rental market;
    expands owner participation in the program by adopting private market
    real estate practices; and finally, permits the use of vouchers for home
    purchase. Actions also were taken to make it easier for families to use
    vouchers in tight rental markets and to protect assisted tenants from
    rent increases by providing additional subsidies where necessary.
      As part of its commitment to assure that all public housing residents
    live in decent, safe, and sanitary conditions, the Administration worked
    to demolish deteriorating, non-viable public housing units and replace
    them with either new, less-dense, mixed-income public housing or housing
    vouchers. In total, the Administration demolished nearly 60,000 public
    housing units and has funded the future demolition of 50,000 more. The
    President also established the One Strike and You're Out policy in 1996
    to create safer assisted-housing communities. The policy gives public
    housing agencies the authority to screen and evict residents who are
    involved in drugs and drug-related crime.
      USDA's RHS ensured that over the last eight years, 273,600 poor
    families were able to continue renting decent, safe affordable housing
    in areas that otherwise offer few rental housing opportunities. RHS
    provides direct loans to private developers for the construction and
    rehabilitation of rental housing for very low- to low-income residents,
    elderly households, and disabled individuals. RHS combines these loans
    with Rental Assistance Grants to reduce the rent paid by very-low income
    tenants. In 1996, RHS also began a rural multifamily housing guarantee
    loan program.
      The Administration also provided housing assistance and supportive
    services for the very low-income elderly and disabled to help them live
    as independently as possible, including the conversion of existing
    elderly housing to assisted living facilities. Since 1993, HUD added
    approximately 75,000 units to the elderly and disabled housing stock.

    Providing Housing Tax Incentives

      The Government provides significant support for housing through tax
    preferences. The two largest tax benefits are the mortgage interest
    deduction for owner-occupied homes and the deductibility of State and
    local property tax on owner-occupied homes (which collectively will cost
    the Government $87 billion in 2001, a 41-percent increase since 1993).
    Other tax provisions also encourage investment in housing. States and
    localities can issue tax-exempt mortgage revenue bonds, whose proceeds
    subsidize purchases by first-time, low- and moderate-income home buyers.
    Also, installment sales provisions let some real estate sellers defer
    taxes. Finally, the low-income housing tax credit supports the
    construction or renovation of 60,000 to 90,000 units of affordable
    rental housing annually. The use of this tax credit increased by 114
    percent since 1993.
      The Community Renewal Act of 2000 increased the amount of low-income
    housing tax credits that may be allotted by State housing agencies to
    qualifying projects. The Taxpayer Relief Act of 1997 provided a new
    exclusion for capital gains on principal residences that substantially
    simplifies the tax treatment of houses for most taxpayers. Under the
    provision, taxpayers can exclude up to $250,000 of capital gain on
    principal residences ($500,000 for married taxpayers filing jointly).

    [[Page 111]]

    Promoting Commerce, Technology, and International Trade

      Technology and Intellectual Property Rights: The Department of
    Commerce undertakes a range of activities to promote technological
    innovation. In 1999, the Nation's intellectual property rights system
    was strengthened with the passage of the landmark American Inventors
    Protection Act, which reformed patent law and converted Commerce's
    Patent and Trademark Office (PTO) into a performance-based organization
    to better serve America's entrepreneurs and innovators. PTO also
    protects U.S. intellectual property rights around the world through
    international treaties.
      Despite record growth in applications, PTO has maintained its average
    processing time for both patent and trademark applications. In 2001, PTO
    will issue over 165,509 patents, a 54-percent increase since 1993. Also
    in 2001, PTO will register 211,500 trademarks, a 185-percent increase
    since 1993.

      Commerce's National Institute of Standards and Technology (NIST): NIST
    works with industry to develop measurements, standards, and technology
    to promote American competitiveness. NIST also assists industry through
    the Advanced Technology Program (ATP) and the Manufacturing Extension
    Partnership (MEP). Since 1993, NIST has expanded its research into new
    fields such as nanotechnology and e-commerce. MEP, which disseminates
    technological information and expertise to smaller manufacturers,
    achieved nationwide coverage in 1997. Today MEP operates 400 assistance
    centers in all fifty States plus Puerto Rico. ATP, a public/private
    partnership, has administered approximately $1.5 billion in Federal
    matching funds for 468 projects since its inception.
      In 2001, NIST laboratories will produce over 2,200 technical
    publications, a three-percent increase since 1993. MEP will serve more
    than 33,600 clients in 2001, 7,600 more than in 1997. In that same time,
    MEP assistance will have increased clients' sales by $748 million and
    generated $607 million in additional capital investment. ATP will fund
    the research and development of 200 new technologies in 2001, a dramatic
    increase over the four studied in 1993.

      Commerce's International Trade Administration (ITA): Since 1993, ITA
    has greatly expanded its outreach to small and medium sized firms to
    develop their export potential. In 2000, ITA serviced over 137,000 small
    to medium sized businesses, almost double the 1993 level. ITA also
    supported trade negotiation, market-access, and trade-enforcement
    activities that greatly benefit the Nation's economy.
      Commerce's Bureau of Export Administration (BXA): BXA is a regulatory
    agency that enforces U.S. export controls. In 2001, BXA will issue
    14,000 licenses for dual-use commodities (military or civilian use),
    5,200 more than in 1996.
      Under the Chemical Weapons Convention (CWC) implementing legislation,
    BXA leads international inspections of U.S. chemical production sites
    and regulates the export of key toxic and precursor chemicals.
    Regulations for CWC inspections were finalized in May 2000, ensuring
    U.S. compliance with CWC while protecting the proprietary commercial
    information of U.S. industry.

      Commerce's Census Bureau and Bureau of Economic Analysis (BEA): The
    Census Bureau collects, tabulates, and distributes a wide variety of
    statistical information about Americans and the economy, including the
    decennial census. In addition, BEA prepares and interprets U.S. economic
    accounts, including the Gross Domestic Product. BEA and the Census
    Bureau are also leading Government efforts to monitor and analyze the
    impacts of the new Digital Economy.
      Since 1993, the Census Bureau has completed a wide array of
    demographic and economic surveys and censuses, including the
    constitutionally-mandated decennial census of population, which is used
    for apportioning seats in the House of Representatives across States,
    redistricting within States, and the distribution of nearly $200 billion
    in Federal funds to States and localities. During Census 2000, the
    Census Bureau mailed or hand delivered census forms to 120 million
    households nationwide. Non-response follow-up interviews were also
    conducted with approximately 42 million households. This year, the 67-
    percent mail response rate improved over the 65-percent response rate
    for the

    [[Page 112]]

    1990 Census, arresting a decades-long decline in mail response. The
    Census Bureau also completed, on schedule and ahead of the 1990 Census
    pace, the collection of data from the remaining households that did not
    respond by mail (33 percent). While the Census Bureau must await the
    results of the Accuracy and Coverage Evaluation survey to determine the
    ultimate accuracy and completeness of Census 2000, the Census Bureau is
    classifying Census 2000 as an operational success.

      Small Business Administration (SBA): SBA assists and promotes small
    business by expanding access to capital through guaranteed private
    sector loans. SBA guaranteed over $14.5 billion in small business loans
    in 2000. SBA loans carry longer terms and lower interest rates than
    those for which small businesses would otherwise qualify. Between 1993
    and 2000, SBA guaranteed $80.6 billion in loans compared to the $78.0
    billion in loans guaranteed between 1953 and 1992. SBA also provides
    technical assistance and venture capital.
      A key component of the Administration's economic development strategy
    over the past eight years has been to increase access to capital and
    credit for women- and minority-owned firms. Between 1993 and 2000, SBA
    provided $12 billion in loans to women, which is more than double the
    $5.7 billion provided in the previous nineteen years between 1973 and
    1992. Likewise, SBA provided $18.4 billion in loans to minorities
    between 1993 and 2000, which is more than double the $7.9 billion
    provided between 1953 and 1992. Further, Federal contract awards to
    minority-owned firms increased to $6.2 billion in 1999 from $3.4 billion
    in 1990.
      Complementing SBA's loan programs are technical assistance programs,
    which increase the borrower's probability of success. For instance, to
    date, SBA has not experienced any defaults on its direct microloan
    program, which has a substantial technical assistance component. This
    suggests that technical assistance has had a positive impact. The
    Administration also increased the number of small businesses receiving
    counseling and training to 1.15 million in 2000 from 900,000 in 1993.
    Outreach efforts are expected to reach 1.2 million small businesses in
    2001.
      The New Markets initiative, enacted in December 2000, is the
    Administration's most recent effort to foster private-sector investment
    in rural and inner-city communities. New Markets Venture Capital, New
    Markets Technical Assistance, and the BusinessLINC programs provide $250
    million in public and private capital, plus technical assistance to
    increase entrepreneurial success and mentoring opportunities for
    aspiring small businesses.

      Federal Trade Commission (FTC): The FTC enforces various consumer
    protection and antitrust laws that prohibit fraud, deception, anti-
    competitive mergers, and other unfair and anti-competitive business
    practices in the marketplace. Since 1992, the FTC has obtained judgments
    for over $800 million in consumer redress and established a consumer
    complaint database that is shared with more than 270 law enforcement
    partners. The FTC continues to protect the marketplace by successfully
    monitoring a record number of corporate merger transactions that have
    tripled in volume over the last eight years. Congress recently enacted
    Administration-proposed legislation that will make the merger-review
    process more equitable by establishing a new three-tiered fee structure
    that increases the bottom filing threshold.
      Federal Communications Commission (FCC): As the introduction of
    wireless, Internet-based and new communication technologies continues to
    grow, the FCC has focused on market-based solutions in a deregulatory
    environment. The FCC's market-based auctions program has been a driving
    force in promoting efficient use of the spectrum and recovering a fair
    return to the general public for this resource, including over $20
    billion in actual and estimated cash receipts through 2001. The auctions
    program also fostered a four-fold increase in the number of wireless
    phone subscribers and enabled a 40-percent drop in wireless phone bills.
    Over the past four years, local telephone service competition increased
    significantly in large part due to the FCC's aggressive implementation
    of the Telecommunications Act of 1996. Over the past three years, the
    FCC fully funded the E-rate program to wire 82 percent of public schools
    and 51 percent of public libraries to the Internet. The FCC also
    expanded services to those in

    [[Page 113]]

    underserved communities, including Native Americans and the 54 million
    Americans with disabilities.

    Providing Tax Incentives for Commerce

      The tax law provides incentives to encourage business investment. The
    Government taxes capital gains at a lower rate than other income. The
    tax law provides more generous depreciation allowances for machinery,
    equipment, and buildings. This business incentive will cost the
    Government $33 billion in 2001, a 68-percent increase since 1993. Other
    tax provisions benefit small firms generally, including the graduated
    corporate income tax rates, preferential capital gains tax treatment for
    small corporation stock, and write-offs of certain investments. Credit
    unions, small insurance companies, and insurance companies owned by
    certain tax-exempt organizations also enjoy tax preferences.
      The Taxpayer Relief Act of 1997 significantly changed the tax
    treatment and lowered tax rates for long-term capital gains. Also,
    during the last four years, several capital gains provisions were
    enacted to limit certain perceived abuses related to capital gains
    taxes. The capital gains tax incentive cost the Government $6 billion in
    1993, but it will cost the Government almost $42 billion in 2001. In
    addition, the law does not tax gains on inherited capital assets that
    accrue during the lifetime of the original owner. Tax law changes during
    this Administration also provided an increase in expensing for small
    businesses, and an increase in the top corporate tax rate.

    Regulating Financial Institutions and Markets

      Federal Deposit Insurance: Federal deposit insurance protects
    depositors against losses when insured commercial banks, thrifts
    (savings institutions), and credit unions fail. From 1985 to 1995, this
    insurance protected depositors in over 1,400 failed banks and 1,100
    failed thrifts, with total deposits of over $700 billion. As of June
    2000, the Bank Insurance Fund, the Savings Association Insurance Fund,
    and the Credit Union Share Insurance Fund insured total deposits of more
    than $3.3 trillion. Five agencies regulate federally-insured depository
    institutions to ensure their safety and soundness: the Office of the
    Comptroller of the Currency regulates national banks; the Office of
    Thrift Supervision regulates thrifts; the Federal Reserve regulates
    State-chartered banks that are Federal Reserve members; the Federal
    Deposit Insurance Corporation regulates other State-chartered banks;
    and, the National Credit Union Administration regulates credit unions.
      Securities and Exchange Commission (SEC) and Commodity Futures Trading
    Commission (CFTC): The SEC regulates U.S. capital markets and the
    securities industry and facilitates capital formation. The CFTC
    regulates U.S. futures and options markets. Both regulators have
    protected investors during a period of unprecedented growth in our
    Nation's financial markets. Between calendar years 1990 and 1999,
    trading volume on stock exchanges and NASDAQ increased by nearly five
    times, and dollar volume increased by more than nine times.
    Additionally, an increasing number of Americans now participate in the
    Nation's financial markets. For example, the number of households that
    own mutual funds has increased by 60 percent since 1994. Today, nearly
    half of all households own mutual funds.