[Economic Outlook, Highlights from FY 1994 to FY 2001, FY 2002 Baseline Projections]
[I. The President's Transmittal Message]
[From the U.S. Government Printing Office, www.gpo.gov]
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I. THE PRESIDENT'S TRANSMITTAL MESSAGE
To the Congress of the United States:
I am pleased to submit my FY 2002 Economic Outlook, Highlights from FY
1994 to FY 2001, FY 2002 Baseline Projections. For the benefit of the
new Administration and the public, this document includes an economic
overview, a technical presentation of current services projections, a
programmatic review of the Federal Government that details my
Administration's actions over the last eight years, and pending policy
proposals that I believe should be the starting point for a new
Administration.
The Outlook in 1993
To appreciate what we have accomplished in the past eight years, we
must take stock of where we were in 1993. When I took office in 1993,
economic growth had averaged only 1.7 percent in the four previous
years. In 1992, unemployment surged to 7.8 percent. In 1992, the budget
deficit was $290 billion, the largest in the history of our Nation. The
debt held by the public quadrupled between 1980 and 1992 and threatened
to keep mounting. The deficit was projected to reach $390 billion by
1998 and $639 billion by 2003.
I believed that by exercising fiscal responsibility and making
strategic investments in our future, we could reverse this trend and
spur the economy to robust growth. Eight years later, with deficits
turned to surplus, with the mountain of debt receding, and with
sustained economic growth at record level, we can say that we were able
to achieve this goal through a steadfast commitment to fiscal
discipline.
The Clinton-Gore Record
Over the eight years of my Administration, our total deficit reduction
totals $1.2 trillion, more than double our original estimates. We have
experienced four straight years of surplus, a stretch of prosperity last
seen following World War I. For three years in a row, we have actually
been able to pay off $363 billion of this debt and expect to pay off
$600 billion by the end of this year. With a sustained commitment to
fiscal discipline by continuing to use the surplus to pay down the debt,
this Nation can be fully debt-free in this decade for the first time
since 1835. We can eliminate the publicly held debt by the end of the
decade and, by doing so, we can strengthen our economy and our Nation's
prospects for the future.
FY 2002 Economic Outlook, Highlights from FY 1994 to FY 2001, FY 2002
Baseline Projections continues to project that the Federal budget will
remain in surplus for many decades to come, if a responsible fiscal
policy prevails and realistic assumptions and projections are used.
The Federal Government must continue to meet the needs of the American
people in a Nation with a growing economy and a growing population. We
take for granted the need to maintain critical functions like air
traffic safety, law enforcement, the administration of Social Security
and Medicare, and national security--both defense and diplomacy. Because
I firmly believe that the American people demand and deserve a
Government that meets their needs, this document reflects the progress
we have made in serving the American people. These accomplishments
include:
Improving education, with initiatives focusing on
accountability and school-system
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reforms; increased funding for Pell Grants and Work-Study
Programs; and, initiatives to reduce class size, establish
after-school programs, improve reading ability, expand
mentoring and education technology, and renovate crumbling
schools. The results are significant. For example, 29,000
teachers have been hired, on our way to the goal of hiring
100,000 new teachers to reduce class size, and there has been
a six-fold increase in the number of Title I elementary
schools with after-school programs. We have doubled funding
for Head Start, and increased funding for higher education
programs--the biggest increase since the G.I. Bill.
Rewarding work and ``ending welfare as we know it,'' with
incentives to States for moving welfare recipients into jobs,
encouraging businesses to hire people from welfare rolls,
expanding the Earned Income Tax Credit, tripling funding for
dislocated worker training, and increasing funding for child
care. Since January 1993, the welfare rolls have decreased
from 14.1 million to 6.3 million, the fewest number of people
on welfare since 1968.
Making Social Security solvency a national priority, with the
challenge to ``save Social Security first,'' ensuring that
Social Security funds are used to pay for Social Security and
strengthen our economic health.
Achieving the longest Medicare Trust Fund solvency in a
quarter century while improving Medicare's benefits.
Reversing the increase in the number of uninsured Americans
through the Children's Health Insurance Program (CHIP) and
other policies. Over 3.3 million children have received health
insurance through the CHIP.
Setting the highest level of environmental standards ever.
More land in the lower 48 States has been protected under the
Antiquities Act than by any other Administration; 58.5 million
acres of national forest will be protected from road building
and logging; unprecedented legislation will provide $12
billion over six years in dedicated funding for the
conservation of America's land and coastal resources; climate
change and clean water funding was increased; and, efforts to
fight budget riders that would have sacrificed hard-won
environmental safeguards to special-interests succeeded.
Increasing investments in science and technology, as the keys
to economic growth. Funding for medical research at the
National Institutes of Health doubled, allowing for
breakthroughs such as the complete sequencing of the human
genome and new therapies to prevent breast cancer.
Securing funding to hire over 100,000 additional community
police officers, making our streets safer. My Administration's
initiatives to reduce crime contributed to the lowest annual
serious crime count since 1985.
Giving Americans confidence that when natural disasters
occur, such as the Northridge Earthquake, Hurricane Floyd, and
the Midwest Floods, their Government will help them return to
prosperity.
Implementing the Uruguay Round, the North American Free Trade
Agreement, and other major agreements, to liberalize trade and
financial markets, aid construction of a new global economic
architecture, and promote growth.
Fighting transnational threats, such as HIV/AIDS, terrorism,
and environmental destruction, as well as securing historic
debt relief for countries in crisis and resources to fight
child abuse at home and abroad.
Improving the security of Americans at home and abroad,
through increased funding for embassy security.
Strengthening our national security by promoting stability in
responding to natural disasters in Central America and Africa,
as well as man-made crises in Kosovo, Bosnia, and Indonesia.
Maintaining the Nation's security, with the best-equipped,
best-trained, and best-prepared military in the world.
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This document also highlights the dramatic improvements in the
management of the Federal Government we have made over the last eight
years. We have used information technology to create a Government that
is more accessible and responsive to citizens. The Federal Government
has reinvented the way it buys goods and services, focusing on customer
satisfaction and results. We have transformed the Federal financial
management system. Eight years ago, only a few agencies routinely
prepared and issued audited financial statements. Now virtually all
agencies issue annual audited financial statements. More than half of
the 24 largest agencies received clean audits in 1999. In addition,
significant strides have been made to advance the transparency and
underpinnings of the regulatory process and improve the Nation's
statistics. These management functions are the essentials of
governmental operations. Doing them very well rarely garners attention.
Failing to do them can undermine program and policy effectiveness as
certainly as bad policy decisions or inadequate program implementation.
As the Nation looks to the future, there are several important areas
where additional work is needed. Examples include:
Providing prescription drug coverage for Medicare
beneficiaries;
Passing legislation to stiffen penalties for hate crimes;
Ensuring equity for legal immigrants;
Increasing the minimum wage to support millions of working
families;
Providing a Medicaid buy-in option for children with
disabilities in working families;
Ensuring stability in the Middle East peace process;
Increasing our embassy security;
Funding diplomacy as an alternative to crises and violence;
Striving to hire 100,000 new teachers to reduce class size;
Helping school districts to obtain financing to construct and
modernize schools; and,
Expanding and improving the quality of the Head Start
program.
My Hopes for the Nation
This is a rare moment in American history. Never before has our Nation
enjoyed so much prosperity, at a time when social progress continues to
advance and our position as the global leader is secure. Today, we are
well prepared to make the choices that will shape the future of our
Nation for decades to come.
By reversing the earlier trend of fiscal irresponsibility, using
conservative economic estimates, balancing the budget, and producing an
historic surplus, we have helped restore our national spirit and
produced the resources to help opportunity and prosperity reach all
corners of this Nation. We have it within our reach today, by making the
right choices, to offer the promise of prosperity to generations of
Americans to come. If we keep to the path of fiscal discipline, we can
build a foundation of prosperity for the future of the Nation.
Over the last eight years, I have sought to provide the fiscal
discipline necessary to ensure the continuing growth of our economy
while making essential investments in the future of our people--
especially those who are less fortunate. The results are evident. I
present this document with pride in our accomplishments, and the hope
that this progress will continue and grow for all Americans.
In the past eight years, we have enjoyed extraordinary economic
performance because our fiscal policy was responsible and sound. To
continue the Nation's strong economic performance, we must maintain our
commitment to a sound fiscal policy. Experience over the last twenty
years clearly shows how perilous it is to create conditions for
budgetary problems. We are now enjoying the benefits of a virtuous cycle
of surplus and debt reduction and must not return to the vicious cycle
of red ink.
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The challenge now, in this era of surplus, is to make balanced choices
to use our resources to meet both the evident, pressing needs of today,
and the more distant, but no less crucial, needs of generations to come.
William J. Clinton
January 16, 2001
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Table I-1. Baseline Totals
(In billions of dollars)
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Estimate
Category 2000 -----------------------------------------------------------------------------------------------------------------------------------
Actual 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2001-2010 2002-2011
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Receipts.......................................... 2,025 2,125 2,210 2,301 2,401 2,525 2,649 2,788 2,934 3,088 3,257 3,434 26,278 27,587
Outlays........................................... 1,789 1,868 1,933 1,994 2,058 2,145 2,204 2,279 2,365 2,450 2,540 2,623 21,836 22,591
Unified surplus................................... 236 256 277 307 343 380 446 509 570 638 717 810 4,442 4,996
Memorandum
Compostion of surplus:
Social Security................................. 152 160 176 194 210 233 247 265 281 295 313 329 2,374 2,543
Postal Service.................................. -2 -2 -3 * * 1 1 1 1 2 2 2 4 8
Medicare Hospital Insurance (HI)................ 30 27 35 39 44 47 54 56 59 62 67 69 490 532
Remaining on-budget............................. 57 71 69 74 89 99 144 188 228 279 335 410 1,575 1,914
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Debt held by the public........................... 3,410 3,173 2,907 2,611 2,277 1,906 1,470 970 411 \1\ \1\ \1\ ......... .........
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* $500 million or less.
\1\ Excess balances start to be accumulated in 2006, when the amount of the unified surplus that is available to repay debt held by the public is more than the amount of debt that is available
to be redeemed. Excess balances exceed debt held by the public (gross) beginning in 2009. Policy decisions will be required on the use of the surpluses that are accumulated as excess
balances.
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Table I-2. Baseline Totals by Category
(In billions of dollars)
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Estimate
Category 2000 ------------------------------------------------------------------------------------------------------------------------
Actual 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
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Receipts.................................................... 2,025.2 2,124.6 2,209.7 2,301.3 2,400.6 2,524.7 2,649.3 2,788.4 2,934.4 3,088.1 3,257.2 3,433.6
Outlays:
Discretionary:
Defense................................................. 295.0 303.7 306.7 321.1 331.0 340.7 350.6 360.1 369.2 379.5 390.2 401.3
Non-Defense............................................. 322.0 350.5 374.9 388.7 397.5 408.0 418.3 429.8 441.7 452.7 464.9 474.7
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Subtotal, discretionary................................. 617.0 654.1 681.5 709.8 728.5 748.7 768.9 789.9 810.9 832.2 855.1 876.0
Mandatory:
Social Security......................................... 406.0 431.4 451.3 473.6 498.7 526.4 556.2 588.9 624.5 664.6 708.7 756.0
Medicare and Medicaid................................... 312.0 347.7 369.2 394.2 421.6 456.8 482.6 522.2 561.5 603.8 649.1 704.3
Means-tested entitlements \1\........................... 105.2 108.7 114.5 120.2 125.0 132.3 134.6 136.5 144.1 148.8 154.1 162.1
Other mandatory......................................... 125.5 116.2 124.2 122.8 129.3 147.9 153.5 160.3 172.6 182.8 192.4 199.5
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Subtotal, mandatory..................................... 948.8 1,004.0 1,059.2 1,110.8 1,174.4 1,263.3 1,326.8 1,407.9 1,502.7 1,599.9 1,704.3 1,822.0
Net interest.............................................. 223.2 210.2 192.0 173.8 154.6 132.8 107.8 81.2 51.4 18.3 -19.3 -74.6
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Total Outlays............................................. 1,789.0 1,868.3 1,932.8 1,994.4 2,057.5 2,144.8 2,203.5 2,279.1 2,364.9 2,450.4 2,540.1 2,623.4
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Surplus..................................................... 236.2 256.3 276.9 306.9 343.0 379.9 445.8 509.4 569.5 637.6 717.2 810.2
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\1\ Food stamps, TANF/family support, SSI, child nutrition, EITC, veterans pensions, children's health insurance fund.
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Table I-3. Federal Government Financing and Debt \1\
(In billions of dollars)
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Estimate
Actual -------------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
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Financing:
Unified surplus.................................. 236 256 277 307 343 380 446 509 570 638 717 810
Social Security surplus........................ 152 160 176 194 210 233 247 265 281 295 313 329
Medicare HI surplus............................ 30 27 35 39 44 47 54 56 59 62 67 69
Postal Service surplus......................... -2 -2 -3 * * 1 1 1 1 2 2 2
Other surplus.................................. 57 71 69 74 89 99 144 188 228 279 335 410
Means of financing other than borrowing from the
public:
Premiums paid (-) on buybacks of Treasury -6 -8 ...... ...... ...... ...... ...... ...... ....... ....... ....... .......
securities \2\................................
Changes in: \3\
Treasury operating cash balance.............. 4 13 ...... ...... ...... ...... ...... ...... ....... ....... ....... .......
Checks outstanding, deposit funds, etc. \4\.. 3 -* -1 ...... ...... ...... ...... ...... ....... ....... ....... .......
Seigniorage on coins........................... 2 2 2 2 2 2 2 2 2 2 2 2
Less: Net financing disbursements:
Direct loan financing accounts............... -22 -25 -14 -15 -13 -14 -14 -14 -14 -14 -14 -14
Guaranteed loan financing accounts........... 4 -* 1 2 2 2 2 2 2 2 2 2
Total, means of financing other than -13 -19 -11 -10 -9 -10 -10 -10 -10 -10 -10 -10
borrowing from the public.................
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Total, amount available to repay debt 223 237 266 296 334 370 436 500 560 628 707 800
held by the public......................
Change in debt held by the public: \5\ \6\
Change in debt held by the public (gross)...... -223 -237 -266 -296 -334 -370 -147 -171 -97 -128 -72 -52
Less change in excess balances................. ....... ...... ...... ...... ...... ...... -289 -328 -462 -500 -636 -748
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Change in debt held by the public (net)...... -223 -237 -266 -296 -334 -370 -436 -500 -560 -628 -707 -800
Debt Subject to Statutory Limitation, End of Year:
Debt issued by Treasury.......................... 5,601 5,608 5,606 5,593 5,563 5,523 5,729 5,930 6,222 6,501 6,860 7,253
Adjustment for Treasury debt not subject to -15 -15 -15 -15 -15 -15 -15 -15 -15 -15 -15 -15
limitation and agency debt subject to limitation
\7\.............................................
Adjustment for discount and premium \8\.......... 6 6 6 6 6 6 6 6 6 6 6 6
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Total, debt subject to statutory limitation \9\ 5,592 5,598 5,596 5,584 5,554 5,513 5,719 5,920 6,212 6,491 6,850 7,244
Debt Outstanding, End of Year:
Gross Federal debt:
Debt issued by Treasury........................ 5,601 5,608 5,606 5,593 5,563 5,523 5,729 5,930 6,222 6,501 6,860 7,253
Debt issued by other agencies.................. 28 28 27 26 25 23 22 20 20 20 20 20
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Total, gross Federal debt.................... 5,629 5,636 5,633 5,620 5,588 5,546 5,751 5,950 6,242 6,521 6,880 7,273
Held by:
Debt securities held as assets by Government 2,219 2,462 2,726 3,009 3,312 3,639 3,992 4,363 4,752 5,159 5,590 6,036
accounts......................................
Debt securities held as assets by the public:
\6\
Debt held by the public (gross) \10\......... 3,410 3,173 2,907 2,611 2,277 1,906 1,759 1,587 1,490 1,362 1,290 1,238
Less excess balances......................... ....... ...... ...... ...... ...... ...... -289 -617 -1,079 -1,579 -2,214 -2,962
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Debt held by the public (net).............. 3,410 3,173 2,907 2,611 2,277 1,906 1,470 970 411 \11\ NA \11\ NA \11\ NA
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* $500 million or less.
NA = Not applicable.
\1\ Treasury securities held by the public and zero-coupon bonds held by Government accounts are almost entirely measured at sales price plus amortized
discount or less amortized premium. Agency debt is almost entirely measured at face value. Treasury securities in the Government account series are
measured at face value less unrealized discount (if any).
\2\ This table includes estimates for Treasury buybacks of outstanding securities only through FY 2001. These estimates assume that Treasury will buy
back $35 billion (face value) of securities in FY 2001. The premiums paid on buybacks are based on experience to date and the interest rates in the
economic assumptions.
\3\ A decrease in the Treasury operating cash balance (which is an asset) would be a means of financing a deficit and therefore has a positive sign. An
increase in checks outstanding or deposit fund balances (which are liabilities) would also be a means of financing a deficit and therefore would also
have a positive sign.
\4\ Besides checks outstanding and deposit funds, includes accrued interest payable on Treasury debt, miscellaneous liability accounts, allocations of
special drawing rights, and, as an offset, cash and monetary assets other than the Treasury operating cash balance, miscellaneous asset accounts, and
profit on sale of gold.
\5\ For 2000, includes a $355 million reclassification of debt. Indian tribal funds that are owned by the Indian tribes and held and managed in a
fiduciary capacity by the Government on the tribes' behalf were reclassified from trust funds to deposit funds as of October 1, 1999, and their
holdings of Treasury securities were accordingly reclassified from debt held by Government accounts to debt held by the public.
\6\ The amount of unified budget surplus available to repay debt held by the public is estimated to be greater than the amount of debt that is available
to be redeemed in 2006 and subsequent years. The difference is assumed to be held as ``excess balances'' and to earn interest at a Treasury rate.
(``Excess'' means in excess of amounts held for operational and programmatic purposes.) The ``debt held by the public (gross)'' is the amount of
Federal debt securities held by the public. The ``debt held by the public (net)'' is the ``debt held by the public (gross)'' less the ``excess
balances.''
\7\ Consists primarily of Federal Financing Bank debt.
\8\ Consists of unamortized discount (less premium) on public issues of Treasury notes and bonds (other than zero-coupon bonds) and unrealized discount on Government account series securities.
\9\ The statutory debt limit is $5,950 billion.
\10\ At the end of 2000, the Federal Reserve Banks held $511 billion of Federal securities and the rest of the public held $2,899 billion. Debt held by the Federal Reserve Banks is not estimated for future years.
\11\ ``Excess balances'' start to be accumulated in 2006, when the amount of the unified surplus that is available to repay debt held by the public is
more than the amount of debt that is available to be redeemed. Excess balances exceed debt held by the public (gross) beginning in 2009. Policy
decisions will be required on the use of the surpluses that are accumulated as excess balances.