[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]


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                            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

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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

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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

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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

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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

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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

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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

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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

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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.
