[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]


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                     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

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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.

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  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

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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).

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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

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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

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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.
