[House Document 104-160]
[From the U.S. Government Publishing Office]
104th Congress, 2d Session - - - - - - - - House Document 104-
160, Pt. 1
DEFICIT REDUCTION AND BALANCED BUDGET BY FISCAL YEAR 2002
----------
MESSAGE
from
THE PRESIDENT OF THE UNITED STATES
transmitting
PROPOSED LEGISLATION FOR DEFICIT REDUCTION AND TO ACHIEVE A BALANCED
BUDGET BY FISCAL YEAR 2002
January 9 (legislative day, January 5), 1996.--Message and accompanying
papers referred to the Union Calendar and ordered to be printed
104th Congress, 2d Session - - - - - - - - House Document 104-
160, Pt. 1
DEFICIT REDUCTION AND
BALANCED BUDGET BY FISCAL YEAR 2002
__________
MESSAGE
from
THE PRESIDENT OF THE UNITED STATES
transmitting
PROPOSED LEGISLATION FOR DEFICIT REDUCTION AND TO ACHIEVE A BALANCED
BUDGET BY FISCAL YEAR 2002
January 9 (legislative day, January 5), 1996.--Message and accompanying
papers referred to the Union Calendar and ordered to be printed
To the Congress of the United States:
I hereby submit to the Congress a plan to achieve a
balanced budget not later than the fiscal year 2002 as
certified by the Congressional Budget Office on January 6,
1996. This plan has been prepared by Senator Daschle and if
passed in its current form by the Congress, I would sign it
into law.
William J. Clinton.
The White House, January 6, 1996.
Balanced Budget Highlights
Balances The Budget In 7 Years Under Congressional Budget
Office Scoring
Achieves Over $600 Billion Of Deficit Reduction
Cuts Taxes For Families With Children, Provides Deductions For
Higher Education, and Increases Savings Through IRAs.
Extends The Solvency Of The Medicare Part A Trust Fund Through
2011.
Protects Medicare And Medicaid Recipients
No Cuts In Student Loans; Funds Key Investments In Education,
The Environment, And Science And Technology
Contains Zero Special Interest Giveaways, Spenders, And Outyear
Deficit Busters
Triggers Accelerated Deficit Reduction; Tax Cuts; And
Investments In Education, And Other Priorities As CBO
Deficit Targets Are Exceeded
The Investment Dividend
Triggers Dividends if Economic Performance Exceeds CBO
Expectations
CBO/OMB Baseline Differences Total $194 Billion Between 1996
and 2002
Dividend Allocation:
\1/3\ For Additional Deficit Reduction
\1/3\ For Additional Tax Cuts
\1/3\ For Additional Investments
Allocation Of Dividend Results In:
Total Tax Cuts--$147 Billion
Investments--$23 Billion Above a Freeze
Surplus--$29 Billion in 2002
BALANCED BUDGET PROPOSAL
[In billions of dollars]
----------------------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001 2002 7-year
----------------------------------------------------------------------------------------------------------------
CBO December Baseline................... 172 183 183 195 204 211 228 .......
Take full BLS adjustment............ 0 0 -2 -2 -3 -5 -6 -17
-----------------------------------------------------------------------
Revised Baseline.................. 172 182 181 193 201 206 223 .......
=======================================================================
Discretionary........................... -12 -7 -14 -30 -47 -75 -110 -295
=======================================================================
Mandatory:
Medicare............................ -0 -3 -6 -12 -19 -26 -35 -102
Medicaid............................ 0 -0 -2 -7 -10 -13 -19 -52
Farm programs....................... 0 0 0 0 0 0 0 0
FCC spectrum auction................ -0 -2 -3 -4 -3 -3 -7 -21
Welfare (outlays and revenues)...... -1 -5 -6 -7 -8 -8 -9 -43
EITC................................ -0 -0 -0 -0 -0 -0 -0 -2
Student loans....................... 0 0 0 0 0 0 0 0
Veterans programs................... -0 -0 -0 -1 -1 -1 -1 -6
Federal retirement/Postal benefits.. -1 -2 -3 -3 -3 -3 -4 -19
Banking and housing................. -4 0 0 0 0 0 -1 -4
Other mandatory..................... -1 -1 -1 -1 -1 -1 -2 -2
-----------------------------------------------------------------------
Total Mandatory................... -8 -13 -22 -36 -46 -56 -78 -259
Tax Cuts................................ 3 13 14 16 22 17 2 87
Corporate Loopholes and other........... -2 -6 -7 -9 -10 -12 -14 -60
=======================================================================
Total Policy Changes.............. -19 -13 -31 -60 -85 -131 -205 -544
Net interest............................ -0 -2 -3 -5 -9 -15 -24 -57
-----------------------------------------------------------------------
Total Changes..................... -20 -15 -34 -65 -93 -146 -229 -602
Plan Deficits........................... 153 167 149 130 110 65 -1 .......
Distribution of Possible Investment Dividend
CBO/OMB baseline differences............ -12 -6 7 24 38 61 82 194
Assume \1/3\ for deficit reduction.. -4 -2 2 -8 13 20 27 65
Assume \1/3\ for tax cuts \1\....... 0 0 0 0 13 20 27 65
Assume \1/3\ discretionary \1\...... 0 0 0 0 13 20 27 65
Adjusted Deficits with Dividend......... 157 169 147 122 98 45 -28 .......
Adjusted Tax Cuts with Dividend......... 3 13 14 16 34 38 29 147
Adjusted Discretionary with Dividend -12 -7 -14 -30 -34 -55 -83 -235
Comparison to BA freeze............. -4 2 -3 2 14 11 1 23
Comparison to Republican Offer...... 6 23 25 26 34 35 26 174
----------------------------------------------------------------------------------------------------------------
\1\ Effective only in last 3 years.
OTHER MANDATORY CHANGES IN BALANCED BUDGET PROPOSAL
[In billions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001 2002 7-year
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Veterans programs:
Health Care Per Diems and Copays............................ 0.000 0.000 0.000 -0.058 -0.062 -0.065 -0.070 -0.255
Medical Care cost recovery.................................. 0.000 0.000 0.000 -0.190 -0.198 -0.206 -0.215 -0.809
Verify income for pension purposes.......................... 0.000 0.000 0.000 -0.010 -0.020 -0.030 -0.040 -0.100
Verify income for medical care.............................. 0.000 0.000 0.000 -0.004 -0.008 -0.012 -0.016 -0.040
Pension limitation--nursing home vets....................... 0.000 0.000 0.000 -0.194 -0.236 -0.169 -0.212 -0.811
Fees on original loans...................................... 0.000 0.000 0.000 -0.074 -0.076 -0.078 -0.080 -0.308
Fees on later loans......................................... 0.000 0.000 0.000 -0.024 -0.025 -0.025 -0.025 -0.099
Resale losses............................................... 0.000 0.000 0.000 -0.004 -0.004 -0.004 -0.004 -0.016
Enhanced loan asset sale authority.......................... -0.005 -0.005 -0.005 -0.005 -0.005 -0.005 -0.005 -0.035
Overturn Supreme Court Gardner decision..................... -0.088 -0.210 -0.328 -0.451 -0.504 -0.426 -0.457 -2.464
Withholding payments and benefits........................... -0.090 0.000 0.000 0.000 0.000 0.000 0.000 -0.090
Reduce COLA for MGIB benefits............................... -0.007 -0.025 -0.044 -0.061 -0.080 -0.099 -0.118 -0.434
Round-down compensation COLA................................ 0.002 -0.015 -0.046 -0.081 -0.122 -0.139 -0.186 -0.587
-------------------------------------------------------------------------------------------------------------------------------
Total, veteran programs................................... -0.188 -0.255 -0.423 -1.156 -1.340 -1.258 -1.428 -6.048
===============================================================================================================================
Federal retirement:
Extend COLA delay for Civilian retirement................... 0.000 -0.309 -0.323 -0.326 -0.329 -0.342 -0.356 -1.985
Raise agency pension contributions.......................... -0.497 -0.641 -0.615 -0.587 -0.532 -0.510 -0.486 -3.868
Revise congressional retirement benefits.................... (*) (*) -0.001 -0.001 -0.002 -0.002 -0.003 -0.009
Employee contributions (revenues)........................... -0.198 -0.393 -0.529 -0.570 -0.582 -0.607 -0.634 -3.513
Add prefunded health benefits............................... 0.000 -0.850 -1.700 -1.700 -1.800 -1.800 -2.000 -9.850
USPS Transitional Appropriation............................. 0.000 -0.009 -0.037 -0.037 -0.036 -0.036 -0.036 -0.191
-------------------------------------------------------------------------------------------------------------------------------
Total retirement.......................................... -0.695 -2.202 -3.205 -3.221 -3.281 -3.297 -3.515 -19.416
===============================================================================================================================
Banking and Housing:
Deposit insurance funds (BIF/SAIF).......................... -4,100 -0.500 -0.500 -0.900 -0.800 -0.800 -0.200 -0.400
Rent adjustments for operating costs........................ -0.018 -0.066 -0.126 -0.177 -0.210 -0.229 -0.249 -0.075
FHA single-family assignment................................ -0.119 -0.216 -0.234 -0.268 -0.308 -0.317 -0.317 -1.779
1% cut in housing rent adjustments.......................... -0.042 -0.170 -0.216 -0.211 -0.198 -0.182 -0.170 -1.189
-------------------------------------------------------------------------------------------------------------------------------
Total, banking and housing................................ -4.279 0.048 -0.076 0.244 0.084 0.072 -0.536 -4.443
===============================================================================================================================
Asset sales and fees:
Asset sales:
U.S. Enrichment Corporation............................. -1,300 0.000 -0.021 -0.054 -0.055 -0.046 -0.047 -1.523
Elk Hills............................................... 0.000 0.000 0.000 0.000 0.000 0.000 -1.100 -1.100
Sale of DOE assets...................................... -0.020 -0.015 -0.015 -0.015 -0.015 -0.015 -0.015 -0.110
Sale of Weeks Island Oil................................ -0.100 -0.188 -0.182 0.000 0.000 0.000 0.000 -0.470
Sale of Helium Reserve.................................. 0.000 -0.003 -0.008 -0.009 -0.009 -0.009 -0.009 -0.047
OCS deepwater royalty relief............................ 0.000 0.000 0.000 0.000 0.000 -0.020 -0.020 -0.040
Sale of Governors Island NY............................. 0.000 0.000 0.000 0.500 0.000 0.000 0.000 -0.500
Sale of Union Station Air Rights........................ 0.000 -0.040 0.000 0.000 0.000 0.000 0.000 -0.040
-------------------------------------------------------------------------------------------------------------------------------
Subtotal, asset sales................................. -1.420 -0.246 -0.226 -0.578 -0.079 -0.090 -1.191 -3.830
===============================================================================================================================
Fees and other:
NRC charges............................................. 0.000 0.000 0.000 -0.330 -0.330 -0.330 -0.330 -1.320
U.S. Enrichment Corporation............................. 0.306 -0.084 0.064 0.036 -0.255 -0.080 0.030 0.185
Lease of excess SPRO capacity........................... 0.000 0.000 -0.024 -0.037 -0.064 -0.059 -0.071 -0.255
Elk Hills--lost receipts................................ 0.000 0.000 0.000 0.000 0.000 0.000 -0.094 -0.094
Hetch Hetchy fees....................................... -0.001 -0.001 -0.001 -0.001 -0.001 -0.001 -0.001 -0.007
Bonneville Power Administration......................... 0.000 0.000 -0.016 -0.014 -0.012 -0.026 -0.026 -0.094
OCS..................................................... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Park fees............................................... -0.007 -0.013 -0.014 -0.011 -0.014 -0.010 -0.014 -0.083
National Defense Stockpile sales........................ -0.021 -0.079 -0.079 -0.079 -0.080 -0.155 -0.156 -0.649
Vessel Tonnage Duties................................... 0.000 0.000 0.000 -0.049 -0.049 -0.049 -0.049 -0.196
FEMA charges............................................ -0.012 -0.012 -0.012 -0.012 -0.012 -0.012 -0.012 -0.084
Denial unemployment insurance to individuals who
voluntarily leave military service..................... -0.235 -0.270 -0.265 -0.270 -0.275 -0.285 -0.295 -1.895
Extend patent and trademark fees........................ 0.000 0.000 0.000 -0.119 -0.119 -0.119 -0.119 -0.476
Subtotal, fees...................................... 0.030 -0.291 -0.347 -0.886 -1.211 -1.126 -0.949 -4.780
===============================================================================================================================
Total, asset sales and fees......................... -1.390 -0.537 -0.573 -1.464 -1.290 -1.216 -2.140 -8.610
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Medicare
This proposal implements reforms that strengthen and
improve Medicare, reducing its rate of growth by $102 billion
(net) over seven years and guaranteeing the solvency of the
trust fund for more than a decade. Specific reforms provide
seniors with more choices of private health plans, improve
Medicare's fee-for-service program by making it more efficient
and responsive to beneficiary needs, tackle fraud and abuse
through programs applauded by law enforcement officials, reduce
the rate of growth of provider payments, and extend the 25%
Part B premium.
Highlights of Provider Payment Reforms and Program Savings
Hospitals ($40 B). Reduces inflation update for hospitals
and payments for capital and indirect medical education;
reforms payments for graduate medical education.
Managed Care ($22 B). Reforms payments by using reasonable
rate of growth limits on updates for managed care payments,
removing payments made for disproportionate share and medical
education and reducing current geographic variation in
payments.
Physicians ($15 B). Reforms physician payments by
collapsing the current three conversion factors into a single
update for all physicians; replaces current ``volume
performance standards'' with a ``sustainable growth rate.''
Home Health Care ($9 B)/Skilled Nursing Facilities ($7 B).
Implements a series of interim payment reforms before the
establishment of separate prospective payment systems for home
health care and skilled nursing facilities.
Fraud and Abuse ($7 B). Introduces aggressive and
comprehensive policies to stamp out Medicare waste, fraud, and
abuse and extends and enhances Medicare secondary payor policy.
Other Providers ($5 B). Freezes or reduces payments for
durable medical equipment and ambulatory surgical centers.
Beneficiaries ($7 B). Requires beneficiaries to pay 25% of
Part B costs.
Provisions to Improve Rural Health Care
This proposal implements a variety of measures to enhance
access to and quality of health care in rural areas. These
include an extension of Rural Referral Center program, direct
Medicare reimbursement for nurse practitioners and physician
assistants, improvements to the Sole Community Hospital
program, and an expansion of the Rural Primary Care Hospital
program.
Program Improvements and Preventive Benefits (+$11 B)
A series of reforms transform the fee-for-service program
from a bill-paying insurance program into a responsive health
plan by giving Medicare the authority to adopt the same types
of purchasing and quality techniques pioneered by private
sector payers. The proposal also expands and improves Medicare
managed care by (1) ensuring beneficiary protections while
increasing the types of plans (including PPOs and PSNs)
available to seniors and (2) instituting a coordinated annual
open enrollment process during which beneficiaries use
comparative information to choose among managed care and
supplemental insurance options. A preventive benefits
demonstration program provides respite care for Alzheimer's
patients, annual mammograms and elimination of mammography co-
insurance, and colorectal cancer screening.
Medicaid
This proposal would reform the Medicaid program rather than
repeal it, guaranteeing health and long-term care coverage for
all Medicaid recipients. It achieves $51.7 billion in savings
in a responsible manner by limiting spending on a per person
basis (a ``per capita cap'') and reducing and retargetting
Medicaid Disproportionate Share Hospital (DSH) payments to
hospitals that serve large numbers of Medicaid and uninsured
patients. The plan provides special payments for Federally
Qualified Health Centers and States that have large numbers of
undocumented immigrants, and gives States additional
flexibility to allow them to more efficiently administer their
Medicaid programs. Finally, this plan would retain current
nursing home quality standards as well as spousal
impoverishment protections and provisions that protect the
financial resources of adult children whose parents are in
nursing homes.
savings proposals
Per Capita Cap ($22.2B). A per capita cap would limit the
amount of Federal spending per eligible person while retaining
current eligibility and benefit guidelines. This approach
guarantees that the elderly, disabled, and pregnant women and
children meeting certain criteria will continue to be eligible
for health benefits while reducing the rate of increase in
Medicaid spending to a level that is sustainable for States and
the Federal government.
Disproportionate Share Hospital Payments ($29.5B).
Disproportionate Share Hospital (DSH) payments would be reduced
and retargeted to specific institutions, including public
hospitals, children's hospitals, Federally Qualified Health
Centers and Rural Health Clinics. An additional fund is created
for States with large numbers of undocumented immigrants.
provisions to increase state flexibility
Boren Amendment. This plan repeals the Boren Amendment,
eliminating provider payment requirements that are imposed on
States.
Managed Care. This plan would allow States to move toward
managed care and other types of cost-effective arrangements
without Federal waivers.
Home and Community Based Care. States would be allowed to
move populations needing long-term care from nursing homes to
home and community based care without having to seek Federal
waivers.
protections for low-income seniors and native americans
Retains current policy of assisting low-income seniors by
assuming responsibility for their Medicare premiums,
copayments, and deductibles and retains current payment
protections for Medicaid-eligible Native Americans treated in
Indian Health Service facilities.
Welfare Reform Savings
The plan will move welfare recipients to work while
protecting children saving about $45.7 billion over 7 years.
The plan essentially follows the House Democratic Coalition
plan with some modifications.
SSI/Disabled Children: New eligibility standards for
childhood disability benefits would begin as soon as possible
for new applicants. For children currently receiving SSI, a one
year transition period would be granted with disability reviews
beginning in 1997 to be completed by 1998. Full cash benefits
for all eligible children would be retained.
Child Care: A total of $11.8 billion is included for child
care, which is $3 billion above baseline ($8.8 billion) for
child care assistance for those welfare recipients required to
work, transitioning from welfare to work, and the working poor.
This is in addition to the $1 billion per year in discretionary
funding authorized under the Child Care Development Block
Grant. Existing child care programs would be consolidated into
the Child Care Development Block Grant.
Nutrition programs: Cuts in food stamps would be about
$20.6 billion and cuts in child nutrition programs would be
$3.3 billion for a total of $23.9 billion in savings. There
would be no block grants under the Food Stamp program. There
would be no food stamp overall cap. There would be no child
nutrition block grants, but child nutrition spending would be
reduced by about 6% in 2002. There would be tighter targeting
of food subsidies for Family Day Care Homes and meal
reimbursement rates would be rounded down to the nearest cent
for child nutrition programs.
Noncitizens: About $5 billion would be saved by deeming
sponsor income until citizenship.
Title XX (Social Services Block Grant): Cuts $1.9 billion.
Cash Assistance: AFDC would be terminated and replaced by a
new conditional entitlement of limited duration. There would be
a 5 year maximum time limit with a state option for vouchers at
the end of that period to assist children.
EITC: Improved compliance and inclusion of capital gains
income in determining the credit would save about $2 billion.
Dependent Care Tax Credit: As under the Coalition plan, the
DCTC would be made refundable and phased out between $60,000
and $80,000 of AGI.
ESTIMATED REVENUE EFFECTS OF ``MIDDLE CLASS BILL OF RIGHTS TAX RELIEF ACT OF 1996''
[By fiscal years, in millions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Provision Effective 1996 1997 1998 1999 2000 2001 2002 1996-2000 1996-2002
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
I. Middle-class bill of rights:
1. Credit for families with young children 1/1/96................................ -1,451 -7,228 -7,081 -7,763 -11,096 -9,073 .......... -34.619 -43.692
2. Deduction for higher education expenses 1/1/96................................ -1,736 -5,010 -5,996 -6,679 -6,995 -4,532 .......... -26,416 -30,948
3. Provisions relating to individual 1/1/96................................ 235 -445 -964 -1,674 -3,443 -3,630 -2,034 -6.290 -11,954
retirement plans.
4. Increase the self-employed health tyba 12/31/95......................... -29 -91 -137 -267 -422 -358 .......... -945 -1,303
insurance deduction (35% in 1996 and
1997; 40% in 1998; 45% in 1999; 50% in
2000; and 30% thereafter).
II. Limitations on corporate welfare and other
revenue provisions:
1. Revision of tax rules on expatriation.. 2/6/95................................ 18 29 46 65 86 102 109 244 455
2. Gain recognition for certain da 5/3/95............................. -56 -100 -71 -33 13 69 104 -247 -74
extraordinary dividends (Seagrams).
3. Registration of certain confidential aiolRSg............................... (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\1\) (\2\) (\2\)
corporate tax shelters.
4. Disallow interest deduction for lpoaa 10/13/95........................ 220 579 883 1,369 1,749 1,856 1,895 4,800 8,551
corporate-owned life insurance policy
loans (BBA).
5. Phase out preferential tax deferral for (\4\)................................. 26 37 38 39 40 41 42 179 261
certain large farm corporations required
to use accrual accounting.
6. Reformulate Puerto Rico and possessions tyba 12/31/96......................... ......... 56 175 308 455 616 718 994 2,328
tax credit (section 936).
7. Further restrict like-kind exchanges eoa 12/31/95.......................... 2 5 8 11 13 15 17 39 71
involving foreign property.
8. Eliminate interest allocation exception tyba 12/31/95......................... 41 93 107 123 141 163 187 505 855
for certain nonfinancial corporations
(BBA).
9. Repeal section 1374 for large 12/7/95............................... 21 42 44 47 49 51 54 203 308
corporations ($5 million fair market
value).
10. Modification of loss carry-back and NOLgtyba 12/31/99..................... ......... ......... ......... ......... -165 1,360 1,695 -165 2,890
carry-forward rules; restrict to 1-year
carry-back.
11. Require recognition of gain for ...................................... 100 100 100 100 100 100 100 500 700
certain transactions.
12. Extend pro rata disallowance of tax- (\5\)................................. 24 43 49 56 64 70 73 238 381
exempt interest expense to all
corporations.
13. Reduce dividends received deduction to dpa 1/31/96........................... 241 383 402 422 443 465 488 1,891 2,844
50%.
14. Modify holding period for dividends dpa 1/31/96........................... 6 14 16 17 18 19 20 71 109
received deduction \6\.
15. Treat certain preferred stock as 12/7/95............................... 80 147 150 154 160 104 33 692 829
``boot''.
16. Deny interest deduction on certain dia 12/7/95........................... 25 76 136 212 262 288 303 711 1,302
debt instruments.
17. Interaction with 50% DRD proposal..... dia 12/7/95........................... 1 3 5 8 11 12 12 28 52
17. Defer original issue discount dia 12/7/95........................... 5 17 36 53 64 78 90 175 343
deduction on convertible debt.
18. Modification of rule relating to 2/6/95................................ 93 162 171 180 188 197 206 794 1,197
foreign trusts having one or more United
States beneficiaries.
19. Expand subpart F provisions regarding tyba 12/31/95......................... 11 15 10 10 11 12 12 57 80
income from notional principal contracts
and stock lending transactions.
20. Treat foreign taxes on oil and gas 1/1/96................................ 800 2,000 2,000 2,400 2,600 2,800 3,000 10,000 15,800
extracted income as royalties (with
treaty override).
21. Repeal section 911.................... tyba 12/31/95......................... 300 1,300 1,400 1,500 1,600 1,700 1,800 6,100 9,600
22. Require thrifts to account for bad tyba 12/31/95......................... 63 95 216 280 277 272 260 931 1,462
debts in the same manner as banks.
23. Reform depreciation under the income ppisa 9/13/95......................... 18 83 29 13 14 16 19 157 192
forecast method.
24. Repeal lower of cost or market method. tyba 12/31/98......................... ......... ......... ......... 55 306 330 336 361 1,027
25. Repeal advance refunds of diesel fuel 1/1/96................................ 8 19 19 19 19 19 19 84 122
tax for diesel cars and light trucks
(BBA).
26. Increase penalties for failure to file rda 90 daDOE.......................... 12 20 21 22 23 24 25 97 147
correct information returns.
27. Modify basis adjustment rules under icoa 9/13/95.......................... 2 4 7 11 16 23 31 40 94
section 1033.
28. Intermediate sanctions................ 9/14/95 & 1/1/96...................... 4 4 4 5 5 5 6 22 33
29. Extend Superfund AMT permanently...... 1/1/96................................ 351 612 633 647 672 700 729 2,915 4,345
30. Extend Oil Spill Liability Trust Fund 1/1/96................................ ......... ......... ......... ......... .......... 63 65 ........... 128
tax through 9/30/02.
31. Extend 0.2% FUTA surtax through 2002 ...................................... ......... ......... ......... 877 1,199 1,218 1,237 2,076 4,531
(under current law; scheduled to expire
12/31/98).
32. Provide that rollover of gain on sale sea 12/31/95.......................... (\7\) (\7\) (\7\) (\7\) (\7\) (\7\) (\7\) (\7\) (\7\)
of a principal residence cannot be
elected unless the replacement property
purchased is located within the United
States (limit to resident aliens who
terminate residence within 2 years) (BBA).
33. Repeal exemption for withholding on 1/1/96................................ 20 6 6 6 6 7 7 44 58
gambling winnings from bingo and keno
where proceeds exceed $5,000 (BBA).
34. Repeal 15-day tax-free vacation home tyba 12/31/95......................... 11 22 23 23 24 26 27 103 155
rental.
35. EIC compliance and self-employment tyba 12/31/95......................... 13 252 261 265 272 276 282 1,062 1,619
taxes.
36. Modify definition of disqualified tyba 12/31/95......................... 11 111 122 132 143 158 171 519 846
investment income test.
37. Modify dependent care credit.......... 1/1/97................................ ......... 128 377 433 493 544 622 1,431 2,597
-------------------------------------------------------------------------------------------------------------------------------------------------
Net Total............................... ...................................... -507 -6,414 -6,552 -6,551 -10,582 -3,793 12,763 -30,604 -21,638
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Gain of less than $5 million.
\2\ Gain of less than $25 million.
\3\ Gain of less than $30 million.
\4\ No new suspense accounts could be established in taxable years ending after 9/13/95. The income in existing suspense accounts would be recognized in equal installments over a 20-year
period beginning with the first taxable year beginning after 9/13/95.
\5\ Effective for taxable years beginning after 12/31/95 with respect to obligations acquired after 12/7/95.
\6\ Includes interaction with 50% DRD provision.
\7\ Gain of less than $500,000.
Note.--Details may not add to totals due to rounding.
Legend for ``Effective'' column: aiolRSg=after issuance of Internal Revenue Service guideline; da=distributions after; dia=debt issued after; DOE=date of enactment; dpa=dividends paid after;
eoa=exchanges on or after; icoa=involuntary conversions occurring after; ipoaa-interest paid or accurred after; NOLgtyba=NOLs generated taxable years beginning after; ppisa=property placed
in service after; rda 90 daDOE=returns due after 90 days after date of enactment; sea=sales and exchanges after; tyba=taxable years beginning after.
Source: Joint Committee on Taxation.
U.S. Congress,
Congressional Budget Office,
Washington, DC, January 6, 1996.
Hon. Newt Gingrich,
Speaker of the House of Representatives, Washington, DC.
Dear Mr. Speaker: The Congressional Budget Office (CBO) has
prepared a preliminary analysis of the President's budgetary
submission of this date. The analysis is based on draft
legislative language or on other descriptive material provided
by staff. It employs CBO's updated economic and technical
estimating assumptions, which incorporate the economic effects
of balancing the federal budget by 2002 and are described in
the CBO memorandum ``Economic and Budget Outlook: December 1995
Update.'' The analysis also assumes, as specified by staff,
that the projected adjustment to reduce the formula bias in the
consumer price index (CPI) will reduce the rate of growth of
the CPI by 0.3 percentage points a year, which is the upper end
of the range estimated by the Bureau of Labor Statistics. CBO's
December baseline assumes a reduction near the middle of the
range.
Under these assumptions, the proposal would result in
deficits of $153 billion in 1996 and $167 billion in 1997 and a
surplus of $1 billion in 2002. Compared to the CBO baseline,
the proposal would reduce the deficit by $220 billion over the
next five years and by $583 billion over the 1996-2002 period.
Table 1 summarizes the proposed policy changes. Table 2 shows
the estimated savings from the changes in direct spending and
revenues that would result from enactment of each title of the
proposal.
Sincerely,
Paul Van de Water
(For June E. O'Neill, Director).
Attachments.
TABLE 1.--DEMOCRATIC PLAN CHANGES FROM CBO'S DECEMBER BASELINE
[By fiscal years, in billions of dollars]
----------------------------------------------------------------------------------------------------------------
Total
1996 1997 1998 1999 2000 2001 2002 1996-2002
----------------------------------------------------------------------------------------------------------------
CBO December Baseline Deficit \1\..... 172 182 183 195 204 211 228 *
Baseline Adjustments \2\.............. 0 0 -2 -2 -3 -6 -6 -19
-------------------------------------------------------------------------
Adjusted December Baseline............ 172 182 181 193 201 205 222 *
=========================================================================
Democratic Plan Policies:
Outlays:
Discretionary \3\:
Freeze \4\................ -8 -9 -11 -32 -49 -66 -84 -258
Savings relative to freeze -4 2 -3 2 2 -9 -26 -37
-------------------------------------------------------------------------
Subtotal................ -12 -7 -14 -30 -47 -75 110 -295
=========================================================================
Mandatory:
Medicare.................. (\5\) -3 -6 -12 -19 -26 -35 -102
Medicaid.................. 0 (\5\) -2 -7 -10 -13 -19 -52
Other..................... -7 -9 -12 -15 -15 -15 -22 -95
-------------------------------------------------------------------------
Subtotal................ -7 -12 -21 -34 -45 -54 -76 -249
Net Interest (\5\) -2 -3 -5 -9 -14 -23 -56
-------------------------------------------------------------------------
Total Outlays........... -20 -21 -37 -69 -100 -143 -209 -599
Revenues \6\ (\5\) 6 6 6 10 3 -14 17
-------------------------------------------------------------------------
Total Policies.......... -20 -15 -32 -63 -90 -140 -223 -583
Democratic Plan Deficit............... 153 167 149 130 110 65 -1 *
----------------------------------------------------------------------------------------------------------------
\1\ Projections assume that discretionary spending is equal to the spending limits that are in effect through
1998 and will increase with inflation after 1998.
\2\ The Democratic plan assumes that the anticipated change in the consumer price index (CPI) methodology used
by the Bureau of Labor Statistics (BLS) will reduce the rate of growth of the CPI by 0.3 percentage points a
year, which is the upper end of the range estimated by the BLS. CBO's December baseline assumes a reduction
near the middle of the range.
\3\ Discretionary savings specified by staff.
\4\ Savings from freezing 1996-2002 appropriations at the nominal level appropriated for 1995.
\5\ Less than $500 million.
\6\ Revenue increases are shown with a negative sign because they decrease the deficit. Includes Earned Income
Credit outlays.
Notes.--*=not applicable. Numbers may not add to totals because of rounding.
Sources: Congressional Budget Office: Joint Committee on Taxation.
TABLE 2.--SAVINGS FROM POLICY CHANGES IN THE DEMOCRATIC PLAN BASED ON CBO'S DECEMBER BASELINE ASSUMPTIONS, BY
TITLE
[By fiscal years, in billions of dollars]
----------------------------------------------------------------------------------------------------------------
Total,
Title 1996 1997 1998 1999 2000 2001 2002 1996-2002
----------------------------------------------------------------------------------------------------------------
I--Banking and Housing:
Outlays........................... -4.3 (1) -0.1 0.2 0.1 0.1 -0.5 -4.4
II--Spectrum Allocation:
Outlays........................... -0.2 -1.8 -2.7 -3.6 -3.1 -2.7 -7.4 -21.3
III--Medicaid:
Outlays........................... 0 -0.4 -2.4 -6.7 -10.3 -13.2 -18.6 -51.7
IV--Medicare:
Outlay............................ (1) -2.7 -6.1 -12.3 -19.1 -26.0 -35.4 -101.5
V--Welfare Reform:
Outlays........................... -0.9 -4.8 -5.8 -6.3 -6.9 -6.9 -7.6 -39.1
Revenues 2........................ -0.1 -0.3 -0.6 -0.7 -0.8 -0.8 -0.9 -4.2
Deficit........................... -1.0 -5.1 -6.4 -7.0 -7.6 -7.7 -8.5 -43.3
VI--Federal Retirement:
Outlays........................... -0.5 -1.8 -2.7 -2.7 -2.7 -2.7 -2.9 -15.9
Revenues 2........................ -0.2 -0.4 -0.5 -0.6 -0.6 -0.6 -0.6 -3.5
Deficit........................... -0.7 -2.2 -3.2 -3.2 -3.3 -3.3 -3.5 -19.4
VII--Veterans Provisions:
Outlays........................... -0.2 -0.3 -0.4 -1.2 -1.3 -1.3 -1.4 -6.1
VIII--Asset Sales, User Fees, and
other Mandatory Provisions:
Outlays........................... -1.3 -0.5 -0.6 -1.5 -1.3 -1.3 -2.2 -8.7
IX--Revenues:
Revenues 1, 3..................... 0.5 6.5 6.9 7.0 11.1 4.3 -12.1 24.2
X--Budget Enforcement:
Outlays........................... 0 0 0 0 0 0 0 0
Total:
Outlays........................... -7.3 -12.3 -20.7 -33.9 -44.6 -53.8 -76.0 -248.7
Revenues 2, 3..................... 0.2 5.8 5.8 5.8 9.7 2.9 -13.7 16.5
Deficit........................... -7.1 -6.5 -14.9 -28.2 -34.9 -60.9 -89.7 -232.2
----------------------------------------------------------------------------------------------------------------
\1\ Less than $50 million.
\2\ Revenue increases are shown with a negative sign because they reduce the deficit.
\3\ Includes Earned Income Credit outlays.
Sources: Congressional Budget Office; Joint Committee on Taxation.