[Weekly Compilation of Presidential Documents Volume 35, Number 38 (Monday, September 27, 1999)]
[Pages 1795-1796]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Message to the House of Representatives Returning Without Approval the 
``Taxpayer Refund and Relief Act of 1999''

September 23, 1999

To the House of Representatives:

    I am returning herewith without my approval H.R. 2488, the 
``Taxpayer Refund and Relief Act of 1999,'' because it ignores the 
principles that have led us to the sound economy we enjoy today and 
emphasizes tax reduction for those who need it the least.
    We have a strong economy because my Administration and the Congress 
have followed the proper economic course over the past 6 years. We have 
focused on reducing deficits, paying down debt held by the public, 
bringing down interest rates, investing in our people, and opening 
markets. There is $1.7 trillion less debt held by the public today than 
was forecast in 1993. This has contributed to lower interest rates, 
record business investment, greater productivity growth, low inflation, 
low unemployment, and broad-based growth in real wages--and the first 
back-to-back budget surpluses in almost half a century.
    This legislation would reverse the fiscal discipline that has helped 
make the American economy the strongest it has been in generations. By 
using projected surpluses to provide a risky tax cut, H.R. 2488 could 
lead to higher interest rates, thereby undercutting any benefits for 
most Americans by increasing home mortgage payments, car loan payments, 
and credit card rates. We must put first things first, pay down publicly 
held debt, and address the long-term solvency of Medicare and Social 
Security. My Mid-Session Review of the Budget presented a framework in 
which we could accomplish all of these things and also provide an 
affordable tax cut.
    The magnitude of the tax cuts in H.R. 2488 and the associated debt 
service costs would be virtually as great as all of the on-budget 
surpluses the Congressional Budget Office projects for the next 10 
years. This would leave virtually none of the projected on-budget 
surplus available for addressing the long-term solvency of Medicare, 
which is currently projected by its Trustees to be insolvent by 2015, or 
of Social Security, which then will be a negative cash-flow position, or 
for critical funding for priorities like national security, education, 
health care, law enforcement, science and technology, the environment, 
and veterans' programs.
    The bill would cause the Nation to forgo the unique opportunity to 
eliminate completely the burden of the debt held by the public by 2015 
as proposed by my Administration's Mid-Session Review. The elimination 
of this debt would have a beneficial effect on interest rates, 
investment, and the growth of the economy. Moreover, paying down debt is 
tantamount to cutting taxes. Each one-percentage point decline in 
interest rates would mean a cut of $200 billion to $250 billion in 
mortgage costs borne by American consumers over the next 10 years. Also, 
if we do not erase the debt held by the public, our children and 
grandchildren

[[Page 1796]]

will have to pay higher taxes to offset the higher Federal interest 
costs on this debt.
    Budget projections are inherently uncertain. For example, the 
Congressional Budget Office found that, over the last 11 years, 
estimates of annual deficits or surpluses 5 years, into the future erred 
by an average of 13 percent of annual outlays--a rate that in 2004 would 
translate into an error of about $250 billion. Projections of budget 
surpluses 10 years into the future are surely even more uncertain. The 
prudent course in the face of these uncertainties is to avoid making 
financial commitments--such as massive tax cuts--that will be very 
difficult to reverse.
    The bill relies on an implausible legislative assumption that many 
of its major provisions expire after 9 years and all of the provisions 
are repealed after 10 years. This scenario would create uncertainty and 
confusion for taxpayers, and it is highly unlikely that it would ever be 
implemented. Moreover, this artifice causes estimated 10-year costs to 
be understated by about $100 billion, at the same time that it sweeps 
under the rug the exploding costs beyond the budget window. If the tax 
cut were continued, its budgetary impact would grow even more severe, 
reaching about $2.7 trillion between 2010 and 2019, just at the time 
when the baby boomers begin to retire, Medicare becomes insolvent, and 
Social Security comes under strain. If the bill were to become law, it 
would leave America permanently in debt. The bill as a whole would 
disproportionately benefit the wealthiest Americans by, for example, 
lowering capital gains rates, repealing the estate and gift tax, 
increasing maximum IRA and retirement plan contribution limits, and 
weakening pension anti-discrimination protections for moderate- and low-
income workers.
    The bill would not meet the Budget Act's existing pay-as-you-go 
requirements, which have helped provide the discipline necessary to 
bring us from an era of large and growing budget deficits to the 
potential for substantial surpluses. It would also automatically trigger 
across-the-board cuts (or sequesters) in a number of Federal programs. 
These cuts would result in a reduction of more than $40 billion in the 
Medicare program over the next 5 years. Starting in 2002, they would 
also lead to the elimination of numerous programs with broad support, 
including: crop insurance, without which most farmers and ranchers could 
not secure the financing from banks needed to operate their farms and 
ranches; veterans readjustment benefits, denying education and training 
to more than 450,000 veterans, reservists, and dependents; Federal 
support for programs such as child care for low-income families and 
Meals on Wheels for senior citizens; on many others.
    As I have repeatedly stressed, I want to find common ground with the 
Congress on a fiscal plan that will best serve the American people. I 
have profound differences, however, with the extreme approach that the 
Republican majority has adopted. It would provide a tax cut for the 
wealthiest Americans and would hurt average Americans by denying them 
the benefits of debt reduction and depriving them of the certainty that 
my proposals for Medicare and Social Security solvency would provide as 
they plan for their retirement.
    I hope to work with Members of Congress to find a common path to 
honor our commitment to senior citizens, help working families with 
targeted tax relief for moderate- and lower-income workers, provide a 
better life for our children, and improve the standard of living of all 
Americans.
                                            William J. Clinton
The White House,
September 23, 1999.