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PRESIDENT CLINTON'S
FISCAL YEAR 1998
BALANCED BUDGET
Summary Documents
February 6, 1997
TABLE OF CONTENTS f!c,;;-yump Conversion )
I. 2-Page Summary of President Clinton's FY 1998 Balanced
Budget
II. I-Page Summary of Savings in the Budget
III. 2-Page Chart on Selected Clinton Administration
Discretionary Investments
IV. I-Page Summary on Tax Cuts in the President's Budget
v. I-page Summary of the President's Medicare Reform
Package
VI. I-Page Summary of President Clinton's Record on Deficit
Reduction
VII. I-Page Summary on Government Spending under President
Clinton
VIII. I-Page Summary on Credibility of Clinton Administration
Budget Assumptions.
T lk' n'
Summary ~ a mg rOints: February 6, 1997
,unp COnVGiSlOn
A BALANCED BUDGET THAT REFLECTS AMERICA'S VALUES.
President Clinton's budget demonstrates that we can move the country beyond the
false choices of the past -- and that we can finish the job of balancing the budget, to
lower interest rates and keep the economy growing, while still investing in key
priorities such as education that help the American people thrive and our economy
grow.
A DETAILED PLAN TO BALANCE THE BUDGET IN 5 YEARS.
Protect and Strengthen Medicare & Medicaid. Extend the life of the Medicare Trust Fund well into
the next century. Protect the fundamental guarantee of health benefits for the disabled, nursing home
residents, & strengthen health coverage for children.
Invest in Education -- our nation's number 1 priority for preparing for the next century.
Strengthen environmental protections.
Build on the Vice~President's efforts to make our government work better and cost less.
Provide middle-class tax relief to pay for education, health care, to help raise a child and buy and
sell a home.
BUILD ON PRESIDENT CLINTON'S RECORD ON DEFICIT REDUCTION.
We have cut the deficit by 63% after it had quadrupled during the previous 12 years.
We now have a smaller deficit as a share of GDP than any other major country in the world.
FY98 budget builds on this progress and reaches balance by 2002 while investing in the future.
MEETING REPUBLICANS HALFWAY ON MEDICARE.
On difficult issues such as Medicare reforms,the President shows that he is serious about reaching a bipartisan
agreement to balance the budget.
The President's Balanced Budget uses responsible Medicare policies to strengthen the life of the
Trust Fund without placing unnecessary burdens on beneficiaries. The President's plan achieves
$100 billion of savings over 5 years ($138 billion over 6 years) through several reforms including reducing
reimbursement to managed care. The plan also guarantees the solvency of the Part A trust fund until 2007
while maintaining choice and the high-quality of Medicare services.
TAX CUTS FOR FAMILIES WHEN THEY NEED IT MOST.
The President's budget provides about $100 billion of tax cuts over the next five years to help families:
Raise their children ($500 per child),
Send them to college ($1,500 HOPE Scholarship and $10,000 tuition tax deduction), .
Save for the future (penalty-free withdrawals from IRAs for education and first homes; tax-free
savings for education through combined use of the tuition tax deduction and education IRA);
Buy and sell their homes by the exclusion of $500,000 of capital gains on the sale of the home,
Move from welfare to work with tax incentives to businesses, by allowing employers a 50% credit
on the first $10,000 of annual wages that they pay to long-term welfare recipients.
And tax incentives to boost investment in distressed areas and promote hiring of the economically
disadvantaged.
~v-tJump CGnv~;siJi1
INVESTING IN THE FUTURE. The President's budget maintains our critical priorities by increasing our
investments in health care, education and training, the environment and science and technology. It also
establishes new initiatives important new initiatives to help prepare America for the 21 st century.
Health Care:
Helps an estimated 3.2 million families, including 700,000 children, keep their health care
coverage for up to six months until their breadwinners find new jobs.
Provides health insurance coverage for millions of children who are uninsured.
Invests more in the Ryan White AIDS program and in biomedical research at NIH to find
ways to prevent and treat diseases.
Establishes a new Alzheimer's respite benefit within Medicare and provides for an annual
mammogram without copayments.
Education and Training:
Increases funding for Head Start by 55%, from $2.8 billion in FY93 to $4.3 billion in FY98.
Increases GOALS 2000 funding by 26% to help states raise educational achievement.
Doubles funding to $500 million next year for the Technology Literacy Challenge and a related
program to help ensure that all children are technology literate by the tum of the century.
Includes the largest increase in the maximum Pell.Grant scholarship in two decades, a $1. 7
billion increase in aid over FY97, and expanded eligibility for at least 348,000 more students.
Creates the America Reads Challenge to help insure that all children can read well and
independently by the end of third grade ($2.5 billion over five years.)
Creates a $5 billion new school construction fund over four years to spur $20 billion in school
construction and renovation.
Environment:
Funds the Kalamazoo Initiative to protect communities from toxic pollution by the 2000.
Increases funds for the National Park System to help improve park facilities and further protect
our national and cultural treasures.
Crime:
Funds 17,000 more police, helping to move towards the President's goal of 100,000
new police by the year 2000.
Increases funds for the Drug Courts initiative, for drug testing, for the Safe and Drug-Free
Schools initiative and othe~ programs to fight drugs.
Funds 7,359 Border Patrol agents -- 85% more than in FY93 -- to control illegal immigration.
A BALANCED BUDGET PLAN THAT CLOSES LOOPHOLES AND SPECIAL INTEREST
PROVISIONS.
To protect priorities like Medicare, Medicaid, education and the environment, the President believes we should
also be closing loopholes and special interest provisions.
The President's budget proposes approximately $34 billion of business tax base broadeners, tax
loophole closers and tax compliance measures for FY 1998-2002.
LET'S BUILD ON OUR PROGRESS.
We have cut the deficit by 63%. Deficit reduction has reduced interest rates, and spurred strong investment and
the creation of over 11 million new jobs. Now, we must work together to achieve a real and solid balanced
budget that keeps America strong and growing.
PRESIDENT CLINTON'S BUDGET:
=> PRODUCES $350 BILLION IN SA VINGS OVER 5 YEARS
=> CUTS NET SPENDING BY $275 BILLION
=> CUTS NET SPENDING, INCLUDING CORPORATE SUBSIDIES, BY $309 BILLION
=> CUTS THE DEFICIT BY $252 BILLION
THE BUDGET SA VES $350 BILLION OVER 5 YEARS, INCLUDING:
It saves $137 billion in discretionary spending, by cutting unnecessary and lower-priority spending areas;
It saves $100 billion in Medicare ($138 billion over six years), extending the life of the Part A Trust Fund
to 2007 while maintaining the high-quality of Medicare services. It also saves $9 billion in Medicaid
-- $22 billion in gross savings offset by a $13 billion related to the welfare reform law and new
children's health initiatives.
It saves $34 billion by reducing corporate subsidies .
.THE BUDGET CUTS THE DEFICIT BY $252 BILLION:
It cuts taxes by $98 billion, providing tax relief to tens of millions of middle-income Americans and small
businesses, while extending several expired tax provisions.
AREA SA VINGS OVER 5 YEARS, 1998-2002
Discretionary spending $137.4 billion
Medicare $100.2 billion*
Medicaid $9.3 billion**
Spectrum safes/mandatory spending $n.8 billion
Net interest $15.9 billion
NET SPENDING CUTS $275 billion
Corporate subsidies $34.3 billion
TOTAL CUTS INCLUDING $309 billion
CORPORATE LOOPHOLES
Ewending tax provisions $41.7 billion
TOTAL SA VINGS $350 billion
Tax cuts -$98.4 billion
TOTAL DEFICIT REDUCTION $252 billion
..
* $138 billIOn over SIX years
initiatives
SELECTED CLINTON ADMINISTRATION DISCRETIONARY I ',;;ffilvESTti'ENTS
INITIATIVE FY93-FY97 INVESTMENT IMPACT FY98 BUDGET
EDUCATION AND TRAINING: The President's FY98 Budget increases funding 33% for major education and training
discretionary programs compared to FY93, providing $51 billion for all FY98 education & training.
Created Goals 2000 to support Goals 2000 is now Increases funding 26 in FY98 to
Goals 2000 state-developed academic supporting school $620 million, supporting
standards and school reform, reforms in all 50 standards-based reform in 16,000
supporting reform in 1,000 states. public schools across the 50 states.
schools in 1994.
Technology Literacy Created and funded in FY97 at Funds state-wide plans More than doubles funding in FY98
Challenge $200 million to help ensure that to wire schools, train to $425 million and provides $2
(TLC) all children are technologically teachers, and purchase billion over 5 years. Provides $500
literate by the dawn of the 21st educational software million for the TLC and a related
century. and on-line resources. grant program in FY98.
Increased the maximum Pell 3.7 million Increases the grant from $2,700 to
Pell Grants Grant 17 , from $2,300 in FY93 low-income students $3,000 in FY98 -- the largest
to $2,700 in FY97, increasing currently receive Pell increase in two decades. Provides
college opportunities for Grants of up to $1.7 billion more aid in FY98 than
low-income students. $2,700. FY97, making 348000 more families
eligible.
Dislocated Worker Doubled funding for dislocated Provides 274,000 Increases funding to $1,350 million
Assistance workers, from $651 million in more workers in FY97 to serve 605,200 dislocated workers
FY93 to $1,286 million in FY97. with job training and in FY98, double then number in
Will assist 580,000 workers this search services to help FY93.
year. them find jobs more
quickly.
EARLY CHILDHOOD DEVELOPMENT AND HEALTH:
I I
Increased funding 43 from $2.8 Serves 800,000 Provides a $324 million increase in
Head Stan billion in FY93 to $4.0 billion in low-income 3- and FY98, serving 122,100 more children
FY97. Created the Early Head 4-year olds this year, than in FY93 while continuing to
Start program in 1994 to support including thousands of increase program quality and the 0-3
zero-3 year olds and their 0-3 year-olds and their program, and on track to serve 1
families. families. million children in 2002.
Increased funding nearly $1 Expanded Increases funding to $4.1 billion to
WIC Supplemental billion or 34 to $3.83 billion in participation by 1.7 achieve the President's goal of full
Nutrition Program FY97. Provides nutrition million since 1993, or participation by the end of FY98.
packages, nutrition education and 30 with the requested Research shows that WIC prenatal
health referrals to low-income supplemental, from services save Medicaid much more
pregnant women, infants, and 5.7 to 7.4 million by reducing health care costs in the
children. women, infants, and first 60 days after birth.
children.
Ryan White AIDS Increased funding 158 , to $996 This program may be Provides a 221 increase for State
Treatment million in FY97. Provides grants partly responsible for AIDS Drug Assistance since 1996 to
to states and to 49 hard-hit cities, the 30 decline in expand access to effective new
double the number in FY93. AIDS deaths in NYC medications to those who could not
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'" in 1996. otherwise afford them.
Increased funding 23 , to $12.7 Research has Increases funding by $337 million to
National Institutes billion in FY97. NIH now contributed to major maintain NIH's leadership in
of Health supports 32,000 grants in more advances in treating medical research.
than 1,700 universities, medical people with HIV and
schools, and other research \0 medications for
institutions. Alzheimer's disease.
INITIATIVE FY93-97 INVESTMENT IMPACT FY98 BUDGET
ENVIRONMENT:
Reformed the program, reduced Cleaned up more sites Increases funding 50 from FY97 to
Superfund funding 12 ,and cleaned up 260 in the last 4 years than clean up an additional 500 sites by
toxic waste sites in the last 4 in the previous 12. the year 2000 -- 2/3 of all listed sites.
years.
Environmental Increased funding 12 to $3.1 Will cut chemical Increases funding 9 -- $293 million --
Enforcement billion for EPA operations plant toxic air fully funding EPA's portion of the
including enforcement. emissions 90 and Climate Change Action Plan.
enforced.
National Parks Increased operations funding 17 Maintaining parks for Increases funding 6 to increase
to $1.2 billion. 4 increase in the 275 million annual maintenance and keep up with
number of parks since 1993. visitors. increasing visitorship.
COMMUNITY:
AmeriCorps National Created the AmeriCorps in 1993 Enabled 70,000 Funds 35,000 participants and
Service to enable young people to earn young people to earn increases funding 31 to provide
money for college while serving money for college tutor coordinators for the President's
their communities. through services in 3 America Reads Challenge.
years.
Community Created Community Awarded $37 million Increases funding 150 to $125
Development Development Financial in financial and million in FY98, and invests $1
Institutions Institutions Fund to expand access technical assistance to billion over the next 5 years.
to credit and capital to distressed 32 CDFIs in 1996.
communities.
Created the first federal Designated 105 Proposes to double the number of
Ezs/ECs Empowerment Zones and EZs/ECs, providing EZ/ECs with a second round of
Enterprise Communities in 1994, $2.5 billion in tax designations, and tax incentives to
providing assistance to distressed incentives & $1 billion spur the clean up and development
urban and rural communities. in funding over 5 of "brownfield" industrial sites.
years.
E:
Community Created COPS program in 1994 Will have funded Proposes funding for an additional
Policing: COPS Crime Bill to put 100,000 more 64,000 police by the 17,000 officers, on track to fund
community police on the streets. end of FY97. 100,000 by the year 2000.
Federal Prisons Increased funding 62 to $1.4 Reduced Continues to increase funding for
billion in FY97 to open new overcrowding while new federal prisons and to continue
, ... '.
. HCX-UUOlp vUIIV~I~ J\lfederal prisons. prison population to reduce overcrowding.
expanded 38 .
INS Border Patrols More than doubled funding to 6,859 border patrol Funds 7,359 agents -- 85 more
$729 million in FY97. agents -- 2,894 than in FY93.
more.
TECHNOLOGY:
Advanced Technology Increased funding 231 to $225 Funds high risk $50 million increase to support
Program million in FY97 to develop new technologies w/ large about 90 new projects with 200 new
technologies with private sector. potential public participants.
benefit.
Manufacturing Increased funding 428 I Providing technical Increases funding an additional 29
Extension expanding from 7 to 78 extension expertise to smaller in FY98 to help more small
centers. manufacturers. manufacnlrers increase sales & jobs.
NIl and Next . Created the National Information NIl supports Increases NIl and proposes $100
Generation Internet Infrastructure program in 1994, innovative telecom million for the next generation
funded at $21 million in FY97. demonstration Internet: 100-1,000 roster than
projects. todays Internet.
SUMMARY OF TAX CUTS IN THE PRESIDENT'S BUDGET
$100 BILLION IN TAX CUTS. President Clinton's 1998 budget provides nearly $100 billion of tax cuts
through FY 2002, including a child credit for middle-income families; tax cuts for education and training;
expanded lRAs; targeted home-ownership tax cut; and tax incentives to boost investment in distressed areas and
to promote hiring of the economically disadvantaged.
MIDDLE-CLASS TAX CUTS ($90.8 BILLION). These proposals will help middle-class families pay the
bills~raise their children, send them to college, upgrade their skills, and save for retirement.
Tax Credit for Dependent Children ($46.7 billion): Phased-in $500 tax credit for dependent children.
Education and Training Tax Incentive ($38.6 billion): HOPE Scholarship tax credits of up to $1,500 per
year, for first two years of post-secondary education; a $10,000 tax deduction for post-secondary education and
training; income exclusion for forgiveness of certain student loans; and extending the exclusion for
employer-provided educational assistance, reinstating exclusion for graduate courses, and providing small
businesses a 10% income tax credit for employee education expenses.
Expand Individual Retirement Accounts (IRAs) ($5.5 billion): Double, over time, the income limits on
deductible lRAs; expand penalty-free withdrawals to cover post-secondary education, unemployment
expenses, and first-time home purchases; and add new "special" back-loaded lRAs.
TARGETED HOME-OWNERSHIP TAX CUT ($1.5 BILLION). Allow exclusion of $500,000 ($250,000
singles) of capital gains from selling a home. This would exempt over 99% of home sales from capital gains
taxes and dramatically simplify taxes and record-keeping for over 60 million homeowners.
T AX INCENTIVES FOR DISTRESSED AREAS ($2.4 BILLION)
"Brownfields" Initiative: Allow immediate expensing of certain costs to encourage firms to clean up
abandoned, contaminated industrial properties in distressed urban & rural areas.
Incentives to Empower Communities: Stimulate revitalization of economically distressed urban & rural
communities by designating 20 additional Empowerment Zones and 80 additional Enterprise Communities,
providing new tax incentives, additional small business expensing, and new private activity boards.
allocated among equity investors in community development banks.
WELFARE-TO-WORK INITIATIVE ($0.5 BILLION). To encourage hiring oflong-term welfare recipients,
provide a new welfare-to-work credit through September 30, 2000. It would allow employers a SO% credit on
the first $10,000 of annual wages that they pay to long-term welfare recipients for up to two years. Also expand
the Work Opportunity Tax Credit to include certain able-bodied adults, ages 18-S0.
SMALL BUSINESS AND FARM ESTATE TAX RELIEF ($0.7 BILLION). To address cash-flow problems
that may arise upon the death of a farmer or small business owner, increase the amount of property eligible for a
favorable interest rate on deferred tax from $1 million to $2.S million.
OTHER INITIATIVES. Extend for one year expiring tax provisions (R&E credit, Work Opportunity Tax
Credit, others) ($2.7 billion). Modify statutes oflimitations on tax refunds to treat the disabled fairly ($0.05
billion). Revitalize DC with tax incentives ($0.26 billion) and provide a more efficient and effective tax
incentive for Puerto Rico ($0.417 billion). Allow FSC software benefits for computer software licenses ($0.S6
billion).
President Clinton's balanced budget balances our values and protects our priorities. It achieves $100
billion in real scorable savings over 5 years, places no undue burdens on beneficiaries, modernizes and
improves the program, and extends the life of the Medicare Trust Fund to 2007. This plan meets
Republicans halfway -- and they have responded in a constructive and positive manner. The President
looks forward to working with both Congressional Democrats and Republicans in a bipartisan process to
protect Medicare.
The President's plan reforms and improves Medicare by:
Extending the life of the Medicare Trust Fund to 2007.
Bringing the program into the 21st century by:
=> Providing more choice by establishing new private health plan options.
=> Establishing market-oriented purchasing for Medicare including new
prospective payment systems and competitive bidding authority and centers of
excellence to improve quality and cut back on costs.
Adding Medigap protections to increase the security of Medicare beneficiaries.
The President's plan explicitly:
Saves $34 billion by reducing reimbursement to managed care through a phased
in reduction in HMO payment rates and an indirect reduction in HMO payments
associated with the traditional fee-for-service cuts.
Saves $33 billion in hospital expenditures through reductions in hospital
updates, capital payments etc.
Saves about $14 billion over 5 years through the transition to and
establishment of a new prospective payment system and other programmatic
changes in reimbursement to home health care.
Saves about $7 billion over 5 years through the transition to and establishment
of a new prospective payment system and other programmatic changes in
reimbursement to nursing home facilities.
Saves about $7 billion over 5 years through a modification of physician
updates.
Saves about $9 billion over 5 years through new provisions to combat fraud
and abuse.
Saves about $10 billion over 5 years by extending current law that sets the Part
B premium at 25% of program costs.
Invests $15 billion over 5 years in preventive health care to improve seniors'
health status, in establishing a new Alzheimer's respite benefit starting in 1998
and in buying down excessive outpatient copayments to the traditional 20%
level.
REDUCTION
CUT THE DEFICIT BY 63 PERCENT. President Clinton has reduced the budget deficit by 63 percent--
from $290 billion in FY 1992 to $107 billion in FY 1996. [Based on data from OMB, FY 1998 Budget, February 1997.)
LOWEST DEFICIT SINCE THE EARLY 1970'S. The deficit has fallen from 4.7 percent ofGDP in FY
1992 to 1.4 percent in FY 1996 -- the lowest for any year since 1974. [Based on data from OMB, FY 1998 Budget,
February 1997.)
LOWEST DEFICIT OF ANY MAJOR ECONOMY. The total U.S. deficit in 1996 as a percentage of the
economy was lower than for any other major country. [OECD, Economic Outlook, December 1996.)
MAKING GOVERNMENT MORE EFFICIENT. Federal employment has fallen by 275,000 from its
1993 base. Federal employment as a share of total employment is the smallest it has been since the early
1930's. [Based on data from OMB, FY 1998 Budget, February 1997.)
AS A RESULT OF PRESIDENT CLINTON'S EFFORTS TO REDUCE THE DEFICIT, ECONOMIC
PERFORMANCE HAS IMPROVED DRAMATICALLY:
INVESTMENT BOOM. Deficit reduction has lowered interest rates and spurred investment.
Equipment investment has grown by 10 percent per year under President Clinton -- faster than any
Administration since John F. Kennedy was President. [Based on data from the Bureau of Economic Analysis,
Department of Commerce.)
EMPLOYMENT BOOM. Since January 1993, the economy has added more than 11 million new jobs
-- a faster rate of job growth than under any Republican Administration since the Roaring 1920's. [Based on
data from the Bureau of Labor Statistics, Department of Labor.)
THE LOWEST COMBINED RATE OF UNEMPLOYMENT AND INFLATION SINCE
JOHNSON. The combined rate of unemployment and inflation has been lower under President Clinton
than for any Administration since Lyndon Johnson was President. [Based on data from the Bureau of Labor
Statistics, Department of Labor.)
THE EXPERTS AGREE THAT ECONOMIC PERFORMANCE HAS BEEN REMARKABLE;
..,j Money Magazine: President Clinton has "presided over the kind of economic progress any
Republican President would be proud to post." IMoney Magazine, August 19961
Paul Volcker, former Chairman of the Federal Reserve: "It's been a remarkable period of steady
growth, low inflation and low unemployment." 18/3/961
Allen Sinai, a leading economic forecaster: "When the history book on this business cycle upturn
is written, it will go down as the best ever, compared with other post-World War II upturns."
110/23/961
CLINTON
SPENDING IS LOWER TODAY UNDER REAGAN OR BUSH:
FEDERAL SPENDING WAS LOWER IN 1996 -- AND IS EXPECTED TO REMAIN
LOWER IN 1997 -- THAN IN ANY YEAR SINCE 1979. Federal outlays as a share ofGDP
were lower in 1996 than in any year since 1979. And current projections suggest no increase in
outlays as a percent of GDP during 1997. Outlays under President Clinton have been a smaller
share of GDP than under Reagan or Bush. [Based on data from OMB, FY 1998 Budget, February \997.]
SINCE PASSAGE OF PRESIDENT CLINTON'S 1993 DEFICIT REDUCTION PACKAGE,
EXPECTED GOVERNMENT SPENDING BETWEEN 1993 AND 2002 HAS FALLEN BY
MORE THAN $1.4 TRILLION. The President's budget will cut net spending by an additional
$275 billion by 2002 -- for a total spending cut between 1993 and 2002 of more than $1. 7 trillion.
That's about $25,000 for a family offour. [Based on data from OMB, FY 1998 Budget, February \997.]
GROWTH IN TOTAL FEDERAL SPENDING HAS BEEN LOWER UNDER CLINTON
THAN UNDER REAGAN OR BUSH. Real Federal outlays have grown by 0.7 percent per year
under President Clinton -- lower than under President Bush (2.6 percent per year) or President
Reagan (2.6 percent per year). [Based on data from OMB, FY 1998 Budget, February \997.]
WHILE MAINTAINING CRUCIAL INVESTMENTS IN PEOPLE, REAL
DISCRETIONARY SPENDING HAS FALLEN UNDER PRESIDENT CLINTON -- A
BETTER RECORD THAN UNDER REAGAN OR BUSH. Real discretionary outlays have
fallen by 2.5 percent per year under President Clinton -- lower than under President Bush or
Reagan. [Based on data from OMB, FY 1998 Budget, February \997.]
NON-DEFENSE DISCRETIONARY SPENDING IS NOW A SMALLER SHARE OF THE
ECONOMY THAN IN 8 OF THE 12 YEARS UNDER REAGAN OR BUSH. Non-defense
discretionary outlays are now lower than in 8 of the 12 Reagan-Bush years. With the President's
balanced budget plan, non-defense discretionary outlays will fall by 9 percent in real terms between
1997 and 2002. [Based on data from OMB, FY 1998 Budget, February \997.]
=> SPENDING GROWTH LOWER UNDER CLINTON THAN UNDER REAGAN OR BUSH
Federal outlays Real growth in Federal
(% ofGDP) outlays
(percent per year)
CLINTON 21.3 0.7
BUSH 22.1 2.6
REAGAN 22.5 2.6
[Based on data from OMB, FY 1998 Budget, February \997.]
ESTABLISHING A CREDIBLE RECORD OVER THE PAST 4 YEARS
A RECORD OF CREDIBLE FORECASTS. For the past four years, the Clinton Administration
has used middle-of-the-road economic forecasts for budgetary purposes. For four years in a row,
growth has been higher and the deficit has been smaller than we had projected.
ACTUAL DEFICITS HAVE BEEN SMALLER THAN WE PREDICTED. Between FY 1994
and FY 1996, the actual deficit has on average been about $50 billion lower than we had
projected the year before. CBO has been less accurate: their estimates have been off by $59
billion on average.
THE 1996 DATA CONFIRM THE CREDIBILITY OF OUR FORECASTS. The most
recently available economic data confirm the credibility of our forecasts. Our estimates of
growth and the deficit for 1996 were too cautious -- and turned out to be more accurate than the
Congressional Budget Office's forecasts.
In last year's budget, we projected that real growth during 1996 would be 2.2
percent. But the GDP data released last Friday indicate that growth in 1996 was 2.5
percent (on a year-over-year basis). While both the Administration's forecast and
the CBO's forecast were conservative, ours was more accurate (CBO had predicted
2.0 percent). Over the past four years, our real GDP forecasts have been more
accurate than CBO's.
The FY 1996 deficit was smaller than we had projected. Our projection for the FY
1996 deficit was $170 billion in February 1994 and $197 billion in February 1995.
CBO's projections were $177 billion in February 1994 and $211 billion in February
1995. The actual deficit was only $107 billion. Again, while both the
Administration and CBO forecasts were conservative, ours were more accurate.
NO MORE ROSY SCENARIOS. As in each of the four years that we have been in office, our
estimates of growth in 1996 were thus too low and our estimates of the deficit too high --
confirming that the Clinton Administration does not use rosy scenarios for its budget projections.
MAINSTREAM PROJECTIONS FOR THE FUTURE. Our forecasts for the next 5 years are
also mainstream and conservative. For key budgetary variables such as GDP growth (2.2 percent
per year) and GDP inflation (2.6 percent per year), our assumptions match those of the Blue Chip
private sector consensus. While we think that the economy can grow faster than these forecasts
would suggest, we continue to use prudent projections for budgetary purposes.
==================== ATTACHMENT 1 ====================
ATT CREATION TIME/DATE: o 00:00:00.00
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5911FC5929AFD180360952A2F4051C754EF5B5483742COD34CDBDBB6F95BAAA4E7308D78E810Cl
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PRESIDENT CLINTON'S
FISCAL YEAR 1998
BALANCED BUDGET
Summary Documents
February 6, 1997
TABLE OF CONTENTS f!c,;;-yump Conversion )
I. 2-Page Summary of President Clinton's FY 1998 Balanced
Budget
II. I-Page Summary of Savings in the Budget
III. 2-Page Chart on Selected Clinton Administration
Discretionary Investments
IV. I-Page Summary on Tax Cuts in the President's Budget
v. I-page Summary of the President's Medicare Reform
Package
VI. I-Page Summary of President Clinton's Record on Deficit
Reduction
VII. I-Page Summary on Government Spending under President
Clinton
VIII. I-Page Summary on Credibility of Clinton Administration
Budget Assumptions.
T lk' n'
Summary ~ a mg rOints: February 6, 1997
,unp COnVGiSlOn
A BALANCED BUDGET THAT REFLECTS AMERICA'S VALUES.
President Clinton's budget demonstrates that we can move the country beyond the
false choices of the past -- and that we can finish the job of balancing the budget, to
lower interest rates and keep the economy growing, while still investing in key
priorities such as education that help the American people thrive and our economy
grow.
A DETAILED PLAN TO BALANCE THE BUDGET IN 5 YEARS.
Protect and Strengthen Medicare & Medicaid. Extend the life of the Medicare Trust Fund well into
the next century. Protect the fundamental guarantee of health benefits for the disabled, nursing home
residents, & strengthen health coverage for children.
Invest in Education -- our nation's number 1 priority for preparing for the next century.
Strengthen environmental protections.
Build on the Vice~President's efforts to make our government work better and cost less.
Provide middle-class tax relief to pay for education, health care, to help raise a child and buy and
sell a home.
BUILD ON PRESIDENT CLINTON'S RECORD ON DEFICIT REDUCTION.
We have cut the deficit by 63% after it had quadrupled during the previous 12 years.
We now have a smaller deficit as a share of GDP than any other major country in the world.
FY98 budget builds on this progress and reaches balance by 2002 while investing in the future.
MEETING REPUBLICANS HALFWAY ON MEDICARE.
On difficult issues such as Medicare reforms,the President shows that he is serious about reaching a bipartisan
agreement to balance the budget.
The President's Balanced Budget uses responsible Medicare policies to strengthen the life of the
Trust Fund without placing unnecessary burdens on beneficiaries. The President's plan achieves
$100 billion of savings over 5 years ($138 billion over 6 years) through several reforms including reducing
reimbursement to managed care. The plan also guarantees the solvency of the Part A trust fund until 2007
while maintaining choice and the high-quality of Medicare services.
TAX CUTS FOR FAMILIES WHEN THEY NEED IT MOST.
The President's budget provides about $100 billion of tax cuts over the next five years to help families:
Raise their children ($500 per child),
Send them to college ($1,500 HOPE Scholarship and $10,000 tuition tax deduction), .
Save for the future (penalty-free withdrawals from IRAs for education and first homes; tax-free
savings for education through combined use of the tuition tax deduction and education IRA);
Buy and sell their homes by the exclusion of $500,000 of capital gains on the sale of the home,
Move from welfare to work with tax incentives to businesses, by allowing employers a 50% credit
on the first $10,000 of annual wages that they pay to long-term welfare recipients.
And tax incentives to boost investment in distressed areas and promote hiring of the economically
disadvantaged.
~v-tJump CGnv~;siJi1
INVESTING IN THE FUTURE. The President's budget maintains our critical priorities by increasing our
investments in health care, education and training, the environment and science and technology. It also
establishes new initiatives important new initiatives to help prepare America for the 21 st century.
Health Care:
Helps an estimated 3.2 million families, including 700,000 children, keep their health care
coverage for up to six months until their breadwinners find new jobs.
Provides health insurance coverage for millions of children who are uninsured.
Invests more in the Ryan White AIDS program and in biomedical research at NIH to find
ways to prevent and treat diseases.
Establishes a new Alzheimer's respite benefit within Medicare and provides for an annual
mammogram without copayments.
Education and Training:
Increases funding for Head Start by 55%, from $2.8 billion in FY93 to $4.3 billion in FY98.
Increases GOALS 2000 funding by 26% to help states raise educational achievement.
Doubles funding to $500 million next year for the Technology Literacy Challenge and a related
program to help ensure that all children are technology literate by the tum of the century.
Includes the largest increase in the maximum Pell.Grant scholarship in two decades, a $1. 7
billion increase in aid over FY97, and expanded eligibility for at least 348,000 more students.
Creates the America Reads Challenge to help insure that all children can read well and
independently by the end of third grade ($2.5 billion over five years.)
Creates a $5 billion new school construction fund over four years to spur $20 billion in school
construction and renovation.
Environment:
Funds the Kalamazoo Initiative to protect communities from toxic pollution by the 2000.
Increases funds for the National Park System to help improve park facilities and further protect
our national and cultural treasures.
Crime:
Funds 17,000 more police, helping to move towards the President's goal of 100,000
new police by the year 2000.
Increases funds for the Drug Courts initiative, for drug testing, for the Safe and Drug-Free
Schools initiative and othe~ programs to fight drugs.
Funds 7,359 Border Patrol agents -- 85% more than in FY93 -- to control illegal immigration.
A BALANCED BUDGET PLAN THAT CLOSES LOOPHOLES AND SPECIAL INTEREST
PROVISIONS.
To protect priorities like Medicare, Medicaid, education and the environment, the President believes we should
also be closing loopholes and special interest provisions.
The President's budget proposes approximately $34 billion of business tax base broadeners, tax
loophole closers and tax compliance measures for FY 1998-2002.
LET'S BUILD ON OUR PROGRESS.
We have cut the deficit by 63%. Deficit reduction has reduced interest rates, and spurred strong investment and
the creation of over 11 million new jobs. Now, we must work together to achieve a real and solid balanced
budget that keeps America strong and growing.
PRESIDENT CLINTON'S BUDGET:
=> PRODUCES $350 BILLION IN SA VINGS OVER 5 YEARS
=> CUTS NET SPENDING BY $275 BILLION
=> CUTS NET SPENDING, INCLUDING CORPORATE SUBSIDIES, BY $309 BILLION
=> CUTS THE DEFICIT BY $252 BILLION
THE BUDGET SA VES $350 BILLION OVER 5 YEARS, INCLUDING:
It saves $137 billion in discretionary spending, by cutting unnecessary and lower-priority spending areas;
It saves $100 billion in Medicare ($138 billion over six years), extending the life of the Part A Trust Fund
to 2007 while maintaining the high-quality of Medicare services. It also saves $9 billion in Medicaid
-- $22 billion in gross savings offset by a $13 billion related to the welfare reform law and new
children's health initiatives.
It saves $34 billion by reducing corporate subsidies .
.THE BUDGET CUTS THE DEFICIT BY $252 BILLION:
It cuts taxes by $98 billion, providing tax relief to tens of millions of middle-income Americans and small
businesses, while extending several expired tax provisions.
AREA SA VINGS OVER 5 YEARS, 1998-2002
Discretionary spending $137.4 billion
Medicare $100.2 billion*
Medicaid $9.3 billion**
Spectrum safes/mandatory spending $n.8 billion
Net interest $15.9 billion
NET SPENDING CUTS $275 billion
Corporate subsidies $34.3 billion
TOTAL CUTS INCLUDING $309 billion
CORPORATE LOOPHOLES
Ewending tax provisions $41.7 billion
TOTAL SA VINGS $350 billion
Tax cuts -$98.4 billion
TOTAL DEFICIT REDUCTION $252 billion
..
* $138 billIOn over SIX years
initiatives
SELECTED CLINTON ADMINISTRATION DISCRETIONARY I ',;;ffilvESTti'ENTS
INITIATIVE FY93-FY97 INVESTMENT IMPACT FY98 BUDGET
EDUCATION AND TRAINING: The President's FY98 Budget increases funding 33% for major education and training
discretionary programs compared to FY93, providing $51 billion for all FY98 education & training.
Created Goals 2000 to support Goals 2000 is now Increases funding 26 in FY98 to
Goals 2000 state-developed academic supporting school $620 million, supporting
standards and school reform, reforms in all 50 standards-based reform in 16,000
supporting reform in 1,000 states. public schools across the 50 states.
schools in 1994.
Technology Literacy Created and funded in FY97 at Funds state-wide plans More than doubles funding in FY98
Challenge $200 million to help ensure that to wire schools, train to $425 million and provides $2
(TLC) all children are technologically teachers, and purchase billion over 5 years. Provides $500
literate by the dawn of the 21st educational software million for the TLC and a related
century. and on-line resources. grant program in FY98.
Increased the maximum Pell 3.7 million Increases the grant from $2,700 to
Pell Grants Grant 17 , from $2,300 in FY93 low-income students $3,000 in FY98 -- the largest
to $2,700 in FY97, increasing currently receive Pell increase in two decades. Provides
college opportunities for Grants of up to $1.7 billion more aid in FY98 than
low-income students. $2,700. FY97, making 348000 more families
eligible.
Dislocated Worker Doubled funding for dislocated Provides 274,000 Increases funding to $1,350 million
Assistance workers, from $651 million in more workers in FY97 to serve 605,200 dislocated workers
FY93 to $1,286 million in FY97. with job training and in FY98, double then number in
Will assist 580,000 workers this search services to help FY93.
year. them find jobs more
quickly.
EARLY CHILDHOOD DEVELOPMENT AND HEALTH:
I I
Increased funding 43 from $2.8 Serves 800,000 Provides a $324 million increase in
Head Stan billion in FY93 to $4.0 billion in low-income 3- and FY98, serving 122,100 more children
FY97. Created the Early Head 4-year olds this year, than in FY93 while continuing to
Start program in 1994 to support including thousands of increase program quality and the 0-3
zero-3 year olds and their 0-3 year-olds and their program, and on track to serve 1
families. families. million children in 2002.
Increased funding nearly $1 Expanded Increases funding to $4.1 billion to
WIC Supplemental billion or 34 to $3.83 billion in participation by 1.7 achieve the President's goal of full
Nutrition Program FY97. Provides nutrition million since 1993, or participation by the end of FY98.
packages, nutrition education and 30 with the requested Research shows that WIC prenatal
health referrals to low-income supplemental, from services save Medicaid much more
pregnant women, infants, and 5.7 to 7.4 million by reducing health care costs in the
children. women, infants, and first 60 days after birth.
children.
Ryan White AIDS Increased funding 158 , to $996 This program may be Provides a 221 increase for State
Treatment million in FY97. Provides grants partly responsible for AIDS Drug Assistance since 1996 to
to states and to 49 hard-hit cities, the 30 decline in expand access to effective new
double the number in FY93. AIDS deaths in NYC medications to those who could not
........ _. -
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'" in 1996. otherwise afford them.
Increased funding 23 , to $12.7 Research has Increases funding by $337 million to
National Institutes billion in FY97. NIH now contributed to major maintain NIH's leadership in
of Health supports 32,000 grants in more advances in treating medical research.
than 1,700 universities, medical people with HIV and
schools, and other research \0 medications for
institutions. Alzheimer's disease.
INITIATIVE FY93-97 INVESTMENT IMPACT FY98 BUDGET
ENVIRONMENT:
Reformed the program, reduced Cleaned up more sites Increases funding 50 from FY97 to
Superfund funding 12 ,and cleaned up 260 in the last 4 years than clean up an additional 500 sites by
toxic waste sites in the last 4 in the previous 12. the year 2000 -- 2/3 of all listed sites.
years.
Environmental Increased funding 12 to $3.1 Will cut chemical Increases funding 9 -- $293 million --
Enforcement billion for EPA operations plant toxic air fully funding EPA's portion of the
including enforcement. emissions 90 and Climate Change Action Plan.
enforced.
National Parks Increased operations funding 17 Maintaining parks for Increases funding 6 to increase
to $1.2 billion. 4 increase in the 275 million annual maintenance and keep up with
number of parks since 1993. visitors. increasing visitorship.
COMMUNITY:
AmeriCorps National Created the AmeriCorps in 1993 Enabled 70,000 Funds 35,000 participants and
Service to enable young people to earn young people to earn increases funding 31 to provide
money for college while serving money for college tutor coordinators for the President's
their communities. through services in 3 America Reads Challenge.
years.
Community Created Community Awarded $37 million Increases funding 150 to $125
Development Development Financial in financial and million in FY98, and invests $1
Institutions Institutions Fund to expand access technical assistance to billion over the next 5 years.
to credit and capital to distressed 32 CDFIs in 1996.
communities.
Created the first federal Designated 105 Proposes to double the number of
Ezs/ECs Empowerment Zones and EZs/ECs, providing EZ/ECs with a second round of
Enterprise Communities in 1994, $2.5 billion in tax designations, and tax incentives to
providing assistance to distressed incentives & $1 billion spur the clean up and development
urban and rural communities. in funding over 5 of "brownfield" industrial sites.
years.
E:
Community Created COPS program in 1994 Will have funded Proposes funding for an additional
Policing: COPS Crime Bill to put 100,000 more 64,000 police by the 17,000 officers, on track to fund
community police on the streets. end of FY97. 100,000 by the year 2000.
Federal Prisons Increased funding 62 to $1.4 Reduced Continues to increase funding for
billion in FY97 to open new overcrowding while new federal prisons and to continue
, ... '.
. HCX-UUOlp vUIIV~I~ J\lfederal prisons. prison population to reduce overcrowding.
expanded 38 .
INS Border Patrols More than doubled funding to 6,859 border patrol Funds 7,359 agents -- 85 more
$729 million in FY97. agents -- 2,894 than in FY93.
more.
TECHNOLOGY:
Advanced Technology Increased funding 231 to $225 Funds high risk $50 million increase to support
Program million in FY97 to develop new technologies w/ large about 90 new projects with 200 new
technologies with private sector. potential public participants.
benefit.
Manufacturing Increased funding 428 I Providing technical Increases funding an additional 29
Extension expanding from 7 to 78 extension expertise to smaller in FY98 to help more small
centers. manufacturers. manufacnlrers increase sales & jobs.
NIl and Next . Created the National Information NIl supports Increases NIl and proposes $100
Generation Internet Infrastructure program in 1994, innovative telecom million for the next generation
funded at $21 million in FY97. demonstration Internet: 100-1,000 roster than
projects. todays Internet.
SUMMARY OF TAX CUTS IN THE PRESIDENT'S BUDGET
$100 BILLION IN TAX CUTS. President Clinton's 1998 budget provides nearly $100 billion of tax cuts
through FY 2002, including a child credit for middle-income families; tax cuts for education and training;
expanded lRAs; targeted home-ownership tax cut; and tax incentives to boost investment in distressed areas and
to promote hiring of the economically disadvantaged.
MIDDLE-CLASS TAX CUTS ($90.8 BILLION). These proposals will help middle-class families pay the
bills~raise their children, send them to college, upgrade their skills, and save for retirement.
Tax Credit for Dependent Children ($46.7 billion): Phased-in $500 tax credit for dependent children.
Education and Training Tax Incentive ($38.6 billion): HOPE Scholarship tax credits of up to $1,500 per
year, for first two years of post-secondary education; a $10,000 tax deduction for post-secondary education and
training; income exclusion for forgiveness of certain student loans; and extending the exclusion for
employer-provided educational assistance, reinstating exclusion for graduate courses, and providing small
businesses a 10% income tax credit for employee education expenses.
Expand Individual Retirement Accounts (IRAs) ($5.5 billion): Double, over time, the income limits on
deductible lRAs; expand penalty-free withdrawals to cover post-secondary education, unemployment
expenses, and first-time home purchases; and add new "special" back-loaded lRAs.
TARGETED HOME-OWNERSHIP TAX CUT ($1.5 BILLION). Allow exclusion of $500,000 ($250,000
singles) of capital gains from selling a home. This would exempt over 99% of home sales from capital gains
taxes and dramatically simplify taxes and record-keeping for over 60 million homeowners.
T AX INCENTIVES FOR DISTRESSED AREAS ($2.4 BILLION)
"Brownfields" Initiative: Allow immediate expensing of certain costs to encourage firms to clean up
abandoned, contaminated industrial properties in distressed urban & rural areas.
Incentives to Empower Communities: Stimulate revitalization of economically distressed urban & rural
communities by designating 20 additional Empowerment Zones and 80 additional Enterprise Communities,
providing new tax incentives, additional small business expensing, and new private activity boards.
allocated among equity investors in community development banks.
WELFARE-TO-WORK INITIATIVE ($0.5 BILLION). To encourage hiring oflong-term welfare recipients,
provide a new welfare-to-work credit through September 30, 2000. It would allow employers a SO% credit on
the first $10,000 of annual wages that they pay to long-term welfare recipients for up to two years. Also expand
the Work Opportunity Tax Credit to include certain able-bodied adults, ages 18-S0.
SMALL BUSINESS AND FARM ESTATE TAX RELIEF ($0.7 BILLION). To address cash-flow problems
that may arise upon the death of a farmer or small business owner, increase the amount of property eligible for a
favorable interest rate on deferred tax from $1 million to $2.S million.
OTHER INITIATIVES. Extend for one year expiring tax provisions (R&E credit, Work Opportunity Tax
Credit, others) ($2.7 billion). Modify statutes oflimitations on tax refunds to treat the disabled fairly ($0.05
billion). Revitalize DC with tax incentives ($0.26 billion) and provide a more efficient and effective tax
incentive for Puerto Rico ($0.417 billion). Allow FSC software benefits for computer software licenses ($0.S6
billion).
President Clinton's balanced budget balances our values and protects our priorities. It achieves $100
billion in real scorable savings over 5 years, places no undue burdens on beneficiaries, modernizes and
improves the program, and extends the life of the Medicare Trust Fund to 2007. This plan meets
Republicans halfway -- and they have responded in a constructive and positive manner. The President
looks forward to working with both Congressional Democrats and Republicans in a bipartisan process to
protect Medicare.
The President's plan reforms and improves Medicare by:
Extending the life of the Medicare Trust Fund to 2007.
Bringing the program into the 21st century by:
=> Providing more choice by establishing new private health plan options.
=> Establishing market-oriented purchasing for Medicare including new
prospective payment systems and competitive bidding authority and centers of
excellence to improve quality and cut back on costs.
Adding Medigap protections to increase the security of Medicare beneficiaries.
The President's plan explicitly:
Saves $34 billion by reducing reimbursement to managed care through a phased
in reduction in HMO payment rates and an indirect reduction in HMO payments
associated with the traditional fee-for-service cuts.
Saves $33 billion in hospital expenditures through reductions in hospital
updates, capital payments etc.
Saves about $14 billion over 5 years through the transition to and
establishment of a new prospective payment system and other programmatic
changes in reimbursement to home health care.
Saves about $7 billion over 5 years through the transition to and establishment
of a new prospective payment system and other programmatic changes in
reimbursement to nursing home facilities.
Saves about $7 billion over 5 years through a modification of physician
updates.
Saves about $9 billion over 5 years through new provisions to combat fraud
and abuse.
Saves about $10 billion over 5 years by extending current law that sets the Part
B premium at 25% of program costs.
Invests $15 billion over 5 years in preventive health care to improve seniors'
health status, in establishing a new Alzheimer's respite benefit starting in 1998
and in buying down excessive outpatient copayments to the traditional 20%
level.
REDUCTION
CUT THE DEFICIT BY 63 PERCENT. President Clinton has reduced the budget deficit by 63 percent--
from $290 billion in FY 1992 to $107 billion in FY 1996. [Based on data from OMB, FY 1998 Budget, February 1997.)
LOWEST DEFICIT SINCE THE EARLY 1970'S. The deficit has fallen from 4.7 percent ofGDP in FY
1992 to 1.4 percent in FY 1996 -- the lowest for any year since 1974. [Based on data from OMB, FY 1998 Budget,
February 1997.)
LOWEST DEFICIT OF ANY MAJOR ECONOMY. The total U.S. deficit in 1996 as a percentage of the
economy was lower than for any other major country. [OECD, Economic Outlook, December 1996.)
MAKING GOVERNMENT MORE EFFICIENT. Federal employment has fallen by 275,000 from its
1993 base. Federal employment as a share of total employment is the smallest it has been since the early
1930's. [Based on data from OMB, FY 1998 Budget, February 1997.)
AS A RESULT OF PRESIDENT CLINTON'S EFFORTS TO REDUCE THE DEFICIT, ECONOMIC
PERFORMANCE HAS IMPROVED DRAMATICALLY:
INVESTMENT BOOM. Deficit reduction has lowered interest rates and spurred investment.
Equipment investment has grown by 10 percent per year under President Clinton -- faster than any
Administration since John F. Kennedy was President. [Based on data from the Bureau of Economic Analysis,
Department of Commerce.)
EMPLOYMENT BOOM. Since January 1993, the economy has added more than 11 million new jobs
-- a faster rate of job growth than under any Republican Administration since the Roaring 1920's. [Based on
data from the Bureau of Labor Statistics, Department of Labor.)
THE LOWEST COMBINED RATE OF UNEMPLOYMENT AND INFLATION SINCE
JOHNSON. The combined rate of unemployment and inflation has been lower under President Clinton
than for any Administration since Lyndon Johnson was President. [Based on data from the Bureau of Labor
Statistics, Department of Labor.)
THE EXPERTS AGREE THAT ECONOMIC PERFORMANCE HAS BEEN REMARKABLE;
..,j Money Magazine: President Clinton has "presided over the kind of economic progress any
Republican President would be proud to post." IMoney Magazine, August 19961
Paul Volcker, former Chairman of the Federal Reserve: "It's been a remarkable period of steady
growth, low inflation and low unemployment." 18/3/961
Allen Sinai, a leading economic forecaster: "When the history book on this business cycle upturn
is written, it will go down as the best ever, compared with other post-World War II upturns."
110/23/961
CLINTON
SPENDING IS LOWER TODAY UNDER REAGAN OR BUSH:
FEDERAL SPENDING WAS LOWER IN 1996 -- AND IS EXPECTED TO REMAIN
LOWER IN 1997 -- THAN IN ANY YEAR SINCE 1979. Federal outlays as a share ofGDP
were lower in 1996 than in any year since 1979. And current projections suggest no increase in
outlays as a percent of GDP during 1997. Outlays under President Clinton have been a smaller
share of GDP than under Reagan or Bush. [Based on data from OMB, FY 1998 Budget, February \997.]
SINCE PASSAGE OF PRESIDENT CLINTON'S 1993 DEFICIT REDUCTION PACKAGE,
EXPECTED GOVERNMENT SPENDING BETWEEN 1993 AND 2002 HAS FALLEN BY
MORE THAN $1.4 TRILLION. The President's budget will cut net spending by an additional
$275 billion by 2002 -- for a total spending cut between 1993 and 2002 of more than $1. 7 trillion.
That's about $25,000 for a family offour. [Based on data from OMB, FY 1998 Budget, February \997.]
GROWTH IN TOTAL FEDERAL SPENDING HAS BEEN LOWER UNDER CLINTON
THAN UNDER REAGAN OR BUSH. Real Federal outlays have grown by 0.7 percent per year
under President Clinton -- lower than under President Bush (2.6 percent per year) or President
Reagan (2.6 percent per year). [Based on data from OMB, FY 1998 Budget, February \997.]
WHILE MAINTAINING CRUCIAL INVESTMENTS IN PEOPLE, REAL
DISCRETIONARY SPENDING HAS FALLEN UNDER PRESIDENT CLINTON -- A
BETTER RECORD THAN UNDER REAGAN OR BUSH. Real discretionary outlays have
fallen by 2.5 percent per year under President Clinton -- lower than under President Bush or
Reagan. [Based on data from OMB, FY 1998 Budget, February \997.]
NON-DEFENSE DISCRETIONARY SPENDING IS NOW A SMALLER SHARE OF THE
ECONOMY THAN IN 8 OF THE 12 YEARS UNDER REAGAN OR BUSH. Non-defense
discretionary outlays are now lower than in 8 of the 12 Reagan-Bush years. With the President's
balanced budget plan, non-defense discretionary outlays will fall by 9 percent in real terms between
1997 and 2002. [Based on data from OMB, FY 1998 Budget, February \997.]
=> SPENDING GROWTH LOWER UNDER CLINTON THAN UNDER REAGAN OR BUSH
Federal outlays Real growth in Federal
(% ofGDP) outlays
(percent per year)
CLINTON 21.3 0.7
BUSH 22.1 2.6
REAGAN 22.5 2.6
[Based on data from OMB, FY 1998 Budget, February \997.]
ESTABLISHING A CREDIBLE RECORD OVER THE PAST 4 YEARS
A RECORD OF CREDIBLE FORECASTS. For the past four years, the Clinton Administration
has used middle-of-the-road economic forecasts for budgetary purposes. For four years in a row,
growth has been higher and the deficit has been smaller than we had projected.
ACTUAL DEFICITS HAVE BEEN SMALLER THAN WE PREDICTED. Between FY 1994
and FY 1996, the actual deficit has on average been about $50 billion lower than we had
projected the year before. CBO has been less accurate: their estimates have been off by $59
billion on average.
THE 1996 DATA CONFIRM THE CREDIBILITY OF OUR FORECASTS. The most
recently available economic data confirm the credibility of our forecasts. Our estimates of
growth and the deficit for 1996 were too cautious -- and turned out to be more accurate than the
Congressional Budget Office's forecasts.
In last year's budget, we projected that real growth during 1996 would be 2.2
percent. But the GDP data released last Friday indicate that growth in 1996 was 2.5
percent (on a year-over-year basis). While both the Administration's forecast and
the CBO's forecast were conservative, ours was more accurate (CBO had predicted
2.0 percent). Over the past four years, our real GDP forecasts have been more
accurate than CBO's.
The FY 1996 deficit was smaller than we had projected. Our projection for the FY
1996 deficit was $170 billion in February 1994 and $197 billion in February 1995.
CBO's projections were $177 billion in February 1994 and $211 billion in February
1995. The actual deficit was only $107 billion. Again, while both the
Administration and CBO forecasts were conservative, ours were more accurate.
NO MORE ROSY SCENARIOS. As in each of the four years that we have been in office, our
estimates of growth in 1996 were thus too low and our estimates of the deficit too high --
confirming that the Clinton Administration does not use rosy scenarios for its budget projections.
MAINSTREAM PROJECTIONS FOR THE FUTURE. Our forecasts for the next 5 years are
also mainstream and conservative. For key budgetary variables such as GDP growth (2.2 percent
per year) and GDP inflation (2.6 percent per year), our assumptions match those of the Blue Chip
private sector consensus. While we think that the economy can grow faster than these forecasts
would suggest, we continue to use prudent projections for budgetary purposes.
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