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URGING FISCAL DISCIPLINE AND DEBT REDUCTION
"In the past seven years we've balanced Washington's books, we've cut its credit card balance. Now let's refinance our nation's mortgage and then wipe the ledger clean. Paying down the debt creates wealth, creates jobs, creates opportunity. It's the right and responsible thing to do and we have the chance of a lifetime to do it."
President Bill Clinton
August 4, 1999
Lowering the Nation's Debt Through Fiscal Discipline. The Clinton-Gore Administration's policy of fiscal discipline has turned our economy around, changing our task from financing a deficit to managing a surplus. As a result of this fiscal discipline, the nation's publicly held debt has dropped from 50 percent of the economy in 1993 to 41 percent now. On Monday, the Treasury Department announced that this fiscal year, we will pay down $87 billion in publicly held debt – the largest debt pay-down on record. Over the last two years, we have paid down $142 billion in publicly held debt. Under President Clinton's plan to save Social Security and strengthen Medicare, the publicly held debt would be entirely eliminated by 2015, the first time the nation has been debt-free in 180 years.
The Benefits of Debt Reduction. Paying down the debt would result in real benefits for American families and businesses:
- Lower Debt Will Reduce the Federal Government's Interest Payments. When President Clinton took office, interest payments on the publicly held federal debt were projected to eat up 27 cents of every budget dollar by the year 2014. Under the President's proposal, interest payments would be only two-tenths of a cent by 2014.
- Lower Debt Will Make Us Better Able to Respond to Economic Challenges. With lower debt or no debt at all, our nation will be better prepared to respond to an aging population, economic slowdowns, and other contingencies.
- Lower Debt Will Help Maintain Long-Term Economic Growth. Lower interest rates encourage more business investment. More investment means higher productivity, higher wages, and greater prosperity.
- Lower Interest Rates Provide the Effect of a $2,000 Tax Cut to Families with a $100,000 Mortgage. Due to debt reduction, it is estimated that a family with a home mortgage of $100,000 might expect to save about $2,000 per year in mortgage payments. This means that families would have a "stealth tax cut" of roughly $2,000 per year in lower interest costs as a result of President Clinton's strategy of maintaining fiscal discipline. There would also be significant savings on typical car payments and credit card loans.
- Refinancing the Debt Would Save Taxpayers Billions. The Treasury Department today proposed new tools to help manage federal finances in a new era of budget surpluses. These tools would give the government the same kind of flexibility that families and businesses have in managing their finances – in effect, allowing us to refinance the debt and pay it down on the best terms possible, saving taxpayers billions of dollars.
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