THE CLINTON-GORE ADMINISTRATIONS
June 26, 2000
Table of Contents
1. The Clinton-Gore Administrations Budget Framework
2. President Clinton Makes a Constructive Offer to Address Priorities
for American Families in a Framework of Fiscal Discipline
3. Taking Medicare Off-budget and Dedicating the Resulting Interest
Savings to Extend Its Solvency
4. Improving the Presidents Medicare Prescription Drug Benefit and
A1. The Clinton-Gore Administration: Paying Off the Debt By 2012
A2. The Clinton-Gore Economic Record: What a Difference Seven Years
THE CLINTON-GORE ADMINISTRATIONS BUDGET
June 26, 2000
The Clinton-Gore Administrations budget framework continues the
three-part strategy put in place at the beginning of the Administration:
getting our fiscal house in order and keeping it that way, investing in people,
and opening markets abroad. This strategy has helped foster the longest
economic expansion in history, contributing to the lowest unemployment rate in
over thirty years.
Specifically, the budget framework would make investments in key
priorities while putting America on track to eliminate the debt by 2012
one year earlier than projected in the February budget.
The Six Key Elements of the Clinton-Gore
Administrations Budget Framework
1. Pay off the debt by 2012
2. Take Medicare off-budget as the next step in locking in
fiscal discipline and debt reduction
3. Extend the solvency of Social Security to at least 2057 and
Medicare to at least 2030
4. Improve the Presidents prescription drug benefit and
health care provider payments
5. Establish a $500 billion Reserve for Americas
6. Invest in key priorities like education, expand health
coverage, and provide targeted tax relief
(1) Pay off the debt by 2012. The President has a fiscally
responsible plan to pay off the debt held by the public by 2012, one year
earlier than was projected in the February budget.
The $211 billion unified surplus this year will be the largest on
record. In 1992 the deficit was a record $290 billion and the
Congressional Budget Office projected that it would rise to $455 billion in
2000. Instead, this year the projected surplus is a record $211 billion
a $666 billion improvement relative to forecast in this one year
The on-budget account will be in surplus for the first time since
Medicare was established. In 2000, the on-budget surplus, excluding both
Social Security and Medicare, is projected to be $39 billion. This is
the only surplus on this basis since the Medicare program was established in
Debt held by the public will have been paid down by the largest
amount in history: $324 billion. In 1998 and 1999, the debt held by the
public was reduced by $140 billion. OMB is projecting that the government will
pay down an additional $184 billion in debt held by the public this fiscal
year. That will bring the total debt pay-down to $324 billion the
largest three-year debt pay-down in American history, and almost 9 percent
of the total in public hands as of the end of fiscal year 1997.
The Presidents plan would lock in $2.9 trillion of debt
reduction between now and 2010 and eliminate the debt by 2012. The
President proposes to save the entire Social Security surplus, $2.3 trillion
over 10 years, and devote it to paying down the debt held by the public. In
addition, he proposes to save the entire Medicare surplus, $403 billion over 10
years, and devote it to debt reduction. He also proposes to further reduce the
debt held by the public by dedicating a portion of the on-budget surplus, based
on the interest savings from these policies, to the solvency of Social Security
and Medicare. Over the next decade these policies would dramatically reduce the
debt held by the public by $2.9 trillion; the remaining debt held by the public
would be eliminated by 2012.
The Presidents plan would eliminate net Federal interest
expenses. Currently the Federal government spends 12 cents of every dollar
on net interest payments. These payments, which were once projected to grow to
25 percent of all federal spending in 2012, would be completely eliminated by
that date under the Presidents plan.
(2) Take Medicare off-budget as the next step in locking in fiscal
discipline and debt reduction. Following the leadership of Vice President
Gore, President Clinton is proposing to take Medicare Part A off-budget. This
would mean that the projected $403 billion Medicare surplus will be off-budget,
like the Social Security surplus, and therefore, no longer counted as part of
the funds available for other purposes. Under this plan, the Medicare surplus
will be dedicated to paying down the publicly held debt to help strengthen the
life of the Medicare program.
Building on our progress with Medicare. In 1993, the Medicare
Trust Fund was projected to be exhausted in 1999. The latest estimates by the
Medicare Trustees push the exhaustion date back to 2025. The Medicare surplus
has grown from $4 billion in 1993 to $24 billion in 2000. This makes taking
Medicare off-budget the next logical step in the Clinton-Gore
Administrations fiscal discipline and Medicare policies.
(3) Extend the solvency of Social Security to at least 2057 and
Medicare to at least 2030. The President would ensure that the benefits of
the debt reduction that are due to Social Security and Medicare are used to
extend their solvency by:
Protect Social Security and Medicare surpluses. The President
proposes to protect the Social Security and Medicare surpluses from being spent
on other purposes, locking them away to pay down the debt.
Make transfers based on the interest savings achieved by locking
away the surpluses. The President proposes to go one step further to ensure
that Social Security and Medicare receive the benefit of locking away their
surpluses for debt reduction. According to the Social Security actuaries, the
Presidents plan would extend the solvency of Social Security to at least
2057. The Presidents proposed Medicare solvency transfers, together with
the Presidents proposals to increase competition and reduce fraud, extend
the solvency of Medicare to at least 2030.
Republican so-called "lockboxes" do not add a single day to the
life of Social Security or Medicare. Because they would not add any new
resources to Social Security or Medicare, the Republican so-called "lockboxes"
would not extend the life of Social Security by a single day. Furthermore, they
have "trap doors" that would allow these surpluses to be used for other
(4) Improve the Presidents Medicare prescription drug benefit
and provider payments. The framework allocates a net $264 billion over ten
years for Medicare prescription drug benefits and other reforms (with an
additional $115 billion in Medicare solvency transfers that go to debt
reduction). The President will improve his voluntary and affordable Medicare
prescription drug benefit by specifying that no Medicare beneficiary will pay
more than $4,000 in out-of-pocket drug costs; maintaining the beneficiary
premium at the same level even with the enhanced benefit; starting the program
one year earlier; and providing immediate payments to managed-care plans to
provide a prescription drug benefit, for a total cost of $253 billion over 10
years. The President is also proposing $40 billion over ten years to further
mitigate the impacts of the Balanced Budget Act of 1997 reductions for Medicare
and Medicaid providers. Finally, the Presidents proposal maintains the
key elements of the Administrations Medicare reform plan, such as the
increased competition and anti-fraud provisions from the February budget,
saving $29 billion over 10 years.
(5) Establish a $500 billion Reserve for Americas Future.
The framework sets aside $500 billion over ten years that could be used for key
national priorities, such as retirement savings, additional targeted tax cuts,
investments in education, research, health and the environment, or further debt
reduction. There are always uncertainties in budget and economic projections,
especially when they cover a long period into the future. This reserve provides
a margin of insurance: if the surplus is not as large as projected, then any
use of the reserve could be reduced. The allocation of the reserve should be
subject to a full debate over national priorities this year, given the
competing visions of the use of these funds.
(6) Invest in key priorities like education, expand health coverage,
and provide targeted tax relief. The Presidents budget framework
maintains his commitment to his proposals from the February budget
Invest in priorities. The Presidents framework maintains
the FY2001 budget proposals for specific, detailed policies to address the
Nations priorities in national defense, education, law enforcement, the
environment, and veterans programs. These policies are part of an overall
fiscally prudent level of spending.
Expand health insurance for working Americans. The
Presidents budget invests $110 billion over 10 years in a number of
policies that would efficiently extend coverage to an additional 5 million
uninsured Americans and expand access to millions more by building on current
options. Together with the State Childrens Health Initiative enacted in
1997, up to 10 million uninsured people could be covered.
Provide targeted tax relief for American families. The
Presidents February budget made detailed proposals for $359 billion of
gross tax cuts over 10 years of which $263 billion are paid for out of
the surplus and $96 billion are paid for with corporate loophole closers,
elimination of tax shelters, and other measures. (These cost estimates are
based on the revised economic assumptions and thus differ slightly from the
cost estimates released in the February budget.) The Presidents proposals
include expanding the Earned Income Tax Credit to help larger families and to
reduce the marriage penalty, increasing the Child and Dependent Care Tax Credit
and making it refundable, making up to $10,000 of college tuition tax
deductible through the College Opportunity Tax Cut, and helping pay for
long-term care with a $3,000 tax credit.
PRESIDENT CLINTON MAKES A CONSTRUCTIVE OFFER
TO ADDRESS PRIORITIES FOR AMERICAN FAMILIES IN A FRAMEWORK OF FISCAL
June 26, 2000
Today President Clinton will make a constructive offer to the Congress
to lock in our fiscal discipline and debt reduction and address priorities for
American families. The Presidents offer builds on bipartisan consensus on
three issues: we should lock in Social Security and Medicare surpluses for debt
reduction, American families should have marriage penalty tax relief, and
Seniors need an affordable prescription drug benefit. The President will offer
that if the Congressional leadership agrees to an overall framework of fiscal
discipline that takes Medicare off-budget, the President would be willing to
sign broader marriage penalty relief legislation if the Congress will pass his
prescription drug plan.
The precondition: lock in added debt reduction by taking Medicare
off-budget. The Vice President has proposed taking Medicare off-budget to
ensure that its surpluses are used to reduce the debt. Last week, the House
virtually unanimously endorsed this principal. The President will ask the
Congressional leadership to agree to take Medicare Part A which covers
hospital insurance truly off-budget. This would protect the $403 billion
Medicare surplus for debt reduction. If this legislation was combined with a
commitment to lock away Social Security surpluses for debt reduction, as
proposed by the President, then the total debt reduction would be $2.7 trillion
over ten years.
Accept the Presidents proposal for a Medicare prescription drug
benefit. The President has proposed a new, meaningful voluntary Medicare
prescription drug benefit. This long-overdue benefit would provide coverage for
50 percent of prescription drug costs up to $5,000 when fully phased in. It
would provide protections against catastrophic drug expenses by limiting
out-of-pocket spending to $4,000. Beneficiaries would pay a premium of $25 per
month in the first year for this coverage which would assure access to
discounts, needed drugs, and local pharmacies. This Medicare drug benefit is
part of the Administrations Medicare reform plan that improves provider
payments by $40 billion, makes the program more competitive and efficient, and
extends the life of Medicares trust fund.
Broader marriage penalty relief legislation. The President is
committed to marriage penalty relief. His February budget included a $43
billion proposal to provide targeted marriage penalty relief. The President
believes that the Republican marriage penalty proposals, standing alone, are
too large, too untargeted to people who specifically face marriage penalties,
and outside of the context of fiscal discipline. However, if a broader marriage
penalty bill, along the lines reported out by the Senate Finance Committee or
passed by the House of Representatives, is passed as part of a framework that
locks in additional debt reduction by taking Medicare off-budget and provides
the Presidents proposal for a Medicare prescription drug benefit, then
the President would be willing to sign it.
TAKING MEDICARE OFF-BUDGET AND DEDICATING THE
RESULTING INTEREST SAVINGS TO EXTEND ITS SOLVENCY
June 26, 2000
Following the leadership of Vice President Gore, President Clinton is
proposing to take Medicare off-budget. This would mean that, like the Social
Security surplus, the projected $403 billion Medicare surplus would, like the
Social Security surplus, not count towards the on-budget surplus and therefore
could no longer be diverted for other purposes. Taking the Medicare surplus
off-budget would ensure that Medicare is protected for paying down the debt to
help strengthen the life of the Medicare program. The President would also
dedicate the total interest savings that result from using the Medicare surplus
for debt reduction to its trust fund, contributing towards extending its life
to at least 2030.
What Taking Medicare Off-budget Means
The Administration projects that if current policies are continued,
Medicare Part A, which covers hospital expenses, will run a surplus of $403
billion from 2001-10. This surplus is the excess of Medicare income,
principally from the 2.9 percent payroll tax (combined employer and employee),
over benefit payments and administrative costs. The Medicare surplus has grown
from $4 billion in 1993 to $24 billion in 2000.
Under previous budget accounting conventions, this Medicare surplus
was treated as part of the total on-budget surplus and was thus available for
new spending on other programs or tax cuts.
By taking Medicare Part A off-budget, the President proposes to make
it unavailable for other spending or tax cuts. Instead, the projected baseline
Medicare surplus would be used to pay down the debt.
Taking Medicare off-budget, like maintaining Social Security
off-budget, honors the social contract of the payroll tax. Workers pay their
payroll taxes today in the expectation that they will receive Social Security
and Medicare benefits in the future. If there are any surpluses in Social
Security or Medicare today, they should be used only for paying down the debt
to strengthen Social Security and Medicare, not spent on other programs or tax
cuts. They should not be used to meet budget targets or pay for other spending
increases or tax cuts.
On-budget Surplus (baseline
Social Security Surplus (includes a small
- $2.320 trillion
Medicare HI Surplus
- $0.403 trillion
Extending the Solvency of Medicare to at Least 2030
Taking Medicare off-budget does not eliminate the need to make
Medicare more efficient and to provide it with additional resources to meet
future needs. By itself, it does not extend the life of the Medicare trust
Taking Medicare off-budget helps pay down debt today and increases
investment and growth, helping to prepare the Nation for the challenge of the
retiring baby boom generation. It also results in interest savings to the
Federal government. Instead of using these interest savings for tax cuts or
spending increases, the President proposes to transfer an amount equal to the
total interest savings ($115 billion over the next ten years) to the Medicare
trust fund to extend its solvency.
Together with the Presidents reforms to increase competition
and efficiency and reduce fraud, these transfers extend solvency to at least
2030. This will help Medicare prepare for the doubling of its enrollment from
39 million in 1999 to 81 million in 2035.
Building on Progress
In 1993, Medicare was projected to become insolvent in 1999. As a
result of strong management, reduced fraud, policy reforms, and improvements in
the economy, today Medicare is projected to be solvent to 2025 as long
as any period of projected solvency in Medicare history.
In 2000, the on-budget surplus, excluding Social Security and
Medicare, is projected to be $39 billion. This is the first time that there has
been a surplus on this basis since the Medicare program was established in
Taking Medicare off-budget builds on the fiscal progress we have made
in going from a record unified deficit of $290 billion in 1992 to a record
unified surplus of $211 billion this year.
IMPROVING THE PRESIDENTS MEDICARE
PRESCRIPTION DRUG BENEFIT AND PROVIDER PAYMENTS
June 26, 2000
The President will improve his comprehensive plan to strengthen and
modernize Medicare by investing additional surplus available in part due
to lower Medicare growth and a healthier trust fund to his voluntary
Medicare prescription drug proposal and increasing of certain provider payments
affected by the Balanced Budget Act of 1997 (BBA). Specifically, the President
will invest an additional $58 billion over 10 years to: (1) specify his limit
on out-of-pocket prescription drug spending at $4,000; (2) maintain the
beneficiary premium at the same level even with the enhanced benefit; (3) start
the program one year earlier; and (4) provide immediate payments to managed
care plans to provide a prescription drug benefit. He will also add $40 billion
over 10 years to increase Medicare health care provider payments in the wake of
the BBA. The President will reiterate his commitment to critical structural
reforms that will be needed as the baby boom generation retires. Finally, he
will drop savings proposals that are no longer needed. Altogether, the
President would invest $264 billion over 10 years less than one-fifth of
the on-budget surplus. Combined with taking Medicare off-budget and extending
the life of its trust fund, this plan represents the most important set of
changes to Medicare in the programs history.
IMPROVED MEDICARE PRESCRIPTION DRUG BENEFIT
The President will add $58 billion over 10 years ($39 billion over 5
years) to his voluntary, affordable Prescription drug benefit for all
beneficiaries. His original proposal would cover half of all cost up to $5,000
when fully phased in, at a premium that begins at $25 per month with extra
protections for low-income people. In addition, the Presidents February
budget set aside a surplus reserve to develop protections against catastrophic
prescription drug costs. He will add to this plan by:
Specifying that no beneficiary would pay more than $4,000 in
out-of-pocket drug costs. The Presidents plan would limit
beneficiary spending on prescription drugs to $4,000 per year in 2002, indexed
to drug inflation in subsequent years. This reaffirms the Presidents
commitment to providing true insurance, enabling beneficiaries to afford needed
drugs when they have high costs.
Limiting premiums to $25 per month even with the benefit
improvement. The Presidents proposal will dedicate a portion of this
new investment to maintain the monthly premium at the levels that were in his
February proposal, even with the newly specified catastrophic benefit. Thus,
premiums for this coverage would start at $25 per month in the first year and
would increase as the benefit is phased in.
Starting the benefit in 2002, not 2003. The Presidents
plan accelerates the implementation of the drug benefit to January 1, 2002.
Seniors and people with disabilities need prescription drug coverage as soon as
possible and the new resources available will allow for an earlier start-up.
Paying managed care plans to provide prescription drugs in 2001.
To help managed care plans continue to offer prescription drug coverage
next year and stabilize the managed care market, the President proposes to
increase payments to the Medicare+Choice plans in 2001 to explicitly pay for
prescription drug coverage. Plans that provide at least 50 percent coinsurance
to $2,000 would be eligible for these subsidies. Under the Presidents
plan, managed care plans would receive direct subsidies for the provision of a
prescription drug benefit for the first time in program history. This will
increase payments by over $25 billion over 5 years and over $75 billion over 10
years, including $2 billion in 2001.
Altogether, the new total cost of the Medicare prescription drug benefit
would be about $253 billion over 10 years ($79 billion over 5 years).
IMPROVING HEALTH CARE PROVIDER PAYMENTS
The Balanced Budget Act of 1997 (BBA) helped to eliminate the deficit,
created the State Childrens Health Insurance Program, and reduced and
restructured Medicare and Medicaid payments to health care providers. Many of
the provider payment changes were justified and have contributed to improved
efficiency and the unprecedented fiscal health of the Medicare trust fund.
However, some of the policies may have the potential to affect the quality of
and access to health care services. To address this, the President has proposed
to dedicate $40 billion over 10 years ($21 billion over 5 years) to a provider
payment initiative designed to ensure adequate reimbursement to hospitals,
rural providers, teaching facilities, home health agencies, nursing homes,
managed care plans, and others.
Increasing provider payments for 2001. About half $19
billion over 10 years ($9 billion over 5 years) is devoted to specific
policies that are primarily designed to address payment reductions the BBA
scheduled to occur on October 1. This includes: updating inpatient, home
health, and skilled nursing facility payments at the full market basket update;
delaying the further reductions in Medicare and Medicaid disproportionate share
hospital payments; and postponing the 15 percent reduction to home health
Setting aside enough funds for permanent and/or targeted policy
solutions. The plan also includes $21 billion over 10 years ($11 billion
over 5 years) in unspecified funding for use in developing additional policies
that target and/or permanently correct flawed BBA policies.
The proposal, designed to ensure access to high-quality care, clearly
illustrates that adequate financing for provider payments need not conflict
with necessary funding for a long-overdue, voluntary Medicare prescription drug
COMMITMENT TO STRUCTURAL REFORMS TO MEDICARE
Last June, the President proposed a series of far-reaching proposals to
structurally reform Medicare provider payment. Specifically, the plan would
give traditional Medicare essential payment tools to improve quality and
efficiency like adding encouraging disease management and innovative payment
options for doctors and hospital. It would also create a system called
"Competitive Defined Benefit" plan that would allow managed care plans to
compete on price and quality and get paid based on their bids rather than a
complex, statutory formula. He also proposed in his budget policies, supported
by the Inspector General, General Accounting Office and others, to reduce
Medicare fraud, waste and overpayments. Finally, his plan included rational
cost sharing changes and benefit improvements (e.g., extension of coverage of
immunosuppressive drugs and people with disabilities who go back to work).
These policies remain an important part of the Presidents plan to
strengthen and modernize Medicare. However, traditional provider payment
policies for 2003 through 2007 appear to no longer be needed given the
reduction in projected Medicare spending and are thus no longer in the plan. In
addition, the plan does not include proposals to repeal the Balanced Budget
Refinement Act managed care risk adjustment delay, to reduce bad debt payments,
and to create preferred provider arrangements in Medicare. These changes reduce
net savings by $30 billion over 10 years. The net Medicare effect of the reform
policies in the package therefore is $29 billion over 10 years ($8 billion over
THE CLINTON-GORE ADMINISTRATION:
PAYING OFF THE DEBT BY 2012
June 26, 2000
LARGEST UNIFIED SURPLUS EVER AND THE ONLY ON-BUDGET SURPLUS SINCE
MEDICARE WAS ESTABLISHED
Instead of a $455 billion deficit, a $211 billion
surplus this year the largest ever. In 1992, the deficit in
the Federal budget was $290 billion the largest dollar deficit in
American history. In January 1993, the Congressional Budget Office projected
that the deficit would grow to $455 billion by 2000. Today, the Office of
Management and Budget is projecting a $211 billion surplus the third
consecutive surplus and the largest surplus ever, even after adjusting for
inflation. Compared with original projections, that is $666 billion less in
government drain on the economy and $666 billion more potentially available for
private investment in this one year alone.
Largest unified surplus as a share of the economy since 1948.
The 2000 surplus is projected to be 2.2 percent of GDP the largest
surplus as a share of GDP since 1948.
Third surplus in a row for the first time in over 50
years. The $211 billion projected surplus in FY2000 follows a surplus of
$124 billion in FY 1999 and $69 billion in FY 1998. The last time America had
three surpluses in a row was over fifty years ago in 1947-49. The FY2000
surplus marks the eighth consecutive year of fiscal improvement, for the first
time in American history surpassing the pre-Clinton-Gore best of five
The second consecutive surplus excluding Social
Security. Excluding Social Security, the surplus is projected to be $63
billion this year. This is the second consecutive surplus on this basis, for
the first time since 1956-57.
The first on-budget surplus in the history of Medicare.
The on-budget surplus, which excludes the Social Security and Medicare
surpluses, is projected to be $39 billion this year. This is the only on-budget
surplus on this basis since Medicare was established in 1965.
LARGEST DEBT REDUCTION EVER
The Presidents plan would eliminate the debt by 2012
one year earlier than previously projected. President Clintons budget
proposes to reduce the national debt by $2.9 trillion over the next decade and
to eliminate it by 2012, one year ahead of the projection in the February
budget. The Presidents debt reduction comes from saving the entire $2.3
trillion Social Security surplus, the entire $403 billion Medicare surplus, and
$192 billion of the on-budget surplus for debt reduction.
Interest payments would be eliminated. Currently we spend 12
cents of every Federal dollar on interest payments. These payments, which were
once projected to grow to 25 percent of all federal spending in 2012, would be
eliminated under the Presidents plan by that time.
On track to pay down $324 billion in debt held by the public over
three years. In 1998 and 1999, the debt held by the public was reduced by
$140 billion. OMB is projecting that the government will pay down an additional
$184 billion in debt held by the public this fiscal year alone. That will bring
the total debt pay down to $324 billion the largest three-year debt
pay-down in American history. In contrast, under Presidents Reagan and Bush,
the debt held by the public quadrupled.
The debt held by the public is on track to be $2.4 trillion lower
in 2000 than was projected when the President took office. In 1993, the
debt held by the public was projected by the Office of Management and Budget to
balloon to $5.85 trillion by 2000. Instead, shrinking deficits and growing
surpluses in the last three years are projected to bring the debt down to $3.45
trillion in 2000 $2.4 trillion less than expected. In 1993, the debt
held by the public was 50 percent of GDP and projected to rise to 65 percent of
GDP in 2000. Instead, it has been slashed to a projected 35 percent of GDP.
Under the Presidents plan, it would be completely eliminated by
As a result, interest payments on the debt in 2000 are $125
billion lower than projected. In 1993, the net interest payments on the
debt held by the public were projected to grow to $348 billion in 2000. This
Administrations fiscal discipline has slashed this figure to a projected
$223 billion a $125 billion improvement for one year alone.
REDUCING SPENDING WHILE CUTTING TAXES FOR MIDDLE-INCOME
Federal spending as a share of the economy is the lowest since
1966. The spending restraint under President Clinton has brought spending
down from 22.2 percent of GDP in 1992 to a projected 18.5 percent of GDP in
2000 the lowest since 1966. At the same time, President Clinton has
increased investments in education, technology and other areas that are vital
Non-defense discretionary Federal spending as a share of the
economy is the lowest on record. Since President Clinton took office,
non-defense discretionary spending has fallen from 3.7 percent of GDP in 1992
to 3.3 percent of GDP in 1999 the lowest as a share of the economy on
record. Over this period, total discretionary spending fell from 8.6 percent of
GDP to 6.3 percent of GDP, also the lowest on record. (Comparable data for
these categories go back to 1962.)
The smallest Federal civilian workforce in 40 years. The
Federal civilian workforce increased from when President Reagan took office to
when President Bush left office. Since President Clinton and Vice President
Gore took office, the Federal workforce has been cut by 377,000 nearly a
fifth and is now lower than any time since 1960.
While balancing the budget and paying down the debt, the
Clinton-Gore Administration has provided tax relief for working families.
The tax cuts signed into law by the President in 1993 and 1997 for
example, the expanded Earned Income Tax Credit, the $500 child tax credit, the
$1,500 HOPE Scholarship Tax Credit, and expanded IRAs have reduced taxes for
American families. The total Federal tax rate for middle-income families has
dropped from 24.5 percent in 1992 to 22.8 percent in 1999 thats
the lowest tax rate since 1978. For families at one-half the median income, the
effective Federal tax rate has been slashed from 19.8 percent in 1992 to 14.1
percent in 1999 thats the lowest tax rate since 1968.
WHAT FISCAL DISCIPLINE MEANS FOR AMERICA
Goldman Sachs credits deficit and debt reduction with lowering
interest rates by 2 percentage points. "According to the model, the swing
in the federal budget position from a deficit of $290 billion in 1992 to a
surplus of $124 billion in 1999 roughly matching the improvement in the
general government position has lowered equilibrium bond yields by a
full 200 basis points." [Goldman Sachs, GSWIRE Undistorted by the Budget
Surplus, April 14, 2000.]
Lower interest rates have already cut mortgage payments by $2,000
for families with a $100,000 mortgage. Because of deficit and debt
reduction, it is estimated that a family taking out a home mortgage of $100,000
expects to save roughly $2,000 per year in mortgage payments. This has
helped raise the homeownership rate to 66.8 percent in 1999 the highest
rate on record.
Lower interest rates cut car payments by $200 annually for
families taking out a typical car loan.
Lower interest rates cut student loan payments by $200 annually
for a person with a typical student loan.
Lower debt will help maintain strong economic growth. With the
government no longer draining resources out of capital markets, businesses have
more funds for productive investment. This has helped to fuel a 12.6 percent
real annual increase in productive equipment and software investment since 1993
the seventh consecutive year of double-digit growth and the strongest
period of growth on record. This compares to 4.7 percent annual growth from
1981-92, a period that saw the debt held by the public quadruple.
Rising investment has contributed to a pickup in productivity
growth. Non-farm business productivity has grown at a 2.6 percent average
annual rate for the last five years, and a 3.1 percent average annual rate for
the last three years. This is more than double the 1.4 percent annual growth
from the 1973 through 1990.
WHAT THE EXPERTS SAY
Experts agree that President Clintons 1993 economic plan helped
reduce the deficit, lower interest rates, spur business investment, and
strengthen the economy. The economy and the budget are now working in a
virtuous circle lower deficits have led to lower interest rates, which
led to faster business investment, which led to faster growth, which led to
more revenues and lower spending and even lower deficits. Experts agree that
the Presidents 1993 Economic Plan helped create this virtuous circle:
Alan Greenspan, Federal Reserve Board Chairman, 1/04/00
with President Clinton at Chairman Greenspans re-nomination
announcement: "My colleagues and I have been very appreciative of your
[President Clintons] support of the Fed over the years, and your
commitment to fiscal discipline has been instrumental in achieving what
in a few weeks will be the longest economic expansion in the
Paul Volcker, Federal Reserve Board Chairman (1979-1987), in
Audacity, Fall 1994: "The deficit has come down, and I give the
Clinton Administration and President Clinton himself a lot of credit for that.
[He] did something about it, fast. And I think we are seeing some
Business Week, 5/19/97: "Clintons 1993 budget
cuts, which reduced projected red ink by more than $400 billion over five
years, sparked a major drop in interest rates that helped boost investment in
all the equipment and systems that brought forth the New Age economy of
technological innovation and rising productivity."
Goldman Sachs, March 1998: One of the reasons Goldman Sachs
cites for the "best economy ever" is that "on the policy side, trade, fiscal,
and monetary policies have been excellent, working in ways that have
facilitated growth without inflation. The Clinton Administration has worked to
liberalize trade and has used any revenue windfalls to reduce the federal
Lehman Brothers, 1/10/94: "Lower deficits, lower long-term
rates and higher real growth was the overall promise. With the data now rolling
in for December 1993, it seems clear that President Clinton delivered on all
THE CLINTON-GORE ECONOMIC
WHAT A DIFFERENCE SEVEN YEARS MAKES
June 26, 2000
After seven and a half years, the results of President Clinton and Vice
President Gores economic leadership for the American people are clear. In
1992, when Bill Clinton was elected President, the American economy was barely
creating jobs and wages were stagnant. His bold, three-part economic strategy
focused on establishing fiscal discipline; investing in education, health care,
science and technology; and opening foreign markets so that American workers
have a fair chance to compete abroad. Seven and a half years later the results
of this strategy are clear:
Deficits Replaced By Surpluses: Keeping Us On Track to Be Debt
Free by 2012
1992. The deficit was $290 billion the highest dollar
level in history. When President Clinton took office, the Congressional Budget
Office projected the deficit would grow to $455 billion in 2000.
Today. In 1999, we had a budget surplus of $124 billion
the largest dollar surplus on record. This year the Administration forecasts a
surplus of $211 billion. This is $666 billion less drain by the government on
private financial markets than projected when President Clinton and Vice
President Gore took office. With the Presidents plan, we are now on
track to eliminate the nations publicly held debt by 2012.
Jobs Are Up: 22 Million Created Since January 1993
1981-1992. During President Reagan and Vice President
Bushs three terms combined, the economy created only 18.5 million
new jobs, despite the growth of the labor force from the maturation of the baby
boom. Only 2.5 million jobs were created under President Bush, with nearly half
of them in the public sector.
Today. The economy has created 22.2 million new jobs since
January 1993. This is the most jobs ever created under a single President.
There has been an average of 255,000 jobs created per month a faster
rate than under any President. And 19.9 million of the new jobs were created in
the private sector, the highest share since Harry Truman was President
(excluding temporary Census workers).
Faster Economic Growth: 3.9 Percent Per Year
1981-1992. The economy grew an average 1.7 percent per year
under President Bush and 2.8 percent per year during the Reagan-Bush
Today. Since President Clinton and Vice President Gore took
office, growth has averaged 3.9 percent per year.
Private-Sector Growth Is Up: 4.5 Percent Per Year
1981-1992. The private sector of the economy grew 2.9 percent
annually from 1981-1992.
Today. The private sector of the economy has grown 4.5 percent
annually since 1993.
Equipment and Software Investment Is Growing Faster Than
1981-1992. Real equipment and software investment rose just
3.8 percent annually during the previous Administration, and only 4.7 percent
annually for the entire Reagan-Bush period.
Today. Real equipment and software investment is up 12.6
percent per year under President Clinton faster than any Administration
on record. We have seen seven consecutive years of double-digit growth in
equipment and software investment, for the first time on record.
Government Spending: Lowest in Over Three Decades
1981-92. Under Presidents Reagan and Bush, Federal government
spending as a share of the economy increased from 21.6 percent in 1980 to 22.2
percent in 1992.
Today. Under President Clinton, Federal government spending as
a share of the economy has been cut from 22.2 percent in 1992 to a projected
18.5 percent in 2000 its lowest level since 1966.
Taxes for Typical Families: Lowest in Over Two Decades
1981-92. The total Federal tax rate for middle-income families
rose from 23.7 percent in 1980 to 24.5 percent in 1992. (Total tax rates
include both the employer and employee portion of the Social Security and
Medicare payroll taxes.)
Today. Under President Clinton, the total Federal tax rate for
middle-income families has dropped from 24.5 percent in 1992 to 22.8 percent in
1999 thats the lowest tax rate since 1978. For families at
one-half the median income, the effective Federal tax rate has been slashed
from 19.8 percent in 1992 to 14.1 percent in 1999 thats the lowest
tax rate since 1968.
Homeownership Is Up: The Highest in American History
1981-1992. The homeownership rate fell from 65.4
percent in 1981 to 64.2 percent in 1992.
Today. In 1999, the homeownership rate was 66.8 percent
the highest ever recorded.
Inflation is Down: The Lowest Core Rate In 35 Years
1981-1992. The underlying core rate of inflation averaged 4.7
Today. Under President Clinton the core rate of inflation has
averaged 2.6 percent annually the lowest of any Administration since
Welfare Rolls Dropped Dramatically: Lowest Since 1969
1981-1992. The number of welfare recipients increased by
almost 2.5 million (a 22 percent increase) to 13.6 million people.
Today. Between January 1993 and September 1999, the number of
welfare recipients dropped by 7.5 million (a 53 percent decline) to 6.6 million
the lowest level since 1968.
Unemployment Is Down: The Lowest Rate in 30 Years
1981-1992. The unemployment rate averaged 7.1 percent and rose
to more than 10 percent in 1982 and 1983.
Today. In 2000, the unemployment rate has averaged 5.0 percent
the lowest rate in over 30 years. The unemployment rate has been below 5
percent for 35 consecutive months.
Unemployment for African-Americans the Lowest on
1981-1992. African-American unemployment reached 21.2 percent
in January 1983 a record high and never dropped below 10
Today. The African-American unemployment rate has fallen from
an average of 14.2 percent in 1992 to an average of 7.7 percent in 2000
the lowest rate on record.
Unemployment for Hispanics Recovered From Record Highs to Achieve
1981-1992. Hispanic unemployment hit a record high of 15.7
percent in December 1982.
Today. The Hispanic unemployment rate has dropped from an
average of 11.6 percent in 1992 to an average of 5.8 percent in 2000 the
lowest rate on record.
Real Wages Rising Again: Fastest Growth in Two Decades
1981-1992. Real average hourly earnings fell 4.3
percent under Presidents Reagan and Bush.
Today. Real wages have grown 6.5 percent under President
Clinton. Real wages have grown for five consecutive years for the first
time since the 1960s.
Poverty For African-Americans Dropped to Lowest On
1981-1992. Between 1980 and 1992, the poverty rate for African
American remained at 30 percent or more.
Today. Since 1993, the African-American poverty rate has
dropped from 33.1 percent to 26.1 percent in 1998 the lowest level
recorded, and the largest five-year drop in African-American poverty since
Poverty For Hispanics Dropped to Lowest Since 1979
1981-1992. Between 1980 and 1992, the poverty rate for
Hispanics increased from 25.7 percent to 29.6 percent.
Today. Since 1993, the Hispanic poverty has dropped to 25.6
percentthe lowest since 1979.
Poverty For Single Mothers is the Lowest On Record
1981-1992. Between 1980 and 1992, an additional 2.1 million
families with single mothers were pushed into poverty.
Today. Under President Clinton, the poverty rate for families
with single mothers has fallen from 46.1 percent in 1993 to 38.7 percent in
1998 the lowest level on record.
Family Income Up More Than $5,000 Since 1993
1988-1992. Median family income (in inflation-adjusted 1998
dollars) fell by $1,864, dropping from $44,354 in 1988 to $42,490 in
Today. Since 1993, real median family income has increased by
$5,046 , rising to $46,737 in 1998.