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President Clinton and Vice President Gore’s Economic Plan: Building the Path to Prosperity for America’s Families (8/5/00)
President Clinton and Vice President Gore’s Economic Plan: Building the Path to Prosperity for America’s Families (8/5/00)
Seven years ago this week, President Clinton and Vice President Gore’s economic plan was enacted without a single Republican vote. Vice President Gore broke a tie on August 6, 1993 to pass the measure in the Senate and President Clinton signed the 1993 Budget Reconciliation into law four days later. Their bold, three-part strategy established fiscal discipline; invested in education, health care, science and technology; and opened foreign markets so that American workers have a fair chance to compete abroad. Passage of the economic plan was a historic turning point, reversing 12 years of trickle-down economics and turning the largest deficit in history into the largest budget surplus in history. It also committed the country to a path of fiscal discipline that helped unleash the productive potential of the American people, contributing to the longest economic expansion in history, including the creation of over 22 million jobs, the lowest unemployment and inflation rates in a generation, rising wages and the highest homeownership rates on record. Today, working families are enjoying the benefits of this comprehensive plan and the course of fiscal discipline it established.
Clinton-Gore Economic Plan Restored Fiscal Discipline
The previous two administrations drove annual budget deficits to their highest level in history, piled up more debt in 12 years than the nation did in the previous 200, and quadrupled the national debt. Thanks to the 1993 economic plan, President Clinton and Vice President Gore kept their promise to cut the deficit in half in four years and produced three back-to-back surpluses for the first time in over 50 years. Fiscal discipline has resulted in real benefits for American families by keeping interest rates low and productivity high, and by creating the conditions for the strongest economy in our nation’s history.
Slashed the Federal Deficit
1993 Plan – $500 Billion in Deficit Reduction: When President Clinton and Vice President Gore took office, the deficit was $290 billion and expected to grow to $455 billion by 2000. The 1993 economic plan contained $500 billion of total projected deficit reduction over five years, including $255 billion in spending cuts. Even before the Balanced Budget Agreement of 1997 took effect, the deficit had been cut to $22 billion in FY 1997, a 92 percent drop.
Paul Volcker, Former Federal Reserve Board Chairman: "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 benefits." [Audacity, Fall 1994].
Today – On Track to be Debt Free by 2012: Today we have turned the largest deficit in history into the largest surplus in history and, under the Administration’s budget framework, we are on track to be debt free by 2012 for the first time since Andrew Jackson’s administration.
Lowered Interest Rates and Increased Productivity
1993 Plan – Fiscal Responsibility Produced an Immediate Drop in Interest Rates: Even though the recession had technically ended when President Clinton and Vice President Gore took office, America remained mired in high unemployment and slow economic growth. The passage of the deficit reducing legislation almost immediately led to a drop in interest rates, which spurred investment and led to an increase in the rate of job creation, wage growth and productivity.
According to Federal Reserve Chairman Alan Greenspan, the ’93 plan was "an unquestioned factor in contributing to the improvement in economic activity that occurred thereafter." [House Banking Committee Testimony, 2/20/96]
"Clinton’s biggest gift to consumers was the sharp drop in interest rates in 1993. Following the President’s early drive to lower the deficit, the Federal Reserve cut short term rates while bond traders drove down long-term rates, sending 30-year fixed mortgages from 8.31 percent in November 1992 to 6.83 percent in October 1993. That’s the lowest overall mortgage rate since 1971." [Money Magazine, August 1996]
"Clinton’s 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." [Business Week, 5/19/97]
Today - Families have Enjoyed $2,000 Effective Tax Cut: Wall Street analysts credit deficit reduction with lowering interest rates by 2 full percentage points. [Goldman Sachs, GSWIRE Undistorted by the Budget Surplus, April 14, 2000]. This means that a family taking out a home mortgage of $100,000 expects to save roughly $2,000 per year in mortgage payments. Thanks in part to low mortgage rates, the homeownership rate increased to 67 percent in 1999 --the highest rate on record. Lower interest rates also cut both car payments and student loan payments by $200 annually for families taking out typical loans.
Cut Taxes and for Small Businesses to Create Jobs and Build the Economy
1993 Plan - Tax Cuts and Investment Incentives for 90 Percent of Small Businesses: The economic plan included tax cuts and investment incentives for small business owners, including a targeted capital gains tax cut, an extension of health insurance deductions and increased expensing. Ninety percent of American small businesses were eligible for a tax cut through incentives to invest in their businesses and create jobs.
Today - Six Million New Small Businesses: Since President Clinton and Vice President Gore came to office, the economy has created over 22 million jobs. Over 90 percent of these jobs are in the private sector and 80 percent of all new jobs have been created by small businesses. Under the Clinton-Gore Administration, nearly 6 million small businesses have been created.
Clinton-Gore Economic Plan Invested in the American People
Not only did President Clinton and Vice President Gore reverse the failed economic polices that had resulted in a sea of red ink, they also reversed 12 years of neglect of working families. Their economic strategy invests in America’s future by rewarding those who work hard and play by the rules. Their strategy has transformed America, so that we now enjoy the lowest crime rate in 25 years, the smallest welfare rolls in 30 years and the highest child immunization rate in history. Today, more young people are graduating from high school and going to college, more Americans enjoy clean air and clean water, and more Americans are confident about the future of our nation. The 1993 economic plan was the first step in this strategy, cutting taxes for working families, preserving and protecting Medicare, and making key investments and reforms in child immunizations, higher education, and research and development.
Cut Taxes for Working Families
1993 Plan - Expand EITC for 15 Million Working Families: President Clinton and Vice President Gore included a significant expansion of the Earned Income Tax Credit in their economic plan to give a boost to working families who had struggled too long. The plan gave tax cuts to 15 million families, and the average family with two children received over $1,000.
"I thought the Earned Income Tax Credit was the right direction because it helps people get off of welfare." [Speaker Newt Gingrich, Atlanta Journal & Constitution, 9/2/93]
"One of the Clinton presidency's biggest accomplishments is also one of its least ballyhooed. We're talking about the Earned Income Tax Credit (EITC), which may be as boring as it sounds but which also may have more beneficial impact on some of the neediest American families than anything the government has done in decades." [Black, Minneapolis Star-Tribune, 10/16/1994]
Today - Lowest Tax Burden for Middle Class Families in a Generation: Today, the EITC lifts 4.3 million working families out of poverty. And thanks in part to the expanded EITC and other targeted tax reduction measures signed by President Clinton, lower and middle class families bear the lowest income tax burden in 35 years.
Preserved and Protected Medicare
1993 Plan - Investments in Preserving Medicare: When President Clinton and Vice President Gore took office, Medicare was expected to be bankrupt by 1999. The economic plan attacked this problem by dedicating some of the taxes paid by Social Security beneficiaries to the Medicare trust fund. The 1993 Economic Plan extended the life of the Medicare Trust Fund by three years to 2002.
Today - Medicare is as Solvent as it has Ever Been: Today, thanks to additional provisions to combat waste, fraud and abuse and bipartisan cooperation in the 1997 Balanced Budget Amendment, Medicare is expected to remain solvent until 2025. In addition, prudent management has kept Medicare premiums nearly 20 percent lower than they were projected to be in 1993.
Expanded Childhood Immunizations
1993 Plan - New Commitment to Child Immunization: In 1992, less than 60 percent of two-year-olds were fully immunized - the third lowest rate in the Western Hemisphere. The Economic plan contained investments to guarantee the health of children and prevent the easily avoidable costs of preventable childhood diseases.
The Children’s Defense Fund applauded the initiative and its results saying, "We are delighted that so many more American children are immunized and fewer American children are getting sick. This is truly a lifesaving effort. . . . [T]he president and first lady deserve a huge amount of credit for fighting for the [Vaccines for Children Act] and the immunization initiative in 1993." [CDF Press Release, 7/23/97]
Today - Highest Child Immunization Rate Ever: Today, the nation's overall immunization rate for preschool children is at the highest rate ever recorded. And because childhood vaccination levels in the United States are at an all-time high, disease and death from diphtheria, ertussis, tetanus, measles, mumps, rubella and Hib are at or near record lows.
Revitalized Communities with Empowerment Zones
1993 Plan - Created Empowerment Zones and Enterprise Communities: The Economic Plan contained the Empowerment Zones/Enterprise Communities initiative. The first effort included nine Empowerment Zones and 95 Enterprise Communities. The plan provided a total of $3.5 billion in job and wage credits and other incentives to build and revitalize cities and rural areas.
Today - Over $10 Billion in Investment to Revitalize 135 Communities: Today the Empowerment Zones/Enterprise Communities initiative has leveraged $10 billion worth of public and private sector investment in 135 communities across the country.
Reformed Student Loans
1993 Plan - Reforming Student Loans: The economic plan created the Direct Student Loan Program, which has cut paperwork and reduced costs for students and families and saved taxpayers money.
Today - Saved Students and Taxpayers Nearly $8 Billion: Lower loan origination fees have saved students $3.7 billion to date and lower costs associated with Direct Lending have saved taxpayers $4 billion over the past five years.
Encouraged Investment in Research, Development and Job Creation
1993 Plan - Incentives for Research and Development: The 1993 economic plan extended the 20 percent tax credit for research and development expenditures and made it easier for new companies to take advantage of the tax credit. The plan also included credits to encourage employer-provided educational and training assistance and a targeted jobs tax credit.
Today - Research Breakthroughs Fuel Economic Strength: Since 1993, the Clinton-Gore Administration has substantially increased the federal commitment to research. The Administration has made major investments in areas such as information technology, to develop high-performance communications and computer equipment; clean energy, to decrease our reliance on imported oil and fossil fuels; genetic research, including gene therapies and the Human Genome Project; and biotechnology research to find cures and treatment for diabetes, AIDS, cancer and mental illness. Funding for programs in the President’s 21st Century Research Fund has increased by 45 percent since 1993.