Remarks by Jack Lew
Director of the Office of Management and Budget
The Urban Institute
May 2, 2000
The FY 2001 Budget:
The Choices Before Congress and Why They Matter in a Time of Surplus
I am happy to be here today at the Urban Institute, and it is a particular pleasure to be hosted by
my old friend Bob Reischauer. The Institute is lucky to have Bob back.
Yesterday, the Treasury Department announced that the federal debt will be reduced by $216
billion this year. This progress in debt reduction is yet another measure of our sustained
economic success -- success built on the policy of fiscal discipline, expanded trade and
investments in our future. President Clinton forged this approach in 1993, and by holding to it,
we have helped to provide enormous benefits throughout the economy.
We have reduced the deficit by a total of $1.8 trillion, ending an era of deficit spending that
extended through the 1980's and into the 1990's. We have balanced the budget and produced
budget surpluses for three years in a row for the first time in half a century. By the end of this
fiscal year, it now appears that we will reduce publicly held debt by more than $350 billion, or
almost ten per cent, in just three years. And we have created the conditions for an economy that,
in seven years, has produced 21 million new jobs, historically low unemployment rates for black
and Hispanic workers, the lowest welfare rolls in 30 years and the Nation's highest home
ownership in history.
Now we are poised -- if we choose to take the right steps -- to make America debt free by 2013.
As we consider the prospect of a debt-free America, it is important to note that we are 110 months
into the longest economic expansion in our Nation's history. In contrast to the fiscal and
economic conditions when the President took office seven years ago, this is a time of plenty.
Seven years ago, the budget deficit was nearly $300 billion and growing, with the debt projected
to reach nearly $6 trillion. By the year 2012, it was projected that twenty five cents on every tax
dollar would be needed to pay interest on the debt. In 1993, most fiscal policy experts saw only
one reasonable policy -- to reduce the deficit and begin to reduce our mountain of debt. In 1993,
the question was whether political leaders could rise to the difficult task of putting our economic
house back in order.
Because we rose to that challenge, we now live in a time of unprecedented prosperity. We have
the opportunity and responsibility to make real and significant choices over how to allocate
substantial resources. These choices embody our values, reflect our goals, define who we are as a
people and how we want to set our economic course and shape our Nation's future.
President Clinton has called this a "magic moment of possibility". With prosperity at home and
relative stability abroad, we can invest resources in a way that will make a difference well into
this new century. Here are the choices before us. Will we provide the resources needed to
strengthen and secure Social Security and Medicare? Will we stay on a path to eliminate the
Nation's debt by 2013, keeping our economy strong for years to come? Will we use these
resources to provide a new generation with the educational opportunities they deserve? Will we
invest in science and technology to sustain prosperity in this new economy?
There are fundamental questions about how we will treat the elderly and the vulnerable, and how
we will honor the social contract that has done so much to improve the quality of life in this
Nation over the past half-century. Will we extend the life of Social Security and Medicare and
provide a voluntary prescription drug benefit to extend and improve the quality of life? Do we
use these resources to help those left out of the current wave of prosperity, by providing more
low-income children with access to health insurance, and by making health insurance available to
their parents as well?
And do we take responsible steps to plan for a rainy day? In the middle of a boom it is tempting
to believe it will go on forever. Yet we all know the risk that it will not. The best way to prepare
for such a rainy day is to eliminate the national debt in short-order, so that Americans reap the
benefits of lower interest rates and our fiscal position will be stronger, whether or not the boom
continues. Will we plan ahead with realism and responsibility or simply live for the moment,
hoping that everything will be just fine in the future?
It is hard to imagine choices that more fundamentally define our course at the dawn of a new
century. Yet the steps taken by Congress up to this point, and the path Congress charted in its
budget will preclude our ability to consider many of the choices I have just described. By calling
for an oversized tax cut, Congress has effectively made the decision that tax cuts are more
important than any of the other choices that might be made -- further debt reduction, Medicare
prescription drugs, expanded health insurance coverage for low-income families, and investing in
education and technology, to name a few. We have been down this road before and the
consequences are as serious now as they were last year when Congress passed an irresponsibly
large tax cut, which President Clinton vetoed. We need only look back to the deficits of the
1980's to see the results of a tax cut designed to leave inadequate resources for other critical
purposes. We ended up with a national debt that quadrupled in the twelve years prior to this
Administration.
In its budget resolution, Congress calls for a five-year tax cut from $150 to $215 billion. But
when you tally up the tax cuts that have done piece by piece, the cost reaches $384 billion over
ten years, and $458 billion with interest. Of course, using five-year projections in the budget
resolution understates the true size of the tax cut, which could reach as high as $1 trillion over the
standard ten-year projection.
In recent months, it has been encouraging that we appear to have reached consensus that the
Social Security surplus should be used for debt reduction and not to finance either spending or a
tax cut. We must continue to move forward on the President's lockbox proposal, which would
dedicate interest savings to extending Social Security solvency. However, I am concerned about
recent proposals that appear to use the Social Security surplus to finance a new approach to
retirement savings, not only because of the programmatic concerns, but as a matter of fiscal
policy. If we spend the Social Security surplus for any new purpose, we will backslide on the
commitment to debt reduction, which is critical to our continued economic prosperity.
While we must protect the Social Security surplus, we must also work to protect the non-Social
Security surplus from being squandered. The large tax cut called for in the Republican budget
plan cannot be accomplished without putting in jeopardy other goals that are vital to our future. It
sacrifices the opportunity for further debt reduction and unnecessarily limits our ability to invest
prudently for the future.
There is still time to work toward a consensus, both on the appropriations bills and in other key
areas important to the American people -- the Patient's Bill of Rights, minimum wage, Medicare
prescription drugs, hate crimes, and gun control. We must also pass a balanced and targeted tax
cut for American families. While we may not accomplish everything we set out to achieve, we
can get many of the most important things done. Unfortunately, for the annual funding measures
that must be completed this year, Congress has left itself with inadequate resources to pass
responsible appropriations bills for 2001. Moreover, by assuming that savings from these
inadequate appropriations levels can finance a tax cut, this budget reflects a bankrupt approach
which would lead either to misguided spending policies or undermine our ability to pay down the
debt.
While we believe we can work together to address these issues, absent significant improvements
to the appropriations and other bills, the President simply cannot and will not sign them. For
example,
- A Patient's Bill of Rights bill that fails to offer real protections is unacceptable.
- A Labor/HHS bill that fails to provide for our schools, our students and their teachers is
unacceptable.
- A Commerce/Justice/State or Foreign Operations bill that fails to protect Americans at home
and abroad is unacceptable.
- And bills that fail to preserve our Nation's open green spaces with funding for the President's
Lands Legacy program are unacceptable.
There is still time for Congress to avoid these problems. It is not necessary to make room for an
oversized and irresponsible tax cut. I hope Congress will choose a more balanced, responsible
course so that we can work together between now and the fall.
Let's look a bit more closely at the implications of the discretionary spending levels that
the congressional budget calls for.
On average the congressional budget would cut most domestic discretionary spending by ten
percent below the President's Budget in 2001. As Congress gets to work this week on
appropriations, on funding levels for each of the thirteen appropriations bills, it will become clear
that these limits have real policy consequences -- that unrealistic targets lead to unacceptable cuts.
The American people deserve a full and open debate as the Congress moves forward. It would be
cynical to simply rely on past experience to conclude that by the fall, one way or another Congress
will find a way to meet needs that cannot be satisfied within their own budget. The budget should
be a clear statement of priorities and not a puzzle that even skilled professionals cannot decipher.
Let me begin with education. It is by investing in education that we can best prepare our young
people to meet the challenges of this increasingly demanding economy. As you know, the
President believes we must invest in our future and has proposed Federal funding to build and
modernize 6,000 schools, along with funding to move us 20,000 teachers closer to the goal of
100,000 new teachers. The funding level provided for appropriations simply does not permit
these initiatives to be funded without dismantling other education or health programs.
The Congress would need to cut funding for Title I programs for low-income youth by $1 billion
from the President's request, reducing or eliminating services to almost 1.6 million low-income
students.
I believe that the Labor/HHS/Education subcommittees on a bipartisan basis would prefer not
to make these kinds of reductions, but the numbers simply do not add up. It is no surprise that the
Republican chairman of the House Labor/HHS/Education Subcommittee described the
appropriations target as a noose around his committee's neck.
In the VA/HUD appropriations bill, we can see how the congressional budget forces untenable
choices between meeting our commitments to the past, present and future. Overall, this bill is
cut by 8 percent. If VA medical programs are protected, as both Congress and our budget call for,
the cut to remaining programs exceeds 10 percent.
The congressional budget will force appropriators to choose between funding veterans health
programs or providing affordable housing to Americans who have not yet shared in our economic
prosperity. The President's budget proposes increased funding for veterans health and 120,000
new housing vouchers, including 18,000 for homeless people, at a time when, in spite of our great
prosperity, the number of poor families with severe housing needs has reached a high of 5.4
million. VA/HUD funding at levels consistent with the congressional budget simply does not
provide adequate resources to fund housing, science, environmental protection and veterans
programs, along with the many other important programs such as AmeriCorps, our national
service program.
The congressional budget also cuts funding for important law enforcement activities. Their
budget would require a major cut in the President's successful COPS program and would cut his
request for additional police officers, seriously undermining the President's goal of funding up to
150,000 additional officers by FY 2005. It would also force lower funding levels for gun crime,
drug enforcement, and the FBI. Inadequate resources threaten significant reductions in a broad
range of law enforcement activities: DEA could lose 400 agents, the FBI approximately 1,100
agents, and the INS nearly 1,700 Border Patrol agents.
Other key areas that appear to be shortchanged under the congressional budget include:
- a $480 million reduction to the National Science Foundation, resulting in almost 18,000 fewer
researchers, educators and students receiving NSF support that is vital to the research and
workforce needed for the Nation's future.
- no new resources for long-term research in supercomputing or in the area of Nanotechnology --
which offers the promise of surgical techniques that are far less invasive and the detection of
cancerous tumors when they are only a few cells in size.
- underfunding FAA operations by almost six percent, forcing the FAA to choose between
employee furloughs or terminating critical safety-related contracts.
- hundreds of millions of dollars below the President's request for EPA's core budget,
eliminating all major EPA initiatives in the President's budget, including funding increases for
the Clean Water Action Plan as well as efforts to clean up the Great Lakes and to address
polluted run-off, the largest source of water pollution.
- cuts to EPA's Superfund program totaling $152 million, eliminating funding for all 15 new
federally led cleanups and 25 ongoing federally led cleanups in FY 2001.
- cuts to international commitments that would substantially increase U.S. arrears to the U.N.
and jeopardize the negotiations for reforms mandated by Congress. The allocations will impair
the bipartisan effort to improve embassy security and the safety of Americans working abroad,
and debt reduction, intended to help the poorest Nations who are undertaking reforms manage
their debt, alleviate poverty and move toward joining the global economy.
And so, as we consider the decisions members of Congress have to make before going home to
campaign this fall, let us consider what is at stake.
We have at this moment both resources and opportunity. Our policy makers and legislators
should live up to the promise of this moment by strengthening our Nation's future. If we do not
strengthen our fiscal position by an aggressive program of debt reduction, that will certainly be a
lost opportunity. And if Congress rejects prudent investments for a prosperous future, that will
certainly be a failure.
A tax cut that jeopardizes these goals jeopardizes our health, our wealth, and our values as a
Nation. In a time of resources and opportunity such as this, we need a balanced approach that
includes targeted tax relief and important health care policy reforms, not a tax cut that leaves no
room for initiatives to benefit our people and strengthen our economy. We should dedicate the
benefits of reducing our debt by saving the Social Security surplus to extending Social Security
solvency. The course we are on is working. Changing direction would be worse than short-sighted
-- it would be wrong.
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