THE CLINTON-GORE ADMINISTRATION'S BUDGET FRAMEWORK

June 26, 2000

Table of Contents

1. The Clinton-Gore Administration's 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 President's Medicare Prescription Drug Benefit and Provider Payments

Appendix

A1. The Clinton-Gore Administration: Paying Off the Debt By 2012

A2. The Clinton-Gore Economic Record: What a Difference Seven Years Makes

The Clinton-Gore Administration's 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.

(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 alone.
• 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 1965.
• 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 President's 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 President's 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 President's 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 Administration's 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 President's plan would extend the solvency of Social Security to at least 2057. The President's proposed Medicare solvency transfers, together with the President's 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 purposes.

(4) Improve the President's 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 President's proposal maintains the key elements of the Administration's 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 America's 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 President's budget framework maintains his commitment to his proposals from the February budget including:

• Invest in priorities. The President's framework maintains the FY2001 budget proposals for specific, detailed policies to address the Nation's 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 President's 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 Children's Health Initiative enacted in 1997, up to 10 million uninsured people could be covered.

• Provide targeted tax relief for American families. The President's 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 President's 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.

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 President's 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 President's 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 Administration's Medicare reform plan that improves provider payments by $40 billion, makes the program more competitive and efficient, and extends the life of Medicare's 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 President's proposal for a Medicare prescription drug benefit, then the President would be willing to sign it.

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.

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 fund.

• 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 President's 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 1965.

• 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.

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 program's 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 President's 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 President's 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 President's 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 President's 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 President's 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 President's 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 Children's 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 agencies.

• 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 benefit.

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 President's 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 5 years).

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 straight years.

• 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 President's plan would eliminate the debt by 2012 – one year earlier than previously projected. President Clinton's 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 President's 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 President's 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 President's plan, it would be completely eliminated by 2012.

• 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 Administration's 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 FAMILIES

• 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 to growth.

• 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 – that's 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 – that's 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 Clinton's 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 President's 1993 Economic Plan helped create this virtuous circle:

• Alan Greenspan, Federal Reserve Board Chairman, 1/04/00 with President Clinton at Chairman Greenspan's re-nomination announcement: "My colleagues and I have been very appreciative of your [President Clinton's] 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 nation's history."
• 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 benefits."
• Business Week, 5/19/97: "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."
• 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 budget deficit."
• 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 three counts..."

After seven and a half years, the results of President Clinton and Vice President Gore's 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 President's plan, we are now on track to eliminate the nation's publicly held debt by 2012.

Jobs Are Up: 22 Million Created Since January 1993

• 1981-1992. During President Reagan and Vice President Bush's 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 years.
• 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 Ever

• 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 – that's 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 – that's 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 percent annually.
• Today. Under President Clinton the core rate of inflation has averaged 2.6 percent annually – the lowest of any Administration since Kennedy.

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 Record

• 1981-1992. African-American unemployment reached 21.2 percent in January 1983– a record high – and never dropped below 10 percent.
• 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 Record Lows

• 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 Record

• 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 1967-1972.

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 percent—the 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 1992.
• Today. Since 1993, real median family income has increased by $5,046 , rising to $46,737 in 1998.

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