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BUDGET OF THE
UNITED STATES
GOVERNMENT

Fiscal Year 1995
9




^ ^ ^

^ ^ ^ ^ ^ ^ ^ ^

THE BUDGET DOCUMENTS
Budget of the United States Government, Fiscal in the budget documents are consistent with the conYear 1995 contains the Budget Message of the Presi- cepts and presentation used in the 1995 Budget, so
the data series are comparable over time.
dent and presents the President's budget proposals.
Analytical Perspectives, Budget of the United
States Government, Fiscal Year 1995 contains analyses that are designed to highlight specified program
areas or provide other significant presentations of budget data that place the budget in perspective.
It includes economic and accounting analyses, such
as a balance sheet-type presentation; information on
Federal receipts and collections, including user fees and
tax expenditures; analyses of Federal spending; detailed
information on Federal borrowing and debt; the Budget
Enforcement Act preview report; current services estimates; and other technical presentation, such as the
national income and product accounts.
It also includes information on management improvements; the budget system and concepts; a listing of
the Federal programs by agency and account; and a
glossary of budget terms.

Budget of the United States Government, Fiscal
Year 1995—Appendix contains detailed information
on the various appropriations and funds that constitute
the budget. The Appendix contains more detailed information than any of the other budget documents. It
includes for each agency: the proposed text of appropriation language, budget schedules for each account,
new legislative proposals, explanations of the work to
be performed and the funds needed, and proposed general provisions applicable to the appropriations of entire
agencies or group of agencies. Supplemental and rescission proposals for the current year are presented separately. Information is also provided on certain activities
whose outlays are not part of the budget totals.

Automated Sources of Budget Information. Copies of the budget number data in electronic form may
be obtained from the U.S. Department of Commerce,
National Technical Information Service, Springfield, VA
Historical Tables, Budget of the United States 22161, telephone (703) 487-4650. Refer to stock number
Government, Fiscal Year 1995 provides data on bud- PB94-500030. Historical budget information is availget receipts, outlays, surpluses or deficits, and Federal able on compact disk (CD) from the U.S. Department
debt covering an extended time period—in many cases of Commerce, Office of Business Analysis, HCHB Room
beginning in fiscal year 1940 and ending in fiscal year 4885, Washington, D.C. 20230, telephone (202)
1999. These are much longer time periods than those 482-1986. Refer to the National Economic, Social, and
covered by similar tables in other budget documents. Environmental Data Bank (NESE-DB). There is a
The data in this volume and all other historical data charge for both of these items.

GENERAL NOTES
1. All years referred to are fiscal years, unless otherwise noted.
2. Detail in this document may not add to the totals due to rounding.

U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON 1994
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402




ISBN 0 - 1 6 - 0 4 3 0 3 1 - 3

TABLE OF CONTENTS
The Budget Message of the President
Introduction

Page

1

11

The Record Thus Far
1. Where We Started

39

2. What We Have Accomplished: The Clinton Economic Plan

53

The Agenda Remaining
3. Economy and Efficiency:
3A. Prosperity and Jobs
3B. Investing for Productivity and Prosperity
3C. Delivering a Government that Works Better and Costs Less
4. Reforming the Nation's Health Care System to Provide Health Security for
All Americans
5. Personal Security: Crime, Illegal Immigration, and Drug Control
6. National Defense and International Affairs

63
87
155
175
195
211

Summary Tables

233

List of Charts and Tables

257

OMB Contributors to the 1995 Budget

263




i







The Budget Message
of the President




THE BUDGET MESSAGE OF THE PRESIDENT
To the Congress of the United States:
The Fiscal Year 1995 budget, which I
transmit to you with this message, builds
on the strong foundation of deficit reduction,
economic growth, and jobs that we established
together last year. By encouraging private
investment—and undertaking public investment to produce more and higher-paying
jobs, and to prepare today's workers and
our children to hold these jobs—we are
renewing the American dream.
The budget continues to reverse the priorities of the past, carrying on in the new
direction we embraced last year:
• It keeps deficits on a downward path;
• It continues our program of investment in
long-term economic growth, in fighting
crime, and in the skills of our children
and our workers; and
• It sets the stage for health care reform,
which is critical to our economic and fiscal
future.
When I took office a year ago, the budget
and economic outlook for our country was
bleak. Twelve years of borrow-and-spend budget policies and trickle-down economics had
put deficits on a rapid upward trajectory,
left the economy struggling to emerge from
recession, and given middle class taxpayers
the sense that their government had abandoned them.
Perhaps most seriously, the enduring American dream—that each generation passes on
a better life to its children—was under siege,
threatened by policies and attitudes that
stressed today at the expense of tomorrow,
speculative profits at the expense of long-

term growth, and wasteful spending at the
expense of our children's future.
A year later, the picture is brighter. The
enactment of my budget plan in 1993, embodying the commitment we have made to invest
in our future, has contributed to a strengthening economic recovery, a clear downward
trend in budget deficits, and the beginnings
of a renewed confidence among our people.
We have ended drift and broken the gridlock
of the past. A Congress and a President
are finally working together to confront our
country's problems.
Serious challenges remain. Not all of our
people are participating in the recovery; some
regions are lagging behind the rest of the
country. Layoffs continue as a result of
the restructuring taking place in American
business and the end of the Cold War.
Rising health care costs remain a major
threat to our families and businesses, to
the economy, and to our progress on budget
deficits. Our welfare system must be transformed to encourage work and responsibility.
And our Nation, communities, and families
face the ever-increasing threat of crime and
violence in our streets, a threat which degrades the quality of life for Americans
regardless of their income, regardless of their
race, regardless of where they live.
We will confront these challenges this year,
by acting on health care reform, welfare
reform, and the crime bill now under consideration in the Congress, and by continuing
to build on our economic plan, with further
progress on deficits, and investments in our
people as well as in research, technology,
and infrastructure.

WHAT WE INHERITED
When our Administration took office, the
budget deficit was high and headed higher—
to $302 billion in 1995 and well over $400
billion by the end of the decade.




When our Administration took office, the
middle class was feeling the effects of the
tax changes of the 1980s, which had radically
shifted the Federal tax burden from the
3

4

THE BUDGET FOR FISCAL YEAR 1995

wealthy to those less well off. From the
late 1970s to 1990, tax rates for the wealthiest
Americans had declined, while rates for most
other Americans had increased.
When our Administration took office, the
economy was still struggling to break out
of recession, with few new jobs and continuing
high interest rates. In 1992, mortgage rates

averaged well over eight percent. Unemployment at the end of 1992 stood at 7.3
percent, and barely a million jobs had been
added to the economy in the previous four
years. The outlook for the future was slow
productivity growth, stagnant wages, and rising inequality—as sagging consumer confidence demonstrated.

A NEW DIRECTION
Today, whether it is the deficit, fairness,
or the status of the economy, the situation
is much improved.
The budget I am submitting today projects
a deficit of $176 billion, a drop of $126
billion from where it would have been without
our plan. If the declines we project in the
deficits for 1994 and 1995 take place, it
will be the first time deficits have declined
three years running since Harry Truman
occupied the Oval Office.
The disciplines we have put into place
are working.
We have frozen discretionary spending. Except in emergencies, we cannot spend an
additional dime on any program unless we
cut it from another part of the budget.
We are reducing low-priority spending to
fulfill the promise of deficit reduction as
well as to fund limited, targeted investments
in our future. Some 340 discretionary programs were cut in 1994, and our new budget
cuts a similar number of programs. These
are not the kind of cuts where you end
up spending more money. These are true
cuts, where you actually spend less. Total
discretionary spending is lower than the
previous year—again, in straight dollar terms,
with no allowance for inflation.
As for entitlement spending, the Omnibus
Budget Reconciliation Act of 1993 achieved
nearly $100 billion in savings from nearly
every major entitlement program. Pay-asyou-go rules prevent new entitlement spending
that is not paid for, and I have issued
an executive order which imposes the first
real discipline on unanticipated increases in
these programs. For the future, health care
reform will address the fastest growing entitle-




ment programs—Medicare and Medicaid—
which make up the bulk of spending growth
in future budgets, and the Bipartisan Commission on Entitlement Reform, which I have
established by executive order, will examine
the possibility of additional entitlement savings.
While we have imposed tough disciplines,
there is one more needed tool. The modified
line-item veto, which would provide Presidents
with enhanced rescission authority, has already been adopted by the House as H.R.
1578. If enacted, it will enable Presidents
to single out questionable items in appropriations bills and require that they be subject
to an up-or-down majority vote in the Congress. I think that makes sense, and it
preserves the ability of a majority in Congress
to make appropriations decisions.
In addition to budget discipline, we made
dramatic changes that restored fairness to
the tax code. We made the distribution of
the income tax burden far more equitable
by raising income tax rates on only the
richest 1.2 percent of our people—couples
with income over $180,000—and by substantially increasing the Earned Income Tax Credit
for 15 million low-income working families.
Thus, nearly 99 percent of taxpayers will
find out this year that their income tax
rates have not been increased.
Results
Finally, the most significant result of our
commitment to changing how Washington
does business is growing economic confidence.
Investment is up—in businesses, in residences,
and in consumer durables; real investment
in equipment grew seven times as fast in
1993 as over the preceding four years. Mort-

5

THE BUDGET MESSAGE OF THE PRESIDENT

gage rates are at their lowest level in decades.
Nearly two million more Americans are working than were working a year ago, twice
as great an increase in one year as was
achieved in the previous four years combined;
and the rate of unemployment at the end

of 1993 was down to 6.4 percent, a drop
of nearly a full percentage point.
The fundamentals are solid and strong,
and we are building for the future with
a steady and sustainable expansion.

THE ECONOMIC PLAN
How did all this happen? Our economic
plan had three fundamental components:
Deficit Reduction
First, the introduction and eventual enactment of our $500 billion deficit-reduction
plan—the largest in history—brought the deficit down from 4.9 percent of GDP, where
it was in 1992, to a projected 2.5 percent
of GDP in 1995 and 2.3 percent of GDP
in 1999. This substantially eased pressure
on interest rates by reducing the Federal
Government's demand for credit and by convincing the markets of our resolve in reducing
deficits. Those lower interest rates encouraged
businesses to invest, and convinced families
to buy new homes and automobiles, along
with other durable goods.
Investment
Second, we proposed, and Congress largely
provided, a set of fully paid-for measures
to encourage private investment (beyond the
inducement provided by deficit reduction) and
commit public investment to our country's
future. The first component was making nine
out of ten businesses eligible for tax incentives
to invest in future growth—including a major
expansion of the expensing allowance for
small businesses and a new capital gains
incentive for long-term investments in new
businesses.
The second component was public investment in the future: in infrastructure, technology, skills, and security. These investments
are directed toward preparing today's workers
and our children for the new, higher-paying
jobs of the modern economy; repairing and
expanding our transportation and environmental infrastructure; fighting crime; expand-




ing our Nation's technological base; and increasing our health and scientific research.
Among other things, we greatly expanded
the very successful Head Start program and
WIC nutrition program for pregnant women,
infants, and young children; provided a major
increase to fulfill the mandate of the Intermodal Surface Transportation Efficiency Act
(ISTEA) authorization; provided initial funding
for the National Service Act and new funding
for educational reforms and other education
and training initiatives; began the process
of fulfilling my goal of putting another 100,000
police officers on the streets of our cities
and towns; and provided additional resources
for urban and rural development.
Trade
Finally, our long-term economic strategy
depends on the expansion of our international
trade markets. In 1993, we did more than
at any time in the past two generations
to open world markets for American products.
The ratification of the North American Free
Trade Agreement (NAFTA) establishes the
largest market in the world. By lowering
tariffs on our exports to Mexico, the agreement
is going to increase jobs in this country—
and, if previous experience is a guide, they
will mostly be high-paying jobs.
We also completed work on the Uruguay
Round of the General Agreement on Tariffs
and Trade (GATT), a worldwide agreement
to reduce tariffs and other trade barriers
that will also create high-paying jobs and
spur economic growth in this country.
In addition, we established the U.S.-Japan
Framework for a New Economic Partnership
so that we can work to increase Japanese
imports of U.S. goods and services and pro-

6

THE BUDGET FOR FISCAL YEAR 1995

mote international competitiveness. And to
relieve unnecessary burdens on U.S. businesses, we eliminated unneeded export controls on certain technology to encourage exports of U.S. high-technology products.

THE YEAR AHEAD
In 1994, we will build on the strong
foundation we laid in 1993.
Fiscal Discipline
We continue to implement the $500 billion
in deficit reduction from last year's reconciliation bill. To achieve the required hard
freeze in discretionary spending and make
needed investments, we propose new cuts
in some 300 specific non-defense programs.
That includes the termination of more than
100 programs. Many of these savings will
be controversial, but we have little choice
if we are going to meet our budget goals.
On the other side of the ledger, this
budget contains no new tax increases.
New Investment
The investments in this budget continue
to target jobs, education, research, technology,
infrastructure, health, and crime.
Investing in people. First and foremost,
the goal of our economic strategy is to provide
more and better paying jobs for our people—
both today and in the future—and to educate
and train them so that they are prepared to
do those jobs.
The budget contains a major workforce
security initiative to promote job training
and reemployment. In the past, government
has provided workers who lost their jobs
with temporary unemployment benefits to
tide them over, and little else. But in this
new era, when the fundamental restructuring
of our economy is causing permanent layoffs
and the virtual shutdown of entire industries,
we need to create a reemployment system.
This budget begins the process of establishing that system, which ultimately will give
dislocated workers easier access to retraining,
job-search, and other services designed not
only to help them through a difficult period




but also to prepare them to thrive in productive, new jobs.
We also continue to invest in our most
precious resource—our children—with proven,
effective programs, as well as with new
initiatives to confront the problems of a
changing society.
We propose to expand funding for the
school-to-work program, which will provide
apprenticeship training for high school students who do not plan to attend college.
And our budget expands the national service
program, which gives our young people an
opportunity to serve their communities and
earn money towards college.
We provide strong support for the Goals
2000 program, which I hope Congress will
enact early this year, to help local school
systems reform themselves to educate our
children for the 21st century. We must set
high standards for all of our children, while
providing them with the opportunity they
deserve to learn.
We also provide major increases for WIC
and for Head Start, which we will seek
to improve as well. And we significantly
expand and better target the Title I program,
which focuses on needy children to make
sure they can take full advantage of our
educational system.
Investing in know-how. America has always sought to be the world's leader in science
and technology. In some arenas in recent
years, we have lost that status. But in the
remainder of this decade and in the 21st century, we must be sure that the United States
is on the cutting edge of research and technological advances.
To that end, the 1995 budget proposes
critical investments in the National Institute
of Standards and Technology's Advanced Technology Program; NASA's research, space, and

7

THE BUDGET MESSAGE OF THE PRESIDENT

technology programs; the National Science
Foundation; the information superhighway,
on which the Vice President has worked
so hard; and energy research and development.
In addition, I am determined to continue
assisting the industries and communities
which have supported our Nation's defense
as we continue the defense downsizing that
began in the mid-1980's and accelerated in
the early 1990s with the end of the Cold
War.
I am proposing significant investments in
the Technology Reinvestment Project, which
will work with the private sector to encourage
the development and application of dualuse technologies. And the budget also includes
additional resources for the Office of Economic
Adjustment, which provides planning grants
to communities as they convert their local
economies to profitable peacetime endeavors.
Investing in physical capital. The Nation's capital infrastructure and the economies
of too many urban and rural communities have
suffered too long from neglect. Last year, we
began to address these shortfalls, and in 1995,
we propose to continue these initiatives.
We propose, first, to continue full funding
of core highway programs within the ISTEA
transportation authorization act, as well as
a substantial increase in Mass Transit Capital
Grants. To help provide this level of funding,
the budget proposes rescission of many highway demonstration projects, which frequently
are an inefficient allocation of taxpayers'
dollars.
In addition, we propose to continue the
restoration of our environmental infrastructure
with investments in the technologies of the
future under the Clean Water Act and other
environmental programs.
Last year, we enacted legislation to establish
urban and rural Empowerment Zones. This
year, we will designate those zones, as well
as enterprise communities, to attract investment to neglected communities and provide
the kinds of services needed to support economic development.
In this budget, HUD outlays for housing
assistance, services to the homeless, and
development aid to distressed communities




will increase substantially, with aid to the
homeless nearly doubling from the previous
year. Both housing aid to families and aid
to the homeless will be restructured to support
transitions to economic independence.
I also propose to continue our rural development initiative, with grants and loans that
represent a 35-percent increase over the previous year. This assistance will provide for
improved rural infrastructure and services,
such as water treatment facilities and rural
health clinics, increase rural employment,
further diversify rural economies, and provide
rural housing opportunities by expanding assistance to allow low- and moderate-income
residents to become homeowners.
Investing in quality of life. This budget
continues our efforts to enhance environmental
protection and preserve our natural resources.
We propose both to strengthen the stewardship of these resources and improve environmental regulatory and management programs.
We increase state revolving funds for clean
water and drinking water, and we propose
the establishment of four ecosystem management pilot projects. In addition, we are
proposing significant improvements and reforms in the Superfund program, as well
as important international environmental initiatives.
Health Care Reform
Enactment of health care reform, with
its focus on controlling health care costs,
is the key to making even greater progress
on deficits. Indeed, if the Congress adopts
the Health Security Act in 1994, we believe
that deficits will fall to 2.1 percent of GDP
in fiscal year 1999, the lowest since 1979.
Of course, deficit reduction is only one
reason for health care reform. Providing health
security to every American, with a package
of comprehensive benefits through private
health insurance that can never be taken
away, is critical not only to long-term budget
restraint but also to long-term economic
growth, to the productivity of our workers
and businesses, and to the health and peace
of mind of all Americans.
With some 58 million Americans lacking
insurance at some time during the year;

8
with the estimated 81 million Americans
with preexisting conditions paying more, unable to get insurance, or not changing jobs
for fear of losing their insurance; with the
small businesses that cover their workers—
and a majority do—burdened by the skyrocketing cost of insurance, which is 35 percent
higher for them than it is for big business
and government; and with 76 percent of
Americans carrying policies that contain lifetime limits, which can leave them without
coverage when they need it most—this country
is facing a health care crisis. And we must
confront it now.
In addition to our health care reform
effort, the 1995 budget contains key investments in health care and research. We propose
the largest increase ever requested in research
funds for the National Institutes of Health.
This national treasure not only keeps our
Nation in the forefront of health research
but has demonstrably saved millions of lives
and improved the quality of millions more.
The additional investment we propose will
help NIH with its research in many areas,
from AIDS to heart problems, from mental
health to breast cancer.
Welfare Reform
A major initiative for my Administration
has been and will continue to be overhauling
our welfare system. We must reward work,
we must give people the wherewithal to
work, and we must demand responsibility.
Welfare reform has already begun. The
first step was the expansion of the Earned
Income Tax Credit last year. That expansion
rewards work by ensuring that families with
a full-time worker will not live in poverty.

THE BUDGET FOR FISCAL YEAR 1995

people from going on welfare in the first
place. We must remember this: governments
do not raise children, parents do.
The ultimate goal of our reforms is to
have our people rely on work, not on welfare.
Our plan will build on the Family Support
Act by providing education, training, and
job search and placement for those who
need it; it will require people who can
work to do so within two years, either
in the private sector or community service;
it will restore the basic social contract of
providing opportunity and demanding responsibility in return.
Crime
Enactment of the crime bill now being
considered in the Congress is also essential,
and it should happen quickly. We simply
cannot tolerate what is happening in the
streets of our cities and towns today. Crime
and violence, the proliferation of handguns
and assault weapons, the fear that millions
of Americans feel when they emerge from
their homes at night—and even in the daytime—must be confronted head-on.
We need to toughen enforcement, and we
need to provide our local governments with
the resources they need to take on the
epidemic of violent crime. The crime bill
will provide substantial resources, enough
to fulfill my commitment to put 100,000
additional police on our streets. This budget
funds major pieces of the crime bill, and
I urge the Congress not only to approve
the authorizing legislation but to provide
the financial resources to back it up.
Defense and International Affairs

The second stage of welfare reform is
health care reform. Our current health care
system often encourages those on welfare
to stay there in order to receive health
insurance through Medicaid. When we require
that every worker be insured, that disincentive
to work will disappear.

Profound shifts are taking place in America's
foreign relations and defense requirements.
When we came into office, we faced dramatically changed international conditions and
problems, but we inherited foreign and defense
policies and institutions still geared, in many
ways, to the conditions and needs of the
Cold War.

The next element of welfare reform is
personal responsibility. Our welfare reform
plan will include initiatives to prevent teen
pregnancy, ensure that parents fulfill their
child support obligations, and try to keep

This budget reflects the major changes
we are carrying out in the content, direction,
and institutions which ensure that our interests are defended abroad. We are committed
to remaining engaged in a world inextricably




THE BUDGET MESSAGE OF THE PRESIDENT

9

linked by trade and global communications.
The nature of that engagement is changing,
however.

efficient and responsive. Last year, we began
implementing its recommendations. With this
budget, that effort shifts into high gear.

We remain committed to maintaining the
best trained, best equipped and best prepared
fighting force in the world. Thanks to our
1993 Bottom-Up Review of defense, this force
is being reshaped to meet the new challenges
of the post-Cold War era. We can maintain
our national security with the forces approved
in the Bottom-Up Review, but we must
hold the line against further defense cuts,
in order to protect fully the readiness and
quality of our forces.

First, this budget implements the reduction
by 100,000 of Federal positions required by
my Executive Order of last year. Indeed,
because of discretionary spending constraints,
our proposals actually exceed that total by
18,000. In addition, planning has begun on
the further downsizing that will be required
to implement the remaining portion of the
252,000-position personnel reduction recommended by the NPR. With this downsizing,
we will bring the number of Federal employees
to the lowest level in thirty years.

We have put our economic competitiveness
at the heart of our foreign policy, as we
must in a global economy. We are following
the success of NAFTA and GATT with further
market-opening negotiations and intensified
focus on the promotion of U.S. exports. We
are paying particular attention to the Asian
and Pacific markets, which have the most
dynamic growth of any region in the world.
We are dedicated to the enlargement of
the community of free market democracies,
both as a way of ensuring greater security
and as a way of expanding economic opportunity. Our programs for the New Independent
States of Europe and Central Asia are the
centerpiece of this effort.
We are responding aggressively to the new
international security challenges that face
us: regional conflicts, the proliferation of
weapons of mass destruction, the movement
of refugees, and the international flow of
illegal narcotics. And we are addressing
threats to the global environment and rapid
population growth with a program to promote
sustainable development.
Finally, we are fundamentally reforming
and restructuring our international cooperation programs, giving an entirely new postCold War structure to our efforts by rewriting
the basic legislation that has guided such
programs for more than thirty years.
National Performance Review
The Vice President's National Performance
Review (NPR) has paved the way for major
reforms of how our government works, which
are essential to making government more




To reach these goals, we need to be able
to offer incentive packages to those whose
positions will be eliminated. This is one
of our highest legislative priorities, and it
requires attention now. These "buy-out" packages will minimize the need for more costly
reductions in force, are less disruptive since
they are voluntary, and save the government
money in the long run.
The time also has come for swift passage
of procurement reform, another of our highest
priorities. Streamlining procurement is essential to meeting our personnel downsizing
targets. And overhaul of the current, wasteful
system can give us significant savings, as
well as improved performance by government
suppliers.
Further, this budget contains many of the
specific programmatic savings proposed by
the NPR. These savings have been used
in large part to help us meet the discretionary
spending freeze.
With my executive order last year, we
also began the process of reforming one
of the basic functions of government—the
regulatory process. Regulations are often necessary to improve the health, safety, environment, and well-being of the American people.
Our goal is a more open, more fair, and
more honest process that produces smart
regulation: rules that impose the least burden
and provide the most cost-effective solutions
possible.
Finally, all of our departments and agencies
have begun to reform their basic operations,

10
including their financial and other administrative practices.
The goal of the NPR is to make government
work better and cost less—and to make
it more convenient and responsive to those
it serves. That is not something that can
be completed in one year, in four, or even
eight. But we have a responsibility to begin,
and that we have done.
Conclusion
These are the priorities I seek to pursue
in the coming year. Last year, we succeeded
in breaking the gridlock that had gripped
Washington for far too long. In contrast
to past budgets, which lacked credibility,




THE BUDGET FOR FISCAL YEAR 1995

we made sure to use cautious estimates,
and we shot straight with the American
people.
The results are evident.
We said we would bring the deficit down,
and we did. We said we would revitalize
the economy, and we did. We said that
we would help the private sector to create
jobs, and we did. We said that we would
reduce the size of the bureaucracy, and
we did.
Last year, my Administration and the Congress worked side by side to move our
country forward. Let us extend that record
of achievement in 1994.
WILLIAM J. CLINTON

February 7, 1994

Introduction:
An Overview of the 1995 Budget




11

THE FEDERAL GOVERNMENT DOLLAR
FISCAL YEAR 1995 ESTIMATES
WHERE IT COMES FROM.

CORPORATE
INCOME
TAXES

9%

EXCISE
TAXES

5%

WHERE IT GOES.

OTHER
FEDERAL
OPERATIONS

D I R E C T BENEFIT
PAYMENTS FOR
INDIVIDUALS

48 %

5%

GRANTS TO
STATES
& LOCALITIES

15 %

12



NATIONAL
DEFENSE
NET
INTEREST

14 %

18 %

INTRODUCTION: AN OVERVIEW OF THE 1995
BUDGET
The 1995 budget proposes outlays of
$1,518.3 billion, receipts of $1,342.2 billion,
and a deficit of $176.1 billion (Table 1-1).
If this outcome is realized, and the deficit
for 1994 (already four months old) is as
expected, it will mark the third consecutive
year the deficit will have decreased (1992,
$290.4 billion; 1993, $254.7 billion; 1994,
an estimated $234.8 billion)—the first such
sequence since the Administration of President
Harry S Truman. If the President's health
care reform bill is enacted, the 1995 deficit
will be even lower: $165.1 billion. (Furthermore, these estimates were made on the
basis of economic assumptions as of December
1993. If subsequent developments could have
been incorporated into the economic assumptions, the projected deficits over the forecast

period—with or without health reform—would
have been about $5 billion to $6 billion
per year lower.)
The deficit is cut more than 40 percent
from the level projected one year ago. As
a percentage of GDP, it is projected to
be cut in half—from the 5.2 percent that
was projected one year ago for 1993 under
the policies of the previous Administration,
to 2.5 percent in 1995. It is projected to
fall to 2.3 percent and remain there for
1996-99, unless the President's health care
reform is enacted. With health reform, the
deficit is projected to fall to 2.1 percent
of GDP in 1999. As the President made
clear last year, the difference between a
deficit that is falling as a percentage of

Table 1-1. OUTLAYS, RECEIPTS AND DEFICIT SUMMARY
(Dollar amounts in billions)
1993
Outlays:
Discretionary
Mandatory:
Deposit insurance
Other mandatory

1994

1995

1996

1997

1998

1999

542.5

550.1

542.4

543.9

544.3

548.1

554.4

-28.0
694.9

-3.3
733.7

-11.1
774.0

-11.3
826.1

-6.1
887.5

-4.9
949.9

-3.3
1,023.8

666.9
198.8

730.4
203.4

762.9
213.1

814.9
224.8

881.4
234.6

945.0
245.0

1,020.5
255.2

1,408.2
1,153.5

1,484.0
1,249.2

1,518.3
1,342.2

1,583.5
1,410.4

1,660.3
1,479.5

1,738.2
1,550.8

1,830.2
1,629.0

Deficit

254.7

234.8

176.1

173.1

180.8

187.4

201.2

Totals as a percent of GDP:
Outlays
Receipts

22.4%
18.3%

22.3%
18.8%

21.6%
19.1%

21.3%
19.0%

21.2%
18.9%

21.0%
18.7%

20.9%
18.6%

4.0%

3.5%

2.5%

2.3%

2.3%

2.3%

2.3%

254.7

234.8

165.1

169.6

186.4

190.5

181.1

4.0%

3.5%

2.4%

2.3%

2.4%

2.3%

2.1%

Subtotal, mandatory ..
Net interest
Total outlays
Receipts

Deficit
Memorandum—Totals with
health reform:
Deficit
Deficit as a percent of
GDP




13

14

THE BUDGET FOR FISCAL YEAR 1995

GDP and one that is merely stable is fundamental health reform.
This budget achieves sustained deficit reduction by breaking the bad fiscal habits of
the 1980s.
• After years of budgets based on borrow
and spend economics, this budget maintains fiscal discipline—the discipline established in the President's economic program last year. The tight discretionary
spending caps negotiated by the Administration and the Congress—which impose
a five-year freeze at about the fiscal year
1993 level, with no allowance for inflation—are obeyed. There are no deficit-increasing changes in entitlement spending
or revenues. This budget discipline has already paid enormous dividends: interest
rates have declined; business investment
in equipment, and household investment
in new homes, automobiles, and other
consumer durables have increased; and
employment growth has returned to the
United States. The economy produced almost twice as many jobs in the last year
than under the entire preceding Administration.
• Where past budgets have practiced trickledown economics, in the vain hope that tax
relief for the most well-off would cause
economic growth for the rest, this budget
maintains tax fairness. The economic
record of the past year demonstrates that
growth and fairness need not conflict. The
Administration's increases in the Earned
Income Tax Credit (EITC) to reward
work—a first step toward welfare reform—
provide sorely needed tax relief for lowincome working families with children. At
the same time, the necessary additional
taxes to reduce the deficit are being borne
by those most able to pay: households with
incomes over $200,000 will pay 80 percent
of the tax increases enacted in the President's budget package last year. Only the
best-off 1.2 percent of households face
higher income tax rates.
• Where past budgets lacked a long-term
view, this budget invests for the future—
in the physical infrastructure, scientific
and technological knowledge, and worker
skills that the private sector needs to be




an engine of job creation and productivity
growth. The budget also encourages private business investment—through continued deficit reduction and the resulting low
interest rates, and through the investment
incentives (especially for small business)
enacted in the President's economic program last year. These incentives help business to play its role as the ultimate source
of long-term prosperity.
• In contrast to past budgets, which lacked
credibility and were routinely characterized as dead on arrival, this budget dispenses with smoke and mirrors. Its economic assumptions are prudent, and its
budget projections are solid. It will be a
sound basis for the Congressional budget
process and the public debate as well.
This introduction identifies and describes
the major components of the 1995 budget.
It identifies the ways in which budget discipline is attained, and the initiatives that
are proposed. The remainder of the budget
describes in more detail the economic backdrop
for the President's economic plan, the success
that the plan has met thus far, and the
President's agenda for the future.
ECONOMIC ASSUMPTIONS
A year ago, the recovery from the 1990-91
recession was still very fragile; now it is
more secure. This transformation was the
result of corrective actions taken by the
private and public sectors. Households and
businesses improved their balance sheets by
reducing debt. But most importantly, the
Federal Government seriously addressed its
own deficit problem. Congress enacted the
Administration's deficit reduction plan and
refocused spending priorities on productivityenhancing investment.
The return to fiscal responsibility contributed to a fall of one percentage point in
long-term interest rates between the election
in November 1992 and the end of 1993.
Falling rates stimulated key interest-sensitive
sectors, pushed the stock market to record
highs and reduced the debt servicing costs
of governments, households and businesses.
By the second half of 1993, households and
businesses were willing and able to undertake

15

INTRODUCTION: AN OVERVIEW OF THE 1995 BUDGET

the investment spending that produces selfsustaining growth. Business and consumer
confidence improved as sales picked up, orders
increased, payrolls expanded and incomes
rose. And even though the economy accelerated
during 1993 and the unemployment rate
declined, inflation remained well under control. Thus, as 1994 begins, the essential
elements for sustained, noninflationary growth
are in place.
The Administration's economic assumptions
through 1999 project a continuation of the
trends evident in 1993: real economic growth
sufficiently strong to lower unemployment
gradually without reigniting inflation (Table
1-2).
• Between the fourth quarter of 1993 and
the fourth quarter of 1994, real GDP is
projected to increase 3.0 percent. From
1995 through 1999, the growth rate slows
progressively to 2.5 percent.

• The unemployment rate is projected to decline 0.3 percentage point in 1994. (The
current employment outlook is even more
favorable than when these economic assumptions were finalized in December of
1993.) Further decreases of about this
magnitude are projected each year through
1998.
• Inflation, as measured by the Consumer
Price Index, is projected to be 3.0 percent
during 1994, compared with 2.8 percent
during 1993. As the economy grows further, the inflation rate is assumed to edge
up slightly, leveling off at 3.4 percent per
year during 1997-1999.
• Short-term interest rates are projected to
rise moderately from their exceptionally
low current levels as the economy expands, while long-term rates are projected
to remain unchanged at their levels at the
end of 1993—in keeping with sustained

Table 1-2. ECONOMIC ASSUMPTIONS i
(Calendar years)
Projections

1992
Actual
Gross Domestic Product (GDP):
Percent change, fourth quarter
over fourth quarter:
Current dollars
Constant (1987) dollars
Implicit
price
deflator
(1987 = 100)

1993

1994

1995

1996

1997

1998

1999

6.7
3.9

5.0
2.3

5.8
3.0

5.6
2.7

5.7
2.7

5.7
2.6

5.7
2.6

5.6
2.5

2.8

2.6

2.7

2.8

2.9

3.0

3.0

3.0

Consumer
Price
Index
(all
urban): 2
Percent change, fourth quarter
over fourth quarter

3.1

2.8

3.0

3.2

3.3

3.4

3.4

3.4

Unemployment rate,
percent: 3
Fourth quarter level

7.3

6.7

6.4

6.0

5.8

5.6

5.5

5.5

3.5
7.0

3.0
5.9

3.4
5.8

3.8
5.8

4.1
5.8

4.4
5.8

4.4
5.8

4.4
5.8

Interest rates, percent:
91-day Treasury bills4
10-year Treasury notes

civilian,

i Based on information available as of December 1993.
for all urban consumers.
3 Pre-1994 basis. A February 1994 change in survey methodology is expected to add about 0.5 percentage points
to the measured unemployment rate.
4 Average rate (bank discount basis) on new issues within period.
2CPI




16

THE BUDGET FOR FISCAL YEAR 1995

low inflation and continued budget discipline.
The economic assumptions presume enactment of the Administration's budget proposals.
OUTLAYS
1995 outlays are projected at $1,518.3 billion
without the Administration's health reform
proposal, an increase of $34.3 billion, or
2.3 percent, from 1994 estimates. Later years
show continued slow outlay growth. Between
1993 and 1999, total outlays are projected
to grow by an average of only 4.5 percent
per year, or about one percent in real terms.
In contrast, between 1981 and 1993, total
outlays grew by an average of 6.3 percent
per year. In 1999, projected outlays equal
20.9 percent of the gross domestic product
(GDP); in 1993, outlays equaled 22.4 percent
of GDP. The Administration's health reform
would add a projected $0.6 billion to 1995
outlays.
Discretionary Spending
Total discretionary outlays decline in 1995,
from $550.1 billion in 1994 to $542.4 billion.
Defense discretionary outlays decline from
an estimated $280.6 billion in 1994 to $271.1
billion in 1995. Non-defense discretionary outlays decrease by almost three percent in
real terms—increasing slightly in nominal
terms, from an estimated $269.5 billion to
$271.3 billion, a rise of $1.8 billion, or
0.7 percent.
The reduction in discretionary spending
is not a mindless across-the-board cut. Every
department and agency was examined to
find potential savings that would have the
least possible adverse effect on the economy
and on delivery of public services. In addition,
the President maintained his commitment
to investment in physical capital, ideas, and
people to strengthen the economy, increase
living standards, and create jobs.
As a result, although total discretionary
spending declines from 1994 to 1995, the
change varies from department to department.




Seven of the 14 major departments face
a budget cut in nominal terms (ten in
real terms); and the increases in the others,
which implement most of the President's
investment, still leave total outlays on the
decline in 1995 (Table 1-3).
Spending cuts. Not surprisingly, given that
total discretionary spending is cut, the 1995
budget reduces budget authority in dollar
terms—without any increase for inflation—in
at least 300 programs, including at least 115
terminations (some listed in Table 1-4), and
in 228 of 636 programmatic budget accounts.
Another 51 of the 636 budget accounts are frozen at the 1994 level, with no increase for
inflation; and another 100 receive dollar increases that are less than would be needed
to keep up with inflation. Thus, 379 of 636
budget accounts are cut in real terms.
The reductions are spread throughout the
Government. Low-priority and less-efficient
programs are cut or eliminated, to reduce
the deficit and to finance investments that
strengthen the economy, safeguard the environment, and fight crime. However, even
some programs in the President's general
investment areas are cut—to free funds for
more-efficient programs that pursue the same
high-priority objectives better. These include
33 separate program terminations in the
Department of Education; some low-income
housing reductions in the Department of
Housing and Urban Development; the youth
training grants under the Job Training Partnership Act in the Department of Labor;
mass transit operating subsidies; and three
program terminations and numerous reductions in the National Aeronautics and Space
Administration.
Budget savings are also obtained through
the President's Executive Order requiring
Federal personnel reductions of 100,000 by
1995, and the National Performance Review
recommendation for an additional 152,000
reduction by 1999; and the President's Executive Order requiring administrative expense
reductions of 3 percent in 1994, increasing
to 14 percent in 1997.

17

INTRODUCTION: AN OVERVIEW OF THE 1995 BUDGET

Table 1-3. DISCRETIONARY SPENDING BY AGENCY
(In billions of dollars)

Cabinet Agencies:
Agriculture

Estimate

1993

Agency

Actual

1994

1995

1996

1997

1998

1999

BA
OL

15.6
14.6

16.4
16.2

15.4
15.7

15.5
15.5

15.7
15.6

15.7
15.7

15.8
15.9

Commerce

BA
OL

3.2
2.9

3.6
3.4

4.2
3.6

6.0
5.5

BA
OL .
BA
OL
BA
OL

250.0
268.4
24.4
24.5
18.6
19.0
34.3
36.6

252.9
259.9
26.1
24.0
18.0
17.9
35.4
36.8

4.7
4.7
241.0
245.4

5.0
4.9

Defense

4.5
4.3
244.2
249.9
26.3
25.8
18.3
18.6
36.2
38.8

26.5
26.3
18.3
18.4
38.0
40.4

247.5
245.5
23.7
26.5
18.6
18.6
39.3
42.3

253.8
246.3
26.9
26.7
19.0
18.9
41.2
44.0

Health and Human Services

BA
OL

262.6
280.1
23.7
23.0
19.3
18.0
31.6
32.0

Housing and Urban Development

BA
OL

25.5
25.0

25.1
27.5

26.1
29.5

33.5
30.5

35.2
31.2

37.5
31.2

38.8
31.9

Interior

BA
OL

7.1
7.1

7.2
7.4

7.3
7.4

BA
OL .. ,,
BA
BA ,
OL

9.3
9.2
9.9
9.5

12.1
10.6
11.7
10.4

14.3
12.9
12.0
11.3

7.4
7.5
15.2
14.3
12.5
11.8

7.4
7.5

Justice

7.5
7.3
9.4
9.7
10.6
10.0

16.0
15.5
12.5
12.3

7.5
7.5
17.3
17.1
12.6
12.4

BA
OL
BA
BA
OL

4.9
4.9
13.5
34.1

5.3
5.4
11.2
36.2

4.9
5.0
13.5
36.8

4.7
4.8
13.2
38.0

4.8
4.9
12.4
38.2

4.8
4.9
13.2
38.4

5.0
5.0
13.2
38.6

Treasury

BA , ,
OL

10.1
9.9

10.3
10.4

10.4
10.3

10.8
10.7

10.6
10.6

10.1
10.2

Veterans Affairs

BA ,
BA
OL

16.7
16.3

17.6
17.4

17.8
18.0

18.3
18.4

18.9
18.8

10.4
10.3
18.9
18.9

BA
OL
BA
OL
BA
OL
BA
OL
BA
OL
BA
OL ,,.

6.9
6.1
14.3
14.3
2.7
2.4

6.7
6.8

7.9
7.6

14.5
14.4
3.3
3.2

512.2
542.4

14.6
14.5
3.4
3.3
23.7
20.9
2.9
2.8
2.9
2.9
526.0
544.4

8.2
7.8
14.6
14.6
3.5
3.4

498.8
550.1

7.4
7.1
14.4
14.4
3.2
3.0
27.9
29.1
2.9
2.8
2.7
2.7
517.7
546.1

7.7
7.4

2.6
2.6
2.3
2.4

7.2
6.9
14.3
14.4
3.2
2.9
26.5
26.9
2.9
2.8
2.5
2.5

Education
Energy

Labor
State
Transportation

Major Agencies:




BA
OL

..
..

27.9
28.2
2.4
2.4
2.3
2.3
509.6
542.5

14.5
14.2
3.0
2.8
25.5
29.4

28.0
29.1
2.9
2.8
2.8
2.8
520.3
547.8

18.9
18.9

17.6
17.9
2.9
2.8
3.0
3.0
535.8
548.3

THE BUDGET FOR FISCAL YEAR 1995

22

Table 1-4. ILLUSTRATIVE LISTING OF PROGRAMMATIC TERMINATIONS
AND REDUCTIONS
(In millions of dollars)

1993 Enacted

1994 Estimate

1995 Estimate

BA

BA

BA

O

O

Change:
1994 to 1995
^T

O

Number
Change

PROGRAMMATIC TERMINATIONS
Non-Defense Discretionary Programs
Defense Discretionary Programs

2,947.8
2,099.0

3,024.4
371.8

1,777.0
1,736.1

1,962.5
973.8

12.5
259.1

1,055.8 -1,764.5
1,205.6 -1,477.0

-906.7
231.8

106
9

Total Programmatic Terminations

5,046.8

3,396.2

3,513.1

2,936.3

271.6

2,261.4 -3,241.5

-674.9

115

Non-Defense Discretionary Programs
Defense Discretionary Programs

38,343.1 30,977.2 39,081.7 35,978.5 30,510.9 33,330.1 -8,570.8 -2,648.4
122,386.4 108,346.8 118,404.8 112,664.1 107,987.0 110,490.6 •
-10,417.8 -2,173.5

71
35

Total Programmatic Reductions
Total

160,729.5 139,324.0 157,486.5 148,642.6 138,497.9 143,820.7 •
-18,988.6 -4,821.9
165,776.3 142,720.1 160,999.7 151,578.9 138,769.5 146,082.1 --22,230.2 -5,496.8

106
221

PROGRAMMATIC REDUCTIONS

PROGRAMMATIC TERMINATIONS
Department of Agriculture:
Section 32—oilseed export subsidies
Cooperative State Research Service, Earmarked Buildings and Facilities
Rural Development Administration (EDAy
Emergency Community Water Assistance
Grants
Farmers Home Administration (FmHA):
State Mediation Grants
Agriculture Total
Department of Commerce:
National Oceanic and Atmospheric Administration (NOAA):
Operations, Research and Facilities:
Cooperative Geodetic Survey
Land Information System
Marine Observation Buoys
Chesapeake Bay Observation Buoys
Wetlands Management Demonstration ...
Algal Bloom Crisis
Stuttgart Aquaculture
Stock Management Plan
Atlantic Bluefin Tuna Research
U.S/Canada Lobster Study
Center for Shark Research
Columbia River Hatcheries
Columbia River Smolt
Beluga Whale Committee
Fishery Observer Training
Export Strategie^Mahi-Mahi
National Acid Precipitation Assessment .
Wind Profiler Demonstration Network ...
Fed/State Weather Mod. Grants
Southeastern Storm Research
VENTS
SE US/Caribbean FOCI Program
GLERL Zebra Mussel
Lake Champlain Study
Pacific Island Technical Assistance
Sea Grant—Zebra Mussel
National Coastal R&D Institute
National Undersea Research Program ....
Samoa Weather Office
Regional Climate Centers
Construction:
Charleston Fisheries Lab Repairs
Boston Biotechnology Innovation Center




50.0

50.0

50.0

50.0

52.0

45.0

23.0

51.0

30.0

7.0

10.0

3.0

3.0

135.0

-50.0

-50.0

54.0

-23.0

3.0

11.0

18.0

-10.0

7.0

3.0

3.0

2.0

-3.0

-1.0

105.0

86.0

115.0

74.0

-86.0

-41.0

0.6
1.7
0.1
0.4
1.8
0.5
0.6
0.5
0.3

0.6
1.7
0.1
0.2
1.0
0.3
0.6
0.6
0.3

0.1
10.3
0.1
0.2
0.1
0.8
1.4
4.4
2.6
0.4
2.5
1.0
0.9
0.2
0.2
2.8
1.3
16.0
0.2
3.0

0.1
11.7
0.1
0.2
0.1
0.7
1.4
4.4
2.6
0.3
2.5
1.0
0.9
0.2
0.2
2.6
1.2
15.6
0.2
3.0

0.6
1.2
0.1
0.4
0.5
0.4
0.6
0.5
0.3
0.3
0.1
10.3
0.1
0.2
0.2
0.8
1.4
4.4
3.0
0.4
2.5
0.5
0.9
0.3
0.2
2.8
1.1
18.1
0.2
3.0

0.6
1.4
0.1
0.3
0.8
0.4
0.6
0.5
0.3
0.2
0.1
10.9
0.1
0.2
0.1
0.7
1.4
4.4
2.8
0.3
2.5
0.7
0.9
0.2
0.2
2.7
1.1
17.1
0.2
3.0

0.2
0.6
0.1
0.1
0.3
0.1
0.2
0.2
0.1
0.1
0.1
4.5
0.1
0.1
0.3
0.6
1.9
1.2
0.2
1.1
0.3
0.4
0.1
0.1
1.2
0.5
7.3
0.1
1.3

-0.6
-1.2
-0.1
-0.4
-0.5
-0.4
-0.6
-0.5
-0.3
-0.3
-0.1
-10.3
-0.1
-0.2
-0.2
-0.8
-1.4
-4.4
-3.0
-0.4
-2.5
-0.5
-0.9
-0.3
-0.2
-2.8
-1.1
-18.1
-0.2
-3.0

-0.3
-0.8
-0.1
-0.2
-0.5
-0.2
-0.3
-0.3
-0.2
-0.1
-0.1
-6.4
-0.1
-0.1
-O.l
-0.4
-0.8
-2.5
-1.6
-0.2
-1.4
-0.4
-0.5
-0.1
-0.1
-1.5
-0.7
-9.8
-0.1
-1.7

0.7
1.0

0.5
0.2

0.7
1.0

0.7
0.8

0.6
0.8

-0.7
-1.0

-0.1
0.1

4

19

INTRODUCTION: AN OVERVIEW OF THE 1995 BUDGET

Table 1-4. ILLUSTRATIVE LISTING OF PROGRAMMATIC TERMINATIONS
AND REDUCTIONS—Continued
(In millions of dollars)

1993 Enacted

Commerce Total
Department of Defense:
Begin closure of Uniformed Services University of Health Sciences
Navy CH-53 Heavy Cargo Helicopter Procurement
Navy SH-60B Ship-Based Anti-Submarine
Warfare Helicopter
Navy SH-60F Carrier-Based Anti-Submarine
Warfare Helicopter
Navy HH-60H Combat Search and Rescue
Helicopter
Air Force F-16 Fighter Aircraft
LANDSAT 7 Satellite Acquisition
Follow On Early Warning System Development
Spacelifter Launch System Development
Defense Total
Department of Education:
Elementary and Secondary Education:
Impact Aid 3(b): payments for military dependents
Impact Aid Section 2: payments for Federal property
Education for Native Hawaiians
Foreign Languages Assistance (school improvement)
Territorial Teacher Training
Ellender Fellowships (Close-up Foundation)
Fund for the Improvement and Reform of
schools
Civic Education
Follow-through
Dropout Prevention Demonstrations
Law-related Education (Educational Improvement)
Immigrant Education formula grant
General Assistance to the Virgin Islands ...
National writing project (U.C. Berkeley
grant)
National Board for Professional Teaching
Standards




1995 Estimate

BA
Mystic Maritime Education and Research Center
Alaska Fisheries Center
Beaufort Laboratory
Columbia River Facilities
Multispecies Aquaculture Center
Oxford Fisheries Lab
Lafayette Fisheries Lab
National Estuarine Research Reserves ...
Monitor Marine Sanctuary Museum
Indiana State University
Ruth Patrick Science Center
Newport Marine Science Center
Fishing Vessel Obligation Guarantees
Aircraft Procurement and Modernization

1994 Estimate
BA

BA

O

1.0
0.1
0.2
7.9
0.4

0.2
0.6
0.2
6.1
0.1
0.8

1.7
0.5

0.3
0.3

O

1.0
0.5
0.2
8.2
1.0
0.8
2.0
5.0
0.8
1.4
1.0
1.8
0.5
43.0

Change:
1994 to 1995

O

0.8
0.4
0.2
7.9
0.4
0.1
0.6
0.8
0.1
0.2
0.2
1.4
0.9
6.0

Number
Change

~

0.8
0.3
0.1
6.8
0.7
0.5
1.2
3.1
0.5
0.9
0.6
1.5
13.8

-1.0
-0.5
-0.2
-8.2
-1.0
-0.8
-2.0
-5.0
-0.8
-1.4
-1.0
-1.8
-0.5
-43.0

0.1
-0.0
-0.0
-1.1
0.3
0.3
0.6
2.3
0.4
0.6
0.5
0.1
-0.9
7.7

55.5

-124.0

-20.8

68.2

63.5

124.0

76.3

84.0

69.0

86.0

82.0

70.0

73.0

-16.0

-9.0

494.6

65.8

291.1

194.1

41.1

254.1

-250.0

60.0

234.5

31.2

188.0

133.7

-188.0

35.2

172.2

22.9

42.0

59.9

7.6

68.8

-34.4

8.9

116.5
676.5
84.1

15.5
29.1
18.6

256.3
400.0
204.0

70.1
175.7
75.9

39.9
100.5

123.1
349.4
88.3

-216.4
-299.5
-204.0

53.0
173.7
12.4

236.6

119.7

214.8
53.9

190.3
27.3

96.6
18.6

-214.8
-53.9

-93.7

2,099.0

371.8

1,736.1

973.8

1,205.6 -1,477.0

231.8

123.6

100.1

123.1

145.6

31.8

-123.1

-113.8

16.3
6.4

13.2
6.1

16.3
8.2

19.2
7.7

4.2
7.1

-16.3
-8.2

-15.0
-0.6

10.9
1.7

15.1
1.8

10.9
1.7

11.5
1.7

9.6
1.4

-10.9
-1.7

-1.9
-0.2

4.2

6.0

4.2

4.5

3.7

-4.2

-0.8

9.1
4.3
8.5
37.5

9.9
4.2
8.0
35.5

9.1
4.5
8.5
37.7

9.6
4.2
9.9
43.8

7.9
3.9
7.7
34.4

-9.1
-4.5
-8.5
-37.7

-1.7
-0.3
-2.2
-9.4

6.0
29.5
2.5

5.6
16.3
2.3

6.0
39.0
1.2

6.9
34.5
2.7

5.4
33.7
1.4

-6.0
-39.0
-1.2

-1.5
-0.8
-1.3

3.2

2.8

3.2

3.1

2.8

-3.2

-0.2

4.8

5.1

4.8

8.1

3.2

-4.8

-4.9

98.5 .

259.1

-8.7

46

20

THE BUDGET FOR FISCAL YEAR 1995

Table 1-4. ILLUSTRATIVE LISTING OF PROGRAMMATIC TERMINATIONS
AND REDUCTIONS—Continued
(In millions of dollars)

1993 Enacted

1994 Estimate

1995 Estimate

Change:

Number
Change

1994to1995

BA
Library Programs:
Library Demonstration
Library Literacy
Public Library Construction
College Library Technology
Research Libraries
Library Education and Training
Higher EducatioiVStudent Financial Aid:
Assistance to Guam
State Student Incentive grants (student
aid)
Cooperative Education
Eisenhower Leadership program
Law school clinical experience
Federal Perkins Loans Capital contributions
National Early Intervention Scholarships ..
Teacher corps
Gallaudet University construction
Vocational Education:
Bilingual Vocational Training
Vocational Education Community based
organizations
Consumer and Homemaking Education
Education Total
Department of Energy:
Oil shale, fossil energy research and development
Magnetohydrodynamics, fossil energy research and development
Atomic vapor laser isotope separation program, uranium supply and enrichment
Energy Total
Environmental Protection Agency:
Clean Lakes Demonstration Program
Rural Water Assistance
EPA Total
Department of Interior:
USGS Water Resources Research Institutes
BOM Minerals Institutes
BIA Community Development—Business Enterprise Development Program (Grants) ....
BIA Direct Loan Program
BIA Technical Assistance Grants
Office of Surface Mining Rural Abandoned
Mine Program
Interior Total
Department of Justice:
Office of Justice Programs—Byrne Anti-Drug
Abuse Formual Grant Program




O

BA

O

BA

O

^T

^

2.8
8.1
16.6
3.9
5.8
5.0

3.5
10.3
16.9
4.9
7.4
6.3

2.8
8.1
17.8
3.9
5.8
5.0

3.1
8.9
23.4
4.3
6.4
5.5

1.7
4.8
24.9
2.3
3.5
2.9

-2.8
-8.1
-17.8
-3.9
-5.8
-5.0

-1.4
-4.1
1.5
-2.0
-3.0
-2.5

72.0
14.0
3.0 ..
10.0

89.0
16.0

72.0
14.0
4.0
15.0

72.0
14.0
3.0
11.0

36.0
12.0
3.0
12.0

-72.0
-14.0
-4.0
-15.0

-36.0
-2.0

183.0

1.0

142.0
1.0
1.0
1.0

12.0

166.0

158.0

2.0

3.0

158.0
2.0
2.0
1.0

3.0

2.0

3.0

3.0

12.0
35.0

9.0
26.0

12.0
35.0

627.7

596.2

639.8

6.0

6.0

30.0

36.0

5.0

22.0

1,243.0

1,400.0

177.0

246.0

1,279.0

1,442.0

182.0

271.0

4.0
5.0

4.0
5.0

5.0
8.0

9.0

9.0

6.0
11.6

1.0

-158.0
-2.0
-2.0
-1.0 ...

-41.0
1.0
1.0

2.0

-3.0

-1.0

10.0
30.0

9.0
28.0

-12.0
-35.0

-1.0
-2.0

691.8

445.5

-639.8

-246.3

3.0

1.0

-2.0

14.0

-8.0

5.0

34

-177.0

-246.0

15.0

-177.0

-256.0

5.0
6.0

3.0
3.0

-5.0
-8.0

-2.0
-3.0

13.0

11.0

6.0

-13.0

-5.0

6.0
11.6

6.0
8.1

6.0
8.2

0.6
7.3

-6.0
-1.6

-5.4
-0.9

5.2
2.5
4.3

5.2
2.5
4.3

4.0
2.5
4.3

4.3
2.5
4.3

1.2
1.3

-4.0
-2.5
-4.3

-3.1
-2.5
-3.0

13.4

13.4

13.3

13.3

5.6

-13.3

-7.7

43.0

43.0

38.2

38.6

16.0

-31.7

-22.6

6

423.0

413.7

358.0

408.7

307.2

-358.0

-101.5

1

5.0

6.5

6.5

3

2

21

INTRODUCTION: AN OVERVIEW OF THE 1995 BUDGET

Table 1-4. ILLUSTRATIVE LISTING OF PROGRAMMATIC TERMINATIONS
AND REDUCTIONS—Continued
(In millions of dollars)

1993 Enacted

1995 Estimate

BA
National Aeronautics and Space Administration (NASA):
Long Duration Orbiter
Commercial Experiment Transporter
Advanced Solid Rocket Motor

1994 Estimate
BA

BA

O

O

7.0
23.0
195.0

4.0
23.0
206.0

43.0
15.0
178.0

225.0

233.0

236.0

231.0

30.0
19.8

30.0
19.8

18.0
13.1

SBA Total
Department of State:
Bilateral Science and Technology
State Justice Institute
Department of Transportation:
Coast Guard: Boating Safety Grants
FRA: Local Rail Freight Assistance

49.8

49.8

4.5
14.0

Transportation Total
United States Information Agency:
North South Center

O

27.0
18.0
186.0 .

NASA Total
Small Business Administration:
SBA grants for tree planting
SBA earmarked grants

Total Programmatic Terminations

Change:
1994 to 1995

Number
Change

^

17.0
6.0
77.0

-43.0
-15.0
-178.0

-10.0
-12.0
-109.0

100.0

-236.0

-131.0

18.0
13.1 .,

-18.0
-13.1

-18.0
-13.1

31.1

31.1

-31.1

-31.1

2

4.5
14.0

4.3
7.0

4.3
7.0

0.6
1.0

-4.3
-6.0

-3.7
-6.0

1
1

32.0
29.0

35.0
7.0

32.0
17.0

33.0
35.0

18.0
17.0

-32.0
-17.0

-15.0
-18.0

61.0

42.0

49.0

68.0

35.0

-49.0

-33.0

2

8.7

8.7

8.7

-8.7

-8.7

1

5,046.8

3,396.2

3,513.1

2,936.3

271.6

2,261.4 -3,241.5

-674.9

115

430.0

397.0

424.0

446.0

419.0

432.0

-5.0

-14.0

33.0
279.0
25.0

35.0
236.0
23.0

33.0
267.0
26.0

32.0
301.0
26.0

26.0
25.0
11.0

28.0
105.0
21.0

-7.0
-242.0
-15.0

-4.0
-196.0
-5.0

194.0

182.0

195.0

216.0

100.0

164.0

-95.0

-52.0

14.0
12.0

16.0
13.0

14.0
13.0

15.0
14.0

8.0
7.0

12.0
10.0

-6.0
-6.0

-3.0
-4.0

147.0

147.0

100.0

100.0

75.0

75.0

-25.0

-25.0

210.0

87.0

70.0

135.0

19.0

110.0

-51.0

-25.0

288.0

179.0

298.0

273.0

116.0

290.0

-182.0

17.0

165.0
94.5
1,533.4

163.4
77.3
1,444.5

120.2
104.5
1,412.0

123.7
106.9
1,683.7

40.2
94.5
1,245.4

40.0
94.9
1,341.2

-80.0
-10.0
-166.6

-83.7
-12.0
-342.5

3,424.9
190.0

3,000.2
145.0

3,076.7
249.0

3,472.3
149.0

2,186.1
187.0

2,723.1
180.0

-890.6
-62.0

-749.2
31.0

1,358.0
130.0
172.0

1,074.0
53.1
168.0

1,304.0
80.0
183.0

1,448.0
139.9
205.0

959.0
15.0
148.0

1,100.0
82.5
162.0

-345.0
-65.0
-35.0

-348.0
-57.4
-43.0

1,660.0

1,295.1

1,567.0

1,792.9

1,122.0

1,344.5

-445.0

-448.4

1.0

8.7 .,

3

PROGRAM REDUCTIONS
Department of Agriculture:
Cooperative State Research Service, Earmarked Special Research Grants
Soil Conservation Service:
Resource Conservation and Development...
Watershed & Flood Prevention Operations
Great Plains Conservation Program
Agriculture Stabilization & Conservation
Service:
Agricultural Conservation Program
Colorado River Basin Salinity Control Program
Forestry Incentive Program
Commodity Credit Corporation:
Market Promotion Program
Rural Electrification Administration:
Electric and Telephone Loan Subsidies
Farmers Home Administration:
Multi-family Housing Loans
Food and Nutrition Service:
The Emergency Food Assistance Program
Commodity Supplemental Food Program ...
PL 480 (Titles I, II, III)
Agriculture Total
Appalachian Regional Commission
Army Corps of Engineers:
Construction, General
Flood Control and Coastal Emergencies
General Investigations
Corps of Engineers Total




14
1

3

22

THE BUDGET FOR FISCAL YEAR 1995

Table 1-4. ILLUSTRATIVE LISTING OF PROGRAMMATIC TERMINATIONS
AND REDUCTIONS—Continued
(In millions of dollars)

1993 Enacted

Commerce Total
Consumer Product Safety Commission
Department of Defense:
Personnel:
Reduce Active Military Personnel to 1.526
Million and Reserve Military Personnel
to 0.979 Million in 1995
Reduce Civilian Personnel to 873,000 in
1995
Procurement:
Army AH-64 Apache Attack Helicopter
Army Guardrail Electronic Intelligence
Aircraft Modifications
Army Kiowa Warrior Armed Reconnaissance Helicopter
Army Avenger Air Defense Missil^Gun
system
Army Javelin Anti-Armor Missile System ..
Army Multiple-Launch Rocket System
Bradley Fighting Vehicle Family
Army
High
Mobility
Multi-Purpose
Wheeled Vehicle
Army Family of Heavy Tactical Vehicle
Army Reserve Component Computer Automation System
Navy F/A-18QD Fighter Aircraft
Navy Trident II Submarine Launched Ballistic Missile
LHD-1 Amphibious Assault Ship Conversion
Mine Warfare Command Ship Conversion
Oceanographic Ship
Air Force B-2 Bomber
Air Force Advanced Medium-Range Air-toAir Missile
Air Force Space Boosters
Air Force Military Satellite Communications Equipment
Defense Support Project Office Major
Equipment
Research and Development:
Army Medical Advanced Technology
Army Apache Longbow Anti-Armor Missile




1995 Estimate

BA

Department of Commerce:
National Oceanic and Atmospheric Administration (NOAA):
Operations, Research and Facilities:
NEXRAD Doppler Weather Radars
Construction: NEXRAD WFO Construction
Fleet Modernization, Shipbuilding and
Conversion
National Telecommunications and Information Administration (NTIA):
Public Broadcasting Facilities, Planning
and Construction

1994 Estimate
BA

BA

O

O

O

Change:
1994to 1995

Number
Change

JT
T

84.5
48.4

81.6
22.4

120.0
62.8

103.6
45.2

79.6
18.3

90.0
52.5

-40.4
-44.5

-13.6
7.3

28.5

20.6

77.1

18.1

23.0

27.1

-54.0

9.0

20.3

19.0

24.0

20.2

10.7

26.2

-13.3

6.0

181.7
48.0

143.6
42.0

283.8
42.0

44.0

131.7
40.0

195.8
41.0

-152.1
-2.0

8.6
-3.0

65,215.0

61,954.0

62,614.0 62,418.0

60,199.0

60,007.0

-2,415.0 -2,411.0

44,360

43,340.0

43,325.0 43,349.0

41,736.0

41,773.0

-1,589.0 -1,576.0

139.6

20.9

167.6

68.3

5.6

100.6

-162.0

32.3

92.5

13.9

111.3

45.3

26.9

70.1

-84.4

24.8

319.2

47.9

226.2

133.2

111.8

195.4

-114.4

62.2

146.9
18.3
253.4
93.5

13.7
1.7
23.6
1.9

135.2
207.3
253.6
71.1

53.6
23.8
94.3
40.2

13.8
131.1
60.1
14.1

103.9
78.3
188.2
64.4

-121.4
-76.2
-193.5
-57.0

50.3
54.5
93.9
24.2

218.4
309.5

35.6
50.4

242.9
403.0

113.1
169.7

108.1
16.5

154.5
217.0

-134.8
-386.5

41.4
47.3

187.7
1,134.8

30.6
150.9

162.0
1,520.4

89.7
556.2

101.5
1,032.4

118.2
974.4

-60.5
-488.0

28.5
418.2

980.3

150.0

1,098.6

458.9

696.0

786.9

-402.6

328.0

3,831.3

164.7

888.6
123.6
109.5
1,543.4

45.3
6.3
5.6
965.9

800.1

118.2
16.4
14.6
1,817.7

-888.6
-123.6
-109.5
-743.3

72.9
10.1
9.0
851.8

605.8
380.0

180.1
112.5

487.2
463.2

310.6
241.5

309.5
381.8

357.0
322.7

-177.7
-81.4

46.4
81.2

48.6

23.1

70.8

47.6

3.8

26.6

-67.0

-21.0

183.3

37.2

331.4

121.3

11.7

156.8

-319.7

35.5

248.4
290.9

136.6
160.0

115.0
277.8

147.7
251.7

41.0
191.3

79.8
220.9

-74.0
-S6.5

-67.9
-30.8

23

INTRODUCTION: AN OVERVIEW OF THE 1995 BUDGET

Table 1-4. ILLUSTRATIVE LISTING OF PROGRAMMATIC TERMINATIONS
AND REDUCTIONS—Continued
(In millions of dollars)

1993 Enacted

1995 Estimate

BA

Navy Advanced Submarine Systems
Navy Ship Self-Defense
Navy Standard Anti-Air Warfare Missile ...
Air Force B-2 Bomber
Air Force Milstar Satellite
Air Force Joint Surveillance Target Attack
Radar System
Air Force Tri-Service Stand-off Attack Missile
Air Force Medium Launch Vehicle
Air Force Titan Space Launch Vehicles
Special Operations Tactical Systems
Foreign Material Acquisition and Exploitation

1994 Estimate

O

BA

BA

128.1
216.4
50.1
1,189.3
1,107.3

70.5
119.0
27.6
601.8
560.3

140.4
285.8
62.3
785.8
918.4

120.0
229.5
51.0
807.9
846.7

86.0
192.3
11.8
408.5
625.4

104.2
218.1
31.2
590.8
738.5

-54.4
-93.5
-50.5
-377.3
-293.0

-15.8
-11.4
-19.8
-217.1
-108.2

313.5

158.6

283.1

251.4

190.4

223.8

-92.7

-27.6

46.6
147.2
121.0

23.6
74.5
57.1

265.4
71.2
270.1
218.0

134.3
52.1
187.5
149.8

81.1
21.0
161.1
167.4

132.6
39.6
188.7
175.6

-184.3
-50.2
-109.0
-50.6

-1.7
-12.5
1.2
25.8

9.5

4.5

155.6

77.1

49.9

84.9

-105.7

7.8

O

O

Change:
1994 to 1995
^

Number
Change

122,386.4 108,346.8 118,404.8 112,664.1 107,987.0 110,490.6 -10,417.8 -2,173.5
Defense Total
Department of Energy:
-255.0
-211.0
-199.0
-412.0
-398.0
-201.0
-220.0
-199.0
Lease Elk Hills, Naval Petroleum Reserves ..
Nuclear reactor programs, energy supply re341.0
245.0
365.0
261.0
268.0
16.0
319.0
-97.0
search and development
2,186.0
2,088.0
2,121.0
2,140.0
1,616.0
1,768.0
-505.0
-372.0
Nuclear weapons stockpile support
1,300.0
1,180.0
1,024.0
1,162.0
878.0
922.0
-146.0
Nuclear weapons materials support
-240.0

35

Energy Total
Environmental Protection Agency:
Targeted Wastewater Assistance
Funds Appropriated to the President:
Assistance to Central and Eastern Europe ....
Department of Health And Human Services:
Health Care Financing Administration:
Research and Demonstrations
Medicare Contractors
Health Professions Curriculum Assistance
Program
Maternal and Child Health Block Grant ....
Indian Health Services
Low Income Home Energy Assistance Program
Community Services Block Grant

3,585.0

3,354.0

3,179.0

3,468.0

2,343.0

2,560.0

-836.0

-908.0

4

556.0

117.0

558.0

283.0

250.0

397.0

-308.0

114.0

1

400.0

277.6

390.0

346.5

380.0

384.7

-10.0

38.2

1

68.3
1,555.6

69.5
1,502.8

86.0
1,615.3

69.6
1,549.6

68.6
1,610.3

74.0
1,566.0

-17.4
-5.0

4.4
16.4

265.0
665.0
1,863.0

245.0
622.0
1,742.0

281.0
687.0
1,947.0

265.0
653.0
1,949.0

266.0
679.0
1,700.0

279.0
665.0
1,804.0

-15.0
-8.0
-247.0

14.0
12.0
-145.0

1,346.0
440.9

1,067.9
422.8

1,437.4
464.2

2,075.7
474.9

730.0
434.6

790.9
465.0

Health and Human Services Total
Department of Housing and Urban Development:
Public Housing Development
Public Housing Modernization
Severely Distressed Public Housing
Elderly Housing New Construction
Low Income Housing Preservation
Congregate Services
Lead-Based Paint Grant Program
HOME

6,203.8

5,672.0

6,517.9

7,036.8

5,488.5

5,643.9 -1,029.4 -1,392.9

402.0
3,193.0
300.0
1,132.0
600.0
21.0
100.0
1,173.0

537.0
1,647.0
372.0
3.0
5.0
1.0
212.0

598.0
3,230.0
778.0
1,158.0
541.0
25.0
150.0
1,275.0

552.0
2,164.0
30.0
381.0
44.0
11.0
45.0
876.0

150.0
2,786.0
500.0
150.0
6.0
100.0
1,000.0

529.0
-448.0
2,501.0
-444.0
-278.0
146.0
667.0 -1,008.0
94.0
-541.0
16.0
-19.0
75.0
-50.0
-275.0
1,196.0

-23.0
337.0
116.0
286.0
50.0
5.0
30.0
320.0

HUD Total
Department of Interior:
Bureau of Reclamation—Construction
Fish and Wildlife Service Construction
National Park Service Construction
Bureau of Indian Affairs Construction
Bureau of Reclamation Loan Program

6,921.0

2,777.0

7,755.0

4,103.0

4,692.0

5,224.0 -3,063.0

1,121.0

501.0
110.0
225.0
150.0
4.0

470.0
73.0
257.0
124.0
4.0

448.0
74.0
202.0
167.0
14.0

640.0
113.0
272.0
138.0
9.0

381.0
35.0
149.0
114.0
4.0

392.0
73.0
235.0
114.0
7.0

-67.0
-39.0
-53.0
-53.0
-10.0

-248.0
-10.0
-37.0
-24.0
-2.0

990.0

928.0

905.0

1,172.0

683.0

821.0

-222.0

-351.0

Interior Total




-707.4 -1,284.8
-29.6
-9.9
7

8

5

24

THE BUDGET FOR FISCAL YEAR 1995

Table 1-4. ILLUSTRATIVE LISTING OF PROGRAMMATIC TERMINATIONS
AND REDUCTIONS—Continued
(In millions of dollars)

1993 Enacted
BA
Department of Labor:
Job Training Partnership Act:
Training grants for low-income youth
Migrant and seasonal farm workers
Job Training for the homeless demonstration
Community Service Employment for Older
Americans
Unemployment Trust Fund: State UI Administrative costs

1994 Estimate

O

BA

O

1995 Estimate
O

BA

Change:
1994to 1995
^

Number
Change

676.7
78.3

699.0
78.0

658.7
85.6

547.5
74.5

598.7
78.3

609.8
81.7

-60.0
-7.3

62.3
7.2

12.5

9.2

12.5

10.0

5.1

11.7

-7.4

1.7

396.1

389.0

410.5

386.0

396.1

406.3

-14.4

20.3

2,380.1

2,318.6

2,485.3

2,450.9

2,459.7

2,391.8

-25.6

-59.1

3,543.7

3,493.8

3,652.6

3,468.9

3,537.9

3,501.3

-114.7

32.4

4,430.0
112.0
189.0

4,025.0
133.0
202.0

408.0
769.0
115.0
141.0
547.0

399.0
713.0
124.0
152.0
549.0

3,961.0
126.0
222.0
66.0
515.0
1,102.0
122.0
156.0
589.0

4,144.0
125.0
198.0
39.0
459.0
960.0
120.0
151.0
575.0

3,680.0
92.0
135.0
52.0
471.0
899.0
103.0
143.0
481.0

4,095.0
106.0
201.0
50.0
481.0
957.0
110.0
147.0
516.0

-281.0
-34.0
-87.0
-14.0
-44.0
-203.0
-19.0
-13.0
-108.0

-49.0
-19.0
3.0
11.0
22.0
-3.0
-10.0
-4.0
-59.0

NASA Total
National Science Foundation:
Academic research infrastructure
Department of State:
Migration and Refugee Affairs
Department of Transportation:
Coast Guard: Alteration of Bridges
Transit Discretionary Grants
Transit Operating Subsidies

6,711.0

6,297.0

6,859.0

6,771.0

6,056.0

6,663.0

-803.0

-108.0

9

50.0

18.0

100.0

94.0

55.0

84.0

-45.0

-10.0

1

620.7

628.0

670.7

592.6

632.9

639.8

-37.8

47.2

1

13.0
1,725.0
802.0

7.0
1,298.0
802.0

13.0
1,734.0
802.0

24.0
1,450.0
802.0

1,517.0
600.0

13.0
1,608.1
681.0

-13.0
-217.0
-202.0

-11.0
158.1
-121.0

Transportation Total
Department of the Treasury:
United States Customs Service:
Air and Marine Interdiction Program
United States Information Agency:
Educational and Cultural Exchange Programs
Department of Veterans Affairs:
Medical and Prosthetic Research

2,540.0

2,107.0

2,549.0

2,276.0

2,117.0

2,302.1

-432.0

26.1

3

243.0

238.0

233.0

232.0

176.0

182.0

-57.0

-50.0

1

242.3

211.9

242.0

237.3

221.8

231.9

-20.2

-5.4

1

232.0

232.0

252.0

252.0

211.0

211.0

-41.0

-41.0

1

160,729.5 139,324.0 157,486.5 148,642.6 138,497.9 143,820.7 -18,988.6 -4,821.9

106

Labor Total
National Aeronautics and Space Administration (NASA):
Space Shuttle & related
Spacelab
Facilities Construction (Mission Support)
Near Earth Asteroid Rendezvous
Life & Microgravity Sciences
Aeronautical Research & Technology
Space Transportation Technology
Spacecraft & Remote Sensing Technology
Mission Communication Services

Total Programmatic Reductions
* Less than $500 thousand.




5

25

INTRODUCTION: AN OVERVIEW OF THE 1995 BUDGET

Table 1-5. PROPOSED INVESTMENTS
(Budget authority; dollar amounts in millions)
1993
Enacted

ECONOMIC SECURITY
Infrastructure:
Department of Agriculture:
Rural Development Initiative:
Grant levels
(Loan levels)
Department of Transportation:
Highways (obligations)2
Intelligent vehicle highway system (obligations)2
Mass transit formula capital grants
(limitation on obligations) 2
(total budgetary resources)
Next generation high speed rail
Penn Station redevelopment

1994
Estimate 2

1995
Proposed

Dollar
Change:
1993 to
1995

Percent
Change:
1993 to
1995

Dollar
Change:
1994 to
1995

Percent
Change:
1994 to
1995

878
(3,119)

1,039
(4,046)

1,148
(5,728)

270
(2,609)

31
84

109
(1,682)

10
42

(18,043)

(19,978)

(20,301)

(2,258)

13

(323)

2

(30)
54
(844)
(898)

(90)
659
(954)
(1,613)

(135)
1,061
(306)
(1,367)
28
90

450
#
36
152
WA
WA

(75)
456
(196)
(652)
28
80

83
69
21
40
WA
800

—

—-

—

10

(165)
1,115
(1,150)
(2,265)
28
90

22,730
(4,046)

23,997
(5,728)

4,148
(2,609)

21
84

1,267
(1,682)

6
42

6,696
582

50
105
6,912
472

150
700
7,579
660

150
700
883
78

WA
WA
13
13

100
595
667
188

200
567
10
40

2,776

3,326

4,026

1,250

45

700

21

602

1,465
150
250
9
1,157

863
150
250
9
191

143
WA
WA
WA
20

347
100
200

31
200
400

—

—

966

1,118
50
50
9
1,040

117

11

Subtotal, Infrastructure
Loan levels
Education and Training:
Department of Education:
School-to-work (Education Department share)
Goals 2000
Title I, education for the disadvantaged
Safe and drug-free schools
Department of Health and Human Services:
Head Start
Department of Labor:
Dislocated Worker Assistance Act
School-to-work (DOL share)
One-stop career shopping
Worker profiling
Job Corps
National Service:
National Service Initiative3

19,849
(3,119)

279

575

850

571

205

275

48

Subtotal, Education and Training
Technology:
Department of Agriculture:
USDA-National Science and Technology
Council (NSTC)
Department of Commerce:
Economic Development Administration, defense conversion
National Institute of Standards and Technology (NIST) growth, NIST high performance computing, and NIST NSTC
Information highways
NOAANSTC
Department of Defense:
ARPA technology reinvestment project
Department of Energy:
Conservation R&D/EPAct
Cooperative R&D agreements
Advanced neutron source
Linear accelerator "B-Factory"
Department of Health and Human Services:
High performance computing

11,901

13,707

16,996

5,095

43

3,289

24

161

171

189

28

17

18

11

80

140

140

N/A

60

75

47

520
26
64

935
100
106

554
100
59

145
WA
126

415
74
42

80
285
66

472

554

625

153

32

71

349
151
12

436
262
17
36

654
275
40
44

305
124
28
44

87
82
233
WA

218
13
23
8

50
5
135
22

58

82

35

74

24

41




_
—

—
—
—

—

381
—

—

47

*

13

26

THE BUDGET FOR FISCAL YEAR 1995

Table 1-5. PROPOSED INVESTMENTS—Continued
(Budget authority; dollar amounts in millions)
1993
Enacted

National Aeronautics and Space Administration:
Mission to Planet Earth
Aeronautics initiatives
High performance computing
New technology investments
National Science Foundation:
NSF research and education

1994
Estimate 2

1995
Proposed

Dollar
Change:
1993 to
1995

Percent
Change:
1993 to
1995

Dollar
Change:
1994 to
1995

Percent
Change:
1994 to
1995

932
129
30

1,023
289
66
60

1,236
347
76
67

304
218
46
67

33
169
153
ItyA

213
58
10
7

21
20
15
12

2,619

2,891

3,060

441

17

169

6

Subtotal, Technology
Environment:
Department of Agriculture:
Natural resource protection and environmental infrastructure
National research initiative
Climate change action plan
Pacific Northwest Forest Plan implementation
Department of Commerce:
NOAA: rebuild U.S. fisheries
Department of Energy:
Alternative fuels vehicles
Federal Facility Energy Efficiency (FFEE) ....
Renewable energy programs
Climate change action plan
Department of the Interior:
Natural resource protection and environmental infrastructure (includes NAFTA environmental activities)
Pacific Northwest Forest Plan
South Florida ecosystem restoration
National Biological Survey
National Spatial Data Infrastructure Initiative
BuRec wastewater reclamation and reuse
pilot program (So. Cal.)
Climate change action plan
Corps of Engineers:
President's August 1993 wetlands plan
Climate change action plan
Environmental Protection Agency:
Clean water and safe drinking water State
revolving funds
Watershed restoration grants
Environmental Technology
Green Programs
Climate change action plan4
Montreal protocol
NAFTA environmental support
NGedy cities 5
Wetlands initiative

5,330

6,553

7,976

2,646

50

1,423

22

749

735
112
2

782
130
12

33
32
12

4
33
WA

47
18
10

6
16
500

60

97

97

N/A

37

62

232

231

280

48

21

49

21

28
5
251

44
16
341
17

69
37
393
208

41
32
142
208

146
640
57
WA

25
21
52
191

57
131
15
#

1,783

1,813
27
17
167

1,964
71
45
177

181
71
19
177

10
N/A
73
N/A

151
44
28
10

8
163
165
6

1

7

7

N/A

6

600

10

10

10

—

—

—

N/A
N/A

Subtotal, Environment
Other Economic Security:
Department of Agriculture:
WIC (Special supplemental food program for
women, infants and children)
Food safety6




26

—

—

92
1

110
1

24
1

28
WA

18

20

—

—

1,839
80
128
26
26
10
74
100
31

2,300
100
172
35
76
24
179
100
36

356
50
80
27
76
14
25

18
100
87
338
WA
140
16

461
20
44
9
50
14
105

25
25
34
35
192
140
142

—

—

36

N/A

5

16

5,616

6,000

7,415

1,799

32

1,415

24

2,860
494

3,210
517

3,564
534

704
40

25
8

354
17

11
3

86

1,944
50
92
8
—

10
154
100
—

—

—

INTRODUCTION: AN OVERVIEW OF THE 1995 BUDGET

27

Table 1-5. PROPOSED INVESTMENTS—Continued
(Budget authority; dollar amounts in millions)

1993
Enacted

Food safety research
Department of Defense:
Office of Economic Adjustment
Department of Energy:
Conservation:
weatherization
assistance
grants
Department of Health and Human Services:
Social Security: disability processing and automation investments (budget authority
and limitations on obligations)2
Department of Housing and Urban Development:
Multifamily property disposition 7
Incremental housing vouchers
Homeless programs: homeless assistance
grants and innovative homeless initiatives
program8
Moving to independence
Department of the Treasury:
IRS: Tax system modernization
Community Development Financial Institutions:
Community development financial institutions
Small Business Administration:
Section 7(a) loan guarantees (loan levels)
Empowerment zones
(Loan levels)
Small Business Investment Company guarantees
(Loan levels)
Legal Services Corporation:
Payment to the Legal Services Corporation ...
Subtotal, Other Economic Security
(Loan levels)

1994
Estimate2

1995
Proposed

Dollar
Change:
1993 to
1995

Percent
Change:
1993 to
1995

Dollar
Change:
1994 to
1995

Percent
Change:
1994 to
1995

25

156

16

16

41

25

156

30

39

39

9

30

—

—

185

207

250

65

35

43

21

4,823

5,498

5,825

1,002

21

327

6

93
1,307

555
1,404

733
2,743

640
1,436

688
110

178
1,339

32
95

572

823
—

1,250
149

678
149

119

—

WA

427
149

WA

572

694

989

417

73

295

43

—

—

144

144

WA

144

WA

(6,410)

(7,000)

(8,995)
27
(375)

(2,585)
27
(375)

WA
WA

40

(1,995)
27
(375)

WA
WA

40
(326)

91
(730)

78
(656)

600
886

51
(404)

128
124

400

500

143

100

25

—

—

—

—

13
(74)
357

52

40

29

11,322
(6,484)

13,403
(7,326)

16,879
(10,100)

5,557
(3,616)

49
56

3,476
(2,774)

26
38

54,018
(9,603)

62,393
(11,372)

73,263
(15,828)

19,245
(6,225)

36
65

10,870
(4,456)

17
39

Department of Health and Human Services:
Public Health Service:
NIH
Ryan White Act AIDS treatment
Immunizations 9
Drug Treatment

10,326
348
341
717

10,956
579
528
755

11,473
672
888
1,040

1,147
324
547
323

11
93
160
45

517
93
360
285

5
16
68
38

Total, Health Security

11,732

12,818

14,073

2,341

20

1,255

10

265

265

N/A

265

N/A

Total, Economic Security
(Loan levels)
HEALTH SECURITY

PERSONAL SECURITY
Department of Housing and Urban Development:
Community partnerships against crime
Department of Justice:
Community policing
Brady Bill/Criminal records upgrade
Border security and illegal immigration initiative




—

150

—

25

—

—

1,720
100

1,570
100

#
WA

1,695
100

#
WA

—

—

300

300

WA

300

WA

28

THE BUDGET FOR FISCAL YEAR 1995

Table 1-5. PROPOSED INVESTMENTS—Continued
(Budget authority; dollar amounts in millions)

Other Crime bill (miscellaneous bureaus)
Employer sanctions and naturalization initiatives
Total, Personal Security

—

150

1994
Estimate 2

—

25

1995
Proposed

Dollar
Change:
1993 to
1995

Percent
Change:
1993 to
1995

Dollar
Change:
1994 to
1995

Percent
Change:
1994 to
1995

303

1993
Enacted

303

WA

303

WA

68

68

WA

68

WA

2,756

2,606

#

2,731

#
20
39

Total, Proposed Investments
(Loan levels)

65,900
(9,603)

75,236
(11,372)

90,092
(15,828)

24,192
(6,225)

37
65

14,856
(4,456)

Memorandum:
Discretionary investments
Mandatory investments

65,900

75,236

88,935
1,157

23,035
1,157

35
WA

13,699
1,157

—

—

18
WA

* $500 thousand or less.
ItyA = Not applicable.
# = Percentage change of greater than 1,000 percent.
1 Estimates for 1994 include proposed supplemental and rescissions.
2 Budget authority totals include obligation limitations in the Departments of Health and Human Services and Transportation.
3 The 1993 enacted column includes funding for ACTION and the Commission on National and Community Service. All other columns
include funding for ACTION and the Corporation for National and Community Service.
4 EPA Climate change action plan estimates are incremental investment estimates.
5 EPA Needy Cities funding for 1994 is a contingent appropriation subject to Congressional authorization.
6 The investment proposal for food safety is the total program level. The 1995 budget proposes to partially offset this program level by a
new user fee of $103 million to cover the cost of overtime meat and poultry inspection.
7 Proposal assumes passage of property disposition (PD) reform legislation. Budget authority for 1995 represents a new mandatory
spending program whose costs are offset by proposed mandatory program reforms.
s Estimates for HUD homeless programs for 1995 include funds for the Homeless food and shelter program formerly in the Federal
Emergency Management Agency.
9 Immunizations includes $424 million in budget authority in 1995 for mandatory vaccine purchase.

Investments. While total discretionary spending declines, budget discipline and spending
cuts in every department and agency make
room for targeted increases in programs important to the economy and the society. The President requests a total increase of $13.7 billion
in budgetary resources, or 18 percent ($7.7 billion in outlays, or 11 percent), in the discretionary spending that embodies much of his
investment program (Table 1-5). Over the past
two budget years, these programs have been
increased by a total of $23.0 billion in budgetary resources, or 35 percent ($15.3 billion
of outlays, or 23 percent), while total discretionary outlays have decreased by $0.1 billion.
These figures demonstrate clearly that this
Administration has been making tough
choices—maintaining budget discipline and
reducing spending, but shifting the limited
budget dollars into investment programs that
invest in people and contribute to a strong
economy.
The discretionary investment programs in
the 1995 budget include:




• Economic growth: investing in people. Substantial investments are proposed in education, ranging from Head Start through
title I for disadvantaged elementary students and GOALS 2000 for elementary
and secondary school reform, through
school-to-work transition assistance for
non-college-bound secondary-school students. Training investments include the
Workforce Security initiative to provide a
new reemployment system, and a significant expansion of the Job Corps. The national service program is expanded, allowing more young people to serve their communities and earn money towards college.
Other investments for people include WIC,
to nourish pregnant and post-partum
women, infants, and children; new resources for dealing with the backlog of Social Security Disability Insurance claims;
increases in grants for assistance to the
homeless; and food safety inspections and
research. Overall investments increase by
over 8 percent next year and 23 percent
over the next five years. Investments for

INTRODUCTION: AN OVERVIEW OF THE 1995 BUDGET

29

children increase 10 percent in 1995 and
25 percent in the next five years.

form. The increases come to 40 percent
over the next five years.

• Economic growth: investing in science and
technology. The budget strengthens programs that promote growth, job creation,
and environmental quality in U.S. businesses through cost-shared, applied research. It provides major increases for the
Advanced Technology Program in the National Institute of Standards and Technology of the Department of Commerce;
the Technology Reinvestment Project and
other dual-use programs in the Department of Defense; and development of the
National Information Infrastructure. Support for fundamental science is bolstered
through increases in funding for the National Science Foundation and the National Institutes of Health.

• Crime and drug abuse. The Crime Bill currently in the Congress provides a substantial increase for a broad range of activities
within the Department of Justice. The
President's initiative to put an additional
100,000 police on the streets is one part
of the budget plan. Drug treatment—especially for hard-core users—is another important part of the Administration's new
strategy. It concentrates resources at the
local level and shifts international resources from transit interdiction to incountry efforts against drug production.
The increases reach 18 percent in 1995,
and 45 percent over the next five years.

• Economic growth: investing in infrastructure. The largest investments include full
funding of the Intermodal Surface Transportation Efficiency Act (ISTEA) core highways program; a substantial increase of
the mass transit formula capital grants;
and the Department of Agriculture's rural
development initiative.

• National security. The Administration
funds—and the President supports as an
irreducible minimum—a military that is
ready, technologically superior, and oriented to the new threats in our changing
world, in keeping with the Bottom-Up Review undertaken last year by the Department of Defense.

All of these investments are undertaken
within a declining overall level of discretionary
• Economic growth: investing in the environ- spending—made possible through the Presiment. Natural resource and environment
dent's Executive Orders reducing Federal perinitiatives in the Departments of Agrisonnel and overhead expenses, and through
culture, Commerce, Energy, Interior, the
hard choices among competing priorities.
Corps of Engineers, and the Environmental Protection Agency focus on interMandatory Spending
national issues, such as global climate
Mandatory, or entitlement, spending is prochange; particular U.S. ecosystems, such
jected to increase from $730.4 billion in
as the Pacific Northwest Forest; cleanup
1994 to $762.9 billion in 1995, an increase
of Defense, Energy, and Superfund sites;
of $32.5 billion, or 4.4 percent, in the absence
energy conservation; stewardship for safe
of the President's health reform.
and clean water and land management;
and enforcement of the nation's environThough projected mandatory outlays grow
mental protection laws. Overall, these inmore rapidly in 1995 than discretionary spendvestments increase by 4 percent in 1995—
ing (outlays other than debt service grow
and 7 percent over the next five years
by 4.4 percent from 1994, and debt service
from spending levels in the previous Adcosts grow by 4.8 percent), mandatory spendministration.
ing growth is significantly below its recent
• Health investments. Substantial funding pace. For example, from 1981 to 1993, mandatory outlays other than debt service and
increases are provided to the National Indeposit insurance grew by 7.2 percent per
stitutes of Health, Ryan White Act AIDS
year; debt service grew by 9.2 percent per
treatment program, the President's immuyear. The slower projected growth for this
nization program, and for drug treatment.
budget year is due in part to the improving
Still further investments are included in
economy, which reduces the Federal Governthe President's comprehensive health re-


http://fraser.stlouisfed.org/ 0 - 9 4 - 2 (QL 3)
150-001
Federal Reserve Bank of St. Louis

30

THE BUDGET FOR FISCAL YEAR 1995

merit's unemployment and income-support
costs, as well as the costs of deposit insurance;
and in part to strict compliance with the
pay-as-you-go restrictions on mandatory spending increases in the Budget Enforcement
Act.
Projected outlay growth in 1995 is distributed unevenly across entitlement categories.
Medicare and Medicaid grow 8.9 and 10.6
percent, respectively—much faster than any
other category of spending (Table 1-6). Other
entitlements—Social Security, the other nonmeans tested entitlements (including Federal
employee civilian and military retirement programs, veterans programs, unemployment
compensation, and other programs), and the
other means-tested entitlements for low-income persons (food stamps, family support
assistance, and other programs)—all grow
at below or very little more than the average
rate of growth of spending, and below the
rate of growth of revenues.

This pattern demonstrates again the crucial
role of health care costs in the Federal
budget. Of all the categories of spending,
discretionary or mandatory, health care is
far and away the fastest growing. As the
President has pointed out on numerous occasions, we will not control our deficit until
we achieve fundamental health reform. The
President's proposal would reach both of
these objectives—as the alternative deficit
paths in this budget, with and without health
care reform, illustrate.
Initiatives. The Administration contemplates
several major initiatives in the mandatory
spending arena:
• Health reform, as discussed above, is essential to long-term control of the Federal
budget deficit—and to the health security
of all Americans. The President's proposal,
presented last year, will provide guaranteed private insurance with a comprehen-

Table 1-6. MANDATORY SPENDING
(Dollar amounts in billions)
1994

1995

1996

1997

1998

1999

Social security benefits
Federal retirement benefits1
Medicare (pre-reform)
Medicaid (pre-reform)
Unemployment benefits
Means-tested benefits2
Deposit insurance
Other, including undistributed offsetting receipts

317.7
63.0
141.0
87.2
26.7
89.4
-3.3

334.5
65.2
155.4
96.4
23.0
96.7
-11.1

353.7
67.9
174.2
108.2
23.5
102.4
-11.3

369.5
71.3
192.7
121.5
23.9
109.9
-6.1

389.6
74.6
211.8
136.3
24.0
116.6
-4.9

410.8
78.9
234.7
152.2
25.1
124.0
-3.3

8.8

2.7

-3.7

-1.3

-3.1

-1.8

Mandatory, excluding health reform

730.4

762.9

814.9

881.4

945.0

1020.5

Mandatory without health care reform as a
percent of GDP

11.0%

10.9%

11.0%

11.2%

11.4%

11.7%

Memorandum:
Effects on mandatory outlays of the health
care reform proposal:.
Net effect

-0.2

0.9

11.7

28.3

43.3

30.8

730.3

763.7

826.6

909.7

988.3

1051.3

11.0%

10.9%

11.1%

11.6%

11.9%

12.0%

Total mandatory with health reform
Total mandatory with health care reform as
a percent of GDP

Civil service and military retirement.
Food stamps and food aid to Puerto Rico, family support payments, SSI, child nutrition, EITC and veterans
pensions.
1

2




31

INTRODUCTION: AN OVERVIEW OF THE 1995 BUDGET

petitive U.S. producers of goods and services than ever before, and thereby increase
U.S. incomes and contribute to long-term
deficit control.

sive package of benefits, and enhance competition among providers and insurers to
keep costs down.
• Welfare reform will fundamentally revamp
a system that encourages dependency
rather than independence, and fails to reward work. It will provide the training
and services that parents need to support
their families—including health coverage—but require responsibility in return. It will simplify what is now an excessively complex system, and give States
greater flexibility.
• Workforce security—a reemployment system,
rather
than
our
outmoded
unemployment system—will focus resources on workers who must make the
inevitable adjustments in a changing economy. It will screen new job-losers to provide the needed combination of counseling,
training, and job-search assistance, in a
more accessible, unified system to replace
the current patchwork of categorical programs.
• The recently negotiated Uruguay Round
agreements under the General Agreement
on Tariffs and Trade (GATT) will open foreign markets to a broader range of com-

All of these initiatives will be deficitneutral, in keeping with the pay-as-you-go
requirements of the Budget Enforcement Act.
RECEIPTS
1995 receipts are projected at $1,342.2
billion, an increase of $93.0 billion, or 7.4
percent, in the absence of the proposed health
reform. All new receipts raised by OBRA93 are deposited in the Deficit Reduction
Fund created by an Executive Order of the
President. The health reform proposal would
add $11.6 billion in receipts, all to pay
for health care.
Receipts increases in 1995—as did those
in 1994—reflect the President's deficit-reduction plan of last year, and the affected
receipts sources grow the most rapidly as
a result (Table 1-7). The budget contains
no tax increase proposals.
DEFICIT
As a result of this budget discipline, the
deficit is projected to decline in 1995 to

Table 1-7. RECEIPTS
(Dollar amount in billions)
1994

1995

1996

1997

1998

1999

550.0
130.7
461.9
54.6
52.0

597.2
141.0
492.1
55.8
56.0

630.6
146.3
518.5
56.7
58.2

663.9
150.3
546.1
57.8
61.3

698.6
152.9
576.0
58.9
64.4

739.4
157.5
604.7
60.3
67.2

1,249.2

1,342.2

1,410.4

1,479.5

1,550.8

1,629.0

Total receipts without health care reform as
a percent of GDP

18.8%

19.1%

19.0%

18.9%

18.7%

18.6%

Memorandum:
Effect of health care reform proposal on receipts

-0.1

11.6

16.9

25.6

36.2

44.0

1,249.1

1,353.8

1,427.3

1,505.1

1,586.9

1,672.9

18.8%

19.3%

19.2%

19.2%

19.2%

19.1%

Individual income taxes
Corporation income taxes
Social insurance taxes and contributions
Excise taxes
Other receipts
Total receipts

Total receipts with health care reform
Total receipts with health care reform as a
percent of GDP




32

THE BUDGET FOR FISCAL YEAR 1995

$176.1 billion, from the 1994 level of $234.8
billion. If this projection is realized, it will
be the first sub-$200 billion deficit since
1989.

jected deficits that were higher by $47 billion
per year. In this budget, CBO projects deficits
that are lower by an average of $3 billion
per year.

More reflective of the impact of the deficit,
however, is its size relative to the economy.
The 1995 deficit is a projected 2.5 percent
of the GDP, down from an estimated 3.5
percent for 1994, and an actual 4.9 percent
for 1992. At 2.5 percent of GDP, the 1995
deficit is the lowest since 1979. Thus end
the economic policies of the 1980s.

These figures reflect the major impacts
of the President's economic plan—both the
first installment enacted last year, and the
agenda remaining. The economic plan thus
far has contained the deficit, and thereby
restored the economy to healthy growth—
with rising investment, productivity, and employment. The next stage of the economic
plan—centered around health reform, continued budget discipline, and the President's
investment program—will put the deficit on
a continuing downward path, provide health
security to all Americans, and remove further
barriers to competitiveness and economic
growth. The President is committed to this
program of continued deficit reduction and
higher investment to achieve long-term economic growth and prosperity for all Americans.

Without health reform, the deficit is projected to fall to 2.3 percent of GDP for
the remainder of the decade. With health
reform, the deficit as a percentage of GDP
fluctuates in a narrow range as costs and
savings from the plan phase in; but by
1999, the deficit falls to 2.1 percent of
GDP.
This much-improved deficit outlook is confirmed by the projections of the Congressional
Budget Office (CBO). On average over the
history of five-year budget projections under
the two preceding Administrations, CBO pro-




This budget begins the second stage of
President Clinton's program of economic renewal.

INTRODUCTION: AN OVERVIEW OF THE 1995 BUDGET

33

THE PRESIDENTS 1995 BUDGET: THE "NEW DIRECTION" INDEX
Economic Growth
• Unemployment rate, December 1993
• Unemployment rate, December 1992
• Number of private sector jobs created, February 1993-December 1993
• Number of private sector jobs created, January 1989-January 1993
• Mortgage rate, January 1994
• Mortgage rate, January 1993
• Number of Americans who saved money by refinancing their mortgages, 1993
• Rate of business investment growth, first three quarters 1993
• Rate of business investment growth, 4th quarter 1988-4th quarter 1992

6.4%
7.3%
1.6 million
1.0 million
7.09%
8.22%
5.4 million
16.5%
2.2%

Fiscal Responsibility
• Number of programs terminated in 1995 budget proposal
• Number of programs cut below last year's dollar level
• Annual spending growth (nominal), 1994 to 1999
• Annual spending growth (nominal), 1981 to 1993
• Annual spending growth (real), 1994 to 1999
• Annual spending growth (real), 1981 to 1993
• Federal spending as share of GDP, average 1994 to 1999
• Federal spending as share of GDP, average 1981 to 1993
• Deficit as share of GDP, 1997
• Deficit as share of GDP, 1992
• Annual discretionary spending growth (nominal), 1994 to 1999
• Annual discretionary spending growth (nominal), 1981 to 1993
• Annual discretionary spending growth (real), 1994 to 1999
• Annual discretionary spending growth (real), 1981 to 1993
• Annual non-defense domestic discretionary spending growth (nominal), 1994 to 1999
• Annual non-defense domestic discretionary spending growth (nominal), 1981 to 1993
• Annual non-defense domestic discretionary spending growth (real), 1994 to 1999
• Annual non-defense domestic discretionary spending growth (real), 1981 to 1993
• Change in public debt as share of GDP, 1994 to 1999
• Change in public debt as share of GDP, 1981 to 1993
• Number of years of projected consecutive deficit declines, 1993 to 1995
• Last President with 3 years of consecutive deficit declines
• Number of Federal employees added, 1981 to 1993
• Number of Federal employees cut, 1993 to 1995
• Number of Federal employees cut, 1993 to 1999
• Number of new police officers on the street by 1998
• Projected number of Federal employees, 1999
• Last year Federal employment was below 2 million

More than 115
More than 300
4.6%
6.3%
1.4%
2.2%
21.6%
23.1%
2.4%
4.9%
-0.1%
4.8%
-2.9%
1.0%
1.7%
4.4%
-1.2%
0.6%
52.3% to 50.7%
26.5% to 51.6%
3
Truman
44,000
-118,000
-252,000
100,000
1.9 million
1966

Investing in People
• Increase in Head Start funding by 1995 (over 1993)
45%
• Additional children enrolled in Head Start by 1995 (over 1993)
126,000
• Percent of students able to make income-contingent college loan repayments, 1993
Less than 1%
• Percent of students able to make income-contingent college loan repayments, 1995
100%
• Typical student's savings from lower fees and interest under phased-in loan reforms
$1,250
• Number of young Americans providing community service for partial loan repayment, 1995 ... 33,000
• Increase in Chapter 1 education dollars going to schools in poorest districts by 1998
40%
• Number of working families getting tax cut to reward work, 1994
15 million
350,000
• Number of dislocated workers receiving help finding a new job, 1993
• Number of dislocated workers receiving help under Workforce Security program
1.3 million
• Number of small businesses getting SBA-backed loan guarantees in 1995
35,000
• Average number of small businesses getting such loans yearly in the late 1980s
15,000
Keeping America Strong
• Average defense budget, Eisenhower Administration (1995 dollars)
• Average defense budget, Ford Administration (1995 dollars)
• Average defense budget, Nixon Administration (1995 dollars)
• Proposed defense budget, 1995
Note: Projected fiscal estimates include health care reform.




$243.3 billion
$249.8 billion
$254.8 billion
$252.2 billion




THE RECORD THUS FAR




35




THE RECORD THUS FAR
This Administration inherited an economy
faced with past-due bills, both literally and
figuratively:
• A rising budget deficit, piling debt upon
debt, with interest costs mounting faster
than the economy's ability to pay them;
• Business and household debt burdens, aggravated by high interest rates, that discouraged investment in equipment, homes,
autos, and other durable goods;
• The largest international debt and trade
deficit in the world;
• Stubbornly high unemployment, and stagnant employment growth;
• Neglect of public investment in physical
infrastructure, in scientific and technical
knowledge, and in our people themselves—
necessary tools for the private sector to
lead the way to growth, productivity, job
creation, and prosperity; and
• A corrosive unfairness in the Nation's tax
laws, weakening the incentive of many
typical American families, and contributing to mounting Federal budget deficits.
The ill effect of these failures of economic
policy was feeding upon itself. A rising national debt eroded public confidence, which
bridled economic activity, which shrank the
tax base and raised the debt. The growing
budget deficit inflamed financial-market fears
arid raised interest rates, which inhibited
investment and job creation, which slowed
the economy and raised the deficit.
The challenge accepted by the President
in the election of 1992 was to break this
destructive cycle.




In its first year, this Administration proposed, and the Congress passed, the largest
deficit reduction package in the Nation's
history. In response to that package, longterm interest rates have declined by about
a full percentage point; business investment
and purchases of housing, autos and other
consumer durable goods have strengthened;
private-sector employment has grown by 50
percent more than in the preceding four
years combined; and confidence in the economy
has returned.
In short, the President challenged the Nation to discipline itself and get back on
the right track. The results are clear. The
key now is to stay on that track; and
the 1995 budget does so. It continues to
implement the $504.8 billion of deficit reduction enacted in last year's budget reconciliation
bill. Further spending cuts and freezes in
hundreds of programs continue a discretionary
spending freeze. Low-priority programs are
cut to finance needed investments in jobs,
health, law enforcement, education, infrastructure, science and technology. And the President's health care reform will achieve additional deficit reduction, while providing health
security to all Americans.
When this Administration took office, the
budget deficit for 1995 was projected at
$302 billion. This budget expects a 1995
deficit of $176 billion—$126 billion less.
This budget reports on the substantial
progress thus far, and presents our continuing
program for National economic renewal.

37







Where We Started




1. WHERE WE STARTED
Rising Budget Deficits.—For years, the
Federal Government has spent more than it
collected in taxes, and borrowed the difference—"borrow and spend" economics. The
rise of the deficit was especially pronounced
during the 1980s: from 2.8 percent of the Nation's annual production—its gross domestic
product (GDP)—in 1980 to 4.9 percent in 1992.
(See Chart 1-1.) (Comparisons in this section
end with 1992, the last year of the previous
Administration.) While the deficit has been
swollen by the 1990-91 recession and the subsequent weak recovery, it remains high even
after adjustment for cyclical factors. In 1992,

this "structural" budget deficit was 3.3 percent
of potential ("full-employment") GDP, compared with 1.7 percent in 1980.
Mounting budget deficits escalated the Federal debt and drove real interest rates well
above historical norms. (See Chart 1-2.) The
Federal Government's annual credit needs
so drained the savings of the private sector
of the economy that the Nation was forced
to rely on foreign capital to finance its
own investment.

Chart 1-1. FEDERAL BUDGET DEFICIT
(percent of GDP)
PERCENT

nt 1 R P 9 . U C A 1A
G A 8S D H PV




01/26/5*4

41

42

THE BUDGET FOR FISCAL YEAR 1995

Chart 1-2. FEDERAL DEBT
(percent of GDP)
PERCENT

• Federal debt held by the public rose from
26.8 percent of the GDP at the end of
1980 to 50.5 percent at the end of 1992.
The Nation could not continue indefinitely
to pile up debt more rapidly than its capacity to service that debt would grow; the
economic and budget path of the 1980s
was literally unsustainable.
• This growing debt, in turn, increased the
debt service burden in the Federal budget.
Net interest payments on the debt reached
$199 billion in 1992, absorbing 14.4 percent of total Federal outlays, and 3.4 percent of the GDP—sharply higher than the
$53 billion, 8.9 percent of Federal spending and 2.0 percent of the GDP in 1980.
(See Chart 1-3.)
• The excess of the interest rate over the
rate of inflation—the "real" interest rate—




on 10-year Treasury notes averaged 4.3
percent during 1980-1992. This compares
with 0.8 percent in the 1970s and 2.6 percent in the 1960s.
• Real interest rates might have been even
higher and domestic investment even less
had it not been for a massive inflow of
foreign capital; other nations proved surprisingly willing to lend us funds to finance our burgeoning deficit. The United
States, as it were, depended upon the
kindness of strangers. However, that kindness bore a price. While foreigners extended us credit, we bought their goods,
and thereby expand their markets here in
the United States. The result was a widening trade deficit. Our foreign borrowing
and trade deficit turned the United States
into the world's leading debtor country.

43

1. WHERE WE STARTED

Chart 1-3. NET INTEREST ON THE FEDERAL DEBT
(percent of GDP)

rrf. 1 R P N B D H PG A B L U C A 1C

• Our current account balance shifted from
a small surplus of $2 billion in 1980 to
a peak deficit of $167 billion (3.7 percent
of GDP) in 1987. The current account deficit narrowed in the subsequent five years,
but still stood at 1.1 percent of GDP in
1992.
• Our net international investment position
(the difference between U.S.-owned assets
abroad and foreign-owned assets in the
United States) shifted from a surplus of
$393 billion in 1980 to a deficit of $521
billion in 1992—a swing of almost $1 trillion of wealth. U.S. citizens will pay interest to foreign creditors for decades because
of the borrowing binge of the 1980s.




01/26/94

Inadequate Capital Formation and Subnormal Economic Growth.—The ReaganBush Administration's economic program of
the early 1980s was intended to stimulate saving and investment and spur economic growth.
Key elements of the program were reductions
in personal income tax rates and accelerated
depreciation allowances for business investment in plant and equipment. Despite a significant recovery in output and employment
in 1983-84, achievements fell far short of expectations; in fact, this program sowed the
seeds of the economic decline of the end of
the decade.

44

THE BUDGET FOR FISCAL YEAR 1995

Chart 1-4. NET NATIONAL SAVING
(percent of net national product)

PERCENT

rtf. 1 R P 9B D H PG A HS U C A 1D
.

Slow Growth: On average, over the 12
years of the last two Administrations, growth
was low by historical standards. Real GDP
grew at an average annual rate of only
2.3 percent from 1980 to 1992, lower than
the 2.8 percent rate of the 1970s and well
below the 3.8 percent rate of the 1960s.
The pace of growth was particularly slow
during the four years of the Bush Administration, when real GDP grew a mere 1.4 percent
a year.
Low Saving: Less of the national output
was devoted to domestic saving than in
previous decades. The net national saving
rate, which for two decades hovered around
eight percent, dropped sharply in the 1980s
and remained depressed through 1992. (See




01/26/94

Chart 1-4.) The decline in saving is partly
due to the large increase in the Federal
budget deficit, which began in 1981-82. It
was also partly due to a decline in private
saving—which coincided, ironically, with generous tax cuts intended to stimulate saving.
(See Chart 1-5.)
• Through most of the 1980s, total nonfinancial domestic debt surged at doubledigit rates, much faster than the growth
of the economy. The ratio of debt to GDP
rose from 145 percent in 1980 to 195 percent in 1992, an increase of more than
one-third. The ratio of Federal debt to
GDP almost doubled (up 88 percent); the
private debt-to-GDP ratio rose only 22 percent.

45

1. WHERE WE STARTED

Chart 1-5. NET PRIVATE SAVING

rrt. 1 R P 9 . U C A IE
G A H 5 P H PB

Low Investment: Inadequate national saving
contributed to a subnormal investment performance. Even with the support of heavy
foreign borrowing, the United States devoted
a smaller proportion of its gross domestic
product to fixed private investment in
1980-1992 than other industrialized countries.
(See Chart 1-6.)
The investment record of the United States
in the 1980s was poor not only when compared
with those of its major trading partners,
but also relative to the norm of our experience.
This was especially true for investment measured on a net basis—after adjustment for




01/26/94

the depreciation of worn out or obsolescent
plant and equipment. (See Chart 1-7.)
• Net private fixed investment averaged 5.4
percent of net national product during the
12-year period ending in 1992—well below
the average rate of 8.0 percent from 1959
to 1979.
At the same time, Government was also
underinvesting in public infrastructure, education, training, research and development
(R&D), and other growth-promoting investment. The best measures of the size and
effectiveness of public investment demonstrate
this "investment deficit/'

46

THE BUDGET FOR FISCAL YEAR 1995

Chart 1-6. PRIVATE FIXED INVESTMENT, 1980-1992
(percent of GDP)

35

JAPAN

30
25 -

FRANCE

WEST
GERMANY

ITALY
UNITED
KINGDOM

UNITED
STATES

20-

15 10-

5 0

01/26/94

ntlG«ABIHI0DC8AFl-y

Chart 1-7. NET PRIVATE FIXED INVESTMENT
(percent of net national product)

PERCENT

io-

8 -

6 -

4 -

2

-

0
nt. l K rWl D H WG
G Aa - C A U




1959-79

1980-92
01/26/94

1. WHERE WE STARTED

47

A prime example is the Nation's educational
performance.

by structural imbalances and speculative behavior within the business sector.

• Fewer than two in five students in Grade
12 can move beyond surface understanding of a text, make inferences or draw conclusions from what they have read. These
skills are essential for success today and
into the next century.

The over-generous tax provisions for business depreciation in the early 1980s made
otherwise unprofitable investments in commercial buildings attractive; the tax savings actually outweighed the losses in the marketplace.
With apparently risk-free profits to be reaped
from the tax law, financial institutions were
more than willing to lend funds for construction. The result was a speculative building
boom that wasted the economy's scarce resources on commercial buildings that the
marketplace would not support. By the mid1980s, office vacancy rates in major cities
approached 20 percent, and real estate values
plummeted. (See Chart 1-9.)

• Fewer than one in five students in Grade
12 demonstrate an understanding of algebraic, statistical, geometric and spatial
reasoning. These are kinds of mathematical skills needed by our work force to compete successfully in the global economy.
The capabilities of adults further exemplify
this poor educational performance. According
to a recent study funded by the National
Center for Education Statistics:
• Almost half of Americans aged 16 years
and older have verbal and quantitative
skills that are inadequate for tasks required in the competitive work place, such
as use of written information, tables,
charts and maps, and performing arithmetic computations using numbers found
in printed materials.
Our Nation's investment in research and
development (R&D) was also weak. In 1992,
Federal Government R&D spending adjusted
for inflation was below that of 1986. Moreover,
most of that R&D was for defense purposes.
As a result, the gap between our Nation's
nondefense R&D effort and that of our major
trading partners widened. By 1991, the United
States devoted 1.8 percent of GDP to nondefense R&D, well below Germany's 2.7 percent and Japan's 3.0 percent.
Government's investment in physical capital
has also proved inadequate to the increasingly
competitive pressures of the world economy:
• Congestion on urban interstate highways—measured by peak-hour vehiclemiles traveled at more than 80 percent
of the capacity of the road—rose to an alltime high of 70 percent in 1991. In 1980,
only 52 percent of travel was congested
by the same definition. (See Chart 1-8.)
Structural Imbalances, Speculative Bubble.—The poor saving and investment performance of the past decade was aggravated




The resulting defaults contributed to loan
losses and bankruptcies of banks as well
as savings and loan institutions. For banks,
the defaults on real estate and construction
lending added to others, notably loans to
less-developed countries—doubling loan loss
rates over the decade. Furthermore, high
interest rates squeezed profit margins. Although the financial condition of some institutions improved, delay in closing many insolvent thrifts permitted them to gamble for
resurrection,
increasing
speculation—and
losses, for the Federal insurance funds and
(ultimately) the taxpayers. As a result, over
1,100 thrifts and 1,419 banks failed between
1982 and 1992. (See Chart 1-10.)
The high interest rates of the 1980s also
encouraged investors to look for speculative
short-term profits rather than more solid
long-term rates of return. This speculative
drive was manifested in the leveraged-buyout
mania, in which firms took on heavy loads
of debt, financed with sub-investment-grade
"junk" bonds, to buy other firms. There
was less appeal to investing in new plant
and equipment that would earn uncertain
profits in the future than there was to
buying some other firm's existing plant and
equipment to earn apparently certain profits
today.
• Between 1984 and 1990, new issues of corporate bonds averaged $80 billion a year.
During that period, there was a drawdown

48

THE BUDGET FOR FISCAL YEAR 1995

Chart 1-8. TRAVEL CONGESTION ON URBAN INTERSTATES
PERCENT CONGESTED

NOTE: Congestion measured as the percentage of vehicle-miles during peak hours for which volume is greater than 80 percent of capacity.
rrf. l R T M U C A lH
G A H J P H P-

01/26/94

Chart 1-9. COMMERCIAL OFFICE VACANCY RATE
(in downtown areas)
PERCENT

nl K P M B D H PtG A B L U C A lI




01/26/94

49

1. WHERE WE STARTED

Chart 1-10. BANK AND THRIFT FAILURES
(total assets)
DOLLARS IN BILLIONS

150-

1 0 0 -

50-

0

1988

1989

1990

1991

1992

1993
01/19/94

of corporate equity averaging $91 billion
a year. (See Chart 1-11.)

come in the 1970s to 18.0 percent in 1989.
(See Chart 1-13.)

It is acceptable for a firm to borrow
to finance investment—so long as the firm
does not borrow so much that it cannot
service its debt in bad times. In the mentality
of the 1980s, however, bad times were inconceivable, and so firms borrowed excessively.
When the policy errors of the 1980s brought
on the inevitable crunch at the end of
the decade, many large corporations were
left with debt-service obligations they could
not meet. The results were bankruptcies,
plant closings, and lost jobs.

Health Care Costs.—In 1960, health care
expenditures consumed five percent of GDP.
By 1980, that share had reached nine percent.
From 1980 to 1992, health expenditures almost doubled in constant dollars, and reached
14 percent of GDP.

• Net interest payments as a share of nonfinancial corporate cash flow rose from an
average of about 19 percent in the 1970s
to a peak of 27 percent in 1989. (See Chart
1-12.)
• Households took on more debt and were
similarly cash-squeezed; total debt service
of households increased from an average
of 15.4 percent of disposable personal in-




Rising health expenditures have squeezed
both public and private budgets. Currently,
about 45 percent of health expenditures are
financed publicly; Medicare and Medicaid
alone account for about 32 percent. The
ever-rising share of public health expenditures
contributed to the surge in the federal deficit
in the 1980s. In fact, since 1980, just three
budget categories—Medicare, Medicaid, and
interest on the National debt—more than
account for all of the growth of Federal
spending as a percentage of the GDP. Because
the interest on the debt cannot be controlled
directly—only indirectly by reducing other
spending or raising taxes—health care spend-

50

THE BUDGET FOR FISCAL YEAR 1995

Chart 1-11. NEW ISSUES OF CORPORATE
STOCKS AND BONDS

DOLLARS IN BILLIONS

wt l R R M U C A tH
G A H J P H P-

01/19/94

Chart 1-12. INTEREST BURDEN OF NONFINANCIAL
CORPORATE BUSINESS
(percent of cash flow)

28 -

24 20 -

16 -

1960-1979 AVERAGE !

12 -

Su

0
nr. 1GRAPB5S.BUDCHAP1-L




1985

1986

1987

1988

1989

1990

1991

1992

01/26/94

51

1. WHERE WE STARTED

Chart 1-13. HOUSEHOLD DEBT PAYMENTS
(percent of disposable personal income)

20-

n

18 -

16 -

I960 -1979 AVERAGE

14 -

12 -

¥
0

1985

1986

1987

1988

1989

1990

1991

1992
01/26/94

ing is clearly the most important driving
force behind the deficit.
In the private sector, much of health care
is paid for through insurance, although 38
million Americans lack health insurance coverage. For those who are covered, rising
insurance premiums must be absorbed in
employee compensation costs—forcing employers to cut take-home pay for employees.
If health insurance premiums had remained
fixed at their 1975 share of total compensation,
workers today could have an extra $1,000
a year in cash income.
These trends are likely to continue unless
there is systemic health care reform, as
proposed by this Administration. (For further
details about the health care issue and the
President's proposal, see Chapter 4.)
Rising Income Inequality.—Not only was
household income growth weak on average
during the Reagan-Bush years, but what
growth there was occurred almost entirely at
the upper end of the income distribution.




While the incomes of the top 20 percent of
households rose 15 percent after adjustment
for inflation between 1980 and 1992, the real
incomes of the lowest 40 percent of households
actually shrank during these dozen years.
These trends made the income distribution
even more unequal. (See Chart 1-14.)
• The share of total money income received
by the upper 20 percent of households rose
from 44.1 percent in 1980 to 46.9 percent
in 1992, while the share of those at the
lowest 20 percent declined from 4.2 percent to 3.8 percent.
• The income distribution shifted in favor
of the most well-off even counting government cash and noncash transfers as part
of income, and subtracting taxes. In part
driven by President Reagan's 1981 tax bill,
the share of after-tax, after-transfer income of the upper 20 percent of households rose from 40.8 percent to 43.3 percent between 1980 and 1992, while the
share of the lowest 20 percent declined
from 5.4 percent to 4.9 percent.

52

THE BUDGET FOR FISCAL YEAR 1995

Chart 1-14. REAL INCOME BY QUINTILE
(percent change, 1980 -1992)
PERCENT

2 0 -

15 10
5 0

-5 -

1

Lowest

Second

Middle

NOTE: Before-tax money income of households, excluding capital gains.
wtlGRAfroSJHJDCHAPl-N

The increase in income inequality can be
traced to a more skewed distribution of
wages, which account for the lion's share
of total income. Wage and employment opportunities shifted in favor of more educated
and skilled workers in the 1980s. For example,
male college graduates earned 35 percent
more than those with only high school diplomas in 1980, but 70 percent more by 1992.
Workers with more years of schooling are
paid increasingly higher incomes because of
the growing need for skilled labor. No one
can begrudge the rewards of those who
school themselves and work hard; but the
bonds of our community are strained when
other deserving families actually lose ground—
and public policies do not cushion, or even
aggravate, their loss.




Fourth

Highest
01/19/94

The income distribution became less equal,
and family incomes stagnated, in large part
because wage growth was poor. Wage growth
slowed in the early 1970s, and the economic
policies of the 1980s did not reverse that
trend. Real total compensation per worker
grew on average by only 0.6 percent per
year from 1980 through 1992, less than
half the 1.5 percent annual gain from 1960
through 1980.
The slow growth of wages was at least
in part determined by the sluggish investment
of the 1980s. Workers equipped with more
and better capital are more productive; but
on average, workers were not well served
by business investment in the 1980s. Our
society as a whole suffers when standards
of living are so constrained.




What We Have Accomplished:
The Clinton Economic Plan




2. WHAT WE HAVE ACCOMPLISHED: THE
CLINTON ECONOMIC PLAN
The Clinton Administration rejected the
legacy of the past and moved toward a
new vision of the future. Its economic agenda
called for shrinking the budget deficit, thus
reducing Federal borrowing to free resources
for private investment; increasing public investment in skills, technology and infrastructure to enhance productivity, spur long-term
economic growth, and prepare current and
future workers for higher-wage jobs and greater opportunities; reversing the trend toward
rising income inequality; and expanding world
trade and opening foreign markets for U.S.
exports.
Genuine Deficit Reduction for Private
Investment.—On August 10, 1993, 202 days
after taking office, the President signed into
law the Omnibus Budget Reconciliation Act of
1993 (OBRA-93). The Act reduces budget deficits in 1994 through 1998 by a total of $504.8
billion through a balance of $254.7 billion from
net cuts in Federal spending and $250.1 billion
from net revenue increases.
The spending cuts were aimed at lowpriority, outdated programs in virtually every
part of the budget, achieving savings to
finance both deficit reduction and cost-effective
public investment. Savings were achieved
through specific cuts in discretionary programs; reform of entitlements (including Medicare and Medicaid); and extension and improvement of the process disciplines in the
1990 Budget Enforcement Act (BEA), including
discretionary spending caps, and "pay-as-yougo" rules for taxes and entitlement policies.
Entitlements.—OBRA-93 contained $71 billion in five-year net entitlement savings, which
included:
• $49.1 billion from Medicare, largely from
reducing payments to hospitals, physicians, and other providers.
• $7.2 billion from Medicaid, mainly from
repealing the mandatory provision of nonmedical personal care services and imposing needed controls on supplemental pay


ments to hospitals that serve large numbers of poor or uninsured patients.
• $11.5 billion from Federal retirement programs, primarily from delaying retirees'
cost-of-living adjustments, eliminating the
lump-sum payment option, and restraining
retirement and health benefits.
• $1.7 billion from agriculture programs.
• $3.5 billion from veterans programs.
• $3.6 billion from replacing the costly guaranteed student loan program with a direct
loan program.
Discretionary.—OBRA-93 extended the
BEA through 1998, which otherwise would
have expired after 1995. With its discretionary
caps, OBRA-93 imposes a real, enforceable
five-year hard freeze on discretionary outlays
that produces $107.7 billion in savings, and
reduces spending in inflation-adjusted terms
over the five years by about 12 percent.
These mandated savings for 1994 were
achieved through the appropriations process.
Discretionary outlays were estimated in the
OMB Final Sequestration Report at $542.6
billion—1.4 percent below the 1993 level
of $550.1 billion. Hundreds of budget accounts
were cut without any allowance for inflation.
The 1995 budget is limited to $541.7 billion—
another 0.4 percent year-over-year cut, without
reference to inflation.
Entitlement Targets arid Deficit Reduction Fund.—The President implemented other
budget enforcement measures to restrain Federal spending. Last August, he signed an Executive Order (No. 12857) setting a separate entitlement budget, with numerical targets for
1994 through 1997. The President must specifically inform the Congress if spending exceeds or is projected to exceed these targets,
and propose whether and how to address the
overage. This Executive Order took the place
of an identical legislative proposal, which
passed the House but was procedurally blocked
by a minority in the Senate.
55

56
A second Executive Order (No. 12858) established a Deficit Reduction Fund, which will
help ensure that the deficit reduction intended
under OBRA-93 becomes a reality. This Fund
contains the savings achieved year by year
under OBRA-93, and may be used only
to retire maturing public debt instruments
owned by foreign governments.
Tax Fairness.—On the revenue side, the
President's plan reversed past policy by requiring those most able to pay to make the greatest contribution to deficit reduction. OBRA-93's
tax increases fall almost exclusively on higherincome taxpayers. The major provisions include (revenue figures over five years):
• $124 billion from a new 36-percent marginal tax bracket on taxable income exceeding $140,000 for joint returns and
$115,000 for single taxpayers (generally
equivalent to almost $200,000 of gross income for joint returns, and $150,000 for
single persons); a 10-percent surtax on
taxable income over $250,000; an increase
in the alternative minimum tax; and permanent extension of the limitation on
itemized deductions and the phaseout of
personal exemptions.
• $29 billion from repeal of the $135,000
limit on income subject to the Medicare
wage tax.
• $16 billion from reducing the deductible
portion of business meals and entertainment from 80 percent to 50 percent.
• $14 billion from increasing the top marginal corporate income tax rate from 34
percent to 35 percent.
• $32 billion from extending the 1990 tax
increase of 2.5 cents per gallon on transportation fuels and adding a permanent
increase of 4.3 cents per gallon on motor
fuels.
• $18 billion from increasing from 50 percent to 85 percent the taxable portion of
Social Security benefits for the 13 percent
of beneficiaries with the highest total incomes.
Tax Incentives.—In addition to these and
some smaller tax increases, OBRA-93 also contained a number of tax incentives.




THE BUDGET FOR FISCAL YEAR 1995

• Expansion of the earned income tax credit
(EITC) is one of the most important antipoverty actions in recent history; when
fully phased in, the increased EITC plus
food stamps will lift from poverty families
with children where at least one parent
works full time. The EITC expansion is
also a major step toward welfare reform—
by making work pay.
• Small businesses received important tax
incentives. The expensing allowance for investment, especially important for small
business, was substantially increased. A
targeted capital gains provision for new
small businesses was enacted. The deduction for health insurance premiums of the
self-employed was extended.
• Extension of the credit for research and
experimentation encourages technological
advancement. Alternative minimum tax
relief was provided for business investment depreciation.
• Empowerment Zones were enacted for the
first time, to help in the renewal of targeted urban and rural areas. The low-income housing credit, mortgage revenue
bonds, and small-issue industrial development bonds were made permanent.
Deficits Decline.—By 1998, the last year
of the President's program, the budget deficit
was expected to be $145.8 billion below what
it otherwise would have been—a cut of about
1.8 percent of projected 1998 GDP.
Public Investment: Human, Physical,
Technological.—The President's economic
plan contained more than just deficit reduction. It also called for increased public investment in people, jobs and infrastructure to promote faster growth of productivity and living
standards—financed by budget savings above
and beyond the mandated deficit reduction.
• A world of rapidly changing technology,
where workers change jobs several times
in a lifetime, calls for skills and adaptability. The President proposed a program
of lifelong learning through better schools
and job training to meet these challenges.
This included expansion of Head Start (including child care feeding and Medicaid),
youth apprenticeship for non-college-bound
secondary school students and national

2. WHAT WE HAVE ACCOMPLISHED: THE CLINTON ECONOMIC PLAN

service to help others to afford college, a
dislocated worker program, and other initiatives.
• Rebuilding America requires public investment in transportation, the environment,
community development and defense conversion. Initiatives were proposed to:
—Expand the Federal-aid highway program to the level contained in the Intermodal Surface Transportation Efficiency
Act (ISTEA); accelerate "smart cars/
smart highways" programs to improve
traffic control and provide congestion information; increase funding for mass
transit capital improvements; and modernize air traffic control.
—Develop advanced systems to recycle
materials, treat toxic waste, and clean
up air and water pollution.
—Explore new science and technology to
create high-wage jobs and push America
toward the cutting edge of manufacturing; apply defense technology to business; and promote cooperative efforts by
business, Government and universities
to advance research.
Public Investment.—$11.5 billion—69 percent of the budget authority requested by the
President—was reallocated from defense and
low-priority non-defense programs to public investment in 1994 legislative action.
Infrastructure: The 1994 budget included a
$1.0 billion increase for mass transportation
grants, other transportation programs, and
Corps of Engineers water projects. Congress
provided $773 million, or 77 percent of the
requested increase. In addition, the Administration requested an increase of $2.6 billion
in the obligation level for construction and repair of interstate highways and bridges under
ISTEA. Congress provided $1.8 billion, or 69
percent of that amount. This is a 15 percent
increase over 1993.
Health and Nutrition: The Administration
requested a $2.4 billion increase for public
health, nutrition, and food safety programs,
with a particular focus on AIDS, women's
health, veterans' health care, and the Women,
Infants and Children feeding program (WIC).
Congress provided $1.8 billion, or 75 percent
of the requested increase. This includes $232




57

million of the $310 million requested increase
for the Ryan White Act and $273 million of
the $350 million requested investment increase for the WIC program. The Ryan White
funding represents an increase of 66 percent
over the 1993 level. The WIC funding is a
23 percent increase from 1993.
Head Start: The 1994 budget included a $1.3
billion investment increase for Head Start.
Congress approved 36 percent of the proposed
increase, nearly a 20 percent increase over the
1993 enacted level.
Education and National Service: The 1994
budget included a $1.4 billion increase for education programs. Congress appropriated $659
million, or 47 percent of the requested increase. This includes funds for three new programs: (a) $105 million for Goals 2000 education reforms; (b) $370 million for national
service; and (c) $50 million for the Education
Department share of the school-to-work program.
Employment and Training: The Administration requested a $2.9 billion increase for employment and training programs. Congress appropriated $962 million, or 34 percent of the
requested increase. This included a $587 million increase for dislocated worker assistance,
which was a 116 percent increase—more than
doubling—for that program from 1993. Also,
the Labor Department received $50 million for
its share of the school-to-work program.
Science, Technology and Energy: The 1994
budget included $1.3 billion in new funding
for NOAA weather technology, National Institute of Standards and Technology (NIST) programs, information highways, energy research,
NASA research and development, the National
Science Foundation, the Federal Coordinating
Council on Science, Engineering and Technology (FCCSET), and related programs. Congress provided $1.1 billion of new funding, or
82 percent of the requested increase. This included $26 million for the new information
highways program. Also, the increase for
NIST—to fund such activities as high-performance computing—represented a 36 percent increase over the 1993 level.
Crime: The President requested a $390 million increase for the Justice Department for
salaries and expenses for the FBI, INS, Fed-

58
eral prisons, and the Community Relations
Service; prisoner support; and Federal/State
partnerships. Congress appropriated $164 million, or 42 percent of the requested increase.
This includes $25 million out of $100 million
requested to hire police through Federal/State
partnerships.
Housing and Community Development: The
1994 budget included a $1.8 billion increase
for a number of low-income and other housing
programs, Community Development Block
Grants, and Community Development Financial Institutions. Congress exceeded the President's request, appropriating $2.1 billion in
new funds for these programs.
Environmental Protection and Enhancement:
The 1994 budget included $2.0 billion in investment funding for the Forest Service, the
Interior Department, the Energy Department
and the Environmental Protection Agency for
infrastructure projects to implement the Clean
Water and Safe Drinking Water Acts; infrastructure improvements in national forests and
parks; and energy conservation programs. Congress approved $1.9 billion, or 97 percent of
the request.
Rural Development: The President requested
$560 million in new funding for rural development, housing and wastewater treatment (supporting $1.6 billion in new loans and loan
guarantees). Congress appropriated $374 million (supporting $1.2 billion in loans and loan
guarantees), or 67 percent of the requested increase.

THE BUDGET FOR FISCAL YEAR 1995

• At the top of the income distribution, families with $200,000 or more in annual income (1.3 percent of all families) will pay
on average about $23,500 in additional
taxes per family, according to CBO estimates. In total, they will pay 80 percent
of the taxes raised by OBRA-93 ($33 billion out of $41 billion). The effective tax
rate for the average family in this upper
income bracket is likely to increase from
about 28 percent to almost 33 percent.
• Families with $100,000 to $200,000 in income (5.2 percent of all families) will pay
on average about $650 more in taxes, raising their effective tax rates by one-half
of one percentage point. In aggregate, they
will pay about $3.6 billion more in taxes.
Thus, families with incomes over $100,000
will shoulder about 90 percent of the taxes
raised by OBRA-93.
• Families with $30,000 to $100,000 in annual income will pay only slightly more
in taxes, ranging on average from $50 for
families at the low end of this range, to
$312 for those nearer the top. The effective
tax rates for families in this range will
be increased by only a few tenths of a
percentage point.
• Families with incomes below $30,000 will
have their tax payments lowered on average $41 to $86 per year for a total decrease of $3.3 billion—due largely to the
historic increase in the earned income tax
credit.

Fairness in OBRA-93.—OBRA-93 achieved
the Administration's objective of placing the
heaviest tax burden on those most able to
carry it, while lightening the load on those
least able to pay. As a result, the tax system
is more progressive than at any time since
1977, according to the Congressional Budget
Office (CBO).

The effective tax rates for families with
incomes below $20,000 will be lowered by
about one-half to one percentage point. In
other words, those at the low end of the
income distribution will be better off because of OBRA-93. (See Chart 2-1.) Lowand middle-income families are still protected by inflation indexing of the income
tax rate brackets.

OBRA-93 provisions affecting taxes are outlined above. The distributional impact of
these and other provisions is shown in Table
2-1. Whether measured by the change in
average taxes, the share of total new taxes
raised, or the change in effective tax rates,
the message is the same: The tax system
has been made fairer.

Opening Foreign Markets.—The President's plan also called for free and fair trade,
to maintain our place in the increasingly integrated international economy—to be achieved
through ratification of the North American
Free Trade Agreement (NAFTA), after completion of key side agreements, and negotiation
of the Uruguay Round of trade liberalizations




59

2. WHAT WE HAVE ACCOMPLISHED: THE CLINTON ECONOMIC PLAN

Table 2-1.

DISTRIBUTIONAL EFFECTS OF OBRA-93
Effective Tax Rate

Number of
Families
(millions)

Average
Change in
Taxes
(dollars)

Total
Change
(billions)

Before
OBRA-93

After
OBRA-93

15.1
18.8
16.9
13.6
10.7
16.8
7.3
5.6
1.4
108.1

Family Income (dollars)

-68
-86
-41
50
105
192
312
649
23,521
382

-1.0
-1.6
-0.7
0.7
1.1
3.2
2.3
3.6
32.9
41.3

7.5
11.5
16.9
19.8
21.6
23.4
25.2
26.1
27.9
22.8

6.4
10.9
16.8
19.9
21.8
23.7
25.5
26.6
32.7
23.7

$1-$10,000
$10,000-$20,000
$20,000-$30,000
$30,000-$40,000
$40,000-$50,000
$50,000-$75,000
$75,000-$100,000
$100,000-$200,000

$200,000 or more
All incomes

Source: Congressional Budget Office. Family income is before-tax money income including realized capital gains
and cash transfers. It also includes an allocation of the employer share of Social Security and federal unemployment insurance payroll taxes and corporate income tax. Thus, family income includes all federal income, social
insurance and corporate income taxes. Effective tax rates include these taxes as well as federal excise taxes.
Changes in corporate income taxes due to OBRA-93 are distributed according to families income from capital. The
all-incomes line includes families with negative incomes.




Chart 2-1. FEDERAL TAX RATES BY QUINTILE
3025 -

20
15 -

10
5 0

1977

1980

1985

I LOWEST QUINTILE
SOURCE: Congressional Budget Office. See notes to Table 2-1.

1989

1

1994

13 HIGHEST QUINTILE
01/26/94

60
under the General Agreement on Trade and
Tariffs (GATT).
When the Administration took office, the
prospects for market opening were cloudy.
NAFTA had been signed by the United
States, Canada and Mexico, but opposition
in the Congress was strong. The Uruguay
Round negotiations, which had started in
1986, were foundering; the United States
and some of its major trading partners were
at odds over seemingly intractable issues.
The Federal Government seemed poorly prepared; opening markets simply had no priority.
This Administration reversed that dismal
course, making completion of the agreements
a high priority and undertaking a review
of trade promotion activities. The most urgent
issue was NAFTA. The President directed
that the agreement be improved through
negotiation of side agreements to assure that
no NAFTA partner used lax enforcement
of its domestic environmental or labor laws
to attract trade or investment. The side
agreements were concluded on August 13,
1993, and legislation for Congressional "fast
track" action was transmitted on November
1. The assurances in the side agreements
and an extraordinary Administration effort
to explain the long-term benefits to the
the country brought passage by the Congress
on November 20, 1993.
NAFTA creates a free trade area of more
than 360 million consumers and over $6
trillion annual output, linking the United
States to our first and third largest trading
partners (Canada and Mexico). NAFTA will
stimulate growth, create job opportunities,
enhance the ability of North American producers to compete, and raise the standards
of living of all three countries. Approximately
60 percent of U.S. exports to Mexico will
be eligible for duty-free treatment within




THE BUDGET FOR FISCAL YEAR 1995

five years. NAFTA also includes agreements
providing fair treatment for services, investment, intellectual property rights, and agriculture; strengthening trade rules; and creating a regional development bank.
The President also directed the U.S. Trade
Representative to assure the successful completion of the Uruguay Round negotiations,
achieving the fullest possible market opening.
To facilitate this effort, the Congress passed
an extension of its fast track authority that
was signed by the President on July 2,
1993. In December, the United States reached
agreement with the members of the General
Agreement on Trade and Tariffs (GATT)
to reduce tariff barriers and remove other
nontariff barriers to trade. The recent agreement also extends GATT coverage to areas
of trade and investment that up to now
have not been subject to GATT discipline,
including agriculture, textiles, services, and
intellectual property rights.
The Uruguay Round will increase U.S.
incomes and jobs because open markets promote specialization that raises productivity
and creates new employment opportunities.
Studies suggest that these gains could add
approximately one percent to the level of
U.S. GDP after the tariff cuts are fully
phased in. Additional benefits from trade
liberalization in services, enhanced protection
of intellectual property rights, and other
improvements could add another 0.5 percent
to GDP. The combined gain would add $100
billion to $150 billion to U.S. GDP ten
years after implementation of the agreement.
In 1993, the President also hosted the
first-ever meeting of the Asia-Pacific Economic
Cooperation (APEC), which is working toward
greater trade liberalization in that important
region.

THE AGENDA REMAINING


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Federal Reserve Bank150-001 Louis- 3
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61

(QL 3)







3A. Prosperity and Jobs

63




3A. PROSPERITY AND JOBS
THE ECONOMIC PROGRAM
At the time of the 1992 election, the
U.S. economy was caught in a destructive
cycle of weak investment in household durables (with unsatisfactory growth in business
plant and equipment as well), adverse consumer sentiment, and stagnant employment.
To break out of that cycle, the economy
needed jobs—to add to household incomes,
and to give families the confidence to make
commitments for housing and other big-ticket
consumer goods that, in turn, stimulate investment in the business sector and build momentum for the economy as a whole.
The jobs picture was not encouraging. The
unemployment rate had risen, predictably,
with the recession that began in mid-1990.
Surprisingly, however, employment remained
stagnant—and the unemployment rate continued rising—for a year after the recession
technically ended. Breaking this pattern of
sluggish employment growth would be essential to energize the recovery.

The economy was stalled by high interest
rates; and interest rate reduction was stalled
by concerns about economic policy. Large
budget deficits raise interest rates through
a straightforward interaction of supply and
demand: as the Federal Government demanded more of a limited supply of credit
in the financial markets, it drove up the
price—that is, the rate of interest. But further,
large and apparently permanent budget deficits threatened inflation: if there were further
policy errors (and large, continuing budget
deficits clearly do not inspire confidence in
economic policy), or if the buildup of debt
grew so large that the Federal Government
could not service it (and hence could only
inflate its way out of the debt), more rapid
inflation would result. Lenders in the financial
markets naturally demanded higher interest
rates to protect themselves against such
threats of future inflation.

The same prescription would help toward
the ultimate goal of the President's vision
for economic renewal: increasing prosperity
for all Americans. In the long run, even
if every qualified job seeker can find work
with just a limited search, living standards
depend upon the factories, machines, and
technology available to make our workers
productive (as well as the skills of the
workers themselves). Increased demand for
big-ticket items, and hence investment goods,
would begin the process of building for the
future.

The overwhelming majority of economists
would argue that deficit reduction slows the
economy in the near term—by reducing the
purchasing power in the hands of businesses
and consumers. (Every dollar of Federal spending becomes someone's spendable income—
either as the price of labor or commodities
supplied to the government, or as a grant
or transfer. Taxes reduce household or business spendable income directly.) Partially offsetting that effect is the reduction of interest
rates that results as Federal borrowing needs
are reduced. Ultimately, that drop in interest
rates encourages investment and makes the
economy stronger; but for the short run,
the expected net effect of credible deficit
reduction on economic growth is negative.

The greatest resistance to this economic
takeoff—the major source of inertia—was the
burden of debt service in all sectors of
the economy. With interest rates stubbornly
high, much of current income was absorbed
in meeting past commitments; and future
commitments for major purchases appeared
dauntingly expensive. This Administration recognized that cutting interest rates would
be crucial to stimulate the economic recovery.

However, the economic policy inherited by
this Administration was so out of balance
that righting it—reducing the large and continuing budget deficits—bore far less of a
short-run cost than most economists expected.
Fears of future inflation—because of the
mounting budget deficits—were so great that
lenders demanded an extraordinary margin
of protection through higher interest rates.
As the President's economic plan was devel-




65

66

THE BUDGET FOR FISCAL YEAR 1995

Chart 3A-1. INTEREST RATES

rrf. ICEAProSJWPCHAMA-A

oped and put into law, the fears of mounting
deficits and future inflation were dissipated,
and bond buyers reduced their interest rate
demands by far more than the margin predicted by past economic analysis. Thus, the
effect of credible deficit reduction on the
financial markets was much more than the
narrow supply-and-demand impact in the conventional analysis; it was a restoration of
financial stability, through the undoing of
a pattern of continuing past economic policy
errors, and a threat of similar mistakes
extending into the future. Thus, budget discipline has freed the economy from a burden
that limited its prospects in both the long
run and the short run.
• The yield on 30-year Treasury notes,
which stood at 7.66 percent on election day
of 1992, dropped to 6.09 percent by late
August 1993 when Congress approved the
Administration's economic plan. Although
the long-term rates have climbed slightly
in recent months, they remained about




01/25/94

100 basis points lower than in early November 1992. (See Chart 3A-1.)
That drop in interest rates, through refinancing of home mortgages and other long-term
loans, reduced the debt-service burden of
households and businesses, freeing some of the
cash flow that was devoted to servicing past
commitments and allowing them to consider
new investments in autos, homes, and plant
and equipment. The same lower interest rates
reduced the cost of those further commitments.
With the growth of demand for big-ticket goods
came increased employment—both in these
sectors and throughout the economy. (See
Charts 3A-2, 3, 4, and 5.)
• Corporate finance has reversed course,
with slower issuance of corporate bonds
and increased new issues of corporate
stock—reversing the dangerous trend of
the 1980s toward increased leverage.
• With the change in corporate finance and
the reduction of interest rates, the debtservice burden on corporate cash flow has

67

3A. PROSPERITY AND JOBS

Chart 3A-2. CONSUMER SENTIMENT
(February 1966 = 100)

SOURCE: University of Michigan Consumer Sentiment Index.
wtlCllArWSJHJPCHAFM-B

01/25/94

Chart 3A-3. AUTO SALES
MILLIONS

n t JGEATHM-IUDCHAWA-C




(annual rate)

01/25/94

68

THE BUDGET FOR FISCAL YEAR 1995

Chart 3A-4. HOUSING STARTS
(annual rate)
MILLIONS

ret 1GKAPIPS3UPCHAP3A-P

eased considerably—declining to close to
its average of the 1970s. The same
changes have benefitted households, with
their debt-service costs as a share of disposable personal income declining by
about two percentage points.
Economic growth over the past year has
been heavily concentrated in purchases of
business investment goods, homes, automobiles, and other consumer durables—precisely because such goods are typically financed by borrowing, and the Administration's
program has brought the cost of borrowing
down. This is doubly gratifying—both because
it helps sectors of the economy that had
been especially weak, and because it builds
for the future.
• During the first three quarters of 1993,
for example, investment in producers' durable equipment rose at an inflation-adjusted annual rate of 16.5 percent, followed by production of durable consumption items at a 5.6 percent rate. The housing market showed considerable strength




01/25/94

in the closing months of 1993, when new
and existing home sales reached levels not
seen in years.
THE PAYOFF: MORE JOBS, BETTER
JOBS
The growing strength in the investment
and consumer durables industries finally provided the long-needed boost to employment
growth that now promises to become selfsustaining.
• Payroll employment increased by nearly
two million jobs in 1993. In fact, almost
twice as many new private sector jobs
were created in 1993 than during all of
the four years of the Bush Administration.
Total employment (including farm and
self-employed) increased by 2.5 million;
from 1988 to 1992, the average yearly increase was only 0.5 million. Job increases
were widespread in 1993, with 57 percent
of all industries expanding employment.
The manufacturing sector, which had been
trimming payrolls since 1990, added jobs

69

3A. PROSPERITY AND JOBS

Chart 3A-5. INVESTMENT IN EQUIPMENT
(percent of GDP)
PRE T
ECN

rat 1 RP WHCHTA
GAH J JC A3K
-

01/25/94

Chart 3A-6. TOTAL PRIVATE NONFARM EMPLOYMENT
GROWTH IN THOUSANDS

2,000GROWTH
FROM
DECEMBER
1992 TO
DECEMBER
1993

1,500

1,000-

500"

GROWTH
FROM
DECEMBER
1988 TO
DECEMBER
1992

1988 - 1992
ML I K P Ho C A A
G A H rP H M r




1993
01/25/94

70

THE BUDGET FOR FISCAL YEAR 1995

in the last three months of 1993. (See
Chart 3A-6.)
• The overall jobless rate fell to 6.4 percent
in December 1993, or 1.3 percentage
points below its June 1992 high. The unemployment rate fell or held steady in
every month of 1993. The unemployment
rates of all major demographic groups—
teenagers, adults, whites, African Americans and Hispanics—fell over the year.
The number of unemployed fell in ten of
the last twelve months; the cumulative reduction was 1.1 million. During the prior
four years, the number of unemployed rose
by an average of 0.7 million per year. (See
Chart 3A-7.)
• In December, 1.7 million workers had been
without a job for 27 weeks or longer—still
far too many, but less than the high of
2.0 million reached in September 1992.
• About one-half of the 1993 increase in employment occurred in high-paying managerial and professional occupations.

PERCENT

wt 1GRAPHM.BUPCHAP3A-C




There have been large reductions in the
numbers of persons laid off and of permanently
separated job losers. Also, in November, the
work week reached its highest level since
the end of World War II, and overtime
its highest level since that statistic was
first collected in the 1950s. These records
signal future employment gains.
And despite the rapid growth of output
and employment, inflation has remained subdued—lending further stability to interest
rates. After rising at an annual rate of
3.8 percent in the first quarter of 1993,
CPI inflation slowed to a 2.7 percent rate
for the year. At the producer level, inflation
has nearly disappeared, with the core PPI
(that is, excluding the volatile food and
energy components) increasing only 0.2 percent during 1993—the best performance since
1974. (See Chart 3A-S.)
One further benefit of this Administration's
economic program has not yet been felt.
As was noted above, large budget deficits
increase the Nation's borrowing from abroad,

Chart 3A-7. UNEMPLOYMENT RATE

71

3A. PROSPERITY AND JOBS

Chart 3A-8. CONSUMER PRICE INDEX

rrf. 1 K P 5 . L C A 3 G A H SB P H P AH

raise the value of the dollar, and thereby
increase our trade deficit. From the early
1980s, budget irresponsibility has done untold
harm to the manufacturing sector through
these effects. With the deficit reduced and
interest rates down, the dollar can find
a more competitive level, and U.S. exporters
will have a fairer playing field. Thus, budget
discipline, combined with a lean American
manufacturing industry, bodes well for U.S.
growth and jobs in the future.
Unfortunately, U.S. exporters cannot sell
if other economies cannot buy; and virtually
all other industrialized nations—especially
Japan and Europe—are mired in recession,
suffering their own adjustments from the
excesses of the 1980s. So while the U.S.
trade position with the industrializing nations
is strong—and U.S. manufacturers are more
competitive than they have been for decades—
our overall trade deficit remains high. But
the fundamentals are in place to change
that, dramatically and for the better, once




Europe, Japan and other nations pull themselves out of their own economic slumps.
JOBS IN THE 1995 BUDGET
This budget will contribute to continued
job growth.
First, continued budget discipline will keep
interest rates down, and keep employment
growing. With the momentum of investment
in business equipment, new homes, new automobiles, and other consumer durables, the
economic recovery has become self-sustaining.
Employment growth is on track for the
President's goal of eight million new jobs
over four years, and the unemployment rate
is falling faster than economic forecasters
have predicted.
Second, many of the President's proposed
public investments in the 1995 budget will
create more and better jobs directly:
• The President's 1995 budget request for
highways—full funding of the ISTEA highways program—will support a large num-

72

THE BUDGET FOR FISCAL YEAR 1995

ber of direct and indirect jobs, mostly in
the construction and supplying industries.
• The budget request for mass transit formula capital grants would support further
jobs, mostly in the construction, motor vehicle manufacturing, and business and
professional service industries.
• The proposed 42 percent increase for debt
and equity capital guarantee programs
provided through the Small Business Administration will contribute to the creation
of new employment opportunities through
small business creation and expansion,
and also help to maintain existing jobs.
• The budget maintains funding in the Community Development Block Grant (CDBG)
program, which provides grants for a wide
range of community development activities. The request includes $200 million for
the HUD Secretary's proposed "Leveraged
Investments For Tomorrow" program, for
mixed-use development in distressed
urban neighborhoods. CDBG is an important job creator.
• The Administration proposes $900 million
for new community and economic development initiatives, to assist local governments to stimulate job creation and economic vitality within urban neighborhoods
through support of individual projects and
local community-building efforts.
• The President's request for public housing
modernization funds will improve living
conditions for many of the almost 1.3 million families living in public housing—and
will support numerous job opportunities.
• The proposed Community Development Financial Institutions Fund would provide
assistance to qualifying community development lenders. Lowering barriers for
lending in distressed neighborhoods will
open the door to construction employment
opportunities.
• In July of 1993, the President requested
a comprehensive review and overhaul of
interagency regulation implementing the
Community Reinvestment Act. The review
yielded proposed revised regulation on December 21, 1993. With clearer guidance,
reduced compliance burdens and greater



flexibility, private lenders will be able to
increase credit in distressed communities,
aiding development and construction employment.
• Last year, the President proposed and the
Congress enacted legislation to create Enterprise Zones and Communities, to concentrate resources—through tax cuts, investment, and regulatory relief—on neighborhoods that are lagging behind the economic expansion. This year, the Administration will implement that policy. This
will add Federal assistance to newly freed
private resources, and stimulate economic
activity and job creation in the parts of
the country that need it most.
• The Vice President's push for information
highways will create jobs as we extend our
high-speed communications network to
every classroom, clinic, hospital and library in America. Other research and
technology investments will also accelerate
technological progress and employ scientific and technical workers—and help to
reemploy workers from the downsizing defense sector.
• Within the Department of Labor, Title IIB of the Job Training Partnership Act subsidizes temporary minimum-wage jobs and
academic enrichment for low-income youth
aged 14-21 during the summer. The budget increases funding for this program.
• The Administration provides substantial
increases for water infrastructure projects,
including Clean Water State Revolving
Funds, Drinking Water State Revolving
Funds, and loans and grants for rural
water and wastewater disposal systems.
These investments will lead to job creation
in infrastructure construction, repair and
improvement.
Other Administration initiatives will help
to safeguard this job growth. The Workforce
Security proposal, creating a new reemployment system, will help to match workers
with job opportunities. The expansion of the
Job Corps will help some of the most disadvantaged job seekers. The School-to-Work initiative will help non-college-bound secondaryschool students to train for and find productive
jobs. Finally, last year's small business tax

73

3A. PROSPERITY AND JOBS

cuts—including the increase in the amount
of business investment eligible for immediate
deduction (expensing), and the capital gains
tax break for new small businesses—will
keep America's prime job generator moving.
This Administration has made early and
substantial progress on creating more and
better jobs—far beyond the expectations of
most economists and job-market experts. With
job creation at almost eight times the rate
of the preceding Administration—almost twice
the jobs in one quarter of the time—the
nation is on track to reach the President's
eight-million-job goal. Continued adherence
to the economic program and the President's
proposed investments will keep job creation
on the fast track.
BUDGET PROJECTIONS
The budget outlook has improved enormously over the past year; but much remains
to be done to put the economy finally on
a sound fiscal footing. As the President
has often said, it took many years to find
our way into our current predicament, and
it will take many years to work our way
out.
There are three broad tasks remaining
to achieve a truly sound fiscal policy:
• Fulfill the requirements of OBRA-93. The
major outstanding obligation is finding
discretionary spending savings to meet the
discretionary spending caps. Some critics
argued that the discretionary caps postponed actual deficit reduction; but discretionary spending has always been appropriated on an annual basis, so those savings can be attained only over time. The
second requirement is obeying the pay-asyou-go restrictions on entitlement programs and taxes; any tax cut or entitlement spending increase must be offset by
another tax increase or entitlement spending cut. A further requirement is imposed
by the President's entitlement targets, established by executive order; if entitlement
spending exceeds or is projected to exceed
the preset levels, the President must report to the Congress on the cause and,
if he chooses, offer a legislative solution.
Compliance with OBRA-93 will lock in the




$500 billion of deficit reduction that
turned the economy around.
• Health reform. Medicare and Medicaid
costs are a growing burden on both the
private and the public sectors. Health care
costs are the single major force behind the
Federal budget deficit. In fact, the Federal
Government's health care costs are growing so fast that, without fundamental
change, there can be no control of the
overall budget deficit.
• A sound economy. In the long run, we need
growing incomes and plentiful employment
opportunities to keep the Nation's ledger
sound. So, within the constraints imposed
by OBRA-93, we must invest in science
and technology, physical infrastructure,
and worker skills that the private sector
needs to make the economy grow.
This budget continues the progress made
last year on all of these fronts.
Total Spending
1995 outlays are projected at $1,518.3 billion
(without the Administration's health reform
proposal), an increase of $34.3 billion, or
2.3 percent, from 1994. Later years show
continued slow outlay growth. Between 1993
and 1999, total outlays are projected to
grow by an average of only 4.5 percent
per year. In contrast, between 1981 and
1993, total outlays grew by an average of
6.3 percent per year. In 1999, projected
outlays equal 20.9 percent of the gross domestic product (GDP); in 1993, outlays equaled
22.4 percent of GDP.
Discretionary Spending
Discretionary spending is controlled by caps
set in OBRA-93 through 1998—holding outlays
to the approximate level of 1993, without
an increase for inflation expected at the
enactment of the 1993 law (a "hard freeze").
(If inflation exceeds the 1993 forecast, the
spending caps are adjusted upward for the
excess; but if inflation is below the 1993
forecast—as it was last year—the spending
caps are adjusted downward for the underage.)
As a result, discretionary spending is expected
to remain at approximately the 1993 level
through 1998—which would leave it at an
inflation-adjusted level 12 percent below that

74

THE BUDGET FOR FISCAL YEAR 1995

of 1994. Compared with what would have
been spent with a full inflation adjustment
over 1994-1998, this restraint of OBRA-93
will save a cumulative $107.7 billion.

FTE savings, procurement reforms, and other
crosscutting proposals—are discussed in more
detail in Chapter 3C, "Delivering a Government That Works Better and Costs Less."

After 1993, discretionary spending is subject
to a single cap; in 1991-1993 there were
separate caps for defense, international, and
domestic discretionary spending. Given the
Administration's proposed downward path for
defense, the two nondefense categories are
not held to a hard freeze; but the defense
reductions are not large enough to permit
nondefense spending to keep up with inflation.

Table 3A-1 summarizes the current status
of proposed 1994/1995 budget savings from
the recommendations of the National Performance Review agency teams. The current savings estimate of $6.8 billion compares favorably with the original NPR estimate.

Domestic discretionary spending has not
been the source of the increase in the budget
deficit. While the budget deficit has increased
as a percentage of GDP, domestic discretionary
spending is below its 1980 percentage of
GDP. Total discretionary spending is at its
lowest percentage of the GDP since 1962
(the earliest year for which data have been
compiled). Over the next five years, all categories of discretionary spending are projected
to shrink as percentages of the GDP.

NPR Agency Teams

Table 3A-1. STATUS REPORT:
LATEST ESTIMATE OF SAVINGS
Billion of
Dollars
Original NPR savings estimates ...
Higher than anticipated savings
Proposals proceeding, but with
startup delays anc|/or reestimates of savings
Proposals not proceeding at the
present time
Current savings estimate

National Performance Review
The restrained spending levels in this budget reflect, in part, the recommendations of
the National Performance Review (NPR). Recommendations that cut across agency lines—

7.0
1.9

-1.6
-0.5
6.8

Table 3A-2 provides more detailed information on the agency savings proposals affecting
the estimates in the 1995 budget.

Table 3A-2. PROGRESS REPORT: NATIONAL PERFORMANCE REVIEW
RECOMMENDATIONS WITH 1995 BUDGET EFFECTS
(In millions of dollars)
1995 Estimate
Recommendation

Department of Agriculture:
The wool and mohair subisidy program will be phased out beginning in 1994 and all
payments are terminated after 1996 per Public Law 103-130
Legislation was submitted in the Fall of 1993 to phase out the honey program by the
end of 1996
Legislation was submitted in the Fall of 1993 to reorganize the Departmental agency structure. This program will reduce the number of USDA bureaus from 42 to
30 and is a vital part of the Administration's plan to streamline USDA's extensive
field office structure
Department of Commerce:
To help protect fishing resources, fees will be proposed to help recover the costs of
administering living marine resources
Department of Defense:
The Corps of Engineers will recover its costs for processing certain commercial applications and DOD will establish goals for solid waste reduction and recycling




Budget
Authority

Outlays

-47.0

-47.0

—

-6.5

-6.5

—

-166.9

-158.3

—

—

—

-50.0

-43.0

Receipts

82.0
6.0

75

3A. PROSPERITY AND JOBS

Table 3A-2. PROGRESS REPORT: NATIONAL PERFORMANCE REVIEW
RECOMMENDATIONS WITH 1995 BUDGET EFFECTS—Continued
(In millions of dollars)
1995 Estimate
Recommendation
Authority

The efficiency of DOD health care operations will be maximized by using emerging
technology to upgrade care at DOD health care facilities and by closing the Uniformed Services University of Health Sciences (USUHS)
-16.0
Department of Energy:
DOE defense facilities and laboratories will be redirected to Post-Cold War Priorities
by consolidating or eliminating unneeded facilities, and making their services of
greater benefit in the post-Cold War era
-1,007.4
Department of Health and Human Services:
In order to take more aggressive actions to collect outstanding debts owed to the Social Security Trust Fund, SSA will request the authority to use a full range of
-60.0
debt collection tools available under the Debt Collection Act of 1982
User fees are proposed for the inspection and approval processes of the Food and
Drug Administration (FDA). Food, drug and medical device manufacturers, processors and suppliers should be required to pay for FDA services
-337.9
The Health Care Financing Administration will seek authority to fully and openly
compete Medicare claims processing contracts to reduce costs, improve quality of
service, and eliminate inefficiencies and conflicts of interest
-80.0
Department of Housing and Urban Development:
To assist neighborhood revitalization, the 1995 budget includes an FHA single-family mortgage insurance initiative
14.0
Incentive contracts will be used to refinance expensive old subsidized mortgages
-177.0
Administrative changes will reduce unjustified increases in annual payments to Section 8 projects. This proposal would limit rent increases to those cases where existing rents are less than the local market average rent for non-luxury housing
—
Public housing agencies will be encouraged to make better use of their assets by reducing subsidies paid for unjustifiably vacant units
-43.3
Department of the Interior:
Reclamation of abandoned mine lands will be improved through a combination of administrative and legislative strategies designed to reduce duplication, increase
States' decisionmaking authority, and distribute reclamation funds where they are
needed most
-15.0
A national spatial data infrastructure will be established administratively through
development of digital data standards, accelerated development of a data clearinghouse, and acquisition of new high-priority data
7.0
Mineral Management Service royalty collections will be improved through legislative
action to enable penalties to be assessed for substantial underpayments
—
The Federal Helium Program will be improved through administrative action. To obtain maximum benefit from helium operations, the Government will reduce costs,
increase efficiencies in helium operations, increase sales of crude helium as market conditions permit, and study the recommendations to cancel the helium debt ..
-2.0
Reforms will be instituted to guarantee a fair return for Federal resources such as
livestock grazing and hard-rock mining
17.0
Environmental mangement will be enhanced by remediating hazardous materials
sites through administrative action
3.9
Entrepreneurial management will be promoted by seeking expanded authority to increase park entrance and other recreation user fees
4.8
Department of Labor:
Occupationally disabled Federal employees will be helped to return to productive careers by extending DOL's assisted reemployment progam, thereby reducing longterm benefit costs to the government; an administrative review of the FECA longterm benefit rolls will also be undertaken
-7.0
An electronic database will be developed to enable Federal contracting agencies to
electronically access wage determination information instantly. When integrated
into the Service Contract Act process, it should eliminate delays both in the delivery of wage determinations and in the Federal procurement process
0.5




0utla

^

^

^

-9.0

—

-862.8

—

-60.0

—

-337.9

—

-80.0

—

7.4
37.4

—
—

-110.0

—

-19.9

—

-15.0

—

6.7

—

—

2.0

-2.0

6.0

17.0

80.0

3.9

—

3.6

32.0

-7.0

—

0.5

—

76

THE BUDGET FOR FISCAL YEAR 1995

Table 3A-2. PROGRESS REPORT: NATIONAL PERFORMANCE REVIEW
RECOMMENDATIONS WITH 1995 BUDGET EFFECTS—Continued
(In millions of dollars)
1995 Estimate
Recommendation
Authority

The Consumer Price Index (CPI) will be revised and updated. The CPI is revised
after each decennial census. This revision will be completed in 2000. The revision
includes new market baskets of goods and services as well as improvements in collecting and processing data for the CPI and surveys which support the CPI
The Federal Employees Compensation Act will be amended in order to reduce fraud
by (1) making it a felony to lie on benefit applications, (2) making people convicted
of defrauding the program ineligible for benefits, and (3) making people who are
incarcerated ineligible for benefits
National Aeronautics and Space Administration:
A major reorganization to streamline program management has occurred and savings are continued in the 1995 budget
Small Business Administration:
User fees will be established for Small Business Development Centers, located primarily at colleges and universities, which provide management and technical assistance to small businesses
Department of Stat^LJ.S. Information Agency:
A department-wide computer modernization and upgrade plan will be developed
along with a more effective management policy to begin modernization of computer systems in 1995
USIA will begin to restructure core program activities in 1994
The Regional Administrative Management Center in Mexico City will be relocated to
a domestic location
Department of Transportation:
Federal Aviation Administration fees will be increased for inspection of foreign repair facilities
Level I (low use) air control towers will be converted to contract operation
Funding for selected highway demonstration projects is proposed for rescission.
These demonstration projects should compete at the state level for the limited
highway resources available and not be singled out for special treatment at the
Federal level
Unobligated balances for 1992 and prior earmarked funding for the FTA New Starts
and Bus Program that remain unobligated after three years will be proposed for
rescission
New, more restrictive criteria will be proposed for small airports to qualify for essential air service subsidies. Somewhat tighter criteria were enacted for 1994
To reduce costs, federal grant funding of two Federal Aviation Administration postsecondary education programs is proposed for elimination
Department of Treasury:
Federal resources dedicated to the interdiction of drugs will be redirected and better
coordinated by consolidating intelligence gathering facilities and reducing flying
hours and the marine interdiction fleet
The licensing fee for firearm dealers is proposed to increase from $200 for three
years to $600 per year to cover the costs of license processing and reduce the number of dealers. A fee increase to $200 was enacted in the Brady Bill
Section 5121 of the Internal Revenue Code will be amended to require proof of tax
payment by retailers prior to sale of alcohol to them by wholesalers
NAFTA legislation provides for fee increases and implements the Customs Modernization Act, as recommended by the NPR. The 1995 Budget includes
inititatives to modernize Customs commercial operations
Civil monetary penalties are proposed to be adjusted to the inflation index
Certain Federal workers will be required to convert from checks to electronic funds
transfer and the consolidation of Financial Management Services (FMS) regional
centers will begin
Department of Veterans Affairs:
The final stage of VA's computer modernization effort for benefits claims processing
will be funded




Outlays

5.2

5.2

—

-1.0

-1.0

—

-396.0

-282.0

—

—

—

17.0

25.0
-3.0

21.3
-3.0

—
—

2.7

—

—

Receipt*

—
8.3

—
8.1

1.6
—

-817.0

-406.3

—

—

-5.1

—

-7.8

-6.7

—

—

-10.0

—

-57.4

-51.0

—

—

—

25.2

—

—

13.6

—
—

—
—

215.0
16.9

-2.4

-1.9

—

25.5

—

—

77

3A. PROSPERITY AND JOBS

Table 3A-2. PROGRESS REPORT: NATIONAL PERFORMANCE REVIEW
RECOMMENDATIONS WITH 1995 BUDGET EFFECTS—Continued
(In millions of dollars)
1995 Estimate
Recommendation

Budget
Authority

Total, 1995 budget savings
Total 1995 budget authority plus receipts
Memorandum:
1994 savings enactec^requested
Total 1994 budget authority plus receipts
NPR budget savings estimated for 1994 and 1995
Total budget authority plus receipts

Entitlements
OBRA-93 cut projected entitlement spending
by $3.7 billion in 1994, and $98.4 billion
over 1994-1998. There were also five-year
increases of $18.3 billion in the earned income
tax credit, $2.7 billion in food stamps, and
$6.1 billion in other programs.
In 1995, entitlements (not including debt
service) are projected to comprise 50.2 percent
of budget outlays, or 10.9 percent of the
GDP—at a total of $762.9 billion. This is
a substantial increase from 1965 ($27.8 billion,
23.5 percent of outlays, and 4.1 percent
of GDP) and 1980 ($261.9 billion, 44.3 percent
of outlays, and 9.9 percent of GDP).
This rapid growth has led some to conclude
that entitlements are the source of the budget
deficit problem. This is true, but insufficiently
precise. In fact, from 1980 through 1992,
Federal spending on health care increased
from 1.7 percent to 3.2 percent of GDP,
while other entitlements shrank from 8.2
percent to 7.9 percent.
Looking forward, the picture is the same.
By 1999 (without passage of the Administration's health reform proposal), combined Medicare and Medicaid spending will reach $386.9
billion, equal to 20.3 percent of total outlays




0.3

0.3

-11.0

-55.0

-12.9

-12.9

-29.4

-29.4

-3,242.4

-2,508.6

497.3
3,739.7

-2,901.5

-703.6

-6,143.9

A pilot project in the New York City Regional Office is designed to help streamline
the benefits claims process
Supply depots will be phased out. The conversion from a depot storage to a vendor,
just-in-time delivery system will be completed by the end of 1995
VA's capabilities in implementing electronic data interchange technology will be enhanced. Benefits from implementing this proposal include more efficient management of VA's supply inventories
Administrative costs of the Veterans insurance program will be recovered from premiums and dividends from three VA life insurance programs

Outlays

Receipts

-3,212.2

163.0
3,064.5
660.3
6,804.2

or 4.4 percent of GDP. Other entitlements
will grow to $633.8 billion, equal to 33.3
percent of total outlays or 7.2 percent of
GDP—less than the percentages of 1992.
Medicare and Medicaid spending will grow
faster than revenues; other entitlements will
grow more slowly than revenues.
In fact, over the five-year budget window,
Medicare and Medicaid are the only major
categories of Federal spending that are projected to grow faster than the economy,
or faster than revenues. Even interest on
the debt, which had been one of the fastestgrowing categories of the budget, has been
brought under control by passage of the
Administration's deficit-reduction program.
Health care is left as the sole major force
behind the budget deficit.
The simple mathematical fact is that, with
health costs growing faster than the economy
over the foreseeable future, reform of health
care is essential if the deficit is to be
brought under control. Any other savings
merely buy time, because health costs will
eventually grow to erase that progress.
Social Security comprises about
of total entitlement spending. In
long run, Social Security costs are
to increase sharply—mostly as a

one-third
the very
projected
result of

78
the retirement of the baby boom population,
but also because of increased life expectancies,
and hence longer periods of retirement. At
this time, Social Security is running annual
surpluses which add to the balance in its
trust fund and reduce the unified budget
deficit. However, we must maintain the goal
of 75-year actuarial balance; and the 75year outlook for the system worsens slightly
with each passing year, as one year of
system surplus becomes history and one year
of post-baby-boom deficit comes over the 75year horizon.
This is a long-term Social Security issue,
not a short-term budget deficit issue; it
should be answered with careful study, not
precipitous, politically motivated action. Social
Security is one of the most successful Federal
programs in history; it is largely responsible
for the reduction in the incidence of poverty
among the aged from 35.2 percent in 1959
to 12.9 percent in 1992. More than half
of today's elderly rely on Social Security
for most of their income, and millions of
workers nearing retirement have factored their
expected Social Security benefits into their
retirement plans. The Social Security Board
of Trustees will report on the condition
of the system early this year.
Entitlements other than Medicare, Medicaid
and Social Security comprise only about 40
percent of projected total entitlement spending
for 1995. Spending on these programs is
projected to grow less rapidly than the economy or Federal revenues. These programs
include Federal military and civilian employee
retirement, food stamps, aid to families with
dependent children, farm price supports, unemployment compensation, and other, smaller
programs. The Administration is committed
to seek efficiencies and savings in these
programs, and the Bipartisan Commission
on Entitlement Reform, established by the
President under Executive Order No. 12878,
will contribute to that task. However, given
the size and rapid rate of growth of the
medical programs, ultimate deficit control
can come only if we address that area.
The Administration has proposed a major
health reform to be considered by the Congress
this year. This proposal is expected to add
to outlays modestly in the first few years




THE BUDGET FOR FISCAL YEAR 1995

(offset by other provisions), but to contribute
significant deficit reduction in 1999 and later
years. The health reform program is discussed
in detail in Chapter 4.
The Administration also proposes a comprehensive reform of the Nation's welfare
programs, which is being drafted for submission to the Congress in the spring. This
program will combine training and child
care initiatives for the welfare population
with work requirements and other outlayreducing provisions in a deficit-neutral package. This program is discussed more fully
in Chapter 3B.
Total entitlement outlays are projected to
increase from $763.6 billion in 1995 to
$1,020.7 billion in 1999. These projections
are within the bounds set by the entitlement
targets in the President's Executive Order
No. 12857.
During the upcoming year, the Administration will put forward significant initiatives
including comprehensive health and welfare
reforms, and ratification of the Uruguay Round
agreement of the GATT. These initiatives
will be deficit-neutral, in keeping with the
pay-as-you-go restrictions in the Budget Enforcement Act.
Revenues
OBRA-93 achieved slightly less than half
of its total deficit reduction through tax
increases—$250.1 billion cumulatively over
1994-1998. With those increases, revenues
are expected to change very little as a
percentage of GDP over the next five years—
from 19.1 percent in 1995 to 18.6 percent
in 1999.
This budget proposes no further change
in revenues. It proposes some increases in
user fees. These are scored in the Budget
according to the principles set forth by the
bipartisan Report of the President's Commission on Budget Concepts, October 1967, which
have been observed by all succeeding Administrations.
The Administration supports revenue-neutral initiatives designed to promote sensible
and equitable administration of the internal
revenue laws. These include simplification,
technical corrections, and taxpayer compliance

3A. PROSPERITY AND JOBS

measures. The Administration will monitor
and consider ways to ease the impact of
the reduction of the deductible portion of
business meals and entertainment expenses.
Deficit
With these changes in outlays and revenues,
the deficit is projected to decline from $254.7
billion in 1993, to an estimated $234.8 billion
in 1994, to a projected $176.1 billion in
1995. If this forecast materializes, it will
mark the first consecutive three-year decline
in the budget deficit since 1948—under President Harry S Truman. As a percentage
of GDP, the deficit falls from 4.0 percent
in 1993, to 3.5 percent in 1994, to 2.5
percent in 1995—the lowest since 1979, before
Ronald Reagan took office.
Without health-care reform, spending in
Medicare and Medicaid will continue to grow
faster than the economy, and will eventually
force the deficit up again. It is essential
to long-term deficit control that the Congress
pass the President's health-care reform proposal.
MAINTAINING BUDGET DISCIPLINE
Ultimately, the Nation's budget deficit problem will be solved by changes in policy,
not changes in process. However, this Administration recognizes that the budget process
must support, not impede, the formulation
of budget policy and the attainment of other
important National goals. Therefore, the Administration supported significant budget process disciplines in OBRA-93, and proposes
further reforms in the current budget. Some
of the proposals are major changes in the
budget process or structure; others are relatively small, but will sharpen the focus
of the budget and make it more rational
and understandable.
Reforms in OBRA-93 and Associated
Administrative Action
Discretionary spending caps. As noted
above, OBRA-93 extended the discretionary
spending caps enacted in the Budget Enforcement Act of 1990 (BEA) through 1998 at approximately the 1993 level—leaving discretionary spending at an inflation-adjusted level
12 percent below that of 1994. These caps are




79
a major source of budget discipline. The discretionary spending caps have been obeyed; discretionary spending has been held at or below
the levels prescribed in the BEA. While the
law allows an emergency designation for
spending outside of the budget caps, this exception has been used sparingly; from 1991
through 1993, total emergency spending has
been limited to such needs as hurricanes Andrew and Hugo, tropical storms Iniki and
Omar, the Loma Prieta earthquake, and the
midwest floods.
Pay-as-you-go. The Administration also proposed extension of the "pay-as-you-go" restraint on entitlement increases and tax cuts,
and it was enacted in OBRA-93. Pay-as-yougo requires that any proposed reduction in
taxes or increase in entitlement spending be
offset by a tax increase or entitlement cut, so
that the entire package is "deficit neutral."
Like the discretionary caps, the pay-as-you-go
restriction has been obeyed.
Entitlement targets. The pay-as-you-go
constraints have been successful in that they
have prevented the statutory expansion of existing entitlement programs, the creation of
new entitlements, or the enactment of tax cuts
without budgetary offsets. However, it has not
prevented the unanticipated growth of costs
of existing entitlements, particularly in medical care. To address this problem, the President issued Executive Order No. 12857, which
established targets for spending for entitlement or mandatory programs (except deposit
insurance and interest on the public debt) for
1994 through 1997. The targets were based
on the 1994 budget resolution's estimates of
mandatory spending, and may be adjusted annually in the budget for unanticipated increases in the number of beneficiaries. If there
is an actual or projected overage in any year,
the President must submit a message in the
budget explaining the cause. Depending on
economic or other circumstances, the President
may recommend recouping or eliminating all,
some, or none of the overage. If the President
recommends reducing the overage, the message must include the text of a resolution providing specific instructions to the appropriate
Committees in the House of Representatives
and the Senate. The House has instituted
rules to expedite its response to such a message. (See Chapter 15, "Review of Direct

80

THE BUDGET FOR FISCAL YEAR 1995

Spending and Receipts," in the Analytical Perspectives volume of this budget.)
This Executive Order replaced an identical
legislative proposal, which passed the House
but was procedurally blocked by a minority
in the Senate.
Deficit Reduction Fund. The President established a Deficit Reduction Fund in the
Treasury by Executive Order No. 12858. The
Fund guarantees that the net budget savings
achieved by OBRA-93 are dedicated exclusively
to deficit reduction. Amounts in the Fund can
be used only to redeem maturing debt obligations of the Treasury that are held by foreign
governments. Information about the Fund is
included in Chapter 16, "Deficit Reduction
Fund," in the Analytical Perspectives volume
of this Budget.
Legislative Proposals
The budget process can be further reformed
to facilitate sound economic policy, and to
clarify the budget itself.
Enhanced rescission authority. The current rescission procedures are inadequate.
Each appropriations act passed by the Congress provides billions of dollars of funding for
thousands of items. If the President believes
that a particular spending item should be reduced or eliminated, he has three choices:
• He can veto the entire bill, and potentially
disrupt funding for many Federal agencies
and programs.
• He can sign the bill, and allow the misguided money to be spent.
• He can sign the bill, and ask the Congress
to "rescind" the particular item in accord
with the rules of the Impoundment Control Act of 1974.
Under current rules, a proposed rescission
does not become effective unless it is approved
by both Houses of the Congress within 45
days. If a proposed rescission is not approved,
the funds must be spent. This means that
the Congress can defeat the President's rescission proposals by inaction. The President's
actual proposal need never come to a vote,
even in Committee.




It is important to maintain the proper
authority of the Congress in matters of
spending; however, it is reasonable to ask
that a President's rescission recommendations
receive a timely up-or-down vote. Several
bills have been introduced in the Congress
to achieve that objective, including the Expedited Rescissions Act of 1993, which the
President supported and the House passed
last year. They would merely require the
Congress to put each of the President's
rescission recommendations, individually and
without change, to a prompt majority vote
(unlike the current veto procedure's twothirds vote). Such reform is needed to make
the rescission authority meaningful.
Biennial budgeting. The budget process
consumes an enormous amount of time each
year, to the detriment of other important functions of the Executive Branch and the Congress. With only slightly more effort every
other year, the budget process could cover two
years instead of one. This would:
• Reduce the frequency with which hundreds of small and noncontroversial appropriations are considered, and allow more
time for the major issues;
• Leave more time in the intervening year
for program oversight by Congress and the
Executive Branch;
• Allow the Executive Branch to shift resources from budgeting to program management;
• Provide greater predictability to program
managers and the public; and
• Reduce the opportunities to enact wasteful
spending.
A biennial budget would not preclude
changes (supplemental appropriations and rescissions) during the alternate year any more
than the current annual budget precludes
changes during the year. Realistically, the
need for incremental mid-cycle changes is
likely to be somewhat greater, because appropriations in the alternate year will have
been based on assumptions made further
in advance of actual operations. Nevertheless,
those changes will be far fewer and simpler
than the current annual appropriations process.

3A. PROSPERITY AND JOBS

Proper amounting for retirement
costs.—The Administration is proposing a reform to charge Federal agencies the full cost
of the Government's share of retirement benefits for Federal employees covered by the Civil
Service Retirement System (CSRS) and other,
smaller, individual-agency systems. Effective
in the mid-1980s, Federal civilian and military
employee retirement systems were reformed to
charge agencies for the full accruing costs of
new hires; but agencies are charged for only
about two-fifths of the Government's share of
accruing costs for civilian employees hired before 1984—who still constitute 1.6 million of
the Federal work force.
The Administration's proposed reform makes
the cost of the Federal retirement system
more explicit. It will also improve agency
budget decisions, because it will force comparisons of the full cost of labor with alternative
means of providing services, such as contracting out or acquiring labor-saving hardware.
It will also allow better comparisons between
labor-intensive programs and other programs.
This step will not change the deficit, because
the increased agency contribution will be
paid from one Government account into another.

81
be charged to the budgetary account for a program or activity. The current structure has
grown haphazardly and does not meet these
objectives. OMB, working with the agencies
and consulting with the Congress, will begin
a review of the functional and account structure, in conjunction with the implementation
of the Government Performance and Results
Act of 1993. Some budget account restructuring may be proposed for the 1996 budget, and
full agency strategic plans will be completed
prior to 1998.
Present budget in millions and consolidate accounts. The budget comprises about
2,200 expenditure and receipt accounts shown
in thousands of dollars (ranging from $1,000
to over $300 billion) for about 130 agencies,
and 90,000 separate "lines" of information.
This level of detail and the disparity in sizes
of accounts distracts from the larger issues of
program and policy. OMB plans to present the
detailed budget Appendix in millions of dollars,
and to consolidate smaller accounts as part
of the restructuring just described.

Discontinue the separate grouping of
Federal funds and trust funds. Maintaining
separate summary figures for Federal funds
and trust funds no longer serves a useful purpose. OMB plans to discontinue the separate
Simplify the investment of balances held
grouping beginning with the 1996 budget.
by Government accounts. Federal funds are
Summary tables and an analysis of revolving,
authorized by law to invest in U.S. Treasury
special, and trust funds, as a group, will be
securities. In some cases, fund managers may
choose any terms for Treasury securities availpresented. The accounting integrity of all trust
able in the private market. This arrangement
funds will be preserved, and the existing presis complex and obscures the budget presenentations for all major trust funds will be contation. The Administration plans to conduct a
tinued.
review of the government account investments
A Capital Budget
and propose legislation that would simplify the
way these accounts are credited with interest,
The NPR recommended that the budget
while continuing to recognize program objec"recognize the special nature and long-term
tives and tie returns to market rates on Treasbenefits of investments through a separate
ury securities.
capital budget." This budget begins this process, which will be completed with the 1996
Other Administration Initiatives
document.
The Administration plans to make adminisUnder the NPR proposal, the budget would
trative changes in the budget process after
be presented in three parts: a capital budget
consultation with the Congress.
for fixed assets; an operating budget of all
expenditures except those included in the
Improve budget accountability. The
capital budget, plus depreciation on the stock
structure of budget functions, subfunctions, acof assets purchased under the capital budget;
counts and subaccounts should be aligned with
and a "total" or "cash" budget corresponding
agency missions, outputs, and desired outto the current measure of outlays.
comes. The full cost of these operations should




82
The purpose of the capital budget is to
intensify and improve the analysis and review
of capital investment expenditures—outlays
that yield long-term benefits. By the broadest
measure, the Federal Government will spend
over $250 billion on capital investment in
1994. The Administration is strongly committed to increasing investment—both public and
private—to raise economic growth and future
living standards. In A Vision of Change
for America, the President identified these
as key elements of his economic plan for
the Nation: "... long-term public investments
to increase the productivity of our people
and businesses; and a serious, fair, and
balanced deficit-reduction plan to stop the
government from draining the private investments that generate jobs and increase incomes." Thus, the President proposed to increase investment and reduce the deficit
at the same time. Congress appropriated
69 percent of the President's proposed investments, while reducing the deficit by more
than $500 billion over five years.
For more than forty years, the budget
has separated Federal investment outlays
from outlays for current use, using several
broad categories of investment so that alternative definitions of investment could be
used. This presentation was designed primarily for analytical purposes rather than
for decision-making. Now, the capital budget
will put such analysis to more practical
use.
A capital budget requires several refinements to be most effective. The NPR recommended several changes to the planning
and budgeting process for fixed assets which
OMB plans to put into effect for the 1996
budget:
• A long-term planning and analysis process
for fixed-asset acquisitions, to provide
guidance for evaluating choices and setting priorities.
• Incorporation into the budget of the results of agency plans, including a crosscutting analysis of fixed-asset acquisitions
among different agencies.
• More flexible funding mechanisms and
procedures to ensure that the most economical method of acquiring fixed assets




THE BUDGET FOR FISCAL YEAR 1995

is used. In particular, the rules of the
budget process should not prevent acquisition by the most economical means of
needed fixed assets, even if that would create "spikes" in agency spending.
The Federal Government's method of accounting for fixed assets obviously does not
change the supply of real or financial resources
in the economy; therefore, this capital budgeting process does not obviate the need for
fiscal discipline. Furthermore, budget discipline cannot be enforced through a budget
measure including depreciation, which is a
sunk cost not subject to current control.
For these reasons, the NPR stated that,
"The cash budget reflects the effect of both
the capital and the operating budget on
the economy. Therefore, the discipline of
the cash outlay caps in the Budget Enforcement Act must be maintained."
With continued fiscal discipline, long-term
planning and more detailed budget review,
the NPR's proposed capital budget will help
the Federal Government to allocate its scarce
investment dollars in the most efficient way—
while reducing the Federal deficit and increasing economic growth in the long run.
An Option Opposed by the Administration
The Administration does not support current
proposals to amend the Constitution to require
a balanced budget. While such an amendment
may appear to impose fiscal responsibility
by forcing policymakers to face hard choices,
in practice it would do more harm than
good.
• First and foremost, our Constitution is the
foundation of our democracy, safeguarding
our most fundamental rights and liberties.
It is not the proper vehicle to define accounting methods, data measures, projection periods, and other technical and economic concepts. The Constitution was
meant to be timeless; it should not prescribe annual policy choices.
• Second, any balanced budget amendment
would constrain macroeconomic policy.
The Government could be forced to raise
taxes or cut spending when the economy
was weak, which could cause or aggravate
recessions. While most proposed amend-

3A. PROSPERITY AND JOBS

ments would allow three-fifths of the Congress to override the requirements, and
could even allow an automatic suspension
of the requirements during a recession, the
real harm would be done when the amendment required fiscal contraction before a
recession was obvious. The amendment
would thus threaten the Nation's overall
economic strength, which is a principal
test of wise fiscal stewardship.
• Third, the balanced budget amendment
could encourage manipulation of the budget. It would strengthen the incentive to
shift costs off the budget through direct
regulation of the private sector, unfunded
mandates on states, creation of government-sponsored entities, or subtle accounting devices. For one example, some important government policies—such as certain
insurance and retirement programs—show
significant differences between costs measured on accrual and cash bases; accounting methods could be chosen to minimize
the measured deficit. For another, a reluctance to show the deterioration of the Nation's financial institutions led to tens of
billions of dollars of unnecessary costs for
thrift and bank restructuring. A balanced
budget amendment could encourage future
administrations to mismeasure such accruing costs, with potentially serious implications for long-term economic welfare.
• Fourth, the amendment would be extremely difficult to enforce. Tax and
spending policies—or the validity of forecasts of economic conditions, outlays and
revenues—could ultimately be decided in
the courts, by unelected judges. A frequently violated or manipulated amendment could bring disrespect for the Constitution as a whole.
• While an amendment would provide a
sense of action, it would not by itself provide any deficit reduction. In fact, the illusion of progress could delay the necessary
hard choices, leading to an even more economically damaging crunch when the
amendment finally took effect. The amendment is, in truth, a gimmick designed precisely to postpone the hard choices needed
to deal with the deficit problem. Past
Presidents and Congresses did not hide be-




83
hind the Constitution when the times required difficult and painful action. Indeed,
last year's enactment of a $500 billion deficit reduction package required no Constitutional amendment—only the leadership and will to make tough choices.
• Finally, an amendment would give a minority in Congress the power to bring government operations to a halt—and could
result in less deficit reduction, not more.
If economic or other conditions make a deficit inevitable, but three-fifths of the Congress is needed to pass a budget with a
deficit, then two-fifths plus one can prevent enactment of a budget. For that minority, there would be a tremendous temptation to demand some projects for their
constituents—after all, there would be a
deficit anyway—as the price for their votes
to pass a budget. This would make fiscal
policy excessively responsive to special interests and increase, not decrease, the deficit.
While the Administration is selective in
its support of budget process proposals, the
debate about methods should not obscure
the substantial agreement about goals. The
Clinton Administration is strongly committed
to the objectives of most proposed reforms—
sound fiscal policy, continued deficit reduction,
and vigorous long-term economic growth.
INVESTING FOR PRODUCTIVITY AND
PROSPERITY: SETTING PRIORITIES
UNDER BUDGET DISCIPLINE
At the outset of this Administration, the
economy needed Federal budget deficit reduction for both short-run and long-run reasons.
In the near term—as has been amply demonstrated—deficit reduction would reduce the
burden of Federal borrowing on the credit
markets, reduce interest rates, and thereby
stimulate credit-sensitive purchases and allow
the economy as a whole to grow. In the
long run, by freeing private savings to finance
private investment, deficit reduction encourages the capital formation needed to increase
productivity, raise living standards, and create
jobs.
But the economy also needs public investment for the long run—to provide physical

84

THE BUDGET FOR FISCAL YEAR 1995

infrastructure, scientific and technological
knowledge, and worker skills that allow the
private sector to prosper and grow. President
Clinton and Vice President Gore articulated
their program for public investment during
the election campaign in Putting People First;
that program was presented to the Congress
in A Vision of Change for America in the
early days of their Administration.
While deficit reduction and public investment are complementary prerequisites of economic health, they conflict in the budget.
Tax increases contributed less than half of
total deficit reduction in the President's economic plan—with the amount restricted to
limit the burden on middle-class families
and maintain economic incentives—and so
significant spending restraint was unavoidable. The Congress passed, and the President
signed, legislation mandating $107.7 billion
of discretionary spending savings over
1994-1998 through binding caps—a five-year
hard freeze. Yet discretionary spending must
implement much of this Administration's investment agenda.
The President's 1994 budget began the
process of increasing public investment
through discipline elsewhere in the budget.
The Congress followed the President's lead
and funded about two-thirds of his substantial
public investment program. This 1995 budget
continues on that same path. Despite the
tight discretionary cap—spending must actually decline in dollar terms, without any
adjustment for inflation—this budget provides
$7.7 billion of increases in outlays ($13.7
billion in budgetary resources) in the President's designated investments by making
tough choices in the other budget accounts.
The budget achieves the necessary savings
in the following ways:
• Choosing priorities. With limited resources, a dollar devoted to one objective
cannot be used for another purpose. The
President had to determine which goals
were most important. Accordingly, the
budget focuses its resources on the prerequisites of economic growth—infrastructure, scientific and technological knowledge, education, worker training, health
reform, personal security from crime and
drug abuse, and national security. Other




public purposes must take their proper
place in the line for resources. The result
is a budget that fulfills the commitment
to deficit reduction while funding the highest investment priorities.
• Achieving efficiencies. Given a set of priorities, there are more and less cost-effective
ways to pursue them. With limited resources available because of the imperative of deficit reduction, it is equally imperative to choose the best means to each
objective. Thus, the budget funds formula
grants for infrastructure rather than earmarked projects; civilian and "dual-use"
technology more than specialized defense
research; an unconditional "re-employment" system more than a plethora of narrow earmarked programs; and treatment
of hard-core drug abusers more than interdiction of drug shipments in vast "transit
zones." The broad range of such choices
is presented in the following discussion.
• Personnel reduction. The President directed the agencies and departments to
achieve reductions of 100,000 personnel by
the end of 1995 in Executive Order No.
12839. The National Performance Review
recommended increasing that reduction to
252,000 by the end of 1999; that recommendation was implemented through a
Presidential Memorandum of September
11, 1993, "Streamlining the Bureaucracy."
Personnel reductions on this track are included in this budget, and provide substantial spending savings.
• Administrative efficiencies. The President
further required that the agencies and departments achieve administrative savings
of 3 percent in 1994, increasing to 14 percent by 1997, in Executive Order No.
12837. Because administrative expenses
themselves do not achieve investment objectives, such costs are an appropriate
source of savings. The President's mandate, coupled with the budgetary pressures involved in meeting the discretionary cap, provide still further means of
achieving deficit reduction while funding
a significant investment program.
The following discussions show how, in
every priority area, tough choices were made
and efficiencies were achieved to allow deficit

3A. PROSPERITY AND JOBS

reduction and public investment to join—
for the long-term strength of the economy.




85







3B. Investing for Productivity
and Prosperity:
Setting Priorities Under Budget
Discipline




3B. INVESTING FOR PRODUCTIVITY AND
PROSPERITY
INVESTING IN P E O P L E

Our national economic strategy for America will put people first at every stage of their lives. We will
dramatically improve the way parents prepare their children for school, give students the chance to
train for jobs or pay for college, and provide workers with the training and retraining they need to
compete in tomorrow's economy.
President Bill Clinton

This discussion highlights significant Administration investments that follow through on
the President's commitment to "put people
first." These investments play a dual role.
In a global economy where a nation's only
unique resources are the skills and knowledge
of its workforce, these investments are the
key to prosperity. Further, because many
of these investments are targeted to our
youngest and least fortunate citizens, they
also help break the cycle of poverty and
open success to all.
The Administration is committed to producing real change in people's lives. To do
so within existing budget constraints requires
choosing investments with records of success
or the ability to leverage other resources.
It requires reforming programs to make them
more effective. And it requires combining
opportunity with an emphasis on responsibility.
Table 3B-1.

Each section of this discussion addresses
an important aspect of Investing in People:
• Investing in Young Children will ensure
that children start out healthy, are prepared to enter school, and receive good
parenting.
• Improving Education will raise the
achievement of all children, and help
reach the National Education Goals.
• Investing in the Workforce will aid students' transitions from school to work,
train the disadvantaged and retrain workers who lose their jobs in a changing economy.
• Encouraging National Service will provide
opportunities for young Americans to serve
their communities and earn educational
benefits in return.

MAJOR INVESTMENTS IN PEOPLE

(Discretionary budget authority; dollar amounts in millions)
1993
Actual
Young children
Education
Workforce Investments
National Service




5,977
7,278
5,010
279

1994
Enacted

1995
Proposed

Dollar
Change:
1994 to
1995

Percent
Change:
1994 to
1995

7,064
7,539
5,474
575

8,054
9,089
6,480
850

+990
+1,550
+1,006
+275

+14%
+21%
+18%
+48%

89

90

THE BUDGET FOR FISCAL YEAR 1995

• Reforming Welfare will hold parents responsible for their children and provide
them with the skills they need to support
themselves and their families through
work.
• Redirecting Housing Assistance for families will provide better neighborhoods for
raising children and expand opportunities
for work.
INVESTING IN YOUNG CHILDREN
As early as the fourth century B.C., the
philosopher Plato stressed the importance
to a just and prosperous society of investing
in children from an early age. In The Republic,
he discusses the type of poetry youth should
learn, physical exercise they should undertake
and diets they should follow to prevent
diseases. He observes
.. the first step,
as you know, is always what matters most,
particularly when we are dealing with those
who are young and tender. That is the
time when they are taking shape and when

any impression we choose to make leaves
a permanent mark."
Several millennia later, numerous scientific
studies confirm Plato's suppositions about
the importance of investing in our children.
Research on early, high-quality children's education programs shows gains that may last
into adulthood, including higher earnings,
lower unemployment rates, and lower crime
rates. Supplementing the diets of pregnant
women and infants, and immunizing children
against early childhood diseases, also save
lives and improve health. As Chart 3B-1
shows, these investments both enhance the
life prospects of children and save money
for the taxpayer over the long run.
Programs such as Head Start, childhood
immunization and the Special Supplemental
Food Program for Women, Infants and Children (WIC), with demonstrated success in
stretching the minds and strengthening the
bodies of children, ought to reach more of
their target population. Other programs like
Family Support and Preservation can teach

Chart 3B-1. RETURN ON INVESTMENTS IN CHILDREN
HIGH QUALITY PRE-SCHOOL

E5S5I ES5I

FOOD SUPPLEMENTS

EES

m m :

CHILDHOOD IMMUNIZATION

mm

i l l EE9
EES ES3 E S EE3
Z3
E5551

ISEil

8BB1

A Dollar Invested in One
High Quality Pre-school
Program Saved $7.16 in
Welfare, Crime and
Unemployment Costs
rtf. 1GKAFHM.BUDCHAP3B-A




E l l

liLiiilo liiiiliiil
A Dollar Invested in
Childhood Immunization Saves $14 in
Avoided Medical Costs

A Dollar Invested in
Nutritious Food
Supplements for Pregnant
Women Saves $1.77 to
$3.13 in Medicaid Costs
01/26/94

91

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

parenting skills, help families with children
at risk of abuse and neglect to stay together,
and avoid foster-care placements. Accordingly,
the Administration is committed to expanding
resources for such programs. These and other
programs for children and families also need
to be integrated in ways that insure seamless
services to recipients, as recommended by
the National Performance Review.
Working with the Congress, the Administration has already increased funding for these
programs by 19 percent. For 1995, the budget
proposes an additional 21 percent increase
for a total increase exceeding $2.6 billion
(or 44 percent) over the two years it has
been in office (See Table 3B-2).
Childhood Immunization
Children should be immunized against at
least nine diseases. Most inoculations should
be received by age two. Through grants
Table 3B-2.

to State and local health agencies, the Centers
for Disease Control and Prevention (CDC)
currently finance about a quarter of all
childhood immunizations. State, local, and
other Federal programs finance an additional
quarter. The remainder is financed through
the private sector.
Investments in childhood immunizations
have high returns in averted medical costs,
hospitalization and deaths. According to one
study, the combined measles, mumps and
rubella vaccine saves more than $14 for
every dollar invested. Increasing childhood
immunization keeps our children healthy,
prevents tragic, avoidable losses of life, and
reduces future medical costs.
While countries such as Belgium, Denmark
and Spain had immunization rates at or
above 80 percent for measles, polio, diphtheria
and tetanus by the mid-1980s, the United

PROGRAMS INVESTING IN YOUNG CHILDREN
(Budget authority; dollar amounts in millions)
1993
Actual

1994
Enacted

1995
Proposed

Percent
Change:
1994 to
1995

Percent
Change:
1993 to
1999

341
IS/A

WA

528

888
13,186

+68%

+54%

Head Start Funds
Head Start Slots (000s)
Percent of Target Population Reached3

2,776
714
51%

3,326
750
54%

4,026
840
60%

+21%
+12%

+ 246%
+53%

WIC Funds
WIC Recipients (000s)
Percent of Target Population Reached4

2,860
5,920
79%

3,210
6,510
85%

3,564
7,220
95%

+11%
+11%

+54%
+28%

Immunization Funds1
Children Receiving Immunization (000s) 2

Family Preservation and Support Funds 5
Individuals Served (000s)
Percent of Target Population Reached

—
—

—
—

WA

WA

WA

WA

WA

WA

WA
WA

WA
WA

150

+150%

WA
WA

WA
WA
WA

60

WA

Mandatory Programs
Discretionary Programs

5,977

60
7,064

574
8,054

+857%
+14%

+96%

Total

5,977

7,124

8,628

+21%

+209%

11995

funding shows a combined $464 million (current discretionary immunization program) and $424 million
(new entitlement program). Specific goals will be established after survey data become available.
2 Data is for all children up through age 18.
3 Target population is 1.4 million Head Start eligible children.
4 Target estimate is based on a 1993 CBO study estimating that 84 percent of all WIC eligibles will apply for
WIC.
5 Since Family Preservation and Support is a new entitlement program, participation estimates have not yet
been developed.
N/A: Not applicable




92
States had immunized only 55 to 65 percent
of its pre-school children. A survey of nine
cities in 1991 found a median measle, mumps
and rubella immunization rate of 38 percent
for children under two years. In some innercity areas, the vaccination rate may be as
low as 10 percent. For 1992, data indicate
higher vaccination rates, but 71-72 percent
of children at or below the poverty level
were still in need of at least one vaccine.
In the past, drops in vaccine use have
caused dramatic increases in the incidence
of preventable childhood diseases such as
measles and mumps. Reported measles cases,
for example, rose from a record low of
1,497 in 1983 to 46,000 between 1989 through
1991, before dropping again.
One barrier to childhood immunization has
been the high cost of vaccine. To eliminate
that barrier, the President sponsored an initiative, enacted in OBRA 1993, to establish
a new Federal vaccine entitlement program
by October, 1994. The new program, called
the Vaccines for Children Program, will buy
free vaccine for underinsured and certain
low-income children. With the new program
underway, health officials have set a target
of bringing vaccination rates for all twoyear olds nationwide up to 90 percent by
the year 2000.
Another barrier to childhood immunization
has been access to services. In 1995, the
Administration will request $46 million in
added discretionary funds for extended clinic
hours, mobile vaccination units, vaccine purchases, publicity campaigns about the importance of vaccinating young children and other
outreach activities. Combined funding levels
for the new entitlement program and the
current discretionary program represent about
a 68 percent increase over the past year's
funding level. Ultimately, the President's
health reform plan will have universal coverage for childhood immunization as part
of a comprehensive benefit package available
to all.
The Administration will continue to explore
linkages between participation in federally
assisted programs for child care and immunization, along the lines of school immunization
standards. When children are in group settings
like child care, infectious diseases are the




THE BUDGET FOR FISCAL YEAR 1995

most dangerous. Immunizing children in child
care programs can prevent the spread of
communicable illnesses.
Preventing childhood diseases by early immunization makes good sense. These measures
also help children enter pre-school programs
(such as Head Start) and elementary school
healthy and ready to learn.
Head Start
Head Start is a $3.3 billion program offering
comprehensive social services for pre-school
children. The 2,000 local Head Start centers
provide early childhood development services
such as education, health care, and nutritious
meals. The program helps disadvantaged preschoolers aged 3 to 5, 90 percent of whom
must be from families below the poverty
line, prepare to succeed in school.
In addition, virtually all of Head Start
families receive social services directly or
through referral from Head Start, and 36
percent of paid Head Start staff are current
or former Head Start parents.
Evaluations of Head Start children have
found short-term gains in IQs, better reading
and math skills, higher socio-emotional test
scores, and improved health status. Former
Head Start children are more likely to be
promoted to the next grade and less likely
to be assigned to special education classes.
Long-lasting positive effects are harder to
prove. One long-term study, which followed
a group of participants in a high-quality
pre-school program through age 27, found
that it returned $7.16 for every dollar invested
because it halved participants' crime rates,
significantly increased participants' earnings
and property wealth as adults, and increased
their labor-force participation. Unfortunately,
not all Head Start programs deliver the
high-quality services needed to produce such
results.
For these reasons the Administration is
committed not only to a major expansion
of Head Start, but also to improvements
in quality. To address both issues, the Administration appointed a bipartisan Advisory Committee in June 1993 to review Head Start
and make recommendations for its improve-

93

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

20 percent increase over the past year's
funding level; and it requests a 21 percent
funding increase for 1995. As Chart 3B-2
shows, the proposed number of Head Start
slots for children increases by about 18
percent from 1993 to 1995.

ment and expansion. This panel has identified
three principles to guide Head Start:
• Excellence.—We must strive for excellence
in serving both children and families. This
means more emphasis on improvements in
staffing, in financial management, in facilities, and in Federal oversight and research.

The budget supports significant and sustained increases to continue expansion of
Head Start services, to ensure quality in
all aspects of the program, and to provide
local flexibility to respond to family and
community needs. Program quality set-asides
of one quarter of the annual increase in
funding will be spent on higher staff salaries,
upgrades to facilities and teaching tools, and
transportation (such as new buses for the
children). For the children of working parents,
the Administration plans to offer about
100,000 all-day program slots by 1995 (See
Chart 3B-2) and about 290,000 by 1999.
These expansions and quality improvements
invest not only more, but also more wisely,
in the future of our most vulnerable children
and families.

• Expansion.—We must expand the number
of children served and the scope of services
provided in a way that is more responsive
to the needs of children and families. This
means more full-day, full-year programs,
more targeting of resources to high concentrations of poverty, and a possible expansion to younger children.
• Partnerships.—We must encourage Head
Start to develop partnerships with key
community and State institutions and programs with similar objectives.
The Administration has embraced this
framework in its vision of Head Start for
the 21st century. For 1994, it obtained a

Chart 3B-2. INCREASED ALL-DAY AND TOTAL
HEAD START SLOTS FOR CHILDREN
1993-1995

THOUSANDS

850

800 -

750 -

700

650 -

P
1993

1994
I REGULAR SLOTS

w t 1GRAPHM.BUDCHAP3B-B


http://fraser.stlouisfed.org/
150-001 0 - 9 4 - 4
Federal Reserve Bank of St. Louis

(QL 3)

1995

• ALL DAY SLOTS
01/26/94

94

THE BUDGET FOR FISCAL YEAR 1995

To maintain their intellectual and social
gains, Head Start alumni must enter stronger,
more challenging schools. The Administration's
reauthorization proposal for Title I is an
essential element in reforming and restructuring schools attended by poor children, and
for providing continuity between pre-school
and elementary school education (See the
following "Education" section).
Special Supplemental Food Program for
Women, Infants, and Children (WIC)
The WIC program, established in 1972,
improves the nutrition of eligible low-income
pregnant, breastfeeding
or post-partum
women, and their children under age five.
The program provides supplements such as
eggs, cereal, milk, juice, and cheese—foods
often lacking in low-income diets—as well
as nutrition counselling and referrals to other
services such as health care. To be eligible,
participants must have incomes below 185
percent of the poverty line (about $22,000
for a family of three in 1993) or receive
Medicaid, Food Stamps, or Aid to Families

with Dependent Children, and be found to
be at medical or nutritional risk. The program
is fully federally funded. Today, about four
in every ten babies born in America participate
in WIC.
Recent studies of WIC suggest the program
improves the health status of pregnant women
and reduces by 25 percent adverse birth
outcomes such as low birthweight among
Medicaid beneficiaries. Chart 3B-3, for instance, shows that in five States WIC mothers
consistently had lower percentages of babies
born with very low birthweights than nonWIC mothers. (Low birthweight causes health
and development problems—and is present
in 61 percent of all U.S. infant deaths.)
WIC also improves nutrition and prenatal
care, and lowers fetal mortality. One study
concluded that every dollar spent on WIC
for pregnant women saves $1.77 to $3.13
in Medicaid costs in the first 60 days after
birth. WIC has also been found to reduce
iron deficiencies in infants and improve vitamin and mineral intakes in young children.

Chart 3B-3. PERCENT OF CHILDREN WITH VERY LOW
BIRTHWEIGHTS BORN TO WIC AND NON-WIC MOTHERS




PERCENT

5 -

4 -

3 "

2

-

1

-

FLORIDA

MINNESOTA

N. CAROLINA

H WIC USER

S. CAROLINA

TEXAS

• NON WIC USER

SOURCE: 1987-1988 State data on Medicaid newborns.
01/25/94

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

Recognizing the role of WIC in children's
health, the 1994 budget provided a 15 percent
increase, or $427 million above the previous
year. The budget proposed that by the end
of 1996, States should have the funds to
serve the 7.5 million post-partum women,
infants and children who meet current eligibility requirements and want to participate
in WIC. In this year's budget, the President
seeks to increase WIC spending by another
11 percent. This will expand the program
to serve about 7.2 million women and children
in 1995—up from 6.5 million in 1994—
and maintain the funding needed to achieve
the participation targets in the 1994 budget.
Because participation in WIC is so closely
linked with improved health, the Administration further addresses WIC in the Health
Security Act, the President's health care
reform proposal. The Act includes a special
fund to supplement annual WIC appropriations, and thus ensure that the program's
participation targets for 1996 will be met.
Parenting and Family Support
Although government can improve the
health, nutrition, and education of children,
even more important to their welfare is
good parenting and strong families. Yet some
parents receive almost no help in learning
to raise the next generation, and new babies
do not come with easy-to-read instructions.
The Home Observation for Measurement of
the Environment scale, which measures conditions like the quality of the physical environment, the availability of intellectual stimulation, and the degree of emotional support
provided by parents, suggests that 11 percent
of all children aged 3 to 5 years have
deficient home environments. Among lowincome households, this rate more than doubles. Today, parenthood is all the more
difficult because of the dual burdens of so
many working mothers, parents who are
trying to raise children alone, and the gradual
decline in informal sources of information
and support, such as extended families. Substance abuse, community violence, poverty,
and homelessness have touched too many
families, making the challenge of raising
healthy children even greater.




95
Most families can raise their children with
only a little extra help, but some need
more intensive services, and a few have
such serious problems that there is no alternative to out-of-home placement. From 1981
to 1991, child abuse and neglect reports
increased two-fold to about 2.7 million (Chart
3B-4), and the foster care caseload increased
by roughly 60 percent, to nearly 430,000
children. By 1990, there were approximately
six children per thousand in foster care,
the highest measured rate since 1962. Aside
from the trauma of being removed from
their parents, children in foster care also
may face frequent shuttling between foster
homes and interminable waiting periods before
permanent placement (a phenomenon known
as "foster care drift").
To meet the needs of families for both
preventive services, like parenting education,
and more intensive crisis services, communitybased programs have sprung up across the
country. But such services reach too few
families. Recognizing this, the President proposed a major new program, Family Preservation and Support, in 1993. This new law,
the most significant change in over a decade,
will provide services such as family counselling, respite care of children, stress management and parenting skills training. The new
program:
• provides community-based services that
help and support parents to raise their
children more effectively;
• prevents abuse and neglect before they
occur; and
• helps children in foster care to return to
their families as quickly as possible.
Family Preservation and Support, which
will provide over $900 million over five
years, has a 75 percent Federal funding
match rate. Families with children at risk
of placement in substitute care and parents
opting to improve their parenting skills are
eligible, without regard to income levels.
Using the new funds, States could expand
home visiting programs like the Home Instruction Program for Preschool Youngsters in
Arkansas and the Parents as Teachers program in Missouri, which have been replicated
in almost every State.

96

THE BUDGET FOR FISCAL YEAR 1995

Chart 3B-4. GROWING CHILD ABUSE AND NEGLECT REPORTS
1981-1991
MILLIONS

2.8

2.6
2.4
2.2
2.0
1.8
1.6
1.4 "
1.2

- , "

-

1.0 w-

.

v

*.,...

.. - ,
• ...

-

.

i

.

•...

" ..

"'•".

.

..

-.A

. ..." kK

,^

• .

. ...

.«

^-.'-s -

- «

.• '

V

* v..

:

V./>1" ''' ' '"•
~•
-v.:*'-v.* -

"

:>*.
.>.

'

-> v

•,.

,-

...-' .

0

1981

1983

1985

1987

1989

1991

NOTE: Sources of duplication are multiple reports within a year on one child and multiple sources reporting a single incident.
ret 1GRAPH9S.BUDCHAP3B-D

01/25/94

Home visiting programs, which are provided
nationwide in countries such as the United
Kingdom and Denmark, can teach parents
about child development, provide developmental^ appropriate activities for parents and
children to complete together, and ensure
developmental screening of participating children. Longitudinal studies have found lasting
benefits from some targeted home visiting
programs in the United States, including
less welfare dependency, a lower incidence
of abuse and neglect, and higher IQ scores.

also obtained changes to the cluster of programs that provide child welfare services:

States will also provide services such as
intensive family preservation. Such programs
employ caseworkers to work intensively with
troubled families in their homes for a short
time. Caseworkers provide referrals for problems such as substance-abuse treatment where
needed, and help families cope with stress
and other factors that may lead to child
abuse and neglect.

• An estimated $35 million of the Family
Preservation and Support funds will be
awarded as grants to State court systems
to determine more effective, streamlined
ways to handle foster care cases and to
otherwise apply child welfare laws judiciously. Overcrowded court dockets make
it difficult to adjudicate child welfare cases
swiftly and contribute to foster care drift.

In conjunction with the Family Preservation
and Support program, the Administration

• The Independent Living program, which
provides transitional support to foster chil-




• States receive three years of enhanced (75
percent) Federal funding matches to develop automated child welfare management information systems. Such systems
provide regular and timely status updates
for each child in the child welfare system,
allaying long-time concerns that many
States do not have adequate information
about the children they have in foster
care.

97

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

dren who "age out" of the foster care system, was permanently reauthorized. Independent Living teaches teenagers basic
skills such as how to budget their income,
keep house, and find a job. The program
will continue at its current annual level
of $70 million.
• $26 million of the authorized funding for
Family Preservation and Support is set
aside for evaluation, research, demonstration, training and technical assistance. Because the Family Preservation and Support program is new, it is important to
monitor how well it works. Evaluation
grants will help to determine which types
of services best help families of at-risk
children and teach good parenting skills.
Millions of parents struggle to raise children
with little assistance or support from the
community. New and inexperienced parents
may lack the knowledge to raise a child.
Families may not get services until they
are reported for abuse or neglect, and sometimes not even then. Family preservation
and support services help communities deliver
parenting training and assistance to troubled
families before crises erupt.
The Administration pledges to seek significantly greater resources for programs such
as childhood immunization, Head Start, WIC,
and Family Preservation and Support. Such
programs can improve the life prospects for
children, especially those from low-income
families, and help ensure that they enter
the school system ready to learn.
EDUCATION
A world-class education for all children
is one of the Administration's highest prior-

ities. The American education system is a
partnership of States, communities, educators,
and parents, but national leadership is essential. With enactment of the Administration's
legislative and budget proposals, the Federal
Government will become a full partner in
the nationwide effort to raise the educational
achievement of all children and reach the
National Education Goals.
The Administration has proposed new education legislation and seeks increased resources to improve the education system.
The discretionary budget authority increase
for the Department of Education—seven percent, or $1.7 billion, over 1994—is one of
the largest increases for any department.
The Administration is not just proposing
to invest more. It is also proposing to reinvent
the Federal role in elementary and secondary
education to raise faltering educational
achievement. The new role would change
the whole system, through high standards
and accountability for results; new flexibility
for States, communities and schools; and
new Federal funding to support them.
Elementary and Secondary Education
The elementary and secondary education
system is in serious trouble, and has been
for many years. Government at all levels,
business groups, and others have documented
low educational performance relative to other
nations, declining college entrance test scores,
weak educational preparation of teachers,
substantial numbers of adults without the
literacy skills to get a driver's license or
read a ballot, and inefficiencies in school
management. Federal, State and local spending for elementary and secondary education
has soared during this period—rising 33 per-

LEGISLATION PROPOSED AND ENACTED:
The Student Loan Reform Act of 1993
National Service Trust Act of 1993

LEGISLATION PROPOSED AND PENDING IN CONGRESS:




The
The
The
The

Goals 2000: Educate America Act
Improving America's Schools Act
Safe Schools Act
School-to-Work Opportunities Act

98

THE BUDGET FOR FISCAL YEAR 1995

Table 3B-3. FUNDING OF SELECTED INVESTMENTS TO RISE 23
PERCENT IN 1995
(Budget authority; dollar amounts in millions)
1993
Actual

Goals 2000
School to Work (Education and Labor)
Title I Education for Disadvantaged
Safe and Drug-Free Schools
Head Start
National Service

1994
Enacted

1995
Proposed

Dolloar
Change:
1994 to
1995

Percent
Change:
1994 to
1995

700
300
7,579
660
4,026
850

+595
+200
+667
+188
+700
+275

+567%
+200%
+10%
+40%
+21%
+48%

10,333

Total

6,696
582
2,776
279

105
100
6,912
472
3,326
575
11,490

14,115

+2,625

+23%

Chart 3B-5. MATHEMATICS TEST SCORES OF
13-YEAR-OLDS IN SELECTED COUNTRIES
AVERAGE PERCENT CORRECT

80-

SOURCE: U.S. Department of Education, National Center for Educational Statistics,
International Assessment of Educational Progress, I^aminy Mathematics, by Educational Testing Service, 1991.
nt I R M SID H PB
C A PJI C A 3 B

cent in constant dollars from 1982 to 1992—
without comparable nationwide improvement
in student achievement.
Few States or school districts have established challenging performance standards for
their students; most measure progress with




01/25/94

tests that are not related to the material
taught. Parents can rarely obtain information
to hold their children or the schools accountable for performance. There are many examples of individual schools, teachers, and States
changing their systems and achieving good
results. But there are too few such examples

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

to improve educational performance nationwide.
The Nation's Governors and the Federal
Government agreed in 1990 to the National
Education Goals.
THE NATIONAL EDUCATION GOALS.
By the Year 2000:
1. All children will start school ready to learn.
2. High school graduation rate at least 90 percent.
3. Competency in challenging academic subjects.
4. First in the world in science and mathematics.
5. Literacy for all adults.
6. Safe and drug-free schools.

National goals are the first step. Still
needed are: challenging academic standards;
curricula designed around those standards;
teachers trained in helping children learn
the curricula; and assessments that fairly
and accurately measure progress so that
there will be accountability to students and
parents.
Systemic Reform.—The centerpiece of the
Administration's education reform agenda is
the Goals 2000: Educate America Act Sent to
Congress by the President on April 21, 1993,
Goals 2000 will provide the national framework to coordinate Federal, State, and local
efforts into an integrated strategy for effective
education reform.
Goals 2000 will disseminate reforms
throughout the education system. In 1993,
about half of the States were planning for one
or another of the components of systemic reform, but only one or two had fully developed
plans and timetables for reform. School reform
has to move more rapidly and more consistently in all school districts in order to achieve
dramatic improvement in educational achievement. Educators, business leaders, and parents
are beginning to learn what works; these findings must now be used to improve schools in
much larger numbers and in approaches designed by each community to meet its needs.
New resources and national assistance under
Goals 2000 will encourage communities and
States to focus their efforts and sharply accelerate the pace of reform.
States and communities will receive new
Federal funds and other assistance to change




99
whichever parts of their systems stand in
the way of world-class performance. Some
States need to plan and test new ideas.
Others need funds for teacher training and
technical assistance to implement reforms
in all schools. Still others need to replace
outmoded tests with multi-faceted assessment
systems linked to the new standards and
curricula.
For 1995, the Administration seeks $700
million for Goals 2000, an increase of $595
million over the 1994 appropriation. Beginning
in 1996, the budget calls for annual appropriations of $1 billion. With this major commitment, every State and as many as 20,000
public schools (about one-fifth of all schools
in the nation) would receive financial assistance to implement reforms by 1996, with
more schools added every year thereafter.
Goals 2000 would also establish an independent National Education Goals Panel, consisting of governors, State legislators, Congressional leaders, and Administration officials.
The Panel would monitor the Nation's progress
toward the education goals and report annually on accomplishments and remaining problems. The Act would also create: a National
Education Standards and Improvement Council to certify voluntary national and voluntary
student performance standards; and a National Skill Standards Board, to work with
business, labor and schools to develop standards for what students should know to enter
different careers. State and local participation
would be voluntary, in keeping with this
Nation's tradition of local and State control
of education. However, these groups will
provide much-needed models of world-class
standards toward which reformers can aim.
The Improving America's Schools Act—
Goals 2000 would provide the new educational
setting in which over $10 billion would be
spent under the Administration's proposal to
reauthorize and restructure the Elementary
and Secondary Education Act (ESEA). The proposal was transmitted to Congress on September 13, 1993 as The Improving America's
Schools Act.
Particularly in the largest ESEA program,
Chapter 1 (1994 funding: $6.9 billion), Federal
law and policy since the mid-1960s have
stressed discrete and separate services for

100
children with low educational achievement.
Unfortunately, that approach has too often
failed to improve the overall education they
received. Emphasis has been on compliance
with resource tracking rules, not on improved
educational performance. Constant testing is
required, using tests that stress mastery
only of low-level basic skills, not challenging
subject matter. Little has been done to improve the training of teachers or the quality
of curriculum.
National evaluation studies by independent
groups and the Department of Education
document that Chapter 1 and other ESEA
programs have had little impact on the
educational progress of the five million children served, despite expenditure of tens of
billions of dollars over the years. Furthermore,
studies provide stark evidence that the educational achievement of children in schools
with the highest levels of poverty is very
low. Over half the children in schools with
the highest concentrations of poverty are
low achievers, compared to only 15 percent
in schools with the least poverty. ESEA
programs need to be restructured to produce
better results.
The Administration's reauthorization proposal is based on five principles:
• High standards for all children.—This is
the essential starting point for improving
student and school performance. Federal
programs, particularly those for at-risk
children, have generated low expectations
for students, focusing instruction on lowlevel basic skills. To receive funding under
the new proposal, schools would set challenging performance standards for all students, including those at most risk of failure, and design curricula based on those
standards.
• Focus on teaching and learning.—Opportunities for professional development of
teachers and other school staff have been
haphazard, short-term and ineffective. An
expanded "Eisenhower Professional Development Program" would support quality
pre-service and in-service training and
education for teachers and administrators.
These would be tied to the high standards.
A system of regional technical assistance
centers would coordinate Federal pro-




THE BUDGET FOR FISCAL YEAR 1995

grams and would assist States and communities implementing educational improvements. A new education technology
program would support innovation to raise
educational achievement for all students.
• Flexibility to stimulate local initiative, coupled with responsibility for improved student performance.—Flexibility and responsibility would replace compliance with administrative process regulations as the
hallmark of ESEA programs. The proposal
would give schools and communities greater flexibility by simplifying the law and
providing a broad waiver authority to remove Federal obstacles to State and community success. More schools with the
highest concentrations of poor children
could use Federal funds to raise educational improvement throughout the
whole school rather than for selected
grades or groups of students. A public
"charter schools" initiative would encourage teachers, parents and others to create
their own high-performance schools,
"schools within schools," or clusters of
schools, operated outside restrictive rules
and regulations. Funding for the proposal's Title I (successor to Chapter 1) could
help extend the school day or school year.
Under Title I, schools and school districts
would be sanctioned for failure to make
progress toward State performance standards, and would be rewarded for outstanding performance.
• Link schools, parents, and communities.—
Schools alone, particularly in high poverty
communities, cannot ensure that all students reach high standards. The new Act
will encourage and enable parents to work
in partnership with teachers and administrators to improve learning, and help
schools forge strong ties with community
social services. Parents would be encouraged to help their children do well in
school.
• Resources targeted to greatest needs and
in amounts sufficient to make a difference.—Federal resources are currently
spread too thinly across too many schools.
Academic performance tends to be lowest
in schools with high concentrations of poor
children. Under the new Act, Title I funds

101

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

would be better targeted to the poor children in the schools and school districts
serving areas with the highest concentrations of poverty. In the Migrant Education
program, funds would be targeted to the
children with the greatest need for additional services: those children who have
moved within the previous 24 months.
Thirty percent of resources distributed by
States to school districts under the Safe
and Drug-Free Schools and Communities
program would be targeted on a limited
number of high-need school districts.
Overall, spending on ESEA programs would
increase more than $900 million over 1994.
State and local programs under the restructured ESEA Title I would be funded at
$7.6 billion, an increase of $667 million,
or 10 percent, over comparable activities
in 1994.
Safe and Drug-Free Schools.—Violence
and drug and alcohol abuse in many schools
make effective teaching and learning impossible. On May 25, 1993, the Administration
proposed the Safe Schools Act to help schools
reduce violence by adding security personnel,
finding and removing weapons, and teaching
alternative approaches to dispute resolution.
Congress appropriated $20 million for 1994
contingent upon enactment; the budget includes $100 million for 1995.
In addition, the Administration proposes
to expand the current "Drug-Free Schools
and Communities Act" into a new Safe and
Drug-free Schools and Communities program
that would add violence prevention activities.
The budget requests $560 million for the
new Act, an increase of $108 million, or
24 percent, over comparable activities in
1994. Beginning in 1996, the separate Safe
Schools Act would be phased out as comprehensive State and local violence and drug
abuse prevention strategies take over. (See
also Chapter 5, "Personal Security: Crime,
Illegal Immigration, and Drug Control.")
School- to- Work Opportunities Act.—In
contrast to those in other industrialized nations, few of our Nation's schools work with
businesses to prepare students for the workplace or further skill training. The School-toWork Opportunities Act, sent to Congress on
August 4, 1993, provides a framework to help




States implement such strategies, and increases funding to $300 million, $200 million
more than Congress appropriated for comparable activity in 1994. (See the following
"Workforce Investment" section.)
Improving literacy.—Findings from the
National Adult Literacy Survey indicate that
over 40 million adults can function only at
the lowest literacy proficiency level—unable to
do even simple tasks, such as locating a meeting time and place on a form. Literacy must
be addressed at all age levels. Even Start in
the Education Department and Head Start in
the Department of Health and Human Services both address inter-generational literacy by
working with young children and their parents
together. Grants to States under the Adult
Education program would be funded at $267
million, an increase of $12 million, or 5 percent
over 1994, to help States provide basic literacy
improvement and high school equivalency degrees for disadvantaged adults. Workplace literacy grants would be funded at $24 million,
$5 million, or 26 percent above 1994 to help
businesses work with educational institutions
to raise the literacy levels of workers.
Head Start.—The budget provides $4 billion for Head Start in 1995, an increase of
$700 million, or 21 percent over 1994. Head
Start is the key program in the Federal Government's strategies to help the Nation reach
the first National Education Goal of all children entering school ready to learn. The Administration's Title I proposal calls for coordination with Head Start in each Title I school
district. (See the previous section, "Investing
in Young Children.")
Postsecondary Education
Increasingly, the economy demands, and
high-paid jobs require, education or training
beyond the high school level. Yet without
grants or loans, higher education is beyond
the reach of many families. The Federal
Government is the largest provider of needbased student aid. The major Federal programs are Pell grants and student loans.
The loan programs have become very costly,
difficult to administer, and subject to abuse.
The growing use of loans to finance postsecondary education and training overburdens
increasing numbers of borrowers, who often

102

THE BUDGET FOR FISCAL YEAR 1995

make career decisions based more on the
income needed to pay off debt than on
real career desires.
In response, the President sent to Congress
two bills: The National Service Trust Act
and The Student Loan Reform Act. Both
were enacted in 1993. (See the "National
Service" section below.)
The Student Loan Reform Act—The
guaranteed loan system that has evolved since
1965 is riddled with administrative complexities; provides high subsidy payments to banks,
intermediary guaranty agencies and secondary
markets; confuses students and schools; and
has default costs in excess of $2 billion per
year. It has been the subject of repeated Congressional investigations and GAO and Inspector General criticisms.
The Administration's Student Loan Reform
Act replaces guaranteed lending with Federal
direct lending. Direct lending, plus the Act's
reductions in the cost of the guaranteed
program during the phase-in period, saves

taxpayers $4.3 billion (CBO estimate) over
the first five years. The Act lowers charges
and interest rates paid by borrowers and
increases fees on banks, guaranty agencies
and secondary markets. Direct lending simplifies administration, over time eliminating
from new lending the 8,000 banks, 46 guaranty agencies and the secondary markets.
The Act phases in direct lending over several
years, so that by 1998, at least 60 percent
of lending will be direct lending—or more
if the schools ask for it. The direct and
guaranteed loan programs together provide
about $20 billion per year in loan capital
to 5.5 million borrowers.
The new Act creates income-contingent repayment options for direct loan borrowers.
Instead of repaying on fixed or other amortization schedules over ten years or less, regardless of earnings, borrowers may repay loans
as a small percentage of income over an
extended period. Borrowers may also suspend
repayment during times of low family earnings, to avoid defaults. All borrowers who

Chart 3B-6. PELL GRANT INCREASES
DOLLARS IN MILLIONS

PROGRAM COSTS

MAXIMUM AWARD

DOLLARS

2,6002,5002.400

2,400-

2.400

2.400
2.300

2,300-

2.300

1993

1994

2,200
2,100
2,000
1993

RECIPIENTS IN THOUSANDS

1994

RECIPIENTS

1995

1990

1991

1992

1995

AVERAGE AWARD

4,400-

1993
ret iGRAPH9S.MJDCHAF3BNEW-F




1994

1995
01/26/94

103

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

now have loans, or will take out guaranteed
loans during the phase-in period, can convert
those loans to Federal direct loans to take
advantage of income-contingent repayment.
Through this repayment option, borrowers
may take volunteer or low-paying community
service jobs and still meet their loan obligations.
Program management.—The rapid growth
in size and complexity of the postsecondary
grant and loan programs through the 1980s,
accompanied by inadequate Federal management, led to substantial abuses by some
schools and default costs exceeding $2 billion
per year. Laws enacted since 1989, especially
the Higher Education Amendments of 1992,
give the Education Department many new
tools to improve the integrity of the programs,
protect students, and reduce defaults. In particular, the new State Postsecondary Review
Program, for which the budget seeks $35 million, $14 million—or 65 percent—over 1994,
reviews schools with indications of program
abuses and helps remove unscrupulous schools
Table 3B-4.

from student aid programs. The Student Loan
Reform Act, when fully implemented, will further simplify loan program administration.
The budget provides new staff and resources
to manage student aid programs.
Pell grants.—The 1995 budget provides
$6.5 billion for the Pell grant program for
school year 1995-1996. Of this amount, $118
million would complete the retirement of the
current estimate of the funding shortfall from
prior years. For school year 1995-1996, $6.4
billion would provide grants to 4.1 million individuals, the most ever. The Administration
also proposes to increase the maximum award
by $100 to $2,400.
The Department of Education Budget
Discretionary budget authority for the Department of Education in the 1995 budget is
$26.1 billion, an increase of $1.7 billion, or
7 percent over 1994. Although a number of
programs would receive increased funding, not
all of Education's 230 current programs should
be funded or have funding increased. Many

EDUCATION DEPARTMENT BUDGET INCREASES 7
PERCENT OVER 1994
(Discretionary budget authority; dollar amounts in millions)
1993
Actual

Goals 2000
School to Work (Education share)
Title I
Safe and Drug-Free Schools
Impact aid
Professional Development
Bilingual and Immigrant Education
Education of the Disabled
Vocational and Adult Education
Pell Grant Program
Pell Grant Shortfall
Work-Study; Supplemental Grants
Other Student Aid Programs
Historically Black Colleges
Other Higher Education Programs
Research and Statistics
All Other
Total




1994
Enacted

1995
Proposed

Dollar
Change:
1994 to
1995

Percent
Change:
1994 to
1995

6,696
582
840
711
213
2,966
1,474
5,788
671
1,200
253
98
735
189
1,278

105
50
6,912
472
798
650
227
3,109
1,481
6,304
250
1,200
245
101
793
202
1,455

700
150
7,579
660
750
800
254
3,295
1,447
6,393
118
1,300
18
106
783
226
1,481

+595
+100
+667
+188
-48
+150
+27
+186
-34
+89
-132
+100
-227
+5
-10
+24
-26

+567%
+200%
+10%
+40%
-6%
+23%
+12%
+6%
-2%
+1%
-53%
+8%
-93%
+5%
-1%
+12%
-2%

23,694

24,354

26,060

+1,706

+7%

—

—

104

THE BUDGET FOR FISCAL YEAR 1995

are too small to have any significant impact.
Others address lower-priority issues, are ineffective, or have long since accomplished their
original purpose. The National Performance
Review (NPR) cited 34 such programs. Seven
of these were terminated by Congress in 1994.
The remaining 27 NPR programs, plus another
six programs, would be ended by the 1995
budget. Thus, 33 programs, funded for a total
of $639 million in 1994, would receive no funding in 1995. For example, the budget provides
no funding for the Impact Aid "b" program,
funded at $123 million in 1994. Impact Aid
generally compensates schools for educating
children who live on, or whose parents work
on, Federal property. Funding is continued for
children who both live on and have parents
who work on Federal property.
WORKFORCE INVESTMENTS
Economic change has challenged America
throughout its history, and successfully meeting this challenge has long set America
apart from less flexible societies. But in
recent years, advancing technological developments, defense downsizing, corporate restructuring, and intensifying global competition
have altered the nature of our challenge.
Many Americans are anxious about economic
change and fearful about their economic security.
Current training and unemployment programs were designed in a different time
to suit a different economy. When the existing
Table 3B-5.

system was established, a much larger number
of low-skill, entry-level jobs awaited highschool graduates. Today's typical eighteenyear-old needs a higher level of skill to
compete in the emerging global economy.
A large share of the unemployed cannot
expect to return to their old jobs, and must
seek new work. Gaining entry to the labor
market requires a higher level of skill. Finally,
maintaining membership in the workforce
requires greater flexibility.
This means fundamentally rethinking government's role in the labor market. The
transition from school to work is at once
more important and more difficult to manage.
As skill requirements rise, the transition
from one job to the next is more hazardous
and, for some, more common. To preserve
Americans' historical adaptability and openness to change, government must help citizens
equip themselves to negotiate these workforce
transitions.
To boost productivity growth and create
a better-prepared workforce, the Administration has proposed new investments in working
people, and a shift in policy from simply
buffering the pain of unemployment to actively
promoting re-employment. Despite the extraordinary budget constraints facing all discretionary programs, the 1995 budget includes
$6.5 billion in budget authority for employment and training programs, an increase
of $1.0 billion, or 18 percent, from the
1994 level. (See Table 3B-5.)

WORKFORCE PROGRAMS

(Budget authority; dollar amounts in millions)
1993
Actual
Grants for Training the Disadvantaged
Dislocated Worker Assistance
Job Corps
Summer Youth Employment
School-to-Work (DOL Share)
One-Stop Career Shopping
Other Employment and Training




Total

Percent
Change:
1994 to
1995

1994
Enacted

1995
Proposed

676

1,647
1,118
1,040
888
50
50
681

1,729
1,465
1,157
1,056
150
250
673

+5.0%
+31.0%
+11.3%
+19.4%
+200.0%
+400.0%
-1.1%

5,010

5,474

6,480

+18.4%

1,692
651
966
1,025

—

105

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

The Clinton Administration's three-pronged
workforce investment strategy will finance
initiatives that promote: (1) first jobs for
people just entering the workforce; (2) new
jobs by easing access for workers in transition
from one job to the next; and (3) better
jobs for all Americans as the economy continues to evolve.
First Jobs
The Administration's budget request includes targeted increases in high-payoff measures to ensure all young Americans a solid
start in the working world.
Building a National School-to-Work System.—Too few young Americans possess the
skills they need to qualify for entry-level jobs
in high-wage careers. The proposed School-toWork Opportunities Act, passage of which is
anticipated in 1994, will provide students with
on-the-job experience tightly integrated with
classroom training, leading to a school diploma
and, for most students, a degree or diploma
certifying successful completion of at least one
year of postsecondary education, and an industry-recognized credential with currency in the
job market. The proposed legislation contains
special provisions for serving poor and at-risk
youth.
The program operated as a demonstration
in 1994. For 1995, the budget requests $150
million each for the Departments of Labor
and Education for expanded activities. Under
the proposed legislation, a nationwide system
would be established in waves, with states
competing—on the basis of innovative program
designs—to join earlier waves. All States
would have the opportunity to implement
school-to-work systems by the end of 1997.
In the long run—once Statewide systems
are in place—the Federal role will be limited
to information dissemination and program
evaluation.
Expansion of the Job Corps.—The Job
Corps is America's oldest, largest, and most
comprehensive residential training and education program for young, unemployed, and
undereducated youth. Designed for severely
disadvantaged youth ages 14 through 24, the
program breaks the cycle of poverty and welfare dependence by providing the vocational
training and job placement that youths need




to become taxpaying citizens. The $1.2 billion
program boasts a proven track record and is
administered through a network of 109 centers, located in 45 states, Puerto Rico, and the
District of Columbia.
The budget requests $100.5 million to expand this proven program. An additional
$30 million is requested to address a backlog
of needed repairs. The expansion funds would
launch six new centers in addition to the
eight initiated last year. When the current
expansion is completed over the next decade,
the number of centers will have increased
to 162 and the number of slots from 42,500
to 62,500—a 50 percent increase in capacity.
Summer Youth Employment.—Title II-B
of the Job Training Partnership Act authorizes
the Summer Youth Employment and Training
program, which provides temporary summer
jobs and academic enrichment for disadvantaged youth ages 14-21. Internal audits and
external reviews show that the young people
involved in the program are well-supervised,
perform useful work for the community, and
often receive substantial education benefits.
The increased funding will maintain approximately the same participation level in the
summers of 1994, 1995, and 1996 as were supported in the summer of 1993.
The Administration's request for programs
helping youth into their first job does not
reflect an automatic, across-the-board increase
in all programs. Indeed, while proven or
promising approaches are expanded, $60 million less is being sought for one major
program—Title II-C of the Job Training Partnership Act—until the Administration can
remedy problems it has identified in the
program.
New Jobs
Each year, about 27 percent of all U.S.
workers move to new jobs, whether to advance
careers or rebound from job loss. Countless
others fear job loss and feel insecure about
their employment outlook. The Clinton Administration's "new jobs" investment initiative
will help experienced workers move from
one job to the next, and ease fears about
job change. Proposed for this purpose are
a $1.5 billion comprehensive worker adjustment program for displaced workers and

106
$250 million to continue work on a network
of one-stop career centers with improved
labor market information and services for
all job-seekers, as well as a small but strategic
investment in a national network of occupational skills standards. The "new jobs" initiative also builds on the recently mandated
program for "profiling" claimants for unemployment benefits. Profiling identifies workers
likely to have difficulty finding new jobs
and refers them to intensive job search
assistance programs early in their period
of unemployment.
While the Federal Government spends more
than $1 billion annually for worker adjustment
assistance, existing programs often are rigid
and ineffective, and serve only a fraction
of the 2 million workers permanently displaced
each year. A patchwork of categorical programs targets subsets of the dislocated worker
population—such as workers displaced by
trade, defense downsizing, or environmental
initiatives—raising serious concerns about equity and efficiency.
The Administration will propose legislation
to consolidate, expand, and improve existing
programs under a comprehensive Workforce
Security program. The 1995 budget includes
$1.5 billion for the new program, a 31
percent increase from the 1994 level. Serving
some 750,000 workers in its first year of
operation, the Workforce Security program
is projected to serve 1.3 million dislocated
workers or virtually all of those estimated
to need and want services upon full implementation. Program expansion would refine and
build on growth already begun with the
Administrations 1994 dislocated worker investment proposal. In 1994, the $1.1 billion
in budget authority for dislocated worker
assistance was a 72 percent increase over
the prior year, and the corresponding number
of participants is estimated to rise 43 percent,
reaching 500,000.
The Administration's Workforce Security
program emphasizes services with proven effectiveness, and those that displaced workers
find most valuable. Early outreach is the
critical first step in helping dislocated workers.
Thus, the new program will improve State
rapid-response activities and refer UI applicants who have been identified as at risk




THE BUDGET FOR FISCAL YEAR 1995

of long-term unemployment to early reemployment services. In addition, all dislocated
workers will have access to basic reemployment services, including (1) information on
job openings, labor market trends, and the
quality of education and training providers;
(2) referral to appropriate programs, including
student financial aid; (3) individual assessment; (4) job counseling; and (5) job search
assistance, including job clubs. Dislocated
workers who need more intensive services
can choose long-term training, in the form
of occupational skills training (both classroom
and on-the-job), basic skills training, and
entrepreneurial training.
Most importantly, the new program will
hold training providers accountable for their
results. Potential trainees will be armed with
information on the track record of training
providers, including their success in keeping
participants enrolled, placing them in jobs,
and securing higher earnings and licensure
rates for their graduates. Unscrupulous or
unsuccessful training providers whose curricula fail to meet these—and other—quality
standards will be barred from program participation.
Finally, under the legislation, qualified longterm trainees will receive supportive services
and be eligible for income support to allow
them to complete training and launch new
careers.
As another part of the "new jobs" investment
strategy, the Administration proposes to establish a network of user-friendly One-Stop Career Centers to provide a single point of
entry into the employment and training system. Growing from a 1994 budget of $50
million, the proposed 1995 funding of $250
million will provide Federal "seed money"
to help States plan and implement programs
that streamline access to the full range
of employment and training services—aided,
where necessary, by waivers of Federal requirements. Eventually, the Administration's
One-Stop Shopping initiative will provide all
jobseekers with easy access to jobs, career
information, and Federal training and employment programs.
Finally, one title of the Administration's
"Goals 2000" initiative (discussed under "Education" above) is pivotal to the "new jobs"

107

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

agenda. The Administration requests $12 million for Title IV of Goals 2000, which authorizes a National Skill Standards Board. This
program would create a national system of
voluntary skill standards and certification.
These standards will introduce real accountability to the training system and insure
that workers make the investments that
firms value.
Better Jobs
The Administration is pursuing three tactics
to create an environment for better jobs.
The first tactic focuses on the economy in
general, stimulating investment through low
deficits; investing in new technologies; expanding retraining programs; and opening global
markets to American made products. The
second and third focus on the job site,
promoting the high performance workplace
and enhancing enforcement of workplace laws.
Toward the second goal, the Secretary of
Labor is initiating a new mission of promoting
high performance workplace practices such
as employee training, performance-based pay,
and front-line decision-making. This is an
innovation with important practical consequences for companies and workers, but
one that, by design, has few Federal budgetary
consequences.
To meet the third goal, the Department
of Labor is launching new efforts to enforce
workplace rules that protect both workers
and responsible employers and that will total
355 staff and $66.7 million. These additional
resources would address new responsibilities
under recent laws such as the Family and
Medical Leave Act and new regulations. Also
included are initiatives addressing new workplace hazards, inspection of small mines and
mine health issues, review of the periodic
roll in the Federal Employees' Compensation
Act program, and coordinated, high-profile
enforcement interventions that focus on repeated and egregious violations of key labor
laws.
In addition, the Administration will work
with Congress to improve occupational safety
and health. Reforms could include: a decentralized worksite-based approach to workplace
safety and health, such as written health
and safety programs and worksite health




and safety committees; extension of OSHA
coverage to Federal, State, and local government employees not now covered by the
Act's provisions; increased employee participation in workplace safety and in OSHA inspections and accompanying protection measures;
and targeting those that historically have
been egregious violators of Federal laws and
regulations. Included in the amounts referenced above are 132 staff and $18 million
for improved oversight of workplace safety
and health.
While seeking additional resources for some
purposes, the Administration also will reinvent
its enforcement practices to be more efficient,
more strategic, more outcome-based, and fairer. This involves fairness to both workers
and firms. When irresponsible companies seek
competitive advantage by illegally underpaying
wages and taking shortcuts to health and
safety, it undermines the position of responsible companies that comply with workplace
laws. Good corporate citizens, as well as
workers, benefit from efficient and evenhanded enforcement of workplace rules.
NATIONAL SERVICE
National service enhances educational opportunity, rewards responsibility, rebuilds local
communities and fosters a sense of national
community. Signed into law on September
21, 1993, the National and Community Service
Trust Act will provide Americans of all ages
and backgrounds with opportunities to serve
their country addressing educational, public
safety, human needs, and environmental problems. The Act established the new Corporation
for National and Community Service and
a new "AmeriCorps," under which participants
will receive an education award of $4,725
per year in return for service for up to
two years. These awards may be used for
post-secondary education, approved training,
or to pay off education loans.
The 1995 budget for the Corporation totals
$850 million, a $275 million (48 percent)
increase over 1994. This includes financing
to expand the new programs started in
1994, as well as to continue existing programs
formerly operated by ACTION and the Commission on National and Community Service.
With this funding, the Corporation will provide

108

THE BUDGET FOR FISCAL YEAR 1995

opportunities for more than three-quarters
of a million Americans to engage in service.
AmeriCorps is the heart of the President's
vision of national service. Through formula
and competitive grants, local communities
will develop and implement programs to fund
20,000 service positions by the end of 1994.
The 1995 request will finance 33,000 service
positions (over three times the size of the
Peace Corps and VISTA combined in 1995).
WELFARE REFORM
Our current welfare system violates two
core American values: work and responsibility.
Instead of giving people the education and
training they need to work, it encourages
dependence. Instead of encouraging teenagers
to, defer parenthood and insisting that absent
parents support their children, it allows both
to act irresponsibly. Instead of assisting parents who are working hard to support their
families, it devotes most of its resources
to those who are not.
The Administration will forward to Congress
in' late spring a detailed, comprehensive,
deficit-neutral welfare reform plan. In the
interim, the Administration will consult extensively on a bipartisan basis to finalize the
plan and the entitlement reforms which finance it.
From Welfare to Work
Fundamental reform of the welfare system
will require four major steps:
1. Promoting parental responsibility to help
prevent the need for welfare in the first
place.
2. Rewarding people who go to work by
insuring that families have the tax credits,
the health insurance, and the child care
they need to make work pay.
3. Substituting work for welfare by providing
job search, education, and training to those
who need it, and expecting them to work
at the end of two years.
4. Reinventing government assistance to
reduce administrative bureaucracy, combat
fraud and abuse, and give states greater
flexibility within a system focused on work.




These reforms cannot be considered in
isolation. The Administration has undertaken
many closely linked initiatives to spur economic growth, improve education, expand opportunity, restore public safety and rebuild
a sense of community: worker training and
retraining, parenting education, family preservation and support, educational reform, Head
Start, National Service, Empowerment Zones,
community development banks, community
policing, violence prevention, and more. Welfare reform is one piece of a larger whole,
but it is an essential piece.
Two important steps in the Administration's
welfare reform have already been taken:
expansion of the Earned Income Tax Credit
(EITC) as part of the Omnibus Budget Reconciliation Act of 1993; and introduction of
The Health Security Act in September 1993.
Both will help to make work pay, as described
in more detail below.
The Current Welfare System
Currently, there are about 9.5 million children on Aid to Families with Dependent
Children (AFDC). This is 14 percent of all
children, up from 9 percent in 1970. Government at all levels spent $23 billion for
this aid in 1993, and more than twice
that amount when noncash benefits (like
Food Stamps and Medicaid) for the same
families are included. Yet, the system left
most of its families still poor. In 1993,
AFDC benefits for a mother with two children
and no other income ranged from a low
of $120 per month in Mississippi to $923
per month in Alaska. The median for all
states was $367 per month. Combined with
Food Stamps, the total was $652, about
70 percent of the poverty level. Worst of
all, the system discourages work and marriage.
Under current welfare rules, a recipient who
goes to work or marries often sees little
increase in income. This system serves no
one well. It is anti-work; it is anti-family;
and it leaves children in poverty.
Promoting Parental Responsibility
Poverty (especially long-term poverty) and
welfare dependency are increasingly associated
with growing up in one-parent families. Although most single parents do a heroic job
of raising their children, the fact remains

109

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

that welfare dependency could be significantly
reduced if more young people delayed childbearing until they were ready to assume
the responsibility of raising children.
Increasingly, single-parent families are
headed by an unwed mother. Further, between
1983 and 1992, cases headed by unwed
mothers accounted for about four-fifths of
the growth in the welfare rolls. These mothers
typically have little education or other resources with which to raise children. About
three-fourths receive AFDC. Only one in
six receives any financial help from the
child's father.
Given these trends, rebuilding an ethic
of parental responsibility is fundamental. No
one should bring a child into the world
until he or she is prepared to support and
nurture that child. Government does not
raise children; families do. To encourage
parental responsibility, the Administration's
plan will:

• Require absent parents to support their
children by strengthening paternity establishment and collecting child support.
• Reduce the number of teenagers having
children through family planning and
other measures.
• Require unwed teens with children to live
with their parents in order to receive benefits, except in exceptional circumstances.
The first step in promoting parental responsibility will be to ensure that both parents
support their children. Welfare reform will
expect parents who go on welfare to work
to support their children. Noncustodial parents
should be held equally accountable. Unfortunately our current system of child support
enforcement sends the opposite message. Almost two-thirds of single women with children
receive little or no child support; and the
gap between what absent parents could pay
and what they do pay was an estimated
$34 billion in 1990.

Chart 3B-7. THE PERCENT OF CHILDREN LIVING WITH
A SINGLE PARENT HAS TRIPLED IN 30 YEARS
Since 1980, the increase has come almost entirely among children living with a never married parent.
PERCENT OF ALL CHILDREN

30 "
25 -

•

20
15 10
5 -

1960

1970
I FORMERLY MARRIED PARENTS

1980

1992

H NEVER MARRIED PARENTS

SOURCE: "Marital Status and Living Arrangements: March 1992," Tables G and 6
ref. ICKAPHW.BUPCHAPS-C




01/26/94

110

THE BUDGET FOR FISCAL YEAR 1995

Chart 3B-8. MOST SINGLE MOTHERS RECEIVE NO
CHILD SUPPORT
7 MILLION
FORMERLY
MARRIED MOTHERS

3 MILLION
NEVER MARRIED
MOTHERS

47%

25%

S3 HAD NO CHILD SUPPORT AWARD
H HAD AWARDS BUT RECEIVED NO SUPPORT
•

RECEIVED SOME CHILD SUPPORT

SOURCE: "Child Support and Alimony: 1989," P60, No. 173.
01/26/94

To improve on the current system, the
Administration is considering:
• A universal and simplified paternity establishment process at time of birth;
• A strict requirement that mothers applying for welfare cooperate with the authorities in establishing paternity;
• Periodic updating of child support orders
to reflect the current income and circumstances of the noncustodial parent;
• Greater penalties for nonpayment combined with more help for noncustodial parents who need education, training, or
other support to stay involved in their
children's lives; and
• More streamlined establishment of paternity, better record-keeping at the state
and national level, and other measures to
insure that those who should pay, do pay.
Better child support enforcement will not
only add to the incomes of single-parent
families but may also deter some men from




fathering children they are not prepared
to support. The problem of irresponsible childbearing is particularly acute among teenagers.
Teenage birth rates, after dropping in the
1970s and early 1980s, have been rising
since 1987. By one estimate, about 40 percent
of all women will experience at least one
pregnancy before age 20. Most teen mothers
do not intend to get pregnant; most teen
fathers do not intend to start a family.
Unfortunately, the majority of the mothers
end up on welfare. The Nation paid about
$34 billion in 1992 to assist families begun
by a teenager.
To remedy this situation, the Administration
will:
• Encourage and support more responsible
family planning;
• Work with community leaders, educators,
and the media to foster more responsibility; and
• Experiment with programs to reduce teen
pregnancy and other high risk behavior

111

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

among youth, especially in distressed communities.
Making Work Pay
Even full-time work can leave a family
poor—especially as real wages have declined
significantly over the past two decades. In
1974, some 12 percent of full-time, fullyear workers earned too little to keep a
family of four out of poverty. By 1992,
the figure was 18 percent.
To support the efforts of parents to work
their way off the welfare rolls, the President
has already launched an expansion of the
EITC. Unlike welfare, the EITC is available
only for people who work. Because the EITC
is refundable, an eligible family may receive
any portion of the credit not needed to
offset tax liability through a direct payment
from the Department of the Treasury. When
the expansions enacted last year are fully
implemented, a parent with two children
may qualify for an EITC totalling more
than $3,500. Combined with the current fed-

eral minimum wage of $4.25 per hour, the
maximum EITC increases the effective wage
for a worker with two children to about
$6.00 per hour. The expanded EITC brings
such a family up to the poverty level, even
if the parent is working at a low-wage
job. However, we must find better ways
to deliver the EITC on a timely basis throughout the year.
Ensuring that all Americans can count
on health insurance coverage is also essential.
Non-working poor families on welfare often
have better coverage than working families.
Enactment of the Health Security Act will
end this inequity. Health reform is necessary
to make work better than welfare so that
no parent need sacrifice his or her children's
health by going to work.
With the EITC and health reform, the
major missing element to make work really
pay is child care. For this reason, the Administration's plan will include:

Chart 3B-9. BY 1996 THE 1993 EXPANSION OF EITC
WILL BRING A FULL-TIME, MINIMUM WAGE
WORKER WITH TWO CHILDREN UP TO THE
POVERTY LINE

BEFORE OBRA 1993
nr. 1GRAPH9&BUDCHAF3-I




AFTER OBRA 1993
01/26/94

112
• Expanded child care and Head Start for
the working poor and public assistance recipients moving toward independence.
• Coordinated child care programs and requirements that States ensure seamless
coverage for persons who leave welfare for
work.
Providing Education and Training,
Imposing Time Limits, and Expecting
Work
The Family Support Act of 1988 provided
a new vision of mutual responsibility and
work. Government would provide welfare recipients access to the education and training
they need to find employment, and recipients
would be expected to take advantage of
these opportunities to move from welfare
to work. This legislation created the Job
Opportunities and Basic Skills (JOBS) program to deliver the services for recipients
to become economically independent. The Administration's plan will build on the Family
Support Act. As an architect of that effort,
the President is committed to building on
its vision.
Unfortunately, the site visits and hearings
of the President's Welfare Reform Working
Group over the past year indicated that
this vision is largely unrealized at the local
level. The primary function of welfare offices
is still writing checks while conforming to
all the myriad administrative rules concerning
eligibility and the calculation of benefits.
The Administration seeks to transform the
culture of the welfare bureaucracy and fulfill
the promise of the Family Support Act.
We do not need a welfare program built
around "income maintenance;" we need a
program built around work.
The Administration's goal is to establish
a welfare system in which people are asked
to move toward work and independence. Welfare recipients will be required to look for
work from day one. If none is available,
they will enter into a social contract to
help develop and then follow a plan for
self-sufficiency, if the State provides the services in the plan. After two years, people
still on welfare who can work but have
not found a private sector job will be required
to search for a job and work in community




THE BUDGET FOR FISCAL YEAR 1995

jobs to support their families while they
are searching.
The Administration's plan will transform
the current welfare system:
Expanded Access to Education and
Training Services Through the JOBS Program.—The current JOBS program serves
only 7 percent of adult welfare recipients. The
plan will expand the JOBS program to give
many more recipients the services they need
to find lasting employment, and many more
recipients will be required to participate.
A More Integrated Education and Training System.—Under reform, the JOBS program will not be a completely separate education and training system for welfare recipients, but will provide access to, and information about new job search and placement,
training and education programs, including
National Service, School-to-Work, One-Stop
Shopping and income-contingent student loans.
The plan will also serve as a link to such existing programs as Pell grants, JTPA, and Job
Corps.
A Time Limit for Cash Benefits.—Limiting the length of time employable persons can
receive cash assistance to two years is part
of the effort to shift the welfare system from
issuing checks to promoting work and self-sufficiency. The two-year time limit will guide
both the recipient and welfare agency toward
continuous efforts to find a job.
Making Work Available to Those Who
Have Reached the Time Limit.—Persons
who have reached the time limit for cash assistance will have to work, preferably by finding regular work in the private sector. The
goal is for participants to find lasting employment outside the program. States will likely
have discretion in the work programs to
achieve this end. For example, a State could
subsidize short-term private sector jobs or positions in not-for-profit agencies, in the expectation that many of these positions would become permanent.
Reinventing Government Assistance
The current welfare system is enormously
complex, with multiple programs with different
rules and requirements that confuse and
frustrate recipients and caseworkers alike.

113

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

The welfare reform plan, in keeping with
the Administration's commitment to reinvent
government, will rationalize, consolidate and
simplify the existing social welfare system.
It will:
• Establish performance measures which
emphasize moving people from welfare to
work, while giving States and localities
flexibility to design their programs for the
task.
• Use technology to prevent waste, fraud
and abuse.
• Streamline AFDC application, budgeting
and redetermination processes by simplifying and eliminating rules and reporting
requirements, particularly those concerning earnings.
• Make AFDC rules more consistent with
those in the Food Stamp program.
The above measures are a fundamental
change in direction, from a system based
on welfare, to support for work and family.
Welfare reform means more independence,
control, and security for America's families.
It means government helping people to help
themselves. Ultimately, it means fewer people
on welfare, a more productive citizenry, and
lower costs for the taxpayer.
MOVING TO INDEPENDENCE:
HOUSING AND THE HOMELESS
The 1995 budget also includes initiatives
to expand and reform low-income housing
and aid to the homeless in ways that better
support families and work. These proposals
will redirect housing and homeless programs
to complement the Administration's proposals
for welfare reform.
Reforming Housing Assistance for
Families
Housing assistance can and should support
those who work at low-paying jobs or who
are struggling to grow from dependency to
economic independence. Too often, however,
it has trapped families in poor neighborhoods
and increased their dependency. Timely housing assistance, combined with other services,
should instead encourage transitions. A mother or father can use a housing voucher




to move to an area offering greater job
opportunities, better schools for the children,
and safety. A young resident of public housing
can gain skills and job experience rehabilitating the apartments where he or she lives.
Homeless families and individuals can have
shelter and stability, appropriate transitional
services, and rent subsidies, to allow them
to live independently, with dignity.
All this can be done with:
• Faster expansion of housing assistance to
help program beneficiaries live in safe
neighborhoods with job opportunities;
• Redirection of some family housing assistance to the homeless and those working
or moving toward work to emphasize and
reward transitions from dependency to
independence; and
• Changes in Federal program organization
and administration to link programs for
the homeless with existing mainstream
programs to provide a "continuum of care;"
The cost can be paid with careful trimming
of many existing Federal housing subsidies
and other money-saving reforms.
Moving to Independence.—The budget redirects the Department of Housing and Urban
Development's (HUD's) housing assistance for
families to provide stronger support for economic transitions. The Moving to Independence initiative combines housing certificates
with counseling and apartment search assistance to ensure that all certificate holders can
truly choose where they will live. Some families, particularly those in high-poverty communities, may choose to move to neighborhoods
where they will have more housing choices,
better access to jobs, and less concern about
their safety and the quality of schooling. Too
many assisted tenants have been housed in
distressed neighborhoods. These families pay
lower rents, but lack some basic amenities:
community services, safety from violence,
neighbors who work and serve as positive role
models for children, and access to good jobs.
Experience with housing assistance in combination with support for wider apartment
search suggests that it has long-term benefits
for low-income families, especially the children.

114
Metropolitan area-wide assisted housing.—In addition, the Administration proposes
a three-year demonstration ($24 million in
1995) to improve social and economic opportunities for low-income families who live in highly segregated neighborhoods. Such neighborhoods are often particularly isolated from good
schools, social services, and employment opportunities.
This initiative would establish pilot programs in three locations around the country.
Each pilot would be operated by a private
non-profit organization. Each organization
would be charged with expanding housing
opportunities for low-income families by coordinating the region's tenant selection, assignment, and counseling services. This approach
to housing assistance would reduce the concentration of families by race, ethnicity, and
income and link them to opportunities for
sustained self-sufficiency.
Other reforms affecting families,—To emphasize that housing assistance supports transitions to independence, working families who
cannot afford adequate housing will be selected
ahead of similar welfare-dependent families
from the waiting lists for public and other assisted housing. As working poor families increase their incomes and no longer need housing subsidies, those funds will be freed to serve
additional families.
As another support for economic transitions, *
the budget also proposes expanded use of
public housing modernization and other Federal resources to create jobs for public housing
residents, especially youth. Other public housing initiatives include an expanded Tenant
Opportunity program to help residents organize and conduct job training, and develop
businesses; and continued support for Family
Investment Centers, to expand access to education and jobs. The budget also expands
support for Family Self-Sufficiency Coordinators to link housing with other social services
for families in transition.
To meet the housing needs of families
in rural areas, the budget proposes to double
the amount of guaranteed loans for singlefamily housing and maintain direct loans
at the 1994 level. These loans are for very
low-, low-, and moderate-income rural households who otherwise cannot secure mortgage




THE BUDGET FOR FISCAL YEAR 1995

financing. Interest rates on the direct loans
vary by recipients' income and can be as
low as one percent. In 1995, the budget
proposes to conform to other Federal housing
standards the amount of income loan recipients contribute to their direct loan mortgage
payments; recipients would pay 30 rather
than 20 percent of their income. To aid
rural renters, the Administration proposes
to continue funding for rural housing vouchers,
which received their first appropriation last
year, at the 1994 level. These vouchers
provide a flexible source of housing assistance,
especially in areas with a surplus of rental
units.
Homeless Assistance
Homelessness is one of the most disturbing
products of the failure of society to provide
adequate opportunity and care for all of
its citizens. Communities, States, and the
Federal Government have expanded their efforts. Annual Federal appropriations have
surpassed $1 billion. Most of the funds for
aid to the homeless were authorized in the
1987 Stewart B. McKinney Homeless Assistance Act—with HUD and HHS receiving
the largest share of funds. To date, these
responses do not appear to have substantially
reduced the numbers of people with no place
to call home.
One problem is a lack of coordination
both across Federal agencies and at the
local level. Federal homeless funds often
do not link with mainstream Federal programs
for which the homeless may be eligible,
or with other homeless programs in the
locality. Providers are heroes battling on
the front lines, but they cannot succeed
unless programs properly diagnose the needs
of the homeless, give them appropriate transitional services, and graduate them from shelters to relatively independent, stable housing.
Increases in 1994.—In 1994, the Administration made homeless assistance a top priority, proposing more than $1.4 billion for assistance targeted to homeless families and individuals. Congress provided more than $1.3 billion—about 25 percent above the 1993 level.
Federal Plan.—Federal assistance aims to
break the cycle of existing homelessness and
prevent future homelessness. To advance these

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

goals, President Clinton signed an Executive
Order on May 19, 1993, calling for the Interagency Council on the Homeless, chaired by
HUD Secretary Cisneros, to develop a Federal
plan to break the cycle of homelessness. This
plan, which will be completed in February
1994, will review the distribution of funding
and the way current programs work together.
The Interagency Council is now compiling and
analyzing information from Federal sources,
States and localities, nonprofit providers, advocates, and homeless persons through the Domestic Policy Council.
1995 overall proposed increase.—The
1995 budget proposes more than $2.1 billion
in funding for programs specifically targeted
to aid homeless families and individuals—an
increase of 60 percent over 1994 and almost
double the 1993 appropriation. This increase
is in addition to the mainstream Federal assistance provided to the homeless (e.g.,
through programs like Food Stamps and
AFDC) and surplus Federal equipment, food
and real property provided to homeless persons. For HUD alone, the budget proposes
$1.76 billion, more than 85 percent over the
1994 level. Components of the HUD funding
include:
—$1.12 billion to reorganize the HUD
McKinney Act programs. Under the proposed reorganization, funds would support
activities to form a "continuum of care"
to assist homeless persons and prevent future homelessness. Grant funds would initially be allocated to communities that can
demonstrate a comprehensive plan to address homelessness; forge partnerships
with local, private, and nonprofit providers; and improve participants' access to
mainstream services and income-support
programs. In subsequent years, awards




115
may be phased out as mainstream programs take over. Some of the funds could
be used for the Secretary's Innovative
Homeless Initiative, which also promotes
comprehensive homeless systems through
local partnerships:
— $514 million for 15,000 rental vouchers
for five years to help previously homeless
families pay the rent in private apartments that they select. These vouchers
provide a vital last link of the "continuum
of care" that moves families from homelessness through shelter and transitional
housing to relative independence.
— $130 million to continue the Emergency
Food and Shelter program authorized
under Title III of the McKinney Act and
previously administered by FEMA.
Focus on mainstream programs.—In addition to the increases in funding targeted to
homeless persons, the President's budget also
links homeless assistance with mainstream
programs providing services and income support, to help homeless people to break the cycle
of homelessness. The mainstream Job Training
Partnership Act program has been modified to
focus more funding on persons with the greatest need, including the homeless population.
Similarly, HHS' mainstream Community Services Block Grant program, along with existing
HHS targeted programs, helps states and localities to provide health and substance abuse
treatment services to the homeless. Finally,
HUD's reorganization of its McKinney Act programs also increases linkages with mainstream sources, with some grants initially allocated to communities that have demonstrated
efforts to improve access by homeless persons
to mainstream services and income-support
programs.

116

THE BUDGET FOR FISCAL YEAR 1995

INVESTING IN KNOW HOW
SCIENCE AND TECHNOLOGY

for the 1995 budget are designed to sustain
this momentum.
S&T Highlights

Investing in technology is investing in America's
future: a growing economy with more high-skilled,
high-wage jobs for American workers; a cleaner environment ... Scientific advances are the wellspring
of the technical innovations whose benefits are seen
in economic growth, improved health care, and
many other areas.
President Bill Clinton
February 1993/October 1993

Investment in science and technology (S&T)
is essential to build a prosperous economy,
create high quality jobs, improve health care
and education, and maintain national security.
Federal programs can play a key role in
supplementing private research in areas where
returns on research investments are too distant or uncertain for private firms to bear.
During the Cold War era, Federal S&T
programs were dominated by investments
in space, defense, and basic research; civilian
technology benefited primarily by serendipitous spin-off. The end of the Cold War
and sharp increases in international competitive pressure on U.S. industries demand a
new approach. The Administration's response
was outlined in Technology for America's
Economic Growth, A New Direction to Build
Economic Strength' (February, 1993), including
three main goals:
• Reaffirming our commitment to fundamental science, the foundation upon which all
technical progress is built.
• Improving the contribution of federally
sponsored S&T innovation to economic
growth and environmental protection by
forging closer working partnerships among
industry, Federal and state governments,
workers, and universities.
• Coordinating federally supported S&T investments across the Federal Government.
The major progress made toward these
goals during 1993 was reported in "Technology
for Economic Growth: President's Progress
Report" (November, 1993). Programs proposed




National Science and Technology Council (NSTC).—In responding to a key recommendation of the National Performance Review, the cabinet-level NSTC was created in
November 1993 (Executive Order 12881) to coordinate Federal S&T investments and policies. While we are imposing strict limits on
Federal spending to reduce our Federal budget
deficit, the NSTC will ensure that taxpayers
receive the maximum benefit for their investment. The Committee of Advisers on Science
and Technology was established along with the
NSTC to serve as a private sector advisory
group to the President and the NSTC. The
NSTC will spend the next year examining how
to improve the integration of S&T activities
in a broad range of areas, including information technology, manufacturing, health, transportation, environment, fundamental science
and education. This more comprehensive review process should be ready for the 1996
budget.
Research and Development (R&D) Investments.—While there are some sophisticated technologies that are not included in the
Federal R&D budget (e.g., the Space Shuttle,
operational weather satellites, technical information services, etc.), the R&D budget has traditionally been considered the most comprehensive summary of Federal S&T activities.
The Administration is proposing $71 billion in
R&D investments (excluding facilities) in 1995,
a $2.5 billion or four percent increase over
1994 (Table 3B-6). Civilian R&D will increase
over $1 billion or four percent to $32 billion.
The combination of continued annual growth
for civilian R&D, anticipated decreases in defense R&D after 1995, and the inclusion of
dual-use defense R&D is likely to cause the
civilian share of the R&D budget to exceed
50 percent earlier than the 1998 date predicted
in the 1994 budget. Much of this increase will
be focused on cost-shared and competitively selected projects that are industry-defined and
industry-led (i.e., consortia, cooperative R&D,
etc.). In 1995, university-based research will
increase to $12 billion, a $437 million or four

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

percent increase over 1994. University-based
research continues to provide an important
contribution to the creation of knowledge, technological innovation, and the training of scientists and engineers.
Research Grant Overhead Payments.—
The Federal Government awards over $17 billion in research grants each year to universities and other non-profit institutions, including substantial amounts (over $3 billion) for
reimbursement of overhead costs. In a year
in which total discretionary spending is being
frozen, and government administrative costs
are being aggressively reduced, it is necessary
to ask universities and other non-profit institutions to participate in this restraint. Instead
of a permanent cut or cap on overhead payments, the 1995 budget proposes a one year
pause that instructs grantee institutions not
to seek additional payments for overhead
above the amounts claimed in 1994.(See the
Supplemental Proposals section of the Budget
Appendix for specific implementation language.) The yearlong pause will provide time
for the Council of Economic Advisers, the Office of Science and Technology Policy, and the
Office of Management and Budget—with advice from representatives of affected institutions—to conduct a comprehensive review with
the goal of improving the incentives that govern overhead reimbursement for a wide range
of federal research grantees and contractors.
Putting S&T to Work for America's
Future.
Expand Cost-shared R&D Partnerships/
Technology




Transfer.—Partnerships

ensure

117
that federally sponsored research is relevant
and efficiently put to use in private markets.
The Federal agencies (including Defense, Energy, Health and Human Services, NASA,
Transportation, EPA, and Agriculture) play a
key role in building these partnerships with
industry and the university community, including the use of cooperative research and
development agreements (CRADAs). There will
be over 3,200 CRADAs in 1995, a 453 or 16
percent increase over 1994, with public and
private cash and non-cash investments exceeding $1.5 billion. The Federal agencies will also
invest $865 million in 1995 on technology
transfer activities, a $314 million or 57 percent
increase over 1994.
Expand the Commerce Department's National Institute for Standards and Technology (NIST) R&D Programs.—The Advanced Technology Program (ATP), Manufacturing Extension Partnerships (discussed latter), and in-house research on measurements,
standards, data verification, and test methods
form the core of the NIST activities. The $451
million budget more than doubles the ATP in
1995. The budget will support roughly 200
ATP projects, with 100 new projects in strategic program areas chosen in cooperation with
industry. Funding for in-house research increases to $316 million in 1995, with major
new increases in advanced manufacturing ($18
million), biotechnology ($4 million), environmental technology ($5 million), advanced materials ($17 million), information infrastructure
($38 million), international standards ($5 million), and math and science post-doctoral education.

118

THE BUDGET FOR FISCAL YEAR 1995

Table 3B-6. FUNDING FOR SCIENCE & TECHNOLOGY HIGHLIGHTS
(Budget authority; dollars amounts in millions)
1993
Actual

Research & Development (R&D):
Civilian:
Basic
Applied & development

1994
Enacted

1995
Proposed

Dollar
Change:
1994 to
1995

Percent
Change:
1994 to
1995

11,951
16,384

12,578
17,770

12,880
18,621

+301
+850

+2%
+5%

28,335

30,349

31,500

+1,152

+4%

1,411
40,004

1,212
36,923

1,232
38,296

+20
+1,373

+2%
+4%

Total
Total R&D (without facilities)
Total R&D (with facilities)
Civilian share of R&D i
Defense share of R&D
R&D by agency (without facilities):
Defense
Health & Human Services
National Aeronautic and Space Administration
Energy
National Science Foundation
Agriculture
Other

41,415
69,750
72,478
43
57

38,136
68,484
71,073
47
53

39,528
71,029
73,045
47
53

+1,393
+2,544
+1,972
NA
NA

+4%
+4%
+3%
NA
NA

38,617
10,336
8,090
5,827
1,882
1,335
3,664

35,538
11,033
8,493
6,054
2,026
1,393
3,948

36,971
11,484
8,597
6,052
2,220
1,394
4,310

+1,433
+451
+105
-2
+194
+1
+362

+4%
+4%
+1%

Total R&D
R&D support to university researchers
Cost-Share R&D Partnership^Technology Transfer
Technology Transfer
Number of CRADAs
Public/Private Cash and Non-cash value of CRADA Investments ....
NIST R&D programs
National Science Foundation
NASA's new technology investments
Health research
(National Institutes of Health)
Human genome project:
National Institutes of Health
Energy
International space station
Civilian industrial technologies:
Manufacturing technologies
NIST manufacturing extension partnership
National information infrastructure:
National Telecomunications Information Administration
National Technical Information Service
High performance computing and communications:
Defense
National Science Foundation
Energy
National Aeronautics and Space Administration
National Institutes of Health
Commerce
EPA

69,750
11,674

68,484
11,719

71,029
12,156

+2,544
+437

+4%
+4%

384
2,230
813
366
2,734
10,336
9,891

551
2,758
1,176
490
3,018
42
11,033
10,486

865
3,211
1,504
874
+3,200
67
11,484
10,994

+314
+453
+328
+384
+182
+25
+451
+508

57%
16%
28%
+78%
+6%
+60%
+4%
+5%

106
63
2,262

129
70
2,104

152
89
2,121

+23
+19
+17

+18%
+27%
+1%

NA
18

1,841
30

2,000
61

+159
+31

+9%
+103%

26

100
18

+74
+18

+285%

Total
Defense:
Basic
Applied & development

Total HPCC
Transportation:
Federal Aviation Administration research
New generation of vehicles (Energy only)
Alternative fuel vehicles




8

+10%
+9%

+*

298
225
100
82
47
12
8

341
267
123
113
58
29
7

397
329
125
125
82
82
14

+56
+62
+2
+12
+24
+53
+7

+16%
+23%
+2%
+11%
+42%
+183%
+92%

772

938

1,154

+216

+23%

230
107
29

254
141
44

267
175
69

+13
+34
+25

+5%
+24%
+57%

119

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

Table 3B-6. FUNDING FOR SCIENCE & TECHNOLOGY HIGHLIGHTS—
Continued
(Budget authority; dollars amounts in millions)
1993
Actual

Intelligent vehicles/highway systems
Next generation high-speed rail
NASA aeronautics research
U.S. Global Change Research Program
National Aeronautics and Space Administration
National Science Foundation
Energy
Commerce
Agriculture
Environmental Protection Agency
Interior
Smithsonian
Defense
National Institutes of Health
Tennessee Valley Authority
Total USGCRP

1994
Enacted

1995
Proposed

Dollar
Change:
1994 to
1995

Percent
Change:
1994 to
1995

155
5
129

214
4
287

289
33
347

+75
+29
+60

+35%
+725%
+21%

932
125
87
67
48
25
38
7
7
3

1,022
142
93
63
49
27
33
7
6
3

1,236
208
126
84
58
31
33
8
6
4
1

214
+66
+33
+21
+8
+4
-1

+21%
+46%
+35%
+34%
+19%
+14%
-1%
+3%

+1

+13%
+233%

1,794

+348

+24%

*

1,338

*

1,446

*

•
*

Includes Defense Dual-Use Activities.
* Less than $500 thousand.
NA: Not applicable.
1

National Science Foundation (NSF).—
The budget proposes $3.2 billion for NSF,
a $182 million or six percent increase over
1994. The NSF supports peer-reviewed, university-based science and engineering research,
including interagency research efforts in global
change research, high performance computing,
and manufacturing.
NASA's New Technology Investments
(NTI).—The budget proposes $67 million for
the second year of the NASA NTI program
(a $25 million or 60 percent increase over
1994). The NTI is focused on industry-led
projects, including industry-defined advanced
technologies and small satellite technologies
Health Research.—The budget proposes
roughly $11.5 billion for health-related R&D
activities funded through the Department
of Health and Human Services, a $451 million
or four percent increase over 1994. Of these
funds, roughly $11 billion is for the National
Institutes of Health, $508 million or 5 percent
over 1994. NIH supports biomedical and
behavioral research.
Human Genome Project.—The budget
proposes 241 million in Energy and NIH,
a $42 million or 21 percent increase over




1994, for this multi-year effort to decode
the information locked in the chemical building blocks that form human genetic inheritance.
New Facilities for Fundamental Science
and Applied Research.—The budget includes $40 million to begin constructing the
Advanced Neutron Source (ANS) research
reactor project at the Oak Ridge National
Lab, a $23 million increase over 1994. In
addition, $116 million is included for the
B-meson research facility at Stanford ($46
million) and the Tokamak Physics Experiment
(TPX) facility at Princeton ($70 million). The
ANS will replace aging neutron sources and
supports research on disease and human
genetics, high-temperature superconductivity,
nuclear medicine, and advanced materials.
The B-meson facility will explore the dynamics
of matter in the Universe's earliest moments,
a central question in science. The TPX will
advance the development of an economically
attractive fusion energy reactor.
International Space Station.—The budget
includes $2.1 billion for the redesigned space
station and Russian participation. The space
station will be a premier orbital research
facility for life science and materials research.

120
NASA also plans a number of Shuttle flights
to the Russian Mir space station. This collaborative project on the Mir will provide valuable
information for the construction and operation
of the international space station.
Moving Manufacturing Technologies to
the Global Marketplace.
Accelerate Investments in Civilian
Technologies.—Federal programs aimed at
increasing competitiveness of civilian industries while improving the environment will
be coordinated by the NSTC's Committee
on Civilian Industrial Technology. Working
closely with the private sector, the Committee
will develop a government-wide plan for improving manufacturing technologies that are
broadly applicable to U.S. industries and
of special importance to our nation's economy.
In 1995, nine agencies propose to spend
over $2 billion for R&D in manufacturing
technologies, a $159 million or 9 percent
increase over 1994. Defense, Energy, Commerce, NASA, and NSF are the primary
contributors.
Deployment of Civilian Industrial Technologies.—The Federal Government's effort
to deploy technologies includes NISTs Manufacturing Extension Partnerships (MEP). The
budget funds NISTs MEP at $61 million,
a $31 million increase or doubling over 1994.
This partnership will help small- and mediumsized manufacturers to tap into regional and
national sources of information, knowledge,
and assistance in the use of modern manufacturing and production technologies. The Administration anticipates more than 100 manufacturing extension centers by 1997. The
Technology Reinvestment Project in Defense
and programs in industrial extension in Energy will complement the NIST MEP program.
Realizing the Opportunities of the
Information Age
Improve the National Information Infrastructure (Nil).—All Americans have a stake
in the construction of the communications
network, computers, databases, and consumer
electronic products that constitute the NIL
While the private sector will build the Nil,
the Federal Government has a key role
to play by investing in research and advanced
communications applications, and by becoming




THE BUDGET FOR FISCAL YEAR 1995

a leading-edge adopter of information technologies. Federal Nil projects are coordinated
by the Information Infrastructure Task Force
chaired by Commerce. In January, the Vice
President challenged the private sector to
connect all our classrooms, libraries, hospitals
and clinics to the Nil by 2000.
High Performance Computing and Communications (HPCC).—The HPCC, which
will become part of the NSTC Committee
on Information and Communications, funds
research programs to create more powerful
computers, faster computer networks, and
more sophisticated software; and to address
complex scientific and engineering computing
problems known as 'Grand Challenges,' such
as weather forecasting, designing life-saving
drugs, and modeling aircraft. For 1995, the
budget proposes $1.2 billion for HPCC, a
$216 million or 23 percent increase over
1994. The HPCC program also includes a
component called Information Infrastructure
Technologies and Application (IITA) which
applies HPCC technologies in a broad range
of applications with large societal impacts,
including health care, education, libraries,
and manufacturing.
National Telecommunications and Information
Administration's
(NTIA)
Networking Pilot and Demonstration
Projects.—The NTIA funds competitively selected grants to connect schools, clinics, hospitals, libraries, and other non-profit entities
to existing computer networks. The budget
proposes $100 million for this activity, a
$74 million or 285 percent increase over
1994.
National Technical Information Service
(NTIS).—The NTIS proposes a one-time $18
million pool of investment capital to help
support the electronic dissemination of data
generated by the Federal Government.
Transportation and the Economy
A transportation system that can move
people, goods, and services quickly and efficiently needs technologies to minimize the
maintenance of existing transportation infrastructure, and lead to the next generation
of transportation modes.

121

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

Federal Aviation Administration (FAA)
Research, Engineering, and Development
(RE&D).—The budget includes $267 million
for FAA RE&D, a five percent increase above
1994. FAA conducts research in improving
the safety, security, productivity, and capacity
of the air traffic control system, including
the use of satellite-based navigation and
communications technologies.
Partnership for a New Generation of
Vehicles.—President Clinton, Vice President
Gore, and the CEOs of General Motors,
Ford, and Chrysler agreed to an ambitious
set of research goals to enhance the competitiveness of the U.S. automobile industry and
to improve the environment. This agreement,
which involves Commerce, Defense, Energy,
Transportation, NASA, EPA, and NSF, will
target advanced manufacturing processes,
technologies for near-term improvements in
fuel economy, and up to three-times improvement in fuel economy in about a decade.
While the interagency budget will be fully
developed during 1994, Energy alone is proposing $175 million for these activities, a 24
percent increase over 1994. Energy's efforts
focus on advanced lightweight and ceramic
materials, fuel cells, more efficient engines,
electric vehicles, and hybrid vehicles. Another
$69 million is proposed in 1995 by Energy
for alternative fuel vehicle development and
purchases of alternative fuel vehicles for
the Federal fleet, a $25 million or 57 percent
increase over 1994.
Intelligent Vehicles/Highway Systems.—
The Department of Transportation (DOT) is
conducting research on improving highway
safety, increasing highway automation and
productivity. The 1995 budget proposes $289
million, an increase of $75 million or 35
percent over 1994.
Next Generation High-Speed Rail.—The
objective of this DOT program is to promote
private industry investments in futuristic,
cost-effective rail technologies through the
use of existing infrastructure. The program
will be funded at $33 million in 1995,
a $29 million increase over 1994. Where
possible, the program will be administered
in conjunction with Commerce's Advanced
Technology Program and Defense's Technology
Reinvestment Project.




NASA Aeronautics Research.—The aviation industry employs nearly 1 million people,
generates almost $100 billion in annual sales,
and produces tens of billions of dollars in
exports. In collaboration with industry, NASA
is sponsoring high-speed research (HSR), advanced subsonic technologies (AST), and the
HPCC activities mentioned above. Industry
concepts envision a high-speed civil transport
that could carry 300 people overseas at
Mach 2.4 (arriving in roughly half the current
subsonic transport time and at comparable
subsonic fares). The AST program will increase
subsonic aircraft productivity and lower operating costs through the development of lightweight engines and airframes, optical flight
systems, and integrated wing designs, and
other technologies. For 1995, the budget proposes $347 million for HSR and AST, a
$60 million or 21 percent increase over 1994.
In addition, most of the $74 million of
1994 funding is available in 1995 for the
definition of requirements and design, in
collaboration with industry, for new or drastically modified U.S. wind tunnels.
Energy and Environment: New S&T for
Environmentally-Safe Economic Growth
Energy and environment S&T activities
can help balance economical growth with
lower energy use and environmental protection. The Administration is developing a
comprehensive energy and environment approach, including the U.S. Global Change
Research Program to improve knowledge of
our planet's climate, the Climate Change
National Action Plan to curb greenhouse
emissions, and the development of environmental and energy conservation technologies
(for more details, see the Investing in the
Quality of Life section).
Defense Technology: The Payoffs for
Economic and Military Security
For 1995, $9.3 billion is proposed for defense
S&T programs. This includes $4.2 billion
for basic and applied research, as well as
$5.1 billion for advanced technologies. These
efforts form the foundation for advanced
military capabilities—such as stealth aircraft
and precision weapons convincingly demonstrated during Operation Desert Storm.
In addition, in the post-Cold War era defense

122

THE BUDGET FOR FISCAL YEAR 1995

technology investments can provide for national security requirements and contribute
to economic growth. In 1995, Defense dualuse S&T activities will total $2.1 billion,
which includes both established programs
and initiatives such as the Technology Reinvestment Project, an effort jointly funded
by the Federal Government and private
sources (for more details, see the next section
on Defense Reinvestment and Conversion).
DEFENSE REINVESTMENT AND
CONVERSION

Clearly, defense conversion can be done and can
be done well, making change our friend and not our
enemy. But in order to do it we must act, act decisively, act intelligently and not simply react years
after the cuts occur.
President Bill Clinton
March 11, 1993

The end of the Cold War provides an
opportunity to reinvest some defense industrial, technological and work force capabilities
to contribute to our Nation's economic competitiveness: those who helped us win the Cold
War can help us compete globally. The Administration's five-year, multi-agency Defense Reinvestment and Conversion program, unveiled
in March 1993, capitalizes on this opportunity
through the President's investment priorities
of worker retraining, community redevelopment, and advanced technology investments.
For workers, the Department of Labor's
(DOL) workforce security initiative provides
retraining and job search assistance. In 1995,
an estimated $195 million of the overall
initiative could be expected to be used to
assist displaced defense workers. SWAT teams
of labor program experts respond to layoff
announcements or base closures to provide
quick-reaction job-search services and assistance information. For Department of Defense
(DOD) civilian and military personnel, the
conversion program provides funding for separation and transition programs, including the
Troops-to-Teachers program which provides
financial incentives to local school districts
to hire separating military personnel. DOD
also provides early retirement incentives to




manage the personnel drawdown and ease
the transition for those leaving military service.
For communities, DOD's Office of Economic Adjustment (OEA) is often the first
Federal agency on the scene after the announcement of intended military base closures
or defense contract cutbacks. The $39 million
requested in 1995 ensures access to redevelopment and diversification planning grants. The
Department of Commerce's Economic Development Administration (EDA) funds long-range
economic planning, construction of infrastructure and development facilities, and management and technical assistance. For 1995,
$140 million is requested for EDA's defense
conversion activities, a $60 million increase
over 1994.
In response to the July 1993 round of
military base closure announcements, the Administration developed a five-point plan for
revitalizing affected communities. The plan,
distinct from the overall conversion program,
promotes redevelopment through the transfer
of base property to communities at low or
no cost, rapid environmental cleanup, and
improved access to Federal programs and
funding.
For industry, the defense conversion program reflects a two-pronged strategy: invest
in civilian high-technology conversion opportunities for defense firms, and promote dualuse technologies that have both a commercial
and military application.
Civilian Technology Investment. The multiagency conversion program provides more
than $7 billion over five years for civilian
high-technology investments. For example,
NASA's aeronautics initiative helps defense
firms and workers use defense expertise in
civilian aircraft technology development. The
Department of Commerce's Information Highways use defense-related software and hardware. These investments leverage the talents
and resources of defense workers and firms,
diversify the economy, and build overall competitiveness.
Dual-Use Technologies. The defense technologies that make us the strongest military
power can also promote industrial competitiveness. At the same time, dual-use technology

3B.

123

INVESTING FOR PRODUCTIVITY AND PROSPERITY

Table 3B-7. DEFENSE REINVESTMENT AND CONVERSION*
(Budget authority in millions of dollars)
1994
Estimate

1993
Actual
Department of Defense Personnel Assistance
and Community Support
Department of Energy Worker and Community Transition Program
Department of Labor Workforce Security Program
Department of Commerce Community Diversification Assistance (EDA)

Total: Worker and Community Assistance Programs
Department of Defense Dual-Use Technology
Technology Reinvestment Project (TRP)
Other Dual-use Initiatives

New Federal High Technology Investments (Conversion Opportunities)7
Other Industry Assistance Programs
Grand total: Programs that will assist
defense workers, communities and
firms

Proposed
1995

Total

1996

1997

1993-97

1,020

1,265

1,192

21,192

21,192

5,861

92

200

125

100

100

617

195

4195

195

710

3

4

125

4

4

5

80

140

140

140

500

1,112

1,670

1,652

1,627

1,627

7,688

882

1,441

1,429

1,454

1,479

6,685

907
»50

1,734
«50

2,054

2,444

7,139
100

4,068

4,865

5,135

5,550 21,612

6465
417

1,994

554
887

625
804

650
2804

675
2804

2,969
3,716

1This program reflects funding above 1993 levels plus that portion of existing programs re-directed to conversion efforts.
2 This is the 1995 level. Specific estimates for 1996 and 1997 are not yet available.
3 $75 million was transferred in 1993 from the Department of Defense to the Department of Labor.
4 This is the portion of the overall investment increase that could be expected to be used to assist displaced defense workers.
6 In addition, $80 million was transferred in 1993 from the Department of Defense.
6 In addition to $465 million of TRP funding, the 1993 TRP solicitation included $7 million in separately budgeted Small Busi-

ness Innovative Research funds for a total of $472 million.
7 This includes investment programs that provide direct conversion opportunities (e.g., NASA's aeronautics initiative) and 50
percent of programs that provide some conversion opportunities (e.g., Department of Commerce program for Information Highways.)
8 This reflects the National Shipbuilding Initiative which the Congress funded in 1994 in the defense budget. Funding for
1995 loan subsidies is provided in the Department of Transportation budget.

increases national security because the unprecedented advances in civilian technology benefit
military systems. For 1995, the defense conversion program provides $1.4 billion for dualuse programs including the Technology Reinvestment Project (TRP), a multi-agency effort
administered by DOD's Advanced Research
Projects Agency to promote commercial-military technology integration. 1995 funding for
the TRP has been increased to $625 million,
over $70 million more than the 1994 level.
Coordination of the Defense Reinvestment
and Conversion program is within the Execu-




tive Office of the President, to ensure that
resources are delivered effectively, fairly and
in keeping with the goals of the program.
Funding. As shown in Table 3B-7, the
conversion program brings together activities
from across the Federal Government. In almost all cases, increased funding has been
requested for 1995. These increases, when
combined with additional 1993 and 1994
spending in key conversion programs, bring
the defense conversion program to about
$22 billion over five years—$2 billion over
the $20 billion level announced in March
1993.

124

THE BUDGET FOR FISCAL YEAR 1995

INVESTING IN PHYSICAL CAPITAL
IMPROVING THE NATION'S
INFRASTRUCTURE

To build a twenty-first century economy, America
must revive a nineteenth century habit—investing
in the common, national economic resources that
enable every person and every firm to create wealth
and value. The only foundation for prospering in
the global economy is investing in ourselves.
President Bill Clinton

Americans have come to expect public infrastructure investments that are safe, dependable, and well maintained. Investments in
transportation, water resources, and the environment:
• promote growth of production, employment, productivity, and living standards;
• make the Nation more competitive in the
world economy;
• contribute to a clean environment; and
• create jobs.
This Administration is committed to increasing funding to improve the infrastructure
and to targeting resources to projects that
Table 3B-8.

provide the greatest benefits. Therefore, this
budget:
• fully funds core highway investments at
the congressionally authorized level, but
eliminates funding for selected so-called
"demonstration projects";
• increases formula capital grants for mass
transit and proposes an urban congestion
initiative, but waits for a revised evaluation process to fund additional discretionary "new starts;"
• increases funds for air traffic control improvements, and maintains the current
level of airport grants; and
• increases funds for water treatment and
supply facilities, and funds ongoing water
resources development projects.
The 1995 budget proposes $34.4 billion
for infrastructure spending. (See the summary
Table 3B-8 below and the detailed Table
3B-9 at the end of this section.) This is
$0.5 billion, or 2 percent, more than proposed
for 1994. Chart 3B-10 displays the percent
of 1994 spending for types of infrastructure.
Highway spending accounts for 60 percent
of the total.

SUMMARY OF INFRASTRUCTURE INVESTMENT
(Discretionary program level; dollar amounts in billions)
1993
Actual

Highways
Other Transportation
Water Treatment and Supply
Water Resources Development
Other Infrastructure Investment
Total Infrastructure

1994
Proposed1

Dollar
Change:
1994 to
1995

18.0
7.1
3.1
2.2
0.8

20.3
7.5
3.1
2.1
0.9

20.3
8.3
3.3
1.6
0.9

+0.7
+0.3
-0.5

31.3

33.9

34.4

+0.5

Note: Program level is budget authority, obligations, or obligation limitation.
* $50 million or less or 0.5 percent or less.
1 Includes proposed supplemental and rescissions for 1994.




1995
Proposed

Percent
Change:
1994 to
1995
- * %

—

+10%
+9%
-22%
—

+2%

125

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

Federal, State, and local governments all
have important roles in infrastructure investment. Infrastructure investment by all levels
of government totaled $65.9 billion in 1990.
State and local governments financed $40.2
billion or 61 percent of this amount (according
to a recent study by the Congressional Budget
Office (CBO); latest data available). The Federal Government financed the remaining $25.7
billion, of which $21.4 billion was grants
to State and local governments.
In order to improve the Nation's infrastructure, the Administration seeks not only greater
investment, but also more effective investment.
Toward this end, the President recently issued
an Executive Order setting forth principles
for Federal infrastructure investments. The
Order instructs agencies to conduct systematic
economic analysis of these investments. Because the benefits from infrastructure facilities
depend in part on how well they are managed,
the Order also requires periodic reviews of
management practices, including operation

and maintenance activities, contracting practices, and pricing policies.
Economic Growth.—Many recent studies
(such as How Federal Spending for Infrastructure and Other Public Investments Affects the
Economy, CBO, 1991) have documented the
important contribution of infrastructure investment to economic growth. Transportation
and other infrastructure systems can reduce
costs and increase productivity, helping the
private sector compete in the international
arena. However, public investment financed at
the expense of more productive private investment can hinder economic growth. Thus, increased public investment is important, but
only the most effective investments merit funding, and there must be a balance between public and private investment.
Clean Environment—Selective infrastructure investments also protect the environment.
Because pollution crosses State lines, there is
an important Federal role in investments in
water and wastewater treatment systems.

Chart 3B-10. INFRASTRUCTURE SPENDING
(1994 discretionary budget resources by major category)

OTHER

HUD-CDBG
RURAL
DEVELOPMENT

HIGHWAYS

^

60%

2%
ARMY CORPS
5 %
EPA WATER
7%

TRANSIT
10%

AVIATION
TOTAL SPENDING:


http://fraser.stlouisfed.org/
150-001
- 94-5
Federal Reserve Bank of St.0Louis <QL 3)

11 %

$33.9 BILLION

01/26/94

126
Job Creation.—Infrastructure investment
also contributes to job creation. Estimates indicate that $1 billion of Federal highway construction generates as many as 26,000 jobs
and, by increasing the productivity and competitiveness of the economy generally, aids job
creation and retention in the private sector.
Addressing Infrastructure Problems in
the 1995 Budget
Highways
The Administration proposes full funding
of the Intermodal Surface Transportation Efficiency Act (ISTEA) authorized level for the
core highway programs, which are the categorical grants distributed to the States under
the Federal-aid highway programs. These
grants help finance the preservation of 900,000
miles of major highways, including the 43,000
miles of the Interstate Highway System.
Individual projects are selected by the States.
For these core programs, the Administration
requests $19.8 billion in budgetary resources
for 1995, $0.7 billion or 4 percent more
than in 1994.
This funding permits the States to address
a wide range of priorities from Interstate
preservation to congestion mitigation and air
quality improvement. Full funding also permits the States to take maximum advantage
of the flexibility provisions of ISTEA. ISTEA
provides States the discretion to transfer
funding between highway and transit uses.
The Administration has submitted to Congress recommendations for the National Highway System. The proposed system includes
nearly 159,000 miles of Interstate highways,
major arterials and defense support roads,
and key corridors. If enacted as proposed,
the System would include highways that
carry about 40 percent of total vehicle miles
travelled and 75 percent of interstate truck
traffic. The National Highway System will
provide the focus for major State highway
investment decisions.
Elimination of Funding for Low Priority
Highway Projects.—To "free up" limited
funding for the core highway programs, the
Administration proposes rescissions of $4.7 billion for selected "highway demonstration"




THE BUDGET FOR FISCAL YEAR 1995

projects. This includes prior year balances and
authorized amounts for 1995-1997.
Both the recent National Performance Review (NPR) and the General Accounting Office
(GAO) have criticized increased congressional
earmarking of projects at the Federal level.
According to these reports, there are three
reasons that rescission of these projects is
warranted. First, most of the projects do
not respond to the most critical Federalaid highway needs of States and regions.
For example, in more than half of the
cases, the projects were not even included
in State or regional plans. Second, there
is no guarantee that these projects, once
started, would be finished. GAO determined,
for example, that project costs greatly exceed
authorized Federal and State funding levels,
and that State officials are uncertain of
their ability to contribute more. The excess
costs have been estimated to be more than
$27 billion for ISTEA projects. Third, many
States are of the view that these projects
offer only limited benefits, especially compared
with other projects that could use additional
Federal funding to greater advantage. In
conclusion, reducing or eliminating these
projects allows funding for other, critical
highway spending. If the projects are a
high priority, the States may choose to fund
from the core programs.
Increased Funding for Smart Cars/
Smart Highways.—To promote more efficient
use of the existing infrastructure, the Administration supports the intelligent vehicle highway system (IVHS), or "smart car^smart highways," which uses advanced technology to provide drivers with congestion and safety information. This will improve traffic flow, reduce
congestion and travel time, and improve safety. The budget requests an increase of $75 million for 1995 for this program, from $214 million in 1994 to $289 million in 1995.
Emergency Highway Repair.—The 1995
budget estimates do not display requested
funding for the repair of highways in and
around Los Angeles damaged by the recent
San Fernando Valley earthquake. Funding of
$1.4 billion for highways has been transmitted
to Congress separately. Much of the 1994
amount for emergency repairs ($0.7 billion) included in the budget and shown in Table 3B-9

127

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

is associated with continuing repair work for
highways damaged in the 1993 floods and the
Loma Prieta earthquake in Northern California in 1989.
Mass Transit
formula Capital Grant Increases.—Mass
transit is critical to reducing congestion and
pollution. The Administration proposes a 40
percent increase for formula capital spending,
from $1.6 billion in 1994 to $2.3 billion in
1995. With this funding, the Federal Government shares with State and local governments
the cost of purchasing and rehabilitating
buses, bus facilities, rail systems, and other
investments. These investments improve public mass transportation in approximately 500
urban and rural areas in the country.
Reductions for Discretionary Projects.—
Compared with formula grant funding, discretionary grant funding is normally allocated to
relatively few cities. For some discretionary
projects, costs have been much higher, and ridership lower, than originally estimated. To ensure that Federal resources are directed only
to the most effective investments, the Administration is developing a revised "new start"
evaluation process, as required by ISTEA.
The $1.5 billion in budgetary resources
for transit discretionary capital grants would
maintain 1994 funding levels for rail modernization and bus projects, but limit funds
for "new start" construction to projects already
approved.

areas to implement projects that will contribute to decreased traffic congestion.
Railroads
Improving Rail Transportation in the
Northeast Corridor.—The Federal Government invests in improved passenger rail service in the Northeast Corridor between Washington, D.C., and Boston. Grants to the National Railroad Passenger Corporation (Amtrak) are used to electrify track between New
Haven, Connecticut and Boston, and for other
projects to reduce travel time. The Administration requests $0.2 billion to continue this program in 1995.
The Administration also proposes to form
a partnership with New York State, New
York City, and Amtrak to redevelop Penn
Station in New York City. Penn Station
is the largest intermodal hub in the country,
and serves Amtrak, the Long Island Railroad,
New Jersey Transit, and the New York
City subway. For 1995, the Administration
requests $90 million to support this project,
which will renovate the James A. Farley
Post Office building as a train station and
commercial center, and upgrade Penn Station.
Funds will be contingent upon financial contributions from the State of New York, New
York City, and Amtrak. A 1994 supplemental
appropriation of $10 million is requested
to initiate the project.
The grant to Amtrak for capital spending
will allow for the purchase of new equipment,
station improvements, and capital equipment
overhauls, all of which will reduce operating
costs in the long run. The Administration
is requesting $0.3 billion for these grants
for 1995, an increase of 29 percent over
1994.

Urban Congestion Relief Initiative.—
Highway congestion has increased, especially
in large urban areas. The percentage of urban
Interstate travel that is congested during the
daily peak travel hour increased from 55.4 percent in 1983 to 70.2 percent in 1991. Congestion in the Nation's 50 largest urban areas
now costs more than $39 billion annually in
lost productivity and fuel costs. Many of these
areas also have serious automobile-related air
quality problems.

Air Transportation

The Administration is developing an urban
congestion initiative to address this growing
and costly problem. As part of this initiative,
10 percent of the formula capital grants
would be used as an incentive to urban

Air Traffic Control Investment.—The
Federal Aviation Administration's air traffic
control modernization program supports
growth in aviation activity. Benefits include
reduced delays, more efficient aircraft routing,




The Federal Government invests in air
transportation through modernization and
maintenance of facilities and equipment for
the air traffic control system and through
airport development grants.

128

THE BUDGET FOR FISCAL YEAR 1995

fewer accidents, and more cost-effective operation.

Federal Government has provided more than
$9 billion in capitalization funds.

The Administration requests $2.3 billion
in budget authority for facilities and equipment, an increase of $0.2 billion (nine percent)
over 1994. The 1995 proposal implements
the Capital Investment Plan with new solidstate navigation and landing aids and highlyautomated work consoles to replace controller
work stations to handle increased air traffic
of the 1990s and beyond.

The Administration requests $1.6 billion
for the clean water State revolving funds,
$0.4 billion more than the 1994 amount,
to meet the immense needs for water quality
protection and restoration. With leveraging
and repayments of prior loans, States will
be able to provide more than $2 billion
in loans in 1995.

Airport Grants.—Approximately 3,300
large and small airports are eligible to receive
capital grants from the Federal Government
to assist local airport authorities in the construction of runways and other capital improvements.
The Administration requests $1.7 billion
for the airport grants program for 1995,
the same amount as for 1994, to assist
with capital needs. These grants supplement
locally generated capital, which on average
funds 90 percent of the development costs
of large hub airports. This local funding
includes approximately $0.7 billion in local
passenger facility charges, which were authorized in 1990 and are paid by passengers
for the improvement of the aviation facilities
they use. The collections go directly to the
local airports for improvement projects.
Water Treatment and Supply
The Administration requests $3.3 billion
in budget authority for 1995 for water treatment and supply programs, $0.3 billion or
9 percent more than in 1994. Most of this
spending is in the Environmental Protection
Agency (EPA).
Clean Water and Drinking Water State
Revolving Funds (EPA).—The clean water
State revolving fund (SRF) program provides
capitalization grants to State revolving funds,
which make low-interest loans to municipalities to finance wastewater treatment facilities
and other specified activities to improve water
quality. The goal of the program is to create,
in each State, a fund to provide steady loan
amounts year after year, even after the Federal Government has ended its annual capitalizations. This will occur as loan repayments
to the fund are loaned out again. To date, the




The Administration will apply the revolving
loan fund concept to drinking water as well,
to meet treatment requirements under the
Safe Drinking Water Act. In 1994, $0.6
billion was provided for drinking water State
revolving funds. For 1995, the Administration
is requesting $0.7 billion in budget authority,
to become available after the drinking water
State revolving fund program is authorized.
Targeted Wastewater Assistance.—EPA
also provides wastewater assistance targeted
to special needs outside the normal State revolving fund allocation formula. For 1995, the
Administration proposes $250 million, including $150 million for Mexican border environmental projects in support of NAFTA—of
which $50 million will be devoted to the
colonias in Texas—and $100 million for cities
that meet stringent criteria of high needs for
secondary treatment and high current user
charges.
Rural Water and Wastewater Programs.—The Department of Agriculture funds
construction, repair, and improvement of rural
water and wastewater disposal systems
through direct loans and grants for low-income
communities with populations of less than
10,000. Many rural communities need Federal
assistance for water and sewer systems because they cannot afford private credit terms
for needed facilities, including those necessary
to meet the requirements of the Clean Water
Act and the Safe Drinking Water Act. The interest rate on the direct loans varies depending on the income of the community and
whether the water or sewer project is necessary for health and safety reasons. Under
a proposed reorganization, these programs will
operate through a "Rural Utilities Service."
in

The Administration requests $1.0 billion
loan authority for rural water and

129

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

wastewater facilities, a 17 percent increase
above 1994; and $0.5 billion in budget authority for grants, a $25 million or 5 percent
increase above 1994. The proposed loan level
will support about 934 systems, while about
896 communities will receive grants. This
will give rural Americans access to clean
water and will also provide important environmental benefits. In addition, the Administration is requesting $25 million in grants
for drinking water projects targeted to the
colonias along the Mexican border.
Water Resources Development
Water Resources Projects Already Underway.—Water resources investments include multi-use facilities such as dams that
provide flood control, water storage for irrigation and drinking water, hydropower, and
recreation; single-purpose facilities, such as
channels and levees for flood damage reduction, and locks and dams for inland waterways; and major commercial ports to aid water
transportation. The Administration requests
$1.6 billion for 1995 for water resources infrastructure, $0.5 billion less than in 1994. These
programs are operated primarily by the Army
Corps of Engineers and the Bureau of Reclamation. The request will support work on
projects already underway.
Army Corps of Engineers.—The Corps of
Engineers operates more than 400 multi-purpose dams. In addition, the Corps is responsible for locks and dams along major water
routes. It has constructed and now maintains
25,000 miles of navigation channels that serve
130 of the Nation's 150 largest cities, and is
responsible for construction and maintenance
of 100 major commercial ports. Ports and waterways now handle more than 2 billion tons
of cargo per year. Corps facilities provide 4
percent of the Nations electrical energy, water
supply for more than 9 million people, and
account for 644 million recreational visits. Infrastructure programs of the Corps are costshared with State and local governments and
through collection of user fees.
For 1995, the Administration requests $1.2
billion in discretionary budget authority for
the construction programs of the Corps, $0.4
billion or 24 percent less than the 1994
amount of $1.6 billion. The 1995 request




emphasizes completion of projects already
underway. There will be no new starts—
170 projects will be funded and 13 are
expected to be completed in 1995. These
projects are economically justified and environmentally sound.
Bureau of Reclamation.—Programs of the
Bureau of Reclamation are located exclusively
in the western United States. The Bureau has
constructed multi-purpose projects for storage
and conveyance of water to almost 10 million
acres. These projects service the full water
supply needs of 15 million people, provide 2
percent of the Nation's electrical energy, and
account for 79 million recreational visits. Program emphasis is shifting from project construction to resource management, consistent
with recommendations of the National Performance Review. As an example of this transition, the budget includes $10 million in grants
to the Los Angeles area to fund a water reclamation and reuse pilot program, which is not
a traditional water resources development
project and is included as an environmental
investment.
The Administration requests $371 million
in infrastructure development budget authority for 1995, $67 million or 15 percent
less than the 1994 amount of $438 million.
The decrease is largely the result of construction projects nearing completion. As with
the Corps, there are no new water resources
development projects proposed for 1995.
Other Infrastructure Investment
Approximately 20 percent of the Community
Development Block Grant program (Department of Housing and Urban Development)
is used for urban streets and other infrastructure. Infrastructure spending from this grant
is estimated to be $0.9 billion in 1995,
the same as in 1994.
Additional Information on Investment
Spending in the 1995 Budget
Other sections in this Chapter discuss budget proposals for investing in research and
development and education and training.
Chapter 8 of 1995 Budget Analytical Perspectives, "Federal Investment Outlays and Capital
Budgets," provides more comprehensive information on outlays for all physical capital

130

THE BUDGET FOR FISCAL YEAR 1995

investment, including infrastructure, and outlays for research and development and education and training. The Historical Tables
volume, which also accompanies this budget,
Table 3B-9.

provides historical data on investment outlays:
outlays for physical capital are in Section
9; and outlays for the conduct of research
and development and for education and training are in Section 10.

INFRASTRUCTURE INVESTMENT

(Discretionary program level in billions of dollars)
1993
Actual
TRANSPORTATION
Department of Transportation:
Highways:
Core categorical highway grants
Emergency repair2
Highway demonstrations and other projects
Subtotal, highways
Mass transit:
Formula capital grants
Discretionary grants
Subtotal, mass transit
Railroads:
Northeast corridor
Penn Station redevelopment
Amtrak capital

1994
Proposed i

1995
Proposed

Dollar
Change:
1994 to
1995

16.5
0.5
1.0

19.1
0.7
0.5

19.8
0.1
0.4

18.0

20.3

20.3

0.9
1.7

1.6
1.7

2.3
1.5

+0.7
-0.2

2.6

3.3

3.8

+0.4

0.2

0.2

+0.1
+0.1

+0.7
-0.6
-0.1

0.2

0.2

0.2
0.1
0.3

0.4

0.4

0.5

+0.1

2.3
1.8

2.1
1.7

2.3
1.7

+0.2

4.1

3.8

4.0

+0.2

25.1

27.9

28.6

+0.7

1.9
0.6

1.2
0.6
0.6

1.6
0.7
0.3

+0.4
+0.1
-0.3

0.5
(0.8)

0.6
(0.8)

0.7
(1.0)

(0.1)

Subtotal, water treatment and supply

3.1

3.1

3.3

+0.3

WATER RESOURCES DEVELOPMENT
Arjny Corps of Engineers
Bureau of Reclamation (Department of Interior)

1.7
0.5

1.6
0.4

1.2
0.4

-0.4
-0.1

Subtotal, water resources development

2.2

2.1

1.6

-0.5

0.8

0.9

0.9

31.3

33.9

34.4

Subtotal, railroads
Air transportation:
Air traffic control facilities and equipment
Grants for airports
Subtotal, air transportation
Subtotal, transportation
WATER TREATMENT AND SUPPLY
Environmental Protection Agency:
Clean water State revolving funds
Drinking water State revolving funds
Targeted wastewater assistance 3
Department of Agriculture:
Rural water and wastewater programs:
Grants and loans
Loan level

—

—

*

—

OTHER INFRASTRUCTURE INVESTMENT
Community development block grants 4
Total infrastructure

—

+0.5

Note: Program level is budget authority, obligations, or obligation limitations.
* $50 million or less.
1 Indicates proposed supplemental and rescissions for 1994.
2 Budget does not include estimates associated with the recent San Fernando Valley earthquake. Funding of $1.4 billion
for highways has been transmitted separately.
3 $500 million in 1994 for targeted wastewater assistance is subject to congressional authorization.
4 Includes 20 percent of these grants, which is the approximate amount used for infrastructure.




3B.

INVESTING FOR PRODUCTIVITY AND PROSPERITY

DEVELOPING URBAN AND RURAL
ECONOMIES

The best way to serve distressed communities in
urban and rural America is through a comprehensive, coordinated, and integrated approach that
combines bottom-up initiatives and private sector
innovation with responsive Federal-State support.
President Bill Clinton

This budget includes an array of new
initiatives for the economic development of
distressed urban and rural communities.
Taken together, they will:
• mobilize underused human and physical
capital resources; and
• redress inequalities in economic opportunity arising either from history or from
more recent dislocations.
The Clinton Administration's strategy to
increase economic opportunity for people in
distressed urban and rural communities balances investments in human and physical
capital, in businesses and in housing. The
evolving new approach to aiding distressed
communities both provides financial resources
and additional flexibility to use them for
redevelopment. In addition to creating new
jobs in areas of concentrated poverty, it
provides residents of those areas with new
means to obtain training and to move to
areas with jobs and economic stability. Finally,
it reforms the relationship between the Federal government and State and local governments. Communities are encouraged to think
and plan strategically, to form new community-based partnerships, to integrate resources
from different Federal programs, and to set
measurable performance objectives. Their efforts will be judged primarily on whether
they achieve the objectives they have set
for themselves. Proposed 1995 funding for
urban and rural development initiatives is
highlighted in the Table 3B-10.
Empowerment Zones and Enterprise
Communities
The Administration's effort was launched
in 1993 with enactment of its Empowerment
Zones and Enterprise Communities. This new




131
approach to urban and rural redevelopment
is designed to empower people and communities all across the nation by inspiring
Americans to work together to create jobs
and opportunity. It combines tax benefits,
social service grants, improved program coordination, and local flexibility in nine
Empowerment Zones and ninety-five Enterprise Communities. The competitive application process will encourage creative planning
by requiring each applicant to develop and
submit a strategic vision for change. The
community must demonstrate strong relationships between the local government and the
private sector and show how its plan will
combine resources from Federal programs
and other sources. Urban Zones and Communities will be designated by the Secretary
of HUD; Rural Zones and Communities will
be designated by the Secretary of Agriculture.
Federal financial support will be concentrated primarily in the six urban and
three rural Empowerment Zones. Enterprise
Communities will also receive grant money,
and will benefit mostly from special access
to other Federal programs as well as regulatory waivers from various program requirements. The President's Community Enterprise
Board—the White House committee established in September to develop and implement
the Administration's urban and rural revitalization strategy—communicates with leaders
from local government, community and religious groups, private businesses, and others
to
implement
the
new
community
empowerment program. The Administration
plans to designate the six urban and three
rural Empowerment zones and a large portion
of the Enterprise Communities by August,
1994.
Tax incentives available to designated Enterprise Communities and businesses include:
• tax exempt facility bonds for qualified zone
businesses; and
• tax credits of 50 percent for individual and
group contributions to Community Development Corporations.
Additional tax incentives available to
Empowerment Zone communities and businesses include:

132

THE BUDGET FOR FISCAL YEAR 1995

Table 3B-10. PROPOSED URBAN AND RURAL DEVELOPMENT INITIATIVES
(Discretionary loan levels and grant budget authority; dollar amounts in millions)

A

CTonr*Tr/P»*r»crvnm

1993

Agency/Program

Actual

HUD:
Community/Economic Development Assistance
Project-Based Community Development Grants
Economic Revitalization Grants
Community Viability Fund
Empowerment Zones Grants
Colonias Assistance Program

1994

Enacted

1 QQK

Dollar

Percent

g*5

Change:

Change:

posed

1995

1995

1994 to

1994 to

—

150
150
500
100

+150
+150
+500
+100

NA
NA
NA
NA

—

—

900

+900

NA

850
425
152

834
500
300

977
525
375

+143
+25
+75

+17%
+5%
+25%

187
34
21

249
100
42

1,116
125
50

+867
+25
+8

+348%
+25%
+19%

1,295
580
404
49

1,800
728
447
85

1,800
1,300
523
85

+572
+76

+79%
+17%

3,997

5,085

6,876

+1,791

+35%

269

+269

NA

144

+144

NA

8,189

+2,691

+53%

—

TOTAL, URBAN AND RURAL DEVELOPMENT INITIATIVES

—

—

Subtotal, USDA
Commerce:
UrbaiyRural Business Development
EDA Guaranteed Loans
Other Independent Agencies:
Community/Economic Development Assistance
Community Development Financial
Institutions

—

—

Subtotal, HUD
USDA:
Rural and Infrastructure Investment
Water and wastewater disposal loans
Water and wastewater disposal grants
Community facilities loans
Rural Community and Business Assistance
Business and Industry guaranteed loans
Intermediary relending direct loan program
Rural Development Grants
Rural Housing Assistance
Single family direct loans
Single family guaranteed housing loans
Rural rental assistance grants
Other rural housing loan and grant assistance

—

—

3,997

5,085

—

—

NA: Not applicable.

• a wage tax credit for private employers
hiring Zone residents. An employer located
within a Zone receives a 20 percent tax
credit on the first $15,000 in wages or certain training expenses for employees who
live in the Zone;
• accelerated depreciation for certain property in the Zones; and
In addition, $1 billion of Title XX Social
Service Grants will be divided among the
Empowerment Zones and Enterprise Communities. Each urban Zone receives $100 million;




each rural Zone receives $40 million; and
each urban and rural enterprise community
receives $2.95 million. Communities may use
these funds for a broad range of activities,
including making investments in community
development corporations; purchasing or improving land; paying wages to individuals
as a social service; creating drug and alcohol
prevention and treatment programs; establishing training programs for zone residents
on construction and rehabilitation of affordable
housing; public infrastructure and community
facilities; afterschool programs to protect fami-

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

lies and children; job counseling; transportation services; and homeownership counseling.
New Community and Economic
Development Initiatives
The Department of Housing and Urban
Development (HUD) is proposing a set of
new initiatives to help local governments
create jobs and bring new economic vitality
to urban neighborhoods. These will not only
fund individual projects but also strengthen
local capacity to plan, design, and implement
community-building efforts.
The new community economic development
initiatives reinforce and enhance other programs including Empowerment Zones and
Enterprise Communities, the Community Development Block Grant (CDBG) program, and
the related Section 108 loan guarantees.
They reflect the National Performance Review's recommendation of flexible assistance
to enable localities to identify and respond
to their specific needs. All will be competitively
awarded, based on the strength of local
commitments as well as needs. They all
address the shortage of jobs and economic
opportunities in so many urban neighborhoods.
The new initiatives include:
• Economic Revitalization Grants. The budget proposes $150 million in grants to help
finance projects under the Section 108
loan guarantee program. Section 108
loans, which are guaranteed by future
CDBG revenues, finance a wide range of
community economic revitalization activities. The proposed grants, which would be
awarded on a competitive basis, would encourage greater use of Section 108 loans
by giving localities a source of loan repayment and a way to reduce the effective
interest rates on the loans.
• Community Viability Fund. Many distressed communities lack the capacity to
use existing Federal and state resources.
The budget proposes $150 million in competitive grants for strategic local and regional planning, innovative urban design,
and comprehensive local and regional
planning for strategic economic development. This fund would focus national attention on local and regional efforts for




133
economic redevelopment; reduce the spatial isolation of lower-income groups; and
expand amenities and community services
in distressed urban areas. Twenty million
dollars of these funds will be used to continue the NCDI initiative authorized last
year.
• Empowerment Zones and Enterprise Communities Grants. The budget proposes
$500 million in grants to finance capital
projects, including housing, in urban
Empowerment Zones and Enterprise Communities. These grant funds would complement other Federal resources (e.g., tax
incentives and Title XX Social Service
Block Grants) authorized in the Omnibus
Budget Reconciliation Act of 1993. The
grants could be used for a range of activities, at local discretion, including: repayment of debt financed by municipal bonds;
financing section 108 loan guarantee
projects and other economic development
projects; and project-based rental assistance, and other housing activities.
• Leveraged Investments for Tomorrow
(LIFT). The budget proposes $200 million
within CDBG for the LIFT competitive
grant program to provide subsidies for private investment in strategic nonresidential
or mixed-use development projects in distressed urban neighborhoods.
• Colonias assistance. The Colonias program
will provide $100 million for severely distressed settlements along the United
States-Mexico border. These areas have inadequate roads and drainage, inadequate
or nonexistent water and sewer facilities,
and grossly substandard housing. Applicants would be required to develop comprehensive action plans to address housing, infrastructure and social service needs
in conjunction with other Federal and
state resources.
Economic
Development Administration
(EDA) Guaranteed Loans. The budget proposes
creation of a $50,000,000 EDA credit subsidy
reserve to guarantee $269,000,000 in loans
to private and public entities. The loans
will have broad eligibility and will help
businesses in distressed communities to access
investment capital. This credit reserve will
complement similar programs of the Small

134
Business Administration and Farmers Home
Administration by targeting potential commercial borrowers that do not meet the criteria
used by these agencies.
Rural Development Initiative
The Administration's Rural Development
Initiative (RDI) was first proposed in 1994
when Congress enacted 67 percent of the
requested $1.9 billion investment increase.
For 1995, the Administration again requests
increased resources to improve rural infrastructure, which provides the necessary underpinning for rural economic development. It
would also directly assist rural communities
and businesses to improve the quality of
rural life, increase rural employment and
housing opportunities, and further diversify
the rural economy.
The budget request includes a significant
increase in funding for Department of Agriculture (USDA) Small Community and Rural
Development Programs by leveraging Federal
investment loan and grant programs to allow
rural areas to help themselves. Overall, the
total 1995 program level for the RDI is
$6.9 billion (grants plus loans at face value),
which is a 35 percent increase over the
comparable 1994 enacted level, and more
than a 70 percent increase over 1993. (See
Table 3B-10.)
$1.5 billion will be available in 1995 for
loans and grants to improve rural water
and wastewater disposal systems. Often small
rural communities are unable to meet expensive water and sewage standards without
Federal assistance. Community facility loans
are proposed at $375 million. These loans
are available to finance essential community
facilities, such as hospitals and fire stations.
To help support business development and
job creation in rural areas, $1.1 billion would
be available through USDA's Business and
Industry guaranteed loan program. In addition, $125 million in one percent interest
rate loans would be available to State-sponsored
rural
economic
development
intermediaries, that, in turn, relend to rural
businesses and emerging "micro-enterprises".
All assistance would continue to be coordinated
through existing State Rural Development
Councils, whose members include representa-




THE BUDGET FOR FISCAL YEAR 1995

tives from Federal, State and local government
agencies, as well as the private sector.
The RDI would also improve the housing
conditions of low- and moderate-income persons in rural areas. Direct and guaranteed
homeownership loans totaling $3.1 billion
would be provided in 1995, an increase
of nearly $600 million over 1994. Rental
assistance in rural areas would also be provided through housing vouchers and grants
for use in rental units. Vouchers would
be targeted to areas where rental units
are available, but not currently affordable
for low-income persons.
Community Development Financial
Institutions
The Administration has proposed the creation of a Community Development Financial
Institutions Fund (Fund) to provide assistance
to qualifying community development lenders.
The purpose of the program is to support
lenders who are committed to providing credit
and related financial services to currently
underserved and distressed communities. For
example, the program will help lenders provide
loans to otherwise creditworthy first-time
homebuyers with limited or mixed credit
histories, or to offer financing to local community groups hoping to start a daycare program,
or to provide credit to an entrepreneur planning to rehabilitate affordable apartment
buildings in a deteriorating area. In addition,
the program will help lenders offer basic
banking services—checking and savings accounts—in communities where a lack of depository institutions forces residents to rely on
expensive check cashing services.
The Administration supports legislation currently before Congress which would establish
the CDFI Fund as an independent agency.
To be eligible for assistance, a community
development financial institution (CDFI) must
have a primary mission of lending to and
developing an underserved target population
that is low-income or disadvantaged. All types
of new and existing community development
financial institutions will be eligible for assistance, including community development banks,
community development credit unions, revolving loan funds, micro-loan funds, minorityowned banks, and community development

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

corporations. All CDFIs will be required to
present a strategic plan in their application
which clearly states how they will meet
the economic and community development
needs of their targeted communities.
The Fund will provide capital (equity investments and grants), loans, and technical assistance to qualifying applicants. A dollar-fordollar match for investment in insured depository CDFIs will be required. A match is
also required for investment in other CDFIs,
but the amount is at the discretion of the
Fund. Eligibility for assistance will also be
based on the applicant's level of community
support, the likelihood that the applicant
will become self-sustaining, and the extent
of community lending that will result from
the federal support. All insured depositories
receiving assistance from the Fund will still
be subject to all laws and regulations established by Congress and the banking regulatory
agencies.
Community Reinvestment Act
In July 1993, the President requested the
Office of the Comptroller of the Currency,
the Office of Thrift Supervision, the Federal
Deposit Insurance Corporation and the Federal
Reserve Board to undertake a comprehensive
review and overhaul of the interagency regulations implementing the Community Reinvestment Act (CRA). Under the CRA, banks
and thrifts have an affirmative obligation
to help meet the credit needs of their entire
communities, including low and moderate income areas. The President charged the agencies with reforming the CRA regulations
to emphasize performance over documentation,
and to refocus the regulations on making
credit and financial services available to all
communities, including underserved areas
throughout urban and rural America. In
response to the President's request, the agen-




135
cies issued proposed revised regulations on
December 21, 1993. Following a public comment period, final regulations will be issued.
Currently, banks and thrifts' CRA assessments are based on 12 general factors. The
regulatory agencies and examiners within
the agencies have interpreted and judged
these factors differently, resulting in inconsistent CRA ratings. The Administration's initiative calls for more specific, uniformly applicable assessment standards based on measurable
performance in three specific areas: lending,
service, and investment. Under the proposal,
banks and thrifts would be evaluated based
on the products and services offered in their
normal course of business.
The proposed revisions will improve the
implementation of the CRA in four key
ways. First, financial institutions will have
clearer guidance. Quantitative measures of
performance will be stressed instead of the
current public relations and documentation
focus. Second, public participation will be
encouraged by advance publication of examination schedules and solicitations for public
comments prior to examinations. Third, unnecessary compliance burdens will be reduced
and improved performance will be rewarded.
The proposal provides for streamlined, but
rigorous, small institution examinations and
shifts the examination burdens from the
institution to the examiner. Fourth, the proposal provides for flexibility for examinations
of diverse institutions by distinguishing between large and small retail institutions
and among retail, wholesale, and limitedpurpose institutions. The proposed reforms
will help financial institutions focus on what
they do best—lending—rather than on regulatory compliance. This in turn, will greatly
expand the credit and financial services available in currently underserved, distressed communities.

136

THE BUDGET FOR FISCAL YEAR 1995

INVESTING IN THE QUALITY OF LIFE: INCREASED ENVIRONMENTAL PROTECTION AND NATURAL RESOURCES ENHANCEMENT, WITH ECONOMIC EFFICIENCY

Preserving our heritage, enhancing it, and passing it along is a great purpose worthy of a great people. If we seize the opportunity and shoulder the responsibility, we can enrich the future and ennoble
our own lives.
President Bill Clinton

With these words in his April 1993 Earth
Day speech, President Clinton offered a new
set of challenges to the American people
regarding environmental policy and the need
to invest in our own quality of life.
The 1995 budget carries through that theme
by focusing resources on strengthening our
stewardship of the Nation's natural resources
and improving our environmental regulatory
and management programs.
The aim of the environment and natural
resources budget is to achieve these two
goals by targeting limited financial resources
to high-priority areas to support key programs
and, in many cases, fund the initial stages
of powerful new approaches to environmental
management, such as ecosystem management.
These priority areas comprise about onethird of total spending on the environment
and natural resources. The budget request
increases discretionary funding for these investment priorities by 18 percent above the
1994 enacted levels, from $8.8 billion up
to $10.4 billion. (See Tables 3B-11 and
3B-12.)

a number of individual programs increasing
substantially—EPA's Operating Program, energy conservation, solar and renewable energy
research and development, international environmental aid, and the Montreal Protocol.
Federal facilities cleanup funding also continues to increase, though not at the same
rate as in recent years.
Overall, total discretionary funding for environment and natural resources increases for
1995 by 5 percent, or $1.6 billion, over
1994, from $33.6 billion to $35.2 billion.
Compared to 1993, this represents a 12percent increase, when spending totalled $31.4
billion (Table 3B-11).
This discussion presents the 1995 environment and natural resources budget in five
major categories, which are briefly summarized below:

These priority investments include funding
for such programs as State revolving funds
for clean water and drinking water; natural
resource protection and enhancement of our
national forests, national parks, and other
protected lands and waters; global climate
change national action and research programs;
pilot programs in ecosystem management;
and international programs supporting the
North American Free Trade Agreement
(NAFTA).

EPA's Operating Program.—The budget
for this program is one of the key indicators
of the Administration's commitment to providing adequate resources to manage the country's environmental protection activities, carry
out numerous Congressional mandates, and introduce needed reforms in overall Environmental Protection Agency (EPA) management.
The budget requests an increase of 13 percent,
to $3,051 billion, up from $2,689 billion in
1994. Along with this, the budget includes an
increase in staffing to fulfill one of the recommendations of the National Performance
Review, which is to encourage some conversion
from contractor to Federal employees in key
areas where the result will be better program
control and management.

Funding for most other environment and
natural resource programs is being maintained
at about the same level as in 1994, with

Stewardship of Natural Resources.—In
keeping with the President's Earth Day statement, the budget places a high priority on the




137

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

Table 3B-11. TARGETING RESOURCES TO HIGH-PRIORITY
ENVIRONMENT AND NATURAL RESOURCE PROGRAMS
(Discretionary budget authority; dollar amounts in millions)
1994
Enacted

1995
Proposed

Dollar
Change:
1994 to
1995

Percent
Change:
1994
tol995

8,100

8,798

10,385

+1,587

+18%

2,750
15,136
56
11,643
1,810

2,689
15,129
511
13,438
1,807

3,051
15,409
610
13,931
2,238

+362
+280
+99
+493
+431

+13%
+2%
+19%
+4%
+24%

31,395

33,574

35,239

+1,665

+5%

1993
Actual
Priority Investments
Total Spending by Program Category:
EPA's Operating Program
Stewardship
Ecosystem Management and Biodiversity
Cleanup and Compliance
International Cooperation
Total

management, protection, and enhancement of
the Nation's natural resources. Management
of Federal lands in the national parks, national forests, national wildlife refuges, lands
under management by the Bureau of Land
Management, and coastal and marine areas
under management by the National Oceanic
and Atmospheric Administration all receive increased funding. In addition, the budget requests increased support for the Climate
Change National Action Plan and for State
and local water infrastructure grant and loan
programs. The budget request in this area is
for $15.4 billion, an increase of $280 million.
Ecosystem
Management
and
Biodiversity.—Nothing better characterizes
the Administration's new approach to natural
resource management than the emphasis on
ecosystem management. This emphasis on
managing whole ecosystems replaces the piecemeal approach of the past wherein land, water,
air, endangered species, and mineral and other
resources were primarily dealt with one by
one. The budget includes funding for four pilot
projects covering a range of ecosystems: the
forests of the Pacific Northwest; the Everglades of Florida; the marine ecosystem of
Prince William Sound in Alaska; and an urban
river in the Nation's capital. In addition, the
Administration plans strong support for information collection and other programs to protect and preserve our rich heritage of
biodiversity. The budget request in this area




is $610 million in discretionary spending, an
increase of 19 percent over 1994.
Cleanup and Compliance.—A very large
share of the Federal government's discretionary spending on environmental issues is
devoted to cleaning up the problems of the
past. The largest Federal programs are those
at the Departments of Energy and Defense,
cleaning up the environmental legacy of the
Nation's weapons and defense programs of the
past fifty years. Another key program is the
Superfund, dealing with hazardous wastes at
over one thousand inactive contaminated sites
around the country. The Administration is proposing significant changes in this program in
order to streamline it, speed cleanups, reduce
their cost, and decrease private-sector spending on litigation—without sacrificing human
health or the environment. The 1995 budget
request for cleanup and compliance is $13.9
billion, an increase of 4 percent over 1994.
International Cooperation.—International
environmental leadership is part of our Nation's global role. The budget includes a significant increase in funding to support the implementation of the NAFTA agreement, the U.S.
global change research program, a new initiative in global environmental education, the
Montreal Protocol on reducing ozone-depleting
chemicals, and environmental funding through
multilateral and bilateral assistance programs.
The request for $2.2 billion represents a $431
million increase over 1994.

138

THE BUDGET FOR FISCAL YEAR 1995

Table 3B-12. PRIORITY INVESTMENTS AND OTHER MAJOR ENVIRONMENT
AND NATURAL RESOURCE PROGRAMS
(Discretionary budget authority; dollar amounts in millions)

Dollar
Change:
1994 to
1995

Percent
Change:
1994 to
1995

1,600
700
661
100
10
100
283

+360
+101
+45
+20

+29%
+17%
+7%
+25%

+238

+529%

1,062
735
483
269

1,128
782
541
296

+66
+47
+58
+27

+6%
+6%
+12%
+10%

2,532
232
590
92
8
601

2,549
231
635
128
26
681

2,747
281
708
172
35
718

+198
+50
+73
+44
+9
+37

+8%
+22%
+11%
+34%
+35%
+5%

52

302
39
167

372
59
177

+70
+20
+10

+23%
+51%
+6%

209

148

300

+152

+103%

406
932

424
1,022

558
1,236

+134
+214

+32%
+21%

1,338

1,446
1

1,794
12

+348
+11

+24%
+1,100%

Total, priority investments 2
OTHER MAJOR PROGRAMS:
EPA's operating program
Stewardship:
• Wetlands reserve program (mandatory) (USDA)
• Solar and renewable energy research and development (DOE)
• Energy conservation (DOE)
• Pesticide reduction initiative: selected programs (USDA)
Cleanup and compliance:
• Federal facility/site cleanup:.
DOE (environmental management program)
DOD
Others (USD^VDOVDOT/Others)

8,100

8,798

10,385

+1,587

+18%

2,750

2,689

3,051

+362

+13%

15
302
576
103

67
340
690
118

283
390
978
159

+216
+50
+288
+41

+322%
+15%
+42%
+35%

5,521
1,686
196

6,175
2,579
201

6,280
2,710
229

+105
+131
+28

+2%
+5%
+14%

Subtotal
• Superfund (EPA)(Non-Fed. facility/site cleanup)
• Environmental compliance and pollution prevention (DOD)
• Research and development for environmental programs (DOD)
International cooperation:
• Montreal Protocol (EPA/STATE)
• Multilateral and bilateral international assistance (Funds Appropriated to the
Presidenl/AID)

7,403
1,589
1,804
373

8,955
1,497
2,324
343

9,219
1,499
2,557
353

+264
+2
+233
+10

+3%
+10%
+3%

25

25

48

+23

+92%

272

277

326

+49

+18%

15,202

17,315

18,839

+1,524

+9%

1993
Actual
PRIORITY INVESTMENTS:
Stewardship:
Clean water state revolving funds (SRFs) (EPA)
Drinking water SRFs (EPA)
Water/wastewater grant^loans (LJSDA)
Watershed restoration (EPA)
So. CA water reclamation and reuse pilot prog. (DOI)
Needy cities (EPA)
Climate charge national action plan (DOE^EPMJSDA/Others)
Enhanced Federal natural resource protection and environmental infrastructure:
National parks (DOI)
National forests (USDA)
Wildlife refuges (DOI)
Public lands (DOI)
Subtotal
Recover fisheries and protected species (NOAA)
Wetlands plan (Corpg/DOtyEPM)thers)
Environmental technology (EPA)
Green programs (EPA)
Federal aid highways, congestion mitigation & air quality (DOT)
Ecosystem management and biodiversity:
Pacific northwest forest plan (USDA/DOtyOthers)
Everglades/South FL restoration (DOl/Corp^EPA/NOAA)
National Biological Survey (DOI)
International cooperation:
NAFTA env. support (EPMJSDVTreasury/Others)
U.S. global change research program:.
Ground-based (DOE/NSF/USDA/NOAA/Others)
Space-based (mission to planet earth) (NASA)
Subtotal:
Global environmental education (NOA^NASA)

Total, other major programs 2
1 1994 funding level
2 Total does not add

not yet determined pending Congressional reauthorization.
due to elimination of double counts and mandatory spending.
* $500 thousand or less or 0.05 percent or less.




1994
Enacted

1995
Proposed

1,240
599
616
80
10
uoo
45

984
749
506
293

1,944
548
50
100

—
—

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

The sections below on EPA's operating
program, stewardship, ecosystem management
and biodiversity, cleanup and compliance,
and international cooperation provide more
detail on the Administration's budget for
increasing environmental protection and enhancing natural resource conservation, with
economic efficiency.
EPA'S OPERATING PROGRAM
The budget requests $3.1 billion for the
EPA's Operating Program, providing a 13percent increase over 1994. The Operating
Program provides funding for research, regulatory development, enforcement, and State
grants. This major increase signals the Administration's commitment to increased environmental protection and includes these specific
initiatives:
• A $53 million increase to continue the Climate Change National Action Plan implemented in CY 1993, 98 percent over 1994.
• A $44 million, or 34-percent, increase in
funding for environmental technology.
• A $20 million, or 25-percent, increase for
watershed resource restoration grants to
States.
• A $56 million, or 12-percent, increase for
implementing the 1990 Clean Air Act
Amendments.
EPA's workforce will increase 4.5 percent
from the 1994 approved level. Specific
workforce increases are provided to continue
implementation of the Climate Change National Action Plan (98 FTEs), and convert
up to 900 contractor positions to EPA employees. This contractor conversion will allow
EPA to address Congressional and EPA Inspector General criticisms of its reliance upon,
and ability to manage, contractors by increasing contractor oversight and by reassigning
certain critical tasks to Federal employees.
STEWARDSHIP
Water Infrastructure
Environmental Protection Agency (EPA)
The budget requests substantial additional
funds for EPA water infrastructure in 1995.
For the Clean Water State Revolving Funds




139
(SRFs), $1.6 billion is requested, a $360
million increase over the 1994 enacted level
for continued capitalization of these SRFs.
In addition, the Administration is proposing
substantive changes to the Clean Water Act
(CWA) that address remaining national water
quality impairments and promote flexibility
in implementing the CWA. These changes
were not final when the 1995 budget process
was complete. Therefore, the budget reflects
only the increased Clean Water SRF capitalization.
For additional Drinking Water SRF capitalization, $700 million is requested, a $101
million increase over 1994 enacted. The budget
also includes $150 million for wastewater
infrastructure to control municipal sewage
along the Mexico border in support of NAFTA;
and a $100 million grant in targeted clean
water assistance for cities that meet stringent
need and user-charge criteria established last
year by the Administration.
Rural Water and Wastewater Infrastructure
Investment
The Department of Agriculture's new Rural
Utilities Service funds the construction, repair,
and improvement of rural water and
wastewater disposal systems through direct
loans and grants. These loans and grants
are awarded to low-income, rural communities
with populations of less than 10,000. The
budget requests $977 million in loan authority,
a 17-percent increase over 1994, and $525
million in grants, a 5-percent increase over
1994, for these programs. Within the amount
proposed for grants, $25 million is targeted
to the colonias along the U.S/Mexico border.
Southern California Water Reclamation/Reuse
Pilot Program
The budget proposes $10 million in 1995
for a Bureau of Reclamation water reclamatioiyVeuse pilot program in Southern California. The pilot provides Federal funds for
several projects in the Los Angeles area
that will contribute to efforts to improve
water quality in Santa Monica Bay; reduce
dependence on water imports from Mono
Lake, the San Francisco Bay/SacramentoSan Joaquin Delta, and the Colorado River;
and create jobs as part of the Rebuild
L.A. effort.

140
Air Quality
EPA's operating program request includes
an increase of $56 million for carrying out
the Administration's commitment to implement the 1990 Clean Air Act (CAA) Amendments effectively. Included in this funding
is $24 million, a $14 million increase, for
assistance through the Montreal Protocol Facilitation Fund to help developing countries
reduce their emissions of ozone-depleting
chemicals. Coupled with a similar amount
being provided through the State Department,
this funding will enable the U.S. to meet
its current commitments under the Montreal
Protocol and eliminate the current payment
arrearage over two years.
In addition, the budget for the Department
of Transportation includes estimated obligations of $718 million (a 5-percent increase
over 1994) in Federal highway funds designed
to improve air quality through projects to
mitigate congestion. The Congestion Mitigation
and Air Quality (CMAQ) Improvement Program, which is one of several sub-programs
funded by the Federal-aid highways grant
program, directs funds toward transportation
projects in CAA non-attainment areas for
ozone and carbon monoxide. The projects
funded by the program must help areas
make progress toward the CAA standards.
Examples of projects that may be funded
through this program include any Transportation Control Measure (TCM) in the CAA,
construction of pedestrian and bicycle facilities,
transit programs, and advanced traffic management systems that help reduce vehicle
emissions.
Climate Change National Action Plan
On Earth Day 1993, the President announced an ambitious but achievable goal—
to reduce U.S. greenhouse gas emissions
to their 1990 level by the year 2000. To
meet this commitment, the President announced last October the Administration's
Climate Change National Action Plan comprising 50 new and expanded initiatives. The
budget provides $283 million in 1995, a
$238 million, or 529-percent increase, over
1994.
The Action Plan is comprehensive, targeting
all significant greenhouse gases—carbon diox-




THE BUDGET FOR FISCAL YEAR 1995

ide,
methane,
nitrous
oxide,
and
hydrofluorocarbons—and all emitting sectors
of the economy. It will foster partnerships
with business to solve environmental problems
and stimulate investments in the technologies
of the future.
The Action Plan will encourage individuals
and firms to invest in cost- and energyefficient equipment or other technologies—
over $60 billion in private investment and
energy savings between 1994 and 2000, with
additional energy savings of over $200 billion
by the year 2010. These investments will
create new jobs in the sectors and industries
that produce, market, or install technologies
that save energy or reduce greenhouse gas
emissions.
Between 1994 and 2000, the Administration
is committed to spending approximately $1.9
billion (generally from existing Federal resources) on the Action Plan.
Enhanced Natural Resource Protection of
Federal Lands
The budget reflects the President's Earth
Day commitment to "...set our course by
the star of age-old values, not short-term
expediencies; to waste less in the present
and provide more for the future; to leave
a legacy that keeps faith with those who
left the Earth to us." The foundation for
the environmental legacy that today's Americans will leave to future Americans is the
beauty and wonder embodied in the Nation's
national parks, forests, wildlife refuges, marine sanctuaries, and other public lands and
waters. The Administration is committed to
enhancing these national treasures and managing them into the future for their longterm environmental and sustainable economic
value, not for short-term gain.
For those areas set aside for natural resource preservation, Interior's National Park
Service and Fish and Wildlife Service, and
Commerce's National Oceanic and Atmospheric
Administration (NOAA) will increase their
efforts to protect our Nation's unique natural
places found in the national parks, wildlife
refuges, and marine sanctuaries.
The budgets of the Agriculture Department's
Forest Service and Interior's Bureau of Land

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

Management show significant increases for
efforts to manage the landscape as integrated
ecosystems on a sustainable basis, rather
than as unrelated fragments to be exploited
and depleted separately. The budget acknowledges that these multiple-use lands can continue to provide our Nation with wealth
only if they are managed with future generations in mind.
Part of our Nation's legacy includes the
diversity of life. The Fish and Wildlife Service,
the National Biological Survey, and the National Oceanic and Atmospheric Administration will make major strides in 1995 not
only to protect the Nation's endangered species, but also to prevent more of our biological
heritage from becoming endangered in the
future.
National Park Service
The President's priority investments expand
funding for enhanced protection of our national
parks (a total of $1.1 billion, 6 percent
over 1994). Beyond additional funds for basic
operating requirements and specific resource
protection needs in selected parks, the budget
proposes an additional $23 million for improving the professionalism of park rangers and
other Park Service employees.
Improving Entrepreneurial Management of
National Parks
To implement the National Performance
Review's recommendations on promoting entrepreneurial management by the National Park
Service, the budget seeks expanded authority
to increase park entrance and other recreation
user fees. In addition, funding is included
to cover the costs of collecting these fees.
This legislative proposal will raise an additional $32 million in revenues in 1995 and
create a new, mandatory National Park Renewal Fund, which will receive half of the
additional revenues, net of fee collection costs,
and return them to the collecting parks
for direct expenditure in 1996. To ensure
accountability, expenditures will be held to
strict performance standards based on demonstrated results in program output and
project execution.




141
Managing and Conserving Marine and Coastal
Resources and Habitat
The budget for the Department of Commerce's National Marine Fisheries Service
(under NOAA) provides a total of $281 million
to strengthen the Federal role in marine
fisheries and protected species management
and conservation. This is a 22-percent increase
over 1994, and reflects the Administration's
commitment to reversing declining marine
populations, particularly commercially important fish species. The budget supports the
restoration of marine species through implementation of improved fishery management
practices, information, and science. Improved
fishery management will help restore jobs
in the depressed commercial fishing industry,
as well as provide for the sustainable use
of our marine resources.
In addition, the budget for the National
Ocean Service (NOAA) provides $12 million
(a 31-percent increase over 1994) for the
designation and operation of national marine
sanctuaries. Sanctuaries, the marine equivalent of our treasured national parks, define
areas of the marine or Great Lakes environment of special resource or human-use values.
During 1995, NOAA will improve the management, research and educational aspects of
twelve designated national marine sanctuaries.
Three additional sanctuaries will be in development during 1995.
Implementation of the Administration's
Wetlands Plan
In August 1993, the Administration announced a comprehensive wetlands plan to
protect natural resources without impeding
economic growth. The plan was developed
after consultation with Congress, State and
local governments, the development community, and environmental organizations. The
budget provides additional resources to implement the plan, improve the wetlands regulatory process, encourage voluntary wetlands
restoration on private lands, and enhance
State capacity to assume a larger share
of the effort to protect wetlands.
The budget requests nearly $1 billion in
total spending (a 41-percent increase over
1994) for wetlands restoration, acquisition,
protection, research, mapping, monitoring, and

142
education; and improved non-Federal capabilities for wetlands management. This includes
$283 million (322 percent over 1994) in
mandatory spending for USDA's Wetlands
Reserve Program, which in 1995 will retire,
on a willing-seller basis, up to 300,000 acres
of current or former wetlands from agricultural
production. EPA's budget includes a $5 million
(50-percent) increase to its wetlands grants
program, primarily to assist State governments in operating their delegated Clean
Water Act Section 404 programs for regulating
activities in wetlands. An enhanced nonFederal role in wetlands management is a
key tenet of the Administration's wetlands
policy.
The budget also incorporates a legislative
proposal authorizing an increase in Section
404 wetlands regulatory permit fees charged
by the Army Corps of Engineers. The increased
fee revenue will total $6 million in 1995,
and $12 million in each subsequent year.
Commercial applicants may be assessed fees
on a sliding scale based on the degree
of the proposed development's impact on
the affected wetland and the amount of
effort required to conduct the permit review.
Energy Conservation
The Department of Energy (DOE) conservation program funds research and development
(R&D) and commercialization activities to
improve energy efficiency and reduce the
generation of waste and pollutants in virtually
all sectors of the U.S. economy: transportation,
buildings, industry, and utilities. The program
also includes funding for grants to States
for low-income home weatherization and Statelevel energy efficiency programs. The environment-related activities are concentrated in
the R&D component of the program.
Energy conservation activities are funded
at $978 million, up $288 million (42 percent)
from 1994. This increase reflects both Energy
Policy Act and Climate Change National
Action Plan initiatives. Major components
include: a doubling of funds for R&D and
commercial promotion of advanced building,
heating/cooling, and appliance technologies
($179 million, up $98 million, or 120 percent
over 1994); expanded R&D on electric and
hybrid vehicles and other transportation tech-




THE BUDGET FOR FISCAL YEAR 1995

nologies ($228 million, up $49 million, or
28 percent); increased outreach, demonstration, and commercialization efforts for industrial energy efficiency and waste minimization
($181 million, up $56 million, or 44 percent);
improved utility planning ($13 million, up
$6 million or 86 percent); and an increase
in weatherization and State energy conservation grants ($325 million, up $71 million
or 28 percent).
These energy conservation activities will
save 4 percent of the energy consumed in
the U.S. by the year 2000, resulting in
savings of $25 to $30 billion for consumers.
These conservation efforts will also achieve
a 50 million metric ton reduction in carbon
dioxide (CO2) gas emissions.
Solar and Renewable Energy
The solar and renewable energy program
within the Department of Energy funds research and development and commercialization
activities to enhance the use of renewable
energy sources in all sectors of the economy.
These sources include photovoltaics, solar thermal, wind, and biomass energy. The program
also funds research and development on high
temperature superconductivity, electric transmission, and energy storage, including hydrogen. For 1995, the solar and renewable
program is funded at $390 million, up $50
million or 15 percent over 1994. The 1995
program includes significant increases in areas
such as photovoltaics, biomass use for utility
electric generation, wind, and health effects
of electric and magnetic fields.
Grazing Fees
The Administration supports reforms in
the management of public rangelands and
is committed to bringing Federal grazing
fees closer to market value in order to
improve the long-term health of America's
rangelands. While discussions continue with
Western Governors, interested groups, and
the general public to refine the Administration's grazing fee proposal, the budget assumes
reforms and fees announced by the Secretary
of the Interior in August 1993.

143

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

Hardrock Mining
The Administration is committed to comprehensive reform of the Mining Law of
1872 to bring Federal policy on public land
hardrock mining into the twentieth century,
and do so without threatening the health
of the domestic mining industry. The budget
assumes fee levels and reforms consistent
with H.R. 322, the House-passed version
of hardrock mining law reform. Royalties
are assumed at 8 percent on a "pre-smelter"
basis; additional user fees to cover the costs
of implementation are also assumed. The
royalties and increased fees will finance a
new abandoned mine restoration fund and
the increased costs of implementing hardrock
mining reform.
Acquisition Strategies for the
Conservation and Protection of Land and
Water
The Administration proposes several means
to protect our natural and cultural assets.
A primary tool is the Land and Water
Conservation Fund (LWCF) administered by
the Departments of the Interior (DOI) and
Agriculture (USDA), funded at $254 million
(same as the 1994 enacted level). LWCF
funding finances land acquisition to preserve
nationally important natural and historic resources and incorporate them into the Nation's
national park, forest, refuge, and public land
systems. It also finances State grants supporting outdoor recreation activities.
The budget also includes $18 million (a
$2 million, 11-percent increase over 1994)
for DOFs Partners in Wildlife Program. This
voluntary Federal-private partnership administered by the Fish and Wildlife Service
implements fish and wildlife habitat restoration on private land. From revenues generated
from Duck Stamps and other sources, DOFs
Migratory Bird Conservation Fund is used
by the Fish and Wildlife Service to acquire
important waterfowl habitat. The Administration proposes $41 million in mandatory spending for Migratory Bird Conservation Fund
acquisition in 1995. The Fish and Wildlife
Service will also spend approximately $14
million in 1995 (17-percent increase over
1994) from the North American Wetlands
Conservation Fund to acquire additional wet-




land habitat consistent with the North American Waterfowl Management Plan.
ECOSYSTEM MANAGEMENT AND
BIODIVERSITY
The Administration is reinventing the way
the Federal Government uses and cares for
the environment. Several agencies have issued
new or revised statements and policies supporting "ecosystem management" to maintain
the sustainability
and biodiversity
of
ecosystems, as well as economies and communities. The human component is fundamental.
To ensure Federal efforts are comprehensive
and efficient, the National Performance Review recommended a coordinated ecosystem
management policy be established across the
Federal Government.
The Administration is considering the following principles for ecosystem management:
• Manage along ecological rather than political or administrative boundaries.
• Ensure coordination among Federal agencies, and increased collaboration with
State, local, and tribal governments, the
public, and Congress.
• Use monitoring, assessment, and the best
science available.
• Consider all natural and human components and their interactions.
The budget accelerates implementation of
selected, on-going interagency ecosystem management efforts. Each effort described below
will entail better management of existing
activities. Modest savings may be possible
as conflicts and the need for remediation
are reduced.
Ecological and Economic Sustainability: The
Pacific Northwest Forests
Following the April 1993 Forest Conference
in Portland, Oregon, the President directed
a Federal inter-agency team to develop a
comprehensive, integrated approach to managing old-growth forests and their biological
diversity west of the Cascade Range in Washington, Oregon, and Northern California. The
Forest Plan that the President subsequently
approved offers such a new approach, based

144
on sound science and a commitment to existing
law. It identifies and protects key watersheds,
old-growth forests, and scores of species—
such as the northern spotted owl, the marbled
murrelet, and salmon—as well as the region's
drinking water.
Regional economic and social needs were
integrated into the Forest Plan. The Administration proposed new assistance for local
workers, businesses, and communities to diversify the region's economy. Implementation
has already begun with oversight by an
inter-agency team and participation from State
and local agencies. $372 million in proposed
1995 funding (a 23-percent increase over
1994) will be used for worker retraining,
business loans, watershed analysis, and ecosystem restoration.
Looking at the uBig Picture": South Florida
Ecosystem Restoration
The natural systems from the Kissimmee
River, south of Disney World, to the coral
reefs off the Florida Keys are an interdependent landscape and seascape. Historically, however, these systems have been managed as
if they functioned in isolation from one another. Half of the Everglades have been
drained and converted to agriculture or urban
development. As a result, populations of wading birds have declined by more than 90
percent, and South Florida has 56 threatened
or endangered species. Florida Bay, which
in the past supported huge commercial and
recreational fisheries, is in a State of ecological
collapse.
The Administration is developing a comprehensive restoration approach to better manage the South Florida Ecosystem as a whole,
working closely with State, tribal, and local
governments. To support this effort, a regional
working group will develop an integrated,
long-term budget. This budget proposes $59
million in 1995, a 51-percent increase over
1994 enacted funding for restoration activities.
A preliminary restoration plan has been developed and is being reviewed. In addition,
issues of water quality, water quantity, and
the effect of water delivery on the natural
systems central to the restoration effort are
being analyzed.




THE BUDGET FOR FISCAL YEAR 1995

Using Available Resources More Effectively:
The Restoration of Prince William Sound
(Alaska)
In the past year, significant strides have
been made to restore the natural and economic
resources of Prince William Sound, which
were heavily damaged by the March 1989
Exxon Valdez oil spill—the largest in U.S.
history. The Administration committed $25
million to acquire environmentally sensitive
lands, worked closely with the State of Alaska
to hire an Executive Director for joint Federal/
State restoration, and published a draft restoration plan outlining the use of the restitution and settlement payments that are being
made by the Exxon Corporation into the
next century (a total of $1.1 billion). In
1995, the Administration will continue leadership in the acquisition of environmentally
sensitive habitat, and the development of
a comprehensive research and monitoring
program in the spill zone. The budget includes
$90 million in mandatory spending for these
activities.
Restoring a Forgotten River: The Anacostia
(Maryland and the District of Columbia)
The Anacostia River watershed covers 170
square miles in Maryland and the District
of Columbia. The river flows through some
of the most densely populated and economically depressed areas of the Nation's capital.
Once covered with forest and wetlands, the
watershed is now highly urbanized, the natural river flow has been altered, and the
river is best known for its extremely poor
water quality. Until recently, little attention
was given to the Anacostia in contrast to
the Potomac River. In fact, while over $1
billion has been spent to bring Lyndon Johnson's dream of a fishable, swimable Potomac
to pass, less than 1 percent of that sum
has been spent on restoration of the Anacostia.
As a result, the Anacostia has been rated
among the Nation's 10 most threatened rivers.
In 1987, the District of Columbia, the
State of Maryland, and two Maryland counties
signed a landmark restoration agreement for
the Anacostia, and established a committee
of local governments and regional organizations to develop a comprehensive restoration
plan. The role of the Federal Government

145

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

in the Anacostia is different than in the
Pacific Northwest and South Florida. Rather
than being a primary organizing force, it
is a participant in an effort developed and
led by State and local governments. The
budget proposes $2.3 million in Federal funding for river basin restoration efforts in
1995. Participating Federal agencies include
the Army Corps of Engineers, EPA, the
National Park Service, the Forest Service,
and the Fish and Wildlife Service.
An example of the Administration's leadership in addressing urban watershed issues,
the Anacostia River restoration effort is well
underway. A recently completed restoration
project that doubled the amount of wetlands
in the tidal Anacostia and a soon to be
completed Corps of Engineers' feasibility study
of restoration alternatives are two projects
jointly funded by the Federal Government,
the District of Columbia, the State of Maryland, and local governments.
The National Biological Survey
In his Earth Day speech, the President
announced his intent to create a new agency
in the Department of the Interior, the National
Biological Survey (NBS), to avoid the costly
and unnecessary economic and environmental
"trainwrecks" of the recent past.
The new agency will provide better, more
reliable, objective scientific information in
advance of problems that might threaten
animal and plant species with extinction.
Inadequate science has led to poor decisions
that years later have posed a false choice
between jobs and the environment. By identifying potential problems early, while society
still has flexibility to address them, the
NBS will make it easier to continue economic
growth in harmony with the environment.
The budget includes $177 million for the
NBS, a 6-percent increase over 1994. The
increase will accelerate world-class research
and monitoring of key U.S. ecosystems, such
as the Northwest forests and the Everglades.
The Bottom Line
The Administration will better manage natural resources by bringing together all interested parties, with a focus on natural systems
(rather than bureaucracy) to make informed




decisions for the long run. The ecosystem
management efforts and the NBS will improve
the way decisions are made on the ground
across the Nation.
CLEANUP AND COMPLIANCE
Midwest Flood Response/Recovery, and
Alternatives to Levee Construction
The 1993 Midwest floods were unmatched
in U.S. history in property damage, environmental harm, disrupted business, and personal
tragedy.
To assist States and localities meet this
unique challenge, the Administration proposed,
and Congress enacted, an emergency supplemental bill totalling $5.7 billion to fund
the Federal share of the relief effort. This
budget proposes additional emergency supplemental funding totalling $411 million for
the Army Corps of Engineers and the Department of Agriculture's Soil Conservation Service
(SCS) for levee repairs that could not be
addressed within the amounts in the 1993
supplemental. Over 450 levees should be
repaired by the end of the 1994 construction
season.
The Administration's first priority after the
floods was to return people's lives to normal
as quickly as possible. At the same time,
however, the Administration reviewed existing
flood recovery and floodplain management
policies and practices to reduce future damages
and disruption of lives, and restore the environment and the natural functions of the
floodplains:
• In August 1993, the Administration promulgated procedures to ensure that nonstructural levee repair alternatives were
considered.
• In November, the Administration published a list of Federal programs offering
floodplain management alternatives to
States, localities, and private citizens.
• In the emergency supplemental, the Administration requested, and Congress provided, language to allow the SCS, under
certain circumstances, to fund wetland
restoration in lieu of levee repair if local
landowners agreed. With the additional
SCS funding requested in the budget, this

146

THE BUDGET FOR FISCAL YEAR 1995

new authority should result in over
100,000 acres of restored, protected wetlands. For example, levees in Louisa County, Iowa, protecting 3,000 acres of land,
2,000 acres of which are cropland, have
received Federal repair funds 14 times in
60 years, totalling $3.5 million in 1993
dollars. The local levee district has applied
to restore the lands to wetland condition
through SCS's Emergency Wetland Reserve Program—an opportunity for a
major change from the wasteful floocj/repair cycles of the past.
• The Administration also supports new approaches to recovery and long-term mitigation of flood hazards in urban areas. Hundreds of communities have requested assistance to relocate damaged homes, businesses, and facilities out of harm's way.
Not simply reacting to the Midwest floods,
the Administration also commissioned a study
by Federal agency experts to ensure that
the assets of the floodplain are used to
the fullest extent compatible with economic
and environmental values. The views of State
and local governments and the private sector
should be carefully considered and addressed
in this study, to be released in the spring
of 1994.
Department of Energy Federal Facility
Cleanup and Compliance
The Department of Energy (DOE) faces
one of the Nation's most complex environmental challenges. Its Office of Environmental
Restoration and Waste Management (EM)
must safely manage the generation, handling,
treatment, storage, transportation, and disposal of DOE nuclear and hazardous waste
(including waste management, environmental
restoration, facility transition, and technology
development). The budget provides $6.28 billion, an increase of 2 percent over 1994,
for these key programs. Additionally, DOE
has been authorized to convert 1,200 contractor positions to Federal positions through
1994 and 1995. This conversion will enable
DOE to strengthen its management and improve EM effectiveness and efficiency.
Waste Management activities (47 percent
of the EM budget) include the minimization,
characterization, transportation, treatment,




storage, and disposal of radioactive, hazardous,
mixed, and sanitary wastes generated by
past and ongoing operations.
The Environmental Restoration program (33
percent of the budget) manages assessment
and cleanup at surplus and inactive sites.
DOE implements 93 cleanup and compliance
agreements with State regulators and EPA.
These agreements include specific activities
and schedules required to meet environmental
laws and regulations.
Facility Transition (14 percent of the budget)
coordinates and oversees the transition of
DOE surplus contaminated installations, facilities, and materials into the EM program
for deactivation, decommissioning, or disposition.
Technology Development (6 percent of the
budget) is the applied research and development arm of the EM program, supporting
new technologies for environmental restoration
and waste management.
Department of Defense Federal Facility
Cleanup, Compliance, Research and
Development, and Conservation Programs
The Department of Defense (DOD) continues
to make significant progress in environmental
cleanup, compliance and pollution prevention,
research and development, and conservation.
The budget provides a total of $5.7 billion
for these programs, an increase of 6 percent
above 1994.
DOD plans to spend $2.7 billion, a 5percent increase over 1994 (including the
defense environmental restoration and base
closure accounts) for environmental cleanup—
the identification, investigation, and cleanup
of past contamination from hazardous substances and wastes. Since 1984, DOD has
been engaged in cleanup at about 1,800
military installations and 8,000 formerly used
defense locations, including over 60 installations scheduled for closure or realignment
under the President's Fast Track Cleanup
Program.
In addition to cleaning up past contamination, DOD plans to spend nearly $2.6 billion
for environmental compliance and pollution
prevention (a 10-percent increase over 1994)—
meeting current standards in air and water

147

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

permits, maintaining and repairing environmental treatment facilities, and undertaking
construction to meet new environmental standards. This allows DOD to comply with all
applicable Federal, State, and local environmental laws. Pollution prevention includes
activities designed to eliminate or reduce
pollution at its source.
DOD provides $353 million for research
and development in 1995. This will accelerate
development and deployment of dual-use technologies for environmental cleanup, waste
minimization, and substitutes for hazardous
waste materials. It also provides funding
for research on global environmental change.
Finally, funding for the DOD conservation
program is $108 million in 1995. DOD is
the steward for over 25 million acres of
public lands. Its conservation program ensures
that the biological, cultural, and historical
resources on these lands are managed in
balance with the Department's military mission.
Superfund
The Administration is proposing legislation
to reform the Superfund program. Reforms
to the current liability system will reduce
litigation and related transaction costs for
the private sector of our economy, enhance
the program's fairness, speed site cleanups,
and promote economic development. Reforms
to the existing remedy selection process will
reduce cleanup costs without sacrificing
human health or the environment, while
increasing community involvement. Because
the Administration was still finalizing its
Superfund legislative reforms when the 1995
budget data base was locked, the current
request does not reflect the budgetary impact
of these reforms.
Pesticide Use Reduction Initiative
The Administration is committed to reducing
pesticide use and promoting sustainable agriculture practices. In June 1993, it announced
a series of food safety legislative, regulatory,
and administrative initiatives. These initiatives were designed to maintain and enhance
food safety for all Americans; address recommendations of a 1993 National Academy
of Sciences report on ways to protect children




from pesticide risks; and strengthen Federal
regulatory agency authority to make and
enforce sound, timely, science-based decisions
for protecting both public health and the
environment.
The budget supports the pesticide use reduction initiative (total funding of about $160
million, 35 percent over 1994) by increasing
support for research and extension activities
such as Integrated Pest Management, biological and cultural pest and disease control
systems, and other sustainable agriculture
systems. The budget also includes substantial
increases for USDA's food intake surveys
to include more information on small children,
and to expand USDA's chemical use surveys
and restricted use pesticide surveys to include
more States and crops and post-harvest chemical use.
The budget also reinstates fees on pesticide
manufacturers to cover EPA's costs of issuing
new pesticide registrations; and extends and
increases existing fees to support EPA's program to re-evaluate the safety of pesticides
already in use and re-register those determined to be safe.
INTERNATIONAL COOPERATION
North American Free Trade Agreement
(NAFTA) Environmental Support
The budget includes $300 million in support
of NAFTA and the U.S.-Mexico Border Environmental Plan. This represents a $152 million (103-percent) increase over 1994 that
will continue existing anti-pollution activities
and provide additional resources targeted
along the border with Mexico.
The budget continues construction of the
new Tijuana sewage treatment plant near
San Diego and expands treatment capacity
at the plants in Nogales, Arizona, and
Mexacali, Mexico. These projects will dramatically improve water quality along the Mexico
border. The budget also includes $50 million
in EPA State grants to address wastewater
treatment needs in colonias (unincorporated
sub-divisions) along the border in Texas.
These border communities lack the health
and environment infrastructure enjoyed by
other areas of the country. In addition, the
budget requests $25 million in new resources

148
for USDA grants for colonias to improve
the quality of drinking water by installing
necessary infrastructure. This will bring total
E P A / U S D A colonias funding to $186 million
since 1993.
NAFTA's environmental side agreement and
related agreements between the United States
and Mexico established three new institutions—the Commission for Environmental Cooperation (CEC), the Border Environment
Cooperation Commission (BECC), and the
North
American
Development
Bank
(NADBank).
The EPA budget includes $5 million as
the U.S. share for a permanent, independent
CEC Secretariat to facilitate cooperation
among the United States, Mexico, and Canada
on environmental and conservation issues.
$3 million is requested in the State Department budget for BECC operations, assisting
U.S. and Mexico border States and communities design and finance wastewater treatment, drinking water, and municipal waste
projects. The NAFTA Implementation Act
provided Treasury with $56 million as the
first of four payments to capitalize NADBank
(a total U.S. share of $225 million over
1995-98). NADBank will backstop shortfalls
in private-sector financing for border environmental projects. Finally, the Interior Department budget includes $11 million to enhance
endangered species protection along the border, and invest more funding in national
wildlife refuges and fisheries habitat restoration in the border area.
U.S. Global Change Research Program
(USGCRP)
The Administration is committed to support
a series of international agreements and
national policies that address environmental
changes that can have significant impacts
oil the world's society and economy (global
warming, ozone depletion, and biodiversity).
The USGCRFs goal is to support the development and implementation of these policies
by continually improving our knowledge of
the natural and anthropogenic processes and
forces that influence these changes. In 1995,
$1.8 billion is being proposed for this interagency research effort, a $349 million or
24-percent increase over 1994.




THE BUDGET FOR FISCAL YEAR 1995

The budget proposes a special research
emphasis on improving our understanding
of the dynamics between human behavior,
the economy, and environmental change; terrestrial ecology; international ground-based
data campaigns; and climate change modeling.
The budget also funds the continued development of a comprehensive space-based data
collection system (NASA's Mission to Planet
Earth).
International Environmental Funding
Global Environment Facility
The Global Environment Facility (GEF)
was created in 1991 as a three-year pilot
collaboration among the World Bank, the
United Nations Development Program, and
the United Nations Environment Program.
Originally capitalized with approximately $1.3
billion from both direct contributions to the
Global Environment Trust Fund of the GEF
and co-financing arrangements, the GEF provides concessional financing to developing
countries to address the problems of global
warming, ozone depletion, loss of biodiversity,
and pollution of international waters. The
pilot phase of the GEF expires in 1994.
International negotiations are underway to
restructure the GEF as a permanent entity.
The Administration is committed to the successful conclusion of these negotiations and
the creation of a transparent, accountable
GEF that can serve as the funding source
for achieving global environmental benefits,
including those related to the Climate Change
and Biodiversity conventions.
Montreal Protocol
The EPA and State Department budgets
provide a total of $48 million to replenish
the Montreal Protocol multilateral fund, a
$23 million (92-percent) increase over 1994.
This will both meet the second year of
a three-year U.S. commitment (1994-96) totalling $114 million, and pay down over a
two-year period amounts not paid from previous years. The multilateral fund helps developing countries finance ozone-protection training, research, investments, and projects
(chlorofluorocarbon (CFC) recycling/recovery
equipment and devices; and retooling of manufacturing facilities for non-CFC alternatives).

149

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

Global Environmental Education
The budget provides a total of $12 million
in 1995 for the "Global Learning and Observations to Benefit the Environment" (GLOBE)
initiative. NOAA and NASA began this effort
in 1994 with a total commitment of $1
million from existing resources. EPA will
also participate in the initiative, beginning
in 1995. Students around the world will
take part in an environmental observations
program designed by educators and scientists
to enhance awareness of the environment
and the impacts of human activities, and
collect environmental data for increased scientific understanding of the earth. Although
the United States would take the lead,
GLOBE's long-term goal is a global partnership. Over 1,000 schools will participate globally by the spring of 1996, with a target
of 100,000 by the year 2000.
Multilateral and Bilateral Assistance
The budget requests an increase of $49
million (an increase of 18 percent over 1994)
for bilateral and multilateral environment
assistance. Bilateral assistance comprises
Agency for International Development (AID)
activities
to
improve
climate
change,
biodiversity, tropical forests, urban and industrial pollution, coastal zones and water resources, environmentally sound energy use,
and sustainable agriculture in developing
countries. Multilateral assistance funds U.S.
voluntary contributions to the United Nations
environment system and other international
organizations that address a wide range of
international environment activities, including
the United Nations Environment Program
(UNEP), Convention on International Trade
in Endangered Species (CITES), and the
World Meteorological Organization (WMO).

Green GDP and Economic/Environmental
Accounting
The Department of Commerce's Bureau of
Economic Analysis (BEA) has an ambitious
plan to improve understanding of the interaction between the economy and the environment. BEA's three-phase plan calls for the
development of a comprehensive, integrated
set of economic and environmental accounts.
By Earth Day 1994, BEA will present prototype estimates of the economic value of
nonrenewable natural resources (including oil
and gas, coal, uranium, and nonfuel minerals
with a scarcity value) and a measure of
gross domestic product (GDP) adjusted for
the depletion of these resources. The prototype
estimates will utilize a range of alternative
methods for measuring the stocks of natural
resources, new discoveries and extensions,
and depletions. In addition, BEA will present
an integrated economic and environmental
accounting framework for renewable natural
resources and a broader range of environmental assets.
Subsequently, BEA will extend the
nonrenewable natural resource accounts to
renewable natural resources such as forests,
soil, water, water aquifers, and fish stocks.
BEA ultimately will value a broader range
of environmental assets, such as clean air
and the environment as a recreational resource. These final estimates will be more
difficult because they must be based on
less well-developed concepts and data sources.
Although significant advances will be required
in data as well as methods, BEA will move
from near ground zero to the forefront of
world efforts in integrated economic and
environmental accounting. To carry out these
activities, the budget proposes $1.9 million,
an increase of $1.5 million over 1994.

OPENING MARKETS OVERSEAS

The truth of our age is this and must be this:
Open and competitive commerce will enrich us as a
Nation.




President Bill Clinton

Opening overseas markets to U.S. exports
increases employment and incomes in the
United States, and gives foreign consumers
the same range of choices of products and
services that U.S. consumers have in our
open market. This Administration made great
progress last year, and has a full agenda
for the future.

150

THE BUDGET FOR FISCAL YEAR 1995

URUGUAY ROUND
The Uruguay Round represents the largest,
mpst comprehensive set of trade agreements
since the GATTs inception in 1947, involving
117 countries and directly affecting approximately 85-90 percent of global trade. At
the insistence of the United States, the
Round not only involved traditional trade
liberalization by reducing tariffs, but also,
more importantly, it opened trading opportunities for many sectors of the American economy,
including services, that had never previously
benefitted from multilateral trade agreements.
The Council of Economic Advisors tentatively
estimates that, once the Uruguay Round
is fully implemented in 2004, it will add
$100 to $200 billion to U.S. annual GDP
per year (1.5-3.0 percent of current GDP)
as a direct result. The Uruguay Round will:
• Reduce tariffs by an average of onethird. Significant reductions or eliminations of tariffs will occur in such sectors
as construction, medical and agricultural
equipment, steel, beer, pharmaceutical
goods, paper, toys, furniture, and certain
electronics. Chemical tariffs will be set at
low rates.
• Cover trade in agriculture in a comprehensive way for the first time.
Countries must permit a minimum level
of agricultural imports (e.g., rice imports
by Japan), must cut agricultural export
subsidies by 36 percent and reduce the
quantity of exports subsidized by 21 percent over 6 years for developed countries
(10 years for developing countries). Domestic subsidies to agriculture must be at levels 20 percent below their 1986-90 base.
The United States has already achieved
the required reductions in domestic subsidies. Efficient U.S. producers of farm
commodities will realize significant benefits from freer markets.
• Eliminate the current trade regime
for textiles and apparel over a 10-year
period. American consumers will pay
lower prices for clothing as a result of this
part of the Round. At the same time, the
agreement provides a mechanism to cushion the impact on U.S. producers from
sudden increases in imports.




• Provide new coverage of trade in
services and intellectual property. The
achievement of this major U.S. objective
will create a framework for the liberalization of the $900 billion worth of cross-border trade in services and approximately
$3 trillion of international activity that
has not traditionally been regarded as
trade such as some forms of legal services.
• Prohibit many export subsidies. Government subsidies generally provided for
domestic purposes (e.g., for industrial research) that might give a commercial advantage to a benefitting firm are allowed,
but only under certain prescribed circumstances.
• Reduce other non-tariff barriers to
trade. A wide range of other barriers to
trade, such as unfair licensing procedures
and trade-related investment measures,
have been made less restrictive or removed entirely.
North American Free Trade Agreement
(NAFTA)
NAFTA creates a $6.5 trillion market with
370 million people and eliminates most restrictions on trade between the U.S. and Mexico,
our third largest and fastest growing export
market. Since Mexico began to open its
markets in 1986, U.S. merchandise exports
to Mexico have risen by 228 percent, reaching
$40.6 billion in 1992. NAFTA locks in this
liberalization and eliminates the remaining
Mexican barriers to U.S. exports, which are
2.5 times larger that current U.S. barriers
to Mexican exports.
As of January 1, 1994, 50 percent of
all U.S. exports to Mexico enter Mexico
duty-free, including some of our most competitive products, such as semiconductors and
computers, aerospace equipment, telecommunications equipment, electronic equipment, and
medical devices. NAFTA has opened Mexico's
markets to U.S. service exports (e.g., telecommunications services, insurance, and banking) and eliminated numerous Mexican requirements on U.S. investment. Service trade
with Canada will also be further liberalized.
Unlike previous trade agreements, the NAFTA
text also explicitly provides for the consideration of environmental standards and con-

151

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

cerns, such as discouraging a NAFTA country
from weakening its environmental protection
to attract investment. Provisions of the
NAFTA also ensure that the U.S. can maintain
and enforce its existing environmental standards as well as international treaty obligations
to limit trade in controlled products such
as endangered species.
A consensus of the economic studies of
NAFTA have found that it will increase
U.S. GDP, employment, and probably wages.
Most studies suggest that the U.S. GDP
will increase by approximately one-quarter
to one-half a percentage point once NAFTA
is fully implemented. Export-related jobs are
expected to rise. Currently, the number of
American workers producing merchandise exports to Mexico is estimated to be 700,000.
With NAFTA, employment related to exports
to Mexico is projected to increase by another
200,000 by 1995. This adds to the 1.5 million
U.S. jobs that are already supported by
merchandise exports to Canada. Real wages
may also benefit, since the wages of U.S.
workers in jobs related to exports to Mexico
are 12 percent higher than the national
average.
Although NAFTA's net effect on U.S. jobs
will be positive, it is also likely to lead
to some job displacement. To assist those
workers who may face job loss, the Administration has in place a transitional program
until the Administration's comprehensive
workforce security program has been enacted.
Key to NAFTA's effective implementation
Eire the side agreements negotiated by the
Administration on labor, the environment
and import surges. Both the labor and environment agreements obligate each NAFTA partner to enforce its domestic laws. Each of
these agreements also creates a commission
charged with monitoring progress under the
agreements. An additional side agreement
between the U.S. and Mexico will address
the serious environmental problems in the
border region and ensure that the environmental consequences of increased trade with
Mexico will be affirmatively managed. The
side agreement on import surges creates
an "early warning" mechanism to identify
sectors where explosive trade growth may




occur and significantly harm domestic industry
during the transition period.
THE TRADE AGENDA
The Administration has an ambitious agenda to continue market opening and export
promotion. It will implement NAFTA's side
agreements and other provisions such as
transitional support for workers adversely
affected by NAFTA and environmental cooperation between the United States and
Mexico. Once the Uruguay Round of trade
agreements is signed, the Administration intends to submit legislation to implement
the Uruguay Round agreements for Congressional approval under the fast track procedures. The Administration will also examine
the prospects for future bilateral and multilateral trade negotiations, with the latter focused
on the relationship between trade and the
environment, competition policy and worker
rights. In addition, the Administration is
engaged in comprehensive negotiations with
Japan, through the U.S.-Japan Framework,
in order to improve market access.
The end of the Cold War has changed
the nature of the requirement for export
controls on critical military technologies. The
Administration is relieving unnecessary burdens on U.S. business by eliminating unilateral dual-use export controls unless they
are essential to national security and foreign
policy interests. The Administration has significantly liberalized control levels for computers, and is negotiating with our allies to
liberalize control levels for supercomputers
and telecommunications. These actions carry
out the President's pledge at the United
Nations to "work with our partners to remove
outdated controls that unfairly burden legitimate commerce and unduly restrain growth
opportunities all over the world."
On other issues also on the legislative
agenda, the Administration will seek the
renewal of the Generalized System of Preferences (GSP), a program that provides dutyfree treatment to selected items from eligible,
less developed countries that meet certain
worker rights and other criteria. The agenda
also includes a decision on whether to seek
a renewal of Most Favored Nation (MFN)
trade status for China. The Administration

152
has conditioned MFN renewal on China's
progress in the human rights area. Consistent
with the Budget Enforcement Act, the Administration will seek bipartisan agreement on
offsets for the budgetary cost of any trade
legislation that reduces tariff revenues.
Finally, the Administration recognized the
need for a unified review of the budgets
of U.S. agencies that promote trade and
for the creation of a unified export provision
budget as mandated by the Export Enhancement Act of 1992. The Administration is
committed to strengthening the country's trade
promotion efforts because exports play a
vital and increasing role in creating high
skill, high wage jobs for our economy. In
a report published last September by the
Trade Promotion Coordination Committee
(TPCC) Toward a National Export Strategy,
the Administration lays out a set of initiatives
to enhance coordination and to consolidate
federal export promotion efforts. In furthermore of this goal, and the statutory mandate,
the TPCC will shortly issue a companion
document which details the allocation of Federal resources across agencies involved in
export promotion efforts. One focus of the
review was how best to promote higher
technology, U.S. exports, and ensure that
budget resources went to high priority programs. The Trade Promotion Coordination
Committee made several recommendations to
OMB that were used in planning the 1995
budget:
1. Costs of Trade Negotiations. The five
agencies with the most direct responsibility—the Departments of Commerce, State,
Treasury and Agriculture, as well as the
U.S. Trade Representative—expect to
spend about $190 million in 1995 in negotiating and implementing trade agreements.
2. Providing Credit to Less Developed
Countries. Eximbank and other agencies




THE BUDGET FOR FISCAL YEAR 1995

provide loans, insurance and guarantees
to developing countries to purchase U.S.
exports. The 1995 budget will request $1.4
billion to pay for this credit.
3. Helping Correct Market Imperfections. The Commerce Department and
other agencies provide assistance, such as
market information, to U.S. exporters. The
budget will request about $290 million for
these services.
4. Matching Foreign Export Subsidies.
Eximbank and the Agriculture Department provide subsidies to U.S. exporters
to counter foreign export subsidies. The
most significant development in this area
is the $150 million "tied-aid fund" that
Eximbank will administer. The budget will
request $682 million for matching U.S.
subsidies.
5. Other Trade Related Subsidies. The
Agriculture and State Departments provide subsidies to foreign importers of U.S.
goods, both for business and foreign policy
reasons. These subsidies will decline from
about $1.0 billion in 1994 to about $0.5
billion in 1995.
The review revealed that export-related
expenditures total about $3.4 billion in the
1995 budget as Table 3B-13 shows:
Two caveats about these figures should
be borne in mind. First, the primary contribution the U.S. Government can make to promote U.S. exports is to reduce the deficit,
which constricts resources for the exporters
and the economy as a whole. Second, budget
resources are measures of inputs not outcomes,
such as increased U.S. exports. The major
determinants of U.S. exports, which totalled
$592 billion in 1992 for merchandise trade
and services, are underlying competitiveness,
foreign exchange rates and open trade regimes,
not U.S. Government budget support for
a limited number of U.S. exporters.

153

3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY

Table 3B-13 EXPORT-RELATED EXPENDITURES BY CRITERIA
(In millions of dollars)
1993 Actual
Authority

1994 Estimated

^ays

1995 Proposed

Outlays

Outlays

(1) Credit problems in LDC markets.
a. These programs provide credit-worthy emerging markets with otherwise unavailable credit so that they
can purchase U.S. goods
Department of Agriculture—Mandatory
Department of Agriculture—Discretionary
Export-Import Bank
Subtotal

752
346
647

534
324
259

403
330
944

368
419
458

394
280
694

396
297
555

1,745

1,117

1,677

1,246

1,368

1,248

b. These programs provide credit anchor grant assistance to U.S. companies interested in investing in or
exporting to less-developed countries.
Trade and Development Agency
Department of Energy
Overseas Private Investment Corporation

36

23

36

32

18

11

17

Subtotal

54

34

1,799

1,151

Total

13

40
20
20

39
8
21

53

45

80

68

1,730

1,291

1,448

1,316

(2) Negotiating open markets and lowering/removal of trade barriers. These programs negotiate to open
markets to U.S. goods and services.
Department of Agriculture—Discretionary
Department of the Treasury
Department of State
Department of Commerce
Office of the U.S. Trade Representative
Total

11
7
62
78
20

11
7
61
68
20

12
7
65
77
21

12
7
64
75
22

12
7
66
81
21

12
7
66
119
21

178

167

182

180

187

225

(3) Costs of exporting that small- and medium-sized firms cannot fully bear. These programs provide market
information, matching services, trade events, etc.
Department of Agriculture—Mandatory
Department of Agriculture—Discretionary
Export-Import Bank
Trade and Development Agency
Department of Energy
Department of Commerce
Small Business Administration
Department of State

50
17
4
4
161
19
12

57
17
1
3
4
142
19
12

Total

268

255

1

33
19
4
9
187
10
13
276

1

43
19
4
6
178
10
13
274

1

26
18
5
13
199
15
14
291

1

26
18
1
4
12
210
15
13
299

(4) Matching foreign export subsidies. These programs attempt to combat foreign export subsidies.
Department of Agriculture—Mandatory
Department of Agriculture—Discretionary
Export-Import Bank

567
1
27

504
1
3

563
1
100

563
1
13

532
1
150

532
1
44

Total

594

507

663

576

682

576

(5) Other trade related expenditures (e.g., direct subsidies) that serve objectives other than those listed
above.
Department of Agriculture—Mandatory
Department of Agriculture—Discretionary
Department of State/Commodity Import Program

665
52
223

637
52
223

631
53
325

673
53
325

582
43
125

582
43
125

Total

940

912

1,009

1,051

750

750

3,779

2,992

3,860

3,372

3,358

3,166

Grand Total







3C. Delivering a Government that
Works Better and Costs Less




155




3C. Delivering a Government that Works
Better and Costs Less
The entire agenda of change depends upon our ability to change the way we do our own
business with the people's money. That is the only way we can restore the faith of our citizens.
President Bill Clinton
September 7, 1993
This Administration inherited a Government
with a trust deficit. Americans don't believe
that they—or their tax dollars—are treated
with due respect. They also don't believe
that Government can or will change.
The private sector has cut costs and raised
quality to compete around the world. The
Federal Government must do the same—
to cut the deficit and free up capital for
investment, and to keep up with and support
our more efficient private sector, so that
the whole economy can grow faster.
To be a vital partner in economic renewal
and prosperity, then, the Federal Government
must rise to three challenges:
• It must rebuild public trust.
• It must work better and cost less.
• It must stay in step with—not drag
down—the private sector.
The Clinton Administration took swift action
in its earliest days to begin putting the
Federal house in order, launching the National
Performance Review (NPR) under the leadership of the Vice President.
The National Performance Review
Challenge
The NPR's intensive six-month effort was
the first step in a long journey toward
a reshaped government for the next century:
a government that will emphasize results
instead of rules; treat citizens more like
customers, with respect; empower front-line


http://fraser.stlouisfed.org/
150-001 0 - 9 4 - 6
Federal Reserve Bank of St. Louis

employees to do their best; and strip away
activities it can no longer afford.
That vision parallels the successful, and
necessarily painful, transformation of America's private sector. To stay competitive in
world markets, big corporations have redefined
missions, reorganized for results, focused on
customer service, and capitalized on advancing
technology. While the Federal Government
has tried to do more with less for years,
it has not been forced to reexamine those
fundamentals all at once.
The sheer size of the Federal Government,
with annual expenditures of over 23 percent
of the Gross Domestic Product, makes this
a major challenge. The expenditures of each
of the Federal Government's three biggest
agencies—the Departments of Health and
Human Services, Defense, and Treasury—
nearly triple the revenues of the Nation's
biggest corporation, General Motors Corp.;
expenditures of mid-sized Federal agencies
match revenues of Fortune 50 companies.
The NPR's principles for "reinventing" government yielded 384 recommendations—from
systemic government-wide change to proposals
for agencies—all following these four themes:
• Cut red tape by shifting from accountability for following rules to accountability for
achieving results.
• Put the customer—the citizen—first by giving a voice and a choice. Restructure operations to meet the needs of individuals.
Use competition, or where competition
157

(QL 3)

158

THE BUDGET FOR FISCAL YEAR 1995

isn't feasible, use other market incentives
for success.
• Empower employees to get results by decentralizing authority, permitting those
who work on the front lines to make more
decisions and solve more of their own
problems. Employees responsible for results must be provided with the necessary
tools, information, and training. Make full
use of computer systems and telecommunications to reengineer activities and ensure
that programs are run efficiently and effectively.
• Go back to basics, paring back programs
by abandoning the obsolete, eliminating
the duplicative, and ending special-interest privileges.
The recommendations will affect all sectors
of the Federal Government. The Administration will reduce the Federal work force by
252,000 through 1999—or about 12 percent
of the civilian non-postal work force—by rethinking not only what government does
but how it does it, and by improving program
delivery as well as streamlining procurement,
personnel, financial management, and regulatory affairs.

From Rhetoric to Reality
As management reformers have learned,
getting from rhetoric to reality requires a
top-down imperative and a bottom-up stake
in change. Under the leadership of the Vice
President, this Administration has depended
primarily on government employees, not outside consultants, to paint the vision and
translate it into tangible next steps.
The NPR created a framework for action.
The President's Management Council will
coordinate and oversee critical management
changes, such as streamlining and field office
restructuring. Its members are the officials
(mostly deputy secretaries) who have been
designated Chief Operating Officers in their
departments.
The President and the Vice President both
have noted that implementing the NPR agenda
will take eight to ten years. However, as
a result of 16 NPR-based Presidential directives issued to date, as well as prior legislation
and reform efforts, key administrative initiatives are already in progress throughout the
Government. These agency-specific initiatives
are highlighted throughout this budget. The
key government-wide initiatives are discussed
below.

REBUILDING PUBLIC TRUST THROUGH RESULTS AND SERVICE
PUTTING CUSTOMERS FIRST

ence a change for the better in the services
they receive from the Federal Government.
Finding Out What Customers Want

We need to listen to our customers and hear clearly what they have to say to us.
Vice President A1 Gore
October 27, 1993

The quality revolution sweeping through
American businesses has brought the issue
of customer service front and center. The
Government must seek to provide the service
and results its customers, and American
citizens and taxpayers, deserve. Long lines,
busy signals, bad information, and financial
errors are all too common, undermining public
trust in Government to do anything right.
Weary of promises, Americans need to experi-




Go to the places where your customers go and
pretend you are a customer. Fill in the forms, apply
for the grants„ stand in the lines, call the 800 numbers. See if you like the service you receive.
SSA Commissioner Shirley S. Chater
December 14, 1993

On September 11, 1993, President Clinton
issued Executive Order No. 12862, "Setting
Customer Service Standards." It requires Federal agencies to put customers first by regularly asking them how they view Government
services, what problems they encounter, and
how they would like services improved. The

3C. DELIVERING A GOVERNMENT THAT WORKS BETTER AND COSTS LESS

first step in responding to the Executive
Order is to find out who a program's customers
are and what they want.
Internal Revenue Service (IRS): In response
to its customers, the IRS piloted a system in
1992 that enables most taxpayers who use a
1040-EZ tax return to file their returns over
the telephone. With a touch tone telephone,
the taxpayer enters all the necessary information into an entirely automated, probe-and-response system. After an expanded pilot in Ohio
in 1993, IRS plans to make TELEFILE available to taxpayers in seven states in 1994. For
the taxpayer, TELEFILE simplifies filing and
improves access (24-hour availability, seven
days a week) and timeliness of service (refund
checks were sent to taxpayers on average within 22 days, compared to 29 days for paper
filings).
Similarly, IRS began testing joint electronic
filing of Federal and State tax returns in
1991. By 1993, 12 States had pilots and
three States had fully implemented programs.
In 1994, IRS expects to receive over 1
million jointly filed returns from 25 participating States. Joint electronic filing benefits:
(1) taxpayers and tax practitioners by saving
time and money since income tax data need
only be filed with one taxing authority,
not two or more; (2) State governments
by saving substantial implementation and
maintenance costs for an independent system;
and (3) the IRS by encouraging the growth
of electronic filing.

159

Social Security Administration (SSA): By
talking to its customers, SSA has become increasingly sensitive to the problems caused by
delays in processing disability claims. The
number of SSA's initial disability claims increased 57 percent between 1990 and 1994,
creating a serious backlog of cases. The 1995
budget proposes a substantial investment
($280 million) to reengineer the SSA claims
process to alleviate the backlog, reduce processing and review delays, and improve SSA's
overall delivery of service. SSA customer surveys also are helping to shape its reengineering of the disability process for appeals and
continuing disability reviews as well as to
guide its study of the recent growth in initial
disability claims.
Department of Labor (DOL): By listening to
its customers, DOL has learned that the public
perceives the current Federal/State job training system as a confusing array of programs
with multiple entry points. To respond to customers who seek job information and training,
DOL proposes to establish a nationwide network of user friendly One-Stop Career Centers
that will provide a single point of entry into
the employment and training system. The
1995 budget proposes a significant increase
($200 million) over the 1994 base ($50 million)
for the One-Stop Shopping initiative. In some
cases, these resources are "seed money," helping States plan and implement programs that
streamline access to the full range of employment and training services. In other cases,
States may provide One-Stop services with
their own resources, aided by waivers of Fed-

Highlights of E.O. No. 12862
"Setting Customer Service Standards/' September 11,1993
• The Government must be customer driven.
• The standard of quality for Government customer service is set equal to the best practices in the private sector.
• Agencies are to identify who their customers are and survey them to determine what
they want.
• Agencies are to develop and publish performance standards and measure results
against them.
• Employee ideas and actions are to be a big part of the solution.
• Agencies are to provide customers with choices in both the sources of service and the
means of delivering them.
• Information, services, and complaint systems are to be easily accessible.




160
eral requirements that would otherwise constrain flexibility. Full implementation of the
Administration's One-Stop Shopping initiative
will provide all job seekers with easy access
to job and career information as well as Federal training and employment programs.
Integrated Service Delivery Using
Information Technology
Americans inside and outside the Government must deal with an incredibly complicated
assortment of Federal agencies, organizations,
processes, and forms—often resulting in slow,
ineffective service and an aggravated public.
Information technology can be a key to providing more timely, cost-effective and user-friendly Government services. The recent move
toward electronic transfers of all collections
and payments is illustrative.
Simplification of wage reporting: Initial
steps will include fostering intergovernmental
tax filing, reporting, and payments processing
through wage reporting simplification. Currently a business prepares and submits the
same financial data to a number of different
Federal, State and local entities. Minimizing
this duplication will allow a business owner
to file wage information only once. Early recognition and correction of reporting errors will
also lower costs. Participating agencies will
begin the design phase and pilot limited facets
of wage reporting simplification in 1994.
Electronic benefits transfer (EBT): An extension of electronic payment transfers first popularized in electronic banking, EBT is another
example of how information technology may
improve the delivery of government services.
Though automated teller machines, access
cards, and electronic networks are now commonplace, government benefits still are distributed primarily through paper-based systems of
checks and food stamps. For the more than
26 million monthly recipients of food stamps,
Federal and State governments spend several
hundred million dollars annually just to print,
distribute, and destroy coupons. EBT adopts
commercial electronic payment practices for
the delivery of government assistance services,
improving efficiency and ultimately lowering
costs. Building on commercial practices, Maryland implemented a State-wide pilot program
in 1993, serving 200,000 recipients of Aid to




THE BUDGET FOR FISCAL YEAR 1995

Families with Dependent Children, food
stamps, child support, and general assistance.
OMB has established an interagency EBT
Task Force to develop by March 1994 a plan
for interagency cooperation among EBT users
that will bring the benefits of the Maryland
pilot to other States.
Facilitating Agency Customer Surveys
The President's Customer Service Executive
Order requires surveys of Government customers and their levels of satisfaction on
a scale unprecedented for most agencies.
OMB has undertaken two initiatives to facilitate the development, review, and operation
of customer surveys. First, in November 1993,
it released the Resource Manual for Customer
Surveys that outlines a general approach
to customer survey planning and provides
a directory of services available from statistical
agencies. Second, in December 1993, OMB
issued to the Social Security Administration
and the Indian Health Service the first
generic clearances for customer surveys under
a new streamlined process. During 1994,
OMB will continue to develop and disseminate
regular updates to the Resource Manual,
expedite generic clearance reviews for customer surveys, and coordinate group consultations and training in customer survey methods.
MOVING TOWARD A MORE RESULTSORIENTED GOVERNMENT

The law simply requires that we chart a course
for every endeavor that we take the people's money
for, see how well we are progressing, tell the public
how we are doing, stop the things that don't work,
and never stop improving the things that we think
are worth investing in.
President BUI Clinton
August 3, 1993

The President made these remarks as he
signed into law the Government Performance
and Results Act of 1993 (GPRA). This Act,
complemented by other Administration actions,
introduces a results-oriented focus for government managers and can transform how our
government is managed. In the course of
making these changes, the Federal Govern-

3C. DELIVERING A GOVERNMENT THAT WORKS BETTER AND COSTS LESS

ment will adopt many of the best practices
used by business to improve operational and
financial results.
The GPRA shifts attention from program
inputs (such as resources, staffing levels,
and rules) to program execution: what results
(outcomes and outputs) are being achieved,
and how well are programs meeting intended
objectives? Emphasis will be given to improving program effectiveness, including service
quality and customer satisfaction, and to
increasing individual and organizational accountability for program performance and
achieving pre-set goals.
Under GPRA, agencies are required to
prepare: (1) strategic plans that define an
agency's mission and long-term general goals;
(2) annual performance plans that contain
specific goals (targets) and are derived from
the general goals (a government-wide performance plan will be prepared using the agency
performance plans); and (3) annual reports
that compare actual performance with the
targets. Additionally, as Federal managers
are to be more accountable for how programs
perform, the Act allows managers to be
given more flexibility and discretion in how
they manage.
Implementation of GPRA will occur over
the next six years. The first stage, already
underway, consists of agency pilot projects
during 1994-1996. In January 1994, 21 de-

161

partments and agencies were designated as
pilot projects for performance plans and reports. These pilot projects cover about 375,000
employees (nearly 20 percent of the Federal
non-postal civilian work force) and programs,
activities, and operations with aggregate annual spending of $48 billion. Additional pilot
project designations for performance plans
and reports are expected in the Spring of
1994.
Also, in early 1994, Cabinet Secretaries
are drafting performance agreements, as recommended by the NPR. Cabinet Secretaries
and agency heads will use the agreements
to increase their focus on the accomplishment
of organizational goals.
A second set of GPRA pilot projects involving
managerial flexibility and accountability will
be designated this year. These pilot projects
will waive certain administrative requirements
to provide this added flexibility; these waivers
could significantly expand managers' authority
to make decisions and spend administrative
monies. Several of these pilots are expected
to waive selected administrative requirements
that are applied to state and local governments.
The second stage of GPRA implementation—
full-scale and government-wide—commences in
the Fall of 1997, with completion of agency
strategic plans and submission of the first
of the annual performance plans. Agencies

Examples of GPRA Pilot Projects
Pilot project covers entire organization: Defense Logistics Agency, Forest Service, Internal
Revenue Service, Small Business Administration, Social Security Administration
Pilot project covers specific programs: Post-secondary Student Loan and Grant Programs,
Department of Education; Organized Crime and Drug Program, FBI; Air Traffic Control
and Navigation Facilities and Equipment, Federal Aviation Administration
Examples of Pilot Project Performance Goals and Measures
Bureau of Engraving and Printing

Reducing unit production cost, spoilage, and increasing productivity

Environmental Restoration and Waste Eliminating and reducing risks to human health
Management, Dept. of Energy
and safety and environment at inactive and surplus sites and facilities.
National Oceanic
Administration




and

Atmospheric Building sustainable fisheries, reducing wasteful,
incidental catch of recovered species.

162

THE BUDGET FOR FISCAL YEAR 1995

are required to consult with Congress and
other interested and potentially affected parties when preparing the strategic plans.
As a result of these efforts, starting next
year, budgets will contain more information
on what taxpayers are getting for their
money. This information will provide the
basis for the initial government-wide performance plan that is required to be submitted
to Congress early in 1998 as part of the
1999 budget.
To encourage Government managers to
think of new ways of how to get the best
results for the public, under the aegis of

the NPR, agencies established over 100
"Reinvention Labs." The reinvention laboratories are designed to accelerate the introduction of new ways of doing business, with
particular emphasis on cutting "red tape",
unleashing innovative improvement ideas from
employees, encouraging risk-taking, and placing value on the customer. The "Reinvention
Labs" and Executive Order 12861 (September
30, 1993)—which calls on agencies to eliminate
half of their internal regulations within three
years—complement provisions in GPRA for
reducing certain types of controls and limitations imposed on managers and make Government more results oriented.

MAKING GOVERNMENT WORK BETTER AND COST LESS
REINVENTING FEDERAL
PROCUREMENT

Our system is based on a premise that extensive
controls will result in more efficient purchasing decisions. But these excessive controls, stemming from
mistrust, tie the hands of government managers
and produce tremendous inefficiencies and poor
business decisions for the taxpayers.
President Bill Clinton
October 26, 1993

Getting Value for Money
On October 26, 1993, the President and
Vice President announced a major overhaul
in the way the Federal Government buys
its goods and services. Over the years, the
Federal procurement system has evolved into
a complex and burdensome maze of laws
and regulations affecting both private sector
vendors and Federal personnel. Furthermore,
the procurement system fails to provide significant incentives for contractors to deliver quality. Both the NPR and the Acquisition Law
Advisory Panel to the U.S. Congress on
Streamlining Defense Acquisition Law (known
as the Section 800 Panel) have documented
the need to streamline procurement procedures
to increase access to and competition in
Federal procurement, provide the best technologies available, and save the government
money. "American taxpayers have a right
to expect that their Federal dollars are being




put to the best possible use. The current
Federal procurement system is inefficient and
wasteful. It adds significant costs without
providing extra value," President Clinton emphasized as he announced the major overhaul
of government buying. "It's time the Federal
Government viewed Federal purchasing as
a major source of savings by creating a
more efficient and responsive Federal procurement system."
Government-wide Initiatives
Legislative and administrative initiatives
recommended by NPR and the Section 800
Panel comprise the basis of the Administration's procurement reform agenda. The Administration seeks to remove unnecessary or
special burdens imposed by legislation and
regulation, simplify acquisition procedures, encourage innovation to promote greater value,
and allow the Government to buy commercial
items more like a commercial customer.
Procurement Reform Legislation: Congress'
commitment to procurement reform is clear.
In 1993, two significant pieces of legislation
were introduced. Both seek to streamline the
process and encourage acquisition of commercial products. The Administration supports the
principles behind these legislative proposals
and seeks swift passage of a procurement reform bill in 1994.
Electronic Commerce: In an October 26,
1993, memorandum, the President ordered the
Federal Government to move from the current

3C. DELIVERING A GOVERNMENT THAT WORKS BETTER AND COSTS LESS

163

A Wake-Up Call
During Operation Desert Shield, the U.S. military placed an emergency order for 6,000
Motorola commercial radio receivers. Because Motorola's commercial unit lacked the recordkeeping systems to show the Pentagon that it was getting the lowest available price, the
deal reached an impasse. How was it resolved? The Air Force asked the Japanese to buy
the radios for the U.S., so the U.S. could circumvent its own process. "When the government of another nation has to step in and buy something for the U.S. military because our
procurement regulations are so crazy, that's a clear wake-up call that we have got to have
the reforms that are being announced today," Vice President A1 Gore said on October 26,
1993.

paper-based system to an electronic exchange
of procurement information, including solicitations, bids and invoices. An interagency task
force will develop the required system architecture by March 1994. When implemented, electronic commerce will improve access to Federal
contracting opportunities for the more than
300,000 vendors currently doing business with
the government, particularly small businesses.
Initial electronic commerce capability is anticipated in 1995.
Making Supplier Past Performance Count:
Considering past performance in making new
contract awards provides a powerful incentive
to improve the quality of goods and services
provided by vendors. Judgments of suppliers'
past performance are crucial in contract award
decisions in the commercial world—but are
minimally considered in government. The Administration seeks to change this. A number
of Federal agencies (The Departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Interior,
Justice, Labor, State, Transportation, Treasury, and Veterans Affairs—and NASA, EPA,
GSA, FEMA, the Bonneville Power Administration, and the Nuclear Regulatory Commission) are pledging to make past performance
a major factor in the source evaluation of a
number of specific contracts they will compete
this year. Better guidelines will be developed
for measuring supplier performance, and the
use of this information will be pilot tested in
these acquisitions. The results from the pilots
will serve as the basis for changes in regulations, procedures and management practices
government-wide.




Voluntary Cooperation to Improve Procurement Performance: The Office of Federal Procurement Policy (OFPP) in OMB has initiated
a cooperative program with agency procurement executives to obtain from agencies voluntary joint "pledges" to take specific action
to improve their procurement processes. The
pledge to consider contractors' past performance is being signed by almost all major agencies. To reduce paperwork while maintaining
accurate records, nine agencies pledged last
October to boost use of government purchase
cards (instead of purchase orders) this fiscal
year for small purchases. Several agencies
have estimated significant administrative savings when making a purchase card transaction, which could apply to millions of small
purchases made each year. Pledges are being
developed to help convert some of the $100
billion spent each year on contracting for services to performance-based contracting and,
when appropriate, from a cost-based to a fixed
price contract to generate significant savings.
Moving From Rigid Rules to Guiding Principles: Adequate guidance for Federal procurement officials should not require 1,600 pages
of government-wide regulations and 2,900
more pages of agency-specific supplements. In
1994, a task force of procurement professionals
and Federal managers, with the advice of Congress and industry, will begin rewriting the
Federal procurement regulations to enable procurement personnel to meet the customer's
needs and obtain the best possible deal for
the government. This will end unnecessary
regulatory requirements while still fostering
competition and emphasizing best value in
Federal procurement.

164

THE BUDGET FOR FISCAL YEAR 1995

STREAMLINING THE FEDERAL
GOVERNMENT
Beginning in 1993 and continuing throughout the decade, the Federal Government will
identify and implement opportunities to reduce
waste, eliminate unneeded bureaucracy, improve service to taxpayers, and create a
leaner, more productive government. Overall,
these reforms will result in the net elimination
of 252,000 full-time equivalent (FTE) employment, reducing the civilian, non-postal work
force by 12 percent.
Agencies are targeting administrative control and headquarters functions, such as
budgeting, personnel, and procurement and
unnecessary layers of middle management
as the principal focus of "right-sizing." They
are considering every opportunity for streamlining, including: reengineering work processes; elimination of certain programs; closing
or consolidating field offices (over 75 percent
of the Federal work force is located in
34,000 field offices across the country); making
fuller use of new—especially information—
technology; reducing regulation and red tape
in administrative control areas; and enhancing
employee training.
Much of the personnel reduction will be
accomplished through normal attrition. The
Office of Personnel Management will give
agencies broad authority to offer early retirement and to expand their retraining, outplacement efforts, and other tools to accomplish right-sizing. In addition, the Administration will seek swift enactment of legislation
permitting agencies to offer cash payments
to those who leave Federal service voluntarily,
whether by retirement or resignation. Rightsizing the Federal Government should save
the taxpayer approximately $40 billion over
five years.
"Right-sizing"—A Progress Report
On February 10, 1993, the President issued
Executive Order 12839, "Reduction of 100,000
Federal Positions"—the first step toward reducing Federal employment by 252,000 by
the end of 1999, as ordered in the subsequent
September 11, 1993, Presidential memorandum. Actual employment in 1993 achieved
the reduction targeted for that year, and
the planned employment levels for 1994 and




1995 will meet the 100,000 reduction goal.
(See Chapter 12, "Federal employment and
compensation" in the Analytical Perspectives
volume.
Federal Agencies Leading the Way
As a result of the declining force structure,
the Department of Defense is making a
major effort to reduce the defense infrastructure. (See DoD streamlining section in Chapter
6 of this volume.)
The Department of Agriculture (USDA),
Department of Housing and Urban Development (HUD), Internal Revenue Service (IRS)
in the Department of the Treasury, Bureau
of Reclamation and U.S. Bureau of Mines
in the Department of the Interior, Army
Corps of Engineers and United States Agency
for International Development (USAID) stand
out as early leaders in the streamlining
effort. These agencies are aggressively restructuring and reengineering services to create
greater value for customers and taxpayers.
USDA: The Secretary has announced plans
to restructure the Department along six mission lines, merging 42 separate agencies into
30, eliminating waste and administrative overhead, and consolidating the field structure.
Over the next five years, these reforms are
estimated to reduce staffing by at least 7,500
and save over $2 billion. Authorizing legislation for the headquarters reorganization is
being actively considered by both houses of
Congress.
HUD: The Secretary has announced plans
to change all of its regional offices into field
offices directly serving the states and metropolitan areas where they are located. This
streamlining effort simultaneously reduces a
level of review and gets more HUD employees
closer to their customers.
IRS: The IRS has announced a major restructuring plan to improve service to taxpayers and increase voluntary compliance and
tax collections. The plan, scheduled to be implemented fully by 2001, envisions a new IRS
which will take full advantage of information
technology to provide faster, more accurate
service to customers, reduce taxpayer time and
cost, and provide better targeted and more productive tax enforcement.

3C. DELIVERING A GOVERNMENT THAT WORKS BETTER AND COSTS LESS

IRS plans to right-size its field structure,
wherever possible redeploying agency financial
and human resources to enhanced frontline operations. For example, the agency
will consolidate the 44 geographical locations
where it currently has telephone operations
into 23 Customer Service Centers, with online access to comprehensive tax data bases,
allowing taxpayers to resolve many issues
concerning their tax accounts in a single
call. In addition, headquarters and regional
office restructuring is moving forward: the
agency has collapsed Assistant Commissioner
positions by more than 50 percent and will
reduce its regional offices from seven to
five. The IRS is committed to reinvesting
its human resources by redeploying, as appropriate, affected staff to customer service and
compliance activities.
Interior Department's Bureau of Reclamation
and U.S. Bureau of Mines: The Bureau of Reclamation has removed a thick layer of bureaucracy that has long stood between the commissioner and the field offices. Two deputy commissioners and all five assistant commissioner
positions have been abolished, and staff in
Denver has been reoriented to provide fee-forservice support to the field. In addition, the
size of the 2,000 person Denver staff will be
reduced, both to reflect the end of an era of
constructing large water projects and to move
functions and personnel to regional and field
offices closer to the customer.
The U.S. Bureau of Mines (USBM) recently
completed a comprehensive review of its activities, organization, and facilities. The bureau
has begun to build consensus with its customers and Congress to refocus USBM efforts,
over a transition period of several years,
into three program areas: environmental technology, health and safety research, and mineral data collection and dissemination. The
bureau seeks to consolidate more than a
dozen field offices into five Centers of Excellence, each specializing in a distinct research
area.
Army Corps of Engineers: The Secretary of
the Army is developing a streamlining plan
to realign the Corps' organization structure—
substantially unchanged since 1942—according
to current needs. The Secretary will consider
reorganizing the Corps' headquarters, reducing




165

the number of division offices, and restructuring district functions to increase program and
administrative efficiency.
USAID: Its streamlining plan includes closing 21 posts overseas—the first time since
USAID programs were introduced with the
Marshall Plan that the agency has reduced
the overall number of countries with which it
is working. The agency also has conducted
right-sizing reviews of each of its 20 Washington bureaus and offices, identifying ineffective,
wasteful management structures, systems, and
processes. AID also has begun to streamline
its procurement and personnel system.
REFORMING THE PERSONNEL
SYSTEM
Over the years, the Federal personnel system has become so complex that no one
person understands it and few can work
efficiently within it. Ten thousand pages
of guidelines from the Federal Personnel
Manual are piled on top of 1,300 pages
of regulations that put into effect 850 pages
of personnel law. Managers face months of
delay in hiring new employees from a central
Office of Personnel Management register,
while they are unable to hire a local wellqualified candidate who is not on the register.
A complex and rigid classification system
that requires sorting Federal employees into
one of more than 450 specific occupational
series further delays hiring and reduces employee mobility. The performance management
system, which was supposed to recognize
and reward performance is widely viewed
as burdensome and ineffective. The labormanagement relations program is excessively
adverserial and elevates form over substance
and litigation over problem-solving.
To reform the system, the NPR recommended:
• Sunsetting the Federal Personnel Manual;
• Legislation to give agencies authority to
conduct their own recruiting and examining and to abolish all central registers of
job applicants;
• Legislation to simplify the classification
system and give agencies greater flexibility in classification and pay decisions;

166
• Allowing agencies to design their own performance management and reward systems to improve performance of individual
workers, managers, and organizations;
• Forming Labor-Management Partnerships
to harness the energies of employees and
management to work cooperatively across
the government from the local to the national level.
Thus far, OPM has worked with employees,
union representatives, and agency managers
to identify the portions of the Federal Personnel Manual that should be abolished, retained,
or issued in alternative formats. This "sunset"
of the Federal Personnel Manual was accomplished on January 27, 1994, almost a year
ahead of the NPR target. Legislation authorizing the discredited performance management
system that previously applied to Federal
managers was not renewed when it expired
October 31, 1993. The President established
the National Partnership Council by Executive
Order. The Council, composed of employee
representatives and management, has begun
working to assure establishment of labormanagement partnerships at the local level,
and to develop the draft legislation for the
President called for by the NPR.
The challenge to both labor and management is to put aside the old way of doing
business and to work together to achieve
a true partnership. The measure of success
will be the creation of a personnel system
that provides for cooperation and accountability and allows all employees—front-line workers, supervisors, and managers—to take pride
in producing better public service.
Pay in the budget: An estimated $2.1 billion
is included in agencies' budgets in 1995 to
fund the locality pay raises granted to employees in January 1994. This budget provides $1.1
billion for additional civilian employee pay
raises in 1995. This $1.1 billion would permit
a raise of 1.6 percent across the board for all
civilian employees effective January 1, 1995,
but the Administration plans to consult with
employee organizations and other interested
parties on the best approach to distributing
pay increases; i.e., a national pay raise, locality
pay, or some combination of the two. The Department of Defense budget includes $0.7 bil-




THE BUDGET FOR FISCAL YEAR 1995

lion for a January 1995 across-the-board military pay raise of 1.6 percent.
IMPROVING MANAGEMENT OF THE
GOVERNMENTS FINANCES

If a publicly-traded corporation kept its books the
way the Federal Government does, the Securities
and Exchange Commission would close it down immediately.
National Performance
Review Report
September 7, 1993

Sound financial management is indispensable to achieving the goals of efficient and
effective government. This is no small task.
The Government's assets amount to approximately $2.3 trillion. Its cash flow in 1993
amounted to almost $3 trillion.
In this era of increasingly scarce resources
and shrinking budgets, it is essential for
the Congress and Federal managers to know
exactly how the Government's assets are
being managed and where the money is
being spent. Only then can they make informed choices and ensure the best return
for taxpayer investment. Numerous improvements have been made following enactment
of the Chief Financial Officers Act of 1990;
however, much remains to be done.
Strengthen the Financial Management
Infrastructure
The first step in improving financial management is to assure the existence of a
strong framework, with the following key
components.
Standards: Standards are important to ensure consistent and accurate Federal financial
reporting so that Federal managers and the
Congress can make informed decisions about
program costs and resources, now and in the
future. In 1993, the Administration adopted
the first recommendations of the Federal Accounting Standards Advisory Board and is
working toward the NPR recommendation that
a complete set of Federal accounting standards
be issued by March 1995.

3C. DELIVERING A GOVERNMENT THAT WORKS BETTER AND COSTS LESS

Financial Management Organization and
Qualified Personnel: The Administration developed and issued Financial Management for
Program Managers to educate program managers on the importance of financial management. The Federal Credit Management Training Institute, established in 1991, will continue
courses in accounting and financial statement
analysis and add courses in appraisals during
1994. Coordinated training curriculums for financial staffs are in place in the Department
of Energy and will be established in the Treasury Department in 1994.
Effective Financial Systems: Financial systems that work efficiently, communicate with
one another, and contain accurate data are essential to provide information to Federal managers. The Administration is helping agencies
to improve their financial management systems through updated guidance, on-site systems reviews, continued development of standard requirements and data standardization to
enhance stewardship over budget and financial
information.
Franchise and Innovation Funds: Following
the NPR recommendations, legislation was introduced in Congress to create "franchise
funds" that would permit agencies to purchase
common administrative services, such as payroll, accounting or computer support, competitively from other Federal agencies. In addition,
franchise funds would provide investment capital for administrative support innovations at
a time when there is great pressure on Federal
agencies to do their jobs better, cheaper and
faster.
The NPR recommended, and legislation
was introduced, creating program-related "innovation funds" which would provide a source
for financing projects that improve program
services and productivity at reduced cost.
Programs that borrow from the innovation
fund must repay on a schedule, with interest.
Manage Assets Effectively
The Government's assets include $310 billion of tax and non-tax receivables, of which
$107 billion is delinquent, and $660 billion
of guaranteed private sector loans. In 1993,
non-tax delinquent receivables decreased from
$47 billion to $44 billion—the first significant
decrease since government-wide numbers be-




167

came available in 1985. A significant portion
of the delinquent debt is estimated to be
uncollectible due to factors such as bankruptcy, inability to locate the debtor, and
various legislative restrictions. However, efforts must be made to maximize the Government's recoveries, including the following initiatives:
Credit Screening: The Administration reduced the risk in loan origination through expansion of the Department of Housing and
Urban Development's automated Credit Alert
Interactive Voice Response System ("CAIVRS")
for screening loan applicants for defaults on
previous HUD loans. Expansion of this system
to other agencies is ongoing.
Debt Collection Legislation: The Administration will continue to pursue passage of the
Government Reform and Savings Act, which
passed the House of Representatives in November 1993, in order to strengthen debt collection through the following provisions: (1)
allow agencies to retain a small portion of delinquent debt collections for additional debt
collection activities; (2) permit greater use of
private collection contractors by Federal agencies; and (3) enhance the Department of Justice's ability to use private counsel in civil
monetary litigation.
Tax Receivables: The Administration will
seek legislation that would permit the IRS to
use private collection agencies for locating delinquent taxpayers and allow payment of delinquent taxes by credit card.
Erroneous Payments: The Death Notification
Entry (DNE), a new Automated Clearing
House service, was implemented. With an estimated $100 million lost annually due to unrecovered payments to persons not entitled to
benefits, usually due to death, Federal agencies are using the DNE to notify banks immediately when a direct deposit customer dies.
The Social Security Administration, the first
agency to use the DNE, estimates $500 million
in outlays will be avoided over five years, leading to program savings of $49 million and 150
FTE.
Electronic Funds Transfer: The NPR recommended the Administration commit to a
course of action that will lead to electronic
transfer of all collections and payments. The

THE BUDGET FOR FISCAL YEAR 1995

168

initial steps will be to pay businesses with
Federal contracts, State and local governments, Federal employees and retirees, and
interagency transfers of funds via electronic
funds transfer.
Improve Accountability
Empowerment requires accountability. Financial reporting provides accountability by
demonstrating that government agencies are
achieving the expected results and disclosing
to taxpayers how their tax dollars are actually
spent. The NPR recommended, and the Administration is planning, issuance of an audited
consolidated annual report on Federal finances
by 1997.
The Administration initiated a system in
1993 to report publicly the status of financial
management in the 23 agencies covered by
the CFOs Act. As Table 3C-1 indicates,
significant challenges remain for agencies
to make improvements in financial management activities.
In 1993, 95 reporting entities submitted
audited financial statements, covering approxi-

mately $875 billion of gross budget authority;
37 were determined by independent audit
to be in conformity with prescribed accounting
standards. This is a marked increase from
1992 when 55 reporting entities submitted
audited financial statements and only 19
were determined to be in conformity with
prescribed accounting standards.
Another tool for public accountability is
the High Risk Program, which focuses on
correcting management control weaknesses
that could result in major breakdowns in
Government service, or in fraud, waste or
abuse. A progress report on agency efforts
to correct high risk areas appears in "Analytical Perspectives"
Finally, the Administration will revise agency guidance on internal control systems to
eliminate prescriptive procedural requirements, and streamline the management control program. To reduce the NPR-identified
burden of other mandated reports, the Administration has developed and submitted to
Congress a phased program to consolidate
duplicative reports and streamline the others.

Table 3C-1. CURRENT STATUS OF FINANCIAL MANAGEMENT IN THE U.S.
GOVERNMENT i
1992 Financial Statement Audits
Agency

1992
Budget
Authority
(in billions
of dollars)

HHS
Treasury5
Defense
Agriculture
Labor
Transportation
OPM
Veterans Affairs
Education
HUD
Energy
NASA
Justice
Interior
EPA
AID
State
FEMA
Commerce




559.6
295.7
281.9
66.3
48.2
36.2
35.8
33.9
28.8
25.0
17.2
14.3
10.0
7.1
6.5
5.7
5.2
4.8
3.0

Unqualified
Audit
Opinions

iVa

Goals

Percent
Audit
Coverage2

All

51
81
58
100
100
61
20
100
23
100
21
100
11
41
26
2
12
13
1

lof 5
4 of 10
2 of 15
5 of 7
Oof 1
1 of 4
Oof 4
Oof 1
lof 2
lof 3
10 of 11
Oof 1
4 of 5
Oof 5
Oof 5
3 of 5
Oof 2
2 of 4
lof 1

Material
Weaknesses in
Accounting Controls

Receivables

Cash Management
Percent
Timely
Payments4

Percent
Payroll
by EFT

Increase

95

90

28
-10
0
11
7
-6
-5
18
4
5
-9
-3
15
32
-14
-9
-75
459
-21

95
78
93
99
94
85
77
82
94
81
93
97
80
78
98
79
54
91
90

85
84
87
75
74
92
83
81
93
88
87
91
85
78
89
96
93
83
86

Percent
Delinquent3

Percent
Change in
Delinquencies

Percent
Change in
Collections

0

iVa

Decrease

10
24
19
34
5
9
5
5
3
8
11
5
6
12
9
4
11
2
0

28
81
7
10
53
68
68
72
81
15
61
13
42
19
52
2
73
12
23

69
0
0
-16
9
5
13
-7
-13
-1
5
0
-22
3
58
-49
-74
0
-49

169

3C. DELIVERING A GOVERNMENT THAT WORKS BETTER AND COSTS LESS

Table 3C-1. CURRENT STATUS OF FINANCIAL MANAGEMENT IN THE U.S.
GOVERNMENT i—Continued
1992 Financial Statement Audits
Agency

NSF
SBA
GSA
NRC

1992
Budget
Authority
(in billions
of dollars)
2.6
1.9
0.4
0.02

Percent
Audit
Coverage2

Unqualified
Audit
Opinions

1
86
100
100

Receivables

Material
Weaknesses in
Accounting Controls

lof 1
Oof 1

lof 1
Oof 1

0
3
1
4

Percent
Delinquent3
58
24
71
20

Percent
Change in
Delinquencies

Cash Management
Percent
Change in
Collections

-70

2
5
23

Percent
Timely
Payments4

Percent
Payroll
by EFT

n/a
51

90

52

95

-17

2
12
3

95

85
83

Boldface indicates the Agency is meeting financial management goals.
Agencies that are not in boldface did not achieve the audit coverage required by the CFOs Act. The percent of audit coverage required varies by agency and includes spending authority from offsetting collections.
3 A significant portion of the delinquent debt is believed to be uncollectable due to factors such as bankruptcy, inability to locate the
debtor, and various legislative restrictions.
4 Timely payment statistics in excess of 95 percent that are not in boldface could not be verified by a reliable quality control system.
6 The percent audit coverage excludes Interest on the Public Debt.
n/a = Not applicable
1

2

STAYING IN STEP WITH THE PRIVATE SECTOR
REINVENTING REGULATORY
MANAGEMENT
Regulations, like other instruments of government policy, have enormous potential for
both good and harm. Well-chosen and carefully
crafted regulations can minimize fraud, limit
pollution, increase worker safety, discourage
unfair business practices, and contribute in
many other ways to a safer, healthier, more
productive, and more equitable society. Excessive or poorly designed regulations, by contrast, can cause confusion and delay, give
rise to unreasonable compliance costs in the
form of capital investments and/or ongoing
paperwork, retard innovation, reduce productivity, distort private incentives, and adversely
affect living standards.
The importance of regulations in our society
and the many challenges that regulators
face make it imperative that the process
for developing regulations be principled, pro-

fessional, and productive. Regrettably, this
Administration did not inherit such a process.
On the contrary, the way Federal regulations
were developed and reviewed in the recent
past has been severely criticized for delay,
uncertainty, favoritism, and secrecy. Improvement was clearly needed.
Improving Regulatory Integrity
To meet this responsibility, President Clinton issued Executive Order No. 12866, "Regulatory Planning and Review/' and other instructions to help create regulations that
"work for [the American people], not against
them."
• The President affirmed the primacy of
Federal agencies in the regulatory decision-making process. At the same time, he
reaffirmed the importance of centralized
regulatory review to ensure that, to the
extent permitted by law, regulations are

We can't reject all regulations. Many of them do a lot of good things. They protect workers
in the workplace, shoppers in the grocery stores, children opening new toys. But there are
others that serve no purpose at all. This executive order will provide a way to get rid of useless, outdated and unnecessary regulations that are obsolete, expensive and bad for business.




President Bill Clinton
September 30, 1993

170

THE BUDGET FOR FISCAL YEAR 1995

consistent with his priorities and do not
interfere with policies or actions taken or
planned by another agency.
• In choosing among regulatory approaches,
agencies were directed to select those approaches that maximize net benefits, and
to base decisions on the best reasonably
obtainable scientific, technical, economic,
and other information concerning the need
for, and consequences of, the intended regulation.
• Regulatory Policy Officers, reporting directly to the agency head, are to oversee
regulatory affairs and examine ways to
streamline internal clearance processes for
regulations. The President's Regulatory
Working Group ensures coordination
among agencies and early discussion of
regulatory issues affecting more than one
agency.
• In Executive Order No. 12875, President
Clinton directed agencies to establish a
mechanism for intergovernmental consultation, and, in light of these consultations, to justify the need for any
nonstatutory unfunded mandates they put
into a regulation. The consultations are to
occur as early as feasible, and should involve not only local program officials but
also those more directly responsible for the
funding of compliance with the Federal
mandate.
• In Executive Order No. 12861, President
Clinton directed agencies to reduce internal, nonstatutory regulations by not less
than 50 percent, over the next three years.
Reducing Red Tape and Streamlining the
Process
The Administration has taken a number
of steps to improve cooperation among agencies
involved in producing effective regulations
and to streamline the regulatory review process.
• OMB and the agencies will decide early
on which rules are "significant" (based on
their economic, social, or legal importance), and OMB will review only those
rules that are so characterized. This process is well underway and is resulting in




significantly fewer rules being submitted
for OMB review.
• The time for OMB review is strictly limited. Only in unusual circumstances will
such review take more than 90 days.
• OMB staff and agency staffs are working
together much earlier in the process to
identify and resolve problems. Rather than
waiting until the agency has virtually
completed its work, potential problems are
being raised to policy makers while there
is still time to respond on the merits.
Openness and Accountability
Openness and accountability are essential
to a regulatory process that works.
• Agencies are encouraged actively to seek
the involvement of those affected by a regulation even before a proposed rule is
drafted; to use consensus-based techniques
in rulemaking; and to allow a 60-day comment period for proposed regulations.
• The Administrator of the Office of Information and Regulatory Affairs (OIRA) in
OMB now meets quarterly with representatives of State, local, and tribal governments to discuss regulatory issues.
• As of July 1, 1993, OIRA began making
available a list of agency regulations
under review. OIRA also discloses contacts
with those from outside the Executive
branch, and has their views transmitted
to the agency.
• Each regulatory agency now identifies for
the public the substantive changes that it
made to the regulatory action between the
time it was submitted to OIRA for review
and the time the action was publicly announced, indicating those changes that
were made at the suggestion or recommendation of OIRA.
IMPROVING THE NATION'S ACCESS
TO QUALITY INFORMATION
The ability of the United States to compete
effectively in the world economy is dependent
on its ability to manage and effectively use
information as well as the vitality of the
Nation's statistical infrastructure. How the
Federal Government gathers, consolidates, and

171

3C. DELIVERING A GOVERNMENT THAT WORKS BETTER AND COSTS LESS

distributes this information determines how
well the United States competes globally.
Regrettably, the way the Federal Government
manages its information is old-fashioned and
outdated. As the Vice President noted when
presenting the NPR report to the President:
it's the Government using a quill pen in
the age of word processing.
The budget proposes $3.7 billion for improvements in key Government information systems, supporting both NPR recommendations
and the National Information Infrastructure.
Improved Information Management
Coordinating the management of information that serves more than one agency's
programs can significantly improve the quality
and timeliness of services delivered to the
public as well as Federal decision making.
Two recently completed pilot projects illustrate
the benefits of sharing data across agencies.
• The Department of the Army began transferring medical records directly from military separation centers to the Department
of Veterans Affairs' Service Medical
Records Center, rather than holding them
for storage. These medical records are
needed to adjudicate veteran claims for
service-connected disability compensation.
They may also be required by the Army
if the separating individual later joins a
Reserve unit. A test conducted under the
pilot showed that 98 percent of records requested by the Army were returned within
48 hours. The Army is therefore not disadvantaged by the early transfer, and
months of delay under the old process can
be eliminated from the time for adjudication of a veteran's disability claim.
• The Customs Service and the Food and
Drug Administration (FDA) experimented
with the electronic filing and distribution
of shipping documents between the two
agencies. The pilot system has resulted in
over 65 percent of incoming FDA-regulated
cargo shipments being approved for unloading prior to their arrival, rather than
the previous average waiting time of 36
hours after arrival. The electronic filing
of shipping documents allows better analysis of the shipments, expediting low-risk
shipments and allowing FDA inspectors to




focus on more risky cargos. This improved
service results in reduced cost and paperwork burden for shippers.
"Best Practices" Project for Managing
Information Technology
A consortium of Federal agencies has begun
a project to improve Federal information
technology management practices. The project
is spotlighting "best practices" that improve
the ability of Federal agencies to serve the
public and increase the efficiency of program
administration. To date:
• The Office of Personnel Management has
streamlined the filling of certain Federal
job vacancies by allowing candidates to
begin the application process using a
touch-tone telephone. Since August 1993,
the system has processed over 1,500 applicants for nursing positions. The application process takes less than ten minutes.
The improved process makes it easier to
locate, screen, and hire candidates, quickly
filling vacancies and improving agency
performance.
• The General Services Administration has
established three telecommuting centers in
the Washington area. Between 400 and
600 Federal employees use these facilities
to communicate electronically with their
organization's main workplace from locations closer to their homes. Preliminary
results indicate telecommuting improves
worker morale, lowers energy consumption, reduces employee time lost to commuting, and reduces pollution.
Electronic Information Availability

I challenge you, the people in this room, to connect all of our classrooms, all of our libraries, and
all of our hospitals and clinics by the year 2000. We
must do this to realize the full potential of information to educate, to save lives, provide access to
health care and lower medical costs.
Vice President A1 Gore
January 11, 1994

Thomas Jefferson said that information
is the currency of democracy. Federal agencies

172
are among the most prolific generators of
this valuable national resource. Recent advances in information technology are now
making it possible to dramatically improve
the accessibility of Government information,
helping to support Jefferson's democratic ideal.
The amount of Government information
available on electronic bulletin boards, on
magnetic and optical media such as CDROM's, and over the Internet has been rapidly
increasing. One example is the "FedWorld"
system established by the Department of
Commerce's National Technical Information
Service. In its first year of operation, FedWorld
handled nearly a quarter million calls from
over 45,000 users, who downloaded more
than 600,000 files, including over one thousand
copies each of the NPR report and the
Administration's proposed Health Security Act.
FedWorld also links the public with over
130 Federal bulletin boards and information
centers.
The increasing power of information technology is reducing reliance on traditional
printing technology in favor of computeraided print-on-demand techniques to produce
Government information in paper form. Based
on the NPR recommendation, the Administration is seeking increased flexibility for agencies
in meeting their printing needs while strengthening the role of the Federal Depository
Libraries in dissemination of Government
information in paper and electronic form.
A major challenge, however, is to develop
methods to effectively manage the ever growing and increasingly diverse sources of Government information. To this end, OMB is sponsoring the development of an electronic Government Information Locator Service (GILS)—
a virtual card catalogue that will indicate
the availability of Government information
regardless of its form. An initial GILS capability should be available in 1994. Ultimately,
the GILS can serve as more than just
a pointer to Government information, and
will have the capability to link users directly
to the underlying data bases.
Enhancing Information for Economic
Competitiveness
The 1995 budget includes an integrated,
government-wide effort that will fundamen-




THE BUDGET FOR FISCAL YEAR 1995

tally reorient statistical programs to recognize
basic structural changes over the last thirty
years. This initiative seeks to improve the
quality of statistics in rapidly changing areas
of the economy, where accurate information
is most urgently needed to inform public
and private responses to challenges facing
the United States: national investment, savings, and wealth statistics, including the
"Green GDP' initiative proposed by the President on Earth Day; net international investment statistics; construction, service sector,
and corporate financial statistics; and output,
price, and productivity estimates.
Cutting Costs While Improving Census
Coverage
Escalating costs and the persistent differential under-coverage of certain population
groups have brought growing criticism of
the Decennial Census of Population and Housing. The NPR underscored concerns of the
Administration, the Congress, and the public:
the current approach to census-taking appears
to have exhausted its potential for accurately
counting the population at a reasonable cost.
OMB is working on a continuing basis with
the Bureau of the Census and representatives
of virtually every Executive Branch department to develop, test and evaluate alternatives
for the 2000 census that will yield quality
improvements and cost savings. These include
a variety of new approaches to census-taking,
such as respondent-friendly designs of the
census questionnaire, statistical sampling to
follow up households that fail to respond,
and innovative cooperative ventures with the
U.S. Postal Service.
Eliminating Barriers to Efficient
Operations
Specific statutory formulas that have been
devised to protect the confidential relationship
between statistical agencies and survey respondents have produced inconsistent treatment of the public and have created significant
barriers to effective working relationships
among these agencies. The NPR highlighted
legislative barriers that currently impede the
exchange of statistical data provided by businesses to various Federal agencies. A uniform
confidentiality policy that substantially eliminates the risks of sharing confidential data

3C. DELIVERING A GOVERNMENT THAT WORKS BETTER AND COSTS LESS

for statistical purposes would permit significant improvements in data used for both
public and private decisions without the current duplication of effort and without compromising public confidence in the integrity




173

and security of reports provided to agencies.
OMB currently is developing tools to establish
the necessary statistical confidentiality policy
within all Executive agencies and statutory
language that would permit data sharing.




4. Reforming the Nation's
Health Care System to Provide
Health Security For All Americans







4. REFORMING THE NATION'S HEALTH
CARE SYSTEM TO PROVIDE HEALTH
SECURITY FOR ALL AMERICANS
Every American must have the security of comprehensive health benefits that can never be taken
away. That is what the Health Security Act is all about.
President Bill Clinton
transmitting the Health Security Act
to the Congress, September 1993

Why We Need to Reform the Health
Care System Now

insurance. Health reform should make health
care affordable for all.

The Moral Imperative

The Economic Imperative

On September 22, 1993, President Clinton
submitted the Health Security Act to the
Congress. The central premise of the Act
is that all Americans need health security—
the knowledge that quality medical care will
always be available and affordable.

The cost of health care threatens America's
economic future. Rising health costs drain
resources away from other productive uses,
threaten the competitiveness of American
firms, add to the Federal deficit, and reduce
national savings. The U.S. spends more of
its economic output (as measured by Gross
Domestic Product, or GDP) on health care
than any other industrialized country. Today,
14 percent of U.S. GDP is devoted to health
care, and by the end of the decade that
number is projected to rise to slightly more
than 18 percent.2 By comparison, no other
industrialized country spends more than 10
percent of its output on health care—and
most of those countries insure all of their
citizens.3 We spend the most, insure the
fewest, and rank 20th in the world in preventing infant mortality, 19th in fatal heart
disease, and 16th in life expectancy.4

Every year, many people lose their insurance
for some period of time, usually because
they work for small businesses that can
no longer afford it. We all face the same
predicament: the 85 percent of Americans
who have health insurance do not have
health security, because even the insured
are often just one serious illness away from
exhausting their health benefits and finding
themselves unable to renew their coverage.
Another predicament we face is that although the U.S. has the best medical care
in the world, that care is not always available
to the 15 percent of Americans—38.5 million
people1—who do not have coverage because
they are sick or poor or because they work
for businesses that cannot afford it. All
Americans need medical care at some time,
but uninsured Americans frequently are unable to pay for the care they receive. These
costs are then shifted to those with private

The Federal Government spends about 19
percent of its budget on health care. If
current trends continue, that percentage will
rise to 25 percent by 1998. Health care
will consume almost 50 percent of Federal
spending growth between 1993 and 1998.

2 Congressional Budget Office, Projections of National Health
Expenditures, 1993 Update, October 1993, p. 3.
3 Organization for Economic Cooperation and Development,
i Employee Benefit Research Institute, Sources of Health Insurance and Characteristics of the Uninsured: Analysis of the March Annual Report, 1993.
4 Organization for Economic Cooperation and Development,
1993 Current Population Survey, Special Report and Issue Brief
Number 145, January 1994, p. 4.
OECD Health Data, 1960-1991.




177

178

THE BUDGET FOR FISCAL YEAR 1995

The story is the same at the State and
local level. In 1960, State and local governments spent 8 percent of their budgets on
health; in 1992, that figure rose to about
15 percent.5

1975 share of compensation through 1992,
and if employers had passed the difference
on to workers in the form of wages, real
wages per worker would have been more
than $1,000 higher in 1992.?

Health care spending is crowding out other
important investments. Here's one example:
In 1962, the Federal Government spent roughly the same amount on education and training
as on health care—about $1.2 billion. In
1992, the Federal Government spent twice
as much, or $90 billion, on health care,
excluding Medicare, as on education. The
situation is the same at the State and
local level. While health costs are rising
as a proportion of State and local government
expenditures, transportation spending has fallen from 18 percent in 1960 to 10 percent
in11992.6

The lack of health security hinders economic
flexibility and hurts overall productivity.
American workers with employer-based health
insurance voluntarily change jobs 25 percent
less frequently than do workers whose employers do not provide coverage—in part because
widespread pre-existing condition clauses prevent workers from obtaining coverage from
their new employers.8 Others are discouraged
from forming small businesses or becoming
self-employed because of the difficulty of
obtaining insurance. Many others stay on
welfare because they fear they will lose
Medicaid coverage for their children—and
not be able to replace it—if they take a
job.9

The rise in health care costs has meant
lower wage growth for American workers.
Businesses generally respond to higher health
care costs by foregoing wage increases for
employees. Similarly, the taxes required to
finance government health care spending are
borne by workers in the form of lower
wages. If employer contributions to health
insurance had remained constant at their

The growing portion of Federal and State
budgets devoted to health care costs is reason
alone for health care reform. When combined
with health care's drag on the overall economy
and personal economic status, health reform
becomes an economic imperative.

Q. What is the relationship between universal coverage and cost containment?
Universal coverage is an essential tool for controlling health costs. Currently, the uninsured pay only
20 percent on average of the hospital costs they incur, while the privately insured pay 130 percent of
their hospital costs, as hospitals pass on their unpaid bills in the form of higher prices to people with
private insurance.10 According to one recent estimate, the insured will pay for about $25 billion of uncompensated care in 1994.11
Universal coverage will eliminate most uncompensated care, reducing
costs to firms that now provide coverage and making resources available for higher wages, more jobs,
investment in plant and equipment, or lower prices. Universal coverage will also mean that people who
use emergency rooms as health care of last resort will be able to afford more appropriate care earlier,
which will also help to restrain cost growth.

5 Congressional Budget Office, unpublished data from HCFA National Health Accounts, November 1993. Also see Survey of Current
Business, Vol. 73, No. 9, September 1993, Bureau of Economic
Analysis, Department of Commerce. Also see National Income and
Product Accounts, Vol. 2, 1959-1988, September 1992, Bureau of
Economic Analysis, Department of Commerce.
6 Survey of Current Business, Vol. 73, No. 9, September 1993, Bureau of Economic Analysis, Department of Commerce, Also see National Income and Product Accounts, Vol. 2, 1959-1988, September
1992, Bureau of Economic Analysis, Department of Commerce.
7 OMB staff calculation based on data from the National Income
and Product Accounts.
8Madrian, Brigitte, Employment-Based Health Insurance and
Job Mobility: Is There Evidence of Job-Lock?, NBER Working
Paper No. 4476, September 1993.




9 One estimate is that as many as 25 percent of the 4 million
welfare recipients would leave welfare for employment under
health care reform. See Douglas Holtz-Eakin, Health Insurance
Provision and Labor Market Efficiency in the United States and
Germany, NBER Working Paper No. 4388, 1993.
10 Prospective Payment Assessment Commission, Medicare and
the American Health Care System: Report to the Congress, June
1993.
11 OMB staff calculation based on 1991 data in S. Christensen,
"Single Payer and All-Payer Health Insurance Systems Using
Medicare's Payment Rates," CBO Staff Paper, April 1993.

4.

179

REFORMING THE NATION'S HEALTH CARE SYSTEM

Why We Must Act Now

1. Security

There is a national consensus on the scope
and severity of the health care problem.
Across the country, Americans agree that
the health care crisis cannot be ignored.

This principle speaks to the human misery, to the costs,
to the anxiety we hear about every day ... when people
talk about their problems with the present system.

The costs of doing nothing are enormous.
Without reform, health costs will consume
an additional $56 billion of our national
output in the year 2000—money that could
more than double Federal spending on transportation or education and training. Put another way, these savings could also boost
productivity and wage growth by increasing
the resources available to lift capital invested
per worker by roughly half.12 If current
trends continue, real wages will be further
eroded by almost $600 per worker by the
end of the decade. If we do not curb increasing
health costs, we will not be able to continue
bringing down the deficit or make the investments in jobs and infrastructure that we
need to keep the U.S. economy healthy.
Americans recognize that without reform,
health insurers will continue to drop coverage
for people when they get sick and price
others out of the market entirely. One in
four Americans will lose their health insurance
at some point in the next two years without
health reform. Fewer jobs will be created
and rapidly rising health care costs will
continue to hinder productivity. Government
and businesses alike will continue to spend
ever-increasing amounts on health care, lowering the national saving rate and crowding
out new investment capital. The longer we
wait, the harder it will be to restrain increasing costs and the less we will have to
leave to future generations.
The President's Six Principles of Health
Care Reform
The Health Security Act is the most detailed, comprehensive, and responsible health
care reform plan ever offered. The President's
plan commits to six principles for reform;
fixing what is broken, while preserving what
works in our current system.
izSchultze, Charles L., Memos to the President, The Brookings
Institution, Washington, D.C., 1992, p. 245.




President Bill Clinton
September 1993

Security means that those who do not
now have health coverage will receive it;
and those -who do have coverage will never
have it taken away. The Act will provide
every American with a Health Security card
and a comprehensive package of benefits
guaranteed over an entire lifetime. The guaranteed benefits will be comparable to packages
offered by most Fortune 500 companies today.
One important way the Act achieves security
is through insurance reforms. Health plans
will not be able to refuse or discontinue
coverage to people with pre-existing conditions,
nor will they be able to raise premiums
for people who become sick. In addition,
people will not see a break in their coverage
when they change jobs or if they become
unemployed.
2. Simplicity
A hospital ought to be a house of healing, not a monument to paperwork and bureaucracy.
President Bill Clinton
September 1993

To refer to the current health care delivery
and insurance mechanisms as a "system"
is a misnomer. "System" implies a coordinated
effort—practically the opposite of how we
provide and insure health care now. There
are over 1,500 insurers in the U.S. with
thousands of different forms, eligibility requirements, and reimbursement conditions.
Myriad insurance forms, for example, are
time-consuming for providers and consumers
and require a byzantine overhead apparatus
to process.
The Health Security Act will implement
ONE standard claims form for physician
office visits and will standardize other forms.
Once we develop consensus standards for
automation, administrative information will
be transmitted electronically while protecting
privacy. The goal of simplification is to move
towards a paperless system as quickly as

180

THE BUDGET FOR FISCAL YEAR 1995

possible and to minimize the administrative
burden on consumers and providers.
In addition, the President's plan will simplify the rules and regulations that have
contributed to past inefficiencies. The Act
seeks to streamline quality assurance regulations by setting minimum Federal standards
that are performance-based; coordinating annual quality-related surveys; revising Medicare
peer review organization activities; and changing Federal regulation of clinical laboratories
by eliminating requirements for labs performing simple tests.
The principle of simplicity goes beyond
reducing administrative costs—simplicity also
means making health insurance choices more
clear. Individuals and firms will no longer
have to sort out the different plans, options,
and limitations offered by various insurers.
Instead, they will be able to look to their
health alliance to provide the complete price
and quality information they need to make
sound decisions from a wider range of choices
than most have access to today. The standard,
comprehensive benefit package will give them
a solid basis for comparison.
3. Savings
People may disagree over the best way to fix this system
... But we cannot disagree that we can find tens of billions of dollars in savings from what is clearly the most
costly and the most bureaucratic system in the entire
world.
President Bill Clinton
September 1993

The Health Security Act introduces a simple
market force into the health care system:
competition. Organized into large purchasing
pools, consumers and small businesses will
have the same bargaining power that large
corporations have now to negotiate with health
plans for lower rates on better health coverage.
The Health Security
care dollars by giving
stake in their choice
information on which
Experience has shown




Act also saves health
consumers a financial
of health plan (and
to base that choice).
that employees choose

lower cost plans when they are given adequate
information and the financial incentive to do
so.13 Health plans will compete against one
another on price and quality—not on their
ability to select low risk enrollees. The Act
also encourages providers to join together in
groups that will provide care as cost-effectively
as possible and use lower premiums to compete for consumers.
4. Choice
The choice will be left to the American citizen, the worker—not the boss, and certainly not some government
bureaucrat.
President Bill Clinton
September 1993

One of the most dearly held features of
health care in America is the right to choose
one's own doctor and health plan. But under
the current system, the employer often makes
the initial choice of health plan. Rising costs
have forced many employers to offer only
one health plan, as 40 percent of those
who offer coverage do now. Their employees
have no real choice of plans and, frequently,
a limited choice of providers.
The Health Security Act will give every
American a choice among at least three
plans and usually more. Individuals can stay
with their current doctors, join a network
of doctors and hospitals, or join a health
maintenance organization. An annual open
season will allow people to choose or change
plans. Even those who do not sign up with
a health plan prior to seeking care will
be able to enroll at the point of service—
when they visit their doctor. Further, the
Act will ensure that doctors are free to
apply to practice in the plan of their choice,
and the Act allows doctors to participate
in more than one plan.
isFeldman, R. and B. Dowd, 'The Effectiveness of Managed
Competition in Reducing the Costs of Health Insurance," in Robert
B. Helms, Health Policy Reform: Competition and Controls, The
AEI Press, 1993.

4.

181

REFORMING THE NATION'S HEALTH CARE SYSTEM

5. Quality
If we reformed everything else in health care, but failed
to preserve and enhance the high quality of our medical
care, we will have taken a step backward, not forward.
President Bill Clinton
September 1993

The United States enjoys medical care
that is envied the world over, but in today's
system doctors and hospitals get paid more
to treat people after they become sick than
to keep them healthy in the first place.
The health system needs incentives that
emphasize preventive care. The Health Security Act's comprehensive benefit package includes a wide range of preventive health
services, which many health plans do not
cover today. Many of these preventive services
have no out-of-pocket costs, to encourage
consumers to take advantage of them.
We also have to strengthen our system
of monitoring and assuring quality. For too
long, health care data have been collected
with an eye toward counting health care
dollars, not evaluating cost-effectiveness or
success in treatment.
The Health Security Act will assure quality
by requiring health plan performance reports
so consumers will have the information they
need to choose the highest quality doctors
and hospitals. Minimum quality and performance measures will help consumers compare
quality across plans. Plans and providers
demonstrating the highest levels of quality
at a reasonable cost will receive the most
business, and other providers will have a
financial incentive to keep improving quality
to attract more customers.
6. Responsibility
Responsibility in our health care system isn't just about
them, it's about you, it's about me, it's about each of us.
Too many of us have not taken responsibility for our own
health care and for our own relations to the health care
system.
President Bill Clinton
September 1993

Americans must take responsibility for being
part of the solution to a health care crisis
that affects us all. Responsibility means that
insurance companies should no longer be
allowed to cast people aside when they become




sick. It also means that all employers and
employees will be asked to pay their fair
share for health insurance. No longer will
some "free riders" get health care while
responsible employers pay their bills. Businesses that do not provide insurance will
not be able to continue to shift costs onto
those that do.
Responsibility must apply as well to laboratories that submit fraudulent bills, to lawyers
who abuse malpractice claims, and to doctors
who order unnecessary procedures.
Responsibility also means that people must
change the behavior that contributes to rising
health costs. Smoking, violence, excessive
drinking, illicit drug use, and teen pregnancy
all drive up health care costs. One important
way the Act asks risk takers to pay for
the extra costs they impose on the health
care system is through increased excise taxes
on tobacco products. The Congressional Office
of Technology Assessment (OTA) estimates
that smoking-related illness leads to $21
billion in direct medical costs and another
$47 billion in economic costs associated with
disability and death every year.
What the Health Security Act Will Do
Health

insurance

that cannot

be taken

away.

The first building block of the Health Security
Act is health security for every American.
The Act guarantees that every individual
will have continuous coverage for a comprehensive package of health benefits,
no matter whether the individual works for
a large or small company, is self-employed
or unemployed, or works full-time or parttime. This guarantee cannot be taken away
under any circumstance. Changing jobs, leaving the work force, starting a business,
going back to school—none of these changes
will cause a break in coverage for any
American.
The Act assures the security of universal
continuous coverage by requiring all employers
and all workers with sufficient income to
contribute. All employers will pay 80 percent
of the average premium for the standard,
comprehensive benefit package (described
14 Office of Technology Assessment testimony before the Senate
Special Committee on Aging, May 6, 1993.

182

THE BUDGET FOR FISCAL YEAR 1995

Table 4-1. SMALL FIRM PREMIUM CAPS
(As a percent of payroll)
Firm Size
Average wage
workers
<812,000
$12,000-815,00
815,000-818,00
818,000-821,00
821,000-824,00
>824,000

below) calculated on a per worker basis
for full-time employees and a pro rata share
for part-time employees. Individuals and families are responsible for the remaining 20
percent of their alliance's premium for the
comprehensive benefit package. If they choose
a plan that costs less than the average,
they will pocket the savings. If they choose
a higher cost plan, they will pay a little
more.
Individuals and families with adjusted gross
incomes (AGI) below $40,000 will be eligible
for discounts that will ensure they pay no
more than 3.9 percent of AGI for their
share of the cost of health coverage. Individuals and families with income below 150
percent of poverty will receive extra discounts.
Employers in the regional alliance system
will pay no more than 7.9 percent of payroll
for insurance premiums; and small, lowwage firms will receive additional discounts
to make their insurance affordable, consistent
with the schedule in Table 4-1.
One responsibility of those proposing change
in the health care sector is to minimize
disruption wherever possible. Currently, 80
percent of all workers are offered insurance
by their employers,15 and 84 percent of
the uninsured are in families that have
at least one employed member.16 Building
15 Urban Institute's TRIM2 model, 1993.
16 Employee Benefit Research Institute, p. 9.




25-49
workers

3.5
4.4
5.3
6.2
7.1
7.9

4.4
5.3
6.2
7.1
7.9
7.9

50-74
workers
5.3
6.2
7.1
7.9
7.9
7.9

75+
workers
7.9
7.9
7.9
7.9
7.9
7.9

on the employer-based system is the least
disruptive way of achieving universal coverage.
Comprehensive

benefits

for

all

Americans.

Although millions of workers have no choice
of health plans, those workers fortunate
enough to be able to choose are now confronted
with plans that differ from one another
according to benefits, cost-sharing, price, and
the size and quality of provider networks—
so many variables that it may be difficult
to compare plans without actuarial and medical advice. The second building block of
the Health Security Act is a standardized,
comprehensive package of insurance benefits
that all health plans will offer, allowing
consumers to compare plans according to
price and quality.
Consumers will choose among three different
cost-sharing arrangements. Under the low
cost-sharing option, enrollees will pay a $10
copayment for outpatient services, $25 for
outpatient psychotherapy and some emergency
room services, and $20 for some dental visits.
Under the high cost-sharing option, enrollees
will pay an annual deductible ($200 for
individuals, $400 for families) and, after the
deductible, coinsurance of 20 percent. Under
the combination cost-sharing option, enrollees
will pay the low cost-sharing charges for
services received from providers within a
network, and high cost-sharing charges for
services from providers outside of the network.
All three cost-sharing options contain

4. REFORMING THE NATION'S HEALTH CARE SYSTEM

an annual out-of-pocket limit of $1,500
for individuals and $3,000 for families.

The comprehensive benefits in the Health Security Act include:
Visits to doctors and other health professionals
Hospital services
Prescription drugs
Preventive services
Emergency medical and surgical services
Mental illness and substance abuse services
Family planning services and services for
pregnant women
Home health care
Extended care services
Ambulance services
Outpatient lab, radiology, and diagnostic
services
Outpatient rehabilitative services
Durable medical equipment
Vision care
Dental care
Hospice care
Benefits for services such as mental health
and dental are fully phased in after January
1, 2001.

Health alliances. The third building block
of the Health Security Act is the health
alliance, a purchasing pool with a board
of directors equally divided between consumers
and employers. The purpose of the alliances
is to improve competition by increasing the
purchasing power of individual consumers
and small businesses.
The alliance will include workers in firms
with fewer than 5,000 full-time employees
(as well as those in larger firms that choose
to join the regional alliances), the self-employed, non-workers, and current Medicaid
recipients. Each State will have at least
one alliance; and in a State with multiple
alliances, only one alliance will operate in
a given geographical area. Each alliance must
offer consumers at least one fee-for-service
plan.
Alliances will streamline health bureaucracy
and reduce overall administrative costs by
reducing the administrative burden on individual plans, business, and consumers. Like
large companies do now, alliances will solicit




183

bids from potential health plans, review the
bids to make sure the plans can offer all
covered services, determine consumers' eligibility for premium and cost-sharing discounts,
and collect premiums from employers and
consumers.
Health alliances will collect detailed information from plans on the quality of care
provided by the plans, including outcomes
data. The alliances will then provide this
information in an annual report card so
consumers can more directly compare quality
measures across plans. Examples of the type
of information the alliances will collect include:
access to care (e.g., time to next available
appointment); appropriate use of medical care
(e.g., immunization and mammography rates);
and outcomes (e.g., survival rates for cardiac
arrest).
Corporate alliances. The Act enables companies with more than 5,000 full-time employees
to provide coverage to their employees through
corporate alliances. Corporate alliances will
function much like regional alliances, accepting bids from plans and collecting premiums
from employees. They are also required to
offer their employees a choice of at least
three plans, one of which must be feefor-service. Firms that choose to establish
their own corporate alliances will be assessed
1 percent of payroll to finance their fair
share of support for community-wide expenses
such as academic health centers and graduate
medical education. Large firms may also
choose to join the regional alliance system.
Health plans and insurance reforms. The
fourth building block of the Health Security
Act is the individual health plan and the
new environment in which it will operate.
Once a health plan's bid has been accepted
by the alliance, the plan will conduct open
enrollment during which the plan must accept
all enrollees, regardless of health status or
history, employment, age, or income. Plans
must offer each enrollee the comprehensive
benefit package in its entirety, and may
not limit coverage for any services in the
comprehensive package because of an enrollee's health status or pre-existing condition.17
1 7 During transition to the new system, health plans may exclude
coverage for treatment of pre-existing conditions for not more than

Continued

184

THE BUDGET FOR FISCAL YEAR 1995

Q. Will people be able to choose their own doctors?
Yes. The Health Security Act requires each regional and corporate alliance to offer its members at
least one fee-for-service plan, where individuals can choose any doctor they want. Moreover, alliances
must accept bids from all plans that offer the comprehensive benefit package at premiums within 20
percent of the per capita premium target and meet minimum quality; solvency, and grievance procedure
standards. The typical enrollee will be able to choose from among many fee-for-service plans, staff
HMOs, and plans that combine staff providers with a provider network.

Today, insurance companies charge what
is called an experience rate—where individuals
are charged according to their health experience and those with poor health experiences
due to old age or chronic illness are charged
more. Under the Health Security Act, all
members of a community will pay the same
rate—a community rate. Health plans will
charge premiums based on the average expected cost of providing coverage to all enrollees for all the benefits in the comprehensive
package.
Of course, open enrollment means that
some health plans may enroll sicker (and
more expensive) individuals than other plans
in the same alliance. These plans will incur
per-person costs higher than the communityrated premium. To protect plans that enroll
sicker individuals, the alliance will assess
the health risks for each plan's enrollees
and adjust the premium the alliance pays
to the plan. Thus, plans that enroll higherrisk individuals will receive higher per-person
payments and plans that enroll lower risk
individuals will receive lower per-person payments. Therefore, plans will have no incentive
to avoid enrolling people with high medical
expenses, as many do today. Note that the
risk adjustment is made to the amount
paid by the alliance to the plan and not
to the amount paid by the enrollee. All
6 months for individuals who have not had continuous health coverage for the 6 months preceding enrollment. See section 11005 of

enrollees will pay the same amount to the
alliance; it is the alliance's responsibility,
consistent with nationally-developed methods,
to adjust the premiums for risk. The Act
gives alliances the flexibility to use traditional
reinsurance mechanisms during the transition
and authorizes grants for further research
in this evolving area.
Because the health plan will receive a
fixed amount of money to provide all of
the services under the comprehensive package
to each enrollee, the plan will have an
incentive to provide high quality care as
cost-effectively as possible. Plans that cut
quality to reduce cost will see their quality
ratings decline, and with that, their enrollment. Plans that maintain and improve quality but do not contain costs may not remain
solvent. Plans that maintain and improve
quality and contain costs will make money
and attract enrollees.
Premium Targets. The alliances and accountable health plans in the Health Security
Act are designed to contain health costs
and maintain quality by strengthening competitive forces within the health care market.
But since the Act asks all employers and
individuals to pay their fair share into the
new health system, it also offers Americans
an important guarantee: that their premiums
will not spiral out of control, as they have
in recent years.

the Health Security Act.

Q. Will people be able to spend their own money to pay for additional health care?
Yes. Individuals may purchase any additional coverage they choose—for example, to assist with
copayments or deductibles or services (e.g., cosmetic surgery) beyond the comprehensive benefit package.
There are no limits whatsoever on how much people may choose to spend out of their own pockets for
additional coverage.




4. REFORMING THE NATION'S HEALTH CARE SYSTEM

Thus, the fifth building block in the Health
Security Act is a system of premium targets
that will provide American businesses, consumers, and taxpayers with another aspect
of health security: protection against premiums that rise substantially faster than
inflation. The Act allows the national per
capita premium target to rise by the Consumer
Price Index (CPI) plus 1.5 percentage points
in 1996, CPI plus 1 point in 1997, CPI
plus .5 point in 1998, and by the CPI
alone in 1999 and 2000. After 2000, premiums
are expected to grow no faster than the
growth in real GDP per capita plus inflation.
The premium targets exclude payments
by individuals for supplemental insurance policies or other out-of-pocket
health costs.
In the meantime, the premium targets
work this way: The National Health Board
will establish a per capita premium target
for the comprehensive benefit package in
1996, and then use this national target
to establish a per capita target for each
alliance, adjusted initially to account for the
number of uninsured and underinsured in
an alliance area, demographics, health status,
and other variables. Every year, the alliances
will conduct a bidding process with the
health plans in their area. The NHB will
then compare the weighted average of the
premiums submitted by each alliance to the
alliance's target. If the actual premium is
below the target, then the State will receive

185

half of the discount savings.18 If the weightedaverage premium for the alliance is above
the target, the alliance will invite plans
above the target to submit new bids until
the average premium equals the per capita
target.
The most effective form of cost containment
is to give producers and informed consumers
free choice in a competitive marketplace.
The targets in the Health Security Act for
the growth of insurance premiums are backstop devices that will most likely never
be needed once insurers, providers, and consumers respond to strengthened competition
and incentives to become more efficient. The
targets also provide the security of knowing
that health care inflation will be contained,
which must happen if we are to bring
personal, business, and government health
spending under control.
Moving To Universal Coverage: Transition to
Reform
The Health Security Act will provide every
American with universal coverage by January
1, 1998, at the latest. States may begin
to phase in the new system on January
1, 1996, if they choose. However, because
1 8 The lower the premium, the lower the discount the Federal
Government will have to pay to make the premium affordable for
low-income Americans. If the alliance's weighted-average premium
is below its NHB target, the State receives half of the percentage
reduction in health spending multiplied by the Federal payment to
that State for discounts. The State can use this amount to reduce
the State's maintenance of effort payment towards the discount
cost for former Medicaid recipients. See Section 6005 of the Health
Security Act.

Q. How will low-income families receive coverage under the Health Security Act?
To fulfill the promise of universal coverage for all, the Act provides premium discounts to those who
cannot afford coverage. Individuals and families who have less than $1,000 in income will pay nothing
towards their premiums. Those with income between $1,000 and 150 percent of poverty will pay on a
sliding scale from zero to the lesser of 3.9 percent of their income or 20 percent of the weighted average
premium.
The Act's method of financing coverage for low-income families breaks the link that now exists between
health care coverage and welfare dependency. Individuals and families who are eligible for Federal
cash assistance (Aid to Families with Dependent Children and Supplemental Security Income) will be
full members of regional alliances and will pay nothing to enroll in any health plan with a premium at
or below the weighted-average for the alliance. AFDC and SSI recipients will also receive discounts to
help pay for their coinsurance. Severely disabled individuals who now receive coverage for long-term
care through Medicaid can stay in the Medicaid program under the Health Security Act, or they may
move to the new community-based long-term care program.




186

THE BUDGET FOR FISCAL YEAR 1995

Q. How are the elderly treated under the Health Security Act?
While Medicare benefits expand substantially under the Health Security Act, the underlying structure
of the Medicare program remains intact. In general, Medicare beneficiaries will continue to receive care
through the program as they do now. Upon becoming eligible for Medicare, non-working individuals
may choose to join the Medicare program, or they may choose to remain in the regional alliance system.
Working Medicare beneficiaries will receive employer sponsored coverage through a regional or corporate alliance (although Medicare will continue to pay their cost-sharing requirements for Medicarecovered services). In any case, they will be able to take advantage of two important new benefits: longterm care for the severely disabled and prescription drugs. For the low-income elderly, Medicaid will
continue to cover Medicare's out-of-pocket costs, as under current law, and to provide certain services
not covered by Medicare.

38.5 million Americans need coverage now,
the Act offers transitional coverage. The Act
also includes provisions to help States prepare
for reform.

as early as January 1, 1996. To help States
prepare for reform, the Act will also make
available planning grants to assist in planning
and startup of State systems.

Transitional Risk Pool for the Uninsured.—The Act establishes a transitional risk
pool to make health insurance coverage available to people who lose coverage or are unable
to obtain coverage because of health status.
The transitional pool will be coordinated with
States and build on their existing health insurance risk pools. It will offer benefits, conditions
of coverage, and cost-sharing comparable to
benefits and terms available in existing State
pools. The transitional pool will be financed
through premiums and contributions by insurers and self-funded plans.

Insurance Reforms.—To protect consumers
from breaks in coverage during the transition
to reform, the Act establishes interim insurance regulations. These regulations will prevent insurers from terminating coverage of the
currently insured, moderate growth in premium increases, prevent plans from imposing
preexisting conditions on new employees who
were insured in the 90 days prior to employment, and prohibit plans from reducing existing coverage for medical conditions that cost
more than $5,000 to treat.

jHelping the States Prepare.—Recognizing
that many States have already begun reform
on their own, the Act builds on these efforts
by allowing States to start alliance systems

How the Health Security Act is
Financed: Sources and Uses
A key question about any health care
reform proposal is how it is financed. About

Q. How will the Act affect the private sector and jobs?
After an initial phase-in period, the Health Security Act will gradually lower aggregate business spending on health insurance, and many employers who currently offer health insurance will see their costs
fall. By the end of the decade, aggregate business spending on services covered by the Health Security
plan will be $28 billion less than it is expected to be without reform. In addition, eliminating the costshifting caused by uncompensated care will lower costs to businesses that provide coverage. Businesses
will be able to do many things with the cost savings: hire more workers; raise wages; invest more in
plant, equipment, training, and research and development; lower prices, and increase dividends to
shareholders. Each of these will stimulate the economy and help increase employment.
The Health Security Act will also give workers the freedom to move to jobs where they might be more
productive without the risk of losing their health insurance. In particular, this will help small businesses, which have had difficulty in the past attracting highly skilled workers. More firms will be able
to hire workers with pre-existing conditions, allowing for more efficient matches between employers and
employees.




4. REFORMING THE NATION'S HEALTH CARE SYSTEM

three-quarters of health insurance spending
under the Health Security Act comes from
the same places it comes from now—businesses and households paying insurance premiums. This section describes the sources
and uses of the additional financing called
for in the Health Security Act.19
Sources of Funds

187

private sector premiums, producing significant
savings for States and the Federal Government. Additional savings accrue because the
Act nearly eliminates uncompensated care,
enabling the replacement of Medicaid disproportionate share hospital payments with
a much smaller program of targeted payments.
Finally, States will have an opportunity to
reduce administrative expenses in response
to reduced responsibilities in enrollment, oversight, rate-setting, and claims processing.

Medicare will realize savings of $118 billion
over 1995-2000 under the Act, which proposes
a set of 29 policy changes that will reduce
Medicare's average growth rate from its current 11 percent per year to less than 9
percent over 1995-1999 (which is still nearly
three times the rate of inflation) by the
end of the decade. The policy changes include
changes in certain payment rates to some
providers, extensions of certain current law
provisions, and some increased beneficiary
cost-sharing to reduce excess utilization.

An increase in the tobacco products
excise tax will raise $67 billion. Billions
of dollars of health care costs are related
to smoking, and this increase may help
pay for some of these costs. This tax increase
may also reduce the number of young people
who begin smoking in the first place as
well as encourage some current smokers
to cut back or quit.20

Medicaid will realize savings of $61 billion
over 1995-2000. Medicaid beneficiaries who
are not AFDC or SSI cash recipients will
obtain coverage through a regional alliance
rather than through Medicaid. As many of
these people are employed, Medicaid will
not finance their premiums; however, these
individuals may receive Federal premium discounts. AFDC and SSI cash recipients will
also obtain coverage through alliances. Medicaid payments for alliance premiums for cash
recipients will grow at the same rate as

Other Federal programs will realize increased receipts and savings of $29 billion
over 1995-2000. New sources of revenues
will be available to the Departments of
Veterans Affairs, Defense, and Health and
Human Services as their programs are coordinated with the reformed health care system.
For example, VA will receive new revenues
from now uninsured veterans, and HHSsupported grantees will receive revenues from
now uninsured low-income Americans. Premiums paid by Federal employees and retirees

1 9 These estimates were calculated using the economic assumptions in the 1995 budget. Estimates released in November 1993
were based on the economic assumptions in the 1993 Midsession
Review.

20 Smoking and Health in the Americas, A 1992 Report of the
Surgeon General, in collaboration with the Pan American Health

Organization,
129.

U.S. Department of Health and Human Services, p.

Q. How can we guarantee coverage for all Americans?
The Act entitles every American to comprehensive coverage. It relies on individuals to enroll in a health
plan, as well as on the corporate and regional alliances to ensure that eligible individuals enroll and
that enrollment procedures are simple and accessible. In turn, every health plan offered through a regional or corporate alliance must accept every eligible person seeking enrollment. The Act prohibits the
current practice of insurance companies of attracting or limiting enrollees based upon personal characteristics such as health status, age, anticipated health needs, occupation, or affiliation with any person
or entity.
Even persons who do not enroll in a health plan prior to seeking care will be able to get coverage. Alliances will maintain point-of-service enrollment procedures. At the point of service, the provider will notify the alliance of an unenrolled patient's identity and the patient can enroll in a health plan at that
time. Every American will be able to walk into a hospital or doctor's office knowing that he or she will
have coverage for a comprehensive set of services.




188

THE BUDGET FOR FISCAL YEAR 1995

now enrolled in the Federal Employees Health
Benefit Program will be lower.
Other Federal revenues will rise by
$93 billion. For example, health reform will
reduce the growth in insurance premiums,
which will raise taxable income. Money now
spent by employers on non-taxable premiums
will be available as taxable profits or wages,
and the $28 billion in additional taxes that
will result should continue to finance a
portion of our health care system.

Contributions from corporate alliances
in the form of a 1 percent of payroll assessment will raise $24 billion. Large corporations
will benefit from reduced cost-shifting under
health reform and share responsibility for
funding a share of the public health system
from which all benefit.
Uses of Funds
Premium discounts for businesses and
families ($151 billion over 1995-2000)—To
assist those businesses and families who

Q. How does the Act address malpractice reform?
The Health Security Act includes several provisions to reform medical malpractice. It encourages consumers and providers to resolve disputes through more informal and less costly mechanisms before litigating. Every health plan will develop at least one alternative dispute resolution process, and every
malpractice claim will first go through that process before a suit can be filed. The Act also makes other
changes, such as limiting the amount of lawyers' fees to no more than one-third of the amount recovered, requiring lawyers to submit a "certificate of merit" (an affidavit by a qualified medical specialist
before filing a suit), and preventing plaintiffs from receiving "windfall" recoveries where insurance is
already available to compensate victims for economic damages.




Chart 4-1. FINANCING THE HEALTH SECURITY ACT
(TOTALS: 1995-2000)

DOLLARS IN BILLIONS

500 -

$397
f

$397

DEBT
J s ^ SERVICE $4

400 -

DEFICIT REDUCTION $59

OTHER REVENUE EFFECTS $93

300

CUSHION $41
FEDT- PROG. RECEIPTS A SAVINGS $291
PREMIUM DISCOUNT $110

200

TOBACCO T A X A N D CORP.
ASSESSMENT $92

DEDUCTION $9
MEDICAID SAVINGS $61

100

SELF-EMPLOYED T A X

MEDICARE SAVINGS $118

MEDICARE DRUG BENEFIT $69

LONG-TERM CARE $ 6 2

PUBLIC HEALTH/ADMINISTRATION $47 j

0

SOURCES OF FUNDS

USES OF FUNDS

NOTE: These estimates were calculated using the economic assumptions in the 1995 budget. Estimates released in November 1993 were based on
economic assumptions in the 1993 Midsession Review. Numbers may not add due to rounding.

01/26/94

4. REFORMING THE NATION'S HEALTH CARE SYSTEM

189

Table 4-2. FINANCING THE HEALTH SECURITY ACT
Sources of Funds (billions of dollars)
1995

Medicare
Part A Savings
Part B Savings
Parts A and B Savings
HI Tax Extended to all State & Local Government
Employees
Income Related SMI Premium with outlay and
premium effects
Medicaid
Cash-Eligible Beneficiaries in Alliances
Reduced Disproportionate Share Hospital Payments
Less Supplemental Services for Children
Payment Lag, Administrative Savings, and Other
Changes
Other Federal Programs
Veterans Affairs: Third Party Receipts
Defense Department Health (a)
Federal Employees Health Benefits
Tobacco Tax/Corporate Assessment
Tobacco Tax
Corporate Assessment
Other Revenue Effects
Exclusion of Health Insurance from Cafeteria
Plans
Effects of Mandate, Cost Containment, and Discounts
Dedicated Revenues for Academic Health Centers
Assessment on Employers for Retiree Discounts ...
Anti-Abuse Rule—Certain S Corp. Shareholders ...
Modify Tax Treatment of Certain Health Care Organizations
Reporting Penalties—Non-corp. Ind. Contractors ..
Modify Tax Treatment Retirement Funding Accounts
Recapture Retiree Discounts High-Income Recipients
Incentives for Health Providers in Shortage Areas
Debt Service
TOTAL

1996

1997

1998

1999

2000

1995-2000

2.1
0.0
1.9
0.2

9.0
3.3
2.4
1.5

14.3
7.0
2.7
2.2

22.1
12.0
5.3
2.6

31.6
16.4
8.7
4.2

39.2
20.4
11.5
5.0

118.3
59.1
32.4
15.8

0.0

1.6

1.6

1.5

1.5

1.5

7.6

0.0
0.0
0.0

0.2
0.8
0.3

0.9
3.5
1.2

0.7
9.2
3.7

0.8
20.1
6.6

1.0
27.1
9.7

3.6
60.8
21.5

0.0
0.0

1.0
-0.1

3.7
-0.4

10.4
-1.1

15.2
-1.6

17.4
-1.6

47.7
-4.8

0.0
0.0
0.0
0.0
0.0
12.0
12.0
0.0
0.1

-0.4
0.4
0.6
0.1
-0.2
15.0
11.3
3.8
0.8

-1.0
1.2
1.7
0.2
-0.7
16.2
11.2
5.0
8.4

-3.8
6.9
4.4
0.7
1.8
16.2
11.1
5.1
20.0

-0.1
9.8
5.8
0.8
3.2
16.1
11.0
5.1
28.8

1.6
10.9
6.1
0.8
4.0
16.1
10.9
5.2
34.5

-3.6
29.2
18.5
2.6
8.2
91.6
67.4
24.2
92.6

0.0

0.0

5.3

8.1

8.7

9.3

31.4

0.0
0.0
0.0
0.0

0.1
0.5
0.0
0.2

0.9
1.6
0.0
0.5

4.4
4.3
2.4
0.5

9.3
5.5
4.3
0.5

13.7
5.8
4.7
0.5

28.4
17.7
11.4
2.2

0.0
0.1

0.0
0.1

0.1
0.1

0.2
0.1

0.2
0.1

0.2
0.1

0.7
0.5

0.0

0.0

0.0

0.0

0.1

0.1

0.3

0.0
-0.0
0.3

0.0
-0.0
0.6

0.0
-0.0
0.5

0.0
-0.0
0.2

0.1
-0.0
0.6

0.1
-0.0
2.0

0.2
-0.1
4.2

14.5

26.7

44.0

74.7

107.0

129.8

396.8

(a) Under the proposed legislation, the Secretary of Defense is to decide when the military system will be coordinated with national
health reform. Trie table shows the estimated budgetary effects on the Department of Defense if the military system were to be fully coordinated with national health reform by 1998.
Notes:
These estimates were calculated using the economic assumptions in the 1995 budget. Estimates released in November 1993 were based
on the economic assumptions in the 1993 Midsession Review.
The numbers in this table for the years 1994-1999 are drawn from the budget database, except that they include the Vulnerable Population Adjustment and a Medicare adjustment based on more recent data than were available at the time the budget database was completed.

are unable to pay their full share, the
Health Security Act includes discounts for
small and low-wage businesses and lpw-income
families. The Administrations estimates include a 15% "cushion" (another $41 billion
on top of the estimated discounts) to cover
behavior changes and economic uncertainties.

coverage of prescription drugs similar to that
which is included in the comprehensive benefit
package for Americans under age 65. Medicare
will begin to cover outpatient prescription
drugs in 1996. The benefit includes a $250
deductible and 20 percent coinsurance with
a $1,000 annual out-of-pocket limit.

Medicare prescription drug benefit ($69
billion over 1995-2000)—To help elderly Americans afford the cost of prescription drugs,
the Health Security Act establishes Medicare

Long-term care benefit ($62 billion over
1995-2000)—To help ease the burden of caring
for elderly and disabled family members,
the Health Security Act establishes a new


http://fraser.stlouisfed.org/
1S0-001 0 9 4 - 7
Federal Reserve Bank of St. -Louis(QL 3)

THE BUDGET FOR FISCAL YEAR 1995

190

Table 4-3. FINANCING THE HEALTH SECURITY ACT
Uses of Funds (billions of dollars)
1995
Veterans, Public Health, New Administration, and Other
Veterans Health Care Investment Fund
New Public Health Initiatives
Net New Spending on Acad. Health Ctrs.
and Grad. Med. Educ
Advance Practice Nurses (Medicare)
New Federal Administrative and Start-Up
Costs
Special Supplemental Food Program (WIC)
Vulnerable Population Adjustment
Long-Term Care
Home Based Care for the Disabled
Medicaid Offset
Liberalized Medicaid Eligibility and Personal Needs Allowance
Tax Incentives for Long-term Care
Medicare Drug Benefit
100% Tax Deduction for Self-Employed
Health Insurance
Discounts
Discounts—Net of Cushion
Total Discounts
Employers (net of cushion)
Non-retired Households (net of cushion)
Retirees—low income discounts (net of
cushion)
Retirees—added discounts (net of cushion)
Out-of-Pocket
Cushion
Offsets Made Possible by Health Reform
Medicaid
States' Required Maintenance of Effort...
Discontinued Medicaid Coverage
Basic Benefits
Wrap-around Benefits
Medicare Offset for Employed Beneficiaries

1996

1997

1998

1999

2000

1995-2000

3.0
1.0
0.4

5.2
0.6
1.1

9.6
1.7
1.6

8.9
0.0
1.3

10.0
0.0
1.2

10.3
0.0
1.1

47.0
3.3
6.7

0.3
0.0

1.8
0.2

3.8
0.4

4.9
0.5

6.2
0.6

6.5
0.6

23.5
2.2

1.3
0.0
0.0
0.0
0.0
0.0

0.9
0.5
0.1
5.1
6.0
-1.5

1.2
0.6
0.3
8.8
10.2
-2.4

0.9
0.6
0.7
12.2
13.9
-2.9

0.6
0.7
0.8
16.0
18.2
-3.5

0.6
0.7
0.8
20.1
22.8
-4.1

5.4
3.1
2.7
62.2
71.1
-14.4

0.0
0.0
0.0

0.4
0.2
6.9

0.5
0.5
14.0

0.5
0.7
15.0

0.5
0.8
16.0

0.5
0.9
17.2

2.4
3.1
69.1

0.5
0.0
0.0
0.0
0.0
0.0

0.6
5.8
4.5
10.2
3.0
4.4

0.9
17.5
13.6
31.6
9.2
14.0

1.7
41.8
31.4
82.7
23.7
36.8

2.5
44.3
31.7
100.0
28.4
45.0

2.8
41.8
28.8
103.0
28.7
46.7

8.9
151.1
109.9
327.4
93.1
146.9

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

0.7
0.4
0.3
1.3
-4.4
-3.4
-2.0
-1.4
-1.3
-0.1
-1.0

2.1
1.4
1.0
4.0
-14.1
-12.1
-6.4
-5.7
-5.2
-0.5
-2.0

5.5
3.7
2.6
10.4
-40.9
-34.9
-18.1
-16.8
-15.2
-1.6
-6.0

6.7
4.5
2.7
12.6
-55.7
-47.7
-22.4
-25.3
-22.9
-2.4
-8.0

7.0
4.8
2.8
13.0
-61.2
-53.2
-23.4
-29.8
-26.9
-2.9
-8.0

21.9
14.8
9.4
41.2
-176.3
-151.3
-72.3
-79.0
-71.5
-7.5
-25.0

Total Spending
Deficit Reduction

3.5
11.0

23.5
3.2

50.9
-6.9

79.4
-4.8

88.8
18.2

92.1
37.7

338.3
58.5

Total

14.5

26.7

44.0

74.7

107.0

129.8

396.8

Notes:
These estimates were calculated using the economic assumptions in the 1995 budget. Estimates released in November 1993 were based
on the economic assumptions in the 1993 Midsession Review.
The numbers in this table for the years 1994-1999 are drawn from the budget database, except that they include the Vulnerable Population Adjustment and a Medicare adjustment based on more recent data than were available at the time the budget database was completed.

Federal-State long term care benefit for disabled persons of all ages and income levels.
This new benefit includes three major components: a new home and community-based
service program for the disabled; liberalized
spend-down rules for the Medicaid-eligible
institutionalized; and tax incentives for the
purchase of long term-care insurance.
100 percent tax deduction for selfemployed health insurance ($9 billion over
1995-2000)—The Act "levels the playing field"
by allowing full deduction of self-employed




health insurance premiums, similar to the
tax treatment of premiums paid by most
businesses today.
Transitional support for public health
activities ($1.6 billion over 1995-2000)—
To ensure that the uninsured have adequate
access to quality health care during the
transition, the Health Security Act authorizes
transitional support for selected services. Such
support includes funding for community and
migrant health centers, an expanded National
Health Service Corps, qualified community

4. REFORMING THE NATION'S HEALTH CARE SYSTEM

191

Chart 4-2. COST OF PREMIUM DISCOUNTS
DOLLARS IN BILLIONS

(TOTALS:

1995-2000)

$327

300-

CUSHION $41
OUT OF POCKET $9]

200-

$176

FAMILIES $169

$151

MEDICARE $25
EARLY RETIREE $15

100-

STATE
MAINTENANCE OF |
EFFORT $72
NET $151

BUSINESS $93

0

MEDICAID $79

GROSS

OFFSETS

=

NET

NOTE: These estimates were calculated using the economic assumptions in the 1995 budget Estimates released in November 1993 were based on
economic assumptions in the 1993 Midsession Review.
ict ICKAPH95.BUDCHAP4-B

01/26/94

Capped Entitlements.—The Federal payments to alliances for the discounts in the Health Security
Act for businesses and low-income families are not open-ended. Instead, these payments are capped at
specific levels. For any year in which Federal payments to alliances are less than the capped amount
specified in the Act, the surplus will be accumulated and made available in future years.
We believe the capped amounts in the Act were estimated conservatively and will not likely be
breached. If the President anticipates that the amount of the cap will not be sufficient, he will submit
to Congress specific legislative recommendations to eliminate the shortfall. Congress will consider the
President's recommendations under an expedited up-down procedure similar to that in the Defense
Base Closure and Realignment Act of 1990. The Act enforces accountability by requiring the President
and Congress to take specific actions before they can to spend more on discounts.

health plans, and school-based clinics. To
ensure that providers who now serve underserved populations (e.g., in community health
centers) are brought into the new system,
the Act allows HHS to designate these providers temporarily as "essential community providers" with which plans would be required
to contract to target underserved populations.

technology and innovation continue to advance
under reform, the Act authorizes additional
support for biomedical research. To evaluate
health reform as it is implemented and
to find ways to improve it, the Act also
authorizes funds for health services research.

Investments in biomedical and health
services
research
($5.1
billion
over
1995-2000)—To ensure that American medical

The underlying cost estimates of the Health
Security Act were carefully developed by
experts both inside and outside government




Development of Cost Estimates

THE BUDGET FOR FISCAL YEAR 1995

192

using methods that typically reflected a conservative fiscal outlook.

Budget includes Medicare and Medicaid savings, and spending on new Medicare benefits
and public health activities; premium discounts for small, low-wage firms and low-income families; and revenues from tobacco taxes
and corporate assessments. The net total of
all the savings and new spending is a $11
billion reduction in the deficit in 1995 and a
$58 billion reduction over 1995-2000. (See
Table 4-3)

Experts From Inside and Outside Government.—In estimating the effects on existing government programs, the Office of Management and Budget worked closely with the
Department of Health and Human Services
and the Council of Economic Advisers. The Department of Treasury estimated the revenue
effects and tax-related Medicare provisions.
The Administration also sought the expertise
of government agencies, think tanks, and consulting firms in developing the premium discount estimates, the most complex component
of the Act's costs. A team of private actuaries
and health economists also examined and validated the estimation methods and data
sources.

When the Health Security Act is enacted,
the budget will include information on estimated total premium contributions by employers and consumers. Information on premium
payments will be reported much the same
way the budget reports financial information
on government-sponsored enterprises (GSEs).
Alliances, like GSEs, are subject to Federal
oversight but otherwise operate independently
of the Federal Government. Thus, while the
National Health Board will approve initial
State plans for organizing the alliances and
will set alliance premium targets, the Board
will not oversee individual alliance budgets,
negotiations, or operations. Since the alliances
are not Federal entities, premiums paid to
the alliances are not Government receipts,
and expenditures by the alliances are not
Federal expenditures. Therefore, the financial
transactions of the alliances are not used
to calculate the budget of the Federal Government.

Conservative Fiscal Outlook.—The estimates reflect a fiscally conservative approach
in assessing the new system. For example, the
premium cost estimates are based on the higher of two separate estimates. The phase-in assumptions reflect a realistic view about the
speed at which States will enter the new system. Such adjustments and assumptions—including the $41 billion premium discount
"cushion" described above—are typical of the
prudent approaches taken in developing the
Act's cost estimates.
Treatment of Health Reform in the
Budget—The 1995 budget reflects savings to
and expenditures by the Federal Government
under the Health Security Act. Specifically, the

Table 4-4. HEALTH INVESTMENTS IN THE 1995 BUDGET
(Budget authority; dollar amounts in millions)
1993
actual

National Institutes of Health
Ryan White Act HIV/AIDS Treatment
Immunizations*
Drug Treatment for Heavy Users
High Performance Computing
WIC
Veterans Medical Care**

, ..

„

10,326
348
341
717
47
2,860
14,646

1994
enacted

1995
proposed

10,956
579
528
813
58
3,210
15,622

11,473
672
693
1,018
82
3,564
16,122

Dollar
change:
1994 to
1995

+517
+92
+165
+205
+24
+354
+500

* Includes mandatory vaccine purchase and Medicaid offset
** Excludes $1 billion in 1995 funding from the Veterans Health Care Investment Fund.




Percent
change:
1994 to
1995

+5%
+16%
+31%
+25%
+41%
+11%
+3%

4. REFORMING THE NATION'S HEALTH CARE SYSTEM

Investments in the 1995 Budget
The 1995 budget contains a number of
investments that are building blocks to comprehensive health reform.
National Institutes of Health.—The 1995
budget contains $11.5 billion for NIH, an increase of $517 million (4.7 percent) over 1994.
NIH supports a number of high priority research areas—including HIV/AIDS, women's
health, and high performance computing—that
may provide new therapeutic strategies for diseases that are now difficult to treat.
Ryan White Act HIV/AIDS Treatment—
The Health Security Act will provide all Americans—including the sickest and most vulnerable—with community-rated, comprehensive
coverage that can never be taken away. Those
who are infected with the human immunodeficiency virus (HIV) will, for the first time, have
guaranteed coverage for treatment.
In the meantime, the 1995 budget includes
$672 million for programs authorized under
the Ryan White Act, an increase of $92
million (16 percent) over 1994. These funds
help people with HIV/AIDS receive HIV testing and counseling services, as well as early
treatment. This funding level will be sufficient
to provide assistance to an estimated 3
to 7 cities that may become eligible for
Title I relief grants in 1995.
Drug Abuse Treatment for Hard-Core
Users.—The Health Security Act provides all
Americans with coverage for substance abuse
treatment services. Substance abuse benefits
will be fully phased in after January 1, 2001.
Because heavy drug users are taking an
enormous toll on society through violent crime,
health costs, and lost productivity, the 1995
budget includes a $355 million initiative
to expand treatment services for heavy users.
Childhood Immunizations.—The Act's
comprehensive benefits package covers all rec-




193

ommended childhood immunizations. In the
meantime, to ensure that low-income and uninsured children are immunized prior to the
implementation of health reform, the 1995
budget reflects a recently enacted $424 million
program that will purchase vaccine for eligible
children and provide it to them free of charge.
The vaccine purchase program is designed to
sunset upon enactment of comprehensive
health reform.
The 1995 budget also includes an additional
$46 million to keep clinics open longer and
at more convenient hours, hire more health
professionals, and support outreach and education campaigns.
WIC.—The 1995 budget requests almost
$3.6 billion for the Special Supplemental Food
Program for Women, Infants, and Children
(WIC), a $354 million increase (11 percent)
over 1994. WIC has been shown to play a key
role in health promotion by providing nutritional supplements to pregnant women and
young children. Fully funding WIC is a priority
of the President and will be achieved by the
end of 1996 under the 1995 budget and health
care reform. (See Chapter 3B for more detail
on programs that serve young children.)
Veterans Medical Care.—The 1995 budget
includes $16.1 billion for Veterans Medical
Care, an increase of $500 million over 1994.
With these funds, the Department of Veterans
Affairs (VA) will maintain its 1994 level of
effort and open new medical facilities, including one new hospital and five new nursing
homes.
In addition to the amount requested for
Medical Care, $1 billion in 1995 will be
provided to VA by the Veterans Health
Care Investment Fund established by the
Health Security Act. This Investment Fund
will provide $3.3 billion over three years
to allow the VA medical care system to
make an effective transition to the reformed
health care system.

194

THE BUDGET FOR FISCAL YEAR 1995

Next Steps: One of the Most Important Debates of the Century
Reform Must Achieve Health Security

On this journey, as on all others of true consequence, there will be rough spots in the road and honest
disagreements about how we should proceed After all, this is a complicated issue. But every journey is
guided by fixed stars. And if we can agree on some basic values and principles, we will reach this destination, and we will reach it together.
President Bill Clinton
September 1993

When President Clinton traveled across
America, he heard one concern over and
over again: Americans want health coverage
that cannot be taken away. The plan the
Administration presented to Congress responds to Americans' most basic concern
about health care, and it reflects the principles
to which the President is committed: security,
simplicity, savings, choice, quality, and responsibility.
To survive the critical appraisal of the
American people, a successful health care
reform plan will have to address each of
these principles. The Administration has offered one way; others in Congress, to be
sure, have different formulations with different
priorities. We are flexible on the particulars,
but steadfast on the one "fixed star" that
we must achieve: the security of health




insurance for all Americans that can never
be taken away.
Security means that those who do not
now have health care coverage will have
it, and those who do have it will not
have it taken away.
A National Debate
The President has launched a national
debate that will allow everyone to learn
about the choices necessary to design an
American solution. Through continued leadership in the executive and legislative branches,
this debate will produce a national consensus
on reforming our health care system—and
a bill the President can sign this year
to make an historic improvement in the
health security of all Americans.




5. Personal Security:
Crime, Illegal Immigration,
and Drug Control




5. PERSONAL SECURITY: CRIME, ILLEGAL
IMMIGRATION, AND DRUG CONTROL
The first duty of any government is to try to keep its citizens safe, but clearly, too many
Americans are not safe today. We no longer have the freedom from fear for all our citizens
that is essential to security and prosperity.
President Bill Clinton
August 1993
The 1995 budget marks a new beginning
in America's fight against crime, illegal immigration, and drugs. It holds the line on
the growth of our Federal crime control
bureaucracy, invests in the communities and
the people most affected by crime and drugs,
and commits the resources required to ensure
that violent criminals and serious drug traffickers serve stiff sentences behind bars.
It proposes initiatives to put more police
on our streets, provides innovative programs
to prevent non-violent first-time offenders
from becoming hardened criminals, and at-

tacks hard-core drug use directly and with
substantial new spending for treatment programs. The 1995 budget, together with the
provisions and funding offered by the pending
Violent Crime Control and Law Enforcement
Act, will begin the shift in emphasis from
a wholly Federal response to a response
which empowers States and communities to
fight crime and drug abuse locally. Finally,
the budget will significantly improve border
security and will upgrade efforts to restrain
illegal immigration.

CONTROLLING CRIME
The Administration's request to control
crime in 1995 is $18.3 billion, an increase
of $3.2 billion or 21 percent over 1994.

As Chart 5-1 shows, the largest share of
the proposed increase for controlling crime
goes to assist State and local law enforcement.

Table 5-1. ASSISTANCE TO STATE AND LOCAL LAW ENFORCEMENT
GROWS SIGNIFICANTLY
(Discretionary budget authority; dollar amounts in billions)
1990
Actual
Law Enforcement
Litigative and Judicial
Corrections
State and Local Assistance
Total Fighting Crime




1993
Actual

1994
Enacted

5.2
3.8
2.6
0.8

7.1
4.8
1.9
0.8

7.1
5.1
2.2
0.7

12.4

14.6

15.1

Dollar
Change:
1994 to
1995

Percent
Change:
1994 to
1995

7.3
5.6
2.6
2.8

+0.1
+0.5
+0.4
+2.1

+2%
+11%
+17%
+304%

18.3

+3.2

+21%

1995
Proposed

197

198

This contrasts with recent years, in which
State and local assistance has been essentially
static.
Identifying A New Strategy
The President has often referred to the
damaging effect of violent crime on our
society and has pledged to support tough
new laws that put violent criminals behind
bars. Reducing violent crime must therefore
be among our highest priorities, especially
reducing its appalling increase among our
youth. It is a tragedy both for its victims
and its perpetrators.
The Federal Government has traditionally
responded to a growing public awareness
of violent crime by expanding its law enforcement role. But even our expanded Federal
law enforcement infrastructure must be put
in perspective. Federal spending accounts for
only about 10 percent of all law enforcement
resources. It is State and local governments
that have always played the central role
in controlling crime, particularly violent crime.
There are, however, crime control functions
that should be performed by the Federal
Government. Federal law enforcement agencies are required to enforce laws that are
peculiarly within Federal jurisdiction, such
as forgery and espionage; are best positioned
to encourage cooperation among State and
local governments; and can act cooperatively
with foreign governments to curb the spread
of drug-related and organized crime.
The Federal Government is also best able
to collect national crime statistics and disseminate crime control information. Federal resources help to develop and promote new
technologies to improve law enforcement. Federal crime databases, fingerprint facilities,
DNA testing laboratories, and other technical
and training facilities serve local law enforcement as well as Federal needs.
Most important, only the Federal Government can articulate a national strategy for
controlling crime—a strategy that recognizes
that most crime fighting is done at the
local level and puts resources in the hands
of local law enforcement.




THE BUDGET FOR FISCAL YEAR 1995

Where We Are in the Fight Against Crime
The Federal Government uses two sources
of data to track the level of violence in
our society: a compilation of crime information
reported to police and surveys asking the
public whether they have been victims of
particular types of crime. When compared,
these data suggest that while the rates
of homicide, aggravated assault, robbery, and
rape per 100,000 residents appear to have
remained stable in recent years, the number
of violent crimes and murders reported has
reached intolerable levels.
Chart 5-1 shows the homicide rate and
the growth in Federal, State, and local spending for police, jails, and prisons. While real
spending has increased four times in constant
dollars, the homicide rate has remained at
roughly historical levels. This suggests that
we need to consider new strategies to reduce
violent crime, strategies that will improve
the effectiveness of these resources.
While the overall rate of violent crime
in American society has remained stable
in recent years, its nature has changed
dramatically. It has become increasingly concentrated among our youth, particularly young
males. Between 1971 and 1991, the percentage
of homicide victims ages 15 to 24 rose
by 24 percent, while the rate of homicide
committed by young men, ages 14 to 17,
more than doubled.
Violence has become especially tragic for
young African-American males. Between 1985
and 1990, the likelihood of a black male
between the ages of 20 and 24 being killed
almost doubled. For black males, ages 15
through 19, it more than doubled. Virtually
all of the increase in homicides for these
age groups was attributable to firearms.
Growth in Federal Prison Population
For decades, Federal and State governments
have sought to remove violent offenders and
major drug traffickers from the society they
prey upon. The level of resources devoted
to our Federal prison system reflect this
commitment and has made prison spending
a growing portion of our total law enforcement
budget. Federal prison system funding has
grown from roughly $600 million in 1986

5.

PERSONAL SECURITY: CRIME, ILLEGAL IMMIGRATION, AND DRUG CONTROL

199

Chart 5-1. POLICE AND CORRECTIONS SPENDING HAS
INCREASED BUT VIOLENT CRIME REMAINS A PROBLEM-NEW
STRATEGIES ARE NEEDED

HOMICIDES PER 100,000

1993 DOLLARS
300 -

- 14
HOMICIDES PER 1009000
RESIDENTS

250 -

-

12

200 -

150 -

FEDERAL, STATE AND
LOCAL PER CAPITA
EXPENDITURES

100 -

50 -

0 -J-T
1960

'

1

' I ' '
1965

1

• I ' •1

1 \

1970

1

1975

i i |i i i i |i i i i |> 0
1980

1985

SOURCE: Federal Bureau of Investigation for homicide data. Bureau of the Census for expenditure data.

to1 over $2.2 billion in 1994. It is estimated
that the current system will need to accommodate a net increase of 7,000 inmates in
each of the next five years.
To address prison population growth, the
1995 budget request is $2.6 billion for the
Bureau of Prisons, an increase of almost
$400 million, or 17 percent over 1994. Stronger
laws will shut down the revolving door of
law enforcement. In the future, if you commit
violent crime, you will do the time.
Controlling Violent Crime—A New
Direction
The Administration's strategy for controlling
violent crime takes a new direction by focusing
on the need to put Federal resources to
work supporting local law enforcement, rather
than by simply expanding Federal involvement
in local crime fighting.
As shown in Table 5-1, discretionary Federal crime control spending will grow by
$3.2 billion, or 21 percent, from 1994 to
1995. Not only is this increase greater than




1990

• 0M
19
/

the growth rate of prior years, but it also
reflects a new direction. In previous years,
almost all budget increases were for Federal
law enforcement agencies, e.g., the FBI, U.S.
Attorneys, and the Bureau of Prisons. While
these bureaus will receive funding increases
in 1995, the majority of additional funding
will be for grants to States and localities.
This will help State and local criminal justice
systems perform their function as the primary
agents of law enforcement.
Adding 100,000 New Police Officers
One of the cornerstones of the President's
program to combat crime, particularly violent
crime in our urban communities, is increasing
the number of police officers on our streets.
For 1995, $1.7 billion in new funding is
requested to provide State and local grants
to begin hiring these officers. These grants
will assist States and localities in establishing
community policing programs across the Nation. A total of $6 billion more will be
provided for 1996-1999 to ensure that as
many as 100,000 new police officers are

200

THE BUDGET FOR FISCAL YEAR 1995

Chart 5-2. 1995 BUDGET REFLECTS A NEW DIRECTION
IN FEDERAL CRIME FIGHTING
DOLLARS IN BILLIONS

30-

STATE A N D L O C A L
ASSISTANCE

25 20-

15
10 DIRECT FEDERAL PROGRAMS

0

1982

T

1984

1986

T

1988

1990

1992

1994

1996

1998

NOTE: Includes both mandatory and discretionary funding.
01/19/94

ret 1GRAPH95.BUDCHAP5-B

Table 5-2.

MAJOR CRIME CONTROL
INITIATIVES

(Increased budget authority in millions of dollars)
New Police Officers
Criminal Records Upgrade (Brady Bill)
Juvenile Crime Prevention
Total

added to the State and local police rolls.
This program will ultimately increase the
number of police officers by over 15 percent.
The 1995 budget proposes to eliminate
the formula portion of the Byrne drug law
enforcement grant program. While saving over
$300 million, this funding will be replaced
in large part by the President's new community policing initiative and various other
new grant programs supporting State and
local law enforcement authorized by the pending House- and Senate-passed crime bills.




1,720
100
69
1,E

Also, the budget proposes an increase of
$50 million for the discretionary portion of
the Byrne grant program, effectively doubling
those projects that target specific needs.
Implementing the Brady Handgun
Violence Prevention Act
The recently enacted Brady Handgun Violence Prevention Act requires a five-day waiting period for the purchase of a handgun
and a criminal records check of potential
purchasers. This Act will make America's

5. PERSONAL SECURITY: CRIME, ILLEGAL IMMIGRATION, AND DRUG CONTROL

neighborhoods safer by limiting access to
guns for felons and those psychologically
unable to use handguns responsibly. The
1995 budget provides $100 million for grants
to States to improve their criminal records
identification systems, facilitate records
checks, and fund the FBI's national instant
record check system. Within a few years,
this system will allow the immediate processing of criminal records information.
Upgrading Gun Licensing Procedures
The Administration is taking steps to ensure
compliance with gun dealer licensing requirements. The 1995 budget includes nearly $6
million to fund a number of new initiatives
to ensure that the President's commitment
is realized. First, over $2 million is requested
for the Bureau of Alcohol, Tobacco and Firearms (BATF) to obtain more information
from dealer license applicants, including fingerprints and photographic identification. This
information will help ensure that only authorized gun dealers receive licenses. Second,
over $2 million is requested to automate
multiple handgun sales reports and to enhance
firearms enforcement databases. These steps
will increase BATF's ability to access additional databases to trace firearms used in
the commission of crimes. Third, over $1
million is requested to automate the records
of gun dealers who have gone out of business,
thereby expediting the tracing of firearms
used in illegal activities.
In addition, the Administration will address
the proliferation of Federally licensed gun
dealers. Currently, there are over 280,000
gun dealers paying a license fee of $66
a year, though it costs the taxpayer about
$600 each year to award the license. Before
the President signed the Brady Handgun
Violence Prevention Act, a license had cost
only $10 a year. As part of this budget,
the President will submit a legislative proposal
that the licensing fee for Federal firearms
dealers be increased to $600 annually. This
increase could eliminate up to 200,000 gun
dealers and will end the taxpayer subsidization of the gun business.
Improving Law Enforcement Technology
The 1995 budget requests $93 million to
support the FBI's Integrated Automated Fin-




201

gerprint Identification System (IAFIS). IAFIS
will be a rapid response, paperless system
that will receive and process electronic fingerprint images, criminal histories, and related
data on convicted felons. The system will
be a major new component of our national
law enforcement information system. This
system, coupled with the FBI's DNA identification program and improved wiretap technology, will provide the Nation's law enforcement community with the most effective
law enforcement technology available.
Targeting Juvenile Crime Through
Prevention Strategies
Violent juvenile crime has increased sharply
during the last decade. In response the
1995 budget proposes $172 million in grants
to aid in the prevention and reduction of
juvenile crime and the treatment of youthful
offenders. This request is $69 million above
1994 levels and builds upon strategies to
strengthen the family, support core community
institutions in their work with youth, emphasize the prevention of delinquency and gangrelated activity, and control violent youth.
Passing Effective Crime Control
Legislation
Several important crime control initiatives
are funded contingent upon enactment of
a strong crime bill, such as that passed
by the Senate. During the past year, the
Administration has worked with the Congress
to develop a comprehensive crime bill that
will provide much needed relief in the fight
against crime. The Senate bill includes a
number of initiatives strongly supported by
the Administration, including grants for community policing, boot camps and drug courts
for youthful and non-violent offenders, as
well as drug treatment in prisons and jails.
The Administration also supports a ban on
semi-automatic firearms; limitations on access
to handguns by juveniles; and the creation
of a crime control fund to pay for eligible
crime control initiatives. The Administration
will continue to work for the earliest possible
passage of a crime bill.
The Administration is specifically requesting
that the fund support the community policing
initiative which would put 100,000 new police
officers on the street, the criminal records

202

THE BUDGET FOR FISCAL YEAR 1995

upgrade program authorized in the Brady
Bill, and several of the immigration control
initiatives described below. Allocation of the
remaining spending from the Fund will await

final Congressional action on crime legislation.
Other types of activities that will be supported
by the Administration include programs like
boot camps and drug courts, which are described below.

Table 5-3. LAW ENFORCEMENT SPENDING BY AGENCY
(Discretionary budget authority; dollar amounts in billions)
1990
Actual
Crime Control Fund
Bureau of Prisons
Drug Enforcement Administration
Federal Bureau of Investigation
Immigration and Naturalization Service
General Legal Activities
U.S. Attorneys
U.S. Customs
Bureau of Alcohol, Tobacco, and Firearms ..
U.S. Secret Service
Judiciary
All Other Law Enforcement
Total Crime Control

1993
Actual

1994
Enacted

2.6
0.5
1.7
0.8
0.3
0.5
1.3
0.3
0.4
1.6
2.4

1.9
0.7
1.9
1.0
0.4
0.8
1.5
0.4
0.5
2.4
3.2

2.2
0.7
2.0
1.1
0.4
0.8
1.5
0.4
0.5
2.6
3.1

12.4

14.6

15.1

Dollar
Change:
1994 to
1996

Percent
Change:
1994 to
1996

2.4
2.6
0.7
2.1
1.1
0.4
0.8
1.5
0.4
0.5
2.9
2.8

+2.4
+0.4

WA
+17%

+0.1
+0.1

+0.3
-0.2

+5%
+9%
+6%
+1%
+1%
+2%
+2%
+13%
-8%

18.3

+3.2

+21%

1996
Proposed

+*

* Less than $50 million.

IMPROVING BORDER SECURITY AND CONTROLLING ILLEGAL
IMMIGRATION
Illegal immigration is a continuing problem
which threatens this country's immigrant traditions and reduces the ability of State and
local governments to provide quality human
services. The public has lost confidence in
the Federal Government's ability to handle
this problem. It is, therefore, imperative that
the Federal Government take its responsibility
for controlling the border seriously. In order
to maintain fiscal and economic security,
and turn the rising tide of negative sentiment
against all immigrants, the Federal Government must take aggressive measures to secure
the border and curb illegal immigration.
This Administration pledges to continue
its leadership in finding solutions to this
important and controversial problem. The
President's goal for reforming the immigration
system is straightforward: rebuild and revital-




ize the Immigration and Naturalization Service (INS), the agency which has primary
responsibility for immigration control.
The 1995 budget proposes $2.1 billion for
the INS. This represents a 22 percent increase
over its 1994 level. The Administration's
1995 Border Security and Illegal Immigration
Control initiative will cost $368 million, which
includes an investment of $327 million for
critical immigration control programs and
$41 million for other Justice bureaus to
support INS activities.
Pressing Immigration Problems—The
President's Border Security and Illegal
Immigration Control Plan
Approximately 3.2 million undocumented
persons currently live in our communities.

203

5. PERSONAL SECURITY: CRIME, ILLEGAL IMMIGRATION, AND DRUG CONTROL

Table 5-4.

MORE SPENDING REQUESTED TO COUNTER ILLEGAL
IMMIGRATION
(Budget authority; dollar amounts in billions)
1990
Actual

Immigration and Naturalization Service
(includes Crime Control Fund and mandatory funding)

1993
Actual

1.2

1.6

1994
Enacted

1995
Proposed

1.7

Dollar
Change:
1994 to
1995

Percent
Change:
1994 to
1995

+0.4

+22%

2.1

The INS estimates that this population increases by almost 300,000 illegal aliens annually. The majority of these illegal migrants
enter through the Southwest border.

sought new authority to control illegal immigration. He asked for:

Past attempts to curb illegal immigration
have had limited success. The Immigration
Reform and Control Act of 1986 (IRCA),
which included employer sanctions, was intended to reduce the attraction of employment
in this Nation for illegal migrants. The
Act also authorized substantial increases in
Border Patrol strength to prevent unauthorized entry. However, these and other wellintentioned enforcement measures have not
been forcefully implemented. In large part,
the INS has lacked the leadership and resources to fulfill its missions.
i
The President has a comprehensive plan
which will "reinvent" the INS so that it
can solve its problems and produce visible
results. This past summer the President

• $45 million to fully upgrade visa processing technology to exclude terrorists and
other ineligible aliens;




• $45 million and up to 600 agents to deter
illegal entry across the border;

The President also proposed:
• legislation to exclude and remove fraudulent asylum seekers who attempt illegal
entry through air, sea, and land ports; and
• legislation to toughen criminal penalties
for convicted smugglers of aliens.
Increasing Border Controls
The border control initiative requires $181
million to strengthen our ability to apprehend
and return illegal aliens to their country
of origin. This prevention strategy provides
necessary resources for the Border Patrol
to take better command of the current illegal

Table 5-5. INITIATIVES IN THE PRESIDENT S
BORDER SECURITY AND ILLEGAL IMMIGRATION CONTROL PLAN
(Increased budget authority in millions of dollars)
Border Control
Expedited Deportation (for criminal aliens)
Asylum Reform and Deportation (for those denied
asylum)
Increased Enforcement (employer sanctions)
Promote Naturalization (for eligible aliens)
Total

181
55
64
38
30
368

204

flow. The success of the pilot Special Operation
in El Paso is exemplary of this targeted
approach. More agents will provide a visible
presence at high-risk border areas to deter
illegal entry. This initiative also contains
a significant technology enhancement that
will enable most of the INS components
to analyze intelligence, dismantle alien smuggling operations, and reduce illegal immigration generally. With the proper combination
of sophisticated technology and people, the
INS should be able to reduce illegal entry
more effectively and regulate border admissions fairly and efficiently.
As another part of this initiative, significant
resources will be devoted to upgrading the
capability of the INS to communicate electronically with the State Department and other
Government agencies so that it can control
admissions at ports of entry more effectively.
In addition, with implementation of the Administration's plan to improve management
coordination between the INS and the Customs
Service (a National Performance Review recommendation) we can more effectively reduce
illegal alien and drug entries.
Deporting Criminal Aliens
Foreign-born nationals represent approximately 11 percent of the inmate population
in the five largest immigration-affected states
and 25 percent of the Federal inmate population. Those foreign-born non-resident aliens
who have committed aggravated felonies are
subject to deportation. However, many illegal
immigrants who are convicted felons are
released into local communities. This problem
is intolerable and the Administration is committed to removing these deportable criminal
aliens as expeditiously as possible. This budget
includes $55 million to enable the INS to
deport up to 20,000 more criminal aliens
annually, once fully operational.
Reforming Asylum and Deporting
Fraudulent Applicants
The 1995 budget requests $64 million to
implement the President's pledge to reform
the asylum system. This proposal will complement the Justice Department's efforts to
streamline asylum procedures. It will more
than double the capability of asylum officers,
immigration judges, and attorneys to handle




THE BUDGET FOR FISCAL YEAR 1995

the backlogged cases as well as the significant
number of new cases received annually. The
current, overwhelmed asylum system has no
prospects for adjudicating these cases in a
timely fashion. As a result, virtually anyone
who applies for asylum receives work authorization, while the case is pending. The asylum
system is increasingly vulnerable to abuse
by ineligible applicants. Enactment of the
Administration's reform proposal will permit
deportation of those fraudulent applicants
whose cases are adjudicated and denied.
Implementing Employer Sanctions and
Anti-Discrimination Laws
The budget proposes $38 million to enforce
the employer sanctions and anti-discrimination
provisions of existing law. This is almost
double what is currently spent on this activity.
Sanctions will discourage the illegal employment of undocumented aliens, thus reducing
the U.S. employment "magnet effect." The
INS will increase investigation and prosecution
of fraudulent document vendors who undermine the effectiveness of employer sanctions.
The INS will conduct a national campaign
to investigate industries that have been the
worst violators of the sanctions law. In addition, the budget provides resources to streamline the employment document verification
process.
Government must be sensitive to the civil
rights of employees. Reducing discrimination
against citizens and legal aliens and protecting
their rights are integral parts of this initiative.
Resources will be available to provide grants
to community-based organizations for antidiscrimination education. In addition, the Office of Special Counsel for Immigration-Related
Unfair Employment Practices will expand
its efforts to prosecute those employers who
discriminate against "foreign-sounding" and
"foreign-looking" individuals in the hiring process.
Promoting Naturalization Benefits
Finally, the President's comprehensive plan
calls for $30 million to increase the naturalization of eligible immigrants. The majority
of immigrants do not naturalize when eligible.
Within the next several years, about three
million people will become eligible for citizenship. There are potentially five million other

5.

PERSONAL SECURITY: CRIME, ILLEGAL IMMIGRATION, AND DRUG CONTROL

legal aliens who have immigrated to the
United States since 1965, but have not taken
advantage of naturalization benefits. This
initiative will bolster the integration of newcomers into society and help counteract antiimmigrant sentiment. With these new resources, the INS will ensure that the naturalization benefits are provided correctly, courteously, and compassionately to all persons
eligible. Furthermore, the INS will distribute
grants for the first time to community-based
and educational organizations to assist appli-

205

cants in completing the applications, instruct
them in civics and language proficiency, and
conduct certified testing on behalf of the
INS.
These investments in the immigration system will increase the security of our borders
against the detrimental effects of illegal immigration. This 1995 budget is an important
step forward in the President's efforts to
pursue an aggressive and comprehensive immigration control program.

CONTROLLING ILLICIT DRUG ABUSE
The cost of illicit drug use in America
is staggering, both in economic and human
terms. It destroys the lives and futures
of thousands of Americans, breeds crime
and corruption worldwide, and facilitates the
spread of AIDS and other deadly diseases.
It also costs our economy an estimated $67
billion in direct costs and lost productivity
each year.1 The Nation's fight to eliminate
illicit drugs focuses on two areas: reducing
demand for illicit drugs by providing treatment
and prevention services to the users and
potential users of illicit drugs; and reducing
the supply of available drugs through domestic
law enforcement, border enforcement, and
international cooperation.

The Administration's 1995 drug control
budget requests $13.2 billion, an increase
of $1.0 billion, or 9 percent more than
in 1994. This budget departs from former
spending plans by placing new emphasis
on drug treatment and prevention programs,
while keeping most drug law enforcement
spending relatively constant. Chart 5-3 shows
the relationships of selected categories of
drug control funding. By emphasizing growth
of treatment and prevention programs, the
1995 drug budget defines a new role for
the Federal Government and significantly
changes how the Nation deals with illicit
drug use.

The Administration's National Drug Control
Strategy provides the details of how this
Nation can respond to the imperative of
reducing illicit drug use in America. The
Strategy's demand reduction formula is
straightforward: reduce drug use by focusing
on eliminating hard-core drug use; rebuild
communities ravaged by drug use and drugrelated crime; and deliver a consistent and
continuing prevention message to our youth
both in and out of schools. The strategy's
approach to supply reduction is to increase
community police presence, focus Federal law
enforcement efforts on large drug trafficking
organizations, and provide assistance to fight
drugs in source countries.

The 1995 drug control budget requests
over $2.9 billion to treat drug abuse, an
increase of $360 million, or 14 percent over
1994. It is estimated that the Nation will
have the capacity to treat approximately
1.4 million addicts in 1994. Investing in
treatment makes good public policy and good
economic sense. Of the approximately one
million persons infected with HIV, about
one third were infected as a result of injection
drug use, at a cost of $85,000 to $150,000
per patient for medical services.2 When compared with an average cost of treating drug
users of $5,000 to $12,000 per patient, drug
treatment can be significantly more cost effective. By every standard, it is far cheaper
to treat drug users and return them to
a productive life than to pay for the health

1 Rice, D.P., Unpublished Data, Institute for Health and Aging,
University of California at San Francisco; cited in
Substance

Abuse: The Nations's Number One Health Problem, Key Indicators
for Policy, prepared for the Robert Wood Johnson Foundation,
Princeton, New Jersey, October, 1993, p. 16.




Improving and Targeting Drug Treatment

2

Department of Health and Human Services. Surgeon

General's

Report to the American Public on HIV Infection and AIDS (Washington, D.C.: GPO), 1993.

THE BUDGET FOR FISCAL YEAR 1995

206

Table 5-6.

TREATMENT AND PREVENTION SPENDING SHOW
GREATEST GROWTH
(Budget authority; dollar amounts in billions)
Dollar
Change:
1994 to
1995

Percent
Change:
1994 to
1995

1990
Actual

Total
Supply Reduction
Demand Reduction

1994
Enacted

1.6
1.2
4.2
1.8
0.5
0.4

2.3
1.5
5.7
1.5
0.5
0.6

2.5
1.6
5.7
1.3
0.4
0.7

2.9
2.1
5.9
1.2
0.4
0.7

+0.4
+0.4
+0.2
-0.1
+0.1

9.7

Treatment
Prevention and Education
Criminal Justice
Interdiction
International
Intelligence and Research

1993
Actual

12.1

12.1

13.2

+1.0

+9%

+0.2

+3%

+0.8

+18%

6.6
68%
3.2
32%

7.9
65%
4.4
35%

7.6
63%
4.5
37%

1995
Proposed

7.8
59%
5.4
41%

+•

* Less than $60 million.




Chart 5-3. IN 1995, DEMAND PROGRAMS GROW
FASTER COMPARED TO OTHER PROGRAMS

+14%
+28%
+4%
-7%
+22%
+4%

5. PERSONAL SECURITY: CRIME, ILLEGAL IMMIGRATION, AND DRUG CONTROL

207

Table 5-7. MAJOR INITIATIVES IN THE
NATIONAL DRUG CONTROL STRATEGY
(Increased budget authority in millions of dollars)
Hard-Core Drug Treatment
Safe and Drug Free Schools
Community Policing
International/Source Countries
Total

and crime expense resulting from their drug
abuse. The Administration is requesting funding for several initiatives that implement
programs for expanding treatment:
• Targeting the Hard-Core User.—The
budget requests $355 million for new
grants to treat hard-core drug users. A
total of $310 million in Health and Human
Services treatment grant funds will be
augmented with $45 million from the Office of National Drug Control Policy's Special Forfeiture Fund. These funds will go
to those most in need and the hardest to
reach. While treating this hard-core population presents serious difficulties, no comprehensive effort to fight drug abuse can
succeed without reaching those who are
costliest to society, have suffered the longest, and are the hardest to help.
• Treating Incarcerated Addicts.—Over
200,000 drug addicts enter U.S. correctional facilities each year. Many of these
addicts are released without receiving
drug treatment. Nearly 80 percent of those
leaving such institutions become repeat offenders and return to the prison system.
This revolving door can be shut down, in
part, through in-prison programs to treat
prisoners before release and by providing
transitional treatment services after release. To this end, the Bureau of Prisons
will spend $22 million for prison treatment
programs, and the Department of Health
and Human Services grants for jail-based
treatment programs will provide $39 million for such programs. Jail-based programs have proven particularly useful in
motivating prisoner involvement in treatment by separating them from the general




355
172
568
76
1,171

population at the same time offering treatment, counseling, and early release options.
Providing Help For Non-Violent Drug
Offenders
The pending Violent Crime Control and
Enforcement Act of 1993 is likely to authorize
promising, innovative programs which offer
ways to help non-violent youthful drug offenders. If authorized, programs such as the
following will be supported:
• Boot Camps For Youthful Offenders.—
Boot Camps have demonstrated that they
can work for a select group of non-violent
offenders. Such programs offer rigorous
discipline, physical conditioning, job training, and education. Typical jail sentences
for drug offenders average five years,
while successful participants often leave
boot camps after six months.
• Drug Courts Provide An Alternative
To Incarceration.—Drug Courts offer an
alternative to costly litigation and incarceration of non-violent drug offenders.
They provide treatment, testing, and counseling services for arrestees in lieu of trial
and incarceration. Participants who comply with court mandates and pass periodic
drug tests avoid a trial and incarceration,
while saving courts and penal systems significant time and expense. Those who
don't, return to serve their sentence.
Building Community-Based Prevention
The 1995 drug control budget provides
$2.1 billion for drug prevention programs,
an increase of $448 million over 1994. Prevention programs have proven successful in reduc-

208

ing casual drug use, but recent Monitoring
The Future Survey statistics suggest that
continued efforts are needed.3
• Community Policing As Drug Prevention.—Approximately $285 million of the
1995 community policing initiative described earlier is attributed to drug abuse
prevention. Such community law enforcement efforts that place "cops on the
streets." These programs can help to reduce both the supply and demand for illegal drugs; they can help close down openair drug markets, while also helping to
identify hard-core drug users in need of
treatment. They can also increase public
awareness, improve community pride, and
foster community involvement.
• Safe and Drug-Free Schools.—The 1995
drug budget requests $660 million, or $172
million more than 1994, for Federal activities and grants to States for programs supporting the prevention of drug-related
crime and violence in our schools as well
as comprehensive drug prevention education and services for school children.
These programs are the foundation of our
Nation's drug prevention effort. They provide teacher training and curriculum development that allow for the integration
of drug resistance training into school life;
student assistance programs that offer
drug-free activities; and security services
to address weapon and drug-related security problems on school grounds.
Changing Direction of Drug Law
Enforcement
The 1995 drug control budget request for
domestic drug law enforcement is $5.9 billion,
an increase of $225 million, or four percent
over 1994. It keeps spending on Federal
law enforcement constant and increases resources for corrections and grants to States
and localities.
The drug law enforcement budget reflects
a change in emphasis from a growing Federal
presence towards a policy centered on community-based enforcement. This policy defines
a The Monitoring The Future (MTF) Survey shows an increase in
drug use. The MTF Survey found that illicit drug use is up with
marijuana, stimulants, inhalants, and hallucinogens presenting the
largest increase.




THE BUDGET FOR FISCAL YEAR 1995

the Federal role in terms of providing leadership and training, fostering inter-governmental
cooperation, and providing incentives to States
and localities to adopt innovative drug control
methods.
• Community Policing As Drug Law Enforcement.—An additional $285 million is
attributed to the community policing initiative. The presence of new police officers
on the streets of high crime and drug
areas should significantly deter street
drug crime, and help solve long-term drug
crime problems.
• High Intensity Drug Trafficking Areas
(HIDTA).—1The 1995 drug control budget
requests $98 million for the HIDTA program, an increase of $12 million, or 15
percent over 1994. This reflects the addition of one new metropolitan area to the
list of HIDTAs, bringing the total to six.
These areas receive resources specifically
targeted to dismantling large drug trafficking organizations and the reduction of
hard-core drug use, which is one of the
HIDTA operating objectives.
Controlling The Flow of Drugs
The 1995 drug control budget requests
$1.2 billion for drug interdiction, $94 million
less, or 7 percent below 1994. This saving
is due to a shift in emphasis from counterdrug operations in the vast transit zones
to host country operations. Other savings
will come from a consolidation of intelligence
gathering facilities.
Since 1993, spending for drug interdiction
has declined by almost $300 million, reflecting
the growing realization that the best longterm approach to reducing the flow of drugs
across our borders is to reduce the demand
for drugs within our borders.
Care has been taken to ensure that our
capabilities remain available should cultivation, production, or trafficker activity require
a change in our level of response. Savings
have resulted from proposing the consolidation
of certain Customs/Coast Guard intelligence
centers and Department of Defense interdiction command and control facilities. In part,
better use of intelligence has enabled the
Coast Guard to reduce the size of its patrolling

5. PERSONAL SECURITY: CRIME, ILLEGAL IMMIGRATION, AND DRUG CONTROL

209

effort, and the Customs Service to reduce
the size of its air and marine assets.

that supports alternatives to drug cultivation
and trafficking.

Improving International Cooperation.

The cocaine cartels of South America have
the capacity to produce 1,000 metric tons
of cocaine annually—virtually the entire
world's supply. Their wealth fuels corruption
that threatens the existence of democratic
institutions throughout the region. International drug control efforts, funded by the
Department of State and supported by incountry anti-drug operations, provide law enforcement training and economic assistance
to foreign governments in efforts to resist
the influence of drug trafficking cartels.

The 1995 budget requests $428 million
for international drug programs, an increase
of $76 million, or 22 percent more than
in 1994. This reduced level of effort is
consistent with the Administration's decision
to shift emphasis from interdiction efforts
in the transit zones to assisting host countries.
Assistance programs provide support for conducting law enforcement activities, building
judicial and other necessary institutions, and
creating an economic and social environment










6. National Defense
and International Affairs




6. NATIONAL DEFENSE AND
INTERNATIONAL AFFAIRS
I took this office on a pledge that had no partisan tinge to keep our nation secure by remaining engaged in the rest of the world. And this year, because of our work together, enacting NAFTA, keeping our military strong and prepared, supporting democracy abroad, we
have reaffirmed America's leadership, America's engagement, and as a result, the American
people are more secure than they were before.
President Bill Clinton
January 25, 1994
This Administration came into office facing
a host of new international and national
security challenges. The Cold War tensions
had begun to subside, and the first rays
of opportunity in the post-Cold War world
were gaining strength. Yet the United States
was still pursuing policies formulated during
a 40-year period of hostility and mistrust
that existed between the two superpowers.
We also maintained a military establishment
sufficient to deter our principal adversary

Table 6.1

and, if necessary, to defeat that adversary
in what could have been a global conflict.
This Administration now faces the task
of redefining our national security policies
and reshaping our programs and institutions
to fit the realities of the post Cold War
era. Moreover, this new approach must have
the strong support of the American people
and be clearly understood by the international
community.

DISCRETIONARY FUNDING SUMMARY FOR NATIONAL
DEFENSE AND INTERNATIONAL AFFAIRS
(Dollar amounts in billions)
1993
Actual

National Defense (050):
Budget Authority
Outlays
Department of Defense—Military (051):
Budget Authority
Outlays
International Affairs (150):
Budget Authority
Outlays
Total
Budget Authority
Outlays


http://fraser.stlouisfed.org/ 0 - 9 4 - 8 (QL 3)
150-001
Federal Reserve Bank of St. Louis

1994
Estimate

1995
Proposed

Dollar
Change:
1994 to
1995

Percent
Change:
1994 to
1995

+2.4
-9.5

+1.0%
-3.4%

276.1
292.4

261.7
280.6

264.2
271.1

(262.4)
(280.1)

(250.0)
(268.3)

(252.8)
(259.8)

33.3
21.6

20.8
21.8

20.9
20.8

+0.1
-1.0

+0.5%
-4.6%

309.4
314.0

282.5
302.4

285.1
291.9

+2.6
-10.5

+0.9%
-3.5%

(+2.9) (+1.1%)
(-8.5) (-3.2%)

213

214

In addressing these new issues, we confront
two contradictory trends. On the one hand,
we live in a world made smaller by growing
economic interdependence and communications. Satellites, television, fiber optic cables,
international financial flows, and the
globalization of production all expand the
understanding of global human values and
the importance of cooperation and collaboration. On the other hand, the end of the
Cold War has brought to the surface ethnic
and national tensions that undermine regional
security and threaten to divide communities
in heart-rending conflict.
Neither of these trends provides the clear
and present threat we once faced. Each
new problem forces us to redefine and rethink
our national interest—the core mission of
our national security strategy. Not surprisingly, in these new conditions, the importance
of our continued international engagement
has been unclear to the American people.
National security strategy and foreign policy
are again subjected to a familiar debate:
withdraw from the world, or remain engaged?
In the Administration's view, this is a
false choice. We cannot disengage from the
world. U.S. exports (which alone constitute
over 10 percent of the U.S. Gross Domestic
Product) make withdrawal no choice at all.
Global issues such as environmental pollution,
the migration of refugees and the flow of
narcotics directly concern our nation.
More fundamentally, the sobering lessons
of history illustrate the dangers of isolationism. At the end of World War I, the United
States made a political decision to withdraw
from the world only to have to reenter
a global conflict at a very high price once
the international system failed. After World
War II, the United States debated its international commitments intensively, and made
a fundamental decision to engage internationally. We held that course against a global
adversary with successful results.
Today, as a new era begins, the Administration is committed to engagement and international leadership. The United States is
the remaining superpower; those who say
otherwise sell America short. We have the
world's strongest military, its largest economy
and its most dynamic society. We are setting




THE BUDGET FOR FISCAL YEAR 1995

a global example in reinventing our government and restoring our economy. Around
the world, our power, authority and example
provide unparalleled opportunities to lead,
but in this new era, we must be prepared
to lead in new ways.
This mission of international leadership
continues to advance our national interests.
Today, however, the defense of the national
interest requires a more subtle examination
of the dangers and opportunities in a new
world.
Our strategy for promoting our values and
defending our national interests has four
basic objectives:
• integrating a healthy American economy
into a healthy global economy;
• creating and expanding democratic governance and free markets overseas;
• defending our national security through
skilled diplomacy and a strong, ready military; and
• shaping cooperative solutions to such
transnational problems as the degradation
of the global environment, population
growth, refugee migration and the flow of
narcotics.
U.S. foreign policy and defense planning
during the Administration's first year have
pursued these objectives. Our budget for
the second year sharpens this focus, based
on our reexamination over the past twelve
months of our foreign and defense policies
and of the institutions that make and implement those policies.
Our review has led to fundamental changes
in our foreign policy, putting trade, competitiveness and market expansion front and
center. It has also led to a basic restructuring
of foreign assistance programs. The new international affairs budget focuses on:
• Promoting U.S. Prosperity through Trade,
Investment and Employment;
• Building Democracy;
• Promoting Sustainable Development;
• Promoting Peace;
• Providing Humanitarian Assistance; and

6. NATIONAL DEFENSE AND INTERNATIONAL AFFAIRS

• Advancing Diplomacy.
At the same time, the Administration has
carried out the first fundamental post-Cold
War reexamination of U.S. defense policies
and institutions—the Bottom-Up Review
(BUR). Focusing on new threats and opportunities—nuclear security and counter-proliferation, regional conflict, the expansion of democracy and economic security—the BUR is reshaping a smaller U.S. military to be ready,
flexible and technologically superior. Preparing
for the new roles and missions of the postCold War era, these forces remain capable
of deterring and if necessary, prevailing in
two nearly simultaneous, major regional conflicts. Our defense budget provides full support
for that force structure.
This basic reexamination of our national
security policy and institutions gives us the
tools to exercise leadership as we move
toward a new century. This budget recognizes
that high-priority international challenges and
opportunities involve the full range of governmental institutions, including many concerned
primarily with domestic policy. In particular,
these new challenges and opportunities require
increasingly close cooperation and coordination
between the defense and foreign affairs agencies of the government.
We will use these redefined, reshaped and
newly coordinated policies and institutions
and the resources proposed in the 1995
budget to tackle the highest priority international and national security policy issues:
—Our first priority is the health of the
American economy and its competitiveness
in a healthy global economy. We have invested in education, technology and defense conversion to bolster American competitiveness. Our efforts to empower our
people, revive our economy, reform our
health care, welfare and worker training
programs, reduce the deficit and reinvent
government enhance our global strength
and our ability to lead and to compete in
the global economy. In an increasingly integrated world economy, the strength of
our economy and the standard of living
of all Americans are closely linked to our
international economic agenda. We seek to
open new markets and level the trade
playing field for all nations. Trade policy




215

is the centerpiece of our international economic policy—including successful implementation of the GATT and NAFTA agreements and further market opening
through the Japan Framework negotiations, the Asian Pacific Economic Cooperation (APEC) process, negotiations with
China, and wider free trade agreements
with our Latin American neighbors.
—The clearest link between the expansion
of democracy and free markets and the
U.S. national interest is in Russia and the
other newly independent states (NIS) of
Eurasia and central and eastern Europe.
The Cold War, which bought security at
a great price, has been replaced by the
struggle to create and strengthen institutions of representative government and
private sector economies in this diverse region. If the people of Russia build a free
society and a market economy, the payoffs
for the United States will be large: a permanently diminished threat of nuclear
war, vast new markets, and cooperation
on the global and regional issues that once
divided us. Helping democracy prevail in
Russia remains the wisest and least expensive security investment that we can
make. The United States has led in shaping bilateral and international assistance
programs to achieve these objectives.
These programs continue in the 1995
budget for both international affairs and
defense agencies.
—The defense of American security focuses increasingly on the proliferation of
weapons of mass destruction (WMD). With
the end of the Cold War, the risk of proliferation of weapons and delivery systems
has become one of the most serious threats
to the security of the United States and
our allies. The 1995 budget provides continuing support for the Nunn-Lugar program in the Department of Defense (DOD)
in order to achieve the safe and secure
dismantling of nuclear weapons in Russia,
Belarus, Ukraine and Kazakhstan, and to
safeguard those weapons and materials. It
also increases voluntary funding for the
International Atomic Energy Agency for
nuclear safeguards and inspections and
provides for additional DOD activities to
stem WMD proliferation. Funding for in-

THE BUDGET FOR FISCAL YEAR 1995

216

telligence nonproliferation activities also
grows significantly. Throughout DOD,
steps are being taken in the areas of policy, military doctrine and planning, acquisitions and research, intelligence, and
international cooperation to prevent WMD
proliferation as well as to prepare to protect U.S. forces and interests. At the same
time, the Administration is also relieving
unnecessary burdens on U.S. business by
eliminating unilateral controls on the export of technologies with dual military and
civilian uses—unless they are of critical
importance to national security.
—The Administration is enhancing U.S.
national security through arms control—
turning the promises of existing agreements into reality. A critical step was
made at the recent Summit meeting,
where the President helped Russia and
Ukraine fashion an agreement that will
allow Ukraine to satisfy the conditions it
had set for START I ratification. This creative agreement compensates Ukraine for
forgoing nuclear weapons, provides assurances on the integrity of its borders, and
supplies reactor fuel. START I's implementation will provide the basis for U.S.-Russian ratification of START II.
In the non-strategic arena, the Administration has submitted the Chemical Weapons Convention (CWC) to the Senate for
its advice and consent to ratification and
is working with other CWC signatories to
prepare for the treaty's implementation.
Also, the U.S. is participating in international efforts to identify and examine
potential verification measures for the Biological and Toxins Weapons Convention
(BWC) and is supporting convening a special conference to strengthen the BWC.
The United States continues to observe a
moratorium on nuclear testing, and has
begun to negotiate a Comprehensive Test
Ban. Finally, the U.S. strongly supports
indefinite extension of the Non-Proliferation Treaty (NPT) and is undertaking vigorous diplomatic efforts to achieve this
outcome at the 1995 NPT Conference.
—The United States will seek stability in
regions important to our interests through
diplomatic and economic means as our




first line of defense, while above all remaining prepared to deter or defeat major
aggression, unilaterally when necessary.
However, we are also prepared to participate in multinational operations sanctioned by the UN Security Council for enforcement of UN resolutions, or at the request of another country for its self-defense when it is in our interests to do so.
—This budget supports international
peacekeeping and peace enforcement operations, which promote U.S. national security interests and regional peace and security. Effective peacekeeping can have great
benefits for the United States. If we permit regional conflicts to spin out of control
the cost to restore order is higher and the
danger to America greater than halting
conflicts before they spread. At the same
time, the United States cannot and should
not shoulder a disproportionate share of
the human and economic costs of maintaining international peace and security.
—Therefore the Administration has undertaken a basic review of its peacekeeping
policy, paying special attention to command and control arrangements for U.S.
combat forces, to reforming United Nations peacekeeping operations and to securing adequate funding. This budget proposes a new policy of "shared responsibility" between the Departments of Defense
and State for managing and funding
peacekeeping. Specifically, the Departments will share responsibility for day-today support and funding of UN peace operations in a manner consistent with the
Departments' principal areas of competence. State will have lead responsibility
for and fund traditional peacekeeping operations mandated under Chapter VI of
the UN Charter which do not involve U.S.
combat units. These operations are unlikely to involve significant use of force
and their objectives are primarily political.
The Department of Defense will have lead
responsibility for and fund those Chapter
VI peacekeeping operations that involve
U.S. combat units and all Chapter VII
peace enforcement operations. In these operations, military imperatives tend to predominate. In all cases, key decisions on
U.S. support for or participation in UN

6. NATIONAL DEFENSE AND INTERNATIONAL AFFAIRS

peace operations will continue to be made
on an interagency basis at senior levels.
—Finally, the budget makes good on the
President's promise to fund assessed payments for peacekeeping for which the U.S.
has fallen behind.
—U.S. security will also be enhanced by
peace in the Middle East. Our greatest
asset in advancing our interests in this
region is our security relationship with
key regional states. Through forward positioning, prepositioning of equipment and
military exercises with our allies, we deter
potentially hostile powers and can respond
quickly to crises in that region. In addition, our diplomatic contribution to peace
negotiations gives us a central role in
what could become one of the most successful conflict resolution efforts in recent
decades. This budget provides critical support for both of those efforts, as well as
for the rebuilding that must now begin
in the region.

217

—Our ability to export, and to expand
overseas investment is directly linked to
the growth of market-based economies and
democracy. This budget makes a strong
commitment to sustainable development,
population programs and democratization
in these emerging economies, both through
meeting our commitments on U.S. contributions to multilateral development institutions like the World Bank and
through a strong program of bilateral development assistance.
—Our security is increasingly threatened
by problems which transcend national
frontiers, such as the degradation of the
global environment, starvation, refugee
flows, and the growth of the international
trade in narcotics. This budget devotes significantly increased resources to dealing
with such problems: new bilateral and
international initiatives on the environment, funding for humanitarian assistance
and refugee programs, and an increase in
funding to reduce the flow of illicit drugs
to the United States.

INTERNATIONAL AFFAIRS

As we take [these] steps together to renew our strength at home we cannot turn away from
our obligation to renew our leadership abroad.
President Bill Clinton,
January 25, 1994
In reshaping foreign policy and foreign
assistance programs to fit post-Cold War
realities, the Administration has proposed
new legislation for reform of foreign assistance
and related programs. That legislation and
the budget that supports it divide international affairs programs into six major categories that reflect U.S. goals in this new
era.
PROMOTING U.S. PROSPERITY
The highest-priority foreign policy goal of
the Administration is the growth of the




U.S. economy and employment. One of the
most effective ways to achieve this goal
is to open foreign markets through trade
agreements and related negotiations.
This budget supports a more focused strategy to promote and facilitate U.S. exports.
The Administration has reviewed export promotion programs through the Trade Promotion
Coordinating Committee (TPCC), and this
budget acts on several TPCC recommendations.

THE BUDGET FOR FISCAL YEAR 1995

218

Table 6-2.

1995 INTERNATIONAL AFFAIRS--FUNCTION 150
DISCRETIONARY
(Budget authority in millions of dollars)
1994

1995

Dollar
Change:

1994 to
1995

Estimate

Promoting U.S. prosperity through trade, investment and employment ..
Export-Import Bank Financing (net)*
Food Export Promotion (Public Law 480 Title I)
Trade and Development Agency
Overseas Private Investment Corp. credit activities
Overseas Private Investment Corp. non-credit programs
Building Democracy
New Independent States of the former Soviet Union (NIS)*
NIS Assistance (Defense transfers to USAID)
Central and Eastern Europe
Countries in Transition
Information and Exchange
Promoting sustainable development
Multilateral Development Banks, IMF, and debt reduction
StateyTJSAID Programs
Broad-Based Economic Growth (including Public Law 480 Title III)
Protection of Global Environment
Stabilization of World Population Growth
Support for Democratic Participation
Peace Corps, Inter American and African Development Foundations
Promoting Peace
Regional Peace and Security
of which: Middle East Peace Process
of which: military loan subsidy
Peacekeeping Programs
Peacekeeping supplemental
Non-Proliferation and Disarmament
Narcotics, Terrorism, and Crime Prevention
Providing Humanitarian Assistance
Refugee Assistance

Disaster Assistance (including Crisis and Transition Initiative)
Food Assistance (Public Law 480 Title II)

Advancing Diplomacy
State Department Operations
USAID Operating Expenses
State Dept small programs
UN and Other Affiliates (Assessed Payments)
Other
Other programs
Enacted Rescissions and Special Defense Acquisition Fund
Proposed Rescissions
Total Discretionary Programs**

Proposed

1,037

1,038

+1

718
395
40
17
-133

796
312
45
20
-135

+78
-83
+5
+3
-2

3,677

2,853

-624

891
919
390
124
1,353

900
380
143
1,430

+9
-919
-10
+19
+77

4,375

4,974

+599

1,485
(2,621)
1,664
292
502
163
268

2,109
(2,591)
1,477
350
585
179
274

+624
(-30)
-187
+58
+83
+16
+6

6,844

6,431

-412

5,430
(5,176)
(47)
477
670
94
172

5,460
(5,225)
(60)
608

+30
(+49)
(+13)
+131
-670
+17
+80

1,703

1,626

-77

720
161
822

683
170
773

-37
+9
-49

4,004

4,146

+142

2,535
559
49
861

2,623
567
42
914

+88
+8
-7
+53

-825

-208

+617

73

74

+1

-474
-424

-282

+192
+424

20,817

20,861

+44

111'
252

* 1994 appropriations of $300 million for Export Import Bank for export financing in the New Independent States is shown
under " N e w Independent States of the former Soviet Union."
* * Total may not add due to rounding.




6. NATIONAL DEFENSE AND INTERNATIONAL AFFAIRS

Export-Import Bank.—The Bank, which
administers a major U.S. program for financing exports, provides loans, loan guarantees
and insurance to U.S. firms primarily for capital-goods exports. In 1994, the Bank received
a significant one-time amount of $300 million
to support credit for exports to the former Soviet Union. Some of these resources remain
available in 1995.
In addition, the Administration requests
a net $796 million for the Export-Import
Bank in 1995. This includes resources at
the level appropriated for 1994 for the Bank's
regular credit programs ($650 million, excluding the amount for the former Soviet Union)
and could subsidize as much as $17.6 billion
in loans, guarantees and insurance. This
budget also includes a new initiative recommended by the TPCC—a $150 million
"tied aid" fund. Many developed countries
use foreign aid grants or concessional loans
to finance capital-goods export sales. While
international agreements have limited this
practice, a significant amount of "tied aid"
persists. The tied aid fund administered by
Export-Import Bank permits the United States
to deter other countries' use of tied aid
and to compete with other countries selectively, when they use such aid.
P.L. 480 Title I Export Credits.—Loans
under Title I of Public Law 480, managed by
the Department of Agriculture (USDA), promote the export of selected agricultural commodities primarily to developing countries and
Eurasian markets where export prospects appear promising. Budget authority for this program would decrease from $355 million in
1994 (after rescissions) to $312 million in
1995. A number of other federal programs continue to support U.S. farm exports, including
over $5.5 billion annually in USDA guaranteed
loans for export financing and about $1 billion
annually for USDA export subsidies for US
farm commodities.
Trade and Development Agency.—TDA
promotes U.S. exports by funding feasibility
studies and other activities for potential industrial and infrastructure projects in middle-income and developing countries. This provides
U.S. business involvement in the early stages
of project development and helps them to establish a position in markets otherwise dif-




219

ficult to penetrate. In 1995, TDA's resources
would increase 12 percent to $45 million. TDA
also will receive $17.5 million in 1994 in additional funding, transferred from the State Department, for programs in Russia and the
other NIS. The agency has responsibility to
conduct all U.S. government-funded feasibility
studies for export promotion.
Overseas Private Investment Corporation (OPIC).—Foreign investment by U.S.
firms benefits the recipient countries and also
generates substantial U.S. exports. The Overseas Private Investment Corporation provides
insurance, loans and loan guarantees for foreign investment in developing countries, Eastern Europe, Russia and the other NIS. OPIC
has undertaken new initiatives in Russia (the
Russia country fund) and in the Middle East
(the Israel Growth Fund), and is planning a
new fund for Africa, which will devote a significant amount of resources to projects in
South Africa.
BUILDING DEMOCRACY
New Independent States of the Former
Soviet Union.—Perhaps the most significant
political event of the late 20th century is the
effort by the states of the former Soviet Union
to become democracies and develop market
economies. The United States has provided
substantial bilateral assistance in support of
these efforts, and has encouraged other bilateral aid donors and the major international
financial institutions to support this transition.
For 1995 the budget calls for $900 million in
assistance to the NIS to consolidate their gains
and continue reform.
Central and Eastern Europe.—Countries
in Central and Eastern Europe have made remarkable progress toward democracy and market-oriented economies. Poland, Hungary and
the Czech Republic, in particular, are rapidly
integrating into the world economy, realizing
economic benefits that also promote political
stability. The pace of this transition offers
hope to reformers in the former Soviet Union.
The progress of some Eastern European countries permits a shift of some U.S. support to
other nations in the region within total budget
authority of $380 million in 1995.
Countries in Transition.—The democratic
revolution is taking place in many other coun-

220

tries. A modest investment can support free
elections in Africa and foster truly democratic
governments in Central America and elsewhere. $143 million in budget authority has
been requested for this purpose.
Information and Exchange.—The U.S. Information Agency (USIA) constitutes a key element of U.S. efforts to promote democracy by
increasing foreign understanding of American
society, democratic values, processes, and policy. USIA conducts exchange programs for foreign leaders and scholars, distributes books
and operates resource, information and cultural centers. The consolidation of U.S. international radio broadcasting under the Agency's
management in 1995 will reduce costs and increase flexibility to meet the information needs
of a rapidly changing world. One time consolidation costs and the integration of all broadcasting funds under USIA will increase budget
authority for the Agency to $1.4 billion. Outlay
savings from this consolidation will total about
$400 million by the end of 1997. USIA is also
restructuring internally to streamline core programs, consistent with the National Performance Review, leading to budget savings of over
$15 million in 1995.
PROMOTING SUSTAINABLE
DEVELOPMENT
Multilateral
Development
Banks
(MDBs).—The Administration proposes $2 billion for the MDBs in 1995. The United States
has long been a major contributor to the World
Bank Group of institutions and to the Asian,
African and Inter-American development
banks and more recently the European Bank
for Reconstruction and Development. These institutions provide loans on terms ranging from
highly concessional interest rates and repayment periods to terms close to what developed
country governments pay. U.S. support is leveraged, because many other developed countries contribute to the MDBs and because the
banks increase their resources by borrowing
funds on world capital markets. Total lending
by these banks in 1993 is estimated to be $45
billion, which also translates into procurement
opportunities for U.S. exporters.
Because of the magnitude of their resources,
the banks, particularly the World Bank, can
strongly encourage economic reform in recipi-




THE BUDGET FOR FISCAL YEAR 1995

ent countries, including budget stability and
privatization. Moreover, the MDBs can quickly
bring large scale resources to bear in such
areas as South Africa, Eastern Europe and
the New Independent States, where development and free markets are of major importance to the United States. U.S. contributions
to the Banks have, in recent years, fallen
behind the level of commitments previously
negotiated, leading to arrears of $819 billion
by 1994. The budget would halt the accumulation of arrears and would begin a fouryear process of paying off previously accumulated arrears. The 1995 budget proposes:
• $1.6 billion for scheduled payments on
commitments previously negotiated.
• $275 million for new capital for the African Development Fund, the Inter-American Development Bank (IDB) and the
Global Environment Facility (GEF), a
major new multilateral environmental initiative (all currently in negotiation).
• $87 million to the IDB, World Bank group
and the African Development Fund to
start clearing existing MDB arrears.
Enhanced Structural Adjustment Facility (ESAF).—1The ESAF, managed by the
International Monetary Fund, offers highly
concessional loans to developing countries that
are carrying out economic reform and privatization. The budget proposes a U.S. contribution of $100 million in 1995.
State/USAID Programs Under Sustainable Development.—USAID is changing as a
"reinvention lab" in the Administration's National Performance Review. USAID's philosophy and program mix of bilateral development
assistance is being altered to increase its effectiveness and to fit post-Cold War needs. Bilateral assistance will have a lasting impact only
if it:
• is provided to countries moving toward
market economies,
• involves in its design and implementation
not only recipient country governments
but also the people served by the assistance and, where appropriate, non-governmental organizations, and
• conserves scarce natural resources and
counters environmental degradation.

221

6. NATIONAL DEFENSE AND INTERNATIONAL AFFAIRS

Sustainable development funds will also
pay for U.S. voluntary contributions to UN
and related development organizations such
as the UN Development Program and
UNICEF.

tions. USAID will continue its support for
free elections, for human rights programs
and for improving the administration of
justice. The budget requests $179 million
for this program category.

USAID's reshaped program has four main
components to meet its new priorities:

Peace Corps, Inter-American and African Development Foundations.—The Administration will continue to support grassroots development activities around the world
by providing* trained Peace Corps volunteers
and by supporting indigenous self-help efforts
through the Inter-American Foundation and
the African Development Foundation. The
budget includes $274 million for these programs in 1995.

• Broad-Based Economic Growth.—USAID
provides grants to developing countries to
support sustainable economic growth. Activities include technical assistance on economic reforms, and projects in such areas
as agriculture, education and housing.
Budget authority of $1,477 million is proposed in 1995.
• Protection of the Global Environment—
The 1992 United Nations Conference on
Environment and Development in Rio de
Janeiro heightened awareness of the need
for environmentally sound development
programs. Programs for the environment
will have high priority in USAID's sustainable development activities. The budget
provides a significant increase in budget
authority for environmental programs
from $292 million in 1994 to $350 million
in 1995. This will provide $57 million to
the UN Environment Program and the
Montreal Protocol Multilateral Fund. The
$293 million of direct USAID projects includes support for biodiversity, reduction
of greenhouse gasses and expanding markets for U.S. environmental products.
• Stabilization
of
World Population
Growth.—Through USAID, the Administration will also emphasize programs that
reduce the growth of world population,
and will provide leadership at the International Conference on Population and Development in Cairo later this year. Proposed budget authority grows 17 percent
to $585 million in 1995. This revitalized
program will focus on voluntary family
planning and related activities. The United States will also provide $60 million to
the UN Population Fund (UNFPA) from
these funds.
• Support for Democratic Participation.—
The Administration will work, in part
through USAID, to support the enlargement of the community of democratic na-




PROMOTING PEACE
U.S. foreign policy also places high priority
on reducing the risk of regional conflict
in the post-Cold War world.
Regional Peace curd Security.—This activity—requested at $5.46 billion—supports primarily regional security and the peace process
in the Middle East. It provides the current
level of assistance for Israel and Egypt, new
aid to programs on the West Bank and in the
Gaza strip, and modest assistance for other
countries supporting the peace process. The
program also provides Greece and Turkey with
direct loans to buy U.S. military exports, and
provides Turkey with economic aid grants.
Several other countries also receive assistance
for military training, but direct military aid
is deemphasized.
Peacekeeping and Related Programs.—
The 1995 budget requests $608 million of
budget authority for Department of State-funded voluntary and mandatory financial contributions to peacekeeping operations including
$288 million for arrears anticipated on 1994
assessments. For 1995 these contributions pay
for operations involving peaceful settlement of
disputes mandated by Chapter VI of the UN
Charter that do not involve U.S. combat units.
A fully offset supplemental appropriation of
$670 million is proposed to pay assessed contributions for current peacekeeping operations
that will come due in 1994. Failure to meet
these obligations would seriously impair, if not
shut down, ongoing operations in regions such
as the Middle East, Latin America, Europe

222

and elsewhere that are important to U.S. national interests.
Non-Proliferation and Disarmament.—
The State and Defense Departments and the
Arms Control and Disarmament Agency,
among other departments and agencies, share
responsibility for reducing the spread of nuclear and other weapons of mass destruction.
Budget authority of $111 million is requested
for the international affairs portion of this effort to support a revitalized ACDA, to finance
innovative State Department non-proliferation
activities, and to increase voluntary contributions for the increasingly important activities
of the International Atomic Energy Agency
(IAEA) by 33 percent over 1994 to $40 million.
International Narcotics Trafficking,
Terrorism and Crime Prevention.—The Administration is shifting the primary emphasis
of international narcotics control activities
from interdicting the flow of illegal drugs into
the United States to assisting major source
and transshipment countries, particularly in
the Andean cocaine growing region, to prevent
growth and export of those drugs. The budget
increases funding from $157 million in 1994
to $232 million. Anti-terrorism assistance will
remain at the 1994 level of $15 million. Also,
a new $5 million anti-crime program will be
initiated to help countries and international
organizations cope with international lawlessness (e.g., trafficking in arms or endangered
species, and financial and computer crimes).
PROVIDING HUMANITARIAN
ASSISTANCE
The budget reflects continued U.S. leadership in humanitarian assistance, particularly
for refugees and victims of disasters.
Refugee Assistance.—In addition to resettling the largest number of refugees (110,000
refugee admissions to the United States are
planned for 1995), the United States is also
the largest contributor to UN and other multilateral efforts to assist refugees abroad. The
budget proposes $683 million in 1995 for refugee admissions and assistance.
P.L. 480 Title II Humanitarian Food
Aid.—Under this longstanding food aid program, agricultural commodities and products
are donated to needy people abroad through




THE BUDGET FOR FISCAL YEAR 1995

U.S. private and voluntary organizations and
through the UN World Food Program. The
budget proposes $773 million to continue the
highly effective emergency feeding component
of Title II and slightly reduced non-emergency
regular feeding activities.
Disaster Assistance.—The Agency for
International Development aids the victims of
natural and man-made disasters with non-food
assistance complementing the P.L. 480 Title
II program. Budget authority in 1995 would
increase to $170 million. This would finance
a new element (Crisis and Transition Initiative) of the program to bridge the gap between
immediate responses and long-term reconstruction.
ADVANCING DIPLOMACY
Department of State and USAID Operations.—The effective use of diplomacy—
through reporting, crisis prevention and membership in the UN and other international organizations—is critical to success in achieving
all U.S. foreign policy goals. The foundation
of an assertive American diplomacy is a strong
Department of State that can support a worldwide network of over 260 embassies, missions
and other posts in a constantly changing
world. The 1995 budget reflects restructuring
and new investments in agency operations to
conduct foreign affairs more effectively. Budget
authority of $2.6 billion is requested for Department of State programs to maintain global
operations, restructure and improve communications and information management systems, and accommodate facility requirements
worldwide including a new embassy office
building in Ottawa. The budget also reflects
the major organizational streamlining recently
begun by the Agency for International Development (USAID) including the phasing out of
21 overseas missions. The budget provides
$567 million for USAID's operating expenses.
UN and Other Affiliates.—Recognizing the
growing role of the United Nations (UN) and
other international organizations, the budget
requests $873 million to pay the U.S. share
of those organizations' budgets, as required by
treaty. The budget also reaffirms the U.S. commitment to eliminate arrearages owed to the
UN and other international organizations; it
includes $41 million as the next installment

6. NATIONAL DEFENSE AND INTERNATIONAL AFFAIRS

on the arrearage-elimination schedule begun
in 1991. Under this plan, U.S. arrearages will
be paid off by 1997. As in past years, arrear-

223

age payments will be used for activities agreed
upon by the United States and the international organizations, and payments will be
conditional upon such agreements.

NATIONAL DEFENSE

Our forces are the finest military our Nation has ever had, and I have pledged that as
long as I am President, they will remain the best equipped, best trained and best prepared
fighting force on the face of the earth.
President Bill Clinton
January 25, 1994
The dramatic changes in the military threat
to the United States, combined with the
demonstration of U.S. military capabilities
in Operation Desert Storm, have led to
major changes in U.S. defense planning. The
1995 defense budget continues the process
of both downsizing and reshaping U.S. military
forces and defense technology for the challenges of the post-Cold War world.

gional conflicts. The budget continues to transform U.S. Reserve and National Guard forces
to reshape and strengthen their contribution
to national defense. Most important, the budget underwrites the Administration's strong
commitment to maintain the high level of
readiness needed to confront, in a timely
way, any contingencies where U.S. interests
require military action.

The Department of Defense and the military
services face major new challenges. From
a force designed to meet a global Soviet
threat, we must shape one which has the
size, training, flexibility and technology to
deal with threats large and small in any
part of the world. The first step in this
reshaping was the Bottom-Up Review (BUR).
A key premise of the BUR was that the
United States, in concert with its allies,
must field forces capable of fighting and
winning two nearly simultaneous major regional conflicts. With this capability, the
United States, its allies and its potential
adversaries can all be certain that involvement
in a single regional conflict will not threaten
the interests of the United States or its
allies in other regions.

The budget emphasizes U.S. technological
superiority, through investment in research
and development. It will acquire key capabilities to arm U.S. forces through the end
of the decade and into the next century.
It also continues to reshape intelligence capabilities to provide the knowledge necessary
for defense planners to anticipate, deter and
combat new threats.

The 1995 defense budget provides the force
structure needed to accomplish this mission,
and, if not engaged in two major regional
conflicts, lesser missions such as peacekeeping,
smaller-scale conflicts and humanitarian operations. These lesser missions, however, would
have to be significantly curtailed in the
event of two nearly simultaneous major re-




The budget reflects the Defense Department's commitment to ease the economic
impact of defense "downsizing" through dualuse technology programs and policies to create
a smaller, more responsive defense industrial
base; through transition support for civilian
and military personnel leaving the Department; through community planning assistance;
and through major investment by both the
Department of Defense and the Department
of Energy to identify, resolve and prevent
harm to the environment from defense and
nuclear activities.
The budget reflects the role of the Department of Defense in a number of ongoing
programs concerning counter-proliferation, humanitarian assistance, disaster relief and

224

THE BUDGET FOR FISCAL YEAR 1995

peacekeeping. Through the Nunn-Lugar program, DOD is pursuing cooperative threat
reduction with the former Soviet Union aimed
at the safe and secure dismantlement of
nuclear and chemical weapons and preventing
the spread of weapons of mass destruction.
All of these programs will be fully coordinated
with other agencies to ensure a comprehensive
approach to these issues.
This budget also reflects a commitment
to provide a dollar of defense for a dollar
of budget. As part of the National Performance
Review and with Congressional cooperation,
the Department is undertaking a significant
restructuring of defense acquisition policies
and practices, is improving its business operations and financial accounting systems, and
is reforming its health-policy programs to
control costs and enhance benefits in anticipation of national health reform. Finally, the
Department and the services are implementing
the three previous rounds of base closures
through an accelerated program for quick
cleanup and rapid disposal of property, and
are preparing for the next round of base
closure commission decisions due in 1995.
Overall, the Administration is committed
to supporting a properly sized, balanced,
flexible, technologically dominant military capability for the 21st Century. The Administration will provide this capability while meeting
Table 6-3.

the needs of the men and women in the
military, the requirements for a responsive
public and private defense infrastructure, and
the impact of these changes on America's
economy and communities.
DEFENSE BUDGET LEVEL
The 1995 defense budget request and the
1995-1999 projected defense plan continue
the reduction of defense resources since the
end of the Cold War. The budget requests
discretionary funding of $264.2 billion in
budget authority and $271.1 billion in outlays
for programs in the National Defense Function
(050). This includes functions of the Department of Defense-Military (051), Atomic Energy
Defense Activities (053) and Other DefenseRelated Activities (054). Table 6-3 shows
budget authority and outlay funding levels
for these functions through 1999.
For the military functions of the Department
of Defense, the budget requests discretionary
funding of $252.8 billion in budget authority
and $259.8 billion in outlays in 1995. In
real (inflation-adjusted) dollars, the budget
levels projected for DOD by the end of
the five-year planning period are 35 percent
below the last Cold War (1989) budget level,
and 42 percent below the 1985 peacetime
defense spending peak. Historical budget authority trends since 1950 are shown in Chart

FUNDING SUMMARY FOR NATIONAL DEFENSE
(Discretionary funding in billions of dollars)
1993
Actual

262.4
280.1
12.1




Proposed
1996

1997

1998

1999

250.0
268.3

252.8
259.8

244.2
249.9

241.0
245.4

247.5
245.5

253.8
246.3

10.9
11.2

10.6
10.5

11.0
10.8

10.9
10.9

11.0
11.0

11.2
11.1

1.7
1.3
.
..

1995

11.0

Department of Defense-Military (051):
Budget Authority
Outlays
Atomic Energy Defense Activities (053):
Budget Authority
Outlays
Other Defense Related Activities (054):
Budget Authority
Outlays
Total National Defense (050):
Budget Authority
Outlays

1994
Estimate

0.9
1.1

0.7
0.8

0.7
0.9

0.7
0.7

0.7
0.7

0.7
0.7

276.1
292.4

261.7
280.6

264.2
271.1

255.9
261.6

252.6
257.0

259.2
257.1

265.7
258.1

6. NATIONAL DEFENSE AND INTERNATIONAL AFFAIRS

6-1. As a share of the GDP, DOD spending
will fall from 3.7 percent in 1995 to 2.8
percent in 1999. This compares to an average
DOD share of 8.5 percent of GDP during
the mid 1950s to mid 1960's.
The budget request also includes a proposed
1994 emergency supplemental of $1.2 billion
for the incremental costs incurred by the
Department of Defense related to peacekeeping
and peace enforcement operations in Somalia,
Bosnia, Iraq and Haiti. These incremental
costs result from special military pay for
hazardous duty, operation and maintenance
of equipment, transportation of personnel and
equipment, and force support expenses not
included in the 1994 budget.
FORCES RESTRUCTURED FOR
REGIONAL SECURITY AND
CONTINGENCIES
U.S. military forces are being downsized
and restructured to meet the requirements
identified in the Bottom-Up Review, building
on the experience and success of Operation

225

Desert Storm. Core military capabilities will
be preserved and active and reserve forces
will be better integrated for regional contingencies. Although the primary focus of the
budget is on conventional forces for regional
defense, the budget also continues to support
a strong strategic deterrent.
The new force structure will be smaller
than the Cold War force. Main force trends
are shown in Table 6-4.
A military force sized for two major regional
contingencies is expected to be capable of
undertaking likely peacekeeping and humanitarian missions in the post-Cold War world.
Reflecting a shared responsibility approach
between DOD and the Department of State,
the Administration now proposes that the
Department of Defense assume lead management and funding responsibility for such
missions. The Administration proposes that
the Department of Defense assume responsibility for those Chapter VI peacekeeping operations that involve U.S. combat units and
all Chapter VII peace enforcement operations.

Chart 6-1. DOD-MILITARY BUDGET AUTHORITY TREND

nt IOAWHJUDCHAW-A




01/26/94

226

THE BUDGET FOR FISCAL YEAR 1995

Table 6-4.

MILITARY FORCE TRENDS
1989

Active Forces:
Army Divisions
Navy Aircraft Carriers
Navy Air Wings
Navy Surface Combatants and Attack Submarines
Marine Divisions and Air Wings
Air Force Tactical Wings
Reserve Forces:
Army Combat Brigades
Navy Air Wings
Navy Aircraft Carrier
Navy Ships
Marine Divisions
Marine Air Wings
Air Force Tactical Wings
Nuclear Deterrent:
Intercontinental Ballistic Missiles
Ballistic Missile Submarines (Missiles)
Bombers
Mobility Forces:
Strategic Airlift Aircraft
Sealift Ships i
Military Personnel (in thousands):
Active Forces
Guard and Reserve Forces
1

1994

1995

18
16
13
287
3
25

12
12
11
196
3
13

12
11
10
198
3
13

56
2

48
1

—

—

26
1
1
12

16
1
1
9

46
1
1
17
1
1
8

1,000
34(608)
268

642
15(352)
152

550
15(360)
107

367
163

356
174

365
178

2,130
1,171

1,611
1,025

1,526
979

Includes ships in the Ready Reserve Force funded by the Department of Transportation.

The budget requests $300 million in funding
for the Defense Department to pay UN
assessments for such operations in 1995.
Military Personnel
Active military end strength will decline
to 1.526 million by 1995—28 percent below
the 1989 level and the lowest level since
before the Korean War. An active force
level of about 1.45 million will be achieved
by. 1999, as shown in Chart 6-2. Guard
and Reserve personnel levels will also decline.
In 1995, Guard and Reserve end strength
are estimated at 979 thousand, or 16 percent
below the 1989 level. By 1999, Active forces
will be about 1,453 thousand and the Reserve
forces will be 906 thousand. As Active and
Reserve forces decline, our armed services
must continue to place high priority on
recruiting and retaining highly motivated and
well-trained personnel.




Army National Guard and Reserve
Reform
The Army National Guard and Army Reserve forces are being downsized and restructured consistent with the Bottom-Up Review.
Army National Guard units will focus on
wartime combat and peacetime domestic emergency missions. Army Reserve units will
support wartime combat forces. Consistent
with these missions, some combat missions
currently assigned to the Army Reserve will
be transferred to the Guard while some
support functions in the Guard will be transferred to the Reserve. As a result of these
changes, Army Reserve elements will decline
from 670 thousand personnel in 1994 to
575 thousand in 1999.
READINESS IS THE TOP PRIORITY
The first priority of the Department of
Defense is to maintain high levels of readiness
in the smaller U.S. military force. Readiness

6. NATIONAL DEFENSE AND INTERNATIONAL AFFAIRS

227

Chart 6-2. HISTORICAL DEFENSE PERSONNEL LEVELS
THOUSANDS

is fundamental to the morale and job satisfaction of men and women in uniform and
to the ability of the forces to carry out
their missions. The budget supports training
programs at levels that will keep forces
ready to fight. Proposed funding for repair
and replacement of equipment will provide
U.S. forces the tools they need. The budget
proposes full funding for personnel programs
and high operating tempos for 1995. The
budget provides for the operating rates, a
key indicator of force readiness, shown in
Table 6-5.
EMPHASIS ON TECHNOLOGICAL
SUPERIORITY
As stealth aircraft and precision weapons
vividly demonstrated during Operation Desert
Storm, advanced technology employed by welltrained forces can be decisive and save lives.
U.S. defense technology is dominant today,
and the 1995 budget gives high priority
to Research, Development, Test, and Evaluation programs to ensure dominance in the
future.




To maintain a clear technological edge
for future U.S. forces, the budget proposes
funding of $9.3 billion for defense science
and technology programs.
The Administration's defense technology
strategy ensures that new capabilities enter
the forces quickly through improved operational military systems, while new systems
are developed. Providing $23.6 billion for
development of defense systems, the budget
strikes a balance between development of
new systems ($12.7 billion) and improvements
to existing systems ($10.9 billion). For example, upgrades are being developed for the
E-3 Airborne Warning and Control System
(AWACS) aircraft now in operational units.
At the same time, work continues on the
development of a new generation of combat
aircraft, including the Army's RAH-66 helicopter and F/A-18E/F and F-22 multi-role
tactical aircraft for the Navy and Air Force.
Funding for the major categories is shown
in Table 6-6.

228

THE BUDGET FOR FISCAL YEAR 1995

Table 6-5.

MILITARY OPERATING RATES
1985

Army:
Annual tank miles
Flying hours per crew month
Navy:
Flying hours per crew month
Ship steaming days per quarter:
Deployed forces
Non-deployed forces
Air Force:
Flying hours per crew month:
Fighters
Bombers*

1990

1993

1994

1995

833
13.1

733
14.2

600
13.5

800
14.5

800
14.5

25

24

24

24

24

53.6
27.4

54.2
28.1

54.9
28.3

50.5
29

50.5
29

19.0
NA

20.4
NA

20.7
21.8

20.3
18.0

19.7
19.9

* Bomber flying hours were not separately identified prior to 1993.

Table 6-6. DOD RESEARCH, DEVELOPMENT,
TESTING, AND EVALUATION
(Budget authority in billions of dollars)
1994
Technology:
Basic research
Applied research
Advanced technology development:
Ballistic Missile Defense
Other Technology Development

1.2
2.7

R&D management support
Total RDT&E

DEPARTMENT OF ENERGY R&D
ACTIVITIES
The primary post-Cold War defense missions
at the Department of Energy's laboratories
are to sustain the safety and reliability
of the nuclear weapons stockpile without
nuclear testing and to provide technology
to prevent the spread of nuclear weapons,
materials, and expertise. The former will




1.2
3.9

10.1

9.3

10.1
11.4

12.7
10.9

21.5

23.6

3.2

3.3

34.8

System Development:
New system development
Development of modifications for existing systems

1.2
3.0

2.6
3.6

Total Science and Technology

Total

1995

36.2

be carried out through a comprehensive Stockpile Stewardship Program, using above-ground
non-nuclear (hydrodynamic) experiments, computer simulations, weapons physics experiments, nuclear weapons effects simulations,
and review and analysis of historical data,
in place of underground nuclear testing. The
budget provides $1.3 billion for RDT&E in
support of Stockpile Stewardship and $315
million for non-proliferation and arms control.

6. NATIONAL DEFENSE AND INTERNATIONAL AFFAIRS

MAJOR MODERNIZATION PROGRAMS
CONTINUE
The budget continues a trend of the past
five years to procure fewer new systems
as forces shrink. By retaining technological
dominance, fewer new models of systems
need to enter production.
The budget proposes $43 billion to procure
new systems and perform upgrades in 1995.
Important modernization programs include enhancements in strike capabilities of aircraft
carriers, lethality of Army firepower, the
ability of long-range bombers to deliver conventional smart munitions, and the continuing
ability to project military power over long
distances.
Strategic mobility modernization will improve capabilities for rapid deployment of
U.S.
forces
worldwide
through
more
prepositioning and enhancements to airlift
and sealift. The 1995 budget funds procurement of six C-17 aircraft and two largecapacity sealift ships, and improves rail transportation and port facilities within the United
States.
Prominent procurement programs include
the E-8 Joint Surveillance Target Attack
Radar System (Joint STARS) aircraft ($564
million for 2 aircraft), the Navy's F/A-18C/
D tactical aircraft ($1,117 million for 24
aircraft), modifications to install the Longbow
radar on the Army's AH-64 Apache attack
helicopter ($118 million) and the CVN-76
aircraft carrier ($2,447 million).
REFOCUSED INTELLIGENCE
ACTIVITIES
The post-Cold War era is clearly characterized by a dispersal of threats, problems
and opportunities, and significant uncertainty
about world events. An intelligence apparatus
focused for decades principally on a single
major military threat must now deal with
a wide variety of targets and issues. To
respond to this diversity and uncertainty,
the 1995 budget continues the process of
refocusing U.S. intelligence programs and
capabilities on new priorities:




229

Monitoring threats to regional stability
The proliferation of weapons of mass destruction and their means of delivery, terrorist
activities, ethnic conflicts and trafficking of
illegal drugs pose significant threats to regional peace and U.S. security interests. Monitoring these activities and providing information on these threats will be primary tasks
of U.S. intelligence in 1995 and beyond.
Supporting military operations
Intelligence will increasingly provide a realtime picture of the battlefield. Restructuring
tactical reconnaissance, increasing interoperability, and improving the timeliness and
reliability of imagery dissemination receive
increased emphasis in the 1995 budget.
Enhancing economic security
Intelligence on democracy and reform abroad
and on international factors affecting U.S.
economic well-being is also increasing. The
community will monitor international compliance with economic sanctions and international trading practices, including unfair
foreign competition and foreign government
efforts to acquire sensitive U.S. commercial
information.
Streamlining infrastructure and support
Management and implementation of intelligence programs and capabilities are being
improved through consolidations and streamlining. A civilian personnel drawdown of
about 3 percent in National Intelligence programs will be implemented in 1995. Further
annual reductions are planned through 1999
resulting in more than a 20 percent reduction
during the 1990's.
NON-PROLIFERATION, COUNTERPROLIFERATION, AND THREAT
REDUCTION ACTIVITIES
Funding is included in the Department
of Defense budget both to prevent proliferation
of weapons of mass destruction (WMD) and
to develop U.S. military capabilities to protect
U.S. forces in case prevention fails. The
budget includes $400 million for the NunnLugar program to help with the safe and
secure dismantlement of nuclear weapons

230

in Russia, Belarus, Ukraine, and Kazakhstan,
and the conversion of defense industries in
these countries to the civilian sector. The
Intelligence Community is increasing its nonproliferation funding by 21 percent. This
will help to improve the information available
for formulating military and diplomatic options
to prevent proliferation. Recognizing that prevention may fail, the budget provides for
the development of a wide range of needed
military capabilities to counter the WMD
threat. Finally, the budget includes $30 million
for DOD support of the activities of the
U.N. Special Commission on Iraq, nuclear
safeguards programs of the International
Atomic Energy Agency, effective export control
systems in areas of proliferation risk, and
analyses of proliferation issues.
MAJOR INITIATIVES IN THE DEFENSE
TRANSITION
The Department of Defense and the military
services face new internal challenges from
the end of the Cold War. As budgets decline
and production dollars shrink, DOD uniformed
and civilian personnel, the defense industry,
communities and the workforce face a transition. The 1995 budget addresses these problems to assist the necessary transition and
ensure the maintenance of a defense industrial
base that can meet future needs.
Defense Reinvestment, and Conversion
The Department of Defense is a key player
in the Administration's commitment to reinvest defense resources productively. DOD provides almost 60 percent of the funding and
many of the program initiatives in the Defense
Reinvestment and Conversion Program. A
key program is the Technology Reinvestment
Project (TRP), which promotes technologies
with both military and civilian applications
(or "dual-use"). Funding for the TRP will
grow to $625 million. Projects supported by
the TRP will be selected competitively from
private-sector proposals, and will be jointly
funded by DOD and the private sector. Among
these projects is the $40-million MARITECH
initiative to increase productivity of the American shipbuilding industry.
In addition to the TRP, the Defense Department is investing to bring the dynamism
of the commercial sector to the development




THE BUDGET FOR FISCAL YEAR 1995

of defense systems. Recognizing the rapid
advances in commercial products, particularly
electronics, the Administration has given high
priority to such technologies. Such dual-use
programs include $1.4 billion for defense
conversion initiatives, and $.7 billion of other
continuing technology developments. Important dual-use programs include development
of high performance computers and communications ($397 million) and support of
SEMATECH to develop advanced equipment
to produce semiconductors ($90 million).
Industrial Base Programs and Policies
The Department has provided funding in
a small number of exceptional cases to maintain defense-unique industrial capabilities, including nuclear propulsion for ships and submarines. Procurement of the third Seawolf
submarine in 1996 is an example of this
policy.
Department of Energy Laboratory
Conversion Activities
The primary Department of Energy mechanism for defense technology conversion is
cooperative research and development between
DOE laboratories and the private sector on
technologies that provide dual-benefit for defense and civilian purposes. The Cooperative
Research and Development
Agreements
(CRADAs) that govern the joint research
require that at least 50 percent of the
resources come from the private sector. The
CRADAs also allow private-sector participants
to retain rights to all patents and other
intellectual property resulting from the joint
research. The 1995 budget includes $216
million for the DOE weapons laboratories
for dual-benefit CRADAs.
Initiatives for Personnel and
Communities
The Department of Defense provides personnel separation benefits and administers an
aggressive job search program to help military
and civilian personnel find careers in the
private sector. For communities, DOD is
implementing the Administration's five-point
plan for revitalizing the towns and cities
hard hit by base closures. The Department
is working to speed low-cost or no-cost transfer
of closed bases to communities for economic

6. NATIONAL DEFENSE AND INTERNATIONAL AFFAIRS

redevelopment by expediting environmental
clean-up and facilitating community planning.
In 1995, as part of the Defense Reinvestment
and Conversion Program, DOD will spend
nearly $1.2 billion for personnel and community assistance programs. The Department
of Energy will spend $125 million on its
program to assist workers and communities.
Environmental Programs
The Department of Defense and the Department of Energy both face serious environmental problems as their activities are reduced.
The Department of Defense continues to
make significant progress in environmental
cleanup, compliance, conservation, pollution
prevention, and related research and development. The 1995 budget provides a total
of $5.7 billion, an increase of 6 percent
above the 1994 enacted level. This includes
funding for cleaning up past contamination,
complying with Federal, State and local environmental laws, conserving natural and cultural resources, and reducing pollution. DOD
is also pursuing research and development
to reduce cleanup and compliance costs, (see
also DOD section in the "Investing in the
Quality of Life" section of Chapter 3B).
In 1994, Department of Energy funding
for environmental activities surpassed funding
for research and production of nuclear warheads for the first time. DOE faces one
of the nation's most complex environmental
challenges. The mission of its Office of Environmental Restoration and Waste Management (EM) is to manage the generation,
handling, treatment, storage, transportation,
and disposal of DOE waste. Key areas are
waste management, environmental restoration,
facility transition, and technology development. The budget provides $5.2 billion, an
increase of 1 percent over 1994, for these
important programs (see also DOD section
in the "Investing in the Quality of Life"
section of Chapter 3B).
REFORMING DEFENSE MANAGEMENT
With shrinking forces and changing missions, the Department of Defense is working
to be a National Performance Review leader
as a better customer, with reformed manage-




231

ment practices and streamlined infrastructure.
With smaller budgets, every dollar must
contribute to the central mission of the
Department: the delivery of its combat capabilities.
Acquisition Reform
The Administration is committed to reforming the way government contracts for goods
and services. As the largest single purchasing
agency (spending 67 percent of all government
procurement dollars), DOD has a major stake
in this effort. Success means cost savings
and access to the most advanced technologies
of the commercial marketplace. Working closely with the National Performance Review,
the Department helped to develop the Administration's proposals for improving the acquisition system. There are now two major acquisition reform bills in Congress incorporating
many of the Administration's ideas. These
bills would raise the threshold under which
simplified purchase procedures can be used
(from $25,000 to $100,000), and encourage
the acquisition of more commercial items
by Federal agencies.
The Department will continue to seek efficiencies in acquisition and to reform its
contracting practices.
Defense Business Operations Fund
One of the key DOD management reforms
continues to be the Defense Business Operations Fund (DBOF), which promises to bring
greater efficiency to defense support services.
Military commanders purchase supplies, equipment maintenance, and other services through
the DBOF. Resources for the DBOF are
greater than those for many government
agencies. For 1995, DBOF sales of goods
and services are estimated at about $80
billion, and 311,000 military and civilian
personnel conduct these activities.
DBOF was created in 1992 to establish
a more business-like relationship between
military commands and support activities.
The goal was better control over support
costs. This approach is consistent with key
National Performance Review goals of "Giving
Customers a Voice—and a Choice," "Making
Service Organizations Compete," and "Creating Market Dynamics."

232

^Problems remain. Inadequate accounting
systems have contributed to DOD's financial
management problems. In 1993, the Department undertook a major review of the DBOF
arid has already begun to implement changes.
The Department has developed a new action
plan and established a defense-wide DBOF
Corporate Board, led by the DOD Comptroller,
to resolve these problems.
Financial Management
The DBOF problems stem, in part, from
weaknesses in DOD financial and accounting
systems. DOD currently operates over 280
financial and accounting systems—80 financial
and accounting systems and about 200 ancillary systems that feed financial information
to these systems. These systems do not
always produce accurate and reliable information. General Accounting Office, military department, and DOD Inspector General audits
continue to identify serious weaknesses in
these systems. In addition, the requirements
of the Chief Financial Officers Act of 1990
make it imperative that DOD develop the
capability to produce auditable financial statements. Correcting the problems of DOD's
financial management systems requires the
development of integrated financial accounting
systems and procedures. The Department is
moving aggressively to improve its financial
operations, including centralizing financial
functions in the Defense Finance and Accounting Services (DFAS).
Health Program
The Department continues to reform and
streamline its health operations within the




THE BUDGET FOR FISCAL YEAR 1995

framework of the Administration's national
health reform program. The DOD health
program is available to an estimated 8.3
million beneficiaries. These are active duty
military personnel, retired military personnel,
and their dependents. The program consists
of the military services' medical facilities
and the Civilian Health and Medical Program
of the Uniformed Services (CHAMPUS). In
1995, the military services will operate 133
hospitals and medical centers and 504 medical
clinics at a cost of $15.3 billion.
Streamlining Infrastructure and Support
The Administration is making a major
effort to reduce defense infrastructure (bases,
depot facilities, and related civilian employment) as forces are reduced. The final round
of closures under the current Base Realignment and Closure process is due in 1995.
Activities in 1988-90, 1991, and 1993 will
close 70 major domestic installations. Depot
maintenance is another area where greater
use of the private sector could result in
savings and help with the maintenance of
the industrial base. Finally, the Department
is pursuing an aggressive policy to reduce
civilian personnel levels consistent with the
declining force structure and infrastructure
requirements. The National Performance Review set a goal of a government-wide civilian
personnel reduction of 12 percent through
1999. Based on current plans, defense fulltime equivalent (FTE) civilian personnel levels
will fall from 932 thousand in 1993 to
766 thousand in 1999, an 18 percent reduction.
The long term trend in civilian personnel
is shown in Chart 6-2.




7. Summary Tables

233




7. SUMMARY TABLES
Table 7-1.

BUDGET OUTLAYS BY CATEGORY
(In billions of dollars)
Estimate

Actual
Discretionary:
Defense discretionary
Nondefense discretionary
Discretionary health care reform
Subtotal, discretionary
Mandatory:
Social Security benefits
Federal retirement benefits1
Medicare
Medicaid
Unemployment benefits
Means-tested entitlements benefits 2
Deposit insurance
Health care allowances 3
Undistributed offsetting receipts
Other
Subtotal, mandatory
Net interest
Total outlays
1

1994

1995

1996

1997

1998

1999

292.4
250.0

280.6
269.5

271.1
271.3

261.6
282.3
2.2

257.0
287.3
3.4

257.1
291.0
-3.7

258.1
296.3
-6.1

542.5

550.1

542.4

546.1

547.8

544.4

548.3

302.0
59.8
127.8
75.8
35.5
80.8
-28.0

317.7
63.0
140.8
87.2
26.7
89.4
-3.3

-37.4
50.7

-37.9
46.7

334.5
65.2
153.3
96.4
23.0
96.7
-11.1
3.0
-42.5
45.2

353.7
67.9
173.1
104.6
23.5
102.4
-11.3
16.4
-41.6
37.9

369.5
71.3
192.9
109.7
23.9
109.9
-6.1
39.9
-39.4
38.1

389.6
74.6
202.2
105.9
24.0
116.6
-4.9
83.3
-41.4
38.3

410.8
78.9
215.0
100.9
25.1
124.0
-3.3
101.8
-40.5
38.7

666.9

730.3

763.7

826.6

909.7

988.3

1,051.3

198.8

203.4

212.8

224.2

234.0

244.6

254.4

1,408.2

1,483.8

1,518.9

1,596.9

1,691.4

1,777.4

1,854.0

Civil service and military retirement.

Food stamps and food aid to Puerto Rico, family support payments, SSI, child nutrition, EITC, veterans pensions.
Premium subsidies, long-term care, other mandatory health reform, and 1995 "pay-as-you-go" items. The impact of health reform on
Medicare and Medicaid is included in the Medicare and Medicaid estimates shown above.
2
3




235

THE BUDGET FOR FISCAL YEAR 1995

236

Table 7-2.

RECEIPTS BY SOURCE—SUMMARY
(In billions of dollars)

Individual income taxes
Corporation income taxes
Social insurance taxes and contributions
(On-budget)
(Off-budget)
Excise taxes
Estate and gift taxes
Customs duties
Miscellaneous receipts
Total receipts
(On-budget)
(Off-budget)




Estimate

1993

Source

Actual

...

1994

509.7
117.5
428.3
(116.4)
(311.9)
48.1
12.6
18.8
18.6

549.9
130.7
461.9
(125.7)
(336.2)
54.6
12.7
19.2
20.0

1995

595.0
140.4
490.4
(135.2)
(355.2)
71.9
13.9
20.9
21.3

1996

627.7
145.8
518.3
(143.6)
(374.7)
71.7
15.0
21.3
27.6

1997

664.1
149.8
548.5
(151.0)
(397.5)
72.7
16.1
22.2
31.6

1998

701.6
152.5
580.0
(158.6)
(421.4)
73.6
17.3
23.1
38.7

1999

745.1
157.2
610.2
(165.0)
(445.1)
74.9
18.5
24.0
43.1

1,427.3
1,586.9
1,153.5 1,249.1 1,353.8
1,505.1
1,672.9
0841.6) (1912.9) (998.6) (1052.6) (1J07.6) (1J65.5) (1,227.8)
(336.2) (355.2) (374.7) (397.5) (421.4) (445.1)
.... (311.9)
...

7. SUMMARY TABLES

237

Table 7-3.

DISCRETIONARY BUDGET AUTHORITY BY AGENCY
(In millions of dollars)
1993

^

e n c

y

Cabinet Agencies:
Agriculture (excluding International
grams)
Commerce
Defense
Education
Energy
Health and Human Services
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury
Veterans Affairs

Actual

Pro-

Major Agencies:
Appalachian Regional Commission
Community Development Financial Institutions
Corporation for Public Broadcasting
Corps of Engineers
District of Columbia
Environmental Protection Agency
Executive Office of the President
Equal Employment Opportunity Commission
Federal Emergency Management Agency
General Services Administration
International Programs (other than the State
Department
Legal Services Corporation
National Aeronautics and Space Admin
National Archives and Records Admin
National Endowment for the Arts
National Endowment for the Humanities
National Labor Relations Board
National Science Foundation
National Service Initiative
Office of Personnel Management
Postal Service
Railroad Retirement Board
Securities and Exchange Commission
Small Business Administration
Smithsonian Institution
Tennessee Valley Authority
Allowances
All Other Agencies
Judicial Branch
Legislative Branch
Total




Estimate
1994

1995

1996

1997

1998

1999

14,052
3,216
262,617
23,696
19,262
31,608
25,524
7,078
9,315
9,920
4,928
13,514
10,082
16,701

15,018
3,632
249,979
24,354
18,614
34,318
25,105
7,512
9,376
10,561
5,289
11,186
10,339
17,584

14,170
4,187
252,850
26,060
18,010
35,414
26,064
7,231
12,144
11,694
4,860
13,543
10,350
17,812

14,241
4,502
244,200
26,305
18,282
36,193
33,537
7,346
14,343
11,987
4,713
13,194
10,790
18,281

14,402
4,742
241,000
26,539
18,278
37,957
35,152
7,380
15,240
12,492
4,807
12,364
10,649
18,941

14,436
4,973
247,500
26,747
18,580
39,304
37,544
7,433
16,000
12,517
4,847
13,175
10,381
18,866

14,595
5,962
253,800
26,935
19,021
41,179
38,785
7,491
17,255
12,625
4,960
13,187
10,094
18,866

190

249

187

187

187

187

187

319
3,842
688
6,923
236
222
2,573
275

275
3,915
700
6,659
185
230
800
522

144
293
3,315
722
7,163
190
246
704
1,600

144
312
3,724
722
7,395
190
246
704
172

111
293
3,451
722
7,678
191
246
704
177

101
293
3,821
722
7,876
191
246
704
177

293
3,561
722
8,188
192
246
704
177

16,266
357
14,309
168
174
177
170
2,734
279
123
122
395
127
925
405
135

15,528
400
14,466
192
170
177
171
3,018
575
123
91
378
58
740
403
140

16,001
500
14,300
197
170
177
175
3,200
850
117
92
362
306
806
487
140
-1,155

15,917
500
14,400
197
170
177
175
3,234
1,359
114
92
348
319
798
458
140
818

15,839
500
14,500
197
170
177
175
3,300
1,587
116
92
333
333
824
458
140
1,036

15,804
500
14,600
197
170
177
175
3,400
1,860
118
92
318
348
848
458
140
-6,831

15,710
500
14,600
197
170
177
175
3,500
2,185
121
92
303
364
870
458
140
-9,884

1,297
2,367
2,313

921
2,556
2,307

1,134
2,893
2,545

1,164
2,893
2,699

1,155
2,893
2,803

1,162
2,893
2,917

1,178
2,894
2,994

509,624

498,816

512,250

517,682

520,331

525,967

535,769

THE BUDGET FOR FISCAL YEAR 1995

238

Table 7-4.

DISCRETIONARY OUTLAYS BY AGENCY
(In millions of dollars)
iggg

A

«ency

Cabinet Agencies:
Agriculture (excluding International
grams)
Commerce
Defense
Education
Energy
Health and Human Services
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury
Veterans Affairs

Actual

Pro-

Major Agencies:
Appalachian Regional Commission
Community Development Financial Institutions
Corporation for Public Broadcasting
Corps of Engineers
District of Columbia
Environmental Protection Agency
Executive Office of the President
Equal Employment Opportunity Commission
Federal Emergency Management Agency
General Services Administration
International Programs (other than the State
Department
Legal Services Corporation
National Aeronautics and Space Administration
National Archives and Records Administration
National Endowment for the Arts
National Endowment for the Humanities
National Labor Relations Board
National Science Foundation
National Service Initiative
Office of Personnel Management
Postal Service
Railroad Retirement Board
Securities and Exchange Commission
Small Business Administration
Smithsonian Institution
Tennessee Valley Authority
Allowances

Estimate
1994

1995

1996

1997

1998

1999

13,095
2,889
280,101
23,017
18,022
32,020
24,965
7,118
9,153
9,502
4,946
34,129
9,936
16,292

14,572
3,374
268,423
24,457
18,971
36,641
27,498
7,275
9,705
9,981
5,378
36,237
10,410
17,413

14,398
3,649
259,855
24,046
17,877
36,805
29,477
7,363
10,614
10,421
4,954
36,821
10,322
18,030

14,195
4,311
249,858
25,769
18,561
38,846
30,514
7,447
12,943
11,317
4,795
38,026
10,695
18,449

14,371
4,652
245,358
26,261
18,415
40,416
31,183
7,506
14,332
11,787
4,892
38,237
10,594
18,839

14,483
4,926
245,466
26,520
18,556
42,288
31,163
7,461
15,521
12,264
4,925
38,425
10,340
18,861

14,671
5,481
246,286
26,723
18,931
43,982
31,892
7,525
17,068
12,405
5,009
38,595
10,154
18,863

145

149

180

205

198

195

193

319
3,377
698
6,112
195
218
2,855
449

275
4,297
698
6,762
191
228
2,566
1,018

86
293
3,589
722
6,909
188
243
1,844
884

144
312
3,587
722
7,110
188
247
967
1,679

124
293
3,586
722
7,410
190
245
836
1,002

105
293
3,687
722
7,633
191
245
704
306

40
293
3,687
722
7,809
193
245
704
-206

16,624
389

16,462
393

15,834
483

16,372
500

16,377
500

16,303
500

16,247
500

14,304

14,182

14,410

14,375

14,399

14,529

14,592

270
173
168
171
2,442
219
222
122
390
99
1,111
395
143

282
173
190
173
2,814
436
214
91
378
65
1,119
403
139

190
172
180
174
2,858
601
214
92
362
295
901
476
133
-1,074

190
173
179
175
3,039
941
217
92
348
319
815
499
133
136

190
170
178
175
3,187
1,344
224
92
333
333
816
475
133
595

190
170
178
175
3,266
1,625
226
92
318
347
839
474
133
-7,093

190
170
178
175
3,361
1,904
231
92
303
363
861
473
133
-9,736

926

1,201

1,136

1,134

1,199

1,192

1,189

Judicial Branch

2,414

2,573

2,812

2,815

2,814

2,814

2,815

Legislative Branch

2,315

2,367

2,546

2,681

2,783

2,894

2,968

542,450

550,109

542,303

546,085

547,759

544,449

548,286

All Other Agencies

Total




7. SUMMARY TABLES

Table 7-5.

239

DISCRETIONARY PROPOSALS BY APPROPRIATIONS
SUBCOMMITTEE
(In billions of dollars)
Change:
1994 Enacted to

Agriculture and Rural Development
Commerce, Justice, State and the Judiciary
Defense
District of Columbia
Energy and Water Development
Foreign Operations
Interior and Related Agencies
Labor, HHS, and Education
Legislative
Military Construction
Transportation and Related Agencies
Treasury-Postal Service, and General Government
Veterans Affairs, HUD, Independent Agencies
Allowances
Total Discretionary

1994 Enacted

1994 Proposed i

1995 Proposed

BA

Appropriations Subcommittee

Outlays

BA

Outlays

BA

Outlays

14.9
23.0
239.8
0.7
22.3
13.7
13.8
67.3
2.3
10.1
13.3

14.9
24.0
259.0
0.7
23.0
14.1
13.5
69.3
2.3
8.7
35.6

15.0
23.7
240.7
0.7
21.9
13.4
13.8
67.3
2.3
9.5
10.9

14.9
24.6
259.9
0.7
22.7
14.0
13.5
69.3
2.3
8.6
35.6

13.7
27.4
244.6
0.7
20.6
13.9
13.5
71.9
2.5
8.4
13.3

14.2
25.6
251.4
0.7
20.6
13.7
13.8
69.9
2.5
8.5
36.3

-1.2
4.3
4.8

-0.7
1.6
-7.6

-1.7
0.2
-0.3
4.7
0.2
-1.7
-0.1

-2.4
-0.4
0.3
0.6
0.2
-0.1
0.6

11.7

12.3

11.6

12.3

12.8

12.0

1.0

-0.3

68.6

71.7

68.2

71.7

70.2
-1.2

74.2
-1.1

1.6
-1.2

2.5
-1.1

501.5

549.1

498.8

550.1

512.2

542.4

10.8

-6.8

1995 Proposed
BA

Memorandum: Amounts Excluded From Budget Resolution Allocations
Proposed Emergency Supplementals:
Agriculture and Rural Development
Defense
Energy and Water Development
Transportation and Related Agencies
IRS Compliance Initiative:
Treasury-Postal Service, and General
Government
11994

(In millions of dollars)

365.5
1,198.3
70.0
308.0

127.5
924.7
35.0
36.5

236.1
189.7
35.0
130.8
188.0

184.0

proposed includes enacted appropriations plus supplementals and rescissions proposed in the 1995 budget.




Outlays

240

THE BUDGET FOR FISCAL YEAR 1995

Table 7-6.

MANDATORY AND RECEIPTS PAYGO PROPOSALS
(Deficit impact in millions of dollars)
1994

1995

1996

1997

1998

1999

PAYGO PROPOSALS (EXCLUDING HEALTH CARE
REFORM)
Agriculture:
Comprehensive reform of Federal Crop Insurance program:
Increase insurance program

O

168

Eliminate ad-hoc disaster payments

O

-500

-1,000

-1,000

-1,000

-1,000

—

-332

-299

-123

-23

159

74

192

257

288

301

O

—

-105

-261

-248

-314

-350

O

—

-160

-160

O

—

Deficit impact, comprehensive crop reform

701

877

977

1,159

Energy/USEC:
Propose to amend the Nuclear Waste Policy Act to allow for
permanent appropriation of funds by the the Nuclear Waste
Fund, starting 1995. Would allow the permanent use of 5 0 %
of the annual available balances of the N W for site characterization at Yucca Mountain

O

Achieve savings in uranium enrichment operations
Allow private parties to bid for the right to upgrade electric
power generation capacity at Federal dams and sell the resulting increment in hydroelectric power at market prices.
Affects several agencies

—

—

—

Health and Human Services:
Enhance debt collection authority (SSI program)—consistent
with HR3400

-18

-13

-9

-9

-9

—

—

—

—

—

-1

-4

-4

-3

-2

-112

-110

-108

1

29

49

Housing and Urban Development:
Reform disposition of multifamily housing properties 1

O

-520

Interior: 2
Implement NPR recommendation to increase park fees to enhance park facilities and make 15 percent of estimated receipts available for fee collection costs. Create a new National Park Renewal Fund to expend 5 0 percent of net new
receipts and return them to the collection park

U

Impose 8 % royalty on hardrock minerals removed from Federal
lands—consistent with HR322

U

—

—

-16

O

—

—

—

G

—

-39

-39

-39

-39

-39

Receipt effect

G
O

-36
4

-56
-74

371
-259

448
-472

479

Outlay effect

-526

356
-1,314

-32

-130

112

-24

-47

-958

Establish hardrock reclamation fund to reclaim abandoned
mine sites on federal lands
Justice:
Create enforceable 1 5 % surcharge against debtors
Labor/PBGC:
Strengthen

PBGC

requirements

for underfunded

pension

plans, increase premiums for risky plans, enhance PBGC enforcement authority:

Deficit impact, PBGC
Reduce overpayment of special benefits through (1) a review of
payment rolls, (2) subsidized reemployment of some beneficiaries, and (3) cutting off benefits to people in jail and
those convicted of defrauding the program—Consistent with
H.R.3400

O

—

-2

-a

-3

-3

-3

U

—

-100

-100

-100

-100

-100

Transportation:
Maritime Reform:
Increase customs tonnage duty fees by 150%
Provide subsidies for operation of up to 52 merchant marine
ships
Extend railroad safety user fees

98

110

104

104

U

—

—

-39

-40

-42

-43

G

—

-40

-40

-38

-38

-38

*

*

*

*

*

-2

-1

-17

-24

80

O

Treasury:
Impose Bureau of Alcohol, Tobacco and Firearms fees
Veterans' Affairs:
Allow Chairman of Board of Veterans Appeals, in limited instances, to overturn benefit denial decisions made by the
Board

O

Environmental Protection Agency:
Increas^extend pesticide reregistration fees on manufacturers

U

—

-1

Various:
Adjust civil monetary penalties for inflation




G

-17

-17

-17

7. SUMMARY TABLES

241

Table 7-6. MANDATORY AND RECEIPTS PAYGO PROPOSALS—Continued
(Deficit impact in millions of dollars)
1994
Subtotal, PAYGO proposals (excluding health care reform):
Receipts
Outlays

1995

1997

1996

1998

1999

-36
-516

-479

275
-704

354
-743

385
-871

255
-1,477

-552

Deficit

-152

-631

-429

-389

-486

-1,222

-15
-2,120

-3,547
-1,087
8,153

-11,778
157
25,240
10,200
4,242

-30,447
-9,558
64,565
13,900
4,728

-51,335
-19,630
77,576
18,200

231

108

-12,528
-5,910

-12,436
-12,175

-12,340
-18,803

-12,237
-21,708

HEALTH CARE REFORM
Medicaid
Medicare
New health premium subsidies
Long term care (gross benefits)

. .

O

....
.

0
0
O

Other mandatory outlays
Discretionary (outlay consequences of 1995 funding)
Tax on tobacco products
Other receipts
Subtotal, health care reform:
Receipts

.
.
....

0
0
G
G

—

-150
—

—

—

—

—

342

—

102

2,683
-13,394
417

—

6,000
1,854
362

5,989
—

102

-12,977
890

-18,438
11,735

-24,611
28,292

-31,143
43,296

-33,945

-150
-48

-12,087

-6,703

3,681

12,153

-3,145

Total, PAYGO proposals
Existing PAYGO balances

-600
4

-12,718
-969

-7,132

3,292

-450

-469

11,667
-1,114

-4,367
WA

Total, balances with enactment of 1995 budget

-596

-13,687

-7,582

2,823

10,553

Outlays
Deficit

30,800

WA

MEMORANDUM
Adjustments to health care reform: 3
Add vulnerable population adjustment
Revise Medicare
Subtotal, adjustment
Total, health care reform with adjustments:
Receipts
Outlays
Deficit
Total, PAYGO proposals with adjustment

—

—

100

300

700

—

-2

191

1,001

870

800
859

—

-2

291

1,301

1,570

1,659

-150

-12,977
888

-18,438
12,026

-24,611
29,593

-31,143
44,866

-33,945
32,459

-48

-12,089

-6,412

4,982

13,723

-1,486

-600

-12,720

-6,841

4,593

13,237

-2,708

102

G=Governmental receipt.
U = User fees and other offsetting collections.
0 = Other outlays.
1 Excludes $15 million in 1996 outlays that were double counted in the database.
Excludes increases in hardrock receipts inadvertently included in the database.
Estimates above reflect health care reform consistent with the computer database. These adjustments incorporate revised scoring of the
Health Security Act.
2

3




THE BUDGET FOR FISCAL YEAR 1995

242

Table 7-7.

EFFECT OF PROPOSALS ON RECEIPTS
(In billions of dollars)
Estimate
1994

Health Security Act:
Increase tax on tobacco products1
Levy assessment on corporate alliance employers1
Increase deduction for health insurance costs of the
self-employed
Limit exclusion of employer-provided health coverage . ..
Provide deduction for qualified long-term care services ..
Modify tax treatment of long-term care insurance premiums and benefits
Modify tax treatment of accelerated death benefits
Provide tax credit for cost of personal assistance services
Provide tax credit for health service providers in
shortage areas
Increase expensing limit for medical equipment in
shortage areas
Modify self-employment tax treatment of certain S
corporation shareholders and partners
Modify penalty for failure to report payments to independent contractors
Modify tax treatment of health care organizations
Relate early retiree health premium discounts to income
Levy assessments on employers to pay for early retirees1
Modify employer contributions to post-retirement
medical and life insurance reserves and retiree
health accounts
Recapture medicare Part B subsidies
Extend medicare coverage to all State and local government employee1
Levy assessment on premiums for health coverage
purchased through regional alliances1
Effect of employer mandate, cost containment, and
subsidies on individual income and payroll taxes

Subtotal, other proposals1
Total effect of proposals i
* $50 million or less.
1 Net of income offsets.




1996

1997

1998

1999

12.0

11.3
3.8

11.2
5.0

11.1
5.1

11.0
5.1

-0.5

-0.6
-0.1

-0.9
5.3
-0.2

-1.7
8.1
-0.2

-2.5
8.7
-0.2

-0.1

-0.2

-0.3

-0.4

-0.1

-0.1

-0.1

0.2

-0.1

0.5

0.5

0.5

0.1

0.1
0.1

0.1
0.2

0.1
0.2

*
•
—

0.1

*

*

2.4

0.1
4.3

0.2

0.9

0.8

0.1
0.9

1.6

1.6

1.5

1.5

0.5

1.6

4.3

5.5

0.1

0.9

4.4

9.3

11.6

16.9

25.6

36.2

44.0

-0.1

-0.1

-0.2

-0.3

-0.4

0.1

-0.4

-0.4

-0.5

-0.4

•

•

•

*

*

*

•

-0.1

Subtotal, Health Security Act1
tier proposals:
Modify Federal pay raise (receipt effect)
Levy surcharge on civil judgements
Reform PBGC funding (receipt effect)
Reallocate old age survivors (OASI) and disability (DI)
tax rates
Adjust civil monetary penalties for inflation
Increase or establish new BATF fees1
Increase or expand fees collected under securities laws
Levy fees on users of Federal fisheries1

1995

*

•

*

0.1
0.4
0.1

.
*

-0.1

0.5
12.2

*

*

*

0.1
0.4
0.1
*

16.9

*

*

*

*

*

0.4
0.1

0.4
0.1

0.4
0.1

-0.2

-0.3

-0.2

25.5

35.9

43.7

7. SUMMARY TABLES

243

Table 7-8.

PROPOSED INVESTMENTS
(In millions of dollars)
1993
nn a ( lt ela
_ac ff j
n

Estimate
-iotm 1

19941

100c

1995

Change:
1994 e to
1 on
1995
1996

Estimate
1997

1998

1999

S u m m a r y b y Agency?

Commerce

BA
OL
BA

5,256
4,883
660

5,862
5,530
921

Defense

OL
BA

525
502

Education

OL
BA

246
7,278

Energy

OL
BA
OL

7,375
981
877

Health and Human Services

BA2

Agriculture

662
593
480
7,539
7,521
1,376
1,200

6,497
6,098
1,561
945
664

635
568
640
283
71

595
9,089
7,645
1,970
1,544

115
1,550
124
594
344

21,700
20,321

24,006
22,669

2,306

2,782
7,732

5,140
8,511
2,274
2,204
2,491
819
3,031
2,141
22,849
19,974

2,466

Housing and Urban Development

BA
OL

19,378
18,128
1,972
7,142

Interior

BA
OL

1,809
1,742

2,035
1,883

Labor

BA
OL
BA

Transportation

OL
BA2

150
8
1,568
1,494
18,971
17,630
572

25
83
2,267
1,592
21,691
19,215
694
644

OL

Justice

OL
BA
OL
BA

Treasury

517
86

989
888
111

Environmental Protection Agency

OL
BA
OL

88
2,358

93
94
2,314

1,578

1,848

National Aeronautics and Space Administration

BA

1,091
885

1,438

2,097
1,726

1,236

1,542

Corps of Engineers

OL
BA
OL
BA

Community Development Financial Institutions
National Science Foundation

OL
BA
OL

National Service Initiative

no
3,022

8,845
2,165
1,974

9,552
2,363
2,222

9,825
2,638
2,434

2,348

25,181
24,499

27,068
26,241

28,567
28,195

29,738

2,358
779

4,993
9,484

5,162
10,527

5,999
11,486

6,751
12,525

239
321

2,374
2,349

2,391
2,384

2,406
2,401

5,074

5,578
5,065
3,982

2,405
2,399
6,581

736
764
549
1,158
759
295
244
18
16
708
249

110
3,297
2,341

288

1,836
1,772
144
144

111
124

3,089
2,895
1,359

3,150

101
105
3,247
3,113

118
90

78
60

(3,119)

1,039
787
(4,046)

1,148
895
(5,728)

BA
OL

2,860
2,846

3,210
3,222

3,538

USDA—National Science and Technology Council
(NSTC)

BA

189

Food safety 3

161
90
494

171

OL
BA

119
517

130
534

OL

494

511

BA

16

16

533
41

OL

15

16

40

25
24

program

1,939

40
30

90,092
81,762

food

1,958

940
121
114

75,236
73,585

Loan levels

1,858

275
165

65,900
66,035

WIC (Special supplemental
women, infants & children)

110
3,949
3,232

850
601

100
90

878
621

22,619
22,289
1,304
110

575
436

500
483

6,487
4,089
3,981

110
3,711
3,073
2,022

2,685

400
393

2,737
30,154

110
3,553
2,735
1,894

86
169
35

357
357

10,030
2,961

no

86
3,060
2,720

2,891

3,815
22,619
22,072

2,067
769
746
10,244

1,481
1,493

144
2,619
2,328
279

4,008
3,918
3,335
22,619
21,832

7,469
7,532
2,134

1,535
1,473
110

306
144

BA
OL

BA
OL
(Loans)

4,358
2,407
3,470
2,922
22,764
21,297
1,497
1,315
no

Legal Services Corporation

Investment Detail:
Agriculture D e p a r t m e n t :
Rural development initiative:
Grant levels

2,091
1,693
716
688
9,844

BA
OL

BA2

1,801
1,324
690
650
9,681

Small Business Administration

OL

7,362
7,214

7,435
7,386
2,119
1,948
743
718
10,054

220
13
12

Total proposed investments

7,099
6,742

3,038
1,587
1,344

1,860

1,362

1,906

40
3,345
3,206
2,185
1,904

125
118

1,625
129
121

500
500

500
500

500
500

500
500

14,856
8,177

96,529
92,624

101,173
100,996

105,301
107,443

112,949

109
108
(1,682)

1,300
1,009
(5,728)

1,285
1,170
(5,728)

1,248
(5,728)

1,148
1,229
(5,728)

3,914

4,166
4,147

4,245
4,239

4,394
4,383

208

215
192
541

207
541

1,262

132
125

109,607

for

Food safety research

3,564

354
316

3,896

18
11

200
194

17
22

535

197
537

535
41

537
41

541
41

541
41

41

41

41

41

214

Natural resource protection and environmental in-

National research initiative




BA

749

735

782

47

865

874

874

874

OL

frastructure

757

768
130

18

839

876

871

874

18

130

130

130

130

106

31

116

126

130

130

BA

98

750
112

OL

60

75

THE BUDGET FOR FISCAL YEAR 1995

244

Table 7-8.

PROPOSED INVESTMENTS—Continued
(In millions of dollars)
1993

Estimate

Enacted

Climate change action plan
Pacific Northwest Forest Plan implementation

o>i 1
19941

1Q

Change:

i q q c

1995

i o q c
1995

°

Estimate
1996

Administration,

1998

1999

BA
OL
BA
OL

2
2
60
48

12
11
97
77

10
9
37
29

17
15
97
97

24
23
97
97

30
27
97
97

30
30
97
97

BA
OL

80
8

140
39

60
31

140
82

140
116

140
133

140
139

520
370

935
527

1,407
1,257

1,422

100
18

1,089
781
150

1,379
1,057

26
1

415
157
74
17

280
261
106
100

49
40
42
38

61
280
266
142
134

150
136

231
221
64
62

150
103
280
277
142

554

625
557

71
112

Commerce Department:
Economic Development
conversion

1997

Defense

National Institute of Standards and Technology
(NIST) growth, NIST high performance computing, and NIST NSTC

BA
OL

381
252

Information highways

BA
OL

NOAA: rebuild U S fisheries

BA
OL
BA
OL

227
47
46

BA
OL

472
223

BA
OL

30
23

NOAANSTC

232

140

280
280
142
142

1,356
150
150
280
280
142
142

Defense Department:
ARPA technology reinvestment project
Office of Economic Adjustment

445
39
35

39
38

.
3

650

675
648
41

725
703
44

40

700
676
43
42

200
135

200
188

165
195

110
165

1,000
618

1,000
929
8,064

1,000
994

1,000
1,000
8,554
8,284

611
40
39

43

Education Department:
School-to-work (Education Department share)
Goals 2000
Title I, education for the disadvantaged

BA
OL

50
6

150
52

BA
OL
BA
OL

105

700
154

46
595
141

7,579
6,918
660
521

667
29
188
-92

7,821
7,472

6,696

13
6,912
6,889
472

100

660
620

7,788
580
647

8,309
8,040
580
596

25
18

66
63

66
66

66
66

218
121

738
693
247
244
49
48
454
435
325
318
204

819
753

43
23
21
10
52
59
13
6
23
15
8
15
191
77

679
629
240
240
49
37
426
408
300
291
120
73
52
50
233
183

BA
OL

6,601
582
774

Alternative fuels vehicles

BA
OL

28
20

44
31

Conservation R&D/EPAct

BA
OL
BA
OL
BA
OL
BA
OL
BA
OL
BA
OL
BA
OL
BA
OL

349
303
185
192
5
19
251
238
151
100
12

436
367
207
193
16
11
341
295
262
258
17
12
36
27
17
6

69
49
654
488
250
216
37
21
393
354
275
264
40
27
44
42
208
83

BA

2,776

3,326

4,026

700

4,726

OL

2,567

3,066

3,529

463

4,270

BA
OL
BA
OL

10,326
9,533
348
316

10,956
10,251

11,473
11,009
672

11,955
11,680

12,457
12,369

627

517
758
93
117

889
862

BA

341
304

528
446
58
53
755
704

888
901
82

360
455
24

773
739
917

79
1,040
862

26
285
158

Safe and drug-free schools

613

580
581

Energy Department:

Conservation: weatherization assistance grants
Federal facility energy efficiency (FFEE)
Renewable energy programs
Cooperative R&D agreements
Advanced neutron source
Linear accelerator "B-Factory"
Climate change action plan

5

146
45
47
235
225

255
248
49
49
483
463
350
342
403
281

66
66
844
814
262
256
49
49
512
492
375
367
642
481

11
213
221

211
212

5,426

6,126

6,826

4,938

5,633

6,332

12,980
13,071
1,022

13,525
13,594

Health and Human Services:
Head Start
Public Health Service:
NIH
Ryan White Act AIDS treatment
Immunizations 4
High performance computing
Drug treatment




OL
BA
OL
BA
OL

47
41
717
601

579
510

911
85
83
1,071
1,009

999

937
926
89

967
955
92

86
1,104

90
1,139
1,110

1,069

1,175
1,152
998
985
96
93
1,174
1,146

7.

SUMMARY TABLES

245

Table 7-8.

PROPOSED INVESTMENTS—Continued
(In millions of dollars)
1993
Enacted

Estimate
19941

Change:
1994 t o -

1995

1995

Estimate
1996

1997

1998

1999

Social Security: Disability processing and automation investments (budget authority and limita-

BA/OB

4,823
4,766

5,498
5,291

5,825
5,662

327
371

5,654
5,807

6,166
5,991

6,241

OL

6,337

6,360
6,436

BA
OL

tions on obligations)

93
93

555
102

733
119

178
17

763
142

858
170

511
200

779
333

265
19

265
152
2,812
8,410

265
265
2,882
9,040

265
265
4,062
9,708

265
265
4,542
10,471

1,000
1,156
161
157

1,000
1,295
165
161

2,056
2,053
86
85

Housing and Urban Development:
Multifamily property disposition 6

BA
OL
BA
OL

Incremental housing vouchers
Homeless

programs:

homeless

assistance

1,307
6,877

1,404
7,407

2,743
7,863

265
19
1,339
456

BA
OL
BA
OL

572
172

823
223

1,250
509
149
1

427
286
149
1

1,000
631
153
149

1,000
899
157

BA
OL
BA
OL

1,783
1,732

1,813
1,757

1,964
1,942

85
85

2,048
2,045
85
85

BA
OL
BA

26
10

17
15
167

71
58
45
31
177

2,013
2,003
85
81

2,028
2,025

27
19

151
185
44
39

45
47
187

45
45
192

45
45
200

45
45
210

OL
BA
OL

82
1
1

156
7
7

28
16
10
74
6
6

179
7
7

188
7
7

196
7
7

205
7
7

BA

10

37

34

21

1

OL
BA

9

32

34

23

4

•

•

1

OL

Community partnerships against crime

*

*

*

1,720
444
100
22
300
255
303
44
68
54

1,695

2,070

2,270

1,900

361
100
22
300
255
303
44
68
54

1,074
100
57
350
328
1,767

1,879

2,085

1,631

73
350
348
2,380
1,637
74
71

43
350
350
3,250
2,510
78
77

5
350
350
6,150
4,421
81
80

1,118
558
50
15
50
10
9
9

1,465
973
150
40
250
90
9
9

347
415
100
25
200
80

2,165
1,742
200
187
250
250

2,165

1,355
200
125
250
250

2,055
165
197
250
250

2,213
2,152
110
169
250
250

1,040
1,000

1,157
1,029

117
29

1,156
1,192

1,303
1,156

1,402
1,313

1,516
1,410

grants

and innovative homeless initiatives program 6
Moving to independence

153

Interior Department:
Natural resource protection and environmental infrastructure

(includes

NAFTA

environmental

activities)
Pacific Northwest Forest Plan
South Florida ecosystem restoration
National Biological Survey
National spatial data infrastructure initiative
BuRec wastewater reclamation & reuse pilot program (So. Cal.)
Climate change action plan

10 ..
10

*

Justice Department:
Community policing
Brady Bill/Criminal records upgrade
Border security and illegal immigration
Other crime bill (miscellaneous bureaus)
Employer sanctions and naturalization initiatives ...

Labor Department:
Dislocated Worker Assistance
School-to-work (DOL share)
One-stop career shopping
Worker profiling
Job Corps

Transportation Department:
Highways
Intelligent vehicle highway system
Note: Outlays included in Highways
Mass transit formula capital grants


http://fraser.stlouisfed.org/
150-001
-94-9
Federal Reserve Bank of St.0 Louis (QL 3)

BA

150

25

OL
BA
OL
BA
OL
BA

8

83

OL
BA
OL
BA
OL
BA
OL
BA
OL
BA
OL

602

BA
OL

966
936

OB
OL
OB
OL
BA
OB
BA+OB
OL

558

(18,043) (19,978) (20,301)
16,651 18,159 18,780
(30)
(90)
(165)
54
(844)

659
(954)

(898)
979

(1,613)
1,043

1,115
(1,150)
(2,265)
1,170

883
71
65
1,864

(323) (20,301)
621 19,634
(75)
(170)
456
(196)
(652)
127

1,144
(1,121)
(2,265)
1,579

(20,146)
19,926
(180)
345
(1,920)
(2,265)
1,859

(20,146)
19,926
(180)

(20,146)

345
(1,920)
(2,265)
2,104

345
(1,920)

20,005
(180)

(2,265)
2,251

THE BUDGET FOR FISCAL YEAR 1995

246

Table 7-8.

PROPOSED INVESTMENTS—Continued
(In millions of dollars)
1993
Enacted

Estimate
19941

Change:
1994 to •

i g 9 5

BA

1995

Penn Station redevelopment

28

28

OL

Next generation high speed rail

3

11

8

RA
OL

10
10

90
13

Estimate
1996

1997

1998

1999

80

28
30

28

28

28

33

33

33

3

54

14

9

295
244

1,497

1,535

1,481

1,304

1,315

1,473

1,493

1,362

Treasury Department:
BA

572

694

989

OL

IRS: Tax system modernization

517

644

888

Corps of Engineers:
President's August 1993 wetlands plan

BA

86

92

110

18

110

110

110

110

88

93
1

109
1

16

110

110

110

110

Climate change action plan

OL
BA.

1

1

OL
E n v i r o n m e n t a l Protection Agency?
Clean water and safe drinking water State revolv-

Green programs

1,839

2,300

461

2,500

2,700

2,900

3,000

1,424

1,540

1,627

87

2,013

2,296

2,382

50

80

100

100

100

200

BA

26
92

55
128

79
172

20
24

1,725
100

44

92
212

97
262

99
312

362

90

104

136

32

177

220

269

318

BA

8

26

35

35

8

16
50

32
111

35
34

35

2

35
24

9

OL

Environmental technology

1,944

OL

Watershed restoration grants

BA
OL
BA
OL

ing funds

35

35

117

27
14

75
24

103
24

125
113
24

113
114
24

Climate change action plan 7

BA

Montreal protocol

OL
BA

10

OL

3

8

14

6

21

23

24

24

BA

154

74

179

105

179

179

179

47

179
114

133

156

155

100

100

NAFTA environmental support

26
9
10

76
36
24

151

OL

7

40

87

BA

100

100

100

OL

Needy cities 8

26

53

61

8

70

76

45

17

BA

31

36

36

36

36

31

33

5
2

36

OL

Wetlands initiative

35

36

36

36

1,023
918
289
224

1,236
1,101

213
183

1,394
1,378

58
93
10
14
7
16
144
86

1,308
1,286
462
437
87
82
37
53
111
124

1,378
1,337

347
317
76
70
67
54
144
86

1,271
1,228
404

506
485
101
95
37
41
101
105

406
442

169
35
275
165

3,089
2,895
1,359
940

3,150

3,247
3,113
1,860
1,625

3,345
3,206
2,185
1,904

(7,814)

(8,056)

(8,306)

(8,564)

National Aeronautics a n d S p a c e Administration:
Mission to Planet Earth

BA
OL

932
754

Aeronautics initiatives

BA
OL
BA
OL
BA
OL
BA
OL

129
109

BA
OL
BA
OL

2,619
2,328
279
220

2,891
2,685
575
436

3,060
2,720
850
601

(6,410)

(7,000)

(8,995)
27

High performance computing
New technology investments
C o m m u n i t y D e v e l o p m e n t Financial Institutions
N a t i o n a l Science F o u n d a t i o n :
NSF research and education
National Service I n i t i a t i v e 9
S m a l l Business Administration:
Section 7(a) loan guarantees
Empowerment zones

Small Business Investment Company guarantees ....

(Loans)
BA
OL

30
22

19
13
12
(74)

(Loans)

40
30
(326)

29

(386)
93

(398)
96

(423)
102

88
(752)

91
(775)

(411)
99
93

26

100
90

500
500

14,856
8,177

96,529
92,624

357

400

500

393

483

BA2

65,900

75,236

90,092

OL

66,035

73,585

81,762

• $500 thousand or less.
i Estimates for 1994 include proposed supplementals and rescissions.




28

19
51
41
(404)

357

40

30

28

91
71
(730)

BA

3,038
1,587
1,344

69
81
37
38

29
27

27
(375)

OL
Total proposed investments

(1,995)

(375)

(Loans)
BA
OL

L e g a l Services Corporation:
Payment to the Legal Services Corporation

66
56
60
38

393
75
75
86
76
144
144

30

(800)

96
(824)

500

500

500

500

500

500

101,173
100,996

105,301

109,607

107,443

112,949

7.

SUMMARY TABLES

247

2 Budget authority includes estimates for obligation limitations in the Departments of Health and Human Services and Transportation, as
identified in the detail for those agencies.
3The investment proposal for food safety is the total program level. The 1995 budget proposes to partially offset this program level by a
new user fee of $103 million to cover the cost of overtime meat and poultry inspection.

« Immunizations includes $424 million in budget authority and outlays in 1995 for mandatory vaccine purchase.
5 Proposal assumes passage of property disposition (FD) reform legislation. Budget authority starting in 1995 represents a new mandatory
spending program whose costs are offset by proposed mandatory program reforms. Outlays in 1995 include $6 million for the new mandatory program and $113 million of outlays from balances for the discretionary program.
6 Estimates for H U D homeless programs for 1995-1999 include funds for the Homeless food and shelter program formerly in the Federal
Emergency Management Agency.
7 EPA Climate change action plan estimates are incremental investment estimates.

EPA Needy Cities funding for 1994 is a contingent appropriation subject to Congressional authorization.
The 1993 enacted column includes funding for ACTION and the Commission on National and Community Service. All other columns include funding for ACTION and the Corporation for National and Community Service.
8
9




THE BUDGET FOR FISCAL YEAR 1995

248

Table 7-9. FEDERAL EMPLOYMENT IN THE EXECUTIVE BRANCH
(Civilian employment as measured by Full-Time Equivalents in thousands)
Agency

Cabinet agencies:
Agriculture
Commerce
Defense—military functions1
Education
Energy
Health and Human Services
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury2
Veterans Affairs
Other agencies (excluding Postal Service):
Agency For International Development
Corps of Engineers
Environmental Protection Agency
Equal Employment Opportunity Commission
Federal Emergency Management Agency
Federal Deposit Insurance Corporation and Resolution Trust Corporation
General Services Administration
National Aeronautics and Space Administration .
National Archives and Records Administration ...
National Labor Relations Board
National Science Foundation
Nuclear Regulatory Commission
Office of Personnel Management
Panama Canal Commission
Peace Corps
Railroad Retirement Board
Securities and Exchange Commission
Small Business Administration
Smithsonian Institution
Tennessee Valley Authority
United States Information Agency
All other small agencies
Total, Executive Branch civilian employment3
FTE reduction from the base
Percentage reduction from the base
Percentage reduction target/FTE reduction target

1993
Base

1993
Actual

Change: 1993 base to
1995

Estimate
1994

1995

FTE's

Percent

114.6
36.7
931.4
5.0
20.6
130.0
13.6
77.9
99.4
19.9
26.0
71.1
166.1
232.4

113.4
36.1
931.8
4.9
20.3
129.0
13.3
76.7
95.4
19.6
25.6
69.9
161.1
234.4

110.2
35.8
886.0
5.1
20.4
127.7
13.3
76.0
97.2
19.4
25.4
68.9
161.2
235.1

108.5
35.8
854.9
5.2
20.6
127.2
13.4
74.6
101.9
19.5
25.0
67.5
157.6
229.7

-6.1
-0.9
-76.5
0.2

-5.3%
-2.6%
-S.2%
2.4%

-2.8
-0.2
-3.3
2.5
-0.4
-1.0
-3.6
-8.5
-2.7

-2.2%
-1.8%
-4.3%
2.5%
-2.3%
-4.0%
-5.0%
-5.1%
-1.1%

4.4
29.2
19.0
2.9
2.7

4.1
28.4
18.3
2.8
2.6

4.0
28.5
18.6
2.9
2.6

4.0
27.8
19.4
3.0
2.7

-0.4
-1.4
0.4
0.1

-8.6%
-4.7%
2.2%
5.6%
-1.1%

21.3
20.7
25.7
2.8
2.1
1.3
3.4
6.2
8.7
1.3
1.9
2.7
4.0
4.9
19.1
8.7
17.5

21.6
20.2
24.9
2.6
2.1
1.2
3.4
5.9
8.5
1.2
1.8
2.7
3.9
4.5
17.3
8.3
16.4

20.4
20.1
24.5
2.7
2.1
1.2
3.3
6.0
8.6
1.2
1.8
2.7
3.8
4.8
17.3
8.5
17.0

15.1
19.7
23.6
2.6
2.1
1.3 .
3.2
5.8
8.8
1.2
1.8
2.9
3.8
4.7
16.6
8.3
17.2

-6.2
-1.0
-2.1
-0.2

-28.8%
-4.7%
-8.2%
-4.7%
-4.2%
-4.0%
-5.5%
-7.3%
0.7%
-1.0%
-4.7%
7.2%
-4.4%
-3.6%
-13.2%
-5.0%
-1.8%

2,155.2

2,134.3

2,084.2

-20.9
-1.0%
-1.0%

-71.0
-3.3%
-2.5%

2,036.9

-0.2
-0.4
0.1
-0.1
-0.1
0.2
-0.2
-0.2
-2.5
-0.4
-0.3
-118.3

-118.3 .
-5.5%
-100.0
-4.0%

1 Because Defense was already reduced by almost 42,000 from 1992 to 1993, no further reduction was required in 1993.
2 The Administration is working with Congress to design a deficit reductioiVtax compliance initiative for the Internal Revenue Service
that would increase Treasury FTEs by approximately 5,000 above the level shown. Even with these additional FTEs, the Administration
still achieves the 100,000 reduction under E.O. 12839.
3 Excludes Postal Service and Postal Rate Commission.




7.

249

SUMMARY TABLES

Table 7-10.

FEDERAL GOVERNMENT FINANCING AND DEBT i
(In billions of dollars)
jggg
Actual

Estimate
1994

1995

1996

1997

1998

FINANCING
Surplus or deficit (-)
(On-budget)
(Off-budget)
Means offinancingother than borrowing from the public:
Change in: 2
Treasury operating cash balance
Checks outstanding, etc.3
Deposit fund balances
Seigniorage on coins
Less: Netfinancingdisbursements:
Direct loanfinancingaccounts
Guaranteed loanfinancingaccounts
Total, means of financing other than borrowing
from the public
Total, requirement for borrowingfromthe public ...
Reclassification of debt4
Change in debt held by the public

-254.7 -234.8 -165.1 -169.6 -186.4 -190.5 -181.1
-300.0 -290.1 -225.0 -236.3 -265.5 -279.2 -278.6
45.3
55.3
59.9
66.7
79.2
88.7
97.6

6.3
0.4
-0.4
0.4

12.5
-0.9
-0.5
0.6

—
-0.4
-1.7
0.6

—
—
—
0.6

—
—
—
0.6

—
—
—
0.6

—
—
—
0.6

-3.8
4.6

-6.4
4.2

-10.1
3.0

-15.9
2.5

-17.9
2.3

-18.9
1.4

-19.0
0.4

7.4

9.5

-8.6

-12.8

-15.0

-16.8

-18.0

-247.3 -225.2 -173.7 -182.4 -201.4 -207.3 -199.1
-1.3
—
—
—
—
—
—
248.5

225.2

173.7

182.4

201.4

207.3

199.1

DEBT, END OF YEARi
Gross Federal debt:
Debt issued by Treasury
Debt issued by other agencies
Total, gross Federal debt
Held by:
Government accounts
The public
(Federal Reserve Banks)
(Other)
DEBT SUBJECT TO STATUTORY LIMITATION,
END OF YEAR
Debt issued by Treasury
Less: Treasury debt not subject to limitation6
Agency debt subject to limitation
Adjustment for discount and premium®
Total, debt subject to statutory limitation ?

4,326.5 4,652.1 4,936.0 5,243.0 5,577.2 5,929.4 6,281.4
24.8
23.9
24.2
24.1
24.1
24.1
24.1
4,351.2 4,676.0 4,960.1 5,267.1 5,601.3 5,953.5 6,305.4
1,104.0 1,203.6 1,314.0 1,438.5 1,571.3 1,716.3 1,869.1
3,247.2 3,472.4 3,646.1 3,828.5 4,029.9 4,237.2 4,436.3
325.7
2,921.5

4,326.5 4,652.1 4,936.0 5,243.0 5,577.2 5,929.4 6,281.4
-15.6 -15.6 -15.6 -15.6 -15.6 -15.6 -15.6
0.2
0.1
0.1
0.1
0.1
0.1
0.1
4.5
4.5
4.5
4.5
4.5
4.5
4.5
4,315.6 4,641.1 4,925.0 5,232.0 5,566.2 5,918.4 6,270.3

Treasury securities held by the public and zero-coupon bonds held by Government accounts are almost entirely measured at sales price
plus amortized discount or less amortized premium. Agency debt is almost entirely measured at face value. Treasury securities in the
Government account series are measured at face value less unrealized discount (if any).
2 A decrease in the Treasury operating cash balance (which is an asset) is a means of financing the deficit. It therefore has a positive
sign, which is opposite to the sign of the deficit. An increase in checks outstanding or deposit fund balances (which are liabilities) is also a
mefans of financing the deficit and therefore also has a positive sign.
1

3 Besides checks outstanding, includes accrued interest payable on Treasury debt, miscellaneous liability accounts, allocations of special
drawing rights, and, as an offset, cash and monetary assets other than the Treasury operating cash balance, miscellaneous asset accounts,
and profit on sale of gold.
4 The Farm Credit System Financial Assistance Corporation was reclassified from a Government-sponsored enterprise to a Federal agency as of October 1, 1992, and its debt was accordingly reclassified as Federal agency debt. This reclassification does not constitute borrowing.
6

Consists primarily of Federal Financing Bank debt.

Consists of unamortized discount (less premium) on public issues of Treasury notes and bonds (other than zero-coupon bonds) and unrealized discounts on Government account series securities.
6

7 The statutory debt limit is $4,900 billion.




250

THE BUDGET FOR FISCAL YEAR 1995

Table 7-11. OUTLAYS BY AGENCY
(In billions of dollars)
Estimate

Actual
Cabinet Agencies:
Agriculture
Commerce
Defense—Military
Education
Energy
Health and Human Services
On-budget
Off-budget
Housing and Urban Development ..
Interior
Justice
Labor
State
Transportation
Treasury
Veterans Affairs

1994

1995

1996

1997

1998

1999
64.7
5.5
245.5
31.2
17.2
835.3
(429.4)
(405.9)
28.5
7.0
17.7
37.0
5.6
39.2
397.6
41.8

63.1
2.8
278.6
30.3
16.9
581.1
(282.8)
(298.3)
25.2
6.8
10.2
44.7
5.2
34.5
298.8
35.5

64.9
3.2
267.5
28.7
17.2
631.3
(316.6)
(314.7)
25.5
7.2
10.8
37.1
5.8
36.7
309.3
37.9

60.3
3.6
259.3
29.7
15.7
672.1
(341.6)
(330.5)
27.7
7.2
11.3
34.0
5.4
37.3
327.7
38.1

61.0
4.3
249.1
28.3
16.7
723.0
(373.2)
(349.8)
28.4
7.1
13.6
35.2
5.3
38.5
345.4
37.4

62.6
4.6
244.6
30.3
16.7
768.1
(402.8)
(365.3)
28.1
7.0
15.0
35.9
5.4
38.8
362.9
39.7

63.3
4.9
244.7
30.7
16.6
799.9
(414.8)
(385.2)
27.9
7.0
16.2
36.5
5.5
39.0
380.4
40.2

29.3
5.9
0.2

31.0
6.5
0.2

30.9
6.7
0.2

32.0
6.9
0.2

33.2
7.2
0.2

34.6
7.5
0.2

36.8
7.7
0.2

11.2
0.7
2.6
2.4

11.4
1.0
2.9
2.8

11.1
0.9
3.1
2.9

11.4
1.6
3.1
3.1

11.1
1.0
3.1
3.2

11.3
0.3
3.1
3.3

11.3
-0.2
3.1
3.4

14.3
36.8
0.8

14.2
38.1
0.6

14.4
40.2
0.5

14.4
42.3
0.5

14.4
44.5
0.5

14.5
47.2
0.6

14.6
49.7
0.6

All Other Agencies
On-budget
Off-budget

-10.0
(-U.5)
(1.4)

15.7
(13.9)
(1.7)

9.2
(5.9)
(3.3)

5.7
(5.4)
(0.2)

10.4
(10.9)
(-0.5)

11.5
(12.6)
(-1.1)

12.8
(14.2)
(-1.5)

Undistributed Offsetting
Receipts
On-budget
Off-budget

-119.7
(-86.5)
(-33.2)

-123.7
(-88.2)
(-35.5)

-132.3
(-93.9)
(-38.4)

-134.2
(-92.1)
(-42.1)

-137.5
(-91.1)
(-46.4)

-145.7
(-94.3)
(-51.4)

-151.7
(-94.7)
(-56.9)

Major Agencies:
Corps of Engineers, Military
Retirement and Other Defense ...
Environmental Protection Agency..
Executive Office Of the President ..
Funds Appropriated to the President
General Services Administration ...
The Judiciary
Legislative Branch
National Aeronautics and Space
Administration
Office of Personnel Management....
Small Business Administration

1.9

Allowances
Total
On-budget
Off-budget




1,408.2
(1,141.6)
(266.6)

1,483.8
(1,203.0)
(280.9)

1,518.9
(1,223.6)
(295.4)

16.5
1,596.9
(1,288.9)
(308.0)

40.5
1,691.4
(1,373.1)
(318.3)

76.2
1,777.4
(1,444.8)
(332.7)

92.0
1354.0
(1,506.5)
(347.6)

7. SUMMARY TABLES

251

Table 7-12.

Function

National defense:
Department of Defense—Military ..
Other
International affairs
General science, space, and technology
Energy
Natural resources and environment ..
Agriculture
Commerce and housing credit
On-budget
Off-budget
Transportation
Community and regional development
Education, training, employment,
and social services
Health
Medicare
Income security
Social Security
On-budget
Off-budget
Veterans benefits and services
Administration of justice
General government
Net interest
On-budget
Off-budget
Allowances
Undistributed offsetting receipts:
Employer share, employee retirement (on-budget)
Employer share, employee retirement (off-budget)
Rents and royalties on the Outer
Continental Shelf
Other undistributed offsetting
receipts
Total, Undistributed offsetting
receipts
On-budget
Off-budget
Total
On-budget
Off-budget




OUTLAYS BY FUNCTION
(In billions of dollars)

1993
Actual

Estimate
1994

1995

1996

1997

1998

1999

278.6
12.5
16.8

267.4
12.5
19.0

259.2
11.5
17.8

249.1
11.9
17.9

244.6
11.8
17.7

244.7
11.9
18.0

245.5
12.0
18.2

17.0
4.3
20.2
20.4
-22.7
(-24.2)
(1.4)
35.0

17.3
5.0
22.3
16.9
0.5
(-1.2)
(1.7)
37.6

16.9
4.6
21.8
12.8
-5.5
(-8.7)
(3.3)
38.4

17.1
5.0
22.1
12.7
-9.0
(-9.2)
(0.2)
39.5

17.1
5.0
22.0
13.1
-5.7
(-5.2)
(-0.5)
39.9

17.2
4.8
21.4
13.5
-5.4
(-4.3)
(-1.1)
40.3

17.4
5.0
20.8
13.9
-3.9
(-2.4)
(-1.5)
40.4

9.3

9.2

9.0

8.9

8.5

8.5

9.1
50.0
99.4
130.6
207.3
304.6
(6.2)
(298.3)
35.7
15.0
13.0
198.8
(225.6)
(-26.8)

50.8
112.3
143.7
214.6
320.5
(5.8)
(314.7)
38.1
16.5
14.3
203.4
(232.5)
(-29.1)

53.5
123.1
156.2
221.4
337.2
(6.6)
(330.5)
39.2
17.3
13.8
212.8
(244.5)
(-31.7)
0.2

54.5
149.6
176.0
230.8
356.8
(7.0)
(349.8)
38.2
19.6
15.3
224.2
(259.1)
(-34.9)
-1.9

57.9
180.0
195.8
242.5
372.7
(7.4)
(365.3)
41.5
21.0
14.5
234.0
(272.8)
(-38.8)
-3.5

60.3
221.1
205.2
253.0
393.1
(7.9)
(385.2)
40.3
22.2
13.7
244.6
(287.8)
(-43.2)
-9.5

62.2
235.9
218.1
265.2
414.3
(8.4)
(405.9)
41.9
23.7
13.1
254.4
(302.4)
(-48.0)
-12.2

-28.2

-28.2

-28.5

-27.6

-27.5

-28.3

-28.8

-6.4

-6.5

-6.8

-7.2

-7.6

-8.3

-8.9

-2.8

-2.7

-3.0

-2.7

-2.8

-2.8

-2.8

-0.5

-4.3

-4.2

-1.6

-2.0 .

-37.4
(-31.0)
(-6.4)

-37.9
(-31.4)
(-6.5)

-42.6
(-35.8)
(-6.8)

-41.7
(-34.5)
(-7.2)

-39.4
(-31.8)
(-7.6)

-41.4
(-33.1)
(-8.3)

-40.5
(-31.6)
(-8.9)

1,408.2
(1,141.6)
(266.6)

1,483.8
(1,203.0)
(280.9)

1,518.9
(1,223.6)
(295.4)

1,596.9
(1,288.9)
(308.0)

1,691.4
(1,373.1)
(318.3)

1,777.4
(1,444.8)
(332.7)

1354.0
(1,506.5)
(347.6)

THE BUDGET FOR FISCAL YEAR 1995

252

Table 7-13.

BUDGET AUTHORITY BY AGENCY
(In billions of dollars)
1993

A

«enc*

Cabinet Agencies:
Agriculture
Commerce
Defense—Military
Education
Energy
Health and Human Services
On-budget
Off-budget
Housing and Urban Development ..
Interior
Justice
Labor
State
Transportation
Treasury
Veterans Affairs
Major Agencies:
Corps of Engineers, Military Retirement and Other Defense
Environmental Protection Agency ..
Executive Office Of the President ..
Funds Appropriated to the President
General Services Administration ...
The Judiciary
Legislative Branch
National Aeronautics and Space
Administration
Office of Personnel Management....
Small Business Administration
All Other Agencies
On-budget
Off-budget
Undistributed Offsetting
Receipts
On-budget
Off-budget

Actual

Estimate
1994

* $50 million or less.




1996

1997

1998

1999

67.9
3.2
267.4
31.5
17.7
586.7
(286.6)
(300.1)
26.5
6.9
10.5
46.9
5.3
40.0
300.5
36.0

65.3
3.6
249.0
28.8
16.8
643.8
(327.6)
(316.2)
25.6
7.5
10.3
38.6
5.7
37.7
310.1
36.5

61.7
4.2
252.2
31.7
15.9
667.0
(334.9)
(332.0)
27.5
7.1
12.8
36.0
5.3
40.8
328.7
37.8

62.4
4.5
243.4
29.1
16.7
724.4
(374.0)
(350.4)
34.8
7.2
15.0
36.8
5.2
39.3
346.4
38.7

64.3
4.8
240.2
30.9
16.9
772.5
(403.3)
(369.2)
36.3
7.0
15.9
37.8
5.3
40.6
364.1
39.8

64.8
5.0
246.7
31.7
16.9
804.2
(415.3)
(388.9)
38.5
7.1
16.7
38.0
5.4
38.8
381.6
40.1

66.2
6.0
253.0
32.3
17.5
840.7
(430.8)
(409.8)
39.7
7.1
17.9
39.1
5.5
38.8
398.6
41.6

29.9
6.7
0.2

30.6
6.4
0.2

30.6
6.9
0.2

32.1
7.2
0.2

33.1
7.5
0.2

34.8
7.7
0.2

36.6
8.0
0.2

24.8
0.6
2.6
2.6

11.0
0.6
2.8
2.7

11.3
1.6
3.2
2.9

9.7
0.1
3.2
3.1

9.4
0.1
3.2
3.2

9.4
0.1
3.2
3.3

9.4
0.1
3.2
3.4

14.3
39.3
1.2

14.5
40.2
0.7

14.3
42.1
0.8

14.4
44.1
0.8

14.5
46.9
0.8

14.6
49.4
0.8

14.6
51.8
0.9

24.1
(21.8)
(2.2)

39.5
(35.2)
(4.3)

23.7
(18.4)
(5.3)

22.1
(20.1)
(2.1)

19.6
(19.3)
(0.3)

20.8
(19.2)
(1.6)

19.5
(19.5)

-119.7
(-86.5)
(-33.2)

-123.7
(-88.2)
(-35.5)

-132.3
(-93.9)
(-38.4)

-134.2
(-92.1)
(-42.1)

-137.5
(-91.1)
(-46.4)

-145.7
(-94.3)
(-51.4)

-151.7
(-94.7)
(-56.9)

3.0

Allowances
Total
On-budget
Off-budget

1995

1,473.6
(1,204.4)
(269.1)

1,504.7
(1,219.8)
(284.9)

1,537.0
(1,238.0)
(298.9)

16.6
1,623.5
(1,313.1)
(310.4)

40.6
1,718.1
(1,395.0)
(323.1)

76.3
1,810.3
(1,471.3)
(339.1)

*

91.9
1,892.2
(1,539.2)
(352.9)

7.

SUMMARY TABLES

Table 7-14.

Function

National defense:
Department of Defense—Military ..
Other
International affairs
General science, space, and technology
Energy
Natural resources and environment ..
Agriculture
Commerce and housing credit
On-budget
Off-budget
Transportation
Community and regional development
Education, training, employment,
and social services
Health
Medicare
Income security
Social Security
On-budget
Off-budget
Veterans benefits and services
Administration of justice
General government
Net interest
On-budget
Off-budget
Allowances
Undistributed offsetting receipts:
Employer share, employee retirement (on-budget)
Employer share, employee retirement (off-budget)
Rents and royalties on the Outer
Continental Shelf
Other undistributed offsetting
receipts
Total, Undistributed offsetting
receipts
On-budget
Off-budget
Total
On-budget
Off-budget
* $50 million or less.




253

BUDGET AUTHORITY BY FUNCTION
(In billions of dollars)
Estimate

1993

Actual

267.2
13.9
32.3

1994
249.0
12.0
18.8

1995
252.2
11.5
18.8

1996
243.4
11.9
17.0

1997
240.2
11.8
17.0

1998

1999

246.7
12.0
17.0

253.0
12.1
17.2

17.2
8.3
21.6
19.1
9.9
(7.7)
(2.2)
40.4

17.5
4.7
22.2
16.1
28.2
(23.9)
(4.3)
38.9

17.3
4.7
21.6
13.0
11.3
(5.9)
(5.3)
41.8

17.2
6.2
22.2
12.0
8.1
(6.0)
(2.1)
40.4

17.3
6.0
21.9
12.6
5.4
(5.1)
(0.3)
41.7

17.4
5.6
21.9
12.6
5.9
(4.4)
(1.6)
40.0

40.0

10.2

8.4

9.3

8.9

8.8

8.8

8.8

17.6
6.0
21.4
13.0
5.0
(5.0)
*

52.8
108.6
124.8
214.8
306.3
(6.2)
(300.1)
36.3
15.2
13.2
198.8
(225.6)
(-26.8)

53.4
116.1
150.6
215.2
322.0
(5.8)
(316.2)
36.7
15.9
13.6
203.4
(232.5)
(-29.1)

57.7
118.4
156.1
221.7
338.7
(6.6)
(332.0)
38.9
19.0
14.7
212.8
(244.5)
(-31.7)
0.1

56.7
151.6
176.6
239.9
357.4
(7.0)
(350.4)
39.5
21.1
13.9
224.2
(259.1)
(-34.9)
-3.0

60.2
181.9
195.5
253.0
376.6
(7.4)
(369.2)
41.6
22.0
13.9
234.0
(272.8)
(-38.8)
-4.0

62.5
222.2
205.1
265.4
396.8
(7.9)
(388.9)
40.2
22.7
13.7
244.6
(287.8)
(-43.2)
-9.6

64.7
237.0
218.6
278.7
418.2
(8.4)
(409.8)
41.8
24.0
13.5
254.4
(302.4)
(-48.0)
-12.4

-28.2

-28.2

-28.5

-27.6

-27.5

-28.3

-28.8

-6.4

-6.5

-6.8

-7.2

-7.6

-8.3

-8.9

-2.8

-2.7

-3.0

-2.7

-2.8

-2.8

-2.8

-0.5

-4.3

-4.2

-1.6

-2.0

-37.9
(-31.4)
(-6.5)

-42.6
(-35.8)
(-6.8)

-41.7
(-34.5)
(-7.2)

-39.4
(-31.8)
(-7.6)

-41.4
(-33.1)
(-8.3)

-37.4
(-31.0)
(-6.4)

.
-40.5
(-31.6)
(-8.9)

1,473.6

1,504.7

1,537.0

1,623.5

1,718.1

1,810.3

(1,204.4)
(269.1)

1392.2

(1,219.8)
(284.9)

(1,238.0)
(298.9)

(1,313.1)
(310.4)

(1,395.0)
(323.1)

(1,471.3)
(339.1)

(1,539.2)
(352.9)

THE BUDGET FOR FISCAL YEAR 1995

254

Table 7-15.

SUMMARY OF RECEIPTS, OUTLAYS, AND SURPLUSES OR
DEFICITS(-): 1789-1999
(In millions of dollars)
Total

Year

ceipts

Outlays

On-Budget
Surplus or
Deficit ( - )

Receipts

Outlays

Off-Budget
Surplus or
Deficit ( - )

Receipts

Outlays

Surplus or
Deficit ( - )

1789-1849 .

1,160

1,090

70

1,160

1,090

70

1850-1900 .

14,462

15,453

-991

14,462

15,453

-991

588
562

525

63

588

525

63

1902

485

77

562

485

77

1903

562

517

45

562

517

45

1904

541

584

-43

541

584

-43

1905

544

567

-23

544

567

-23

1906

595

570

25

595

570

25

1907

666

579

87

666

579

87

1908

602

659

-57

602

659

-57

1909

604

694

-89

604

694

-89

191 0

676

694

-18

676

694

-18

191 1

702

691

11

702

691

11

191 2

693

690

3

693

690

3

191 3

714

715

714

715

191 4

725

726

725

726

191 5

683

746

-63

683

746

191 6

761

713

48

761

713

48

191 7

1,101

1,954

-853

1,101

1,954

-853

191 8

3,645

12,677

-9,032

3,645

12,677

-9,032

191 9

5,130

18,493

-13,363

5,130

18,493

-13,363

1920

6,649

6,358

291

6,649

6,358

291

192 1

5,571

5,062

509

5,571

5,062

509

1922

4,026

3,289

736

4,026

3,289

736

1923

3,853

3,140

713

3,853

3,140

713

1924

3,871

2,908

963

3,871

2,908

963

1925

3,641

2,924

717

3,641

2,924

717

1926

3,795

2,930

865

3,795

2,930

865

1927

4,013

2,857

1,155

4,013

2,857

1,155

1928

3,900

2,961

939

3,900

2,961

939

1929

3,862

3,127

734

3,862

3,127

734

1930

4,058

193 1
1932

3,116
1,924

3,320
3,577

738
-462

3,320
3,577

738
-462

4,659

1933
1934

1,997

-2,735
-2,602

4,058
3,116
1,924

4,659
4,598
6,541

-2,735
-2,602

6,412

-2,803
-4,304
-2,460

265

-2

267

6,850
9,154

-486
-3,362

387
503

-10
-13

397

190 1

1,997
2,955

-63

2,955

4,598
6,541

3,609

6,412

3,923
5,387

8,228

-2,803
-4,304

7,580

-2,193

3,609
3,923
5,122

1939

6,751
6,295

6,840
9,141

-89
-2,846

6,364
5,792

1940

6,548

9,468

-2,920

5,998

9,482

-3,484

550

-14

564

194 1

8,712

13,653

-4,941

8,024

13,618

-5,594

688

35

653

1942

14,634

35,137

-20,503

13,738

35,071

-21,333

896

66

830

1943

24,001

78,555

-54,554

22,871

78,466

-55,595

1,130

89

1,041

1944

43,747

91,304

-47,557

42,455

91,190

-48,735

1,292

114

1,178

1945

45,159

92,712

-47,553

43,849

92,569

-48,720

1,310

143

1,167

1946

39,296

55,232

-15,936

38,057

55,022

-16,964

1,238

210

1,028

1947

38,514

34,496

4,018

37,055

34,193

2,861

1,459

303

1,157

1948

41,560

29,764

11,796

39,944

29,396

10,548

1,616

368

1,248

1949

39,415

38,835

580

37,724

38,408

-684

1,690

427

1,263

1935
1936
1937
1938

-3,586

8,228
7,582

-3,586

516

1950

39,443

42,562

42,038

-4,702

2,106

524

1,583

51,616

45,514

-3,119
6,102

37,336

195 1

48,496

44,237

4,259

1,277

1952

66,167

67,686

-1,519

62,573

65,956

-3,383

3,120
3,594

1,730

1,843
1,864

1953

69,608

76,101

-6,493

65,511

73,771

-8,259

4,097

2,330

1,766

1954

69,701

70,855

-1,154

65,112

67,943

-2,831

4,589

2,912

1,677




7.

SUMMARY TABLES

255

Table 7-15. SUMMARY OF RECEIPTS, OUTLAYS, AND SURPLUSES OR
DEFICITS(-): 1789-1999—Continued
(In millions of dollars)

Total
Year

Receipts

Outlays

On-Budget
Suiplus or
Deficit ( - )

Receipts

Outlays

Off-Budget
Suiplus or
Deficit ( - )

65,451
74,587

1957
1958

68,444

-2,993

60,370

70,640

3,947

68,162

64,461
65,668

79,990
79,636

1955
1956

76,578
82,405

3,412

73,201

70,562

2,639

-2,769

71,587

74,902

-3,315

-4,091
2,494

Receipts
5,081
6,425
6,789
8,049

Outlays
3,983
4,972
6,016
7,503
Q <VV»

iurplus or
j
Deficit ( - )
1,098
1,452
773
546

1959

79,249

92,098

-12,849

70,953

83,102

-12,149

8,296

1960

92,492

92,191

301

81,851

81,341

510

10,641

10,850

-209

1961
19$2

94,388

97,723

82,279

86,046

106,821

87,405

12,109
12,271

431
-1,265

1963
1964

106,560
112,613

111,316
118,528

-4,756

-3,966

-5,915

92,385
96,248

93,286
96,352

-3,766
-5,881

11,677

99,676

-3,335
-7,146

14,175
16,366

1965

116,817

1966

130,835

118,228
134,532

1967

148,822

1968
1969

152,973
186,882

1970

192,807

1971
1972

187,139
207,309

1973
1974

230,799
263,224

1975
1976

279,090
298,060
81,232

TQ
1977
1978

355,559
399,561
463,302

1979
1980

517,112
599,272

1981
1982

15,734

-789
632

19,085

16,529
19,715

-630

102,794

-6,546
-1,605

16,723

-3,068

-1,411

100,094

-3,698

111,749

101,699
114,817

157,464

-8,643

124,420

137,040

20,424

3,978

-25,161

128,056

155,798

-12,620
-27,742

24,401

178,134

24,917

22,336

2,581

183,640

3,242

157,928

158,436

-507

28,953

25,204

3,749

195,649
210,172

-2,842

159,348

168,042

-8,694

33,459

27,607

5,852

-23,033

151,294

-23,373
-14,908
-6,135

167,402

177,346
193,824

-26,052

230,681
245,707
269,359

32,826
36,857

3,019
3,050

184,715
209,299

200,118
217,270

-15,403
-7,971

35,845
39,907
46,084

45,589
52,089

495
1,836

332,332
371,792

-53,242
-73,732

216,633
231,671

271,892

-55,260
-70,512

62,458
66,389

95,975
409,218
458,746

63,216
278,741
314,169
365,309

76,555
328,502

503,485

-14,744
-53,659
-59,186
-40,183

369,089
403,507

-13,339
-49,760
-54,920
-38,199

18,016
76,817
85,391
97,994

60,440
69,609
19,421
80,716
89,657
99,978

2,018
-3,220
-1,405
—3,899
-4,266
-1,984

590,947

-73,835

113,209
130,176

114,329

-1,120

-78,976

476,618
543,053

-72,715

678,249
745,755

403,903
469,097
474,299
453,242

594,351
661,272

-208,030

147,320

147,108

500,382

686,032

-185,650

166,075

165,813

262

547,886
568,862

769,584

-221,698

186,171

176,807

-237,976

200,228
213,402

183,498
193,832

9,363
16,731

241,491

202,691

19,570
38,800

-205,235

263,666

210,911

52,754

1983

617,766
600,562

1984

666,457

851,846

1985
1986
1987

734,057

946,391
990,336

769,091

13,535
14,964

-700

808,380

-127,989
-207,818
-185,388
-212,334
-221,245

640,741

302,183

806,838
810,079

-26,423

-73,956
-120,052

53,925

143,467

135,196
151,404

194

-5,020
-7,937
212

-149,769
-155,187

667,463

990,691

1,003,911
1,064,140
1,143,172

-152,481

727,026

861,449
932,261

1990
1991
1992
1993
1994 estimate

1,031,321
1,054,272
1,090,453
1,153,535
1,249,071

1,252,705
1,323,793
1,380,856
1,408,205
1,483,829

-221,384
-269,521
-290,403
-254,670
-234,758

749,666
760,388
788,027
841,601
912,892

1,027,640
1,082,106
1,128,518
1,141,618
1,202,953

-277,974
-321,719
-340,490
-300,017
-290,061

281,656
293,885
302,426
311,934
336,179

225,065
241,687
252,339
266,587
280,876

56,590
52,198
50,087
45,347
55,303

1995
1996
1997
1998

1,353,815
1,427,312
1,505,072

1,518,945
1,596,877
1,691,443
1,777,416
1,854,023

-165,130
-169,564
-186,371
-190,491
-181,077

998,594
1,052,606
1,107,581
1,165,532
1,227,811

1,223,582
1,288,898
1,373,129
1,444,760
1,506,455

-224,987
-236,292
-265,548
-279,228
-278,644

355,221
374,706
397,491
421,393
445,135

295,364
307,979
318,314
332,656

59,857
66,727
79,177
88,737
97,567

854,143
908,954

1988
1989

estimate
estimate
estimate
estimate

1999 estimate
4

$500 thousand or less.




1,586,925
1,672,946

-169,339
-193,986

347,568







List of Charts and Tables




LIST OF CHARTS AND TABLES
LIST OF CHARTS
Page

Introduction
The Federal Government Dollar—Fiscal Year 1995 Estimate

12

The Record Thus Far
Where We Started:
1-1. Federal Budget Deficit
1-2. Federal Debt
1-3. Net Interest on the Federal Debt
1-4. Net National Saving
1-5. Net Private Saving
1-6. Private Fixed Investment, 1980-1992
1-7. Net Private Fixed Investment
1-8. Travel Congestion on Urban Interstates
1-9. Commercial Office Vacancy Rate
1-10. Bank and Thrift Failures
1-11. New Issues of Corporate Stocks and Bonds
1-12. Interest Burden of Nonfinancial Corporate Business
1-13. Household Debt Payments
1-14. Real Income by Quintile

41
42
43
44
45
46
46
48
48
49
50
50
51
52

What We Have Accomplished: The Clinton Economic Plan:
2-1. Federal Tax Rates by Quintile
The Agenda Remaining
Prosperity and Jobs:
3A-1. Interest Rates
3A-2. Consumer Sentiment
3A-3. Auto Sales
3A-4. Housing Starts
3A—5. Investment in Equipment
3A-6. Total Private Non-Farm Employment
3A-7. Unemployment Rate
3A-8. Consumer Price Index
Investing
3B-1.
3B-2.
3B-3.
3B-4.
3B-5.
3B-6.
3B-7.
3B-8.
3B-9.
3B-10.




for Productivity and Prosperity: Setting Priorities Under Budget Discipline:
Return on Investments in Children
Increased All-Day and Total Head Start Slots for Children
Percent of Children With Very Low Birthweights Born to WIC and Non-WIC
Mothers
Growing Child Abuse and Neglect Reports
Mathematics Test Scores of 13-Year-Olds in Selected Countries
Pell Grant Increases
The Percent of Children Living With a Single Parent Has Tripled in 30 Years
Most Single Mothers Receive No Child Support
By 1996 the 1993 Expansion of EITC Will Bring a Full-Time, Minimum Wage
Worker With Two Children Up to the Poverty Line
Infrastructure Spending

59

66
67
67
68
69
69
70
71
90
93
94
96
98
102
109
110
Ill
125
259

THE BUDGET FOR FISCAL YEAR 1995

260

LIST OF CHARTS—Continued
Page

Reforming the Nation's Health Care System to Provide Health Security for All Americans:
4-1. Financing the Health Security Act
4-2. Cost of Premium Discounts

188
191

Personal Security: Crime, Illegal Immigration, and Drug Control:
5-1. Police and Corrections Spending Has Increased But Violent Crime Remains a
Problem—New Strategies Are Needed
5-2. 1995 Budget Reflects a New Direction in Federal Crime Fighting
5-3. In 1995, Demand Programs Grow Faster Compared to Other Programs

199
200
206

National Defense and International Affairs:
6-1. DOD-Military Budget Authority Trend
6-2. Historical Defense Personnel Levels

225
227

LIST OF TABLES
Page

Introduction: An Overview of the 1995 Budget
1-1. Outlays, Receipts, and Deficit Summary
1-2. Economic Assumptions
1-3. Discretionary Spending by Agency
1-4. Illustrative Listing of Programmatic Terminations and Reductions
1-5. Proposed Investments
1-6. Mandatory Spending
1-7. Receipts

13
15
18
25
30
31
23

The Record Thus Far
What We Have Accomplished: The Clinton Economic Plan:
2-1. Distributional Effects of OBRA-93

59

The Agenda Remaining
Prosperity and Jobs:
3A-1. Status Report: Latest Estimate of Savings (NPR Agency Teams)
3A-2. Progress Report: National Performance Review Recommendations With 1995
Budget Effects
Investing for Productivity and Prosperity: Setting Priorities Under Budget Discipline:
3B-1. Major Investments in People
3B-2. Programs Investing in Young Children
3B-3. Funding of Selected Investments to Rise 23 Percent in 1995
3B-4. Education Department Budget Increases 7 Percent Over 1994
3B-5. Workforce Programs
3B-6. Funding for Science and Technology Highlights
3B-7. Defense Reinvestment and Conversion
3B-8. Summary of Infrastructure Investment
3B-9. Infrastructure Investment
3B-10. Proposed Urban and Rural Development Initiatives
3B-11. Targeting Resources to High-Priority Environment and Natural Resource
Programs




74
74
89
91
98
103
104
118
123
124
130
132
137

LIST OF CHARTS AND TABLES

261

LIST OF TABLES—Continued
Page

3B-12.
3B-13.

Priority Investments and Other Major Environment and Natural Resource
Programs
Export-Related Expenditures by Criteria

138
153

Delivering a Government That Works Better and Costs Less:
3C-1. Current Status of Financial Management in the U.S. Government

168

Reforming
cans:
4-1.
4-2.
4-3.
4-4.

182
189
190
192

the Nation's Health Care System to Provide Health Security for All AmeriSmall Firm Premium Caps
Financing the Health Security Act—Sources of Funds
Financing the Health Security Act—Uses of Funds
Health Investments in the 1995 Budget

Personal Security: Crime, Illegal Immigration, and Drug Control:
5-1. Assistance to State and Local Law Enforcement Grows Significantly
5-2. Major Crime Control Initiatives
5-3. Law Enforcement Spending by Agency
5-4. More Spending Requested to Counter Illegal Immigration
5-5. Initiatives in the President's Border Security and Illegal Immigration
Control Plan
5-6. Treatment and Prevention Spending Show Greatest Strength
5-7. Major Initiatives in the National Drug Control Strategy

203
206
207

National Defense and International Affairs:
6-1. Discretionary Funding Summary for National Defense and International
Affairs
6-2. 1995 International Affairs—Function 150 Discretionary
6-3. Funding Summary for National Defense
6-4. Military Force Trends
6-5. Military Operating Rates
6-6. DOD Research, Development, Testing, and Evaluation

213
218
224
226
228
228

Summary Tables
Summary Tables:
7-1. Budget Outlays by Category
7-2. Receipts by Source—Summary
7-3. Discretionary Budget Authority by Agency
7-4. Discretionary Outlays by Agency
7-5. Discretionary Proposals by Appropriations Subcommittee
7-6. Mandatory and Receipts Paygo Proposals
7-7. Effect of Proposals on Receipts
7-8. Proposed Investments
7-9. Federal Employment in the Executive Branch
7-10. Federal Government Financing and Debt
7-11. Outlays by Agency
7-12. Outlays by Function
7-13. Budget Authority by Agency
7-14. Budget Authority by Function
7-15. Summary of Receipts, Outlays, and Surpluses or Deficits: 1789-1999




197
200
202
203

235
236
237
238
239
240
242
243
248
249
250
251
252
253
254




OMB CONTRffiUTORS TO THE 1995 BUDGET
The following Office of Management and Budget personnel contributed to the preparation of this
publication. Hundreds, perhaps thousands, of others throughout the Government also deserve credit
for their valuable contributions.
A
Rein Abel
Gordon Adams
Marsha D. Adams
Roger S. Adkins
Steven D. Aitken
Susan E. Alesi
Richard M. Allen
Robert A. Allison
Ahmad Al-Samarrie
Lois Altoft
Wayne S. Amchin
Barry B. Anderson
James L. Anderson
Janet L. Anderson
Robert B. Anderson
John C. Angell
Donald Arbuckle
Jack Arthur
Thomas L. Arthur
Jeffrey Ashford
Renee Austin
Dionel M. Aviles

B
David F. Baker
Patricia A. Baker
Sharon A. Barkeloo
Robert E. Barker
Christina Barnes
Pamela S. Barr
Mary C. Barth
Shireif Battat
Richard B. Bavier
Jean D. Baxter
Bruce D. Beard
Cora P. Beebe
Gary L. Bennethum
Deborah L. Benoit
Rodney G. Bent
Maya A. Bernstein
Christoph P. Bertram
Pamela L. Beverly
Martha M. Black
Todd M. Blakely
Donald B. Blanchon
Jeffrey Blend
Jill M. Blickstein
Mathew C. Blum
Daniel Blume
James Boden
Constance J. Bowers
Yvonne T. Bowlding
Jacqueline Boykin
James Bradford, Jr.
Betty I. Bradshaw
Denise M. Bray
Godula E. Brendel
Jonathan D. Breul
Hazel W. Briggs




Paxil W. Brower
Allan E. Brown
Bruce H. Brown, Jr.
Christopher Brown
Cynthia Brown
James A. Brown
Paul Bugg
Ann Burget
Kim H. Burke
Allan V. Burman
John D. Burnim
Katherine A. Byse

c
Derek Cail
Scott J. Cameron
Debra Cammer
Bruce P. Campbell
Susan CanMichael Casella
Lester D. Cash
Derek G. Chan
Edward H. Chase
Antonio E. Chavez
Anita Chellaraj
Daniel J. Chenok
David C. Childs
Alice Cho
Zach Church
Robert L. Civiak
Charles W. Clark
Edward H. Clarke
Barry Clendenin
Thomas Cocozza
Jerry L. Coffey
Ronald M. Cogswell
William S. Coleman, Jr.
D. Marie Collins
Tbresa L. Collins
Sheila Conley
Melissa Cook
Robert M. Cooper
Dionne M. Copper
Daniel J. Corbett
Darlene E. Cornelius
Daniel W. Costello
Daniel Coyne
Douglas A. Criscitello
Michael F. Crowley
Craig Crutchfield
William P. Curtis

D
Josie R. Dade
Rosemarie W. Dale
Philip R. Dame
Robert G. Damus
Alice R. Davis
Margaret B. Davis
TVacy A. Davis
Lorraine Day

Stacy L. Dean
Arline P. Dell
Carol R Dennis
Aurelia A. Derubis
Eugene J. Devine
Margaret DiBari
Barbara J. Diering
Elizabeth M. DiGennaro
Lanny A. Dillon
Michael J. Discenza, Jr.
Arnold E. Donahue
Karen S. Dooley
William L. Dorotinsky
Michael C. Dost
Robert S. Dotson
Carla B. Downing
Barbra E. Drauszewski
James E. Duke
Sherron R Duncan
Philip A. Dusault
Carter Dutch
Suzanne M. Duval
Kiran Duwadi
Nancy J. Duykers
Marguerite D. Dyson

E
Eugene M. Ebner
Mabel E. Echols
Christopher F. Edley
Christine B. Ellertson
Teresa F. Ellison
Kristina Emanuels
Richard P. Emery Jr.
Noah Engelberg
Adrienne Erbach
John Evans Klock
Suzann K. Evinger
Rhodia (Rowe) Ewell
Quincy Ewing III
Allison H. Eydt

F
Timothy Fain
Chris Fairhall
Lisa B. Fairhall
Robert S. Fairweather
William R. Feezle
Tanya M. Felder
Jack D. Fellows
Erik S. Ferlanti
Patricia A. Ferrell
Joseph Firschein
James F. Fish
E. Holly Fitter
Darlene B. Fleming
Dana Flower Lake
Martha Foley
Keith J. Fontenot
Anita D. Ford
Janet R. Forsgren

Roberta L. Foster
Wanda J. Foster
Stephen M. Frerichs

G
Martha Gagne
Evett F. Gardner
Darcel D. Gayle
Darlene O. Gaymon
Michael D. Gerich
Donald E. Gessaman
Brian Gillis
T.J. Glauthier
Kenneth G. Glozer
Michael L. Goad
JoEllen M. Godfrey
Stephen M. Goldberg
Maria E. Gonzalez
Gerald Gourdain
W. Tbdd Grams
Janet L. Graves
Arecia A. Grayton
Maryanne B. Green
Pamela B. Green
Richard E. Green
Judy Grew
David B. Grinberg
Walter S. Groszyk Jr.
Lisa Grove
Norman E. Gunderson

H
Lauren Haber
Hermann Habermann
Dianne M. Ham-McFarland
Rebecca J. Hardy
Brenda F. Harper
David J. Haun
Audry V. Hawkins
Donald J. Hayes
Daniel D. Heath
Christopher Heiser
Renee P. Helm
Jean M. Henke
Daryl Hennessy
Gregory G. Henry
Jefferson B. Hill
Adam Hoffberg
Jean W. Holcombe
Stephen H. Holden
Christine Holmes
Linda Hoogeveen
Edith D. Hopkins
Sarah Horrigan
Jeannie Houseman
Kathy M. Hudgins
Lawrence W. Hush
263

264

THE BUDGET FOR FISCAL YEAR 1995

I
Steven J. Isakowitz
Cecy Ivie

J
Norwood Jackson
Claire Newcomer Jacobi
Lawrence R. Jacobson
Irene James
Carol D. Jenkins
Duane E. Jenkins
Carol S. Johnson
Darrell A. Johnson
Erik Johnson
Kim I. Johnson
Lisa E. Johnson
Lorraine M. Johnson
Scott Johnson
Lisa M. Jones
Marilyn E. Jones
Ronald E. Jones
Christopher A. Jordan
James F. Jordan
Matthew I. Josephs
James J. Jukes

K
Barbara F. Kahlow
Phyllis Kaiser-Dark
Stuart R. Kasdin
Sally Katzen
Stanley Kaufman
Stephanie I. Kaufman
James B. Kazel
Alexander S. Keenan
Steven Kelman
John W. Kelly
Kenneth S. Kelly
Farooq Khan
Jean G. Kibler
Charles E. Kieffer
Robert W. Kilpatrick
Carole Kitti
Karin L. Kizer
David K. Kleinberg
Louisa Koch
Richard H. Kodl
Raymond P. Kogut
Alicia Kolaian
Justin A. Kopca
Shannah Koss
Mark S. Kramer
Lori A. Krauss
Peggy R. Kuhn
Richard A. Kuzmack
Bradley W. Kyser

L
Joseph F. Lackey Jr.
Neil F. Lamb
Ronald N. Landis
John C. Langenbrunner
Lisa A. Langmead
Kelley Lehman
Robert S. Lesher, Jr.
Cameron M. Leuthy
Christopher M. Lewis
Thomas S. Lewis
Christine Lidbury
Linn M. Ligon




Henry E. Lilienthal
Susanne D. Lind
Jenise Littlejohn
Lin C. Liu
Neil Lobron
Patrick Locke
Richard C. Loeb
Bruce D. Long
Jonna Long
Ron Longo
Sheila D. Lucas
Randolph M. Lyon

M
Karen A. Maclntyre
James B. MacRae Jr.
Jennifer Main
Judy Mann
Linda L. Mann
Courtney M. Manning
Palmer A. Marcantonio
Diana J. Marino
Karen Maris
Bernard H. Martin
Larry R. Matlack
Alexander J. McClelland
Bruce W. McConnell
Douglas D. McCormick
Yvonne A. McCoy
Brenda L. McCray
James McDivitt
Katrina A. McDonald
Larry E. McGee
Richard S. McKay
William N. McLeod
William J. McQuaid
Carla B. McTigue
Mark D. Menchik
William C. Menth
Richard A. Mertens
Steven M. Mertens
Linda L. Mesaros
Harry G. Meyers
James D. Mietus
Alice McNutt Miller
Matthew L. Miller
Nancy-Ann Min
Joseph J. Minarik
Janet W. Minkler
Ronald C. Mitchell
Ginger Moench
Gretina S. Monk
John B. Moore
Harry E. Moran
Elizabeth Mori
John F. Morrall III
Delphine C. Motley
Jane T. Moy
Lydia Muniz
James C. Murr
Suzanne M. Murrin
Christopher Mustain

N
Peter T. Nakahata
Robert L. Neal, Jr.
Jonas Neihardt
C. Spencer Nelms, Jr.
Wendy C. New
Kimberly A. Newman
Robin A. Newman

Kevin F. Neyland
Len M. Nichols
James A. Nix
Patrick C. Noon
Memphis A. Norman
Douglas A. Norwood

o
Dale P. Oak
Marcia Occomy
Ellen M. ODonnell
Kashira Oldes
Marvis G. Olfus
Sidra Oliphant
Laura A. Oliven
Richard A. Ong
Judith F. Owens
Valerie J. Owens

P
Wayne D. Palmer
William D. Palmer
Jennifer M. Palmieri
Leon E. Panetta
Anna K. Pannell
Christopher Parker
Katherine M. Parrish
Jeffrey L. Payne
Robert M. Peay
Robert J. Pellicci
Emily D. Pelton
Kathleen Peroff
Janice E. Perry
Ronald K. Peterson
John R. Pfeiffer
Carolyn R. Phelps-Carter
Robert Pickel
Janet S. Piller
Shirley C. Piplin
Richard A. Popper
Keith J. Posen

R
Bernice M. Randolph
Edward M. Rea
Francis S. (Steve) Redburn
Mcgavock D. Reed
Franklin S. Reeder
Rosalyn J. Rettman
Barbara A. Retzlaff
Jeeyang Rhee
Alan B. Rhinesmith
Cheri Rice
Valentina V. Richard
John M. Richardson
Sarah B. Richardson
Nancy S. Ridenour
Robert B. Rideout
Donna M. Rivelli
Alice M. Rivlin
Mary Ann Robinson
Justine F. Rodriguez
Lara Roholt
Annette E. Rooney
Elizabeth L. Rossman
Martha A. Rubenstein
Michael Ruffner
Kenneth F. Ryder Jr.

S
Cynthia R. Salavantis
Maria F. Salcedo
LaVonne D. Sampson
Nicole Sanderson
John J. Sandy
Mark S. Sandy
Bruce K. Sasser
Deborah M. Saunders
Ruth D. Saunders
Isabel V. Sawhill
Thomas Schaaf
Phillip E. Schaff
Kevin J. Scheid
Andrew M. Schoenbach
Ingrid M. Schroeder
John T. Schuhart
Rudolph J. Schuhbauer
Leslie Schumann
Kenneth L. Schwartz
Mark J. Schwartz
Nancy E. Schwartz
Ardy D. Scott
Robyn Seaton
Jasmeet Seehra
Albert Seferian
Frank J. Seidl III
Marvin S. Self
Barbara S. Selfridge
Steven H. Semenuk
Neil K. Shapiro
Margaret Shaw
Alice S. Sheck
John P. Sheehan Jr.
Vanna J. Shields
Mary Jo N. Siclari
Lisa A. Signori
Adrien L. Silas
Ronald L. Silberman
Angela C. Simmons
Pamula L. Simms
Jack A. Smalligan
Bryan R. Smith
Patricia A. Smith
Edward C. Springer
Thomas P. Stack
Norman H. Starler
Randolph J. Steer
Douglas L. Steiger
Darlene C. Steil
Harold Steinberg
Albert F. Stidman
Dennis L. Stout
Ira Strong
Kelley L. Sullivan
Milo B. Sunderhauf
Lawanna S. Sutor
E. Steve Swain
Carolyn Swinney
Andrew W. Swire

T
Daniel H. Taft
Daniel Tangherlini
Vernetta Tanner
Beverly B. Thierwechter
Margaret A. Thomas
Sharon K. Thomas
Desiree N. Thompson
Joseph Tipan
Paul Tisdale

OMB CONTRIBUTORS TO THE BUDGET
Barry J. Tbiv
Linda G. Tboker
Jodie R. Tbrkelson
David E. Tbrnquist
Melanie Trunzo
Robert J. Tuccillo
Donald L. Tuck
Kathleen M. Turco
Richard J. Turman
Carla A. Turner
Crawford M. Tuttle
Katherine M. Tyer

V
Cynthia A. Vallina
Pamela B. VanWie
Robert N. Veeder
Areletha L. Venson
Sandra L. Via




Phebe Vickers
Lori Victor

Frances Von Schilling

w
Stanley R. Wallace
Katherine K. Wallman
Maureen H. Walsh
Sharon A. Warner
Theodore Wartell
Teresa Washington
Mark A. Wasserman
Iratha H. Waters
Patricia J. Watson
Gary Waxman
Rebecca A. Wayne
Mark A. Weatherly
Bessie M. Weaver
Tawana Webb
Stephen A. Weigler

265

Jeffrey A. Weinberg
Peter N. Weiss
Dianne M. Wells
Phil Wenger
Michael G. Wenk
Ophelia D. West
Tina L. Westby
Lisa F. Western
Deborah J. Wetterhall
Sherry R. Whitaker
Arnette C. White
Barry White
Bayla F. White
Kim S. White
Linda Wiesman
Roxanne W. Willard
Debra L. Williams
Joyce M. Williams
Linda G. Williams
Steve Willson
Doris J. Wingard

Joseph M. Wire
Lisa K. Witt
Wayne A. Wittig
Robert W. Wolf
Daren K. Wong
Thomas Woodley
Anthony B. Wu

Y
Margaret Yao
Louise D. Young
Margaret A. Young
Julia E. Yuille

z
David Zavada
Wendy B. Zenker
Joseph F. Zimmer
Gail S. Zimmerman
Leonard B. Zuza


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