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We have heard the trumpets. We have changed the guard.
And now each in our own way, and with God ’s help,
we must answer the call.




President Bill Clinton
January 20, 1993

THE WHITE HOUSE
WAS H I NGTO N

February 17, 1993

TO THE CONGRESS OF THE UNITED STATES:

To accompany my address to the Joint Session of the Congress, I am submitting this
report, entitled A Vision of Change for America. This report describes the comprehensive
economic plan I am proposing for the nation.
I am asking you to join with the American people in their call for change. My vision is
one of fundamental change—to invest in people, to reward hard work and restore
fairness, and to recognize our families and communities as the cornerstones of Americas
strength.

For more than a decade, our government has been caught in the grip of the failed policy
of trickle-down economics. While the rich get richer, middle-class Americans pay more
taxes to their government and get less in return. My plan will put an end to government
that benefits the privileged few and mark the beginning of an economic strategy that
puts people first.

My plan has three key elements: economic stimulus to create jobs now while laying the
foundation for long-term economic growth; long-term public investments to increase the
productivity of our people and businesses; and a serious, fair, and balanced deficit-reduc­
tion plan to stop the government from draining the private investments that generate
jobs and increase incomes.

The change will not be easy, but the cost of not changing is far greater. We must ensure
that our children’s generation is not the first to do worse than their parents. We must
restore the American dream.
We have already heard the clamor of the powerful special interests who oppose change
because they profit from the status quo. But the American people have demanded change,
and it is our responsibility to answer their call. With that in mind, I ask for your help
and support to restore our economy and give our people hope.




A Vision of Change For America
Table of Contents




Chapter / Page

A New Direction /

1

Legacy of Failure / 5
Anemic Recovery from Recession / 5

Stagnating Productivity and Living Standards f 6
Underinvestment and Slow Growth f 6

The Alarming Rise in Inequality / 7

A Government That Doesn’t Pay Its Way /

8

Why Deficits Matter / 9
Skyrocketing Health Care Costs I 11

A Government That Doesn’t Work Well / 12

The Price of Not Changing / 13

What We Must Now Do / 21
Change is Imperative I 21
Economic Assumptions j 23
Ensuring Economic Recovery and Creating Jobs: Economic Stimulus / 27
Investing in the Future: Increasing Public Investment 141

Investing in the Future: Reducing the Deficit to Increase Private Investment / 65

Restoring Fairness f 107
Making Government Work Better I 1,1

The Task Remaining I

115

The Perils of Inaction / 115
The Role of Health Care Costs / 116
Conclusion: A Vision of Change for America / 117

Appendix /

ii




121




GENERAL NOTES
All years referred to in this volume are fiscal years,
unless otherwise specified.

Detail in the tables, text, and charts of this volume may
not add to the totals because of rounding.
The Budget Enforcement Act of 1990 changed the date
by which the President is required to transmit his Budget
from the first Monday after January 3rd to the first
Monday in February. As a result of this change, President
Bush was not required to submit a budget before he left
office. Thus, President Clinton is the first President in
modem times required to construct and submit to Con­
gress a complete budget in the first few weeks of his
Administration. If as a result of developing this budget
document in such a short time errors have been made,
they will be corrected.

For sale by the U.S. Government Printing Office
Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328

ISBN 0-16-041662-0

iii

A New Direction
When our Founders boldly declared America’s independence to the world and our purposes
to the Almighty, they knew that America to endure would have to change; not change for
change sake, but change to preserve America’s ideals: life, liberty, the pursuit of happiness.




Bill Clinton
Inaugural Address
January 20, 1993
Throughout our history, at every critical moment, Americans have summoned
die courage to change, to adapt our nation’s policies and institutions to address
new problems in a changing world. Today we must once again find the courage
to change. We must shift our energies from the Cold War priorities of the past to
the economic priorities of the future. And we must reverse die distorted trends of
the last twelve years—slow growth, stagnant family incomes, growing
inequality, an increase in poverty among children, soaring health care costs, and
rising fiscal deficits as far as the eye can see.

It is not enough simply to stay the course. We must change our course. In the
words of Abraham Lincoln, “We must think anew and act anew ... and then we
shall save our country.”

Americans have an underlying vision that has sustained us through previous
challenges and that will sustain us through the challenges we now confront. It is
a vision of economic and political freedom, of the rewards of hard work and
initiative, of a fundamental sense of fairness, of the family and the community
as the foundations of our strength, and of every generation’s obligation to create
a better life for the one that follows.
In recent years, our leaders lost sight of this vision. They embraced trickle-down
policies that benefitted the wealthy at the expense of the middle class and the
working poor. We have deluded ourselves that somehow economic growth and
fairness are at odds, when in fact they go hand in hand. While the privileged few
have prospered, millions of Americans who worked hard and played by the rules
have been left behind.
Our family structures have weakened, often as a result of economic adversity
and government negligence. Greed and financial scheming have eclipsed the
virtues of hard work and sacrifice for the common good. Debt has soared as
individuals, businesses, and governments have lived beyond their means. Our
commitment to invest in the future and to bequeath, a promising future to our
children has somehow fallen by the wayside.

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A New Direction

In this report, we share our economic vision for America. We attempt, candidly
and forthrightly, to explain the challenges that face us. For too long, bland
pronouncements and fiscal gimmicks have obscured harsh economic realities.
We offer, instead, a detailed plan that can, if we work together, transform our
vision and values into reality.
First, we seek an America that can provide rising living standards for all of its
citizens. To achieve this, we must fundamentally shift our spending priorities
away from consumption to investment. Investment is the key to a growing
economy that produces good jobs and high-quality goods and services for
ourselves and for the international marketplace. We must invest more in our
people, our plant and equipment, our infrastructure, and our research and
development if we are to restore the American dream for our children.
Second, we seek an America that provides opportunities for all who want to
work hard and play by the rules and that offers assistance to those who want
jobs but cannot find them. We seek meaningful opportunities for all
Americans—not just for a privileged few. We must give all of our people a
chance to acquire the skills they need to succeed, understanding that in today’s
world, education is a lifelong process. We must support parents in their efforts to
balance the demands of work with the needs of their children. And we must
commit to fundamental change in our health care system, to control skyrocketing
costs and provide security for every individual and family.

Third, we seek an America that fosters a spirit of responsibility and service to
community among its citizens. People must feel responsible not only for
improving their own lives, but also for helping those in need. We must reject the
idea that the individual stands in opposition to the community and embrace the
idea that we are all members of the same community. There is no them; there is
only us.
Fourth, we seek an America in which the government is viewed not as the
enemy of prosperity but as a partner with the private sector working to foster
growth. Only a government that works can ensure that view. Government must
be accessible to those it serves and to those who pay its bills. It must be
responsive to their concerns. It must be run efficiently and well with respect for
the tax dollars on which it depends. It must be financed by a fair tax system that
rewards work and requires a fair share from those most able to pay. And it must
pay its way and live within its means.

Fifth, we seek an America that recognizes the importance of the environment to
the quality of our life, rejecting false choices between economic prosperity and
environmental quality. We must demand both for our future, not sacrifice one for
the other.
Sixth, we seek an America that is prosperous and confident enough to continue
its role as a world leader. The nations of the world look to us to strengthen the
international trading system, to preserve the global environment, to nurture the
growth of democracy, and to maintain global peace and security. Whether we

2






A New Direction

will continue to shoulder these global responsibilities depends on whether we
successfully overcome the economic problems we face at home. If we fail,
America, like other global powers that preceded it, will ultimately be defeated
not by external power but by internal weakness.

Productive jobs and rising standards of living; opportunity and fairness for all
Americans; responsibility and community; a government that works and that
continues to meet its global commitments. That is our vision. To achieve it, we
must change our course.

3




A Legacy of Failure
Raised in unrivaled prosperity, we inherit an economy that is still the world’s strongest, but
is weakened by business failures, stagnant wages, increasing inequality and deep divisions
among our own people.

Bill Clinton
The election of 1992 was a mandate for change—and no wonder. Twelve years
of neglect have left America’s economy suffering from stagnant growth and
declining incomes. They have left the average American family worried about its
future, working harder, and getting less in return. The specter of rapidly rising
health care costs threatens every family and business. They have left a mountain
of debt and a Federal Government that must borrow to pay more than a fifth of
its current bills. Perhaps most sadly, they have left die great majority of our
people no longer dreaming the American dream. Our children’s generation may
be the first to do worse than their parents.
Such is the sorry legacy of 12 years of short-sightedness, mismanagement, and
protection of the privileged. All of this must be changed.

Anemic Recovery from Recession




The U.S. economy grew very slowly in toe late 1980s and slid into recession in
the summer of 1990. Sales and profits fell. Unemployment rose. The National
Bureau of Economic Research says that toe recession ended in March 1991. For
most Americans, however, the recession has not ended. The great American job
machine has ground to a halt, and toe unemployment rate is higher than it was at
toe recession’s official end (Chart 2-1). The fraction of toe unemployed who
have permanently lost their jobs is near its record high (Chart 2-2).
The 1991-93 recovery has been called a “jobless” recovery—a description that
is all too apt (Chart 2-3). The reason is simple: few new jobs have been created
because production has grown so slowly (Chart 2—4). Until toe last two quarters,
this was not a recovery worthy of toe name. That is toe first thing we must
change.

In a strong, durable recovery, people go back to work in great numbers, and are
able to earn toe incomes they need to buy toe goods and services that economic
growth produces. The increase in sales stimulates investment, and thus generates
still more -jobs. The process sustains itself until toe economy is producing at its
full capacity and toe labor force is fully employed.

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A Legacy of Failure

Recently, however, recovery has been slowed by powerful forces that are
reducing the numbers of jobs. Key industries are laying off workers to become
leaner and more competitive. The defense sector is downsizing to reflect the new
realities of the post-Cold War world.

Already we have seen the recovery process begin twice, only to sputter when
early signs of growth were not followed by solid gains in employment. Now,
once again, the long-dormant American economy seems to be waking up. This
time, we must be absolutely sure that the recovery is strong enough and durable
enough to put Americans back to work. The stimulus component of the Clinton
economic program is an insurance policy designed to make sure that the
recovery does not falter again. It is also a downpayment on the long-term
investments that will encourage lasting economic growth.

Stagnating Productivity and Living Standards
But mere recovery from recession is not good enough if we return to the
trickle-down policies of the 1980s. America’s economic problems are deeper
than a temporary lull in economic activity. We must aim not only for more jobs,
but also for better jobs at higher wages. We must aim not only to produce at our
current capacity, but also to add to our economy’s capacity to create a better life
for all.
The productivity of American labor—what an average worker produces in an
hour—has been growing at an agonizingly slow pace for about two decades. In
turn, real wages have stagnated (Chart 2-5) and family incomes have advanced
at a snail’s pace. These developments, more than anything else, explain why the
American dream is fading for the average worker.

Even a small improvement in a nation’s productivity growth rate can yield much
higher standards of living in the long run. Had real hourly compensation grown
' at 2.0 percent a year since 1973, instead of the actual 0.7 percent gain, average
American workers would make almost $5.00 per hour more (Chart 2-6).
Increasing productivity growth will have a direct and positive impact on living
standards. We simply must do better.

Underinvestment and Slow Growth
The slowdown in productivity growth is partly mysterious, even to experts who
have studied it for years. But no one doubts that part of the cause is that as a
nation we have underinvested: in private business capital, in public capital, and
in “human capital”—the skills and capabilities of the American workforce.

6



A Legacy of Failure

Chart 2-7 shows that the United States devotes a smaller fraction of gross
domestic product (GDP) to business investments than do the other major nations
with whom we compete in the international marketplace. Chart 2-8 shows that
American governments at all levels have been spending a decreasing share of
our total resources on civilian public investment—including both physical
investment and the research and development that underpins future growth.
Studies indicate that additional investment in private and government R&D, and
in public infrastructure, could yield substantial economic benefits.
We have also underinvested in education and training. American students
routinely score far below their counterparts in other industrial countries on tests
of mathematical competence and scientific knowledge. Moreover, recent
evidence also suggests that the demand for more highly trained, better-educated
workers has been outrunning the supply. Chart 2-9 shows that the wages of
college graduates have advanced far faster than those of high school graduates
since 1978; similarly, the wages of high school graduates have risen faster than
the wages of nongraduates. These growing wage gaps indicate that the financial
returns to education have been rising.

This evidence suggests that more investment is vital to raising the growth rate of
productivity and boosting living standards. We must invest more in business
capital, in public infrastructure, and in the skills of our people. Our future has
been shortchanged for too long. We owe it to our children to change course now.
The Clinton program will do precisely that.

The Alarming Rise in Inequality




Throughout the 1980s, slow growth in living standards was accompanied by
growing inequality. The rich got richer while the middle class paid more in taxes
and fell further behind. In fact, income gains were so concentrated that people at
the bottom of the income scale actually lost ground: measured in
inflation-adjusted dollars, their incomes fell between 1977 and 1991. The rising
staircase in Chart 2-10 depicts a simple but doleful message: During this period,
the richer you were, the better you did.

Behind these statistics lay very real problems. Middle-class families grew
disillusioned and cynical while they worked longer hours but had trouble
making ends meet. Tens of millions of families lived in fear of losing their
health insurance; 37 million had none at all. The working poor were forced to
choose between feeding their children and heating their homes. Hopelessness
bred violence in America’s inner cities. The nation drifted.

It is time to reverse that drift and reorder our priorities. It will require those who
have profited to bear the greatest burdens and do right by the people who work

7

A Legacy of Failure

hard and play by the rules. Our economic plan will redress the inequities of the
1980s.

A Government That Doesn’t Pay Its Way
For more than a decade, the Federal Government has been living well beyond its
means—spending much more than it takes in, and borrowing the difference. The
annual deficits have been huge, both in dollars and as a percent of GDP (Chart
2-11). As a result of all this borrowing, the Federal debt has grown as a
percentage of GDP since 1981, reversing three decades of decline (Chart 2-12).
The Federal deficit is currently swollen by two temporary factors. One is the
recession, which has reduced revenues and increased expenditures to aid those
adversely affected; the other is increased borrowing for the savings and loan
cleanup. Even when these temporary factors are behind us, however, a large
structural deficit will remain. The structural deficit—the deficit that would be
there even if the economy were producing at full capacity and the savings and
loan cleanup were complete—was 3.4 percent of GDP in 1992. The really bad
news is that the structural deficit not only will remain but will grow even faster
than the economy unless the Government changes course.
The problem of the structural deficit is rooted in the early 1980s, when we cut
income taxes and massively increased defense spending. Subsequent tax
hikes—in particular, large increases in regressive payroll taxes—and a slower
growth of defense spending during the second half of the 1980s temporarily
halted the growth of the structural deficit. Nonetheless, the structural deficit
remained huge by historical standards, and it once again began to climb relative
to GDP by the early 1990s. Without a real deficit reduction program, the
structural deficit will exceed 4 percent of GDP by 1997, rivalling the highs of
the mid-1980s, and it will grow at an accelerating rate as a percent of GDP.
At first glance, slowly growing revenues and rapidly rising outlays, both
aggravated by the economy’s slowdown during the last two years, appear to be
responsible for our deficit problem. Correcting for these recession effects, the
share of Federal revenues in GDP is 0.5 percent less than it was at the beginning
of the 1980s, while the share of Federal outlays has increased by 1.1 percent.
These trends in total revenues and outlays, however, mask some important
changes in how the Government raises its revenues and spends its money.

Major reforms of the Social Security system in 1977 and 1983 sharply raised
taxes, stabilized benefits as a percentage of total Federal spending and caused an
accumulation of large surpluses in the Social Security trust fund. But taxes to
support the rest of the Government’s activities have been cut by as much as
Social Security taxes have been raised.

8



A Legacy of Failure

Adjusting for cyclical effects, the share in GDP of revenues to support the
Government’s other spending programs has actually shrunk by about 1.5
percentage points since 1980. And the surpluses in the Social Security fund have
been used to fill the gap. Instead of adding to national savings to fund the
retirement of the baby boom generation early in the next century, these surpluses
have camouflaged the true imbalances in the Government’s revenue and
spending streams. Consequently, if we do not change course and revitalize our
economy, redeeming the IOUs held by the trust funds will require major tax
increases when the baby boom finally retires.

While Government spending has increased, its composition has changed. After a
sharp increase in the first half of the 1980s, defense spending currently accounts
for about 22 percent of total Federal outlays, down slightly from its 1980 share.
Spending on non-defense discretionary programs has fallen sharply, from about
24 percent of total spending in 1980 to about 17 percent today. During the same
period, public investment by the Federal Government—measured as the sum of
outlays for non-defense physical capital, non-defense R&D, and education and
training—has fallen from 8.2 percent to 6.3 percent of total outlays.

In contrast, health care—Medicare and Medicaid—and interest payments on the
debt have claimed increasing shares of total spending. Between 1980 and 1992,
spending on Medicare and Medicaid rose from 7.8 percent to 13.3 percent of
total government spending. To make matters worse, large annual deficits,
together with high interest rates for more than a decade, have swollen net
interest payments on the debt. Interest payments now amount to almost $200
billion a year. About three-quarters of the money the Government borrows this
year will go to pay interest on the debt piled up from previous years.
Unless there are meaningful changes in policy, sharp continuing growth in health
care costs and self-perpetuating growth of interest on the debt will overwhelm
projected revenue growth and cuts in defense spending. The Federal deficit will
continue to balloon out of control unless we change course.

Why Deficits Matter




Deficit reduction is not an end in itself. It is a means to the end of higher
productivity, rising living standards and the creation of high-wage jobs. In short,
it is about securing a better economic future for ourselves and, even more
importantly, our children.

Huge structural budget deficits are harmful for a simple reason: when the
economy is not in recession, each dollar the Federal Government borrows to
finance consumption spending absorbs private savings that would otherwise be
used to increase productive capacity. Large, sustained budget deficits mean that
we must either reduce our investment at home or borrow the money overseas.

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A Legacy of Failure

This drain on our savings has caused anemic domestic investment, especially in
comparison with most other advanced industrial countries (Chart 2-7). It has
retarded growth in productivity and living standards. Meanwhile, borrowing
from the rest of the world to maintain investment at even today’s depressed
levels has increased interest payments to foreign lenders. In effect, we have
signed over some of the fruits of today’s productivity-enhancing investments to
the children of Europe and Japan, rather than preserving them for our own.
Regardless of whether the debt is owed to foreigners or U.S. citizens, the
interest obligation requires higher taxes. Moreover, our skyrocketing interest
costs squeeze out revenues that would otherwise be available for other priorities.
Since 1988, for example, net interest alone has risen by $50 billion, making
interest payments the fastest growing Federal “program.” This mounting interest
burden mocks our efforts to fund token initiatives for pressing social needs: next
year’s projected increase in interest payments by itself could fully fund the Head
Start program five times over.

As a result, the nation has suffered from another deficit—the deficit in public
investment in education, training, infrastructure, and civilian technology. Like
private investments, well-chosen public investments raise future living standards.
Deficit reduction at the expense of public investment has been and will continue
to be self-defeating. The Clinton plan is explicitly and emphatically aimed at
reducing the deficit while increasing much-needed public investment. One
without the other will not work.
Beyond the quantifiable benefits of deficit reduction—greater investment and
economic growth—are unquantifiable but no less important benefits.
First, deficit reduction could allay anxiety in financial markets. Large and
growing structural deficits could destabilize global capital markets because of
the growing drain of government borrowing on available funds. Such anxieties
help explain why historically high long-term real interest rates persist despite a
weak economy. The threat that the United States might ultimately inflate the
dollar to depreciate its runaway debt obligations raises the specter of a spike in
interest rates, a collapse of the dollar, or both.

Second, a credible effort to reduce our structural deficit will improve our ability
to coordinate macroeconomic policies with our major trading partners, who are
concerned about our deficit’s drain on global capital markets. Putting our fiscal
house in order will improve our leverage in international negotiations.
Finally, deficit reduction will help break legislative gridlock and reverse public
cynicism about government. Large deficits have virtually assured that each
legislative session has been dominated by the deficit debate, encouraging
budgetary quick fixes that have shortchanged the nation’s long-term public
investment needs and created a deficit of trust.

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A Legacy of Failure

Skyrocketing Health Care Costs




Another legacy of the past 12 years is the crisis of rapidly escalating health care
costs—a crisis that threatens the security of every American family and business.
In 1992, Americans spent $840 billion on health care, or 14 percent of GDP
compared with about 9 percent of GDP only a dozen years ago (Chart 2-13). At
this rate health spending will reach an astonishing 18 percent of GDP by the
year 2000: Americans will be devoting almost one dollar of every five they earn
to health care, and the average family’s health costs will rise to almost $10,000
a year.
Rising health care costs are straining the budgets of families, businesses, and
government. They are eating up incomes and squeezing out other spending.
Individuals are facing soaring insurance premiums and rising out-of-pocket bills.
Skyrocketing premiums have forced many businesses to drop or curtail health
coverage for their workers, swelling the ranks of the uninsured. More than 37
million people do not now have insurance coverage. Many are dependent on
hospital emergency units for care.
Inflation in health care costs is also robbing government budgets of scarce
resources needed for critical investment in our future—education, job training,
infrastructure, and technology development. If current trends continue, by 1998
the Federal Government will spend one in every four dollars on health care
(Chart 2-14). State and local spending for health will rise over the same period
from 14 to 18 percent of total outlays. Exploding health costs threaten funding
for other public priorities.

The rise in health care costs now projected will consume between 25 and 35
percent of total projected GDP growth for the rest of the decade and will
account for over 40 percent of the total increase in Federal spending. In short,
containing health care costs has become an economic imperative. Indeed, the
potential “health dividend” is far larger than the peace dividend promised by the
end of the Cold War. If America spent the same share of GDP on health as our
main international competitors do, last year alone we would have had $230
billion more to invest in our people. Similarly, if spending by employers on
health insurance had remained at the 1980 percentage of total compensation,
cash wages for the average worker could have been $670 a year higher in 1991
without affecting corporate profits.
Despite these bleak statistics, widespread evidence suggests that we can control
health care costs and maintain quality. Other advanced industrial nations have
levels of health spending substantially below ours and have controlled cost
growth more successfully—even while providing care that matches and often
exceeds our own. Their success offers a strong basis for hope as we step up to
the challenge of fundamental change.

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A Legacy of Failure

A Government That Doesn’t Work Well
Finally, it is clear (hat the American people have lost confidence in their
government. They believe that government has gotten too big, that it is out of
touch with its citizens, that it wastes money, that it is ill-equipped for taking on
the country’s problems—or, worse, that it causes those problems and hears only
the voices of the privileged few.

In too many cases they are right. We cannot deny the evidence.

• Billions of taxpayers’ dollars have been lost to fraud and abuse. The worst
examples—scandalous military purchases, sweetheart deals, the saving and
loan debacle, and abuse of government perks—have made headlines, but
many remain hidden. We must crack down on these hidden scandals and
catch problems before they occur, not after.
• Millions of Americans every year must deal with the maze called “Federal
bureaucracy.” The American people deserve a government that treats them
like customers, by giving them more choices and stripping away unnecessary
layers of management and red tape.
• The size and cost of the Federal Government has grown over the past twelve
years. Despite many promises, administrative costs have increased and
special perquisites for high-level officials have proliferated. That is why we
have already made real cuts in the Executive Branch and will do so over the
coming years.
Our political system has failed to address many of the most urgent problems
facing the American people—health care, declining incomes, job loss, budget
deficits. A large part of the blame must go to the lobbyists and special interests
who profit from the status quo. All too frequently they control the agenda or use
their campaign contributions to dominate the debate. Even as government did
less, the ranks of the special interests grew. By the decade’s end, some 80,000
people will make their living pleading the causes of the special interests. To
break the stalemate in Washington, we must attack the problem at its source:
entrenched power and money.

The Clinton Administration is determined to meet a double challenge. First, we
must cut the waste and make government operations more responsive to the
American people. It is a time to shift from top-down bureaucracy to
entrepreneurial government that generates change from the bottom up. We must
reward the people and ideas that work and get rid of those that don’t.
Second, we must restructure government to deal with new realities, both foreign
and domestic. Our defense and foreign affairs agencies must be reorganized to
reflect the new problems of the post Cold-War era and the global economy. We
must also reinvent our domestic agencies to serve us more effectively in the
twenty-first century.

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A Legacy of Failure

Public cynicism about government is not merely a political problem. Making our
government more responsive and improving the way it works is essential to the
future of our children and our democracy.

The Price of Not Changing




Reversing the legacy of the last twelve years will not be easy. Nor will it happen
overnight. But the cost of clinging to the status quo will be bom by every
family—and by our children and their children. Consider:
(1) If we do not change, we could continue to have epidemics of measles and
other preventable childhood diseases; if we find the courage to change, we could
immunize every child.
(2) If we do not change, a college education could become the domain of the
privileged; if we find the courage to change, hundreds of thousands of
Americans could go to college in exchange for national service.
(3) If we do not change, health care costs will continue to terrorize our
families. If we find the courage to change, all Americans can have affordable
quality health care.
(4) If we do not change, the deficit will continue to grow and incomes will
stagnate. If we have the courage to change, we can have a higher standard of
living and a government that pays its way.

The stakes for every American’s standard of living are enormous. From World
War II to the early 1970s, we grew more productive year by year and our
standard of living doubled. At today’s anemic rate of growth, our standard of
living will no longer double every generation—but once every 100 years. If we
do not summon the courage of change, our legacy will not be worthy of the
nation we have inherited.
Continuing the failed policies of the past twelve years is a choice without a
future. To restore our nation’s economic vitality and reclaim our vision of
America, we must change course. And we must do it now.

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A Legacy of Failure

Chart 2-1. CIVILIAN UNEMPLOYMENT RATE
Though the unemployment rate has declined from its peak of 7.7 percent, it is currently still higher
than it was in* March 1991, at the trough of the recession.

PERCENT UNEMPLOYED

Chart 2-2. RATIO OF PERMANENT JOB LOSERS TO TOTAL UNEMPLOYED
In 1992, the fraction of unemployed workers not expecting to be recalled to a job rose to its
highest level on record.
RATIO

SOURCE: Departmeat of Labor

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A Legacy of Failure

Chart 2-3. NONFARM PAYROLL EMPLOYMENT IN POST-WWII RECOVERIES
The current recovery has not produced the growth in employment that characterized previous recoveries.
(percent change in employment from end of recession)

PERCENT

SOURCE: Department of Labor

Chart 2-4. GROWTH OF GROSS DOMESTIC PRODUCT IN POST-WWII RECOVERIES
Output in 1991-93 has grown much more slowly than in a typical recovery.

SOURCE: Department of Labor

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A Legacy of Failure

Chart 2-5. PRODUCTIVITY AND REAL HOURLY COMPENSATION
Output and real compensation per hour grew much more slowly between 1973 and 1992 than
between 1954 and 1973.

■ 1954-1973 B1973-1992
NOTE: Compensation and output per hour are for the total economy.
SOURCE: Department of I>abor

Chart 2-6. REAL HOURLY COMPENSATION, TOTAL ECONOMY
The growth of real hourly compensation has slowed since 1973.

DOLLARS

NOTE: Compensation is deflated by the CPI-U-X1.
SOURCE: Department of Labor

16



(in 1982 dollars)




A Legacy of Failure

Chart 2-8. PUBLIC INVESTMENT AS A PERCENT OF GDP
Federal, state, and local governments are investing less.

PERCENT
6

4.5

1960s

1970s

1980s

NOTE: Defined to be fixed non-residential government capital and federal outlays for R&D.
SOURCE: Department of Commerce

17

A Legacy of Failure

Chart 2-9. RELATIVE EARNINGS BY EDUCATION FOR 25-34 YEAR OLDS
The relative payoffs of both high school and college degrees have been increasing since 1978.
RATIO

SOURCE: U.S. Bureau of the Census

18




Chart 2-11. FEDERAL STRUCTURAL DEFICITS SINCE 1980
Federal deficits have been very large since 1983 and growing of late.

$ BILLIONS
300 -i------------------------------------------------------------------------------------------------------------------

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
NOTE: Excludes Desert Storm contributions and deposit Insurance since 1989.
SOURCE: Congressional Budget Office

Chart 2-12. FEDERAL DEBT HELD BY THE PUBLIC
Strong economic growth allowed the debt-to-GDP ratio to fall until 1974,
but large budget deficits have caused it to rise since then.
PERCENT
(as , percent of GDp)

1,

9
4

.........................................................

K.

,

©
©

,

,

©

00

,

,

©

SO

©

,,

Nt

,
,

©

,

,

,

1940

1945

,

V

C




A Legacy of Failure

,---------- ,
1950

1955

,

,

,

1960

1965

1970

,---------- ,---------- 1

1975

1980

1985

,-----1990

NOTE: Equals gross Federal debt less Federal debt held la Federal government accounts and by the Federal Reserve.

19

A Legacy of Failure

Chart 2-13. HEALTH CARE EXPENDITURES

Chart 2-14. HEALTH CARE EXPENDITURES

20




What We Must Now Do
To renew America, we must be bold.

Bill Clinton

Change Is Imperative




To reverse the legacy of failure and move toward our vision of the future,
drastic changes in Federal policy are needed. We must soberly take stock of
where we are and dedicate ourselves to revitalizing our economic future.

The over-arching theme of the Clinton Administration’s economic plan is
increasing public and private investment in the broadest sense. To ensure more
productive, higher-wage jobs and greater economic opportunities for ourselves
and our children, we need to devote a larger share of our current resources to
modernizing factories and equipment, developing skills, and accelerating the
advance of technology. We must increase the share of the Government’s budget
devoted to investment in future growth and must create incentives for the
private sector to shift from consumption to investment. The need to increase
investment motivates all three elements of the Clinton economic plan: stimulus,
investment, and deficit reduction.
The stimulus package is designed to ensure that recovery from recession is
strong and durable. It will provide a boost to the economy in the short run and
create up to half a million new jobs. What we call stimulus in this plan,
however, is not a conventional prescription for adding to consumer demand by
cutting taxes or creating make-work jobs. Instead, it is a down payment on
longer-run investment. We selected some investment projects that could be
started quickly—especially those that would create a significant number of new
jobs—and get a fast start on these projects. Spending proposals in the stimulus
package will be included in a request to Congress for supplemental funds for
1993. All of the proposed spending in the stimulus package is consistent with
the proposals for longer-term public investment. Tax incentives for immediate
increases in investment by large and small business are also a vital part of the
stimulus package.
The investment package proposes major additions to ongoing activities that
expand America’s capacity to produce and provide more opportunities for
current and future workers. It is designed to help fill the investment deficit by
increasing spending for highways and other infrastructure, to enhance the
opportunities and skills of future workers, to accelerate the development and use

21

What We Must Now Do

of science and technology, to improve the delivery of health care for
underserved groups, and to increase incentives and opportunities for productive
employment. Tax incentives for business investment also continue.

The deficit reduction plan makes a vital contribution to increasing investment
and raising standards of living by gradually reducing the structural deficit in the
Federal budget. Cutting the deficit will reduce the Federal Government’s drain
on national savings, lower long-term interest rates, and encourage productive
private investment.
The deficit reduction plan is a balanced mix of cuts in ongoing spending and
selected tax increases. We believe it is fair, that it contains many changes that
would be desirable even without the necessity for deficit reduction, and that it is
a bold assault on the structural deficits that threaten our future prosperity.
TABLE 3-1. HIGHLIGHTS OF THE PLAN
(In billions of dollars)

1993

1994

1995

1996

1997

319

301

296

297

346

390

1,241

1,630

Spending Changes:
Defense Discretionary.........................
Nondefense discretionary..................
Entitlements........................................
Social Security......................................

1
_*

-7
-4
-6
-3

-12
-10
-12
-6

-20
-15
-24
-6

-37
-20
-34
-7

-36
-23
-39
-8

-76
-50
-76
-21

-112
-73
-115
-29

Subtotal...........................................
Debt Service.......................................

*
*

-20
_*

-40
-3

-65
-7

-98
-14

-106
-22

-223
-24

-329
-46

Baseline Deficit....................................

Total spending cuts (-)..............

1

-20

-43

-73

-112

-128

-247

-375

Revenue increases (-)........................

-3

-46

-51

-66

-83

-82

-246

-328

Gross deficit reduction......................

-2

-66

-93

-139

-195

-210

-493

-704

8

2
20
17

1
32
15

*

*

6

6
9
13

39
15

45
17

9
100
60

9
144
77

Total stimulus and investment..

15

27

39

47

55

62

169

231

Total Deficit Reduction..........................

13

-39

-54

-92

-140

-148

-325

-473

Resulting Deficit...................................
Deficit as a percent of GDP..............

332
5.4%

262
4.0%

242
3.5%

205
2.9%

206
2.7%

241
3.1%

916
3.3%

1,157
3.2%

Stimulus and investment:
Stimulus outlays.................................
Investment outlays................................
Tax incentives.....................................

* $500 million or less.

22




1994- 19941997 1998
1998 Total Total

What We Must Now Do

Economic Assumptions




Budget outcomes are determined in part by die performance of the economy.
Hence, any budget proposal must rest upon assumptions about future changes in
the key economic variables: real economic growth, inflation, unemployment,
and interest rates. The more optimistic the assumed path of those economic
variables, the smaller future deficits will appear to be.

Unfortunately, in recent years, unrealistically optimistic economic assumptions
have become a standard substitute for responsible budget choices. Instead of
proposing unpopular measures—reducing spending and raising taxes—to bring
the deficit down, budget planners have assumed lower unemployment and
higher growth rates to make future deficits look smaller. But these budget
planners could reduce unemployment and raise the growth rate only on
paper—not in the real world.

This statistical manipulation has masked the true size of the deficit problem,
postponed necessary choices about how to solve it, and resulted in higher
national debt. Moreover, the use of rosy scenarios has eroded trust in
Government broadly, and in economic policymaking in particular. The American
people have been so disappointed by economic programs that have promised
instant prosperity and failed to deliver that they could dismiss out of hand even
a solid program of private investment through deficit reduction and carefully
targeted public initiatives.
This Administration’s economic program provides no gimmicks and promises,
no instant gratification. Instead, it proposes the difficult and often unglamorous
steps necessary to ensure prosperity over the long run. To make this message
clear, and to direct the public debate to the substance of the program rather than
to imagined immediate rewards, the Administration has deliberately chosen
cautious economic assumptions that some may even regard as overly
pessimistic.

In an effort to avoid controversy over the forecast, the Administration used the
economic assumptions that the Congressional Budget Office (CBO) used in its
January 1993 report to Congress. The Administration thus assumes that the
economy will continue to recover from the recent recession at a pace well below
the historical average, with real annual economic growth peaking at 3 percent.
Over the longer term, as the economy approaches full utilization of its capacity,
real growth is projected to slow gradually to only 2 percent per year. This
estimate marks the low end of the consensus range among economists, and
significantly limits the measured benefit of the Administration’s economic
program.
Because productivity growth is projected to be slow, even this modest rate of
growth of GDP implies a steady decline in the unemployment rate. The forecast
assumes that unemployment will reach its minimum level consistent with low

23

What We Must Now Do

inflation—about 5.5 percent unemployment—shortly after the end of the
five-year forecast period.

In part because of this modest economic growth, die inflation rate is projected to
decline: with slow economic activity and hence limited consumer demand,
producers have little latitude to raise prices. Consumer prices are expected to
increase in the long run by only 2.7 percent per year; prices of economic output
produced in the United States, measured by the GDP implicit deflator, increase
by only 2.2 percent in the long run. (The GDP deflator increases more slowly
than the consumer price index because computers, whose prices are falling in
quality-adjusted terms, make up a greater share of the former index than of the
latter.) Though the American public might be gratified by such modest inflation,
it will offer little reward in terms of die budget deficit: slower inflation helps to
hold spending down, but it also reduces tax revenues.
The deficit is highly sensitive to interest rates, however, and interest rates are
themselves highly sensitive to inflation. When inflation is expected to increase,
for example, lenders tend to demand higher interest rates to protect the
purchasing power of the money that will be returned to them. The
Administration assumes that the projected decrease in inflation will be passed
through to the long-term interest rates that die Treasury must pay approximately
point for point. This is a cautious assumption because inflation-adjusted
long-term interest rates may have remained at their current near-record levels in
spite of a moderation of inflation because lenders fear that inflation could
accelerate in the near future. One might expect that several more years of
modest economic growth and low inflation would assuage those fears and bring
long-term interest rates down much closer to their historical average. If they do
not, die Government’s projected interest costs—and budget deficit—will be
higher. Further, the Administration projects that short-term interest rates will
increase by more than a full percentage point, even though growth remains
modest and the inflation rate falls.

Taken together, these assumptions constitute almost a worst-case forecast of die
likely course of the economy. On every score, the elements of die forecast work
against the attainment of the desired budget outcomes.
This Administration does believe, however, that enacting its economic program
will provide significant rewards for both the economy and the budget.
Accordingly, we provide an alternative economic forecast that is conditional
upon enactment of our program (See Table 3-2) (in fact, such a “post-policy”
forecast in the budget document is required by law). Though we do not present
detailed budget data based on this forecast, we do illustrate the effect of a more
favorable economic performance on the deficit itself.

24





339-885 - 93 - 2


What We Must Now Do

TABLE 3-2. ECONOMIC ASSUMPTIONS
(Calendar years)
1992

BASELINE ASSUMPTIONSM

1993

1994

1995

1996

1997

1998

Percent Change, Fourth Quarter Over Fourth Quater

Real GDP Growth.................................

2.7

2.8

3.0

2.8

2.6

2.2

1.8

GDP Deflator Growth...........................

2.4

2.5

2.4

2.3

2.2

2.2

2.2

Consumer Price Index Increase.........

3.1

2.8

2.7

2.7

2.7

2.7

2.7

Annual Average

Unemployment Rate (civilian).............

7.4

7.1

6.6

6.2

6.0

5.8

5.7

91-Day Treasury Bill Rate...................

3.5

3.2

3.7

4.3

4.7

4.8

4.9

10-Year Treasury Note Rate...............

7.0

6.7

6.6

6.6

6.5

6.5

6.4

1992
ADMINISTRATION POLICY

1993

1994

1995

1996

1997

1998

Percent Change, Fourth Quarter Over Fourth Quarter

Real GDP Growth.................................

2.9

3.1

3.3

2.7

2.5

2.5

2.5

GDP Deflator Growth...........................

2.4

2.8

2.9

3.0

3.0

3.0

3.0

Consumer Price Index Increase.........

3.1

3.0

3.1

3.3

3.3

3.4

3.4

Annual Average

Unemployment Rate (civilian)............

7.4

6.9

6.4

6.1

5.9

5.7

5.5

91-Day Treasury Bill Rate..................

3.5

3.7

4.3

4.7

4.8

5.0

10-Year Treasury Note Rate..............

7.0

6.7

6.6

6.5

6.5

4.9
6.4

6.4

Our post-policy economic forecast assumes that the economy will recover
somewhat more quickly from the current recession, and that its sustainable
growth rate in the long run will be 2.5 percent rather than 2.0 percent. This
increase in growth reflects greater optimism about productivity, at least partially
attributable to the Administration’s program of deficit reduction. It also reflects
moves to bring down interest rates (with the cooperation of the Federal
Reserve), a development that will itself further encourage private investment.
The increase in growth is also expected to stem from the Administration’s
stimulus package in the near term, and from its program of investment in
productive public and human capital in the longer run. Even this projected
growth rate, however, is only at the midpoint of the consensus of economists 'for
the average rate in the economy. In other words, even this more optimistic
post-policy forecast is really rather cautious.

The Administration expects that this more rapid economic growth will help to
bring unemployment down. In contrast to our baseline forecast, we project that
unemployment will reach 5.5 percent on an annual basis before the end of the
five-year period.

25

What We Must Now Do

We expect that the economic activity added by the Administration’s program
will increase inflation slightly. The ultimate rate of increase of the GDP deflator
is 3.0 percent, or almost a full percentage point per year higher than the baseline
forecast; for consumer prices, inflation is about 0.7 percent per year faster in the
long run.
Despite the additional inflation, we expect that interest rates will be about the
same as in the baseline forecast. This means that inflation-adjusted interest rates
will be lower. The Administration believes that this expectation is realistic
because our proposed substantial reduction of the budget deficit will reduce both
federal demand in the credit markets and the risk of a future increase of
inflationary pressures.

The Administration’s economic assumptions based on the enactment of its
program are themselves close to the mainstream of economic opinion. We
believe that this forecast presents a reasonable expectation of the benefits of our
program of increased private and public investment. We supplement our
presentation of the program with the resulting deficit computations to show that
sound policy will be rewarded beyond any transient cost.

26



What We Must Now Do

Ensuring Economic Recovery and Creating Jobs: Economic Stimulus

First things first. None of the things we want for America can be accomplished
while millions of our citizens are unemployed and hundreds of billion of dollars
of industrial capital lie idle. Americans will not tolerate another false start; and
they shouldn’t. We must get our economy moving again—and producing jobs.

Two criteria guided the design of the stimulus package.

Speed. Any tax reductions or spending programs included in the package had to
be fast-acting and job-creating. The unemployed have waited too long. We
consulted with mayors and governors as well as with all the major agencies to
ensure that the money requested in 1993 could be obligated quickly for projects
that were ready to go and that workers would be hired right away—this
summer—to work on them.
Content. Items selected for inclusion had to be worthwhile on their merits and
consistent with the long-run goal of shifting the nation’s attention to its future.
The stimulus package is a down payment on the Administration’s long-run
investment program. For example, our long-run investment plan puts major
emphasis on ensuring that all children get a healthy start in life and come to
school ready to learn. To generate major new efforts for children quickly, we
included these elements in the stimulus package: summer Head Start, an
increase in funding for the Supplemental Food Program for Women, Infants and
Children (WIC), and a fast start on a new immunization initiative. Similarly, the
investment package stresses the improvement of our nation’s infrastructure,
including major upgrading of our highway network. Hence, the stimulus
package includes funding for highway projects that can be started quickly,
especially repair and resurfacing projects that can employ workers soon.

The Size of the Stimulus




The Administration proposed its economic stimulus program in part to provide
insurance for the twice-stalled economic recovery. The economy harbors heavy
imbalances: large accumulations of debt by households, businesses, and
governments at all levels; shaky financial institutions; an enormous overhang of
vacant commercial real estate; and extraordinary competition from imports.
These imbalances make the course of recovery far less predictable than it was
after past recessions. The impact of substantial corporate downsizings, though
they were announced over the last two years, is yet to be fully translated into
actual layoffs. The defense base closings that were absorbed in the national
consciousness over the last three years are just beginning to be realized; and
more defense conversion is yet to occur as the Cold War fades into history.

27

What We Must Now Do

Thus, we have an economy that may have achieved a self-sustaining recovery,
but that is operating well below its capacity. The unemployment rate is still
higher than it was at the bottom of the recent recession, and inflation remains
well under control—in part under intense competition from imported products.
The risks posed by a short-term economic stimulus are thus small; and the
rewards—in greater near-term economic growth and in forestalling any possible
relapse into recession—are significant.

Under these circumstances, the Administration has chosen a stimulus program
that is substantial enough to provide real impetus to the recovery, but that is
small enough to avoid jarring the financial markets or triggering inflation. The
program is targeted to the investments in the administration’s long-term
economic program, on both the tax and the spending sides of the budget.
In spending, the stimulus program provides additional budget authority equal to
$16.3 billion—the amount by which the 1993 appropriations fell short of the
combined discretionary spending caps in the Budget Enforcement Act. Thus, the
discretionary spending proposed in the stimulus program will not increase the
deficit relative to what was outlined in the 1990 budget agreement.
The program also increases the obligation limit for transportation funding under
the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) by $3.0
billion. This increase allows for full funding of the portion of ISTEA devoted to
Federal-aid highways, and also increases potential obligations for the Airport
Improvement Program and mass transit. The stimulus further includes $3.3
billion to increase loan levels, primarily for the Small Business Administration
7(a) loan guarantee program. Of that amount, $220 million is specified as the
long-term budget subsidy.

In tax incentives, the program provides over $12 billion in temporary
incremental investment tax credit. This provision will be available through
calendar year 1994; over $6 billion will be received by taxpayers as reductions
in liabilities in 1993.

While much of the additional budget authority will not be spent in 1993, the
near-term economic impact will be greater than the outlay figures indicate.
Many of the investment programs—including prominently the ISTEA highway
program—will result in binding contracts with private firms within the fiscal
year, even though payments will not be made until the work is completed in
later years. Those contractors will hire workers and begin work immediately.
Thus, the contractual obligations will trigger economic activity even before
outlays register in the budget itself. Likewise, private investors will commit
themselves to investment projects because of the stimulus program’s investment
tax credit before they can actually claim the tax savings on their returns.
This economic stimulus will be felt most directly in the creation of new jobs;
the lack of new jobs especially marks the current recovery, and constrains the
spending needed to create a self-sustaining economic expansion. Several of the
spending programs in the stimulus package—particularly community develop-

28




What We Must Now Do

ment block grant assistance to States and localities, and highway programs—
promote substantial job creation. The youth summer jobs program of the Job
Training Partnership Act, as well as the summer Head Start program, will have
particularly strong impacts in the summer months. The investment tax credit and
even the longer-term business incentives will stimulate spending on capital
goods and thereby promote hiring in the private sector. We estimate that the tax
and investment proposals together will create almost 500,000 new jobs by the
end of 1994.
All told, this plan provides almost $30 billion in outlays and tax incentives in
1993 and 1994. This stimulus will provide insurance against renewed economic
weakness in die near term; create jobs; help boost the recovery; add to
economic growth over the next two years; cushion the beginning of the
Administration’s deficit reduction program; and begin the investment program
that will lay the foundations for enhanced private-sector productivity and
prosperity.

Infrastructure




One of die key elements of the Administration’s long-term investment package
is the strengthening of our nation’s infrastructure. Some of the initiatives in that
area can be advanced into 1993, providing an immediate impact on jobs and
economic growth. In this category, the stimulus package contains transportation
projects, Army Corps of Engineers water projects, and improvements in
deteriorating Department of Veterans Affairs medical facilities. Details of these
investments follow.
Transportation/Federal-aid highway program. The Administration proposes to
expand the Federal-Aid Highway program to the levels contained in the
Intermodal Surface Transportation Efficiency Act (ISTEA) for 1993. This will
require increasing total obligations for Federal-aid Highways from the current
level of $17.7 billion to $20.6 billion, a 17-percent increase of almost $3 billion.
More than one-third of the increase will be directed to fast-spending resurfacing,
rehabilitation, and restoration projects, which can proceed quickly and bring
jobs on line most rapidly. This measure will create an additional 13,000 jobs in
1993 and 45,000 in 1994. This increase will improve the conditions and
performance of the 155,000 mile National Highway System. This system carries
over forty percent of all highway traffic.

Transportation/Mass transit capital improvements. The Administration pro­
poses to increase 1993 funding for mass transit capital improvements by $736
million. The funds will be used to replace over age buses and vans, and to fund
rail cars and rail rehabilitation projects. Of the $736 million, about $270 million
will be entirely devoted to quick-to-acquire bus and van purchases, while the
remaining $466 million may be used for either bus or rail capital purposes. This
initiative will create more than 9,000 jobs in 1993 and 1994. The bus/van

29

What We Must Now Do

program will permit the acquisition of more than 100 full-size buses, 1,800
small buses, and 2,000 vans.

Transportation/Amtrak capital projects. This initiative provides $188 million
for AMTRAK to purchase new train cars and locomotives, modernize stations
and maintenance facilities, and overhaul aging equipment. These will help to
improve Amtrak’s financial performance, moving it closer to achieving
operating self-sufficiency.
Transportation/Airport grants. Many of the Nation’s airports are congested,
resulting in unacceptable delays for air travelers. Growth in air travel in the
future will only add to the problem. Increased airport capacity can help reduce
delays, speed air travel, and increase safety in many cases. This proposal to add
$250 million for airport grants in 1993 will enable airports to undertake safety
and capacity improvement projects that are “ready-to-go”.

Army Corps of Engineers water project construction and cyclic maintenance.
The Administration proposes an additional $94 million to speed construction of
about 30 projects nationwide for flood damage reduction, inland waterway and
deep-draft harbor transportation, hydropower, environmental restoration, and
recreation.
Veterans Affairs/Medical Care and Minor Construction. The Administration
proposes $235 million to fund much needed improvements, largely in VA
medical facilities, such as roof repairs, interior finishing, utility systems
upgrades, and projects to ensure compliance with current safety and fire codes.
This investment will create more than 4,000 jobs in an eight-month period.

A Summer of Opportunity
The Administration’s stimulus package seeks to expand the opportunities for
learning for children, youth, and workers while providing thousands of jobs,
particularly during the summer months. In several instances, the initiatives are
the leading edge for a specific program contained in the long-term investment
plan.
HHS/Head Start Summer Program. The Administration is proposing a new
Head Start summer program, which eventually would enroll up to 350,000
disadvantaged children. The purpose of the program is to help the youngest
pre-school and school children to retain the social and intellectual gains made
during the school year. It would expand the proven benefits of Head Start to the
summer months and reduce further the learning disadvantages faced by children
served by the program. This initiative would employ up to 50,000 Head Start
staff (12,500 full-year equivalent) during 1993.

Education: Chapter 1 Summer School Program. The Administration proposes
new, one-time supplemental funding of $500 million to expand summer school
programs in 1993 for educationally disadvantaged children. Funds would be

30






What We Must Now Do

allocated to schools with concentrations of poor children. About 14,000 full-year
equivalent jobs would be created.
Education: Chapter 1 Census Supplemental The proposal would provide $235
million in 1993 to substantially mitigate the effects on distribution of Chapter 1
funds caused by changes in the location of poor children in the U.S. that
occurred between the 1980 and 1990 censuses. The Chapter 1 compensatory
education program will, for the first time, use 1990 census data to distribute
1993 appropriations used during the 1993-94 school year. The total number of
poor children ages 5 to 17 increased between 1980 and 1990, and the
distribution of those children shifted. Poor children are increasingly concentrated
in the schools of the western States and less concentrated in the schools of the
eastern States. The supplemental will ease the transition to a smaller
compensatory education program in communities that would otherwise have the
size of their Chapter 1 grants substantially reduced for the 1993-94 school year.

Agriculture/fYIC Program. The Administration proposes to expand 1993
funding by $75 million for the Special Supplemental Food Program for Women,
Infants, and Children (WIC), which pays for supplemental foods, health care
referrals, and nutrition education for low-income pregnant and post-partum
women, infants, and children under 5 years of age who are found to be at
nutritional risk. The increase will permit the program to serve 300,000
additional participants, most of whom will be children ages 1-4. It is a down
payment on the Administration’s commitment in the long-term investment plan
to provide full funding for WIC so that it serves all eligible children.
Agriculture/Emergency Food Assistance Program. The Administration pro­
poses to provide $23 million worth of food to the States through The
Emergency Food Assistance Program (TEFAP). This successful program
provides surplus food to about 2.5 million needy households and has been an
important weapon in the Nation’s arsenal against hunger.

HHS/Childhood immunizations. The President’s plan to increase childhood
vaccinations will immunize one million children during the summer of 1993.
The Administration proposes to award $300 million to support a communitybased effort to finance vaccine purchases and education and outreach
campaigns. This program will help to raise the Nation to the standards of child
immunizations set by other advanced countries, which we have fallen far
behind. Too many families are deterred by outrageously high costs from having
their children immunized. The President intends to end that problem.
Labor/Summer Youth Employment and Training Program. Young Americans
have an especially hard time finding jobs. The problem is worse for
disadvantaged youth, and worse yet in die cities. The Summer Youth
Employment and Training Program employs economically disadvantaged youth
ages 14 to 21 to work at public and nonprofit agencies during die summer
months. The Administration proposes to boost program funding by $1 billion in
the summer of 1993. This will finance almost 700,000 summer jobs, bringing to

31

What We Must Now Do

nearly 1.4 million the total number of youth who could participate in the
program. Approximately one-half of this summer’s funding will be concentrated
on the 100 American cities—small and large—with the greatest number of
eligible youth. The public summer jobs program will be coupled with and
complemented by a campaign to expand private summer job opportunities for
young Americans.
National Service. This is a first step in the President’s long range national
service initiative. The Administration proposes to implement a program in the
summer of 1993 to train a core group of leaders to spur service around the
country. Combining leadership training with service, this initial phase of the
national service initiative will cost $15 million.

Extension of Emergency Unemployment Compensation. For millions of
workers, the apparent recovery has not brought employment opportunities. The
rate of job growth in the economy relative to past recoveries has been extremely
sluggish. The Administration proposes to extend the current Emergency
Unemployment Compensation program for seven months, through October 2,
1993. The program provides an additional 20 to 26 weeks of support for
workers who have exhausted their regular unemployment benefits. The net
estimated cost is $5.6 billion over two years.
Education/PeU Grant unfunded shortfalls. The Administration proposes to
make up shortfalls in the Pell Grant program, providing over $2.0 billion to
ensure that the program is funded at estimated current law levels through school
year 1993-94.
HHS/AJDS/Ryan White Act. To initiate the President’s long-term investment
plan to fully fund HIV/AIDS prevention efforts under the Ryan White Act, the
Administration proposes to increase funding for 1993 grants by $200 million.
These programs focus on AIDS prevention efforts.

Agriculture/Child and Adult Care Food Program. The Administration proposes
an increase of $56 million for the Child and Adult Care Food Program, which
pays for meals and snacks at Head Start centers, to serve the children in the
proposed Summer Head Start program.
Labor/Worker profiling. The Administration proposes establishment of a $14
million program in 1993 and 1994 to assist the States in developing automated
systems to identify laid-off workers who may have difficulties in finding new
jobs, and to assist them in finding employment. This initiative seeks to respond
to the problems faced by many workers laid off because of business downsizing
and restructuring. Federal funding for this initiative will cover the up-front costs
of developing worker profiling systems in the States.

Labor/Community Service Employment for Older Americans. The Administra­
tion proposes $33 million to expand participation in the Community Service
Employment for Older Americans program, which offers low-income seniors
meaningful work experience in community service projects. This investment
will finance over 5,000 jobs in the current year.

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What We Must Now Do

Interior/Bureau of Indian Affairs (BIA) School Operations. The Administra­
tion proposes that $49 million be provided to cover currently identified
shortfalls in funding due to rising enrollments to improve the educational
performance of over 40,000 Indian students at the elementary and secondary
level attending BIA-funded schools.

Equal Employment Opportunity Commission. Financing of $9 million for
additional staff to enforce the Americans with Disabilities Act and the Civil
Rights Act will help stem the ballooning backlog of cases filed under those
Acts.

Technology Investments




A very important part of the Administration’s efforts to promote long-term
economic growth is to increase investment in new, productivity-enhancing
technology. A number of such projects are funded in the stimulus package
because they can be initiated quickly, with immediate increases in jobs.

Industry-Led Federal R&D at the National Institute of Standards and
Technology (NIST). The Advanced Technology Program at the National
Institute of Standards and Technology provides matching grants for industry-led
research projects for the development and commercialization of pre-competitive
generic technologies and refining manufacturing practices. The Administration
proposes $103 million for the program in the current fiscal year.
Commerce/Information Highway Demonstrations. The development of a
broadband, interactive telecommunications network linking the Nation’s schools,
libraries, health care facilities, governments, and other public information
producers could pay enormous dividends to the U.S. economy. Interactive
networks such as this are in their very early stages of development. The
Administration proposes to make $64 million available to the Department of
Commerce’s National Telecommunications and Information Administration to
accelerate development of such information highways.

National Science Foundation/Research and development Investments in
research and development (R&D) tend to be the strongest and most consistent
positive influence on productivity growth. Most of the National Science
Foundation’s (NSF) investments are in competitively selected university-based
R&D programs. These activities contribute to the nation’s productivity by
generating new scientific and engineering knowledge and contribute to the
training of the next generation of scientists and engineers. The Administration
proposes an investment in 1993 of $188 million to restore NSF funding to
roughly the level that was planned for in 1993.

Networking and computer applications. The Administration proposes that
programs be initiated at the National Institute of Standards and Technology, the
National Science Foundation, the National Aeronautics and Space Administra­
tion, and the National Institutes of Health to develop applications which use

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What We Must Now Do

advanced computers and communication networks to solve problems in health
care, education, manufacturing, and access to library information.

National Oceanic and Atmospheric Administration equipment acquisition. The
Administration proposes an investment of $81 million to accelerate the
modernization of National Weather Service and central NOAA data systems, to
procure hardware for more efficient utilization of the nation’s fisheries, to
improve weather prediction technologies, and to further climate and atmospheric
research in areas of global concern such as atmospheric ozone.
HHS/Disability Insurance processing. The Administration proposes that $302
million be provided to help the Social Security Administration reduce delays in
processing of Disability Insurance claims, review cases earlier, and make other
improvements to improve delivery of services. There has been a tremendous
backlog of Disability Insurance claims in recent years, which this investment
would help alleviate.
Treasuiy/Accelerate implementation of Internal Revenue Service Tax System
Modernization. The IRS is now operating with severely outdated computer
equipment. Through Tax System Modernization (TSM), the IRS is undertaking a
multi-billion-dollar, decade-long effort to re-invent its operations. The
Administration proposes fiscal stimulus funding of $148 million to enable the
IRS to accelerate several TSM projects and replace computer and telecommuni­
cations equipment that in many cases is nearly ten years old. This is a down
payment on a long-term investment in the IRS modernization program.

Urban Development and Housing Initiative
The fiscal stimulus contains several initiatives to provide additional resources
for housing and other development in the Nation’s urban areas. These efforts are
critical to our hopes of reviving our cities.

Housing and Urban Development/Community Development Block Grants.
Community development projects are an important source of jobs and economic
development in America’s communities. States and local governments have a
backlog of unfunded projects that are ready to begin, such as basic street and
bridge work, painting and resurfacing, building rehabilitation, and public service
projects. The Administration proposes a one-time supplemental appropriation of
$2.5 billion for Community Development Block Grants to fund such projects
and create about 60,000 jobs during 1993-1995. The Administration will
propose modifications to the program to ensure that projects have an immediate
economic impact.

Commerce/Economic Development Administration grants. The Administration
proposes $94 million for Economic Development Administration awards to
economically distressed areas to rebuild basic infrastructure—industrial parks,
water and sewer improvements, and access roads to industrial sites. The grants
are also for the purpose of planning for economic development.

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What We Must Now Do

Minority Business Development Administration. $2 million is proposed for the
Minority Business Development Administration to support the provision of
technical assistance to minority businesses through a nationwide network of 107
centers. These centers help minority businesses write loan applications, develop
marketing plans, and upgrade accounting practices.
Housing and Urban Development/Accelerate HOME investment partnership.
The Administration proposes to speed the spendout of $2.5 billion in previously
released affordable housing funds by regulatory and statutory changes to
increase participant flexibility and information, and training to improve public
understanding of the program. These changes will increase the rate at which
existing funds can begin to create jobs and boost the local economy.
Housing and Urban Development/Accelerate public housing modernization. A
substantial amount of funds in HUD’s modernization program remain unspent.
Explanations for this “backlog” of unspent funds—the time-consuming process
of getting the funds out of HUD to the public housing authorities, inefficient
management and planning on the part of public housing authorities—make the
problem more comprehensible but no more tolerable to this Administration.
Accelerating the spendout will not only stimulate the economy but also help to
ensure a better quality of life for public and Indian housing residents. This
measure will create over 10,000 jobs during 1993-1998. It will result in the
repair/restoration of approximately 2,500 more public housing units in 1993 (or
31,800 more public housing units 1993-1998).

Housing and Urban Development/Supportive Housing Program. The Admini­
stration proposes an accelerated investment of $423 million in the Supportive
Housing Program, which assists homeless persons not only with shelter but also
with the root causes of homelessness. The Administration will propose
modifications to ensure that these funds go to projects ready for immediate
implementation. This proposal will create over 10,000 new jobs during
1993-1995.

District of Columbia. The Federal Government makes an annual payment to the
District to compensate it for the net cost of the large Federal presence in the
nation’s capital. The 1993 Federal payment was reduced below the amount the
Mayor requested to help balance the District’s budget. The Administration
proposes $28 million to reduce the District’s budget deficit.

Rural Development Initiative




The Nation’s rural areas were among those hardest hit by the recent recession.
The fiscal stimulus plan provides a number of key initiatives to provide needed
assistance for the special concerns of rural areas.

Agriculture/Rural water and wastewater loans and grants. Water quality is a
matter of increasing concern in cities and towns across the U.S. Drinking water
and sewage treatment systems serving small, mostly rural populations currently

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What We Must Now Do

have the highest rates of noncompliance with Federal environmental standards.
Without Federal assistance, rural areas often find compliance very difficult to
achieve. The Administration proposes an estimated additional $470 million in
loans and $281 million in grants for the Rural Development Administration to
help poor rural communities comply with clean water standards.

Agriculture/Food Safety and Inspection Service. The Administration proposes
to add meat and poultry inspectors, at a cost of $4 million, to improve the
Federal meat and poultry inspection system to help reduce the risk of future
food poisoning outbreaks.

Agriculture/Forest Service natural resource protection and environmental
infrastructure initiative. This is one part of an Administration proposal to
protect and rehabilitate America’s inventory of natural and cultural assets,
restore the facilities that protect these resources, and improve public access to
them. This funding would complete the inventory of ready-to-go resource
protection projects, facility maintenance, rehabilitation and construction, and
other similar projects that stimulate economic growth and employment in rural
and urban areas. This investment will total $188 million in 1993.
Agriculture/Farmers Home Administration low-income housing repair loans
and grants. The Administration proposes $6 million in grants and $3 million in
loans for a Farmers Home Administration program that helps rural, very
low-income applicants to repair or rehabilitate their homes in order to remove
safety and health hazards.

Agriculture/Single Family Housing Guaranteed Loans. This proposal would
increase the single-family guaranteed loan authority by $235 million. The 1993
level of $329 million is expected to be used by May 1993. Given the increased
demand for this program, because of lower commercial interest rates, the
proposed increase would meet the remaining demand for this program.
Agriculture/Soil Conservation Service watershed projects. The proposed
stimulus includes $47 million to fund a backlog of projects to address
emergency watershed problems resulting from natural disasters, soil erosion,
sedimentation, and flood damage that affect public health and safety.

Agriculture/Agricultural Research Service facility maintenance. The Admini­
stration proposes $38 million to finance repairs and accelerate hazardous waste
clean-up at aging Federal agricultural research laboratories. There are
approximately 30 hazardous waste clean-up projects planned, including removal
of underground storage tanks and clean-up of pesticide spills.
Interior/Economic development on Indian reservations. $39 million is
provided to upgrade roads, improve school facilities, and subsidize loan
guarantees for reservation facilities, hotels, and office buildings.

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What We Must Now Do

Environment and Energy Initiatives




The Administration’s initiatives offer certain proof that environmental protection
and economic growth can—and must—go hand in hand. These proposals
represent a down payment not only on longer-term investments, but also on
creating a cleaner world for ourselves and our children.
Interior/Natural resource protection and environmental infrastructure initia­
tive. This is one part of an Administration proposal to protect and rehabilitate
America’s inventory of natural and cultural assets, restore the facilities that
protect these resources, and improve public access to them. This funding would
complete the inventory of ready-to-go resource protection projects, facility
maintenance, rehabilitation and construction and other similar projects that
stimulate economic growth and employment in rural and urban areas. This
investment of $349 million in 1993 would create over 11,000 jobs. Much of the
investment would be earmarked for the National Park Service alone, including
increased operational funds to keep open areas that were previously scheduled
for closure during 1993.
Interior/ffistoric preservation funding for repair and deferred maintenance
projects. The Administration proposes $23 million to fund a backlog of brick
and mortar rehabilitation projects, emergency surveys, engineering reports, and
deferred maintenance at National Trust for Historic Preservation Museum
properties across the Nation, and other priority projects.

Environmental Protection Agency/Watershed resource restoration. The Ad­
ministration proposes $47 million to reduce non-point source pollution which
poses a threat to the Nation’s water quality.

Environmental Protection Agency/Voluntary “Green” programs. The Admini­
stration proposes to expand EPA’s voluntary “Green” programs by $23 million
in 1993 over the current $8 million funding level. The program encourages the
Nation’s business community to seek ways of increasing energy efficiency.
Environmental Protection Agency/Wastewater treatment project. The Admini­
stration proposes $845 million in capitalization grants for the construction of
sewage treatment facilities. This would accelerate completion of an $18 billion
wastewater treatment grant authorization that is scheduled to end in 1994. This
investment creates about 16,000 jobs over the four year period 1993-1997.

Cooperative Research and Development Agreements. CRADAs are one of the
mechanisms by which the national laboratories can work with industry to
transfer lab-developed technology and know-how to the private sector. Current
funding for non-defense CRADAs is $9 million in 1993, but there is more
demand from industry for assistance through CRADAs then can be met with
that funding, This increase will allow additional lab scientists to work with
industry. In addition, $47 million in 1993 funds appropriated for research and
development of nuclear weapons at DOE’s defense laboratories will be
redirected to research in dual use technologies.

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What We Must Now Do

Energy/Weatherization Assistance Program. The Administration proposes $47
million (conditioned on matches from States or utilities) to encourage State
weatherization programs to take advantage of utilities’ demand-side management
(rebate and discount) programs, assuring that funds go to States that demonstrate
a serious commitment to low-income weatherization activities. Approximately
62,500 additional homes will be weatherized over the currently projected
number.

Energy/Building and industrial conservation. The Administration proposes $19
million in cost-shared funding (50 percent) for “model projects” that
demonstrate or accelerate the commercial acceptance of advanced energy
conservation technologies and products.
Energy/Alternative fuel vehicles. The Administration proposes $28 million for
the acquisition of and/or conversion to additional alternative fuel vehicles in the
Federal fleet.

Federal buildings energy efficiency. An additional investment of $19 million is
proposed to improve energy efficiency in facilities throughout the Federal
Government.

Stimulus: Tax Incentives
The plan also contains carefully targeted tax provisions designed to provide an
immediate boost to investment in the short term, and to encourage capital
spending over the long run.

Permanent small business tax credit Small businesses will now be eligible for
a permanent investment tax credit on their equipment. The credit will generally
be 7 percent in 1993 and 1994 and 5 percent thereafter. Small businesses
operate at the margin and need a permanent incentive to invest, grow and
provide new employment opportunities. At the same time, the decrease in the
rate from 7 percent to 5 percent after two years will provide an incentive to
accelerate investment and add support for the current recovery.
Temporary marginal investment tax credit for all business. Businesses will also
be eligible for a tax credit on qualifying investments; the credit will be
temporary and will apply only to “marginal” investment acquired between
December 3, 1992 and December 31, 1994. The credit will amount to 7 percent
in 1993 and 1994, with somewhat lower rates applicable to shorter-lived
property. To ensure that the credit is targeted to marginal investment by large
companies, the credit each year is applied to investment over an historic base.
Simplifying and enhancing depreciation provisions for companies subject to
the alternative minimum tax (AMT). Currently, property is depreciated for
AMT purposes over a substantially longer period than for regular tax purposes.
(For example, commercial aircraft are depreciated over 7 years for regular tax
purposes and 12 years for AMT purposes.) In addition, a corporation subject to
the AMT must compute three depreciation schedules for federal tax purposes.

38






What We Must Now Do

The proposal substantially enhances the investment incentives for taxpayers
subject to the AMT and simplifies the AMT by using the shorter regular tax
depreciable lives for minimum tax as well as regular tax purposes. Thus, one
depreciation period will be used for computation of both the minimum and
regular tax, although the rate of depreciation will remain less rapid under the
minimum tax than under the regular tax.

Because they reduce the net cost of acquiring depreciable assets, the investment
tax credit proposals will stimulate investment by both small and large
businesses. The investment tax credit proposals, coupled with the liberalized
depreciation under the minimum tax, will provide a strong and lasting stimulus
to investment, encourage modernization of productive equipment, and help
create good jobs.

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What We Must Now Do

Investing in the Future: Increasing Public Investment
We must invest more in our people, in their jobs and in the future...

Bill Clinton
Even after economic recovery is assured, our real economic challenges remain
long term. The Administration’s vision of public investment to improve our
people’s productivity involves initiatives in a wide range of critical physical and
human capital priorities.

Rebuild America

Transportation




While our economic competitors have invested heavily in their infrastructure, we
have not done as well. To regain our economic edge, we must invest more. We
will upgrade our nation’s roads, bridges, mass transit, and airports; support
high-speed rail links between major cities; and create “information highways”
that link homes, businesses, schools and libraries to databases and public
records. These initiatives will put Americans back to work, spur productivity,
and make transportation safer, faster and easier for all Americans.
DOT/Expand the Federal-aid highway program to the levels contained in the
Intermodal Surface Transportation Efficiency Act (ISTEA). Full-funding of
ISTEA will maintain conditions and performance on the nation’s most important
roads, the National Highway System. It calls for $2.6 billion in obligations in
1994 above baseline spending amounts. The total increase through 1997 is $5.6
billion in outlays, targeted to high priority projects. This initiative will create
approximately 14,000 new jobs in 1994, and about 150,000 over a four year
period.

DOT/Accelerate “Smart cars/smart highways” (part of Federal-aid highway
program). The Intelligent Vehicle-Highways Initiative (IVHS) (also known as
“Smart cars/smart highways”) will improve traffic control systems, warn drivers
of dangerous situations, and make more efficient use of the existing highway
infrastructure. It will combine state-of-the-art communications, warning systems,
electronic displays, and computer technology. IVHS also has the potential to
make innovative highway policy such as “congestion pricing” a reality. The new
funding would increase advanced technology development (including artificial
intelligence, machine vision, and other defense-related technologies) that will
make the highways of the next century both safer and more efficient. 1997
obligations will exceed the baseline by $100 million and 1994—1997 obligations
will exceed the baseline by $345 million, a 50 percent increase over the
baseline.

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What We Must Now Do

DOT/Increase funding far mass transit capital improvements. This proposal—
implemented through the Federal Transit Administration’s formula grant
programs—will upgrade rail facilities and equipment by beginning to eliminate a
rail investment backlog recently estimated at $14 billion. The additional funds
will also replace ancient buses, vans and rail cars still in the U.S. transit fleet.
These newer vehicles will be not only safer and more efficient, but also more
accessible to disabled persons. Over four years an estimated $1.2 billion will be
invested (outlays), creating about 83,000 jobs.
DOT/Investment in magnetic levitation (maglev) and high-speed rail
transportation. Maglev and high-speed rail systems can meet die transportation
needs of several of the nation’s high-density corridors. These systems could
relieve congestion, improve air quality, reduce consumption of petroleum-based
fuels and improve safety. The funds could be used for construction of a maglev
prototype and/or to support the start-up of private or State/local high-speed rail
projects. Total increased outlays: over 1994-1997—about $646 million;
1997—$258 million.

DOT/Alcohol-related highway safety grants and other DOT capital These
grants to States will support programs that reduce alcohol-related traffic
accidents and increase the use of safety belts and motorcycle helmets. Other
DOT capital funds two important safety and environmental-protection projects in
the maritime area: (1) state-of-the-art Vessel Traffic Systems (VTS) in busy
ports and harbors, which reduce maritime accidents and the threat of hazardous
materials and oil spills; and (2) replacement of seagoing and coastal buoy
tenders—many of which are over 50 years old. The new vessels carry oil
recovery systems and require smaller crews, saving operating costs. Total
increased outlays: over 1994-1997—$201 million; 1997—$88 million.

DOT/Increase funding for airport grants. Investing in airport development
projects at both large and small airports will speed air travel, link remote
communities with opportunities elsewhere, and open up airports to different
aircraft and aviation uses. These projects include building or expanding runways
to increase capacity, removing obstructions to improve safety, or adding terminal
facilities and airport taxiways to speed the movement of airplanes on the ground.
Noise abatement projects permit these improvements to occur while minimizing
the impact on surrounding communities. Outlays over 4 years: $108 million.
1997 outlays: $44 million.
DOT/Increase funding for air traffic control modernization. Growth in air
travel is expected to result in more than a 25 percent increase in aircraft
operations at our major airports in the next 10 years. The Federal Aviation
Administration’s multi-year air traffic control modernization program, which
will help address this growth includes new radars, computers, controller
workstations and communications equipment, and the supporting R&D. Benefits
will include reduced air travel delays, more efficient aircraft routing, fewer
accidents and the more cost-effective operation of the air traffic control system.

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What We Must Now Do

Investment (budget authority) over 4 years: $720 million. 1997 investment: $200
million. Over 2,000 jobs will be created.

DOT/Public land highways and Indian reservation roads. Many national parks,
forests, and Indian reservations are located in rural areas of the country where
roads are unpaved or impassable. Good roads ensure that visitors have safe
access to national parks and forests, and are critical to economic development
opportunities on Indian reservations. Investment in upgrading these roads will
reduce the acknowledged backlog of projects in excess of $15 billion. Estimated
outlays: $295 million in 1994-1997; $153 million in 1997.

Environment




A healthy environment means a better future for generations of Americans to
come, and it also means jobs. The investments outlined here will create
tremendous new opportunities for Americans to develop advanced systems to
recycle, treat toxic waste and clean our air and water. Together, these
investments prove that there is no choice between spurring economic growth and
protecting the environment—that we can and must do both at once.

EPA/Drinking water state revolving funds. Provide $599 million in 1994 and
$1 billion per year for 1995 to 1997 in new grants for low-interest loans to help
municipalities comply with the Safe Drinking Water Act (SDWA)—which is
estimated to require $10 billion in water infrastructure upgrades between now
and 1998. Estimated outlays: over four years—$1.3 billion; in 1997—$692
million.
EPA/Clean water state revolving funds. Provide $1,198 million in 1994 and $2
billion per year for 1995 to 1997 under a new authorization for capitalizing
Clean Water State Revolving Funds (SRFs). These SRFs would make
low-interest loans to municipalities for construction of projects to address water
quality problems. If these capitalization grants are leveraged in the financial
markets (as allowed under the Clean Water Act), States could have up to $6
billion available annually for clean water project loans. Funding for waste water
(as well as drinking water) projects in rural areas can be obtained also through
USDA loans and grants. Estimated outlays: over four years 1994-1997—$2.7
billion; 1997—$1.4 billion.

Interior and USDA/Natural resource protection and environmental infrastruc­
ture initiative. Building on the stimulus initiative, this proposal would protect
and rehabilitate America’s inventory of natural and cultural assets, restore the
facilities that protect these resources, and improve public access to them. This
funding would help to eliminate the backlog of resource protection projects,
facility maintenance, rehabilitation and construction and other similar projects in
rural and urban areas. The work would be located at resource areas managed by
the Department of the Interior (National Park Service, Fish and Wildlife Service,
Bureau of Land Management, and Bureau of Indian Affairs), and by the
Department of Agriculture (Forest Service). This investment would create more

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What We Must Now Do

than 5,500 jobs in 1994. It calls for an estimated investment of $1.5 billion in
1994—1997 outlays; $509 million in 1997 outlays.
Interior/Bureau of Indian Affairs (BIA) safety of dams. In 1989, the
Department of die Interior’s Inspector General reported that more than half of
the high-risk dams on Indian reservations were in poor or unsatisfactory
condition. This proposal will ensure that urgently needed rehabilitation and
repair work can proceed. It calls for oudays of $59 million in 1994-1997; $23
million in 1997.

Reduce backlog of water resource Corps of Engineers cyclic maintenance
projects. Corps of Engineers water projects provide flood damage reduction,
inland and harbor waterway transportation, hydropower, and environmental
restoration benefits. The projects, though, are aging: more than 50 percent of
these projects are over three decades old. Nearly one quarter exceed 50 years of
age. In spite of a growing backlog, resources for these projects have stayed
largely constant. Estimated expenditures: over four years—$544 million;
1997—$160 million.
EPA/Watershed resource restoration. This proposal would double the current
funding level of $50 million annually by 1995 for non-point source grants under
Section 319 of the Clean Water Act. Non-point source pollution, such as runoff
from farms, mining sites and city streets is now the largest cause of pollution in
our Nation’s waters. Reductions in non-point source pollution will help restore
watersheds and estuaries, leading to increased numbers of fish and other aquatic
life, and improving fishing and recreational opportunities in urban, suburban,
and rural areas. Estimated outlays: over four years—$139 million; 1997—$47
million.

DOE/Cleanup of non-dtfense sites and uranium enrichment facilities. The
Department of Energy is responsible for the management and disposal of
radioactive and hazardous wastes resulting from research and uranium
enrichment activities conducted by the Department of Energy. The investment
supported by this Administration reflects die emphasis that it places on reversing
the imbalance in priorities, by placing more priority on the environment. Outlays
will increase $220 million between 1994 and 1997, and $107 million in 1997
alone.
USDA/Forests for the Future. Vice President Gore stated that “forests represent
the single most important stabilizing feature of the Earth’s land surface” in his
book Earth in the Balance. The Administration proposes to invest $30 million in
1994 and $50 million in each of the next four years, towards the international
goal of reducing world-wide deforestation. At the 1992 Rio “Earth Summit”, the
U.S. proposed that all countries join in doubling international forest assistance.
This investment will be a down payment towards that commitment, to fund
initial partnership activities with foreign nations and domestic and international
non-governmental organizations. Funds would be used, in part, to support
integrated resource management, assist scientific research on tropical forests and

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What We Must Now Do

biodiversity, assist local communities in forest resource management, improve
inventory and management of large forests, develop institutions that can attract
private investment in forest conservation, and reforest degraded lands. Estimated
outlays; over four years—$170 million; 1997—$50 million.
NOAA Weather Service modernization. NOAA is now in the process of
modernizing National Weather Service systems. Under the Administration’s plan,
by the turn of this century, NOAA will operate one of the most advanced
weather warning and prediction networks in the world. New observation systems
such as doppler radars and weather satellites will provide for more accurate and
timely forecasts of severe weather events and for more reliable forecasts. These
improvements will translate into lives saved and damages averted. They will
also benefit all sectors of the economy that rely on accurate warnings and
forecasts for planning. Estimated investment (budget authority): $35 million in
1997; $293 million over 1994-1997.

EPA/Environmental technology. This proposal would increase funding for
environmental engineering and technology development by $36 million in 1994,
a total of $626 million through 1998, and a total of $1.85 billion over nine years.
EPA currently allocates about $120 million annually to these activities. The
focus of this initiative will be long-term research and pollution prevention by
EPA, other Federal agencies, and the private sector. The goal is to develop more
advanced environmental systems and treatment techniques that can yield
environmental benefits and increase exports of “green” technologies. This
investment will aid in the transition away from a defense-oriented economy, by
stimulating the increased use of private-sector R&D resources for environmental
quality-related purposes. Estimated outlays: over four years 1994-1997—$271
million; 1997—$127 million.
Expand EPA’s voluntary “green” programs. EPA launched its “Green Lights”
program two years ago to encourage Fortune 500 companies to convert
profitably into more energy-efficient lighting, which will reduce electricity
generation and greenhouse gas emissions. EPA identifies profitable opportunities
for companies to conserve energy and enlists participants to install the energy
conservation measures. As of October 1992, Green Lights participants had
committed over 2.8 billion square feet of facility space to the program—the
equivalent of all the office space in our eight biggest cities. EPA estimates that
expanded “green” programs such as this one can reduce greenhouse gas
emissions by 75-108 million metric tons of carbon by year 2000. Estimated
outlays: over four years 1994—1997—$69 million; 1997—$25 million.

USDA/Tree planting initiative. Reforestation on the huge tracts of poorly
managed private, nonindustrial forests can result in increased environmental
benefits such as removing more carbon dioxide from the air. These benefits of
tree planting also make it important for urban forests because of their location in
and around population centers. In addition to the environmental benefits, urban
forestry programs can provide productive seasonal jobs for inner city youth.
Estimated outlays 1994—$33 million; 1994-1997—$246 million.

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USDA/National research initiative (NRI) grants. Top flight R & D is needed to
assure the continued competitiveness of U.S. agricultural products in global
trade, ensure the food supply’s safety and quality, and sustain natural resources.
NRI grants are awarded competitively after a stringent peer-review process to
ensure that the most qualified research proposals are chosen. The NRI funds
research in animal and plant biotechnology (including genome mapping), food
safety, sustainable agricultural production practices, and technologies to
manufacture new agricultural materials. Because the competitive grants program
focuses primarily on basic research, the results of many projects would be useful
to scientists in other disciplines. Five hundred more projects will be funded each
year by this increase. Estimated increased outlays: over four years—$188
million; in 1997—$110 million.

USDA/Forestry research initiative. Managing the Nation’s forest resources
relies increasingly upon scientific information and technology. This includes
areas as diverse as understanding forest ecosystems and the wildlife/urban
interface, to research on extending the use of wood as a raw material. This
investment will allow the Forest Service and other USDA research agencies to
increase the breadth and depth to which forestry research areas are investigated,
providing the necessary information to help the Nation develop sound
forest-related policies that will both provide resources to meet ever-increasing
demands from the population and sustain forest ecosystems. The initiative would
be funded at $287 million over four years. Estimated outlays: 1994—$16
million; 1994—1997—$261 million.

Rural Development Initiative
Family farmers have made a unique contribution to this nation’s growth, feeding
our people and caring for our land. This initiative would provide 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 and increase employment
opportunities in rural areas.
USDA/Increase RDA rural water and waste water loans and grants. Federal
and State regulators report that drinking water and sewage treatment systems
serving small, mostly rural populations currently have the highest rates of
noncompliance with Federal environmental standards. To comply with clean
water standards set by EPA, rural America’s water and waste water needs total
roughly $10 billion by the year 2000. Often these small rural communities are
unable to meet these expensive standards without Federal assistance. The Rural
Development Administration (RDA) administers a water and waste water loan
and grant program that targets rural communities of up to 10,000 in population
whose average income is at or below 80 percent of State median income. This
proposal increases RDA loan authority from $600 million to $780 million, and
its grant authority from $390 million to $510 million in 1994; and to $900
million and $590 million respectively each year 1995 through 1997. Additional

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What We Must Now Do

funding for drinking water and waste water construction is proposed through
EPA for new drinking water and clean water grants to State revolving funds.
Estimated RDA outlays: over four years 1994-1997—$331 million; 1997—$176
million.

Community and business assistance. This initiative would provide Federal
assistance to rural communities, businesses, and individuals, by leveraging
Federal investment to allow rural areas to help themselves. Farmers Home
Administration (FmHA) direct loans for community facilities would be increased
by $300 million in 1994, and $500 million thereafter, for construction of rural
health care clinics, fire stations and equipment, and other vital facilities. Rural
Development Administration (RDA) guaranteed loans for rural businesses and
industries would be increased by $300 million in 1994 and $500 million
thereafter to assist rural businesses in securing start-up capital and financing for
expansion, creating jobs and helping diversify the rural economy. Additional
rural business assistance would be provided through the RDA Intermediary
Relending Program that provides one percent loans to State-sponsored rural
development programs who, in turn, re-lend to rural businesses. These funds (an
additional $150 million in 1994 loans, and an additional $250 million in loans
each year through 1997) would be targeted to small, emerging “micro-enter­
prises.” In addition, RDA rural development grants would be increased by $30
million in 1994, and $50 million thereafter. Business assistance would be
coordinated through RDA’s existing State Rural Development Councils, whose
members include representatives from Federal, State and local government
agencies, as well as the private sector.

These investments would provide increased employment opportunities for rural
individuals, and upgrade community infrastructure to improve the quality of life
for all rural residents. The investment proposal also would improve the housing
conditions of low-income, rural individuals. FmHA direct and guaranteed
homeownership loans would be increased by $300 million each in 1994, and by
$500 million each year 1995 through 1998. Rental assistance in rural areas
would also be provided through housing vouchers and grants for use in
FmHA-fmanced rental units. Vouchers would be targeted for areas where rental
units are available, but not currently affordable for low-income persons. A total
of $150 million in additional rental assistance would be provided through these
programs in 1994, and $300 million each year from 1995 to 1998. Estimated
RDA outlays for community and business assistance; over four years
1994—1997—$1,115 million; 1997—$454 million.

Energy




Without thoughtful energy policies, our nation will remain dependent on foreign
oil and special interests. The Administration will launch initiatives to develop
new, clean, renewable energy sources that cost less and preserve the
environment. We will also encourage energy efficiency and conservation to

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What We Must Now Do

lower the energy bill for middle-class Americans, and lessen our vulnerability to
events outside our control.

DOE/Increase funding for renewable energy and energy conservation
programs. The Energy Policy Act of 1992 contains new responsibilities for the
Federal government including: (1) establishment of new energy efficiency
standards; (2) authorization for enhanced research programs; and (3) new
demonstration/commercialization programs for renewable energy and energy
conservation. This initiative progressively increases funding in these areas,
reaching an increase of $500 million in 1997, for a four-year total increase of
$1.3 billion. The increased funding will be distributed roughly equally among
the four major program areas: solar and renewable energy, and industrial,
transportation, and buildings conservation R&D. The largest increases will go to
technology transfer and commercialization, advanced materials (especially
ceramics), industrial wastes and materials processing, electric and hybrid
vehicles, and modeling of building systems interactions. By making a major
effort to develop and commercialize these environmentally “clean” technologies,
substantial energy cost savings will be realized by consumers while creating
enormous opportunities for economic growth and increased jobs.

DOE/Increase weatherization assistance program. This Department of Energy
program provides funds to States to help pay for home weatherization
improvements for low-income citizens. The increase proposed here, $60 million
in 1994, and $100 million per year in 1995-97, would be distributed differently
than the typical “formula grants,” in order to increase the leverage received on
taxpayer funds. Matching funds (at least 1:1) will be required from States or
utilities. This will encourage State weatherization programs to take advantage of
utilities’ demand-side management (rebate and discount) programs, and will
ensure that the funds go to States that demonstrate a serious commitment to
low-income weatherization activities. With 1:1 leveraging of these funds, an
additional 450,000 homes will be weatherized over the currently projected
number for the 1994-97 period.
Increase the energy efficiency of Federal buildings and facilities. Current
Federal investment in energy efficiency improvements is running around $150
million per year. This initiative will increase spending to almost $500 million
per year by 1996. The cumulative increase will be $1 billion over four years.
The four biggest energy-consuming agencies—Defense, Energy, Veterans Affairs
and the General Services Administration—will receive increased funding for
their in-house energy management programs directly. In addition, a fund will be
established at the Department of Energy for energy efficiency improvements
proposed by all of the remaining Federal agencies. Over 700 energy managers
will be trained in 1994, and over 2,000 per year in 1995-98. Outside energy
audit teams will review 600 Federal sites in 1994, starting with the largest
energy consumers, and 1,000 sites per year in 1995-98. By 1997 these
investments should payoff heavily, saving the Government about $350 million
per year.

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What We Must Now Do

Provide increased funds for acquisition of alternative fuel vehicles for the
Federal fleet, and for conversion of existing vehicles. This initiative provides
$18 million in 1994, and $30 million per year from 1995 through 1998 for the
purchase and/or conversion of petroleum based gasoline powered motor vehicles
to alternatively fueled vehicles. This expands upon the Alternative Motor Fuels
Act (AMFA) purchases currently funded by appropriations to the Department of
Energy.

DOE/lncrease natural gas utilization R&D. This initiative will roughly double
the combined natural-gas spending of the Conservation and Fossil R&D
programs. A critical new feature is to involve segments of the natural gas
industry in the design and operation of research programs. This will help ensure
that the enhanced R&D is relevant to the needs of industry and the market place.
It will also provide an opportunity for private sector cost-sharing, thereby
increasing the overall level of gas research. In the combined programs, this
initiative will increase spending on natural gas utilization by $14 million in
1994, increasing to $119 million in 1997, for a total of $263 million in
additional spending over that four-year period.
Build an advanced neutron source—a user facility for applied research and
development. This proposal would fund the design and construction of a national
user facility to produce rare isotopes for medical diagnosis, treatment and
research and to perform applied research using neutron scattering and neutron
irradiation techniques. The facility, called the Advanced Neutron Source (ANS),
would be used by approximately 1,000 user groups each year. Users would
come from industry, universities, and Federal laboratories. The medical isotopes
produced could help tens of thousands of patients. Neutron scattering is a
relatively new experimental technique with applications for materials science,
metallurgy, crystallography, chemistry, industrial radiography, forensic detection
of trace elements, biology, and biotechnology. The heart of the facility would be
a new research reactor that would have the most intense beams of steady-state
neutrons in the world—approximately five to ten times higher than the current
world leader at the Institute Laue-Langevin in Grenoble, France. The total
projected cost of the facility is about $2.7 billion. The proposal adds $243
million in outlays over the baseline between 1994 and 1997.

DOE/lncrease funding for fusion energy research. Fusion offers the promise of
abundant energy from readily available fuels with low environmental impact.
The centerpiece of the research effort in magnetic fusion energy is a
collaboration among the United States, the European Community, Japan, and
Russia to build an International Thermonuclear Experimental Reactor (ITER).
Design and construction of ITER will be a multi-billion dollar effort that could
take two decades to complete. The United States must maintain a vital domestic
research program to support our efforts on ITER. Yet, the U.S. has not
commissioned a major new machine for fusion research since the early 1970s.
This investment would fund moderate growth in the U.S. fusion energy program
above inflation to allow construction of a new facility, the Tokamak Physics

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Experiment (TPX). Estimated additional spending 1994 and 1997 is $210
million in outlays; ($90 million in 1997).

Community Development and Defense Conversion
If we are going to rebuild our nation, we will have to do it from the bottom up.
These initiatives will empower the Americans who create jobs and raise
incomes—small businesses, entrepreneurs, and the dreamers with an idea and
the initiative to make it work. They will make sure that the skills of our defense
workers are not lost, but harnessed to the peacetime projects our future demands.
And these initiatives will create real opportunity in America’s inner
cities—because America will not prosper until our urban areas once again
become engines of economic growth.
HUD/Provide additional funding for Community Development Block Grants
(CDBG). Community development projects are an important source of jobs and
economic development both in die short- and long-term. States and local
governments have a backlog of unfunded “ready to go” projects such as basic
street and bridge work, painting and resurfacing, building rehabilitation, and
public service projects. However, the State and local needs continue to exceed
the existing Federal contribution. The Administration’s proposal would provide
an additional $690 million between 1994-1998 to continue much-needed
investment in America’s communities. This additional funding would directly
create about 60,000 jobs over the next five years, with even more jobs being
created indirectly in the local economy. These funds are targeted at low- and
moderate-income residents, providing assistance in areas with die greatest need.
Because communities can select eligible activities most appropriate to their local
circumstances, this additional funding will help communities where they need it
most.

Enact enterprise zones legislation in order to promote investment and job
creation in Federally-designated zones. The Administration’s enterprise zone
proposal will promote entrepreneurship and job creation in distressed urban and
rural communities through a number of employment and investment incentives.
The proposal includes such policies as an employer wage credit and an
expansion of the targeted jobs tax credit in order to encourage low-income
inner-city and rural residents to obtain employment, become self-supporting, and
leave welfare. It also includes investment incentives designed to encourage
individuals to invest in zones. Taken together, these incentives will be a critical
factor in helping poorer cities and rural areas become economically more vital.
Estimated outlays reach $2.4 billion over four years, with 1.2 billion in 1997.

Community Development Banks. Many American communities face problems
of deteriorating housing, loss of jobs, lack of private enterprise, and declining
economic and social infrastructure. A network of community development banks
will be created to provide loans for business and housing purposes in distressed
communities that have previously been underserved by traditional lending
institutions. Government investment and technical assistance would supplement

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What We Must Now Do

private funds and expertise to ensure community development banks’
effectiveness in restoring healthy economic development in these communities.
Estimated cost: over four years—$354 million; 1997—$110 million.

SBA/Increase Section 7(a) loan guarantees. This program helps small
businesses struggling to attract bank lending because of the general weakness of
the economy. Building on a stimulus proposal, increased funding levels will be
extended to assure that creditworthy small businesses have access to capital.
These funds will make about 14,000 loans to individuals otherwise unable to
expand or start small businesses. Estimated cost: over four years—$501 million;
1997—$157 million.
Defense Conversion Program. With the end of the Cold War, the nation faces
the challenge of the defense transition. How should we address the needs of the
men, women, companies and communities who helped us win the Cold War but
who now feel the impact of declining defense budgets? How do we best reinvest
in the industrial, technological and workforce capabilities of the Cold War so
they can play a role in our effort to make the nation globally competitive? Our
economic plan is designed to face this challenge and to seize this opportunity.

Our defense conversion program builds on current efforts and increases
investment funding. In the Department of Defense, we will propose additional
funding for dual-use technology programs and for the community adjustment
assistance activities of the Office of Economic Adjustment. In the Department of
Labor, significant new investment funding will be requested to provide for the
training and retraining of America’s workforce, including those parts of the
workforce displaced by defense spending reductions. In the Department of
Commerce, we will request additional funding both for National Institute of
Science and Technology programs helpful to industry and for the work of the
Economic Development Administration supporting the economic diversification
of communities hurt by defense reductions.

These programs will address the need for defense transition assistance in the
industries, the workforce and the communities that experience the impact of
declining defense budgets. In addition, our investment initiatives in high
technology will help stimulate the “market pull” to provide new opportunities
for high technology businesses and the highly skilled workforce currently in the
defense market. To meet this goal, we are proposing spending for the
Departments of Energy, Transportation and Commerce, and NASA, among
others, on such technologies as high performance computing, aviation and
aeronautics, transportation, space and manufacturing technology.
To ensure that the parts of this defense conversion program work together,
activities will be coordinated through the Executive Office of the President and
interagency committees.

This proposal provides additional funding of $555 million in 1997 for defense
conversion, of which $480 million will go to the Department of Defense for
dual-use technology and manufacturing programs. Funding of $20 million will

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be provided to DoD’s Office of Economic Adjustment and $55 million to the
Economic Development Administration in the Department of Commerce for
community diversification. For the programs of the other agencies described
above, additional initiatives in the investment package include about $2 billion
for job training and $4 billion for the acquisition of high technology products
and R&D. Estimated outlays of the Department of Defense and the Economic
Development Administration parts of this proposal: over four years—$1.5
billion; 1997—$520 million.

Revitalizing Technology
To move ahead of our competitors in technological research and development,
this initiative will provide incentives to explore new technologies. It will create
high-wage jobs and help push America toward the cutting edge of
groundbreaking technologies. It will create markets that encourage the use of
defense technology for civilian purposes and bring together businesses and
universities in an effort to ensure that innovative products have the label “Made
in America.”

NSF/Enhancing university-based competitive science and engineering re­
search in the U.S. Studies show that investments in research and development
(R&D) tend to be the strongest and most consistent positive influence on
productivity growth. Most of NSF’s investments are in university-based R&D
programs which are competitively selected on their merit by members of the
science and engineering community. These activities contribute to the Nation’s
productivity by generating new scientific and engineering knowledge and
contribute to the training of the next generation of scientists and engineers. In
1992, NSF had $1 billion of unfunded proposals that were rated excellent
through peer review. Thus, it appears that NSF has the capacity to invest more
funds in a broad range of important research areas, including strategically
targeted research in improving our understanding of the climate system and
improved engineering approaches to mitigate environmental problems; advanced
computers and digital networks; biotechnology; materials processing; advanced
manufacturing; math and science education; and smart highways, bridges, and
other civil infrastructure. This proposal—which adds $2.3 billion over four
years, and $954 million in 1997—also includes funds to support the Nation’s
university-based research facilities and instrumentation.
Commerce/Increase civilian R&D at the National Institute of Standards and
Technology (NIST). America’s competitiveness rests ultimately with the private
sector. Yet, the Federal Government has an important role to play in promoting
economic growth, in part by supporting research and development. This proposal
provides aggressive growth for the National Institute of Standards and
Technology (NIST). NIST is the only Federal lab with the principal mission of
supporting U.S. industry and has provided a steady stream of technology support
to U.S. firms for over 90 years. This proposal provides for: 1) an increase of
$138 million in 1994, rising to $680 million by 1997, for the Advanced

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What We Must Now Do

Technology Program to provide matching grants for industry-led R&D projects,
including funding for consortia like SEMATECH; 2) over 100 manufacturing
extension centers nationwide by 1997 to assist manufacturers to modernize their
production capability; and 3) doubling the amount of R&D performed in the
NIST labs by 1998. This proposal would increase total NIST funding from $381
million in 1993 to $1.2 billion in 1997 (budget authority).

Commerce/“Information Highways” Demonstrations. The development of a
broadband, interactive telecommunications network linking the Nation’s
businesses, schools, libraries, hospitals, governments, and others could pay
enormous dividends to the U.S. economy. Engineers working on the same
problem, teachers and students, and patients and doctors would all be able to
communicate instantly no matter how much distance separated them. This
proposal builds on the 1993 stimulus initiative by providing new seed money to
“jumpstart” the development of these networks. In 1994, $54 million will be
made available to the Department of Commerce for grants to States, local
governments, universities, school systems, and non-profits to link public
facilities in such a network. Between 1995 and 1998, $150 million annually
would be made available.

Federal Coordinating Council for Science, Engineering, and Technology
(FCCSET) initiatives. As the fields of science and technology have progressed,
and as applications of scientific advances have improved, it has become obvious
that a single field of science can have applications in numerous different areas,
governed by different Federal departments and agencies. In order to coordinate
scientific advances among agencies and to avoid duplication of efforts, the
Federal Coordinating Council for Science, Engineering and Technology
(FCCSET) has established interagency committees.
There are currently six specific areas, which have been identified as important
national research and education activities. They are: improving our under­
standing of the climate system, advanced supercomputers and computer
networks, math and science education, materials processing, biotechnology, and
advanced manufacturing. The climate initiative, for example, is focused on
understanding the processes involved in climate change and was a key
component of the U.S. action plan in the recent “Earth Summit” negotiations.
The advanced manufacturing initiative will focus on areas such as intelligent
manufacturing cells and computer-based tools for production design. Over a
dozen Federal agencies, including NASA, Defense, Energy, the National Science
Foundation, Commerce, Agriculture, and the National Institutes of Health, have
programs which address one or more of the six specific areas.

Crosscutting high performance computing (NSF/NIH/NASA/NIST). This
investment builds directly on a stimulus program to develop applications which
use advanced computers and communication networks to solve problems in
health care, education, manufacturing, and more. For example, under a pilot test
in Boston, a physician could transmit images (X-rays, CAT scans, photos)
quickly to a specialist across town for immediate consultation. This program

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would be part of the multi-agency High Performance Computing and
Communications program and would be coordinated by the Office of Science
and Technology Policy’s Federal Coordinating Council for Science, Engineering,
and Technology (FCCSET). 1997—$320 million; four year total—$784 million.
NASA/Civil aviation. The quality of the air transportation system has a direct
impact on the quality of life of every U.S. citizen. This investment option would
expand NASA aeronautics research in its support of the aviation industry and its
enhancement of the safety and capacity of the national airspace system. One
area for investment, advanced subsonics research, would focus on developing
technology that would increase the competitiveness of U.S. commercial transport
aircraft and enhance the safety and productivity of the national aviation system.
The other area for investment, high-speed research, would focus on resolving
critical environmental issues and establishing the technology base for an
economical, supersonic aircraft. These investments will help counter aggressive
government-supported foreign competition. In addition, it will provide
technologies that improve the environmental compatibility of existing and future
aircraft by reducing noise and engine emissions. Funding will reach an
additional $222 billion in 1997, for a four year total increase of $550 million.

NASA/Short-haul aircraft research. This initiative will expand NASA
aeronautics research to develop technologies for short-haul aviation. Short-haul
aircraft includes commuter aircraft, rotorcraft, and general aviation airplanes.
There are roughly 220,000 short-haul aircraft in the United States, making up 98
percent of the total civil aviation fleet. To help bolster the competitive position
of the U.S. short-haul industry, NASA would develop technologies for both
rotary and fixed wing aircraft to enable a new mode of high utility, safe, fast,
and direct transportation linking thousands of smaller communities. The program
would take advantage of ongoing and new Federal Aviation Administration
(FAA) and industry cooperation to accelerate application of these advanced
technologies to U.S. aircraft and engine manufacturers. Estimated outlay
increase: in 1997, $20 million; over four years, $50 million.
Greatly increase non-defense Cooperative Research and Development
Agreements (CRADAs) at the national labs. Cooperative Research And
Development Agreements (CRADAs) are one of the mechanisms by which the
national laboratories can work with industry to transfer lab-developed
technology and know-how to the private sector. The funds go to the labs to pay
for their share of the jointly agreed-upon R&D in the CRADA. The laboratory
work under each CRADA is proprietary to the private-sector partner, who also
hold the patent rights to inventions made under the CRADA. The current
funding for CRADAs to transfer technology developed by DOE non-defense
programs is $9 million, but there is more demand from industry for assistance
through CRADAs than can be funded with that amount of money. This
investment initiative provides an additional $30 million in 1994 and $50 million
per year over the baseline in 1995-97.

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What We Must Now Do

Modernizing Social Security Administration computer systems. The Social
Security Administration (SSA) relies heavily on its information systems to
provide services and pay benefits. To meet current and future demands, SSA and
State Disability Determination Services (DDSs) must abandon their labor-inten­
sive, paper-driven tradition and automate. The proposal would invest in the pilot
tested Intelligent Workstations and Local Area Networks and (IWS/LAN),
creating a standard, state-of-tbe-art, computing network for all of SSA and
DDSs. The investment funding includes modular workstations, and design/site
preparation/installation. Estimated cost: over four years—$880 million;
1997—$245 million.
Modernize Internal Revenue Service. IRS currently processes tax returns using
technology from the 1960s. These out-of-date systems result in long delays for
taxpayers and extra costs for the Federal government. Tax Systems
Modernization (TSM) represents IRS’s effort to move to an up-to-date,
automated approach to processing taxes. With TSM, tax returns will be
processed and stored using modem technology. Tax returns will be available in
electronic files instead of remote warehouses. As a result, IRS employees will be
able to provide immediate responses to most taxpayer questions over the phone.
TSM will enable IRS to reduce the risks and costs associated with operating
their current systems while also improving their ability to serve the public in the
administration of the nation’s tax system into the 21st century. Estimated cost:
over four years—$1.8 billion; 1997—$0.7 billion.

Housing




These initiatives will help make housing more affordable, and streets and
neighborhoods safer. In conjunction with other measures, they will also provide
the help that the homeless need. By empowering our people, these measures will
go far toward creating real choices for Americans at every income level—and
help them achieve the American dream.

HUD/Assist more households with housing subsidies. The Department of
Housing and Urban Development currently provides housing subsidies to 4.7
million low-income and very-low-income households to overcome their housing
problem. Nevertheless, an estimated 3.6 million families and elderly
very-low-income renters still face severe housing problems because they either
have a “worst case need” for housing with (1) rent that exceeds 50 percent of
their income or (2) live in a severely substandard housing unit. Additional
Federal investments are needed to eliminate these remaining very-low-income
rental housing problems. This investment would substantially increase assistance
through HOME grants and housing vouchers. HOME funds would double to the
full amount authorized of $2.2 billion; housing vouchers would increase from
nearly 40,000 annually in 1993 to 100,000 by 1998. Estimated investment: over
four years $716 million; 1997 $422 million.
HUD/Supportive housing program. This investment is targeted towards the
problem of homelessness. It increases funds for rehabilitation of housing that

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serves the homeless as well as other services which seek to address the root
causes of homelessness. The $138 million increase in 1997 and $241 million
over four years represents a doubling of the program.

HUD/Public housing operating subsidies. The rent paid by residents of public
and Indian housing often does not cover the operating costs incurred by housing
authorities. The Department of Housing and Urban Development’s Payment for
the Operation of Low-Income Housing program pays the housing authorities for
those operating costs not covered by rental payments, thus permitting housing
authorities to provide and maintain safe, sanitary and decent housing. This
investment of an additional $121 million in 1997 and $206 million over four
years, by meeting the estimated cost of providing quality public housing, will
strengthen our nation’s stock of public housing and enable the people who reside
there to have decent shelter.
HUD/Preserving and renovating low-income rental housing. The Administra­
tion proposes to increase funding to repair and restore the nation’s stock of
assisted rental housing, most of which is 20 to 30 years old. Many units are in
deteriorated buildings. Many operators of buildings are also financially troubled.
In the worst cases, hundreds of project operators have defaulted on federally
insured mortgages, turning HUD into the lender and, ultimately, the
landlord-of-last-resort. Another 360,000 units of HUD-assisted low-income
housing face a problem of a different sort. These properties are nearing the end
of the long-term HUD subsidies that helped them to remain as low-income
rental housing. Without additional Federal subsidies, some owners could convert
these affordable rental units into luxury apartments or even condominiums,
leaving their low-income tenants out in the cold. Congress created the
Low-income housing preservation program in 1990 to provide landlords the
necessary incentives and subsidies to preserve this federally subsidized
low-income housing as affordable low-income housing. The Administration
proposes increasing funding for this program to ensure that no existing tenant
loses his or her housing benefits as a result of adverse landlord actions. The cost
of this additional investment in preserving and renovating low-income rental
housing will be $858 million over the next four years. For 1997, spending will
total $384 million.
HUD/Community Development Block Grants (CDBG). Since 1974, the CDBG
program has been an important source of flexible Federal aid to State and local
governments. CDBG funds directly help fund local economic and community
development projects that benefit low- and moderate-income residents in large
cities and urban counties and smaller communities. The Administration’s
proposed investment would directly create more than 7,300 jobs over the next
five years, with even more jobs being created indirectly in the local economy.
Because communities can select eligible activities most appropriate to their local
circumstances, this additional funding will help communities where they need it
most. Total spending would increase $137 million in 1997 and $430 million
between 1994 and 1998.

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HUD/Crime in public housing. The Administration proposes an Urban
Partnership Against Crime initiative to address the increase in gang- and
drug-related crime activity in many public housing developments across the
country. Crime has exacted a profound and intolerable toll on public housing
residents. Living in a constant state of fear of physical harm, residents have been
robbed of their sense of community and personal well-being. Meanwhile, they
have witnessed an ever-increasing expenditure of scarce public resources on
repairing the damage done by crime to the physical environments of these
developments. This initiative, costing $138 million in 1997 and $312 million
over four years, would allow the Department of Housing and Urban
Development to work with public housing and other local officials in an
intensive effort to reduce crime in public housing. It focuses resources on those
developments with greatest need, and gives flexibility to local officials to
develop solutions (like community policing, neighborhood watches, youth
activities) to the problems of crime in their communities.

HUD/Restore dilapidated public housing. This investment would provide an
additional $138 million in 1997 and $241 million over the next four years to
rehabilitate and restore severely dilapidated public housing projects that today
are not only uninhabitable, but also contribute to the economic and social
problems of the surrounding neighborhoods. These economically viable public
housing units would then provide, once again, decent, safe, and affordable
housing for low-income renters.

Lifelong Learning

 339-885 - 93 - 3


Becoming a productive member of the community requires certain basics: like a
healthy, supportive childhood; safe, sound schools; a chance to serve your
country; and the opportunity to be retrained for the challenges of today’s global
economy. The Administration’s commitment to major investments in these kinds
of “human capital” promises payoffs for the nation far beyond their original
price.

HHS/Full funding of Head Start. Children who participate in Head Start do
better in school and become more productive as adults. By giving them the
caring, stimulating environment they need, Head Start programs enable at-risk
children to become problem-solvers instead of problems. Thousands of parents
and selected studies have testified to the program’s success, but for years our
government—despite promises—has failed to make Head Start available to all
the children who need it. With this initiative, one of our country’s most
cost-effective programs will become far more widely available and help change
countless lives. The Administration will increase funding for Head Start by $3.2
billion in 1997, $8 billion over four years, achieving full funding for an
estimated 1.4 million eligible disadvantaged children by 1999.
VSDA/Head Start-related child care feeding. Pay for meals at Head Start
centers and serve them to the participants added by the Administration’s Head
Start initiative; $237 million in 1997; $590 million over four years.

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HHS/Head Start related Medicaid. Fund new entrants in the Medicaid program
resulting from Head Start expansion; $116 million in 1997, $275 million over
four years.

USDA/FuU funding of WIC program. If our nation is going to prosper, our
children will have to grow up healthy, not hungry. This special supplemental
food program for women, infants, and children (WIC), helps make sure they do.
By the end of 1996, all eligible children ages 1 to 4, including some 2 million
who were not served last year, can be assisted with the proposed investment of
$1 billion in 1997, $2.6 billion over four years.

HHS/Parenting and family support. These initiatives stem from a simple
reality: governments don’t raise children; parents do. These proposals will
empower parents with the skills and the tools they need to help raise their
children. They will support disadvantaged parents, including activities to help
them work with their children at home and parenting classes, with an investment
of $500 million in 1997, $900 million over four years.
Department of Education/Reforms and initiatives. All American children need
greater access to better education—not just to make the American Dream more
available, but to make the American economy more productive. These initiatives
will provide $2.7 billion in 1997, $6.2 billion over four years, to support reforms
and reauthorizations in elementary, secondary, and postsecondary education,
including state and local systemic reforms, a new SAFE Schools program,
student assistance program improvements, and support of Historically Black
Colleges and Universities.
National Service. The national service initiative will help young people pay for
college and other postsecondary education by serving their country. In
conjunction with income-contingent loan repayment, which will help Americans
take low-paying community service jobs and still pay off their student loans, the
program will provide dramatic new opportunities to serve our country. Young
people will meet pressing national needs in areas including education, public
health, environmental protection, and public safety. In return for one or two
years of service, they will be able to receive a significant educational benefit. As
it enables Americans of all backgrounds to help themselves and their country at
once, the initiative will reinvigorate American citizenship—lifting our country
up and bringing our people together. The Administration’s commitment to a fully
realized program of national service is behind its plan to invest $7.4 billion in
the next four years, building from $389 million in budget authority in 1994 to
$3.4 billion in 1997.

Labor/Dislocated workers program. Legislation will be proposed for a new
program to replace and improve upon two existing programs to help workers
who lose their jobs because of restructuring of their industries, international
competition, or defense downsizing to secure rapid reemployment or train for
new careers. The program will cost an additional $2 billion in 1997, $4.6 billion
over four years.

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What We Must Now Do

Labor/Job Corps expansion. Provide resources to increase the size of the Job
Corps program by 50 percent by 2001. This will increase the number of Job
Corps participants to 104,000, from the current 70,000. Job Corps provides
remedial education, occupational skills training, supportive and job placement
services to severely disadvantaged youth in its network of 110 residential
centers. The plan would finance 50 new residential centers. The 1997 cost is
$202 million; the 1994-97 cost is $341 million.

Labor/Job Corps maintenance. Spend $50 million in 1997 and $105 million
over four years to repair and renovate Job Corps’ aging residential centers.
Labor/Summer youth employment and training program (SYETP). The
SYETP offers economically disadvantaged youth age, 14 through 21, work
experience in minimum wage jobs in public and nonprofit agencies dining the
summer months. This investment of $625 million in 1997 and $2.0 billion over
four years would finance about 2 million additional summer youth jobs. The
plan includes an enriched program of work experience, basic skills training,
testing and counseling, and closer coordination with schools.

Labor/One-stop career shopping. This program would make it easier for adults
seeking to change jobs or careers or upgrade their skills to obtain access to the
confusing array of Federal programs and services by developing “one-stop shop”
career centers. Over four years, the proposed investment is $900 million, $250
million of which is to be spent in 1997.

Labor and Education/Youth apprenticeship. This program would finance a
nationwide system of school- and work-based learning programs for high school
youth who do not plan to attend college, in order to reduce drop-out rates and
help them make a successful transition to meaningful careers in technical
occupations. The proposal provides $500 million in 1997, a total of $1.2 billion
over four years.

Rewarding Work




Earned Income Tax Credit (EITC). In America, no one who works should have
to raise a family in poverty. The EITC currently provides refundable tax credits
to low-income working families with children. By expanding the EITC, we will
assure that a family of four will not be forced to live in poverty, if one of the
parents works full-time at a minimum wage job. The cost of the entire proposal
is $6.7 billion in 1997 and $19.9 billion over four years.
Welfare Reform. Later this year, the Administration will present a
comprehensive reform plan to end welfare as we know it. The President’s plan
will carry out his pledge that no one with a family who works full-time has to
live in poverty, that parents who bring children into the world should be held
accountable for raising them, and that welfare ought to be a second chance, not
a way of life. The plan, coupled with the Earned Income Tax Credit, tougher
child support enforcement to crack down on deadbeat parents, increased training,
parenting, and family support for moving people from welfare to work, will

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What We Must Now Do

move toward a time-limited system of welfare. This will give people on welfare
the education and training they need for up to two years, but after that, require
all those who can work to go to work.

Justice
Justice/Crime initiative. A comprehensive program to support and improve all
aspects of the criminal justice system. The initiative includes: (1) a new
Community Policing/"Cops on the Beat" grant program to localities to create
safer streets and to community policing, thereby building a bond of trust
between citizens and police so that they can work together to fight crime; (2) a
new Police Corps program, to provide scholarships to would-be police officers
in exchange for a commitment to service as a State or local police officer; (3) a
Criminal Records Upgrade program to assist States in improving their criminal
records infrastructure and link with die FBI’s criminal information databases; (4)
increased funds to meet costs associated with detaining and incarcerating the
growing Federal prison population, which has resulted from increased arrests
and the imposition of minimum mandatory sentences; and (5) increased funds
for existing Federal law enforcement activities. The budget authority investment
is $900 million in 1997, $2.8 billion over four years.

Equal Employment Opportunity Commission (EEOC)/Enforcement Increase
EEOC enforcement staff in field offices to provide full enforcement of the
Americans With Disabilities Act and the Civil Rights Act of 1991. The proposed
outlays are $18 million in 1997, $63 million over four years.

Health Care
HHS/AIDS, immunizations, NIH research, and other public health initiatives.
This investment provides substantial new funding—$3.4 billion in 1997 and $8.2
billion over four years—for a number of public health initiatives including: (1)
HIV/AIDS research; (2) research on women’s health issues; (3) the President’s
plan for increasing childhood immunizations; (4) teen pregnancy programs, and
(4) other efforts to promote public health.

HHS/Substance abuse prevention and treatment. Challenge grants to the States
to create substance abuse treatment capacity where is it needed most and for
hard-to-treat populations. It will serve 30,000 people in 1994 and more in years
after. The outlays are $800 million in 1997, $1.5 billion over four years.
USDA/Food Safety and Inspection Service. Improve the existing meat and
poultry inspection system by increasing the number of Food Safety and
Inspection Service inspectors available in order to ensure that visibly diseased
animals are not processed, slaughterhouses and processing plants are clean and
follow safe food handling procedures, and plant employees follow proper
hygiene. Food safety research would also be enhanced. This responds to a clear
need for improvements, highlighted by the recent food poisoning outbreak in
Washington State. The initiative adds 200 inspectors. The investment is $34

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What We Must Now Do

million in 1997, $111 million over four years, and it would create some 275 jobs
in 1994.
Rural Health Initiative. This proposal provides grants and other assistance to
small rural hospitals to upgrade needed services. Grants may be used to launch
integrated health systems and telecommunications links for remote consultation
and diagnosis in low manpower areas. Estimated $50 million in 1994.
VA/Medical care. This four-year investment provides a $2.5 billion increase
over the baseline to ensure high quality health care for veterans by such
measures as providing adequate staff levels to meet requirements on residency
education programs and automating drug dispensing in VA hospitals.

HHS/Social Security Administration/Disability insurance processing. Increase
resources for the processing of dramatically increased disability benefit claims
by $200 million in 1995-98. This will cut down on the significant delays that
have occurred in recent years and reverse the general decline in service.

HHS/Ryan White Act. HIV/AIDS is now the ninth leading cause of death
overall. Currently, approximately 1 million people are infected with HIV in the
U.S., and about 60,000 new AIDS cases are reported each year. The President
has pledged to respond to this need by fully funding the Ryan White Act and
increasing Federal support for HIV/AIDS prevention efforts. To begin fulfilling
these pledges this year, this proposal would increase funding for grants
authorized under the Ryan White Act by $120 million in 1994. The proposal
includes additional funding of approximately $1 billion over the next four years.
State and Local Relief. Within the Health Care, Rewarding Work and Lifelong
Learning investment packages, the Administration will design a program to
offset the impact of refugees and undocumented residents on the budgets of
State and local governments, including those in California, Texas and Florida.

Investment Package: Tax Incentives




We recognize that the only way to lay the foundation for renewed American
prosperity is to spur investment. New investment will create jobs, putting people
back to work today, and will provide the productive equipment that we need to
compete in the global economy.
Our overall program consists of outlays for physical and human capital and
investment tax incentives for the private sector. Outlays for physical capital will
help rebuild the crumbling foundations of the United States, create millions of
high-wage jobs, and smooth the transition from a defense to a commercial-based
economy. Our program will concentrate on the transportation, environment, and
communications infrastructure. The program of tax incentives will increase
private investment over the long run. Like the outlay programs, these incentives
are designed to increase investment in human and physical capital. These
incentives will be particularly helpful to small business which generates the
lion’s share of jobs.

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What We Must Now Do

Permanent small business tax credit As discussed in the stimulus package, the
plan provides that small businesses will now be eligible for a permanent
investment tax credit on their equipment. The credit will generally be 7 percent
in 1993 and 1994, and 5 percent thereafter. Small businesses operate at the
margin and need a permanent incentive to invest, grow and provide new
employment opportunities.

Incentive for investment in smaU business. The program provides relief from
the capital gains tax for investors in small businesses. This proposal will allow
investors generally to exclude 50 percent of the gains earned from investment in
the stock of a qualified small business (less than $25 million capitalization)
when held at least 5 years. Furthermore, 50 percent of the excluded gain is not
subject to taxation under the alternative minimum tax. The tax incentives will
both stimulate job creation over the short-run and increase investment over the
long-term.
Research and experimentation tax credit The economic plan will permanently
extend the research and experimentation credit. This will encourage firms to
undertake the research necessary to develop the technological innovations
required to increase the supply of good jobs.
Real estate. The plan also permanently extends both the low-income housing
credit and mortgage revenue bond provisions. Doing so will provide a stimulus
to increase the supply of housing for low-income families. In addition, the
program modifies the passive loss rules for persons in certain real estate trades
or businesses, relaxes restrictions on pension investments in real estate and
extends the depreciable life of nonresidential real estate.

Enterprise zones. This part of the program authorizes the establishment of a
number of enterprise zones. Businesses located in enterprise zones will be
eligible for a wage credit for the hiring of enterprise zone residents and
accelerated depreciation or expensing of investments in enterprise zone property.
In addition, small businesses in qualifying economically distressed areas will be
eligible to obtain low interest rate loans through tax-exempt financing even if
the area is not selected as one of the zones. Combined with the other tax
incentives and other non-tax initiatives targeted to urban areas, these benefits
should help promote investment and job creation in these areas.
Simplifying and enhancing depreciation provisions for companies subject to
the alternative minimum tax (AMT). As noted in the discussion of the stimulus
package, the plan substantially enhances the investment incentives for taxpayers
subject to the AMT and simplifies the AMT by using the shorter regular tax
depreciable lives for minimum tax as well as regular tax purposes. Because they
reduce the net cost of acquiring depreciable assets, this proposal will provide a
lasting stimulus to investment for affected companies.
Targeted jobs tax credit; employer-provided educational assistance. The plan
permanently extends these two provisions, thus providing an incentive for
American businesses to continue to invest in human capital. The plan also

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What We Must Now Do

expands the targeted jobs tax credit to include workers in an apprenticeship
program. An educated workforce will be more productive and better able to
adapt to the challenges of a modem information-based economy.

Health insurance deduction for the self-employed. The plan calls for an
extension of the 25 percent deduction for health insurance premiums of the
self-employed through the end of 1993. This will retain the current law tax
treatment of these premiums for affected individuals until the Administration’s
comprehensive health care proposals are enacted.

SmaU issue bonds and high speed rail facilities. The ability to issue tax-exempt
bonds for qualifying small businesses and certain farmers would be extended
permanently under the plan. In addition, in order to promote the development of
high speed rail facilities, tax-exempt bonds issued for that purpose will not be
subject to the State private activity bond volume limitations.

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What We Must Now Do

Investing in the Future: Reducing the Deficit to Increase Private
Investment
Why this plan?




The Federal budget deficit is too high, and must be reduced. But how fast? A
lower deficit will strengthen the economy in the long run—by increasing
national saving, lowering long-term interest rates, and encouraging private
investment. But reducing the deficit too rapidly could weaken the economy in
the near term. Every dollar of Federal spending, worthy or unworthy, is
someone’s income. If that income is cut, and that recipient reduces his or her
spending as a result, the loss of income cascades through the economy. Tax
increases produce the same effect. So deficit reduction must be prudently sized,
carefully timed, and coordinated with other Government policies (and with the
Federal Reserve’s monetary policy) to limit the economic cost.
The impact of a deficit reduction package on the economy is best measured by
the relative sizes of the two—that is, by the amount of the deficit reduction
amount as a percentage of the gross domestic product (GDP). The larger the
deficit reduction at any given time, the greater the risk of economic dislocation.
History suggests that annual deficit reduction of less than one-half of 1 percent
of the GDP is safe, and that deficit reduction of under 1 percent of the GDP is
manageable, as long as the Federal Reserve cooperates by easing the money
supply. Further, to limit that risk in a substantial program of multiyear deficit
reduction, the size of the bite out of the deficit should be held to a relatively
even percentage from year to year.

Relying on these principles, this Administration’s economic program is designed
to impose policy deficit reduction savings of slightly less than one-half of 1
percent of the GDP per year over four years. This pace maintains a substantial
margin of safety and provides the Federal Reserve with ample notice to expand
the supply of credit in compensation, but also accumulates to a significant
reduction of the Federal Government’s drain on the Nation’s savings by the end
of the period.
Apart from growth miracles, there are only two ways to reduce a deficit:
spending can be cut or taxes can be raised. Both are controversial and bound to
arouse vociferous opposition. We have attempted to put together a balanced plan
of deficit reduction that includes both spending cuts and tax increases.

We believe the plan is fair. It spreads the necessary contributions broadly. It
does not bear heavily on any one group or region or industry. The proposed
spending cuts do not fall on the most vulnerable members of our society, but on
those best able to shoulder the cost. The tax increases included in the plan fall
disproportionately on the wealthiest. They place a fair share of the burden of
deficit reduction on those who profited the most from the uneven prosperity of

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What We Must Now Do

the last decade and who enjoyed the greatest reduction in their share of the
burden of Government. Those earning more than $100,000 will contribute over
70 percent of the total new revenue.

We believe that the specifics of the plan contain many desirable policies that
could be defended on their merits, quite apart from the need to reduce the
deficit. On the spending side, cuts have been aimed at low-priority programs.
The purpose of deficit reduction is to transfer resources within the economy
from low-priority uses to additional public and private investments that add
more to our economic strength. A changing world makes some Government
programs obsolete—-just as it leaves some private businesses in abandoned
comers of the marketplace. The Administration proposes to rationalize or
eliminate programs that have outlived their usefulness; that provide unnecessary
or excessive subsidies to narrow groups at great expense to society at large; or
that reduce the overall efficiency of Government. Continued support for such
programs would weigh down the economy as a whole with a burden that can
only grow in the future. It is time to put the national interest ahead of the special
interests. On the tax side, the proposed new tax on energy will encourage
socially responsible behavior such as energy conservation and environmental
protection.
We also believe that the plan is bold. There is no way to reduce the deficit
without incurring the opposition of politically powerful groups and lobbies. This
Administration has not shrunk from proposing necessary spending cuts or tax
increases for fear of offending powerful interests. Deficit reduction is essential
to the economic health of the nation, and all groups must contribute to the
solution of this common problem.
Much of the deficit reduction that we propose can and should be legislated in
this fiscal year. Some of it, however, will depend upon actions in later years that
cannot be determined now. For this reason, we propose an extension of the
Budget Enforcement Act of 1990 to set the conditions for decisions in the future;
and we also propose an enhanced rescission procedure that will give this
President—and all future Presidents—the opportunity to require a simple
majority vote on individual spending items. These procedural changes will
safeguard the deficit reduction we need.

The heart of the benefit from deficit reduction is the additional private
investment that it allows. Those investment dollars, driven to their best uses by
an intensely competitive marketplace, will add to wages for workers and profit
for entrepreneurs. However, the private sector also needs tools that only the
public sector can efficiently provide: the skills and the infrastructure upon which
businesses can build.
Accordingly, this Administration proposes to dedicate a modest share of its
deficit reduction—about one dollar in five in 1997—to selected public
investments in physical infrastructure; technology development and dissemina­
tion; environmental protection and energy conservation; the education and

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What We Must Now Do

training of our work force; incentives for work; and preventive health care and
public health. A further share of the deficit reduction—less than 10
percent—will go toward tax incentives for private investment and work effort.
This combination of increased private investment—through deficit reduction and
targeted incentives—and increased public investment—through a reorientation of
Federal Government priorities—will help to reverse the self-destructive
consumption binge of the last decade and to solidify the economic base upon
which our nation can grow in the competitive world of the next century.

Based on cautious economic assumptions, this program will begin to rein in the
Federal budget deficit, which now is growing faster than the economy; that is an
unsustainable condition that will deal with us if we do not deal with it. We chose
that cautious base to avoid the overconfidence that has led to foolish and
impossible commitments in the past, and to the resultant reversals of economic
policies. However, the Administration is confident that the additional public and
private investment will stimulate growth and reduce interest rates, both of which
will narrow the deficit gap still further. There remain unfinished economic
policy tasks. Other commitments must be addressed and other economic policies
reformed. These will be identified later in this report.

The Clinton Administration’s approach to deficit reduction accepts change as its
point of departure. Because the world has changed, America’s armed forces must
redefine their roles and missions, and translate those updated missions into new
resource requirements. Similarly, old verities no longer work on the domestic
side. Indeed, a drastic restructuring of Federal priorities is overdue on both
fronts.

Facing New International Challenges and Opportunities




While this report focuses on our economic plan, the nation faces a host of new
international challenges and opportunities that will affect the prospects for
domestic economic renewal. World economic growth, our national security and
the health of our domestic economy are integrally linked. When our economy is
growing, we have more strength in international negotiations, our institutions
and values hold more attraction abroad, and our international engagement is
more affordable and sustainable. Moreover, our willingness to confront the
global issues and problems of the post-Cold War era will determine whether we
will shape global change in ways that advance our interests, or let those changes
engulf us. The agencies of government that defend and promote American
interests and values abroad must be redesigned to deal directly with new
international challenges and to operate efficiently in a streamlined government.
This economic plan and the budget that will follow redirect and reinvigorate our
national security priorities and institutions to meet new international challenges
and take advantage of new opportunities. This plan is an investment in
preventing regional wars and international crises that could consume scarce
resources. It also invests in new initiatives that will yield economic and
environmental benefits for the American people.

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International Affairs
United States foreign policy seeks a world community increasingly receptive to
democracy, market economics and international cooperation as we face new
international challenges. While spending for international affairs must share in
the reductions we are carrying out across the government, our budget plan has
made room for a number of important new initiatives, while maintaining those
existing programs that advance our enduring interests.

Few issues are more vital to our long-term security than the progress made in
Russia and other states, from Eastern Europe to Latin America and Africa,
toward democracy and the establishment of market economies. We already have
made a significant investment in supporting this evolution; our new budget
increases our commitment to progress in this area. For example, we are
committing funds to such new initiatives as a Radio Free Asia, to carry news
and hope to China and other Asian nations.
Our national security is also linked to helping prevent or resolve conflicts that
can grow out of ethnic, regional, or religious tensions throughout the world.
International peacekeeping and peacemaking activities have increasing value in
such conflicts. Somalia, Bosnia, Cambodia and Mozambique provide current
examples of multilateral peacekeeping efforts; more such exercises are likely in
the future. Our budget plan accommodates the likelihood of greater peace­
keeping commitments.
The proliferation of weapons of mass destruction and the means of their delivery
poses a serious long-term threat to international peace and stability. This
administration is shaping a coherent non-proliferation strategy, which will be
supported by our budget plan.

The competitiveness of U.S. firms in the global market is another foreign policy
priority. We will create a dynamic two-way relationship with the business
community that responds to its needs rapidly and creates a more level playing
field for international trade.
We also plan to address more coherently the many challenges posed by the
degradation of die global environment, through strong support for international
agreements and programs to protect that environment. We are building a strong
base for a new approach to global environment problems. Finally, our budget
plan increases our commitment of resources to active population programs, and
significant on-going support for refugee and humanitarian assistance—festering
problems that, unattended, will create tomorrow’s crises.

In order to fund these priorities and initiatives, we are also working to
streamline and modernize the structure of our national security machinery. Some
current programs, designed to meet the needs of the Cold War era, need new
focus. We are reshaping the Department of State, as well as the Office of the
Secretary of Defense and the National Security Council staff, to give new
strategic emphasis to problems such as assisting the former Soviet Union,

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non-proliferation, new global issues and our economic competitiveness. We are
reviewing such programs as international security assistance, development
assistance, and information and broadcasting, many of which were designed for
the Cold War. We will be taking a close look at future priorities for international
development lending through multilateral development banks, and at export
guarantee and promotion programs. Over time, we hope to restructure many of
these activities, streamline their operations or redesign them, while meeting our
existing international commitments and enhancing American interests.

National Defense




The world remains a dangerous place, but the nature of those dangers has
dramatically changed. Our military forces and intelligence capabilities must,
therefore, continually be redesigned in a changing world. Unquestioned
American military power remains essential to the success of our diplomacy and
to strengthening our international relationships.
Reducing the size of the military to provide funds for other needs, therefore, is
not our purpose. Rather, our goal is to reshape our forces to provide us with the
capabilities we need to defend our continuing interests, deal with new problems
and threats, and contribute to the promotion of democracy, prosperity, and
security in a new world.
Our defense strategy will be driven by a fresh assessment of the challenges that
require the use of American military force because they threaten our interests or
require our engagement. Many of these already are known: from the continuing
confrontation in Iraq, to our humanitarian operations in Somalia. Other risks are
equally real: the potential for new conflict in such places as Korea or the Middle
East; the international dangers of ethnic, religious or regional conflicts in other
regions, such as the Balkans; and the proliferation of weapons of mass
destruction and the means of their delivery.

The forces we design to address these challenges will continue to be built on the
superb capabilities and training of our military personnel and the continuing
technological superiority of our weapons. The men and women who proudly
serve America in our military constitute the finest fighting force in the history of
the world; we must ensure they remain so. We are determined to avoid a hollow
military. Our defense program will fulfill this promise. Together with active
diplomacy and a strong economy, our military will maintain deterrence, reduce
the incentive for others to proliferate, reassure our friends and democratic allies
and discourage potential adversaries, preserve freedom on the high seas, protect
our global economic interests, combat terrorism and drug-trafficking, and enable
us to take part in global peacekeeping and peacemaking activities.
These forces will be consistent with the design we have promised: 1.4 million
men and women on active duty, a strong, integrated reserve and a capable
forward presence of roughly 100,000 troops in Europe. Our military will be
mobile (with the sealift and airlift it requires), agile (with new technologies and
integrated doctrine which allows it to dominate by maneuver, speed and

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technological superiority), precise (to reduce the loss of life in combat), flexible
(to operate with diverse partners in diverse regions), smart (with the intelligence
and communications it needs for the diverse threats it will face) and, especially,
ready (given the unpredictability of new threats).
Our defense planning also confronts a new fiscal and management challenge.
The most recent five-year budget projection of the previous administration may
underestimate the true costs of the forces and hardware in their plan. In addition,
we may well face greater than previously anticipated liabilities, such as
environmental cleanup costs at our bases and facilities, as we downsize the Cold
War defense establishment. Finally, the budget we inherited may overstate the
savings that would result from planned defense management reforms and
overhead consolidations. A task force has been appointed to review this problem
and report back to the Secretary of Defense. Our defense plan delivers on the
savings we promised; we plan to deliver, as well, on our commitment to honest
budgeting and tight management in the Defense Department.
Our plan will also redesign defense administration and operations to carry out
new initiatives and face post-Cold War challenges. A restructured Defense
Department will focus on the new issues and threats, on sound financial and cost
management, on military personnel and readiness, and on creating a streamlined,
efficient acquisition process. In addition, we intend to do more to integrate and
harmonize the roles and missions of the services.

Finally, we plan to attend to the needs and problems of the nation’s defense
industrial and technology base, defining the core skills and industries we require
for our defense and working to integrate more closely defense and commercial
technology and manufacturing. As we reduce the size of our forces, we must
repay the debt of gratitude we owe to the men and women in the services and
the defense industries who have served their nation over the past 45 years. Our
budget plan includes a firm commitment to assist the transition for military and
civilian personnel to private life and other work. Elsewhere, we have described
our defense reinvestment and transition program, including new technology
investments and programs, job retraining, and community diversification
assistance.

This military program will also be affordable. Planned funding for national
defense over the next four years fulfills the promise of an additional $60 billion
in program savings. Combined with government-wide pay and benefit changes
and additional reductions to offset projected underfunding, this program will
yield $37 billion in outlay savings in 1997. (See Table 3-3.) We will implement
those reductions carefully as part of our effort to redesign the force. As we
undertake a major strategic review over the coming months, we will identify
new changes, savings and additions that will fit our new strategy.

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TABLE 3-3. SUMMARY OF NATIONAL DEFENSE
BUDGET ADJUSTMENTS
(In billions of dollars)
1997
Outlays

Bush adjusted baseline...................................................
Adjustments to baseline:
Program reductions1...................................................
Pay and benefit changes...........................................
Additional reductions to offset projected underfund­
ing ..................................................................................

287

Total adjustments..................................................

-37

Revised budget level2....................................................

249

-26
-6

-5

Note: Details may not add due to rounding.
1 These outlay savings reflect 1994-1997 budget authority
reductions of about $60 billion from national defense programs

2 These estimates do not include the investment package initiatives
for defense conversion and for energy efficiency in Federal
buildings.

Restructuring Domestic Government

Our founders saw themselves in the light of posterity. We can do no less. Anyone who has
ever watched a child’s eyes wander into sleep knows what posterity is. Posterity is the world
to come—the world for whom we hold our ideals; from whom we have borrowed our planet;
and to whom we bear sacred responsibility.




Bill Clinton
It is critical that we reduce long-term budget deficits in order to make room for
greater private investment in the economy. Some savings are justified on those
grounds alone. But part of the effort to remake government means eliminating
spending that is unnecessary or wasteful, that provides unjustified subsidies to
particular industries or areas, that goes to programs that simply do not work or
which are no longer useful in a changed world, or that contribute to growing
health care costs. There are some savings we must also enact to ensure that all
groups contribute to the success of our efforts. The detailed deficit reduction
plan follows. Unless otherwise noted, savings are in outlays for 1997 and the
four-year period of 1994-1997.

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Reform programs that don ’t work or are no longer needed




Making government work for the next century means reforming programs that
don’t work and updating policies and programs that were designed to meet the
needs of an earlier era.

USDA/Federal Crop Insurance. The Federal crop insurance program suffers
from high losses and low farmer-participation. Over the period 1981-1990, total
Federal Crop Insurance Corporation (FCIC) indemnities exceeded total
premiums by $2.5 billion. For every dollar paid in premiums, one dollar and
forty cents is paid out by FCIC in indemnities. The Administration proposal for
reform builds on an ongoing FCIC pilot project by changing to “area-yield”
insurance. Area-yield would set premiums and pay indemnities based on an
area’s (e.g. a county’s) performance, rather than that of an individual farmer.
Farmers who purchase area-yield insurance would be paid whenever the county
yield for a particular crop dropped below a specified level for a given area.
Farmers could select a desired “trigger” yield and amount of protection per acre.
Higher, individual insurance coverage would be available only through the
private sector without Federal subsidies. Discretionary savings would result from
reduced loss adjustment activities. Entitlement savings would come from a
reduced FCIC loss ratio, from the present 1.4 to roughly 1.1. The estimated
savings are $171 million in 1997, $551 million over four years.

USDA/Economic Research Service. USDA’s Economic Research Service (ERS)
provides economic and other social science information and analysis to USDA
and others. However, much of its work duplicates that of other USDA bureaus.
This proposed reform would result in reduced duplication as well as direct ERS
efforts toward the most essential information activities. The estimated savings
are $17 million in 1997, $61 million over four years.
Commerce/Economic Development Administration Trade Adjustment Assis­
tance Program. The Administration proposes to eliminate the Department of
Commerce’s Trade Adjustment Assistance Program (TAAP), which provides
technical assistance to firms that are adversely affected by increased imports.
There is no evidence that the TAAP succeeds in restoring the international
competitiveness of the firms it assists. It simply diverts resources and attention
away from competitive businesses and eases the problems of non-competitive
businesses. This proposal would not affect the Department of Labor’s Trade
Adjustment Assistance Program for individuals in industries affected by
international trade. Estimated savings are $14 million in 1997, $30 million over
four years.

State Justice Institute. The Administration proposes to eliminate die State
Justice Institute, a Federally-assigned agency. The program serves States well
but fulfills no clear Federal purpose. The estimated savings are $17 million in
1997, $51 million over four years.




What We Must Now Do

Energy/Ettminate unnecessary nuclear reactor research. The Administration
proposes necessary funding in the research and development area for
maintaining the operation of the current generation of reactors and the licensing
actions for reactors that have commercial interest. It also includes the necessary
funding to support the high-level waste program. This proposal eliminates the
research and development funding support and related facility funding for
nuclear reactors that have no commercial or other identified application. It
provides necessary funding for termination costs as well as for safety-related
activities that are required to place the test facilities in a safe-shutdown
condition.

Termination of Commissions. The Administration proposes to eliminate a
number of commissions which are no longer necessary, for savings of $11
million in 1997, $41 million over four years. They are:
•National Space Council
•National Critical Materials Council

• Commission on the Bicentennial of the U.S. Constitution
• Competitiveness Policy Council

•National Advisory Council on the Public Service

In addition, the President has issued an executive order requiring the elimination
of more than 200 advisory committees now operating throughout the
government.
USDA/Rural Electrification Administration. The Administration proposes to
maintain electric and telephone loan levels but eliminate loan subsidies on most
REA loans by increasing loan interest rates from 5 percent (and in some cases 2
percent) to Treasury rates (currently 6.8 percent). $25 million in 5 percent loans
for electric distribution “hardship” borrowers would be maintained each year
through 1998. REA was created in 1935, when only 11 percent of farms in the
U.S. had electric service. Now nearly 100 percent of rural areas have this
service. Many REA loans are currently made to suburban and resort areas. In
addition, many current telephone borrowers are subsidiaries of major telephone
corporations. The vast majority of REA borrowers can afford private financing
without significant increase in rural subscriber rates. The estimated savings are
$150 million in 1997, $374 million over four years.
USDA/Farmers Home Administration. The Administration proposes to reduce
Farmers Home Administration (FmHA) direct farm loans 25 percent and replace
them with an equal amount of subsidized guaranteed loans. Lower interest rates
have created greater opportunities for use of subsidized guaranteed loans rather
than direct loans, and given the projected continuation of these lower rates, the
same individuals can be assisted at less cost to the taxpayer, while farmers gain
valuable, lasting relationships with their local lending institutions. Estimated
savings are $10 million in 1997, $31 million over four years.

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Commerce/Bureau of Export Administration. The Bureau of Export Admini­
stration is die principal Federal export control agency. Since the break-up of the
Soviet bloc and the dissolution of the Soviet Union, the workload associated
with export control licenses on dual use technologies has precipitously declined.
Estimated savings are $7 million in 1997, $27 million over four years.
HHS/Health Professions Curriculum Assistance Grants.
The Federal
government, through HHS, awards health professions curriculum assistance
grants to support the training of various types of health professionals.
Recognizing that most health professionals are no longer in short supply,
targeted support through the health professions curriculum assistance grants
would continue to be available for primary care, nursing, and the effective
elements of disadvantaged student assistance. Estimated savings are $27 million
in 1997, $87 million over four years.

Environmental Protection Agency/Completion of Wastewater Treatment
Construction Grants. This proposal reflects savings due to the completion of the
current wastewater treatment grant funding authorization that was designed to
end Federal assistance for wastewater funding. With the $846 million in
wastewater stimulus funding provided in 1993, the $18 billion authorization
under the 1987 Water Quality Act will have been largely completed a year ahead
of schedule. Under this authorization, wastewater State Revolving Funds will
have been capitalized at $10.3 billion (including the State 20-percent match) for
the purpose of making loans to municipalities for construction of wastewater
treatment plants. As these loans are repaid, States will be able to make a new
round of loans due to the self-sustaining nature of the State Revolving Funds.
Also, one of the long-term investments proposed by the Administration is a new
$2 billion annual authorization for capitalizing Clean Water State Revolving
Funds for low-interest loans to municipalities to address water quality problems.
Estimated savings resulting from the completion of the wastewater treatment
authorization are $1.9 billion in 1997 and $4.1 billion over four years.
Commerce/Appalachian Regional Commission. The Administration proposes to
freeze spending for the Appalachian Regional Commission at the 1993 level of
spending. The Commission was established in 1965 to help improve economic
and social conditions in the 13-state Appalachian region. Approximately 70
percent of its funding supports highway construction. More than two-thirds of
the Appalachian Highway System has been funded. Increases in federal-aid
highway funding will more than compensate for the reductions necessitated by
this proposal, which saves $11 million in 1997 and $20 million over four years.

Community Investment Program. This program will be fully funded in 1994.
However, the new crime initiative proposed by the Administration provides
substantially increased funding for the social service and anti-crime programs
supported by the Community Investment Program, making this program
duplicative. Streamlining these programs will allow for increased Federal
coordination and lead to efficient and effective policies of community

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revitalization and crime fighting throughout the country. Estimated savings are
$552 million in 1997, $1.2 billion over four years.

Tennessee Valley Authority. The Administration proposes to terminate the
Tennessee Valley Authority’s fertilizer research activities and its economic
development program. The fertilizer industry is fully capable of financially
supporting fertilizer research without the need for taxpayer subsidized work in
TVA. With regard to economic development, while these activities have a long
and noted history, other much larger programs with similar purposes have been
put into place, and are slated to receive substantial increases from the
Administration’s stimulus and investment proposals. The estimated savings from
this proposal are $188 million from 1994 to 1997, including $50 million in
1997.

Eliminating Subsidies; Charging Fees for Government Services




The nation can no longer afford subsidies and giveaways to those who don’t
need them, and we must assure that the taxpayer is fairly compensated for
services or resources provided by government.
USDA/Phase out below-cost timber sales. Timber sales from some National
Forests do not cover the costs to the government of making the timber available
for sale. This proposal would gradually eliminate sales in those forest regions
where timber-sale program costs exceed timber-sale revenue. This gradual
phase-out would reduce the economic impacts on rural communities dependent
on the timber industry. Below-cost forests would be reviewed periodically to
determine if sales could proceed at no net loss to the Government. Estimated
savings are $86 million in 1997, $274 million over four years.
Expand Agriculture user fees. New user fees for three USDA agencies (the
Federal Grain Inspection Service, the Agricultural Marketing Service, and the
Agricultural Cooperative Service) to recover costs for Federal services being
provided to a specific group. Estimated savings are $16 million in 1997, $59
million over four years.
USDA/Meat and poultry fees. Requires all slaughterhouses and processing
plants with overtime shifts to reimburse the government for the full cost of
Federal meat and poultry inspections. Estimated savings are $104 million in
1997, $416 million over four years.

HHS/Food and Drug Administration user fees. Identifiable beneficiaries of
government services should pay for the value conferred by certifying the safety
and efficacy of drugs and medical devices. Estimated savings are $336 million
in 1997, $1 billion over four years.
Bureau of Alcohol, Tobacco and Firearms (BATF) user fees. BATF is
required to approve all alcoholic beverage labels and conduct various laboratory
analyses to assure compliance with Federal law. There is currently no charge for
these services, though manufacturers receive real, tangible benefits from them.

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Collection of these fees to cover BATF’s costs will save $20 million over the
1994-1997 period, and $5 million in 1997.

SEC/Higher registration fees for securities being sold to the public. The
Administration proposes to raise this charge to corporations to cover the SEC’s
costs. The proposal would raise the rate at which this fee is collected, and at the
same time increase the amount that helps to fund the SEC directly. Estimated
savings are $54 million in 1997, $203 million over four years.
DOE/Power Marketing Agencies (PMAs) debt repayment reform and market
incentives for conservation. The Federal Government owns and operates five
Power Marketing Agencies (PMAs), which sell electric power generated at 123
Corps of Engineers and Bureau of Reclamation dams across the country.
Congress intended that the full cost of the power portions of these facilities be
repaid by power customers. Proposals to cover the full cost of PMA-supplied
power have been studied for years. The Administration’s initiative, however, is
different from previous proposals. It combines a modest repayment reform,
which does not involve changing interest rates, with a powerful market-based
incentive for customers to reduce electricity consumption through demand side
management programs and switching to the direct use of natural gas. Under the
proposal, the PMAs would use straight line amortization of project appropriation
debt to help recover more of the government’s full cost of providing the power.
The proposal also creates incentives for conservation by allowing PMA
wholesale customers to resell power saved through demand side management
activities or through switching to the direct use of natural gas. Customers’ profits
from the resale of the conserved power would be shared 50/50 with the Federal
government until the power portions of the projects were repaid. The Federal
government would collect over $500 million in 1997 from both of these
initiatives, about $1.7 billion from 1994 to 1997. The straight line amortization
schedule (requiring a fixed percent of the outstanding principal to be repaid each
year) would have a de minimus effect on retail rates.
Phase-in increased Inland Waterway user fees. The Nation’s inland waterways
are the most heavily subsidized form of commercial freight transportation. Since
the system was constructed for commercial navigation beneficiaries, they should
pay for all operation and maintenance costs. Existing inland waterway fuel taxes
collected on applicable segments of the system only offset half of the Corps of
Engineers’ cost of construction and major rehabilitation (estimated at $430
million in 1993). This proposal would increase the 1994 Federal inland
waterway fuel tax from 19 cents to $1.19 per gallon in a series of increasing
steps to a total of $1.00. Estimated savings are $460 million in 1997, $820
million over four years.

USDA and Interior/Increase grazing fees. The Administration proposes an
increase in grazing fees on public lands as negotiated by the Secretaries of
Interior and Agriculture. Grazing fees are the charge for an annual permit to
graze cattle, sheep, or horses on Federal lands. The permits are based on a fee
per “Animal Unit Month” (AUM). The AUM for cattle is the acreage needed to

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support a cow and calf with one month’s worth of forage. Today, grazing fees
are based on a formula established by the 1978 Public Rangelands Improvement
Act for a seven-year trial period. The formula was continued by Executive Order
in 1985 when the trial period ended. Th formula calculation resulted in a fee of
$1.92 per AUM in 1992, and a reduction to $1.86 per AUM for 1993. Recent
estimates of fair market value for public range are two to five times higher. This
proposal would give Secretaries of the respective departments the authority to
negotiate a fee schedule that would generate estimated revenues of $76 million
in 1994—1997 ($35 million in 1997).

Interior/Implement a Federal irrigation water surcharge. Authorize a per
acre-foot surcharge on water sales to Reclamation projects throughout the West
(except for the Central Valley Project in California, for which a similar
surcharge was recently enacted). Revenue from the surcharge would be
deposited into a special fund for use (subject to appropriations) in mitigating
harm to fish and wildlife caused by irrigation. These costs are currently paid by
the Federal taxpayer or repaid by project beneficiaries (without interest) over 50
years. The surcharge would also encourage more rational water use that would
reduce the harmful impacts of non-point source pollution. Estimated savings are
$15 million in 1997, $45 million over four years.
Army Corps of Engineers/Increase recreation fees at existing Corps of
Engineers areas. This proposal would give the Corps of Engineers authority to
increase certain camping fees and eliminate free camping sites in order to
increase the amount of Corps of Engineers’ costs that are offset by the users of
these facilities. Additionally, the Corps could add fees for use of some facilities.
The fee increases would be in the range of $1 to $3 per site or activity, but in no
case greater than $3 per site or activity. Fees would not be charged for wayside
exhibits, overlook sites, general visitor information, or comfort facilities. The
increased fees would be collected in a special account to be used (subject to
appropriation) to offset recreation program costs. No Corps of Engineers
entrance fees would be chaiged. The Corps of Engineers currently charges
camping fees, averaging $6 per site, and special-use fees for activities such as
use of group picnic shelters. Estimated savings over four years, $72 million,
including $18 million in 1997.
Interior/Increase recreation fees at certain national parks and other recreation
areas. Authority would be given to the Secretary of the Interior to increase
entrance fees for certain National Park Service and Fish and Wildlife Service
areas. Also establish entrance fees at other National Park units and Bureau of
Land Management developed recreation sites where justifiable. Where
appropriate, the Bureau of Land Management would also increase special-use
permit charges. With the exception of entrance to national parks, increases in
current fees would be no greater than $3 per entry. This proposal would generate
an anticipated $147 million in 1994-1997 receipts ($45 million in 1997) to be
used, subject to appropriation, to maintain and enhance recreational
opportunities furnished by the Department of the Interior.

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Interior/Permanently extend hardrock mining holding fees. There are over one
million hardrock mining claims on Federal lands operating under the 1872
Mining Law. Hardrock minerals include gold, silver, lead, copper, zinc, and
numerous other minerals. The 1872 Law requires claimants to annually perform
$100 worth of work to develop and maintain their claims. Claimants must pay
only a filing fee to the Federal government for the right to mine this land. This
proposal would permanently authorize charging a $100 per claim holding fee on
all hardrock claims on Federal lands (extending a fee enacted for 1993). The
claimant would be relieved of annual work requirements, which should increase
his or her flexibility on timing the development of claims. It will also reduce
unnecessary ground disturbance to satisfy current law. The proposal would
increase revenues to the Treasury by an estimated $80 million per year, after
covering the costs of administering the entire hardrock mining program,
including environmental compliance. It would generate estimated revenues of
$320 million in 1994-1997.

Interior/Institute hardrock mining royalties. Establish a 12.5 percent royalty on
the gross value of the hardrock minerals extracted from mining claims on public
lands. There are over one million hardrock mining claims on Federal public
lands operating under the 1872 Mining Law. Hardrock minerals include gold,
silver, lead, copper, zinc, and numerous other minerals. The 1872 Law was one
of many laws intended to encourage the settlement and development of the
West. It allows miners to prospect, make claims, and extract minerals from
Federal lands for the cost of filing a claim. There is no current authorization to
charge a royalty on hardrock minerals privately extracted from public lands.
Laws enacted early in this century provide for Federal leasing and collection of
royalties from oil, gas, coal and certain other minerals extracted from Federal
lands. Hardrock mining, however, remains under the rules of the 1872 Law. The
new royalty would be phased in over three years. The time necessary to set up
and administer the royalty in the most effective way would delay initiation of
royalty collection until 1995. Receipts from hard rock mining royalties would be
shared with the States where the mining occurs. This proposal is expected to pay
for the costs of enforcement and collection. It would generate estimated
revenues of $471 million in 1994-1997, including $277 million in 1997.
Treasury/Improve enforcement of harbor maintenance fees. Provide up to $5
million annually from the Harbor Maintenance Trust Fund for the Department of
the Treasury (Customs Service) to improve compliance with existing harbor
maintenance fees. Harbor maintenance fees paid by shippers consist of an ad
valorem tax applied to the value of cargo shipped through U.S. harbors.
Currently, the Customs Service administers the Harbor Maintenance Fee only at
a minimum level, and many fee collections are on a voluntary basis. Estimated
savings: over four years, $165 million; 1997, $65 million.

USDA and Interior/Permanently extend 50 percent net receipt sharing (on
shore minerals). Permanently extend 50 percent net receipt sharing for on-shore
minerals. States sharing mineral receipts should also share the costs of

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administering the mineral receipts program. Net receipt sharing occurs when the
Federal government, prior to distribution of gross mineral receipts to the States
and Federal Treasury, deducts a portion of the costs of administering the Federal
minerals program. Since 1991, Congress has placed language in the Interior
Appropriations bills directing 50 percent net receipt sharing (deducting 50
percent of the cost of the programs before distribution to States and the Federal
Treasury). This proposal would save an estimated $170 million in 1994-1997
outlays ($45 million in 1997).
USDA/Tncrease Forest Service recreation fees. The Forest Service manages
156 national forests that provide a wide spectrum of outdoor activities, including
over 33 million acres of wilderness, 5,800 facilities, and approximately 116,000
miles of trails. Currently, the Forest Service charges user fees for fully equipped
camping sites. In order to generate revenue to maintain and enhance recreation
on National Forests, the Forest Service would selectively charge entrance fees
for developed recreation areas, such as areas where all-terrain vehicles are
allowed. These fees would range from $1 to $3. User fees would be increased
by no more than $3 per site or activity. These proposed recreation fees would
generate an additional $10 million in 1994 and would be placed in a special
account to be used, subject to appropriation, to maintain and enhance
recreational opportunities in National Forests. Estimated savings are $13 million
in 1997, $46 million over four years.
USDA/Eliminate subsidies to honey producers. All Commodity Credit
Corporation (CCC) price-support payments to honey producers would be
terminated. There are roughly 3,500 individuals enrolled in USDA’s honey
program. These represent slightly more than 1 percent of all honey producers in
the U.S. Roughly 350 individuals get over 50 percent of payments made by the
honey program. Due to the large number of pollination servicers whose bees are
not in the program, pollination of the Nation’s crops would not be significantly
affected by this proposal. Estimated savings: $4 million in 1997, $32 million
over four years.

USDA/Target CCC farm subsidy payments to farmers with off-farm incomes
below $100,000. Make ineligible from receiving CCC crop subsidies (price
support loans and income support payments) any producer receiving $100,000 or
above in off-farm adjusted gross income. USDA farm programs are criticized for
unfairly supporting large farms and wealthy producers rather than smaller farms
and lower-income farmers. U.S. farm producers have an annual income more
than twice the national average. The Congressional Office of Technology
Assessment concluded that most big farms “do not need direct government
payments and/or subsidies to compete and survive.” The proposed targeting of
subsidies would direct farm payments to smaller, family farms, which deserve
Federal financial help more than large agricultural enterprises. It would cause an
estimated 1-2 percent of program participants to drop out of USDA farm
programs. Most of these wealthiest participants include corporations and
individuals for whom farming is not their primary occupation or source of

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income. Savings: $470 million in CCC outlays during 1994-1997, and $140
million in 1997.

USDA/Increase non-eligible payment acres (triple base) starting in 1996.
Under “triple base,” instituted in the 1990 Omnibus Budget Reconciliation Act,
15 percent of a farm’s crop acreage base is ineligible for CCC deficiency
payments (authorized for wheat, feedgrains, cotton, and rice). Most crops still
can be raised on those acres, and the farm’s crop acreage base for future CCC
payments in later years is preserved. This proposal raises the percentage of
“triple base” acres from 15 percent to 25 percent in the 1995 Farm Bill. The
resulting budget savings do not reduce farm income dollar-for-dollar. Crops
raised on the ineligible acres receive the market price, and the producer responds
more directly to markets, rather than to CCC rules for its farm programs. Since
triple base began in 1991, farm income has been at record levels. The triple base
provision in CCC programs is good for the environment. It gives farmers more
flexibility to plant as the market indicates, and to rotate crops as sound
environmental practice indicates, rather than as the goal of maximum Federal
subsidies dictates. Triple base moves the U.S. farm sector toward the global
future of less subsidized, competitive production. Savings: $1 billion during
1994-1997 and $720 million in 1997.
USDA/Eliminate 0/92 and 50/92 (PAY/92) programs starting in 1996. USDA’s
PAY/92 program is an example of paying farmers not to plant. The program
allows farmers to not plant their crop base—ordinarily devoted to wheat, feed
grains, cotton, or rice—in return for receiving income-support payments. The
producer must set aside a minimum of 8 percent of his maximum payment acres
without pay, while all additional set-aside acreage may receive income-support
payments. For wheat and feed grains, producers may elect to plant none of their
acreage—the “0/92 option”—and then receive 92-percent of their normal
deficiency payments. For cotton and rice, producers must plant at least 50
percent of their acreage base (“50/92"), with most of the rest eligible for clover
and deficiency payments. PAY/92 was introduced in the 1985 Farm Bill during a
time of substantial excess production. Because CCC target prices and loan rates
have been capped or reduced since the 1985 Farm Bill, excess production has
declined. Other Farm Bill provisions, like the marketing loan and the Acreage
Reduction Program, help to ensure that USDA will not be forced to purchase
large quantities of commodities under CCC loan. Also, because of the paid
set-aside of the PAY/92, exports have been less than they would have been
otherwise. While U.S.-planted acreage fell by 10 percent over the period when
PAY/92 was introduced from the previous decade (1975-1984), planted acreage
in other countries virtually replaced America’s idled acres on an acre-for-acre
basis. Estimated savings are $937 million over four years, including $664
million in 1997.
USDA/Increase assessments on “non-program” Federally-subsidized crops
starting 1996. This proposal would increase projected receipts on “non-program” crops such as sugar, tobacco, honey, peanuts, soybeans, wool and mohair

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by 67 percent in the 1995 Farm Bill, in line with the percentage increase in
non-eligible acres in the Administration’s “triple base” proposal. Some crops
receive a subsidy through Federally-restricted markets rather than from the
Treasury directly. Federal support for these crops arises not from direct subsidy
payments from the U.S. Treasury but from U.S. government loans and
restrictions on production or imports. These laws cause consumers, rather than
taxpayers, to pay most of the subsidy through higher market prices. A proposal
to increase triple base non-eligible acres for subsidy payments affects the
“program” crops and so favors the “non-program” crops. For equitable treatment
of all subsidized crops, fees on “non-program” crops should be increased in
tandem with the triple base increase. If not, crop production patterns could be
distorted, leading to increased CCC costs. These assessments will be designed so
as to avoid, to the extent possible, any serious impact on small family farmers.
The proposal would reduce net CCC outlays by $900 million during 1994—1997,
and $450 million in 1997.

USDA/Limit payments on wool and mohair to $50,000 per person. USDA’s
wool program was authorized in 1954 to ensure the Nation a strategic reserve of
wool in times of war and other emergencies. Wool can no longer be considered
a “strategic” material. Mohair never was. Under this proposal, income-support
payments from the wool and mohair program would be limited to $50,000 per
producer. The 1993 payment limitation is currently $150,000 each for both wool
production and mohair production (a maximum of $300,000 per producer).
Payments are heavily concentrated. In 1991, less than 1 percent of producers
received 54 percent of the payments. Thirty percent of all producers receive
checks for $100 or less. Producers on average receive from the Federal
government almost 210 percent of the market value of their production.
Estimated savings over four years, $212 million; in 1997, $66 million.
FDIC/Assess examination fees for state-chartered, FDIC-insured banks.
Although all FDIC-insured banks and thrifts must be examined every year,
State-chartered banks (unlike federally-chartered banks and thrifts) are not
assessed fees for their Federal examinations. Many federally-chartered banks
and thrifts have converted to state charters to avoid the higher Federal
examination fees. The Administration proposes that state-chartered banks pay the
same rates as national banks, but that they also be allowed to take credit for
amounts they pay to state regulators. Estimated savings are $286 million in
1997, $1.1 billion over 4 years.

CFTC/Institute a fee on all U.S. futures exchange transactions. Currently,
traders, brokers, hedgers, speculators, exchanges and others who benefit from
Federal regulation of U.S. futures exchanges do not pay for its cost. The
Administration proposes to institute a fee on all U.S futures exchange
transactions. The revenue from this fee would cover the costs of the CFTC. To
the extent this fee may adversely affect the competitiveness of U.S. futures
exchanges, the Commodity Futures Trading Commission (CFTC) would be
given the discretion to correct for any adverse competitive effects that may arise.

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Estimated savings are $235 million over four years, including $63 million in
1997.

SEC/Higher registration fees for securities being sold to the public.
Corporations which raise money through our securities markets must file a
registration statement with the Securities and Exchange Commission (SEC) and
pay a fee. The revenues collected from this fee cover a portion of the SEC’s
costs. The Administration proposes to raise the rate at which this fee is collected,
and at the same time increase the amount that is deposited to the General Fund
of the Treasury. Estimated savings over four years, $188 million; $50 million in
1997.
Postal Service/Require payment of outstanding retirement and health care
costs. When the U.S. Postal Service (USPS) was reorganized in the early 1970s,
it assumed assets and liabilities. One of the liabilities was the retirement costs
associated with former USPS workers. These workers, however, have been
covered by health and benefit payments managed by the Office of Personnel
Management (OPM). The USPS has made payments towards OPM’s costs but
only well after the costs have been incurred. As a consequence, when the
Federal Government’s interest costs are included USPS’s payments have fallen
$1 billion short of OPM’s costs. This proposal would require USPS to make
payments of $347 million in 1995, 1996 and 1997. Estimated savings over four
years are $1.0 billion, $347 million in 1997.

Commerce/Permanentiy extend patent and trademark fees. The Patent and
Trademark Office (PTO) is self-financed through various user fees. The standard
patent fee was increased by the Omnibus Budget Reconciliation Act (OBRA) of
1990 by adding a surcharge, which is set to expire in 1995. This proposal raises
the standard fee to incorporate the surcharge and allows the standard fee to fully
cover patent operation costs with annual adjustments to the Consumer Price
Index (CPI). It does not propose new fees. The proposal also assures that the
patent and trademark process continue to be fully funded by fees. Estimated
savings: $115 million in 1997, $226 million over 1994-1997.

DOT/Increase registration fees for general aviation aircraft. General aviation
aircraft account for about 26 percent of the Federal Aviation Administration’s
cost of running our aviation system, but pay fees covering just 7 percent of these
costs. Airlines and their passengers pay all the costs they impose on the system.
As a result, taxpayers provide general aviation operators with an annual subsidy
of about $2 billion. This proposal would gradually increase current general
aviation registration fees over 4 years and require annual, rather than 3-year,
renewals. The increased fees will result in general aviation operators still paying
only a fraction of their “fair share” costs. Estimated savings over four years are
$151 million, including $58 million in 1997.
Social Security Administration/Fee for State SSI administration. The
Administration proposes that states reimburse part of the cost of Federal
administration of state supplements to the Federal Supplemental Security Income

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(SSI) benefit. Estimated savings: over four years, $520 million; in 1997, $180
million.
VA/Increase housing loan fees to 2 percent. The VA Home Loan Program
guarantees mortgages made by private lenders to veterans, active duty
service-persons, and selected reservists. Beneficiaries obtain mortgage credit on
favorable terms (e.g., no-downpayment and a loan fee that is below the fees for
a private mortgage). The Administration will propose legislation to increase most
loan fees by .75 percent (e.g., the no-downpayment fee would go from 1.25 to 2
percent). This fee increase would reduce the taxpayer subsidy to this program,
while continuing to offer veterans a downpayment and fee package that would
be below conventional loan requirements. Estimated savings are $157 million in
1997, $620 million over four years.
Treasury/Permanently extend Customs Service merchandise and passenger
processing fees. The current fees are set to expire in 1995. The Administration
will propose legislation extending them indefinitely, in order that the government
may continue receiving payment to cover the costs of these necessary services.
Over the 1994-1997 period, this will save $1.1 billion; in 1997, savings will be
$579 million.

FCC/Auction spectrum for communication services. Today many multimillion
dollar industries—including television and radio—are built around the free use
of a scarce and valuable Federal resource: the electromagnetic spectrum. The
traditional practice of assigning spectrum rights by lottery or hearing has often
resulted in huge windfalls being distributed to individuals and businesses at the
taxpayers expense. In the cellular industry alone, for example, many overnight
fortunes were made by speculators who won spectrum rights through a lottery
and resold them days later to large communications companies. The bottom line
is that an “auction” of these rights already occurs today; the question is whether
the taxpayer will benefit. The Administration will seek legislation to transfer 200
megahertz now used by the Federal Government to the FCC for private use, and
to grant the FCC authority to assign this new spectrum, and make all other
future license assignments, using auctions. Enactment of the legislation will help
to ensure that new licensees do not reap large financial windfalls at the
taxpayer’s expense. The proposal does not apply any fees or royalties to existing
licensees so as not to disturb settled arrangements. Estimated savings are $2.1
billion in 1997, $4.1 billion over four years.

The Administration is concerned about so-called “earmarking” of projects in
various Federal programs. The following options for deficit reduction identify
such projects with the understanding that the Congress may find offsetting
savings within the same program areas to preserve these initiatives.
USDA/Cooperative State Research Service (CSRS) earmarked research grants.
Congressional earmarking of CSRS research funding has increased significantly
in recent years. In report language for the 1993 appropriations, 126 grants,

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totaling over $50 million, were funded through specific earmarks. These grants
were not peer-reviewed, competitively awarded, or specifically authorized. Many
of the research projects funded could be financed by the agribusinesses that
directly benefit from the research (e.g., the floral, timber, and seafood
industries). Another source of funds for projects with scientific merit is the
National Research Initiative (NRI) competitive grants program, also adminis­
tered by CSRS, which is proposed at higher funding levels in 1994. Estimated
savings over four years are $96 million, $42 million in 1997.

USDA/Cooperative State Research Service (CSRS) earmarked facilities
construction. The CSRS Buildings and Facilities account has become a main
example of Congressional earmarking of scarce Federal research dollars. The
projects funded often are not high national priorities and would be better funded
by States, or the agribusinesses that directly benefit from them. Estimated
savings over four years are $86 million, including $44 million in 1997.
USDA/Earmarked special ES grants. Each of the Extension Service’s (ES)
earmarked special extension grants that would be eliminated could be financed
through funds each State receives from USDA to support the Extension
Service’s general operations in each State. The use of these State funds, which
are awarded by formula, is not restricted and can be used to address
high-priority projects identified by each State. Estimated savings are $14 million
in 1997, $54 million over four years.
Commerce/Low-priority NOAA programs, projects, and demonstrations.
Approximately 47 National Oceanic and Atmospheric Administration projects
have been identified as low priority. Many of these projects have had funding
“earmarked” for them in the past, thereby bypassing NOAA’s project
competitive review process. Estimated savings: $70 million in 1997, $220
million over 1994-1997.

Army Corps of Engineers, Interior/Reduce or stretch out construction funding
for low priority water projects. Funding for these projects is not high priority
because the projects are either: (1) not economically justified, (2) not a Federal
responsibility, (3) exempted from standard non-Federal cost sharing, or (4)
environmentally unacceptable. Estimated savings are $398 million over four
years, including $92 million in 1997.
DOT/Lower-priority programs and projects. There are a wide variety of
lower-priority projects which have been funded by the Department of
Transportation. Estimated savings over four years, $1.3 billion, including $428
million in 1997.
HUD/Eliminate individual HUD grants (special purpose). For the past three
years, Congress has added money for 408 projects that are awarded by HUD’s
Appropriations Act. Past projects included art centers, drainage improvements,
health care facilities, and business centers. The ten states with the highest per
capita income receive 33 percent of the funding in 1992. Estimated savings over
four years: $565 million; in 1997: $278 million.

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SBA/Funding for SBA earmarked grants. Appropriations were provided to
SBA in 1993 for a number of unnecessary earmarked grants. Estimated savings
over four years, $315 million; $110 million in 1997.

Managing Government for Cost-Effectiveness and Results




Making our government more effective and efficient means abandoning
structures and practices that impede flexibility, waste resources, and frustrate
service delivery.

White House staff reductions. The Administration will share in the sacrifices all
Americans will be asked to make in working together to reduce the Federal
deficit. The President has already taken action to reduce the size of the White
House staff by 25 percent. The newly reorganized White House will be better
suited to promote the agenda for change and economic growth. Through greater
emphasis on policy councils and the Cabinet, the President will reach beyond the
White House for policy development and ideas. Estimated savings are $40
million in 1997, $129 million over four years.
Federal salaries. Reflecting the President’s intention to ensure that government
makes the first contribution to the major deficit reductions that he is calling for,
the Administration proposes that there be no national pay increase or locality
pay increase for Federal employees in calendar year 1994. National pay
increases in 1995-1997 would be one percent less than current law in each year.
Locality pay would be implemented beginning in 1995 under a revised system
that will permit more equitable and accurate determinations to be made than
would occur under the current, flawed methodology. The savings from these
initiatives are $2.7 billion in 1997 and $8.0 billion over four years.

Agency streamlining, employee reductions, administrative cost-cutting. The
Federal Government today employs over two million workers, not counting the
armed forces or the Postal Service, with an annual payroll of about $100 billion.
Many are employed in inefficient work settings, using obsolete equipment and
antiquated work processes. The use (and abuse) of government-owned aircraft
and limousines, executive dining facilities, and attendance at conferences held at
vacation resorts have in the past entailed unjustifiable costs to the taxpayers.
Overhead costs of Federal agencies are excessive and can be reduced
significantly by more efficient and frugal management and by modernization of
equipment, facilities and processes.
The Administration has taken a number of steps to reduce administrative and
overhead costs, increase productivity, streamline agency operations, and improve
delivery of services to the public. The President has issued Executive Orders
requiring a reduction of 100,000 civilian personnel positions by the end of 1995;
reduction of at least 50 percent in the number of executive motor vehicles
owned or leased by Federal agencies by the end of 1993; elimination of
non-essential air travel and use of government-owned aircraft where commercial
air travel is available; guidelines for selection of conference sites and Federal
employee attendance at conferences; closing or placing on a full-cost-recovery

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basis all executive dining facilities; abolition of at least one-third of the 700
non-statutory Federal advisory commissions now in existence; and reduction of
Federal administrative costs by 14 percent by 1997. These measures are
estimated to save taxpayers $15.6 billion over the next four years.

Agriculture/Consolidation into one Farm Service Agency. The Administration
proposes to create a new Farm Service Agency (FSA) from the USDA programs
and staffs serving farmers from county offices. The agencies that would be
consolidated are the Agricultural Stabilization and Conservation Service (ASCS),
the Soil Conservation Service (SCS) and the Farmers Home Administration
(FmHA). Currently USDA maintains more than 12,000 offices for these
county-based agencies, with separate computer systems and State and National
office support staffs. Most farmers must visit different county offices of these
agencies and often are required to fill out redundant paperwork. The proposed
FSA would maintain a USDA field office at the county level, and would
improve service to farmers. Savings would result from a streamlined county
office structure and from efficiencies at the National and State offices, as these
agencies are consolidated. Estimated savings are $307 million in 1997, $730
million over four years.
Agricuiture/Reform agricultural crop disaster payments made by the CCC.
Each year since 1987, Congress and the Administration have provided ad hoc
disaster payments to farmers. Under existing 1990 Farm Bill law, disaster
payments are subject to appropriations. This proposal would reform ad hoc
disaster payments. The option assumes a continuation of the Federal Crop
Insurance Corporation (FCIC). Under 1990 Farm bill law, a farmer must suffer a
35 percent loss (40 percent if the farmer has not purchased Federal crop
insurance, even though it was available). In addition, disaster payments would
only be available contingent upon a Presidential declaration of an emergency as
defined by the Budget Enforcement Act. Because disaster payments are not
assumed in the baseline, no savings are scored for this proposal. However,
savings would be realized upon the enactment of the next disaster bill.

Justice/Prison construction. There remains a need for new prison construction
to accommodate the rapidly increasing prison population. However, more than
$1.6 billion already authorized has not been spent due to a construction lag. The
Administration proposal permits the continued spending of already authorized
funds, so that the current rate of overcrowding—40 percent, compared to 70
percent in 1990—will be reduced to less than 6 percent by 1997. It allows
limited new construction in 1994 and 1995. Estimated savings are $181 million
in 1997, $331 million over four years.
Education/Reform campus-based aid. Today, the three campus-based student
aid programs (supplemental grants, work-study, Perkins loan capital) overlap and
duplicate aid available from the much larger Pell Grant and Family Federal
Education Loan Programs. They represent less than 9 percent of total aid made
available by the Department of Education’s major student aid programs. Pell and
guaranteed loans have requirements that assure that those who are most in need

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benefit most from Federal funds. Campus-based programs, however, while
need-tested, permit schools to select less needy students for awards. The
Administration proposal reduces spending for campus-based student aid
programs by $200 million but gives schools complete flexibility to use the
remaining $1.2 billion for whichever aid approaches best meet student needs. In
combination with other budget policies, total aid available from the Education
Department’s major student aid programs is estimated to increase, despite the
reduction in campus-based funding. Also, the new flexibility increases the
efficiency of the campus-based programs in addressing student needs and should
enable more funding to be used for high priority purposes, such as funding
additional community service jobs. The estimated savings from the proposal are
$275 million in 1997, $732 million over four years.

Education/Impact Aid “b” Payments. The proposal would phase out Impact Aid
“b” payments to school districts over a three-year period. The Impact Aid
program makes payments to school districts to partially offset the presumed
adverse impact on the school district of the presence of Federal property and
federally connected children. However, “b” payments, unlike “a” payments, are
based on children who either do not actually live on Federal property or whose
parents do not work on that property. Most “b” children live in the community
on property that is taxed by the school district and have families who pay State
and local taxes used to finance local education. Estimated savings are $145
million in 1997, $404 million over four years.

DOE/Superconducting Super Collider. The Administration is committed to the
development of the superconducting super collider as a major contribution to
scientific information for the future. The Administration believes, however, that
in order to ensure that all of the components of this project are technologically
effective, the project schedule should be extended.

Energy/Uranium enrichment. The Department of Energy’s uranium enrichment
program will become a government corporation, known as the U.S. Enrichment
Corporation, on July 1, 1993. It will be required to operate as a commercial
business enterprise on a profitable and efficient basis. The Administration is
moving in this direction by proposing several actions to enhance the cost
effectiveness of Federal uranium enrichment-related activities while reinforcing
the Administration’s nuclear non-proliferation policies. These Administration
initiatives provide for: (1) the phase-out by 1996 of one of the operating
diffusion plants; (2) lower Federal costs for power purchased for Federal
uranium enrichment operations; and (3) speed-up of the purchase of highly
enriched uranium from the republics of the former Soviet Union. This will allow
former weapons grade uranium to be recycled into commercial power reactor
fuel, provide a valuable commercial activity for the former Soviet republics, and
advance mutual nuclear weapons non-proliferation goals. Estimated savings are
$386 million in 1997, $1.3 billion over four years.

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Energy/Strategic Petroleum Reserve. The Strategic Petroleum Reserve currently
contains over 570 million barrels of oil. This stockpile has served well in
defusing the impacts of oil disruptions such as that experienced during Iraq’s
invasion of Kuwait, and in deterring market manipulations by oil-exporting
countries. The U.S. today obtains less than one-quarter of its oil from OPEC
countries, and the rate at which we continue to fill the Reserve can be slowed,
saving money for the taxpayer. The Administration proposes to reduce the fill
rate by one-third, from 20,000 barrels of oil per day to 13,300 barrels per day.

Transportation/Federal Aviation Administration streamlining. Major growth
has occurred in the budget of the Federal Aviation Administration (FAA) to
upgrade operations following the 1981 firing of almost 10,000 striking air traffic
controllers. The controller work force has been reestablished. In addition, air
traffic growth has slowed. These factors lead the Administration to propose a
modest decrease in operational funding. This reflects reduced requirements as
the agency transitions from a period of rapid growth to one of maintaining
existing operating levels in the face of slowed aviation traffic growth. Estimated
savings are $62 million in 1997, $241 million over four years.
Housing and Urban Development/Modify fees for Federal housing. The
Administration proposes to reduce gradually to a uniform level the fee that the
Department of Housing and Urban Development pays to local entities to
administer several Federal housing subsidy programs. Independent studies by the
General Accounting Office and a HUD contractor determined that the current
fee substantially exceeds the costs of services the local administrative agents
provide. The plan will reduce Federal housing costs and eliminate windfall gains
to administrative agents. Estimated savings are $193 million in 1997, $454
million over four years.

Housing and Urban Development/Consolidate several HUD programs into
HOME. This proposal to consolidate funding for several HUD housing
programs into the HOME program allows states and large urban cities greater
flexibility and efficiency in providing low-income housing assistance. HOME
allows local officials to determine and pay for the housing assistance—new
construction, tenant based assistance, rehabilitation of existing housing—that
best meets the needs of the community. Several current HUD housing programs
are very costly. Budget pressures have continuously reduced the number of
additional housing subsidies these specific programs can provide. Consolidation
will increase the amount of total resources available to mayors and governors to
address their most critical low-income housing needs. The HOME program calls
for states and locals to match 25-30 percent of the Federal funds provided to the
community. With this leveraging of local resources, this proposal to shift funding
to HOME provides savings for the Federal government without reducing the
amount of public resources dedicated to meeting the housing needs of
low-income people. Estimated savings over four years: $178 million. Estimated
savings in 1997: $150 million.

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What We Must Now Do

Housing and Urban Development/Low-income housing preservation, homeownership grants. Preserving the affordability of as many as 360,000 units of
low-income housing is one of the Administration’s investment proposals. To
avoid paying excess subsidies to landlords to ensure preservation, this proposal
limits the maximum preservation subsidy that landlords can receive to the same
amount that a tenant would receive in the same circumstances. In addition, the
proposal eliminates homeownership grants from the Preservation program. The
Administration supports the goal of helping low-income tenants to become
homeowners through other programs. This proposal would save over $190
million from 1994 to 1998.

EPA/Increase private sector financing of Superfund cleanups. In line with the
“polluter pays” principle, this proposal will increase the proportion of hazardous
waste sites cleaned up by private parties (as allowed by law). The proposal
would preserve Federal Superfund money only for sites where there are no
viable private parties to undertake the cleanup. Estimated four-year savings are
$308 million, including $109 million in 1997.

NASA programs. The Administration is committed to a cost-effective space
station program. To control serious cost overruns in the present program, the
Administration recommends a restructuring of the space station. Employment
associated with the program would be maintained, and additional funds would
be directed to other NASA space missions.
Small Business Administration/Reduce subsidies. The Administration proposes
to reduce losses on loans made to small businesses by private lending
institutions under the SBA Section 7(a) loan program. This would be
accomplished by decreasing the Federal guarantee on loans to an average of 75
percent. Requiring private lenders to take a greater share of the risk would
increase their scrutiny of loan applications, ultimately resulting in a lower
default rate and better recovery rate on loans repurchased. Estimated savings are
$118 million in 1997 and $423 million over four years.

U.S. Postal Service/Reduce subsidy payments. The Administration proposes to
reduce the subsidy paid to the Postal Service for the reduced postal rates paid by
certain non-profit organizations. This postal subsidy is an inefficient means of
supporting charitable and non-profit organizations, particularly compared to the
support provided by the tax deduction allowed for charitable contributions.
Additionally, loopholes exist that allow some mailers to take advantage of this
system; for example, certain special interest lobbying groups can mail at reduced
rates. The estimated savings from this proposal are $43 million in 1997, $152
million over four years.
Justice/Freeze grants. The Administration proposes to freeze at 1993 levels
funding for Office of Justice Programs grants. Estimated savings are $56 million
in 1997, $138 million over four years.

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Education/Streamline programs and other program reform. This proposal
saves $620 million in 1997 and $1.5 billion over four years by eliminating,
restructuring, or combining some of the many small programs in the Department
of Education that are low priority, have achieved their purpose or can be made
more effective by merger with other authorities, as well as by maintaining
funding at 1993 levels for other categorical programs for which there are not
compelling policy reasons to increase or decrease funding.

Education/Require States to share default costs in the Student Loan Program.
Student loan defaults cost the Federal Government $2.5 billion in 1992. This
proposal would require States to share default costs for student loans, as a way
of encouraging better State management to prevent excessive defaults. The fee,
assessed against new loan volume, would be equal to one half the percentage by
which the default rate in the state exceeds 20 percent: a 22 percent default rate
would yield a one-percent fee on new loan volume.
States would be authorized to charge schools in their State a fee based on the
school’s default rate and the State’s implementation costs. States would have an
additional incentive to tighten licensing provisions, monitor schools more
intensely and take corrective action early to prevent high defaults. Schools
would work harder to avoid defaults. Schools that could justify high default rates
would be exempt. Savings would be $131 million in 1997 and $459 million over
four years.
Agriculture/Foreign Agricultural Service. The Administration proposes to
streamline Foreign Agricultural Service (FAS) programs to better assist U.S.
agricultural overseas market development. The proposal would decrease funding
for FAS program operations, while making changes to enable FAS to utilize its
funds more effectively. Savings from this proposal are $10 million in 1997, $35
million over four years.

Overhead costs for university research and development Federal research
grants to colleges and universities by the Departments of Agriculture, Health and
Human Services, and Defense, and the National Science Foundation and other
agencies, cover both direct research costs and overhead administrative costs. In
1972, each dollar of direct research funding paid to universities cost an
additional 30 cents for the overhead allocated to Federal research. By 1990, 46
cents in overhead was paid for each dollar spent on direct research. Consistent
with the Administration’s actions to streamline overhead costs in Federal
departments and agencies, the budgets for civilian research and development
grant-making agencies have been adjusted to place an upper limit on overhead
charges. This proposal and the substantial new investment in civilian research
and development included in the President’s economic plan represent a
concerted effort to shift national spending from overhead to funding research.
Savings from this overhead change are $383 million in 1997, $1.2 billion over
four years.

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Veterans Affairs/Improving management of construction. The Major Construc­
tion program of the Department of Veterans Affairs primarily supports the
veterans’ direct delivery health care system. To meet veterans’ future needs, the
Administration proposes $362 million in 1994 budget authority for construction,
maintenance and improvements of VA medical facilities. In addition, to improve
the planning and management of VA’s construction program, the Department
will take into account the following major factors in planning and proposing
future construction projects: (1) the projected demand from veterans who are
likely to use the VA system; (2) the relationship of the project to the VA system
as a whole; and (3) the health care resources available to veterans in die
community. Estimated savings are $134 million in 1997, $282 million over four
years.
Veterans Affairs/Improve management of VA hospitals. To ensure that VA
resources are used more efficiently, the Administration proposes to use a
prospective payment system, similar in concept to Medicare’s, for allocating
funds to VA medical centers. In general, the current resource allocation system
simply retains the past year’s allocation among medical centers and then adds
funds for inflation and special projects. Little or no changes are made to the
“base budget” to reflect potential improvements or efficiencies in current
operations. Estimated savings from this proposal are $400 million in 1997 and
$1 billion over four years.

Agriculture/Market Promotion Program. The Market Promotion Program
provides commodity associations, cooperatives and private for-profit companies
subsidies in order to promote the utilization of U.S. commodities overseas.
Because the program has a large and fixed funding level, the Department acts to
use all funds. Consequently, a number of questionable and controversial funding
decisions have been made. Therefore, the Administration proposes freezing the
program at the 1993 level, encouraging the Foreign Agricultural Service to more
effectively target the funding toward those industries that would otherwise be
unable to promote their products abroad. Estimated savings are $52 million in
1997, $208 million over four years.
Housing and Urban Development/Real Estate Mortgage Investment Conduits
(REMICs). The Administration proposes to have the Government National
Mortgage Association (GNMA) guarantee prompt payment to all investors in
secondary mortgage market securities known as Real Estate Mortgage
Investment Conduits or REMICs. These mortgage-backed securities, established
after the 1986 Tax Act removed a tax impediment, will increase the funds
available to make Federal Housing Administration (FHA) and Department of
Veterans Affairs (VA) insured mortgages, and consequently decrease mortgage
interest rates for FHA and VA homebuyers. This proposal saves $146 in 1997,
$584 million over four years.
Housing and Urban Development/FHA insurance reforms. The Department of
Housing and Urban Development (HUD) provides mortgage insurance through
its FHA programs to help low and moderate income homebuyers obtain

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mortgage financing and to help owners and developers finance the construction
or rehabilitation of low and moderate income rental properties. The Congress
enacted reforms in the 1990 National Affordable Housing Act (NAHA) to
restore the single family FHA insurance program to an actuarially sound
financial position. Unfortunately, the original financial goals established in
NAHA have not yet been achieved and further reforms appear necessary. In
addition, HUD continues to encounter major losses in its insurance for
multifamily properties. Legislative and regulatory impediments, as well as poor
management, have added to these excessive insurance losses. Reforms will be
proposed to help reduce these insurance losses and reestablish these FHA
insurance programs as effective government financing vehicles. Savings from
these reforms are expected to reduce spending by $81 million in 1997 and by
$336 million between 1994 and 1998.

Education/Reform student loan programs. The Administration proposes to
modify and expand the current direct lending pilot program, with the goal of
replacing guaranteed lending now provided under the Federal Family Education
Loan Program (FFELP) with direct loans in 1997. Federal capital and schools
largely would replace private capital and banks as loan originators. The direct
lending program is to be built up gradually, to permit development and
implementation of the administrative systems necessary while maintaining
proper management of the outstanding guaranteed loan portfolio. At the same
time, as part of the President’s goal of enhancing people’s ability to work in
community service jobs, new systems will be devised to permit eligible
borrowers to repay their loans under flexible repayment options, including
options where repayment varies with annual income. This will permit many
individuals to take lower paying community service jobs without fear of inability
to pay their student loan debt. Estimated savings over five years are $3.2 billion,
including $1.3 billion in 1997.

Office of Personnel Management/Federal employee child-survivor benefits.
Under the Federal employee retirement programs, child survivors may continue
to receive survivor benefits until age 22 if they are full-time students, 18 if not.
(Disabled children may receive benefits indefinitely and would not be affected
by this proposal.) The Administration proposes to conform the maximum
entitlement age for CSRS/FERS child-survivor benefits to that of Social
Security. Child survivors would receive benefits until age 18 unless they are
full-time students in a primary or secondary school, in which case they would
receive benefits until age 19. The proposal does not affect those receiving
benefits before October 1, 1994. Estimated four-year savings are $50 million,
including $20 million in 1997.
Office of Personnel Management/Federal employee survivor annuities.
CSRS/FERS retirees may elect survivor benefits in exchange for a reduced
annuity for themselves. The survivor benefits are equal to a percentage (up to 55
percent) of the retiree’s unreduced annuity. This proposal would base the
survivor annuity on the retiree’s reduced annuity, thus slightly reducing the

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government’s subsidy to survivors. Estimated savings over 1994—97: $350
million. Estimated 1997 savings: $140 million.

Veterans Affairs/Down payment, fee for multiple use of loan guarantees.
Under current law, there is no limit on how many times a beneficiary may use
the VA loan guaranty program. Multiple-users are charged the same fees as
one-time users, and are not required to make a down payment. Allowing
borrowers who have already received home-ownership assistance to remove the
equity from their existing homes and purchase another home (with zero equity)
with VA-guaranteed financing, exposes the Government to additional risk. The
Administration proposes to require a 2.5 percent fee and a 10 percent down
payment for multiple-use of the loan guaranty benefit. This will provide savings
because of the fees and because it will reduce foreclosures. Estimated savings
are $17 million in 1997, $68 million over four years.
Veterans Affairs/Permanently extend resale loss provision. When a private
lender forecloses on a VA guaranteed property, VA uses a formula for
determining whether to pay the guarantee to the lender or acquire the property
from the lender and resell it. The Administration proposes to make permanent
the inclusion in that formula of expected losses on the resale of foreclosed
properties. This requirement makes property acquisition more cost-effective to
the Federal government and is consistent with the practices of private mortgage
lender. Estimated savings over four years are $80 million, including $21 million
in 1997.

Treasury/Reform U.S. Customs Inspector overtime laws. Customs Inspectors
receive compensation for overtime work at rates different from most other
Federal employees. Current law contains quirks that tend to provide strong
incentives for wasteful overtime scheduling practices and other abuses. The
Administration proposes to eliminate these opportunities for abuse, reducing
required overtime payments by an estimated $72 million over the 1994-1997
period, and $18 million in 1997 and to make necessary changes in the law to
ensure that savings from overtime reform are used to reduce the deficit.
Interior/Mariana Islands funding agreement. A recent agreement with the
Commonwealth of Northern Mariana Islands, a U.S. territory, reduces Federal
support for the Commonwealth and directs it toward infrastructure projects only.
In addition, the agreement gradually eliminates Federal funding. Implementation
of this agreement would save an estimated $31 million in 1994-1997, including
$10 million in 1997.

Veterans Affairs/Insurance administration costs. The Administration proposes
that the administrative costs of three of the five VA life insurance programs be
paid with excess revenues from those programs, rather than from annual
appropriations. This would reduce the $30-million-a-year taxpayer subsidy to
these programs, which pay dividends of over $1 billion per year to
policyholders. The estimated savings are $31 million in 1997 and $113 million
over four years.

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Veterans Affairs/Internal Revenue Service income verification. The Admini­
stration proposes to extend permanently the Department of Veterans Affairs’
authority to access IRS tax data to verify income reported by pension and
medical care beneficiaries. There are no savings from this extension in the
1994-97 period. Savings in 1998 are $197 million.

Veterans Affairs/Permanently extend pensions-Medicaid nursing home provi­
sions. The Administration proposes to extend permanently the current $90
monthly limit on pension benefits paid to any veteran or survivor without
dependents who receives Medicaid coverage in a Medicaid-approved nursing
home. This proposal would reduce an indirect federal subsidy from veterans
programs to state Medicaid programs. There are no savings in the 1994-97
period. Savings in 1998 would be $300 million.

Veterans Affairs/Service members’ contributions to the Montgomery GI Bill
Education Program. The Montgomery GI Bill program provides monthly
benefit payments to eligible service members and veterans who are enrolled in a
post-secondary education program. To become eligible, military personnel agree
to contribute to the program through a reduction in their basic pay during their
first year of service. In two steps over the last three years, Congress has
increased the monthly benefits by 33 percent without increasing individuals’
payroll contributions to the program. Before the increases in benefits, the
program funding match was 9:1 (govemmenfcservice members). This proposal
would prospectively increase their contributions to restore the 9:1 match.
Estimated savings are $339 million over four years, including $98 million in
1997.

Controlling Health Care Costs
Systemwide health care reform is a top Administration priority, but some
additional short-term savings proposals, focusing on providers rather than
beneficiaries, make immediate sense.

Medicare:

HHS/10 percent capital reduction, inpatient. The proposal would extend
current law beyond 1995. Hospitals receive payments for Medicare’s share of
capital expansions and improvements of both inpatient and outpatient
department (OPD) facilities. The current payment level was reduced in OBRA
90 by 10 percentage points to 90 percent of Medicare’s share of capital costs in
every year. Estimated savings: over four years—$680 million; 1997—$380
million.
HHS/10 percent capital reduction, OPD. The proposal would extend current
law beyond 1995. Hospitals receive payments for Medicare’s share of capital
expansions and improvements of both inpatient and outpatient department
(OPD) facilities. The current payment level was reduced in OBRA 90 by 10
percentage points to 90 percent of Medicare’s share of capital costs in every
year. Estimated savings: over four years—$260 million; 1997—$150 million.

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HHS/Maintain calendar year 1995 ratio of premium collections to program
outlays with a 27 percent ceiling. Under this proposal, beginning in January,
1996, the monthly Part B premium would be set to maintain the percentage of
program costs covered by premium collections in the previous year, but with a
ceiling of 27 percent. The monthly Part B premium amount currently is set in
law through the end of calendar year 1995 ($36.60 in CY93, $41.10 in CY94,
$46.10 in CY95), and premium collections are projected to cover about 27.5
percent of program costs in 1995. When originally established, SMI premiums
were intended to cover 50 percent of program costs. They eroded significantly
over the years, however, and TEFRA 1982 established a temporary 25 percent
premium floor, beginning in 1984. Congress extended the floor twice, and
OBRA90 set fixed premium amounts in law through 1995 at levels then
estimated to be approximately 25 percent of program costs. Beginning in 1996,
calculation of the premium is scheduled to increase by the lower of the OASI
COLA adjustment to the previous year’s premium, or to be set at 50 percent of
program costs. Estimated savings: over four years—$5 billion; 1997—$3.9
billion.
HHS/Eliminate add-on paymentfor hospital-based HHAs. This proposal would
eliminate the separate add-on payment that hospital-based home health agencies
(HHAs) receive in addition to payment under the Medicare cost limits.
Eliminating the add-on would create a level playing field on which all home
health agencies can compete. Estimated savings: over four years—$840 million;
1997—$250 million.
HHS/Eliminate skilled nursing facility return on equity payments. The
proposal would eliminate the Medicare payment policy that pays proprietary
skilled nursing facilities (SNFs) a return on equity (ROE) invested in the SNF.
Medicare should pay for services rendered to beneficiaries; it should not
subsidize private investment Estimated savings: over four years—$560 million;
1997—$160 million.

HHS/Lower IME to 5.65 percent. This proposal would gradually lower the
Medicare indirect medical education (IME) from 7.7 percent to 5.65 percent for
each .1 increase in the intern and resident to be a ratio (IRB ratio). Teaching
hospitals currently receive an additional 7.7 percent payment to the Medicare
DRG payment for each .1 increase in their IRB ratio, above their base year
levels. The adjustment is intended to compensate these hospitals for the higher
costs of delivering care incurred by inexperienced residents. In addition,
teaching hospitals tend to have sicker case mixes than non-teaching hospitals.
The General Accounting Office (GAO) and the Prospective Payment Assessment
Commission (ProPAC) have both found that the 7.7 percent adjustment
overcompensates teaching hospitals for these costs and have recommended that
the adjustment be reduced. ProPAC has recommended setting the adjustment at
5.4 percent. Lowering the IME adjustment would also encourage teaching
hospitals to instill within their residents more cost-effective patterns of care at an

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early stage in the residency. Estimated savings: over four years—$1.94 billion;
1997—$1.4 billion.
HHS/Permanently extend 2 percent laboratory fee update. This proposal would
extend the 2 percent annual update of Medicare reimbursement rates for clinical
laboratory services. OBRA 90 established a 2 percent update through the end of
1993, after which laboratory fees would be updated by the urban component of
the Consumer Price Index (CPI-U), approximately 3.5 percent annually. There is
no evidence, however, to indicate that laboratory costs are increasing by the rate
of inflation. Medicare payments to laboratories should more closely reflect
decreasing costs due to technological advances, such as increased automation,
and changes in the market, such as lower-cost equipment. Medicare payments to
laboratories are already excessive. An OIG study found that Medicare paid
laboratories 90 percent more than physicians paid for the same tests. Moreover,
a GAO study indicated that laboratories use higher profits from Medicare to
subsidize discounts to other, private payers. Estimated savings: over four
years—$740 million; 1997—$380 million.
HHS/Provide incentive to encourage submission of claims via electronic
format. In total, Medicare Part B outlays were projected to be $59.8 billion in
1993. The proposal would save 0.1 percent of the 1994-98 Medicare Part B
baseline. The proposal would encourage physicians and other Part B providers to
submit claims via the more administratively efficient electronic format by
charging physicians and other providers $1 for each paper claim filed. The
proposal would not take effect until January 1, 1996, to give providers lead time
to adjust their filing systems. Estimated savings: over four years—$265 million;
1997—$175 million.

HHS/Medicare Secondary Payer (MSP) reforms. The MSP requirements
currently vary depending upon the category of enrollee. This proposal would
create a consistent MSP threshold for the aged, disabled, and end stage renal
disease (ESRD) patients—all employers of 20 or more would be primary payers.
Current law already requires that Medicare enrollees with employer-based health
insurance use their private health insurance before drawing upon their Medicare
policies. This applies more consistent standards and more efficient enforcement
of these provisions to save Medicare costs. Estimated savings are $947 million
for 1994 through 1997; and $305 million in 1997.

HHS/Permanently extend reduction of payments for hospital outpatient
services by 5.8 percent. OBRA 1990 reduced Medicare reimbursement for
hospital outpatient department (OPD) reasonable costs by 5.8 percent through
1995. This proposal would extend that provision permanently. Depending on the
service, OPDs are paid based upon varying formulas, some of which take into
account the OPDs’ reasonable costs. The overall reduction to OPDs would be
much less than 5.8 percent, because less than half of Medicare reimbursement is
based on reasonable costs. Because hospital inpatient reimbursement rates are
constrained by DRGs, hospitals have shifted services and costs to the outpatient
setting. As a result, outpatient services are one of the fastest growing

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components of the Medicare program, rising by an average of 17 percent per
year in the 1980s. Legislators approved a 5.8 percent reduction in OBRA 1990
in an attempt to counter this rapid growth. If this provision is allowed to expire,
outpatient costs, which continue to grow in the double-digits, will start growing
even faster. Support for this proposal is well-established through previously
approved legislation. Estimated savings are $950 million for 1994 through 1997;
and $525 million in 1997.

HHS/Reduce hospital outpatient department reimbursement by an additional
4.2 percent. In total, Medicare Part B outlays were projected to be $59.8 billion
in 1993. The proposal would save 0.5 percent of the 1994-98 outpatient services
base. Currently, Medicare reimbursement for outpatient services is based in part
on the OPD’s reasonable costs minus 5.8 percent, while reimbursement for
outpatient capital costs is reduced by 10 percent. This proposal would reduce
reimbursement for OPD services by an additional 4.2 percent beginning in 1996,
to a 10 percent reduction. This would make payment for both categories
consistent by reimbursing both at 90 percent of costs. Estimated savings: over
four years—$690 million; 1997—$375 million.
HHS/Ban physician self-referrals. A Physicians may not refer a Medicare or
Medicaid patient to a clinical laboratory in which the physician or the
physician’s relatives have a financial interest. Several exceptions are specified in
statute. This proposal would extend ownership and referral prohibitions to
additional services, such as physical and occupational therapy, durable medical
equipment, and parenteral/enteral nutrition equipment and supplies. Estimated
savings: over four years—$250 million; 1997—$100 million.
HHS/Set EPO at non-U.S. market rates. The proposal would reduce the
amount Medicare pays for erythropoietin (EPO) from $11 per 1,000 units to $10
per 1,000 units. EPO is the drug used by patients suffering from kidney failure,
to counter anemia by increasing the body’s production of red blood cells.
Medicare is virtually the sole purchaser of EPO and should exercise its market
power to pay reasonable costs while maintaining access for all Medicare
beneficiaries. Estimated 1997 savings are $50 million. Estimated savings
1994-1997—$160 million; savings for 1994-1998—$210 million.
HHS/Resource-based practice expense phase-in. This proposal is an interim
step toward a resource-based system for practice expenses. It would reduce
practice expenses in relation to the relative value work units by one-half of the
difference between practice expense and physician work relative value units,
rent no lower than 110 percent. Phase-in to a resource-based system for practice
or overvalued expenses under the physician fee schedule would begin in 1997.
The recently implemented physician payment reform system divided payment
into three distinct components—overhead, work, and malpractice expenses. The
work component is based on an extensively-researched relative value system,
developed in 1991. The existing practice expense component is based upon an
obsolete fee schedule and bears no relationship to the reformed work component
of the fee schedule. This proposal would only reduce the practice component in

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extreme instances—when it exceeds the value of the work component. More
comprehensive reform of the practice component is expected to take several
years to develop. This proposal provides a simple, intermediate step to address
immediately the most egregious inequities in the reimbursement framework.
Estimated 1997 savings—$875 million. Estimated savings 1994-1997—$2,025
million; savings for 1994-1998—$2,975 million.

HHS/Pay hospitals for inpatient services by hospital-based physicians. Include
payment for radiology, anesthesia, and pathology (RAP) services as an add-on to
the hospital DRG payment. Separate billing by physicians for these services
would not be allowed. Quality of care would be improved and unnecessary
utilization would be minimized. Estimated 1997 savings are $160 million;
1994-1997—$390 million.

HHS/Single fee for surgery. The fee paid to a primary surgeon would be
reduced by the amount paid to assistants-at-surgery. HHS would establish
exceptions by regulation in which the difficulty of the procedure or the condition
of the patient necessitated the use of physicians as assistants-at-surgery. Whether
assistants are used and what type of personnel are used are primarily dependent
on geographic practice patterns and the practice styles of individual surgeons,
rather than on characteristics related to the specific patient and the surgery
performed. Evidence does not show that quality of care would be jeopardized.
Estimated 1997 savings is $120 million; 1994-1997—$380 million.
HHS/Durable Medical Equipment (DME) options—Set DME at market levels.
Initially, fee schedules for DME would be adjusted downward with an upper
limit based upon the median DME fee schedule, rather than the national average.
The fee schedule for prosthetics and orthotics would also be recomputed with a
national median cap. The HHS Secretary would be authorized to adjust DME
rates based upon market factors, including surveys of what other providers, such
as the VA, DoD and the private sector, pay for DME. The Secretary also would
be authorized to initiate competitive bidding programs for DME supplies where
appropriate. Granting broader HHS discretion would allow adjustments to be
made to reflect changes in technology, utilization patterns and other market
factors. Estimated savings are $510 million for 1994-97; and $160 million in
1997.
HHS/Direct medical education. This proposal would base Medicare direct
medical education payments on a national per resident amount derived solely
from the average of salaries paid to residents. Direct medical education
payments would reflect differential weighing of the national average resident
salary, based on the specialty area a resident is pursuing and the length of the
residency. A resident in a primary care specialty would be weighted at 240
percent, a non-primary care resident in the initial residency period would be
weighted at 140 percent, and a non-primary care resident beyond the initial
residency period would be weighted at 100 percent. The average weight would
be 175 percent of the national average resident salary, down from the average

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weight of about 215 percent under current law. Estimated savings: over four
years—$1.4 billion; 1997—$330 million.

HHS/Set laboratory rates at market levels. The proposal initially would limit
the Medicare Part B laboratory fee schedule to 76 percent of the median of all
fees (as opposed to current maximum of 88 percent). Later, based on market
surveys, the Secretary of HHS would adjust Medicare payment rates to
laboratories to account for technological changes or other market factors. This
proposal would address excessive Medicare payments for laboratory tests. An
OIG study found that Medicare paid laboratories 90 percent more than
physicians paid for the same tests. Moreover, a GAO study indicated that
laboratories use higher profits from Medicare to subsidize discounts to private
payers. In addition, the proposal would control growth in Medicare Part B
laboratory payments, which more than doubled from 1985 to 1990. Estimated
savings: over four years—$3.1 billion; 1997—$1.1 billion.
HHS/Reduce default Medicare volume performance standard and update. The
effect of this proposal is to reduce the amount of increases in physician fees in
future years. This proposal would reduce the Medicare volume performance
standard (MVPS) default formula and the default update for Medicare payments
to physicians. These two factors determine annual aggregate physician payment
levels. Estimated savings: over four years—$850 million; 1997—$650 million.

HHS/Permanendy extend three current Medicare Secondary Payer (MSP)
provisions. The proposal would extend three OBRA ’90 Medicare Secondary
Payer provisions due to expire at the end of 1995 including: (1) 1862(b) of the
Social Security Act authorizing MSP for disabled active individuals with
employer group health plan (EGHP) coverage; (2) 1826(c) of the Social Security
Act amended by OBRA ’90 authorizing MSP for individuals with ESRD after
18 months (expanded from 12 months); and (3) 8051 of OBRA ’90 authorizing
an IRS/SSA data match for MSP. The data match authorizes access to tax data to
identify the existence of EGHP for MSP purposes. Estimated savings over four
years—$1,845 billion; 1997 savings—$1,115 billion.
HHS/Put hospitals on calendar year update. Medicare payments to hospitals
for inpatient care are updated October 1 of each year. Most other Medicare
services are updated January 1 or July 1. This proposal would move the hospital
update to January 1. Estimated savings: over four years—$4.6 billion; 1997 $1.3
billion.

HHS/FuUy increase primary care fees; modestly increase doctor fees in 1994.
The proposal would update in full the physician fee schedule in CY 1994 for
primary care services only. For all other physician services, the update would be
two percentage points less than the full update. Estimated savings: over four
years—$1.3 billion; in 1997—$400 million.

HHS/Reduce Medicare hospital update market basket by 1 percent in 1994
and 1 percent in 1995. This proposal would extend the current law practice of
PPS updates of less than the hospital market basket index (HMBI). The 1993

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update of the PPS standardized amount is set at the HMBI minus 1.55 percent
for urban hospitals and HMBI minus 0.55 percent for rural hospitals, as set in
OBRA 1990. Under current law, the update for urban hospitals will equal the
market basket rate of increase in 1994 and 1995. For rural hospitals the update
is set at market basket plus 1.5 percent for 1994 and the HMBI plus an
adjustment needed to match the urban rate in 1995. Estimated savings: over four
years—$5.19 billion; 1997—$1.7 billion.

HHS and others: Third party liability—enhanced identification of other health
coverage. Federal and State taxpayers spend over $1.5 billion a year for health
care that should be paid for by others. Inappropriate payments have been
identified in most federally-assisted or financed health programs including:
Medicare, Medicaid, Veterans Affairs Health, CHAMPUS/DOD Direct Care, and
the Indian Health Service. This proposal removes many of the structural
impediments hindering proper identification and billing of third party liability
(TPL) by: (1) requiring employers to report employment based health coverage
data annually on the W-2; (2) granting access to this data to all federally-assisted
and financed health programs; (3) reinforcing existing coordination of benefits
(which payer pays and in what order) laws and regulations; and (4) removing
impediments that hinder states from collecting from private insurers. Rather than
the current ‘pay and chase’ procedures where federal programs pay first and
chase payers afterwards, this proposal focusses on avoiding erroneous payments
by identifying the appropriate coverage before payment.
Medicaid:

HHS/Tighten estate recovery/transfer of assets rules. Total Federal Medicaid
outlays for 1993 are projected to be $80.3 billion. This proposal would save
approximately 0.1 percent of the 1994-98 Medicaid baseline. This proposal
would strengthen transfer-of-asset rules to restrict further the diverting of
property to qualify for Medicaid. In addition, the Federal government would
require States to operate estate recovery programs and would enhance States’
abilities to implement these programs. Estimated savings: over four years—$395
million; 1997—$155 million.

HHS/Remove prohibition on State use of drug formularies. This proposal
would repeal the OBRA 1990 statutory provisions that prohibit States from
using formularies. Before OBRA 1990, States were allowed to limit the number
of drugs listed on their formularies, e.g., States could cover only the generic
alternative of a multiple-source drug. The OBRA 1990 formulary restriction
resulted in increased expenditures for States and the Federal government.
Estimated savings: over four years—$70 million; 1997—$25 million.
HHS/Eliminate mandatory Medicaid personal care. This proposal would
ensure that personal care remains an optional benefit after 1994. The Medicaid
statute requires States to cover home health services for all individuals who are
eligible for nursing home services. Currently, States also have the option to pay
for personal care services to these individuals. Due to a legislative drafting error,

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OBRA-90 designated personal care as a home health service. Therefore,
coverage of personal care services would become mandatory for all States in
1995, if Congress does not amend the statute. In an era of increasing fiscal
pressures and growing Medicaid spending, Congress should avoid imposing
additional mandates upon State Medicaid programs. Moreover, maintaining
personal care as an optional service would allow States continued flexibility in
designing and administering Medicaid long-term care strategies. Estimated
savings: for four years—$4.1 billion; 1997—$1.5 billion.

Shared Contribution




For deficit reduction to succeed, all groups must contribute. Only if there is a
sharing of the load can the entire country be sure that everyone is participating.
Social Security/Conform taxation of benefits to private pensions. Up to 50
percent of Social Security and Railroad Retirement (Tier I) benefits are currently
included in taxable income for those recipients with income and benefits
exceeding $25,000 for individuals, and $32,000 for couples. The Administration
proposes including up to 85 percent of benefits in adjusted gross income, for
those with income and benefits exceeding the current $25,000/$32,000
thresholds. This would move the treatment of Social Security and Railroad
Retirement Tier I benefits toward that of private pensions. Under current law,
pension benefits that exceed an employee’s after-tax contributions to qualified
pension plans are subject to tax at distribution. Extending this approach to Social
Security would mean including at least 85 percent of benefits in taxable income
for nearly all recipients. However, maintaining the existing income thresholds
protects most low- and middle-income beneficiaries from benefit taxation.

HHS/Strengthening child support enforcement. Of the over 10 million women
living alone with their children, only half have child support orders and only
half of those women receive full payment. Child support enforcement will be
strengthened by streamlining paternity establishment; using the IRS to collect
seriously delinquent child support; making sure that absent parents who can pay
child support do; setting up a national registry to track down deadbeat parents;
requiring employees to report child support obligations on IRS W-4 forms; and
improving medical support for children. Better child support enforcement will
ensure both parents’ responsibility for the well being of their children and
decrease the burden of welfare on the taxpayer. Estimated Savings: over four
years—$328 million; 1997—$109 million..

HHS/Equate matching rates for welfare programs. Currently, States are
reimbursed by the Federal Government at different rates for the various costs of
administering Aid to Families with Dependent Children (AFDC), Food Stamps,
and Medicaid. The Administration proposes to set the Federal reimbursement
rate at a uniform 50 percent for all administrative costs of each of these three
programs. There will be waivers for some States, in hardship cases. Estimated
savings: over four years—$1.8 billion; 1997—$600 million.

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OPM/End lump-sum benefit retirement. The lump-sum retirement option
allows Federal civilian employees to elect upon retirement to receive a lump
sum roughly equal to employee contributions in exchange for a reduced annuity
for life. The Omnibus Budget Reconciliation Act suspended the lump sum for 5
years, through 1995, for all employees except those who are critically ill,
involuntarily separated or activated for Desert Shield/Storm. This proposal
would eliminate die lump sum for all employees retiring on or after October 1,
1995. Estimated 1994-97 savings: $5.1 billion. Estimated 1997 savings: $3
billion.
Veterans Affairs/Permanently extend medical care cost recovery. The VA
operates a nationwide health care delivery system for our nation’s veterans. This
proposal would make permanent VA’s authority to collect the cost of medical
care from health insurers of veterans with service-connected (military related)
disabilities when the care is provided for non-service-connected conditions. This
proposal would hold private health insurance companies responsible for the costs
of their beneficiaries’ care. VA already has permanent authorization to collect
costs from insurers of veterans without service-connected conditions. Estimated
savings: over four years—$1.2 billion; 1997—$407 million.
Veterans Affairs/Permanently extend prescription charge/copayment. The VA
operates a nationwide health care delivery system for our nation’s veterans. This
proposal would make permanent VA’s authority to collect from most veterans a
$2 copayment for each 30-day supply of outpatient prescription drags that is not
related to treatment of a service-connected (military related) disability. Cost
sharing encourages more appropriate utilization of prescription drugs. This
proposal has been enacted three times by the Congress (currently through 1997).
Estimated savings in 1998—$42 million.

Deficit Reduction: Revenues
The Administration had hoped to achieve the twin goals of economic growth and
deficit reduction without asking those who were squeezed the hardest in the
1980s to contribute more. But the deficit has grown substantially and, if we are
to invest in our people and achieve fundamental change, we must all do our part.
Revenue increases, by necessity, must play a role. In raising new revenue, we
had two goals. First, raise the bulk of new revenue from those who can most
afford to pay. Second, minimize any increases in the burden on the middle class
and the working poor. These goals were met; those earning more than $100,000
will contribute over 70 percent of the total new revenues.
Most Americans, however, will be asked to contribute a small amount towards
reducing pollution and lowering our dependence on foreign oil through a new
broad-based energy tax. The direct impact of the new energy tax, even when
fully phased in, will be less than $10 per month for a typical family of four
earning $40,000. And special offsets will fully insulate low-income households
from any increase in their tax burden.

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In 1997, the deficit reduction package will yield a net increase of $74 billion, the
result of $78 billion in new revenues minus $4 billion to offset the impact of the
eneigy tax. Non-energy sources will account for approximately three of every
four dollars of this increase. Those who can most afford to pay will bear the vast
majority of the burden.
Raising taxes on the wealthiest. The 1980’s saw the personal income tax rate on
the most affluent Americans drop from 70 percent to 28 percent; at the same
time, middle income families paid a rising share of their incomes in income and
payroll taxes. Our plan reverses that trend.
Personal Income Taxes. The plan increases the top income tax rate from 31
percent to 36 percent for taxpayers with high incomes. The 36% tax rate will
apply to taxable income in excess of $140,000 for couples and $115,000 for
individuals, beginning this year. Average taxpayers with taxable income in
excess of the $140,000/$115,000 thresholds will have adjusted gross income in
excess of $180,000 on joint returns and $140,000 on individual returns. In
addition, the package applies an additional 10 percent surtax for those people
with taxable income over $250,000, resulting in a 39.6% tax rate for those
income levels; and increases the Alternative Minimum Tax rate to 26 percent on
AMT income of less than $175,000 and 28 percent on AMT income over
$175,000.

These changes affect just over 1 percent of taxpayers and produce $26 billion of
new revenues in 1997. Yet tax rates remain well below previous highs,
preserving incentives to work and save.

The plan also extends existing law rules on itemized deduction limitations and
the personal exemption phaseout that are targeted to high income taxpayers.
Those provisions are scheduled to expire in calendar years 1996 and 1997,
respectively.
The package also includes a number of other personal income tax changes that
are designed to improve fairness. It reduces compensation that can be taken into
account for purposes of benefits and contributions under qualified retirement
plans to $150,000 (1993 cap is $235,840). This change will better target the
benefit of tax deferral to middle income Americans and will raise almost $1
billion in 1997. It also disallows deductions for closing costs and meals incurred
as a result of moving to a new residence. These expenses that are generally not
deductible for other taxpayers should improve (he equity of the tax system. The
change in the moving expense rules raises $0.5 billion in 1997.
Hospital Insurance Taxes. Higher income individuals are also required to
increase their payments under the Medicare tax. The proposal eliminates the
current cap ($135,000) on earnings subject to the Hospital Insurance (HI)
portion of the Social Security tax. Imposing die HI tax on all earnings increases
revenues by $7 billion in 1997 and ensures that those who can afford to pay
more for their health care in retirement do so. The additional revenue will
bolster the HI Trust Fund, which is estimated to be exhausted by about 2002.

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Estate Taxes. Current law imposes a tax on the cumulative value of gifts and
bequests. The rates range from 18 percent on the first $10,000 of taxable estate
to 50 percent on transfers of more than $2.5 million as of January 1993. Our
proposal extends the additional marginal rates of 53 percent and 55 percent that
were in effect in 1992. Extending these rates will affect only the wealthiest
taxpayers, while raising nearly a $1 billion in 1997.

Business Taxes. The investment tax credits, the corporate alternative minimum
tax changes and the favorable capital gains provisions in the stimulus and
investment packages will spur investment and encourage the growth of all
businesses, especially small business. At the same time however, large highly
profitable companies will have to pay a greater portion of their net earnings in
taxes. The package increases the corporate tax rate from 34 percent to 36
percent for taxable income above $10 million, raising $6 billion in 1997. Of the
2.2 million corporations, only about 2,700 large corporations will be affected by
this proposal in any year.

Deductions. The package also contains a proposal to reduce the deductible
portion of meals and entertainment from 80 percent to 50 percent. This will
increase revenues by almost $4 billion in 1997. Meals and entertainment
expenses involve a substantial component of personal consumption. A 50 percent
split reasonably balances the mixed benefits of meals and entertainment
expenses.
The plan would deny certain other business deductions, including the deduction
for compensation in excess of $1 million, unless linked to productivity. The goal
is to encourage corporations to focus more carefully on their compensation
policies and to shift business spending from excess pay to investment. This
proposal would raise $.2 billion in 1997.

Possessions tax credit. In a package in which enterprise zones are being
established throughout the United States for economically distressed areas, we
must reassess the extremely costly tax incentives provided in Puerto Rico. At the
same time, we must recognize our unique relationship with Puerto Rico and its
unusual circumstances. The package seeks to strike a balance by capping die tax
incentives available to American corporations in Puerto Rico at 65 percent of
compensation paid to workers there.
Tax compliance. The package also contains a series of international compliance
reforms and related provisions. Two provisions are designed to improve the tax
compliance of both foreign and domestic corporations by preventing the
improper shifting of U.S. profits to foreign jurisdictions. The principal provision
would require multinational enterprises to establish their transfer prices before
they file their tax returns. A related provision restricts the ability of U.S.
corporations with foreign shareholders to avoid tax on their earnings distributed
as interest. In addition, the Administration will institute a sweeping new
enforcement initiative targeted at transfer pricing abuses. It is expected that

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marked improvement in compliance will result from this investment of IRS
resources.

Another set of provisions will reduce the tax incentives for U.S. corporations to
operate abroad. These include encouraging research and development to be
performed in the United States and the related products to be manufactured here
as well, preventing multinational oil companies from sheltering foreign earnings
by inflating their working capital reserves abroad, and compelling multinationals
to pay tax on excessive passive earnings accumulated abroad.

Securities dealers will no longer be permitted inventory accounting rules that
have allowed the recognition of losses, but not gains and will generally be
required to conform their tax treatment to their accounting practices. This will
result in additional revenues of $1.1 billion in 1997. In addition, certain
businesses which have acquired troubled savings and loans will not be allowed
deductions for asset losses subject to Government reimbursement. This proposal
will result in additional revenues of $200 million in 1997.

The tax gap—the difference between what people owe in taxes and what is
actually paid—is a persistently large number. The lion’s share of this shortfall is
attributable to unreported income, often by business. The package includes
several provisions—raising over $2 billion in 1997—to get at this problem and
improve compliance with the tax laws in other ways.
Introducing a broad-based energy tax. The package introduces a broad-based
tax on all types of energy, based on the energy content of the fuel (measured in
British Thermal Units or BTUs), to be collected at the source. The tax is
designed to promote energy conservation and to reduce harm to the
environment. Coal and natural gas will be taxed at the rate of $.257 per million
BTUs, while oil will be taxed at the rate of $.599 per million BTUs. The higher
rate on oil is intended to promote energy security and the use of cleaner burning
fuels. The new tax raises $18.3 billion in 1997 (net of the offsets described
below).
Energy taxes will encourage conservation by making energy more expensive,
reducing pollution, and decreasing the country’s dependence on foreign energy
suppliers. Despite a drop in oil prices during the Persian Gulf War, this country
still depends on foreign sources for nearly half of its oil and about one-fifth of
its total energy.

Without some form of adjustment or offset, the broad-based energy tax would
impose a particularly heavy burden on low-income households. To avoid such an
outcome, the energy tax is accompanied by proposed increases in transfers under
the Low-Income Home Energy Assistance (LIHEAP) and Food Stamp Programs.
Since many low-income households are outside of the labor force and the tax
system, these programs are needed to alleviate the4 burden of the energy tax.

Other Provisions. The package includes a number of other miscellaneous
revenue-raising proposals, including extension of the 2.5 cents per gallon
gasoline tax currently scheduled to expire in 1995.

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Distribution of Burden Among Taxpayers. The plan distributes the burden of
the changes in tax treatment in a fair way, ensuring that taxes rise
proportionately more for high-income households than for households with less
income. Those earning more than $100,000 will contribute over 70 percent of
the total new revenue. The impact of the revenue raising component of the
deficit reduction package is shown below.

Budget Enforcement Proposals
A strong, workable enforcement mechanism is essential to die credibility of any
deficit reduction package. As part of the process of implementing the President’s
economic program, the Administration will propose specific measures to ensure
that the deficit reduction contained in the plan, once enacted, is maintained.
The current Budget Enforcement Act (BEA) expires at the end of 1995. If the
BEA is not extended, there will not be an adequate mechanism for enforcing
deficit reduction decisions. The budget will propose to extend the BEA with
limited modifications, including specifically the extension of discretionary
spending caps through 1998, and extension of “Pay-As-You-Go” provisions
through 2003 in order to reach die outyear effects of entitiement and tax
legislation and the use of sequestration to enforce compliance. In addition, the
budget will support enactment of enhanced rescission authority legislation that
would require expeditious Congressional action on Presidential rescissions,
similar to H.R. 2164 as passed by the House last year.

106



What We Must Now Do

Restoring Fairness
Distributional Effects of the Spending Proposals




Some of the outlay proposals in the Administration’s program have effects that
spread across the population. Others, however, have identifiable effects on
incomes, or on services targeted to particular income groups. We have sought to
impose the principle of fair contribution so that the burden is concentrated on
those most able to bear it. Similarly, investment programs are targeted to those
in need and pursue greater productivity growth and standards of living for the
population as a whole.
Table 3-4 shows the distributional effects of those program increase proposals
that are amenable to such analysis including Head Start, the Job Training
Partnership Act and the Job Corps, housing assistance, WIC, dislocated worker
training, one-stop career training centers, and veterans medical care and hospital
construction. Also included are three spending reductions: Federal employee
health benefits; Federal employee pay; and the premium increase for Medicare
Part B. Table 3-4 reflects 1997 spending levels deflated to 1994 dollars. This
year was chosen to correspond to the fully implemented tax proposals displayed
on subsequent tables. The total of analyzed spending increases is $8.9 billion;
the total of analyzed spending reductions is $6.6 billion. Not all of the spending
proposals constitute changes to the disposable incomes of families. Some
spending on services, such as Head Start or Job Corps, would brighten the
economic futures of participants but would not change their families’ incomes
directly.

Table 3-4 shows that families and single people with incomes below $10,000
benefit from $3.6 billion of additional spending. Those with incomes below
$20,000 benefit from an estimated $4.9 billion. Further, these groups will benefit
from almost all of the proposed increases of $8.2 billion in outlays for the
earned income tax credit, food stamps and the low-income home energy
assistance program (LIHEAP) when tax policies discussed below are fully
phased-in. Table 3-4 also shows that families with incomes above $50,000
would bear virtually the entire burden of the budget savings. Most of the savings
are the result of the proposal to hold Federal salaries below projected levels.

Although Table 3-4 includes a significant proportion of the proposed changes in
outlay programs, many proposals are not reflected. Stimulus outlays for 1994 are
not included. Some spending proposals would not affect beneficiaries directly,
such as Medicare changes that would affect providers but not beneficiaries, and
so are not included. When proposals are intended to affect die economy as a
whole or everyone more or less equally, such as increased spending to improve
the national infrastructure, no attempt was made to distribute the effects by
income level. In a few cases, such as enterprise zones, education proposals for
schools in low-income neighborhoods, or community development block grants

107

What We Must Now Do

(CDBGs), there were no bases for a reasonable distribution by income level, and
they were omitted from die analysis. The outlay programs not included in this
analysis are a substantial part of the overall recommended policy changes, and
so these estimates of the ultimate distributional impact should be used with
caution.

Distributional Effects of the Tax Proposals
The impact of the revenue raising proposals is shown in Table 3-5. As discussed
above, the major revenue changes in the deficit reduction proposal are higher
rates under the personal income tax, removal of the earnings cap for the
Medicare tax, higher rates for the estate tax, and increased taxation of large
businesses. These taxes primarily affect wealthy individuals and have virtually
no impact on taxpayers in die lower- and middle-income groups.

To control pollution and alleviate our dependence on imported oil, the package
also contains a broad-based energy tax. The energy tax by itself would place a
relatively heavy burden on many taxpayers with limited ability to pay. For this
reason, the introduction of the energy tax was combined with several offsets,
including an expansion of the earned income credit and an increase in transfers
under the Low-income Home Energy Assistance Program (LIHEAP) and under
the Food Stamp program. These three offsets eliminate any increased burden at
the low end of the income distribution. Middle-income families experience only
a slight increase in their tax liabilities, and the tax burden rises with family
income thereafter.
Table 3-5 summarizes the combined impact of all revenue raising provisions in
the stimulus, investment, and deficit reduction combined, including the offsets to
the eneigy tax. This table confirms that our plan distributes the tax burden in a
fair way, ensuring that low-income families are spared any tax increase and that
middle-income families experience only a slight rise in their taxes; most of the
burden falls on higher-income households.

Overall Distributional Effects of the Program
Table 3-6, which combines the tax and outlay changes as a percentage of
pre-tax income, shows that the effects of the Administration’s program on the
two sides of the budget ledger are consistent and mutually reinforcing.
The lowest income category receives both a small tax cut and a benefit increase
under the administration’s program. Other income categories up to $30,000 have
little net tax change. At higher income levels, there are spending cuts that are
quite small, but tax increases that are more substantial.
The program effects identified here, however, will not affect all families within
any income group in the same way. In fact, many families will not be affected at
all by any of the program changes, while others (Federal employees, low-income
program beneficiaries) may be affected by several. Thus, the ultimate impact on
the population may vary considerably from family to family. On the whole, the
burden is borne mainly by those most able to bear it.

108







What We Must Now Do

Table 3-4. Change in Federal Outlays for Social Programs and
Federal Pay1
(Positive numbers are additional tax revenues, negative numbers are outlays)

Amount
(billions of
dollars)

Family income

As a Percent
of Pre-tax
income

$0 to $10,000.......................................................

3.6

3.7

$10,000 to $20,000.............................................

1.3

0.5

$20,000 to $30,000.............................................

0.0

0.0

$30,000 to $50,000.............................................

-0.8

-0.1

$50,000 to $75,000.............................................

-0.9

-0.1

$75,000 to $100,000...........................................

-0.6

-0.1

$100,000 and more................................ .............

-0.6

-0.1

Total.................................................. .............

2.3

0.1

11997 spending levels deflated to 1994 dollars. Includes increases of $8.9 billion and
savings of $6.6 billion for a net proposed change of $2.3 billion. Increases are for Head Start
and associated nutrition programs ($3.4 billion), youth titles of JTPA ($0.8 billion), housing
programs ($1.1 billion), WIC ($0.9 billion), dislocated workers ($1.8 billion), one-stop career
shopping ($0.2 billion), and veterans medical care and construction ($0.6 billion). Savings are
for lower Federal salaries ($3.0 billion), Federal employees health benefits ($0.02 billion), and
higher Medicare premiums ($3.6 billion).

Table 3-5. Change in Federal Taxes and Certain Transfer Payments1
(Positive numbers are additional tax revenues, negative numbers are outlays)

Amount
(billions of
dollars)

As a
Percent of
Pre-tax
income

As a
Percent of
Post-tax
Income

$0 to $10,000............................

-0.2

-0.2

-0.2

$10,000 to $20,000...................

0.0

0.0

$20,000 to $30,000...................

0.0
0.4

0.1

0.1

$30,000 to $50,000..................

4.4

0.5

0.6

Family income

-

$50,000 to $75,000..................

7.6

0.7

0.9

$75,000 to $100,000................
$100,000 to $200,000..............

5.9
8.0

0.7
0.7

0.9

$200,000 and more..................

34.3

2.9

0.9
3.7

Total.........................................

60.5

1.0

1.3

1 Effects as If policies were fully phased in CY 1994. Transfer payments include increases of
$3 billion for Food Stamps and $1 billion for LIHEAP.

109

What We Must Now Do

Table 3-6. Combined Effects of Tax and Transfer Changes
(Positive numbers are additional tax revenues, negative numbers are outlays)

Family income1

Amount
(billions)

As a Percent
of Pre-tax
income

$0 to $10,000.......................................... ............

3.8

$10,000 to $20,000................................. ............

1.3

0.4

$20,000 to $30,000................................. ............

-0.3

-0.1

$30,000 to $50,000................................. ............
$50,000 to $75,000................................. ............

-5.2

-0.6

-8.5

-0.8

$75,000 to $100,000...........................................

-6.4

-0.7

$100,000 and more................................. ............

-42.8

-1.8

Total....................................................... ............

-58.2

-1.0

4.5

1 The concepts of family income used in the tax and spending tables above are not strictly
comparable. The tax table reflects the Department of the Treasury’s concept of economic
family income. The outlay table reflects the concept of money income employed by the
Bureau of the Census. To combine the tax and outlay effects, amounts of taxes and outlays
were compared to aggregates of Treasury family income by income level from the tax table.

110



What We Must Now Do

Making Government Work Better

This beautiful capital, like every capital since the dawn of civilization, is often a place of
intrigue and calculation. Powerful people maneuver for position and worry endlessly about
who is in and who is out, who is up and who is down, forgetting those people whose toil and
sweat send us here and pay our way. Americans deserve better. And in this city today there
are people who want to do better.

Bill Clinton
January 20, 1993

A crucial element of the President’s economic plan, and of the success of our
Nation in the coming years, is to improve the way Government works. Before
we ask the American people to change, Government must change. It must work
effectively and efficiently if it is to help encourage economic growth. We must
restructure our defense and international mechanisms to adjust to the new
realities of the post-Cold War era. Moreover, the American people have a right
to Government that is honest, that is responsive to their concerns, and that serves
them well.

Adapting to a Changing World




The institutions of Government that handle national security and our foreign
relations must be redesigned. Constrained budgets necessitate efficient
management of our defense and foreign relations. In addition, the many new
challenges and opportunities of the next decade mean that structures designed
for the Cold War must be reorganized so that they can carry out new policy
initiatives successfully.

The major restructuring of our foreign relations institutions, as announced by the
Secretary of State, has begun. Through the consolidation of functions and a
one-third reduction in the number of deputy assistant secretaries, we will
significantly streamline the operations of the State Department. In addition, the
undersecretaries are acquiring new responsibilities, consonant with such new
international missions as peacekeeping, democratization, and U.S. economic
competitiveness, and such global issues as non-proliferation, the environment,
refugees and population. To manage the critical relationship with the countries
that were part of the Soviet Union, we have also created the position of Special
Advisor to the Secretary of State for the New Independent States. And we are
also initiating a review of current international affairs programs and structures in
such areas as international development, finance and promotion, and
international radio broadcasting, intending to streamline and redesign operations
while ensuring we meet our current commitments.

Ill

What We Must Now Do

A similar restructuring is under way in the national security arena. As the
defense budget declines, we must become more efficient in managing the
operations of the Department of Defense. Even as we build down and reshape
our forces, we must assure an effective military capability, structured to meet
new international challenges. The management structure of the Department of
Defense must also be realigned for the new tasks ahead. The Office of the
Secretary of Defense is being reshaped for efficiency and effectiveness by
reducing the number of officials who report directly to the Secretary of Defense
and by giving the undersecretaries responsibility for key departmental
operations: defense policy, financial management, personnel and readiness, and
technology and acquisition. In addition, defense policy offices are being
restructured to focus on such new challenges as counter-proliferation,
peacekeeping, economic and environmental security, and democratization. These
changes promise to ensure that the Department of Defense is managed to
achieve key strategic results, rather than simply conducting business as usual. As
we develop a new defense strategy this year, we will be paying close attention to
other defense management issues, such as defense overhead and business
practices, acquisition reform and the future of the defense industrial and
technology base.

Finally, the National Security Council staff is also being reshaped to focus on
the new challenges we face internationally, so that it can lend effective support
and coordination for interagency activities.

Restructuring for Domestic Change
Here at home, the President has already taken a number of direct actions to
reduce the size and cost of Government, improve its honesty, and reduce the
privileges that too often fostered insensitivity and arrogance in previous
administrations:
•An executive order requiring that the Federal civilian workforce be
reduced by 100,000 by 1995, with at least 10 percent coming from the
ranks of management.

•An executive order requiring a reduction of at least 14 percent in
administrative costs throughout Government over the next four years,
which, along with the reduction in personnel, will save over $15 billion
over that period.
• An executive order requiring the elimination of more than 200
non-statutory Federal advisory committees that currently operate through­
out the Government.
• A 25 percent reduction in the size of the White House staff, with savings
of $10 million in 1994.

•An executive order that imposes on top-level Administration employees
die most stringent ethical standards in the nation’s history.

112






What We Must Now Do

• A Presidential memorandum sharply reducing the availability of
Government automobiles and drivers for high-level officials.
• A Presidential memorandum requiring that executive dining rooms, if they
remain open, fully recover their costs.
• A Presidential memorandum restricting air travel by high-level officials.

In addition to these steps, the Administration will make more effective
management of Government a top priority. Government is not a business. But
there are business management techniques which can help improve the
performance of Government, streamline bureaucracies, and reduce costs.
Overcoming years of neglect is a difficult task. But it is essential that we begin
now.

Managing for results. Too often, Government agencies and programs have only
the vaguest goals. As a result, they have little to guide their efforts, and there is
no way for an Administration, or the American people, have no way to measure
the results of their work. Businesses set goals and evaluate managers and
workers based on their performance in meeting those goals. Government can
and should do the same. The Administration is studying possible ways of testing
performance-based management to help agencies and their employees do their
jobs better, and to enable managers and the public to evaluate their work.
Restructuring Government. The Federal Government is more complex than it
needs to be. Often, many different agencies deal with the same issue, and
individuals, businesses, communities, and states find it impossible to have their
problems addressed. Departments and agencies are already consolidating and
simplifying their operations, and the Administration will seek to rationalize and
streamline functions Government-wide.

More responsive Government. Well-run businesses seek to maintain good
relations with their customers, but Government is too often arrogant toward
those it serves. This Administration will seek to improve the delivery of
services, using client-oriented, “user-friendly” approaches, such as “one-stop
shopping” for multiple services.
Unnecessary spending. Wasteful spending is sometimes the result of legislative
mandates that escape scrutiny through their inclusion in large appropriations
bills. Under current procedures a President cannot single out wasteful items in
an appropriations bill for a veto; he must veto the entire measure. The President
intends to work with the Congress to enact a modified line-item veto that will
enable a President to reject wasteful items from an appropriations bill and will
require the Congress to cast a separate vote on those items. Items that have
broad support will survive; but over time millions, perhaps billions, of dollars
will be saved by the defeat of items without broad support.

Campaign reform. A primary reason for the cynicism of the American people
about politics and Government has been the pervasive influence of special
interests. Much of that influence is related directly to the impact of money on

113

What We Must Now Do

the political system. The President is already working with the Congress to
develop strong campaign reform legislation that will curb the influence of
special interest political action committees (PACs) and control election spending.
Lobbying reform. The American people have a right to know who is lobbying
their Government leaders, who is paying them to lobby, and how much they are
being paid. The Administration is working with the Congress to enact legislation
that would impose strict disclosure rules on lobbying. In addition, the President’s
deficit-reduction plan includes a tax provision eliminating the deduction of the
expenses special interests incur in lobbying the Congress or state legislatures.
No longer will the average taxpayer have to subsidize this search for
Government benefits by high-priced lobbyists. The Administration is committed
to enactment of campaign finance reform legislation. If such legislation calls for
public resources, funds raised by the repeal of the provision are a possible
source of funding for this purpose.

Taken together, these actions will help bring about Government that is better
able to meet its responsibilities at home and abroad, that is more responsive,
effective, efficient, and honest. This Administration is making a full-time
commitment to improving Government and making it truly the servant of the
people.

114



The Task Remaining
The urgent question of our time is whether we can make change our friend and not our
enemy.

Bill Clinton
The plan presented in these pages is as bold as the challenges it confronts are
daunting. It calls for fundamental change—to invest in people; to reward hard
work and restore fairness; to recognize our families and communities as the
cornerstones of America’s strength; to reclaim our future.

This plan promises rising standards of living, productivity and national savings.
It stimulates job growth and provides insurance that the current slow recovery
will be lasting and strong. It invests in the education, training and health of our
people. It encourages the private sector to modernize and acquire the tools and
technology to compete in the global economy. And it confronts our deficit head
on, with a serious, fair plan to bring it under control and generate economic
growth.

The Perils of Inaction




Achieving this change will not be easy. But the cost of not changing is far
greater.
After the fiscal failures of the last twelve years, we cannot accept the status quo.
While every American can sense the weakness in our economy from day to day,
the real cost of inaction becomes clear only when we examine the course that
our economy and budget will follow if we do not change.

Under the policies left by the previous Administration and taking a cautious
view of the economic outlook, the budget deficit will decline for the next two
years, and then begin to grow even as the economy continues to recover and
expand (Chart 4-1). As a percentage of the GDP, a better measure of its impact
on the economy, the deficit declines through 1996, but then begins to climb
(Chart 4-2).

Far more troubling, however, these deficits will be so large that the national
debt will grow faster than the economy (and thus will increase as a percentage
of the GDP) all the way to the forecast horizon (Chart 4-3). This path cannot be
sustained. If rising deficits are left to cascade into debt, hence into interest costs,
and then back into still higher deficits, there can be no good economic outcome.

115

The Task Remaining

And the longer this vicious cycle is left to build its momentum, the more painful
the jolt when—inevitably—it is broken.
The Administration’s economic plan controls the deficit before the deficit
controls our economy. In a fair and measured way, the plan will bring the deficit
down until, by 1997, it will be $140 billion lower than it would be if we cling to
the status quo. The deficit under this program falls from 5.4 percent of the GDP
in fiscal year 1993 to 2.7 percent in 1997. This is 1.9 percent of GDP lower
than would occur under the policy left behind by the previous Administration.
To be cautious, we have based our deficit projections on an extremely
unfavorable path of economic growth, with slow progress of productivity and
real economic output growing less than two percent per year in the long run.
Under those circumstances, the deficit would rise slowly after 1996—even with
the aggressive deficit reduction policies recommended by this Administration.
Though much improved relative to past economic policies, this outcome is
unacceptable (Chart 4-1). As a percentage of the GDP, the deficit would rise in
the long run (Chart 4-2); and die growth of the national debt relative to the
GDP would continue (Chart 4—3).

This Administration believes that its policies of deficit reduction and public and
private investment will increase the growth of productivity and incomes, thereby
increasing Federal revenues, retarding the expansion of Federal spending, and
forcing the deficit down. If the economic outcome is more favorable than we
have assumed, the deficit will grow more slowly. Under the more optimistic
assumptions, the deficit will be nearly stabilized as a percentage of the GDP.
The economy will grow more rapidly than the national debt, and so the debt as
a percentage of the GDP will fall slowly. Eventually we will reverse the borrow
and spend legacy of the 1980s.

The Role of Health Care Costs
Even the most favorable scenarios for economic growth under our plan leave
unfinished business, however. The budget totals conceal rapidly rising health
care spending that threatens to bankrupt our national treasury.

Recently, health care costs have accounted for almost half of the increase in
Federal spending; if we do nothing, by decade’s end one in every four Federal
dollars will go to providing health care. Relentlessly rising costs will continue to
stunt long-term economic growth—and terrorize American families—unless and
until we achieve fundamental change.
Later this spring we will deliver to the Congress a comprehensive plan for
change. That plan will control health care costs and will provide security to
families, so that they cannot be denied the coverage they need. It will root out
fraud and outrageous charges, and make sure that paperwork no longer chokes

116




The Task Remaining

consumers or doctors. And it will maintain American standards—the highest
quality medical care in the world, and the choices we all deserve.
Our health care plan will bring costs under control. And while the savings we
achieve will go mostly to the private sector, taxpayers will benefit as well.
Federal funds will be freed for investments in education, training, and the
technologies of tomorrow.
That reform will control the growth of Medicare and Medicaid spending in the
long term, and thereby supplement the deficit reduction in this economic
program. If the growth of Federal health care costs can be limited to the rate of
growth of the population, plus the rate of inflation, plus two percent, the deficit
will decline in dollar terms and as a percentage of the GDP (Charts 4-1 and
4-2); and the increase in the ratio of the national debt to the GDP of the 1980s
will be reversed (Chart 4-3).

Enactment of the economic plan and health care reform together will reverse the
failures of the 1980s, and put the economy on a sound footing for the next
century. It will reduce the threat of financial instability posed by a national debt
rising faster than our income. It will stop sending the signal to the rest of the
industrialized world that our economic policy is out of control. Most important,
it will add to the prosperity and security of the American people and allow us to
compete more effectively in the global economy.

Conclusion: A Vision of Change for America




Throughout our history, at every critical moment, Americans have summoned
the courage to change, to adapt our nation’s policies and institutions to changing
problems and a changing world. Once again we face such a challenge. Now we
must change our course.

We need a change to restore what makes America great: a vision of economic
and political freedom; of the rewards of hard work and initiative; of a
fundamental sense of fairness, of our families and our communities as
foundations of our strength; and of every generation’s obligation to create a
better life for those that follow.
The plan we present invests in our people and promises an America where a
growing economy produces rising living standards and high-wage, high-skill
jobs. It rewards hard work and restores fairness, providing opportunity in return
for responsibility. It ends twelve years of government that served only the
privileged and returns that government to its rightful owners: the American
people.

Here in Washington, the powerful special interests are already doing their best
to suffocate change. They oppose it because they profit from the status quo.
They refuse to listen to the American people’s call for change.

117

The Task Remaining

It is our responsibility to answer that call and restore hope to our people. The
voices of conventional wisdom will first whisper and then shout that it cannot
be done. But we must summon the wisdom and courage to reject convention
and embrace the new direction that we have needed for so long.

118







The Task Remaining

Chart 4-1. FEDERAL DEFICIT PROJECTIONS 1993 - 2003
$ BILLIONS

Chart 4-2. FEDERAL DEFICIT PROJECTIONS 1993 - 2003
(as a percent of GDP)

PERCENT

119

The Task Remaining

Chart 4-3. FEDERAL DEBT PROJECTIONS 1993 - 2003
(as a percent of GDP)

120



Appendix
TABLE 1. DEFENSE DISCRETIONARY PROPOSALS
(in billions of dollars)
1993
Current OBRA Baseline:
Budget Authority...............................................
Outlays................................................................

1994

1995

1996

1997

1998

288.0
289.6

296.4
293.8

304.5
299.8

312.9
306.5

321.5
313.8

Change from OBRA to Bush Adjusted:
Budget Authority...............................................
Outlays................................................................

-12.5
-5.3

-18.4
-9.5

-26.2
-15.2

-28.3
-20.0

-28.1
-24.8

Current Bush Adjusted Baseline:
Budget Authority................................................
Outlays................................................................

275.5
284.4

278.0
284.3

278.3
284.6

284.6
286.5

293.4
289.0

Proposed Policy Changes:
Budget Authority...............................................
Outlays................................................................

-11.8
-6.7

-15.2
-11.7

-24.5
-19.7

-36.2
-37.4

-39.2
-36.3

263.7
277.7

262.8
272.6

253.8
264.9

248.4
249.1

254.2
252.7

Proposed Defense Discretionary:
Budget Authority................................................
Outlays................................................................


339-885 - 93 - 5


274.3
294.3

274.3
294.3

121

Appendix

TABLE 2. NON-DEFENSE DISCRETIONARY PROGRAM SAVINGS
(Outlays in millions of dollars)

1994

1995

1996

1997

1998

19941997
Total

PROGRAMS THAT DON’T WORK OR ARE NO LONGER
NEEDED
Commerce:
Eliminate Trade Adjustment Assistance for firms.......................
Reduction in Export Administration workload.............................
Health and Human Services:
Fund priority health professions curriculum assistance grants.
Stats:
Eliminate Russia/Eurasia research...............................................
Environmental Protection Agency:
Completion of wastewater treatment grants authorization
(except NAFTA)...............................................................................
Appalachian Regional Commission:
Freeze Appalachian Regional Commission.................................
Community Investment Program:
Reforms in light of new crime initiative..............................................
State Justice Institute:
Terminate State Justice Institute..................................................
Tennessee Valley Authority:
Terminate TVA fertilizer and community development..............
Multi-Agency:
Eliminate unnecessary nuclear reactor R&D.............................
Terminate commissions..................................................................
Subtotal, Programs That Don’t Work or are No Longer
Needed ............................................................................................

-1
-6

-5
-7

-10
-7

-14
-7

-14
-7

-30
-27

-14

-21

-25

-27

-29

-87

-1

-8

-10

-10

-11

-29

-109

-624

-1,424

-1,947

-2,207

-4,104

-1

-2

-6

-11

-12

-20

-211

-411

-532

-550

-1,154

-3

-15

-16

-17

-17

-51

-42

-46

-50

-50

-52

-188

-97
-9

-198
-10

-257
-11

-268
-11

-279
-11

-820
-41

-283

-1,147

-2,227

-2,894

-3,189

-6,551

-27
-14

-77
-14

-120
-15

-150
-16

-171
-16

-374
-59

-4
-3
-13

-18
-7
-13

-32
-32
-14

-42
-44
-14

-46
-60
-15

-96
-86
-54

-1
-104

-6
-104

-7
-104

-10
-104

-10
-104

-24
-416

-30

-55

-65

-70

-73

-220

-85

-70

-30

-50

-15

-235

-10

-10

-11

-11

-12

-42

-167

-230

-285

-336

-387

-1,018

ELIMINATING SUBSIDIES: CHARGING FEES FOR
GOVERNMENT SERVICES
Agriculture:
Reduce Rural Electrification Administration 5-percent loan
subsidies..........................................................................................
Expand certain agriculture user fees...........................................
Eliminate Cooperative State Research Service (CSRS)
earmarked research grants............................................................
Eliminate CSRS earmarked facilities construction.....................
Eliminate earmarked special extension grants...........................
Eliminate Agricultural Research Service earmarked facilities
construction......................................................................................
Meat/Poultry fees: Reimbursement for overtime........................
Commerce:
Terminate NOAA demonstration projects....................................
Corps of Engineers:
Reduce construction funding for lower priority water projects..
Energy:
Assess foreign customers decommissioning and
decontamination fee (receipts).....................................................
Health and Human Services:
Increase FDA user fees.................................................................

122



Appendix

TABLE 2. NON-DEFENSE DISCRETIONARY PROGRAM SAVINGS-Continued
(Outlays in millions of dollars)

1994
Housing and Urban Development:
Eliminate special purpose grants..................................................
Interior:
Reduce construction funding for lower priority water projects..
Transportation:
Eliminate low priority Transportation programs and projects....
Treasury:
Establish a Bureau of Alcohol, Tobacco, and Firearms user
fee.....................................................................................................
Small Business Administration:
Eliminate SBA earmarked grants.............................. ...................
Securities and Exchange Commission:
Increase SEC Registration Fees..................................................

Subtotal, Eliminating Subsidies: Charging Fees for
Government Services...................................................................

1995

1996

1997

1998

19941997
Total

-5

-73

-209

-278

-288

-565

-18

-40

-63

-42

-23

-163

-129

-337

-438

-428

-417

-1,332

-5

-5

-5

-5

-5

-20

-44

-71

-90

-110

-116

-315

-47

-50

-52

-54

-56

-203

-706

-1,180

-1,572

-1,764

-1,814

-5,222

-6
-30
-46
-65
-105
-12
-5
-3

-17
-63
-59
-139
-110
-16
-10
-8

-20
-72
-83
-219
-165
-16
-10
-10

-36
-81
-86
-307
-171
-17
-10
-10

-38
-90
-86
-403
-177
-18
-10
-11

-79
-246
-274
-730
-551
-61
-35
-31

-20
-39

-198
-86

-239
-134

-275
-145

-312
-149

-732
-404

-274
-58

-374
-22

-386
37

-340
39

108
-1,275
-98

-40
-5
-1

-85
-15
29

-7
-136
-37
-56

-36
-193
-58
-150

-58
-204
-80
-474

-43
-454
-115
-178

-7

-40

-103

-181

-249

-331

-55
-29

-62
-53

-62
-69

-62
-86

-62
-99

-241
-237

-7
-100

-46
-200

-95
-300

-134
-400

-152
-500

-282
-1,000

MANAGING GOVERNMENT FOR COST-EFFECTIVENESS
AND RESULTS
Agriculture:
Reduce Enterprise for the Americas debt forgiveness (P.L
480)...................................................................................................
Reduce development-oriented foreign food aid.........................
Phase out below-cost timber sales (Forest Service).................
Implement one new Farm Service Organization........................
Reform crop insurance through area-yield..................................
Reduce Economic Research Service programs.........................
Reduce Foreign Agriculture Service programs...........................
Reduce direct ACIF farm loans 25%; replace with guarantees
Education:
Reform campus-based aid.............................................................
Phase out impact aid “b”...............................................................
Energy:
Stretchout Superconducting Super Collider................................
Implement uranium enrichment initiative.....................................
Reduce Strategic Petroleum Reserve fill by one-third..............
Housing and Urban Development:
Eliminate public housing new construction amendments...............
Modify fees Federal housing.........................................................
Reforming low-income housing preservation..............................
Consolidate several HUD housing programs into HOME.........
Justice:
Reduce prison construction...........................................................
Transportation:
Maintain level Federal Aviation Administration (Operations)....
Adjust Coast Guard for military pay............................................
Veterans Affairs:
Reform major construction.............................................................
Improve management of VA hospitals.........................................




108....
-241
-55

123

Appendix

TABLE 2. NON-DEFENSE DISCRETIONARY PROGRAM SAVINGS-Continued
(Outlays in millions of dollars)

1994

Environmental Protection Agency:
Increase private sector Superfund financing..............................
National Aeronautics and Space Administration:
Redesign Space Station and invest in new technology...........
Small Business Administration:
Reduce 7(a) business loan subsidies.........................................
Board for International Broadcasting:
Consolidate overseas broadcasting..............................................
Executive Office of the President:
Cut White House and Office of National Drug Control Policy
staff....................................................................................................
Funds Appropriated to the President:
Re-orient AID programs and reduce spending..........................
Phase out defense acquisition fund............................................
Reduce International Security Assistance...................................
Reduce Enterprise for the Americas debt forgiveness (AID)....
Export Import Bank of the United States:
Reduce Export Import Bank credits............................................
U.S. Information Agency:
Russian Far East Technical Assistance Center.........................
Terminate funding for North-South Center..................................
Multi-Agency:
Freeze other foreign assistance programs..................................
Maintain current program level for programs in small
agencies...........................................................................................
No Federal Pay Raise CY94; ECl-Based Raise minus 1%
CY1995-1997; revise locality pay beginning CY1995..............
Administrative Efficiencies:
Cut 100,000 Federal employees...............................................
Other administrative savings.....................................................
Reduce overhead rate on university R&D..................................
Subtotal, Managing Government for Cost-Effectiveness and
Results.............................................................................................

1995

1996

1997

1998

19941997
Total

-31

-73

-95

-109

-118

-308

203

662

625

636

510

2,126

-58

-113

-116

-118

-121

-405

-60

-59

-281

-244

-250

-644

-20

-32

-37

-40

-43

-129

-7
-23
-84
-8

-84
-92
-264
-20

-152
-138
-504
-34

-257
-133
-731
-45

-341
-86
-943
-54

-500
-386
-1,583
-107

-3

-6

-39

-105

-148

-153

-2
-4

-2
-9

-2
-9

-2
-10

-2
-10

-8
-32

-6

-14

-75

-95

-111

-190

-12

-30

-60

-92

-124

-194

-1,361

-1,963

-2,281

-2,741

-2,965

-8,346

-932
-676
-156

-2,180
-1,392
-330

-2,306
-2,169
-369

-2,509
-3,462
-383

-2,591
-3,553
-396

-7,927
-7,699
-1,238

-4,003

-7,511

-10,271

-13,227

-14,819

-35,012

-38
-70

-13
-10
-100

-76
-318
-1
-500
-265
-19
-52
-25
-52
-1
-34
-38
-170

-96
-486
-3
-832
-443
-38
-105
-33
-63
-3
-56
-70
-230

-117
-620
-7
-1,168
-621
-56
-161
-44
-68
-6
-77
-103
-267

-139
-758
-12
-1,512
-822
-73
-215
-54
-73
-10
-99
-137
-292

-327
-1,494
-11
-2,699
-1,433
-138
-320
-112
-216
-10
-180
-221
-767

-604

-1551

-2,458

-3,315

-4,196

-7,928

STREAMLINING GOVERNMENT

Agriculture............................................................................................
Education.............................................................................................
Energy.......................................................................................................
Health and Human Services.............................................................
Housing and Urban Development....................................................
Justice...................................................................................................
Labor.....................................................................................................
Transportation......................................................................................
Treasury...............................................................................................
Veterans Affairs........................................................................................
Corps of Engineers.............................................................................
Environmental Protection Agency....................................................
Other agencies....................................................................................

Subtotal, Streamlining Government.........................................

124



-199
-104
-25
-2
-10
-33

Appendix

TABLE 2. NON-DEFENSE DISCRETIONARY PROGRAM SAVINGS-Continued
(Outlays in millions of dollars)

1994

1995

1996

1997

1998

19941997
Total

TECHNICAL ADJUSTMENTS

-9
-30
66
214..
-105

-10
-11
122

-10
5
131

-91

200
2
41

-74

-10
53
135
-35
-61

-11
257
134
-144
-48

-39
17
454
179
-331

200
0
55

200
-4
65

200
-8
72

200
-10
78

800
-10
233

130
-54
169
104

133
-194
106
122

126
-265
147
127

119
-270
79
135

143
-281
117
144

508
-783
501
488

29
143
-15
-89
3

29
156
-59
-90
9

30
163
-95
-96
8

31
171
-102
-222
5

32
178
-104
-323
9

119
633
-271
-497
25

236
83

469
250

533
131

580
110

540
97

1,818
574

Subtotal, Technical Adjustments..............................................

1,118

1,196

1,122

982

1,008

4,418

TOTAL, all categories..................................................................

-4,478

-10,193

-15,406

-20,218

-23,010

-50,295

Agriculture............................................................................................
Commerce............................................................................................
Education.............................................................................................
Energy..................................................................................................
Health and Human Services..............................................................
Interior:
Indian Land and Water Rights Claim Settlements.....................
Other Interior programs..................................................................
Justice..................................................................................................
Labor:
Unemployment Insurance administration workload adjustment
Other Labor programs....................................................................
State.....................................................................................................
Transportation.....................................................................................
Treasury:
United States Customs..................................................................
Fund additional IRS tax compliance efforts................................
Environmental Protection Agency.....................................................
General Services Administration.......................................................
Office of Personnel Management.....................................................
Funds Appropriated to the President: International Affairs
programs..............................................................................................
Other agencies....................................................................................




125

Appendix

TABLE 3. PROPOSED CHANGES TO MANDATORY PROGRAMS
(Outlays in millions of dollars)

1994

1995

1996

1997

1998

19941997
Total

ELIMINATING SUBSIDIES: CHARGING FEES FOR
GOVERNMENT SERVICES
Energy:
Reform Power Marketing Administration........................................ ................................
Natural Resources and Environment:
Phase-in increased Inland Waterway user fees.................
-35
-115
Increase grazing fees: Agriculture Department....................
-2
-5
Increase grazing fees: Interior Department.........................
-4
-8
Implement a Federal irrigation water surcharge.................
-10
-10
Increase recreation fees: Corps of Engineers.....................
-18
-18
Increase recreation fees: Interior Department.....................
-34
-29
Increase recreation fees: Agriculture Department...............
-10
-11
Permanently extend hardrock mining holding fees.............
-80
-80
Institute hardrock mining royalties................................................
-63
Improve enforcement of harbor maintenance fees.............
-10
-25
Permanently extend 50% net receipt sharing (on-shore
minerals)....................................................................................
-40
-42
Below-cost timber sales (loss of receipts)...........................
38
48
Agriculture:
Eliminate subsidies to honey producers...................................
-12
-10
Target CCC subsidies to farmers with off-farm incomes
below $100,000............................................................................
-75
-115
Increase non-eligible payment acres (triple base) starting
in 1996..................................................................................................
Eliminate 0/92 and 50/92 (PAY/92) programs starting in
1996......................................................................................................
Increase assessments on “non-program” crops starting in
1996........................................ .............................................................
Limit payments on wool and mohair to $50 thousand per
person............................................................................................
-10
-68
Permanently extend market promotion program at 1993
-52
-52
level...............................................................................................
Commerce and Housing Credit:
Assess examination fees for State-chartered, FDIC-insured
-255
banks.............................................................................................
-265
Institute Commodity Futures Trading Commission
-57
processing fees (revenue)...........................................................
-55
Increase Securities and Exchange Commission registration
-44
fees (revenue)..............................................................................
-46
Permanently extend patent and trademark fees...........................
Transportation:
Increase registration fee on general aviation aircraft.............
-18
-31
Permanently extend tonnage fees...................................................
Health:
Complete payment of outstanding postal liabilities: FEHB
-116
portion...................................................................................................
Income Security:
-50
-110
Charge fee for State SSI administration...................................

126



-100

-100

-100

-200

-210
-8
-14
-10
-18
-39
-12
-80
-131
-65

-460
-13
-22
-15
-18
-45
-13
-80
-277
-65

-460
-19
-32
-15
-18
-50
-13
-80
-277
-65

-820
-28
-48
-45
-72
-147
-46
-320
-471
-165

-43
58

-45
58

-47
58

-170
202

-6

-4

-3

-32

-140

-140

-140

-470

-310

-720

-720

-1,030

-273

-664

-640

-937

-450

-450

-450

-900

-68

-66

-66

-212

-52

-52

-52

-208

-275

-286

-297

-1,081

-60

-63

-66

-235

-48
-111

-50
-115

-52
-120

-188
-226

-44
-67

-58
-68

-60
-70

-151
-135

-116

-116....

-180

-180

-348
-190

-520

Appendix

TABLE 3. PROPOSED CHANGES TO MANDATORY PROGRAMS-Continued
(Outlays in millions of dollars)

1994

Administration of Justice:
Permanently extend U.S. Customs merchandise and
passenger processing fees................................................................................
Undistributed Offsetting Receipts:
Auction Federal Communications Commission spectrum.........................
Complete payment of outstanding postal liabilities: Cost-ofliving adjustments for retirees.......................................................................

Subtotal, Eliminating Subsidies: Charging fees for
Government Services............................................................

-771

1995

1996

1997

1998

19941997
Total

-564

-579

-597

-1,143

-374

-1,623

-2,083

-340

-4,080

-231

-231

-1,838

-5,290

-7,020

-4,981

-14,919

-238

-246

-255

-264

-739

-146
-66

-146
-78

-146
-81

-146
-83

-584
-253

213
-122

-378
-126

-1,343
-131

-1,833
-137

-1,337
-459

-10

-15

-20

-25

-50

-70

-105

-140

-175

-350

-83

-90

-98

-108

-339

-17
-28
-155

-17
-29
-155

-17

-17

-31
-157

-32
-165

-68
-113
-620

-231 ...

-693

MANAGING GOVERNMENT FOR COST-EFFECTIVENESS
AND RESULTS

Agriculture:
Reform crop insurance program through area-yield
(mandatory savings).......................................................................................
Reform commodity disaster payments.........................................
Commerce and Housing Credit:
Government National Mortgage Association: Real estate
-146
mortgage insurance conduits.....................................................
Reform Federal Housing Administration insurance................
-28
Education, Training, Employment, and Social Services:
171
Reform student loan program....................................................
Require States to share default costs......................................
-80
Income Security:
Conform CSRS/FERS child-survivor benefits age to Social
Security..........................................................................................
-5
Base CSRS/FERS survivor annuities on reduced retiree
annuity...........................................................................................
-35
Veterans Benefits and Services:
Restore 1:9 contribution ratio for GI Bill benefits...................
-68
Implement housing down-payment for second and
-17
subsequent uses.........................................................................
Pay insurance administration from excess funds....................
-25
Set housing loan fees at 2%.....................................................
-153
Permanently extend pensions-medicaid nursing homes
provisions...........................................................................................
Permanently extend pension/medical care income
verification through Internal Revenue Service.............................
Permanently extend medical care costs recovery..................
-46
Permanently extend prescription charge/co-payment.................
Permanently extend resale loan loss provisions.....................
-19
Administration of Justice:
Reform U.S. Customs overtime.................................................
-18
General Government:
Implement Commonwealth of the Northern Mariana Islands
funding agreement......................................................................
-6
Net Interest:
Shorten maturity of debt securities...........................................
-1,634




-300...

-326

-391

-407

-20

-20

-21

-197...
-425
-42...
-22

-18

-18

-18

-18

-72

-7

-8

-10

-12

-31

-2,660

-3,264

-3,919

-4,877

-11,477

-1,170
-80

127

Appendix

TABLE 3. PROPOSED CHANGES TO MANDATORY PROGRAMS-Continued
(Outlays in millions of dollars)

1994

1995

1996

1997

1998

1994—
1997
Total

Other:
FTE cut—offsets—employer contributions................................
FTE cut—offsets—employee contributions..............................
Pay reduction—related employee contributions......................
Increase revenues from IRS tax compliance efforts..............

115
29
71
-11

269
67
95
-74

284
71
109
-297

310
77
131
-554

320
80
141
-601

978
244
406
-936

Subtotal, Managing Government for Costeffectiveness and results.....................................................

-1,905

-3,396

-4,919

-6,830

-8,938

-17,050

-12
-25
-10

-18
-1,190
-80
-15

-21
-1,355
-135
-20

-24
-1,540
-155
-25

-27
-1,760
-170
-30

-75
-4,085
-395
-70

-1,000

-80
-1,140

-390
-110
-75

-690
-140
-125

-150
-1,180
-580
-890
-150
-150

-160
-1,290
-1,360
-1,120
-160
-160

-180
-1,420
-1,600
-1,390
-170
-175

-390
-4,610
-1,940
-3,090
-560
-510

-30
-127
-160
-100
-50
160

-40
-240
-200

-40
-275
-230

-50
-305
-250

-50
-345
-280

-350

-700

-875

-950

-100
200

-110
490

-120
940

-130
1,410

-160
-947
-840
-2,025
-380
1,790

-550

-1,380

-1,560

-1,700

-1,860

-5,190

-30

-110

-110
-220

-150
-380

-170
-570

-260
-740

-300

-380

-420

-680

-650

-960

-1,085

-1,610

-35

-35

-35

-70

-45

-120

-205

-165

-425

-525

-600

-950

-250
-340

-400
-330

-450
-320

-800
-1,360

CONTROLLING HEALTH CARE COSTS
Health:
Institute Medicare fee limits over 65: Federal Employees
Health Benefits.............................................................................
Medicaid: Eliminate mandatory medicaid care............................
Medicaid: Tighten estate asset rules........................................
Medicaid: Remove prohibition on drug formularies................
Medicare:
Pay hospitals for inpatient services by hospital-based
physicians..........................................................................................
Put hospitals on a calendar year update.................................
Gradually lower indirect medical education rate to 5.65%.........
Set laboratory rates at market levels........................................
Eliminate skilled nursing facility return on equity payments..
Durable medical equipment—options.......................................
Set erythropoietin (EPO) at non-U.S. market rates ($10 per
1000 units).....................................................................................
Medicare secondary payor (MSP) reforms...............................
Eliminate add-on for hospital based home health agency....
Phase-in resource-based practice expense.............................
Implement single fee for surgery...............................................
Discount for interactions..............................................................
Reduce hospital update market basket minus 1% in 1994
and 1995.......................................................................................
Permanently extend 10% capital reduction, outpatient
department.........................................................................................
Permanently extend 2% laboratory fee update.......................
Permanently extend 10% capital reduction, Prospective
Payment System neutral.................................................................
Permanently extend Medicare Secondary Payer (MSP) for
the disabled.......................................................................................
Permanently extend MSP for End Stage Renal Disease
after 18 months................................................................................
Permanently extend Internal Revenue Service/Social
Security Administration/Health Care Financing
Administration data match...............................................................
Permanently extend reduction of payments for hospital
outpatient services by 5.8%............................................................
Third party liability—Enhance identification of other health
coverage............................................................................................
Direct medical education.............................................................

128



-350

-150
-340

Appendix

TABLE 3. PROPOSED CHANGES TO MANDATORY PROGRAMS-Continued
(Outlays in millions of dollars)

1994

Ban physician self referrals..........................................................
Reduce default Medicare volume performance and update....
Reduce doctor fees in 1994 except primary care...................
Provide electronic billing incentive................................................
Outpatient department cut at 10%...............................................
Medicare—Maintain 1995 ratio of premium collections to
program outlays with a 27% ceiling............................................

1995

-50

-200

-300

1996

1997

1998

19941997
Total

-100
-200
-350
-90
-315

-100
-650
-400
-175
-375

-100
-1,225
-425
-175
-425

-250
-850
-1,250
-265
-690

-1,145

-3,870

-6,560

-5,015

-3,059

-6,538

-11,631

-17,204

-21,892

-38,432

-160

-400

-440

-490

-540

-1,490

-2,700

-5,600

-6,200

-6,900

-7,700

-21,400

-27
-40

-80
-80

-112
-90
-2,100

-109
-90
-3,032

-177
-90
-3,197

-328
-300
-5,132

Subtotal, Shared Contribution.......................... .......--------

-2,927

-6,160

-8,942

-10,621

-11,704

-28,650

TOTAL, PROPOSED ENTITLEMENT SAVINGS_______

-8,662

-17,932

-30,782

-41,675

-47,515

-99,051

-2,755

-5,755

-6,700

-7,884

-8,723

-23,094

Subtotal, Controlling Health Care Costs---------------------

SHARED CONTRIBUTION
Health:
Medicaid: Equate matching rates for welfare program..........
Social Security:
Retain Social Security threshold and tax 85% (revenue)......
Income Security:
Strengthen child support enforcement.....................................
Equate matching rates for welfare program............................
End lump-sum benefit....................................................................

MEMORANDUM:
Revenue items included above.....................................................




129

Appendix

TABLE 4. STIMULUS PROPOSALS
(In millions of dollars)
1993
Total
-----------------------------------------------------------------------------------------------------------------------------------------------1994Budget
Obttga1994
1995
1996
1997
1998
1997
Authority
tions
Outlays
outlays
outlays
outlays
outlays
outlays
outlays

INFRASTRUCTURE
Department of Defense—Civil:
Army Corps of Engineers water projects......

94

94

28

316
34
28

1,895
106
131

66 ................................................... .........

Department of Transportation:
Federal highway program................................
Airport improvement program.........................
AMTRAK............................................................
Mass transit:
Obligation limitation......................................
1993 supplemental.......................................

188

2,976
250
188

736

16
736

1
139

3
245

Subtotal, Transportation..........................

924

4,166

518

2,380

235

235

153

1,253

4,495

699

Department of Veterans Affairs:
Maintenance backlog...................................
SUBTOTAL, INFRASTRUCTURE____ ....

66

103
25

64
13

59
10

2,467
207
159

5
147

3
95

3
89

1
22

14
576

648

226

169

92

3,423

.........

82

405
63
28 ..

82 ..

92

3,571

7 .............................................................

7

2,528

648

226

169

SUMMER OF OPPORTUNITY
Department of Agriculture:
Food and Nutrition Service:
Women, Infants, and Children (WIC)
supplemental feeding program...................
The Emergency Food Assistance
Program (TEFAP).........................................

75

75

68

23

23

23 ............................................................................................

Subtotal, Agriculture................................

98

98

91

Department of Education:
Pell Grants unfunded shortfalls:
Fund current law for 1993-1994 school
year without borrowing from 1994 funds...
Fund shortfall caused in prior years
without borrowing from 1994 funds...........
Chapter 1:
Census supplemental...................................
Summer 1993 pre-school and school
programs........................................................
Subtotal, Education—....----------------------

130



7

7 ............

653

653 .............................................................

1,371

1,371 ..............................................................

5

207

400

100 ............................

100

428

260

235

235

28

500

500

2,759

2,759

160

42

42

307

Appendix

TABLE 4. STIMULUS PROPOSALS-Continued
(In millions of dollars)
1993
Total
----------------------------------------------------------------------------------------------------------------------------------------------1994Budget
Obliga1994
1995
1996
1997
1998
1997
Authority
tions
Outlays
outlays
outlays
outlays
outlays
outlays
outlays

Department of Health and Human Services:
Head Start:
Head Start summer program.....................
Childcare feeding (Agriculture)...................
Immunization....................................................
AIDS: Ryan White Act.....................................

500
56
300
200

500
56
300
200

425
48
236
152

Subtotal, Health and Human Services..

1,056

1,056

861

Department of the Interior:
Bureau of Indian Affairs:
Enhanced school operations......................

49

28

28

1,000
14

1,000
14

660
9

32
4,000

32
4,000

6
4,000 ..

Department of Labor:
Summer youth employment...........................
Worker profiling................................................
Community service employment for older
Americans.........................................................
Extend Unemployment Compensation.........
Offsets: Extension lowers spending on
Extended Benefits program...........................
Subtotal, Labor..........................................

....
....
....
....

.................
.................
.................
.................

75
8
64
48

195 ....

.................

195

4 .......................... .................

21

.................
.................

340
5

23

3 .......................... .................

26

368

3 ............................................

371

3 ................... ........................................
1 ................... ........................................

3
1

75
8
64
48

17

340 ....
5 ....

-800 ..

5,046

5,046

3,875

15
9

15
9

12
8

Other Agencies:
National Service program..............................
Equal Employment Opportunity Commission
Small Business Administration:
7(a) loan guarantees—loan levels............
Loan subsidy...............................................

(2,575)
141

Subtotal, Other Agencies.........................

165

SUBTOTAL, SUMMER OF OPPORTUNITY

(2,575) .
141

42

99 ...

...........

99

165

62

103 ...

...........

103

9,173

9,152

5,345

5 ................ ...........

1,004

103
14

54
14

33
11

31
26
13 ............................
3 ..............................................................

70
3

81

81

67

14 ............................................................

14

64

38

3

31

30 ............................................

61

262

187

114

79

56

13 ............................

148

950

49

TECHNOLOGY INVESTMENTS
Department of Commerce:
National Institute of Standards and
Technology:
Advanced technology program...................
Networking and computing applications...
National Oceanic and Atmospheric
Administration: Equipment acquisition..........
National Telecommunications and
Information Administration: “Information
Highways”.........................................................
Subtotal, Commerce............................ .




131

Appendix

TABLE 4. STIMULUS PROPOSALS-Continued
(In millions of dollars)
1993

Total

------------------------------------------------------------------------------------------------------------------1994Budget ObligaAuthoritytions
Outlays

1994
outlays

1995
outlays

1996
outlays

1997
outlays

1998
outlays

1997
outlays

Department of Health and Human Services:
National Institutes of Health:
Networking and computing applications...
9
Social Security Administration:
Disability Insurance (DI) processing..........................

302

302 ............................................................................................

Subtotal, Health and Human Services..

9

311

308

3 .............................................................

3

Department of the Treasury:
Accelerate Tax System Modernization
(TSM).................................................................

148

148

104

44 ...........................................................

44

5

4

3

188
19

150
15

85
8

75
8

28 ....
3 ....

103
11

Subtotal, NSF..............................................

207

165

93

83

31 ....

114

Subtotal, Other agencies.........................

212

169

96

85

31 ....

116

631

815

622

211

87

13 ....

94

94

9

29

29

18

2

2

1

1

Subtotal, Commerce..................................

96

96

10

30

Department of Housing and Urban
Development:
Accelerate Home Investment Partnership....
Accelerate Public Housing Modernization....
Community Development Block Grants........
Supportive Housing.........................................

2,536
423

2,536
423

83
659
127

173
1,319
211

Subtotal, HUD.............................................

2,959

2,959

869

Other Agencies:
District of Columbia.........................................

28

28

3,083

3,083

Other Agencies:
National Aeronautics and Space
Administration:
Networking and computing applications...
National Science Foundation
Research and development.......................
Networking and computing applications...

SUBTOTAL,
TECHNOLOGY
INVESTMENTS................................................

9

6

3 .............................................................

2 ...

3

2

311

URBAN DEVELOPMENT AND HOUSING
INITIATIVE

Department of Commerce:
Economic Development Administration........
Minority Business Development
Administration...................................................

SUBTOTAL, URBAN DEVELOPMENT
AND HOUSING INITIATIVE..........................

132



7

2

...

83
1

18

7

2

84

263
558 ...
85 ...

260

171

85

867
1,877
296

1,703

906

260

171

85

3,040

1,733

935

278

178

87

3,124

29

28 .

907

Appendix

TABLE 4. STIMULUS PROPOSALS-Continued
(In millions of dollars)
1993
Total
---------------------------------------------------------------------------------------------------------------------------------------------- 1994Budget
Obliga1994
1995
1996
1997
1998
1997
Authority
tions
Outlays
outlays
outlays
outlays
outlays
outlays
outlays

RURAL DEVELOPMENT INITIATIVE

Department of Agriculture:
Soil Conservation Service:
Watershed and conservation......................
Agricultural Research Service:
Enhanced facility maintenance...................
Enhanced natural resource protection..........
FmHA Very Low-Income Housing Repair
Loans:
Loan levels...................................................
Loan subsidy................................................
FmHA very low-income housing repair
grants.................................................................
FmHA Single Family Housing Guaranteed
Loans:
Loan levels...................................................
Loan subsidy................................................
Food Safety and Inspection Service.............
Rural Development Administration:
Loan levels...................................................
Loan subsidy................................................
Grants............................................................

Subtotal, Agriculture.................................
Department of the Interior:
Bureau of Indian Affairs: Economic
development on Indian Reservations:
Loan levels...................................................
Loan subsidy...............................................
Road maintenance and facility repair.......

47

47

24

23

23

38
188

38
188

30
169

8
19

8
19

(3)
1

(3)
1

6

6

(235)
5
4

(235)
5
4

4
1 ............................................................
1
4 ............................................................................................

(470)
67
281

(470)
67
281

2
6

19
67

22
84

637

638

244

138

106

(48)
6
33

(48) ••
6
33

1 ............

5

1

...........................................................

1

65
275

24 ............................
124 .............................
148 ............

392

6

..............................................................................................

29

4 ................................................. ..........

4

4 ..

..........

4

148 ................. ..........

396

7 ...
7 ...

..........
..........
..........

26
33
9

14 ...

..........

68

Subtotal, Interior........................................

39

39

35

SUBTOTAL, RURAL DEVELOPMENT........

676

677

280

Department of Energy:
National Laboratories (CRADAs)..................
Increase weatherization grants......................
Building and industrial conservation.............
Vehicle energy conversion.............................

47
47
19
28

47
47
19
28

22
14
10
28

19
26
9 ..

Subtotal, Energy........................................

141

141

74

54

142

106

.......

ENVIRONMENT/ENERGY




133

Appendix

TABLE 4. STIMULUS PROPOSALS-Continued
(In millions of dollars)
1993
Budget
Authority

Obliga­
tions

Outlays

1994
outlays

1995
outlays

1996
outlays

1997
outlays

1998
outlays

Total
19941997
outlays

Department of the Interior:
Enhanced natural resource protection..........
National Park Service: Historic preservation

349
23

349
23

315
14

35
9

35
9

Subtotal, Interior......................................

372

372

329

44

44

Other Agencies:
Environmental Protection Agency:
Watershed resource restoration grants....
Green programs..........................................
Wastewater State revolving fund..............

47
23
845

47
23
845

23
8
39

15
11
179

8
4
272

172

72

34

23
15
695

Subtotal, EPA..............................................

915

915

70

205

284

172

72

34

733

Mufti-Agency cross-cutting option :
Federal buildings energy efficiency..............

19

19

11

7

1

Subtotal, Other agencies........................

934

934

81

212

285

172

72

34

741

SUBTOTAL, ENVIRONMENT/ENERGY......

1,447

1,447

484

310

299

172

72

34

853

6,442

6,442

6,442

SUBTOTAL, ALL SPENDING........................
SUBTOTAL, LOAN LEVELS..........................
LESS LOAN SUBSIDY................................
SUBTOTAL, SPENDING + LOAN LEVELS..
SUBTOTAL, TAX INCENTIVES.....................

16,262
3,331

8,336

5,874

2,124

842

419

213

9,259

19,373
6,442

19,669
3,331
-220
22,780
6,442

8,336
6,442

5,874

2,124

842

419

213

9,259

TOTAL...................................................................

25,815

29,222

14,778

5,874

2,124

842

419

213

9,259

8

TAX INCENTIVES

Investment tax credit and other tax stimulus
provisions..............................................................
TOTALS, ALL CATEGORIES

134



-220

Appendix

TABLE 5. INVESTMENT PROPOSALS
(In millions of dollars)

1994

1995

1996

1997

1998

19941997
Total

REBUILD AMERICA—INFRASTRUCTURE
Transportation:
Federal-aid highway program........................................................
Smart cars/smart highways (part of Federal-aid highway
obligations).......................................................................................
Mass transit formula capital grants............... ...............................
High-speed rail and MAGLEV.......................................................
Alcohol-related highway safety and other transportation capital
Airport improvement program........................................................
Air traffic control modernization.....................................................
Public land highways and Indian reservation roads..................
High-speed rail bonds (tax incentive)................................................
Subtotal, Transportation..........................................................

402

1,736

1,847

1,631

1,402

5,616

(70)
23
27
11
5
24
5

(85)
149
140
37
22
69
38
1

(90)
398
221
65
36
111
99
4

(100)
639
258
88
44
140
153
11

(100)
864
305
98
47
161
200
20

(345)
1,209
646
201
107
344
295
16

497

2,192

2,781

2,964

3,097

8,434

Environment:
Drinking water state revolving funds (EPA)................................
Clean water state revolving funds (EPA).....................................
Safety of dams on Indian reservations (Interior)........................
Water resources development (Corps of Engineers).................
Watershed resource restoration (EPA).........................................
Environmental restoration and waste management (DOE).......
Forests for the Future (USDA)......................................................
Weather service modernization (NOAA)......................................
Environmental technology (EPA)...................................................
Green programs (EPA)...................................................................
Natural resource protection and environmental infrastructure
(Interior and USDA)........................................................................
Tree planting initiative (USDA)......................................................
National research initiative grants (USDA).................................
Forestry research initiative (USDA)..............................................

24
54
4
77
15
8
24
84
14
5

172
344
12
147
34
35
46
86
46
16

440
900
20
160
43
70
50
70
84
23

692
1,402
23
160
47
107
50
50
127
25

840
1,666
23
160
49
146
50
-16
175
25

1,328
2,700
59
544
139
220
170
290
271
69

167
33
2
16

384
64
16
56

471
73
60
84

509
76
110
105

538
79
160
122

1,531
246
188
261

Subtotal, Environment............ .................................................

527

1,458

2,548

3,483

4,017

8,016

Rural Development Initiative:
Rural water and waste water loans and grants (USDA)...........
Business and community initiative (USDA)..................................

6
105

42
240

107
356

176
454

207
544

331
1,155

Subtotal, Rural Development Initiative........... .....................

111

282

463

630

751

1,486

18
49
18
18

30
152
63
8

30
270
94
9

30
329
100
3

30
342
100
1

108
800
275
38

48
5
11
9

168
25
50
39

304
55
116
72

420
90
243
90

520
112
439
95

940
175
420
210

176

535

950

1,305

1,639

2,966

Energy:
Alternative fuels vehicles................................................................
Energy efficiency in Federal buildings.........................................
Increase weatherization grants (DOE).........................................
Close-out costs for DOE reactors.................................................
Energy conservation and renewable energy programs
(Energy Policy Act).........................................................................
Natural gas research and development: Emphasize utilization.
Advanced neutron source...............................................................
Fusion energy research..................................................................
Subtotal, Energy........................................................................




135

Appendix

TABLE 5. INVESTMENT PROPOSALS—Continued
(In millions of dollars)

1994

Community Development and Defense Conversion:
Community development block grant (CDBG)............................
Office of Economic Adjustment for defense reinvestment and
transition............................................................................................
Economic Development Administration for defense
reinvestment and transition............................................................
Enterprise zones (tax incentive)....................................................
Community development banks....................................................
Subtotal, Community Development and Defense
Conversion...................................................................................

1995

1996

1997

1998

19941997
Total

4

41

100

137

148

282

9

17

20

20

20

66

3
73
45

16
347
93

33
772
106

44
1,228
110

53
1,699
114

96
2,420
354

134

514

1,031

1,539

2,034

3,218

36
3

121
10

171
17

222
20

267
20

550
50

133

322

420

456

480

1,331

Technology and Business Reinvestment and Defense
Conversion:
NASA civil aviation...........................................................................
NASA short-haul aircraft research.................................................
Dual-use technology for defense reinvestment and transition
(DOD).................................................................................................
Federal Coordinating Council for Science, Engineering, and
Technology (research initiatives)..................................................
Crosscutting high performance computing (NSF, NIH, NASA,
and NIST).........................................................................................
National Inst of Standards and Technology growth....................
National labs (non-defense)...........................................................
Information highways (Commerce)................................................
National Science Foundation.........................................................
Government automation and efficiency........................................
Extend R&E tax credit (tax incentive)..........................................

100

266

383

457

514

1,206

53
56
14
6
134
204
1,207

158
219
35
42
451
652
1,503

253
403
47
98
758
850
1,750

320
628
50
129
954
943
1,977

362
805
50
150
1,100
735
2,200

784
1,306
146
275
2,297
2,649
6,437

Subtotal, Technology and Business Reinvestment and
Defense Conversion.......................... ......................................

1,946

3,779

5,150

6,156

6,683

17,031

7
37

65
155
22
145
478
387
52
17
5

222
282
81
160
791
164
116
68
19

422
384
138
172
1,114
17
138
121
34

654
519
183
174
1,442
-158
133
167
48

716
858
241
581
2,597
822
312
206
58

Housing:
100% vouchers (100,000 units)....................................................
Preservation and restoration of assisted housing.......................
Supportive housing program..............................................................
Mortgage revenue bonds (tax incentive)......................................
Extend low-income housing tax credit (tax incentive)...............
Real estate investment (tax incentive).........................................
Urban Partnership Against Crime..................................................
Severely distressed public housing...................................................
HOPE youthbuild..................................................................................

104
214
254
6

Subtotal, Housing..............................................................
SUBTOTAL, TAX INCENTIVES.................................................
SUBTOTAL, SPENDING INCENTIVES....................................

622
1,852
2,161

1,326
2,861
7,225

1,903
3,641
11,185

2,540
4,519
14,098

3,162
5,377
16,006

6,391
12,873
34,669

TOTAL, REBUILD AMERICA.......................................................

4,013

10,086

14,826

18,617

21,383

47,542

136



Appendix

TABLE 5. INVESTMENT PROPOSALS-Continued
(In millions of dollars)

1994

1995

1996

1997

1998

19941997
Total

LIFELONG LEARNING
WIC (Special supplemental food program for women, infants,
and children).........................................................................................
Parenting and Family Support..........................................................
Head Start............................................................................................
Child Care and Development Block Grant......................................
Education Reform and Initiatives......................................................
Employer Provided Education Assistance (tax incentive).............
National Service..................................................................................
Worker Training Initiatives:
Dislocated Worker Assistance Act (for NAFTA, Defense
Reinvestment and Transition, Energy Conversion, and Trade
Adjustment)......................................................................................
Job Corps: adopt “50-50 plan”.....................................................
Job Corps: eliminate maintenance backlog................................
JTPA, summer youth employment and training..........................
One-stop career shopping..............................................................
Older Americans employment.......................................................
Youth apprenticeship......................................................................
Worker profiling................................................................................
Targeted jobs tax credit (tax incentive)........................................

318
40
932
30
206
425
98

60
11
7
247
30
4
32
6
170

532
85
1,886
95
1,043
458
1,042

879
32
20
540
170
22
243
3...
327

800
230
2,790
145
2,206
492
1,890

984
495
3,676
200
2,697
528
3,000

1,000
600
4,562
250
3,083
565
3,400

2,634
850
9,284
470
6,152
1,903
6,030

1,699
96
32
625
250
34
448

1,960
202
45
625
250
35
495

2,000
344
50
625
250
35
500

406

496

605

4,598
341
104
2,037
700
95
1,218
9
1,399

Subtotal, Worker Training Initiatives............................
SUBTOTAL, TAX INCENTIVES.................................................
SUBTOTAL, SPENDING INCENTIVES....................................

567
595
2,021

2,236
785
6,592

3,590
898
11,245

4,108
1,024
14,664

4,409
1,170
16,699

10,501
3,302
34,522

TOTAL, LIFELONG LEARNING...................................................

2,616

7,377

12,143

15,688

17,869

37,824

REWARDING WORK
Earned income tax credit (tax incentive).........................................
Extension of unemployment compensation.....................................
Crime Initiative, including Community Policing, Criminal
Records Upgrades, and Police Corps.............................................
Equal Employment Opportunity Commission..................................
SUBTOTAL, TAX INCENTIVES.................................................
SUBTOTAL, SPENDING INCENTIVES....................................

525
2,400...

6,228

6,445

6,662

6,927

19,860
2,400

210
10
525
2,620

521
17
6,228
538

725
18
6,445
743

842
18
6,662
860

918
18
6,927
936

2,298
63
19,860
4,761

TOTAL, REWARDING WORK......................................................

3,145

6,766

7,188

7,522

7,863

24,621

346
60
46
54
1,000

1,660
192
207
98
2,000
316

2,806
305
456
101
3,000
649

3,370
392
797
102
3,000
982

4,251
445
933
103
3,000
998

8,182
949
1,506
355
9,000
1,947

HEALTH CARE
AIDS, women's health, immunizations, NIH research, and other
public health initiatives.......................................................................
AIDS—Ryan White Act.......................................................................
Substance abuse prevention and treatment....................................
Food safety initiative (USDA) and emergency food assistance....
Food Stamps........................................................................................
Low-income Home Energy Assistance Program................................




137

Appendix

TABLE 5. INVESTMENT PROPOSALS-Continued
(In millions of dollars)

1994

Rural Health Initiative........................................................................
VA medical care................................................................................
Improving disability insurance processing.....................................
Health Insurance Deduction for Self-employed (tax incentive)...
SUBTOTAL, TAX INCENTIVES...............................................
SUBTOTAL, SPENDING INCENTIVES..................................

1995

50
279
120
313...
313...
1,955

5,391

2,268

12
(525)
(104)

55
663
200

1996
10...
733
200

1997

1998

19941997
Total

800
200

861
200

8,260

9,643

10,791

115
2,475
720
313
313
25,249

5,391

8,260

9,643

10,791

25,562

(1,207)
(214)
2,795

93
(6,228)
(145)
0)
(1,503)
(478)
3,133

155
(6,445)
(160)
(4)
(1,750)
(791)
3,027

207
(6,662)
(172)
(11)
(1,977)
(1,114)
3,309

247
(6,927)
(174)
(20)
(2,200)
(1,442)
3,501

467
(19,860)
(581)
(16)
(6,437)
(2,597)
12,264

188
6,399
14

307
3,584
28

396
107
35

404
-961
37

273
-572
37

1,295
9,129
114

70

73

75

77

79

295

60
9,478
60

131
7,218
131

153
3,795
153

157
3,073
157

160
3,565
160

501
23,564
501

TOTAL, PRIVATE-SECTOR INCENTIVES................................

9,538

7,349

3,948

3,230

3,725

24,065

TAX INCENTIVES, ALL CATEGORIES.................................

12,763

17,092

14,779

15,278

17,039

59,912

SPENDING INCENTIVES, ALL CATEGORIES.............

8,817

19,877

31,586

39,422

44,592

99,702

61,631

159,614

TOTAL, HEALTH CARE..............................................................
PRIVATE-SECTOR INCENTIVES

Investment Tax Incentives:
Targeted capital gains exclusion (tax incentive).......................
Earned income tax credit (EITC) (tax incentive).......................
Mortgage revenue bonds (tax incentive)....................................
High-speed rail bonds (tax incentive).........................................
Extend R&E tax credit (tax incentive)........................................
Extend low-income housing tax credit (tax incentive).............
Small business investment tax credit (tax incentive)...............
Alternative minimum tax depreciation preference (tax
incentive).........................................................................................
Temporary incremental investment tax credit (tax incentive)..
Small issue manufacturing bonds (tax incentive).....................
Alternative minimum tax exception for gifts of appreciated
property (tax incentive).................................................................
Railroad retirement fund transfer (tax incentive)......................
Small business credit availability....................................................
SUBTOTAL, TAX INCENTIVES...............................................
SUBTOTAL, SPENDING INCENTIVES..................................

TOTAL, ALL CATEGORIES....................................................

138



21,580

36,969

46,365

54,700

Appendix

TABLE 6. REVENUE AND RECEIPTS PROPOSALS
(In billions of dollars)

1994

1993
Revenue Raising Proposals:
Raise individual income taxes for upper incomes.
Repeal HI taxable wage base.....................................
Increase top income tax rate on large
corporations to 36%...................................................
Broad based energy tax1............................................
Cap possessions tax credit (sec. 936) at 65% of
wages..............................................................................
Service industry non-compliance initiative.................
Tax Identification Number (TIN) validation................
Disallow unreasonable plaims......................................
Restrict deduction for business meals and
entertainment to 50%....................................................
Reduce pension compensation cap...........................
Mark to market for security dealers...........................
Disallow moving deductions for meals and realestate expenses.............................................................
Extend 2.5 cent per gallon gas tax............................
Extend 53% and 55% estate tax rate........................
Deny deduction for dub dues............................ .........
Prohibit double-dip related to FSLIC assistance....
Deny lobbying deductions............................................
Deny deduction for executive pay over $1 million.
International tax provisions.......................................
Miscellaneous revenue raising provisions.................

1995

1997

1996

19941997
Total

1998

1.8

27.7
2.8

19.9
6.0

22.9
6.4

26.3
6.8

27.7
7.2

96.8
22.0

0.4

7.7
1.5

5.4
8.9

5.5
16.4

5.7
22.3

5.8
22.4

24.4
49.0

0.2
0.1
*

0.9
0.6
*

1.6
1.3
*

0.3

0.6

0.4

2.1
1.9
0.1
0.3

2.2
2.2
0.1
0.3

4.8
4.0
0.1
1.6

1.8
0.3
0.5

3.2
0.8
1.1

3.4
0.8
1.1

3.7
0.9
1.1

4.0
0.9
0.7

12.1
2.7
3.8

0.1

0.4

0.5
0.1
0.6
0.1
0.1
0.8
0.8

0.5
0.2
0.1
0.2
0.1
1.6
0.1

0.4
2.6
0.6
0.3
*
0.2
0.1
1.9
-0.2

0.4
2.6
0.6
0.3
0.2
0.2
0.2
2.1
0.2

0.4
2.6
0.6
0.3
0.1
0.2
0.1
2.2
0.2

1.3
5.2
2.1
0.9
0.9
0.7
0.5
6.5
1.0

0.8
_*
«

Subtotal, revenue raising proposals...............
Investment/stimulus....................................................

2.9
-6.4

46.1
-12.8

50.6
-17.1

65.9
-14.8

77.9
-15.3

80.3
-17.0

240.4
-59.9

Total, net revenue proposals.................................

-3.6

33.3

33.5

51.1

62.6

63.3

180.5

*

0.1
0.1
*

0.1
*

0.3
0.1
0.1
0.2
*

0.6
0.1
0.1
0.5
*

0.9
0.2
0.2
0.8
0.2
-0.4
-0.2

Other provisions affecting receipts:
IRS initiative...................................................................
Commodity Futures Trading Commission fee...........
Harbor maintenance tax...............................................
Inland waterway tax......................................................
SEC registration fee......................................................
Federal pay raise (receipt effect)................................
Federal FTE levels (receipt effect).............................

-0.1
_*

-0.1
-0.1

-0.1
-0.1

-0.1
-0.1

0.6
0.1
0.1
0.5
0.1
-0.1
-0.1

Total, other provisions...................................................

0.1

0.2

0.5

1.0

1.0

1.7

-3.6

33.3
0.1
2.7

33.5
0.2
5.6

51.1
0.5
6.2

62.6
1.0
6.9
3.9

63.3
1.0
7.7
0.8

180.5
1.7
21.4
3.9

-3.6

36.1

39.3

57.8

74.4

72.8

207.5

Addendum:
Total, net revenue proposals....................................
Total, other provisions...................................................
Tax 85% of sodal security benefits............................
Corporate estimated tax rules.....................................
TOTAL, REVENUE AND RECEIPTS PROPOSALS.

0.1
*
*
*

* $50 million or less.
1 The impact of this proposal is offset for low-income families by increases in the low-income home energy assistance program
and food stamps that are reflected elsewhere.




139

Appendix

TABLE 7. BUDGET OUTLAYS BY FUNCTION
(In billions of dollars)
Estimate

Function

1994

1993

1995

1996

1997

1998

National defense....................................................................

292.9

277.3

272.3

19.3

18.7

18.7

264.9
18.2

249.2

International affairs................................................................

18.0

18.4

General science, space and technology............................

17.2

18.1

19.7

20.7

21.6

22.2

252.7

Energy......................................................................................

4.9

3.4

4.1

4.5

4.2

4.0

Natural resources and environment....................................

22.1

21.9

22.8

23.3

23.7

23.7

Agriculture...............................................................................

21.6

16.1

13.8

12.2

Commerce and housing credit............................................

13.6

14.0

0.6

-10.5

10.9
-10.2

11.5
-7.0

Transportation.........................................................................

36.9

39.8

40.4

41.3

42.7

43.7

Community and regional development...............................

11.1

10.4

9.7

9.5

9.7

Education, training, employment, and social services......

10.8
53.4

53.8

56.6

56.1

62.7

65.5

Health.......................................................................................

105.3

149.6

166.8

185.4

132.7

118.3
147.2

133.3

Medicare.................................................................................

162.8

179.0

195.2

213.6

Income security.......................................................................

208.8

214.3

221.5

229.7

240.4

249.1

Social security.........................................................................

305.0

321.0

336.7

351.3

367.4

383.1

Veterans benefits and services...........................................

35.7

37.8

37.5

37.0

39.1

40.0

Administration of justice........................................................

15.3

15.9

17.2

17.4

17.7

18.2

General government..............................................................

14.8

14.4

15.6

15.5

15.7

15.8

Net interest.............................................................................

202.1
*

212.0

227.2

272.7

-3.3

-6.1

243.3
-7.2

257.4

Allowances..............................................................................

-8.9

-9.1

Undistributed offsetting receipts..........................................

-37.3

-39.0

-40.7

-43.2

-45.6

-46.1

Total outlays.....................................................................

1,475.1

1,513.0

1,564.5

1,612.8

1,677.5

1,767.0

* $50 million or less.

140



Appendix

TABLE 8. BUDGET OUTLAY TOTALS BY AGENCY
(In billions of dollars)
Estimate

1993

1994

1995

1996

1997

1998

Cabinet Agencies:
Agriculture............................................................................

67.0

63.6

63.9

65.2

65.0

Commerce...........................................................................

3.1

3.2

3.4

3.7

3.9

4.2

Defense...............................................................................

279.5

264.1

258.9

251.4

235.8

239.5

Education.............................................................................

30.9

31.0

30.6

26.6

30.2

30.8

Energy.................................................................................

15.8

16.9

639.6

686.3

17.0
735.2

16.8

Health and Human Services............................................

16.9
591.7

16.9
845.4

Housing and Urban Development....................................

26.0

28.9
7.2

7.2

30.2
7.1

30.7

7.5

29.9
7.1

29.9

Interior..................................................................................

Justice..................................................................................

10.5

10.4

11.0

10.8

10.5

10.8

789.8

65.9

7.3

Labor....................................................................................

46.8

37.8

36.1

37.6

38.4

39.1

State....................................................................................
Transportation.....................................................................

5.7

5.7
39.6

5.9
40.4

5.9

36.5

5.6
39.2

41.6

6.1
42.6

Treasury...............................................................................

302.4

319.9

344.6

368.9

390.7

414.6

Veterans Affairs..................................................................

35.4

37.1

36.4

35.8

37.7

38.4

Corps of Engineers, Military Retirement and Other
Defense...............................................................................

29.5

30.7

7.8

33.1
-12.7

35.4

6.9

31.8
-4.2

34.2

Deposit Insurance Agencies.............................................

-11.5

-7.5

Environmental Protection Agency....................................

6.5

6.7

6.9

7.0

7.2

7.4

Executive Office of the President....................................

0.2

0.3

0.3

0.3

0.3

0.3

Federal Emergency Management Agency......................

3.2

1.8

1.2

0.8

0.7

Funds Appropriated to the President..............................

11.9

11.8

11.5

0.9
11.1

10.8

10.8

Major Agencies:

General Services Administration......................................

1.3

0.9

1.4

0.4

0.3

0.1

Judicial Branch...................................................................

2.6

2.6

2.7

2.8

2.9

3.0

Legislative Branch.............................................................

2.8

2.9

3.0

3.1

3.2

3.3

National Aeronautics and Space Administration............

14.1

14.7

15.5

15.9

16.3

16.6

National Science Foundation...........................................

2.9

3.0

3.3

3.7

4.0

4.2

Office of Personnel Management....................................

37.2

38.8

39.9

43.6

46.8

49.3

Postal Service.....................................................................
Railroad Retirement Board................................................
Small Business Administration.........................................

1.6
4.7

2.2
4.7

1.3
4.7

-0.6
4.7

-1.0
4.7

-1.3
4.7

1.0

0.4

0.4

0.4

7.8

0.8
7.7

0.4

All Other Agencies...............................................................

9.3

8.3

8.5

9.2

Undistributed Offsetting Receipts...................................

-119.3

-127.5

-135.0

-144.6

-153.9

-162.0

Total outlays..................................................................

1,475.1

1,513.0

1,564.5

1,612.8

1,677.5

1,767.0




141

Appendix

TABLE 9. TOTAL FULL-TIME EQUIVALENT EMPLOYMENT
(Full-time equivalent employment in thousands)
Estimate

Agency

1993
base

1993

1994

1995

1996

1997

1993
base to
1997
change

Cabinet Agencies:

Agriculture........................................................................
Commerce.......................................................................
Defense...........................................................................

112.5
36.4

927.2

111.4

109.7

108.0

107.0

105.4

-7.0

36.0
917.8

35.5
895.2

34.9
865.2

34.9
842.2

34.9
832.2

-95.0

-1.5

Education.........................................................................

5.0

4.9

4.8

4.8

4.8

20.0

19.8

19.5

19.2

19.2

4.8
19.2

-0.2

Energy.............................................................................

Health and Human Services........................................

130.0

128.7

126.7

124.8

124.8

124.8

-5.2

Housing and Urban Development...............................

13.5

13.4

13.2

12.9

12.9

12.9

-0.5

Interior..............................................................................

77.9
98.4

77.2

76.0

-3.1

95.9

74.8
94.4

74.8

97.4

74.8
94.4

94.4

-3.9

Justice..............................................................................

-0.8

Labor................................................................................

19.8

19.6

19.3

19.0

19.0

19.0

-0.8

State................................................................................

26.0

25.8

25.4

25.0

25.0

25.0

-1.0

Transportation.................................................................

71.1

70.4

69.3

68.2

68.2

68.2

-2.8

Treasury...........................................................................

163.2

161.6

159.1

156.7

156.7

156.7

-6.5

Veterans Affairs..............................................................

230.4

228.1

224.6

221.2

221.2

221.2

-9.2

Other Agencies:
Agency for International Development........................

4.4

4.3

4.3

4.2

4.2

4.2

-0.2

Corps of Engineers.......................................................

27.4

27.2

26.8

26.3

26.3

26.3

-1.1

Environmental Protection Agency................................

17.9

17.7

17.5

17.2

17.2

17.2

-0.7

Equal Employment Opportunity Commission............

2.8
2.7

2.8

2.8

2.7

2.7

2.7

2.6

2.6

2.5

2.5

2.5

-0.1
-0.1

Federal Emergency Management Agency..................

Financial Institutions (FDIC/RTC).................................

16.1

15.9

15.2

13.8

11.3

8.8

-7.2

General Services Administration..................................

22.7

22.5

22.1

21.8

21.8

21.8

-0.9

National Aeronautics and Space Administration........

24.9

24.7

24.3

23.9

23.9

23.9

-1.0

National Archives and Records Administration..........
National Labor Relations Board...................................
Nuclear Regulatory Commission..................................

2.8
2.1
3.4

2.7
2.1
3.3

2.7
2.1

2.6
2.1
3.2

2.6
2.1
3.2

2.6
2.1

Office of Personnel Management................................

6.1

6.0

5.9

Panama Canal Commission.........................................
Securities and Exchange Commission.......................

8.7

8.5

5.9
8.4

8.4

2.7

8.6
2.7

5.9
8.4

-0.1
-0.1
-0.1
-0.2

2.7

2.6

Small Business Administration.....................................

4.7

4.6

4.6

4.5

2.6
4.5

2.6
4.5

-0.2

Smithsonian Institution..................................................

4.9

4.8

4.8

4.7

4.7

4.7

-0.2

Tennessee Valley Authority..........................................

19.1

18.6

18.5

18.4

18.4

18.4

-0.8

United States Information Agency..............................

8.7

8.6

8.5

8.3

8.3

8.3

-0.3

Other small agencies....................................................

22.0

21.8

21.3

20.9

20.9

20.8

-1.2

Total, executive branch...........................................

2,135.5

-152.8

3.3

3.2
5.9

2,113.7

2,072.5

2,023.3

1,996.8

1,982.7

FTE reduction from the base....................................

21.8

63.0

112.2

138.7

152.8

Percentage reduction from the base.......................

1.0

2.9

5.3

6.5

7.2..

Percentage reduction target/1993-1997 FTE
reduction target..........................................................

1.0

2.5

4.0

4.0

4.0

142



-0.3
-0.1

-100.0

Appendix

TABLE 10. BUDGET BY BEA CATEGORY
(In billions of dollars)

1993

1994

1995

1996

1997

1998

Discretionary:
Defense.........................................................
Nondefense.......................................... ........

294.3

277.8
270.4

273.1

265.5

249.7

253.3

261.7

282.1

292.6

302.4

312.5

Subtotal, Discretionary.................... ........

666.0

648.2

555.2

558.1

552.1

565.8

Mandatory............................................... ........

717.0

752.7

782.1

811.5

868.0

928.5

Net Interest............................................. ........

202.1

212.0

227.2

243.3

257.4

272.7

Total, Outlays...................................... ........

1,475.1

1,513.0

1,564.5

1,612.8

1,677.5

1,767.0

Revenues.........................................................

1,143.2

1,250.5

1,322.8

1,407.5

1,471.0

1,525.6

Deficit....................................................... ........

331.9

262.5

241.7

205.3

206.5

241.4

On-Budget Deficit (+).......................... ........

376.7

324.0

314.0

291.6

301.4

347.3

Off-Budget Surplus (-)........................ ........

-44.9

-61.6

-72.3

-86.3

-94.9

-105.8

Addendum:




143

Appendix

TABLE 11. CHANGE FROM JANUARY TO CURRENT BASELINE
(In billions of dollars)

1993

1994

1995

1996

1997

1998

January Uncapped Baseline Deficit............... ..............................
Bush defense proposals1...........................................................

327.3
0.0

309.1
-4.2

307.1
-9.8

324.4
-16.3

384.1
-22.3

426.4
-28.7

Uncapped Baseline with Bush defense........................................
Changes due to revised economic assumptions:
Discretionary inflation:
Defense..................................................................................
Nondefense...........................................................................
Mandatory outlays...................................................................
Net interest:
Rates......................................................................................
Debt service..........................................................................

327.3

304.9

297.2

308.1

361.8

397.7

0.0
0.0
-1.3

-0.5
-0.4
-2.2

-1.9
-1.7
-7.2

-4.2
-3.7
-15.9

-7.0
-6.1
-24.7

-9.9
-8.7
-35.0

-0.5
0.1

-6.7
0.2

-13.4
0.3

-15.5
-0.1

-17.9
-0.9

-22.0
-1.5

Subtotal, outlays...............................................................
Receipts (+ equals decrease)................................................

-1.7
4.4

-9.5
12.7

-24.0
21.6

-39.4
28.2

-56.5
42.7

-77.1
70.1

Subtotal, changes due to revised economic assumptions.....
Changes due to technical reestimates:
Defense discretionary..............................................................
Nondefense discretionary.......................................................
Mandatory:
Deposit insurance................................................................
Other.......................................................................................

2.7

3.2

-2.4

-11.2

-13.8

-7.0

3.6
-1.3

0.0
-0.3

0.0
-1.3

0.0
-2.3

0.0
-2.3

0.0
-2.6

-8.6
-0.4

-8.2
-1.4

3.1
-1.4

2.4
-0.8

0.1
-0.5

-0.4
-1.4

Subtotal, mandatory.................................................................
Net interest:
FFB (deposit insurance and other)....................................
Interest on the public debt..................................................
Debt service..........................................................................

-9.0

-9.6

1.7

1.6

-0.5

-1.8

0.2
-0.4
-0.3

0.9
-0.1
-0.8

1.2
*

-1.1

1.1
0.4
-1.2

1.0
1.1
-1.5

1.0
3.8
-1.8

Subtotal, outlays...............................................................
Receipts (+ equals decrease)................................................

-7.2
-3.6

-9.9
3.2

0.6
0.5

-0.4
0.6

-2.1
0.4

-1.5
0.5

Subtotal, changes due to technical reestimates......................

-10.8

-6.8

1.0

0.2

-1.7

-1.0

Total, changes due to revised economic assumptions and
technical reestimates.......................................................................

-8.1

-3.6

-1.3

-11.0

-15.5

-8.0

Current Baseline Deficit..................................................................

319.2

301.3

295.9

297.0

346.3

389.7

* $50 million or less.
11ncludes related debt service.

144






Appendix

TABLE 12. CHANGE IN THE STRUCTURAL DEFICIT
(Fiscal years, in billions of dollars)
Estimate
1993

1994

1995

1996

1997

1998

Baseline deficit................................., .......

319.2

301.3

295.9

297.0

346.3

389.7

Cyclical component...................................
Deposit insurance.............................. .......

66.8
6.9

51.6
7.9

36.3
-4.0

24.0
-12.5

16.8
-11.3

16.1
-7.3

Baseline structural deficit.....................

245.5

241.8

263.6

285.5

340.8

380.9

Effect of policy proposals.........................

12.7

-38.9

-54.2

-91.7

-139.8

-148.3

Proposed structural deficit...................

258.2

202.9

209.4

193.8

201.0

232.6

145

U.S.GOVERNMENT PRINTING OFFICE : 1993 - 339-885