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BUDGET BUDGET OF THE UNITED STATES GOVERNMENT Fiscal Year THE BUDGET DOCUMENTS Budget of the United States Government, Fiscal Year 1997 contains a summary of the President’s budget proposals. Budget System and Concepts, Fiscal Year 1997 contains an explanation of the system and concepts used to formulate the President’s budget proposal. The following additional budget documents should be available the week of March 18, 1996. Budget of the United States Government, Fiscal Year 1997—Supplement contains the Budget Message of the President and information on the President’s FY 1997 budget proposals. Analytical Perspectives, Budget of the United States Government, Fiscal Year 1997 contains analyses that are designed to highlight specified subject areas or provide other significant presentations of budget data that place the budget in perspective. It includes economic and accounting analyses; information on Federal receipts and collections; analyses of Federal spending; detailed information on Federal borrowing and debt; the Budget Enforcement Act preview report; current services estimates; and other technical presentations. It also includes information on the budget system and concepts and a listing of the Federal programs by agency and account. Historical Tables, Budget of the United States Government, Fiscal Year 1997 provides data on budget receipts, outlays, surpluses or deficits, Federal debt, and Federal employment covering an extended time period—in most cases beginning in fiscal year 1940 or earlier and ending in fiscal year 2002. These are much longer time periods than those covered by similar tables in other budget documents. As much as possible, the data in this volume and all other historical data in the budget documents have been made consistent with the concepts and presentation used in the 1997 Budget, so the data series are comparable over time. Budget of the United States Government, Fiscal Year 1997—Appendix contains detailed information on the various appropriations and funds that constitute the budget designed primarily for the use of the Appropriations Committee. The Appendix contains more detailed financial information on individual programs and appropriation accounts than any of the other budget documents. It includes for each agency: the proposed text of appropriation language, budget schedules for each account, new legislative proposals, explanations of the work to be performed and the funds needed, and proposed general provisions applicable to the appropriations of entire agencies or group of agencies. Supplemental and rescission proposals for the current year are presented separately. Information is also provided on certain activities whose outlays are not part of the budget totals. A Citizen’s Guide to the Federal Budget, Budget of the United States Government, Fiscal Year 1997 is an Office of Management and Budget publication that provides general information about the Budget and the budget process for the general public. AUTOMATED SOURCES OF BUDGET INFORMATION The information contained in these documents is available in electronic format from the following sources: • The budget documents are available on CD-ROM from STATUSA and the Government Printing Office. For more information, see the order form at the back of this document. • The budget documents can be accessed using a computer modem as well as on the Internet through the U.S. Department of Commerce’s STAT-USA information service. There is no charge for use of this service when used to obtain budget information. BBS Access: Set your computer communications software parameters to 8-bit words, no parity, and 1 stop-bit, then use your computer to contact STAT-USA’s Economic Bulletin Board (EBB) at one of the following modem numbers: 2400 bps (202) 482–3870 9600 bps (202) 482–2584 14400 bps (202) 482–2167 When connecting to the EBB, use the word GUEST as your login userid. At the EBB’s main information menu, select the [P]residential option for a list of budget documents that are available for online viewing or downloading to your computer. Internet Access: Budget documents are available through STAT-USA’s Internet service using the file transfer protocol (ftp), gopher, and the World Wide Web (WWW) at the following addresses: STAT-USA ftp address ...... STAT-USA gopher address STAT-USA WWW URL ..... • ftp.doc.gov/pub/BudgetFY97 gopher.doc.gov/BudgetFY97 http://www.doc.gov/BudgetFY97 /index.html For more information on access to STAT-USA information services, call (202) 482–1986. Copies of the database used to generate the budget numbers may be purchased from the U.S. Department of Commerce, National Technical Information Service, Springfield, VA 22161, telephone (703) 487–4650. Refer to stock number PB95–502340. GENERAL NOTES 1. 2. All years referred to are fiscal years, unless otherwise noted. Detail in this document may not add to the totals due to rounding. U.S. GOVERNMENT PRINTING OFFICE WASHINGTON 1996 For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402 1 THE WHITE HOUSE WA S H I N G T O N February 5, 1996 To the Congress of the United States: In accordance with 31 U.S.C. § 1105(a), I am transmitting my 1997 Budget to Congress. This budget provides a thematic overview of my priorities as we continue to discuss how to balance the budget over the next seven years. It also includes the Administration’s new economic assumptions. Because of the uncertainty over 1996 appropriations as well as possible changes in mandatory programs and tax policy, the Office of Management and Budget was not able to provide, by today, all of the material normally contained in the President’s budget submission. I anticipate transmitting that material to Congress the week of March 18, 1996. William J. Clinton i TABLE OF CONTENTS Page AN AGE OF POSSIBILITY ........................................................................................... 1 AMERICA AND THE WORLD ...................................................................................... 5 A STRONGER NATION AT HOME Strengthening Medicare ...................................................................................... 8 Strengthening Medicaid and Expanding Health Coverage ............................... 9 Reforming Welfare ............................................................................................... 10 Making Work Pay ................................................................................................. 11 Meeting America’s Challenges ............................................................................ 12 Providing Tax Relief ............................................................................................. 13 Closing Corporate Loopholes and Other Tax Measures .................................... 14 SUMMARY TABLES ....................................................................................................... 15 iii AN AGE OF POSSIBILITY The President’s 1997 Budget achieves two basic objectives: • It reaches balance in seven years, making real cuts in entitlements and discretionary spending while providing modest tax relief; and • It maintains our commitments to economic growth and to protecting the most vulnerable Americans, including senior citizens, working families, and children. The budget strengthens Medicare and Medicaid; invests in education and training, the environment, science and technology, and other priorities; reforms the welfare system; provides for a strong defense; and provides tax relief to help families raise their children, send their children to college, and save for the future. programs, $56 billion in other mandatory programs, $297 billion in discretionary spending, and $59 billion in corporate subsidies and other revenue provisions. The budget also includes a mechanism, known as a ‘‘trigger,’’ to ensure that the budget reaches balance under either CBO or OMB assumptions. Under this trigger, most of the tax cuts end after 2000 if the deficit is not at least $20 billion below CBO’s initial estimate for that year. If, on the other hand, the deficit is at least $20 billion below estimates, then (1) the tax cuts remain in place, and (2) the amount that exceeds $20 billion is applied, first, to reduce the discretionary spending cuts and, then, to a larger tax cut and more deficit reduction. Spurring Economic Growth Reaching Balance The budget reflects the President’s most recent proposal in his budget negotiations with the bipartisan congressional leadership. Because it reaches balance in 2002 by basically using the economic and technical assumptions of the Congressional Budget Office (CBO), it fulfills a goal that the President shares with Congress. Using the economic and technical assumptions of the Office of Management and Budget, this budget projects a surplus of $40 billion in 2002. The President believes that Congress should quickly enact the savings that he and congressional leaders have in common in their budget proposals—savings that are sufficient not only to balance the budget in seven years, but to provide a modest tax cut. As the President said in his State of the Union address, we should make permanent deficits a part of yesterday’s legacy. To reach balance, this budget saves $596 billion over seven years by reforming Federal entitlement programs, cutting deeply in discretionary spending, and limiting corporate subsidies. It saves $124 billion in Medicare, $59 billion in Medicaid, $40 billion in welfare From the start, the President’s economic program has emphasized one primary concern—to raise the standard of living for average Americans now and in the future. His budget policy has played a central role. By cutting the deficit nearly in half in the last three years, we have reduced Federal borrowing, making more funds available in the private markets so that businesses can invest, grow more productive, expand, and create jobs. We also have shifted resources to education and training, science and technology, and other priorities, not only to make businesses more competitive but to give Americans the skills they need to compete in the new economy. Like the President’s previous budgets, this budget maintains his investments in education and training, science and technology, environmental protection, law enforcement, and other key priorities. These include the Head Start program for disadvantaged children; the Safe and Drug-Free Schools and Communities program to create safe learning environments; Goals 2000, which helps States and school systems extend high academic standards, better teaching, and better learning to all stu1 2 dents; AmeriCorps, through which 25,000 Americans a year serve their communities and earn money for college; lower cost student loans with greatly increased flexibility for repayment; Pell grant scholarships for needy students; and Skill Grants (or job training vouchers) for dislocated workers and lowincome adults. The budget also protects environmental enforcement through the Environmental Protection Agency’s operating program; programs to protect national parks and other sensitive resources; and basic and applied research and technology development. It funds the Community Oriented Policing Services (COPS) initiative to put 100,000 more police on the street by 2000; more border patrols to prevent illegal immigration and more inspections to prevent the hiring of illegal immigrants; and the Community Development Financial Institutions fund to spur growth and create jobs in communities that have been left behind. In addition, the budget includes funds to launch the important initiatives that the President outlined in his State of the Union address. In education, the budget funds an educational technology initiative to connect every classroom to the information superhighway by 2000; expanded work-study to help one million students work their way through college by 2000; a $1,000 merit scholarship for the top five percent of graduates in every high school; and charter schools to let parents, teachers, and communities create public schools to meet their own children’s needs. For workers, the budget funds an initiative, which the White House Conference on Small Business recommended, to make it easier for small businesses and farmers to establish their own pension plans. For the environment, it funds tax incentives to encourage companies to clean up abandoned, contaminated industrial properties in distressed areas. And for law enforcement, it provides funds with which the FBI and other law enforcement agencies will launch a war on juvenile crime and gangs that involve juveniles. THE BUDGET FOR FISCAL YEAR 1997 A Period of Change The Nation has entered a period of profound change—from an economy based on traditional manufacturing to one based on information— the most profound change since the transformation from agriculture to manufacturing a century ago. It is a period of great opportunity and great uncertainty, a period that demands new thinking and new responses. In this age of possibility, the United States must continue to provide leadership across the globe and cooperate in the community of nations, not retreat from it. At home, the public and private sectors must work together; we cannot rely on just one or the other. Americans of all generations must come together in the interests of all. For this new era, we need the right kind of Government and the right kind of policies. We need a Government that creates opportunity, not bureaucracy, one that works with State and local governments, businesses, and religious, charitable, and civic associations. We need policies that grow the middle class and shrink the underclass. And we need to invest in our future, both by balancing the budget and by finding additional resources for education and training, the environment, science and technology, and other priorities. Government should not do for individuals what they can do for themselves. We must ask more of ourselves, expect more of one another, and meet the challenges that confront us together. We must strive to enable all of our people to make the most of their lives with stronger families, more educational opportunity, economic security, safer streets, a cleaner environment, and a safer world. The Record to Date Three years into this Administration, the Nation is stronger and moving in the right direction. The economy continues to grow, with the lowest combined rates of unemployment and inflation in nearly three decades. We have created nearly eight million new jobs—over seven million of them in the private sector, and a million of those in basic industries like construction and auto- 3 AN AGE OF POSSIBILITY mobiles. Exports are at an all-time high. And we have cut the budget deficit nearly in half, bringing down interest rates and, in turn, the costs of home mortgages, car payments, and credit card rates. We are also cutting the size of Government. We have reduced the Federal workforce by more than 200,000 employees in less than three years, and we will continue to reduce the workforce in the years ahead. Already, we have the smallest Federal workforce in 30 years; as a share of the Nation’s civilian workforce, it is the smallest since 1933. With the help of Vice President Gore’s National Performance Review, we are streamlining the bureaucracy, overhauling the procurement system, and delivering better service—that is, creating a Government that ‘‘works better and costs less.’’ And to ease the burden on small businesses and average Americans, we are cutting 16,000 pages of Federal regulations. Meanwhile, communities across America are coming together. Crime is down in most major cities and, across America, the poverty rate is down, the welfare rolls are down, the Food Stamp rolls are down, the teen pregnancy rate is down, and the divorce rate is down. In the world at large, American leadership is strong, bringing new hope for peace. Today, more people than ever live free and, with our help, peace is taking root in Haiti, in Northern Ireland, in the Middle East, and even in Bosnia, where U.S. soldiers are enforcing an historic settlement. We are safer at home as well; today, not a single Russian nuclear missile is aimed at America’s children. Honoring Our Commitments To remain strong, we must do more than play a leading role on the military and diplomatic front. We also must honor our financial obligations. The President urges Congress to send him a straightforward, fullyear extension of the Nation’s debt limit, ensuring that the United States can honor our obligations, make timely payments to Social Security, veterans, and other beneficiaries, and meet other commitments. AMERICA AND THE WORLD The President’s budget provides the resources to sustain the leadership role of the United States in the struggle for freedom and peace throughout the world. While some voices call for a U.S. retreat into isolationism, we have chosen to engage. Our diplomatic leadership continues to be critical to keeping the peace and defending our interests in major regions of the world. We have stimulated and led the peace process in the Middle East, helping achieve peace between Israel and Jordan and an interim agreement between Israel and the Palestinians and fostering continuing discussions between Israel and Syria. In Eurasia, we have strengthened our relationship with Russia and the other New Independent States and worked to secure free markets and democracy in that critical region. In Europe, we have crafted a comprehensive peace agreement among the warring factions in Bosnia and led a cooperative NATO effort to enforce that agreement. We also lent critical support to efforts to achieve a settlement of the long-running conflict in Northern Ireland. In Asia, we negotiated an agreement with North Korea that halted, and will eliminate, its nuclear weapons program and created an international coalition to carry out that agreement. Throughout the globe, we lead in the struggle to strengthen democracy and free markets, with singular successes in central Europe, Asia, Latin America, and South Africa. Not only does our leadership secure our interests and promote our values, it is a key ingredient in dealing with the new threats of the post-Cold War era. Leading the global effort for arms reductions and nonproliferation continues to be an integral element of our diplomacy and national security strategy. Our efforts support a broad range of programs to reduce the threat of nuclear and chemical weapons. We are making our children’s future safer by reducing existing arsenals and ensuring that rogue states and terrorist groups do not acquire these terrible weapons or the materials and technologies needed to make them. Other threats know no national borders; America must lead in confronting such problems as ethnic and national conflicts which threaten regional stability; terrorism, international crime, and drug trafficking, which directly threaten our free and open society; and large-scale environmental degradation. More than ever, our domestic and foreign economic interests are closely intertwined, and mutually reinforcing. Economic and trade issues are increasingly at the forefront of our diplomacy. We need a strong economy to sustain our military forces and diplomatic strategy. And we must be global leaders in trade and investment if we are to open foreign markets and create the high-wage jobs that will raise the living standards of our people. With regard to trade, we have created new markets across the world for our exports, which have reached an all-time high. Along with securing legislation to implement the General Agreement on Tariffs and Trade and the North American Free Trade Agreement, we have completed over 80 other trade agreements. Our defense capability is the bulwark which sustains and supports our diplomacy. This budget continues our critical support for the world’s strongest and most ready military force—a force designed to fight successfully two nearly simultaneous regional conflicts. Our weapons are state-of-the-art, and our military is the best equipped, best trained, and best prepared in the world. When necessary, we have sent the men and women of our military into action. Only when U.S. forces were about to land could our negotiators convince the unwelcome dictators to leave Haiti; we then reinstalled the democratically-elected leader and, in the process, stemmed the large-scale migration from Haiti to our borders. We worked with NATO forces to bring a cease-fire to Bosnia. 5 6 With Iraq once again threatening Kuwait, we moved quickly to send additional forces to the region. And we saved hundreds of thousands of lives by employing our military forces in humanitarian efforts in Rwanda. America cannot be everywhere, nor can we do everything. But where our interests and values are sufficiently at stake and THE BUDGET FOR FISCAL YEAR 1997 our action can make a difference, the United States must act. In this age of possibility, it is clear that this Nation must continue to lead; our leadership has not only helped to bring peace to long-warring nations, but it also builds on a half-century of security and prosperity that Americans continue to enjoy. A STRONGER NATION AT HOME This budget reaches balance in seven years in the right way—by cutting wasteful spending while upholding our commitments to senior citizens, to children, to working families, and to the needy. It achieves a balanced budget in 2002, a goal to which the President is committed, by basically using the economic and technical assumptions of the Congressional Budget Office; and it achieves a surplus of $40 billion under economic and technical assumptions of the Office of Management and Budget. But it also protects our fundamental values as Americans. The President and congressional leaders have worked hard to find agreement on a plan to balance the budget over seven years. While they have not finished the job, the President believes strongly that their negotiations have been productive and have brought the two sides closer together. He is committed to doing whatever he can to complete the task. In their talks, the President and the leaders have outlined a variety of proposals. The minimum amounts of savings which the plans have in common in the major budget categories (e.g., $124 billion in Medicare, $297 billion in discretionary spending) add to some $700 billion—enough to balance the budget and also provide a modest tax cut. To be sure, significant policy differences remain in the negotiations—over the size and distribution of a tax cut; whether Medicaid continues to guarantee health coverage to senior citizens, the poor, and people with disabilities; and so on. But the President believes the Administration and Congress should balance the budget now, setting aside the remaining policy differences for another day. He has proposed that the two sides quickly enact the savings that they have in common and give the American people a balanced budget. The President’s budget saves $596 billion over seven years. Among its major elements, the budget: • saves $124 billion in Medicare, strengthening and improving the program and guaranteeing the solvency of the Part A trust fund for over a decade; • saves $59 billion in Medicaid, reforming the program but continuing the guarantee of meaningful health and long-term care coverage for the most vulnerable Americans; • saves $40 billion through real welfare reform, moving recipients to work while protecting children; • saves $297 billion in discretionary spending, cutting wasteful and lower priority spending but investing in education and training, the environment, science and technology, law enforcement, and other priorities that will raise living standards and improve the quality of American life; • cuts taxes by $99 billion, providing tax relief to tens of millions of middle-income Americans and to small businesses; and • saves $59 billion by ending corporate subsidies and other tax loopholes. These major elements of the President’s budget are described in more detail below. 7 8 THE BUDGET FOR FISCAL YEAR 1997 STRENGTHENING MEDICARE The President’s Medicare plan strengthens and improves the program, reducing spending by a net $124 billion over seven years and guaranteeing the solvency of the trust fund for more than a decade. Specific reforms give seniors more choices among private health plans, make Medicare more efficient and responsive to beneficiary needs, attack fraud and abuse through programs praised by law enforcement officials, cut the growth rate of provider payments, and hold the Part B Premium at 25 percent of program costs. Provider Payment Reforms and Program Savings • Hospitals. The budget reduces the annual inflation increase or ‘‘update’’ for hospitals and payments for capital; reforms payments for Disproportionate Share Hospitals; and reforms the payment method for outpatient departments while protecting beneficiaries from increasing charges for those services. • Managed Care. The budget reforms payments by using reasonable rate-of-growth limits on updates for managed care payments and reducing the current geographic variation in payments. • Physicians. The budget reforms physician payments by paying a single update for all physicians and replaces current ‘‘volume performance standards’’ with a sustainable growth rate. • Home Health Care/Skilled Nursing Facilities. The budget implements a series of interim payment reforms before the establishment of separate prospective payment systems for home health care and skilled nursing facilities. • Fraud and Abuse. The budget introduces aggressive and comprehensive policies to stamp out Medicare waste, fraud, and abuse, and extends and enhances Medicare secondary payor policy to ensure that Medicare pays only when it should. • Other Providers. The budget freezes or reduces payments for durable medical equipment and ambulatory surgical centers. • Beneficiaries. The budget continues, but does not increase, the requirement that beneficiaries pay 25 percent of Part B costs. Provisions to Improve Rural Health Care The President’s plan enhances access to, and the quality of, health care in rural areas. To do so, it extends the Rural Referral Center program, directs Medicare reimbursement for nurse practitioners and physician assistants, improves the Sole Community Hospital program, and expands the Rural Primary Care Hospital program. Program Improvements That Expand Choices and Add Preventive Benefits The President’s plan transforms the traditional fee-for-service program from a billpaying insurance program into a responsive health plan by giving Medicare the authority to adopt many of the purchasing and quality techniques pioneered by private sector payors. The budget also expands and improves Medicare managed care by: • ensuring beneficiary protections while increasing the types of plans—including Preferred Provider Options (PPOs) and Provider Service Networks (PSNs)—available to seniors; and • instituting a coordinated annual open enrollment process—similar to that used by the Federal Employees Health Benefits Plan (FEHBP)—during which beneficiaries use comparative information to choose among managed care and supplemental insurance options. In addition, the budget expands coverage of preventive benefits to include annual mammograms and the elimination of mammography coinsurance, colorectal cancer screening, and increased payments for flu shots. Finally, the budget introduces a respite care benefit to provide some relief for families caring for relatives with Alzheimer’s disease. 9 A STRONGER NATION AT HOME STRENGTHENING MEDICAID AND EXPANDING HEALTH COVERAGE The President’s plan for Medicaid reforms the program but preserves the guarantee of health and long-term coverage for the most vulnerable Americans. It saves $59 billion over seven years responsibly, by limiting spending on a per-person basis (a ‘‘per capita cap’’) and reducing Disproportionate Share Hospital payments and retargeting them to hospitals that serve large numbers of Medicaid and uninsured patients. The plan provides special payments for States to transition into the new system, and to meet the most pressing needs. It also gives States unprecedented flexibility to administer their programs more efficiently. Finally, this plan retains current nursing home quality standards and continues to protect the spouses of nursing home residents from impoverishment. Program Savings • Per capita cap. Under the budget, a per capita cap limits Federal spending growth per person while retaining current eligibility and benefit guidelines. This approach guarantees that the elderly, people with disabilities, and pregnant women and children who depend on Medicaid will remain eligible for health benefits while it cuts the rate of increase in spending to a level that States and the Federal Government can support. In contrast to a block grant, the Administration’s plan protects States facing population growth or economic downturns. • Disproportionate Share Hospital Payments (DSH). The budget reduces DSH payments and retargets them to hospitals that serve a large proportion of Medicaid and uninsured patients, including children’s and public hospitals. It provides special payments for Federally Qualified Health Centers, Rural Health Clinics, and States with large numbers of undocumented immigrants. Provisions to Increase State Flexibility The budget includes a number of policies to give States more flexibility in managing their Medicaid programs, such as: • Boren amendment. The plan repeals the so-called ‘‘Boren amendment,’’ eliminating Federal provider payment requirements for hospitals and nursing homes. • Managed care. The plan allows States to enroll beneficiaries in managed care without Federal waivers. • Home- and community-based care. The plan allows States to move populations who need long-term care from nursing homes to home- and community-based settings, without having to seek Federal waivers. • Coverage expansions without waivers. The plan enables States, without waivers, to expand coverage to any person whose income is less than 150 percent of the poverty line. Protections for Low-income Seniors and Native Americans The President’s plan retains the policy of helping low-income seniors through the shared Federal-State responsibility for their Medicare premiums, copayments, and deductibles. It also retains payment protections for Medicaid-eligible Native Americans treated in Indian Health Service facilities. These protections are not subject to the per capita cap. Reforms to Make Health Coverage More Accessible and Affordable In his State of the Union address, the President challenged Congress to enact insurance reforms that would enable more Americans to maintain health insurance coverage when they change jobs, and stop insurance companies from denying coverage for preexisting conditions. This budget requires that plans make coverage available to all groups 10 THE BUDGET FOR FISCAL YEAR 1997 of businesses, regardless of the health status of any group members. Insurers would have to provide an open enrollment period of at least 30 days for all new employees (whether or not they were previously insured), and insurers could not individually underwrite new enrollees—i.e., their premiums would have to match other enrollees’ with similar demographic characteristics. To increase affordability, the President’s insurance reforms phase out the use of claims experience, duration of coverage, and health status in determining rates for small businesses. To put the self-employed on a more equal footing with other businesses, the reforms gradually raise the self-employed tax deduction from 30 to 50 percent. And to help give small businesses the purchasing clout that larger businesses have, the budget gives technical assistance and $25 million a year in grants with which States can set up voluntary purchasing cooperatives. Health Insurance for the Temporarily Unemployed The budget gives individuals who lose their health insurance when they lose their jobs premium subsidies to pay for private insurance coverage for up to six months. States would receive funding to design and administer the program, which would provide coverage for about 3.8 million Americans a year. During the four-year period for which this program is authorized, a Commission would study and provide recommendations to the Administration and Congress as to making it permanent. REFORMING WELFARE For too long the welfare system has undermined the values of work and family, not strengthened them. The Administration has made steady progress in reforming welfare. In 1993, the President’s economic plan gave tax cuts to 15 million working families through the Earned Income Tax Credit, which rewards work over welfare. The Federal Government collected a record $10 billion in child support in 1994. The Administration has given 35 States the freedom to experiment with welfare initiatives to move people from welfare to work and protect children. The President is determined to keep working with Congress to enact a bipartisan welfare reform bill that moves people from welfare to work and protects children. The President’s plan repeals the existing system, replacing it with one that requires work and provides child care so people can leave welfare for work. It saves $40 billion over seven years while promoting sweeping work-based reform and protecting children. Time-Limited Employment Assistance and Child Protection Everyone who can work should go to work, and no one who can work should be able to stay on welfare forever. The budget repeals Aid to Families with Dependent Children (AFDC) and replaces it with a new, timelimited, conditional entitlement in return for work. Within two years, parents must go to work or lose their benefits, and after five years, benefits end. The budget gives States new flexibility to design their own approach to welfare reform. At the same time, the plan provides vouchers for children whose parents reach the time limit, and protects States in the event of economic downturn or population growth. The budget authorizes $3.8 billion above current law for child care to move recipients from welfare to work, and to help the working poor. It also includes an $800 million performance bonus fund to reward States that move people from welfare to work. It has tough new child support enforcement measures and a new Work First program to make welfare a transitional work-based system. And it preserves the national commitment to foster 11 A STRONGER NATION AT HOME care and adoption assistance programs, preserving States’ ability to respond to growing caseloads. Supplemental Security Income (SSI) For Disabled Children and Others The budget tightens eligibility standards for childhood disability benefits; retains full cash benefits for all eligible children; tightens eligibility for children now on the rolls, but provides that children found ineligible would not lose benefits until January 1998; trims cash benefits of children in families with relatively higher incomes; eliminates eligibility for SSI on the basis of drug addiction or alcoholism; adds resources for more continuing disability reviews; and provides new tools to collect SSI overpayments. Food Stamps and Child Nutrition The budget maintains the national nutrition safety net for the Food Stamp and Child Nutrition programs, enabling them to respond to the changing circumstances of families and children they serve. Under the budget, the Food Stamp program continues to index basic benefits to inflation; all energy assistance counts as income; a work requirement makes adults aged 18 to 50 with no dependents ineligible for Food Stamps after six months of each year unless they work 20 hours a week or participate in workfare or training (although eligibility continues if a State fails to supply a training or workfare slot); and new integrity measures crack down on fraudulent Food Stamp trafficking and reduce program waste. The budget better targets food subsidies for Family Day Care Homes, and makes other minor changes in Child Nutrition programs. Title XX The President’s plan cuts the Social Services Block Grant by 10 percent, beginning in 1996. Benefits for Legal Immigrants The budget tightens sponsorship and eligibility rules for SSI, Food Stamps, and AFDC for non-citizens, forcing sponsors to bear greater responsibility for those they encourage to come to the United States. It counts (or ‘‘deems’’) sponsors’ income in determining whether immigrants are eligible for benefits— until immigrants become citizens. It also preserves eligibility for Medicaid; maintains the exemption for the disabled and the very elderly from deeming; and establishes a uniform definition of eligibility across the AFDC, Food Stamps, SSI, and Medicaid programs. MAKING WORK PAY Reward should follow responsibility. Those who play by the rules—who work hard, especially to support a family—should see the benefit of their efforts. With wages at the low end of the income scale often lagging, and with the task of parenting only getting harder, the budget provides support to make that hard work pay. families and households. Consistent with the Administration’s multi-faceted efforts to improve compliance, the budget saves $5 billion by improving both the targeting of the EITC and compliance while continuing to ensure that eligible and deserving workers can claim and receive the EITC. The Minimum Wage The Earned Income Tax Credit (EITC) The budget ensures that low- and moderateincome taxpayers are rewarded for work and helped in meeting their family responsibilities through the EITC. The budget protects the EITC’s dramatic expansion of 1993 that helped reward work for over 15 million In terms of purchasing power, the minimum wage is near a 40-year low. It is well below the minimum needed for a full-time, full-year worker to support a family. The best economic evidence suggests that a moderate increase in the minimum wage would improve the standard of living of millions 12 THE BUDGET FOR FISCAL YEAR 1997 of workers at little or no economic cost. The President proposes to increase the mini- mum wage from $4.25 to $5.15 per hour, in two equal steps. MEETING AMERICA’S CHALLENGES The budget cuts discretionary spending by $297 billion over seven years, while investing in education and training; the environment; science and technology; law enforcement; and other priorities to help raise living standards and the quality of life for average Americans. While shifting available resources to highpriority investments, the budget also makes choices among non-investment programs. It limits cuts in the most important of those non-investments by eliminating others and applying recommendations of the National Performance Review on cutting red tape and bureaucracy. Nothing is more important to future living standards than education and training. The workers of today and tomorrow will need the best education and skills they can get to acquire high-wage jobs in the new global economy. The budget funds a broad agenda of life-long learning by investing in Head Start for disadvantaged children; the Safe and Drug-Free Schools and Communities program to create safe learning environments; Goals 2000 to help States and school systems extend high academic standards, better teaching, and better learning to all students; AmeriCorps to help young Americans serve their communities and earn money for college; expanded college scholarships to cover more recipients and increase the maximum grants; and, finally, expanded School-to-Work opportunities and improved job training for dislocated workers and low-income adults. It also funds an educational technology initiative to make children technologically literate and connect every classroom to the information superhighway by 2000; expanded work-study to help one million students work their way through college by 2000; a $1,000 merit scholarship for the top five percent of graduates in every high school; and charter schools to let parents, teachers, and communities create public schools to meet their own children’s needs. The budget protects the environment and public health, placing a priority on environmental enforcement and increasing funds for the Environmental Protection Agency’s operating program—the backbone of our efforts to protect the environment. It continues the President’s commitment to protect the national parks and forests, wildlife refuges, other public lands, sensitive ecosystems (such as the Northwest Forests and South Florida Everglades), and marine sanctuaries. The budget funds Superfund to protect residents near toxic waste sites, and gives States more flexibility to ensure water quality by consolidating the Clean Water and Safe Drinking Water revolving funds. In addition, the budget supports the Agriculture Department’s Water 2000 initiative to bring clean water to rural areas. It also promotes energy efficiency in Government-owned and operated buildings and in privately-owned buildings through voluntary partnerships, and promotes the use of alternative energy sources. It provides funds to address a wide range of research and international environmental challenges, including global climate change, ozone depletion, and commitments under the North American Free Trade Agreement. It also funds tax incentives to encourage companies to clean up ‘‘brownfields’’—abandoned, contaminated industrial properties in distressed areas. The budget also invests in science and technology, through a balanced mix of basic research, applied research, and technology development, including through cooperative projects with private industry and universities. It adds funds for biomedical and behavioral research at the National Institutes of Health, for basic research and education at the National Science Foundation, for basic research at NASA (including Mission to Planet Earth) and other agencies, and for such important initiatives as the Advanced Technology Program and the Technology Reinvestment Project. 13 A STRONGER NATION AT HOME Finally, the budget continues the President’s aggressive efforts to combat crime, which have helped to dramatically reduce violent crime in major cities. The budget fully funds the President’s Community Oriented Policing Services (COPS) initiative, adding 23,000 more police in local communities across the country, bringing the total additional police under COPS to 100,000 by 2000. Also, it funds the Violent Crime Reduction Trust Fund that, among other things, will expand support for State and local crime-fighting activities and prisons. It provides funds with which the FBI and other law enforcement agencies will launch a war on juvenile crime and gangs that involve juveniles. And it funds more border patrols to prevent illegal immigration and more inspections to prevent the hiring of illegal immigrants. PROVIDING TAX RELIEF The President’s plan targets tax relief to middle-income Americans through his Middle Class Bill of Rights, which he originally proposed in last year’s budget. This new plan also includes estate tax relief for small businesses and family farms, expanded expensing for small businesses, pension simplification, and the ‘‘brownfields’’ initiative cited in the previous section. Middle Class Bill of Rights The President again proposes the three feasures of his Middle Class Bill of Rights, and enhances the proposed child credit. Small Business Estate Tax Relief Act of 1996 To address the liquidity problems that may arise upon the death of a farmer or small business owner, the budget increases the amount of property eligible for a favorable four percent interest rate on deferred estate tax from $1,000,000 to $2,500,000. It also extends the eligibility for deferral to additional entities, and it extends the five-year interestfree deferral period and four percent interest rate provision to certain entities that cannot now take advantage of them. Small Business Expensing (1) The budget phases in a $500 tax credit for dependent children. The full credit is available for families with incomes of under $60,000, and the credit is phased out at incomes of $75,000. The taxpayer will first calculate the effect of the child credit (and all other credits) and then calculate the EITC; this makes the EITC more valuable to moderate-income working families with children. As the President advocated in 1993, and as Congress has now agreed by including it in the Balanced Budget Act, the budget increases the amount of tangible depreciable property that small businesses can expense each year from $17,500 to $25,000. (The increase will be phased in by annual increments.) (2) The budget phases in a $10,000 tax deduction for education and training expenses, including college tuition. Building on bipartisan efforts in Congress, the President proposes to simplify rules (and expand coverage) for pension plans sponsored by businesses of all sizes, nonprofit organizations, and State and local governments, as well as for multiemployer plans. The budget includes a new, simple retirement savings plan (the National Employee Savings Trust or the NEST) for small businesses that combines the most attractive features of the (3) The budget expands Individual Retirement Accounts (IRAs), such as by doubling over time the income limits for tax-deductible IRAs and allowing families to make taxfree withdrawals for a range of educational, housing, and medical needs. Pension Simplification 14 THE BUDGET FOR FISCAL YEAR 1997 IRA and the 401(k) plan, minimizes administrative and compliance costs, and eliminates the need for employer involvement with the Government. CLOSING CORPORATE LOOPHOLES AND OTHER TAX MEASURES The budget saves $59 billion by cutting corporate tax subsidies, closing loopholes, and improving tax compliance. It includes provisions that the President proposed in December and others. For example, the budget prevents corporations from achieving tax arbitrage by deducting interest on borrowings against life insurance policies on their employees or where the corporation owns tax-exempt obligations; addresses recent developments in tax-motivated financial products; curtails manipulation of the tax accounting rules; and tightens existing rules that are designed to prevent tax avoidance through expatriation and the use of foreign trusts. The Administration continues to support revenue neutral initiatives to promote sensible and equitable administration of the tax laws. These include tax simplification initiatives and technical corrections. In addition, the Administration supports, and wants to work with Congress to provide, revenue neutral extension of various tax provisions that have expired. SUMMARY TABLES The Congressional Budget Office has not estimated all of the proposals in the President’s budget. Therefore, the following tables that use CBO December economic and technical assumptions include: (1) CBO estimates of proposals where available and (2) OMB estimates based on CBO’s December baseline where specific CBO estimates are not available. The remaining tables use OMB’s July technical assumptions because OMB and the agencies have not completed their revisions. The budget documents to be released in March will contain estimates using the economic assumptions contained in this budget and updated technical assumptions. Table 1. The President’s Budget Proposals Under CBO Assumptions (Uses CBO December economic and technical assumptions, in billions of dollars) 1996 1997 1998 1999 2000 2001 2002 7 Year Baseline deficit 1 .................................... Savings: Discretionary ...................................... 172.8 180.7 179.9 192.2 199.9 204.3 221.1 1,350.8 –12.5 –10.4 –18.6 –34.5 –50.9 –73.9 –96.6 –297.4 Mandatory: Medicare .......................................... Medicaid .......................................... Welfare reform ................................ EITC 2 .............................................. Other mandatory ............................ –2.6 .......... –* –* –4.4 –5.7 –2.0 –4.9 –0.7 –1.9 –9.1 –3.1 –6.0 –0.8 –1.5 –16.6 –8.2 –6.4 –0.8 –3.6 –22.9 –10.3 –6.9 –0.8 –5.4 –27.3 –16.0 –7.1 –0.9 –8.1 –40.1 –19.4 –8.4 –0.9 –26.0 –124.2 –59.0 –39.8 –5.0 –51.0 Total, mandatory ........................ –7.0 –15.3 –20.6 –35.6 –46.3 –59.4 –94.9 –279.0 Tax cuts .............................................. 3.3 14.2 16.1 18.5 24.8 19.5 2.1 98.5 Corporate loopholes and other .......... –1.7 –7.1 –8.7 –9.5 –10.2 –10.4 –11.9 –59.4 Total, policy proposals ....................... –18.0 –18.5 –31.9 –61.2 –82.5 –124.2 –201.2 –537.4 Debt service ........................................ –0.5 –1.6 –3.0 –5.5 –9.2 –14.7 –23.6 –58.1 Total savings .......................................... Deficit/surplus ........................................ –18.5 154.4 –20.1 160.6 –34.9 145.0 –66.7 125.5 –91.7 108.1 –138.9 65.4 –224.8 –3.7 –595.5 755.3 * Less than $50 million. 1 OMB has adjusted CBO’s December baseline to remove the directed scorekeeping of student loan administrative costs and to reflect the pending Supreme Court review of a lower court decision on accounting for ‘‘goodwill’’. 2 Includes EITC revenues. 15 16 THE BUDGET FOR FISCAL YEAR 1997 Table 2. The President’s Budget Proposals Under OMB Assumptions—Excluding Effects of ‘‘Fiscal Dividend’’ (Uses OMB July economic and technical assumptions, in billions of dollars) Baseline deficit ....................................... Adjustments: BLS adjustments ............................ Fiscal bonus .................................... Subtotal, adjustments ........................ December base ....................................... Savings: Discretionary ...................................... 1996 1997 1998 1999 2000 2001 2002 7 Year 185.4 196.8 194.5 202.2 208.4 206.5 215.5 1,409.3 .......... –1.6 –1.6 183.8 –* –8.6 –8.6 188.1 –1.0 –17.5 –18.5 176.0 –3.4 –26.7 –30.0 172.2 –6.4 –36.4 –42.7 165.6 –9.5 –46.8 –56.2 150.2 –13.6 –56.0 –69.6 145.9 –33.8 –193.6 –227.4 1,181.9 –12.5 –10.4 –18.3 –35.3 –52.8 –77.1 –100.5 –306.9 Mandatory: Medicare 1 ........................................ Medicaid 1 ........................................ Welfare reform ................................ EITC 2 .............................................. Other mandatory ............................ –2.6 .......... –0.3 –0.0 –6.8 –5.7 –2.0 –5.1 –0.9 –0.8 –9.1 –3.1 –5.7 –1.1 –4.8 –16.6 –8.2 –6.1 –1.1 –5.1 –22.9 –10.3 –6.8 –1.0 –7.3 –27.3 –16.0 –7.1 –1.0 –11.8 –40.1 –19.4 –8.5 –1.0 –30.5 –124.2 –59.0 –39.5 –6.1 –67.1 Total, mandatory ........................ –9.6 –14.5 –23.8 –37.1 –48.4 –63.2 –99.4 –295.9 Tax cuts .............................................. 4.6 13.5 14.5 17.7 22.8 14.8 0.8 88.6 Corporate loopholes and other .......... –1.9 –6.3 –7.7 –9.1 –9.8 –10.1 –11.7 –56.6 Total, policy proposals ....................... –19.5 –17.7 –35.3 –63.7 –88.2 –135.6 –210.8 –570.9 Debt service ........................................ –0.6 –1.7 –3.2 –5.9 –10.0 –16.2 –25.3 –62.7 Total savings .......................................... Deficit/surplus ........................................ –20.1 163.7 –19.4 168.8 –38.5 137.5 –69.6 102.6 –98.2 67.5 –151.8 –1.5 –236.1 –90.3 –633.6 548.3 MEMORANDUM: Deficit/surplus with February economic assumptions 3 ........................... 152.0 148.7 113.3 80.0 50.8 –9.9 –91.6 443.3 * Less than $50 million. 1 Administration estimates have not been completed for Medicaid and Medicare proposals; therefore, these estimates use CBO December economic and technical assumptions. 2 Includes EITC revenues. 3 Includes preliminary estimate based on the Administration’s February economic assumptions and July technical assumptions. 17 SUMMARY TABLES Table 3. Application of the ‘‘Fiscal Dividend’’ to the President’s Budget Proposals (In billions of dollars) 1996 1997 1998 Deficit or surplus assuming tax cuts expire on December 31, 2000: CBO December economics ........... –154.4 –160.6 –145.0 OMB February economics ........... –152.0 –148.7 –113.3 Difference .................................. Trigger impact on OMB estimates: Step 1—Continue tax cut ............ Step 2—Increase discretionary spending .................................... Step 3: Further discretionary increases ................................... Reserved for additional tax cuts ......................................... Reserved for deficit reduction . Debt service .............................. Total trigger ..................................... OMB February deficit or surplus ... 2.4 11.9 31.8 1999 2000 2001 2002 –125.5 –80.0 –108.1 –50.8 –65.4 9.9 3.7 91.6 45.4 57.3 75.3 87.9 (20.0) –9.3 –23.7 (20.0) –20.0 –20.0 (5.8) –5.8 –5.8 (5.8) (5.8) (–5.8) 0.0 –0.8 (–5.8) 0.0 –2.7 –35.9 –26.0 –52.1 39.5 Not applicable –152.0 –148.7 –113.3 –80.0 (57.3) –50.8 18 THE BUDGET FOR FISCAL YEAR 1997 Table 4. The President’s Budget Proposals Under OMB Assumptions—Including Effects of ‘‘Fiscal Dividend’’ (Uses OMB July economic and technical assumptions, in billions of dollars) 1996 1997 1998 999 2000 2001 2002 7 Year Baseline deficit ............................... Adjustments: BLS adjustments .................... Fiscal bonus ............................ 185.4 196.8 194.5 202.2 208.4 206.5 215.5 1,409.3 ............ –1.6 –* –8.6 –1.0 –17.5 –3.4 –26.7 –6.4 –36.4 –9.5 –46.8 –13.6 –56.0 –33.8 –193.6 Subtotal, adjustments ................ –1.6 –8.6 –18.5 –30.0 –42.7 –56.2 –69.6 –227.4 December base ............................... Savings: Discretionary .............................. 183.8 188.1 176.0 172.2 165.6 150.2 145.9 1,181.9 –12.5 –10.4 –18.3 –35.3 –52.8 –51.3 –74.7 –255.3 Mandatory: Medicare 1 ................................ Medicaid 1 ................................ Welfare reform ........................ EITC 2 ...................................... Other mandatory .................... –2.6 ............ –0.3 –0.0 –6.8 –5.7 –2.0 –5.1 –0.9 –0.8 –9.1 –3.1 –5.7 –1.1 –4.8 –16.6 –8.2 –6.1 –1.1 –5.1 –22.9 –10.3 –6.8 –1.0 –7.3 –27.3 –16.0 –7.1 –1.0 –11.8 –40.1 –19.4 –8.5 –1.0 –30.5 –124.2 –59.0 –39.5 –6.1 –67.1 Total, mandatory ................ –9.6 –14.5 –23.8 –37.1 –48.4 –63.2 –99.4 –295.9 Tax cuts ...................................... 4.6 13.5 14.5 17.7 22.8 24.1 24.5 121.6 Corporate loopholes and other .. –1.9 –6.3 –7.7 –9.1 –9.8 –10.1 –11.7 –56.6 Total, policy proposals ............... –19.5 –17.7 –35.3 –63.7 –88.2 –100.5 –161.4 –486.3 Debt service ................................ –0.6 –1.7 –3.2 –5.9 –10.0 –15.4 –22.6 –59.3 Total savings .................................. Effect of February economic assumptions ................................... Deficit/surplus with February economic assumptions 3 ................... –20.1 –19.4 –38.5 –69.6 –98.2 –115.9 –184.0 –545.5 –11.7 –20.1 –24.3 –22.6 –16.6 –8.4 –1.4 –105.0 152.0 148.7 113.3 80.0 50.8 26.0 –39.5 531.3 * Less than $50 million. 1 Administration estimates have not been completed for Medicaid and Medicare proposals; therefore, these estimates use CBO December economic and technical assumptions. 2 Includes EITC revenues. 3 Includes preliminary estimate based on the Administration’s February economic assumptions and July technical assumptions. 19 SUMMARY TABLES Table 5. The President’s Budget Under CBO Assumptions (Uses CBO December economic and technical assumptions, in billions of dollars) 1996 1997 1998 1999 2000 2001 2002 7 Year 539.0 543.5 537.4 537.6 537.9 531.9 527.4 3,754.8 173.9 97.2 522.1 189.2 105.2 554.3 203.9 115.0 585.7 216.7 121.5 617.1 231.9 132.2 649.0 250.9 140.8 671.5 263.5 153.2 688.5 1,529.9 865.1 4,288.2 Subtotal, mandatory ............. Net interest ........................... 793.2 243.0 848.7 247.4 904.6 249.3 955.2 248.9 1,013.0 246.1 1,063.2 246.3 1,105.2 246.3 6,683.2 1,727.3 Total outlays ............................. Revenues ................................... 1,575.1 1,420.8 1,639.6 1,479.0 1,691.3 1,546.3 1,741.8 1,616.3 1,797.0 1,688.9 1,841.4 1,776.0 1,878.9 1,882.6 12,165.2 11,409.9 Deficit/surplus .............................. –154.4 –160.6 –145.0 –125.5 –108.1 –65.4 3.7 –755.3 Outlays: Discretionary ......................... Mandatory: Medicare ............................ Medicaid ............................ Other .................................. Table 6. The President’s Budget Under OMB Assumptions—Excluding Effects of ‘‘Fiscal Dividend’’ (Uses OMB July economic and technical assumptions, in billions of dollars) 1996 1997 1998 1999 2000 2001 539.0 543.5 537.4 537.6 537.9 531.9 527.4 3,754.8 174.2 96.1 524.8 188.5 102.5 561.3 202.7 111.3 586.1 213.1 116.3 612.9 228.2 126.1 642.9 247.3 132.8 659.3 259.9 143.0 673.6 1,513.8 828.1 4,260.9 Subtotal, mandatory ........... Net interest ......................... 795.0 244.6 852.4 249.3 900.1 252.2 942.3 255.1 997.2 254.4 1,039.4 251.0 1,076.5 242.9 6,602.9 1,749.4 Total outlays ........................... Revenues ................................. 1,578.6 1,414.9 1,645.2 1,476.4 1,689.7 1,552.2 1,735.0 1,632.4 1,789.5 1,722.0 1,822.4 1,823.9 1,846.8 1,937.0 12,107.1 11,558.8 Deficit/surplus ............................ –163.7 –168.8 –137.5 –102.6 –67.5 1.5 90.3 –548.3 Outlays: Discretionary ....................... Mandatory: Medicare .......................... Medicaid .......................... Other ................................ 2002 7 Year 20 THE BUDGET FOR FISCAL YEAR 1997 Table 7. COMPARISON OF ECONOMIC ASSUMPTIONS (Calendar years) Nominal GDP 1: Level, billions of dollars: 1996 Mid-Session Review .................. CBO December baseline .................... 1997 Budget ........................................ Percent change, fourth quarter over fourth quarter: 1996 Mid-Session Review .................. CBO December baseline .................... 1997 Budget ........................................ CPI–U, percent change, fourth quarter over fourth quarter: 1996 Mid-Session Review ...................... CBO December baseline ........................ CBO December adjusted 2 ..................... 1997 Budget ............................................ Unemployment rate, percent: 1996 Mid-Session Review ...................... CBO December baseline ........................ 1997 Budget ............................................ Interest rates, percent: 91-day Treasury bills: 1996 Mid-Session Review .................. CBO December baseline .................... 1997 Budget ........................................ 10-year Treasury notes: 1996 Mid-Session Review .................. CBO December baseline .................... 1997 Budget ........................................ 1 Assumptions 1995 1996 1997 1998 1999 2000 2001 2002 7,091 7,079 7,078 7,470 7,418 7,428 7,879 7,788 7,805 8,310 8,173 8,203 8,765 8,577 8,623 9,245 9,002 9,058 9,745 9,447 9,523 10,268 9,915 10,005 4.7 4.3 4.2 5.5 5.0 5.1 5.5 5.0 5.1 5.5 4.9 5.1 5.5 5.0 5.1 5.5 4.9 5.1 5.4 5.0 5.1 5.4 5.0 5.1 3.2 2.9 2.9 2.7 3.2 3.2 3.2 3.1 3.2 3.1 2.9 2.9 3.2 2.9 2.8 2.8 3.1 2.9 2.8 2.8 3.1 2.9 2.8 2.8 3.1 2.9 2.8 2.8 3.1 3.0 2.9 2.8 5.8 5.6 5.6 5.9 5.9 5.7 5.8 6.0 5.7 5.8 6.0 5.7 5.8 6.0 5.7 5.8 6.0 5.7 5.8 6.0 5.7 5.8 6.0 5.7 5.7 5.5 5.5 5.4 5.3 4.9 5.2 5.0 4.5 5.0 4.7 4.3 4.8 4.2 4.2 4.6 3.9 4.0 4.6 3.9 4.0 4.4 3.9 4.0 6.6 6.6 6.6 6.5 5.8 5.6 6.6 5.6 5.3 6.4 5.5 5.0 6.2 5.5 5.0 6.0 5.5 5.0 5.8 5.5 5.0 5.6 5.5 5.0 do not reflect NIPA revisions announced on January 19, 1996. assumption that January 1997 correction for formula bias will reduce CPI growth by 0.3 percentage points per year, as incorporated in CBO scoring of the Administration’s January 6, 1996, offer. 2 Reflects Need Additional Copies ??? 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