PRESIDENT CLINTON and VICE PRESIDENT GORE'S FY2000 BUDGET: MEETING THE NATION'S LONG-TERM CHALLENGES Summary Document: February 1, 1999

A Return to Fiscal Strength

President Clinton entered office determined to restore the nation's fiscal strength and to put our economy back on a robust upward path. His consistent economic strategy of fiscal discipline, open markets, and strategic investments in our people has proved successful:

· Record Budget Deficit Has Been Erased: In 1992, the deficit stood at a record $290 billion and CBO was projecting it would climb to $357 billion in 1998.

· Instead, We Have the First Surplus in a Generation: Last year, the nation recorded its first surplus in three decades -- nearly $70 billion.

· All While Cutting Taxes for Working Families: The typical American family of four will face the lowest federal tax burden in over two decades (since 1978).

· And Making Strategic Investments in the Nation's Future: Six years of critical investments in our people from 200,000 more children in Head Start to making the first two years of college universally available.

· Sparking the Longest Peacetime Expansion in History: January marks the 94th consecutive month of economic expansion, making it the longest peacetime expansion in American history. Unemployment is at a 29-year low and 17.7 million new jobs have been created.

The President's new fiscal year 2000 budget adopts the same framework that has led to our fiscal and economic success. It makes strategic investments and maintains fiscal discipline. The fiscal year 2000 budget -- with its many important investments in education, research, the environment, health, and foreign policy and defense --is fully paid for, meets the discretionary caps, and adheres to the budget rules that have been so successful to enforce fiscal discipline.

The Next Step: Meeting the Nation's Long-term Challenges

With the nation's fiscal and economic strength restored, the President is leading the nation to seize this historic opportunity to meet the long-term challenges ahead. The President has charted a bold course:

· "Save Social Security First." The President proposes to transfer 62 percent of the projected budget surpluses over the next 15 years -- $2.8 trillion -- to the Social Security system. The President proposes that the trust fund invest about one-fifth of the transferred surpluses in the private sector to achieve higher returns for Social Security -- just as any state or local government, or private pension does.

Once Social Security Has Been Strengthened:

· Strengthen Medicare for the 21st century. The President's framework will reserve 15 percent of the projected surpluses for Medicare, ensuring the Medicare Trust Fund is secure for 20 years. These additional dedicated dollars should be used in conjunction with important reforms which would modernize the program by providing market-oriented purchasing tools, additional savings, and a long- overdue prescription drug benefit.

· Create new Universal Savings Accounts -- USA Accounts -- a $536 billion tax cut for working families. The President's framework will reserve 12 percent of the projected surpluses to create new USA Accounts so all working Americans can build wealth to meet their retirement needs.

· Prepare America for other critical future challenges. The President's framework will reserve 11 percent of the projected surpluses for military readiness and pressing national domestic priorities, such as education, research, and the security of Americans at home and abroad.

As a Result of this Fiscal Responsibility: · Debt-to-GDP Ratio Will Fall to Lowest Level Since 1917. As a share of the economy, the publicly held debt increased from 26% in 1981 to 50% in 1993. Since President Clinton took office, the publicly held debt as a share of GDP has dropped to 44 %. And under the President's framework, current projections suggest that the publicly held debt, as a share of GDP, will fall from 44% today to 7.1% in 2014 -- its lowest level since 1917.

Additional Tax Relief for Working Families

Create USA Accounts -- a $536 billion tax cut over 15 years to help working families save for retirement: As described above, the President's plan would create new Universal Savings Accounts (USAs) so all working Americans can build wealth to meet their retirement needs. Elements of this powerful new tax incentive -- the USA account -- could, for example, include:

_ Automatic flat annual contributions for low and moderate working Americans;

_ An additional tax incentive to match a portion of each dollar on a progressive basis that an individual voluntarily contributes.

Plus, Targeted Tax Cuts for Working Families, Including:

· A $1,000 Long-term Care Tax Credit to help pay for formal and informal long term care services for about 2 million Americans, including 1.2 million older Americans, over 500,000 non-elderly adults, and approximately 250,000 children at a cost of $5.6 billion over five years.

· A $1,000 Tax Credit for Work-related Expenses for People with Disabilities to help cover the formal and informal costs that are associated with employment, such as special transportation and technology needs. This tax credit will help 200,000 to 300,000 Americans and costs $700 million over 5 years.

· Tax Credits to Build Modern Schools for Our Children. A centerpiece of the President's tax cut agenda is to provide Federal tax credits to pay interest on nearly $25 billion in bonds to build and renovate public schools at a cost of $3.7 billion over 5 years.

· Tax Relief for Child Care for Three Million Working Families, Plus Tax Relief to Parents Who Stay at Home. The President's proposal increases the child and dependent care tax credit (CDCTC) for families earning up to $59,000, providing an additional average annual tax cut of $345 for these families. In addition, parents who stay at home with children under one year old will be able to take advantage of CDCTC by allowing them to claim assumed child care expenses of $500, providing an average tax credit of $178 and benefitting 1.7 million families. Overall, this combined proposal costs $6.3 billion over five years.

Moving Forward on Investment Agenda

Education and Training:

· Performance Accountability: $200 million in Title I to hold States and school districts more accountable for raising student achievement.

· 21st Century Community Learning Centers/After-School and Summer School Programs: $600 million for the 21st Century/After-School program, an increase of $400 million over FY 1999 levels, as part of a comprehensive approach to fix failing schools and help end social promotion.

· New Qualified Teachers and Smaller Class Sizes: $1.4 billion as the second installment of the President's plan to help schools recruit, hire, and train 100,000 new teachers by 2005 and reduce class size in the early grades.

· Education Technology: to ensure teachers will be able to effectively integrate technology into their instruction by providing: $450 million for the Technology Literacy Challenge Fund; $65 million for Community-Based Technology Centers; $75 million for the Pre-Service Teacher Training in Technology initiative; and $30 million for a new Middle School Teacher Training initiative.

· Removing Barriers to Work For People With Disabilities: 1) full funding of the Work Incentives Improvement Act which will be introduced by Senators Jeffords Kennedy, Roth and Moynihan. 2) expanded access to information and communications technologies.

· A $965 Million Three-Part Initiative To Close America's Skills Gap: 1) $190 million increase for adult education and family literacy initiative. 2) $368 Million increase for a universal re-employment initiative. 3) $405 million increase for a youth employment initiative.

Child Care:

· Child Care and Development Fund: A $1.2 billion increase to a total of $4.5 billion in funds to provide child care subsidies for 500,000 more poor and near-poor families in 2000.

· Early Learning Fund: $600 million to States to provide challenge grants to communities to support child care providers and programs serving children ages 0 to 5, including language development, emergent literacy, and other child development activities aimed at improving readiness for school.

· Head Start: A $607 million increase that will add 42,000 new slots for young children, including 7,000 Early Head Start slots, for total enrollment of 877,000 and on track to meet the one million participation goal by 2002.

Health:

· Health Options for Older Americans: 1) Allow Americans aged 62 to 65 to buy Medicare coverage. 2) Provide Medicare "buy-in" option to workers between the ages of 55 and 62 who have lost-company sponsored health care coverage because their hours were scaled back or their employer relocated or stopped operations. 3) For "broken promise" retirees between the ages of 55 and 65, employers who have canceled the insurance of these retirees would be required to guarantee access to health insurance, by providing these retirees the option to "buy in" to the company sponsored plan at a fair price.

· Long-Term Care Initiative: In addition to the tax credit described above, the budget provides $625 million over 5 years to provide respite, home care services, and information and referral assistance to the approximately 250,000 families caring for elderly relatives who are chronically ill or disabled. It also includes a national campaign to educate Medicare beneficiaries about how best to evaluate long-term care options and a proposal to have the Federal government serve as a model employer by offering private long-term care insurance to Federal employees at group rates.

· Encouraging Small Businesses to Offer Health Insurance: 1) Provide a tax credit to small businesses who decide to offer coverage by joining coalitions. 2) Encourage private foundations to support coalitions by allowing their contributions towards these organizations to be tax exempt. 3) offer technical assistance to small business coalitions from the Office of Personnel Management.

· Providing Access to Health Care Services for Uninsured Workers: This initiative invests $1 billion over 5 years in comprehensive health care delivery systems that traditionally provide services to the uninsured.

· Medicare Cancer Clinical Trials: $750 million over four years for a demonstration to give more Americans access to cutting-edge cancer treatments.

· Ryan White HIV/AIDS Treatment Grants: $1.5 billion, a 7 percent increase over 1999.

· Mental Health Block Grants: $359 million, a 24 percent increase over 1999 and the largest increase ever.

· Childhood Asthma Initiative in Medicaid: $50 million in demonstration grants for States to test innovative asthma disease management techniques for children enrolled in Medicaid.

· Family Planning Services Grants: $240 million, an 11.6 percent increase over last year's funding level, and the largest increase in 15 years.

·Improving Food Safety with Increased Inspections and Surveillance. The budget includes an additional $105 million -- a 12 percent increase -- to ensure food safety by improving inspections for both domestic and imported food and by enhancing surveillance efforts.

Environment:

· Protecting Our Environment and Public Health: A five percent increase to a record $33.9 billion in FY 2000 to protect our natural resources, our communities, and the global environment.

· Preserving America's Lands Legacy: A $1 billion Lands Legacy Initiative -- the largest one-year investment ever in the protection of America's land resources and a 125 percent increase over FY 1999 -- includes $442 million to expand federal efforts to save America's natural treasures, and $588 million to help states and communities protect urban parks, threatened farmland and other local green spaces.

· Building Livable Communities for the 21st Century: Better America Bonds, a new financing tool generating $9.5 billion over five years for investments by state and local governments to preserve green space, protect water quality, and clean up brownfields and $1.8 billion to support state and local efforts to simultaneously ease traffic congestion and reduce air pollution.

· Meeting the Challenge of Global Warming: More than $4 billion to promote clean, efficientenergy and for other efforts to reduce greenhouse gas emissions, including: $200 million for a new Clean Air Partnership Fund and $3.6 billion in tax incentives over five years for climate change initiatives including credits for the purchase of energy-efficient homes, cars and appliances.

Community Empowerment:

· New Markets Initiative: a new package of tax credit and loan guarantee incentives that will stimulate $15 billion of new private capital in businesses in America's own untapped markets.

· Community Development Financial Institutions (CDFI) Fund: A $30 million increase to provide $125 million to increase capital availability and development opportunities in distressed communities.

· National Service: $848 million, a 19 percent increase over 1999, to encourage Americans of all ages and backgrounds to help solve community problems and provide opportunities to engage in community-based service.

· Low-Income Housing Tax Credit: A 40 percent increase in the State per-capita cap from $1.25 to $1.75 to create an additional 150,000-180,000 new rental housing units for low-income American families over the next five years at a cost of $1.7 billion over five years.

· Empowerment Zones and Enterprise Communities: Mandatory funding for each of the next ten years: $150 million for urban EZs and Strategic Planning Communities; $10 million for rural EZs; and $5 million for rural ECs.

· Abandoned Buildings: $50 million in competitive grant funds to local governments to support the demolition or deconstruction of blighted, abandoned buildings, as long as there is a plan -- with significant private-sector participation -- to redevelop the property for commercial use or multi-family and single family housing.

Research and Development:

· Information Technology for the Twenty First Century: A new $366 million initiative to keep America at the cutting-edge of the Information Revolution.

· Strong Support for Basic Research: A 7 percent increase in the National Science Foundation budget, a 5 percent increase in the Department of Energy's science budget, and a 4 percent increase in NASA's space science research.

· Climate Change Technology: A $1.8 billion initiative to promote energy efficiency and technologies that reduce greenhouse gas emissions.

· Research and Experimentation Tax Credit: To encourage research and experimentation, this credit would be extended for one year through June 30, 2000 at a cost of $2.4 billion over five years.

Crime:

· 21st Century Policing Initiative: A $1.3 billion initiative: 1) $600 million to help put more police on the street, helping communities to hire and redeploy between 30,000 and 50,000 more law enforcement officers over five years; 2) $350 million to help State and local enforcement agencies tap into new technologies that will allow them to communicate more effectively, to use technology to solve more crimes, and to forecast problems; and 3) $200 million to hire, redeploy or train community based prosecutors; and 4) $125 million for community crime prevention.

· Zero Tolerance Drug Supervision: $215 million for a new program to promote "zero tolerance" drug supervision for persons under criminal justice supervision.

Maintaining Military Strength and US Leadership in the World

· Supporting the World's Strongest Military Force: Our military serves as the backbone of our national security strategy, and the President is committed to maintain a strong and capable military that protects our freedoms and our global leadership role as we approach the 21st Century. To achieve these goals, the budget proposes a long-term sustained average annual real increase of about 1 percent in defense funding to enhance the military's readiness and operations, build for the future with weapons system modernization, and take care of military troops and their families by enhancing quality of life, thereby increasing recruitment and retention.

· International Affairs: The budget provides $21.3 billion for international affairs programs so that the Unites States maintains its role as world leader and responds to international challenges in a complex and crucial time. The budget includes resources to promote peace in troubled areas, to provide enhanced security for our official representatives abroad, to fund activities to combat weapons of mass destruction, to stabilize the international economy, to promote trade, and to respond to the needs of our neighbors and others who face disaster.