THE CLINTON-GORE ADMINISTRATIONS BUDGET FRAMEWORK
June 26, 2000
The Clinton-Gore Administrations budget framework continues the
three-part strategy put in place at the beginning of the Administration:
getting our fiscal house in order and keeping it that way, investing
in people, and opening markets abroad. This strategy has helped foster
the longest economic expansion in history, contributing to the lowest
unemployment rate in over thirty years.
Specifically, the budget framework would make investments in key priorities
while putting America on track to eliminate the debt by 2012 -- one
year earlier than projected in the February budget.
The Six Key Elements of the Clinton-Gore Administrations
1. Pay off the debt by 2012
2. Take Medicare off-budget as the next step in locking in fiscal discipline
and debt reduction
3. Extend the solvency of Social Security to at least 2057 and Medicare
to at least 2030
4. Improve the Presidents prescription drug benefit and health
care provider payments
5. Establish a $500 billion Reserve for Americas Future
6. Invest in key priorities like education, expand health coverage,
and provide targeted tax relief
(1) Pay off the debt by 2012. The President has a fiscally responsible
plan to pay off the debt held by the public by 2012, one year earlier
than was projected in the February budget.
- The $211 billion unified surplus this year will be the largest
on record. In 1992 the deficit was a record $290 billion and the
Congressional Budget Office projected that it would rise to $455 billion
in 2000. Instead, this year the projected surplus is a record $211
billion -- a $666 billion improvement relative to forecast in this
one year alone.
- The on-budget account will be in surplus for the first time
since Medicare was established. In 2000, the on-budget surplus,
excluding both Social Security and Medicare, is projected to be $39
billion. This is the only surplus on this basis since the Medicare
program was established in 1965.
- Debt held by the public will have been paid down by the largest
amount in history: $324 billion. In 1998 and 1999, the debt held
by the public was reduced by $140 billion. OMB is projecting that
the government will pay down an additional $184 billion in debt held
by the public this fiscal year. That will bring the total debt pay-down
to $324 billion -- the largest three-year debt pay-down in American
history, and almost 9 percent of the total in public hands as of the
end of fiscal year 1997.
- The Presidents plan would lock in $2.9 trillion of debt
reduction between now and 2010 and eliminate the debt by 2012.
The President proposes to save the entire Social Security surplus,
$2.3 trillion over 10 years, and devote it to paying down the debt
held by the public. In addition, he proposes to save the entire Medicare
surplus, $403 billion over 10 years, and devote it to debt reduction.
He also proposes to further reduce the debt held by the public by
dedicating a portion of the on-budget surplus, based on the interest
savings from these policies, to the solvency of Social Security and
Medicare. Over the next decade these policies would dramatically reduce
the debt held by the public by $2.9 trillion; the remaining debt held
by the public would be eliminated by 2012.
- The Presidents plan would eliminate net Federal interest
expenses. Currently the Federal government spends 12 cents of
every dollar on net interest payments. These payments, which were
once projected to grow to 25 percent of all federal spending in 2012,
would be completely eliminated by that date under the Presidents
(2) Take Medicare off-budget as the next step in locking in fiscal
discipline and debt reduction. Following the leadership of Vice
President Gore, President Clinton is proposing to take Medicare Part
A off-budget. This would mean that the projected $403 billion Medicare
surplus will be off-budget, like the Social Security surplus, and therefore,
no longer counted as part of the funds available for other purposes.
Under this plan, the Medicare surplus will be dedicated to paying down
the publicly held debt to help strengthen the life of the Medicare program.
- Building on our progress with Medicare. In 1993, the Medicare
Trust Fund was projected to be exhausted in 1999. The latest estimates
by the Medicare Trustees push the exhaustion date back to 2025. The
Medicare surplus has grown from $4 billion in 1993 to $24 billion
in 2000. This makes taking Medicare off-budget the next logical step
in the Clinton-Gore Administrations fiscal discipline and Medicare
(3) Extend the solvency of Social Security to at least 2057 and
Medicare to at least 2030. The President would ensure that the benefits
of the debt reduction that are due to Social Security and Medicare are
used to extend their solvency by:
- Protect Social Security and Medicare surpluses. The President
proposes to protect the Social Security and Medicare surpluses from
being spent on other purposes, locking them away to pay down the debt.
- Make transfers based on the interest savings achieved by locking
away the surpluses. The President proposes to go one step further
to ensure that Social Security and Medicare receive the benefit of
locking away their surpluses for debt reduction. According to the
Social Security actuaries, the Presidents plan would extend
the solvency of Social Security to at least 2057. The Presidents
proposed Medicare solvency transfers, together with the Presidents
proposals to increase competition and reduce fraud, extend the solvency
of Medicare to at least 2030.
- Republican so-called "lockboxes" do not add a single
day to the life of Social Security or Medicare. Because they would
not add any new resources to Social Security or Medicare, the Republican
so-called "lockboxes" would not extend the life of Social
Security by a single day. Furthermore, they have "trap doors"
that would allow these surpluses to be used for other purposes.
(4) Improve the Presidents Medicare prescription drug benefit
and provider payments. The framework allocates a net $264 billion
over ten years for Medicare prescription drug benefits and other reforms
(with an additional $115 billion in Medicare solvency transfers that
go to debt reduction). The President will improve his voluntary and
affordable Medicare prescription drug benefit by specifying that no
Medicare beneficiary will pay more than $4,000 in out-of-pocket drug
costs; maintaining the beneficiary premium at the same level even with
the enhanced benefit; starting the program one year earlier; and providing
immediate payments to managed-care plans to provide a prescription drug
benefit, for a total cost of $253 billion over 10 years. The President
is also proposing $40 billion over ten years to further mitigate the
impacts of the Balanced Budget Act of 1997 reductions for Medicare and
Medicaid providers. Finally, the Presidents proposal maintains
the key elements of the Administrations Medicare reform plan,
such as the increased competition and anti-fraud provisions from the
February budget, saving $29 billion over 10 years.
(5) Establish a $500 billion Reserve for Americas Future.
The framework sets aside $500 billion over ten years that could be used
for key national priorities, such as retirement savings, additional
targeted tax cuts, investments in education, research, health and the
environment, or further debt reduction. There are always uncertainties
in budget and economic projections, especially when they cover a long
period into the future. This reserve provides a margin of insurance:
if the surplus is not as large as projected, then any use of the reserve
could be reduced. The allocation of the reserve should be subject to
a full debate over national priorities this year, given the competing
visions of the use of these funds.
(6) Invest in key priorities like education, expand health coverage,
and provide targeted tax relief. The Presidents budget framework
maintains his commitment to his proposals from the February budget including:
- Invest in priorities. The Presidents framework maintains
the FY2001 budget proposals for specific, detailed policies to address
the Nations priorities in national defense, education, law enforcement,
the environment, and veterans programs. These policies are part of
an overall fiscally prudent level of spending.
- Expand health insurance for working Americans. The Presidents
budget invests $110 billion over 10 years in a number of policies
that would efficiently extend coverage to an additional 5 million
uninsured Americans and expand access to millions more by building
on current options. Together with the State Childrens Health
Initiative enacted in 1997, up to 10 million uninsured people could
- Provide targeted tax relief for American families. The Presidents
February budget made detailed proposals for $359 billion of gross
tax cuts over 10 years -- of which $263 billion are paid for out of
the surplus and $96 billion are paid for with corporate loophole closers,
elimination of tax shelters, and other measures. (These cost estimates
are based on the revised economic assumptions and thus differ slightly
from the cost estimates released in the February budget.) The Presidents
proposals include expanding the Earned Income Tax Credit to help larger
families and to reduce the marriage penalty, increasing the Child
and Dependent Care Tax Credit and making it refundable, making up
to $10,000 of college tuition tax deductible through the College Opportunity
Tax Cut, and helping pay for long-term care with a $3,000 tax credit.