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THE MINIMUM WAGE:
INCREASING THE REWARD FOR WORK
March 2000
A REPORT BY THE NATIONAL ECONOMIC COUNCIL
WITH THE ASSISTANCE OF THE COUNCIL OF ECONOMIC ADVISERS
AND THE OFFICE OF THE CHIEF ECONOMIST, U.S. DEPARTMENT OF LABOR
EXECUTIVE SUMMARY
Raising the Minimum Wage by $1 to $6.15 an Hour Would Potentially Benefit More
than 10 Million American Workers-Most of Whom are Adult Workers. An analysis of
labor market data shows that in 1999, 10.1 million hourly paid workers made between $5.15
and $6.14 an hour, and thus would potentially benefit from a $1 increase in the minimum
wage. About 09 percent of these workers are adults (age 20 or over), about 60 percent are
women, about 45 percent worked full-time, and about 33 percent were parents with children
under 18 years old. In 1997, the earnings of average minimum wage workers accounted for
54 percent of their family's total earnings.
Raising the Minimum Wage to $6.15 an Hour Would Restore the Real Value to What It
Was in 1982. Since it was first established in 1938, the minimum wage has been increased
19 times. Between January 1981 and March 1990, the minimum wage was fixed at $3.35 an
hour, while prices rose by nearly 50 percent. The proposal to raise the minimum wage by $1
over two years would restore the real value of the minimum wage to what it was in 1982.
Increasing the Minimum Wage Would Help Hard-Pressed Families Pay for Groceries,
Rent, and Other Necessities. Raising the minimum wage from $5.15 to $6.15 would raise
the annual earnings of a full-time worker by about $2,000 a year. A study of spending by
low-income families found that they spend on average about $300 per month on groceries
and about $400 per month on rent. Thus, for a full-time worker, the minimum wage increase
would translate into enough money to pay for nearly 7 months of groceries or 5 months of
rent.
Recent Increases in the Minimum Wage Had No Discernable Negative Effect on
Employment. Since the minimum wage increase in 1996, the economy has created more
than 10 million jobs and the unemployment rate has fallen from 5.2 percent in September
1996 to 4.1 percent in February 2000, near its lowest level in thirty years. Labor market
trends for workers most affected by the minimum wage increase-including younger
workers, workers with lower educational levels, and minorities-also show no negative
impact of the minimum wage on employment. Numerous careful economic studies,
including ones by David Card and Alan Krueger, have shown that increasing the minimum
wage has no negative effect on employment. Recent research has even suggested that higher
wages can increase employment, because they increase employers' ability to attract, retain,
and motivate workers. And they benefit workers by increasing the reward to work.
The Minimum Wage Plays a Key Role in Ensuring That All Workers Share in a
Growing Economy. In the last seven years, incomes have grown nearly as strongly at the
bottom as at the top of the income distribution, ending a decades long increase in inequality.
In contrast, in the previous two decades inequality widened, as poorer families saw their
incomes decline in real terms. Research has shown that the decline in the real value of the
minimum wage from 1979 to 1988 was responsible for approximately 24 percent of the
increase in wage inequality experienced by men and about 32 percent of the increase in wage
inequality for women.
The Minimum Wage Has Helped Reduce the Welfare Caseload. By increasing the
reward to work, a higher minimum wage attracts new workers into the workforce. An
analysis by the Council of Economic Advisers showed that higher federal and state minimum
wages were responsible for 10 to 16 percent of the decline in welfare caseloads between
1996 and 1998.
The Minimum Wage and the Earned Income Tax Credit Are Complementary. A
working parent with two children earning the minimum wage in 1993 made $10,563 with the
EITC (in 1998 inflation-adjusted dollars)-well below the poverty line. With the 1993
increase in the EITC and the 90 cent increase in the minimum wage in 1996 and 1997, a
comparably situated family in 1998 was above the poverty line-making $13,268-a 26
percent inflation-adjusted increase in its standard of living.
ii
1. INTRODUCTION
The American economy is in the midst of the longest economic expansion in history. Since
January 1993, the economy has created nearly 21 million new jobs. The unemployment rate in
February 2000 was 4.1 percent, near its lowest level in three decades. The overall performance
of the economy has only grown stronger over time. In the last four years, labor productivity has
grown at a 2.9 percent annual rate and GDP has grown at a 4.4 percent annual rate. At the same
time, the underlying core inflation rate in 1999 was 1.9 percent-the lowest rate since 1965.
In contrast to the previous twenty years, the strong economy of the last seven years has
contributed to shared growth across all income groups and substantial poverty reduction. As
indicated in Chart 1, incomes have grown nearly as strongly at the bottom as at the top of the
Chart 1: Growth in Mean Real Family Income by Quintile
income distribution, ending a decades long
3
increase in inequality. The poverty rate has
1993-98
fallen to 12.7 percent, the lowest level since
2
1979. The strong labor market has been
1973-93
Average annual percent change
beneficial to people across the economic and
demographic spectrum. In 1999, the
1
unemployment rates for African Americans
and Hispanics fell to the lowest levels ever
0
recorded.
Strong growth is necessary but not sufficient
Bottom
2nd quintile
3rd quintile
4th quintile
Top quintile
to produce sustained income gains and
quintile
poverty reduction. Also important are
Source Department or Conmerce (Bureauol the Census)
policies that insure that all workers are
rewarded for their work. The Clinton Administration has consistently sought to make work pay
through a range of policies, including expanding the Earned Income Tax Credit in 1993,
reforming welfare in order to increase work incentives, and increasing investments in child care
for working parents. And an additional key element was the 1996-97 increase in the minimum
wage. These policies interact in a beneficial way for low-income families. For instance, a
working parent with two children earning the minimum wage in 1993 made $10,563 with the
EITC (in 1998 inflation-adjusted dollars), well below the poverty threshold. With the 1993
increase in the EITC and the 90 cent increase in the minimum wage in 1996 and 1997, a
comparably situated family in 1998 was above the poverty level-making $13,268-a 26
percent inflation-adjusted increase in their standard of living.
This report examines the role that the minimum wage plays in increasing the reward to work and
boosting incomes for workers at the bottom of the earnings distribution. The report also
examines the recent evidence about the effect of the minimum wage on employment.
2. BACKGROUND ON THE MINIMUM WAGE
A federal minimum wage of 25 cents was first established as a part of the Fair Labor Standards
Act of 1938 (FLSA). Since its inception, the federal minimum wage has been increased 19
times, and the FLSA has been amended numerous times to expand the workers covered by the
minimum wage provision. In recent years, about two thirds of wage and salary workers have
been covered by the FLSA minimum wage. (Workers who are exempt most often are in
executive, administrative, and professional occupations.)
The federal minimum wage reached its highest value in real terms in 1968, at $7.67 in 1999
dollars (see Chart 2). With five increases during the 1970s, the minimum wage held its value at
approximately $6.60. The last increase of the 1970s left the inflation-adjusted value at $6.66.
From January 1981 through March 1990, the minimum wage was unchanged, while at the same
time prices rose by nearly 50 percent. This eroded the real value of the minimum wage at the
end of the 1980s to $4.50. The dollar level of the minimum wage was increased from $3.35 to
$3.80 in 1990 and to $4.25 in 1991. In real terms the value of the minimum wage was still well
below the 1968 peak.
Even with the modest inflation of the 1990s, the minimum wage lost value, falling to $4.65 in
1995. By 1996, the minimum wage adjusted for inflation was approaching a 40-year low.
Inflation had largely wiped out the last increase in the minimum wage in 1990. In August 1996.
Congress passed and President Clinton signed into law a two-step increase, lifting the minimum
wage from $4.25 to $5.15. The first step of that increase went into effect October 1, 1996 and the
second step on September 1, 1997. More recently, President Clinton proposed to increase the
minimum wage by $1 over two years, raising it to $6.15. If the full increase were implemented
in 2001, this would restore the real value of the minimum wage to its 1982 level, about 75
percent of the 1968 peak value.
Chart 2: Real Level of the Minimum Wage
8.00
7.50
7.00
6 50
1999 Dollars
6.00
5 50
5.00
4.50
4.00
1954
1959
1964
1969
1974
1979
1984
1989
1994
1999
Source Department of Labor (Bureau of Labor Statistics)
2
3. THE 1996-97 MINIMUM WAGE INCREASE
The $0.90 increase in the minimum wage in 1996 and 1997 is estimated to have benefited almost
10 million American workers. This section examines the impact of this increase on
employment and the distribution of wages.
Effect on Employment
Since the 1996-97 increase in the minimum wage, the American economy-and labor markets in
particular--have continued to perform very strongly. Between September 1996 and February
2000, 10.2 million jobs were created-an average of 248,000 per month, even stronger job
growth than in the previous 2 years. In retail trade, which has a large concentration of minimum
wage workers, there were 1.4 million new jobs. Over this same period the overall
unemployment rate fell from 5.2 percent to 4.1 percent.
In addition, welfare rolls have declined 44 percent since welfare reform was enacted in August
1996. A report by the Council of Economic Advisers (1999) suggests that 10 to 16 percent of
the welfare caseload decline from 1996 to 1998 was attributable to the increases in federal and
state minimum wages. Other important factors were changes in welfare policy and the decline in
unemployment.
The strong labor market of the last four
Chart 3. Civilian Unemployment Rates by Education
years, however, is not definitive proof that
10
the minimum wage has no adverse effects on
employment. Numerous other factors affect
8
Did not complete high school
the job market, and workers paid at or near
Minimum age increase
the minimum wage are a relatively small
(October 1996)
6
fraction of the overall workforce. A better
Percent
High school
graduate. no college
test of the impact of minimum wage
4
increases is the experience of workers most
likely to be affected by the increases. An
2
Minimum age increase
(September 1997)
examination of data for these workers also
shows no discernable negative effect of the
0
95:Q1
96:Q1
97.Q1
98.Q1
99 Q1
last minimum wage increase. For example,
Source Department of Labor (Bureauol Labor Statistics)
adults (age 25 and above) with lower levels
Chart 4: Employment to Population Ratios by Education
of education generally have relatively low
70
wages. As Chart 3 indicates, though,
High school
65
graduate. no college
quarterly unemployment rates have generally
60
declined for both high school graduates with
Minimum age increase
55
no college and those with less than a high
(October 1996)
school education. Chart 4 shows, similarly,
Percent
Minimum age increase
50
(September 1997)
that over the past five years the employment
45
to population ratio generally held steady or
Did not complete high school
40
increased for both groups of adults. No
35
visible disruptions to these trends are
30
apparent following either the 1996 or 1997
95:Q1
96 Q1
97:Q1
98.Q1
99 Q1
minimum wage increases. Comparable
Source Department of Labor (Bureauch Labor Statistics)
I
See Bernstein and Schmitt (1998).
3
observations pertain for teenage workers in general, and for African American teens specifically
(Charts 5 and 6). 2
These data provide evidence that the minimum wage increase did not have a major negative
effect on employment. Still, as suggestive as this evidence is, it does not provide rigorous
statistical tests that control for the myriad of factors that affect employment. Section 5 reviews
the evidence from recent economic studies.
Chart 5: Civilian Unemployment Rates, Ages 16-19
Chart 6: Employment to Population Ratios, Ages 16-19
45
50
All races
40
45
35
30
African Americans
40
Minimum v age increase
Minimum age increase
Minimum age increase
(September 1997)
25
Percent
(October 1996)
20
Percent
35
(October 1996)
African Americans
All races
15
30
10
Minimum age increase
25
5
(September 1997)
0
20
95:Q1
96 Q1
97:Q1
98.Q1
99:Q1
95.Q1
96.Q1
97.Q1
98 Q1
99:Q1
Source Department of Labor (Bireauol Labor Statistics)
Source Department of Labor (Bureauot Labor Statistics)
Effect on Wages for Low-income Workers
Recent increases in the minimum wage in the U.S. have improved the distribution of wages at
the low end of the distribution. Fortin and Lemieux (1997) demonstrate the importance of the
minimum wage in boosting wages at the low end, and reducing wage inequality. They show that
the decline in the real value of the minimum wage from 1979 to 1988 was responsible for
approximately 24 percent of the increase in wage inequality experienced by men and about 32
percent of the increase in wage inequality for women. Card and Krueger (1995) conclude that
the 1990-91 minimum wage increase reversed about 30 percent of the increase in wage
inequality that occurred during the previous decade.
The effect of the recent minimum wage increase-in October 1996 and September 1997-on the
wage distribution IS clearly evident in wage data. Statistics tabulated from the Current
Population Survey (CPS), show that in the first two quarters of 1996, when the federal minimum
wage was S4.25. about 10 percent of all hourly wage workers earned less than $5.00. 3 The
minimum wage increase (to $5.15) clearly increased wages in the low end of the distribution; by
the first two quarters of 1998, the fraction of workers earning less than $5.00 declined to 2
percent.
1,
One careful statistical analysis (Neumark, 1999) shows that the 1996-97 minimum wage increases had no effect on
the general employment of 16-19 year olds.
3
The analysis presented in this paper excludes salaried and other non-hourly workers. Research has shown,
however, that a relativi smaller number and share of salaried workers and others not paid by the hour have
earnings that. when translated into hourly rates, are at or below the minimum wage. BLS does not routinely
estimate hourly earnings for nonhourly workers because of data concerns that arise in producing these estimates.
See Haughen and Mellor (1990) for further information.
4
Chart 7 illustrates the effect of the 1996-97 minimum wage increases on the low end of the wage
distribution ($3.00 to $7.99) for just one demographic group of interest, women who maintain
families and have at least one child present in
Chart 7. Wage Distribution, $3.00 to $7.99,
the household. 4 For 1996, the distribution of
Women who Maintain Families with Children
12
1998
wages shows that a relatively small share of
1996
workers with hourly wages earn between
10
$3.00 and $3.99. 5 In contrast, a substantial
8
fraction earned between $4.00 and $4.49.
(The chart shows the distribution by 50-cent
6
increments.) This jump, of course, reflects the
4
clustering of workers whose wages were at or
near the minimum wage. The comparable
2
distribution for 1998 indicates a shift that was
0
clearly due to the change in minimum wage
3.00
3.50
4.00
4.50
5.00
5.50
6.00
6.50
7.00
7.50
policy. In the first two quarters of 1996,
Source Council of Economic Advisers labulation Current Population Survey data
about 9 percent of these women earned less
than $5.00. By the first two quarters of 1998, this fraction declined to 2 percent.
At the same time, an increasing share of workers earned wages above $6 and $7, suggesting that
the increase in the minimum wage had spillover benefits for workers above the minimum wage.
Such spillover effects have been documented more formally in research by Grossman (1983),
Katz and Krueger (1992), and Card and Krueger (1994).
4. RAISING THE MINIMUM WAGE TO $6.15: WHO IS DIRECTLY AFFECTED?
Raising the minimum wage from $5.15 to $6.15 would raise the annual earnings of a full-time
worker by about $2,000 a year. A study of spending by low-income families found that they
spend on average about $300 per month on groceries and about $400 per month on rent. Thus,
for a full-time worker, the minimum wage increase would translate into enough money to pay for
nearly 7 months of groceries or 5 months of rent. This section provides a detailed examination
of the workers that would benefit from a further increase in the minimum wage.
Characteristics 01 Minimum Wage Workers in 1999
Evidence about workers who currently earn the minimum wage is available from unpublished
tabulations provided by the Bureau of Labor Statistics (BLS) based on data from the CPS. In
1999, 72.3 million workers were paid at hourly rates, representing about 61 percent of wage and
salary workers. It is estimated that 3.3 million workers-4.6 percent of all workers who are paid
an hourly rate-eam a wage at or below the current $5.15 Federal minimum. Of these 3.3
million workers, about 1.1 million reported a wage at exactly $5.15. while the remainder, 2.2
4 A family maintained by a woman IS one in which the householder (person in whose name the housing unit is rented
or owned) IS female. and no spouse is present. Here we examine such households when a child under 18 is present.
5
The presence of workers with reported wages below the minimum wage does not necessarily indicate violations of
the Fair Labor Standards Act. There are several reasons why the reported wage for a worker may be below the
Federal minimum. First. certain workers are exempt from the minimum wage provisions of the law, including
workers for whom tips might serve to supplement the hourly wages received. Second, there may be a misreporting
01 rounding in the survey responses. When the minimum wage is $5.15. for example, a large number of workers
report a wage of exacily $5.00.
5
million, earned a wage less than $5.15. A study by Bernstein and Schmitt (1998) indicated that
in 1997 the earnings of average minimum wage workers accounted for 54 percent of their
family's total earnings.
Selected demographic and economic characteristics for these workers are presented in Table 1.
The statistics indicate that about 70 percent of workers earning $5.15 or less were age 20 or
older. 64 percent of these workers are women.
How Many Workers would be Affected by an Increase in the Minimum Wage?
Using the CPS data described above, it is possible to examine the number and characteristics of
workers who would potentially receive a pay raise from a $1.00 increase in the federal minimum
wage. Table 2 presents the number of individuals who currently have an hourly wage between
$5.15 and $6.14. This table indicates that:
There are approximately 10.1 million workers within this wage range-about 14 percent of
all workers paid an hourly rate.
69 percent of the affected workers are adults age 20 or older.
About 60 percent of these workers are women.
16 percent are African American and 20 percent are Hispanic.
37 percent are the household head or a spouse who contributes to family income.
Other respected studies have looked at the question of who would potentially benefit from an
increase in the minimum wage, focusing on family and income characteristics. Some highlights
from these studies are:
Parents with children under 18 years old comprise almost 33 percent of those potentially
affected. (Bernstein, Hartmann, and Schmitt, 1999).
Over 50 percent of the proposed gains would go to households with incomes less than
$25,000 per year. (Bernstein, Hartmann, and Schmitt, 1999).
45 percent of the gains go to families with incomes below 200 percent of the poverty level,
and an additional 19 percent to families with income below 300 percent of the poverty level.
(Burkhauser, 1999).
There are other workers who would also likely benefit from a $1.00 minimum wage increase in
addition to those workers that report hourly wages between $5.15 and $6.14. As noted above, a
number of the over 900,000 workers who report a $5.00 per hour wage are also likely to be
workers currently at the minimum wage, but mis-reporting their earnings. There is also
evidence, as discussed earlier, that workers who earn wages just above the new minimum can see
their pay rise as a result of the minimum wage increase. To help gauge the size of this group in
the event of a minimum wage increase to $6.15, Table 2 also presents the number of workers
with hourly wages between $6.15 and $7.14. In 1999 there were approximately 8.4 million such
workers. many of whom could indirectly benefit from a minimum wage increase.
Appendix A presents a breakdown of the number of workers that would benefit by state. While
the most populous states would have the greatest number of workers in these wage categories
(California. for example, has almost 1.5 million workers with wages between $5.15 and $6.14)
the evidence suggests that thousands of workers in every state would potentially benefit from a
$1.00 increase in the minimum wage.
6
Table 1. Employed Wage and Salary Workers Paid Hourly Rates with Earnings At or
Below Minimum Wage, 1999
Number of workers
Percent
Percent distribution
(in thousands)
of
workers
in
demogra
Total
Total
Characteristic
Paid
Paid
phic
paid
paid
$5.15 or
$5.15 or
group
hourly
hourly
less
less
who
rates
rates
earn
$5.15 or
less
Total, 16 years and over
72,306
3,340
100.0
100.0
4.6
AGE
16 to 19 years
6,600
1,006
9.1
30.1
15.2
20 and over
65,706
2,334
90.9
69.9
3.6
SEX
Men, 16 years and over
36,073
1,214
49.9
36.3
3.4
Women, 16 years and over
36,233
2,126
50.1
63.7
5.9
RACE AND HISPANIC ORIGIN
White
58,999
2,698
81.6
80.8
4.6
African American
10,126
515
14.0
15.4
5.1
Hispanic
9,402
513
13.0
15.4
5.5
FULL- AND PART-TIME STATUS
Full-time workers
54,931
1,320
76.0
39.5
2.4
Part-time workers
17,227
2,010
23.8
60.2
11.7
FAMILY RELATIONSHIP
Husbands
17,609
242
24.4
7.2
1.4
Wives
16,996
622
23.5
18.6
3.7
Women who maintain families
5,395
288
7.5
8.6
5.3
Men who maintain families
1,815
50
2.5
1.5
2.8
Other persons
30,491
2,082
42
62
28
Note: Data exclude the incorporated self-employed. Detail for the above race and Hispanic-origin groups will not
sum to totals because data for the "other races" group are not presented and Hispanics are included in both the white
and black population groups. Also note that the distinction between full- and part-time workers is based on hours
usually worked. These data will not sum to totals because full- or part-time status on the principal job is not
identifiable for a small number of multiple jobholders.
Source: U.S. Department of Labor (Bureau of Labor Statistics), unpublished tabulations from the Current Population
Survey. 1999 annual averages.
7
Table 2. Distribution of Wage and Salary Workers Paid Hourly Rates, 1999
Percent of
workers in
Number of
Percent
demographic
workers (in
distribution
group who fall
Characteristic
thousands)
in wage
category
$5.15
$6.15 -
$5.15 -
$6.15 -
$5.15 -
$6.15 -
$6.14
$7.14
$6.14
$7.14
$6.14
$7.14
Total, 16 years and over
10,093
8,370
100.0
100.0
14.0
11.6
AGE
16 to 19 years
3,133
1,482
31.0
17.7
47.5
22.5
20 and over
6,960
6,888
69.0
82.3
10.6
10.5
SEX
Men, 16 years and over
4,076
3,405
40.4
40.7
11.3
9.4
Women, 16 years and over
6,018
4,965
59.6
59.3
16.6
13.7
RACE AND HISPANIC ORIGIN
White
8,027
6,668
79.5
79.7
13.6
11.3
African American
1,602
1,336
15.9
16.0
15.8
13.2
Hispanic
1,989
1,447
19.7
17.3
21.2
15.4
FULL- AND PART-TIME STATUS
Full-time workers
4,563
5,301
45.2
63.3
8.3
9.7
Part-time workers
5,512
3,048
54.6
36.4
32.0
17.7
FAMILY RELATIONSHIP
Husbands
851
990
8.4
11.8
4.8
5.6
Wives
1,821
1,962
18.0
23.4
10.7
11.5
Women who maintain families
855
807
8.5
9.6
15.8
15.0
Men who maintain families
171
167
1.7
2.0
9.4
9.2
Other persons
6,396
4,445
63
53
84
58
Note: Data exclude the incorporated self-employed. Detail for the above race and Hispanic-origin groups will not
sum to totals because data for the "other races" group are not presented and Hispanics are included in both the white
and black population groups. Also note that the distinction between full- and part-time workers is based on hours
usually worked These data will not sum to totals because full- or part-time status on the principal job is not
identifiable for a small number of multiple jobholders.
Source: U.S. Department of Labor (Bureau of Labor Statistics), unpublished tabulations from the Current Population
Survey, 1999 annual averages.
8
5. ECONOMIC RESEARCH ON THE EFFECT OF THE MINIMUM WAGE ON
EMPLOYMENT
The impact of a moderate increase in the minimum wage on employment is a key question for
policymakers. Clearly, while an increase in the minimum wage benefits those workers who
receive it, some have raised concerns that these direct gains may be partially or fully offset if the
minimum wage increase leads to greater unemployment among lower income workers. Section
3 discussed some of the aggregate evidence from the 1996-97 experience. This section discusses
the economic theory and empirical evidence behind the effects of the minimum wage on
employment.
Recent Economic Theory on the Impact of the Minimum Wage on Employment
The traditional economic theory of supply and demand predicts that an increase in the minimum
wage above the market rate would increase the cost faced by employers, causing them to reduce
employment. Recent theoretical analyses, however, have challenged this conventional wisdom,
examining reasons why some employers may respond to a moderately higher minimum wage by
expanding employment. Specifically, higher wages can help firms attract better workers,
motivate them to work harder, and retain them for longer periods. (While firms always have the
option of increasing their pay rate, some managers leave wages unchanged because of reluctance
to increase average labor costs.) At least five papers-recently published in peer-reviewed
economics journals-rigorously study this logic.⁶ These papers show that a moderate minimum
wage can have a positive effect on employment. In general, then, an increase in the minimum
wage has an ambiguous effect on employment. The only way to determine the effect in practice
is to look at the empirical evidence.
Recent Empirical Evidence on Employment Effects
In an important book, economists David Card and Alan Krueger (1995) provide a critical
analysis of previous research, and present their own extensive exploration of the wide variation
in minimum wages across states found in the late 1980s and early 1990s. Their work shows that
there were no negative employment effects even for teenagers, the group for whom any
disemployment effects should be most apparent. Similarly, their detailed analysis fails to find
disemployment effects of a minimum wage in the retail trade or in employment of fast food
restaurants. More recent studies confirm these results.
Employment in Fast Food Restaurants. To determine the impact of minimum wages on
employment. one would like to gather data from firms prior to a minimum wage increase and see
how firms adjust employment relative to other similar firms for which the minimum wage does
not increase. New work by Card and Krueger (forthcoming) comes closest to doing this. In
1992, New Jersey imposed a higher minimum wage, and yet the neighboring state of
Pennsylvania did not. And then in 1996 an increase in the federal minimum wage affected
Pennsylvania but not New Jersey. These two episodes provide an experiment that can be used to
infer the effects of a minimum wage increase on employment. Card and Krueger use the BLS's
employer-reported payroll files from 1991 through 1997 to evaluate employment growth of fast
1,
See Bhaskar and To (1999). Dickens. Machin, and Manning (1999). Lang and Kahn (1998). Manning (1995), and
Rebitzer and Taylor (1995). Additional discussion of these models are found in Chapter 11 of Card and Krueger
(1995).
9
food restaurants in New Jersey and nearby counties in Pennsylvania. They conclude that the
minimum wage changes had very little (and possibly slightly positive) effect on employment.⁷
The British Experience. Dickens, Machin, and Manning (1999) studied the British experience
with minimum wages. They found strong evidence that [minimum wages] compressed the
distribution of earnings and no evidence that they have reduced employment."
6. CONCLUSION
The evidence is convincing that moderate increases in the minimum wage have provided
meaningful additional earnings for many of America's most hard-pressed working families with
no discernible negative employment effects. Increasing the minimum wage is one of the ways
that government can help ensure that everyone continues to share in the benefits of growth.
When the minimum wage was fixed from 1981 to 1990, the wages and incomes of poorer
workers fell in real terms. Thanks to the 1996-97 minimum wage increase, today the minimum
wage is helping to ensure that a single parent with two children does not have to raise his or her
children in poverty.
The minimum wage is just one component of an overall strategy for insuring that all families
benefit from the nation's economic growth. The President's proposed expansion in the Earned
Income Tax Credit-to increase benefits for families with three or more children, reduce the
marriage penalty, and reduce the phaseout rate-would enhance the value of a higher minimum
wage, especially for families with more children and thus greater needs. At the same time, the
President is committed to continuing to make important investments in people. Since 1993, the
budget for education and training programs has nearly doubled and the President is proposing
record increases for a number of key education programs, including Head Start, in his FY 2001
budget. Together. these policies are an investment in continued strong and shared economic
growth.
:
While some critics of Card and Krueger expressed concern about their data collection, the most recent research
uses BLS employment records and finds basically the same results.
10
REFERENCES
Bernstein, Jared, Heidi Hartmann, and John Schmitt. 1999. "The Minimum Wage Increase: A
Working Woman's Issue." Economic Policy Institute Issue Brief 133, Washington, D.C.
Bernstein, Jared and John Schmitt. 1998. Making Work Pay: The Impact of the 1996-97
Minimum Wage Increase. Economic Policy Institute, Washington, D.C.
Bhaskar, V. and Ted To. 1999. "Minimum Wages for Ronald McDonald Monopsonies: A
Theory of Monopsonistic Competition." The Economic Journal 109 (April): 190-203.
Burkhauser, Richard V. and Sarah G. Blanding. 1999. "A Review of Recent Evidence on the
Effect of the Minimum Wage on the Working Poor," (paper presented at the Low Pay
Commission's International Minimum Wage Symposium, London, England).
Card, David and Alan Krueger. 1994. "Minimum Wages and Employment: A Case Study of the
Fast Food Industry in New Jersey and Pennsylvania." American Economic Review, 84: 772-793.
-
1995. Myth and Measurement. Princeton: Princeton University Press.
.
1999. "A Reanalysis of the Effect of the New Jersey Minimum Wage Increase on the
Fast-Food Industry with Representative Payroll Data." Forthcoming, American Economic
Review:
Council of Economic Advisers. 1999. "The Effects of Welfare Policy and the Economic
Expansion on Welfare Caseloads: An Update." Executive Office of the President of the United
States.
Dickens, Richard. Stephen Machin, Alan Manning. 1999. "The Effects of Minimum Wages on
Employment: Theory and Evidence from Britain." Journal of Labor Economics 17(1): 1-22.
Fortin, Nicole and Thomas Lemieux. 1997. "Institutional Changes and Rising Wage Inequality:
Is There a Linkage?" Journal of Economic Perspectives 11(2): 75-96.
Grossman, J.B. 1983. "The Impact of the Minimum Wage on Other Wages." Journal of Human
Resources 18: 359-378.
Haugen, Steven E. and Earl F. Mellor. "Estimating the Number of Minimum Wage Workers."
Monthly Labor Review January 1990.
Katz, Lawrence and Alan Krueger. 1992. "The Effects of the Minimum Wage on the Fast Food
Industry." Industrial and Labor Relations Review 46: 6-12.
Lang, Kevin and Shulamit Kahn. 1998. "The Effect of the Minimum-Wage Laws on the
Distribution of Employment: Theory and Evidence." Journal of Public Economics 69: 67-82.
Manning. A. 1995. "How Do We Know Real Wages Are Too High?" Quarterly Journal of
Economics 110(4): 1111-25.
11
Neumark, David. 1999. "The Employment Effects of Recent Minimum Wage Increases:
Evidence from a Pre-Specified Research Design." National Bureau of Economic Research
Working Paper 7171, June.
Rebitzer, James and Lowell Taylor. 1995. "The Consequences of Minimum Wage Laws: Some
New Theoretical Ideas." Journal of Public Economics 56(2): 245-55.
12
Appendix: Distribution of Wage and Salary Workers Paid Hourly Rates by State, 1999
Percent of All Wage and Salary
Number (in thousands)
Workers
$5.15 to $6.14
$6.15 to $7.14
$5.15 to $6.14
$6.15 10 $7.14
Total
10,093
8,370
13.9
11.6
Alabama
202
146
18.1
13.1
Alaska
9
13
5.5
7.6
Arizona
200
157
15.2
11.9
Arkansas
130
101
20.9
16.2
California
1,463
1.023
17.4
12.1
Colorado
79
92
7.3
8.4
Connecticut
62
70
7.5
8.6
Delaware
22
21
10.8
10.0
DC
12
12
10.0
10.7
Florida
597
530
15.5
13.8
Georgia
267
248
13.1
12.3
Hawaii
47
29
15.0
9.4
Idaho
58
45
15.6
12.3
Illinois
428
354
13.2
10.8
Indiana
180
209
9.8
11.4
lowa
103
91
11.2
9.9
Kansas
123
96
15.6
12.3
Kentucky
157
161
14.2
14.7
Louisiana
297
123
25.9
10.7
Maine
45
39
11.8
10.4
Maryland
125
137
9.5
10.5
Massachusetts
161
162
9.6
9.7
Michigan
341
312
11.3
10.3
Minnesota
115
121
8.0
8.4
Mississippi
146
74
22.7
11.5
Missouri
172
169
11.9
11.8
Montana
54
32
21.5
12.7
Nebraska
67
68
13.2
13.6
Nevada
60
60
11.2
11.3
New Hampshire
29
31
8.2
8.5
New Jersey
205
187
10.6
9.8
New Mexico
75
39
18.0
9.1
New York
566
395
14.8
10.3
North Carolina
247
223
12.4
11.2
North Dakota
34
29
18.3
15.9
Ohio
427
356
12.7
10.6
Oklahoma
170
126
19.6
14.5
Oregon
35
184
3.7
19.7
Pennsylvaina
454
338
13.8
10.3
Rhode Island
37
25
13.4
9.3
South Carolina
153
116
14.9
11.3
South Dakota
33
29
15.2
13.7
Tennessee
208
216
13.6
14.2
Texas
929
653
18.5
13.1
Utah
61
84
10.1
14.0
Vermont
21
20
12.4
11.5
Virginia
218
207
13.6
12.8
Washington
180
158
10.9
9.6
West Virgina
106
60
22.2
12.8
Wisconsin
157
177
8.9
10.0
Wyoming
25
19
17.8
13.8
Note: Workers in the $5.15 to $6.14 category would be directly affected by a $1.00 increase in the minimum wage.
Those in the $6.15 to $7.14 category could be affected by spillovers.
Source: U.S. Department of Labor, Bureau of Labor Statistics, unpublished tabulations from the Current Population
Survey, 1999.
13
Percentage of workers paid hourly rates earning
between $5.15 and $6.14 per hour, by State
(U.S. percentage = 14.0 percent)
1999 annual averages
Mountain
West
New England
North Central
WASH
East
North Central
MAINE
MONT
ND
Middle
I
VT
ORE
MINN
Atlantic
NH
MASS.
IDAHO
WIS
MICH
7
S.D
N.Y.
R.I.
WYO
CONN.
IOWA
NEB
PA
OHIO
N.J.
NEV
ILL
IND
MD.
CALIF
UTAH
DEL
COLO
KAN
MO
W.VA
KY.
VA
DC.
TENN
ARIZ
N.C.
N.M
OKLA
ARK
S.C.
South Atlantic
Pacific
MISS
ALA
GA,
TEX
LA
20.0% or over
FLA
15.0% 19 9%
ALASKA
East
10.0% 14.9%
HAWAII
South Central
5 0% 9.9%
West
South Central
4.9% or below
Source: Bureau of Labor Statistics
WOMEN
AND
RETIREMENT SECURITY
PREPARED BY THE NATIONAL ECONOMIC COUNCIL
INTERAGENCY WORKING GROUP ON SOCIAL SECURITY
OCTOBER 27, 1998
TABLE OF CONTENTS
Page
EXECUTIVE SUMMARY
3-4
I. Basic Facts on Women and Retirement
5-6
II. Social Security and Women
7-11
III. Challenges for the Current System
12-14
IV. Women and Pensions
15-16
V. Conclusion
17
Endnotes
18-19
Women and Retirement Security
2
EXECUTIVE SUMMARY
Women Have Lower Income in Retirement than Men -- And Thus Higher Poverty.
In 1997, median income for elderly unmarried women (widowed, divorced, separated,
and never married) was $11,161, compared with $14,769 for elderly unmarried men and
$29,278 for elderly married couples. Thus, the poverty rate for elderly women was
higher than that of men: in 1997, the poverty rate of elderly women was 13.1 percent,
compared to 7.0 percent among men. Among unmarried elderly women, the poverty rate
was significantly higher -- about 19 percent.
Social Security Is Particularly Important to Women. Elderly unmarried women --
including widows -- get 51 percent of their total income from Social Security. Unmarried
elderly men get 39 percent, while elderly married couples get 36 percent of their income
from Social Security. For 25 percent of unmarried women, Social Security is their only
source of income, compared to 9 percent of married couples and 20 percent of unmarried
men. Without Social Security benefits, the elderly poverty rate among women would
have been 52.2 percent and among widows would have been 60.6 percent.
Women Face Greater Economic Challenges in Retirement. First, women tend to live
longer: a woman who is 65 years old today can expect to live to 85, while a 65 year old
man can expect to live to 81. Second, women have lower lifetime earnings than men do.
And third, women reach retirement with smaller pensions and other assets than men do.
The Current Social Security System Has a Number of Features That Help Women
Meet These Challenges.
1.
Social Security provides an inflation-protected benefit that lasts as long as you live.
Since women tend to live longer than men, they are in greater danger of outliving
their other sources of retirement income; but it is impossible to outlive one's Social
Security benefit.
2.
The progressive benefit formula provides a higher replacement rate for workers with
lower earnings. For the median female retiree, Social Security replaces 54 percent of
average lifetime earnings, compared with 41 percent for the median male.
3.
Social Security provides extra benefits to spouses with low lifetime earnings. The
Social Security spousal benefit helps many women, even if they did not work at all
outside the home.
4.
Social Security provides benefits to elderly widows; 74 percent of elderly widows
receive benefits based on the earnings of their deceased spouse.
5.
Social Security provides benefits to spouses of any age who care for children under
16 if the worker (other spouse) is retired, becomes disabled, or dies; women
represent 98 percent of recipients receiving benefits as spouses with a child in their
care.
Women and Retirement Security
3
Social Security Will Continue to Be Important for Women in the Future. As the
labor force participation rates of women continue to rise, women in the future will reach
retirement with much more substantial earnings histories than in the past. Therefore, the
percentage of women receiving benefits based solely on their own earnings history is
expected to rise from 37 percent today to 60 percent in 2060. However, this means that
40 percent of women will continue to receive benefits based on their husband's earnings.
Poverty Rates Among Unmarried Elderly Women -- Especially Widows Who Make
up 45 Percent of All Elderly Women -- Are High. Divorced women are a growing
share of the elderly population, and their poverty rate is higher than the overall elderly
poverty rate. And finally, poverty rates among elderly minority groups are unacceptably
high.
Among Current Retirees, Women Have Much Less Pension Coverage Than Men.
Only 30 percent of all women aged 65 or older were receiving a pension in 1994 (either
worker or survivor benefits), compared to 48 percent of men.
Pensions Received by Women Are Worth Less than Those Received by Men.
Among new private sector pension annuity recipients in 1993-94, the median annual
benefit for women was $4,800, or only half of the median benefit of $9,600 received by
men. And among women approaching retirement, pension wealth is much smaller: for
example, single women had average pension wealth that was 34 percent of the single
men's average.
Among Workers, Women's Pension Coverage Depends on Work Status. Overall,
fewer women workers have pensions through work, 40 percent of women compared to 44
percent of men. However, women in full-time jobs are equally likely to have pension
coverage as men; in 1997, 50 percent of women in full-time jobs had pensions compared
to 49 percent of men. It is important to note, though, that women are much more likely to
work part-time or be out of the labor force than men.
Women and Retirement Security
4
WOMEN AND RETIREMENT SECURITY
Over the course of this year, the Administration, Congress, and other interested parties
have engaged Americans in a national debate about ways to strengthen Social Security for the
21st Century. President Clinton and Vice President Gore attended three bipartisan Social
Security forums convened by the AARP and the Concord Coalition, and the President and Vice
President hosted a conference on private retirement savings in July. One issue that has arisen
repeatedly throughout this process is the relationship between Social Security and women's
retirement security. The purpose of this report is to inform the national debate by presenting
some of the key facts and issues about women and their Social Security benefits and pensions.
I. BASIC FACTS ON WOMEN AND RETIREMENT
Women Have Lower Income in Retirement than Men Do. In 1997, median income
for elderly unmarried women (widowed, divorced, separated, or never married) was
$11,161, compared with $14,769 for elderly unmarried men and $29,278 for elderly
married couples.¹
Poverty Rates Among Elderly Women Are Higher Than Rates Among Men. The
poverty rate among Americans age 65 and over has fallen from 35.2 percent in 1959 to
10.5 percent today. The poverty rate for all elderly women was 13.1 percent in 1997,
compared to a 7.0 percent rate for all elderly men.² And for unmarried elderly women,
the poverty rate is even higher -- around 19 percent.
POVERTY RATES OF THE FEMALE POPULATION 65 AND OVER
BY MARITAL STATUS, 1997³
All Elderly
Women
Married
Divorced
Widowed
Never Married
13.1%
4.6%
22.2%
18.0%
20.0%
Nearly 60 Percent of Elderly Women Are Unmarried. The poverty rate among
unmarried women is particularly important because 59 percent of elderly women are
either widowed (45 percent), divorced (7 percent), separated (2 percent), or never married
(5 percent). In contrast, only 27 percent of elderly men are unmarried.4
Social Security Is Particularly Important to Women. Elderly unmarried women --
including widows -- get 51 percent of their total income from Social Security.
Unmarried elderly men get 39 percent, while elderly married couples get 36 percent of
their income from Social Security.⁵
Women and Retirement Security
5
SOURCES OF INCOME FOR PERSONS 65 AND OVER, 1996
(PERCENT OF TOTAL INCOME)
Social
Income
Security
Pensions
from Assets
Earnings
Other
Unmarried
51%
15%
20%
10%
4%
women
Unmarried
39
22
16
19
4
men
Married
36
20
18
25
1
couples
All elderly
40
18
18
20
4
Social Security Is Particularly Important
For Elderly Women
Percentage of Income from Social Security
60%
51%
50%
39%
40%
36%
30%
20%
10%
0%
Married Couples
Unmarried Men
Unmarried Women
Source: Social Security Administration
Women and Retirement Security
6
II. SOCIAL SECURITY AND WOMEN
Most Social Security Recipients Are Women. Women represent 60 percent of all
elderly Social Security recipients (women are 18.9 million of the 31.7 million aged
beneficiaries).
Women Make Up Nearly Three Quarters -- 72 Percent -- of the Increasing Number
of Americans Over 85 Years Old. Because women live longer, on average, than men,
women make up 72 percent of all beneficiaries age 85 and above.⁶
Most Social Security Beneficiaries Are Women
Among Oldest Beneficiaries Women Are An Even Larger Share
Women As A Percentage of Social Security Beneficiaries
90
80
70
60
50
40
62
65
70
75
80
85
90
95+
Age
Source: Social Security Administration.
For Many Elderly Women, Social Security Is Their Only Source of Income. For 25
percent of unmarried women (widowed, divorced, separated, never married), Social
Security is their only source of income. Social Security is the only source of income for
9 percent of married couples and 20 percent of unmarried men.⁷
Excluding Social Security Benefits, the Poverty Rate among Elderly Women Would
Be More Than 50 Percent. In 1997, the poverty rate among elderly women was 13.1
percent. Without Social Security benefits it would have been 52.2 percent. For elderly
widows the poverty rate was 18.0 percent; without Social Security benefits it would have
been 60.6 percent. (For elderly men the rate is 7.0 percent, without Social Security it
would be 40.7 percent.)8
Women and Retirement Security
7
Without Social Security, More than Half
of Elderly Women Would Be in Poverty
Poverty Rate (for 1997)
60.0%
52.2%
50.0%
40.0%
30.0%
20.0%
13.1%
10.0%
0.0%
With Social Security
Without Social Security
Source: Social Security Administration
Why Women Face Greater Economic Challenges in Retirement
Women Live Longer than Men. A woman who is 65 years old today can expect to live
to 85, while a 65 year old man can expect to live to 81.9 This gap is expected to persist
into the future. Because women live longer, they depend on Social Security for more
years, and become increasingly dependent on Social Security with age. Unmarried women
between 65 and 74 years old get 43 percent of their income from Social Security, while
unmarried women 75 and older get 55 percent of their income from Social Security.
EXPECTED TOTAL LIFETIME FOR PERSONS AGE 65
Year Turning Age 65
Male
Female
1940
77.0
78.7
1998
81.2
84.8
2030
82.7
86.1
Women Have Lower Lifetime Earnings than Men. Women have lower lifetime
earnings than men do for three reasons:
Women Who Work Are More Likely to Work Part-time. In the third quarter
of 1998, 25.8 percent of female workers worked part-time, compared with 10.6
percent of male workers. Women represented 67.5% of all part-time workers. 10
Full-time Female Workers Earn Less than Full-time Male Workers. The
median earnings of full-time year-round women workers in 1997 was $24,973,
compared to $33,674 for men -- that means that the median woman earns 74
percent of the median man's earnings.¹¹
Women and Retirement Security
8
Women Take More Years Out of the Labor Force than Men Do. Women are
more likely to take time out of the labor force for child raising or other care giving
responsibilities. Of workers retiring in 1996, the median woman had worked 27
years over her lifetime, while the median man had worked 39 years. 12
Women Reach Retirement with Smaller Pensions and Other Assets than Men Do.
Only 30 percent of women aged 65 or older were receiving their own pensions in 1994
(either as a retired worker or a survivor), compared with 48 percent of men. Section IV
describes issues related to women and pensions in more detail.
How the Current Social Security System Helps Women Meet Retirement Challenges
The current Social Security system has a number of features that are particularly important to
women.
Social Security Provides an Inflation-Protected Benefit That Lasts as Long as You
Live. Although women receive lower average Social Security benefits than men do,
women tend to live longer than men and to receive benefits for more years. In addition,
because women live longer, they are in greater danger of outliving their other sources of
retirement income; but it is impossible to outlive one's Social Security benefit.
Furthermore, the cost of living protection in Social Security is more valuable the longer a
person lives; therefore, this feature of the program is particularly valuable to women.
The Progressive Benefit Formula Provides a Higher Replacement Rate for Workers
with Lower Earnings. Since women tend to have lower earnings than men, they receive
worker benefits that are a higher fraction of their lifetime earnings. For the median
female retiree, Social Security replaces 54 percent of average lifetime earnings, compared
with 41 percent for the median male. 13
Social Security Provides Extra Benefits to Spouses with Low Lifetime Earnings.
Women are more likely than men to take time out of the labor force for child rearing, and,
on average, have lower earnings when they work than men do. This means that the
Social Security benefit they are entitled to -- based on their own earnings history -- can be
small. But Social Security provides a spousal benefit that helps many women, even if
they did not work at all outside the home. A spouse receives a benefit equal to the larger
of the benefit she is entitled to based on her own earnings or one-half of the benefit
received by her husband. Currently, 63 percent of female Social Security beneficiaries
age 65 and over receive benefits based on their husband's earnings record. (Only 1.2
percent of male Social Security beneficiaries receive benefits based on their wife's
earnings record). The result is women receive more than they would based only on their
own earnings histories. While the average full benefit a women is entitled to based on her
own earnings record is only 62 percent of that of men, the average benefit received by
women is 75 percent of that of men.¹⁴
Women and Retirement Security
9
Social Security Provides Benefits for Widows. Social Security pays an elderly widow
a benefit equal to either the benefit she receives as a worker or the benefit of her deceased
spouse, whichever is higher. Nearly three quarters -- 74 percent -- of elderly widows
receive benefits based on the earnings of their deceased spouse.
Social Security Provides Benefits to Spouses with Young Children. Social Security
provides benefits to spouses of any age who care for children under 16 if the worker
(other spouse) is retired, becomes disabled, or dies; women represent 98 percent of
recipients receiving benefits as spouses with a child in their care.
Nearly One-Third of Social Security Beneficiaries Are Either Disabled or
Survivors (or Their Dependents). Nearly one-third of Social Security's 44
million beneficiaries are either disabled or survivors (or their dependents). This
includes 3.8 million children who receive benefits, with 1.9 million as survivors
of deceased parents, 1.4 million as children of disabled workers, and 0.4 million
as children of retired workers. Disability insurance (in case an individual
becomes disabled and can't work) and survivors' insurance are each separately
equivalent, for the average young family with two children, to an insurance policy
of about $300,000.
Social Security Is More Than A Retirement Program
Percentage of Social Security Beneficiaries By Program
Retirement Program
70.0%
Survivors Program
16.0%
Disability Program
14.0%
Women and Retirement Security
10
Will Social Security Continue to Be as Important for Women in the Future?
As younger cohorts of women reach retirement, more and more female beneficiaries will receive
benefits based upon their own earnings records. Nonetheless, the average benefit received by
women is expected to remain below that of men, and a significant share of women will continue
to receive benefits based on their spouse's earnings record.
Labor Force Participation Rates among Women Have Risen Dramatically. In the
future, women will reach retirement with much more substantial earnings histories than in
the past. (Male labor force participation has been falling due largely to earlier
retirement).
Labor Force Participation Rates
1950-2075
Labor Force Participation Rate
100
Men
80
60
Women
40
20
1955
1965
1975
1985
1995
2005
2015
2025
2035
2045
2055
2065
2075
Source: Social Security Administration. Data are age adjusted.
More Women Will Receive Benefits Based Solely On Their Own Earnings History.
The percentage of women receiving benefits based solely on their own earnings history is
expected to rise from 37 percent today to 60 percent in 2060. However, this means that 40
percent of women will continue to receive benefits based on their husband's earnings.¹⁵
Average Benefits Based On Own Earnings Record Will Rise Relative to Men. The
average full monthly benefit for retired female workers based on their own earnings record,
which is currently 62 percent of the average for men, will rise to 67 percent in 2050. 16
Projections Indicate That Women Will Continue to Live Longer than Men. The
difference in life expectancy at age 65 between men and women will fall only slightly
under Social Security Administration projections from a gap of 3.6 years today to 3.4
years in 2030. Thus, in the future, women will continue to depend on Social Security for
more years than men will.¹⁷
Women and Retirement Security
11
III. CHALLENGES FOR THE CURRENT SYSTEM
Poverty Rates Remain High Among Elderly Women
Poverty Rates Among the Elderly Have Fallen Dramatically, Due Largely to Social
Security. The poverty rate among Americans age 65 and over has fallen from 35.2
percent in 1959 to 15.2 percent in 1979 and 10.5 percent today. This compares with an
overall poverty rate of 13.3 percent.
Poverty Rates among Widowed, Divorced, and Never Married Women Remain
High. The poverty rate for all elderly women was 13.1 percent in 1997, compared to a
7.0 percent rate for all elderly men. For both divorced and widowed women, poverty
rates are significantly higher than men: the poverty rate is 22.2 percent for divorced
women and 15.0 percent for divorced men and the poverty rate is 18.0 percent for
widowed women and 11.4 percent for widowed men. Married couples had a poverty rate
of only 4.6 percent.
Poverty Rates Are High
Among Unmarried Elderly Women
1997
Poverty Rate
30.0%
25.0%
22.2%
20.0%
20.0%
18.0%
15.0%
13.1%
10.0%
4.6%
5.0%
0.0%
All Elderly Women
Divorced Women
Never Married Women
Married Women
Widowed Women
Source: Social Security Administration, Based on Data from the Census Bureau.
Widows Make Up A Large Fraction of Elderly Women. Of women 65 and over, 45
percent of women are widowed, 43 percent are married, 7 percent are divorced, and 5
percent are never married. This means that the high poverty rate among widows and
other unmarried women affects a large share of elderly women.
There Are Also a Substantial Number of Relatively Young Widows, Though the
Number Is Falling. Of 60-year old women, 13 percent are widows. This percentage
rises to more than one-quarter of women aged 65 to 67. Because husbands in low-income
families tend to die at younger ages than husbands in higher-income families, these early
widows are often poor.
Women and Retirement Security
12
Divorced Women Are a Growing Share of the Elderly Population. In 1997, 7.1
percent of elderly women were divorced -- this compares with only 2.2 percent in 1969.
Among women approaching retirement (55-64 years old), 14.4 percent were divorced in
1997. Since divorced women have higher poverty rates than other women, this trend
could lead to higher poverty rates for women in the future.
Poverty Rates Are Higher among Elderly Blacks and Hispanics. The poverty rate for
black women aged 65 or above is 28.9 percent, compared with 28.1 percent for Hispanic
women, and 11.7 percent for white women. The poverty rate for black men aged 65 or
above is 22.2 percent, compared with 23.6 percent for Hispanic men, and 6.0 percent for
white men.
Poverty Rates Are Particularly High
Among Elderly Minority Groups
1997
Poverty Rate
35.0%
Men
30.0%
Women
28.9%
28.1%
25.0%
23.6%
22.2%
20.0%
15.0%
11.7%
10.0%
6.0%
5.0%
0.0%
White
Black
Hispanic
Source: Bureau of the Census
Women and Retirement Security
13
Reasons Why Poverty Rates Are Higher Among Widows than Among Married Women¹⁸
Declines in Social Security Benefits at Widowhood. Widow benefits vary from 50 to
67 percent of benefits for a married couple. The official poverty thresholds imply that a
widow needs 79 percent of a couple's income to maintain her pre-widowhood
consumption level. Thus, women who are in couples just above the poverty line, can fall
below the line when they become widowed. Empirical studies suggest that this factor can
explain as much as half of the excess in poverty among widows.
Pre-Widowhood Differences in Economic Status. Poorer husbands typically do not
live as long as richer husbands. Therefore, at a given age, women who are widowed are
more likely to have been poor throughout their lives than are the women whose husbands
have not yet died. Empirical studies conclude that this fact explains around one third of
the difference in poverty rates between married women and widows.¹⁹
Declines in Pension Income at Widowhood. Research using data from the 1970s
implies that roughly 15 percent of the gap in poverty between widows and married
women can be explained by the loss of the husband's pension income. However, these
data predate the Retirement Equity Act of 1984 which was designed to encourage the
choice of a pension with survivorship rights.
Declines in Income from Other Assets at Widowhood. Some assets may be
bequeathed to people other than the widow or used for medical or other expenses when
the widow's spouse dies. Empirical evidence suggests that the decline in other asset
income is responsible for about 10 percent of the difference in poverty rates between
widowed and married women.
Issues Concerning Benefits for Spouses who Work in the Home and Benefits Based on Paid
Employment
Spousal Benefit Ensures Adequate Retirement Income. A woman is eligible to
receive a Social Security benefit that is 50 percent of her husband's benefit while her
husband is alive, and a benefit that is 100 percent of her husband's benefit after he dies.
These benefits reward women for work done in the home and ensure that all Americans
have an adequate retirement income, even those with little paid employment. However,
some people argue that spouse benefits are unfair because women with many years of
paid employment can end up with benefits that are no larger than stay-at-home moms,
and others point out that two families with identical total earnings can end up with
different Social Security benefits depending on the division of the earnings between the
two spouses.
Women and Retirement Security
14
IV. WOMEN AND PENSIONS
Social Security provides a key foundation for retirement security. Pensions and individual
savings provide important resources as well. For elderly married couples, these other sources of
income account for 64 percent of total income. For elderly unmarried females, these other
sources account for 49 percent of total income.
Among Current Retirees, Women Have Much Less Pension Coverage Than Men
Women Are Less Likely To Have A Pension. Only 30 percent of all women aged 65 or
older were receiving a pension in 1994 (either worker or survivor benefits), compared to
48 percent of men.²⁰
Lower Pension Coverage Among Private-Sector Workers. Only 31 percent of women
aged 65 or older (and 55 percent of men) who had worked in the private sector reported
pension benefits, compared to 66 percent (and 75 percent of men) of public sector
retirees.²¹
Pensions Received by Women Are Worth Less than Those Received by Men.
Among new private sector pension annuity recipients in 1993-94, the median annual
benefit for women was $4,800, or only half of the median benefit of $9,600 received by
men. The median pre-retirement wage replacement rate of annuity benefits was 20
percent for women, compared to 30 percent for men. Among lump sum pension
recipients in 1993-94 who were age 40 and over, the median lump sum distribution was
$5,000 for women and $14,475 for men.²²
Among Women Approaching Retirement, Pension Wealth Is Much Smaller. Single
women had average pension wealth that was 34 percent of the single men's average.
Among married people, the gender gap was even larger, with the women's average being
only 25 percent of men's. These estimates include both private and public sector workers
with and without pensions.²³
401(k) Plan Take-up Rates
Women Are Less Likely To Take Up 401(k) Option When Offered. Among private
wage and salary workers offered a 401(k) plan in 1993, the overall participation rate was
62 percent for women and 70 percent for men.²⁴
Lower Take Up Is Largely Explained By Lower Earnings. The take-up rate is highly
correlated with earnings. For example, while only 39 percent of workers earning less
than $15,000 per year participate in a 401(k) plan when offered, 90 percent of workers
earning $75,000 or more do so. Because men, on average, earn more than women, their
overall take-up rates in 401(k) plans are higher. However, when wages are held constant
the take-up rate for women is generally equal to or greater than that of men. Among
workers earning less than $15,000 in 1993 the take-up rate was 41 percent for women
compared to 35 percent for men. For workers earning from $30,000 to $40,000 the take-
up rate was 75 percent for women and 72 percent for men.²⁵
Women and Retirement Security
15
Among Workers, Women's Pension Coverage Depends on Work Status²⁶
Overall, Fewer Women Have Pensions Through Work. For all female workers -- both
full time and part time -- 27 million (40 percent) had a pension plan through work in
1997. For all male workers, 34 million (44 percent) had an employment based pension.
In Full-time Jobs, Women Are Equally Likely To Have Pension Coverage. Twenty
five years ago, pension coverage for women in full-time jobs was only 70 percent of the
rate for men. Today, the coverage rates are nearly identical. In 1997, 50 percent of
women in full-time jobs had pension coverage, compared with 49 percent of men.
Coverage Is Significantly Lower for Part-time Workers. Coverage is significantly
lower for women who work part time. In 1997, 15 percent of women working part time
were covered by pensions versus 50 percent working full time.
Women Are More Likely to Work Part-time or Be Out of the Labor Force than
Men. In 1997, 75 percent of men were in the labor force, versus 60 percent of women.
In addition, over one fourth of working women were part-time, compared with one tenth
of men.
Women Who Work Part time Are Less Likely To Work For Firms With Pension
Plans. In 1997, of the 48 million women workers employed full time, 30 million (63
percent) worked for a firm with a plan. Among the 20 million women employed part
time in 1997, only 7 million (36 percent) worked for a firm sponsoring a pension plan.
Women Who Work Part time Are Less Likely to Participate in Pension Plans.
Among women employed by firms sponsoring pension plans, those employed on a part-
time basis are far less likely to participate in the plan, primarily because plans often
exclude employees working less than 1,000 hours per year. Of the 30 million full-time
women workers in 1997 employed with firms with plans, 24 million (80 percent)
participated in the plan. Of the 7 million part-time women workers employed by firms
with plans, only 3 million (41 percent) participated in the plan.
Vesting Rate is Higher for Women Who Work Full time. For women participating in
a pension plan the vesting rate is higher for those who work full time, particularly for
those with less than five years of service. In 1993, 64 percent of women with less than
five years of service who were employed full time in private sector jobs reported that they
were vested, compared to 56 percent of women employed part time. A total of 325,000
women with less than five-years of pension service in a part-time job reported that they
were not vested.²⁷
Women Have Smaller Non-Pension Wealth as Well.
Median Net Worth Is Lower for Women. In 1993, the median female householder
aged 65 or older had $9,560 in financial net worth (not including equity in own home).
In comparison, the median male householder had $12,927, and the median married
couple had $44,410.²⁸
Women and Retirement Security
16
V. CONCLUSION
As discussions of Social Security reform continue, it will be important to study the
impacts of comprehensive reform proposals on women. The design of reforms must take into
account, not only the current characteristics of elderly women, but also the changes in their
needs that are likely to come about in the 21st century as more women with long work
histories reach retirement. In addition, reforms should consider the entire range of sources of
retirement income available to women and how Social Security can best fit into the overall
retirement security package.
Women and Retirement Security
17
ENDNOTES
1.
Social Security Administration, Office of Policy, October 1998.
2.
Bureau of the Census, Poverty in the United States: 1997, September 1998.
3.
Social Security Administration, Office of Policy, October 1998.
4.
Social Security Administration, Office of Policy, October 1998.
5.
Social Security Administration, Office of Policy, October 1998.
6.
Social Security Administration, Office of the Chief Actuary, October 1998.
7.
Social Security Administration, Office of Policy, October 1998.
8.
These calculations make the assumption that other income would not change if Social Security
were not available.
9.
Social Security Administration, Office of the Chief Actuary.
10.
Bureau of Labor Statistics, Current Population Survey, October 1998.
11.
Social Security Administration, Office of Policy, October 1998.
12.
Social Security Administration, Office of the Chief Actuary, October 1998.
13.
Social Security Administration, Office of the Chief Actuary.
14.
The average benefit based on women's own earnings is the average for only those women claiming
benefits as retired workers. Thus, it does not include the 37.5 percent of aged female beneficiaries
who receive benefits as wives or widows only. Including these additional beneficiaries with full
"worker" benefits of zero in the average would reduce the average full benefit for women as a share
of the average full benefit for men to 39 percent.
15.
Social Security Administration, Office of the Actuary.
16.
The average benefit for retired female workers based on their own earnings records is calculated
using only those women claiming benefits as retired workers. In the future, increased labor market
experience will be divided between increased years of work for women who already have been
receiving retired worker benefits, and additional women becoming eligible for worker benefits. As
more women claim benefits as retired workers, many of the additional women will have earnings
below the average for women already claiming as retired workers. This expansion of the population
used in calculating the average explains in part why the average is forecast to rise only from 62 to
67 percent of the average for men even as cohorts of women retire with much greater labor market
experience.
17.
Social Security Administration, Office of the Actuary.
Women and Retirement Security
18
18.
The subsequent estimates are based on integrating evidence from a number of studies, including the
following: Hurd, Michael D. (1990). "Research on the Elderly: Economic Status, Retirement, and
Consumption Savings," Journal of Economic Literature, XXVIII(2): 565-637. Holden, Karen
(forthcoming). "Insuring Against the Consequences of Widowhood in a Reformed Social Security
System," In National Academy of Social Insurance, Framing the Social Security Debate: Values,
Politics, and Economics, Brookings Institute. Holden, Karen C., Richard V. Burkhauser, and Daniel
A. Myers (1986). "Income Transitions at Older Stages of Life: The Dynamics of Poverty," The
Gerontologist, 26(3): 292-297.
19.
Holden, Karen (forthcoming). "Insuring Against the Consequences of Widowhood in a Reformed
Social Security System," In National Academy of Social Insurance, Framing the Social Security
Debate: Values, Politics, and Economics, Brookings Institution. Holden, Karen C., Richard V.
Burkhauser, and Daniel A. Myers (1986). "Income Transitions at Older Stages of Life: The
Dynamics of Poverty," The Gerontologist, 26(3): 292-297.
20.
Department of Labor, Current Population Survey, September 1994.
21.
Department of Labor, Current Population Survey, September 1994.
22.
Department of Labor, Current Population Survey, September 1994.
23.
Gustman, Alan, Olivia Mitchell, Andrew Samwick, and Tom Steinmeier. Forthcoming. "Pension
and Social Security Wealth in the Health and Retirement Study." Wealth, Work, and Health:
Innovations in Measurement in the Social Sciences, editors, James P. Smith and Robert Willis. Ann
Arbor, Michigan: University of Michigan Press.
24.
Department of Labor, Current Population Survey, April 1993.
25.
Department of Labor, Current Population Survey, April 1993.
26.
Unless otherwise noted, data in this section are from the Department of Labor, Current Population
Survey, March 1998.
27.
Department of Labor, Current Population Survey, April 1993.
28.
Bureau of the Census, Asset Ownership of Households: 1993, August 1995.
Women and Retirement Security
19
THE CLINTON-GORE ADMINISTRATION
FY2001 BUDGET:
MAINTAINING FISCAL DISCIPLINE
WHII MAKING KEY INVESTMENTS
Summary Documents
FEBRUARY 7, 2000
TABLE OF CONTENTS
I.
Summary
II. Overall Framework for the FY2001 Budget
Budget Framework
Medicare
Social Security
New Opportunity Agenda
Health Insurance Coverage
Targeted Tax Relief
III. Clinton-Gore Economic Record
The Economy Then and Now
Paying Off the Debt
A Smaller, But More Progressive Government
IV. Highlights of the FY2001 Budget
Education and Training
Child Care
Health Care
Environment
Working Families
Community Empowerment
From Digital Divide to Digital Opportunity
Research & Development
Safe Communities
United States Leadership in the World
America's Armed Forces
Restoring Fairness to Legal Immigrants
Tobacco Policy
Farm Safety Net
Building One America
V. Charts
the
I. SUMMARY
the
01/04
of
THE CLINTON-GORE ADMINISTRATION'S FY2001 BUDGET: MAINTAINING FISCAL
DISCIPLINE WHILE INVESTING IN THE AMERICAN PEOPLE
When President Clinton was elected. he implemented an economic plan which consisted of restoring
fiscal discipline, investing in people, and opening markets abroad. The Clinton-Gore Administration
are submitting their eighth budget - and their fourth balanced budget. Like the previous budgets, this
one not only maintains fiscal discipline but continues to make important investments in the American
people.
FISCAL DISCIPLINE: CONTRIBUTING TO THE LONGEST EXPANSION IN U.S.
HISTORY
President Clinton entered office determined to unleash the productive potential of the American people
by putting the government's fiscal house back in order. As a result of fiscal discipline, interest rates
have fallen and private investment has boomed, contributing to the longest expansion in U.S. history.
Record budget deficits have been erased. In 1992 the deficit was a record $290 billion and CBO
projected that it would grow to $455 billion by 2000. Instead we have a projected $167 billion
surplus, the third one is a row. That is $622 billion less savings drained by the government in one
year alone.
The largest pay-down of debt in history: $297 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 $157 billion in debt held by the public this fiscal year. That will bring the total debt pay
down to $297 billion - - the largest three-year debt pay down in American history. In contrast,
under Presidents Reagan and Bush, the debt held by the public quadrupled.
Smallest government in over three decades while increasing key investments in our people.
Government spending has declined from 22.2 percent of the economy in 1992 to 18.7 percent of
the economy in 1999 - the lowest share since 1966. At the same time, the government has made
important investments, including nearly doubling investments in education and training.
Tax burden for typical families is the lowest since the 1970s. At the same time, the typical
American family will shoulder the lowest Federal tax burden since 1978.
Investment has boomed. The benefits of fiscal discipline for our economy have been enormous.
Interest rates are lower than they would have been otherwise, helping to fuel seven consecutive
years of double-digit investment growth for the first time in our Nation's history. That is a 12.1
percent real annual increase in investment in business equipment and software since 1993 -
compared to 4.7 percent annual growth from 1981 to 1992.
Unemployment is the lowest in a generation. The unemployment rate in January 2000 was 4.0
percent - the lowest in 30 years - and America has created 20.8 million jobs since January 1993,
with 92 percent - 19.2 million - of these in the private sector. At the same time, the underlying
core rate of inflation was 1.9 percent in 1999 - the lowest rate since 1965.
The longest economic expansion in history. The economy is entering its 107th month of
economic expansion - the longest economic expansion in U.S. history.
A BALANCED AND FISCALLY RESPONSIBLE BUDGET
President Clinton's FY2001 budget provides a balanced and fiscally responsible framework to
eliminate the debt by 2013, strengthen the solvency of Social Security and Medicare, and invest in key
priorities like health and education. Under the President's budget:
The debt would be paid off by 2013. President Clinton has proposed to use the entire Social
Security surplus, $2.2 trillion over 10 years, for debt reduction. In addition, over the next 10 years
he would dedicate $350 billion of the $746 billion non-Social Security surplus to debt reduction,
with the vast majority of it being used to extend Medicare solvency. That is nearly half of the non-
Social Security surplus for debt reduction. The President's budget is projected to pay off the debt
held by the public by 2013, the first time America will have been debt free since 1835.
Discretionary spending would be kept at tight but realistic levels. The President's Budget is
Based on a realistic, fiscally conservative plan that maintains our domestic priorities, including
national defense, education, law enforcement, public health, the environment, and veterans
programs. The President's budget precludes the use of emergency spending except in the case of
truly unforeseen emergencies, and it makes sure that all spending is accounted for in the
appropriate year. The budget proposes to keep the growth of spending slightly below the rate of
inflation.
Medicare solvency would be extended for over a decade to at least 2025. The President's
FY2001 budget dedicates $432 billion over 10 years - an amount equivalent to over half the on-
budget surplus - to strengthen and modernize Medicare to prepare it for the health, demographic,
and financing challenges of the 21st Century.
Social Security solvency would be extended to at least 2050. The President would ensure that
the benefits of the debt reduction that are due to Social Security are used to extend the life of Social
Security. He would do this by devoting the entire Social Security surplus to debt reduction and
then earmarking the interest savings from this debt pay-down to Social Security. These transfers
would extend the life of Social Security to 2050. If a prudent portion of the transfers were invested
for higher returns, solvency would be extended to 2054.
Health coverage would broaden. The President's budget also invests $110 billion over 10 years
in a number of policies that would efficiently expand coverage to at least 5 million uninsured
Americans and expand access to millions more by building on current options. Together with the
State Children's Health Initiative enacted in 1997, that would cover 10 million uninsured people.
TAX RELIEF FOR WORKING FAMILIES
President Clinton is proposing significant new tax relief for America's working families as part of a
budget framework that maintains our fiscal discipline, makes investments in key priorities, strengthens
the solvency of Social Security and Medicare, and pays down the debt by 2013. The President
proposes $351 billion of gross tax cuts over 10 years - of which $256 billion are paid for out of the
surplus and $96 billion are paid for with corporate loophole closers and other measures. Highlights of
the tax package include:
Retirement Savings Accounts (RSAs). The President proposes a tax cut to provide generous and
progressive incentives to encourage families to save and invest. (Cost: $54 billion over 10 years.)
Tax Incentives to Encourage Small Businesses to Offer High-Quality Pensions. The President
would propose a 50 percent tax credit for employer's contributions to high-quality pensions. (Cost:
$17 billion.)
College Opportunity Tax Cut. A College Opportunity Tax Cut to provide a choice between a tax
deduction or a 28 percent tax credit on up to $10,000 in tuition in order to make college, graduate
school, and courses taken for a job more affordable. (Cost: S30 billion.)
School Construction. Tax credits for $25 billion of bonds for the construction and modemization
of up to 6,000 schools. (Cost: $8 billion.)
Earned Income Tax Credit. The President's budget would increase and expand the Earned
Income Tax Credit to better reward work and family, reducing poverty for families with three or
more children. (Cost: $23 billion.)
Marriage Penalty and Broad Tax Relief. The President's proposal would reduce the marriage
penalty by increasing the standard deduction by more than $2,000 for married, two-earner couples.
(Cost: $45 billion.)
Alternative Minimum Tax Relief. The President proposes to ensure that the Alternative
Minimum Tax does not penalize large families who play by the rules. (Cost: $33 billion.)
Long-term Care. A $3,000 long-term care tax credit to compensate people with long-term care
needs or their caregivers for the cost of care. (Cost: $27 billion.)
Tax Credits for Medicare 55-65 and Americans In Between Jobs. The President's budget
would provide tax credits to help make his Medicare buy-in proposal affordable and to for people
in between jobs. (Cost: $12 billion.)
Child Care. The President's proposal would expand the child care tax credit to defray up to 50
percent of expenses and make it refundable in order to help working families afford child care.
(Cost: $30 billion.)
New Markets Tax Credit. More than double the proposed New Markets tax credit to spur $15
billion of private investment in New Markets. (Cost: $5 billion.)
Empowerment Zones. The President's proposes to extend and expand Empowerment Zone tax
cuts and to give all Empowerment Zones the same wage and business tax incentives. (Cost: $4.4
billion.)
Better America Bonds. The President proposes to establish $10.75 billion of Better America
Bonds to allow State, local, and tribal governments to borrow interest free in order to preserve
green space, create or restore urban parks, protect water quality and clean up brownfields. (Cost:
$3 billion.)
Energy Efficiency. In order to improve energy efficiency and help the environment, the President
proposes $9 billion in tax credits for energy-efficient cars, homes, and appliances. (Cost: $9
billion.)
Philanthropy. Encouraging philanthropy by allowing non-itemizers to take a tax deduction for
charitable giving, improving the tax treatment of foundations, and allowing larger donations of
stock and assets by individuals. (Cost: $14 billion.)
MOVING FORWARD ON AN INVESTMENT AGENDA
Education and Training:
Largest Head Start Expansion in History. An increase in Head Start's funding by $1 billion -
the largest funding increase ever proposed for the program - to provide Head Start and Early Head
Start to approximately 950,000 children.
Universal After-School for Students in the Most Need. $1 billion in the 21st Century
Community Learning Centers program to help ensure that every child in every failing school can
have a safe place to learn during the after school and summertime hours.
Accountability Fund. An increase in funding from $134 million to $250 million to turn around
failing schools.
Class Size Reduction. $1.75 billion - an increase of S450 million - to hire 49.000 teachers in our
public schools.
Teaching to High Standards. A new S1 billion teacher quality plan to recruit. train and reward
good teachers.
School Construction and Modernization. $24.8 billion in tax credit bonds to build or modernize
up to 6,000 schools. And a new $1.3 billion initiative to provide urgent repairs for 5,000 schools
each and every year.
College Opportunity Tax Cut. A $29.8 billion tax cut over the next 10 years to make college,
graduate school, and job training more affordable for millions of families.
Increasing Support for College Access. A nearly $1 billion increase for initiatives such as the
Pell Grant, SEOG, and Work Study programs.
Keeping Young People On Track for Success. An increase of more than $200 million for
programs such as GEAR UP, TRIO, and College Completion Challenge Grants that prepare
students to take full advantage of post-secondary educational opportunities.
Bureau of Indian Affairs (BIA) School Construction and Repair. $300 million, more than
double last year's level, to replace and repair BIA-funded schools on reservations.
Child Care:
Tax Cuts to Enable Child Care. A variety of measures offering tax relief so that good child care
becomes affordable for working families.
Helping Low-Income Families Afford Child Care. Expansion of the Child Care and
Development Block Grant by $817 million in FY2001, enabling the program to provide child care
subsidies to nearly 150,000 more children next year.
Largest Head Start Expansion in History. An increase in Head Start's funding by $1 billion -
the largest funding increase ever proposed for the program - to provide Head Start and Early Head
Start to approximately 950,000 children.
Promoting Early Learning. $3 billion over five years for the Early Learning Fund to help
improve child care quality and early childhood education for children under five years old.
Health Care:
Addressing the Nation's Multi-Faceted Long-term Care Needs. A $28 billion, 10-year
investment in long-term care, the centerpiece of which is a $3,000 tax credit for people with long-
term care needs or their caregivers - tripling the credit over last year's proposal.
Patients Bill of Rights and Medical Privacy. Assuring the Quality of Health Care through a
Patients' Bill of Rights and by Protecting Medical Privacy.
Preventing Medical Errors and Improving Quality of Care. Funds to improve medical errors
prevention, patient safety research, and reporting and information dissemination.
Supporting Biomedical Research. Almost $19 billion, an increase of $1 billion over last year's
funding level, for biomedical research at the National Institutes of Health.
Combating the Spread of HIV / AIDS and Other Diseases. A variety of initiatives to curtail
HIV/AIDS and other diseases abroad and at home.
Environment:
Protecting our Environment and Public Health: Overall, President Clinton and Vice President
Gore propose a record $42.5 billion in FY2001 - an 11 percent increase over FY2000 and a 36
percent increase over FY 1993 - to protect our natural resources, communities and families.
A Permanent Lands Legacy for America. $1.4 billion, the largest one-year investment ever in
helping communities protect wildlife and open space; saving natural and historic treasures; and
providing special assistance to coastal areas. In addition, the President is proposing a new.
protected budget category to preserve this higher level of funding in future years.
Meeting the Challenge of Global Warming. The President is proposing $2.4 billion - a 42
percent increase - to combat global climate change, and $1.7 billion for scientific research into
factors influencing climate and the likely consequences of global warming.
Protecting Forests and Biodiversity Around the World. $150 million for a new Greening the
Globe initiative to help stem the loss of forests worldwide.
Building Livable Communities. $9.3 billion, a 14 percent increase, for the Administration's
Livable Communities initiative to help communities grow in ways that enhance quality and strong
economies.
Working Families:
Helping Low-Income Families Get to Work. The President's budget will make it easier for
working families to own a reliable vehicle and receive food stamps by allowing states to conform
their food stamp vehicle policy with a more generous TANF vehicle policy. The budget also
proposes to double Access to Jobs transportation funding to $150 million to expand grants to
communities to develop innovative public transportation solutions that help people get to work.
Helping Millions Move from Welfare to Work. Since January 1993, the welfare rolls have
fallen by more than half, from 14.1 million to 6.9 million. Three years after enactment of the
welfare reform law, the number of Americans on welfare is at its lowest level since 1969. The
President and Vice President will continue these policies and work to see that the federal
government fills its job openings with former welfare recipients when appropriate.
Ensuring Equal Pay. $27 million for the Equal Pay Initiative, an increase of $12 million over
Fiscal Year 2000, to provide training and assistance to employers on how to comply with equal pay
requirements, to launch a public service announcement campaign on wage issues, to train women
in nontraditional jobs, and other measures.
Fathers Work/Families Win Grants. $255 million in new competitive grants to promote
responsible fatherhood and support working families, critical next steps in reforming welfare and
reducing child poverty.
Community Empowerment:
The New Markets Initiative. Significant new tax credits and loans guarantee incentives to
stimulate $22 billion of new private capital investments in economically distressed communities
and build a network of private investment institutions to funnel credit, equity and technical
assistance to businesses in America's new markets. In addition, the budget proposes a new
initiative, known as First Accounts, to provide low-cost bank accounts to working families.
Empowerment Zones. The President's proposes to extend and expand Empowerment Zone tax
cuts and to give all Empowerment Zones the same wage and business tax incentives. The
Administration will also fight for the full $150 million in annual funding for the Second Round of
Empowerment Zones.
Creation of the Delta Regional Authority. $153 million for the creation of a new Delta Regional
Authority to bring the resources of a Federal-state partnership to the fight for economic growth in
the Mississippi Delta region.
Expanding Housing Vouchers. $690 million for 120,000 new housing vouchers to subsidize the
rents of low-income families.
Encouraging Philanthropy. $14 billion over 10 years for a comprehensive package of new tax
proposals to encourage philanthropy.
From Digital Divide to Digital Opportunity:
Private Sector Involvement in Bridging the Digital Divide: S2 billion over 10 years in tax
incentives to encourage private sector donation of computers, sponsorship of community
technology centers. and technology training for workers.
Teacher Training: $150 million to help train all new teachers entering the workforce to use
technology effectively in the classroom.
Community Technology Centers: $100 million to create up to 1,000 Community Technology
Centers in low-income urban and rural communities.
Public-Private Partnerships for Home Access: $50 million for a public/private partnership to
expand home access to computers and the Internet for low-income families.
Research & Development:
Biomedical Research. $1 billion increase in biomedical research at the National Institutes of
Health.
Nanotechnology. $495 million for the National Nanotechnology Initiative - an increase of 83
percent.
National Science Foundation. A $675 million increase in the NSF's budget - double the largest
dollar increase in its history.
Safe Communities:
21st Century Policing Initiative. The initiative funds: 50,000 more police for our streets by
FY2005; access for law enforcement to the latest crime-fighting technologies; collaboration
between new prosecutors and local law enforcement; and public-private partnerships to prevent
crime.
Stopping Crime by Stopping Drugs. $215 million - doubling current funding - to move more
offenders off of drugs and away from crime.
Safe Schools. $250 million - a $100 million increase - for the Safe Schools/Healthy Students
Initiative to help communities develop community-wide responses to school and youth violence.
Supervising Released Offenders: Project Reentry. $60 million for a community supervision
initiative to create "reentry partnerships" and "reentry courts" to address community safety
concerns, lower recidivism rates, and promote responsible fatherhood among offenders returning to
communities.
Reauthorization of the Violence Against Women Act. The President's budget also includes
$516 million to combat domestic violence.
Improving Law Enforcement in Indian Country. $439 million, an increase of $103 million over
FY2000, for the Departments of Justice and Interior for the third year of the President's Indian
Country Law Enforcement Initiative.
Largest National Gun Enforcement Initiative in History. $280 million for the largest national
gun enforcement initiative in history, including funding for: 500 ATF agents and inspectors; 1,000
gun prosecutors; comprehensive crime gun tracing; a new national integrated ballistics information
network; and local anti-gun violence media campaigns.
Funding Innovative Smart Gun Technology. $10 million to fund the expansion, testing and
replication of "smart" gun technologies that can limit a gun's use to its adult owner or other
authorized users.
Strengthening Brady Background Checks. Doubling funding to $70 million for improvements
in state criminal history records and in the speed and accuracy of Brady background checks.
United States Leadership in the World:
Kosovo. $175 million to bolster democracy in Kosovo and help the democratic opposition in
Serbia.
Southeast Europe Initiative. $428 million to promote the political and economic integration of
the Balkans into Europe and into the global community and economy.
Middle East Peace. $1.8 billion from the Economic Support Fund (ESF) and $3.4 billion from
Foreign Military Financing (FMF) to support the next phase of negotiations between Israel and its
neighbors.
Expanded Threat Reduction Initiative (ETRI). $974 million to contain the spread of weapons
of mass destruction (WMD) from the former Soviet Union and to promote stability.
Colombia Assistance. $954 million in FY2000 emergency supplemental appropriations plus $318
million in new FY2001 for drug interdiction in Colombia.
Debt Forgiveness. $600 million for a U.S. contribution to the Heavily Indebted Poor Country trust
fund over three years, including a $210 million supplemental request in FY2000. The budget also
includes $37 million for the Tropical Forest Initiative, to use debt relief funds in support of
conservation.
AIDS/Vaccines. To combat AIDS and other infectious diseases, especially in the developing
world, the budget proposes $100 million for AIDS prevention, $50 million for the Global Alliance
for Vaccines and Immunizations, increased funding for vaccine research, and a new tax credit that
will encourage the development of vaccines.
Expanding the Fight Against Abusive Child Labor. More than double combined investments in
child labor from customs enforcement to helping children move out of dangerous work situations
and into schools.
America's Armed Forces:
Increased Funding. Discretionary funding of $292.2 billion in budget authority and $278.6
billion in outlays for 2001 to strengthen our armed forces, an increase in $11.3 billion over the
proposed 2000 level and $4.8 billion over the 2001 level assumed in the 2000 budget.
Enhancing Military Readiness. The current high level of readiness is the Administration's top
defense priority. Increased funding will enable the Services to support unit operations and joint
exercises, meet their required training standards, maintain their equipment in top condition, recruit
and retain quality personnel. and procure sufficient spare parts and other equipment.
Modernizing Weapons Systems. $60.3 billion for the procurement program, which is $6.1 billion
more than the 2000 level, to maintain our status as the best equipped armed force in the world.
Developing Missile Defenses. $1.9 billion in 2001 for an National Missile Defense system plus
$2.8 billion for other missile defense technologies and systems.
Restoring Fairness to Legal Immigrants:
Overall, $2.5 billion over five years to restore critical disability, health, and nutrition benefits to
additional categories of legal immigrants.
Tobacco Policy:
A 25 cents per pack excise beginning in FY2001 to raise further the price of tobacco products from
the 45-cent increase agreed to by the states and the industry in 1998.
$3,000 assessment charged to the tobacco industry for every smoker under age 18 starting in 2004
if youth smoking has not been cut in half and to remain in effect until the youth smoking reduction
goal has been met.
Farm Safety Net:
Farm Safety Net for Family Farmers. Overall, an $11 billion package to strengthen the farm
safety net through 2002, when the next farm bill will be enacted to repair the weaknesses of the
1996 Farm Bill.
Income Assistance. An estimated $2.5 billion for the 2000 crop and $3.1 billion for the 2001 crop
on counter-cyclical farm income support payments.
Building One America:
Civil Rights Enforcement. $698 million - a 13 percent increase - for civil right enforcement
agencies.
Ensuring Equal Pay. $27 million for the Equal Pay Initiative, an increase of $12 million, to fund
a variety of measures aimed at reducing disparities of pay between men and women who perform
similar jobs.
Hate Crimes. $20 million to train Federal, state, and local law enforcement to prevent and
respond to hate crimes and to promote police integrity.
Native American Initiative. $9.4 billion - an increase of $1.2 billion - to fund school
construction and repair and infrastructural upkeep on Indian reservations as well as budgetary
increases for tribal colleges, the Indian Health Service, the President's Indian Country Law
Enforcement Initiative, and other programs as well.
II. OVERALL FRAMEWORK
FOR THE FY2001 BUDGET
Budget Framework
Medicare
Social Security
New Opportunity Agenda
Health Insurance Coverage
Targeted Tax Relief
BUDGET FRAMEWORK
President Clinton Proposes a balanced and fiscally responsible budget that eliminates the debt,
strengthens the solvency of Social Security and Medicare, and invests in key priorities like health and
education. By balancing competing needs and maintaining fiscal discipline, the President's budget
continues the successful strategy that has fostered the longest economic expansion in the Nation's
history. Over 10 years, it uses the entire $2.2 trillion Social Security surplus for debt reduction and
devotes nearly half of the $746 billion non-Social Security surplus to debt reduction. Under the
President's budget:
The debt held by the public would be paid off by 2013, resulting in lower interest rates and a
stronger economy.
Medicare solvency would be secured for at least 10 years to 2025, Medicare would be reformed to
make it more efficient and competitive, and its benefits modernized with a new prescription drug
benefit.
The Social Security surplus would be dedicated to paying down the debt, and Social Security
solvency would be extended to at least 2050.
The budget framework is based on realistic discretionary spending levels that include investment in
key priorities like education, health care, environment, public safety, and national security, while
keeping overall spending growth slightly below inflation.
A set of fair and responsible targeted tax cuts would provide tax relief for middle-class Americans
while helping them save for retirement.
The President's Balanced and Responsible Budget Will Help Keep the Economy Strong,
Building on the Progress That He Has Made in Bringing America's Fiscal House Back in Order.
According to the Office of Management and Budget, in 2000 the debt held by the public will be $2.4
trillion lower than it was projected to be when the President came into office. This achievement has
kept interést rates down and confidence and investment up, contributing to the strongest American
economy and fiscal position in generations.
The $167 billion surplus this year will be the largest on record. In 1992 the deficit was $290
billion and projected to grow to $455 billion this year. As a result of the President's seven year
record on fiscal discipline, and particularly the major deficit reduction in 1993 and 1997, and the
strong economy to which it contributed, the budget surplus for this year is projected to be $167
billion, the largest dollar surplus on record. Compared with the original projections, that is $622
billion less borrowing drained by the government in one year alone.
The largest pay-down of debt in history: $297 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 $157 billion in debt held by the public this fiscal year. That will bring the total debt pay-
down to $297 billion - the largest three-year debt pay-down in American history. In contrast,
under Presidents Reagan and Bush, the debt held by the public quadrupled.
Investment has boomed. The benefits of fiscal discipline for our economy have been enormous.
Interest rates are lower than they would have been otherwise, helping to fuel seven consecutive
years of double-digit investment growth for the first time on record.
Unemployment is the lowest in a generation. The unemployment rate in January 2000 was
4.0 percent - the lowest in thirty years - and America has created 20.8 million jobs since January
1993.
President Clinton's Budget Would Pay Off the National Debt by 2013. President Clinton has
proposed to use the entire Social Security surplus, $2.2 trillion over 10 years, for debt reduction. In
addition, over the next 10 years he would dedicate $350 billion of the S746 billion non-Social Security
surplus to debt reduction. That is nearly half of the non-Social Security surplus being used for debt
reduction. The President's budget is projected to pay off the debt held by the public by 2013, the first
time America will have been debt free since 1835. Debt reduction will continue to benefit the
economy and American families:
Keeps investment and growth strong. With the government no longer draining resources from
capital markets, interest rates are lower and businesses have more funds for productive investment.
Paying off the debt would continue to help fuel investment and productivity growth while
increasing productive capacity and restraining inflation.
Saves money for families. Because of the deficit and debt reduction we have already done, it is
estimated that a typical family with a home mortgage might expect to save roughly $2,000 per year
in mortgage payments.
Saves money for taxpayers. Currently we spend 13 cents of every Federal dollar on net interest
payments. These payments, which were once projected to grow to 26 percent of all federal
spending in 2013, would be completely eliminated under the President's plan.
Prepares for the retiring baby boomers. By paying off the debt, eliminating interest payments, and
dedicating the resulting benefits to extending Medicare and Social Security solvency, debt
reduction will free up funds for investment and boost workers' productivity and incomes, helping
the Nation prepare for the challenge of the retiring baby boomers.
The President's Budget is Based on a Realistic, Fiscally Conservative Plan That Maintains Our
Domestic Priorities, Including National Defense, Education, Law Enforcement, Health, the
Environment, and Veterans Programs. The President's budget precludes the use of emergency
spending except in the case of truly unforeseen contingencies, and it makes sure that all spending is
accounted for in the appropriate year. The budget proposes realistic, fiscally conservative levels of
spending that respond to the Nation's most pressing needs.
Smallest government as a share of the economy since 1966. The President's proposal builds on a
record of fiscal discipline. President Clinton's fiscal discipline has helped bring spending down
from 22.2 percent of the economy in 1992 to 18.7 percent of the economy in 1999 - the lowest
share since 1966. Non-defense discretionary spending is now smaller as a share of the economy
than any time on record (comparable data go back to 1962). In contrast, Federal government
spending increased from 21.6 percent of GDP in 1980 to 22.2 percent in 1992.
Spending growth slightly below inflation. The President's budget is based on spending plans that
are tight but realistic, keeping overall discretionary spending growth slightly below inflation.
Invests in expanding health insurance to working Americans. The President's budget also invests
$110 billion over 10 years in a number of policies would efficiently expand coverage to at least 5
million uninsured Americans and expand access to millions more by building on current options.
Together with the State Children's Health Initiative enacted in 1997, that would cover 10 million
uninsured people.
MEDICARE
The President's FY2001 budget dedicates $432 billion over 10 years - the equivalent of over half of
the non-Social Security surplus - to strengthen and modernize Medicare. It includes a new, multi-
billion dollar reserve fund that can be used to add protections against catastrophic drug costs to the
President's prescription drug benefit. This financing commitment is part of the comprehensive reform
plan that the President unveiled last June which is also included in the budget. This plan makes
Medicare more fiscally sound, competitive, and efficient and it modernizes Medicare's benefits,
including the provision of a long-overdue prescription drug benefit. The reforms coupled with the
surplus dedication would extend the life of its trust fund by at least 10 years to at least 2025.
Making Medicare More Fiscally Sound, Competitive and Efficient. Since taking office, President
Clinton has worked to pass and implement Medicare reforms that, coupled with the strong economy
and the Administration's aggressive anti-fraud and abuse enforcement efforts, have saved hundreds of
billions of dollars and helped to extend the life of the Medicare Trust Fund from 1999 to 2015. Yet,
the doubling of Medicare enrollment with the retirement of the baby boom generation, coupled with
the potential return of higher health cost growth in the future, will create unavoidable financing
challenges for Medicare. Because the President is committed to not passing this burden on to the next
generation, he has proposed a strong plan that not only provides the needed, new financing but
provides the program with new private-sector tools and injects competition into the program.
Specifically, the plan:
Allocates Nearly Three-fourths of Medicare Investment to Trust Fund Solvency. It would be
impossible to pay for a doubling in Medicare enrollment through competition, provider payment
savings or beneficiary premium increases alone. To address the future financing shortfall, the
budget dedicates $299 billion of the surplus to Medicare over 10 years which not only helps to
extend the financial health of the Trust Fund through 2025, but reduces publicly held debt since
these funds will not be available for tax cuts or other spending.
Gives Traditional Medicare New Private Sector Purchasing and Quality Improvement Tools.
The President's proposal would make the traditional fee-for-service program more competitive
through the use of market-oriented purchasing and quality improvement tools to improve care and
constrain costs. It would provide new, broader authority for competitive pricing for current
Medicare services, use of private disease management services that have demonstrated higher
quality, coordinated care for beneficiaries with chronic illnesses, and other best-practice private
sector tools.
Improves Price Competition in Medicare through the "Competitive Defined Benefit"
Program. The Competitive Defined Benefit proposal would, for the first time, inject true price
and quality competition into Medicare. While keeping the same Part B premium for those
remaining in the traditional program, the policy would allow beneficiaries to pay lower premiums
for choosing efficient private plans. Specifically, beneficiaries would have their Part B premium
reduced by 75 cents of every dollar of savings that the private plan generates. For example, if a
person chose a plan that saved $10 they would get $7.50 reduced from their premiums every
month. Price competition would make it easier for beneficiaries to make informed choices about
their plan options and would, over time, save money for both beneficiaries and the program.
Constrains Out-year Medicare Spending Growth and Continues to Ensure Program
Integrity. Since President Clinton took office. the life of the trust fund has been extended from
1999 to 2015 and spending growth has been reduced by two-thirds. But as health inflation
increases; experts suggest that average Medicare spending growth per beneficiary will almost
double for 2003-2010 compared to 1998-2002. The FY2001 budget includes the anti-fraud and
waste proposals from the FY2000 budget and moderated out-year savings proposals to protect
against a return to excessive growth rates.
Savings from Medicare total $70 billion over 10 years. The budget preserves its commitment to the
Balanced Budget Refinement Act, recognizing that in some cases Balanced Budget Act payment
reductions were excessive. This budget's savings are about 33 percent less than the budget and reform
plan savings proposed last year.
Modernizing Medicare's Benefits. Unlike virtually all private health plans, Medicare does not cover
prescription drugs. Over three in five lack dependable insurance coverage for drugs. As such, those
with the highest need pay the highest prices. The President's budget adds a long-overdue prescription
drug benefit, and also improves preventive services and rationalizes cost sharing. Specifically, the
plan:
Establishes a New Voluntary Medicare Prescription Drug Benefit that is Affordable to All
Beneficiaries and the Program. The drug benefit costs $160 billion over 10 years; including
savings, the net cost of the President's Medicare proposals would be $98 billion over 10 years.
The voluntary prescription drug benefit would be:
Accessible and voluntary. Optional for all beneficiaries. Provides financial incentives for
employers to develop and retain their retiree health coverage
Affordable for beneficiaries and the program. Premiums of $26 per month in the first year with
lower or no premiums for low-income beneficiaries. Provides privately-negotiated discounts,
gained by pooling beneficiaries' purchasing power, for all drug expenses. Has no deductible
and pays for half of each beneficiary's drug costs from the first prescription filled each year up
to $5,000 in spending when fully phased in. Discounts continue after limit is reached.
Competitively and efficiently administered. Competitively selects private benefit manager to
deliver benefit to enrollees in traditional program. No price controls, no new bureaucracy.
Integrated into current eligibility and enrollment systems.
High-quality and provide necessary medications. Private entities that use formularies must
ensure access to medications off formulary if physician deems medically necessary. Requires
use of state-of-the-art quality improvement tools.
Creates a Medicare Reserve Fund to Add Protections for Catastrophic Drug Costs. To build
on the President's prescription drug benefit, the budget includes a reserve fund of $35 billion for
2006 through 2010, available to design protections for beneficiaries with extremely high drug
spending. This reserve will permit the Administration to work in collaboration with Congress to
design this enhanced prescription drug benefit. If no consensus emerges, the reserve would be
used for debt reduction.
Improves Preventive Benefits in Medicare. This proposal would:
Eliminate the existing deductible and copayments for preventive services, including colorectal
cancer screening, bone mass measurements, pelvic exams, prostate cancer screening, diabetes
self management benefits, and mammographies.
Develop and design a 3-year demonstration project on smoking cessation services.
Rationalizes Cost Sharing. As proposed last year, the plan would rationalize the current cost
sharing requirements for Medicare by:
Re-instating 20 percent coinsurance and the Part B deductible for clinical laboratory services.
The modest lab copayment would help prevent overuse and reduce fraud.
Indexing the Part B deductible for inflation. Over time, inflation decreases the amount of the
deductible in real terms. The deductible has been $100 since 1991 and has only been increased
three times since Medicare was created. The deductible would keep pace with inflation under
this proposal.
Reforms Medigap. The plan would reform private insurance policies that supplement Medicare
(Medigap) by: (1) working with the National Association of Insurance Commissioners to add a
new option with low copayments and to revise existing plans to conform with the President's
proposals; (2) directing the Secretary of HHS to determine the feasibility and advisability of
reforms to improve supplemental cost sharing in Medicare; (3) providing easier access to Medigap
if a beneficiary is in an HMO that withdraws from Medicare; and (4) including people with
disabilities and end stage renal disease (ESRD) in the initial 6 month open enrollment.
SOCIAL SECURITY
In his FY2001 budget, the President proposes a specific plan to extend the solvency of Social Security.
For almost 65 years, Social Security has been an unshakable covenant among generations. It provides
a bond between workers and retirees, between the disabled and the able bodied. The President's
proposal would build on this historic period of prosperity and budget surpluses to strengthen Social
Security. The President's plan reserves the entire Social Security surplus for Social Security and debt
reduction, and earmarks the benefits of paying down the debt held by the public to extend the solvency
of Social Security. According to projections by the independent Office of the Actuary at the Social
Security Administration, the President's proposed transfers would extend the solvency of Social
Security to 2050. If a prudent portion of the transfers were invested for higher returns, solvency would
be extended to 2054. The President's plan to strengthen Social Security is a central part of his fiscally
disciplined framework to pay off the debt held by the public by 2013.
Social Security is the Cornerstone of our Retirement System. Social Security is the principal
source of retirement income for two-thirds of the elderly. In 1959, the poverty rate for senior citizens
was 35.2 percent. In 1998, it was 10.5 percent - the lowest on record. Last year, Social Security
benefits lifted roughly 15 million senior citizens out of poverty, but it must be noted that poverty
remains too high for widows and other groups. And Social Security is more than just a retirement
program. One in five beneficiaries is under the age of 62, receiving either disability benefits or
survivors benefits.
Social Security is Projected to Become Insolvent By the End of 2034 As a Result of Demographic
Pressures. Currently, Social Security takes in more payroll taxes than it pays out in benefits, and is
building up its trust fund to pay future beneficiaries. But, as the baby boomers retire and life
expectancies continue to rise, the number of people age 65 and over is projected to double - from 35
million in 1998 to 72 million in 2035. In 1960, there were 5.1 covered workers for every Social
Security beneficiary. In 1999 there were only 3.4 workers for every beneficiary. And by 2035, there
are projected to be only 2.0 workers for every beneficiary.
The President's Plan Devotes Social Security Surpluses to Debt Reduction. The President's
proposal devotes the entire Social Security surplus to paying down the debt held by the public. This is
projected to reduce the debt held by the public by $2.2 trillion over the next 10 years and produce
interest savings.
The President Uses the Interest Savings To Extend the Solvency of Social Security. Although the
so-called lockboxes proposed by Republicans would have used any interest savings to pay for an
exploding tax cut, the President proposes to use the interest savings for the purpose of extending the
solvency of Social Security. As an additional safeguard for fiscal responsibility, the President
proposes to limit the amount of the transfers to the available on-budget surpluses that are currently
projected to result from the President's fiscally disciplined framework.
The President's Plan Transfers the Interest Savings to the Social Security Trust Fund From 2011
to 2050. The Social Security actuaries project that the interest savings that would occur from the
reduction in publicly held debt due to transfers alone would total $99 billion in 2011 and grow to $205
billion in 2016. Under the intermediate projections of the Social Security Trustees, these potential
interest savings would be transferred in full to the Social Security trust fund. Transfers would stay at
the 2016 level through 2050. The total transfers in the first 5 years (2011-2015), as projected by the
Social Security actuaries, would be $690 billion.
The President's Plan Extends Solvency to at Least 2050. The Social Security trust fund is currently
expected to be unable to pay benefits in full on a timely basis starting in 2034. According to
projections by the Social Security actuaries, the President's proposes interest savings transfers would
extend solvency to 2050. This is an extra 16 years added to the life of the trust fund. To put Social
Security on an even firmer financial footing, the President also provides the option of allowing a
limited and prudent portion of the transfers to be invested independently and without political
interference in broad-based equity indexes. Under this plan, the Social Security actuaries project that
the Social Security trust fund would hold about 3 percent of the total market value, on average, over
the 30-year period 2011 through 2040. The combination of prudent investment in equities and the
transfers is projected to extend the life of the trust fund to 2054.
Addressing Widow Poverty and Eliminating the Retirement Earnings Test. The President
believes that, in the context of longer-term reforms, it is essential to improve the effectiveness of
Social Security in combating widow poverty and to modernize it by eliminating the outdated
retirement earnings test.
The President's Plan Provides a Foundation on Which to Build. The President remains committed
to working together with Congress on a bipartisan basis to enact reforms that make Social Security
solvent for at least 75 years. The President's proposal provides a sound starting point for such an
agreement.
NEW OPPORTUNITY AGENDA
The Clinton-Gore Administration FY2001 budget proposes a coherent program to build on the
Nation's economic prosperity and expand its reach to every corner of America through an agenda
rooted in three core values: community, opportunity and responsibility. It comprises a range of
programs designed to ensure that working families have the tools and the opportunity to succeed.
REWARDING WORK AND HELPING FAMILIES
Expanding the Earned Income Tax Credit (EITC) to Reward Work and Family. President
Clinton proposes a $23 billion plan to expand the Earned Income Tax Credit to reward work and
family, including more relief with families with three or more children often facing the highest
poverty rates. According to estimates by the Department of the Treasury, this EITC expansion
would provide tax relief for 6.8 million working families.
Increasing the Minimum Wage. The President again proposes a $1 increase in the minimum
wage. This proposal, which builds upon President Clinton's 1996 minimum wage increase, would
help 10 million Americans - 70 percent of whom are adults and 60 percent of whom are women.
For a full-time, year-round worker at the minimum wage, this would mean an additional $2,000 per
year.
Expanding and Improving the Child Care Tax Credit for Working Families. President
Clinton will include in his FY2001 budget tax relief for families struggling to pay for child care.
As part of a comprehensive child care initiative that includes subsidy assistance and new
investments in child care quality, the President will propose to 1) make the Child and Dependent
Care Tax Credit refundable for the first time; 2) increase the level of the credit; and 3) extend the
credit to parents who stay at home to take care of their infants. The President will also propose tax
incentives to encourage businesses to provide child care for employees. The child care package
would benefit an estimated 8.1 million families and would cost $30 billion over 10 years.
Helping Families Afford Child Care. The President's budget boosts the Child Care and
Development Block Grant by S817 million in FY2001, enabling the program to provide child care
subsidies to nearly 150,000 more children next year. These new funds, combined with the child
care funds provided in welfare reform, will enable the program to serve over 2.2 million children in
2001, an increase of nearly one million since 1997.
Promoting Progressive Savings Through Retirement Savings Accounts. Retirement Savings
Accounts (RSAs) would give 76 million low- and moderate-income Americans the opportunity to
build wealth and save for their retirement through a progressive tax cut. A person who participated
in this savings program for 40 years could accumulate over $266,000 - enough to produce $24,000
a year of income in retirement.
Expanding Health Insurance Coverage to Uninsured Americans. The President and Vice
President will propose a 10-year, $110 billion initiative that would dramatically improve the
affordability of and access to health insurance for people under 200 percent of the poverty line.
The proposal would expand coverage to at least 5 million uninsured Americans and expand access
to millions more. Together with the State Children's Health Initiative enacted in 1997, that would
cover 10 million uninsured people. The Program includes a new. affordable insurance option for
families through the State Children's Health Insurance Program. In addition, in order to ensure
that people do not lose their health insurance coverage between jobs. the President will propose a
new 25 percent tax credit for COBRA continuation coverage.
Expansion of Housing Vouchers and Tax Credits for Hard Pressed Working Families. The
President's budget will include $690 million for 120,000 new housing vouchers to subsidize the
rents of low-income families, and increase and index the Low-Income Housing Tax Credit
(LIHTC) which provides incentives to build and make available affordable housing to working
families.
Additional Initiatives to Help Working Families. The President's budget will contain $255
million to promote responsible fatherhood and support working families as well as provisions that
will make it easier for working families to own a car without jeopardizing their food stamps
eligibility. These proposals are both critical steps in reforming welfare and emphasizing work.
PROMOTING OPPORTUNITY AND RESPONSIBILITY IN EDUCATION
Expanding on Early Childhood and Pre-School Programs. High quality early learning
childhood programs can significantly improve educational achievement, especially among low-
income children. President Clinton and Vice President Gore are proposing a number of different
initiatives to support this goal including:
Creation of the Early Learning Fund. The President's budget includes $3 billion over five years
for the Early Learning Fund to help improve child-care quality and early childhood education for
children under five years old. The Early Learning Fund will provide community grants for
activities that foster cognitive development, improve childcare quality and readiness for school.
The Largest Head Start Expansion in History. President Clinton and Vice President Gore have
nearly doubled Head Start - expanding funding by 90 percent since 1993. The FY2001 budget
boosts funding for Head Start by $1 billion - the largest funding increase the program has ever
experienced - to provide Head Start and Early Head Start slots to approximately 950,000 children,
nearing the President's goal of serving one million children in 2002. This builds the foundation for
the long-term goal of universal pre-school. The proposed increase for Early Head Start is $144
million.
Fixing Failing Schools, Rewarding Success and Universal After School. The President and
Vice President are committed to a comprehensive approach to improve student achievement by
investing in raising standards and increasing accountability. President Clinton's budget will more
than double the support for the Universal After-School program for students most in need; increase
support for the Accountability Fund to $250 million, boost funding for the Class Size Reduction
program to $1.75 billion, and include $120 million for a Small Schools Initiative to reinvent high
schools on a smaller and more human scale.
Expanding Opportunities to Make College More Affordable for Disadvantaged Youth by
Nearly $1 Billion. In FY2001, President Clinton budget will propose nearly $1 billion in increases
to Pell Grants, SEOG and Work Study programs and for the creation of the College Completion
Challenge Grants and Dual Degree Programs for Minority-Serving Institutions to help students
have access to and stay in college.
Increasing Resources to Keep Youth on the Track to Success by Over $400 Million. President
Clinton and Vice President Gore are dedicated to supporting critical investments in education and
will propose over $400 million in program increases to keep youth on the track to success in their
FY2001 budget. These include: an expansion of GEAR UP, increased support of the TRIO
Programs, expansion of Youth Opportunity Grants and Youth Training Formula Grants, additional
funding for Youthbuild, expanding Job Corps, and a new $20 million initiative known as
Rewarding Achievement in Youth to support comprehensive training and education services to
over 9,000 high achieving, low-income youth.
OPENING NEW MARKETS AND STRENGTHENING COMMUNITY EMPOWERMENT
Spurring $22 Billion in New Investment in Economically Distressed Areas. The President
proposes a package of tax credits and loan guarantees to more than double the New Markets Tax
Credit from last year (at a cost of $5 billion over 10 years) to spur $15 billion dollars in new
investment in community development in economically distressed areas.
Expanding and Improving the Empowerment Zones Tax Incentives. In addition, the budget
proposes to expand the Empowerment Zone tax incentives to improve economic growth in the 31
existing Empowerment Zones, as well as create a third round of 10 new empowerment zones at a
cost of $4 billion over ten years. The President will also propose creation of new investment
vehicles to help leverage private equity capital as well as expand existing programs to promote
investments and provide greater access to capital in these distressed areas.
Creating First Accounts for Low-income Americans. The President's budget will propose $30
million to: encourage the creation of low-cost bank accounts known as First Accounts; to expand
access to ATMs; and provide education low-income Americans about personal financial
management.
Increasing Funding for Native Americans Communities. In order to better serve Native
American communities in the 21st Century, the President's budget includes an increase of $1.2
billion over Fiscal Year 2000 for key new and existing programs assisting Native Americans and
Indian reservations. This initiative brings together several agencies in order to address the needs of
Native American communities comprehensively.
Moving From Digital Divide to Digital Opportunity. There is strong evidence of a "digital
divide" - unequal access to technology by income, education level, race, and geography. To
address this troubling trend, the President's budget proposes a comprehensive package to help
bridge the Digital Divide and to help create more digital opportunity for all Americans. To
increase private-sector involvement in bridging the digital divide, the President proposes $2 billion
over 10 years in tax incentives to encourage private sector donation of computers, sponsorship of
community technology centers, and technology training for workers. The President has an $150
million Teacher Training initiative to help train all new teachers entering the workforce to use
technology effectively in the classroom. The Digital Divide initiative also includes $100 million to
create up to 1,000 Community Technology Centers in low-income urban and rural communities
and $50 million for a Public-Private Partnerships for Home Access to expand access to computers
and the Internet for low-income families.
HEALTH INSURANCE COVERAGE
The President's budget includes a 10-year, $110 billion initiative that would dramatically improve the
affordability of and access to health insurance. Over 44 million Americans lack health insurance, and
this has serious consequences. The uninsured are three times likelier than the privately insured not to
receive needed medical care, and 50 to 70 percent more likely to need hospitalization for avoidable
hospital conditions like pneumonia or uncontrolled diabetes. The President's proposal would expand
coverage to at least 5 million uninsured Americans and expand access to millions more. Together with
the State Children's Health Initiative enacted in 1997, that would cover nearly a quarter of all the
uninsured people in America. It addresses the nation's multi-faceted coverage challenges by building
on and complementing current private and public programs. Specifically, the initiative will: (1)
provide a new, affordable health insurance option for families; (2) accelerate enrollment of uninsured
children eligible for Medicaid and S-CHIP, which helps children in families with income too high to
be eligible for Medicaid but too low to afford private insurance; (3) expand health insurance options
for Americans facing unique barriers to coverage; and (4) strengthen programs that provide health care
directly to the uninsured. In addition, the President has proposed a $28 billion initiative to address the
Nation's long-term care needs which, together with the health coverage initiative, would bring the cost
to $138 billion over 10 years.
Providing a New, Affordable Health Insurance Option for Families ($76 billion over 10 years,
about 4 million uninsured covered). Over 80 percent of parents of uninsured children with incomes
below 200 percent of poverty (about $33,000 for a family of four) are themselves uninsured. Yet,
while states have aggressively expanded insurance options for children through Medicaid and the State
Children's Health Insurance Program (S-CHIP), parents are often left behind. There are about 6.5
million uninsured parents with income in the Medicaid and S-CHIP eligibility range for children.
These parents frequently do not have access to employer-based insurance, and when they do, cannot
afford it. Recognizing that family coverage not only helps a large proportion of the nation's uninsured
adults but also increases the enrollment of children, the President, Vice President, the National
Governors' Association, and a wide rage of groups including Families USA and the Health Insurance
Association of America have called for building on S-CHIP to cover parents. The Administration's
budget adopts this approach by:
Creating a New "FamilyCare" Program. Under FamilyCare. states would have the option to
cover parents in the same plan as their children. States would use the same systems and follow
most of the same rules as they do in Medicaid and S-CHIP today, and the program would be
overseen by the same state agency. State spending for FamilyCare would be matched at the same
higher matching rate as S-CHIP (up to 15 percentage points higher than the Medicaid rate). To
ensure adequate funding, $50 billion over 10 years would be added to the current state S-CHIP
allotments. To access this option, states would have to first cover children to 200 percent of
poverty as 30 states now have done. Given states' enthusiastic response to S-CHIP and the NGA
support for this option, we expect strong state response and significant expansions to parents under
FamilyCare. If after 5 years. some states have not expanded coverage of parents to at least 100
percent of poverty ($16,700 for a family of 4), a fail-safe mechanism would be triggered to require
states to expand coverage to that level.
Assisting Families in Affording Private Employer-Based Coverage. FamilyCare would also
facilitate the option to pool state funding with employer contributions toward private insurance,
which can be a cost-effective way to expand coverage. Under this option, families otherwise
eligible for FamilyCare coverage could get assistance in purchasing their employers' health plan if
it meets FamilyCare standards, is cost effective, and their employer pays for at least half of the
premium. This minimum employer contribution, along with the S-CHIP crowd-out policies,
should discourage employers from reducing or dropping coverage. This option is supported by the
National Governors' Association as well.
Accelerating Enrollment of Uninsured Children Eligible for Medicaid and S-CHIP ($5.5 billion
over 10 years, an additional 400,000 uninsured children covered). Enrollment in S-CHIP doubled
to 2 million children in 1999. Despite this encouraging trend, millions of children remain eligible but
unenrolled in both S-CHIP and Medicaid. The Administration's budget includes ideas advocated by
the Vice President that would give states needed tools to increase coverage by:
Allowing School Lunch Programs to Share Information with Medicaid ($345 million over 10
years). Since 60 percent of uninsured children are in the school lunch program, sharing eligibility
information can efficiently help outreach efforts.
Expanding Sites Authorized to Enroll Children in S-CHIP and Medicaid ($1.2 billion over 10
years). This includes schools, child care resource and referral centers, homeless programs, and
other sites.
Requiring States to Make their Medicaid and S-CHIP Enrollment Equally Simple ($4.0
billion over 10 years). Most states have carried over their S-CHIP simplification strategies like
eliminating assets tests and using mail-in applications into the Medicaid program. This proposal
would have all states do so to make enrollment easier for both programs.
Expanding Health Insurance Options for Americans Facing Unique Barriers to Coverage ($28.5
billion over 10 years, about 600,000 uninsured people covered). Some vulnerable groups of
Americans often lack accèss to employer-sponsored insurance and insurance programs like Medicare
or Medicaid. These include older Americans, people in transitions (between jobs. turning 19 and
entering the workforce, leaving welfare for work), and workers in small businesses. This plan
addresses these specific and other problems by:
Establishing a Medicare Buy-In Option and Making It More Affordable Through a Tax
Credit ($5.2 billion for both the buy-in and credit over 10 years). The rate of uninsured is
growing fastest among people ages 55 to 65 and is expected to increase even faster in the future.
Recognizing this, the President and Vice President have called on Congress to pass legislation that
allows people ages 62 through 65 and displaced workers ages 55 to 65 to pay premiums to buy into
Medicare. The proposal also would require employers who drop previously-promised retiree
coverage to allow early retirees with limited alternatives to have access to COBRA continuation
coverage until they reach age 65 and qualify for Medicare. This year, to make this policy more
affordable, the President proposes a tax credit, equal to 25 percent of the premium, for participants
in the Medicare buy-in. Coupled with the tax credit for COBRA (described below), this policy will
address both access to and the affordability of health insurance for this vulnerable group.
Making COBRA Continuation Coverage More Affordable ($10.3 billion over 10 years). The
Consolidated Omnibus Budget Reconciliation Act (COBRA), passed in 1985, allows workers in
firms with greater than 20 employees to pay a full premium (102 percent of the average cost of
group health insurance) to buy into their employers' health plan for up to 18 to 36 months after
leaving their job. However, fewer than 25 percent of people eligible for this coverage participate,
in part due to cost. The Administration's budget includes a 25 percent tax credit for COBRA
premiums to reduce the number of Americans who experience a gap in coverage due to job change.
Improving Access to Affordable Insurance for Workers in Small Businesses ($313 million
over 10 years). Nearly half of uninsured workers are in firms with fewer than 25 employees. The
President proposes to give small firms that have not previously offered health insurance a tax credit
equal to 20 percent their contribution - twice the credit he proposed last year - towards health
insurance obtained through purchasing coalitions. In addition, tax incentives would be given to
foundations to help pay for start-up costs of these coalitions, and the Federal Employees' Health
Benefits Program would make available technical assistance to purchasing coalitions.
Expanding State Options to Insure Children Through Age 20 ($1.9 billion over 10 years).
Nearly one in three people ages 18 to 24 are uninsured mostly because they age out of Medicaid or
S-CHIP or no longer are dependents in private plans. However, they often do not have jobs that
offer affordable coverage. The budget would gives states the option to cover people ages 19 and
20 through Medicaid and S-CHIP.
Extending Transitional Medicaid ($4.3 billion over 10 years). Many people leaving welfare for
work take first jobs that do not offer affordable health insurance. Recognizing this, Congress
passed a requirement in 1988 that extends Medicaid coverage for up to a year for those losing it
due to increased earnings. This provision was extended in the welfare reform law to 2001. The
budget makes this provision permanent and simplifies the state and family requirements to promote
enrollment.
Restoring State Options to Insure Legal Immigrants ($6.5 billion over 10 years). States are
prohibited from providing health insurance for certain legal immigrants who entered the U.S. after
the enactment of welfare reform. The uninsured rate for people of Hispanic origin, some of whom
are legal immigrants, was 35 percent in 1998 - over twice the national average of 16 percent. The
proposal would give states the option to insure children and pregnant women in Medicaid and S-
CHIP regardless of their date of entry. It would eliminate the 5-year ban, deeming, and affidavit of
support provisions. The proposal would also provide Medicaid coverage to disabled immigrants
who would be made eligible for SSI by the FY2001 budget's SSI restoration proposal.
Strengthening Programs that Provide Health Care Directly to the Uninsured (At least $1 billion
over 10 years). Public hospitals, clinics, and thousands of health care providers give health care of the
uninsured and receive inadequate compensation for doing so. Despite a rising need, reductions in
government spending and aggressive cost cutting by private insurers has left less money in the health
care system to address these needs. The President will renew his commitment to helping these
providers by:
Increasing Funding for Increasing Access to Health Care for the Uninsured (+$100 million
for FY2001, $1 billion over 5 years). Last year, the President and Secretary Shalala proposed an
historic new program to coordinate systems of care, increase the number of services delivered and
establish an accountability system to assure adequate patient care for the uninsured and low-
income. The Congress funded an initial $25 million investment for this program. This year, the
President proposes funding this initiative at $125 million, a $100 million increase over 2000,
representing a down payment on the President's proposal to invest $1 billion in this initiative. The
Administration will also aggressively pursue an authorization to ensure that the program addresses
health care safety net needs.
Investing in Community Health Centers (+$50 million for FY2001). The budget proposes a
$50 million increase to $1.0690 billion in FY2001 to support and enhance the network of
community health centers that serve millions of low-income and uninsured Americans.
TARGETED TAX RELIEF
President Clinton has worked to deliver tax relief to America's working families. In 1993, the
President delivered a tax cut to 15 million working Americans through an expanded EITC. Then, in
1997, the President delivered a $500 child tax credit, $1,500 Hope Scholarships to make the first years
of college universally available, and expanded IRAs. The result: the lowest Federal tax burden in
more than two decades for a typical middle-income family. To build on this record of tax relief for
working families, President Clinton is proposing significant new tax relief for America's working
families as part of a budget framework that maintains our fiscal discipline, makes investments in key
priorities, strengthens Social Security and Medicare, and pays down the debt by 2013. The President
proposes $351 billion of gross tax cuts over 10 years - of which $256 billion are paid for out of the
surplus and $96 billion are paid for with corporate loophole closers and other measures.
MAKING RETIREMENT MORE SECURE BY ENCOURAGING SAVINGS
Retirement Savings Accounts (RSAs) To Help Families Save and Invest And Expand Pension
Coverage for Small Businesses. The President's Retirement Savings Accounts (RSAs) proposal
will give 76 million Americans the opportunity to build wealth and save for their retirement
through a progressive tax cut. This proposal builds on the successful model of Individual
Development Accounts (IDAs), extending generous matches to all low- and moderate-income
families to encourage them to develop savings and assets. A person who participated for 40 years
in this savings program could accumulate over $266,000 - enough to produce $24,000 a year of
income in retirement. This proposal would cost $54 billion over 10 years.
Tax Incentives For Small Businesses To Offer High-Quality Pension Coverage. In an effort to
encourage more small businesses to offer pensions for their employees, the budget provides for a
50 percent tax credit for three years of qualified contributions to employees' pensions. This
provision would cost $17 billion over 10 years.
REWARDING WORK AND FAMILY
Expanding the Earned Income Tax Credit (EITC): The President is proposing a $23 billion
plan to expand the EITC. According to estimates by the Department of the Treasury, the
President's proposed EITC expansion would deliver tax relief for 6.8 million families, providing
up to $1,155 in additional tax relief. The President's proposal builds on the 1993 expansion signed
into law by the President, which provided a tax cut for 15 million families.
Reducing the Marriage Penalty for Married, Two-Earner Couples By Increasing the
Standard Deduction by More Than $2,000. The President will propose to increase the standard
deduction for two-income married couples to twice that of single filers, providing substantial tax
relief for 9.1 million married couples. When fully phased in, this change would result in a $2,150
increase in the standard deduction. The President's proposal would also increase the standard
deduction by $500 for single-earner married couples and by $250 for single filers. Both elements
of the President's plan would cost $45 billion over 10 years and benefit 42.1 million families.
Alternative Minimum Tax Relief: The President will propose in his budget a $33 billion
proposal over 10 years to correct serious design flaws in the individual Alternative Minimum Tax
(AMT) that increasingly hurt middle-income families with children who play by the rules. It
complicates their tax preparation and raises their tax bills. The President's proposal will take over
9 million families per year off the AMT when fully phased in.
EXPANDING EDUCATION INCENTIVES
College Opportunity Tax Cut: The President will propose a College Opportunity Tax Cut
costing $30 billion over 10 years to, for the first time, make tax deductible up to $10,000 of tuition
and fees for any post-secondary education (includes training and graduate school). Families would
also have the option to take a 28 percent credit, which would be worth almost twice as much as a
deduction for families in the 15 percent tax bracket. In general, the proposal would provide up to
$2,800 annually in tax relief per family.
Tax Credits For School Construction and Modernization: To address this critical need,
President Clinton is renewing his commitment to provide $24.8 billion in tax credit School
Modernization Bonds and Qualified Zone Academy Bonds over two years to modernize up to
6,000 schools. The cost would be $8 billion over ten years.
MAKING HEALTH CARE MORE AFFORDABLE
Long-term Care Credit: As part of a 10-year initiative that helps address the nation's
multifaceted long-term care challenge, the President proposes a $3,000 tax credit to compensate
people with long-term care needs or their caregivers for the cost of care. The cost is $27 billion
over 10 years.
Expanding Health Coverage Through Targeted Tax Credits: As part of his initiative to
dramatically improve the affordability of and access to health insurance for at least 5 million
uninsured Americans, the President will propose $12 billion in targeted tax cuts to expand health
insurance options for Americans facing unique barriers to coverage.
HELPING FAMILIES AFFORD CHILD CARE
Child Care Tax Credit. President Clinton will include in his FY2001 budget tax relief for
families struggling to pay for child care. As part of a comprehensive child care initiative that
includes subsidy assistance and new investments in child care quality, the President will propose to
1) make the Child and Dependent Care Tax Credit refundable for the first time; 2) increase the
level of the credit; and 3) extend the credit to parents who stay at home to take care of their infants.
The President will also propose tax incentives to encourage businesses to provide child care for
employees. The child care package would benefit an estimated 8.1 million families and would cost
$30 billion over 10 years.
OPENING NEW MARKETS & EMPOWERING COMMUNITIES
A Major Expansion of the New Markets and Empowerment Zone Tax Credits: As part of the
President's New Markets initiative, which will spur at least $22 billion in new capital investment in
businesses in economically-distressed areas, the President has proposed to more than double the
proposed New Markets tax credit at a cost of about $5 billion over 10 years and expand
Empowerment Zone Tax Incentives at a cost of $4.4 billion.
New Markets Tax Credit. The budget more than doubles the proposed New Markets
tax credit to spur $15 billion in new private investment. An entity making new equity
investments in a selected community development projects would be eligible for a tax
credit worth up to 25% of the cost of the investment. A variety of vehicles providing equity
and credit to businesses in underserved areas would also be eligible.
Empowerment Zone Tax Incentives. The President is proposing to expand the
Empowerment Zones tax incentives to promote economic growth in underserved areas
through expanding business investment incentives, ensuring that all Empowerment Zones
get the wage tax credit, and the creation of a Third Round of 10 new Empowerment Zones.
Better America Bonds. The President is proposing Federal tax credits to pay the interest on
$10.75 billion in bonds over 5 years for investments by State, local, and tribal governments. The
bonds can be used to preserve green space, create or restore urban parks, protect water quality and
clean up brownfields (abandoned industrial sites). The cost is $3.1 billion over 10 years.
Increase the Low-Income Housing Tax Credit. To expand and improve the supply of available
low-income housing, the budget raises the allocation of low-income housing tax credits to States.
The President proposes to raise the State per capita cap from $1.25 to $1.75 beginning in 2001 and
index it for inflation thereafter at a cost of $5.7 billion over 10 years. This proposal would provide
additional incentives to build and make an additional 180,000 units of affordable housing available
to working families over the next five years.
INCREASING ENERGY EFFICIENCY & IMPROVING THE ENVIRONMENT
Tax Credits For Energy-Efficient Cars, Homes, and Appliances. Cars and light trucks
currently account for 20 percent of U.S. greenhouse gas emissions. The budget provides for tax
incentives to help curb these emissions by moving advanced technologies for the purchase of
qualifying hybrid vehicles from the laboratory to the highway. Tax credits would be offered for
the purchase of qualifying hybrid vehicles from 2003 through 2006; and the current tax credit for
electric vehicles and fuel cell vehicles would be extended through 2006. The President is also
proposing tax credits for the purchase of energy-efficient homes; for solar energy systems, for the
purchase of energy-efficient heating and cooling equipment; and for wind and biomass power. The
cost of these proposals would be $9 billion over 10 years.
ENCOURAGING CHARITABLE GIVING
Encouraging Philanthropy. President Clinton will unveil a package of new tax proposals to
encourage philanthropy. First, he will propose allowing non-itemizers to take a tax deduction for
charitable giving. Second, he will propose new rules to make it easier for charitable foundations to
make gifts in times of need. And third, he will propose to raise the limit for individual donations of
appreciated assets like securities and real property. These proposals would cost $14 billion over 10
years.
CURBING CORPORATE SHELTERS AND REDUCING UNWARRANTED TAX SUBSIDIES
The President also proposes sound tax policies, including proposals to curb corporate tax shelters and
reductions in unwarranted tax subsidies, which pay for $96 billion of the targeted tax cuts over 10
years. Tax shelters require taxes for everyone else to be higher and create perceptions of unfairness
and disrespect for the system. The budget increases disincentives for entering into abusive transactions
and attacks specific tax shelter transactions. The Department of the Treasury will continue to study
additional remedies for corporate tax shelters and will work with Congress to address this issue.
III. THE CLINTON-GORE
ECONOMIC RECORD
The Economy Then and Now
Paying Off the Debt
A Smaller, But More Progressive Government
THE CLINTON-GORE ECONOMIC RECORD:
WHAT A DIFFERENCE SEVEN YEARS MAKES
After seven years, the results of President Clinton and Vice President Gore's economic leadership for
the American people are clear. In 1992, when Bill Clinton was elected President, the American
economy was barely creating jobs and wages were stagnant. His bold, three-part economic strategy
focused on establishing fiscal discipline; investing in education, health care, science and technology;
and opening foreign markets so that American workers have a fair chance to compete abroad. Seven
years later the results of this strategy are clear:
Deficits Replace By Surpluses: Keeping Us On Track to Be Debt Free by 2013
1992. The deficit was $290 billion - the highest dollar level in history. When President Clinton
took office, the Congressional Budget Office projected the deficit would grow to $404 billion in
1999 and $455 billion in 2000.
Today. In 1999, we had a budget surplus of $124 billion - the largest dollar surplus on record
(even after adjusting for inflation) and the largest as a share of our economy since 1951. This year
the Administration forecasts a surplus of $167 billion. With the President's plan, we are now on
track to eliminate the nation's publicly held debt by 2013.
Government Spending: Lowest in Over Three Decades
1981-92. Under Presidents Reagan and Bush, Federal government spending as a share of the
economy increased from 21.6 percent in 1980 to 22.2 percent in 1992.
Today. Under President Clinton, Federal government spending as a share of the economy has
been cut from 22.2 percent in 1992 to 18.7 percent in 1999 - its lowest level since 1966.
Taxes for Typical Families: Lowest in Over Two Decades
1981-92. The total Federal tax rate rises for middle-income families from 23.7 percent in 1980 to
24.5 percent in 1992. (Total tax rates include both the employer and employee portion of the
Social Security and Medicare payroll taxes.)
Today. Under President Clinton, the total Federal tax rate for middle-income families has dropped
from 24.5 percent in 1992 to 22.8 percent in 1999 - that's the lowest tax rate since 1978. For
families at one-half the median income, the effective Federal tax rate has been slashed from 19.8
percent in 1992 to 14.1 percent in 1999 - that's the lowest tax rate since 1968.
Jobs Are Up: Nearly 21 Million Created Since January 1993
1981-1992. In their three terms combined, Presidents Reagan and Bush created only 18.5 million
new jobs despite the growth of the labor force from the maturation of the baby boom. Only 2.5
million jobs were created under President Bush, with nearly half of them in the public sector.
Today. The economy has created 20.8 million new jobs since January 1993. This is the most jobs
ever created under a single President. There have been an average of 248,000 jobs created per
month - a faster rate than any President. And 19.2 million - 92 percent - of the new jobs were
created in the private sector, the highest share since Harry Truman was President.
Faster Economic Growth: 3.9 Percent Per Year
1981-1992. The economy grew an average 1.7 percent per year under President Bush and 2.8
percent per year during the Reagan-Bush years.
Today. Since President Clinton took office, growth has averaged 3.9 percent per year.
Private-Sector Growth Is Up: 4.4 Percent Per Year
1981-1992. The private sector of the economy grew 2.9 percent annually from 1981-1992.
Today. The private sector of the economy has grown 4.4 percent annually since 1993.
Equipment and Software Investment Is Growing Faster Than Ever
1981-1992. Real equipment and software investment rose just 3.8 percent annually during the
previous Administration and only 4.7 percent annually for the entire Reagan-Bush period.
Today. Real equipment and software investment is up 12.1 percent per year under President
Clinton - faster than any Administration on record. We have seen seven consecutive years of
double digit growth in equipment and software investment, for the first time on record.
Homeownership Is Up: The Highest in American History
1981-1992. The homeownership rate fell from 65.4 percent in 1981 to 64.2 percent in 1992.
Today. In 1999, the homeownership rate was 66.8 percent - the highest ever recorded.
Inflation is Down: The Lowest Core Rate In 35 Years
1981-1992. The underlying core rate of inflation averaged 4.7 percent annually.
Today. In 1999, the underlying core rate of inflation was 1.9 percent - the lowest since 1965.
Welfare Rolls Dropped Dramatically: Lowest Since 1969
1981-1992. The number of welfare recipients increased by almost 2.5 million (a 22 percent
increase) to 13.6 million people.
Today. Between January 1993 and June 1999, the number of welfare recipients dropped by 7.2
million (a 51 percent decline) to 6.9 million - the lowest level since 1969.
Unemployment Is Down: The Lowest Rate in 30 Years
1981-1992. The unemployment rate averaged 7.1 percent and rose to more than 10 percent in 1982
and 1983.
Today. In January 2000, the unemployment rate was 4.0 percent - the lowest rate in 30 years.
The unemployment rate has been below 5 percent for 31 consecutive months.
Unemployment for African Americans the Lowest on Record
1981-1992: African American unemployment reached 21.2 percent in January 1983- a record high,
and never dropped below 10 percent.
Today. The African-American unemployment rate has fallen from 14.2 percent in 1992 to 8.0
percent in 1999 - the lowest rate on record.
Unemployment for Hispanics Recovered From Record Highs to Achieve Record Lows
1981-1992. Hispanic unemployment hit a record high of 15.7 percent in December 1982.
Today. The Hispanic unemployment rate has dropped from 11.6 percent in 1992 to 6.4 percent in
1999 - the lowest rate on record.
Real Wages Rising Again: Fastest Growth in Two Decades
1981-1992. Real average hourly earnings fell 4.3 percent under Presidents Reagan and Bush.
Today. Real wages have grown 6.6 percent under President Clinton. Real wages have grown for
five consecutive years - for the first time since the 1960s.
Poverty For African-Americans Dropped to Lowest On Record
1981-1992. Between 1980 and 1992, the poverty rate for African American remained at 30 percent
or more.
Today. Since 1993, the African-American poverty rate has dropped from 33.1 percent to 26.1
percent in 1998 - the lowest level recorded, and the largest five-year drop in African-American
poverty since 1967-1972.
Poverty For Hispanics Dropped to Lowest Since 1979
1981-1992. Between 1980 and 1992, the poverty rate for Hispanics increased from 25.7 percent to
29.6 percent.
Today. Since 1993, the Hispanic poverty has dropped to 25.6 percent-the lowest since 1979.
Poverty For Single Mothers is the Lowest On Record
1981-1992. Between 1980 and 1992, an additional 2.1 million families with single mothers were
pushed into poverty.
Today. Under President Clinton, the poverty rate for families with single mothers has fallen from
46.1 percent in 1993 to 38.7 percent in 1998 - the lowest level on record.
Family Income Up More Than $5,000 Since 1993
1988-1992. Median family income, adjusted for inflation, fell by $1,864, dropping from $44,354
in 1988 to $42,490 in 1992.
Today. Since 1993, real median family income has increased by $5,046, rising to $46,737 in 1998.
THE CLINTON-GORE ADMINISTRATION:
PAYING OF THE DEBT BY 2013
The Clinton-Gore Administrations' FY2001 budget proposes a plan to keep America on track to pay
off the debt by 2013. An era of deficits has given way to an era of surpluses, with the unified budget
surplus projected to rise to $167 billion this year - the largest surplus ever and the third unified surplus
in a row. The budget also projects the on-budget surplus, which excludes Social Security, to be $19
billion in FY2000 - the second consecutive on-budget surplus. The President's budget builds on this
historic fiscal strength with a plan to invest in key priorities like education and health, strengthen
Social Security and Medicare, and pay down the debt by 2013.
LARGEST UNIFIED SURPLUS EVER
Instead of a $455 billion deficit, a $167 billion surplus this year - the largest ever. In 1992, the
deficit was $290 billion - the largest dollar deficit in American history. In January 1993, the
Congressional Budget Office projected that the deficit would grow to $455 billion by 2000.
Today, the Office of Management and Budget (OMB) is projecting a $167 billion surplus - the
third consecutive surplus and the largest surplus ever, even after adjusting for inflation. Compared
with original projections, that is $622 billion less in government drain on the economy and $622
billion more available for private investment in one year alone.
Largest surplus as a share of the economy since 1951. The 2000 surplus is projected to be 1.7
percent of GDP - the largest surplus as a share of GDP since 1951.
Three surpluses in a row - for the first time in over 50 years. The $167 billion projected
surplus in FY2000 follows a surplus of $124 billion in FY 1999 and $69 billion in FY 1998. The
last time America had three surpluses in a row was over fifty years ago in 1947-49. The FY2000
surplus marks the eight consecutive year of fiscal improvement. for the first time in American
history - surpassing the pre-Clinton best of five straight years.
A projected on-budget surplus of $19 billion in 2000 - the second consecutive on-budget
surplus. OMB projects that the on-budget surplus, which excludes Social Security, will be $19
billion in 2000. This follows an on-budget surplus of $0.7 billion in 1999. The last time America
balanced the budget without using Social Security funds was in 1960. The President is committed
to continuing to ensure that the entire Social Security surplus is protected for debt reduction.
LARGEST DEBT REDUCTION EVER
The President's plan would eliminate the debt by 2013 - 2 years earlier than planned. The
President's plan to use the entire Social Security surplus for debt reduction, to devote the interest
savings from this debt reduction to extend the life of Social Security to at least 2050. The
President's plan also uses nearly half of the non-Social Security surplus over the next decade for
debt reduction and to extend the life of Medicare by shoring up the Hospital Insurance trust fund,
would put America on the path to eliminate the debt in 2013. This is two years earlier than
projected in the President's June 1999 plan.
Interest payments would be eliminated. Currently we spend 13 cents of every Federal dollar on
interest payments. These payments, which were once projected to grow to 26 percent of all federal
spending in 2013, would be eliminated under the President's plan.
On track to pay down $297 billion in debt held by the public over three years. In 1998 and
1999, the debt held by the public was reduced by a combined $140 billion. OMB is projecting that
the United States will pay down an additional $157 billion in debt held by the public this fiscal
year. That will bring the total debt pay down to $297 billion - the largest three-year debt pay down
in American history.
The debt held by the public is on track to be $2.4 trillion lower in 2000 than was projected
when the President took office. In 1993, the debt held by the public was projected by the Office
of Management and Budget to balloon to $5.9 trillion by 2000. Instead, shrinking deficits and
surpluses in the last three years are projected to bring the debt down to $3.5 trillion in 2000 - $2.4
trillion better than expected. In 1993, the debt held by the public was 49.5 percent of GDP and
projected to rise to 64.7 percent of GDP in 2000. Instead, it has been slashed to a projected 36.3
percent of GDP.
As a result, interest payments on the debt in 2000 are $128 billion lower than projected. In
1993, the net interest payments on the debt held by the public were projected to grow to $348
billion in 2000. Fiscal discipline has slashed this figure to a projected $220 billion - a $128 billion
improvement for one year alone.
REDUCING SPENDING WHILE CUTTING TAXES FOR MIDDLE-INCOME FAMILIES
Federal spending as a share of the economy is the lowest since 1966. The spending restraint
under President Clinton has brought spending down from 22.2 percent of GDP in 1992 to 18.7
percent of GDP in 1999 - the lowest in over thirty years. At the same time, President Clinton has
increased investments in education, technology and other areas that are vital to growth.
While balancing the budget and paying down the debt, President Clinton has provided tax
relief for working families. The tax cuts signed into law by the President in 1993 and 1997 - for
example, the expanded Earned Income Tax Credit, the $500 child tax credit, the $1,500 HOPE
Scholarship Tax Credit, and the expanded IRAs have reduced taxes for American families. The
total Federal tax rate for middle-income families has dropped from 24.5 percent in 1992 to 22.8
percent in 1999 - that's the lowest tax rate since 1978. For families at one-half the median income,
the effective Federal tax rate has been slashed from 19.8 percent in 1992 to 14.1 percent in 1999 -
that's the lowest tax rate since 1968.
WHAT FISCAL DISCIPLINE MEANS FOR AMERICA
Lower interest rates have already cut mortgage payments by $2,000 for families with a
$100,000 mortgage. Because of the policy of deficit and debt reduction, it is estimated that a
family taking out a home mortgage of $100,000 expects to save roughly $2,000 per year in
mortgage payments. This has helped raise the homeownership rate to 66.8 percent in 1999 - the
highest rate on record.
Lower interest rates cut car payments by $200 annually for families taking out a typical car
loan.
Lower interest rates cut student loan payments by S200 annually for a person with a typical
student loan.
Lower debt will help maintain strong economic growth. With the government no longer
draining resources out of capital markets, businesses have more funds for productive investment.
This has helped to fuel a 12.1 percent real annual increase in productive equipment and software
investment since 1993 - the seventh consecutive year of double digit growth, the strongest period
of growth on record. This compares to 4.7 percent annual growth from 1981-92, a period that saw
the debt held by the public quadruple.
Rising investment has contributed to a pickup in productivity growth. Non-farm business
productivity has grown at a 2.7 percent average annual rate for the last four years. This compares
to 1.5 percent growth from the 1970s through the early 1990s.
WHAT THE EXPERTS SAY
Experts agree that President Clinton's 1993 economic plan helped reduce the deficit, lower interest
rates, spur business investment, and strengthen the economy. The economy and the budget are now
working in a virtuous circle - lower deficits have led to lower interest rates which have led to faster
business investment which led to faster growth which led to even lower deficits. Experts agree that the
President's 1993 Economic Plan helped create this virtuous circle:
Alan Greenspan, Federal Reserve Board Chairman, 1/04/00 with President Clinton at
Chairman Greenspan's re-nomination announcement: "My colleagues and I have been very
appreciative of your [President Clinton's] support of the Fed over the years, and your commitment
to fiscal discipline has been instrumental in achieving what in a few weeks. will be the longest
economic expansion in the nation's history."
Paul Volcker, Federal Reserve Board Chairman (1979-1987), in Audacity, Fall 1994: "The
deficit has come down, and I give the Clinton Administration and President Clinton himself a lot of
credit for that. [He] did something about it, fast. And I think we are seeing some benefits."
Business Week, 5/19/97: "Clinton's 1993 budget cuts, which reduced projected red ink by more
than $400 billion over five years, sparked a major drop in interest rates that helped boost
investment in all the equipment and systems that brought forth the New Age economy of
technological innovation and rising productivity."
Goldman Sachs, March 1998: One of the reasons Goldman Sachs cites for the "best economy
ever" is that "on the policy side, trade, fiscal, and monetary policies have been excellent, working
in ways that have facilitated growth without inflation. The Clinton Administration has worked to
liberalize trade and has used any revenue windfalls to reduce the federal budget deficit."
Lehman Brothers, 1/10/94: "Lower deficits, lower long-term rates and higher real growth was
the overall promise. With the data now rolling in for December 1993, it seems clear that President
Clinton delivered on all three counts
A SMALLER BUT MORE PROGRESSIVE GOVERNMENT
President Clinton and Vice President Gore have cut Federal spending and cut the Federal workforce,
reversing twelve years when the Republicans exploded the deficit and more than quadrupled the debt.
At the same time, the Clinton-Gore Administration has made investments in everything from education
to science and technology to health care to tax relief for working families.
PAYING OFF THE DEBT BY 2013
The debt quadrupled under President's Reagan and Bush. The debt held by the public
increased from $712 billion in 1980 to $3.0 trillion in 1992. In early 1993, the debt was projected
to rise to $5.9 trillion in 2000. The President's fiscal discipline has slashed that to a projected $3.5
trillion in 2000. That is $2.4 trillion less in debt than was projected seven years ago.
On track to pay-down $297 billion in debt held by the public over three years. In 1998 and
1999, the debt held by the public was reduced by $140 billion. The Office of Management and
Budget (OMB) is projecting that the United States will pay-down an additional $157 billion in debt
held by the public this fiscal year. That will bring the total debt pay-down to $297 billion - the
largest three-year debt pay down in American history. This keeps us on track to pay off the debt
held by the public by 2013 - two years ahead of the President's previous projection.
LOWEST GOVERNMENT SPENDING IN OVER THREE DECADES
Federal spending as a share of the economy is the lowest since 1966. The fiscal restraint under
President Clinton has brought spending down from 22.2 percent of GDP in 1992 to 18.7 percent of
GDP in 1999 - the lowest since 1966. At the same time, President Clinton has increased
investments that are vital for future growth, including nearly doubling education and training.
Under Presidents Reagan and Bush, Federal government spending as a share of the economy
increased from 21.6 percent in 1980 to 22.2 percent in 1992.
Non-defense discretionary Federal spending as a share of the economy is the lowest on
record. Since President Clinton took office, non-defense discretionary spending has fallen from
3.7 percent of GDP in 1992 to 3.3 percent of GDP in 1999 - the lowest as a share of the economy
on record. Over this period. total discretionary spending fell from 8.6 percent of GDP to 6.3
percent of GDP, also the lowest on record. (Comparable data for these categories goes back to
1962.)
Discretionary spending down under President Clinton and up under the previous two
Administrations. Real discretionary spending has fallen by 1.1 percent per year under President
Clinton; from 1980 to 1992. real discretionary spending increased 1.0 percent per year.
Lower general government spending - as a share of GDP - than any major economy in the
world. According to the OECD, the U.S. has lower total government spending - Federal, state,
and local - as a share of GDP than any major economy in the world.
SMALLEST FEDERAL WORKFORCE IN 40 YEARS
The smallest Federal civilian workforce in 40 years. The Federal civilian workforce increased
from when President Reagan took office to when President Bush left office. Since President
Clinton took office, the Federal workforce has been cut by 377,000 - nearly a fifth - and is now
lower than any time since 1960.
LOWEST TAXES FOR MIDDLE-INCOME FAMILIES IN OVER TWO DECADES
While balancing the budget and paying down the debt, President Clinton has provided tax
relief for working families. The tax cuts signed into law by the President in 1993 and 1997 - for
example, the expanded Earned Income Tax Credit, the $500 child tax credit, the $1,500 HOPE
Scholarship Tax Credit, and expanded IRAs, have reduced taxes for American families. The total
Federal tax rate for middle-income families has dropped from 24.5 percent in 1992 to 22.8 percent
in 1999 - that's the lowest tax rate since 1978. For families at one-half the median income, the
effective Federal tax rate has been slashed from 19.8 percent in 1992 to 14.1 percent in 1999 -
that's the lowest tax rate since 1968.
IV. HIGHLIGHTS OF THE
FY2001 BUDGET
Education and Training
Child Care
Health Care
Environment
Working Families
Community Empowerment
From Digital Divide to Digital Opportunity
Research & Development
Safe Communities
United States Leadership in the World
America's Armed Forces
Restoring Fairness to Legal Immigrants
Tobacco Policy
Farm Safety Net
Building One America
EDUCATION AND TRAINING
Education and training have been a cornerstone of the Clinton-Gore Administration's agenda since
1993. The President's initiatives have helped to provide students with the educational opportunities
they need to reach high standards, enhanced the quality of teaching, made college more affordable for
all Americans, and offered lifetime education and training opportunities to those in need. The
President's FY2001 budget builds on these efforts and offers new initiatives to improve the educational
and training opportunities needed for a strong economy and healthy communities. At the core of these
proposals is a basic principal: we must invest more in our schools and demand more from them.
Proposing the Largest Head Start Expansion in History. The President's budget increases funding
for Head Start by $1 billion - the largest funding increase ever proposed for the program - to provide
Head Start and Early Head Start to approximately 950,000 children. This funding will bring within
reach the President's goal of serving one million children in 2002 and builds the foundation for the
long-term goal of universal pre-school. Early Head Start, created by the Clinton-Gore Administration
in 1994, brings these services to families with children ages zero to three and to pregnant women. The
President's FY2001 proposal would increase funding for Early Head Start by $143 million. Since
1993, this Administration has already increased funding for Head Start by 90 percent.
Fixing Failing Schools and Rewarding Success. The President believes that we must not only
demand more from our schools, we must also invest more in them. The following initiatives provide
resources and incentives to help all students meet high academic standards:
Universal After-School for Students in the Most Need. The President and Vice President
propose to invest $1 billion in the 21st Century Community Learning Centers program to help
ensure that every child in every failing school has extended learning opportunities in the after-
school and summertime hours. The Administration's budget will maintain the commitment to
serving all children, but will dedicate much of the increase to help those children most in need
of academic assistance as part of a comprehensive approach to help low-achieving students
meet high academic standards.
Accountability Fund. In his FY2001 budget, the President will propose to nearly double
funding from $134 million in FY2000 to $250 million to turn around failing schools. This
funding is used by states and localities to turn around low-performing schools through a variety
of approaches, including overhauling the curriculum, improving staffing, or bringing in new
management and staff. The initiative also includes provisions supporting public school choice
for students in failing schools.
Rewarding High Performance and Closing the Achievement Gap. The President also
proposes a $50 million initiative to provide bonuses to states that make exemplary progress in
improving student performance and closing the achievement gap between high and low-
performing groups of students. States would be eligible for bonuses based on student
performance and narrowing of the achievement gap as indicated by performance on the
National Assessment of Educational Progress (NAEP).
Class Size Reduction. The President's budget request maintains his commitment to reduce
class size in the early grades by staying on a path to hiring 100,000 high-quality teachers
2005. The Administration's FY2001 budget will boost funding for this initiative to $1.75
billion, an increase of $450 million over current levels - enough to fund about 49,000 teachers,
nearly half way to our long-term goal.
Small, Safe and Successful High Schools. The President's budget will include $120 million
for a Small Schools Initiative to reinvent high schools on a smaller scale and make them more
responsive to student needs. School districts could use this money to create small schools or to
break up existing large schools into smaller learning communities. Districts would be expected
to demonstrate increases in student achievement, graduation rates, and the number of students
pursuing postsecondary options, and decreases in disruptions and violence.
Teaching to High Standards. This initiative is a new $1 billion teacher quality plan to recruit, train
and reward good teachers. The Teaching to High Standards Initiative will give grants to states and
districts to fund high-quality, standards-based professional development for teachers. It also includes
several new proposals:
Higher Standards-Higher Pay for Teachers. This $50 million initiative will award grants to
high-poverty school districts to help them attract and retain high-quality teachers through better
pay and higher standards. Participating teachers would receive immediate pay increases; some
would receive additional raises for exceptional work.
Teacher Quality Rewards. This $50 million program will reward school districts that have
made exceptional progress in reducing the number of uncertified teachers and out-of-field
teachers. The President has proposed requiring states to ensure that 95 percent of teachers are
certified and 95 percent of secondary teachers are teaching within field by 2004.
Hometown Teacher Recruitment. This $75 million program would make students aware of
the opportunities available in the teaching profession; provide mentoring and teaching
experiences as they progress through school; and provide financial assistance for students who
pursue bachelor's degrees with the goal of teaching in high-need communities after graduation.
Transition to Teaching. This $25 million initiative will build on the success of the
Department of Defense's Troops to Teachers program by recruiting and preparing talented mid-
career professionals from diverse fields to become teachers in high-need subject areas and
high-need schools.
School Leaders Initiative. This $40 million program will fund non-profit partnerships
designed to recruit, prepare and provide professional development for superintendents and
principals, and other school leaders to bolster their capacity to lead high-performing schools.
Funding would support approximately 20 centers and 10,000 school leaders.
Early Childhood Educator Professional Development. This $30 million competitive grant
program will fund partnerships to help early childhood educators in high-poverty communities
obtain high-quality professional development, and improve their capacity to work with young
children, particularly on the language and literacy skills that are the foundation for academic
advancement.
Special Education. The President's budget proposes nearly $6.4 billion to support the education of
children with disabilities under the Individuals with Disabilities Education Act (IDEA). This increase
includes almost $300 million to help states and local school districts educate children with disabilities,
as well as an increase of more than $30 million in competitive grants. including funds for states to help
schools comply with IDEA. Funding for special education has more than doubled since 1993.
Charter Schools. The President's budget will increase funding for charter schools by $30 million
dollars from $145 million to $175 million. Charter schools are public schools that are open to all and
given a great deal of flexibility in exchange for agreeing to meet defined goals for student
performance. With 1,700 charter schools now in operation, this funding will help reach the President's
goal of 3,000 charter schools bY2002.
College Test Preparation for Low-Income Students. This $10 million initiative will provide
rigorous SAT/ACT college preparation programs to low-income students. Competitive grants would
be given to partnerships that would provide college preparatory services to college-bound students.
Challenging Coursework Online. This $10 million initiative will support the development of high
quality, Web-based Advanced Placement, second language, and other challenging courses. The
program will provide grants of up to three years to partnerships for research, development and
evaluation of innovative technologies that can help provide high-quality learning experiences for all
students no matter where their school is located.
School Construction and Modernization. President Clinton is renewing his commitment to his
School Modernization Bonds by proposing $24.8 billion in tax credit bonds over two years to
modernize up to 6,000 schools. Within this $24.8 billion program, $2.4 billion is reserved for
Qualified Zone Academy Bonds. In addition, the budget includes a new $1.3 billion urgent/emergency
school renovation loan and grant proposal. This proposal would cost $8 billion over 10 years.
College Opportunity Tax Cut. The College Opportunity Tax Cut expands the President's Lifetime
Learning tax credit in order to make college, graduate school, and job training more affordable for
millions of families. The proposal would give families, for the first time, the option of taking a tax
deduction or a 28 percent tax credit on tuition and fees to pay for college and other higher education.
This is worth nearly twice as much as a deduction for families in the 15 percent bracket. The proposal
would cover up to $5,000 of educational expenses in 2001 and 2002 and rise to $10,000 of educational
expenses from 2003 forward. This proposal would provide up to $2,800 in tax relief annually to help
American families pay for college, graduate work, or courses taken to improve job skills. This
proposal will provide families with $30 billion in tax relief over the next 10 years.
Increasing Support for College Access. In the new economy, education is the key to economic
opportunity. The FY2001 budget includes a nearly $1 billion boost in investments to make college
more affordable for economically disadvantaged students.
Pell Grants. The Pell Grant program provides grants to economically disadvantaged young people
to help pay the cost of post-secondary education. The FY2001 budget increases the maximum Pell
award $3,500. Funding for the Pell Grant program is increased by over $716 million, bringing the
total Pell Grant appropriation to $8.356 billion.
SEOG. The Federal Supplemental Educational Opportunity Grant (SEOG) program provides
campus-based grant assistance to needy undergraduate students. Generally, this program
supplements the aid students receive from other sources, and leverages institutional aid by at least
one dollar for every three Federal dollars. The FY2001 budget provides $691 million.
Work Study. Work Study provides students with the opportunity to work their way through
college. The FY2001 budget includes $1.011 billion for Work-Study, an increase of S77 million to
continue the President's commitment to serve one million students.
Dual Degree Programs for Minority-Serving Institutions. This new $40 million program
increases opportunities for an estimated 3,000 students at minority-serving institutions. Students
would receive two degrees within five years: one from a minority-serving institution, and one from
an institution in a field in which minorities are underrepresented.
Keeping Young People On Track for Success. Students not only need help to pay for college, they
need support to enter and complete college. The President's FY2001 budget includes an increase of
more than $400 million for programs designed to prepare students to take full advantage of post-
secondary opportunities.
GEAR UP. GEAR UP is a nationwide initiative to encourage more disadvantaged young people
to have high expectations, stay in school, study hard, and take the right courses to go to and
succeed in college. GEAR UP is funded at $200 million in FY2000, enough to provide services to
over 750,000 students. The FY2001 budget provides a 62.5% increase to $325 million, enough to
provide services to 1.4 million students.
TRIO. The TRIO programs seek to motivate and prepare students to go to and stay in college.
The FY2001 budget provides $725 million for TRIO, an increase of $80 million to help provide
assistance to over 760,000 students, 37,000 more than in 2000.
College Completion Challenge Grants. The FY2001 budget creates a new initiative within the
TRIO program called College Completion Challenge Grants (CCCG). Although college
enrollment rates have risen, 37 percent of students that go on to post-secondary school drop out
before they get a certificate or a degree. The problem is especially acute for minorities: 29 percent
of African Americans and 31 percent of Hispanics drop out of college after less than one year,
compared to 18 percent of whites. The CCCG program is designed to address this problem with a
comprehensive approach including pre-freshman summer programs, support services and increased
grant aid to students. This S35 million initiative will improve the chances of success for nearly
18,000 students.
Youth Opportunity Grants and Youth Training Formula Grants. These competitive grants
provide comprehensive employment and training assistance to youth, primarily out-of-school youth
in high poverty areas. The President's FY2001 budget provides a 50 percent increase in funding to
$375 million, enough to serve 85,000 youth in high poverty areas. In addition, the FY2001 budget
provides a $22 million increase (to $1.022 billion) for the Youth Activities formula grant program.
This level will provide job training and summer job opportunities to about 612,000 disadvantaged
young people.
Youthbuild. This program is targeted to 16-24 year old high school dropouts. and provides
disadvantaged young adults with education and employment skills through rehabilitating and
building housing for low-income families and homeless people. Funded at $75 million, the
Youthbuild programs will provide opportunities for approximately 3,330 trainees in 2001.
Job Corps. Job Corps is the nation's largest and most comprehensive residential education and
job training program targeted at impoverished young people. The FY2001 budget increases
funding by S35 million, bringing the total budget to $1.393 billion.
Investments in Job Training to Ensure Economic Opportunity. The President's FY2001 budget
expands successful training programs and implements new ones focused on providing needed training
for young people, displaced workers and individuals with disabilities.
Employment of People with Disabilities. The budget proposes a $1,000 tax credit for workers
with disabilities to defray costs including improving access to employment and training programs.
Universal Reemployment Initiative. The Dislocated Worker Training program provides training
and support services to help permanently dislocated workers return to productive, unsubsidized
employment. The President's FY2001 budget provides an increase of $181 million and provides
assistance to almost 1 million dislocated workers. Also included in the budget is $50 million to
provide reemployment assistance to unemployment claimants.
Responsible Reintegration for Young Offenders. This new $75 million initiative in the
Department of Labor helps young offenders under age 35 to successfully reintegrate into the
mainstream economy. Competitive grants will be made to partnerships between the criminal
justice system and local workforce investment systems. This effort will be operated in conjunction
with a related initiative at the Department of Justice that focuses on community safety and the
supervision of ex-offenders.
Bureau of Indian Affairs (BIA) School Construction and Repair. The President has proposed $300
million, more than double the FY2000 enacted level of $133 million, to replace and repair BIA-funded
schools on reservations. This is the largest investment ever in a single year for BIA school
construction and repair. Of these funds, $126 million would be used to assist in replacing at least six
of the 185 BIA-funded schools on reservations. The remaining $174 million would provide for much-
needed health and safety-related repairs, improvements, and maintenance that together comprise a
roughly $700 million backlog.
Training and Recruiting New Native American Teachers. Only two-thirds of Native American
students successfully complete high school. To address this challenges the budget provides $10
million for the Education Department to continue the second year of the Administration's initiative to
begin training and recruiting 1,000 new teachers to serve in schools with high concentrations of
American Indian and Alaska Native students.
New American Indian Administrator Corps. The President and the Vice President propose $5
million for a new Department of Education initiative, the American Indian Administrator Corps, that
will support the recruitment, training, and in-service professional development of 500 American
Indians and Alaska Natives to become effective school administrators in schools with high populations
of Native American students. As in the Native American teacher initiative, higher-education
institutions are encouraged to form consortia with the tribal colleges in order to develop this program.
CHILD CARE
The Clinton-Gore Administration's FY2001 budget includes a comprehensive child care initiative to
address the struggles our nation's working parents face in finding child care they can afford, trust and
rely on. Through unprecedented tax relief and subsidy support, the President's balanced budget
includes a package of proposals to help working families pay for child care, improve the safety and
quality of care, expand after-school programs and promote early learning.
The number of children with parents who work outside of the home is higher than ever before. In
1996, three out of four mothers with young children worked outside of the home, compared to one in
four in 1965. During the Clinton-Gore Administration, funding for child care has more than doubled.
Still, many eligible children do not receive assistance.
Tax Relief for Over 8 Million Families with Child Care Expenses. The Child and Dependent Care
Tax Credit (CDCTC) provides tax relief to those who, in order to work, pay for the care of a child
under 13 or for a disabled dependent or spouse. The President's proposals, which cost $30 billion over
10 years, broaden this tax relief and will help over 8 million families pay their child care expenses:
Making the Credit Refundable for Nearly Two Million Working Parents. Under current law, a
typical family of four with an income under $25,000 is ineligible for credits for child care expenses
because it has no income tax liability. Many such families earn too little to claim the credit, but too
much to get the full benefit of child care subsidies. To help these families, the President proposes
to make the CDCTC refundable for the first time - so that families with no tax liability can receive
up to $2,400 to help offset the cost of child care. This proposal will assist nearly two million
families.
Increasing the Child Care Tax Credit. For families earning up to $60,000, the President
proposes to increase the maximum level of the CDCTC from 30 percent to 50 percent. This will
provide an average additional tax cut of $249 for these families and eliminate tax liability for
nearly all families with incomes below 200 percent of poverty that claim the maximum allowable
child care expenses. Under this proposal, a family of four with an annual salary of $35,000, and
child care expenses of $3,100. would receive a tax credit of $1,395 - an increase of $775 over
current law. This expansion proposal will help over four million working families pay for child
care.
Providing Tax Relief to Parents Who Stay at Home. The President will also propose enabling
parents who stay at home with children under age one to take advantage of the Child and
Dependent Care Tax Credit by claiming assumed child care expenses of $500. This proposal will
provide an average tax cut of $154, benefiting almost two million parents.
Proposing the Largest Head Start Expansion in History. The President's budget increases funding
for Head Start by S1 billion - the largest funding increase ever proposed for the program - to provide
Head Start and Early Head Start to approximately 950,000 children. Head Start prepares low-income
children for a lifetime of learning by providing early, comprehensive child development services.
Universal After-School for Students in the Most Need. The President and Vice President propose to
invest $1 billion in the 21st Century Community Learning Centers program to help ensure that every
child in every failing school can have a safe place to learn during the after- school and summertime
hours. This more than doubles the FY2000 investment. The Administration's budget will maintain the
commitment to serving all children, but will dedicate much of the increase to help those children most
in need of academic assistance as part of a comprehensive approach to help low-achieving students
meet high academic standards. The budget provides sufficient funding to make after- or summer-
school programs universally available to all students attending Title I school identified as low-
performing, nearly tripling the number of children served by the program to 2.5 million.
Helping Low-Income Families Afford Child Care. The President's budget boosts the Child Care
and Development Block Grant by $817 million in FY2001, enabling the program to provide child care
subsidies to nearly 150,000 more children next year. These new funds, combined with the child care
funds provided in welfare reform, will enable the program to serve over 2.2 million children in 2001,
an increase of nearly one million since 1997.
Promoting Early Learning. The President's budget includes $3 billion over five years for the Early
Learning Fund to help improve child care quality and early childhood education for children under five
years old. The Early Learning Fund will provide community grants for activities that foster cognitive
development, improve child care quality and promote readiness for school. Resources could be used to
help child care providers get training or certification, facilitate licensing or accreditation of child care
centers, and reduce child-to-staff ratios.
Supporting High-Quality Early Childhood Educators. The President's budget includes $30 million
to ensure that well-trained professionals are teaching our young children. The Early Childhood
Professional Development initiative will provide competitive grants to local partnerships that can pull
together universities, local school districts and child care providers. The initiative would focus on
equipping early childhood educators with the tools they need to help children develop vital language
and literacy skills.
Supporting Parents in Higher Education by Offering College Campus Based Child Care. To
help low-income parents pursue higher education, the President's budget includes $15 million - a $10
million increase over last year's funding level - to provide an additional 150 college campuses with
grants to support the establishment or expansion of child care services. States may also use a share of
the Child Care and Development Block Grant for this purpose.
Creating New Child Care Tax Incentives for Businesses. In his budget, President Clinton will also
propose a new tax credit for businesses that provide child care services for their employees. These
services could include: building or expanding child care facilities, operating existing facilities, training
child care workers, or providing child care resource and referral services. The credit covers 25 percent
of qualified costs (and 10 percent of resource and referral service expenses), but may not exceed
$150,000 per year per business. This tax credit costs $1.4 billion over 10 years.
HEALTH CARE
The Clinton-Gore Administration's FY2001 budget includes investments to address the nation's long-
term care needs, improve the quality of care, expand the Administration's commitment to biomedical
research, and safeguard and improve the public health.
Addressing the Nation's Multi-faceted Long-term Care Needs. The President's FY2001 budget
will include a $28 billion, 10-year investment in long-term care. The initiative tackles the complex
problem of long-term care that affects millions of elderly, people with disabilities, children with
special needs and the families who care for them. Its centerpiece is a $3,000 tax credit for people with
long-term care needs or their caregivers - the budget triples the credit over last year's proposal. In
addition to the tax credit, the initiative will: (1) provide funding for services which support family
caregivers of older persons; (2) improve equity in Medicaid eligibility for people in home- and
community-based settings; (3) encourage partnerships between low-income housing for the elderly and
Medicaid; and (4) encourage the purchase of quality private long-term care insurance by Federal
employees. This initiative complements the Administration's effort, spearheaded by the Vice
President, to improve the quality of care in nursing homes.
Assuring the Quality of Health Care. Since he took office, President Clinton has been aggressive in
his efforts to promote patients' rights and ensure the delivery of high-quality health care.
Patients' Bill of Rights. Over the coming year, the President will continue to challenge the
Congress to finally finish the overdue job of passing patients' rights legislation that includes
critical protections such as: guaranteed access to needed health care specialists; access to
emergency room services when and where the need arises; continuity of care protections so that
patients will not have an abrupt transition in care if their providers are dropped; access to a fair,
unbiased and timely internal and independent external appeals process to address health plan
grievances; and an enforcement mechanism that ensures recourse for patients who have been
harmed as a result of a health plan's actions. Last fall, over 60 Republicans joined virtually every
Democrat in the House in voting for the Norwood-Dingell Patients Bill of Rights. This strong,
enforceable, patient protections bill should not be watered down in a manner that makes it
ineffective and unworthy of signing by including provisions that further segment healthy from
unhealthy populations without significantly expanding coverage for the currently uninsured.
Protecting Medical Privacy. The Clinton-Gore Administration will also continue to act to protect
the privacy of Americans' private medical information. This year the Administration will issue
historic, final rules that will legally guarantee key privacy protections: notice of data uses; consent
before records are used for non-medical purposes; patient access to records; proper security; and
effective enforcement. In addition, the President will continue to advocate for strong Federal
action on this issue and encourage Congress to pass legislation that ensures that this private
information will not be used to discriminate against Americans seeking employment, being
evaluated for promotion. or purchasing health insurance.
New Initiatives. The President's FY2001 budget includes new initiatives to improve health care
quality.
Preventing Medical Errors and Improving Quality of Care. The FY2001 budget responds to
the President's request to act aggressively to develop new avenues for the prevention of medical
errors. It will include new funds to improve medical errors prevention, patient safety research,
reporting and information dissemination. More detailed information about these initiatives, as well
as additional actions the Administration is currently reviewing, will be outlined in the Quality
Interagency Task Force's response to the President, scheduled to be released early this year.
Protecting Patients Purchasing Prescription Drugs Over the Internet. This initiative would
invest $10 million in new funds in the investigation, identification, and prosecution of entities
selling unapproved new drugs, counterfeit drugs, prescription drugs without a valid prescription,
expired or illegally diverted pharmaceuticals, and the marketing of products based on fraudulent
health claims. It would certify internet pharmacy sites that meet all state and Federal requirements.
It would also update the current penalty structure to create new civil money penalties for
dispensing without a valid prescription over the internet or for selling drugs without Federal
certification; and provide FDA with new administrative subpoena authority in order build a case
against offenders.
Supporting Biomedical Research. The President's FY2001 budget includes almost $19 billion, an
increase of $1 billion over last year's funding level, for biomedical research at the National Institutes
of Health (NIH). Two years ago, the President called for an increase of almost 50 percent over 5 years
in the NIH budget as part of his Research for America Fund. Since that time, the NIH budget has
increased by over $4.3 billion and with the funding proposed by the President this year, the
Administration will be one year ahead of schedule in reaching the 50 percent goal. As a result, NIH
now supports the highest levels of research ever on nearly all types of disease and health conditions.
In addition, the budget proposes to repeal the provision enacted for 2000, which would delay the
availability of 2000 funds for NIH and other HHS programs.
Safeguarding and Improving the Public Health. President Clinton's FY2001 budget affirms the
Administration's commitment to improving public health and invests in several priorities including:
new efforts to combat HIV and AIDS; food safety programs; additional efforts to combat emerging
infectious diseases; family planning efforts nationwide; efforts to promote childhood immunizations; a
Medicare demonstration project on cancer clinical trials; mental health and substance abuse prevention
activities; and improving the nation's response to the threat of bioterrorism.
Combating the Spread of HIV / AIDS and Other Diseases. The President's FY2001 budget
calls for an additional $100 million investment in AIDS prevention, care, public health
infrastructure, and education in the African and Asian countries that have been hit the hardest by
the disease. It also includes a new tax credit for sales of vaccines for malaria, tuberculosis, and
AIDS to accelerate the development of these vaccines, building upon a proposed $50 million
investment in the Global Alliance for Vaccines and Immunization (GAVI). Finally, the President
will call upon the World Bank to dedicate up to $900 million annually to expand immunization,
treat common diseases, and build delivery systems for basic health services. The President's
budget also invests an additional $125 million in the Ryan White Program, an increase of almost 8
percent over last year's funding level, to provide primary medical care, drugs critical to treatment,
and other support services for people living with HIV and AIDS. The budget also includes an
additional $50 million for HIV prevention, community intervention to encourage individuals at risk
to avoid behaviors that can result in the transmission of the disease and increase the number of
people who know their HIV status.
Enhancing the Nation's Food Safety System. A total of S422 million is included in the
President's budget for his interagency food safety initiative - a $68 million, or 19 percent, increase
over FY2000 enacted. The initiative includes funding for the U.S. Department of Agriculture
(USDA) and the Department of Health and Human Services (HHS) to: achieve annual inspections
of high-risk domestic food establishments; expand the number of imported food exams; enhance
the national network of public health laboratories capable of subtyping foodborne pathogen DNA
for rapid response to disease outbreaks (PulseNet); and expand research, risk assessment and
education activities. Funding is also included for HHS and USDA to begin implementation of the
Egg Safety Action Plan adopted by the President's Council on Food Safety.
Major Increase in the War on Emerging Infectious Diseases: This initiative will dedicate an
additional $20 million, a 45 percent increase over the FY2000 funding level, to further the
development of a national electronic disease surveillance network to track newly emerging
infectious diseases, such as West Nile-like encephalitis, and new strains of influenza, and provide
essential information to public health clinics, hospitals, and health care providers. Funds will also
be used to enhance local investigations, education, and focused disease monitoring nationwide, and
promote the dissemination of new software for outbreak detection.
Increasing Family Planning Efforts Nationwide: The FY2001 budget will invest an additional
$35 million, a 16 percent increase over the FY2000 funding level, for grants to family planning
clinics providing reproductive health services and clinical care to over 5 million low income
women. These new funds will be used to prevent over a million unintended pregnancies year by
improving the delivery of comprehensive reproductive health services, including STD and cancer
screening and prevention, and HIV prevention, education and counseling; providing educational
programs that encourage adolescents to postpone of sexual activity; increase the accessibility of
contraceptive counseling and services; increasing efforts to provide effective contraceptives to
those in need; and developing partnerships with other community based providers to conduct
outreach to adolescents at risk. In addition, the budget continues the requirement that health plans
in Federal Employee Health Benefits Programs (FEHBP) offer a full range of contraceptive
options.
Promoting Childhood Immunizations: The budget proposes almost $1 billion for childhood
immunizations, including the Vaccines for Children program and CDC's discretionary
immunization program. The incidence of vaccine-preventable diseases among children, such as
diphtheria, tetanus, measles. and polio, is at an all-time low.
Establishing Medicare Cancer Clinical Trial Demonstration: The budget gives more
Americans access to these cutting-edge cancer treatments and encourages higher participation in
clinical trials by establishing a three-year, $750 million demonstration program. Medicare
beneficiaries who participate in certain cancer clinical trials will have their routine patient care
costs covered for those trials.
Expanding Substance Abuse Activities: The budget includes a S82 million increase for the
prevention and treatment of substance abuse, a 50 percent increase from the FY 1993 enacted level.
These new funds continue the Administration's commitment to expand substance abuse treatment
for thousands of under-served Americans. To help communities address gaps in substance abuse
services for emerging areas of need, the budget proposes an additional $54 million for Targeted
Capacity Expansion grants. With this increase and an additional $31 million in funding for the
Substance Abuse Block Grant, the budget will provide treatment for another 15,000 individuals. In
addition, in Januar Y2001, the FEHBP's benefit structure will, for the first time, provide for parity
in the provision of mental health and substance abuse benefits. illnesses which have long been
given less favorable treatment by the health care industry.
Increasing Federal Support for Improving the Mental Health of All Americans: According to
the December 1999 Surgeon General's Report on Mental Health. one in five Americans is living
with a mental health disorder. This report states that the fundamental components of effective
service delivery are broadly agreed upon, but in short supply. The budget includes a new
investment of $100 million for mental health services, an increase of 16 percent over last year's
funding level and a 90 percent increase since 1993.
Improving Asthma Treatment for Low-income Children: The budget proposes $100 million in
demonstration grants ($50 million in FY2001 and $50 million in FY2002) to States test innovative
asthma disease management techniques for children enrolled in Medicaid to help these children
receive the most appropriate care, and keep their asthma in check.
ENVIRONMENT
The Clinton-Gore Administration FY2001 budget proposes a record $42.5 billion in FY2001 to protect
our natural resources, our communities and families, and the global environment. The proposed
environment budget represents an 11 percent increase over FY2000 and a 36 percent increase over FY
1993. It includes major initiatives to preserve America's lands legacy, combat global warming, protect
tropical forests, end childhood lead poisoning, and build more livable communities
A Permanent Lands Legacy for America. In FY2000, the President secured $652 million, a 42
percent increase for his Lands Legacy initiative. For FY2001, the President is proposing $1.4 billion,
the largest one-year investment ever in conserving America's land and coastal resources. In addition,
the President is proposing a new, protected budget category to preserve this higher level of funding in
future years. More than half this dedicated funding would be used to support state and local
conservation efforts. For FY2001, the President proposes:
Helping Communities Protect Wildlife and Open Space. The President's budget proposes $521
million, almost four times current funding, to help state, local, and tribal governments protect
wildlife and local green spaces. Priorities include protecting threatened farmland, working forests,
wetlands, and urban parks. This includes a new $100 million grant program to help states protect
non-game wildlife.
Saving Natural and Historic Treasures. $450 million, a 7 percent increase, for Federal
acquisition and protection of critical lands, including: wildlife-rich bayous in the Lower
Mississippi Delta, giant sequoias in California's Sierra Nevada, Civil War battlefields, the historic
Lewis and Clark trail, fragile Southern California desert, and the Florida Everglades.
Providing Special Assistance to Coastal Areas. $429 million, a 159 percent increase, to protect
ocean and coastal resources, including $100 million for a new program to help coastal states
address environmental impacts of existing offshore oil and gas development, and $100 million to
help state, local and tribal efforts to restore coastal salmon in the Pacific Northwest.
Meeting the Challenge of Global Warming. The President is proposing $2.4 billion - a 42 percent
increase - to combat global climate change, and $1.7 billion for scientific research into factors
influencing climate and the likely consequences of global warming. Highlights include:
Promoting Clean Energy at Home and Abroad. $289 million to develop technologies that
convert crops and other "biomass" into clean fuels and other products; and over $200 million, a
105 percent increase, to promote the export of clean energy technologies to developing nations.
Moving New Technology into the Marketplace. The budget proposes $9 billion over 10 years in
tax relief to encourage the purchase of energy-efficient cars, homes, and appliances, and the
production of wind, solar, and biomass power.
Advancing Clean Energy Research. $1.4 billion, a 30 percent increase, to develop and deploy
renewable energy and energy efficiency technologies for the buildings, transportation, industry and
utility sectors; and to research coal and natural gas efficiencies and carbon sequestration.
Helping Local Clean Air Efforts. S85 million for a new Clean Air Partnership Fund for state and
local projects that reduce both greenhouse gases and air pollutants like soot and smog.
Protecting Forests and Biodiversity Around the World. The President is proposing $150 million
for a new Greening the Globe initiative to help stem the loss of forests worldwide - especially tropical
forests, which support more than half the known species on earth. The initiative will help developing
nations strengthen their economies by preserving their forests. It includes:
Targeted Conservation Investments. $100 million, a 60-percent increase, for programs at the
U.S. Agency for International Development (USAID) that help more than 60 countries in Africa,
Asia, and Latin America conserve their forests and other natural areas.
Debt-for-Nature Swaps. $37 million, almost three times current funding, to relieve developing
countries of debt owed to the United States when they commit to invest in forest conservation.
Research and Wildlife Protections. $10 million to protect wildlife habitat and research causes
and prevention of forest fires; $3 million to protect endangered elephants, tigers, and rhinos.
Monitoring Forest Loss from Space. A new program led by USAID and NASA to compile the
first comprehensive satellite maps of the world's tropical forests, and to work with national and
international partners to regularly monitor and report on future changes in forest cover.
Building Livable Communities. The President is proposing $9.3 billion, a 14 percent increase, for
the Administration's Livable Communities initiative, which helps communities grow in ways that
enhance their quality of life and ensure strong, sustainable economic growth. Priorities include:
Community Transportation Choices. $9.1 billion to help ease traffic congestion, including a
record $6.3 billion for light rail and other transit systems; $1.6 billion for innovative local
programs that ease congestion while reducing air pollution; and $468 million for an expanded
passenger rail fund.
Better America Bonds. The President is proposing Federal tax credits to pay the interest on
$10.75 billion in bonds over 5 years for investments by State, local, and tribal governments. The
bonds can be used to preserve green space, create or restore urban parks, protect water quality and
clean up brownfields (abandoned industrial sites). The cost is 3.billion 1 over 10 years.
Crime Data Sharing. $125 million for grants to state and local governments to improve public
safety through data sharing and the use of advanced crime-solving technologies.
"Smart Growth" Partnerships. $25 million to promote strategic regional "smart growth"
planning in urban and rural communities.
Protecting Children From Lead Poisoning. The President is proposing $165 million to launch a 10-
year strategy to end childhood lead poisoning by eliminating lead hazards, strengthening enforcement,
advancing research, and improving health monitoring and intervention. FY2001 priorities include:
Making Homes Lead-Safe. S120 million, a 50 percent increase, for grants and other Housing and
Urban Development efforts to reduce lead paint hazards in low-income homes with children under
six.
Increased Enforcement. So million for the Environmental Protection Agency and the Department
of Justice to increase public education and enforcement of lead-disclosure rules.
Promoting Conservation on the Farm. The President is proposing $3 billion, a $1.3 billion increase
over currently authorized levels, for voluntary programs that help farmers protect water quality and
wildlife habitat. A new $600 million Conservation Security Program would provide additional income
to family farmers who adopt comprehensive plans to curb erosion and protect water supplies from
polluted runoff. Other proposed increases would expand efforts to restore habitat, preserve streamside
buffer zones, and protect farmland threatened by sprawl.
Restoring the Great Lakes. The President is proposing a new $50 million initiative to help state and
local governments restore polluted "areas of concern" in the Great Lakes so they can be used for
fishing, swimming, boating and urban redevelopment. Matching grants could be used to clean up
contaminated sediments, control stormwater, restore wetlands, acquire greenways and buffers, and
control polluted runoff. State or local governments would provide at least 40 percent of project costs,
resulting in a total investment of more than $80 million.
WORKING FAMILIES
Since 1993, the Clinton-Gore Administration has worked hard to reduce poverty and increase
opportunity for our most disadvantaged families. The overall poverty rate fell to 12.7 percent in 1998,
with 7.7 million fewer people in poverty than in 1993. The child poverty rate has declined from 22.7
percent to 18.9 percent - the largest five year drop in nearly 30 years. But despite the strongest
economy in a generation, there are still millions of workers struggling to raise a family and make ends
meet. The President believes that parents who work hard and play by the rules should not have to raise
their children in poverty. President Clinton's FY2001 budget proposes to create new initiatives and
expand upon existing programs to help give working families the opportunities they need to partake of
our country's prosperity.
Expanding the Earned Income Tax Credit (EITC) to Even Better Reward Work and Family.
President Clinton proposes a $23 billion plan to expand the Earned Income Tax Credit to reward work
and family. According to estimates by the Department of the Treasury, this EITC expansion would
provide tax relief for 6.8 million hard-pressed working families, providing up to $1,200 in additional
tax relief for some of them. The President's proposal would build on his 1993 EITC expansion, which
provided a tax cut for 15 million families and made EITC even more effective at encouraging work
and reducing poverty, by:
increasing benefits for families with three or more children;
expanding the credit for married, two-earner couples;
rewarding families that are working hard to move into the middle class by lowering the phaseout
rate; and
encouraging savings through simplification.
Increasing the Minimum Wage. The President again proposes a $1 increase in the minimum wage.
This proposal, which builds upon President Clinton's 1996 minimum wage increase, would help 10
million Americans - 70 percent of whom are adults and 60 percent of whom are women. For a full-
time, year-round worker at the minimum wage, this would mean an additional $2,000 per year.
Individual Development Accounts. Since 1992, the President has supported the creation of
Individual Development Accounts (IDAs) to empower individuals to save for a first home, post-
secondary education. or to start a new business. In 1998, the President signed into law legislation
authorizing a five-year $125 million demonstration program. The President's budget provides $25
million for IDAs in FY2001. The Administration will also propose to allow low-income working
families to use IDAs to save for a car that will allow them to get or keep a job.
Retirement Savings Accounts (RSAs) To Help Families Save and Invest And Expand Pension
Coverage for Small Businesses. The President's Retirement Savings Accounts (RSAs) proposal will
give 76 million Americans the opportunity to build wealth and save for their retirement through a
progressive tax cut. This proposal builds on the successful model of Individual Development
Accounts (IDAs), extending generous matches to all low- and moderate-income families to encourage
them to develop savings and assets. A person who participated for 40 years in this savings program
could accumulate over $266,000 - enough to produce $24,000 a year of income in retirement. This
proposal would cost $54 billion over 10 years.
Tax Incentives For Small Businesses To Offer High-Quality Pension Coverage. In an effort to
encourage more small businesses to offer pensions for their employees. the budget provides for a 50
percent tax credit for three years of qualified contributions to employees' pensions. This provision
would cost $17 billion over 10 years.
Reducing the Marriage Penalty for Married, Two-Earner Couples By Increasing the Standard
Deduction by More Than $2,000. The President will propose to increase the standard deduction for
two-income married couples to twice that of single filers, providing substantial tax relief for 9.1
million married couples. When fully phased in, this change would result in a $2,150 increase in the
standard deduction. The President's proposal would also increase the standard deduction by $500 for
single-earner married couples and by $250 for single filers. Both elements of the President's plan
would cost $45 billion over 10 years and benefit 42.1 million families.
Alternative Minimum Tax Relief: The President will propose in his budget a $33 billion proposal
over 10 years to correct serious design flaws in the individual Alternative Minimum Tax (AMT) that
increasingly hurt middle-income families with children who play by the rules. It complicates their tax
preparation and raises their tax bills. The President's proposal will take over 9 million families per
year off the AMT when fully phased in.
Helping Families Afford to Take Family Leave. The President's budget includes a $20 million
family leave initiative to fund roughly 15 competitive planning grants for states and other interested
entities to explore ways to make parental leave and other forms of family leave more affordable and
accessible for American workers. Today, many workers face barriers, such as financial barriers, to
taking advantage of unpaid leave. A 1996 Study by the Commission on Family and Medical Leave
found that loss of wages was the most significant barrier to parents taking advantage of unpaid leave
following the birth or adoption of a child. The President's budget request will enable states and others
to identify in more detail the workers who need financial assistance to take parental leave or other
forms of family leave and to evaluate and develop options to aid these workers.
Helping Low-Income Working Families Get to Work. Transportation to work is a barrier for many
low-income families. Some families need a car to get to work, but owning a car can often be the one
item that makes a household ineligible for food stamps. The President's budget will make it easier for
working families to own a reliable vehicle and receive food stamps by allowing states to conform their
food stamp vehicle policy with a more generous TANF vehicle policy. The Administration will also
propose to allow low-income working families to use IDAs to save for a car that will allow them to get
or keep a job. In addition, the Administration supports expanding public transit as a reliable form of
transportation. The budget proposes to double Access to Jobs transportation funding to $150 million to
expand grants to communities to develop innovative public transportation solutions that help more
low-income workers and welfare recipients get to work.
Helping Millions Move from Welfare to Work. In 1992, President Clinton promised to end welfare
as we know it, and now more than three years after the enactment of the welfare reform law, we've
seen revolutionary changes to promote work and responsibility: the number of Americans on welfare is
at its lowest level since 1969 - 30 years ago - as millions of people move from welfare to work. Since
January 1993, the welfare rolls have fallen by more than half, from 14.1 million to 6.9 million. More
than 1.3 million welfare recipients went to work in 1998 alone. The 12,000 business participating in
the Welfare to Work Partnership launched by the President in 1997 have hired nearly 650,000 former
welfare recipients. The Federal government is also doing its share: in 1997, the President asked the
Vice President to lead the Federal hiring initiative to hire 10,000 welfare recipients over four years,
and today, we've far exceeded that goal, hiring more than 16,000 people at a time when the Federal
workforce is the smallest it has been in thirty years.
Helping More Long-term Recipients Move from Welfare to Work. Because of the President's
leadership, the 1997 Balanced Budget Act included $1.5 billion in each of years 1998 and 1999 for
Welfare-to-Work grants to help long-term welfare recipients and certain non-custodial parents go to
work and support their children. Currently, grantees have up to three years to spend the funds and
fully implement these important efforts. The President's budget allows grantees an additional two
years to spend these existing funds.
Ensuring Equal Pay. According to the Department of Labor, the average woman who works full-
time earns approximately 75 cents for each dollar that an average man earns. For women of the color,
the gap is even wider. This gap is attributable, in part, to differing levels of experience, education, and
skill. However, even after accounting for these factors, a significant pay gap still remains between
men and women in similar jobs. On January 24, the President announced a $27 million Equal Pay
Initiative in his FY2001 budget, an increase of $12 million over FY2000. The Initiative requests $10
million for the Equal Employment Opportunity Commission (EEOC) to provide training and technical
assistance to about 3,000 employers on how to comply with equal pay requirements and to launch a
public service announcement campaign on wage issues. The Initiative also dedicates $10 million for
the Department of Labor (DOL) to train women in nontraditional jobs, including high-tech jobs and
other skill shortage occupations. Lastly, the Initiative provides $7 million for DOL to help employers
assess and improve their pay policies, support public education efforts, provide for projects in non-
traditional apprenticeships, and implement industry partnerships. The President also called on
Congress again to pass the Paycheck Fairness Act, which would strengthen wage discrimination laws,
provide for new collection of data on wage issues, and provide for additional research, training, and
public education efforts on this important subject.
Creating Initiatives to Collect More Child Support. Since the President took office, child support
collections have nearly doubled, from $8 billion in 1992 to $15.5 billion in 1999. Today, parents who
owe child support have their wages garnished, their bank accounts seized, and their tax refunds
withheld. To build on this success, the budget contains several new measures to get parents to pay the
child support they owe and to ensure more support goes directly to families. Parents who owe past-due
child support will have their gambling winnings intercepted. If they are delinquent, they will have
their vehicles booted, they will have a harder time obtaining or renewing a passport, and they can be
prohibited from enrolling as a Medicare provider. The proposals also provide incentives for states to
pass through more child support payments directly to families, so that families leaving welfare can
keep all the payments, and families still working their way off can keep up to $100 a month. Finally,
the budget will require that child support orders be updated more frequently. In total, these initiatives
will bring in nearly $2 billion more for families.
Fathers Work/Families Win Grants. The President's budget will contain $255 million in new
competitive grants in FY2001 to promote responsible fatherhood and support working families, critical
next steps in reforming welfare and reducing child poverty. This budget will encourage responsible
fatherhood through $125 million in "Fathers Work" grants to put approximately 40,000 non-custodial
parents (mainly fathers) who owe child support to work and help them connect with their children. As
part of this effort, states will need to put in place procedures allowing them to require more parents
who owe child support to pay or go to work. The President's budget will also contain $130 million in
"Families Win" grants to help about 40,000 low-income parents stay in their jobs, move up the career
ladder, and remain off cash assistance. An important part of these grants will be to improve families'
access to food stamps, health care. childcare, and other critical support for working families. Of these
amounts, $10 million will be set-aside for applicants from Native American workforce agencies. This
proposal complements other budget initiatives to ensure that low-income working families have access
to the health care coverage and nutritional assistance they need.
Second Chance Homes. The budget includes $25 million in new funds to support "second chance
homes," adult-supervised and supportive living arrangements, for unmarried teen parents and their
children who cannot live at home or with other relatives. States will be able to use these funds, as they
can other Social Services Block Grant (SSBG) funds, to support services provided by faith-based and
community-based organizations. (Overall, the budget increases SSBG funds by $75 million over
current law.) This new initiative will be the latest of the Administration's efforts to break the cycle of
dependency and reduce teen pregnancy, which have resulted in the lowest teen pregnancy rates on
record and an 18 percent decline in teen birth rates from 1991 to 1998.
Homeless Initiative. Homeless persons do not participate fully in important health and other
programs for which they are eligible. The President's budget proposes legislation for a new $10
million initiative that would improve homeless individuals' access to mainstream programs that will
help them move toward self-sufficiency. Demonstration grants would be awarded to several states to
improve access to and provide coordination among mainstream programs such as Medicaid, State
Children's Health Insurance Program (SCHIP), Temporary Assistance for Needy Families, Food
Stamps, the Workforce Investment Act, and the Mental Health and Substance Abuse Block Grants.
The budget also proposes $1.2 billion for homeless assistance programs at the Department of Housing
and Urban Development, including $105 million for 18,000 homeless vouchers.
COMMUNITY EMPOWERMENT
The United States is currently in the midst of the longest expansion in its history. The strength and
duration of this expansion have helped bring economic opportunity to millions of people once cut off
from the economic mainstream. But too many urban and rural areas have not participated in this
growth. Working with the private sector and state and local governments, the President is committed
to help these communities participate in our country's economic prosperity. The Clinton-Gore
Administration's FY2001 budget proposes an expanded New Markets initiative and Empowerment
Zone program, a new program known as First Accounts, creation of the new Delta Regional Authority,
new initiatives to close the Digital Divide, efforts to expand opportunities to Native Americans as well
as other programs that will provide distressed communities with additional opportunities to succeed.
The New Markets Initiative. The President's budget provides tax credits and loans guarantee
incentives to stimulate $22 billion of new private capital investments in economically distressed
communities around the country and build a network of private investment institutions to funnel credit,
equity and technical assistance to businesses in America's new markets. In addition, the budget
proposes a new initiative, known as First Accounts that will provide low-cost bank accounts for
working families.
More Than Doubling the New Markets Tax Credit. The President proposes to more than
double the New Markets tax credit to spur $15 billion in new investment in community
development in economically distressed areas. An entity making new equity investments in a
selected community development project would be eligible for a tax credit worth 25 percent of the
cost of the investment. A variety of vehicles providing equity and credit to businesses in
underserved areas would be eligible. The total cost of the tax credits amounts to $5 billion over 10
years.
Expanded Empowerment Zones. The proposed expanded wage credits, tax incentives, and new
round of urban and rural EZs will extend and improve economic growth in the 31 existing urban
and rural Empowerment Zones, administered by the Department of Housing and Urban
Development (HUD) and the U.S. Department of Agriculture (USDA), and support the proposed
third round of 10 new Empowerment Zones to be designated in 2001. The total cost of these
proposals will be $4.4 billion over 10 years.
America's Private Investment Companies (APICs). Modeled after the Overseas Private
Investment Corporation's (OPIC) successful investment fund program, the President's budget
proposes $37 million to allow APICs to provide guaranteed debt to private investment companies,
licensed by HUD, to help leverage private equity capital and lower the cost of capital for
investments in low- and moderate-income communities. For every dollar that private investors
provide, the government will guarantee two dollars in debt to expand the APIC's pool of capital
available for making investments and enhance the return on those investments to the private
investors. APICs will make equity investments in larger businesses that are expanding or
relocating in inner cities and rural areas.
New Market Venture Capital Firms (NMVCs). The budget proposes $52 million to allow
NMVC firms to match the equity of private investors with Government-guaranteed debt and
technical assistance funding to cultivate the growth of smaller firms. NMVC would invest in
smaller growth companies that can also benefit from expert management assistance.
Creation of First Accounts. The President's budget proposes $30 million for the Department of
Treasury to pilot strategies to help low- and moderate-income Americans benefit from basic
financial services. Treasury will work with financial institutions and others: (1) to encourage the
creation of low-cost bank accounts (First Accounts); (2) to expand access to automatic teller
machines in safe, secure, and convenient locations, including U.S. Post Offices, in low-income
neighborhoods; (3) to educate low-income Americans about the benefits of having a bank account,
managing household finances, and building assets. The First Accounts initiative complements
Treasury's Electronic Transfer Accounts (ETAs) - low-cost, electronic banking accounts for
"unbanked" Federal benefit recipients - by reaching those not eligible to participate in the ETA
program because they are not Federal benefit recipients.
Other Elements of New Markets. Other elements in the budget include: increasing the funding
for SBA's microenterprise lending program to $50 million; $15 million to fund PRIME - a
program authorized last year to provide technical assistance to low-income entrepreneurs; boosting
CDFI funding to $125 million; expanding support to $6.6 million for BusinessLINC to encourage
large businesses to work with small businesses in new markets; and providing $5 million to
establish a New Markets University Partnerships pilot project which, under the auspices of HUD,
would provide Universities with funding to develop local community partnerships, assistance to
intermediaries, and technical and business development assistance to new and existing firms. In
addition, to better serve Native American communities, the President will provide additional
funding to expand the New Markets initiative to Indian Country.
Native American Initiative. In order to better serve Native American communities in this millennium
and to honor the Federal government's trust responsibility to tribes, the President's budget includes an
increase of $1.2 billion over FY2000 - the largest increase ever - for a total of $9.4 billion for key new
and existing programs assisting Native Americans and Indian reservations. Some of the highlights
include:
Bureau of Indian Affairs (BIA) School Construction and Repair. The President has proposed
$300 million, more than double the FY2000 enacted level of $133 million, to replace and repair
BIA-funded schools on reservations. This is the largest investment ever in a single year for BIA
school construction and repair.
Increased Funding for Tribal Colleges. The budget proposes increased funding of $25 million
for the Nation's tribal colleges for a total of $77 million.
Indian Health Service. The President's budget proposes $2.6 billion, an increase for the Indian
Health Service (IHS) of $230 million or 10 percent over the FY2000 enacted level.
Improving Law Enforcement in Indian Country. The budget proposes $439 million, an
increase of $103 million over FY2000, for the Departments of Justice and Interior for the third year
of the President's Indian Country Law Enforcement Initiative. The initiative will improve public
safety for the over 1.4 million residents on the approximately 56 million acres of Indian lands.
Building Roads and Bridges in Indian Country. The Transportation Department (DOT) will
expand its program to improve roads and bridges on Indian reservations. The President's budget
proposes to give the Indian Reservations Roads program the full authorization amount of $275
million with an additional $74 million from a highway receipts account for a total of $349 million,
which is an increase of $117 million over the previous year. This will allow Tribes to address the
estimated backlog of $4 billion in needs on these roads and bridges.
Tribal Infrastructure Projects. The President and the Vice President propose $49 million, an
increase of $46 million over FY2000, for the Department of Commerce's Economic Development
Administration (EDA) to fund infrastructure, planning, and public works projects.
Addressing the Digital Divide. To encourage Native Americans to pursue careers in information
technology and other science and technology fields, the budget provides $10 million, to be
administered by the National Science Foundation, for grants to tribal colleges for networking and
access, course development, student assistance, and capacity building.
Bureau of Indian Affairs (BIA) Contract Support Costs. Within the overall BIA increase, the
budget continues to support Tribal self-determination by proposing $134 million, a $9 million or 7
percent increase over 2000 for contract support costs. This funding provides $5 million for new
and expanded contracts and $129 million for existing contracts.
Trust Services. The Administration is committed to improving trust services and management
through its trust reform efforts at the Interior Department. The budget proposes $108 million, a 48
percent increase over 2000, for improved trust services in the BIA for activities such as probate,
real estate appraisals, and other services.
Indian Trust Fund Balances. The Administration is committed to resolving disputed Indian trust
fund account balances through informal dispute resolution and supports the unique government-to-
government relationship that exists in Indian trust land management issues. After Tribal
consultations, BIA submitted its "Recommendations of the Secretary of the Interior for Settlement
of Disputed Tribal Accounts" to Congress in November 1997. Legislation reflecting these
recommendations was proposed in 1998, but not enacted. The Department will continue efforts to
resolve trust fund account balances.
Trust Land Management. As part of BIA's commitment to resolving trust land management
issues, Interior worked with Congress in 1999 to repropose legislation (S. 1586) to establish an
Indian Land Consolidation program to address the ownership fractionation of Indian land. In
addition to S13 million for the Indian Land Consolidation program, the budget provides $83
million for DOI's Office of Special Trustee, including the trust management improvement project.
Current activities include verifying individual Indian's account data and converting these data to a
commercial-grade accounting system.
Creation of the Delta Regional Authority. In the Mississippi Delta, poverty remains at 175 percent
of the national average. The President's budget proposes $153 million for the creation of a new Delta
Regional Authority, modeled after the successful Appalachian Regional Commission, to bring the
resources of a Federal-State partnership to the fight for economic growth in the region. This
partnership will help bring the infrastructure and job training needed to make the Nation's prosperity a
reality in the Delta.
Closing the Digital Divide. Access to computers and the Internet and the ability to effectively use this
technology are becoming increasingly important for full participation in America's economic, political
and social life. Unfortunately, unequal access to technology and high-tech skills by income,
educational level, race, and geography could deepen the divisions that exist within American society.
The President's budget proposes a comprehensive package to help bridge the Digital Divide and to
help create more digital opportunity for all Americans. These initiatives include S2 billion in tax
incentives to encourage private sector activities such as computer donations, and $380 million in new
and expanded initiatives to serve as a catalyst for public-private partnerships designed to increase
access, training and applications for low-income families.
Expanding Housing Vouchers and Opportunities for Hard Pressed Working Families. The
President's budget will include $690 million for 120,000 new housing vouchers to subsidize the rents
of low-income families. These housing vouchers subsidize the rents of low-income Americans,
enabling them to move closer to job opportunities - many of which are being created far from where
these families live. Of the 120,000 new housing vouchers, 32,000 will be targeted to families moving
from welfare to work, 18,000 to homeless individuals and families, and 10,000 to low-income families
moving to new housing constructed through the Low Income Housing Tax Credit (LIHTC), with the
remaining 60,000 vouchers allocated to local areas to help address the large unmet need for affordable
housing. These new vouchers build on the 110,000 new housing vouchers secured through the
President's leadership over the past two years. In addition, the President's budget proposes to increase
the Low-Income Housing Tax Credit volume cap from $1.25 per capita to $1.75 per capita and to
index the cap to inflation after 2001, which will provide additional incentives to build and make an
additional 180,000 units of affordable housing available to working families over the next five years.
Supporting Community Empowerment Fund (CEF). The CEF/EDI, funded at $100 million in
FY2001, working in tandem with the Section 108 loan guarantee program, funded at $30 million in
FY2001, will work with a new pilot program beginning in 2000 to create loan pools to improve the
securitization of Section 108 loans.
AmeriCorps and Encouraging Community Service. Since the start of his Administration, the
President has encouraged and facilitated community service. Over 150,000 young people have
participated in AmeriCorps - they have helped to immunize more than a million people; taught, tutored
or mentored 4.4 million children; helped build some 11,000 homes; and truly sparked a new spirit of
public engagement across the land. The President's budget includes over $850 million for the
Corporation for National Service. This increase of nearly $120 million keeps AmeriCorps on track for
the President's goal of 100,000 members each year bY2004. The budget will also include a new
"AmeriCorps Reserves" program. modeled after the military reserves. and designed to engage former
Corps members in times of need. The budget also includes $15.5 million in new initiatives that reward
innovations in youth service, as well as additional resources to encourage service by senior citizens,
and to engage students in service through a new "Community Coaches" program.
Encouraging Philanthropy. The budget includes a comprehensive package of new tax proposals to
encourage philanthropy. The budget proposes allowing non-itemizers to take a tax deduction for
charitable giving. New rules will make it easier for charitable foundations to make gifts in times of
need. In addition, the budget proposes making it easier for individuals to donate appreciated assets like
securities and real property. These proposals would cost $14 billion over 10 years.
Strengthening Non-profits' Role in Community Development. Already many faith-based and
community-based organizations partner with government to help our nation's families, but the
President and Vice President believe we should do more, and their budget proposes to increase the
involvement of religiously affiliated and community-based organizations in after-school, housing,
community development, criminal justice, welfare reform, teen pregnancy prevention, and juvenile
justice programs, consistent with the constitutional line between church and state.
Helping More Long-term Recipients Move from Welfare to Work. Because of the President's
leadership, the 1997 Balanced Budget Act contained $3 billion for Welfare-to-Work grants to help
long-term welfare recipients and certain non-custodial parents go to work and support their children.
To fully implement these important efforts, the President's budget allows grantees an additional two
years to spend these existing funds.
Helping Low-Income Working Families Get to Work. Transportation to work is a barrier for many
low-income families. Some families need a car to get to work, but owning a car can often be the one
item that makes a household ineligible for food stamps. The President's budget will make it easier for
working families to own a reliable vehicle and receive food stamps by allowing states to conform their
food stamp vehicle policy with a more generous TANF vehicle policy. The Administration will also
propose to allow low-income working families to use IDAs to save for a car that will allow them to get
or keep a job. In addition, the Administration supports expanding public transit as a reliable form of
transportation. The budget proposes to double Access to Jobs transportation funding to $150 million to
expand grants to communities to develop innovative public transportation solutions that help more
low-income workers and welfare recipients get to work.
Homeless Initiative. Homeless persons do not participate fully in important health and other
programs for which they are eligible. The President's budget proposes legislation for a new $10
million initiative that would improve homeless individuals' access to mainstream programs that will
help them move toward self-sufficiency. Demonstration grants would be awarded to several states to
improve access to and provide coordination among mainstream programs such as Medicaid, State
Children's Health Insurance Program (SCHIP), Temporary Assistance for Needy Families, Food
Stamps, the Workforce Investment Act, and the Mental Health and Substance Abuse Block Grants.
The budget also proposes $1.2 billion for homeless assistance programs at HUD, including $105
million for 18,000 homeless vouchers.
FROM DIGITAL DIVIDE TO DIGITAL OPPORTUNITY
Access to computers and the Internet and the ability to use this technology effectively are becoming
increasingly important for full participation in America's economic, social and political life.
Unfortunately, there is strong evidence of a "digital divide" - unequal access to technology by income,
education level, race, and geography. In 1998, those with a college degree were more than eight times
more likely to have a computer at home and nearly sixteen times as likely to have home Internet access
as those with an elementary school education. This growing divide also cleaves our community along
income, ethnic, and geographic lines, with affluent, white, and urban/suburban households enjoying
better computer and Internet access than their African-American, Hispanic, less affluent and more rural
counterparts.
Private sector competition and rapid technological progress are powerful forces to bridge the digital
divide and make Information Age tools available for more and more Americans. By working with the
private sector and community-based organizations, the Administration can accelerate the trend toward
expanded access. But we also need to give people skills to use technology and to promote content and
applications of technology that will help empower under-served communities. Building on their past
successes in bridging the digital divide, President Clinton and Vice President Gore propose the
following initiative to help accomplish these goals:
Tax incentives to encourage private sector involvement. The budget proposes $2 billion over 10
years in tax incentives to encourage private sector donation of computers, sponsorship of community
technology centers, and technology training for workers, including:
Encouraging companies to donate computers. The President proposes to extend and expand the
tax deduction that gives companies an incentive to donate computers to schools, libraries and
computer technology centers. This enhanced deduction allows companies to deduct more than the
cost of their donation. Under current law, this deduction applies to donations of computers to
schools only and expires after the year 2000. The President's proposal would extend this provision
through June 30, 2004 and expand it to donations to public libraries or community technology
centers in Empowerment Zones, Enterprise Communities, and high-poverty areas.
Promoting corporate sponsorship of schools, libraries and community technology centers.
The President proposes tax relief to encourage companies to sponsor schools and community
technology centers in Empowerment Zones, Enterprise Communities. and targeted low-income
areas. The President's proposal would allocate credits for $16 million in corporate sponsorship to
each of the 31 existing Empowerment Zones and 10 proposed new Empowerment Zones and $4
million in corporate sponsorship for each of the more than 80 Enterprise Communities. In total, the
President's proposal would help support up to nearly $1 billion in annual sponsorships to help
improve schools and community technology centers.
Supporting technology training for workers. The President's proposal would provide targeted
tax relief to encourage companies to provide computer training, workplace literacy, or other basic
education for employees who lack the basic skills to succeed in the modern workplace. Companies
would be allowed to take a 20 percent tax credit for up to $5,250 in annual expenses per employee.
Eligible employees generally would not have received a high school degree or its equivalent.
Teacher training. The budget proposes S150 million to help train new teachers entering the
workforce to use technology effectively in the classroom. Under the leadership of President Clinton
and Vice President Gore, the United States has made enormous progress in connecting schools to the
Internet and increasing the number of modern computers in the classroom. However. access to
computers and the Internet will not help students achieve high academic standards unless teachers are
as comfortable with a computer as they are with a chalkboard. President Clinton's budget calls for
$150 million in Department of Education grants - double last year's investment of $75 million - to
achieve this goal.
Community Technology Centers. The President proposes $100 million to create up to 1,000
Community Technology Centers in low-income urban and rural communities. The President's budget
more than triples the Department of Education's support for Community Technology Centers - from
$32.5 million in FY2000 to $100 million in FY2001. This initiative, championed by Congresswoman
Maxine Waters, was initially funded at $10 million in FY 1999. It aims to help close the "digital
divide" by providing computers and Information Age tools to children and adults who can not afford
them at home.
Public/private partnerships. The President's budget includes a new $50 million Department of
Commerce pilot program to expand access to computers and the Internet for low-income families and
to give these families the skills they need to use these new Information Age tools effectively. This
new program will provide competitive grants to public-private partnerships at the local level.
Innovative applications of technology. President Clinton's budget will increase the investment in the
Department of Commerce's highly-successful Technology Opportunities Program (TOP) to $45
million - triple the current level of $15 million. Applications might include public health information
systems that raise childhood immunization rates in inner cities, tele-mentoring for at-risk youth, and
electronic networks that strengthen local communities by fostering communication and collaboration.
High-speed networks in underserved communities. High-speed Internet access is becoming as
important to the economic vitality of a community as roads and bridges are today. The President
proposes a new $25 million program at the Department of Commerce and the Department of
Agriculture to accelerate, through grants and loan guarantees, private sector deployment of broadband
networks in under-served urban and rural communities.
Native Americans and information technology. The President proposes $10 million to prepare
Native Americans for careers in information technology and other technical fields. The National
Science Foundation will support efforts by tribal colleges to increase the number of Native Americans
who are prepared to pursue careers in information technology and other technical fields.
RESEARCH & DEVELOPMENT
President Clinton and Vice President Gore include a nearly S3 billion increase in the "Twenty-First
Century Research Fund" in their FY2001 budget, including a S1 billion increase in biomedical
research at the National Institutes of Health and double the largest dollar increase for the National
Science Foundation in its 50 year history. These investments will ensure that science and technology
will continue to fuel economic growth and allow Americans to lead longer, healthier lives. These
investments also will enable America to continue to lead in the 21st century by increasing support in all
scientific and engineering disciplines, including biomedical research, nanotechnology, information
technology, clean energy, and university-based research. Specifically, this infusion of funds will
enable researchers to tackle important scientific and technological challenges.
The Benefits of Technology for America. Technology has helped fuel American prosperity,
improved the lives of American families, and enabled us to learn more about the world around us.
American Prosperity in the 21st Century. With rapid growth, increased productivity and rising
standards of living, the U.S. economy is thriving, in large part because of our technological
leadership. Science and technology have become the engine of America's economic growth:
information technology alone accounts for 1/3 of U.S. economic growth, and is creating jobs that
pay almost 80 percent more than the average private-sector wage. Many of the technologies that
are fueling today's economy are the result of government investments in the 1960's and 1970's.
Longer, Healthier Lives for All Americans. In the last 100 years, the life expectancy of the
average American has increased by almost 30 years, as a result of breakthroughs such as
antibiotics. Today, we are on the verge of even greater scientific advances, and continued
investment in health-related research could lead to greater life expectancies and better quality of
life.
Educating America's High-tech Workforce. The President's investment in university-based
research will help spur innovations in new technologies and treatment, while preparing the next
generation of leaders in science, engineering and technology.
Cleaner Energy for a Cleaner Environment. Research can help America create cleaner sources
of energy and energy-efficient technologies, such as fuel cells that emit only water, cars that get 80
miles per gallon, and bioenergy derived from new cash crops.
New Insights into the World Around Us. Increases in funding for science-based research can
lead to amazing breakthroughs in our understanding of the world around us and beyond.
The President's FY2001 Proposals for Research and Development. In his FY2001 budget the
President is proposing a wide range of initiatives and funding increases for vital investments in
research and development:
$1 billion Increase in Biomedical Research at the National Institutes of Health (NIH). The
President's FY2001 budget includes almost $19 billion, an increase of $1 billion over last year's
funding level, for biomedical research at NIH. In addition, the President will eliminate the delays
in releasing $4 billion in research funds as required in last year's appropriations bill. This increase
will support research in areas such as diabetes. brain disorders. cancer. genetic medicine, disease
prevention strategies, and development of an AIDS vaccine. It will also help researchers complete
in the near future a first draft of the entire human genome - the very blueprint of life. This and
other wise investments in science are leading to a revolution in our ability to detect, treat, and
prevent disease. If Congress passes the President's proposal, funding for NIH will increase by over
80 percent - nearly twice what the NIH budget was when President Clinton came into office.
A New $495 Million National Nanotechnology Initiative. The President's budget proposes an 83
percent increase in nanotechnology research, from $270 million in FY2000 to $495 million in
FY2001. Nanotechnology - the ability to manipulate individual atoms and molecules - could
revolutionize the 21st century in the same way that the transistor and the Internet led to the
Information Age. Increased investments in nanotechnology could lead to breakthroughs such as
molecular computers that can store the contents of the Library of Congress in a device the size of a
sugar cube, new materials ten times stronger than steel and a fraction of the weight, and the ability
to detect cancerous tumors that are a few cells in size.
A $675 Million Increase in the National Science Foundation - Double the Largest Dollar
Increase in NSF's History. The President's FY2001 budget includes $4.6 billion for research and
education investments at the National Science Foundation (NSF). This represents a $675 million
(17 percent) increase over current funding levels. If Congress approves this investment, it would
double the largest dollar increase ever for the Foundation, and NSF funding would have increased
by 66 percent since President Clinton took office. This increase will boost university-based
research and ensure balanced support for all science and engineering disciplines. NSF accounts for
half of all non-health university-based research.
An Almost $600 Million Increase in Information Technology Research. The President's
FY2001 budget provides $2.3 billion for IT R&D, almost $600 million more than last year's
appropriations and a billion dollars more than the FY 1999 appropriation. This is the second year
of the Administration's "Information Technology for the Twenty-First Century" initiative. This
increase in information technology research could lead to advances such as high-speed wireless
networks that can bring distance learning and telemedicine to isolated rural areas; and
supercomputers that can more accurately predict tornadoes and hurricanes, and more rapidly
develop life-saving drugs. These investments are consistent with the recommendations of the
President's Information Technology Advisory Committee. a committee of experts in industry and
academia which has called on the government to substantially increases its investment in long-term
information technology research. Previous Federal investments in information technology research
have led to today's Internet, the first "point and click" Web browser, advanced microprocessors,
and the technology for many of today's Internet search engines.
Promoting Bioenergy and Bio-based Products. The President's FY2001 budget proposal
includes a new initiative in research and development in bio-based technologies, which convert
crops, trees, and other "biomass" into a vast array of fuels and products. The initiative provides an
increase of more than $93 million over the amounts available for FY2000 - a 47 percent increase.
The initiative supports the President's goal of tripling U.S. use of biobased products and bioenergy
bY2010. Reaching the President's goal would generate billions of dollars of new income for
farmers and diversify and strengthen the rural economy producing 50,000 new, high-technology
jobs in small processing plants in rural America and up to 130,000 such jobs in biopower,
bioproducts, and biofuels industries. It would also lower the emissions of greenhouse gases by 100
million tons, equal to the amount emitted by 70 million cars.
Weapons of Mass Destruction (WMD) Preparedness and Critical Infrastructure
Preparedness R&D. The President's budget provides $501 million, a S28 million increase, for
WMD preparedness. This will enhance our efforts to prevent, detect and respond to the release of
weapons of mass destruction. The budget also includes $606 million, a $145 million increase, to
improve the safety and security of the Nation's "critical infrastructure." This is the power,
communications, information, transportation and other systems on which our economy and quality
of life depend.
Integrated Science for Ecosystem Challenges. The budget proposes $747 million - a $90
million increase over FY2000 - to support environmental research to improve our understanding of
the factors that result in ecosystem decline and biodiversity loss, and to design more effective
options to prevent future declines.
SAFE COMMUNITIES
America has the lowest crime rate in a generation. The Clinton-Gore Administration's FY2001 budget
proposes a series of measures to continue to make progress toward the goal of making America the
safest large country in the world.
21st Century Policing Initiative. The President's COPS program has funded 100,000 more
community police for our streets. The 21st Century Policing Initiative builds on that success by:
providing resources for communities to hire and redeploy up to 50,000 more police for our streets
by FY2005, targeting new officers to crime "hot spots";
giving law enforcement access to the latest crime-fighting and crime-solving technologies, such as
improved police communications, crime mapping software, laptop computers, and crime lab
improvements;
funding new state and local prosecutors to work with local law enforcement and the community to
combat local crime problems; and
engaging all sectors of the community to prevent and fight crime by funding partnerships with
probation parole officers, schools and faith-based organizations.
Stopping Crime by Stopping Drugs. Offenders under the influence of drugs or in the pursuit of
money to feed a drug habit commit many crimes. To break the vicious cycle of drugs and crime, the
President's budget provides more funding to help states to implement tough, rigorous systems of drug
testing, punishment, and treatment of offenders under criminal justice supervision. The President's
$215 million initiative would double current funding for this initiative to move more offenders off of
drugs and away from crime. Studies show that offenders who complete drug-treatment are 70 percent
less likely to commit crime. The initiative will also fund innovative drug courts and intensive drug
treatment for state prisoners with the most serious drug problems.
Safe Schools. While overall school and youth crime continues to decline, recent incidents of tragic
violence in our nation's schools reminds us that we can do more. The budget reaffirms the President's
commitment to school safety by calling for a significant expansion of his Safe Schools/Health Students
Initiative. The President's initiative, first launched at the White House Conference on School Safety in
1998, helps communities to develop and implement community-wide responses to school and youth
violence. The program joins principals, parents, police and others in the community in comprehensive
strategies to address youth violence in and out of school. The budget provides a $100 million increase
for this initiative, investing a total of nearly $250 million in this signature program.
Supervising Released Offenders: Project Reentry. The need for greater supervision of the 500,000
inmates who will leave prison this year and reenter local communities is significant: two-thirds of all
prisoners are re-arrested for new offenses within three years of release. The President's budget
contains $60 million for community supervision initiative to create "reentry partnerships" and "reentry
courts" to address community safety concerns, lower recidivism rates. and promote responsible
fatherhood among offenders returning to communities. The initiative is complemented by $75 million
in Responsible Reintegration for Young Offenders grants from the Department of Labor as well as $10
million in SAMHSA targeted capacity expansion grants for substance abuse and mental health services
at the Department of Health and Human Services.
Reauthorization of the Violence Against Women Act. In 1994, the President signed into law the
Violence Against Women Act (VAWA I), an historic piece of Federal legislation that contains a broad
array of ground-breaking laws to combat the epidemic of violence against women. The Clinton
Administration has awarded over $1.3 billion in VAWA grants since 1994. The President called on
Congress to reauthorize this historic piece of legislation this year, as part of his Crime bill, in order to
ensure that these programs and prevention strategies continue in this millennium. The President's
budget also includes $516 million in order to combat domestic violence - $296 million for the
Department of Justice and $220 million for the Department of Health and Human Services.
Improving Law Enforcement in Indian Country. The budget proposes $439 million, an increase of
$103 million over FY2000, for the Departments of Justice and Interior for the third year of the
President's Indian Country Law Enforcement Initiative. The initiative will improve public safety for
the over 1.4 million residents on the approximately 56 million acres of Indian lands. This funding will
increase the number of law enforcement officers on Indian lands, provide more equipment, expand
detention facilities, enhance juvenile crime prevention, and improve the effectiveness of tribal courts.
Although violent crime has been declining nationally for several years, it has been on the rise in Indian
country. According to the Department of Justice, American Indians are the victims of violent crimes at
more than twice the rate of all U.S. residents. Recognizing this, the President made a major
commitment to improve law enforcement in Indian country.
Fighting Gun Crime with the Largest National Gun Enforcement Initiative in History. The
President's strategy of combating gun violence has helped lead to a 35 percent decline in gun crime.
Building on that success, the President's budget includes $280 million for the largest national gun
enforcement initiative in history. The initiative specifically includes:
500 New ATF Agents and Inspectors. The President's initiative includes the largest increase
ever in ATF agents and inspectors, with new agents to crack down on violent gun criminals and
illegal gun traffickers at guns shows, gun stores and on the streets and more firearms inspectors to
target unscrupulous gun dealers who supply firearms to criminals and juveniles.
Over 1,000 Federal, State, and Local Gun Prosecutors. The President's initiative will fund
more than 1,000 new Federal. state and local prosecutors to incarcerate gun criminals.
Specifically, the President's budget will provide funding for 1,000 new state and local gun
prosecutors to work closely with communities, law enforcement, and Federal prosecutors on gun-
related crimes. In addition, over 100 more Federal gun prosecutors in the offices of U.S.
Attorneys, and 20 gun enforcement teams will be funded in high gun crime areas across the nation
to coordinate enforcement efforts and maximize tough Federal sentences against armed career
criminals and illegal gun traffickers.
Comprehensive Crime Gun Tracing. To move toward tracing every crime gun in America, 250
local law enforcement agencies will receive training and tracing equipment to facilitate
comprehensive tracing. In addition, the Administration's successful Youth Crime Gun Interdiction
Initiative (YCGII), which helps law enforcement crack down on traffickers that illegally supply
guns to young people, will be expanded from 38 to 50 cities across the country.
New National Integrated Ballistics Information Network. The President's budget will more
than triple current funding for ballistics testing programs to launch the first-ever national ballistics
network - to support the deployment of 150 ballistics imaging units to law enforcement, helping to
link bullets and shell casings to the criminal guns they were fired from.
Local Anti-Gun Violence Media Campaigns. To help communities send a strong message to
combat gun crime and violence, the budget funds $10 million in matching grants to support local
anti-violence media campaigns highlighting penalties for breaking gun laws, safe storage of
firearms and preventing child access.
Funding Innovative Smart Gun Technology. The accidental gun death rate for children under 15 in
the U.S. is nine times higher than in 25 other industrialized nations combined. To help prevent
accidental gun death and injuries of children who obtain access to guns, gun theft, and other
unauthorized uses, the President's budget provides $10 million to fund the expansion, testing and
replication of "smart" gun technologies. These state-of-the-art gun safety precautions can limit a gun's
use to its adult owner or other authorized users.
Strengthening Brady Background Checks. The President's budget provides $70 million to double
funding to improve state criminal history records and improve the speed and accuracy of Brady
background checks. In addition, $5 million will fund a National Instant Notification (NIN) system to
help police apprehend criminals attempting to illegally purchase firearms.
Keeping Used Police Guns Out of the Hands of Criminals. To end the resale of used police guns
and seized firearms on civilian markets where criminals may gain access to them, the budget provides
$10 million for one-time grants to help law enforcement meet budgetary constraints on the condition
that they agree to halt the practice of resales.
UNITED STATES LEADERSHIP IN THE WORLD
At the start of a new century, the United States is faced with new opportunities and new challenges as a
global leader and the world's strongest force for peace and prosperity. American leadership has been
instrumental in seizing new opportunities for peace, including reversing ethnic cleansing and restoring
stability to the Balkans; ending bloodshed in Northern Ireland; brokering peace in the Middle East
between Israel and its neighbors; restoring democracy in East Timor; supporting Russia's
transformation to democracy and free markets; and integrating China into the international community.
U.S. leadership has also been decisive in meeting new challenges and combating new threats such as
weapons proliferation, terrorism, and drug-trafficking. The Clinton-Gore Administration's FY2001
budget seeks to build upon past success to advance America's leadership position in the world, funding
a number of new initiatives designed seize the new opportunities and face the new challenges the 21ˢᵗ
century presents.
Promoting Peace and Democracy Abroad.
Kosovo. After reversing the campaign of ethnic cleansing by leading the NATO alliance to victory
against Serb forces, the President remains committed to finishing the job by restoring peace and
prosperity to the region. His budget proposes $175 million to help the people of Kosovo build a
democratic society, strengthen their economy, and create new employment opportunities. The
members of the European Union will bear the lion's share of the aid money, but the United States
must contribute as well. FY2000 emergency supplemental appropriations of $624 million will be
used for economic and democratic reform activities in Kosovo, Croatia, and Montenegro, as well
as to provide additional assistance to the democratic opposition in Serbia. This funding will also
provide critical support needed in 2000 for the UN Mission in Kosovo (UNMIK) and to build
secure U.S. diplomatic facilities in Kosovo, Bosnia, and Albania.
Southeast Europe Initiative. The political and economic integration of the Balkans into Europe
and the global community is critical for lasting peace in Europe. The budget requests in the
Support for Eastern European Democracies account $428 million for this fundamental initiative,
including $96 million that will help to promote the democratic opposition of Serbia and to provide
assistance to Montenegro. Approximately $6 million of U.S. assistance will go to accelerating the
integration of Southeast Europe's countries into the global trading system by breaking down
barriers to trade and investment.
Middle East Peace. This year the President brokered a peace agreement between Israel and the
Palestinians to implement key provisions of the Wye River Accords, launched permanent
settlement talks. and restarted the Israel-Syria track of Middle East peace. His budget reflects his
commitment to a lasting peace in the region by requesting funds of $1.8 billion from the Economic
Support Fund (ESF) and $3.4 billion from Foreign Military Financing (FMF) to provide a strong
support for the next phase of negotiations between Israel and its neighbors.
Meeting Threats.
Expanded Threat Reduction Initiative (ETRI). This effort to contain the spread of weapons of
mass destruction (WMD) from the former Soviet Union and to promote stability has already helped
to: deactivate nearly 5,000 nuclear warheads; eliminate nuclear weapons from Ukraine, Belarus,
and Kazakhstan; strengthen security of nuclear weapons and materials: tighten export controls and
detect illicit trafficking; and engage former Soviet weapons scientists in productive civilian
research. Despite this considerable progress. more help is needed. The President has requested
S974 million for ETRI, including programs administered by the Departments of State. Defense. and
Energy. These funds will support science centers, enhance border control and regional security
efforts to decrease smuggling of technology or materials, expand protection of fissile material, and
accelerate closure of nuclear weapons production facilities.
Colombia Assistance. To assist Colombian President Andres Pastrana combat drug traffickers in
his country and stem the flow of cocaine and other narcotics to the United States, the President's
budget proposed a substantial increase in assistance to this embattled partner. The budget proposed
to increase assistance programs through 2000 emergency supplemental appropriations of $954
million and 2001 new funding of $318 million in the international affairs and other budget areas.
Funds will be used to support President Pastrana's "Plan Colombia" in enhancing alternative
development, strengthening civil justice and democratic institutions, and providing military
assistance.
Transnational Threats. Global security is threatened by the proliferation of weapons of mass
destruction (WMD) and terrorism. The budget proposes $194 million to support international
efforts to combat the spread of weapons of mass destruction through several programs and a global
network of sensors to detect nuclear explosions. The budget also includes funding for the Korean
Peninsula Energy Development Organization, which will construct two proliferation-resistant
nuclear power reactors in North Korea. The Administration is strengthening its fight against
terrorism by increasing funding for new embassies overseas, upgrading physical security at our
most at-risk posts, and the destruction of small arms abroad. The Comprehensive Nuclear Test
Ban (CTBT) also remains an important element of the global nonproliferation regime. The
Administration is committed to working to create the conditions for a successful vote to approve
the CTBT in the Senate.
Expanding Trade.
Trade Agreements. The Administration is committed to opening markets and integrating the
global economic system, which has become a key element of continuing economic prosperity here
at home. The budget proposes significant increases for efforts by our trade negotiators to promote
open markets and a fair, rules-based trading system. Securing passage of permanent Normal Trade
Relations with China to implement the historic trade agreement reached between our two countries
last November is critical to achieving the goal of expanded trade and a legislative priority of the
Administration this year. In addition, the President urges Congress to enact the African Growth
and Opportunity Act and the Caribbean Basin Initiative enhancement legislation, which would
facilitate the integration of these important developing regions into the world economy through
preferential trading arrangements and expand opportunities for American firms, as well as the
Balkans trade initiative and the extension of the Generalized System of Preferences.
Reaching Out to the Developing World.
Debt Forgiveness. The Administration this year helped to lift those in the world's poorest
countries by forgiving $500 million in debt and forging agreement among G-8 industrialized
countries to provide additional debt relief through the expanded Heavily Indebted Poor Country
(HIPC) initiative. The President led this effort with a proposal that remains at the forefront of this
issue with his commitment to forgive 100 percent of the debt owed to the U.S. by the world's
poorest countries, a majority of them in sub-Saharan Africa. To fulfill this pledge. the
Administration is requesting S600 million for a U.S. contribution to the HIPC trust fund over three
years, including a $210 million supplemental request in FY2000. The budget also includes $37
million for the Tropical Forest Initiative, to use debt relief funds in support of conservation.
Making Vaccines More Accessible. In his September 1999 address to the UN General Assembly,
the President called for a concerted effort to make vaccines more widely available in the
developing world, where more than three million children die each year from vaccine-treatable
diseases. As an important first step, the budget proposes a $50 million contribution to the Global
Alliance for Vaccines and Immunizations, where the money will be used to purchase existing
vaccines and ensure their safe delivery. This initiative will be complemented by increased funding
for the National Institute of Health to accelerate the development of vaccines for major infectious
diseases. In addition, the President's budget proposes a new tax credit that will encourage the
development of vaccines for diseases that occur primarily in the developing world.
Child Labor. In December of last year, the President signed, with Senate advice and consent, the
ILO's convention to ban abusive child labor. This year, he proposes to take these efforts to a new
level, providing $110 million to support international efforts to eliminate child labor through a
comprehensive strategy with three inter-related components: (1) increasing the U.S. contribution to
the ILO's International Programme for the Elimination of Child Labor by 50 percent to $45
million; (2) establishing a new $55 million bilateral educational assistance program to promote
school rather than work in areas where exploitative child labor is prevalent; and (3) doubling - to
$10 million - Customs Service resources to enforce the ban on the importation of goods made with
forced or indentured child labor.
Anti-Sweatshop Initiative. President Clinton's FY2001 budget includes a $5 million grant program
at the State Department that will fund innovative programs to eliminate unhealthy and abusive labor
conditions in sweatshops around the world, particularly in foreign factories that produce consumer
goods for the American market.
AMERICA'S ARMED FORCES
President Clinton and Vice President Gore are committed to maintaining a strong and capable military
that protects our freedoms and fortifies our global leadership role in the 21st century. To achieve this,
President Clinton last year initiated a long-term, sustained increase in defense spending by providing
additional resources of $112 billion over six years to protect our high level of military readiness and
procure modern and effective weapons systems. This year's budget continues this increase in defense
spending, providing discretionary funding of $292.2 billion in 2001. This represents an increase in
$11.3 billion over the proposed 2000 level and $4.8 billion over the 2001 level assumed in the 2000
budget.
Enhancing Military Readiness. The current high level of readiness is the Administration's top
defense priority. Increased funding will enable the Services to support unit operations and joint
exercises, meet their required training standards, maintain their equipment in top condition, recruit and
retain quality personnel, and procure sufficient spare parts and other equipment. The Department of
Defense (DoD) continues to monitor its current and future readiness through the Senior Readiness
Review process. which ensure that DoD leadership remains well informed about force preparedness
issues.
Operations and Support Programs. This proposed increase in resources will ensure that we keep
pace with the latest advances to protect against and prepare for new and emerging threats,
including the use of chemical and biological weapons, other weapons of mass destruction, and
efforts to weaken the critical infrastructure of our nation. This budget will also increase
procurement of modern, effective weapons systems and provides pay, benefits, and quality of life
improvements for our servicemen and women.
Contingency Operations. The budget proposes $4.4 billion in 2001 for ongoing contingency
operations - limited military operations in conjunction with our allies - in Bosnia, Kosovo, and
Southwest Asia. This funding will allow DoD to avoid redirection of funds from standard
operations and maintenance programs to contingency operations, which could undermine the
readiness of our fighting forces.
Modernizing Weapons Systems. The United States military must maintain its status as the best
equipped in the world. Weapons systems modernization, both in the form of upgrades to existing
systems and in the form of research, development and procurement of new systems. continues to be a
high Administration priority. The budget achieves that goal by providing $60.3 billion for the
procurement program, which is S6.1 billion more than the 2000 level.
Modernizing Ground Forces. Army modernization efforts will address the need to maintain a
force capable of accomplishing a wide range of missions from contingencies, to its primary
mission of defeating adversaries in a major theater war. The budget supports plans to: transform
units to deploy more easily than the heavy tank and mechanized infantry divisions, incorporate
digital communications equipment into weapons systems to strengthen battlefield planning and
execution, and to extend the life and improve battlefield performance of primary combat systems
by integrating new navigation and data transfer technology.
Modernizing Naval Forces. The budget continues procurement of several ship classes. including
$3.1 billion for three DDG-51 Aegis Destroyers. and $1.5 billion for two LPD-17 Amphibious
Transport Dock ships. The Navy budget also funds modernization of the nuclear aircraft carrier
fleet by providing $4.1 billion to procure the tenth Nimitz-class nuclear aircraft carrier and S700
million to fund the first phase of modernization for second Nimitz-class carrier.
Modernizing Air Forces. Substantial investment in new tactical combat aircraft is necessary for
the United States to maintain its ability to dominate battles. The budget supports three new aircraft
programs: $3.1 billion for 42 F/A-18E/F Super Hornets, which will become the Navy's principal
fighter/attack aircraft; $2.5 billion for 10 F-22 Raptors, the Air Force's new air superiority fighter;
and $857 million to start advanced development and research for the Joint Strike Fighter, which is
designed to produce a family of aircraft for the Air Force, Navy and Marine Corps.
Developing Missile Defenses. The Administration intends to determine this year whether to deploy a
limited National Missile Defense (NMD) against ballistic missile threats to the United States from
rogue nations. At the same time, the President seeks funding for theater missile defense to defend our
forces in the field.
Defending Against Strategic Ballistic Missiles. The budget proposes $1.9 billion in 2001 for the
development, procurement, and construction of an NMD system to defend all 50 states against an
attack. The Administration's long-range defense plan now provides a total of about $10.4 billion
in 2001-2005 for NMD, including additional funding to expand the NMD capability to counter the
rogue threat.
Developing Missile Defense Technologies. The budget proposes $2.8 billion for other missile
defense technologies and systems, including $1.9 billion for theater systems to defend against
missiles that directly threaten deployed U.S. and allied forces. While the funding is primarily for
research and development of advanced systems to meet future threats, it includes $0.4 billion in
procurement, the majority of which will be used to purchase an advanced version of the Patriot
missile.
RESTORING FAIRNESS FOR LEGAL IMMIGRANTS
Upon signing the 1996 welfare reform law, the President made a commitment to reversing unnecessary
cuts in benefits to legal immigrants that had nothing to do with the law's goal of moving people from
welfare to work. In 1997, the President fought for and ultimately was successful in ensuring that the
Balanced Budget Act protects the most vulnerable. In 1998, the President continued his proposals to
reverse unfair cuts in benefits to legal immigrants. The Clinton-Gore Administration's FY2001 budget
continues to fight for restoring important disability, health, and nutrition benefits to additional
categories of legal immigrants, at a cost of $2.5 billion over five years.
Disability and Health. The Balanced Budget Act of 1997 and the Noncitizen Benefit Clarification
and Other Technical Amendments Act of 1998 invested $11.5 billion to restore disability and
health benefits to 380,000 legal immigrants who were in this country before welfare reform
became law (August 22, 1996). The President's FY2001 budget proposes to restore eligibility for
SSI and Medicaid to legal immigrants who enter the country after that date if they have been in the
United States for five years and become disabled after entering the United States. This proposal
will cost approximately $1.2 billion and assist an estimated 53,000 legal immigrants by 2005,
about half of whom would be elderly.
Nutritional Assistance. The Agricultural Research Act of 1998 provided Food Stamps for
225,000 legal immigrant children, senior citizens, and people with disabilities who entered the
United States by August 22, 1996. The President's FY2001 budget restores eligibility to legal
immigrants in the United States before August 22, 1996 who either subsequently reach age 65 or
who live in a household with Food Stamp eligible children. This proposal will restore benefits to
about 165,000 legal immigrants by 2005 at a cost of $565 million.
Health Care for Children and Pregnant Women. Under current law, states have the option to
provide health coverage to legal immigrant children and pregnant women who entered the country
before August 22, 1996. The President's FY2001 budget gives states the option to extend
Medicaid or SCHIP coverage to low-income legal immigrant children and Medicaid to pregnant
women regardless of their date of entry to the country, including those who entered after August
22, 1996. The proposal would cost $695 million and provide critical health insurance to
approximately 144,000 children and 33,000 women by FY2005. This proposal would help reduce
the number of high-risk pregnancies and ensure healthier children. The budget's Medicaid/SCHIP
FamilyCare initiative also covers legal immigrant parents of children who are covered by Medicaid
or SCHIP.
TOBACCO POLICY
The Clinton-Gore Administration's budget will include important new steps to reduce youth smoking
and hold the tobacco industry accountable. Every year, more than 400.000 Americans die from
tobacco-related diseases; nearly 90 percent of them started smoking as children. To address this, one
of the nation's most serious public health challenges, the Administration proposes to:
Cut Youth Smoking in Half by Holding the Tobacco Industry Accountable. The Administration's
budget will cut youth smoking in half by charging the tobacco industry an assessment for every
underage smoker. These youth smoking assessments will provide a strong incentive for tobacco
companies to reduce sales to minors and eliminate advertising encouraging children to smoke. The
$3,000 assessment for every smoker under age 18 will be put in place starting in 2004 only if youth
smoking has not been cut in half and would remain in effect until the youth smoking reduction goal has
been met. This $3,000 annual assessment represents twice the lifetime profits the industry is expected
to make from hooking a teen on cigarettes. This policy will significantly reduce youth smoking when
combined with the price increases and public health initiatives underway as a result of the 1998 state
tobacco settlement and other Federal, state, and local efforts.
In addition to the youth smoking assessments, the Administration's budget includes a 25 cents per pack
excise beginning in FY2001, to raise further the price of tobacco products from the 45 cent increase
agreed to by the states and the industry in 1998. This increase will help reduce youth smoking and
help achieve the Administration's goal of cutting youth smoking in half. Public health experts agree
that raising the price of cigarettes cuts youth smoking and recent surveys of youth smoking released by
independent experts indicate youth smoking rates have started to decline since recent price increases
were put in place. In addition to raising the price of cigarettes by 25 cents a pack, the Administration's
budget will include comparable increases in the price of other tobacco products such as smokeless
tobacco and cigars, and will move an already legislated 5 cents per pack cigarette increase from
January 1, 2002 to October 1, 2000.
These proposals will reduce youth smoking, and complement the progress being made as a result of the
1998 settlement between the states and the industry. These policies would not affect the $246 billion
agreement made between the states and the tobacco industry.
Help Current Smokers Quit. The Administration's budget will take an important step to improve the
health of low-income Americans by ensuring they have access to drugs to help them quit smoking.
The Administration's budget will ensure every state Medicaid program covers both prescription and
non-prescription smoking cessation drugs, removing a special exclusion now in law and requiring
states to cover these drugs as they cover all other Food and Drug Administration-approved drugs. The
Federal government would provide the usual Federal match for these costs, as it does for other
Medicaid expenses, and states could use proceeds from the 1998 tobacco settlement or other funds to
pay their share. Medical research shows that smoking cessation products greatly increase success rates
for those trying to quit smoking, and that quitting has major and immediate health benefits for smokers
of all ages. Through this proposal, the Administration will ensure millions of low-income Americans
have access to medical treatments that will help them break their addiction to tobacco, at a Federal cost
of $66 million over the next five years.
Support State and Community Efforts to Prevent Youth Smoking. The Administration's budget
will help support tobacco prevention programs in states and local communities through a S106 million
in resources for the Centers for Disease Control and Prevention (CDC). This funding. a ten-fold
increase over 1993 levels, will enable the CDC to work with states and communities to help them put
in place effective programs to prevent tobacco use. particularly among children. This effort is
critically important as states begin to decide how to spend the $246 billion they will receive over the
next 25 years from the 1998 settlement with the tobacco industry.
Help Enforce Laws Preventing Minors from Purchasing Tobacco Products. The Administration's
budget will include $39 million for the Food and Drug Administration (FDA) to help enforce the laws
preventing youth under age 18 from purchasing tobacco products. Currently Federal law requires
every state to prohibit minors from purchasing tobacco products, and Federal regulations ensure
retailers check photo IDs of young people who try to purchase them. These funds will help the FDA
work with the states and with retailers to enforce these laws, by providing retailers with informational
materials to help them explain the rules to customers and by conducting random checks of retailer
compliance.
Support the FDA's Full Authority to Keep Cigarettes Out of the Hands of Children. The
Administration supports full FDA authority to regulate tobacco products in order to halt advertising
targeted to children and to curb minors' access to tobacco products. In 1996 the Administration put
forward a comprehensive regulation to protect children from tobacco, which the tobacco industry
challenged in court. The Administration remains fully committed to the FDA rule.
Recover Tobacco-related Health Care Costs. The Administration firmly supports the Department of
Justice's litigation to recover Federal tobacco-related health costs, and the budget contains funds to pay
the necessary legal costs. In addition to any remedies imposed by the court to advance public health,
recoveries from the litigation will be used to assist tobacco farmers and their communities, to pay
Federal tobacco related health costs, and to enhance the security of Medicare and Social Security for
future generations.
Protect Farmers and Farming Communities. The Administration is committed to protecting
tobacco farmers and their communities. The Administration fully supports the $5 billion settlement to
compensate tobacco farmers, which was agreed to by the states and industry in 1998. as well as the
$328 million included in the Agricultural Appropriations bill for FY2000, and is committed, as any
Federal litigation moves to judgment or settlement, to ensure funds are set aside for the financial
security of tobacco farmers and their communities.
FARM SAFETY NET
Because the 1996 Farm Bill fails to sufficiently support farm family incomes when crop prices fall or
natural disasters strike, the Clinton-Gore Administration's FY2001 budget includes a comprehensive
$11 billion package to strengthen the farm safety net through 2002 when the next farm bill will be
enacted. His proposal includes counter-cyclical income assistance, crop insurance reform, a major
farm conservation program initiative (much of which extends beyond 2002), and targeted assistance to
certain segments of the farm and rural communities.
Income Assistance. A particular defect of the 1996 Freedom to Farm Act is that payments are not
targeted to farmers in need or increased when farm income is low. The 2001 Budget's income support
initiative will help to strengthen the safety net by adding new payment programs to existing farm
programs.
Supplemental Income Payments. The Administration's proposal includes counter-cyclical farm
income support to provide additional payments through the expected enactment of the next farm
bill (through crop year 2001). This would ensure producers receive at least 92 percent of farm
revenue relative to a five-year average. In order to target payments to family-sized farmers, there
would be a $30,000 combined payment limitation for these counter-cyclical payments plus AMTA
payments. Payments would be available for producers of the "major" crops (corn, wheat,
soybeans, cotton, rice, barley, sorghum). Total payments on the 2000 and 2001 crop are estimated
to be $2.5 billion and $3.1 billion respectively. There would be no reduction to AMTA or LDP
payments.
Freeze Loan Rates. The Secretary of Agriculture will hold U.S. Department of Agriculture
(USDA) marketing assistance loan rates for the 2000 crop year at their current levels, at a cost of
$500 million in FY2001.
Dairy Program. The budget extends the dairy price-support program, set to expire in December
2000, through 2002, the end of the current farm bill. This proposal will cost $150 million in
FY2001 and FY2002, respectively.
Conservation Initiatives in the Safety Net Proposal. Providing assistance to farmers and ranchers
who practice environmentally sound land management will yield benefits to all Americans while
increasing farm family income. Through these USDA programs, participants can receive cost-share
assistance, technical assistance, and in many cases annual payments for high-priority conservation
activities. The proposal - which increases conservation funding by nearly $1.3 billion over authorized
levels in FY2001 - includes:
Conservation Security Program. The new Conservation Security Program would provide $600
million in annual payments to farmers and ranchers who implement various conservation practices,
with payment levels based on the comprehensiveness of their conservation plans.
Environmental Quality Incentives Program (EQIP). The EQIP. a key component of the
President's Clean Water Action Plan, provides financial, technical. and educational assistance to
farmers and ranchers who wish to implement conservation practices on land currently in
production. The President proposes increasing annual funding for the program from $200 million
to $325 million. Half of the funding is used to address livestock-related concerns.
Wetlands Reserve Program (WRP). The WRP offers technical and financial assistance to
farmers who wish to restore and protect agricultural wetlands. There are only 40,000 acres left to
enroll in 2001 under the 975.000 acre cap set by the 1996 Farm Bill. The President proposes
enrolling 250,000 acres in each year, beginning in 2001.
Conservation Reserve Program (CRP). The CRP provides farmers with technical and financial
assistance, including annual rental payments, in exchange for removing environmentally sensitive
farm land from production and implementing conservation practices such as wildlife habitat
restoration and field windbreaks. The Administration proposes to raise the CRP cap by 3.6 million
acres to 40 million acres.
Conservation Reserve Program "Continuous Sign-up" Bonuses. The Administration
plans to offer bonuses totaling up to $100 million in FY2000 and up to $125 million in
fiscal years 2001-2002 to producers who enroll land in CRP through the "continuous
signup." The CRP continuous sign-up allows producers to enroll certain high priority
practices such as grassed waterways, filter strips, and riparian buffers at any time during the
year.
Farmland Protection Program (FPP). The FPP, part of the President's Lands Legacy
Initiative, provides matching funds to state, local, and Tribal governments to permanently
protect farmland threatened by development from urban and suburban "sprawl", through
the purchase of easements that preserve the land for farm use. The budget proposes $65
million per year for the FPP.
Wildlife Habitat Incentives Program (WHIP). For farmers, ranchers, and other
landowners who wish to implement wildlife habitat practices, WHIP offers $50 million in
cost-share assistance for up to 75 percent of the habitat restoration expenses and technical
assistance.
Technical Assistance. The Natural Resources Conservation Service (NRCS) will provide
additional technical assistance to farmers and ranchers to carry out these enhanced
programs.
Crop Insurance Reform. Crop insurance represents a critical risk management tool for the nation's
farmers. In recent years, however, many producers have declined to participate in the program or
signed up for only minimal coverage because of its expense and shortcomings. The President's budget
takes critical steps towards improving the crop insurance program with the following initiatives:
Continue Crop Insurance Premium Discounts for the 2001 Crop Year: Premium discounts on
the farmer-paid portion of crop insurance premiums were provided through emergency
appropriations for 1999 and 2000. Evidence demonstrates that producers have largely invested
their premium-discount benefits in higher levels of insurance coverage. The Farm Safety Net
proposal will provide $640 million to support discounts for the 2001 crop.
Establish Multi-year Loss Coverage. Multi-year coverage is needed because even producers
with coverage levels as high as 75 percent can find it hard to withstand losses in consecutive years
on which they must absorb a 25 percent reduction in expected revenue. To address the multi-year
loss problem, the budget includes S100 million for USDA to develop or reinsure a privately
developed policy that addresses the problem of multi-year losses.
Livestock Insurance Pilot. The majority of U.S. ranchers have not used the risk management
tools available on existing futures and options exchanges because the size of the contracts available
are too large for small operators. The proposed $100 million pilot would offer price insurance to
small ranchers to protect them against a drop in market prices over the growing period.
Intermediaries, such as crop insurance companies, would sell small "unbundled" portions of
options contracts from the Chicago Mercantile Exchange (CME) on cattle and hogs. USDA would
subsidize the operating expense of the intermediary and the producer's premiums for this price
coverage.
Waive the "NAP Trigger" in the Noninsured Crop Disaster Assistance Program (NAP). The
budget includes $110 million in 2000 and 2001 to loosen the eligibility requirements for NAP
coverage so that more producers of crops such as lettuce, mushrooms, and artichokes who suffer
significant losses from natural disasters can qualify for this important risk management tool.
Risk Management Education (RME). USDA's Risk Management Agency's RME operation
trains producers in the use of new and existing risk management tools and farm financial
management. The budget includes $40 million in FY2001 and 2002 for an aggressive expansion of
RME programs.
Research & Development. The need for new crop insurance policies on specialty crops is well
recognized in both the Administration and Congress. The President's budget includes $30 million
in FY2001 and FY2002 for USDA R&D on crop policies that may not be seen as attractive to
private developers, while also providing incentives to private sources of crop insurance R&D.
Other Targeted Assistance. In addition to the proposals identified above, the President is proposing
several smaller, targeted programs to assist rural communities and producers.
Rural Empowerment Zone/Enterprise Community Program. The President's budget includes
$15 million in mandatory funding for each of the remaining eight years of the five Second Round
rural Empowerment Zones and twenty Second Round rural Enterprise Communities.
Cooperative Development. The proposal would provide financing to cooperatives for livestock
processing and other value-added facilities, so producers can share in the profits gained through
value-added processing of their raw agricultural commodities.
Ethanol Subsidies. The CCC will provide up $100 million in 2000, and $150 million in 2001 and
2002, in incentive payments to ethanol and other bioenergy producers to expand production of
biobased fuels. Larger proportional payments would go to smaller bioenergy producers.
On-Farm Storage Facility Loans. Recent commodity surpluses have resulted in storage
shortages that can restrict farmers' marketing options and reduce their profits. In addition, there
have been recent requests for farmers to separate crops grown from genetically modified seeds.
USDA will offer producers an estimated $350 million in Treasury-rate loans in 2000 and $150
million in 2001 and 2002 to build on-farm storage facilities, with a total loan subsidy cost of $14
million.
BUILDING ONE AMERICA
To help achieve the President's vision of One America, the Clinton-Gore Administration's FY2001
budget provides funding for a variety of purposes including: to strengthen civil rights enforcement and
programs, to better serve Native American communities, to provide English language instruction and
fairness to immigrant families, to eliminate health disparities, and to promote educational opportunities
and economic development in urban and rural areas.
CIVIL RIGHTS
The FY2001 budget proposes a significant increase for civil rights enforcement to help ensure equal
opportunity for all Americans. The President's budget request of $698 million for civil rights
enforcement agencies represents a 13 percent increase over last year's funding levels. Highlights of
the President's proposal include
Department of Justice's Civil Rights Division. The President's budget includes $98 million for
the Department of Justice (DOJ) Civil Rights Division - an increase of 86 percent over the 1993
level. The proposed funding will permit the Justice Department to expand significantly
investigations and prosecutions of criminal civil rights cases (including hate crimes and police
misconduct), as well as fair housing and lending cases. Funds are also included to fund the
Division's enforcement of the ADA.
Equal Employment Opportunity Commission (EEOC). The budget provides $322 million for
the EEOC, 15 percent more than the enacted FY2000 budget. The majority of increased funding
will be dedicated to reducing the backlog of private sector cases and improving the Federal EEO
complaint process.
Department of Labor's Office of Federal Contract Compliance Programs. The budget also
provides $76 million to encourage Federal contractor compliance.
Department of Housing and Urban Development's (HUD) Fair Housing Initiatives. The
budget proposes $50 million. a 14 percent increase above last year, for HUD's efforts to reduce
housing discrimination. Of this request, $7.5 million will support the final year of a three-year,
audit-based housing discrimination study being conducted in 20 communities around the country.
Department of Agriculture's Office of Civil Rights. The USDA's civil rights programs
increased from $18 million to $21 million, will emphasize outreach to disadvantaged farmers,
involve small and disadvantaged businesses in USDA programs. increase conflict resolution
activities and more effectively process complaints.
Department of Education's Office for Civil Rights. The budget proposal of $76 million
provides an increase of $5 million over the 2000 enacted budget to fund staff training and
technological improvements to speed the resolution of civil rights issues.
Ensuring Equal Pay. The President's budget includes a $27 million Equal Pay Initiative, an increase
of $12 million over FY2000. The Initiative requests $10 million for the EEOC to provide training and
technical assistance to about 3,000 employers on how to comply with equal pay requirements. The
Initiative also dedicates S10 million for the Department of Labor (DOL) to train omen in
nontraditional jobs, including high-tech jobs and other skill shortage occupations. Lastly, the Initiative
provides $7 million for DOL to help employers assess and improve their pay policies, support public
education efforts, provide for projects in non-traditional apprenticeships. and implement industry
partnerships.
Hate Crimes. The President continues to urge Congress to pass the Hate Crimes Prevention Act,
which would strengthen the existing Federal hate crimes law by expanding the situations in which the
Department of Justice can prosecute defendants for violent crimes based on race, color, religion, or
national origin. Further, it would expand existing law to cover cases of hate crimes based on sexual
orientation, gender, or disability. The President's budget includes $20 million for training for Federal,
state, and local law enforcement to prevent and respond to hate crimes, and to promote police integrity.
One America Dialogues. The budget proposes $5 million for the Department of Justice to fund
Citizen Academies, where citizens will acquire public safety problem-solving tools and training and
engage in honest and constructive dialogues on race.
NATIVE AMERICANS
In order to better serve Native American communities in this millennium and to honor the Federal
government's trust responsibility to tribes, the President's budget includes an increase of $1.2 billion
over FY2000 - the largest increase ever - for a total of $9.4 billion for key new and existing programs
assisting Native Americans and Indian reservations. Some of the highlights include:
Bureau of Indian Affairs (BIA) School Construction and Repair. The President has proposed $300
million, more than double the FY2000 enacted level of $133 million, to replace and repair BIA-funded
schools on reservations. This is the largest investment ever in a single year for BIA school
construction and repair.
Increased Funding for Tribal Colleges. The budget proposes increased funding of $25 million for
the Nation's tribal colleges for a total of $77 million.
Indian Health Service. The President's budget proposes $2.6 billion, an increase for the Indian
Health Service (IHS) of $230 million or 10 percent over the FY2000 enacted level.
Improves Law Enforcement in Indian Country. The budget proposes $439 million, an increase of
$103 million over FY2000, for the Departments of Justice and Interior for the third year of the
President's Indian Country Law Enforcement Initiative. The initiative will improve public safety for
the over 1.4 million residents on the approximately 56 million acres of Indian lands.
Building Roads and Bridges in Indian Country. The Transportation Department (DOT) will expand
its program to improve roads and bridges on Indian reservations. The President's budget proposes to
give the Indian Reservations Roads program the full authorization amount of $275 million with an
additional $74 million from a highway receipts account for a total of $349 million, which is an increase
of $117 million over the previous year. This will allow Tribes to address the estimated backlog of $4
billion in needs on these roads and bridges.
Tribal Infrastructure Projects. The President and the Vice President propose $49 million. an
increase of $46 million over FY2000, for the Department of Commerce's Economic Development
Administration (EDA) to fund infrastructure. planning, and public works projects.
Addressing the Digital Divide. To encourage Native Americans to pursue information technology
and other science and technology fields, the budget provides $10 million, to be administered by the
National Science Foundation, for grants to tribal colleges for networking and access; course
development; student assistance; and capacity building.
Bureau of Indian Affairs (BIA) Contract Support Costs. Within the overall BIA increase, the
budget continues to support Tribal self-determination by proposing $134 million, a $9 million or 7
percent increase over 2000 for contract support costs. This funding provides $5 million for new and
expanded contracts and $129 million for existing contracts.
Trust Services. The Administration is committed to improving trust services and management
through its trust reform efforts at the Interior Department. The budget proposes $108 million, a 48
percent increase over 2000, for improved trust services in the BIA for activities such as probate, real
estate appraisals, and other services.
Indian Trust Fund Balances. The Administration is committed to resolving disputed Indian trust
fund account balances through informal dispute resolution and supports the unique government-to-
government relationship that exists in Indian trust land management issues. After Tribal consultations,
BIA submitted its "Recommendations of the Secretary of the Interior for Settlement of Disputed Tribal
Accounts" to Congress in November 1997. Legislation reflecting these recommendations was
proposed in 1998. but not enacted. The Department will continue efforts to resolve trust fund account
balances.
Trust Land Management. As part of BIA's commitment to resolving trust land management issues,
Interior worked with Congress in 1999 to repropose legislation (S. 1586) to establish an Indian Land
Consolidation program to address the ownership fractionation of Indian land. In addition to $13
million for the Indian Land Consolidation program, the budget provides $83 million for DOI's Office
of Special Trustee, including the trust management improvement project. Current activities include
verifying individual Indian's account data and converting these data to a commercial-grade accounting
system.
IMMIGRANTS
English Language/Civics Instruction Initiative. Immigrant adults - and other adults who have
limited-English proficiency-need access to opportunities to master English literacy in order to further
their education, obtain good jobs. and become full participants in American society. To this end,
President Clinton is proposing an increase for the English Language/Civics Initiative, an innovative
program to help states and communities provide limited English proficient (LEP) individuals with
expanded access to high-quality English-language instruction linked to civics and life skills instruction.
This important initiative is a powerful tool in building a stronger American community. For FY2001,
the Administration's budget request $75 million for this initiative, a nearly $50 million increase from
FY2000 enacted level to help an additional estimated 250,000 LEP individuals.
Funding and Restructuring INS to Improve Services. In a continuing effort to improve INS
services, this budget provides $35 million to address backlogs in naturalization, adjustment of status,
and other immigration benefit applications. It establishes a $93 million Immigration Services Capital
Investment Account to fund on-going backlog reduction efforts and to cover major capital acquisitions.
The President also calls on Congress to move forward with a restructuring of the INS - along the
principles outlined by the Administration - to improve immigration service delivery and border
enforcement.
Restoring Benefits to Legal Immigrants. The President believes that legal immigrants should have
the same economic opportunity. and bear the same responsibility, as other members of society. In the
Balanced Budget Act of 1997 and the Agricultural Research, Extension and Education Reform Act of
1998, the President fought for and succeeded in reversing unfair cuts in benefits to legal immigrants.
The FY2001 budget builds on the Administration's progress of restoring these important benefits by
providing $2.5 billion over five years to: (1) restore SSI and Medicaid to legal immigrants who entered
the United States after August 22, 1996, have been here for five years, and become disabled after
entry; (2) restore Food Stamp eligibility to legal immigrants who were in the country before August
22, 1996 and either subsequently reach age 65 or live in a household with Food Stamp eligible
children; and (3) allow states to provide Medicaid or SCHIP to legal immigrant children and pregnant
women regardless of their date of entry, and to legal immigrant parents of children who are covered by
Medicaid or SCHIP in the proposed FamilyCare program.
EDUCATION
Hispanic Education Action Plan. As part of the Administration's commitment to raising the
educational outcomes of Latino youth, the President again proposes significant increases to programs
within the Hispanic Education Action Plan to help Latinos excel academically, graduate from high
school, go on to college, and continue on the path to life-long learning. The final budget includes
increases of $823 million for programs that enhance educational opportunity for Latinos, including: a
$416 million increase for Title 1. to provide support supplemental education services for students who
have fallen behind in school, in particular those in high poverty communities; $725 million for TRIO
college preparation programs, an increase of $80 million, which help disadvantaged high school and
college students prepare for, attend, and graduate from college; and $296 million, an increase of $48
million, for the Bilingual Education program to increase the quality of services offered to limited-
English proficient (LEP) students and provide 8,000 bilingual and ESL teachers with the high quality
in-service and pre-service training they need to teach this special population.
Dual Degree Programs for Minority-Serving Institutions. The FY2001 budget proposes a new
program to increase opportunities for students at minority-serving institutions. Students would receive
two degrees within five years: one from a minority-serving institution. and one from a partner
institution in a field in which minorities are underrepresented. This new S40 million program will
serve an estimated 3,000 students.
Title I Education for the Disadvantaged. This program provides funds to help disadvantaged
children reach high academic standards. Title I will receive $9.1 billion in FY2001, an $400 million
increase over last year's level. The President's budget also includes an increase of S134 million for the
Title I Accountability Fund bringing total funding to $250 million. The Title I Accountability Fund
supports immediate and significant State and local interventions in the lowest performing schools to
improve school achievement and promotes public school choice.
HEALTH
Eliminating Racial and Ethnic Disparities in Health. In February 1998. the President committed
the nation to an ambitious goal by the year 2010: eliminate disparities in six health areas where racial
and ethnic minorities are disproportionately affected, while continuing the progress we have made in
improving the overall health of the American people. As a key part of this effort. the budget includes
$35 million, a 17 percent increase over 2000, for demonstration projects (begun in 1999) to better
address racial disparities in health.
NEW MARKETS INITIATIVE
The President's budget provides tax credits and loans guarantee incentives to stimulate $22 billion of
new private capital investments in economically distressed communities around the country and build
a network of private investment institutions to funnel credit, equity and technical assistance to
businesses in America's new markets. In addition, the budget proposes a new initiative, known as
First Accounts that will provide low-cost bank accounts to working families.
More Than Doubling the New Markets Tax Credit. The President proposes to more than double
the New Markets tax credit to spur $15 billion in new investment in community development in
economically distressed areas. An entity making new equity investments in a selected community
development project would be eligible for a tax credit worth 25 percent of the cost of the investment.
A variety of vehicles providing equity and credit to businesses in underserved areas would be eligible.
The total cost of the tax credits amounts to about $5 billion over 10 years.
Expanded Empowerment Zones. The proposed expanded wage credits, tax incentives, and new
round of urban and rural EZs will extend and improve economic growth in the 31 existing urban and
rural Empowerment Zones, administered by HUD and USDA, and support the proposed third round of
10 new empowerment zones to be designated in 2001. The total cost of these proposals will be $4.4
billion over 10 years.
America's Private Investment Companies (APICs). Modeled after the Overseas Private Investment
Corporation's (OPIC) successful investment fund program, the President's budget proposes $37
million to allow APICs to provide guaranteed debt to private investment companies. licensed by HUD,
to help leverage private equity capital and lower the cost of capital for investments in low- and
moderate-income communities. For every dollar that private investors provide, the government will
guarantee two dollars in debt to expand the APIC's pool of capital available for making investments
and enhance the return on those investments to the private investors. APICs will make equity
investments in larger businesses that are expanding or relocating in inner cities and rural areas.
New Market Venture Capital Firms (NMVCs). The budget proposes $52 million to allow NMVC
firms to match the equity of private investors with Government-guaranteed debt and technical
assistance funding to cultivate the growth of smaller firms. NMVC would invest in smaller growth
companies that can also benefit from expert management assistance.
Creation of First Accounts. The President's budget proposes $30 million for the Department of
Treasury to pilot strategies to help low- and moderate income Americans benefit from basic financial
services. Treasury will work with financial institutions and others: (1) to encourage the creation of
low-cost bank accounts (First Accounts); (2) to expand access to automatic teller machines in safe,
secure, and convenient locations. including U.S. Post Offices, in low-income neighborhoods; (3) to
educate low-income Americans about the benefits of having a bank account, managing household
finances, and building assets. The First Accounts initiative complements Treasury's Electronic
Transfer Accounts (ETAs) - low-cost, electronic banking accounts for "unbanked" Federal benefit
recipients - by reaching those not eligible to participate in the ETA program because they are not
Federal benefit recipients.
Other Elements of New Markets. Other elements in the budget include: increasing the funding for
SBA's microenterprise lending program to $50 million; $15 million to fund PRIME - a program
authorized last year to provide technical assistance to low-income entrepreneurs; boosting CDFI
funding to $125 million; expanding support to $6.6 million for BusinessLINC to encourage large
businesses to work with small businesses in new markets; and providing $5 million to establish a New
Markets University Partnerships pilot project which, under the auspices of HUD, would provide
Universities with funding to develop local community partnerships, assistance to intermediaries, and
technical and business development assistance to new and existing firms. In addition, to better serve
Native American communities, the President will provide additional funding to expand the New
Markets initiative to Indian Country.
V. CHARTS
the
Fiscal Discipline - Surpluses Follow Years of Deficits
Surplus (+) / deficits (-) in billions of dollars
400
300
FYs 2001-2010
Unified Budget Surplus $2.9 Trillion
200
Off-Budget $2.2 Trillion
On-Budget $0.7 Trillion
100
0
Total Deficits
-100
1981-1992 $2.3 Trillion
-200
Savings to Date
1993-2000 $2.5 Trillion
-300
Pre-OBRA 1993 Baseline
-400
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
00-02-07 bud iceberg
America is Debt Free by 2013
Dollars in trillions
4
3
2
1998-2000 -- $297 billion of debt paid off
1
0
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
00-02-07.bud.payoff
Paying off the Debt Reduces Interest Burden
Pre-OBRA Baseline
2010 Projected in 2001
Budget
Interest
Interest
23.3%
3.1%
00-02-07 bud intshare
Securing and Preserving Medicare
for the Next Generation
Year of
Estimate
1993
998
1999
2001
1990
2000
2010
2020
2030
ref.00-02-07 solvency
Allocation of On- and Off-Budget Surpluses: 2001-2010
On-Budget Surplus
Off-Budget Surplus
$746 Billion*
$2.2 Trillion
Farm
Security
and Other
$33
Medicare
Solvency
Social Security
$334
Solvency Lock-Box
Tax Cut
$256
Total Debt Reduction = $2.5 Trillion
* With other receipts and offsets, total $1 trillion.
00-02-07.bud.pie
Paying off the Debt with Smaller Government
Percent of GDP
25
24
23
Outlays
22
Average 1980-1998: 21.6
21
20
19
18
17
0
1980
1985
1990
1995
2000
2005
2010
ref.99-02-07.des.pliers