Washington, 2 February 1999 (RFE/RL) -- U.S. President Bill Clinton has proposed a budget of $1.77 trillion for the American government in the financial year 2000.
Revealing his proposal at the White House Monday, Clinton emphasized its historic significance as the first budget of the 21st century and his third which will be balanced.
The budget for the fiscal year, which begins October 1st, proposes increasing defense spending for the first time since the 1980s, raising it by $12.6 billion in 2000 and similar amounts in following years. It includes major pay raises for American military personnel.
The budget proposes $34 billion in tax cuts, including special credits for people caring for elderly or sick relatives, tax credits for stay-at-home parents, and incentives to spur corporate investment in poor rural and urban areas.
It proposes paying for all this by raising $36 billion in new taxes mostly by closing tax loopholes that corporations have begun to use when there are mergers of large conglomerates. In addition, the budget counts on $8 billion in new taxes on cigarettes designed to pay for the increased medical costs caused by tobacco consumption.
Most importantly, the budget projects that it would have a surplus -- income over spending -- of over $117 billion.
Clinton said this balanced budget is making a real difference in the lives of citizens, transforming the cycle of budget deficits and high interest rates into one of surpluses and low interest rates. As interest rates fall, he said, people can buy more and pay off old debts. When deficits disappear, capital is liberated to work, he said. In an age of worldwide capital markets, a nation prospers by saving and investing, not running up big debts.
The Chairman of the President's Council of Economic Advisors, Janet Yellen, told reporters that budgets with surpluses are only possible because the economy is so strong:
Yellen said the economy's performance has been extraordinary in the longest peacetime expansion in history. Since 1993, 18 million new jobs have been created, unemployment is at its lowest level in three decades and real wages have grown more than in the 1980s.
Clinton is proposing that most of the surplus be put into the social security trust fund to be saved to keep the national pension-paying system viable at least to the year 2050. The pension system, which currently collects far more from workers than it pays out to pensioners, will see that ratio change in coming years as the huge wave of births following World War II, known as the baby-boomers, begin to retire.
Jack Lew, Director of the Office of Management and Budget -- which draws up the budget for the president -- said that in ending deficits and producing surpluses, the budget will cut a significant cost each year -- the cost of interest payments:
Lew said that in 1993, the U.S. was projecting interest costs by the year 2014 would be 27 percent of the budget -- 27 cents of every dollar. Under this new budget proposal, he said, interest costs will only be two percent or two cents of every dollar spent.
But the president's budget is only a proposal which is now submitted to the congress. Since the congress is controlled by his political opposition, the Republican party, the standard wisdom is that the 535 members of congress -- 435 members of the House and 100 members of the Senate -- will mostly rewrite it to suit their own ideas.
Republican leaders have said, for instance, that instead of putting the budget surplus into the Social Security trust fund, they would prefer across-the-board tax cuts to put the money back in the pockets of citizens.
House of Representatives (lower chamber) Speaker Dennis Hastert said: "The next great debate will center on one simple premise: should we give tax relief to working people when we have the largest surplus in American history?...We say yes."
Still, in the end, the budget will have to be passed by both chambers of Congress - the House and Senate -- and signed into law by Clinton before it takes effect. And because the Republicans do not have enough votes to override any presidential vetoes without Democratic support, there will be a great deal of negotiation in the coming months.
The numbers in the budget are not only difficult to comprehend for the average person, but will change as the congress begins debating the proposal. That is because most of the figures are based on estimates of what is going to happen in the current fiscal year, which is currently only in it's fourth month. Once more than half of this year is completed, the figures will be adjusted to fit what has actually occurred. But it will be a long time between this budget proposal and final passage and implementation.