May 2, 1997

Clinton Agrees to Balance the Budget

When Republicans assumed control of Congress in 1995, their foremost goal was to keep a promise they made to the American people: To balance the federal budget and to cut their taxes. However, standing between Republicans and the fulfillment of their promise was the President. Now after more than two years of refusal, President Clinton has finally agreed to a balanced budget that reduces taxes.

Getting to this point has not been easy. Prior to Republicans assuming control of Congress in 1995, President Clinton refused to embrace the idea of a balanced budget. Clinton's first budget called for an astronomical tax hike of $220 billion that Democrats in Congress increased to $240 billion. Clinton's first three budgets -- released in 1993, 1994, and 1995 (for FYs 1994, 1995, and 1996 respectively), left deficits of $241.4 billion, $201.2 billion, and $194 billion by his own estimation (which CBO scored at $228.5 billion, $206.2 billion, and $276 billion respectively). In the meantime he vetoed the Republicans' budget in 1995 -- a budget that would have cut taxes and been the first to have balanced since 1969. Not until election year 1996 did he even aspire to balance, producing a budget that left an $81 billion deficit in its final year.

For more than two years, President Clinton has blocked all of the Republicans' efforts to eliminate the deficit and reduce taxes. Today for the first time, President Clinton has joined Republicans in its goal and agreed to his first balanced budget. The budget will:

• Balance honestly by 2002 with steadily declining deficits.
• Provide significant pro-family and pro-growth tax relief -- the largest tax cut since Ronald Reagan's in 1981.
• Avert the crisis of Medicare's imminent bankruptcy.
• Rein-in federal spending's unconstrained growth and provide real entitlement reform.
• Produce the largest entitlement reform in U.S. history.
• Protect areas important to America: Education, the environment, and national security.

Honest Balance

The budget will be in balance by 2002 -- the same date that Republicans have promised since taking control of Congress in 1995. It will do so honestly -- as estimated by the Congressional Budget Office (CBO), the same arbiter on whom Republicans have insisted since 1995 and the President has promised since 1993.

Major Elements of the Agreement

The budget balances and reduces taxes by focusing on the basic principles that are important to America: Families will keep more of their money to save, spend and invest; the economy will produce more and better jobs; and the federal government will be smaller five years from now than it is today. While final details still have to be completed the basic elements are clear. The agreement will:

• Provide $85 billion in net tax relief over five years -- enough to accommodate a $500 per-child tax cut, estate tax reform, capital gains tax reform, and a plan to make education more affordable.
• Extend the life of the Medicare trust fund by up to ten years by simply slowing the rate of its growth by $115 billion over five years.
• Provide over $600 billion in entitlement savings over ten years.

The budget will accomplish its goals without threatening areas important to American families:

• Contain no legislative change in the Consumer Price Index (CPI) -- thus there will be no change in law of CPI-adjusted entitlement programs.
• Not only protects education but promotes it -- its biggest increase in funding in 30 years.
• Protects the environment and national security.

Measuring the Agreement

The agreement should not be seen as the end of the process. To quote Winston Churchill: "Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning." There is much work that has to be done to put the agreement into legislation. The agreement is not perfect -- surely spending and taxes could have been cut more and more of Clinton's 1993 record tax hike been reversed. In the process of turning this agreement into legislation it can and undoubtedly will be made better.

Rather than seeing the agreement as either the end of the effort to reduce the size of government or as perfect, it is best seen in the proper perspective of where President Clinton wanted to lead America just four years ago: The deficit will be over $240 billion lower than in his first budget and taxes will be $325 billion lower than he first proposed. By any measure, today's agreement is an incredible step forward for America and a giant leap from where Clinton and his party began.