The Task Remaining

The urgent question of our time is whether we can make change our friend
and not our enemy.

Bill Clinton



The plan presented in these pages is as bold as the challenges it 
confronts are daunting. It calls for fundamental change to invest in 
people; to reward hard work and restore fairness; to recognize our 
families and communities as the cornerstones of America's strength; to 
reclaim our future.

This plan promises rising standards of living, productivity and national 
savings. It stimulates job growth and provides insurance that the current 
slow recovery will be lasting and strong. It invests in the education, 
training and health of our people. It encourages the private sector to 
modernize and acquire the tools and technology to compete in the global 
economy. And it confronts our deficit head on, with a serious, fair plan 
to bring it under control and generate economic growth.


The Perils of Inaction

Achieving this change will not be easy. But the cost of not changing is 
far greater.

After the fiscal failures of the last twelve years, we cannot accept the 
status quo. While every American can sense the weakness in our economy 
from day to day, the real cost of inaction becomes clear only when we 
examine the course that our economy and budget will follow if we do not 
change.

Under the policies left by the previous Administration and taking a 
cautious view of the economic outlook, the budget deficit will decline for 
the next two years, and then begin to grow even as the economy continues 
to recover and expand (Chart 4-1). As a percentage of the GDP, a better 
measure of its impact on the economy, the deficit declines through 1996, 
but then begins to climb (Chart 4-2).

Far more troubling, however, these deficits will be so large that the 
national debt will grow faster than the economy (and thus will increase as 
a percentage of the GDP) all the way to the forecast horizon (Chart 4-3). 
This path cannot be sustained. If rising deficits are left to cascade into 
debt, hence into interest costs, and then back into still higher deficits, 
there can be no good economic outcome. And the longer this vicious cycle 
is left to build its momentum, the more painful the jolt when inevitably 
it is broken.

The Administration's economic plan controls the deficit before the deficit 
controls our economy. In a fair and measured way, the plan will bring the 
deficit down until, by 1997, it will be $140 billion lower than it would 
be if we cling to the status quo. The deficit under this program falls 
from 5.4 percent of the GDP in fiscal year 1993 to 2.7 percent in 1997. 
This is 1.9 percent of GDP lower than would occur under the policy left 
behind by the previous Administration.

To be cautious, we have based our deficit projections on an extremely 
unfavorable path of economic growth, with slow progress of productivity 
and real economic output growing less than two percent per year in the 
long run. Under those circumstances, the deficit would rise slowly after 
1996 even with the aggressive deficit reduction policies recommended by 
this Administration. Though much improved relative to past economic 
policies, this outcome is unacceptable (Chart 4-1). As a percentage of the 
GDP, the deficit would rise in the long run (Chart 4-2); and the growth of 
the national debt relative to the GDP would continue (Chart 4-3).

This Administration believes that its policies of deficit reduction and 
public and private investment will increase the growth of productivity and 
incomes, thereby increasing Federal revenues, retarding the expansion of 
Federal spending, and forcing the deficit down. If the economic outcome is 
more favorable than we have assumed, the deficit will grow more slowly. 
Under the more optimistic assumptions, the deficit will be nearly 
stabilized as a percentage of the GDP. The economy will grow more rapidly 
than the national debt, and so the debt as a percentage of the GDP will 
fall slowly. Eventually we will reverse the borrow and spend legacy of the 
1980s.


The Role of Health Care Costs

Even the most favorable scenarios for economic growth under our plan leave 
unfinished business, however. The budget totals conceal rapidly rising 
health care spending that threatens to bankrupt our national treasury.

Recently, health care costs have accounted for almost half of the increase 
in Federal spending; if we do nothing, by decade's end one in every four 
Federal dollars will go to providing health care. Relentlessly rising 
costs will continue to stunt long-term economic growth and terrorize 
American families unless and until we achieve fundamental change.

Later this spring we will deliver to the Congress a comprehensive plan for 
change. That plan will control health care costs and will provide security 
to families, so that they cannot be denied the coverage they need. It will 
root out fraud and outrageous charges, and make sure that paperwork no 
longer chokes consumers or doctors. And it will maintain American 
standards the highest quality medical care in the world, and the choices 
we all deserve.


Our health care plan will bring costs under control. And while the savings 
we achieve will go mostly to the private sector, taxpayers will benefit as 
well. Federal funds will be freed for investments in education, training, 
and the technologies of tomorrow.

That reform will control the growth of Medicare and Medicaid spending in 
the long term, and thereby supplement the deficit reduction in this 
economic program. If the growth of Federal health care costs can be 
limited to the rate of growth of the population, plus the rate of 
inflation, plus two percent, the deficit will decline in dollar terms and 
as a percentage of the GDP (Charts 4-1 and 4-2); and the increase in the 
ratio of the national debt to the GDP of the 1980s will be reversed (Chart 
4-3).

Enactment of the economic plan and health care reform together will 
reverse the failures of the 1980s, and put the economy on a sound footing 
for the next century. It will reduce the threat of financial instability 
posed by a national debt rising faster than our income. It will stop 
sending the signal to the rest of the industrialized world that our 
economic policy is out of control. Most important, it will add to the 
prosperity and security of the American people and allow us to compete 
more effectively in the global economy.


Conclusion: A Vision of Change for America

Throughout our history, at every critical moment, Americans have summoned 
the courage to change, to adapt our nation's policies and institutions to 
changing problems and a changing world. Once again we face such a 
challenge. Now we must change our course.

We need a change to restore what makes America great: a vision of economic 
and political freedom; of the rewards of hard work and initiative; of a 
fundamental sense of fairness, of our families and our communities as 
foundations of our strength; and of every generation's obligation to 
create a better life for those that follow.

The plan we present invests in our people and promises an America where a 
growing economy produces rising living standards and high-wage, high-skill 
jobs. It rewards hard work and restores fairness, providing opportunity in 
return for responsibility. It ends twelve years of government that served 
only the privileged and returns that government to its rightful owners: 
the American people.

Here in Washington, the powerful special interests are already doing their 
best to suffocate change. They oppose it because they profit from the 
status quo. They refuse to listen to the American people's call for change.

It is our responsibility to answer that call and restore hope to our 
people. The voices of conventional wisdom will first whisper and then 
shout that it cannot be done. But we must summon the wisdom and courage to 
reject convention and embrace the new direction that we have needed for so 
long.