July 27, 2000
The current economic expansion is built on the foundation of the tough and prudent fiscal discipline pursued since 1993. This strategy has helped bring about the largest surpluses and longest economic expansion in the Nation's history. H.R. 4865 and other legislation moving through Congress would spend that entire surplus one tax break at a time -- threatening to raise interest rates, putting at risk the economic expansion, slowing investment and productivity growth, increasing dependence on foreign capital, and reducing the Nation's flexibility to deal with potential future problems.
Moreover, these tax proposals provide relatively little benefit to the vast majority of working families. The proposals will provide about as much relief to the top one percent of taxpayers as to the millions of working people who make up the bottom 80 percent of taxpayers. As a result of the tax cuts passed this year, the average family in the top one percent would receive a tax cut of over $16,000 -- dwarfing the roughly $220 tax cut received by a family in the middle of the income distribution. A one-third of a percentage point increase in interest rates as a result of these tax cuts would raise the payments on a $100,000 mortgage enough to wipe out the tax cut for such a middle-income family.
The President has proposed a series of targeted tax cuts that deliver 70 percent more tax relief to middle-class families at less than half the cost of the tax cuts passed by Congress this year. The President's proposals would maintain fiscal discipline while helping families send their children to college, care for chronically ill family members, assist people with disabilities to enter or remain in the workforce, pay for child care, ease the burden on working families with three or more children, and provide progressive saving incentives and carefully targeted marriage penalty relief. Because the President's tax plan would cost substantially less than the tax cuts proposed by the Congress, there would still be enough money to provide a Medicare prescription drug benefit, strengthen Social Security, modernize Medicare, and stay on track to be debt-free in 2012.
Ironically, the Republican leadership has opposed general revenue transfers to the Medicare or Social Security trust funds when those transfers would have extended the solvency of these vital programs. Now, if all of the tax cuts previously passed by this Congress were to be enacted this year or next, there could be no surplus left to transfer to Medicare even to retain its current solvency. If the transfers proposed in the bill were eliminated, it would take five years off the projected life of Medicare -- making the trust fund insolvent in 2020, instead of 2025 as projected under current law. Even if the transfers proposed in the bill were made, they would not add a single day to the life of Medicare.
The Administration has proposed a comprehensive plan to modernize the Medicare program, introduce competition among health-care providers, add a long-overdue Medicare prescription drug benefit, and extend the life of the Medicare Trust Fund to at least 2030. The Administration has also made proposals to extend the life of the Social Security trust fund to at least 2057 and to strengthen the Social Security benefit for the most vulnerable in our society, especially for elderly widows, who suffer poverty at nearly twice the rate of the elderly population overall. In contrast, H.R. 4865 would leave more than four out of five Social Security beneficiaries with no more than they have today.
Resources are available to accomplish great things. The Administration hopes to work with the Congress on a bipartisan basis to agree on a balanced framework of tax cuts, investments, and debt reduction that safeguards the Nation's prosperity and benefits all Americans -- while maintaining fiscal discipline.
H.R. 4865 would affect receipts; therefore, it is subject to the pay-as-you-go requirements of the Omnibus Budget Reconciliation Act of 1990. Based on estimates of revenue losses made by the Department of the Treasury, the absence of any offsets could cause a sequester of Federal resources.