hope to assure a healthy economic future for all Americans. And only then can we hope to restore the public's confidence in Government.

The Task Ahead: Balancing the Budget

This budget fulfills the President's commitment to reach balance in 2002. In fact, under the Administration's economic and technical assumptions, it would generate a $17 billion surplus that year.

The budget builds on the balanced budget proposals that the President outlined in his negotiations with the bipartisan congressional leadership over the last two years. The negotiations brought the two sides close to an agreement, and the President is determined to finish the job this year. He views this budget proposal as the next step in the march to reach balance.

Specifically, the President continues to seek cuts in unnecessary and lower-priority spending in both discretionary and mandatory programs, and to eliminate unwarranted tax loopholes and preferences. His $388 billion in total savings would do more than bring the budget into balance by 2002. They also would provide enough savings to finance a modest tax cut to help middle-income Americans raise their children, send them to college, and save for the future; and to correct the harsh provisions that Congress attached to last year's welfare reform legislation.

Among its major elements, the budget: • saves $137 billion in discretionary spending, cutting unnecessary and lower-priority programs while investing in education and training, the environment, science and technology, law enforcement, and other priorities that would raise living standards and the quality of life for average Americans (see Chapters 2-6);

• saves $100 billion in Medicare ($138 billion over six years), ensuring the solvency of the Part A trust fund until 2007 while maintaining the essential quality of Medicare services for the elderly and people with disabilities (see Chapter 1);

• saves $22 billion in Medicaid, building upon the substantial savings that Federal and State experimentation in this jointlyrun program is already generating, and continuing the guarantee of essential health and long-term care coverage for the most vulnerable Americans (see Chapter 1);

• saves $76 billion by ending corporate subsidies and other tax loopholes, extending expired tax provisions, and improving tax compliance (see Chapter 8);

• saves $36 billion by continuing the Administration's successful policy of auctioning segments of the broadcast spectrum (for other proposals on mandatory programs, see below);

• provides $18 billion to correct the harsh provisions that Congress attached to last year's welfare reform law, protecting those in need and helping recipients to find selfsupporting work (see Chapter 7); and

⚫ cuts taxes by $98 billion, providing tax relief to tens of millions of middle-income Americans and small businesses (see Chapter 8).

With regard to other mandatory programs, the budget proposes to more fully fund the costs of Federal civilian employee retirement; extend previously-enacted savings in veterans' benefits; cut subsidies to financial institutions that make and hold student loans while reducing the costs to borrowers; impose fees to recover the costs of services that the Federal Government provides to private businesses; and privatize or sell, rather than give away, valuable public resources.

All budget plans-the President's, Congress', and others-rest on a set of assumptions about how the economy will perform over the next five years, and about technical matters such as how fast Medicare spending will grow. Those assumptions, in turn, help shape projections about the future direction of the deficit and, thus, the size of the challenge ahead in balancing the budget.

Since the President took office, the Administration has worked hard to develop a set of conservative assumptions each year and, in fact, our economic assumptions generally

have proved too conservative. The economy has performed better than most analysts expected in the past four years, providing strong growth, low interest rates, and stable prices. The Government has received more tax revenues, and spent less on certain social programs-and, as a result, the deficit has fallen far more than projected.

The Administration's assumptions also proved more accurate than the even-more conservative assumptions of the Congressional Budget Office (CBO)—although both sets of assumptions were quite reasonable. The Administration is confident that its own assumptions will continue to prove the more accurate.

Nevertheless, the budget includes a mechanism to ensure that the President's plan reaches balance in 2002 under OMB or CBO assumptions. If OMB's assumptions prove correct, as we expect, then the mechanism would not take effect. If, however, CBO proves correct-and the President and Congress cannot agree on how to close the gap through expedited procedures-then most of the President's tax cuts would sunset, and discretionary budget authority and identified entitlement programs would face an across-the-board limit.

With this mechanism in place, the American people can rest assured that we will reach balance in 2002—no matter which set of assumptions are used in the budget process.

The Task Ahead: Investing in the Future

Balancing the budget is not an end in itself. Rather, it helps fulfill the President's central economic goal-to raise the standard

of living for average Americans, both now and in the future.

So, too, do the spending priorities of this budget. Details matter. How the Government spends money-for whom, for what purposeis just as important as whether it does.

Within tight constraints, the budget continues the President's policy of the last four years in shifting Federal resources to education and training, science and technology, and other investments to enable Americans to get the skills to acquire good jobs, and to give businesses the tools to become more competitive, in the new economy. The budget also continues to shift resources to the environment and law enforcement, raising the quality of life for average Americans.

For education and training, the budget proposes to fulfill the President's commitment to put one million disadvantaged children in the Head Start program by 2002; to create safe learning environments for more children; to help more school systems extend high academic standards, better teaching, and better learning to all students; to enable more Americans to serve their communities and earn money for college; to bring technology into more classrooms; to expand college workstudy to one million students by the year 2000; to create a $1,000 merit scholarship for the top five percent of graduates in every high school; to let more parents, teachand communities create public schools to meet their own children's needs; to make it easier for parents and students to borrow and repay college loans; to create the largest increase in Pell Grant scholarships in 20

years; and, finally, to provide Skill Grants to adults for job training.

On other priorities, the budget proposes to maintain environmental enforcement; protect national parks and other sensitive resources; and provide tax incentives to encourage companies to clean up "brownfields"abandoned, contaminated industrial properties in distressed areas. The budget would put 17,000 more police on the street, bringing the total to 81,000 and moving closer to the President's goal of 100,000 by the year 2000; and it would provide more funds to combat juvenile crime and step up the fight against drugs, largely by focusing on treatment and prevention aimed at youth. It would increase the number of Border Patrol agents and workplace investigations to prevent illegal immigration and deter the hiring of illegal immigrants.

The budget invests in research, including biomedical research at the National Institutes of Health, in programs to combat infectious diseases at the Centers for Disease Control, in the Ryan White AIDS program that provides potentially life-extending drug therapies to many people with AIDS, and in community health centers and Indian Health Service facilities. The budget funds full participation in the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), which would be 7.5 million people by the end of 1998.

Finally, the budget proposes to add $1 billion to the Community Development Financial Institutions Fund over five years to create jobs and foster development in lowincome urban and rural communities. For the same purpose, the budget proposes to expand the number of Empowerment Zones and Enterprise Communities, providing tax relief and other assistance for distressed urban and rural areas.

Over the last year, the President also has proposed a series of initiatives to more quickly, and more effectively, meet his goal of higher living standards and a better quality of life for all Americans.

Along with his earlier tax deduction proposal of up to $10,000 for college tuition. and job training, the President proposes

a new $1,500-a-year HOPE scholarship tax credit to make two years of college universal. The budget also proposes to increase Pell Grants for lower-income families who lack the tax liability to benefit from the tax cuts.

• The President proposes the America Reads Challenge to help ensure that all children can read by the third grade, and a fiveyear, $5 billion school construction fund to help States and communities address the serious problem of dilapidated school buildings.

Building on his earlier proposal to help the unemployed keep their health care coverage for six months, the President now proposes to help expand health care coverage to uninsured children.

Having taken the first step to reform welfare, the President now proposes to enhance the Work Opportunity Tax Credit to encourage employers to hire long-term welfare recipients.

The President proposes to reshape the Federal Government's relationship with the District of Columbia by assuming responsibility for certain pension, justice, and other functions. In exchange, the Government no longer would make an annual discretionary payment to the city, and it also would expect the city to be more accountable for how it uses its resources.

A Look Ahead

A balanced budget; a leaner, more effective Government; investments to help secure brighter future-these are the priorities that pervade this budget, and that are outlined in the pages that follow. They are the priorities that will, in the President's words that began this section, "prepare America for... the 21st Century."

But to fully appreciate the President's agenda for the future, it helps to know what the Administration has already accomplished. The President's economic policies, including a dramatic cut in the deficit, have helped to revive an economy that was suffering from over a decade of debt and other burdens. It is to that record-four years of significant accomplishment-that we now turn.