February 1, 2000

The President’s Fiscal Year 2001 Budget

Download Special Report No. 94

Special Report No. 94

Executive Summary President Clinton’s newly proposed budget plans on a steadily growing series of budget surpluses over at least the next ten years. To ensure the surpluses, the Administration has proposed a number of new spending programs and tax cuts but spends relatively little on these proposals.

On the spending side, the budget will see an overall increase in spending of $58.3 billion over the next five years compared to the OMB baseline. Spending on the environment, education and expanded health care provisions for children and the elderly are among the programs targeted for increases. The Administration’s plan to use surplus funds to pay down the national debt would significantly lower interest expenses.

On the revenue side, the Clinton plan contains a mix of tax cuts and increases. These would, on net, cut federal revenues by $4.4 billion over the next five years. The largest cuts are aimed at individuals and include a myriad of proposals ranging from increases in education and health care tax credits, relief from the alternative minimum tax and the marriage penalty, and increases in the earned income tax credit for the poor. However, almost all of the tax reduction is offset by tax increases aimed mostly at businesses (which of course are ultimately borne by individuals) and tobacco-including an increase in cigarette excise taxes of 30 cents per pack.

The budget envisions federal outlays decreasing slightly more as a percentage of GDP during FY 2001 than they would under current law. Outlays would total $1,835 billion, or 18.7 percent of GDP, during FY 2001. Under the OMB baseline they would total $1,838.8 billion. During the next four years, however, outlays would be slightly higher under the Clinton plan than they would be under current law. According to the budget, federal outlays as a percentage of GDP would fall 0.4 percent, from 18 percent in FY 2002 to 17.6 percent in FY 2005. Under the OMB baseline, they would fall 0.5 percent, from 17.9 percent in FY 2002 to 17.4 percent in FY 2005.

Federal receipts also show relatively little difference between what the Clinton plan proposes and what OMB estimates would occur under current law. The Clinton plan projects that federal revenues will total $2.019 billion, or 20.1 percent of GDP, during FY 2001. Under current law, federal receipts are expected to total $2,009.9 billion in FY 2001, or 20 .0 percent of GDP. During the remaining four years of the Clinton plan, federal receipts are expected to average 19.5 percent of GDP while the OMB baseline shows federal receipts averaging 19.6 percent of GDP.

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