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1 Patrick Fleenor, President's Fiscal Year 1998 Budget Leaves Problems Unresolved for Next Administration 1 (1997)

handle is hein.taxfoundation/srghxz0001 and id is 1 raw text is: Sp-t, TAX rq FOUNDATION February 1997, No. 67 Presient's Fiscal Year 1998 Budget Leaves Problems Unresolved for Admistration The Clinton Administration's newly proposed fiscal year 1998 budget contains a plan that it claims will reduce the deficit next Figure 1 Federal Receipts and Outlays as a Percentage of GDP, FY 1962-2002 Clinton Budget Proposal v. OMB Current Services Baseline h'stimales 25% [ ' \ 20% \ 15% 1965 1970 1975 1980 1985 1990 1995 2000 Outlays/GDP (Baseline Estimates) Receipts/GDP (Baseline Estimates) -- - Outlays/GDP (Clinton Budget) Receipts/GDP (Clinton Budget) Source: Tax FoUndation, Office of Management and Budget. fiscal year and stem the flow of red ink by FY 2002. To accomplish this objective the Administration would slow the growth of federal expenditures over the next five years, particularly those for Medicare. On the revenue side of the ledger, the Clinton plan contains a set of very modest provisions that it says will cut selected taxes by $98.4 billion over the next five years. These losses in revenue are more than made up for by other provisions of the plan which would raise a host of other taxes and fees by S 123.3 billion over that period. The plan also assumes that continued economic growth will produce levels of federal receipts which are high by historical standards. The Clinton plan does little to address the nation's long-term fiscal maladies. Just over the five-year budget horizon the deficit will re- emerge as a major problem, driven by the rapid growth of entitlement spending. With- out entitlement reform, the deficit will rapidly rise to levels that could threaten the economic well being of Americans during the early part of the next century. Figure 1 contrasts the Clinton budget pro- posal (symbolized by dark and light blue dashes) with what would occur if existing laws governing federal entitlement spending remained unchanged and if discretionary spending was allowed to grow with inflation (symbolized by gray and black lines). These latter figures, known as baseline estimates, are calculated by the Office of Management and Budget (OMB). The graph also shows federal outlays and receipts as a percentage of (ross Domestic Product (GDP) since 1962. Present- ing federal outlays and receipts in this manner places them on a common scale and allows comparisons to be made over time. The defi- By Patrick Fleenor Economist ax Foundation : )I f

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