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1 Patrick Fleenor, The President's Fiscal Year 1999 Budget: Proposal Relies on Record Tax Levels to Balance Budget 1 (1998)

handle is hein.taxfoundation/srhgxz0001 and id is 1 raw text is: TAX ill FOUNDATION February 1998 No. 76 The President's Fiscal Year 1999 Budget Proposal Relies on Record Tax Levels to Balance Budget The Clinton Administration's newly pro- posed FY 1999 budget contains a plan that it claims will create a budget surplus of $9.5 bil- lion in FY 1999 and generate additional sur- pluses in fiscal years 2000-2003. The Adminis- Figure I Federal Receipts and Outlays as a Percentage of GDP, FY 1962-2003 Clinton Budget Proposal v. OMB Current Services Baseline Estimates 24% 23% 21% 20% 19% 18% 17% 16% 1965 1970 1975 1980 1985 1990 1995 2000 - eeOtlays/GDP (Clinton) Receipts/GDP (Clinton) - - - Outlays/GDP (Baseline) ... ...... -:cipts /GDP (Baseline) Source: Tax Foundation, Office of Management and Budget tration hopes to bring about these surpluses by slowing the growth of most types of federal spending over the next five years and raising a host of taxes and fees. While the Clinton proposal would hold the line on most types of federal spending it proposes several new spending initiatives. These include plans for increasing aid to edu- cation, expanding child-care subsidies, and in- creasing spending on medical research. The administration's proposal also contains several provisions which would affect federal entitle- ment spending. These include a proposal to use any surpluses to bolster the Social Security trust fund and a plan to expand Medicare cov- erage. It is unclear how the administration would accomplish its objective of bolstering the Social Security Trust Fund. In any case, doing so is likely have only a negligible impact on the long-term solvency of that fund. On the other hand, the administration's plan to expand Medicare coverage would likely exac- erbate the nation's already serious long-term budget woes. On the revenue side of the ledger the Clinton plan proposes raising taxes and fees by $81.5 billion over the next five years. The ad- ministration hopes to raise $65.5 billion of this sum through a deal with tobacco companies. The balance would come from raising other taxes and fees. The Clinton plan also assumes that tax dollars will continue to flow into fed- eral coffers at record levels. So far during the 1990s, federal receipts have averaged 18.5 per- cent of GDP - much higher than the postwar average of 17.8 percent. The Clinton plan as- sumes that federal receipts will average 19.8 percent of GDP during fiscal years 1999-2003. Figure 1 contrasts the Clinton budget pro- posal, illustrated by the solid lines for FY 1999-FY 2003, with what would occur if exist- By Patrick Fleenor Senior Economist Tax Foundation :)I

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