Social Security History

PRESIDENT CLINTON'S 1999 STATEMENTS

PRESIDENT CLINTON'S 2000 STATEMENTS

1. Remarks by the President in Addressing the Future of Entitlements Conference, Bryn Mawr, Penn.,-- December 13, 1993

Ladies and gentlemen, it's a pleasure for me to be here. I have looked forward to this conference with great anticipation for some time. I want to thank Congresswoman Margolies-Mezvinsky for getting this together and for inviting me here. I thank President McPherson and this wonderful institution for hosting us. (Applause.) I'm delighted that Speaker Foley and Congressman Penny are here for the Congress; and Senator Kerrey and Senator Walker, your own senator, are here to talk about these important issues.

I want to also thank all the people who helped to put this conference together and to all the people in our administration who were invited and are here participating. We pretty much shut the town down in Washington today and just sort of came up here to Pennsylvania to talk about entitlements. (Laughter and applause.)

This is a very serious subject, worthy of the kind of thoughtful attention that it will be given today. I hope there will be a great national discussion of the issues that we discuss today, and I hope that this will be the beginning of a debate that will carry through for the next several years.

I ran for President because I thought our nation was going in the wrong direction economically, and that our society was coming apart when it ought to be coming together. I wanted to work hard to create jobs and raise incomes for the vast mass of Americans; and to try to bring our country back together by restoring the bonds of family and civility and community, without which we cannot hope to pass the American dream on to the students who are here at Bryn Mawr or the students who will come
behind.

To do this, we must all -- without regard to party or philosophy -- at least agree to face the real problems of this country: 20 years of stagnant wages; 30 years of family decline, concentrated heavily among the poor; 12 years in which our debt has quadrupled, but investment in our future has lagged leaving us with twin deficits, a massive budget deficit and a less publicized investment deficit -- the gap between what we need to invest to compete and win, and what we are receiving in terms of new skills and new opportunities.

These things are linked. Creating jobs in growth requires that we bring down both the budget deficit and the investment deficit. High government deficits keep invest --interest rates high, they crowd out private demands for capital, they take more government money to service the debt. All this tends to reduce investment, productivity, jobs and ultimately, living standards.

The deficit increased so dramatically over the last 12 years because of things that happened on the spending side and on the revenue side. Defense increased dramatically until 1987, but it's been coming down since then quite sharply. However, the place of defense, as we'll see later, has been more than overtaken by an explosion in health care cost going up for the government at roughly three times the rate of inflation. Interest on the debt is obviously increased more when interest rates were high than now, but always when the accumulated national debt goes up. And the larger number of poor people in our country has inevitably led to greater spending on programs that are targeted to the poor.

On the revenue side, the tax cut of 1981 wound up being roughly twice the percentage of our income that was originally proposed by President Reagan as the President and the Congress entered into a bidding war. And then in 1986 we adopted indexing, a principle that is clearly fair, but reduced the rate of growth of federal revenues by adjusting people's taxes downward as inflation pushed their incomes upward. And finally, a prolonged period of very slow growth has clearly reduced government revenues and added to the deficit.

If you look at this chart, you will see that we inherited a deficit that was projected to be actually -- when I took office, for the fiscal year that ended at the end of September -- above $300 billion. It was obvious that -- and it was headed upward. This was the line -- the blue line here is what I found when I became President. It was clear that something had to be done. I asked the Congress to pass the largest deficit reduction package in history. It had $255 billion in real enforceable spending reductions from hundreds of programs. Now, let's make it clear what you mean. When you hear the word spending reductions or cuts in Washington terms, it can mean two things. One is a reduction in the rate of increase in government spending from the previous five-year budget, which is still an increase in spending, but not as much as it would have been had the new reduction not taken place.

The second thing it might mean is what you mean when you say cut, which is you spend less than you did before you used the word. (Laughter.) And it is important to know which one you're talking about. However, both are good in terms of reducing the deficit over a five-year period. We not only reduced the rate of increase, but actually adopted hundreds of cuts this year. The budget year that started on October 1st has less spending than the previous year in 342 separate accounts of the federal budget.

Adjusted for inflation, this means a discretionary spending cut of 12 percent over the next five years, more than was done under the previous two administrations. If this continues, according to the Wall Street Journal, then by 1998, discretionary spending -- that is the non-entitlement spending and discounting interest on the debt, the things that we make decisions on every year -- will be less than 7 percent of our annual income; about half the level it was in the 1960s.

In addition to the discretionary spending cuts, our budget did reduce entitlements, making reductions in agricultural subsidies, asking upper-income recipients of Social Security to pay more tax on their income, lowering reimbursements to Medicare providers, making other adjustments in Medicaid and in veterans' benefits. Now, all these cuts are already on the books. We are also cutting -- with the help of the Vice President's National Performance Review -- over 250,000 positions from the federal payrolls, largely by attrition and early retirement over the next five years. We're finally attempting to reform the system in ways that will permit us to save billions of more dollars in discretionary spending through reform of personnel budgeting and, most importantly, procurement systems -- if the Congress will authorize all three of those systematic reforms.

We also passed some taxes -- a modest 4.3 cents-a-gallon gas tax which, so far, has been barely felt because we have the lowest price in oil in many, many years so the price of gasoline has actually dropped since the gas tax was put on. We also asked the top 1.2 percent of Americans to pay higher income taxes because their incomes went up the most and their taxes dropped the most in the previous 12 years. The corporate income tax on corporations with incomes above $10 million a year was raised. Middle-class families will pay slightly less taxes because, again, of the adjustments for inflation. And taxes were cut for 15 million families who worked for very modest wages as a dramatic incentive to get them to continue to chose work over welfare.

When Congresswoman Mezvinsky and her colleagues voted for this economic plan, they voted for your economic future, for lower deficits, higher growth and for better jobs. They did vote to cut spending. They did not vote to raise taxes on the middle class. And, frankly, the kinds of radio ads that have been -- this is the only political thing I'm going to say today (laughter) -- but the kind of radio ads that have been run against here in this district do not serve the public interest because they do not tell the truth. (Applause.)

If somebody wants to say that we should not have raised income taxes on the top 1.2 percent of the American people, let them advertise that on the radio. If someone wants to say that the corporate income taxes above $10 million a year in income should not have been raised, let them advertise that on the radio. If someone wants to say that the gas tax was unfair, let them advertise that on the radio. But do not try to tell the American people there were no budget cuts and they paid all the tax increases, because that is simply not true. And we have a lot of work to do in this country and a lot of honest disagreements to have, we need not expend our energy on other things. And if you don't believe that read the front page of the Wall Street Journal this morning. That is hardly the House organ of my administration. (Laughter.)

Read the front page of the Wall Street Journal this morning talking about the unprecedented cuts that this budget made. It does not do anybody any good to continue to assert things about that economic plan that are not true. The markets had it figured out. That's why interest rates are down and investment is up. That's why inflation is down and more jobs have come into this economy in the last 10 months than in the previous four years. The markets figured it out. All the smoke and mirrors and radio ads in the world couldn't confuse the people that had to make investment decisions and read the fine print. (Applause.)

That's the good news. Now let's talk about the continuing problems, the real problems. The economic plan which the Congress adopted represents the red line. That's how much less the deficit will be. And the aggregate amount between these two lines is how much less our total debt will be by 1998. The yellow line represents where we can go, by conservative estimates, if the health care plan is adopted. You still have an operating deficit, and the national debt will still increase by this amount, but not by that amount.

So we are clearly better off with the economic plan. We will have to make further cuts, by the way, to meet this red line. We're not done with that. We will be better off still if we do something about health care -- I'll say more about that in a minute -- but there is still more to be done. The debt of this country now is over $4 billion. That means our accumulated debt is more than two-thirds our annual income. It is important that the debt, as a percentage of our annual income, go down. It is way too high, much higher than it has been outside of war time.

It is important that the annual deficit, as a percentage of our income, go down. It will go down under this plan, but we can do more to try to reduce the aggregate debt and the deficit as a percentage of our income. Both of them are too high.

Now, let's look at the next chart here. I think you all have it out in the audience. This chart just basically shows where you money goes. When you pay federal taxes, or when the government -- on your behalf -- borrows money, in debt, we spend 47.4 percent in entitlements -- that is what we're here to talk about today -- about 21 percent on defense, it's going down, as you'll see in a minute; about 18 percent on non-defense, discretionary, which is being held constant; and about 14 percent in interest on the national debt.

Let's look at the next chart now. This chart gives you an idea of which spending categories are headed in which direction. Average annual real growth -- now, I want to tell you what this means. I haven't lived in Washington very long so I still use ordinary meanings for words. (Laughter.) When you see real on a government chart, that means adjusted for inflation. (Laughter.) You'll never find that in a dictionary, but that is what it means. In other words, these are the numbers adjusted for inflation at a projected inflation growth of more or less three and a half percent a year. If you look at that you see defense is going down. Frankly, we're reducing it as much as I think we responsibly can; and, in fact, more than we responsibly can unless Congress will pass the procurement reform so the Defense Department can buy what it needs for our national defense at more efficient prices. But I hope that will happen.

Other entitlements -- we'll come to that in a minute what those other entitlements are -- they're also going down relative to inflation. That is basically the entitlements for the poor and the veterans' benefits and agriculture benefits.

Non-defense discretionary is a little under zero, as you see. That's all the investments for education, for training, for technology, for defense conversion, for you-name-it, anything for infrastructure, for roads; anything we spend money on that we have an option not to spend money on that -- we'll come back to that -- is going down relative to inflation. If there were no inflation numbers here, it would actually be just a tiny bit above the line, but it is functionally zero. For all practical purposes, if I want to increase the amount of money, for example, we spend on Head Start in Pennsylvania by a million dollars, we have to cut something else by a million dollars. We are not increasing the aggregate amount of this kind of discretionary spending. Net interests will go up and, again, this is adjusted for inflation, so it is continuing to rise because the amount of the debt is continuing to rise.

Social Security will go up, again, adjusted for inflation. This is about -- this is the population increase, effectively, in Social Security. There aren't new benefits being added, so there will be a couple of percent growth in population between now and 1998. So it will go up by the amount of increasing numbers of people on Social Security.

And look what happens to health entitlement. It's going up more than twice as much as Social Security, more than three times as much as net interest, and everything else is going down. Now that's what's happening. Let's go on to the next chart.

As the chart shows here, this is the new revenues we're getting in this year. Now, the new revenues include the tax increases that we just talked about. They're about 40 percent of that revenue growth. The rest of it's just ordinary increases in tax revenues to the government coming from increasing employment or increasing incomes. So it's -- every year -- and inflation -- so every year we get some revenue growth. This revenue chart is about 60 percent ordinary revenue growth, 40 percent new taxes. As you can see, the whole thing goes to deficit reduction, interest increases and entitlement increases. That's where the money went. Eighty percent of the new revenues, including taxes and revenue growth went to deficit reduction and interest increases; 20 percent of it went to entitlement increases. As you can see, that does not leave a great deal of room for any kind of future investments.

This is something that presumably both Senator Kerrey and Congressman Penny will talk about today. But there is, I think it's fair to say, a broad consensus in the Congress among Republicans and Democrats, among liberals and conservatives, that there are some things on which we are not spending enough money to get us to the 21st century. We have put ourselves in a box after the last -- trying to work our way out of this deficit business, so that we do not have the flexibility to make those kind of growth-oriented investments in the public sector.


That is a dilemma. So we have two continuing dilemmas, if you will -- one, we still got a deficit and a debt problem; two, there are things which literally over 80 percent of the Congress -- both parties -- would agree we should invest more in that we simply cannot invest more in because of the problem we have with the budget.
Could we go on now into the next chart? Let's go into the next chart.

Now, this gives you a picture of entitlement spending. And I know Alice Rivlin talked about this a little before -- and she knows a lot more about it than I ever will -- but I think it's worth going back over because this is an entitlements conference. So it's worth focusing on what an entitlement is. And when you hear people use that term, what they are.

So look at this. These entitlement programs are programs that provide benefits for people that have certain characteristics. People who meet the test of eligibility for the program get it, notwithstanding some previously budgeted amount for that program. That's why they're called entitlements.

For example, someone who has paid into the Social Security Trust Fund, along with his or her employer, who is 65 becomes "entitled" to Social Security. You just go to the Social Security office with the documents that prove you're eligible and you're going to get the check no matter how many other people qualify for Social Security. Since it's hard to know in advance exactly how many people will apply for benefits, Congress doesn't set aside a specific amount of money as it does for the discretionary spending programs. Instead, it simply directs to Treasury to make payments to everybody who applies and qualifies for the benefits under the laws.

There are two main kinds of entitlements. And you can just see by looking up here what they are. They are the contributory entitlements; that is, you're entitled to something because you paid into it. It's contract oriented. Social Security is a contributory entitlement. Medicare is a contributory entitlement. Federal retirement is a contributory entitlement. You did the work, you put the money aside, you get it back.

Then there are the entitlements for those in need, or entitlements that are in a special category because you can't predict how much is going to be needed every year. The entitlements for those in need would include AFDC, supplemental security income, the Medicaid program, medical care for the poor. Agriculture is in a separate category. It has been treated as an entitlement partly because it's so caught up in the global economy, it's impossible to predict from year to year how much of the support subsidies will be needed.

Now, the contributory retirements are sometimes called middle-class entitlements because they benefit everybody. The middle class, or Mr. Peterson will tell you in a few minutes, the upper-middle-class or the wealthy -- if you pay in, you get it back plus a cost of living increase. Now, the poor people's entitlement, I said, are mostly in the category of like AFDC and food stamps and Medicaid. But let me show you something about these entitlements, because most people, I think, don't know this. Social Security is 43 percent of the total. Medicare is 18 percent, Medicaid is 11 percent, federal retirement is 8 percent, unemployment is 5 percent -- obviously it goes up or down, depending on what the unemployment rate is and how long people are unemployed. Food stamps are 4 percent, other is 11 percent. In the other you have agriculture, veterans, supplemental security income -- which is for lower-income elderly people -- and AFDC. The welfare program of this 11 percent is 2 percent. The average monthly welfare benefit in America is actually lower today, adjusted for inflation, than it was 20 years ago. The program is more expensive because there are more poor people. But I think it's quite interesting to point that out. Most people are surprised to know that the welfare budget is about two percent of the entitlements, or about one percent of the overall federal budget.

Now, the entitlement programs for the needy, as you can see, make up about 12 percent of the whole budget; or about a quarter of the entitlement spending. The biggest entitlements are Social Security and Medicare. They are about 61 percent of the total. When you add federal civilian retirement and military retirement, you've got over two-thirds of the retirements there -- of the entitlements there.

Now, I think it's important to point out, just in passing, that behind every one of these entitlements there's a person. That's why it's so controversial when they're debated in Congress. It's not just organized interest groups, there are people who believe they are literally entitled to receive something back that they paid into. It is the middle-class entitlements, that have united us and brought us together, that also have the strongest constituencies and provoke the biggest controversies when we get into dealing with this. And these programs are also very important in human terms. And I just might mention, too, the -- if you look at Medicare, before Medicare, there was a good chance that Americans, when they got older, would need charity care, would simply do without health care. Today nearly 34 million people go to see a doctor, or get medical care because of the Medicare program.

Social Security has changed, literally, what it means to be old. In the beginning of 1985, for the first time in our history, the percentage of our elderly people who were above the poverty line was better than the percentage of the population as a whole. In other words, the poverty rate for the elderly was lower than the poverty rate of the general population.

It is very difficult to say that this was a bad thing. That was -- I argue -- a good thing. We should not view this whole program, in other words, as welfare. It is not a welfare program. Does that mean that there should be no changes in it? No. It just means that we should be very sensitive about the fact that this is something that has worked. Because of these programs, we are a healthier people. We are a more unified country. We treat out elderly with greater dignity by having allowed them to earn a decent retirement and to maintain a middle-class standard of living, independent of whatever their children are required to do, and to make them more independent over the long run. This is a huge deal in a country where the fastest growing group of people, in percentage terms, are people over 80 years of age. (Applause.) This is a big deal. (Applause.)

Now, I recommended exposing more of the incomes of the top 10 or 12 percent of Social Security recipients, somewhere in that range, to taxation, and Congress adopted a modified version of that plan. That was an entitlements move. I thought it was an appropriate thing to do because a lot of people in upper-income levels, by definition, have other sources of income, too, and will get back what they paid into Social Security plus reasonable interest growth in a reasonably short period of time, so I thought it was fair to do that.

We recommended upper-income people pay more for Medicare benefits. I think that is reasonable to do because the Medicare payment itself only covers a small percentage of the total cost of Medicare. Where I think we should draw the line, however, is in trying to have happen to the elderly middle class what is happening to the non-elderly middle class. All over the world today, and certainly in all the advanced countries of the
world, the middle class is under assault. Earnings inequality has increased in the last 12 years. It is becoming very difficult for working people to sustain a middle-class way of life. We are going to have to all change. We've got to change our government policies. People are going to have to acquire much higher levels of skill and be committed to training for a lifetime. There are a lot of things that have to be done. But the general policy point, I think, is valid. We do not want to deal with a problem like the deficit which is aggravated because middle-class people's incomes have stagnated by having the same sort of income stagnation for the middle-class elderly.

So I think there are things we can do to deal with this. They will be discussed later. We did some things to deal with the entitlements in the last budget. But let us not say that it was a bad thing to dramatically reduce poverty among elderly people, or that it is a bad thing for our consumer economy to maintain a large number of middle-class people in their retirement years. That means that we have to have honest, specific and clear discussions of this, as unencumbered as possible by these sort of rhetorical bombs flying in the air from the left and the right.

Just talking it through and listening to each other and asking ourselves what will be the practical impact of proposed change A, B or C; and will we all be more secure, will our children and our grandchildren be better off; will this help to stabilize and increase the middle class ballast of our society? And I think we are on the verge, perhaps, of having that discussion in no small measure because of this kind of conference.

Now, let's go on and let's look at what I think the real problem in the entitlements is, is clearly the danger signal for the long run. Let's look at the next chart. As you can see, 20 years ago health spending and entitlements -- Medicare and Medicaid -- 13 percent of the total; 1983, 19 percent of the total; 1993, 30 percent of the total; 2003, 43 percent of the total. Keep in mind -- and this is with the number of elderly people going up like crazy, so the population of people drawing Social Security is going way up, right? And still, look at that.

So, clearly, that is the portion of government spending that is out of control. That is the portion of entitlement spending that is out of control. Now let me just illustrate it by a couple more charts, real quickly. Let's go to the next one.

Non-defense discretionary outlays are going down as a percent of our income. Social Security outlays as a percentage of our income is solid, stable here. It could go up some in the next century, is projected to when all the baby boomers go in. I heard Ms. Rivlin refer to that as the President's generation. (Laughter.) I am the oldest of the baby-boomers.

But still, you see, it's a stable as a percentage of the gross national product. And the Congress, in 1983, after the Bipartisan commission on Social Security made recommendations for fixing Social Security, attempted to keep this number stable by gradually raising the retirement from 65 yo 67, by about a month a year over a prolonged period of time starting just in the next century.

Now let's go on to the last one. This chart shows you that unlike Social Security and discretionary spending, medical spending is going up like a rocket. Medicare and Medicaid have tripled since 1982. Medicare and Medicaid will soon cost more than Social Security. And next year for the first time -- in large measure because Medicaid is a state-federal matching program, so that every state has to put in money along with the federal government -- next year, for the first time, states will spend more money on health care than education. And since we -- and since I supported this, I see other present and former governors around this table -- in the 1980s we said to the national government, "You've got a problem with the deficit, we'll spend more on education. You do what you have to do to deal with your other problems." This is a very serious danger signal. If you want the states to spend more educating people, getting children to the point where they can compete, training the work force -- to have the states all of the sudden spending more on health care than education is a very serious danger signal for the distribution of responsibilities between the state and the federal government.

Now, we have some options. If we want to control Medicare and Medicaid spending, basically we have some options. And to be fair, again I want to say during the 1980s under the Reagan and Bush administration -- the two administrations and the United States Congress did try to cooperate on several things to control Medicare and Medicaid spending. They took total pricing controls away from hospitals and doctors. They tried to do a number of things. But what happened? If you control the price of a given product in this environment, what happens? Providers can provide more products, I mean, more of the same product, right? You increase the volume if you lower the price, and the money still goes up. That's one problem. Secondly, poverty increased in the '80s and is continuing to increase among the poor and the -- both the idle and the working poor -- and that drives the Medicaid budget up. So controlling unit prices didn't work. The other thing you could argue that we could do is to try to control the categories within Medicare and Medicaid; basically, just spend less. In other words, even though they're entitlements, just say we are going to spend less on certain categories by both controlling volume and price. Is there a problem with that? Yes there is. What is it? Any doctor or hospital will tell you that there has been a lot of cost shifting in this health care system, and it's one of the causes of rising prices and inefficiency. Cost shifting largely occurs in two ways -- when hospitals have to care for people who don't have any insurance, or when they provide government funded health care at less than their cost of providing the service, they shift the cost onto the private sector.

So we could bring this deficit down -- we could do this -- I want to -- let's 'fess up, we could do this. We could just cut how much we're going to spend on Medicare and Medicaid, even though it's an entitlement, in terms of price per unit and volume. We can just take 'er down. But if we do that, what will happen? Those costs will be shifted by the health care providers to the people who already are providing insurance; with the impact that it will be a hidden tax increase on businesses and on employees. Employees will probably see it in not getting pay raises they otherwise would have gotten. Businesses will see it in spending more on health insurance premiums and having less to reinvest in the business or to take in profits. I don't think it is fair thing to do. That is why our administration has argued that if you really want to solve this problem, you have to go back and have comprehensive health care reform. This is the only country in the world that doesn't find a way to solve that issue, that doesn't give -- the only advanced nation, that is -- that doesn't give basic health care to all its citizens within a framework that controls costs in the public and private sector.

We're spending 14.5 percent of our income on health care. Nobody else is over ten; Germany and Japan are at nine. The health outcomes of other countries are roughly similar to ours. We can't get down to where they are because we spend more on technology and more on, basically, costly treatments than other countries do, and more on medical research. And that's fine. And we can't get down to where they do because we have more violence and higher rates of AIDS and other very expensive diseases than other countries. But we could do better. And unless we do better in an overall way, in my judgement, we are going to be in trouble.

Now we had a nonpartisan analysis by the respected firm of Lewin-VHI last week about our health care plan. This company does research on the economics of health care for businesses, unions, consumer groups. It includes people who served in the Reagan and Bush administrations as budget and health officials. They say that our plan will reduce the deficit. We think it will reduce it even more than they will. I won't get into the details of that today. We're here to talk about entitlements. The point I want to make is I believe you don't entitlement control, you don't get ultimate deficit control unless you do something about Medicare and Medicaid. I believe you don't get that done just by cutting Medicare and Medicaid unless you want to hurt the private sector. Therefore, I think we have to have some sort of health reform. That's what I believe. You have to decide if you believe that, but I think it's important. (Applause.)

Let me just close with this. This is the lead editorial in this morning's Washington Post. It says -- on the entitlements mess -- and it says as follows: "Nor have all the entitlements been badly behaved in recent years in terms of costs. The health care programs are the budget busters. By contrast Social Security costs have risen in "stately fashion" with population and inflation. And the costs of all the other entitlements taken together, including those that support the poor has declined in real terms" -- remember what "real" means in Washington, less than the rate of inflation. "The real federal budget problem" -- that's the normal word "real". Here they mean real like you do. (Laughter.) "The real federal budget problem isn't entitlements, it's health care."

So I say to you we can talk about these other entitlements and we should. As we talk about them, let us not make our middle-class squeeze problem worse than it is already. That's one of the profound problems that is driving this country. One of the reasons that Senator Wofford is in the Senate today, is because of the anxieties of middle-class workers in Pennsylvania.

Let us continue to work on this deficit. Let us realize the deficit is too big and the debt is much too large as a percentage of our gross national product. Let us realize that there are two problems with it. One is the deficit and the other is we aren't investing enough. But on the entitlements issue, I would argue the real culprit is health care costs, and we can only address it if we have comprehensive health care reform.

And let me close by saying one more time, if Marge Mezvinsky hadn't voted for that budget, we wouldn't be here celebrating economic progress or talking about entitlements. We'd still be back in Washington throwing mudballs at each other. And I respect her for that and I'm glad to be here today. (Applause.)

6. REMARKS BY THE PRESIDENT ON SUBMISSION OF 1999 BUDGET-- February 2, 1998

East Room 10:44 A.M. EST

THE PRESIDENT: Thank you very much for that warm welcome. Good morning. Thank you, Mr. Vice President, Mr. Bowles, members of our economic team, members of the Cabinet and administration. And I thank the large number of members of Congress who have come here today, and others, all of you here for the submission of the first balanced budget in 30 years, one that will truly strengthen our nation for the 21st century.

This budget marks the end of an era, an end to decades of deficits that have shackled our economy, paralyzed our politics, and held our people back. It can mark the beginning of a new era of opportunity for a new American Century.

Consider what has been achieved in so short a time. In the 12 years before I took office, trickle-down economics led to an explosion in the federal deficit which quadrupled our national debt in only 12 years. Government deficits soaked up trillions of dollars in capital that should have been used for productive investment. Massive deficits led to high interest rates that slowed growth. And massive deficits also paralyzed the Congress in their attempts to invest in our future, as we spent more and more and more of the taxpayers' dollars just to pay interest on the debt we had run up.

The new economy was being held back by old political ideas and arrangements. The deficit was more than an economic reality; it was a powerful symbol that government had simply failed to meet its most basic obligations. And doing something about the deficit was one of the reasons I ran for President in 1992.

The day I took office, the deficit was projected to be about $300 billion for that year. For five years, beginning in 1993, as the Vice President said, the Congress and the American people have worked tirelessly to put our economic house in order. We have worked hard here to put our fiscal house in order. The government is the smallest it's been in 35 years. And deficit reduction has given us lower interest rates, higher investment, and, I might add, lower unemployment, more taxpayers, and more funds to invest in America's future.

That is the gamble we took in 1993 -- a gamble now that I thought was not such a gamble at all. But it did, as the Vice President said, cost several members of Congress their jobs. Wherever they are today -- wherever they are -- I hope they know and remember that we passed that budget in '93 by one vote in the Senate and by one vote in the House and we did not have a vote to spare. And everybody that stood up, and especially those who lost their seats, can know they gave 14 million Americans jobs that would not have been there otherwise and a brighter future for all the American people, and I'm very grateful for that. (Applause.)

I also want to point out, as the Vice President did, that the job to be finished and to eliminate the structural deficit, came with a balanced budget agreement last year. And we should applaud all those in both parties who were part of that. Because it will not only enable us to achieve a balanced budget, it will enable us to maintain a balanced budget long into the future if we stay with the disciplined framework that was embraced last year by very large majorities in both Houses of both parties. And that is very important. It's one thing to get the deficit down, another thing to hold it there. And that balanced budget agreement will not only go from a much smaller deficit down to balance, but also will hold it there if we stay with the discipline. We have not done all this work to let it go.

Now, I believe, if we will stay with the plan, we can balance the budget without further cuts. Indeed, the balanced budget I submitted shows we can balance the budget and still hire 100,000 new teachers and modernize 5,000 schools. We can balance the budget and allow hundreds of thousands of middle-aged Americans who have no health insurance through no fault of their own to buy into Medicare. We can balance the budget and still extend child care to a million more children. And above all we can balance the budget and save Social Security first. (Applause.)

In other words, it is obvious that you can have a smaller government but a more progressive one that gives you a more stronger America. We've done more than simply balance the budget, more than just line up numbers on a ledger. We have restored the balance of the values in our policy, restored the balance of confidence of between government and the public. Now, we'll have a balanced budget not only next year but as far as the eye can see.

We have to use this opportunity to build a stronger America. And let's just talk about that. First and foremost, we project that the budget will not only balance, it will actually run a surplus of $9.5 billion next year and over $200 billion over the next five years -- fully $1 trillion over the next 10 years. This budget reserves that surplus -- I want to say it again -- this budget reserves that surplus, saving it until we have taken the steps necessary to strengthen Social Security into the next century.

One of the reasons that balancing the budget has been hard is that we have insisted on a balanced budget that honors our values. Finding a way to reduce red ink without shrinking the circle of opportunity has been at the heart of our efforts. And when we started, most people said you couldn't do it. They said there is no way to cut the rest of government enough to reduce the deficit and increase investment in important areas. But that is an important achievement as well.

Now it is most important of all that we balance the budget while renewing our commitment to save Social Security. When I left Washington last week and went to Champaign, Illinois, and La Crosse, Wisconsin, I was moved by the strength and depth of the American people's priority for the surplus they created. I think they want us to save Social Security first, as well. And I hope all of you, and members of Congress in both parties, will support that.

We have a great opportunity now to take action now to avert a crisis in the Social Security system. We have a great opportunity now to be able to tell all these young people who are shadowing their Cabinet and administration leaders that Social Security will be there for them when they retire. We have a great opportunity, those of us in the baby boom generation, to tell our own children that when we retire and start drawing Social Security, it isn't going to bankrupt them to take care of us and undermine their ability to take care of their own children. We need to do this.

We don't need to take any shortcuts, we don't need to take any short-term benefits. Before we do anything with that surplus, let's save Social Security first. (Applause.)

The budget continues our efforts at education reform. As I said, it enables us to hire 100,000 new teachers working with states to reduce class size to an average of 18 in the 1st, 2nd, and 3rd grades, and to help modernize or build 5,000 schools. It helps to give our parents the tools they need to meet their responsibilities at home and at work, among other things allowing people between the ages of 55 and 65 who lose their health insurance to buy into the Medicare program.

It includes a breakthrough investment in child care through tax credits, vouchers for states, scholarships for care givers. It will help America to meet its obligations in international leadership -- meet our obligations to stabilize the world's financial markets, to pay our dues to the United Nations, to continue our support of our military so that our men and women in uniform can continue to do the job for us.

It will provide tax cuts in research and development to help meet the challenge of global climate change in a way that enables us to grow the economy while actually improving the environment. It continues to support our urban empowerment strategy, bringing more private sector investments to our hardest-pressed cities and neighborhoods while continuing to put 100,000 police officers on the streets and giving our children something to do after school, so more of them can stay out of trouble and on a path to success.

It will lead to future generations the gift of scientific and medical advances. The 21st Century Research Fund, the largest funding increases ever for the National Institute of Health, the National Science Foundation, and the National Cancer Institute, will speed the progress of biomedical breakthroughs in the fight against many of our deadliest diseases.

The budget funds these initiatives by continued cuts in government programs, by closing unwarranted tax loopholes, and from the passage of tobacco legislation, which, as every passing day shows, is critically important to the future of our children and therefore of our country. (Applause.)

This budget meets the test I set out before Congress last week: no new spending initiatives, no new tax cuts unless they can actually be accomplished without adding a dime to the deficit. For more than two centuries, Americans have strengthened our nation at every critical moment with confidence, unity, a determination to meet every challenge. For too long the budget deficit, a worsening crime wave, the seemingly unsolvable welfare difficulties -- they all seemed to challenge our innate American confidence. In the past five years, the American people have met these challenges and have moved to master them. Now we have a chance, in a period of peace and prosperity with renewed confidence, to build for the future. That's what this balanced budget does.

Now, it is -- I am going to close my remarks now, by asking the Vice President to give me a magic marker so that I can be the first person to actually certify what the budget will say for the coming year. Even we can do this. I am technologically challenged, therefore, we're not doing this on a computer. (Laughter and applause.)

END 10:55 A.M. EST

7. REMARKS BY THE PRESIDENT ON SOCIAL SECURITY -- February 9, 1998

Gaston Hall, Georgetown University, Washington, D.C.

10:53 A.M. EST

THE PRESIDENT: Thank you very much. Special thanks to those of you who had to wait all night to get in. (Laughter.) Hope you won't be disappointed. (Laughter.)

Mr. Vice President, Father O'Donovan, to all the groups here who are concerned with Social Security, especially to Congressman Penny and the Concord Coalition, and John Rother and the AARP, I thank you all for being here.

I thank Senator Bob Kerrey, who when he cast the decisive vote for our budget in 1993 said that he would do so only if I were also committed to dealing with the long-term structural problems of Social Security, to heal the deficit there as well. I thank Gene Sperling and the members of my staff who worked with us on this. And thank you, Mannone Butler, for embodying what this struggle is all about. Weren't you proud of her? She did a great job I think. Thank you very much. (Applause.)

When I first ran for President six and a half years ago now, I came to this hall to set out my vision for 21st century America, and a strategy for achieving it. Often in the years since I have come back here to discuss our nation's most demanding challenges. And on many occasions, but none more relevant than today, I have recalled the assertion of my freshman professor in the history of civilizations course, Carroll Quigley, that the distinguishing characteristic of Western civilization in general and the United States of America in particular is what he called future preference -- the idea that the future can be better than the present or the past; that each of us has a personal, moral responsibility to work to make it so, to plan for it, to work for it, to invest for it.

There is no better example of that principle for the strength of America than the opportunity and the duty all of us as Americans have now to save Social Security for the 21st century. So today I return to discuss what we have to do to achieve that and why it is so important.

You know, there was a recent poll which said that young people in the generation of the students here felt it was far more likely that they would see a UFO than that they would draw Social Security. (Laughter.) And others may think that it's a long way off, as Mannone said, and the Vice President said he thought it was a long way off.

A couple of days ago I went to New Mexico to visit our national labs -- you may have seen the story. And our national labs at Los Alamos and Sandia and Lawrence Livermore, where we do a lot of the research that not only helps us to preserve the security of our smaller and smaller nuclear arsenal, but helps us to deal with our environmental questions and a lot of other fascinating challenges of the future. But anyway, after I finished this, I had lunch with a few of my friends, including a man that I went to Georgetown with. And at the end of the lunch, he whipped out this photo and gave it to me, and we were sitting in a park together, about a week after I graduated in 1968. And I looked at that photo and I said, my goodness, where did all the time go? It seems like it was yesterday to me.

I say that to make this point: It may seem a long way away from the time you now -- where you are until you will need retirement. It may seem a long way away before most of your parents need retirement -- but it isn't. And great societies plan over long periods of time so that individual lives can flower and take root and take form. And that is what we have to do today.

Social Security is a lot more than a line in the budget. It reflects some of our deepest values -- the duties we owe to our parents, the duties we owe to each other when we're differently situated in life, the duties we owe to our children and our grandchildren. Indeed, it reflects our determination to move forward across the generations and across the income divides in our country, as one America.

Social Security has been there for America's parents in the 20th century, and I am determined that we will have that kind of security for the American people in the 21st century. We are entering this new millennium, the new century, with restored confidence -- the Information Age, a growing global economy, they're changing the way we live and work. And the scope and pace of change, well, it may seem commonplace to those of you who have grown up with it, but to people my age it is still truly astonishing. And I can tell you, it is without historical precedent.

For a long time our country failed to come to grips with those changes and we paid the price in a stagnant economy and increasing inequality among our working families, in higher child poverty, in record welfare rolls, higher crime rates, other deepening social problems. Before the present era we had only run budget deficits, and the deficit I think came to symbolize what was amiss with the way we were dealing with the changes in the world. We had only run budget deficits for sound economic reasons -- either because there were some overwhelming need to invest or because there was a recession that required stimulation of the economy, or because there was a national emergency like war. The idea that we would just simply have a structural deficit and run one year in and year out was unheard of. But that is exactly what has happened throughout your lifetime.

And it got so bad in the 1980s that between 1981 and 1992 the total debt of the country was quadrupled -- quadrupled -- in a 12-year period, over and above the previous 200 years. That raised interest rates. It took more and more tax money away from investments in education, for example, or the environment to pay interest on the debt. It slowed economic growth and it definitely compromised your future.

Five years ago I determined that we had to set a different course, to move past the debate that was then paralyzing Washington and, frankly, didn't have much to do with the real world, between those who said government was the enemy, those who said government was the solution and as long as you can fight about something, then you don't have to get down to the nitty-gritty of dealing with the real problems.

When the British Prime Minister was here last week, Tony Blair, we stressed that we both think, and many other leaders increasingly around the world are beginning to think that this debate is fruitless and that there has to be a third way -- that 21st century government, Information Age government, must be smaller, must be less bureaucratic, must be fiscally disciplined and focus on being a catalyst for new ideas and giving you and all other Americans the tools they need to make the most of their own lives.

For five years we have reduced the size of the deficit, reduced the size of government, dramatically reduced the budget deficit by over 90 percent, but continued to invest in your future. And in very dramatic ways that's changed the experience of going to college.

Student loans that are guaranteed by the government have been made less expensive and easier to repay. There are hundreds of thousands of more Pell Grant scholarships, 300,000 more work-study slots. AmeriCorps has allowed 100,000 young people to earn money for college while serving in their community. There are now tax-free IRA accounts for college education. Last year we enacted the HOPE Scholarship, which is a $1,500 tax credit for the first two years of college. And then there's a lifetime learning tax credit for junior and senior years for graduate schools and for adults who have to go back for further training. For the first time in history, while reducing the deficit by 90 percent, we can honestly say if you're willing to work for it, whatever your circumstances, you can go on to college in the United States, and that is a very important achievement.

Now, all of these things have worked together to give us the strongest economy in a generation -- almost 15 million new jobs, the lowest unemployment rate in 24 years, the lowest inflation rate in 30 years, the highest homeownership in history, average incomes rising again. I've submitted to Congress for 1999 the first balanced budget in 30 years. All that is a remarkable achievement. But, as I said, we have to be thinking about the future. And all of you know to a greater or lesser degree of specificity, every one of you know that the Social Security system is not sound for the long-term, so that all of these achievements -- the economic achievements, our increasing social coherence and cohesion, our increasing efforts to reduce poverty among our youngest children -- all of them are threatened by the looming fiscal crisis in Social Security.

Today I want to talk about what it is and how we propose to deal with it. And as the Vice President said, we should use the economic good times. That old saying that you don't wait for a rainy day to fix the roof is good for us today; it's very sunny outside. And on this sunny day, we should deal with Social Security.

In very specific terms, we've got a great opportunity because it is projected that we stay with the present budget plan, that taking account of the fact that we won't always have the greatest economic times as we've had now -- there will be times when the economy will grow faster, times when it will grow slower, we may recessions -- but structurally, we have eliminated the deficit, so that over time we should have a balanced budget, and over time, most times we should be running a surplus now if we stay with the discipline we have now over the next couple of decades.

Now, if that's so, it is now estimated that with normal ups and downs in economic growth, over the next 10 years, after 30 years of deficits, that the United States will have a budget surplus in somewhere in the range of a trillion dollars in the aggregate over the next 10 years. I have said before we spend a penny of that on new programs or tax cuts, we should save Social Security first. I think it should be the driving principle of this year's work in the United States Congress -- do not have a tax cut, do not have a spending program that deals with that surplus -- save Social Security first.

That is our obligation to you and, frankly, to ourselves. And let me explain that. This fiscal crisis in Social Security affects every generation. We now know that the Social Security trust fund is fine for another few decades. But if it gets in trouble and we don't deal with it, then it not only affects the generation of the baby boomers and whether they'll have enough to live on when they retire, it raises the question of whether they will have enough to live on by unfairly burdening their children and, therefore, unfairly burdening their children's ability to raise their grandchildren. That would be unconscionable, especially since, if you move now, we can do less and have a bigger impact, especially since we now have the budget surplus.

Let me back up just a minute, mostly for the benefit of the young people in the audience, to talk a little bit about the importance of this effort. It's hard for even people in my generation to understand this, much less yours. But early in this century, to be old meant to be poor. To be old meant to be poor. The vast majority of people over 65 in America early in this century were living in poverty. Their reward for a lifetime of work, for doing right by their children, for helping with their grandchildren, unless their kids could take care of them, was living in poverty.

If you ever have a chance you ought to read some of the books that have thousands of letters that older people sent to President Roosevelt, begging him, in the words of one typical letter writer, to eliminate -- and I quote -- "the stark terror of penniless, helpless old age." That's what prompted President Roosevelt to launch the Social Security system in 1935, to create what he called the cornerstone of a civilized society.

Now, for more than half a century Social Security has been a dramatic success. If you just look at the first chart over here on the right, you will see that in 1959 -- I don't see as well as I once did -- (laughter) -- the poverty rate among seniors was still 35 percent. As recently as 1959, still over a third of seniors lived in poverty. By 1979, it had dropped to 15.2 percent. By 1996, it had dropped to 10.8 percent.

To give you an idea of the profound success of the program over the last 30 years -- as you know, there have been increasing number of children being raised in single-parent households, where the incomes are not so high -- the child poverty rate in America is almost twice that. But no one can begrudge that. So the first thing we need to say is, Social Security has succeeded in ending the stark terror of a penniless old age. And that is a terrific achievement for the American society.

Now, it's also known, however, that the changes that are underway today will place great stresses on the Social Security safety net. The baby boomers are getting grey. When my generation retires -- and I'm the oldest of the baby boomers; I was born in 1946, I'm 51 -- and the generation is normally held to run for the 18 years after that, that's normally what people mean when they talk about the baby boomers -- it will dramatically change the ratio of workers to earners, aggravated by increasing early retirements and other things, offset by gradual increase in the Social Security retirement age enacted back in 1983. So if you look at that, that's the second chart here.

In 1960, there were 5.1 Americans working for every one person drawing Social Security. In 1997, there's still 3.3 people working for every one person drawing Social Security. In 2030, the year after the Social Security trust fund supposedly will go broke unless we change something, at present projected retirement rates -- that is, the presently projected retirement age and same rates -- there will be two people working for every one person drawing Social Security.

Now, if you look at that plus the present investment patterns of the funds of which are designed to secure 100 percent security and, therefore, get a somewhat lower return in return for 100 percent security for the investments, that's what will cause the problem. So if you look at the presently projected retirement and the presently projected returns, that will cause the problem.

It's very important you understand this. Once you understand this, you realize this is not an episode from the X Files, and you're not more likely to see a UFO if you do certain specific things. On the other hand, if you don't do anything, one of two things will happen -- either it will go broke and you won't ever get it; or if we wait too long to fix it, the burden on society of taking care of our generation's Social Security obligations will lower your income and lower your ability to take care of your children to a degree most of us who are your parents think would be horribly wrong and unfair to you and unfair to the future prospects of the United States.

So what's the bottom line? You can see it. Today, we're actually taking in a lot more money from Social Security taxes enacted in 1983 than we're spending out. Because we've run deficits, none of that money has been saved for Social Security. Now, if you look at this little chart here, from 1999 forward we'll be able to save that money -- or a lot of it, anyway. We'll be able to save a lot of it that will go into pure surplus in the budget. It can be invested. But other things will have to be done, as well. That will not be enough.

And if nothing is done by 2029, there will be a deficit in the Social Security trust fund, which will either require -- if you just wait until then -- a huge tax increase in the payroll tax, or just about a 25 percent cut in Social Security benefits. And let me say today, Social Security -- I want to put that in, too, because I want you all to start thinking about this -- Social Security was conceived as giving a floor for life. It is not enough to sustain the standard of living of almost any retiree retiring today.

So you also will have to make provisions for your own retirement savings, and you should start early when you go out and go to work, with a 401(k) plan or whatever. But this is what is going to happen unless we change. if we change now we can make a big difference.

I should also point out that Social Security also goes to the spouses of people when their widowed. Social Security also goes to the disabled. There's a Social Security disability program. Cassandra Wilkins, who's here with us, who the Vice President recognized, ran the Social Security disability program for me when I was governor. It's a very important program. But all of these things should be seen in terms of these economic realities.

Now, again I say, if we act soon, less is more. If we can develop a consensus as a country to act soon we can take relatively modest steps in any number of directions to run this 2029 number well out into the future in ways that will keep Social Security's role in providing some retirement security to people without unfairly burdening your generation and your ability to raise your children to do that. And I can tell you, I have had countless talks with baby boomers of all income groups and I haven't found a single person in my generation who is not absolutely determined to fix this in a way that does not unfairly burden your generation. But we have to start now.

We have to join together and face the facts. We have to rise above partisanship, just the way we did when we forced the historic balanced budget agreement. This is -- as you can well see, this is reducible to stark mathematical terms. This need not become a partisan debate. Oh, there ought to be a debate, a good debate on what the best way to invest the funds are. There ought to be a good debate on what the best trade-offs are between the changes that will have to be made. But it ought to be done with a view toward making America stronger and, again, preserving the ties that bind us across the generations.

I have asked the America Association of Retired Persons, the AARP, a leading voice for older Americans, and the Concord Coalition, a leading voice for fiscal discipline, to organize a series of four nonpartisan regional forums this year. The Vice President and I will participate. I hope the Republican and Democratic leadership will also participate. I was encouraged that Speaker Gingrich said the other day that he felt we should save the surplus until we had fixed the Social Security first.

The first forum, which will set out before the American people the full nature of the problem -- essentially, what I'm doing with you today with a few more details -- will be in Kansas City on April 7th. Then in subsequent ones we will hear from a variety of experts and average citizens across all ages. It is very important to me that this debate involve young people -- very important, because you have a huge stake in it and you need to imagine where you will be and what kind of investment patterns you think are fair for you and how you think this is going to play out over the next 20, 30, 40 years. We want people of all ages involved in this.

This national call also will spread to every corner of the country, to every member of Congress. There are other private groups which have to play a role. The Pew Charitable Trust has launched a vital public information campaign -- Americans Discuss Social Security. On March 21st, I will help kick off the first of many of their town hall meetings and teleconferences.

Now, when we go out across the country and share the information and get people's ideas -- then, at the end of the year in December, I will convene a historic White House Conference on Social Security. And then, in a year, I will call together the Republican and Democratic leaders of the House and Senate to begin drafting comprehensive, bipartisan landmark legislation to save the Social Security system.

This national effort will require the best of our people -- and I think it will get the best of our people. It will ask us to plan for the future. It will ask us to be open to new ideas, not to be hide bound and believe that we can see the future through the prism of the past. But it will ask us to hold on to the old values that lifted our senior citizen from the burden of abject poverty to the dignity of a deserved good, solid old age.

Keep in mind, most of you who are sitting out here can look forward to a life expectancy well into your 80s. Most of you, by the time you get to be my age, if you live to be my age, your life expectancy will probably be by then 90 or more. We're going to have to rethink this whole thing. But we have to do it with a view towards preserving the principles and the integrity of our society, binding us together across the generations and across the income divides.

We can do this. President Roosevelt often called us to the spirit of bold, persistent experimentation. We will have to do that. But he also reminded us that our greatest challenges we can only meet as one nation. And we must remember that. With our increasing diversity, and the way we work and live, and our racial and ethnic and other backgrounds -- religious backgrounds -- we still have to be, when it comes to treating people with dignity and fulfilling our obligations to one another, one nation.

Acting today for the future is in some ways the oldest of American traditions. It's what Thomas Jefferson did when he purchased the Louisiana Territory and sent Lewis and Clark on their famous expedition. It's what Abraham Lincoln did when at the height of the Civil War, he and the Congress took the time to establish a system of land grant colleges, which revolutionized the future of America. It's what we Americans did when, in the depths of the Depression, when people were only concerned about the moment, and 25 percent of the American people were out of work, our Congress and our President still took the time to establish a Social Security system, that could only take flower and have full impact long after they were gone.

That is what we do when we do best -- what Professor Quigley called "future preference." What I prefer is a future in which my generation can retire, those who are not as fortunate as me can retire in dignity, but we can do it in a way that does not burden you and your ability to raise our grandchildren. Because I believe the best days of this country lie ahead of us if we fulfill our responsibilities today for tomorrow.

Thank you very much. (Applause.)