                             What We Must Now Do

To renew America, we must be bold.

Bill Clinton


Change Is Imperative

To reverse the legacy of failure and move toward our vision of the future, 
drastic changes in Federal policy are needed. We must soberly take stock 
of where we are and dedicate ourselves to revitalizing our economic future.

The over-arching theme of the Clinton Administration's economic plan is 
increasing public and private investment in the broadest sense. To ensure 
more productive, higher-wage jobs and greater economic opportunities for 
ourselves and our children, we need to devote a larger share of our 
current resources to modernizing factories and equipment, developing 
skills, and accelerating the advance of technology. We must increase the 
share of the Government's budget devoted to investment in future growth 
and must create incentives for the private sector to shift from 
consumption to investment. The need to increase investment motivates all 
three elements of the Clinton economic plan: stimulus, investment, and 
deficit reduction.

The stimulus package is designed to ensure that recovery from recession is 
strong and durable. It will provide a boost to the economy in the short 
run and create up to half a million new jobs. What we call stimulus in 
this plan, however, is not a conventional prescription for adding to 
consumer demand by cutting taxes or creating make-work jobs. Instead, it 
is a down payment on longer-run investment. We selected some investment 
projects that could be started quickly especially those that would create 
a significant number of new jobs and get a fast start on these projects. 
Spending proposals in the stimulus package will be included in a request 
to Congress for supplemental funds for 1993. All of the proposed spending 
in the stimulus package is consistent with the proposals for longer-term 
public investment. Tax incentives for immediate increases in investment by 
large and small business are also a vital part of the stimulus package.

The investment package proposes major additions to ongoing activities that 
expand America's capacity to produce and provide more opportunities for 
current and future workers. It is designed to help fill the investment 
deficit by increasing spending for highways and other infrastructure, to 
enhance the opportunities and skills of future workers, to accelerate the 
development and use of science and technology, to improve the delivery of 
health care for underserved groups, and to increase incentives and 
opportunities for productive employment. Tax incentives for business 
investment also continue.

The deficit reduction plan makes a vital contribution to increasing 
investment and raising standards of living by gradually reducing the 
structural deficit in the Federal budget. Cutting the deficit will reduce 
the Federal Government's drain on national savings, lower long-term 
interest rates, and encourage productive private investment.

The deficit reduction plan is a balanced mix of cuts in ongoing spending 
and selected tax increases. We believe it is fair, that it contains many 
changes that would be desirable even without the necessity for deficit 
reduction, and that it is a bold assault on the structural deficits that 
threaten our future prosperity.


TABLE 3-1. HIGHLIGHTS OF THE PLAN                                                                                      
(In billions of dollars)                                                                                               
                                     1993    1994    1995    1996    1997    1998 1994-1997  1994-1998
                                                                                      Total      Total

Baseline Deficit                      319     301     296     297     346     390     1,241      1,630
Spending Changes:                                                                                                      
Defense Discretionary                  --      -7     -12     -20     -37     -36       -76       -112
Nondefense discretionary                1      -4     -10     -15     -20     -23       -50        -73
Entitlements                           -*      -6     -12     -24     -34     -39       -76       -115
Social Security                        --      -3      -6      -6      -7      -8       -21        -29
Subtotal                                *     -20     -40     -65     -98    -106      -223       -329
Debt Service                            *      -*      -3      -7     -14     -22       -24        -46
Total spending cuts (-)                 1     -20     -43     -73    -112    -128      -247       -375
Revenue increases (-)                  -3     -46     -51     -66     -83     -82      -246       -328
Gross deficit reduction                -2     -66     -93    -139    -195    -210      -493       -704
Stimulus and investment:
Stimulus outlays                        8       6       2       1       *       *         9          9
Investment outlays                     --       9      20      32      39      45       100        144
Tax incentives                          6      13      17      15      15      17        60         77
Total stimulus and investment          15      27      39      47      55      62       169        231
Total Deficit Reduction                13     -39     -54     -92    -140    -148      -325       -473
Resulting Deficit                     332     262     242     205     206     241       916      1,157
Deficit as a percent of GDP          5.4%    4.0%    3.5%    2.9%    2.7%    3.1%       3.3%       3.2%

*/$500 million or less.                                                                                                

Economic Assumptions

Budget outcomes are determined in part by the performance of the economy. 
Hence, any budget proposal must rest upon assumptions about future changes 
in the key economic variables: real economic growth, inflation, 
unemployment, and interest rates. The more optimistic the assumed path of 
those economic variables, the smaller future deficits will appear to be.

Unfortunately, in recent years, unrealistically optimistic economic 
assumptions have become a standard substitute for responsible budget 
choices. Instead of proposing unpopular measures reducing spending and 
raising taxes to bring the deficit down, budget planners have assumed 
lower unemployment and higher growth rates to make future deficits look 
smaller. But these budget planners could reduce unemployment and raise the 
growth rate only on paper not in the real world.

This statistical manipulation has masked the true size of the deficit 
problem, postponed necessary choices about how to solve it, and resulted 
in higher national debt. Moreover, the use of rosy scenarios has eroded 
trust in Government broadly, and in economic policymaking in particular. 
The American people have been so disappointed by economic programs that 
have promised instant prosperity and failed to deliver that they could 
dismiss out of hand even a solid program of private investment through 
deficit reduction and carefully targeted public initiatives.

This Administration's economic program provides no gimmicks and promises, 
no instant gratification. Instead, it proposes the difficult and often 
unglamorous steps necessary to ensure prosperity over the long run. To 
make this message clear, and to direct the public debate to the substance 
of the program rather than to imagined immediate rewards, the 
Administration has deliberately chosen cautious economic assumptions that 
some may even regard as overly pessimistic.

In an effort to avoid controversy over the forecast, the Administration 
used the economic assumptions that the Congressional Budget Office (CBO) 
used in its January 1993 report to Congress. The Administration thus 
assumes that the economy will continue to recover from the recent 
recession at a pace well below the historical average, with real annual 
economic growth peaking at 3 percent. Over the longer term, as the economy 
approaches full utilization of its capacity, real growth is projected to 
slow gradually to only 2 percent per year. This estimate marks the low end 
of the consensus range among economists, and significantly limits the 
measured benefit of the Administration's economic program.

Because productivity growth is projected to be slow, even this modest rate 
of growth of GDP implies a steady decline in the unemployment rate. The 
forecast assumes that unemployment will reach its minimum level consistent 
with low inflation about 5.5 percent unemployment shortly after the end of 
the five-year forecast period.

In part because of this modest economic growth, the inflation rate is 
projected to decline: with slow economic activity and hence limited 
consumer demand, producers have little latitude to raise prices. Consumer 
prices are expected to increase in the long run by only 2.7 percent per 
year; prices of economic output produced in the United States, measured by 
the GDP implicit deflator, increase by only 2.2 percent in the long run. 
(The GDP deflator increases more slowly than the consumer price index 
because computers, whose prices are falling in quality-adjusted terms, 
make up a greater share of the former index than of the latter.) Though 
the American public might be gratified by such modest inflation, it will 
offer little reward in terms of the budget deficit: slower inflation helps 
to hold spending down, but it also reduces tax revenues.

The deficit is highly sensitive to interest rates, however, and interest 
rates are themselves highly sensitive to inflation. When inflation is 
expected to increase, for example, lenders tend to demand higher interest 
rates to protect the purchasing power of the money that will be returned 
to them. The Administration assumes that the projected decrease in 
inflation will be passed through to the long-term interest rates that the 
Treasury must pay approximately point for point. This is a cautious 
assumption because inflation-adjusted long-term interest rates may have 
remained at their current near-record levels in spite of a moderation of 
inflation because lenders fear that inflation could accelerate in the near 
future. One might expect that several more years of modest economic growth 
and low inflation would assuage those fears and bring long-term interest 
rates down much closer to their historical average. If they do not, the 
Government's projected interest costs and budget deficit will be higher. 
Further, the Administration projects that short-term interest rates will 
increase by more than a full percentage point, even though growth remains 
modest and the inflation rate falls.

Taken together, these assumptions constitute almost a worst-case forecast 
of the likely course of the economy. On every score, the elements of the 
forecast work against the attainment of the desired budget outcomes.

This Administration does believe, however, that enacting its economic 
program will provide significant rewards for both the economy and the 
budget. Accordingly, we provide an alternative economic forecast that is 
conditional upon enactment of our program (See Table 3-2) (in fact, such a 
"post-policy" forecast in the budget document is required by law). Though 
we do not present detailed budget data based on this forecast, we do 
illustrate the effect of a more favorable economic performance on the 
deficit itself.


TABLE 3-2. ECONOMIC ASSUMPTIONS                                                                                 
(Calendar years)                                                                                                
                                    1992 1993 1994 1995 1996 1997  1998
BASELINE ASSUMPTIONS         Percent Change, Fourth Quarter Over Fourth Quarter
Real GDP Growth                      2.7  2.8  3.0  2.8  2.6  2.2   1.8
GDP Deflator Growth                  2.4  2.5  2.4  2.3  2.2  2.2   2.2
Consumer Price Index Increase        3.1  2.8  2.7  2.7  2.7  2.7   2.7
                                           Annual Average
Unemployment Rate (civilian)         7.4  7.1  6.6  6.2  6.0  5.8   5.7
91-Day Treasury Bill Rate            3.5  3.2  3.7  4.3  4.7  4.8   4.9
10-Year Treasury Note Rate           7.0  6.7  6.6  6.6  6.5  6.5   6.4

                                    1992 1993 1994 1995 1996 1997 1998
ADMINISTRATION POLICY       Percent Change, Fourth Quarter Over Fourth Quarter
Real GDP Growth                       2.9  3.1  3.3  2.7  2.5  2.5   2.5
GDP Deflator Growth                   2.4  2.8  2.9  3.0  3.0  3.0   3.0
Consumer Price Index Increase         3.1  3.0  3.1  3.3  3.3  3.4   3.4
                                             Annual Average
Unemployment Rate (civilian)          7.4  6.9  6.4  6.1  5.9  5.7   5.5
91-Day Treasury Bill Rate             3.5  3.7  4.3  4.7  4.8  4.9   5.0
10-Year Treasury Note Rate            7.0  6.7  6.6  6.5  6.5  6.4   6.4


Our post-policy economic forecast assumes that the economy will recover 
somewhat more quickly from the current recession, and that its sustainable 
growth rate in the long run will be 2.5 percent rather than 2.0 percent. 
This increase in growth reflects greater optimism about productivity, at 
least partially attributable to the Administration's program of deficit 
reduction. It also reflects moves to bring down interest rates (with the 
cooperation of the Federal Reserve), a development that will itself 
further encourage private investment. The increase in growth is also 
expected to stem from the Administration's stimulus package in the near 
term, and from its program of investment in productive public and human 
capital in the longer run. Even this projected growth rate, however, is 
only at the midpoint of the consensus of economists for the average rate 
in the economy. In other words, even this more optimistic post-policy 
forecast is really rather cautious.

The Administration expects that this more rapid economic growth will help 
to bring unemployment down. In contrast to our baseline forecast, we 
project that unemployment will reach 5.5 percent on an annual basis before 
the end of the five-year period.

We expect that the economic activity added by the Administration's program 
will increase inflation slightly. The ultimate rate of increase of the GDP 
deflator is 3.0 percent, or almost a full percentage point per year higher 
than the baseline forecast; for consumer prices, inflation is about 0.7 
percent per year faster in the long run.

Despite the additional inflation, we expect that interest rates will be 
about the same as in the baseline forecast. This means that 
inflation-adjusted interest rates will be lower. The Administration 
believes that this expectation is realistic because our proposed 
substantial reduction of the budget deficit will reduce both federal 
demand in the credit markets and the risk of a future increase of 
inflationary pressures.

The Administration's economic assumptions based on the enactment of its 
program are themselves close to the mainstream of economic opinion. We 
believe that this forecast presents a reasonable expectation of the 
benefits of our program of increased private and public investment. We 
supplement our presentation of the program with the resulting deficit 
computations to show that sound policy will be rewarded beyond any 
transient cost.


Ensuring Economic Recovery and Creating Jobs: Economic Stimulus

First things first. None of the things we want for America can be 
accomplished while millions of our citizens are unemployed and hundreds of 
billion of dollars of industrial capital lie idle. Americans will not 
tolerate another false start; and they shouldn't. We must get our economy 
moving again and producing jobs.

Two criteria guided the design of the stimulus package.

Speed. Any tax reductions or spending programs included in the package had 
to be fast-acting and job-creating. The unemployed have waited too long. 
We consulted with mayors and governors as well as with all the major 
agencies to ensure that the money requested in 1993 could be obligated 
quickly for projects that were ready to go and that workers would be hired 
right away this summer to work on them.

Content. Items selected for inclusion had to be worthwhile on their merits 
and consistent with the long-run goal of shifting the nation's attention 
to its future. The stimulus package is a down payment on the 
Administration's long-run investment program. For example, our long-run 
investment plan puts major emphasis on ensuring that all children get a 
healthy start in life and come to school ready to learn. To generate major 
new efforts for children quickly, we included these elements in the 
stimulus package: summer Head Start, an increase in funding for the 
Supplemental Food Program for Women, Infants and Children (WIC), and a 
fast start on a new immunization initiative. Similarly, the investment 
package stresses the improvement of our nation's infrastructure, including 
major upgrading of our highway network. Hence, the stimulus package 
includes funding for highway projects that can be started quickly, 
especially repair and resurfacing projects that can employ workers soon.


The Size of the Stimulus

The Administration proposed its economic stimulus program in part to 
provide insurance for the twice-stalled economic recovery. The economy 
harbors heavy imbalances: large accumulations of debt by households, 
businesses, and governments at all levels; shaky financial institutions; 
an enormous overhang of vacant commercial real estate; and extraordinary 
competition from imports. These imbalances make the course of recovery far 
less predictable than it was after past recessions. The impact of 
substantial corporate downsizings, though they were announced over the 
last two years, is yet to be fully translated into actual layoffs. The 
defense base closings that were absorbed in the national consciousness 
over the last three years are just beginning to be realized; and more 
defense conversion is yet to occur as the Cold War fades into history.


Thus, we have an economy that may have achieved a self-sustaining 
recovery, but that is operating well below its capacity. The unemployment 
rate is still higher than it was at the bottom of the recent recession, 
and inflation remains well under control in part under intense competition 
from imported products. The risks posed by a short-term economic stimulus 
are thus small; and the rewards in greater near-term economic growth and 
in forestalling any possible relapse into recession are significant.

Under these circumstances, the Administration has chosen a stimulus 
program that is substantial enough to provide real impetus to the 
recovery, but that is small enough to avoid jarring the financial markets 
or triggering inflation. The program is targeted to the investments in the 
administration's long-term economic program, on both the tax and the 
spending sides of the budget.

In spending, the stimulus program provides additional budget authority 
equal to $16.3 billion the amount by which the 1993 appropriations fell 
short of the combined discretionary spending caps in the Budget 
Enforcement Act. Thus, the discretionary spending proposed in the stimulus 
program will not increase the deficit relative to what was outlined in the 
1990 budget agreement.

The program also increases the obligation limit for transportation funding 
under the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) 
by $3.0 billion. This increase allows for full funding of the portion of 
ISTEA devoted to Federal-aid highways, and also increases potential 
obligations for the Airport Improvement Program and mass transit. The 
stimulus further includes $3.3 billion to increase loan levels, primarily 
for the Small Business Administration 7(a) loan guarantee program. Of that 
amount, $220 million is specified as the long-term budget subsidy.

In tax incentives, the program provides over $12 billion in temporary 
incremental investment tax credit. This provision will be available 
through calendar year 1994; over $6 billion will be received by taxpayers 
as reductions in liabilities in 1993.

While much of the additional budget authority will not be spent in 1993, 
the near-term economic impact will be greater than the outlay figures 
indicate. Many of the investment programs including prominently the ISTEA 
highway program will result in binding contracts with private firms within 
the fiscal year, even though payments will not be made until the work is 
completed in later years. Those contractors will hire workers and begin 
work immediately. Thus, the contractual obligations will trigger economic 
activity even before outlays register in the budget itself. Likewise, 
private investors will commit themselves to investment projects because of 
the stimulus program's investment tax credit before they can actually 
claim the tax savings on their returns.

This economic stimulus will be felt most directly in the creation of new 
jobs; the lack of new jobs especially marks the current recovery, and 
constrains the spending needed to create a self-sustaining economic 
expansion. Several of the spending programs in the stimulus package 
particularly community development block grant assistance to States and 
localities, and highway programs promote substantial job creation. The 
youth summer jobs program of the Job Training Partnership Act, as well as 
the summer Head Start program, will have particularly strong impacts in 
the summer months. The investment tax credit and even the longer-term 
business incentives will stimulate spending on capital goods and thereby 
promote hiring in the private sector. We estimate that the tax and 
investment proposals together will create almost 500,000 new jobs by the 
end of 1994.

All told, this plan provides almost $30 billion in outlays and tax 
incentives in 1993 and 1994. This stimulus will provide insurance against 
renewed economic weakness in the near term; create jobs; help boost the 
recovery; add to economic growth over the next two years; cushion the 
beginning of the Administration's deficit reduction program; and begin the 
investment program that will lay the foundations for enhanced 
private-sector productivity and prosperity.


Infrastructure

One of the key elements of the Administration's long-term investment 
package is the strengthening of our nation's infrastructure. Some of the 
initiatives in that area can be advanced into 1993, providing an immediate 
impact on jobs and economic growth. In this category, the stimulus package 
contains transportation projects, Army Corps of Engineers water projects, 
and improvements in deteriorating Department of Veterans Affairs medical 
facilities. Details of these investments follow.

Transportation/Federal-aid highway program. The Administration proposes to 
expand the Federal-Aid Highway program to the levels contained in the 
Intermodal Surface Transportation Efficiency Act (ISTEA) for 1993. This 
will require increasing total obligations for Federal-aid Highways from 
the current level of $17.7 billion to $20.6 billion, a 17-percent increase 
of almost $3 billion. More than one-third of the increase will be directed 
to fast-spending resurfacing, rehabilitation, and restoration projects, 
which can proceed quickly and bring jobs on line most rapidly. This 
measure will create an additional 13,000 jobs in 1993 and 45,000 in 1994. 
This increase will improve the conditions and performance of the 155,000 
mile National Highway System. This system carries over forty percent of 
all highway traffic.

Transportation/Mass transit capital improvements. The Administration 
proposes to increase 1993 funding for mass transit capital improvements by 
$736 million. The funds will be used to replace over age buses and vans, 
and to fund rail cars and rail rehabilitation projects. Of the $736 
million, about $270 million will be entirely devoted to quick-to-acquire 
bus and van purchases, while the remaining $466 million may be used for 
either bus or rail capital purposes. This initiative will create more than 
9,000 jobs in 1993 and 1994. The bus/van program will permit the 
acquisition of more than 100 full-size buses, 1,800 small buses, and 2,000 
vans.

Transportation/Amtrak capital projects. This initiative provides $188 
million for AMTRAK to purchase new train cars and locomotives, modernize 
stations and maintenance facilities, and overhaul aging equipment. These 
will help to improve Amtrak's financial performance, moving it closer to 
achieving operating self-sufficiency.

Transportation/Airport grants. Many of the Nation's airports are 
congested, resulting in unacceptable delays for air travelers. Growth in 
air travel in the future will only add to the problem. Increased airport 
capacity can help reduce delays, speed air travel, and increase safety in 
many cases. This proposal to add $250 million for airport grants in 1993 
will enable airports to undertake safety and capacity improvement projects 
that are "ready-to-go".

Army Corps of Engineers water project construction and cyclic maintenance. 
The Administration proposes an additional $94 million to speed 
construction of about 30 projects nationwide for flood damage reduction, 
inland waterway and deep-draft harbor transportation, hydropower, 
environmental restoration, and recreation.

Veterans Affairs/Medical Care and Minor Construction. The Administration 
proposes $235 million to fund much needed improvements, largely in VA 
medical facilities, such as roof repairs, interior finishing, utility 
systems upgrades, and projects to ensure compliance with current safety 
and fire codes. This investment will create more than 4,000 jobs in an 
eight-month period.


A Summer of Opportunity

The Administration's stimulus package seeks to expand the opportunities 
for learning for children, youth, and workers while providing thousands of 
jobs, particularly during the summer months. In several instances, the 
initiatives are the leading edge for a specific program contained in the 
long-term investment plan.

HHS/Head Start Summer Program. The Administration is proposing a new Head 
Start summer program, which eventually would enroll up to 350,000 
disadvantaged children. The purpose of the program is to help the youngest 
pre-school and school children to retain the social and intellectual gains 
made during the school year. It would expand the proven benefits of Head 
Start to the summer months and reduce further the learning disadvantages 
faced by children served by the program. This initiative would employ up 
to 50,000 Head Start staff (12,500 full-year equivalent) during 1993.

Education: Chapter 1 Summer School Program. The Administration proposes 
new, one-time supplemental funding of $500 million to expand summer school 
programs in 1993 for educationally disadvantaged children. Funds would be 
allocated to schools with concentrations of poor children. About 14,000 
full-year equivalent jobs would be created.

Education: Chapter 1 Census Supplemental. The proposal would provide $235 
million in 1993 to substantially mitigate the effects on distribution of 
Chapter 1 funds caused by changes in the location of poor children in the 
U.S. that occurred between the 1980 and 1990 censuses. The Chapter 1 
compensatory education program will, for the first time, use 1990 census 
data to distribute 1993 appropriations used during the 1993-94 school 
year. The total number of poor children ages 5 to 17 increased between 
1980 and 1990, and the distribution of those children shifted. Poor 
children are increasingly concentrated in the schools of the western 
States and less concentrated in the schools of the eastern States. The 
supplemental will ease the transition to a smaller compensatory education 
program in communities that would otherwise have the size of their Chapter 
1 grants substantially reduced for the 1993-94 school year.

Agriculture/WIC Program. The Administration proposes to expand 1993 
funding by $75 million for the Special Supplemental Food Program for 
Women, Infants, and Children (WIC), which pays for supplemental foods, 
health care referrals, and nutrition education for low-income pregnant and 
post-partum women, infants, and children under 5 years of age who are 
found to be at nutritional risk. The increase will permit the program to 
serve 300,000 additional participants, most of whom will be children ages 
1-4. It is a down payment on the Administration's commitment in the 
long-term investment plan to provide full funding for WIC so that it 
serves all eligible children.

Agriculture/Emergency Food Assistance Program. The Administration proposes 
to provide $23 million worth of food to the States through The Emergency 
Food Assistance Program (TEFAP). This successful program provides surplus 
food to about 2.5 million needy households and has been an important 
weapon in the Nation's arsenal against hunger.

HHS/Childhood immunizations. The President's plan to increase childhood 
vaccinations will immunize one million children during the summer of 1993. 
The Administration proposes to award $300 million to support a 
community-based effort to finance vaccine purchases and education and 
outreach campaigns. This program will help to raise the Nation to the 
standards of child immunizations set by other advanced countries, which we 
have fallen far behind. Too many families are deterred by outrageously 
high costs from having their children immunized. The President intends to 
end that problem.

Labor/Summer Youth Employment and Training Program. Young Americans have 
an especially hard time finding jobs. The problem is worse for 
disadvantaged youth, and worse yet in the cities. The Summer Youth 
Employment and Training Program employs economically disadvantaged youth 
ages 14 to 21 to work at public and nonprofit agencies during the summer 
months. The Administration proposes to boost program funding by $1 billion 
in the summer of 1993. This will finance almost 700,000 summer jobs, 
bringing to nearly 1.4 million the total number of youth who could 
participate in the program. Approximately one-half of this summer's 
funding will be concentrated on the 100 American cities small and large 
with the greatest number of eligible youth. The public summer jobs program 
will be coupled with and complemented by a campaign to expand private 
summer job opportunities for young Americans.

National Service. This is a first step in the President's long range 
national service initiative. The Administration proposes to implement a 
program in the summer of 1993 to train a core group of leaders to spur 
service around the country. Combining leadership training with service, 
this initial phase of the national service initiative will cost $15 
million.

Extension of Emergency Unemployment Compensation. For millions of workers, 
the apparent recovery has not brought employment opportunities. The rate 
of job growth in the economy relative to past recoveries has been 
extremely sluggish. The Administration proposes to extend the current 
Emergency Unemployment Compensation program for seven months, through 
October 2, 1993. The program provides an additional 20 to 26 weeks of 
support for workers who have exhausted their regular unemployment 
benefits. The net estimated cost is $5.6 billion over two years.

Education/Pell Grant unfunded shortfalls. The Administration proposes to 
make up shortfalls in the Pell Grant program, providing over $2.0 billion 
to ensure that the program is funded at estimated current law levels 
through school year 1993-94.

HHS/AIDS/Ryan White Act. To initiate the President's long-term investment 
plan to fully fund HIV/AIDS prevention efforts under the Ryan White Act, 
the Administration proposes to increase funding for 1993 grants by $200 
million. These programs focus on AIDS prevention efforts.

Agriculture/Child and Adult Care Food Program. The Administration proposes 
an increase of $56 million for the Child and Adult Care Food Program, 
which pays for meals and snacks at Head Start centers, to serve the 
children in the proposed Summer Head Start program.

Labor/Worker profiling. The Administration proposes establishment of a $14 
million program in 1993 and 1994 to assist the States in developing 
automated systems to identify laid-off workers who may have difficulties 
in finding new jobs, and to assist them in finding employment. This 
initiative seeks to respond to the problems faced by many workers laid off 
because of business downsizing and restructuring. Federal funding for this 
initiative will cover the up-front costs of developing worker profiling 
systems in the States.

Labor/Community Service Employment for Older Americans. The Administration 
proposes $33 million to expand participation in the Community Service 
Employment for Older Americans program, which offers low-income seniors 
meaningful work experience in community service projects. This investment 
will finance over 5,000 jobs in the current year.

Interior/Bureau of Indian Affairs (BIA) School Operations. The 
Administration proposes that $49 million be provided to cover currently 
identified shortfalls in funding due to rising enrollments to improve the 
educational performance of over 40,000 Indian students at the elementary 
and secondary level attending BIA-funded schools.

Equal Employment Opportunity Commission. Financing of $9 million for 
additional staff to enforce the Americans with Disabilities Act and the 
Civil Rights Act will help stem the ballooning backlog of cases filed 
under those Acts.


Technology Investments

A very important part of the Administration's efforts to promote long-term 
economic growth is to increase investment in new, productivity-enhancing 
technology. A number of such projects are funded in the stimulus package 
because they can be initiated quickly, with immediate increases in jobs.

Industry-Led Federal R&D at the National Institute of Standards and 
Technology (NIST). The Advanced Technology Program at the National 
Institute of Standards and Technology provides matching grants for 
industry-led research projects for the development and commercialization 
of pre-competitive generic technologies and refining manufacturing 
practices. The Administration proposes $103 million for the program in the 
current fiscal year.

Commerce/Information Highway Demonstrations. The development of a 
broadband, interactive telecommunications network linking the Nation's 
schools, libraries, health care facilities, governments, and other public 
information producers could pay enormous dividends to the U.S. economy. 
Interactive networks such as this are in their very early stages of 
development. The Administration proposes to make $64 million available to 
the Department of Commerce's National Telecommunications and Information 
Administration to accelerate development of such information highways.

National Science Foundation/Research and development. Investments in 
research and development (R&D) tend to be the strongest and most 
consistent positive influence on productivity growth. Most of the National 
Science Foundation's (NSF) investments are in competitively selected 
university-based R&D programs. These activities contribute to the nation's 
productivity by generating new scientific and engineering knowledge and 
contribute to the training of the next generation of scientists and 
engineers. The Administration proposes an investment in 1993 of $188 
million to restore NSF funding to roughly the level that was planned for 
in 1993.

Networking and computer applications. The Administration proposes that 
programs be initiated at the National Institute of Standards and 
Technology, the National Science Foundation, the National Aeronautics and 
Space Administration, and the National Institutes of Health to develop 
applications which use advanced computers and communication networks to 
solve problems in health care, education, manufacturing, and access to 
library information.

National Oceanic and Atmospheric Administration equipment acquisition. The 
Administration proposes an investment of $81 million to accelerate the 
modernization of National Weather Service and central NOAA data systems, 
to procure hardware for more efficient utilization of the nation's 
fisheries, to improve weather prediction technologies, and to further 
climate and atmospheric research in areas of global concern such as 
atmospheric ozone.

HHS/Disability Insurance processing. The Administration proposes that $302 
million be provided to help the Social Security Administration reduce 
delays in processing of Disability Insurance claims, review cases earlier, 
and make other improvements to improve delivery of services. There has 
been a tremendous backlog of Disability Insurance claims in recent years, 
which this investment would help alleviate.

Treasury/Accelerate implementation of Internal Revenue Service Tax System 
Modernization. The IRS is now operating with severely outdated computer 
equipment. Through Tax System Modernization (TSM), the IRS is undertaking 
a multi-billion-dollar, decade-long effort to re-invent its operations. 
The Administration proposes fiscal stimulus funding of $148 million to 
enable the IRS to accelerate several TSM projects and replace computer and 
telecommunications equipment that in many cases is nearly ten years old. 
This is a down payment on a long-term investment in the IRS modernization 
program.


Urban Development and Housing Initiative

The fiscal stimulus contains several initiatives to provide additional 
resources for housing and other development in the Nation's urban areas. 
These efforts are critical to our hopes of reviving our cities.

Housing and Urban Development/Community Development Block Grants. 
Community development projects are an important source of jobs and 
economic development in America's communities. States and local 
governments have a backlog of unfunded projects that are ready to begin, 
such as basic street and bridge work, painting and resurfacing, building 
rehabilitation, and public service projects. The Administration proposes a 
one-time supplemental appropriation of $2.5 billion for Community 
Development Block Grants to fund such projects and create about 60,000 
jobs during 1993-1995. The Administration will propose modifications to 
the program to ensure that projects have an immediate economic impact.

Commerce/Economic Development Administration grants. The Administration 
proposes $94 million for Economic Development Administration awards to 
economically distressed areas to rebuild basic infrastructure industrial 
parks, water and sewer improvements, and access roads to industrial sites. 
The grants are also for the purpose of planning for economic development.

Minority Business Development Administration. $2 million is proposed for 
the Minority Business Development Administration to support the provision 
of technical assistance to minority businesses through a nationwide 
network of 107 centers. These centers help minority businesses write loan 
applications, develop marketing plans, and upgrade accounting practices.

Housing and Urban Development/Accelerate HOME investment partnership. The 
Administration proposes to speed the spendout of $2.5 billion in 
previously released affordable housing funds by regulatory and statutory 
changes to increase participant flexibility and information, and training 
to improve public understanding of the program. These changes will 
increase the rate at which existing funds can begin to create jobs and 
boost the local economy.

Housing and Urban Development/Accelerate public housing modernization. A 
substantial amount of funds in HUD's modernization program remain unspent. 
Explanations for this "backlog" of unspent funds the time-consuming 
process of getting the funds out of HUD to the public housing authorities, 
inefficient management and planning on the part of public housing 
authorities make the problem more comprehensible but no more tolerable to 
this Administration. Accelerating the spendout will not only stimulate the 
economy but also help to ensure a better quality of life for public and 
Indian housing residents. This measure will create over 10,000 jobs during 
1993-1998. It will result in the repair/restoration of approximately 2,500 
more public housing units in 1993 (or 31,800 more public housing units 
1993-1998).

Housing and Urban Development/Supportive Housing Program. The 
Administration proposes an accelerated investment of $423 million in the 
Supportive Housing Program, which assists homeless persons not only with 
shelter but also with the root causes of homelessness. The Administration 
will propose modifications to ensure that these funds go to projects ready 
for immediate implementation. This proposal will create over 10,000 new 
jobs during 1993-1995.

District of Columbia. The Federal Government makes an annual payment to 
the District to compensate it for the net cost of the large Federal 
presence in the nation's capital. The 1993 Federal payment was reduced 
below the amount the Mayor requested to help balance the District's 
budget. The Administration proposes $28 million to reduce the District's 
budget deficit.


Rural Development Initiative

The Nation's rural areas were among those hardest hit by the recent 
recession. The fiscal stimulus plan provides a number of key initiatives 
to provide needed assistance for the special concerns of rural areas.

Agriculture/Rural water and wastewater loans and grants.  Water quality is 
a matter of increasing concern in cities and towns across the U.S. 
Drinking water and sewage treatment systems serving small, mostly rural 
populations currently have the highest rates of noncompliance with Federal 
environmental standards. Without Federal assistance, rural areas often 
find compliance very difficult to achieve. The Administration proposes an 
estimated additional $470 million in loans and $281 million in grants for 
the Rural Development Administration to help poor rural communities comply 
with clean water standards.

Agriculture/Food Safety and Inspection Service. The Administration 
proposes to add meat and poultry inspectors, at a cost of $4 million, to 
improve the Federal meat and poultry inspection system to help reduce the 
risk of future food poisoning outbreaks.

Agriculture/Forest Service natural resource protection and environmental 
infrastructure initiative. This is one part of an Administration proposal 
to protect and rehabilitate America's inventory of natural and cultural 
assets, restore the facilities that protect these resources, and improve 
public access to them. This funding would complete the inventory of 
ready-to-go resource protection projects, facility maintenance, 
rehabilitation and construction, and other similar projects that stimulate 
economic growth and employment in rural and urban areas. This investment 
will total $188 million in 1993.

Agriculture/Farmers Home Administration low-income housing repair loans 
and grants. The Administration proposes $6 million in grants and $3 
million in loans for a Farmers Home Administration program that helps 
rural, very low-income applicants to repair or rehabilitate their homes in 
order to remove safety and health hazards.

Agriculture/Single Family Housing Guaranteed Loans. This proposal would 
increase the single-family guaranteed loan authority by $235 million. The 
1993 level of $329 million is expected to be used by May 1993. Given the 
increased demand for this program, because of lower commercial interest 
rates, the proposed increase would meet the remaining demand for this 
program.

Agriculture/Soil Conservation Service watershed projects. The proposed 
stimulus includes $47 million to fund a backlog of projects to address 
emergency watershed problems resulting from natural disasters, soil 
erosion, sedimentation, and flood damage that affect public health and 
safety.

Agriculture/Agricultural Research Service facility maintenance. The 
Administration proposes $38 million to finance repairs and accelerate 
hazardous waste clean-up at aging Federal agricultural research 
laboratories. There are approximately 30 hazardous waste clean-up projects 
planned, including removal of underground storage tanks and clean-up of 
pesticide spills.

Interior/Economic development on Indian reservations. $39 million is 
provided to upgrade roads, improve school facilities, and subsidize loan 
guarantees for reservation facilities, hotels, and office buildings.


Environment and Energy Initiatives

The Administration's initiatives offer certain proof that environmental 
protection and economic growth can and must go hand in hand. These 
proposals represent a down payment not only on longer-term investments, 
but also on creating a cleaner world for ourselves and our children.

Interior/Natural resource protection and environmental infrastructure 
initiative. This is one part of an Administration proposal to protect and 
rehabilitate America's inventory of natural and cultural assets, restore 
the facilities that protect these resources, and improve public access to 
them. This funding would complete the inventory of ready-to-go resource 
protection projects, facility maintenance, rehabilitation and construction 
and other similar projects that stimulate economic growth and employment 
in rural and urban areas. This investment of $349 million in 1993 would 
create over 11,000 jobs. Much of the investment would be earmarked for the 
National Park Service alone, including increased operational funds to keep 
open areas that were previously scheduled for closure during 1993.

Interior/Historic preservation funding for repair and deferred maintenance 
projects. The Administration proposes $23 million to fund a backlog of 
brick and mortar rehabilitation projects, emergency surveys, engineering 
reports, and deferred maintenance at National Trust for Historic 
Preservation Museum properties across the Nation, and other priority 
projects.

Environmental Protection Agency/Watershed resource restoration. The 
Administration proposes $47 million to reduce non-point source pollution 
which poses a threat to the Nation's water quality.

Environmental Protection Agency/Voluntary "Green" programs. The 
Administration proposes to expand EPA's voluntary "Green" programs by $23 
million in 1993 over the current $8 million funding level. The program 
encourages the Nation's business community to seek ways of increasing 
energy efficiency.

Environmental Protection Agency/Wastewater treatment project. The 
Administration proposes $845 million in capitalization grants for the 
construction of sewage treatment facilities. This would accelerate 
completion of an $18 billion wastewater treatment grant authorization that 
is scheduled to end in 1994. This investment creates about 16,000 jobs 
over the four year period 1993-1997.

Cooperative Research and Development Agreements. CRADAs are one of the 
mechanisms by which the national laboratories can work with industry to 
transfer lab-developed technology and know-how to the private sector. 
Current funding for non-defense CRADAs is $9 million in 1993, but there is 
more demand from industry for assistance through CRADAs then can be met 
with that funding, This increase will allow additional lab scientists to 
work with industry. In addition, $47 million in 1993 funds appropriated 
for research and development of nuclear weapons at DOE's defense 
laboratories will be redirected to research in dual use technologies.

Energy/Weatherization Assistance Program. The Administration proposes $47 
million (conditioned on matches from States or utilities) to encourage 
State weatherization programs to take advantage of utilities' demand-side 
management (rebate and discount) programs, assuring that funds go to 
States that demonstrate a serious commitment to low-income weatherization 
activities. Approximately 62,500 additional homes will be weatherized over 
the currently projected number.

Energy/Building and industrial conservation. The Administration proposes 
$19 million in cost-shared funding (50 percent) for "model projects" that 
demonstrate or accelerate the commercial acceptance of advanced energy 
conservation technologies and products.

Energy/Alternative fuel vehicles. The Administration proposes $28 million 
for the acquisition of and/or conversion to additional alternative fuel 
vehicles in the Federal fleet.

Federal buildings energy efficiency. An additional investment of $19 
million is proposed to improve energy efficiency in facilities throughout 
the Federal Government.


Stimulus: Tax Incentives

The plan also contains carefully targeted tax provisions designed to 
provide an immediate boost to investment in the short term, and to 
encourage capital spending over the long run.

Permanent small business tax credit. Small businesses will now be eligible 
for a permanent investment tax credit on their equipment. The credit will 
generally be 7 percent in 1993 and 1994 and 5 percent thereafter. Small 
businesses operate at the margin and need a permanent incentive to invest, 
grow and provide new employment opportunities. At the same time, the 
decrease in the rate from 7 percent to 5 percent after two years will 
provide an incentive to accelerate investment and add support for the 
current recovery.

Temporary marginal investment tax credit for all business. Businesses will 
also be eligible for a tax credit on qualifying investments; the credit 
will be temporary and will apply only to "marginal" investment acquired 
between December 3, 1992 and December 31, 1994. The credit will amount to 
7 percent in 1993 and 1994, with somewhat lower rates applicable to 
shorter-lived property. To ensure that the credit is targeted to marginal 
investment by large companies, the credit each year is applied to 
investment over an historic base.

Simplifying and enhancing depreciation provisions for companies subject to 
the alternative minimum tax (AMT). Currently, property is depreciated for 
AMT purposes over a substantially longer period than for regular tax 
purposes. (For example, commercial aircraft are depreciated over 7 years 
for regular tax purposes and 12 years for AMT purposes.) In addition, a 
corporation subject to the AMT must compute three depreciation schedules 
for federal tax purposes. The proposal substantially enhances the 
investment incentives for taxpayers subject to the AMT and simplifies the 
AMT by using the shorter regular tax depreciable lives for minimum tax as 
well as regular tax purposes. Thus, one depreciation period will be used 
for computation of both the minimum and regular tax, although the rate of 
depreciation will remain less rapid under the minimum tax than under the 
regular tax.

Because they reduce the net cost of acquiring depreciable assets, the 
investment tax credit proposals will stimulate investment by both small 
and large businesses. The investment tax credit proposals, coupled with 
the liberalized depreciation under the minimum tax, will provide a strong 
and lasting stimulus to investment, encourage modernization of productive 
equipment, and help create good jobs.
