-
https://clinton.presidentiallibraries.us/files/original/3b2722c28b4c3286ed6994ead0fcb5c1.pdf
33320c659758c2448ca5ccbe1bd121b1
PDF Text
Text
-,
,.
SHORT-TE~'>1
ECONOMIC AGENDA
Monday, January 18th, 1993
Coopers & Lybrand
ISOO M Street, NW
Suite 400
Agenda:
2:00 - 2:05
Introduction and framework for discussion
Bob Rubin. National Economic Council
2:05- 2: 10
Budgetary parameters for short-term agenda
Leon Panetta, Office of Management and Budget
2: 10 . 2: 15
Short·term economic outlook
Laura Tyson. Council of Economic Advisers
2: 15 - 2:20
T"" policy
Treasury
2:20 - 3:20
Presentations
Agriculture
Commerce
FAiucation
Energy
Environmental Protection Agency
Health and Human Services
Housing and Urban Development
[ntenor
Labor
Technology: (Office of Science and Technology Policy. Office of, the Vice
President)
Transportation
3:20 - 3:50
Questions
Rubin, Panetta
3:50 - 4:00
Next Steps
Rubin, Panetta
�TALKING POINTS FOR BOB RUBIN: INTRO
*
I want to thank everyone for responding so quickly to our request for
options for the President-elect's short-term economic agenda. [thought
everyone did an excellent job - especially considering all of the
competing demands on your time.
*
As you know, no decision has been made on whether to proceed with a
short-term economic package for the remainder of fiscal year 1993.
However, if the President-ele<:t does decide to move forward, we need to
be prepared to present him with a well-designed package.
*
What I would like to accomplish in this meeting is to give everyone the
opportunity to briefly discuss the initiatives that they believe should be in
the President's short-term package.
*
Based on the discussions we have had to date, I think the package will
be composed of roughly $10 to $20 billion in additional domestic
discretionary spending, and another $10 billion in tax incentives. The tax
portion of the package, however, will probably be moved later in the
year.
*
Priority will be given to those initiatives with the following
characteristics:
I.
Increases economic growth and creates Jobs immediately: The
whole point of a stimulus package is to get the economy moving
immediately. We need to select programs that will have an impact
in this fiscal year. The President-elect has stressed the importance
of some tangible sign of activity as a result of this package by this
summer.
2.
Implements the President-elec!'s long-term investment agenda,
as outlined in Putting People First: We should look for
initiatives that also tackle our long-term problems - such as slow
productivity growth and underlnvestmenl in our people, our
infrastructure, and in plant and equipment and R&D.
�•
"II' ~
3,
High return on investment: We need to make sure that we are
selecting investments with the highest "bang for the buck." For
example, if child immunization saves 10 dollars for every dollar we
invest, that's an investment worth making.
,
*
As you might imagine, the sum tolal of your proposals was much higher
than the likely size of the stimulus package. Therefore, it's very
important that -you identify what your top priorities are, I'd like to know
whieh initiatives you would fund if you only had a $1 billion, or if you
had one-third of your proposed budget.
*
Also, I think we should take to heart President-elect Clinton's instructions
to work together as a team, Obviously, all of you will be advocates for
your Department. But we are also members of Bill Clinton's team. We
should also be thinking about how this package will fit together -- and
how we can make it greater than the sum of the parts,
*
Before we begin the presentations, I'd like Leon to say a few words on
budget process, Laura Tyson to discuss the short-term economic outlook,
and (Bentsen or Altman) to discuss tax policy and other Treasury issues.
Draft 111 7193
�•
CurrER TALKING POINTS ON NEXT STEPS
,.
Although the President-elect has not yet decided whether or not to go
forward with a short-term economic package in Fiscal Year 1993, we
need to move quickly to prepare an intelligent menu of options.
*
As we've discussed, the total dollar value of the options you have
submitted is substantially higher than the likely level of the short-term
economic package.
'
*
Accordingly, I would like to have you or your deputies meet with my
staff on Tuesday or Thursday morning to discuss what your priorities are.
*
Leon and his staff at OMB will be preparing an analysis of the spend-out
rates of the proposals you have submitted.
*
This Friday, I would like to hold a meeting of the National Economic
Council at the Deputies level to begin discussion of a Decision
Memorandum for the President on the short-term economic package.
Draft 11/17/92
�.• ".~
·,
"\." I
THE WHITE HOUSE
WASHINGTON
February 1, 1993
MEMORANDUM FOR THE PRESIDENT
~
FROM:
ROBERT E. RUBIN
SUBJECT:
Memoranda from Laura Tyson and Alan Blinder
The attached memoranda from Laura Tyson and Alan Blinder
th~ decisions that you
will have to make with respect to the economic plan.
provide additional analytic context for
Laura and I will meet with you briefly before tomorrow's
two-hour meeting, for Laura to discuss these two memoranda and
for me to give you some additional comments that 1 have garnered
from various people whoso judgment I respect on these matters.
Attachments
�EXECUTIVE OFFICE OF THE PRESIDENT
,
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON, D.C. 20500
,~
L,£ II- J ~, +r,t..
February 11 1993
c. {f
'1
~uj';'"
J (' h.-.q-
TH€ CHAIRMAN
t ;:, ;.....
(.) ...f .....
c ... "'"rec
~ .."'t"'Ur_ t:-....."",: •
MEMORANDUM FOR THE PRESIDENT
/I ., ,
f . . )f~ ~
ATTENTION:
ROBERT RUBIN, NEC
FROM:
LAURA TYSON, CHAIR-DESIGNATE U)T
ALAN BLINDER, CHIEF ECONOMIST/i&
SUBJECT:
I"h ;h<:J;'
41 '"
Why Deficit Reduction Matters?
,v"'?:;'!J:'
J.r..... +t. ... 4 .~ ...... ~
/oj"'':
•
Thi,g memo outlines the main economic issues that should be
considen:'od in devising a deficit-reduction plan. The memo was
prepareC'. by Laura Tyson and Alan Blinder and was reviewed and
approvec by OMS and Treasury. It concludes with individual
statements sketching the positions of the three agencies {CEA.
OMS, and Treasury} on the appropriate amount of deficit
reduction.
1.
The RelatioDship Between the Deficit and Future Living
Stanctard§
Deficit reduction is not an end in itself t nor is it a
It is a means to the end of higher productivity,
real wages l and national living standards. In short, it is about
securing a better economic future for ourselves and even ~ore
"importantly for our children.
"jobs" program.
Most economists believe that a sustained and substantial
reduction in the deficit will increase the national saving and
investment rates--which are now quite low. Over the long run, a
permanently higher i.nvestment rate will increase the economy/s
productive capacity and raise the nation's living standards.
This is the primary economic t~stification for reducing the
deficit.
However t the process whereby deficit reduction improves
living standards is a slow one. According to our simulation
results, for e~amplet even under the most optimistic scenario,
cutting approximately $132 billion off the 1997 projected deficit
WOuld add ~ most 0.7% to the economy/s productive capacity in
that year. Over the longer run# the increase in investment made
possible by deficit reduction of this magnitude might add as ~uch
as 4.0% to the nation ' s productive capacity by the year 2013.
That is twice the size of a typical recession; and would
translate into significant extra consumption (private and public)
for the average family in the next generation.
�"
2
2.
Deficit Reduction and Public Investment
Well chosen and carefully designed in'creases in public
investment,
e.q~
investr.tents in
education/~
training,
infrastructure, and technology, are another way to increase the
economy's investment rate and future living standards.
Although
there is a debate among economists about whether public
investment programs have higher or lower rates of return than
private investment, most economists agree that such programs, if
well-designed and executed 1 contribute to the economy's long-run
productive potential.
~~Rgn§e
Consequently, deficit reduction at the
of public investment is self-defeating. Some economists
go even further and argue that government deficits that finance
public investment do not reduce the econo~y's overall investment
rate and are therefore not a policy concern. But l of course J our
current deficit exceeds public investment.
The main difficulty with relying on government investment
rather than deficit reduction to boost future incomes is that.
unlike private i'nvestment which is guided :by market forces¥
political factors can easily dominate the choice of pUblic
investment projects~ On the other hand r the overbuilding of
commercial real estate in the 1980s indicates that private
investment decisions themselves can sometimes yield undesirable
outcomes, especially if skewed by inappropriate tax incentives.
In our view, a prudent course to increase the nation's
overall investment rate includes a gradual multi-year deficit
reduction program, tax incentives to promote private investment I
and a shift in government spending toward public investment
programs, This is the course the economic team is working to
design.
3.
The Interest Burden of Large Deficits
Almost 14% of the Federal budget (about $200 billion) now
goes to interest payments. Even if we reduce the deficit to $225
billion by FY 1997, interest costs will rlse to $260 billion-
the extra $60 billion- is as large as the entire investment
portion of our budget. Most talk about the enor.nous uburden,t of
this interest is fallacious since it ignores the fact that one
group of Americans (taxpayers) simply pays the money to another
group (bondholders). But foreigners own about 18% of the debt.
M2~e important. taxes must be levied to pay all this interest;
and such taxes both distort economic incentives and impose
political costs.
�'.
3
4.
Nonquantifiable Benefits of Deficit Reduction
A. Reducing the Risks of Instability in Financial Markets
.
A credible deficit-reduction package:will reduce the risk of
a financial crisis occasioned by anxieties about the growing
burden of government borrowing on national and international
capital
markets~
Without credible and sUbstantial deficit
reduction, the prospects for long-run stable growth continue to
be held hostage to this risk.
Indeed, many economists believe
that concerns ahout growing future deficits are a major factor
behind the persistence of high long-term interest rates despite a
weak economy. And some believe that, if we fail to introduce a
serious deficit-reduction package, there is a serious possibility
of a financial market crisis either in the form of an upward
spike in interest rates, a collapse in the dollar's value or a
combination of the two~
.
'
If avoiding a financial crisis is the najor motivation for
deficit reduction, then both its size and its composition should
be evaluated in terms of their credibility as it is likely to be
judged by financial markets. Reducing the deficit enough to
stabili~~e the debt/GDP ratio would seem to be the minimum
required to allay the anxieties of financial markets. The reason
is simple; an ever-increasing debt/GDP ratio is intrinsically
unsusta~nable.
Our choice is between stopping it now or stopping
it later, and much more harshly. In this'regard J it'is worth
remembering that very long-run projections show a rising debt/GOP
ratio.
B. lnprQying Our Ability to Coordinate Macroeconomic Policies
wj.th the G7
Our efforts to coordinate macroeconor:tic policies with our G1
partner!:; have been unsuccessful in recent years, in part because
we have brought little credibility to the negotiating table. Our
G7 partners have repeatedly expressed anxiety about our Federal
budget deficits and their drain on global'capital markets and
interest rates. By promulgating a credible multi-year deficit
reduction package, we take a step toward harmonizing
macroeconomic policies in ways that will boost global growth~
For eX311tple, if Japan and Germany react to our deficit-reduction
program by stimulating their economies, the contractionary
effects would be partially offset by more rapid growth in our
exports~
c~
Enhancing the Ability of the Federal Goyernment to Respond
tQ Unforeseen Security and Economic· Challenges
Large deficits restrict the government's ability to respond
to unforeseen economic and/or national security crises that
require unanticipated increases in government spending. For
I
�4
example, the deficit precluded the Bush Administration from using
expansionary fiscal policy to offset the recession of 1990-91.
The deficit is also likely to continue to'hamper our ability to
fashion effective policies to promote economic stability and
democracy in the former Soviet union.
o~
Deficit Reduction and Relations with Congress
If the Administration does not come forward with a deficit
reducticm plan that is credible to members of congress, it is
likely t:hat we will lose control of the budgetary process to
them. In particular, passage of a balanced budget amendment-
which is a terrible idea for the economy as well as for the
effectiveness of the government--becomes a real possibility, as
does thEl enactment of a neW and stronger budget process bill of
the Gramm-Rudman variety.
On a more positive note, solving the deficit problem would
help alleviate the myopia of Congressional decision-makers whose
tlnendin9 concern with the deficit leads them to adopt costly
short-term bUdgetary fixes that overlook or shortchange .the
nation I f~ long-term investment needs.
5.
The Short-Run Dangers of Deficit Reduction
~I
J........
LIP-. {
The long-term benefits of deficit reduction involve {-~ 1~ ~I
potentially large short-run costs. Cutting the deficit requires .... I.<t~'
some combination of increased taxes and reductions in valued
+--k
governm~nt programs.
Cutbacks in programs hurt those who benefit ~
both directly and indirectly from these government activities,
~pr ~
while tax increases reduce disposable incomes and distort
~ /
incentives. In short, both spending cuts and tax increases not
~
only cause political pain but also reduce demand and economic
~ ~
gro'dttl. That is why it is best to reduce. the deficit when the'
'/
economy is strong. During periods of recession or anemic
~,
economic: growth, deficit reduction will further weaken an already .....l.~
weak economy. This is the rationale for stimulating the economy
in the near term and introducing a gradual multi-year deficit
reduction package that hits when the econot:ly is closer to
capacity~
As we have repeatedly emphasized in our briefings, it is
possible that stimulative monetary policy.by the Federal Reserve
and/Qr a sustained bond market rally triggered by credible
geficit reduction could offset the shQrt-run demand and output
losses caused by cuts in government spen.9..ing or ingreases in
taxation. But it is impossible to predict with any degree of
certainty what course Federal Reserve policy will follow or how
the bond market will respond to a given amount and timing of
deficit reduction. Indeed, there is even uncertainty about
whether the Federal Reserve would be able to offset completely
the fiscal restraint implicit in deficit reduction even if it
�'
..
5
wanted
to~
There is a long lag between a monetary policy
decision and its effects on demand.
Therefore, it is difficult
to time monetary policy actions so that their effects coincide
with periods of economic weakness, let alone with fiscal policy
actions.
6.
How Much Deficit Reduction i5 EnQugh?: Shades of Difference
Alt,hough there is widespread agreement that the deficit is
currently too large, there is considerable disagreement about how
fast we should move to reduce it. Those who argue for a fast
pace st:r;'oss the need to act credibly to convince the bond market,
the FedE;ral Reserve, the congress! Ross Perot, and the American
people that we are serious about realizing our goaL
Unfortunately, each of these groups may well have a different
standard against which they will assess whether we are acting
fast ene.ugh. The bond traders and Ross Perot., for example, are
probably looking for much tougher action than the American
public.
Those who argue for a somewhat slower pace of deficit
reduction stress the potential dangers of strenuous deficit
reduction measures in an economy which is likely to be
characterized by excess capacity and modest growth during the
next few years. In an ideal world, the safest strategy might be
to devise a deficit-reduction plan that would trigger in only
after the economy reached capacity output. But such an approach
would be technically difficult to legislate and would probably
not be credible, since observers would conclude that the
triggering date would never rnateriali2e~
CEA Position
As we have suggested before, an economically defensible
deficit-reduction package--and one which we believe will be
strenuous enough to be credible to most ObSGrVers--would contain
enough deficit reduction to stabilize the debt/GOP ratio by 1997.
Such a package would require an additional $118 billion in
spending cuts and revenue increases in FY 1997, over and above
the $27 billion in defense spending cuts proposed by the Bush
Administration. This implies a total deficit reduction package
of $145 billion which is the amount of deficit reduction you have
mentioned in recent interviews. Such a package would reduce the
projected uncapped ceo baseline deficit of $384 billion for FY
1991 by 38%. We believe that as long as this package embodies
x:;:eal spending cuts and revenue incx:;:eases as opposed to "smoke and
mirrors. lt it would be a credible signal to the financial markets,
to the voters, and to the world that you are honorin9 your .
commitment to serious deficit reduction.
�'"
','
6
Such a package could be seen as the first step in a 8-10
year deficit-reduction strategy.
We do not believe that more
massive deficit-reduction measures between now and 1996 are
required on economic grounds. The long-term economic benefits
resulting from an additional $25-30 billion in deficit reduction
during that time frame are very small, while the short-term
economic and political risKs are quite large.
As the recent CBO report indicates, the amount of time taken
to close the deficit--5 or 10 years--will actually have little
impact on the long-term benefits of eliminating the deficit,
provided that our deficit-reduction package is credible and is
carried through. This is because much of the rise in the deficit
expected over the next decade occurs after 1998 and is due to
exploding health care costs. Thus any plan to bring down the
deficit by large amounts--and hold it there--in the late 19906
and into the next century will require changes in our health care
system.
Treasury ?osition
The CEA's proposal to stabilize the ratio of debt to GOP by
The Treasury
believes that this is an inadequate amount and will undermine
confidence in the your commitment to deficit reduction. You have
already stated publicly that the Administration was aiming to
reduce the original 1992 deficit of $290 billion by one half, or
$145 billion.
Because of revisions in the out years, the $145
billion reduction no longer cuts the 1997 deficit by one half as
promised in the campaign. Backing away fro~ the $145 billion
figure will appear to be reneging for the second time on the
commitment to deficit reduction.
1997 implies a reduction of $117 billion in 1997.
Stabilizing the debt to GOP ratio is too arcane a concept
for the public. However, even if stabilization were a reasonable
goal, a credible effort would require more than $111 billion for
at least t~o reasons. First, a stabiliZation program must
recognize the period after 1997; even with $145 billion of
deficit reduction the ratio of debt to GOP continues to rise
after 1997. Second, aiming for the minimal target fails to
account for the fact that, based on experience over the period
1980 to 1992, ceo has systematically underestimated future
deficits over a 5-year period by roughly $60 billion. There is a
substantial risk that the "deficit problem tt will recur and that
further painful action will have to be taken if a modest $117
billion program were legislated this year.
In short, the commitment to stabilizing the debt to GDP
ratio will neither be understandable to the public nor seen as
tough enough by the financial community.
�7
ONB Position
while OMS concurs with the basic analysis in the eEA memo,
we believe that a more vigorous deficit reduction plan is
necessary.
We believe that a deficit reduction package of at
least $145 billion from a baseline of $357 billion in FY 1997 is
necessary to send a strong signal that the Administration is "
serious about deficit reduction and intends 'to pursue the dual
strategy of increasing public investment 'and reducing public
dissaving in order to increase future living
standards~
In addition, we share Treasury's concern that the debt/GDP
ratio is not an appropriate criterion for selecting a deficit
targat. -'Stabilizing the debt/GDP ratio is only a statement that
we dontt want the deficit problem to get worse. We believe that
the debt/(;op ratio must be reduced over time, which requires
particularly strong action today given tl;l.e rising deficits
projected for later in this decade4 We believe the deficit
should·- be eliminated as. quickly as possible consistent with
maintaining a growing economy.
OMB also shares Treasuryts concern that failure to act
boldly enough now risks leaving the deficit a political issue in
1996..::"-which would put the Administration in the unha"ppy situation
of paying a political price for some unpopular actions now, and
yet still . being vulnerable on the deficit later. ,
.
Finally, OMB would emphasize more heavily than the CEA our
belief that· the Fed and the bond markets will respond very
~
favorably if we are aggressive enou~h in our deficit reduction~
plan. We also believe that the Adm~histration should err on the
side of a stronger deficit reduction position because the risks
of slippage (e~9., though unforeseen ·expenditures) tend to all be
on the upside.
cC:
Lloyd Bentsen, Secretary of Treasury
Ronald Brown, secretary of Commerce
Robert Reich, Secre~ry of Labor
Leon Panetta, Director of OMB
Roger Altman, Deputy Secretary of Treasury
Alice Rivlin, Deputy Director of OMS
.. ~.(
Bo cutter, Deputy Assistant to the president, NEC
Alicia Munnell, Assistant Secretary-Designate, Treasury
Joe lUnar ik I Associate Director OMS
#
�EXECUTIVE OFFICE OF THE PRESIDENT
CCUNCI:.. OF ECONOMIC A'JvtSEIlS
WASHINGTON, D.C. 20500
February 1, 1993
,HE CHAfRMAN
MEMORANDUM FOR THE PRESIDENT
ATTENTION,
Robert Rubin, NEe
FROM,
LAURA TYSON, CHAIR-DESIGNATE L-T
ALAN BLINDER, CHIEF ECONOMIST/ill
SUlJJECT:
"Eight Million Jobs"
1.
~li
Current Situation
There is a widespread impression that this has been a
"jobless recovery" so far. At one level, this is true: job growth
since the recession trough has been just 1.5 million jobs, or
1.3\--much less than in previous recoveries~ But, at another
level,·· t.he claim is false: job growth has not beon particularly
abnormal ..given the laggard growth of GOP. The real reaso:n why so
few new jobs have appeared since the spring of 1'91 is that GDP
has grown so little.
Tht~ attached chart illustrates this point by comparing the
1991-92 recovery with the ayerage of the six previous
recoveries. What is measured is the amount by which GOP growth
has exceeded employment growth--as,it always does in recoveries.
The gral-)h shows that we are now more or less tracking historical'
patterns. More sophisticated statistical procedures lead to
roughly the same conclusion.
The implication of this is that if the economy grows more or
less in line with the CEA forecast, rapid job growth is about to
begin. specifically, we expect a bit more than 2 million new
jobs wi1:hin the next year, and about 2.7 million in the year
after that.
2. The Eight-Million Job Target
Our judgment is that tbe campaiqn promise Qf a million new
jobs is redeemable if all goes well--although, there is little
room for slippage. We estimate job growth of 8.9 million between
the thil:d quarter of 1992 and the third quarter of 1996 (just
before t~he election) under the eRA Uoptimistic'" forecast. Under
our "pessimistic'" forecast, this drops to 6.8 million. Putting
75% weight on "optimistic*' and 25% weight on "pessimistic" would
lead to a forecast of 8.3 million new jobs.
For comparison, the newest eBO forecast is lookin9 for 8.S
million new jobs over the next four years--almost exactly the
same as ours. The November Blue Chip forecast used to prepare
Mr. Oarman's last budget built in just 6.5 million new jobs over
four years.
�· '.
~
..
2
J.
I2&J:icit Reduction and Jobs
As we said in the long February 1st memo on deficit
reduction, deficit reduction shOU~d. Dot be thought of as a. "jobs
proqr&m .. u The goal of deficit reduction is to raise productivity
and real wages, not to "create jobs.'· We mention this not to
belittl(! deficit reduction; after all, real wages are the single
most important determinant of standards of living for the
ordinary American. But, if we are to embark on a serious program
of def i(:i1; reduction, we ought to know wilY.
There has been a great deal of talk in recent days about how
many jobs might be "created" by our deficit reduction package.
The answer is: approximately zero! Here is why.
As a matter of arithmetic, the number of jobs is the product
of:
(a) population
-
(b) the fraction of the population that wants to work
(c) the fraction of job seekers that are employed.
In a market economy like ours, this last fraction gravitates
toward t,he full-employment number (say I 94.5%, which is an
unemployment rate of 5.5%), albeit slowly, no matter what fiscal
or monetary policy does. That means that any effects of
conventional fiscal and monetary policies on the number of jobs
must be transient. The only way policy can have a pe[manen1;
effect (short of changing population growth!) is to increase the
fraction of the population that is employablg, and part ot our
investment program is devoted to this end. But the number of
newly-employable people thereby created is bound to be quite
small.
The previous paragraph should not be misread as saying that
fiscal policy is irrelevant to jobs, for it can have a profound
effect on the speed at which the economy returns to full
employment. For short-run analysis--which includes periods of up
to 4-5 years!--the number of jobs is indeed quite sensitive to
fiscal policy. This is the sense in which!
(a) our stimulus package will (transitorily) create about
600,000 additional jobs;
{b} deficit reduction will (transitorily) destroy jobs
unless the Federal Reserve and/or the bond market help
out.
In sum, fiscal and monetary policy have large effects on the
number of jobs in the short run, but negligible effects in the
long run.
�•
Employment and Output Growth
In Post WWII Recoveries
Cum. output change· Cum. employment change
"
4.0
3.5 l.... ;<
Average of Previous
Recoveries
3,0 I-
/'
r
2.5 l-
2.0
1.5
I
~
1991·92 Recovery/, /'
/'
/'
.;
r-
1.0 I-
0.5
./'
I
........
........
....
1
-- --
4
,
"
Quarters after trough
Sources: Department of Commerce and OepartlTli:mt
of labor,
Note: Excludes recoveries of
1949~51
/'
/'
-
/'
/'
/'
'
3
2
/'
--..; /'
,.--
/'
/'
/'
/'
and 1980·8'
5
6
7
�'"
f'l c., :
r
c.","'''>t.<-t.....
MEMORANDUX
February 1, 1993
'1'0.
President Clinton
FROM.
Leon E. Panetta
SUBJECT:
Your questions on the budget
,
Following are the answers to your questions about the
Federa 1 budget.
1.
What are the oauses of tbe "struotural" defioit, and in what
proportion?
As you know, the structural deficit is the deficit that
would. remain if the, economy were at ftfull
employment~"
Identifying the causes of the structural deficit is a
judglllent call; one person could say that we spend too much
on defense, while another could say that we spend too much
on health, and another could say that we do not collect
enough taxes.
The most objective answer comes from a comparison of changes
over time, though even that leaves room for judgment.
Choosing as a base year for comparison a time of high
defense spending (say, 1986) would yield ,a different view
than another time of low defense spending (for example,
1979). Further. though particular budget items might have
increased at the same time as the structural deficit also
increased, giving an appearance of cause and effect, anyone
could argue that those program increases were wise and that
other programs should have been cut to compensate.
Following is a comparison of the budget from 1980 -- chosen
as a base for comparison because it is just before the
Reagan era began -- and 1992 -- the most recent completed
fiscal year:
fl ...J
�STRUCTURAL DEFICIT COMPARISONS
Percent of GDP
Change,
1900
11~ulI-Employ~ntRe\lenues
ll~UllwEmploymentOutlays
!STAUCTUAALDEFICrr
'OU11.AYS
National Defense
Human Resources
Medicare
MQdicaid
Social Secul'lty
1992
538,900 1,163,900
586,700 ~365AOO
{47,801l>! 201,500
1980
Percent
116.0%1
132.7~
321.5%'
133,995
32.090
14,000
Physical Resou~$
Other Funetions
Net lrilerest
Undistributed Offsetting
OTAL OU11.AV$
118,541
R~jpl$
119,024
57,800
287,545
(122:7;
, -__
270,G;
384.3'
142,6%11)
148,737
Other
298,361
299,225
1Ui"~
65,985
74,788
44,996
74,0Cl1
52,538
199,429
(19,942)
(39,280)
590,947 1,381,791
20,4%
22.2%
1992
19.8,
23"3~
n .•%".4
Change
-0.5%
1.1%
1.6%
5.1%
5.1%
O.Q%
1,2%
0.5':4
2,O~
0.8%
0,6%
1,2~
4.5%
4,9')
0,4%
5.6%
5,1'"
2.5%
1.7%
2.0%
4J.8%
22.3%
1,3~
·0.5%
w1.2%
1,3'}1
-0.4%
23,5~
5.2%
14.3%
5"~
1,3%
8tl~
12.0~
~2,3%
tl1~
19.6'%
18.6OX
·U)%
13,3'}
56!:,:
Cj~7~
h
!:U J.n
133.8%11
SA"
1,4%
·(L 7~
0,1%
1.2%
RECEIPTS
Payroll Tax
Other
138,148
378,364
385,491
106,140
OTALRECEIP'fS
517,112
1,091,631
73,835
290,160
DEFICIT
G1)?
JJfC"-ll.J'15'
117"~
293,0
2J~%
4,9%i
2.2%
�As you can see, between 1980 and 1992, the structural
deficit increased from 1. 8 percent to :3 .,4 percent of the
GDP, or an increase of 1.6 percentag~ points. Over that
same time, outlays increased by 1.2 percent of GOP, and
revenues de'CJ:1m:d by-=O~~:9: p:;r;:~' iJlereasln<j the
~crt-ny 2.2 perce
• (The extra 0.6
eerceD.~~g~ point increase in the ac,!:ual deflclL over-the
structural deficit means that-tne economy moved farther from
~l?:~at-Ghanqe-was~cycl~h::crt(-not: st:ructural.l
~ght say, because the actual increases of outlays and
revenues were of about the same size as a percentage of GDP
that the outlay and revenue contrj,butions were about equal~
1
However, a closer look tells a more complex story. The
fastest g~gwina spending categ~ries -- Medicare, Medicaid,
«ana net interest -- accounted "for more than the t-otar
crease in outlays by a wlde ~~~ Those three programs
increa
. percen of GDP~ while other outlays
decreased by 1.6 percent of GDP (Medicare's O~8 percent plUS
Medicaj,d's O~6 percent plus net interest's 1.4 percent,
minus the total increase of 1.2 percent). Defense spending
increased substantially as a percentage of GDP from 1960
until 1986, but then began to decline, ending the period
where it began. However I that temporary bulge in defense
spending did increase the structural deficit by increasing
the net interest cost of servicing the debt.
On the other side of the ledger, revenues other than the
tax (with the payroll tax"" deflned....to ~nclude the
full OXSDHI tax plUS railroad retirement contributions)
~~ by 2.3 percent of GOF, while the payroll tax
lncreased by 1.3 pe~ent ot GOP.
____
~l
Looking at both sides of the ledger. Social Securi!y outlays
increased as a percentage of GDP, butiSoct§i Security
revenues also increased, so that this program taken as a
whole did not add to the red ink
--------- the structural deficit is defined here to
(Please note that
#
-
......
exclude deposit insurance -- both because it is a temporary
bulge in the deficit, and because it is a transfer of
financial assets rather than an end use of actual resources
(labor and capital) in the economy.]
Look in
ectivelYI the view i
cally the same.
1"0 ol,,'l.ng is ana er a e comparing 1992 a
This
table is calculated by ceo rather than OMS, and so concepts
are slightly different but do not alter "the story in any
meaningful way.) The
ural deficit is increasin b a
,tittle o,,~e percent of GDP
are affected by
roundjng), wlcfi Me~care, ::~!caid and net intero3t lsading
the wax. Oeher au lays an
venues are actUally decreasrng
the deficit.
�STRUClURAL DEFICIT COMPARISONS
Change,
1992
1998
STRUCTURAL DEFICIT
201,5
350.5
OUTLAYS
Discretionary (Total)
537.4
Percent
Percent of GOP
1sao
1992
Change
-
73.9%
3.4%
4,5%
584.0
B,1~
9,2%
7.4'
~L7%
129A
67.8
285,1
259,0
145.0
385.0
100,""
2,2%
115,3~
1.2%
4,9'1\
3,3.
19l'
0,7%
228,9
261,0
-10,0
292,0
---- -
1.0%
- - ----
Mandatory
Medicare
Medicaid
SOCIal Security
Other
Deposit Insurance
Net Int@rest
Undistributed Offsetting Rece'lpts
TOTAt. OUTLAYS
RECEIPTS
Payroll Tax
Other
TOTAL RECEIPTS
DEFICIT
2,6
199.4
·68,8
1361.e
-76.0
1839.0
413.7
677.9
1091.6
290,2
559.0
923.0
1482.0
357.0
35,0%
14,0%
484,~
3,9'1\
0,0%
3,4%
46.4%
13,4%
.1.2%
33,1~
23.5%
35,1%
36,1%
35,8%
23.0%
7,0%
11.6%
U%
4,9>
0.0%
3,3'
-OJ5%.
.0,"
-0,2$
0.3%
0.2%
3,10
·1,'l'
23.4%
HlS%
7,1%
11,7%
18,8%
4,9%
-0.2%
- - - - --
4,5%
0.1%
0.2%
0.2%
-0.4%
•
�2.
Bow much have revenues grown in each of the last four years?
3.
Same for expenditures, by area? ••• by department?
<Following are data that show the growth of revenues and
outlays.
Perhaps the most meaningful revenue figures are expressed as
percentages of the COP. Total Federal revenues have
declined from 19~2 percent or the GOP in 1989 to 18.6
percent in 1992~ Individual income taxes fell from 8.6
percent of the GOP to 8.1 percent over the same period;
corporate taxes fell from 2.0 percent to 1.7 percent. This
decline is the typical outcome of recession, when individual
incomes and corporate profits fall. Note that the total of
all other taxes actually increased slightly as a percentage
of the GOP.
On the outlay side, the figures reflect the overall
bUdgetary trend of increased health care costs and net
interest with most other expenditures close to flat
relative to the economy.
(Note that the Treasury is given
depart.mental responsibility for net interest payments.)
I
�R«eipts ud Outlays by Source
1989
1990
1991
1992
273.3
71.2
104.5
269.0
245.0
134.5
194.5
7Ll
·39.4
1323.8
298.4
Percent Change
1989·92
Outlays by Su(!crfunr:tioD
Defense
Health
Medicare
Social Security
Otber Human Resources
Physical Resources
Net Interest
Other Functions
Offsetting Receipts
Total
303.6
48.4
85.0
232.5
202.8
SLl
168.3
57.S
·37.2
1143.2
(billions $)
299.3
57.7
98.1
248.6
214.9
125.5
184.2
60.9
·36.6
1252.7
89.6
1I9.0
287.5
277.5
74.S
199.4
74.9
·39.3
1381.S
Difference in
Percentage points
(percent ofGDP)
Defens.e
5.9
5.5
Hea!th
Medicare
Social Security
Other Human Resources
Physical Resources
Net Interest
Other Functions
Offsetting Receipts
Total
0.9
I.l
1.8
1.6
4.5
3.9
1.6
3.3
l.l
.0.7
22.1
·1.7
85.1
40.1
23.7
36.8
·7.7
18.5
29.6
·5.6
20.9
4.9
1.3
5.1
-O.S
I.S
1.9
2.0
5.0
5.4
0.6
0.4
Ll
1.4
4.8
5.2
4.2
2.3
l.4
l.l
..0.7
22.9
4.7
2.4
3.5
3.4
-0.3
0.1
1.3
1.3
0.2
·0.1
23.5
.(l.7
23.5
0.0
1.4
1.3
�Re('~ipts
and Outlays by Source
Percent Change
1989
1990
1991
1992
467.8
.98.1
370.5
49.9
1054.3
476.5
100.3
385.5
55.6
1091.6
1989·92
_____________ mmm'n''''..
Receip.ts
Individuallncome Taxes
Corporate Income Tax.es
Employment Taxes
Other
Tolal
Individual hu:::ome Taxes
Corporate Income Ta'\es
Employment Taxes
445.7
103.3
332.9
47.9
990.7
8.6
2.0
Other
6.4
0.9
Total
19.2
(billion, $)
46<>.9
93.5
353.9
55.5
1031.3
(percent of GDP)
8.3
8.5
1.7
1.7
6.9
·2.9
15.8
16.1
10.2
Difference in
Percentage points
8.1
1.7
6.5
6.6
6.6
1.0
18.9
0.9
18.7
0.9
18.6
·Q.5
·0.3
0.1
0,0
·0,6
�R~eipts
and Outlays by Sour«
Percent Olangc
1989
1991
1992
19R9·92
2.3
20
0.2
1L7
2.1
2.3
0.'
ILl
54.1
53.2
159.6
$6.$
16.9
2.6
286.6
28.3
26.0
-0.2
·2.8
20"5
205
193.7
245.0
20.2
54.1
2.6
261.9
26.5
25.3
12.5
218.0
266.4
22.8
6.1
6.6
2S.7
6.'
8.2
9.8
57.7
34,0
47.2
108.2
1990
Olttlns by Ae.!!!£l',
(billions $)
llrancb
The Judi-::iary
Exec. Office Qfthe i'n:sidcnl
funds Appropriated to the Pre$:,
u:gi~lItivc
Agriculture
Conunerce
Defcnsc.Military
Ocfense-Civil
f:ducation
Energy
Health and Human S~rviceS-e(cepl Soc. Sec.
neaJIh and Human ServiceS· Soc, Sec,
Hoosing and Urban Development
lnlericr
Juslice
wb",
Slate
Transpo!U!liQn
Treasury
Veterans Afftdrs
Enviromr..:r,ul I',01xljou AlJ,lltlCY
GeneraL Scrviccs Admiois(r.t1)on
NASA
Officc ofPcrsonnd Manllgcmen:
Small Business Administradon
Olher Independent Ag~nci~$
Undistributed OHScuing Rct:eipts
TQtai Outlays
Legi~ative
2.1
0.1
2.2
1.6
0.2
4.3
48".1
46,0
1.5
2.6
294,9
23.5
21.6
t 1.4
172.3
227.5
19.7
$.2
6.2
22.7
3.7
16.6
23lM
30.0
4.9
}{U
3.7
289.8
25.0
23.1
12.1
,.•
,s.;
34.5
255.2
29,0
276.3
31.1
293.4
33.9
'.1
-Rl
58
6.0
0.'
0.5
12.4
13.9
14.0
'48
35,6
22.4
0.6
OA
363.5
745
81.2
~98,9
~\lO.O
18.6
«117.1
1323.8
1381.8
-43.6
-31.5
20.9
(percent ofGDP)
0.0
0.0
0.0
02
0.9
0.1
'.6
0.5
O.
O[
0.'
O[
0.1
0.4
0';
0.1
0.1
0.6
0.7
01
0.6
Vclcrans Aff.:.iH
Envinmmeotal Pro1ection Agt:ncy
Geocm] Services Admmi1ltrlltion
NASA
Otilce cf l'cr/wlllld Mansgcmenl
Small Bus.iMSS Adminism.tion
Other Indl.."JV!lldenl Agencies
Undistributed Of(s.;uing Receipls
TQuI Outlays
0.0
0.1
0.0
0.0
0.0
0.2
1.0
0.0
5.1
0.0
0.2
L1
0.0
5.'
0.5
0.'
0.4
0.5
0.1
0.2
3.7
4.7
41
5.1
05
03
'.0
0.1
02
5.'
05
01
0.2
0,9
0.1
0.6
4.9
53
5.7
0.6
0,1
-0,0
0.1
0.'
0.0
0.6
0.6
0.1
.0,0
0.2
0.6
0.0
IA
06
0.1
0,0
0.)
0.7
00
1.6
' 0.7
0.1
0.0
~L9
~2.1
22.1
2V}
23.'
-u
Differem:e in
Per.:enlaae aims
0.0
0.0
0.0
0.1
0.2
-0.0
.0.2
c
0.2
3.3
4.4
Treasury
21.3
201.3
26.5
31.9
0.7
En"",
0.5
45
23,7
22.1
27.3
12.8
0.4
TrampOt1iltinn
24,3
32.5
0.0
0.0
0.4
0.1
24.5
30.5
Branch
The Judiciary
Exec. Office of the Il:rcslden!
Funds A,pprornllled to the I'r~$.
Agnrullure
COfJ1.llWrce
fXfensc-Militruy
Defen5C_Civil
Educa1ion
HC<!hh and Hum.:u'. Services-c(u{l: Soc. Sec.
Heallb and Hum.an Ser",Kes-Snc. Sec,
Housir.,!l, and Urban f'MYc\!)pmenl
Interior
Justice
Labor
Stalc
49,7
'.0
1252.7
0.'
36.3·
4.J
11·13.2
0.1
0.9
0.0
'.7
15.5
2SS.0
281.4
4.0
28.6
-05
11.0
29--1
0.1
32.9
-89.1
0.0
27.1
'0.3
,0.7
. 0.0
OA
-23
2l.!
O[
O[
0.1
1.7
1.0
0.1
0.0
O[
0';
00
0.1
1.2
O[
0.0
0.0
0.1
0.1
0.0
.0.3
-0.5
1.4
�4.
Is tbe deficit measured by budget authority or actual
outlays?
Outlays. The deficit is a cash concept, and therefore is
measured using cash spending (outlays) rather than the
authority to spend in the future (budget authority). Note
also that outlays (cash going out) is the conceptual analog
to receipts (cash coming in).
�5.
Need a detailed account of differences between this plan and
Putting people First -- e.q., deficit projections biqger by
in each of 1994-97; revenues estimated in PPF wrong by
--- in
area (e.q., foreign corporations); investment
reduced by
in
area; revenue growth estimates wrong
by
; spending cuts in
off by
; tax cuts different
by
in ___ area.
===
Putting People First was written for fiscal years 1993
through 1996; the current budget plan is being written for
1994 through 1997. Therefore, numbers do not match
perfectly.
As you know, the deficit baseline has deteriorated
significantly since PPF was written. Because it was written
for different fiscal years, an exact comparison is
impossible; but the total~SQ~ deterioration for 1997
would be well in exc-ess of $100 billion. All budget
forecasters -conimi tied essentially this same error.
The attached table highlights the differences between PPF
and the current plan with respect to policy changes, simply
moving the PPF numbers out one year to make them line up
with the current plan.
In the table, all policy changes
that reduce the deficit are shown as minuses.
The table shows that the investments have been trimmed, but
by shrinking amounts over time.
This reflects the fact that
many of the investment programs come on line a bit more
slowly than PPF assumed.
Also, because of the baseline deterioration, we have been
forced to provide more deficit reduction in every category
than ~'as contemplated in PPF. The early years show smaller
cuts in nondefense discretionary, however, again because
those program changes take some time to take full effect.
�·>\' '. 93'"
e U('·':J:':" ';. ·'::':;'-'~·H::..r:""'~' ~:: ;.", ::">..;:.:;
(in billions of dollars)
1993
1994
1995
1996
1997
94-97
42
54
59
64
§
-22
-5
-26
-38
-16
-7
-:rT
-16
-30
-8
-39
-18
-8
-43
-25
15
24
34
43
51
15
0
16
-10
-13
-:rT
-:rT
0
-36
-20
-25
-62
-74
-2
-76
-33
-38
-70
-98
-7
-105
-43
-51
-76
-119
-14
-133
15
-18
-21
-16
-13
12
-8
-6
-21
0
6
-18
-25
-2
-5
-43
-34
-94
-14
Putting People First (delayed one year)
Spending Increases:
Stimulus end investment. .... _
Spending Decreases:
Disaetionary.........................
Ent~lements.......................... .
-31
Revenue Increases............... _... .
Total Proposals.....................
Current status
Spending Increases:
Stimulus and investment. ..•. _
Spending Decreases:
Oisaellonary.........................
Entttiements ...........................
Revenue Increases.....................
Total Proposals ....... _............
Debt Service ................................
Net Deficit Reduction ....... _.....
Difference
Spending Increases:
Stimulus end investment. .... _
Spending Decreases:
Disaetionary...._...................
Ent~lements................._........
Revenue lflCr'eases......._...... _....
Total Proposals.....................
Debt Service............................ _..
0
-58
-2
-31
-31
-80
-7
-117
-28
-150
. -75
@
-48
-60
-80
-37
-23
-60
0
68
-32
70
38
-23
�6.
For proposed revenue raisers an4 spending cuts, need to know
who gets hurt (by income level expressly) and whetber they
have been cut in budget actions of last five year8~
Treasury (for revenues) and OMS (for spending) are preparing
detailed analyses of the ?istributional effec~s of the
current plan. Please note that for some fax changes and
many outlay changes, the precise distriqutional effects are
very difficult to determine. For example, a significant
share of alcohol consumption is a business expense, and it
CQuld be passed on to consumers or absorbed as lower
business profits; and government worker-training
expenditures benefit both the workers 3nd the businesses
that hire tham~
Pending that detailed analysis. there follow five tables.
The first pairs the comparable spending changes from the
1990 budget reductions (the Omnibus Budget Reconciliation
Act of 1990, or OSRA 1990) with the current plan. It shows
that
the proposed cuts are for the most part targeted at the
more well-to-do program recipients -- probably to a greater
extent than OBRA 1990.
The second and third tables show the distributional effects
of taxing 85 percent of Social Security'at current
thresholds, and allowing COLAs at cpr ~inus one percent.
The income taxation of Social security benefits is
distinctly progressive. For Federal employees and retirees,
the COLA restriction also is significantly progressive.
Among Social security beneficiaries, it is slightly
regressive. Our COLA restriction on the last dollars of
Social Security benefit, based on poverty thresholds, may be
less regressive; we are preparing detailed analysis of it.
The fourth table compares the revenue provisions of OBRA
1990 with those now under consideration. It indicates that
the vast majority of new provisions bear most heavily on
upper~income individuals and on corporations; only a small
portion of the total revenue take is comprised of the energy
taxes and IIsinll taxes.
The fifth table refers only to the tax provisions of OBRA
1990, and shows that they ~ere progressive -- decreasing the
percentage of income paid in tax by the lowest income
categories, and increasing it for the others, and especially
for the most well-off. Given the favorable comparison
between the particular tax cuts in the current plan and
those in OBRA 1990, it is reasonable to expect that such a
distributional table for the new plan would be at least as
attractive.
�02101/93
8AB;lWH
94SUO\fNCL'EVOl :A
EFFECT BY INCOME CLASS OF OSRA 1990 CHANGES AND PROPOSED SAVINGS
(outlays in billions)
Change
)B8A:,
~nt$'
.199"9;
!..Iwings~
150:
eec commod~ty provisions ........... .
-'1.0
The.main provision reduced base payment acras by 15 percent for all farmers. This would
probably hUft small farms more than large farms, Small farms are generally in the lower
half of the income distribution.
,00: GSL reforms", .. , ... ,.... ,., ...... " ..... ".
.1.1
;'70: Medicare ,,,, "" ,... " ........ " ..... "., .... .
·42.2
loo: CSRS lump sum."""" ................. .
-7.5
No effect, PfOvisions primi!rily eliminated high-defauit schools from the program and did not
affect beneficiaries.
Increased Part B deductible from $75 to :$:100; fixed premiums for 1991-95. Ne~ effect by
income class is not dear. but deductible increase would be regressive.
No change by income class. Provil'ion required benefits to be in annuity form, not lump sum.
through 1995.
~~jp!l§.;
i50: Medicaid .......... ,... "., ....•. ,...... ,,, ....
lOO; Earned income tax credit............. ..
100, MOC........................................ ..
)00; SSI." .... ",,,, ..... , ......................... ..
2.2
15.2
1.4
, .0
Savings
'ROPOSED SAVING.S,
1l!Jl.4:ll~
.1.,
150: CCC: Total income over $100,000
350: Limit payments to $50,000.",.., ....
-1.0
150: Other CCC reforms., ................ ,....
-5.3
)OO:"Difect student loans............. " ..... ..
')70: Medicare:
(1) Maintain 1996 SMI premium with
ffoor ..... '". ,..........., ...... , ..............," .,.
These
These
These
These
four expansions increased benefits to the poor or near poor.
fout expansions increased benefits to the POOl
Of
near poor"
four expansions increased benefits to the poor or neat poor.
fOtlf expansions increased benefits to the poor Of near poor.
Would affect upper income groups.
Would affect primarily the upper income groups or large farms.
Many of these proposals eliminate payments to farmers who choose not to grow crops, The
effect by income class is not clear, but thtl reductions wouk! probably affect higher income
groups more than lower income gtoups.
-3.6
No-effect. Savings reStllt from revised admil'l~str3tive provisions
-6.5
This provision would increase premiums by the same amount for all beneficiaries. Thus. as a
percent of income, the low income groups would be affected more than upper income groups,
121 30% coinsurance when Medigap
pays some beneficiaries ... " .... , .. "",,,
-10.9
500/650; Social security and retirement
Option 2 ................................., ....... ..
-92.4
and do not affec"t beneficiaries.
This provision would increase the cost of additional private insurance. Some would no longer
purchase such insurance and therefore would use fewer servlces or finance medicare gaps
and coinsurance frQm out~()f·pocket expenses. This. would not affect the poor, whose
medical expenses would $1;111 be paid by medicaid. Probably Oil proportional effect by income
class,
See attached table. Social security (educt ions are generally proportional to the diwibution of
social secufity benefits. Since ,more than half of social security benefits go to the bottom
40 percent of the income distribution, the cuts are slightly regressive.
�INCREASED TAXES PAID WITH 85 PERCENT RULE ON TAXABILITY
OF SOCIAL SECURITY AND RAILROAD RETIREMENT [SS-RRR)
Estimates for 1994, Based on 1991 Data from the March, 1992
Current Population survey
(Only households with
NUMBER OF
HOUSEHOLD
FILING
QUINTILE:
UNITS
WITH SS-RRR
PRE-TAX
(millions)
INCOME
SS~RRR
BASELINE
TAXES
PAID (*)
recipients tabulated.)
INCREASE
IN
TAXES
.
(bils $)
.
(bils $)
PERCENT
INCREASE
IN TAXES
(%)
SHARE
OF
INCREASE
(t)
TOP
$21.4
$2.384
+11.1 %
54.5 %
4
2.91
7.5
1.445
+19.3 %
33.1 %
3
4.84
4.8
.541
+11.4 %
12.4
2
,
,
,
,
,
,
2.35
7.56
1.6
.002
8.73
.1
BOTTOM
0
0
0
0
0
{OJ
{OJ
t
CO}
IN GROUP
QUARTERS
TOTAL
( • 09)
26.48
(negl. )
$35.4
$4.372
+12.3 %
100.0 %
(*) Note, estimates do not yet correct for under reporting for
any income type , including SS-RRR. Estimates do not include
imputed tax exempt interest in SS-RRR taxability calculation at
this time. Update to new economic assumptions of 01-29-93 will
shortly include a range of estimates, to deal, with the above
issues.
�02.'01/93
BAB:LWH
94BUD\!NClEVOl :B
COLA AT CPI MINUS 1
Pte-tax cash
income
Tota!
Total
social
gQint®
!!!£~-
$jLi;uJjty,
Total
Social
income
!9J;SJ\$
security
{I?un
Federal
letlrees'
Federal
employees'
l(lsn.s
!osse~
Bottom
3.8%
24.3%
14.0%
22.8%
2.9%
0.5%
Second
9.6%
30.8%
21.5%
31.2%
14.6%
3.7%
Middle
15.9%
21.5%
19.2%
21.9%
20.7%
12.0%
Fourth
24.2%
12.9%
19,1%
13.2%
25.5%
28.9%
Fifth
46.5%
10.5%
26.2%
10,8%
36.3%
54.8%
From 1/30,,93 memo from Rich Bavier to Bany Anderson (revised),
NOTE:
- The table illustrates the first year of the "minus-one'" PH.wislon, but the later yealS and the six-month delay
effects would nIH look very different.
- The social security
COLA~ 1
percent proPQsal takes proportionally more 110m the uppet quintiles because their
benefits tend to average a little larger,
-- The poverty effects of the Federal retil:ement and Fedcfal pay changes ace small. Federal retirees, and
especially Federal employees, tend to have incomes that put them relatively high in the distribution.
�TAXPAYERS HURT BY REVENUE INCREASES CONTAINED IN THE
OMNIBUS BUDGET RECONCILIATION ACT OF 1990
Reoeipt Effect
(billions of $)
1091-19 9';
-
Increase in maximum marginal individual income tax rate: The maximum
marginal individual income tax rate was increased from 28% to 31%
for families/singles with taxable income greater than $194,000/
$114,000 in 1991. The AMT rate was increased from 21% to 24%.
The AMT is applicable to income in excess of the exemption amounts
of $40,000 for families and $30 / 000 for singles ......•.••••••.•...•..
29.5
Limit itemized deductions: otherwise allowable deductions were reduced
for taxpayers with adjusted gross income in excess of $100,000 in
1991 ..•••••....•. "."" •.•.
O'............
11.0
PhAse-out personal exemptions: The deduction for personal exemptions was
phased-out for families/singles with adjusted gross income in
excess of $150,000/$100,000 in 1991..................................
10.0
O' • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
Increase amount of waqes and selt-employment income subject to the medicare
hospital insurance payroll tax: The maximum amount of wages and self
employment income subject to the medicare tax in 1991 was increased
from $53,400-to $125,OOO •••• :.-.-~.· •••••••••••••••••• ~ ••••••.••-•••••••• ___ .34 •.1
Increase excise taxes on distilled spirits, beer and wine; Excise taxes on
distilled spirits were increased by $1.00 to $13.50 per proof gallon.
Excise taxes on beer generally were doubled from $9.00 to $18.00 per
barrel. wine l which generally had been taxed at rates ranging from
$0.17 to $2.40 per wine gallon, is now taxed at rates ranging from
$1.07 to $3.30 per wine gallon. While affecting all income classes,
these taxes tend to be regressive •••••.•......•.• * •••••• ~.~ ••
••
11.0
Inorease tobacco excise taxes: Excise taxes on all tobacco products were
.increased by sot over two years. While affecting all income classes,
these taxes tend to be regressive •..•........•••••••........•.••••••.
6.1
#4.4.4
�Increase highway and motor boat fuels excise tax: Excise taxes imposed on
gasoline and special motor fuels used in highway transportation and
motor boats were increased from $.09 to $.14 per gallon. The excise
tax on diesel fuel used in highway transportation was increased from
$.15 to $.20 per gallon. While affecting all income classes, these
taxes tend to be regressive •••••....................•.•.•••••••••.••.
26.8
Extend telephone excise tax: The 3% tax imposed on local and toll tele
phone service, which was scheduled to expire after December 30, 1990,
was permanently extended. While affecting all income classes, this
tax tends to be regressive .•••••..•••••••••••.•••••••••••••••.••.••••
16.1
Impose excise tax on certain luxury goods: An excise tax equal to 10%
of the retail price in excess of specified thresholds was levied
on the following: automobiles above $30,000, boats and yachts above
$100,000, aircraft above $250,000, and furs and jewelry above
$10,000.
Because of the thresholds and the items taxes, these
taxes tend to fallon high income individuals .•.••••...••..••....
2.0
�TAXPAYERS HURT BY REVENUE PROPOSALS
CURRE~LY UNDER CONSIDERATION
Reoeipt Effect
(billions of $)
199.-19'8
in maximum marginal individual income tax rate; The maximum
marginal individual income tax rate would he increased from 31%
to 36% for families/singles with taxable income greater than
$140,OOO/$115 r OOO in 1994. The AMT rate would be increased
from 24% to 28% •••• *. _"." ... "." .... " .........•........• ~. ~ .•...••••••
65.1
10\ individual income tax surcharge: A surcharge of 10% would be levied
on adjusted gross income in excess of $1 million.....................
S.S
Extend phase-outs o~ itemized deductions and personal exemptions: The
current law phase-outs of the benefits of itemized deductions and
personal exemptions would be extended beyond their current law
expiration dates of December 31, 1995 and December 31. 1996,
respectively. Taxpayers with adju5ted gross incomes in excess of
$108,000 would be affected by the itemized deduction provision.
Families/singles with adjusted gross income in excess of $163,000/
$108,000 would be affected by the personal exemption provision •••••••
17.8
,cRepeal HI·waqe-base: The cap on wages and se~f-employment income.subject~.~
to the medicare tax would be repealed in 1994. This would affect
individuals with income in excess of $140,700.~ •.••••••••.•. ~ .•••••••
27.8
Include 85%, rather than 50% of social security benefits in ~odified
adjusted qross income for Federal inco~e tax purposes: 85% of social
security and railroad retirement Tier I benefits would be included
in taxable income and subject to income tax at the current thresholds
of $32,000 for couples and $25,000 for single taxpayers*.* •••••• ~.~.
29.1
Incre~se
Increase in alcohol and tobacco excise taxes: The specifics have not been
worked out. While affecting all income classes, these taxes tend to
be
regt'essive.~~~
...
~.".~
••••..•
~.~
.........................•.....•.
23.1
�Broad-b.ae4 energy tax: The specifics have not been worked out~ While
affecting all income classes, these taxes tend to be regressive .•.
~_
Extend $.025 per gallon hiqhvay and motor boat fue~s excise tax: Under
current law, $.025 per gallon of the excise taxes on highway and motor
boat fuels is scheduled to expire on September 30, 1995. Under. this
proposal the additional tax would be extended. While affecting
all income classes, this tax tends to be regressive.................
"
82.3
7.7
�SUMMARY OF DISTRIBUTIONAL EFFECTS, BY INCOME CATEGORY /1
Revenue Provisions of the Omnibus Budget Reconciliation Act of 1990
(1990 Income levels)
Income Category
2J
less than $Hi;OOO"j
10,000 to 20.000"..
20,000 to 30,000.... 1
30,000 to 40,000 .... j
40,000 to 50,000 .... '
50,000 to 75,000 ....
75,000 to 100,000"
100,000 to 200,000 ..
200,000 and over.....
Total, alltaxpayers"
Changes In
Federal Taxes
Federal Taxes Effectlve~Tax Rates
Federal
Under
Present
Under
Taxes 1/3/
Present Law /4
Proposal/I /4
Law
Proposal
Billions Percent ~iOl1s[ Percent Billions I Percent Percent Percent
-$0~3 ~::2:0%
$14.2
1.6%
$14~0
1~6%
13.3%
13~1%
~~~~~~-
-2.1
1.8
2.3
1.8
2.6
1.4
2.4
8.4
sHl.3
-3.20/0
1.8%
2.0%i
2.0%
1.5%
2.1%
2.3%
6.3%
2.1%
65.8
7.6%
102.5 11.9%
115.8 13.4%
87.9 10.20/0
172.8 20.0%
7.7<'10
66.5
104.4 12.1%
133.3 15.4%
$663.21 100.0%
63.7
7.2%
104.3 11.8%
118.1
13.4%
89.7 10.2""
175.3 19.9%
7.7%
68.0
106.7 12.1%
141.7 16.1%
$681.5 100.0%
15.6%
18.4%
20.0'%
21.4%
24.7%
25.8%
26.20/0
25.20/0
21.8%1
15.1%
18.8%
20.4%
21.9%
25.1%
26.4%
26.8%
26.8%
22.3%
Source: Joint Committee on Taxation
1/ Distributional analysis includes effects from the Budget Reconciliation (H.R. 5835). Revenue Provisions with
respect to beer. wine, and distilled spirits taxes, tobacco tax, motor fuels tax, telephone tax, increase in HI wage
cap, increased individual and AMT rates. phaseout of personal exemption, limitation on itemized deductions, individual
AMT component of oil and gas production incentives, increase and modification of the EITC, child health insurance
tax credit and increase in the standard deduction for tax payers with children under 1 year old. Analysis does not
take into account any effects from changes in taxpayer behavior.
2J The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: (1)
tax-exempt interest, (2) employer contributions for health plans and life insurance, (3) inside buildup on life
insurance, (4) workers' compensation, (5) nontaxable social security benefits, (6) deductable contributions to
individual retirement accounts, (7) the minimum tax preferences, and (8) net losses in excess of minimum tax
preferences from passive business activities.
31 Estimates of total tax liability presented in distributions will not match estimated changes in receipts because
of differing time periods (CY 1990 V$. FY 1991-95), because of varying patterns of fiscal year receipts.
4/ Distributions represent combined effects of individual income taxes, payroll taxes, Federal .>IOise laxes, and
estate and gift laxes. For the purpose of distlibutions, the full burden of payroll taxes is assigned to employees.
Excise taxes are assumed to be borne fully by individuals either directly through purchase of the taxed commodity or
indirectly through higher prices on all commodities as businesses pass along these added costs. Because of the
uncertainty concerning the incidence of the corporate income tax. rt is el<Cluded from this lable. Information in table
excludes individuals who are depenents of other taxpayers.
�7.
Keasured by actual outlays tbe investment proqram seems
anemic and much less than anyone recommended at tbe Eoonomic
Conference -- $30 billion after all is only 1/2 percent of
GDP. Hew can we oredibly claim to be etimulatinq anytbinq
but PR? How many jobs will be created by what expenditures?
What gets tbe quickest return7 best dollar/job creation
ratio?
There is a wide range of opinion on an appropriate economic
stimulus at this time; the $50 billion figure that you heard
at thE~ Economic Conference is the top of the range, while
other economists would argue that there should be no
stimulus at alL We have come down on the side of a small
to-moderate sized stimulus for the following reasons;
First, a stimulus that frightened the bond markets because
it was too large, and engende~ed a tightening from the
Federal Reserve, would be counterproductive. The apparent
consensus of the markets is that a $20 billion to $30
billion stimuLus is in the right ball park. Exceeding that
range would be risky, especiallY because the markets will
not believe the ultimate deficit reduction package until
they see it enacted into law.
On the other hand, even a $20 billion to $30 billion
stimulus is worth doing. Even though it is not large, it
does increase economic activity, and thus provides a margin
of insurance against a triple-dip to the recession.
Furthl~rmore, the individual program increases -- WIC, Head
start, immunizations, full funding for ISTEA, youth summer
jobs, CDBG assistance to states and localities, and so on
will provide real benefit to persons and sectors of the
economy that are hurting.
There are constraints on the size of a stimulus package.
Even the most meritorious programs can expand only so far in
a short time. This is particularly true of the physical
investment programs -- ISTEA and other publio works.
Pushing farther risks that monies will be used for low
priorIty activities, or will be shifted to pay for projects
that were already being undertaken -- with no net stimulus
to the economy. We believe that our spending program
choices are just about to the limit of what they can
productively do.
The f"rlllal briefing materials prepared by OMS will provide
the latest outlay and obligation figures, as well as job
creation estimates l for each of the stimulus programs.
�8.
aeyon4 1997.
lnat bappens to the deficit in the next four years if
health oare is under inflation and,population growth?
about moving up sooial security retirement aqe
increases to start in 19t1?
l~at
How muoh does indexinq contribute to the structural
deficit, e.q., if you give back inflation revenues to
taxpayers you don't eliminate inflation from government
costs -- salaries, liqht bills, weapons, etc.,
Ditto for declines in corporate tax revenues.
As thu following table shows, holding Federal health costs
to the rate of 5lr9.~h of infl$lflon._ana_po~ulat1011. would
'Ptoduce enormous~~~~. The only cavea is that we g~ill
r
heed to find the POll-enzs to achieve that goal without
excessive costs in the quality and availability of health
care ..
Movin9 up the Social Security retirement age increase would
provide savings -- for a time. Once that increase would
have been fully in effect anyway, the savings go to zero.
The attached table shows the long-term effect if the
retirement age is increased to 67-1/2 instead of 67 years of
age; those long-term savings are substantial.
Putting the Medicare eligibility age up along with Social
Security would provide even larger savings~ However I this
policy would impose a significant strain on employers and
individuals unless a new National system is enacted to
provide coverage. At present, many early retirees either
lose their employer-based coverage or add considerably to
their employers' health insurance costs.
Individual income tax indexation does sloW' the growth of
Federal revenues~ However, indexation does not hold
reVenues constant in nominal terms, but only in inflation
adiust~ terms.
In other words, if a worker'S income
increases with inflation, his indexed income tax liability
also increases with inflationj without tax indexation, his
income tax liability would increase faster than inflation.
So even indexed income tax liabilities should keep up with
the cost of goods in the economy; what has gone wrong in
recent years is that income growth has been so slow.
Corporate income tax revenues are not explicitly indexed;
their behavior during inflation is er.ratic. On the one
hand, depreciation allowances do not keep up with inflation,
and so taxes can increase fasteri on the other hand t
interest cost deductions can increase fa-star during
inflation, which can slow tax growth.
�,,
LONG-RANGE OUTLAY ISSUES
,,
02l01{93
(billions of dollars)
2025
2030
2000
2005
2010
2015
2QgO
Hold medicare and medicaid to inflation
and population beginning in 1997:
1')1:::07
- ....
-390
-470
982
-1579 -2421
Deficit .... """ ... "" ... "............. ",... "" '"" ......
14.9%
Percent of GOP",,,,,,,,,,,,,,,,,,,,,,,,,,,
4,6%
6,6%
9,0%
11.8%
4.5%
5,0%
329
682
1217
2010
3236
5088
109
Reduction from baseline"""""""""
-1.3% -3.2% -5A% -8.1%
-11.4%
-15,7% -21.1%
Percent of GOP""."",,,,,,,,,,,,, ... ,,,,
_~'l,)
-.1V~
~~
Freeze all COLA's beginning in 1997:
-443
-640
Deficit. .... "", ..,., .... ..... :" ....... " ...... ,......
5.2%
6.1%
Percent of GOP:" ",,",,"" """""""
159
56
Reduction Irom baseline""""... """.
-1.5%
Percent of GOP""."""""""""""" -0.7%
Raise Social Security retirement age to
67 1/2 on accelerated schedule
beginning 1997:
-797
Oelcil." ... " ..."" .. " .. "."." .. " ". " ..". "." .-499
7,7%
5.8%
Percent 01 GOP""""."""""."""".
0
2
Reduction Irom baseline""""".""".
0.0% -0.0%
Percent of GOP"""""."""".".......
.. Tie Medicare eligibility to Social. Security
retirement age:
beginning 1997:
-498
-789
Oeficit. .. " . " "." " ."".:.... " ......"" ." ""...
Percent of GOP ......................... " ..
5.8%
7.6%
1
10
Reduction from baseline ..................
Percental GOP ............................. -0.0%
-0.1%
Addenda:
Baseline deficit... ............ " ....................
Percent of GOP......................... " ..
GOP............." ....... ""............ " ..............
-1004
-1656
-2700 -4230
8.0%
11.1%
15.4% 20.5%
543
310
889
1427
-2.5%
-3.6%
-5.1% -6.9%
-6500
26.9"J!,
2175
-9.0%
-1307
-2176 -3546
-5580
10.4%
14.5% 20.2%
27.1%
7
43
23
77
-0.1%
-0.2% -0.2%
-0.4%
-8544
35.4%
-"~
,
...
-.~
131
-0.5%
-1294
-2158 -3491 -5479
10.3%
14.4%
19.9% 26.6%
41
178
98
20
-0.2%
-0.3%
-0.6% -0.9%
-8405
34.8%
270
-1.1%
-499
-799
-1314 -2199
-3589 -5657
5.8%
7.7%
10.4%
14.7%
20.4%
27.5%
8553
10415
12609
14973
17582
20590
-8675
35.9%
24141
---
-".
�P, \., \ ~ <~.., ... ,~
MEMORANIlUM
(iL ...
'cbrllary 1, 1993
To:
DiHtribution List
Fr:
Ricki Seidman
Re:
Coordinated Effort to Promote Economic Plan
As we discussed at the potitital meeting this evening. we need to launch an atl
out effort to develop support for the President's economic pltm that wit! he fl.nIlOunccd
on February 17, 1993. Your department should prepare a memo with two components:
•
suggestions for message/appro;:l<,.'h that arc important 10 the
constitllencies/concerns with which you arc dealing; and
•
a list of proposed activities that your dcpartnwnt could undertake (or
activities that should be undertaken by other departments) to ray the
predicate for and promote the plan) executing the message that you have
described.
The list should be inclusive. rather than exclusive. Be creative,
Your list should include suggestions for events/actions that Involve the President
and events/actions ,that would involve surrogates, including the Vice Prcsiti{!nt, the First
and Second l.,adies, members of the Cabinet, White J-louse senior staff, ~md uthers.
Think of "set the stage" activity Ihat should lake place before Fehruary 17th,
follow~up tH:tivity to occur between the 171h and March lSI. and longer term <lcth·ity for
the following weeks.
Please get your memo to me by \\'cdncsday at 4:00 p,m. litis material witl
provide the basis for the overall plan.
Lis!
Rahm EmmanueifJoan Daggett
Christine Varney
Alexis Herman/Mike Lux
Regina Montoya/John Hart
Howard Paster/Susan Brophy/Steve Rkehctti/Lorraine Miller
Carol Rasco/Bruce Reed/Bill Galston
Bob Rubin/Oe:rlc Sperling/Bo Cotter
Marla Romash
Maggie Williams/Lisa Caputo
David Dreyer/Bob Boorstin/Michacl Waldman/Ann Walker
(FYI)Stepha"opoulos/Gcaran/Podcsla
�,,,
-
"
I
THE WHITE HOUSE
WASHINGTON
February 13, 1993
MEMORANDUM FOR THE PRESIDENT
FROM:
ROBERT E. RUBIN
SUBJECT:
Treasury Memos on the "Credit Crunch"
You frequently express concern about the "credit crunch:'.
The following two memos outline Secretary Bentsen's views as to
what actions should be taken in the reasonably near future.
A
deciSion memo will be forthcoming by Monday, so that you can
includE! discussion of this issue in your, speech.
You can disregard these memoS and wait for the decision
memo, or read them as background.
�..
THE SECRETARY OF THE TREASURY
WASHINGTON
February 10, 1993
MEMORANDUM FOR:
Robert E. Rubin
FROM:
Lloyd Bentsen
RE:
Credit Crunch
L\7/~4
Treasury is working on proposals to alleviate the credit
crunch and this is an update on where we stand. We believe that
there are some immediate steps that the Administration can take
that deserve inclusion in the President's February 17th speech.
We have operated using a couple of goals.
First, we need a coordinated response from all bank
regulators. The Office of the Comptroller and the Office of
Thrift Supervision are on board and the Fed and the FDIC have
agreed in principle with our proposals.
It is also important
that the SEC agree on some of the measures.
Second, we can take immediate administrative action -
legislation will have to come later. There are a number of
regulatory actions described below that can be implemented as
soon as regulations are drafted.
Third, we need to send the right signals. We need to let
Congress and other concerned parties know that we will not do
anything that jeopardizes safety and soundness. At the same
time, we need to send a strong message to bankers that we hear
their concerns and are acting to alleviate them.
With these goals in mind, we are prepared to take
approximately nine regulatory actions that we could take in
conjunction with the Fed and FDIC. Most of these are highly
technical, but should bring an immediate and positive response
from the banking community. They include:
1. Changing loan review procedures to address the "character
loan" problem.
2. Establishing examination procedures for loans secured by
real estate that will focus on the borrower's ability to pay
over time.
�3. Establishing appropriate guidelines for returning
partially charged-off loans to performing status.
4. Increasing coordination by regulatory agencies to
minimize uncertainty and disruption.
5. Establishing workable appeals processes that would allow
expedient resolution and direct input from Washington.
There will be two primary effects of these changes. They
will make it administratively easier for lenders to lend. And,
the psychological impact on lenders of such a regulatory shift
will be considerable. We will develop estimates for the credit
availabi.lity impact of these proposals.
We also plan to include some safety and soundness regulatory
changes such as increasing attention on "derivative" financial
instruments and interest-rate risks.
Treasury will also review possible legislative actions which
could provide relief including bankruptcy reform and reduced
reporting requirements. We will report to the White House within
90 days of the possibility of legislative'initiatives. The
President can make a statement to that effect in his speech.
We would, of course, like to review any specific language in
this area which might be used in the President's materials.
2
�THE SECRETARY OF' THE TREASURY
WASHINGTON
February 11, 1993
, ,
Memoranduru for:
'iF)
•
oS
Lloyd Bentsen
Re:
-,
, h ...
80B RUBIN
From:
-
.. "-
credit crunch
Enclosed you will find information that has been prepared by
Frank Newman and Gene LUdwig concerning proposed administrative
actions on addressing the credit crunch. Roger Altman has worked
with them in compiling this and I think it is an excellent start
down the road to alleviating the problem.
Attachment
CC:
Roger Altman
Frank Newman
Gene Ludwig
�CRI!DI'l' CRIlliCH ALLlIVtAnoN PROGRAM
A.
Regulatory actions (by ace , OTS, in coordination with Ped
and FDIC)
Reduce uncertainty by getting. required and backlogged
1.
regulations out soon.
2.
Establish workable appeals process for financial
institutions to review significant differences in
judqement directly with appropriate regulatory
officials.
3.
Establish examination and r'ating procedures that
separate nother mentioned" loans from higher-risk
classifications. (This is esp. important for loans to
small and medium-sized businesses, and directly
addresses IIcharacter loans. "),
4.
Establish appropriate guidelines for returning
partially charged-off loans to performing status, for
loans that have reached fully collectible status.
5.
Establish examination procedures for loans secured by
real estate, that focus on the borrower's ability to
pay over time, rather than presuming immediate
liquidation.
6.
Increase coordination of examinations by regulatory
aqencies to minimize uncertainty and disruption to bank
of thrift operations, whenever backup or duplicate
examinations are required by law.
7.
Chanq8 bank and thrift regulatory reporting guidelines
to avoid unnecessarily classifying a loan as"in
SUbstance foreclosure," when tne borrowers is
reasonably expected to pay the loan.
s.
Revise treatment of loans used to finance the purchase
of real estate from banks to ~nsure reasonable
standards~
9.
B4
At:
Revise appraisal procedures to limit requiremenes for
appraisals to times when they genuinely assist in
making informed credit decisions~
the same time t increased regulatory attention will be
on the following areas:
fc~used
L
SWaps and other "derivative tt financial instruments.
2.
Interest-rate risk.
�."
- 2
c.
Changes requiring legislation will be developed for proposal
to Congress, dealing initially with:
1..
Bankruptcy reform
2, •
Paperwork burden.
,.
�",
February 10, 1993
FEB. 17 SPEECH
credit crunch Issues
I.
fmtline of Credit Crunch Issues
ir
credit critical to economic growth and development has
not been readily available, particularly to small and
medium sized businesses.
~,
This "credit crunch" has been caused in part by an
excessive regulatory burden imposed on banks and
thrifts by their regulators.
~r
Through sensible regulation that focuses on real risk.
as opposed to excessive burdens we can both ensure the
safety and soundness of our financial services sector
and put an end to this credit crunch.
~r
Over the last several weeks ~he Treasury Department and
the Office of the Comptroller of the CUrrency have
examined this issue closely and have come up with a
program that is a significant first step in achieving
this balance.
;
~r
ir
II.
This program includes primarily administrative and
regulatory changes that will .be implemented within the
next several weeks by both the Office of the
Comptroller of the Currency and the Office of Thrift
Supervision. This program includes changes in the area
of in substance foreclosure, treatment of OAEM loans,
examination procedures for loans secured by real
estate, limitations on required appraisals, and an
appeals process for banks which believe they have been
unfairly treated in the examination process.
We
']~ext
Related to Credit Crunch Issues.
have consulted with the Federal Reserve Board and
the FDIC and have reason to believe that they will
adopt a similar program.
'
']~e availability of credit in our country is critical to our
econolllic growth and development.
In recent years credit has not
been flufficiently available, particularly to small and medium
sized companies, due in part to an overreaction to difficulties
experienced by some banks with some borrowers.
,]'~his
contiilue.
Administration does not intend to let the credit crunch
I believe that we can make credit available again to
�"
...
- 2
creditworthy borrowers, without going back to a period of lax
standards that charac~erized the 19805. Moreover. I believe that
through a more realistic analysis of lender risk and ~he
application of this analysis to examination seandards. ~e cannot
only put an ena to the credit crunch r but ~e can at the same ti~e
actually increase the safety and soundness of our financial
services system~ And, I believe that these goals can and must be
accomplished in a manner that enhances our commitment to equal
credit: opportunity and community reinvestment.
T.o this end, we have developed a new program that is
designed to do four things: (1) make credit available again to
creditworthy borrowers; (2) maintain sound underwriting standards
for loans and improve the safety and soundness of banks and
thrifts through realistic risk analysis; (3) reduce unnecessary
regulatory burdens that CQst taxpayers money and weaken financial
services institutions; and (4) advance our commitment to equal
credit opportunity and community reinvestaent.
Specifics of this program, much of vhich can be accomplished
within the next few months administratively, will be developed in
coordination with the Federal Reserve and the FDIC. who have
already been eonsulted reqardinq the principles of the proqram~
The proqram as it has been developed thus far includes changes in
the area of "in substance foreclosure", treatment of OAEM loans,
examination procedures tor loans secured by real estate,
limitations on required appraisals and an appeals process for
banks which believe they have been unfairly treated in the
examination process . .
�...
',II
, I
.,,
,
I
THE WHITE HOUSE
WASHINGTON
February 13, 1993
MEMORANDUM FOR SECRETARY BENTSEN
RUBI~C'-
FROM:
ROBERT E.
SUBJECT:
Congressman Rostenkowski Letter on the Incremental
Investment Tax Credit
I am forwarding the attached memo from Chairman
Rostenkowski, for your information.
Attachment
�.
,
MEMORANDlIl!
TO:
PRESIDENT BILL CLINTON
FROM:
Dan Rostenkowski
DATE:
February 9, 1993
RE:
Incremental Investment Tax credit
Mr. president, I am reading in the newspapers much about the
possibility that you may include an incremental investment tax
credit in your economic stimulus package. :Even though I have not
been briefed about the specifics of your stimulus pro9ram~ I want
to share my concerns about this particular element before it is '
finalized by you in preparation for your State of the Union
Address +
~
•
While I intend to stand behind your economic program and
assist you to the best of my ability in its passage, I feel a
strong responsibility to seek effective and fair modifications to
the Nation's tax law~ In this respect. some issues relating to a
possible incremental investment tax credit are troubling to me,
and I would ask you to review these issues:as you make your
decisions on an economic plan. Of course, I would be happy to
discuss (my of these issues further with you if you so desire.
First. because enacting an incremental credit requires
picking some arbitrary historical ("base lt ) period to .determine if
investment is "new"l I fear that a lot of worthy companies will
not be helped at all. Thus, the credit will be unfair. For
example, say that company A made a long-term strategic decision
to plow its earnings into new equipment and has been investing
steadily for sQveral years. Company A would have a high level of
investment for the base period and, therefore, may never get the
benefit of the credit, even though it continues to invest a large
amount each year. This will be true for all mature companies,
for recent "growth" companies, and for companies whose lines of
business require steady, rather than sporadic, investment
4
• I have been hearing that entire industries, such as the
utility industry, might not be helped by an incremental
credit simply because they have been investing steadily
each year, even during tough times4
* I also havQ been hearing that some firms might not be
helped even though they will be investing as much as, or
more than, other firms in the same industry. for example,
Company A's main competitor may be a company that will get
a tax break on almost all its future investment simply
rlecause it used its earnings in the past years to pay
dividends instead of to invest in its future4 I have been
told that sQme companies, like company A, mi9ht be driven
out of business because of this co~petitive disadvantage.
�..
,.
\..,
- 2
• Because so many companies would not 'be helped by an
incremental credit, and may even be hurt relative to their
competitors, I fear that the support for an incremental credit
may be fairly ~eak.
Second, I have some concerns that the overall economic
stimulus generated by an incremental credit will be meager at
best.
* A
tax incentive as small as $10 billion is a drop in the
bucket compared to a $6 trillion economy, like
ours -- it simply isn't large enouqh to spur. any
noticeable increase in economic growth.
• Oespite my joint announcement with then-Senator Bentsen
and your personal support of a December 4, 1992 effective
date, I hear that many companies are ignoring the prospect
of an investment credit when making their investment
dE!cisions. Because of the incremental nature of the
credit and the desire to limit the revenue loss, many
companies think it highly uncertain -- or, worse, unlikely
-- that they will benefit at all~
oft
I1~
an investment credit is combined with a corporate rate
increase in an overall plan, then to some degree the plan
CQuld be: criticized as having given to the corporate
cmrununity with one hand and taken away with the other. A
C(lrporate rata increase is likely to cancel whatever
incentive an incremental credit might provide. For
companies that would not get the credit, the rate increase
could possibly represent a net decline in their ability to
invest. It will also test their willingness to support
your pr09ram.
• Because of the potential timing of a tax bill after a jobs
package to stimulate growth, by the time credit
legislation is actually enacted, the economic
justification for it may be weakened.
Third, I. fear that an investment credit especially an
incremental one t would possibly open the door to distortions that
congress worked so hard to eliminate in 1986. On some level, a
targeted credit is contradictory to the broad-base, low-rate
philosophy of tax reform. The narrower the credit, the worse the
problem because more arbitrary policy distinctions will have been
made to leave out various assets or industries. These
distortions could be unjustified on policy grounds, and might
provide motivation to the "losers" to avoid tax.
I
Fourt:h, it is my understanding that it would be difficult, if
not impossible, to prevent companies from engaging in
sophisticated tax planning that might result in abusing an
incremental credit. I am informed by my staff that no matter how
comprehensive anti-abuse rules are, we can, be sure that sharp
�,.
~l •
i I"t-.
THE WH1TE HOUSE
\
J
WASHINGiON
February 24, 1993
)'0
t
MEMORANDUM FOR THE PRESIDENT
~ 1-1
J.,}
FROM:
ROBERT E. RUBIN (1(---,
SUBJECT:
Effective Dates for Personal and Corporate Tax
Increases
'»'
I
Issues
The personal and corporate tax increases in the economic
plan currently have an effective date of 1/1/93 r but are not
payable until 4/15/94. The effect of these two proposals is to
increase taxpayer liability by about $23 billion in calendar year
-1993.
Individual and corporate taxpayers, however. will only pay
about $2 billion in fiscal year 1993. (Because of b~havioral
responses. moving the effective date to 1/1/94 would result in a
revenue loss of a negligible amount in fiscal year 1993, about
823 pillion in fiscal year 1994, and about $27 billion over the
period 1993-1997.)
The problem could take one of two forms (or most likely a
blend of the two)$ depending on whether the April 1994 tax
payments affect spending in 1993 or 1994.
(1) If the economic impact is in 1993, the taxes could be
viewed as offsetting the stlmulus# thus eliminating the
anticipated job creation: and
(2) If the economic impact is in 1994, the fiscal deficit
reduction in 1994 may have too large an impact on the
GOP {i.e~~ the phasing of deficit reduction may have
been too heavily weighted to 1994, which has a
substantially larger change in the deficit as a
percentage of GOP than any other year in our program}.
An answer to our first problem is the drop in long-term
interest rates since the election I which should provide more than
enough stimulus to offset the tax increase~ thereby leaving our
stimulus program as a net impact for job generation~ (A
substantial decline in long-term interest rates generates
business investment~ increased housing starts r exports through a
lower dollar, consumption via lower consumer credit costs and
mortgage refinancing, and perhaps a greater sense of general
confidence.
�,
..
-2
Macr(,econornic monitaring organizations like DRI and Lawrence
Meyers will give us limited credit for the interest rate decline,
and thus \"i11 be reporting that our program' is deflationary for
1993~
(Personally, I think we are right in claiming credit for
the full interest rate drop, and thus for a more than offsetting
impact on interest rates.)
Some members of our own economic team l including CEA, feel
that there is an internal inconsistency in asking simultaneously
for stimulus and a tax increase in the same year.
That would
mean that the flscal impact on GDP -- the only part of the impact
on GOP that we can control directly -- would be canceled out. or,
even worse, contractionary.
If you take that as the starting point. it would follow that
your claim of a stimulus and job creation were not valid. (On
the other hand, if you take into account the full interest rate
drop, the total stimu1ative impact includes the stimulus plus
some extra effect from the net of the interest rate reduction and
the tax increase.)
Some press seems willing to give us credit for the full
interest rate dec1ine, but economists seem to argue that we
should get credit for only part of it.
As to the second problem, the aggregat~ COP impact of lower
interest rates over the 1993 and 1994 period needs to be measured
against the negative impact of the deficit reduction program
during that period.
I have discussed this at some length with the CEA, and I
think a fair summary would be that the unexpectedly large move in
long-term rates should 1argely offset the heavy deficit reduction
in 1994, although there might be ·slightly lower growth than they
had projected (but most likely still higher-than the CBO
projection)~
Here, there is no issue of whether or not we should
get credit for the lower rates. It is simp1y a matter of
projecting effects on Gnp.
DeciSion
The c,hoice now is whether to stay with our 1/1/93 date or
move toward some later date, e.g., the date of signing, or
1/1/94~
After lengthy conference calls over the weekend, we all
agreed that a later starting date wou1d have been better on
purely economic grounds. However, given where we are, we all
agreed to have a public posture that the effective date would
have to ba worked out with Congress, and not to fuel expectations
one way or the other, thus preserving our options.
�;
"
.
-3
There are three possible choices at this point: retain the
present date; change the dates now; or take the position that we
will work with Congress and then postpone the decision until some
later time, depending on whatTs happening in the economy. Some
of the economic and political pros and cons for changing the date
are laid out above. Others are as follows:
Con -
Could make us look soft in the face of
Congressional and other pressures on taxes, and so
hurt us in the bond market by raising questions
about the strength of our commitment to the
deficit reduction program (if we make the change,
"it must be with the strongest reaffirmation on our
1997 commitment, although with recognition that
our four-year reduction will be less).
Can -
Could look as if we had miscalculated initially.
Con -
Would there be any Fed reaction to the change?
Pro -
Elimination of the argument that our stimulus is
vitiated by tax increases~
Pro -
Reduces possible unduly heavy deficit reduction in
1994.
Pro -
Improves spending cut/tax increase ratio.
Until a decision is made, we are sticking to the position we
all agreed upon and Secretary Bentsen used on the Brinkley show,
to wit, the effective date will have to be worked out with
Congress, but we are totally committed to our 1997 deficit
reduction objectives.
Recommendation.
There are very different views within your economic team.
Secretary Bentsen and I both would wait and see what happens. We
would not change unless led to because of economic or poli.tical
developments~
Secretary Bentsen has spoken with both Senator
Moynihan and Congressman Rostenkowski, who will work with us if a
change in the date begins to seem desirable.
The CRA and Gene Sperling believe that our claim of a
stimulus is hollow because of the tax offset, and so would change
to a later date as quickly as possible, in cooperation with
Congress.
�r " ,
The reasons for my view are:
(A) I believe that ~e may have enough positive GDP impact
to serve our purposes in 1993 and 1994, and that our
argument as to the validity of your claims concerning
stimulus is strong even if not recognized by the
macroeconomic services (since they won't give us credit
for much of the interest rate decline). Also~ I am
concerned about the possible impact of change on the
bond market (not because of the numbers because there I
think we have a strong argument I but we are still
totally committed to our 1997 plan), but rather because
of the concern that it will indicate weakness and a
willingness to change in the face of pressure.
(8) I am concerned about the possible impact of change on
the bond market, if ~nterpreted as indicating weakness
and a willingness to change in the face of pressure.
�·;
•
r
'.
\
I
MEMORANDUM FOR THE PRESIDENT
FROM:
GENE SPERLING AND SYLVIA MATHEWS
SUBJECT:
organizing the Cuts
Here are the challenges we feel you face in discussing and
organizing- the spending cuts.
The biggest issue you face is that as you go out to the
nation to discuss spending cuts, every singLe cut affects
something that is important to some people -- including their job
1.
in some cases~ You have to find a way to exp~ain how tough you
are on cuts, while treating a~l of the people who will be
affected with dignity. It is one thing to be told you must lose
your job eventually because of the need for'national imperatives,
it is another thing to be told your job was just a boondoggle
anyway_
2. You must convince the nation that the cuts are real and
substantial. This requires specificity to overcome the
skepticism that people have toward government generally; but
toward promises of deficit reduction specifically.
3.
Because you have such a wide array of specific cuts~ some may
characterize them as being random.
YOu need to be able
unfair~y
to organi~~e to both allow you to speak in short hand to people
and demonstrate a philosophy or criteria that organizes the
specific cuts.
Sased on meeting these goals; we would recommend organizing
the cuts in the following four categories that are similar to the
OM8 categories r with one major difference. 'we have created a
category Qf cuts which you should simply admit are cuts that you
would not 1ike to make under normal circumstances, but because
"of the hand we have been dealt" we have to' cut because there are.
more pressing national priorities. When addressing groups
affected hy our cuts, you should say that their contrihutions
were valuable; but in light of our pressing needs to invest in
people, put cops on the street, and educate our children, we make
tough cholces.
A.
Does this program not work or is it no longer needed?
TO restore public confidence we need to show peop1e we
are as good at ending outdated programs as starting
them. Making government work for the next century means
ending funding in programs that don't work and updating
policies and programs that were designed to meet the
needs of an earlier era.
�,
.
Examples
~
Termination of Commissions especially the
•
Bicentennial of the U.s. Constitution Commission
Elimination of most loan subsidies for the Rural
Electrification Administration
•
•
Eliminate unnecessary nuclear reactor research
TVA termination of the TVA's fertilizer research
•
•
Consolidating overseas broadcasting programs
Terminating State Justice Institute
activities
B.
Does the program provide unnecessary or excessive
subsidies to narrow groups at the expense of society at
large? It is important when describing increased fees
and reduced subsidies to stress the distributional
impact: can we continue to ask a cab driver in Chicago
to subsidize the registration fees of private plane
owners. The nation can no longer afford subs~dLes and
giveaways to those who donft need them~ and we must
assure that the taxpayer is fairly compensated for
services or resources provided by the government.
Examples
•
•
•
•
•
•
•
Enstating Bureau of Alcohol, Tobacco and Firearms
(BATF) user fees.
Improve enforcement of harbor maintenance fees.
Target CCC farm subsidy payments to farmers with
off-farm incomes above $100,000
Limit payments on wool and mohair to $50,000
Permanently extend patent and trademark fees
Auctioning spectrum for new communicat~ons
services to end windfalls
Reducing export promotion support for large
companies
•
•
C.
New or increased user fees for SEC reg~stration
Increase fees on general avLation aircraft.
Could we improve the efficiency of the program or
Department? You should continue to talk about your
cuts in government not in an anti-government manner~
but because you can believe that government can often
be run with the efficiency of our best businesses if we
are willing to reinvent government~ It is also your way
of showing that this effort starts at the top.
Exampl~§
•
•
•
•
•
•
White House Staff reductions
Department cost cutting
Reducing Foreign. Agriculture services
Streamlining USDA offices
Strengthening child support enforcement mechanisms
Phasing out Impact Aid "b" payments
�.
"
,
D.
Programs that must be slowed or stopped simply to meet
our priorities~ We must make tough cuts we would
prefer not to meet the extreme economic and investment
challenges that we face? (This is not a category from
the OMS document) Here you can stress to the people
you speak to that many cuts are tough. but simply have
to be done because we need new priorities. You can
stress it is not fUn to freeze the wages of hundreds of
thousands of working people who are trying to raise a
family, but we all have to make the tough government
cuts if we want to get the deficit down. This both
shows that you realize the people ,behind the cuts,
while letting those who want more to recognize how
tough and significant what you have already done is.
Examples
•
•
•
•
Freezing federal wages (moved from the efficiency
section in the OMS document)
Setting laboratory and durable medical equipment
rates at market levels
Ending lump-sum benefits for Federal retirees
Increasing the tax on Social Security benefits of
those already taxed
(Many others could fit in this category)
The OMS has two other sections~ one on -I'Health Care Costs"
and the other on ushared Contribution. ,t Examples from these
sections have been folded into the category-of those things we
don't want to do, but when forced to triage we must do.
�THE WHITE HOUSE:
WASHINGTON
February 5, 1993
MEMORANDuM FOR TH~ P~SIOENT
FROM,
ROBERT E. RUBIN
SUBJECT.
Enerqy Tax Decision Memorandum
,
Energy taxation can play an inteqral part in your strat
egy to make the u.s. economy mora efficient and compat~tlve~
Ra~enue3 raised can reduce the deficit, put ~ho government on a
more appropriate pay-as-you-go basis tor needed public programs,
and enet)uraqe enerqy efficiency and fuel m,ix ehoices bettor
reflecting the true environmental and security costa of energy
use. An enarqy tax can help move the U.S. eoonomy from income
~ased
to consumption-based taxation, with attendant benefits to
laving, investment and returns to work .tfort. Introduced in a
p,hased manner, it can maah w~th the desired time prot!le of
stimulus - deficit re4uction and send an 'important siqnal up
t~ontt
thAt to become a more competit~ve nation we must fully
r"eCognizo the costs of. hiqh enerqy use in our workplaces and
lifestylesl shocks to the system will be avoided, time f.or
adjustment will be provided, but a chanqe must come~
However enlightened this message may be as policy,
politieally it will be extremely difficult. While an or9anized
constituency tor energy taxation 1s beqinnin9 to form,
principally among the environmental community, the public debate
is Btill characterized by broad consumer antipathy and powerful.
focussed opposition from particularly-affected parties, notably
producer industries and states. Their arguments include regional
hardship, re9ress1v1ty, and international competitive
disadvantAge. Any energy tax proposal will raise taxes on
averaqe familias and thus will likely encounter political
difficulty on this qround alone 1 particularly when campaign
atatementa on this issue are taken into account.
Decisions you make on energy taxation cAn help address these
cOncerns. ThoDQ decisions are presented here as (1) the torm of
ener9Y tax, (2) the amount 'of tax and (3) the adjustments, it
any, for adverse regional, sectoral or income di&tributional
impacts. The focus here 1s on question (1), which tax. 7he
other questions are inteqral to formulating an energy tax
proposal, but require more work to present and evaluate specific
options,. 'l'hey are: included here for completeness and to get a
signal tram you about where to concentrate further work~ While
these materials focus on the choice among enerqy tAX options,
they should also be uBeful on deciding the more fundamental
�question of whether the economic paokage should include a lArge
energy tax component.
,
1
wi.thin question (l) t the focus 1s on ad valorem and BTU
taxes. These are broad-basQd taxes which permit relatively low
,
tax rates for any given revenue target • . This both. limits impacts
on the real economy and spreads them broadly across sectors and
reg10ns. For com~r1son purpo.8s, other anergy tax options __
carbon tax, motor fuels tax and oil import ~ee -- have also b$en
evaluated. A carb~n tax is more heavily weiqhtad toward coal.
The motor fuals ta~ requires a higher, and highly visible, tax on
a narrower base, and runs counter to a campaiqn pledqe. An
import tee requires the hiqhest rate ot all on the narrowest,
least stable base and, absent countervailing taxation, producQs
large income windfalls to domestic p~oducers. More detailed
in~ormation on all1the taxes considered Is ~ound in the attached
tabs ..
1.
Whioh talC?
I
with a commonjbroad tax base (See Tab A for tax
and a common revenUe target, ad valorem and BTU
taxes have 8imilariovarall economic effects (See Table 1 at ~he
end of thia memo and Tab B for comparison ot the Lmpaots ot
alternative taxes.) They do have dlt~Qrential eftacts on the
prices of different fuels, as seen in the following chart for a
$22 billion tax; 1
;
speci~ie&tion8)
AVlBAQB ,RiCI
2000
1990
Be:for.
Ac:It.ual
!
Coal.
I
31.57
x,oc
200g ,
shonSR 'rpm
A4
BTU
hO.. CA••
Ad
Va.lor*1IIl
(ODd u •• )
35.62
11.6\
12.4\
1.05
2.5'
6.2\
6.9'
9.7\
(short
ton)
I
P.tro~.ua
1.02
Product.
(gailon)
.
,
NatUl!'al 0 • •
4.02
(mei)
Bl.ctJ:'.ieit.y
(kWh)
0.068
.
0.069
6.U
I
5.0\
However, because user demands are only moderately rosponsive to
these price changes, fuel consumption will change much less:
,
,
- 2
�aVERAiB laiC:I
% £ :ZS;UZg t s;lI.lIilSiS from tUllSI
••
2000
SiiAAa
B:rtI
AClt.ual
Def"or;e
Tax
Ad
Valor_a
(.aure.)
997
959
-2.3\
-0.9'
-1.3\
ou
17.3
19.0
-0.9'
,
-2.U
-I.H
.....
19.9
22.8
-0.8 to _).71
-2.1\
-l.H
1990
Coo.~
(ml1Hon
ton)
(mmb/d)
N'oturel
Ad
ValoroDl
(.nd US_)
(tc!)
Changes in production are correspondingly small. ThuB, these tax
alternatives d1ffer somewhat as to who will pay greater taxes -
&.9. coal users or\oil users -- but little'aB to which fuels will
be produced or consumed. rncreases over the period due to
economio growth are forecABt tor both consumption and production.
These increases eubstantially exceed any absolute or dirterential
etfects ot theae taxes, loaving aggregate levele well above those
ot today and tuel shAres virtually unchanged.
i
~he three alternatives reduce carbon dioxide emissions 1-2\
in the year 2000. IWhile this i8 a small absolute reduction, it
is siqn1tieant in ~he context ot meeting the U«5. goal under the
Global Climate convention of returning its greenhouse gas
emissions to 1990 1.v.18~ The environment benefits from enerqy
taxatioll both because ot conservation and because tax differences
among f1lels may ca.use cleaner fuels to substitute for dlt;'tiar
tuels. More natural gas is conserved tor' the eame percentage
price increAs9 than either oil or coal. Conservation tends to be
more important than fuel substitution in 'producing carbon dioxide
emission reductions ter the three taxes .under con8ideratlon~ The
BTU tax is the most efficient reducer ot carbon dioxide
emissi~ns, but its ;lenq run effect ia laGsenad since it is not
indexed to inflation. Ad valorem tax receipts will increase over
,
time with energy price inflation, but a BTU tax will erode in
real tarms unless it is indexed.
Regional impadts of the three taxes are quite similar
(Tab C.) Across AIIl ragions, taxes are increased an average of
$88 per capita, wh~ch varies from $96-l03' in New England to $79
81 in Mississippi, 'Alabama, Tennessee and Kentucky. With the
limited changes in ,production cited above, producer-industry and
producer-stAte impacts are also limited. However, an ad valorem
(source) tax, unles'a based on a national averaqe price, would
shift some production from Appalachia and the midwest to cheaper
- 3
�,
I
,
,
I
(ndnemouth) western coal. This ndqht amount to 0.5-1.0\ of total
production, or 15 million ahort tons/year, for 6 $22 billion tax
in the year 2000. '
i
Energy taxes are all re_gressive when viewed aCrOSs. income
classes, although less
classes. " (Tab D.)
I
8Q
when looked at across expenditure
While expenditul;'e clasas are a. more accurato
measure of well-being, inco~e comparisons have been more
influential politieally, and were used by Democrats to criticize
Bush Administration proposals. These three broad-based taxes
have similar distributional effects, which may. be more regressive
than some alternat~v. ways of rGduc1ng the budget deficit, but
leBs regressive than many others.
The effecta on u.s. industry costa vary somewhat. w~th an ad
valorem (use) tax imposing the lea&t burden (Tab E.) This is
beCAuse the U8e tax strikes capital as well as !uel coats o!
energy qeneration ~ i.e. is less narrowly tarqeted to !uel.
Overall, the deterioration in competitive position ot u.s.
anergy-intensive inaustries from these three taxes is expected to
be otfset by improvements to the trade balance !rom modestly
,
declining oil imports and lower interest rates due to credible
deficit reduction. I
.
,
Qf
The Treasury Department considers these alternatives to be
administrative ditticulty (Ta~ A.>
comparab~e
Without majoriditferential impacts driving the choice at
tax, you· are able to ohoose a variant based on what it is you
want to aecomplishl Clearly, all three alternat~vGs raise
revenues and promote enerqy conservation. The question is how to
do that.
I
I
The BTU tax rationale i5 .uv1~o~~tal.
The BTU tax
results in the hi9hest CO, emission reduction per
dollar ot revenue collected, although it does affect
natural qas consumption sliqhtly more than oil
consumption.
2.
3.
I
ad valorem end-use tax is the most n.utral in its
effects on primary fuel prices. It also keeps rat9s
low withla broad tax ba•• which includes 'enerqy
generation and delivery capital, particularly affecti~g
electricity.
I
Enerqy •• cur~tr is a rationa1e tor the ad valorem
(source>ltax, which shows the greatest reduction in oil
conBumpt~on and imports.
~he
,
-
4
�Multiple objaetive~ may be met with hybrid options. These may be
combinations ot tafes, such as the European Community's blended
carbon/BTU tax proposal, a BTU/9asoline tax combination, or
design modifioations sucb as (1) modified tax base definitions
(2) variations in impos1tiQ~ points or (3) differential tax
rates.- :Up to a po~nt, such tailoring may serve poliey qo&18, but
may be hard to
pre~ent
as coherent policy.
DECISION.
_BTU Tax
Valorem (source) Tax·
~
Valorem (UeQ)Tax
Hybrid
No
enerqy~~t~a~x~::::~!:::::::::::::::::::::::::::::::::::::::::::::::::
Other
2•
_
Wb...t. ameu.. t 1
I
Deticit reduction targeted in the economic package can be
achieved with an estimated $22 billion energy tax (See Tab A for
annual revenue estimates.) This can be raised with an energy tax
soaled to bring 1nl$22 billion, or it can be accomplished with a
larger tdX and a give-back in other taxes. The qive-back
alternative.!
.
per.mits some action on middle class tax relief as
promised!in the campaiq~~
shifts t~e tax structure somewhat away from returns to
labor and investment and toward consumption.
impose. ~ larqer tax burden on:.nergy consumers, with
an attendant increaee in absolute regional differences,
in any regressive effects, and in the competitiveness
burden
on
I
energy-intensive U.S~' indust;r;ies.
increases the energy tax Lmpacts on the real economy -
consumption, production -- with 9reater potential for
ahort-term economic dislocation but concomitant
conservation, environmental and security benefits.
I
increases Federal outlays as a 'result of inflation,
requirin9 higher tax rates to Achieve any desired net
budqet position.
I
Broad g.lve-back options include the personal. income tax and t:h~
payroll tax. Particulars of such an arrangement remain to be
developed and are riot posed as a choice here~ Of course, the
- 5
�I
cO!l\l)ination of
ratio do.ired.
I
,
I
eneren'
tax and qive-back could be sealed to any
DECISION.
$22 Billion
~nerqy
Tax
Larger gnerqy Tax with
Significant Give-Back
through Other Taxes
I
Other ___________~I------------------------------------------I
3.
What adjust.ente?
.
I
I
The greateat poliey challenge of energy taxes is not 4
m~tter ot economle;impact or administrative difficulty but of
publio Acceptability, most.oiten expressed in terms of effects on
regional producers:and consumers, on enerqy-intenaive sectors
(drivers, lnduBtri,s) and on lower-income households. specific
actions to addrGS8!these concorns can be packaged with an energy
tax
proposal~
On the other hand, as the energy tax is embedded
in a much larger economic package within an even larger economic
policy agenda, speoific energy-tax-linked mitigation may not be
appropriate~
Indeed, configuring components of the economic
packaqe to be jUdged individually, when they have baen fashioned
jointly for desirable overall benefits, may facilitate their
being picked otf and hung separately.
:
I
Regarding req+onal impacts, ~he most-oftan-expressed view of
potentially-affected states is "sand money" -- 1 .. e., some untied
sharing of revenuej Ragardinq sector ~actB, possible remedies
Lnclude investm&ntland R&D tax credits, enterprise zones,
manu~acturinq extens~on programs -- items already on your agenda.
That Agenda also includes a number of proposals, e.g .. , defense
conversion and trade, where assistance to cope with economic
dislocation will
warranted, making A ·general approach
desirable. Compared with the impacts of .these other proposals, a
phased-ln energy tax will not be a leading source of dislocation.
Thus .
general mitiqation seams most appropriate here.
I
,
Regardinq reqresaivity, the uniformity and strength of public
op1ni~n about thie!issue warrants special attention to it, eVen
though reqreasivity may not be as great as generally believed
(Tab D.) Hitiqati~h may be available throuqh personal income tax
adjustments (earned income tax credit, other exemption8#
deductions or cred{ts)t payroll tax reductions, or targeted
assistance programS~ However, a better solution would be to
address regressivity of all new tax proposals at one time. as
part of a oomprehensive package of tax measures. Any aecision ~o
proceed with aner9Y.-tax-tied mitigat10n will require further
specification work.'
I
,
be
- 6
�DECISION.
I.
Develop enez:qy-tax-,apecifio m.itigation to'r~
~q1onAl
I
,
Impact~
___Sec~or Impacts
___ Oistrlbut~onal ImpactB
I
Address. mitigation 'measures in context of overall economic
packaqs'_______________________________________________________
Othar____________-7____________________
- 7
~---------------------
�of
mllar eff.,cts on .
i
taxes de",...
short·toom
economic grOYoth:
unless offset by
expanslonary
economy. A~
on 011 ofthfee
I
i
c_
firms hUll. Others
tionally
major options:
nghtest on coal,
Accontuatos
price shocks.
reductions. with
Btu tax most
efficient per
doUar of revenue
helped somewllal by
deflclt ,eduction,
Coordination with
and Japan eould
reduce
similar. by
income and
Hlgion. '
monetary 0< ftI<aI '.
policy, Ad valorem. hfi&;:;;;;;n<;;---j
opdens provfde
constant real
effect on fuel
revanue; real
i markets,
leviJnues for other;• because tax
taxesla11 unl...
baselnciu<le$
Indexed fo<
capital .. welles
inflatfon.
Texas
raised, Othe<
beneftts Include
ec
compet~lII.ness
ccsu.
reduced
environmental
costs related to
automobIle use•
i' energy.
Accemuat"
Impact on coal
falls_ned
VtM0l8mlOXM
..
10
reduction in auto
to
production, 01 an
more:
regressive
and less
laxes considered.
unoorm
Smallest effoc:t on
U.S. ind!JJ5trlaJ energy
use, but small
carbon
reductions.
te<Jionalty
than broad·
~::::::-1~::~~-t::=~~;;;-1~~~~~~rnT1
~mod8to
v.itIt monetary
policy.
produce", get
windfall gains,
n• ., loom
Signiffcani
because of largo
Mexico. and Conad.
impat1 on
en.efgy prices.
would likely seek
exemptions.
drilling Incr.....
with lesser
production
, increase.
: Speeds
! deplotlon of U,S.
In
NAFTA p<Obiems,
UK, Venezuela.
baS&<l taxes.
�A·I
Energy Tax Alternatives:
!
.
,Specifications, Revenues, and
lo.dminlstrative Considerations
I
Energy Tax Alternalives
1.
tal
Btu Tax. The
is based on the average or actual heat content
(measured in British thermal units) of energy consumed In the United
~tates.
I
.
2.
Ad Valorem· at. source. The tax is based on the average or actual value
of energy at the first point of sale (excluding exports).
3.
Ad Valoram •
use. The tax is based on the average or actual value of
energy sold to ena users (excluding exports).
e~cI
[
4.
Carbon Tax. T~e tax is based on the average or actual camon content 01
domestically consumed lossil fuels (and possibly other carbon sources,
such as cement manufacturing).
i
5,
Gaaollne Till<. The excise tax on motor fuels (including diesel) used by
highway vehicles i:ould be increased, The base could be broadened to
include diesel uslid by railroads, avia~on fuel, and other uses of motor fuels.
6.
011 Import Fee. The tax is a unit tax imposed on imported crude oil and
petroleum products.
,
I
Blended Tax. An energy tax could use a rate that Is a blend of the above taxes.
The European Community (EC) has proposed an energy tax with a rate that is
based half on Btu content and half On carbon content.
I
Specifications.tor Each Tax
I
This section provides ~ more detailed description of the base, collection point. ,
and prices (lor ad valorem taxes) that were used for analyzing the first six [axes
listed above. The rates required for each tax to raise $22 billion In FY 1997, and
alternatively 10 raise $40 billion in FY 1997 are also shown. It is assumed that
�I
A-2
I
each tax would be effective 1/1/94. and phased in over lour years In equal
stages, with the full rates In effect 1/1/97 and thereafter. 1
1. Btu Tax
I
Base is fuel uses of fossil fuels (011. natural gas, and coal) consumed In the
United States and electricity generated from hydro and nuclear power. Base
excludes nonfuel uses of fossil fuels, nonconventlonal fuels (solar, wind, etc.),
and exported fOssil fuels, For nuclear-generated electricity, the Btu content 01
the nuclear fuel is the base; lor hydro.generated and imported electriCity, the
,
average fossil fuel B~ Input that would be required to generate the electricity is
'
the base,
Collection point is thJ refinery for oil, importation point fOr electricity and refined
petroleum products, the pipeline fOr natural gas, mlnemouth fOr coal. and the
utility fOr hydro- and nuclear-generated electricity. Some downstream credits lor
nonluel use are required.
,
Rates are $O.44/mililon Btu fOr the $22 billion alternative and $O.84/million Btu
fOr the $40 billion alternative. One barrel of oil contains 5.8 million Btu's and a
tax ot $2.55 would be paid. One thousand cubic reet of gas contains 1.03 million
Btu's: a tax of $0.45 ..:..culd be paid. One short on of coal contains 21.S million
Btu's; a tax of $9,59 ..:..culd be paid,
2. Ad valorem· at source
I
Base and collection p\)ints are the same as for a Btu tax.
p~ces
a~UiSiticn
RAe
are refinery ,
cost (RAC) for oil, the
equivalent for refined
petroleum produots, wellhead lor natural gas, minemouth for coal. and fossil
fuel.generated equivalent for hydro- and nuolear-generated and Imported
electriCity.
i
Rates are 16 percent pf the indicated prices for the $22 billion altemative and 30
percent fOr the $40 billion alternative.
3. Ad valorem· end,use
I
Base excludes nonfuel uses 01 fossil fuels. nonconventional fuels, and fossil
fuels sold to electricaligenerating plants. All electricity delivered to customers is
I
I
1 The tour-year phase in would make 114 of Ihe full rate in effect in 1994, 1/2 In 1995,3/4 in
1996. and the 1ull rata in 1997 and later years,
�A·3
I
in base (i.e., transmission losses excluded). Natural gas used in pipelines is
also excluded.
I
Collection point is the 'refinery for petroleum products, the pipeline for natural
gas, a~d the utility for ,electricity.
I
Prices are end user prices.
I
Rates iye 4,70 percerit of end user prices for the $22 billion alternative and 8.65
percent for the $40 blli,ion alternative.
4. Carbon Tax
I
Base is confined to fu~1 uses of fossil fuels.
I
Collection point is the refinery for oil, importation point for refined petroleum
products, the pipeline for natural gas. and minemouth for coal. Some
dcwnstream credits for nonfuel use are required.
,
I
Rates are $22,OO/short ton of carbon for the $22 billion aHemative and
$42,OO/short ton of carbon for the $40 billion altemative,
,
,
5. Gasoline Tax
Base is 'Highway Trust Fund Base,' which is gasoline and diesel used as a
motor fuel, excluding purchases by nonprofit organizations. state and local
governments. farms, aviation, inland waterway transportation, intracity and
,
,
school buses, and off-highway use.
,
Collection point is the Jame as current law,
,
Rates are $O,237/galloh for the $22 billion a~emalive and $O.442/9allon for the
$40 bill ion alternative.
6, 011 Import Fee
I
I
Base is all imported crude all and refined petroleum products (measured in
crude equivalents).
'
1
Collection is at the point of importation,
Rates are $9.67/barrellor the $22 billion alternative and $21 ,33lbarrel for the
$40 billl"n alternative, :
.
�A-4
I
,
,
Preliminary Revenue Estimates
Table A-I shows' preliminary ravenue estimates for each of the above energy
taxes and for both reVenue targets in FY 1997 {$22 billion and $40 billion), All 01
the energy tax alternatives, by design, would reach the revenue targets in FY
1997, 'and all would raise similar amounts of revenue over the FY 1994-1998
,
period. The ad
taxes. however would raise more revenue in FY 1998
and subsequent yellrs.
Tabla
ReVllnue Estimates for Alternative Energy Taxea
,
I
Adminlatl'atlve Considerations
I
ThiS slOlon describes the administrative considerations affecting the design 01
an energy tax, In gen"ral, the adminlstrabillty of a tax is enhanced by adherence
to the follOwing principles:
-
,
I
Rlites should be expressed on a per-unit basis and should be blIsad on
averages rather than on actual energy content. carbon content. or price,
,
-
The number of taicpayers should be minimized,
•
The tax should
I
be imposed as lar up~tream as possible,
�,
I
A·S
I
•
The base should be defined so ti1at taxability can be determined with
certainty at the Point of collection.
.
•
The visibility of the tax should be minimized.
I
eXISti~9
-To the extent JSsible.
administrative
with the foregoing criteria should be used.
.
.
st~clures that are consistent
I
The considerations relating to broad based taxes (jJI., the Btu tax, both variants
of the ad valorem taX, and ti1e carbon tax) are similar and those taxes are
discussed as a group. The oil import fee and the gasoline tax are each
,
.
discUllsed separately.
.
,
I
BROAD BASED TAXes
,
I
Use of Averaae Bale$. The taxes would impose significant administrative
problems if imposed on the basis of actual energy or carbon content or actual
price, determined on 'a transaction·by·transaction basis. For ease of
administration. the taXes should be imposed on a per·unit basis (J.g., barrel of
oil, Ion of coal) at a "ita based on a national average for each type of energy
,
source. Thus, for example, the Btu tax imposed on a barrel of 011 or a ton of coal
would be based on the average energy content of oil or coal rather than on the
actual energy content of the particular barrel of oil or ton of coal. Similarly, the
ad valorem tax would: be based on the average price in all transac~ons during a
recent period (see be.low) rather than on the actual priee in the particular
transaction.
I
.
The different grades of coal vary significantly in their energy content, carbon
content. and price. Thus. equity and regional balance may require that coal be
treated as muniple Pr?aucts (J.g., bituminous, su):)..bituminous, lignite). each
subject to a different tax rate.
,
. i
Tax rates would also !'e determined for the different types of refined petroleum
products (!l.g., gasoline, fuel oil). The end use ad valorem tax is Imposed on
both domestic and imPorted refined products at rates determined in the manner
deScribed above. The other taxes are imposed on imported (but not domestic)
refined products at a iate equal 10 the average tax embedded in the cost of
equivalent domestic products.
I
Except under a carbon tax. tax rates would also be determined for electricity
from hydro and nuclear power. The tax per unit on electricity from these sources
would be equal to thelaverage tax embedded in the cost of electricity generated
from fossil fuels.
i
Ad valorem taxes would be adjusted periodically to reflect changing prices for
energy products. The adjustment mechanism should balance various factors
including (1) the goal of reflecting current price levels as closely as possible. (2)
I
,
�A-6
the advantages of stable rates, and (3) the lag time between a change in prices
and a corresponding Change In rates imposed by delays In data collection and
the need to give reasOnable advance notice to taxpayens, The rates for a Btu or
carbon tax WIluid generally remain ,constant over time (although some variance
may occur if the mix of fuels used changes),
.
,
,
IiAjnjmjzing Number of Taxpayer~, The taxes are collected at the narrowest point
In the chain of production and distribution SO the lAS can focus its collection
efforts on the smallesi possible number of taxpayers, For example, the tax on
crude aU (or, In the case of the end use ad valorem tax, refined petroleum
products) Is collected at the refinery,
I
I
Upstream Imposition, IThe taxes are generally imposed at or near the producer
level £I&.. upstream) and before the point at which the product is likely to be put
to a taxable use, Thislmlnlmizes the potential for avoidance from the taxable
use of a product before it reaches the point at which tax is imposed,
i
Definition 01 Ejase, Th!l taxation of all energy sources, without exception, would
simplify the administration of the tax, To the extent the base is narrowed
through exemptions, it!may not be possible to determine until the product is
actually used whether tax should be Imposed, The tax-free sale and refund
mechanisms typically provided when products are purchased for or used in an
exempt use increase administrative burdens and opportunities for avoidance,
The broad based taxeJ minimize these problems. In general. the only significant
exemption under all ot'the taxes is for nonfuel uses. In the case of the end use
ad valorem tax, however, fossil fuel (principally coal) used to produce electriCity
is also exempt.
I
,
Vlsjbili11(, Taxes are most visible to the public when they are Imposed on retail
sales and are separately stated in the amount Charged to customers, In
addition, a tax that results in a substantial increase in the price of a product is
likely to be visible even, if it is not separately stated.
The broad based tax~ are generally imposed before the retail sale and wou:d
not be separately state(;, (Note that utilities would prefer a tax that is impoSed
,
on the customer and collected by the utility, They are concemed that otherwise
there would be a significant delay in their ability to pass the tax along to the
customar, Such a tax Would be highly visible if separately stated on utility bills.)
In addttlon, none of the: broad based taxes should cause a noticeable increase in
retail prices for any proauct.
,
Use of Existing AdmlniStratjve Struc~...,es, A new tax is easiest to implement il il
is imposed at the same,point and collected from the same person as an existing
tax on the same product. In that case, the administrative structures used for the
existing tax can be ext~nded, without significant modification, to the new tax,
The existing tax on crude oil Is imposed on receipt at the reflnery and coliected
I
I
,
,
�A-7
from the refiner and the e)(lsting Ill)( on coal is imposed at the minemouth and
collected from the prol:tucer, Thus, administrative structures for these la)(es
,
could be extended to a Btu Ill)(, carbon Ill)(, or at source ad valorem tax,
I
,
Floor Sto9kli Tax, A floor stocks Ill)( may be imposed when a t8)( takes effect or
Its rate Increases, The purpose is to ensure that Ia)( is paid on products that are
already past the point' at which t8)( is generally imposed, Floor stocks taxes
involve large numbers of Ill)(payers and are difficult to administer. Nevertheless,
they are generally considered necessary to prevent'slockpiling prior to the
effective dale at a neW Ill)( or a higher 18)( rate,
I
l
The oil Import fee Is a per-barrel fee on crude all and petroleum products
Imported into the United States. Although there may be more importers than ,
refiners of imported crude oil, the Ia)( must be collected at the point of
importation because, once In the United States, Imported and domestic
petroleum are indistinguishable, (Nole that a floor stocks Ia)( would not be
imposed for this reason.) On the other hand, although the base at the Ia)( is
relatively narrow, all Imported petroleum products would be la)(ed (with a
possible 9)(ception for products that are re-exported), Thus, la)(ability can be
determined with certainty at the time of importation, minimizing the complexity
and opportunities for avoidance associated with exemptions, The oil import fee,
because 01 its narroW: base. will have a noticeable effect on retail prices ot
petroleum products sUch as heating oil and gasoline, Thus, it is likely to be
much more visible than the broad based la)(es, Existing administrative
structures can be used to collect the oil import fee on refined petroleum
products, but there are no structures in place to collect the tee on crude oil
I
imports.
Gasoli02m
I
,
implementation of an:increase In the tax on gasoline and other motor fuels wocld
require no new administrative structures, It should be noted, however, that
exl,sting structures are not satisfactory, IRS enforcement efforts are hampered
by the large number tQ)(payers as well as the exemptions for off-highway use
and a variety 01 other; uses, As a result, evasion of the motor fuels la)(es is
widespread, Moreover. the gasoline Ia)( is the most visible of all the proposed
alternatives, The eff9ct of the proposed increase on the retail price of gasoline
would be as great as that of an 011 import fee and would be immediately refiected
in prices at the pumpi
of
�,
.
Alternative Energy' Taxes:
I
I Energy Market,
'
Environmental, and
Economy-wide Impacts
Total Energy Consumption
I
• Total 1992 U,S, energy consumption was 87,0 Quads, In the
absence of energy taxes, consumption is prolectad to grow by
10% to 12%: by 2000 and another 9% In the following decade,
leading to increased reliance on imported energy,
!
'
• While the taxes analyzed would reduce energy use from
projected levels. economic growth would raise energy
consumption In the U,S, above,1992 levels under all of the
scenarios analyzed,
.
Jx
• An energy
netting $22 billion in FY 1997 would reduce
projected energy consumption by 0,5% to 2,8% in the year
2000: a tax nailing $40 billion would reduce consumption by
0,8% to 5.5%. The largest impacts on energy use would come
from an oil Import fee. while the smallest would come from a
motor fuels tax and an end-use ad valorem tax,
I
�B·2
Table',B·1: Energy Consumption In Year 2000
(percentage change from Base Cat.)
I~~~
Tabla B·2: Energy Consumption In Year 2010
.
change from Baae Case)
,""Tu
NOTE:
MVI\orIl/!lTil
CmonTa
OIIInpOlt , .
for a $40 billion revenue target are roughly double.
Energy Consumption Shares
J,port
• With the exeeption of oil ,
fees, none of the taxes analyzed has large effeet5 on the relative
market shares at coal. 08, and natural gas. These remain within percentage points of base case
.Ila,.... Ma_ ">r eachjfuel will be larger in 2000 in absoM. terms Ihan tMy are today.
..
A1 a rGVenUG level of $22 billion, carbon and Stu taxee reduce total ~ production by 2% to 3% in
Ihe year 2000: III • """'101 $40 billion they ,edu"" prodUdlon by 4% !() 5%.
,
..
The coal market Impact of an ad valorem tax depends on where it is collected. A tax levied on Ire
,
price at Ihe source encoorages switching from eastern to western coal because the laner w;::U'Q rave
a much lower prIce for tax' purposes, This result, howe-lief, i$ dependent on the specification of t~e
lax
I
• The 011 Import 1ee has the:greatest effect on domestk energy producers, boosting domestic o'!
productIon by as much as' 11 % with a $22 billion tax (approximately one million barrels per day). If
natural gu prices also move upward as B result of the fee, gil!, could become less competitive in :he
market for eJectrlc utility fuelS. Alternatively, increases!n domestic oil exploration and production
actMty could increase na£ural gas supplies and reduce the price of natural gas.
�B-3
Table B-3: Producer Prices In Year 2000
!percentage change from Base Casel
,
~Of1d
lerud.
Oil
!Coa'
iMlnefOOUth
.,
~~Gas.
''''
_I
"'"
lItlI'IX
u:...:"
MV_ _ fa
22,9S
,
-<),01(,
.1.1)",
I
CtrbonTu
iIokIf 'wi Tu:
011 llIIpOft Fit
-O,S"
-0,4%
·1,1%
,4,1%
battel
20.03
short ton
21.71
26,45
,
-<),."
-<), ,,,
-0,2')4
·0.4'%
0,0l(,
·02%
mel
1.71
2,58
,
-<),8"
.o.S%
..0.4%
O.O%.
0.4%
··3"
,
,
I
Tabla B-4: End-Use Prices In Year 2000
(percentage cllange frem Base Case)
I
'toO
_
....
...
short ton
31,32
3<1,38
17.7"
122"
0,0l(,
I~allon
1,26
1,44
,
2.6%
6,3%
4,$% .
3.4'%
12.5%
'"OS
3,7%
8,7%
•.5"
.c.4%
-0.3%
6.SO
,
4,3%
O,OS
5.8%
I
eo.1 - utiliti..
\3aoolino
Retail
~US."'1d
oallon
1.12
mel
e. \0
!'iausohold .
NoMa! Gao
Ele<!rlcily ..
Residential
kWh
O,OS
'u.l
MV_ _".
Wt_
u,::'::::;"
Ctlt<lnTu
20.1""36,7%
0,0%
:IIofo(
OlIMpoor1l'M
TU
,,,..
I
,
,
,
,
,
11 ]'Wt
,
15,~
,
,
,
Ie
,
ow,..
6,1%
I
I
3,Slio
4,'"
5,3%
4.2"
I
,
0,1%
,
·1.$..... 108.8%
,
,
,
0,0%
5,3%
NOTE: Effects for a $40 billion revenue target are roughly double,
\5%
I
Primary and Secondary Fu.1 Price.
..
The affects of taxes expressed In nominal terms {e,g" cenl$ per galtoo) are eroded owr time due to ioflat!on,
Over a twenty yetJI period.
impacts of tax rates on inflatlotHIdjusted price5 would be teduced 40% 10
60%, The effec1s of ad valorem taxes. which are specified as a percentage of the sales pres, do not eroce
overtime,
me
I
'
..
Ad valorem taxes w\l1 amplify any price shocks that occur In energy markets unless soma alternal:ve
provision is made.
..
Carbon and Btu taxes have trye largest effects on the price of coal. SW, carbon, and end-use ad val()(eI'n
I
I
taxes affect electricity prices the most
I
,
• Because 01 their narrower tax bases, gasoline taxes and oil import fees jn\tONe higher price increases on 11'&
fuels affected by those taxes ~han broader based taxes. such as those based on carbon, btu's, Of '/a;ve,
I
I
�I
B-4
I
I
I
T!lb1a 8-5: Change In CO2 Emissions
(percentage change from basellnel
I
Yeo,
B....I...
I!m~lon. (mmlc)
~1,4" to -2.1%
-1,5%\0 -2.0%
~1.1"'to-1.3%
-1,3%!O ,2,6%
QuoUn.
,,(l6'" to ·1.'%
011 Import F..
I
1*
1407
c._
I
,
1_
Blu
Ad V..","", (AI Sou_)
Ad V......m (end Un)
I
-
I
I
-2,3%\0 -3.0'!I
NOTE: Effects for a $40 billion revenue target are roughly double,
I
I
Environmental Impacts
• At the Fllo Summit, the U.S. $iQned a climate convention that included the goal of returnIng its greenhOuse
gas (GHG) emissions to 1990 levels. {GHGs include carbOn dloxlde (COzl. methane, and nitrous oxide.j If
all elements at the U.S, Action'Pfan are successfully implemented, GHG emissions are predicted to be I A%
to 6% higher In the year 2000 than in 1990. The addition of energy tax" considered here could result in
emission reductions that would meet this goal.
•
I
'
Because anorgy use Is Ukely 10 growsteedily In an expanding economy. COt emissions in the U.s, are
predicted to grow by roughly 10'lb over the next decade.
the predominant GHG.) The energy lax ....
d••ign.d to ",I.., $22 billion Ini1997would reduce
_ n o by up 10 3% In lhe year 2000, Wdh Ih.
higher revenue goal of $40 billi,on, COz emission r~uctions of up to 6%. could be schiewd by the year 2000.
Thus, by themsetves. the energy taxes of the magnitude under conslderation here cannot be expected to
return Co. omissions (." opposed tel all greenhouH gas .mIssIons! 10 1990 !evel$.
co.
(co."
I
•
OutsIde of the oil Import fee, it1- carbon tax results in the highest CO2 emission reduction per doliar 01
revenue collected. followed by (the Btu and the at-source ad valorem taxes, The motor fuels tax and Ina e!"\d·
use ad valorem tax haw the lo:west carbon reducUon effiCiency. The emission reduction benefits ot IN3
carbon and Btu taxes are roug~1y similar,
•
Beyond the year 2000, C~ e~rsslons projections are necessarily more uncertain. especially tor ad valorem
taxes, The carbon and Btu taxes continue to reduce the most C~ per doUar 01 revenue raised, but since
their specffled rates were not iI~dexed to Inflation, their COz reduction beoefit& decline over time, II appears
that tho CO. redUetJon effea '" the 011 import fee falls dramatically aft",'he yo.. 2000,
,
• Ad valorem taxes rise with inflation. Therefore, they have an increasing effect 00 both conset'\lation and tuei
substitution CMlr tl!'\"le. If eonHrvatton in oil and gas out:weighs fuel switching towards co,a! in tne ele<:1J!c
utility sector, the at-source ad Valorem tax has larger CO2 reduction ben$flts in 2010 than the er;d·;.,I,e :ax
and other taJ(es, Should utility ;fueJ switching dominate. the C~ benefim of the at~source tax in 2010 *'Owld
b••ubstantially lower.
•
i
,
.
The energy taxes Vitll result in ~ther environmental benefits Including lessening of uroan smog. ac'c ra,,"I,
waste disposal probfems and oil spills. These additional benefits, hOwever, Bre likely to be re!atN~ f':"¢<!est
For example, fl g8$Qlille tax of ,
$O.2!Ygallon (approximately equivalent 10 the l't'IOtor fuels tax assQCla:&d NItti
the $22 billion revenue target) ~ill reduce volatile «ganic rotnp¢unds (VOCs) that cause urban sl1">Oq by
roughly 20,000 tons, or 0.4% -of total U,S, emissions in th~ 'lear 2000.
�6-5
I
Economy-wide Impacts
GOP EffectS
,
• A new energy tax, like any other tax increase. if
unaccompanied by accommodative monetary policy or
other offSets. would reduce economic groWtih and
aggregate employment over the short to medium tenm
,
(on the order of 0.5%). Adverse GOP and employment
effects could be reduced or aven eliminated if
accommOdative monetary policy is undertaken or if the
financial 'markets view the defic~ reduction program as
credible, l'therebY reducing interest rates and spurring
growth.
• Of the taxes considered. the oil Import fee is likely to
have the:greatest negative impact on national economic
growth per unit of revenue raised. While the oil import
fee will boost regional economic activity In the all
producing regions. its inflationary impacts are the largest
of the taxes under consideration, As a resuH. monetary
authorities would be more constrained In their abil~ 10
,
.
accommodate the tax package.
I
Induatty-Spaclflc Effects
• Energy ulxes would cause specific industres to gain at
the expense of others. Those most likely to gain would
be non-energy intensive manufacturing concerns with a
large exp?rt market. Some of these industries would be
able to take advantage of the decline in the U.S.
exchange rate that would follow the adoption of an
energy tax by itself. These industries include:
.
construction equipment, a;rcrafl, industrial machinery
such as metal working machinery. and copiers.
Industries most negatively affected would be energy
producing and energy-intensive manufacturing
industries, such as mining. electric utilities, and the
chemical 'and pulp and paper industries.
I
I
I
�c·,
Table C-1: Regl0n+llmpacts on Consumer. of AlternaUva Energy Tax..
,
.
TIXI
I
,
Btu TIX
C.rwUI Region
~
I
East
I:ast South
,
wast NO""
~
Ad
WUsI
$100
I
,
1.58
...
""EndIU..
o~
~i
1.57
~
~
i
.~.
-
i
,
,
,
,
I
12%
56
~
).57
0.60
0.57
0.49
Table C-2: Relative
Cen.... 1I"1Ilon
BtuTox
Btu TIl'"
~
I
1041
100,
I I:ast North'
, East South'
.
rlXl
At~
102
I We.t NoM
Impacts on Conaumer. of Alternative Energy Taxn
~ta:ax ~
..
~
1Q
~
92
I We.t:
107
~
Tot
~
9.
91
91
l'
..!!l
~
109
9'
Ragl9nallmpacte on Consumer.
•
jmp~
The above tabfes prowJ information on the regionaJ
of the Btu and ad valorem eM(g'f:.u
altemntive~, assuming a:W billion ravenue target !n FY 1991. Table 1 $hom by census region
tho dollar amount of tax that would be paid on a per capita basis. Table 1 alsO' expresses the la,w
increa'SeS as a percent of dlSp0$8.ble personal Income in each region. Table 2 shows the same
imormauon as Table 1, b'ut oxpre$$f!!O as 8 percent of the national average. A map of cen~us
regions folfows the table$:.
I
•
•
The tables inlflCate that the regional impacts of thesa three energy taxes are slmilar,
• Note that while the lax bJrden on a givan reglGl"l may be higher than the national average 0" a ;:..,.
capita basis, it Is often I~r than the national average as a percent of disposable personal
lneoroo, and vice versa, for all threelaxes.
I
�C-2
Figure C-1: U.S. Census Regions and
I
Divisions
I
I
'"
Ce
Mou
•
In
~dle
Qantlc
i
South
C::;:;:::-{ !lanUc
�D·'
I Distributional Effects of Energy Taxe9 I
I
',01------
I
•
•
•
1_ _ ,.,.
0......
a _ _ ... 111", _ _
I
,
I
Figure D·': Distributional Effects of
Alternative Energy Taxes (average share of
pre·tax Income 2000·2004)
,
Figure D"z: Distributional Effects of
AlternstiVa Energy Taxes (average share
expenditures 2000·2004)
• Relative to annual Income, the direct Impect of broad· based energy taxes is
regressive. although this regressivity is reduced when indirect effects - e,g"
air travel plice Increases - are taken into account. Grouping households by
annual expenditures also shows energy taxes to be much less regressive,
This.!. a more accurate measure of well·being, especially in the lowest
income quintile which exhibits the greatest regressivity effects on an income
basis.
:
•
• All of the a~ernstiv~s are about equal distributionally. so this feature does not
provide a basis for distinguishing between taxes,
• Note that the dlstriJroons In the graphs above are oefore any possible give.
back to mitigate regressivity. and do not reflect other elements of the tax
package (e,g. higher rates on high-income taxpayers), Neither dO they
reflect any softening of the impact on low·income households through cost
of-living adjustment~ to transfer payments they receive,
• Distributions by ann'ual income are the more influential politically (and were
used by Democralaita criticize Bush Administration proposals).
of
�E-1
Industrial Sector Fuel ~rlc.s In 2000
(p.trc,mtlge change from BaH Case)·
AclV__ Tu
•
for a
NOTE:
are
billion
double.
Industrial
• With r'agard to the InCIUsma sector, the carbon and Btu taxes have similar Impacts.
• The motor fuels tax
almost no affect on industrial prices.
and
• Art energy tax could Ihduce some displacement of energy-Intensive industries to
non-tilldng countries"undercutting the revenue baSe and environmental benefits of
I
the tax.
• On balance, deficit reduction financed partially through energy taxes could modestly
boost U.S. intamational competitiveness. This is because:
.
."
!
• Energy taxes would reduce slightly our dependence on imported oil (Wlth the
exception of the oil import fee which affects imports significantly), Improving our
trade balance
!
• A credible deficit reduction package would lower interest rates, causing a' outflow
of capital from the U.S., lowering our eXChange rates and making our exports mere
compet~ive
I.
..
• Together these two factors could more than offset the loss in competitive posilion of
U.S. energy-intensive industries, which would see a rise in their production costs
vis-a-vis their overseas competitors.
!
• U.S fuel prices are
taxes
among the lowest in the G7 (see following page). The
not greatly change this situation.
�,
FIgure E·1: Comparison of Fuel Types
by G·7 Country
.
"t". ..." . "". """
... . "...... "
" ...
~
~..
~
.. .
·,.t--
I,· "'".
f··
~"
,. ~
,.
-
~ ~
'.
I
Ltghl".... 011_ In Q·7 CountnH
~1991 P,k:eo and
Rat..)
ExcharIgo
EI_1Iy PrIcH In Q.7 Countrl..
(1991 P_and Exchange Rat",,)
" """""""""".""""" .. ""."
.... ....
I,.... .....
1,.. • ••
~
~
~
i", ...."
J'. .
,.
,
----_
........
Ouolln. PIlcH In Q.7 Cou_
(1.991 P,I_ and Exchange Rates)
1
i
''".
.. ...
~
..... .
I
I
I
---'*-~"
Natural On PrI... In
Countrt...
(1991 Prices and Exchange RatOll)
"leu
Coal
In 0.7 Count.....
(1991 PrIc.. and Exchange RS'''I
..
�E-3
Import Fe.t/Customs Dullea and International Obllgatlons
bu
• The tariff on crude can be raised (either directly or via an import fee)
without violating oJr obligations under the General Agreement on Trade and
Tariffs (GAT!). HoWever. the application of any tariff increase or Import fee to
imports of crude fr<im Canada, and possibly Mexico and Venezuela, would be
lim~ed by other existing agreements (see below).
I
• The ~uation Is different for petroleum products, where U.~. tariffs are bound
. under the GATT. Imposillotl of higher lariffs or Import fees could make the
U.S. liable 10 pay compensation under GATT, and subject the U.S. 10
retaliation.
I
• While the U.S. could invoke the 'National Security" exception under GATT
noles, the deficit reduction aim of the Import fee would expose the U.S. to a
challenge within GATT. A GATT panel could find the exception inapplicable
and require the U,S, to pay significant compensation to the satisfaction of
•
GATT member countries.
I
• Agreements with i~dividual trading partners would impose additional
constraints on the application of increased tariffs or Import fees. The U.S.
would likely need tb:
!
• Exempt Canada from the tariff, because 01 the U.S./Canada Free Trade
Agreement (CFTAj. Once the North American Free Trade Agreement
(NAFTA), goes into effect, Mexico may also have to be exempted from the
tariff.,
I
'.
I
.• Abrogate a U.S.Neoezuela bilateral agreement that binds U.S. tariff rates
on Venezuelan crude 011 and petroleum products. 'Most Favored Nation"
obligations under GATT would not allow the U.S. to exempt Venezuela (with
wIlieh the U.S, does not have a free trade agreement) from increased tariffs
or import fees without extending similar benefits 10 all GATT members,
I
�...
A
E-4
The Europoan Commlulon'. Btu/Carbon Tax Proposal
In 1991, the EC Com~ission suggested a Btu/carbon tax. The proposal, an
element of the Commission's oarbon dioxide limitation strategy, calls for a tax
startfnll at the equivalent 01 $3 per'barrel 01 oil in 1993, rising to the equivalent of
$10 per barrel in 2000. Fossil fuel prices and use would be affected by both the
energy and carbon components of the tax, while carbon-free energy sources.
suoh as nuclear and hydro, would be affected only by the former. Thus, while
affecting all energy, trie tax offers a relative advantage to low- and no·carbon
I
energy sources,
The formal proposal, put forward by the Commission in May 1992, provides that
the application of the tax would be 'conditioned on the edopoon of similar
measures' by other cOuntries. The proposal also suggests that energy·intensive
industries be given sPecial \reatment or exemptlons: from the tax to offset,
possible competitiveness effects. In addition, the proposal suggests that
•
revenues be used to (educe other taxes, but leaves the decision to the individual
member states since iIley, rather than the EC Commission, have competency in
this aree.
The EC Commission Btu/carbon tax must have unanimous approval from the EC
Council of Ministers, representing the individual member state governments,
before it can take eff~ The Btu/carbon tax is being reviewed by three different
sets of member country ministers: finance, energy, and environment. Views vary
widely across both countries and ministries. To date, Council action has been in
the form of a request for further analysis.,
'
On Jan~ary 28, 1993! the EC Commission issued the following statement:
The EIJropean Commission welcomes the recent declarations mado in US,
Government circles Which demonstrate a willingness to seriously and efficiently
tackle world energy aOO environment problems. The European Commission is
/lspee/ally pleased to IS/l6 the new U.s. Administration thinking about measures
regarding a possible environment and energy tax. The European Commission
has already approved such measures but they are subject to a "conditionality
I
clause.'
�
Dublin Core
The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
Title
A name given to the resource
Clinton Administration History Project
Creator
An entity primarily responsible for making the resource
Cinton Administration History Project
Council of Economic Advisers
Department of Commerce
Central Intelligence Agency
Department of the Interior
Department of Defense
Corporation for National Service
Council on Environmental Quality
Department of Justice
Domestic Policy Council
Department of Education
Department of Energy
Environmental Protection Agency
Federal Emergency Management Agency
General Services Administration
Small Business Administration
Social Security Administration
United States Agency for International Development
National Economic Council
Office of Management & Budget
Office of National Drug Control Policy
Office of Personnel Management
Office of Science & Technology Policy
Office of the Vice President
United States Trade Representative
Date
A point or period of time associated with an event in the lifecycle of the resource
1993-2001
Description
An account of the resource
<p>The Clinton Administration History Project describes in detail the accomplishments of President Clinton's Administration for the period 1993-2001. The records consist of the histories of 32 agencies or departments within the Executive Branch. In general, each organization associated with the Project submitted a narrative history along with supporting documents. These narrative accounts are primarily overviews of the various missions, special projects, and accomplishments of the agencies. The supplementary records include substantive memos, press releases, briefing papers, and publications illustrated with photos and charts.</p>
<p>Agencies:<br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Council+of+Economic+Advisers&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Council of Economic Advisers</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Central+Intelligence+Agency&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Central Intelligence Agency</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+Commerce&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of Commerce</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+the+Interior&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of the Interior</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+Defense&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of Defense</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Corporation+for+National+Service&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Corporation for National Service</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Council+on+Environmental+Quality&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Council on Environmental Quality</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+Justice&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of Justice</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Domestic+Policy+Council&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Domestic Policy Council</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+Education&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of Education</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+Energy&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of Energy</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Environmental+Protection+Agency&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Environmental Protection Agency</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Federal+Emergency+Management+Agency&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Federal Emergency Management Agency</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+General+Services+Administration&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the General Services Administration</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+Health+and+Human+Services&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of Health and Human Services</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+Housing+and+Urban+Development&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of Housing and Urban Development</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+Labor&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of Labor</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+National+Economic+Council&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the National Economic Council</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Office+of+Management+and+Budget&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Office of Management and Budget</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Office+of+National+Drug+Control+Policy&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Office of National Drug Control Policy</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Office+of+Personnel+Management&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Office of Personnel Management</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Office+of+Science+and+Technology+Policy&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Office of Science and Technology Policy</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Office+of+the+Vice+President&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Office of the Vice President</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Small+Business+Administration&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Small Business Administration</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Social+Security+Administration&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Social Security Administration</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+State&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of State</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+Transportation&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of Transportation</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+the+Treasury&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of the Treasury</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+United+States+Agency+for+International+Development&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the United States Agency for International Development</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+United+States+Department+of+Agriculture&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the United States Department of Agriculture</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+United+States+Trade+Representative&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the United States Trade Representative</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+Veterans+Affairs&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of Veterans Affairs</a></p>
Is Part Of
A related resource in which the described resource is physically or logically included.
<a href="http://clinton.presidentiallibraries.us/items/show/36051">Collection Finding Aid</a>
Provenance
A statement of any changes in ownership and custody of the resource since its creation that are significant for its authenticity, integrity, and interpretation. The statement may include a description of any changes successive custodians made to the resource.
Clinton Presidential Records: White House Staff and Office Files
Publisher
An entity responsible for making the resource available
Clinton Presidential Library & Museum
Format
The file format, physical medium, or dimensions of the resource
Adobe Acrobat Document
Extent
The size or duration of the resource.
1474 folders in 111 boxes
Text
A resource consisting primarily of words for reading. Examples include books, letters, dissertations, poems, newspapers, articles, archives of mailing lists. Note that facsimiles or images of texts are still of the genre Text.
Original Format
The type of object, such as painting, sculpture, paper, photo, and additional data
Paper
Dublin Core
The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
Title
A name given to the resource
NEC – Deficit Reduction Plan of 1993 [1]
Creator
An entity primarily responsible for making the resource
History of the National Economic Council
Clinton Administration History Project
Date
A point or period of time associated with an event in the lifecycle of the resource
1993-2001
Is Part Of
A related resource in which the described resource is physically or logically included.
Box 39
<a href="http://clintonlibrary.gov/assets/Documents/Finding-Aids/Systematic/Administration-History-finding-aid.pdf">Collection Finding Aid</a>
<a href="http://catalog.archives.gov/id/1497354">National Archives Catalog Description</a>
Provenance
A statement of any changes in ownership and custody of the resource since its creation that are significant for its authenticity, integrity, and interpretation. The statement may include a description of any changes successive custodians made to the resource.
Clinton Presidential Records: White House Staff and Office Files
Format
The file format, physical medium, or dimensions of the resource
Adobe Acrobat Document
Publisher
An entity responsible for making the resource available
Clinton Presidential Library & Museum
Medium
The material or physical carrier of the resource.
Reproduction-Reference
Date Created
Date of creation of the resource.
6/24/2011
Source
A related resource from which the described resource is derived
1497354-nec-deficit-reduction-plan-of-1993-1
1497354