President William J. Clinton
|President Clinton's Remarks on Social Security- 1999|
9:10 P.M. EST
THE PRESIDENT: Mr. Speaker, Mr. Vice President, members of Congress, honored guests, my fellow Americans: Tonight, I have the honor of reporting to you on the State of the Union.
Let me begin by saluting the new Speaker of the House, and thanking him, especially tonight, for extending an invitation to two special guests sitting in the gallery with Mrs. Hastert: Lyn Gibson and Wei Ling Chestnut are the widows of the two brave Capitol Hill police officers who gave their lives to defend freedom's house. (Applause.)
Mr. Speaker, at your swearing-in, you asked us all to work together in a spirit of civility and bipartisanship. Mr. Speaker, let's do exactly that. (Applause.)
Tonight, I stand before you to report that America has created the longest peacetime economic expansion in our history -- ( applause) -- with nearly 18 million new jobs, wages rising at more than twice the rate of inflation, the highest home ownership in history, the smallest welfare rolls in 30 years, and the lowest peacetime unemployment since 1957. (Applause.)
For the first time in three decades, the budget is balanced. (Applause.) From a deficit of $290 billion in 1992, we had a surplus of $70 billion last year. And now we are on course for budget surpluses for the next 25 years. (Applause.)
Thanks to the pioneering leadership of all of you, we have the lowest violent crime rate in a quarter century and the cleanest environment in a quarter century. America is a strong force for peace from Northern Ireland to Bosnia to the Middle East.
Thanks to the leadership of Vice President Gore, we have a government for the Information Age. Once again, a government that is a progressive instrument of the common good, rooted in our oldest values of opportunity, responsibility and community; devoted to fiscal responsibility; determined to give our people the tools they need to make the most of their own lives in the 21st century -- a 21st century government for 21st century America.
My fellow Americans, I stand before you tonight to report that the state of our union is strong. (Applause.)
America is working again. The promise of our future is limitless. But we cannot realize that promise if we allow the hum of our prosperity to lull us into complacency. How we fare as a nation far into the 21st century depends upon what we do as a nation today.
So with our budget surplus growing, our economy expanding, our confidence rising, now is the moment for this generation to meet our historic responsibility to the 21st century.
Our fiscal discipline gives us an unsurpassed opportunity to address a remarkable new challenge -- the aging of America. With the number of elderly Americans set to double by 2030, the baby boom will become a senior boom. So first, and above all, we must save Social Security for the 21st century. (Applause.)
Early in this century, being old meant being poor. When President Roosevelt created Social Security, thousands wrote to thank him for eliminating what one woman called the "stark terror of penniless, helpless old age." Even today, without Social Security, half our nation's elderly would be forced into poverty.
Today, Social Security is strong. But by 2013, payroll taxes will no longer be sufficient to cover monthly payments. By 2032, the trust fund will be exhausted and Social Security will be unable to pay the full benefits older Americans have been promised.
The best way to keep Social Security a rock-solid guarantee is not to make drastic cuts in benefits, not to raise payroll tax rates, not to drain resources from Social Security in the name of saving it. Instead, I propose that we make an historic decision to invest the surplus to save Social Security. (Applause.)
Specifically, I propose that we commit 60 percent of the budget surplus for the next 15 years to Social Security, investing a small portion in the private sector, just as any private or state government pension would do. This will earn a higher return and keep Social Security sound for 55 years.
But we must aim higher. We should put Social Security on a sound footing for the next 75 years. We should reduce poverty among elderly women, who are nearly twice as likely to be poor as our other seniors. (Applause.) And we should eliminate the limits on what seniors on Social Security can earn. (Applause.)
Now, these changes will require difficult but fully achievable choices over and above the dedication of the surplus. They must be made on a bipartisan basis. They should be made this year. So let me say to you tonight, I reach out my hand to all of you in both Houses, in both parties, and ask that we join together in saying to the American people: We will save Social Security now. (Applause.)
Now, last year we wisely reserved all of the surplus until we knew what it would take to save Social Security. Again, I say, we shouldn't spend any of it -- not any of it -- until after Social Security is truly saved. First things first. (Applause.)
Second, once we have saved Social Security, we must fulfill our obligation to save and improve Medicare. Already, we have extended the life of the Medicare trust fund by 10 years -- but we should extend it for at least another decade. Tonight, I propose that we use one out of every $6 in the surplus for the next 15 years to guarantee the soundness of Medicare until the year 2020. (Applause.)
But, again, we should aim higher. We must be willing to work in a bipartisan way and look at new ideas, including the upcoming report of the bipartisan Medicare Commission. If we work together, we can secure Medicare for the next two decades and cover the greatest growing need of seniors -- affordable prescription drugs. (Applause.)
Third, we must help all Americans, from their first day on the job -- to save, to invest, to create wealth. From its beginning, Americans have supplemented Social Security with private pensions and savings. Yet, today, millions of people retire with little to live on other than Social Security. Americans living longer than ever simply must save more than ever.
Therefore, in addition to saving Social Security and Medicare, I propose a new pension initiative for retirement security in the 21st century. I propose that we use a little over 11 percent of the surplus to establish universal savings accounts -- USA accounts -- to give all Americans the means to save. With these new accounts Americans can invest as they choose and receive funds to match a portion of their savings, with extra help for those least able to save. USA accounts will help all Americans to share in our nation's wealth and to enjoy a more secure retirement. I ask you to support them. (Applause.)
Fourth, we must invest in long-term care. (Applause.) I propose a tax credit of $1,000 for the aged, ailing or disabled, and the families who care for them. Long-term care will become a bigger and bigger challenge with the aging of America, and we must do more to help our families deal with it. (Applause.)
I was born in 1946, the first year of the baby boom. I can tell you that one of the greatest concerns of our generation is our absolute determination not to let our growing old place an intolerable burden on our children and their ability to raise our grandchildren. Our economic success and our fiscal discipline now give us an opportunity to lift that burden from their shoulders, and we should take it. (Applause.)
Saving Social Security, Medicare, creating USA accounts -- this is the right way to use the surplus. If we do so -- if we do so -- we will still have resources to meet critical needs in education and defense. And I want to point out that this proposal is fiscally sound. Listen to this: If we set aside 60 percent of the surplus for Social Security and 16 percent for Medicare, over the next 15 years, that saving will achieve the lowest level of publicly-held debt since right before World War I, in 1917. (Applause.)
So with these four measures -- saving Social Security, strengthening Medicare, establishing the USA accounts, supporting long-term care -- we can begin to meet our generation's historic responsibility to establish true security for 21st century seniors. . . .
The Roosevelt Room
THE PRESIDENT: Good morning. Last Tuesday night, in my State of the Union address, I was honored to report to the American people that our families, our communities and our country are stronger, healthier and more prosperous than ever. But I warned that we cannot let the hum of our prosperity lull us into complacency. Instead, we must use this moment of promise to meet the long-term challenges we face as a nation -- to meet our historic responsibility to the 21st century.
Over the last six years, our hard-won fiscal discipline has given us the chance to meet those long-term challenges. Six years ago, our budget deficit was $290 billion. Last year, we had a budget surplus of $70 billion. We expect another one a little larger than that this year, and we're on course for budget surpluses for the next 25 years.
So now we face a new choice -- what to do with the surplus. I believe we should use it to plan and save for retirement, to strengthen the readiness of our military, to get our children ready for the 21st century. Very simply, I believe we should use the first surplus in three decades and the projected ones in the future to meet America's great challenges. Above all, that means saving Social Security and Medicare.
We all know that the baby boom will soon become a senior boom -- the number of seniors will double by 2030; average life expectancy is rising rapidly, and that means rising costs for Social Security and Medicare.
I propose to keep Social Security strong for 55 years by committing 60 percent of the surplus for the next 15 years, and investing a small portion in the private sector just as any private or state pension would do. We should make further tough choices to put Social Security on a sound footing for the next 75 years, to lift the limits on what seniors on Social Security can earn, and to provide support to reduce the poverty rate among elderly women -- which is twice the poverty rate among seniors as a whole. We can do that with a good bipartisan effort.
Once we've accomplished this, I propose we use one of every six dollars of the surplus over the next 15 years to double the life of the Medicare trust fund.
Then I believe we should dedicate $500 billion of the surplus to give working families tax relief for retirement savings, by creating new Universal Savings Accounts -- USA accounts -- to help all Americans build a nest egg for their retirement.
Under my plan, families will receive a tax credit to contribute to their USA account, and an additional tax credit to match a portion of their savings, with a choice in how they invest the funds -- and more help for those who will have the hardest time saving.
Let me give you an example of how USA accounts could work. With the help of USA account tax credits, working people who save and invest wisely from the time they enter the work force until the time they retire could have more than $100,000 in their USA account, and a more secure retirement. That's the kind of tax relief America needs.
By providing this new tax credit for retirement savings, we can make it possible for all Americans to have a stake in the remarkable economic growth they have worked so hard to create.
Social Security first; then saving Medicare and giving tax relief to help all Americans save in the new USA accounts; investing in defense and education -- that's the right way to use America's surplus. If we squander the surplus, we'll waste a once-in-a-lifetime opportunity to build a stronger nation for our children and our grandchildren. Instead, let's work together to prepare our nation for the great challenges and opportunities of the 21st century.
Thanks for listening.
I would like to thank Secretary Shalala, Social Security Commissioner Apfel, and Gene Sperling for their work on this meeting today. I'd like to thank our panelists Laura Tyson, Uwe Reinhart, Martha McSteen, Hans Riemer, and Stuart Altman for their presence. And they will be introduced in a few moments.
In my State of the Union address last week, I challenged Congress and the American people to meet the long-term challenges our country faces for the 21st century. Today you all know we are here to talk about perhaps the largest of those, the aging of America.
The number of elderly Americans will double by 2030. Thanks to medical advances, by the middle of the next century, the average American will live to be 82 -- six years longer than today. These extra years of life are a great gift, but they do present a problem for Social Security, for Medicare, for how we will manage the whole nature of our society.
As I have said repeatedly, this is a high-class problem, and the older I get the better it looks. (Laughter.) But it is one, nonetheless, that we have to face. Fortunately, we are in a strong position to act because of our prosperity and our budget surplus.
It is well to remember that the current prosperity of this country was created not by rash actions in Washington, but by facing boldly the challenge forced by the budget deficits -- by getting the deficit down, getting into balance, bringing the interest rates down and bringing the economy back. We also should face the challenge of the aging of America in the same way.
In the State of the Union, I laid out a three-part plan, and asked Congress to consider it -- to invest our surplus in ways that will both strengthen our economy today and in the future, and meet the needs of the aging of America. First, I proposed that we devote 62 percent of the surplus for the next 15 years to saving Social Security, investing a small portion in the private sector, as private, state and local government pensions do. The average position of the retirement fund in the stock market, of Social Security, would be under two percent of the market for the next 15 years, under three percent for the next 20 years, and always under four for the next 50 years.
Over the course of the last week, I have been gratified to see discussions of this proposal, and obviously differences about the whole market investment issue, but substantial agreement in the idea of dedicating a large portion of the surplus to saving Social Security across partisan lines. And for that I am very grateful. I think we should build on this to extend the life of the Social Security trust fund further. If we do what I suggested it will add 55 -- take us to 2055.
I think we should have a 75-year life for the Social Security trust fund. We should also make some changes to reduce the poverty rate among elderly women who have a poverty rate at twice -- almost twice the general poverty rate among seniors in our country. And I believe we should eliminate the limits on what seniors on Social Security can earn.
To make the changes necessary to go to 75 years on the trust fund and deal with these other challenges, we will simply have to have a bipartisan process. There is no way to avoid it. But I'm confident that the changes, while somewhat difficult, are fully achievable. And if we work together we can make them.
To prepare America for the senior boom will require more than saving Social Security. We also have to deal with the challenge to Medicare and our obligation to make sure that our seniors have access to quality health care. I want to say very clearly that we need to set aside enough of the surplus for Medicare and Social Security before we address new initiatives like tax cuts. That's why the second part of our proposal calls for devoting 15 percent of the surplus for 15 years to the Medicare trust fund. If we do this and nothing else we can secure the trust fund until after the year 2020.
But I want to make something else clear. I believe that -- some have suggested that by dedicating the surplus to Medicare we won't need to make any decisions to reform the program. I disagree with that. Medicare needs revenues to increase its solvency, but it also needs reform to make sure that it is modern and competitive and to gain additional savings to help finance a long overdue prescription drug benefit. So, for me, reforming Medicare and committing the surplus go hand in hand.
I'd also like to say that for me there could be no better use of our surplus in assuring a secure retirement and health care to older Americans. And I believe that it is good not only for older Americans, but for their children and grandchildren as well, and for the larger economy.
Why is that? Well, first of all, if we dedicate this portion of the surplus to Social Security and Medicare over the next 15 years, obviously in most of those years that money will not be needed. In all those years we will, in effect, be buying back the national debt. As we do that, we will bring the percent of our debt -- I mean, our publicly held debt as a percentage of our economy -- down to its lowest point since 1917, since before World War I. What will that do? That will drive interest rates down and it will free private capital up to invest in the United States -- to create jobs, to raise incomes.
So I think that it's very important. If you look around the world today at the troubles these countries are facing, when their budget deficits get out of hand, when their interest rates go through the roof and they can't get any money from anywhere, when we worry constantly about our trading partners, trying to keep them in good shape and help them to not only preserve our economic markets, to preserve partners for peace and democracy and freedom -- if we in the United States could actually be doing something to pay down our debt while saving Social Security and Medicare, we would keep these interest rates down. And it would be an enormous hedge against whatever unforeseen future volatility occurs in the global economy.
So this is a strategy that will actually grow the American economy while preparing for the future. Of course, in an even more direct way it's good for the rest of America because, when the baby boomers retire -- as I said in the State of the Union, none of us want our children to be burdened with the costs of our retirement, nor do we want our grandchildren's childhoods to be lessened because our kids are having to pay so much for our retirement or our medical care. So, from my point of view, this is a very good thing for Americans of all ages, without regard to their political party, their income, their section of the country. I think this will benefit the country and help to bring us together and strengthen us over the next several decades.
Let me just say very briefly that the third part of our proposal is to dedicate $500 billion of the surplus to give tax relief to working families through USA accounts -- Universal Savings Accounts. Under my plan, working Americans would receive a tax credit to contribute to their own savings account, and an additional tax credit to match a portion of their savings -- with the choice theirs about how to invest the funds -- and more help for those who are working harder on lower incomes and, therefore, would have a harder time saving.
This new tax credit would make it easier for Americans to save for their own retirement and long-term care needs. And obviously, this would be further helped by something that is already in our balanced budget, which is the $1,000 long-term care tax credit.
So these are the things that I think together would not only help us to manage and deal with in a very good way the aging of America, I think it would help us to secure the long-term economic prosperity of the country and help to keep families together across the generations without seeing unbearable strains put on those families, as so many of the baby boomers live longer and inevitably have more medical costs.
So I hope that we will have a good debate in Congress. There will be others with their own ideas; I welcome them, I look forward to it. Today, we're going to focus on the programs that I mentioned at the beginning of my talk. And I'd like the Vice President, who has worked very hard on this with me, now to make a few remarks and to introduce our panelists so we can get on with the morning.
Thank you very much. (Applause.)
THE VICE PRESIDENT: Well, thank you very much, Mr. President, for your commitment to America's seniors and the understanding that you just presented to us, that working to save Social Security and Medicare are more than just fiscal responsibilities and more than just policy priorities -- they are profoundly moral responsibilities. And we're determined that our country will face them directly.
You know, a lot of people thought that we'd never be able to balance the budget in our country, but we did. And for as long as we've heard about that concern we've also heard about the entitlement problem, as people call it. Well, we can deal with that, too, and that's what we're here to talk about.
The President acknowledged all the members of the Congress, House and Senate, who are here. And we deeply appreciate your participation in this whole process. Thank you very much -- and the members of the administration team. I wanted to add to that Dr. Janet Yellen, the Chair of the President's Council of Economic Advisors. And I wish we could go ahead and identify all of the leaders of private groups that are here, many of whom have worked for a lifetime on these issues. And we're grateful for your presence here. I want to acknowledge Reverend Jesse Jackson, who is among these leaders present here today, and many others who ought to be singled out.
You know, last year the President set us on a path of progress with four memorable words: Save Social Security first. It was really a turning point in the long debate about what to do with our entitlement programs, because it created a new set of incentives that allowed our country to use this unprecedented budget surplus as leverage -- whatever your political party, whatever your place on the ideological spectrum, automatically there is an incentive to use the surplus or part of the surplus for whatever other purposes you're thinking about, but you can't do it until the country comes together, first of all, to save Social Security first and deal with this generational problem. And it really has changed the dynamic.
And last week in the State of the Union address, the President took that commitment one step further by asking us to save Medicare at the same time, dedicating 15 percent of the surplus as part of a broad-based effort to improve this important program. In the process, the President has transformed what used to be called a third rail into a second chance for America's senior citizens.
This commitment couldn't come at a better time because, as everybody knows, we're now going to finish this century with a surplus of more than $76 billion; instead of the biggest deficit in history, now the biggest surplus in history -- so it's a good time to move forward with this issue. (Applause.)
And the predictions are that for the next quarter century, whatever the ups and downs of the business cycle, the general trend is going to be for surpluses every year for the next 25 years. So this is the moment for us to meet our responsibilities to the 21st century. And with 75 million baby boomers retiring over the next 15 to 20 years and with that ratio of the folks who are in the work force, compared to the folks who are retired, changing dramatically -- of course, it's more than three people working for each person drawing Social Security now and it's going to decrease to two people working for each person retired. I guess everybody in this room surely has internalized the implications of that mathematical shift -- that's really the real reason why we're here. And that's why our responsibility is so clear.
And we must also focus on the important task of saving and strengthening Medicare, because the coming senior boom will exact a similar toll on Medicare. By 2030, the ratio of workers to Medicare beneficiaries is also expected to decline, in this case by over 40 percent. If we dedicate 60 percent of the surplus to Social Security, and 15 percent of the surplus as part of a broad-based effort to strengthen and improve Medicare, we can meet this challenge in a way that preserves the dignity of our seniors in retirement.
And of course, we've talked about all the numbers involved here, but it's always essential to remember that this, ultimately, is not really about numbers, it's about people. And our generation is the first generation to have more parents than children. And our medical care expenses, as a generation, for our parents, greatly exceeds that for our children. And all of the individuals that we are talking about have faces, and hearts, and connections to their families and their loved ones. And that's really what we're talking about here: how do we help families deal with this time of stress and transition?
It's about Medicare beneficiaries, also, who cannot now afford crucial medications without some help -- and they don't have that help today in many, many cases. And you talk to anybody in our generation helping their parents, or you talk to seniors who have retired who have health care problems -- right away the conversation will turn to, how are we going to get a little bit of help to pay for these medicines that the doctors are prescribing and that are greatly needed. And so the President has addressed that issue, as well.
It's about rural retirees who face more limited choices. And it's about assuring quality health care for women who, after all, make up 60 percent of all Medicare beneficiaries. That's why we're working on this and that's why our country has to solve this.
So Mr. President, we have a great panel here. It's my honor to just briefly introduce all of them and then I'll turn it back to you to start the dialogue here.
First, we're delighted to welcome back Laura Tyson, who was such a prominent part of this administration in its early years as Chairperson of the White House Council of Economic Advisors, and Director of our National Economic Council after that; and now a Dean of the Haas School of Business at Berkley. She's also, of course, a member of the National Bipartisan Commission on the Future of Medicare.
Second, Uwe Reinhart. Professor Reinhart is, of course, a nationally renowned health care expert from Princeton and has served on several government commissions on health care -- I could say quite a few government commissions on health care -- and is the Commissioner of the Kaiser Commission on Medicaid and the Uninsured. We're honored that you are joining us.
Third, Stuart Altman, who is a professor of National Health Policy at the Heller School for Social Policy at Brandeis University. Dr. Altman has been a nonpartisan advisor to the Congress, and also currently serves on our Medicare commission.
Fourth, Martha McSteen, President of the National Committee to Preserve Social Security and Medicare, the nation's second-largest seniors organization. And as someone who served for 39 years with the Social Security Administration, she knows a thing or two about this program.
And last, but least only in age, Hans Riemer, who is, at 26, the founder and director of the 2030 Center, a public policy organization for young adults focused on economic issues affecting all Americans. We'd like to thank each of our panel members for being a part of this discussion. And now I'll turn it back to you, Mr. President.
THE PRESIDENT: Well, I would like to begin by asking a question of Laura Tyson, who is, as has been said, on this bipartisan Medicare Commission. One of the things that I have seen -- and I alluded to this in my remarks -- one of the things that I've seen said in the press in the aftermath of the State of the Union is that by proposing to allocate 15 percent of the surplus for 15 years to the Medicare trust fund, I basically was killing any chance to reform the program because we can keep it just like it is until 2020.
I didn't see it that way, for the reasons I said. First of all, I think there are some substantive changes that ought to be made that would enrich the program, like the prescription drug program; and secondly, because I think the demographics and the costs are going to require reform anyway. I mean, if my numbers are right, I think that the Medicare spending would have to grow at half the rate of economic growth for the next decade just to extend it for another five or six years.
So what I'd like for you to talk about is whether you think it's a good thing to dedicate some of the surplus to Medicare, and whether you think it can be used as an excuse not to make any further changes in the program, or whether it would actually facilitate changes?
I think we need to get this out. And I really don't know what she's going to say, but I've been very concerned about that because when I made this suggestion, I did not intend to say that, whoop-de-do, now we don't have to make any changes in the program. What I was trying to do was to make it possible for us to change the program without pricing it out of the reach of Americans, millions of Americans.
So, Laura, you want to talk about that?
DR. TYSON: Well, frankly, I was very surprised when I heard that reaction to your speech. When I heard the speech, as a member of the bipartisan Commission on Medicare, I was in a hotel room and I started cheering -- because I know the numbers, we've all looked at the numbers on Medicare, and there is a serious financing problem.
It's a very complicated problem; it's not just a demographic problem. It has to do with health care costs, with technology, with the delivery system. And even the most conservative projections about the growth of health care costs, combined with the change in the demographics, show clearly that additional financing for Medicare will be required. And that is even with an ambitious reform program.
I think that we must all face the reality. There are things we need to do to make Medicare a better program, to modernize it, to include adequate benefits, to make it more efficient, to make it more equitable. After you do all of those things -- and we've looked carefully at the range of things you can do -- you still need additional money.
And I feel that a dedication of the surplus, the hard-won surplus of the American people, to this very important program will secure the program. It will allow the commission to come forward with reforms. I don't think we could have come forward with reforms without some agreement on some source of funds to get us through the next several years.
Now, let me also just end by saying Medicare is a problem we're going to have to revisit time and time again because there is a huge amount of uncertainty in terms of how people get care, in terms of shift to prescription drugs, in terms of the possibility of having drugs that are individualized to the genetic background of each individual. We're engaged in a huge technological revolution in health. So what I think we're going to try to do in the commission is put in place some reforms that we believe will allow Medicare to remain modern and to be flexible as health care changes. But we can't do any of that without some additional money.
So all I have to say is I cheered the proposal and I'm optimistic now that we can get something done.
THE VICE PRESIDENT: I'd like to ask Dr. Reinhart a question, following up on that one. One of the reasons why after all the deliberations here the President made the decision to dedicate -- recommend dedicating some of the surplus to Medicare, is that we've learned from our studies here that you really cannot extend the life of the trust fund for any substantial period of time without really significant reductions in Medicare. I know you've spent so many years studying the details of this issue. Tell us why you think resources are part of the answer -- and significant resources are part of the answer, from a health, economic, budgetary perspective.
DR. REINHART: Well, Mr. Vice President, every projection I have seen that seems plausible suggests that even the present benefit package, which people say is inadequate, will be eroded unless additional money is brought into this program. I think any expert will tell you that.
And we now have the opportunity, the unique historic opportunity to provide those monies. And I think it would be sinful not to do so. I support this initiative because it is prudent, it is fair and it is civilized. What do I mean by "prudent"? By prudent is exactly the point that every projection shows we will fall short.
Now, our method in the '80s was to create a huge deficit, then look at each other and look at each other and look at God and say we cannot be our brother's keeper because we have a deficit -- and we thought God bought the argument. (Laughter.) Fair enough. What are we going to do in the '90s or in 2010? We have the surplus and we look at God and we say, we cannot help the elderly who now trade food for medicine -- that was on the front page of the Wall Street Journal.
So, therefore, I consider this civilized. And, finally, I consider it fair, because the baby boom created -- helped work to create the surplus. And the President proposes to put that surplus aside to help finance health care for the baby boom when they are retired. That strikes me as socially fair. So on these three counts I have in the press, as you may have read, wholeheartedly supported this, and I hope the American people will, too.
THE VICE PRESIDENT: Well, as I understand the response, those who disagree with us are uncivilized sinners. (Laughter and applause.) That's it basically.
DR. REINHART: As an economist I can certify -- (laughter) -- that to stay in the club of civilized nations will require a little bit more money for Medicare and I'm willing to sign on that. (Laughter.)
THE PRESIDENT: Let me just say for the record as someone who knows a little about such characterizations, I wouldn't do that, myself. (Laughter.)
I'd like to ask Stuart Altman a question. Stuart has worked for Republican and for Democratic administrations. He's been through all the various generations of reforms we've had, trying to manage these health programs that we fund. And he's now on the Medicare Commission. I'd like to just ask him to give us some idea from his point of view about -- maybe be a little more specific, and I'm sure the members of Congress here would like this -- what are the type of structural reforms you think we should adopt to improve and modernize Medicare, even as we extend the life of the trust fund?
MR. ALTMAN: Well, I've been a long-term supporter of Medicare, and I have both worked with and have watched how HCFA has tried to grapple with incredibly complex problems. And what we ask of HCFA today -- and I think back to when I was in the administration -- in one day they have to solve 50 problems that used to take us five years to deal with. No private agency is ever asked to deal with the complexity.
And often we make their life so much more difficult by the rules that the Congress puts in their place. They can't operate an efficient system, an efficient health care system, with the rules. So these rules need to be changed. We need to make the Medicare program, HCFA, a much more efficient -- I know they want to do it, and I hope that the Congress will give them the tools to do that. They need to be able to contract with providers in a more efficient way; they need to be able to bill out in a more efficient way. And they need to be able to compete with the private sector.
I believe strongly in competition, and I think that as we move forward -- and I am in support of restructuring the system towards a premium support to allow HCFA to compete. I think when they have these tools they will compete very effectively.
But we also need to change the benefit package. The benefit package that was designed for Medicare was the right benefit package in 1965. There were really two legs of our chair in health care. There was physicians and it was institutional care. And Medicare did a good job in both of them.
We now have a three-legged stool. And that third leg -- prescription drugs and what goes with it -- is becoming every bit as important as the other two. The idea that Medicare does not cover prescription drugs for our seniors on an outpatient basis is a crime. And it's going to become more and more of a crime. As Uwe pointed out, the idea that seniors have to trade food for drugs; the idea that every time a physician writes a prescription, they have to think whether that thing is going to be filled -- and how many have we heard, about our seniors sort of taking one out of three, and one out of four, so that the whole prescription is useless?
Prescription drugs has to be added. It has to be added in a fiscally appropriate way. It needs to be added to the new Medicare. And I share Laura's and Uwe's comments. We could not have supported the premium support system, what we were thinking about, without more revenues, because it would have been a sham. So I, too, have applauded -- I was in another hotel room -- (laughter.)
DR. TYSON: We lead exciting lives. (Laughter.) The life of an ex-government official. DR. REINHART: That's our home. So, please -- and I hope -- and I've talked to many members of Congress on both sides, as well as other commissioners -- I view this as such a positive statement. I think we've got a shot now. Thank you very much.
THE PRESIDENT: I don't want to interrupt the flow of the program; I think they're doing so well. But I just want to comment on one thing that Stuart said, because I think we want to drive it home. Many of us have actually met people who choose between food and medicine. Nobody made a deeper impression on me when, in 1992, than this elderly couple I met in the Arel (phonetic) Senior Center in Nashua, New Hampshire, when they described this choice they made on a weekly basis.
But the point I want to make is, when we have partisan fights in Washington, they always get a lot of publicity. And when we do something together, almost nobody notices. But one of the things that I'd like to compliment all the members of Congress here for is that there has been an enormous amount of bipartisan consensus to dramatically increase investment in medical research. And the NIH budget, for example, has grown exponentially as a result of that.
Now, what are we trying to do? Among other things, we're trying to find cures for everything from cancer to arthritis to Parkinson's to you name it. And we're also trying to develop preventions. A lot of those cures and preventions will be in the form of medicine. And a lot of what lengthens people's lives is in the form of medicine. We will be spending more and more and more money every year that we don't have to spend, on hospital care and doctor care, if we don't provide a prescription drug benefit.
And from the point of view of the Congress, I would ask you to think, if we were all serious about all this money we have put into the NIH, then we have to be equally serious about getting the benefits of that investment to all the American people, to the health care system in general and to the economy in general. And I think it's very important because the problem Stuart mentioned is going to accelerate because of the breakthroughs that will occur as a result of the medical research that all of you have funded.
THE VICE PRESIDENT: And with the completion of the human genome within the next two to three years, we're likely to see an even further acceleration of that -- with medications for pain, medications for mental illness, all kinds of suffering can be alleviated.
Martha McSteen, I'd like to ask you about why, in your opinion, as you've said, we need to deal with Social Security and Medicare together and how this challenge is shaped by the fact that there are going to be, as the President mentioned, double the number of seniors in the year 2030, compared to now.
MS. MCSTEEN: Well, Mr. Vice President, it really is a challenge for us to be able to address both of these programs at the same time. But they are really viewed by most people as one program. When I speak to a group of seniors I find that -- about Social Security -- the first question asked is, and what about my Medicare? So Social Security and Medicare are entwined and it is very appropriate, Mr. President, Mr. Vice President, that you're addressing both of those programs at this time.
Social Security does keep millions of people out of poverty. And Social Security is, indeed, an intergenerational program. It is a program that touches the lives of all Americans. And we must make sure that as we move into the next century that these baby boomers have what they need in order to continue. Their lives are going on for many, many years and we must be thinking about how they are going to be productive in the future, because they will be moving from a marketplace probably early in life, but have to be thinking about, what am I going to do next.
There are many opportunities for volunteering. The marketplace has to make some readiness for you younger people coming back into the market -- maybe not in the same positions, but very much contributing to this society. And in line with that, how can you expect to be able to continue to age 90 and 95 if we do not have good health care. And, of course, this country has the very best health care in the world right at our fingertips.
The research grants that you are providing are tremendous. That will allow us to move into the 21st century with all of you being healthy and productive and have a goal for what you can do to help this country continue to be the greatest country in the world with productivity and enterprise and volunteering and opportunities that are unlimited. We salute you, the National Committee to Preserve Social Security and Medicare, for taking these initiatives.
THE VICE PRESIDENT: Thanks for your leadership.
THE PRESIDENT: I'd like to close this section of the panel with Hans Riemer and ask him sort of what this looks like from his perspective. Let me remind you that the people that are now on Social Security don't have to worry about what we're talking about. The people that are now on Medicare, by and large, don't have to worry about what we're talking about -- although, there's a more immediate time problem there. What we're trying to do for Social Security is to take it out to the time when it would even cover Hans's retirement -- which it ought to as a retirement system that big -- and also to try to at least have a framework which will enable us to not only secure Medicare for 2020, but make some changes that will enable us to manage the program far beyond that.
So I'd like for Hans to talk a little about his work and how he sees this and what advice he has.
MR. RIEMER: Thank you, Mr. President. I think it's important that we should keep in mind the kinds of responsible choices that you've been making over the past six years have really brought about a certain measure of prosperity of an economy, has jobs for everyone -- and that's good for the budget. So I think we now have to use our strong position to think about that future and about tomorrow. So I would look to maintain this kind of fiscal discipline by using our surplus for the Medicare trust fund and for the Social Security trust fund, as you have proposed.
And I would also think that we should begin to take a hard look at the jobs of the future and to think about -- since my generation will be living longer than any other generation that has come before us, we need some budget flexibility, which you will be bringing to us with paying down the debt. But we also need to investigate the pension kinds of problems and health care problems, which I think your USA accounts and some of these Medicare proposals really begin to do. So I think a holistic look at fiscal responsibility and jobs will really go a long way towards putting my generation in a much better situation down the road.
THE PRESIDENT: You know, I doubt, given the global economy, at least in the foreseeable -- and I mean probably the next 10 to 20 years -- it will ever be possible for a country that wants to have a great economy to run permanent deficits again. Now, we all know, if a recession happens and you've got fewer taxpayers paying in and more money going out for unemployed people -- and we know there will be good times and bad times -- that's part of human nature -- but the elimination of the structural deficit, I think, is pretty much going to be a requirement for every country that wants to run an advanced economy and have long-term, stable conditions. Because the control of the -- the people that can decide where the money goes and why are going to pretty much demand it. And I think that that's something that we have to be quite careful about and we need to be very prudent in projecting this.
And everybody understands when we say we're going to have surpluses over 25 years that they will vary in size, depending on the condition of the economy. What we mean by that is that we have a structural surplus and that the projections are pretty good. And I think that we have to -- my sense is that that's where Congress is in both parties. There will be people who think that we ought to have a tax cut now instead of a retirement tax cut, so that it ought to be fungible now.
There will be arguments about that. But my sense is, there's almost no one willing to do anything that would in any way run the risk of returning to a structural deficit. And I think that's a big step forward for our country.
Well, I thank all of you. We have here, in addition to members of Congress, we've got a lot of health care providers and people who represent other folks. We've got a little time -- I wonder if any member of Congress who is here would like to ask a question of any member of our panel. This is not prepared. This is all -- (laughter.)
Mr. Nadler? Mr. Pomeroy?
REPRESENTATIVE NADLER: The question I want to ask is, former Secretary Riley and others have pointed out that the projections of the Social Security actuaries, which everybody always quotes to say that the Social Security trust fund is going to go bankrupt in 2032, are based on extraordinarily conservative economic assumptions, not borne out by recent history or recent actuarial experience; and that they, in fact -- a central assumption to those economic projections is an average economic growth rate of 1.5 percent in the next 75 years, which is -- we've had 3.8 percent average for the last 35 years. Why are we -- why is the Social Security Administration using that kind of background assumption?
THE PRESIDENT: Ken, you want to answer that? (Laughter.) He just greedily wants all the money he can get, that's all.
MR. APFEL: We think that the OMB assumptions are very prudent assumptions for the future. They're based on a lowering of the number of people joining the work force. We're going to have a very significant shift in the future. That's going to mean a lowering of overall economic growth, because we're seeing a lowering of the number of people entering the work force. If we were in a situation to rely on a much more optimistic economic forecast, and we find out 20 or 30 years from now that we're wrong we would have dug ourselves a much deeper hole, a much deeper hole to deal with this issue. Instead, if we find that the economy grows much more rapidly, we'll find ourselves in a situation 20 or 30 years from now with a very significant windfall. And I'm sure we'll be able to think of many ways to use that. (Laughter.)
We believe that the way you deal with this issue is to use prudent economic assumptions and demographic assumptions, which we use. We think it's the right course.
THE PRESIDENT: Let me say -- I'm with you. I think they're wrong, but I don't think we can take the risk. But let me tell you why it looks like they're right. The reason it looks like they're right is that the number of people taking early retirement, for example -- taking the early Social Security option -- is going up, still -- people checking out at 62. And then they -- if they're living to 82, then that's -- and by the way, even today people who live to be 62 have a life expectancy of nearly 80. A 76 average life expectancy is from birth. So somebody who lives to be 62 years old, unless they have some critical condition, their chances of living to be 80 or more are pretty good. So the assumptions are based on two things. Number one is a slowing of the growth of the work force, and number two is people drawing for a lot longer time.
Now, I'll make you a prediction -- that's one of the reasons that I think it's imperative that we make this bipartisan agreement this year -- we can make it wrong -- because I think you have to consider one thing. Number one, there's a record number of kids in school today. Now, they say they've factored that in, but that means you're going to have more workers in a few years. Number two, we've still got a fairly generous immigration policy, which I think, on balance, has served us well.
But the third and the most important thing is, after you get a certain percentage of people who retire at 62, and they're going to live until 82 or 85 or whatever -- if we take the earnings limit off, you will have more and more people working. The computer and the Internet are changing the nature of work. When I became President, there were only 3 million people making a living out of their homes. When I ran for reelection, the number was 12 million. I think, today, the number's almost 20 million.
So I think what you are going to have is a dramatic change in the nature of work in the next 20 years, and more people doing work in different places and different ways, especially older people. So my guess is, they are low, but if you look at people drawing Social Security for a longer period of time, and the sheer demographics, and you were in charge of keeping the thing stable, you'd probably make the same call they did.
DR. TYSON: I want to make an observation, which is that I think for the entire time I was with the economic team here we were very cautious. And the President and the Vice President correctly thought that the economy could do better -- and, in fact, they were better forecasters than his economic forecasters.
Having said that, the good news here is when you are projecting forward over very long periods of time, I really think caution is the right position, because we're talking about dedicating surpluses to two major programs. I think the American people can really have faith in this President and his economic team that the assumptions on which these surpluses are projected are very realistic and cautious assumptions.
The greatest likelihood, therefore, is positive surprises, which are the kind of surprises that we've had in the last six years. We've made cautious forecasts; the economy has done better than that. It's very important, I think, to assure people these surpluses we're predicting are realistic and we can use them.
THE VICE PRESIDENT: I just want to add briefly that in late '92, during the transition period in Little Rock, we made a conscious decision to choose the most conservative economic assumptions so that we would not have surprises on the wrong side. And we anticipated that we would have surprises on the other side. And I think that's probably the right philosophical approach here.
But beyond that, it's interesting that world economic growth right now is lower than the number used in this actuarial projection. And if you look at the unfunded pension liabilities in the countries that are some of our largest trading partners, it's a pretty sobering thought.
Final point: From the beginning of the Social Security program, its interaction with the economy was a key factor in the assumptions that we made about how Social Security's investments might strengthen economic growth above what it would otherwise be were clearly part of the projection. We ought to have a national debate, after this one about how to save Social Security, about how for the long-term we can make your prediction and Bob Reich's prediction come true by -- and I think the President's investments in next generation Internet, the IT-squared program -- there are a lot of investments that I think have the potential for really raising that economic growth number.
THE PRESIDENT: Mr. Pomeroy, Mr. Smith, and Mr. Cardin. Go ahead.
REPRESENTATIVE POMEROY: Mr. President, I think your framework has significantly advanced prospects for achieving Social Security reform. It represents in particular a conceptual breakthrough that I think is going to make this agreement possible by continuing absolutely the guarantees of Social Security; and dealing with individual accounts, the Universal Savings Account, as a new initiative to aid the retirement savings initiative and as an initiative that doesn't undermine in any way the guaranteed nature of Social Security. That was a real conceptual breakthrough and very important.
Secondly, and this is what I'd like some comment on, it seems to me in substance the critical piece of this program that maybe hasn't received enough attention since its announcement in the State of the Union is the effect of paying down the debt held by the public and positioning our country to take a greater demand on the Social Security program, on the Medicare program, as the country ages and the demographics change. Pay down the debt now, because we know we've got a bigger problem later is really the substance, heart of this as I see it. I'd like some further comment on it.
DR. TYSON: Well, I agree with that completely. I would say that in a way, economists who thought about the problems confronting the country have thought about the financing problems of Social Security and Medicare. They've also thought about the problem that for at least 30 years the savings rate in the United States has been going down.
And you need to, when you know there's going to be a demographic bulge and you know that costs of health care are going to continue to rise, you need to be saving more. And we were saving less. The government was dis-saving when we had a huge deficit, and meanwhile, personal savings rates have continued to go down. So one of the things that this plan does -- we can say it reduces the debt. Another way I would say it is that it is going to increase the savings rate. I think the Council of Economic Advisors estimates that this might put an additional 2 percentage points on our national savings rate.
This is something which we have been trying to achieve for at least 30 years. The rest of the world has correctly been lecturing us that as a great nation we should become a creditor nation, we should not be borrowing from the rest of the world and dis-saving.
So I agree with you completely, it hasn't been remarked enough that this is a savings program, as well as the use of a savings to secure these two entitlement programs.
THE PRESIDENT: Janet Yellen, our Chair of the Council of Economic Advisors, nodded yes when she said it will add 2 points to the savings rates. That's good.
REPRESENTATIVE SMITH: Mr. President, maybe a question for Dr. Tyson. Following up on what the Vice President said, it seems to me what is going to happen in 30 years is two workers have to have a kind of productivity to produce enough goods to satisfy the Social Security and Medicare needs of themselves and one retiree. So part of the mix has got to be what are we going to do to ensure we're on the cutting edge of productivity and competitiveness.
DR. TYSON: Well, the President and the Vice President have led the way really on thinking about the right investment strategy for our future -- in education, in technology, in liberalizing trade. So I think -- I would say, we know what the ingredients are, the basic ingredients, and the policies I think they should speak to.
THE VICE PRESIDENT: Well, the new Governor of California, Gray Davis, points out that if every retiree 30 years from now is going to have two workers financing his retirement, he says, I don't want my two to have a C average and inadequate schools today. (Laughter.) A pretty good way to put it.
THE PRESIDENT: You talk about our long-term productivity. Let me just mention one thing that was a part of my State of the Union address that didn't get a lot of attention, but I hope that it will get more and I hope that there will be a real bipartisan effort here. And that is that I think we still have a lot of capacity for growth and productivity within the borders of the United States.
When you've got hundreds of thousands of high-tech computer jobs going begging, and when you've got neighborhoods in this country where the unemployment rate is still in double digits, mostly in inner cities and rural areas -- our trick in the next 10 years, if you want to think about how we can continue to grow this economy with no inflation, will be to try to find the right mix of incentives for private sector investment and then removing the barriers to employment investment in a lot of places, whether it's education and training or whatever else.
We've had some success with the empowerment zones. I proposed some new initiatives in my State of the Union. But for the last two years -- Reverend Jackson is here -- I've gone to this unusual meeting with Jesse Jackson, Jack Kemp and Wall Street to talk about how we can get Wall Street to try to invest more in our inner cities and our isolated rural areas. And I think that's something we should not dismiss the potential of.
If you think about it, if you go into a place where there is complete under-investment and, therefore, under-purchasing of American goods and services, if it works when we invest in Central America or whatever, it would certainly work here. And I'd like to see some more careful attention given to that.
Mr. Cardin and Mr. Markey?
REPRESENTATIVE CARDIN: I think there is a general theme that has been carried here today of the economic security for our older Americans. And I'm glad Mr. Riemer is here because I think you have to -- this generation in order to really deal with the problems of our future seniors. We are talking about programs that will be for 20, 30, 40 years from now.
The Social Security program is so important as far as economic security for future generations. And I'm glad to hear that paying down our deficit -- Dr. Tyson's analysis that that could add 2 percentage points to the personal savings -- because one of the statistics we're not proud about in below savings ratios of Americans -- Social Security is part of a three-legged commitment to economic security -- private savings and private retirement being the other.
I guess my question is to Mr. Riemer. I'm very intrigued by the USA accounts, in which you provide incentives for young people and for low-wage workers to start retirement accounts, by offering economic incentives from the government to match their savings so that you put money away, in addition to Social Security, for your future. How do we get that message across to young people about the economics of saving and the economics of involving themselves in retirement accounts?
MR. RIEMER: That's a great question. I think a lot of young people are thinking about that issue, and they're thinking about it in very concrete ways. Benefits are one of the most important issues for new job applicants, as surveys have shown.
But I think all this talk about Social Security and the insecurity that many people feel about the future of the program have made young workers turn to saving and investments. And they've really increased the focus on pensions. So I think there is a receptivity to the message, but we have to get out with a campaign to put out an idea like USA accounts, which I think truly is a great policy for the next generation, and really stir up some excitement about it.
But I think that young people are waiting to hear for this kind of long-term thinking. I think when you combine an approach that strengthens Social Security, but supplements Social Security with a new kind of saving program, it really begins to broaden the opportunity to save. I think that's exactly what young people are waiting to hear. So I would say that young people have been waiting for this kind of a policy for a long time, and it's just now a matter of speaking.
THE PRESIDENT: Mr. Markey?
REPRESENTATIVE MARKEY: I think it's a really brilliant package of recommendations which you've made. One of the questions that has been raised is that, although -- as you point out, Mr. President -- only four percent of the market at any time would have government investment in it, that that's still too much, and that you have to have safeguards against government interference with the market.
And what I was wondering is if Laura could take that question, and perhaps construct a set of safeguards that we could use as a touchstone to answer that question of how to protect the market from government interference.
DR. TYSON: Well, first of all, I want to say that we do have models that show we can do this. We have models of state and local governments that do it. We have the Federal Retirement Investment Board. When I was a member of the government, I was part of the Thrift Savings Plan, and we had a board, and we had a set of funds, and the funds included equity funds and bond equity funds -- every sort of set of funds you would normally get in a private retirement system like UC-Berkeley, where I am. And they were managed efficiently and independently.
I think that the issues here -- and I really would refer to a proposal that has been suggested by Henry Aaron and Bob Reischauer. They've actually laid out a very nice proposal. The ingredients are how the board of managers was chosen; the fact that they would accept bids from private institutions to handle the money for them; the fact that if the government had ownership rights, through holding equity, that those rights would be proxy-voted by members of the board, independently of government considerations.
The key thing is that these decisions on how to invest and how to vote as an equity owner need to be based on fiduciary responsibility, not on political influence, not on political concerns. But we have examples of institutions already doing that at the Federal level, and furthermore, we know what the ingredients are. So I think this is a brilliant -- I agree with your word entirely -- I think it's a brilliant proposal.
Look, any portfolio manager would tell any entity that was holding a lot of reserves, you should diversify your portfolio. The government has a huge portfolio. It is not diversified right now. It is an elementary economic logic that we should have some diversification. We can solve the problem, administratively, of how to do it.
THE VICE PRESIDENT: If I could add briefly to that -- on the side of the investments chosen, there are also some options there. Index funds -- there are all kinds of investment opportunities that add a whole new layer of insulation from the political problems that some people have raised, which we looked at so carefully.
And, you know, during this whole national discussion, one of the single most important, salient facts that jumped out at everybody is that, over any 10-year period in American history, returns on equities are just significantly higher than these other returns. And in order to capture some part of that economic advantage, surely there is a way to solve these problems. And the people who have spent time on it are just totally convinced that it can be solved pretty easily.
THE PRESIDENT: I want to call on Mr. Portman, but Gene Sperling, did you want to say anything about the question here?
MR. SPERLING: I think Laura hit the issues well. But I think that a couple of principles that we are working with the President and Vice President on that I think we want to articulate is the one that whatever the trustees do, their role -- essentially they should be dealing with competitive bidding so that private sector managers are investors. So the actual investment will be taking place by private sector managers.
To the extent that you had several doing that, then you have even more -- of power. So let's say that the President said that the Social Security trust fund would have 4 percent of the market when it was fully implemented. If there is competitive bidding -- then no one would have more than 1 percent -- it would be a very small amount of market power -- if all of the investment is by private sector managers, then you have an -- index which are passive. We don't allow any picking of stocks. And that means discipline by all sides politically. No political interference at all.
So if you have an independent structure like -- where they cannot be removed, protected for political reasons, we have independence; you have private sector managers, competitive bidding; you have broad-based index without any kind of picking, then you're creating the kind of system that is insulated and should get the highest return.
We should note that when you have this kind of investment, the administrative costs are very, very low, and that means more dollars are going to the recipient and less are being diverted to brokerage fees and other things that would happen where you have millions and millions in individual accounts.
THE PRESIDENT: Mr. Portman.
REPRESENTATIVE PORTMAN: Mr. President, I commend you for raising the profile of this issue and again addressing it in the State of the Union. I think you've made some very -- (inaudible) -- in just the last couple of weeks -- being able to -- (inaudible.)
I was impressed at the retirement summit in December when you made the point that there really are three major options here to deal with -- talked about earlier. One is increasing payroll taxes. I don't think anybody is particularly -- (inaudible.) Another is reducing benefits, which I don't think, again -- (inaudible.)
And the third really is, as you said, taking advantage of the dynamics of the marketplace to get -- (inaudible) -- historically from the market. And I would just encourage you and your administration to keep the notion of private savings accounts on the table as we enter into these more intense discussions between the Congress.
As a Republican I have worked very hard on the issue of private savings with Representative Pomeroy and others, and I think USA accounts are a step in the right direction. But ultimately, they don't tie into Social Security, of course. And if we are going to solve this problem long-term, I think we need to deal with Chairman Greenspan's and others about political interference in the marketplace, notwithstanding Gene Sperling's comments to Congress -- I'm not sure that is something that most of us could be helpful with
And the second is his concern -- and, perhaps, Dr. Tyson, I misunderstood you, -- you talked about the need to increase net personal savings, that ultimately it's about creating new savings and that that is so important in terms of our economic growth and creating new jobs for the future. And then -- the government borrowing money and then investing it, you're not telling us what we need to do, which is to increase net savings -- and then rather than having individuals invest that money in the private market -- have a better impact -- on the economy in the long run. Thank you.
DR. TYSON: Can I just clarify something? This proposal does increase national savings. It increases government savings, because the government is actually for -- surplus projection means the government is bringing in more revenue than it's spending. It is holding those revenues in reserves to pay off Social Security and Medicare claims going forward.
So there is an increase in savings. I believe Chairman Greenspan was saying, and others would say, that if you look at the personal savings rate, what households are doing in the United States, that we've had a disturbing tendency for that rate to continue to go down. In fact, in the last quarter of last year the observed measured savings rate was negative -- people were actually spending more than they were bringing in.
Now, I think in thinking about the role of private saving accounts in this, I will tell you my position, and I think it would be that, if one wants to have private saving accounts, having them as a complement to Social Security is one thing. Having them as a substitute for Social Security is quite something else, because a substitute for Social Security undermines the social insurance value of Social Security.
We have a system in which individuals' retirement through Social Security depends upon their earnings during lifetime. It does not depend upon the riskiness of their investment strategy. It does not depend upon them paying administrative fees to get a high rate of return on a private account. It does not depend upon the date they retire and what the stock market looks like that day. I think we want to maintain those great benefits of social insurance. So that's what the USA accounts seem to me to do. They complement -- they add to Social Security.
THE PRESIDENT: We are getting down to the real details of this debate that will unfold. I wanted to make two points, if I might.
There are some proposals for savings accounts, private savings accounts, that say that they could ensure a floor, which would be a return no less than Social Security would otherwise give. That will all be part of this debate, and I'm looking forward to it. And I appreciate it.
Let me say one other thing to Mr. Portman that -- if you were to set aside this much money for Social Security and Medicare, then most of the Republican caucus would believe that there is not enough money left for a tax cut of the size you believe should flow. And then we would argue about the form of the tax cut. If you look at that negative savings rate, I think that's partly because people have great confidence -- you know, the stock market went up again, and also interest rates are down, home mortgage payments are lower, and a lot of people may feel like they're more comfortable spending more money.
But one of the challenges that we have to face in this coming Congress is not only what the size, but what the nature, of the tax cut should be. And should it be in the nature of helping people develop greater private savings plans, or should it just be a tax cut that people can dispose of?
Now, the argument for the latter, frankly, which doesn't have all that much appeal to the young or to the old, but might have a lot of appeal to the parents in the middle is, hey, I'm maxed out on my credit cards and I need some help. You know, there's a negative savings rate, that means I can't go charge anything else.
But the argument for the long-term of the country, it seems to me to be the stronger argument, because that is one way we can have an increase in personal savings as opposed to the aggregate savings rate. When we buy in the debt -- which we'll do if we save this money, we'll be buying back the debt -- that will increase the national savings rate, and it will free up private money, and it will be invested privately.
But if you want to increase the personal savings rate, it seems to me, we need to really think about not only what the size, but what the nature of the tax cut should be.
We've already gone 40 minutes over -- that's a good sign -- but I'll give Mr. Hill the last word, because he had his hand up, and then we'll go. Go ahead.
REPRESENTATIVE HILL: Thank you, Mr. President. I want to go back to the question of investing the money in the stock market -- As I understand it, history shows us that public institutions investing privately have produced substantially lower rates of return than private institutions investing in the market. It's a fact, it's a factor like a 50 percent higher rate of return.
I guess the question I have is -- and I have some concern, obviously, about the idea of the Federal Treasury investing in the private marketplace -- have you identified what the elements are, what the obstacles are, what the barriers are, that cause the public institutions' investment to show such a lesser return than the private institution investing in the same marketplace? Thank you.
THE PRESIDENT: Gene? (Laughter.) They're more risk-averse, I imagine is one reason.
MR. SPERLING: I think that's right. Actually, part of this is that state and local pensions do tend to be more risk-averse, and therefore have a lower percentage of their portfolio in equities.
And I think you should remember that under any scenario, investment in the market over a long period of time does have a higher return than the government bonds that Social Security gets now. So under any scenario, the Social Security recipients would be getting a higher return. But the important point is that the provisions that we're talking about -- broad-based index -- is designed to ensure that there are not inappropriate political calculations coming in, so you are getting the highest return possible.
So I think for recipient, you're always doing better when you have a long-term investment in the market. And we would be doing everything in the provision -- (inaudible) -- to make sure that those decisions are being made on the soundest economic judgment and that clinical calculations from the right or left are not part of that.
THE PRESIDENT: Thank you very much. This was terrific. And thank the participants, thank you. (Applause.)
THE PRESIDENT: Thank you, and good morning. Thank you, Mr. Perkins -- or, good afternoon. Don't tell anybody. (Laughter.) Don't tell anybody I didn't know what time it was. (Laughter.)
Thank you, Mr. Perkins, for your memory of that -- I did say that, about counting. Mr. McManus, Tess Canja, Margaret Dixon, John Rother, Horace Deets -- thank you especially for representing the AARP so well in dealing with the White House over the last six years.
I was glad to be invited to come over here today. You know, it's rare that a President gets to speak to an organization of which he's a member. (Laughter.) As I said repeatedly a couple years ago, I had mixed feelings about that, when you called my attention to the fact that I was aging. (Laughter.) But I don't have mixed feelings about the record the AARP has established for 40 years, calling attention to the challenges of aging to all Americans.
Those challenges, today, are more profound than ever as we look forward to the baby boom becoming a senior boom -- the number of seniors doubling by 2030. We owe it to 21st century America, to the children and the grandchildren of the baby boom -- as well as to all the seniors -- to meet those challenges and to meet them together.
I remember, in 1992 when I was a candidate for President, I came to your convention in San Antonio, and talked about the kind of America I wanted to work with you to build -- an America in which we honor our obligations to older Americans without burdening younger Americans. An America with its fiscal house in order and its future shining brightly. When I took office, we charted a new course to achieve that kind of America -- with fiscal discipline, more investments in our people, more trade for our goods and services around the world.
In the past six years, the American people have worked hard and come far. We know now that we have the longest peacetime expansion in history; nearly 18 million new jobs; wages rising at twice the rate of inflation; the highest home ownership in history; the lowest welfare rolls in history; and now, the lowest peacetime unemployment rate since 1957. Last year, for the first time in three decades, the red ink turned to black with a $70 billion surplus. We project one slightly larger than that this year, and projecting them on out for about a generation, as we have ended the structural deficits that caused our national debt to quadruple between 1981 and
I want to thank you for your hard work over these past six years -- for standing strong for bipartisan progress on the issues of great concern to you. Now, I ask you to stand with me and to say, we must meet the great challenges of the next century. We must use this prosperity, we must use this confidence, we must use this projected surplus to save Social Security, to strengthen Medicare, to meet the challenges of the aging of America.
In my State of the Union address, I laid out a four-point plan to do that: saving Social Security; strengthening Medicare; providing tax relief to help Americans save for their own retirement; and a tax credit to help families with long-term care for aging, ailing and disabled relatives. These will help our country to honor our duties to people today, and to uphold our responsibility to future generations.
On Monday, I sent my new balanced budget to Congress -- the first budget of the 21st century -- to implement this plan. First, in the budget we dedicate the lion's share of the surplus to saving Social Security and to strengthening Medicare. Both are important, and I'd like to explain why.
I proposed that we invest 62 percent of the surplus to save Social Security, and the surplus -- excuse me, for the next 15 years. I am very pleased that members of Congress in both Houses and both parties have agreed that this is the right thing to do. As you know, I have proposed investing a small portion of the trust fund in the private sector, to do it in a way that any private or state government pension would do. I agree with AARP that we absolutely have to insulate any investment of the surplus from political influence. And I believe we can, just as other public pension funds do.
I was in New York last night, talking to several people there in the investment community who came up to me and said they thought I was right and they hoped that we wouldn't let initial criticism stop us from offering a plan which would demonstrate to the American people that you could run this investment just like any other public pension investment is run. And I am confident that we can do that.
If we do this, we can earn a higher return and keep Social Security sound for 55 years. Now, all of you know that from the beginning we have measured the financial health of Social Security by asking if it will be sound for 75 years into the future. I do believe we have to take steps to strengthen Social Security for 75 years. I have looked at the options, believe me -- it's a lot easier to go from 55 to 75 than it is to go from where we are now, 2032 to 75.
I also believe we have to improve the program by reducing poverty among elderly women who are twice as likely to be poor as married couples on Social Security. I believe we should eliminate the limits on what seniors on Social Security can earn. This costs the trust fund some money in the short run, but over the long-term it will actually strengthen the retirement systems of the country and, more importantly, it will strengthen the quality of life of people in their later years.
Now, doing these things will require some difficult choices, but they are clearly achievable. You know basically what the range of options is and I know what it is, as well. To make them, it is clear what we have to do. We have got to work together across party lines to make these decisions. We have to work together across generational lines to make these decisions. But think of how we'll feel if we have Social Security secure for 75 years, if we lift the earnings limit and if we do something to reduce the deeply troubling rate of poverty among single elderly women, who are growing in numbers at a very rapid rate.
I have told the American people and members of Congress in both Houses of both parties -- I've met with dozens of them, literally -- that I am ready to make these choices and to make them with them, and it is time to get on with the job. Now, I feel pretty good about where we are with that, because of the initial positive support for setting aside the surplus portion for Social Security. I wanted to come here today to tell you what I said in the State of the Union I was very serious about -- I do not think it is enough. We all know that Medicare is going to have financial trouble well before Social Security does, unless we do something about it.
Now, if you look at -- where is my chart -- there it is. (Laughter.) What I propose is to take 62 percent of the surplus, which you see there for Social Security -- maybe I'll bring it up a little closer. (Laughter.) You may be able to see it just fine, but I can see better from here. (Laughter.) And then to take 15 percent, about a little less than $1 in every $6 of the surplus, and commit it to Medicare.
Now, some of those who agree with us on Social Security do not agree that we should do this. They would use the entire rest of the surplus for tax cuts. I believe we can only meet our responsibility to the future by saving Social Security and Medicare. Now, President Kennedy, who first proposed Medicare, once said, "To govern is to choose." And so we should have a great national debate about the choices involved in managing this surplus. After all, we haven't had one in 30 years, and it's a little unusual for us.
Yesterday, we learned of a proposal that would make a very different choice about what to do with the surplus. The plan would spend well over $1 trillion over the next 15 years on a tax proposal that would benefit clearly the wealthiest Americans -- who have, I might add, done quite well as the stock market has virtually tripled in the last six years. I'm happy about that; we should all be. But we ought to look at this proposal against that background. It would do this before Medicare has been secured, and in a way that would prevent us from spending 15 percent of this, or investing 15 percent, of this surplus in Medicare.
Now, to govern is to choose. I believe that's the wrong choice; I believe this is the right choice. You, the American people, and the United States Congress will have to decide. This is the latest in a rather long series of large and risky tax proposals that we have heard over the years. If we had adopted even one of the large ones, we wouldn't have the surplus we enjoy today.
We cannot return to the old policies of deficit and debt. Quite apart from our obligations to deal with the aging of America, the strength of our economy is premised on our demonstrated discipline and driving down profligate deficit spending, driving down interest rates, getting private investment up, generating opportunities for the American people.
I believe the American people should have tax relief; in a few moments I'll talk a little bit about what I think the best way to do that is. I believe there are things we can and we must do to help families. And I believe our targeted tax cut for the USA account is especially important. I'll say more about it in a moment.
But, first of all, anyone who hopes to invest the surplus or to spend it on other programs, or to spend it with a tax cut, must first tell America's families: What is your plan to preserve and strengthen Medicare in the 21st century? (Applause.) I was always taught from childhood, as most of you were, that you may want to do a lot of things, but you have to do first things first. To me, Social Security and Medicare, with their looming financial challenges, are the first things, and we have to take care of them first.
I want to work with you to strengthen Medicare. I want to work with the results of the Medicare Commission that Senator Breaux is chairing. In the bipartisan balanced budget we reached in 1997, we extended the life of the Medicare trust fund by 10 years. But no one seriously believes this is adequate, particularly with more and more people qualifying for Medicare.
To stabilize Medicare, we should extend its life until 2020. To truly strengthen Medicare for the long-term, we will have to take further steps. That means committing a percentage of the surplus to the trust fund. It also means committing ourselves to meaningful reforms that will meet the demands of the 21st century.
I am frank to tell you that some people have said, well, the President, by committing this amount of money from the surplus to Medicare to the trust fund, is trying to convince people that we can just go on forever without making any changes in Medicare. That is simply not true, and I don't want to pretend that that's true. But neither do I believe we should be in the position of making reforms or changes that we might later regret, simply because we haven't stabilized the trust fund when we have the funds to do it. These funds should support meaningful reform and prevent permanent damage to Medicare and to the people who depend upon it and are entitled to rely on it.
So here's what I think we should do, with regard to at least basic principles, as we look forward to the 21st century Medicare program. Did they change the chart? Good. (Laughter.)
First, Americans should be able to count on Medicare and know it will be there when they need it. I have proposed to use, as I said, about one of every six dollars in the surplus for the next 15 years to just simply guarantee the soundness of the Medicare fund until the year 2020. Without these new resources, Medicare spending would have to plummet significantly below the private sector average. No one believes we can have that happen without seriously weakening a program that millions of older Americans need.
Second, Americans on Medicare should be able to count on a modern, competitive system that maintains high-quality care and top-notch service by drawing on the best private sector practices. Third, Americans on Medicare, especially Americans with lower incomes, should be able to count on a defined set of benefits and protections without having to worry about excessive new costs they can't begin to afford.
Fourth, Americans on Medicare should be able to count on a benefit that many have long waited for, and that will actually cut our cost over the long run, and lengthen life, and lengthen the quality of life: prescription drugs. (Applause.)
Now, I believe we ought to use the savings that reforms in Medicare can create to provide this prescription drug benefit. Yes, it will be more costly on the front end, but over the long run it is bound to save money. It will keep people out of the hospital. It will keep people away from more expensive medical procedures. It will lengthen life and it will lengthen the quality of life.
I want to thank especially Senators Kennedy and Rockefeller for their leadership on this issue. I look forward to working with members of both parties. But keep in mind -- within these principles, my view of Medicare is: take 15 percent of the surplus, make sensible reforms, add the prescription drug benefit. All three will be required to truly strengthen Medicare for the 21st century.
Now, as I said before, we know the American people have worked very hard to replace the era of budget deficits with an age of budget surpluses. They deserve to benefit from that, and they deserve some tax relief. The real question is: What kind of tax relief and how much should it be? What are the other competing demands for the country? Again, to govern will be to choose.
I think we should use a percentage of the surplus to give Americans tax relief -- that strengthens working families, that encourages savings and the sharing of our nation's wealth among a broader range of Americans. And that is why I have proposed that we set aside -- we're back to the chart now -- 12 percent of the surplus, or, over 15 years, $536 billion, to establish USA accounts, Universal Savings Accounts, that give working Americans a chance to save for the future. These accounts would basically involve the government giving a tax credit that would be a cash match for a certain amount of savings by Americans who save, with extra help for Americans who are lower-income working families who have less ability to save on their own.
Now, all of you know that when Social Security was set up, it was never viewed as the sole source of income, ideally, for retirees -- although, unfortunately, it still is the sole source of income for a large number of people. We need a country in which we have a sound Social Security system, a sound set of pension options -- and all of you know how the pension marketplace has been changing, from defined benefits to defined contributions -- and we need, thirdly, a vehicle which promotes more private savings.
The USA account is designed to give tax relief -- which, I might add, would be considerably greater tax relief for middle income families than most of the other proposals I've heard that cost a lot more money. But tax relief in the form that actually promotes personal savings, more secure retirement and gives people who otherwise would not have it a chance to have a savings account which would give them the opportunity to hook into the creation of wealth in America, and to own a part of America's wealth-creating enterprise. I think it's very, very important.
I have also proposed $1,000 tax credit to help pay for the long-term care needs of families who are caring for aged, ailing or disabled family members. We know that long-term care needs will increase. Frankly, I would like this tax credit to be even larger. But I believe if we start now, within our other obligations to fix Social Security and Medicare and other competing claims and responsibilities of the government, I believe that this will become an integral part of the way we manage long-term care, and will be a strong part of a bipartisan American consensus for how we should support long-term care over the long run. So I very much hope that will pass.
For middle-income families I have also supported tax relief for child care, for work related expenses for disabled Americans, for further tax relief from the interest payments on student loans and tax relief to businesses which help their employees start retirement programs. We've worked very hard for six years to stabilize the existing retirement systems and to facilitate the establishment of retirement programs by more small- and medium-sized businesses for whom the old laws were quite a hassle and a lot of trouble, and actually a lot of start-up costs, so we're working very hard on that.
Now, this is the kind of tax relief that I think is good for the country. I have proposed tax reliefs to individuals and corporations who will invest money in areas of high unemployment in America -- in inner cities and rural areas, to bring private enterprise to create jobs and to generate more national growth and more national wealth.
This is the first time, at least in 30 years, when we've had a level of prosperity and the resources necessary to actually get free enterprise into the inner-city and rural areas that still have been left behind by the economic expansion. And I hope you will all support that, because, keep in mind, that helps the whole economy. We have to keep finding new ways to growth this economy, even with a low unemployment rate, that doesn't spark inflation. And this is clearly the best way we can.
Now, I think this tax relief is good for America. We can afford it. It is all paid for -- all this tax relief I mention, except for the USA Account -- every other bit of this tax relief I mentioned is paid for in the balanced budget. It has nothing to do with this surplus. It will not have anything to do with undermining our fiscal strength.
I simply think we have to use the surplus in a way that honors our most profound responsibilities to our parents, to our children, to our grandchildren, and I think that we cannot waste a penny of it until we have saved Social Security and Medicare for the 21st century.
As I pointed out in the State of the Union address, there is another enormous benefit that will come from saving the surplus in this way. It will enable us to buy back a lot of the national debt held by the public. And that is very important. Why? In 1981, our total national debt amounted to about 26 percent of our annual income. In 1992 it had quadrupled in dollars, and it was about half our national income. When I got the budget charts, it was projected to go as high as 75 or 80 percent of our national income -- a very dangerous situation.
Now, the national debt has dropped from 50 percent down to 44 percent of our income, but if -- if -- we save the money I recommend for Social Security and for Medicare for 15 years, our national debt will drop to seven percent of our national income. That's the lowest level since 1917, before the United States entered World War I.
Now, what does that mean in practical terms, to an average family? It means that we will have lower interest rates; lower home mortgage rates; lower car payment rates; more investment; a dramatic increase in national savings; and more economic growth. It also means that if we have all the financial instability you see around the world -- and I want to make it clear that the financial instability that we saw, for example, in Asia, came primarily not out of irresponsible government spending policies -- a lot of those people had balanced budgets -- but there was just turmoil in the financial markets because of banking systems and investment patterns. That undermines our ability to grow, when our trading partners get in trouble.
We need to know that we have some insurance against that sort of trouble here at home, so we can keep plugging ahead, even as we try to help our friends around the world get back on their feet and start growing again. So this is an enormous insurance policy.
The last thing I want to tell you is this: You can be thinking about what your successors around this table will be debating 15 years from now. Today, when we draw up a budget, the first thing we have to do is take interest payments on the debt off the table. Right? Some of you may own that debt -- you may have government bonds. We've got to pay you before we can do anything.
Today, that takes over 13 cents of every single tax dollar. Fifteen years from now, if we do this, it will take 2 cents of every tax dollar. Once we secure Social Security and Medicare, think what you could do with that difference -- in tax cuts, or investments in education, or whatever you think it ought to be spent on. This is a very important issue.
So, seven years ago, I said to you that if we worked together we could leave our children a nation that is stronger, freer, and wealthier than the one we inherited. Today, we actually have the chance to do this. Today we have a chance to deal with the aging of America -- a challenge facing every advanced society on earth -- in a way that is dignified, that has genuine integrity; that will strengthen not only the lives of seniors but will strengthen the lives of their children and grandchildren. It is an enormous opportunity, and an enormous opportunity.
I ask you to join with me to make sure that our country meets that responsibility. Thank you, and God bless you.
The East Room - 3:00 P.M. EST
THE PRESIDENT: Well, thank you very much, Sharon. You did a great job, and I feel better knowing that you're out at NIH, doing great work there.
I would like to thank Secretary Rubin and Commissioner Apfel and Senator Robb and Representative Baldwin. I'd like to thank Congressman Levin and Hoyer for being here, and the members of the administration; all of the young people here from your various organizations. We have young people here from City Year and AmeriCorps. We have young people here from the University of Maryland, from the James McGregor Burns Leadership program. We have young people here who are doing other things with your lives, who consented to come.
I want to talk a little today in greater specifics about the nature of the choice facing our country now. For 200 years, the test of each generation of Americans has been not simply how well they did in their own time, but whether they left our country in better shape for future generations. Because of the size of the baby boom generation, to which the First Lady and I and a few others in this room belong, we have a special responsibility to the generation represented by most of you in this room, and by Sharon in particular, as she spoke.
We have rarely had both a clearer picture of the large challenges facing our future, and more resources to meet them. And I don't just mean money, although we do have a strong position in that budget. But our country is doing well. We have a lot of confidence. We have a lot of access to information. We have a lot of tools for dealing with our challenges that many of our predecessors did not have. Since we have a pretty good idea of what the challenges are, and we have an extraordinary array of opportunities and resources to meet them, I would argue to you that we have an even greater obligation than our predecessors did to do just that.
We now have embarked on a great debate as a result of our surplus, on the one hand, and the evident financial challenges to Social Security and Medicare on the other. We have clearly two different strategies through all the complexities for moving into the future -- one offered by our administration and many members of our party and the Congress, on the one hand; and, on the other, by the leaders of the majority party in Congress. We're debating how best to seize this moment, how best to provide a better future for you.
This is a truly historic opportunity. And it is very important that as a people we choose wisely. It is a substantive debate, it is an honest debate, it is a debate worth having.
Underlying all the details and all the complexities you will hear this year about how you do the accounting on the surplus, how we should increase the rate of return on Social Security, what exactly we should do on Medicare, how much money will be required in the future for defense, should we also be investing more in medical research and education and other things over the long run, what should be the size of the tax cut and who should get the tax cut -- all of these questions are quite complex, particularly when you try to mesh them together in one plan. But underlying all of it, there is fundamentally a very simple choice: Will our first priority be spending the budget surpluses we have worked so hard to create on a terrifically appealing tax cut in the moment, or will our first priority be investing whatever the necessary amount of the surplus is for at least the next 15 years to strengthen Social Security and Medicare, to cut taxes in a way that help people not so much today, but to save for their own retirement, and to pay down the national debt as much as we possibly can, so that we can guarantee longer-term prosperity into the 21st century.
That is really what the simple choice underlying all the details will be. What is our first priority? It's no secret what I think it should be. I think we should move forward with the economic strategy of the last six years, to put a priority on investing in our people and the future. I do not believe we should go back to a version of the policy that dominated the United States in the 12 years before this administration came to office and gave us a decade-plus of deficits and quadrupling the national debt, and under-investment in our future.
The proposed new tax policy of the majority party in Congress, I believe, would spend too much of the surplus now and invest too little of it for tomorrow. I believe it would target the lion's share of the benefits away from the middle class who need the money the most to prepare for the future of their children and their own retirement. I believe it would reward consumption over savings, when we should be doing the reverse.
Our plan would put priority on investing for the future. And I'd like to say, in defense of our plan, I think we ought to be at least entitled to the benefit of the doubt, based on the last six years.
Seven years ago, when I was running for President and going from college campus to college campus, there was a lot of anger, a lot of frustration. There were a lot of young people who felt that they had been betrayed by their parents' generation, because we had just allowed things in this country to get out of hand. The deficit was out of control, the debt had quadrupled, interest rates were high, unemployment was up, social problems were growing worse, and the division -- the sense of anxiety and division -- in the country was intensifying.
And there was really a lot of doubt about whether our country was up to meeting these challenges. I didn't doubt that very much because it seemed to me that it just simply required people in positions of responsibility to make a few clear decisions. And remember, in every complex debate, the details really matter, but they only matter after you make the big, simple decisions.
We now have the longest peacetime expansion in our history; 18 million new jobs, almost; wages are going up at nearly twice the rate of inflation. We have the highest home ownership in history; the lowest percentage of people on welfare in history; the lowest recorded rates of minority unemployment since we've been keeping those statistics, for about 27 years now; the lowest peacetime unemployment in our country since 1957. Last year, for the first time in three decades, as Senator Robb noted, the red ink turned to black with a surplus of $70 billion. We project a slightly larger surplus this year, with more to come.
Now, of course, over the next 15 or 20 years there will be fluctuations that we can't predict exactly from year to year. If we have a recession, there will be fewer people paying taxes and there will be more money going out to the unemployed. But the point that has to be emphasized is that the long-term projections are good because we have eliminated the permanent structural deficit. We now have a permanent, structural balanced budget and surplus.
And that is what has brought us to this moment of decision -- that and the evident financial crisis which will be imposed on Social Security when the baby boomers retire, and on Medicare even sooner, because we're living longer and there's more technology, and because the older you get, the more it costs to maintain a state of wellness.
Now, I would say again: I realize that the path we have recommended and the path that I personally, passionately, believe in, will not be the most popular one at first hearing. But I ask you to at least look at the last six years and say, maybe they ought to be given the benefit of the doubt.
I was very moved when Sharon talked about being a nurse and learning from dealing with all different kinds of people that no one can predict what will happen to you in life. My mother was a nurse, and she used to tell me those stories over and over again. By pure coincidence, less than an hour before I came over here, I got word that a young woman whose family has been close to Hillary and me over the last several years, who has two young children, just found out that she has cancer. Now, she may be fine, there's wonderful treatment available, the tests are just being done. But the point is, a week ago such a thing would have never crossed her mind -- she is the picture of health, she is a fitness fanatic, she has no conduct that would indicate a propensity to develop it. These things happen.
And the great dilemma for all of us, both in our family and our work lives and in our national life, is that we really have to always be planning for the future as if we're all going to be all right from now on -- because, as a country and as a people and in our families, most of us are, most of the time. But we also have to plan for a future in which we recognize our shared responsibility to care for one another and to give each other the chance to do well, or as well as possible when the accidents occur, when the diseases develop, when the unforeseen occurs. Or when time takes its toll, and we get older -- which looks younger every day to me. (Laughter.)
And that is the question. This is -- it's hard to imagine a more profound subject, really, with which to be dealing. Tammy was talking about her grandmother and her niece. This is something that affects us all, and as time and chance occurs, and we try to fulfill our responsibilities, we have to make it work out so that, at the end of the day, our families are stronger, and our nation is stronger, and your future is brighter.
Now, what I want you to think about today is what we should do as our first priority with this surplus. When I took office in 1993, we were spending 14 cents of every dollar you paid in taxes paying interest on the national debt -- $200 billion -- 15 times more than we were spending on education, training and employment services, just to make the interest payments. By the year 2014, when I took office, it was projected that we'd be spending 27 cents of every dollar you pay in taxes making interest payments on the debt -- $1.28 trillion.
Now, just by eliminating the deficit over the past six years and going into these surpluses, we now know that we'll be able to meet our Social Security obligations between now and 2032, because the trust fund will be available -- actually, it will be in about 14 years that the taxes will not cover the payments on a monthly basis, but the trust fund, the savings account, will carry to 2032.
Now, that's a lot of progress. But we've still got some real challenges. Number one, 2032 is not that far away, and when you're dealing with money this big, the sooner you start to deal with the problem, the easier it is to deal with it; and the longer you take to deal with it, the more difficult, the more painful, the more expensive it will be and the more unpleasant our choices will be. Number two, we're still carrying a $3.7-trillion publically-held debt on our books.
Now, I believe if we were to use the budget surpluses -- overwhelmingly, to pay down the national debt for 15 years and target that money to Social Security and Medicare, it would dramatically improve your economic future and it would be a great safety protection against the possibility of adverse economic developments beyond our borders, which could affect us here.
We can also save Social Security and Medicare. We can keep the promises that have already been made -- we can provide substantial tax relief, targeted heavily to the middle-class families to save for retirement.
You know, half the seniors in this country would be in poverty today if it weren't for Social Security. But the poverty rate among elderly women is still twice the overall poverty rate of our seniors. Women have longer life expectancies than men. They're more likely to -- I expect NIH to change that, by the way, with all the investment we put in. (Laughter.) They're more likely, therefore, to spend more years alone and more likely to be in poverty.
We need to have a tax relief package that encourages people to save for their own retirement -- you, now. And we can increase government savings and do it in a way that provides tax relief that also increases private savings for your future, which I think is very, very important. And, parenthetically, as you pay down the debt, that leads to lower interest payments for college loans, for mortgage loans, for car payments, for credit card payments. It leads to lower interest rates for business loans, which leads to higher investment and more jobs and a brighter future. So you get a two-for-one thing if you do it. But, to be fair, the choice is, you have to give up some of the tax cut that the congressional majority would offer you today -- which sounds nice.
Now, my proposal is, save 62 percent of the surplus for Social Security for the next 15 years, and invest a modest portion in the private sector so we can increase the rates of return on the Social Security trust fund. That takes us to 55 years for the soundness of the program.
Next, I want to extend the life of Social Security to 75 years, which is where we have traditionally thought it should be, so that young people living in college today -- college students today, if we do that, would be covered well into their 90s. I think we should do more to reduce poverty among elderly women. I think we should lift the limits on what people on Social Security can earn for themselves, without having to give back their benefits, in effect.
We can do this if we make some other choices and work together. They're clear, and they're not complicated, really. They'll be somewhat unpopular, but we have to do some things to get this done.
Second thing I want to do is to give another 15 percent of the surplus for 15 years to Medicare. If we do this, we can keep it safe and sound until 2020, and I hope we can go further. I think that we should, at a very minimum, cover the greatest growing need of seniors, which is for affordable prescription drugs. This is a big deal. Anybody involved in medical research will tell you we can actually keep seniors out of the hospital, and out of trouble and, therefore, lower the aggregate costs of health care over the long run, if we can work Medicare out so we can absorb the front-end investment of a prescription drug benefit.
And, by the way, by the time your parents -- those of you in your 20s -- are on Medicare, it will be more true. And by the time you are there it will be even more true. So the quicker we get to a health care program that allows people to manage their own health care and stay healthy, and use whatever modern medicine develops to do so, the better off we're going to be.
Now, the third thing I propose is that we have a tax cut of over $500 billion to create USA accounts -- Universal Savings Accounts -- that would be targeted to middle class families to help them save for their own retirement. Social Security alone is not enough for people to maintain their standard of living. Many people in the years where they're working hard and raising their kids and worrying about sending them to college do not have the resources to save. We want to make it possible through the tax cut to have more people save for their own retirement.
So where are we with all this? The Republican leadership has said that generally it supports setting aside 62 percent of the surplus until we save Social Security. That's good and I appreciate that. So we have national unity on that issue. Then we can argue about the details about what the best way to do that is. But that's where the agreement ends. And I think it's important -- they still really haven't made a commitment to extend the life of the Social Security trust fund from 55 to 75 years, and you should demand that all of us do that. Everybody here in your 20s, you should demand that we not walk away from this session of Congress without extending the life to 75 years, and doing something about the poverty rate among elderly women, and letting our seniors get out from this earnings limitation.
Now, secondly, they do not agree that we should set aside 15 percent of the surplus to save Medicare and to pay down the national debt even further to lower future interest rates even more, to spur even more economic growth. I think this is a terrible mistake.
That does not mean that we won't have to make some tough choices to reform the Medicare program. But we're going to be better off saving more of this surplus, paying down the debt more, and saving Medicare along with Social Security.
Third, we differ on the tax relief. I believe that tax relief is appropriate. I don't think that the whole surplus should be retained by the government, even for Social Security and Medicare. But when you've got a country with a savings rate as low as ours is, and when you know right now that working families need to be saving more for their own retirement, it seems to me wrong to have a tax cut where a disproportionate amount of the benefits will go to people in very high income categories who have taken care of their retirement fine and who have made a good deal of money in the stock market over the next six years, and not target even greater tax relief to middle income families who need to do more to save for their own retirement.
So those are the basic differences. But I just want to hammer to the young people here home the following things -- you should want us to save Social Security and Medicare not only for yourselves, but for your families. You heard Tammy Baldwin talking about that. I can tell you that the baby boom generation is really worried, as I said in the State of the Union, that our retirement will cause undue burden on our children and on our children's ability to raise our grandchildren.
So if you don't have to worry about that, that is also a direct financial benefit to you. If you don't have to worry about the medical bills of your bills because we save Medicare it could be worth a lot more to you if your parents get sick than a short-term tax cut would today -- a lot more. And if we continue this debt reduction and we go as far as Secretary Rubin said -- just think about it -- having public debt the smallest percentage of our economy that it's been since before we went into World War I.
I'll tell you what that will mean in 15 years. Just 15 years. And believe me, 15 years passes in the flash of an eye. What it means is that we will only be spending 2 cents of every dollar you pay in taxes on debt service. And 15 years from now, if the Congress wants to give more tax relief, let them do it; 15 years from now, if we're on the verge of a comprehensive cure for cancer and they want to give it to the National Institute of Health, let them do it; 15 years from now, if we have some other big crisis and we want to have a major investment in education, as we did when we got into the space race, let them do it.
We should be willing to give some of these decisions to the future, instead of taking it now, when it looks easy, but we'd be squandering a historic responsibility. I am quite willing to leave a decision like that to the future. A lot of you may be here then; I'd like for you to have the option to do what is necessary.
So, again I say, underneath all these complexities, there is a fundamentally simple choice. Should our first priority be an across-the-board tax cut now, of a size which will keep us from dedicating a lot of this surplus to Medicare and will reduce our ability to pay down the debt and keep down interest rates and keep up investments over the long run -- and tie the hands of future decision-makers? Or should our priority be to save Social Security and Medicare, and have targeted tax relief to help retirement savings be built up in middle-class families that have not been doing it, or that need more, in a way that maximizes our ability to pay down the debt?
Some people in this room have heard me tell this story too many times, but I want to say it one more time. When I was a freshman in college and I took a course in the history of civilization, in the last lecture of the year, my professor at Georgetown said that the distinguishing characteristic of Western civilization was that we had always, at critical junctures, been driven by what he called "future preference," the idea that the future can be better than the present and that each individual and society as a whole have a personal, moral responsibility to make it so.
Now, that's really what this is about. Their idea sounds simpler, sounds good, even sounds fair -- 10 percent for everybody. Our idea will give you a stronger economy, will save Social Security and Medicare, will stabilize families, will strengthen the ability of the United States to lead the world, and will make you feel a whole lot better 15 years from now when you're dealing with both the opportunities and the pain of time and chance that affects us all.
You know, I see a few of the young people here today with ashes on their foreheads. Yesterday was Mardi Gras for Christians; today is Ash Wednesday. For people all over the world this is about to be springtime and a season of renewal. This is a time for renewal. I hope we make the right decision -- mostly, for your sake. And I believe we will.
Thank you and God bless you. (Applause.)
Tucson Convention Center
12:35 P.M. MST
PRESIDENT CLINTON: Thank you. Thank you. I was just wondering if Esther would agree to go back to Washington with me. (Applause.) That was amazing.
Thank you for your wonderful welcome. I had no idea when I got here that I was coming to a place so large or so beautiful or completely full, with a good crowd outside. And it's a real testament to your good citizenship. You can't imagine, as Congressman Kolbe said, what this weather looks like to us. It has been freezing in Washington. And I come here, and I'm sort of a sports fan -- you've got three teams in spring training; you've got this great golf tournament going on here. And here you are with me. Thank you very much. I'm very grateful. (Applause.)
I'd like to thank Mayor Miller for meeting me at the airport and being here today. And he and his wife met me, and it's her birthday today -- I hope she's enjoying this unusual celebration of her birthday. (Applause.)
I thank County Supervisor Sharon Bronson for her remarks and her presence here today. And Congressman Kolbe, thank you for crossing district and party lines to be here with us today. We appreciate it very much. (Applause.) I thank my good friend, Ed Pastor, and his wife for their friendship and support and leadership over the years. I thank him for that. (Applause.)
I know Attorney General Janet Napolitano and several legislators and tribal leaders and others are here. I thank them for being here. (Applause.) I think the Director of the Pima County Council on Aging, Marian Lupu is here. (Applause.) I was told before I got here that Linda Ronstadt and Cece Peniston are here, and if they are, thank you for being here. And if they're not, I'm giving them free publicity. That's okay, too. (Laughter.)
You know, I'm delighted to be back in Arizona, I'm delighted to be here. Ed told me that I am the first President to come to Tucson since President Ford. If that's true, the others didn't know what they were missing, I can tell you that. (Applause.) I'm not sure, but I believe this is the first time I've had the opportunity in Arizona to thank the people of Arizona for their support for the Vice President and me in 1996, and I'm very grateful for that. (Applause.)
This state is living proof that the great era of westward expansion did not end a century ago; it is still going on. And when I look out here at all of you, I am reminded that when America looks to the west, it still sees the future. We see in Arizona the glimpses of America's future, and the seismic shifts in population, and growth you are already undergoing.
The Mayor mentioned Hillary -- the one thing -- (applause) -- I wanted to say this -- the one thing Hillary said to me this morning, only half kidding, before I left -- I said, you know, look at this -- this speech begins by saying, Arizona is the mirror of the future, all these shifts in population. She said, yeah, there's another way it's a mirror of the future, too; the women are in charge at last. (Applause.) I think my political career just got in there under the wire. That's what I think. (Laughter.)
Let me say to all of you, we've had a good time today and I am delighted to be here. But I do want to take a few moments to have a serious discussion with you about what I believe we should be doing in this last year of the 20th century. And I think it is terribly important, because the United States is so fortunate today to have the longest peacetime expansion in our history and the lowest peacetime unemployment since 1957 and all the other economic indicators you know well. We're in our second year of budget surpluses after 30 years of deficits. Welfare rolls are about half what they were six years ago. We are so fortunate.
But the tendency is for people in public life and positions of responsibility and for citizens at large, after having gone through difficult and challenging times, when things get a whole lot better and ordinary folks can finally begin to feel it -- to see it in the highest home ownership in our history, for example -- the tendency is to say, whew, and to relax, and to basically just enjoy this moment or to think about other things, or to get distracted. And I believe that would be an error.
And I ask you to come here today to join with me in thinking seriously about our future, because this prosperity we have and this confidence we have gives us not only an opportunity, but an obligation to try to deal with the long-term challenges America faces. That's what I attempted to talk to the American people about in the State of the Union. I want to mention a few of them today and then focus on the ones that have already been discussed.
There's one other person, though, I will not forgive myself if I don't introduce -- a native of Arizona and a very important member of my personal White House staff, Mr. Fred Duval. So I wanted to introduce Fred. Thank you very much. (Applause.)
One of the big challenges you face in Arizona that all America will have to face is, how do we preserve the environment as we grow the economy; how do we maintain what you all came to California -- I mean, Arizona -- for in the first place. (Laughter.) While you have sustained record -- economic growth. If you moved here from California, if you're not like Esther and you weren't born here, if you moved here, it puts you in an awkward position to say you wish other people would stay home, doesn't it? So the question is, how do we sustain growth as a country, knowing we're going to put more pressure on our natural resources, and knowing we have local problems like preservation of greenspace, other natural heritage, quality of water, quality of air, not having toxic sites -- and that's all somehow connected to a lot of global problems like the warming of the climate.
This is a major challenge. I know that you are working on it. When the Mayor met me at the airport he gave me a shirt that I'm going to try to wear out to spring training when I leave you -- on the Bellota Ranch, which you have preserved, I think 10 or 12 miles from here -- the kind of thing we ought to be doing more of. (Applause.)
And so one example of what we're trying to do to help you deal with the future is the livability agenda that I talked about a little bit in the State of the Union, that the Vice President and I developed, that will give communities new tools and new resources to deal with whatever the major challenge is in any community to making it more livable -- whether it's reducing traffic congestion, or saving greenspace, or promoting smart growth.
We also have to recognize that we're not yet giving all of our children a world-class education, so in the State of the Union I talked a lot about how we can build a 21st century education for every American child, from putting more teachers in the schools -- (applause) -- to building or modernizing 6,000 schools, to having more summer school and after-school programs, to having more charter schools and Internet hook-ups for all of our classrooms. (Applause.) These things are very important. And Arizona has growth challenges and diversity challenges there as well.
We talked a lot about -- in the State of the Union, I talked a lot about the need to bring economic opportunity to the communities and the people that still haven't been part of the recovery, whether they're in urban areas, or isolated rural areas, or Native American reservations. We have a program now -- if we can't get investment in there now when unemployment is low and when money is ample, if we can't get private investment to prove free enterprise will work for all Americans who will work, we'll never get around to doing that. So I think that is a very important thing for us to do now, and I hope you will support that. (Applause.)
But for the next few years, all of these major challenges will be overshadowed by two great decisions: how do we deal with the aging of America; and what are we going to do now that we finally have a budget surplus, what are we going to do with it? And I want you to think about that.
You know you are on the cutting edge of the aging of America. Here in Pima County alone, there are an enormous number of people over 65. The number has doubled just since 1980 -- the number of Americans over 65 in the entire country will double within 30 years. Life expectancy is already 76 years-plus in America. If you get to be 65 years old, your life expectancy, on average, is already over 80, well over 80. People over 80 are the fastest-growing group of Americans. Esther's just one of the crowd there. (Laughter.) And her family.
So what does all that mean? Well, it means that before you know it, there will only be two people working for every one person drawing Social Security. It means even before that, there will be many, many more people on Medicare -- and the older you get, the more you tend to access health services. And even staying healthy often costs money.
If you look at that, when the baby boomers retire -- we had to wait two generations. It's not until -- this group that's now in the schools today is the only group of Americans more numerous than the baby boom generation. I'm the oldest of the baby boomers, I was born in 1946 --
Q Me, too. (Laughter.)
THE PRESIDENT: It looks better on you. (Laughter.) And those of us in the next 18 years are the so-called baby boom generation. We retire, there will be two people drawing -- working for every one person drawing Social Security. And even before that, as I said, there will be great pressures put on the Medicare program because we're living longer, and we have more access to high-tech medicine, but we access it more.
Another thing that's important for you to remember is that Social Security is not just a retirement program, it's an insurance program. One-third of the investments that are paid out in Social Security go to people who become disabled, or to the survivors of people who die prematurely from accidents, disease and other things. And when you think about what you're getting out of Social Security, particularly if you're not drawing it yet, don't forget that every year -- you have the equivalent of a term insurance policy that's issued every year against disability or death.
All over America, I meet people who literally would not be able to get along were it not for these benefits. So here's the problem: Everybody likes Social Security, everybody likes Medicare, and we can't sustain the programs unless we make some changes -- both changes in the structure of the program and investing more money.
Now, thank goodness we now have a surplus. We're in the second year of surpluses and we project that, on average, we'll have them for at least another 25 years. That doesn't mean that we won't have bad economic years, but on average, year in and year out, we'll have them, and that's good. (Applause.)
Now, in the State of the Union address, as Esther said, I proposed setting aside for 15 years 62 percent of the surplus for Social Security and 15 percent of it for Medicare. And I'd like to talk a little about that. I propose to do it in a way that would enable us to pay down the national debt with the surpluses -- (applause) -- but as we pay the debt down, to commit the money that we're using to pay the debt down when it comes back in, when it's manifested in the out-years, to commit future years money to Social Security and Medicare.
Now, if we do that, every young person in the audience should be for that -- not just because it would guarantee that you would get Social Security and Medicare, but because if you pay the debt down, as I'll say more about in a minute, it will immeasurably strengthen the American economy. And keep in mind, it is the strength of our economy that is enabling us to have this whole conversation today. If we still had 8 percent unemployment and a $200-billion deficit, we'd be letting somebody else think about this down the road.
Now, I want to say, first of all, that I am very encouraged that there are more and more members of Congress like the two here, Ed Pastor and Jim Kolbe, who are committed to seeking reasonable solutions to these challenges, and who want to set aside -- there seems now to be broad agreement among leaders and rank-and-file members in both parties of Congress to set aside the lion's share of the surplus to save Social Security.
There seems to be, now, some movement in the Republican majority away from having a large across-the-board tax cut if it would take away from the surplus' ability to save Social Security. We don't yet have that kind of agreement on setting aside some of the surplus for Medicare, and I think we should. And I'm going to keep pushing for that, because I think it's important, and I'll explain more about that in a moment -- because I think we have to have both Social Security and Medicare fixed by the end of this year. (Applause.)
Now, I can tell you -- if you look at what this surplus is projected to be over the next 15 years, if we did what I asked there would still be a substantial amount of money, out of which you could have targeted tax cuts, which I think the best are the USA accounts, the savings accounts I proposed, because most people need help saving for their retirement. But you could have a targeted tax cut. You could have investments for defense, for education, for medical research. There's still money there.
But keep in mind: when you save money, if it doesn't materialize, you just didn't save quite as much as you meant to. Once you give the tax cut, the money's gone. So we're giving it back to you, and it was all your money in the first place. And that's good. But if you want us to fix Social Security and Medicare, you should want us to make sure that we invest enough to do that. And if we do it -- (applause) -- thank you.
Now, let me just tell you basically what I propose to do. What I propose to do is to take 62 percent of the surplus, commit it to Social Security and pay the debt down. And what I believe we should do is to invest a modest amount of this in the private sector, the way every other retirement plan does. The Arizona State retirement plan does; every municipal retirement plan does; every private plan does. But I don't want to see the government having too much influence over the stock market, so I proposed to set up a totally independent board -- like every other retirement plan has -- that no politician can have any influence over, and then to limit the aggregate amount of our investments to about 4 percent. It will never get over 4 percent in the next 20 years.
There's some differences about that, but if you do it, you'll increase the rate of return on Social Security. When only two people work and one person draws, you have to find some way to do it. Mr. Kolbe's got a different way he thinks is better.
But here's the point I want to make: If you set aside 62 percent of the trust fund for Social Security, it will extend the life of the Social Security trust fund to 2050 -- maybe another year or two, depending on how much longer the economy stays in good shape. But there are three other things we need to do, and I want you to think about it.
Number one, historically, to have a good retirement system with Social Security, we've always thought we ought to have it alive for 75 years. Number two, the rate of poverty among single elderly women is over 18 percent, nearly twice the general rate of poverty among seniors, and we need to make some adjustments in the program to lift them out of poverty, I think. (Applause.)
Number three, I think it's a mistake, when more and more seniors are living longer and living healthier, to continue the earnings limitation on Social Security, that limits what people can earn. (Applause.) And interestingly enough, if you lift the earnings limitation, it actually costs the trust fund money in the short run because a lot of people start collecting their Social Security. But within a matter of a few years, it starts making money, because even retired people who earn income pay taxes on it, so after a certain period it will actually start replenishing the Social Security trust fund.
Now, to do that, to do that we will have to make some other changes. And to do that, we will have to make some changes that will be perhaps somewhat controversial, that will have to be made in a bipartisan fashion. But the changes won't be nearly as dramatic, nearly as big and nearly as troublesome as they would be if we didn't commit the surplus in the first place.
So I hope that you will support this idea of committing the surplus and then you will tell -- we're down in Ed's district now -- tell him that you know he wants to preserve Social Security, you know he wants to take care of the people that have to be taken care of, and you will trust him to go up there and make some decisions that may be somewhat controversial today, but 10 or 20 years from now we'll all be thanking goodness that the Congress of the United States was willing to do what it takes to save Social Security for 75 years. And I think that's important. (Applause.)
Now, let me say furthermore, on Medicare, here's the problem. We've made a lot of changes in Medicare to try to cut down on fraud and abuse, and there was a bunch of it. Right now, the trust fund in Medicare is stable for 10 years; that's the good news. Here's the bad news. Ten years is not enough; we ought to stabilize it for 20 years. And as probably most of you have noticed, inflation and the cost of health care has gone way down the last few years. Health insurance premiums have not been going up very fast. We've got them back in line with inflation.
When I became President, for many years before that, health insurance premiums had been going up at three times the rate of inflation. But a lot of the savings, the easy savings that could be squeezed out for managed care -- and some not so easy, which is why I'm for the patients' bill of rights -- (applause) -- a lot of those savings have been squeezed out. So this year, it is estimated that health insurance premium costs will increase about 7 percent, whereas the general rate of inflation will be just a little over 2 percent.
So you can see that that's a real problem. We can't sustain the present budgeted costs of Medicare. We're going to have to put some more money in it. If we put 15 percent of the surplus aside for Medicare for 20 years, 15 years, we could take the trust fund out from 2010 to 2020.
Now, I would also like to see us begin to work into Medicare a prescription drug benefit, which I think would dramatically improve it. (Applause.) But keep in mind, the program doesn't have enough money now. We've got to be careful how we do it because you could spend a whole lot of money in a hurry and give people who may not need it the benefit. But if you think about it, we're spending -- we've had a remarkable bipartisan consensus. You know, you wouldn't think we ever agreed on anything, I'm sure, out here -- (laughter) -- once in a great while we agree on something. And one of the things that we've had real agreement on ever since I've been in Washington, for the last six years, has been to dramatically increase spending for medical research. And some of the findings are breathtaking.
We've uncovered the genes that give a strong predisposition to breast cancer. We've done nerve transplantations in laboratory animals from legs to spines that have actually cured broken spinal cords in laboratory animals. Just unbelievable things that have breathtaking potential for the future. But if we're investing all this money to try to come up with medicine, for example, that helps to keep people well or to cure conditions that were formerly incurable, that dramatically improve the quality of life, we want to be able to bring those into the lives of the American people.
And if you're worried about people, in effect, as we get older putting enormous burdens on the hospital costs, which is all the money is -- you know, hospital and doctor visits -- if we can work out the right sort of prescription drug benefit, we'll actually save money over the long run because people will stay out of the hospital, they'll stay out of costly medical care, they will stay healthy. (Applause.) So we have to work hard to kind of get this right.
So again, my proposal is, set aside 15 percent of the surplus for Medicare; take the trust fund out to 2020; but recognize we're going to have to make some changes there for the same reason we have to make some changes in Social Security, and especially if we want to add a prescription drug benefit for the people who really need it.
Now, that's the general outline of my proposal. But I also want to emphasize, if you save the surplus for 15 years -- we save a little over three-quarters of this surplus for 15 years and used it to buy into publicly-held debt, and to pledge the future revenues to Social Security and Medicare, here's what would happen. We would go from a national debt that today was quadrupled between 1981 and 1993, we quadrupled the debt -- and it was 50 percent of our annual income -- today it's down to 44 percent of our annual income. In 15 years, it will be down to 7 percent of our annual income. The last time it was 7 percent of our annual income was 1917, right before we went into World War I.
What does that mean to you in practical terms? This is where I want the young people in the audience to listen. It will mean that the Congress that meets 15 years from now, instead of having to take a 13-plus-cents of every dollar you pay in taxes right off the top to pay interest on the debt, we'll be spending 2 cents of every dollar you pay in taxes to pay interest on the debt. (Applause.)
In the early years, most of the difference will go to fix Social Security and Medicare. But over time, that's a huge amount of money that can be invested in the needs of future generations. It can be providing for tax cuts; it can be providing for anything out in the country when we get this debt off.
But what I want the young people to understand here, especially is if we start paying this debt down and we go all the way, if we stay on this trajectory we could be debt-free for the first time in 2018. That's just 19 years from now. And in the meanwhile -- (applause) -- we'll have lower interest rates, higher investment, more investment in new business and new jobs, home mortgage rates will be lower, credit card payments will be lower, car payments will be lower, student loan rates will be lower, and the economy will grow faster. (Applause.) Now, I want you to think about it. Why will that happen? Because the government will not be going in and taking up a bunch of money every year to finance the deficit. So interest rates will go down, savings will go up, investment in our future will go up.
So this proposal is good for younger people for two reasons: This is not -- for one thing, people on Social Security now don't have to worry, it's going to be fine for 30 years; you don't have to worry. Now, you do, most of you on Medicare, have to worry because it's not going to be fine after 10 years if we don't fix that.
But every American of every age should care about this. Why? Well, for one thing, I can tell you as the oldest of the baby boomers, I spend a lot of time, I stay in touch with the people I grew up with, a lot of them. Most of them are just middle-class people, the kind of people who live here in Tucson. And my whole generation is obsessed with the thought that our retirement, because we're such a large group, would put an unacceptable burden on our children and their ability to educate and raise our grandchildren. And if we fix Social Security and Medicare, then our children will have more of their disposable income in those years to build their families', their quality of life and their children's future. That's why this is not just a seniors' issue.
Secondly, if we pay down the debt, the major beneficiaries of those changes will be the younger people. You know, there's been a lot of trouble in the world economy the last couple of years. Last year it was terrible. I have worked very hard to try to turn it around. I will do everything I can this year to make some major strides forward, because a lot of our prosperity depends upon the prosperity of our trading partners.
But our ability to control what happens beyond our borders is somewhat limited, as all of you understand. I can tell you this: If we pay this debt down, whatever bad times come in the future won't be as bad as they would have been by a long shot. (Applause.) And whatever good times come in the future will be much better than they would have been because of this.
So I say again, I haven't tried to give you a traditional political speech today, we're just having a talk. And I appreciate how -- (applause) -- I very much appreciate how quiet you've been and how you've listened to this.
There are some promising signs in Washington. I met with the leaders of both parties in both Houses, a couple of days ago. There's some indication that there is -- I think there is an agreement that we have to use the lion's share of the surplus to save Social Security. There is, I think, some movement toward reaching some consensus about the nature of tax cuts, if they ought to be targeted and benefit the people that need it most, and try to not get in the way of saving Social Security. We're not there on Medicare yet, and the Medicare problem will come soon.
But we need to hear -- the people of this country need to make a decision. And this is maybe a fairly complicated scenario I've laid out for you. I know it would be a lot more popular to say, we've got a surplus, it's your money, I'm just going to give it back to you. And then you could all cheer, and I could go home, we'd go watch baseball or do something else. (Laughter.)
But what I want to say to you is, this is a high-class problem. This is nothing to wring your hands about. The reason we have this Social Security and Medicare problem is because we've got the best medical science in the world and because we're all living longer. This is not an occasion for hand-wringing. The older I get, the better I like this problem. (Laughter.) This is a high-class problem.
But we have a responsibility to the future. This country's still around here, after more than 200 years, because whenever the chips are down and we had to make a decision about what kind of country we were going to be and what future we were going to have, we did the right thing. And we kept going forward. (Applause.)
And the decisions that we make -- not just in the Congress and the White House, but as a people -- about whether we're willing to take on the challenge of securing Social Security for the 21st century; whether we're willing to do the same thing for Medicare; and whether we're willing to save a substantial part of this surplus to do those things, and to pay this debt down, will shape, in large measure, what America is like for the young people in this audience, and their counterparts throughout the United States.
This is a wonderful time to be in the United States. We can all be grateful. Because the truth is, no one -- not even the President -- could have predicted that the results of our attempts to reduce the deficit, to bring interest rates down, would have produced these results. And no one can claim sole credit for it. This is a shared achievement of the American people. And we should be proud of it. (Applause.)
So as we go back to Washington and we go back to work, I ask you here -- and I ask you to talk to your friends and neighbors in Arizona, when you're on your phone with your friends and family members throughout the country, I want you to tell them about this meeting today. And if you don't remember anything else, just remember, if we save about three-quarters of this surplus for Medicare and Social Security, and if we pay the debt down with the surplus, and then if we have the courage to make some decisions that may sound a little tough -- to save Social Security for 75 years, fix Medicare for 20 years, and get the debt down to where it's virtually nonexistent -- America is going to be a stronger, better place.
These programs will be there, these programs will be there for the next generation of Americans, but America will be there. America will be there -- brighter, better, stronger than ever before.
Thank you, and God bless you. (Applause.)
THE PRESIDENT: Good afternoon. I would like to begin by saying that our thoughts and prayers are with all those people who were involved in this morning's Amtrak crash in Illinois. We've dispatched safety officials from the National Transportation Safety Board and other federal investigators to the site to lead the investigation. I want you to know that we will do everything we can to help the victims and their families, and to ensure that the investigation moves forward with great care and speed.
Now, before I leave for Florida I would also like to comment on an issue of vital importance to our future -- how to strengthen the Medicare program for the 21st century.
Today, Senator Breaux and Representative Thomas will hold a final meeting of their Medicare Commission. Although it did not achieve consensus, the commission has helped to focus long overdue attention on the need to modernize and prepare the program for the retirement of the baby boom generation, and for the present stresses it faces. The commission has done valuable work, work that we can and must build on to craft Medicare reform.
Make no mistake, we must modernize and strengthen Medicare. For more than three decades, it has been more than a program. It has been a way to honor our parents and grandparents, to protect our families. It has been literally lifesaving for many, many seniors with whom I have personally talked.
In my 1993 economic plan that put our country on the path to fiscal responsibility, we took the first steps to strengthen Medicare. In 1997, in the bipartisan balanced budget agreement, we took even more significant actions to improve benefits, expand choices for recipients, to fight waste, fraud and abuse, and to lengthen the life of the trust fund.
But as the baby boomers retire, and medical science extends the lives of millions, we must do more -- we must take some strong and perhaps difficult steps to modernize Medicare so that it can fully meet the needs of our country in the new century. If we don't act, it will run out of funds. That would represent a broken promise to generations of Americans, and we cannot allow it to happen.
As I said in January, we must act, and when we do our actions should be grounded in some firm principles. We must seize the opportunity created by our balanced budget and surplus to devote 15 percent of the surplus to strengthen the trust fund.
We must modernize Medicare and make it more competitive, adopting the best practices from the private sector and maintaining high quality services. We must ensure that it continues to provide every citizen with a guaranteed set of benefits. And we must make prescription drugs more accessible and affordable to Medicare beneficiaries.
The plan offered by Senator Breaux and his colleagues included some very strong elements, which should be seriously considered by Congress. However, I believe their approach falls short in several respects. First it would raise the age of eligibility for Medicare from 65 to 67, without a policy to guard against increasing numbers of uninsured Americans.
I know that back in 1983, the commission voted in Social Security and the Congress ratified a decision to slowly raise the Social Security age to 67. But there is a profound difference here. Perhaps the fastest growing number of uninsured people are those between the ages of 55 and 65. We cannot simply raise the age to 67 without knowing how we're going to provide for health insurance options for those who are already left out in the cold between the ages of 55 and 65. It is simply not the right thing to do.
Also, the proposal has the potential to increase premiums for those in the traditional Medicare program beyond the ordinary inflation premiums that keep the percentage paid by the beneficiaries the same. It does not provide for an adequate affordable prescription drug benefit.
But most important of all, it fails to make a solid commitment of 15 percent of the surplus to the Medicare trust fund. That is the biggest problem. Even if all the changes recommended by the commission were adopted, because of the projected inflation rates in health care costs, it would not be sufficient to stabilize the fund. Only by making this kind of commitment can we keep the program on firm financial ground well into the next century.
Every independent expert agrees that Medicare cannot provide for the baby boom generation without substantial new revenues. Beyond that, it is clear the it will also require us to make difficult political and policy choices. Devoting 15 percent of the surplus to Medicare would stabilize the program -- and improve our ability to modernize and improve its services, and to make those hard choices.
I want to thank the members of the Medicare Commission for their hard work and for their recommendations. Today, I am instructing my advisors to draft a plan to strengthen Medicare for the 21st century, which I will present to this Congress. I look forward to a good and healthy debate about how best to strengthen this essential program. We must find agreement this year. Medicare is too important to let partisan politics stand in the way of vital progress. I believe if we make the hard choices, if we work together, if we act this year, we can secure Medicare into the future.
Thank you very much.
Q Mr. President, your critics are suggesting that by not endorsing the Breaux plan you're simply assuring that there will be a campaign issue, something the Democrats can run on.
THE PRESIDENT: I want an agreement this year. I have given my best assessment of where we are now, of what my
objections are. I think it is now incumbent upon me to present an alternative proposal, and I will do that.
But I want to make it clear that I believe we owe it to the American people to make an agreement this year, and I'm going to do my dead-level best to get it done.
THE PRESIDENT: Thank you very much. Please be seated. (Applause.) I welcome all of our guests here, as well as the members of the administration. And I thank those who have joined me here on the platform for this important announcement.
Twice in the last six years, we have strengthened our nation's future in the 21st century by addressing serious, great fiscal challenges to America. In 1993, we met the threat of mounting deficits and a stagnant economy with an economic plan of fiscal discipline, expanded trade and investment in our people.
Thanks to that action, the red ink of the federal budget has turned to black, and we are enjoying the longest peacetime expansion in our nation's history.
In 1997, we reaffirmed our commitment to fiscal discipline with the bipartisan balanced budget agreement. It took important steps to improve Medicare, savings tens of billions of dollars in costs while expanding benefits for recipients and choices.
Today, we have new evidence that those determined actions were the right ones. I have just been briefed by our four Social Security and Medicare Trustees for the administration -- Secretaries Rubin, Shalala, Herman, Social Security Commissioner Apfel, who are here with me today. The Trustees have issued their annual report on the future financial health of these vital programs. The Trustees Report shows that the strength of our economy has led to modest but real improvements in the outlook for Social Security. They project that economic growth today will extend the solvency of the Social Security trust fund to 2034 -- two years longer than was projected in last year's report.
After that date, however, the trust fund will be exhausted, and Social Security will not be able to pay the full benefits older Americans have been promised. Therefore, still I say we must move forward with my plan to set aside 62 percent of the surplus for Social Security, investing a small portion in the private sector for better return, just as any private or state government pension would do.
As I said in my State of the Union address, we then must go further, with difficult but achievable reforms that put Social Security on a sound footing for 75 years; that lift the earnings limitations on what seniors can earn; and that do something about the incredible problem of poverty among elderly women living alone.
The trustees have also told us that today the future for Medicare has improved even more. The trustees project that the life of the Medicare trust fund has been extended until 2015. That's seven years longer than was projected in last year's report. These improvements are only partially due to the stronger economy. According to the trustees, they are also the result of the difficult but necessary decisions made in 1997; and to our successful efforts to fight waste, fraud, and abuse in the Medicare program.
Now, this Trustee Report is very good news. We should be pleased; Americans can be proud. But we should not be lulled into thinking that nothing more needs to be done, because the improvements we see today, themselves, did not happen by accident, but instead came as a result of determined action to make sure that the problems were not allowed to get out of hand.
When I became President six years ago, Medicare was actually projected to go bankrupt this year. We worked hard in 1993 and 1997 to make sure that didn't happen. Some of the actions we took at the time were not particularly popular, but we knew they had to be done. They helped to strengthen Medicare, and they laid the foundations from the difficult challenges we still must face.
Social Security and Medicare face long-term challenges, as all of you know, with the baby boom aging, with medical science extending the lives of millions, with the number of elderly Americans set to double by 2030. Even with today's good news, Social Security will run out of money in 35 years, Medicare in 16 years. We cannot -- we will not -- allow that to happen.
For three decades, Medicare has protected seniors and the disabled while expressing the values of care and mutual obligations that bind families and the generations of Americans together. Since my State of the Union address, I have called for devoting 15 percent of our surplus to strengthening Medicare, while modernizing the program with real reforms and helping seniors with prescription drugs.
When the Medicare Commission completed its work two weeks ago, I said we must build on their recommendations by adopting the best practices from the private sector while also maintaining high-quality services, continuing to provide every citizen with a guaranteed set of benefits, and making prescription drugs more accessible and affordable to Medicare beneficiaries.
Now we must build on the good news we have received today. We must extend the life of Medicare even further, modernize the program even more, and make prescription drugs even more accessible and affordable. Medicare cannot remain static in the face of the sweeping changes in our nation's health care system, a system today that relies increasingly on prescription drugs.
Today, 13 million seniors each spend more than $1,000 a year, out of pocket, for prescriptions. Let me say that again -- 13 million seniors today spend more than $1,000 a year out of pocket for prescription medication. At the same time, seniors who have no drug coverage do not benefit from the lower prices that insurance firms often can negotiate from pharmaceutical companies. The higher prices these seniors pay are in effect a hidden tax. We must find a way through Medicare to inject more competition into the health care system and to provide a prescription drug benefit.
Now, I know that some might say this good news means that we can simply delay reform. Nothing could be further from the truth. Strengthening and modernizing Medicare requires tough but achievable changes. And now is the time to make those changes -- now when our economy is strong; now when our people have renewed confidence; and now when we have time on our side so that modest changes today can have major impacts in the years ahead.
Nothing in this report lessens the need to devote 15 percent of the surplus to strengthening Medicare. But nothing in this report lessens the need to make tough but achievable reforms either. And nothing in this report lessens the need to help seniors with a prescription drug benefit. If we wait we will be condemning ourselves to future changes that will be much more costly and wrenching and much less satisfying in the end.
Today we face a choice that is a test of our wisdom as a self-governing people and a test of our vision of 21st century America. Will we seize this moment of prosperity? Will we devote these surpluses to strengthening Medicare, to strengthening our future? Or will we rush and do the most appealing prospect of the moment, a tax cut that will explode in later years and avoid our generation's responsibility and put the future of Medicare at risk?
The Trustees Report is welcome news, but it also contains a clear lesson -- tough, disciplined action is good economics. It's good for Social Security; it's good for Medicare; it's good for America. It's very good for our children's future and for the future of our families across the generations.
We can extend the life of Social Security and Medicare, and have an appropriate, affordable amount of tax relief specially targeted to the neediest working families and middle class families. But we have to apply the lessons we have learned in the last six years to the first years of the 21st century. I am determined to see that we do so this year. And the Trustees Report should make it easier for us to fulfill our responsibilities.
Thank you very much. (Applause.)
The Rose Garden
THE PRESIDENT: Thank you very much. Andrew and Theresa and I were walking down here, and they were mildly nervous because they don't do this every day. But I think you did a very fine job. (Applause.) I want to thank them and their three sons for coming. I'd also like to thank Felicia Harris and her daughter, Alexis, who came because they're another representative family who will be benefitted by the USA Account proposal.
I thank Senator Barbara Boxer who is here and has had to stand up here alone because all of the House members who were supposed to be with her are back at the House voting, and I appreciate her being here. I want to thank Secretary Rubin for his leadership on this issue, along with Deputy Secretary Larry Summers and Secretary Shalala; Gene Sperling, my National Economic Counselor.
You know that we want to talk to you about a major issue relating to retirement security in the 21st century. I think it's important to start out by saying that this will be a very big deal to a lot more people. We all know that the number of people over 65 will double by the year 2030. By the year 2050, the average American will live to be 82 years old.
Now, keep in mind that in 1900, life expectancy was only 47 1/2 years. It took 4,000 years, the majority of all recorded history, to make a leap in longevity like the one we have seen in just one century. Now, as I get older, I remind everyone that this is a very high-class problem, and I like it better as the years go by. They are a precious gift.
President Roosevelt said, there is no tragedy in growing old, but there is tragedy in growing old without means of support. Historically, our people have relied upon three basic means of support. First, Social Security. It became the basic means of support and still alone is responsible for lifting almost half of our senior population out of poverty. But it was never supposed to be seniors' only means of support. And we see by the fact that the poverty rate among elderly single women is twice that of seniors in general what happens when Social Security is the only means of support.
Pensions are the second, and private savings are the third. Retirement, to be truly secure, needs a mix of all three.
Well, how strong are these building blocks for most Americans? First, Social Security. It's a rock-solid guarantee and it has been for generations. But for the 18 percent of the seniors, as I said, for whom Social Security is their only source of retirement income, life is still pretty tough.
The first thing we have to do is to make sure that Social Security will be there for the baby boomers. As I said in my State of the Union address, that's why we ought to set aside 62 percent of the surplus to save Social Security and at the same time, as Secretary Rubin said, to pay down our national debt.
We also need to be very mindful that Medicare is quite important not only to Social Security recipients who have that as their only source of income, but to a lot of other seniors as well. And we need to set aside enough money from the surplus to secure Medicare well into the next century.
Our budget plan pays down the debt and saves Social Security and Medicare. I look forward to working with Congress over the coming months to make some changes that are necessary to lengthen the life of both the Social Security and the Medicare trust funds, to maintain our fiscal discipline and secure the health of our economy into the 21st century.
Now, what about the second building block -- private pensions? Half of all American workers, 73 million of them, have no employer-provided pensions whatever. IRAs and 401Ks are something they hear and read more and more about, but don't have for themselves. Currently, only one-third -- listen to this -- only one-third of the tax benefits for pensions and retirement savings go to families who earn less than $100,000, even though they represent the vast majority of working people in the United States today.
The third building block is personal savings. Americans living longer than ever and moving from job to job, who may have defined contribution rather than defined benefit pension plans, more and more will need to increase their personal savings. Our national savings rate has doubled over the last six years because we're saving more in the government and not having deficits.
But personal savings has gone down over the last six years. Too few Americans are saving for their own retirement. For too many Americans, the hard work they do to provide for their families today, as you've just heard, makes it difficult for them to save for tomorrow. The typical family, headed by someone between the ages of 55 and 64, has financial assets worth just $32,000. That won't support them very long in their retirement. For many Americans, as their lives stretch longer, their resources are stretched thinner.
I believe Americans who work hard their entire lives and raise their children should not have to have their retirement posed precariously on the edge of poverty. I believe that Americans, however, have to do more to save for their own future, but that Americans deserve the chance to do that.
Now, that's what this USA Account proposal is all about. It is a complete and comprehensive new plan to help Americans with retirement savings for the 21st century. It is the right way to provide tax relief for the American people, and it is the right way to increase savings and strengthen our economy, even as we help families like the ones we honor today.
Now, I proposed in the State of the Union address setting aside 12 percent of the surplus to establish these accounts. Let me say specifically what I think we ought to do. I propose that Americans be given the chance to open, voluntarily, Universal Savings Accounts. I propose that workers receive a refundable tax credit if their incomes are up to $80,000 a year, deposited directly into their USA accounts, and as they save, that the government help them save further, matching their contributions on a sliding scale, depending on income, giving extra help to those least able to save.
Further, I propose that aid be given to people with incomes between the incomes of $80,000 and $100,000 a year, but on a reduced basis. And even for people with incomes over $100,000 a year, if they have no other personal retirement savings or pensions, they should also be eligible for this help.
This would give many, many millions of Americans a new opportunity to invest in the growing American economy, to have some wealth and security in retirement. It will revolutionize savings not simply for older Americans, but especially, perhaps, for younger Americans, from their very first days in the work force. With USA accounts everyone in the USA will be able to save, especially if we get more and more congressional support as we go along. (Laughter.)
Now, let me go through the reasons that I believe that this is the right way to provide tax relief with the surplus, and I would like to go through some very specific things. First of all, Universal Savings Accounts do just what the name says, they make savings universal. It would be many workers' first, or certainly their best, opportunity ever to save. And by rewarding responsibility, USA Accounts would help set them on the road to further savings.
Second, USA Accounts make investment universal. Savings, of course, is about more than protecting what you have, it's about creating and building greater wealth for a better future. With these accounts, working families will have a chance to invest just as wealthier families do today. They can choose to invest in an interest-bearing account or a stock market mutual fund or a bond fund, just as they would with a government or private pension.
Third, they make real retirement security universal, extending it even to workers with low and moderate incomes who are least likely to be offered pensions by their employers and least likely to be able to save on their own. As I said earlier, I want to emphasize this again today -- only a third of all the tax benefits provided under all the laws of Congress of existing retirement plans go to families earning less than $100,000.
You heard what our distinguished speaker said. Listen to this. I mean, does this family -- these look like the people you want to help, right? I mean, they're making America great. Only seven percent of existing tax benefits for retirement go to families with incomes of $50,000 a year or less -- only seven percent.
Our plan more than doubles that. More than 80 percent of the tax benefits of USA Accounts will go to people making incomes of $100,000 a year or less. It's the vast majority of the American people and it's the right thing to do. It is the kind of tax cut America needs, targeted toward working families, toward savings, and toward the future.
USA Accounts will add up. For example, if a couple earning $40,000 saved just $700 a year, matched by the government, a USA Account invested conservatively would be worth a quarter of a million dollars after 40 years. How many people making $40,000 a year in this country today have a quarter of a million dollars in wealth? Think what this could do for America.
That means -- let me just say what it means practically -- it means that a person could retire and, just from this account, living over 80 years, have well over $15,000 a year in income during retirement. That's the power of savings and compound interest.
But USA Accounts involve more than compound interest. They also add up to a larger stake in our society and its future. Families who own very few financial assets would now own a share of our nation's prosperity and in the remarkable economic growth they have done so much to create. People like Andrew and Theresa, people like Felicia Harris, people working hard, raising their children, thinking about their children's future, would have their first real chance to save for tomorrow while they are working today.
With USA accounts we can say to a 25-year old just starting a family, you can start to save. With these accounts we can say to someone who has made a transition from welfare to work and is watching the stock market surge in value, you actually can have a stake in this wealth you are helping to create. We can say to working families, now you can think about your children's future, and your own.
So, as I stand here at the end of one century and the dawn of the next, and I think about what I would like family life to be like 10, 20, 30, 40 years from now, one of the things that I want very badly to do is to see our wealth more fairly shared by those who create it, and to see it shared in a way that makes sure that, as we live longer and longer, those of us who retire will not pose unconscionable financial burdens for our children and their ability to raise our grandchildren.
Saving Social Security and Medicare is a part of that. Having the right sort of tax cut is a part of that. The USA accounts increase savings, increase retirement security, and will give millions and millions and millions of families who are a big part of this remarkable recovery we have enjoyed for the last six years -- for the first time, those people will have a chance to actually own a piece of the American recovery they have done so much to create.
Thank you very much. (Applause.)
I am deeply disappointed by reports that the Congressional Republican leadership has abandoned the effort to enact legislation this year to strengthen Social Security for the 21st Century. We have an obligation to ensure that Social Security is safe and strong not only for today's seniors but for our children and future generations as well. The American people expect us to meet this fundamental challenge. Instead, just one week after passing a budget that promises a massive $800 billion tax cut, the Republican leadership is sending a message that Congress is either unable or unwilling to face up to the challenge of strengthening Social Security. That is not acceptable, and I urge the Republican leadership to reconsider its opposition to acting on Social Security this year. I have proposed concrete steps to bolster Social Security and offered time and again to work with the Congress in a bipartisan way to make the tough choices needed to secure the Trust Fund over the long term. Republican leaders have yet to consider my proposals or advance any of their own. Our economy is the strongest it has been in a generation. Now is the time to strengthen Social Security for the future. I remain committed to working with members of Congress of both parties who are committed to enacting comprehensive Social Security legislation this year. We can and must accomplish this critical goal for the American people.
THE PRESIDENT: Good morning. Six years ago, we put in place a new economic strategy for the Information Age. We put our fiscal house in order, we invested in our people, we expanded trade in American goods and services. By making tough decisions, America has reaped rich rewards. We built the longest peacetime expansion in our history.
Last week we learned that in the first three months of 1999, the economy grew at a 4.3 percent rate, with very low inflation. With record numbers of new homes being built, paychecks increasing, hundreds of thousands of young people getting new help to go to college, new businesses opening their doors, a surging market on Wall Street, we are truly widening the circle of opportunity in America.
I'm here to report to the American people on more good news about our budget. As required by law, my administration is releasing the mid-session review of the budget. Here is what we have found. When I took office, the national government had a record deficit of $290 billion, projected to increase indefinitely. Last year, for the first time in 29 years, we balanced the budget.
In January this year, we projected a surplus for this year of $79 billion. Today, I am pleased to report that, in fact, the budget surplus for 1999 will be $99 billion, the largest as a share of our economy since 1951. For next year, we now project a budget surplus of $142 billion, a surplus of $5 billion not counting the receipts from Social Security. In fact, improvements in the outlook since February have added $179 billion to the projected budget surplus over five years, half a trillion dollars over ten years, and $1 trillion over 15 years.
Fiscal discipline does bring real results. I want to thank my economic team for all the work that they have done. Lower interest rates have led to a boom in business investment, to lower mortgage rates, to lower credit card rates, to lower student loan rates. Fiscal discipline has widened opportunity and created hope for all working people in our country. Now we have a chance to do even more -- to use the fruits of our prosperity today to strengthen our prospects for tomorrow; indeed, for tomorrows well into the 21st century.
In my State of the Union address, I set out a plan for how to use the budget surplus. Today, in light of the unexpectedly large surplus, I am proposing to build on that budget framework, with a new approach that honors our values, meets our commitments, and makes it possible to reach bipartisan agreement on a budget for America.
First, we can strengthen our commitment to use the bulk of the surplus to save Social Security and Medicare, and to pay down the national debt. The new budget numbers mean that we will run a surplus in the non-Social Security part of the budget, starting next year, much earlier than previously expected. I am pleased that Republicans and Democrats in Congress have agreed to use the Social Security surpluses to reduce the national debt. But we must go forward and achieve an even stronger lock box than one proposed by Congress. Social Security taxes should be saved for Social Security, period. Let's finish the job and work to extend the solvency of Social Security. I'm encouraged that Republicans and Democrats on the House Ways and Means Committee are meeting together to try to accomplish this goal.
Second, our new large surplus will help us to strengthen and modernize Medicare while providing a prescription drug benefit. Tomorrow I will reveal the details of my plan to modernize Medicare. The steps I will propose to use the surplus will increase Medicare's solvency for at least 25 years. By taking additional measures to increase competition, combat fraud, and reduce costs, we can provide a new prescription drug benefit and still pay down our national debt.
Third, our new budget framework will use part of the surplus to provide substantial tax relief. It will maintain USA accounts, the largest and most progressive tax incentive ever offered to encourage savings. USA accounts will allow every American to begin saving from the first day in the work force, providing more help for those who need it, giving every American a stake in our shared prosperity.
In addition to the USA accounts, I have proposed tax cuts, targeted and paid for, for child care, for stay-at-home mothers, for long-term care, to encourage businesses to invest in poor communities, and to modernize 6,000 schools. But first things first.
Fourth, we can use this surplus to meet other vital national needs, such as maintaining military readiness, honoring our veterans, protecting the environment, promoting health research, farm security and other core functions of our government.
Beyond this, we have a chance to use the surplus not only to care for our parents through Social Security and Medicare, but to give a greater chance in life to our young children. So today I am proposing a new $156 billion children's and education trust fund. This commitment can enable us to offer Head Start pre-school to a million children, to hire those 100,000 teachers, to provide extra help for a million children in our poorest communities, to pay for dramatic improvements in children's health.
And finally, by investing to save Social Security and strengthen Medicare, my plan now will entirely pay off our national debt. In the 12 years before I took office, reckless fiscal policies quadrupled our debt, bringing us higher interest rates, higher unemployment, higher inflation. By balancing the budget we have begun to reduce the debt. But today our national debt still totals $13,400 for every man, woman and child. If we maintain our fiscal discipline, using the surplus to pay down the debt and using the savings to strengthen Social Security, America will entirely pay off the national debt by 2015.
If you look at this chart, you will see that we have now cut up Washington's credit card. Now we can pay off the debt; by 2015, this country can be entirely out of debt. This is a remarkable milestone, but it is clearly within reach, if we do not squander the surplus by choosing short-term gain over long-term national goals.
The surplus is the hard-earned product of our fiscal discipline. We should use it to prepare for the great challenges facing our country -- caring for our parents, caring for our children, freeing our nation from the shackles of debt so that we can have long-term, sustained economic prosperity.
Keep in mind what this means to ordinary people. If you pay this debt off, it means interest rates will be lower. It means there will be more business investment. It means there will be more new jobs. It means there will be more money left over for higher wages. It means the cost to families of homes and cars and college educations will be lower. That's what being out of debt means.
It means the next time there is an international financial crisis, we will be relatively less vulnerable because we won't have to borrow so much money, and the poorer countries will be able to borrow more money at lower interest rates, bringing greater global prosperity and stability. This is a very significant achievement for our country, and for a more stable and peaceful and prosperous world.
So I hope very much to work with Congress in the weeks ahead -- to pay off the debt, to finish the work of strengthening Social Security and Medicare, and to make a real commitment to our children and our future.
Again, let me thank the national economic team, and all others who have supported these initiatives over the last six years. Thank you very much.
Q Are you open to tax cuts beyond those that you mentioned, Mr. President?
THE PRESIDENT: I think we should achieve these objectives. Within the framework of achieving these objectives, obviously I'll be working with the Congress to achieve them. Thank you.
Q Do you want to run for Senate from Arkansas? (Laughter.)
THE PRESIDENT: I think Rubin should run for the Senate from Arkansas. (Laughter.) He's got the best timing of anybody alive.
MRS. CLINTON: Thank you very much. And I want to thank Secretary Shalala, who has been a strong voice and strong force on behalf of issues that affect how we live and what kind of country we are.
As the Henry Kaiser Family Foundation and OWL have reminded us again and again, women simply live longer than men. Now, we hope that is one gender gap that will eventually be closed, but it is the fact. And it is the fact as we project out into the 21st century. Now, that means we have more years to cherish our mothers and our grandmothers, but it also means that they and we are more likely to suffer from multiple and chronic illnesses and have greater long-term care needs. Four out of five of America's elderly women are widowed and almost half live out their days alone. And, not surprisingly, elderly women are much more likely to be poor. Nearly 7 in 10 Medicare beneficiaries living in poverty are women.
For all these reasons, supported by new data that the President will talk about in a few minutes, women rely more on Medicare than men and are, therefore, more vulnerable to changes in Medicare policies.
I'm sure each of us here today has a story to tell. And we have with us just one example of a devoted daughter: Mary Lee DiSpirito, whose mother came to live with her in Virginia after her father died. As her mother became increasingly frail, Mary Lee had to stop working to care for her mother full-time. Like so many elderly women today, Mary Lee's mother suffered from multiple health problems. And while she had Medicare, and even a Medigap policy, it did not cover prescription drugs.
Because her mother's sole source of income was a monthly $800 Social Security check, Mary Lee and her family paid $4,500 a year in out-of-pocket expenses for prescription drugs -- an amount that would have -- if her mother had been alone, without a devoted daughter and family -- would have depleted half of her mother's yearly income. Mary Lee's mother passed away last November. But her valiant efforts to care for her mother, often under very difficult circumstances, are a vivid reminder of why we must act now to protect and preserve Medicare. I'd like to ask Mary Lee to stand up, because she is emblematic, and symbolic, of women throughout our country. (Applause.)
We owe Mary Lee and all of us the commitment that goes not only to our parents and our grandparents, but to those of us in this generation who are the caretakers who will soon begin to age, may become disabled or chronically ill ourselves. And we owe it to our children and eventually our children's children -- because if we don't invest in our nation's priorities and dedicate the necessary funds to save and modernize Medicare, countless women, like Mary Lee and all of us, and her mother and ours, will be at even greater risk than they are today.
If we don't save and modernize Medicare, then women will continue to struggle to pay for out-patient prescription drugs, and the problem will only get worse as medical advances increasingly rely on drug treatments that even today are beyond the means of most ordinary citizens. If we don't save and modernize Medicare, then women will continue to skip regular screenings and check-ups that would enhance the quality of their lives and reduce Medicare's long-term costs.
So, as we continue to debate these critical issues, not only in the halls of Congress, but around our kitchen tables -- let's not forget the human dimension of what we stand for and we fight for, and what we are seeking to protect and support. Sometimes these debates have a way of making our eyes glaze over as hundreds of billions of dollars are talked about. So let's remember to keep a human face on this debate. (Applause.)
And I want to introduce someone who will add to our understanding and make sure we keep that human dimension, just as Mary Lee has, someone who knows firsthand the challenges of caring for an aging mother at a time when her own daughter had not even yet left home. She knows what's at stake for women in this debate over the future of Medicare. She also represents millions of women who would benefit if we act now to strengthen and modernize Medicare. So it is my great pleasure to introduce Judith Cato. (Applause.)
* * * * *
I want to thank Secretary Shalala, and acknowledge the presence in the audience of Deborah Briceland Betts, the Executive Director of the Older Women's League; the people here from the Henry Kaiser Family Foundation, and the other representatives of women's groups, senior women's groups, and Medicare advocates. Hillary and Secretary Shalala and I are delighted to welcome you to the White House today, and we thank you for your interest in this critical issue.
We are here to discuss what I have repeatedly called a high-class problem: the American people are living longer, especially women. And it is a high-class problem because we have this surplus today, and a projected surplus for several years into the future, which will enable us to deal with the challenge of people living longer and spending more money on Medicare, and then the retirement of the baby boomers, which will put additional pressure on Medicare and on Social Security.
It is a high-class problem, but we don't want it to turn into a nightmare because we walked away from it when we could have dealt with it and we had the money to deal with it -- when we had the time to deal with it, and we knew good and well we ought to deal with it. So, again I say I thank you for being here, and I hope today we can get out some information which will persuade the American people and members of the Congress that the approach I have recommended for the future is the right one.
For 34 years now, Medicare has protected the health of our seniors -- it has enriched the lives of the disabled, it has eased the financial burdens on families as they cared for their loved ones. For millions of American women, in particular, Medicare has been the lifeline to a dignified retirement.
As the report released today by the Older Women's League so clearly tells us, a strong and modern Medicare system is absolutely vital to the health and future of America's women. First it is critical because the majority of beneficiaries quite simply are women. Listen to this: 20 of the 34 million Americans currently enrolled in Medicare are women. I think we've got a chart that says that. But look here: 41 million -- 41 percent of the people in this country on Medicare over 65 are men; 59 percent are women.
Second, without Medicare the doors to hospitals and doctor's offices to basic medical treatment and good health would actually be closed to millions of older women. Throughout their lives, women's incomes have always lagged behind those of men, a gap underscored in retirement through smaller pensions and Social Security checks. So even as they must make ends meet on smaller incomes, women must meet greater health care needs. Nearly three-fourths of older women have two or more chronic illnesses, compared to just 65 percent of older men. For these women, Medicare has truly meant the difference between a healthy retirement and one clouded by uncertainty, untreated illness and poverty.
But we have taken all the easy steps, and some that, arguably, have gone too far. Everywhere I go, people say, you know, the therapy services have been cut back too much, or the inner-city hospitals with big teaching loads or the teaching hospitals generally -- not just in the big urban centers -- everywhere I go, people talk to me about this. So it should be obvious to everyone, there are no longer any easy ways to lengthen the life of the Medicare trust fund -- just as people are living longer and accessing it more. So that is problem one.
Problem two is that Medicare's benefits have not changed significantly since 1965, although the world of modern medicine has changed dramatically. There are some who really believe we can afford to put off this until later. I disagree. To them I say, listen to Judith Cato's story. Like millions of women in the same situation, affording prescription drugs for herself is right around the corner, and for her mother is today.
The typical 65-year-old woman retiring this year can expect to live to be 84. That's 19 more years of retirement. But if we don't act soon, the Medicare trust fund will expire in 16 years. Over the past six and a half years, we have managed to transform an economy burden by an unconscionable deficit of $290 billion to an economy that today is the picture of fiscal health, with a surplus of $99 billion and a large projected surplus over the net decade. We've done this by balancing the budget, cutting unnecessary spending, expanding our investments in education and training, expanding our trade abroad; all of it bringing interest rates down and getting investment up and giving us a remarkable period of economic growth -- the longest peacetime expansion in our history; nearly 19 million new jobs and the lowest minority unemployment and the highest home ownership ever recorded.
One of my bright staff members said, it's kind of like a family sitting around the kitchen table saying, you know, we have always wanted to plan a really fancy vacation to Europe -- let's just do it and blow the works, and when we get home, we'll figure out whether we can pay the mortgage, the car payment and send the kids to college. (Laughter.)
Now, so what do I think we have to do? Here's what I think we should do. I think, first of all, my plan would secure Medicare by dedicating over $320 billion of our budget surplus for 10 years, to extend the life of the trust fund from 2015 to 2027. That would be the longest projected life we've had on the trust fund in many years. But we have not been this financially healthy in many years, nor have we faced the challenge of so many people retiring and living so long ever before. So we need to know it's going to be all right for a good while.
Secondly, we will introduce more modern mechanisms of competition to improve quality, but to control costs as well as we can, as private sector innovations have done. We will give seniors the chance to choose between lower-cost Medicare managed-care plans and the traditional program, but we will not support changes that would force them to move from one to the other.
I also believe it's important to modernize benefits and, over the long run, the economical thing to do. Over the last 30 years, a medical revolution has transformed health care, and in many cases prescription drugs now supplant what used to be routinely dealt with with surgeries. They have lengthened and improved the quality of life.
As the Older Women's League study shows, women have borne the greatest cost of this pharmaceutical revolution. According to the next chart, women spend $1,200 a year on prescription drugs, on average -- about 20 percent more than men. Now, as you have already heard, our plan will help seniors to afford the prescription drugs that have become essential to modern medicine. The plan is completely voluntary, but available to all Medicare beneficiaries.
This is a challenge, I might add, not just for poor women. It is also a challenge for middle-class women as well. Look at the next chart. Half of all middle-class women -- that is, for seniors, those who make at least $12,700 a year or, with couples, $17,000 a year -- have no prescription drug coverage at all. So among those who have no coverage, a quarter are below the poverty line, a quarter are between 100 and 150 percent of poverty, half are over 150 percent of the poverty line -- although, if your drug bills are big enough, it doesn't take long to get down below the poverty line again.
Now, I think anybody that says we don't need to do this is out of touch with people's real lives and out of date. I'd also like to point out that our plan would eliminate the last barrier between seniors and preventive screenings -- tests for breast cancer, colon cancer, prostate cancer, diabetes and osteoporosis -- that can help save their lives. For too many seniors on fixes incomes, especially low-income women, the cost of the modest co-payment is prohibitive. Last year, for example -- listen to this -- just one in seven women took advantage of the mammograms covered by Medicare.
Now, this is a good plan. It is a responsible plan. And it is important that we deal with the Medicare challenge now, while we have the funds and the prosperity to do so. I have proposed to dedicate the Social Security portion of the surplus to Social Security, but also to lengthen the life of the trust fund by taking the interest savings we'll have, because this will allow us to pay the debt down, and putting it into the Social Security trust fund, so it will last longer. So we'll have at least over 50 years of life on the Social Security trust fund. (Applause.)
And as I said, I proposed to put over $320 million in Medicare. There's not a single expert on this program who believes that we can stabilize the fund and lengthen the life of it and deal with the coming demographic challenges without more money. No one who has looked into this believes it. And I think this is very, very important, because if the tax cut being pushed by the congressional majority, which includes vast benefits for people in my income group and higher -- who have done quite well in the stock market, thank you very much -- (laughter) -- and are not clamoring for it, and are worried that it will destabilize the economy -- even today, there are stories in the paper that if we have a big tax cut, with the economy growing as fast as it is, it might stimulate inflation, which would cause increases in interest rates, which would take away all the economic benefits of the tax cuts in higher interest rates.
So I say to you, I do not believe that is the wise thing to do. I think first we should say, let's save Social Security and Medicare; let's add this responsible prescription drug benefit; let's decide the commitments that we ought to make -- to give our children good education, to keep our streets safe, to biomedical research, to national defense, to the environment -- and then let's decide what we can afford in a tax cut. Let's do first things first.
In addition, another benefit of my plan not present in any other one is that if my proposal were to pass the Congress, in about 15 years we would actually be out of debt as a nation, for the first time since 1835. (Applause.)
Now, the significance of that for older Americans is quite important. Why? Because if we are out of debt, it means we will have long-term prosperity, lower interest rates -- which means lower costs for business borrowing, more investment, more jobs, higher incomes, and for families, lower home mortgages, car payments, credit card payments and college loan payments. That amounts to a very big tax cut over 10 or 15 years, getting this country out of debt, making us less vulnerable to the vagaries of the international financial system, securing the long-term economic stability for the young people here in the audience and throughout our country.
Believe it or not, we can do all that and still have a fairly sizable tax cut. I propose to let people use it for retirement savings, for long-term care, for child care. But the point I want to make today is not so much what we spend it on, but how much it can be, and in what order we are doing this. We did not get to this moment of prosperity by figuring out how to eat our cake, and then looking around for the vegetables. (Laughter.) That's not how we got here. We got here -- and a lot of members of Congress lost their jobs over it because we took the tough decisions in 1993 to get the deficit down, to bring interest rates down, and to do it without having to give up on obligations to education and to our other important national priorities.
So here we are with this opportunity of a lifetime to deal with this, and I think we ought to do it. Now, I regret that, as all of you know, the congressional majority appears to have a different philosophy. Look what happened -- last week, in the House of Representatives, they passed an irresponsible tax bill that would spend our surplus, it wouldn't devote a dime -- not a dime -- not one dime to extending the solvency of Medicare. And interestingly enough, these tax cuts are worded so that they won't go into full effect until the year 2010, just when the baby boomers start to retire. And in the second 10 years, they'll cost way over twice as much as they did in the first 10 years.
Now -- so the whole impact of them will hit us right between the eyes as the baby boomers retire, Medicare nears insolvency, Social Security starts to show strains.
They tickle me, you know, these guys. They were fighting the patients' bill of rights several days ago and they said, oh, these Democrats, all they do is stand up and tell stories, we're talking about something besides stories. Well, I don't know about you, but the older I get the more it seems to me like life is just a collection of stories. (Laughter.) And people are pretty important -- a lot more important than statistics.
And I'm telling you, I've been at this business a long time. This country may never have an opportunity like this. And they're spending it on their friends. (Laughter and applause.) And, ironically, their friends are better off under our plan because the stock market has more than tripled -- their friends have done very well under our plan. We have had an economic policy that has been non-discriminatory, benefitting Republicans and Democrats, alike. (Laughter.)
Look, today I want you to read the papers today. They point out that the Congress, the majority, has begun resorting now to accounting gimmicks, because they've approved such a big tax cut they can't meet the fundamental obligations of government without beginning, right now, to spend the surplus. And they don't want to acknowledge that, so they've resorted to accounting gimmicks to disguise the fact that they're dipping into the surplus. They can't live within the budget limits we set in 1997 -- I told you, we all know we cut Medicare too much in '97; we're going to have to fix it. A lot of you know it. A lot of you deal with these programs and these health care providers.
But they want to give the illusion they're living within the budget limits, nothing has to be done, and they can have this tax cut. I'm telling you what's going to happen. If this tax cut were to become law, it would mean huge cuts in education, huge cuts in the environment, huge cuts in medical research, huge cuts in health care, and huge cuts in national defense -- or, if they didn't do that, we would see -- balloon the deficit again, just like we did in the 12 years before I took office, when the national debt quadrupled.
We tried it that way; it didn't work very well. Why are we going down the same road we tried before, when we have a road that we have tried for six and a half years that has brought us to this point? Why would we reverse course instead of building on what we've done and going beyond it? It is a big mistake, and it's wrong. It's not just wrong for the seniors. It's not just wrong for the women of this country. It's wrong for all Americans. It is not the right thing to do.
Now, it also -- it will take away the single best opportunity any of us will ever have in our lifetimes to save Social Security for the baby boomers, to save and strengthen Medicare, and to get us out of debt for the first time since 1835 -- to give the young people in this room a chance at a generation of prosperity. And I don't believe any thinking person, once they understand what the real numbers are -- let's get out of the rhetoric here, who's going to give it to whose friends and all that. What are the numbers? This is an arithmetic problem.
And so I ask you to help me send the word to the Congress that let's do first things first. Let's fix Medicare. The women of America especially need it. (Applause.)
You know, we have to work together. Every time we get in one of these fights people throw their hands up. But there's normally a process that goes on here. When we were doing welfare reform I vetoed two bills because it took away the mandate of health care and nutrition for children. We finally got a welfare reform that I thought was right, it carried by big majorities in both parties, in both Houses -- we have the lowest welfare rolls in 30 years. And we did it in an election year.
Then the next year we did the Balanced Budget Act and it has worked superbly. The only problem with it is that the Medicare cuts were too burdensome on certain groups, and we're trying to fix that. But I can tell you that if this tax cut passes there will be breathtaking cuts in every area of our national life that you would believe is important, over and above what it would do to totally rob us of any chance to stabilize and improve Medicare and save it for the baby boom generation.
We have big tests as a country: How are we going to deal with the aging of America? How are we going to give all of our kids a world-class education, especially since more and more of them come from families whose first language is not English? Those of us who expect to be alive in 20 years, or hope to be, better hope we do a good job of educating those kids.
How are we going to deal with all these other challenges? How are we going to bring economic opportunity to people who still haven't felt it? How are we going to stabilize the economy so that we'll still be growing even better 10, 15, 20 years from now? These are big challenges. But they are high-class problems in the sense that nations rarely get these opportunities. Once in a lifetime you get a chance to stand up with your country in good shape, bring people together, look down the road and say, yes, these are big challenges and we're going to check them off -- one, two, three, four -- because we have the money and the vision to deal with them.
So my appeal today is that we not get into a big fight, we just go back to basic arithmetic. These tax bills the majority is pushing could not get the support of their own members if we had a chart up on the wall that says, here is what we have to spend just to stay where we are today in education, defense, the environment, medical research; here's what every expert says it takes to stabilize Medicare; here is the interest savings you ought to be putting into the Social Security trust fund; here is what we have to do to fix health care. They agree we have to do some more for veterans care. They agree with these things -- the numbers don't add up. We cannot take the vacation without paying the home mortgage, the car payment, and the college loan bill. We can't do it. We can't eat the cake until the vegetables and the soup are out of the way. And we cannot defy the basic laws of arithmetic.
And contrary to some of the debate, we cannot forget the stories. This is about how millions upon millions upon millions of Americans will live. Will they live in dignity and health, or will they live in want and insecurity, imposing unconscionable burdens on their children, and limiting their children's ability to raise their grandchildren?
END 11:06 A.M. EDT
THE PRESIDENT: Good afternoon. I've just had a meeting with the members of my economic team, and I'd like to talk for a few moments about the course we have decided to chart for the future.
Seven years ago when I ran for President I said we had to put our fiscal house in order, start living within our means. Most Americans agreed, but few believed we would do it. Irresponsible policies in Washington had piled deficits upon deficits, and quadrupled our national debt in the 12 years before I took office. As a result, interest and unemployment rates were high, and growth was low.
In 1993, Vice President Gore and I took office determined to change our course, to follow a new economic strategy founded on fiscal discipline, investment in our people, and expanded trade. Today the success of that strategy is very much in evidence. We have balanced the budget, turned a deficit of $290 billion into a surplus of $99 billion, the largest ever. Since 1993, our economy has produced almost 19 million new jobs, wages and home ownership are high, inflation and unemployment the lowest in a generation.
America has come a long way in the last seven years -- from recession to recovery; from economic disorder to a fiscal house finally in order. We have even begun to pay down our debt. Just this week, our administration announced that the federal government will pay down more than $87 billion this year alone -- the largest reduction in our nation's history. Over the last two years we've paid down over $142 billion.
The debt held by the public is now $1.7 trillion -- that's $1.7 trillion -- less than it was projected to be when I took office.
Furthermore, I have proposed a balanced budget that would actually eliminate the debt by 2015. By putting first things first, by saving Social Security and strengthening Medicare, our nation can actually become debt-free for the first time since 1835, when Andrew Jackson was President.
Today, the Treasury Department has proposed new steps to further our progress. Secretary Summers discussed them earlier today, but I just want to summarize. These proposals would help us to manage federal finances in a new era of budget surpluses. They would give the government the same kind of tools, the same flexibility that families and companies have in managing their finances. They would, in effect, allow us to refinance old debt and pay it down on the best terms possible, saving taxpayers billions of dollars in the process.
If past policies brought a vicious cycle of budget deficits and high interest rates, our new economic strategy drives a virtuous cycle of budget surpluses and low interest rates. We know what paying down the debt means for America's families. It is the equivalent of a tax cut worth hundreds, even thousands of dollars to them in lower interest cost. Smaller debt brings lower interest rates. When interest rates fall, more families can afford a home or a car or a college education for their children. More businesses borrow more to invest, boosting productivity and creating more jobs.
In the past seven years we've balanced Washington's books, we've cut its credit card balance. Now let's refinance our nation's mortgage and then wipe the ledger clean. Paying down the debt creates wealth, creates jobs, creates opportunity. It's the right and responsible thing to do and we have the chance of a lifetime to do it.
If we're to make the most of this prosperity we simply have to put first things first. We should maintain our fiscal discipline by investing the bulk of the surplus to pay down the debt, save Social Security, strengthen Medicare and modernize it with a long-term -- long overdue prescription drug benefit. We should honor our values by honoring our commitment to educate our children, protect our environment, strengthen our defense, and fight crime. And we should move forward with an economic strategy that is successful and sound, not revert to one that is a proven failure.
On Capitol Hill, members of the majority have been at work on a tax plan that is risky and plainly wrong for America. Let me repeat what I have said many times -- if they conclude this plan and send it to me, I will have to veto it. I will refuse to sign any plan that signs away our commitment to America's future -- to Social Security, to Medicare, to paying down the debt. We can do these things and still have a sensible tax plan, and I remain committed to work with any members of Congress, from both parties, to achieve that goal.
Q Mr. President, do you believe you can reach an agreement with Republicans later in the year on taxes, and is $300 billion the most you would be willing to allow for a tax cut?
THE PRESIDENT: Well, I hope we can reach an agreement. And let me suggest that the way to proceed -- and I think that the only way we can reach an agreement is if they would do what I have tried to do. I think first they ought to produce their own Medicare plan that lengthens the life of the trust fund and provides a modest prescription drug benefit. Then, of course, they have to calculate how much more money they want to spend over and above the caps. And they have to figure out what's left, and whether they agree with me that we should pay off the debt.
We could certainly do this. I want all of you to understand, for me this is not a political issue, this is a matter of basic arithmetic. We returned to basic arithmetic in 1993 and it has served us well. Gene Sperling once said that to pass the big tax cut first, without knowing how you're going to meet your responsibilities, is like a family saying, let's take the vacation of our dreams, and when we get home, we'll try to decide if we can pay the home mortgage and send the kids to college. I think that the order of this is wrong.
So I think if they would have a very clear idea of what their Medicare proposal would be and what the impact of their proposed increases in expenditures would be, then I think we'd be able to make an agreement. And I'm willing to work for it and hope we can achieve it.
Q Mr. President, by the time Congress comes back from its recess, it will be a little more than a year towards the 2000 elections. What is to make this -- what is to possibly keep this from becoming a political issue, if it isn't already?
THE PRESIDENT: Every issue in Washington, I suppose, is a political issue. The point I'm trying to make is, if we want to save Social Security and Medicare and pay the debt off, then you have to figure out how much money you have left and how much money the Congress is determined to spend over and above the present budget caps, and you can spend what is left on the tax cut.
But to pass a tax cut first and then say, well, I'm sorry, we can't really save Social Security and we're not going to lengthen the life of the trust fund, or, I'm sorry we're not going to lengthen the life of the Medicare trust fund today -- neither one a day under their proposal -- and we may or may not be able to spend money on education and national defense and, if we do, we'll go back into deficit spending again -- I don't think we want to get into that.
So I'm saying -- you asked me, can we achieve this. Of course we can. Remember, in 1996, in an election year, we passed welfare reform with overwhelming majorities of both parties in both Houses. And yesterday we celebrated cutting the rolls in half. And 12,000 companies are helping us to hire people off welfare. So we can do this. We can do this.
We were never going to be able to do it, I might add, unless we had big majorities of both parties in both Houses. It is in our interest, if you want to talk about it in that way, to do the people's work here -- to do it this year and to do it next year. And I think it's terribly important, so I hope we'll do it.
Q Mr. President, why haven't you submitted a plan to reform Social Security? And secondly, sir, would you also comment for us on the First Lady's interview with Talk Magazine and clarify for us, if you will, what she meant in saying that you were scarred by abuse and that that's affected your behavior?
THE PRESIDENT: Well -- what was the first part of the question? (Laughter.) I'll answer the second part -- what Washington the first part?
Q The first part was why you haven't you submitted a plan to reform Social Security yet.
THE PRESIDENT: Well, I am working on that and I have been talking to Chairman Archer about it, and I would be prepared to do that. But keep in mind, that is not what is holding this up, because we both agree on what we have to do with the surplus. That is, we both agree -- and let's not lose sight of the fact that we've actually reached one agreement here; we both agree to keep the Social Security portion of the surplus apart from regular government spending.
My plan, however, is more detailed than theirs in the sense that I also proposed to take the savings that we receive in five years of this 15-year period on the debt reduction and put that back into the trust fund to lengthen the life to 2053. If Congress wished me to do that and that would help to get this agreement -- I've been working very hard on this, and I would be prepared to do that.
Now, let me just say on the other thing, I think anybody who read that article would draw two conclusions -- you can draw a thousand conclusions, but I think there are two conclusions that anyone would have to draw, amid all the differences they might have in the way they read the piece. One is that my wife is an extraordinary person with a passionate commitment to public service and a genuine record of important achievement. And the second is that we love each other very, very much. And I think those are the two important things.
Now, I don't believe that anybody could fairly read the article and think that she was making any excuses for me. I haven't made any excuses for what was inexcusable, and neither has she, believe me. And as to my childhood, everybody knows that's looked into it I didn't have a bed of roses as a kid. But I can tell you this, as I think about other children in the world and in our country that have difficulties growing up, I am convinced from my own life and from my research and from my experience with other children, the most important thing is that every child needs to know growing up that he or she is the most important person in the world to someone. And I knew that, so -- I knew that. And I have no complaints.
Helen, happy birthday. (Laughter.)
MS. THOMAS: Thank you. Thank you, Mr. President.
Q Mr. President, the First Lady has indicated that the trauma of this was to the degree that you can't even take it out and look at it anymore. Are you trying to work through the issues and look back over that time of your life?
THE PRESIDENT: Look, I think that I have said all I need to say about that. I have -- I think every reflective person thinks about his or her life, but what I conclude about my childhood is what I said. It had its really tough moments, but I always knew I was well loved. And I think that's important for all of our children.
Q Mr. President, are you going to call the Prime Minister of Japan to discuss the fluctuations in the currency market? And how concerned are you that they're more interested in market manipulation and intervention than in stimulating domestic demand-led growth, which Secretary Summers and Secretary Rubin have advocated ad nauseam?
THE PRESIDENT: The first -- Japan, how concerned I am about Japan -- I think, first of all, in the last six and a half years, we've seen the currency fluctuations -- they go up, they go down. I don't have anything to comment about that.
I think that we do see some signs that Japan's economy is beginning to grow, and that Prime Minister Obuchi has formed a coherent and strong and effective government, and has secured the necessary support from the Japanese people to continue to move forward.
So we will continue to consult with Japan about what we think is important for their economic recovery, as we should because they're our partners and they're our friends and our allies, and their recovery is critical to Asia's recovery. But I basically believe that the trends are positive there, and so I have a positive view.
END 12:30 P.M.EDT
Adam's Mark Hotel
2:25 P.M. CDT
THE PRESIDENT: Thank you so much, Governor Carper, Governor Leavitt, and Governor Carnahan, thank you for welcoming me back to Missouri and to St. Louis, a place that has been so good to me and our family and our administration.
I must tell you, this has been a great day for me already. My staff says I'm entitled to a great day once in a while -- I got to spend the night in my mother-in-law's house, go to early church in my church, and have breakfast with my friends, and then come to meet with you. And something bad may happen tomorrow, but this has been a good day. (Laughter.)
When I first spoke to the governors as President in 1993, I promised that we would build a new partnership, and I said that I would try to hold up my end of the deal in three ways -- first, by bringing down the federal budget deficit so we could have lower interest rates and greater investment and a recovering economy. I've been a governor through one boom and two busts -- the booms make the job easier.
Second, I promised to work with you to end welfare as we know it, to prove that poor people could succeed at home and at work. And third, I promised to loosen the rules and lift the regulations on Medicare, that had long stopped governors from providing more health care for less.
Six and a half years later I think it's clear that this partnership has worked, through the hard work of the American people and the economic plan we put in place in 1993, followed up with the bipartisan Balanced Budget Act of 1997. We've turned record deficits into record surpluses, as Governor Carper said.Most of your budgets also enjoy healthy surpluses.
We have the largest peacetime expansion in history, and on Friday I announced we had gone over 19 million new jobs in the last six and a half years, with home ownership the highest in the history and minority unemployment the lowest ever recorded.
You all know, and I think Tom referred to this, that with the welfare waivers that we granted the states, followed by the Welfare Reform Act in 1996, your initiatives have led us to the lowest welfare rolls in 32 years now. Last week in Chicago, I was able to announce that every one of your states is meeting the work requirements in the new welfare law, something that the American people should be very grateful for. And we now have 12,000 businesses in our welfare-to- work partnership committed to hiring people from the welfare rolls into the work force.
With the bipartisan balanced budget bill of '97, we created children's the health insurance program, $24 billion, the largest expansion of health coverage since the creation of Medicaid. We've waived or eliminated scores of laws and regulations on Medicaid, including one we all wanted to get rid of, the so-called Boren Amendment. And last week I signed the federalism executive order, putting to rest an issue that has divided the administration and the governors for far too long. (Applause.)
In so many areas we share a common vision. I heard Governor Hunt talking when I walked in today -- I thought, I've heard that voice for more than 20 years. It's still singing more or less the same song and it gets better every time he sings it. I thank you, sir.
So I would say to you that this country is poised to enter a new century and a new millennium with its best days still ahead. But we have some significant long-term challenges. I think we're in a position to meet those challenges. And I'd like to talk very briefly about the next steps that could affect you on the federal budget, on welfare, and on health care.
First, let me say that I do see this as a generation challenge -- to deal with the aging of America; to deal with the children of America, which are more numerous and more diverse than ever before; to deal with the long-term economic health of America; to bring the light of opportunity to places that have still not felt any of this recovery. Those are just a few, but I think the biggest, of our long-term challenges.
So what I propose to do is to take over three-quarters of this projected surplus and set it aside in ways that would enable us to lengthen the life of the Social Security trust fund, in ways that would cover the entire life of all those in the baby boom generation -- that is, I don't expect to be around in 2053; I'd like it if it turned out that way, but I kind of doubt it will happen -- in ways that would lengthen the life of the Medicare trust fund, bring the best that we know in terms of competitive technologies and other things to play, have more preventive screenings to try to keep people out of the hospitals, and have a modest prescription drug benefit -- something we plainly would provide if we were creating Medicare for the first time today.
If we do that, there will still be enough money to meet our fundamental obligations in education, national defense, medical research, veterans, agriculture, the environment -- and to have a modest tax cut. And we can do it, and pay off all the publicly-held debt in this country for the first time since 1835, when Andrew Jackson was President. We can do that in 15 years.
Now, I think that's important, because in a global economy where interest rates are set in part by the movement of money at the speed of light across national borders -- I'll make you a prediction: in 20 years, people will think all rich countries should not have debt because that will keep interest rates lower, investment higher, more jobs, more incomes, smaller costs for everything from homes to college education. And our trading partners around the world that are struggling to lift themselves up, or countries that get in trouble as the Asian countries did over the last couple of years, will be able to get the money they need at lower interest rates, recover more quickly, and help us to continue to integrate the world into a global market.
Now, as you know, I'm having a big argument about this in Washington. And I know you've already heard the other side of it. (Laughter.) But let me just say, I think if you hear it at first blush, the plan of the Republican leadership has some appeal. They say, look, we've got this big projected surplus and we want to let the government keep two-thirds of it and give the people a third of it. And why is that unreasonable?
Well, here's the problem. First of all, you all have been there -- a projected surplus is not the same as one in the bank. And we don't know that. But, secondly, there are budget problems, economic problems and aging realities that I would argue undercut this tax bill that has passed the Congress. Let me just mention them.
First of all, the two-thirds of the surplus that the Republican leadership -- and I applaud this -- is committed not to spend is that produced by the Social Security taxes. So they say we're not going to spend it at all -- which means the only money available for spending over the '97 budget caps is the 100 percent they want to give away in the tax cut. And it is 100 percent, because it's not just the size of the tax cut, but when you cut taxes that much, you reduce debt less, so your interest rates are higher -- the interest payments are higher. So you have to add to the tax cut the interest payments that we will have to pay that we would not otherwise have to pay.
So, basically, it means that the surplus we project to come from Social Security taxes will be out here and if it's kept that way it will be used to pay down the debt. And that's good -- not as much as my plan, but it does pay some down, and that is good and I applaud that. But it also means that you and we and the American people are stuck with the '97 budget caps for the next decade.
Now, let me tell you what that means. First of all, it's not real. The same people that voted for this tax cut are up there spending money to help the farmers -- and they ought to be. We've got a terrible crisis on the farm in America and we need to deal with the present emergency, and we need a long-term modification of the '95 farm bill to reflect the fact that it has no safety net. And we need to do it in a way that doesn't mess up market prices, doesn't go back to the bad old days of overly-managed farm programs by the federal government. There are ways to do this -- and we have to be careful how we do it. There are a lot of good things in that farm bill, in terms of having the government get of telling people what to plant and where; it had a good conservation reserve program, had a lot of good things. But it had no safety net.
So the Congress on the one hand is cutting the taxes and on the other hand spending money for farmers. They're putting more money back into the veterans' health budget, which they ought to do, there's some need there. They want a defense increase even bigger than the increase I want -- neither of which can be funded under the new balanced budget calculations if you keep the Social Security surplus out of it. And that doesn't count what you will want us to do to help you in education or Medicaid or anything else.
And it doesn't count what I hear at every place I go, in every state, in communities large and small, which is that we had cuts that were too severe in the Medicare budget in 1997, which has imposed enormous burdens on the teaching hospitals in every state in the country, on the hospitals with large numbers of poor people, and on a lot of therapy services, for example, for home health care, which have been cut back.
So, on the one hand we've got a construct that sounds simple and good -- we keep two-thirds of the surplus, we give you a third back, to the people -- but it means that we have to stay within the '97 budget caps, which are already being broken, and which should be exceeded. You've got to do something about agriculture. We've got to do something about these teaching hospitals. We need some relief for the Veterans Administration, and that doesn't deal with all the things that you've been talking about, probably, before I got here. Now, so that's the budget problem.
So one of two things will happen. If we have this construct, we would either have huge cuts in all these things -- huge -- or we would have a reversion to past policies. We'd go back to deficit spending. At least we'd be deep into the Social Security portion of the surplus.
Secondly, there are the aging realities. The plan that has passed does not do anything to extend the life of the Medicare trust fund, nor does it do anything -- even though it holds the taxes back -- it doesn't do anything to extend the life of the Social Security trust fund.
Just taking the tax receipts and holding them separate does not extend the life of the Social Security trust fund. To do that, you have to do what I suggested, which is to take the interest savings you get from paying the debt down for five years, and put them into the Social Security trust fund. And I believe we have to find some way of bipartisan agreement to increase the rate of return in the trust fund -- and the only way to do that is to get out of buying something besides government securities. And I think there's a way to do that, and I still believe we can get an agreement on that.
So there's -- then the third thing is the economic realities. We have been told repeatedly, in a soft and indirect way, from the Federal Reserve Chairman to the pages of all the business articles that you read, that if -- with the economy growing like it is, if we have a tax cut of this size, it will lead to larger interest rate increases, and most people will turn right around and pay back, in higher interest costs, what they are going to get in a tax cut.
Now, it is true, as Governor Carper said, that we don't have indexes of inflation here, because America has a relatively open economy and because of the breathtaking increases in productivity, because of technology and other things. We don't. But the Fed took a preventive step, as all of you know, the last time it met. And we have gotten a signal that is loud, clear and unambiguous that if you have a tax cut this big, an economy that's doing this well, there will be higher interest rate increases, and the people will lose what they get in a tax cut in higher interest costs. I personally think that is a mistake.
Now, consider the flip side of this. Here we, the baby boom generation, our generation, has been derided by others and by ourselves for 30 years for being self-indulgent and all that, and been poorly compared to the World War II generation. Well, in their youth, they were required to save the world, and to get us through the Depression. And we had no such challenge. But in our middle age we are being given a chance to get this country out of debt for the first time since 1835. We are being given a chance to stabilize Social Security and Medicare, so that when we retire we don't have to have our hands out to our kids to support us and take money away from them that they would otherwise spend on our grandchildren. And I think it's the opportunity of a lifetime.
Now, we can still have -- my view is the way to resolve this is to stop putting the cart before the horse. To pass the tax cut before we decide what the Medicare fix is and what are we going to do on that, whether we're going to extend the life of the Social Security trust fund, and what we need to spend for these other things is kind of like a family sitting down to dinner and saying, let's take the vacation of a lifetime; when we get home we'll see if we can't make the mortgage payment and send the kids to college. You wouldn't do it. Nobody else would do it and I think it's a mistake to do it.
Now, if you disagree with all this and you want to go back and spend the Social Security surplus, we can do it -- we can do all these things. But you mark my words, interest rates will be higher, this economy will be weaker than it otherwise would have been. And 30 years from now we will wonder what in the living daylights we did with the opportunity of a lifetime. And I think that's why one of the members of the Republican Party who voted against this was Governor Voinovich, who happens to be a senator. And another was Senator Snowe, whose spouse was one of our colleagues.
And so I just would ask you to consider this. To me this is not politics; this is arithmetic. We went back to old-fashioned arithmetic in Washington the last six and half years and it worked pretty well. We had to get rid of 200 or 300 programs. We've now got the smallest federal establishment since John Kennedy was President. And everybody had to take a little medicine they didn't like, but because the economy has grown so much we've actually had more money to spend than we ever dreamed. And we've begun to lift children out of poverty, we've begun to do some other things.
But if you look at this looming problem of what the aging of America will do -- twice as many people over 65 in 30 years -- if you look at what you all are facing, with 2 million teachers about to retire, with the largest number of kids in schools ever, with increasing diversity -- it just seems to me that -- and if you look at the obligations I have and that any President would have of either party to maintain military readiness and deal with the aging of a lot of our systems, and to compete for talented young people to get them into the military when they can get so many good jobs doing other things -- if you just look at all of this, and if you look at the fact that the money is not there yet, this is all projected surplus, it seems to me that the better course is to think of the long-term future of our children.
And I really do believe this is a generational challenge for the so-called baby boomers, and I don't think we ought to blow it. And if I can stop it, I will. (Applause.)
But let me say something else. This is not -- it is literally true that instead of spending more money on the farms, we'd have to cut the farm safety net programs, we'd have to eliminate the crop insurance bill. We'd have to have a $32 billion cut in Medicare, which we're not about to do. We'd have to do all these things.
But let me say that I am also not pessimistic about this. To solve this problem we have to have a majority of both parties and both Houses. And most people say, well, you're already in the political season, all the states -- some of you have done this -- all the states have moved their primaries way up. So everything is now about nothing but politics and we can't get this done. I just think that is dead wrong.
We passed a bipartisan balanced budget agreement in 1997, overwhelming majorities of both Houses and both parties. In '96, in the teeth of the election, we passed that welfare reform bill, overwhelming majorities in both Houses and both parties. And you know, we're all still getting paid, every two weeks we're drawing a check up there, and if we just realize what we're supposed to do for our check we'll figure out a way through this.
I am not nearly as pessimistic as a lot of people are about the prospects of our reaching an agreement, and I am determined to try to do it.
Now, let me just talk briefly about two other things that were part of our partnership -- one is welfare reform. I know a lot of you have been concerned, probably a lot of you in both parties, about the discussion in Washington where some of you, apparently, have been asked outright, how would you feel if we took some of your welfare reform money back. Now, to be fair, I want to just tell you, they're in a terrible bind, because they're living with the budget caps and they want a tax cut that will keep them in the budget caps, and they've got to spend -- they've got to help the farmers, they've got to do something for the farmers. And we probably have cut the veterans' budget too much, and they want to spend more and more on defense, and there's a general consensus that we need to -- not on how we should help you with education, but that we should continue to support that, as you have the largest school populations in history.
Now, I think that it would be wrong to take the money away. But what I want to urge you to do is to make sure that you have made every effort you can to spend the money in the appropriate way. We know, for example, that we're way below -- and I'm trying to get this in the tax bill, by the way -- because keep in mind, there can be a tax bill, it just can't be as big as the one that's passed. We're way below meeting the national need for child care for low income working people. And if we're going to move more people from welfare to work, we've got to do more on that. So I hope you'll consider that.
There also are some states -- I know, you know, Governor Thompson only has 14 people left on public assistance in Wisconsin -- (laughter.) There are some states where the reduction has been so low that, arguably, it is physically impossible to do. And if you all can come up with a fix for that, for if you get the rates below a certain amount that deals with the education of poor children or something, you know, tries to creatively deal with this, bring it to me. I don't want to put anybody in an impossible situation.
But I think that the problem of giving poor children a step on the ladder to a mainstream American life, beginning with education and health care and good parental support, is a problem that our successors and interests will be facing here 10, 20 years from now. And if we can set up the right framework we'll be doing a very good thing.
So you can do two things. You can just say -- they can say, well, can we have some of this money back, because we've got a budget problem, and you can say, no -- and you can probably win then. And I'd be for it, by the way, I'd be for your position. I'd say no, too. (Applause.) But I recommend -- I think the better course is for you to say, no, but here's what we're going to try to do to spend this money that you're giving us, and if we're in a position like -- I don't know how many states are in this position, but Tommy and I talked about this briefly in Chicago the other day -- if you're in a position where you just can't, you say, here's how we really ought to make some changes so we can invest this in our kids and their future. I think that's important.
There's also some discussion in Washington about whether the Congress should reduce the funding for the CHIP program. And again, I think that's a mistake, because between CHIP and Medicaid, and now funded, the vast majority of children in this country without health insurance could get it. And that would be a good thing. And I want to say that thanks to the efforts that a lot of you have made, and the outreach efforts that have been made, the Kaiser Family Foundation says that there's now 1.3 million kids enrolled in the CHIP program, which is a huge increase in the last six months. So it's finally beginning to pick up.
However, we know that there's money out there for four to five times that many children to get health insurance. And I think that rather than talk about giving the money back to Congress, we should talk about how we're going to invest it for the purpose for which it was intended. It was one of the signal achievements of the Balanced Budget Act of 1997, a completely bipartisan thing, and a really laudatory effort. But all of you had to get out there and design programs and figure out how you're going to interface it with Medicaid, and figure out how to tell people about it. It was a complicated thing, but we wanted to do it in a way that this portion of it would be as little hassle for you as possible.
And a lot of things have happened. In Nevada, for example, I know our educator-governor there says the school principals are getting children signed up for CHIP. In Alabama, the All Kids program is mobilizing coaches to enroll children who want to be in sports. In California, Governor Davis is doing outreach for CHIP in 10 different languages. So a lot of good things are happening.
And I think it's important that we remember that this year, this coming school year, will be the first full year of full opportunity and operation of the CHIP program in all the states. So I think it's too soon to rush to judgment about this. This is the first full year of fully operational CHIP programs in all the states.
I think we need to do more to support the outreach, and to take advantage of the Children's Health Initiative. Now, beginning tomorrow, we're going to send every school superintendent in America a letter, and every member of the National Association of Elementary Principals will get letters from that organization, asking them to participate in an outreach effort to inform parents about the value of health insurance and their eligibility.
Next month, when the children get back to school, the Departments of Justice and Health and Human Services are going to launch outreach efforts with the Unite Way. For example, school lunch applications will come with flyers explaining the CHIP program; workers are going to be sent to local McDonald's to sign up families there; Health and Human Services is going to run a radio message campaign to publicize it.
I think there is an enormous amount of promise that is still to be fulfilled here. I need to ask you to do a couple of things. First of all, we need more data to really make the system work. We can't improve the program or know what's wrong with it unless we know how many children have signed up for it. To date, 20 states haven't sent us the information. Some haven't reported on the basic information about children on the Medicaid rolls. And we know that from outside studies that in some states individuals who are Medicaid eligible don't always get the opportunity to enroll without delay, as the present law requires. We need to figure out why this is happening and figure out how to stop it.
So this month, as was reported, I think, already, we will begin working with you in partnership to do some on-site reviews to ensure that there are no roadblocks, intentional or, even more likely, unintentional roadblocks, to those who are eligible for Medicaid. I think that now that we have the funding and the extra flexibility to manage welfare and health care, we've got to make the most of it. Let me just give you some examples.
There is $500 million in the budget to reach out to families who lack health insurance, but are eligible for Medicaid, to simplify procedures for signing them up. We've gotten rid of the census rule that two-earner families that work over 100 hours a week are ineligible for Medicaid, even if their incomes are still low enough to qualify. All of you will get substantial funds on the tobacco settlements. They can be used for preventing youth smoking, but also for expanding health insurance. I hope you will make the most of this.
Let me just make a couple of specific suggestions about CHIP, in addition to what we're trying to do. I think the things that would have the greatest impact are presumptive eligibility for CHIP, as well as Medicaid, and sending eligibility workers into schools, into churches, into health care centers, into day care and pre-school centers, places where the children are where their parents will come.
We have -- this is an enormous opportunity to shrink the health problem of no insurance for children. We know we have about 10 million kids without health insurance. And the last six months of the CHIP program indicate to me that if you just keep working at it, we can get up at least to the four to five million kids that we anticipated. But if you look at the combined eligibility and the level of funding of Medicaid and CHIP, there's no question that the vast majority of uninsured children in this country could in fact get coverage. And it would make a demonstrable difference -- in their health and in their performance in school over the long run.
Well, let me just finally close by saying that, in some ways, these are all high-class problems. If I had come here in '93 and said, now, I'll be back here in a few years and we'll talk about how to spend the surplus, you would have said, you know, I thought that guy had good sense, but he's completely lost it. This is a high-class problem. But all high-class problems have accompanying high-class responsibilities. This is the last NGA meeting of the 20th century; the 92nd meeting of the governors, or the 92nd year in which you've met. I've been to 19 of them. The first one, in 1908, was called by -- that's not the one I went to. (Laughter.) Although some days I feel like I went to it. (Laughter.)
The first one, in 1908, was called by a former governor, Theodore Roosevelt. He was a great governor, and a great President, and a very far-sighted man. And he called the meeting, interestingly enough, about the conservation of our nation's resources.
Now, I'll make you another prediction. When I look around this room and I see how many of you I've visited in natural disasters over the last few years -- you and your successors will spend a lot more time in the next 20 years talking about the conservation of national resources in the context of natural disasters and climate change. And so, it will be deja vu again. And Teddy Roosevelt will look even smarter than he does today.
But I want to close with a quote that he gave to the first governors' meeting. He said, "Both the national and the several state governments must each do its part, and each can do a certain amount that the other cannot do, while the only really satisfactory results must be obtained by the representatives of the national and state governments working heartily together."
I think that if we work heartily together, we will turn these high-class challenges into gold-mine opportunities, and our children will live in America's greatest days.
Thank you, and God bless you. (Applause.)
END 2:55 P.M. CDT
(The Rose Garden)
8:11 A.M. EDT
THE PRESIDENT: Good morning. In a few moments I will be leaving for Louisiana. But before I depart, I want to say a few words about the course we're charting for America's future.
Seven years ago when I ran for president, it was a time of low growth, high interest rates and high unemployment, a vicious cycle, driven by deepening deficits. Irresponsible policies had quadrupled our national debt and risked our future.
Vice President Gore and I took office determined to change all that. We put in place a new strategy for the new economy -- one founded on fiscal discipline, expanded trade and investment in our people and modern technology. The success of that strategy now is clearer than ever. By balancing the budget, we put in motion a virtuous cycle of budget surpluses, low interest rates and low unemployment.
For business, this makes it easier to invest, to create jobs, wealth and opportunity. And for working people, lower interest rates makes it easier to own a home, afford a car, send a child to college.
Today, we received more good news that our strategy is working. According to the Office of Management and Budget, this year's budget surplus will be at least -- I'm going to write this in, enjoy it -- at least $115 billion. This triple-digit surplus is larger than projected, larger than last year's, and larger, in fact, than any dollar surplus in the history of the United States. It is a landmark achievement for our economy. And when you consider where we were just seven years ago, it's as great an American comeback as the Ryder Cup was yesterday. It is further proof that we're on the right road to prosperity.
Our nation has come a long way in a short time. In 1992, the budget deficit was $290 billion, projected to rise above $400 billion this year. Instead, as you can see, we have posted back-to-back surpluses for two years in a row and, believe it or not, that's the first time this has happened since 1957. Now, in 1957, well, that was the year John Lennon first met Paul McCartney, and the Braves won the World Series -- not the Atlanta Braves, the Milwaukee Braves.
Our prosperity now gives us an unprecedented opportunity and an unprecedented responsibility to shape America's future by putting first things first, by moving forward with an economic strategy that is successful and sound, and by meeting America's long-term challenges.
In that spirit, I have asked the Republicans in Congress not to throw in the towel, but to work with me and congressional Democrats to do the work the people elected us to do -- to save Social Security with a lockbox that extends in solvency until 2050, to strengthen and modernize Medicare with a long-overdue prescription drug benefit, to invest in world-class education for our children, and to protect important priorities, from national security to the environment and agriculture, to medical research and modern technology, to investment incentives for rural and urban areas that have not yet been touched by our prosperity.
We can do all that and still have an affordable tax cut for the middle class, and pay down our debt so that by 2015, we are debt-free for the first time since 1835 when Andrew Jackson was President. I will work with members of both parties to fulfill these fundamental obligations to our people and to our future. I hope they will work with me.
Thank you very much.
Q Mr. President --
Q Will you veto Republican spending bills if they exceed the caps?
THE PRESIDENT: Well, I gave them a budget, of course, that did not break the caps, but it would require them to raise some revenues from tobacco. But the main thing that I would say is, I want them to work with me to meet our fundamental priorities. We can give the American people an honest, credible budget that extends the life of Social Security and Medicare, meets our responsibilities in education and other important areas, and leaves us free to pay down that debt and to put America on a target to be debt-free in the next 15 years. I hope they will work with me in that spirit.
We have to come together and work together to get anything done, and we can do that. I cite these examples over and over again, but the Welfare Reform Act in 1996, coming on top of the initiatives we had taken in the previous three years has now given us the lowest welfare rolls in 32 years. And the Balanced Budget Act completed the work of the economic package of 1993, and we now have this $115-billion surplus. So the American people know we can do things together, and that's how we're going to have to do this.
Q Do you still plan to offer a plan to reform Social Security? The White House had promised more than a year ago that there would be one after the last election.
THE PRESIDENT: We have met several times, as you probably know, at various levels with members in the House, and we have tried to get close to an agreement on that. The reason I said what I said today is that if they would just agree to my plan on paying down the debt and then dedicating a few years of the interest savings by locking up the Social Security taxes, which would happen a few years in the future, but if they would agree to do that, then that, alone, would extend the life of Social Security to 2050, which would take us out beyond the life expectancy of all but the most fortunate baby boomers. So I would hope that at least we could do that.
Obviously, I would like to do more, and we're still working on that. But at the minimum, we could do this.
Q Sir, there's every indication Republicans will not work with you. But in the meantime, where does the American taxpayer stand in this battle between your rock and their hard place?
THE PRESIDENT: Oh, I think if the past is any measure, one way or the other, the taxpayers are going to be all right, because we can do pretty well by conflict, I suppose, and eventually drag this out to where we've at least got a decent education budget and we're still paying down the debt. But they have to work with me if we're going to extend the life of Medicare and Social Security and do some of these other very important things.
I'm not pessimistic; we've still got plenty of time. I know it's almost the end of the fiscal year, but they know how to extend that; they've done that several times by passing a continuing resolution, and there's still plenty of time to do this and I hope they'll do it with me.
Q Mr. President, will our relations with Indonesia remain the same while they're torturing the villages?
THE PRESIDENT: Will their what?
Q Will relations with Indonesia remain the same as the villages are being torched -- torched, sorry.
THE PRESIDENT: They've already been somewhat altered, as you know, by the cessation of military cooperation, and obviously, our relationships with them will have to be dictated by the course of their conduct. As you know, they have a somewhat unusual system where they have elections. They had elections several weeks ago, but they still haven't settled on who the new leader of the country will be.
This is a time of great instability and uncertainty for them. We should stand against those actions which violate human rights and which are wrong, but we should also hope that both stability and humane policies will be returned to Indonesia as soon as possible. It is a very large country with 200 million people, the largest Muslim country in the world and capable, as we have seen periodically over the last few years, of enormous progress and capable of playing an important, positive role in the future of Asia, and that's what I hope and pray will happen. But it will require responsible leadership from Indonesia, as well as appropriate responses from the United States and others.
Thank you very much.
END 8:22 A.M. EDT
12:55 P.M. EDT
THE PRESIDENT: Good afternoon. I wanted to talk to you before I leave for New York about two developments affecting our economy and the progress we are making to build a stronger one.
Today we have further evidence that our economic strategy of fiscal discipline, investment in our people, and expanded trade is working. In the 12 years before I came to Washington, irresponsible policies here quadrupled our debt. That led us to high interest rates and high unemployment, stagnant wages and low growth. The Vice President and I came here determined to change all that -- to put the American people first and give them the tools to turn around the American economy.
Over the last six and a half years, the results speak for themselves -- the longest peacetime expansion in history, more than 19 million new jobs, the lowest unemployment in 29 years, the lowest welfare rolls in 32 years, the first back-to-back surpluses in 42 years, the largest surplus and the highest home ownership in history.
Today I am pleased to announce another economic milestone in the implementation of this strategy. In its annual study on income and poverty in America, the Census Bureau reports that a typical household income rose $1,304 in just one year -- from $37,581 in 1997 to $38,885 in 1998. That's a 3.5 percent increase in a year, tied for the largest since 1978, allowing American families more money for things that matter -- sending their children to college, buying a home, purchasing a car, saving for retirement.
The report also shows that since we launched our economic plan in 1993, median family income is the highest it has ever been, increasing from $41,691 in '93 to $46,737 in '98. That's over $5,000 more that hardworking families can put to good use. But the best news is that these gains finally are being shared with all groups in America, from the wealthiest to the poorest.
In the 1980s, most working families saw their incomes stagnate, with the worst performance at the bottom of the economic scale. In the last five years, finally we have stemmed the tide of rising inequality, and this new report documents the strong income growth among all groups of people.
This broad-based growth has helped to lift millions of hardworking families out of poverty. The report shows that the poverty rate fell to 12.7 percent. That is the lowest poverty rate since 1979 -- the lowest rate in 20 years.
While we still have room for improvement, the African American poverty rate is now at its lowest level on record; the Hispanic poverty rate its lowest level in 20 years. And we know that 4.3 million Americans were lifted out of poverty last year because of our expanded earned income tax credit, which was a critical part of the economic reform plan in 1993. It is now, inexplicably to me, under attack by some in Congress.
Our economy is now working for all the American people, and it has to continue. That brings me to my second point.
Today is the last day of the current fiscal year. Because the Congress has not finished its work, it must send me a continuing resolution, a temporary spending measure to keep the government working for three more weeks. But it should be sending me spending bills that meet the great challenges and opportunities before us -- that protect and strengthen Social Security; that strengthen and modernize Medicare with prescription drug coverage; that make vital investments in education, national security, the environment, medical research and other critical areas; and that enable us to pay down the American debt so that we can pay it off, for the first time since 1835, over the next 15 years.
Now, a few minutes ago, just before I came out here, I signed that continuing spending bill, not because I wanted to, but because it was the only way to prevent another government shutdown. Months ago I presented a responsible budget plan that pays for itself, invests in education, saves Social Security and Medicare, puts us on the path to paying America out of debt by 1835. Regrettably, the majority in Congress, the Republican majority, has chosen to disregard the way I put this budget together and to disregard the path of fiscal discipline.
Instead of making the difficult choices to finish their work and crafting a responsible budget, they've resorted to gimmicks and gamesmanship, like using two sets of books and designating the fully predictable census, for example, as emergency spending.
But they're doing something else that troubles me more. To disguise the fact that they're spending the Social Security surplus, the congressional majority wants to delay earned income tax payments to nearly 20 million families. Now, the income and poverty figures I announced earlier show that 4.3 million Americans were lifted out of poverty last year, twice the number that were lifted out of poverty by the earned income tax credit before we expanded it in 1993.
We've worked hard to eliminate barriers to families who are working their way out of poverty. We've got record numbers of people moving from welfare to work, often at very modest wages, eligible for this earned income tax credit. Delaying their EITC payments would put one more roadblock in their way.
So let me be clear: I will not sign a bill that turns its back on these hardworking families. They're doing all they can to lift themselves out of poverty, to raise their children with dignity. I don't think we should be putting more roadblocks in their way. Delaying the earned income tax credit payment is more than a gimmick. It is an effective tax increase on the most hard-pressed working Americans.
Now, one of the most interesting developments of the last week in this budget fight -- which as I said, I was hoping would not be a fight and I still hope will be resolved -- but one of the most interesting things to me about this last week is that the Republican majority actually launched an ad campaign that plays the worst kind of politics with this issue. Instead of spending their time creating an honest budget, they're spending millions of dollars creating phony ads to accuse the Democrats in Congress, who are in the minority, of doing what the Congressional Budget Office -- their own Congressional Budget Office -- says they are doing. That is, spending the Social Security surplus.
In fact, just yesterday, the very day they were announcing these misleading and unfair ads, their own Congressional Budget Office sent them a letter that shows they are spending $18 billion from the Social Security surplus. Now, I can't help noting that these are the same people who told us they could spend all this money and cut taxes $792 billion, and never touch the Social Security surplus.
Let's back up and look at where we are here, really. I had a lot of difficult decisions in my budget. I had a cigarette tax; I had a tax on polluters to clean up toxic waste dumps. Why did I put that in there, knowing it would be controversial? Because there was a general consensus here that with the second year of a budget surplus we ought to move as quickly as possible to divide the surpluses, if you will -- the Social Security from the non-Social Security -- and that we would move this year to try to stop spending Social Security funds that the government had been spending since 1983. At least since 1983, when the revenues were raised.
And so we all said, okay, let's try to do it this year. And so, I knew it would be hard, but I said, okay, I'll do my part, I'll try to do this. But we're going to have to make some tough decisions here if we're going to meet the needs of people in both parties -- the investment priorities.
Then they said, no, we don't want to do that -- the Republican majority said, no, we don't want to do that. We don't want a cigarette tax and we don't want to ask the polluters to pay more for the toxic waste. Once they said that, to be fair, there was no way they could avoid at least one more year of spending Social Security funds.
Now, that's where we are on this. That's really what's going on. And there is another way. We don't have to do this. We don't have to get into an ad war where they accuse us of doing what they're doing, that their own Congressional Budget Office says they're doing. And they don't have to act like if they get caught doing it they've, in effect, committed a felony.
There was a decision they had to make. When we decided we were going to try to get out of spending Social Security funds this year, instead of next year, they had to make a decision. And the decision was to close corporate loopholes, deal with the toxic waste dumps by asking polluters to pay more, and raise the cigarette tax. If they weren't willing to make that decision, they were going to be in the pickle they're in now. Now, that's what happened.
It doesn't have to be this way. We can work together. We can fashion a budget that builds on our economic prosperity and eliminates the public debt by the year 2015, and extends the life of the Social Security trust fund to 2050, past the life expectancy of the baby boomers, rendering this momentary debate completely irrelevant by dealing with the long-term security of the country. And that is what we ought to do.
I also would say it is profoundly important that we fund the right kind of education budget that has 100,000 teachers; that supports our efforts to mentor poor kids and get them to college; that supports our efforts to help young people read; and that gives our kids access to after-school programs; that doesn't undercut our efforts to connect all the classrooms to the Internet next year; that helps us to build or modernize 6,000 schools; that helps us to have some real accountability so we get what works and we stop funding what doesn't.
That's the other big, outstanding question in this budget debate that has nothing to do with what the ads are about -- what kind of education policy we're going to have; what kind of future are we going to give our kids. Then there's the whole criminal justice issue which we've argued about since 1994, that we've got the lowest crime rate in 26 years, but it's still too high, and I want to fund another 50,000 police to go out there in the most dangerous neighborhoods to prevent crime from happening in the first place, through the community policing program.
So that is what I wanted to say. We don't need gimmicks in the budget, and we don't need gimmicks on the airwaves. What we need to do is to roll up our sleeves and go to work together, and make decisions and tell the American people why we made them and what they are and what the long-term consequences are.
The Congress now has three weeks to finish the job the American people sent them to Washington to do. I will work with Congress on a budget that honors our commitments, that protects Social Security and Medicare. If we work together to meet these objectives -- keep in mind, if we work together to meet these objectives, we could pass a long-term budget that not only gets us out of debt by 2015, but actually has an affordable program for middle class tax relief.
But this argument that's being held now, and this sort of ad war is, I think, the worst kind of -- first of all, it's misleading. And secondly it's a waste of time and money. What we need to do is to roll up our sleeves and do the job the American people sent us here today.
So, thank you.
Q Mr. President, what's you're reaction to the Associated Press report of a massacre of hundreds of refugees by American servicemen during the Korean War? There is -- a dozen veterans of that war are quoted as corroborating this account. Do you think there should be an investigation?
THE PRESIDENT: Yes. The most important thing you need to know about that is -- I was briefed on it this morning -- is that Secretary Cohen has said that he wants to look into this, he wants to get to the bottom of it, he wants to examine all the available information and evidence. And he has assured us that he will do that. And that was his immediate instinct, too. And I appreciated it.
Q Mr. President, the Vice President seems to be in some political trouble, despite the good economic numbers that you cite. Mr. Bradley, former Senator Bradley, has out-raised him in the last quarter. I would like to know whether you counseled him to move his headquarters, whether you thought he panicked, and why you think that people like Senator Moynihan say that he can't be elected -- Senator Moynihan who, of course, backs Mrs. Clinton.
THE PRESIDENT: I gave you enough time to put all of your little twists in there, didn't I? (Laughter.)
First of all, let me say I think it's a good decision, the decision he made to move his headquarters to Tennessee. I suppose I think that because I had such a good experience when I stayed home and close to my roots. We discussed it a long time ago. But I can tell you I'm absolutely -- he called me yesterday morning, he said that he had made a decision to do this. And we had not discussed it, in I don't know, a good while. I'm absolutely -- he told me a week or so ago that he was thinking about some things that he thought would help his campaign and make it more consistent with the kind of message that he wanted to convey to the American people, and the kind of campaign he personally wanted to run. And he announced those three decisions yesterday, and I approve of all of them. I think they were good decisions. And I think they'll get good results. And the most important thing is he made them and he believes in them. And that's all you can do in one of these campaigns.
Q What's the problem? Has it been you? Has it been the record of the administration?
THE PRESIDENT: Well, first of all, I think he's, by all reports I get, he's personally doing quite well out there and I think he will continue to do well. So I don't have the same take on it you do. I'm not a political analyst anymore, I have to stay here and do my job. But the only thing I would say is when you run for President you need to know what you want America to look like, and then you need to have good ideas and you need to try to share them with people in a way they can relate to. And I believe he'll be -- I believe he'll do quite well.
Keep in mind, we're a long way from the end of the road here.
Q On the budget, if the Republicans won't give you the taxes you want, what's the alternative? Cut back on the spending you want? How do you get out of this pickle?
THE PRESIDENT: Well, the alternative is, just mechanically -- if they won't raise money, the alternative is you either have to say -- well, let me say what the alternative is not, first. The alternative is not their gimmicks, and then we'll come up with our gimmicks, and we'll all see who can out-gimmick someone else. That is not the alternative.
The alternative should be that we decide we're going to cut back on the spending for a year. Or if it's too severe -- and from what we hear out there in the country from -- and what we know about the needs of education, what we know about what we both want to do to help restore our ability to recruit in the military and help our military families with a pay increase there, what we know in a number of other areas -- if we decide to spend this money together, if we jointly agree on it, and it won't allow us to have a divided surplus -- which, keep in mind, we want to do this year -- then both parties need to agree on that.
Now, I strongly prefer to go on and get out of the Social Security surplus this year. And what I proposed is not all that onerous -- I mean, dealing with -- the corporate loopholes I proposed to close, the cigarette tax and the toxic waste dump fees. That's not all that bad. You could always compromise. You could raise less and spend a little less.
But my point is, the most important thing is, we should be straightforward with the American people about this, and we shouldn't try to get them all tied up in knots and pretend that something is going on that isn't. We know we are going to now have, in the future years, a surplus that will -- except when we have economic downturns, but on average, a surplus that will be large enough, projected, that we can meet the future needs of education, the environment, national security out of non-Social Security revenues.
Now, this is a -- let me remind you all, this is a new development. When we were in the deficit spending mode all during the '80s -- all of you know this, you wrote about it a lot -- the deficits were made to seem smaller than they were because Social Security revenues were in surplus over Social Security payments. They are still in surplus over Social Security payments, but now other revenues are in surplus over other spending this year.
But the '97 budget caps were very tight -- they were for the teaching hospitals; they were for a lot of other things; they were when it comes to continuing to improve education, and we do need to spend some more on national defense, as all of you know -- at least I feel that way, and the Republicans do, too, because of the problems for the military families and some modernization problems.
So this whole question that there is just so much agitation on and all these ads filling the airwaves, it's really about the fact that when they started looking at their budget, they couldn't get out of the Social Security funds until next year either unless they were willing to raise some money this year from the cigarette tax, from closing corporate loopholes, or the toxic waste dumps.
So all I'm suggesting is we need to sort of stop misleading the American people -- they need to, with their television ads -- and we need to sit down and work this out and figure out what's right for the people, make the right disciplined choices and go forward.
Q Mr. President, you said you need to sit down and talk, and yet there are some Republicans on the Hill who make it clear that that's the last thing they want to do, is to sit down with the White House and start negotiating. What is --
THE PRESIDENT: That's the last thing they want to do.
THE PRESIDENT: Yes, that's right.
Q So what is the status of communication right now, and how can you get out of this if you all don't start communicating?
THE PRESIDENT: Well, I don't think we can if we don't start communicating. But all I'm telling you is -- they've had a debate apparently within their caucus in both houses about whether we ought to join hands and do the, evidently, right thing for the American people, and also be candid about this budget problem that they have -- because they're philosophically opposed to raising the cigarette tax and they don't want to close any corporate loopholes right now. We've just got to figure out if there is a resolution to that. And then there are those who believe that they can somehow create this whole other issue, spending the Social Security surplus, and then say that they're not doing it, we're doing it, even though they're in the majority and they approve all the money -- or they can say, well, I made them do it somehow. That's what's going on here.
So there are people who believe in their caucus that somehow they can make some big political issue out of this. And then there are those who want to get something done. I had a long talk with a committee chairman yesterday -- and I won't identify him for fear of hurting him -- but we talked a long time about how we need to make an honest effort to resolve the differences between where they are and where we are on the areas within his jurisdiction.
So I think there is a difference of -- I think a lot of them would like to just show up for work tomorrow. And that's what I hope we'll do.
Q Has Japan asked for American help in dealing with its nuclear accident? And how would the United States treat such a request?
THE PRESIDENT: Well, first of all -- and I should have said this the very first thing -- we are all very concerned and our thoughts and prayers are with the people in Japan today because of this uranium plant accident. You can only imagine how difficult this must be for them, quite apart from whatever the facts are. This is going to be a very hard day for the people of Japan.
And we are doing our best to determine what, in fact, has happened and what assistance we can give. And we will do whatever we possibly can that will be helpful to them. And we will try to be as comprehensive and prompt about it as possible.
Q Mr. President, what about your mortgage, sir? Do you now understand why some people felt that it was improper for you to arrange a mortgage with a loan guarantee from Mr. McAuliffe? And are you now planning to get a different kind of mortgage?
THE PRESIDENT: Well, I will stay with what Mr. Lockhart has told you about that. We had just a day or two to get that house -- a lot of people wanted it for the same reason we liked it. A lot of people liked the house, it's a nice place. We liked it. So we did what was necessary to secure it.
Now, we're going to close on it in a little more than a month. And if we change the financing between now and then, we'll let you know as soon as we do. But we did not do it before we got an opinion from the Office of Government Ethics about the mechanics of it, and that it did not constitute a gift under federal law.
Q Why wouldn't Bowles and Rubin help?
THE PRESIDENT: They were -- I don't have anything to say about that. McAuliffe called me the first thing when I was talking to him, and he said, look, if you can get somebody else to do it, fine. I think because -- everybody thought it was a legitimate business arrangement. No one thought there was anything wrong with it, all the people I talked to about it, and all the people anybody else talked to about it.
I think some people didn't want to do it because they know they live in a world where they live in the Larry Klayman political press world in which what's true is not as important as whether you can be dragged around, you have to spend a lot of money you don't have or you'd rather not spend for reasons that have nothing to do with anything that's real.
It's like this television ad campaign, to go back to the budget issue. There is the rest of the world and the way it works and the way people view things, and then there is the way a lot of things around here work. And so I don't -- anybody that's ever been through it knows that's true.
You're all smiling because you think, I wonder if the President made a mistake by committing the truth in that last remark. I can see you all smiling and thinking that. So all I can tell you is I feel good about where we are on it. We're going to close on it in a month and we're excited about it. And if we change the financing, we'll let you know.
Q Are you going to read the Reagan book? What do you think about Jesse Ventura's views on reincarnation? (Laughter.)
END 1:20 P.M. EDT
This week I sat down with congressional leaders of both parties at the White House to ask them to work with me to construct an overall framework for completing our work on the spending bills that reflect the priorities and the values of our people. The cornerstone of that framework must be paying down our debt, investing in education and other critical priorities, strengthening and modernizing Medicare, and saving Social Security for the retirement of the baby boom generation.
If we value the financial well-being of our parents and grandparents; if we believe that all Americans deserve to retire with dignity; if we want to make sure we don't place an unfair burden on the backs of the next generation of young parents, then we must seize this moment of unprecedented prosperity and budget surpluses to extend the life of Social Security.
Unfortunately, so far, instead of making the tough choices to save Social Security and extend its life to 2050, the Republican majority in Congress, especially some of the House Republican leaders, have been accusing the Democrats of spending the Social Security surplus. They've also been claiming that their budget doesn't spend the Social Security surplus.
As it happens, neither claim is true. Oh, they've used a lot of budget gimmicks -- like claiming the census and ordinary Pentagon expenditures are actually emergencies -- in an effort to claim they're not spending billions from the Social Security surplus. But unfortunately for their argument, their own Congressional Budget Office has said they've already spent more than $18 billion of the Social Security surplus.
But the main problem is, while spending this money, their plan doesn't extend the solvency of Social Security by a single day. I think we can do better. The American people deserve more than confusion, double-talk and delay on this issue.
So it's time to have a clear, straightforward bill on the table, and next week I plan to present one -- legislation that ensures that all Social Security payroll tax will go to savings and debt reduction for Social Security. Over 15 years, this will allow us to pay down more than $3.5 trillion of debt, to be debt-free as a nation for the first time since 1835, when Andrew Jackson was President.
But my plan goes further. After a decade of debt reduction from protecting Social Security funds, all the interest savings from this debt reduction will then be reinvested in Social Security, extending its solvency into the middle of the next century. This is the first big step toward truly saving Social Security. It will take the trust fund out beyond the life span of the baby boom generation -- no gimmicks, no budgetary sleight of hand; just the right choices that really add up to protecting the Social Security surplus, extending the life of Social Security and paying down the debt by 2015.
Let's remember what's at stake. Since 1935, Social Security has provided a solid foundation for retirement and lifted millions of our people out of poverty. But the number of older Americans will double as the baby boomers retire, and the number of workers supporting each beneficiary will decline. Today, there are 3.4 workers for each Social Security beneficiary. By 2030, the ratio will be down to two to one. That will put a big strain on the system. If nothing is done, the Social Security trust fund will be completely depleted by the year 2034. We can't let that happen, and we don't have to. We can easily go back to 2050.
Social Security was created in the depths of the Depression. Today, we have the longest peacetime expansion in history, with seven consecutive years of fiscal improvement and back-to-back surpluses for the first time in 42 years. This gives us an historic opportunity and a responsibility to protect and guarantee Social Security for future generations. Again, I urge the congressional majority to put aside partisanship and achieve something of lasting value for all our people.
Thanks for listening.
10:55 A.M. EDT
THE PRESIDENT: Thank you very much. Thank you, Mr. Callus, Ms. Kaydeen, for your remarkable statements. Thank you, Secretary Shalala, for your steadfast leadership on this issue. I would like to welcome a very large number of members of the United States Congress who are here -- Senator Baucus and Senator Wyden; Representatives Abercrombie, Brown, Waters, Obie, Vento, and Hoyer; and Congressman Berry. And I would like to acknowledge the important work of two that are not here -- Representatives Waxman and Allen, who have been particularly interested in this issue.
Before I go into my remarks, I would like to make a statement about the passing last night of Senator John Chafee of Rhode Island. Rhode Island and America have lost a great leader and a fine human being, who in 23 years in the Senate and in his service as Secretary of the Navy, always put his concern for the American people above partisanship.
When you think of the term bipartisan, you immediately think of John Chafee, known throughout his beloved Rhode Island simply as "the man you can trust." Senator Chafee was a consummate statesman and patriot. He served with valor in war and peace. I am particularly grateful for his commitment to health care, his concern for the environment, and his devotion to our children, especially his work for foster care and child care.
John Chafee proved that politics can be an honorable profession. For him, civility was not simply a matter of personal manners. He believed it was essential to the preservation of our democratic system and the progress of our nation. He embodied the decent center which has carried America from triumph to triumph for over 200 years. How we will miss him.
Today our thoughts and prayers are with his wonderful wife, Ginny, their five children and their twelve grandchildren. And again, I want to say a special personal word of appreciation on behalf of Hillary and myself for the many kindnesses John Chafee extended to us, and the many opportunities we had to work together.
Now -- last January, in the State of the Union address, I was able to give the American people a great report on our economy and the improving condition of our society, which now has the lowest unemployment rate in 29 years, the lowest welfare rolls in 30 years, the lowest poverty rates in 20 years, the lowest crime rates in 30 years, and the first back-to-back budget surpluses in 42 years.
In the State of the Union address I said, as we approached the new century, we could look back on 100 years of Americans meeting the great challenges of the century we're about to leave -- the Depression, civil rights, two world wars, the Cold War. And, now, because of the good fortune we presently enjoy, we have the opportunity and the obligations to meet the great challenges that we know lie before us in the 21st century: to build one America out of our amazing diversity; to make America debt free for the first time since 1835; to use this moment of prosperity to bring genuine economic opportunity to the people and places that have been left behind; to deal with the challenge of global warming; to meet the new security challenges of the 21st century, including the challenges of high-tech terrorism and weapons of mass destruction; to give the largest and most diverse group of children in American history a world-class education; and to meet the challenge of the aging of America.
We will double the number of people over 65 in just 30 years. There will be two people working for every one person drawing Social Security. This challenge would be truly daunting were it not for the fact that all of us, as a country, have worked so hard over the last seven years to bring us to this moment of prosperity and to bring us to a point where we can predict long-term, consistent budget surpluses into the future which give us the means, if we have the will and vision, to deal with this challenge.
No one should have to make the kind of choices Mr. Callus and Ms. Kaydeen spoke of in their remarks in a country that has the strongest economy on Earth. No senior should have to forgo or cut back on lifesaving medication because of the cost. Neither should any senior be forced to get on a bus to Canada where the same medicines cost so much less. Just a couple of days ago, the Vice President held up an example of one of the most popular drugs for lowering cholesterol. In Canada, 60 tablets cost $44; in New Hampshire, they cost $102, if you're lucky. I think we can do better than that. It's wrong and we have to deal with it.
We also have to deal with the fact that about three-quarters of our seniors simply don't have effective, affordable access to prescription drugs. We can afford to do something about it; we know what to do about it, and therefore, we have no excuse for inaction.
This debate over Medicare is more than about politics and budgets, it's about people -- real people like Mr. Callus. You heard what he said. He said he was in pretty good shape, and I think that his speech verified that. (Laughter and applause.) But giving him and Americans like him all over the country the chance to live to the fullest of their God-given abilities, not only to live as long, but to live as well as they can, is an important value that we all stand for.
For 34 years, Medicare has helped to achieve that value. And it has eased the financial burden on families who care for their loved ones. Before Medicare, nearly half of our seniors had no health care coverage at all.
Today, Medicare is truly at a crossroads. As Secretary Shalala said, when we took office the trust fund was supposed to expire this year. And thanks to the good work of the Congress and the people who operate the program and the people who administer the health care of the country, we've worked together and we got the life expectancy of the trust fund back to 2015. We've done it by combatting fraud and making Medicare more efficient, and investing some more funds. But we know we have to go further, because it is simply not going to be enough to stay with the status quo.
This past June, I gave the Congress a comprehensive and fiscally responsible plan to extend the life of Medicare to 2027, while at the same time modernizing it to keep pace with changes in our medical system and our medical needs. I proposed new innovations used now in private sector health care to keep quality high and costs lower. I said we should remove barriers to preventive tests for cancer, for diabetes, for osteoporosis and other diseases. I said we should invest more money, not only to deal with some of hardships caused by the savings in the Balanced Budget Act of 1997, but simply because there are going to be so many more people on Medicare over the next few years. And I want to say this again: No expert who has studied this has said we can deal with the challenge of Medicare without injecting more money into the system.
And, finally, I called for adding a prescription drug benefit. Adding prescription drug coverage, as Secretary Shalala said, isn't just the right thing to do, it is the smart thing to do, medically, over the long run. Today, prescription drugs can accomplish what once could be done only through surgery, at far less pain and far less cost. We already pay for doctor and hospital benefits under Medicare, but we let many of our seniors go without prescription drugs and preventive screenings that could keep them healthy and keep them from having to undergo expensive treatment. It doesn't make sense.
Unfortunately, the Republican leadership in Congress has refused altogether to consider adding a prescription drug benefit, effectively rendering meaningful Medicare reform impossible this year. The Congress is joining with me to work to alleviate undue strain on hospitals, nursing homes, home health agencies and other providers -- and that's a good thing -- to alleviate some of the most severe burdens of the Balanced Budget Act.
But by ignoring the need for a prescription drug benefit, the Republican leaders are squandering a golden moment, leaving more than 13 million seniors without any prescription drug coverage and millions more with inadequate coverage, unreliable at best.
Now, in human terms, that means a lot. Think of the seniors on fixed incomes, like Mr. Callus, who are paying a couple of thousand dollars a year out of pocket. Think of men and women falling prey to illnesses because they can't afford proper doses of new miracle drugs that could easily keep them well. Asking them to wait for Medicare reform is like putting their lives on hold, and maybe into a lottery. It is unacceptable. It is unacceptable especially because it is so unnecessary. And I want you to know I don't intend to give up the battle until it is won. (Applause.)
And the good news is, because I vetoed the tax bill that would have taken away all the money -- (applause) -- to fix Medicare, we can still win it. (Applause.)
First, let's set the record straight. One of the key reasons no action was taken on prescription drugs this session was because the pharmaceutical industry spent millions of dollars on an all-out media campaign filled with flat-out falsehoods. In ads featuring a fictional senior named Flo -- (laughter) -- the special interests say that our Medicare proposal -- and I quote -- "would put big government in your medicine cabinet."
I might point out that even though we do, thanks to the leadership of these people, have the smallest federal government since 1962, it's still not small enough to get in your medicine cabinet. (Laughter.)
It says -- and I quote -- "all seniors will be forced into a government-run plan." The truth is, under our plan there are no government restrictions of any kind. Doctors would be able to prescribe any needed drug for any patient at any time, and the benefit would be purely voluntary. Completely optional. If seniors want to keep their current coverage, they're perfectly free to do so.
We cannot stand by and watch the pharmaceutical industry go on and distort this debate. We have to expose these deceptions and give the American people the facts. I wish they' d spend this ad money explaining why seniors have to get on the bus and go to Canada to buy drugs at less than half the price they can buy them in America, when the drugs are made in America with the benefit of the American system and American research and American tax systems. I wish they would spend their advertising money explaining that to the American people. (Applause.)
I guess if you've got a weak case, the best thing to do is change the subject. (Laughter.) But I would like for Flo to get on TV and tell me about that. I'm sure she could explain it. (Laughter.) And it would be so enlightening to us. (Laughter.) Meanwhile, the rest of us are going to keep on talking about expanding access to affordable prescription drugs.
Another thing I don't understand is, I know they're worried that if we buy drugs in bulk the way the private sector does, that their profit per package of drugs will be smaller. But if we cover all the seniors, the volume will be so much greater, they will make more money. Do you remember when Medicare came in? All the people were saying, oh, my goodness, the people providing health care are going to go broke. But they didn't.
The pharmaceutical companies are going to do fine under this. We're not going to have the government try to take them over. We're not going to have a big price control system. But we ought to be able to bargain to get American seniors a decent deal. And the volume, the increase in volume will more than offset the better prices that large purchases get.
Besides that, old Flo's up there arguing for keeping 13 million seniors, just like her, from having any access to any drugs. Bet she wouldn't be making that ad if she had found herself in the same position.
So this is really important. Look, all these issues are complicated. We're a big, grown-up country; we don't have to have bogus ads out there confusing people about what the truth is. This is a matter of life or death. Everybody this man's age, who has the ability to be standing and talking and being what he was up here today, ought to have the same chance. That's what we believe. (Applause.)
Now, beyond dealing with the ad campaign, to illustrate that the failure to add a prescription drug benefit has actual consequences, I am going to gather clear and indisputable evidence of what this failure costs in physical and financial terms. Today, I'm directing Secretary Shalala to produce a sweeping study -- the first of its kind -- to examine prescription drug costs in America. In 90 days she will present me with an analysis of what the most commonly prescribed drugs cost for those with and without coverage, to help assess whether people without coverage are paying too much. The analysis will also report on trends in drug spending by age and by income, to help us document the increasing toll high drug costs are taking on our seniors, on people with disabilities and on their families.
Combined with a state-by-state analysis on our seniors' prescription drug needs, which I've already ordered, the new cost study should help to lay the foundation for a more informed debate in the coming year.
Finally, as part of the plan to safeguard the Social Security surplus, tomorrow I will send to Congress legislation that would reserve a third of the non-Social Security surplus -- the non-Social Security surplus -- all of which would be gone if I hadn't vetoed the tax cut bill -- (laughter) -- that would reserve a third of this for extending the solvency of Medicare and for funding a prescription drug benefit. (Applause.)
Now, I stand ready to work with Congress across party lines on crafting a Medicare reform plan that has the best chance of gaining bipartisan support. But even if Congress won't pass the Medicare modernization plan this fall, it can and should adopt at least a proposal for protecting the Social Security surplus.
I challenge Congress to pass this legislation as part of the final budget negotiations now underway, to ensure that Social Security and Medicare will have the resources they need to meet the challenges in the new century.
Let me just say what the difference in my proposal is and the proposal of the Republican majority. Anybody under any circumstances who saves the Social Security surplus gives America one big benefit, which is, if we don't spend the Social Security surplus we pay down more of the debt every year, interest rates stay lower, the economy grows more. Our two plans have that in common.
The difference is that under my plan, starting at about 10 years, we will take the interest savings we get from reducing the debt from the Social Security surplus and put it into the Social Security trust fund, which will take the trust fund out to 2050 and go beyond the life expectancy of the baby boom generation. That's the big difference.
If you just save the Social Security surplus, if you don't do anything else, it doesn't add to the life of the Social Security trust fund. Because all those years, from 1983 forward, when the deficit was made to look smaller because we were spending the Social Security surplus -- the Social Security surplus got a government bond and it gets the money back, and it pays the seniors. So if you want to do something meaningful for the baby boom generation, it's not enough to save the Social Security surplus. You've got to take the interest savings you get on the budget from saving the surplus and put it into Social Security, so you add to the life of the Social Security trust fund. (Applause.)
So we have a lot more work to do, even though we're already in the last week of October. Congress still has not done a lot of things. Because they have not taken action to protect the privacy of medical records, I will use the power of my office to do that in the coming days. I think that's a very important issue. (Applause.) But there are other agreements we have to make before we can end this year. Congress made a commitment last year, which I applauded, a bipartisan commitment, to 100,000 more teachers in our schools to reduce class size, and paid for 30,000 of them. Now they want to totally undo it. I think it's wrong.
They have not yet given our families the vital protections of a patients' bill of rights. They took the hate crimes legislation out of the legislation that they've sent me to fund the Justice Department. They have not yet raised the minimum wage. And they have not yet fixed the flawed system that prevents people with disabilities from going to work. All those things can be done in the next few weeks, and we intend to work hard to see that they are done. (Applause.)
But let me close again with the subject that brought us here today. Colleen Kaydeen came here and spoke about her experience as a pharmacist. She also spoke for every pharmacist and every community pharmacy in America. Steven Callus came here and talked about his life. He could have been speaking for millions upon millions of seniors.
Time is passing here. And I want to get back to the point I made at the beginning. I hope to be one of those baby boom seniors one day -- and it's getting there in a terrible hurry -- (laughter) -- but I have lived, already, quite a good number of years. Never in my lifetime has this country had the opportunity we now have -- free of war, free of internal discord -- to chart a course for the future that will embrace all Americans and that will consciously deal with the great challenges before us.
Only once in my lifetime have we had an economy that approximated this economy. That was in the early '60s -- but we had to deal with the civil rights challenge and with the Vietnam War. We have never had an economy like this and, basically, the freedom within our own hands to just chart a course for the future. And there are some things that we know are going to be out there, including how many kids we're going to have and what their different backgrounds are; and how many seniors we're going to have and what their, absolutely certain, health challenges will be. And we absolutely have no conceivable excuse for walking away from the chance of a lifetime to build the century of our dreams.
Thank you very much. (Applause.)
END 11:15 A.M. EDT
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Today, I want to talk to you about what we achieved and highlight a little-known accomplishment that will make a big difference to people with disabilities who want to be part of our nation's growing economy.
This week's budget agreement is truly a victory for the American people, a victory for children because it invests in world-class education that keeps us on the path to hiring 100,000 quality teachers to reduce class size. It doubles funds for after-school and summer school programs, and it provides help for communities to turn around failing schools or shut them down. It's a victory for families and neighborhoods, because it commits the resources necessary to begin hiring another 50,000 community police officers to keep our crime rate, already at a 25-year low, coming down.
It's a victory for future generations, because it protects the environment and preserves more natural areas, and it's a victory for American leadership in the world, because finally, it pays our U.N. dues and maintains our commitments around the globe to peace in the Middle East, to reducing the nuclear threat and chemical weapons threats, to helping relieve the debt of the world's poorest nations.
In short, we have delivered a 21st century budget that prepares for the future and lives up to our values. It also continues to pay down our national debt, because we walked away from that big $792-billion tax cut that the Congress passed and I vetoed. So we got the best of all worlds.
Perhaps nothing better symbolizes just what we were fighting for than the historic progress made in the budget to open new doors of opportunity for Americans with disabilities.
Now, we're enjoying one of the strongest economies in generations. Yet, even today, 75 percent of Americans with severe disabilities who are ready, willing and able to work aren't working. One of the biggest reasons is they fear they'll lose their health insurance when they get a job. And there's a good reason for this fear.
Under current law, many people with disabilities are eligible for Medicaid or Medicare coverage. But they can't go to work and keep that coverage. Yet, when they do go to work, they can't get private insurance because of their disability. So there is a tremendous disincentive to work.
Let me just give you one example. I met a man in New Hampshire not long ago who is paralyzed as a result of an accident. He wanted to take a job that paid $28,000 a year, but he would have lost his Medicaid health coverage, which would have led to medical expenses of $40,000 a year.
Now, the taxpayers would actually be better off. We're going to pay the medical expenses one way or the other, but if he went to work, he'd become a taxpaying citizen. And, more important, he would have the dignity of work. No citizen should have to choose between going to work and paying medical bills.
I'm very proud this week that Congress, on a bipartisan basis, finally agreed on the historic Work Incentives Improvement Act. It's bipartisan legislation to allow people with disabilities to keep their health care on the job. They can earn a salary, pay taxes and be role models by proving what people can do if given a chance to live up to their God-given potential.
This will make a real difference, also, for people with potentially severe disabilities -- those who are facing the early onset of diseases like AIDS, muscular dystrophy, Parkinson's or diabetes. Right now, they may be able to work, but their conditions aren't deemed severe enough to qualify for Medicaid. Yet, because they have them, they still can't get private health insurance. In other words, they can't get any health care until they're too sick to work.
In the final hours of negotiations, we were able to further strengthen this legislation by getting $250 million for a demonstration program to allow these Americans to buy into Medicaid, stay on the job and stay healthier longer. I encourage all the states to take advantage of these new health care options.
Taken together, this initiative is the most significant advancement for people with disabilities since the passage of the Americans With Disabilities Act almost a decade ago. It is part of our administration's seven-year commitment to tearing down barriers to work and rewarding responsibility, along with reforming welfare, increasing the minimum wage, increasing child care assistance, and doubling the Earned Income Tax Credit.
The Work Incentives Improvement Act is another milestone on the path to opening work and rewarding responsibility for Americans. Now, I hope we'll stay on that course and take on America's still-unfinished agenda: common-sense gun safety legislation, a real patients' bill of rights, meaningful hate crimes legislation, saving Social Security, reforming Medicare, adding prescription drug coverage, raising the minimum wage.
To Congress I say: We've done a good job for the American people by working together. Let's keep working together, build on our progress and get the right things done for the American people. Thanks for listening.
24. REMARKS BY THE PRESIDENT AT SIGNING CEREMONY FOR TICKET TO WORK AND WORK INCENTIVES IMPROVEMENT ACT OF 1999 -- December 17, 1999