middle class during my presidency.
As we were trying to close the deal, Laura Tyson said she felt she had to point out that there was no significant economic difference between a fifth-year reduction of $140 billion and one of $120 or $125 billion. Congress would probably pare back whatever I proposed anyway. She argued that, if it eased our political problems or was simply better policy, we would save ourselves some headaches by reducing the figure to $135 billion or even a little less. Reich, Sperling, Blinder, Begala, and Stephanopoulos all agreed with her. The others held out for the high number. Bentsen said we could save $3 billion by dropping the estimated cost of welfare reform from the budget. I agreed. After all, we hadn’t developed our proposal yet, and the number was just a guess. We knew we’d have to spend more on training, child care, and transportation to help poor people move from welfare to work, but if we moved enough people off the rolls, the net cost might go down, not up. Moreover, I believed we could pass welfare reform separately with bipartisan support.
Later, Lloyd Bentsen added a final piece to the plan, removing the $135,000 earnings cap on the 1.45 percent payroll tax that funded Medicare. This was necessary to make sure that our numbers on extending Medicare’s solvency added up, but it did ask for more from the wealthiest Americans, whose top rate we were already proposing to raise to 39.6 percent, and who would almost certainly never cost the Medicare program as much as they would now pay into it. When I asked Bentsen about it, he just smiled and said he knew what he was doing. He was confident that he and other high-income Americans who would pay the extra tax would more than make it back in the stock market boom that our economic program would spark.
On Monday, February 15, I gave my first televised address from the Oval Office, a ten-minute outline of the economic program I would unveil two days later to a joint session of Congress. Even though the economy was in a statistical recovery, it was a jobless one, burdened by the quadrupling of the debt in the last twelve years. Since all the deficits were the result of the tax cuts for the wealthy, soaring health costs, and increases in defense spending, we were investing less in “the things that make us stronger and smarter, richer and safer,” like education, children, transportation, and local law enforcement. At the rate we were going, our living standards, which usually doubled every twenty-five years, wouldn’t do so again for another one hundred years. Reversing the trend would require a dramatic change in our national priorities, with a combination of tax increases and spending cuts to reduce the deficit and invest more in our future. I said that I had hoped to pursue this course without asking more of middle- class Americans, because they had borne hardships and had been treated unfairly in the previous twelve years, but the deficit had grown far beyond the earlier estimates on which I had built my budget proposals in the campaign. Now “more Americans must contribute today so that all Americans can do better tomorrow.” However, unlike what had happened in the 1980s, most of the new taxes would be paid by wealthier Americans; “for the first time in more than a decade, we’re all in this together.” In addition to deficit reduction, my economic plan would provide incentives to businesses to create new jobs; a shortterm stimulus to add 500,000 jobs right away; investments in education and training, with special programs to help displaced defense workers; welfare reform and the big increase in the EITC; Head Start opportunities and vaccinations for all children who need them; and the national service initiative to allow young people to earn money for college in return for serving in their communities. I acknowledged that these proposals would not be easily or quickly implemented, but when they were, we could “restore the vitality of the American dream.”
On Wednesday night, in the address to Congress, I explained the strategy behind the plan and outlined the specifics. Its guiding principles were four: to shift more public and private spending from consumption to investment in order to create more jobs; to honor work and family; to produce a budget with conservative estimates, not the unrealistic “rosy scenario” figures that had been used in the past; and to pay for the changes with real cuts in spending and fair taxes. To create more jobs, I proposed a permanent investment tax credit for small businesses, which employed 40 percent of the workforce but were creating most of our new jobs, and the establishment of community development banks and empowerment zones, two of my campaign commitments, which were designed to bring new loans and investments into poor areas. I also asked for more money for roads, bridges, mass transit, high-tech information systems, and environmental cleanups to increase productivity and employment.
On education, I recommended increased investments in and higher standards for public schools, and incentives to encourage more students to go to college, including my national service initiative. I complimented Congress on passing the family leave law, and asked them to follow up with tougher child-support enforcement. On crime, I asked for passage of the Brady bill, military-style boot camps for first-time nonviolent offenders, and my proposal to put 100,000 new police on the streets. I then asked Congress to help me change the way government worked, by enacting campaign finance reform and registration requirements for lobbyists, and eliminating the tax deduction for lobbyists’ expenses. I committed to reduce the size of the federal workforce by 100,000, and to cut administrative expenses, saving $9 billion. I asked Congress to help me slow spiraling health-care costs, and said that we could continue modest defense downsizing but that our responsibilities as the world’s only superpower required us to spend enough to keep our military the best trained and equipped in the world. I saved taxes for last, recommending that we increase the top income tax rate from 31 to 36 percent on incomes over $180,000, with a 10 percent surcharge on incomes over $250,000; raise the corporate income tax rate from 34 to 36 percent on incomes over $10 million; end the tax subsidy that made it more profitable for a company to shut down its American operations and move overseas than to reinvest at home; subject more of the income of the best-off Social Security recipients to taxation; and enact the BTU tax. The income tax rates would increase on only the top 1.2 percent of earners; the Social Security increase would apply to 13 percent of recipients; and the energy tax would cost about $17 per month for people with incomes of $40,000 or more a year. For families with incomes of $30,000 or less, the EITC would more than offset the cost of the BTU tax. The taxes and budget would enable us to reduce the deficit by about $500 billion over five years at present economic estimates. At the end of the speech, I did my best to bring home the magnitude of the deficit problem, pointing out that if present trends continued, within a decade the annual deficit would increase to at least $635 billion a year from this year’s $290 billion, and that interest payments on our accumulated debt would become America’s largest budget item, taking more than twenty cents of every tax dollar. To show I was serious about deficit reduction, I invited Alan Greenspan to sit with Hillary in the First Lady’s box in the House gallery. To show he was serious about it, Greenspan came, overcoming his understandable reluctance to make what could be seen as a political appearance.
After the speech, which was generally well received, all the commentators noted that I had abandoned the middle-class tax cut. So I had, but a lot of my other promises were fulfilled in the economic plan. Over the next few days, Al Gore, the cabinet members, and I fanned out across the country to sell it. Alan Greenspan praised it. So did Paul Tsongas, who said the Clinton who spoke to Congress was not the Clinton he ran against, which, of course, is what my political advisors and some congressional Democrats were worried about.
There were enough important and controversial proposals in the speech to keep Congress busy for the rest of the year, not to mention the other legislation that already was, or soon would be, on their calendar. I knew that there would be a lot of ups and downs before the economic program passed, and that I wouldn’t be able to spend all of my time pushing it. Foreign problems and domestic developments wouldn’t permit it.
On the home front, February ended in violence. On the twenty-sixth, a bomb exploded at Manhattan’s World Trade Center, killing six people and injuring more than one thousand. The investigation quickly revealed it to be the work of terrorists from the Middle East, who hadn’t covered their tracks very well. The first arrests were made March 4; eventually, six of the conspirators were convicted in federal court in New York and each sentenced to 240 years in prison. I was pleased with the effectiveness of our lawenforcement work, but troubled by the evident vulnerability of our open society to terror. My national security team began to devote more attention to terror networks and what we could do to protect ourselves and free societies around the world against them.
On February 28, four agents from the Bureau of Alcohol, Tobacco, and Firearms were killed and sixteen others wounded at the onset of a confrontation with a religious cult, the Branch Davidians, at their compound outside Waco, Texas. The Davidians were suspected of illegal firearms violations. The sect’s messianic leader, David Koresh, believed he was Christ reincarnate, the only person who knew the secret of the seven seals referred to in the book of Revelation. Koresh had almost hypnotic mind control over the men, women, and children who followed him; a large arsenal of weapons, which he was obviously prepared to use; and enough food to hold out for a long time. The standoff between the Davidians and the FBI dragged out for almost two months. During that time, several adults and children left, but most of them stayed, with Koresh promising to surrender but always finding an excuse to delay doing so.
On Sunday night, April 18, Janet Reno came to the White House to tell me that the FBI wanted to storm the compound, apprehend Koresh and any of his followers who had taken part in killing the agents or some other crime,
