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1997 Balanced Budget and Taxpayer Relief Act

SUMMARY:

The Balanced Budget Act of 1997 (a spending bill) and the Taxpayer Relief Act of 1997 (a tax bill) legislated the elimination of the annual budget deficit by 2002. Both bills were passed by Congress by large bipartisan majorities and signed into law by President Clinton prior to the August 1997 congressional recess.

DESCRIPTION:

Following difficult and highly partisan budget negotiations in 1993 (for the FY 1994 budget) and 1995 (for the FY 1996 budget), the negotiations in 1997 for the FY 1998 were marked largely by bipartisanship, even as the legislators and the President sought to produce the first balanced federal budget since 1969.

The negotiations moved ahead at a fairly quick pace for at least three major reasons. First, politicians interpreted the 1996 general elections, which returned Clinton to the White House and Republican majorities to both houses of congress, as the American people wanting compromise and bipartisanship; there was little desire for the intense inter-party battles that had resulted in the government shut-downs of 1995 and 1996. Second, bipartisan agreement on spending and taxation was easier to achieve because the economy was growing at a very quick pace due in part to the boom in the technology and financial sectors. As a result of increase in the highest marginal tax rates in 1993, the federal government’s tax receipts grew at an unprecedented level beginning in the mid-1990s. And third, with federal revenues increasing so rapidly, both parties saw a federal budget surplus on the horizon, and both parties wanted to claim that as an accomplishment.

Still, points of debate remained, with Republicans seeking larger spending cuts and tax cuts than Democrats were willing to provide, and Democrats seeking new tax expenditures (a $500 per child tax credit) and a new children’s health insurance program (SCHIP). Ultimately, Republicans won large cuts in domestic discretionary spending and more modest tax cuts; Democrats won the child tax credit, SCHIP, as well as other concessions. Both parties, however, failed to address the longer term fiscal concerns associated with entitlements, such as Social Security and Medicare.

In the end, tax revenues were increasing at such a rate that the federal budget went into surplus several years ahead of schedule in FY 1998 and continued in surplus in 1999, 2000, and 2001.

FURTHER INFORMATION:

Balanced Budget Act of 1997 (Pub. Law No.: 105-33). http://www.gpo.gov/fdsys/pkg/PLAW-105publ33/pdf/PLAW-105publ33.pdf

Taxpayer Relief Act of 1997 (Pub. Law No.: 105-34). http://www.gpo.gov/fdsys/pkg/PLAW-105publ34/pdf/PLAW-105publ34.pdf

"Budget Reconciliation, 1997 Legislative Overview." In Congress and the Nation, 1997-2001, vol. 10, 48. Washington, DC: CQ Press, 2002. http://library.cqpress.com/catn/catn97-97-6343-324298.

"Reconciliation Spending Cuts, 1997 Legislative Chronology." In Congress and the Nation, 1997-2001, vol. 10, 50. Washington, DC: CQ Press, 2002. http://library.cqpress.com/catn/catn97-97-6343-324301.

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