increase in revenues. the budget enforcement act ( bea ) of 1990, and the later modifications and extensions of the act, almost surely contributed to the better budget outcomes as well, before the brief emergence of surpluses eroded the will to adhere to its deficit - containment rules. the key provisions of the bea expired in 2002, and no replacement has been adopted. reinstatement of a structure like the bea would signal a renewed commitment to fiscal restraint and would help restore discipline to the annual budgeting process. but it would be only a part of any meaningful endeavor to establish a framework for fiscal policy choices. the bea was designed to constrain legislative actions on new initiatives. it contained no provisions for dealing with unanticipated budgetary outcomes over time. it was also not designed to be the centerpiece for longer - run budget policy ; importantly, the bea did not set a clear objective toward which fiscal policy should aim. budget outcomes over the next decade will deviate, as they always have from projections - perhaps, significantly. accordingly, it would be quite helpful to have mechanisms in place that assist the congress in making mid - course corrections as needed. four or five decades ago, such mechanisms were unnecessary, in part because much of the budget was determined on an annual basis. indeed, in the 1960s, discretionary spending, which is subject to the annual appropriations process and thus comes under regular review by the congress, accounted for about two - thirds of total outlays. that share dropped markedly in the 1970s and 1980s as spending on retirement, medical, and other entitlement programs rose sharply. in the early 1990s, it fell below 40 percent, where it has remained over the past decade. the rise in the share of expenditures that is not subject to annual review complicates the task of making fiscal policy by effectively necessitating an extension of the budget planning horizon. in the 1960s and early 1970s, the president ’ s budgets provided information mainly for the upcoming fiscal year. the 1974 legislation that established a new budget process and created the congressional budget office required that cbo provide five - year budget projections. by the mid - 1990s, cbo ’ s projection horizon had been pushed out to ten years. given the changing composition of outlays, these longer planning horizons and the associated budget projections were essential steps toward allowing the congress to balance budget priorities sensibly. among other things, this change has made the budget process more reliant on forecasting. to be

##ties by inhibiting these competitive forces. however, over the longer run such actions would slow innovation and impede the rise in living standards. they could not alter the eventual shifts in production that owe to enormous changes in relative prices across the economy. protectionism might enable a worker in a declining industry to hold onto his job longer. but would it not be better for that worker to seek a new career in a more viable industry at age 35 than to hang on until age 50, when alternative job opportunities would be far scarcer and when the lifetime benefits of additional education and training would be necessarily smaller? to be sure, assisting those who are already close to retirement in failing industries is an imperative. but that can be readily accomplished without distorting necessary capital flows to newer technologies through protectionist measures. more generally, we must ensure that our whole population receives an education that will allow full participation in this dynamic period of american economic history. no doubt, in your communities many workers may view the changing needs of their employers as a threat to the security of their job ; and perhaps students preparing to enter the workforce see the demand for rising skills as a hurdle too high to overcome with the limited resources available to them. you, as community leaders, can continue to explore ways of developing creative linkages between businesses and educational institutions to better prepare students for the rising demands of the workplace and to help workers, who must keep up with those changing demands and who must cope with the consequences of global competition, renew and upgrade their skills. as i indicated earlier, one notable aspect of the remarkable performance of our economy in recent years has been the substantial, and relatively broadly based, rise in real income. during the past several years, workers, including those at the low end of wage distribution, have seen noticeable increases in the inflation - adjusted value of their wages ; more comprehensive census bureau figures on the real money income of families also show gains in each quintile between 1996 and 1998, and presumably when the 1999 data become available further improvement will be evident. these recent increases for low - income workers, however, have not reversed the rise in wage inequality that occurred during the 1980s and early - 1990s when the gap in wages between those at the top and the bottom of the distribution was widening considerably. nonetheless, the leveling off in that disturbing trend is an encouraging sign of what can be achieved if we can maintain strong and dynamic labor markets accompanied by low inflation. of course, we need also to consider trends in wealth