E C O N O M I C R E P O R T O F T H E P R E S I D E N T

information technologies that enable businesses to manage with leaner inventories(as discussed in Chapter 3).GovernmentReal Federal Government consumption expenditures and gross investmentincreased 5.3 percent on a national income and product accounts (NIPA)basis over the four quarters of 1999. Real defense spending rose 5.4 percentduring that period, reversing a downward trend that saw this spending categoryfall nearly 2.6 percent per year on average over the preceding decade.Real nondefense spending was up 5.0 percent over 1999 as a whole. Federalpurchases of equipment and software were an important contributor to thepickup in real Federal purchases.The Federal Government surplus on a unified budget basis for fiscal 1999(which ended in September) was $124 billion, compared with $69 billion infiscal 1998. The last time the Federal Government recorded two consecutivebudget surpluses was over 40 years ago. And at 1.4 percent of GDP, the fiscal1999 surplus was the largest relative to the size of the economy in nearly 50years (Chart 2-5). The challenge for the future is to maintain the hard-earnedfiscal discipline of recent years, so that the economy continues to reap therewards of greater investment and growth. In support of this goal, the Presidentrejected a congressional proposal for large-scale tax cuts that threatenedthe prospects for continued fiscal discipline; instead he has proposed a budget56 | Economic Report of the President