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Unless otherwise indicated, all years referred to in this report are fiscal years. Numbers in the text and tables of this report may not add to totals because of rounding. |
This volume compiles more than 200 specific policy options for increasing federal revenues or reducing spending in a wide variety of federal programs. This is the 16th such compendium that the Congressional Budget Office (CBO) has prepared as part of its annual report to the House and Senate Committees on the Budget. Over the years, this report has become a standard reference for developing deficit reduction plans.
The 216 specific policy options included in this report come from many sources, and most have been considered by the Congress at some time in the past. In accordance with CBO's mandate to provide objective and impartial analysis, the discussion of each option presents the cases for and against it as fairly as possible. CBO does not endorse the options included, nor does exclusion of any proposal imply a recommendation.
The report begins with an introductory chapter that provides general background information on CBO's latest deficit projections and explains how to use the options presented in this volume. The next three chapters present 177 options for reducing spending, organized by broad categories that have become the focus for deficit reduction efforts-defense and international discretionary spending, domestic discretionary spending, and entitlements and other mandatory spending. The last chapter presents 39 revenue-generating options. The report concludes with an appendix listing the spending options by the budget functions that would be affected and a glossary of budget and economic terms.
The economic assumptions and baseline budget projections underlying the estimates of spending reductions and revenue increases contained in this volume are described in more detail in the first volume of CBO's annual report, The Economic and Budget Outlook: Fiscal Years 1996-2000 (January 1995).
All divisions of the Congressional Budget Office contributed to this report, which was coordinated by James L. Blum. Philip Joyce prepared Chapter 1. The options presented in Chapters 2 through 5 were coordinated by Mark B. Booth, David H. Moore, R. Mark Musell, Constance Rhind, and R. William Thomas. Budget authority and outlay estimates were coordinated by Paul R. Cullinan, Peter H. Fontaine, Michael A. Miller, William P. Myers, and Murray N. Ross. Revenue estimates were prepared by the staffs of the Congressional Budget Office and the Joint Committee on Taxation and were reviewed by the Tax Analysis Division of CBO under the supervision of Rosemary D. Marcuss.
Paul L. Houts and Sherry Snyder supervised the editing and production of the report. Major portions were edited by Paul L. Houts, Sherry Snyder, Sherwood D. Kohn, and Leah Mazade. Christian Spoor provided editorial assistance during production. The authors owe special thanks to Mary Braxton, Cynthia Cleveland, Sharon Corbin-Jallow, Marlies Dunson, Denise Jordan, Simone Thomas, and Donna Wood, who typed the many drafts. John McCarty and Kathryn Quattrone prepared the report for publication.
Robert D. Reischauer
Director
February 1995
ONE - USING THIS VOLUME'S OPTIONS FOR DEFICIT REDUCTION
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TWO - DEFENSE AND INTERNATIONAL DISCRETIONARY SPENDING
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| Strategic Systems | |
| DEF-01 | Reduce Nuclear Delivery Systems Within Overall Limits of START II |
| DEF-02 | Terminate Production of D5 Missiles After 1996 |
| DEF-03 | Reduce the Scope of DOE's Stockpile Stewardship Program |
| DEF-04 | Focus Theater Missile Defense Efforts on Core Systems |
| Navy and Marine Corps Programs | |
| DEF-05 | Reduce the Number of Aircraft Carriers and Air Wings to 10 |
| DEF-06 | Cancel Procurement of the Third Seawolf Submarine |
| DEF-07 | Eliminate Frigates from the Naval Force |
| DEF-08 | Reduce Procurement of DDG-51 Destroyers |
| DEF-09 | Cancel the Upgrade of the Navy's F/A-18 Fighter and Buy the Current Model |
| DEF-10 | Cancel the Marine Corps's V-22 Aircraft Program and Buy CH-53E Helicopters |
| Air Force Programs | |
| DEF-11 | Reduce Air Force Tactical Forces |
| DEF-12 | Cancel the Air Force's F-22 Aircraft Program |
| DEF-13 | Buy No More Than 40 C-17s and Buy Commercial Airlifters Instead |
| DEF-14 | Retire Excess KC-135 Tankers |
| DEF-15 | Make the Army Responsible for Close Air Support |
| DEF-16 | Freeze Funding for Military Space Programs |
| Army Programs | |
| DEF-17 | Reduce the Number of Army Light Divisions |
| DEF-18 | Cancel the Army's Tank Upgrade Program and Lay Away Production Facilities |
| Other Investment | |
| DEF-19 | Cut Spending for Dual-Use Technology Programs to Historical Levels |
| Military Personnel | |
| DEF-20 | Reduce the Basic Allowance for Subsistence of Enlisted Personnel |
| DEF-21 | Restructure Officer Accession Programs |
| DEF-22 | Restructure the Bonus Program for Pilots |
| DEF-23 | Restructure Reserve Compensation |
| DEF-24 | Deny Unemployment Compensation to Service Members Who Voluntarily Leave Military Service |
| Military Health Care | |
| DEF-25 | Close the Uniformed Services University of the Health Sciences |
| DEF-26 | Adopt HMO Staffing Patterns in Military Medical Facilities |
| DEF-27 | Revise Cost Sharing for Military Health Care Benefits |
| Operation and Maintenance | |
| DEF-28 | Consolidate Pilot Training and Delay Buying the Joint Primary Aircraft Training System |
| DEF-29 | Reduce Funding for Defense Environmental Programs |
| DEF-30 | Reduce Funding for DOE's Cleanup Program |
| DEF-31 | Increase Reliance on Private-Sector Housing for Military Families |
| DEF-32 | Eliminate Federal Support of Commissaries |
| DEF-33 | Reduce the DoD Civilian Acquisition Workforce |
| DEF-34 | Encourage Private Ownership of Industrial Assets Used in Defense Production |
| International Programs | |
| DEF-35 | Recover the Full Cost of Military Exports |
| DEF-36 | Cease Supporting Multilateral Development Banks |
| DEF-37 | Eliminate Overseas Broadcasting and Reduce Exchange Programs |
| DEF-3 8 | Reduce Eximbank's Credit Assistance |
| DEF-39 | Reduce State Department Funding and Eliminate Miscellaneous Foreign Affairs Activities |
| DEF-40 | Reduce Development Assistance |
| DEF-41 | Eliminate P.L. 480 Title I Sales and Title III Grants |
THREE - DOMESTIC DISCRETIONARY SPENDING
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| Science and Space | |
| DOM-01 | Cancel the International Space Station Program |
| DOM-02 | Scale Back and Delay NASA's Earth Observation System |
| Energy | |
| DOM-03 | Reduce Department of Energy Funding for Energy Technology Development Efforts |
| DOM-04 | Eliminate Further Funding for the Clean Coal Technology Program |
| DOM-05 | Eliminate the Department of Energy's Precollege Education Program |
| DOM-06 | Eliminate Energy Conservation Grant Programs |
| DOM-07 | Sell the Strategic Petroleum Reserve |
| DOM-08 | Allow Private Producers to Build and Operate Cogeneration Facilities at Federal Civilian Installations |
| DOM-09 | Eliminate Electrification and Telephone Credit Subsidies Provided by the Rural Utilities Service |
| Natural Resources and Environment | |
| DOM-10 | Eliminate Below-Cost Timber Sales from National Forests |
| DOM-11 | Reduce Bureau of Mines Funding for Mining and Related Technology Development Efforts |
| DOM-12 | Eliminate Federal Grants for Water Infrastructure Programs |
| DOM-13 | De-Emphasize Permanence in Superfund Cleanups; Emphasize Land Use in Choosing Cleanup Levels |
| DOM-14 | Impose a Five-Year Moratorium on Land Purchases by the Departments of Agriculture and the Interior |
| Agriculture | |
| DOM-15 | Reduce Federal Support for Agricultural Research and Extension Activities |
| DOM-16 | Reduce Department of Agriculture Spending for Export Marketing and International Activities |
| DOM-17 | Reduce Loans Made by the Farmers Home Administration for Farm Ownership and Operations |
| Credit and Commerce | |
| DOM-18 | End Small Business Administration Loans and Loan Guarantees |
| DOM-19 | Eliminate the Small Business Administration's Tree Planting Program |
| DOM-20 | Reduce the Budget of the Export Administration |
| DOM-21 | Eliminate the U.S. Travel and Tourism Administration and the Trade Promotion Activities of the International Trade Administration, or Charge the Beneficiaries |
| DOM-22 | Eliminate the Advanced Technology Program |
| Transportation | |
| DOM-23 | Reduce Federal Aid for Mass Transit |
| DOM-24 | Eliminate Airport Grants-in-Aid |
| DOM-25 | Eliminate the Essential Air Service Program |
| DOM-26 | Abolish the Interstate Commerce Commission |
| DOM-27 | Eliminate Funding for Highway Demonstration Projects |
| DOM-28 | Eliminate the Operating Subsidy for Amtrak |
| DOM-29 | Eliminate the Local Rail Freight Assistance Program |
| DOM-30 | Eliminate NASA's Support for Producers of Commercial Airliners |
| Community and Regional Development | |
| DOM-31 | Eliminate Certain Rural Development Programs |
| DOM-32 | Eliminate the Economic Development Administration |
| DOM-33 | Eliminate the Appalachian Regional Commission |
| DOM-34 | Eliminate or Restrict Community Development Block Grants |
| DOM-35 | Eliminate Federal Support for Tennessee Valley Authority Activities |
| DOM-36 | Consolidate Area Offices of the Bureau of Indian Affairs |
| Education. Training. Employment, and Social Services | |
| DOM-37 | Eliminate Funding to School Districts for Impact Aid |
| DOM-38 | Eliminate Ancillary Vocational Education Programs |
| DOM-39 | Eliminate 30 Small Grant Programs in the Department of Education |
| DOM-40 | Reduce Funding for Elementary and Secondary Education Programs |
| DOM-41 | Eliminate State Student Incentive Grants |
| DOM-42 | Eliminate Federal Funding for Campus-Based Student Aid |
| DOM-43 | Reduce Funding for the Job Training Partnership Act's Youth Training Program |
| DOM-44 | Eliminate the Senior Community Service Employment Program |
| DOM-45 | Consolidate Social Service Programs and Reduce Their Budgets |
| DOM-46 | Eliminate or Reduce Funding for the Arts and Humanities |
| Health | |
| DOM-47 | Reduce the Maternal and Child Health Care Block Grant and the Preventive Health Services Block Grant |
| DOM-48 | Eliminate Subsidies for Health Professions Education |
| DOM-49 | Reduce Funding for Research Supported by the National Institutes of Health |
| DOM-50 | Limit the Government's Share of the Cost for the FEHB Program to a Fixed Amount per Employee |
| Income Security | |
| DOM-51 | Reduce Federal Rent Subsidies by Shifting Some Costs to Tenants or the States |
| DOM-52 | Stop Expansion of the Number of Rental Assistance Commitments |
| DOM-53 | Shift Rental Housing Assistance from New Construction to Vouchers |
| DOM-54 | Eliminate or Scale Back Low-Income Home Energy Assistance |
| Veterans Benefits and Services | |
| DOM-55 | Close or Convert Inefficient or Underused Facilities in Veterans' Hospitals |
| Administration of Justice | |
| DOM-56 | Revise the Mandatory Sentencing System for Some Nonviolent Federal Crimes |
| DOM-57 | Eliminate Certain Crime Prevention Programs Authorized in the 1994 Crime Bill |
| DOM-58 | Reduce Funding for Law Enforcement Efforts to Control Illegal Drugs |
| DOM-59 | Reduce Funding for Justice Assistance and Certain Justice-Related Activities |
| General Government, Allowances, and Multifunction Options | |
| DOM-60 | Limit Salary Increases for Federal Civilian Employees |
| DOM-61 | Reduce the Number of Political Appointees |
| DOM-62 | Eliminate the One-Dollar Bill and Replace It with aNew Dollar Coin |
| DOM-63 | Reduce the Overhead Rate on Federally Sponsored University Research |
| DOM-64 | Reduce Spending for the High Performance Computing and Communications Program |
| DOM-65 | Modify the Service Contract Act by Eliminating the Successorship Provision |
| DOM-66 | Repeal or Modify the Davis-Bacon Act |
FOUR - ENTITLEMENTS AND OTHER MANDATORY SPENDING
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| Energy | |
| ENT-01 | Charge Market Prices for Electricity Sold by Power Marketing Administrations |
| Natural Resources and Environment | |
| ENT-02 | Improve Pricing for Commercial and Recreational Uses of Public Lands |
| ENT-03 | Change the Revenue-Sharing Formula from a Gross-Receipt to a Net-Receipt Basis for Commercial Activities on Federal Lands |
| ENT-04 | Index Nuclear Waste Disposal Fees for Inflation; Eliminate the Deferred Payment Option |
| ENT-05 | Charge Royalties for Hardrock Mining on Federal Lands |
| Agriculture | |
| ENT-06 | Reduce Deficiency Payments to Farmers Participating in USDA Commodity Programs by Lowering Target Prices |
| ENT-07 | Eliminate the 0/85-92 and 50/85-92 Programs for Participants in USDA Commodity Programs |
| ENT-08 | Raise the Proportion of Each Farmer's Base Acreage Ineligible for Deficiency Payments |
| ENT-09 | Restrict Eligibility for Benefits from Price Support Programs and Reduce the Payment Limitation |
| ENT-10 | Reduce Loan Guarantees Made Under the USDA's Export Credit Programs by Eliminating Guarantees for Loans to High-Risk Borrowers |
| ENT-11 | Eliminate the Export Enhancement Program |
| ENT-12 | Eliminate the Market Promotion Program |
| ENT-13 | Reduce Costs for the Dairy Price Support Program by Increasing Producer Contributions |
| ENT-14 | Reform Milk Marketing Orders |
| ENT-15 | Increase Producer Assessments to Participants in Federal Programs Supporting Prices of Sugar, Peanuts, and Tobacco |
| ENT-16 | Allow Haying or Grazing on Land in Annual Set-Asides and in the Long-Term Conservation Reserve Program |
| Commerce | |
| ENT-17 | Increase FCC User Fees |
| ENT-18 | Charge a User Fee on Commodity Futures and Options Contract Transactions |
| ENT-19 | Eliminate the Flood Insurance Subsidy on Pre-FIRM Structures |
| ENT-20 | Broaden and Extend the FCC's Authority to Use Auctions to Assign Licenses to Use the Radio Spectrum |
| Transportation | |
| ENT-21 | Establish Charges for Airport Takeoff and Landing Slots |
| ENT-22 | Establish User Fees for Air Traffic Control Services |
| ENT-23 | Impose User Fees on the Inland Waterway System |
| ENT-24 | Increase User Fees for General Aviation |
| Education | |
| ENT-25 | Reduce Subsidies for Student Loans |
| ENT-26 | Reduce Stafford Loan Spending by Including Home Equity in the Determination of Financial Need and Modifying the Simplified Needs Test |
| Health | |
| ENT-27 | Increase User Fees on Products Regulated by the FDA |
| ENT-28 | Limit the Growth of Foster Care Administrative Costs to 10 Percent a Year |
| ENT-29 | Reduce the 50 Percent Floor on the Federal Share of Medicaid, AFDC, Foster Care, and Adoption Assistance Payments |
| ENT-30 | Reduce Matching Rates for Administrative Costs in the Medicaid, Foster Care, and Adoption Assistance Programs |
| ENT-31 | Restrict the Income Criteria That States May Use to Establish Medicaid Eligibility for Children and Pregnant Women |
| ENT-32 | Make Capitation Payments to the States for Medicaid Services |
| Medicare | |
| ENT-33 | Freeze Medicare's Prospective Payment System Rates for One Year |
| ENT-34 | Eliminate the Disproportionate Share Adjustment for Hospitals in Medicare's Prospective Payment System |
| ENT-35 | Reduce Medicare's Payments for the Indirect Costs of Patient Care That Are Related to Hospitals' Teaching Programs |
| ENT-36 | Reduce Medicare's Direct Payments for Medical Education |
| ENT-37 | Eliminate Medicare's Additional Payments to Sole Community Hospitals |
| ENT-38 | Reduce Medicare's Payments for Hospitals' Inpatient Capital-Related Costs |
| ENT-39 | Eliminate Medicare Payments to Hospitals for Enrollees' Bad Debts |
| ENT-40 | Revise Medicare's Cost Limits for Home Health Services and Skilled Nursing Facilities |
| ENT-41 | Continue Medicare's Transition to Prospective Rates for Facility Costs in Hospitals' Outpatient Departments |
| ENT-42 | Increase and Index Medicare's Deductible for Physicians' Services |
| ENT-43 | Increase the Coinsurance Rate for Physicians' Services Under Medicare to 25 Percent |
| ENT-44 | Collect 20 Percent Coinsurance on Clinical Laboratory Services Under Medicare |
| ENT-45 | Collect 20 Percent Coinsurance on All Home Health and Skilled Nursing Facility Services Under Medicare |
| ENT-46 | Prohibit First-Dollar Coverage Under Medigap Policies |
| ENT-47 | Increase the Premium for Physicians' Services Under Medicare to 30 Percent of Program Costs |
| ENT-48 | Relate the Premium for Physicians' Services Under Medicare to Enrollees' Income |
| ENT-49 | Modify the Process for Updating Physicians' Fees Under the Medicare Fee Schedule |
| Income Security | |
| ENT-50 | Reduce Federal Employee Retirement Costs |
| ENT-51 | End or Scale Back Trade Adjustment Assistance |
| ENT-52 | Increase Targeting of Child Nutrition Subsidies |
| ENT-53 | Eliminate Small Food Stamp Benefits |
| ENT-54 | Reduce the $20 Exclusion from Income in Supplemental Security Income |
| ENT-55 | Restrict Legal Immigrants' Eligibility for Welfare Programs |
| ENT-56 | Limit Spending in the Emergency Assistance Program |
| ENT-57 | Eliminate the $50 Child Support Payment to AFDC Families |
| ENT-58 | Reduce the Federal Matching Rate and Increase Fees in the Child Support Enforcement Program |
| Social Security | |
| ENT-59 | Reduce the Replacement Rate Within Each Bracket of the Social Security Benefit Formula |
| ENT-60 | Lengthen the Social Security Benefit Computation Period by Three Years |
| ENT-61 | Eliminate Social Security Benefits for Children of Retirees Ages 62-64 |
| ENT-62 | Consider Veterans' Compensation When Determining Social Security Disability Income Payments |
| Veterans Benefits and Services | |
| ENT-63 | End Veterans' Compensation Payments for Certain Veterans with Low-Rated Disabilities |
| ENT-64 | End Veterans' Disability and Death Compensation Awards in Future Cases When a Disability Is Unrelated to Military Duties |
| ENT-65 | Eliminate "Sunset" Dates on Certain Provisions for Veterans in the Omnibus Budget Reconciliation Act of 1993 |
| Allowances (All Functions) | |
| ENT-66 | Impose a Cost-of-Capital Offset Fee on Fannie Mae and Freddie Mac |
| ENT-67 | Restrict Cost-of-Living Adjustments in Non-Means-Tested Benefit Programs |
| ENT-68 | Apply Means Tests to Federal Entitlements |
| ENT-69 | Charge Federal Employees Commercial Rates for Parking |
| ENT-70 | Make Permanent Various Expiring User Fees Included in the Omnibus Budget Reconciliation Acts of 1990 and 1993 |
| FIVE - REVENUES | |
| Raise Income Tax Rates | |
| REV-01 | Raise Marginal Tax Rates for Individuals and Corporations |
| REV-02 | Amend or Repeal the Indexing of Income Tax Schedules |
| REV-03 | Tax All Corporate Income at a 35 Percent Rate |
| Restrict Itemized Deductions and Credits Under the Income Tax | |
| REV-04 | Eliminate or Limit Deductions for Mortgage Interest |
| REV-05 | Eliminate or Limit Deductions of State and Local Taxes |
| REV-06 | Eliminate or Limit Deductions for Charitable Giving |
| REV-07 | Limit the Tax Benefit of Itemized Deductions to 15 Percent |
| REV-08 | Phase Out the Dependent-Care Credit |
| Restrict the Tax-Favored Treatment of Nonretirement Fringe Benefits | |
| REV-09 | Impose an Excise Tax on Nonretirement Fringe Benefits |
| REV-10 | Tax Employer-Paid Health Insurance |
| REV-11 | Tax Employer-Paid Life Insurance |
| Restrict the Tax-Favored Treatment of Certain Household Income | |
| REV-12 | Decrease Limits on Contributions to Qualified Pension and Profit-Sharing Plans |
| REV-13 | Impose a 5 Percent Tax on Investment Income of Pension Plans and Individual Retirement Accounts |
| REV-14 | Tax the Income-Replacement Portion of Workers' Compensation and Black Lung Benefits |
| REV-15 | Increase Taxation of Social Security and Railroad Retirement Benefits |
| REV-16 | Tax Investment Income from Life Insurance and All Annuities |
| REV-17 | Tax a Portion of the Insurance Value of Medicare Benefits |
| Increase Taxes Dedicated to Social Insurance Trust Funds | |
| REV-18 | Expand Medicare and Social Security Coverage |
| Increase Taxes on Income From Worldwide Activity | |
| REV-19 | Curtail Tax Subsidies for Exports |
| REV-20 | Impose a Minimum Tax on Foreign-Owned Businesses |
| Broaden Taxes on Wealth and Capital Gains | |
| REV-21 | Tax Capital Gains from Home Sales |
| REV-22 | Tax Capital Gains Held Until Death |
| REV-23 | Increase Estate and Gift Taxes |
| Curtail Income Tax Preferences for Businesses | |
| REV-24 | Amortize a Portion of Advertising Costs |
| REV-25 | Eliminate Private-Purpose, Tax-Exempt Bonds |
| REV-26 | Reduce Tax Credits for Rehabilitating Older Buildings |
| REV-27 | Disallow Interest Deductions for Corporate-Owned Life Insurance Loans |
| REV-28 | Repeal the Low-Income Housing Credit |
| REV-29 | Tax Credit Unions Like Other Thrift Institutions |
| REV-30 | Repeal Tax Preferences for Extractive Industries |
| REV-31 | Capitalize the Costs of Producing Timber |
| REV-32 | Repeal the Partial Exemption for Alcohol Fuels from Excise Taxes on Motor Fuels |
| Impose Broad-Based Taxes on Consumption | |
| REV-33 | Impose a Value-Added Tax |
| REV-34 | Impose a Broad-Based Energy Tax |
| Increase Excise Taxes | |
| REV-3 5 | Increase Excise Taxes on Tobacco and Alcoholic Beverages |
| REV-36 | Increase Taxes on Petroleum and Motor Fuels |
| REV-3 7 | Impose Excise Taxes on Water Pollutants |
| REV-3 8 | Impose Excise Taxes on Air Pollutants |
| REV-39 | Tax Additional Ozone-Depleting Chemicals |
| APPENDIXES | |
| A - Estimated Savings in the Department of Defense Budget for Selected National Defense Options
B - Estimated Savings from the Administration's 1996 Request for Selected National Defense Options C - Spending Options by Budget Function |
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| GLOSSARY | |
| TABLES | |
| 1 -1. | The Budget Outlook Through 2005 with Discretionary Inflation After 1998 |
| 1-2. | Illustrative Deficit Reduction Path |
| 1 -3. | Deficit Reduction Necessary to Meet Illustrative Path Under Different Baseline Assumptions, 1996-2000 |
| 2-1. | U.S. Military Forces |
| 2-2. | Discretionary Appropriations for National Defense for Fiscal Year 1995 |
| 2-3. | Alternative Budget Paths for National Defense |
| 2-4. | Discretionary Appropriations for International Affairs for Fiscal Year 1995 |
| 3-1. | Budget Authority and Outlays for Domestic Discretionary Programs, by Budget Function, 1995 |
| 3-2. | Pay Raises Under FEPCA |
| 4-1. | Sources of Growth in Mandatory Spending |
| 4-2. | CBO Baseline Projections for Mandatory Spending |
| 4-3. | Target Crop Prices Under CBO Baseline Assumptions and Under 3 Percent Annual Reductions |
| 5-1. | CBO Baseline Projections for Revenues, by Source |
| 5-2. | Individual Income Tax Brackets, 1995 |
| 5-3. | The Size of Two Possible Tax Bases for a Value-Added Tax, 1993 |
| A-1. | Savings in the DoD Budget for Selected Options in Budget Function 050 |
| B-1. | Savings from CBO's Estimates of the Administration's 1996 Plan for Selected Options in Budget Function 050 |
| FIGURES | |
| 2-1. | Budget Authority for National Defense |
| 2-2. | Outlays for International Affairs |
| 3-1. | Domestic Discretionary Spending as a Share of GDP |
| 5-1. | Total Revenue as a Share of GDP |
| 5-2. | Revenues by Source as a Share of GDP |
| BOXES | |
| 1-1. | The Discretionary Spending Limits and PAYGO |
| 3-1. | Categories of Domestic Discretionary Spending |
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