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Numbers in the text and tables may not add up to totals because of rounding. Unless otherwise indicated, all years referred to are fiscal years. |
This Congressional Budget Office (CBO) analysis of the President's budget request for fiscal year 2002 was prepared at the request of the Senate Committee on Appropriations. It was produced by the staffs of CBO's Budget Analysis, Macroeconomic Analysis, and Tax Analysis divisions under the supervision of Robert Sunshine, Robert Dennis, and Tom Woodward. The baseline revenue estimates were prepared by CBO; the estimates of the President's revenue proposals were prepared by the Joint Committee on Taxation.
Sandy Davis of CBO's Projections Unit wrote the report under the supervision of Jeff Holland, with contributions from Mark Booth, Tom Bradley, Jeanne De Sa, Kathy Gramp, John Peterson, and Eric Rollins. Box 1 was written by Mark Hadley. Barry Blom, Ellen Hays, Felix LoStracco, Laurie Pounder, and Erin Whitaker provided valuable assistance. Fact checking was done by Mark Hadley, Ellen Hays, Ken Johnson, Rachel Milberg, Kathy Ruffing, Christi Hawley Sadoti, and Amy Wendholt.
Christine Bogusz edited the report, and Christian Spoor proofread it.
Marion Curry produced the tables, and Kathryn Quattrone prepared the report
for publication. Lenny Skutnik produced the printed copies, and Annette
Kalicki prepared the electronic versions for CBO's Web site.
Dan L. Crippen
Director
May 2001
THE PRESIDENT'S BUDGETARY POLICIES
COMPARISON OF CBO'S AND THE ADMINISTRATION'S ECONOMIC PROJECTIONS
DIFFERENCES BETWEEN CBO'S AND OMB'S BASELINE ESTIMATES
COMPARISON OF THE PRESIDENT'S BUDGET AND THE CONGRESSIONAL BUDGET RESOLUTION
APPENDIX: MAJOR CONTRIBUTORS TO THE REVENUE AND SPENDING PROJECTIONS
TABLES | |
1. | Comparison of Projected Surpluses in CBO's Baseline and Its Estimate of the President's Budget for 2002 |
2. | The President's 10-Year Budget Plan |
3. | Changes in CBO's Baseline Projections of the Surplus Since January 2001 |
4. | CBO's Projections of Debt Held by the Public and Net Indebtedness at the End of the Year |
5. | CBO's Baseline Budget Projections |
6. | Comparison of CBO's and the Administration's Estimates of the Budget for 2002 |
7. | Sources of Differences Between CBO's and the Administration's Estimates of the President's Budgetary Proposals |
8. | CBO's Estimate of the Effect of the President's Proposals on Baseline Surpluses |
9. | CBO's Estimate of the President's Revenue Proposals, Including Effects on Outlays |
10. | CBO's Baseline Projections of Mandatory Spending |
11. | Discretionary Spending Under the President's Budgetary Proposals and CBO's Baseline Projections |
12. | Comparison of Discretionary Budget Authority Enacted for 2001 and the President's Request for 2002, by Budget Function |
13. | Comparison of CBO's and the Administration's Economic Projections for Calendar Years 2001-2011 |
14. | Comparison of CBO's Baseline and OMB's Current-Services Baseline |
15. | Comparison of CBO's Baseline and Alternative Budget Plans |
FIGURES | |
1. | Allocation of Projected Baseline Surpluses Under the President's Budget |
2. | Reduction in Revenue Under the President's Proposed Tax Cuts, 2002-2011 |
BOX | |
1. | The Cost of Credit Programs in the Federal Budget |
On April 9, President Bush submitted to the Congress the formal documents detailing his budget plan for fiscal year 2002. The broad outlines of that plan had been submitted on February 28 in a preliminary document titled A Blueprint for New Beginnings. There are few significant differences between the broad budget policies outlined in the President's blueprint and those detailed in his April submission.
At the request of the Senate Committee on Appropriations, the Congressional
Budget Office (CBO) has prepared this analysis of the President's April
budget submission. The President's plan would produce a total budget surplus
of $257 billion in 2002, CBO estimates, including an on-budget surplus
of $86 billion and an off-budget surplus of $171 billion (see Table 1). The off-budget figure consists almost entirely of the surpluses of the Social Security trust funds. Budget surpluses over 10 years (2002 through 2011) would total about $3.2 trillion under the President's proposals--$0.7 trillion on-budget and $2.5 trillion off-budget. CBO's estimates of the budget plan are similar to those of the Administration (see Table 2).
Table 1. Comparison of Projected Surpluses in CBO's Baseline and Its Estimate of the President's Budget for 2002 (By fiscal year, in billions of dollars) |
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2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | Total, 2002- 2011 |
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Surplus in CBO's Baseline | ||||||||||||||
On-budget | 119 | 132 | 166 | 197 | 215 | 270 | 322 | 366 | 425 | 495 | 553 | 3,142 | ||
Off-budget | 156 | 172 | 187 | 202 | 221 | 238 | 256 | 275 | 293 | 311 | 330 | 2,487 | ||
Total | 275 | 304 | 353 | 400 | 437 | 508 | 578 | 641 | 718 | 806 | 883 | 5,629 | ||
Surplus in CBO's Estimate of the President's Budget | ||||||||||||||
On-budget | 116 | 86 | 75 | 72 | 42 | 46 | 51 | 56 | 73 | 87 | 111 | 698 | ||
Off-budget | 156 | 171 | 187 | 202 | 221 | 237 | 255 | 275 | 292 | 310 | 330 | 2,481 | ||
Total | 272 | 257 | 262 | 274 | 262 | 283 | 306 | 331 | 365 | 398 | 440 | 3,179 | ||
Difference (Baseline minus President's budget) | ||||||||||||||
On-budget | 3 | 46 | 91 | 125 | 174 | 225 | 271 | 310 | 352 | 408 | 442 | 2,443 | ||
Off-budget | 0 | * | * | * | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 6 | ||
Total | 3 | 47 | 91 | 125 | 174 | 225 | 272 | 311 | 353 | 408 | 442 | 2,449 | ||
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SOURCE: Congressional Budget Office. | ||||||||||||||
NOTE: * = between zero and $500 million. | ||||||||||||||
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Table 2. The President's 10-Year Budget Plan (By fiscal year, in billions of dollars) |
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Total, 2002-2011
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CBO's Estimate |
Administration's Estimate |
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Baseline Surplus | 5,629 | 5,637 | |||
Tax Proposals (Revenue effects only) | -1,698 | -1,612 | |||
Spending Proposals | |||||
Immediate Helping Hand and Medicare Modernization plana | -153 | -153 | |||
Other spending proposals (Including outlay effects of tax proposals) | -137 | -19 | |||
Additional debt service | -462 | -420 | |||
Remaining Surplus | 3,179 | 3,433 | |||
Off-budget surplusb | 2,481 | 2,591 | |||
Reserve for contingencies | 698 | 841 | |||
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SOURCES: Congressional Budget Office; Office of Management and Budget. | |||||
a. Sufficient detail is not available to permit CBO to do an independent estimate of these proposals. The estimates shown in the table are those contained in the President's budget. | |||||
b. The projected off-budget surplus consists principally of the surpluses of the Social Security trust funds. | |||||
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The President's budget specifies plans for allocating projected surpluses
over the 2002-2011 period (see Figure 1). In the
absence of policy changes, CBO projects surpluses totaling $5.6 trillion
over the 10-year period. The President proposes to devote all of the off-budget
surpluses, which CBO estimates will total $2.5 trillion, to reducing debt
held by the public.(1)
The President's tax and spending policies, CBO estimates, would lower total
surpluses by about $2.4 trillion. The President's proposals to cut taxes
make up the largest component of that reduction. The Joint Committee on
Taxation (JCT) and CBO estimate that those proposals would reduce baseline
surpluses by nearly $1.8 trillion between 2002 and 2011 (excluding their
impact on debt service). About $1.7 trillion of the reduction would come
from lower estimated revenues and about $75 billion from higher outlays
for refundable tax credits. Relative to CBO's baseline, other increases
in spending would consume about $0.2 trillion of the projected 10-year
surplus, and increased debt-service costs would use another $0.5 trillion.(2) The President proposes to set aside the remaining surpluses, which CBO estimates at about $0.7 trillion, in a contingency reserve to be used for emergencies, programmatic reforms, further debt reduction, or other purposes. However, because the President's budget does not include specific proposals for using the surpluses held in reserve, CBO assumes in this analysis that they would be used to pay down the debt.
Figure 1. Allocation of Projected Baseline Surpluses Under the President's Budget (By fiscal year) |
SOURCE: Congressional Budget Office. |
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Strong economic growth over the past few years has been the largest
single cause of the surpluses, but recent signs of a weakening economy
have prompted concern that projections of the surplus may fall. Although
current economic conditions are somewhat weaker than CBO anticipated last
winter, it is not clear that they warrant significant changes to CBO's
long-term economic projections.(3) CBO does not normally revise its economic forecast until the summer, when it prepares its midyear update of the budget baseline. This analysis, therefore, does not reflect any revisions to CBO's economic assumptions.
A baseline is a projection of spending and revenue levels under current budget policies and current economic assumptions. CBO prepares a 10-year baseline under the requirements and guidelines of the 1985 Balanced Budget and Emergency Deficit Control Act and the 1974 Congressional Budget Act, as amended. Revenues and mandatory spending, both of which typically flow from provisions of permanent law, are projected at levels that are estimated to occur under current policies. Discretionary spending, which is provided anew each year in appropriation acts, is projected at the levels enacted for the current year and adjusted for the projected rate of inflation.
The baseline is intended to be a neutral benchmark against which lawmakers can assess the budgetary impact of proposals to change laws governing spending or revenues. It is not a prediction of future outcomes. Policies will change and the economy will perform differently, either better or worse, than CBO now projects. Thus, baseline projections are inherently uncertain, especially in the later years of the 10-year projection period.(4)
In conjunction with this analysis of the President's budget, CBO has
revised its January 2001 baseline projections to take into account new
information from the President's budget and from other sources. In general,
CBO's revised projections differ little from those in its January baseline
(see Table 3). The changes reflect technical revisions,
such as year-to-date information on spending and receipts, revised rates
of projected spending, and budget reclassifications. CBO has not changed
the economic assumptions that underlie the baseline, and no new laws affecting
spending or revenues have been enacted since the January baseline was prepared.
Table 3. Changes in CBO's Baseline Projections of the Surplus Since January 2001 (By fiscal year, in billions of dollars) |
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2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | Total, 2002- 2011 |
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January 2001 Baseline Surplus | 281 | 313 | 359 | 397 | 433 | 505 | 573 | 635 | 710 | 796 | 889 | 5,610 | ||||||
Technical Changes | ||||||||||||||||||
Revenues | -20 | -10 | -5 | * | * | * | * | * | * | * | * | -15 | ||||||
Outlays | ||||||||||||||||||
Discretionary | -4 | -4 | -3 | -2 | -2 | -3 | -3 | -3 | -3 | -3 | * | -27 | ||||||
Mandatory | ||||||||||||||||||
Medicaid | * | * | -1 | -2 | -2 | -2 | -3 | -3 | -3 | -4 | -5 | -25 | ||||||
SSI | * | -1 | -1 | -1 | -2 | -2 | -2 | -3 | -3 | -3 | 1 | -17 | ||||||
Credit reestimates | -11 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||
SCHIP | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | * | 7 | ||||||
FHA (Mutual Mortgage Insurance)a | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 19 | ||||||
Other | -1 | 1 | 3 | * | * | 1 | * | * | -1 | -2 | 7 | 9 | ||||||
Subtotal, mandatory | -10 | 3 | 3 | * | -2 | * | -2 | -3 | -4 | -7 | 6 | -7 | ||||||
Subtotal, outlays | -14 | -1 | 1 | -3 | -4 | -3 | -5 | -6 | -8 | -10 | 6 | -34 | ||||||
Total Effect on Surplus | -6 | -9 | -6 | 3 | 4 | 3 | 5 | 6 | 8 | 10 | -6 | 19 | ||||||
May 2001 Baseline Surplus | 275 | 304 | 353 | 400 | 437 | 508 | 578 | 641 | 718 | 806 | 883 | 5,629 | ||||||
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SOURCE: Congressional Budget Office. | ||||||||||||||||||
NOTE: * = between -$500 million and $500 million; SSI = Supplemental Security Income; SCHIP = State Children's Health Insurance Program; FHA = Federal Housing Administration. | ||||||||||||||||||
a. Outlay increases reflect offsetting collections reclassified as discretionary. | ||||||||||||||||||
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Like the January baseline, CBO's revised baseline shows record surpluses
that grow steadily throughout the 10-year projection period. CBO's estimate
of the total surplus for the 2002-2011 period remains essentially unchanged
at about $5.6 trillion. Of that amount, on-budget surpluses would total
$3.1 trillion and off-budget surpluses about $2.5 trillion. CBO continues
to project that by 2006 those surpluses would be sufficient to pay off
all of the publicly held debt that will be available to be redeemed (see
Table 4).(5)
Table 4. CBO's Projections of Debt Held by the Public and Net Indebtedness at the End of the Year (By fiscal year, in billions of dollars) |
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Actual 2000 |
2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | ||
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CBO's Baseline | |||||||||||||
Debt Held by the Public | 3,410 | 3,169 | 2,870 | 2,537 | 2,157 | 1,738 | 1,306 | 1,185 | 1,100 | 1,007 | 953 | 898 | |
Balance of Uncommitted Fundsa | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | 60 | 503 | 1,046 | 1,658 | 2,397 | 3,212 | |
Net Indebtedness | 3,410 | 3,169 | 2,870 | 2,537 | 2,157 | 1,738 | 1,246 | 682 | 54 | -651 | -1,444 | -2,314 | |
CBO's Estimate of the President's Budget for 2002 | |||||||||||||
Debt Held by the Public | 3,410 | 3,173 | 2,921 | 2,679 | 2,426 | 2,183 | 1,917 | 1,623 | 1,303 | 1,007 | 953 | 898 | |
Balance of Uncommitted Fundsa | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | 58 | 391 | 767 | |
Net Indebtedness | 3,410 | 3,173 | 2,921 | 2,679 | 2,426 | 2,183 | 1,917 | 1,623 | 1,303 | 949 | 562 | 131 | |
Memorandum: | |||||||||||||
Debt Held by the Public as a Percentage of GDP | |||||||||||||
Baseline | 34.7 | 30.7 | 26.4 | 22.1 | 17.9 | 13.7 | 9.8 | 8.5 | 7.5 | 6.6 | 5.9 | 5.3 | |
President's Budget | 34.7 | 30.8 | 26.8 | 23.3 | 20.1 | 17.3 | 14.4 | 11.6 | 8.9 | 6.6 | 5.9 | 5.3 | |
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SOURCE: Congressional Budget Office. | |||||||||||||
a. CBO's term for the surpluses remaining each year after paying down the publicly held debt available for redemption. Uncommitted funds accumulate from one year to the next. | |||||||||||||
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Revisions to Estimates for Fiscal Year 2001
The total budget surplus will reach $275 billion in fiscal year 2001,
CBO estimates, $6 billion lower than projected in January. That total comprises
an on-budget surplus of $119 billion and an off-budget surplus of $156
billion (see Table 5). Revisions to the projected
on-budget surplus account for nearly all of the difference, reflecting
various technical revisions for updated data on receipts and outlays recorded
since January and for new information from the President's budget and other
sources.
Table 5. CBO's Baseline Budget Projections (By fiscal year) |
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Actual 2000 |
2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | ||||
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In Billions of Dollars | |||||||||||||||
Revenues | |||||||||||||||
Individual income taxes | 1,004 | 1,071 | 1,125 | 1,176 | 1,230 | 1,289 | 1,354 | 1,424 | 1,500 | 1,583 | 1,675 | 1,774 | |||
Corporate income taxes | 207 | 200 | 207 | 221 | 236 | 246 | 255 | 264 | 276 | 289 | 303 | 319 | |||
Social insurance taxes | 653 | 686 | 725 | 762 | 797 | 840 | 879 | 921 | 963 | 1,010 | 1,059 | 1,110 | |||
Other | 161 | 158 | 169 | 179 | 190 | 194 | 200 | 207 | 216 | 225 | 234 | 244 | |||
Total | 2,025 | 2,115 | 2,226 | 2,338 | 2,453 | 2,570 | 2,689 | 2,816 | 2,955 | 3,107 | 3,271 | 3,447 | |||
On-budget | 1,545 | 1,610 | 1,693 | 1,777 | 1,864 | 1,950 | 2,040 | 2,136 | 2,243 | 2,360 | 2,489 | 2,628 | |||
Off-budget | 481 | 504 | 532 | 561 | 589 | 620 | 649 | 680 | 712 | 746 | 782 | 819 | |||
Outlays | |||||||||||||||
Discretionary spending | 615 | 643 | 678 | 707 | 727 | 748 | 763 | 778 | 801 | 821 | 841 | 866 | |||
Mandatory spending | 1,032 | 1,080 | 1,159 | 1,222 | 1,294 | 1,375 | 1,440 | 1,518 | 1,611 | 1,710 | 1,815 | 1,942 | |||
Offsetting receipts | -81 | -88 | -95 | -107 | -110 | -107 | -112 | -119 | -125 | -131 | -139 | -148 | |||
Net interest | 223 | 205 | 180 | 163 | 142 | 117 | 91 | 74 | 67 | 60 | 55 | 52 | |||
Proceeds earned on the balance of uncommitted fundsa | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | -1 | -13 | -40 | -71 | -107 | -148 | |||
Total | 1,789 | 1,839 | 1,922 | 1,985 | 2,054 | 2,133 | 2,181 | 2,238 | 2,314 | 2,389 | 2,465 | 2,564 | |||
On-budget | 1,458 | 1,491 | 1,561 | 1,611 | 1,667 | 1,734 | 1,769 | 1,814 | 1,877 | 1,935 | 1,994 | 2,075 | |||
Off-budget | 331 | 348 | 361 | 373 | 386 | 399 | 411 | 424 | 437 | 453 | 471 | 489 | |||
Surplus | 236 | 275 | 304 | 353 | 400 | 437 | 508 | 578 | 641 | 718 | 806 | 883 | |||
On-budget | 87 | 119 | 132 | 166 | 197 | 215 | 270 | 322 | 366 | 425 | 495 | 553 | |||
Off-budget | 150 | 156 | 172 | 187 | 202 | 221 | 238 | 256 | 275 | 293 | 311 | 330 | |||
Memorandum: | |||||||||||||||
Gross Domestic Product | 9,828 | 10,319 | 10,880 | 11,477 | 12,059 | 12,656 | 13,279 | 13,932 | 14,619 | 15,338 | 16,109 | 16,922 | |||
As a Percentage of GDP | |||||||||||||||
Revenues | |||||||||||||||
Individual income taxes | 10.2 | 10.4 | 10.3 | 10.2 | 10.2 | 10.2 | 10.2 | 10.2 | 10.3 | 10.3 | 10.4 | 10.5 | |||
Corporate income taxes | 2.1 | 1.9 | 1.9 | 1.9 | 2.0 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | |||
Social insurance taxes | 6.6 | 6.6 | 6.7 | 6.6 | 6.6 | 6.6 | 6.6 | 6.6 | 6.6 | 6.6 | 6.6 | 6.6 | |||
Other | 1.6 | 1.5 | 1.6 | 1.6 | 1.6 | 1.5 | 1.5 | 1.5 | 1.5 | 1.5 | 1.4 | 1.4 | |||
Total | 20.6 | 20.5 | 20.5 | 20.4 | 20.3 | 20.3 | 20.2 | 20.2 | 20.2 | 20.3 | 20.3 | 20.4 | |||
On-budget | 15.7 | 15.6 | 15.6 | 15.5 | 15.5 | 15.4 | 15.4 | 15.3 | 15.3 | 15.4 | 15.5 | 15.5 | |||
Off-budget | 4.9 | 4.9 | 4.9 | 4.9 | 4.9 | 4.9 | 4.9 | 4.9 | 4.9 | 4.9 | 4.9 | 4.8 | |||
Outlays | |||||||||||||||
Discretionary spending | 6.3 | 6.2 | 6.2 | 6.2 | 6.0 | 5.9 | 5.7 | 5.6 | 5.5 | 5.4 | 5.2 | 5.1 | |||
Mandatory spending | 10.5 | 10.5 | 10.7 | 10.6 | 10.7 | 10.9 | 10.8 | 10.9 | 11.0 | 11.1 | 11.3 | 11.5 | |||
Offsetting receipts | -0.8 | -0.9 | -0.9 | -0.9 | -0.9 | -0.8 | -0.8 | -0.9 | -0.9 | -0.9 | -0.9 | -0.9 | |||
Net interest | 2.3 | 2.0 | 1.7 | 1.4 | 1.2 | 0.9 | 0.7 | 0.5 | 0.5 | 0.4 | 0.3 | 0.3 | |||
Proceeds earned on the balance of uncommitted fundsa | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | * | -0.1 | -0.3 | -0.5 | -0.7 | -0.9 | |||
Total | 18.2 | 17.8 | 17.7 | 17.3 | 17.0 | 16.9 | 16.4 | 16.1 | 15.8 | 15.6 | 15.3 | 15.2 | |||
On-budget | 14.8 | 14.5 | 14.3 | 14.0 | 13.8 | 13.7 | 13.3 | 13.0 | 12.8 | 12.6 | 12.4 | 12.3 | |||
Off-budget | 3.4 | 3.4 | 3.3 | 3.3 | 3.2 | 3.2 | 3.1 | 3.0 | 3.0 | 3.0 | 2.9 | 2.9 | |||
Surplus | 2.4 | 2.7 | 2.8 | 3.1 | 3.3 | 3.5 | 3.8 | 4.1 | 4.4 | 4.7 | 5.0 | 5.2 | |||
On-budget | 0.9 | 1.2 | 1.2 | 1.4 | 1.6 | 1.7 | 2.0 | 2.3 | 2.5 | 2.8 | 3.1 | 3.3 | |||
Off-budget | 1.5 | 1.5 | 1.6 | 1.6 | 1.7 | 1.7 | 1.8 | 1.8 | 1.9 | 1.9 | 1.9 | 2.0 | |||
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SOURCE: Congressional Budget Office. | |||||||||||||||
NOTE: n.a. = not applicable; * = between -0.05 percent and zero. | |||||||||||||||
a. "Uncommitted funds" is CBO's term for the surpluses remaining in each year after paying down publicly held debt available for redemption. | |||||||||||||||
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Revenues for 2001 are expected to be lower--by about $20 billion--than CBO estimated in January. CBO now projects that corporate receipts in 2001 will fall $15 billion short of the amount it projected in January, a decline of about 3.5 percent below last year's level. CBO also reduced its estimate of revenues for 2001 by another $5 billion to reflect lower-than-expected collections of withheld income taxes since January. Corporate tax receipts and, to a lesser extent, withheld income taxes have been weaker than expected. Corporate receipts through April were 2.6 percent below those recorded a year ago. That weakness developed recently; from February through April, corporate receipts were 18 percent below the amount recorded during the same period last year. That development is consistent with the weak level of profits recently announced by firms and indicated by national income data for the fourth quarter of calendar year 2000 and the first quarter of 2001. Much of the weakness in profits and receipts was not anticipated when CBO prepared its January baseline projections.
The drop in the 2001 surplus caused by the estimate of lower revenues
is partially offset by CBO's estimate of lower spending for 2001. CBO anticipates that this year outlays will fall about $14 billion below the level it estimated in January. That drop in spending largely results from a net reduction of $11 billion in estimated subsidy costs for credit programs that the
President's Office of Management and Budget (OMB) plans to record this
year. The reduction is an accounting adjustment that OMB makes each year
to represent changes in its estimates of the long-term costs of federal
direct loans and loan guarantees (see Box 1). Other revisions include a mix of relatively small increases and decreases in spending that reduce net outlays for the year by another $3 billion. Those revisions include slower-than-anticipated growth in discretionary spending for the year and other technical changes.
The federal budget includes dozens of programs that either provide direct loans to individuals or businesses or guarantee loans made by private financial institutions. In 2000, federal agencies issued about $35.5 billion in direct loans and guaranteed $180.6 billion of loans issued by others. The terms and conditions of those direct loans and loan guarantees vary, with some programs offering below-market interest rates, some charging fees that are expected to cover most or all of the costs, and others guaranteeing loans for particularly risky ventures. In 1992, the federal budget began recording the cost of credit programs (direct loans and loan guarantees) as the estimated subsidy cost to the federal government of extending credit. The estimated subsidy cost is defined as the net present value of the credit program over its full term, accounting for interest rate subsidies, fees, expected repayments, and anticipated defaults. Accurately projecting loan repayments, defaults, and changes in market interest rates over the uncertain and sometimes lengthy life of federal credit programs is very difficult, and errors are inevitable. The Federal Credit Reform Act of 1990 anticipated the problem, directing agencies to reestimate the cost of the federal credit subsidy for individual programs. Agencies have recorded such reestimates each year since 1994. The President's budget for 2002 includes credit subsidy reestimates that will decrease on-budget outlays by nearly $18 billion in 2001. Of that $18 billion, about $14 billion represents changes in the estimated subsidy needed for outstanding loans, and $4 billion represents the interest savings on those changes. In its January 2001 baseline, the Congressional Budget Office (CBO) accounted for nearly $7 billion in credit subsidy reestimates that it anticipated would be made by the Federal Communications Commission and the Small Business Administration. CBO's May baseline reflects the remaining $11 billion in credit subsidy reestimates that have been included in the President's budget. The reestimates in 2001 will be the largest reduction in outlays for credit subsidies ever recorded. They also differ in direction from most previous reestimates, which in total added about $7 billion to outlays over the 1994-2000 period, excluding interest. The figure below shows cumulative reestimates (without interest) since 1994, indicating the total difference between the original estimate and the current estimate of the costs of credit. Over the 1994-2001 period, the magnitude of annual changes
has grown. Aside from loans connected to the auction of licenses to use
portions of the electromagnetic spectrum, as the portfolio of outstanding
loans increases each year, the magnitude of reestimates is also likely
to grow. At this time, however, CBO has no basis for anticipating the direction,
size, or timing of future reestimates.
Despite the magnitude of the reestimates for 2001, those and earlier reestimates still may not indicate the ultimate cost of credit programs. Many of the loans the government makes or guarantees will not mature for years; for 20-year loans made in 1992, final information on subsidy costs may not be available until 2012 or later. Additionally, the performance of existing loans may not accurately predict future behavior. The timing of defaults over the lifetime of a particular loan portfolio is uncertain. Even though the percentage of loans defaulting through 2000 might have been lower than expected (given historical averages), it is possible that more defaults will occur in the next few years. Loan performance during recent years (when the U.S. economy has experienced strong growth) may not be a good indicator of loan performance over the next several years (when economic conditions might not be as favorable). |
Revisions to Projections for Fiscal Years 2002-2011
For fiscal years 2002 through 2011, CBO made smaller annual changes in its baseline to reflect the impact of the updated information received for the current fiscal year and other technical factors. For the 10-year period, CBO raised its estimate of total surpluses by $19 billion over the January projections.
CBO views the recent decline in corporate profits and tax receipts as a cyclical weakness in economic activity rather than a permanent one. Therefore, it expects that over the next two years, profits and receipts will revert to the levels projected in January. As a result, CBO reduced its estimate of corporate receipts by $10 billion for 2002 and $5 billion for 2003. It made no changes to the revenue projections beyond 2003.
CBO lowered its estimate of total outlays for the 2002-2011 period by
about $34 billion, reflecting net reductions of $27 billion in discretionary
outlays and $7 billion in mandatory outlays (see Table
3). One of the largest revisions in the two categories of spending
reflects a budget-accounting change for offsetting collections of the Federal
Housing Administration's Mutual Mortgage Insurance program. Those collections,
now estimated at about $26 billion over the 10-year projection period,
have been moved from the mandatory to the discretionary category to be
consistent with OMB's treatment of the program. That reclassification lowers
discretionary spending by $19 billion and increases the mandatory total
by the same amount. In addition, CBO has increased its estimate of those
collections by $7 billion since January to reflect a higher anticipated
volume of loans. Other revisions in mandatory spending reflect slight changes
in estimated caseloads for Supplemental Security Income, Medicaid, and
the State Children's Health Insurance Program.
The President's Budgetary Policies
In general, CBO's estimates of the President's budget are similar to
the Administration's over the 10-year projection period (see Table 6). The estimated surpluses differ by $253 billion over 10 years--with both CBO and the Administration estimating about $26 trillion in revenues and $23 trillion in outlays over that period. The small discrepancies are split between differing estimates of the President's policy proposals and
different baseline budget projections (see Table 7).
Baseline economic and technical differences between CBO and the Administration
are discussed later in this report.
Table 6. Comparison of CBO's and the Administration's Estimates of the Budget for 2002 (By fiscal year, in billions of dollars) |
|||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | Total, 2002- 2011 |
||||
|
|||||||||||||||
CBO's Reestimate of the President's Budget for 2002 | |||||||||||||||
Revenues | 2,115 | 2,201 | 2,275 | 2,359 | 2,440 | 2,517 | 2,616 | 2,735 | 2,863 | 3,001 | 3,165 | 26,173 | |||
On-budget | 1,610 | 1,669 | 1,715 | 1,770 | 1,820 | 1,868 | 1,936 | 2,023 | 2,117 | 2,219 | 2,346 | 19,482 | |||
Off-budget | 504 | 532 | 561 | 589 | 620 | 649 | 680 | 712 | 746 | 782 | 819 | 6,691 | |||
Outlays | |||||||||||||||
Discretionary | 643 | 684 | 712 | 733 | 755 | 770 | 786 | 809 | 830 | 855 | 875 | 7,809 | |||
Mandatory | 994 | 1,078 | 1,133 | 1,199 | 1,287 | 1,345 | 1,421 | 1,510 | 1,602 | 1,703 | 1,825 | 14,102 | |||
Net interesta | 206 | 182 | 168 | 153 | 135 | 119 | 103 | 86 | 66 | 46 | 25 | 1,083 | |||
Total | 1,843 | 1,944 | 2,013 | 2,084 | 2,177 | 2,234 | 2,310 | 2,405 | 2,498 | 2,604 | 2,725 | 22,994 | |||
On-budget | 1,495 | 1,583 | 1,639 | 1,698 | 1,778 | 1,822 | 1,885 | 1,967 | 2,044 | 2,132 | 2,235 | 18,784 | |||
Off-budget | 348 | 361 | 374 | 387 | 399 | 412 | 425 | 438 | 454 | 472 | 490 | 4,210 | |||
Surplus | 272 | 257 | 262 | 274 | 262 | 283 | 306 | 331 | 365 | 398 | 440 | 3,179 | |||
On-budget | 116 | 86 | 75 | 72 | 42 | 46 | 51 | 56 | 73 | 87 | 111 | 698 | |||
Off-budget | 156 | 171 | 187 | 202 | 221 | 237 | 255 | 275 | 292 | 310 | 330 | 2,481 | |||
Administration's Estimate of the President's Budget for 2002 | |||||||||||||||
Revenues | 2,137 | 2,192 | 2,258 | 2,339 | 2,438 | 2,529 | 2,643 | 2,771 | 2,910 | 3,058 | 3,233 | 26,370 | |||
On-budget | 1,633 | 1,661 | 1,697 | 1,749 | 1,809 | 1,870 | 1,950 | 2,044 | 2,149 | 2,255 | 2,386 | 19,570 | |||
Off-budget | 504 | 531 | 561 | 590 | 629 | 659 | 693 | 726 | 761 | 804 | 846 | 6,800 | |||
Outlays | |||||||||||||||
Discretionary | 649 | 692 | 712 | 731 | 754 | 770 | 787 | 809 | 830 | 854 | 877 | 7,816 | |||
Mandatory | 1,001 | 1,081 | 1,129 | 1,184 | 1,270 | 1,326 | 1,408 | 1,498 | 1,591 | 1,693 | 1,810 | 13,991 | |||
Net interesta | 206 | 188 | 175 | 161 | 145 | 127 | 109 | 90 | 69 | 46 | 20 | 1,130 | |||
Total | 1,856 | 1,961 | 2,016 | 2,077 | 2,169 | 2,224 | 2,303 | 2,398 | 2,490 | 2,593 | 2,706 | 22,938 | |||
On-budget | 1,509 | 1,601 | 1,649 | 1,697 | 1,776 | 1,818 | 1,880 | 1,959 | 2,032 | 2,113 | 2,203 | 18,729 | |||
Off-budget | 348 | 359 | 368 | 380 | 392 | 406 | 423 | 439 | 458 | 480 | 504 | 4,209 | |||
Surplus | 281 | 231 | 242 | 262 | 269 | 305 | 340 | 373 | 420 | 465 | 526 | 3,433 | |||
On-budget | 125 | 59 | 49 | 52 | 32 | 52 | 69 | 85 | 117 | 142 | 184 | 841 | |||
Off-budget | 156 | 172 | 193 | 211 | 237 | 252 | 270 | 287 | 303 | 323 | 343 | 2,591 | |||
Difference (CBO minus Administration) | |||||||||||||||
Revenues | -22 | 9 | 17 | 20 | 2 | -12 | -27 | -35 | -47 | -57 | -67 | -197 | |||
On-budget | -23 | 8 | 17 | 22 | 11 | -2 | -14 | -22 | -32 | -36 | -40 | -88 | |||
Off-budget | * | 1 | * | -2 | -9 | -9 | -13 | -14 | -15 | -22 | -27 | -109 | |||
Outlays | |||||||||||||||
Discretionary | -6 | -7 | * | 2 | 1 | * | -1 | -1 | * | 1 | -1 | -7 | |||
Mandatory | -7 | -3 | 4 | 15 | 17 | 18 | 13 | 12 | 11 | 9 | 15 | 111 | |||
Net interesta | -1 | -7 | -7 | -9 | -9 | -8 | -6 | -5 | -3 | * | 5 | -48 | |||
Total | -14 | -17 | -3 | 8 | 9 | 10 | 7 | 7 | 8 | 10 | 18 | 57 | |||
On-budget | -14 | -18 | -9 | 1 | 2 | 4 | 5 | 7 | 12 | 19 | 32 | 55 | |||
Off-budget | * | 2 | 6 | 7 | 7 | 6 | 2 | -1 | -4 | -9 | -14 | 2 | |||
Surplus | -9 | 26 | 20 | 12 | -7 | -22 | -34 | -42 | -55 | -67 | -86 | -253 | |||
On-budget | -9 | 26 | 26 | 21 | 9 | -7 | -18 | -29 | -44 | -55 | -73 | -143 | |||
Off-budget | * | * | -6 | -9 | -16 | -15 | -15 | -13 | -11 | -13 | -13 | -110 | |||
|
|||||||||||||||
SOURCES: Congressional Budget Office; Office of Management and Budget. | |||||||||||||||
NOTE: * = between -$500 million and $500 million. | |||||||||||||||
a. Includes earnings on the balance of uncommitted funds. | |||||||||||||||
|
Table 7. Sources of Differences Between CBO's and the Administration's Estimates of the President's Budgetary Proposals (By fiscal year, in billions of dollars) |
||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | Total, 2002- 2011 |
|||||
|
||||||||||||||||
Administration's Estimate | ||||||||||||||||
Surplus Under the President's Budgetary Policies | 281 | 231 | 242 | 262 | 269 | 305 | 340 | 373 | 420 | 465 | 526 | 3,433 | ||||
Sources of Differences Between CBO and the Adminstration | ||||||||||||||||
Revenue Differences | ||||||||||||||||
Baseline | -23 | 5 | 14 | 15 | * | -9 | -20 | -24 | -25 | -30 | -36 | -110 | ||||
Policy | * | 5 | 4 | 5 | 1 | -3 | -7 | -12 | -22 | -27 | -31 | -87 | ||||
Subtotal | -22 | 9 | 17 | 20 | 2 | -12 | -27 | -35 | -47 | -57 | -67 | -197 | ||||
Outlay Differences | ||||||||||||||||
Discretionary | -6 | -7 | * | 2 | 1 | * | -1 | -1 | * | 1 | -1 | -7 | ||||
Mandatory | ||||||||||||||||
Baseline | -7 | -4 | * | 8 | 9 | 10 | 5 | 4 | 3 | 2 | 7 | 44 | ||||
Policy | * | 1 | 4 | 6 | 8 | 8 | 8 | 8 | 8 | 8 | 8 | 67 | ||||
Subtotal, mandatory | -7 | -3 | 4 | 15 | 17 | 18 | 13 | 12 | 11 | 9 | 15 | 111 | ||||
Net interest | -1 | -7 | -7 | -9 | -9 | -8 | -6 | -5 | -3 | * | 5 | -48 | ||||
Total, outlays | -14 | -17 | -3 | 8 | 9 | 10 | 7 | 7 | 8 | 10 | 18 | 57 | ||||
All Differences | -9 | 26 | 20 | 12 | -7 | -22 | -34 | -42 | -55 | -67 | -86 | -253 | ||||
CBO's Estimate | ||||||||||||||||
Surplus Under the President's Budgetary Proposals | 272 | 257 | 262 | 274 | 262 | 283 | 306 | 331 | 365 | 398 | 440 | 3,179 | ||||
Memorandum: | ||||||||||||||||
Economic Differences | ||||||||||||||||
Revenues | 1 | -5 | -17 | -32 | -51 | -67 | -79 | -84 | -88 | -92 | -100 | -614 | ||||
Outlays | -4 | -3 | -2 | -3 | -5 | -8 | -13 | -18 | -24 | -30 | -35 | -142 | ||||
Total | 5 | -2 | -15 | -29 | -46 | -59 | -66 | -66 | -64 | -62 | -64 | -473 | ||||
Technical Differences | ||||||||||||||||
Revenues | -24 | 15 | 34 | 52 | 53 | 55 | 52 | 49 | 41 | 35 | 32 | 417 | ||||
Outlays | -10 | -13 | -1 | 11 | 14 | 19 | 20 | 25 | 32 | 40 | 54 | 198 | ||||
Total | -14 | 28 | 36 | 41 | 39 | 37 | 33 | 24 | 9 | -6 | -21 | 219 | ||||
|
||||||||||||||||
SOURCE: Congressional Budget Office. | ||||||||||||||||
NOTE: * = between -$500 million and $500 million. | ||||||||||||||||
|
Surpluses under the President's budget would sum to about $3.2 trillion over 10 years, CBO projects. Of that amount, on-budget surpluses would total $0.7 trillion and off-budget surpluses would amount to $2.5 trillion. The President proposes to devote all of the projected off-budget surpluses--essentially the surpluses of the Social Security trust funds--to reducing debt held by the public. CBO estimates that total surpluses under the President's budget would be sufficient by 2009 to pay off all publicly held debt that will be available for redemption (see Table 4).
CBO anticipates that the President's tax and spending policies would
lower surpluses by about $2.4 trillion compared with its baseline (see
Table 8). Those budget effects are concentrated in two broad policy proposals--tax
cuts and changes to Medicare. Based on information provided by the JCT,
CBO estimates that the President's proposals to cut taxes would lower projected
surpluses by $1.774 trillion over the 2002-2011 period. That estimate includes
$1.698 trillion in lower revenues and $76 billion in higher outlays for
the refundable portion of the President's tax proposals. The President's
Medicare proposals, including prescription drug coverage and other changes,
are referred to collectively in his budget as the "Immediate Helping Hand
and Medicare Modernization" plan. Those proposals have not been specified
in detail, so CBO could not prepare an independent estimate. The President's
budget includes $153 billion for those proposals over the 2002-2011 period,
and CBO has used that figure in this analysis.
Table 8. CBO's Estimate of the Effect of the President's Proposals on Baseline Surpluses (By fiscal year, in billions of dollars) |
||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | Total, 2002- 2011 |
|||||||
|
||||||||||||||||||
CBO's Baseline Surplus | 275 | 304 | 353 | 400 | 437 | 508 | 578 | 641 | 718 | 806 | 883 | 5,629 | ||||||
Effect of the President's Proposals | ||||||||||||||||||
Revenues | 0 | -25 | -63 | -94 | -130 | -172 | -199 | -220 | -243 | -270 | -282 | -1,698 | ||||||
Outlays | ||||||||||||||||||
Discretionary | 1 | 6 | 5 | 6 | 7 | 7 | 8 | 8 | 9 | 14 | 9 | 78 | ||||||
Mandatory | ||||||||||||||||||
Immediate Helping Handa | 3 | 11 | 13 | 15 | 4 | 0 | 0 | 0 | 0 | 0 | 0 | 43 | ||||||
Medicarea | 0 | 0 | 0 | 0 | 8 | 13 | 13 | 16 | 17 | 20 | 24 | 110 | ||||||
Medicaid | 0 | -1 | -1 | -1 | -1 | -1 | -1 | -1 | -1 | -1 | -1 | -10 | ||||||
Auctions of electromagnetic spectrum | 0 | 4 | 3 | -3 | -1 | -4 | * | * | * | * | * | -3 | ||||||
Earned income and child tax credits | 0 | * | 1 | 2 | 2 | 3 | 3 | 3 | 3 | 3 | 3 | 24 | ||||||
Health care tax credit | 0 | 0 | 3 | 4 | 6 | 7 | 7 | 6 | 6 | 6 | 6 | 52 | ||||||
Other | * | * | * | -1 | * | * | * | * | -1 | -1 | -1 | -4 | ||||||
Subtotal, mandatory | 3 | 14 | 19 | 15 | 19 | 17 | 22 | 24 | 24 | 27 | 31 | 211 | ||||||
Net interest | * | 2 | 5 | 11 | 18 | 29 | 43 | 59 | 77 | 98 | 121 | 462 | ||||||
Subtotal, outlays | 3 | 22 | 28 | 31 | 44 | 54 | 73 | 91 | 110 | 138 | 160 | 751 | ||||||
Total Effect on Surplus | -3 | -47 | -91 | -125 | -174 | -225 | -272 | -311 | -353 | -408 | -442 | -2,449 | ||||||
Surplus Under the President's Proposals | 272 | 257 | 262 | 274 | 262 | 283 | 306 | 331 | 365 | 398 | 440 | 3,179 | ||||||
|
||||||||||||||||||
SOURCE: Congressional Budget Office. | ||||||||||||||||||
NOTE: * = between -$500 million and $500 million. | ||||||||||||||||||
a. Sufficient detail is not available to permit CBO to do an independent estimate of these proposals. The estimates shown in the table are those contained in the President's budget. | ||||||||||||||||||
|
The President's proposals for discretionary spending would increase outlays by about $6 billion in 2002 and about $78 billion over the 2002-2011 period, relative to CBO's baseline projections. (The Administration estimates that discretionary outlays under the President's budget would rise about $28 billion above its baseline projections over the 10-year period--with most of that increase in the first five years.) Those increases differ largely because of differences in projected inflation and spending rates. In addition, CBO estimates that the President's budget proposals would result in $462 billion in additional outlays for net interest, mainly for higher debt service.
The President proposes to allocate the remaining on-budget surpluses, which CBO estimates at nearly $700 billion, to a contingency reserve. That amount might be used for emergencies, other unforeseen needs, program reforms, or other purposes over the 2002-2011 period. CBO's estimate of the President's budget assumes that the reserved amounts would reduce publicly held debt or increase uncommitted funds.(6) However, if the contingency reserve was used, both total and on-budget surpluses would fall from the levels that CBO now estimates under the President's budget.
Revenue Policies
The President's budget proposes changes to tax law that would significantly reduce tax revenues over the next decade. The package largely consists of proposals to reduce revenues from the personal income tax, estate and gift taxes, and, to a much smaller extent, the corporate income tax. The major proposals would start in 2002 and phase in over time, becoming fully effective in 2006 or beyond.
CBO and JCT estimate that the proposals in total would reduce revenues
by $1.698 trillion over the period from 2002 through 2011 and would increase
outlays by $76 billion over the same period through their effects on refundable
credits (see Table 9).(7) As a share of projected gross domestic product (GDP), the revenue reductions would average 1.2 percent over the 10-year period, increasing steadily from 0.2 percent of GDP in 2002 to 1.7 percent of GDP by 2011. The budget includes only two revenue-increasing proposals, which would raise miscellaneous receipts by about $1 billion over the 10-year period.
Table 9. CBO's Estimate of the President's Revenue Proposals, Including Effects on Outlays (By fiscal year, in billions of dollars) |
|||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | Total, 2002- 2011 |
||
|
|||||||||||||
Reduce Existing Individual Income Tax Rates | 0 | -13 | -24 | -38 | -48 | -64 | -71 | -73 | -74 | -77 | -79 | -560 | |
Create a 10 Percent Individual Income Tax Rate | 0 | -6 | -14 | -22 | -30 | -38 | -41 | -41 | -42 | -42 | -43 | -317 | |
Repeal Estate and Gift Taxes | 0 | * | -6 | -7 | -11 | -17 | -23 | -36 | -53 | -73 | -79 | -306 | |
Increase the Child Tax Credit | 0 | -1 | -6 | -11 | -17 | -22 | -28 | -29 | -31 | -32 | -33 | -211 | |
Reinstate the Two-Earner Deduction | 0 | -1 | -4 | -7 | -10 | -12 | -13 | -13 | -14 | -14 | -15 | -103 | |
Allow Nonitemizers to Deduct Charitable Contributions | 0 | * | -2 | -4 | -6 | -9 | -11 | -12 | -13 | -14 | -15 | -84 | |
Make the Research and Experimentation Tax Credit Permanent | 0 | 0 | 0 | -1 | -4 | -5 | -6 | -7 | -8 | -8 | -9 | -47 | |
Other | 0 | -3 | -11 | -10 | -14 | -16 | -17 | -18 | -19 | -19 | -20 | -146 | |
Totala | 0 | -25 | -67 | -100 | -138 | -181 | -209 | -230 | -253 | -280 | -292 | -1,774 | |
Memorandum: | |||||||||||||
Outlay Effectsb | 0 | * | 4 | 5 | 8 | 10 | 10 | 10 | 10 | 10 | 9 | 76 | |
Revenue Effects | 0 | -25 | -63 | -94 | -130 | -172 | -199 | -220 | -243 | -270 | -282 | -1,698 | |
|
|||||||||||||
SOURCES: Congressional Budget Office; Joint Committee on Taxation. | |||||||||||||
NOTE: * = between -$500 million and $500 million. | |||||||||||||
a. Includes effects on outlays. | |||||||||||||
b. This amount includes the effects on outlays from child tax credits, earned income tax credits, and the proposed health insurance credit. Increases in outlays are shown as positive numbers. | |||||||||||||
|
Under the President's plan, the major reductions in personal income
taxes would become fully effective in 2006, and estate and gift taxes would
be fully repealed by 2009. In all, 28 percent of the estimated reduction
in revenue over 10 years would occur during the 2002-2006 period, and the
remaining 72 percent would occur during the 2007-2011 period (see Figure 2). The disproportionately large share of the dollar reductions that would occur in the second half of the budget period in part reflects growth in projected income over time, but mostly reflects the phasing-in of the proposals. Adjusting the figures for that growth in income, CBO calculates that 33 percent of the estimated revenue reductions relative to projected GDP would occur during the first half of the 10-year period and the other 67 percent would occur during the second half.
Figure 2. Reduction in Revenue Under the President's Proposed Tax Cuts, 2002-2011 (By fiscal year) |
SOURCE: Congressional Budget Office. |
Seven proposals account for over 90 percent of the cost of the President's tax package. The proposals to reduce existing statutory tax rates and create a 10 percent rate account for about half of the cost over the 2002-2011 period (see Table 9). Following is a brief summary of the major proposals and the total amount by which each proposal would reduce surpluses over the 2002-2011 period.(8)
Mandatory Spending Policies
Mandatory spending is usually provided by laws other than appropriation
acts. It constitutes about two-thirds of total spending and goes largely
for major entitlement programs such as Social Security, Medicare, Medicaid,
federal retirement, and other benefit programs (see Table
10). Offsetting receipts are also considered part of mandatory spending.
Table 10. CBO's Baseline Projections of Mandatory Spending (By fiscal year, in billions of dollars) |
|||||||||||||||
Actual 2000 |
2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | ||||
|
|||||||||||||||
Means-Tested Programs | |||||||||||||||
Medicaid | 118 | 130 | 142 | 151 | 164 | 177 | 192 | 208 | 226 | 245 | 267 | 291 | |||
State Children's Health Insurance | 1 | 4 | 4 | 4 | 5 | 4 | 4 | 5 | 5 | 5 | 5 | 5 | |||
Food Stamps | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 24 | 25 | 26 | 27 | 27 | |||
Supplemental Security Income | 31 | 27 | 31 | 33 | 35 | 39 | 38 | 37 | 42 | 44 | 47 | 53 | |||
Family Supporta | 21 | 24 | 25 | 25 | 25 | 25 | 26 | 26 | 26 | 26 | 26 | 26 | |||
Veterans' Pensions | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 4 | 4 | 5 | |||
Child Nutrition | 9 | 10 | 10 | 10 | 11 | 11 | 12 | 12 | 13 | 13 | 14 | 14 | |||
Earned Income and Child Tax Credits | 27 | 27 | 27 | 27 | 28 | 28 | 28 | 28 | 29 | 29 | 29 | 29 | |||
Student Loans | 1 | -1 | 5 | 4 | 4 | 4 | 4 | 4 | 4 | 4 | 4 | 4 | |||
Foster Care | 5 | 6 | 6 | 7 | 7 | 8 | 8 | 9 | 10 | 10 | 11 | 11 | |||
Total | 236 | 248 | 273 | 287 | 303 | 324 | 340 | 356 | 382 | 406 | 432 | 466 | |||
Non-Means-Tested Programs | |||||||||||||||
Social Security | 406 | 429 | 451 | 474 | 498 | 523 | 550 | 578 | 608 | 643 | 680 | 719 | |||
Medicare | 216 | 238 | 253 | 270 | 290 | 315 | 333 | 362 | 391 | 422 | 456 | 501 | |||
Subtotal | 622 | 668 | 704 | 744 | 787 | 839 | 883 | 940 | 999 | 1,065 | 1,136 | 1,220 | |||
Other Retirement and Disability | |||||||||||||||
Federal civilianb | 50 | 53 | 56 | 59 | 62 | 65 | 68 | 72 | 75 | 78 | 82 | 85 | |||
Military | 33 | 34 | 35 | 36 | 37 | 38 | 39 | 40 | 41 | 42 | 43 | 44 | |||
Other | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 6 | |||
Subtotal | 88 | 92 | 96 | 100 | 104 | 108 | 113 | 117 | 121 | 126 | 130 | 135 | |||
Unemployment Compensation | 21 | 24 | 26 | 27 | 29 | 32 | 33 | 35 | 38 | 40 | 41 | 43 | |||
Other Programs | |||||||||||||||
Veterans' benefitsc | 24 | 21 | 25 | 26 | 28 | 31 | 30 | 28 | 31 | 32 | 33 | 36 | |||
Commodity Credit Corporation Fund | 30 | 17 | 11 | 10 | 10 | 9 | 8 | 7 | 6 | 5 | 5 | 5 | |||
Social services | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | |||
Credit liquidating accounts | -11 | -7 | -6 | -6 | -7 | -7 | -6 | -6 | -6 | -6 | -5 | -5 | |||
Universal Service Fund | 4 | 5 | 6 | 6 | 12 | 13 | 13 | 13 | 13 | 13 | 13 | 13 | |||
Department of Defense health care | 0 | 0 | 0 | 6 | 6 | 7 | 7 | 7 | 8 | 9 | 9 | 10 | |||
Other | 14 | 6 | 20 | 17 | 17 | 16 | 15 | 15 | 15 | 15 | 15 | 15 | |||
Subtotal | 66 | 47 | 60 | 64 | 70 | 73 | 71 | 69 | 72 | 73 | 75 | 79 | |||
Total | 796 | 831 | 886 | 935 | 991 | 1,051 | 1,100 | 1,161 | 1,229 | 1,303 | 1,383 | 1,477 | |||
Total | |||||||||||||||
All Mandatory Spending | 1,032 | 1,080 | 1,159 | 1,222 | 1,294 | 1,375 | 1,440 | 1,518 | 1,611 | 1,710 | 1,815 | 1,942 | |||
|
|||||||||||||||
SOURCE: Congressional Budget Office. | |||||||||||||||
NOTES: Spending for the benefit programs shown above generally excludes administrative costs, which are discretionary. Spending for Medicare also excludes premiums, which are considered offsetting receipts (such receipts are not included in this table). | |||||||||||||||
a. Includes Temporary Assistance for Needy Families, Payments to States for Child Support Enforcement and Family Support, Child Care Entitlement to States, and Children's Research and Technical Assistance. | |||||||||||||||
b. Includes Civil Service, Foreign Service, Coast Guard, and other small retirement programs and annuitants' health benefits. | |||||||||||||||
c. Includes veterans' compensation, readjustment benefits, life insurance, and housing programs. | |||||||||||||||
|
The President's principal mandatory spending initiatives focus on Medicare. Those initiatives are referred to in the budget as the "Immediate Helping Hand and Medicare Modernization" plan. Because the President's budget offers little detail on the proposed changes to Medicare, CBO used the Administration's estimates of the President's Medicare proposals in this analysis.
Immediate Helping Hand and Medicare Modernization. The President's Immediate Helping Hand proposal would give states grants that the Administration estimates would total $3 billion in 2001 and $43 billion over the 2002-2005 period. Those grants would be used to pay for prescription drugs and other health care services for Medicare beneficiaries with low income or high out-of-pocket spending. That grant program would end in 2005, when a Medicare Modernization initiative would add coverage of prescription drugs and protection against high out-of-pocket expenses to Medicare. The Administration estimates that the initiative would increase Medicare spending by $110 billion over the 2005-2011 period.
Medicaid. The President's budget contains a proposal that would restrict states' ability to generate additional Medicaid funds using financing mechanisms related to the Medicare upper payment limit (UPL). Federal regulations issued under the Benefits Improvement and Protection Act of 2000 limit total Medicaid payments for inpatient and outpatient services provided in hospitals operated by local governments to 150 percent of the UPL. The regulations provide a transition period for states that have been making payments in excess of that limit to come into compliance.
Under the Administration's proposal, the federal government would no longer approve amendments to state Medicaid plans that raise payments to hospitals operated by local governments above 100 percent of the UPL. That proposal would not apply to states with plan amendments that were approved on or before December 31, 2000; their limit would remain at 150 percent of the UPL.
CBO estimates that this proposal would reduce federal Medicaid outlays by about $11 billion over the 2002-2011 period, whereas the Administration estimates that it would save about $17 billion over the same period. (CBO estimates that other proposals in the President's budget that affect Medicaid would increase outlays by about $1 billion over the 10-year period.) CBO and OMB have similar estimates of the additional Medicaid payments that will be made under current law because the payment limit for local hospitals is 150 percent of the UPL instead of 100 percent. However, CBO expects that a larger share of those payments will be made to states whose Medicaid plan amendments have already been approved. Since those states would not be affected by the Administration's proposal, CBO's estimate of the savings from the proposal is lower than that of OMB.
Spectrum Auction Receipts. The President's budget includes three proposals that would affect offsetting receipts from the Federal Communications Commission's auction of licenses to use portions of the electromagnetic spectrum. Two proposals involve frequencies slated for auction under the Balanced Budget Act of 1997. The first proposal--a roughly two-year delay in the start of two auctions--would increase proceeds by a total of $1.8 billion over the next five years, CBO estimates, because the auctions would be held closer to the time when the frequencies could be used by the winning bidders. The second proposal aims to reduce the encumbrances on some of those frequencies so they can be used for new services faster than expected under current law. CBO cannot estimate the budgetary impact of that proposal because the President's budget does not provide any details about the new policy. Under the President's third proposal, the government would collect $200 million a year by imposing a lease fee on spectrum used by commercial entities for analog television broadcasts. CBO estimates that such a fee would increase offsetting receipts by a total of $1.6 billion over the 2002-2011 period.
Discretionary Spending Policies
Discretionary spending, which constitutes the remaining one-third of total spending, is provided in and controlled by appropriation acts. In general, it is provided one year at a time and funds a wide array of government activities, including defense, international affairs, energy, education, housing, scientific research, transportation, and general government functions.
CBO estimates that the President's budget would boost total new discretionary
budget authority for 2002 to $661 billion, an increase of about 4 percent
over the amount enacted for 2001 (see Table 11).
By comparison, new budget authority for discretionary programs increased
by about 6.4 percent from 2000 to 2001.(9)
Table 11. Discretionary Spending Under the President's Budgetary Proposals and CBO's Baseline Projections (By fiscal year, in billions of dollars) |
||||||||||||||
2001 | 2002a | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | ||||
|
||||||||||||||
CBO's Estimate of Total Discretionary Spending Under the President's Budget | ||||||||||||||
Budget Authority | ||||||||||||||
Defense | 311 | 325 | 334 | 343 | 353 | 363 | 373 | 383 | 394 | 405 | 416 | |||
Nondefense | 324 | 336 | 352 | 360 | 368 | 376 | 385 | 395 | 404 | 418 | 422 | |||
Total | 635 | 661 | 686 | 703 | 721 | 738 | 758 | 778 | 798 | 823 | 838 | |||
Outlays | ||||||||||||||
Defense | 301 | 320 | 326 | 335 | 348 | 355 | 362 | 376 | 387 | 398 | 413 | |||
Nondefense | 342 | 364 | 386 | 398 | 407 | 415 | 424 | 433 | 443 | 457 | 462 | |||
Total | 643 | 684 | 712 | 733 | 755 | 770 | 786 | 809 | 830 | 855 | 875 | |||
CBO's Baseline for Discretionary Spending | ||||||||||||||
Budget Authority | ||||||||||||||
Defense | 311 | 322 | 330 | 339 | 347 | 356 | 366 | 375 | 385 | 394 | 405 | |||
Nondefense | 324 | 340 | 349 | 358 | 367 | 376 | 385 | 395 | 405 | 415 | 426 | |||
Total | 635 | 662 | 679 | 697 | 714 | 732 | 751 | 769 | 789 | 809 | 830 | |||
Outlays | ||||||||||||||
Defense | 301 | 314 | 323 | 332 | 344 | 350 | 356 | 369 | 378 | 388 | 402 | |||
Nondefense | 341 | 364 | 384 | 395 | 404 | 413 | 422 | 432 | 442 | 453 | 464 | |||
Total | 643 | 678 | 707 | 727 | 748 | 763 | 778 | 801 | 821 | 841 | 866 | |||
|
||||||||||||||
SOURCE: Congressional Budget Office. | ||||||||||||||
a. Budget authority in 2002 under the President's budget excludes $22.7 billion in advance appropriations that the President proposes to reclassify as mandatory spending. | ||||||||||||||
|
Within that overall rate of growth, however, the President recommends
larger increases for certain high-priority programs and smaller increases
or reductions for others (see Table 12). For example,
the President's budget proposes to increase budget authority for defense
by about 4.5 percent, CBO estimates, and for education, training, and other
related programs by about 6.9 percent. Excluding those two categories,
new budget authority for discretionary spending in 2002 would increase
by 2.9 percent over the amount enacted in 2001. In addition, the Administration
is conducting a strategic review of defense activities that may lead to
changes in the President's request for defense spending.
Table 12. Comparison of Discretionary Budget Authority Enacted for 2001 and the President's Request for 2002, by Budget Function (By fiscal year, in billions of dollars) |
|||||||||||
Increase or Decrease (-)
|
|||||||||||
Budget Function | 2001 Enacted |
2002 Requesta |
Billions of Dollars |
Percent | |||||||
|
|||||||||||
Defense Discretionary (National defense) | 311.1 | 325.1 | 14.0 | 4.5 | |||||||
Nondefense Discretionary | |||||||||||
International affairs | 22.7 | 23.9 | 1.2 | 5.3 | |||||||
General science, space, and technology | 20.9 | 21.2 | 0.3 | 1.6 | |||||||
Energy | 3.1 | 2.8 | -0.3 | -10.1 | |||||||
Natural resources and environment | 28.7 | 26.4 | -2.3 | -8.0 | |||||||
Agriculture | 4.8 | 4.8 | * | 0.6 | |||||||
Commerce and housing credit | 0.9 | -0.1 | -1.0 | -109.5 | |||||||
Transportation | 18.9 | 16.8 | -2.1 | -11.0 | |||||||
Community and regional development | 11.6 | 10.4 | -1.2 | -10.5 | |||||||
Education, training, employment, and social services | 61.2 | 65.4 | 4.2 | 6.9 | |||||||
Health | 38.8 | 41.0 | 2.2 | 5.8 | |||||||
Medicare (Administrative costs) | 3.4 | 3.5 | 0.1 | 3.4 | |||||||
Income security | 39.4 | 42.8 | 3.3 | 8.5 | |||||||
Social Security (Administrative costs) | 3.4 | 3.5 | 0.1 | 2.1 | |||||||
Veterans' benefits and services | 22.5 | 23.5 | 1.0 | 4.5 | |||||||
Administration of justice | 30.0 | 29.8 | -0.1 | -0.5 | |||||||
General government | 13.9 | 14.8 | 0.8 | 6.0 | |||||||
Allowances for emergencies and other needs | n.a. | 5.3 | 5.3 | n.a. | |||||||
Subtotal, nondefense | 324.0 | 335.8 | 11.8 | 3.6 | |||||||
Total Discretionary | 635.1 | 660.8 | 25.7 | 4.0 | |||||||
Memorandum: | |||||||||||
Transportation Obligation Limitations | 38.3 | 40.9 | 2.6 | 6.7 | |||||||
|
|||||||||||
SOURCE: Congressional Budget Office. | |||||||||||
NOTE: * = between zero and $50 million; n.a. = not applicable. | |||||||||||
a. As estimated by CBO. Excludes budget authority for advance appropriations that the President proposes to reclassify as mandatory. | |||||||||||
|
The President's proposed level of discretionary spending for 2002 does not reflect $22.7 billion in budget authority enacted as advance appropriations in 2001 appropriation acts. In general, advance appropriations are amounts of new discretionary budget authority that become available in the fiscal year following the year covered by the applicable appropriation act. The President asserts that excessive amounts of advance appropriations have been enacted in recent years in order to stay within the limits on discretionary appropriations for the budget year. He therefore proposes to provide the full amount of "normal" funding for the affected programs in 2002 and requests no advance appropriations for 2003. That change in practice would result in an unusually large amount of discretionary budget authority for 2002. The President therefore proposes language, to be included in appropriation acts for 2002, that would reclassify $22.7 billion in budget authority for advances in 2002 as mandatory. That reclassification would affect only advances for 2002 made in 2001 appropriation acts and would not affect outlays.
Over the 2002-2011 period, CBO estimates, total new discretionary budget authority under the President's budget would grow at an average annual rate of about 2.7 percent, a rate of increase generally in line with CBO's baseline for discretionary budget authority.
Contingency Reserve
The contingency reserve proposed by the President reflects the portion of the projected 10-year on-budget surplus that is estimated to remain after the President's spending and tax policies take effect. That amount, estimated by CBO at about $700 billion, is based on current baseline projections of surpluses for the 2002-2011 period. The Administration's estimate of the reserve amount is $841 billion.
The President proposes that criteria be established for using the reserve
and that amounts from the reserve be available only if specifically requested
by the President and designated for that purpose by the Congress in statute.
He proposes to enforce the reserve amount by extending the statutory caps
on discretionary spending through 2006 at the levels proposed in his budget
and to continue the pay-as-you-go requirement for new laws affecting mandatory
spending or revenues. Those requirements would, if enforced, prevent new
spending or revenue laws from reducing projected surpluses. They would
not, in their current form, keep surpluses from falling because of a downturn
in the economy or because of technical revisions in spending or revenue
levels that were unrelated to the enactment of new laws.
Comparison of CBO's and the Administration's Economic Projections
The Administration's economic projections result in larger estimates of revenues and surpluses than those implied by CBO's economic assumptions. Both the Administration and CBO project that real GDP growth will average 3.1 percent a year during the 2002-2011 period. Other aspects of their projections differ, however, resulting in higher projected revenues under the Administration's outlook.
Because the Administration assumes both slightly greater inflation and
higher taxable income as a share of GDP, the projected size of the tax
base is higher under its assumptions (see Table 13).
The Administration projects that the growth of the GDP price index will
average 2.1 percent per year, 0.2 percentage points higher than CBO's projection. That causes the Administration's projected level of nominal GDP to be almost $400 billion higher than CBO's in 2011, even though both project the same real growth of GDP. Similarly, corporate profits and wage and salary disbursements are assumed to account for a higher share of GDP in the Administration's forecast, averaging 56.9 percent over the 2002-2011 period, whereas CBO projects that those shares will average 56.2 percent. The combination of higher nominal GDP and higher shares of those two income categories imply a projected tax base higher than CBO's by 2011.
Table 13. Comparison of CBO's and the Administration's Economic Projections for Calendar Years 2001-2011 |
||||||||||||
Estimated 2000 |
Forecast |
Projected Annual Average |
||||||||||
2001 | 2002 | 2002-2006 | 2007-2011 | |||||||||
Nominal GDP (Billions of dollars) | ||||||||||||
CBO | 9,974 | 10,446 | 11,029 | 13,439a | 17,132b | |||||||
Administration | 9,974 | 10,434 | 11,004 | 13,550a | 17,524b | |||||||
Nominal GDP (Percentage change) | ||||||||||||
CBO | 7.3 | 4.7 | 5.6 | 5.1 | 5.0 | |||||||
Administration | 7.3 | 4.6 | 5.5 | 5.3 | 5.3 | |||||||
Real GDP (Percentage change) | ||||||||||||
CBO | 5.1 | 2.4 | 3.4 | 3.1 | 3.1 | |||||||
Administration | 5.1 | 2.4 | 3.3 | 3.1 | 3.1 | |||||||
GDP Price Index (Percentage change) | ||||||||||||
CBO | 2.1 | 2.3 | 2.1 | 1.9 | 1.9 | |||||||
Administration | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | |||||||
Consumer Price Indexc (Percentage change) | ||||||||||||
CBO | 3.4 | 2.8 | 2.8 | 2.6 | 2.5 | |||||||
Administration | 3.4 | 2.7 | 2.6 | 2.5 | 2.5 | |||||||
Unemployment Rate (Percent) | ||||||||||||
CBO | 4.0 | 4.4 | 4.5 | 4.7 | 5.2 | |||||||
Administration | 4.0 | 4.4 | 4.6 | 4.5 | 4.6 | |||||||
Three-Month Treasury Bill Rate (Percent) | ||||||||||||
CBO | 5.8 | 4.8 | 4.9 | 4.9 | 4.9 | |||||||
Administration | 5.8 | 5.3 | 5.6 | 5.4 | 5.0 | |||||||
Ten-Year Treasury Note Rate (Percent) | ||||||||||||
CBO | 6.0 | 4.9 | 5.3 | 5.6 | 5.8 | |||||||
Administration | 6.0 | 5.4 | 5.6 | 5.7 | 5.7 | |||||||
Tax Bases (Percentage of GDP) | ||||||||||||
Corporate profitsd | ||||||||||||
CBO | 9.4 | 8.9 | 8.5 | 8.2 | 8.0 | |||||||
Administration | 9.4 | 9.1 | 8.9 | 8.8 | 8.2 | |||||||
Wages and salaries | ||||||||||||
CBO | 47.8 | 48.2 | 48.2 | 48.2 | 48.0 | |||||||
Administration | 47.8 | 48.1 | 48.3 | 48.5 | 48.3 | |||||||
|
||||||||||||
SOURCES: Congressional Budget Office; Office of Management and Budget; Department of Commerce, Bureau of Economic Analysis; Federal Reserve Board; Department of Labor, Bureau of Labor Statistics. | ||||||||||||
NOTE: Percentage changes are year over year. | ||||||||||||
a. Level of GDP in 2006. | ||||||||||||
b. Level of GDP in 2011. | ||||||||||||
c. The consumer price index for all urban consumers. | ||||||||||||
d. Corporate profits are book profits. | ||||||||||||
|
The Administration's economic assumptions do not imply significantly
higher outlays in spite of the faster growth of the GDP price index and
slightly higher interest rates. Projections of outlays are affected more
by the growth of the consumer price index (CPI) than by the growth of the
GDP price index, and CBO and the Administration have similar forecasts
for the CPI. The Administration projects that both short-term and long-term
interest rates will be about 0.5 percentage points higher in the early
years of the projection period than CBO does, but the forecasts are similar
for subsequent years. In addition, the Administration assumes that the
unemployment rate will, on average, be lower than CBO assumes, which holds
projected spending down slightly.
Differences Between CBO's and OMB's Baseline Estimates
The differences between CBO's and OMB's baselines are small (see Table 14). Both agencies project total surpluses of about $5.6 trillion for the 2002-2011 period. Their estimates of the on-budget and off-budget totals are also very similar. CBO projects on-budget surpluses of $3.1 trillion and off-budget surpluses of $2.5 trillion; OMB projects on-budget surpluses of $3.0 trillion and off-budget surpluses of $2.6 trillion.
Table 14. Comparison of CBO's Baseline and OMB's Current-Services Baseline (By fiscal year, in billions of dollars) |
|||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | Total, 2002- 2011 |
||||
|
|||||||||||||||
CBO's Baseline | |||||||||||||||
Revenues | 2,115 | 2,226 | 2,338 | 2,453 | 2,570 | 2,689 | 2,816 | 2,955 | 3,107 | 3,271 | 3,447 | 27,872 | |||
On-budget | 1,610 | 1,693 | 1,777 | 1,864 | 1,950 | 2,040 | 2,136 | 2,243 | 2,360 | 2,489 | 2,628 | 21,180 | |||
Off-budget | 504 | 532 | 561 | 589 | 620 | 649 | 680 | 712 | 746 | 782 | 819 | 6,691 | |||
Outlays | |||||||||||||||
Discretionary | 643 | 678 | 707 | 727 | 748 | 763 | 778 | 801 | 821 | 841 | 866 | 7,732 | |||
Mandatory | 991 | 1,064 | 1,115 | 1,184 | 1,268 | 1,327 | 1,399 | 1,486 | 1,578 | 1,676 | 1,794 | 13,891 | |||
Net interesta | 205 | 180 | 163 | 142 | 117 | 90 | 60 | 27 | -10 | -52 | -96 | 621 | |||
Total | 1,839 | 1,922 | 1,985 | 2,054 | 2,133 | 2,181 | 2,238 | 2,314 | 2,389 | 2,465 | 2,564 | 22,243 | |||
On-budget | 1,491 | 1,561 | 1,611 | 1,667 | 1,734 | 1,769 | 1,814 | 1,877 | 1,935 | 1,994 | 2,075 | 18,039 | |||
Off-budget | 348 | 361 | 373 | 386 | 399 | 411 | 424 | 437 | 453 | 471 | 489 | 4,204 | |||
Surplus | 275 | 304 | 353 | 400 | 437 | 508 | 578 | 641 | 718 | 806 | 883 | 5,629 | |||
On-budget | 119 | 132 | 166 | 197 | 215 | 270 | 322 | 366 | 425 | 495 | 553 | 3,142 | |||
Off-budget | 156 | 172 | 187 | 202 | 221 | 238 | 256 | 275 | 293 | 311 | 330 | 2,487 | |||
OMB's April 2001 Current-Services Baseline | |||||||||||||||
Revenues | 2,137 | 2,221 | 2,324 | 2,438 | 2,569 | 2,698 | 2,836 | 2,979 | 3,131 | 3,302 | 3,483 | 27,981 | |||
On-budget | 1,633 | 1,690 | 1,764 | 1,847 | 1,940 | 2,039 | 2,143 | 2,253 | 2,370 | 2,498 | 2,637 | 21,181 | |||
Off-budget | 504 | 531 | 561 | 590 | 629 | 659 | 693 | 726 | 761 | 804 | 846 | 6,800 | |||
Outlays | |||||||||||||||
Discretionary | 649 | 684 | 707 | 726 | 746 | 766 | 788 | 809 | 831 | 854 | 878 | 7,789 | |||
Mandatory | 998 | 1,067 | 1,114 | 1,176 | 1,259 | 1,317 | 1,394 | 1,482 | 1,575 | 1,674 | 1,787 | 13,846 | |||
Net interesta | 206 | 186 | 169 | 150 | 125 | 99 | 69 | 36 | * | -40 | -85 | 710 | |||
Total | 1,853 | 1,938 | 1,991 | 2,051 | 2,130 | 2,182 | 2,250 | 2,328 | 2,406 | 2,488 | 2,580 | 22,345 | |||
On-budget | 1,505 | 1,579 | 1,623 | 1,671 | 1,738 | 1,777 | 1,829 | 1,890 | 1,949 | 2,009 | 2,077 | 18,144 | |||
Off-budget | 348 | 359 | 367 | 379 | 392 | 405 | 422 | 438 | 457 | 479 | 503 | 4,201 | |||
Surplus | 284 | 283 | 334 | 387 | 439 | 515 | 585 | 651 | 725 | 814 | 903 | 5,637 | |||
On-budget | 128 | 111 | 140 | 176 | 202 | 262 | 314 | 363 | 421 | 489 | 560 | 3,038 | |||
Off-budget | 156 | 172 | 194 | 211 | 237 | 253 | 272 | 289 | 304 | 324 | 344 | 2,599 | |||
Difference (CBO minus OMB) | |||||||||||||||
Revenues | -23 | 5 | 14 | 15 | * | -9 | -20 | -24 | -25 | -30 | -36 | -110 | |||
On-budget | -23 | 3 | 14 | 17 | 9 | * | -7 | -10 | -10 | -9 | -9 | -1 | |||
Off-budget | * | 1 | * | -2 | -9 | -9 | -13 | -14 | -15 | -22 | -27 | -109 | |||
Outlays | |||||||||||||||
Discretionary | -6 | -6 | * | 2 | 2 | -4 | -9 | -8 | -10 | -13 | -11 | -57 | |||
Mandatory | -7 | -4 | * | 8 | 9 | 10 | 5 | 4 | 3 | 2 | 7 | 44 | |||
Net interesta | -1 | -7 | -6 | -7 | -8 | -8 | -8 | -9 | -11 | -12 | -12 | -89 | |||
Total | -14 | -16 | -6 | 3 | 3 | -2 | -13 | -14 | -18 | -23 | -16 | -101 | |||
On-budget | -14 | -18 | -12 | -4 | -4 | -8 | -15 | -13 | -14 | -14 | -2 | -105 | |||
Off-budget | * | 2 | 6 | 7 | 7 | 6 | 2 | * | -4 | -8 | -14 | 4 | |||
Surplus | -9 | 21 | 20 | 13 | -3 | -7 | -7 | -10 | -7 | -7 | -20 | -8 | |||
On-budget | -9 | 21 | 26 | 21 | 13 | 8 | 8 | 4 | 4 | 6 | -7 | 104 | |||
Off-budget | * | * | -6 | -9 | -16 | -15 | -15 | -13 | -11 | -13 | -13 | -112 | |||
|
|||||||||||||||
SOURCES: Congressional Budget Office; Office of Management and Budget. | |||||||||||||||
NOTE: * = between -$500 million and $500 million. | |||||||||||||||
a. Includes earnings on the balance of uncommitted funds. | |||||||||||||||
|
Most of the difference in on-budget surpluses comes in the first three years of the 10-year projection period. OMB's projected on-budget surpluses for 2002 through 2004 are $21 billion to $26 billion lower than CBO's, mainly because CBO projects higher revenues and lower interest costs for those years. However, both agencies project on-budget surpluses that are well over $100 billion in 2002 and that rise steadily throughout the projection period.
CBO's estimate of baseline revenues over the 2002-2011 period is lower than OMB's by about $110 billion, which is only 0.4 percent of total projected revenues over that period. That modest difference arises from a number of partially offsetting factors. As described above, CBO projects lower nominal GDP and mostly lower tax bases than OMB does, causing CBO's estimate of revenues to be lower by about $600 billion. About $500 billion of that difference is largely offset by CBO's projection of a higher level of tax receipts--especially from individual income taxes--for a given level of income in the economic forecast. Nearly all of the overall difference is in off-budget receipts. The lower levels of GDP and wage income in CBO's projection cause its estimate of off-budget payroll tax receipts to be lower than the Administration's by about $100 billion. That difference is not offset because CBO and the Administration have very similar projections of payroll tax receipts for a given level of wages.
CBO's estimate of on-budget outlays is about $100 billion lower than
OMB's over the 2002-2011 period, so the aggregate surplus figures end up
almost the same. The largest source of difference results from projections
of interest rates over the 10-year period. CBO's projection of slightly
lower interest rates causes its estimate of interest payments and of proceeds
from uncommitted funds to be lower than the Administration's.
Comparison of the President's Budget and the Congressional Budget Resolution
On May 10, the Congress adopted its concurrent resolution on the budget for fiscal year 2002 (H. Con. Res. 83). The Congressional budget resolution establishes the broad budget priorities of the Congress. Unlike the President's budget, it contains little or no detail. Instead, it sets forth spending and revenue recommendations in the form of aggregate levels and functional categories of spending. The resolution is a Congressional document only; it is not presented to the President for his approval and does not become law. Spending and revenue bills for the fiscal years covered by the budget resolution are considered separately and generally are required to be consistent with the resolution's levels.
The President's budget and the Congressional budget resolution recommend
broadly similar budget policies over the 10-year projection period (see
Table 15). The amounts shown in that table for the
President's budget and the CBO baseline were prepared by CBO. Those for
the budget resolution, which CBO does not review, reflect the levels adopted
by the Congress.
Table 15. Comparison of CBO's Baseline and Alternative Budget Plans (By fiscal year, in billions of dollars) |
||||||||||||||||||||||||
Difference from CBO's Baseline |
||||||||||||||||||||||||
CBO's Baseline
|
President's Budgeta |
Congressional Budget Resolution |
President's Budgeta |
Congressional Budget Resolution |
||||||||||||||||||||
2002 | 2002- 2011 |
2002 | 2002- 2011 |
2002 | 2002- 2011 |
2002 | 2002- 2011 |
2002 | 2002- 2011 |
|||||||||||||||
|
||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
On-budget | 1,693 | 21,180 | 1,669 | 19,482 | 1,638 | 19,911 | -25 | -1,698 | -55 | -1,269 | ||||||||||||||
Off-budget | 532 | 6,691 | 532 | 6,691 | 532 | 6,691 | 0 | 0 | 0 | 0 | ||||||||||||||
Total | 2,226 | 27,872 | 2,201 | 26,173 | 2,171 | 26,603 | -25 | -1,698 | -55 | -1,269 | ||||||||||||||
Outlays | ||||||||||||||||||||||||
Discretionary | ||||||||||||||||||||||||
Defense | 314 | 3,557 | 320 | 3,621 | 319 | 3,592 | 6 | 63 | 5 | 35 | ||||||||||||||
Nondefense | 364 | 4,175 | 364 | 4,189 | 363 | 4,130 | * | 14 | -1 | -45 | ||||||||||||||
Subtotal | 678 | 7,732 | 684 | 7,809 | 683 | 7,722 | 6 | 78 | 4 | -10 | ||||||||||||||
Mandatory | ||||||||||||||||||||||||
Social Security | 451 | 5,724 | 451 | 5,724 | 452 | 5,721 | 0 | 0 | * | -2 | ||||||||||||||
Medicare | 226 | 3,169 | 226 | 3,279 | 226 | 3,474 | 0 | 110 | * | 305 | ||||||||||||||
Other | 386 | 4,998 | 401 | 5,100 | 405 | 5,181 | 14 | 102 | 19 | 183 | ||||||||||||||
Subtotal | 1,064 | 13,891 | 1,078 | 14,102 | 1,082 | 14,376 | 14 | 211 | 19 | 486 | ||||||||||||||
Net interestb | 180 | 621 | 182 | 1,083 | 187 | 1,120 | 2 | 462 | 7 | 499 | ||||||||||||||
Total Outlays | 1,922 | 22,243 | 1,944 | 22,994 | 1,952 | 23,218 | 22 | 751 | 30 | 975 | ||||||||||||||
On-budget | 1,561 | 18,039 | 1,583 | 18,784 | 1,590 | 19,015 | 22 | 745 | 29 | 976 | ||||||||||||||
Off-budget | 361 | 4,204 | 361 | 4,210 | 361 | 4,204 | * | 6 | 1 | -1 | ||||||||||||||
Surplus | ||||||||||||||||||||||||
On-budget | 132 | 3,142 | 86 | 698 | 48 | 897 | -46 | -2,443 | -85 | -2,245 | ||||||||||||||
Off-budget | 172 | 2,487 | 171 | 2,481 | 171 | 2,488 | * | -6 | -1 | 1 | ||||||||||||||
Total | 304 | 5,629 | 257 | 3,179 | 219 | 3,384 | -47 | -2,449 | -85 | -2,244 | ||||||||||||||
Memorandum: | ||||||||||||||||||||||||
Discretionary Budget Authorityc | ||||||||||||||||||||||||
Defense | 322 | 3,619 | 325 | 3,688 | 325 | 3,656 | 3 | 69 | 3 | 37 | ||||||||||||||
Nondefense | 340 | 3,815 | 336 | 3,815 | 336 | 3,774 | -4 | 1 | -4 | -41 | ||||||||||||||
Total | 662 | 7,434 | 661 | 7,504 | 661 | 7,430 | -1 | 70 | -1 | -4 | ||||||||||||||
|
||||||||||||||||||||||||
SOURCE: Congressional Budget Office. | ||||||||||||||||||||||||
NOTE: * = between -$500 million and $500 million. | ||||||||||||||||||||||||
a. As estimated by CBO. | ||||||||||||||||||||||||
b. Includes earnings on the balance of uncommitted funds. | ||||||||||||||||||||||||
c. Budget authority in the Administration's budget excludes $22.7 billion in advance appropriations for 2002 that the President proposes to reclassify as mandatory spending. | ||||||||||||||||||||||||
|
Compared with CBO's baseline, the President's budget would allocate
$2.4 trillion of the total projected surplus for new spending and tax policies;
the budget resolution would allocate $2.2 trillion for such policy changes.
Both budget plans include significant tax reductions--the President's budget
proposes tax cuts that JCT estimates would amount to about $1.7 trillion;
the budget resolution recommends a total cut of $1.3 trillion. For discretionary
spending, the President's budget would increase outlays by about $78 billion
over the 2002-2011 period relative to CBO's baseline; the levels recommended
in the budget resolution would reduce total discretionary outlays by about
$10 billion over the same period--including $35 billion in defense spending
increases and $45 billion in nondefense spending cuts. For mandatory spending,
the largest difference is in the plans' respective recommendations for
Medicare. The President recommends policy changes that he estimates would
increase Medicare spending by $153 billion over the 2002-2011 period ($43
billion for the "Immediate Helping Hand" program and $110 billion for the "Medicare Modernization" proposal). In contrast, the budget resolution recommends increases in Medicare spending of about $305 billion over the 10-year period.
The following Congressional Budget Office analysts
prepared the revenue and spending projections in this report:
Revenue Projections | |
Mark Booth | Revenue forecasting |
Barbara Edwards | Individual income taxes |
Pam Greene | Estate and gift taxes |
Ed Harris | Social insurance taxes |
Carolyn Lynch | Corporate income taxes, Federal Reserve System earnings |
Larry Ozanne | Capital gains realizations |
Robert Taylor | Excise taxes |
Will Terry | Earned income tax credit |
David Weiner | Revenue modeling |
Erin Whitaker | Customs duties, miscellaneous receipts |
Spending Projections | |
Defense, International Affairs, and Veterans' Affairs | |
JoAnn Vines | Unit Chief |
Kent Christensen | Defense (military construction, base closures) |
Sunita D'Monte | International affairs (conduct of foreign affairs and information exchange activities), veterans' housing |
Raymond Hall | Defense (Navy weapons, missile defenses, atomic energy defense) |
Sarah Jennings | Military retirement, veterans' education |
Sam Papenfuss | Veterans' health care, military health care |
Michelle Patterson | Veterans' compensation and pensions |
Dawn Sauter Regan | Defense (military personnel) |
Matt Schmit | Intelligence programs, defense acquisition reform |
Joseph Whitehill | International affairs (development, security, international financial institutions) |
Health | |
Thomas Bradley | Unit Chief |
Alexis Ahlstrom | Medicare, Public Health Service, Federal Employees Health Benefits program |
Charles Betley | Medicare, Federal Employees Health Benefits program |
Niall Brennan | Medicare, Public Health Service |
Julia Christensen | Medicare, Public Health Service |
Jeanne De Sa | Medicaid, State Children's Health Insurance Program |
Mara Krause | Medicare, Public Health Service |
Eric Rollins | Medicaid, State Children's Health Insurance Program |
Christopher Topoleski | Medicare, Public Health Service |
Human Resources | |
Paul Cullinan | Unit Chief |
Valerie Baxter | Food Stamps, child nutrition, child care, low-income home energy assistance |
Sheila Dacey | Child Support Enforcement, Temporary Assistance for Needy Families |
Geoff Gerhardt | Federal civilian retirement, Supplemental Security Income, child and family services |
Deborah Kalcevic | Education |
Tami Ohler | Pension Benefit Guaranty Corporation |
Kathy Ruffing | Social Security |
Christi Hawley Sadoti | Unemployment insurance, training programs, programs for the elderly, arts and humanities, foster care |
Susan Sieg Tompkins | Housing assistance |
Donna Wong | Elementary and secondary education, Pell grants |
Natural and Physical Resources | |
Kim Cawley | Unit Chief |
Coleman Bazelon | Spectrum auction receipts |
Megan Carroll | Conservation and land management |
Lisa Cash Driskill | Energy, Outer Continental Shelf receipts |
Mark Grabowicz | Justice, Postal Service |
Kathleen Gramp | Energy, science and space, spectrum auction receipts |
Mark Hadley | Deposit insurance, credit unions, air transportation |
Greg Hitz | Agriculture |
David Hull | Agriculture |
Ken Johnson | Commerce, Small Business Administration, Universal Service Fund |
James Langley | Agriculture |
Susanne Mehlman | Pollution control and abatement, Federal Housing Administration and other housing credit programs |
Rachel Milberg | Water resources, Federal Emergency Management Agency, highways, Amtrak, mass transit |
Deborah Reis | Recreation, water transportation, community development, other natural resources |
John Righter | General government, legislative branch |
Lanette Keith Walker | Justice, regional development, Bureau of Indian Affairs |
Other | |
Janet Airis | Unit Chief, scorekeeping |
Jeff Holland | Unit Chief, projections |
David Sanders | Unit Chief, computer support |
Edward Blau | Authorization bills |
Barry Blom | National income and product accounts, monthly Treasury data |
Joanna Capps | Appropriation bills (Agriculture, Interior) |
Sandy Davis | Budget process |
Kenneth Farris | Computer support |
Mary Froehlich | Computer support |
Ellen Hays | Federal pay |
Catherine Little | Appropriation bills (VA-HUD, Treasury) |
Felix LoStracco | Other interest, discretionary spending |
Virginia Myers | Appropriation bills (Commerce-Justice-State, foreign operations) |
Laurie Pounder | Net interest on the public debt |
Robert Sempsey | Appropriation bills (Labor-HHS, Transportation, military construction) |
Amy Wendholt | Appropriation bills (Defense, energy and water) |
1. CBO estimates that the President's budget policies would have negligible effects on baseline off-budget surpluses, summing to about $6 billion over the 2002-2011 period.
2. Although CBO and JCT have been able to develop independent estimates for most of the President's proposals, the budget does not include any details of the major health care initiatives--the Immediate Helping Hand and Medicare Modernization proposals. Consequently, this analysis uses the Administration's figures for the cost of those proposals ($3 billion in 2001 and $153 billion over the following 10 years).
3. See Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2002-2011, January 2001.
4. For more information about the uncertainty of budget projections, see Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2002-2011, Chapter 5.
5. In any given year, certain amounts of publicly held debt, such as debt that matures in later years, are not available for redemption. Under CBO's revised baseline, such debt is projected to total $1,306 billion in 2006 and $898 billion in 2011.
6. "Uncommitted funds" is CBO's term for the surpluses remaining each year after paying down the publicly held debt available for redemption. For further discussion, see Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2002-2011, p. 15.
7. For proposals that would amend the Internal Revenue Code, CBO is required by law to use estimates provided by the Joint Committee on Taxation. For those estimates, see Joint Committee on Taxation, Estimated Revenue Effects of the President's Fiscal Year 2002 Budget Proposal, JCX-31-01 (May 4, 2001).
8. Separate estimates of each proposal's effect on revenues and outlays are not available.
9. In calculating those rates of growth, CBO adjusted its baseline totals of new discretionary budget authority for 2000 and 2001 to restore certain advance appropriations to the normal program year. Those advances represent delayed funding of amounts that ordinarily would have been provided in the previous year.