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This analysis of the President's 1984 credit budget was prepared at the request of the House and Senate Budget Committees. It presents the Congressional Budget Office's baseline credit budget projections together with CBO's reestimate of the President's credit budget proposals. The report also provides estimates of the savings in federal outlays that would result from the Administration's proposed credit budget reductions. Finally, it presents a function-by-function examination of the 1984 credit budget.

The paper was prepared by CBO's Budget Process Unit. Richard P. Emery, Jr., wrote the first three chapters. Deirdre B. Phillips and Amy R. White wrote Chapter IV. The authors gratefully acknowledge the assistance of Charles J. Richardson and CBO's cost analysts in developing baseline credit budget projections, and the helpful comments of Linwood T. Lloyd and Marvin M. Phaup of CBO and Edward Brigham of the House Committee on the Budget. Francis S. Pierce edited the manuscript, which was prepared for publication by Paula Gatens and Nancy E. Wenzel.
 

Alice M. Rivlin
Director
March 1983
 
 

SUMMARY

CHAPTER I. INTRODUCTION TO THE CREDIT BUDGET

• Composition of the Credit Budget
• Credit Budget Accounting
• 97th Congress Action on Credit
• Baseline Credit Projections

CHAPTER II. THE ADMINISTRATION'S CREDIT BUDGET PROPOSALS

• Major Changes in 1984
• Impact of the President's Proposed Credit Budget on Federal Outlays
• CBO Reestimates of the Administration's Credit Budget Proposals

CHAPTER III. BUDGET IMPACT OF THE CREDIT BUDGET

• The Interest Subsidies in Federal Credit
• The Extent of Defaults in Federal Credit Activities
• Net Lending
• Federal Financing Bank Activity

CHAPTER IV. THE CREDIT BUDGET BY MAJOR BUDGET FUNCTION

• National Defense
• International Affairs
• General Science, Space and Technology
• Energy
• Natural Resources and Environment
• Agriculture
• Commerce and Housing Credit
• Transportation
• Community and Regional Development
• Education, Training, Employment and Social Services
• Health
• Income Security
• Veterans' Benefits
• General Government
• General Purpose Fiscal Assistance

The President's credit budget for 1984 continues the Administration's efforts to constrain the credit activities of the federal government. The Administration argues that direct and guaranteed lending by the federal government, which grew rapidly during the second half of the 1970s, must be reduced in order to provide private borrowers greater access to capital markets. It believes that unsubsidized private borrowers frequently make more productive use of available capital funds, and thus contribute more to economic growth. Reduced federal credit activities will also mean lower deficits in the unified budget.

The Congressional Budget Office (CBO) estimates that the Administration's credit proposals would succeed in holding the annual amount of new direct and guaranteed lending for the next five years below the 1983 level. This would represent a reduction of almost $150 billion from what would otherwise occur under current polices. New direct loan obligations would remain relatively constant at approximately $38 billion over the next five years, while primary guarantee commitments would be allowed to rise gradually from $86 billion in 1984 to $96 billion in 1988.

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