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This analysis was prepared at the request of the Senate Committee on Appropriations to provide Members an overview of the President's budgetary proposals for fiscal year 1983. The report describes the problem of chronic budget deficits faced by the federal government under existing tax laws and current spending programs and the Administration's proposals for dealing with this problem. It discusses the economic outlook and the assumptions used for the February budget.

This report also presents the Congressional Budget Office's reestimates of the budgetary impact of the Administration's proposals based on alternative economic assumptions and on CBO's technical estimating methods and programmatic assumptions. Finally, the report analyzes in some detail the major budget increases proposed for national defense programs.

This report was prepared by the staff of the Budget Analysis, Fiscal Analysis, and Tax Analysis Divisions under the supervision of James L. Blum, William J. Beeman, and James M. Verdier, respectively. Robert L. Faherty, Patricia H. Johnston, Francis S. Pierce, and Johanna Zacharias edited the manuscript. It was typed for publication by Barbara Bakari, Gwen Coleman, Dorleen Dove, Susie Fominaya, Betty Jarrells, Thelma L. Jones, Brice McDaniel, Paula Spitzig, and Nancy Wenzel.
 

Alice M. Rivlin
Director
February 1982
 
 

SUMMARY

CHAPTER I. THE ADMINISTRATION'S PROPOSALS

• The Budget Outlook Under Current Policies
• The Administration's Budget Proposals
• The Credit Budget

CHAPTER II. THE ADMINISTRATION'S ECONOMIC ASSUMPTIONS

• Economic Developments in 1981
• Comparison of Administration and CBO Forecasts for 1982 and 1983
• The Prospects for Growth Through 1987
• Conclusion

CHAPTER III. CBO REVENUE REESTIMATES

• Differences in Economic Assumptions
• Technical Estimating Differences

CHAPTER IV. CBO OUTLAY REESTIMATES

• Differences in Economic Assumptions
• Technical Estimating Differences
• Unevaluated Administration Savings Estimates
• Outlay Reestimates by Major Function

CHAPTER V. THE ADMINISTRATION'S DEFENSE BUDGET

• Defense Budget Growth in Perspective
• Growth in Forces, Major Purchases, and Development
• Risks of Underpricing
• Potential Reductions

APPENDIX. MAJOR CONTRIBUTORS TO THE PREPARATION OF THIS REPORT
 

TABLES
1.	THE BUDGET OUTLOOK UNDER CURRENT POLICIES
2.	ESTIMATED REVENUE LOSSES RESULTING FROM THE ECONOMIC RECOVERY TAX ACT OF 1981
3.	THE ADMINISTRATION'S PROPOSED DEFICIT REDUCTIONS MEASURES
4.	THE ADMINISTRATION'S REVENUE INCREASE PROPOSALS
5.	COMPOSITION OF REVENUES
6.	COMPOSITION OF OUTLAYS
7.	OUTLAYS FOR BENEFIT PAYMENTS FOR INDIVIDUALS
8.	PROPOSED REDUCTIONS IN BENEFIT PAYMENTS FOR INDIVIDUALS
9.	OUTLAYS FOR DIRECT GRANTS TO STATE AND LOCAL GOVERNMENTS
10.	OUTLAYS FOR OTHER FEDERAL OPERATIONS
11.	GROSS OUTLAYS FOR OTHER FEDERAL OPERATIONS
12.	OUTLAYS OF OFF-BUDGET FEDERAL ENTITIES
13.	NET OUTLAYS OF THE FEDERAL FINANCING BANK
14.	ESTIMATES OF DEBT SUBJECT TO STATUTORY LIMIT
15.	TOTAL CREDIT BUDGET
16.	CHANGES IN THE 1983 CREDIT BUDGET TOTALS
17.	COMPARISON OF ADMINISTRATION AND CBO FORECASTS
18.	COMPARISON OF ADMINISTRATION AND CBO LONG-RUN ECONOMIC ASSUMPTIONS
19.	CBO REESTIMATES OF ADMINISTRATION BUDGET REVENUES
20.	ADMINISTRATION BUDGET REVENUES AND CBO REESTIMATES, BY SOURCE
21.	CBO REVENUE REESTIMATES, BY SOURCE, BASED ON CBO TECHNICAL ESTIMATING DIFFERENCES
22.	REVENUE REESTIMATES BASED ON THE EFFECTS OF ECONOMIC RECOVERY TAX ACT
23.	CBO REESTIMATES OF THE ADMINISTRATION'S SPENDING PROPOSALS
24.	OUTLAY REESTIMATES BASED ON CBO'S BASELINE ECONOMIC ASSUMPTIONS
25.	OUTLAY REESTIMATES BASED ON CBO'S PESSIMISTIC ECONOMIC ASSUMPTIONS
26.	CBO TECHNICAL OUTLAY REESTIMATES
27.	UNEVALUATED ADMINISTRATION SAVINGS ESTIMATES
28.	THE ADMINISTRATION'S DEFENSE BUDGET
29.	SUMMARY OF MAJOR FORCES, MANPOWER, AND PROCUREMENT LEVELS
30.	ADMINISTRATION'S NAVY SHIPBUILDING PROGRAM FOR 1983-1987
31.	COMPARISON OF CARTER AND REAGAN ADMINISTRATION AIRCRAFT ACQUISITION PLANS, BY SERVICE
32.	COMPARISON OF CARTER AND REAGAN ADMINISTRATION PLANS TO ACQUIRE STRATEGIC AND THEATER NUCLEAR MISSILES, BY SERVICE
33.	COMPARISON OF CARTER AND REAGAN ADMINISTRATION PLANS TO ACQUIRE TACTICAL MISSILES
34.	COMPARISON OF CARTER AND REAGAN ADMINISTRATION PLANS TO ACQUIRE ARMORED COMBAT VEHICLES
35.	PROPOSED FUNDING AND PERCENT OF REAL GROWTH FOR READINESS ITEMS, BY SERVICE
36.	COMPARISON OF CBO AND ADMINISTRATION INFLATION ASSUMPTIONS FOR DEFENSE PURCHASES
37.	MAJOR WEAPONS SYSTEMS COST GROWTH PER UNIT
38.	MAJOR WEAPONS SYSTEMS COST GROWTH IN THE 1983 PROGRAM
39.	COMPARISON OF THE PRESIDENT'S DEFENSE BUDGET WITH ALTERNATIVE BUDGET PROJECTIONS
FIGURES
1.	CBO BASELINE BUDGET PROJECTIONS
2.	FEDERAL BUDGET DEFICIT AS A PERCENTAGE OF GNP
3.	MAJOR SOURCES OF FEDERAL REVENUES
4.	PROPOSED CHANGE IN OUTLAYS BETWEEN 1982 AND 1985
5.	THE COMPOSITION OF FEDERAL SPENDING
6.	FEDERAL DEBT
7.	COMPONENTS OF NET FEDERAL CREDIT
8.	COMPARISON OF MAJ0R ECONOMIC ASSUMPTIONS
9.	PERCENT CHANGE IN THE VELOCITY OF MIB FROM TWO YEARS EARLIER
10.	CBO OUTLAY REESTIMATES
11.	BUDGET AUTHORITY FOR THE DEPARTMENT OF DEFENSE
12.	NATIONAL DEFENSE OUTLAYS AS A PERCENTAGE OF TOTAL OUTLAYS AND OF GNP
13.	PERCENTAGE OF DEFENSE OUTLAYS RESULTING FROM CURRENT AND PRIOR YEAR BUDGET AUTHORITY

 

The budget deficit for fiscal year 1982 is now expected to exceed $100 billion. The sharp rise from previously estimated levels can be attributed largely to the current economic recession, which was not anticipated in last year's budget estimates by either the Administration or the Congress. The economy is expected to recover during 1982 and to move upward thereafter. But budget deficits are projected to increase steadily for the foreseeable future, even after economic recovery, unless existing tax and spending policies change.

The President's 1983 budget contains proposals--mostly affecting spending policies--to reduce projected deficits during the next three years by $239 billion. According to Administration estimates, adoption of these proposals would result in only marginal reductions in the budget deficit from the record high level of 1982. The Administration anticipates deficits of $92 billion in 1983, $83 billion in 1984, and $72 billion in 1985, all substantially above the 1981 level of $58 billion.

The Congressional Budget Office (CBO) has analyzed the President's budgetary proposals and finds that revenues are likely to be slightly lower than projected by the Administration and outlays significantly higher. Hence, even if the President's proposals are adopted, CBO estimates that the budget deficit will climb steadily from an estimated $111 billion in 1982 to $121 billion in 1983, $129 billion in 1984, and $140 billion in 1985. Furthermore, there is the possibility that the budget deficits could be even larger, if tight credit conditions produce a weaker economy than assumed by either the Administration or CBO.

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